2018 Budget. Board of Commissioners: Sidney Sid Logan Tanya Toni Olson Kathleen Kathy Vaughn

Transcription

1 2018 Budget Board of Commissioners: Sidney Sid Logan Tanya Toni Olson Kathleen Kathy Vaughn

2 Snohomish County PUD 2018 BUDGET

3 SNOHOMISH COUNTY PUD 2018 BUDGET TABLE OF CONTENTS CEO/General Manager s Message... 1 ELECTRIC SYSTEM... 5 Exhibit 1 Operating and Other Revenue Exhibit 2 Purchased Power, Transmission and Ancillary Services Exhibit 3 Operating and Maintenance Expenses By Cost Center Exhibit 4 Operating Expenses By Cost Element Exhibit 5 Capital Expenditures DIVISIONS Administration (includes Commission, Office of the CEO/General Manager, Safety & Line Training, and Government Relations)...21 Corporate Communications (includes Corporate Communications, Print Shop, Mail Center, and Business Readiness & Training)...22 Legal Services (includes General Counsel, District Information Governance)...23 Finance (includes AGM Finance and Treasury, Budget and Financial Planning, SAP Support Finance, Treasury & Risk Management, Meter Reading, Customer Accounting, General Accounting, Contracts & Purchasing, and Warehouse)...24 Customer Services (includes Customer Service Experience, Customer Service Support)...25 Energy Services (includes AGM Customer and Energy Services, CES Business Operations, Residential, Strategic Segments, Strategic Accounts, Senior Manager Energy Services, and Advanced Metering Infrastructure)...26 Facilities and Security (includes Grounds and Engineering, Custodial Services, Facilities Maintenance, Facilities Planning, Security and Business Continuity, and Facilities Administration)...27 Employee Resources and Benefits Information Technology Services (includes AGM ITS, ITS Administration Management, ITS Automation Projects, Project and Delivery Management, IT Quality Assurance, IT Project Release Management, ITS Operations Management & Architecture, ITS Operations Support, ITS End User Support, Data Base Administration, Enterprise Architecture, ITS Application Management & Architecture, ITS Security Architecture, M2C Application Security, EAM/CMP/ALM, and B2R/P2P/H2R/R2D, Data Strategy & Analytics)...29 Power and Transmission Management (includes AGM Power and Transmission, Power Scheduling; Power Supply; Regional Transmission & Compliance and Rates and Economics)...30 Distribution and Engineering (includes AGM Distribution & Engineering, D&E Business Operations, Asset Management, Local Offices, Everett Region, Everett Region Support, Environmental Affairs, Real Estate, Transportation, Construction Services, Vegetation Management, Energy Control Center, Inspection / Scheduling, Distribution Engineering, Transmission Engineering, GIS / Maps & Records / Drafting, Operational Technology Engineering, System Planning & Protection, Everett Engineering, Plat Development, Substation Engineering,Substation Construction, Metering, Telecommunications)...31 Other Costs GENERATION SYSTEM Exhibit 6 Operating Revenues and Expenditures Jackson Hydro Project and Other Generation Renewable Generation and Youngs Creek Hydro Project Woods Creek Hydro Project, Calligan Hydro and Capital Expenditures Hancock Creek Hydro Project and Generation Sys. Capital Expenditures...39 WATER SYSTEM...41 Exhibit 7 Operating and Other Revenue Exhibit 8 Operating Expenses by Cost Element Exhibit 9 Capital Expenditures Snohomish County PUD 2018 BUDGET

4 Snohomish County PUD 2018 BUDGET

5 2018 BUDGET The 2018 Budget for Snohomish County PUD represents a compilation of efforts from the Leadership Team, project leaders and other PUD staff. Every effort has been made to ensure an accurate and straightforward representation of the PUD s revenue and expenditure requirements and a budget plan that upholds the mission, values, and strategic priorities of the PUD. I encourage you to visit our website at snopud.com to learn more about the PUD and the valuable services we provide to Snohomish County and Camano Island residents BUDGET KEY FEATURES The 2018 Budget and expenditure plan provides funding to develop, maintain, and enhance the PUD s Electric, Generation, and Water systems and continue to provide excellent service and enhance reliability to our customers while pursuing renewable resources and all cost-effective conservation. The 2018 Operating Budget for the Electric System is $663 million, roughly equivalent to the 2017 Operating Budget. The expenditure plan also includes $94 million in capital expenditures; the majority of those expenditures are for system reliability improvements and upgrades. The 2018 Operating Budget for the Generation System is $15.8 million; $1.5 million higher than The expenditure plan also includes a combined $14 million in capital expenditures for construction and improvements. The Water System s 2018 Operating Budget is approximately $11.6 million, roughly equivalent to the 2017 Operating Budget. The following highlights some of the major components of the 2018 Electric System Operating Budget and capital expenditures: 4 Rate adjustment There are no planned rate increases in the 2018 Electric System Budget. 4 Residential Exchange Program As a part of the Residential Purchase and Sale Agreement with Bonneville, the PUD is participating in the BPA Residential Exchange Program. The 2018 Budget includes $3.32 million of Residential Exchange credits to be passed on to residential customers. 4 Retail power consumption Retail load is expected to be 6% lower than 2017 budgeted levels. This is expected to result in a $25 million decrease in retail sales from 2017 Budget levels. 4 New connections The estimate for 2018 new customer connections is 3, Reading meters monthly In 2016, the PUD began reading all residential and commercial customer meters on a monthly basis. The 2018 Budget includes the use of reserves to fund the difference between monthly and bi-monthly meter readings. 4 System reliability investments The 2018 Capital plan includes several major projects aimed at increasing reliability for customers major projects include the Cedar Valley Substation, the Stanwood to Camano 115 kv line, the OSO Substation upgrade and the Casino Substation transformer replacement, as well as continuation of the wood pole and underground cable replacement programs. 4 Grid modernization investment Includes $5.5 million to continue investment in infrastructure, including further substation automation, and incorporating energy storage into the grid infrastructure. Snohomish County PUD 2018 BUDGET 1.

6 4 75th Street Business Center upgrades Following the purchase of this facility in 2017, the 2018 Budget includes $6.8 million for renovation and improvements. 4 Bond proceeds The PUD issued $141 million in bonds in 2015 and the proceeds are being used to provide funding for qualified system capital improvement efforts over a three-year period. The expenditure plan includes the use of $28 million of the proceeds in 2018 for qualified projects. 4 Energy-efficiency programs The PUD continues investment in energyefficiency programs in the 2018 Budget with $22.0 million in planned expenditures. These expenditures are reported as part of Operating and Maintenance. 4 Renewable resource projects Includes $6.6 million for several renewable resource investments including the final commissioning of the Hancock and Calligan Creek hydroelectric projects and further low-impact hydroelectric exploration. These projects will be funded by the Resource Reinvestment Reserve. COMPLIANCE WITH COMMISSION POLICY Pursuant to Commission Policy, specifically EL-4 that defines the executive limitation for financial planning and budgeting, the 2018 Budget: w Includes a credible projection of revenues and expenditures; w Maintains cash reserves at levels consistent with Commission policy established in Resolution 5319; w Provides for 2018 Electric System debt service coverage greater than the Commission s 1.75x target; and w Planned use of bond proceeds does not exceed the Commission s target of 40% of non-generation electric system capital. PUBLIC BENEFITS The PUD remains committed to the benefits of public power for its customers and fulfilling its mission while also responding to the needs of the community. The 2018 Budget includes: n Energy-efficiency programs including residential lighting discounts, rebates for home weatherization improvements, efficient retail products and heat pumps, and comprehensive retrofits for low-income housing efficiency. Incentives also encourage businesses throughout the County to save energy by making efficiency upgrades to lighting, HVAC, motors and process improvements. Significant efforts are made to educate and increase customer awareness of the benefits of energy efficiency for all ratepayers. n Fish and wildlife recovery efforts that are featured at the PUD s hydroelectric projects, including Jackson, Youngs Creek and Woods Creek. In addition, approximately 35% of the PUD s payments for power to BPA, approximately $84 million, fund fish and wildlife recovery on the Columbia River; n Low-income discounts estimated at about $6.7 million are provided by the PUD for qualifying low-income customers; n Public safety information programs are communicated in a variety of ways, including our website, customer newsletters, school programs, newspaper ads, and other means; n Trained field employees who live in the communities, keep a watchful eye for customers who may be at risk and provide responsive service during major storm and emergency outage conditions; n Energy education programs serving local area schools with classroom presentations, student workshops, and electrical safety demonstrations; n Environmental sensitivity demonstrated in our power resource development acquisition and construction practices; n The Helping Hands program, funded by employees, which assists low-income seniors with their PUD bills; n The Project PRIDE program, funded by customer donations, which provides financial assistance to low-income families for their PUD electric bills; 2. Snohomish County PUD 2018 BUDGET

7 n Quality jobs and local employment provided by the customer-owned PUD; n The Social Service Agency and LIHEAP (Energy Assistance) support, which provides customers and agencies easier access to customers data at the time assistance is being provided and coordinates pledges to pay; n Tax-exempt financing for capital projects helps maintain stable rates; and STRATEGIC PRIORITIES 2018 BUDGET ELEMENTS PUD management and the Board of Commissioners worked together to create a plan that establishes and identifies the mission, values and strategic priorities of the PUD. The 2018 Budget upholds the values of the plan. The PUD Board of Commissioners and Management Team are taking actions today to build a strong base of sustainable knowledge and physical assets. This will provide a foundation from which our utility can prosper and meet the needs of our customers, while recognizing our environmental stewardship role and the social and economic issues of our community. The Strategic Priorities are designed to support the PUD s mission of providing quality water and electric energy products and services. Providing power and water is our core business, but the PUD is more than simply a commodity supplier. We endeavor to increase the value of these products by providing outstanding service, information, customer convenience and safety. The plan identifies five major areas of strategic focus with underlying strategic priorities, and the PUD has identified a sample of related 2018 Budget elements that support those priorities as follows: Team PUD n Safety There s nothing that we do in achieving our mission that s worth incurring even a single injury, period. Related Budget Elements: Safety Program & Line Training ($1.4 million), Safety Training Meetings ($630,000) n Leadership PUD Leaders will be models of integrity, professionalism, respectful engagement and accountability. Leadership is not defined by position or title. Leaders make a difference in helping others to be successful and realize their highest potential. Related Budget Elements: Education and Training Opportunities ($1.4 million), Administration Division ($1.7 million), Leadership Development Training ($150,000) n Our People Capable, creative and dedicated team members that are at the core of what makes the PUD successful and respected in our community. We do this by performing the highest quality and quantity of work, using our skills and knowledge to our fullest ability and by exercising safe and productive work practices. Related Budget Elements: Apprenticeship Program ($1.7 million), Recruiting Program ($375,000) n Our Identity As a public utility, our focus is on providing critical services to our neighbors, friends, family and communities. We will be mindful of the trust invested in us by our customers, and will work hard to earn that trust in everything we do. Related Budget Elements: Corporate Communications ($2.1 million), Government Relations ($880,000), Customer Service Experience ($13.6 million) Customer Service n Serving our Customers As long-standing members of the community, we work hard to earn and maintain our customers trust every day. We strive to improve the customer experience and work hard to resolve customer issues promptly. We provide customers with ways to interact with us that meet a variety of needs and lifestyles. We are committed to serving now and for generations to come. Related Budget Elements: Customer Service Experience ($13.6 million) Snohomish County PUD 2018 BUDGET 3.

