Comprehensive Annual Financial Report - Mason PUD 3 · The Comprehensive Annual Financial Report...

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making connections.making connections.making connections.

2013

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MASON COUNTYPUBLIC UTILITY DISTRICT NO. 3

Shelton, Mason County, Washington

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

For the fiscal year ended December 31, 2013Prepared by the Finance, Administration and Public Information/Government Relations Departments

2013 Finance Staff Clockwise from bottom: Brian Taylor (CFE), Jenifer Sliva, Emily Gott, Dani Leboki, Karissa Byrne, Sherry Speaks (CPA), and Dawn Thompson (CPA, CFE).

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Table of Contents

Introductory Section Message from the Commission President and Manager ..................................................................................... 2 Fast Facts .............................................................................................................................................................. 4 CertificateofAchievementforExcellenceinFinancialReporting ....................................................................... 5 LetterofTransmittal ........................................................................................................................................ 6-10 OrganizationalChart ..................................................................................................................................... 11-12 Board of Commissioners ............................................................................................................................... 13-14

Financial Section IndependentAuditor’sReport ...................................................................................................................... 15-16 Management’sDiscussionandAnalysis ........................................................................................................ 17-21 BasicFinancialStatements: StatementofNetPosition-ProprietaryFund ...................................................................................... 22 StatementofRevenues,ExpensesandChangesinNetPosition-ProprietaryFund ........................... 23 StatementofCashFlow-ProprietaryFund ......................................................................................... 24 StatementofNetPosition-FiduciaryFunds ........................................................................................ 25 StatementofChangesinFiduciaryNetPosition .................................................................................. 26 NotestoFinancialStatements ........................................................................................................ 29-50 RequiredSupplementaryInformation ............................................................................................................... 51

Statistical Section StatementofRevenues,ExpensesandChangesinNetPosition ....................................................................... 54 NetPosition ........................................................................................................................................................ 54 RevenuesandConsumptionbyCustomerClass ................................................................................................ 55 RetailRates ......................................................................................................................................................... 56 District’sPrincipalRatepayers ............................................................................................................................ 57 ComparativeTaxCosts ....................................................................................................................................... 58 DebtServiceCoverage ....................................................................................................................................... 59 DebtMarginInformation ................................................................................................................................... 59 RatiosofOutstandingDebt ................................................................................................................................ 60 DemographicStatistics ....................................................................................................................................... 61 PrincipalEmployersinMasonCounty ............................................................................................................... 62 OperatingIndicators ...................................................................................................................................... 63-64

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

For the fiscal year ended December 31, 2013

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Intro

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“Making connections starts from within. PUD 3 employees work collaboratively and creatively to form teams from various fields and departments. These efforts help us make efficient and cost effective decisions for the PUD and our customers.”

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Message from theCommission President and Manager

TomFarmerCommission President

AnnetteCreekpaum,CPAManager

Makingconnectionsisimportantforanyorganization,especiallypublicutilities.ForMasonPUD3,itisavitalpartofourculture.Itrepresentsafiberofcommunicationswovenintothetapestryofouruniquebusiness.Weservenearly33,000customerswholiveinadiverseeconomic,culturalandgeographicarea.Itisabeautifulregion,tiedtogetherbyPUD3’spowerlinesandfiberopticnetworkcables.

Makingconnectionsstartsfromwithin.PUD3employeesworkcollaborativelyandcreativelytoformteamsfromvariousfieldsanddepartments.TheseeffortshelpusmakeefficientandcosteffectivedecisionsforthePUDandourcustomers.

Ourfiberopticnetworkisanexcellentexampleofthisteamworkandgooddecision-making.2013sawacontinuedbuildoutofthePUD’sinfrastructuretobringhigh-speed,openaccessbroadbandservicetoourruralcommunity.Ourworkenhancedsecurityforourfacilities;connectedclassroomstotheworld;bolsteredpublicsafety;andbroughtworld-classservicetolocalbusinessessotheycanbettercompeteforbusinessinourcommunityandaroundtheworld.

Specifically,ourpartnershipwiththeNorthwestOpenAccessNetwork(aconsortiumofpublicutilitiespassionateaboutruralbroadbandconnections)(NoaNet),andWashingtonState’sK-20schoolnetworkbrought100MbpsbroadbandservicetotheHoodCanalSchool,whichislocatedintheSkokomishTribalNation’sreservation.Localconnectionsarepersonifiedbytheexpansionofreliable,high-speedcellulartelephoneservicethankstoNoaNet’scontractswithmajorwirelesscarriers.NoaNetcontractedwithPUD3toconstructfiberopticconnectionstosevencellsites.Theprojectprovidesforbettercallservice,datanetworks,andpublicsafety.

Throughourmissionandourpersonalcommitment,makingconnectionswithourcustomersiskeytothePUD’sservicetothecommunity.We’veworkedhardtomaintainastronglinktothoseweserve.In2013weofferedcustomersmoreflexiblepaymentoptions,especiallythroughpaperlessbilling.Wehelpedcustomerssavehundredsofdollarsonheatingbillsthroughthepromotionofductlessheatpumpsandotherconservationmethods.Weupdatedthelayoutofournewslettertomakeiteasiertoread.WeareleadersintheeffectiveuseofFacebook,Twitterandmobilewebsitedesigntocommunicateimportantissuestothepublic.We’reworkingonwaystoputthepowerintothehandsofourcustomerssotheycanmanagetheirownaccounts;reportoutages,dangertrees,andstreetlightissuesonline.

Ourinnovativeapproachtoproblemsolvinghasstrengthenedconnectionswithotherpublicagencies.WeworkedcloselywiththeWashingtonStateDepartmentofTransportationinthedesignofsafetycorridorimprovementinBelfaironHighwayThree.Thestatehelpedusfindlocationsforourpowerpoles,whichneededtomovetomakeroomfortheroadwork.OurengineeringandoperationsstaffrelocatedthreeoffourtransmissionpolesinNovember.Theyweremovedwhilepowerlineswereenergized.Thisinnovativeapproachavoidedtheneedforseverallarge,plannedoutages.Employeesshowedagreatdealoftrustandrespectincarryingoutthistask.We’veworkedwiththecityofSheltontotestenergyefficientandlonglastinglight-emittingdiode(LED)streetlights.Theprojectwillenhancesecurity,improvesafetyforpedestriansandmotorists,saveenergy,andcutmaintenancecosts.Asweprovethebenefits,wehopetoexpandtheuseofLEDlightstootherareas.

Asourcommunitygrowsandstrengthens,PUD3willbethere,helpingtoweavetogetherthecommonthreadsthatmakeMasonCountysuchawonderfulplacetoliveanddobusiness.

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“The PUD 3 telecommunications department continued to expand its community connections in 2013. Our fiber optic network supports security

at our facilities throughout Mason County. The extra capacity on our network provides high-

speed connections for public safety, education, and economic development.”

- Dale KnutsonTelecommunications Manager

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Fast Facts As of December 31, 2013

13,894average annual use,

residential in kWh

$0.0839average kWh costfor residential use

170,156maximum system

peak demand in kW

656,362,8972013 electricity sales in kWh

overhead primary line miles

11number of substations

79,790average load in kW

422fiber optic

line miles within system

$59,086,8762013 Budget

1,078underground primary

line miles

690

32,498number of customers

fiber opticend user active connections

584number of employees

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June23,2014

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

TheComprehensiveAnnualFinancialReport(CAFR)oftheMasonCountyPublicUtilityDistrictNo.3(District)fortheyearendedDecember31,2013,isherebysubmitted.ThereportisdesignedtoassesstheDistrict’sfinancialcondition,educatereadersabouttheDistrict’sservices,examinecurrentchallengesfacingtheDistrict,andfulfilllegalreportingrequirements.

WashingtonStatelawrequiresthateverylocalgovernmentsubmitfinancialreportstotheStateAuditorwithin150daysafterthecloseofeachfiscalyear.TheDistrict’sbondcovenantsrequirefinancialinformationtobeprovidedtoeachnationallyrecognizedmunicipalsecuritiesinformationrepositoryinaccordancewithSection(b)(5)ofSecuritiesandExchangeCommissionRule15c2-12undertheSecuritiesandExchangeActof1934.ThisreportispublishedtofulfillbothrequirementsforthefiscalyearendedDecember31,2013.

Managementassumesfullresponsibilityforthecompletenessandreliabilityoftheinformationcontainedinthisreport,baseduponacomprehensiveframeworkofinternalcontrolsthatareestablishedforthispurpose.Becausethecostofinternalcontrolsshouldnotoutweightheirbenefits,theDistrict’ssystemofinternalcontrolshasbeendesignedtoprovidereasonableratherthanabsoluteassurancethatthefinancialstatementswillbefreefrommaterialmisstatement.Asmanagementweassertthat,tothebestofourknowledgeandbeliefthisfinancialreportiscompleteandreliableinallmaterialrespects.

TheWashingtonStateAuditor’sOfficehasissuedanunmodified(“clean”)opinionontheDistrict’sfinancialstatementsfortheyearendedDecember31,2013.Managementhasmadeavailabletotheauditorallfinancialrecordsandrelateddatanecessarytocompletetheaudit.Managementconsidersandtakesappropriateactiononauditrecommendationsconcerninginternalcontrolprocedures,financialmattersandlegalcompliance.Theindependentauditor’sreportislocatedatthefrontofthefinancialsectionofthisreport.

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

Profile of the DistrictMasonCountyPublicUtilityDistrictNo.3wasestablishedbyvotein1934andbeganoperationsin1939.Understatelaw,theDistrictisauthorizedtoprovideelectric,waterandtelecommunicationservices,andifapprovedbyvote,sewerservices.TheDistrictengagesinthepurchase,distributionandsaleofelectricenergy,aswellaswholesaletelecommunicationservices.TheDistrict’sheadquartersareinShelton,Washington,approximately22milesnorthwestofOlympia,thecapitalofWashingtonState.Itsserviceareaencompasses567squaremiles,mostofwhichisinMasonCounty.However,electricserviceisprovidedtofivesquaremilesinsouthernKitsapCounty,18squaremilesineasternGraysHarborCounty,and0.00156squaremilesinsouthwesternPierceCounty.TheDistricthasasatelliteofficeinBelfair,Washington,whichisinnorthernMasonCounty.

Sinceitsestablishmentin1934,MasonCountyPublicUtilityDistrictNo.3hasbeenunderthedirectionofthreeelectedcommissioners.Commissionmembersservesix-yearterms,withonememberelectedeverytwoyears.TheBoardofCommissionersappointstheDistrict’smanager,auditorandtreasurer.AsthechiefadministrativeofficeroftheDistrict,themanagerisresponsibleforalladministrativefunctionsincludingpreparationofanannualbudgetandthehiringanddischargeofemployeesunderherdirection.

TheDistrictisafullrequirementscustomeroftheBonnevillePowerAdministration(BPA)meaningthatBPAprovidesalloftheDistrict’spowerrequirementsatcost-basedrates.TheDistricttakesdeliveryoftheBPApower

COMMISSIONERSThomasJ.FarmerLindaR.GottBruceE.JorgensonMANAGERAnnetteS.Creekpaum

P.O.Box2148•Shelton,WA98584•(Bus)360-426-8255•(Fax)360-426-8547www.masonpud3.org

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atelevensubstations,tenofwhichareownedbytheutility.Ithas1,768milesofprimarylinesandownsandoperates29.80milesof115kVtransmissionlines.AsofDecember31,2013,thevalueoftheDistrict’snetplanttotaled$136.5millionanditserved32,498customers.Loaddatafortheyearincludedkilowatt-hour(kWh)salestoretailcustomersof656,362,897kWh.

TheDistrictprovideswholesalefiberopticservicestosixserviceproviderswhointurnprovideretailservicesto584connectionsover422milesoffiberopticlinewithinMasonCounty.TheDistrictisalsoamajorhubforhighcapacitydatalinesthroughoutwesternWashington.Itsstrategiclocationprovidesredundantservicecapabilitiesthroughtwomajorinternetroutes.

TheDistrictrecordsfinancialtransactionswithinasingleproprietaryfund,otherthanthoseinitstwofiduciaryfundscomprisedofaVoluntaryEmployees’BeneficiaryAssociation(VEBA)trustestablishedinMayof2004andtheOtherPostemploymentBenefits(OPEB)trustestablishedin2008.TheDistricthasnogovernmentalfundswithlegallyadoptedbudgetsthatcarrytheforceoflaw.Accordingly,theDistrict’sbudgetisnotcontainedwithinthisreport.However,theDistrictadoptsanannualbudgetforpurposesofplanningandmanagementcontrol.ThebudgetprocessinvolvespreparationofaproposedoperatingandcapitalbudgetbyDistrictstafffortheensuingyearthatispresentedtotheBoardofCommissioners.Duringworkshopsessionsthatareopentothepublic,thestaffandboardreviewandrevisetheproposedbudget.Apublichearingisconductedtoobtainratepayercomments.Whenapprovedbyboardresolution,thebudgetbecomesthebasisforoperationsfortheensuingcalendaryear.

Local EconomyTheeconomyofMasonCountyhashistoricallycenteredonitswealthofnaturalresourcesandscenicbeauty.Overthepastthreedecades,thecommunityhasstrivedtodiversifyitseconomicbasethroughthewiseuseofitsforestsandwaterassets,aswellastheattractionofnewbusinessinterests.Theprimarysectorsthatsupportthecounty’seconomyare:forestproducts,includinglumberprocessingandmanufacturing;aquaculture,includingshellfishharvestingandprocessing;specialtyforestproductsandfloralgreens;retailtradeandthehospitalityindustry;government,schoolsandmedicalfacilities.

Theincreasinglydiversifiedeconomicbasehasresultedinrelativelystableemploymentforaresourcedependentcounty.Duringthepasttenyears,theunemploymentratewas6.7percentin2004toadecadehighof11.3percentin2009.Thecurrentrateofunemploymentisninepercent(December2013).

SelectedprojectsandeventsofcommunityinterestwithintheDistrict’sserviceterritory:

• TheDistrictbeganmonitoringactivityinvolvingastudyoftheColumbiaRiverTreatybytheU.S.ArmyCorpsofEngineersandtheBonnevillePowerAdministration.TheagreementwithCanadaisdesignedtomanagetheriverforpowergenerationandfloodcontrolasitflowsfromBritishColumbiaintotheUnitedStates.TheDistrictisamemberofthe“ColumbiaRiverTreatyPowerGroup,”whichwasformedtoensureafairandequitableoutcomefortheestimated6.4millionPacificNorthwestelectriccustomersitserves.

• TheDistrictsolditsformerdowntownSheltonengineeringbuildingtoNorthwestResourcesII.Itincludedtheengineeringbuilding,anadjacentpark/gardenarea,andaccesstoon-sitebackupelectricitygeneration.ThefacilityisusedforNorthwestResources’counselingservices.TheDistrict’sengineeringandadministrationbuildingsbecamesurplusafterthecompletionoftheJohnsPrairieoperationscenterin 2012.

• “ProjectShare”enteredits30thyearofcontinuousoperation,helpinglow-incomeMasonCountyfamilieswiththeirelectricitybills.TheprogramisajointeffortoftheDistrict,theCommunityActionCouncil,churches,interestedcitizens,andDistrictcustomers.

• TheDistrictparticipatedinthehighlysuccessfulCleanHydrocampaign,tore-introducePacificNorthwestresidentstothevalueofhydroelectricityandthevariousbenefitsthatdamsintheColumbiaRiverBasinprovidetotheregion.NorthwestRiverPartnerscoordinatedthecampaign.

• TheDistrictconductedacampaigntoincreasethenumberofcustomerswhousetheDistrict’sonlinebillingoffering,especiallypaperlessbilling.Duringthepromotion1,940customerssignedup,resultinginanannualsavingsof$13,483.Thenetsavingsforthefullfirstyear,lesspromotionalcostsis$10,136.JustovertenpercentofalltheDistrict’scustomers(3,431)usethepaperlessbillingprogram.Nearly17percentoftheDistrict’scustomershaveonlineaccesstomanagetheiraccounts.

• TheDistrictcelebrated“PublicPowerWeek”withaspecialeducationprogramforover600MasonCountyfifth-gradestudents,openhousesforcustomers,andaspecialShelton-MasonCountyChamberOf

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Commerceafter-hoursevent.• BonnevillePowerAdministrationadoptedaninepercentaveragewholesalepowerrateincreaseand

an11percentaveragetransmissionrateincreasefortheDistrictandotherpublicutilitiesinthePacificNorthwest.Thenewratessupportimprovementstoensuretheregion’sfederalhydropowerandtransmissionsystemscancontinuetoreliablydelivercarbon-free,affordablepowertoNorthwesthomesandbusinesses.

• OneofthelargestsolararraysinwesternWashingtonquietlydeliversoff-gridelectricitytotheDistrict’sJohnsPrairieoperationscenternearShelton.A225kilowattphotovoltaicsystematthefacilitycoversabout22,000squarefeetononeofthevehiclestoragebuildings.Itgeneratednearly243,000kWhofelectricityinitsfirstfullyearofoperation,oranannualaverageofabout25percentoftheoperationscenter’senergyneeds.ThealternativepowerproductionwillreducetheDistrict’scarbonfootprintbyabout13tonsperyear.

AswithanyothercommunityinWashingtonState,MasonCountyhasfaceditstrialsduringtherecession.However,itschoicesindevelopinginfrastructure,diversifyingitseconomicbase,andsupportingexistingbusinessesmakethecommunityconfidentitwillemergestrongerthanbefore.

Long-Term Financial PlanningTheDistrict’sfive-yearforecastiscontinuallyupdatedtofollowprojectionsandchangesaffectingtheDistrict.Theforecastincludesbothoperatingandcapitalactivitywithafocusonreservelevels,debtservicecoveragelevels,andpotentialrateaction.

ThroughbondresolutiontheDistrictestablishes,maintainsandcollectsratesandchargesforservicestoprovideforallpaymentsthattheDistrictisobligatedtopay.

Major Initiatives• TheDistrictinstalledadditionalthree-phasepowerandfiberopticcableacrosstheHarstineIslandBridge.

Theprojectwaspartofa$250,000effortbytheDistricttoenhanceelectricalserviceandextendtheDistrict’sfiberopticnetworkacrosstoHarstineIslandforpotentialfuturebroadbandservice.

• Districtlinemenreplaceda73year-old,high-voltagetransmissionpoleatthecornerofFirstandAlderStreetsindowntownSheltonthatcarries115thousandvoltpowerlinesleadingtotheMasonsubstationonKneelandStreet.ThreeDistrictsubstationswerede-energizedduetoaconcurrentBonnevillePowerAdministrationplannedoutage.Powerforresidentialandcommercialcustomerswasmaintainedbyreroutingservicefromothersubstations.

• DistrictengineersandlinemenconductedaninnovativetransmissionpolerelocationprojectrequiredbyaWashingtonStateDepartmentofTransportationStateRoute3roadwideningprojectinBelfair.Ratherthaninstallingnewtransmissionpolesandtakingseveraloutagestoapproximately6,000customerswhiletransferringthepowerlinesovertothenewfacilities,theDistrictlinemenwereabletoslidethree75-foottransmissionpolesapproximatelyninefeet.Thissavedthousandsofdollarsandeliminatedtheneedforseveralmajorplannedoutages.

• UndercontractwiththeNorthwestOpenAccessNetwork(NoaNet),theDistrictextendedfiberopticlinestovariouscelltowersitesinMasonCounty.

• DistrictlinemenspentthedayafterChristmasrestoringelectricitytocustomersindowntownSheltonafternearly700customershadtheirpowercut.AccordingtoanewsreleasefromthecityofSheltonPoliceDepartment,itappearsthatapieceoflargelog-handlingequipmentbeingtransportedbyrailcarcaughtaspanofwiresbetweenpoles.Thesnaggedwirespulleddownpowerpolesasthetraincontinuedon.

SubstationUpgrades–TheDistrictcompletedtheMasonsubstationrebuildprojectindowntownShelton.Constructionbeganinthesummerof2012,withcompletioninearly2013.Duringconstruction,3,400customersservedbythefacilitygottheirelectricityfromtheJohnsPrairie,SkookumorMt.Viewsubstations.

Theengineer’sestimatefortheentireprojectwas$3.5million,buttheactualcostoftheprojectcameinunderestimateatalittlemorethan$3million.

Priortotheupgrade,theMasonsubstationwastheoldestofthe11intheDistrict’sserviceterritory,withsomeofitscomponentsdatingtothe1940’s.

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ThesubstationservescustomersindowntownShelton,Angleside,aportionofRailroadAvenue,NorthcliffRoad,partofNorth13thStreet,Hillcrest,anareanorthofAlderStreet,theSimpsonLumberCompanywaterfrontmills,allofCloquallumRoad,WestandEastDeeganRoad,andtheShelton-MatlockInterchange.

ConservationPrograms–TheDistrict’sconservationdepartmentisworkingdiligentlyandsystematicallytopromoteenergyconservationinitsserviceterritory.TheDistrictisdedicatedtoeducatingitscustomersaboutaffordablewaystoimprovetheirhomes’energyefficiency,andinvestingresourcestoassistthecustomersinthecompletionoftheseprojects.

Someoftheconservationinitiativesinclude:

• WorkingwiththeMasonCountyHomelessShelterandrentalagencieswithintheDistrict’sserviceterritorytopromoteupgradestounder-insulatedhomes.TheDistrictisabletopay100percentoftheprojectcostsforqualifyinglow/moderateincomeweatherizationprojectsinelectricallyheatedhomes.

• EncouragingtheimplementationofductlessheatingandcoolingsystemsinMasonCounty.Ductlessheatpumpsrepresentanincrediblecost/BTUvalueforresidentsofthePacificNorthwest.

• Workingtowardacomprehensiveoverhaulofallcommerciallightinginitsserviceterritory.ThePacificNorthwestisonthecuspofatremendousshiftinlightingtechnologyavailable:fluorescentlightstoLEDs.Thisupgradeintechnologyrepresentsalargeopportunityinenergysavings.It’soneoftheconservationdepartment’sgoalstohelpitscustomersnavigatethistransitioninacost-consciousmanner.

• Detailingallofthecommercialandindustrialcustomers’conservationprojectscompletedandpotentialprojectslefttobedone.Itistheconservationdepartment’sgoaltohaveeverycommercialandindustrialcustomercontactedandencouragedtohaveafreeenergyauditdoneattheirqualifyingfacility.

• Filmingsimplehow-tovideosthatequipcustomerswithsimpleno-costorlow-costprojectsaroundtheirhometoimproveenergyefficiency.

Awards and Acknowledgements• WylaWood,MasonCountyPUD3managerfortenyears(2003through2013),retiredfromthe

leadershippostMarch31,2013.Wood,theeighthmanageroftheDistrictsinceitsformationin1939,wasalsothefirstfemalemanageroftheutility.AnnetteCreekpaum,theDistrict’sFinanceManager/Auditor,wasappointedbytheBoardofCommissionersastheDistrict’snewmanager,effectiveApril1,2013.

• MasonCountyPUD3CommissionerLindaGottwaselectedtoserveaspresidentofEnergyNorthwest’sBoardofDirectorsforatwo-yearterm.

• TheAmericanPublicPowerAssociationnamedMasonCountyPUD3CommissionerLindaGotttoaone-yeartermonitsPolicyMakersCouncil.The40-membercouncilassiststheassociationinpromotingfederallegislationthatisimportanttopublicpowerutilities,andworkstoprotectutilitiesfromharmfullegislation.Italsoprovidesadviceonotherissuesofimportancetothenationalorganization.

• TheMasonConservationDistrictnamedtheDistricta2012conservationstewardoftheyear(awardedin2013).TheconservationdistrictworkedcloselywiththeDistrictdesignteamtointroducenativeplantsintotheareaaroundtheJohnsPrairieoperationscenter,andadoptwaystomanagestormwaterrunoffinamannerthatreducedenvironmentalimpacts.ThepartnershipbetweentheconservationdistrictandtheDistrictdemonstratedhowlocalgovernmentcooperationcouldachievesubstantialpublicbenefitsthroughsharingofresourcesandthewiseuseofpublicfinances.

• TheDistrictpasseditsannualinspectionbytheWashingtonStateAuditor’sOfficewithanexemplaryevaluation.Thereportmarkedthe34thconsecutiveyearinwhichtheutilityhasreceivedacleanbillofhealthfromthestateagency.

