CPP Ratestudy.Pdf

CITY OF CLEVELAND

Department of Public Utilities Cleveland Public Power

Request for Proposal For Development of Comprehensive Financial Plan, including Cost of Service Study and Rate & Fee Analyses for Electric Service 2019 through 2023

January 2018

1 Table of Contents

I. Introduction and Background II. Scope of Services III. Project Schedule and Deliverables IV. Proposal Requirements V. Qualifications for Proposal VI. Proposal Contents VII. Proposal Evaluation; Selection Criteria

Appendix A – CPP Rate Schedules Appendix B – List of Ancillary Fees and Charges for CPP Appendix C – 2016 Separately Issued Report for CPP Appendix D – Fee Proposal Template Appendix E – Required City Forms  OEO Notice to Bidders and Schedules  Federal Form W-9  Vendor Entry Form  Affidavit  Non-Competitive Bid Contract Statement For 2018  Northern Ireland Fair Labor Practices Affidavit Appendix F – Sample Agreement Appendix G – Reimbursables Policy Appendix H – Ordinance No. 1436-17

2 I. INTRODUCTION AND BACKGROUND

Introduction

The City of Cleveland (the “City”) Department of Public Utilities (“DPU”) operates the Division of Cleveland Public Power (“CPP”) for the purpose of supplying electric energy to customers located primarily in the City. Today, CPP serves approximately 72,000 customers primarily through wholesale power purchases and interests in several generating plants through its membership in American Municipal Power (AMP) Inc.

In addition to CPP, DPU consists of five other divisions including the Division of Fiscal Control (Fiscal Control) and Utilities Administration. Fiscal Control manages the financial aspects of DPU. Utilities Administration handles all administrative aspects for DPU, including, but not limited to Public Affairs, Information Technology, and Human Resources.

CPP will need to undertake a financial study and analyses in order to develop its schedule of Rates, Fees and Charges covering year’s 2019 through 2023. A full cost of service study has not been completed since the early 1980s. The Cost of Service Study and subsequent rate design development process is intended to provide justifiable and equitable methodologies for appropriate user fees that are adequate to fully fund the expenses associated with the power system, including operating and capital costs. This will include a review and evaluation of CPP’s current operating revenues and expenses and a comparison of similar utilities.

In addition, while the Comprehensive Financial Plan to be developed for CPP will specifically cover the years 2019 through 2023, the selected consultant will also be required to study and consider the long term impacts any recommendations implemented as a result of this study will have upon the financial well-being of CPP. For the purpose of this study, this long term period shall be defined as the period from 2019 through 2034.

Background Information - The Division of Cleveland Public Power

CPP was created in 1906 and charged with the responsibility for the distribution of electricity and related electric service to customers within its service areas. CPP operates a municipal electric system that is the largest in the State of Ohio and the thirty-ninth largest in the United States according to the American Public Power Association’s statistics for 2014. CPP serves an area that is predominantly bound by the City limits and presently serves approximately 72,000 customers.

According to the most recent census estimates, the City’s population is 390,000 people. There are approximately 212,000 residential dwelling units. Approximately 33,000 companies have a presence in Cleveland. CPP has distribution facilities in about 60% of the geographical area of the City, primarily on the east side.

CPP obtains substantially all of its power and energy requirements through agreements with various regional utilities and other power suppliers of power delivered through CEI interconnections. The balance of CPP's power and energy requirements are satisfied with production from CPP's three combustion turbine generating units and various arrangements for the exchange of short-term power and energy. To reduce its reliance on the wholesale market, CPP’s long-term base load supply includes a mix of power provided by participation in AMP hydroelectric projects, the Fremont Energy Center, the Prairie State Energy Campus project, and the Blue Creek Wind project.

Major Cleveland Public Power Issues To Be Addressed

CPP has three main components to the rates charged to customers, 1) Base Rate 2) Energy Adjustment Charge (EAC) and 3) Environmental and Ecological Adjustment. The last time CPP changed the Base Rate was 1983. The ordinance for the EAC was updated in 2012. This charge is used to account for the annual costs of power that can fluctuate over time to account for the power market environment CPP is part of.

A. Stagnant Load

Over the past few years, CPP has signed on several new large customers. The increased consumption has been off-set by other customers’ reduced consumption use, and in some cases, other customers leaving CPP.

B. Rising Expenses

CPP is facing rising operation and maintenance expenses, which need to be factored into the development of any long range financial plan and subsequent rate analyses and recommendations. CPP’s operation and maintenance expenses have increased 11% between 2014 and 2016.

C. Rising Power Costs

CPP has an EAC which allows CPP to pass on the costs of power to their customers. CPP has experienced an increase in power costs of 26% between 2012 and 2016, but in that same time, has seen no significant change in kWh sales.

4 D. Capital Needs

CPP has significant capital needs over the next five years, as many existing electric system assets are coming to an end of their useful life, and will need to be addressed over this time period.

CPP intends to address multiple areas over this five year time period, including but not limited to: replacing the current 69 KV System used in several areas of the City, turbine replacement/rehab work, new substations, updating the SCADA system, Southern Transmission Line, and installation of new meters for the customer base.

E. Current and Future Debt Issuances

CPP has funded significant capital improvements in the past through revenue bonds and annual operating revenue. The most recent new bond issue in 2008 (Series 2008 A&B) netted CPP approximately $72.6 million in proceeds to fund the system expansion, to pay capitalized interest and costs of issuance.

As of the end of 2017, CPP will have $202 million of outstanding bond debt. CPP’s annual debt service payments on its outstanding revenue bonds will average in excess of $18 million per year. In addition, CPP has several interests in AMP projects which include debt payments for the project construction and/or purchase. These payments are made through power invoices, but should also be considered.

F. Rate Structure (Appendix A)

CPP’s current monthly retail electric rate schedule consists of a base rate, EAC, Environmental and Ecological Adjustment, and a kilowatt tax. There are seven different rate classifications currently used; residential, small commercial, large commercial, industrial, street lighting, traffic lights and protective lighting. CPP currently has two different seasonal rates for each of these classifications, a summer rate (five months) and a winter rate (seven months). Currently, there is no fixed fee charge for customers.

In addition to these rate classifications, CPP has customized rates for customers who meet certain criteria as set by ordinance. These rates are negotiated between the customer and CPP, and usually are attached to a long term contract for service with CPP.

CPP’s most recent rate increase was in 1983. There have been many changes to the electric industry since that time. The electric industry in Ohio was deregulated in 2001. At this time, the investor owned utilities were broken up into two main categories; transmission and distribution, and power supply. CPP continued to offer a bundled service and did not break out the transmission, distribution and power supply.

5 CPP is looking at all options for rate structures including, but not limited to, fixed fees, different customer classifications, solar rates, etc. The consultant will provide different options for the structure as well as the phase in for such a change in rate structure if chosen.

G. Rate Competitiveness

It should be noted our current rates sometimes negatively impacts our ability to be competitive when negotiating electric service agreements with potential new customers. Based on Public Utilities rate comparisons, CPP existing rates can be a major impediment, making CPP non-competitive in terms of cost. Conversely, if CPP provides special rates to a large number of customers, CPP runs the risk of either alienating or adversely affecting our relationship with a group of existing customers. The determination of potential methodologies for bridging this competitive gap is an issue which needs to be addressed as part of this Comprehensive Financial Plan.

H. Rates and Price Elasticity Considerations

Another issue regarding rates which should be examined in this study is relative to price elasticity. Specifically, we would like to determine what impact our proposed rate increases, as well as other utility rate increases, have on electric consumption. For example, as the EAC increases, what percentage of power consumption will decline, if any? This issue needs to be studied in detail and taken into account when forecasting consumption levels for the five-year study period.

I. Customer Retention Factors and Strategies

CPP is in direct competition with CEI for many large customers. CPP is aware of several instances where current customers have been approached by CEI to switch service provider. Many customers have notified CPP of these discussions. Currently, no significant movement has been made by the large customers, but as prices increase, this will need to be addressed.

Prospective consultants should also be aware that in 1986 and 2014, Cleveland City Council approved new rate provisions authorizing CPP to enter into separate electrical service agreements with Governmental, Charitable, and Commercial customers based on factors as stated in CCO 523.195 and CCO 523.196.

J. Led Street and Protective Lighting

The City of Cleveland owns the streetlights throughout the City. CPP is responsible for power and maintenance of the 64,000 streetlights in the City. CPP and the City are currently working to convert the current lights to LED technology. CPP also plans to utilize LED lights for new protective lighting installations. The new LED lights will

6 consume less power and need less maintenance over the useful life. The selected consultant will need to provide new tariffs for both LED street lights and protective lights as well as update the current street light and protective light tariffs.

K. Regulatory Transmission Organization (RTO)

CPP has power resources through AMP in both the MISO District and PJM. CPP is subject to any regulations issued by these entities. The selected consultant will assist CPP in assessing current issues under review in both regions.

L. Direct Competition

CPP is one of the few municipal electric companies in the United States that competes door to door with an investor-owned utility; in this case First Energy Corporation’s Cleveland Electric Illuminating Company (CEI). The selected consultant will need to provide customer billing comparisons as well as any rate/bill differentials.

The City reserves the right to reject any or all proposals or portions of them, to waive irregularities, informalities, and technicalities, to re-issue or to proceed to obtain the service(s) desired otherwise, at any time or in any manner considered in the City’s best interests. The Director may, at their sole discretion, modify or amend any provision of this notice or the RFP.

II. SCOPE OF SERVICES

The cost of service study will define and separate fixed and variable costs. The study should identify costs to be allocated across all customer classes and those costs which are specific to each class.

The prospective consultant’s attention is directed to the enclosed copies of CPP’s 2016 Annual Report for further background information as it relates to CPP’s current operations and/or current financial condition. Additional detailed information regarding the operations of CPP can be found at its web site, www.cpp.org.

The prospective consultant should consider all of the issues discussed in the previous section, including declining consumption, rising Operations and Maintenance (O & M) expenses, continuance of a multi-year CIP, and current and future debt levels when preparing their proposal.

A. POWER RATE STUDY (INCLUDING MISCELLANEOUS FEE SCHEDULES)

The basic Scope of Services for performing an electrical rate study shall include but is not limited to the following elements:

Operation and Maintenance Expenses

Review past history of operation and maintenance expenses, including staffing levels, for CPP. Conduct a detailed review using the City’s current chart of accounts and project future Operation and Maintenance (O & M) costs on a detailed basis for the period of 2019 through 2023 for CPP.

Capital Financing Plan

 Review Capital Improvement Plans for CPP and project annual funding needs for capital projects, including both existing and future debt service coverage, for the years 2019 through 2023.

 Review CPP’s current 5-year CIP (2019-2023).

 In consultation with CPP staff, identify all capital outlay requirements and other future capital projects and major initiatives for the rate period.

 Establish all capital requirements and develop a 5-year CIP for CPP for the years 2019-2023 for rate making purposes.

 Identify the funding mix (debt vs. pay-as-you-go) and evaluate various types of financing available (fixed rate, variable rate, etc.) to optimize funding needs.

 Develop financing plans with various options for consideration and make recommendations.

 Develop a schedule of annual debt service costs (existing plus new), as well as capital funded by operating revenue (pay-as-you-go) for the years 2019- 2023, taking into account debt coverage and rate stabilization over the period.

Total Revenue Requirements

 Estimate the total income required annually from 2019 through 2023 to adequately support CPP.

New Customer Connections

 CPP does not charge costs back to the customer for connection to the system.

8  Identify methodology for construction labor and related overhead rates. The consultant should provide a recommendation on if/how CPP should institute a policy to collect the costs of new customer connections.

Anticipated Growth of Power Load

 Identify current electric load and project future loads by customer class based on anticipated usage.

Customer Rate Classifications

 Review customer database and review current customer classifications. Make recommendations for changes to be in line with current power usage classifications while ensuring subsidies across customer classes are minimized.

Energy Adjustment Charge

 Analyze all costs included in the EAC, including but not limited to capacity charges, transmission fees, and purchased power costs.

Fees and Charges

 Analyze all sources of non-metered revenue available to CPP including interest income, miscellaneous revenue, pole attachments, temporary service, tampering, etc.

Consumption and Production Analysis

 Evaluate and analyze historical consumption figures as reported in CPP’s Accounts Receivable Activity reports including adjustments. Identify gaps and make recommendations for improvement, if necessary.

 Review planned strategies for metering programs – remote disconnect, AMI, etc.

 Review past consumption trends and study current and projected demographic information in order to project in detail future electrical consumption within the service area.

 Project future consumption for the years 2019-2023 utilizing a power consumption demand model as described below.

9 Power Consumption Demand Model

The selected consultant will be required to develop and utilize a computerized Power Demand Model to aid in the projection of future power consumption for the years 2019 through 2023. These projections will need to be broken down in detail by customer class, by consumption per account and the number of accounts, and by other relevant statistical categories.

The power consumption demand model which is to be utilized in determining these projections must take into account many factors such as historical data, climatic conditions and weather, local economic conditions, and any other factors relevant to the scientific projection of future power consumption levels. CPP is not looking for a simplistic approach to be used in making these projections based solely upon recent historical trends. Rather, CPP is looking for the development of a true demand model which takes into consideration all of the factors relative to the projection of future power consumption levels, in accordance with any American Public Power Association (APPA) methodologies and guidance readily available.

Metered Sales Revenue

 Based upon forecasted consumption levels, project annual power sales revenue which might be realized for the period of 2019 through 2023 with the power rates are in effect for the year 2017.

 Compare the results of total projected metered sales revenue, with the power rates in effect for the year 2017, to the total metered sales revenue required for the years 2019 through 2023. Determine the shortfalls annually generated for the years 2019 through 2023 for CPP.

Power Rate Adjustments

 Develop a preliminary schedule of annual incremental power rate adjustments, for the period 2019 through 2023 which would eliminate any shortfalls. Determine the impact which rate increases of varying percentages will have on consumption levels in various rate classes.

 Develop combinations of recommended power rate increases and miscellaneous service fee levels for consideration which would satisfy the revenue shortfall. This task would include performing what-if scenarios of various rate and fee combinations.

 Develop alternate power rate schedules for consideration.

10  Determine the impact of our Homestead Exemption Program on future projected power sales revenue.

 Consider the factor of price elasticity in the proposed power rate schedule.

 Perform impact/sensitivity analysis for various rate alternatives.

 Make recommendation of power rates for adoption by the Board of Control and approval by Cleveland City Council for the period of 2019 through 2023.

 Provide CPP with a computerized rate model for their use in the future as subsequently described.

Rate Schedule Goals and Objectives

 CPP desires to incorporate the following goals and objectives into the development of all new rate and fee schedules to the greatest extent possible.

. cost of service recovery; . minimizing customer impact; . legality; . conservation/demand management; . affordability to disadvantaged customers; . revenue stability; . equitable contributions from new customers; . ease of understanding; . ease of updating; . ease of implementation; . rate stability; and . economic development.

 The selected consultant, in consultation with CPP and Fiscal Control staff, will categorize and prioritize objectives.

 Selected consultant will identify rate alternatives which meet the goals and objectives.

 CPP management will select preferred alternatives.

5-Year Pro-Forma Analysis

 For all the proposed rate and fee scenario combinations, compile the results of projected total revenues, projected O & M expenses, debt service

11 requirements and capital requirements into a pro-forma analysis to project CPP’s results of operations for the years 2019 – 2023.

 Include in the pro-forma tables projections of CPP’s revenue bond debt service coverage ratios, total cash fund balance, and unencumbered cash fund balance at each year’s end.

Computerized Financial Planning and Rate Model

 Based on the selected scenario, provide CPP with an updatable computerized working rate model for use in revising and updating its financial plans, cost of service and rate design formulas on a routine basis.

 The computerized rate model will be used to revise and update projections, calculate adjustments and to conduct “what-if” scenarios based on the impact of changing various system variables such as growth, inflation, budget changes, CIP schedules, etc.

 Computerized rate model is to be user friendly, developed using Microsoft Excel spreadsheet software and tailored specifically to CPP requirements.

 Provide appropriate training on the use of the power financial planning and rate model to appropriate DPU staff.

Communication/Public Relations

 Develop a strategic plan/program for communicating the power rate increases and/or rate structure changes to the Mayor, City Council, and the public.

 Use a variety of communication tools such as public information meetings, hearings, presentations, news releases, web site, mailers, newsletters, etc.

 Assist CPP in obtaining buy-in from major stakeholders – Mayor, City Council, etc.

 Develop, implement, execute and assist in a rate increase public relations campaign as required.

Final Power Rate Reports

 Compile final power rate reports for CPP including results, recommendations, and implementation plans.

12 B. Cost of Service Studies for Power

The basic Scope of Services for performing the power cost of service study shall include the major Cleveland Public Power issues noted in the Power Rate Study section including the items noted below, but is not limited to the following:

 Determine the actual historical cost of service for the various customer classes (residential, small commercial, small industrial, etc.) in accordance with methodology endorsed by APPA. These costs of service should be calculated utilizing data from recent years (2015 through 2017).

 Use the total revenue requirements (operation & maintenance expenses, debt service and capital expenditures for 2019 – 2023) as calculated for the general power rate study. Project future cost of service for various customer classes, and utilize this information for making rate recommendations.

 Identify rate subsidies by class in revenue.

 Prospective consultants are advised that not all historical cost data may be available in the format needed to perform a true cost of service study. In those cases, allocations and/or assumptions will have to be made and documented.

 Design a rate structure/schedule which will recover from each class of customer the cost to serve each class of customer to the greatest extent possible.

 Train appropriate personnel concerning how to update this process for future use.

 Prepare a power cost of service report including results, recommendations and implementation plan.

Documents Available From CPP

CPP has various materials available which can be utilized and incorporated by the selected consultant for their use in this project. These materials consist mainly of various reports and plans available from CPP relating to the financial nature of this project. The following is a partial listing of these materials which will be made available to the selected consultant.

 5-year Capital Improvement Plan (2019-2023).

 Accounts Receivable Activity Report (metered consumption & revenue).

 CPP’s Annual Reports including audited financial statements (ohioauditor.gov).

 Recent Bond Issue Official Statements.

 CPP Service Agreements (Authorized by CCO 523.195 and 523.196).

 Annual operating budgets for current and recent past years.

 Financial reports from the City’s accounting system.

 List of all CPP facilities.

 Summary of information on key CPP electrical infrastructure.

 Multi-year purchased power cost schedule.

 Recent CPP insurance schedule of assets.

Study, Analysis and Assessment

The selected consultant will be required to study, analyze, quantify, make detailed recommendations and participate in the approval processes pertaining to all major issues associated with the Scope of Services as previously outlined in this RFP. It is expected that the prospective consultants will break down the Scope of Services to be provided into various phases and tasks within their submitted proposals. This flexibility is being given to allow the prospective consultant the opportunity to propose the utilization of whatever methodologies they deem appropriate to successfully complete the required studies. Obviously, the breakdown of phases and the methodologies to be employed by the prospective consultant are of extreme interest to CPP and they will be carefully considered during the proposal evaluation process.

The prospective consultants are also advised that although CPP management and staff will make themselves available for interviews and consultation, the selected consultant will ultimately be held responsible for the gathering of all information and data required to complete this study. CPP and Utilities Fiscal Control will assign a project manager(s) who will interact with the selected consultant’s project team on a regular basis.

III. PROJECT SCHEDULE AND DELIVERABLES

A detailed itemized schedule for all phases of these studies should be submitted within the prospective consultant’s proposal. This schedule should be realistic, based upon the consultant’s available manpower as well as their familiarity with the work to be

1 4 completed. The schedule should be presented in both Gantt chart and table format. The schedule must be complete with a listing of verifiable milestones and a description of the specific deliverables that will be provided to CPP upon completion of each phase of work or when individual milestones are achieved.

The following timeframe should be utilized by the Consultant when preparing their proposal, as these milestone dates must be achieved in order to have adopted rates and rate structures in place for the years 2019 – 2023.

As can be seen from the timeframe above, CPP is requiring a very aggressive schedule for the completion of this study. This aggressive schedule is necessitated by the various notification requirements that must be met by CPP in order to have a new rate schedule in place that will become effective on January 1, 2019. Additional consideration will be given to any prospective consultants able to shorten the timeline above. Accordingly, prospective consultants are advised that the maximum period of time which they will have available in order to complete all of their required scope of services will not exceed six months from the date when they are issued a Notice to Proceed and they should plan their schedules and their man power assignments to this project accordingly.

Recommendations, Report Preparation and Implementation Processes

A. Recommendations

Based upon the results of the study phases, it will be the responsibility of the selected consultant to make a series of detailed recommendations to CPP’s Management Staff regarding all items outlined in the Scope of Services. All recommendations must quantify the potential benefits and disadvantages to be realized by CPP if the recommendations are implemented.

B. Report Preparation

The selected consultant will include the results of the study, as well as their recommendations, in final reports to CPP. The report shall include discussion of the major Cleveland Public Power issues noted as well as the major topics in the power study discussion points in the RFP. The consultant shall provide a summary of the process the consultant used to complete the studies. The final report should be clear and concise. The final reports should include color graphs, charts, etc. as necessary, which may be used for future presentations to Cleveland City Council, other public entities, or as required.

Prior to submitting its detailed reports in final form, the selected consultant will be required to submit its reports in draft form to CPP Management Staff for review and approval. The Management Staff may suggest subsequent revisions and/or alternatives

to be studied. The selected consultant will be required to make every reasonable effort to accommodate the recommendations made by the CPP Management Staff and to address the issues raised by CPP as a result of this review process.

The selected consultant will provide CPP with a series of detailed reports of all of its findings in regard to issues identified and studied as outlined in the required Scope of Services. The selected consultant will also be required to make several presentations of its findings and study results to various City of Cleveland governmental entities, including the Management Staff, the City Administration, Cleveland City Council and various other forums as required. The detailed final reports should provide CPP with complete, narrative descriptions of all of the issues studied. The reports should also contain detailed cost versus benefit analyses concerning individual issues studied by the consultant, as well as an overall global cost versus benefit analysis of the proposed issues. A total of at least 25 printed copies of each of the selected consultant’s final detailed reports will be needed for CPP purposes. The City will also require at least 25 printed copies of the final comprehensive reports/financial plans. In addition, the City will require each report to be submitted electronically.

C. Implementation Processes

The prospective consultants are also advised that following the submission and acceptance of their detailed reports, the selected consultant will also be required to actively participate in the implementation processes for those recommendations which are deemed to be acceptable by CPP. These services will include developing a thorough plan and strategies for the implementation of the selected recommendations, as well as assisting with the actual implementation processes as required by CPP. This function will include appearing before various committees of Cleveland City Council to fully explain the recommendations and the potential benefits to be realized, since the implementation of the selected recommendations will require legislative approval. In addition, the selected consultant may be requested by CPP to make various presentations to the public regarding any of these issues. The prospective consultant should include up to 12 meetings for public information and public relation purposes when preparing their fee proposal, including any meetings needed in the next section.

Progress Meetings and Reports

The selected consultant will be required to meet with DPU Management Staff in order to discuss the progress of these studies. The department would like to have an in person kick off meeting. Progress meetings after this point can be via teleconference. In person meetings/presentations may also be required for presentations to DPU management staff, Cleveland City Council, and Mayor Presentations. Otherwise meetings and progress reports will be held as often as necessary, but no less than once per month. Other than the kick off, closing meeting and council presentations, meeting can be held teleconference. It is also expected that the selected consultant will provide

16 CPP with a detailed written progress report concerning the status of these studies on a monthly basis for the duration of the entire project. Accordingly, please factor the cost of your attendance at these progress meetings in Cleveland and the cost of the preparation of these progress reports into your proposal.

IV. PROPOSAL REQUIREMENTS A. Submission of Proposal

Each proposer shall submit its proposal(s) in the number, form, and manner, and by the date and time and at the location required in the cover letter.

i. Each Proposer shall provide all information requested in this RFP. The proposer must organize its proposal package to address each of the elements in this RFP in the order listed in the section, Proposal Contents. The proposer should carefully read all instructions and requirements and furnish all information requested. If a Proposal does not comply with all terms, conditions, and requirements for submittal, the City may consider it unacceptable and may reject it without further consideration.

ii. The City wishes to promote the greatest feasible use of recycled and environmentally sustainable products and to minimize waste in its operations. To that end, all proposals should comply with the following guidelines: Unless absolutely necessary, copies should minimize or eliminate use of non-recyclable or non re- usable materials. Materials should be in a format permitting easy removal and recycling of paper. A proposer should, to the extent possible, use products consisting of or containing recycled content in its proposal including, but not limited to, folders, binders, paper clips, diskettes, envelopes, boxes, etc. Do not submit any or a greater number of samples, attachments or documents not specifically requested.

iii. If you find discrepancies or omissions in this RFP or if the intended meaning of any part of this RFP is unclear or in doubt, send a written request for clarification or interpretation via e-mail to [email protected] no later than the date stated in the cover letter.

B. The City’s Rights and Requirements

i. The Director, at his/her sole discretion, may require any Proposer to augment or supplement its proposal or to meet with the City’s

17 designated representatives for interview or presentation to further describe the Proposer’s qualifications and capabilities. The requested information, interview, meeting, or presentation shall be submitted or conducted, as appropriate, at a time and place the Director specifies.

ii. The City reserves the right, at its sole discretion, to reject any proposal that is incomplete or unresponsive to the requests or requirements of this RFP. The City reserves the right to reject any or all proposals and to waive and accept any informality or discrepancy in the proposal or the process as may be in the City’s best interest.

iii. Proposal as a Public Record.

