mason county public utility district no. 3...mason county public utility district no. 3 was...

2010

Annual REport

comprehensive

financial

Mason CountyPublic Utility District No. 3shelton, mason county, washington

Fiscal Year Ended December 31, 2010

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cOMPREHENSIVE ANNUAL FINANCIAL REPORT

Mason County Public Utility District No. 3Shelton, Mason County, Washington

For the fiscal year ended December 31, 2010

2010 Finance Staff from Left:Dani Leboki, Jenifer Sliva, Emily Gott, Sherry Speaks, CPA,

Jennifer Renecker, and Annette Creekpaum, CPA.

Prepared by the Finance, Administration and Public Information Departments

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Table of Contents

Introductory Section Commission President’s & Manager’s Message 2-3 Fast Facts 4 CertificateofAchievementforExcellenceinFinancialReporting 5 LetterofTransmittal 6-9 OrganizationalChart 11 BoardofCommissionersandAttorney 12

Financial Section IndependentAuditor’sReport 15 Management’sDiscussionandAnalysis 16-19 BasicFinancialStatements: StatementofNetAssets 21 StatementofRevenues,ExpensesandChangesinFundNetAssets 22 StatementofCashFlows 23-24 StatementofFiduciaryNetAssets 25 StatementofChangesinFiduciaryNetAssets 26 NotestoFinancialStatements 27-49 RequiredSupplementaryInformation 50

Statistical Section StatementofRevenues,ExpensesandChangesinNetAssets 53 NetAssets 53 RevenuesandConsumptionbyCustomerClass 54 RetailRates 55 District’sPrincipalRatepayers 56 ComparativeTaxCosts 57 UncollectibleAccountAnalysis 58 DebtServiceCoverage 59 DebtMarginInformation 59 RatiosofOutstandingRevenueBondDebt 60 DemographicStatistics 61 PrincipalEmployersinMasonCounty 62 OperatingIndicators 63-64

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INTRODUCTORYSECTION

Pud 3 commissioners and staff at the johns prairie operations center groundbreaking ceremony on August 10, 2010.

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Message from theCommission President and Manager

Aspartofitscommitmenttoahighlevelofservicetoitscustomers,MasonCountyPUDNo.3aggressivelyworkstoupgradeandmaintainitselectricandtelecommunicationssystemseveryyear.Thesearesomeofthemanyeffortsthathelppreparetheutilitytoserveitscustomersintothefuture.

In2010itwasnodifferent,withupgradestotheelectricalsystem,includingthecompletionoftheMountainViewsubstationrebuild,telecommunicationsextensions,andcontinuedtreetrimmingefforts.

Inrecentyears,thecommissionandmanagementofPUD3tookadditionalstepstopreparetheutilityanditscustomersforthefuturebymovingforwardwiththerelocationofitsoperationstoJohnsPrairieRoad.ThisincludedtheconstructionofawatermainfromthecityofShelton’smunicipalwatersystemtoservethenewfacility.

Therelocationistheculminationofmorethan15yearsofplanningonthepartoftheformerandcurrentcommissionersandmanagementstaff.ThenewJohnsPrairieoperationscenter,scheduledforcompletionbytheendof2011,willbethesiteforthePUDwarehouse;fieldoperations,suchasSheltonlineworkers;vehiclemaintenance,repair,andfueling;engineering,telecommunications,themetershop,transformerandsubstationmaintenance;andvariousadministrativefunctions.

Throughoutmuchofthepastcoupleofyears,dueinlargeparttothesizeandscopeoftheprojects,questionswereaskedaboutwhymoneywasbeingspentontheconstructionoftheJohnsPrairieoperationscenterandthewatermaininstallation.WithMasonCounty,alongwiththerestofthecountry,goingthroughchallengingeconomictimes,somefeltitwrongforthePUDtospendmoneynowonprojectsthatdidn’tprovideimmediatebenefitsorrelieftothosestrugglingfinancially.

Recognizingthechallengingeconomictimes,PUD3broadenedeligibilityforitsin-housebillassistanceprograms,utilizedEnronsettlementfundsforlow-incomeenergyassistance,andcontinuedthepracticeofkeepingretailratesasstableaspossible.

Furthermore,thePUDcommissionandmanagementputinplaceasoundfinancialplaninkeepingwithformerCommissionerBobOlsen’s(heldofficefromApril1982-December1994)goalthatconstructionofnewfacilitiesshouldnothaveanetimpactonrates.Together

withnearly$10millioninbondssoldinthefallof2008,asecondbondsaleinJuly2010completedthefinancingfortheoperationscenterandwatermain,aswellasotherplannedcapitalprojects.Withthetimingofthisyear’sissueandthematuringofexistingbonds,thebondsalefortheseprojectswillnotimpactelectricrates.

Manypeoplerecognizedtheeconomicdownturnof2010wasoneofthebesttimestobuildbecauseoflowinterestratesforfinancing,anexcellentbiddingclimate,andtheabilitytoprovidejobs.Infact,bymovingforwardthisyear,PUD3achievedsignificantsavingsinbothinterestratesonbondsandincostsfortheoperationscenterandthewatermain

MasonCountyPUDNo.3workedhardtoimproveitsbondratingspriortotheJulyissuance.DuetoPUD3’sexcellentfinancialmanagement,Standard&Poor’sandMoody’sInvestorServiceeachgrantedupgradestothePUD’sbondrating.TheimprovedevaluationsallowedthePUDtofinanceprojectsmoreeasily,attractabroaderrangeofinvestorstoitsbondsales,andmakethebondslesscostlytofinance.

ThebondissueprovidedPUD3theopportunitytorefinancesomeexistingdebtatlowerinterestrates,getlowratesonnewborrowing,andaccess“BuildAmericaBonds”throughthefederalgovernment’sstimulusprograms,whichwillprovideannualrebatestothePUDtoreducefinancecharges.Thus,thedebtserviceislowerthanwhatwasanticipated.

Additionally,bidsforthesitepreparation,constructionoftheoperationscenter,andtheextensionofthewatermainweremuchlowerthanestimated.Whilelowerbidswereduetotheeconomicdownturn,theseprojectsbroughtworkforqualifiedlocalcontractors,permitfees,salestaxrevenue,andgeneratedbusinessforretailersandrestaurants,allofwhichcontributetohelpingimprovethelocaleconomy.

Theextensionofthewatermain,whichwasbuiltbythePUDtoservetheoperationscenter,willalsoprovidewatertoanareadesignatedforcommercialandindustrialdevelopment.Theexistenceofthewatermainandassociatedfireflowwillboosttheabilityfornewbusinessestolocatethere.

ConcernsoverthewithdrawalofwaterfromtheJohnsCreekaquifer,andlowwaterflowconditionsatcertaintimesoftheyeararealsoaddressedbythewatermain,

"The future is purchased by the present"

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asitwillreducewithdrawalsfromtheaquifer,protectingstreamflowsandcriticalsalmonhabitat.Likewise,itwillaiddomesticwaterandfireflowrequirementsforthearea.Uponcompletion,theownershipofthewatermainwillbeturnedovertothecityofShelton,andPUD3willrecoverthecostsofconstructionthroughlatecomerpaymentsasotherpropertyownersconnecttothesystemoverthenext20years.

Itisthebeliefofthemanagementandcommissionthatitisourresponsibilitytolaythegroundworkforthosewhofollow.Likeourpredecessorswhoconstructedanelectricalsystemtoaccommodategrowthinourcounty,andbuiltfacilitieswhichcustomersandemployeescanuseforseveraldecades,wefeelstronglythatwemustdothesame

AsthegreatEnglishlexicographerandessayistSamuelJohnsonsaid,“Thefutureispurchasedbythepresent.”

Sincerely,

LindaR.Gott,PresidentBoardofCommissionersMasonCountyPUDNo.3

WylaWood,ManagerMasonCountyPUDNo.3

Linda gott (president of the board of commissioners) was re-elected in November 2010 to serve another 6 year term.

Wyla Wood is currently in her sixth year of being manager for Mason County PUD 3. She has worked for the utility since 1981.

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Fast Facts

32,520

654,566,801

13,842

116

$0.0736 683 11

1,072 77,629

537144,271$55,399,483

numberofcustomers numberofemployees

2010ElectricitysalesinkWh

averageannualuse,residentialinkWh

averagekWhcostforresidentialuse

numberofsubstationsmilesofoverheadprimarylines

milesofundergroundprimarylines

averageloadinkW

maximumsystempeakdemandinkW

2010budget

362

fiberend-useractiveconnections

fibermileswithinsystem

Rob Coleman - Journeyman Lineman

Dennis Simon - Journeyman LinemanJerry Riley - Apprentice Lineman

John Clements - Journeyman LinemanScott Miller - Journeyman Lineman

Jeff Gott - Journeyman LinemanChris Andersen - Switchboard Operator

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COMMISSIONERSTHOMAS J. FARMERLINDA R. GOTTBRUCE E. JORGENSONMANAGERWYLA J. WOOD

P.O. Box 2148 • Shelton, WA 98584 • (Bus) 360-426-8255 •(Fax) 360-426-8547www.masonpud3.org

June1,2011

To the Board of Commissioners and Customers of Public Utility District No. 3 of Mason County, Washington

TheComprehensiveAnnualFinancialReport(CAFR)oftheMasonCountyPublicUtilityDistrictNo.3(District)fortheyearendedDecember31,2010,isherebysubmitted.ThereportisdesignedtoassesstheDistrict’sfinancialcondition,educatereadersabouttheDistrict’sservices,examinecurrentchallengesfacingtheDistrict,andfulfilllegalreportingrequirements.

StatelawrequiresthateverylocalgovernmentsubmitfinancialreportstotheStateAuditorwithin150daysafterthecloseofeachfiscalyear.TheDistrict’sbondcovenantsrequirefinancialinformationtobeprovidedtoeachnationallyrecognizedmunicipalsecuritiesinformationrepositoryinaccordancewithSection(b)(5)ofSecuritiesandExchangeCommissionRule15c2-12undertheSecuritiesandExchangeActof1934.ThisreportispublishedtofulfilltheserequirementsforthefiscalyearendedDecember31,2010.

Managementassumesfullresponsibilityforthecompletenessandreliabilityoftheinformationcontainedinthisreport,baseduponacomprehensiveframeworkofinternalcontrolsthatisestablishedforthispurpose.Becausethecostofinternalcontrolsshouldnotoutweightheirbenefits,theDistrict’ssystemofinternalcontrolshasbeendesignedtoprovidereasonableratherthanabsoluteassurancethatthefinancialstatementswillbefreefrommaterialmisstatement.Asmanagement,weassertthattothebestofourknowledgeandbelief,thisfinancialreportiscompleteandreliableinallmaterialrespects.

TheWashingtonStateAuditor’sOfficehasissuedanunqualified(“clean”)opinionontheDistrict’sfinancialstatementsfortheyearendedDecember31,2010.Managementhasmadeavailabletotheauditorallfinancialrecordsandrelateddatanecessarytocompletetheaudit.Managementconsidersandtakesappropriateactiononauditrecommendationsconcerninginternalcontrolprocedures,financialmattersandlegalcompliance.Theindependentauditor’sreportislocatedatthefrontofthefinancialsectionofthisreport.

Management’sdiscussionandanalysis(MD&A)immediatelyfollowstheindependentauditor’sreportandprovidesanarrativeintroduction,overview,andanalysisofthebasicfinancialstatements.TheDistrict’sMD&Acomplementsthistransmittalletterandshouldbereadinconjunctionwithit.

PROFILE OF THE DISTRICTMasonCountyPublicUtilityDistrictNo.3wasestablishedbyvotein1934andbeganoperationsin1939.Understatelaw,theDistrictisauthorizedtoprovideelectric,waterandtelecommunicationservices,andifapprovedbyvote,sewerservices.TheDistrictengagesinthepurchase,distributionandsaleofelectricenergy,aswellaswholesaletelecommunicationservices.TheDistrict’sheadquartersareinShelton,Washington,approximately22milesnorthwestofOlympia,thecapitalofWashingtonState.Itsserviceareaencompasses567squaremiles,mostofwhichisinMasonCounty.However,electricservicealsoisprovidedtofivesquaremilesinsouthernKitsapCounty,18squaremilesineasternGraysHarborCounty,and0.00156squaremilesinsouthwesternPierceCounty.TheDistricthasasatelliteofficeinBelfair,Washington,whichisinnorthernMasonCounty.

MasonCountyPublicUtilityDistrictNo.3hasoperatedunderthedirectionofthreeelectedcommissionerssince1939.Commissionmembersservesix-yearterms,withonememberelectedeverytwoyears.TheBoardofCommissionersappointstheDistrict’smanager,auditorandtreasurer.AsthechiefadministrativeofficeroftheDistrict,themanageris

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responsibleforalladministrativefunctionsincludingpreparationofanannualbudgetandthehiringanddischargeofemployeesunderherdirection.

TheDistrictisafullrequirementscustomeroftheBonnevillePowerAdministration(BPA)meaningthatBPAprovidesalloftheDistrict’swholesaleelectricityrequirementsatcost-basedrates.TheDistricttakesdeliveryoftheBPApoweratelevensubstations,tenofwhichareownedbytheutility.Ithas1,755milesofprimarylinesandownsandoperates29.77milesof115kVtransmissionlines.AsofDecember31,2010,thevalueoftheDistrict’snetplanttotaled$120.2millionanditserved32,520customers.Loaddatafortheyearincludedkilowatt-hoursalestoretailcustomersof654,566,801.

TheDistrictprovideswholesalefiberopticservicestosevenserviceproviderswhointurnprovideretailservicesto537connectionsover362milesoffiberopticlinewithinMasonCounty.TheDistrictisalsoamajorhubforhighcapacitydatalinesthroughoutwesternWashington.Itsstrategiclocationprovidesredundantservicecapabilitiesthroughtwomajorinternetroutes.

TheDistrictrecordsfinancialtransactionswithinasingleproprietaryfund,otherthanthoseinitstwofiduciaryfundscomprisedofaVoluntaryEmployeeBenefitAssociation(VEBA)trustestablishedinMayof2004andtheOtherPostemploymentBenefits(OPEB)trustestablishedin2008.TheDistricthasnogovernmentalfundswithlegallyadoptedbudgetsthatcarrytheforceoflaw.Accordingly,theDistrict’sbudgetisnotcontainedwithinthisreport.However,theDistrictadoptsanannualbudgetforpurposesofplanningandmanagementcontrol.ThebudgetprocessinvolvespreparationofaproposedoperatingandcapitalbudgetbyDistrictstafffortheensuingyearthatispresentedtotheBoardofCommissioners.Duringworkshopsessionsthatareopentothepublic,thestaffandboardreviewandrevisetheproposedbudget.Apublichearingisconductedtoobtainratepayercomments.Whenthebudgetisapprovedbyboardresolutionitbecomesthebasisforoperationsfortheensuingcalendaryear.

LOCAL ECONOMYTheeconomyofMasonCountyhashistoricallycenteredonitswealthofnaturalresourcesanditsscenicbeauty.Overthepastthreedecades,thecommunityhasstrivedtodiversifyitseconomicbasethroughthewiseuseofitsforestsandwaterassetsaswellastheattractionofnewbusinessinterests.Theprimarysectorsthatsupportthecounty’seconomyare:forestproducts,includinglumberprocessingandmanufacturing;aquaculture,includingshellfishharvestingandprocessing;specialtyforestproductsandfloralgreens;retailtradeandthehospitalityindustry;government,schoolsandmedicalfacilities.

Theincreasinglydiversifiedeconomicbasehasresultedinrelativelystableemploymentforaresourcedependentcounty.Duringthepasttenyears,theunemploymentratewas8.9percentin2001toadecadehighof10.6percentin2009.Thecurrentrateofunemploymentis10.2percent.

CurrentandfutureprojectsthatwillbenefitthelocaleconomyincludetheextensionofcityutilitiestotheonlyindustriallyzonedpropertyavailablefordevelopmentinMasonCounty.MasonCountyPUDNo.3,workinginconcertwiththecityofSheltonandPortofShelton,hascoordinatedtheDistrict’sconstructionofawatermainfromthecityofShelton’swatersystemtotheJohnsPrairiearea.Availabilityofwaterservicewillaidinjobcreationandretentionbyopeningup152parcelsofindustriallyzonedlandfordevelopment.Propertyownerslookingtoexpandtheiroperations,andnewcommercialorresidentialconstructionwillbenefit.

OngoingprojectswithintheDistrict’sserviceterritoryinclude:constructionofanewDistrictoperationscenterintheJohnsPrairieareanearShelton;thepotentialre-useofexistingDistrictfacilitiesinSheltonfordowntownrevitalization;expansionofMasonGeneralHospital,whichwillactasamagnetforhealthcareservices,rangingfromspecializedmedicinetoeldercare;thecityofShelton’scontinuedupgradestoitsregionalwaterandwastewatersystem;SimpsonLumberCompany’sreconstructionofitssteamboilertoprovideservicetoitswaterfrontoperations,anearbyplywoodmill,andtogenerateelectricity;aproposaltohosttheexpansionoftheWashingtonCorrectionsCenterreceptionunits;andadestinationracetrackforclubracingandtimetrialsbeingdevelopednearShelton.

AswithanyothercommunityinWashingtonState,MasonCountyhasfaceditstrialsduringtherecession.However,itschoicesindevelopinginfrastructure,diversifyingitseconomicbase,andsupportingexistingbusinessesmakethe

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communityconfidentitwillemergestrongerthanbefore.

LONG-TERM FINANCIAL PLANNINGTheDistrict’sfive-yearforecastiscontinuallyupdatedtofollowprojectionsandchangesaffectingtheDistrict.Theforecastincludesbothoperatingandcapitalactivitywithafocusonreservelevels,debtservicecoveragelevels,andpotentialrateaction.

TheDistrictthroughbondresolutionestablishes,maintainsandcollectsratesandchargesforservicestoprovideforallpaymentsthattheDistrictisobligatedtopay.

MAJOR INITIATIVESJohns Prairie Operation Center – InAugust2010,theDistrictbrokegroundtomarkthestartofconstructionofitsnewJohnsPrairieoperationcenterafter15yearsoflong-termplanninganddiscussions.ThefacilitywillbethesitefortheDistrict’swarehouse;fieldoperationssuchasSheltonlineworkers;vehiclemaintenance,repairandfueling;engineering,telecommunications,themetershop,transformerandsubstationmaintenance;andvariousadministrativefunctions.Greaterefficiencywillbeattainedhavingemployeeswhohavesimilarorrelatedtasksneareachother.TheconsolidationofmostDistrictfunctionsattheJohnsPrairiesitewillresultinasignificantcostsavingsovera25-yearperiodcomparedtohavingoperationsspreadoutoverfourlocations.

Substation Upgrades –TheDistrictcelebratedthecompletionofanearlysix-month,$3.1millionupgradetoitsMountainViewsubstationin2010.TheupgradeincludedinstallationofequipmenttoseparatethecircuitsfortheMountainView,MasonandJohnsPrairiesubstations.Theupgradeimprovedreliabilityandflexibilitywhenrespondingtooutagesorconductingsystemmaintenance.WiththecompletionoftherebuildofMountainViewsubstation,theDistrictismovingforwardwiththeupgradeoftheMasonsubstationin2011withthecompletionanticipatedinSeptember2012.Theupgradewillconsistofremovalallexistingstructures,footings,foundations,equipment,andsomesoilremovalandsitepreparation.Itwillbereplacedwithfivefeederbayswitha15kV1200ampcircuitbreakersineach;a115kV1200ampcircuitswitcher;40MVApowertransformerwithloadtapchanger;meteringstructure;controlbuilding;fencing;oilcontainment;andstormwatercontrol.Becausethepropertyiswithinthe100-yearfloodzoneforGoldsboroughCreek,additionalchangesingradingandequipmentelevationisneeded.TelecommunicationsalsoplanstoreplacetheexisitingfiberhutattheMasonsubstationwithabuildingthatwillmeetcurrentandfuturetelecommunicationsneedsintheSheltonarea. Residential Demand Response Pilot Project – TheDistrictandBonnevillePowerAdministration(BPA)havepartneredonasmartgridpilotprojecttoseekwaystobalancethePacificNorthwest’shugebaseofhydroelectricpowerwithitsfast-expandingcollectionofwindfarms.TheDistrictisthefirstutilityinthenationtousewaterheaterstotesttheintegrationofwindenergyintothePacificNorthwestpowergrid.

Theprojectaddressestwofundamentalbottlenecksinthepowergrid;congestionduringtimesofhighpoweruseandtheimbalancecreatedwhenmorewind-poweredenergyisbeinggeneratedthanisbeingused.Thepilotprojectcentersoncopingwithwindpower’sstartsandstopsbystoringsurpluswindenergyincustomers’waterheaters.Theelectricwaterheaterswillbeequippedwithcontrollersandtwo-waycommunicationslinkstoawindfarm,sothattheheaterscanbeturnedoffinadvanceofamajorwindfront,thenswitchedontoabsorbthesurpluselectricpowerwhenthefrontarrives.Additionally,thecontrollerswillallowgroupsofwaterheaterstobeturnedoffonarotatingbasistoreduceloadwhenthewindisnotproducingenergywithoutaffectingtheavailabilityofhotwaterforthecustomer.Theproject’ssoftwarewillalsofactorineachcustomer’swaterusagepatternstomakesurethereisenoughhotwaterwhenfamilymemberscustomarilytaketheirshowers.Thecustomers,allvolunteers,maychoosetooverridetheheatercontrolsifneeded.

Windpowercanonlybeproducedwhenthereisadequatewind,sousingwaterheatersasenergystoragedevicesgivestheDistrictanothertooltohelpbalancethevariablenatureofwindgeneration.Whenthereisexcesswind,theprojectcanalsokeepitfromgoingtowastebyturningonthewaterheatersthathadbeenpreviouslyturnedoffbythedevices.Thewindenergyisputtouseinheatingupthewater,whichisstoredforthefamily’suse.Withenough“storageunits”inplace,theregioncanreducetheneedtorelyonthehydrosystemorfossilfuelresourcestomaintainthepowersystembalance.WithincreasingdemandsontheNorthwesthydrosystem,thisprojectprovidesavaluableadditionalsourceforsystemflexibility.

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AWARDS AND ACKNOWLEDGEMENTSTheGovernmentFinanceOfficersAssociationoftheUnitedStatesandCanada(GFOA)awardedaCertificateofAchievementforExcellenceinFinancialReportingtoMasonCountyPublicUtilityDistrictNo.3foritscomprehensiveannualfinancialreportforthefiscalyearendingDecember31,2009.ThiswasthesixthconsecutiveyearthattheDistricthasreceivedthisprestigiousaward.InordertobeawardedaCertificateofAchievement,agovernmentmustpublishaneasilyreadableandefficientlyorganizedcomprehensiveannualfinancialreport.Thisreportmustsatisfybothgenerallyacceptedaccountingprinciplesandapplicablelegalrequirements.

ACertificateofAchievementisvalidforaperiodofoneyearonly.WebelievethatourcurrentcomprehensiveannualfinancialreportcontinuestomeettheCertificateofAchievementProgram’srequirementsandwearesubmittingittotheGFOAtodetermineitseligibilityforanothercertificate.

