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MINUTES OF LINCOLN ELECTRIC SYSTEM ADMINISTRATIVE BOARD Minutes of regular meeting held at 9:30 a.m., Friday, August 16, 2019, at the offices of Lincoln

Electric System, 1040 O Street, Lincoln, Nebraska. Board Members Present: Layne Sup, DaNay Kalkowski, Andy Hunzeker, Sarah Peetz,

Lucas Sabalka, Rebecca Lai, Eliot Bostar, David Spinar, Karen Griffin

Board Members Absent: None LES Staff Present: Kevin Wailes, Shelley Sahling-Zart, Laura Kapustka, Jason Fortik,

Dan Pudenz, Paul Crist, Lisa Hale, Trish Owen, Jim Rigg, Marc Shkolnick, Scott Benson, JD Linscott, Eric Ruskamp, Chasity Blair, Kyle Dump, Jennifer Bangert, Troy Hopkins, Dave Auman, Dustan Daniel, Bryan Willnerd, Tom Rathe, Kelley Porter, Richard Grabow

Others Present: Alyssa Martin, Alyssa Baker, Ken Winston News Media Present: None Chair Layne Sup called the meeting to order at approximately 9:30

a.m. A safety briefing was provided. He noted that LES conducts its meetings in compliance with the Nebraska Open Meetings Act, and noted that copies of the Act are located near the entrance to the Board room.

Former Board member and Vice Chair Tammy Ward was elected to

the City Council and subsequently resigned from the LES Administrative Board, leaving a vacancy in the office of Vice Chair. Election of officers was deferred for a couple of months pending confirmation of new Board members. The nominating committee had previously recommended the following slate of officers:

Chair – Layne Sup Vice Chair – DaNay Kalkowski Secretary – Andy Hunzeker

It was also recommended that Shelley Sahling-Zart be temporarily appointed as Assistant Secretary due to Lacy Stockdale having accepted a position elsewhere in LES. Sarah Peetz moved that the recommended slate of officers and appointment of Sahling-Zart be approved. Lucas Sabalka seconded the motion. The vote to elect the officers was:

Call to Order Election of 2019 Officers

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Aye: Sup, Hunzeker, Kalkowski, Peetz, Sabalka, Lai, Bostar, Griffin, Spinar

Nay: None Abstain: None Absent: None Chair Sup asked for approval of the minutes of the meeting of

July 19, 2019. Sarah Peetz moved their approval. Andy Hunzeker seconded the motion. The vote for approval of the minutes was:

Aye: Sup, Hunzeker, Kalkowski, Peetz, Sabalka,

Lai, Bostar, Griffin, Spinar Nay: None Abstain: None Absent: None Ken Winston submitted a letter from Nebraska Interfaith Power &

Light and nine other individuals and organizations outlining suggestions for additional uses of the Sustainable Energy Program Funds. (Exhibit I)

Alyssa Baker, on behalf of herself and the Nebraska Sierra Club, requested that LES livestream its Board meetings and archive the videos of its meetings online. She noted that many cannot attend the LES Board meetings, but they are interested in the policies the LES Board is considering.

Lucas Sabalka, Chair of the Operations & Power Supply

Committee, reported on Committee discussion which included the following: 1) a review of proposed 2020 power costs which are projected to be lower than 2019; 2) a review of drivers and barriers for customer electric vehicle adoption; 3) current trends in utility generation portfolio targets; and 4) a review of 2019 second quarter generation revenue and costs. (Exhibit II)

Sarah Peetz, Chair of the Finance & Audit Committee, reported on

Committee discussion which included the following: 1) overview of LES’ efforts to identify and prevent or mitigate threats to LES employees and physical assets; 2) overview of the LES Enterprise Risk Management program and how

Approval of Minutes Comments from Customers Operations & Power Supply Committee Finance & Audit Committee

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LES’ Risk Appetite Statement is used to manage risks; and 3) an overview of LES’ Employee Retirement 401(k) Plan and 457 Deferred Compensation Plan. (Exhibit III)

Sarah Peetz, LES’ representative on the District Energy

Corporation (DEC) Board, provided a quarterly update on activities of the DEC. She noted that Tammy Ward and Alyssa Martin are new DEC Board members, both representing the City of Lincoln. The DEC currently operates six DEC plants at various locations. Current capital projects include a central thermal facility at the Nebraska State Penitentiary and extending distribution piping to the new Olsson’s building in the West Haymarket. Peetz also noted that DEC is celebrating its 30th anniversary this year. An anniversary recognition is scheduled for October. (Exhibit IV)

Eric Ruskamp, Manager, Regulatory Compliance, provided an

overview of the North American Electric Reliability Corporation (NERC) and LES’ efforts to comply with NERC reliability standards. (Exhibit V) He summarized some large outages in the northeast that spurred the creation of the Electric Reliability Organization and mandatory electric reliability standards. Penalties for violating the standards can run as much as $1 million per violation, per day. NERC has 97 enforceable standards, 68 of which are applicable to LES, and more than 500 requirements, more than 300 of which are applicable to LES. There are numerous additional sub-requirements within the standards.

LES’ regional reliability enforcement entity is the Midwest

Reliability Organization which is accountable to NERC and the Federal Energy Regulatory Commission (FERC). The MRO employs a variety of monitoring processes including compliance audits, self-certification, spot checking, compliance violation investigations, and self-reporting, among others.

Ruskamp noted that LES conducts an annual internal review of its compliance involving 38 subject matter experts throughout the company. In addition, various LES staff are also actively engaged with MRO and NERC in the process of developing and revising reliability standards, although FERC has the final approval of standards. Ruskamp also summarized the NERC 2019 State of Reliability Report.

Quarterly District Energy Corporation (DEC) Update North American Electric Reliability Corporation (NERC) Overview

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Scott Benson, Manager, Resource & Transmission Planning, gave an overview on Renewable Energy Certificates/Credits (REC). (Exhibit VI) He provided the same overview at the July meeting, but due to the fact that some Board members wanted more time to consider the policy and new Board members have been recently confirmed, Benson repeated the overview. A renewable energy certificate is a tradeable, market-based instrument that represents the legal property rights to the “renewable-ness” – or all non-power attributes – of renewable electricity generation. A REC is issued for every megawatt-hour (MWh) of electricity generated and delivered to the electric grid from an applicable renewable energy resource. Benson went over historical LES REC sales, the existing LES REC Purchase Program and proposed a new LES REC Purchase Program.

Benson noted that staff is seeking input from the Board

whether they are comfortable with LES continuing to sell LES’ generated RECs to third parties rather than claiming them for LES. Following considerable discussion, the consensus of the Board was to continue selling RECs with first priority given to LES customers and initiating a REC marketing program.

Due to time constraints, the construction update on the LES

Operations Center was deferred to the September Board meeting.

Kelley Porter, Manager, Customer & Corporate Communications,

reported on LES’ Sustainable Living Festival (SLF) held July 27 on Canopy Street in the West Haymarket. (Exhibit VII) The SLF is LES’ signature outreach event and this was the ninth year for the event. Approximately 46 employee volunteers assisted with the event and this year we had 33 community partnerships. The partnerships include a variety of vendors or organizations with a focus on some aspect of sustainable living ranging from home solar panels and electric vehicles to recycling and composting. An estimated 2,000 people attended the festival.

Andy Hunzeker moved that the Board go into closed Executive

Session to discuss a) labor negotiations and b) a pending tort claim. DaNay Kalkowski seconded the motion. The vote to go into closed Executive Session was:

Aye: Sup, Hunzeker, Kalkowski, Peetz, Sabalka,

Lai, Bostar, Griffin, Spinar

Renewable Energy Credit (REC) Sales Overview & Guidance LES Operations Center (LOC) Update Sustainable Living Festival Report Executive Session

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Nay: None Abstain: None Absent: None

Chair Sup declared the Board in closed session at 11:57 a.m. He declared the Board out of closed session at 12:24 p.m.

The Monthly Financial and Power Supply Reports were distributed

to the Board and staff was available to answer questions. (Exhibit VIII)

Board members were invited to attend the Nebraska Lineworkers

Rodeo at the Nebraska State Fair on August 24. There will also be a Public Power Booth at the State Fair for the duration of the fair.