Under the laws of the State of Ohio, all parts of a proposal, other than trade secret or proprietary information and the fee proposal, may be considered a public record which, if properly requested, the City must make available to the requester for inspection and copying. Therefore, to protect trade secret or proprietary information, the Proposer should clearly mark each page - but only that page - of its proposal that contains that information. The City will notify the proposer if such information in its proposal is requested, but cannot, however, guarantee the confidentiality of any proprietary or otherwise sensitive information in or with the proposal. Blanket marking of the entire proposal as “proprietary” or “trade secret” will not protect an entire proposal and is not acceptable. iv. CLEVELAND AREA BUSINESS CODE

Requirements. During performance of this Agreement, Contractor shall comply with all applicable requirements of the Cleveland Area Business Code, Chapter 187 of the Codified Ordinances of Cleveland, Ohio, 1976 (“C.O.”), and any Regulations promulgated under the Code, which Code and Regulations are incorporated into and made part of this RFP by this reference as fully as if rewritten in it or attached. Specifically, compliance under any resulting agreement shall include, but not be limited to, the Contractor’s:

. Compliance with its proposal representations regarding CSB, MBE, and/or FBE participation in performance of the Agreement;

18 . Compliance and cooperation with Project Monitors, whether from the Mayor’s Office of Equal Opportunity (the “OEO”) or the contracting department; . Accurate, complete, and on-time submission of all reports, forms, and documents including, but not limited to, employment reports, certified payrolls, monitoring forms, and other information the Director of the OEO may require, whether in printed or electronic form, to ascertain and verify Contractor’s compliance; and . Attendance at and participation in all required project meetings, including OEO compliance meetings, and progress meetings called by the contracting department director(s) at key intervals during performance of the contract services (e.g. 25% completion, 50% completion, 75% completion).

Failure to Comply. When determining the contractor’s future eligibility for a City contract, the City shall consider a contractor’s failure to comply with the representations of its proposal and the requirements under the Code as a failure to faithfully perform a contract. a. Under the Cleveland Area Business Code, the City of Cleveland is firmly committed to assisting Minority Business Enterprises (MBEs), Female Business Enterprises (FBEs), and Cleveland- area small businesses (CSBs) by providing and enhancing economic opportunities to participate in City contracts. The successful proposer for a contract will be a firm that shares that commitment. Accordingly, a proposer is strongly encouraged to utilize the services of qualified MBE/FBE/CSB sub-consultants that are certified by the Mayor’s Office of Equal Opportunity (the “OEO”) in its proposal. b. The standard subcontracting goal for professional services contracts is 10% Cleveland Area Small Business (“CSB”) subcontractor participation. Please review the attached Office of Equal Opportunity documents to ascertain the goal for the proposed contract. Proposers are required to make a good- faith effort to subcontract portions of the work to certified Minority Business Enterprise (“MBE”), Female Business Enterprise (“FBE”), and CSB firms, consistent with the subcontracting goal(s) applicable to this RFP. c. To document its good-faith effort to utilize certified MBE, FBE and CSB sub-consultants, each proposer must complete Schedules 1 through 4 found in the Cleveland Area Business

19 Code - Notice to Bidders and Schedules. These schedules identify the Proposer’s proposed use of MBE, FBE and CSB sub-consultants on the project, which evidences the proposer’s good-faith effort to obtain the participation of certified sub-consultants. The Proposer shall submit the completed forms with its proposal and they will be forwarded to the City’s Office of Equal Opportunity for evaluation. Failure to submit complete schedules may result in the rejection of a proposal

Proposers may obtain a listing of firms certified by the OEO as CSBs, MBEs and FBEs by checking the City’s website at http:// cleveland.diversitycompliance.com. You will find a selection in the right side of the page for “CSB/MBE/FBE Registry”.

Proposers are responsible for obtaining the most current list and for contacting potential CSB/MBE/FBE sub-consultants. The City assumes no responsibility for matching prime consultants with qualified, certified MBE, FBE, and/or CSB subconsultants.

The City Office of Equal Opportunity will monitor participation of MBE, FBE, and/or CSB sub-consultants throughout the duration of the engagement or project. The successful proposer, as contractor, will be responsible for providing the OEO with all information necessary to facilitate this monitoring.

The Cleveland Area Business Code, any Regulations promulgated under the Code, and the OEO Notice to Bidders & Schedules are, by this reference, incorporated in and made part of this solicitation and any resulting contract as fully as if written in it or attached. d. The successful proposer, as contractor, will be required to comply with all terms, conditions, and requirements imposed on a “contractor” in the following Equal Opportunity Clause, Section 187.22(b) of the Cleveland Codified Ordinances, and shall make the Clause part of every subcontract or agreement entered into for services or goods and binding on all persons and firms with which the proposer may deal, as follows: No Contractor shall discriminate against any employee or applicant for employment because of race, religion, color, sex, sexual orientation, national origin, age, disability, ethnic group

20 or Vietnam-era or disabled veteran status. Contractors shall take affirmative action to ensure that applicants are employed and that employees are treated during employment without regard to race, religion, color, sex, sexual orientation, national origin, age, disability, ethnic group or Vietnam-era or disabled veteran status. As used in this chapter, “treated” means and includes without limitation the following: recruited whether by advertising or other means; compensated, whether in the form of rates of pay or other forms of compensation; selected for training, including apprenticeship, promoted, upgraded, demoted, transferred, laid off and terminated. Contractors shall post in conspicuous places available to employees and applicants for employment, notices to be provided by the hiring representative of contractors setting forth the provisions of this nondiscrimination clause.

e. Within 60 calendar days after entering into a contract, the successful Proposer, as Contractor, shall file a written affirmative action program with the OEO containing standards and procedures and representations assuring that the Contractor affords all qualified employees and applicants for employment equal opportunities in the Contractor’s recruitment, selection, and advancement processes. v. Term of Proposal’s Effectiveness.

By submission of a proposal, the Proposer agrees that its proposal will remain effective and eligible for acceptance by the City until the earlier of the execution of a final contract or 180 calendar days after the proposal submission deadline (the “Proposal Expiration Date”). vi. Execution of a Contract.

The Successful Proposer shall, within ten (10) business days after receipt of a contract prepared by the City Director of Law, exclusive of Saturdays, Sundays and holidays, execute and return the contract to the City together with evidence of proper insurance and intent to conform to all requirements of the contract attached hereto or which are a part hereof and all applicable federal, state and local laws and ordinances prior to or at the time of execution of the contract. vii. “Short-listing”.

The City reserves the right to select a limited number (a “short list”) of Proposers to make an oral presentation of their qualifications, proposed services, and capabilities. The City will notify the Proposers selected for oral presentations in writing.

viii. Proposer’s Familiarity with RFP; Responsibility for Proposal

By submission of a proposal, the Proposer acknowledges that it is aware of and understands all requirements, provisions, and conditions in and of this RFP and that its failure to become familiar with all the requirements, provisions, conditions, and information either in this RFP or disseminated either at a pre- proposal conference or by addendum issued prior to the proposal submission deadline, and all circumstances and conditions affecting performance of the services to be rendered by the successful proposer will not relieve it from responsibility for all parts of its Proposal and, if selected for contract, its complete performance of the contract in compliance with its terms. Proposer acknowledges that the City has no responsibility for any conclusions or interpretations made by Proposer on the basis of information made available by the City. The City does not guarantee the accuracy of any information provided and Proposer expressly waives any right to a claim against the City arising from or based upon any incorrect, inaccurate, or incomplete information or information not otherwise conforming to represented or actual conditions.

C. Interpretation The City is not responsible for any explanation, clarification, interpretation, representation or approval made concerning this RFP or a Proposal or given in any manner, except by written addendum. The City will mail, e-mail, or otherwise deliver one copy of each addendum issued, if any, to each individual or firm that requested and received a RFP. Any addendum is a part of and incorporated in this RFP as fully as if originally written herein. V. QUALIFICATIONS FOR PROPOSAL

A. Each Proposer, regardless of the form of its business entity, must meet the following requirements. Failure to meet all requirements may be cause for rejection of a proposal. If Proposer is a partnership or a joint venture, at least one general partner or constituent member must meet the requirements. Each Proposer must:

22 i. Provide evidence that it has a minimum of five continuous years of experience leading up to the proposal response to this RFP of providing and implementing environmental, health, safety and engineering services relating to the required services and deliverables described in this RFP.

ii. Be authorized to conduct business in the State of Ohio, County of Cuyahoga and the City of Cleveland.

iii. Possess or demonstrate it qualifies for all applicable licenses, certificates, permits, or other authorizations required by any governmental authority, including the City, having jurisdiction over the operations of the Successful Proposer and the proposed services.

B. Insurance: The Successful Proposer, at its expense, shall at all times during the term of the contract resulting from this RFP, maintain the following insurance coverage. The insurance company (ies) providing the required insurance shall be authorized by the Ohio Department of Insurance to do business in Ohio and rated “A” or above by A. M. Best Company or equivalent. The Successful Proposer, as contractor, shall provide a copy of the policy or policies and any necessary endorsements, or a substitute for them satisfactory to and approved by the Director of Law, evidencing the required insurances upon execution of the contract.

i. Professional liability insurance with limits of not less than $200,000.00 for each occurrence and subject to a deductible for each occurrence of not more than $25,000.00 per occurrence and in the aggregate, and if not written on an occurrence basis, shall be maintained for not less than two (2) years after satisfactory completion and written acceptance of the services under the contract.

ii. Workers’ compensation and employer’s liability insurance as provided under the laws of the State of Ohio.

iii. Statutory unemployment insurance protection for all of its employees.

iv. Such other insurance coverage(s) as the City may reasonably require.

v. The City will not negotiate the “Limits of Liability”.

23 VI. PROPOSAL CONTENTS

Each technical proposal shall include the following parts in the below order. Please separate and identify each part by tabs for quick reference. Each proposal should be organized so as to facilitate its evaluation of the consultant’s ability to perform the scope of services. There is a limit of 50 pages per technical proposal. Please submit in a bound format, no 3-ring binders.

A. Cover Letter: The cover letter shall identify and introduce the Proposer and provide other general information about Proposer’s business organization including, at least, in one or more attachments or in the Proposal, Proposer’s name, principal address, federal ID number, telephone and facsimile numbers, and e-mail address.

If a corporation, provide the state of incorporation, and the full name, title, and experience of each high level corporate officer. If the Proposer is not an Ohio corporation, please state whether or not the Proposer is qualified to do business in the State of Ohio as a foreign corporation. A foreign corporation must provide evidence, prior to execution of a contract, that is qualified to do business in the State of Ohio or it must register with the Ohio Secretary of State.

If the Proposer is a sole proprietorship, state the name of the proprietor doing business.

If a partnership, state the full name, address and other occupation, if any, of each partner; whether the partner is a general or limited partner, and whether active or passive; state each partner’s experience and the proportionate share of the business owned by each partner.

If a joint venture, state the name of each firm participating in the joint venture and each principal officer of each firm; each officer’s experience and the proportionate share of the joint venture owned by each joint venture partner.

B. Executive Summary: The Executive Summary should provide a complete and concise summary of Proposer’s background, area(s) and level(s) of expertise, relevant experience and ability to meet the requirements of this RFP. The Executive Summary should briefly state why Proposer is the best candidate for the engagement. The Summary should be organized so it can serve as a stand-alone summary apart from the remainder of the proposal.

C. Exceptions: Proposer shall itemize any exceptions it has to the RFP. If it has no exceptions to or deviations from any part of this RFP, it shall so state on

24 an “Exceptions” page. If no deviations or exceptions are identified, Proposer understands that if the City accepts the Proposer’s proposal, it must comply with and conform to all of the requirements of the RFP.

D. Qualifications: In the Qualifications section, each Proposer should state in detail its qualifications, and experience, and how its services and/or products are unique and best suited to meet the requirements and intent of this RFP. Proposer may include as much information as needed to differentiate its services and product(s) from other Proposers. At a minimum, please include, the following:

i. How Proposer meets or exceeds the qualifications; ii. A description of the nature of the firm’s experience in providing the service(s) and/or product(s) sought by this RFP and state the number of persons currently employed for such purpose; iii. The total number of such engagements and the clients comparable to the City for which the firm has provided like or similar services within the last five years; and iv. The names and addresses of at least three references for the firm’s professional capabilities and at least three written, verifiable, references dated within the last six months from clients for which the Proposer has rendered services substantially similar to those sought by this RFP, and recommending Proposer for selection for such services. Each reference shall include the name, e-mail address, and telephone number of a contact person.

D. Proposed Services:

i. Proposer shall describe in detail how Proposer’s management and operating plan for delivery of the services for the engagement or project will achieve the intent and goal(s) of the RFP. In its response to this sub-section, Proposer shall provide or describe: a. An organizational chart specific for the proposed engagement or project; b. Resumes of key management personnel; c. Trouble shooting/follow-up protocols; d. At least three examples of work performed at similarly sized utilities.

ii. Environmental Sustainability: Describe how the proposed services/project/solution incorporate environmental sustainability.

E. Fee Proposal: Proposer should submit its fee proposal for all its services in a separately sealed envelope clearly marked on the outside. Itemize the fee by

25 project phase or other divisible unit completed, in dollars and percentage, or by deliverable. Proposer shall provide its best estimate of expenses including, but not limited to, travel and associated expenses. No qualification of the financial offer will be accepted. The fee proposal shall be a firm and final amount including the costs and expenses for all anticipated services.

See Appendix D – Fee Proposal Template.

 The reports are considered “Not-To-Exceed”, implying that the total dollars proposed for each of these reports shall be capped. The Consultant shall be required to complete the scope of work of each report for less than or equal to the amount of the cap on each report. If the work on a report remains, but the Consultant has billed up to the cap; the Consultant shall complete the scope of work, but receive no additional compensation. Each Proposer is advised, therefore, to include sufficient hours and dollars within each Not-To-Exceed report. The Consultant shall be paid monthly based on actual hours work, subject to the Not-To- Exceed.

 Proposer shall submit a list of its project team personnel and job classification. This information will be included as an Exhibit to the Contract.

 Proposer shall submit a final detailed list of Reimbursable expenses for the project. This information will be included as an Exhibit to the Contract.

 For all reports, the proposer shall invoice each component’s labor based on Actual Hours Expended. Proposer will not be paid for costs in excess of the report value.

 Proposer shall not be compensated at a premium hourly rate for overtime hours expended, except when required by law. Proposer shall submit in advance documentation which justifies premium labor rate payment.

 DPU may elect to delete, substitute, reduce or redefine components as needed.

 The proposer shall be compensated for approved Reimbursable expenses incurred in the interest of the project. No markup is permitted on reimbursable expenses.

F. Financial Information: The Proposer shall include the following financial information:

26 Any financial information required will be requested only from any Proposer that is “short-listed”.

G. Required City Forms: Proposer shall complete, execute, and return with its fee proposal the following documents, blank copies of which are attached to this RFP as Appendix E:

i. The Office of Equal Opportunity Notice to Bidders and Schedules; ii. Federal Form W-9 including Taxpayer Identification Number; iii. Non-Competitive Bid Contract Statement for Calendar Year 2018 iv. Affidavit v. Vendor Entry Form vi. Northern Ireland Fair Labor Practices Affidavit

VII. PROPOSAL EVALUATION; SELECTION CRITERIA

A. Evaluation Methodology. The City department/division issuing this RFP will evaluate each proposal submitted. The department will present its recommendations to the City Board of Control (“Board”). The Board may, but shall not be obligated to, entertain formal presentations. The Board may approve one or more contracts to one or more firms. The City will only consider proposals that are received on or before the proposal submission deadline, and which meet all the requirements of this RFP. The City reserves the right to request a “best and final offer” from Proposers meeting the minimum requirements.

B. Scoring of Proposals. The City will score each Proposal in each of the following categories:

 Level of services to be provided  Proposed schedule and deliverables  Project team organization and qualifications, including local presence  Experience and references/firms and individuals  Perceived level of CPP/Fiscal Control involvement required  Meaningful and appropriate CSB participation

Proposals shall be evaluated first on qualifications and technical merit. Once rankings are established, the fee submittals shall be considered.

The criteria for the evaluation of proposals as stated above may be revised before any actual evaluation actually takes place.

The ratings are not intended or to be interpreted as a reflection of a Proposer’s professional abilities. Instead, they reflect the City’s best attempt

27 to quantify each Proposer’s ability to provide the services sought by the City and to meet the specific requirements of this RFP, for comparison purposes.

It is envisioned that following a detailed review of the received proposals, it will be determined by DPU that one or more of the submitted proposals will be considered to be superior to the other respondents. Interviews and/or presentations may be required with these consultants to determine which proposal will best serve the interest of CPP and will be so notified by DPU.

C. Disqualification of a Proposer/Proposal: The City does not intend by this RFP to prohibit or discourage submission of a proposal that is based upon a Proposer’s trade experience in relation to the nature or scope of work, services, or product(s) described in this RFP or to prescribe the manner in which its services are to be performed or rendered.

The City will not be obligated to accept, however, significant deviations from the work or services sought by this RFP, including terms inconsistent with or substantially varying from the services or the financial and operational requirements of the RFP, as determined solely by the City. The City reserves the right to reject any proposal that does not furnish or is unresponsive to the information required or requested herein. The City reserves the right to reject any proposal or to waive or to accept any deviation from this RFP or in any step of the proposal submission or evaluation process so as to approve the award of the contract considered in the City’s best interest, as determined in the City’s sole discretion.

Although the City prefers that each Proposer submit only one proposal including all alternatives to the proposal that the Proposer desires the City to consider, it will accept proposals from different business entities or combinations having one or more members in interest in common with another Proposer. The City may reject one or more proposals if it has reason to believe that proposers have colluded to conceal the interest of one or more parties in a proposal, and will not consider a future proposal from a participant in the collusion. In addition, the City will not accept a proposal from or approve a contract to any Proposer that is in default as surety or otherwise upon an obligation to the City or has failed to perform faithfully any previous agreement with the City, or is currently in default under any agreement with the City.

The City reserves the right to reject any or all proposals. Failure by a Proposer to respond thoroughly and completely to all information and document requests in this RFP may result in rejection of its proposal. Further, the City reserves the right to independently investigate the financial status, qualifications, experience, and performance history of a Proposer.

The City reserves the right to cancel the approval or authorization of a contract award, with or without cause, at any time before its execution of a contract and to later enter into a contract that varies from the provisions of this RFP, if agreed to by another Proposer.

29 APPENDIX A

CPP RATE SCHEDULE

§ 523.01 Provisions for Sale of Electricity The rates, rules and regulations governing the sale of the product of electric current furnished by the Department of Public Utilities, Division of Light and Power, are hereby established as set forth in the following Sections. (Ord. No. 1090-39. Passed 7-17-39) § 523.02 Residential Rate Schedule The following schedule is applicable to private single residences or to any individually metered family accommodation when service is used primarily for domestic and household purposes, as distinguished from commercial, professional or industrial purposes: (a) Kilowatt Hour Charge.

Summer Rate Winter Rate KWH Per Month (per KWH) (per KWH)

First 1,000 $0.0774 $0.0655 All over 1,000 $0.0752 $0.0353

(b) Definition of Seasonal Rate. For the purpose of this rate schedule, the summer rate shall be in effect during the months of June, July, August, September and October. The winter rate shall be in effect during the months of November, December, January, February, March, April and May. (c) Energy Adjustment Charge. In accordance with Section 523.21, an incremental charge or credit for energy may be determined on a monthly basis by the Division of Light and Power. Such incremental charge may be made in addition to the rates established in this section, but in no case shall such charge exceed the amount calculated by using the formula established in Section 523.21. (d) Environmental and Ecological Adjustment. An environmental and ecological adjustment shall be applied to this rate as set forth and described in Section 523.17. (Ord. No. 1027-83. Passed 5-6-83, eff. 5-10-83) § 523.021 Residential Incentive Rate Schedule The following schedule is applicable to private single residences or to any individually metered family accommodation when service is used primarily for domestic and household purposes, as distinguished from commercial, professional or industrial purposes: (a) Kilowatt Hour Charge.

Summer Rate Winter Rate KWH Per Month (per KWH) (per KWH)

First 1,000 $0.0696 $0.0589 All over 1,000 $0.0676 $0.0317

(b) Definition of Seasonal Rate. For the purpose of this rate schedule, the summer rate shall be in effect during the months of June, July, August, September, and October. The winter rate shall be in effect during the months of November, December, January, February, March, April and May. (c) Energy Adjustment Charge. In accordance with Section 523.21, an incremental charge or credit for energy may be determined on a monthly basis by the Division of Cleveland Public Power. Such incremental charge may be made in addition to the rates established in this section, but in no case shall such charge exceed the amount calculated by using the formula established in Section 523.21. (d) Environmental and Ecological Adjustment. An environmental and ecological adjustment shall be applied to this rate as set forth and described in Section 523.17. (e) Applicability. This rate shall be available for service installed after the effective date of this section to residential dwellings which have not been connected to Cleveland Public Power facilities within the past six (6) months, and shall be in effect through May 31, 2011. This rate schedule shall expire on June 1, 2011, after which the customers’ rates shall be determined under Section 523.02. (Ord. No. 1586-09. Passed 12-7-09, eff. 12-9-09) (BOC Res. No. 545-09. Adopted 12-9-09) § 523.03 Small Commercial Rate Schedule The following schedule is applicable to all commercial installations during any month in which such installation has a demand of less than thirty (30) kilowatts (KWD): (a) Kilowatt Hour Charge.

Summer Rate Winter Rate KWH Per Month (per KWH) (per KWH)

First 7,500 $0.0679 $0.0588 All over 7,500 $0.0398 $0.0309

(b) Definition of Seasonal Rate. For the purpose of this rate schedule, the summer rate shall be in effect during the months of June, July, August, September and October. The winter rate

shall be in effect during the months of November, December, January, February, March, April and May. (c) Special Service. Standby, temporary, special, welding, intermittent or extremely low load factor service is not included in this schedule and shall be subject to special rates based upon cost as computed by the Division of Light and Power. Applicants for these services may be charged with the cost of installing and furnishing such services as well as the cost of removal of such services at the discretion of the Division. (d) Combined Billing. At the option of the Division, commercial installations on the same premises may be combined on one (1) meter and billed under this schedule with the number of kilowatt hours in each block of the rate and the minimum charge multiplied by the number of commercial installations. (e) Plural Service Connections. Where plural service connections supply a customer on the same premises, meter readings on one (1) commercial light service connection and on one (1) commercial power service connection may, at the option of the Division, be added for billing purposes, and meter readings on two (2) or more commercial connections supplying a customer on the same premises may be added for billing purposes at the option of the Division. (f) Environmental and Ecological Adjustment. An environmental and ecological adjustment shall be applied to this rate as set forth and described in Section 523.17. (g) Energy Adjustment Charge. In accordance with Section 523.21, an incremental charge or credit for excess energy costs may be determined on a monthly basis by the Division. Such incremental charge may be made in addition to the rates established in this section, but in no case shall such charge exceed the amount calculated using the formula established in Section 523.21. (h) Determination of Applicable Schedule. In any month that the kilowatt demand (KWD) equals or exceeds thirty (30), the billing for that month shall be calculated using the Large Commercial Rate Schedule set forth in Section 523.04. (Ord. No. 1027-83. Passed 5-6-83, eff. 5-10-83) § 523.04 Large Commercial Rate Schedule The following schedule is applicable to all commercial installations during any month in which such installation has a demand equal to or greater than thirty (30) kilowatts (KWD) and less than ten thousand (10,000) kilowatts (KWD) and a kilowatt hour consumption of less than or equal to five hundred thousand (500,000). (a) Demand Charge.

Summer Rate Winter Rate Kilowatt Per Month KWD KWD

First 50 $7.99 $7.28

All over 50 $6.92 $6.33

(b) Reactive Charge.

Kilovar Per Month KVARD KVARD

For KVAR in excess of 30 $0.20 $0.20

Kilowatt Per Month KWH KWH

First 40,000 $0.0331 $0.0288 Next 60,000 $0.0207 $0.0173 All over 100,000 $0.0166 $0.0140

(d) Minimum Charge. The monthly minimum charge shall be twelve dollars and twenty-five cents ($12.25), plus the energy adjustment charge. (e) Maximum Charge. The monthly maximum charge shall be sixteen and one-half cents ($0.165)/KWH, plus the energy adjustment charge. (f) Definition of Seasonal Rate. For the purpose of this rate schedule, the summer rate shall be in effect during the months of June, July, August, September and October. The winter rate shall be in effect during the months of November, December, January, February, March, April and May. (g) Determination of Demand. The kilowatt demand shall be determined monthly by demand measurements and shall be the maximum thirty (30) minute kilowatt demand during the month. (h) Determination of Reactive Demand. For all three (3) phase installations where the kilowatt demand is sixty-five (65) or greater, and all single-phase installations where the kilowatt demand is seventy-five (75) or greater, the reactive billing demand shall be determined by multiplying the monthly kilowatt demand by the ratio of the monthly lagging reactive kilovolt ampere hours to the monthly kilowatt hours. For all three (3) phase installations where the kilowatt demand is less than sixty-five (65), and all single-phase installations where the kilowatt demand is less than seventy-five (75), the reactive billing demand shall be zero.