PreparationoftheComprehensiveAnnualFinancialReportwasmadepossiblebythededicatedserviceoftheentirestaffoftheFinance,AdministrationandPublicInformationdepartmentsoftheDistrict.Wewishtoexpressourappreciationtothesestaffmembersfortheircontributionstothedevelopmentofthisreport.FurtherappreciationisextendedtotheBoardofCommissionersforitsleadershipandsupportinplanningandconductingthefinancialoperationsoftheDistrictinaresponsibleandenterprisingmanner.

Respectfullysubmitted,

WylaWood AnnetteCreekpaumManager FinanceManager/Auditor

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PUD 3 managed construction of the water main on Johns Prairie from the city of Shelton's municipal water system to serve the new operations center.

The mountain view substation rebuild improves reliability and flexibility when dealing with outages or system maintenance.

construction of the new operations center began in 2010 with site

preparation awarded to a local contractor,

creating local jobs.

The residential demand response pilot program (smart grid) seeks to balance wind power with hydroelectric power on the regional power grid through customers' hot water tanks.

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Mason County PUD 3CUSTOMERS

COMMISSIONERSThomas Farmer

Linda GottBruce Jorgenson

ManagerWyla Wood

AttorneyRobert Johnson

AuditorAnnette Creekpaum

TreasurerSherry Speaks

Finance ManagerAnnette Creekpaum

Human Resource Manager

Michelle Wicks

Telecommunications ManagerDale Knutson

Customer Service Manager

Michele Knauf

Engineering Manager

Terry Peterson

organizational chart

public information & Government

Relations ManagerJoel Myer

Assistant to themanager

Nancy Bolender

energy services & Power Supply

ManagerJay Himlie

InformationServices Manager

John Bennett

Operations Manager

Bob Smith

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board of Commissioners

PUD 1 Service Area

District 3 District 2District 1

Linda R. gottPresident

Thomas J. FarmerSecretary

Bruce E. JorgensonVice President 1

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Commissioner Farmer beganasix-yeartermin

January2009.Heservesthesecondcommissiondistrict,whichincludesthenorthernportionofMasonCounty.

HisfirsttermendsDecember31,2014.

CommissionerJorgensontookofficein1995andserves

commissiondistrictthree,whichincludespartofthecity

ofSheltonandareassouth.Hehasbeenre-electedtwice

andhiscurrenttermendsDecember31,2012.

CommissionerGottservescommissiondistrictone,whichincludespartofthecityofSheltonandareaseastofthecity.Shetookofficein1999,andwasre-electedinNovember2010.HerthirdtermendsDecember31,2016

Attorney:RobertW.Johnson

P L L C P.O.Box1400

Shelton,WA98584360-426-9728

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Due to challenging economic times, PUD 3 broadened its in-house bill assistance program.

eNERGY sERVICES tECHNICIAN, KEVIN NELSON PREPARes FOR A BLOWER DOOR TEST. pud 3 OFFERS CONSERVATION SERVICES LIKE THIS TO ITS CUSTOMERS AT NO CHARGE.

PUD 3 has two full-time tree trimming crews, That clear over 677 miles of line on a 5-6 year cycle. Along with system upgrades, the number of outages during storms has been significantly reduced.

Kim Albaugh - Customer Service Representative

Mike Aries - Tree Trimmer Foreman

The Nine Canyon Wind Project near Kennewick, wa. is one of the largest public power wind projects in the nation. Managed by energy northwest, PUd 3 has 3.14% interest in the total project.

Kevin Nelson - Energy Services Technician

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financialSECTION

Exterior view (auditorium) - Johns Prairie Operations center

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Washington State AuditorBrian Sonntag

Insurance Building, PO Box 40021• Olympia, Washington 98504-0021 • (360) 902-0370 • (866) 902-3900 • TDD Relay (800) 833-6388FAX (360) 753-0646 • http://www.sao.wa.gov

INDEPENDENTAUDITOR’SREPORT

May31,2011

BoardofCommissionersPublicUtilityDistrictNo.3ofMasonCountyShelton,Washington

Wehaveauditedtheaccompanyingfinancial statementsof thebusiness-typeactivitiesandtheaggregateremaining fundinformationofPublicUtilityDistrictNo.3ofMasonCounty,Washington,asofandfortheyearendedDecember31,2010,whichcollectivelycomprisetheDistrict’sbasicfinancialstatementsaslistedinthetableofcontents.ThesefinancialstatementsaretheresponsibilityoftheDistrict’smanagement.Ourresponsibility istoexpressopinionsonthesefinancialstatementsbasedonouraudit.

WeconductedourauditinaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmericaandthestandardsapplicabletofinancialauditscontainedintheGovernmentAuditingStandards,issuedbytheComptrollerGeneraloftheUnitedStates.Thosestandardsrequirethatweplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreeofmaterialmisstatement.Anauditincludesexamining,onatestbasis,evidencesupportingtheamountsanddisclosuresinthefinancialstatements.Anauditalsoincludesassessingtheaccountingprinciplesusedandsignificantestimatesmadebymanagement,aswellasevaluatingtheoverallfinancialstatementpresentation.Webelievethatourauditprovidesareasonablebasisforouropinions.

Inouropinion,thefinancialstatementsreferredtoabovepresentfairly,inallmaterialrespects,therespectivefinancialpositionofthebusiness-typeactivitiesandtheaggregateremainingfundinformationofPublicUtilityDistrictNo.3ofMasonCounty,Washington,asofDecember31,2010,and the respectivechanges infinancialpositionand,whereapplicable, cashflowsthereoffortheyearthenendedinconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica.

InaccordancewithGovernmentAuditingStandards,wewillalsoissueourreportdatedMay31,2011,onourconsiderationoftheDistrict’s internalcontroloverfinancialreportingandonourtestsof itscompliancewithcertainprovisionsof laws,regulations,contractsandgrantagreementsandothermatters.Thepurposeofthatreportistodescribethescopeofourtestingofinternalcontroloverfinancialreportingandcomplianceandtheresultsofthattesting,andnottoprovideanopiniononthe internalcontroloverfinancial reportingoroncompliance.That report isan integralpartofanauditperformed inaccordancewithGovernmentAuditingStandardsandshouldbeconsideredinassessingtheresultsofouraudit.

Themanagement’sdiscussionandanalysisonpages16through19andinformationonpostemploymentbenefitsotherthanpensionsonpage50arenotarequiredpartofthebasicfinancialstatementsbutissupplementaryinformationrequiredbytheGovernmentalAccountingStandardsBoard.Wehaveappliedcertainlimitedprocedures,whichconsistedprincipallyofinquiriesofmanagementregardingmethodsofmeasurementandpresentationoftherequiredsupplementaryinformation.However,wedidnotaudittheinformationandexpressnoopiniononit.

TheinformationidentifiedinthetableofcontentsastheIntroductoryandStatisticalSectionsispresentedforpurposesofadditionanalysisandisnotarequiredpartofthebasicfinancialstatementsoftheDistrict.Suchinformationhasnotbeensubjectedtotheauditingproceduresappliedintheauditofthebasicfinancialstatementsand,accordingly,weexpressnoopiniononit.

Sincerely,

BRIANSONNTAG,CGFMSTATEAUDITOR

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Management's Discussionand analysis

AsmanagementofMasonCountyPUDNo.3,weofferreadersofMasonCountyPUDNo.3’s(District)financialstatementsthisnarrativeoverviewandanalysisofthefinancialactivitiesoftheDistrictforthefiscalyearendedDecember31,2010.Weencouragereaderstoconsidertheinformationpresented.Itshouldbereadinconjunctionwiththebasicfinancialstatementsandaccompanyingnotes,andtheadditionalinformationthatwehavefurnishedinourletteroftransmittal.

FINANCIAL HIGHLIGHTS

• TheDistrict’soverallfinancialpositionimprovedin2010ascomparedto2009.

• Attheendofthefiscalyear,theassetsoftheDistrictexceededitsliabilitiesby$108.5million.Netassetsinvestedincapitalassets(netofdepreciationandrelateddebt)accountfor74percentoftheamount($80.8million).

• TheDistrict’stotalnetassetsincreasedby$2.8millionoverthepreviousyear.

• TheDistrict’stotaloutstandingbondeddebtincreased$47.5million(137.1percent)to$82.1millionduringthecurrentfiscalyear.

• Operatingrevenuesfromthesaleofenergy,wholesalingoftelecommunicationservices,andmiscellaneousotherrevenuesdecreasedby$546,868to$47.9million,a1.1percentdecreaseover2009.

OVERVIEW OF THE FINANCIAL STATEMENTSMasonCountyPUDNo.3accountsforitsfinancialactivitieswithinasingleproprietaryfundtitledtheElectricSystem.TheElectricSystemisusedtoaccountforthepurchase,transmission,distributionandsaleofelectricenergy,aswellasthesaleofwholesaletelecommunicationservices.

InaccordancewithrequirementssetforthbytheGovernmentalAccountingStandardsBoard,theDistrict’sfinancialstatementsemploytheaccrualbasisofaccountinginrecognizingincreasesanddecreasesineconomicresources.Accrualaccountingrecognizesallrevenuesandexpensesduringtheyear,regardlessofwhencashisreceivedorpaid.

Thebasicfinancialstatements,presentedfortheyearendedDecember31,2010,arecomprisedof:

• Statement of Net Assets: TheStatementofNetAssetspresentsinformationontheDistrict’sassetsandliabilities,withthedifferencebetweenthetworeportedasnetassets.Overtime,increasesordecreasesinnetassetsmayserveasausefulindicatorofwhetherthefinancialpositionoftheDistrictisimprovingordeclining.

• Statement of Revenues, Expenses, and Changes in Net Assets:ThisstatementreflectsthetransactionsandeventsthathaveincreasedordecreasedtheDistrict’stotaleconomicresourcesduringtheperiod.Revenuesarepresentednetofallowancesandaresummarizedbymajorsource.Revenuesandexpensesareclassifiedasoperatingornonoperatingbasedonthenatureofthetransaction.

• Statement of Cash Flows:TheStatementofCashFlowsreflectthesourcesandusesofcashseparatedintofourcategoriesofactivities:operating,noncapitalfinancing,capitalandrelatedfinancing,andinvesting.

Thenotestothefinancialstatements,presentedattheendofthebasicfinancialstatements,areconsideredanintegralpartoftheDistrict’spresentationoffinancialposition,resultsofoperations,andchangesincashflows.

17

FINANCIAL ANALYSIS Net Assets – TheDistrict’snetassetsincreased2.68percentbetweenfiscalyears2009and2010to$108.5million.(SeeTableA-1.)

ByfarthelargestportionoftheDistrict’snetassets(74percent)reflectsitsinvestmentincapitalassets(e.g.,land,buildings,substations,andequipment),lessanyrelateddebtusedtoacquirethoseassetsthatisstilloutstanding.TheDistrictusesthesecapitalassetstoprovideservicestocustomers;consequently,theseassetsarenotavailableforfuturespending.AlthoughtheDistrict’sinvestmentsinitscapitalassetsisreportednetofrelateddebt,itshouldbenotedthattheresourcesneededtorepaythisdebtmustbeprovidedfromothersources,sincethecapitalassetsthemselvescannotbeusedtoliquidatetheseliabilities.

2010 2009Increase (Decrease) %Change

CurrentAssetsandSpecialFunds 66,171$ 36,030$ 30,141$ 83 66%NetCapitalAssets 120,184 112,548 7,636 6 78%OtherNoncurrentAssets 14,198 3,100 11,098 358 00%TotalAssets 200,553 151,678 48,875 32 22%

CurrentLiabil ities 10,598 12,988 (2,390) -18 40%NoncurrentLiabil ities 81,464 33,028 48,436 146 65%TotalLiabil ities 92,062 46,016 46,046 100 07%

InvestedinCapitalAssets,NetofDebt 80,780 84,071 (3,291) -3 91%RestrictedforDebtService 8,295 2,826 5,469 193 52%Unrestricted 19,416 18,765 651 3 47%

Total Net Assets 108,491$ 105,662$ 2,829$ 2.68%

Table A-1Statement of Net Assets (in thousands)

TherewasasignificantincreaseinthecurrentassetsandspecialfundsoftheDistrict.ThiswasaresultoftheDistrictissuingElectricRevenueBuildAmericaBondsinJuly2010.Alittleover$35millionofdebtproceedsremainedasacurrentassetatyear-end.ThisDistrictisusingthefundstofinancetheongoingconstructionofanewoperationcenterandothercapitalimprovementsin2011.

Othernoncurrentassetsincreased$11millionfrom2009to2010.Inparttheincreasewasaresultofthe2010ElectricRevenueBuildAmericaBondsincludingproceedsof$6.7millionforfuturecapitalconstructionanticipatedforyears2012and2013.TheincreasewasalsoaresultofadditionalfundingtotheBondReserveFundwithproceedsfromthe2010bondissuance.TheBondReserveFundisdesignatedfortheliquidationofnoncurrentdebts.TheDistrictisalsoproactiveinthefundingofOtherPostemploymentBenefitsOtherthanPensions.AnactuarialvaluationwasperformedfortheDistrictin2010andpreviousassumptionswereupdatedtoreflecttotalcontributionstothetrustpluspremiumsandclaimspaid. Theincreaseinthenoncurrentliabilitiesof$48.4millionisprimarilyaresultoftheissuanceofBuildAmericaBondsandElectricRevenueRefundingBondsin2010.Therewasatotalof$59.8millionofbondsissuedand$12.3millionredeemedorrefunded.TheBuildAmericaBondsmaturein2040andtheRefundingBondsmaturein2021.

Thenetassetsrestrictedfordebtserviceincreasedsubstantiallyfrom2009to2010asaresultoftheadditionalfundingoftheBondReserveFundandthecapitalizationofinterestonthe2010BuildAmericaBonds.

Changes in Net Assets – TheDistrict’stotalrevenuesweremostlyunchangedbetweenfiscalyears2009and2010;remainingatapproximately$49million.(SeeTableA-2.)Operatingrevenues,whichaccountforapproximately98percentoftheDistrict’srevenues,decreasedbyonepercentto$47.9million.Sixty-fourpercentoftheDistrict’soperatingrevenuescomefromresidentialsales,andapproximately27percentfromcommercialandindustrialsales.Anotherfivepercentcomesfromasingleindustrialcustomer,andtherestfromothermiscellaneous.(SeeFigureA-1.)

Nonoperatingotherincomeincreased$398,000or219.89%over2009becauseofthereceiptofaBuildAmericaBondssubsidypayment.

Thetotalofallexpensesincreased$2.4millionfrom2009to2010asaresultoftheincreaseinthecostofpowerandanincreaseininterestchargesfortheadded2010debt.TheDistrict’soperatingexpensesincludetransmissionanddistribution

18

expensesalongwithcustomeraccounts,customerservicesandinformationalexpenses,salesandgeneralandadministrativeexpenses.Nearly50percentoftheDistrict’soperatingexpensesareforthepurchaseofpower.(SeeFigureA-2.)Interestchargesforfiscalyear2010increased49.33percentduetothe2010bondissuances.

The2010totalrevenuesremainedconstantwith2009levelsbutthetotalexpensesoftheDistrictincreased$2.4millionover2009resultinginayear-endincreaseinnetassetsofa$2.8millioncomparedtotheincreaseinnetassetsof$5.4millionin2009

2010 2009Increase (Decrease) %Change

Operating RevenuesUtil itySalesandServiceFees 46,383$ 46,724$ (341)$ -0 73%Other 1,550 1,756 (206) -11 73%

Nonoperating RevenuesInterest Income 201 217 (16) -7 37%OtherIncome 579 181 398 219 89%

TotalRevenue 48,713 48,878 (165) -0 34%

Operating ExpensesPowerSupply 21,670 20,388 1,282 6 29%Operation/Maintenance/General 15,126 14,666 460 3 14%Taxes/DepreciationExpense 6,275 6,591 (316) -4 79%

Nonoperating ExpensesOtherExpenses 16 4 12 300 00%InterestExpense 2,797 1,873 924 49 33%

TotalExpenses 45,884 43,522 2,362 5 43%

ChangeinNetAssets 2,829 5,356 (2,527) -47 18%BeginningNetAssets 105,662 100,306 5,356 5 34%Ending Net Assets 108,491$ 105,662$ 2,829$ 2.68%

Table A-2Statement of Revenue, Expenses, and Changes in Net Assets (in thousands)

OutdoLightingFixed RFaciliti

1%

Commerc& Indust

27%

oor g & ate ies

cial rial

Large Industrial

5%

Operating RFigure A

Revenue for F

Misc Other Operating

3%

A-1 Fiscal Year 20

ResidenSales64%

010

ntial s

CustomeAccounts

Service5%

Admin & General

10%

D

OperM

1

er &

Taxes & Depreciation

14%

Oper

ration & Maint.

18%

IntCh

6

Figurating Expens

terest arges6%

ure A-2ses for Fiscal

Pu

Year 2010

urchased Power47%

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CAPITAL ASSETS AND LONG-TERM DEBT ACTIVITYCapital Assets – Attheendof2010,theDistricthadinvested$120.2million,netofdepreciation,incapitalassets.Thisinvestmentincapitalassetsincludesland,buildings,distributionandgeneralplant,generation,transmission,andmachineryandequipment.ThetotalincreaseintheDistrict’sinvestmentincapitalassetsforthecurrentyearwas6.9percent.

Majorcapitalasseteventsduringthecurrentfiscalyearincludedthefollowing:

• CompletionoftheMountainViewsubstationrebuildatacostof$3.1million.• ContinuedconstructionontheJohnsPrairieoperationcenter;constructioninprogressatthecloseofthefiscalyear

hadreached$8.5million.• ConstructionbeganonthewatermainextensionalongJohnsPrairieRoad;constructioninprogressattheendofthe

currentfiscalyearhadreached$752,587.• TheDistrict’smajoradditionsalsoincludednumerousprojectsassociatedwithimprovementstoexistingdistribution

infrastructure.

MoredetailedinformationabouttheDistrict’scapitalassetsispresentedinNote2tothefinancialstatements.

Long-term Debt -Atyear-endtheDistricthad$82.1millioninbondsoutstanding,anincreaseof137percentoverlastyearasshowninTableA-3.MoredetailedinformationabouttheDistrict’slong-termliabilitiesispresentedinNote6tothefinancialstatements

TheDistrictissued$52.55millionofBuildAmericaBondsonJuly21,2010tofundcapitalimprovements.Inaddition,theDistrictissued$7.26millioninrefundingbondstodefeasethe2001RevenueBondat$7.31million.TheDistrictalsoredeemedthe1997,1998and2001Abondsusingcashreservesof$2.58million.Asaresultofthesetransactionsandregularlyscheduledfiscalagentpaymentsof$2.45million,thenetincreaseintheDistrict’soutstandingbondswas$47.47million.

In2010,Standard&Poor’supgradedtheDistrict’screditratingtoA+fromA-;Moody’srecalibratedtheDistrict’sratingtoAa3onitsGlobalRatingsScalefromA2.

BondcovenantsrequiretheDistricttoestablish,maintainandcollectratesandchargesthatshallbeadequatetoprovideineachfiscalyearnetrevenuesinanamountequaltoatleast1.25timestheannualdebtserviceontheparitybondsoutstandinginsuchfiscalyear.TheDistrict’sdebtservicecoverageratiowas1.73and3.87for2010and2009,respectively.

OTHER SIGNIFICANT MATTERSTheDistrictcreatedaRateStabilizationAccountonJanuary25,2011.Thisaccountisallowedunderbondcovenantsforthepurposesofcalculatingthecoveragerequirementandthefutureparitybondstest.AnyamountwithdrawnfromtheRateStabilizationAccountanddepositedintotheRevenueFundAccountmaybeaddedtonetrevenuescollectedinsuchfiscalyear.Likewise,anyamountwithdrawnfromtheRevenueFundAccountanddepositedintheRateStabilizationAccountwillbesubtractedfromnetrevenuesinsuchfiscalyear.

TheDistrictdoesnotplantoimplementarateincreasein2011.However,afuturerateincreaseisanticipatedtooffsettheincreasedpowersupplycosts.

REQUESTS FOR INFORMATIONThefinancialreportisdesignedtoprovideageneraloverviewoftheDistrict’sfinancesandtodemonstratetheDistrict’saccountabilityforthemoneyitreceives.QuestionsconcerninganyoftheinformationprovidedinthisreportshouldbedirectedtotheFinanceManageroftheDistrictatP.O.Box2148,Shelton,WA98584.

2010 2009Increase (Decrease) % Change

Revenue Bonds 82,095$ 34,623$ 47,472$ 137%

Table A-3Outstanding Bond Debt (in thousands)

20

Ongoing maintenance of electrical facilities improve the reliability of service to customers.

fiber optic extensions continued in 2010 especially helping economic development and existing businesses.

PUD 3 is a wholesale fiber optic Data services provider and a major hub for high capacity data lines throughout western washington.

Chris Jorgensen - Maintenance Engineering Tech

Bob Gilman - Utility Electrician

Engineering and operations coordination is key to providing safe and reliable services.

Joe McClanahan - Telecommunications Project Engineer

Mary McKay - E&O Support Supervisor

21The accompanying notes are an integral part of the financial statement.