The next regular meeting of the LES Administrative Board is

scheduled for Friday, September 20, 2019, at 9:30 a.m. There being no further business before the Board, Layne Sup

declared the meeting adjourned at approximately 12:27 p.m.

Monthly Financial and Power Supply Reports Miscellaneous Next Meeting Adjournment

Andy Hunzeker, Secretary

BY: S/Shelley Sahling-Zart Shelley Sahling-Zart Assistant Secretary

Exhibit I

NebraskalnterfaithPower& Light

August 16,2019

Layne Sup, ChairpersonMembers of the LES Board

RE: Sustainable Energy Program Funding

Dear Chairperson Sup and Members of the LES Board:

The undersigned individuals and organizations request that the Lincoln Electric Systemmaintain the funding for the Sustainable Energy Program at the 2019 level of $1.5million for the 2020 Fiscal Year. Applications to date indicate the entire amount allocatedfor 2019 will be used by LES customers to make investments to become more energyefficient and this program should continue to be funded to meet the needs of the programin2020.

V/e further request that the approximately $1.8 million that was rolled ovsr from the 2018SEP budget into the Rate StabilizationFund to be'oavailable for customer energyeffrciency and conservation use in a future fiscal year" continue to be earmarked forsustainability purposes. There are many worthwhile projects in the community whichcould benefit from allocation of such funds to reduce energy use and cost for yourcustomer owners. LES should engage in conversations with customer owners on ways tobest use these funds.

We encourage LES to take a big picture and long-tenn approach for use of these funds.Funding for customer solar and geothermal projects would achieve the same goals as theenergy efficiency and conservation purposes named in the resolution and would benefitboth your customer owners and the community as a whole. Following are some suggesteduses for these funds:

Solar and geothermal demonstration projects for environmental educationpurposes.

Incentives for solar facilities for churches and non-profits that are unable to makeuse of tax incentives.

Solar facilities for public buildings, such as the City of Lincoln, Lincoln PublicSchools, SCC or I-INL.

Projects such as these would help reduce the energy burden on LES, free up funds forthese organizations to carry out their respective missions and create jobs that wouldbenefit the local economy. They would also help with the overriding mission of reducinggreenhouse gas emissions, which is an absolute imperative for our community and ourplanet.

We would like to set up a meeting of interested persons to meet with board members and

staff to discuss the ideas set forth in this letter.

Sincerely,Kenneth C. WinstonDirector of Policy and OutreachNebraska Interfaith Power & [email protected] 402-212-37 37

John Hansen, PresidentNebraska Farmers Union

Moni UsaszLincoln Citizens Climate Lobby

Sherlyn MillerLeague of Women Voters ofNebraska

Dr. Donald A. V/ilhiteProfessor Emeritus, Climate ScienceUniversity of Nebraska Lincoln

Kristal StonerExecutive DirectorAudubonNebraska

Chris CallihanIBEW LocaI265

Jane KleebFounder and Executive DirectorBold Nebraska

Senator Ken Haar, retiredLincoln City Council 1989 -1997State Senat or 2009 -2017

David E. CorbinChair, Nebraska Sierra Club

Exhibit II

Operations and Power Supply Committee Meeting Summary

August 5, 2019

2020 Power Cost Review: The proposed 2020 Power Cost net expenditure is $98.9M, which is $3.5M lower than the 2019 Power Cost Budget. Customer loads in the SPP footprint, continued low projected natural gas prices, and increasing wind generation in the footprint continue to have a significant influence on Power Costs. Staff now has four full calendar years of representative historical market data that is being used to help refine the proposed Power Cost budget. The Operations and Power Supply Committee is scheduled to review the overall Budget and any proposed changes to the Power Cost expenditure at the September Committee meeting.

Drivers and Barriers for Customer Electric Vehicle (EV) Adoption: LES, in collaboration with seven other major utilities around the country, coordinated with the Electric Power Research Institute to survey over 3,200 individuals to determine which factors have the largest impact on electric vehicle purchasing decisions. Direct monetary incentives such as vehicle purchase price discounts, home charging station incentives, and reduced overnight electricity price discounts were surveyed. Indirect incentives such as the availability of workplace charging stations, free EV parking, and increases in the availability of public charging stations were also surveyed. Vehicle purchase price discounts were shown to create the largest increase in projected EV sales while indirect incentives had much smaller impacts on customers’ purchasing decisions. This survey data will be used in conjunction with the data from LES’ ongoing electric vehicle pilot study to shape any future LES EV programs.

Current Trends in Generation Portfolio Targets: Staff shared an overview of generation portfolio targets that a sample of electric utilities across the country have adopted. The sample utilities have portfolio targets that cover a broad range of renewable generation and traditional generation technologies. The operational realities of utilities currently claiming to be 100% renewable were discussed. And further, the infrastructure and technology advancements that will be necessary for utilities setting zero carbon or net-zero carbon goals were also reviewed. Staff will continue to monitor technologies and trends in the industry to find opportunities to further advance decarbonization of the resource portfolio while meeting the requirements for a reliable, economical, and environmentally responsible power supply resource portfolio. This topic will be further addressed by future Committee and Board discussions.

2019 Second Quarter Generation Revenue and Cost Report: Staff presented its analysis of the financial performance of LES’ generating resources in the SPP Integrated Marketplace for the second quarter of 2019. Natural gas prices trended at or below Budget in the second quarter due to lower demand by the electric generation sector and lower liquified natural gas demand. Market electricity prices for the second quarter trended higher than Budget due to ongoing generating unit outages in the SPP footprint and lower wind production. LES’ generating fleet posted positive net revenue results for the second quarter, though the results were lower than the first quarter.

Exhibit III

Finance & Audit Committee – meeting minutes August 16, 2019

1. Physical Security Update (Jim) • Jim Rigg, Manager, Safety & Physical Security gave an update that outlined the

inception of the Physical Security department and provided an explanation for the measures we take regarding security. Jim also provided a description of Critical Infrastructure and how LES falls into that category.

• Jim provided an outline for the types of facilities we are protecting, as well as the 500 LES employees. Jim described the types of threats utilities are seeing, such as terrorism, homegrown violent extremists and internal/external threats. He defined the steps LES has taken to strengthen the security of LES installations and provided a look at what’s on the table for future efforts.

2. Enterprise Risk Management at LES (Bryan)

• Bryan Willnerd provided an overview of LES’ Enterprise Risk Management (ERM) program, which included a description of ERM, the developing ERM culture at LES, how LES’ Risk Appetite Statement is used to manage risks, and what role Finance & Audit has within the program.

3. An overview of LES’ Retirement Plans (Laura) • An overview of LES’ retirement plans was provided which included a description

of the underlying LES policies which provide the authority for actions related to the Plans.

• A description of the responsibilities of each of the parties that supports the Plans was also provided.

• At the end of 2019, there was $164 million invested in both Plans. • The Finance & Audit Committee will continue to receive periodic updates on the

Plans.

Exhibit IV

DEC Board Meeting Summary

July 31, 2019

The District Energy Corporation held its most recent Board meeting on July 31, 2019. Highlights from the

meeting include the following:

1. New Board Members: The Board President recognized new Board members Tammy Ward and Alyssa

Martin. They fill the two recently vacated Board positions for City of Lincoln representatives.

2. Multi-Year Contract Considerations: The DEC Board adopted “Non Appropriation Clause” language that

will be included in multi-year contracts that notifies the contractors the contract may be terminated if

sufficient funds are not appropriated for the contract in future years. The Board also adopted language

that will be included in each year’s Budget Resolution that lists the total estimated cost of multi-year capital

projects and authorizes the DEC Administrator to enter into multi-year contracts to complete those

projects. These two actions resolve the outstanding items in the recently adopted Management

Agreement that needed further clarification.

3. DEC Management Report

a. Operations Update: Staff provided an overview of the six DEC plants, the types of service they

provide, and their locations. Staff also reviewed the natural gas purchasing program and noted that

we are in the process of issuing an RFP for a new natural gas supplier, with a goal of awarding the

contract by November 1st.

b. Capital Projects Update

1. Nebraska State Penitentiary (NSP) DEC Central Thermal Facility

a. The building and steel erection work is substantially complete. The steam system and backup

electrical generator system are scheduled to be in service by September 27, 2019. The chilled

water system is scheduled to be in service by October 25, 2019. Although final completion is

not expected until early November, we have been able to meet the customer’s interim

heating and cooling needs through the use of a temporary boiler and operation of the

customer’s existing chilling equipment. The project has a $22M budget and it appears the

final project cost will be right at $22M.