(i) Discount for Primary Metering. Where the electric energy is metered on the primary (2,300 volts or higher) side of the service transformers, a discount of two percent (2%) of the gross primary metered kilowatt hours may be allowed. (j) Voltage Supply Discount. Where the electric energy is provided entirely from an eleven thousand (11,000) volt circuit, a discount of five cents ($0.05) per kilowatt of demand billed may be allowed. (k) Substation Ownership Discount. A discount of thirty cents ($0.30) per kilowatt of demand billed may be allowed when a customer owns, installs and maintains transformation and substation apparatus, thereby relieving the Division of these costs. (l) Off-Peak Demand Allowance. At the option of the Division, the billing demand may be the greater of the regularly incurred demand or eighty-five percent (85%) of the maximum demand incurred during off- peak periods. The cost of special metering to determine such demand shall be charged to the customer. Off-peak periods shall be from 12:00 a.m. until 8:00 a.m., Tuesday through Saturday, and from 4:00 p.m. Saturday through 8:00 a.m. Monday. (m) Special Service. Direct current, standby, temporary, special, welding, intermittent or extremely low load and extremely low load factor service is not included in this schedule and shall be subject to special rates based upon cost as computed by the Division of Light and Power. Applicants for these services may be charged with the cost of installing and furnishing such services as well as the cost of removal of such services at the discretion of the Division. The monthly minimum charge shall be applied in the case of all special services. (n) Combined Billing. Where plural service connections supply a customer on the same premises, meter readings may, at the option of the Division, be added for billing purposes. The combined demand shall be the sum of the undiversified demands computed as for separate billing. (o) Environmental and Ecological Adjustment. An environmental and ecological adjustment shall be applied to this rate as set forth and described in Section 523.17. (p) Energy Adjustment Charge. In accordance with Section 523.21, an incremental charge or credit for excess energy costs may be determined on a monthly basis by the Division. Such incremental charge may be made in addition to the rates established in this section, but in no case shall such charge exceed the amount calculated using the formula established in Section 523.21. (q) Determination of Applicable Schedule. In any month that the kilowatt demand (KWD) is less than ten thousand (10,000) and the kilowatt hour consumption exceeds five hundred thousand (500,000), the billing for that month shall be calculated using the Industrial Rate Schedule set forth in Section 523.043. In any month that the kilowatt demand (KWD) is less than thirty (30), the billing for that month shall be calculated using the Small Commercial Rate Schedule set forth in Section 523.03

(Ord. No. 1027-83. Passed 5-6-83, eff. 5-10-83) § 523.043 Industrial Rate Schedule The following schedule is applicable to all commercial installations during any month in which such installation uses more than five hundred thousand (500,000) kilowatt hours during the current month and has a demand of less than ten thousand (10,000) kilowatts: (a) Demand Charge.

Summer Rate Winter Rate Kilowatt Per Month KWD KWD

First 50 $7.99 $7.28 All over 50 $6.92 $6.33

(b) Reactive Charge.

Kilovar Per Month KVARD KVARD

For KVAR in excess of 30 $0.20 $0.20

Kilowatt Per Month KWH KWH

First 40,000 $0.0331 $0.0288 Next 60,000 $0.0207 $0.0173 Next 200 KWH/KWD but notless than 400,000 KWH $0.0166 $0.0140 Next 200 KWH/KWD $0.0105 $0.0084 All excess KWH $0.0056 $0.0056

(d) Determination of Demand. The kilowatt demand shall be determined monthly by demand measurements and shall be the maximum thirty (30) minute kilowatt demand during the month. (e) Definition of Seasonal Rate. For the purpose of this rate schedule, the summer rate shall be in effect during the months of June, July, August, September and October. The winter rate shall

be in effect during the months of November, December, January, February, March, April and May. (f) Determination of Reactive Demand. The reactive billing demand shall be determined by multiplying the monthly kilowatt demand by the ratio of the monthly lagging reactive kilovolt ampere hours to the monthly kilowatt hours. (g) Discount for Primary Metering. Where the electric energy is metered on the primary (two thousand three hundred (2,300) volts or higher) side of the service transformers, a discount of two percent (2%) of the gross primary metered kilowatt hours may be allowed. (h) Voltage Supply Discount. Where the electric energy is provided entirely from an eleven thousand (11,000) volt circuit, a discount of five cents ($0.05) per kilowatt of demand billed may be allowed. (i) Substation Ownership Discount. A discount of thirty cents ($0.30) per kilowatt of demand billed may be allowed when a customer owns, installs and maintains transformation and substation apparatus, thereby relieving the Division of these costs. (j) Off-Peak Demand Allowance. At the option of the Division, the billing demand may be the greater of the regularly incurred demand or eighty-five percent (85%) of the maximum demand incurred during off- peak periods. The cost of special metering to determine such demand shall be charged to the customer. Off-peak periods shall be from 12:00 a.m. until 8:00 a.m., Tuesday through Saturday, and from 4:00 p.m. Saturday through 8:00 a.m. Monday. (k) Special Service. Direct current, standby, temporary, special, welding, intermittent or extremely low load and extremely low load factor service is not included in this schedule and shall be subject to special rates based upon cost as computed by the Division of Light and Power. Applicants for these services may be charged with the cost of installing and furnishing such services as well as the cost of removal of such services at the discretion of the Division. The monthly minimum charge shall be applied in the case of all special services. (l) Combined Billings. Where plural service connections supply a customer on the same premises, meter readings may, at the option of the Division, be added for billing purposes. The combined demand shall be the sum of the undiversified demands computed as for separate billing. (m) Environmental and Ecological Adjustment. An environmental and ecological adjustment shall be applied to this rate as set forth and described in Section 523.17. (n) Energy Adjustment Charge. In accordance with Section 523.21, an incremental charge or credit for excess energy costs may be determined on a monthly basis by the Division. Such incremental charge may be made in addition to the rates established in this section, but in no case shall such charge exceed the amount calculated using the formula established in Section 523.21.

(o) Determination of Applicable Schedule. In any month that the kilowatt demand (KWD) equals or exceeds ten thousand (10,000), the billing for that month shall be calculated using the Large Industrial Rate Schedule set forth in Section 523.047. In any month that the kilowatt hour consumption is less than or equal to five hundred thousand (500,000), and the kilowatt demand (KWD) is less than ten thousand (10,000), the billing for that month shall be calculated using the Large Commercial Rate Schedule set forth in Section 523.04. (Ord. No. 1027-83. Passed 5-6-83, eff. 5-10-83) § 523.047 Large Industrial Rate Schedule The following schedule is applicable to all commercial installations during any month in which such installation has a demand of greater than ten thousand (10,000) kilowatts. (a) Demand Charge.

Summer Rate Winter Rate Kilowatt Hour PerMonth KWD KWD

First 5,000 $8.43 $7.68 All over 5,000 $7.85 $7.09

(b) Reactive Charge.

Kilovar Per Month KVARD KVARD

For KVAR in excess of 10% of kilowatt demand $0.20 $0.20

Kilowatt Per Month KWH KWH

First 115 KWH/ KWD Charges are included in the demand charge Next 305 KWH/ KWD $0.0115 $0.0092 All excess KWH $0.0050 $0.0053

(d) Determination of Demand. The kilowatt demand shall be determined monthly by demand measurements and shall be the maximum thirty (30) minute kilowatt demand during the month.

(e) Determination of Reactive Demand. The reactive billing demand shall be determined by multiplying the monthly kilowatt demand by the ratio of the monthly lagging reactive kilovolt ampere hours to the monthly kilowatt hours. (f) Definition of Seasonal Rate. For the purpose of this rate schedule, the summer rate shall be in effect during the months of June, July, August, September and October. The winter rate shall be in effect during the months of November, December, January, February, March, April and May. (g) Discount for Primary Metering. Where the electric energy is metered on the primary (two thousand three hundred (2,300) volts or higher) side of the service transformers, a discount of two percent (2%) of the gross primary metered kilowatt hours may be allowed. (h) Voltage Supply Discount. Where the electric energy is provided entirely from an eleven thousand (11,000) volt circuit, a discount of five cents ($0.05) per kilowatt of demand billed may be allowed. (i) Substation Ownership Discount. A discount of thirty cents ($0.30) per kilowatt of demand billed may be allowed when a customer owns, installs and maintains transformation and substation apparatus, thereby relieving the Division of these costs. (j) Off-Peak Demand Allowance. At the option of the Division, the billing demand may be the greater of the regularly incurred demand or eighty-five percent (85%) of the maximum demand incurred during off- peak periods. The cost of special metering to determine such demand shall be charged to the customer. Off-peak periods shall be from 12:00 a.m. until 8:00 a.m., Tuesday through Saturday, and from 4:00 p.m. Saturday through 8:00 a.m. Monday. (k) Special Service. Direct current, standby, temporary, special, welding, intermittent or extremely low load and extremely low load factor service is not included in this schedule and shall be subject to special rates based upon cost as computed by the Division of Light and Power. Applicants for these services may be charged with the cost of installing and furnishing such services as well as the cost of removal of such services at the discretion of the Division. The monthly minimum charge shall be applied in the case of all special services. (l) Combined Billings. Where plural service connections supply a customer on the same premises, meter readings may, at the option of the Division, be added for billing purposes. The combined demand shall be the sum of the undiversified demands computed as for separate billing. (m) Environmental and Ecological Adjustment. An environmental and ecological adjustment shall be applied to this rate as set forth and described in Section 523.17. (n) Energy Adjustment Charge. In accordance with Section 523.21, an incremental charge or credit for excess energy costs may be determined on a monthly basis by the Division. Such incremental charge may be made in addition to the rates established in this section, but in no case shall such charge exceed the amount calculated using the formula established in Section 523.21.

(o) Determination of Applicable Schedule. In any month that the demand is less than ten thousand (10,000) kilowatts, the billing for that month shall be calculated using the Industrial Rate Schedule set forth in Section 523.043. (Ord. No. 1027-83. Passed 5-6-83, eff. 5-10-83) § 523.048 Optional Large Industrial Rate Schedule The following schedule is applicable to all commercial customers who contract for a demand equal to or in excess of ten thousand (10,000) kilowatts for a period of not less than five (5) years and who are served at a primary voltage of 138,000 volts. (a) Demand Charge.

Kilowatt Per Month Summer Winter

$8.15/ $7.35/ For the first 10,000 KWD KWD KWD For all over 10,000 $7.85/ $7.09/ KWD KWD KWD

(b) Reactive Charge.

Kilovar Per Month Summer Winter

$0.20/ $0.20/ For all KVAR in excess of 10% of kilowatt demand KVARD KVARD

Kilowatt Per Month Summer Winter

For the first 115 KWH/KWD Charges are included in the demand charge $0.0115/ $0.0092/ For the next 305 KWH/KWD KWH KWH $0.0050/ $0.0053/ For all excess KWH KWH KWH

(d) Determination of Demand. The kilowatt demand shall be determined monthly by demand measurements, and shall be the maximum thirty (30) minute kilowatt demand during the month. (e) Determination of Reactive Demand. The reactive billing demand shall be determined by multiplying the monthly kilowatt demand by the ratio of the monthly lagging reactive kilovolt ampere hours to the monthly kilowatt hours. (f) Definition of Seasonal Rate. For the purpose of this rate schedule, the summer rate shall be in effect during the months of June, July, August, September and October. The winter rate shall be in effect during the months of November, December, January, February, March, April and May. (g) Metering. Electric energy shall be metered on the secondary side of the service transformers. (h) Facilities Ownership Discount. When a customer owns or constructs transmission, transformation, substation apparatus or other facilities, relieving the Division of these costs, a discount of rates and charges may be allowed based on the cost of service to such customer as determined by the Division. (i) Combined Billing. At the option of the Division, where plural connections supply the same customer, meter readings may be added for billing purposes and the combined demand shall be the coincident demand or the sum of the undiversified demands. (j) Environmental and Ecological Adjustment. An environmental and ecological adjustment may be applied to this rate as set forth and described in Section 523.17. (k) Energy Adjustment Charge. An incremental charge for excess energy costs may be determined on a monthly basis by the Division and applied in addition to the rates established in this section. The energy adjustment charge shall be determined by dividing the sum of the costs of coal, oil, gas and all costs of purchase power from a specific source or sources purchased by the Division for distribution to the Consumer by the total kilowatt hours distributed to Consumer. From the resulting figure shall be subtracted fifteen (15) mils per kilowatt hour, which constitutes the cost of coal, oil, gas and purchase power which is imbedded in the Optional Large Industrial Rate Schedule. In the event that no specific energy source is identified for Consumer, the energy adjustment charge shall be determined pursuant to Section 523.21(c)(2). (Ord. No. 327-95. Passed 2-27-95, eff. 3-6-95) § 523.049 Capacity Enhancement Incentive Rate Schedule The following schedule is applicable to all new commercial customers who have not received Cleveland Public Power service at their present location in the preceding two (2) years, who enter into a written ten (10) year contract for service anticipated to commence in 2010, who will be served by distribution capacity created as part of Cleveland Public Power’s “Capacity Enhancement Program,” and whose peak demand is equal to or in excess of one hundred fifty (150) kilowatts. The availability of this rate schedule shall be limited to the first one hundred thousand (100,000) kilowatts of peak demand contracted under this rate schedule, or such lower total as may be determined by the Division.

The rates and charges contained in paragraphs (a) through (h) of this schedule shall be fixed for the duration of the initial contract term. For all commercial installations during any month in which such installation has a demand of less than one hundred fifty (150) kilowatts, the appropriate standard rate schedule shall apply. For all commercial installations during any month in which such installation has a demand of at least one hundred fifty (150) kilowatts and less than six hundred fifty (650) kilowatts: (a) Customer Charge per Month: Ninety dollars and fifty-eight cents ($90.58). (b) Demand Charge.

Kilowatt Per Month Summer Winter

$14.269/ $13.326/ For the first 200 KWD KWD KWD $12.631/ $11.750/ For all excess KWD KWD KWD

Kilovar Demand Per Month Summer Winter

$0.456/ $0.456/ For all KVARD in excess of 30 KVARD KVARD

(d) Kilowatt Hour Charge.

Kilowatt Per Month Summer Winter

$0.06709/ $0.06365/ For the first 200 KWH/KWD KWH KWH $0.05115/ $0.04790/ For the next 200 KWH/KWD KWH KWH $0.04197/ $0.04017/ For all excess KWH KWH KWH

For all commercial installations during any month in which such installation has a demand equal to or greater than six hundred fifty (650) kilowatts: (e) Customer Charge Per Month: Two hundred twenty-six dollars and thirty-two cents ($226.32) (f) Demand Charge.

Kilowatt Per Month Summer Winter

$14.994/ $14.994/ For the first 500 KWD KWD KWD $13.905/ $13.905/ For the next 500 KWD KWD KWD $11.723/ $11.723/ For all excess KWD KWD KWD

(g) Reactive Charge.

Kilovar Demand Per Month Summer Winter

$0.456/ $0.456/ For all KVARD in excess of 30 KVARD KVARD

(h) Kilowatt Hour Charge.

Kilowatt Per Month Summer Winter

$0.06480/ $0.06480/ For the first 150 KWH/KWD KWH KWH $0.05100/ $0.05100/ For the next 150 KWH/KWD KWH KWH $0.03552/ $0.03552/ For the next 150 KWH/KWD KWH KWH $0.01362/ $0.01362/ For all excess KWH KWH KWH

(i) Determination of Demand. The kilowatt demand shall be determined monthly by demand measurements, and shall be the maximum thirty (30) minute kilowatt demand during the month. (j) Determination of Reactive Demand. The reactive billing demand shall be determined by multiplying the monthly kilowatt demand by the ratio of the monthly lagging reactive kilovolt ampere hours to the monthly kilowatt hours. At the Division’s option, the reactive billing demand may be the metered reactive demand. (k) Definition of Seasonal Rate. For the purpose of this rate schedule, the summer rate shall be in effect for bills rendered during the months of June, July, August, and September. The winter rate shall be in effect for bills rendered during the months of October, November, December, January, February, March, April, and May. (l) Discount for Primary Metering. Where the electric energy is metered on the primary (two thousand three hundred (2,300) volts or higher) side of the service transformers, a discount of two percent (2%) of the gross primary metered kilowatt hours may be allowed. (m) Substation Ownership Discount. A discount of thirty cents ($0.30) per kilowatt of demand billed may be allowed when a customer owns, installs and maintains transformation and substation apparatus, thereby relieving the Division of these costs. (n) Combined Billing. At the option of the Division, where plural connections supply the same customer in the same general location, meter readings may be added for billing purposes and the combined demand shall be the coincident demand or the sum of the undiversified demands. (o) Transmission, Taxes, and Other Charges. Customers under this schedule shall be charged for increases incurred after the adoption of this schedule for transmission service, costs or charges imposed by federal or state law, regulatory authorities, regional transmission operators, or reliability authorities/organizations, and taxes of any kind, however measured, paid directly or indirectly by the City. The kWh tax prescribed by RC Chapter 5727, or any successor tax, shall be charged to the same extent as such tax is applied to customers under the standard CPP rate schedules. (Ord. No. 65-08. Passed 3-31-08, eff. 4-3-08) (BOC Res. No. 309-08. Adopted 7-2-08) § 523.05 Street Lighting Schedule The following schedule is applicable to all electric street lighting service provided by the Division of Light and Power to governmental entities: (a) Non-ornamental Lighting Service.

Mercury Vapor (Watt) KWH/Lamp Monthly Rate/Lamp

175 75 $5.55 250 105 $6.46

400 165 $8.40 1000 395 $14.00 High Pressure Sodium (Watt) KWH/Lamp Monthly Rate/Lamp

100 52 $6.20 150 71 $7.66 250 112 $9.94 400 174 $11.28

(b) Ornamental Lighting Service – Type I (thirty (30) ft. Steel Pole).

Mercury Vapor (Watt) KWH/Lamp Monthly Rate/Lamp

100 (E & M only) 46 $6.00 175 75 $14.10 175 (E & M only) 75 $4.57 250 105 $14.75 250 (E & M only) 105 $5.15 400 165 $16.50 400 (E & M only) 165 $6.55 700 280 $17.50 700 (E & M only) 280 $8.00 1000 395 $22.45 1000 (E & M only) 395 $9.95 High Pressure Sodium (Watt) KWH/Lamp Monthly Rate/Lamp

100 52 $10.58 100 (E & M only) 52 $6.15 150 71 $12.04 150 (E & M only) 71 $7.55 250 112 $14.62 250 (E & M only) 112 $9.25 400 174 $18.00

400 (E & M only) 174 $12.25 Fluorescent (Watt*) KWH/Lamp Monthly Rate/Lamp

200 101 $10.45

* Not available for new installation (c) Ornamental Lighting Service – Type II (thirty (30) ft. Concrete Pole).

Mercury (Watt) KWH/Lamp Monthly Rate/Lamp

400 165 $22.99 High Pressure Sodium (Watt) KWH/Lamp Monthly Rate/Lamp

250 112 $21.21 400 174 $24.59

(d) Ornamental Lighting Service – Type III (forty-one (41) ft. Steel Pole w/Breakaway Base).

Mercury Vapor (Watt) KWH/Lamp Monthly Rate/Lamp

1000 395 $34.45 High Pressure Sodium (Watt) KWH/Lamp Monthly Rate/Lamp

400 174 $30.00

(e) Street and Highway Lighting Service – Energy Only.

Mercury (Watt) KWH/Lamp Monthly Rate/Lamp

100 (Controlled) 40 $1.15 100 (Continuous) 96 $2.40 175 (Controlled) 75 $1.88 175 (Continuous) 158 $3.95 250 (Controlled) 105 $2.63

Mercury (Watt) KWH/Lamp Monthly Rate/Lamp

250 (Continuous) 220 $5.50 400 (Controlled) 165 $4.13 400 (Continuous) 346 $8.65 700 (Controlled) 280 $7.00 1000 (Controlled) 395 $9.88 High Pressure Sodium (Watt) KWH/Lamp Monthly Rate/Lamp

100 (Controlled) 52 $1.30 100 (Continuous) 110 $2.75 150 (Controlled) 71 $1.78 150 (Continuous) 150 $3.75 200 (Controlled) 88 $2.20 200 (Continuous) 185 $4.63 High Pressure Sodium (Watt) KWH/Lamp Monthly Rate/Lamp

250 (Controlled) 112 $2.80 250 (Continuous) 236 $5.90 400 (Controlled) 174 $4.35 400 (Continuous) 366 $9.15 1000 (Controlled) 396 $9.90 Metal Halide (Watt) KWH/Lamp Monthly Rate/Lamp

1000 (Controlled) 391 $9.78

(f) Terms and Conditions. (1) Street lights will be operated by time clock or by photoelectric control, to provide illumination from dusk to dawn, unless illumination is specified as continuous. (2) The Division of Light and Power pays for the entire installation and amortizes the costs through the monthly rate. If the installation is paid for by an outside party (Federal, State, County or private) and the Division maintains the installation, the Division shall charge the appropriate “energy and maintenance only” (E & M only) rate.

If the installation is paid for and maintained by an outside party (Federal, State, County or private), the Division shall charge the appropriate “energy only” rate. (3) The Division may, at its discretion, meter “energy only” installations. If such an installation is metered, the energy shall be billed at two and one- half cents ($0.025) per kilowatt hour. (4) “Non-ornamental lighting service” means lights of an overhead-type construction where the supply circuits are overhead wires and the lights are attached or suspended from wooden poles, trolley poles or are wall-mounted. (5) “Ornamental lighting service” means all lights other than non-ornamental including lights of an underground-type construction where the supply circuits are underground cables and lights are attached to ornamental standards; lights of an overhead construction where the supply circuits are overhead and the lights are attached to ornamental steel or concrete poles; and the lights that are wall-mounted in which the supply circuit is enclosed in conduit. (g) Environmental and Ecological Adjustment. An environmental and ecological adjustment may be applied to this rate as set forth and described in Section 523.17. (h) Energy Adjustment Charge. In accordance with Section 523.21, an incremental charge or credit for excess energy costs may be determined on a monthly basis by the Division. Such incremental charge may be made in addition to the rates established in this section, but in no case shall such charge exceed the amount calculated using the formula established in Section 523.21. (Ord. No. 1027-83. Passed 5-6-83, eff. 5-10-83) § 523.06 Protective Lighting Schedule (a) The following schedule is applicable to all protective lighting service provided by the Division of Light and Power. Such service shall include installation and full maintenance.

Area Lighting KWH/ Lamp Monthly Rate/Lamp

100 Watt High Pressure Sodium 52 $12.67 175 Watt Mercury Vapor 75 $8.32 250 Watt Mercury Vapor 105 $9.41 250 Watt High Pressure Sodium 112 $15.16 400 Watt Mercury Vapor 165 $13.39 400 Watt High Pressure Sodium 174 $19.14 1000 Watt Mercury 395 $20.40 1000 Watt Metal Halide 391 $27.85

KWH/ Monthly Flood Lighting Lamp Rate/Lamp

250 Watt Mercury Vapor 105 $10.61 250 Watt High Pressure 112 $14.41 Sodium 400 Watt Mercury Vapor 165 $16.69 400 Watt High Pressure 174 $20.45 1000 Watt Mercury Vapor 395 $22.03 1000 Watt Metal Halide 391 $29.05 1000 Watt Quartz 348 $23.70 1500 Watt Quartz 522 $25.27

(b) Environmental and Ecological Adjustment. An environmental and ecological adjustment may be applied to this rate as set forth and described in Section 523.17. (c) Energy Adjustment Charge. In accordance with Section 523.21, an incremental charge or credit for excess energy costs may be determined on a monthly basis by the Division. Such incremental charge may be made in addition to the rates established in this section, but in no case shall such charge exceed the amount calculated using the formula established in Section 523.21. (Ord. No. 1027-83. Passed 5-6-83, eff. 5-10-83) § 523.061 Charge for Outdoor Residential Lighting The charge for outdoor residential lighting equipment provided by Cleveland Public Power shall be established in accordance with the cost of service as computed by the division. The division may allow a customer to pay such charges under a payment plan through installments included in the customer’s bill, for a period of twelve (12) months commencing with the first billing period after installation, provided such customer has a good account history, as determined by the division. (Ord. No. 510-98. Passed 5-18-98, eff. 5-25-98) § 523.062 Homestead Discount for Outdoor Residential Lighting The charges for outdoor residential lighting established pursuant to Section 523.061 shall be discounted by ten percent (10%) for any customer who has obtained a certificate of reduction of taxes pursuant to the Homestead Exemption provisions of RC 323.151 through 323.157. (Ord. No. 1277-98. Passed 7-29-98, eff. 8-5-98)

§ 523.065 Traffic Signal Service Rate Schedule The following schedule is applicable to all energy sold to governmental entities for the purpose of traffic signal service: (a) Kilowatt Hour Charge.

Summer Rate Winter Rate

$0.023 $0.023

(b) Definition of Seasonal Rates. For the purpose of this rate schedule, the summer rate shall be in effect during the months of June, July, August, September and October. The winter rate shall be in effect during the months of November, December, January, February, March, April and May. (c) Environmental and Ecological Adjustment. An environmental and ecological adjustment may be applied to this rate as set forth and described in Section 523.17. (d) Energy Adjustment Charge. In accordance with Section 523.21, an incremental charge or credit for excess energy costs may be determined on a monthly basis by the Division of Light and Power. Such incremental charge may be made in addition to the rates established in this section, but in no case shall such charge exceed the amount calculated using the formula established in Section 523.21. (Ord. No. 1027-83. Passed 5-6-83, eff. 5-10-83) § 523.21 Energy Adjustment Charge (a) An additional incremental charge for excess fuel and power production and purchase power costs may be applied to the rates prescribed in Sections 523.02 to 523.065 and any other rate schedule as may be adopted by the City. (b) The incremental charge shall be based on the fuel and purchase power cost per kilowatt hour delivered calculated under divisions (c)(1) and (c)(2) of this section. (c) (1) The fuel and purchase power cost per kilowatt hour sold to residential ratepayers shall be determined by dividing the sum of the cost of the kilowatt hours purchased from the Power Authority of the State of New York and the average cost of kilowatt hours purchased from other sources needed to supply the residential customers by the total kilowatt hours distributed to residential customers. The incremental charge calculated herein shall be adjusted by subtracting fifteen (15) mils per kilowatt hour for residential customers who provide the Division of Cleveland Public Power with a certificate of reduction of taxes obtained pursuant to the Homestead Exemption provisions of Sections 323.151 through 323.157 of the Revised Code, and nine and three-quarters (9.75) mils per kilowatt hour for all other residential customers.