ASSETS

CURRENT ASSETSCash & Cash Equivalents (Note 4)

Cash & Working Funds 20,912,440$ Restricted Construction Funds 35,227,060 Restricted Bond Fund ‐ Principal & Interest 3,227,522

Accounts Receivable 4,934,510 Less Uncollectibles (117,379) Plant Material & Operating Supplies 1,966,100 Prepayments 20,353

Total Current Assets 66,170,606

NONCURRENT ASSETSRestricted for Future Capital Construction (Note 4) 6,715,154 Restricted Bond Reserve Fund (Note 4) 5,067,414 Deferred Charges (Note 7) 883,824 Net OPEB Asset (Note 11) 1,531,625

Subtotal Noncurrent Assets 14,198,017

Capital AssetsLand and Intangible Plant 2,133,306 Plant 141,244,810 Structures and Improvements 8,553,527 Machinery and Equipment 15,699,959 Construction Work in Progress (Note 3) 14,180,281

Less: Accumulated Depreciation (61,627,482) Total Capital Assets (Net) (Note 2) 120,184,401 Total Noncurrent Assets 134,382,418

TOTAL ASSETS 200,553,024$

NET ASSETS AND LIABILITIES

CURRENT LIABILITIESRevenue Bonds, Current Portion (Note 6) 1,415,000$ Capital Leases, Current Portion (Note 5) 30,448 Current Portion of Personal Time Off 1,299,678 Warrants Payable 683,270 Accounts Payable 3,909,997 Customer Deposits 511,820 Taxes Accrued 544,361 Interest Accrued ‐ Long‐Term Debt 387,821 Other Current & Accrued Liabilities 1,815,403

Total Current & Accrued Liabilities 10,597,798

NONCURRENT LIABILITIESPersonal Time Off 728,942 Capital Leases (Note 5) 27,537 Revenue Bonds (Note 6) 80,680,000 Unamortized Premium and Discount and Loss on Defeasance 27,964

Total Noncurrent Liabilities 81,464,443 Total Liabilities 92,062,241

NET ASSETSInvested in Capital Assets, Net of Debt 80,780,194 Restricted for Debt Service 8,294,936 Unrestricted Net Assets 19,415,653

TOTAL NET ASSETS 108,490,783$

STATEMENT OF NET ASSETSDecember 31, 2010


OPERATING REVENUESUtility Sales and Service Fees 46,382,942$ Other Charges for Services 320,095 Other Operating Revenues 1,230,382 Total Operating Revenues 47,933,419

OPERATING EXPENSESPurchased Power 21,670,151 Operation 3,323,598 Maintenance 4,192,985 Customer Accounts 1,913,446 Customer Service, Information, Advertising 256,205 Administrative & General 4,474,990 Maintenance of General Plant 964,479 Depreciation 5,074,238 Taxes Other than Income 1,200,681 Total Operating Expenses 43,070,773

OPERATING INCOME (LOSS) 4,862,646

NONOPERATING REVENUES & EXPENSESRevenue from Merchandising 10,979 Cost of Merchandising (16,042) Interest Income 200,892 Interest and Amortization on Long‐Term Debt (2,797,248) Other Nonoperating Revenues 567,553 Total Nonoperating Revenues (Expenses) (2,033,866)

CHANGE IN NET ASSETS 2,828,780

TOTAL NET ASSETS, BEGINNING OF YEAR 105,662,003

TOTAL NET ASSETS, END OF YEAR 108,490,783$

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETSFor the Year Ended December 31, 2010


CASH FLOWS FROM OPERATING ACTIVITIESCash Received from Customers 49,063,077$ Cash Payments to Suppliers (27,417,456) Cash Payments to Employees (11,670,589) Taxes Paid (3,022,920) Miscellaneous other Revenue 198,725 Net Cash Provided by Operating Activities 7,150,837

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES ‐

CASH FLOWS FROM CAPITAL FINANCING ACTIVITIESProceeds from Capital Debt 59,805,000 Acquisition and Construction of Capital Assets (12,306,983) Principal paid on Capital Debt (12,387,023) Interest paid on Capital Debt (2,922,038) Capital Debt Service Subsidy from the Federal Government 368,828 Deferred Credits (9,368) Net Cash Used for Capital Financing Activities 32,548,416

CASH FLOWS FROM INVESTING ACTIVITIESPurchase of Investments (9,864,343) Interest Received on Investments 171,672 Net Cash Flow Provided by Investing Activities (9,692,671)

NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS 30,006,582

CASH & CASH EQUIVALENTS, BEGINNING OF YEAR 29,360,440

CASH AND CASH EQUIVALENTS, END OF YEAR 59,367,022$

STATEMENT OF CASH FLOWSFor the Year Ended December 31, 2010

24

The accompanying notes are an integral part of the financial statement.

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

Operating Income 4,862,646$

Adjustments to Reconcile Operating Income to Net Cash provided by Operating Activities:

Merchandising ‐ Net (5,061) Customer Deposits (52,139) Depreciation 5,074,238 Customer Accounts Receivable (132,842) Miscellaneous 198,725 Other Accounts Receivable (247,888) Uncollectibles 107,205 Material Inventory 140,832 Prepayments (1,230) Outstanding Warrants (649,068) Accounts Payable (796,289) Other Postemployee Benefits (OPEB) (1,000,025) Taxes Accrued (413,996) Miscellaneous Accrued Liabilities 65,729

Total Adjustments 2,288,191

NET CASH PROVIDED BY OPERATING ACTIVITIES 7,150,837$

NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES:

STATEMENT OF CASH FLOWSFor the Year Ended December 31, 2010

Capital lease obligations of $46,122 were incurred when the District entered into leases for new electronic data storage.

(continued)

25


Private‐Purpose Trust (VEBA)

Other Postemployment

Benefit Plans (OPEB)

ASSETS

Cash and Cash Equivalents 2,261$ 68,737$ Investments 2,721,296 2,992,680

Total Assets 2,723,557 3,061,417

LIABILITIES 2,261 ‐

TOTAL NET ASSETS HELD IN TRUST FOR OTHERS 2,721,296$ 3,061,417$

STATEMENT OF FIDUCIARY NET ASSETSDecember 31, 2010

26


Private‐Purpose Trust (VEBA)

Other Postemployment

Benefit Plans (OPEB)

ADDITIONSContributions 539,305$ 842,959$ Net Investment Income 242,711 185,899

Total Additions 782,016 1,028,858

DEDUCTIONSBenefits Paid to or for Participants 314,596 217,959 Net Investment Loss ‐ ‐

Total Deductions 314,596 217,959

NET INCREASE (DECREASE) 467,420 810,899

NET ASSETS ‐ BEGINNING 2,253,876 2,250,518

NET ASSETS ‐ ENDING 2,721,296$ 3,061,417$

STATEMENT OF CHANGES IN FIDUCIARY NET ASSETSFor the Year Ended December 31, 2010

27

Notes to financial StatementYear Ended December 31, 2010

NOTE 1 - SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIESMasonCountyPublicUtilityDistrictNo.3isacustomer-ownedutilityprovidingelectricalandwholesaletelecommunicationservicesinMasonCounty,Washington.Formedbyavoteofthepeoplein1934,theutilityisamunicipalcorporationorganizedunderthelawsofthestateofWashington.Itislegallyandfiscallyindependentofotherstateorlocalgovernments.Itbeganelectricalserviceduring1939.AsofDecember31,2010,theDistrictprovidedelectricserviceto32,520customers.

AboardofthreecommissionerselectedbythevotersservestheDistricttoestablishpolicy,reviewoperationsandapproveplans,budgetsandexpenses.ThelegalresponsibilitiesandpowersoftheDistrict,includingtheestablishmentofratesandchargesforservicesrendered,areexercisedthroughthecommission.

TheaccountingpoliciesofMasonCountyPublicUtilityDistrictNo.3(District)conformtogenerallyacceptedaccountingprinciplesasapplicabletoproprietaryfundsofgovernmentalutilities.Thefollowingisasummaryofthemoresignificantpolicies(includingidentificationofthosepolicieswhichresultinmaterialdeparturesfromgenerallyacceptedaccountingprinciples).

a) Basis of Accounting and Presentation -TheaccountingandreportingpoliciesoftheDistrictareregulatedbytheWashingtonStateAuditor’sOfficeandarebasedontheUniformSystemofAccountsprescribedforpublicutilitiesandlicenseesbytheFederalEnergyRegulatoryCommission(FERC).TheDistrictusesthefull-accrualbasisofaccountingwhererevenuesarerecognizedwhenearnedandexpensesarerecognizedwhenincurred.RevenuesandexpensesrelatedtotheDistrict’sprincipaloperationsareconsideredtobeoperatingrevenuesandexpenses;whilerevenuesandexpensesrelatedtocapital,financingandinvestingactivitiesareconsideredtobenonoperatingrevenuesandexpenses.

TheaccountingpoliciesoftheDistrictconformtogenerallyacceptedaccountingprinciplesapplicabletogovernmentalunits.TheGovernmentalAccountingStandardsBoard(GASB)istheacceptedstandardsettingbodyforestablishinggovernmentalaccountingandfinancialreportingprinciples.TheDistricthasappliedallapplicableGASBpronouncementsandelectedtoapplyFinancialAccountingStandardsBoard(FASB)statementsandinterpretationsissuedafterNovember30,1989,exceptforthosethatconflictwithorcontradictGASBpronouncements.

b) Utility Plant and Depreciation - Utilityplantinserviceandothercapitalassetsarerecordedatcost,whichincludesbothdirectandindirectcostsofconstructionoracquisition.TheDistrict’scapitalizationthresholdis$1,000fornon-infrastructurecapital.Thecostofmaintenanceandrepairsischargedtoexpenseasincurred,whilethecostofreplacementsandimprovementsiscapitalized.

Property,plantandequipmentaredepreciatedusingthestraight-linemethodoverthefollowingestimatedusefullives:

StructuresandImprovements 40yearsGenerationPlant 17–30yearsElectricPlant–Transmission 25–36yearsElectricPlant–Distribution 23–50yearsElectricPlant/Equipment–Broadband 8–25yearsTransportationEquipment 4–8yearsGeneralPlant&Equipment 8–17years

TheDistrict’sContinuingPropertyRecordssystemreflectstherecordingofpropertyunitsaddedandretired.Initialdepreciationonutilityplantisrecordedinthemonthsubsequenttopurchaseorcompletionofconstruction.Whenoperatingplantassetsareretiredorotherwisedisposedof,theiroriginalcosttogetherwithremovalcosts,lesssalvage,ischargedtoaccumulateddepreciation.

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Preliminarysurveyandinvestigationchargesincurredforproposedprojectsaredeferredpendingfinaldecisiontodeveloptheproject.Costsrelatingtoprojectsultimatelyconstructedarereclassifiedtoutilityplant.Chargesrelatingtoabandonedprojectsareexpensed.

c) Deposits and Investments - TheDistrict’scashandcashequivalentsareconsideredtobecashonhand,demanddeposits,andshort-terminvestmentswithoriginalmaturitiesofthreemonthsorlessfromthedateofacquisition.

CashandinvestmentsarerecordedinaccountsasrequiredbytheDistrict’sbondindentures.Restrictedassetsrepresentaccountsthatarerestrictedbybondcovenantsorthirdpartycontractualagreements.AccountsthatareallocatedbyresolutionoftheCommissionareconsideredtobeboarddesignatedaccounts.Boarddesignatedaccountsareacomponentofunrestrictedassetsastheirusemayberedirectedatanytimebyapprovalofthecommissioners

TheDistrictconsidersalldepositswiththeStateTreasurer’sInvestmentPoolcashandcashequivalents.Sincethepoolissufficientlyliquidtopermitwithdrawofcashatanytimewithoutpriornoticeorpenalty,equityinthepoolisalsodeemedtobeacashequivalent.

Asrequiredbystatelaw,alldepositsandinvestmentsoftheDistrict’sfundsare:obligationsoftheU.S.Governmentanditsagencies;certificatesofdeposit;generalobligationsofWashingtonStatemunicipalities(theStateTreasurer’sInvestmentPool);passbookaccountsanddepositswithWashingtonStatebanksandsavingsandloanassociations;orotherinvestmentsallowedbyChapter39.59RCW.

TheDistrict’sdepositsandcertificatesofdepositareentirelycoveredbyfederaldepositoryinsurance(FDICandFSLIC)orbycollateralheldinamultiplefinancialinstitutioncollateralpooladministeredbytheWashingtonPublicDepositProtectionCommission(PDPC).

d) Restricted Assets - Inaccordancewithbondresolutions,relatedagreementsandlaws,separaterestrictedaccountshavebeenestablished.Theseassetsarerestrictedforspecificusesincludingdebtservice,bondreserve,andcapitaladditionsandareclassifiedascurrentornoncurrentassets,asappropriate.

e) Receivables - Thepercentage-of-salesallowancemethodisusedtoestimateuncollectibleaccounts.AccountsthataredeterminedtobeuncollectiblebytheDistrictareturnedovertoacollectionagencybutremaininaccountsreceivableuntilitisdeterminedthereisnopossibilityofcollection.Theyarethenchargedagainsttheprovisionforuncollectibles.

f) Inventories -Inventoriesarevaluedatweightedaveragewhichapproximatesthemarketvalue.

g) Personal Time Off (PTO) - TheDistrictaccruesaccumulatedunpaidpersonaltimeoff(PTO)benefitsasamountsareearned.PTOincludesvacation,sickleaveandotherleave.PTO,whichmaybeaccumulatedupto120days,ispayableuponresignation,retirement,ordeath.TheamountofPTOearnedin2010equaled$1,579,989,andtheamountusedwas$1,520,756leavingabalanceof$2,028,620asofDecember31,2010,comparedto$1,969,387atyear-end2009.ThecurrentandnoncurrentliabilityforunpaidpersonaltimeoffappearsontheStatementofNetAssets.

h) Deferred Financing Costs -Costsassociatedwiththeissuanceofbondsareamortizedtoexpenseoverthetermoftherelateddebt.Amortizationexpenseiscalculatedusingthebondsoutstandingmethod.AtDecember31,2010,deferredfinancingcoststotaled$825,833.

i) Debt Premium and Discount - Originalissuebondpremiumsanddiscountsrelatingtorevenuebondsareamortizedoverthetermsoftherespectivebondissuesusingthebondsoutstandingmethod.Bondpremiumsanddiscountsoffsetthedebtoutstandingbalance.InaccordancewithGASBStatementNo.23,AccountingandFinancialReportingforRefundingsofDebtReportedbyProprietaryActivities,lossesondebtrefundingshavebeendeferredandamortizedovertheshorteroftheremaininglifeoftheoldornewdebt.

j) Reclassifications - Certain2009accountbalancesmayhavebeenreclassifiedtoconformtothe2010presentation.Suchreclassificationswouldhavenoeffectonpreviouslyreportedresultsofoperationsandcashflows.

29

k) Financial Statements - Separatefundfinancialstatementsareprovidedfortheproprietaryfundandthefiduciaryfunds.

Proprietaryfundsdistinguishoperatingrevenuesandexpensesfromnonoperatingitems.Operatingrevenuesandexpensesgenerallyresultfromprovidingservicesandproducinganddeliveringgoodsinconnectionwithaproprietaryfund’sprincipalongoingoperations.TheprincipaloperatingrevenuesoftheDistrict’senterprisefund,theelectricenterprisefund,arechargestocustomersforsalesandservices.TheDistrictalsorecognizesasoperatingrevenuetheportionofconnectionfeesintendedtorecoverthecostofconnectingnewcustomerstothesystem.Operatingexpensesforenterprisefundsincludethecostofsalesandservices,administrativeexpensesanddepreciationofcapitalassets.Allrevenuesandexpensesnotmeetingthisdefinitionarereportedasnonoperatingrevenuesandexpenses.

TheDistricthastwofiduciarytrusts.ThefirstistheVoluntaryEmployees’BeneficiaryAssociation(VEBA)TrustasdescribedinNote15andthesecondistheOPEBTrustasdescribedinNote16.

NOTE 2 - UTILITY PLANT AND DEPRECIATIONUtilityplantactivityfortheyearendedDecember31,2010,wasasfollows:

Utility Plant Assets BalanceDec. 31, 2009 Increase Decrease Balance

Dec. 31, 2010

UtilityPlantNotBeingDepreciated:Land $2,073,601 $47,924 $- $2,121,525ConstructionWorkinProgress 9,377,977 17,062,826 (12,260,522) 14,180,281Intangibles 11,781 - - 11,781

TotalUtilityPlantNotBeingDepreciated $11,463,359 $17,110,750 $(12,260,522) $16,313,587

UtilityPlantBeingDepreciated:GeneratingPlant $6,231,421 $- $- $6,231,421TransmissionPlant 4,935,003 51,204 (9,363) 4,976,844DistributionPlant 134,212,706 11,194,826 (5,118,749) 140,288,783GeneralPlant 13,213,501 966,568 (178,821) 14,001,248

TotalUtilityPlantBeingDepreciated $158,592,631 $12,212,598 $(5,306,933) $165,498,296

LessAccumulatedDepreciationfor:GeneratingPlant $(1,726,418) $(207,951) $- $(1,934,369)TransmissionPlant (1,761,275) (156,418) 11,214 (1,906,479)DistributionPlant (46,274,608) (4,579,106) 1,498,143 (49,355,571)GeneralPlant (7,745,436) (853,021) 167,394 (8,431,063)

TotalAccumulatedDepreciation $(57,507,737) $(5,796,496) $1,676,751 $(61,627,482)NetUtilityPlant $112,548,253 $23,526,852 $(15,890,704) $120,184,401

Interestincurredduringtheconstructionphaseofcapitalassetsisincludedaspartofthecapitalizedvalueofassetsconstructedwhentheconstructionperiodisaminimumofsixmonthsandtheestimatedcostoftheprojectisgreaterthan$100,000.ThetotalinterestexpenseincurredbytheDistrictduring2010was$3,097,207.Ofthisamount,$87,775wasincludedaspartofthecostofcapitalassetsunderconstructioninconnectionwiththeMountainViewsubstationremodeland$269,506wasincludedaspartofthenewJohnsPrairieoperationcenterproject.

30

NOTE 3 - CONSTRUCTION IN PROGRESSConstructioninprogressrepresentsbalancesofworkordersforutilityplantinprocessofconstruction.The2010year-endworkinprogressequaled$14,180,281.

Description Expended

UndergroundCableReplacements $1,147,756

SystemConstruction 3,234,319

BroadbandSystem 336,212

OperationCenter 8,534,544

WaterLineExtension 752,587

OtherMiscellaneousProjects 174,863

WorkinProgressBalance $14,180,281

NOTE 4 – CASH, DEPOSITS AND INVESTMENTSAsofDecember31,2010,theDistricthadthefollowingcash,depositsandinvestments:

Description Fair Value

Cash&WorkingFund $20,912,440

ConstructionFunds 35,227,061

RestrictedBondFunds–Principal&Interest 3,227,521

CertificatesofDeposit 11,782,568

Total Cash, Deposits and Investments $ 71,149,590

TheDistrict’sinvestmentsinclude$5,067,414inareserveaccountinordertosatisfytheReserveAccountRequirementpursuanttobondcovenants.Theremaininginvestmentamountof$6,715,154isforfuturecapitalimprovementprojectsfundedfrom2010bondproceeds.

Interest rate risk. Inaccordancewithitsinvestmentpolicy,theDistrictmanagesitsexposuretodeclinesinfairvaluesbymatchinginvestmentmaturitiestomeetanticipatedcashflowrequirements.

Credit risk.TheDistrict’sinvestmentpolicyconformswithstatelawwhichrestrictsinvestmentsofpublicfundstodebtsecuritiesandobligationsoftheU.S.Treasury,U.S.governmentagenciesandcertainotherU.S.governmentsponsoredcorporations,certificatesofdepositandotherevidencesofdepositatfinancialinstitutionsqualifiedbytheWashingtonPublicDepositProtectionCommission(PDPC),bankers’acceptances,investment-gradegeneralobligationdebtofstateandlocalgovernmentsandpublicauthoritiesandWashingtonStateTreasurer’sLocalGovernmentInvestmentPool(LGIP).TheLGIPisanunrated2a7-likepoolandinvestmentsintheLGIParereportedbasedonthepool’sshareprice.Thereportedvalueofthepoolisthesameasthefairvalueofthepoolshares.TheLGIPisgovernedbytheStateFinanceCommitteeandisadministeredbytheStateTreasurer.

Custodial credit risk - Deposits. Foradeposit,thisistheriskthatintheeventofabankfailure,theDistrict’sdepositsmaynotbereturnedtoit.TheDistrict’sdepositsandcertificatesofdepositareentirelycoveredbytheFederalDepositoryInsuranceCommission(FDIC)orbycollateralheldinamultiplefinancialinstitutioncollateralpooladministeredbythePDPC.Understatelaw,publicdepositoriesunderthePDPCarerequiredtopledgesecuritiesascollateralat100percentofalldepositeduninsuredpublicfunds.Asaresult,depositscoveredbycollateralheldinthemultiplefinancialinstitutioncollateralpoolareconsideredtobeinsured.StatelawrequiresthatdepositsmayonlybemadewithinstitutionsthatareapprovedbythePDPC.

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NOTE 5 – LEASE COMMITMENTSCapital Leases -TheDistricthasenteredintoleaseagreementsforfinancingtheacquisitionofelectronicdatastorage.Theseleaseagreementsqualifyascapitalleasesforaccountingpurposesandarerecordedasassetsandaslong-termliabilitiesatthepresentvalueofthefutureminimumleasepaymentseffectiveonthedateoftheirinception.TheDistrictrecordsleasepaymentsasareductionofthelong-termliabilityandasinterestexpenseoverthelifeofthelease.Thefutureminimumleasepaymentsundertheseleaseagreementsareasfollows:

FiscalYearEndingDecember31:

2011 $31,9582012 16,2872013 12,215Totalminimumleasepayments $60,460Lessamountrepresentinginterest (2,475)Presentvalueofnetminimumleasepayments $57,985

Operating Leases - TheDistrictiscommittedunderoperatingleasesforpersonalcomputersandotherofficemachines.Theseleasesareconsideredoperatingleasesforaccountingpurposes.Totalcostsforoperatingleaseswere$109,698fortheyearendedDecember31,2010.Thefutureminimumleasepaymentsfortheseleasesareasfollows:

FiscalYearEndingDecember31:

2011 $98,3642012 89,3822013 57,9122014 19,6022015 407Total $265,667

NOTE 6 - LONG-TERM DEBTTheDistricthasfourrevenuebondsoutstandingasofDecember31,2010.Theoriginalamountsofthesebondstotaled$82,340,000andthefundswereusedfortheacquisitionandconstructionofmajorcapitalfacilities.Revenuebondsoutstandingareasfollows:

Purpose InterestRate OriginalAmount

2002–ElectricRevenueBonds 4 45% - 5 50% $12,585,000

2008–ElectricRevenueBonds 5 30% - 5 375% 9,950,000

2010A–ElectricRevenueRefundingBonds 2 00% - 4 00% 7,255,000

2010B–ElectricRevenueBonds(TaxableBABs) 2 334% - 6 347% 52,550,000

Total $82,340,000

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Thefollowingisalistofthelong-termdebtactivityandyear-endsummaryasofDecember31,2010.

Issue Beginning Balance Additions Reductions Ending

Balance

AmountsDueWithinOne

Year1997ElectricRevenueBonds,dueinannualinstallmentsof$25,000-$265,000throughJuly1,2011

$520,000 $- $520,000 $- $-

1998ElectricRevenueBonds,dueinannualinstallmentsof$55,000-$800,000throughDecember1,2012

2,300,000 - 2,300,000 - -

2001ElectricRevenueBonds,dueinannualinstallmentsof$400,000-$845,000throughDecember1,2021

7,805,000 - 7,805,000 - -

2001AElectricRevenueBonds,dueinannualinstallmentsof$469,196-$750,279throughDecember1,2011

1,462,865 - 1,462,865 - -

2002ElectricRevenueBonds,dueinannualinstallmentsstartingin2010of$210,000-$1,425,000throughDecember1,2021

12,585,000 - 210,000 12,375,000 880,000

2008ElectricRevenueBonds,dueinannualinstallmentsstartingin2026of$3,145,000-$3,490,000throughDecember1,2028

9,950,000 - - 9,950,000 -

2010AElectricRevenueRefundingBonds,dueinannualinstallmentsstartingin2010$35,000-$795,000throughDecember1,2021

- 7,255,000 35,000 7,220,000 535,000

2010BElectricRevenueBonds,dueinannualinstallmentsstartingin2022of$2,060,000-$24,560,000through2040

- 52,550,000 - 52,550,000 -

Subtotal $34,622,865 $59,805,000 $12,332,865 $82,095,000 $1,415,000

Plus:UnamortizedDiscounts&Premiums (191,678) 458,864 8,422 258,764 -

Less:UnamortizedLossonRefundings - (241,801) (11,001) (230,800) -

TotalBondsPayable $34,431,187 $60,022,063 $12,330,286 $82,122,964 $1,415,000

CapitalLeases 66,021 46,122 54,158 57,985 30,448

CompensatedAbsences 1,969,387 1,579,989 1,520,756 2,028,620 1,299,678

TotalLong-TermDebt $36,466,595 $61,648,174 $13,905,200 $84,209,569 $2,745,126

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Futuredebtservicerequirementsonthebondsareasfollows:

Year Principal Interest Total2011 $1,415,000 $4,653,850 $6,068,8502012 1,485,000 4,605,750 6,090,7502013 1,535,000 4,549,700 6,084,7002014 1,605,000 4,488,370 6,093,3702015 1,670,000 4,423,970 6,093,9702016-2020 9,665,000 20,813,387 30,478,3872021-2025 10,915,000 18,295,003 29,210,0032026-2040 53,805,000 28,747,005 82,552,005Total $82,095,000 $90,577,035 $172,672,035

Thereareanumberoflimitationsandrequirementscontainedinthevariousbondindentures.TheDistrictisincompliancewithallsignificantlimitationsandrestrictionsincludingthecompliancewithfederalarbitragerequirements.