2. A distribution piping extension was installed to the new Olsson’s building in the West Haymarket.

c. The Board passed a Resolution and an associated Policy to clarify that the DEC does not provide

electrical generation defined as “Legally Required Standby Systems,” also known as “Life Safety

Systems.” The DEC will continue to provide “Optional Standby” electrical generation to customers

where life safety does not depend on the performance of the system.

4. DEC Financial Report

a. Energy sales for Q2 2019 were up 16% from budget, due largely to weather and operational

challenges at the County Adult Detention Facility. Revenues were 1% above budget overall, although

revenue from the LES Operations Center was below Budget due to the delayed timing of the plant

reaching Substantial Completion. Expenses were 19% below budget, also largely due to the timing of

the LES Operations Center plant. Debt Service Coverage is 1.44 compared to a budget of 1.21 due to

the lower than expected expenses.

b. Staff provided the Semi-Annual Investment Report, a verbal update on the DEC Enterprise Risk

Management Program, and received approval from the Board to enter a contract with BKD, LLP for

audit services. Staff also received approval to obtain pollution liability insurance and to obtain

cybersecurity coverage.

5. Other Business: The DEC is celebrating its thirty-year anniversary in 2019. The October Board meeting will

include a tour of the new LES Operations Center thermal plant along with an anniversary event. The Board

also heard an update from the attendees of the June International District Energy Association annual

conference. District energy systems continue to gain popularity due to the energy efficiency they provide

compared to conventional heating and cooling systems. These increased efficiencies are being recognized

by the United Nations in its District Energy in Cities Initiative as another tool to reduce fossil fuel

consumption in the building space conditioning sector.

Exhibit V

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NERC Overview andCompliance Update

Eric RuskampManager, Regulatory Compliance

August 16, 2019

1

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Agenda

NERC Overview• History• Regulatory Hierarchy• Reliability Standards• Compliance Enforcement

Compliance Update• Noteworthy Changes• Standards Activity

2

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NERC | History

How long has NERC been around?a) 5 yearsb) 14 yearsc) 22 yearsd) 32 yearse) 51 years

3

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NERC | History

How long has NERC been around?a) 5 yearsb) 14 yearsc) 22 yearsd) 32 yearse) 51 years

4

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NERC | History

The Event – Nov 9, 1965• A single wrongly set relay in Ontario caused

a key 345kV transmission line to open• Escalating line overloads • Within 5 minutes, islanding across much of

the Northeast• 25 Million people (80,000 square miles)

were without electricity for up to 12 hours • Reason: varying operating standards

developed somewhat independently

5

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NERC | History

The Result• North American Electric Reliability Council (NERC) formed on

June 1, 1968 under the Electric Power Reliability Act of 1967• Began developing Operating Policies• Adopted Planning Standards in 1997

6

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NERC | History

7

1965–2003 Major Outages• 1969 – Florida, 2m people• 1977 – New York, 9m people• 1981 – Utah, 1.5m people• 1982 – California, 5m people• 1985 – Florida, 4.5m people• 1996 – Western US and Canada, 7.5m people

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NERC | History

August 14, 2003• Largest Blackout in North

American history• Affected 50 million people• Financial losses estimated at $6

Billion

• Trees!• Line Overloads• Lost 21 power plants in 3 min

8

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NERC | History

1965 2003

9

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NERC | History

Enforcement Needed• EPACT 2005 signed by President Bush on

August 8, 2005• Authorized the creation of the Electric Reliability

Organization (ERO) to span North America with FERC oversight in the US.....

• North American Electric Reliability Corporation (NERC)

• June 18, 2007 Mandatory Enforcement began • Penalties up to $1 million per violation, per day

10

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NERC | Reliability Standards

generation-load balance contingency reserves communication protocols cyber security physical security system restoration emergency operations interconnection requirements vegetation management facility ratings operating limits

transmission loading relief outage coordination real-time assessments model development system operator training system protection underfrequency load shedding generator capability coordination operations planning transmission planning voltage control

11

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Balancing Authority Distribution Provider Generation Owner Generation Operator Planning Coordinator Reliability Coordinator Transmission Owner

Transmission Operator Transmission Planner Transmission Service Provider Resource Planner Reserve Sharing Group

12

Functional Entity Registration

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Balancing Authority Distribution Provider Generation Owner Generation Operator Planning Coordinator Reliability Coordinator Transmission Owner

Transmission Operator Transmission Planner Transmission Service Provider Resource Planner Reserve Sharing Group

13

Functional Entity Registration

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14

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15

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16

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FAC-008-3 - Facility Ratings• Purpose - To ensure that Facility Ratings used in the planning and operation of

the Bulk Electric System are determined based on technically sound principles• Applies to Transmission and Generation • 8 Requirements, 27 sub Requirements

o Development a methodology, and implement

• 1,722 Transmission Elements• 95 Generation Elements

17

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NERC Reliability Standards97 enforceable

• 68 applicable to LES500+ Requirements

• 300+ applicable to LES

An additional 1,100 sub Requirements within the standards (not counting bullet points and attachments)

18

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NERC | Regulatory Hierarchy

19

FERC

NERC

SERC RF MRO TREWECCNPCC

Provides oversight & direction

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20

FERC

NERC


Develops & Enforces Reliability Standards

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21

FERC

NERC


Audits the NERC Reliability Standards

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22

NERC Regional Entities

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MRO – LES’ Regional Entity• Compliance & Enforcement• Registration & Certification• Seasonal and Long-term Assessments• Data Submittals

23

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NERC | Enforcement

The MRO monitors, assesses, and enforces compliance with Reliability Standards using eight monitoring processes:

• Compliance Audits• Self-Certifications• Spot Checking• Compliance Violation Investigations• Self-Reporting• Periodic Data Submittals• Exception Reporting• Complaints

24

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NERC | Enforcement

The MRO monitors, assesses, and enforces compliance with Reliability Standards using eight monitoring processes:

• Compliance Audits• Self-Certifications• Spot Checking• Compliance Violation Investigations• Self-Reporting• Periodic Data Submittals• Exception Reporting• Complaints

25

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NERC | Enforcement

Compliance AuditsMay 2017 onsite audit (every 3 years)

• Preceded by offsite compliance review• 21 NERC Standards• 2,238 evidentiary files provided

May 2019 offsite audit (every 2 years)• 11 NERC Standards• 396 evidentiary files provided

May 2020 onsite audit • Feb – offsite review• May – onsite audit

Audits typically led by MRO• Ops & Planning Audit• CIP Audit

26

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NERC | Enforcement

“Guided” Self Certifications1. List all facilities2. Perform random sample3. Create population4. Documentation for identified Requirements

2017 – 4 Requirements 2018 – 7 Requirements 2019 – 11 Requirements

27

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NERC | Enforcement

Self ReportingExpectation to self identify and Self Report matters of potential noncompliance

1. Issues reported to Regulatory Compliance Dept.2. Regulatory Compliance Dept. investigates3. Formal report and presentation provided to LES Compliance Committee4. LES Board and MRO notified

28

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Annual Internal Review

38 SMEs 12 Group Managers

Regulatory Compliance

29

364 Tracking Records• Compliance narrative • Supporting evidence

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Compliance Update

30

Peak Reliability Dissolution • Ended Reliability Coordinator services on July 1st

• SPP and Cal ISO took over Reliability Coordinator services

Cal ISO

SPPSPP

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Compliance Update

Large Financial Penalty• A large utility received a $10 Million penalty, issued on Jan 25, 2019 • Addressed violations and Self Reports from 2015-2018• 127 violations ranging from minimal to serious risk. NERC determined

that the collective violations posed a serious risk to the security and reliability of the Bulk Power System.