(2) Except as provided in Section 523.048, the fuel and purchase power cost per kilowatt hour sold to all ratepayers, other than residential ratepayers, during the twelve (12) months of the year, shall be determined by dividing the sum of the total cost of coal, oil, gas and purchase power by the total kilowatt hours distributed, except that the computation shall exclude the cost of PASNY power and the amount of PASNY power allocable to kilowatt hours distributed, and shall exclude the costs of all purchase power and kilowatt hours from a specific source or sources purchased by the Division for distribution to ratepayers pursuant to Sections 523.048 and 523.049. The incremental charge calculated herein shall be adjusted by subtracting three (3.0) mils per kilowatt hour. (d) At the end of each month, the Division of Cleveland Public Power shall determine the actual fuel and power costs during such month as herein provided and may adjust the additional incremental charge for future months to defer or over-recover the total cost of power in order to stabilize customer bills. (Ord. No. 567-14. Passed 5-19-14, eff. 5-20-14) (BOC Res. No. 254-12. Adopted 6-13-12)

APPENDIX B

LIST OF ANCILLARY FEES AND CHARGES FOR CPP

§ 523.12 Special Charges The following service charges may be charged by the Division of Light and Power:

Service Charge

Temporary Construction Actual cost Power-50 amp ($45.00 min.) Actual cost Power-100 amp ($60.00 min.) Loosen service pipe for construction $20.00 Refasten service pipe after construction $20.00 Service Charge

Reconnection after disconnection for nonpayment $8.00 Pick up delinquent payment $5.00 Actual Cost Relocate service ($30.00 min.) $1.75/KVA of Standby service transformer capacity Relocation of pole or other facilities Actual cost Penalty for late payment of large commercial, industrial, large 1% per month on unpaid industrial, street lighting and traffic signal invoices balance

(Ord. No. 940-81. Passed 3-8-82, eff. 3-10-82) § 523.23 Pole and Anchor Attachments The following schedule is applicable to any attachment of communication facilities to poles owned by the Division of Light and Power (“attachments”) by any person or entity (“permittee”) other than a joint owner of such pole or a party to any joint use agreement. (a) Application for Attachment. Any person or entity desiring to install attachments shall make a written request for permission to install attachments on any pole owned by the Division of Light and Power. The request shall specify the location of each pole, the identifying number of each pole, the nature of the proposed attachment and the amount and location of space desired. Within thirty (30) days after receipt of a written request, the Division shall notify the applicant whether or not it will permit the attachment and under what conditions. The Division shall have the sole right to determine whether an attachment would adversely affect its electric utility

services and its ability to provide such services in an economic and safe manner, including considerations for the future needs of its customers. (b) Conditions of Attachment. All attachments shall be placed on Division’s poles in a manner satisfactory to the Division and shall not interfere with the present or future use of the pole by the Division. All attachments shall be installed and at all times maintained by the permittee so as to comply with the requirements of the National Electrical Safety Code and other applicable Federal, State, County, or Municipal codes, as well as operating procedures of the Division of Light and Power. The permittee shall be responsible for obtaining any right, license or permit from any governmental body, authority, or other person or persons which may be required for the construction and maintenance of the attachments of the permittee, including easements, rights-of-way, or rights of entry upon premises. If the Division desires to replace an existing pole, or add facilities to an existing pole, to which the permittee has made attachments, the permittee shall, where required by the Division, relocate its facilities at its own expense. In the event that a permittee fails to make or maintain any attachments in conformance to all applicable codes and procedures, the Division, after fifteen (15) days’ written notice, shall have the right to make, or cause to be made, the necessary corrections or shall have the right to remove such attachments, without liability, at the entire expense of the permittee. In the event of any emergency which, in the opinion of the Division, affects or threatens to affect the operations of the Division, the Division shall have the right to perform such detachment, disconnection, relocation or alteration, at the permittee’s expense, of such attachments as may be necessary to meet such emergency. (c) Attachment Rental Fee. $0.25 per month for each pole attachment $0.50 per month for each anchor attachment Attachment rental fees shall be billed monthly and shall be due and payable on or before twenty-one (21) calendar days following the date on which the bill is issued. Payments received after the due date shall be subject to the same penalty as prescribed in Section 523.12. The bill for attachment rental fees will reflect the total number of attachments in place during the previous month. Within five (5) days following the end of each calendar month, the permittee shall notify the Division, in writing, of the completion of all attachments, or removal thereof, during the preceding month. (d) Reimbursement of Costs. If attachment to the Division’s poles imposes on the Division costs which would not otherwise be incurred, the party requesting attachment shall reimburse the Division for all such costs. Such costs may include, but are not necessarily limited to any change in or strengthening of poles, any rearrangement, alteration or addition, or other changes in existing facilities, which in the opinion of the Division are necessary to accommodate the attachments of the party or entity requesting an attachment. Such costs may also include billing, engineering, and any necessary evaluation of the applicant’s request for attachments. The Division reserves the right to require the permittee to have all necessary work performed at the

permittee’s expense by a contractor engaged by the permittee and approved by the Division, performing work in construction standards of the Division. (e) Multiple Applicants for Attachment. When the Division receives application from more than one (1) applicant for permission to attach to any pole and, because of such multiple attachments, either the pole must be replaced or the facilities thereon must be rearranged to provide additional space for the attachments, the Division may apportion the additional total costs resulting from the pole replacement or rearrangement among all permittees. Such apportioned costs shall include common engineering, material and other expenses which result from the multiple applications and the multiple attachments. The permittee shall be bound by the Division’s determination as to any such apportionment of costs. (f) Power Supplies and Amplifiers. Power supplies and amplifiers may be mounted on the Division’s poles at the sole discretion of the Division. Permittee shall request permission to mount such facilities in writing to the Division. The location and design shall be approved by the Division prior to installation. Any electric service for power supplies and amplifiers shall be paid for by the permittee at the Division’s applicable electric rate. The meter, if required, will be furnished by the Division. The meter base will be furnished by the Division and installed by the permittee according to standards set forth by the Division. The permittee’s service conductors, if required, shall be furnished and installed by the permittee with weatherhead included. Sufficient conductor shall be left to reach the Division’s secondary circuit. The permittee shall ensure that all equipment is effectively grounded to an earth ground, separate and apart from any ground wire belonging to the Division, and shall observe the National Electrical Safety Code and all other applicable codes in the installation of these facilities. Power supplies and amplifiers will not be permitted on poles which have transformers, reclosers, cut-outs, oil switches, capacitors, or other equipment of a size or type which would impair climbing or working space if an additional pole-mounted facility were installed. Power supplies and amplifiers may be prohibited in situations deemed sensitive from the standpoint of pole line appearance. The permittee shall install all of its attachments so as to not interfere with climbing space as defined by the National Electrical Safety Code or specifically defined by the Division. (g) Inspection of Facilities. The Division shall have the right to inspect each installation of the permittee upon its poles and thereafter to make periodic inspections. The permittee shall reimburse the Division for the expense of such inspection, which reimbursement for any pole subject hereto, shall not exceed in any year the expense of one (1) inspection. The right to make such inspections and any inspection made shall not impose any obligation or liability on the Division nor shall it relieve the permittee of any responsibility, obligation, or liability. (h) Indemnification. The permittee shall indemnify, hold harmless, and defend the Division from and against any and all actions or causes of actions, claims, demands, liabilities, loss, damage, or expense whatsoever, including attorney’s fees, which the Division may suffer or incur by reason of the failure of the permittee to secure any right, license, permit, or easement required for the construction or maintenance of permittee’s attachments to the Division’s poles,

3 by reason of interruption of permittee’s service to permittee’s subscribers, by reason of bodily injury, including death, to any person or persons, or by reason of damage to or destruction of any property, including the loss of use thereof, arising out of or in any manner connected with the facilities of the permittee to be installed hereunder, or the installation, maintenance, removal, rearrangement or alteration of such facilities by the Division or permittee, or which the Division may sustain or incur in connection with any litigation, investigation, or other expenditures incident thereto including any suit instituted to enforce contractual obligations whether or not due in whole or part to any act, omission, or negligence of the Division, or any of its representatives or employees. (i) Right of Termination. If the permittee fails to comply with any of the provisions of this section or defaults in the performance of any of its obligations under this section and fails to correct such default or non-compliance, the Division may, at its option, remove the permittee’s facilities from the Division’s poles and no liability shall be incurred by the Division because of such action. The permittee shall be liable for the entire cost of removing its attachments from the Division’s poles. (j) Unauthorized Attachments. If equipment or facilities are attached to the Division’s poles for which no attachment is authorized, the Division may require the owner of the attached facilities to remove the attachments immediately at the owner’s cost, or the Division may remove the facilities at the expense of the owner of the attachments without liability to the Division. (Ord. No. 2069-87. Passed 9-21-87, eff. 9-23-87)

APPENDIX C

2016 SEPARATELY ISSUED REPORT FOR CPP

CITY OF CLEVELAND, OHIO

DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

REPORT ON AUDIT OF FINANCCIAL STATEMENTS For the year ended December 31, 2016

CITY OF CLEVELAND, OHIO

DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

TABLE OF CONTENTS

Page

Independent Auditors' Report ...... 1-2

Management’s Discussion and Analysis ...... 3-14

Statement of Net Position ...... 16-17

Statement of Revenues, Expenses and Changes in Net Position ...... 19

Statement of Cash Flows ...... 20-21

Notes to Financial Statements ...... 23-45

Required Supplementary Information ...... 46-47

INDEPENDENT AUDITORS’ REPORT

To the Honorable Frank G. Jackson, Mayor, Members of Council and the Audit Committee Division of Cleveland Public Power Department of Public Utilities City of Cleveland, Ohio:

Report on the Financial Statements

We have audited the accompanying financial statements of the Division of Cleveland Public Power, Department of Public Utilities, City of Cleveland, Ohio (the “Division”) as of and for the year ended December 31, 2016 and the related notes to the 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.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. 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 auditors’ 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.

Opinion

In our opinion, the financial statements referred to previously present fairly, in all material respects, the financial position of the Division of Cleveland Public Power, Department of Public Utilities, City of Cleveland, Ohio as of December 31, 2016, and the changes in financial position and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

1 Emphasis of Matter

As described in Note A to the basic financial statements, the financial statements present only the Division and do not purport to, and do not present fairly the financial position of the City of Cleveland as of December 31, 2016, and the respective changes in its financial position and cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and schedules of net pension liability and pension contributions, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a 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 audit 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. Clark, Schaefer, Hackett & Co.

Cincinnati, Ohio June 27, 2017

2 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

MANAGEMENT'S DISCUSSION AND ANALYSIS

GENERAL

As management of the City of Cleveland’s (the City) Department of Public Utilities, Division of Cleveland Public Power (the Division), we offer readers of the Division’s financial statements this narrative overview and analysis of the financial activities of the Division for the year ended December 31, 2016. Please read this information in conjunction with the Division’s financial statements and footnotes that begin on page 16.

The Division was created in 1906 and charged with the responsibility for the distribution of electricity and related electric service to customers within its service areas. The Division operates a municipal electric system that is the largest in the State of Ohio and the thirty-ninth largest in the United States according to the American Municipal Power Association’s statistics for 2013. The Division serves an area that is bound by the City limits and presently serves approximately 73,700 customers.

The Division is one of the very few municipal electric companies in the United States that competes with an investor-owned utility, in this case First Energy Corporation’s Cleveland Electric Illuminating Company (CEI).

According to the most recent census estimates, the City’s population is 390,000 people. There are approximately 212,000 residential dwelling units. Approximately 33,000 companies have a presence in Cleveland. The Division has distribution facilities in about 60% of the geographical area of the City, primarily on the east side.

The Division obtains substantially all of its power and energy requirements through agreements with various regional utilities and other power suppliers for power delivered through CEI interconnections. The balance of the Division's power and energy requirements are satisfied with production from the Division's three combustion turbine generating units and various arrangements for the exchange of short-term power and energy. To reduce its reliance on the wholesale market, the Division’s long-term base load supply will include a mix of power provided by participation in American Municipal Power (AMP) Inc. hydroelectric projects, the Fremont Energy Center, the Prairie State Energy Campus project and the new Blue Creek Wind project.

COMPARISON OF CURRENT YEAR’S AND PRIOR YEARS’ DATA

FINANCIAL HIGHLIGHTS

• The Division’s net position was $197,764,000 and $197,277,000 at December 31, 2016 and 2015, respectively. Of these amounts, $26,886,000 and $28,268,000 are unrestricted net position at December 31, 2016 and 2015, respectively, which may be used to meet the Division’s ongoing obligations to customers and creditors.

• The Division’s total net position increased by $487,000 in 2016. The increase in net position is primarily due to a reduction in the loss on the disposal of assets of $1,291,000 as compared to 2015.

CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued)

FINANCIAL HIGHLIGHTS (Continued)

• The Division’s total long-term bonded debt decreased by $11,315,000 for the year ended December 31, 2016. The decrease is attributed to scheduled payments to bondholders and the refunding of outstanding bonds.

OVERVIEW OF THE FINANCIAL STATEMENTS

This discussion and analysis is intended to serve as an introduction to the Division’s basic financial statements. The accompanying financial statements present financial information for the City’s Division of Cleveland Public Power Fund, in which the City accounts for the operations of the Department of Public Utilities, Division of Cleveland Public Power. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements.

The Division is considered an enterprise fund because the operations of the Division are similar to a private sector business enterprise. Accordingly, in accounting for the activities of the Division, the economic resources measurement focus and accrual basis of accounting are used. This is similar to businesses in the private sector.

The basic financial statements of the Division can be found on pages 16 - 21 of this report. The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the basic financial statements. The notes to the financial statements can be found on pages 23 – 45 of this report. Required supplementary information can be found on pages 46 - 47.

4 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued)

CONDENSED STATEMENT OF NET POSITION INFORMATION

Provided below is condensed statement of net position information for the Division as of December 31, 2016 and 2015.

2016 2015 (Amounts in Thousands) Assets: Capital assets, net of accumulated depreciation$ 353,569 $ 353,724 Restricted assets 18,042 21,574 Current assets 79,376 84,203 Total assets 450,987 459,501

Deferred outflows of resources 23,202 18,856

Net Position: Net investment in capital assets 167,356 165,505 Restricted for capital projects 484 473 Restricted for debt service 3,038 3,031 Unrestricted 26,886 28,268 Total net position 197,764 197,277 Liabilities: Long-term obligations 248,921 248,855 Current liabilities 26,941 29,246 Total liabilities 275,862 278,101

Deferred inflows of resources 563 2,979

Restricted assets: The Division’s restricted assets decreased by $3,532,000. The decrease is primarily related to use of revenue bond funds for capital project expenses.

Current assets: The Division’s current assets decreased by $4,827,000 in 2016. The decrease is mainly due to a reduction of $7,724,000 in unrestricted cash and cash equivalents, offset by an increase of $2,291,000 in recoverable cost of purchased power. The decline in unrestricted cash and cash equivalents is primarily attributed to payments on prior year accrued liabilities, an increase in net accounts receivable of $1,765,000 and power costs incurred but not passed through to customers.

5 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued)

CONDENSED STATEMENT OF NET POSITION INFORMATION (Continued)

Capital assets: The Division’s capital assets as of December 31, 2016, amounted to $353,569,000 (net of accumulated depreciation). The total decrease in the Division’s net capital assets for the current year was $155,000. A summary of the activity in the Division’s capital assets during the year ended December 31, 2016, is as follows:

Balance Balance January 1, December 31, 2016 Additions Reductions 2016 (Amounts in Thousands) Land$ 5,568 $ $$ 5,568 Land improvements 305 (12) 293 Utility plant 518,471 8,914 (2,249) 525,136 Buildings, structures and improvements 22,110 48 22,158 Furniture, fixtures, equipment and vehicles 83,420 906 (332) 83,994 Construction in progress 82,694 14,436 (4,880) 92,250 Total 712,568 24,304 (7,473) 729,399 Less: Accumulated depreciation (358,844) (18,319) 1,333 (375,830) Capital assets, net $ 353,724 $ 5,985 $ (6,140) $ 353,569

The principal additions to construction in progress during 2016 included the following:

• Lake Road • Ridge Road Substation • Denison Avenue • Customer ATO (Automatic Throw Over) Switches

6 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued)

CONDENSED STATEMENT OF NET POSITION INFORMATION (Continued)

Capital Assets (Amounts in Thousands) 700,000 600,000 500,000 Total * 400,000 Net of Accumulated 300,000 Depreciation * 200,000 Construction in 100,000 Progress ‐ 2011 2012 2013 2014 2015 2016

* Construction in Progress not included

Additional information on the Division’s capital assets, including commitments made for future capital expenditures, can be found in Note D to the basic financial statements.

Current liabilities: The decrease in current liabilities of $2,305,000 is primarily due to the decrease of $2,807,000 in other accrued expenses. The Division accrued $2,813,000 of the 2015 liability for costs associated with the remediation of an oil spill that occurred at the Lake Road generating plant. The cleanup work was completed in 2016 and the associated liability removed. In addition, there was a decrease of $1,414,000 in payable from restricted assets, offset by an increase in accounts payable of $1,784,000.

Pension Liability: During 2015, the Division adopted Governmental Accounting Standards Board (GASB) Statements No. 68 and 71 which significantly revises accounting for pension costs and liabilities. For reasons discussed below, many end users of this financial statement will gain a clearer understanding of the Division’s actual financial condition by adding deferred inflows of resources related to pension and the net pension liability to the reported net position and subtracting deferred outflows of resources related to pension.

GASB standards are national and apply to all government financial reports prepared in accordance with generally accepted accounting principles. When accounting for pension costs, GASB Statement No. 27 focused on a funding approach. This approach limited pension costs to contributions annually required by law, which may or may not be sufficient to fully fund each plan’s net pension liability. GASB Statement No. 68 takes an earnings approach to pension accounting; however, the nature of Ohio’s statewide pension systems and state law governing those systems requires additional explanation in order to properly understand the information presented in these statements.

7 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued)

CONDENSED STATEMENT OF NET POSITION INFORMATION (Continued)

Under the new standards required by GASB Statement No. 68, the net pension liability equals the Division’s proportionate share of each plan’s collective:

1. Present value of estimated future pension benefits attributable to active and inactive employees’ past service 2. Minus plan assets available to pay these benefits

GASB notes that pension obligations, whether funded or unfunded, are part of the “employment exchange” – that is, the employee is trading his or her labor in exchange for wages, benefits, and the promise of a future pension. GASB noted that the unfunded portion of this pension promise is a present obligation of the Division, part of a bargained-for benefit to the employee, and should accordingly be reported by the Division as a liability since they received the benefit of the exchange. However, the Division is not responsible for certain key factors affecting the balance of this liability. In Ohio, the employee shares the obligation of funding pension benefits with the employer. Both employer and employee contribution rates are capped by State statute. A change in these caps requires action of both Houses of the General Assembly and approval of the Governor. Benefit provisions are also determined by State statute. The employee enters the employment exchange with the knowledge that the employer’s promise is limited not by contract but by law. The employer enters the exchange also knowing that there is a specific, legal limit to its contribution to the pension system. In Ohio, there is no legal means to enforce the unfunded liability of the pension system against the public employer. State law operates to mitigate/lessen the moral obligation of the public employer to the employee, because all parties enter the employment exchange with notice as to the law. The pension system is responsible for the administration of the plan.

Most long-term liabilities have set repayment schedules or, in the case of compensated absences (i.e. sick and vacation leave), are satisfied through paid time-off or termination payments. There is no repayment schedule for the net pension liability. As explained above, changes in pension benefits, contribution rates, and return on investments affect the balance of the net pension liability, but are outside the control of the Division. In the event that contributions, investment returns, and other changes are insufficient to keep up with required pension payments, State statute does not assign/identify the responsible party for the unfunded portion. Due to the unique nature of how the net pension liability is satisfied, this liability is separately identified within the long-term liability section of the statement of net position.

In accordance with GASB Statement No. 68, the Division statements prepared on an accrual basis of accounting include an annual pension expense for their proportionate share of each plan’s change in net pension liability not accounted for as deferred inflows/outflows of resources.

As a result of implementing GASB Statement No. 68, the Division is reporting a net pension liability and deferred inflows/outflows of resources related to pension on the accrual basis of accounting.

Long-term obligations: The long-term obligations increase of $66,000 in 2016 is mainly due to an increase in pension liability of $7,200,000, along with an increase in accreted interest payable of $2,244,000, offset by a decrease in revenue bonds payable due to the Series 2016 Revenue Bond refunding and scheduled principal payments totaling $8,055,000.

8 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued)

CONDENSED STATEMENT OF NET POSITION INFORMATION (Continued)

At December 31, 2016, the Division had total bonded debt outstanding of $210,958,000. All bonds are backed by the revenues generated by the Division.

The Division issued revenue bonds in the public capital markets in the late 1980’s and early 1990’s to finance a substantial expansion to its service territory. The Division also issued bonds in April 2008 for system expansion. In 2006, 2010, 2012 and 2016, the Division issued bonds to refinance a portion of its long-term debt. In 2014, the Division issued refunding bonds for the purpose of leveling the Division’s debt service payments over the life of the debt. This outstanding debt is being retired in accordance with repayment schedules through 2038.

Accreted interest payable will increase every year until 2025, due to interest accruing on the Division’s 2008B Capital Appreciation Bonds (CABs). Payments of the accreted amount will begin in 2025.

The activity in the Division’s debt obligations outstanding during the year ended December 31, 2016, is summarized in the following table (excluding unamortized discounts, premiums and accreted interest):

Balance Balance January 1, Debt Debt December 31, 2016 Issued Retired 2016 (Amounts in Thousands) Revenue Bonds:

Revenue Bonds 2006 A-1$ 45,285 $$ (45,285) $ - Revenue Bonds 2006 A-2 4,435 (4,435) - Revenue Bonds 2008 A 19,040 19,040 Revenue Bonds 2008 B-1 39,735 39,735 Revenue Bonds 2008 B-2 27,903 27,903 Revenue Bonds 2010 8,990 (3,620) 5,370 Revenue Bonds 2014 76,885 76,885 Revenue Bonds 2016 42,025 42,025 Total $ 222,273 $ 42,025 $ (53,340) $ 210,958

9 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued)

CONDENSED STATEMENT OF NET POSITION INFORMATION (Continued)

The bond ratings for the Division’s outstanding revenue bonds are as follows:

Moody’s Investors Service Standard & Poor’s

A3 A-

The ratio of net revenue available for debt service to debt service requirements (revenue bond coverage) is a useful indicator of the Division’s debt position to management, customers and creditors. The Division’s revenue bond coverage for 2016 and 2015 was 149% and 150%, respectively. Additional information on the Division’s long-term debt can be found in Note B to the basic financial statements on pages 28 - 32.

Net Position: Net position serves as a useful indicator of a government’s financial position. In the case of the Division, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $197,764,000 and $197,277,000 at December 31, 2016 and 2015, respectively.

Of the Division’s net position at December 31, 2016, $167,356,000 reflects the Division’s investment in capital assets (e.g., land, buildings, utility plant, furniture, fixtures, vehicles and equipment), net of accumulated depreciation, less any related, still-outstanding debt used to acquire those assets. The Division uses these capital assets to provide services to its customers; consequently, these assets are not available for future spending. Although the Division’s investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other resources since the capital assets themselves cannot be used to liquidate these liabilities.

In addition, $484,000 denotes funds restricted for use in capital projects and $3,038,000 represents resources subject to debt service restrictions.

The remaining $26,886,000 reflects unrestricted funds available to meet the Division’s ongoing obligations to customers and creditors.

10 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued)

CONDENSED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION INFORMATION

The Division had a net gain of $487,000 in 2016. Provided below are key elements of the Division’s results of operations as of and for the years ended December 31, 2016 and 2015:

2016 2015 (Amounts in Thousands)

Operating revenues$ 192,967 $ 192,861 Operating expenses 184,910 184,661

Operating income (loss) 8,057 8,200

Non-operating revenue (expense): Investment income 246 73 Interest expense (10,004) (10,462) Amortization of bond premiums and discounts 324 478 Gain (loss) on disposal of assets (1,260) (2,551) Other 3,124 3,155 Total non-operating revenue (expense), net (7,570) (9,307)

Change in net position $ 487 $ (1,107)

• Operating revenues: In 2016, operating revenues increased by $106,000, mostly from increased power costs passed on to customers through the Energy Adjustment Charge (EAC). There was a 0.2% decrease in KWH sold.

• Operating expenses: In 2016, operating expenses increased by $249,000, primarily due to the $1,110,000 rise in the cost of purchased power caused by fluctuations in the energy market. Expenses associated with operations grew $341,000. Total employee and fringe benefit costs increased by $497,000 or 2.1%.

11 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued)

FACTORS EXPECTED TO IMPACT THE DIVISION’S FUTURE FINANCIAL POSITION OR RESULTS OF OPERATIONS

As a municipally-owned utility, the Division's mission is to improve the quality of life in the City by providing reliable, affordable energy and energy services to the residents and businesses of the City. The following sections describe major projects likely to impact the Division over the next several years.

Capacity Expansion Program

The Division’s Capacity Expansion Program, which includes three major components, was designed to support and improve the Division’s electric system reliability and, through increasing system capacity by 80 MW, provide for future load growth opportunities. This program includes the addition of a fourth 138 kV interconnection with the FirstEnergy transmission system (Fourth Interconnect), which was energized in 2011; the extension of the southern 138 kV transmission system (Southern Project); and the expansion of the Lake Road 11.5 kV Substation and the 11.5 kV system downtown (Lake Road Project). In 2008, the Division issued the Series 2008B-1 Bonds to fund the Capacity Expansion Program.

The Lake Road Project includes the construction of a duct line and feeder cables to the 11th Street Substation. The re-feeding of the 11th Street Substation will increase capacity in this area of the downtown and along the corridor between the Lake Road Substation and the 11th Street Substation. In addition, a new step-up substation known as the South Marginal Substation is complete. It provides capacity from the 11.5kV distribution system located downtown to a portion of the 13.8 kV distribution system situated east and southeast of downtown.

Construction is underway on the Southern Project. The Southern Project includes the recently completed modification of the Ridge Road Substation to create a ring bus to support the new 138 kV transmission loop which will run from the Ridge Road Substation to the Pofok Substation. The Division has successfully partnered with the City, Cuyahoga County, and the Ohio Department of Transportation to combine the construction of an underground segment of the transmission line with a roadway project. The overhead portion of the 138 kV transmission line will complete the loop and was recently bid out for construction.

