ML041330422

Scppa 2002-2003 - Annual Report

ML041330422
Person / Time
Site:	Palo Verde
Issue date:	03/11/2004
From:	Southern California Public Power Authority
To:	Office of Nuclear Reactor Regulation
References
Download: ML041330422 (70)

Text

SCPPA 2002-2003 Annual Report

Southern Transmission System Project Mead-Phoenix Transmission Project Mead-Adelanto Transmission Project Palo Verde Nuclear Generating Station Hoover Uprating Project San Juan Generating Station Magnolia Power Project Member Agencies Banning Pasadena Glendale Burbank Los Angeles Vernon Imperial Irrigation District Colton Riverside Azusa Mead-Phoenix Project Southern Transmission System Mead-Adelanto Project Adelanto Converter Station Adelanto Substation Intermountain Converter Station San Juan Unit 3 Westwing Station Palo Verde Mead 500KV substation Lake Tahoe Salt Lake City Farmington Hoover Las Vegas Phoenix ARIZONA NEW MEXICO NEVADA CALIFORNIA UTAH 500 KV AC 500 KV AC Cerritos Table of Contents SCPPA Members Mission Statement 1

Vision 1

What is SCPPA?

1 Presidents Letter 3

Executive Directors Letter 4

Leading the Way to the Future 5

Operations and Projects 6

Palo Verde Project 6

San Juan Unit 3 Project 8

Mead-Phoenix/Mead-Adelanto Transmission Projects 10 Hoover Uprating Project 12 Southern Transmission System Project 12 Magnolia Power Project 13 Financing Activities 14 Legislative Report 15 Municipalities 16 Managements Discussion and Analysis 20 Report of Independent Accountants 39 Combined Financial Statements 40 Supplemental Financial Information 59 Anaheim

1 deliver T

he Southern California Public Power Authority (SCPPA) is a joint powers authority consisting of the original ten municipal utilities and one irrigation district, plus one new SCPPA member utility who joined last year.

SCPPA members currently deliver electricity to approximately 2 million customers over an area of 7,000 square miles, with a total population of 4.8 million.

The members are the municipal utilities of the cities of Anaheim, Azusa, Banning, Burbank, Colton, Glendale, Los Angeles, Pasadena, Riverside, and Vernon, the Imperial Irrigation District, and the municipal utility of Cerritos.

SCPPA was formed in 1980 to finance the acquisition of generation and transmission resources for its members. Currently, SCPPA has three generation projects and three transmission projects in operation, generating and bringing power from Arizona, New Mexico, Utah, and Nevada. A fourth generation project is in the construction phase.

The projects were financed through the issuance of tax-exempt bonds, backed by the combined credit of the SCPPA members participating in each project. As of June 30, 2003, SCPPA had issued $9.7 billion in bonds, notes, and refunding bonds, of which $3.0 billion was outstanding.

SCPPAs role has evolved over the years to include legislative advocacy at the state and national levels, and various cooperative efforts to reduce member costs and improve efficiency.

Mission SCPPA will provide coordination, facilitation, implementation, and communication on issues and projects of mutual interest to the members as determined by the Board of Directors.

Vision SCPPA will provide cost-effective joint action services that supplement member programs and activities to assure continued member success.

What is SCPPA?

efficiency

2 Ronald E. Davis, President; Ronald O.Vazquez, Secretary; Bill D. Carnahan, Executive Director; Thomas K. Clarke,Vice President.

SCPPA Officers We dedicate this years annual report to Alan R.Watts. Alan was one of the original organizers of SCPPA, and became Special Counsel in October 1982.

He served as Special and Corporate Counsel on a continuous basis for the past 21 years. His dedicated service and tireless efforts over those many years contributed greatly to SCPPAs success. We will miss him.

Alan R.Watts (1935-2003)

3 accomplishments dynamic A

s the President of the Southern California Public Power Authority (SCPPA), I am proud to be a part of the many accomplishments and the exciting opportunities for the Southern California public power utilities. I am pleased that the Authority and its individual Members are building new generation in California under the strictest environmental regulations in the nation. At the same time, we continue to work cooperatively to restore a healthy regulatory environment. We are prepared for the future with a recently developed Strategic Plan and one of the strongest financial ratings in the utility industry. Through collaboration, along with sound financial investments and a focus on the communities we serve, SCPPA is delivering reliability and competitive and stable rates every day to the 4.8 million people served by our Members.

In order to meet the growing needs of their customers, the cities of Anaheim, Burbank, Colton, Glendale, Pasadena, and Cerritos (the newest SCPPA member) joined together to begin the planning and construction of the Magnolia Power Project (Magnolia). This SCPPA-owned project held its official groundbreaking on June 10, 2003 and Magnolia is scheduled to begin producing power in 2005. When completed, Magnolia will be a combined cycled natural gas-fired generating plant with a peaking capacity of 310 megawatts and will be built on an existing site in Burbank, California.

Magnolia will continue to meet the reliability needs of the project participants and will be one of the most efficient power plants thereby saving precious resources by replacing older and less-efficient power plants. By working together, these six communities will benefit by receiving locally produced and reliable energy, at competitive and stable rates.

SCPPAs executive team has spent a great deal of time developing and implementing a dynamic Strategic Plan that provides SCPPA with a focused strategic direction. In addition, SCPPA has taken advantage of low interest rates and continues to restructure its generation and transmission debt, which reduces costs to our Members and ultimately our customers. Last year, over $50 million in gross debt savings were realized to SCPPA Members. With a clear direction charted for the future and the financial strength to accomplish our goals, the opportunities abound for SCPPAs public power utilities.

Whether it is impacting energy legislation in Sacramento or on Capitol Hill or working together to meet our commitments to conservation and renewable energy resources or managing the construction of a major generating power plant, working together through SCPPA has provided our Members with proven value in financing, construction, and operation and maintenance of generation and transmissions projects. Through a combination of critical resourceful strategic planning and new load center generation, SCPPA is meeting todays and tomorrows energy needs of our Members customers and the communities they serve. As we look to the future, I am confident that SCPPA is poised and ready to respond to the new challenges in our industry.

Ronald E. Davis President SCPPA has taken advantage of low interest rates and continues to restructure its generation and transmission debt, which reduces costs to our Members and ultimately our customers.

Presidents Letter

4 S

CPPAs role continues to evolve as we find new ways, as a Joint Action Agency, to bring value to our Members so they are positioned to meet the challenges in our industry. The twelve Members of SCPPA are each independent and locally owned highly successful utilities.

They provide reliable energy at competitive and stable rates with sensitivity to the communities and the environment in which they serve. Working together through SCPPA, these agencies have leveraged their talents, resources, and financial strength to collectively bring more value to their communities. I am very proud to be included in their legacy of success.

SCPPA was created in 1980 and continues in its traditional roles of providing financing for our Members generation and transmission projects, managing various projects, and finding ways to reduce capital costs through debt refinancing. Over the last few years, SCPPA has been expanding its role in order to meet the challenges facing our industry.

• We have increased our involvement in legislative and regulatory activities, taking a proactive approach to advocacy of public power issues in Sacramento and Washington, D.C.

• As owner of the Magnolia Power Project (Magnolia) in Burbank, California, we continue to monitor the construction and development of the new generating facility, which is scheduled for completion and operation in May 2005. Magnolia was financed on schedule and within the financing goals established by SCPPA and the six project participants, the cities of Anaheim, Burbank, Colton, Glendale, Pasadena, and Cerritos (the newest SCPPA Member). Magnolia will use the latest technology, requires less fuel, and is more efficient with significantly less pollution than the older power plants it replaces.

Magnolia will also meet the strictest environmental standards and regulations in the nation.

• We have developed new committees for Customer Service and Transmission & Distribution Engineering & Operations.

These new committees are working with the Members to produce benchmarking studies of best practices.

• SCPPA has developed a comprehensive and dynamic Strategic Plan that forms a common vision for our Members.

To maintain and solidify our financial strength, we continue to take advantage of low interest rates and in 2003 we restructured debt, which resulted in over $30 million in gross debt service savings for our Members.

Today, providing financing for new projects and seeking ways to reduce financing costs for existing projects remain SCPPAs primary goals. However, with the experience and benefits of working together through SCPPA, the Members have realized the value of collective leadership and are applying it in new and exciting directions. By working collaboratively in the areas of legislative activity, Public Benefits program development, resource planning and renewable resources acquisition, customer service implementation, training programs, and Transmission & Distribution Engineering & Operations, our Members are responding to the challenges and opportunities in our industry.

SCPPA,in partnership with its Members,is a leader in creating new ideas and developing new programs that continue to bring value to our Members and the communities they serve. Together, we are accomplishing more.

Bill D. Carnahan Executive Director Executive Directors Letter SCPPA is a leader in creating new ideas and developing new programs that continue to bring value to our Members and the communities they serve.

diversity unique 5

The Southern California Public Power Authority (SCPPA) was created in 1980 by all eleven of the public power systems in Southern California to provide financing for their participation in electric generating facilities and high voltage transmission lines. The SCPPA member systems include:

the cities of Anaheim, Azusa, Banning, Burbank, Colton, Glendale, Los Angeles, Pasadena, Riverside,Vernon and the Imperial Irrigation District. The newest SCPPA member is the City of Cerritos. Together, these members serve over 2 million residential and business customers in Southern California representing a population of approximately 4.8 million people.

Collectively, SCPPAs twelve members have several unique characteristics. They are non-profit based, governed locally, have direct participation in the decision making process, and are committed and maintain the obligation to serve and consistently plan for all of the electric needs of the communities they serve. Throughout the California energy crisis, the only success story has been the public power systems through the diversity of their resources and investment in renewable energy sources. Over the years,the Southern California public power systems have invested in or have secured under long-term purchase contracts power generation transmission facilities throughout the West. These facilities provide not only the diversity of fuel and technology, but the location that has served SCPPA members well by providing constant and predictable electrical prices.

Traditional investments have been made in the areas of hydroelectric, nuclear, coal, and natural gas-fired generation.

To meet the challenges and growing demand for energy needs, new investments in local base load and peaking natural gas-fired units will satisfy these needs and increase system reliability. In addition, new renewable projects will further diversify generation portfolios, and also benefit the environment through better pollution control technologies.

When these projects are completed, SCPPA members will have installed in excess of 2,000 megawatts of new gas-fired generation, such as the Magnolia Power Project, to meet base load growth, peaking requirements, or retire older less efficient units. This investment, representing approximately $2 billion, illustrates how seriously SCPPA members take their obligation to serve and plan for the future of their customers.

SCPPA members are well positioned to serve and meet their customers energy needs today and in the future. Through the use of new investments in local base load and peaking natural gas-fired units and prudent use of electricity, SCPPA, in partnership with its members, is leading the way to the future.

Leading the Way to the Future

6 Palo Verde Project Burbank/Glendale/Pasadena (4.4% each)

Azusa/Banning/Colton (1% each)

Vernon Imperial Irrigation District Riverside Los Angeles 0% 10% 20% 30% 40% 50% 60% 70%

Percentage of SCPPA member participation in Palo Verde Project Generation Capacity (Millions of MWHs) Utilization (%)

Unit 1 9.5 86.9%

Unit 2 11.1 101.7%

Unit 3 9.8 90.0%

Aggregate 30.4 92.9%

2002-2003 OPERATIONS

power largest producer 7

P alo Verde completed another high production year, surpassing a 90%

capacity factor for the sixth consecutive year. SCPPA owns 5.91% of the station on behalf of 10 of its members.

Palo Verde Nuclear Generating Station continues to be the largest producer of electricity in the United States. During calendar 2002, Palo Verde set a national generation record of 30.8 million MWHs.

The Independent Spent Fuel Storage Installation (dry cask storage) was completed and began receiving spent fuel from the wet pool.

Palo Verde received its fifth consecutive INPO #1 rating (the highest possible) from the Institute of Nuclear Power Operations.

At the end of the fiscal year, preparations were being made for the replacement of Unit 2 steam generators in the fall of 2003. The replacement project and related modifications will result in a 92 MW capacity increase.

Calendar Cents Year per kWh 1993 2.02 1994 1.93 1995 1.61 1996 1.45 1997 1.33 1998 1.28 1999 1.25 2000 1.25 2001 1.27 2002 1.28 PRODUCTION COST (Operation and Maintenance plus Nuclear Fuel)

Palo Verde set a national generation record of 30.8 million MWHs.

8 San Juan Unit 3 Project Glendale Banning Colton Azusa Imperial Irrigation District 0% 10% 20% 30% 40% 50% 60% 70%

Percentage of SCPPA member participation in San Juan Project

9 quality F

ive SCPPA participants own 41.8% of Unit 3 at the San Juan Generating Station, a coal-fired plant in New Mexico. A series of Interim Invoicing Agreements for fuel has led to high capacity factors and lower per unit fuel costs.

After two decades of surface strip mining at the adjacent coal mine, operations have transitioned to long-wall underground mining.

Fuel from the underground mine will be both lower cost and lower ash, yielding added benefits in efficiency and maintenance costs.

Fuel from the underground mine will be both lower cost and lower ash, yielding added benefits in efficiency and maintenance costs.

dependable

10 benefits Mead-Phoenix/Mead-Adelanto Transmission Projects Pasadena Glendale Burbank Azusa/Banning/Colton (1% each)

Riverside Anaheim Los Angeles 0% 10% 20% 30% 40% 50% 60% 70%

Percentage of SCPPA member participation in Mead-Phoenix Project

11 low-cost T

he two 500-kV transmission lines, which connect Phoenix to Las Vegas, and Las Vegas to Southern California, completed their sixth year of dependable operation for the nine SCPPA members who participate in the projects.

Pasadena Glendale Burbank Colton Banning Azusa Anaheim/Riverside (13.5% each)

Los Angeles 0% 10% 20% 30% 40% 50% 60% 70%

Percentage of SCPPA member participation in Mead-Adelanto Project serve

12 Hoover Uprating Project T

he Hoover Uprating Project continues to provide six SCPPA members with low-cost, renewable energy (hydro). A SCPPA representa-tive is active in the development of the Lower Colorado River Multi-Species Conservation Program.

Burbank Colton Banning Azusa Riverside Anaheim 0% 10% 20% 30% 40% 50% 60% 70%

Percentage of SCPPA member participation in Hoover Uprating Project Southern Transmission System Project (STS)

A s usual, the STS operated with near-perfect availability (99.54%),

delivering over 14 million MWHs to the six SCPPA members who are participants. The power comes 488 miles from the Intermountain Power Project, in Utah, over the +/-500-kV DC line.

Pasadena Glendale Burbank Riverside Anaheim Los Angeles 0% 10% 20% 30% 40% 50% 60% 70%

Percentage of SCPPA member participation in Southern Transmission System Project

availability 13 Magnolia Power Project The result will be more power from less fuel, with less pollution.

renewable C

onstruction has begun on the Magnolia Power Project, a 240 megawatt natural gas-fired, combined cycle plant, to be located on the site of an existing plant in the City of Burbank. It will replace an older, less-efficient, dirtier unit. The result will be more power from less fuel, with less pollution.

Licensing and financing were completed during the fiscal year, and the official groundbreaking was held on June 10, 2003. The plant could be operational by spring of 2005, and will be the first project to be wholly-owned by SCPPA members. The participants are Anaheim, Burbank, Cerritos, Colton, Glendale, and Pasadena.

The ground breaking shovels are put to work by project participant representatives in planting a dwarf magnolia tree to symbolize the start of 24 months of MPP site work.

Pasadena Glendale Burbank Colton Anaheim Cerritos 0% 10% 20% 30% 40% 50% 60% 70%

Percentage of SCPPA member participation in Magnolia Power Project

14 STS Project 2002 Series B Bond Refunding On October 1, 2002, SCPPA sold $38,755,000 Southern Transmission System Project 2002 Refunding Series B subordinate lien bonds maturing 2007 through 2012 at a true interest cost of 3.48 percent. The bond proceeds, along with other sources of funds amounting to $7,308,028, were used to current refund, on December 26, 2002, $46,400,000 bonds (the Residual Interest Bonds and Select Auction Variable Rate Securities (together the RIBS/SAVRS)) maturing in 2012, as part of the Projects 1992 issue. The RIBS were called at a redemption price of 104 percent and the SAVRS were called at par.

Together the RIBS/SAVRS (which share a combined coupon of 6%) were called at a redemption price of 102 percent. Net present value savings from the transaction, after adjusting for forgone interest earnings on prior funds on hand, amounted to $5,675,172, or 12.23% of the bonds refunded. Bear Stearns senior managed the transaction with Loop Capital Markets and Salomon Smith Barney acting as co-managers. The triple-A rated bonds were issued by Financial Security Assurance, Inc. Underlying ratings of A1 and A+ were assigned to the bonds by Moodys and S&P, respectively.

San Juan Project Unit 3 Bond Refunding On October 24, 2002, SCPPA sold $71,850,000 San Juan Power Project Revenue Bonds, 2002 Refunding Series B, to UBS PaineWebber, Inc. The bonds, referred to as Auction Rate Certificates (ARCs), have an initial fixed interest rate to January 1, 2012, after which the ARCs will bear variable rates to their maturity in 2020. The ARCs were sold with a coupon of 5.25%, priced to yield 3.65% with a true interest cost of 3.86%. They will replace the 5.00%, $70,800,000 bonds from the Projects 1993 issue. The refunding net present value savings were $8,131,998, representing 11.48% of the refunded bonds. An investment agreement for the refunding debt service reserve account was entered into with triple-A rated AIG Matched Funding Corp. with a winning bid of 4.442%. The bonds were insured by Financial Security Assurance, Inc. and were assigned triple-A ratings from Moodys Investors Service and Standard & Poors. Underlying ratings of A2 and A+ were assigned to the bonds by Moodys and S&P.

Palo Verde Escrow Restructuring In February 2003, SCPPA closed an escrow restructuring associated with the Projects 1997 Subordinate Refunding Series B bonds, and the refunded Project Revenue Bonds, 1993 Refunding Series A and the 1993 Subordinate Refunding Series. The restructuring involved liquidation of open-market Refcorps securities; the redemption of SLGS interest-bearing and zero coupon securities; the partial termination of a Float Forward Agreement with Lehman Brothers Special Financing, Inc. (at a cost of $3,509,000); the purchase a of U. S.Treasury Note; and the redemption of defeased Series 1993 Bonds on July 1, 2003.

Utilizing a competitive bid process for the sale of securities and the purchase of a replacement security, net present value cash savings in the amount of $16,696,539 were achieved from the restructuring after payment of the Float Forward Agreement breakage fee to Lehman. SCPPA entered into agreements with UBS PaineWebber, Inc. and Public Financial Management, Inc. to execute the restructuring.

Magnolia Power Project Financing On April 2, 2003, SCPPA successfully financed its new Magnolia Power Plant, a natural gas-fired, high-efficiency, combined-cycle generating facility with a nominally rated net base capacity of 240 MW that is being constructed in Burbank. The bonds were sold in two series consisting of $299,975,000 Project A bonds, secured by take or pay power sales agreements with Anaheim, Burbank, Colton, Glendale and Pasadena, and $14,105,000 Project B bonds, secured by base rental payments by Cerritos from its general fund and other legally available funds under a lease agreement with SCPPA. The combined Project bonds, maturing in 2036, were sold at an all-in true interest cost of 4.910%. The triple-A bonds were insured by Ambac Assurance Corporation, and underwritten by co-senior managers UBS PaineWebber, Inc., (as book runner) and Salomon Smith Barney, with co-managers Bank of America Securities, LLC, Banc One Capital Markets, Inc., Bear Stearns

& Co., Inc., Samuel A. Ramirez & Co., Inc., and Siebert Brandford Shank & Co., LLC. Underlying ratings of A1 and A+ were assigned the Project A bonds by Moodys and S&P, respectively. S&P assigned an underlying rating of AA+ to the Project B bonds.

STS Project 2003 Series A Bond Refunding In connection with the issuance of the 2003 Auction Rate Security (ARS) revenue bonds, two transactions took place. On April 24, 2003 SCPPA entered into a 65 percent of LIBOR floating-to-fixed forward interest rate swap with Citigroup Financial Products, Inc. The purpose of the forward swap was to lock in favorable interest rates. The forward start 19-year (16.9-year weighted average life of bonds) interest rate swap replaced an average coupon bond rate of 5.07 percent with a fixed rate of 3.266% that SCPPA will pay Citigroup and in return receive 65% of 1-month LIBOR. On May 20, 2003, SCPPA sold $51,750,000 Southern Transmission System Project Revenue Bonds, 2003 Subordinate Refunding Series A, as Auction Rate Securities (ARS) to Citigroup. The bond proceeds, along with other sources of funds amounting to

$10,094,935, were used to current refund, on July 1, 2003, $58,495,000 1993 Subordinate bonds maturing 2003 to 2023.

Most of the 1993 Subordinate bonds were called at par, with the balance called at 102 percent. Net present value savings from SCPPAs Finance Committee continues to look for opportunities to lower financing costs through bond refunding and escrow restructuring.

Financing Activities

15 SCPPA Legislative Report the transaction, after adjusting for forgone interest earnings on prior funds on hand, amounted to $6,937,640, or 11.86% of the bonds refunded.