• Contributing causes for the violations:o Lack of management engagement, support, and accountabilityo Disassociation of compliance and securityo Lack of communication between management levelso Organizational silos that resulted in confusion regarding ownership of tasks

31

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Compliance Update

New/Revised Standards• FERC Directives• Reliability needs• Clarifications/improvements

• Drafting teams comprised of industry volunteers• Develop and provide comments and voting recommendations

o 66.66% Approval needed• Implement new standards before enforcement date

32

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Compliance Update

Standards Under Development• 12 Projects

o 22 standards being revisedo Standards Efficiency Review

Implementation of Standards• 9 Implementation Plans

o Transient Cyber Assetso Generator testingo Communications testingo Training on protections systems

33

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Compliance Update

NERC 2019 Summer Assessment• Texas continues to have a generation shortfall due to recent generation

retirements. The projected reserve margin is 11%, 3% below their recommended level.

• California faces generation ramping capability concerns. These shortage conditions occur during late afternoon as solar generation output decreases while system demand is still high.

• SPP footprint does not have any emerging reliability issues that are considered unique.

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Compliance Update

NERC 2019 State of Reliability ReportReport looks back over the previous year with a view toward solving future problems

• There were no non-weather related Category 3, 4, or 5 events.

• There was only one Energy Emergency Alert–Level 3 that led to firm load shedding (675 MW, due to extreme weather) in Nova Scotia, lasting just over seven hours. Firm load was served 99.92% of time.

• Despite continually evolving threats, no cyber or physical security incidents leading to unauthorized control actions or loss of load occurred in 2018.

• There were frequency response improvements in all Interconnections. Frequency response arrests and stabilizes frequency during system disturbances.

35

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Compliance Update

NERC and MRO Dues

36

• MRO dues to increase 9.8% in 2020• NERC dues to increase 9.0% in 2020

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NERC Overview andCompliance Update

37

Eric RuskampManager, Regulatory Compliance

Exhibit VI

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Renewable Energy Certificates

1

Scott BensonManager, Resource & Transmission Planning

August 16, 2019

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Renewable Energy Certificates/Credits 101

“A renewable energy certificate (REC) is a tradeable, market-based instrument that represents the legal property rights to the ‘renewable-ness’—or all non-power attributes—of renewable electricity generation.”

“A REC can be sold separately from the actual electricity (kilowatt-hour, or kWh).”

Source: https://www.epa.gov/repowertoolbox/renewable-energy-certificate-monetization

“The REC owner has exclusive rights to make claims about ‘using’ or ‘being powered with’ the renewable electricity associated with that REC.”

“A REC is issued for every megawatt-hour (MWh) of electricity generated and delivered to the electric grid from a renewable energy resource.”

“If you own the RECs associated with your renewable energy project’s electricity output, you can sell these RECs to another party. In doing so, you forfeit the ability to make any claims about ‘using’ renewable energy, but generate a new revenue stream. The revenue is a function of the system’s kWh output and the market price of RECs.”

https://www.epa.gov/repowertoolbox/renewable-energy-certificate-monetization

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LES REC Sales Disclaimer

Source: LES 2018 Financial Report, https://lesannualreport.com/wp-content/uploads/2019/04/LES-Financial-Report_FINAL-1.pdf

https://lesannualreport.com/wp-content/uploads/2019/04/LES-Financial-Report_FINAL-1.pdf

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$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20Sale Price ($/REC)

4

Historical LES REC Sales

Breaking News (10/01/18)$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

2009 2013 2014 2015 2016 2017 2018

Cumulative Sales ($)

2019 Pricing To Date$0.50/REC - $0.60/REC

LES currently produces about 1.2M RECs (MWh) annually.

Total U.S. REC sales in 2017 were in excess of 400M (MWh).

2019 Projected Revenue$600,000 - $700,000

Total net cost of applicable LES renewables ~ $12M for 2018; REC sales represent 5% - 6%.

Source: Status and Trends in the U.S. Voluntary Green Power Market (2017 Data), NREL, October 2018, : https://www.nrel.gov/docs/fy19osti/72204.pdf

https://www.nrel.gov/docs/fy19osti/72204.pdf

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Existing LES REC Purchase Program

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Alternative REC Sources for Customers

Source: https://support.arcadiapower.com/hc/en-us/articles/360017920693-How-does-the-Wind-Energy-program-work-

Source: https://www.terrapass.com/climate-change/climate-changerenewable-energy-credits

$5/MWh $15/MWh

https://support.arcadiapower.com/hc/en-us/articles/360017920693-How-does-the-Wind-Energy-program-work-

https://www.terrapass.com/climate-change/climate-changerenewable-energy-credits

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Proposed New LES REC Purchase Program

Meter # Previous Recent Usage3/1/2019 3/29/2019

123456 1074 kWh

58.86$

Customer Charge 5.00

Faci l i ties Level 2 Charge 26.00

89.86$

2.40$

6.45

Renewable Energy Certi fi cate (.0005/kWh) 0.54

9.39$

0.00

0.00

Total Amount Due 99.25$

Residential- Acct. # 123456789

Current Energy ChargesEnergy Charge 1,074 kW

Total Current Energy Charges

Taxes & Other Charges/ CreditsCity DividendSales Tax

Total Taxes & Other Charges/ Credits

Previous Balance

Payments

RECs would be sold via the LES bill, passing through the cost of a REC (plus related charges) for every kWh consumed each month (after net metering or virtual net metering).

Voluntary program would allow customers to claim 100% renewable energy; RECs would be retired on customer’s behalf.

REC price would be set annually, based on LES’ forecast for the next year.

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Related Policy Discussion

Selling RECs via the LES bill is a significant customer-focused improvement, but truthfully, it’s a rather minor enhancement to the overall program.

The bigger question is actually one of policy:Does the LES Board wish to continue to sell LES’ generated RECs?

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LES Financials

Renewable Financials

LES Marketing

Customer Position

Customer Service

Continue Selling RECs.

$0.6M - $0.7M revenue.

Offset 5% - 6% of total net

cost of related resources.

Include LES REC sales disclaimer whenever

applicable.

Customersofficially 0% renewable.

Customers can partner with LES to claim 100% renewable.

Stop Selling RECs;

retire for LES.

Lost revenue would have benefited all customers.

Net cost of renewable

resources is higher.

Directly claim LES to be 45%

renewable.

Customersofficially 0% renewable.

Customers partner with 3rd party to claim 100% renewable.

Stop Selling RECs;

retire for customers.

Lost revenue would have benefited all customers.

Net cost of renewable

resources is higher.

Include LES REC sales disclaimer whenever

applicable.

Customers can claim

45% renewable.

Customers partner with 3rd party to claim 100% renewable.

Could represent significant administrative overhead for LES.

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July Board Meeting Follow-up

Question:The following question was raised during the previous REC presentation at the July Board meeting:Which REC sales option would best support decarbonization efforts?

Answer:The current practice of selling RECs allows LES to leverage some of our existing sustainability initiatives (i.e., renewable resources) to improve our overall financial position.The better our overall financial position, the more room we then have to pursue new sustainability initiatives in the future…because most of these initiatives place upward pressure on rates.

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Landfill Gas

12

Recent Sustainability Initiatives

SustainableEnergy Program

Community SolarRenewable Generation Rate

Net Metering RatePaperless Billing

EV Study

Peak RewardsAll Made Possible in Large Part by LES’ Strong Financial Position

Exhibit VII

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Sustainable Living Festival Overview

August 16, 2019

1

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Campaign

• Social media / partner posts• Digital ads• Website banner• Radio• Family sites• Partner location promo

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Snapshot

• 9th year of signature event• 2,000 estimated festivalgoers• 33 community partnerships• 46 volunteers

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Community PartnersBig Red WormsBikeLNKCity of Lincoln Parks, Planning & HealthCity of Lincoln Solid Waste ManagementCommon Ground Nebraska Conservation NebraskaElectric VehiclesGC ReVoltGreat Plains Bicycling ClubGreat Plains RenewablesGNRE SolarGroundwater FoundationHigh Level HappinessHVCcycle Inc./Zero MotorcyclesJim King – MusicJ-Tech Solar

Lancaster County Ext. Master GardenersLincoln & Lancaster Co. Health Dept.Lincoln City LibrariesLincoln Public Schools – SustainabilityLower Platte South NRDNebraska811Nebraska Building ProductsNebraska Solar SchoolsPioneers Park Nature CenterSpeedy Pete’s E-Bikes / QP Ace HardwareSustain UNLSWT Energy Inc.UNL State Museum of Natural HistoryUNL Bee LabUNL Office of SustainabilityWheelie Good Bike Shop (promo partner)

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New this year…

• More space • Entrance• Media partners• Experiences!