Power Supply

The Division participates in a diverse mix of resources including coal-fired, natural gas-fueled, hydroelectric, bioenergy, solar, and wind generation. Participation in many of these resources is through the Division’s membership in American Municipal Power (AMP) including: the Prairie State Energy Campus coal-fired generation project, AMP Hydro Phase 1 units (Cannelton/Smithland/Willow Island) and Phase 2 units (Meldahl/Greenup), AMP Fremont Energy Center (AFEC) combined cycle facility, and the Blue Creek Wind Project. Four of the five AMP hydroelectric projects are in commercial operation. Additionally, the Division has allocations of power from two New York Power Authority hydroelectric projects and several behind-the- meter resources including the Collinwood bioenergy generator, CV Kinsman solar, Division-owned diesel generators, and the West 41st Street/Collinwood Combustion Turbines (CTs). For 2016, about 15% of the Division’s energy is being supplied from renewable sources including hydroelectric, wind and bioenergy, and the Division has voluntarily pursued renewable goals which are consistent with the Ohio state-mandated Renewable Portfolio Standard (RPS) targets applicable to investor-owned utilities (IOUs).

12 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued)

FACTORS EXPECTED TO IMPACT THE DIVISION’S FUTURE FINANCIAL POSITION OR RESULTS OF OPERATIONS (Continued)

The Division’s power supply portfolio is also made up of a variety of market energy purchases of various sizes, terms, and delivery locations. These market purchases, often referred to as “block power” purchases because of their standard market types, are often procured as part of the Division’s current market purchases, including block power purchased around-the-clock (7x24), weekday peak periods (5x16), weekend peak periods (2x16) and off-peak periods at night (7x8). These blocks can be procured by AMP on the Division’s behalf with the cost plus a service charge directly passed through to the Division. Alternatively, the Division has the option to contract directly with third parties.

Generation Projects

The Division has chosen to participate in generation projects in order to (i) diversify its power supply portfolio and increase use of renewable energy, (ii) secure long-term stable sources of power, (iii) explore local generation opportunities where transmission congestion costs are mostly avoided, and (iv) mitigate the costs of meeting its resource adequacy obligations.

The generation projects through AMP in which the Division participates are Blue Creek Wind, AMP Fremont Energy Center, AMP Hydro Phase 1/Phase 2, and Prairie State. The following sections describe these projects.

Blue Creek Wind Project In June 2012, the Division entered into an agreement with AMP to purchase 10 MW of energy, capacity and Renewable Energy Credits (REC’s) from the Blue Creek Wind Project. The 304 MW Blue Creek Wind Project was developed, and is owned, by Iberdrola Renewables, LLC and is located in northwestern Ohio in Van Wert and Paulding counties. The project began commercial operation in June 2012. AMP purchases up to 54 MW from the project on behalf of its members through a Renewable Wind Energy Power Purchase Agreement with Blue Creek Wind Farm, LLC.

AMP Fremont Energy Center AMP and two of its member agencies in Michigan and Virginia own the AMP Fremont Energy Center (AFEC), a 707 MW natural gas-fired combined cycle generating plant in Fremont, Ohio. Of the 707 MW, 544 MW is available as an intermediate power source during on-peak hours, and an additional 163 MW of duct-firing is available for use during peak demand times. AMP purchased the facility in 2011 from FirstEnergy Generation Corporation and completed construction and commissioning. The plant went into commercial operation in January 2012. The Division, through a membership participation agreement with AMP, has entitlement to approximately 79 MW of intermediate and peaking power output from AFEC.

AMP Hydro Projects In December 2007, the Division entered into an agreement with AMP to purchase 35 MW of hydroelectric power from three planned AMP run-of-the-river hydroelectric projects (AMP Hydro Phase 1) to be constructed on the Ohio River. These include both the Cannelton and Smithland projects in Kentucky, as well as the Willow Island project in West Virginia.

13 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued)

FACTORS EXPECTED TO IMPACT THE DIVISION’S FUTURE FINANCIAL POSITION OR RESULTS OF OPERATIONS (Continued)

The Cannelton project is located on the Kentucky south shore of the Ohio River at the existing U.S. Army Corps of Engineers Cannelton Locks and Dam. The Cannelton project includes three 29.3 MW bulb-type generators with a combined capacity of 88 MW. In addition to the powerhouse and other equipment, the project includes a 1,000-foot transmission line to the point of interconnection. The first unit of the Cannelton Project entered commercial operation in January 2016, the second unit entered commercial operation in March 2016 and the third entered commercial operation in June 2016.

The Smithland project is located at the existing U.S. Army Corps of Engineers Smithland Navigation Locks and Dam. The plant’s configuration and equipment is similar to Cannelton’s, but includes three 25.3 MW bulb-type generators with a total capacity of 76 MW and a two mile transmission line to the point of interconnection. The Smithland Project is expected to enter commercial operation in 2017.

The Willow Island project in West Virginia is located at the existing U.S. Army Corps of Engineers Willow Island Lock and Dam. The plant design and technology is similar to the other two projects but includes two 22 MW generators with a total capacity of 44 MW. The project includes a 1.6 mile transmission line to the point of interconnection. Willow Island Project entered commercial operation in 2016.

Together these projects are expected to produce 191 MW, of which 35 MW is allocated to the Division. In March 2010, the Division executed agreements with AMP to participate in two additional AMP run-of-the-river hydroelectric projects (AMP Hydro Phase 2) on the Ohio River. The first is the Meldahl Project, a 105 MW three-unit hydroelectric generation facility located on the Kentucky side of the Ohio River. The Meldahl Project entered commercial operation in April 2016. The second project is the Greenup Project, an existing 70 MW plant owned by the City of Hamilton, Ohio. The Division has contracted to receive 15 MW from the Meldahl-Greenup Projects, for a total of 50 MW (when combined with AMP Hydro Phase 1) from the five AMP hydroelectric projects.

Prairie State Energy Campus AMP has a 23% ownership interest in the Prairie State Energy Campus in Illinois, a pulverized coal plant consisting of two generating units with a total rating of 1,582 MW. AMP is entitled to 368 MW as an owner of the facility in partnership with public power agencies and cooperatives in Illinois, Indiana, Kentucky, and Missouri. The project is a “mouth-of-the mine” project that includes entitlement to 200 million tons of coal reserves in an adjacent coal mine. The project was developed by Peabody Energy and went into commercial operation in 2012. The Division purchases 25 MW from the Prairie State project through a participation agreement with AMP.

ADDITIONAL INFORMATION

This financial report is designed to provide a general overview of the Division’s finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Office of the Finance Director, City Hall Room 104, 601 Lakeside Avenue, Cleveland, Ohio 44114.

BASIC FINANCIAL STATEMENTS

CITY OF CLEVELAND, OHIO

DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER STATEMENT OF NET POSITION For the Year Ended December 31, 2016 (Amounts in Thousands)

ASSETS AND DEFERRED OUTFLOWS OF RESOURCES CAPITAL ASSETS Land $ 5,568 Land improvements 293 Utility plant 525,136 Buildings, structures and improvements 22,158 Furniture, fixtures, equipment and vehicles 83,994 637,149 Less: Accumulated depreciation (375,830) 261,319 Construction in progress 92,250 CAPITAL ASSETS, NET 353,569 RESTRICTED ASSETS Cash and cash equivalents 18,037 Accrued interest receivable 5 TOTAL RESTRICTED ASSETS 18,042 CURRENT ASSETS Cash and cash equivalents 49,634 Restricted cash and cash equivalents 590 Receivables: Accounts receivable - net of allowance for doubtful accounts of $5,834,000 in 2016 10,956 Recoverable costs of purchased power 3,989 Unbilled revenue 2,616 Due from other City of Cleveland departments, divisions or funds 2,509 Materials and supplies - at average cost 8,849 Prepaid expenses 233 TOTAL CURRENT ASSETS 79,376 DEFERRED OUTFLOWS OF RESOURCES Unamortized loss on debt refunding 14,122 Pension 9,080 TOTAL DEFERRED OUTFLOWS OF RESOURCES 23,202

CITY OF CLEVELAND, OHIO

DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER STATEMENT OF NET POSITION For the Year Ended December 31, 2016 (Amounts in Thousands)

NET POSITION, LIABILITIES AND DEFERRED INFLOWS OF RESOURCES NET POSITION Net investment in capital assets$ 167,356 Restricted for capital projects 484 Restricted for debt service 3,038 Unrestricted 26,886 TOTAL NET POSITION 197,764

LIABILITIES

LONG-TERM OBLIGATIONS-excluding amounts due within one year Accrued wages and benefits 413 Accreted interest payable 16,080 Revenue bonds 206,399 Net pension liability 23,597 Other 2,432 TOTAL LONG-TERM OBLIGATIONS 248,921

CURRENT LIABILITIES Accounts payable 11,798 Other accrued expenses 585 Customer deposits and other liabilities 1,092 Current portion of accrued wages and benefits 2,384 Due to other City of Cleveland departments, divisions or funds 709 Accrued interest payable 998 Current payable from restricted assets 590 Current portion of long-term debt, due within one year 8,785 TOTAL CURRENT LIABILITIES 26,941 TOTAL LIABILITIES 275,862 DEFERRED INFLOWS OF RESOURCES Pension 563 TOTAL DEFERRED INFLOWS OF RESOURCES 563

See notes to financial statements.

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CITY OF CLEVELAND, OHIO

DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION For the Year Ended December 31, 2016 (Amounts in Thousands)

OPERATING REVENUES Charges for services$ 192,967 TOTAL OPERATING REVENUES 192,967 OPERATING EXPENSES Purchased power 124,909 Operations 24,979 Maintenance 16,703 Depreciation 18,319 TOTAL OPERATING EXPENSES 184,910

OPERATING INCOME (LOSS) 8,057

NON-OPERATING REVENUE (EXPENSE) Investment income 246 Interest expense (10,004) Amortization of bond premiums and discounts 324 Gain (loss) on disposal of assets (1,260) Other 3,124 TOTAL NON-OPERATING REVENUE (EXPENSE), NET (7,570)

INCREASE (DECREASE) IN NET POSITION 487

NET POSITION AT BEGINNING OF YEAR 197,277

NET POSITION END OF YEAR $ 197,764

See notes to financial statements.

CITY OF CLEVELAND, OHIO

DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER STATEMENT OF CASH FLOWS For the Year Ended December 31, 2016 (Amounts in Thousands)

CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers$ 191,466 Cash payments to suppliers for goods or services (18,690) Cash payments to employees for services (23,000) Cash payments for purchased power (125,755) Electric excise tax payments to agency fund and other (5,365) NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES 18,656

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Electric Deregulation tax receipts 2,999 NET CASH PROVIDED BY (USED FOR) NONCAPITAL FINANCING ACTIVITIES 2,999 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from sale of revenue bonds 46,238 Acquisition and construction of capital assets (17,265) Principal paid on long-term debt (8,055) Interest paid on long-term debt (9,859) Cash paid to escrow agent for refunding (45,650) NET CASH PROVIDED BY (USED FOR) CAPITAL AND RELATED FINANCING ACTIVITIES (34,591) CASH FLOWS FROM INVESTING ACTIVITIES Interest received on investments 261 NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES 261

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (12,675) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 80,936 CASH AND CASH EQUIVALENTS, END OF YEAR $ 68,261

CITY OF CLEVELAND, OHIO

DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER STATEMENT OF CASH FLOWS For the Year Ended December 31, 2016 (Amounts in Thousands)

RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES

OPERATING INCOME (LOSS) $ 8,057 Adjustments: Depreciation 18,319 (Increase) decrease in assets: Accounts receivable, net (1,765) Recoverable costs of purchased power (2,291) Unbilled revenue (89) Due from other City of Cleveland departments, divisions or funds 341 Materials and supplies, net (441) Prepaid expenses (66) Deferred outflows of resources related to pensions (6,068) Increase (decrease) in liabilities: Accounts payable 1,784 Other accrued expenses (2,807) Customer deposits and other liabilities 52 Accrued wages and benefits (50) Due to other City of Cleveland departments, divisions or funds (390) Other long-term liabilities (714) Net pension liability 7,200 Deferred inflows of resources from excess purchased power costs (2,679) Deferred inflows of resources related to pensions 263 TOTAL ADJUSTMENTS 10,599

NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES $ 18,656

See notes to financial statements.

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22 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

NOTES TO FINANCIAL STATEMENTS For the Year Ended December 31, 2016

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Division of Cleveland Public Power (the Division) is reported as an Enterprise Fund of the City of Cleveland’s (the City) Department of Public Utilities and is a part of the City’s primary government. The Division was created for the purpose of supplying electrical services to customers within the City. The following is a summary of the more significant accounting policies.

Reporting Model and Basis of Accounting: The accounting policies and financial reporting practices of the Division comply with accounting principles generally accepted in the United States of America applicable to governmental units.

In February of 2015, Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurement and Application was issued. This Statement is effective for reporting periods beginning after June 15, 2015. This Statement addresses accounting and financial reporting issues related to fair value measurements. The definition of fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This Statement provides guidance for determining a fair value measurement for financial reporting purposes. This Statement also provides guidance for applying fair value to certain investments and disclosures related to all fair value measurements. As required, the Division has implemented GASB Statement No. 72 as of December 31, 2016.

In June of 2015, GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement No. 68, and Amendments to Certain Provisions of GASB Statements No. 67 and 68 was issued. This Statement is effective for fiscal periods beginning after June 15, 2015 — except those provisions that address employers and governmental nonemployer contributing entities for pensions that are not within the scope of GASB Statement No. 68, which are effective for fiscal years beginning after June 15, 2016. The objective of this Statement is to improve the usefulness of information about pensions included in the general purpose external financial reports of state and local governments for making decisions and assessing accountability. This Statement establishes requirements for defined benefit pensions that are not within the scope of GASB Statement No. 68, Accounting and Financial Reporting for Pensions, as well as for the assets accumulated for purposes of providing those pensions. In addition, it establishes requirements for defined contribution pensions that are not within the scope of GASB Statement No. 68. It also amends certain provisions of GASB Statement No. 67, Financial Reporting for Pension Plans, and GASB Statement No. 68 for pension plans and pensions that are within their respective scopes. The Division has determined that GASB Statement No. 73 has no impact on its financial statements as of December 31, 2016.

23 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

NOTES TO FINANCIAL STATEMENTS (Continued) For the Year Ended December 31, 2016

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In June of 2015, GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments was issued. This Statement is effective for reporting periods beginning after June 15, 2015. This Statement supersedes GASB Statement No. 55, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. The objective of this Statement is to identify—in the context of the current governmental financial reporting environment —the hierarchy of generally accepted accounting principles (GAAP). The “GAAP hierarchy” consists of the sources of accounting principles used to prepare financial statements of state and local governmental entities in conformity with GAAP and the framework for selecting those principles. This Statement reduces the GAAP hierarchy to two categories of authoritative GAAP and addresses the use of authoritative and nonauthoritative literature in the event that the accounting treatment for a transaction or other event is not specified within a source of authoritative GAAP. As required, the Division has implemented GASB Statement No. 76 as of December 31, 2016.

In August of 2015, GASB Statement No. 77, Tax Abatement Disclosures was issued. This Statement is effective for reporting periods beginning after December 15, 2015. This Statement requires governments that enter into tax abatement agreements to disclose information about the agreements such as: brief descriptive information, gross dollar amount of taxes abated during the period, and commitments made by a government, other than to abate taxes, as part of a tax abatement agreement. Governments should organize those disclosures by major tax abatement program and may disclose information for individual tax abatement agreements within those programs. The Division has determined that GASB Statement No. 77 has no impact on its financial statements as of December 31, 2016.

In December of 2015, GASB Statement No. 78, Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans was issued. This Statement is effective for reporting periods beginning after December 15, 2015. The objective of this Statement is to address a practice issue regarding the scope and applicability of GASB Statement No. 68, Accounting and Financial Reporting for Pensions. This issue is associated with pensions provided through certain multiple-employer defined benefit pension plans and to state or local governmental employers whose employees are provided with such pensions. This Statement amends the scope and applicability of GASB Statement No. 68 to exclude pensions provided to employees of state or local governmental employers through a cost-sharing multiple-employer defined benefit pension plan that (1) is not a state or local governmental pension plan, (2) is used to provide defined benefit pensions both to employees of state or local governmental employers and to employees of employers that are not state or local governmental employers, and (3) has no predominant state or local governmental employer (either individually or collectively with other state or local governmental employers that provide pensions through the pension plan). This Statement establishes requirements for recognition and measurement of pension expense, expenditures, and liabilities; note disclosures; and required supplementary information for pensions that have the characteristics described above. The Division has determined that GASB Statement No. 78 has no impact on its financial statements as of December 31, 2016.

24 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

NOTES TO FINANCIAL STATEMENTS (Continued) For the Year Ended December 31, 2016

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In December of 2015, GASB Statement No. 79, Certain External Investment Pools and Pool Participants, was issued. This Statement is effective for reporting periods beginning after June 15, 2015, except for the provisions in paragraphs 18, 19, 23 – 26, and 40, which are effective for reporting periods beginning after December 15, 2015. This Statement establishes additional note disclosure requirements for qualifying external investment pools that measure all of their investments at amortized cost for financial reporting purposes and for governments that participate in those pools. Those disclosures for both the qualifying external investment pools and their participants include information about any limitations or restrictions on participant withdrawals. As required, the Division has implemented GASB Statement No. 79 as of December 31, 2016.

The Division’s net position is accounted for in the accompanying statement of net position and the net position is divided into the following categories:

• Net investment in capital assets

• Amount restricted for capital projects

• Amount restricted for debt service

• Remaining unrestricted amount

Basis of Accounting: The Division’s financial statements are prepared under the accrual basis of accounting. Under this method, revenues are recognized when earned and measurable and expenses are recognized as incurred.

Revenues: Revenues are derived primarily from sales of electricity to residential, commercial and industrial customers based upon actual consumption. Electricity rates are authorized by City Council and billings are made on a cyclical basis. Estimates for services between the end of the various cycles and the end of the year are recorded as unbilled revenue.

Statement of Cash Flows: The Division utilizes the direct method of reporting for the statement of cash flows as defined by the GASB Statement No. 9, Reporting Cash Flows of Proprietary and Non-expendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting. In a statement of cash flows, cash receipts and cash payments are classified according to operating, non-capital financing, capital and related financing and investment activities.

The Division transfers electric excise tax revenue from billed customers on a monthly basis to an agency fund in the City. Additional electric excise tax revenue from large customers is invoiced separately and deposited directly into the City’s Agency fund.

25 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

NOTES TO FINANCIAL STATEMENTS (Continued) For the Year Ended December 31, 2016

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Cash and Cash Equivalents: Cash and cash equivalents represent cash on hand and cash deposits maintained by the City Treasurer on behalf of the Division. Cash equivalents are defined as highly liquid investments with maturity of three months or less when purchased.

Investments: The Division follows the provisions of GASB Statement No. 72 Fair Value Measurement and Application which requires governmental entities to record their investments at fair value within the fair value hierarchy. The hierarchy is based on the valuation inputs used to measure fair value of the assets. Level 1 inputs are quoted prices in an active market for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs. The Division’s investments in money market mutual funds and State Treasury Asset Reserve of Ohio (STAR Ohio) funds are excluded from fair value measurement requirements under GASB Statement No. 72, and instead are reported at amortized cost.

The Division has invested funds in the STAR Ohio during 2016. STAR Ohio is an investment pool managed by the State Treasurer’s Office, which allows governments within the State to pool their funds for investment purposes. STAR Ohio is not registered with the SEC as an investment company, but has adopted GASB Statement No. 79 for the purpose of measuring the value of shares in STAR Ohio. The Division measures their investment in STAR Ohio at the net asset value (NAV) per share provided by STAR Ohio. The NAV per share is calculated on an amortized cost basis that provides a NAV share that approximates fair value.

Restricted Assets: Proceeds from debt and amounts set aside in various fund accounts for payment of revenue bonds are classified as restricted assets since their use is limited by the bond indentures.

Recoverable Costs of Purchased Power: The Division passes through certain power costs to the customer as Energy Adjustment Charges. The power costs related to recoverable costs of purchased power will be billed to customers in future billing periods.

Capital Assets and Depreciation: Capital assets are stated on the basis of historical cost or, if contributed, at fair market value as of the date received. Depreciation is computed by allocating the cost of capital assets over the estimated useful lives of the assets using the straight-line method. A capital asset is defined as an item with a useful life in excess of one year and an individual cost of more than $5,000 for land, furniture, fixtures, equipment and vehicles and $10,000 for all other assets. When capital assets are disposed of, the cost and related accumulated depreciation are removed from the accounts with gains or losses on disposition being reflected in operations. The estimated useful lives are as follows:

Utility plant 5 to 100 years Land improvements 15 to 100 years Buildings, structures and improvements 5 to 60 years Furniture, fixtures, equipment and vehicles 3 to 60 years

26 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

NOTES TO FINANCIAL STATEMENTS (Continued) For the Year Ended December 31, 2016

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The Division’s policy is to capitalize interest on construction projects up to the point in time that the project is substantially completed. Capitalized interest is included in the cost of the assets and is depreciated on the straight-line basis over the estimated useful lives of such assets. The Division applies GASB guidance pertaining to capitalization of interest cost for its revenue bonds. This guidance requires capitalization of interest cost of eligible borrowings less interest earned on investment of the related bond proceeds from the date of borrowing until the assets constructed from the bond proceeds are ready for their intended use.

For 2016, total interest costs incurred amounted to $13,472,000, of which $3,447,000 was capitalized, net of interest income of $21,000.

Bond Issuance Costs, Discounts, Premiums and Unamortized Losses on Debt Refundings: Bond issuance costs are expensed when incurred. Deferred bond discounts/premiums are netted against long-term debt. The discounts/premiums are amortized over the lives of the applicable bonds. Unamortized loss on debt refundings are categorized as a deferred outflow of resources and is amortized over the shorter of the defeased bond or the newly issued bond.

Deferred Outflows/Inflows of Resources: In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense) until then. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time.

Pensions: 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 pension plans and additions to/deductions from their fiduciary net positon have been determined on the same basis as they are reported by the pension systems. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. The pension systems report investments at fair value.

Compensated Absences: The Division accrues for compensated absences such as vacation, sick leave and compensatory time using the termination payment method specified under GASB Statement No. 16, Accounting for Compensated Absences. These amounts are recorded as accrued wages and benefits in the accompanying statement of net position. The portion of the compensated absence liability that is not expected to be paid out within one year is reported as a long-term liability.

Normally, all vacation time is to be taken in the year available. The Division allows employees to carryover vacation from one year to the next. Sick days not taken may be accumulated until retirement. An employee is paid one-third of accumulated sick leave upon retirement, calculated at the three year base salary rate, with the balance being forfeited.

27 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

NOTES TO FINANCIAL STATEMENTS (Continued) For the Year Ended December 31, 2016

NOTE B - DEBT AND OTHER LONG-TERM OBLIGATIONS

Long-term debt outstanding at December 31, 2016 is as follows:

Original Interest Rate Issuance 2016 (Amounts in Thousands) Revenue Bonds: Series 2008 A, due through 2024 4.00%-4.50%$ 21,105 $ 19,040 Series 2008 B-1, due through 2038 4.00%-5.00% 44,705 39,735 Series 2008 B-2, due through 2038 5.13%-5.40% 27,903 27,903 Series 2010, due through 2017 5.00% 23,915 5,370 Series 2014, due through 2038 5.50% 76,885 76,885 Series 2016, due through 2024 2.50-5.00% 42,025 42,025 $ 236,538 $ 210,958 Less: Unamortized premium (discount)-current interest bonds (net) 4,226 Current portion (8,785) Total Long-Term Debt $ 206,399

28 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

NOTES TO FINANCIAL STATEMENTS (Continued) For the Year Ended December 31, 2016

NOTE B - DEBT AND OTHER LONG-TERM OBLIGATIONS (Continued)

Summary: Changes in long-term obligations for the year ended December 31, 2016, are as follows:

Balance Balance Due January 1, December 31, Within 2016 Increase Decrease 2016 One Year (Amounts in Thousands)

Revenue Bonds: Series 2006 A-1, due through 2024$ 45,285 $$ (45,285) $ - $ Series 2006 A-2, due through 2016 4,435 (4,435) - Series 2008 A, due through 2024 19,040 19,040 2,065 Series 2008 B-1, due through 2038 39,735 39,735 1,020 Series 2008 B-2, due through 2038 27,903 27,903 Series 2010, due through 2017 8,990 (3,620) 5,370 5,370 Series 2014, due through 2038 76,885 76,885 Series 2016, due through 2024 42,025 42,025 330 Total revenue bonds 222,273 42,025 (53,340) 210,958 8,785 Accrued wages and benefits 2,847 2,360 (2,410) 2,797 2,384 Net pension liability 16,397 7,200 23,597 Total $ 241,517 $51,585 $ (55,750) $ 237,352 $11,169

29 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

NOTES TO FINANCIAL STATEMENTS (Continued) For the Year Ended December 31, 2016

NOTE B - DEBT AND OTHER LONG-TERM OBLIGATIONS (Continued)

Minimum principal and interest payments on long-term debt are as follows:

Principal Interest Total (Amounts in thousands) 2017$ 8,785 $ 9,117 $ 17,902 2018 7,705 8,885 16,590 2019 8,060 8,532 16,592 2020 8,430 8,164 16,594 2021 10,135 7,778 17,913 2022-2026 49,771 39,790 89,561 2027-2031 43,950 45,601 89,551 2032-2036 50,967 38,589 89,556 2037-2038 23,155 12,665 35,820 $ 210,958 $ 179,121 $ 390,079

The City has pledged future power system revenues, net of specified operating expenses, to repay $210,958,000 in various Public Power System Revenue Bonds issued in various years since 2008. Proceeds from the bonds provided financing for Public Power System improvements. The bonds are payable from Public Power System net revenues and are payable through 2038. Annual principal and interest payments on the bonds are expected to require less than 68% of net revenues. The total principal and interest remaining to be paid on the various Public Power System Revenue Bonds is $390,079,000. Principal and interest paid for the current year and total net revenues were $17,914,000 and $26,603,000, respectively.