8 n Safety and Reliability Our systems are designed, maintained, and operated to provide safe and reliable service to our community. We know that there will be occasional interruptions, and we will continually improve our capability to provide timely information and faster service restoration. Related Budget Elements: Power Scheduling ($2.5 million), Tree Trimming Program ($6.2 million), Energy Control Center ($4.8 million) n Value The power and water services we supply are foundational to life in our communities. We strive to ensure that they will consistently represent strong value relative to their cost. Related Budget Elements: Government Relations Program ($880,000), Data Strategy & Analytics ($1.8 million), Strategic Accounts ($2.3 million) Delivering Now and For the Future n Resource Planning Provide the lowest reasonable cost and environmentally responsible power and water products to our customers Related Budget Elements: Power Supply ($966,000), Power Scheduling ($2.5 million) n Operations Maintain our assets for cost-effective and reliable service. Leverage technology to lower cost and improve or create power and water services Related Budget Elements: Wood Pole and Cable Replacement Programs ($12.6 million), Asset Management ($905,000), System Planning and Protection ($2.8 million), Water Main Replacements ($3.6 million) n Stewardship Balancing decisions in the best interest of both current customers and future generations Related Budget Elements: Energy-Efficiency Programs ($22.0 million), Low Income and Senior Discount Programs ($6.7 million) Responsible Cost and Fiscal Management n Financial Processes Robust and effective processes for accurate and timely financial and managerial reporting. This will ensure compliance with reporting obligations and provide reliable data to facilitate decision-making and to identify and quantify opportunities and risks. Related Budget Elements: Finance SAP Support ($488,000), General Accounting ($2.9 million), Budget and Financial Planning ($247,000) n Cost Management Proactive, strategic and visible cost control that continuously drives improvement in our ability to mitigate rate pressure Related Budget Elements: Long-term BPA power and transmission contracts ($393 million) n Stability Ensure long-term financial stability through rates and fees that allocate and recover costs fairly and fully, while mitigating short-term rate volatility. Related Budget Elements: Rates and Economics ($768,000), Budget and Financial Planning ($247,000), Treasury and Risk Management ($3.1 million) Continuous Improvement n Establish a formal programmatic effort that fits our needs and provides the tools, resources and expectations to drive continuous improvement in every area of our operations Related Budget Elements: Corporate Communications and Business Readiness Training ($2.7 million), Continuous Improvement Training for Employees ($40,000) 4. Snohomish County PUD 2018 BUDGET

9 2018 BUDGET The Electric System operates primarily to provide electrical service to approximately 345,000 customers in Snohomish County and Camano Island. The Electric System purchases the majority of the electrical energy it sells to customers from the Bonneville Power Administration (BPA). The Electric System consists of the PUD s transmission lines, substations, distribution lines, transformers, meters, and general plant. It also includes customer service, engineering and design, energy-efficiency services, and administrative functions that support the construction, operations and maintenance of the transmission and distribution system. ASSUMPTIONS The 2018 Budget reflects staff s electric load forecast based on an economic forecast for Snohomish County and a power resource forecast that includes staff s best estimates of wholesale market prices. The 2018 Budget for the Electric System is based on the following assumptions for revenues, power resources, and other factors: Revenue Assumptions 4 Energy Rates The 2018 Budget does not include any planned rate increases. 4 Load Forecast PUD retail loads are expected to be 6% lower than loads forecast in the 2017 Budget. 4 New Connections The 2018 Budget reflects projected new connections of 3,400. The 2017 Budget assumed 3,018 new connections although actual connects are expected to be approximately 4,000. Revenues from customer reimbursed work are projected at $16.9 million for Wholesale Revenues The 2018 Budget includes $37 million in wholesale energy revenues. The majority of the PUD s short-term wholesale market sales come from surplus Slice energy, which varies with the seasonal and daily variations in the Slice product s output. If snowpack and water conditions are above average in the region, the energy output is also above average. The $37 million is based on regional water levels at a P35 level, an estimate below average water (P50). Based on current price forecasts, the average wholesale price for revenues from system load balancing used in the 2018 Budget is $19 per MWh. Snohomish County PUD 2018 BUDGET 5.

10 4 Cash Reserve Transfers The PUD maintains four cash reserve accounts as follows: On-going Long-term Reserves u The Operating Reserve, which represents approximately 90 days of nonpower budgeted expenses in order to provide adequate working capital during unforeseen events such as natural disasters, economic downturns, customer loss, and revenue interruption u The Power Market Volatility Reserve, which hedges against risks associated with wholesale market exposure resulting from power supply portfolio imbalances created by such elements as weather, contract purchase/product variability, fuel prices, load variances or resource failure u The Self-Insurance Reserve, which represents the estimated cost to support self-insured retention and insurance carrier deductibles Project Specific Reserve u The Resource Reinvestment Reserve, which represents the proceeds of the sale of operational assets to be utilized to fund capital investments in new assets and other projects. The on-going, long-term reserves are expected to remain in place over time to address business risks. The project specific reserve is expected to be utilized as the costs it is designed to address are spent. In addition, the Electric System periodically sells tax-exempt bonds in order to fund a portion of its capital infrastructure and other major capital projects. The PUD issued $141 million of tax-exempt bonds in 2015 to partially fund qualifying capital expenditures for approximately three years. The PUD plans to utilize approximately $6.7 million from the Resource Reinvestment Reserve to fund the Energy Storage Demonstration Project (MESA) in 2018 and the incremental cost of monthly meter reading. Purchased Power and Transmission Assumptions 4 Bonneville Power Administration (BPA) The 2018 Budget reflects a long-term power purchase agreement effective October 1, 2012 through September 30, 2028 for the purchase of up to 811 amw through the Block and Slice products. The BPA power contract represents 84% of the PUD s 2018 power purchases and 71% of the PUD s total power and transmission costs. 4 Block Product Approximately 41% of the PUD s energy contract with BPA comes from the Block product. The Block product provides the PUD with power in flat monthly amounts that average 3.0 million MWh over a contract year. The amount of energy the PUD receives each month is based on the PUD s historical monthly load shape. In 2018, the total annual cost of the Block product is forecasted at $108.3 million. 4 Slice Product Approximately 59% of the PUD s energy contract with BPA comes from the Slice product. The Slice product is delivered in variable amounts that reflect the actual output of the Federal Base Power System, which can vary from year to year based on regional hydro conditions. Because the annual amount is variable and difficult to forecast, the PUD takes a conservative budget position that assumes the actual production will be below average. Specifically, the PUD assumes for budget purposes that Slice production will be in the 35th percentile of simulated historical production. Slice provides the PUD with the ability to follow its customer loads by storing and dispatching energy on an hourly basis within the contractual constraints and physical limits of the Federal Base Power System. Under the Slice product, the PUD takes responsibility for managing its portion of the Federal Base Power System and assumes the inherent risks. If snowpack and water conditions are above average in the region, the energy output is also above average. If snowpack and water conditions are low, the PUD s energy supply is correspondingly reduced. As a purchaser of the Slice product, the PUD has an obligation to pay its pro-rata share of BPA s actual operating costs. The PUD s share of the Slice of the Federal Base Power System is approximately 5%. The majority of the PUD s short-term wholesale market sales are from 6. Snohomish County PUD 2018 BUDGET

11 surplus Slice energy, which varies with the seasonal and daily variations in the Slice product s output. The 2018 Budget estimates receiving 4.3 million MWh from the BPA Slice product at a cost of $139.6 million. 4 Slice True-Up Adjustment After the end of each fiscal year, BPA trues up the difference between its actual costs and the budget for the fiscal year through the Slice True-Up Adjustment. The result can be a charge or credit. The 2018 Budget assumes no adjustment since we cannot accurately forecast whether or not there will be a charge or credit. 4 Transmission and Ancillary Services The PUD relies on long-term transmission capacity from the BPA transmission network to transport its power supply from the source of generation to the customers it serves. The PUD contracts with BPA for approximately 1,918 MW of firm point-to-point capacity. The 2018 Budget includes $38.8 million for BPA transmission capacity and $17.3 million for ancillary services. 4 Jackson Hydroelectric Project The Electric System is expected to purchase 389,046 MWh of power from the Jackson Hydroelectric Project, a component of the PUD s Generation System, at a cost of $24.2 million in the 2018 Budget. This represents 4% of the Electric System s anticipated 2018 power resource costs. 4 Small Hydroelectric Projects The Generation System owns four small hydroelectric projects in Snohomish and King County: the Woods Creek Project, the Youngs Creek Project, the Calligan Creek project, and the Hancock Creek project. The 2018 Electric System Budget includes $3.6 million in purchased power expenditures related to these projects. In 2018, the Generation System will complete the new small hydroelectric projects in King County along the Skykomish River: the Calligan and Hancock Creek projects. 4 Forward and Short-term Market Purchases The 2018 Budget includes 427,529 MWh, estimated to cost $10.5 million, for forward and short-term market purchases anticipated to satisfy the PUD s retail loads in excess of its firm resources to manage short-term load and resource variations. Of this amount, $5.0 million represents forward purchases which were already committed as of August These costs are offset by wholesale power market sales. 4 Renewable Power Resources The PUD used the target method applying RECs and incremental hydro from its existing power supply portfolio to comply with the annual I-937 renewables requirement for calendar years 2012 through Starting in 2018, the PUD anticipates it may need to begin purchasing small quantities of Renewable Energy Credits (RECs) as part of a hedging and optimization strategy to supplement the PUD s existing REC portfolio to most cost-effectively satisfy the annual I-937 compliance requirements under the target method. The PUD has acquired eligible renewable resources from its own resources and long-term power supply contracts, including the White Creek Wind Agreement, the Wheat Field Wind Agreement, the Hay Canyon I and II Wind Agreements, Qualco Energy Corp., and the Hampton Lumber Agreement. The PUD also is recognized for achieving eligible resources including incremental hydro from the PUD s Woods Creek Hydroelectric Project and Renewable Energy Credits from Bonneville s resource portfolio. The 2018 Budget includes an expected 480,710 MWh of total power from the three wind power purchase contracts and the Hampton Lumber and Qualco Energy Corp. power purchase agreements for a total cost of $36.5 million. Other Assumptions 4 Full-time Equivalent Employees (FTE) The 2018 Electric System Budget includes 1,086 FTE, a net increase of 11 from the 2017 Budget, representing a 1% increase over 2017 levels. Snohomish County PUD 2018 BUDGET 7.