Citigroup Global Markets, Inc. was the underwriter for the transaction.

The triple-A rated bonds were insured by MBIA Insurance Corporation.

Underlying ratings of A1 and A+ were assigned to the bonds by Moodys and S&P, respectively.

Other Refundings SCPPAs Finance Committee continues to look for opportunities to lower financing costs through bond refundings and escrow restructurings. At year-end, refundings of additional San Juan and Mead Adelanto/Mead Phoenix Project bonds were under consideration.

Californias governor, as well as the state Senate and Assembly, were forced to face a budget crisis during this first year of the new two-year legislative session. The combination of mismanagement of the states 2003 budget crisis and the electricity crisis of 2000-01 resulted in the October 7th recall and ouster of Democrat Governor Gray Davis, replacing him with Republican Arnold Schwarzenegger. For the first time in nearly three years, however, the legislature did not face urgent electricity issues. Regardless, several legislative proposals contained weighty policy shifts requiring SCPPA action, either supporting or opposing individual proposals.

Rarely in the legislative arena does a proposal emerge to gather support based purely on public policy since it is the right position to take, irrespective of benefits or lack thereof. Support for Senate Bill 888 (Dunn) by SCPPA and its member utilities is one of those instances. Our combined support became critical to the bills survival through its thorny, yet unfinished legislative journey. SB 888 represents a major policy step toward correcting the failures of electricity restructuring and AB 1890. In 1996, Californias municipal utilities, guided by the wisdom of local officials who govern and set rates, were unconvinced of the promised benefits of deregulation and its business model, requiring investor-owned utilities to sell the assets that produced the product sold. SB 888 once again confirms the traditional regulatory compact for investor-owned utilities. SB 888s concepts are clear - to investor-owned utilities, it restores the obligation to serve, including the obligation to plan for the future electricity needs.

Planning encompasses utility ownership and procurement of generation, transmission and distribution resources. It requires that generation assets are dedicated to the consumers who pay for them. The California Public Utilities Commissions (CPUC) mandated role is to assure that investor-owned utilities have the ability to meet their obligation to serve.

The bill stalled in the Assembly and is pending action next year. Its legislative future and the stability it would offer to Californias electricity market are uncertain.

For a second year, legislation focused on the Magnolia Power Plant project was introduced. Last years Assembly Bill 80 (Havice) authorized cities participating in the Magnolia Power Plant project to aggregate their electricity loads and provide direct access to their residents and was signed by the Governor on September 24, 2002. The 2003 proposal, AB 1169 (Bermudez),

would allow municipal entities participating in the Magnolia Power Plant project to provide electricity to local public agencies located within or contiguous to a project citys jurisdiction. Because the bill is not definitive, it would apply to any project participant as provided by lease revenue bonds. AB 1169 is pending in the Senate Energy, Utilities and Communications Committee and could be reactivated in January. SB 520, sponsored by the California Municipal Utilities Association and supported by SCPPA and its members, would have required the Independent System Operator (ISO) to conduct an internal performance review and operational cost analysis. The ISO would then submit a report on its findings and conclusions to the legislature. The purpose of the review would be to compare the California ISOs costs with system operators in other states. The bill failed in the Senate policy committee. AB 1051 (Goldberg), sponsored by the City of Los Angeles, redefines capital facilities fee to mean any nondiscriminatory charge imposed to pay for public utility facilities, not to exceed reasonable costs; unfortunately Governor Davis vetoed the bill.

As of June 30, 2003 Bond Ratings Moodys Investors Standard &

SCPPA BONDS Service Poors Hoover Uprating Project1 Aa3 AA-Southern Transmission System Senior Lien Bonds Aa3 AA-Subordinate Lien Bonds2 Aaa/VMIG1 AAA/A-1+

Subordinate Lien (underlying)

A1 A+

Palo Verde Project3 Senior Lien Bonds A2 AA-Subordinate Lien Bonds Aaa/VMIG1 A+

Multiple Project Revenue Bonds Mead-Adelanto Aa3 Mead-Phoenix Aa3 Multiple Project4 A2 A

Mead-Adelanto Revenue Bonds5 Aaa AAA Mead-Phoenix Revenue Bonds5 Aaa AAA San Juan Unit 36 Aaa AAA San Juan Unit 3 (underlying)

A2 A+

Magnolia Power Project A7 A1 A+

Magnolia Power Project B7 AA+

1Insured: 2001 Refunding Series A (FSA) 2Insured: 1991 Subordinate Variable Rate Bonds (AMBAC); 1993 Subordinate Series (MBIA); 1996 Subordinate Series A Bonds (MBIA); 1996 Subordinate Variable Rate Series B Bonds (FSA); 1998 Subordinate Series A (MBIA); 2000 Subordinate Variable Rate Series A Bonds (FSA); 2001 Subordinate Series A (FSA); 2002 Subordinate Series A (FSA); 2002 Subordinate Series B (FSA).

3Insured: 1992 Senior Lien Bonds (AMBAC); 1993 Subordinate Bonds (FGIC);

1996 Subordinate Series A (AMBAC); 1996 Subordinate Variable Rate Series B and C Bonds (AMBAC); 1997 Subordinate Series A and B Bonds (FSA);

Installment Deposits to Defease the 1987 and 1989 Bonds (FSA); 1999 Subordinate Refunding Series A Bonds (FSA).

4Uncommitted bond proceeds secured by a guaranteed rate investment contract.

5Insured: 1994 Series A Bonds (AMBAC).

6Insured: 1993 Series A Bonds (MBIA); 2002 Refunding Series A (FSA).

7Insured (AMBAC)

Financing Activities (continued)

16 valuable growth diligent SCPPA Municipalities Marcie L. Edwards General Manager Anaheim Public Utilities Department Joseph F. Hsu Director of Utilities City of Azusa Light & Water Paul Toor Director of Public Works/Assistant City Manager City of Banning Ronald E. Davis General Manager Burbank Water and Power Art Gallucci City Manager City of Cerritos Thomas K. Clarke Utility Director City of Colton City of Burbank Burbank Water and Power began serving both water and electric customers in 1913 and installed on-site generation in response to a surge in industrial and residential growth in the 1940s and 1950s. Today the City receives power from three SCPPA projects, as well as firm and interruptible supplies from other utilities and government agencies, and continues to operate its own local power plants.

City of Anaheim Innovative solutions designed to meet the energy needs of a dynamic community have been a hallmark of Anaheim Public Utilities since its inception in 1894. Today, the City of Anaheim is the only community in Orange County with a publicly owned water and electric utility.

Anaheim residents enjoy rates that are signif-icantly lower than the electric rates charged in neighboring communities,reliable electric service,and an array of more than 40 targeted energy efficiency programs. In the coming years,Anaheim Public Utilities will continue to work to the best advantage of Anaheim consumers. With a strong, creative manage-ment team, sound resource and financial planning, and a cadre of experienced and dedicated employees, we will maintain sharp focus on meeting the communitys long-term power needs and offer measures that will help our customers make efficient use of electricity.

City of Azusa The Citys electric utility was incorporated in 1898 when it purchased the assets of a private utility on the brink of bankruptcy. The foresight and planning of those early pioneers continues to be the cornerstone of todays Azusa Light and Water.

Diligent planning of system improvements and power resource procure-ment has enabled Azusa Light and Water to maintain retail rate stability and competitiveness despite the turmoil in the industry in recent years. Azusa Light and Water has also been recognized as one of the proactive leaders in prompting energy conservation and efficiency programs and renewable energy in the State, earning the recognition of CMUA 2002 Community Services/

Resource Efficiency Award for its 2001 Load Reduction Program and being one of the first utilities in procuring renewable energy from High Winds windpower project, which is expected to provide up to 8% of Azusas annual retail load requirement, and thus substantially exceeding SB 1078s mandate.

City of Banning Established in 1913,the Banning electrical system now serves an area of approximately 22 square miles. The City continues to optimize its power resources through innovative planning.

Bannings energy resource base includes portions of coal, nuclear and hydro generating plants, which provide the majority of electricity required to meet its summer peak load of 42 MW. The Utility has further improved its service and reliability through significant upgrades to its distribution system, and is committed to continue providing quality service to its customers in a reliable manner, and at reasonable rates.

City of Cerritos The first new member to join Southern California Public Power Authority in over 20 years, the City of Cerritos is preparing to serve the electricity demands of its residential and business communities.

To further these efforts, Cerritos is participating in the development of the Magnolia Power Project. With the goal of providing a stable and affordable supply of electricity, Cerritos intends on developing a diverse portfolio of power to be delivered as competitively and economically as possible.

City of Colton The Colton Municipal Utility was established in 1895 and has pro-vided our customers with reliable and affordable electric service for over one hundred years. We are proud of this accom-plishment, and have positioned ourselves to continue this high level of service over the next century. By making firm commitments for resource planning, system maintenance, community involvement, and employee enrichment, we believe this pledge to our customers will provide the value that they deserve.

17 innovative affordable commitment Ignacio R.Trancoso Director of Utilities Glendale Water and Power Glenn O. Steiger Manager, Energy Department Imperial Irrigation District Ronald O.Vazquez Chief Financial Officer Los Angeles Department of Water and Power Phyllis E. Currie General Manager Pasadena Water and Power Thomas P. Evans Public Utilities Director City of Riverside Kenneth J. De Dario Director of Utilities City of Vernon City of Pasadena Established in 1906, the city built its first electric generating steam plant in 1907 and took over operation of its municipal street lighting from Edison Electric.

In 1909, Pasadena began the extension of its operations to commercial and residential customers that resulted in the replacement of all Edison Electric service in the city by 1920.

City of Glendale Incorporated in 1906, Glendale purchased its electric utility in 1909,obtaining power from outside suppliers.

It received its first power from Hoover Dam in 1937 and inaugurated the first unit of its own steam generating plant in 1941.

Now called the Grayson Power Plant, this facility today has eight generating units.

Glendale continues to purchase 85 percent of its power from outside sources.

Imperial Irrigation District IID entered the power industry in 1936 and today serves a peak load of 704 MW with 850 MW of generating resources. Among IID-owned resources are 24 MW of low head hydro units along the All American Canal, 307 MW of gas-fired steam and combined cycle units, and 162 MW of peaking gas turbines.

In addition to IIDs share of SCPPA resources comprising 104 MW at San Juan and 14 MW at Palo Verde, IID has 179 MW of other resources under long-term purchase contracts.

Los Angeles Department of Water and Power Providing service for more than a century, the Los Angeles Department of Water and Power began delivering water to the city in 1902, and with the water came power.

In 1916, LADWP first delivered electicity to the city purchased from the Pasadena Municipal Plant.

A year later, LADWP began generating its own hydro-electric power at the San Francisquito Power Plant No. 1.

After purchasing the remaining distribution system of Southern California Edison within the city limits in 1922, LADWP became the sole water and electricity provider for the City of Los Angeles.

It is now the largest municipally owned electric utility in the nation, serving a population of 3.8 million residents over a 464 square mile area. LADWP remains on firm financial footing and serves as a valuable asset to the City of Los Angeles.

City of Riverside The City of Riverside Public Utilities provides electric service to more than 98,000 metered accounts, representing a service area population of over 274,000. The utility is committed to the highest quality water and electric services at the lowest possible rates to benefit the community. To maintain their commitment, Riverside has positioned itself well in the electric market by utilizing short, mid, and long term contracts from power suppliers, and by building power generation sources with its own power grid, including a 40 MW power plant in 2002. Riversides portfolio includes 28 MW of renewable resources which includes 350 kW of photo-voltaic systems within the City.

City of Vernon Vernons Utilities Department began serving industrial customers in 1933, with completion of its diesel generating plant.

In addition to its own power from diesel units and gas turbines, Vernon also receives power from Palo Verde, Hoover, and various suppliers.

Vernon also is in the process of constructing a 134 MW gas-fired combined cycle power plant within its city limits. Vernon resides within the California Independent System Operator (CAISO) Control Area and is a Participating Transmission Owner.

18 SCPPA Legislative Report (continued)

Replacing the authority of local government decision-making with mandatory state standards for the purchase of renewable resources for generating electricity remains a threat for municipal utilities. SCPPA members continue to assert that such decisions are and should remain with local elected officials who, along with the communitys consumers, determine the mix in their generation portfolio. Though no legislation emerged this year, threats of amendments to force community-owned utilities to meet state renewable portfolio standards were constantly looming and could have been added to several of the bills included in this writing. Committed to acquiring resources sensitive to the environment and air quality concerns, SCPPA members continue to build and purchase renewable assets as well as argue the need to include large hydroelectric investments in the definition of qualifying renewable resources.

SCPPA, its members and other California municipal utilities were also active in their opposition to legislation. AB 816 (Reyes) would impose exit fees on new and existing consumers purchasing electricity service from a municipal utility. SCPPAs position on the bill is unambiguous: customers who move into a new development in local publicly owned utility service territory and were never served by an IOU should not pay any exit fees. A second, equally contentious issue addressed by AB 816 would reinstate direct access, the right of retail end use customers to acquire electricity service from suppliers other than investor-owned utilities. The bill stalled in the Senate, but is subject to action in early 2004.

SB 18 (Burton) failed in the Assembly during the final day of this years legislative session. The bill would create a procedure to determine whether a proposed project may adversely change a traditional tribal cultural site and recommend project changes and mitigation measures to avoid or reduce those changes.

The direction of the new governors electricity policy is at this writing still being developed. What is certain is SCPPA remains committed to building and acquiring generation assets for its members, with particular commitment to renewable generating assets. This commitment along with the combined influence of SCPPA and its members culminates in a common voice on issues on vital electricity policy issues in Sacramento and Washington, D.C., providing greater influence by public power.

In Washington, D.C., Congress tried but failed to pass a comprehensive energy bill that included significant changes in federal electricity policy.Despite strong support from the White House and the Republican leadership in the House and Senate,the final version of the bill proved to be too costly and too controversial to win the 60 votes needed to end a filibuster by Democratic and Republican opponents. Following the failed closure vote, the Senate leadership pulled the bill but pledged to return to it in January,2004. Given the significant regional differences that emerged on several key issues,it remains to be seen whether Congress can craft a consensus and pass a broad-based energy bill, particularly in a presidential election year. From the point of view of SCPPA member utilities and the consumers they serve, the demise of the energy bill is a good result. Although the electricity title had some positive provisions for consumer-owned utilities, its overall impact on SCPPA members would have been more negative than positive.

On the positive side, the bill authorized voluntary - not mandatory - Regional Transmission Organizations (RTOs) and expressly stated that the Federal Energy Regulatory Commission (FERC) could not order unregulated public power systems and federal utilities into an RTO. SCPPA strongly supported both of those concepts.In other ways,however,the bill significantly encroached upon public powers local control. For example, the bill gave FERC new authority over transmission facilities owned and operated by consumer-owned and federal utilities (the so-called FERC Liteprovision) and new authority to order refunds of short-term wholesale power sales by large public power systems if market rules are violated. These provisions would have substituted decisions of FERC for the judgments of local officials and utilities. While SCPPA endorsed the bills delay of FERCs complex new rules on Standard Market Design (SMD), the delay did not apply to the California ISOs Market Design 2002 (MD 02) initiative. Thus, the delay provision provided no benefits for California municipal utilities that believe the ISO should proceed more cautiously with market protocols and rules that differ from those in the rest of the Western market.

Also of concern to SCPPA, the bill repealed the Public Utility Holding Company Act (PUHCA), a 1935 law designed to protect investors and consumers against the risks of holding company diversifications and other transactions. PUHCA also provides barriers to mergers that SCPPA believes promote competition. To mitigate the impact of PUHCA repeal, SCPPA and other consumer interests advocated giving FERC stronger merger review authority and power to deal effectively with market manipulation and deception. Unfortunately, the final version of the energy bill contained none of these additional consumer protection.

Finally, in the last stage of congressional negotiations on the energy bill, the tradable tax credits for consumer-owned electric utilities that develop renewable resources were deleted. Elimination of the tradable tax credits puts SCPPA members and other public power systems at a distinct economic disadvantage, vis--vis private power companies, which benefit from automatic tax credits that effectively buy down the cost of new renewable energy projects. Its elimination was another key reason that SCPPA found the final energy bill wanting. Because the issues at stake in the energy bill are so critical for SCPPA members, we spent considerable time and resources in Washington, D.C. in 2003, working with members of the California congressional delegation and others to inform them of the impact of the electricity title on consumers in Southern California. If Congress takes up the energy bill again in the second session of the 108th Congress, SCPPA will again mount a vigorous effort to protect and promote local control and the interests of the approximately two million consumers we serve.

19 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY COMBINED FINANCIAL STATEMENTS INDEX pages Managements Discussion and Analysis.................... 20-38 Report and Combined Financial Statements:

Report of Independent Auditors.........................

39 Combined Financial Statements......................... 40-45 Notes to Combined Financial Statements.................... 46-57 Supplemental Financial Information:

Supplemental Schedule of Receipts and Disbursements in Funds Required by the Bond Indenture for the Year Ended June 30,2003:

Palo Verde Project................................ 59 Southern Transmission System Project..................... 60 Hoover Uprating Project............................ 61 Mead-Phoenix Project............................. 62 Mead-Adelanto Project............................. 63 Multiple Project Fund.............................. 64 San Juan Project................................. 65 Magnolia Power Project............................. 66

20 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 The following discussion and analysis of the financial performance of each of the projects in which the Southern California Public Power Authority (the Authorityor SCPPA) has interests,provides an overview of the projectsfinancial activities for the fiscal year ended June 30,2003. Descriptions and other details pertaining to the projects are included in the Notes to Combined Financial Statements. Please read this discussion and analysis in conjunction with the Authoritys Combined Financial Statements,which begin on page 40.

The Authority is a joint powers authority whose primary purpose has been to provide joint financing for its member agencies that consist of eleven municipal electric utilities and one irrigation district in California. On a combined basis,these entities provide electricity to more than 2 million retail electric customers. A Board of Directors (the Board) governs the Authority,which consists of one representative from each member agency. Two new member agencies,the Cities of Cerritos and San Marcos,joined the Authority in July 2001.

In August 2003,the Authority by a Board resolution rescinded the membership of the city of San Marcos,as the city no longer met the criteria for membership.

The Authority has interests in the following projects:

Palo Verde Project - On August 14, 1981, the Authority purchased a 5.91% interest in the Palo Verde Nuclear Generating Station (PVNGS), a 3,810 megawatt nuclear-fueled generating station near Phoenix, Arizona, and a 6.55% share of the right to use certain portions of the Arizona Nuclear Power Project Valley Transmission System (collectively,the Palo Verde Project). Units 1,2 and 3 of the Palo Verde Project began commer-cial operations in January 1986,September 1986,and January 1988,respectively.

Southern Transmission System Project - On May 1, 1983, the Authority entered into an agreement with the Intermountain Power Agency (IPA) to defray all the costs of acquisition and construction of the Southern Transmission System Project (STS) which provides for the transmission of energy from the Intermountain Generating Station in Utah to Southern California. STS commenced commercial operations in July 1986. The Department of Water and Power of the City of Los Angeles (LADWP),a member of the Authority,serves as project manager and operating agent of the Intermountain Power Project (IPP).

Hoover Uprating Project - As of March 1, 1986, the Authority and six participants entered into an agreement pursuant to which each participant assigned its entitlement to capacity and associated firm energy to the Authority in return for the Authoritys agreement to make advance payments to the United States Bureau of Reclamation (USBR) on behalf of such participants. The Authority has an 18.68% interest in the contingent capac-ity of the Hoover Uprating Project (HU).

Mead-Phoenix and Mead-Adelanto Projects - As of December 17, 1991, the Authority entered into an agreement to acquire an interest in the Mead-Phoenix Project (Mead-Phoenix), a transmission line extending between the Westwing substation in Arizona and the Marketplace substation in Nevada. The agreement provides the Authority with an 18.31% interest in the Westwing-Mead project component,a 17.76% interest in the Mead Substation project component and a 22.41% interest in the Mead-Marketplace project component.

As of December 17, 1991, the Authority also entered into an agreement to acquire a 67.92% interest in the Mead-Adelanto Project (Mead-Adelanto), a transmission line extending between the Adelanto substation in Southern California and the Marketplace substation in Nevada.

Funding for these projects was provided by a transfer of funds from the Multiple Project Fund and commercial operations commenced in April 1996. LADWP serves as the operations manager of Mead-Adelanto.

Multiple Project Fund - During fiscal year 1990,the Authority issued Multiple Project Revenue Bonds for net proceeds of approximately $600 mil-lion to provide funds to finance costs of construction and acquisition of ownership interests or capacity rights in one or more, then unspecified, projects for the generation or transmission of electric energy. Certain of these funds were used to finance the Authoritys interests in Mead-Phoenix and Mead-Adelanto.

San Juan Project - Effective July 1, 1993, the Authority purchased a 41.80% interest in Unit 3 and related common facilities, of the San Juan Generating Station (SJGS) from Century Power Corporation. Unit 3, a 488 megawatt unit, is one unit of a four-unit coal-fired power generating station in New Mexico.