On December 14, 2016, the City issued $42,025,000 Public Power System Revenue Refunding Bonds, Series 2016. These bonds were issued to refund $45,285,000 of outstanding Series 2006A-1 Public Power System Bonds. Net proceeds of the bonds in the amount of $45,649,796 were placed in an irrevocable escrow account to pay the principal and interest on the refunded bonds on January 13, 2017. The refunded 2006A-1 Bonds are considered to be defeased and the liability for those bonds has been removed from long-term debt. The City completed the refunding in order to achieve debt service savings of approximately $3,965,000 and an economic gain (the difference between the present values of the old and new debt service) of $3,647,000 or 8.05%.

30 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

NOTES TO FINANCIAL STATEMENTS (Continued) For the Year Ended December 31, 2016

NOTE B - DEBT AND OTHER LONG-TERM OBLIGATIONS (Continued)

The Division has, at various times, defeased certain revenue bonds by placing the proceeds of new bonds into an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the Division’s financial statements.

The aggregate amount of defeased debt outstanding at December 31, 2016 is as follows:

Bond Issue 2016 (Amounts in Thousands)

Series 2006 A-1, A-2$ 45,285 Series 2008 B-1 75

Total $ 45,360

Revenue bonds are payable from the revenues derived from operations of the Public Power System, after the payment of all operating and maintenance expenses (net revenues). The bonds are collateralized by a pledge of and lien on such net revenues and the special funds described below.

The indenture requires that, at all times, the Division will charge rates and fees for the products and services of the Public Power System. Revenues will be at least sufficient to provide funds for the payment in each year of the necessary operating and maintenance expenses of the power system and an amount equal to 1.25 times the payments of principal and interest on the revenue bonds then outstanding and due in that year. As of December 31, 2016, the Division was in compliance with the terms and requirements of the bond indenture. The indenture establishes the following fund accounts for the application of revenues:

Revenue Fund: All revenues will be deposited into this fund and will be used for payment of current operating expenses and deposits into other funds.

Debt Service Fund: Monthly deposits will be made from the revenue fund to cover succeeding principal and interest payments as they become due on the revenue bonds.

Debt Service Reserve Fund: Deposits will be made to this fund if the required amount in the debt service reserve fund at any time is less than the debt service reserve requirement. However, the Division has elected, pursuant to provisions of the indenture governing the Division's bonds, to satisfy the bond reserve requirement with a surety bond in an aggregate amount at least equal to the bond reserve requirement. The Series 2014 Bonds are not secured by the debt service reserve fund.

Renewal and Replacement Fund: The balance in this fund is maintained at a minimum of $1,000,000 and is to be applied against the cost of repair or replacement of capital assets in order to maintain the system.

31 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

NOTES TO FINANCIAL STATEMENTS (Continued) For the Year Ended December 31, 2016

NOTE B - DEBT AND OTHER LONG-TERM OBLIGATIONS (Continued)

Construction Fund: The proceeds from Series 1991, Series 1994 and Series 2008 Bonds of $12,050,000, $79,386,000, and $72,608,000, respectively, were deposited into this fund to be used, along with earnings from investments of amounts held therein, for the payment of capital costs. As of December 31, 2016, the Division had $13,516,000 of outstanding commitments for future construction costs that will be funded by available bond proceeds. Capital costs include all costs of additions, extensions, renewals, replacements, alterations, betterments and any other capital improvements to the system. Amounts held in this fund are subject to a lien in favor of bondholders and may be used to pay principal of outstanding bonds to the extent that amounts in all other funds are insufficient. No payment needs to be made into a fund if the amounts in such fund are equal to the required fund balance, if any.

Amounts held in trust may be invested by the City Treasurer or the trustee in permitted investments. However, the use of funds is limited by the bond indenture and, accordingly, the amounts are classified as restricted assets in the financial statements.

NOTE C - DEPOSITS AND INVESTMENTS

Deposits: At December 31, 2016, the Division’s carrying amount of deposits totaled $13,691,000 and the Division’s bank balances totaled $13,523,000. The differences represent positions in pooled bank accounts and normal reconciling items. Based on the criteria described in GASB Statement No. 3, Deposits with Financial Institutions, Investments (including Repurchase Agreements) and Reverse Repurchase Agreements and GASB Statement No. 40, Deposit and Investment Risk Disclosures – an Amendment of GASB Statement No. 3, $13,523,000 of the bank balances at December 31, 2016, was insured or collateralized with securities held by the City or by its agent in the City’s name.

Custodial credit risk for deposits is the risk that in the event of bank failure, the Division will not be able to recover deposits or collateral for securities that are in possession of an outside party. At year end, the Division’s deposits were fully insured or collateralized. All deposits are collateralized with eligible securities pledged and deposited either with the City or with a qualified trustee by the financial institution as security for repayment of all public monies deposited in the financial institution whose market value at all times is equal to at least 110% of the carrying value of the deposits being secured.

Investments: In accordance with GASB Statement No. 72, Fair Value Measurement and Application, the City reports its investments at fair value based on quoted market values, where applicable and recognized the corresponding change in the fair value of the investments recorded in investment earnings in the year in which the change occurs. The City’s investment policies are governed by State statutes and City ordinances which authorize the City to invest in obligations of the U.S. Treasury, agencies and instrumentalities; State Treasurer Asset Reserve Fund (STAR Ohio); commercial paper; US Government Money Market Mutual Funds; guaranteed investment contracts; manuscript debt; bonds and other State of Ohio obligations; certificates of deposit; and repurchase transactions. Such repurchase transactions must be purchased from financial institutions or registered broker/dealers. Repurchase transactions are not to exceed a period of one year and confirmation of securities pledged must be obtained.

32 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

NOTES TO FINANCIAL STATEMENTS (Continued) For the Year Ended December 31, 2016

NOTE C - DEPOSITS AND INVESTMENTS (Continued)

Generally, investments are recorded and are kept at the Federal Reserve Bank in the depository institutions’ separate custodial account for the City, apart from the assets of the depository institution. Ohio statute prohibits the use of reverse repurchase agreements.

Investment securities are exposed to various risks such as interest rate, market and credit. Market values of securities fluctuate based on the magnitude of changing market conditions; significant changes in market conditions could materially affect the portfolio value.

The City categorizes its fair value measurements within the fair value hierarchy established by GAAP. The hierarchy is based on the valuation inputs used to measure fair value of the assets. Level 1 inputs are quoted prices in an active market for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs.

The following is a summary of the fair value hierarchy of the fair value of investments of the Division (excluding STAR Ohio and money market mutual funds) as of December 31, 2016.

Fair Value Fair Measurements Using Type of Investment Value Level 2 (Amounts in Thousands)

Commercial Paper$ 342 $ 342

Total Investments$ 342 $ 342

Interest rate risk: As a means of limiting its exposure to fair value losses caused by rising interest rates, the Division invests primarily in both short and long-term investments maturing within five years from the date of purchase. The intent is to avoid the need to sell securities prior to maturity. Investment maturities are disclosed in the Concentration of Credit Risk section. Custodial Credit Risk: For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the Division will not be able to recover the value of the investments or collateral securities that are in the possession of an outside party. The Division does not have an investment policy dealing with investment custodial credit risk beyond the requirement in the State statute.

Credit Risk: The Division’s investments as of December 31, 2016, include STAR Ohio, commercial paper and money market mutual funds. Investments in STAR Ohio and the First American Government Obligations Fund carry a rating of AAAm, which is the highest money market fund rating given by Standard & Poor’s. Ohio law requires that STAR Ohio maintain the highest rating provided by at least one nationally recognized standard rating service. The Division’s investment in U.S. Bank N.A. Open Commercial Paper carries a Standard & Poor’s rating of A-1+.

33 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

NOTES TO FINANCIAL STATEMENTS (Continued) For the Year Ended December 31, 2016

NOTE C - DEPOSITS AND INVESTMENTS (Continued)

Concentration of Credit Risk: The Division places a limitation on the amount it may invest in any one issuer to help minimize the concentration of credit risk. The Division had the following investments at December 31, 2016, which include those classified as cash and cash equivalents in the Statement of Net Position in accordance with the provisions of GASB Statement No. 9 since they have a maturity of three months or less:

Investment Maturities 2016 2016 Less than Type of Investment Value Cost One Year (Amounts in Thousands)

STAR Ohio$ 36,683 $ 36,683 $ 36,683 Commercial Paper 342 342 342 Money Market Mutual Funds 17,545 17,545 17,545 Total Investments 54,570 54,570 54,570 Total Deposits 13,691 13,691 13,691 Total Deposits and Investments $ 68,261 $ 68,261 $ 68,261

These amounts are monies invested by the City Treasurer on behalf of the Division and are used in daily operations with excess monies invested daily in STAR Ohio and money market mutual funds. These investments are carried at cost which approximates fair value.

As of December 31, 2016, the investments in commercial paper, STAR Ohio and money market mutual funds are approximately 67%, 1% and 32%, respectively, of the Division’s total investments.

34 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

NOTES TO FINANCIAL STATEMENTS (Continued) For the Year Ended December 31, 2016

NOTE D - CAPITAL ASSETS

Capital Asset Activity: Capital asset activity for the year ended December 31, 2016, was as follows:

Balance Balance January 1, December 31, 2016 Additions Reductions 2016 (Amounts in Thousands)

Capital assets, not being depreciated: Land $ 5,568 $ $ $ 5,568 Construction in progress 82,694 14,436 (4,880) 92,250 Total capital assets, not being depreciated 88,262 14,436 (4,880) 97,818

Capital assets, being depreciated: Land improvements 305 (12) 293 Utility plant 518,471 8,914 (2,249) 525,136 Buildings, structures and improvements 22,110 48 22,158 Furniture, fixtures, equipment and vehicles 83,420 906 (332) 83,994 Total capital assets, being depreciated 624,306 9,868 (2,593) 631,581 Less: Accumulated depreciation (358,844) (18,319) 1,333 (375,830)

Total capital assets being depreciated, net 265,462 (8,451) (1,260) 255,751 Capital assets, net $ 353,724 $ 5,985 $ (6,140) $ 353,569

Commitments: The Division has outstanding commitments of approximately $30,644,000 for future capital expenditures at December 31, 2016. It is anticipated that these commitments will be financed from the Division’s cash balances; however, at the discretion of the Division, additional long-term debt may be issued in the future to finance a portion of the costs.

35 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

NOTES TO FINANCIAL STATEMENTS (Continued) For the Year Ended December 31, 2016

NOTE E - DEFINED BENEFIT PENSION PLAN

Net Pension Liability: The net pension liability reported on the statement of net position represents a liability to employees for pensions. Pensions are a component of exchange transactions-–between an employer and its employees—of salaries and benefits for employee services. Pensions are provided to an employee—on a deferred-payment basis—as part of the total compensation package offered by an employer for employee services each financial period. The obligation to sacrifice resources for pensions is a present obligation because it was created as a result of employment exchanges that already have occurred.

The net pension liability represents the Division’s proportionate share of each pension plan’s collective actuarial present value of projected benefit payments attributable to past periods of service, net of each pension plan’s fiduciary net position. The net pension liability calculation is dependent on critical long-term variables, including estimated average life expectancies, earnings on investments, cost of living adjustments and others. While these estimates use the best information available, unknowable future events require adjusting this estimate annually.

Ohio Revised Code limits the Division’s obligation for this liability to annually required payments. The Division cannot control benefit terms or the manner in which pensions are financed; however, the Division does receive the benefit of employees’ services in exchange for compensation including pension.

GASB Statement No. 68 assume the liability is solely the obligation of the employer, because (1) they benefit from employee services; and (2) State statute requires all funding to come from these employers. All contributions to date have come solely from these employers (which also includes costs paid in the form of withholdings from employees). State statute requires the pension plans to amortize unfunded liabilities within 30 years. If the amortization period exceeds 30 years, each pension plan’s board must propose corrective action to the State legislature. Any resulting legislative change to benefits or funding could significantly affect the net pension liability. Resulting adjustments to the net pension liability would be effective when the changes are legally enforceable.

The proportionate share of each plan’s unfunded benefits is presented as a long-term net pension liability on the accrual basis of accounting. Any liability for the contractually-required pension contribution outstanding at the end of the year is included in intergovernmental payable on both the accrual and modified accrual bases of accounting.

Ohio Public Employees Retirement System (OPERS): The Division’s employees, other than full-time police and firefighters, participate in the Ohio Public Employees Retirement System (OPERS). OPERS administers three separate pension plans. The traditional pension plan is a cost-sharing, multiple-employer defined benefit pension plan. The member-directed plan is a defined contribution plan and the combined plan is a cost-sharing, multiple-employer defined benefit pension plan with defined contribution features. While members (e.g. Division’s employees) may elect the member-directed plan and the combined plan, substantially all employee members are in OPERS’ traditional plan; therefore, the following disclosure focuses on the traditional pension plan.

36 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

NOTES TO FINANCIAL STATEMENTS (Continued) For the Year Ended December 31, 2016

NOTE E - DEFINED BENEFIT PENSION PLAN (Continued)

OPERS provides retirement, disability, survivor and death benefits, and annual cost of living adjustments to members of the traditional plan. Authority to establish and amend benefits is provided by Chapter 145 of the Ohio Revised Code. OPERS issues a stand-alone financial report that includes financial statements, required supplementary information and detailed information about OPERS’ fiduciary net position that may be obtained by visiting https://www.opers.org/financial/reports.shtml, by writing to the Ohio Public Employees Retirement System, 277 East Town Street, Columbus, Ohio 43215-4642, or by calling (800) 222-7377.

Senate Bill (SB) 343 was enacted into law with an effective date of January 7, 2013. In the legislation, members were categorized into three groups with varying provisions of the law applicable to each group. The following table provides age and service requirements for retirement and the retirement formula applied to final average salary (FAS) for the three member groups under the traditional plan as per the reduced benefits adopted by SB 343 (see OPERS CAFR referenced above for additional information):

Group A Group B Group C Eligible to retire prior to 20 years of service credit prior to Members not in other Groups January 7, 2013 or five years January 7, 2013 or eligible to retire and members hired on or after after January 7, 2013 ten years after January 7, 2013 January 7, 2013 State and Local State and Local State and Local Age and Service Requirements: Age and Service Requirements: Age and Service Requirements: Age 60 with 60 months of service credit Age 60 with 60 months of service credit Age 57 with 25 years of service credit or Age 55 with 25 years of service credit or Age 55 with 25 years of service credit or Age 62 with 5 years of service credit Formula: Formula: Formula: 2.2% of FAS multiplied by years of 2.2% of FAS multiplied by years of 2.2% of FAS multiplied by years of service for the first 30 years and 2.5% service for the first 30 years and 2.5% service for the first 35 years and 2.5% for service years in excess of 30 for service years in excess of 30 for service years in excess of 35

FAS represents the average of the three highest years of earnings over a member’s career for Groups A and B. Group C is based on the average of the five highest years of earnings over a member’s career. Members who retire before meeting the age and years of service credit requirement for unreduced benefits receive a percentage reduction in the benefit amount.

When a benefit recipient has received benefits for 12 months, an annual cost of living adjustment (COLA) is provided. This COLA is calculated on the base retirement benefit at the date of retirement and is not compounded. For those retiring prior to January 7, 2013, the COLA will continue to be a 3% simple annual COLA. For those retiring subsequent to January 7, 2013, beginning in calendar year 2019, the COLA will be based on the average percentage increase in the Consumer Price Index, capped at 3%.

37 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

NOTES TO FINANCIAL STATEMENTS (Continued) For the Year Ended December 31, 2016

NOTE E - DEFINED BENEFIT PENSION PLAN (Continued)

Funding Policy: The Ohio Revised Code provides statutory authority for member and employer contributions as follows:

State and Local 2016 Statutory Maximum Contribution Rates Employer 14.0 % Employee 10.0 %

2016 Actual Contribution Rates Employer: Pension 12.0 % Post-employment Health Care Benefits 2.0 %

Total Employer 14.0 %

Employee 10.0 %

Employer contribution rates are actuarially determined and are expressed as a percentage of covered payroll. The Division’s contractually required contribution was $1,985,000 for 2016. All required payments have been made.

Pension Liabilities, Pension Expense, Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions: The net pension liability for OPERS was measured as of December 31, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. Following is information related to the proportionate share and pension expense:

OPERS (Amounts in Thousands) Proportionate Share of the Net Pension Liability$ 23,597 Proportion of the Net Pension Liability 0.139410% Pension Expense$ 3,757

38 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

NOTES TO FINANCIAL STATEMENTS (Continued) For the Year Ended December 31, 2016

NOTE E - DEFINED BENEFIT PENSION PLAN (Continued)

At December 31, 2016, the Division’s reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

OPERS (Amounts in Thousands) Deferred Outflows of Resources Net difference between projected and actual earnings on pension plan investments$ 7,095 Division's contributions subsequent to the measurement date 1,985 Total Deferred Outflows of Resources$ 9,080

Deferred Inflows of Resources Differences between expected and actual experience$ 482 Change in Division's proportionate share 81 Total Deferred Inflows of Resources$ 563

The $1,985,000 reported as deferred outflows of resources related to pension resulting from the Division’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending December 31, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pension will be recognized in pension expense as follows:

OPERS (Amounts in Thousands) Year Ending December 31: 2017$ 1,516 2018 1,627 2019 1,797 2020 1,607 2021 (3) Thereafter (12) Total$ 6,532

Actuarial Assumptions – OPERS: Actuarial valuations of an ongoing plan involve estimates of the values of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and cost trends. Actuarially determined amounts are subject to continual review or modification as actual results are compared with past expectations and new estimates are made about the future.

39 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

NOTES TO FINANCIAL STATEMENTS (Continued) For the Year Ended December 31, 2016

NOTE E - DEFINED BENEFIT PENSION PLAN (Continued)

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employers and plan members) and include the types of benefits provided at the time of each valuation. The total pension liability in the December 31, 2015, actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement:

Wage Inflation 3.75% Future Salary Increases, including inflation 4.25% to 10.05% including wage inflation COLA or Ad Hoc COLA 3%, simple Pre 1/7/2013 retirees: 3%, simple Post 1/7/2013 retires: 3%, simple through 2018, then 2.8%, simple Investment Rate of Return 8% Actuarial Cost Method Individual Entry Age

Mortality rates were based on the RP-2000 Mortality Table projected 20 years using Projection Scale AA. For males, 105% of the combined healthy male mortality rates were used. For females, 100% of the combined healthy female mortality rates were used. The mortality rates used in evaluating disability allowances were based on the RP-2000 mortality table with no projections. For males 120% of the disabled female mortality rates were used set forward two years. For females, 100% of the disabled female mortality rates were used.

The most recent experience study was completed for the five year period ended December 31, 2010.

The long-term rate of return on defined benefit investment assets was determined using a building-block method in which best-estimate ranges of expected future real rates of return are developed for each major asset class. These ranges are combined to produce the long-term expected real rate of return by weighting the expected future real rates of return by the target asset allocation percentage, adjusted for inflation.

In 2015, OPERS managed investments in four investment portfolios: the Defined Benefits portfolio, the Health Care portfolio, the 115 Health Care Trust portfolio and the Defined Contribution portfolio. During 2016, OPERS consolidated the health care portfolios. The Defined Benefit portfolio includes the investment assets of the Traditional Pension Plan, the defined benefit component of the Combined Plan, the annuitized accounts of the Member-Directed Plan and the VEBA Trust. Within the Defined Benefit portfolio, contributions into the plans are all recorded at the same time, and benefit payments all occur on the first of the month. Accordingly, the money-weighted rate of return is considered to be the same for all plans within the portfolio. The money weighted rate of return, net of investments expense, for the Defined Benefit portfolio is 0.4% for 2015.

40 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

NOTES TO FINANCIAL STATEMENTS (Continued) For the Year Ended December 31, 2016

NOTE E - DEFINED BENEFIT PENSION PLAN (Continued)

The allocation of investment assets with the Defined Benefit portfolio is approved by the Board of Trustees as outlined in the annual investment plan. Plan assets are managed on a total return basis with a long-term objective of achieving and maintaining a fully funded status for the benefits provided through the defined benefit pension plans. The table below displays the Board-approved asset allocation policy for 2015 and the long-term expected real rates of return:

We ighte d Ave rage Long-Term Expected Target Real Rate of Return Asset Class Allocation (Arithmetic) Fixed Income 23.00 % 2.31 % Domestic Equities 20.70 5.84 Real Estate 10.00 4.25 Private Equity 10.00 9.25 International Equities 18.30 7.40 Other investments 18.00 4.59 Total 100.00 % 5.27 %

Discount Rate: The discount rate used to measure the total pension liability was 8%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and those of the contributing employers are made at the statutorily required rates. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefits payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Sensitivity of the Division’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate: The following table presents the Division’s proportionate share of the net pension liability calculated using the current period discount rate assumption of 8%, as well as what the Division’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is one-percentage-point lower (7%) or one-percentage-point higher (9%) than the current rate:

Current 1% Decrease Discount Rate 1% Increase 7.00% 8.00% 9.00% (Amounts in Thousands) Division's proportionate share of the net pension liability$ 37,557 $ 23,597 $ 11,824

41 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

NOTES TO FINANCIAL STATEMENTS (Continued) For the Year Ended December 31, 2016

NOTE F – OTHER POSTEMPLOYMENT BENEFITS

Plan Description - Ohio Public Employees Retirement System: All full-time employees, other than non- administrative full-time police officers and firefighters, participate in the Ohio Public Employees Retirement System (OPERS). OPERS administers three separate pension plans: The Traditional Pension Plan – a cost-sharing, multiple- employer defined benefit pension plan; the Member-Directed Plan – a defined contribution plan; and the Combined Plan – a cost-sharing, multiple-employer defined benefit pension plan that has elements of both a defined benefit and defined contribution plan.

In March 2016, OPERS received two favorable rulings from the Internal Revenue Service (IRS) allowing OPERS to consolidate all health care assets into the OPERS 115 Health Care Trust. Transition to the new health care trust structure was completed July 1, 2016. As of December 31, 2016, OPERS maintains a cost-sharing, multiple-employer defined benefit post-employment health care trust, which funds multiple health care plans including medical coverage, prescription drug coverage and deposits to a Health Reimbursement Arrangement to qualifying benefit recipients of both the Traditional Pension and the Combined plans. Members of the Member-Directed Plan do not qualify for ancillary benefits, including OPERS sponsored health care coverage. OPERS funds a Retiree Medical Account (RMA) for participants in the Member-Directed Plan. At retirement or refund, participants can be reimbursed for qualified medical expenses from their vested RMA balance.

In order to qualify for health care coverage, age-and-service retirees under the Traditional Pension and Combined plans must have 20 or more years of qualifying Ohio service credit. Health care coverage for disability benefit recipients and qualified survivor benefit recipients is available. The health care coverage provided by OPERS meets the definition of an Other Post Employment Benefit (OPEB) as described in GASB Statement No. 45. Please see the Plan Statement in the OPERS 2015 CAFR for details.

The Ohio Revised Code permits, but does not require, OPERS to provide health care to its eligible benefit recipients. Authority to establish and amend health care coverage is provided to the OPERS Board of Trustees (OPERS Board) in Chapter 145 of the Ohio Revised Code.

OPERS issues a stand-alone financial report. Interested parties may obtain a copy by visiting https://www.opers.org/financial/reports.shtml#CAFR, by writing to OPERS, 277 East Town Street, Columbus, OH 43215-4642, or by calling (614) 222-5601 or (800) 222-7377.

Funding Policy - Ohio Public Employees Retirement System: The Ohio Revised Code provides the statutory authority requiring public employers to fund post-retirement health care through their contributions to OPERS. A portion of each employer’s contribution to OPERS is set aside to fund OPERS health care plans.

Employer contribution rates are expressed as a percentage of the earnable salary of active members. In 2016, State and Local employers contributed at a rate of 14.0% of earnable salary. These are the maximum employer contribution rates permitted by the Ohio Revised Code. Active member contributions do not fund health care.

42 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

NOTES TO FINANCIAL STATEMENTS (Continued) For the Year Ended December 31, 2016

NOTE F – OTHER POSTEMPLOYMENT BENEFITS (Continued)

Each year, the OPERS Board determines the portion of the employer contribution rate that will be set aside to fund health care plans. The portion of employer contributions allocated to health care for members in the Traditional Pension Plan and Combined Plan was 2.0% during calendar year 2016. As recommended by OPERS’ actuary, the portion of employer contributions allocated to health care beginning January 1, 2017 decreased to 1.0% for both plans. The OPERS Board is also authorized to establish rules for the retiree or their surviving beneficiaries to pay a portion of the health care provided. Payment amounts vary depending on the number of covered dependents and the coverage selected. The employer contribution as a percentage of covered payroll deposited into the RMA for participants in the Member- Directed Plan for 2016 was 4.0%.

The Division’s actual contributions to OPERS to fund postemployment benefits were $338,000 in 2016, $362,000 in 2015 and $350,000 in 2014. The required payments due in 2016, 2015 and 2014 have been made.

NOTE G - CONTINGENT LIABILITIES AND RISK MANAGEMENT

Contingent Liabilities: The Division is a member of American Municipal Power (AMP) and has participated in the AMP Generating Station (AMPGS) Project. This project was intended to develop a pulverized coal power plant in Meigs County, Ohio. The Division’s project share was 80,000 kilowatts (kW) of a total 771,281 kW, giving the City a 10.37% project share. The AMPGS Project required participants to sign “take or pay” contracts with AMP. As such, the participants are obligated to pay any costs incurred for the project. In November 2009, the participants voted to terminate the AMPGS Project due to projected escalating costs. All project costs incurred prior to the cancellation and related to the cancellation were therefore deemed impaired and participants were obligated to pay those incurred costs. In prior years, payment of these costs was not required due to AMP’s pursuit of legal action to collect them from Bechtel Corporation (Bechtel). As a result of a March 2014 legal ruling, the AMP Board of Trustees on April 15, 2014 and the AMPGS participants on April 16, 2014, approved the collection of the impaired costs and provided the participants with an estimate of their liability.