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New this year…

EdITH – Educational Interactive Tiny House

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Campaign results

Primary digital campaign:• 3.3 million delivered impression• 4,875 clicks (.15% click through rate)

Macaroni Kid campaign:• 35.5% open rate – newsletter (4,658 subscribers)

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Exhibit VIII

Revenue & Expense Statement (Condensed)JULY 2019

2019 2019 PercentageYEAR TO DATE Actual Budget Difference Difference

1) Total Revenue $183,175 $187,756 ($4,581) -2%

YTD residential revenue is 6% above budget, primarily due to weather related higher use per customer, all other retail classes are below budget. Wholesale revenue is under budget due to extended outages at LRS and Rokeby which kept these units from being offered into the market.

2) Power Costs 75,912 83,701 (7,789) -9%

Produced power is 22% under budget due primarily to lower energy, operations and maintenance expenses at LRS related to a planned outage which lasted longer than anticipated, lower energy expense at WS4, Rokeby, and TBGS, partially offset by higher maintenance expenses at Rokeby related to unit 2 and 3 outages. Purchased power is 3% above budget with higher than budgeted SPP purchased power expenses offset by lower than budget renewable wind energy expenses.

3) Other Operating Expenses 41,202 44,838 (3,636) -8%

Other Operating expenses (operation & maintenance, administrative & general) are under budget (-8%) due to the timing of project spending in categories including transmission, corporate communications, consulting services, and software purchases.

4) Depreciation 30,624 30,814 (190) -1%5) Total Expenses 147,738 159,353 (11,615) -7%

6) Operating Income 35,437 28,403 7,034 25%

7) Non-Operating Expense (Income) 23,465 23,665 (200) -1%

8) Change in Net Position (Net Revenue) $11,972 $4,738 $7,234 153%

Year End Projection Year End Budget9) Debt Service Coverage 2.27 2.10

Month End Actual Month End Budget10) Days Cash on Hand (Days) 178 153

July’s above average temperatures did not result in above budget sales to LES’ retail customers. We are still projecting strong year-end debt service coverage of 2.27 times, which is better than the budgeted debt service

coverage of 2.10 times primarily due to lower than budgeted power, operations & maintenance and administrative & general costs.(Dollar amounts in 000)

Comments

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LINCOLN ELECTRIC SYSTEM

FINANCIAL AND OPERATING STATEMENT

July 2019

INDEX

REVENUE & EXPENSE STATEMENT - CURRENT MONTH ------------------------------------------------------------- 1

REVENUE & EXPENSE STATEMENT - YEAR-TO-DATE ----------------------------------------------------------------- 2

REVENUES, ENERGY & CUSTOMERS - CURRENT MONTH ----------------------------------------------------------- 3

REVENUES, ENERGY & CUSTOMERS - YEAR-TO-DATE --------------------------------------------------------------- 4

OPERATING EXPENSE STATEMENT - CURRENT MONTH ------------------------------------------------------------- 5

OPERATING EXPENSE STATEMENT - YEAR-TO-DATE ----------------------------------------------------------------- 6

BALANCE SHEET --------------------------------------------------------------------------------------------------------------------- 7

STATEMENT OF CASH FLOWS -------------------------------------------------------------------------------------------------- 8

DEBT SERVICE COVERAGE ------------------------------------------------------------------------------------------------------ 9

NOTE: Federal Energy Regulatory Commission accounting guidance for the Southwest Power Pool Integrated Market (SPP IM) transactions (purchases, sales and other charges) requires netting together these transactions based on the time increments. If, during the time increment, sales to SPP are greater than purchases from SPP, the net amount is recorded as wholesale revenue. If, during the time increment, purchases from SPP are greater than sales to SPP, the net amount is recorded as purchased power cost. Because of this netting process, the energy (MWH’s) amounts no longer directly correlate to wholesale revenue.

REVENUE & EXPENSE STATEMENTCURRENT MONTH JULY 2019

CURRENT CURRENT LAST YEARDESCRIPTION MONTH MONTH MONTH

ACTUAL BUDGET AMOUNT % ACTUAL AMOUNT %OPERATING REVENUES 1. Retail $29,732,338 $32,054,815 ($2,322,477) -7.2% $31,634,530 ($1,902,192) -6.0% 2. Wholesale 2,683,205 4,034,828 (1,351,623) -33.5% 3,358,718 (675,513) -20.1% 3. Other Revenue 542,685 521,213 21,472 4.1% 532,465 10,220 1.9% 4. City Dividend 663,243 684,144 (20,901) -3.1% 640,063 23,180 3.6% 5. Total Operating Revenues 33,621,471 37,295,000 (3,673,529) -9.8% 36,165,776 (2,544,305) -7.0%

OPERATING EXPENSES 6. Purchased Power 6,439,732 6,190,173 249,559 4.0% 5,415,729 1,024,003 18.9% 7. Produced Power 4,907,069 7,360,341 (2,453,272) -33.3% 6,409,916 (1,502,847) -23.4% 8. Operations 1,417,929 1,730,477 (312,548) -18.1% 1,829,732 (411,803) -22.5% 9. Maintenance 733,186 761,355 (28,169) -3.7% 865,283 (132,097) -15.3%10. Administrative & General 3,623,236 3,783,704 (160,468) -4.2% 3,470,419 152,817 4.4%11. Depreciation 4,421,499 4,444,364 (22,865) -0.5% 4,281,209 140,290 3.3%12. Total Operating Expenses 21,542,651 24,270,414 (2,727,763) -11.2% 22,272,288 (729,637) -3.3%

13. OPERATING INCOME 12,078,820 13,024,586 (945,766) -7.3% 13,893,488 (1,814,668) -13.1%

NONOPERATING EXPENSES (INCOME)14. Interest Expense 2,196,572 2,185,420 11,152 0.5% 2,300,140 (103,568) -4.5%15. Capitalized Interest (54,568) (45,838) (8,730) 19.0% (178,705) 124,137 -69.5%16. Payments in Lieu of Taxes 1,429,723 1,404,991 24,732 1.8% 1,451,991 (22,268) -1.5%17. City Dividend Expense 635,337 635,337 0 0.0% 622,269 13,068 2.1%18. Other 0 0 0 - - 23 (23) -100.0%19. Total Other Expense 4,207,064 4,179,910 27,154 0.6% 4,195,718 11,346 0.3%20. Interest Income (438,033) (358,801) (79,232) 22.1% (350,366) (87,667) 25.0%21. Total Nonoperating Expense (Income) 3,769,031 3,821,109 (52,078) -1.4% 3,845,352 (76,321) -2.0%

22. Income Before Contributions 8,309,789 9,203,477 (893,688) -9.7% 10,048,136 (1,738,347) -17.3%

CONTRIBUTED CAPITAL23. Contributed Capital Received 77,980 45,083 32,897 73.0% 86,352 (8,372) -9.7%24. Contributed Capital Used (77,980) (45,083) (32,897) 73.0% (86,352) 8,372 -9.7%25. Net Contributed Capital 0 0 0 - - 0 0 - -

26. CHANGE IN NET POSITION $8,309,789 $9,203,477 ($893,688) -9.7% $10,048,136 ($1,738,347) -17.3%

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VARIANCE FROM VARIANCE FROMBUDGET LAST YEAR

REVENUE & EXPENSE STATEMENTYEAR-TO-DATE JULY 2019

LAST YEARDESCRIPTION YEAR TO DATE YEAR TO DATE YEAR TO DATE

ACTUAL BUDGET AMOUNT % ACTUAL AMOUNT %OPERATING REVENUES 1. Retail $155,982,261 $156,305,210 ($322,949) -0.2% $163,246,902 ($7,264,641) -4.5% 2. Wholesale 18,337,606 23,163,292 (4,825,686) -20.8% 21,014,395 (2,676,789) -12.7% 3. Other Revenue 4,427,886 3,808,272 619,614 16.3% 4,028,959 398,927 9.9% 4. City Dividend 4,427,470 4,479,098 (51,628) -1.2% 4,234,985 192,485 4.5% 5. Total Operating Revenues 183,175,223 187,755,872 (4,580,649) -2.4% 192,525,241 (9,350,018) -4.9%