Magnolia Power Project (The Project) - In March 2003, the Authority received approval from the California Energy Commission for construc-tion of the Magnolia Power Project. The Project will consist of a combined cycle natural gas-fired generating plant with a nominally rated net base capacity of 242 megawatts and will be built on a site in the City of Burbank,California. The plant is the first that is wholly owned by the Authority and entitlements to 100% of the capacity and energy of the Project have been sold to six of its members. The City of Burbank,a Project participant, will manage its construction and operation. Construction is under way and commercial operation is expected to begin in mid-2005.

21 ProjectsStabilization Fund - In fiscal year 1997,the Authority authorized the creation of a ProjectsStabilization Fund. Deposits may be made into the fund from budget under-runs,after authorization of individual participants,and by direct contributions from the participants. Participants have discretion over the use of their deposits within SCPPA project purposes. This fund is not a project-related fund;therefore,it is not governed by any project Indenture of Trust.

The members participate in the ProjectsStabilization Fund by making deposits to the fund at their discretion.

Participant Ownership Interests - The Authoritys participants may elect to participate in the projects. As of June 30, 2003, the members have the following participation percentages in the Authoritys interest in the projects:

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 Magnolia Palo Hoover Mead-Mead-San Power Participants Verde STS Uprating Phoenix Adelanto Juan Project City of Los Angeles 67.0%

59.5%

24.8%

35.7%

City of Anaheim 17.6%

42.6%

24.2%

13.5%

38.0%

City of Riverside 5.4%

10.2%

31.9%

4.0%

13.5%

Imperial Irrigation District 6.5%

51.0%

City of Vernon 4.9%

City of Azusa 1.0%

4.2%

1.0%

2.2%

14.7%

City of Banning 1.0%

2.1%

1.0%

1.3%

9.8%

City of Colton 1.0%

3.2%

1.0%

2.6%

14.7%

4.2%

City of Burbank 4.4%

4.5%

16.0%

15.4%

11.5%

31.0%

City of Glendale 4.4%

2.3%

14.8%

11.1%

9.8%

16.5%

City of Cerritos 4.2%

City of Pasadena 4.4%

5.9%

13.8%

8.6%

6.1%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

The Authority has entered into power sales and transmission service agreements with the above project participants. Under the terms of the con-tracts, the participants are entitled to power output or transmission service, as applicable. The participants are obligated to make payments on a take or paybasis for their proportionate share of operating and maintenance expenses and debt service. The contracts cannot be terminated or amended in any manner which will impair or adversely affect the rights of the bondholders as long as any bonds issued by the specific project remain outstanding.

The contracts expire as follows:

Palo Verde Project.................................. 2030 Southern Transmission System Project........................ 2027 Hoover Uprating Project............................... 2018 Mead-Phoenix Project................................ 2030 Mead-Adelanto Project................................ 2030 San Juan Project................................... 2030 Magnolia Power Project............................... 2036

22 Critical Accounting Policies Method of Accounting - The accounting records of the Authority are maintained in accordance with accounting principles generally accepted in the United States of America. As a government-owned utility,in prior years the Authority applied all statements issued by the Governmental Accounting Standards Board (GASB) and all statements and interpretations issued by the Financial Accounting Standards Board (FASB) which were not in conflict with statements issued by the GASB. Effective July 1, 2002, the Authority changed its election under the guidance in GASB Statement No.20,Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that Use Proprietary Fund Accounting, to follow all GASB statements and only FASB statements and interpretations issued before November 30,1989. See Note 2 to the financial state-ments discussing the results of this change in accounting principle.

Costs Recoverable - The Authoritys billing amounts to the participants are determined by its Board of Directors and are subject to review and approval by the participants. Billings to participants are designed to recover costs as defined by the power sales and transmission service agreements. The billings are structured to systematically provide for debt service requirements, operating funds and reserves in accordance with these agreements. The difference between billings and the Authoritys expenses calculated in accordance with generally accepted accounting principles are deferred as costs recoverable in future periods and are presented as net assets. It is intended that the deferred amounts will be recovered through billings for repayment of principal on the related bonds.

Investment Policy and Controls -The Authoritys investment function operates within a legal framework established by Sections 6509.5 and 53600 et. seq. of the California Government Code, Indentures of Trust, instruments governing financial arrangements entered into by the Authority to finance and operate Projects, and the Authoritys Investment Policy. The Indentures of Trust authorize the establishment of specific Project funds and accounts,specify how monies are to be applied,and name third party Trustees.

Funds available for investment include proceeds from bonds and notes sales,payments from the participants,maturities of previous investments, earnings,exchanges of securities and interest from swap agreements. Funds are managed and invested on a separate accounting basis and prin-cipal and earnings are credited and allocated to designated funds or accounts as outlined in each Projects Indenture of Trust, or in the Projects Stabilization Fund which was established by a Board Resolution.

The three fundamental criteria in the investment program, ranked in accordance of importance, are: safety of principal, liquidity and return. An exception to the preceding criteria is made for the Palo Verde Nuclear Decommissioning Trust Funds,as liquidity will not be a factor until 2023. The investment criteria for the Decommissioning Trust Funds,in order of importance,is as follows: safety of principal,return and liquidity.

Debt Management Program - The Authoritys financing goal is to obtain the lowest prudent rates of interest on debt issues and to issue debt in the most cost-effective manner. In addition, the Authority will continue to utilize debt management strategies that reduce the overall cost of borrowing for its members. In general, the Authority issues new money debt and refunding debt on either a negotiated or competitive basis as determined by the Board. A minimum net present value savings of 5%,as a percent of the refunded par amount,is the general target when deter-mining the potential to refund existing Authority debt. The Authority may also use interest rate swaps or other derivative products to help meet important financial objectives.

Using This Financial Report This annual financial report consists of a series of financial statements and reflects the self-supporting activities of the Authority that are funded primarily through the sale of energy and transmission services to member agencies under project specific take or paycontracts that require each member agency to pay its proportionate share of operating and maintenance expenses and debt service with respect to such projects.

Combined Statements of Net Assets (Deficit),Combined Statements of Revenues,Expenses and Changes in Net Assets (Deficit),

and Combined Statements of Cash Flows The Combined Financial Statements provide an indication of the Authoritys financial health. The Combined Statements of Net Assets (Deficit) include all of the Authoritys assets and liabilities,using an accrual basis of accounting,as well as an indication about which assets can be utilized for general purposes and which assets are restricted as a result of bond covenants and other commitments. The Combined Statements of Revenues,Expenses and Changes in Net Assets (Deficit) report all of the revenues and expenses during the time periods indicated. The Combined Statements of Cash Flows report the cash provided and used by operating activities,as well as other cash sources such as investment income,cash payments for bond principal payments,and capital additions and betterments.

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003

23 Net Assets - The Palo Verde Projects Net Assets increased by $155.8 million, mainly due to a $147.4 million increase in Assets and a decrease in Liabilities of $8.4 million. The increase in the Assets of the Project is primarily due to Participant contributions to the Deposit Installment Escrow Fund under a debt-restructuring plan adopted by the Board through a resolution in 1998 to increase the competitiveness of the Palo Verde Project by accelerating the repayment of the Projects debt.Under the debt-restructuring plan,an additional $65 million per year will be added to the Palo Verde Project Participantsbillings through June 30,2004. (Refer to Revenues in Note 2 of the Notes to Combined Financial Statements). During the year, the Authority restructured the 1997 B Escrow Restructuring Account, which resulted in a gain of $16.7 million after expenses, which was deferred and is being amortized over the life of the related bonds (see Note 5 of the Notes to Combined Financial Statements).

The decrease in Liabilities is primarily due to a decrease in long term debt of $20.4 million as a result of principal bond maturities and the amortiza-tion of the bond discounts,premiums and losses on refunding on the related debt,offset by the deferral of the $16.7 million gain on restructuring of the Escrow accounts.

Investment Income - The increase in the PV investment income of $53.6 million is primarily due to the unrealized gain recorded from the increases in the market value of Escrow accounts as a result of the downward movement of interest rates during the current fiscal year.

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 Palo Verde Project Financial Highlights (In thousands)

June 30 2003 2002 (As restated)

Assets Utility plant,net..........................................

183,818 213,923 Investments............................................

674,924 542,513 Cash and cash equivalents.....................................

105,142 60,149 Other 14,658 14,532 978,542 831,117 Liabilities and Net Assets Long-term debt..........................................

609,150 629,554 Current liabilities..........................................

114,030 102,024 723,180 731,578 Net assets (deficit):

Invested in capital assets,net of related debt..........................

(469,233)

(459,192)

Restricted net assets......................................

706,613 536,840 Unrestricted net assets.....................................

17,982 21,891 Total net assets...........................................

255,362 99,539 978,542 831,117 Revenues,Expenses and Changes in Net Assets Operating revenues........................................

180,529 175,374 Operating expenses........................................

(73,650)

(71,266)

Net operating income.....................................

106,879 104,108 Investment income.........................................

96,885 43,301 Debt expenses...........................................

(47,941)

(53,867)

Increase in net assets........................................

155,823 93,542 Beginning balance of net assets..................................

99,539 5,997 Ending balance of net assets....................................

255,362 99,539

24 Long-term Debt - The Authority financed the acquisition of the assets of the Palo Verde Project through the issuance of revenue bonds.Currently, capital additions to the Project are financed from revenues received from participants.

The following graph provides an indication of the principal and interest payments on the Palo Verde Project that are due each year following June 30,2003 until the bonds mature in 2018. Interest is reflected on an accrual basis.

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 2004 2005 2006 2007 2008 2009 2010 Principal 2011 2012 2013 2014 2015 2016 2017 2018 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0

Interest Palo Verde Project Debt Service Requirements Fiscal Year Ending June 30

($ in thousands)

Interest payments on the bonds are payable semi-annually on July 1 and January 1 of each year.

25 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 Southern Transmission System Project (STS)

Financial Highlights (In thousands)

June 30 2003 2002 (As restated)

Assets Utility plant,net..........................................

361,785 381,414 Investments............................................

58,802 83,474 Cash and cash equivalents.....................................

37,936 33,532 Other................................................

23,001 20,603 481,524 519,023 Liabilities and Net Deficit Long-term debt..........................................

807,669 830,680 Current liabilities..........................................

40,229 44,568 847,898 875,248 Net assets (deficit):

Invested in capital assets,net of related debt..........................

(466,659)

(467,080)

Restricted net assets......................................

100,939 115,910 Unrestricted net deficit.....................................

(654)

(5,055)

Total net deficit...........................................

(366,374)

(356,225) 481,524 519,023 Revenues,Expenses and Changes in Net Deficit Operating revenues........................................

82,229 77,573 Operating expenses........................................

(33,433)

(36,864)

Net operating income.....................................

48,796 40,709 Investment income.........................................

6,131 4,961 Debt expenses...........................................

(62,592)

(62,458)

Extraordinary loss on debt refunding................................

(2,484)

(1,538)

Increase in net deficit........................................

(10,149)

(18,326)

Beginning balance of net deficit..................................

(356,225)

(337,899)

Ending balance of net deficit....................................

(366,374)

(356,225)

Net Deficit -The Net Deficit of STS increased in 2003 by $10.1 million due to a $37.5 million decrease in Total Assets and a decrease in Liabilities of

$27.4 million.The decrease in Total Assets consists mainly of:

an increase in accumulated depreciation of $19.6 million, a decrease in investments of $24.7 million,and a $6.8 million increase in Current Assets.

The increase in accumulated depreciation was due to scheduled depreciation. The decrease of $24.7 million in Investments is primarily due to the release of $15.0 million and $2.1 million from the Debt Service accounts and General Reserve Fund, respectively, to fund a portion of the related refunded bonds (See Note 5 of the Notes to Combined Financial Statements).

The decrease in Liabilities of $27.4 million is due to the following:

a decrease of $23.0 million in long-term debt due to maturities and refundings,and a decrease of $4.4 million in Current liabilities.

26 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 The Net Deficit of $366.4 million at June 30, 2003 consists of non-cash expenses which are not billed to the participants but are required to be recorded as expenses under generally accepted accounting principles. These non-cash expenses are primarily comprised of depreciation on utility plant, amortization of debt related expenses, amortization of bond premiums and discounts, and losses on refundings. These costs will be recovered at the time the Authority collects revenues to pay the principal portion of debt service costs.

Operating Income - The increase in STS operating income of $8.1 million is largely due to billings to Participants in excess of period costs and lower operating expenses. The primary reason for the higher billings in the current year is increased debt service requirements.

Long-term Debt - The Authority acquired the STS assets through the issuance of revenue bonds. Capital additions are currently financed with revenues received from participants. Principal bond maturities redeemed on July 1,2002 totaled $26.7 million. During the year the Authority issued new refunding bonds as follows:

Par Amount of Par Amount of Debt Service Present Bond Ratings Description of Bonds Refunded Bonds Refunding Issue Savings Value Savings by Moodys Transmission Project Revenue Bonds 2002 Subordinate Refunding Series B

$ 46,400,000

$ 38,755,000

$ 8,697,986

$ 5,675,172 A1 Transmission Project Revenue Bonds 2003 Subordinate Refunding Series A

$ 58,495,000

$ 51,750,000

$ 13,257,524

$ 6,937,640 A1 Interest payments on the bonds are payable semi-annually on July 1 and January 1 of each year.

As of June 30,2003,Moodys increased the ratings on the STS 2002 and 2003 Subordinate Refunding Bonds to Aaa.

The following graph provides an indication of the principal and interest payments on the STS Project that are due each year following June 30,2003 until the bonds mature in 2024. Interest is reflected on an accrual basis.

2004 2005 2006 2007 2008 2009 2010 Principal 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0

Interest Southern Transmission System Project Debt Service Requirements Fiscal Year Ending June 30

($ in thousands)

27 Net Assets -The Net Assets of the Hoover Uprating Project decreased by $309,000.The net decrease is primarily due to a decrease in the Advances for capacity and energy balance. This balance consists of $20.2 million in advances provided by the Participants to the Hoover Power Plant,net of credits provided by the plant manager. In accordance with the agreements,these advances are returned through an annual amount of energy and capacity credits billed by the plant. Annual billings decrease the Advances for capacity and energy balance,up to the amount of principal paid on debt by the Authority. Credits in excess of principal paid on debt decrease the Projects current year interest expense. During the current year,the project billed $2.124 million, of which $970,000 was used to decrease the Advances balance. The remaining credits were utilized to offset debt expense.

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 Hoover Uprating Project Financial Highlights (In thousands)

June 30 2003 2002 (As restated)

Assets Utility plant,net..........................................

4 Investments............................................

500 3,972 Cash and cash equivalents.....................................

3,726 127 Other 20,674 21,757 24,900 25,860 Liabilities and Net Assets Long-term debt..........................................

19,404 20,275 Current liabilities..........................................

1,643 1,423 21,047 21,698 Net assets:

Invested in capital assets,net of related debt..........................

4 Restricted net assets......................................

2,699 3,187 Unrestricted net assets.....................................

1,154 971 Total net assets...........................................

3,853 4,162 24,900 25,860 Revenues,Expenses and Changes in Net Assets Operating revenues........................................

2,330 2,352 Operating expenses........................................

(2,381)

(2,236)

Net operating income.....................................

(51) 116 Investment income.........................................

73 187 Debt expenses...........................................

(331)

(840)

Extraordinary loss on debt refunding................................

(735)

Decrease in net assets.......................................

(309)

(1,272)

Beginning balance of net assets..................................

4,162 5,434 Ending balance of net assets....................................

3,853 4,162

28 Long-term Debt - The Authority acquired its interest in the Hoover Uprating Project through the issuance of revenue bonds. The following graph provides an indication of the principal and interest payments on the Hoover Uprating Project that are due each year following June 30,2003 until the bonds mature in 2018. Interest is reflected on an accrual basis.

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 2,500 2,000 1,500 1,000 500 0

2004 2005 2006 2007 2008 2009 2010 Principal 2011 2012 2013 2014 2015 2016 2017 2018 Interest Hoover Uprating Project Debt Service Requirements Fiscal Year Ending June 30

($ in thousands)

Interest payments on the bonds are payable semi-annually on October 1 and April 1 of each year. Principal maturities of $905,000 were paid on October 1,2002.

29 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 Mead-Phoenix Project Financial Highlights (In thousands)

June 30 2003 2002 (As restated)

Assets Utility plant,net..........................................

42,786 44,191 Investments............................................

9,751 9,209 Cash and cash equivalents.....................................

1,617 2,081 Other 4,957 4,665 59,111 60,146 Liabilities and Net Deficit Long-term debt..........................................

64,224 63,720 Current liabilities..........................................

2,841 3,274 67,065 66,994 Net assets (deficit):

Invested in capital assets,net of related debt..........................

(20,672)

(18,686)

Restricted net assets......................................

13,495 12,986 Unrestricted net deficit.....................................

(777)

(1,148)

Total net deficit...........................................

(7,954)

(6,848) 59,111 60,146 Revenues,Expenses and Changes in Net Deficit Operating revenues........................................

3,987 4,251 Operating expenses........................................

(1,557)

(2,840)

Net operating income.....................................

2,430 1,411 Investment income.........................................

700 707 Debt expenses...........................................

(4,236)

(4,362)

Increase in net deficit........................................

(1,106)

(2,244)

Beginning balance of net deficit..................................

(6,848)

(4,604)

Ending balance of net deficit....................................

(7,954)

(6,848)

Net Deficit - Net Deficit of the Mead-Phoenix Project increased by $1.1 million mainly due to an increase in accumulated depreciation on utility plant of $1.4 million.

30 Long-term Debt - The acquisition of the assets of the Mead-Phoenix Project was provided by a transfer of funds from the Multiple Project Fund (See Note 1 of the Notes to Combined Financial Statements). In March 1994,the Authority issued Mead-Phoenix Project Revenue Bonds to advance refund the Multiple Project Fund Bonds.

The following graph provides an indication of the principal and interest payments on the Mead-Phoenix Project that are due each year following June 30,2003 until the bonds mature in 2021. Interest is reflected on an accrual basis.

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Principal 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0

Interest Mead-Phoenix Project Debt Service Requirements Fiscal Year Ending June 30

($ in thousands)

Interest payments on the bonds are payable semi-annually on July 1 and January 1 of each year.

31 Net Deficit - The Net Deficit of the Mead-Adelanto Project increased by $4.7 million largely due to an increase in accumulated depreciation on utility plant of $4.5 million.

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 Mead-Adelanto Project Financial Highlights (In thousands)

June 30 2003 2002 (As restated)

Assets Utility plant,net..........................................

140,031 144,532 Investments............................................

27,471 26,461 Cash and cash equivalents.....................................

2,791 3,894 Other 14,236 13,453 184,529 188,340 Liabilities and Net Deficit Long-term debt..........................................

207,307 205,678 Current liabilities..........................................

7,338 8,043 214,645 213,721 Net assets (deficit):

Invested in capital assets,net of related debt..........................

(64,540)

(58,184)

Restricted net assets......................................

35,469 34,329 Unrestricted net deficit.....................................

(1,045)

(1,526)

Total net deficit...........................................

(30,116)

(25,381) 184,529 188,340 Revenues,Expenses and Changes in Net Deficit Operating revenues........................................

11,792 11,593 Operating expenses........................................

(4,955)

(5,778)

Net operating income.....................................

6,837 5,815 Investment income.........................................

1,860 1,915 Debt expenses...........................................

(13,432)

(13,476)

Increase in net deficit........................................

(4,735)

(5,746)

Beginning balance of net deficit..................................

(25,381)

(19,635)

Ending balance of net deficit....................................

(30,116)

(25,381)

32 Long-term Debt - Similar to the Mead-Phoenix Project, the interest in the Mead-Adelanto Project was acquired by the Authority through a transfer of funds, and the bonds issued to obtain these funds, from the Multiple Project Fund (See Note 1 of the Notes to Combined Financial Statements). In March 1994,the Authority issued Mead-Adelanto Project Revenue Bonds to advance refund the Multiple Project Fund Bonds.

The following graph provides an indication of the principal and interest payments on the Mead-Adelanto Project that are due each year following June 30,2003 until the bonds mature in 2021. Interest is reflected on an accrual basis.

Interest payments on the bonds are payable semi-annually on July 1 and January 1 of each year.

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Principal 25,000 20,000 15,000 10,000 5,000 0

Interest Mead-Adelanto Project Debt Service Requirements Fiscal Year Ending June 30

($ in thousands)

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 33 Multiple Project Fund Financial Highlights (In thousands)

June 30 2003 2002 (As restated)

Assets Investments............................................

243,437 247,584 Cash and cash equivalents.....................................

1 Other 8,673 8,960 252,110 256,545 Liabilities and Net Assets Long-term debt..........................................

216,445 222,865 Current liabilities..........................................

28,973 27,325 245,418 250,190 Net assets:

Invested in capital assets,net of related debt..........................

Restricted net assets......................................

6,692 6,355 Unrestricted net assets.....................................

Total net assets...........................................

6,692 6,355 252,110 256,545 Revenues,Expenses and Changes in Net Assets Investment income.........................................

17,275 18,036 Debt expenses...........................................

(16,938)

(17,242)

Increase (decrease) in net assets..................................

337 794 Beginning balance of net assets..................................

6,355 5,561 Ending balance of net assets....................................