InJuly2010,theDistrictissued$7,255,000SeriesA(taxexempt)revenuebondswithanaveragerateof3.849percenttoadvancerefund$7,310,000ofoutstanding2001bondswithanaveragerateof4.982percent.Thenetproceedsof$7,654,670(afterpaymentof$59,194inunderwritingfeesandotherissuancecosts)plusanadditional$458,864bondpremiumweredepositedwithanescrowagenttoprovideforallfuturedebtservicepaymentsonthe2001Seriesbonds.Asaresult,the2001Seriesbondsareconsideredtobedefeasedandtheliabilityforthosebondshasbeenremovedfromlong-termdebt.

Althoughtheadvancerefundingresultedintherecognitionofanaccountinglossof$241,801fortheyearendedDecember31,2010,theDistrictineffectreduceditsaggregatedebtservicepaymentsby$739,583overthenext11yearsandobtainedaneconomicgain(differencebetweenthepresentvaluesoftheoldandnewdebtservicepayments)of$640,612.

InJuly2010,theDistrictissued$52,550,000SeriesB(taxableBuildAmericaBonds–DirectPayment)revenuebondstofinancetheconstructionofanewoperationscenterandothercapitalimprovements,tofundthereserveaccount,tocapitalizeaportionoftheinterestonthebondsthroughJune1,2012,andtopaycostsofissuingandsellingthebonds.TheSeriesBbondsaretermbondsmaturinginannualsinkingfundinstallmentsfromDecember1,2022throughDecember1,2040.InterestratesontheSeriesBbondsrangefrom5.334percentto6.347percent,butaresubjecttoafederalsubsidypaymentfromthefederalgovernmentof35percentoftheinterestrate,resultinginanetinterestrateof3.467percentto4.126percent,andanoveralltrueinterestcostof4.100percent.

TheDistrictestablishes,maintainsandcollectsratesandchargesthatshallbeadequatetoprovideineachfiscalyearnetrevenuesinanamountequaltoatleast1.25timestheAnnualDebtServiceontheParityBondsoutstandinginaccordancewiththebondcovenants.

PursuanttotheresolutionsauthorizingtheissuanceofOutstandingBonds,theDistricthassatisfiedtheReserveAccountRequirementsbypurchasingsuretybondsfromFinancialSecurityAssurance,Inc.(“FSA”)alongwithcashthataresufficienttosatisfytheReserveAccountRequirementfortheOutstandingBonds.ThesuretybondwithFSA,intheamountof$807,172,expiresonDecember1,2021.TheDistrictreplacedasuretybondwithFinancialGuarantyInsuranceCompany(FGIC)withproceedsfromthe2008BondsandDistrictreserves.TheDistrictadditionallyincreasedtheBondReserveAccountwithproceedsfromthe2010BBonds.AsofDecember31,2010,theDistricthadabalanceof$5,067,414initsBondReserveAccount.TheDistrictmaintainsthebondreservefundstoguaranteetheprincipalandinterestpaymentstothebondholders.

TheDistrictdidnotengageinanyshort-termdebtactivityduringtheyear.

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NOTE 7 - DEFERRED CHARGESInaccordancewithgenerallyacceptedaccountingprinciplesforregulatedbusinesses,theDistricthasdeferredthefollowingcostsrelatingtothesaleofbonds.Thecostsareamortizedoverthelivesofthevariousbondissues.

Deferred Charges 2010UnamortizedDebtExpense–2002Bonds $96,768UnamortizedDebtExpense–2008Bonds 206,686UnamortizedDebtExpense–2010ABonds 53,484UnamortizedDebtExpense–2010BBonds 468,895PreliminarySurveys 57,991Total $883,824

NOTE 8 - PENSION PLANSAllfull-timeandqualifyingpart-timeDistrictemployeesparticipateinoneofthefollowingstatewideretirementsystemsadministeredbytheWashingtonStateDepartmentofRetirementSystems,undercost-sharingmultiple-employerdefinedbenefitanddefinedcontributionpublicemployeeretirementplans.TheDepartmentofRetirementSystems(DRS),adepartmentwithintheprimarygovernmentofthestateofWashington,issuesapubliclyavailablecomprehensiveannualfinancialreport(CAFR)thatincludesfinancialstatementsandrequiredsupplementaryinformationforeachplan.TheDRSCAFRmaybeobtainedbywritingto:DepartmentofRetirementSystems,CommunicationsUnit,P.O.Box48380,Olympia,WA98504-8380;oritmaybedownloadedfromtheDRSwebsiteatwww.drs.wa.gov.ThefollowingdisclosuresaremadepursuanttoGASBStatementNo.27,AccountingforPensionsbyStateandLocalGovernmentEmployersandGASBStatementNo.50,PensionDisclosures,anAmendmentofGASBStatementsNo.25andNo.27.

Public Employees’ Retirement System (PERS) Plans 1, 2 and 3Plan Description - PERSisacost-sharingmultiple-employerretirementsystemcomprisedofthreeseparateplansformembershippurposes:Plans1and2aredefinedbenefitplansandPlan3isadefinedbenefitplanwithadefinedcontributioncomponent.

Membershipinthesystemincludes:electedofficials;stateemployees;employeesofthesupreme,appealsandsuperiorcourts(otherthanjudgescurrentlyinajudicialretirementsystem);employeesoflegislativecommittees;communityandtechnicalcolleges,collegeanduniversityemployeesnotparticipatinginnationalhighereducationretirementprograms;judgesofdistrictandmunicipalcourts;andemployeesoflocalgovernments.

PERSparticipantswhojoinedthesystembySeptember30,1977,arePlan1members.ThosewhojoinedonorafterOctober1,1977andbyAugust31,2002forlocalgovernmentemployeesarePlan2membersunlesstheyexerciseanoptiontotransfertheirmembershiptoPlan3.PERSparticipantsjoiningthesystemonorafterSeptember1,2002forlocalgovernmentemployeeshavetheirrevocableoptionofchoosingmembershipineitherPERSPlan2orPERSPlan3.Theoptionmustbeexercisedwithin90daysofemployment.AnemployeeisreportedinPlan2untilachoiceismade.Employeeswhofailtochoosewithin90daysdefaulttoPERSPlan3.Notwithstanding,PERSPlan2andPlan3membersmayoptoutofplanmembershipifterminallyill,withlessthanfiveyearstolive.

PERSPlan1andPlan2definedbenefitretirementbenefitsarefinancedfromacombinationofinvestmentearningsandemployerandemployeecontributions.PERSretirementbenefitprovisionsareestablishedinstatestatuteandmaybeamendedonlybythestatelegislature.

Plan1membersarevestedafterthecompletionoffiveyearsofeligibleservice.Plan1membersareeligibleforretirementafter30yearsofservice,oratage60withfiveyearsofservice,orattheageof55with25yearsofservice.Themonthlybenefitistwopercentoftheaveragefinalcompensation(AFC)peryearofservice.(AFCisthemonthlyaverageofthe24consecutivehighest-paidservicecreditmonths.)Theretirementbenefitmaynotexceed60percentofAFC.ThemonthlybenefitissubjecttoaminimumforPERSPlan1retireeswhohave25yearsofserviceandhavebeenretired20years,orwhohave20yearsofserviceandhavebeenretired25years.Plan1membersretiringfrominactivestatuspriortotheageof65mayreceiveactuariallyreducedbenefits.Ifasurvivoroptionischosen,thebenefit

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isfurtherreduced.Acost-of-livingallowance(COLA)isgrantedatage66baseduponyearsofservicetimestheCOLAamount,whichisincreasedbythreepercentannually.Plan1membersmayalsoelecttoreceiveanoptionalCOLAthatprovidesanautomaticannualadjustmentbasedontheConsumerPriceIndex.Theadjustmentiscappedatthreepercentannually.Tooffsetthecostofthisannualadjustment,thebenefitisreduced.

PERSPlan1providesdutyandnon-dutydisabilitybenefits.Dutydisabilityretirementbenefitsfordisablementpriortotheageof60consistofatemporarylifeannuitypayabletotheageof60.Theallowanceamountis$350amonth,ortwo-thirdsofthemonthlyAFC,whicheverisless.Thebenefitisreducedbyanyworkers’compensationbenefitandispayableaslongasthememberremainsdisabledoruntilthememberattainstheageof60.Amemberwithfiveyearsofcoveredemploymentiseligiblefornon-dutydisabilityretirement.Priortotheageof55,theallowanceamountistwopercentoftheAFCforeachyearofservicereducedbytwopercentforeachyearthatthemember’sageislessthan55.Thetotalbenefitislimitedto60percentoftheAFCandisactuariallyreducedtoreflectthechoiceofasurvivoroption.Acostoflivingallowanceisgrantedatage66baseduponyearsofservicetimestheCOLAamount(basedontheConsumerPriceIndex),cappedatthreepercentannually.Tooffsetthecostofthisannualadjustment,thebenefitisreduced.

PERSPlan1memberscanreceivecreditformilitaryservicewhileactivelyservingthemilitary,ifsuchcreditmakesthemeligibletoretire.Memberscanalsopurchaseupto24monthsofservicecreditlostbecauseofanonthejobinjury.

PERSPlan2membersarevestedafterthecompletionoffiveyearsofeligibleservice.Plan2membersareeligiblefornormalretirementattheageof65withfiveyearsofservice.ThemonthlybenefitistwopercentoftheAFCperyearofservice.(AFCisthemonthlyaverageofthe60consecutivehighestpaidservicemonths.)

PERSPlan2memberswhohaveatleast20yearsofservicecreditandare55yearsofageorolderareeligibleforearlyretirementwithareducedbenefit.Thebenefitisreducedbyanearlyretirementfactor(ERF)thatvariesaccordingtoage,foreachyearbeforeage65.

PERSPlan2memberswhohave30ormoreyearsofservicecreditandareatleast55yearsoldcanretireunderoneoftwoprovisions:

• Withabenefitthatisreducedbythreepercentforeachyearbeforeage65.• Withabenefitthathassmaller(orno)reduction(dependingonage)thatimposesstricterreturntowork

rules.

PERSPlan2retirementbenefitsarealsoactuariallyreducedtoreflectthechoice,ifmade,ofasurvivoroption.Thereisnocaponyearsofservicecredit;andacost-of-livingallowanceisgranted(basedontheConsumerPriceIndex),cappedatthreepercentannually.

ThesurvivingspouseoreligiblechildorchildrenofaPERSPlan2memberwhodiesafterleavingeligibleemploymenthavingearnedtenyearsofservicecreditmayrequestarefundofthemember’saccumulatedcontributions.EffectiveJuly22,2007,saidrefund(adjustedasneededforspeciallegalreductions)isincreasedfrom100percentto200percentoftheaccumulatedcontributionsifthemember’sdeathoccursintheuniformedservicetotheUnitedStateswhileparticipatinginOperationEnduringFreedomorPersianGulf,OperationIraqiFreedom.

PERSPlan3hasadualbenefitstructure.Employercontributionsfinanceadefinedbenefitcomponentandmembercontributionsfinanceadefinedcontributioncomponent.ThedefinedbenefitportionprovidesamonthlybenefitthatisonepercentoftheAFCperyearofservice.(AFCisthemonthlyaverageofthe60consecutivehighestpaidservicemonths.)

EffectiveJune7,2006,PERSPlan3membersarevestedinthedefinedbenefitportionoftheirplanaftertenyearsofservice;orafterfiveyearsofservice,iftwelvemonthsofthatserviceareearnedafterage44;orafterfiveservicecredityearsearnedinPERS2priortoJune1,2003.PERSPlan3membersareimmediatelyvestedinthedefinedcontributionportionoftheirplan.

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VestedPlan3membersareeligibletoretirewithfullbenefitsatage65,ortheymayretireearlywiththefollowingconditionsandbenefits:

• Iftheyhaveatleasttenservicecredityearsandare55yearsold,thebenefitisreducedbyanERFthatvarieswithage,foreachyearbeforeage65.

• Iftheyhave30servicecredityearsandareatleast55yearsold,theyhavethechoiceofabenefitthatisreducedbythreepercentforeachyearbeforeage65;orabenefitwithasmaller(orno)reductionfactor(dependingonage)thatimposesstricterreturntoworkrules.

PERSPlan3definedbenefitretirementbenefitsarealsoactuariallyreducedtoreflectthechoice,ifmade,ofasurvivoroption.ThereisnocaponyearsofservicecreditandPlan3providesthesamecostoflivingallowanceasPlan2.

PERSPlan3definedcontributionretirementbenefitsaresolelydependentupontheresultsofinvestmentactivities.

Thedefinedcontributionportioncanbedistributedinaccordancewithanoptionselectedbythemember,eitherasalumpsumorpursuanttootheroptionsauthorizedbytheDirectoroftheDepartmentofRetirementSystems.

PERSPlan2andPlan3providedisabilitybenefits.Thereisnominimumamountofservicecreditrequiredforeligibility.ThePlan2monthlybenefitamountistwopercentoftheAFCperyearofservice.ForPlan3,themonthlybenefitamountisonepercentoftheAFCperyearofservice.

Thesedisabilitybenefitamountsareactuariallyreducedforeachyearthatthemember’sageislessthan65,andtoreflectthechoiceofasurvivoroption.Thereisnocaponyearsofservicecredit,andacostoflivingallowanceisgranted(basedontheConsumerPriceIndex)cappedatthreepercentannually.

PERSPlan2andPlan3membersmayhaveuptotenyearsofinterruptivemilitaryservicecredit;fiveyearsatnocostandfiveyearsthatmaybepurchasedbypayingtherequiredcontributions.EffectiveJuly24,2005,amemberwhobecomestotallyincapacitatedforcontinuedemploymentwhileservingtheuniformedservices,orasurvivingspouseoreligiblechildren,mayapplyforinterruptivemilitaryservicecredit.Additionally,PERSPlan2andPlan3memberscanalsopurchaseupto24monthsofservicecreditlostbecauseofanon-the-jobinjury.

PERSmembersmayalsopurchaseuptofiveyearsofadditionalservicecreditonceeligibleforretirement.Thiscreditcanonlybepurchasedatthetimeofretirementandcanbeusedonlytoprovidethememberwithamonthlyannuitythatispaidinadditiontothemember’sretirementbenefit.

BeneficiariesofaPERSPlan2orPlan3memberwithtenyearsofservicewhoiskilledinthecourseofemploymentreceiveretirementbenefitswithoutactuarialreduction,ifthememberwasnotatnormalretirementageatdeath.Thisprovisionappliestoanymemberkilledinthecourseofemployment,onorafterJune10,2004,iffoundeligiblebytheDepartmentofLaborandIndustries.

Aone-timeduty-relateddeathbenefitisprovidedtotheestate(ordulydesignatednominee)ofaPERSmemberwhodiesinthelineofserviceasaresultofinjuriessustainedinthecourseofemployment,orifthedeathresultedfromanoccupationaldiseaseorinfectionthatarosenaturallyandproximatelyoutofsaidmember’scoveredemployment,iffoundeligiblebytheDepartmentofLaborandIndustries.

Thereare1,189participatingemployersinPERS.MembershipinPERSconsistedofthefollowingasofthelatestactuarialvaluationdatefortheplansdatedJune30,2009:

RetireesandBeneficiariesReceivingBenefits 74,857

TerminatedPlanMembersEntitledto,butnotyetReceivingBenefits 28,074ActivePlanMembersVested 105,339ActivePlanMembersNon-vested 53,896

Total 262,166

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Funding Policy -Eachbiennium,thestatePensionFundingCounciladoptsPlan1employercontributionrates,Plan2employerandemployeecontributionratesandPlan3employercontributionrates.EmployeecontributionratesforPlan1areestablishedbystatuteatsixpercentforlocalgovernmentunitemployees.TheemployerandemployeecontributionratesforPlan2andtheemployercontributionrateforPlan3aredevelopedbytheOfficeoftheStateActuarytofullyfundPlan2andthedefinedbenefitportionofPlan3.Allemployersarerequiredtocontributeatthelevelestablishedbythestatelegislature.UnderPERSPlan3,employercontributionsfinancethedefinedbenefitportionoftheplan,andmembercontributionsfinancethedefinedcontributionportion.TheDirectoroftheDepartmentofRetirementSystemssetsPlan3employeecontributionrates.Sixrateoptionsareavailablerangingfrom5to15percent;twooftheoptionsaregraduatedratesdependentontheemployee’sage.ThemethodsusedtodeterminethecontributionrequirementsareestablishedunderstatestatuteinaccordancewithChapters41.40and41.45RCW.

Therequiredcontributionratesexpressedasapercentageofcurrentyearcoveredpayroll,asofDecember31,2010,wereasfollows:

PERS Plan 1 PERS Plan 2 PERS Plan 3Employer* 5 31% 5 31% 5.31%**Employee 6 00% 3 90% ***

*Theemployerratesincludetheemployeradministrativeexpensefeecurrentlysetat0.16percent. **Plan3definedbenefitportiononly.

***Variablefrom5percentminimumto15percentmaximumbasedonrateselectedbythePERS3member.

BoththeDistrictandtheemployeesmadetherequiredcontributions.TheDistrict’srequiredcontributionsfortheyearsendedDecember31,wereasfollows:

PERS Plan 1 PERS Plan 2 PERS Plan 32010 $19,854 $266,006 $92,2262009 $24,889 $305,074 $89,0682008 $34,716 $424,471 $114,551

NOTE 9 - POWER SUPPLY/POWER SALES CONTRACTBonneville Power Administration (BPA) -BPAisafederalpowermarketingagency,establishedbytheBonnevillePowerActof1937.BPAispartoftheU.S.DepartmentofEnergy,butisself-financingandreceivesnotaxrevenues.Costsarerecoveredbysellingwholesalepower,transmissionandrelatedservicesatcosttoutilities,industrialandgovernmentalcustomersinsideandoutsideoftheregion.Underfederallaw,BPAmustmeetthepowerneedsofitspreferencecustomers;“consumer-owned”utilitiesthatincludepublicutilitydistricts,people’sutilitydistricts,coopera-tives,tribalutilities,municipalitiesandfederalcustomers.Aboutone-thirdofallthepowerusedinthePacificNorth-westissoldbyBPA.

BPAmakesannualpaymentstotheU.S.TreasuryformoneyappropriatedtotheU.S.ArmyCorpsofEngineersandU.S.BureauofReclamation,orformoneyborrowedtoconstructdams,substationsandtransmissionfacilities.BPAalsofundsfishandwildlifemitigationcostsassociatedwiththefederalhydropowerdevelopmentintheColumbiaRiverBasin

BPAownsnogenerationresourcesordistributionfacilities.Itsfunctionistomarkettheoutputoffederalresourcesandtransmitbothfederalandnon-federalpoweroveritstransmissiongrid.TheCorpsofEngineersandtheBureauofReclamationoperateandmaintain31hydroelectricprojectswhichconstitutethebackboneofthefederalbasesystem.TheBPAownsandoperatesapproximately75percentoftheregion’stransmissioncapacity.BPAhasover3,000mega-wattsofwindintegratedintoitstransmissionsystem,andexpectsthatamounttodoubleby2013.

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Lookback Payment -InSeptember2008,afinalrecordofdecisionwasissuedbyBPAinresponsetothe2007U.S.CourtofAppealsfortheNinthCircuitrulingagainstBPA(WP-07supplementalratecase).Therulingsetthepowerratesforfiscalyear(FY)2009andestablishedthepowerratecomponentsofanewResidentialExchangeProgram(REP)forfiscalyear2009andbeyond.Theratecaseaccomplishedthefollowing:

• RevisedpowerratesforFY2009.• DeterminedtheoverpaymentstotheInvestorOwnedUtilities(IOUs)andtheassociatedoverchargestothe

preferencecustomersduetotheimproperlysetratesforFY2002-2007(the“lookbackamount”).• DeterminedResidentialExchangeProgrambenefitsforIOUsforFY2009.• DeterminedanamountofREPbenefitsthattheIOUswillforgoforFY2009thatwillbereturnedtotheprefer-

encecustomersinFY2009.• DeterminedtheoverchargestothepreferencecustomersforFY2007-2008andclosedouttheinterimagree-

mentssignedinMarch2008.

ItwasdeterminedBPAoverchargeditscustomers$767millionfortheFY2002-2007(LookbackPayment).Theover-chargesfortheLookbackPaymentarebeingreturnedintheformofinstallmentsonBPAcustomerpowerbills.TheDistrict’sportionoftheLookbackPaymentequaled$4.5million,ofwhich$550,000wascreditedin2008,$1.9millionin2009,and$1.2millionin2010,itisanticipatedthattheremaining$870,000willbecreditedin2011.BPA’sgoalistoreturntheremaininglookbackamountstothequalifiedpreferenceutilitieswithinsevenyears,whichmatchesthenumberofyearsthepreferenceutilitiesmadeoverpayments.

TheactualoverchargesfortheFY2007andFY2008total$256.8million.ItisthedifferencebetweenwhattheIOUsreceivedunderthesettlementagreementandwhattheywouldhavereceivedunderanREP.TheDistrictreceivedarefundamountof$2,938,934inOctober2008andanotherrefundintheamountof$178,581inSeptember2009.

Tiered Rates -BPAhasindicatedthatthecapacityoftheFederalColumbiaRiverPowerSystem(FCRPS)maybereachedsoon.Therefore,in2008afternearlythreeyearsofregionaldialoguediscussions,BPAofferednewpowersalescontractsforthetermof2011to2027whichwillallocatethecapacityoftheexistingFCRPSandmaintaintherelativelylowcostofthatresource.ItrequiresanyenergypurchasedinexcessofthatcapacitytobeatBPA’scostofacquiringthoseadditionalresources.TheDistrictsignedthecontract,withreservations,onNovember25,2008.ThisnewcontractwillgointoeffectOctober1,2011.

InNovember2009,theDistrictinformedBPAitwouldpurchase‘Tier2Short-Term’servicefromBPAforloadaboveWashington’sRenewablePortfolioStandardrequirements.

