Team PUD 2019 BUDGET BOARD OF COMMISSIONERS: SIDNEY SID LOGAN TANYA TONI OLSON REBECCA WOLFE

Transcription

1 Team PUD 2019 BUDGET BOARD OF COMMISSIONERS: SIDNEY SID LOGAN TANYA TONI OLSON REBECCA WOLFE

2 Snohomish County PUD 2019 BUDGET

3 SNOHOMISH COUNTY PUD 2019 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, Strategic Accounts, 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 CFO, Budget and Financial Planning, Finance Systems Support, Treasury & Risk Management, Meter Reading, Revenue Cycle Development, Customer Accounting, General Accounting, Contracts & Purchasing, and Warehouse)...24 Customer and Energy Services (includes AGM Customer and Energy Services, Customer Experience, Business Operations, Residential & Small Commercial, Strategic Segments, Senior Manager Energy Services, and Customer Systems Technology)...25 Facilities and Security (includes Grounds & Engineering, Custodial Services, Facilities Maintenance, Facilities Planning, Security & Business Continuity, and Facilities Administration)...26 Employee Resources and Benefits Information Technology Services (includes CIO, ITS Administration, Enterprise Applications, Program and Project Management, Quality Assurance, Cybersecurity, IT Infrastructure & Operations, Enterprise Architecture, Data Management, Software Development & Integration, IT Solution Consulting, End-user Support, and Analytics & Information Management)...28 Power and Transmission Management (includes AGM Power & Transmission, Power Scheduling; Power Supply; Regional Transmission & Compliance and Rates and Economics)...29 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 & Line Training, Vegetation Management, Energy Control Center, Inspection / Scheduling, Apprenticeship Program, Distribution Engineering, Transmission Engineering, GIS / Maps & Records / Drafting, Operational Technology Engineering, System Planning & Protection, Everett Engineering, Plat Development, Substation Engineering, Substation Construction, Metering, Telecommunications)...30 Other Costs...31 GENERATION SYSTEM...33 Exhibit 6 Operating Revenues and Expenditures Jackson Hydro Project and Other Generation Renewable Generation, Youngs Creek Hydro Project and Woods Creek Hydro Project Hancock Creek Hydro Project, Calligan Creek Hydro Project and Capital Expenditures WATER SYSTEM...40 Exhibit 7 Operating and Other Revenue Exhibit 8 Operating Expenses by Cost Element Exhibit 9 Capital Expenditures Snohomish County PUD 2019 BUDGET

4 Snohomish County PUD 2019 BUDGET

5 2019 BUDGET The 2019 Budget for Snohomish County PUD reflects the efforts of leaders, project leads, planners, and staff from all across the organization. It is driven by our values and a set of Strategic Priorities refreshed in 2018 and represents a prudent strategy of reliability, modernization, and infrastructure investment in the future. With the 2019 Budget, the PUD continues to focus on investing in the quality of its people, its commitment to its customers, preparing for the needs of the future, and responsible cost and fiscal management BUDGET KEY FEATURES The 2019 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 cost-effective conservation. The 2019 operating budget for the Electric System is $665 million, an increase of $2.2 million from The expenditure plan includes $93 million in capital expenditures; the majority of those expenditures are for system reliability improvements and upgrades across the PUD s territory. The 2019 operating budget for the Generation System is $12.5 million, $3.2 million lower than The expenditure plan includes $2.3 million in capital expenditures for construction and improvements, primarily at the Jackson Hydroelectric Project. The Water System s 2019 operating budget is approximately $11.9 million, roughly $300,000 higher than the 2018 operating budget. The expenditure plan for the Water system includes $5.8 million in capital improvements, the majority of which are for main replacement projects. The following highlights some of the major components of the 2019 Electric System operating budget and capital expenditures: 4 Retail power consumption Since 2008, consumption of power in the PUD s service territory has generally been declining. Retail loads for 2019 are expected to be 2.6% higher than 2018 budgeted levels. 4 New connections The estimate for 2019 new premise connections is 3,600, higher than the 3,400 assumption used in the 2018 budget. 4 Rate adjustments Includes a 1.3% General Rate increase effective April 1, 2019, and a 1.6% BPA Power rate adjustment on October 1, Both are subject to public rate hearings and Board approval. 4 Wholesale market power sales Expected to decline $7.8 million from 2018 levels, a reflection of lower expected market prices and less excess power available to sell. 4 System reliability investments The 2019 capital plan includes several major projects aimed at increasing reliability for customers major projects include the Swamp Creek 115kV Switching Station, the Lynnwood City Center Substation project, and the Port Gardner Substation as well as continuation of the wood pole and underground cable replacement programs. 4 Arlington Microgrid project Includes $3.6 million for the design and construction of the Arlington Microgrid Project. Microgrid expenditures are expected to be offset by $3.5 million of state grants over the project period. 4 Arlington North County Local Office Includes $5.3 million for the design of a new local office located in Arlington. 4 75th Street Business Center upgrades Following the purchase of this building in 2017, the 2019 Budget includes $5.4 million to complete the upgrades and begin occupancy of this facility. Snohomish County PUD 2019 BUDGET 1.

6 4 Energy-efficiency programs The PUD continues investment in energyefficiency programs with $21.3 million in planned expenditures. These expenditures are reported as part of Operating and Maintenance costs. COST MANAGEMENT IN THE 2019 BUDGET Snohomish County and Camano Island continue to experience population growth, yet the PUD has experienced flat or declining electric loads since 2008 due to the impacts of energy efficiency measures, climate change, solar power installations, and other factors. Lower power sales volumes, aging power distribution infrastructure, industry demands and initiatives, and inflationary factors, have led to pressure on PUD budgets and rates. In order to address this pressure, the Responsible Cost and Fiscal Management portion of the PUD s Strategic Priorities features cost management as an important component, and this is reflected in the 2019 Budget development process. The 2019 Budget was prepared using zero-based budgeting principles, and staff are continually challenged to review their expenditures and processes to ensure that the cost management opportunities are evaluated. Several cost savings categories are evaluated and tracked, including: o Continuous improvement opportunities o Actively bidding contracts and reviewing material pricing o Utilizing internal talent rather than contractors o Utilizing new or alternative technology/tools o Reevaluating absences and capturing attrition o Suspending or restructuring under-utilized contracts/services o Actively pursuing grants or other financial opportunities COMPLIANCE WITH COMMISSION POLICY Pursuant to Commission Policy, specifically EL-4 that defines the executive policies for financial planning and budgeting, the 2019 Budget: w Includes a credible projection of revenues and expenditures; w Maintains cash reserves at levels consistent with Commission policy established in Resolutions 5853, 5854 and 5855; w Provides for 2019 Electric System debt service coverage greater than the Commission s 1.75x minimum 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 2019 Budget includes: m Energy-efficiency programs including residential lighting discounts, incentives for home weatherization and heating improvements, efficient appliances and home products, and comprehensive retrofits for multifamily housing efficiency. Incentives also encourage businesses throughout the County to save energy by making efficiency upgrades to lighting, HVAC, motors and process improvements. Significant educational efforts are made to increase customer awareness of the benefits of energy efficiency for all ratepayers. m Fish and wildlife enhancement efforts that are featured at the PUD s hydroelectric projects, including Jackson, Youngs Creek, Hancock Creek, Calligan Creek and Woods Creek Hydro projects. In addition, approximately one-third of the PUD s payments for power to BPA, approximately $83 million, fund fish and wildlife recovery on the Columbia River; m Low-income discounts estimated at about $6.3 million are provided by the PUD for qualifying senior and low-income customers; m Public safety information programs are communicated in a variety of ways, including the PUD website, customer newsletters, school programs, newspaper ads, and other means; m Trained field employees who live in the communities, keep a watchful eye for customers who may be at risk and provide service during major storm and emergency outage conditions; m Energy education programs serving local area schools with classroom presentations, student workshops, and electrical safety demonstrations; m Environmental sensitivity demonstrated in the PUD s power resource development acquisition and construction practices; 2. Snohomish County PUD 2019 BUDGET

7 m The Helping Hands program, funded by employees, which assists low-income seniors with their PUD bills; m The Project PRIDE program, funded by customer donations, which provides financial assistance to low-income families for their PUD electric bills; m Quality jobs and local employment provided by the customer-owned PUD; m Support to Social Service Agency and LIHEAP (Energy Assistance) programs, which provides customers and agencies easier access to customers data at the time assistance is being provided and coordinates pledges to pay; and m Tax-exempt financing for capital projects that helps lower the cost of borrowing for the construction of long-term infrastructure assets to maintain stable rates. STRATEGIC PRIORITIES 2019 BUDGET ELEMENTS The 2019 Budget supports the mission, strategic priorities and values of the PUD. The 2019 Budget upholds the values of the plan. The Board of Commissioners and Leadership 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 discussion has identified a sample of related 2019 Budget elements that support those priorities as follows: Team PUD u 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 ($932,000), Safety Training ($630,000) u 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: Leadership Development Training ($188,000) u Our People Capable, creative and dedicated team members 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 exercising productive work practices. Related Budget Elements: Apprenticeship Program ($1.7 million), Training Programs ($435,000), Continuous Improvement Training ($415,000), Business Readiness and Training ($653,000), Core Employee Training ($130,000), Tuition Reimbursement ($100,000), Recruiting Program ($375,000) u 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 ($815,000), Customer Service ($13.3 million) Customer Experience u 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 ($13.3 million); Local Office customer service ($2 million); Customer Self-Service, Electronic Bill Payment & Presentment ($1.6 million) Snohomish County PUD 2019 BUDGET 3.