6,692 6,355 Net Assets - There was no significant change in the Net Assets of the Multiple Project Fund for the year. The increase of $337,000 represents the difference between investment income earned on bond proceeds deposited in the Multiple Project Fund and the interest expense on such bonds.

Interest payments on the bonds are payable semi-annually on July 1 and January 1 of each year. Par value of bonds that matured and were redeemed on July 1, 2002 was $6.6 million. A total of $125.5 million of the outstanding Multiple Project Revenue Bonds are not subject to redemption prior to maturity.

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 34 Long-term Debt -The Multiple Project Fund was established by the issuance of revenue bonds. The bond proceeds are to be used to finance costs of construction and acquisition of ownership interests or capacity rights in one or more projects that the Authority expects to undertake. Certain of these funds were used to finance the Authoritys interest in the Mead-Phoenix and Mead-Adelanto Projects (See Note 1 of the Notes to Combined Financial Statements).

The following graph provides an indication of the principal and interest payments on the Multiple Project Fund that are due each year following June 30,2003 until the bonds mature in 2021.Interest is reflected on an accrual basis.

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Principal 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0

Interest Multiple Project Fund Debt Service Requirements Fiscal Year Ending June 30

($ in thousands)

Net Deficit - The Net Deficit of the San Juan Project decreased by $4.3 million, primarily due to an increase of $2.3 million in Total Assets and a decrease in Total Liabilities of $2.0 million. The increase in Total Assets of $2.3 million is largely due to an increase in investments of $5.6 million, due mainly to the new Debt Service Reserve Account that was created when the 2002 Refunding Series B Bonds were issued in October 2002.

In addition, Current Assets increased by $9.7 million largely due to the recognition of a receivable from Participants to fund actual costs for the current year. These increases were offset by a $12.9 million decrease in Utility Plant due to scheduled depreciation.

Net Operating Income (Loss) - Net Operating Income increased by $19.8 million when compared to last year. This increase is primarily due to the

$8.9 million reduced billings to Participants during the 2002 fiscal year as a result of applying the $8.9 million transfer amount from the Debt Service Reserve Fund to the 2002 fiscal year billings.No such transfers from the Debt Service Reserve Fund were made to reduce current year billings. Also included in current years revenues is the $9.9 million billing for the Coal Contract Buyout made in December 2002 (See Note 2 of the Notes to Combined Financial Statements).

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 35 San Juan Project Financial Highlights (In thousands)

June 30 2003 2002 (As restated)

Assets Utility plant,net..........................................

80,989 93,851 Investments............................................

21,602 16,052 Cash and cash equivalents.....................................

15,930 15,063 Other 14,859 6,143 133,380 131,109 Liabilities and Net Deficit Long-term debt..........................................

200,699 200,675 Current liabilities..........................................

16,980 19,030 217,679 219,705 Net assets (deficit):

Invested in capital assets,net of related debt..........................

(125,669)

(105,828)

Restricted net assets......................................

27,548 14,601 Unrestricted net assets.....................................

13,822 2,631 Total net deficit...........................................

(84,299)

(88,596) 133,380 131,109 Revenues,Expenses and Changes in Net Deficit Operating revenues........................................

70,636 50,258 Operating expenses........................................

(56,783)

(56,195)

Net operating income (loss)..................................

13,853 (5,937)

Investment income.........................................

1,289 724 Debt expenses...........................................

(10,771)

(11,013)

Extraordinary loss on debt refunding................................

(74)

(274)

Decrease (increase) in net deficit..................................

4,297 (16,500)

Beginning balance of net deficit..................................

(88,596)

(72,096)

Ending balance of net deficit....................................

(84,299)

(88,596)

Long-term Debt - The Authority financed its acquisition of the assets of the San Juan Project by the issuance of revenue bonds. Currently, capital additions are financed from revenues received from participants. Principal bond maturities that were redeemed on January 1,2003 totaled

$1.6 million. During the year,the Authority issued new refunding bonds as follows:

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 36 Par Amount of Par Amount of Debt Service Present Bond Ratings Description of Bonds Refunded Bonds Refunding Issue Savings Value Savings by Moodys San Juan Power Project Bonds, 2002 Refunding Series B

$ 70,800,000

$ 71,850,000

$ 12,932,905

$ 8,131,998 A2 The graph below provides an indication of the principal and interest payments on the San Juan Project that are due each year following June 30,2003 until the bonds mature in 2020.Interest is reflected on an accrual basis.

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Principal 30,000 0

Interest 25,000 20,000 15,000 10,000 5,000 San Juan Project Debt Service Requirements Fiscal Year Ending June 30

($ in thousands)

Interest payment on the bonds are payable semi-annually on July 1 and January 1 of each year.

Magnolia Power Project (The Project)

Background - In 2000,the City of Burbank (the City),an Authority member,began exploring ways to replace an aging power plant within the city limits and decided that it would be more economical to build a plant with more capacity than required to meet its power demands. To build the plant,the City needed other participants to buy the excess power and it presented the idea to the Authority. Four members,the Cities of Anaheim, Colton,Glendale,and Pasadena (the Project A Participants),indicated their interest in joining the City of Burbank in the Project. The City of Cerritos (the Project B Participant),who became a member of the Authority in July 2001,also decided to participate in the Project.

In March 2003, the California Energy Commission gave its approval for construction of the Magnolia Power Project. The Project is a natural gas-fired generator and is designed to generate 242 megawatts to meet baseload capacity but will be able to generate more than 300 megawatts for short periods of time during peak demand periods. The plant is the first to be owned by the Authority, and the City of Burbank will manage its construction and operation. To finance the Project,the Authority issued $299.975 million of Magnolia Power Project A,Revenue Bonds,2003-1 and

$14.105 million of Magnolia Power Project B,Lease Revenue Bonds (City of Cerritos,California) 2003-1 in April 2003 (Refer to Note 5 of the Notes to Combined Financial Statements).

The following table summarizes the financial position of the Project as of June 30,2003. Amounts are in thousands.

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 37 During the current year,the Project had no revenues and is not anticipated to have any until the Project becomes operational.Costs related to the construction of the plant of $91.6 million and debt service costs of $3.7 million offset by investment income of $1.7 million,were capitalized as part of the utility plant balance. Once the plant becomes operational,these costs will be recovered through future billings to participants.

June 30 2003 Assets Utility plant,net..........................................

93,610 Investments............................................

70,426 Cash and cash equivalents.....................................

162,381 Other 7,234 333,651 Liabilities and Net Assets Long-term debt..........................................

321,730 Current liabilities..........................................

11,921 333,651 Net assets:

Invested in capital assets,net of related debt..........................

Restricted net assets......................................

Unrestricted net assets.....................................

Total net assets...........................................

The following graph provides an indication of the principal and interest payments on the Project that are due each year on July 1 until the bonds mature in 2036. Interest is reflected on an accrual basis.

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MANAGEMENTS DISCUSSION AND ANALYSIS JUNE 30, 2003 38 Interest payments on the bonds are payable semi-annually on July 1 and January 1 of each year.

Projects Stabilization Fund - In 1996 the Board adopted a resolution to establish the Projects Stabilization Fund. Monies deposited by the participants to this Fund are used to pay for Authority costs as directed by the Participants (See Note 1 of the Notes to Combined Financial Statements). At June 30,2003 the Fund had a balance of $96.4 million.

Financial Outlook - The Authoritys credit strength is based on:

The collective credit strengths of each project participant; The absence of concentration risk as evidenced by the lack of substantial reliance by one participant on the resources financed; The low cost power the Project provides the participants;and, Strong legal provisions.

The Authority has take-or-pay power sales and transmission service contracts which unconditionally require the Participants to pay for the cost of operating and maintaining the Projects,including debt service,whether or not the Projects are operating or operable. Although the contracts have not been court-tested,a municipal utilitys authority to enter into such contracts is rooted in the States constitutional provisions for municipal elec-tric utilities.

The Authority continues to play an important role as a legislative advocate and its focused strategic plan continues to provide benefits to member agencies as they prepare for increased competition. The Authoritys management has been very focused on lowering the fixed costs of each project to ensure the flexibility needed to perform in a more competitive marketplace. An example is the refunding of $175.7 million of the Authoritys long-term debt during the fiscal year,which generated $34.9 million of debt service savings. In addition,in February 2003 the Authority restructured the Palo Verde 1993 Escrow Funds resulting in a net gain of $16.7 million,which was deferred and is being amortized over the remaining period of the related bonds.

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 Principal 60,000 50,000 40,000 30,000 20,000 10,000 0

Interest Magnolia Power Project Debt Service Requirements Fiscal Year Ending June 30

($ in thousands)

39 To the Board of Directors and Participants of the Southern California Public Power Authority:

In our opinion, the accompanying combined statements of net assets (deficit) and the related combined statements of revenues, expenses and changes in net assets (deficit) and cash flows present fairly,in all material respects,the financial position of the Southern California Public Power Authority (the Authority) at June 30, 2003 and 2002, and the changes in its net assets (deficit) and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.These financial statements are the responsibility of the Authoritys management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America,which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the accompanying combined statements of net assets (deficit) and the related combined statements of revenues, expenses and changes in net assets (deficit) and cash flows present fairly,in all material respects,the financial position of each of the Authoritys Palo Verde Project,Southern Transmission System Project,Hoover Uprating Project,Mead-Phoenix Project,Mead-Adelanto Project, Multiple Project Fund, San Juan Project, and ProjectsStabilization Fund at June 30, 2003 and 2002, and the changes in their net assets (deficit) and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the accompanying combined statement of net assets and the related combined statement of revenues,expenses and changes in net assets and cash flows present fairly,in all material respects,the financial position of the Authoritys Magnolia Power Project at June 30, 2003, and the changes in its net assets and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Authoritys management;our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,assessing the accounting principles used and significant estimates made by management,and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 2 to the financial statements, effective July 1, 2002, the Authority changed its election under Governmental Accounting Standards Board Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that Use Proprietary Fund Accounting, and no longer applies Financial Accounting Standards Board statements and interpretations issued after November 30, 1989. The Authority has restated all prior years presented to give effect of this change in election.

The managements discussion and analysis included on pages 20-38 is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures,which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However,we did not audit the information and express no opinion on it.

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental financial information, as listed in the accompanying index, is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and,in our opinion,is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

September 8,2003 REPORT OF INDEPENDENT ACCOUNTANTS

ASSETS Noncurrent Assets Utility plant:

Production................

Transmission...............

General.................

Less - Accumulated depreciation.....

Construction work in progress......

Nuclear fuel,at amortized cost......

Net utility plant............

Special funds:

Restricted investments Escrow accounts............

Decommissioning fund.........

Other funds...............

Unrestricted Investments Other funds...............

Total special funds...........

Other Noncurrent Assets Advance to IPA - restricted.........

Advances for capacity and energy, net - restricted..............

Unamortized debt expenses........

Total other noncurrent assets.......

Total noncurrent assets..........

Current Assets Special funds:

Cash and cash equivalents - restricted..

Cash and cash equivalents - unrestricted.

Interest receivable............

Accounts receivable............

Due from other project - restricted.....

Materials and supplies...........

Total current assets...........

Total assets..................

LIABILITIES Noncurrent liabilities Long-term debt..............

Commitments and contingencies (Note 7).

Total noncurrent liabilities........

Current liabilities:

Debt due within one year.........

Accrued interest..............

Accounts payable and accruals.......

Accrued property tax............

Coal contracts buyout...........

Due to other projects............

Total current liabilities.........

Total liabilities................

NET ASSETS (DEFICIT)

Invested in capital assets,net of related debt and deferred credits.........

Restricted net assets.............

Unrestricted net assets (deficit)........

Total net assets (deficit).........

June 30,2003 Southern Palo Transmission Hoover Mead-Mead-Multiple San Magnolia Projects Verde System Uprating Phoenix Adelanto Project Juan Power Stabilization Project Project Project Project Project Fund Project Project Fund Total 623,352 $

172,475 $

795,827 14,062 674,606 50,770 172,319 911,757 2,705 18,911 22 2,640 473 8,067 32,818 640,119 693,517 22 53,410 172,792 180,542 1,740,402 489,707 331,732 22 10,624 32,761 99,826 964,672 150,412 361,785 42,786 140,031 80,716 775,730 18,862 273 93,610 112,745 14,544 14,544 183,818 361,785 42,786 140,031 80,989 93,610 903,019 420,766 16,883 437,649 116,936 116,936 124,227 41,919 9,751 27,471 243,437 21,602 70,426 53,044 591,877 661,929 58,802 9,751 27,471 243,437 21,602 70,426 53,044 1,146,462 12,995 500 13,495 674,924 58,802 500 9,751 27,471 243,437 21,602 70,426 53,044 1,159,957 11,550 11,550 20,197 20,197 5,382 8,945 476 766 2,736 2,590 6,100 26,995 5,382 20,495 20,673 766 2,736 2,590 6,100 58,742 864,124 441,082 21,173 53,303 170,238 243,437 105,181 170,136 53,044 2,121,718 96,075 37,372 2,884 1,498 2,616 11,236 162,381 42,941 357,003 9,067 564 842 119 175 4,694 15,461 1,405 137 1

343 915 8,673 13 1,061 436 12,984 1,043 2,369 3

9,021 73 12,509 3,848 10,582 14,430 6,828 3,235 10,063 114,418 40,442 3,727 5,808 14,291 8,673 28,199 163,515 43,377 422,450 978,542 481,524 24,900 59,111 184,529 252,110 133,380 333,651 96,421 2,544,168 609,150 807,669 19,404 64,224 207,307 216,445 200,699 321,730 2,446,628 609,150 807,669 19,404 64,224 207,307 216,445 200,699 321,730 2,446,628 49,190 29,720 1,190 7,100 8,390 95,590 7,197 6,922 265 1,945 6,116 7,443 5,303 4,467 39,658 56,095 3,587 188 896 1,222 2,887 7,454 72,329 1,548 400 1,948 14,430 14,430 114,030 40,229 1,643 2,841 7,338 28,973 16,980 11,921 223,955 723,180 847,898 21,047 67,065 214,645 245,418 217,679 333,651 2,670,583 (469,233)

(466,659)

(20,672)

(64,540)

(125,669)

(1,146,773) 706,613 100,939 2,699 13,495 35,469 6,692 27,548 96,421 989,876 17,982 (654) 1,154 (777)

(1,045) 13,822 30,482 255,362 $

(366,374) $

3,853 $

(7,954) $

(30,116) $

6,692 $

(84,299) $

96,421 $

(126,415)

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY COMBINED STATEMENTS OF NET ASSETS (DEFICIT)

JUNE 30, 2003 (Amounts in thousands) 40 The accompanying notes are an integral part of the combined financial statements.

June 30,2002 (Restated)

Southern Palo Transmission Hoover Mead-Mead-Multiple San Projects Verde System Uprating Phoenix Adelanto Project Juan Stabilization Project Project Project Project Project Fund Project Fund Total ASSETS Noncurrent Assets Utility plant:

Production........................ $

620,719 175,111 795,830 Transmission.......................

14,062 674,606 50,770 172,319 911,757 General..........................

2,583 18,911 22 2,640 473 8,089 32,718 637,364 693,517 22 53,410 172,792 183,200 1,740,305 Less - Accumulated depreciation.............

452,747 312,103 18 9,219 28,260 90,204 892,551 184,617 381,414 4

44,191 144,532 92,996 847,754 Construction work in progress...............

14,325 855 15,180 Nuclear fuel,at amortized cost..............

14,981 14,981 Net utility plant....................

213,923 381,414 4

44,191 144,532 93,851 877,915 Special funds:

Restricted Investments Escrow accounts.....................

284,327 21,639 305,966 Decommissioning fund.................

104,671 104,671 Other funds.......................

139,987 61,835 2,861 9,209 26,461 247,584 16,052 158,320 662,309 528,985 83,474 2,861 9,209 26,461 247,584 16,052 158,320 1,072,946 Unrestricted Investments Other funds.......................

13,528 1,111 14,639 Total special funds....................

542,513 83,474 3,972 9,209 26,461 247,584 16,052 158,320 1,087,585 Other Noncurrent Assets Advance to IPA - restricted.................

11,550 11,550 Advances for capacity and energy,net - restricted......

21,169 21,169 Unamortized debt expenses................

3,912 8,881 572 843 2,962 2,693 19,863 Total other noncurrent assets...............

3,912 20,431 21,741 843 2,962 2,693 52,582 Total noncurrent assets..................

760,348 485,319 25,717 54,243 173,955 247,584 112,596 158,320 2,018,082 Current Assets Special funds:

Cash and cash equivalents - restricted..........

48,371 29,171 29 1,900 3,493 1

11,779 14,970 109,714 Cash and cash equivalents - unrestricted.........

11,778 4,361 98 181 401 3,284 20,103 Interest receivable.....................

2,483 172 16 340 916 8,960 18 495 13,400 Accounts receivable.....................

1,244 209 1,453 Due from other project - restricted.............

3,482 9,575 13,057 Materials and supplies...................

6,893 3,223 10,116 Total current assets...................

70,769 33,704 143 5,903 14,385 8,961 18,513 15,465 167,843 Total assets..........................

831,117 519,023 25,860 60,146 188,340 256,545 131,109 173,785 2,185,925 LIABILITIES Noncurrent liabilities Long-term debt.......................

629,554 830,680 20,275 63,720 205,678 222,865 200,675 2,173,447 Commitments and contingencies (Note 7).........

Total other noncurrent liabilities..............

629,554 830,680 20,275 63,720 205,678 222,865 200,675 2,173,447 Current liabilities:

Debt due within one year..................

47,395 26,695 905 6,600 1,600 83,195 Accrued interest.......................

8,122 8,457 274 1,945 6,116 7,668 3,325 35,907 Accounts payable and accruals...............

44,557 9,416 244 550 963 3,732 59,462 Accrued property tax....................

1,950 779 964 450 4,143 Coal contracts buyout....................

9,923 9,923 Due to other projects....................

13,057 13,057 Total current liabilities..................

102,024 44,568 1,423 3,274 8,043 27,325 19,030 205,687 Total liabilities.........................

731,578 875,248 21,698 66,994 213,721 250,190 219,705 2,379,134 NET ASSETS (DEFICIT)

Invested in capital assets net of related debt and deferred credits..................

(459,192)

(467,080) 4 (18,686)

(58,184)

(105,828)

(1,108,966)

Restricted net assets......................

536,840 115,910 3,187 12,986 34,329 6,355 14,601 173,785 897,993 Unrestricted net assets (deficit)................

21,891 (5,055) 971 (1,148)

(1,526) 2,631 17,764 Total net assets (deficit)................. $

99,539 (356,225) $

4,162 $

(6,848) $

(25,381) $

6,355 $

(88,596) $ 173,785 (193,209)

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY COMBINED STATEMENTS OF NET ASSETS (DEFICIT)

JUNE 30, 2002 (Amounts in thousands) 41 The accompanying notes are an integral part of the combined financial statements.

Year Ended June 30,2003 Southern Palo Transmission Hoover Mead-Mead-Multiple San Magnolia Projects Verde System Uprating Phoenix Adelanto Project Juan Power Stabilization Project Project Project Project Project Fund Project Project Fund Total 180,529 $

2,330 $

70,636 $

253,495 82,229 3,987 11,792 98,008 180,529 82,229 2,330 3,987 11,792 70,636 351,503 27,462 13,804 2,377 152 454 43,586 87,835 26,702 19,629 4

1,405 4,501 10,084 62,325 8,586 8,586 10,900 3,113 14,013 73,650 33,433 2,381 1,557 4,955 56,783 172,759 106,879 48,796 (51) 2,430 6,837 13,853 178,744 96,885 6,131 73 700 1,860 17,275 1,289 2,372 126,585 (47,941)

(62,592)

(331)

(4,236)

(13,432)

(16,938)

(10,771)

(156,241) 48,944 (56,461)

(258)

(3,536)

(11,572) 337 (9,482) 2,372 (29,656) 155,823 (7,665)

(309)

(1,106)

(4,735) 337 4,371 2,372 149,088 (2,484)

(74)

(2,558) 155,823 (10,149)

(309)

(1,106)

(4,735) 337 4,297 2,372 146,530 99,539 (356,225) 4,162 (6,848)

(25,381) 6,355 (88,596) 173,785 (193,209)

(79,736)

(79,736) 255,362 $

(366,374) $

3,853 $

(7,954) $

(30,116) $

6,692 $

(84,299) $

96,421 $

(126,415)

Operating revenues:

Sales of electric energy...........

Sales of transmission services.......

Total operating revenues...........

Operating expenses:

Operations and maintenance........

Depreciation................

Amortization of nuclear fuel........

Decommissioning.............

Total operating expenses...........

Operating income (loss)..........

Non operating revenues (expenses)

Investment income............

Debt expense...............

Net non operating revenues (expenses).................

Increase (decrease) in net assets (deficit) before extraordinary items.........

Extraordinary loss on refunding of debt.................

Net increase (decrease) in net assets (deficit)...............

Net assets (deficit) - beginning of year....

Net withdrawals by participants.......

Net assets (deficit) - end of year.......

42 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY COMBINED STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS (DEFICIT)

FOR THE YEAR ENDED JUNE 30, 2003 (Amounts in thousands)

The accompanying notes are an integral part of the combined financial statements.