• TheDistrictwasnamedamemberoftheUnitedWayofMasonCounty’sHigh-FiveClub:thetopfivebusinessesandorganizationswhoseemployeesmadedonationsduringtheUnitedWay’slocalworkplacefundraisingcampaign.Theannualcampaignpromotedgivingfromareabusinesses,federalandstateemployees.Themoneyisusedforhumanresourceagenciesthatprovideservicestolocalresidents.

• TheDistricttooktwoawardsinitsutilityclassintheNorthwestPublicPowerAssociationExcellenceinCommunicationawards.(Theclassincludesutilitieswith25,000-49,999customers).Theawardswerefirstplaceforits2011annualreportandthirdplaceforitsbrochureabouttheJohnsPrairieoperationscenter.

• TheDistrictreceivedtheAmericanPublicPowerAssociation’s“AwardofExcellence”initsclassfortheDistrict’s2012annualreport.(Theclassincludedutilitieswithgrossrevenuesoflessthan$75million.)ThethemeofthePUD’sannualreportwas“reliability,”focusingonhowemployeesusetheirknowledge

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making connections.

andtoolstoprovidesafeandreliableservicetotheutility’scustomers.• TheWashingtonPUDAssociationpresentedits“GoodSamaritanAward”toDistrictMeterReaderVince

Campagna.VincewashonoredforhisreactionfollowingaFebruary2013fataltrafficaccidentonHighway3thatsavedlivesandpreventedadditionalaccidentsandinjuriesatthesceneofahead-oncollision.

• DuringtheThanksgivingandChristmasseasons,DistrictemployeescontributedthemakingsfortenThanksgivingdinners;sponsoredgiftsandsupportfor14fosterchildrenandraisednearly$2,800inindividualdonationstohelpastrugglingfamilyhaveamemorableChristmas.

• TheGovernmentFinanceOfficersAssociationoftheUnitedStatesandCanada(GFOA)awardedaCertificateofAchievementforExcellenceinFinancialReportingtoMasonCountyPublicUtilityDistrictNo.3foritscomprehensiveannualfinancialreportforthefiscalyearendingDecember31,2012.ThiswastheninthconsecutiveyearthattheDistricthasreceivedthisprestigiousaward.InordertobeawardedaCertificateofAchievement,agovernmententitymustpublishaneasilyreadableandefficientlyorganizedcomprehensiveannualfinancialreport.Thisreportmustsatisfybothgenerallyacceptedaccountingprinciplesandapplicablelegalrequirements.

ACertificateofAchievementisvalidforaperiodofoneyearonly.WebelievethatourcurrentcomprehensiveannualfinancialreportcontinuestomeettheCertificateofAchievementProgram’srequirements,andwearesubmittingittotheGFOAtodetermineitseligibilityforanothercertificate.

PreparationoftheComprehensiveAnnualFinancialReportwasmadepossiblebythededicatedserviceoftheentirestaffoftheFinance,AdministrationandPublicInformationdepartmentsoftheDistrict.Wewishtoexpressourappreciationtothesestaffmembersfortheircontributionstothedevelopmentofthisreport.FurtherappreciationisextendedtotheBoardofCommissionersforitsleadershipandsupportinplanningandconductingthefinancialoperationsoftheDistrictinaresponsibleandenterprisingmanner.

Respectfullysubmitted,

AnnetteCreekpaum,CPA SherrySpeaks,CPAManager FinanceManager/Auditor

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“The management team works to make connections daily, ensuring PUD 3 delivers safe, reliable and cost-based electrical and telecommunication services, while encouraging economic development and being good stewards of the environment.”

The Management TeamAs pictured from left to right:

Director of Business Services John BennettManager Annette Creekpaum (CPA) Director of Engineering Terry Peterson Director of Business Operations Michelle Wicks (PHR)

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Organizational Chart

TreasurerBrian Taylor, CFE

AuditorSherry Speaks, CPA

Customers

Commissioners

Mason County PUD No. 3

Thomas J. FarmerLinda R. Gott

Bruce E. Jorgenson

ManagerAnnette Creekpaum, CPA

Director of Business Services

John Bennett

Director of EngineeringTerry Peterson

Director of Business Operations

Michelle Wicks, PHR

Finance Manager

Sherry Speaks, CPA

Public Information& Government

Relations ManagerJoel Myer

Executive Assistant& Records Supervisor

Lynn Eaton

AttorneyRobert Johnson

making connections.

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The PUD 3 Board of Commissioners is comprised of three members, each serving a six-year term. Commissioners represent their respective districts and are responsible for making policy decisions for the utility.

Linda R. GottSecretary

Bruce E. JorgensonVice President

Commissioner Jorgenson tookofficein1995andservescommissiondistrictthree,whichencompassesthewesternportionofthecounty,thecityofSheltonandareassouth.Hehasbeenre-electedthreetimes.HiscurrenttermendsDecember31,2018.

CommissionerGottservescommission district one,whichincludesthesoutheasternportionofthecounty.Shetookofficein1999,andwasre-electedinNovember2010.HerthirdtermendsDecember31,2016.

Thomas J. FarmerPresident

Commissioner Farmer beganasix-yearterminJanuary2009.Heservescommission district two,whichincludesthenortheasternportionofMasonCounty.HisfirsttermendsDecember31,2014.

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Board of Commissioners

DistrictNo. 1

DistrictNo. 3

DistrictNo. 2

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Independent Auditor’s Report on Financial Statements Public Utility District No. 3 of Mason CountyJanuary 1, 2013 through December 31, 2013

June 20, 2014

Board of CommissionersPublic Utility District No. 3 of Mason CountyShelton, Washington

REPORT ON THE FINANCIAL STATEMENTSWe have audited the accompanying financial statements of Public Utility District No. 3 ofMason County, Washington, as of and for the year ended December 31, 2013, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the District’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

Washington State AuditorTroy Kelley

_________________________________________________________________________________________________Washington State Auditor’s Office

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We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Public Utility District No. 3 of Mason County, as of December 31, 2013, and the changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Matters of EmphasisAs discussed in Note 1 to the financial statements, in 2013, the District adopted new accounting guidance, Governmental Accounting Standards Board Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources and Net Position and Statement No. 65, Items Previously Reported as Assets and Liabilities. Our opinion is not modified with respect to this matter.

Other MattersRequired Supplementary InformationAccounting principles generally accepted in the United States of America require that the management’s discussion and analysis and information on postemployment benefits other than pensions be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDSIn accordance with Government Auditing Standards, we have also issued our report dated June 20, 2014 on our consideration of the District’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District’s internal control over financial reporting and compliance

TROY KELLEYSTATE AUDITOR

_________________________________________________________________________________________________Washington State Auditor’s Office

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Management’s Discussion and AnalysisAsmanagementofMasonCountyPUDNo.3(District),weofferreadersoftheDistrict’sfinancialstatementsthisnarrativeoverviewandanalysisoffinancialactivitiesforthefiscalyearendedDecember31,2013.Weencouragereaderstoconsidertheinformationpresented.Itshouldbereadinconjunctionwiththebasicfinancialstatementsandaccompanyingnotes,aswellastheadditionalinformationthatwehavefurnishedinourletteroftransmittal.

Financial Highlights• TheassetsoftheDistrictexceededitsliabilitiesatthecloseoffiscalyear2013by$96.1million(net

position).Ofthisamount,$23.3millionrepresentunrestrictednetposition,whichmaybeusedtomeettheutility’songoingobligations.Netinvestmentincapitalassets(netofdepreciationandrelateddebt)was$66.4millionandaccountedfor69percentoftheDistrict’snetposition.

• TheDistrict’stotalnetpositiondecreased$2.4millionfrom2012becauseofincreasedpowercostsandadecreaseinkWhpurchasesbyitsresidentialcustomers.

Overview of the Financial StatementsThediscussionandanalysisprovidedhereareintendedtoserveasanintroductiontotheDistrict’sbasicfinancialstatements.Thebasicfinancialstatementsconsistofthreecomponents:1)proprietaryfundfinancialstatements;2)fiduciaryfundfinancialstatements;and3)thenotestofinancialstatements.Thisreportalsoincludessupplementaryinformationintendedtofurnishadditionaldetailtosupportthebasicfinancialstatementsthemselves.

TheDistrictaccountsforitsfinancialactivitieswithinasingleproprietaryfundtitledtheElectricSystem.TheElectricSystemisusedtoaccountforthepurchase,transmission,distributionandsaleofelectricenergy,aswellasthesaleofwholesaletelecommunicationservices.

InaccordancewithrequirementssetforthbytheGovernmentalAccountingStandardsBoard(GASB),theDistrict’sfinancialstatementsemploytheaccrualbasisofaccountinginrecognizingincreasesanddecreasesineconomicresources.Accrualaccountingrecognizesallrevenuesandexpensesduringtheyear,regardlessofwhencashisreceivedorpaid.

Thebasicfinancialstatements,presentedfortheyearendedDecember31,2013,arecomprisedof:

• Statement of Net Position: TheStatementofNetPositionpresentsinformationontheDistrict’sassetsandliabilities,withthedifferencebetweenthetworeportedasnetposition.Overtime,increasesordecreasesinnetpositionmayserveasausefulindicatorofwhetherthefinancialpositionoftheDistrictisimprovingordeteriorating.

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

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

Restatementof2012: WiththeimplementationofGASBStatementNos.63&65,theDistrict’s2012financialstatementshavebeenrestatedtoconformwiththenewreportingandaccountingrequirements.Inpart,GASB63establishedaccountingandfinancialreportingstandardsthatreclassify,asdeferredoutflowsofresourcesordeferredinflowsofresources,certainitemsthatwerepreviouslyreportedasassetsandliabilities.Inpart,GASB65requireddebtissuancecosts,exceptanyportionrelatedtoprepaidinsurancecosts,toberecognizedasanexpenseintheperiodincurred.

CorrectionofPriorPeriodDepreciation–In1998,theDistrictupgradeditssystemsoftware.Duringtheconversionprocess,whenassetswereenteredintotheaccountingsystem,theassets’remainingusefullifestartedoverusingthefulllifeoftheassets.In2013,anadjustmentwasmadetocatchuptheunder-depreciationandtheremainingusefullivesoftheassetswerechanged(seeNote16).

FiduciaryfundsareusedtoaccountforresourcesheldforthebenefitofpartiesoutsidetheDistrict.FiduciaryfundsarenotreportedintheDistrict’sfinancialstatementsbecausetheresourcesofthosefundsarenotavailabletosupporttheDistrict’sownprograms.

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TheDistrictmaintainstwodifferenttypesoffiduciaryfunds.TheVEBAforEmployeesofWashingtonStatePUDsfundisusedtoreportresourcesheldintrustforemployeehealthcarebenefits.TheOtherPostemploymentBenefit(OPEB)Planfundisusedtoreportresourcesheldintrustforhealthcarebenefitsforretiredemployeesandtheirbeneficiaries.

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

Inadditiontothebasicfinancialstatementsandaccompanyingnotes,thisreportalsopresentsrequiredsupplementaryinformationconcerningtheDistrict’sprogressinfundingitsobligationtoprovideOPEBbenefitstoitsemployees.

Financial Analysis Asnotedearlier,netpositionovertimemayserveasausefulindicatorofagovernmentalentity’sfinancialposition.TheDistrict’sassetsexceededliabilitiesby$96.1millionatthecloseoffiscalyear2013.

Statement of Net Position (inthousands)

Therewasasignificantincreaseincurrentassetsandadecreaseinnoncurrentassets.Thiswasdueprimarilyto$6.7millionpreviouslyrestrictedforfuturecapitalconstruction(classifiedasanoncurrentasset)transferredtorestrictedconstructionfunds(classifiedasacurrentasset).

ByfarthelargestportionoftheDistrict’snetposition(69percent)reflectsitsinvestmentincapitalassets(e.g.,land,buildings,substations,andequipment);lessanyrelateddebtusedtoacquirethoseassetsthatisstilloutstanding.TheDistrictusesthesecapitalassetstoprovideservicestocustomers;consequently,theseassetsarenotavailableforfuturespending.AlthoughtheDistrict’sinvestmentsinitscapitalassetsarereportednetofrelateddebt,itshouldbenotedthattheresourcesneededtorepaythisdebtmustbeprovidedfromothersources,sincethecapitalassetsthemselvescannotbeusedtoliquidatetheseliabilities.

AnadditionalportionoftheDistrict’snetposition(sevenpercent)representsresourcesthataresubjecttoexternalrestrictionsonhowtheymaybeused.Theremaining(24percent)isunrestrictedandmaybeusedtomeettheDistrict’songoingobligations.

Attheendofthecurrentfiscalyear,theDistrictisabletoreportpositivebalancesinallcategoriesofnetposition.Thesamesituationwastrueforthepriorfiscalyear.

However,theDistrict’soverallnetpositiondecreased$2.4millionfromtherestatedpriorfiscalyear.Thereasonsforthisdecreasearediscussedinthefollowingsections.

2013 2012 Restated

Increase (Decrease) % Change

Currentassetsandspecialfunds $34,444 $30,217 $4,227 13.99%UtilityPlant 136,455 139,057 (2,602) -1.87%DeferredOutflowsofResources 233 270 (37) -13.70%Othernoncurrentassets 12,915 19,655 (6,740) -34.29%TotalAssetsandDeferredOutflowsofResources

$184,047 $189,199 $(5,152) -2.72%

Currentliabilities $11,151 $12,009 $(858) -7.14%Noncurrentliabilities 76,833 78,732 (1,899) -2.41%Totalliabilities $87,984 $90,741 $(2,757) -3.04%

Netinvestmentincapitalassets $66,390 $69,112 $(2,722) -3.94%Restrictedfordebtservice 6,423 6,942 (519) -7.48%Unrestricted 23,250 22,404 846 3.78%Total net position $96,063 $98,458 $(2,395) -2.43%

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Statement of Revenue, Expenses, and Changes in Net Position (in thousands)

TheDistrict’stotalrevenuesincreased$4.3millionbetweenfiscalyears2012and2013to$55.3million.Althoughcustomers’consumptiondecreasedinkWh,therewasanetincreaseinutilitysalesof$4.1million.Theincreaseispartiallydueto$1.7millionintaxespreviouslycategorizedasaliability.Thesetaxeswerereclassifiedasarevenueandexpensedwhenpaid(thishasnoeffectonnetposition).Theotherportionofthe$4.1millionisduetotherateincreaseseffectiveinApril2012andApril2013approvedbytheBoardofCommissionersin2012.Otheroperatingrevenuesincreasedbyalmost54percentduetoa$480,000increaseintelecommunicationsrevenuesandadditionalrevenuesof$301,000duetoapolecontactrateincrease.UndercontractwiththeNorthwestOpenAccessNetwork(NoaNet),PUD3extendedfiberopticlinestovariouscelltowersitesinMasonCountywhichincreasedtelecommunicationsrevenues.

Nonoperatingrevenuesdecreasedduetoacombinationofevents.Anunrealizedlossof$130,000wasrecognizedduetothefairmarketvalueofinvestmentsbeinglessthanhistoricalcost.Thecapitaldebtservicesubsidydecreasedby$185,000duetothefederalgovernmentsequestration.Also,in2012theDistricthadasizeableFederalEmergencyManagementAgency(FEMA)accrualintheamountof$443,000;however,in2013therewerenosignificanteventsthatqualifiedforFEMAdeclaration.

Totalexpensesincreasedpartiallydueto$1.7millionintaxespreviouslycategorizedasaliabilitybeingreclassifiedasarevenueandexpensedwhenpaid(havingnoeffectonnetposition).Also,interestexpensedecreasedduetoGASB65requiringdebtissuancecostof$770,000tobeexpensedand$290,000lessinbondinterestexpense.

Infiscalyear2013,65percentoftheDistrict’soperatingrevenuescamefromresidentialsales,andapproximately24percentfromcommercialandindustrialsales.Anotherfivepercentcomesfromonelargeindustrialcustomerandtheremainingfromothermiscellaneoussources.

Revenues for Fiscal Year 2013

5% 5%

65%

24%

1%

OutdoorLighting&FixedRateFacilities1%Commercial&Industrial24%

ResidentialSales65%

LargeIndustrial5%MiscellaneousOtherOperating5%

2013 2012 Restated

Increase (Decrease) % Change

OperatingrevenuesUtilitysalesandservicefees $51,811 $47,652 $4,159 8.73%Otheroperatingrevenues 2,555 1,664 891 53.55%NonoperatingrevenuesInvestmentearnings (130) 103 (233) -226.21% Other income 1,101 1,607 (506) -31.49%Totalrevenue $55,337 $51,026 $4,311 8.45%

OperatingexpensesPowersupply $24,833 $23,883 $950 3.98%Operation/Maintenance/General 18,508 17,857 651 3.65%Taxes/Depreciationexpense 10,255 8,387 1,868 22.27%NonoperatingexpensesInterestexpense 4,136 5,408 (1,272) -23.52%Totalexpenses $57,732 $55,535 $2,197 3.96%

Changeinnetposition $(2,395) $(4,509) $2,114 -46.88%Beginningnetposition 98,458 102,967 (4,509) -4.38% Ending net position $96,063 $98,458 $(2,395) -2.43%

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TheDistrict’soperatingexpensesincludetransmissionanddistributionexpensesalongwithcustomeraccounts,customerservicesandinformational,sales,andgeneralandadministrativeexpenses.Nearly43percentoftheDistrict’soperatingexpensesareforthepurchaseofpower.

Totalexpensesincreased$2.2millionfrom2012to2013.TheDistrict’sincreasedpowersupplycostsattributedto27percentoftheincreaseinoperatingexpenses.TheBonnevillePowerAdministrationimplementedanaverage10percentwholesalerateincreaseeffectiveOctober2012,resultinginapowersupplycostincreaseof$950,000from2012 to 2013.

Insummary,the2013totalrevenuesincreased$4.3millionandtotalexpensesincreased$2.2millionover2012resultinginanetincreaseinnetpositionof$2.1million.However,beginningnetpositiondecreasedby$4.5millionprimarilyduetothedepreciationcorrection(seeNote16),whichresultedinayear-endoveralldecreaseinnetpositionof$2.4million.

Capital Asset and Long-Term Debt ActivityAttheendof2013,theDistricthadinvested$222millionincapitalassets.Thisinvestmentincapitalassetsincludesland,buildings,generation,transmission,distributionandgeneralplant,andmachineryandequipment.ThetotalincreaseintheDistrict’sinvestmentincapitalassetsforthecurrentyearwas1.07percent.

Capital Assets (in thousands)

Therewerenonewmajorcapitalasseteventsduringfiscalyear2013however:

• TheJohnsPrairieoperationscenter$38.8millionworkorderwasfinalizedfromconstructioninprogressandcategorizedintotheappropriatecapitalassets.

• TheDistrictalsofinalizedthe$2.7millionMasonsubstationrebuildandnumerousprojectsassociatedwithimprovementstoexistingdistributioninfrastructure.

MoredetailedinformationabouttheDistrict’scapitalassetsispresentedinNote2tothefinancialstatements.

OutdoorLighting&FixedRateFacilities1%Commercial&Industrial24%

ResidentialSales65%

LargeIndustrial5%MiscellaneousOtherOperating5%

43%

7%18%

11%

5%

16%

Operating Expenses for Fiscal Year 2013

Operation&Maintenance16%CustomerAccounts&Service5%

PurchasedPower43%

GeneralAdministration11%Taxes&Depreciation18%Interest Charges 7%

2013 2012 Increase (Decrease) % Change

Landandintangibleplant $2,205 $2,180 $25 1.15%Plant 152,228 148,658 3,570 2.40%Structuresandimprovements 42,896 8,495 34,401 404.96%Machineryandequipment 20,267 16,011 4,256 26.58%Constructioninprogress 4,431 44,335 (39,904) -90.01%Total $ 222,027 $ 219,679 $ 2,348 1.07%

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Long-term Debt – Attheendofthecurrentfiscalyear,theDistricthad$76.8millioninbondsoutstanding,adecreaseoftwopercentoverlastyear.InOctober2012,theDistrictissued$9.8millionofElectricRevenueRefundingBondstoadvancerefund$11.5millionofoutstanding2002Bondsreducingaggregatedebtservicepaymentsby$1.9millionoverthenextnineyears.TheDistrictdidnotissueanybondsin2013.

Long-term Debt (in thousands)

MoredetailedinformationabouttheDistrict’slong-termliabilitiesispresentedinNote6tothefinancialstatements.

Bond Ratings – TheDistrict’screditratingwithStandard&Poor’sisA+anditscreditratingisAa3onMoody’sGlobalRatingsScale.

BondcovenantsrequiretheDistricttoestablish,maintainandcollectratesandchargesthatshallbeadequatetoprovideineachfiscalyearnetrevenuesinanamountequaltoatleast1.25timestheannualdebtserviceontheparitybondsoutstandinginsuchfiscalyear.TheDistrict’sdebtservicecoverageratiowas1.44percentin2013withafive-yearaverageof2.42percent.

Other Significant MattersInApril2012,theDistrict’sCommissionersapprovedamulti-yearscheduleforelectricityrateincreases.TherevisionsoffsethigherwholesaleelectricityrateschargedbytheBonnevillePowerAdministration(BPA).TheBPAincreaseswentintoeffectOctober1,2011. Theimplementationoftherateincreaseswasadoptedasfollows:

• May1,2012–anaveragethreepercentincreaseintherateforkilowatt-hourconsumptionanda$0.10perdayincreaseinthedailysystemcharge.

• April1,2013–anaveragethreepercentincreaseintherateforkilowatt-hourconsumptionanda$0.10perdayincreaseinthedailysystemcharge.

• April1,2014–anaveragethreepercentincreaseintherateforkilowatt-hourconsumption.(However,inOctober2013,theBPAputintoeffectaninepercentaveragewholesalepowerrateincrease.TheBPAalsoincreasedtransmissionratesbyanaverageofelevenpercent.Inresponse,DistrictcommissionersadoptedaresolutionrescindingtheApril1,2014rateincreaseandadoptinganewrateincrease.Thenewratewentfrom$.0651/kilowatt-hourconsumptionto$.0652/kilowatt-hourconsumptionanddecoupledthestateutilitytaxfromtheenergyratedisclosingitseparately.Thecommissionalsoincreasedthedailysystemchargeby$0.10perday.ThisrevisedrateincreasewentintoeffectFebruary1,2014.)

TheBPA’snewrateswillpayforimprovementstotheregion’sfederalhydropowerandtransmissionsystemstoensuredeliveryofreliable,carbon-free,affordablepowertoPacificNorthwestcustomers.

Requests for InformationThefinancialreportisdesignedtoprovideageneraloverviewoftheDistrict’sfinancesandtodemonstratetheDistrict’saccountabilityforthemoneyitreceives.QuestionsconcerninganyoftheinformationprovidedinthisreportshouldbedirectedtotheFinanceManageroftheDistrictatPOBox2148,Shelton,WA98584.

2013 2012 Increase (Decrease) % Change

Revenuebonds $76,840 $78,385 ($1,545) -1.97%

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ASSETS CurrentAssets:CashandCashEquivalents(Note4)CashandWorkingFunds $ 10,694,970Investments 6,151,082RestrictedConstructionFunds 7,684,468RestrictedBondFund-Principal&Interest 997,829AccountsReceivable,Net 6,390,876PlantMaterialandOperatingSupplies 2,495,404Prepayments 29,097 TotalCurrentAssets 34,443,726 NoncurrentAssets: Investments(Note4) 4,999,776 RestrictedBondReserveFund(Note4) 5,424,725 PreliminarySurveysandInvestigations 57,991 NetOpebAsset(Note10) 2,432,275 SubtotalNoncurrentAssets 12,914,767 CapitalAssets: LandandIntangiblePlant 2,204,651 Plant 152,227,999 StructuresandImprovements 42,895,866 MachineryandEquipment 20,267,584 Construction-in-Progress(Note3) 4,430,626 LessAccumulatedDepreciation (85,571,967) TotalCapitalAssets(Net)(Note2) 136,454,759 TotalNoncurrentAssets 149,369,526

DeferredOutflowsofResources: UnamortizedLossonDefeasedDebt 233,961 TotalDeferredOutflowsofResources 233,961 TotalAssetsandDeferredOutflowsofResources $ 184,047,213 LIABILITIES CurrentLiabilities: RevenueBonds,CurrentPortion(Note6) $ 1,610,000 CurrentPortionofPersonalTimeOff 1,479,593WarrantsPayable 586,193 AccountsPayable 4,286,652 CustomerDeposits 576,447 TaxesAccrued 1,070,796 InterestAccruedonLong-TermDebt 355,859 OtherCurrentandAccruedLiabilities 1,185,891 TotalCurrentandAccruedLiabilities 11,151,431 NoncurrentLiabilities: PersonalTimeOff 693,744 RevenueBonds(Note6) 76,139,203 TotalNoncurrentLiabilities 76,832,947 TotalLiabilities 87,984,378 NET POSITION Netinvestmentincapitalassets 66,390,024 Restrictedfordebtservice 6,422,553 Unrestricted 23,250,258TotalNetPosition $ 96,062,835

Statement of Net PositionProprietary Fund

December 31, 2013

Theaccompanyingnotesareanintegralpartofthefinancialstatements.