OPERATING EXPENSES 6. Purchased Power 44,577,053 43,454,431 1,122,622 2.6% 43,144,265 1,432,788 3.3% 7. Produced Power 31,334,719 40,246,313 (8,911,594) -22.1% 34,802,181 (3,467,462) -10.0% 8. Operations 10,663,813 12,170,754 (1,506,941) -12.4% 12,322,731 (1,658,918) -13.5% 9. Maintenance 4,825,491 5,516,554 (691,063) -12.5% 4,340,040 485,451 11.2%10. Administrative & General 25,712,217 27,150,620 (1,438,403) -5.3% 24,713,443 998,774 4.0%11. Depreciation 30,624,199 30,814,241 (190,042) -0.6% 29,926,424 697,775 2.3%12. Total Operating Expenses 147,737,492 159,352,913 (11,615,421) -7.3% 149,249,084 (1,511,592) -1.0%

13. OPERATING INCOME 35,437,731 28,402,959 7,034,772 24.8% 43,276,157 (7,838,426) -18.1%

NONOPERATING EXPENSES (INCOME)14. Interest Expense 15,228,592 15,261,640 (33,048) -0.2% 14,212,363 1,016,229 7.2%15. Capitalized Interest (1,096,106) (808,303) (287,803) 35.6% (770,907) (325,199) 42.2%16. Payments in Lieu of Taxes 7,304,467 7,303,409 1,058 0.0% 6,917,416 387,051 5.6%17. City Dividend Expense 4,447,359 4,447,359 0 0.0% 4,355,885 91,474 2.1%18. Other (201) 0 (201) - - (1,732) 1,531 -88.4%19. Total Other Expense 25,884,111 26,204,105 (319,994) -1.2% 24,713,025 1,171,086 4.7%20. Interest Income (2,419,081) (2,538,952) 119,871 -4.7% (1,636,775) (782,306) 47.8%21. Total Nonoperating Expense (Income) 23,465,030 23,665,153 (200,123) -0.8% 23,076,250 388,780 1.7%

22. Income Before Contributions 11,972,701 4,737,806 7,234,895 152.7% 20,199,907 (8,227,206) -40.7%

CONTRIBUTED CAPITAL23. Contributed Capital Received 674,978 315,581 359,397 113.9% 499,190 175,788 35.2%24. Contributed Capital Used (674,978) (315,581) (359,397) 113.9% (499,190) (175,788) 35.2%25. Net Contributed Capital 0 0 0 - - 0 0 - -

26. CHANGE IN NET POSITION $11,972,701 $4,737,806 $7,234,895 152.7% $20,199,907 ($8,227,206) -40.7%

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REVENUES, ENERGY & CUSTOMERSCURRENT MONTH JULY 2019


ACTUAL BUDGET AMOUNT % ACTUAL AMOUNT %REVENUE 1. Residential $14,496,814 $15,253,159 ($756,345) -5.0% $15,546,542 ($1,049,728) -6.8% 2. Commercial 11,928,209 13,313,214 (1,385,005) -10.4% 12,832,551 (904,342) -7.0% 3. Industrial 3,151,996 3,276,304 (124,308) -3.8% 3,038,501 113,495 3.7% 4. Street Light 155,319 212,138 (56,819) -26.8% 216,936 (61,617) -28.4% 5. Total Retail 29,732,338 32,054,815 (2,322,477) -7.2% 31,634,530 (1,902,192) -6.0% 6. SPP Sales 932,710 2,252,984 (1,320,274) -58.6% 1,925,375 (992,665) -51.6% 7. Contract Sales 1,750,495 1,781,844 (31,349) -1.8% 1,433,343 317,152 22.1% 8. Total Wholesale 2,683,205 4,034,828 (1,351,623) -33.5% 3,358,718 (675,513) -20.1% 9. Total 32,415,543 36,089,643 (3,674,100) -10.2% 34,993,248 (2,577,705) -7.4%ENERGY (Megawatt-Hours)10. Residential 137,248 135,612 1,636 1.2% 146,446 (9,198) -6.3%11. Commercial 143,892 152,898 (9,006) -5.9% 154,172 (10,280) -6.7%12. Industrial 45,084 46,652 (1,568) -3.4% 40,954 4,130 10.1%13. Street Light 667 1,188 (521) -43.9% 1,839 (1,172) -63.7%14. Total Retail 326,891 336,350 (9,459) -2.8% 343,411 (16,520) -4.8%15. SPP Sales 44,467 132,554 (88,087) -66.5% 73,836 (29,369) -39.8%16. Contract Sales 60,290 60,379 (89) -0.1% 55,266 5,024 9.1%17. Total Wholesale 104,757 192,933 (88,176) -45.7% 129,102 (24,345) -18.9%18. Total 431,648 529,283 (97,635) -18.4% 472,513 (40,865) -8.6%CUSTOMERS19. Residential 124,537 124,470 67 0.1% 123,030 1,507 1.2%20. Commercial 17,017 17,061 (44) -0.3% 16,919 98 0.6%21. Industrial 175 176 (1) -0.6% 176 (1) -0.6%22. Street Light 5 5 0 0.0% 5 0 0.0%23. Total Retail 141,734 141,712 22 0.0% 140,130 1,604 1.1%24. Wholesale 9 8 1 12.5% 7 2 28.6%25. Total 141,743 141,720 23 0.0% 140,137 1,606 1.1%

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REVENUES, ENERGY & CUSTOMERSYEAR-TO-DATE JULY 2019


ACTUAL BUDGET AMOUNT % ACTUAL AMOUNT %REVENUE 1. Residential $72,418,194 $68,558,014 $3,860,180 5.6% $74,581,780 ($2,163,586) -2.9% 2. Commercial 64,300,893 67,442,350 (3,141,457) -4.7% 68,194,276 (3,893,383) -5.7% 3. Industrial 18,013,109 18,888,716 (875,607) -4.6% 18,974,831 (961,722) -5.1% 4. Street Light 1,250,065 1,416,130 (166,065) -11.7% 1,496,015 (245,950) -16.4% 5. Total Retail 155,982,261 156,305,210 (322,949) -0.2% 163,246,902 (7,264,641) -4.5% 6. SPP Sales 8,782,840 12,412,435 (3,629,595) -29.2% 11,806,261 (3,023,421) -25.6% 7. Contract Sales 9,554,766 10,750,857 (1,196,091) -11.1% 9,208,134 346,632 3.8% 8. Total Wholesale 18,337,606 23,163,292 (4,825,686) -20.8% 21,014,395 (2,676,789) -12.7% 9. Total 174,319,867 179,468,502 (5,148,635) -2.9% 184,261,297 (9,941,430) -5.4%ENERGY (Megawatt-Hours)10. Residential 756,140 710,785 45,355 6.4% 794,240 (38,100) -4.8%11. Commercial 844,995 885,279 (40,284) -4.6% 900,740 (55,745) -6.2%12. Industrial 264,028 278,080 (14,052) -5.1% 271,613 (7,585) -2.8%13. Street Light 7,447 7,749 (302) -3.9% 12,182 (4,735) -38.9%14. Total Retail 1,872,610 1,881,893 (9,283) -0.5% 1,978,775 (106,165) -5.4%15. SPP Sales 319,636 762,140 (442,504) -58.1% 454,859 (135,223) -29.7%16. Contract Sales 321,984 360,163 (38,179) -10.6% 333,244 (11,260) -3.4%17. Total Wholesale 641,620 1,122,303 (480,683) -42.8% 788,103 (146,483) -18.6%18. Total 2,514,230 3,004,196 (489,966) -16.3% 2,766,878 (252,648) -9.1%CUSTOMERS AVERAGE19. Residential 124,117 124,069 48 0.0% 122,625 1,492 1.2%20. Commercial 16,980 17,022 (42) -0.2% 16,883 97 0.6%21. Industrial 176 176 0 0.0% 176 0 0.0%22. Street Light 5 5 0 0.0% 5 0 0.0%23. Total Retail 141,278 141,272 6 0.0% 139,689 1,589 1.1%24. Wholesale 8 8 0 0.0% 7 1 14.3%25. Total 141,286 141,280 6 0.0% 139,696 1,590 1.1%