43 Year Ended June 30,2002 (Restated)

Southern Palo Transmission Hoover Mead-Mead-Multiple San Projects Verde System Uprating Phoenix Adelanto Project Juan Stabilization Project Project Project Project Project Fund Project Fund Total Operating revenues:

Sales of electric energy................... $

175,374 $

2,352 $

50,258 $

227,984 Sales of transmission services................

77,573 4,251 11,593 93,417 Total operating revenues...................

175,374 77,573 2,352 4,251 11,593 50,258 321,401 Operating expenses:

Operations and maintenance................

24,434 17,231 2,232 1,434 1,276 43,010 89,617 Depreciation........................

26,701 19,633 4

1,406 4,502 10,072 62,318 Amortization of nuclear fuel................

8,259 8,259 Decommissioning......................

11,872 3,113 14,985 Total operating expenses...................

71,266 36,864 2,236 2,840 5,778 56,195 175,179 Operating income (loss).................

104,108 40,709 116 1,411 5,815 (5,937) 146,222 Non operating revenues (expenses):

Investment income.....................

43,301 4,961 187 707 1,915 18,036 724 10,561 80,392 Debt expense........................

(53,867)

(62,458)

(840)

(4,362)

(13,476)

(17,242)

(11,013)

(163,258)

Net non operating revenues ( expenses)...........

(10,566)

(57,497)

(653)

(3,655)

(11,561) 794 (10,289) 10,561 (82,866)

Increase (decrease) in net assets (deficit) before extraordinary items 93,542 (16,788)

(537)

(2,244)

(5,746) 794 (16,226) 10,561 63,356 Extraordinary loss on refunding of debt..........

(1,538)

(735)

(274)

(2,547)

Net increase (decrease) in net assets (deficit).........

93,542 (18,326)

(1,272)

(2,244)

(5,746) 794 (16,500) 10,561 60,809 Net assets (deficit) - beginning of year............

5,997 (337,899) 5,434 (4,604)

(19,635) 5,561 (72,096) 200,350 (216,892)

Net withdrawals from participants..............

(37,126)

(37,126)

Net assets (deficit) - end of year................ $

99,539 $

(356,225) $

4,162 $

(6,848) $

(25,381) $

6,355 $

(88,596) $ 173,785 (193,209)

The accompanying notes are an integral part of the combined financial statements.

SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY COMBINED STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS (DEFICIT)

FOR THE YEAR ENDED JUNE 30, 2002 (Amounts in thousands)

Cash flows from operating activities:

Receipts from participants........

Payments to operating managers....

Other receipts..............

Net cash flow from operating activities...............

Cash flows from noncapital financing activities:

Withdrawals by participants,net.....

Cash flows from capital and related financing activities:

Additions to plant,net..........

Debt interest payments.........

Proceeds from sale of bonds.......

Proceeds from bond escrow restructuring.............

Payment for defeasance of revenue bonds............

Principal payments on debt.......

Transfer of funds from escrow......

Payment for bond issue costs......

Net cash provided by (used for) capital and related financing activities...............

Cash flows from investing activities:

Interest received on investments.....

Purchases of investments........

Proceeds from sale/maturity of investments............

Net cash provided by (used for) investing activities..........

Net increase (decrease) in cash and cash equivalents.........

Cash and cash equivalents at beginning of year...................

Cash and cash equivalents at end of year...

Reconciliation of operating income to net cash provided by operating activities:

Operating income (loss).........

Adjustments to reconcile operating income to net cash provided (used) by operating activities:

Depreciation............

Decommissioning.........

Advances for capacity and energy..

Amortization of nuclear fuel....

Changes in assets and liabilities:

Accounts receivable.........

Accounts payable and accruals...

Other................

Net cash provided by operating activities...............

Year Ended June 30,2003 Southern Palo Transmission Hoover Mead-Mead-Multiple San Magnolia Projects Verde System Uprating Phoenix Adelanto Project Juan Power Stabilization Project Project Project Project Project Fund Project Project Fund Total 191,357 $

72,665 $

2,289 $

4,179 $

11,407 $

61,123 $

343,020 (29,317)

(13,475)

(261)

(1,009)

(1,125)

(53,811)

(98,998) 166 3

3 100 4

276 162,206 59,193 2,031 3,270 10,286 7,312 244,298 (79,736)

(79,736)

(15,996)

(290)

(84,119)

(100,405)

(35,192)

(42,149)

(1,077)

(3,889)

(12,232)

(15,111)

(7,485)

(117,135) 93,658 80,750 322,582 496,990 17,292 17,292 (108,945)

(72,344)

(181,289)

(47,395)

(26,695)

(905)

(6,600)

(1,600)

(83,195)

(580)

(1,605)

(1,982)

(1,218)

(6,270)

(9,673)

(81,871)

(85,736)

(1,982)

(3,889)

(12,232)

(21,711)

(2,187) 232,193 22,585 9,017 4,217 77 689 1,832 17,564 1,270 199 2,421 37,286 (550,977)

(47,544)

(4,122)

(609)

(4,894)

(1,188)

(15,553)

(75,783)

(92,323)

(792,993) 506,618 74,274 7,595 75 3,905 5,334 10,025 5,772 197,609 811,207 (35,342) 30,947 3,550 155 843 21,710 (4,258)

(69,812) 107,707 55,500 44,993 4,404 3,599 (464)

(1,103)

(1) 867 162,381 27,971 242,647 60,149 33,532 127 2,081 3,894 1

15,063 14,970 129,817 105,142 $

37,936 $

3,726 $

1,617 $

2,791 $

15,930 $

162,381 $

42,941 $

372,464 106,879 $

48,796 $

(51) $

2,430 $

6,838 $

13,853 $

178,745 26,702 19,629 4

1,405 4,501 10,084 62,325 10,900 3,113 14,013 2,124 2,124 8,586 8,586 201 (2,369)

(3)

(8,812)

(10,983) 8,888 (5,829)

(56)

(565)

(1,058)

(10,855)

(9,475) 50 (1,034) 10 8

(71)

(1,037) 162,206 $

59,193 $

2,031 $

3,270 $

10,286 $

7,312 $

244,298 The accompanying notes are an integral part of the combined financial statements.

44 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY COMBINED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2003 (Amounts in thousands)

45 Year Ended June 30,2002 (Restated)

Southern Palo Transmission Hoover Mead-Mead-Multiple San Projects Verde System Uprating Phoenix Adelanto Project Juan Stabilization Project Project Project Project Project Fund Project Fund Total Cash flows from operating activities:

Receipts from participants................. $

184,347 82,431 $

2,568 $

4,064 10,737 52,134 $

336,281 Payments to operating managers..............

(24,762)

(16,959)

(270)

(1,168)

(1,037)

(43,887)

(88,083)

Other receipts (payments).................

27 (622)

(6) 153 148 1,069 769 Net cash flow from operating activities...........

159,612 64,850 2,292 3,049 9,848 9,316 248,967 Cash flows from noncapital financing activities:

Withdrawals by participants,net..............

(37,126)

(37,126)

Cash flows from capital and related financing activities:

Additions to plant,net...................

(15,751) 78 3

(103)

(15,773)

Debt interest payments...................

(37,413)

(45,191)

(1,101)

(3,947)

(12,363)

(15,547)

(10,542)

(126,104)

Proceeds from sale of bonds................

65,236 25,336 135,548 226,120 Payment for defeasance of revenue bonds.........

(76,183)

(28,816)

(124,828)

(229,827)

Principal payments on debt.................

(45,105)

(19,210)

(650)

(1,710)

(3,895)

(6,200)

(7,480)

(84,250)

Payment for bond issue costs................

(1,301)

(627)

(1,530)

(3,458)

Net cash used for capital and related financing activities....................

(98,269)

(76,649)

(5,858)

(5,579)

(16,255)

(21,747)

(8,935)

(233,292)

Cash flows from investing activities:

Interest received on investments..............

11,713 4,390 249 706 2,001 18,299 727 10,576 48,661 Purchases of investments..................

(516,905)

(36,833)

(7,024)

(1,682)

(6,415)

(8,857)

(23,561)

(68,403)

(669,680)

Proceeds from sale/maturity of investments........

423,713 53,262 8,354 2,258 8,140 12,288 19,762 92,432 620,209 Net cash provided by (used for) investing activities....................

(81,479) 20,819 1,579 1,282 3,726 21,730 (3,072) 34,605 (810)

Net increase (decrease) in cash and cash equivalents......................

(20,136) 9,020 (1,987)

(1,248)

(2,681)

(17)

(2,691)

(2,521)

(22,261)

Cash and cash equivalents at beginning of year........

80,285 24,512 2,114 3,329 6,575 18 17,754 17,491 152,078 Cash and cash equivalents at end of year........... $

60,149 33,532 $

127 $

2,081 3,894 1 $

15,063 $

14,970 129,817 Reconciliation of operating income to net cash provided by operating activities:

Operating income (loss)................. $

104,108 40,709 $

116 $

1,411 5,815 (5,937) $

146,222 Adjustments to reconcile operating income to net cash provided (used) by operating activities:

Depreciation.....................

26,701 19,633 4

1,406 4,502 10,073 62,319 Decommissioning..................

11,872 3,113 14,985 Advances for capacity and energy..........

1,954 1,954 Amortization of nuclear fuel.............

8,259 8,259 Changes in assets and liabilities:

Accounts receivable..................

47 33 371 1,168 1,619 Accounts payable and accruals.............

8,811 4,508 185 232 (840) 861 13,757 Other.........................

(186) 38 (148)

Net cash provided by operating activities.......... $

159,612 64,850 $

2,292 $

3,049 9,848 9,316 $

248,967 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY COMBINED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2002 (Amounts in thousands)

The accompanying notes are an integral part of the combined financial statements.

Note 1 - Organization and Purpose The Southern California Public Power Authority (the Authority), a public entity organized under the laws of the State of California, was formed by a Joint Powers Agreement dated as of November 1, 1980 pursuant to the Joint Exercise of Powers Act of the State of California.

The Authoritys participants consist of eleven Southern California cities and one public district of the State of California. The Authority was formed for the purpose of planning, financing, developing, acquiring, constructing, operating and maintaining projects for the generation and transmission of electric energy for sale to its participants. The Joint Powers Agreement has a term of fifty years.

The Joint Powers Agreement authorizes the Authority to admit new members to the agreement. The Cities of Cerritos of Los Angeles County and San Marcos of San Diego County have applied for mem-bership under the agreement. In July 2001, the Authority adopted a policy to establish the criteria for admitting new members. The two cities met all of the established criteria and became members to the agreement in July 2001. In August 2003, the Authority, by resolu-tion of the Board of Directors (the Board),rescinded the membership of the City of San Marcos, as the city no longer met the criteria for membership.

The Authority has interests in the following projects:

Palo Verde Project - On August 14, 1981, the Authority purchased a 5.91% interest in the Palo Verde Nuclear Generating Station (PVNGS),

a 3,810 megawatt nuclear-fueled generating station near Phoenix, Arizona, and a 6.55% share of the right to use certain portions of the Arizona Nuclear Power Project Valley Transmission System (collectively, the Palo Verde Project). Units 1, 2 and 3 of the Palo Verde Project began commercial operations in January 1986, September 1986, and January 1988,respectively.

Southern Transmission System Project - On May 1, 1983, the Authority entered into an agreement with the Intermountain Power Agency (IPA),to defray all the costs of acquisition and construction of the Southern Transmission System Project (STS) which provides for the transmission of energy from the Intermountain Generating Station in Utah to Southern California. STS commenced commercial opera-tions in July 1986.The Department of Water and Power of the City of Los Angeles (LADWP), a member of the Authority, serves as project manager and operating agent of the Intermountain Power Project (IPP).

Hoover Uprating Project - As of March 1, 1986, the Authority and six participants entered into an agreement pursuant to which each partic-ipant assigned its entitlement to capacity and associated firm energy to the Authority in return for the Authoritys agreement to make advance payments to the United States Bureau of Reclamation (USBR) on behalf of such participants. The Authority has an 18.68% interest in the contingent capacity of the Hoover Uprating Project (HU).

Mead-Phoenix and Mead-Adelanto Projects - As of December 17, 1991, the Authority entered into an agreement to acquire an interest in the Mead-Phoenix Project (Mead-Phoenix), a transmission line extending between the Westwing substation in Arizona and the Marketplace substation in Nevada. The agreement provides the Authority with an 18.31% interest in the Westwing-Mead project component, a 17.76% interest in the Mead Substation project com-ponent and a 22.41% interest in the Mead-Marketplace project com-ponent.

As of December 17,1991,the Authority also entered into an agree-ment to acquire a 67.92% interest in the Mead-Adelanto Project (Mead-Adelanto), a transmission line extending between the Adelanto substation in Southern California and the Marketplace substation in Nevada. Funding for these projects was provided by a transfer of funds from the Multiple Project Fund and commercial operations commenced in April 1996. LADWP serves as the operations manager of Mead-Adelanto.

Multiple Project Fund - During fiscal year 1990, the Authority issued Multiple Project Revenue Bonds for net proceeds of approximately

$600 million to provide funds to finance costs of construction and acquisition of ownership interests or capacity rights in one or more, then unspecified,projects for the generation or transmission of electric energy. Certain of these funds were used to finance the Authoritys interests in Mead-Phoenix and Mead-Adelanto.

San Juan Project - Effective July 1, 1993, the Authority purchased a 41.80% interest in Unit 3 and related common facilities,of the San Juan Generating Station (SJGS) from Century Power Corporation. Unit 3, a 488 megawatt unit,is one unit of a four-unit coal-fired power gener-ating station in New Mexico.

Magnolia Power Project (The Project) - In March 2003, the Authority received approval from the California Energy Commission for construction of the Magnolia Power Project. The Project will consist of a combined cycle natural gas-fired generating plant with a nominally rated net base capacity of 242 megawatts and will be built on a site in the City of Burbank,California. The plant is the first that is wholly owned by the Authority and entitlements to 100% of the capacity and energy of the Project have been sold to six of its members. The City of Burbank, a Project participant, will manage its construction and operation.

Construction is under way and commercial operation is expected to begin in mid-2005. During the current year, the Project had no rev-enues and is not anticipated to have any until the Project becomes operational. Costs related to the construction of the plant of $91.6 mil-lion and debt service costs of $3.7 million offset by investment income of $1.7 million, were capitalized as part of the utility plant balance.

Once the plant becomes operational, these costs will be recovered through future billings to participants.

ProjectsStabilization Fund - In fiscal year 1997,the Authority autho-rized the creation of a Projects Stabilization Fund. Deposits may be made into the fund from budget under-runs, after authorization of individual participants, and by direct contributions from the partici-pants.Participants have discretion over the use of their deposits within SCPPA project purposes. This fund is not a project-related fund; there-fore,it is not governed by any project Indenture of Trust.

The members participate in the ProjectsStabilization Fund by mak-ing deposits to the fund at their discretion.

Participant Ownership Interests - The Authoritys participants may elect to participate in the projects. As of June 30, 2003, the members have the following participation percentages in the Authoritys interest in the projects:

46 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY NOTES TO FINANCIAL STATEMENTS

Magnolia Palo Hoover Mead-Mead-San Power Participants Verde STS Uprating Phoenix Adelanto Juan Project City of Los Angeles 67.0%

59.5%

24.8%

35.7%

City of Anaheim 17.6%

42.6%

24.2%

13.5%

38.0%

City of Riverside 5.4%

10.2%

31.9%

4.0%

13.5%

Imperial Irrigation District 6.5%

51.0%

City of Vernon 4.9%

City of Azusa 1.0%

4.2%

1.0%

2.2%

14.7%

City of Banning 1.0%

2.1%

1.0%

1.3%

9.8%

City of Colton 1.0%

3.2%

1.0%

2.6%

14.7%

4.2%

City of Burbank 4.4%

4.5%

16.0%

15.4%

11.5%

31.0%

City of Glendale 4.4%

2.3%

14.8%

11.1%

9.8%

16.5%

City of Cerritos 4.2%

City of Pasadena 4.4%

5.9%

13.8%

8.6%

6.1%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100%

The Authority has entered into power sales and transmission ser-vice agreements with the above project participants. Under the terms of the contracts, the participants are entitled to power output or transmission service, as applicable. The participants are obligated to make payments on a take or paybasis for their proportionate share of operating and maintenance expenses and debt service. The contracts cannot be terminated or amended in any manner which will impair or adversely affect the rights of the bondholders as long as any bonds issued by the specific project remain outstanding.

The contracts expire as follows:

Palo Verde Project................... 2030 Southern Transmission System Project........... 2027 Hoover Uprating Project

................ 2018 Mead-Phoenix Project................. 2030 Mead-Adelanto Project................. 2030 San Juan Project.................... 2030 Magnolia Power Project................. 2036 The Authoritys interests in generation and transmission projects are jointly owned with other utilities. Each joint plant participant, including the Authority, is responsible for financing its share of con-struction and operating costs. The financial statements reflect the Authoritys interest in each jointly-owned project as well as the project that it owns.

2. Summary of Significant Accounting Policies The accounting records of the Authority are maintained in accordance with accounting principles generally accepted in the United States of America. As a government-owned utility, in prior years the Authority applied all statements issued by the Governmental Accounting Standards Board (GASB) and all statements and interpretations issued by the Financial Accounting Standards Board (FASB) which were not in conflict with statements issued by the GASB. Effective July 1,2002,the Authority changed its election under the guidance in GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that Use Proprietary Fund Accounting, to follow all GASB statements and only FASB statements and interpreta-tions issued before November 30,1989.

Accounting Changes Change in Election of Application of GASB 20 - Effective July 1,2002,the Authority changed its election under the guidance in GASB 20 and no longer follows FASB statements issued after November 30, 1989. The impact on the Authoritys financial statements as a result of this change was the discontinuation of the application of FASB Statement No.133, Accounting for Derivative Instruments and Hedging Activities (FASB 133).

The Authority adopted FASB 133 in fiscal year 2001 and consequently began reporting its derivative instruments at fair value. With this accounting change, the Authority is no longer required to report its derivative instruments at fair value under the guidance applicable to state and local governments. The Authority restated its prior year finan-cial statements to retroactively apply this change in election under GASB 20. The Authority believes that this was a change to a preferable method of accounting. The restatement of the fiscal year 2002 financial statements was limited to STS,as it was the only project with derivative instruments.

Included in the derivative commitments caption in the prior years was the $7.9 million premium received by the Authority in consid-eration for entering into an agreement whereby the Authority sold an option (the Swaption) on a floating-to-fixed interest rate swap.

Previously the value of this option was recorded at fair value;however, with this change in accounting principle, it is now reported as part of the debt value and amortized to interest expense as a downward yield adjustment over the life of the related debt. See Note 4 for derivative instrument disclosures.

The following summarizes the impact on the combined financial statements from this change in accounting principle:

As Previously Reported Adjustments As Restated June 30,2002 Combined Statements of Net Assets (Deficit)

Long-term debt.................

$2,166,175 7,272

$ 2,173,447 Derivative commitments.............

99,695

$ (99,695)

Net assets (deficit)................

$ (285,632) 92,423

$ (193,209)

Year Ended June 30,2002 Combined Statements of Revenues, Expenses and Changes in Net Assets (Deficit)

Debt expenses..................

$ (163,701) 443

$ (163,258)

Unrealized loss on derivative commitment....

(36,675) 36,675 Net assets (deficit) -beginning of year (June 30,2001)................

$ (272,197) 55,305

$ (216,892)

Adoption of GASB Statements Nos. 34, 37, and 38 - On July 1, 2001, the Authority adopted GASB Statement No. 34 (GASB 34), Basic Financial Statements and Managements Discussion and Analysis for State and Local Governments; GASB Statement No.37 (GASB 37), Basic Financial Statements and Managements Discussion and Analysis for State and Local Governments: Omnibus - an Amendment of GASB Statements No. 21 and No. 34 and GASB Statement No. 38 Certain Financial Statement Note Disclosures (GASB 38). GASB 34, as amended, and GASB 38 establish specific standards for external financial reporting for all state and local governments. As a result of adopting these Standards, the basic financial statement presentation was significantly changed, including adding managements discussion and analysis of operating,investing and financing activities. GASB 34 also requires the classification of net assets (deficit) into three components - invested in capital assets, net of related debt; restricted; and unrestricted. These classifications are defined as follows:

Invested in capital assets, net of related debt - This component of net assets consists of (a) capital assets, (b) net of accumulated depreciation and (c) unamortized debt expenses, reduced by the outstanding balances of any bonds or other borrowings that are attributable to the acquisition, construction, or improvement of 47

those assets. If there are significant unspent related debt proceeds at year-end,the portion of the debt attributable to the unspent pro-ceeds is not included in the calculation of Invested in capital assets, net of related debt. Rather, that portion of the debt is included in the same net assets component as the unspent proceeds.

Restricted - This component consists of net assets on which con-straints are placed as to their use. Constraints include those imposed by creditors (such as through debt covenants), contri-butors, or laws or regulation of other governments or constraints imposed by law through constitutional provisions or through enabling legislation.

Unrestricted net assets - This component of net assets consists of net assets that do not meet the definition of restrictedor invested in capital assets,net of related debt.