Renewable Portfolio Standard (RPS) -Initiative937,knownas“TheEnergyIndependenceAct”andcodifiedintolawasRCW19.285,waspassedbyWashingtonvotersinNovemberof2006.Itrequiresutilitiestoacquiresetpercentagesoftheirloadfromqualifyingrenewableresourcesbyspecifictimelines(3percentby2012,9percentby2016and15percentby2020)anddevelopaplantoacquireallcost-effectiveenergyconservationbetween2010and2020.

Thefinalruleswerereleasedin2008.Severalstepshavealreadybeentaken,includingjoiningtheCentralWashingtonPowerAgency,ajointoperatingagencysimilartoEnergyNorthwest,andparticipationinseveralwindprojects.

Conservation Programs -TheDistricthasagreementswiththeBPAtoparticipateintwovoluntaryconservationprograms.TheyaretheConservationRateCredit(CRC),whichwassignedin2006aspartofapowersalescontractrevision,andtheEnergyConservationAgreement(ECA)signedin2009.[BPAplanstoendtheCRCprogramSeptember2011andbeginanewprogramcalledtheEnergyEfficiencyIncentive(EEI)October2011.]

CRCisfundedbyaone-halfmill(amillisoneone-thousandthofadollar,$.001)surchargeperkilowatt-hourpurchasedfromBPA.TheDistrictmustdocumentspendingthisamount(approximately$360,000peryear,basedontheDistrict’s2008kilowatt-hourpurchases)onqualifyingconservationand/orrenewableenergyactivitiesduringthecurrentrateperiod(throughSeptemberof2011).

TheECAisanegotiatedamountbetweentheDistrictandBPAbasedonproposedconservationactivities.CustomerincentivespaidbytheDistrictarereimbursedbyBPAuponsubmissionofqualifyinginvoicesanddocumentationona

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project-by-projectbasis.BoththeCRCandECAincluderesidential,commercialandindustrialconservationmeasures.QualifyingmeasuresforbothprogramsaredeterminedbytheRegionalTechnicalForum(RTF)andreportedontheNorthwestPowerPlanningCouncil’sPlanning,TrackingandReporting(PTR)website.TheRTFisanadvisorycommitteeoftheNorthwestPowerPlanningCouncil,establishedin1999todevelopstandardstoverifyandevaluateconservationsavings.MembersareappointedbytheCouncilandincludeindividualsexperiencedinconservationprogramplanning,implementationandevaluation.TheDistricthashadanemployeeservingasamemberoftheRTFsinceitsinception.

Initiative937requiredtheDistricttoestablishbothatotalten-yearachievableconservationpotentialandaspecificenergyconservationtarget(equalto20percentofthetotalpotential)forthe2010-2011bienniumpriortoJanuaryof2010.AtitsNovember10,2009commissionmeeting,theDistrictadoptedaten-yearpotentialof21,885megawatt-hours(MWh)andafirstbienniumtargetof4,377MWh.TheseamountsweredevelopedinaccordancewiththeModi-fiedCalculatormethodologyallowedunderWashingtonAdministrativeCode194-37-070(5).

Olympic View Generating Station - Duetothehighcostofmarketpowerpurchasesduringthe2001energycrisis,BPAaskedallofitscustomerstoreducetheirloadby10percent.TheDistrictsignedthe“RateMitigationAgreement”inJuneof2001.Inadditiontotheenergyconservationmeasurestakentoreduceload,theDistrictalsodecidedtoinstallgenerationcapacitytohelpmeettheloadreduction.

Asaresult,theDistrictsecuredatermloanfor$6milliontofinanceconstructionofanaturalgasgenerationfacilityutilizingtwoWartsila2.8MWreciprocatingengines.Thisloanwassatisfiedin2010.

TheDistricthasparticipatedintwopilotprojects,undercontractwithBPA;tohelpdelayplannedtransmissionlineconstructionontheOlympicPeninsulabyoperatingtheplantduringtimesofanticipatedpeakload.TheDistrictplanstousethefacilitytooffsethighercostresourcesunderpost-2011BPAcontractprovisionswhichmaketheDistrictresponsibleformeetingmoreofitsownloadgrowth.

Energy Northwest (ENW) - ENW,previouslyWashingtonPublicPowerSupplySystemorWPPSS,isamunicipalcorpo-rationandjointoperatingagencyofthestateofWashington,organizedin1957.Itisempoweredtofinance,acquire,constructandoperatefacilitiesforthegenerationandtransmissionofelectricpower.WhileMasonCountyPublicUtil-ityDistrictNo.3wasafoundingmemberofWPPSS,itwithdrewitsmembershiponSeptember11,1984.InJuly2001theDistrictonceagainbecameamemberofEnergyNorthwest.AllmembersownandoperateelectricsystemswithinthestateofWashington.In2010therewere28memberutilities.EnergyNorthwesthasnotaxingauthority.FinancialstatementsforEnergyNorthwestmaybeobtainedbywritingto:EnergyNorthwest,P.O.Box968,Richland,WA99352-0968.Awebsiteisavailableatwww.energy-northwest.com.

Nuclear Projects 1, 2 and 3 - TheDistrictcontinuestofulfillitsobligationconsistentwiththetermsandconditionsoftheNetBillingAgreementswithEnergyNorthwestandtheBonnevillePowerAdministration(BPA).

TheDistrictpurchased1.262percentofWPPSSNuclearProjectWNPNo.1,1.446percentofWNPNo.2and1.265percentofthecapabilityoftheEnergyNorthwest70percentownershipshareofWNPNo.3.TheDistrictinturnsoldthiscapacitytoBPA.Underthe“NetBillingAgreements,”BPAisunconditionallyobligatedtopaytheDistrictandtheDistrictisunconditionallyobligatedtopayEnergyNorthwesttheproratashareofthetotalannualcostsofeachproj-ect,includingdebtserviceonrevenuebondsissuedtofinancetheprojects,whetherornottheprojectsarecompleted,operableoroperatingandnotwithstandingthesuspension,reductionorcurtailmentoftheprojects’output.

WNPNo.2,nowreferredtoastheColumbiaGeneratingStation(CGS),commencedcommercialoperationinDecem-ber1984.InMay1994theBPAandWPPSSterminatedWNPNo.1andWNPNo.3,subjecttorepaymentofthedebtserviceontheoutstandingrevenuebonds.

TheDistrict’sobligationsundertheNetBillingAgreementsarepresentlyscheduledtobefulfilledonCGSin2024,onWNPNo.1in2017andonWNPNo.3in2018.

Columbia Generating Station (CGS) - isareliableenergyproducer-itwillproduceelectricity24hoursaday,sevendaysaweek,unlessitissafelyshutdownbyplantoperators,asitisduringarefuelingoutage.Inaddition,operatorsareabletoadjustpowerlevelstomeetBonnevillePowerAdministration’sneedsbasedonriverconditions;referredto

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as“loadfollowing.”Refuelingandmaintenanceoutagesoccureverytwoyearsduringthespring,whentheColumbiaRiverBasinhasamplerunofftogenerateelectricitythroughthehydroelectricturbines.CGSwillshutdowninApril2011forrefuelingoutage20.Duringtheoutage,approximatelyone-thirdofthereactor’s764fuelassemblieswillbereplacedwithfreshfuelassemblies.Theoutageisscheduledtolastmorethan70days.

OnJanuary19,2010,EnergyNorthwestannouncedthatithadappliedtotheNuclearRegulatoryCommissionfora20-yearrenewalofanoperatinglicenseforitsColumbiaGeneratingStationnuclearenergyfacility.Thelicenserenewalprocesstakesapproximately2½yearsandinvolvescomprehensivereviewsandpublichearingsbytheNuclearRegula-toryCommission(NRC).Thecurrentoperatinglicense,grantedinDecember1983,expiresinDecember2023.LicenserenewalwouldallowColumbiatooperatethrough2043.

Packwood Hydroelectric Project - ThePackwoodHydroelectricProjectislocatednearthetownofPackwoodineast-ernLewisCounty,Washington.Theprojectisa27.5megawattpeakingresource.CommercialoperationbeganinJune1964

Underpowersalesagreements,someoftheEnergyNorthwestmemberpublicutilitydistrictspurchasedtheprojectatPackwood.TheDistricthasatenpercentshareintheproject(participantownersarenotequallyinvestedintheproj-ect).Theparticipantownersareobligatedtopayannualcostsoftheproject,includingdebtservice,whetherornottheprojectisoperable,untiloutstandingbondsarepaidorprovisionismadefortheirretirement,inaccordancewithprovisionsofthebondresolution.InMarch2009,debtserviceonthePackwoodHydroelectricProjectwasretired.Thiswasearlierthantheoriginallyscheduleddateof2012.

InAugustof2008theparticipantsagreedtosellthetotalgenerationoutputtoSnohomishCountyPublicUtilityDistrict,anotherprojectparticipant.Thepowersalescontractwasatwo-yeartermwiththeoptiontorenewwithfullagreementbyallparties.In2010,Snohomishoptedtorenewthepowersalescontractforanotherone-yearterm.TheDistrictisexpectingtobringitstenpercentsharetoloadstartinginOctober2011.

TheFederalEnergyRegulatoryCommission(FERC)licenseforPackwoodexpiredin2010.Theprojectwasgrantedacontinuancetooperateundertheexistinglicenseonayear-to-yearbasisuntilthenewlicenseisissued.EnergyNorth-westbegantherelicensingprocessin2005.Applicationforanew50-yearoperatinglicensewassubmittedtotheFERCinFebruaryof2008.ThefinalEnvironmentalAssessmentandWaterQualityCertificationwerecompletedinJulyof2009.Participantshaveelectedtoreceivenopaymentsfromthesaleoftheproject’senergyoutputinordertoprovidefundsfortherelicensingefforts.Projectmanagerssubmittedafinalre-licensingapplicationin2010.

Inthefallof2007,alargelandslidedamagedthepipelinesupports.Therepaircostswerenearly$1million.In2010theprojectwasdeniedonitssecondandfinalappealtorecovercostsfromtheFederalEmergencyManagementAgencyfortheserepairs.Thecostswillbepaidfromoperatingmarginsfromelectricitysalesonthesecondarymarketoverthenexttwoyears.

Nine Canyon Wind Project - Inearly2001EnergyNorthwestapproachedpublicutilitiesaboutdevelopingawindgenerationproject.InSeptemberof2001,theDistrictsignedanagreementwithEnergyNorthwesttopurchasea1megawattshare(2.08percentofPhaseI)oftheNineCanyonWindProject.

NineCanyonPhaseIconsistsof37Bonuswindturbineswithapeakgeneratingcapacityof48MW.ThisphaseoftheprojectbegancommercialoperationinOctoberof2002.AswiththePackwoodHydroelectricProject,participantsofNineCanyonareobligatedtopaytheannualcostsoftheproject,includingdebtservice,whetherornottheprojectisoperable,untiltheoutstandingbondsarepaidorprovisionismadefortheirretirementinaccordancewiththebondresolution.Bondsintheamountof$71millionweresoldtofinanceconstructionofPhaseIoftheproject.InDecemberof2004,EnergyNorthwestrefinancedthePhaseIbonds,resultinginasavingsof$5.3million.

OnApril22,2003,theDistrictagreedtoenterintoa27-yearagreementforPhaseIIoftheNineCanyonWindProj-ectwithEnergyNorthwestandfourotherparticipants.TwelvemoreBonuswindturbineswereerectedinthesameareaasPhaseI.Theyhaveapeakgeneratingcapacityofanadditional15.6megawatts.TheDistrict’sshareofPhaseIandPhaseIItogetheris2megawattsor3.14percent.Bondsintheamountof$32.9millionweresoldtofinancetheconstructionofthissecondphase.Commercialoperationofthesecondphaseofthiswindgenerationprojectbeganin

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September2003.BondsforPhasesIandIIareexpectedtomaturein2023.

InOctoberof2005,EnergyNorthwestannouncedtheinvestigationofanexpansionoftheNineCanyonWindProject.OnOctober3,2006,theDistrictsigneda23-yearpowerpurchaseagreementfor1MWofoutputfromthePhaseIIIexpansion,keepingitsoutputshareat3.14percentoftheoverallproject.In2006,bondsintheamountof$68millionweresoldtofinancetheconstructionandarescheduledtoconcludein2030.PhaseIIIconsistsof14-2.3MWSiemenswindturbinestotaling32.2MW.ConstructionbeganinJune2007,andcommercialoperationstartedinJune2008.

TheNineCanyonWindProjectisoneofthelargestpubliclyownedwindprojectsinthenation.With63windturbines-14ratedat2.3megawattsand49moreat1.3megawatts–NineCanyon’stotalinstalledcapacityis95.9megawatts.TheDistrictcurrentlybuys3megawattsofrenewableenergy,orgreenpower,producedbytheNineCanyonWindProject(PhasesI,IIandIII).

Radar Ridge Wind Project -In2008,EnergyNorthwestproposedtheRadarRidgeWindProjectinPacificCounty,Washington.Theproject’santicipatedoutputisforupto82MWandithasreceivedinterconnectionapprovalfromtheBonnevillePowerAdministration’sTransmissionBusinessLine.In2009,theDistrictsignedadevelopmentagreementfor15percentoftheprojectoutput.OtherparticipatingutilitiesareGraysHarborPublicUtilityDistrict,ClallamCountyPublicUtilityDistrictandPacificCountyPublicUtilityDistrict.Iftheproposedprojectreceivesthenecessarypermitstobeginconstruction,anEngineering,ProcurementandConstructioncontractwillberequired.

Underthedevelopmentagreement,participatingutilitiesreimburseEnergyNorthwestforalldevelopmentcostsandfinancetheirshareoftheactualprojectprocurementandconstruction,givingthemactualpercentagesharesowner-shipintheproject.During2010environmentalimpactandwindavailabilitystudiescontinuedtohelpdeterminetheproject’sviabilityandwhetherornottomoveforwardwithit.

Inlate2010theparticipantsbegannegotiatinganewdevelopmentagreement.Thenewagreement,signedinJanuary2011,allowstheDistricttominimizeanyfurtherfinancialriskwhilemaintaininganinterestintheprojectasitmovesforwardinthefinalstagesofdevelopmentandpermitting.TheagreementallowstheDistricttoreduceitsexistingsharefrom15percentdownto0.5percent.TheDistricthasanopportunitytostepbackuptoitsoriginal15percentshareifpermittingcertaintyincreases.

Other Projects - In2009theDistrictexpressedinterestintwoproposedsolarprojectsforuptofivemegawattscapac-ityfromeach:theCentralWashingtonPowerAuthorityinCentralEasternWashington;andEnergyNorthwestproposalofthedevelopmentofasolargeneratingprojectintheChristmasValleyareaofcentralOregon.InMarchof2010theDistrictchosenottopursueeitheroftheseoptionsfurtherduetotheoverallprice,coupledwiththeriskofathird-partyownership,financialpre-paysanduncertaintiesregardingthedoubleRenewableEnergyCredit(REC)countingunderinitiative937.UndertheWashingtonRPS,distributedgenerationlessthanfivemegawattscanbecountedastwoREC’s.

NOTE 10 - PUBLIC ENTITY RISK POOLSa) Liability Risk Pool - ThePublicUtilityRiskManagementServices(hereinafter,“PURMS”)providesliabilityinsurance

coveragesforitsmembersparticipatingintheLiabilityRiskPool(“LiabilityPool”)andtoalimitedextentfortheiremployees,underanagreemententitled“PURMSJointSelf-InsuranceAgreement”(amendedandrestatedasofNovember13,2008“SIA”).UndertheSIA,from1977through1995,theLiabilityPoolhadaself-insuredretention(or“LiabilityCoverageLimit”)of$500,000peroccurrence.EffectiveJanuary1,1996,PURMSincreasedtheLiabilityCoverageLimitto$1,000,000peroccurrence,whichwasthecoveragelimitineffectthroughout2010,andineffectasofDecember31,2010.

Atalltimes,PURMSalsomaintainsExcessLiabilityInsuranceforitsmembersintheLiabilityPool(“ExcessLiabilityInsurance”).For2010,theamountoftheExcessLiabilityInsurancewas$35,000,000,withcoverageattachingatthe$1,000,000LiabilityCoverageLimit.

TheLiabilityPoolisfinancedthroughassessmentsofitsparticipatingmembers(“LiabilityAssessments”)inaccordancewiththetermsoftheLiabilityGeneralAssessmentFormula(“LiabilityAssessmentFormula”).LiabilityAssessmentsareleviedatthebeginningofeachcalendaryeartoreplenishtheLiabilityPooltothedesignated

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LiabilityPoolbalanceandatanytimeduringtheyearthattheactualLiabilityPoolbalancebecomes$500,000lessthanthedesignatedLiabilityPoolbalance.DuringthetimethattheLiabilityCoverageLimitasbeen$1millionperoccurrence,thedesignatedLiabilityPoolbalancehasbeen$2millionandtheLiabilityPoolmaintainedcashreservesbetween$1.5and$2milliontopayLiabilityClaimsandLiabilityPoolOperationalExpenses(“LiabilityPoolReserves”).

InNovember2008,viaResolutionNo.11-13-08-1,thePURMSBoardapprovedraisingthedesignatedLiabilityPoolbalancefrom$2millionto$3millionandfundingsuchincreaseoverathree-yearperiodoftimebyadditionalassessmentoftheLiabilityPoolmemberseverysix(6)months,commencingJanuary2009,intheamountof$165,000forthefirstfiveassessments,and$175,000forthefinalassessment.Basedonthisschedule,thedesignatedLiabilityPoolbalancewillreach$3millionuponmembers’paymentofthelastadditionalassessmentinJulyof2011.Thereafter,LiabilityPoolmemberswillbeassessedtoreplenishtheLiabilityPooltothe$3milliondesignatedLiabilityPoolbalanceanytimetheactualLiabilityPoolbalancebecomes$500,000lessthanthatamount.

ThetotalpaidforLiabilityClaimsin2010was$440,344(includingattorneys’feesfordefendingclaims,butexcludingLiabilityPooloperationalexpenses).

AsofDecember31,2010,therewere44knownincidentsand/orunresolvedliabilityclaimspendingagainstoneormoremembersorformermembersoftheLiabilityPool(“PendingLiabilityClaims”).ThetotaldollaramountoftheriskposedbytheseclaimstosuchmembersandtotheLiabilityPoolitselfisunknownandcanonlybeestimated.However,basedonthetotalofthereservesestablishedbytheAdministratorforthesePendingLiabilityClaimsthathadnotbeenpaidoutasofDecember31,2010,theAdministratorestimatesthatthereisapproximately$58,638ofoutstandingliabilitiestotheLiabilityPoolrelatingtotheseclaims.

Inaddition,inaccordancewithWashingtonStateregulatoryrequirementsapplicabletojointlyself-insuredliabilityprograms,onanannualbasis,PURMSengagesanindependentqualifiedactuarytodeterminetheamountofincurred-but-not-reportedclaimsfortheLiabilityPool(“LiabilityPoolIBNR”).AcopyoftheLiabilityPoolActuarialReportisprovidedtotheWashingtonStateRiskManager(“StateRiskManager”)andmadeavailabletotheWashingtonStateAuditor’sOffice(“StateAuditor”).

BecausethetotaldollaramountoftheriskposedbythePendingLiabilityClaimscanonlybeestimatedbytheAdministrator,andbecausetheLiabilityPoolIBNRisbasedonanactuarialreport,noopinioncanbeprovidedastotherisktheseclaimsposetothesolvencyofthePropertyPool.However,sincemembersparticipatingintheLiabilityPoolarerequiredundertheSIAtopaytheirLiabilityAssessmentsleviedanytimethemoneyheldfortheLiabilityPoolsfallsmorethan$500,000belowthedesignatedLiabilityPoolbalance,assumingthattheseassessmentobligationsofmembersundertheSIAareenforceableandthatthemembersareatthetimesolventandpaysuchassessments,theLiabilityPoolwouldhavetheassetstopaythePendingLiabilityClaimsonbehalfofitsparticipatingmembersforanyreasonablyforeseeablerisksuchasclaimsposedtotheLiabilityPool.

Settledclaimshavenotexceededinsurancecoverageinanyofthepastthreefiscalyears.

b) Property Risk Pool -EffectiveApril1,1997,theMasonCountyPublicUtilityDistrictNo.3commissionauthorizedtheDistrict’sparticipationinthePURMSpropertyriskpoolandvehiclecoverage.

PURMSprovidespropertyinsurancecoverageforitsmembersparticipatinginthePropertyRiskPool(“PropertyPool”)inaccordancewiththetermsoftheSIA(identifiedabove).UndertheSIA,fromitsinceptionin1997topresent,thePropertyPoolhashadaself-insuredretention(or“PropertyCoverageLimit”)of$250,000perpropertyloss.

Atalltimes,PURMSalsomaintainsExcessPropertyInsuranceforitsmembersinthePropertyPool(“ExcessPropertyInsurance”).For2010,theamountoftheExcessPropertyInsurancewas$150million,withexcesscoverageattachingatthe$250,000PropertyCoverageLimitforallpropertylossesexceptthosesubjecttoincreasedretentionlevelsforcertainpropertyrisks(“IncreasedRetentions”).

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ThePropertyPoolisfinancedthroughassessmentsofitsparticipatingmembers(“PropertyAssessments”)underthePropertyGeneralAssessmentFormula(“PropertyAssessmentFormula”).PropertyAssessmentsareleviedatthebeginningofeachcalendaryeartoreplenishthePropertyPooltothedesignatedPropertyPoolbalanceandatanytimeduringtheyearthattheactualPropertyPoolbalancebecomes$250,000lessthanthedesignatedPropertyPoolbalance.From1997toNovember21,2002,thedesignatedPropertyPoolbalancewas$500,000.Asaresult,duringthatperiodoftime,thePropertyPoolmaintainedcashreservesbetween$250,000and$500,000topayPropertyClaimsandPropertyPoolOperationalExpenses(“PropertyPoolReserves”).

EffectiveasofNovember21,2002,thePropertyPoolbeganprovidingitsmemberswithAutomaticExtendedPropertyCoverageforpropertylossesthatexceedthePropertyPool’s$250,000PropertyCoverageLimitifthoselosseswerealsosubjecttoincreasedretentionsundertheExcessPropertyInsurance.PursuanttoPURMSBoardResolutionNo.11-20-03-2,thedesignatedPropertyPoolbalancewasincreasedovertimefrom$500,000to$750,000andfundingfortheincreasedPropertyPoolReserveswascompletedin2005.

For2010,thedesignatedriskpoolbalancewas$750,000,therebytriggeringaPropertyAssessmentanytimetheactualPropertyPoolbalancedroppedbelow$500,000.UndertheExcessPropertyInsuranceretentionseffectivefor2010,themaximumexposuretothePropertyPoolfromapropertylossthatexceeded$250,000andthatwassubjecttoanincreasedretention,was$500,000,lesstheapplicabledeductible,oramaximumof$250,000morethanthePropertyCoverageLimit.

Thetotalpaidforpropertyclaimsin2010was$288,588(excludingattorneys’feesandPropertyPoolOperationalExpenses).