The Division’s estimated share of the impaired costs at March 31, 2014, was $13,813,694. The Division received a credit of $6,447,719 related to their participation in the AMP Fremont Energy Center (AFEC) Project, and another credit of $3,617,994 related to the AMPGS costs deemed to have future benefit for the project participants, classified as Plant Held for Future Use (PHFU), leaving an estimated net impaired costs balance of $3,747,981. Because payment is now probable and reasonably estimable, the Division is reporting a payable to AMP in its business-type activities and in its electric enterprise fund for these impaired costs. AMP financed these costs on its revolving line of credit. Any additional costs (including line-of-credit interest and legal fees) or amounts received related to the project will impact the Division’s net impaired cost balance either positively or negatively. These amounts will be recorded as they become estimable.

In late 2016, AMP reached a settlement in the Bechtel litigation. On December 8, 2016, at the AMPGS Participants meeting, options for the allocation of the Settlement funds were approved. The AMPGS Participants and the AMP Board of Trustees voted to allocate the Settlement among the participants and the AMP General Fund based on each participant’s original project share in kW including the AMP General Fund’s project share.

43 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

NOTES TO FINANCIAL STATEMENTS (Continued) For the Year Ended December 31, 2016

NOTE G - CONTINGENT LIABILITIES AND RISK MANAGEMENT (Continued)

Since March 31, 2014, the Division has made payments of $910,264 to AMP toward its net impaired cost estimate. Also since March 31, 2014, the Division’s allocation of additional costs incurred by the project is $139,411 and interest expense incurred on AMP’s line-of-credit of $98,600. As part of the Bechtel Settlement, the Division received a credit of $394,149 against its stranded cost liability, resulting in a net impaired cost estimate at December 31, 2016, of $2,681,579. The Division does have a potential PHFU Liability of $3,721,386 resulting in a net total potential liability of $6,402,965, assuming the assets making up the PHFU (principally the land comprising the Meigs County site) has no value and also assuming the Division’s credit balance would earn zero interest. Stranded costs as well as PHFU costs are subject to change, including future borrowing costs on the AMP line of credit. Activities include negative items such as property taxes as well as positive items like revenue from leases or sale of all or a portion of the Meigs County site property.

The Division intends to recover these costs and repay AMP over the next 13 years through a power cost adjustment, thus this incurred cost has been capitalized and reported as a regulated asset, as allowed by GASB Statement No. 65. The Division intends to recover 50% of these costs from the customers through the Energy Adjustment Charge passed along to customer’s monthly bills.

In addition, various claims are pending against the City involving the Division for personal injuries, property damage and other matters. The City is responsible for the lawsuits. The City’s management is of the opinion that ultimate settlement of such claims will not result in a material adverse effect on the Division’s financial position, results of operations or cash flows.

Risk Management: The Division is exposed to various risks of loss related to torts; thefts of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Division carries insurance to cover particular liabilities and property protection. Otherwise, the Division is generally self- insured. There were no significant decreases in any insurance coverage in 2016.

The City provided the choice of three separate health insurance plans to its employees until March 31, 2016. As of April 1, 2016, the City provided the choice of two separate health self-insurance plans to its employees. The Division is charged a monthly rate per employee by type of coverage. The City participates in the State of Ohio’s Workers’ Compensation retrospective rating program.

In accordance with GASB Statement No. 10, claims liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported. The result of the process to estimate the claims liability is not an exact amount as it depends on many complex factors, such as inflation, changes in legal doctrines, and damage awards. Accordingly, claims are re-evaluated periodically to consider the effects of inflation, recent claim settlement trends (including frequency and amount of pay-outs) and other economic and social factors.

The estimate of the claims liability also includes amounts for incremental claim adjustment expenses related to specific claims and other claim adjustment expenses, regardless of whether allocated to specific claims. Estimated recoveries, for example from salvage or subrogation, are another component of the claims liability estimate. Claims liability for the Division is reported as part of accounts payable on the statement of net position and is immaterial.

44 CITY OF CLEVELAND, OHIO DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER

NOTES TO FINANCIAL STATEMENTS (Continued) For the Year Ended December 31, 2016

NOTE H - RELATED PARTY TRANSACTIONS

Revenues and Accounts Receivable: The Division provides services to the City, including its various departments and divisions. The usual and customary rates are charged to all City departments and divisions.

Operating Expenses: The Division is provided various intra-city services. Charges are based on actual use or on a reasonable pro-rata basis. The more significant costs for the year ended December 31, 2016, are as follows:

(Amounts in Thousands)

City Administration$ 1,776 Telephone Exchange 2,111 Utilities Administration and Fiscal Control 2,050 Division of Water 435 Motor Vehicle Maintenance 353

NOTE I - CUYAHOGA COUNTY REAL PROPERTY TAXES

The Division is required by ordinance to keep records of the estimated property taxes which would be payable to Cuyahoga County were it subject to such taxes. The estimated property taxes for the Division, based on book value of real estate at the current tax rates, would have been approximately $1,038,000 for the year ended December 31, 2016.

NOTE J - KILOWATT PER HOUR TAX

In May 2001, the Division started billing its customers the electric deregulation kilowatt-hour tax according to the laws of the State of Ohio. This law requires the Division to remit the proceeds to the City’s General Fund, except for any proceeds attributable to sales outside the City which are remitted to the State of Ohio. The Division billed $5,263,000 for this tax in 2016, of which $6,920 was remitted to the State. Ordinance No. 1350-14, passed December 2014, directed 50% of the proceeds of the tax to the General Fund in 2016.

CITY OF CLEVELAND DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER Required Supplementary Information Schedule of the City's Proportionate Share of the Net Pension Liability Ohio Public Employees Retirement System Last Three Measurement Years (1), (2)

2015 2014 2013 (Amounts in Thousands) Division's Proportion of the Net Pension Liability 0.139410% 0.136385% 0.136385%

Division's Proportionate Share of the Net Pension Liability (Asset)$ 23,597 $ 16,397 $ 16,054

Division's Covered-Employee Payroll $ 17,775 $ 17,067 $ 15,462

Division's Proportionate Share of the Net Pension Liability (Asset) as a Percentage of its Covered-Employee Payroll 132.75% 96.07% 103.83%

Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 81.08% 86.45% 86.36%

(1) Information presented based on measurement periods ended December 31. (2) Information prior to 2013 was not available. The Division will continue to present information for years available until a full ten-year trend is compiled.

CITY OF CLEVELAND DEPARTMENT OF PUBLIC UTILITIES DIVISION OF CLEVELAND PUBLIC POWER Required Supplementary Information Schedule of Contributions Ohio Public Employees Retirement System Last Four Years (1)

2016 2015 2014 2013 (Amounts in Thousands) Contractually Required Contributions $ 1,985 $ 2,133 $ 2,048 $ 2,010

Contributions in Relation to the Contractually Required Contributions (1,985) (2,133) (2,048) (2,010)

Contribution Deficiency (Excess)$ - $ -$ -$ -

Division's Covered-Employee Payroll$ 16,542 $ 17,775 $ 17,067 $ 15,462

Contributions as a Percentage of Covered- Employee Payroll 12.00% 12.00% 12.00% 13.00%

(1) Represents employer's calendar year. Information prior to 2013 was not available. The Division will continue to present information for years available until a full ten- year trend is compiled.

47 APPENDIX D

FEE TABLE TEMPLATE

RFP for Cost of Service Study and Rate & Fee Analyses for CPP

Fee Proposal Template

Consulting Services Fee

1. Power Rate Study Report

2. Power Cost of Service Study Report

3. Reimbursables Allowance

Total

1. Power Rate Study Report cost should be based on:  Scope of Services - Section A.

Projected Hours ______

2. Power Cost of Service Study Report cost should be based on:  Scope of Services - Section B.

Projected Hours ______

Proposer’s Name: ______Authorized Signature: ______Date: ______

APPENDIX E

REQUIRED CITY FORMS

MAYOR’S OFFICE OF EQUAL OPPORTUNITY

SUBCONTRACTOR PARTICIPATION GOAL

PROFESSIONAL SERVICES CONTRACT

The Subcontractor Participation (Utilization) Goal for this contract is:

10% CSB Participation

A searchable database of all CSB firms eligible to fulfill the subcontractor participation goal can be found on the City of Cleveland Office of Equal Opportunity Website:

http://cleveland.diversitycompliance.com

On the website, click on CSB/MBE/FBE Registry.

City of Cleveland Frank G. Jackson, Mayor

VENDOR ENTRY FORM

qAdd Vendor qChange Vendor Info qDelete Vendor

Business Name: 1099 INFORMATION

Incorporated? qYES qNO Federal Tax ID: -

If “NO” Check One: qSOLE PROPRIETORSHIP qPARTNERSHIP qOTHER: If “NO” Enter your Social Security Number: - - IRS Reporting Name*: *If this is not the name listed on contracts with the city, please attach a detailed explanation.

Address:

City: State: Zip:

Phone: ( ) Ext. Fax: ( )

Website Address:

Email Address: ORDERING ADDRESS INFORMATION

Check each that applies*:

Address:

City: State: Zip:

Phone: ( ) Ext. Fax: ( )

Contact: Title:

Email Address: *Please attach additional pages if you have more than one ordering/other location.

C of C 81-245 REMITTING ADDRESS INFORMATION

Address:

City: State: Zip:

Phone: ( ) Ext. Fax: ( )

Contact:

Payment Name*: *If payment name is different from business name, please attach a detailed explanation. BANK INFORMATION IF YOU ARE CURRENTLY RECEIVING PAYMENTS VIA EFT, PLEASE COMPLETE THIS SECTION TO VERIFY OUR INFORMATION Bank Name: Account #:

Bank Contact: ABA/Routining #:

Phone: ( )

Other questions or issues concerning this form may be addressed to:

TO BE COMPLETED BY THE CITY OF CLEVELAND PLEASE DO NOT WRITE IN THIS SECTION Female Business Enterprise Minority Business Enterprise Business Classification: qYES qNO qYES qNO City of Cleveland Certification Number: FOB Point: Payment Terms:

Discount Payment Terms: Order Minimum: Are Price Breaks Available? Line Minimum: Standard Lead Time: Standard Shipping Method: Price Catalogue on disk/CD:

Approved by Commissioner of Accounts Date

C of C 81-245 1

NOTE: Section 181.23 and Section 185.04 of The Codified Ordinances of Cleveland, Ohio 1976 require that this affidavit, properly executed and containing all required information, accompany your bid. IF YOU FAIL TO COMPLY, YOUR BID WILL NOT BE CONSIDERED.

STATE OF ______SS AFFIDAVIT COUNTY OF______

______being first duly sworn deposes and says:

Individual only: That he/she is an individual doing business under the name of______, at ______, State of ______.

Partnership only: That he/she is the duly authorized representative of a partnership doing business under the name of ______, in the City of ______, State of______.

Corporation only: That he/she is the duly authorized, qualified and acting ______of ______, a corporation organized and existing under the laws of the State of ______And that he/she said partnership or said corporation is filling herewith a bid to the City of Cleveland in conformity with the foregoing specifications;

Individual only: Affiant further says that the following is a complete and accurate list of the names and addresses of all persons interested in said proposed contract ______Affiant further says that he/she is represented by the following attorneys: ______and is also represented by the following resident agents in the City of Cleveland: ______.

Partnership only: Affiant further says that the following is a complete and accurate list of the names and addresses of the members of said partnership: ______Affiant further says that said partnership is represented by the following attorneys:______and is also represent by the following resident agents in the City of Cleveland:______

Rev. 4/3/2012 Mm/dps 2

Corporation only: Affiant further says that the following is a complete and accurate list of the officers, directors and attorneys of said corporation: President: Directors: Vice President: Secretary: Treasurer: Cleveland Manager or Agent Attorneys: And that the following officers are duly authorized to execute contracts on behalf of said corporation: ______

Affiant further says that the bid filed herewith is not made in the interest of or on behalf of any undisclosed person, partnership, company, association, organization or corporation; that such bid is genuine and not collusive or sham; that said bidder has not, directly or indirectly, induced or solicited any other bidder to put in a false or sham bid, and has not, directly or indirectly, colluded, conspired, connived or agreed with any bidder or anyone else to put in a sham bid, or that anyone shall refrain from bidding; that said bidder has not in any manner, directly or indirectly, sought by agreement, communication or conference with anyone to fix the bid price or that of any other bidder, or to secure any advantage against the City of Cleveland or anyone interested in the proposed contract; that all statements contained in such bid are true; that aid bidder has not, directly or indirectly, submitted his bid price or any break-down thereof or the contents thereof, or divulged information or data relative thereto, or paid or agreed to pay, directly or indirectly, any money, or other valuable consideration for assistance or aid rendered or to be rendered in procuring or attempting to procure the contract above referred to, to any corporation, partnership, company, association, organization, or to any member or agent thereof, or to any other individual, except to such person or persons as hereinabove disclosed to have a partnership or other financial interest with said bidder in his general business; and further that said bidder will not pay or agree to pay, directly or indirectly, any money or other valuable consideration to any corporation, partnership, company, association, organization or to any member or agent thereof, or to any other individual, for aid or assistance in securing contract above referred to in the event the same is awarded to

______(name of individual, partnership or corporation)

Further affiant saith not. (Sign Here) ______

Sworn to before me and subscribed in my presence this ______day of ______, 20_____.

______Notary Public

Rev. 4/3/2012 Mm/dps Requested By:______(Department/Office)

NON-COMPETITIVE BID CONTRACT STATEMENT FOR CALENDAR YEAR 2018 (ALL DEPARTMENTS/OFFICES)

This statement, properly executed and containing all required information must be completed. IF YOU FAIL TO COMPLY, YOUR PROPOSAL WILL NOT BE CONSIDERED.

Entity Name:

Entity’s Mailing Address:

COMPLETE SECTION I, II, OR III BELOW, WHICHEVER IS APPROPRIATE, AND SECTION IV.

NOTE: For purposes of this Statement, the “Mayor” and “Mayor’s Committee” means Frank G. Jackson and the Frank G. Jackson For A Better Cleveland Committee, respectively.

TO BE COMPLETED BY NON-PROFIT CORPORATIONS AND GOVERNMENTAL SECTION I. ENTITIES.

If you are recognized by the IRS as a non-profit corporation or are a governmental entity, mark the appropriate designation below and proceed to the indicated section(s).

_____ NON-PROFIT CORPORATION GO TO SECTIONS III and IV.

_____ GOVERNMENTAL ENTITY GO TO SECTION IV.

TO BE COMPLETED BY INDIVIDUALS, SOLE PROPRIETORSHIPS, PARTNERSHIPS, SECTION II. INCORPORATED PROFESSIONAL ASSOCIATIONS, UNINCORPORATED ASSOCIATIONS, ESTATES AND TRUSTS.

The above-named entity is a (Please mark appropriate designation):

_____ SOLE PROPRIETORSHIP _____ TRUST

INCORPORATED PROFESSIONAL _____ ASSOCIATION _____ ESTATE

_____ UNINCORPORATED ASSOCIATION _____ PARTNERSHIP

_____ LIMITED LIABILITY COMPANY _____ JOINT VENTURE

For purposes of Section II, a “principal” means an individual, an owner, a partner, a shareholder, a member, an administrator, an executor or trustee connected with the above-named entity, or the spouse of any of them.

PLEASE READ PARAGRAPHS ( A ) and ( B ) and mark the appropriate paragraph. If paragraph ( B ) is checked, the City of Cleveland is prohibited by Section 3517.13 of the Revised Code from awarding a non- competitively bid contract over $500.00 to the entity during calendar year 2018 unless Council makes a direct award.

_____ ( A ) NO ONE PRINCIPAL of the above named entity made one or more contributions to the Mayor or the Mayor’s Committee between January 1, 2016 and December 31, 2017 that totaled in excess of $1,000.00 per individual. (This paragraph also applies if no principal of the above-named entity made any contributions to the Mayor or the Mayor’s Committee).

_____ ( B ) ONE OR MORE PRINCIPALS of the above named entity made, as individual(s), one or more contributions to the Mayor or the Mayor’s Committee between January 1, 2016 and December 31, 2017 that totaled in excess of $1,000.00. TO BE COMPLETED BY NON- PROFIT AND FOR-PROFIT CORPORATIONS AND BUSINESS SECTION III. TRUSTS.

_____ NON-PROFIT CORPORATION _____ FOR-PROFIT CORPORATION

_____ BUSINESS TRUST (OTHER THAN INCORPORATED PROFESSIONAL ASSOCIATIONS)

For purposes of Section III, a “principal” means an individual or an entity owning more than 20% of the corporation or business trust or the spouse of any such individual.

PLEASE READ PARAGRAPHS ( A ) ( B ) ( C ) and ( D ) and mark the appropriate paragraph. If paragraph ( C ) is checked, the City of Cleveland is prohibited by Section 3517.13 of the Revised Code from awarding a non- competitively bid contract over $500.00 to the entity during calendar year 2018 unless Council makes a direct award. If paragraph ( D ) is checked, the City of Cleveland is prohibited by Section 3599.03 from awarding a contract to the non-profit corporation.

_____ ( A ) NO INDIVIDUAL or entity owned more than 20% of the corporation or business trust between January 1, 2016 and December 31, 2017.

_____ ( B ) NO PRINCIPAL of the above named entity made, as an individual, one or more contributions to the Mayor or the Mayor’s Committee between January 1, 2016 and December 31, 2017 that totaled in excess of $1,000.00. (This paragraph also applies if no principal of the above-named entity made any contributions to the Mayor or the Mayor’s Committee).

_____ ( C ) ONE OR MORE PRINCIPALS of the above named entity made one or more contributions to the Mayor or the Mayor’s Committee between January 1, 2016 and December 31, 2017 that totaled in excess of $1,000.00 individual.

_____ ( D ) FUNDS OF THE NON-PROFIT CORPORATION were contributed to the Mayor or the Mayor’s Committee at any time.

GO TO SECTION IV.

SECTION IV. TO BE COMPLETED BY ALL ENTITIES.

I do hereby state that I have legal authority to complete this statement on behalf of the above-named entity and to the best of my knowledge and belief the answers herein are true and complete.

Print Name Print Title

Signature Date

Telephone No. (Area Code)

STATE OF ) ) SS: COUNTY OF )

Before me, a Notary Public in and for said County and State, personally appeared the above-named ______, who acknowledged that (he/she) did sign the foregoing statement and that the same is (his/her) free act deed, personally and as duly authorized representative of ______, and the free act and deed of the entity on whose behalf (he/she) signed. Notary Public Date

FOR MAYOR’S OFFICE USE ONLY

_____ ELIGIBLE ______

_____ INELIGIBLE ______

DATE ______SUPPLEMENTAL NOTICE TO BIDDERS

Subject: Submission of NORTHERN IRELAND FAIR EMPLOYMENT PRACTICES DISCLOSURE

Each bidder and/or appropriate parties should complete the DISCLOSURE and submit it with the bid, if possible. If not submitted with the bid, it must be completed and submitted to the Commissioner of Purchases and Supplies prior to any contract being awarded by the City. If a bidder or appropriate parties fail to complete and submit it, they shall not be eligible for a contract award.

NORTHERN IRELAND FAIR EMPLOYMENT PRACTICES DISCLOSURE

INSTRUCTIONS: Pursuant to Codified Ordinance Sec. 181.36, the information requested on this page must be supplied by all contractors and any subcontractors having more than a fifty percent (50%) interest in the proposed contract prior to any contract being awarded by the City of Cleveland. Any contractor or subcontractor who is deemed to have made a false statement shall be declared to have acted in default of its contract and shall be subject to the remedies for default contained in its contract. For failure to cure such a default, the contractor or subcontractor shall be automatically excluded from bidding for the supply of any goods or services for use by the City for a period of two years.

CHECK WHICHEVER IS APPLICABLE:

A. ( ) The undersigned or any controlling shareholder,* subsidiary, or parent corporation of the undersigned is NOT ENGAGED IN ANY BUSINESS OR TRADING FOR PROFIT IN NORTHERN IRELAND. (If paragraph A. is checked, proceed to the signature line.)

B. ( ) The undersigned or any controlling shareholder,* subsidiary, or parent corporation IS ENGAGED IN ANY BUSINESS OR TRADING FOR PROFIT IN NORTHERN IRELAND. (If paragraph B. is checked, please either check the stipulation contained in paragraph C. or attach documentation that shows that the undersigned has complied with the stipulation contained in paragraph C.

C. ( ) The undersigned and all enterprises identified in paragraph B. are TAKING LAWFUL AND GOOD FAITH STEPS TO ENGAGE IN FAIR EMPLOYMENT PRACTICES WHICH ARE RELEVANT TO THE STANDARDS EMBODIED IN THE “MacBRIDE PRINCIPALS FOR FAIR EMPLOYMENT IN NORTHERN IRELAND.” A copy of the MacBride Principles can be obtained from the Office of the Commissioner of Purchases and Supplies. In lieu of checking this paragraph, the undersigned must attach documentation which the undersigned believes shows compliance with the stipulation contained in this paragraph C.

______Name of Contractor or Subcontractor

By: ______

Title:______

*"Controlling shareholder” means any shareholder owning more than fifty percent (50%) of the stock in the corporation or more than twenty-five percent (25%) of the stock in the corporation if no other shareholder owns a larger share of stock in the corporation. APPENDIX F

SAMPLE AGREEMENT

SAMPLE AGREEMENT Between THE CITY OF CLEVELAND And NAME For Type of Services

THIS AGREEMENT for professional services is entered into as of this day of ______, 20_ __, between the City of Cleveland (“City”), a municipal corporation of the State of Ohio, through its Director of ******* (“Director”), under the authority of Ordinance No. ****-**, passed by Cleveland City Council on ************, 20**, and Board of Control Resolution No. ****- **, adopted *******, 20** and ______, **********address************* (“Consultant”), through its duly authorized officer.

RECITALS:

1. The City desires to supplement the regularly employed staff of the Department of ***** in order to obtain the professional services necessary to ******.

2. Consultant has proposed by its letter dated ***** to provide the professional services to the City.

3. The City finds Consultant’s Proposal acceptable and desires to hire Consultant to furnish the services under the terms, conditions and provisions in this Agreement.

In consideration of the foregoing, the payments and the mutual promises in this Agreement, the parties agree as follows:

ARTICLE I. SERVICES OF CONSULTANT

A. General

By execution of this Agreement, the City accepts and Consultant agrees to be bound by the Proposal of Consultant dated ******, attached as Exhibit “A,” and the City’s Request for Proposal (“RFP”), attached as Exhibit “B.” Both of these documents are incorporated in this Agreement subject to any

1 changes or modifications that may be made by this Agreement. Complete copies of both Exhibit “A” and “B” are attached to the original of this Agreement on file in the City Division of Accounts and are incorporated in this Agreement as if fully rewritten. The cover page and several other descriptive pages of both documents are attached to all copies. Consultant is hired to supplement the regularly employed staff of the several departments of the City to ********, as more fully described in Exhibit “A” and Exhibit “B.”

B. Specific Services

Consultant shall render the specific services listed and identified in Exhibit “A” and Exhibit “B.”

C. Meetings and Reports

Consultant shall attend meetings and deliver reports in accordance with Exhibit “A” and Exhibit “B” and any other meetings or reports the Department requests.

ARTICLE II. ASSISTANCE OF THE CITY

The City shall assist Consultant to the extent possible as necessary during the term of this Agreement. Office and working facilities shall be provided Consultant on a space available basis only.

ARTICLE III. TERM

The term of this Agreement shall begin upon *****, and shall, unless extended by the City or unless sooner canceled or terminated under the provisions of this Agreement expire upon the project completion date of ****.

ARTICLE IV. PAYMENTS

A. Amount

The City shall pay Consultant for accomplishment of all work and services required hereunder a ***** fee not to exceed ******.

B. Payment

The City shall pay Consultant after submission to and approval by the Director a verified monthly billing itemizing the actual time and effort expended to the date of the billing and the amount of the billing less any prior payments. If the billing is not acceptable, the City shall inform Consultant as to

2 the reasons and the corrective actions necessary, if any, to qualify the billing for approval.

C. Acceptance

No approval given or payment made under this Agreement shall be conclusive evidence of the acceptance of performance under this Agreement either wholly or partially, and no payment made under this Agreement shall be construed to be an acceptance of deficient or unsatisfactory work.

ARTICLE V. CANCELLATION

The City may cancel this Agreement at any time with cause upon written notice to Consultant of such intent when either the progress or results achieved under this Agreement are unacceptable to the City.

If this Agreement is canceled by the City prior to completion, Consultant, within ten (10) days, shall submit a certified final progress report of the percentage of work completed by the date of cancellation. The City shall pay Consultant for the work completed as certified in this statement. Notwithstanding any other provision of this Agreement, including Exhibit “A” and Exhibit “B”, all records, documents, materials and working papers prepared as part of the work under this Agreement shall become and remain the property of the City. Upon any such cancellation, Consultant shall turn over to the City all records, documents, working papers, computer disks of data and other materials which would be necessary, in the judgment of the City, to maintain continuity in progress of the work by another Consultant.

ARTICLE VI. SUBCONSULTANTS

Consultant shall not sublet or subcontract nor shall any Subconsultant commence performance of any part of the work or services included in this Agreement without the previous written consent of the Board of Control. Subcontracting, if permitted, shall not relieve Consultant of any of its obligations under this Agreement.

Consultant shall be and remain solely responsible to the City for the acts or faults of any Subconsultant and of such Subconsultant’s officers, agents and employees, each of whom shall for this purpose, be considered an agent or employee of Consultant to the extent of its subcontract. Consultant shall file a conformed copy of the applicable subcontract with the City. Consultant and any Subconsultant shall jointly and severally agree that the City of Cleveland is not obligated to pay or to be liable for the payment of any sums due any Subconsultant.