Under GASB 34,the statements of equity and of other comprehen-sive income were eliminated; the statement of income was renamed the statement of revenues,expenses and changes in net assets (deficit);

and the statement of cash flows presentation was changed to the direct method (including a reconciliation of operating cash flows to operating income). The adoption of GASB 34 had no significant effect on the basic combined financial statements, except for the change from the indirect method to the direct method of reporting cash flows and the reclassification of cost recoverable, deferred credits and funds due to participants to net assets (deficit) in accordance with the Statement.

Use of Estimates - The preparation of financial statements in confor-mity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Utility Plant - The Authoritys share of construction and better-ment costs associated with PVNGS, STS, Mead-Phoenix, Mead-Adelanto, SJGS and Magnolia Power Project are included as utility plant. Depreciation expense is computed using the straight-line method based on the estimated service lives, principally thirty-five years for PVNGS, STS, Mead-Phoenix and Mead-Adelanto and twenty-one years for SJGS.

48 A summary of changes in Utility plant follows (amounts in thousands):

Balance Balance June 30, June 30, 2002 Additions Disposals Transfers 2003 Nondepreciable Utility Plant Land........................

36,187 36,187 Construction work in progress...........

15,180 101,904 (4,339) 112,745 Nuclear fuel*....................

14,981 5,892 (6,329) 14,544 Total nondepreciable utility plant...........

66,348 107,796 (6,329)

(4,339) 163,476 Depreciable Utility Plant Production Nuclear generation (Palo Verde Project).....

620,003 3,247 (614) 622,636 Coal-fired plant (San Juan Unit 3 Project)....

175,111 868 (3,504) 172,475 Transmission....................

876,286 876,286 General.......................

32,718 224 (124) 32,818 Total depreciable utility plant.............

1,704,118 4,339 (4,242) 1,704,215 Less accumulated depreciation.............

(892,551)

(76,337) 4,216 (964,672)

Total utility plant,net.................

877,915 35,798 (6,355)

(4,339)

$ 903,019

• Nuclear fuel disposals represent amortization.

Nuclear Fuel - Nuclear fuel is amortized and charged to expense on the basis of actual thermal energy produced relative to total thermal energy expected to be produced over the life of the fuel. Under the provisions of the Nuclear Waste Policy Act of 1982,the federal govern-ment assesses each entity with nuclear operations, including the par-ticipants in PVNGS, $1 per megawatt hour of nuclear generation. The Authority records this charge as a current year expense. See Note 7 for information about spent nuclear fuel disposal.

Nuclear Decommissioning - Decommissioning of PVNGS is expected to commence subsequent to the year 2024. The total cost to decom-mission the Authoritys interest in PVNGS is estimated to be $116.6 mil-lion in 2002 dollars ($375.0 million in 2022 dollars, assuming a 6% esti-mated annual inflation rate). This estimate is based on an updated site specific study prepared by an independent consultant in 2001. The Authority is providing for its share of the estimated future decommis-sioning costs over the remaining life of the nuclear power plant through annual charges to expense,which amounted to $10.9 and $11.9 million in fiscal years 2003 and 2002, respectively.The decommissioning liabi-lity is included as a component of accumulated depreciation and was

$170.8 and $159.9 million at June 30,2003 and 2002,respectively.

The Authority contributes to external trusts set up in accordance with the Arizona Nuclear Power Plant participation agreement and Nuclear Regulatory Commission requirements. As of June 30, 2003, decommissioning funds totaled approximately $117.8 million, includ-ing approximately $902,000 of interest receivable.

Demolition and Site Reclamation - Demolition and site reclamation of SJGS, which involves restoring the site to a green condition, is projected to commence subsequent to the year 2014. Based upon the study performed by an independent engineering firm, the Authoritys share of the estimated demolition and site reclamation costs is

$18.7 million in 1992 dollars. The Authority is providing for its share of the estimated future demolition costs over the remaining life of the power plant through annual charges to expense of $3.1 million. The demolition liability is included as a component of accumulated depre-ciation and totaled $31.1 million and $28.0 million at June 30,2003 and 2002,respectively.

As of June 30,2003,the Authority has not billed participants for the cost of demolition nor has it established a demolition fund.

Investments - Investments include United States government and governmental agency securities and repurchase agreements which are collateralized by such securities. These investments are reported at fair value and changes in unrealized gains and losses are recorded in the statement of revenues, expenses and changes in net assets (deficit).

Gains and losses realized on the sale of investments are generally determined using the specific identification method.

The Bond Indentures for the six Projects and the Multiple Project Fund require the use of trust funds to account for the Authoritys receipts and disbursements. Cash and investments held in these funds are restricted to specific purposes as stipulated in the Bond Indentures.

Advances for Capacity and Energy - Advance payments to the United States Bureau of Reclamation for the uprating of the 17 genera-tors at the Hoover Power Plant are included in advances for capacity and energy. These advances are being reduced by the principal portion of the credits on billings to the Authority for energy and capacity.

Cash and Cash Equivalents - Cash and cash equivalents include cash and investments with original maturities of 90 days or less.

Unamortized Debt Expenses - Debt premiums, discounts and issue expenses are deferred and amortized to expense over the lives of the related debt issues. Losses on refunding related to bonds redeemed by refunding bonds are amortized over the shorter of the life of the refunding bonds or the remaining term of bonds refunded. Losses on early extinguishment of debt are recognized immediately.

Arbitrage Rebate - The unused proceeds from the issuance of Multiple Project Revenue Bonds have been invested in taxable financial instruments. The excess of interest income over expense associated with the bonds,if any,is payable to the IRS within five years of the date of the bond offering and each consecutive five years thereafter.

At June 30, 2003, cumulative savings due to the rebate calculation amounted to $14.4 million. As a result, the Multiple Project Fund has recorded liabilities of $3.8 million and $10.6 million to the Mead-Phoenix Project and Mead-Adelanto Projects,respectively.

The next rebate payment to the IRS for these issues,if any,is due in fiscal year 2006.

Revenues - Revenues consist of billings to participants for the sales of electric energy and transmission service in accordance with the partic-ipation agreements. Generally, revenues are fixed at a level to recover all operating and debt service costs over the commercial life of the property.

In September 1998, the Palo Verde participants approved a resolu-tion authorizing the Authority to bill the participants $65 million annu-ally through June 30, 2004 to pay for increased debt service costs as a result of a refunding completed in October 1997. In addition, the par-ticipants resolved to transfer any overbillings,renewal and replacement excess funds or surplus amounts through June 30, 2004 into the Palo Verde reserve account. Amounts on deposit in the reserve account are intended to be used to enhance the competitiveness of the Palo Verde Project, at the discretion of the Board of Directors. Funds held in the reserve account as a result of this resolution totaled $45.5 million and

$34.8 million as of June 30,2003 and 2002,respectively.

San Juan Coal Agreements - On October 17, 2000, an agreement was reached on the principles of a new long-term fuel sourcing and pricing plan between the participants of SJGS and its coal supplier. The agreement authorizes the supplier to develop an underground long-wall mine to replace production from two existing surface mines. To terminate the existing agreement, the Authority made a $9.9 million payment on December 31, 2002, which was its share of the require-ment of the new contract. Included in the current year revenues are billings to project participants for the required proceeds to settle the

$9.9 million buyout. The new underground mine will result in signifi-cantly reduced costs of coal supplied to SJGS through 2017,the term of the new contract.

Reclassifications - Certain prior period amounts have been reclassi-fied to conform to the current presentation.

3. Investments The Authoritys investment function operates within a legal frame-work established by Sections 6509.5 and 53600 et.Seq.of the California Government Code,Indentures of Trust,instruments governing financial arrangements entered into by SCPPA to finance and operate Projects and the SCPPA Investment Policy.

Eligible securities and general limitations are derived from each Projects Indenture of Trust for the issuance of senior and subordinate lien bonds. Additional limitations are derived from the Government Code and SCPPAs evolving investment practices.

49

The operative Indentures of Trust in which securities are authorized for investment purposes relate to the Hoover Uprating Project Bonds, the San Juan Project Bonds,the Palo Verde Project Bonds,the Southern Transmission System Project Bonds, the Mead-Phoenix Project Bonds, the Mead-Adelanto Project Bonds,the Multiple Project Fund Bonds and the Magnolia Power Project Bonds. Authorized investments for the ProjectsStabilization Fund are set forth in a resolution approved by the Board in 1996.

Eligible securities include:

United States Treasury Securities, which are bonds or other obliga-tions secured by the full faith and credit of the United States of America; Federal Agency Obligations,which have the full financial backing of the U.S.Government; Government Sponsored Enterprise Obligations, which are created by acts of Congress to provide liquidity for selected lending pro-grams targeted by Congress; Repurchase Agreements, which are collateralized loan contracts where the seller includes a written agreement to repurchase the securities at a later date for a specified amount; Negotiable Certificates of Deposit, which are deposit liabilities issued by a nationally or state-chartered bank,a savings or a federal association or by a state-licensed branch of a foreign bank which has a short-term ratings of at least A-1by S&P and at least P-1by Moodys; Bankers Acceptances,a short term draft or bill of exchange guaran-teed for payment at face value to the holder of the instrument on its maturity date,which has a short-term rating of at least A-1by S&P and at least P-1by Moodys; Commercial Paper, a short-term unsecured promissory note issued by non-financial or financial firms with a rating of A-1by S&P and P-1by Moodys; Medium Term Notes rated A or better and only those issued by corporations organized and operating within the United States, or by depository institutions licensed by the United States or any state and operating within the United States; Equity-Linked Notes, which are categorized as medium-term cor-porate notes and are subject to the constraints set forth in the Government code.

50 Investments at June 30,2003 and 2002 are as follows:

June 30,2003 Southern Palo Transmission Hoover Mead-Mead-Multiple San Magnolia Projects Verde System Uprating Phoenix Adelanto Project Juan Power Stabilization Project Project Project Project Project Fund Project Project Fund Total

$ 351,717 40,265 2,955 437 3,283 7,435 15,514 46,945 89,239 557,790 420,763 10,337 5,711 436,811 36,423 9,314 24,898 236,002 21,599 35,397 363,633 3,123 9,673 1,253 1,605 2,069 397 150,465 1,035 169,620 4,367 4,367 96 40 18 12 12 22 200

$ 780,066 96,738 4,226 11,368 30,262

$ 243,437 37,532

$ 232,807 95,985

$ 1,532,421

$ 661,929 58,802 9,751 27,471

$ 243,437 21,602 70,426 53,044

$ 1,146,462 12,995 500 13,495 105,142 37,936 3,726 1,617 2,791 15,930 162,381 42,941 372,464

$ 780,066 96,738 4,226 11,368 30,262

$ 243,437 37,532

$ 232,807 95,985

$ 1,532,421 June 30,2002 Southern Palo Transmission Hoover Mead-Mead-Multiple San Projects Verde System Uprating Phoenix Adelanto Project Juan Stabilization Project Project Project Project Project Fund Project Fund Total Federal agencies......................

$ 304,433 44,247 3,972 1,815 5,015 7,435 16,668

$ 156,067 539,652 U.S.government securities.................

290,244 15,094 13,104 318,442 Guaranteed investment contracts..............

40,412 9,209 24,906 240,149 13,524 328,200 Repurchase agreements..................

6,559 6,559 Money market investment account.............

3,389 10,656 105 254 422 1

903 3,088 18,818 Medium term notes.....................

4,500 4,500 Cash............................

96 38 22 12 12 20 1,031 1,231 Total

$ 602,662

$ 117,006 4,099 11,290 30,355

$ 247,585 31,115

$ 173,290

$ 1,217,402 Restricted investments...................

$ 528,985 83,474 2,861 9,209 26,461

$ 247,584 16,052

$ 158,320

$ 1,072,946 Unrestricted investments..................

13,528 1,111 14,639 Cash and cash equivalents.................

60,149 33,532 127 2,081 3,894 1

15,063 14,970 129,817 Total

$ 602,662

$ 117,006 4,099 11,290 30,355

$ 247,585 31,115

$ 173,290

$ 1,217,402 Federal agencies......................

U.S.government securities.................

Guaranteed investment contracts..............

Repurchase agreements..................

Money market investment account.............

Medium term notes.....................

Cash............................

Total Restricted investments...................

Unrestricted investments..................

Cash and cash equivalents.................

Total

4. Derivative Instruments Objective of the swaps. In order to protect against the potential of ris-ing interest rates, the Authority entered into four separate pay-fixed, receive-variable interest rate swaps at a cost less than what the Authority would have paid to issue fixed-rate debt.

Terms, fair values, and credit risk. The terms, including the fair values and credit ratings of the outstanding swaps as of June 30, 2003, are included below. The notional amounts of the swaps match the princi-pal amounts of the associated debt. Except as discussed under the rollover risk, the Authoritys swap agreements contain scheduled reductions to outstanding notional amounts that are expected to approximately follow scheduled or anticipated reductions in the associated bonds payablecategory.

2003 Swap - In April 2003, the Authority entered into an Interest Rate Swap agreement with a third party for the purpose of hedg-ing against interest rate variations arising from the issuance of the 2003 Subordinate Refunding Series A Southern Transmission System Project Revenue Bonds. The notional amount of the Swap Agreement is equal to the par value of the bonds. The Swap Agreement provides for the Authority to make payments to the third party on a fixed rate basis of 3.266%,and for the third party to make reciprocal payments based on a floating rate priced at 65% of one-month LIBOR. The floating rate on the related bonds at June 30, 2003 was 0.857%. The termination of the agreement is July 1,2022.

Swaption/2000 Swap - In February 2001, the Authority entered into a transaction whereby it sold an option (the Swaption) on a floating-to-fixed interest rate swap. The Swaption, if exercised, will effectively convert the $125 million Subordinate Refunding Series A bonds issued by the Southern Transmission System Project in May 2000, into a synthetic fixed-rate debt obligation with a coupon of 4.25%. The floating rate on the Swaption is priced at 60% of one-month LIBOR. In exchange for the right to exercise the swaption, the counterparty paid the Authority a one-time up front option premium amount of $7.9 million.

On April 1, 2002, the counterparty exercised its option and the Authority is now obligated to pay floating for fixed payments on the 2000 Subordinate Refunding Series A bonds based on the terms described above. The floating rate on the related bonds at June 30, 2003 and 2002 was 0.95% and 1.11%,respectively.

2001 Swap - In June 2001, the Authority entered into an interest rate swap agreement with a third party for the purpose of hedg-ing against interest rate variations arising from the issuance of the 2001 Subordinate Refunding Series A Southern Transmission System Project Revenue Bonds. The notional amount of the Swap Agreement is equal to the par value of the bonds. The Swap Agreement provides for the Authority to make payments to the third party on a fixed rate basis of 4.24%, and for the third party to make reciprocal payments based on a variable rate. The reset dates of the variable rate occur weekly and the rate for a reset date will be the rate determined by the Bond Market Association Municipal Swap Index (BMA) minus 40 basis points. The counter-party has the option to terminate the agreement on or after July 1, 2006 should the BMA index average more than 7% over a consecu-tive 180-day period. The floating rates on the bonds were 0.95%

and 1.10% at June 30, 2003 and 2002, respectively. The bonds mature in 2021.

1991 Swap - In fiscal year 1991, the Authority entered into an Interest Rate Swap Agreement with a third party for the purpose of hedging against interest rate fluctuations arising from the issuance of 1991 Subordinate Refunding Series Southern Transmission Project Revenue Bonds. The notional amount of the Swap Agreement is equal to the par value of the bonds. The Swap Agreement provides for the Authority to make payments to the third party on a fixed rate basis at 6.38%, and for the third party to make reciprocal payments mirroring the bond variable coupon rate (0.85% and 1.10% at June 30, 2003 and 2002, respectively). The bonds mature in 2019.

Fair value. Because interest rates have declined since inception date of each swap,all swaps had negative fair value as of June 30,2003. All fair values were estimated using the zero-coupon method. This method calculates the future payments required by the swap, assuming that the current forward rates implied by the yield curve correctly anticipate future spot interest rates. These payments are then discounted using the spot rates implied by the current yield curve for hypothetical zero-coupon rate bonds due on the date of each future net settlement on the swaps.

Credit risk. As of June 30,2003,the Authority was not exposed to credit risk on any of its outstanding swaps because the swaps had negative fair values. However,should interest rates change and the fair values of the swaps become positive,the Authority would be exposed to credit risk in the amount of the derivativesfair value.

The swap agreements contain varying collateral agreements with the counterparties. The swaps require full collateralization of the fair value of the swap should the counterpartys credit rating fall below A -

as issued by Standard & Poors or A3 as issued by Moodys Investors Service for the 1991 Swap, AA-/Aa3 for the 2000 swap, and A3/A1 for the 2001 swap. Collateral on all swaps is to be in the form of US gov-ernment securities held by a third-party custodian.

51 (Amounts in thousands)

Variable Swap Counterparty Notional Effective Fixed Rate Rate Fair Termination Credit Associated Bond Issues Amount Date Paid Received Values Date Rating STS 1991 Revenue Bonds Series A..................

285,400 4/17/1991 6.38%

Bond variable

$ (100,134) 6/30/2019 AAA/Aaa coupon rate STS 2000 Subordinate Refunding Series A Bonds..........

125,000 2/1/2001 4.25%

60% of LIBOR (31,398) 7/1/2022 AA-/Aa1 STS 2001 Subordinate Refunding Series A Bonds..........

79,795 6/14/2001 4.24%

BMA less (14,470) 7/1/2021 AA+/Aa2 40 basis points STS 2003 Subordinate Refunding Series A Bonds..........

51,750 4/24/2003 3.266%

65% of LIBOR (2,068) 7/1/2022 AA-/Aa1 541,945

$ (148,070)

The Authority also enters into master netting agreements when the Authority has more than one derivative transaction with one counter-party. Under the terms of these agreements,should one party become insolvent or otherwise default on its obligations,close-out netting pro-visions permit the nondefaulting party to accelerate and terminate all outstanding transactions and net the transactionsfair values so that a single sum will be owed by,or owed to,the nondefaulting party.

Basis risk. The Authoritys variable-rate bond coupon payment for the 2001 swap is based on the BMA rate. For the 2000 and 2003 swaps for which the Authority receives a variable-rate payment other than BMA, the Authority is exposed to basis risk should the relationship between LIBOR and BMA converge. If a change occurs that results in the rates moving to convergence, the expected cost savings may not be realized. As of June 30,2003,the BMA rate was 0.635%,whereas 60%

of LIBOR was 0.792%, and 65% of LIBOR was 0.857 %. The following is a summary of interest rates paid and received from the counterparties as of June 30,2003:

Type of Derivative 1991 Swap 2000 Swap 2001 Swap 2003 Swap Fixed payments to counterparty 6.380%

4.250%

4.240%

3.266%

Less,variable payments from counterparty 0.850%

0.792%

0.635%

0.857%

Net interest rate swap payments 5.530%

3.458%

3.605%

2.409%

Add,variable-rate bond coupon payments 0.850%

0.950%

0.950%

0.850%

Synthetic interest rate on bonds 6.380%

4.408%

4.555%

3.259%

Termination risk. The Authority or the counterparty may terminate any of the swaps if the other party fails to perform under the terms of the contract.In addition,the 2001 Swap provides the counterparty with the option to terminate the swap agreement commencing July 1, 2006. If any of the swaps are terminated, the associated variable-rate bonds would no longer carry synthetic interest rates. If at the time of termi-nation the swap has a negative fair value,the Authority would be liable to the counterparty for a payment equal to the swaps fair value.

Rollover risk. The Authority is exposed to rollover risk on the 2001 swap as the counterparty has the option to terminate the agreement prior to the maturity of the associated debt should the BMA index average more than 7% over a consecutive 180-day period. When this swap ter-minates,the Authority will not realize the synthetic rate offered by the swap on the underlying debt issue. The following debt is exposed to rollover risk:

Associated Debt Optional Debt Issuance Maturity Date Swap Termination Date STS 2001 Subordinate 7/01/2021 July 5,2006 Refunding Series A Swap payments and associated debt. Using rates as of June 30, 2003, debt service requirements of the Authoritys outstanding variable-rate debt and net swap payments are as follows. As rates vary,variable-rate bond interest payments and net swap payments will vary.

5. Long-Term Debt Long-term debt outstanding at June 30, 2003 consists of revenue bonds and subordinate refunding bonds due serially in varying annual amounts through 2036. The revenue bonds were issued to finance the purchase and construction of the Authoritys share of each of the Projects. The subordinate refunding bonds were issued to advance refund specified revenue bonds. The Multiple Project Revenue Bonds were issued on August 1, 1989 to finance acquisition of ownership interests in one or more Projects expected to be undertaken within five years after issuance. In October 1992,$103.6 million and $285.0 million of these bonds were transferred to the Mead-Phoenix Project and the Mead-Adelanto Project,respectively.

In accordance with the bond indentures, the revenue bonds and subordinate refunding bonds are special, limited obligations of the Authority. With the exception of the Magnolia Power Project B, Lease Revenue bonds (City of Cerritos, California) 2003-1 (Project B Bonds),

the bonds issued by each project are payable solely from and secured solely by interests in the issuing project as follows:

Proceeds from the sale of bonds; All revenues, incomes, rents and receipts attributable to the issu-ing project and related interest on securities held under the bond indentures;and All funds established by the indentures.