12 COMPARATIVE ANALYSIS Schedule 1 is a summary comparing the 2018 Electric System Budget with Schedule 1 ELECTRIC SYSTEM COMPARATIVE FINANCIAL DATA ($000 s) Budget Budget Operating Revenues Energy Retail Sales $ 619,876 $ 594,896 Energy Wholesale Sales 34,409 37,006 Other Operating Revenues 20,274 24,756 Total Operating Revenues $ 674,560 $ 656,658 Operating Expenses Purchased Power $ 343,723 $ 337,340 Transmission & Ancillary 54,217 56,061 Operations & Maintenance 175, ,600 Taxes 37,146 35,536 Depreciation 51,314 52,340 Total Operating Expenses $ 662,075 $ 662,876 Net Operating Income $ 12,485 $ (6,218) Other Income & Expense 9,019 7,926 Interest Charges (15,894) (15,432) Contributions 16,884 16,818 Net Income $ 22,494 $ 3,094 Cash Adjustments to Net Income Capital Expenditures $ (126,182) $ (93,946) Debt Service Principal (9,839) (10,652) Depreciation 51,314 52,340 Loan Repayments and Other 5,401 4,283 Estimated Changes in Reserves $ (56,812) $ (44,882) Operating Revenues Projected retail energy sales are $24.9 million lower in the 2018 Budget due to expectations of lower customer consumption, construction of more energy-efficient homes, and weather normalization. Wholesale energy revenues are $37 million in the 2018 Budget, $2.6 million higher than the 2017 budget. This increase reflects a higher volume of excess power and slightly lower market sales prices expected in 2018 reflecting the current forward price forecast. Other Operating revenues are $24.8 million in the 2018 Budget, a $4.5 million increase from 2017 levels. Other Operating revenues include sales of renewable energy credits, sales of the PUD s transmission capacity, grant reimbursements, customer fees and other revenues. The increase in 2018 reflects an expectation of greater BPA reimbursements for energy-efficiency programs. Operating Expenses Total 2018 Operating expenditures of $662.9 million are $0.8 million higher than the 2017 Budget. The relative amount of the expenditure categories are illustrated in Chart A. Purchased power costs of $337.3 million are $6.4 million lower than the 2017 Budget. This decrease is primarily the result of lower BPA power purchases needed to meet load expectations. Transmission and Ancillary costs of $56.1 million are $1.8 million higher than 2017 budget levels. This increase is due to the purchase of additional firm transmission, higher transmission rates and Hancock and Calligan Creek project wheeling costs. 8. Snohomish County PUD 2018 BUDGET

13 Operating and maintenance (O&M) expenditures in the 2018 Budget are $5.9 million higher than the level included in the 2017 Budget, primarily due to increasing medical insurance and claim costs, an increase in the rates charged by the Washington state Department of Retirement systems, and an increase in Facilities and Information Technology maintenance costs. Operating and maintenance expenditures also include spending on energy-efficiency programs, and the 2018 Budget is slightly lower than 2017 Budget levels. The PUD s energy-efficiency programs include energy-efficiency incentives, low-income weatherization and other programs that provide opportunities for customers to reduce their energy bills. Budgeted taxes of $35.5 million are $1.6 million lower than 2017 reflecting lower retail sales. Taxes include a 3.873% state excise tax and a 2.14% percent county privilege tax. Estimated Deprecation expenditures of $52.3 million are $1 million higher than Depreciation is an estimate of the reduced value of the PUD s fixed assets. Cash Adjustments to Net Income The 2018 Budget reflects a $32.9 million decrease in capital expenditures from The decrease from 2017 is primarily attributable to a lower amount of reliability expansion and upgrade projects, and a one-time purchase of the 75th Street Business Center building in Budgeted capital expenditures for 2018 includes other expansion, upgrades and maintenance of the electric distribution system infrastructure, including funding for line extension and plat work, distribution system line improvements and state requested relocation work. Debt service principal expenditures in the 2018 Budget are $10.6 million, reflective of scheduled debt payments. ENERGY SALES Retail Retail energy sales included in the 2018 Budget are sales within the PUD s service territory to residential, commercial and industrial customers. Retail sales to customers represent 95% of the Electric System s total energy sales revenue. Projected average rates for these categories are as follows: Average Rates Residential 10.2 per kwh Commercial 8.9 Industrial 6.9 Wholesale The PUD also sells energy into the wholesale power market during periods when the PUD s owned and contracted resources don t precisely match the PUD s load. Wholesale energy sales for the 2018 Budget related to load and resource balancing is estimated at $37 million, which includes $9 million in forward sales already committed through August Chart B provides a breakdown of the Electric System s energy sales components. Snohomish County PUD 2018 BUDGET 9.

14 PURCHASED POWER The purchased power budget reflects a strategy for the power supply that focuses on securing stable, reliable power at predictable prices while keeping risk within acceptable levels. The PUD continues to rely on its traditional sources of power, purchases from the Bonneville Power Administration and the PUD s owned hydroelectric projects: Jackson, Youngs Creek, Woods Creek, Calligan Creek, and Hancock Creek. The PUD expects to receive 84% of its 2018 Budgeted power purchases from BPA consistent with the terms of the BPA power supply agreement. It also has long-term contracts that purchase renewable energy from White Creek Wind, Hay Canyon Wind, Wheat Field Wind, and Hampton Lumber. The PUD also purchases short-term balancing market purchases necessary to balance seasonal variations in loads and resources. Chart C illustrates the PUD s purchased power included in the 2018 Budget in terms of MWh purchased, while Chart D indicates the relative cost of the different power resources. Market purchases made for load/resource balancing are included. Note that while BPA provides 84% of the power purchases of the PUD, it makes up 71% of the total cost of purchased power. OPERATING AND MAINTENANCE (O&M) EXPENDITURES Operating and maintenance (O&M) expenditures are designed to meet increasing customer service, system reliability and power quality expectations; maintain existing assets at appropriate operating levels in accordance with the industry standards and practices; operate the electric system in a safe and effective manner; and maintain a trained and skilled workforce. The PUD continues to provide excellent customer service at the lowest cost possible while managing the electric system growth and the increased maintenance requirements. Operating and maintenance expenses in the 2018 Budget are $181.6 million, which includes energy-efficiency programs. O&M expenditures account for 27% of total PUD operating expenditures. O&M expenditures included in the budget are sufficient to maintain our customer responsiveness and system reliability. Exhibit 3 (starting on page 16) provides detail for O&M expenditures by department and Exhibit 4 provides detail for O&M expenditures by cost element. In addition, the division summaries provide detail for O&M expenditures by cost category. O&M expenditures include those costs incurred in: w operating and maintaining the electric distribution system to provide reliable service to our customers. This effort includes the regular maintenance of lines and stations, response to customer outages, and tree trimming efforts; w providing effective customer service through the call center, local offices, account control and front line operations, as well as executive account attention and effective communications; w maintaining an effective program that ensures the safety of employees in the performance of their duties; w providing the internal support needed to serve our customers effectively in areas such as employee resources and safety, finance and accounting, material procurement and management, and information technology; w providing maintenance and upkeep of our facilities, vehicles, and equipment; w ensuring compliance with environmental and other government regulations; and w supporting the policy-making, regulatory and management oversight functions; and maintaining an effective energy-efficiency program. 10. Snohomish County PUD 2018 BUDGET

15 ENERGY-EFFICIENCY & CUSTOMER RENEWABLES PROGRAMS The PUD continues to acquire all cost-effective and achievable energy-efficiency resources and has allocated a 2018 conservation budget of $22.0 million. Energyefficiency revenue sources for 2018 include recapture of $7.9 million of BPA Energy Efficiency Incentives (EEI); and $1.4 million of conservation loan repayments. The 2018 Budget includes continued enhancements to our energy-efficiency program portfolio and meets our regulatory requirements. Energy conservation targets for the biennium will be in keeping with state-mandated I-937 requirements. PUD conservation programs are designed so that all customers residential, commercial and industrial have an opportunity to become more energy efficient. Energy-efficiency programs for 2018 include: w Incentives for residential insulation, high-efficiency windows, efficient heat pumps (air source, ground source, and ductless), and smart thermostats; w Weatherization for low-income residential customers, provided in partnership with local agencies; w Retail discounts on LEDs, fixtures, and other high-efficiency appliances and electronics; w Builder incentives for efficiency upgrades that exceed the levels set by building code in residential new construction, single family, multi-family, and manufactured homes; w Custom incentives to businesses for installing a wide variety of energy-efficient technologies at commercial and industrial customer sites; w Incentives for commercial building new construction projects; w Rebates for energy-efficient commercial lighting, kitchen equipment and other end-uses; and w Energy information services to promote savings from operational and behavioral practices, including a Resource Conservation Management Program (RCM) for school districts and other public entities across the County; Strategic Energy Management (SEM) for industrial facilities; and Wastewater Energy Coaching (WEC) for wastewater facilities The 2018 Budget also includes resources for: w Advancing innovative program development and design; w Supporting a shift toward capacity benefits as a program outcome; w Infrastructure development, including the integration of a comprehensive tracking and reporting system; w Serving as our customers trusted energy advisor by providing information and promotion of programs; w Trade ally network training and development, supporting new jobs in the community; w Measurement, evaluation and continual improvement of program performance; w Leveraging data to inform more sophisticated strategic planning and target market segments for energy-efficiency resource acquisition; w Market research at the local level as well as leveraging regional research efforts; and w Technology demonstration and evaluation projects conducted in Snohomish County with support from EPRI, BPA, and NEEA. Snohomish County PUD 2018 BUDGET 11.