8 u Communications and Engagement While our systems are designed, maintained and operated to provide safe and reliable service to our community, we know there will be occasional interruptions. We will continually improve our capability to provide accurate, timely information and faster outage restoration. We will be proactive and strategic in communicating to and obtaining feedback from our customers, key stakeholders, and local governments on new initiatives. Related Budget Elements: Corporate Communications ($2.1 million), Energy Control Center ($4.5 million), Tree Trimming Program ($6.2 million), Information Technology Services ($8.3 million) u Value As a community-owned not-for-profit electric and water utility, we understand that the services we supply are foundational to the quality of life in our communities. We strive to ensure that they will consistently provide outstanding value relative to their cost. Related Budget Elements: Government Relations Program ($815,000), Data Strategy & Analytics ($1.1 million), Strategic Accounts ($2.8 million) Delivering Now and For the Future u Resource Planning We take a long-term view in planning for, and making prudent investments in, power and water resources, taking into account a rapidly changing environment. This deliberate and balanced approach ensures for the ability to serve both current customers and future generations Related Budget Elements: Power Supply ($1.0 million), Power Scheduling ($2.6 million) u Operations Operate, maintain and optimize our systems and facilities to provide safe, cost effective and reliable service. We will leverage technology and process improvements to efficiently operate our system, and to enable our employees to work ever more effectively and maximize the value of our assets. Related Budget Elements: Wood and Cable Replacement Programs ($9.5 million); Work and Asset Management ($892,000); Facilities Maintenance ($2.9 million); Local Office Operations ($8.9 million); Water System Main Replacements ($1.9 million); System Innovations, Upgrades, and Continuous Improvement in support of the PUD s Strategic Initiatives ($3.5 million) u Stewardship Conduct our daily work in a way that s mindful of our impact to the environment and our community. Actively participate in shaping evolving policies and strive to make decisions in the best interest of both our customers and the natural environment. Related Budget Elements: Energy-Efficiency Programs ($21.7 million), Low- Income and Senior Discount Programs ($6.3 million) Responsible Cost and Fiscal Management u 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: Financial Systems Support ($531,000), General Accounting ($2.9 million), Budget and Financial Planning ($255,000) u Cost Management Proactive, strategic and visible cost control that continuously drives improvement in our ability to mitigate rate pressure. Related Budget Elements: Continuous Improvement Training Program ($198,000), Cost Management Recognition ($200,000) u 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: Budget and Financial Planning ($255,000), Rates and Economics ($750,000), Treasury and Risk Management ($3.5 million), System Planning and Protection ($2.8 million) Continuous Improvement u Lead a cultural shift that moves continual improvement from a program to the way we do business. Related Budget Elements: Business Readiness and Training ($653,000) 4. Snohomish County PUD 2019 BUDGET

9 2019 BUDGET The Electric System operates primarily to provide electrical service to approximately 350,000 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. Original creation by Charlie Sweeney, age 11 ASSUMPTIONS The 2019 Budget reflects staff s electric load forecast based on an economic forecast for Snohomish County and Camano Island and a power resource forecast that includes staff s best estimates of owned and contracted resource output as well as wholesale market prices. The 2019 Budget for the Electric System is based on the following assumptions for revenues, cash reserve transfers, power resources, and other factors: Revenue Assumptions u Load Forecast PUD retail power consumption is expected to be 2.6% higher than loads forecast in the 2018 Budget. u New Connections The 2019 Budget reflects projected new connections of 3,600. The 2018 Budget assumed 3,400 new connections. Revenues from customer reimbursed work are projected at $18.2 million for u Energy Rates The 2019 Budget includes a 1.3% general rate increase effective April 1, 2019, and a 1.6% BPA power rate adjustment effective October 1, Both proposed rate changes are subject to rate hearings and Board approval. u Wholesale Revenues The 2019 Budget includes $29.1 million in wholesale energy revenues, a decline from 2018 levels. Wholesale revenues reflect wholesale market sales resulting from balancing owned and purchased resources with load. Power available for wholesale market sales comes from BPA s Slice product, as well as other power agreements, and Snohomish County PUD 2019 BUDGET 5.

10 its availability is budgeted based on Columbia River Basin water levels at approximately 87% of average. Based on current price forecasts, the average wholesale price for revenues from system load balancing used in the 2019 Budget is $19 per MWh. u Cash Reserves The PUD maintains reserve accounts categorized as follows: g Operating Reserve, which represents approximately 120 days of non-power budgeted expenses in order to provide adequate working capital during unforeseen events such as natural disasters, economic downturns, customer loss, and revenue interruption; the Operating Reserve currently exceeds minimum levels, and the 2019 Budget plans to use $26 million of this reserve in g Contingency 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. This reserve also provides for selfinsured retentions and insurance carrier deductibles. These reserve funds are expected to remain intact during g Project Reserve, which represents funds expected to be used for capital and other projects. These funds are generally the proceeds of bond issues. The PUD has no bond construction funds available at the end of g Benefit Reserves, which are being accrued over time to fund the actuarial cost of post-employment benefit obligations. The 2019 Budget provides $2 million to be added to this reserve g Sinking Reserves are utilized to set aside funds on a monthly basis for annual debt service and privilege tax payments. g Bond Debt Service Reserves are held pursuant to bond covenants for future debt payments. Purchased Power and Transmission Assumptions u Bonneville Power Administration (BPA) The 2019 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 85% of the PUD s 2019 power purchases and 73% of the PUD s total power and transmission costs. g Block Product Forty-four percent 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 3.1 million MWh over calendar year The amount of energy the PUD receives each month is based on the PUD s historical monthly load shape. In 2019, the total annual cost of the Block product are forecasted at $113.4 million. g Slice Product Fifty-six percent 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 5.4%. The majority of the PUD s short-term wholesale market sales are from surplus Slice energy, which varies with the seasonal and daily variations in the Slice product s output. The 2019 Budget estimates receiving 4.0 million MWh from BPA s slice product at a cost of $138.5 million. g 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 2019 Budget assumes no adjustment since we cannot accurately forecast whether or not there will be a charge or credit. 6. Snohomish County PUD 2019 BUDGET

11 g One-time BPA Charges 2019 is a transition year for two new costs that are expected to be incorporated into future BPA rate cases. As a result of a 2017 court order to increase spill at eight federal dams on the lower Columbia and Snake rivers starting with the 2018 spring fish passage season, BPA assessed power customers with a spill surcharge. This BPA surcharge acts to adjust its power rates so BPA can recover costs (make up for its lost secondary market sales revenues) incurred from the increased spill requirement. The PUD s portion of this surcharge has been estimated at $1 million for the 2019 Budget. The PUD s share of the 2018 spill surcharge totaled $698,000. Beginning in October 1, 2019, BPA s power rates are expected to incorporate the cost of a permanent court-ordered spill. The second cost is Financial Reserves funding, which BPA is assessing its customers to bolster its financial reserve level. The PUD s share of 2019 Financial Reserves funding is estimated to be $158,000. g 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 1,618 MW of firm point-to-point capacity. The 2019 Budget includes $38.6 million for BPA transmission capacity and $18.1 million for ancillary services. u Jackson Hydroelectric Project The Electric System is expected to purchase 388,627 MWh of power from the Jackson Hydroelectric Project, a component of the PUD s Generation System, at a cost of $19.9 million in the 2019 Budget. This represents 5% of the Electric System s anticipated 2019 power resources. u Small Hydroelectric Projects The Generation System owns four small hydroelectric projects: the Woods Creek Project and the Youngs Creek Project in Snohomish County and the Calligan Creek Project and the Hancock Creek Project in King County. The 2019 Electric System budget includes $6.2 million in purchased power expenditures related to these projects. u Short-term Market Purchases The 2019 Budget includes 332,142 MWh, estimated to cost $11.0 million, for shortterm market purchases anticipated to satisfy the PUD s retail loads in excess of its firm resources to manage short-term load and resource variations. These costs are offset by wholesale power market sales. u Renewable Energy Credits (RECs) The PUD has used the target method of applying RECs from its long-term wind power supply contracts and incremental hydro from its existing power supply portfolio to comply with the annual I-937 renewables requirement for calendar years 2012 through The PUD had initially elected to meet its I-937 renewables target using the 4% financial cost cap method to capture the PUD s investment in its long-term wind contracts but was not successful in advancing compliance under this method, primarily due to lack of clarity in how this methodology should be implemented. In 2019, the PUD anticipates it may need to purchase small quantities of Renewable Energy Credits (RECs) to supplement the PUD s existing renewables portfolio and most cost-effectively meet the target increase of 15% renewables in The 2019 Budget includes $1 million for forecast REC purchases. u Renewable Power Purchases In addition to the PUD s owned resources, the utility has acquired eligible renewable resources through long-term power supply contracts. These include: the White Creek Wind Agreement, the Wheat Field Wind Agreement, the Hay Canyon Wind Agreements, the Qualco Energy Corporation Small Renewable Generation Agreement, and the Hampton Lumber Mill Darrington, WA Agreement. The PUD has also recognized the contributions of rooftop solar from its Solar Express Program and the RECs associated with the PUD s long-term Bonneville power contract. The 2019 Budget forecasts a total of 468,337 MWh from these contracts at a forecast total cost of $34.5 million. Other Assumptions u Full-time Equivalent Employees (FTEs) The 2019 Electric System budget includes 1,085 FTE, no change from the 2018 Budget level. Snohomish County PUD 2019 BUDGET 7.