AsofDecember31,2010,therewere12knownpropertyclaimspendingfromthemembersofthePropertyPool(“PendingPropertyClaims”).ThetotaldollaramountoftheriskposedbytheseclaimstothePropertyPoolisunknownandcanonlybeestimated.However,basedonthetotalofthereservesestablishedbytheAdministratorforthesePendingPropertyClaimsthathadnotbeenpaidoutasofDecember31,2010,theAdministratorestimatesthatthereisapproximately$50,983ofoutstandingliabilitiestothePropertyPoolrelatingtotheseclaims.

Inaddition,inaccordancewithWashingtonStateregulatoryrequirementsapplicabletojointlyself-insuredpropertyprograms,onanannualbasis,PURMSengagesanindependentqualifiedactuarytodeterminetheamountofincurred-but-not-reportedclaimsforthePropertyPool(“PropertyPoolIBNR”).AcopyofthePropertyPoolActuarialReportisprovidedtotheStateRiskManagerandmadeavailabletotheStateAuditor.

BecausethetotaldollaramountoftheriskposedbythePendingPropertyClaimscanonlybeestimatedbytheAdministrator,andbecausethePropertyPoolIBNRisbasedonanactuarialreport,noopinioncanbeprovidedastotheriskthetotalofsuchclaimsposetothesolvencyofthePropertyPool.However,sincemembersparticipatinginthePropertyPoolarerequiredundertheSIAtopaytheirPropertyAssessmentsleviedanytimethemoneyheldforthePropertyPoolfallsmorethan$250,000belowtheDesignatedPropertyPoolBalance,assumingthattheseassessmentobligationsofmembersundertheSIAareenforceableandthatthemembersareatthetimesolventandpaysuchassessments,thePropertyPoolwouldhavetheassetstopaythePendingPropertyClaimsonbehalfofitsparticipatingmembersforanyreasonablyforeseeablerisksuchclaimsposetothePropertyPool.

c) Health and Welfare Risk Pool - PURMSprovideshealthandwelfareinsurancecoveragefortheemployeesandretireesofeachofitsmembersparticipatingintheHealthandWelfareRiskPool(“H&WPool”)inaccordancewiththetermsoftheHealthandWelfareCoverageoftheSIA(“H&WCoverage”)andthetermsofeachmember’srespectivecoveragebookletprovidedtoitsemployeesandretirees.TheH&WPoolwasestablishedasoneofPURMS’RiskPoolseffectiveMarch31,2000.TheDistrictjoinedthefundasofJanuary1,2002,afterbeingself-insuredforanumberofyears.

UnderthetermsoftheSIAandtheH&WGeneralAssessmentFormula(“H&WAssessmentFormula”),theH&WPoolwasinitiallyfundedwithcashreservesforpayingH&WPoolOperationalExpensesandH&WClaims(“H&WPoolReserves”)inanamountapproximatelyequaltothesumofthree(3)timestheamountofeach

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member’shistoricalaveragemonthlyH&WClaimsExperience(“H&WClaimsExperience”)foritsrespectiveEmployees,RetireesandtheirDependents.(Hereinafter,“Employees”includes“Retirees”and“Dependents.”)ByamendmenttotheSIAeffectiveDecember1,2005,theH&WPoolReservesmaybeestablishedfromtimetotimebymajorityvoteoftheBoardatnolowerthan2.5andnogreaterthan3timesthetotalofallmembers’H&WClaimsExperience.AsofDecember31,2010,theH&WPoolReserveswereestablishedat3timesthetotalofallmembers’H&WClaimsExperience.

TheH&WPool’soperationsarefinancedthroughassessmentsofitsparticipatingmembers(“H&WAssessments”)inaccordancewiththeH&WGeneralAssessmentFormula.UndertheH&WGeneralAssessmentFormula,eachmonth,eachmemberoftheH&WPoolisassessedfor:(a)thecosttheH&WPoolincurredduringtheprecedingmonthfortheH&Wclaimsforsuchmember’semployees(“H&WClaimsCosts”);and(b)forsuchmember’sshareofSharedH&WCosts.“SharedH&WCosts”consistofadministrativeexpensesincurredbytheH&WPool,premiumsforStop-LossInsurance,PreferredProviderOrganization(“PPO”)chargesandsharedH&Wclaims.Thuseachmonth,undertheH&WAssessmentFormulatheoperationalexpensesoftheH&WPoolandallmembers’H&WClaimsCostsforthatmontharepaidandtheH&WPoolReservesarefullyreplenished.

TheexposureofeachH&WPoolmembertotheH&WClaimsCostsofitsemployeesislimitedbytwodifferentpairsofstop-losspoints(“Stop-LossPoints”).ThefirstpairofStop-LossPointsisestablishedannuallybytheExcessStop-LossInsurancethattheH&WPoolacquiresandmaintainsforitsmembers.TheseStop-LossPointsrepresentthedollaramountsatwhichtheStop-LossInsuranceattachesandbeginspayingeithertheH&WClaimCostsrelatingtoanindividualemployee’stotalmedicalclaimsfortheyear(“H&WPoolIndividualStopLossPoint”)ortheH&WClaimsCostsofallEmployeesofallmembersfortheyear(“H&WPoolAggregateStopLossPoint”).For2010,theH&WPoolIndividualStopLossPointwas$200,000peremployeeandtheH&WPoolAggregateStopLossPointwas$12,032,316forthecombinedH&WClaimsCostsoftheemployeesofallmembersoftheH&WPool.

EachH&WPoolmember’sexposuretotheH&WClaimsCostsofitsemployeesisfurtherlimitedbyevenlowerStop-LossPointsdeterminedbytheH&WPoolforitsmembers(“MemberStop-LossPoints”).MedicalexpensesthatexceedtheseStop-LossPointsbecome“SharedH&WClaims”andthereforeareassessedas“SharedH&WCosts”whicharepaidbyallH&WPoolmembers.TheMemberStop-LossPointsarecalculatedannuallyundertheH&WAssessmentFormulabasedontheamountsoftheIndividualandAggregateStop-LossPointsestablishedfortheyearbytheStop-LossInsurance.Asaresultofthisprocess,eachmemberisassignedadollaramountatwhichanyfurtherpaymentsbytheH&WPoolonclaimsforaparticularemployeeconstituteSharedH&WCosts(“Member’sIndividualStop-LossPoint”)andadollaramountatwhichanyfurtherpaymentsbytheH&WPoolontheH&WClaimsofallofamember’semployeesconstituteSharedH&WCosts(“Member’sAggregateStop-LossPoint”).

ThetotalpaidbytheH&WPoolforH&WClaimscostsin2010was$9,233,646(includingSharedH&WClaimsbutexcludingH&WPoolOperationalExpenses).

AsofDecember31,2010,therewereno“open”H&WClaimspendingforemployeesofmembersoftheH&WPool.TheactualtotalexposureoftheH&WPooltoH&WClaimsCostsatanyparticularpointintimecannotbeknownwithcertainty.However,basedontheactuarialreportfortheH&WPool,asofDecember31,2010,thetotal“incurred-but-not-reported”claimsfortheH&WPoolwasapproximately$616,013(“H&WPoolIBNR”).

BecauseIBNRClaimsarebasedonanactuarialreport,noopinioncanbeprovidedastotheriskthoseclaimsposetothesolvencyoftheH&WPool.However,sincemembersparticipatingintheH&WPoolarerequiredundertheSIAtopaytheirH&WAssessmentsleviedonamonthlybasistofullyreplenishtheirshareoftheH&WPoolReserves,assumingthattheseassessmentobligationsofmembersundertheSIAareenforceableandthatthemembersareatthetimesolventandpaysuchassessments,theH&WPoolwouldhavetheassetstopaytheIBNRClaimsonbehalfofitsparticipatingmembersforanyreasonablyforeseeableriskthoseclaimsposetotheH&WPool.

d) State and Independent Audits - EachofthePURMSRiskPoolsisauditedannuallybytheStateAuditor’sOffice.Inaddition,asrequiredbystateregulations,PURMSprovidesquarterlyfinancialreportstotheStateRiskManagerreflectingtheclaimsandadministrativeexpensesoftheRiskPoolsandbi-annually,theStateRiskManager

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performsitsownauditofPURMS’RiskPools.Finally,onanannualbasis,PURMSengagestheservicesoftheaccountingfirmofMossAdamstoperformaclaimsauditforeachoftheRiskPools.

NOTE 11 – POSTEMPLOYMENT BENEFITS OTHER THAN PENSION BENEFIT (OPEB)a) Plan Description -ByresolutiontheDistrictprovidesthreepercentperyearpremiumcreditsbasedonyears

ofemploymentformedical,visionandprescriptionbenefitsforqualifiedretiredemployeesandtheireligibledependents.Thecalculatedpremiumcreditistheemployerportionoftheannualhealthcarepremiumandisabenefittotheretireeasapostemploymentbenefit;thedifferenceinthehealthcarepremiumisfundedbytheretiree.TheplanisadministeredbytheDistrictandnofinancialreportisissued.AsofDecember31,2010,therewere53retireesand33eligibledependentsundertheplan.TheDistricthad116employeesandtheireligibledependentsundertheplanasofDecember31,2010.ThebenefitsforboththeretireesandactiveemployeesareadministeredthroughthePURMSHealthandWelfareRiskPool,anagentmultiple-employerplan,asdescribedinNote10itemc.

b) Funding Policy -TheDistrictfundsitspostemploymenthealthcarebenefitsbymakingannualrequiredcontributions(ARC).TheDistrictmeetsitscurrentretireeobligationbypayingannualassessmentstothePURMSHealthandWelfareRiskPool.TheDistrictalsomakescontributionstotheOPEBTrustforfutureretireehealthandwelfarebenefits.ThepaymentsmadetoPURMSaswellasthecontributionstotheOPEBTrustarecountedtowardtheDistrict’sOPEBAnnualRequiredContribution(ARC).

c) Annual OPEB Cost - TheDistrict’sannualOPEBcostiscalculatedbasedontheARCoftheemployer.TheARCisanamountactuariallydeterminedbasedontheprojectedunitcreditmethod,determinedinaccordancewiththeguidanceofGASBStatementNo.45.TheARCrepresentslevelfundingthat,ifpaidonanon-goingbasis,isprojectedtocovernormalcostseachyearandamortizeanyunfundedactuarialaccruedliabilitiesoveraperiodnottoexceed30years.TheDistrictimplementedGASBStatementNo.45prospectivelyin2008.TheDistrict’sannualrequiredOPEBcost(expense)for2010was$805,967.

Determination of Annual Required Contributions: Fiscal Year Ended12/31/2010

NormalCostwithInterest $266,043UnfundedAAL $6,232,078AmortizationPeriod 30yearsAmortizationAmountwithInterest $527,678AnnualRequiredContribution $793,721

d) Funding Status and Funding Progress - ThecurrentyearfundingoffutureOPEBcostsresultedinadecreaseinthenetOPEBobligationof$1,531,625.ThefollowingtableshowsthecomponentsoftheDistrict’sannualOPEBcostforthefiscalyear2010,theamountactuallycontributedtotheplan,andchangesintheDistrict’snetOPEBobligation.ThenegativenetOPEBobligationhasbeenrecordedasaNetOPEBAssetontheDistrict’sStatementofNetAssets.

AnnualRequiredContributionInterestonNetOPEBObligationAdjustmenttoAnnualRequiredContributionAnnualOPEBCost

$793,721(94,966)

107,212$805,967

NetOPEBObligationBeginningofYearAnnualOPEBCostContributionsMadetoPURMSContributionsMadetoOPEBTrustNetOPEBEndofYear

($1,266,220)805,967

(228,413)(842,959)

($1,531,625)

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TheScheduleofFundingProgressfortheUAALisasfollows:

Actuarial Valuation Date Jan. 1, 2010 Dec. 31, 2010Actuarialvalueofassets $2,250,518 $3,061,417ProjectedUnitCreditAAL $8,482,596 $8,695,591UAAL $6,232,078 $5,634,174Fundedratio 26 5% 35 2%Coveredpayroll $8,756,679 $9,118,034UAALasapercentofcoveredpayroll 71 2% 61 8%

TheScheduleofFundingProgressandtheScheduleofContributionsfromEmployer,presentedasrequiredsupplementaryinformationfollowingthenotestothefinancialstatements,presenttheresultsoftheOPEBvaluationforthefiscalyearendedDecember31,2010.Lookingforward,theScheduleofFundingProgresswillprovideadditionalmulti-yeartrendinformationaboutwhethertheactuarialvalueoftheplanassetsisincreasingordecreasingovertimerelativetotheactuarialaccruedliabilitiesforbenefits.

e) Actuarial Assumptions - Theactuarialvaluationincludesestimatesofthevaluereportedandassumptionsabouttheprobabilityoftheeventsintothefuture.Otheractuarialassumptionsincludeestimatesoffutureemploymentlevels,retirementagesofactiveemployeesandmorbidity/terminationrates.Theseassumptionsarereviewedandcomparedeverythreeyears.Astheseassumptionsandcostsarereviewedinfutureperiods,newestimatesofOPEBcostsandliabilitiesmayresult.

Significantmethodsandassumptionswereasfollows:

ActuarialValuationDate January1,2010 ActuarialCostMethod ProjectedUnitCreditCostMethod AmortizationMethod Closed,ProjectedBenefitspreadoveremployment

historyfromtheageofhiretoretirementage. AmortizationPeriod 30years AssetValuationMethod MarketValue ActuarialAssumptions: InvestmentRateofReturn 7.5% HealthCareInflationRate 11%initialrate,6%ultimateratein2018

NOTE 12 – PARTICIPATION IN NORTHWEST OPEN ACCESS NETWORK, INC. (NOANET)TheDistrict,alongwith13otherWashingtonStatepublicutilitydistrictsandEnergyNorthwest,isamemberofNoaNet,aWashingtonnonprofitmutualcorporation.NoaNetwasincorporatedinFebruary2000toprovideabroadbandcommunicationsbackboneoverpublicbenefitfibersleasedfromtheBonnevillePowerAdministration.ThiscommunicationsbackbonethroughoutWashingtonStateassistsitsmembersintheefficientmanagementofload,conservationandacquisitionofelectricenergyaswellasotherpurposes.ThenetworkbegancommercialoperationinJanuary2001.

AsamemberofNoaNet,theDistricthasguaranteedcertainportionsofNoaNetdebtbasedonitsproportionateshare(seeNote14).TheDistrict’smembershipinterestinNoaNetis7.88percent.ThemanagementofNoaNetanticipatesmeetingbonddebtobligationsthroughprofitableoperations,butitisexpectedthatitwillbenecessaryforNoaNettoassessmemberstocoverdeficitsduringtheinitialyearsofoperation.TheDistrictrecordedasexpensememberassessmentsof$72,608and$123,779in2010and2009,respectively.Assessmentsfor2011asdeterminedbytheNoaNetboardofdirectorsareestimatedat$39,400fordebtservicepaymentsonoutstandingbonds.

NoaNetrecordedanincreaseinnetassets(excludingmemberassessments)of$4,723,395(unaudited)in2010andanincreaseof$652,331for2009.InaccordancewithAccountingPrinciplesBoardOpinionNo.18,TheEquityMethodof

47

AccountingforInvestmentsinCommonStock,aswellasapositionstatementissuedbytheWashingtonStateAuditorconcerningtheappropriateaccountingtreatmentforNoaNet,aproportionateshareofthechangesinnetassetshasnotbeenrecordedbytheDistrict.NoaNethadnegativenetassetsof$1,581,073asofDecember31,2010(unaudited)and$7,225,888asofDecember31,2009.

FinancialstatementsforNoaNetmaybeobtainedbywritingto:NorthwestOpenAccessNetwork,CorporateOffice–5802OverlookAvenueNE,Tacoma,WA98422.Awebsiteisavailableatwww.noanet.net.

NOTE 13 –TELECOMMUNICATION SERVICESMasonCountyPublicUtilityDistrictNo.3wasafoundingmemberofNoaNetin1999.TheDistrictbeganinstallationoffiber-opticcommunicationsforutilityusein1999afterexaminingvarioustypesofinfrastructurethatcouldbeutilizedtodeliveradvancedtelecommunicationsservices.Theresultingresearchshowedthatfiber-opticcableprovidedthemostrobustandcost-effectivesolutionfordeliveringtheseservices.FiberhasanextremelylonglifecycleandalmostunlimitedbandwidthcapacitywhichwillallowtheDistricttomigratetonewtechnologieswithouthavingtoreplaceanexpensiveoutsideplantinfrastructure.Thefiber-opticnetworknowprovidesabackbonefortheDistrict’sutilitycommunications.

Withthepassageofwholesaletelecommunicationsauthorityin2000bythestatelegislature,high-speedcommunicationcapabilitywasbroughttoMasonCounty.TheDistrictisbuildingoutthefiber-opticnetworktosharethebenefitofthetechnologyinvestment.TheDistrictactsasawholesalerforprivateserviceprovidersandbillstheprovidersdirectlyforwholesaletelecommunicationservices.Theseprivateserviceprovidersaredirectlyresponsibleforbillingeachend-user.TheDistrictended2010with537end-useractiveconnectionsand362fibermiles.

TheDistrictusesitsfiber-opticnetworkbackboneforinternalcommunications,SCADA,communicationswithotherutilitiesandlong-hauldatatransmissionviatheNorthwestOpenAccessNetwork.

Asummaryoftelecommunicationsrevenues,expensesandcapitalinvestmentfor2010islistedasfollows:

For Year Ended December 31, 2010Operating RevenueWholesaleFiberServicestoISP $413,260DarkFiberLease 8,362InstallationCharges 29,487

Total $ 451,109

Nonoperating Revenue $ 189,355

Operating ExpensesOperatingExpenses $1,037,469Depreciation 571,616TaxesOtherthanIncome -

Total $ 1,609,085Net Income (Loss) $ (968,621)Capital InvestmentCurrentYearNetPlant (101,755)CumulativeNetPlant $8,912,167

NOTE 14 – COMMITMENTS AND CONTINGENCIESLitigation –AnypendingorthreatenedlawsuitsagainsttheDistrictareeitheradequatelycoveredbyinsuranceorwouldnotmateriallyaffectthefinancialstatements.

Repayment Agreement Relating to NoaNet Line of Credit (see Note 12) - InJuly2001,NoaNetissued$27millioninTelecommunicationsNetworkRevenueBonds(Bonds)tofinancetherepaymentofthefoundingmembersand

48

thecostsofinitialconstruction,operationsandmaintenance.TheBondsbecameduebeginninginDecember2003through2016withinterestduesemi-annuallyatratesrangingfrom5.05percentto7.09percent.TheamountofoutstandingBondswas$14,625,000and$16,550,000atDecember31,2010and2009,respectively.

CurrentandformermembersofNoaNethaveenteredintoarepaymentagreementtoguaranteethedebtofNoaNet.Undertherepaymentagreement,eachguarantoracknowledgesandagreesthatitisaguarantorofthepaymentoftheprincipalandinterestontheBondsandisliablebyassessmentorotherwisetorepayNoaNetforamountsdueandowingwithrespecttosuchprincipalandinterestuptoeachmember’spercentageinterest.TheDistrict’sguaranteeis7.88percentoftheoutstandingBonds,or$1,152,450and$1,304,140asofDecember31,2010and2009,respectively.

Intheeventofafailurebyanyguarantortopaysuchamountswhendue,NoaNetmaybillfromtimetotimeasnecessary,andeachguarantorisobligatedtopay30daysafterreceiptofthebill,anadditionalamountuptoamaximumof25percentofsuchmember’spercentageinterest(the“Step-Up”),uptothemaximumpercentageinterest,inordertocoverthedeficiencycausedbysuchmemberormember’sfailuretopay.Anymemberthatpaysanadditionalamounttocoveradeficiencyreservesallrightstoseekreimbursementfromthememberormembersthatfailedtopay.TheDistrict’smaximumpercentageinterestis9.85percentor$1,440,563and$1,630,175asofDecember31,2010and2009,respectively.

InJanuary2006,NoaNetopeneda$5millionlineofcredit(Note)withBankofAmericatofundcapitalexpenditures.The2006lineofcreditbalancewas$292,280and$1,487,221asofDecember31,2010and2009,respectively.NoaNetmayaccessitsmembersfortheirpercentageshareofprincipalandinterestontheNotetotheextentthatNoaNetdoesnothavesufficientfundstopaytheNote.

InSeptember2008,NoaNetopeneda$1.5millionlineofcreditwithBankofAmericatofundcapitalexpenditures.ThisNoteisguaranteedbythemembers.Theoutstandingbalanceonthe2008lineofcreditwas$900,000and$1,200,000atDecember31,2010and2009,respectively.TheDistrict’sguaranteeis7.88percentoftheoutstandingbalanceor$70,920and$94,560atDecember31,2010and2009,respectively.

InAugust2009,NoaNetopeneda$1.5millionlineofcreditwithBankofAmericatofundcapitalexpenditures.ThisNoteisguaranteedbythemembers.Theoutstandingbalanceonthe2009lineofcreditwas$1,166,667and$1,500,000asofDecember31,2010and2009,respectively.TheDistrict’sguaranteeis7.88percentoftheoutstandingbalanceor$91,933and$118,200atDecember31,2010and2009,respectively.

NOTE 15 – VEBA TRUSTInFebruary2004,theBoardofCommissionersdirectedtheFinanceManager/AuditortonotifyMSAVoluntaryEmployees’BeneficiaryAssociation(“VEBA”)thattheDistrictwouldbeterminatingitsmembershipinthestate-wide,employerdirected,taxexemptmedicalsavingsaccounttrust.Becauseofconcernsregardingthefinancialdifficultiesofacompanyinwhichamajorportionofthetrustfundswasinvested,itwasdecidedtoexploreotherpossibilitiesforatrust.

Aftermonthsofresearch,onMay11,2004,theBoardvotedtoproceedwithimplementingatrustforVEBAforEmployeesofWashingtonPublicUtilityDistrictswithMasonCountyPublicUtilityDistrictNo.3self-administeringtheplan.AnnetteCreekpaum,FinanceManager/Auditor,wasnamedastrustee.OnMay14,2004,fundsintheamountof$1,042,089weretransferredfromtheMSAVEBAinvestmentstotheDistrict.TheyweresubsequentlytransferredforinvestmentinVanguardFederalMoneyMarketFundsuntilemployeeshadanopportunitytochoosefromthreeVanguardFundinvestmentoptions.

TheDistrictsetupa501(c)(9)trustwiththeassistanceandadvicefromanattorneywithexpertiseinthisareaandfiledtheappropriateformswiththeIRStoestablishthenewtrust.ThetrustisadministeredbytheDistrictundersupervisionofthetrustee.ThefinalapprovalfromtheIRSforthetrustwasreceivedbythetrusteeinearly2005.ThefundsheldintrustbelongtotheemployeesnottheDistrict.

TheDecember31,2010,marketvalueofthetrustwas$2,721,296.Theallocationsbetweeninvestmentoptionswere:25.8percentinshort-terminvestments,12.1percentinbondsand62.1percentinstocks.During2010,employercontributionstotaled$539,305,claimspaidequaled$314,596andtherewasagainof$242,711ontheinvestmentsheldinthetrust.