16 CAPITAL EXPENDITURES The 2018 Budget expenditure plan includes costs related to expansion, upgrades and maintenance of the electric distribution system infrastructure, including funding for depreciated cable replacement, distribution system line improvements, and state requested relocation work. In addition, capital expenditures include the costs of the Smart Grid Project including energy storage capabilities, telecommunications infrastructure, information systems applications and hardware, capital work on PUD facilities and purchases of vehicles and equipment. Capital expenditures are categorized in three types: system infrastructure construction, new connection construction, and other capital expenditures. The major capital projects included in the 2018 expenditure plan are presented in the table below. Additional detail on the capital program may be found in Exhibit 5. Significant 2018 Electric System Capital Projects/Programs ($000 s) 75th Street Business Center Upgrades 6,795 Wood Pole Program 6,509 Cable Replacement Program 5,475 Oso Substation Upgrade 5,000 Local Office Design and Development 4,300 Port Gardner Substation 3,802 Beverly Park Substation 3,390 Casino Substation Transformer Replacement 3,253 Cedar Valley Substation 3,200 Delta Substation - 5th Feeder 2,850 System Infrastructure Construction The electric system is planned, designed and constructed to provide dependable capacity and maintain continuity and quality of service to PUD customers. The system infrastructure construction program focuses on continuous improvements to the PUD s electric system. The program involves reliability improvements, upgrades, expansion of existing facilities and construction of new electric system infrastructure to meet both changing load patterns and new load growth. The electric system program also focuses on providing customer voltage with proper power quality and system operational efficiency. The 2018 System Infrastructure Construction expenditure plan is $50.2 million. This electric system construction figure reflects a realistic estimate of the project costs expected to be incurred in The System Infrastructure Construction Plan consists of four categories as follows: 4 Major Capital Expansion Projects The steady growth and changing load patterns of residential, industrial and commercial customers continues to require new facilities and property as well as increase peak load demands. The purpose of this program is to provide increased electric system capacity by constructing new facilities. This category consists of large specific system expansions, such as new substations and new lines. These projects generally extend over a number of years. The 2018 expenditure plan for this program is $14.6 million. 4 Major Capital Upgrade Projects A reliable, cost-effective and safe electric system network requires that facilities be upgraded to provide anticipated levels of service. The upgrades to the existing facilities are prompted by localized load growth, land-use changes and infrastructure expansions. This category consists of large specific system upgrades, such as substation upgrades or line reconductoring. The expenditure plan for this program in 2018 is $12.4 million. 4 Capital Asset Management Programs The existing electric system facilities must be routinely refurbished and/or replaced to provide a reliable, cost-effective and safe system. This program provides for facility relocations, replacement of malfunctioning or deteriorated plant and improving operational efficiency. Each of the programs included in this category consists of specific improvement projects that are continuous and on-going over a number of years. The 2018 expenditure plan is $21.6 million for this program. 4 Other Capital Outlay This program funds anticipated but as yet unidentified work, such as emergency line expansions and replacements and substation improvements. This category consists of small system improvements that experience indicates are necessary each year. This program s expenditure plan for 2018 is $1.9 million. 12. Snohomish County PUD 2018 BUDGET

17 New Connection Construction The new connection construction portion of the capital expenditure plan funds the PUD s response to customer requests for new electrical service, upgrades to existing services and other services including street and area lighting, as well as new equipment such as transformers and meters. This construction work is classified in three different categories. Type 1 work includes overhead and underground secondary and primary services, convenience poles, underground primary systems for plats, and reimbursable overhead and underground line construction. Type 2 work includes the purchase costs and the installation costs for transformers and meters. Type 3 work includes service poles, overhead and underground line construction, overhead street lights, area lights, and street lights for underground plats. Funding for customer service construction is based on approximately 3,400 new service connections derived from the PUD s load forecast. The cost for 2018 is estimated at $23 million to serve the PUD s projected 2018 new connections plus other customer service requirements. Other Capital Expenditures In addition to system infrastructure and new connection construction, the PUD annually plans for capital expenditures related to PUD facilities design, construction and upgrades, development and implementation of smart grid infrastructure, purchase and implementation of software applications, purchases of transportation equipment, purchases of replacement information technology equipment, communications equipment, and storm restoration funding. Funding for these other capital expenditures totals $30 million in the 2018 expenditure plan. Replacement criteria are based on a combination of factors including age, utilization, specific maintenance issues, changes in technology and changes in stakeholders business needs. New technology is continually being investigated to reduce environmental impact and improve workforce efficiency. The 2018 expenditure plan includes $3.5 million for new and replacement vehicles and equipment. The Information Technology Services capital expenditure plan supports the technology infrastructure (such as servers, network, applications, and telecommunications) that provides the basic framework for the PUD s computer and communications systems. The 2018 expenditure plan includes $2.6 million in funding for hardware, network, application improvements and telecommunications. The Facilities department expenditure plan for capital expenditures related to design, construction, upgrade and replacement of the PUD facilities. The 2018 expenditure plan includes $14.0 million related to construction work for the new Arlington local office, 75th Street Business Center renovations, and roofing projects. Other capital expenditures also includes $4 million for the telecommunication projects related to wireless attachments, microwave replacement, and wireless infrastructure, $2.8 million for development and implementation of Smart Grid infrastructure, including additional substation automation, and $2.7 million for energy storage projects funded by grant proceeds and the Resource Reinvestment Reserve. The replacement of aged vehicles and equipment reaching the end of their useful lives is necessary to ensure safe operation, reliable service and optimal efficiency. Vehicle and equipment replacements are planned by Transportation Services with the intent to remove them from service before extensive maintenance costs and downtime are realized. Snohomish County PUD 2018 BUDGET 13.

18 2018 Budget Electric System Operating Revenues Exhibit 1 Operating Revenues Budget Energy Sales Results MWh Mills/Kwh Budget MWh Mills/Kwh Amount Residential $ 359,178,499 3,583, $ 359,178,499 3,363, $ 341,947,099 Commercial 209,399,234 2,433, ,399,234 2,384, ,081,733 Industrial 47,674, , ,674, , ,202,795 Street Lights 3,624,046 27, ,624,046 26, ,664,240 Total Retail Energy Sales 619,876,449 6,741, ,876,449 6,325, ,895,867 Forward Wholesale Market Sales $ 18,523, , $ 14,439, , $ 9,066,215 Balancing Market Sales 19,947, , ,969,807 1,316, ,940,183 Total Wholesale Energy Sales $ 38,471,2660 1,425, $ 34,409,2130 1,980, $ 37,006,399 Total Energy Sales $ 658,347, ,167,185 $ 654,285,662 8,305,433 $ 631,902,266 Other Operating Revenues Transmission Sales $ 4,257,251 $ 2,200,000 $ 3,250,000 Damage Claim Reimbursements 1,843,745 1,000,000 1,000,000 Miscellaneous Operating Expense Reimbursements 0 500, ,000 Surplus REC and Emission Sales 261,428 1,475,810 95,000 BPA ECA Reimbursement 10,655,629 4,500,000 7,745,052 Residential Exchange Credit 2,089, ,000,000 3,259,000 Miscellaneous Service Charge Revenue 5,878,834 5,400,000 5,500,000 Rents from Electric Property 3,114,406 3,198,153 3,407,284 Total Other Operating Revenues $ 28,100,503 $ 20,273,962 $ 24,756,336 Total Operating Revenues $ 686,448,218 $ 674,559,625 $ 656,658, Snohomish County PUD 2018 BUDGET

19 2018 Budget Electric System Purchased Power and Transmisison Services Exhibit 2 Total Total Total MWh's Results MWh's Budget MWh's Budget BPA Block 3,366, ,656,034 3,498, ,185,143 2,989, ,325,095 BPA Slice Base 4,144, ,810,207 3,716, ,055,690 4,285, ,578,408 Supplemental spill charge ,000,000 Slice True-up - (528,485) BPA Slice Subtotal 4,144, ,281,722 3,716, ,055,690 4,285, ,578,408 BPA Lookback Credit/REP Customer Refund - (8,684,268) - (8,700,000) - (7,972,425) Total BPA Power Costs 7,510, ,253,488 7,214, ,540,832 7,275, ,931,077 Generation System: Jackson Hydro 483,805 22,877, ,136 19,088, ,046 24,185,645 Generation System - Other - 28,506,237-18,802,948-17,895,100 Youngs Creek 18,552 1,768,538 18,159 1,795,067 18,159 1,942,477 Woods Creek 1, ,682 1, ,765 1, ,477 Renewable Generation - 216, Hancock ,756 1,360,792 Calligan - - 8,095 1,228,024 21, ,509 Total Generation System 504,119 53,874, ,936 41,482, ,487 45,658,000 Other Renewable Power Sources: Packwood 18, ,000 16, ,000 16, ,634 Qualco 1, ,111 2, ,872 2, ,134 Hampton Lumber Mills 19,086 1,335,345 16,056 1,136,613 18, ,504 Wind Power Contracts 458,656 34,763, ,628 36,594, ,710 36,543,210 Total Other Renewable Power Sources 498,225 36,713, ,867 38,446, ,868 38,164,481 Market Power Purchases Forward Purchases ,200 8,999, ,400 5,037,398 Market/Short Term Purchases 292,940 7,809,982 96,329 2,555, ,129 5,449,824 Total Market and Short-Term Purchases 292,940 7,809, ,529 11,555, ,529 10,487,222 Other Power Purchases Small Power Producer , , ,091 Other Non-Power Services 1,789 3,450,889-3,687,125-2,838,041 REC Purchases ,000 Total Purchased Power 8,808,087 $ 343,114,948 8,604,543 $ 343,723,454 8,676,737 $ 337,340,912 Transmission and Ancillary Services Transmission Services - 40,795,689-37,145,048-38,777,791 Ancillary Services - 11,932,134-17,071,593-17,283,417 Total Transmission and Ancillary Services $ 52,727,823 $ 54,216,640 $ 56,061,209 Snohomish County PUD 2018 BUDGET 15.