The Authority has agreed to certain covenants with respect to bonded indebtedness,including the requirement to enforce the power and transmission sales agreements with the participants. At the option of the Authority, all outstanding Power Project Revenue Bonds and Subordinate Refunding Term Bonds are subject to redemption prior to maturity,except for the 1996 Subordinate Refunding Series A and por-tions of the 1989A,1992A,1992B and 1993A Series bonds issued by the Palo Verde Project; the 1996 Subordinate Refunding Series A bonds issued by the Southern Transmission System;and,a total of $125.5 mil-lion of the outstanding Multiple Project Revenue Bonds.

Revenue Bonds Magnolia Power Project Revenue Bonds - To finance the acquisition and construction of the Magnolia Power Project, the Authority, on April 2003, issued $299.975 million Magnolia Power Project A, Revenue Bonds,2003-1 (Project A Bonds). Simultaneously with the issuance of the Project A Bonds, the Authority issued $14.105 million Project B Bonds. The Project Manager expects that proceeds of both the Project A and Project B Bonds, together with applicable interest earn-ings, will be sufficient to pay all costs necessary to construct and acquire the Project.

52 Fiscal Year Variable-Rate Bonds Interest Rate Ending June 30 Principal Interest Swaps,Net Total 2004 1,575 4,798 24,310 29,108 2005 1,725 4,783 24,217 29,000 2006 1,850 4,768 24,119 28,887 2007 1,950 4,751 24,014 28,765 2008 14,875 4,625 23,197 27,822 2009-2013 134,900 20,267 99,388 119,655 2014-2018 247,220 9,829 48,218 58,047 2019-2022 137,850 1,633 6,088 7,721 541,945 55,454 273,551 329,005

The Project B Bonds will be secured by lease rental payments to be made by the City of Cerritos (the City) in connection with the lease of certain facilities and premises owned by the City to the Authority and the leaseback of such facilities and premises to the City. The Base Rental Payments will be equal to the principal and interest on the Project B Bonds. In accordance with the Assignment Agreement between the Authority and the Trustee, the Authority will assign certain of its rights under the Lease,including its right to receive the Base Rental Payments, to the Trustee for the benefit of the Owners of the Project B Bonds.

The City has covenanted to budget and appropriate sufficient funds to make all payments required to be made under the Lease. The Lease has a term of 55 years.

The bonds mature on July 1,2036.

Hoover Uprating Project Refunding - In December 2001, the Authority issued $24.7 million par value Hoover 2001 Refunding Series A Bonds (refunding bonds) to refund $28.1 million of Hoover 1991 Refunding Series A Bonds (refunded bonds). The remaining amount of $3.4 mil-lion was funded through the release of funds from the debt service accounts related to the refunded bonds. The refunded bonds were redeemed on January 1, 2002. The refunding is expected to reduce total debt service payments over the life of the refunding issue by approximately $9.3 million and is expected to result in present value savings of approximately $2.9 million based on an average cost of 4.74% on the new bonds.

This transaction resulted in a net loss for accounting purposes of

$5.0 million, consisting primarily of the write-off of unamortized debt expense, deferred loss on prior refunding and the discount associated with the refunded bonds.The Authority has proportionately allocated this loss between bonds refunded through funds released from the debt service accounts and through the issuance of refunding bonds.

The loss allocated to the new bonds of $4.3 million was deferred and will be amortized over the life of the new bonds. The portion refunded with cash resulted in immediate recognition of a $0.7 million extra-ordinary loss in fiscal year 2002.

San Juan Unit 3 Project Refunding - In October 2002, the Authority issued $71.85 million par value SJ 2002 Refunding Series B Bonds (refunding bonds) to refund $70.8 million of SJGS 1993 Series A Bonds (refunded bonds). The refunding bonds are being issued as Auction Rate Certificates (ARCs). The initial interest period of the refunding bonds commenced from the date of delivery of the bonds and ends on January 1, 2012. During this period the interest payable on the bonds will accrue at 5.25% per annum. After the initial interest period,the refunding bonds will bear interest at the applicable Auction Rate. The Auction Dates for the 2002 Series B Bonds will generally occur every thirty-five (35) days.

The refunding is expected to reduce total debt service payments over the life of the refunding issue by approximately $12.9 million and is expected to result in present value savings of approximately $8.1 million based on an average cost of 4.80% on the new bonds. The refunded bonds were redeemed on January 1,2003.

This transaction resulted in a net loss for accounting purposes of

$6.04 million,consisting primarily of the write-off of unamortized debt expense and the discount associated with the refunded bonds. The Authority has proportionately allocated this loss between bonds refunded through funds released from the debt service accounts and through the issuance of refunding bonds. The loss allocated to the new bonds of $5.97 million was deferred and will be amortized over the life of the new bonds. The portion refunded with cash resulted in immedi-ate recognition of a $74 thousand extraordinary loss in fiscal year 2003.

In May 2002, the Authority issued $125.3 million par value SJ 2002 Refunding Series A Bonds (refunding bonds) to refund $118.1 million of SJ 1993 Revenue Series A Bonds (refunded bonds).The refunded bonds were redeemed beginning on January 1, 2003 and will continue to be redeemed as they become due every January 1 through January 1,2014.

The refunding is expected to reduce total debt service payments over the life of the refunding issue by approximately $8.9 million and is expected to result in present value savings of approximately $4.0 million based on an average cost of 5.33% on the new bonds.

This transaction resulted in a net loss for accounting purposes of

$7.3 million, consisting primarily of the write-off of unamortized debt expense and the discount associated with the refunded bonds. The Authority has proportionately allocated this loss between bonds refunded through funds released from the debt service accounts and through the issuance of refunding bonds. The loss allocated to the new bonds of $7.0 million was deferred and will be amortized over the life of the new bonds. The portion refunded with cash resulted in immedi-ate recognition of a $0.3 million extraordinary loss in fiscal year 2002.

Subordinate Refunding Bonds Southern Transmission Project Refunding - In May 2003, the Authority issued $51.75 par value STS 2003 Subordinate Refunding Series A Bonds (refunding bonds) to refund $58.5 million of STS 1993 Subordinate Refunding Series A Bonds (refunded bonds). Funds released from the debt service accounts related to the refunded bonds were $9.8 million.

The refunded bonds are expected to be redeemed on July 1,2003.The refunding is expected to reduce total debt service payments over the life of the refunding issue by approximately $13.3 million and is expected to result in present value savings of approximately $9.9 million based on an average cost of 3.27% on the new bonds.

The refunding bonds are issued as Auction Rate Securities bearing interest at a weekly Auction Rate (0.85% at June 24,2003) as determined by the Auction Agent. The Authority entered into an interest rate swap agreement to fix the interest rate at 3.266% (see Note 4).

This transaction resulted in a net loss for accounting purposes of

$9.8 million, consisting primarily of the write-off of unamortized debt expense,deferred loss on prior refundings and the discount associated with the refunded bonds. The Authority has proportionately allocated this loss between bonds refunded through funds released from the debt service accounts and through the issuance of subordinate refunding bonds. The loss allocated to the new bonds of $8.2 million was deferred and will be amortized over the life of the new bonds.

The portion refunded with cash resulted in immediate recognition of a

$1.6 million extraordinary loss in fiscal year 2003.

In October 2002, the Authority issued $38.76 million par value STS 2002 Subordinate Refunding Series B Bonds (refunding bonds) to refund $46.40 million of STS 1992 Subordinate Refunding Series A Bonds (refunded bonds). The remaining $5.2 million was funded from debt service accounts related to the refunded bonds and $2.1 million from the General Reserve Fund. The refunding is expected to reduce total debt service payments over the life of the refunding issue by approximately $8.7 million and is expected to result in present value savings of approximately $7.3 million based on an average cost of 4.57% on the new bonds. The refunded bonds were redeemed in December 2002.

This transaction resulted in a net loss for accounting purposes of

$5.93 million,consisting primarily of the write-off of unamortized debt expense,deferred loss on prior refundings and the discount associated with the refunded bonds. The Authority has proportionately allocated this loss between bonds refunded through funds released from the debt service accounts and through the issuance of subordinate refund-ing bonds. The loss allocated to the new bonds of $5.03 million was deferred and will be amortized over the life of the new bonds. The portion refunded with cash resulted in immediate recognition of an

$892 thousand extraordinary loss in fiscal year 2003.

53

Loss on (Premium)

Unamortized debt-related costs,net:

Refunding Discount Total Palo Verde Project......................................

42,011 61,104 103,115 Southern Transmission System Project............................

127,141 33,545 160,686 Hoover Uprating Project...................................

3,634 (448) 3,186 Mead-Phoenix Project....................................

5,249 2,441 7,690 Mead-Adelanto Project....................................

14,435 7,434 21,869 Multiple Project Fund....................................

11,555 11,555 San Juan Project 11,556 (16,835)

(5,279)

Magnolia Power Project...................................

(7,650)

(7,650) 204,026 91,146 295,172 In May 2002, the Authority issued $63.9 million par value STS 2002 Subordinate Refunding Series A Bonds (refunding bonds) to refund

$73.3 million of STS 1992 Subordinate Refunding Series A Bonds (refunded bonds). The remaining amount of $9.4 million was funded through the release of funds from the debt service accounts related to the refunded bonds. The refunded bonds were redeemed on July 1, 2002. The refunding is expected to reduce total debt service payments over the life of the refunding issue by approximately $4.7 million and is expected to result in present value savings of approximately $3.4 mil-lion based on an average cost of 4.97% on the new bonds.

This transaction resulted in a net loss for accounting purposes of

$9.7 million, consisting primarily of the write-off of unamortized debt expense,deferred loss on prior refundings and the discount associated with the refunded bonds. The Authority has proportionately allocated this loss between bonds refunded through funds released from the debt service accounts and through the issuance of subordinate refund-ing bonds. The loss allocated to the new bonds of $8.2 million was deferred and will be amortized over the life of the new bonds. The portion refunded with cash resulted in immediate recognition of a

$1.5 million extraordinary loss in fiscal year 2002.

Advance Refundings - In prior years,the Authority established irrevo-cable escrow trusts with the proceeds from issuance of subordinate refunding bonds. These investments will be used to call specified rev-enue bonds at scheduled redemption dates.

In February 2003, the Palo Verde 1993 Escrow Funds which were created to defease to maturity $238.3 million of Palo Verde 1993 Refunding Series A and $98.2 million of 1993 Palo Verde Subordinate Refunding Series Bonds, together the 1993 Defeased Bonds, were restructured. The Escrow Securities held to call the 1993 Defeased Bonds were sold and the proceeds were used to purchase securities of the new 1993 Escrow Funds for the purpose of redeeming the 1993 Defeased Bonds on July 1,2003.

The transaction resulted in a gain of $16.7 million, net of expenses of $580,000. For accounting purposes, this gain is being deferred and amortized as a downward yield adjustment over the life of the debt used to advance refund the 1993 Defeased Bonds. The funds will be used to pay a portion of the 2004 fiscal year capital improvements and the debt service in the amounts of $8.9 million and $7.8 million, respectively.

Prior Year Defeasance of Debt - In prior years,the Authority defeased specified revenue bonds by placing the proceeds from issuance of sub-ordinate refunding bonds in irrevocable trusts to provide for all future debt service payments on the refunded bonds.The trust investments and related liability for defeased bonds are not included in the Authoritys financial statements. At June 30,2003 and 2002,$555.9 mil-lion and $790.6 million,respectively,of revenue bonds outstanding are considered defeased.

54 A summary of changes in long-term debt follows:

(Amounts in thousands)

Southern Transmission Hoover Mead-Mead-Multiple Magnolia Palo Verde System Uprating Phoenix Adelanto Project San Juan Power Project Project Project Project Project Fund Project Project Total Total Long-term debt at June 30,2002.............

629,554 830,680 20,275 63,720 205,678 222,865 200,675

$ 2,173,447 Total Debt due within one year at June 30,2002........

47,395 26,695 905 6,600 1,600 83,195 Total Debt at June 30,2002................

676,949 857,375 21,180 63,720 205,678 229,465 202,275 2,256,642 Principal payments.......................

(47,395)

(26,695)

(905)

(6,600)

(1,600)

(83,195)

Revenue bonds issued.....................

314,080 314,080 Bonds refunded........................

(104,895)

(70,800)

(175,695)

Refunding bonds issued....................

90,505 71,850 162,355 Decrease in Unamortized debt-related costs,net........

28,786 21,099 319 504 1,629 680 7,364 7,650 68,031 Total Debt at June 30,2003................

658,340 837,389 20,594 64,224 207,307 223,545 209,089 321,730

$ 2,542,218 Total Debt due within one year at June 30,2003........

(49,190)

(29,720)

(1,190)

(7,100)

(8,390)

(95,590)

Total Long-term debt at June 30, 2003.............

609,150 807,669 19,404 64,224 207,307 216,445 200,699 321,730

$ 2,446,628 Unamortized debt-related costs,net are as follows as of June 30,2003 (amounts in thousands):

The scheduled debt service payments for future years ending June 30, are included in the table below. The variable rates used for the PV 1996 Subordinate Refunding Series B and C, and the STS 1996 Subordinate Refunding Series B were the rates at June 30,2003 of 0.85% and 0.90%,

respectively. The variable rates are set by the bond remarketing agent on a weekly basis based on economic conditions and bond ratings. The variable rate used for the SJ 2002 Revenue Refunding Series B was assumed at 4% per annum starting in January 1,2012.

Fair Value - The fair value of the Authoritys long-term debt (including the current portion) is approximately $3.0 billion and $2.6 billion at June 30, 2003 and 2002, respectively. Management has estimated fair value based on the quoted market prices for the same or similar issues or on the current average rates offered to the Authority for debt of approximately the same remaining maturities, net of the effect of a related interest rate swap agreement.

55 (Amounts in thousands)

Southern Transmission Hoover Mead-Mead-Multiple Magnolia Palo Verde System Uprating Phoenix Adelanto Project San Juan Power Project Project Project Project Project Fund Project Project Total 49,190 29,720 1,190 7,100 8,390 95,590 30,799 37,992 1,030 3,889 12,232 14,396 10,398 15,170 125,906 51,800 28,535 1,230 7,600 8,805 97,970 28,426 37,381 987 3,889 12,232 13,864 10,013 15,170 121,962 31,470 1,275 8,100 9,160 50,005 28,426 36,844 943 3,889 12,232 13,297 9,631 15,170 120,432 34,230 1,315 3,040 10,135 9,570 3,735 62,025 28,426 36,279 893 3,748 11,763 13,297 9,186 15,096 118,688 30,950 1,370 3,175 10,600 10,050 4,520 60,665 28,426 34,668 838 3,598 11,260 13,297 8,695 15,005 115,787 108,120 185,600 7,715 21,340 62,655 74,900 58,735 24,610 543,675 139,885 145,015 3,279 14,617 46,184 50,892 33,304 72,542 505,718 552,345 254,155 9,685 26,005 84,400 13,800 83,600 30,485 1,054,475 108,925 95,674 1,190 7,097 23,778 36,069 10,730 66,056 349,519 333,900 18,355 61,385 123,600 15,500 39,100 591,840 28,788 924 3,088 4,454 785 56,997 95,036 69,515 49,910 119,425 45,664 45,664 63,695 63,695 31,186 31,186 98,025 98,025 10,142 10,142 761,455 998,075 23,780 71,915 229,175 235,100 203,810 314,080

$ 2,837,390 393,313 452,641 9,160 41,651 132,769 159,566 92,742 358,198

$ 1,640,040 5.52%

4.71%

4.15%

5.57%

5.71%

6.99%

3.98%

4.76%

2004 Principal.....................

Interest.....................

2005 Principal.....................

Interest.....................

2006 Principal.....................

Interest.....................

2007 Principal.....................

Interest.....................

2008 Principal.....................

Interest.....................

2009-2013 Principal.....................

Interest.....................

2014-2018 Principal.....................

Interest.....................

2019-2023 Principal.....................

Interest.....................

2024-2028 Principal.....................

Interest.....................

2029-2033 Principal.....................

Interest.....................

2034-2037 Principal.....................

Interest.....................

Principal.....................

Interest.....................

Effective costs of capital....................

6. Net Assets (Deficit)

As a result of the adoption of GASB 34,costs recoverable,deferred cred-its and funds due to participants were reclassified to net assets (deficit) in accordance with this statement.

Costs Recoverable - Billings to participants are designed to recover costs as defined by the power sales and transmission service agree-ments. The billings are structured to systematically provide for debt service requirements,operating funds and reserves in accordance with these agreements. The difference between billings and the Authoritys expenses calculated in accordance with generally accepted account-ing principles are deferred as costs recoverable in future periods and are presented as net assets (deficit). It is intended that the deferred amounts will be recovered through billings for repayment of principal on the related bonds.

Deferred Credits - During fiscal year 1990, the Authority issued Multiple Project Revenue Bonds for net proceeds of approximately

$600 million to provide funds to finance costs of construction and acquisition of ownership interests or capacity rights in one or more, then unspecified,projects for the generation or transmission of electric energy. Certain of these funds were used to finance the Authoritys interests in Mead-Phoenix and Mead-Adelanto. The remaining funds are held in the Multiple Project Fund. Deferred credits represent the accumulated net earnings of the fund.

Funds Due to Participants - In fiscal year 1997, the Authority autho-rized the creation of a Projects Stabilization Fund. Deposits may be made into the fund from budget under-runs,after authorization of indi-vidual participants, and by direct contributions from the participants.

Monies deposited by the participants to this Fund are used to pay for Authority costs as directed by the participants. This fund is not a pro-ject-related fund,therefore,it is not governed by any project Indenture of Trust.Funds due to Participants represents the net amount of contri-butions and net earnings on the invested contributed funds.

56 Net assets (deficit) are comprised of the following (in thousands):

(Amounts in thousands)

June 30, Fiscal Year June 30, Fiscal Year June 30, 2001 2002 Activity 2002 2003 Activity 2003 GAAP items not included in billings to participants:

Depreciation of plant........................... $

(689,743)

(62,318)

(752,061)

(62,325)

(814,386)

Nuclear fuel amortization.........................

(19,548)

(19,548)

(19,548)

Decommissioning expense........................

(118,264)

(6,982)

(125,246)

(6,009)

(131,255)

Amortization of bond discount,debt issue costs, and loss on refundings.........................

(508,404)

(40,956)

(549,360)

(35,096)

(548,456)

Interest expense..............................

(64,766) 835 (63,931) 1,654 (62,277)

Bond requirements included in billings to participants:

Operations and maintenance,net of investment income..........

144,484 31,091 175,575 99,330 274,905 Costs of acquisition of capacity.......................

17,810 959 18,769 1,153 19,922 Billings to amortize costs recoverable...................

230,820 50,410 281,230 50,410 331,640 Reduction in debt service billings due to transfer of excess funds........................

(81,110)

(8,910)

(90,020)

(90,020)

Principal repayments...........................

615,579 77,868 693,447 86,871 780,318 Other...................................

50,339 7,457 57,796 7,833 65,629 (422,803) 49,454 (373,349) 143,821 (229,528)

Multiple Project Fund Net Assets......................

5,561 794 6,355 337 6,692 ProjectsStabilization Fund Net Assets...................

200,350 (26,565) 173,785 (77,364) 96,421 (216,892) 23,683 (193,209) 66,794 (126,415)

7. Commitments and Contingencies Deregulation - In September 1996, Assembly Bill 1890 (the Bill) was given final approval. The Bill, which provides for broad deregulation of the power generation industry in California, requires the participa-tion of the states investor-owned utilities. Consumer-owned utilities can participate on a voluntary basis but must hold public hearings as part of their decision making process. The Bill, which was supported by the Authority, authorizes the collection of a transition charge for generation when a consumer-owned utility opens its service area to competition and participates in the independent transmission system established by the legislation. The Bill also mandates the collection of a public benefit charge from all electric utility customers in the state.

Although these funds (approximately 2.85% of gross revenues) must be spent on renewable resources,conservation,research and develop-ment, or low income rate subsidies, the governing authority of each consumer-owned utility controls actual expenditures. Due to insta-bility in power open markets in California,in 2001 direct access ceased.

The Authority cannot predict the impact of any future direct access or deregulation programs on energy markets or its participants.

Nuclear Spent Fuel and Waste Disposal - Under the Nuclear Waste Policy Act, the Department of Energy (DOE) was to develop the facilities necessary for the storage and disposal of spent fuel and to have the first such facility in operation by 1998. That facility was to be a permanent repository,but the DOE has announced that such a repos-itory now cannot be completed before 2010. There is ongoing litiga-tion with respect to the DOEs ability to accept spent nuclear fuel;how-ever,no permanent resolution has been reached.

In July 2002, a measure was signed into law designating the Yucca Mountain in the state of Nevada as the nations high-level nuclear waste repository. This means the DOE can now file a construction and operation plan for Yucca Mountain with the Nuclear Regulatory Commission (NRC). The DOE expects that the Yucca Mountain site will be open by 2010, a date which is believed to be highly optimistic.