12 COMPARATIVE ANALYSIS Schedule 1 is a summary comparing the 2019 Electric System budget with Schedule 1 ELECTRIC SYSTEM COMPARATIVE FINANCIAL DATA ($000 s) Budget Budget Operating Revenues Energy Retail Sales $ 594,896 $ 622,353 Energy Wholesale Sales 37,006 29,119 Other Operating Revenues 24,756 27,395 Total Operating Revenues $ 656,658 $ 678,867 Operating Expenses Purchased Power $ 337,340 $ 335,794 Transmission & Ancillary 56,061 56,762 Operations & Maintenance 181, ,610 Taxes 35,536 37,983 Depreciation Expense 52,340 50,006 Total Operating Expenses $ 662,876 $ 665,155 Net Operating Income $ (6,218) $ 13,712 Other Income & Expense 7,926 14,137 Interest Charges (15,432) (17,099) Contributions 16,818 18,208 Net Income $ 3,094 $ 28,958 Cash Adjustments to Net Income Capital Expenditures $ (93,946) $ (92,813) Debt Service Principal (10,652) (11,905) Depreciation 52,340 50,006 Loan Repayments and Others 4,283 (725) Estimated Changes in Reserves $ (44,882) $ (26,479) Operating Revenues Projected retail energy sales are $27.5 million higher in the 2019 Budget due to expectations of somewhat higher customer consumption and projected rate adjustments. Wholesale energy revenues are $29.1 million in the 2019 Budget, $7.8 million lower than the 2018 budget. This decrease reflects a lower volume of excess power and slightly lower market sales prices expected in 2019 reflecting the current forward price forecast. Other operating revenues are $27.3 million in the 2019 Budget, a $2.6 million increase from 2018 levels. Other operating revenues include sales of the PUD s transmission capacity, BPA energy-efficiency program reimbursements, grant reimbursements, customer fees and other revenues. Operating Expenses Total 2019 operating expenditures of $665.1 million are $2.2 million higher than 2018, less than a percent higher than the 2018 Budget. The relative amount of the expenditure categories are illustrated in Chart A. Purchased power costs of $335.7 million are $1.5 million lower than the 2018 Budget. This decrease is primarily the result of a lower capital spending plan for the Jackson Hydro Project; Generation System costs are a component for purchased power for the Electric System. Transmission and ancillary costs of $56.7 million are $0.7 million higher than 2018 budget levels. This slight decrease is primarily the result of stabilization of expected load. 8. Snohomish County PUD 2019 BUDGET

13 Operating and maintenance (O&M) expenditures in the 2019 Budget are $3 million or 1.7% higher than the level included in the 2018 budget. Because the PUD uses a zero-based budgeting model, these variations reflect the current budgetary needs of the PUD and are not necessarily a carryover from the previous year. Some of the factors causing the year-to-year increase include an increase in the rate for the PUD s contribution to the Washington State Department of Retirement systems, a shift of some capital project costs to O&M and inflationary pressures on labor, material and services. Operating and maintenance expenses also include expenditures for energy-efficiency programs. 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. Energy-efficiency expenditures are $1.1 million higher than 2018 levels. Budgeted taxes of $38 million are $2.5 million higher than 2018 reflecting higher retail sales. Taxes include a 3.873% state excise tax and a 2.14% percent county privilege tax. Estimated deprecation expenditures of $50 million are $2.3 million lower than Depreciation is an estimate of the reduced value of the PUD s fixed assets and are part of operating expenditures in the 2019 Budget. ENERGY SALES Retail Retail energy sales included in the 2019 Budget are sales within the PUD s service territory to residential, commercial and industrial customers. Sales to retail customers represent 95% of the Electric System s total energy sales revenue. Projected average rates for these categories are as follows: Average Rates Residential 10.4 per kwh Commercial 9.0 Industrial 7.0 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 2019 Budget related to load and resource balancing is estimated at $29.1 million. Chart B provides a breakdown of the Electric System s energy sales components. Cash Adjustments to Net Income The 2019 Budget reflects a $1 million decrease in capital expenditures from 2018 and is based on the current project schedules. Budgeted capital expenditures for 2019 includes 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. It also provides for facilities and information technology capital and vehicle and equipment replacements. Debt service principal expenditures in the 2019 Budget are $11.9 million, reflective of scheduled debt payments on existing revenue bonds. Snohomish County PUD 2019 BUDGET 9.

14 PURCHASED POWER The 2019 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 (BPA) and the PUD s hydroelectric projects: Jackson, Youngs Creek, Woods Creek, Calligan Creek, and Hancock Creek. The PUD expects to receive 85% of its 2019 budgeted power purchases from BPA consistent with the terms of the BPA power supply agreement. It also receives power from long-term contract purchases for renewable energy from White Creek Wind, Hay Canyon Wind, Wheat Field Wind, Hampton Lumber Mills, Qualco and Packwood. In addition, PUD power purchases include short-term and market purchases necessary to balance energy demand with power supply. Chart C illustrates the PUD s purchased power included in the 2019 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 85% of the power purchases of the PUD, it only makes up 73% 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 2019 Budget are $184.6 million, which includes energy-efficiency programs. O&M expenditures account for 28% 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. w maintaining enterprise-wide systems and technology infrastructure in support of PUD operations and customers. 10. Snohomish County PUD 2019 BUDGET

15 ENERGY-EFFICIENCY PROGRAMS The PUD continues to acquire all cost-effective and achievable energy-efficiency resources and has allocated a 2019 conservation budget of $21.37 million. Energyefficiency revenue sources for the 2019 Budget include recapture of $3.5 million of BPA Energy Efficiency Incentives (EEI) and $306,000 of conservation loan repayments. The 2019 Budget includes continued enhancements to the energy-efficiency program portfolio designed to improve customer experience and meet the PUD s growing capacity needs. The energy conservation targets established for the biennium are consistent with the Washington State Energy Independence Act requirements and satisfy the PUD s compliance obligations. 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 2019 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, as well as a focused effort with internal staff to address Energy Burden; 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, multifamily, 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, HVAC, and other end-uses; w Strategic energy management and coaching relationships with large commercial and industrial customers to identify process, behavioral, and capital energy savings projects; and w Pilot engagements with commercial customers and energy services companies focused on shifting process loads away from winter peak load and incentivizing high performance buildings. The 2019 Budget also includes resources for: w Advancing innovative program development and design; w Supporting a shift toward capacity benefits as a program outcome; w Serving as customers Community Energy Partner by providing information and promotion of programs via traditional channels, at events and home shows, and directly in customers homes; 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, NEEA, and local community partners. Snohomish County PUD 2019 BUDGET 11.

16 CAPITAL EXPENDITURES The 2019 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 for 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 2019 expenditure plan are presented in the table below. Additional detail on the capital program may be found in Exhibit 5. 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 Significant 2019 Electric System Capital Projects/Programs ($000 s) Swamp Creek 115kV Switching Station $ 5,323 75th Street Business Center 5,412 North County Local Office 5,279 Cable Replacement Program 4,741 Wood Pole Program 4,610 Port Gardner Substation 4,309 OSO Substation Upgrade 3,894 Facilities Relocations and Control Zone 3,678 Lynnwood City Center Substation/Cedar Valley 3,377 Cascade Feeder Rebuild 1,074 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 2019 system infrastructure construction expenditure plan is $43.4 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: g 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 2019 expenditure plan for this program is $14.1 million. g 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 the 2019 Budget is $6.6 million. g 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 2019 expenditure plan is $19.2 million for this program. 12. Snohomish County PUD 2019 BUDGET

17 g 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 the 2019 Budget is $3.4 million. 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 3,600 new service connections derived from the PUD s load forecast. The cost for 2019 is estimated at $23.2 million to serve the PUD s projected 2019 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, purchase and implementation of software applications, purchases of transportation equipment, purchases of replacement information technology equipment, and communications equipment. Funding for these other capital expenditures totals $31.2 million in the 2019 expenditure plan. 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. 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 2019 expenditure plan includes $4.7 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 2019 expenditure plan includes $3 million in funding for new software and business capabilities, replacement of aging infrastructure and equipment, system software application improvements and telecommunications. The Facilities Department expenditure plan for capital expenditures is related to design, construction, upgrade and replacement of PUD facilities. The 2019 expenditure plan includes $19.7 million related to construction work for the new North County local office, Arlington Microgrid site work, 75th Street business center renovations, and major roofing projects. Other capital expenditures also includes $3.7 million for the telecommunication projects related to wireless attachments, microwave replacement, and wireless infrastructure, and $1.2 million for development and implementation of the Arlington Microgrid infrastructure, including additional substation automation and planning and design for a meter data management system. 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. Snohomish County PUD 2019 BUDGET 13.