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REVENUESOperatingRevenues: UtilitySalesandServiceFees $ 51,811,302OtherChargesforServices 1,551,880OtherOperatingRevenues 1,003,488TotalOperatingRevenues 54,366,670

EXPENSES OperatingExpenses: PurchasedPower $ 24,832,964Operation 3,485,934Maintenance 4,389,255CustomerAccounts 2,278,899CustomerService,Information,Advertising 839,495AdministrativeandGeneral 6,092,145MaintenanceofGeneralPlant 1,422,844Depreciation 6,678,552TaxesotherthanIncome 3,576,006TotalOperatingExpenses 53,596,094OperatingIncome(Loss) 770,576

OTHER REVENUES (EXPENSES) NonoperatingRevenues(Expenses): Revenue(Cost)ofMerchandising $ (7,590)InvestmentEarnings (130,129)InterestandAmortizationonLong-TermDebt (4,136,190)Gain(Loss)onSaleofCapitalAssets 86,111CapitalDebtServiceSubsidyfromtheFederalGovernment 1,044,635OtherNonoperatingRevenues (22,681)TotalNonoperatingRevenues(Expenses) (3,165,844) ChangeinNetPosition (2,395,268) NetPosition-BeginningBeforeRestatement 108,530,027RestatementofPriorPeriod(SeeNote16) (10,071,924)TotalNetPosition,BeginningofYearasRestated 98,458,103 NetPosition-Ending $ 96,062,835

Statement of Revenues, Expenses and Changes in Net PositionProprietary Fund

For the Year Ended December 31, 2013


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Statement of Cash FlowsProprietary Fund

For the Year Ended December 31, 2013CASH FLOWS FROM OPERATING ACTIVITIES CashReceivedfromCustomers $ 55,252,776CashPaidtoSuppliersandServiceProviders (29,497,553)CashPaidtoEmployeesforSalariesandWages (13,731,847)TaxesPaid (5,039,119)MiscellaneousotherRevenue(Expense) 69,849NetCashProvidedby(Usedfor)OperatingActivities 7,054,106 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES - CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES AcquisitionandConstructionofCapitalAssets (6,341,907)PrincipalPaidonCapitalDebt (1,557,025)InterestPaidonCapitalDebt (4,320,487)CapitalDebtServiceSubsidyfromtheFederalGovernment 1,044,635ProceedsFromtheSaleofCapitalAssets 912,962NetCashUsedforCapitalFinancingActivities (10,261,822) CASH FLOWS FROM INVESTING ACTIVITIES PurchaseofInvestments (7,667,078)ProceedsfromSaleofInvestments 14,393,514InterestonInvestments 120,807NetCashFlowProvidedbyInvestingActivities 6,847,243 NetIncrease(Decrease)inCashandCashEquivalents 3,639,527CashandCashEquivalents,BeginningofYear 21,888,823CashandCashEquivalents,EndofYear $ 25,528,350 Reconciliation of Operating Income (Loss) to Net Cash Provided by (used for) Operating Activities: OperatingIncome $ 770,576 AdjustmentstoReconcileOperatingIncometoNetCashProvidedbyOperatingActivities Merchandising-Net (7,590)DepreciationandAmortization 6,678,552Gain(Loss)onSaleofCapitalAssets 86,111MiscellaneousOtherExpense (16,262)Decrease(Increase)inCustomerAccountsReceivable (510,026)Decrease(Increase)inOtherAccountsReceivable (166,229)Decrease(Increase)inMaterialInventory 3,337Decrease(Increase)inPrepayments (1,132)Increase(Decrease)inCustomerDeposits 8,449Increase(Decrease)inOutstandingWarrants (28,104)Increase(Decrease)inAccountsPayable 365,297Increase(Decrease)inOtherPostemployeeBenefits(Opeb) (236,822)Increase(Decrease)inTaxesAccrued 106,838Increase(Decrease)inMiscellaneousAccruedLiabilities 1,111TotalAdjustments 6,283,530NetCashProvidedby(Usedfor)OperatingActivities $ 7,054,106


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Statement of Fiduciary Net PositionFiduciary Funds

December 31, 2013

Private-Purpose Other Postemployment Trust (VEBA) Benefits Plan (OPEB)

ASSETS Cashandcashequivalents $ 6,988 $ 320,633Investments 4,410,253 5,172,710 Total Assets 4,417,241 5,493,343 LIABILITIES 6,988 - TotalNetPositionHeldinTrustforOthers $ 4,410,253 $ 5,493,343


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Statement of Changes in Fiduciary Net PositionFiduciary Funds

For the Year Ended December 31, 2013

Private-Purpose Other Postemployment Trust (VEBA) Benefits Plan (OPEB)

ADDITIONS Contributions $ 60,143 $ 716,516NetInvestmentIncome 703,945 626,683TotalAdditions 1,305,608 1,343,199 DEDUCTIONS BenefitsPaidtoorforParticipants $ 410,341 $ 275,198NetInvestmentLoss - -TotalDeductions 410,341 275,198 ChangeinNetPosition 895,347 1,068,001

NetPosition-Beginning 3,514,906 4,425,342

NetPosition-Ending $ 4,410,253 $ 5,493,343

making connections.Theaccompanyingnotesareanintegralpartofthefinancialstatements.

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making connections.

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Note

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“PUD 3’s communications team thinks outside the box for ways to make strong connections with the community. We updated our newsletter with the focus on our customers. We’ve been especially excited about how our customers are using our social media outreach through Facebook & Twitter. PUD 3 is a leader in the connections we’re making online.” - Joel Myer

Public Information & Government Relations Manager

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Notes to Financial StatementsYear Ended December 31, 2013

NOTE 1 - Summary of Operations and Significant Accounting PoliciesMasonCountyPublicUtilityDistrictNo.3(District)isacustomer-ownedutilityprovidingelectricalandwholesaletelecommunicationservicesinMasonCounty,Washington.Formedbyapublicvotein1934,theutilityisamunicipalcorporationorganizedunderthelawsofthestateofWashington.Itislegallyandfiscallyindependentofotherstateorlocalgovernments.Itbeganprovidingelectricalservicein1939.TheDistrictprovidedelectricserviceto32,498customersasofDecember31,2013.

Aboardofthreecommissioners,electedbythevoters,servestheDistricttoestablishpolicy,reviewoperationsandapproveplans,budgetsandexpenses.ThelegalresponsibilitiesandpowersoftheDistrict,includingtheestablishmentofratesandchargesforservicesrendered,areexercisedthroughthecommission.

TheaccountingpoliciesoftheDistrictconformtogenerallyacceptedaccountingprinciplesasapplicabletoproprietaryfundsofgovernmentalutilities.TheGovernmentalAccountingStandardsBoard(GASB)istheacceptedstandardsettingbodyforestablishinggovernmentalaccountingandfinancialreportingprinciples.TheDistrictappliedallapplicableGASBpronouncementsincludingGASBStatementNo.63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position.Inaddition,theDistrictimplementedGASBStatementNo.65,Items Previously Reported as Assets and Liabilities.WithimplementationofGASB63and65,theDistrictrestatedits2012financialstatements(seeNote16).Thefollowingisasummaryofthemoresignificantpolicies(includingidentificationofthosepolicieswhichresultinmaterialdeparturesfromgenerallyacceptedaccountingprinciples).

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

B) Utility Plant and Depreciation – Utilityplantinserviceandothercapitalassetsarerecordedatcost,whichincludesbothdirectandindirectcostsofconstructionoracquisition.TheDistrict’scapitalizationthresholdis$1,000fornon-infrastructurecapitalwhileitsthresholdforinfrastructurecapitalis$50,000.Thecostofmaintenanceandrepairsischargedtoexpenseasincurred,whilethecostofreplacementsandimprovementsiscapitalized.

Property,plantandequipmentaredepreciatedusingthestraight-linemethodoverthefollowingestimatedusefullives:

TheDistrict’sContinuingPropertyRecordssystemreflectstherecordingofpropertyunitsaddedandretired.Initialdepreciationonutilityplantisrecordedinthemonthsubsequenttopurchaseorcompletionofconstruction.Whenoperatingplantassetsareretiredorotherwisedisposedof,theiroriginalcost(includingremovalcosts,lesssalvage)ischargedtoaccumulateddepreciation.

TheDistrictfollowsFERCoperatinginstructionsfordepreciationexpense,whichincludesallclassesofdepreciableelectricplantinserviceexceptdepreciationexpensechargeabletoclearingaccounts.Depreciationexpensesapplicabletotransportationequipmentandshopequipmentarechargedtoclearingaccountsinordertoobtainaproperdistributionofexpensesbetweenconstructionandoperation.

TheincreaseinaccumulateddepreciationisgreaterthanthedepreciationexpensereportedontheStatementofRevenues,ExpensesandChangesinFundNetPosition.ThisisaresultoftheFERCstandardthatelectricutilitiesmayreporttransportationequipmentandshopequipmentdepreciationtoclearing

StructuresandImprovements 40-50YearsGenerationPlant 17-30YearsElectricPlant-Transmission 25-36YearsElectricPlant-Distribution 23-50YearsElectricPlant/Equipment-Broadband 8-25YearsTransportationEquipment 4-8YearsGeneralPlant&Equipment 8-17Years

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accountsratherthandepreciationexpense.ThedepreciationexpensefortransportationequipmentandshopequipmentisincludedinMaintenanceunderOperatingExpensesontheStatementofRevenues,ExpensesandChangesinFundNetPosition.

Preliminarysurveyandinvestigationchargesincurredforproposedprojectsaredeferredpendingfinaldecisiontodeveloptheproject.Costsrelatingtoprojectsultimatelyconstructedarereclassifiedtoutilityplantandchargesrelatingtoabandonedprojectsareexpensed.

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

CashandinvestmentsarerecordedinaccountsasrequiredbytheDistrict’sbondindentures.Restrictedassetsrepresentaccountsthatarerestrictedbybondcovenantsorthird-partycontractualagreements.Accountsthatareallocatedbyresolutionofthecommissionersareconsideredtobeboarddesignatedaccounts.Boarddesignatedaccountsareacomponentofunrestrictedassetsastheirusemayberedirectedatanytimebyapprovalofthecommissioners.

TheDistrictconsidersalldepositswiththeWashingtonStateTreasurer’sLocalGovernmentInvestmentPool(LGIP)cashandcashequivalents.Sincethepoolissufficientlyliquidtopermitwithdrawofcashatanytimewithoutpriornoticeorpenalty,equityinthepoolisalsodeemedtobeacashequivalent.

Asrequiredbystatelaw,alldepositsandinvestmentsoftheDistrict’sfundsareobligationsoftheU.S.Governmentanditsagencies,certificatesofdeposit,generalobligationsofWashingtonStatemunicipalities,LGIP,passbookaccountsanddepositswithWashingtonStatebanksandsavingsandloanassociations,orotherinvestmentsallowedbyChapter39.59RCW.

TheDistrict’sdepositsandcertificatesofdepositareentirelycoveredbyfederaldepositoryinsurance(FDICandFSLIC)orbycollateralheldinamultiplefinancialinstitutioncollateralpooladministeredbytheWashingtonPublicDepositProtectionCommission(PDPC).

D) Restricted Assets – Inaccordancewithbondresolutions,relatedagreementsandlaws,separaterestrictedaccountshavebeenestablished.Theseassetsarerestrictedforspecificusesincludingdebtservice,bondreserveandcapitaladditions,andareclassifiedascurrentornoncurrentassets,asappropriate.

E) Receivables – Thepercentage-of-salesallowancemethodisusedtoestimateuncollectibleaccounts.AccountsthataredeterminedtobeuncollectiblebytheDistrictareturnedovertoacollectionagencybutremaininaccountsreceivableuntilitisdeterminedthereisnopossibilityofcollectionorthestatuteoflimitationsoncollectionshastranspired.Theyarethenchargedagainsttheprovisionforuncollectibles.

F) Inventories - Inventoriesarevaluedatweightedaveragewhichapproximatesthemarketvalue.

G) Personal Time Off (PTO) – TheDistrictaccruesaccumulatedunpaidpersonaltimeoff(PTO)benefitsasamountsareearned.PTOincludesvacation,sickleaveandotherleave.PTO,whichmaybeaccumulatedupto120days,ispayableuponresignation,retirement,ordeath.Changesincompensatedabsencesduringthecurrentfiscalperiodareasfollows:

TheDistrictestimates$1,479,593willbeusedinthenextfiscalyear.ThecurrentandnoncurrentliabilityforunpaidpersonaltimeoffappearsontheStatementofNetPosition.

H) Debt Premium and Discount – Originalissuebondpremiumsanddiscountsrelatingtorevenuebondsareamortizedoverthetermsoftherespectivebondissuesusingthebondsoutstandingmethod.Bondpremiumsanddiscountsoffsetthedebtoutstandingbalance.InaccordancewithGASBStatementNo.23,Accounting and Financial Reporting for Refundings of Debt Reported by Proprietary Activities,lossesondebtrefundingshavebeendeferredandamortizedovertheshorteroftheremaininglifeoftheoldornewdebt.

I) Reclassifications – Certain2012accountbalancesmayhavebeenreclassifiedtoconformtothe2013presentation.Suchreclassificationswouldhavenoeffectonpreviouslyreportedresultsofoperationsandcashflows.

Outstandingpersonaltimeoff,December31,2012 $2,179,602Personaltimeoffaccruedduring2013 1,594,519Personaltimeoffusedduring2013 (1,600,785)Outstandingpersonaltimeoff,December31,2013 $2,173,336

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J) Financial Statements – Separatefundfinancialstatementsareprovidedfortheproprietaryfundandthefiduciaryfunds.

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

TheDistricthastwofiduciarytrusts.ThefirstistheVoluntaryEmployeesBeneficiaryAssociation(VEBA)TrustasdescribedinNote14andthesecondistheOPEBTrustasdescribedinNote15.

NOTE 2 - Utility Plant and DepreciationUtilityplantactivityfortheyearendedDecember31,2013,wasasfollows:

Interestincurredduringtheconstructionphaseofcapitalassetsisincludedaspartofthecapitalizedvalueofassetsconstructedwhentheconstructionperiodisaminimumofsixmonthsandtheestimatedcostoftheprojectisgreaterthan$100,000.

NOTE 3 - Construction in ProgressConstructioninprogressrepresentsbalancesofworkordersforutilityplantinprocessofconstruction.The2013year-endworkinprogressequaled$4,430,626.

Description ExpendedUndergroundCableReplacements $1,108,658SystemConstruction 2,039,905BroadbandSystem 973,395OtherMiscellaneousProjects 308,668Work in Progress Balance $4,430,626

Utility Plant Assets Ending Balance

12/31/2012 Restated

Increase Decrease Ending Balance 12/31/2013

Utility plant not being depreciated: Land $2,167,980 $24,890 $- $2,192,870Constructioninprogress 44,335,483 6,404,676 (46,309,533) 4,430,626Intangibleassets 11,781 - - 11,781Total utility plant not being depreciated $46,515,244 $6,429,566 $(46,309,533) $6,635,277

Utility plant being depreciated:Generatingplant $6,231,421 $- $- $6,231,421Transmissionplant 5,043,194 18,221 (6,506) 5,054,909Distributionplant 147,613,205 5,403,660 (1,072,122) 151,944,743Generalplant 14,276,443 39,964,713 (2,080,780) 52,160,376Total utility plant being depreciated $173,164,263 $45,386,594 $(3,159,408) $215,391,449

Less accumulated depreciation for:Generatingplant $(2,350,274) $(207,953) $- $(2,558,227)Transmissionplant (2,418,993) (167,200) 726 (2,585,467)Distributionplant (65,604,427) (5,158,501) 1,177,031 (69,585,897)Generalplant (9,517,691) (3,237,899) 1,913,214 (10,842,376)Total accumulated depreciation (79,891,385) (8,771,553) 3,090,971 (85,571,967)Net utility plant $139,788,122 $43,044,607 $(46,377,970) $136,454,759

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NOTE 4 – Cash, Deposits and InvestmentsAsofDecember31,2013,theDistricthadthefollowingcash,depositsandinvestments:

Interest rate risk –Inaccordancewithitsinvestmentpolicy,theDistrictmanagesitsexposuretodeclinesinfairvaluesbymatchinginvestmentmaturitiestomeetanticipatedcashflowrequirements.

Credit risk –TheDistrict’sinvestmentpolicyconformswithstatelawwhichrestrictsinvestmentsofpublicfundsto:debtsecuritiesandobligationsoftheU.S.Treasury;U.S.governmentagenciesandcertainotherU.S.governmentsponsoredcorporations;certificatesofdepositandotherevidencesofdepositatfinancialinstitutionsqualifiedbytheWashingtonPublicDepositProtectionCommission(PDPC);bankers’acceptances;investment-gradegeneralobligationdebtofstateandlocalgovernmentsandpublicauthorities;andWashingtonStateTreasurer’sLocalGovernmentInvestmentPool(LGIP).TheLGIPisanunrated2a7-likepoolandinvestmentsintheLGIParereportedbasedonthepool’sshareprice.Thereportedvalueofthepoolisthesameasthefairvalueofthepoolshares.TheLGIPisgovernedbytheStateFinanceCommitteeandisadministeredbytheStateTreasurer.

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

NOTE 5 – Lease CommitmentsOperatingLeases– TheDistrictiscommittedunderoperatingleasesforpersonalcomputersandotherofficemachines.Theseleasesareconsideredoperatingleasesforaccountingpurposes.Totalcostsforoperatingleaseswere$107,532fortheyearendedDecember31,2013.Thefutureminimumleasepaymentsfortheseleasesareasfollows:

Fiscal Year Ending December 31:

2014 $86,3302015 62,2312016 28,5232017 12,7952018 6,014Total $195,893

Investment Type Maturities Fair Value

BankDeposits $7,977,746ConstructionFunds 7,684,468BondFunds-PrincipalandInterest 997,829StateTreasurer'sLocalGovernmentInvestmentPool 55daysaverage 8,868,306FederalNationalMortgageAssociation 7/5/2014 2,027,840FederalHomeLoanMortgageCorporation 1/30/2015 1,000,372FederalNationalMortgageAssociation 5/15/2017 1,971,564FederalHomeLoanBank 10/30/2017 3,551,925FederalHomeLoanBank 2/5/2020 1,872,800Total Cash, Deposits and Investments $35,952,850

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NOTE 6 - Long-Term DebtTheDistricthasfourrevenuebondsoutstandingasofDecember31,2013.Theoriginalamountsofthesebondstotaled$79,520,000.Thefundswereusedfortheacquisitionandconstructionofmajorcapitalfacilities.Currentlyrevenuebondsoutstandingareasfollows:

Thefollowingisalistofthelong-termdebtactivityandyear-endsummaryasofDecember31,2013.

Issue Beginning Balance Additions Reductions Ending

Balance Amounts

Due Within One Year

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

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

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

6,120,000 - 580,000 5,540,000 605,000

2010BElectricRevenueBonds,dueinannualinstallmentsstartingin2022of$2,060,000-$24,560,000throughDecember1,2040

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

2012ElectricRevenueBonds,dueinannualinstallmentsstartingin2013of$965,000-$1,235,000throughDecember1,2021

9,765,000 - 965,000 8,800,000 1,005,000

Subtotal $78,385,000 $- $1,545,000 $76,840,000 $1,610,000

Plus:UnamortizedDiscounts&Premiums 1,123,697 - 214,495 909,202 -

Less:UnamortizedLossonDefeasedDebt (269,433) - (35,472) (233,961) -

Total Bonds Payable $79,239,264 $- $1,724,023 $77,515,241 $1,610,000

CapitalLeases 12,025 - 12,025 - -

CompensatedAbsences 2,179,602 1,594,519 1,600,785 2,173,336 1,479,593

Total Long-Term Debt $81,430,891 $1,594,519 $3,336,833 $79,688,577 $3,089,593

Purpose Interest Rate Original Amount

2008-ElectricRevenueBonds 5.30% - 5.375% $9,950,000

2010A-ElectricRevenueBonds 2.00% - 4.00% 7,255,000

2010B-ElectricRevenueBonds(TaxableBABs) 2.334% - 6.347% 52,550,000

2012-ElectricRevenueBonds 2.00% - 4.00% 9,765,000

Total $79,520,000

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Futuredebtservicerequirementsonthebondsareasfollows:

Therearelimitationsandrequirementscontainedinthevariousbondindentures.TheDistrictisincompliancewithallsignificantlimitationsandrestrictionsincludingcompliancewithfederalarbitragerequirements.

Inprioryears,theDistrictdefeasedelectricrevenuebondsbyplacingproceedsofthenewbondswithanescrowagenttoprovideforallfuturedebtservicepaymentsontheoldbonds.Accordingly,theescrowaccountassetsandtheliabilityforthedefeasedbondsarenotincludedintheDistrict’sfinancialstatements.AtDecember31,2013,$15,325,000ofdefeasedbondsremainoutstanding.

TheDistrictestablishes,maintainsandcollectsratesandchargesthatshallbeadequatetoprovideineachfiscalyearnetrevenuesinanamountequaltoatleast1.25timestheAnnualDebtServiceontheParityBondsoutstandinginaccordancewiththebondcovenants.

PursuanttotheresolutionsauthorizingtheissuanceofOutstandingBonds,theDistricthassatisfiedtheReserveAccountRequirementsbypurchasingsuretybondsfromFinancialSecurityAssurance,Inc.(“FSA”)alongwithcashthataresufficienttosatisfytheReserveAccountRequirementfortheOutstandingBonds.The$807,172suretybondwithFSAexpiresonDecember1,2021.TheDistrictreplacedasuretybondwithFinancialGuarantyInsuranceCompany(FGIC)withproceedsfromthe2008Bondsandthe2010BBondsandDistrictreserves.AsofDecember31,2013,theDistricthadafairvaluebalanceof$5,424,725initsBondReserveAccount.TheDistrictmaintainsbondreservefundstoguaranteetheprincipalandinterestpaymentstobondholders.

TheDistrictdidnotengageinanyshort-termdebtactivityduringtheyear.

NOTE 7 - Pension PlansAllfull-timeandqualifyingpart-timeDistrictemployeesparticipateinoneofthefollowingstatewideretirementsystemsadministeredbytheWashingtonStateDepartmentofRetirementSystems,undercost-sharingmultiple-employerdefinedretirementplans.TheDepartmentofRetirementSystems(DRS),adepartmentwithintheprimarygovernmentoftheStateofWashington,issuesapubliclyavailablecomprehensiveannualfinancialreport(CAFR)thatincludesfinancialstatementsandrequiredsupplementaryinformationforeachplan.TheDRSCAFRmaybeobtainedbywritingto:DepartmentofRetirementSystems,CommunicationsUnit,P.O.Box48380,Olympia,WA98504-8380;oritmaybedownloadedfromtheDRSwebsiteatwww.drs.wa.gov.ThefollowingdisclosuresaremadepursuanttoGASBStatement27, Accounting for Pensions by State and Local Government EmployersandGASBStatement50,Pension Disclosures, an Amendment of GASB Statements 25 and 27.