20 2018 Budget Electric System Operating and Maintenance Expenses - By Cost Center Exhibit Uses of Funds - by Cost Center CC FTE (1) Results FTE Budget FTE Budget General Manager F , , ,863 Commission F , , ,789 Government Relations F , , ,369 Safety and Line Training F , , ,442,975 Total Administration 13.8 $ 2,931, $ 3,193, $ 3,971,996 Employee Resources Department F ,707, ,969, ,508,436 Employee Benefits F ,628,442-55,082,005-64,520,441 Total Employee Resources and Benefits 19.6 $ 59,335, $ 60,051, $ 68,028,877 Corporate Communications F ,190, ,237, ,101,682 Print Shop F , ,292, ,232,837 Mailroom F ,148, , ,212 Business Readiness & Training F ,830 Total Corporate Communications 15.6 $ 5,222, $ 5,479, $ 5,751,561 General Counsel F ,159, ,515, ,534,977 District Information Governance F , , ,463 Total Legal Services 12.0 $ 3,426, $ 4,023, $ 4,263,440 AGM Finance and Treasury F , , ,108 Budget and Financial Planning F , , ,287 SAP Support Finance F , , ,899 Contracts and Purchasing F ,276, ,489, ,456,928 Warehouse F ,910, ,795, ,999,909 Meter Reading F ,787, ,074, ,919,344 Customer Accounting F ,905, ,134, ,199,884 Treasury & Risk Management F ,522, ,191, ,149,574 General Accounting F ,692, ,945, ,941,549 Total Finance $ 17,095, $ 21,798, $ 21,841,483 Grounds and Enginnering F ,275, ,202, ,216,170 Custodial Services F ,590, ,642, ,853,938 Facilities Maintenance F ,488, ,788, ,843,714 Facilities Planning F , ,490, ,665,343 Security and Business Continuity F ,766, ,153, ,138,919 Facilities Administration F , , ,642 Total Facilities and Security 50.8 $ 9,358, $ 12,007, $ 13,244,725 Customer Service Experience F ,960, ,125, ,640,528 Total Customer Service $ 10,960, $ 13,125, $ 13,640,528 AGM Customer and Energy Services F ,305, ,588, ,215 Business Operations F , , ,157,830 Customer Analytics F , ,272, Customer Strategy, Analytics and Planning F ,050, ,841, Snohomish County PUD 2018 BUDGET

21 2018 Budget Electric System Operating and Maintenance Expenses - By Cost Center Exhibit Uses of Funds - by Cost Center CC FTE (1) Results FTE Budget FTE Budget Residential F ,783, ,497, ,555,568 Market Segments F ,231, ,592, ,164,186 Strategic Accounts F , , ,388,039 Sr. Manager Energy Services F ,035, ,665, ,063 Advanced Metering Infrastructure F ,284,057 Total Energy Services Division 53.7 $ 22,478, $ 24,982, $ 22,254,958 AGM Power and Transmission F , , ,457 Rates & Economics F , , ,341 Power Scheduling F ,381, ,475, ,522,616 Power Supply F , , ,834 Regional Transmission and Compliance F ,389, ,556, ,658,838 Total Power, Rates & Transmission Mgmt $ 5,528, $ 6,100, $ 6,434,086 AGM Information Technology Systems F , , ,683 ITS Administration Management F ,909, ,520, ,161,449 One Project F1503-5,925, ITS Automation Projects F , ,493,000 ITS Project Release Management F , , ,041 IT Quality Assurance F , , ,162 IT Project Release Delivery F , , ,847 ITS Operations Architecture F , , ,074 ITS Operations Support F ,883, ,739, ,406,808 ITS End User Support F ,156, ,087, ,232,004 ITS Database Admin F , , ,220 Enterprise Architecture F , , ,094 ITS Security Architecture F , , ,843 ITS Application Architecture F , ,257, ,502,279 M2C/APP Security F ,270, ,264, ,105,847 EAM/CMP/ALM F ,680, ,636, ,094,515 B2R/P2P/H2R/R2D F ,676, ,855, ,652,022 Data Strategy and Analytics F ,817,968 Total Information Technology Services 87.7 $ 25,946, $ 23,310, $ 27,448,857 Distribution and Engineering General F , ,280 AGM Distribution and Engineering F , , ,050 Distribution and Engineering Business Operations F , , ,944 Distribution and Engineering Capital Operating F1790-7,740,523-5,628,265-9,291,850 Distribution and Engineering General 3.0 9,056, ,289, ,413,124 Work and Asset Management F , , ,093,231 Inspection and Scheduling F , ,427, ,293 Subtotal Work and Asset Management , ,200, ,030,524 Sr. Manager Design and Construction F , , ,845 Snohomish County PUD 2018 BUDGET 17.

22 2018 Budget Electric System Operating and Maintenance Expenses - By Cost Center Exhibit Uses of Funds - by Cost Center CC FTE (1) Results FTE Budget FTE Budget Monroe Local Office F ,495, ,863, ,606,761 Snohomish Local Office F ,818, ,965, ,743,754 Stanwood Local Office F ,672, ,089, ,826,792 Arlington Local Office F ,707, ,776, ,728,740 South County Local Office F , ,029, ,125 Halls Lake F ,701, ,233, ,755,769 Everett Region F ,722, ,612, ,117,444 Everett Engineering F , , ,562 Plat Development F , , ,636 Subtotal Design Construction Services ,923, ,113, ,425,426 Environmental Affairs F , , ,127 Subtotal Environmental Affairs , , ,127 Sr. Manager Shared Services F , , ,691 Real Estate F , , ,899 Transportation F ,606, ,675, ,585,717 Subtotal Shared Services ,582, ,764, ,712,307 Sr. Manager Construction Services F , , ,350 Vegetation Management F ,323, ,229, ,436,302 Energy Control Center F ,982, ,647, ,750,173 Apprenticeship Program F , , Operational Technical Engineering F ,438, ,448, ,724,377 Subtotal Distribution Construction Services ,496, ,191, ,245,202 Sr. Manager Planning F , , ,522 Distribution and Engineering Services F , ,277, ,704,337 Transmission Engineering Services F ,533, ,934, ,182,704 GIS Maps, Records and Drafting F ,312, ,803, ,659,068 Planning and Protection F ,779, ,382, ,817,087 Subtotal Planning/Engineering/Technology ,408, ,839, ,764,717 Sr. Manager Substation, Metering & Telecom F , , ,591 Telecommunications F ,551, ,563, ,364,624 Substation Engineeing and Design F ,118, ,112, ,138,267 Substation Construction F ,152, ,987, ,092,979 Metering F ,592, ,581, ,721,389 Subtotal Substation, Metering, Telecom ,630, ,505, ,568,851 Total Distribution & Engineering Services ,274, ,612, ,829,278 Total Other Costs/Capital Overheads Total Operating and Maintenance Expenses (1) Total FTE include all approved staffing for the department, some of the FTE may be allocated to Capital projects - $ (71,049,143) - $ (74,010,438) - $ (80,109,356) 1,000.5 $ 159,509,507 1,075.5 $ 175,675,281 1,085.5 $ 181,600, Snohomish County PUD 2018 BUDGET

23 2018 Budget Electric System Operating and Maintenance Uses of Funds by Cost Element Exhibit Operating & Maintenance Cost Element Results Budget Budget Labor - Straight Time $ 75,697,372 $ 85,737,470 $ 83,310,235 Labor - Overtime ,309,801 6,243,366 4,299,826 Travel and Education ,019,248 1,434,951 1,526,769 Employee Benefits ,303,781 40,127,078 44,347,285 Property and Liability Insurance ,697,085 3,315,276 1,625,155 Materials, Equipment & Supplies ,694,043 5,953,047 9,523,711 Coded Stock Material ,852,574 3,000,758 2,339,553 Public and Small Works Contracts ,653,700 7,843,802 8,332,569 Professional Services Contracts ,237,918 11,147,166 9,052,880 Other Contracted Services ,338,335 29,717,251 34,210,836 Rents and Utilities ,727,727 2,127,920 1,968,831 Uncollectible Expense ,910,645 2,748,808 2,699,533 Land, Property and Easements ,494 68, ,900 Postage ,569,954 1,675,000 1,621,515 Dues, Memberships & Subscriptions ,154,589 1,743,543 1,848,113 Refunds (82,066) 100,000 (6,100) Capital Operation Expense ,269,179 5,628,265 9,291,850 Overheads/Other (27,209,654) (32,937,325) (34,600,030) Total Operating & Maintenance by Cost Element $ 160,346,724 $ 175,675,280 $ 181,600,432 Snohomish County PUD 2018 BUDGET 19.

24 2018 Budget Electric System Capital Expenditures Exhibit ELEC SYSTEM INFRASTRUCTURE CON. BUDGET BUDGET NEW CONNECTION CONSTRUCTION Budget Budget Swamp Creek 115kV Switching Station $ 1,254,684 $ 466,085 Meters & Installation $ 865,873 $ 905,719 High Rock Substation 62,286 - Transformers & Installation 6,086,793 4,870,901 Echo Lake Substation 60,445 - Area Light Installation 622, ,851 Beverly Park Substation 11,308,459 3,390,459 Estimated Reimbursable 3,359,035 3,155,109 Everett Riverfront 252, ,560 Line Extension 3,385,874 4,287,395 Cedar Valley Substation 96,047 3,200,430 Line Extension Non-Fee 585, ,570 Stanwood to Camano 115kV Line 200,000 50,000 Other 545, ,437 Camano Substation - Add 115kV Breakers and Xfrmr 214,723 - Plat Work 4,059,562 5,430,983 East Stanwood Substation 1,236, ,000 Street Light Install 2,479,724 2,510,766 Port Gardner Substation 2,794,441 3,801,550 Subtotal New Connection Construction $ 21,990,870 $ 22,840,732 Stimson to Sills Corner Transmission Line - 50, kV Ring Bus Station near Turners 178,910 - INFORMATION TECHNOLOGY CAPITAL 115kV Ring Bus Station near Woods Creek 308,020 1,429,190 ITS Automation/Improvement Projects $ 2,000,000 $ 2,019,396 N County 230kV Bank Addition 1,125,948 1,274,739 ITS Operations Hardware and Software 663, ,253 Subtotal Capital Expansion $ 19,093,012 $ 14,631,013 Subtotal Information Technology Capital $ 2,663,000 $ 2,632,649 Hartford Substation - 115Kv Loop $ 279,171 - Polaris Substation Upgrade 620,093 - SMART GRID Station Reliability Improvement Program 1,112, ,606 Smart Grid Test lab $ 86,789 $ 89,554 Oso Substation Upgrade 8,408,099 5,000,374 Distribution Automation 2,290,400 2,740,099 System Metering Enhancements 193,024 - Digital Communication 218,759 - Stimson-Stanwood 115kV Line Rebuild 200,152 - Advanced Metering 2,240,965 - Casino Substation - Replace Transformer 317,580 3,252,766 Outage Management System 318,864 - Stimson Crossing Substation - Double Bank 189,161 50,000 Energy Storage Demonstration Project (MESA 2) 3,700,000 2,669,025 Smokey Point Substation - Double Bank 9,171, ,914 Microgrid Energy Storage (MESA 3) 1,000,000 - Stanwood to Camano 115kV Line - Rebuild 99,982 50,000 Subtotal Smart Grid Capital $ 9,855,777 $ 5,498,677 Delta Substation - 5th Feeder 618,722 2,849,734 Twentieth Ave -Replace BK1 Swtichgear 2,835,268 44,854 TELECOMMUNICATIONS / WIRELESS ATTACHMENTS Subtotal Capital Upgrade $ 24,045,456 $ 12,370,248 Service to Telecommunication Companies $ 1,494,575 $ 1,520,333 Wood Pole Program $ 6,864,666 $ 6,508,501 Microwave Radio System 577,849 - Cable Replacement Program 5,799,989 5,475,279 Fiber Optic System 2,168,759 1,293,884 Distribution System Operational Improvements 588, ,464 Telecom Modernization - 432,242 Transmission System Operational Improvements 134,971 - Wireless Infrastructure/Voice Radio System 1,768, ,739 Facilities Relocations and Control Zone 4,131,813 3,794,538 Subtotal Telecommunications/Wireless Attachments $ 6,009,602 $ 4,026,197 Substation Equipment Replacement 571,684 - Substation Emergency Equipment 1,187,168 - FACILITIES CAPITAL Cascade Feeder Rebuild 765,356 2,076,107 Local Office Design and Construction $ 2,877,000 $ 4,362,074 Halls Lake - SCADA Control 317,912 - Operations Center Updates 2,412, ,186 Ballinger 5th Feeder 46,121 49,884 OPS Master Plan 5,207, ,618 Port of Everett North Marina 630, ,697 Other Facilities Capital 244,250 1,727,253 New Feeder Tie Between 4503 and ,217 3,551 75th Street Business Center Upgrades - 6,795,360 Martha Lake Reconductoring 506, ,347 Building/Land Purchases 5,500,000 - Underground Lynnwood and Aldewood Circuits 836,365 99,844 Subtotal Facilities Capital $ 16,240,250 $ 14,031,491 Woods Creek to Lake Chaplain Circuit Tie 102, ,984 Joint Pole Removal 529, ,021 OTHER CAPITAL Scada Upgrade 579, ,940 New and Replacement Vehicles $ 4,434,635 $ 3,533,425 Hat Island Cable 690,761 - Tools, Testing, and Office Equipment 657, ,564 Substation Circuit Switcher Replacement - 173,938 Transportation/Replacement Vehicles $ 5,091,935 $ 3,917,990 New Feeder Tie Between 133 and ,923 Subtotal Capital Asset $ 24,572,337 $ 21,581,018 Transmission Construction Unspecified $ 198,096 $ 49,895 LESS: O&M COSTS RELATED TO CAPITAL CONSTRUCTION (5,628,265) (9,291,850) Substation Improvements 287, ,000 Substation Security Project 503, ,265 Total Capital Expenditures $ 126,181,522 $ 93,946,466 Distribution Line Improvements Unspecified 1,258,340 1,200,140 Subtotal Capital Outlay $ 2,247,548 $ 1,958, Snohomish County PUD 2018 BUDGET