ARTICLE VII. INDEMNIFICATION

Consultant shall indemnify and save harmless the City and its respective officers, agents and employees from and against all suits or claims that may be based upon any injury to persons or property arising out of an error, omission or negligent act of Consultant or its Subconsultant; and Consultant shall, at its own expense, defend the City in all litigation, pay all attorneys’ fees, damages, court costs and other expenses arising out of the litigation or claims incurred in connection therewith; and shall, at its own expense, satisfy and cause to be discharged the judgments as may be obtained against the City, or any of its officers, agents or employees, arising out of such litigation. This indemnification shall survive the term of this Agreement.

ARTICLE VIII. INSURANCE REQUIREMENT

Consultant and each of its Subconsultants shall, at their expense and at all times during the performance of services under this Agreement, maintain comprehensive general and professional liability insurance insuring themselves against the indemnification obligations undertaken in Article VII, Indemnification above. Consultant shall require its Subconsultants to obtain insurance and shall be responsible for enforcement of its Subconsultants’s obligation to obtain insurance to satisfy the requirements hereunder. The policies shall be with companies authorized to do business in Ohio and rated “A” or above by A.M. Best Company or equivalent. The comprehensive general liability insurance policy shall: be occurrence type; name the City as an additional insured; have limits of not less than Two Million Dollars ($2,000,000.00) for any one incident; have a “per project” endorsement; and be primary with respect to Consultant’s general liability, notwithstanding any other insurance covering the City. Consultant’s insurance policy shall include valuable papers coverage in the amount of not less than One Hundred Thousand Dollars ($100,000.00). The professional liability insurance shall have limits of not less than Five Million Dollars ($5,000,000.00) for any one incident, and if not written on an occurrence basis, shall be maintained for a period of not less than two (2) years following the completion of the services to be provided.

A. Notice of Cancellation

The City shall be listed as an additional insured on all required insurance policies or evidence of insurance. Consultant shall notify the Director, in writing, at least 30 days before it cancels or reduces the required insurance coverage(s), and immediately upon receiving notice of any cancellation or reduction of any required insurance coverage by an insurance company.

4 B. Copy of Insurance Policy

Upon the request of the Director of Law of the City of Cleveland, Consultant shall immediately provide the Director of Law an exact copy of the insurance policy or policies required in this Agreement.

C. Certificate of Insurance

Upon execution of this Agreement, Consultant shall submit to the City a certificate(s) of insurance with respect to such policy or policies. If the additional insured endorsement required above is not available at the Agreement execution date, Consultant shall submit to the City a notation of the endorsement together with either a Binder or an Advice of Insurance with respect to such endorsement. Consultant shall also provide a copy of the endorsement naming the City as an additional insured under Consultant’s comprehensive general liability coverage. The endorsement shall be submitted no later than thirty (30) days after the execution date hereof.

D. Policy

The certificate(s), Binder or Advice required in paragraphs B and C above shall, as to form, coverage and carrier, be satisfactory to the Director of Law. If at any time, the coverage or carrier on any policy shall become unsatisfactory to the Director of Law, Consultant shall immediately provide a new certificate meeting the requirements of the Director of Law.

E. No Limit of Liability

The limits of insurance specified above shall in no way constitute the upper limits of liability for which Consultant is responsible under Article VII, Indemnification above.

ARTICLE IX. STATE INDUSTRIAL COMPENSATION

Consultant shall be required at all times during the term of this Agreement to subscribe to and comply with the Workers Compensation Laws of the State of Ohio and pay such premiums as may be required under those laws and to save the City harmless from any and all liability from or under the Workers’ Compensation laws.

ARTICLE X. SOCIAL SECURITY ACT

Consultant shall be and remain an independent Consultant with respect to all services performed under this Agreement and agrees to and does accept full

5 and exclusive liability for the payment of any and all contributions or taxes for social security, unemployment benefits, pensions and annuities now or will be imposed under any state or federal laws which are measured by the wages, salaries or other remuneration paid to persons employed by Consultant on work performed under the terms of this Agreement and further agrees to obey all lawful rules and regulations and to meet all lawful requirements which are now or may be issued or promulgated under the respective laws by any duly authorized state or federal official. Consultant also agrees to indemnify and save harmless the City of Cleveland from any such contributions or taxes or liability.

ARTICLE XI. INTEREST OF CONSULTANT

Consultant covenants that it presently has no interest and shall not acquire any interest, direct or indirect, which would conflict in any manner or degree with the performance of services required to be performed under this Agreement. Consultant further covenants that no person having any such interest shall be employed in the performance of this Agreement.

ARTICLE XII. DEFAULT AND REMEDIES

A. Consultant shall be in default of this Agreement upon the happening of any of the following events:

1. If Consultant fails to observe or perform any of the covenants or agreements to be observed or performed by it under this Agreement and such failure continues for a period of five (5) days after written notice is given Consultant by the City;

2. The filing, execution or occurrence of: (i) a petition or other proceeding by, or a finding against, Consultant for its dissolution, reorganization or liquidation; (ii) a petition in bankruptcy by Consultant; (iii) an adjudication of Consultant as bankrupt or insolvent; (iv) an assignment or petition for assignment for the benefit of creditors;

3. If Consultant abandons or discontinues its operations for the City except when such abandonment or discontinuance is caused by fire, earthquake, war, strike, or other calamity beyond its control.

B. Upon the happening of any one or more of the events as set forth in Paragraph A of this Article, or upon any other default or breach of this Agreement, the City may, at its option, exercise concurrently or successively any one or more of the following rights and remedies:

1. Without waiving such default to pay any sum required to be paid by Consultant to others than the City and which Consultant has failed to pay under the terms and conditions of this Agreement. Any amounts paid by the City in fulfilling the obligations of Consultant under this Agreement, including all interest, costs, damages, attorneys’ fees and penalties shall be repaid by Consultant to the City on demand with the interest rate of 12% per annum from the date of the City’s payment;

2. To enjoin any breach or threatened breach by Consultant of any covenants, agreements, terms, provisions or conditions;

3. To sue for the performance of any obligation, promise or agreement devolving upon Consultant for performance or for damages for the nonperformance of this Agreement, all without terminating this Agreement;

4. To terminate this Agreement.

C. All rights and remedies granted to the City in this Agreement and any other rights and remedies which the City may have at law and in equity are declared to be cumulative and not exclusive and the fact that the City may have exercised any remedy without terminating this Agreement shall not impair the City’s rights later to terminate or to exercise any other remedy granted or to which it may be otherwise entitled.

ARTICLE XIII. ASSIGNMENT PROHIBITED

Consultant shall not assign, transfer, convey, sell or pledge its rights or interest in this Agreement or any part of this Agreement, or any right or privilege created under this Agreement and upon any attempt by Consultant to do so, this Agreement shall immediately terminate.

ARTICLE XIV. CAMPAIGN CONTRIBUTIONS

Consultant hereby certifies that beginning on the date the contract is awarded and extending until one year following conclusion of the contract, all persons identified in Ohio Revised Code Sections 3517.13(I)(3) and 3517.13(J)(3), as applicable, are in compliance with Ohio Revised Code Sections 3517.13(I)(1) and 3517.13(J)(1).

ARTICLE XV. NOTICE AND PAYMENTS

7 All notices which may be proper or necessary to be served and payments to be made under this Agreement shall be sent by regular mail, postage prepaid, to the following addresses or to such other address as either party may later designate for such purpose. To the City: c/o Director of *****, 1201 Lakeside Ave., Room *****, Cleveland, Ohio 44114. To the Consultant: c/o ************.

ARTICLE XVI. EQUAL OPPORTUNITY

This Agreement is a “contract”, and Consultant is a “Consultant” within the meaning of Chapter 187 of the Codified Ordinances of Cleveland, Ohio 1976. During the term, Consultant shall comply with all terms, conditions and requirements imposed on a “Consultant” in the Equal Opportunity Clause, Section 187.22(b) C.O., attached hereto as Exhibit ********** and made a part of this Agreement. A copy of this Equal Opportunity Clause shall be made a part of every subcontract or agreement entered into for goods or services, and shall be binding on all persons, firms and corporations with whom Consultant may deal.

ARTICLE XVII. CONSTRUCTION OF AGREEMENT

All terms and words used in this Agreement, regardless of the number and gender in which they are used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine, or neuter, as the context or sense of this Agreement or any paragraph or clause herein may require, the same as if such words have been fully and properly written in the number and gender. Consultant agrees that no representation or warranties of any type shall be binding upon the City, unless, expressly authorized in writing in this Agreement. In the event of any conflict between the provisions of this Agreement and the language of the Consultant’s Proposal, the provisions of this Agreement shall govern. In the event of any conflict between the scope of services contained in the Proposal and the RFP, the City’s RFP shall control. The headings of sections and paragraphs, if any, to the extent used in this Agreement are used for reference only, and in no way define, limit, or describe the scope or intent of any provision. This Agreement may be executed in any number of counterparts, each of which, when so executed and delivered, shall be deemed original, but such counterparts together shall constitute but one and the same instrument. The following attached documents are incorporated with and made a part of this Agreement:

1. Exhibit “A” - Consultant’s Proposal 2. Exhibit “B” – City’s Request for Proposals 3. Exhibit “C” - Equal Opportunity Clause 4. Ordinance No. ______5. Board of Control Resolution No. ______

The parties have caused this instrument to be executed as of the date and year first above written.

CITY OF CLEVELAND By: ______******* Director of *****

*********

By: ______

Title: ______

______Taxpayer ID Number

The legal form and correctness of the within instrument is approved.

BARBARA A. LANGHENRY Director of Law

By: ______***************** Assistant Director of Law

Date: ______

9 APPENDIX G

REIMBURSEABLES POLICY

City of Cleveland Professional Services Contracts Reimbursables Policy 01/01/2018

The following constitutes the City of Cleveland’s Reimbursables policies to be used in the City’s Professional Services Contracts.

1. Direct Labor vs. Reimbursables All expenditures in Professional Service Contracts shall fall into one of two categories: Direct Labor, and Reimbursables. Direct Labor shall mean the hourly work (billed by the appropriate hourly rates and multipliers) of the Prime Consultant and all identified Professional Subconsultants. Any expenditure that is not the Direct Labor of the Prime Consultant nor the Subconsultants shall be considered a Reimbursable expenditure.

2. Labor Multipliers In order to be considered responsive, the Prime Consultant and each Subconsultant shall submit with its proposal the labor multipliers to be used on this project. Each Prime Consultant and Subconsultant shall acknowledge that the following items are included in their multipliers: 2.1 Direct Labor 100.00%

2.2 Fringe Benefits: Vacation Holiday Sick Time Career Development Incentive Compensation Cap Contribution Social Security Taxes State Unemployment Federal Unemployment Health & Dental Insurance Worker’s Compensation Retirement

2.3 Overhead Salaries Admin. & Office General Committees & Societies Bids & Proposals Technical Research Marketing Strategic Programs

2.4 Overhead Expenses Admin & Office General Travel Committees and Societies Bid & Proposal Costs Technical Research Marketing Strategic Programs * Rent Expense * Telephone & Telegraph * Engineering & Office Supplies * Engineering & Office Printing Depreciation * Furniture & Equipment Rental Subscriptions Dues to Professional Societies Repairs * Postage Library * Lease Car Temporary Help Recruiting * Computer Expense Audit & General Legal Consulting Fees General Insurance Professional Liability Insurance Misc. & Other Legal Expenses Home Office Allocations Real Estate/Property Tax Fringe Benefits on Overhead Salaries Profit

The portions of the items designated by an asterisk (*) above that are not dedicated to this project shall be included in the Consultant's multipliers. The Project portion of the asterisked items (*) shall be subject to the other conditions enumerated in this policy. The Consultant shall ensure that all portions of all other items listed above are included in its multipliers, and not include portions in the reimbursables submittal. The Consultant shall also ensure that all of the following indirect labor is included in the multiplier and not in the direct labor fees: executives; business development staff; accountants; overtime, except where required by law; and time devoted to contract preparation. 3. Reimbursables List The Consultant shall submit with its Proposal an extensive and detailed list of all expected reimbursable items, with estimated cost. This list shall be finalized, in a format approved by the City, during contract negotiation. No other reimbursable expenses will be allowed on the project, unless pre-authorized by the City in writing.

Each quarter, the Consultant shall submit, for the City’s review and approval, an updated projection of the reimbursables list. This projection shall indicate each item in the reimbursables list, and for each item, the original budget amount, the most recently approved budget amount, the amount spent to date, the estimated amount still needing to be expended, and the new, requested budget amount, if needed. The Consultant will be allowed to recommend moving funds between items, but the City must grant such approval in writing. The Consultant shall not be allowed to expend funds on any line item in excess of the approved budget amount for that line item, until the City approves a modification to the budget amounts that would allow for such expenditures.

4. Invoicing The Consultant shall submit monthly a separate invoice for reimbursable expenditures. Each invoice shall be delivered to the City in less than 30 calendar days after the end of the month being billed for, and normally with the monthly labor invoice. Such reimbursable invoices shall be in a format approved by the City, and shall include all necessary supporting documentation as called for elsewhere in this policy. Such supporting documents shall be properly dated, legible and reproducible.

5. General Qualifications for Reimbursables In general, items procured that are not Direct Labor must be devoted at least 50% of the time to the project during the duration of the project in order to be considered for direct cost reimbursement. Expenses on items (including Class 2 travel) devoted more than 50% but less than 100% to this project shall be pro- rated, with only that portion devoted to the project being billed for. Items devoted less than 50% to this project shall be included in the Consultant’s multiplier. Use of items previously owned or leased by the Consultant (such as computer or CAD workstations), regardless of how much devoted to this project, shall be included in the multiplier and not be billed as a direct cost reimbursable. Assets purchased as a reimbursable for this project shall be turned over to the City when the Consultant no longer has need for them on this project. All reimbursables shall be paid on actual costs, supported by actual receipts, unless otherwise indicated. Direct cost reimbursable items shall have no markup or multiplier applied to them. No expenditures for individual reimbursable items over $10,000 shall be made without prior written approval of the City. The City reserves the right to direct the Consultant to terminate making reimbursable expenditures on any and all categories and expenses.

6. Office Expenses In some cases the City will allow and even expects the Consultant to establish a Project Office dedicated solely to a project and from which no other business shall be conducted. In such cases, the Consultant can include the following expenses generated by the Project Office either in the multipliers, or in the reimbursables provided actual invoices are submitted: • Equipment maintenance

• Recurring communication expenses (including leased lines, cellular phones, pagers, telephones)

• Office Supplies

• External reproduction/binding

• Film developing

• Postage

• Office rent

It must be clear in the Consultant’s proposal whether all such and similar expenses are accounted for in the reimbursables or in the multipliers.

For a Consultant with a dedicated Project Office, those office expenses generated by other offices (the Prime’s other offices, Subconsultants’ offices) can be paid as a direct cost reimbursable only if the item is 100% devoted to this project (e.g. postage and long distance phone calls made on behalf of this project), and only if backed up by actual invoices. Otherwise, all non-Project Office expenses (e.g. rent for other offices) must be included in the Consultant’s or Subconsultants’ multipliers.

For projects in which there is no dedicated Project Office, the Consultant can include as reimbursables only those office expenses devoted 100% to this project (like postage and long distance calls made on behalf of this project,) and only when supported by actual invoices. Office expenses less than 100% devoted to this project (like rent, utilities, use of Consultant's computer workstations) must be included in the Consultant’s multiplier. Smaller items, such as office supplies and hand calculators, even if 100% dedicated to the project, shall be included in the Consultant’s multiplier. It is anticipated that any necessary trailer space for the Consultant at the project/construction site will be provided by the construction contractor.

7. Equipment Equipment to be purchased or leased that will be at least 50% dedicated to this project, and meeting the other qualifications above, including computer hardware and software, fax machines, copying equipment, plotters, printers, communication equipment, cameras/camcorders, overhead projectors, and walky talkies, can be included with the direct cost reimbursables for this project. It is expected that virtually all equipment needing to be acquired, especially computer hardware, shall be leased as opposed to purchased. Only in special cases (such as specialty software like Primavera) and only with the prior approval of the City, shall a Consultant be allowed to purchase equipment for this project. The Consultant shall provide copies of the lease agreements and shall include with its invoices copies of its invoices from the supplying vendor.

8. Vehicles and Local Travel In some cases the City will allow the Consultant to obtain Project Vehicles, dedicated solely to this project. Project Vehicles shall be leased only, not purchased. Copies of the leasing agreement and vendor invoices must be submitted for direct cost reimbursement. Related Project Vehicle costs, such as fuel, parking, maintenance, and insurance shall be included in direct cost reimbursables, and shall be paid on actual costs, supported by actual invoices.

For the use of personal (i.e. non-Project) vehicles, the Consultant shall be paid at the per mile rate ($0.575 per mile as of January 1, 2015) that the City pays internally to its staff for mileage. For such vehicle use, the Consultant shall be paid out of direct cost reimbursables, but only if the travel is work related, outside of the Division of Water's Service area, and non-routine. Only that portion of the trip that is outside of the Division of Water's Service Area shall be eligible for reimbursement. The Consultant shall submit to the City an approved mileage log with its monthly invoices. Expenses related to all other use of personal vehicles (travel within the Division of Water's Service Area, parking, tolls, etc.) shall be included in the Consultant’s multipliers.

9. Markup on Subconsultants Indirect costs related to the Subconsultants, like the liability/risk of hiring Subconsultants, Subconsultant oversight, cost of negotiations/business procurement, and interest on cash flow, shall be included in the Consultant’s multipliers. Any other actual direct cost shall be billed as a reimbursable expense supported by actual invoices. Effort expended on managing Subconsultants shall be billed as a direct labor charge. The Consultant shall not include in the direct cost reimbursables any indirect costs or markups on Subconsultants’ labor or reimbursables. 10. Special Services Special Services, used solely for the benefit of this project and not performed by the Prime Consultant or by the Subconsultants, such as electrical testing, hazardous material testing, training, deliveries, diving services, office and field office setups and maintenance, and telephone and network installations and maintenance, shall be included in the direct cost reimbursables. All such services must receive prior written permission from the City. No markups or other indirect handling costs on these Special Services shall be included in the direct cost reimbursables. The Consultant shall include any such indirect costs or markups in its multipliers. Any direct labor involvement by the Prime Consultant or Subconsultants in managing these services shall be billed in the labor charges.

11. Personal Allowances Reimbursement on all items in this category shall be from the direct cost reimbursables, supported by actual receipts and invoices, except as noted. All regulations in this category shall apply to the Prime Consultant, all Subconsultants, and Special Services staff. Consultant’s staff shall be classified into four classes:

Class 1. Staff Already Living in the Greater Cleveland Area.

Class 2. Infrequent Travelers to Cleveland. Those staff coming to Cleveland for less than a two week stay. Staff hired by the Consultant after the Notice To Proceed has been issued and assigned to this project can only be classified as Class 1 or Class 2.

Class 3. Staff with Extended Stays in Cleveland. Out of towners who will work in Cleveland for stretches longer than two weeks, but less than one year.

Class 4. Relocated Staff. Key, full time project staff (e.g. project manager) who relocate from out of town to work full time for the duration of the project, and for a minimum of one year’s time.

• 11.1 Class 1: Such staff qualify for no reimbursement expenses (travel, lodging, meal, per diem, etc...) whatsoever.

• 11.2 Class 2: Travel: Actually incurred expenses (air, bus, rail, car rental, taxi, etc…) shall be paid for Class 2 staff. However, the charges shall not exceed Federal guidelines (as the guidelines were at the time the expenditure was made; regular economy class fares for air travel.) Class 2 travel shall require prior City approval. Rental car optional insurance is not reimbursable.

• 11.3 Class 2: Per Diem Expenses: Class 2 daily expenses for meals, telephone, etc. shall be paid out of direct cost reimbursables, based on actual costs, with actual receipts submitted with invoices. Reimbursement shall not be made for alcohol, private phone calls, nor for meals for guests or associates of Class 2 staff. Gratuities of up to 15% on meals shall be allowed, but no other gratuity of any type shall be allowed. If a weekend or other non-workday occurs in the middle (but not at either end) of a Class 2 person’s stay, that person shall be entitled to per diem and lodging expenses for those non-work days. For days worked in the Cleveland office, Class 2 daily expenses for meals, telephone, etc. shall not exceed $40.00/day to cover all travel and living expenses other than airfare (actual receipts are required); actual expenses for airfare will be reimbursed when travel takes place and must be submitted with supporting receipts, with travel to/and from the airport in Cleveland covered at actual cost, with receipts required. Travel to the airport from home, and travel from the airport back home is not a reimbursable expense.

• 11.4 Class 2 Lodgings and Related Services: Direct cost reimbursement shall be made, based on actual expenses, for apartments or hotels. The charges shall not exceed Federal guidelines (as the guidelines were at the time the expenditure was made), and shall be supported by actual receipts. The City shall also reimburse for any City/County Hotel Taxes over and above the Federal guideline.

• 11.5 Class 2 Commute Time: Class 2 travelers shall be allowed to bill their time commuting between Cleveland and home as a labor expense, if such travel occurs during normal working hours. No other Class shall be allowed to bill any commute time as a labor expense.

• 11.6 Class 3 Travel: Class 3 staff shall be allowed intermittent travel back home. Consultant shall remain within the initial contract budget for this item. Additionally, the City will only pay actual invoiced amounts, and in no case more than a cap of $800.00 per month for such travel for each Class 3 staff member. Only Class 3 staff shall qualify for this allowance. Travel expenses for Class 3 staff’s initial trip to and final trip from Cleveland shall be paid on an actual basis, and shall not apply against any month's cap. These expenses shall be included in the direct cost reimbursables.

• 11.7 Class 3 Per Diem Expenses: Class 3 staff shall be given an allowance for each full calendar day (including non-working days) spent in the Cleveland area, to be included in the direct cost reimbursables. The Consultant shall submit with its monthly invoices a log for each Class 3 person, indicating the date in town and the allowance being requested. In no case shall the allowance exceed $40.00/day per individual in the Cleveland area. This allowance shall cover daily meals, telephone, television, laundry, local travel, etc. Actual receipts for this particular item are required. Travel to/and from the airport in Cleveland is covered at actual cost, with receipts required.

• 11.8 Class 3 Lodgings: Class 3 staff are expected to secure apartments in the Cleveland area. Direct cost reimbursements shall be made for actual rental costs, supported by actual receipts. Rental for weekend and other non-working days shall be reimbursable. In no case shall rent exceed a cap of $1,000/month per person.

• 11.9 Class 3 Inflation: Inflation shall be measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers for the Midwest Region, as tracked by the Federal Bureau of Labor Statistics. The amount of inflation shall be determined each year, beginning one year after Notice to Proceed, and shall be re-determined on each anniversary of Notice to Proceed. The $800 per month cap for Class 3 Travel, and the $1000 per month cap for Class 3 Lodgings, will be allowed to increase annually by the amount of inflation so determined.

• 11.10 Class 4 Relocation Expenses: Reasonable relocation to Cleveland expenses (including transportation of household items and two cars, incidentals, temporary lodging and meals for family [not to exceed one month in duration], and one, 3-day spousal trip to Cleveland) shall be allowed based on actual expenditure, with an upper limit of $20,000 per individual. Only Class 4 staff qualify for relocation expenses. Class 4 staff qualify for relocation expenses, but for no other Personal Allowance expenses.

• 11.11 Travel to a Work Site Other than Cleveland: Travel to a site outside of Cuyahoga County and outside of the Division of Water's Service Area that is for a project related purpose (such as witnessing a pump test) shall be allowed. Consultants shall propose such travel in their project proposal. Each specific trip must be approved in advance by the City. Class 2 regulations as listed above shall govern this type of travel. The time spent traveling, and the time spent at the alternate site, are billable as a labor expense, provided such time occurs during normal business hours.

12. Taxes Purchases for this project are exempt from state and local sales taxes. The Consultant shall use the City’s tax exempt number (available as necessary) for such purposes.

APPENDIX H

ORDINANCE NO. 1436-17

AUTHORIZING ORDINANCE

AS PUBLISHED IN THE CITY RECORD

Ord. No. 1436-17. Section 2. That the cost of contract or By Council Members Pruitt and contracts authorized shall be paid from Kelley (by departmental request). Fund Nos. 52 SF 001, 54 SF 001, and 58 An emergency ordinance SF 001, Request No. RQS 2005, RL 2017- authorizing the Director of Public 104. Utilities to employ one or more Section 3. That this ordinance is professional consultants to perform a declared to be an emergency measure rate study for the Divisions of Water, and, provided it receives the affirmative Cleveland Public Power, and Water vote of two-thirds of all the members Pollution Control, Department of elected to Council, it shall take effect and Public Utilities. be in force immediately upon its passage Whereas, this ordinance constitutes an and approval by the Mayor; otherwise it emergency measure providing for the shall take effect and be in force from and usual daily operation of a municipal after the earliest period allowed by law. department; now, therefore, Passed December 4, 2017. Be it ordained by the Council of the City Effective December 6, 2017. of Cleveland: Section 1. That the Director of Public Utilities is authorized to employ by contract or contracts one or more consultants or one or more firms of consultants for the purpose of supplementing the regularly employed staff of the several departments of the City of Cleveland in order to provide professional services necessary to perform a rate study for the Divisions of Water, Cleveland Public Power, and Water Pollution Control. The selection of the consultants for the services shall be made by the Board of Control of the nomination of the Director of Public Utilities from a list of qualified consultants available for employment as may be determined after a full and complete canvass by the Director of Public Utilities for the purpose of compiling a list. The compensation to be paid for the services shall be fixed by the Board of Control. The contract or contracts authorized shall be prepared by the Director of Law, approved by the Director of Public Utilities, and certified by the Director of Finance.

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