Public Employees’ Retirement System (PERS) Plans 1, 2 and 3Plan Description –TheWashingtonStateLegislatureestablishedPERSin1947.Membershipinthesystemincludes:electedofficials;stateemployees;employeesoftheSupreme,Appeals,andSuperiorcourts;employeesoflegislativecommittees;employeesofdistrictandmunicipalcourts;andemployeesoflocalgovernments.Membershipalsoincludeshighereducationemployeesnotparticipatinginhighereducationretirementprograms.Approximately49percentofPERSsalariesareaccountedforbystateemployment.PERSretirementbenefitprovisionsareestablishedinChapters41.34and41.40RCWandmaybeamendedonlybytheStateLegislature.

PERSisacost-sharingmultiple-employerretirementsystemcomprisedofthreeseparateplansformembershippurposes:Plans1and2aredefinedbenefitplansandPlan3isadefinedbenefitplanwithadefinedcontributioncomponent.

Year Principal Interest Total2014 $1,610,000 $4,270,300 $5,880,3002015 1,645,000 4,232,050 5,877,0502016 1,690,000 4,186,750 5,876,7502017 1,740,000 4,140,050 5,880,0502018 1,800,000 4,081,100 5,881,1002019-2023 10,050,000 19,239,222 29,289,2222024-2028 14,450,000 16,357,208 30,807,2082029-2033 15,750,000 11,944,217 27,694,2172034-2038 19,245,000 6,572,058 25,817,0582039-2040 8,860,000 849,229 9,709,229Total $76,840,000 $75,872,186 $152,712,186

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PERSmemberswhojoinedthesystembySeptember30,1977arePlan1members.ThosewhojoinedonorafterOctober1,1977andbyeither,February28,2002forstateandhighereducationemployees,orAugust31,2002forlocalgovernmentemployees,arePlan2membersunlesstheyexercisedanoptiontotransfertheirmembershiptoPlan3.PERSmembersjoiningthesystemonorafterMarch1,2002forstateandhighereducationemployees,orSeptember1,2002forlocalgovernmentemployeeshavetheirrevocableoptionofchoosingmembershipineitherPERSPlan2orPlan3.Theoptionmustbeexercisedwithin90daysofemployment.Employeeswhofailtochoosewithin90daysdefaulttoPlan3.

PERSiscomprisedofandreportedasthreeseparateplansforaccountingpurposes:Plan1,Plan2/3,andPlan3.Plan1accountsforthedefinedbenefitsofPlan1members.Plan2/3accountsforthedefinedbenefitsofPlan2members,andthedefinedbenefitportionofbenefitsforPlan3members.Plan3accountsforthedefinedcontributionportionofbenefitsforPlan3members.AlthoughmemberscanonlybeamemberofeitherPlan2orPlan3,thedefinedbenefitportionsofPlan2andPlan3areaccountedforinthesamepensiontrustfund.AllassetsofthisPlan2/3maylegallybeusedtopaythedefinedbenefitsofanyofthePlan2orPlan3membersorbeneficiaries,asdefinedbythetermsoftheplan.Therefore,Plan2/3isconsideredtobeasingleplanforaccountingpurposes.

PERSPlan1andPlan2retirementbenefitsarefinancedbyacombinationofinvestmentearnings,employerandemployeecontributions.EmployeecontributionstothePERSPlan1andPlan2definedbenefitplansaccrueinterestataratespecifiedbytheDirectorofDRS.DuringDRS’FiscalYear2013,theratewasfiveandone-halfpercentcompoundedquarterly.MembersinPERSPlan1andPlan2canelecttowithdrawtotalemployeecontributionsandinterestthereon,inlieuofanyretirementbenefit,uponseparationfromPERS-coveredemployment.

PERSPlan1membersarevestedafterthecompletionoffiveyearsofeligibleservice.

PERSPlan1membersareeligibleforretirementfromactivestatusatanyagewithatleast30yearsofservice,atage55with25yearsofservice,oratage60withatleastfiveyearsofservice.Plan1membersretiringfrominactivestatuspriortotheageof65mayreceiveactuariallyreducedbenefits.

Themonthlybenefitistwopercentoftheaveragefinalcompensation(AFC)peryearofservice,butthebenefitmaynotexceed60percentoftheAFC.TheAFCisthemonthlyaverageofthe24consecutivehighest-paidservicecreditmonths.

PERSPlan1retirementbenefitsareactuariallyreducedtoreflectthechoice,ifmade,ofasurvivoroption.

Plan1membersmayelecttoreceiveanoptionalCOLAthatprovidesanautomaticannualadjustmentbasedontheConsumerPriceIndex.Theadjustmentiscappedat3percentannually.Tooffsetthecostofthisannualadjustment,thebenefitisreduced.

PERSPlan1providesdutyandnon-dutydisabilitybenefits.Dutydisabilityretirementbenefitsfordisablementpriortotheageof60consistofatemporarylifeannuity.Thebenefitamountis$350amonth,ortwo-thirdsofthemonthlyAFC,whicheverisless.Thebenefitisreducedbyanyworkers’compensationbenefitandispayableaslongasthememberremainsdisabledoruntilthememberattainstheageof60,atwhichtimethebenefitisconvertedtothemember’sserviceretirementamount.

Amemberwithfiveyearsofcoveredemploymentiseligiblefornon-dutydisabilityretirement.Priortotheageof55,thebenefitamountistwopercentoftheAFCforeachyearofservicereducedby2percentforeachyearthatthemember’sageislessthan55.Thetotalbenefitislimitedto60percentoftheAFCandisactuariallyreducedtoreflectthechoiceofasurvivoroption.Plan1membersmayelecttoreceiveanoptionalCOLAamount(basedontheConsumerPriceIndex),cappedatthreepercentannually.Tooffsetthecostofthisannualadjustment,thebenefitisreduced.

PERSPlan2membersarevestedafterthecompletionoffiveyearsofeligibleservice.Plan2membersareeligiblefornormalretirementattheageof65withfiveyearsofservice.ThemonthlybenefitistwopercentoftheAFCperyearofservice.TheAFCisthemonthlyaverageofthe60consecutivehighest-paidservicemonths.Thereisnocaponyearsofservicecredit;andacost-of-livingallowanceisgranted(basedontheConsumerPriceIndex),cappedatthreepercentannually.

PERSPlan2memberswhohaveatleast20yearsofservicecredit,andare55yearsofageorolder,areeligibleforearlyretirementwithareducedbenefit.Thebenefitisreducedbyanearlyretirementfactor(ERF)thatvariesaccordingtoage,foreachyearbeforeage65.

PERSPlan2memberswhohave30ormoreyearsofservicecreditandareatleast55yearsoldcanretireunderoneoftwoprovisions,ifhiredpriortoMay1,2013:

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• Withabenefitthatisreducedbythreepercentforeachyearbeforeage65;or

• Withabenefitthathasasmaller(orno)reduction(dependingonage)thatimposesstricterreturn-to-workrules.

PERSPlan2membershiredonorafterMay1,2013havetheoptiontoretireearlybyacceptingareductionoffivepercentforeachyearofretirementbeforeage65.Thisoptionisavailableonlytothosewhoareage55orolderandhaveatleast30yearsofservice.

PERSPlan2retirementbenefitsareactuariallyreducedtoreflectthechoice,ifmade,ofasurvivoroption.

PERSPlan3hasadualbenefitstructure.Employercontributionsfinanceadefinedbenefitcomponentandmembercontributionsfinanceadefinedcontributioncomponent.AsestablishedbyChapter41.34RCW,employeecontributionratestothedefinedcontributioncomponentrangefromfivepercentto15percentofsalaries,basedonmemberchoice.Memberswhodonotchooseacontributionratedefaulttoafivepercentrate.TherearecurrentlynorequirementsforemployercontributionstothedefinedcontributioncomponentofPERSPlan3.

PERSPlan3definedcontributionretirementbenefitsaredependentupontheresultsofinvestmentactivities.Membersmayelecttoself-directtheinvestmentoftheircontributions.Anyexpensesincurredinconjunctionwithself-directedinvestmentsarepaidbymembers.Absentamember’sself-direction,PERSPlan3contributionsareinvestedintheRetirementStrategyFundthatassumesthememberwillretireatage65.

ForDRS’FiscalYear2013,PERSPlan3employeecontributionswere$99million.Planrefundspaidoutwere$69.4million.

ThedefinedbenefitportionofPERSPlan3providesmembersamonthlybenefitthatisplanpercentoftheAFCperyearofservice.TheAFCisthemonthlyaverageofthe60consecutivehighest-paidservicemonths.Thereisnocaponyearsofservicecredit,andPlan3providesthesamecost-of-livingallowanceasPlan2.

EffectiveJune7,2006,PERSPlan3membersarevestedinthedefinedbenefitportionoftheirplanaftertenyearsofservice;orafterfiveyearsofservice,if12monthsofthatserviceareearnedafterage44;orafterfiveservicecredityearsearnedinPERSPlan2byJune1,2003.Plan3membersareimmediatelyvestedinthedefinedcontributionportionoftheirplan.

VestedPlan3membersareeligiblefornormalretirementatage65,ortheymayretireearlywiththefollowingconditionsandbenefits:

• Iftheyhaveatleasttenservicecredityearsandare55yearsold,thebenefitisreducedbyanERFthatvarieswithage,foreachyearbeforeage65.

• Iftheyhave30servicecredityearsandareatleast55yearsold,andwerehiredbeforeMay1,2013,theyhavethechoiceofabenefitthatisreducedbythreepercentforeachyearbeforeage65;orabenefitwithasmaller(orno)reductionfactor(dependingonage)thatimposesstricterreturn-to-workrules.

• Iftheyhave30servicecredityears,areatleast55yearsold,andwerehiredafterMay1,2013,theyhavetheoptiontoretireearlybyacceptingareductionoffivepercentforeachyearbeforeage65.

PERSPlan3benefitsareactuariallyreducedtoreflectthechoice,ifmade,ofasurvivoroption.

PERSPlan2andPlan3providedisabilitybenefits.Thereisnominimumamountofservicecreditrequiredforeligibility.ThePlan2monthlybenefitamountistwopercentoftheAFCperyearofservice.ForPlan3,themonthlybenefitamountisonepercentoftheAFCperyearofservice.Thesedisabilitybenefitamountsareactuariallyreducedforeachyearthatthemember’sageislessthan65,andtoreflectthechoiceofasurvivoroption.Thereisnocaponyearsofservicecredit,andacost-of-livingallowanceisgranted(basedontheConsumerPriceIndex)cappedatthreepercentannually.

PERSmembersmeetingspecificeligibilityrequirementshaveoptionsavailabletoenhancetheirretirementbenefits.Someoftheseoptionsareavailabletotheirsurvivors.

Aone-timeduty-relateddeathbenefitisprovidedtothebeneficiaryortheestateofaPERSmemberwhodiesasaresultofinjuriessustainedinthecourseofemployment,orifthedeathresultedfromanoccupationaldiseaseorinfectionthatarosenaturallyandproximatelyoutofthemember’scoveredemployment,iffoundeligiblebytheDepartmentofLaborandIndustries.

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Thereare1,176participatingemployersinPERS.MembershipinPERSconsistedofthefollowingasofthelatestactuarialvaluationdatefortheplansofJune30,2012:

Funding Policy –Eachbiennium,thestatePensionFundingCounciladoptsPERSPlan1employercontributionrates,PERSPlan2employerandemployeecontributionrates,andPERSPlan3employercontributionrates.EmployeecontributionratesforPlan1areestablishedbystatuteatsixpercentforstateagenciesandlocalgovernmentunitemployees.TheemployerandemployeecontributionratesforPlan2andtheemployercontributionrateforPlan3aredevelopedbytheOfficeoftheStateActuarytofullyfundPlan2andthedefinedbenefitportionofPlan3.UnderPERSPlan3,employercontributionsfinancethedefinedbenefitportionoftheplanandmembercontributionsfinancethedefinedcontributionportion.ThePlan3employeecontributionratesrangefromfivepercentto15percent.

ThemethodsusedtodeterminethecontributionrequirementsareestablishedunderstatestatuteinaccordancewithChapters41.40and41.45RCW.

Therequiredcontributionratesexpressedasapercentageofcurrent-yearcoveredpayroll,asofDecember31,2013,areasfollows:

BoththeDistrictanditsemployeesmadetherequiredcontributions.TheDistrict’srequiredcontributionsfortheyearsendedDecember31wereasfollows:

NOTE 8 - Power Supply/Power Sales ContractBonneville Power Administration (BPA) – TheBPAisafederalpowermarketingagency,establishedbytheBonnevillePowerActof1937.TheBPAispartoftheU.S.DepartmentofEnergy,butisself-financingandreceivesnofederaltaxrevenues.Costsarerecoveredbysellingwholesalepower,transmissionandrelatedservicesatcosttoutilities,industrialandgovernmentalcustomersinsideandoutsideoftheregion.Underfederallaw,theBPAmustmeetthepowerneedsofitspreferencecustomers;consumer-ownedutilitiesthatincludepublicutilitydistricts,people’sutilitydistricts,cooperatives,tribalutilities,municipalitiesandfederalcustomers.Aboutone-thirdofallthepowerusedinthePacificNorthwestissoldbytheBPA.

TheBPAmakesannualpaymentstotheU.S.TreasuryformoneyappropriatedtotheU.S.ArmyCorpsofEngineersandU.S.BureauofReclamation,orformoneyborrowedtoconstructdams,substationsandtransmissionfacilities.TheBPAalsofundsfishandwildlifemitigationcostsassociatedwiththefederalhydropowerdevelopmentintheColumbiaRiverBasin,equalingnearlyonethirdofitswholesalecostofpower,andprovidescapacityforintegrationofrenewablegenerationresourceswithinitsbalancingarea.

TheBPAdoesnotowngenerationresourcesordistributionfacilities.Itsfunctionistomarkettheoutputoffederalresourcesandtransmitbothfederalandnon-federalpoweroveritstransmissiongrid.TheCorpsofEngineersandtheBureauofReclamationoperateandmaintain31hydroelectricprojectswhichconstitutethebackboneofthefederalbasesystem.Inaddition,theBPApurchasesandmarkets1,170MWofEnergyNorthwest’sColumbiaGenerationStation,thePacificNorthwest’sonlynuclearpowerfacility,atthecostofproductionunderaformalnetbillingagreement.TheBPAownsandoperatesapproximately75percentoftheregion’stransmissioncapacity.theBPAhasover4,500megawattsofwindintegratedintoitstransmissionsystem,andexpectsanother2,500megawattsby2015.

*Theemployerratesincludetheemployeradministrativeexpensefeecurrentlysetat0.18percent.**Plan3definedbenefitportiononly.***Variablefrom5.0percentminimumto15.0percentmaximumbasedonrateselectedbythePERS3member.

PERS Plan 1 PERS Plan 2 PERS Plan 3Employer* 9.21% 9.21% 9.21%**Employee 6.00% 4.92% ***

PERS Plan 1 PERS Plan 2 PERS Plan 32013 $7,598 $625,303 $138,2982012 $69,792 $530,114 $119,3572011 $30,890 $423,934 $97,402

RetireesandBeneficiariesReceivingBenefits 82,242TerminatedPlanMembersEntitledto,butnotyetReceivingBenefits 30,515ActivePlanMembersVested 106,317ActivePlanMembersNonvested 44,273Total 263,347

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Lookback Payment – InSeptember2008,afinalrecordofdecisionwasissuedbytheBPAinresponsetothe2007USCourtofAppealsfortheNinthCircuitrulingagainsttheBPA(WP-07supplementalratecase).Therulingsetthepowerratesforfiscalyear(FY)2009andestablishedthepowerratecomponentsofanewResidentialExchangeProgram(REP)forfiscalyear2009andbeyond.Theratecaseaccomplishedthefollowing:

• RevisedpowerratesforFY2009.• DeterminedtheoverpaymentstoInvestorOwnedUtilities(IOUs)andassociatedoverchargestopreference

customersduetoimproperlysetratesforFY2002-2007(the“LookbackAmount”).• DeterminedResidentialExchangeProgrambenefitsforIOUsforFY2009.• DeterminedanamountofREPbenefitsthattheIOUswentwithoutforFY2009thatwasreturnedto

preferencecustomersinFY2009.• DeterminedoverchargestopreferencecustomersforFY2007-2008andclosedouttheinterimagreements

signed in March 2008.

ItwasdeterminedtheBPAoverchargeditscustomers$767millionforFY2002-2007(LookbackPayment).TheoverchargesfortheLookbackPaymentwerereturnedintheformofinstallmentsontheBPAcustomers’powerbills.TheDistrict’sportionoftheLookbackPaymentequaled$4.5million,ofwhich$550,000wascreditedin2008,$1.9millionin2009,$1.2millionin2010,$870,000in2011and$983,000in2012.

TheactualoverchargesfortheFY2007andFY2008totaled$256.8million.ItisthedifferencebetweenwhattheIOUsreceivedunderthesettlementagreementandwhattheywouldhavereceivedunderanREP.TheDistrictreceiveda$2,938,934refundinOctober2008andanotherrefundof$178,581inSeptember2009.TheDistrictwillcontinuetoreceivepaymentsthrough2019,withthepaymentfor2013beingthesameas2012at$983,000,andapproximately$850,000eachyearfortheyears2014through2019.

Tiered Rates – TheBPAsaysthecapacityoftheFederalColumbiaRiverPowerSystem(FCRPS)hasbeenreached.Therefore,in2008afternearlythreeyearsofregionaldialoguediscussions,theBPAofferednewpowersalescontractsforthetermof2011to2027,whichallocatethecapacityoftheexistingFCRPSbasedontheworst-casewateryearandmaintaintherelativelylowcostoftheresource.ItrequiresanyenergypurchasedinexcessofthatcapacitytobeattheBPA’scostofacquiringtheadditionalresources.TheDistrictsignedthecontract,withreservations,onNovember25,2008.ThenewcontractwentintoeffectOctober1,2011.

InNovember2009,theDistrictinformedtheBPAitwouldpurchaseTier2Short-TermservicefromtheBPAforloadsabovetheTier1allocationforthepurchaseperiodof2012-2014.SincetheDistricthasexperiencedlowloadgrowth,andanticipatessuchforthenextseveralyears,inSeptember2011theDistrictrequestedTier2Short-Termserviceforthesecondpurchaseperiodof2015-2019.CurrentlytheDistrictisinload-resourcebalance,anddoesnotanticipateactuallypurchasinganytheBPATier2Short-TermserviceuntilOctoberof2015.

Conservation Programs –TheDistricthasanagreementwiththeBPAtoparticipateintheEnergyEfficiencyIncentive(EEI)conservationprogram,effectiveOctober1,2011.TheEEIreplacestheConservationRateCredit(CRC),signedin2006,andtheEnergyConservationAgreement(ECA),signedin2009,andsupportstheBPA’sacquisitionofconservation.

TheBPAdeterminedEEIfundingforFY2012and2013byidentifyingtheaverageofeachutility’sallocationascalculatedfromrateperiod(FY2010-2011)expenditureanalysisandallocation.CustomerincentivespaidbytheDistrictarereimbursedbytheBPAuponsubmissionofqualifyinginvoicesanddocumentationonaproject-by-projectbasis.Theseprojectsincluderesidential,commercial,andindustrialconservationmeasures.ThedeterminedamountsbytheBPAforMasonCountyPUDNo.3’sEEIbudgetare$651,424forFY2013and$637,176forFY2014.

TheBPAhasalsodeterminedEEIfundingforFY2014and2015byidentifyingtheaverageofeachutility’sallocationascalculatedfromrateperiod(FY2012-2013)expenditureanalysisandallocation.CustomerincentivespaidbytheDistrictarereimbursedbytheBPAuponsubmissionofqualifyinginvoicesanddocumentationonaproject-by-projectbasis.Theseprojectsincluderesidential,commercial,andindustrialconservationmeasures.ThedeterminedamountbytheBPAforMasonCountyPUDNo.3’sEEIbudgetare$1,503,011forFY2014-2015.

Publicutilitycustomers’fundingamountsforEEIweredecreasedinresponseto,andasaresultof,theBPA’soverruninitscapitalfundingbudgetedforenergyefficiencyincentivesunderEnergyConservationAgreements.

TheDistrictachievedover8,100megawatthours(8,164,722kWh/year)ofenergyconservationduring2013,spending$1,466,175inincentivestodoso.Thetargetcostofavoidedcostconservationintheregionis$35permegawatt,asestablishedbytheNorthwestPowerandConservationCouncil(NWPCC).In2013,theDistrictacquiredconservationatarateof$18permegawattwitha30-yearaverageof$23permegawatt.ThisiswellbelowtheCouncil’sestimates,andshowsadedicationoffiscallyresponsibleenergyconservation.

TheaverageDistrictresidentialhome(stickbuiltandmanufactured)uses15,833kWh/year.In2013alone,theDistrictachievedenoughenergysavingstopower516MasonCountyhomesforayear.Energyconservation

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achievementsfor2013havequadrupledtheprevious28years’averageannualachievement,aftermorethandoublingitin2012.

QualifyingmeasuresfortheBPA’sEnergyEfficiencyProgramaredeterminedbytheRegionalTechnicalForum(RTF)andreportedontheBPA’sInterimReportingSolution2.0(IS2.0)website.TheRTFisanadvisorycommitteeoftheNorthwestPowerPlanningCouncil,establishedin1999todevelopstandardstoverifyandevaluateconservationsavings.MembersareappointedbytheCouncilandincludeindividualsexperiencedinconservationprogramplanning,implementationandevaluation.TheDistricthashademployeerepresentationattheRTFsinceitsinception.

Energy Independence Act (Initiative 937) – ApprovedbyWashingtonStatevotersin2006,theEnergyIndependenceAct(theAct),alsoknownasInitiative937(I-937)requireselectricutilitieswithmorethan25,000customerstoinvestinprescribedrenewableenergysourcesandenergyconservationprograms.I-937requirementsarecodifiedinstatelawundertheRevisedCodeofWashington(RCW)19.285andWashingtonAdministrativeCode(WAC)194-37.

TheActhastworequirements.Thefirstisthateachqualifyingutilitypursueallavailableconservationthatiscost-effective,reliable,andfeasiblewithinitsserviceterritory.Thesecondrequirementdictateseachqualifyingutilitytoacquiresetpercentagesofitsloadfromqualifyingrenewableresourcesoracquireequivalentrenewableenergycredits(REC)byspecifictimelines(threepercentby2012,ninepercentby2016and15percentby2020).ARECrepresentsthelegalrightstotheenvironmentalattributesassociatedwiththegenerationofonemegawatthourofrenewableenergy.

TheDistricthastakenmanystepstocomplywiththeAct.Theseincludecontinuedemphasisonresidential,commercialandindustrialconservationprograms;participationinallthreephasesoftheNineCanyonWindProject;along-termenergypurchasefromtheWhiteCreekWindProject;andalong-termRECpurchasefromaPacificNorthwestwinddeveloper.TheDistrictmetitsmandateofthreepercentrenewablesin2012andexpectstomeetthesamelevelthrough2015.Inaddition,thesecuringoftheRECcontractwillenabletheDistricttomeetitsmandateofninepercentrenewablesin2016.Thespecificstrategyforcompliancewiththefifteenpercentrequirementin2020isbeingevaluated.

Olympic View Generating Station –Duetothehighcostofmarketpowerpurchasesduringthe2001energycrisis,theBPAaskedallofitscustomerstoreducetheirloadbytenpercent.TheDistrictsignedthe“RateMitigationAgreement”inJuneof2001.Inadditiontotheenergyconservationmeasurestakentoreduceload,theDistrictalsoconstructedgenerationcapacitytohelpmeettheloadreduction.

Asaresult,theDistrictsecuredatermloanfor$6milliontofinancetheconstructionofanaturalgasgenerationfacilityutilizingtwoWärtsila2.8megawattreciprocatingengineswithABBgenerators.Thisloanwasretiredin2010.

TheDistricthasparticipatedintwopilotprojects,undercontractwiththeBPA,tohelpdelayplannedtransmissionlineconstructionontheOlympicPeninsulabyoperatingtheplantduringtimesofanticipatedpeakload.TheDistrictplanstousethefacilitytooffsethighercostresourcesandcapacityneedsduringpeakhoursinthefuture.Inaddition,thefacilityisbeingevaluatedasbothacontractedcommercialback-uppowerresource,aswellasforadisasterresponseasset.