25 2018 Budget Administration Division Operating and Maintenance by Cost Element Cost Element Cost Element FTE Results FTE Budget FTE Budget Labor - Straight Time ,593, ,610, ,974,186 Labor - Overtime (428) 4,898 25,498 Employee and Retiree Benefits , Travel and Education , , ,242 Property and Liability Insurance Materials, Equipment & Supplies ,451 54,192 85,050 Coded Stock Material ,609 3,940 16,300 Public and Small Works Contracts Professional Services Contracts , , ,000 Other Contracted Services ,579 56,835 11,000 Rents and Utilities ,000 Land, Property and Easements Postage Dues, Memberships & Subscriptions ,175 60,635 61,553 Overheads/Other , ,000 1,270,167 Total Administration Division 13.8 $ 2,931, $ 3,193, $ 3,971,996 Snohomish County PUD 2018 BUDGET 21.

26 2018 Budget Corporate Communications Operating and Maintenance by Cost Element Cost Element Cost Element FTE Results FTE Budget FTE Budget Labor - Straight Time ,205, ,259, ,326,177 Labor - Overtime ,565 31,500 16,000 Employee and Retiree Benefits , Travel and Education ,856 5,246 23,185 Property and Liability Insurance Materials, Equipment & Supplies , , ,000 Coded Stock Material , , ,000 Public and Small Works Contracts Professional Services Contracts , , ,700 Other Contracted Services , , ,511 Rents and Utilities ,297 16,498 13,475 Land, Property and Easements Postage ,570,198 1,670,000 1,619,000 Refunds (540) - - Dues, Memberships & Subscriptions ,544 50,800 34,000 Overheads/Other , , ,513 Total Corporate Communications Division 15.6 $ 5,222, $ 5,479, $ 5,751, Snohomish County PUD 2018 BUDGET

27 2018 Budget Legal Division Operating and Maintenance by Cost Element Cost Element Cost Element FTE Results FTE Budget FTE Budget Labor - Straight Time ,434, ,564, ,657,245 Labor - Overtime Employee and Retiree Benefits , Travel and Education ,218 67,283 67,283 Property and Liability Insurance , , ,000 Materials, Equipment & Supplies ,571 26,800 50,200 Coded Stock Material Public and Small Works Contracts Professional Services Contracts , ,860 1,020,000 Other Contracted Services , , ,600 Rents and Utilities Land, Property and Easements Postage (358) - - Refunds (4,731) - - Dues, Memberships & Subscriptions ,504 12,475 12,475 Overheads/Other , ,762 1,060,637 Total Legal Division 12.0 $ 3,426, $ 4,023, $ 4,263,440 Snohomish County PUD 2018 BUDGET 23.

28 2018 Budget Finance Division Operating and Maintenance by Cost Element Cost Element Cost Element FTE Results FTE Budget FTE Budget Labor - Straight Time ,034, ,363, ,107,085 Labor - Overtime , , ,000 Employee and Retiree Benefits , Travel and Education ,909 96,650 96,650 Property and Liability Insurance ,252,593 1,515,276 1,425,155 Materials, Equipment & Supplies , , ,880 Coded Stock Material ,589 42, ,500 Public and Small Works Contracts Professional Services Contracts ,220 3,707, ,208 Other Contracted Services ,335,237 2,453,941 5,731,581 Rents and Utilities ,180 1,180 Dues, Memberships & Subscriptions ,663 15,585 12,070 Overheads/Other ,693,858 5,219,585 5,267,174 Total Finance Division $ 17,095, $ 21,798, $ 21,841, Snohomish County PUD 2018 BUDGET

29 2018 Budget Customer Service Division Operating and Maintenance by Cost Element Cost Element Cost Element FTE Results FTE Budget FTE Budget Labor - Straight Time ,207, ,598, ,450,979 Labor - Overtime , , ,400 Employee and Retiree Benefits , Travel and Education ,091 55,020 39,190 Property and Liability Insurance Materials, Equipment & Supplies ,429 59,800 90,500 Coded Stock Material ,947 20,000 24,300 Public and Small Works Contracts Professional Services Contracts ,031 50,000 18,000 Other Contracted Services , , ,000 Rents and Utilities ,000 2,000 Land, Property and Easements Postage ,000 2,500 Dues, Memberships & Subscriptions ,101 24,000 18,000 Overheads/Other ,927,807 4,741,564 4,850,659 Total Customer Service Division $ 10,960, $ 13,125, $ 13,640,528 Snohomish County PUD 2018 BUDGET 25.

30 2018 Budget Energy Services Division Operating and Maintenance by Cost Element Cost Element Cost Element FTE Results FTE Budget FTE Budget Labor - Straight Time ,666, ,421, ,640,167 Labor - Overtime ,157 8,000 10,500 Employee and Retiree Benefits , Travel and Education , , ,130 Property and Liability Insurance Materials, Equipment & Supplies , , ,099 Coded Stock Material ,037 1,600 1,600 Public and Small Works Contracts Professional Services Contracts ,120, ,863 1,025,000 Other Contracted Services ,810,103 14,274,253 12,176,000 Rents and Utilities ,697 13,000 10,300 Land, Property and Easements Postage Refunds (2,197) - - Dues, Memberships & Subscriptions , , ,518 Overheads/Other ,900,960 3,362,239 2,971,643 Total Energy Services Division ,478, ,982, ,254, Snohomish County PUD 2018 BUDGET

31 2018 Budget Facilities and Security Division Operating and Maintenance by Cost Element Cost Element Cost Element FTE Results FTE Budget FTE Budget Labor - Straight Time ,970, ,705, ,297,175 Labor - Overtime , , ,000 Employee and Retiree Benefits , Travel and Education ,020 30,300 30,275 Property and Liability Insurance Materials, Equipment & Supplies , ,200 1,001,800 Coded Stock Material , , ,000 Public and Small Works Contracts ,106 1,179,000 2,026,500 Professional Services Contracts ,111,799 1,891,000 1,933,600 Other Contracted Services ,907,986 1,587,845 1,977,700 Rents and Utilities , , ,360 Land, Property and Easements ,497-12,500 Postage Refunds (7,033) - - Dues, Memberships & Subscriptions ,461 5,485 2,890 Overheads/Other ,895,023 2,314,627 2,116,925 Total Facilities and Security Division 50.8 $ 9,358, $ 12,007, $ 13,244,725 Snohomish County PUD 2018 BUDGET 27.

32 2018 Budget Employee Resources and Benefits Operating and Maintenance by Cost Element Cost Element Cost Element FTE Results FTE Budget FTE Budget Labor - Straight Time ,719, ,608, ,475,308 Labor - Overtime (1,545) Travel and Education , , ,200 Employee Benefits ,262,383 40,127,078 44,512,597 Property and Liability Insurance ,001 1,550,000 - Materials, Equipment & Supplies ,653 58,657 86,000 Coded Stock Material Public and Small Works Contracts Professional Services Contracts , , ,700 Other Contracted Services , , ,500 Rents and Utilities Land, Property and Easements Refunds (21,563) - - Postage Dues, Memberships & Subscriptions ,024 31,563 29,655 Overheads/Other ,155 1,025,560 1,047,417 Total Employee Resources Division 19.6 $ 59,335, $ 60,051, $ 68,028, Snohomish County PUD 2018 BUDGET

33 2018 Budget Information Technology Services Division Operating and Maintenance by Cost Element Cost Element Cost Element FTE Results FTE Budget FTE Budget Labor - Straight Time ,577, ,952, ,317,480 Labor - Overtime , , ,000 Employee and Retiree Benefits , Travel and Education , , ,900 Property and Liability Insurance Materials, Equipment & Supplies ,237, ,100 1,810,743 Coded Stock Material ,500-10,000 Public and Small Works Contracts Professional Services Contracts ,793,741 1,425,200 2,093,000 Other Contracted Services ,390,821 7,130,568 9,029,906 Rents and Utilities , ,102 1,047,180 Land, Property and Easements Postage Dues, Memberships & Subscriptions ,078 15,000 12,220 Overheads/Other ,771,928 4,947,029 5,829,427 Total Information Technology Services 87.7 $ 25,946, $ 23,310, $ 27,448,857 Snohomish County PUD 2018 BUDGET 29.