18 2019 Budget Electric System Operating Revenues Exhibit 1 Operating Revenues Budget 2019 Budget Energy Sales Results MWh Mills/Kwh Amount MWh Mills/Kwh Amount Residential $ 362,405,727 3,363, $ 341,947,099 3,496, $ 364,814,430 Commercial 205,652,677 2,384, ,081,733 2,392, ,780,948 Industrial 37,761, , ,202, , ,137,295 Street Lights 3,853,823 26, ,664,240 25, ,620,570 Total Retail Energy Sales 609,674,020 6,325, ,895,867 6,489, ,353,242 Forward Wholesale Market Sales $ - 663, $ 9,066, , $ 2,018,200 Balancing Market Sales 34,946,904 1,316, ,940,183 1,363, ,101,158 Total Wholesale Energy Sales $ 34,946,9040 1,980, $ 37,006,399 1,483, $ 29,119,358 Total Energy Sales $ 644,620,924 8,305,433 $ 631,902,266 7,973,158 $ 651,472,600 Other Operating Revenues Transmission Sales $ 6,877,815 $ 3,250,000 $ 6,095,100 Miscellaneous Operating Expense Reimbursements 1,986,359 1,500,000 1,585,391 Surplus REC and Emission Sales 6,042 95,000 50,000 BPA ECA Reimbursement 6,839,487 7,745,052 8,000,000 Residential Exchange Credit 2,487,521 3,259,000 2,250,000 Miscellaneous Service Charge Revenue 6,554,378 5,500,000 6,068,980 Rents from Electric Property 3,933,251 3,407,284 3,345,238 Total Other Operating Revenues $ 28,684,853 $ 24,756,336 $ 27,394,709 Total Operating Revenues $ 673,305,776 $ 656,658,602 $ 678,867, Snohomish County PUD 2019 BUDGET

19 2019 Budget Electric System Purchased Power and Transmisison Services Exhibit 2 Total Total Total MWh's Results MWh's Budget MWh's Budget BPA Block 3,363,849 $ 117,008,134 2,989,900 $ 108,325,095 3,116,007 $ 113,409,108 BPA Slice Base 4,449, ,716,796 4,285, ,578,408 3,983, ,578,408 Supplemental spill charge ,000,000-1,000,000 Slice True-up - (2,118,550) BPA Slice Subtotal 4,449, ,598,246 4,285, ,578,408 7,099, ,578,408 BPA Financial Reserves and Policy Funding 158,864 BPA Lookback Credit/REP Customer Refund - (8,732,844) - (7,972,425) - (6,632,417) Total BPA Power Costs 7,813, ,873,536 7,275, ,931,077 7,099, ,513, Generation System: Jackson Hydro 453,152 17,993, ,046 24,185, ,627 19,880,774 Generation System - Other - 19,611,786-17,895,100-15,761,196 Youngs Creek Hydro 16,360 1,810,383 18,159 1,942,477 17,114 1,965,542 Woods Creek Hydro 1, ,065 1, ,477 1, ,947 Hancock Creek Hyrdo ,756 1,360,792 27,308 2,198,535 Calligan Creek Hydro , ,509 24,598 1,922,316 Renewable Research - 90, ,328 Total Generation System 471,306 39,893, ,487 45,658, ,920 42,168,636 Other Renewable Power Sources: Packwood 21, ,796 16, ,634 18, ,900 Qualco 2, ,564 2, ,134 2, ,268 Hampton Lumber Mills 17, ,274 18, ,504 18, ,253 Wind Power Contracts 413,212 31,315, ,710 36,543, ,537 32,848,576 Total Other Renewable Power Sources 455,157 32,802, ,868 38,164, ,337 34,484,997 Market Power Purchases Forward Purchases - 202,400 5,037, Market/Short Term Purchases 348,142 10,646, ,129 5,449, ,142 11,032,371 Total Market and Short-Term Purchases 348,142 10,646, ,529 10,487, ,142 11,032,371 Other Power Purchases Small Power Producer , , ,789 Other Non-Power Services - 3,461,934-2,838, ,000 REC Purchases ,000-1,087,363 Total Purchased Power 9,088,519 $ 328,690,321 8,676,737 $ 337,340,911 8,358,896 $ 335,794,118 Transmission and Ancillary Services Transmission Services - 36,966,812-38,777,791-38,668,797 Ancillary Services - 17,641,867-17,283,417-18,093,392 Total Transmission and Ancillary Services - $ 54,608,679 - $ 56,061,209 - $ 56,762,189 Snohomish County PUD 2019 BUDGET 15.

20 2019 Budget Electric System Operating and Maintenance Expenses - By Cost Center Uses of Funds - by Cost Center CC FTE (1) Results FTE Budget FTE Budget General Manager F , , ,948 Commission F , , ,960 Government Relations F , , ,358 Safety and Line Training F , ,468, ,668,754 Strategic Accounts F ,878,194 Total Administration ,054, $ 3,997, $ 6,857,214 Employee Resources Department F ,322, ,508, ,851,972 Employee Benefits F ,104,833-64,520,441-66,097,799 Total Employee Resources and Benefits ,427, $ 68,028, $ 69,949,771 Corporate Communications F ,185, ,101, ,138,730 Print Shop F ,983, ,232, ,262,386 Mailroom F , , ,732 Business Readiness & Training F1144-1, , ,161 Total Corporate Communications ,062, $ 5,751, $ 5,969,009 General Counsel F ,368, ,534, ,773,013 District Information Governance F , , ,544 Total Legal Services ,912, $ 4,263, $ 4,547,557 AGM Finance and Treasury F , , ,111 Budget and Financial Planning F , , ,896 SAP Support Finance F , , ,707 Contracts and Purchasing F ,397, ,456, ,470,884 Warehouse F ,117, ,999, ,172,638 Meter Reading F ,755, ,919, ,090,354 Customer Accounting F ,050, ,199, ,423,675 Treasury & Risk Management F ,317, ,149, ,504,875 General Accounting F ,578, ,941, ,911,154 Total Finance ,328, $ 21,841, $ 22,811,295 Grounds and Enginnering F ,367, ,216, ,184,915 Custodial Services F ,562, ,853, ,253,211 Facilities Maintenance F ,489, ,843, ,816,850 Facilities Planning F ,049, ,665, ,607,425 Security and Business Continuity F ,407, ,138, ,815,764 Facilities Administration F , , ,385 Total Facilities and Security ,303, $ 13,244, $ 12,214,550 Customer Service Experience F ,987, ,640, ,340,276 AGM Customer and Energy Services F ,531, , ,098 Business Operations F , ,157, ,116,009 Customer Analytics F , Customer Strategy, Analytics and Planning F ,239, Residential F ,503, ,555, ,022,466 Market Segments F ,205, ,164, ,183,143 Strategic Accounts F , ,388, Sr. Manager Energy Services F ,000, , ,076,970 Customer Technology Systems F , ,284, ,179,893 Total Customer and Energy Services Division ,285, $ 35,895, $ 34,836,853 Exhibit Snohomish County PUD 2019 BUDGET

21 2019 Budget Electric System Operating and Maintenance Expenses - By Cost Center Uses of Funds - by Cost Center CC FTE (1) Results FTE Budget FTE Budget AGM Power and Transmission F , , ,971 Rates & Economics F , , ,631 Power Scheduling F ,472, ,522, ,602,428 Power Supply F , , ,040,912 Regional Transmission and Compliance F ,260, ,658, ,868,395 Total Power, Rates & Transmission Mgmt ,611, $ 6,434, $ 7,037,336 AGM Information Technology Systems F , , ,167 ITS Administration Management F ,164, ,161, ,322,211 ITS Automation Projects F ,630-1,493,000-2,346,580 ITS Project Release Management F , , ,601 IT Quality Assurance F , , ,826 IT Project Release Delivery F , , ,427 ITS Operations Architecture F , , ,519 ITS Operations Support F ,924, ,406, ,344,387 ITS End User Support F ,258, ,232, ,270,998 ITS Database Admin F , , ,154 Enterprise Architecture F , , ,595 ITS Security Architecture F , , ,238 ITS Application Architecture F , ,502, ,641,605 M2C/APP Security F ,655, ,105, ,365,417 EAM/CMP/ALM F ,151, ,094, ,412,526 B2R/P2P/H2R/R2D F ,823, ,652, ,932,594 Analytics & Information Management F ,817, ,693,129 Total Information Technology Services ,028, $ 27,448, $ 29,598,973 Distribution and Engineering General F (230,078) - 512, ,220 AGM Distribution and Engineering F , , ,936 Distribution and Engineering Business Operations F , , ,398 Distribution and Engineering Capital Operating F ,707,636-9,291,850-5,100,000 Distribution and Engineering General Subtotal ,126, ,413, ,379,554 Work and Asset Management F , ,093, ,958 Inspection and Scheduling F , , ,004,134 Work and Asset Management Subtotal ,403, ,030, ,897,092 Sr. Manager Design and Construction F , , ,976 Monroe Local Office F ,326, ,606, ,488,269 Snohomish Local Office F ,415, ,743, ,548,820 Stanwood Local Office F ,951, ,826, ,805,086 Arlington Local Office F ,370, ,728, ,467,569 South County Local Office F , , ,013,524 Halls Lake F ,533, ,755, ,608,513 Everett Region F ,567, ,117, ,505,585 Everett Engineering F , , ,342 Plat Development F , , ,784 Design Construction Services Subtotal ,116, ,425, ,261,467 Exhibit 3 Snohomish County PUD 2019 BUDGET 17.