Energy Northwest (ENW) – ENW,previouslyWashingtonPublicPowerSupplySystemorWPPSS,isamunicipalcorporationandjointoperatingagencyofWashingtonState,organizedin1957.Itisempoweredtofinance,acquire,constructandoperatefacilitiesforthegenerationandtransmissionofelectricpower.WhileMasonCountyPublicUtilityDistrictNo.3wasafoundingmemberofWPPSS,itwithdrewitsmembershiponSeptember11,1984.InJuly2001theDistrictonceagainbecameamemberofEnergyNorthwest.Thereare27memberutilitiesandallmembersownandoperateelectricsystemswithinWashingtonState.EnergyNorthwesthasnotaxingauthority.FinancialstatementsforEnergyNorthwestmaybeobtainedbywritingto:EnergyNorthwest,P.O.Box968,Richland,WA99352-0968.Awebsiteisavailableatwww.energy-northwest.com.

Nuclear Projects 1, 2 and 3 – TheDistrictcontinuestofulfillitsobligationsconsistentwiththetermsandconditionsoftheNetBillingAgreementswithEnergyNorthwestandtheBonnevillePowerAdministration(BPA).

TheDistrictpurchased1.262percentofWPPSSNuclearProject(WNP)No.1,1.446percentofWNPNo.2and1.265percentofthecapacityoftheEnergyNorthwest70percentownershipshareofWNPNo.3.TheDistrictinturnsoldthiscapacitytotheBPA.UndertheNetBillingAgreements,theBPAisunconditionallyobligatedtopaytheDistrictandtheDistrictisunconditionallyobligatedtopayEnergyNorthwesttheproratashareofthetotalannualcostsofeachproject,includingdebtserviceonrevenuebondsissuedtofinancetheprojects,whetherornottheprojectsarecompleted,operableoroperatingandnotwithstandingthesuspension,reductionorcurtailmentoftheproject’soutput.

WNPNo.2,nowreferredtoastheColumbiaGeneratingStation(CGS),commencedcommercialoperationinDecember1984.InMay1994theBPAandWPPSSterminatedWNPNo.1andWNPNo.3,subjecttorepaymentof

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thedebtserviceontheoutstandingrevenuebonds.

TheDistrict’sobligationsundertheNetBillingAgreementsarescheduledtobefulfilledonCGSin2024,onWNPNo.1in2017andonWNPNo.3in2018.

Columbia Generating Station (CGS) – TheCGSisareliableenergyproducer.Itproduceselectricity24hoursaday,sevendaysaweek,unlessitissafelyshutdownbyplantoperators,asitisduringarefuelingoutage.Inaddition,operatorsareabletoadjustpowerlevelstomeetBonnevillePowerAdministration’sneedsbasedonriverconditions;referredtoas“loadfollowing.”Refuelingandmaintenanceoutagesoccureverytwoyearsduringthespring,whentheColumbiaRiverBasinhasamplerunofftogenerateelectricitythroughhydroelectricturbines.

OnJanuary19,2010,EnergyNorthwestannouncedthatithadappliedtotheNuclearRegulatoryCommission(NRC)fora20-yearrenewaloftheoperatinglicenseforitsColumbiaGeneratingStationnuclearenergyfacility.Thelicenserenewalprocesstookapproximately2½yearsandinvolvedcomprehensivereviewsandpublichearingsbytheNRC.InMay2012theNRCapprovedtheCGSlicenseforanadditional20years,extendingtheoperationthrough2043.

Packwood Hydroelectric Project – ThePackwoodHydroelectricProjectislocatednearthetownofPackwoodineasternLewisCounty,Washington.Theprojectisa27.5megawattpeakingresource.CommercialoperationbeganinJune1964.

TheDistricthasatenpercentshareintheproject(participantownersarenotequallyinvestedintheproject).Theparticipantownersareobligatedtopayannualcostsoftheproject.InMarch2009,debtserviceonthePackwoodHydroelectricProjectwasretired.Thiswasearlierthantheoriginallyscheduleddateof2012.

Underpowersalesagreements,someoftheEnergyNorthwestmemberpublicutilitydistrictspurchasedtheprojectoutputofPackwood.InAugustof2008theparticipantsagreedtosellthetotalgenerationoutputtoSnohomishCountyPublicUtilityDistrict,anotherprojectparticipant.Thepowersalescontractwasatwo-yeartermwiththeoptiontorenewwithfullagreementbyallparties.In2010,Snohomishoptedtorenewthepowersalescontractforanotherone-yearterm.However,theDistrictbegantobringitstenpercentsharetoloadstartinginOctober2011withan18-yearagreement,asaTier1resourceundertheBPARegionalDialogueContract.

TheFederalEnergyRegulatoryCommission(FERC)licenseforPackwoodexpiredin2010.Theprojectwasgrantedacontinuancetooperateundertheexistinglicenseonayear-to-yearbasisuntilthenewlicenseisissued.EnergyNorthwestbegantherelicensingprocessin2005.Applicationforanew50-yearoperatinglicensewassubmittedtotheFERCinFebruaryof2008.ThefinalEnvironmentalAssessmentandWaterQualityCertificationwerecompletedinJulyof2009.Participantselectedtoreceivenopaymentsfromthesaleoftheproject’senergyoutputinordertoprovidefundsfortherelicensingeffortswhicharenowpaidinfull.Projectmanagerssubmittedafinalrelicensingapplicationin2010,andareawaitingfinalapproval.

Nine Canyon Wind Project – Inearly2001EnergyNorthwestapproachedpublicutilitiesaboutdevelopingawindgenerationproject.InSeptemberof2001,theDistrictsignedanagreementwithEnergyNorthwesttopurchaseaonemegawattshare(2.08percent)oftheNineCanyonWindProject,Phase1.

NineCanyonPhaseIconsistsof37Bonuswindturbineswithapeakgeneratingcapacityof48megawatts.ThisphaseoftheprojectbegancommercialoperationinOctoberof2002.AswiththePackwoodHydroelectricProject,participantsofNineCanyonareobligatedtopaytheannualcostsoftheproject,includingdebtservice,whetherornottheprojectisoperable,untiltheoutstandingbondsarepaidorprovisionismadefortheirretirementinaccordancewiththebondresolution.Bondsintheamountof$71millionweresoldtofinanceconstructionofPhaseIoftheproject.InDecemberof2004,EnergyNorthwestrefinancedthePhaseIbonds,resultinginasavingsof$5.3million.

OnApril22,2003,theDistrictagreedtoenterintoa27-yearagreementforPhaseIIoftheNineCanyonWindProjectwithEnergyNorthwestandfourotherparticipants.TwelvemoreBonuswindturbineswereerectedinthesameareaasPhaseI.Theyhaveapeakgeneratingcapacityofanadditional15.6megawatts.TheDistrict’sshareofPhaseIandPhaseIItogetheristwomegawattsor3.14percent.Bondsintheamountof$32.9millionweresoldtofinancetheconstructionofthissecondphase.CommercialoperationofthesecondphasebeganinSeptember2003.BondsforPhaseIandIIareexpectedtomaturein2023.

InOctoberof2005,EnergyNorthwestannouncedtheinvestigationintoanotherexpansionoftheNineCanyonWindProject.OnOctober3,2006,theDistrictsigneda23-yearpowerpurchaseagreementforonemegawattofoutputfromthePhaseIIIexpansion,keepingitsoutputshareat3.14percentoftheoverallproject.In2006,bondsintheamountof$68millionweresoldtofinancetheconstructionandarescheduledtoconcludein2030.PhaseIIIconsistsof14-2.3megawattSiemenswindturbinestotaling32.2megawatts.ConstructionbeganinJune2007,andcommercialoperationstartedinJune2008.

TheNineCanyonWindProjectisoneofthelargestpubliclyownedwindprojectsinthenation.With63windturbines(14ratedat2.3megawattsand49moreat1.3megawatts),NineCanyon’stotalinstalledcapacityis95.9

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megawatts.IntotaltheDistrictbuysthreemegawattsofrenewableenergy,orgreenpower,producedbytheNineCanyonWindProject(PhasesI,IIandIII),whichisusedtoserveDistrictload,aswellastomeettheDistrict’srenewablesmandatesundertheWashingtonState’sEnergyIndependenceAct.

White Creek Wind Project –In2010,theDistrictenteredintoan18-yearpurchaseagreementwithLakeviewLightandPowerWindEnergy,Inc.fortheelectricaloutputandallassociatedenvironmentalattributesorRECsfrom3.22megawattsofcapacityintheWhiteCreekWindProject.DuetominimalDistrictloadgrowth,theenergyisbeingresoldontheopenmarket.TheRECsarebeingretainedfortheDistrict’scompliancewiththethreepercentrenewablestargetundertheEnergyIndependenceAct.However,inSeptember2011theDistrictnotifiedtheBPAthattheenergywillbeusedtomeetDistrictloadgrowthbeginningOctober1,2014.

Long-Term REC Purchase - InSeptember2011,theDistrictenteredintoacontractwithExergyofIdaho,LLCtopurchase50,000RECsperyear.ThecontracttermbeginsonJanuary1,2016andrunsforaperiodof17years.ThispurchasewillbringtheDistrictintocompliancewiththeEnergyIndependenceActattheninepercentlevel.ProjectionssuggestthatthispurchasecouldsavetheDistrictinexcessof$50millionoverthecontractterm,asopposedtotheoptionofpurchasingabundledenergyandRECproductoverthesame17-yearterm.Inaddition,thisoptionallowstheDistricttoserveloadgrowthasitoccurs,withalessexpensive,morereliablebase-loadresource.

NOTE 9 - Public Entity Risk PoolsLIABILITY RISK POOL

A) Liability Pool – Primary Self-Insured and Excess Coverages

ThePublicUtilityRiskManagementServices(hereinafter,“PURMS”)providesliabilityinsurancecoveragesforitsmembersparticipatingintheliabilityriskpool(“liabilitypool”),andtoalimitedextentforthebenefitoftheiremployees,underanagreemententitled“PURMSJointSelf-InsuranceAgreement”(amendedandrestatedasofNovember10,2011(“SIA”)).UndertheSIA,from1977through1995,theliabilitypoolhadaself-insuredretention(or“liabilitycoveragelimit”)of$500,000peroccurrence.EffectiveJanuary1,1996,PURMSincreasedtheliabilitycoveragelimitto$1.0millionperoccurrence,whichwasthecoveragelimitineffectfor2013,andineffectasofDecember31,2013.

Atalltimes,PURMSmaintainsexcessliabilityinsuranceforitsmembersintheliabilitypool(“excessliabilityinsurance”). In2013, thefirst layerofexcess liability coverage, inwhichall liabilitypoolmembersmustparticipate,was$35millionexcessoftheliabilitypool’s$1millionliabilitycoveragelimit.Theliabilitypoolalso offers an additional layer of excess liability insurance coverage for thosemembers that choose toparticipate.For2013,thisadditionalexcessliabilityinsurancelayerwas$25millionexcessof$35million.

B) Liability Pool – Funding Level and Assessment Mechanisms

As a general matter, the liability pool is funded to the amount of its designated liability pool balance(“designated balance”), which in 2013was $3million. Of this amount, $500,000 is used to pay claimscostsastheyareincurredandongoingliabilitypooloperatingexpenses,includingprogramadministration(collectively,“operatingfunds”).The$500,000ofoperatingfundsisreplenishedbyassessmentsofliabilitypoolmembers,asdescribedbelow.Theremaining$2.5millionofthedesignatedbalance isheldbytheliabilitypooltomeetregulatoryreserverequirements,asdescribedinparagraphsC.–E.below.

Assessments to fund operation of the liability pool (“liability assessments”) are triggered automaticallyinaccordancewith the termsof the liabilitygeneralassessment formula (“automaticassessments”).Anautomaticannualassessmentisissuedatthebeginningofeachcalendaryeartoreplenishtheliabilitypooltoits$3milliondesignatedbalance.Inaddition,duringtheyear,automaticinterimassessmentsareissuedtoreplenishthe$3milliondesignatedbalancewhenevertheliabilitypool’scashandinvestments(“actualbalance”)aredepletedtotheamountoftheliabilitypool’sautomaticassessment“trigger”,whichin2013was$500,000belowthedesignatedbalance,orat$2.5million(“actualbalancetrigger”).Inthismanner,theliabilitypool:(a)paysforitsclaimscostsandoperatingexpensesonanongoingbasiswhilegenerallymaintainingcashandinvestmentsbetween$3millionand$2.5million;and(b)startseverynewfiscalyearbyreplenishingtheliabilitypool’sactualbalancetoits$3milliondesignatedbalance.

C) Liability Pool – WAC Program Funding Requirements

In2013,WAC200-100-03001(1)requiredeachjointself-insuranceprogramatthecloseofitsfiscalyeartoobtainanactuarialreportfromanindependentqualifiedactuary(“actuarialreport”)which,amongotherthings,determinedthe“expected”(i.e.55percent)and70percentconfidencelevelsfortheprogram’sunpaidclaimsasoftheendofthefiscalyear.WAC200-100-00301(2)thenrequiredtheprogramtoestablishandmaintainprimaryassets(definedbyWAC200-100-020(20)tomean“cashandinvestments”)

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atorabovethe“expected”confidencelevel(“primaryassettest”)andtoestablishandmaintaintotalassets(i.e.,cashandinvestmentsplus“secondaryassets”)atorabovethe70percentconfidencelevel(“totalassettest”)(collectively,“programfundingrequirements”).

D) Liability Pool – Funding Methodology

TheliabilitypoolfundingmethodologyensurescompliancewiththeWACprogramfundingrequirementsbyadoptingthe70percentconfidencelevelrequiredfor“totalassets”fundingunderWAC200-100-03001(3)asitsminimumlevelof“primaryassets”funding(ratherthanusingthelower55percentconfidenceleveldesignatedbyWAC200-100-03001(2)astheminimumpermittedprimaryassetfunding)(hereinafter,“70percentfundinglevel”).Asaresult,the70percentfundinglevel,whichcoincideswiththeactuariallyestablished70percentconfidencelevel,istheminimumamounttowhichliabilitypoolcashandinvestmentscouldbereducedbypaymentofclaimscostsandoperatingexpensesbeforetriggeringanautomaticassessmenttoreturntheliabilitypooltoits$3milliondesignatedbalance(regardlessoftheamountatwhichtheactualbalancetriggerisset,seediscussioninnextparagraphbelow).Furthermore,solongasthe70percentfundinglevelisestablishedatanamountbelowtheliabilitypool’s$2.5millionactualbalancetrigger(asithasbeeninthepastandwasin2013,seeparagraphE.below),thentheliabilitypool’scashandinvestmentsareunlikelytobedepletedtothe70percentfundinglevelbeforeanautomaticinterimassessmentofallliabilitypoolmembers(whichunderthePURMSinterlocalagreementmustbepaidwithin30daysofissuance)replenishestheliabilitypool’sactualbalancetotheamountofits$3milliondesignatedbalance(seeparagraphE.below).

Finally,theliabilitypool’sfundingmethodologyensuresthepoolultimatelymaintainsitscashandinvestmentsatanamountgreaterthanthe70percentconfidencelevel,evenifanactuarialreportestablishedthatnumberatanamountinexcessoftheactualbalancetrigger.Thefundingmethodologyaccomplishesthisbytriggeringanautomaticinterimassessmentwhentheactualbalancedropseithertothe$2.5millionactualbalancetriggerortothe70percentfundinglevel,whicheveramountisgreater.(SeeparagraphB.aboveandparagraphE.below)Thus,iftrendsinclaimsexperienceortheassertionofamajorclaimresultedinthe70percentconfidencelevelincreasingtoanamountthatexceededthe$2.5millionactualbalancetrigger,thenthe70percentfundinglevelwouldbecometheliabilitypool’sautomaticassessment trigger.

AcopyoftheactuarialreportfortheliabilitypoolisprovidedtotheWashingtonStateRiskManager(“SRM”)andmadeavailabletotheStateAuditor.

E) Liability Pool – 2013 Claims Payments and Operating Funding Levels

Thetotalpaidforliabilityclaimsin2013was$692,960,includingclaimsadjustmentexpenses,i.e.,costsandattorneys’feesfordefendingclaims(butexcludingliabilitypooloperatingexpenses).

For2013,theliabilitypool’sdesignatedbalancewas$3million.The70percentconfidencelevelfortheliabilitypoolestablishedbytheactuarialreportineffectfor2013was$2,008,991,anamountthatis$491,009lessthantheliabilitypool’s$2.5millionactualbalancetriggerforanautomaticassessment.InJanuary2013,theautomaticannualassessmentreplenishedtheliabilitypooltoits$3milliondesignatedbalance.Fortheremainderof2013,anautomaticinterimassessmenttoreplenishtheliabilitypool’sactualbalanceto$3millionwastriggeredwhenevertheactualbalancedroppedto$2.5million,anamountsubstantiallyinexcessofthe$2,008,991minimum70percentconfidencelevelapplicabletotheliabilitypoolin2013.

F) Liability Pool – Pending Claims at Year End – Assessments to Replenish Cash Assets to Designated Balance

AsofDecember31,2013,therewere57knownincidentsorunresolvedliabilityclaimspendingagainstoneormoremembersorformermembersoftheliabilitypool(“pendingliabilityclaims”).Thetotaldollaramountoftheriskposedbytheseclaimstosuchmembersandtotheliabilitypoolitselfisunknownandcanonlybeestimated.Thecasereservessetbytheadministratorfortheseclaims,asofDecember31,2013,was$198,668.Theliabilitypool’sactualbalancewasreplenishedtothe$3milliondesignatedbalanceviatheautomaticannualassessmentissuedinJanuary2014.

G) Liability Pool – Members’ Contractual Obligations relating to Paying Pending Liability Claims and IBNR Liability.

Becausethetotaldollaramountoftheriskposedbythependingliabilityclaimsisbasedoncasereservesestimatedbytheadministrator,andbecausetheamountof“incurred-but-not-reported”claims(“IBNRliability”)isbasedontheactuarialreport,theDistricthasnotreceivedanopinionorrepresentationastotheriskthetotalofsuchpendingliabilityclaimsandIBNRliabilityposetothesolvencyoftheliabilitypool.

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However,asacontractualmatter,sincethePURMS’interlocalagreementrequiresmembersparticipatingintheliabilitypooltopaytheirliabilityassessmentswithinthirty(30)daysofthedatetheyareissued,assumingthattheseassessmentobligationsofmembersareenforceableandthatthemembersareatthetimesolventandpaysuchassessments,theliabilitypoolwouldhavetheassetstopaythependingliabilityclaimsandIBNRliabilityonbehalfofitsparticipatingmembersforanyreasonablyforeseeablerisksuchclaimsposetotheliabilitypool.

PROPERTY RISK POOL

A) Property Risk Pool – Primary Self-Insured and Excess Coverages

PURMSprovidespropertyinsurancecoverageforitsmembersparticipatinginthepropertyriskpool(“propertypool”)inaccordancewiththetermsoftheSIA.UndertheSIA,fromitsinceptionin1997tothepresent,thepropertypoolhashadaself-insuredretention(or“propertycoveragelimit”)of$250,000perpropertyloss.

Atalltimes,PURMSalsomaintainsexcesspropertyinsuranceforitsmembersinthepropertypool(“excesspropertyinsurance”).For2013,theamountoftheexcesspropertyinsurancewas$200million,withexcesscoverageattachingatthe$250,000propertycoveragelimitforallpropertylossesexceptthosesubjecttoincreasedretentionlevelsforcertainpropertyrisks(“increasedretentions”).

Thepropertypoolalsoprovidesitsmemberswithautomaticextendedpropertycoverageforpropertylossesthatexceedthepropertypool’s$250,000propertycoveragelimitifthoselosseswerealsosubjecttoincreasedretentionsundertheexcesspropertyinsurance.Undertheexcesspropertyinsuranceretentionsineffectfor2013,themaximumexposuretothepropertypoolfromapropertylossthatexceeded$250,000,andthatwassubjecttoanincreasedretentionwas$250,000,lesstheapplicabledeductible,oramaximumof$250,000morethanthepropertycoveragelimit.

B) Property Pool – Funding Level and Assessment Mechanisms

Asageneralmatter,thepropertypoolisfundedtotheamountofitsdesignatedpropertypoolbalance(“designatedbalance”),whichin2013was$750,000.Ofthisamount,$250,000isusedtopayclaimscostsastheyareincurredandongoingpropertypooloperatingexpenses,includingprogramadministration(“operatingfunds”).The$250,000ofoperatingfundsisreplenishedbyassessmentsofpropertypoolmembers,asdescribedbelow.Theremaining$500,000ofthedesignatedbalanceisheldbythepropertypooltomeetregulatoryreserverequirements,asdescribedinC.–E.below.

Assessmentstofundoperationofthepropertypool(“propertyassessments”)aretriggeredautomaticallyinaccordancewiththetermsofthepropertygeneralassessmentformula(“automaticassessments”).Anautomaticannualassessmentisissuedatthebeginningofeachcalendaryeartoreplenishthepropertypooltoits$750,000designatedbalance.Automaticinterimassessmentsarealsoissuedtoreplenishthe$750,000designatedbalanceatanytimeduringtheyearthatthepropertypool’scashandinvestments(“actualbalance”)isdepletedtotheamountofthepropertypool’sautomaticassessmenttrigger,whichin2013was$500,000(“actualbalancetrigger”).Inthismanner,thepropertypool:(a)paysforitsclaimscostsandoperatingexpensesonanongoingbasiswhilegenerallymaintainingcashandinvestmentsbetween$750,000and$500,000;and(b)startseverynewfiscalyearbyreplenishingthepropertypool’sactualbalancetoits$750,000designatedbalance.

C) Property Pool – WAC Program Funding Requirements and Property Pool Funding Methodology

ThepropertypoolisgovernedbythesamerequirementscontainedinWAC§200-100-03001regarding“actuariallydeterminedliabilities,programfundingandliquidity”thatapplytotheliabilitypool.(SeeparagraphC.regardingtheliabilitypoolabove.)Therefore,thesamefundingmethodologyasdescribedfortheliabilitypoolinparagraphD.abovewasalsoadoptedforthepropertypool.Inparticular,thepropertypoolfundingmethodologyusestheactuariallyestablished70percentfundinglevelastheminimumamounttowhichpropertypool’s“primaryassets”(i.e.,itscashandinvestments)canbereducedbypaymentofclaimscostsandoperatingexpensesbeforetriggeringanautomaticassessmenttoreturnthepropertypooltoits$750,000designatedbalance.Also,liketheliabilitypool,thepropertypoolfundingmethodologyensuresthepropertypoolultimatelymaintainsitscashandinvestmentsatanamountgreaterthanthe70percentfundinglevelbytriggeringanautomaticinterimassessmentwhenevertheactualbalancedropseithertothe$500,000actualbalancetriggerortothe70percentfundinglevel,whicheveramountisgreater.(SeeparagraphB.aboveandparagraphD.below.)

AcopyoftheactuarialreportforthepropertypoolisprovidedtotheSRMandmadeavailabletotheStateAuditor.

D) Property Pool – 2013 Claims Payments and Operating Funding Levels

Thetotalpaidforpropertyclaimsin2013was$129,510,includingclaimsadjustmentexpenses(but

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excludingpropertypooloperatingexpenses).

For2013,thepropertypool’sdesignatedbalancewas$750,000.InJanuary2013,theautomaticannualassessmentreplenishedthepropertypooltoits$750,000designatedbalance.Thereafter,fortheremainderof2013,automaticinterimassessmentstoreplenishthepropertypool’sactualbalanceto$750,000weretriggeredwhenevertheactualbalancedroppedto$516,974.ThiswastheamountPURMSbelievedrepresentedthe70percentconfidencelevel,andthereforethe70percentfundinglevel,ineffectfor2013.Sincethe70percentfundinglevelof$516,974exceededthepropertypool’s$500,000actualbalancetrigger,during2013,automaticinterimassessmentsweretriggeredat$516,974ratherthanatthelower$500,000actualbalancetrigger.

E) Property Pool – Pending Claims at Year End – Assessments to Replenish Cash Assets to Designated Balance

AsofDecember31,2013,therewere12knownpropertyclaimspendingfromthemembersofthepropertypool(“pendingpropertyclaims”).Thetotaldollaramountoftheriskposedbytheseclaimstothepropertypoolisunknownandcanonlybeestimated.Thecasereservessetbytheadministratorfortheseclaims,asofDecember31,2013,was$285,074.Thepropertypool’sactualbalancewasreplenishedtoits$750,000designatedbalanceviatheautomaticannualassessmentissuedinJanuary2014.