34 2018 Budget Power and Transmission Division Operating and Maintenance by Cost Element Cost Element Cost Element FTE Results FTE Budget FTE Budget Labor - Straight Time ,586, ,744, ,837,436 Labor - Overtime , , ,000 Employee and Retiree Benefits , Travel and Education , , ,500 Property and Liability Insurance Materials, Equipment & Supplies ,599 30,146 18,100 Coded Stock Material Public and Small Works Contracts Professional Services Contracts , , ,000 Other Contracted Services , , ,900 Rents and Utilities Land, Property and Easements Postage Dues, Memberships & Subscriptions , , ,190 Overheads/Other ,638,936 1,724,403 1,847,959 Total Power and Transmission 26.2 $ 5,528, $ 6,100, $ 6,434, Snohomish County PUD 2018 BUDGET

35 2018 Budget Distribution and Engineering Division Operating and Maintenance by Cost Element Cost Element Cost Element FTE Results FTE Budget FTE Budget Labor - Straight Time ,686, ,908, ,424,521 Labor - Overtime ,210,240 5,228,168 3,156,928 Employee and Retiree Benefits , Travel and Education , , ,234 Property and Liability Insurance Materials, Equipment & Supplies ,873,160 3,530,251 4,195,839 Coded Stock Material ,369,211 2,547,343 1,602,853 Public and Small Works Contracts ,619,594 6,664,802 6,306,069 Professional Services Contracts , , ,172 Other Contracted Services ,630,173 2,087,447 2,806,774 Rents and Utilities , , ,516 Land, Property and Easements ,098 68, ,400 Postage Dues, Memberships & Subscriptions , , ,849 Refunds (45,512) - - Capital Operating Expense ,418,056 5,628,265 9,291,850 Overheads/Other ,626,034 18,603,153 17,053,258 Total Distribution and Engineering Division $ 68,274, $ 75,612, $ 74,829,278 Snohomish County PUD 2018 BUDGET 31.

36 2018 Budget Other Costs Operating and Maintenance by Cost Element Cost Element Cost Element FTE Results FTE Budget FTE Budget Labor - Straight Time (480,905) (5,239,045) Labor - Overtime (112,657) - (145,000) Employee and Retiree Benefits (367,684) - (165,312) Travel and Education (30,020) Materials, Equipment & Supplies (5,937,703) - 833,500 Coded Stock Material , Other Contracted Services , , ,364 Rents and Utilities (41,180) Land, Property and Easements , Dues, Memberships & Subscriptions , , ,693 Refunds (165) 100,000 (6,100) Uncollectible Expense ,910,645 2,748,808 2,699,533 Overheads/Other (66,706,738) (77,629,528) (78,346,220) Capital Operation Expense (1,148,877) - - Total Other Costs $ (71,049,143) $ (74,010,438) $ (79,693,787) 32. Snohomish County PUD 2018 BUDGET

37 2018 BUDGET The Generation System is financed and accounted for as a system separate from the Electric System. The Generation System consists of the Jackson Hydroelectric Project (an operating generating facility with a nameplate capacity of MW located on the Sultan River), the Youngs Creek Hydroelectric Project (a 7.5 MW project located near Sultan) the Woods Creek Hydroelectric Project (a 650 KW project also located near Sultan), and the Hancock and Calligan Creek projects (both 6 MW projects located in King County.) The PUD s continuing research and development of low-impact hydroelectric projects and renewable resources are part of Generation System expenditures. The Electric System has covenanted to purchase all power and energy available from the Generation System. The Generation System is charged for administrative functions provided by the Electric System that support its operations. Snohomish County PUD 2018 BUDGET 33.

38 COMPARATIVE ANALYSIS Schedule 2 is a summary comparing the 2018 Budget for the Generation System with the 2017 Budget. Schedule 2 GENERATION SYSTEM COMPARATIVE FINANCIAL DATA ($000 s) Budget Budget Operating Revenues Energy Sales $ 41,482 $ 45,617 Other Operating Revenues Total Operating Revenues $ 41,482 $ 45,617 Operating Expenses Operating & Maintenance Expenses $ 6,513 $ 7,787 Taxes Depreciation 7,738 7,893 Total Operating Expenses $ 14,346 $ 15,778 Net Operating Income $ 27,136 $ 29,839 Other Income & Expense 1, Interest Charges 7,267 6,933 Contributions 50 Net Income $ 21,312 $ 23,908 Cash Adjustments to Net Income Capital Expenditures $ (34,098) $ (14,196) Debt Service Principal (28,612) (28,684) Depreciation 7,738 7,893 Loan Repayments and Others 197 Estimated Changes in Reserves $ (33,463) $ (11,078) Operating Revenues The majority of the Generation System s costs, and the MWh generated, are passed on to the Electric System through energy sales. Energy sales are $4 million higher in the 2018 Budget largely due to the completion of the Hancock and Calligan Creek projects in 2018, resulting in project completion expenditures and increasing operating and maintenance expenditures. Other major impacts include expenditures for the Water Temperature Conditioning project and transmission line replacement for the Jackson project. Operating Expenditures Operating and maintenance expenditures in the 2018 Budget are $1.3 million higher than 2017 primarily due to Hancock and Calligan Creek project completion and operation in Estimated Deprecation expenditures of $3.9 million are lower than the 2017 Budget due to asset retirements. Depreciation is an estimate of the reduced value of the PUD s fixed assets. Interest charges are down, no new debt in Cash Adjustments to Net Income Capital expenditures are budgeted at $14.2 million, $19.9 million lower in 2018 than Capital expenditures in 2018 include $5.8 million in construction costs related to completing the Calligan and Hancock Creek hydroelectric projects and $7.8 million in other capital projects, primarily related to water temperature conditioning phase 2 for the Jackson hydroelectric project. Debt service principal is roughly equivalent in 2018 to Chart F illustrates the relative percentages of Generation System costs transferred to the Electric system as a component of purchased power. 34. Snohomish County PUD 2018 BUDGET

39 2018 Budget Exhibit 6 Generation System - Combined Operating Revenues FTE Results FTE Budget FTE Budget Net Energy Sales Jackson Hydro ,877, ,088, ,145,044 Generation System - Other 28,506,237 18,802,948 17,895,100 Youngs Creek 1,768,538 1,795,067 1,942,477 Woods Creek 505, , ,477 Renewable Generation 216, Calligan Hydro - 1,228, ,509 Hancock Creek - - 1,360,792 Total Net Energy Sales $ 53,874,176 $ 41,482,158 $ 45,617,399 Non Operating Revenues KC Termination Reserve 6,032, Total Other Operating Revenues $ 6,032,000 $ - $ - Total Operating Revenues $ 59,906,176 $ 41,482,158 $ 45,617,399 Operating Expenses Operating & Maintenance Cost Element FTE Results FTE Budget FTE Budget Labor - Straight Time ,099, ,484, ,813,972 Labor - Overtime ,932 80,000 83,000 Travel and Education ,135 55,525 61,134 Insurance and Claims , , ,857 Materials, Equipment & Supplies , , ,505 Public and Small Works Contracts , , ,000 Professional Services Contracts , , ,316 Other Contracted Services , ,452 1,064,487 Rents and Utilities , , ,500 Uncollectible Expense , Land, Property and Easements ,457 5,835 8,750 Dues, Memberships & Subscriptions ,959 25,030 51,525 Overheads ,224,978 1,551,057 1,819,354 Total Operating & Maintenance Expenses $ 6,543,445 $ 6,557,283 $ 7,787,400 Total Taxes 107,753-95,430-97,640 - Total Depreciation 3,718,185 7,738,329 7,893,400 Total Generation Operating Expenses - $ 10,369,382 $ 14,391,042 $ 15,778,440 Snohomish County PUD 2018 BUDGET 35.

40 2018 Budget Exhibit 6 Jackson Hydroelectric - Profit Center Operating Expenses Operating & Maintenance Cost Element FTE Results Budget Budget Labor - Straight Time $ 1,869,042 $ 2,484,931 $ 2,823,404 Labor - Overtime ,958 75,000 75,000 Travel and Education ,135 55,525 61,134 Insurance and Claims , , ,563 Materials, Equipment & Supplies , , ,755 Public and Small Works Contracts ,297 99, ,000 Professional Services Contracts , , ,516 Other Contracted Services , , ,722 Rents and Utilities ,724 99,070 75,600 Uncollectible Expense , Land, Property and Easements ,457 5,835 8,750 Dues, Memberships & Subscriptions ,959 23,030 51,525 Overheads ,097,584 1,550,407 1,793,294 Total Operating & Maintenance Expenses $ 5,929,788 $ 6,266,836 $ 7,242,262 Total Taxes $ 103,406 $ 89,481 $ 83,256 Total Depreciation $ 2,987,259 $ 6,928,163 $ 3,076,876 Jackson Total Operating Expenses - $ 9,020,452 $ 13,284,480 $ 10,402,394 Other Generation - Profit Center Operating Expenses Operating & Maintenance Cost Element FTE Results Budget Budget Labor - Straight Time $ 12,902 $ - $ 30,000 Professional Services Contracts ,304 15,000 12,000 Other Contracted Services , Overheads ,619-19,200 Total Operating & Maintenance Expenses $ 23,654 $ 15,000 $ 61,200 Total Taxes $ - $ - $ - Total Depreciation $ - $ - $ - Other Generation Operating Expenses $ 23,654 $ 15,000 $ 61, Snohomish County PUD 2018 BUDGET

41 2018 Budget Exhibit 6 Renewable Generation - Profit Center Operating Expenses Operating & Maintenance Cost Element FTE Results Budget Budget Labor - Straight Time $ 70,436 $ - $ - Other Contracted Services ,758 Overheads , Total Operating & Maintenance Expenses $ 216,513 $ - $ - Total Taxes $ - $ - $ - Total Depreciation $ - $ - $ - Renewable Generation Total Operating Expenses $ 216,513 $ - $ - Youngs Creek - Profit Center Operating & Maintenance Cost Element FTE Results Budget Budget Labor - Straight Time $ 77,993 $ - $ - Labor - Overtime ,903-5,000 Insurance and Claims ,753 25,497 20,573 Materials, Equipment & Supplies ,858 25,000 32,000 Public and Small Works Contracts ,000 35,000 Professional Services Contracts ,304 7,000 - Other Contracted Services ,153 8,000 29,750 Rents and Utilities ,072 5,000 16,400 Dues, Memberships & Subscriptions ,000 - Overheads ,135-1,880 Total Operating & Maintenance Expenses $ 207,171 $ 82,497 $ 140,603 Total Taxes $ 3,970 $ 3,886 $ 3,886 Total Depreciation $ 692,897 $ 769,897 $ 792,994 Youngs Creek Total Operating Expenses $ 904,039 $ 856,280 $ 937,483 Snohomish County PUD 2018 BUDGET 37.