22 2019 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 Environmental Affairs F , , ,038 Environmental Affairs Subtotal , , ,038 Sr. Manager Shared Services F , , ,493 Real Estate F , , ,730 Transportation F ,029, ,585, ,491,874 Shared Services Subtotal ,040, ,712, ,667,097 Sr. Manager Construction Services F , , ,630 Vegetation Management F ,818, ,436, ,485,901 Energy Control Center F ,998, ,750, ,504,441 Apprenticeship Program F , Operational Technical Engineering F ,589, ,723, ,744,859 Transmission & Distribution Systems Subtotal ,304, ,218, ,089,831 Sr. Manager Planning F , , ,457 Distribution and Engineering Services F ,745, ,704, ,191,388 Transmission Engineering Services F ,405, ,182, ,080,547 GIS Maps, Records and Drafting F ,691, ,659, ,793,201 Planning and Protection F ,809, ,817, ,887,068 Planning/Engineering/Technology Subtotal ,989, ,764, ,332,661 Sr. Manager Substation, Metering & Telecom F , , ,000 Telecommunications F ,706, ,364, ,756,660 Substation Engineeing and Design F , ,138, ,345,031 Substation Construction F ,571, ,092, ,242,094 Metering F ,789, ,721, ,630,807 Subtotal Substation, Metering, Telecom ,283, ,568, ,209,592 Total Distribution & Engineering Services ,916, ,802, ,497,331 Total Other Costs/Capital Overheads (2) - (77,015,967) - (80,108,606) - (80,710,332) 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. 1,056.3 $ 171,914,813 1,085.5 $ 181,600,432 1,085.5 $ 184,609,558 (2) The Other Costs/Capital Overheads number represents the credit for employee benefits charged to cost centers and the credit for Admin and General expenses charged to Capital. 18. Snohomish County PUD 2019 BUDGET

23 2019 Budget Electric System Operating and Maintenance Expense by Cost Element Exhibit Operating and Maintenance Results Budget Budget Labor - Straight Time 80,687,214 83,310,235 87,908,030 Labor - Overtime 2,910,550 4,299,826 3,837,883 Employee Benefits 34,068,996 44,319,362 45,467,378 Travel and Training 1,191,081 1,554,688 1,640,845 Insurance and Claims 5,418,276 1,625,155 2,072,201 Coded Stock 2,379,822 2,339,553 1,598,880 Other Materials and Supplies 1,465, ,589 77,907 Construction Materials 19, Equipment 1,481,757 2,519,390 1,720,271 Supplies and Vehicle Expense 4,701,400 6,108,982 5,717,296 Public Works and Small Roster 5,566,108 8,332,569 6,881,675 Professional Services Contracts 7,791,138 9,052,880 11,799,489 Other Contracted Service 31,916,648 34,210,836 35,363,088 Rents 482, , ,997 Utilities 1,513,058 1,316,480 1,434,159 Land Purchases 36,308 36,308 - Property and Building Purchases 81,939 81,939 - Easements 92,491 92, ,078 Postage 1,455,497 1,621,515 1,662,015 Refunds (364,600) (6,100) - Dues and Memberships 1,817,851 1,848,114 2,100,616 Overheads (27,112,787) (34,599,277) (33,569,674) Capital Operating Expense 11,700,777 9,291,850 5,100,000 Bad Debt Expense 2,612,906 2,699,533 2,987,424 Total Operating & Maintenance by Cost Element $ 171,914,813 $ 181,600,431 $ 184,609,558 Snohomish County PUD 2019 BUDGET 19.

24 2019 Budget Electric System Capital Expenditures ELEC SYSTEM INFRASTRUCTURE CON. BUDGET Budget NEW CONNECTION CONSTRUCTION Budget Budget Swamp Creek 115kV Switching Station $ 466,085 $ 5,322,878 Meters & Installation $ 905,719 $ 704,144 Beverly Park Substation 3,390,459 - Transformers & Installation 4,870,901 - Everett Riverfront 768,560 - Area Light Installation 632, ,927 Cedar Valley Substation 3,200,430 3,377,182 Estimated Reimbursable 3,155,109 3,470,550 Stanwood to Camano 115kV Line 50,000 - Line Extension 4,287,395 5,255,827 East Stanwood Substation 200, ,598 Line Extension Non-Fee 662, ,215 Port Gardner Substation 3,801,550 4,309,324 Boeing Expansion - instl 4th PWR - 2,123,416 Stimson to Sills Corner Transmission Line 50, ,203 Other 384, , kV Ring Bus Station near Turners - 146,462 Plat Work 5,430,983 6,730, kV Ring Bus Station near Woods Creek 1,429,190 21,404 Street Light Install 2,510,766 3,351,779 N County 230kV Bank Addition 1,274,739 22,930 Subtotal New Connection Construction $ 22,840,732 $ 23,249,020 Subtotal Capital Expansion $ 14,631,013 $ 14,151,982 Station Reliability Improvement Program $ 843,606 $ 1,054,642 INFORMATION TECHNOLOGY CAPITAL Oso Substation Upgrade 5,000,374 3,894,717 ITS Automation/Improvement Projects $ 2,019,396 $ 1,823,652 Stimson-Stanwood 115kV Line Rebuild - 43,143 ITS Operations Hardware and Software 613,253 1,229,575 Casino Substation - Replace Transformer 3,252,766 - Subtotal Information Technology Capital $ 2,632,649 $ 3,053,227 Stimson Crossing Substation - Double Bank 50, ,676 Smokey Point Substation - Double Bank 278,914 - TELECOMMUNICATIONS / WIRELESS ATTACHMENTS/ ENERGY STORAGE Stanwood to Camano 115kV Line - Rebuild 50,000 - Energy Storage Demonstration Project (MESA 2) $ 2,669,025 $ - Delta Substation - 5th Feeder 2,849, ,775 Microgrid Energy Storage (MESA 3) - 1,150,000 Twentieth Ave -Replace BK1 Swtichgear 44, ,472 Smart Grid Test lab 89,554 91,000 Transmission Relay Upgrade - 101,043 Service to Telecommunication Companies 1,520,333 - Brightwater 115kV Ring Bus Relay Upgrade - 179,734 Microwave Radio System - 559,534 Subtotal Capital Upgrade $ 12,370,248 $ 6,643,202 Fiber Optic System 1,293,884 - Wood Pole Program $ 6,508,501 $ 4,609,956 Telecom Modernization 432, ,851 Cable Replacement Program 5,475,279 4,741,275 Wireless Infrastructure/Voice Radio System 779, ,533 Distribution System Operational Improvements 588,464 - Voice Radio System - 720,638 Facilities Relocations and Control Zone 3,794,538 3,577,617 Subtotal Telecomm/Wireless Attachments/Energy Storage $ 6,784,776 $ 3,709,557 Substation Emergency Equipment 2,076, ,790 Cascade Feeder Rebuild - 1,074,126 FACILITIES CAPITAL Ballinger 5th Feeder 49,884 1,360,066 Local Office Design and Construction $ 4,362,074 $ 5,279,063 Port of Everett North Marina 975,697 - Microgrid Sitework - 2,415,628 New Feeder Tie Between 4503 and ,551 - Operations Center Updates 432,186 - Martha Lake Reconductoring 404, ,038 OPS Master Plan 714, ,872 Underground Lynnwood and Aldewood Circuits 99, ,618 Roofing Projects - 4,068,847 Woods Creek to Lake Chaplain Circuit Tie 542, ,748 Other Facilities Capital/Equipment 1,727,253 2,471,680 Joint Pole Removal 200, ,133 75th Street Business Center Upgrades 6,795,360 5,412,462 Scada Upgrade 637, ,141 Building/Land Purchases - - Substation Circuit Switcher Replacement 173, ,258 Subtotal Facilities Capital $ 14,031,491 $ 19,777,552 Floral Hills Switchgear Replacement - 235,286 Delta - SCADA Ctrl on Each Line Position - 179,100 OTHER CAPITAL Thrashers Site Improvements - 89,673 New and Replacement Vehicles $ 3,533,425 $ 4,701,639 Turners Corner - 88,241 Tools, Testing, and Office Equipment 384,564 - North Marysville XFMR Replacement - 197,174 Transportation/Replacement Vehicles $ 3,917,990 $ 4,701,639 New Feeder Tie Between 133 and ,923 41,964 Subtotal Capital Asset $ 21,581,018 $ 19,198,205 LESS: O&M COSTS RELATED TO CAPITAL CONSTRUCTION (9,291,850) (5,100,000) Transmission Construction Unspecified $ 49,895 $ - Substation Improvements 300,000 - Total Capital Expenditures $ 93,946,466 $ 92,812,768 Substation Security Project 408, ,369 Distribution Automation 2,740,099 1,650,232 Distribution Line Improvements Unspecified 1,200,140 1,581,783 Subtotal Capital Outlay $ 4,698,399 $ 3,428,385 Exhibit Snohomish County PUD 2019 BUDGET

25 2019 Budget Administration Division Operating and Maintenance by Cost Element Cost Element Cost Element FTE Results FTE Budget FTE Budget Labor - Straight Time ,588, ,974, ,835,383 Labor - Overtime ,498 24,498 Employee and Retiree Benefits , Travel and Education , , ,021 Property and Liability Insurance Materials, Equipment & Supplies ,775 93, ,110 Coded Stock Material ,219 16,300 17,175 Public and Small Works Contracts Professional Services Contracts , , ,500 Other Contracted Services ,465 11,000 1,000,950 Rents and Utilities ,000 6,000 Land, Property and Easements Postage Dues, Memberships & Subscriptions ,528 61, ,265 Overheads/Other ,012,376 1,270,167 1,821,313 Total Administration Division 15.3 $ 3,054, $ 3,997, $ 6,857,214 Snohomish County PUD 2019 BUDGET 21.