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OPERATING EXPENSE STATEMENTCURRENT MONTH JULY 2019


ACTUAL BUDGET AMOUNT % ACTUAL AMOUNT %

POWER COST 1. SPP Purchased Power $1,395,381 $804,701 $590,680 73.4% $658,697 $736,684 111.8% 2. Non-Owned Asset Power 5,044,351 5,385,472 (341,121) -6.3% 4,757,032 287,319 6.0% 3. Total Purchased Power 6,439,732 6,190,173 249,559 4.0% 5,415,729 1,024,003 18.9% 4. Produced Power 4,907,069 7,360,341 (2,453,272) -33.3% 6,409,916 (1,502,847) -23.4% 5. Total Power Cost 11,346,801 13,550,514 (2,203,713) -16.3% 11,825,645 (478,844) -4.0%

OPERATION & MAINTENANCE (O&M) 6. Energy Delivery 1,712,018 1,864,467 (152,449) -8.2% 2,034,385 (322,367) -15.8% 7. Transmission 439,097 627,365 (188,268) -30.0% 660,630 (221,533) -33.5% 8. Total O & M Expense 2,151,115 2,491,832 (340,717) -13.7% 2,695,015 (543,900) -20.2%

ADMINISTRATIVE & GENERAL (A&G) 9. Administration 198,996 226,638 (27,642) -12.2% 155,274 43,722 28.2%10. Communication & Corporate Records 168,939 249,062 (80,123) -32.2% 218,545 (49,606) -22.7%11. Corporate Operations 616,098 518,724 97,374 18.8% 451,513 164,585 36.5%12. Customer Services 889,163 836,631 52,532 6.3% 779,823 109,340 14.0%13. Financial Services 310,658 320,345 (9,687) -3.0% 323,389 (12,731) -3.9%14. Power Supply 405,858 330,956 74,902 22.6% 287,117 118,741 41.4%15. Technology Services 1,033,524 1,301,348 (267,824) -20.6% 1,254,758 (221,234) -17.6%16. Total A & G Expense 3,623,236 3,783,704 (160,468) -4.2% 3,470,419 152,817 4.4%

17. DEPRECIATION 4,421,499 4,444,364 (22,865) -0.5% 4,281,209 140,290 3.3%

18. TOTAL OPERATING EXPENSE $21,542,651 $24,270,414 ($2,727,763) -11.2% $22,272,288 ($729,637) -3.3%

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OPERATING EXPENSE STATEMENTYEAR-TO-DATE JULY 2019


ACTUAL BUDGET AMOUNT % ACTUAL AMOUNT %

POWER COST 1. SPP Purchased Power $10,951,477 $6,650,150 $4,301,327 64.7% $6,301,497 $4,649,980 73.8% 2. Non-Owned Asset Power 33,625,576 36,804,281 (3,178,705) -8.6% 36,842,768 (3,217,192) -8.7% 3. Total Purchased Power 44,577,053 43,454,431 1,122,622 2.6% 43,144,265 1,432,788 3.3% 4. Produced Power 31,334,719 40,246,313 (8,911,594) -22.1% 34,802,181 (3,467,462) -10.0% 5. Total Power Cost 75,911,772 83,700,744 (7,788,972) -9.3% 77,946,446 (2,034,674) -2.6%

OPERATION & MAINTENANCE (O&M) 6. Energy Delivery 12,164,738 13,289,753 (1,125,015) -8.5% 12,410,680 (245,942) -2.0% 7. Transmission 3,324,566 4,397,555 (1,072,989) -24.4% 4,252,091 (927,525) -21.8% 8. Total O & M Expense 15,489,304 17,687,308 (2,198,004) -12.4% 16,662,771 (1,173,467) -7.0%

ADMINISTRATIVE & GENERAL (A&G) 9. Administration 1,442,530 1,578,351 (135,821) -8.6% 1,398,491 44,039 3.1%10. Communication & Corporate Records 1,131,534 1,665,549 (534,015) -32.1% 1,335,795 (204,261) -15.3%11. Corporate Operations 4,552,861 3,950,858 602,003 15.2% 3,588,852 964,009 26.9%12. Customer Services 5,877,553 5,933,518 (55,965) -0.9% 5,729,534 148,019 2.6%13. Financial Services 2,249,414 2,436,665 (187,251) -7.7% 2,142,528 106,886 5.0%14. Power Supply 2,660,114 2,331,528 328,586 14.1% 2,224,665 435,449 19.6%15. Technology Services 7,798,211 9,254,151 (1,455,940) -15.7% 8,293,578 (495,367) -6.0%16. Total A & G Expense 25,712,217 27,150,620 (1,438,403) -5.3% 24,713,443 998,774 4.0%

17. DEPRECIATION 30,624,199 30,814,241 (190,042) -0.6% 29,926,424 697,775 2.3%

18. TOTAL OPERATING EXPENSE $147,737,492 $159,352,913 ($11,615,421) -7.3% $149,249,084 ($1,511,592) -1.0%

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BALANCE SHEETJULY 2019

ASSETS & DEFERRED OUTFLOWS OF RESOURCES LIABILITIES AND NET POSITION END OF VARIANCE END OF VARIANCE

DESCRIPTION MONTH SINCE DESCRIPTION MONTH SINCEBALANCE JANUARY 1 BALANCE JANUARY 1

CURRENT ASSETS: CURRENT LIABILITIES: 1. Revenue Fund (including CDFUO) $98,832,468 ($24,667,445) OTHER LIABILITIES 2. Payments in Lieu of Taxes Fund $5,799,547 ($6,416,150) 1. Accounts Payable $16,810,343 ($9,232,682) 3. Rate Stabilization Fund 36,247,931 575,527 2. Accrued Payments in Lieu of Taxes 7,149,489 (5,946,757) 4. Bond Principal & Interest Funds 33,192,154 15,840,243 3. City Dividend for Utility Ownership Payable 3,176,685 635,337 5. Other Restricted/Designated Funds 3,626,387 794,352 4. Commercial Paper Notes 65,500,000 0

6. Restricted/Designated Funds Total 73,066,472 17,210,122 5. Accrued Liabilities 18,908,888 1,325,186 7. Total Current Asset Funds 177,698,487 (13,873,473) 6. MBPP-BNSF-STB Settlement 0 0 8. Receivables Less Uncollectible Allowance 22,011,547 1,573,142 7. Total Other Liabilities 111,545,405 (13,218,916) 9. Unbilled Revenue 20,496,230 5,575,015 CURRENT LIABILITIES - RESTRICTED ASSETS10. Accrued Interest Receivable 969,786 (206,427) 8. Current Portion of Long-Term Debt 22,750,000 011. Materials, Supplies & Fuel Inventory 15,746,972 1,934,654 9. Accrued Interest 12,409,007 2,508,601 12. Plant Operation Assets 13,402,176 1,608,612 10. Other Current Liabilities 1,339,402 (140,067) 13. Other Current Assets 2,998,952 158,417 11. Total Current Liabilities - Restricted Assets 36,498,409 2,368,534 14. Total Current Assets 253,324,150 (3,230,060) 12. Total Current Liabilities 148,043,814 (10,850,382)

NONCURRENT ASSETS: NONCURRENT LIABILITIES:15. Bond Reserve Funds 19,275,064 39,753 13. 2003 Bonds 1,150,000 016. Self-Funded Benefits Reserve Fund (IBNP) 589,495 1,533 14. 2012-A Bonds 217,020,000 017. Segregated Funds 900,489 250,000 15. 2013 Bonds 75,525,000 018. Restricted Fund Total 20,765,048 291,286 16. 2015-A Bonds 167,800,000 0 19. Unamortized Debt Expense 2,755,381 (72,338) 17. 2016 Bonds 80,095,000 0 20. Other Noncurrent Assets 3,554,207 141,298 18. 2018 Bonds 121,205,000 0

21. Total Noncurrent Assets 27,074,636 360,246 19. Total Revenue Bonds 662,795,000 0 20. Less Current Maturities 22,750,000 0

CAPITAL ASSETS: 21. Less Unamortized Discounts/Premiums (63,254,649) 4,007,699 22. Utility Plant in Service 1,601,960,201 31,486,177 22. Note Purchase Agreement 1,500,000 0 23. Accumulated Depreciation & Amortization (804,399,970) (27,527,881) 23. Revolving Credit Agreement 0 0

24. Construction Work in Progress 142,035,224 (2,709,770) 24. Net Long Term Debt 704,799,649 (4,007,699)25. Total Capital Assets 939,595,455 1,248,526 25. Liabilities Payable from Segregated Funds 896,137 250,000