42 2018 Budget Exhibit 6 Woods Creek - Profit Center Operating Expenses Operating & Maintenance Cost Element FTE Results Budget Budget Labor - Straight Time $ 69,240 $ - $ - Labor - Overtime ,000 3,000 Insurance and Claims ,133 2,405 2,575 Materials, Equipment & Supplies ,007 66,895 21,000 Public and Small Works Contracts ,872 5,000 10,000 Professional Services Contracts ,200 Other Contracted Services ,065 18,000 29,770 Rents and Utilities ,610 20,000 9,500 Overheads , ,380 Total Operating & Maintenance Expenses $ 166,319 $ 117,950 $ 78,425 Total Taxes $ 377 $ 331 $ 331 Total Depreciation $ 38,029 $ 40,269 $ 41,477 Woods Creek Total Operating Expenses $ 204,725 $ 158,550 $ 120,233 Calligan - Profit Center Operating Expenses Operating & Maintenance Cost Element FTE Results Budget Budget Insurance and Claims $ - $ - $ 20,573 Materials, Equipment & Supplies ,500 29,500 Public and Small Works Contracts ,000 Professional Services Contracts ,800 Other Contracted Services ,252 Rents and Utilities ,500 Overheads ,800 Total Operating & Maintenance Expenses $ - $ 37,500 $ 137,425 Total Taxes $ 1,732 $ 5,084 Total Depreciation $ - $ - $ - Calligan Creek Total Operating Expenses $ - $ 39,232 $ 142, Snohomish County PUD 2018 BUDGET

43 2018 Budget Exhibit 6 Hancock - Profit Center Operating Expenses Operating & Maintenance Cost Element FTE Results Budget Budget Insurance and Claims $ - $ - $ 20,573 Materials, Equipment & Supplies ,500 29,250 Public and Small Works Contracts ,000 Professional Services Contracts ,800 Other Contracted Services ,993 Rents and Utilities ,500 Overheads ,800 Total Operating & Maintenance Expenses $ - $ 37,500 $ 166,916 Total Taxes $ - $ 1,732 $ 5,084 Total Depreciation $ - $ - $ - Hancock Creek Total Operating Expenses $ - $ 39,232 $ 172,000 Generation System - Capital Expenditures Results Budget Budget Jackson Hydroelectric $ 4,731,827 $ 6,342,000 $ 7,654,209 Renewable Generation 159, , ,848 Youngs Creek - 150, ,704 Woods Creek 129, ,000 - Calligan Creek 14,819,725 11,848,000 2,669,594 Hancock Creek 17,615,114 14,763,000 3,170,644 Total Generation System Capital $ 37,456,083 $ 34,098,000 $ 14,195,999 Snohomish County PUD 2018 BUDGET 39.

44 40. Snohomish County PUD 2018 BUDGET

45 2018 BUDGET The Water System is financed and accounted for as a system separate from the Electric and Generation Systems. It operates primarily to provide water service to approximately 20,300 customers in central Snohomish County. The Water System purchases the majority of the water it sells to customers from the City of Everett. The assets of the system include transmission mains, pump stations, distribution mains and services, supply wells, treatment plants, reservoirs, meters, maintenance facilities, and equipment. The Water System is charged for administrative functions provided by the Electric System. System Acquisitions The 2018 Budget includes funding to acquire the Warm Beach Water system assets, which includes about 600 customers. The acquisition will ensure long-term viability of the water system and may be integrated with the Kayak Water system. The 2018 Budget includes funding from loans and grants from the Drinking Water State Revolving Fund (DWSRF) to help offset some of the acquisition and costs. ASSUMPTIONS The 2018 Budget is based on the following assumptions: Water Purchases The majority of the water sold by the PUD is purchased from the City of Everett. The City of Everett has estimated a 3.5% increase in its wholesale water rates in Water Rates The 2018 Budget reflects a 1.8% general rate increase, effective January 1, Full-time Equivalent Employees (FTE) The 2018 Budget does not include any additional FTE s (Note: Employee figures do not include services provided by the Electric System including accounting and finance, real estate, employee resources, vehicle and equipment maintenance, telecommunications, legal, contracts, facilities and customer service functions.) Snohomish County PUD 2018 BUDGET 41.

46 COMPARATIVE ANALYSIS Schedule 3 is a summary comparing the 2018 Operating Budget for the Water System with the 2017 Operating Budget. Schedule 3 WATER SYSTEM COMPARATIVE FINANCIAL DATA ($000 s) Budget Budget Operating Revenues Water Retail Sales $ 11,251 $ 12,131 Water Wholesale Sales Other Operating Revenues Total Operating Revenues $ 11,841 $ 12,814 Operating Expenses Purchased Water $ 2,400 $ 2,406 Operating & Maintenance 5,688 5,613 Taxes Depreciation 3,048 2,907 Total Operating Expenses $ 11,735 $ 11,572 Operating Revenues Water retail sales are estimated at $12 million. Wholesale sales have increased primarily due to higher than expected purchases from the cities of Snohomish and Gold Bar. Operating Expenditures Purchased water costs are budgeted at $2.4 million, similar to 2017 levels. Water purchases from the City of Everett are offset partially by production from the PUD s Lake Stevens wells water treatment facility. Operating and maintenance expenditures for 2018 are estimated to be roughly equivalent to 2017 budgeted levels. Contributions are expected to decrease due to a lower level of developer activity. Cash Adjustments to Net Income The 2018 Budget provides approximately $6.9 million for capital expenditures and construction projects and features several significant main replacements as well as capital projects to bring the Warm Beach system to alignment with PUD service standards. The table below lists the significant capital expenditures included in the 2018 Budget. Net Operating Income $ 106 $ 1,242 Other Income & Expense 1, Interest Charges 744 (630) Contributions 2,825 3,371 Net Income $ 3,239 $ 4,699 Cash Adjustments to Net Income Capital Expenditures $ (4,985) $ (6,858) Debt Service Principal (2,025) (2,109) Depreciation 3,048 2,907 Loan Repayments and Others (927) 525 Estimated Changes in Reserves $ (1,650) $ (836) Significant 2018 Water System Construction Projects/Programs ($000 s) CIP #43-32nd St SE Main Replacement $2,417 CIP #310 - Warm Beach System Upgrade 1,071 CIP #49-87th Ave NE Main Replacement Snohomish County PUD 2018 BUDGET

47 2018 Budget Water System Operating and Other Revenue Exhibit 7 Operating Revenues Water Retail Sales Results Budget Budget Sale of Water - Retail SF & MF (includes Surcharge) $ 10,688,898 $ 10,639,800 $ 11,501,288 Low Income / Senior Discounts - (130,000) (110,000) Sale of Water - Commercial 717, , ,241 Total Water Retail Sales 11,406,433 11,251,400 12,130,529 Sale of Water - City of Granite Falls Wholesale 244, , ,403 Sale of Water - City of Arlington Wholesale 88, ,000 92,246 Sale of Water - Other (Snohomish & Goldbar) 10,476 15,000 75,105 Total Wholesale Water Sales 343, , ,754 Total Water Sales 11,750,097 11,586,400 12,552,283 Other Operating Revenues Lake Roesiger Septic Tank Pumping Revenue 10,512 15,000 15,225 Property Rental 203, , ,750 Miscellaneous Receipts & Engineering Fees/Other Other Revenue 110, ,539 50,000 51,000 Total Other Revenues 324, , ,975 Total Operating Revenues $ 12,074,636 $ 11,841,400 $ 12,813,258 Other Revenue Interest Income and Expense Investment Income 149, , ,800 Assessments for LUDS Interest 50,594 60,000 44,000 Subtotal - Interest Income and Other 200, , ,800 Grant Income ,515 Contributions General Facilities Charges 2,210,153 1,500,000 2,039,146 New Service Connections 431, , ,000 Distribution Service Charges 198, , ,500 Non-Cash Contributions/Donated Plant 679,275 1,000,000 1,000,000 Subtotal - Contributions 3,519,452 2,825,000 3,370,646 Assessments for LUD Principal 12, , ,000 Snohomish County PUD 2018 BUDGET 43.

48 2018 Budget Water System Operating Expenses Exhibit Operating & Maintenance Cost Element FTE Budget FTE Budget FTE Budget Labor - Straight-time $ 2,159, $ 1,999, $ 1,783,758 Labor - Overtime , , ,000 Travel and Education ,650 27,000 20,779 Property and Liability Insurance , , ,540 Rents and Utilities , , ,000 Postage ,000 25,000 25,000 Dues, Memberships & Subscriptions ,200 7,200 7,500 Public and Small Works Contracts ,000 50,000 55,000 Professional Services Contracts , , ,000 Other Contracted Services , ,000 1,370,200 Materials, Equipment & Supplies , , ,375 Uncollectible Expense ,100 74,990 60,024 Coded Stock Material ,000 75,000 60,000 Land, Property and Easements ,000-20,000 Refunds , Overheads ,048,795 1,265,123 1,361,236 A&G Credit - - (523,807) Total Operating & Maintenance by Cost Element 28.0 $ 5,854, $ 5,687, $ 5,612,605 Purchased Water 2,200,000 2,400,000 2,406,045 Taxes 540, , ,604 Depreciation 2,988,000 2,850,000 2,907,000 Total Operating Expense $ 11,582,996 $ 11,537,966 $ 11,571, Snohomish County PUD 2018 BUDGET

49 2018 Budget Water System Exhibit 9 PROJECT DESCRIPTION PHASE Donated Plant Coded Stock Coded Stock - Overhead Materials /Equip /Supplies Labor Labor Benefits PSC PWC Other Contracted Services Land & Easements A&G Overhead AFUDC TOTAL Design & Crew Inspection for Donated Plant 0 9,000 1,440 7, ,000 99, ,043 1,000 19,102 6, ,000 Donated Plant 1,000, ,000,000 CIP #43-32nd St SE Main Replacement Design / Construction 0 3, , ,000 67,200 20,000 1,910,000 7,720 1, ,535 53,186 2,417,000 CIP #49-87th Ave NE Main Replacement Design / Construction 0 1, ,500 40,000 25,600 5, , ,344 20, ,000 CIP #48 Frontier Circle Main Replacement Construction Carryover ,029 1, , ,973 5, ,000 Design / Construction 0 5, ,000 22,000 14,080 2, , ,217 2, ,000 CIP #98 - Forced Right of Way Relocations / Replacements CIP #300 - Misc. Meter Replacement Program 0 72,000 11,520 9,870 25,000 16, ,811 3, ,000 CIP #301 - Vehicles and Equipment ,400 2,000 1, ,234 3, ,000 CIP #302 Misc Power Operated Equipment ,282 4,000 2, ,121 3, ,000 CIP #305 - New Services 0 136,000 21,760 27,700 75,000 48, , ,814 7, ,000 CIP #310 - Warm Beach Consolidation Design / Construction 0 29,000 4,640 73, , , , ,000 10,000 1,138 90,655 23,567 1,071,000 TOTAL CAPITAL TO PLANT: 1,000, ,305 41, , , , ,202 3,226,600 44,263 4, , ,927 6,859,000 Snohomish County PUD 2018 BUDGET 45.

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52 SNOHOMISH COUNTY PUD 2018 BUDGET SNOPUD.COM