49

NOTE 16 – OPEB TRUSTInSeptember2008,theDistrict’sBoardofCommissionerspassedResolutionNo.1446establishinganOtherPostemploymentBenefits(OPEB)Trust.TheresolutionappointedAnnetteCreekpaum,FinanceManager/Auditorastrustee.Anactuarywashiredin2007todeterminetheamountofcontributionsneededeachyeartomeettheobligationsrequiredunderGASBStatementNo.45.

TheDistricthassetupa115trustwiththeassistanceandadvicefromanattorneywithexpertiseinthisareaandfiledtheappropriateformswiththeIRStoestablishthetrust.ThetrustisadministeredbytheDistrictundersupervisionofthetrustee.AletterrulingfromtheIRSforthetrustwasreceivedin2009.

TheDecember31,2010,marketvalueofthetrustwas$3,061,417withinvestmentsof88.4percentinguaranteedinvestmentcontracts,9.4percentinmutualfundsand2.2percentincashorcashequivalents.

NOTE 17 – SUBSEQUENT EVENTSOnMarch29,2011,theDistrictauthorizedanoptiontopurchaseagreementwithMasonCountySeniorActivitiesAssociation.SincetheDistrictisbuildinganewoperationscenterlocatedonJohnsPrairieRoad,theDistrictwillnolongerhaveuseforitscurrentadministrativecomplexlocatedindowntownShelton.MasonCountySeniorActivitiesAssociationhasbeengrantedtheoptiontopurchasetheadministrativecomplexatfairmarketvalue.MasonCountySeniorActivitiesAssociationisaWashingtonnon-profitcorporationorganizedasa501(c)non-profitcharitableorganizationwhosemissionistoenhancethequalityoflifeofsenioradultsinMasonCountythroughrecreation,information,educationalandnutritionalservices,includinghealthandwellnessprograms.

50

Required Supplementary InformationOTHER POSTEMPLOYMENT BENEFITS

Actuarial Valuation Date

Actuarial Value of Plan Assets

(a)

Actuarial Accrued Liability (AAL)*

(b)

Unfunded AAL (UAAL)

(b‐a)

Funded Ratio (a/b)

Covered Payroll (c)

UAAL as a Percentage of

Covered Payroll [(b‐a)/c]

1/1/2008 ‐$ 7,822,974$ 7,822,974$ 0% N/A N/A12/31/2008 1,322,793$ 8,350,651$ 7,027,858$ 15.8% 8,436,439$ 83.3%12/31/2009 2,250,518$ 8,482,596$ 6,232,078$ 26.5% 8,756,679$ 71.2%12/31/2010 3,061,417$ 8,695,591$ 5,634,174$ 35.2% 9,118,034$ 61.8%

* Based on projected unit credit actuarial cost methodN/A Indicates data not availableSource: Aon Consulting

Fiscal Year EndingTotal Employer Contributions

Annual Required Contribution

(ARC)

12/31/2008 1,803,238$ 925,870$ 12/31/2009 1,275,646$ 878,308$ 12/31/2010 1,071,372$ 793,721$ 135.0%

Schedule of Employer Contributions

Percentage of ARC Contributed

194.8%

Required Supplementary InformationOther Postemployment Benefits

Schedule of Funding Progress

145.2%

51

statisticalSECTION

overhead view - Johns Prairie Operations center

52

Randy Howard - Johns Prairie Construction Manager speaks at the Johns Prairie Operations

Center pre-construction job show.

Bob Smith - Operations Manager appreciates Packwood Lake while on tour of the hydro facility

that PUD 3 has 10% interest in.

PUD 3 crews re-work lines preparing for the Mountain View substation rebuild.

Statistical Section

ThispartofMasonCountyPUDNo.3’scomprehensiveannualfinancialreportpresentsdetailedinformationasacontextforunderstandingwhattheinforma-tioninthefinancialstatements,notedisclosures,andrequiredsupplementaryinformationsaysabouttheDistrict’soverallfinancialhealth.

Contents: FINANCIAL TRENDS

Theseschedulescontaintrendinfor-mationtohelpthereaderunderstandhowtheDistrict’sfinancialperfor-manceandwell-beinghavechangedovertime.

REVENUE CAPACITYTheseschedulescontaininformationtohelpthereaderassesstheDistrict’smostsignificantlocalrevenuesource,electricsales.

DEBT CAPACITYTheseschedulespresentinformationtohelpthereaderassesstheafford-abilityoftheDistrict’scurrentlevelsofoutstandingdebtandtheDistrict’sabilitytoissueadditionaldebtinthefuture.

DEMOGRAPHIC AND ECONOMIC INFORMATIONTheseschedulesofferdemographicandeconomicindicatorstohelpthereaderunderstandtheenvironmentwithinwhichtheDistrict’sfinancialactivitiestakeplace.

OPERATING INFORMATIONTheseschedulescontainserviceandinfrastructuredatatohelpthereaderunderstandhowtheinformationintheDistrict’sfinancialreportrelatestotheservicestheutilityprovidesandtheactivitiesitperforms.

53

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

OPER

ATIN

G RE

VENU

ESUt

ility S

ales a

nd Se

rvice

Fees

32,4

53,9

6 8$

37,6

98,7

36$

37,1

03,1

34$

36,1

38,5

66$

38,0

34,4

93$

41,0

36,1

15$

43,8

11,6

27$

45,4

61,0

67$

46,7

23,7

87$

46,3

82,9

42$

Othe

r Cha

rges fo

r Ser

vices (1

)1,

212,

253

1,18

0,79

0

1,87

3,11

3

1,68

7,24

4

2,07

2,56

8

2,23

0,54

6

2,48

9,03

6

2,13

9,71

6

1,43

0,89

6

1,23

0,38

2

Misc

ellan

eous O

pera

ting R

even

ues

114,

575

11

0,56

0

109,

530

112,

073

112,

163

141,

803

132,

598

230,

771

325,

422

320,

095

Total O

peratin

g Re

venu

e33

,780

,796

$

38,9

90,0

86$

39,0

85,7

77$

37,9

37,8

83$

40,2

19,2

24$

43,4

08,4

64$

46,4

33,2

61$

47,8

31,5

54$

48,4

80,1

05$

47,9

33,4

19$

OPER

ATIN

G EX

PENS

ESPu

rcha

sed

Pow

er15

,727

,800

$

20,0

66,4

43$

20,7

97,6

17$

20,8

72,5

30$

21,0

95,9

46$

22,1

60,9

73$

21,7

90,0

61$

18,6

07,8

55$

20,3

87,8

19$

21,6

70,1

51$

Oper

atio

n1,

629,

310

4,17

8,28

0

3,50

8,66

3

2,29

0,18

2

2,25

6,73

6

3,08

7,79

0

3,21

6,97

2

2,98

9,81

2

2,37

8,00

3

3,32

3,59

8

Main

tena

nce

2,67

8,63

9

2,23

1,14

1

2,27

1,86

1

2,33

6,81

6

2,62

9,80

0

4,38

9,82

2

3,77

5,38

3

3,76

7,60

0

3,88

5,01

4

4,19

2,98

5

Cust

omer A

ccou

nts

1,07

7,40

0

1,31

1,42

9

1,33

3,62

7

1,31

7,54

1

1,53

6,44

0

1,48

2,64

2

1,66

7,34

4

1,76

0,26

7

1,81

5,22

1

1,91

3,44

6

Cust

omer Se

rvice

, Inf

orm

atio

n, A

dver

tisin

g41

2,74

3

49

7,08

3

459,

361

334,

551

346,

086

776,

217

316,

461

479,

775

823,

417

256,

205

Adm

inist

rativ

e &

Gene

ral

3,23

7,75

0

3,46

1,68

1

3,78

2,82

4

4,29

7,39

9

4,75

5,39

2

3,56

1,29

3

3,44

1,17

7

4,80

3,39

3

5,10

4,77

6

4,47

4,99

0

Main

tena

nce

of G

ener

al Pl

ant

460,

309

45

3,28

2

463,

826

472,

559

534,

186

539,

625

662,

089

664,

558

660,

448

964,

479

Depr

eciat

ion

2,83

4,42

6

3,39

7,87

1

3,50

3,11

9

3,91

7,01

3

4,11

8,73

7

4,25

9,50

5

4,42

8,96

6

4,60

3,81

9

4,84

3,66

4

5,07

4,23

8

Taxe

s Oth

er th

an In

com

e1,

152,

700

1,30

0,41

9

1,32

5,26

4

1,31

9,61

0

1,48

9,14

2

1,62

0,61

9

1,72

6,80

7

1,72

7,45

5

1,74

7,46

9

1,20

0,68

1

Total O

peratin

g Expe

nses

29,2

11,0

77$

36,8

97,6

29$

37,4

46,1

62$

37,1

58,2

01$

38,7

62,4

65$

41,8

78,4

86$

41,0

25,2

60$

39,4

04,5

34$

41,6

45,8

31$

43,0

70,7

73$

OPER

ATIN

G IN

COM

E (LO

SS)

4,56

9,71

9$

2,09

2,45

7$

1,63

9,61

5$

779,

682

$

1,45

6,75

9$

1,52

9,97

8$

5,40

8,00

1$

8,42

7,02

0$

6,83

4,27

4$

4,86

2,64

6$

NONO

PERA

TING

REV

ENUE

S & EX

PENS

ESRe

venu

e fro

m M

erch

andi

sing

9,16

5$

5,62

3$

24,9

74$

7,95

9$

24,5

80$

16,7

49$

33,0

33$

9,48

7$

6,00

7$

10,9

79$

Cost o

f Mer

chan

disin

g(1

2,61

9)

(13,

394)

(12,

046)

(6,4

63)

(15,

246)

(16,

670)

(34,

873)

(3,4

96)

(3,7

72)

(16,

042)

Inte

rest In

com

e78

8,52

9

50

9,54

7

293,

364

278,

215

456,

620

594,

197

591,

222

443,

182

216,

866

200,

892

Inte

rest & A

mor

tizat

ion

on LT

Deb

t(9

20,7

19)

(1,7

93,8

30)

(1,7

89,2

86)

(1,6

66,5

48)

(1,6

45,0

45)

(1,5

58,0

56)

(1

,450

,290

)

(1,4

21,6

55)

(1,8

72,5

92)

(2,7

97,2

48)

Othe

r Non

oper

atin

g Rev

enue

s26

7,36

5

20

8,05

4

223,

540

107,

061

120,

326

824,

662

2,04

9,00

0

188,

426

175,

179

567,

553

Total N

onop

erating Re

venu

es (E

xpen

ses)

131,

721

$

(1,0

84,0

00)

$

(1,2

59,4

54)

$

(1,2

79,7

76)

$

(1,0

58,7

65)

$

(139

,118

)$

1,18

8,09

2$

(784

,056

)$

(1,4

78,3

12)

$

(2,0

33,8

66)

$

CHAN

GE IN

NET

ASS

ETS

4,70

1,44

0$

1,00

8,45

7$

380,

161

$

(500

,094

)$

397,

994

$

1,39

0,86

0$

6,59

6,09

3$

7,64

2,96

4$

5,35

5,96

2$

2,82

8,78

0$

For the

years e

nded

Decem

ber 3

120

0120

0220

0320

0420

0520

0620

0720

0820

0920

10In

vest

ed in

Cap

ital A

sset

s, Ne

t of D

ebt

64,0

57,2

02$

58,5

62,9

82$

64,4

94,1

62$

68,3

73,2

31$

73,7

21,9

99$

76,8

54,7

76$

79,6

39,4

78$

73,1

23,5

44$

84,0

70,9

97$

80,7

80,1

94$

Rest

ricte

d fo

r Deb

t Ser

vice

814,

699

1,

228,

676

685,

816

724,

813

684,

093

736,

105

729,

851

3,28

5,75

1

2,82

5,70

9

8,29

4,93

6

Unre

stric

ted

18,5

17,7

05

24,6

06,4

06

19,5

98,2

47

15,1

80,0

85

10,2

70,0

32

8,47

6,10

3

12,2

93,7

48

23,8

96,7

46

18,7

65,2

97

19,4

15,6

53

TOTA

L NET

ASS

ETS

83,3

89,6

06$

84,3

98,0

64$

84,7

78,2

25$

84,2

78,1

29$

84,6

76,1

24$

86,0

66,9

84$

92,6

63,0

77$

100,

306,

041

$

105,

662,

003

$

108,

490,

783

$

(1) G

over

nmen

t Acc

ount

ing S

tand

ards B

oard St

atem

ent N

o. 3

3 w

as im

plem

ente

d ef

fect

ive 2

001

recla

ssify

ing c

ontri

butio

ns in

aid

of co

nstru

ctio

n as re

venu

e. C

alend

ar ye

ars 2

000 ‐ 2

001

wer

e re

stat

ed fo

r com

para

tive

purp

oses

.

STAT

EMEN

T OF

REV

ENUE

S, EX

PENS

ES A

ND C

HANG

ES IN

NET

ASS

ETS

For the

years e

nded

Decem

ber 3

1

NET

ASSE

TS (2

)

(2)

Net A

sset

s wer

e re

class

ified

for t

he ye

ars 2

001‐

2009

for f

unds re

stric

ted

for d

ebt s

ervic

e

54

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

NU

MBE

R O

F CU

STO

MER

S

Reside

ntial

26,091

26,638

27,177

27,657

28,619

29,279

29,940

30,269

30,368

30,240

Commercial (1

)1,93

9

1,95

0

2,03

9

2,07

4

2,12

1

2,16

0

2,16

1

2,18

0

2,18

2

2,19

6

Large Indu

stria

l (2)

1

1

1

1

1

1

1

1

1

1

Other (3

)86

89

88

86

89

88

88

86

83

83

To

tal

28,117

28,678

29,305

29,818

30,830

31,528

32,190

32,536

32,634

32,520

RETA

IL E

NER

GY

SALE

S (k

Wh)

Reside

ntial

344,66

8,59

0

351,66

1,44

8

350,01

1,98

8

363,91

5,26

4

369,78

0,40

1

389,00

4,24

2

420,05

9,43

3

429,97

0,57

0

435,72

8,40

8

418,58

5,33

8

Commercial

156,78

3,75

9

162,55

9,08

6

158,71

6,21

7

162,88

0,23

0

171,61

4,41

9

184,28

4,66

2

182,43

0,87

7

184,17

8,05

1

181,89

5,88

9

183,43

8,62

7

Large Indu

stria

l64

,771

,200

70,992

,000

64,123

,200

69,436

,800

74,793

,600

70,416

,000

64,065

,600

55,857

,600

40,694

,400

50,457

,600

Other

2,03

0,17

1

2,04

2,67

6

2,12

0,68

1

2,04

6,46

4

2,06

7,15

8

2,11

4,70

1

2,09

2,19

5

2,09

8,43

4

2,08

6,31

1

2,08

5,23

6

To

tal

568,25

3,72

0

587,25

5,21

0

574,97

2,08

6

598,27

8,75

8

618,25

5,57

8

645,81

9,60

5

668,64

8,10

5

672,10

4,65

5

660,40

5,00

8

654,56

6,80

1

REVE

NU

ES F

ROM S

ALES O

F EN

ERG

Y

Reside

ntial

20,666

,406

$

22,366

,839

$

22,433

,267

$

23,166

,516

$

24,051

,725

$

26,140

,240

$

28,721

,012

$

30,128

,431

$

31,559

,128

$

30,820

,643

$

Commercial

(1)

8,61

6,81

4

9,27

7,11

9

9,15

7,95

9

9,26

5,69

8

10,049

,534

11,031

,717

11,454

,329

11,904

,876

12,171

,398

12,214

,056

Large Indu

stria

l (2)

2,28

2,89

4

2,82

8,77

8

2,73

8,92

9

2,88

8,37

2

3,07

9,55

6

2,92

2,45

8

2,72

0,25

6

2,44

9,75

7

1,99

1,05

1

2,33

2,20

8

Other (3

)48

5,45

6

507,16

0

503,31

9

514,28

9

516,08

8

541,63

2

561,54

1

586,68

9

575,80

1

594,41

2

Sale fo

r Resale

402,39

8

‐

‐

‐

‐

‐

‐

‐

‐

‐

To

tal

32,453

,968

$

34,979

,896

$

34,833

,474

$

35,834

,875

$

37,696

,903

$

40,636

,047

$

43,457

,138

$

45,069

,753

$

46,297

,378

$

45,961

,319

$

ANN

UAL

kW

h PE

R CU

STO

MER

Reside

ntial

13,210

13,201

12,879

13,158

12,921

13,286

14,030

14,205

14,348

13,842

Commercial

80,858

83,364

77,840

78,534

80,912

85,317

84,420

84,485

83,362

83,533

Large Indu

stria

l64

,771

,200

70,992

,000

64,123

,200

69,436

,800

74,793

,600

70,416

,000

64,065

,600

55,857

,600

40,694

,400

50,457

,600

Other

23,607

22,951

24,099

23,796

23,226

24,031

23,775

24,400

25,136

25,123

Aver

age ‐ A

ll Cl

asse

s20

,210

20,478

19,620

20,064

20,054

20,484

20,772

20,657

20,237

20,128

REVE

NU

E PE

R kW

h (C

ENTS

)Re

side

ntial

6.00

6.36

6.41

6.37

6.50

6.72

6.84

7.01

7.24

7.36

Commercial

5.50

5.71

5.77

5.69

5.86

5.99

6.28

6.46

6.69

6.66

Large Indu

stria

l3.52

3.98

4.27

4.16

4.12

4.15

4.25

4.39

4.89

4.62

Other

23.91

24.83

23.73

25.13

24.97

25.61

26.84

27.96

27.60

28.51

Aver

age ‐ A

ll Cl

asse

s5.71

5.96

6.06

5.99

6.10

6.29

6.50

6.71

7.01

7.02

(1) Include

s commercial customers an

d pu

blic autho

rities.

(2) S

impson

Tim

ber C

ompa

ny.

(3) Include

s ou

tdoo

r lighting an

d un

metered

signs.

REVE

NU

ES A

ND C

ON

SUM

PTIO

N B

Y CU

STO

MER

CLA

SSFo

r the

yea

rs e

nded

Dec

embe

r 31

Page 46

55

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Sche

dule 1

2 ‐ R

esid

enti

al Ene

rgy Ra

te (p

er kWh)

$ 0.05

16$ 0.05

16$ 0.05

16$ 0.05

16$ 0.05

32$ 0.05

66$ 0.05

66$ 0.05

96$ 0.06

14$ 0.06

14 D

aily Customer Cha

rge

Single Ph

ase

$ 0.46

00$ 0.46

00$ 0.46

00$ 0.46

00$ 0.48

00$ 0.48

00$ 0.48

00$ 0.50

00$ 0.50

00$ 0.50

00 Three

Pha

se$ 0.74

00$ 0.74

00$ 0.74

00$ 0.74

00$ 0.78

00$ 0.78

00$ 0.78

00$ 0.82

00$ 0.82

00$ 0.82

00

Sche

dule 2

0 ‐ G

ener

al S

ervi

ce w

itho

ut D

eman

d Ene

rgy Ra

te (p

er kWh)

$ 0.05

65$ 0.05

65$ 0.05

65$ 0.05

65$ 0.05

82$ 0.06

21$ 0.06

21$ 0.06

53$ 0.06

73$ 0.06

73 D

aily Customer Cha

rge

Single Ph

ase

$ 0.68

00$ 0.68

00$ 0.68

00$ 0.68

00$ 0.72

00$ 0.72

00$ 0.72

00$ 0.72

00$ 0.72

00$ 0.72

00 Three

Pha

se$ 0.94

00$ 0.94

00$ 0.94

00$ 0.94

00$ 1.00

00$ 1.00

00$ 1.00

00$ 1.00

00$ 1.00

00$ 1.00

00

Sche

dule 2

1 ‐ G

ener

al S

ervi

ce w

ith

Dem

and

Ene

rgy Ra

te (p

er kWh)

$ 0.03

43$ 0.03

43$ 0.03

43$ 0.03

43$ 0.03

59$ 0.03

81$ 0.03

81$ 0.04

01$ 0.04

13$ 0.04

13 D

aily Customer Cha

rge

$ 1.82

00$ 1.82

00$ 1.82

00$ 1.82

00$ 1.94

00$ 1.94

00$ 1.94

00$ 1.94

00$ 1.94

00$ 1.94

00

D

eman

d Ra

te (p

er m

easured kW

h of dem

and)

$ 6.21

00$ 6.21

00$ 6.21

00$ 6.21

00$ 6.18

00$ 6.56

00$ 6.56

00$ 6.56

00$ 6.56

00$ 6.56

00

Sche

dule 6

1 ‐ L

arge

Indu

stri

al Ene

rgy Ra

te (p

er kWh)

$ 0.03

07$ 0.03

07$ 0.03

07$ 0.03

07$ 0.03

07$ 0.03

07$ 0.03

07$ 0.03

07$ 0.03

16$ 0.03

16

Dem

and Ra

te (p

er m

easured kW

h of dem

and)

$ 5.59

00$ 5.59

00$ 5.59

00$ 5.59

00$ 5.59

00$ 5.59

00$ 5.59

00$ 5.59

00$ 5.75

00$ 5.75

00

(1)The

se ra

tes represen

t the

typical customer in

that class.

O

ther ra

te sched

ules also in effect a

re outdo

or ligh

ting, ta

x exem

pt status an

d miscellane

ous.

R

enew

able re

source option rates were ad

ded Janu

ary 1, 200

3 (also kn

own as "Green

Pow

er").

As o

f Dec

embe

r 31

RETA

IL R

ATE

S (1)

Page 47

56

Wendi Kirk - Customer Service Representative

Lori Crossan - Cashier

Brad Hanson - Meter Reader

Ener

gyPe

rcen

tage

of

Perc

enta

geEn

ergy

Perc

enta

ge o

f Pe

rcen

tage

Rate

paye

r's R

ate

Clas

sSa

les (

kWh)

Rank

Tota

l kW

hRe

venu

eSa

les R

even

ueSa

les (

kWh)

Rank

Tota

l kW

hRe

venu

eSa

les R

even

ue

Larg

e In

dust

rial C

usto

mer (6

1)50

,457

,600

17.

7%2,

332,

208

$

5.1%

64,7

71,2

00

111

.4%

2,28

2,31

4$

7.0%

Larg

e Ge

nera

l Ser

vice C

usto

mer (2

2)13

,469

,400

22.

1%76

1,48

6

1.7%

14,7

72,0

00

22.

6%65

5,08

7

2.0%

Larg

e Ge

nera

l Ser

vice C

usto

mer (3

3)10

,545

,600

31.

6%53

1,19

7

1.2%

3,17

6,16

0

80.

6%14

4,42

9

0.4%

Larg

e Ge

nera

l Ser

vice C

usto

mer (2

2)7,

965,

000

41.

2%42

7,39

0

0.9%

9,36

3,60

0

41.

6%40

8,84

7

1.3%

Larg

e Ge

nera

l Ser

vice C

usto

mer (2

2)7,

563,

600

51.