26. Other Noncurrent Liabilities 587,962 0 DEFERRED OUTFLOWS OF RESOURCES: 27. Total Liabilities 854,327,562 (14,608,081)26. Deferred Loss on Refunded Debt 12,325,585 (1,014,092)

NET POSITION:28. Net Investment in Capital Assets 179,339,199 4,160,77829. Restricted for Debt Service 20,908,005 13,371,39530. Restricted for Employee Health Insurance Claims 578,122 126,28531. Unrestricted 177,166,938 (5,685,757) 32. Total Net Position 377,992,264 11,972,701

27. TOTAL ASSETS & DEFERRED OUTFLOWS OF RESOURCES $1,232,319,826 ($2,635,380) 33. TOTAL LIABILITIES & NET POSITION $1,232,319,826 ($2,635,380)

Page 7

STATEMENT OF CASH FLOWSJULY 2019

CURRENT MONTH YEAR-TO-DATECASH FLOW FROM OPERATING ACTIVITIES: 1. Received from Sales to Customers and Users $32,287,144 $186,028,724 2. Paid to Suppliers for Goods & Services (17,963,718) (117,310,308) 3. Paid to Employees for Services (2,873,853) (19,960,923) 4. Cash Flow from Operating Activities (a) 11,449,573 48,757,493

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: 5. Payments in Lieu of Taxes (75,937) (13,251,224) 6. City Dividend for Utility Ownership Payments 0 (3,812,022) 7. Other 0 0 8. Cash Flow from (used for) Non-capital Financing Activities (75,937) (17,063,246)

CASH FLOWS FROM INVESTING ACTIVITIES: 9. Net (Purchases) Sales of Investments (1,583,589) 26,144,52310. Interest Income 701,113 2,487,923 11. Cash Flow from (used for) Investing Activities (882,476) 28,632,446

CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES:12. Acquisition and Construction of Capital Assets (4,961,512) (32,101,710)13. Salvage on Retirement of Plant 5,336 56,71014. Cost of Removal of Property Retired (15,379) (1,207,624)15. Debt Issuance Cost Paid 0 (157,191)16. Debt Premiums Collected 0 017. Net Capital Contributions 77,980 674,97818. Net Proceeds form Issuance of Long-Term Debt 0 019. Principal Payments on Long-Term Debt 0 020. Interest Payments on Long-Term Debt (3,669) (15,167,106)21. Cash Flow from (used for) Capital Financing Activities (4,897,244) (47,901,943)

22. Net Increase (Decrease) in Cash and Cash Equivalents 5,593,916 12,424,75023. Cash and Cash Equivalent Beginning of Period 34,742,250 27,911,416 24. Cash and Cash Equivalent End of Period (b) $40,336,166 $40,336,166

STATEMENT OF CASH FLOW FOOTNOTES(a) Reconciliation of operating income to cash flows from operating activities 1. Net Operating Revenue $12,078,820 $35,437,731 2. Noncash items included in operating income 4,526,333 31,312,665 3. Changes in Assets & Liabilities Increase/(Decrease) (5,155,580) (17,992,903) 4. Net cash flows from operating activities $11,449,573 $48,757,493

(b) Cash and cash equivalents are defined as cash and investments with original maturities of three months or less.

Page 8

DEBT SERVICE COVERAGEJULY 2019

DESCRIPTION ACTUAL BUDGET ACTUAL ACTUAL BUDGET ACTUALTHIS YEAR THIS YEAR LAST YEAR THIS YEAR THIS YEAR LAST YEAR

1. Total Operating Revenues $33,621,471 $37,295,000 $36,165,776 $183,175,223 $187,755,872 $192,525,241

2. Total Operating Expenses 21,542,651 24,270,414 22,272,288 147,737,492 159,352,913 149,249,084 3. Less Depreciation (4,421,499) (4,444,364) (4,281,209) (30,624,199) (30,814,241) (29,926,424) 4. Operating Expense Net of Depreciation 17,121,152 19,826,050 17,991,079 117,113,293 128,538,672 119,322,660

5. Net Operating Revenue for Debt Service 16,500,319 17,468,950 18,174,697 66,061,930 59,217,200 73,202,581 6. Interest Income (a) 367,028 305,295 295,922 1,825,028 2,174,150 1,219,850 7. Other Income 0 0 0 0 0 0 8. Rate Stabilization Fund 0 0 0 0 0 0

9. AVAILABLE FOR DEBT SERVICE 16,867,347 17,774,245 18,470,619 67,886,958 61,391,350 74,422,431

10. DEBT SERVICE (b) 4,324,651 4,324,650 4,133,317 30,272,554 30,272,550 26,045,571

11. DEBT SERVICE COVERAGE 3.90 4.11 4.47 2.24 2.03 2.86

(a) Excludes interest from Rate Stabilization Fund.(b) Includes Bond Principal & Interest only. Page 9

-------- CURRENT MONTH ---------- ---------- YEAR-TO-DATE ----------

LES.com

Power Supply Division2019 July Monthly Report

Jason FortikAugust 16, 2019

LES.com

Monthly Actual vs. Budget

2

$8.66

-$0.26

-$5.94

$6.67

-$1.75

$4.91

$5.04

$9.52

-$0.28

-$5.62

$4.46

-$1.78

$7.36

$5.39

-$8 -$6 -$4 -$2 $0 $2 $4 $6 $8 $10 $12

Net

SPP Other***

SPP IM Market Revenue

SPP IM Load Purchases

Contract Sales**

Owned Asset Power

Non-Owned Asset Power*

Millions ($)

Budget Actual

Revenues Expenses

*Non-Owned Asset Power does not include SPP IM Purchased**Contract Sales does not include SPP IM Revenue***SPP Other includes Over-Collected Losses and ARR’s/TCR

LES.com

Daily Temperature Range

3

Monthly Low 55°F

Monthly High 99°F

0

10

20

30

40

50

60

70

80

90

100

7/01

7/02

7/03

7/04

7/05

7/06

7/07

7/08

7/09

7/10

7/11

7/12

7/13

7/14

7/15

7/16

7/17

7/18

7/19

7/20

7/21

7/22

7/23

7/24

7/25

7/26

7/27

7/28

7/29

7/30

7/31

Degr

ees

in F

ahre

nhei

t

Daily Range Normal Low Normal High

LES.com

Loads

4

0

100

200

300

400

500

600

700

800

900M

W

Loads Forecast Weekends

Actual = 767 MW

Forecasted = 766 MW

LES.com

Customer Energy Consumption

5

355.0 360.2

0

50

100

150

200

250

300

350

400

2019 Budget 2019 Actual

GW

H

LES.com

Unit Equivalent Availability

6

0% 20% 40% 60% 80% 100%

J St.

LFGTE

TBGS 4

TBGS 3

TBGS 2

TBGS 1

Rok 3

Rok 2

Rok 1

LRS 1

GGS 2

GGS 1

WS 4

WS 3U

nit

Available Limited Scheduled Outage Forced Outage

LES.com

Resource Energy

7

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000M

Wh

Coal Oil & Gas Wind Hydro LFG

LES.com

Peak Load Day – July 17, 2019

8

0

100

200

300

400

500

600

700

800

900

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

MW

HourGGS_1 GGS_2 LRS WSEC 3 WSEC 4TB_1 TB_2 TB_3 TB_4 LFGTEROK 1 ROK 2 ROK 3 J_St. Wind PSAWind PPA WAPA Firm WAPA Peaking Peak Day Load

Actual = 767 MW

LES.com 9

Coal

Oil & Gas

Renewable

44% 58%

32%9%

24% 34%

Offered UtilizedNote: Total percentage may not add up to 100% due to rounding

Energy Offered and Utilized by the SPP Integrated Marketplace (Fuel Type)

LES.com

Energy Utilized by the SPP Integrated Marketplace

10

WAPA (27 GWh)8%

Gentleman Station (76 GWh)22%

Walter Scott (57 GWh)16%

Terry Bundy (28 GWh)8% Rokeby (2 GWh)

0%Wind PSA's (6 GWh)

2%

Landfill Gas (2 GWh)1%

Wind PPA's (82 GWh)23%

Note: Total percentage may not add up to 100% due to rounding

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