26 2019 Budget Corporate Communications Operating and Maintenance by Cost Element Cost Element Cost Element FTE Results FTE Budget FTE Budget Labor - Straight Time ,266, ,326, ,450,438 Labor - Overtime ,721 16,000 16,000 Employee and Retiree Benefits , Travel and Education ,020 23,185 30,825 Property and Liability Insurance Materials, Equipment & Supplies , , ,000 Coded Stock Material , , ,000 Public and Small Works Contracts Professional Services Contracts , , ,000 Other Contracted Services , , ,931 Rents and Utilities ,473 13,475 13,475 Land, Property and Easements Postage ,455,515 1,619,000 1,659,500 Refunds (1,912) - - Dues, Memberships & Subscriptions ,334 34,000 34,000 Overheads/Other , , ,840 Total Corporate Communications Division 17.4 $ 5,062, $ 5,751, $ 5,969, Snohomish County PUD 2019 BUDGET

27 2019 Budget Legal Division Operating and Maintenance by Cost Element Cost Element Cost Element FTE Budget FTE Budget FTE Budget Labor - Straight Time ,700, ,657, ,742,647 Labor - Overtime Employee and Retiree Benefits , Travel and Education ,343 67,283 76,426 Property and Liability Insurance , , ,000 Materials, Equipment & Supplies ,449 50,200 38,700 Coded Stock Material Public and Small Works Contracts Professional Services Contracts ,773 1,020,000 1,180,000 Other Contracted Services , , ,625 Rents and Utilities Land, Property and Easements Postage Refunds (230) - - Dues, Memberships & Subscriptions ,439 12,475 13,865 Overheads/Other ,078,056 1,060,637 1,115,294 Total Legal Division 13.0 $ 3,912, $ 4,263, $ 4,547,557 Snohomish County PUD 2019 BUDGET 23.

28 2019 Budget Finance Division Operating and Maintenance by Cost Element Cost Element Cost Element FTE Budget FTE Budget FTE Budget Labor - Straight Time ,767, ,107, ,427,076 Labor - Overtime , , ,000 Employee and Retiree Benefits , Travel and Education ,791 96, ,980 Property and Liability Insurance ,841,617 1,425,155 1,777,201 Materials, Equipment & Supplies , ,880 68,272 Coded Stock Material , , ,952 Public and Small Works Contracts Professional Services Contracts , , ,459 Other Contracted Services ,490,299 5,731,581 5,845,919 Rents and Utilities ,143 1, Dues, Memberships & Subscriptions ,172 12,070 16,935 Overheads/Other ,969,069 5,267,175 5,479,721 Total Finance Division $ 23,328, $ 21,841, $ 22,811, Snohomish County PUD 2019 BUDGET

29 2019 Budget Customer and Energy Services Division Operating and Maintenance by Cost Element Cost Element Cost Element FTE Results FTE Budget FTE Budget Labor - Straight Time ,864, ,091, ,271,550 Labor - Overtime , , ,900 Travel and Education , , ,584 Property and Liability Insurance Materials, Equipment & Supplies ,103 1,060, ,700 Coded Stock Material ,960 25,900 26,400 Public and Small Works Contracts Professional Services Contracts ,694,199 1,043,000 1,116,000 Other Contracted Services ,711,982 12,832,000 13,428,200 Rents and Utilities ,241 12,300 16,000 Land, Property and Easements Postage ,500 2,500 Dues, Memberships & Subscriptions , , ,379 Overheads/Other ,446,571 7,822,302 7,298,640 Total Energy Services Division ,285, ,895, ,836,853 Snohomish County PUD 2019 BUDGET 25.

30 2019 Budget Facilities and Security Division Operating and Maintenance by Cost Element Cost Element Cost Element FTE Results FTE Budget FTE Budget Labor - Straight Time ,293, ,297, ,574,976 Labor - Overtime , , ,200 Employee and Retiree Benefits , Travel and Education ,842 30,275 33,270 Property and Liability Insurance Materials, Equipment & Supplies ,909 1,001,800 1,046,000 Coded Stock Material , , ,000 Public and Small Works Contracts ,644 2,026, ,200 Professional Services Contracts ,610,923 1,933,600 1,896,000 Other Contracted Services ,540,367 1,977,700 1,774,063 Rents and Utilities , , ,300 Land, Property and Easements ,500 8,000 Postage Refunds (5,406) - - Dues, Memberships & Subscriptions ,310 2,890 4,405 Overheads/Other ,109,815 2,116,924 2,353,137 Total Facilities and Security Division 52.5 $ 12,303, $ 13,244, $ 12,214, Snohomish County PUD 2019 BUDGET

31 2019 Budget Employee Resources and Benefits Operating and Maintenance by Cost Element Cost Element Cost Element FTE Budget FTE Budget Budget Labor - Straight Time ,458, ,475, ,001,067 Labor - Overtime Travel and Education , , ,725 Employee Benefits ,814,182 44,512,597 45,467,378 Property and Liability Insurance , ,000 Materials, Equipment & Supplies ,326 86,000 82,700 Coded Stock Material Public and Small Works Contracts Professional Services Contracts , , ,450 Other Contracted Services , , ,500 Rents and Utilities Land, Property and Easements Refunds (54,003) - - Postage (99) - - Dues, Memberships & Subscriptions ,858 29,655 27,839 Overheads/Other ,042,976 1,047,418 1,073,862 Total Employee Resources Division 19.4 $ 61,427, $ 68,028, $ 69,949,771 Snohomish County PUD 2019 BUDGET 27.

32 2019 Budget Information Technology Services Division Operating and Maintenance by Cost Element Cost Element Cost Element FTE Results FTE Budget Budget Labor - Straight Time ,224, ,317, ,010,752 Labor - Overtime , , ,200 Employee and Retiree Benefits , Travel and Education , , ,900 Property and Liability Insurance Materials, Equipment & Supplies ,100,970 1,810, ,226 Coded Stock Material ,427 10,000 10,000 Public and Small Works Contracts Professional Services Contracts ,528,349 2,093,000 3,584,080 Other Contracted Services ,783,874 9,029,906 9,095,584 Rents and Utilities ,217,463 1,047,180 1,047,180 Land, Property and Easements Postage Dues, Memberships & Subscriptions ,074 12,220 15,657 Overheads/Other ,017,663 5,829,427 5,795,394 Total Information Technology Services 88.0 $ 25,028, $ 27,448, $ 29,598, Snohomish County PUD 2019 BUDGET

33 2019 Budget Power and Transmission Division Operating and Maintenance by Cost Element Cost Element Cost Element FTE Results FTE Budget FTE Budget Labor - Straight Time ,711, ,837, ,112,214 Labor - Overtime , , ,000 Employee and Retiree Benefits , Travel and Education , , ,775 Property and Liability Insurance Materials, Equipment & Supplies ,517 18,100 11,600 Coded Stock Material Public and Small Works Contracts Professional Services Contracts , ,000 Other Contracted Services , , ,740 Rents and Utilities Land, Property and Easements Postage Dues, Memberships & Subscriptions , , ,190 Overheads/Other ,755,527 1,847,960 2,023,817 Total Power and Transmission 26.8 $ 5,611, $ 6,434, $ 7,037,336 Snohomish County PUD 2019 BUDGET 29.

34 2019 Budget Distribution and Engineering Division Operating and Maintenance by Cost Element Cost Element Cost Element FTE Results FTE Budget FTE Budget Labor - Straight Time ,571, ,424, ,670,175 Labor - Overtime ,284,429 3,156,928 2,701,585 Employee and Retiree Benefits , Travel and Education , , ,999 Property and Liability Insurance Materials, Equipment & Supplies ,035,114 4,186,875 3,510,666 Coded Stock Material ,671,751 1,602,853 1,387,603 Public and Small Works Contracts ,506,465 6,306,069 6,277,475 Professional Services Contracts , ,172 1,360,000 Other Contracted Services ,364,713 2,806,774 3,027,503 Rents and Utilities , , ,201 Land, Property and Easements , , ,078 Postage Dues, Memberships & Subscriptions , , ,850 Refunds (172,524) - - Capital Operating Expense ,700,777 9,291,850 5,100,000 Overheads/Other ,935,997 17,053,258 18,253,182 Total Distribution and Engineering Division $ 73,916, $ 74,802, $ 71,497, Snohomish County PUD 2019 BUDGET

35 2019 Budget Other Costs Operating and Maintenance by Cost Element Cost Element Cost Element FTE Results FTE Budget FTE Budget Labor - Straight Time (3,758,647) - (5,197,524) - (4,188,248) Labor - Overtime (373,646) (145,000) (305,000) Employee and Retiree Benefits (8,155,101) (193,235) - Travel and Education (16,949) (2,100) (38,660) Property and Liability Insurance (88,426) - - Materials, Equipment & Supplies , ,500 1,069,500 Coded Stock Material ,753 - (537,000) Public and Small Works Contracts Professional Services Contracts ,500 - Other Contracted Services (333,983) 154,364 (466,927) Rents and Utilities (116,753) (41,180) (60,780) Land, Property and Easements Dues, Memberships & Subscriptions , , ,231 Refunds (56,324) (6,100) - Uncollectible Expense ,612,906 2,699,531 2,987,424 Overheads/Other (68,381,965) (78,813,058) (79,758,877) Total Other Costs $ - $ (77,015,967) $ - $ (80,108,606) $ - $ (80,710,332) Snohomish County PUD 2019 BUDGET 31.

36 32. Snohomish County PUD 2019 BUDGET

37 2019 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 Creek and Calligan Creek Projects (both 6 MW projects located in King County). The Electric System has covenanted to purchase all power and energy available from the Generation System, and the net cash expenditures of the Generation System are treated as a component of the Electric System s purchased power. The Generation System is charged for administrative functions provided by the Electric System that support its operations. Snohomish County PUD 2019 BUDGET 33.