F) Property Pool – Members’ Contractual Obligations Relating to Paying Pending Claims and IBNR Liability

Becausethetotaldollaramountoftheriskposedbythependingpropertyclaimsisbasedoncasereservesestimatedbytheadministrator,andbecausetheamountof“incurred-but-not-reported”claims(“IBNRliability”)isbasedontheactuarialreport,thisletterprovidesnoopinionastotheriskthetotalofsuchpendingpropertyclaimsandIBNRliabilityposetothesolvencyofthepropertypool.However,asacontractualmatter,sincetheinterlocalagreementrequiresmembersparticipatinginthepropertypooltopaytheirpropertyassessmentswithinthirty(30)daysofthedatetheyareissued,assumingthattheseassessmentobligationsofmembersareenforceableandthatthemembersareatthetimesolventandpaysuchassessments,thepropertypoolwouldhavetheassetstopaythependingpropertyclaimsandIBNRliabilityonbehalfofitsparticipatingmembersforanyreasonablyforeseeablerisksuchclaimsposetothepropertypool.

HEALTH & WELFARE RISK POOL

A) H&W Pool – Primary Self-Insured and Stop-Loss Coverage

PURMSprovideshealthandwelfareinsurancecoveragefortheemployeesofeachofitsmembersparticipatinginthehealth&welfareriskpool(“H&Wpool”)inaccordancewiththetermsofthehealth&welfarecoverageoftheSIA(“H&Wcoverage”)andthetermsofeachmember’srespectivecoveragebookletprovidedtoitsemployees.TheH&WpoolwasestablishedasoneofPURMS’riskpoolseffectiveMarch31,2000.

B) H&W Pool – Funding Level and Assessment Mechanisms

UnderthetermsoftheinterlocalagreementandtheH&Wgeneralassessmentformula(“H&Wassessmentformula”),theH&Wpoolisfundedwithcashreserves(“H&Wpoolreserves”)inanamountapproximatelyequaltothesumofthree(3)timestheamountofeachmember’shistoricalaveragemonthlyH&Wclaimsexperience(“poolclaimsexperiencereserves”)foritsrespectiveemployeesandtheirdependents.(Hereinafter,“employees”includes“dependents”.)UnlessrequiredotherwisebytheH&Wpoolfundingmethodology(seeparagraphE.below),the“poolclaimsexperiencereserves”(ofthree(3)timeseachmember’shistoricalaveragemonthlyH&Wclaimsexperience)shallbedeemedits“designatedH&Wpoolreserves.”TheH&Wpoolmembers’H&WclaimsexperiencewasreevaluatedandrecalculatedinJune2011,establishingthedesignatedH&Wpoolreservesat$2,185,474.Everymonth,aportionoftheH&WpoolreservesisusedforpayingH&WclaimsandH&Wpooloperatingexpenses,andthefundsspentarereplenishedmonthlybyassessmentsoftheH&Wpoolmembers,asdescribedbelow.TheremainingreservesareheldbytheH&Wpooltomeetregulatoryreserverequirements,asdescribedinparagraphsD.,E.andG.below.

TheH&Wpool’soperationsarefinancedthroughassessmentsofitsparticipatingmembers(“H&Wassessments”)inaccordancewiththeH&Wgeneralassessmentformula(“H&Wassessmentformula”).UndertheH&Wassessmentformula,eachmonth,eachmemberoftheH&Wpoolisassessedfor:(a)thecosttheH&WpoolincurredduringtheprecedingmonthfortheH&Wclaimsforsuchmember’semployees(“H&Wclaimscosts”);and(b)forsuchmember’sshareofsharedH&Wcosts.“SharedH&Wcosts”consistofadministrativeexpensesincurredbytheH&Wpool,premiumsforstop-lossinsurance,PPOchargesandsharedH&Wclaims.Thus,undertheH&Wassessmentformula,eachmonth:(1)theoperatingexpensesof

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theH&Wpoolandallmembers’H&Wclaimscostsforthatmontharepaid;and(2)theH&WpoolreservesarereplenishedbytheseassessmentstotheamountofthedesignatedH&Wpoolreserves.

C) H&W Pool – Limits on Members’ Self-Insured Exposures to the H&W Claims Costs of their Respective Health Plans

1. Stop-Loss Insurance Acquired by H&W PoolTheexposureofeachH&WpoolmembertotheH&Wclaimscostsofitsemployeesislimitedbytwodifferentpairsofstop-losspoints(“stop-losspoints”).Thefirstpairofstop-losspointsisestablishedannuallybytheexcessstop-lossinsurancethattheH&Wpoolacquiresandmaintainsforitsmembers.Thesestop-losspointsrepresentthedollaramountsatwhichthestop-lossinsuranceattachesandbeginspayingeithertheH&Wclaimcostsrelatingtoanindividualemployee’stotalmedicalclaimsfortheyear(“H&Wpoolindividualstop-losspoint”)ortheH&Wclaimscostsofallemployeesofallmembersfortheyear(“H&Wpoolaggregatestop-losspoint”).For2013,theH&WpoolIndividualstop-losspointwas$225,000peremployeeandtheH&Wpoolaggregatestop-losspointwas$15,643,814forthecombinedH&WclaimscostsoftheemployeesofallmembersoftheH&Wpool.2. Shared H&W Claims Within H&W PoolEachH&Wpoolmember’sexposuretotheH&Wclaimscostsofitsemployeesisfurtherlimitedbyevenlowerstop-losspointsdeterminedbytheH&Wpoolforitsmembers(“memberstop-losspoints”).Medicalexpensesthatexceedthesestop-losspointsbecome“sharedH&Wclaims”andthereforeareassessedas“sharedH&Wcosts”whicharepaidbyallH&Wpoolmembersexceptthememberwhoseemployee’sH&Wclaimexceededtheapplicablestop-losspoint.Thememberstop-losspointsarecalculatedannuallyundertheH&Wassessmentformulabasedontheamountsoftheindividualandaggregatestop-losspointsestablishedfortheyearbythestop-lossinsurance.Asaresultofthisprocess,eachmemberisassignedadollaramountatwhichanyfurtherpaymentsbytheH&WpoolonclaimsforaparticularemployeeconstitutesharedH&Wcosts(“member’sindividualstop-losspoint”)andadollaramountatwhichanyfurtherpaymentsbytheH&WpoolontheH&Wclaimsofallofamember’semployeesconstitutesharedH&Wcosts(“member’saggregatestop-losspoint”).3. Scope of Members’ Self-Insurance ExposuresExceptforH&Wclaimswhicharesharedclaimsbecausetheyexceedamember’sindividualstop-losspoint,andtheportionsofclaimsthatarecoveredbystop-lossinsurancebecausetheyexceedamember’saggregatestop-losspoint,eachmemberanditshealthplanissolelyresponsibleforpayingthemember’sH&Wclaimscostsandtheassessmentsissuedtothemembertocoverthoseclaimscostsandthemember’sshareofH&Wpooloperatingcosts.Exceptforobligationsrelatingtosharedclaims,nootherH&Wpoolmemberorhealthplan,northeH&Wpool,isrequiredtopayanythingtowardsthemember’sH&Wclaimscostsorassessmentstocoverthosecosts.

D) H&W Pool – WAC Program Funding Requirements

WAC200-110-040requiresjointlyself-insuredhealthandwelfareprogramreservestobefundedattheamountdeterminedbytheformulasetforthinWAC200-110-040(1),orattheamountoftheactuariallydeterminedprogramliability(“programliability”)iftheprogramdoesnotestablishprogramandcontingencyreservesinaccordancewiththeformula.(SeeWAC§200-110-040(2).)WAC200-110-040(3)alsorequiresaprogramtoestablishreservesforprescriptiondrug,dentalandvisionbenefitsintheminimumamountofeight(8)weeksofprogramexpensesallocabletothosebenefits.(SeeparagraphG.below.)

E) H&W Pool – Funding Methodology

TheH&WpoolfundingmethodologyallowstheH&WpooltodeterminetheminimumfundingrequirementsfortheH&WpoolreservesbyestablishingtheprogramliabilityformedicalbenefitseitherbyactuarialreportorundertheformulainWAC200-110-040(1).Likethefundingmethodologyfortheliabilityandpropertypools,theH&WpoolfundingmethodologyalsorequiresfundingactionandspecifiesthefundingmechanismsintheeventofanincreaseinH&WclaimsexperiencethatresultsinestablishingtheprogramliabilityinexcessoftheamountofthedesignatedH&Wpoolreserves.

F) H&W Pool – 2013 Claims Payments

ThetotalpaidbytheH&WpoolforH&Wclaimscostsin2013was$11,514,071(includingsharedH&WclaimsbutexcludingH&Wpooloperatingexpenses).

G) H&W Pool – H&W Claims IBNR and Designated H&W Pool Reserves

ThemostrecentactuarialreportfortheH&Wpool,datedFebruary3,2014,statesthattheH&Wpool’s

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incurred-but-not-reportedreserveliabilityformedicalcoverageis$880,647(“medicalIBNR”).Thereportstatesthatthisnumberreflectstheactuary’s“…bestestimatesoftheamountsforwhichPURMS(i.e.,theH&Wpool)wouldbeliableifthe[medical]benefitprogramhadterminatedonDecember31,2013…”Inaddition,asdirectedbyWAC200-110-040(3),theadministratorhasdeterminedthateightweeksofprogramexpensesforprescriptiondrug,dentalandvisionbenefitswas$305,998,$165,577and$31,802,respectively.Thesenumbersarebasedonthemonthlyaverageexpendituresforthesebenefitsoveratwelve-monthperiodofclaimsexperienceendingDecember31,2013.ThemedicalIBNRof$880,647establishedbytheactuarialreportandtheeightweeksofprogramexpensescalculatedbytheadministratorforprescriptiondrug,dentalandvisionbenefits,inthecombinedamountof$503,377,resultsinatotalH&WpoolreservesrequirementunderWAC200-100-040of$1,384,024,asofDecember31,2013.TheamountofthedesignatedH&WpoolreservesasofDecember31,2013was$2,185,474.UndertheH&Wassessmentformula,themonthlyH&WassessmentofeachmemberpaysfortheH&WclaimscostsofthepreviousmonthanditsallocationofsharedH&WcoststoreplenishtheH&WpooltotheamountofthedesignatedH&Wpoolreserves.(SeeparagraphB.above).

H) H&W Pool – Members Contractual Obligations Relating to Paying H&W Pool Program Liability

BecausetheH&Wpoolprogramliabilityisbasedontheactuarialreport,andontheadministrator’scalculationsforprescriptiondrug,dentalandvisionbenefits,theDistricthasnotreceivedanopinionorrepresentationastotherisktheknownandIBNRclaimsthatmakeupthatprogramliabilityposetothesolvencyoftheH&Wpool.However,asacontractualmatter,sincetheinterlocalagreementrequireseachmemberparticipatingintheH&WpooltopayitsH&Wassessmentonamonthlybasiswithintwenty(20)daysofthedateitisissuedtofullyreplenishitsshareoftheH&Wpoolreserves,assumingthattheseassessmentobligationsofmembersundertheSIAareenforceableandthatthemembersareatthetimesolventandpaysuchassessments,theH&Wpoolwouldhavetheassetstopaytheprogramliabilityonbehalfofeachofitsparticipatingmembers.Further,forreasonsdiscussedinparagraphC.3above,thislettermakesnorepresentationsrelatingtothesolvencyofanyH&Wpoolmemberoritshealthplan,ortheabilityofthememberorhealthplantopayitsassessmentsissuedbytheH&Wpool.

State and Independent AuditsPURMSandeachofPURMS’riskpoolsareauditedannuallybytheStateAuditor’sOffice.AsrequiredbyWAC200-100-060(3)and200-110-130(2),onanannualbasis,PURMSsubmitsauditedfinancialstatements,intheformatprescribedbytheStateAuditor’soffice,totheStateRiskManager’soffice.Finally,onanannualbasis,PURMSengagestheservicesoftheaccountingfirmofMossAdamstoperformaclaimsauditforeachoftheriskpools.

NOTE 10 – Postemployment Benefits Other Than Pension Benefit (OPEB)A) Plan Description – ByresolutiontheDistrictprovidesthreepercentperyearpremiumcreditsbasedon

yearsofemploymentformedical,visionandprescriptionbenefitsforqualifiedretiredemployeesandtheireligibledependents.Thecalculatedpremiumcreditistheemployerportionoftheannualhealthcarepremiumandisabenefittotheretireeasapostemploymentbenefit;thedifferenceinthehealthcarepremiumisfundedbytheretiree.TheplanisadministeredbytheDistrictandaseparate,auditedGAAP-basispostemploymentbenefitplanreportisnotavailable.ThebenefitsforboththeretireesandactiveemployeesaremanagedthroughthePURMSHealthandWelfareRiskPool,anagentmultiple-employerplan,asdescribedinNote9.

B) Funding Policy – TheDistrictfundsitspostemploymenthealthcarebenefitsbymakingAnnualRequiredContributions(ARC).TheDistrictmeetsitscurrentretireeobligationbypayingmonthlyassessmentstothePURMSHealthandWelfareRiskPool.TheDistrictalsomakescontributionstotheOtherPostemploymentBenefits(OPEB)Trustforfutureretireehealthandwelfarebenefits.ThepaymentsmadetoPURMS,aswellasthecontributionstotheOPEBTrust,arecountedtowardtheDistrict’sARC.

C) Annual OPEB Cost and Net OPEB Obligation – TheDistrict’sannualOPEBcostiscalculatedbasedontheARCoftheemployer.TheARCisanamountactuariallydeterminedbasedontheprojectedunitcreditmethod,inaccordancewiththeguidanceofGASBStatementNo.45.TheARCrepresentslevelfundingthat,ifpaidonanon-goingbasis,isprojectedtocovernormalcostseachyearandamortizeanyunfundedactuarialaccruedliabilitiesoveraperiodnottoexceed30years.TheDistrictimplementedGASBStatementNo.45prospectivelyin2008.TheDistrict’sannualrequiredOPEBcost(expense)for2013was$744,013.

AnnualRequiredContribution $720,771InterestonNetOPEBObligation (153,682)AdjustmenttoAnnualRequiredContribution 176,924 Annual OPEB Cost $ 744,013

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ThecurrentyearfundingoffutureOPEBcostsresultedinadecreaseinthenetOPEBobligationof$236,822withanendingcreditbalanceof$2,432,275.

ThefollowingtableshowsthecomponentsoftheDistrict’sannualOPEBcostfortheyear2013,theamountactuallycontributedtotheplan,andchangesintheDistrict’snetOPEBobligation.ThenegativenetOPEBobligationhasbeenrecordedasaNetOPEBAssetontheDistrict’sStatementofNetPosition.

D) Funding Status and Funding Progress –ThefundedstatusoftheplanasofDecember31,2013,wasasfollows:

Actuarialvaluationsofanongoingplaninvolveestimatesofthevalueofreportedamountsandassumptionsabouttheprobabilityofoccurrenceofeventsfarintothefuture.Examplesincludeassumptionsaboutthefutureemployment,mortality,andthehealthcarecosttrend.Amountsdeterminedregardingthefundedstatusoftheplanandtheannualrequiredcontributionsoftheemployeraresubjecttocontinualrevisionasactualresultsarecomparedwithpastexpectationsandnewestimatesaremadeaboutthefuture.TheScheduleofFundingProgress,presentedasrequiredsupplementaryinformationfollowingthenotestothefinancialstatements,presentsmulti-yeartrendinformationthatshowswhethertheactuarialvalueofplanassetsisincreasingordecreasingovertimerelativetotheactuarialaccruedliabilitiesforbenefits.

E) Actuarial Assumptions – Projectionsofbenefitsforfinancialreportingpurposesarebasedonthesubstantiveplan(theplanasunderstoodbytheemployerandplanmembers)andincludethetypesofbenefitsprovidedatthetimeofeachvaluationandthehistoricalpatternofsharingofbenefitcostsbetweentheemployerandplanmemberstothatpoint.Theactuarialmethodsandassumptionsusedincludetechniquesthataredesignedtoreduceshort-termvolatilityinactuarialaccruedliabilitiesandtheactuarialvalueofassets,consistentwiththelong-termperspectiveofthecalculations.

TheJanuary1,2012,actuarialvaluation,whichwasusedtodeterminethe2013AnnualRequiredContribution(ARC),usedtheProjectedUnitCreditCostMethod.Theactuarialassumptionsincludeda7.0percentinvestmentrateofreturnonamixofequitiesandbondsforthetrust,andanannualhealthcarecosttrendrateof10.0percentfor2012(9.5percentfor2013)forpre-65benefitsand6.0percentfor2012(5.75percentfor2013)forpost-65benefits,reducedinincrementstoanultimaterateoffivepercentafterelevenyears.Bothratesincludea2.0percentinflationassumption.Theactuarialvalueoftheplansassetsisequaltothemarketvalueoftheassets.TheDistrict’sunfundedactuarialaccruedliabilityisbeingamortizedoveremploymenthistoryfromtheageofhiretoretirementageusingthelevelpercentageofprojectedpayrollwithanopen30-yearamortizationperiod.

Actuarialaccruedliability(AAL) $10,099,433Actuarialvalueofplanassets $5,493,343Unfundedactuarialaccruedliability(UAAL) $4,606,090Fundedratio(actuarialvalueofplanassets/AAL) 54.4%Coveredpayroll(activeplanmembers) $10,177,803UAALasapercentageofcoveredpayroll 45.3%

NetOPEBObligationBeginningofYear $(2,195,453)AnnualOPEBCost 744,013BenefitspaidtoretireesfromPURMSinexcessofpremiums (264,319)ContributionsmadetoOPEBTrust (716,516) Net OPEB Obligation at End of Year $(2,432,275)

Fiscal Year Ended Annual OPEB CostPercentage of

Annual OPEB Cost Contributed

Net OPEB Obligation

12/31/2010 $805,967 132.9% ($1,531,625)12/31/2011 $777,862 154.9% ($1,739,282)12/31/2012 $757,165 160.2% ($2,195,453)12/31/2013 $744,013 131.8% ($2,432,275)

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NOTE 11 – Participation in Northwest Open Access Network, Inc. (NoaNet)TheDistrict,alongwithtenotherWashingtonStatepublicutilitydistrictsandEnergyNorthwest,isamemberofNoaNet,aWashingtonnonprofitmutualcorporation.NoaNetwasincorporatedinFebruary2000toprovideabroadbandcommunicationsbackboneoverpublicbenefitfibersleasedfromtheBonnevillePowerAdministration.ThiscommunicationsbackbonethroughoutWashingtonassistsitsmembersintheefficientmanagementofload,conservationandacquisitionofelectricenergyaswellasotherpurposes.ThenetworkbegancommercialoperationinJanuary2001.

AsamemberofNoaNet,theDistrictguaranteescertainportionsofNoaNetdebtbasedonitsproportionateshare(seeNote13).TheDistrict’smembershipinterestinNoaNetis12.51percent.ThemanagementofNoaNetanticipatesmeetingthebonddebtobligationsthroughprofitableoperations,butitwasnecessaryforNoaNettoassessmemberstocoverdeficitsduringtheinitialyearsofoperation.TheDistrictwasnotchargedmemberassessmentsin2013or2012.Assessmentsfor2014asdeterminedbytheNoaNetboardofdirectorsarealsoestimatedatzerofordebtservicepaymentsonoutstandingbonds.

NoaNetrecordedanincreaseinnetposition(excludingmemberassessments)of$25,346,160in2013,andanincreaseof$47,709,253for2012.InaccordancewithAccountingPrinciplesBoardOpinionNo.18,The Equity Method of Accounting for Investments in Common Stock,aswellasapositionstatementissuedbytheWashingtonStateAuditorconcerningtheappropriateaccountingtreatmentforNoaNet,aproportionateshareofthechangesinnetpositionhasnotbeenrecordedbytheDistrict.NoaNethadpositivenetpositionof$99,474,750asofDecember31,2013,andpositivenetpositionof$74,128,591asofDecember31,2012.

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

NOTE 12 –Telecommunication ServicesMasonCountyPublicUtilityDistrictNo.3wasafoundingmemberofNoaNetin1999.TheDistrictbeganinstallationoffiber-opticcommunicationsforutilityusein1999afterexaminingvarioustypesofinfrastructurethatcouldbeusedtodeliveradvancedtelecommunicationsservices.Theresultingresearchshowedthatfiber-opticcableprovidedthemostrobustandcost-effectivesolution.Fiberhasanextremelylonglifecycleandalmostunlimitedbandwidthcapacity,whichwillallowtheDistricttomigratetonewtechnologieswithoutreplacinganexpensiveoutsideplantinfrastructure.Thefiber-opticnetworkprovidesabackbonefortheDistrict’sutilitycommunications.TheDistrictusesitsfiber-opticnetworkbackboneforinternalcommunications,SupervisoryControlandDataAcquisition(SCADA),communicationswithotherutilitiesandlong-hauldatatransmissionviatheNorthwestOpenAccessNetwork.

Withthepassageofwholesaletelecommunicationsauthorityin2000bytheWashingtonStateLegislature,high-speedcommunicationcapabilitywasbroughttoMasonCounty.TheDistrictisbuildingoutitsfiber-opticnetworktosharethebenefitofthetechnologyinvestment.TheDistrictisawholesalerforprivateserviceprovidersandbillstheprovidersdirectlyforwholesaletelecommunicationservices.Theseprivateserviceprovidersaredirectlyresponsibleforbillingeachend-user.TheDistrictended2013with568end-useractiveconnectionsand422fibermiles.