The State of Nevada and its congressional delegation are determined to halt the project through the NRC process or through legal chal-lenges.

Feud over funding of the repository, however, ensues. The Administration and Congressional leaders continue to push for full and adequate funding, in order for the DOE to meet the application dead-line of 2004. The Nevada delegation has been working diligently to try to delay the DOEs work on the license application for the Yucca site,in hopes of halting the transfer of nuclear waste to the Nevada facility.

The spent fuel storage in the wet pool at PVNGS exhausted its capacity in 2003. A Dry Cask Storage Facility (also called the Independent Spent Fuel Storage Facility) was built and completed in 2003 at a total cost of $33.9 million (about $2 million for the Authority).

In addition to the facility, the costs also account for heavy lift equip-ment inside the units and at the yard, railroad track, tractors, trans-porter, transport canister, and surveillance equipment. The facility has the capacity to store all the spent fuel generated by the plant until 2026,the end of its lifetime. To date,five casks,each containing 24 fuel assemblies, from Unit 2 were placed in the Storage Facility. Moving of the spent fuel from Unit 1 to the Storage Facility is in progress. The current plan calls for the removal of between 240 and 288 fuel assem-blies from the units to the Storage Facility every year. The costs incurred by the procurement, packing, preparation and transportation of the casks are included as part of the fuel expenses,and would cost approx-imately $12 million a year (about $700,000 for the Authority). If the per-manent repository in Yucca Mountain is opened as scheduled in 2010, the spent fuel from PVNGS will be shipped to the repository starting in 2031.

Nuclear Insurance - The Price-Anderson Act (the Act) requires that all utilities with nuclear generating facilities share in payment for claims resulting from a nuclear incident. The Act limits liability from third-party claims to approximately $9.5 billion per incident. Participants in the Palo Verde Nuclear Generating Station currently insure potential claims and liability through commercial insurance with a $300 million limit;the remainder of the potential liability is covered by the industry-wide retrospective assessment program provided under the Act. This program limits assessments to $88 million for each licensee for each nuclear incident occurring at any nuclear reactor in the United States; payments under the program are limited to $10 million, per incident, per year. Based on the Authoritys 5.91% interest in Palo Verde, the Authority would be responsible for a maximum assessment of $5.2 mil-lion,limited to payments of $591,000 per incident,per year.

Other Legal Matters - Claims and a lawsuit for damages have been filed with the Authority,Intermountain Power Authority (the IPA) and the Department of Water and Power of the City of Los Angeles (the Department) seeking $100 million in special damages and a like amount in general damages. The claimants allege,among other things, that due to improper grounding of the transmission line of STS, their dairy herds were damaged and the value of their land was diminished.

The claimants also seek injunctive relief. The Authority, IPA and the Department intend to vigorously defend the claims.

The Authority is also involved in various other legal actions. In the opinion of management, the outcome of such litigation or claims will not have a material effect on the financial position or the results of operations of the Authority or the respective separate Projects.

57

58 Palo Verde Project Supplemental Schedule of Receipts and Disbursements in Funds Required by the Bond Indenture for the Year Ended June 30,2003 Southern Transmission System Project Supplemental Schedule of Receipts and Disbursements in Funds Required by the Bond Indenture for the Year Ended June 30,2003 Hoover Uprating Project Supplemental Schedule of Receipts and Disbursements in Funds Required by the Bond Indenture for the Year Ended June 30,2003 Mead-Phoenix Project Supplemental Schedule of Receipts and Disbursements in Funds Required by the Bond Indenture for the Year Ended June 30,2003 Mead-Adelanto Project Supplemental Schedule of Receipts and Disbursements in Funds Required by the Bond Indenture for the Year Ended June 30,2003 Multiple Project Fund Supplemental Schedule of Receipts and Disbursements in Funds Required by the Bond Indenture for the Year Ended June 30,2003 San Juan Project Supplemental Schedule of Receipts and Disbursements in Funds Required by the Bond Indenture for the Year Ended June 30,2003 Magnolia Power Project Supplemental Schedule of Receipts and Disbursements in Funds Required by the Bond Indenture for the Year Ended June 30,2003 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY SUPPLEMENTAL FINANCIAL INFORMATION INDEX

59 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY PALO VERDE PROJECT SUPPLEMENTAL SCHEDULE OF RECEIPTS AND DISBURSEMENTS IN FUNDS REQUIRED BY THE BOND INDENTURE FOR THE YEAR ENDED JUNE 30, 2003 (Amounts in thousands)

Debt Decom-Debt Service missioning Deposit General Service Reserve Trust Deposit Reserve Escrow Reserve Issue Operating Reserve &

Revenue Fund Fund Fund Installment Installment Account Account Account Account Contingency Fund Total Balance at June 30,2002.............. $ 40,636

$ 34,629

$ 103,104 $

6,161 $

1,000 $ 571,690 $

Additions:

Investment earnings...............

267 1,418 4,320 14 42 12,345 1

Discount on investment purchases........

174 59 213 34 1

135,783 53 Distribution of investment earnings.......

(331)

(1,455)

(48)

(43)

(57)

Revenue from power sales............

Distribution of revenue..............

21,614 8,671 122,297 Transfer from escrow fund for principal and interest payments............

30,447 (39,997)

Transfer from escrow restructuring........

(17,291) 7,783 Other......................

(2,334) 50,450 (128,198)

Total....................

49,837 22 13,204 141,290 1,879 Deductions:

Construction expenditures............

Operating expenditures.............

3 Debt issue cost..................

3,509 Remarketing/Commitment Fees.........

Fuel costs....................

Payment of principal...............

24,150 Interest paid - non-escrow............

5,172 Premium and interest paid on investment purchases...........

3 Payment of principal and interest paid - escrow..................

30,447 Total....................

59,772 3

3,509 Balance at June 30,2003.............. $ 30,701

$ 34,651

$ 116,305 $

6,161 $

1,000 $ 709,471 $

1,879 46,144 $

25,399 $ 57,973 $

$ 886,736 160 557 2,232 6

21,362 464 126 1,033 24 137,964 (614)

(673)

(2,437) 5,658 191,357 191,357 35,790 9,096 (196,801) 667 9,550 580 8,928 60,574 (2,283) 22,495 704 70,134 34,097 41,347 244 352,054 7,865 7,865 29,314 29,317 3,509 432 432 8,131 8,131 23,245 47,395 29,588 34,760 4

43 50 9,550 39,997 62,819 37,445 7,908 171,456 53,459 $

22,051 $ 91,412 $

244 $1,067,334 This schedule summarizes the receipts and disbursements in funds required under the Bond Indenture and has been prepared from the trust statements. The balances in the funds consist of cash and investments at original cost for both on balance sheet funds and off balance sheet escrows for legally defeased debt. These balances do not include accrued interest receivable,unrealized gain (loss) on investment,and $96 held in the revolving fund at June 30,2003 and 2002, respectively.

60 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY SOUTHERN TRANSMISSION SYSTEM PROJECT SUPPLEMENTAL SCHEDULE OF RECEIPTS AND DISBURSEMENTS IN FUNDS REQUIRED BY THE BOND INDENTURE FOR THE YEAR ENDED JUNE 30, 2003 (Amounts in thousands)

Debt General Service Escrow Reserve Issue Operating Revenue Fund Fund Fund Fund Fund Fund Total Balance at June 30,2002...............................

12,165 189,875 460 76,809 4,425 283,734 Additions:

Investment earnings................................

59 3,040 4

4,104 43 7

7,257 Discount on investment purchases.........................

36 2,386 1

1,172 25 22 3,642 Distribution of investment earnings........................

(94)

(1)

(5)

(4,401)

(69) 4,570 Revenue from transmission sales..........................

72,665 72,665 Distribution of revenue..............................

3,501 1,565 62,591 9,575 (77,232)

Transfer to escrow fund required by refunding bonds issuance...........................

6,545 (163,111) 156,566 Bond proceeds...................................

100,249 (2,023)

(4,568) 93,658 Other transfers...................................

Total......................................

10,047 (57,437)

(458) 215,464 9,574 32 177,222 Deductions:

Operating expenses................................

13,475 13,475 Debt issue cost...................................

1,605 1,605 Payment of principal................................

17,675 9,020 26,695 Interest paid....................................

42,149 42,149 Premium and interest paid on investment purchases............................

2,073 32 2,105 Payment of principal and interest -

escrow bonds..................................

48,685 165,263 213,948 Total......................................

17,675 50,758 218,037 13,475 32 299,977 Balance at June 30,2003...............................

4,537 81,680 2

74,236 524 160,979 This schedule summarizes the receipts and disbursements in funds required under the Bond Indenture and has been prepared from the trust statements. The balances in the funds consist of cash and investments at original cost for both on balance sheet funds and off balance sheet escrows for legally defeased debt. These balances do not include accrued interest receivable,unrealized gain (loss) on investment,and $40 and $38 held in the revolving fund at June 30,2003 and 2002, respectively.

61 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY HOOVER UPRATING PROJECT SUPPLEMENTAL SCHEDULE OF RECEIPTS AND DISBURSEMENTS IN FUNDS REQUIRED BY THE BOND INDENTURE FOR THE YEAR ENDED JUNE 30, 2003 (Amounts in thousands)

Debt Debt Service General Advance Service Reserve Escrow Reserve Payment Operating Revenue Account Account Fund Fund Fund Fund Fund Total Balance at June 30,2002...................... $

1,240 1,623 3

1,184 4,050 Additions:

Investment earnings.......................

7 51 18 1

77 Discount on investment purchases...............

8 19 7

34 Distribution of investment earnings...............

(15)

(70)

(25) 110 Revenue from power sales....................

2,289 2,289 Distribution of revenues.....................

1,923 78 399 (2,400)

Total............................

1,923 78 399 2,400 Deductions:

Operating expenses.......................

261 261 Payment of principal.......................

905 905 Interest paid...........................

1,077 1,077 Total............................

1,982 261 2,243 Balance at June 30,2003...................... $

1,181 1,701 3

1,322 4,207 This schedule summarizes the receipts and disbursements in funds required under the Bond Indenture and has been prepared from the trust statements. The balances in the funds consist of on balance sheet cash and investments at original cost. These balances do not include accrued interest receivable,unrealized gain (loss) on investment,and $18 and $22 held in the revolving fund at June 30,2003 and 2002,respectively.

62 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MEAD-PHOENIX PROJECT SUPPLEMENTAL SCHEDULE OF RECEIPTS AND DISBURSEMENTS IN FUNDS REQUIRED BY THE BOND INDENTURE FOR THE YEAR ENDED JUNE 30, 2003 (Amounts in thousands)

Debt Debt Service Reserve &

Acquisition Service Reserve Operating Contingency Revenue Account Account Account Fund Fund Fund Total Balance at June 30,2002...............................

3,387 5,915 169 1,806 11,277 Additions:

Investment earnings................................

129 431 1

127 1

689 Distribution of investment earnings........................

431 (435)

(127) 131 Transmission revenue...............................

4,179 4,179 Refunds from operating manager.........................

27 27 Refunds from Arizona Department of Taxation...................

168 168 Transfer of revenues................................

3,287 840 12 (4,139)

Payments from Western Area Power Administration................

100 100 Other transfers...................................

168 104 (272)

Total......................................

4,015 (4) 1,140 12 5,163 Deductions:

Operating expenses................................

1,202 1,202 Interest paid....................................

3,889 3,889 Total......................................

3,889 1,202 5,091 Balance at June 30,2003...............................

3,513 5,911 107 1,818 11,349 This schedule summarizes the receipts and disbursements in funds required under the Bond Indenture and has been prepared from the trust statements. The balances in the funds consist of on balance sheet cash and investments at original cost. These balances do not include accrued interest receivable,unrealized gain (loss) on investment,and $12 held in the revolving fund at both June 30,2003 and 2002.

63 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MEAD-ADELANTO PROJECT SUPPLEMENTAL SCHEDULE OF RECEIPTS AND DISBURSEMENTS IN FUNDS REQUIRED BY THE BOND INDENTURE FOR THE YEAR ENDED JUNE 30, 2003 (Amounts in thousands)

Debt Debt Service Reserve &

Acquisition Service Reserve Operating Contingency Revenue Surplus Account Account Account Fund Fund Fund Fund Total Balance at June 30,2002...................... $

6,850 16,267 389 6,826 30,332 Additions:

Investment earnings.......................

132 1,196 2

500 2

1,832 Discount on investment earnings................

25 25 Distribution of investment earnings...............

1,422 (1,196)

(500) 274 Transmission revenue......................

11,407 11,407 Distribution of revenues.....................

10,787 896 (11,683)

Total............................

12,366 896 13,264 Deductions:

Interest paid...........................

12,232 12,232 Operating expenses.......................

1,125 1,125 Total............................

12,232 1,125 13,357 Balance at June 30,2003...................... $

6,984 16,267 162 6,826 30,239 This schedule summarizes the receipts and disbursements in funds required under the Bond Indenture and has been prepared from the trust statements. The balances in the funds consist of on balance sheet cash and investments at original cost. These balances do not include accrued interest receivable,unrealized gain (loss) on investment,and $12 held in the revolving fund at June 30,2003 and 2002,respectively.

64 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MULTIPLE PROJECT FUND SUPPLEMENTAL SCHEDULE OF RECEIPTS AND DISBURSEMENTS IN FUNDS REQUIRED BY THE BOND INDENTURE FOR THE YEAR ENDED JUNE 30, 2003 (Amounts in thousands)

Debt Proceeds Service Earnings Account Account Account Total Balance at June 30,2002.............................................

246,188 1

1,395 247,584 Additions:

Investment earnings..............................................

17,514 50 17,564 Transfer of investment earnings to earnings account..............................

(21,452) 21,452 Transfer to debt service account.........................................

21,710 (21,710)

Total....................................................

(3,938) 21,710 (208) 17,564 Deductions:

Interest paid..................................................

15,111 15,111 Payment of principal..............................................

6,600 6,600 Total....................................................

21,711 21,711 Balance at June 30,2003.............................................

242,250 1,187 243,437 This schedule summarizes the receipts and disbursements in funds required under the Bond Indenture and has been prepared from the trust statements. The balances in the funds consist of on balance sheet cash and investments at original cost. These balances do not include accrued interest receivable.

65 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY SAN JUAN PROJECT SUPPLEMENTAL SCHEDULE OF RECEIPTS AND DISBURSEMENTS IN FUNDS REQUIRED BY THE BOND INDENTURE FOR THE YEAR ENDED JUNE 30, 2003 (Amounts in thousands)

Debt Debt Service Cost of Reserve &

General Service Reserve Escrow Issuance Operating Contingency Reserve Revenue Account Account Account Fund Fund Fund Fund Fund Total Balance at June 30,2002................... $

4,148 $

13,524 $

124,828 $

51 $

3,256 $

9,342 622 $

155,771 Additions:

Investment earnings....................

4 1,116 1,845 1

5 98 5

8 3,082 Discount on investments..................

65 33 36 85 2

16 237 Distribution of investment earnings............

(69)

(1,116)

(1)

(41)

(230)

(7) 1,464 Revenue from power sales.................

61,123 61,123 Distribution of revenues..................

11,205 10 51,762 (366)

(62,611)

Bond proceeds.......................

8,075 71,459 1,216 80,750 Transfer from escrow for principal and interest payments..................

199,050 (199,050)

Transfer to escrow funds required by refunding bond issuance................

(885) 885 Other............................

(59) 59 Total............................

209,370 8,075 (124,828) 1,167 51,762 (413) 59 145,192 Deductions:

Operating expenses.....................

53,811 53,811 Construction expenditures.................

290 290 Debt issue cost.......................

1,218 1,218 Payment of principal....................

1,600 1,600 Interest paid - non-escrow.................

7,485 7,485 Payment of principal and interest - escrow.....................

199,050 199,050 Total............................

208,135 1,218 53,811 290 263,454 Balance at June 30,2003................... $

5,383 $

21,599 $

1,207 $

8,639 681 $

37,509 This schedule summarizes the receipts and disbursements in funds required under the Bond Indenture and has been prepared from the trust statements. The balances in the funds consist of cash and investments at original cost for both on bal-ance sheet funds and off balance sheet escrows for legally defeased debt. These balances do not include accrued interest receivable,unrealized gain (loss) on investment,and $22 and $20 held in the revolving fund at June 30,2003 and 2002, respectively.

66 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY MAGNOLIA POWER PROJECT SUPPLEMENTAL SCHEDULE OF RECEIPTS AND DISBURSEMENTS IN FUNDS REQUIRED BY THE BOND INDENTURE FOR THE YEAR ENDED JUNE 30, 2003 (Amounts in thousands)

Debt Debt Service Operating Reserve &

Service Reserve Project Reserve Contingency Account Account Fund Fund Fund Total Balance at June 30,2002........................................

Additions:

Investment earnings.........................................

137 62 199 Bond proceeds............................................

32,918 19,620 255,044 5,000 10,000 322,582 Other.................................................

727 727 Total................................................

33,055 19,620 255,833 5,000 10,000 323,508 Deductions:

Construction expenditures......................................

84,584 84,584 Debt issue cost............................................

6,270 6,270 Premium and interest paid on investment purchases......................................

72 6

36 114 Total................................................

72 90,854 6

36 90,968 Balance at June 30,2003........................................

33,055 19,548 164,979 4,994 9,964 232,540 This schedule summarizes the receipts and disbursements in funds required under the Bond Indenture and has been prepared from the trust statements. The balances in the funds consist of on balance sheet cash and investments at original cost. These balances do not include accrued interest receivable and unrealized gain (loss) on investment at June 30,2003.

Customers - Retail...................... 109,981 Power Generated and Purchased (in Megawatt-Hours)

Self-Generated.................... 1,079,753 Purchased........................ 2,441,837 Total............................. 3,521,590 Total Revenues (000s).................. $280,550*

Operating Costs (000s)................. $264,258*

• Unaudited Customers Served.................. 15,170 Power Generated and Purchased (in Megawatt-Hours)

Self-Generated....................... 0 Purchased..................... 258,320 Sales Retail.......................... 255,021 Total Revenues (000s)............... $20,630*

Operating Costs (000s).............. $24,173*

• Unaudited City of Anaheim City of Azusa Customers Served.................. 51,438 Power Generated and Purchased (in Megawatt-Hours)

Self-Generated.................. 77,000 Purchased.................... 1,090,987 Total......................... 1,167,987 Total Revenues (000s).............. $215,435*

Operating Costs (000s)............. $192,076*

• Unaudited Customers Served..................17,769 Power Generated and Purchased (in Megawatt-Hours)

Self-Generated.......................0 Purchased.....................338,466 Total..........................338,466 Total Revenues (000s)............... $36,142*

Operating Costs (000s).............. $34,186*

• Unaudited City of Burbank City of Colton Customers Served.................. 83,147 Power Generated and Purchased (in Megawatt-Hours)

Self-Generated................. 166,950 Purchased.................... 1,322,548 Total......................... 1,489,498 Total Revenues (000s).............. $195,648*

Operating Costs (000s)............. $135,945*

• Unaudited City of Glendale Customers Served.................. 10,969 Power Generated and Purchased (in Megawatt-Hours)

Self-Generated....................... 0 Purchased..................... 147,641 Total.......................... 147,641 Total Revenues (000s)............... $17,159*

Operating Costs (000s).............. $16,105*

• Unaudited City of Banning Customers Served.................. 104,678 Power Generated and Purchased (in Megawatt-Hours)

Self-Generated................ 1,044,015 Purchased.................... 1,985,331 Total......................... 3,029,346 Total Revenues (000s).............. $281,906 Operating Costs (000s)............. $232,265 Imperial Irrigation District Customers Served................ 1,420,814 Power Generated and Purchased (in Megawatt-Hours)

Self-Generated............... 12,935,821 Purchased................... 14,751,367 Total........................ 27,687,188 Total Revenues (000s)............ $2,140,752*

Operating Costs (000s)............ $1,974,501*

• Unaudited Los Angeles Department of Water and Power Customers Served.................. 59,075 Power Generated and Purchased (in Megawatt-Hours)

Self-Generated................. 161,979 Purchased.................... 1,157,817 Total......................... 1,319,796 Total Revenues (000s).............. $142,721 Operating Costs (000s)............. $127,131 City of Pasadena Customers Served.................. 98,459 Power Generated and Purchased (in Megawatt-Hours)

Self-Generated................. 331,600 Purchased.................... 2,014,600 Total......................... 2,346,200 Total Revenues (000s).............. $203,101*

Operating Costs (000s)............. $189,100*

• Unaudited Customers Served...................2,059 Power Generated and Purchased (in Megawatt-Hours)

Self-Generated....................350 Purchased...................1,315,686 Total.........................1,316,036 Total Revenues (000s).............$101,393 Operating Costs (000s)..............$87,530 City of Riverside City of Vernon Customers Served.........To be determined Power Generated and Purchased (in Megawatt-Hours)

Self-Generated.......................0 Purchased.............To be determined Total Revenues (000s)...................$0 Operating Costs (000s)..................$0 City of Cerritos

Southern California Public Power Authority 225 S. Lake Avenue, Suite 1250, Pasadena, CA 91101 Tel: (626) 793-9364 Fax: (626) 793-9461 Website: www.scppa.org