38 COMPARATIVE ANALYSIS Schedule 2 is a summary comparing the 2019 Budget for the Generation System with the 2018 Budget. Schedule 2 GENERATION SYSTEM COMPARATIVE FINANCIAL DATA ($000 s) Budget Budget Operating Revenues Energy Sales $ 45,617 $ 42,169 Other Operating Revenues 140 Total Operating Revenues $ 45,617 $ 42,309 Operating Expenses Operating & Maintenance Expenses $ 7,787 $ 6,965 Taxes Depreciation 7,893 5,416 Total Operating Expenses $ 15,778 $ 12,479 Net Operating Income $ 29,839 $ 29,830 Other Income & Expense $ 952 $ 881 Interest Charges 6,933 6,435 Contributions Net Income $ 23,908 $ 24,326 Cash Adjustments to Net Income Capital Expenditures $ (14,196) $ (2,327) Debt Service Principal (28,684) (29,402) Depreciation 7,893 5,416 Loan Repayments and Others 1,987 Estimated Changes in Reserves $ (11,079) $ 0 Operating Revenues The majority of the Generation System s costs, and the MWh generated, are passed on to the Electric System via energy sales (recorded a purchased power by the Electric System). Energy sales are $3.4 million lower in the 2019 Budget largely due to lower capital spending plan for the Jackson hydroelectric facility. Other operating revenues include miscellaneous expense reimbursements. Operating Expenditures Operating and maintenance expenditures in the 2019 Budget are $0.8 million lower than 2018 due to a lower level of scheduled Generation System maintenance projects. Estimated deprecation expenditures of $5.4 million are lower than the 2018 budget and reflect a true-up of the current depreciation schedules on assets for Depreciation is an estimate of the reduced value of the Generation System s fixed assets. Interest charges reflect current debt payment schedules on existing debt. Cash Adjustments to Net Income Capital expenditures in the 2019 Budget are $2.3 million, $11.8 million lower than the 2018 Budget. Capital expenditures in 2018 included costs for the completion of the Hancock Creek and Calligan Creek projects, which are now operational. The 2019 capital expenditures include $1.8 million related to capital maintenance for the Jackson Hydroelectric Project. Debt service principal is slightly higher in the 2019 Budget compared to 2018, reflecting current debt payment schedules on existing debt. There are no planned reserve transfers in 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 2019 BUDGET

39 2019 Budget Exhibit 6 Generation System - Combined Operating Revenues FTE Results FTE Budget FTE Budget Net Energy Sales Jackson Hydro 26.1 $ 17,993, $ 24,145, $ 19,880,774 Generation System - Other 19,611,786 17,895,100 15,761,196 Youngs Creek 1,810,383 1,942,477 1,965,542 Woods Creek 388, , ,947 Renewable Generation 90, ,328 Calligan Hydro - 142,509 1,922,316 Hancock Creek - 1,360,792 2,198,535 Total Net Energy Sales $ 39,893,805 $ 45,617,399 $ 42,168,636 Non Operating Revenues Misc Operating Expense Reimbursement 240, ,000 Total Other Operating Revenues $ 240,840 $ - $ 140,000 Total Operating Revenues $ 40,134,645 $ 45,617,399 $ 42,308,636 Operating Expenses Operating & Maintenance Cost Element Results FTE Budget Budget Labor - Straight Time ,979,050 2,813,972 2,478,537 Labor - Overtime ,461 83,000 89,500 Travel and Education ,745 61,134 67,377 Employee Benefits (140,609) - - Insurance and Claims , , ,815 Materials, Equipment & Supplies , , ,800 Coded Stock Material ,913 29,890 30,500 Public and Small Works Contracts , , ,000 Professional Services Contracts , , ,610 Other Contracted Services ,049 1,064, ,425 Rents and Utilities , , ,653 Uncollectible Expense Land, Property and Easements ,922 8,750 8,750 Dues, Memberships & Subscriptions ,455 51,525 52,670 Refunds (173) - - Overheads ,227,816 1,819,354 1,605,464 Total Operating & Maintenance Expenses - $ 4,991,682 - $ 7,787,400 - $ 6,965,101 Total Taxes 97,487 97,640-97,640 - Total Depreciation 3,699,379 7,893,400 5,416,000 Total Generation Operating Expenses $ 8,788,549 $ 15,778,440 $ 12,478,741 Snohomish County PUD 2019 BUDGET 35.

40 2019 Budget Exhibit 6 Jackson Hydroelectric - Profit Center Operating Expenses Operating & Maintenance Cost Element Results Budget Budget Labor - Straight Time $ 1,750,343 $ 2,823,404 $ 2,466,037 Labor - Overtime ,065 75,000 75,000 Travel and Education ,732 61,134 67,377 Employee Benefits (140,609) - - Insurance and Claims , , ,793 Materials, Equipment & Supplies , , ,800 Coded Stock Material ,653 8,890 12,000 Public and Small Works Contracts , , ,000 Professional Services Contracts , , ,510 Other Contracted Services , , ,780 Rents and Utilities ,997 75, ,353 Land, Property and Easements ,922 8,750 8,750 Dues, Memberships & Subscriptions ,455 51,525 52,670 Overheads ,146,483 1,793,294 1,592,184 Total Operating & Maintenance Expenses $ 4,498,571 $ 7,242,262 $ 6,286,254 Taxes 97,103 83,256 83,256 Depreciation 3,015,374 3,076,876 3,404,039 Jackson Total Operating Expenses $ 7,611,047 $ 10,402,395 $ 9,773,549 Generation System Debt Service - Profit Center Operating Expenses Operating & Maintenance Cost Element Results Budget Budget Labor - Straight Time $ 18,485 $ 30,000 $ 12,500 Professional Services Contracts ,301 12,000 - Other Contracted Services ,859-5,000 Overheads ,479 19,200 8,000 Total Operating & Maintenance Expenses $ 35,994 $ 61,200 $ 25,500 Taxes Depreciation Other Generation Operating Expenses $ 35,994 $ 61,200 $ 25, Snohomish County PUD 2019 BUDGET

41 2019 Budget Exhibit 6 Renewable Generation - Profit Center Operating Expenses Operating & Maintenance Cost Element Results Budget Budget Labor - Straight Time $ 88,647 $ - $ - Travel and Education Materials, Equipment & Supplies Professional Services Contracts , Overheads , Total Operating & Maintenance Expenses $ 111,429 $ - $ - Taxes Depreciation Renewable Generation Total Operating Expenses $ 111,429 $ - $ - Youngs Creek - Profit Center Operating & Maintenance Cost Element Reults Budget Budget Labor - Straight Time $ 81,483 $ - $ - Labor - Overtime ,051 5,000 6,500 Insurance and Claims ,644 20,573 18,790 Materials, Equipment & Supplies ,006 26,000 32,000 Coded Stock Material ,260 6,000 3,500 Public and Small Works Contracts ,700 35,000 35,000 Professional Services Contracts ,926-40,000 Other Contracted Services ,298 29,750 30,975 Rents and Utilities ,716 16,400 25,050 Overheads ,439 1,880 1,600 Total Operating & Maintenance Expenses $ 250,523 $ 140,603 $ 193,415 Taxes 3,501 3,886 3,886 Depreciation 644, , ,568 Youngs Creek Total Operating Expenses $ 898,942 $ 937,483 $ 915,869 Snohomish County PUD 2019 BUDGET 37.

42 2019 Budget Exhibit 6 Woods Creek - Profit Center Operating Expenses Operating & Maintenance Cost Element Results Budget Budget Labor - Straight Time $ 40,092 $ - $ - Labor - Overtime ,000 3,000 Insurance and Claims ,945 2,575 3,515 Materials, Equipment & Supplies ,128 16,000 50,000 Coded Stock Material ,000 3,000 Public and Small Works Contracts ,000 5,000 Professional Services Contracts ,301 1,200 26,500 Other Contracted Services ,894 29,770 35,125 Rents and Utilities ,778 9,500 10,000 Overheads ,683 1, Total Operating & Maintenance Expenses $ 95,167 $ 78,425 $ 137,100 Taxes Depreciation 39,087 41,477 41,782 Woods Creek Total Operating Expenses $ 134,638 $ 120,233 $ 179,213 Calligan - Profit Center Operating Expenses Operating & Maintenance Cost Element Results Budget Budget Insurance and Claims $ - $ 20,573 $ 19,170 Materials, Equipment & Supplies ,500 10,500 Coded Stock Material ,000 Public and Small Works Contracts ,000 25,000 Professional Services Contracts ,800 18,800 Other Contracted Services ,252 42,285 Rents and Utilities ,500 32,625 Overheads , Total Operating & Maintenance Expenses $ - $ 137,425 $ 155,340 Taxes - 5,084 5,084 Depreciation ,921 Calligan Creek Total Operating Expenses $ - $ 142,509 $ 778, Snohomish County PUD 2019 BUDGET

43 2019 Budget Exhibit 6 Hancock - Profit Center Operating Expenses Operating & Maintenance Cost Element Budget Budget Budget Labor - Overtime ,000 Insurance and Claims ,573 15,547 Materials, Equipment & Supplies ,250 15,500 Coded Stock Material ,000 6,000 Public and Small Works Contracts ,000 25,000 Professional Services Contracts ,800 18,800 Other Contracted Services ,993 47,260 Rents and Utilities ,500 32,625 Overheads ,800 1,760 Total Operating & Maintenance Expenses $ 166,916 $ 167,492 Taxes - 5,084 5,084 Depreciation ,689 Hancock Creek Total Operating Expenses $ - $ 172,000 $ 806,265 Generation System - Capital Expenditures Results Budget Budget Jackson Hydroelectric Project $ 7,236,507 $ 7,654,209 $ 1,966,008 Renewable Generation - 460, ,328 Youngs Creek - 240,704 87,858 Woods Creek 79,187-16,675 Calligan Creek 7,843,008 2,669,594 - Hancock Creek 9,443,642 3,170,644 - Total Generation System Capital $ 24,602,344 $ 14,195,999 $ 2,326,869 Snohomish County PUD 2019 BUDGET 39.