Asummaryoftelecommunicationsrevenues,expensesandcapitalinvestmentfor2013islistedasfollows:

For Year Ended December 31, 2013Operating revenuesWholesalefiberservicestoISP $985,792Darkfiberlease 8,198Installationcharges 9,498 Total Operating revenues $1,003,488Nonoperatingrevenue (11,884)Operating expensesOperatingexpenses $1,039,639Depreciation 620,323 Total Operating expenses 1,659,962 Change in net position $(668,358) Capital investmentCurrentyearchangeinnetplant $335,183Cumulativenetplant $9,355,875

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NOTE 13 – Commitments and ContingenciesLitigation – AnypendingorthreatenedlawsuitsagainsttheDistrictareeitheradequatelycoveredbyinsuranceorwouldnotmateriallyaffectthefinancialstatements.Repayment Agreements Relating to NoaNet (see Note 11) InJune2011,NoaNetrefinanceditsJuly2001TelecommunicationsNetworkRevenueBonds(Bonds).TheBondswereoriginallyissuedat$27milliontofinancetherepaymentofthefoundingmembersandthecostsofinitialconstruction,operationsandmaintenance.Theywererefinancedfor$13,165,000andbecameduebeginninginDecember2012through2016withinterestduesemi-annuallyatratesrangingfrom0.75percentto3.00percent.TheamountofoutstandingBondswas$8,185,000and$10,835,000atDecember31,2013and2012,respectively.CurrentandformermembersofNoaNethaveenteredintoarepaymentagreementtoguaranteethedebtofNoaNet.Undertherepaymentagreement,eachguarantoracknowledgesandagreesthatitisaguarantorofthepaymentoftheprincipalandinterestontheBondsandisliablebyassessmentorotherwisetorepayNoaNetforamountsdueandowingwithrespecttosuchprincipalandinterestuptoeachmember’spercentageinterest.TheDistrict’sguaranteeis7.88percentoftheoutstandingBonds,or$644,978and$853,798asofDecember31,2013and2012,respectively.Intheeventofafailurebyanyguarantortopaysuchamountswhendue,NoaNetmaybillfromtimetotimeasnecessary,andeachguarantorisobligatedtopay30daysafterreceiptofthebill,anadditionalamountuptoamaximumof25percentofsuchmember’spercentageinterest(the“Step-Up”),uptothemaximumpercentageinterest,inordertocoverthedeficiencycausedbysuchmember’sormembers’failuretopay.Anymemberthatpaysanadditionalamounttocoveradeficiencyreservesallrightstoseekreimbursementfromthememberormembersthatfailedtopay.TheDistrict’smaximumpercentageinterestis9.85percentor$806,223and$1,067,248asofDecember31,2013and2012,respectively.InAugust2012,NoaNetestablisheda$5millionlineofcreditwithBankofAmericatofundcapitalexpenditures.Thisnoteisguaranteedbythemembers.Theoutstandingbalanceonthe2012lineofcreditwas$5,000,000and$756,400asofDecember31,2013and2012,respectively.TheDistrict’sguaranteeis12.51percentoftheoutstandingbalanceor$625,500and$94,626atDecember31,2013and2012,respectively.InAugust2009,NoaNetopeneda$1.5millionlineofcreditwithBankofAmericatofundcapitalexpenditures.Thisnoteisguaranteedbythemembers.Theoutstandingbalanceonthe2009lineofcreditwas$166,667and$500,000asofDecember31,2013and2012,respectively.TheDistrict’sguaranteeis10.33percentoftheoutstandingbalanceor$17,217and$51,650atDecember31,2013and2012,respectively.InSeptember2008,NoaNetopeneda$1.5millionlineofcreditwithBankofAmericatofundcapitalexpenditures.Thisnoteisguaranteedbythemembers.Theoutstandingbalanceonthe2008lineofcreditwas$0and$300,000atDecember31,2013and2012,respectively.TheDistrict’sguaranteeis10.33percentoftheoutstandingbalanceor$0and$30,990atDecember31,2013and2012,respectively.Energy Northwest – Nine Canyon Wind ProjectTheNineCanyonWindEnergyProjectisownedandoperatedbyEnergyNorthwest.TheDistrict,alongwithnineotherpublicutilities,isaparticipantinPhasesI,II,andIIIoftheProject.UnderitsPowerPurchaseAgreement,theDistrictisobligatedtopayitspercentageshareoftheannualdebtserviceofeachprojectphaseandtheoperationandmaintenancecostsoftheprojectinreturnforitspercentageshareofprojectoutput,whetherornottheprojectisoperatingorcapableofoperating.Undertheagreement,theDistrictisobligatedtopayanamendedpercentageshareeffectiveMay2008whenPhaseIIIachievedcommercialoperation.Underastep-upprovision,theDistrictcouldberequiredtopayuptoamaximumof125percentofitspercentageshareintheeventofdefaultbyanotherpurchaser.TheAgreementlimitsEnergyNorthwest’stotalannualoperationandmaintenancecostto$4millionpriortoPhaseIIICommercialOperationandto$7millionpostPhaseIIICommercialOperation.Theselimitswillchangeannuallybaseoncertaininflationindexes.TheagreementterminatesJuly1,2030.TheDistrict’sapplicablepercentageshareobligationsare:

Allocation of Cost District % ShareDistrict % Share under Step-up

ProvisionDebtService-PhaseI 2.08% 2.60%DebtService-PhaseII 6.41% 8.01%DebtService-PhaseIII 3.14% 3.93%O&MCosts 3.14% 3.93%

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NOTE 14 – VEBA TrustInFebruary2004theBoardofCommissionersdirectedtheFinanceManager/AuditortonotifyMSAVoluntaryEmployees’BeneficiaryAssociation(“VEBA”)thattheDistrictwouldbeterminatingitsmembershipinthestatewide,employerdirected,taxexemptmedicalsavingsaccounttrust.Becauseofconcernsregardingthefinancialdifficultiesofacompanyinwhichamajorportionofthetrustfundswasinvested,itwasdecidedtoexploreotherpossibilitiesforatrust.Aftermonthsofresearch,onMay11,2004,theBoardvotedtoproceedwithimplementingatrustforVEBAforEmployeesofWashingtonPublicUtilityDistrictswithMasonCountyPublicUtilityDistrictNo.3self-administeringtheplan.AnnetteCreekpaum,FinanceManager/Auditor,wasnamedastrustee.OnMay14,2004,$1,042,089fundsweretransferredfromtheMSAVEBAinvestmentstotheDistrict.TheyweresubsequentlytransferredforinvestmentinVanguardFederalMoneyMarketFundsuntilemployeeshadanopportunitytochoosefromthreeVanguardFundinvestmentoptions.TheDistrictsetupa501(c)(9)trustwiththeassistanceandadvicefromanattorneywithexpertiseinthisareaandfiledtheappropriateformswiththeIRStoestablishthenewtrust.ThetrustisadministeredbytheDistrictundersupervisionofthetrustee.ThefinalapprovalfromtheIRSforthetrustwasreceivedinearly2005.Thefundsheldintrustbelongtotheemployees,nottheDistrict.TheDecember31,2013,marketvalueofthetrustwas$4,410,253.Theallocationsbetweeninvestmentoptionswere:18.8percentinshort-terminvestments,14.9percentinbondsand66.3percentinstocks.During2013,employercontributionswere$601,743,claimspaidequaled$410,341andtherewasagainof$703,945ontheinvestmentsheldinthetrust.

NOTE 15 – OPEB TrustInSeptember2008theDistrict’sBoardofCommissionerspassedResolutionNo.1446establishinganOtherPostemploymentBenefits(OPEB)Trust.TheresolutionappointedAnnetteCreekpaum,FinanceManager/Auditorastrustee.Anactuarywashiredin2007todeterminetheamountofcontributionsneededeachyeartomeettheobligationsrequiredunderGASBStatementNo.45.TheDistricthassetupa115trustwiththeassistanceandadvicefromanattorneywithexpertiseinthisareaandfiledtheappropriateformswiththeIRStoestablishthetrust.ThetrustisadministeredbytheDistrictundersupervisionofthetrustee.AletterrulingfromtheIRSforthetrustwasreceivedin2009.TheDecember31,2013,marketvalueofthetrustwas$5,493,343withinvestmentsof5.8percentincashorcashequivalents,64.1percentinequitymutualfundsand30.1percentinfixedincomemutualfunds.

NOTE 16 – Restatement of Prior YearImplementation of New Accounting Standard –In2012GASBissuedStatementNo.65,ItemsPreviouslyReportedasAssetsandLiabilities,whichprovidesguidanceforreclassifyingcertainitemsasdeferredoutflowsofresourcesordeferredinflowsofresources.Thisstatementalsorequiresreportingofcertainitemspreviouslyrecordedasassetsandliabilitiestobepresentedasexpensesorrevenues.Inaccordancewiththisguidance,theDistrictexpenseddebtissuancecosts,whichpreviouslywererecordedasassetsandamortized.Asaresult,$881,965ofbondissuecostsincurredin2013wasexpensedfortheyearendedDecember31,2013.Additionally,unamortizedbondissuecostsof$769,563atthebeginningof2013arepresentedasacumulativeeffectofrestatementandreducethebeginningnetpositionasofJanuary1,2013.Lossondebtrefundingsof$233,961wasreclassifiedfromassetstodeferredoutflowsofresourcesintheStatementofNetPositionasofDecember31,2013,andreclassificationofthisbalancehadnoeffectonnetposition.Correction of Prior Period Depreciation – In1998,theDistrictupgradeditssystemsoftware.Duringtheconversionprocess,whenassetswereenteredintotheaccountingsystem,theassets’remainingusefullifestartedoverusingthefulllifeoftheassets.In2013,anadjustmentwasmadetocatchuptheunder-depreciationandtheremainingusefullivesoftheassetswerechanged.Thisresultedin$278,595additionaldepreciationexpensefortheyearendedDecember31,2013.ApriorperiodadjustmenttobeginningNetPositionasofJanuary1,2013wasmadeintheamountof$8,571,258.AnadditionalpriorperiodadjustmenttobeginningNetPositionasofJanuary1,2013wasmadeintheamountof$731,103toaccountfordepreciationoftheJohnsPrairieOperationCenterthatbecameoperationalasofApril2012.However,theworkorderwasnotclosedinthesystemanddepreciationdidnotstartuntil2013.CumulativeeffecttobeginningNetPositionasofJanuary1,2013intheamountof$9,302,362wasrecordedtoaccountfortheunder-depreciation.

NOTE 17 – Subsequent EventsTheDistricthasnosubsequenteventsthatshouldbefactoredintothefinancialstatementsbeingpresented.

51

Required Supplementary InformationOther Postemployment Benefits

Actuarial Valuation

Date

Actuarial Value of Plan Assets

(a)

Actuarial Accrued

Liability (AAL)* (b)

Unfunded AAL (UAAL)

(b-a)

Funded Ratio (a/b)

Covered Payroll (c)

UAAL as a Percentage of Covered

Payroll [(b-a)/c]

1/1/2008 $- $7,822,974 $7,822,974 0% N/A N/A12/31/2008 $1,322,793 $8,350,651 $7,027,858 15.8% $8,436,439 83.3%12/31/2009 $2,250,518 $8,482,596 $6,232,078 26.5% $8,756,679 71.2%12/31/2010 $3,061,417 $8,695,591 $5,634,174 35.2% $9,118,034 61.8%12/31/2011 $3,672,686 $8,765,101 $5,092,415 41.9% $9,039,380 56.3%12/31/2012 $4,425,342 $9,682,948 $5,257,606 45.7% $9,736,412 54.0%12/31/2013 $5,493,343 $10,099,433 $4,606,090 54.4% $10,177,803 45.3%

Schedule of Funding Progress

Fiscal Year Ending

Total Employer Contributions

Annual Required Contribtuon

(ARC)Percentage of

ARC Contributed

12/31/2008 $1,577,017 $925,870 170.3%12/31/2009 $1,275,646 $878,308 145.2%12/31/2010 $1,071,372 $793,721 135.0%12/31/2011 $1,205,238 $763,049 158.0%12/31/2012 $1,213,336 $738,753 164.2%12/31/2013 $980,835 $720,771 136.1%

Schedule of Employer Contributions

*BasedonprojectedunitcreditactuarialcostmethodN/AindicatesdatanotavailableSource: Dan McM Consulting LLC

making connections.

52

“Our goal is to make creative connections. We respect tradition, but sometimes we get excellent results by challenging the status quo. We had several unconventional initiatives in 2013 that led to great partnerships and customer benefits.” - Justin Holzgrove

Conservation Manager

53

Stat

istic

al Se

ctio

n

This part of Mason County PUD No. 3’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the District’s overall financial health.

Contents:

Financial Trends TheseschedulescontaintrendinformationtohelpthereaderunderstandhowtheDistrict’sfinancialperformanceandwell-beinghavechangedovertime.

Revenue Capacity TheseschedulescontaininformationtohelpthereaderassesstheDistrict’smostsignificantlocalrevenuesource,electricsales.

Debt Capacity TheseschedulespresentinformationtohelpthereaderassesstheaffordabilityoftheDistrict’scurrentlevelsofoutstandingdebtandtheDistrict’sabilitytoissueadditionaldebtinthefuture.

Demographic and Economic InformationTheseschedulesofferdemographicandeconomicindicatorstohelpthereaderunderstandtheenvironmentwithinwhichtheDistrict’sfinancialactivitiestakeplace.

Operating Information TheseschedulescontainserviceandinfrastructuredatatohelpthereaderunderstandhowtheinformationintheDistrict’sfinancialreportrelatedtotheservicestheutilityprovidesandtheactivitiesitperforms.

53

54

2004

2005

2006

2007

2008

2009

2010

2011

2012

Res

tate

d20

13

OPE

RATI

NG R

EVEN

UES

Utility

Salesand

ServiceFee

s$36

,138

,566

$38

,034

,493

$41

,036

,115

$43

,811

,627

$45

,461

,067

$46

,723

,787

$

46,382

,942

$4

6,77

3,57

1$47

,652

,092

$51

,811

,302

OtherCha

rgesfo

rServices

1,687

,244

2,072

,568

2,230

,546

2,489

,036

2,139

,716

1,430

,896

1,23

0,38

21,759

,678

1,140

,786

1,551

,880

Misc

ellane

ousO

peratin

gRe

venu

es112

,073

112

,163

141

,803

132

,598

230

,771

325

,422

3

20,095

53

0,96

9523

,037

1,003

,488

T

otal

Ope

ratin

g Re

venu

e$37

,937

,883

$40

,219

,224

$43

,408

,464

$46

,433

,261

$47

,831

,554

$48

,480

,105

$

47,933

,419

$4

9,06

4,21

8$49

,315

,915

$54

,366

,670

OPE

RATI

NG E

XPEN

SES

Purchased

Pow

er$20

,872

,530

$21

,095

,946

$22

,160

,973

$21

,790

,061

$18

,607

,855

$20

,387

,819

$

21,670

,151

$2

1,66

6,58

5$23

,883

,237

$24

,832

,964

Ope

ratio

n2,290

,182

2,256

,736

3,087

,790

3

,216

,972

2,989

,812

2,378

,003

3

,323

,598

3,412

,839

3,443

,208

3,485

,934

Mai

nten

ance

2,336

,816

2,629

,800

4,389

,822

3

,775

,383

3,767

,600

3,885

,014

4,19

2,98

54,31

5,88

84,337

,810

4,389

,255

CustomerAccou

nts

1,317

,541

1,536

,440

1,482

,642

1,667

,344

1,760

,267

1,815

,221

1

,913

,446

1,770

,770

2,745

,575

2,278

,899

CustomerService,Informati

on,A

dvertising

334

,551

346

,086

776

,217

316

,461

479

,775

823

,417

2

56,205

32

9,17

3705

,067

839

,495

Adm

inistrativ

e&Gen

eral

4,297

,399

4,755

,392

3,561

,293

3,441

,177

4,803

,393

5,104

,776

4

,474

,990

5,192

,285

5,563

,120

6,092

,145

Mainten

anceofG

eneralPlant

472

,559

534

,186

539

,625

662

,089

664

,558

660

,448

9

64,479

77

4,24

91,062

,683

1,422

,844

Dep

recia

tion (

1)4,488

,430

4,690

,154

4,830

,922

5,000

,383

5,175

,236

5,415

,081

5,64

5,65

55,85

1,86

46,592

,569

6,678

,552

TaxesOtherth

anIn

come

1,319

,610

1,489

,142

1,620

,619

1,726

,807

1,727

,455

1,747

,469

1

,200

,681

1,79

3,26

51,794

,335

3,576

,006

T

otal

Ope

ratin

g Ex

pens

es$37

,729

,618

$39

,333

,882

$42

,449

,903

$41

,596

,677

$39

,975

,951

$42

,217

,248

$

43,642

,190

$4

5,10

6,91

8$50

,127

,604

$53

,596

,094

OPE

RATI

NG IN

COM

E (L

OSS

)

$20

8,26

5

$88

5,34

2

$9

58,5

61

$4

,836

,584

$

7,85

5,60

3

$6,2

62,8

57

$

4,29

1,22

9

$3,

957,

300

(

$811

,689

)

$77

0,57

6

NONO

PERA

TING

REV

ENUE

S &

EXP

ENSE

S

Mer

chan

disin

g$1

,496

$

9,33

4$79

($1,840)

$

5,99

1$2

,235

($

5,06

3)$9,21

6$2

,960

($7

,590

)

Investm

entE

arning

s278

,215

456

,620

594

,197

591

,222

443

,182

216

,866

2

00,892

19

0,28

8102

,775

(1

30,129

)

Interest&

Amortizati

ononLTDeb

t(2)

(1,66

6,54

8)(1,64

5,04

5)(1,55

8,05

6)(1,45

0,29

0)(1,42

1,65

5)(1,87

2,59

2)(2,79

7,24

8)(3,546

,857

)(5,40

7,30

6)(4,13

6,19

0)

OtherNon

operati

ngReven

ues

107

,061

120

,326

824

,662

2,049

,000

188

,426

175

,179

5

67,553

1,29

4,87

51,604

,182

1,108

,065

T

otal

Non

oper

ating

Rev

enue

s (E

xpen

ses)

($1,27

9,77

6)($1,05

8,76

5)($139,118)

$1

,188

,092

($7

84,056

)($1,47

8,31

2)($

2,03

3,86

6)($2

,052

,478

)($3,69

7,38

9)($3,16

5,84

4)

CHAN

GE IN

NET

PO

SITI

ON

($1

,071

,511

)

($

173,

423)

$

819,

443

$6

,024

,676

$7,0

71,5

47

$4

,784

,545

$2,

257,

363

$

1,90

4,82

2

($4,

509,

078)

($2

,395

,268

)

NET

POSI

TIO

N

For t

he ye

ars e

nded

Dec

embe

r 31

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Invested

inCap

italA

ssets,Ne

tofD

ebt(3

)$64

,373

,308

$69

,150

,659

$71

,712

,019

$73

,925

,304

$66

,837

,953

$77

,213

,989

$

73,351

,769

$7

4,42

8,92

5$69

,112

,110

$66

,390

,024

Restric

tedforD

ebtS

ervice

724

,813

684

,093

736

,105

729

,851

3,285

,751

2,825

,709

8

,294

,936

7,35

2,66

16,941

,760

6,422

,553

Unrestric

ted(2

)15

,180

,087

1

0,27

0,03

38,476

,104

12

,293

,749

23

,896

,747

18

,765

,298

19,41

5,65

421,18

5,59

522

,404

,233

23

,250

,258

TOTA

L NET

PO

SITI

ON

$80

,278

,208

$

80,1

04,7

85

$80

,924

,228

$

86,9

48,9

04

$94

,020

,451

$

98,8

04,9

96

$10

1,06

2,35

9 $

102,

967,

181

$98

,458

,103

$

96,0

62,8

35

STAT

EMEN

T O

F RE

VENU

ES, E

XPEN

SES

AND

CHAN

GES

IN N

ET P

OSI

TIO

Nfo

r the

year

s end

ed D

ecem

ber 3

1

(1) P

riorP

eriodDe

preciatio

nEn

try-In199

8,th

eDistrictu

pgrade

ditssy

stem

softw

are.Duringtheconversio

nwhe

nassetswereen

teredintoth

eaccoun

tingsystem

,the

assets’remaining

usefullifestartedoverusin

gthefulllife

ofth

easset.In201

3,anad

justmen

twasm

adetoca

tchup

theun

der-d

eprecia

tionan

dtheremaining

usefullifewasch

anged.Thisresultedin$27

8,59

5ad

ditio

naldep

recia

tiontobead

dedtoth

ecurren

tyeara

ndaye

ar-end

priorp

eriodad

justmen

ttoRe

tained

Earningsw

asm

adeinth

eam

ountof$

8,57

1,25

8.A

nad

ditio

nalprio

rperiodad

justmen

tfordep

recia

tionwasm

adeinth

eam

ountof$

731,10

3toaccou

ntfo

rthe

John

sPrairieOp

erati

on

Centerth

atbecam

eop

erati

onalaso

fApril2

012,how

everth

eworko

rderwasnotclosed

unti

l201

3.Calen

dary

ears200

4-20

12fina

ncialstatemen

tswererestated

forcom

parativ

epu

rposes.

(2) G

overnm

entalA

ccou

ntingStand

ardsBoa

rdStatemen

tNo.65wasim

plem

entedeff

ectiv

e20

13classifyin

gde

btissuan

ceco

stsa

sexpen

sedwhe

nincurred

.20

12wasre

stated

forcom

parativ

epu

rposesinth

efin

ancia

lst

atem

ents

.(3) In

vested

inCap

italA

ssets,Ne

tofD

ebtw

asre

classified

forthe

years2

004-2

012forthe

prio

rperiodde

preciatio

nen

try.

55

REVE

NUES

AND

CO

NSUM

PTIO

N BY

CUS

TOM

ER C

LASS

for t

he ye

ars e

nded

Dec

embe

r 31

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

NUM

BER

OF

CUST

OM

ERS

Residen

tial

27,65

728,61

929,27

929,94

030,26

930,36

830,24

030,24

930,00

130,23

1

Com

mercia

l2,074

2,121

2,160

2,161

2,180

2,182

2,196

2,185

2,167

2,183

LargeIn

dustria

l 1

1

1

1

1

1

1

1

1

1

Oth

er

86

89

88

88

86

83

83

83

80

83

T

otal

29,81

830,83

031,52

832,19

032,53

632,63

432,52

032,51

832,24

932,49

8

RETA

IL E

NERG

Y SA

LES

(kW

h)

Residen

tial

363

,915

,264

369

,780

,401

389

,004

,242

420

,059

,433

429

,970

,570

435

,728

,408

418

,585

,338

439

,742

,517

425

,975

,579

420

,030

,119

Com

mercia

l162

,880

,230

171

,614

,419

184

,284

,662

182

,430

,877

184

,178

,051

181

,895

,889

183

,438

,627

176

,111

,109

183

,165

,987

181

,179

,646

LargeIn

dustria

l69,43

6,80

074,79

3,60

070,41

6,00

064,06

5,60

055,85

7,60

040,69

4,40

050,45

7,60

049,03

2,00

052,35

8,40

053,09

2,80

0

Oth

er2,046

,464

2,067

,158

2,114

,701

2,092

,195

2,098

,434

2,086

,311

2,085

,236

2,040

,075

2,037

,307

2,060

,332

T

otal

598

,278

,758

618

,255

,578

645

,819

,605

668

,648

,105

672

,104

,655

660

,405

,008

654

,566

,801

666

,925

,701

663

,537

,273

656

,362

,897

REVE

NUES

FRO

M S

ALES

OF

ENER

GY

Resid

entia

l$2

3,16

6,51

6$2

4,05

1,72

5$2

6,14

0,24

0$2

8,72

1,01

2$3

0,12

8,43

1$3

1,55

9,12

8$3

0,82

0,64

3$3

2,10

0,31

8$3

2,33

6,20

9$3

5,23

6,96

1

Commercia

l (1)

9,265

,698

10,04

9,53

411,03

1,71

711,45

4,32

911,90

4,87

612,17

1,39

812,21

4,05

611,78

1,90

612,26

0,97

313,20

9,44

8

LargeIndu

stria

l (2)

2,888

,372

3,079

,556

2,922

,458

2,720

,256

2,449

,757

1,991

,051

2,332

,208

2,302

,063

2,468

,116

2,753

,594

Othe

r (3)

514

,289

516

,088

541

,632

561

,541

586

,689

575

,801

594

,412

589

,284

586

,794

611

,299

Tot

al$3

5,83

4,87

5$3

7,69

6,90

3$4

0,63

6,04

7$4

3,45

7,13

8$4

5,06

9,75

3$4

6,29

7,37

8$4

5,96

1,31

9$4

6,77

3,57

1$4

7,65

2,09

2$5

1,81

1,30

2

ANNU

AL k

Wh

PER

CUST

OM

ER

Residen

tial

13,15

812,92

113,28

614,03

014,20

514,34

813,84

214,53

714,19

913,89

4

Com

mercia

l78,53

480,91

285,31

784,42

084,48

583,36

283,53

380,60

084,52

582,99

6

LargeIn

dustria

l69,43

6,80

074,79

3,60

070,41

6,00

064,06

5,60

055,85

7,60

040,69

4,40

050,45

7,60

049,03

2,00

052,35

8,40

053,09

2,80

0

Oth

er23,79

623,22

624,03

123,77

524,40

025,13

625,12

324,57

925,46

624,82

3

A

vera

ge -

All C

lass

es20,06

420,05

420,48

420,77

220,65

720,23

720,12

820,50

920,57

520,19

7

REVE

NUE

PER

kWh

(CEN

TS)

Residen

tial

6.3

7 6

.50

6.7

2 6

.84

7.0

1 7

.24

7.3

6 7

.30

7.5

9 8

.39

Com

mercia

l 5

.69

5.8

6 5

.99

6.2

8 6

.46

6.6

9 6

.66

6.6

9 6

.69

7.2

9

LargeIn

dustria

l 4

.16

4.1

2 4

.15

4.2

5 4

.39

4.8

9 4

.62

4.7

0 4

.71

5.1

9

Oth

er 2

5.13

2

4.97

2

5.61

2

6.84

2

7.96

2

7.60

2

8.51

2

8.89

2

8.80

2

9.67

Ave

rage

- Al

l Cla

sses

5.9

9 6

.10

6.2

9 6

.50

6.7

1 7

.01

7.0

2 7

.01

7.1

8 7

.89

(1) Include

scom

mercia

lcustomersa

ndpub

licautho

rities.

(2) Sim

pson

Lumbe

rCom

pany.