2%49

7,22

7

1.1%

4,54

9,20

0

60.

8%25

2,12

5

0.8%

Larg

e Ge

nera

l Ser

vice C

usto

mer (2

3)5,

763,

600

60.

9%32

9,63

0

0.7%

9,42

1,20

0

31.

7%44

9,94

5

1.4%

Larg

e Ge

nera

l Ser

vice C

usto

mer (2

1)5,

172,

400

70.

8%27

3,16

5

0.6%

‐

‐0.

0%‐

0.0%

Larg

e Ge

nera

l Ser

vice C

usto

mer (2

3)3,

873,

600

80.

6%22

6,13

7

0.5%

5,21

3,40

0

50.

9%24

0,12

6

0.7%

Larg

e Ge

nera

l Ser

vice C

usto

mer (2

3)3,

796,

200

90.

6%23

0,12

8

0.5%

‐

‐0.

0%‐

0.0%

Larg

e Ge

nera

l Ser

vice C

usto

mer (2

3)3,

387,

600

100.

5%17

7,00

0

0.4%

3,79

6,80

0

70.

7%16

1,32

2

0.5%

Larg

e Ge

nera

l Ser

vice C

usto

mer (2

3)‐

‐‐

‐

‐2,

633,

400

90.

5%11

6,05

7

0.4%

Larg

e Ge

nera

l Ser

vice C

usto

mer (2

1)‐

‐‐

‐

‐2,

580,

960

100.

5%11

4,12

4

0.4%

Larg

e Ge

nera

l Ser

vice C

usto

mer (2

1)‐

‐‐

‐

‐‐

‐0.

0%‐

0.0%

Larg

e Ge

nera

l Ser

vice C

usto

mer (2

1)‐

‐‐

‐

‐‐

‐0.

0%‐

0.0%

111,

994,

600

17.1

%5,

785,

568

$

12.6

%12

0,27

7,92

0

21.2

%4,

824,

376

$

14.9

%

Tota

l All

Rate

paye

rs65

4,56

6,80

1

45,9

61,3

19$

568,

253,

720

32,4

53,9

68$

DIST

RICT

'S P

RIN

CIPA

L RAT

EPAY

ERS

For the

yea

rs end

ed Decem

ber 3

1

2010

2001

57

Curr

ent

Rate

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

State Pu

blic Utility

Tax

3.87

3%1,10

5,09

0$

1,25

6,73

3$

1,28

6,31

7$

1,36

0,92

7$

1,46

0,04

2$

1,59

6,24

7$

1,67

1,86

4$

1,71

1,08

7$

1,76

2,50

3$

1,72

6,35

9$

State Privilege Tax

2.14

0%65

2,26

7

697,92

6

755,21

1

743,61

0

754,33

7

878,29

4

852,52

9

896,69

9

930,80

4

833,31

5

City of S

helto

n Ut

ility Tax

6.00

0%46

5,23

3

521,62

0

519,71

6

543,10

4

561,87

6

574,46

8

582,03

9

574,28

8

556,98

0

571,63

6

Leaseh

old Tax

12.840

%7,49

5

10,853

14,053

14,224

20,010

14,873

14,738

‐

‐

‐

Payroll Taxes

Vario

us46

8,16

7

493,93

5

527,17

1

526,53

4

587,26

5

599,10

1

589,48

1

634,58

7

630,76

2

652,15

7

L & I, Employ

men

t Securit y

Vario

us14

8,52

7

166,94

8

188,07

7

142,74

1

123,41

9

113,71

5

111,53

9

161,55

6

144,55

3

153,02

5

Misc

ellane

ous T

axes

Vario

us51

,312

47,237

117,40

9

53,319

54,331

69,962

75,893

65,307

38,975

40,213

Total Taxes

2,89

8,09

1$

3,19

5,25

2$

3,40

7,95

4$

3,38

4,45

9$

3,56

1,28

0$

3,84

6,66

0$

3,89

8,08

3$

4,04

3,52

4$

4,06

4,57

7$

3,97

6,70

6$

Total O

peratin

g Re

venu

es33

,780

,796

$

38,990

,086

$

39,085

,777

$

37,937

,883

$

40,219

,224

$

43,408

,464

$

46,433

,261

$

47,831

,554

$

48,480

,105

$

47,933

,419

$

% of O

peratin

g Re

venu

es8.58

%8.20

%8.72

%8.92

%8.85

%8.86

%8.40

%8.45

%8.38

%8.30

%

COM

PARA

TIVE

TAX

CO

STS

For the

yea

rs end

ed Decem

ber 3

1

Page 49

58

Rob Johnson - Attorney (front)Annette Creekpaum - Finance Manager (back)

Lacy McIntosh - Payroll Coordinator

Jay Himlie - Power Supply Manager

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Elec

tric

Reve

nues (1

)29

,768

,676

$

32,1

51,1

18$

32,0

94,5

45$

32,9

46,5

03$

34,6

17,3

47$

37,7

13,5

89$

40,7

36,8

82$

42,6

19,9

96$

44,3

06,3

26$

43,6

29,1

11$

Writ

e‐of

fs12

3,98

1$

120,

764

$

204,

751

$

113,

085

$

135,

068

$

154,

831

$

182,

640

$

137,

553

$

53,3

81$

193,

611

$

Perc

enta

ge W

ritte

n O

ff0.

42%

0.38

%0.

64%

0.34

%0.

39%

0.41

%0.

45%

0.32

%0.

12%

0.44

%

Allo

wan

ce11

6,96

7$

119,

565

$

112,

243

$

213,

392

$

114,

314

$

136,

496

$

143,

727

$

161,

643

$

113,

112

$

121,

817

$

Paym

ents fr

om A

genc

ies

23,6

68$

32,6

18$

26,9

13$

24,5

78$

28,2

97$

38,1

87$

45,5

33$

40,6

77$

38,0

95$

46,6

05$

Paym

ents to

Age

ncie

s8,

771

$

11,6

76$

9,30

8$

7,51

8$

6,05

5$

3,93

3$

4,04

3$

4,75

7$

9,41

2$

11,6

99$

Perc

ent o

f Writ

e‐of

fs19

.09%

27.0

1%13

.14%

21.7

3%20

.95%

24.6

6%24

.93%

29.5

7%71

.36%

24.0

7%Co

llect

ed

(1)

Does n

ot in

clude

sale fo

r res

ale

or La

rge

Indu

stria

l.

UNCO

LLEC

TIBL

E AC

COUN

T AN

ALYS

ISFor the

yea

rs end

ed Decem

ber 3

1

59

2001

(1)

2002

2003

2004

2005

2006

2007

2008

2009

2010

DEBT

SER

VICE

CAL

CULA

TIO

NCh

ange in

Net A

sset

s4,

701,

440

$

1,00

8,45

7$

380,

161

$

(500

,094

)$

397,

994

$

1,39

0,86

0$

6,59

6,09

3$

7,64

2,96

4$

5,35

5,96

2$

2,82

8,78

0$

Adju

stm

ents to

(fro

m) C

hang

e in N

et A

sset

sDe

prec

iatio

n & A

mor

tizat

ion

2,83

4,42

6$

3,39

7,87

1$

3,50

3,11

9$

3,91

7,01

3$

4,11

8,73

7$

4,25

9,50

5$

4,42

8,96

6$

4,60

3,81

9$

4,84

3,66

4$

5,07

4,23

8$

Inte

rest E

xpen

se87

4,74

7

1,72

4,26

1

1,65

8,92

0

1,61

5,66

3

1,59

5,83

7

1,51

1,16

6

1,40

5,85

9

1,37

9,82

4

1,81

3,38

3

2,73

5,86

5

Amor

tizat

ion

Debt D

iscou

nt, P

rem

ium a

nd E

xpen

se45

,972

69,5

69

130,

366

50,8

85

49,2

08

46,8

90

44,4

31

41,8

31

59,2

09

61,3

83

Extr

aord

inar

y Ite

m(2

,244

)

‐

‐

‐

‐

‐

‐

‐

‐

‐

REVE

NUE

AVAI

LABL

E FO

R DE

BT S

ERVI

CE8,

454,

341

$

6,20

0,15

8$

5,67

2,56

6$

5,08

3,46

7$

6,16

1,77

6$

7,20

8,42

1$

12,4

75,3

49$

13,6

68,4

38$

12,0

72,2

18$

10,7

00,2

66$

DEBT

SER

VICE

(2)

1,46

0,44

4$

2,12

8,11

7$

2,68

5,04

5$

2,22

1,05

0$

2,65

3,27

5$

2,58

5,71

0$

2,62

0,70

5$

2,62

2,54

8$

3,12

1,05

0$

6,20

0,99

1$

DEBT

SER

VICE

CO

VERA

GE R

ATIO

5.79

2.91

2.11

2.29

2.32

2.79

4.76

5.21

3.87

1.73

DEBT

MAR

GIN

INFO

RMAT

ION

For the

yea

r end

ed Decem

ber 3

120

01 (1

)20

0220

0320

0420

0520

0620

0720

0820

0920

10

Reve

nue

Avai

labl

e fo

r Deb

t Ser

vice

8,45

4,34

1$

6,20

0,15

8$

5,67

2,56

6$

5,08

3,46

7$

6,16

1,77

6$

7,20

8,42

1$

12,4

75,3

49$

13,6

68,4

38$

12,0

72,2

18$

10,7

00,2

66$

Annu

al D

ebt S

ervi

ce (2

)1,

460,

444

$

2,12

8,11

7$

2,68

5,04

5$

2,22

1,05

0$

2,65

3,27

5$

2,58

5,71

0$

2,62

0,70

5$

2,62

2,54

8$

3,12

1,05

0$

6,20

0,99

1$

Max

imum

Allo

wab

le A

nnua

l Deb

t Ser

vice p

er B

ond

Cove

nant

s (3)

6,76

3,47

3$

4,96

0,12

6$

4,53

8,05

3$

4,06

6,77

4$

4,92

9,42

1$

5,76

6,73

7$

9,98

0,27

9$

10,9

34,7

50$

9,65

7,77

4$

8,56

0,21

3$

Allo

wab

le A

dditi

onal A

nnua

l Deb

t Ser

vice

5,30

3,02

9$

2,83

2,00

9$

1,85

3,00

8$

1,84

5,72

4$

2,27

6,14

6$

3,18

1,02

7$

7,35

9,57

4$

8,31

2,20

2$

6,53

6,72

4$

2,35

9,22

2$

(1) G

ASB

Stat

emen

t No. 3

3 w

as im

plem

ente

d in 2

001

recla

ssify

ing

capi

tal c

ontr

ibut

ions a

s rev

enue

.(2

) Doe

s not in

clude

Ter

m Lo

an ‐

Juni

or Li

en Lo

an.

(3) T

he b

ond

cove

nant

s sta

te th

at n

ew b

onds m

ay b

e iss

ued

if th

e am

ount o

f the

net re

venu

e fo

r any

twel

ve co

nsec

utiv

e m

onth

s in

a 24

‐mon

th p

erio

d di

vide

d by

the

max

imum

ann

ual d

ebt s

ervi

ce in

any

futu

re y

ear i

s not le

ss th

an 1

25%

.

DEBT

SER

VICE

CO

VERA

GEFor the

yea

rs end

ed Decem

ber 3

1

60

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Reve

nue

Bond

s25

,705

,000

$

37,1

60,8

04$

35,4

91,4

86$

34,2

15,7

01$

32,4

82,5

65$

30,6

64,5

69$

28,7

60,6

22$

36,7

13,7

78$

34,6

22,8

65$

82,0

95,0

00$

Una

mor

tized

Pre

miu

m & D

iscou

nt a

nd L

oss o

n De

feas

ance

(30,

868)

(69,

946)

(60,

263)

(53,

819)

(47,

698)

(41,

910)

(36,

477)

(208

,117

)

(194

,718

)

27,9

64

Tota

l Out

stan

ding

Deb

t25

,674

,132

$

37,0

90,8

58$

35,4

31,2

23$

34,1

61,8

82$

32,4

34,8

67$

30,6

22,6

59$

28,7

24,1

45$

36,5

05,6

61$

34,4

28,1

47$

82,1

22,9

64$

Tota

l Rev

enue

Deb

t to

Ope

ratin

g Re

venu

es76

%95

%91

%90

%81

%71

%62

%76

%71

%17

1%

Tota

l Rev

enue

Deb

t to

Tota

l Ass

ets

21%

29%

28%

27%

26%

24%

22%

25%

23%

41%

Tota

l Rev

enue

Deb

t per R

atep

ayer

913

$

1,29

3$

1,20

9$

1,14

6$

1,05

2$

971

$

892

$

1,12

2$

1,05

5$

2,52

5$

RATI

OS

OF

OU

TSTA

ND

ING R

EVEN

UE

BON

D D

EBT

For the

yea

rs end

ed Decem

ber 3

1

Page 5

2

Dani Leboki - Accounts Payable Specialist

Jennifer Renecker - Accountant

Emily Gott - Accounting Assistant

61

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Popu

latio

n of C

ount

y (1

)49

,600

49,8

00

50,2

00

50,8

00

51,9

00

53,1

00

54,6

00

56,3

00

56,8

00

57,1

00

Une

mpl

oym

ent R

ate

(2)

8.9%

8.2%

8.1%

6.7%

5.6%

5.8%

6.0%

8.6%

10.6

%10

.2%

Med

ian

Hou

seho

ld In

com

e (3

)41

,792

$

42,6

02$

42,7

21$

43,3

84$

44,5

99$

47,5

52$

46,5

45$

44,5

70$

45,4

17$

45,3

71$

Per C

apita

Per

sona

l Inc

ome

(2)

24,0

95$

24,7

18$

25,4

09$

26,4

60$

26,8

18$

28,3

96$

29,7

76$

30,3

49$

N/A

N/A

Scho

ol E

nrol

lmen

t (4)

8,45

2

8,18

5

8,21

2

8,13

8

8,19

1

8,23

6

8,12

2

8,05

9

8,08

1

8,23

0

(1)

Sour

ce:

Was

hing

ton

Stat

e O

ffic

e of F

inan

cial M

anag

emen

t.(2

) So

urce

: La

bor M

arke

t and

Eco

nom

ic A

naly

sis, W

ashi

ngto

n Em

ploy

men

t Sec

urity

Dep

artm

ent.

(3)

Sour

ce:

Was

hing

ton

Stat

e O

ffic

e of F

inan

cial M

anag

emen

t.(4

) So

urce

: Was

hing

ton

Stat

e O

ffic

e of S

uper

inte

nden

t of P

ublic In

stru

ctio

n.

For the

yea

rs end

ed Decem

ber 3

1D

EMO

GRA

PHIC S

TATI

STIC

S

62

Charlene McHendry - Energy Services Technician

Joel Myer - Public Information & Government Relations Manager

Charlene talks to a local business about commercial lighting at the bite of shelton - business expo.

Joel attends many local functions for the chamber of commerce and is a board member on the economic development council.

Empl

oyer

Empl

oyee

s R

ank

Perc

enta

ge o

f To

tal C

ount

y Em

ploy

men

tEm

ploy

ees

Ran

k

Perc

enta

ge o

f To

tal C

ount

y Em

ploy

men

t

Little Creek Casino Hotel

Casino

and

hotel

720

13.19

%44

94

2.36

%Sh

elton Scho

ol District

Education prov

ider

641

22.84

%65

02

3.42

%Washing

ton Co

rrection

Cen

ter

State prison

626

32.77

%65

03

3.42

%Mason

Gen

eral Hospital

Med

ical fa

cility

542

42.40

%37

05

1.94

%Wal‐M

art

Retail store

365

51.62

%26

48

1.39

%Mason

Cou

nty

Gov

ernm

ent

360

61.60

%34

36

1.80

%North M

ason

Schoo

l District

Education prov

ider

351

71.56

%28

47

1.49

%Taylor She

llfish

Shellfish

325

81.44

%25

09

1.31

%Sq

uaxin Indian

Tribe

Tribal Facility

260

91.15

%14

412

0.76

%Olympic Pa

nel Produ

cts

Plyw

ood, ven

eer

280

101.24

%‐

‐0.00

%Simpson

Tim

ber Co

mpa

nyLumbe

r21

011

0.93

%84

51

4.44

%Safeway

Groceries

121

160.54

%20

210

1.06

%To

tal

4,80

121

.28%

4,45

123

.39%

Source: Econ

omic Develop

men

t Co

uncil o

f Mason

Cou

nty.

PRIN

CIPA

L EM

PLO

YER

SFor the years en

ded Decem

ber 31

Prod

uct/

Serv

ice

2010

2001

63

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Oper

atin

g Ex

pens

es /

Reve

nues

86.5

%94

.6%

95.8

%97

.9%

96.4

%96

.5%

88.4

%82

.4%

85.9

%89

.9%

Tota

l Ele

ctric

Sal

es in

MW

hRe

tail

Sale

s56

8,25

4

587,

255

574,

972

598,

279

618,

256

645,

820

668,

648

672,

105

660,

405

654,

567

Sale

s for R

esal

e 7,

635

‐‐

‐‐

‐‐

‐‐

‐To

tal M

Wh

575,

889

587,

255

574,

972

598,

279

618,

256

645,

820

668,

648

672,

105

660,

405

654,

567

Annu

al k

Wh

per C

usto

mer

Resid

entia

l13

,210

13,2

01

12,8

79

13,1

58

12,9

21

13,2

86

14,0

30

14,2

05

14,3

48

13,8

42

Gene

ral S

ervi

ce80

,858

83,3

64

77,8

40

78,5

34

80,9

12

85,3

17

84,4

20

84,4

85

83,3

62

83,5

33

Indu

stria

l64

,771

,200

70,9

92,0

00

64,1

23,2

00

69,4

36,8

00

74,7

93,6

00

70,4

16,0

00

64,0

65,6

00

55,8

57,6

00

40,6

94,4

00

50,4

57,6

00

Misc

ella

neou

s23

,335

22,9

51

24,0

99

23,7

96

23,2

26

24,0

31

23,7

75

24,4

00

25,1

36

25,1

23

Aver

age

Annu

al k

Wh

per C

usto

mer‐A

ll Cl

asse

s20

,210

20,4

78

19,6

20

20,0

64

20,0

54

20,4

84

20,7

72

20,6

57

20,2

37

20,1

28

Aver

age

Reve

nue

per R

esid

entia

l Cus

tom

er79

1$

847

$

836

$

844

$

853

$

901

$

967

$

1,00

2$

1,04

6$

1,01

8$

Annu

al R

even

ue p

er C

usto

mer ‐

All C

lass

es1,

154

$

1,22

0$

1,18

9$

1,20

2$

1,22

3$

1,28

9$

1,35

0$

1,38

5$

1,41

9$

1,41

3$

Addi

tions to

Pla

nt, e

xclu

ding

wor

k‐in‐p

rogr

ess (1

)6,

178,

879

$

13,3

06,5

44$

5,78

8,40

3$

6,19

4,45

0$

6,96

7,08

0$

4,56

9,71

5$

5,97

6,04

9$

5,53

2,73

0$

6,04

8,30

7$

6,95

3,58

9$

Net U

tility

Pla

nt89

,101

,770

$

95,0

42,1

21$

99,4

34,3

48$

102,

088,

517

$

105,

753,

357

$

107,

101,

640

$

108,

026,

826

$

109,

209,

590

$

112,

548,

254

$

120,

184,

401

$

Num

ber o

f Sub

stat

ions

10

10

10

10

10

11

11

11

11

11

Prim

ary

Line

Mile

sOv

erhe

ad63

2

636

638

643

654

658

660

671

677

683

Unde

rgro

und

943

958

971

984

993

1,01

0

1,03

0

1,05

0

1,06

2

1,07

2

Tota

l Prim

ary

Line

Mile

s1,

575

1,59

4

1,60

9

1,62

7

1,64

7

1,66

8

1,69

0

1,72

1

1,73

9

1,75

5

Capi

taliz

ed P

ayro

ll1,

448,

074

$

1,54

3,64

9$

1,74

8,42

1$

1,83

9,43

5$

1,72

2,55

8$

1,70

9,38

4$

1,75

8,61

2$

1,89

4,77

0$

1,83

4,63

1$

1,75

9,89

6$

Tota

l Pay

roll

Expe

nse

6,46

3,18

2$

6,78

5,46

2$

7,33

0,83

8$

7,42

4,61

2$

7,60

7,20

2$

7,96

3,19

4$

8,62

8,89

0$

8,36

1,89

1$

8,75

6,67

9$

9,11

8,03

4$

Num

ber o

f Ful

l Tim

e Em

ploy

ees

113

115

117

117

116

115

116

117

118

116

Pow

er O

utag

es

Over

head

398

298

354

322

289

340

296

260

327

327

Unde

rgro

und

158

187

222

238

215

243

193

201

183

158

Tota

l Pow

er O

utag

es55

6

485

576

560

504

583

489

461

510

485

Oper

atin

g In

dica

tors

For the

years e

nded

Decem

ber 3

1

64

Stan Olsen - Service Engineering Technician

Terry Peterson - Engineering Manager

Koral Buck - Distribution Engineer / Metering Supervisor

Mike Dahman - Service Engineering Technician

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Appl

icatio

ns R

ecei

ved

New

586

622

806

852

1,08

3

963

687

344

239

251

Alte

red

361

424

449

481

577

553

648

601

552

669

Back

bone

5

5

10

19

11

34

20

8

4

4

Tota

l App

licat

ions R

ecei

ved

952

1,05

1

1,26

5

1,35

2

1,67

1

1,55

0

1,35

5

953

795

924

Conn

ects

Perm

anen

t24

1

350

406

419

662

586

468

214

104

111

Com

mer

cial

129

50

107

83

75

52

34

38

31

21

Seas

onal

16

20

36

106

24

22

13

17

10

14

Misc

ella

neou

s98

97

114

119

134

161

166

87

75

69

Tota

l Con

nect

s48

4

517

663

727

895

821

681

356

220

215

Tree

Trim

min

gM

iles o

f Lin

es14

0

93

53

53

70

50

57

70

71

63

Heat

ing

Degr

ee D

ays (2

)5,

800

5,62

6

5,14

6

5,02

4

5,13

5

5,24

0

5,47

8

5,81

2

5,68

7

5,32

1

Annu

al P

recip

itatio

n (in

ches

) (3)

65.2

3

53.2

5

64.9

3

45.8

2

62.9

8

82.0

5

61.2

5

53.9

9

55.0

3

63.9

9

(1)

The

Olym

pic V

iew G

ener

atin

g Fa

cility

, com

plet

ed a

t a co

st o

f $5.

8 m

illio

n, w

as a

dded

to th

e El

ectr

ic Pl

ant a

ccou

nt in

200

2.(2

) So

urce

: Na

tiona

l Wea

ther S

ervi

ce F

orec

ast O

ffice

.(3

) So

urce

: PUD

3 M

t. Vi

ew W

eath

er S

tatio

n.

Mason County Public Utility District No. 3P.O. Box 2148

Shelton, Mason County, Washington(360) 426-8255

www.masonpud3.org

mason county public utility district no. 3...mason county public utility district no. 3 was...

Documents