44 2019 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 20,500 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, reservoirs, meters, maintenance facilities, and equipment. The Water System is charged for administrative functions provided by the Electric System. ASSUMPTIONS The 2019 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 wholesale water rates are expected to increase 3.8% in 2019, which is reflected in the budget for purchased water costs. Full-time Equivalent Employees (FTE) The 2019 Budget does not include any additional FTEs (Note: Employee figures do not include services provided by the Electric System including accounting and finance, real estate, employee resources, vehicle and equipment maintenance, information technology services, telecommunications, legal, contracts, facilities and customer service functions.) Asset Acquisition In 2018, the Water System completed the acquisition of the assets of the Warm Beach Water System, which served about 600 customers. The 2019 Budget includes funding for capital and other improvements of the Warm Beach Water System. The 2019 Budget also includes funding from loans and grants from the Drinking Water State Revolving Fund (DWSRF) to help offset some of the acquisition and costs. 40. Snohomish County PUD 2019 BUDGET

45 COMPARATIVE ANALYSIS Schedule 3 is a summary comparing the 2019 Budget for the Water System with the 2018 Budget. Schedule 3 WATER SYSTEM COMPARATIVE FINANCIAL DATA ($000 s) Budget Budget Operating Revenues Water Retail Sales $ 12,131 $ 12,160 Water Wholesale Sales Other Operating Revenues Total Operating Revenues $ 12,814 $ 12,940 Operating Expenses Purchased Water $ 2,406 $ 2,881 Operating & Maintenance 5,613 5,401 Taxes Depreciation 2,907 2,965 Total Operating Expenses $ 11,572 $ 11,899 Net Operating Income $ 1,242 $ 1,041 Other Income & Expense Interest Charges (630) (686) Contributions 3,371 3,887 Net Income $ 4,700 $ 4,955 Cash Adjustments to Net Income Capital Expenditures $ (6,858) $ (5,825) Debt Service Principal (2,109) (1,983) Depreciation 2,907 2,965 Loans and Other Estimated Changes in Reserves $ (835) $ 643 Operating Revenues Water retail sales are estimated at $12.1 million. Other operating revenues include $355,000 in property rental and other miscellaneous fees. No rate increases are planned for Operating Expenditures Purchased water costs are budgeted at $2.9 million, an increase of $0.5 million from 2018 levels. Water purchases needed from the City of Everett include the impact of a 3.8% wholesale water rate increase and are offset partially by production from the PUD s Lake Stevens well water treatment facility. Operating and maintenance expenditures for the 2019 Budget are lower than 2018 budgeted levels. Estimated depreciation of $3.0 million is roughly equivalent to Depreciation is an estimate of the reduced value of the PUD s fixed assets. Contributions are expected to increase in 2019 as a result of a higher level of developer activity. Cash Adjustments to Net Income The 2019 Budget provides approximately $5.8 million for capital expenditures and construction projects, and features several significant main replacements as well as capital expenditures to bring the Warm Beach system to alignment with PUD service standards. The table below lists the significant capital expenditures included in the 2019 Budget. Significant 2019 Water System Construction Projects/Programs ($000 s) CIP #46-26th St NE Main Replacement $ 1,655 CIP #22-114th Dr NE Main Replacement 639 CIP #47-116th Ave NE Main Replacement 485 CIP #310 Warm Beach Consolidation 400 Snohomish County PUD 2019 BUDGET 41.

46 2019 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) $ 11,479,742 $ 11,501,288 $ 11,532,270 Low Income / Senior Discounts (110,000) (113,300) Sale of Water - Commercial 780, , ,174 Total Water Retail Sales 12,260,286 12,130,529 12,160,144 Sale of Water - City of Granite Falls Wholesale 278, , ,491 Sale of Water - City of Arlington Wholesale 96,163 92,246 94,091 Sale of Water - Other (Snohomish & Goldbar) 118,166 75,105 71,607 Total Wholesale Water Sales 492, , ,189 Total Water Sales 12,753,148 12,552,283 12,585,333 Other Operating Revenues Lake Roesiger Septic Tank Pumping Revenue 13,522 15,225 13,932 Property Rental 219, , ,895 Miscellaneous Receipts & Engineering Fees/Other Other Revenue 111,537 51, ,352 Total Other Revenues 344, , ,179 Total Operating Revenues $ 13,097,239 $ 12,813,258 $ 12,940,512 Other Revenue Interest Income and Expense Investment Income $ 202,196 $ 136,800 $ 669,323 Assessments for LUDS Interest 43,828 44,000 44,000 Subtotal - Interest Income and Other $ 246,024 $ 180,800 $ 713,323 Contributions General Facilities Charges $ 1,350,935 $ 2,039,146 $ 2,079,929 New Service Connections 332, , ,846 Distribution Service Charges 443, , ,209 Non-Cash Contributions/Donated Plant 1,608,735 1,000,000 1,000,000 Subtotal - Contributions $ 3,735,386 $ 3,370,646 $ 3,886,984 Assessments for LUD Principal 44, , , Snohomish County PUD 2019 BUDGET

47 2019 Budget Water System Operating Expenses Exhibit 8 Operating Expenses Operating & Maintenance Cost Element FTE Results FTE Budget FTE Budget Labor - Straight-time $ 2,097, $ 1,783, $ 2,219,226 Labor - Overtime , , ,000 Travel and Education ,183 20,779 22,400 Property and Liability Insurance , , ,596 Rents and Utilities , , ,000 Postage ,695 25,000 26,500 Dues, Memberships & Subscriptions ,587 7,500 7,500 Public and Small Works Contracts ,158,739 55,000 30,000 Professional Services Contracts , , ,500 Other Contracted Services (1,419,278) 1,370, ,892 Materials, Equipment & Supplies , , ,875 Uncollectible Expense ,928 60,024 60,704 Coded Stock Material ,885 60,000 60,000 Land, Property and Easements ,991 20,000 50,000 Overheads ,101,410 1,361,236 1,298,656 A&G Credit (349,021) (523,807) (323,087) Total Operating & Maintenance by Cost Element 26.0 $ 5,179, $ 5,612, $ 5,400,762 Purchased Water 2,585,337 2,406,045 2,881,430 Taxes 640, , ,140 Depreciation 2,874,927 2,907,000 2,965,140 Total Operating Expense $ 11,280,095 $ 11,571,254 $ 11,899,472 Snohomish County PUD 2019 BUDGET 43.

48 2019 Budget Water System Exhibit 9 Current A&G: 11.0% Current AFUDC: 0.00% Wtr Stores OH: 16.00% Labor Benefits: 64.0% EXHIBIT 9- PUD NO. 1 OF SNOHOMISH COUNTY WATER UTILITY CAPITAL BUDGET Contract Services WBS 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 TOTAL SW-CP-LS-0* Design & Crew Inspection for Donated Plant 0 9,000 1,440 7, ,000 99, ,043 1,000 19, ,398 SW-CP-LS-0* Donated Plant 1,000, ,000,000 SW-CP-LS-4020 CIP #22-114th Dr NE Main Replacement Design / Construction 0 1, ,000 45,000 28,800 17, ,000 4, , ,939 SW-CP-LS-4020 CIP #26-111th Dr NE Main Replacement Design / Construction ,000 8,320 5, , ,500 16, ,061 SW-CP-LS CIP #43-32nd St SE Main Replacement Design / Construction 0 1, ,426 52,131 33,364 9, ,283 3, ,373 1,200,000 SW-CP-LS-4020 CIP #46-26th St NE Main Replacement Design / Construction 0 1, ,101 35,000 22,400 13, , ,000 51, ,787 SW-CP-LS-4020 CIP #47-116th Ave NE Main Replacement Design / Construction ,000 35,000 22,400 13, , ,142 44, ,328 SW-CP-LS-4020 CIP #51-101st Ave NE Main Replacement Design / Construction 0 1, ,500 5,440 4,000 95, ,000 12, ,029 SW-CP-LS-4020 CIP #98 - Forced Right of Way Relocations / Replacements Design / Construction 0 5, ,000 22,000 14,080 2, , ,217 97,799 SW-CP-LS-4160 CIP #300 - Misc. Meter Replacement Program 0 72,000 11,520 9,870 25,000 16, , ,700 SW-CP-LS-1400 CIP #301 - Vehicles and Equipment 0 2, ,111 3,000 1, ,822 81,173 SW-CP-LS-1100 CIP #302 Misc Power Operated Equipment ,282 4,000 2, , ,963 SW-CP-*-41* CIP #305 - New Services 0 140,000 22,400 27,597 75,000 48, , , ,233 SW-*-CP-1300 CIP #308 - Water SCADA system PLC Upgrade Design / Construction ,342 10,000 6,400 50, ,058 97,800 SW-CP-WB* CIP #310 - Warm Beach Consolidation Design / Permitting 0 10,000 1,600 4,863 80,000 51, , , , ,198 SW-CP-LS-2200 CIP #311 - Lake Stevens Treatment Corrosion Control Optimization Design / Permitting ,000 9,600 60, ,459 8,740 97,799 TOTAL CAPITAL TO PLANT: 1,000, ,287 38, , , , ,349 2,402,283 44,294 21, ,461 5,825, Snohomish County PUD 2019 BUDGET

49 Snohomish County PUD 2019 BUDGET

50 SNOHOMISH COUNTY PUD 2019 BUDGET SNOPUD.COM