(3) In

clude

soutdo

orlig

htingand

unm

etered

signs

56

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Sche

dule

12

- Res

iden

tial

Ene

rgyRa

te(p

erkWh)

$0.05

16

$0.05

32

$0.05

66

$0.05

66

$0.05

96

$0.06

14

$0.06

14

$0.06

14

$0.06

32

$0.06

51

DailyCustomerCha

rge

SinglePh

ase

$0.46

00

$0.48

00

$0.48

00

$0.48

00

$0.50

00

$0.50

00

$0.50

00

$0.50

00

$0.60

00

$0.70

00

Three

Pha

se$0.74

00

$0.78

00

$0.78

00

$0.78

00

$0.82

00

$0.82

00

$0.82

00

$0.82

00

$0.92

00

$1.02

00

Sche

dule

20

- Gen

eral

Ser

vice

with

out D

eman

d

Ene

rgyRa

te(p

erkWh)

$0.05

65

$0.05

82

$0.06

21

$0.06

21

$0.06

53

$0.06

73

$0.06

73

$0.06

73

$0.06

93

$0.07

14

DailyCustomerCha

rge

SinglePh

ase

$0.68

00

$0.72

00

$0.72

00

$0.72

00

$0.72

00

$0.72

00

$0.72

00

$0.72

00

$0.82

00

$0.92

00

Three

Pha

se$0.94

00

$1.00

00

$1.00

00

$1.00

00

$1.00

00

$1.00

00

$1.00

00

$1.00

00

$1.10

00

$1.20

00

Sche

dule

21

- Gen

eral

Ser

vice

with

Dem

and

Ene

rgyRa

te(p

erkWh)

$0.03

43

$0.03

59

$0.03

81

$0.03

81

$0.04

01

$0.04

13

$0.04

13

$0.04

13

$0.04

25

$0.04

38

DailyCustomerCha

rge

$1.82

00

$1.94

00

$1.94

00

$1.94

00

$1.94

00

$1.94

00

$1.94

00

$1.94

00

$2.04

00

$2.14

00

Dem

andRa

te(p

erm

easuredkW

hofdem

and)

$6.21

00

$6.18

00

$6.56

00

$6.56

00

$6.56

00

$6.56

00

$6.56

00

$6.56

00

$6.56

00

$6.56

00

Sche

dule

61

- Lar

ge In

dust

rial

Ene

rgyRa

te(p

erkWh)

$0.03

07

$0.03

07

$0.03

07

$0.03

07

$0.03

07

$0.03

16

$0.03

16

$0.03

16

$0.03

25

$0.03

67

Dem

andRa

te(p

erm

easuredkW

hofdem

and)

$5.59

00

$5.59

00

$5.59

00

$5.59

00

$5.59

00

$5.75

00

$5.75

00

$5.75

00

$5.75

00

$6.31

00

RETA

IL R

ATES

(1)

as o

f Dec

embe

r 31

(1) The

sera

tesrep

resentth

etypicalcustomerinth

atclass.Ot

herratesche

dulesa

lsoineffe

ctareoutdo

orlig

hting,taxexemptstatusand

misc

ellane

ous.

57

2013

2004

Ener

gyPe

rcen

tage

of

Perc

enta

geEn

ergy

Perc

enta

ge o

f Pe

rcen

tage

Rate

paye

r's R

ate

Clas

sSa

les (

kWh)

Rank

Tota

l kW

hRe

venu

eSa

les R

even

ueSa

les (

kWh)

Rank

Tota

l kW

h R

even

ue

Sale

s Rev

enue

LargeIndu

stria

lCustomer(6

1)53,09

2,80

01

8.09

%$2

,753

,594

5.

31%

69,43

6,80

01

11.6

1%$2

,888

,372

8.

06%

LargeGe

neralServiceCustomer(2

2)14,74

7,40

02

2.25

%85

7,13

41.

65%

15,90

1,20

02

2.66

%73

3,93

42.

05%

LargeGe


3)10,84

8,00

03

1.65

%57

4,04

21.

11%

8,271

,600

5

1.38

%417

,532

1.

17%

LargeGe


2)7,821

,600

4

1.19

%44

8,55

60.

87%

8,748

,000

3

1.46

%40

7,17

21.

14%

LargeGe


3)7,533

,600

5

1.15

%44

3,03

40.

86%

6,622

,200

4

1.11

%29

2,76

80.

82%

LargeGe


1)4,738

,000

6

0.72

%27

9,87

60.

54%

5,490

,000

7

0.92

%264

,905

0.

74%

LargeGe


3)4,473

,600

7

0.68

%28

5,59

20.

55%

5,320

,400

9

0.89

%242

,353

0.

68%

LargeGe


3)4,102

,800

8

0.63

%25

1,93

20.

49%

-

-0.

00%

-

0.00

%

LargeGe


3)3,448

,200

9

0.53

%202

,253

0.

39%

3,125

,160

8

0.52

%15

3,18

40.

43%

LargeGe


3)3,378

,000

10

0.51

%23

1,22

40.

45%

2,555

,400

6

0.43

%11

6,90

30.

33%

LargeGe


3) -

-

0.00

% -

0.

00%

3,564

,000

10

0.60

%15

8,53

20.

44%

114

,184

,000

17

.40%

$6,327

,237

12

.21%

129

,034

,760

21

.57%

$5,675

,655

15

.84%

TotalA

llRa

tepa

yers

656

,362

,897

$5

1,81

1,30

2598

,278

,758

$3

5,83

4,87

5

DIST

RICT

’S P

RINC

IPAL

RAT

EPAY

ERS

for t

he ye

ars e

nded

Dec

embe

r 31

58

Curr

ent R

ate

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

StatePu

blicUti

lityTax

3.87

34%

$1,360

,927

$1

,460

,042

$1

,596

,247

$1

,671

,864

$1

,711

,087

$1

,762

,503

$1

,726

,359

$1

,766

,953

$1

,818

,558

$1

,858

,868

StatePrivilegeTax

2.14

0%743

,610

754

,337

878

,294

852

,529

896

,699

930

,804

833

,315

542

,598

966

,168

963

,509

CityofShe

ltonUti

lityTax

6.00

0%54

3,10

456

1,87

657

4,46

858

2,03

957

4,28

855

6,98

057

1,63

657

3,29

458

9,64

661

1,01

4

Leaseh

oldTax

12.8

40%

14,224

20

,010

14

,873

14

,738

-

-

-

4,63

914

,864

38

,265

PayrollTaxes

Vario

us52

6,53

458

7,26

559

9,10

158

9,48

163

4,58

763

0,76

265

2,15

764

7,11

269

5,15

172

4,15

1

L&I,Employmen

tSecurity

Vario

us14

2,74

112

3,41

911

3,71

511

1,53

916

1,55

614

4,55

315

3,02

516

2,82

016

0,35

515

3,16

9

Misc

ellane

ousT

axes

Vario

us53

,319

54

,331

69

,962

75

,893

65

,307

38

,975

40

,213

44

,139

46

,139

41

,732

TotalTaxes

$3,384

,459

$3

,561

,280

$3

,846

,660

$3

,898

,083

$4

,043

,524

$4

,064

,577

$3

,976

,706

$3

,741

,555

$4

,290

,881

$4

,390

,708

TotalO

peratin

gRe

venu

es$3

7,93

7,88

3$4

0,21

9,22

4$4

3,40

8,46

4$4

6,43

3,26

1$4

7,83

1,55

4$4

8,48

0,10

5$4

7,93

3,41

9$4

9,06

4,21

8$4

9,31

5,91

6$5

4,36

6,67

0

%ofO

peratin

gRe

venu

es8.

92%

8.85

%8.

86%

8.40

%8.

45%

8.38

%8.

30%

7.63

%8.

70%

8.08

%

COM

PARA

TIVE

TAX

CO

STS

for t

he ye

ars e

nded

Dec

embe

r 31

59

2004

2005

2006

2007

2008

2009

2010

2011

2012

Res

tate

d20

13

DEBT

SER

VICE

CAL

CULA

TIO

N

Cha

ngeinNetPosition

($1,07

1,51

1)($17

3,42

3)$8

19,443

$6

,024

,676

$7

,071

,547

$4

,784

,545

$2

,257

,363

$1

,904

,822

($4,50

9,07

8)($2,39

5,26

8)

Adj

ustm

ents

to (f

rom

) Cha

nge

in N

et P

ositi

on

Dep

recia

tion&Amortizati

on(1)

$4,488

,430

$4

,690

,154

$4

,830

,922

$5

,000

,383

$5

,175

,236

$5

,415

,081

$5

,645

,655

$5

,851

,864

$6

,592

,569

$6

,678

,552

InterestE

xpen

se1,61

5,66

31,59

5,83

71,51

1,16

61,40

5,85

91,37

9,82

41,81

3,38

32,73

5,86

53,510

,133

4,60

2,54

64,350

,684

Amortizati

onDeb

tDisc

ount,P

remium

50,885

49

,208

46

,890

44

,431

41

,831

59

,209

61

,383

3

6,72

480

4,76

0(2

14,494

)

RateStab

ilizatio

nAc

coun

t(2)

-

-

-

-

-

-

-

(1,68

5,86

1) -

-

Extraordina

ryItem

-

-

-

-

-

-

-

-

-

-

REVE

NUE

AVAI

LABL

E FO

R DE

BT S

ERVI

CE$5

,083

,467

$6

,161

,776

$7

,208

,421

$1

2,47

5,34

9 $1

3,66

8,43

8 $1

2,07

2,21

8 $1

0,70

0,26

6

$9,6

17,6

82

$7,4

90,7

97

$8,

419,

474

DEBT

SER

VICE

(3)

$2,2

21,0

50

$2,6

53,2

75

$2,5

85,7

10

$2,6

20,7

05

$2,6

22,5

48

$2,6

21,1

35

$4,9

83,5

70

$3

,961

,260

$5

,036

,955

$5,8

65,2

96

DEBT

SER

VICE

CO

VERA

GE R

ATIO

2.2

9 2

.32

2.7

9 4

.76

5.2

1 4

.61

2.1

5

2.

43

1.4

9

1.

44

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Revenu

eAv

ailableforD

ebtS

ervice

$5,083

,467

$6

,161

,776

$7

,208

,421

$1

2,47

5,34

9$1

3,66

8,43

8$1

2,07

2,21

8$1

0,70

0,26

6$9

,617

,682

$7

,490

,797

$8

,419

,474

Annu

alDeb

tService(3

)$2

,221

,050

$2

,653

,275

$2

,585

,710

$2

,620

,705

$2

,622

,548

$2

,621

,135

$4

,983

,570

$3

,961

,260

$5

,036

,955

$5

,865

,296

Maxim

umAllowab

leAnn

ualD

ebtS

erviceper

Bond

Coven

ants(4

)$4

,066

,774

$4

,929

,421

$5

,766

,737

$9

,980

,279

$1

0,93

4,75

0$9

,657

,774

$8

,560

,213

$7

,694

,146

$5

,992

,638

$6

,735

,579

Allowab

leAdd

ition

alAnn

ualD

ebtS

ervice

$1,845

,724

$2

,276

,146

$3

,181

,027

$7

,359

,574

$8

,312

,202

$7

,036

,639

$3

,576

,643

$3

,732

,886

$9

55,683

$8

70,283

DEBT

SER

VICE

CO

VERA

GEfo

r the

year

s end

ed D

ecem

ber 3

1

DEBT

MAR

GIN

INFO

RMAT

ION

for t

he ye

ars e

nded

Dec

embe

r 31

(1) Calen

dary

ears200

4-20

12wererestated

forthe

und

er-dep

recia

tionasexplained

inNote16

forc

ompa

rativ

epu

rposes.

(2) P

erBon

dCo

vena

nts,an

yam

ountwith

draw

nfro

mth

eRe

venu

eFund

and

dep

osite

dinth

eRa

teStabilizati

onAccou

ntinanyFisc

alYearw

illbesubtracted

from

NetReven

uesforth

epu

rposesofcalculatin

gthede

bt

coveragere

quire

men

t(3) D

oesn

otinclu

deTermLo

an-JuniorLien

Loan

norca

pitalized

interestonbo

ndproceed

s.

(4) The

bon

dcovena

ntss

tateth

atnew

bon

dsm

aybeiss

uediftheam

ountofthe

netre

venu

efora

nytw

elveco

nsecuti

vem

onthsina24

mon

thperioddivide

dbyth

emaxim

umann

ualdeb

tserviceinanyfu

tureyearisn

otless

than

125

percent.

60

(1) Calen

dary

ears200

4-20

12wererestated

forthe

und

er-dep

recia

tionasexplained

inNote16

forc

ompa

rativ

epu

rposes.

(2) P

erBon

dCo

vena

nts,an

yam

ountwith

draw

nfro

mth

eRe

venu

eFund

and

dep

osite

dinth

eRa

teStabilizati

onAccou

ntinanyFisc

alYearw

illbesubtracted

from

NetReven

uesforth

epu

rposesofcalculatin

gthede

bt

coveragere

quire

men

t(3) D

oesn

otinclu

deTermLo

an-JuniorLien

Loan

norca

pitalized

interestonbo

ndproceed

s.

(4) The

bon

dcovena

ntss

tateth

atnew

bon

dsm

aybeiss

uediftheam

ountofthe

netre

venu

efora

nytw

elveco

nsecuti

vem

onthsina24

mon

thperioddivide

dbyth

emaxim

umann

ualdeb

tserviceinanyfu

tureyearisn

otless

than

125

percent.

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Revenu

eBo

nds

$3

4,21

5,70

1$32

,482

,565

$3

0,66

4,56

9$2

8,76

0,62

2$3

6,71

3,77

8$34

,622

,865

$82,09

5,00

0$8

0,68

0,00

0$7

8,38

5,00

0$7

6,84

0,00

0

Unam

ortized

PremiumDisc

ount

andLossonDe

feasan

ce(53

,819

)(47

,698

)(41

,910

)(36

,477

)(208

,117

)(194

,718

)27,96

410,06

6854

,265

675

,241

CapitalLeases

-

-

-

-

11

0,61

26

6,02

157,98

628,80

412,02

5 -

TotalO

utstan

ding

Deb

t$3

4,16

1,88

2$3

2,43

4,86

7$3

0,62

2,65

9$2

8,72

4,14

5$3

6,61

6,27

3$34

,494

,168

$82,18

0,95

0$8

0,71

8,87

0$7

9,25

1,29

0$7

7,51

5,24

1

TotalD

ebttoOp

erati

ng

Revenu

es

9

0%

8

1%

7

1%62

%

7

7%

7

1%17

1%16

5%16

1%14

3%

TotalD

ebttoTo

talA

ssets

27%

26%

24%

22%

25%

23%

41%

40%

40%

42%

TotalD

ebtp

erRatep

ayer

$

1,14

6$1,05

2$97

1$8

92$

1,12

5$

1,05

7$2

,527

$2,482

$2,457

$2,385

RATI

OS

OF

OUT

STAN

DING

DEB

Tfo

r the

year

s end

ed D

ecem

ber 3

1

61

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Popu

latio

nofCou

nty (1

)50,80

051,90

053,10

054,60

056,30

056,80

060,69

961,10

061,45

061,80

0

Unem

ploymen

tRateofCou

nty (

2)6.

7%5.

6%5.

8%6.

0%8.

6%11

.3%

10.2

%11

.1%

10.1

%9.

0%

Med

ianHo

useh

oldIncomeofCou

nty(3)

$46,43

6$4

7,71

3$5

0,87

8$4

6,89

3$4

8,65

5$4

7,89

8$4

7,27

3$4

7,72

4$4

8,80

4$4

9,99

3

PerC

apita

Persona

lIncom

eofCou

nty(4)

$27,03

4$2

7,48

2$2

8,82

9$3

0,46

2$3

1,23

5$3

0,63

6$3

0,81

6$3

1,64

6$3

2,69

6N/

A

Scho

olEnrollm

ento

fCou

nty(5)

8,138

8,191

8,236

8,122

8,059

8,081

8,230

8,096

7,982

7,972

DEM

OGR

APHI

C ST

ATIS

TICS

for t

he ye

ars e

nded

Dec

embe

r 31

(1) S

ource:W

ashing

tonStateOffi

ceofFinan

cialM

anagem

ent

(2) S

ource:Lab

orM

arketa

ndEcono

micAn

alysis,W

ashing

tonEm

ploymen

tSecurity

Dep

artm

ent

(3) S

ource:W

ashing

tonStateOffi

ceofFinan

cialM

anagem

ent

(4) S

ource:BureauofEcono

micAn

alysis

(5) S

ource:W

ashing

tonStateOffi

ceofSup

erintend

ento

fPub

licIn

struction

62

20

1320

04

Empl

oyer

Prod

uct/

Serv

iceEm

ploy

ees

Rank

Perc

enta

ge o

f To

tal C

ount

y Em

ploy

men

tEm

ploy

ees

Rank

Perc

enta

ge o

f To

tal C

ount

y Em

ploy

men

t

LittleCreekCasinoHo

tel

Casin

oan

dho

tel

788

13.

66%

600

22.

87%

Washing

tonCo

rrectio

nCe

nter

Correctio

nal

647

23.

00%

685

13.

28%

SheltonScho

olDistric

tEd

ucati

onprovide

r59

43

2.76

%54

93

2.63

%

Mason

Gen

eralHospital

Med

icalfacility

547

42.

54%

428

52.

05%

TaylorShe

llfish

Shellfish

350

51.

62%

300

81.

44%

Mason

Cou

nty

Governmen

t33

86

1.57

%36

47

1.74

%

Wal-M

art

Retailstore

297

71.

38%

486

42.

33%

Squa

xinIn

dian

Trib

eTribalFacility

287

81.

33%

189

110.

91%

Olym

picP

anelProdu

cts

Plyw

ood,ven

eer

283

91.

31%

270

101.

29%

NorthMason

Schoo

lDistric

tEd

ucati

onprovide

r27

610

1.28

%28

49

1.36

%

Simpson

Lumbe

rCom

pany

Lumbe

r26

011

1.21

%41

86

2.00

%

Islan

dEn

terprises

TribalCom

panies

175

120.

81%

3943

0.00

%

Total

4,84

222

.47%

4,61

221

.90%

Source:Econ

omicDe

velopm

entC

ouncilofM

ason

Cou

nty

PRIN

CIPA

L EM

PLO

YERS

for t

he ye

ars e

nded

Dec

embe

r 31

63

2004

20

05

2006

20

07

2008

20

09

2010

20

11

2012

20

13

Ope

ratin

g Ex

pens

es /

Reve

nues

97.9

%96

.4%

96.5

%88

.4%

82.4

%85

.9%

89.9

%90

.8%

99.0

%98

.6%

Tota

l Ele

ctric

Sal

es in

MW

h

Re

tailSales

598

,279

618

,256

645

,820

668

,648

672

,105

660

,405

654

,567

666

,926

663

,537

656

,363

Annu

al k

Wh

per C

usto

mer

Re

siden

tial

13,15

812,92

113,28

614,03

014,20

514,34

813,84

214,53

714,19

913,89

4

Ge

neralService

78,53

480,91

285,31

784,42

084,48

583,36

283,53

380,60

084,52

582,99

6

Indu

stria

l69,43

6,80

074,79

3,60

070,41

6,00

064,06

5,60

055,85

7,60

040,69

4,40

050,45

7,60

049,03

2,00

052,35

8,40

053,09

2,80

0

Misc

ellane

ous

23,79

623,22

624,03

123,77

524,40

025,13

625,12

324,57

925,46

624,82

3

Aver

age

Annu

al k

Wh

per C

usto

mer

-All

Clas

ses

20,06

420,05

420,48

420,77

220,65

720,23

720,12

820,50

920,57

520,19

7

Aver

age

Reve

nue

per R

esid

entia

l Cus

tom

er$8

44$8

53$9

01$9

67$1

,002

$1,046

$1,018

$1,059

$1,068

$1,167

Annu

al R

even

ue p

er C

usto

mer

- Al

l Cla

sses

$1,202

$1,223

$1,289

$1,350

$1,385

$1,419

$1,413

$1,438

$1,478

$1,594

Addi

tions

to P

lant

, exc

ludi

ng W

ork-

in-P

rogr

ess (1

)$6

,194

,450

$6,967

,080

$4,569

,715

$5,976

,049

$5,532

,730

$6,048

,307

$6,953

,589

$4,663

,307

$3,049

,114

$42,25

2,07

6

Net U

tility

Pla

nt$1

02,088

,517

$105

,753

,357

$107

,101

,640

$108

,026

,826

$109

,209

,590

$112

,548

,254

$120

,184

,401

$143

,711

,176

$148

,359

,380

$136

,454

,759

Num

ber o

f Sub

stati

ons

10

10

11

11

11

11

11

11

11

11

Prim

ary

Line

Mile

s

Ov

erhe

ad 6

43

654

6

58

660

6

71

677

6

83

686

6

90

690

Un

dergroun

d 9

84

993

1,010

1,030

1,050

1,062

1,072

1,074

1,076

1,078

To

talPrim

aryLin

eMiles

1,627

1,647

1,668

1,690

1,721

1,739

1,755

1,760

1,766

1,768

Capi

taliz

ed P

ayro

ll$1

,839

,435

$1,722

,558

$1,709

,384

$1,758

,612

$1,894

,770

$1,834

,631

$1,759

,896

$1,625

,996

$1,735

,988

$1,878

,325

Tota

l Pay

roll

Expe

nse

$7,424

,612

$7,607

,202

$7,963

,194

$8,628

,890

$8,361

,891

$8,756

,679

$9,118

,034

$9,039

,380

$9,736

,413

$10,17

7,80

3

Num

ber o

f Ful

l-Tim

e Em

ploy

ees

117

1

16

115

1

16

117

1

18

116

1

15

116

1

20

OPE

RATI

NG IN

DICA

TORS

for t

he ye

ars e

nded

Dec

embe

r 31

64

2004

20

05

2006

20

07

2008

20

09

2010

20

11

2012

20

13

Pow

er O

utag

es

Ov

erhe

ad 3

22

289

3

40

296

2

60

327

3

27

433

4

70

275

Un

dergroun

d 2

38

215

2

43

193

2

01

183

1

58

143

1

56

159

To

talPow

erOutages

560

5

04

583

4

89

461

5

10

485

5

76

626

4

34

Appl

icatio

ns R

ecei

ved

Ne

w 8

52

1,083

9

63

687

3

44

239

2

51

165

1

71

192

Altered

481

5

77

553

6

48

601

5

52

669

5

53

567

7

13

Ba

ckbo

ne 1

9 1

1 3

4 2

0 8

4

4

7

3

3

To

talA

pplicati

onsR

eceived

1,352

1,671

1,550

1,355

9

53

795

9

24

725

7

41

908

Conn

ects

Pe

rman

ent

419

6

62

586

4

68

214

1

04

111

6

6 6

2 6

9

Co

mmercia

l 8

3 7

5 5

2 3

4 3

8 3

1 2

1 2

3 2

3 1

8

Season

al 1

06

24

22

13

17

10

14

9

11

11

Misc

ellane

ous

119

1

34

161

1

66

87

75

69

69

71

61

To

talCon

nects

727

8

95

821

6

81

356

2

20

215

1

67

167

1

59

Tree

Trim

min

g

Mileso

fLines

53

70

50

57

70

71

63

55

66

43

Heati

ngDegreeDa

ys(2

)5,024

5,135

5,240

5,478

5,812

5,687

5,321

5,886

5,469

5,339

Annu

alPrecip

itatio

n(in

ches)(

3) 4

5.82

6

2.98

8

2.05

6

1.25

5

3.99

5

5.03

6

3.99

5

3.84

5

5.66

4

8.04

(1) The

John

sPrairieOp

erati

onsC

enterw

hichco

st$38

.8m

illionan

dtheMason

substatio

nwhichco

st$2.7millionwerebo

thfina

lized

and

add

edto

theElectricPlan

taccou

ntin201

3.(2) Sou

rce:N

ation

alW

eatherServiceForecastO

ffice

(3) Sou

rce:Distric

t’sM

t.View

weatherstati

on

“Our well-trained staff focuses on providing the best service possible to our customers. Whenever

we search for solutions, the customer needs are center stage. We upped our game in 2013

with programs designed to enhance PUD 3’s efficiency; all aimed at making our customer’s

experience as easy as possible.”

- Diane HennessyCustomer Service Manager

65

making connections.66

MasonCountyPublicUtilityDistrictNo.3P.O.Box2148

Shelton,MasonCounty,Washington(360)426-8255

www.masonpud3.org

making connections.

Comprehensive Annual Financial Report - Mason PUD 3 · The Comprehensive Annual Financial Report...

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