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					                                       AGENDA

REGULAR UTILITY BOARD MEETING 5:00 P.M. - WEDNESDAY, JANUARY 26, 2011


1.   Pledge of Allegiance
2.   Invocation
3.   Roll Call

4.   Set Agenda

5.   Informational Items:
     a) Generation Report
     b) Rate Comparison
     c) Big Pine Key Office Update
     d) Strategic Planning Update
     e) Financial Status
     f) Audit Committee Report

6.   Consent Agenda *
     a) Approve Minutes - Regular Meeting – January 12, 2011
     b) Approve Disbursements Report
     c) Award Bid for Purchase of Programmable Meters - Bid #03-11
     d) Declare KEYS’ Vehicle #95 and Unit #88 as Surplus
     e) Declare Miscellaneous Wire and Metal as Surplus

7.   Action Items:
     a) Approve Financial Audit and Comprehensive Annual Financial Report (CAFR) for
         Fiscal Year Ended September 30, 2010
     b) Approve the Payment to the City of Key West for the Fiscal Year Ended
         September 30, 2010
     c) Approve Change Order #5 Contract to Power Engineers, Inc. for Monitoring
         Services of Structural Repairs to Utility Poles Over Water – Bid #15-09 and
         Approve Associated Budget Amendment #11-06
     d) Approve Granting Signatory Authority to General Manager/CEO Regarding
         Florida Energy and Climate Commission Grant Agreement

8.   Other Business
9.   Adjournment
     *Item is considered to be routine and enacted by one motion with no separate discussion,
      unless requested by a Utility Board Member or citizen, in which event the item will be
      considered independently.
                  145
                  140
                  135
                  130
                  125
                  120                                                                                                                 Load
                  115
                                                                                                                                                CT4
                  110
                  105
                  100                                                                                                      Capacity             CT3
                   95
                   90
                                                                                                                                                CT2
                   85
Megawatts [MWs]




                   80
                   75                                                                                                                           CT1
                   70
                   65
                                                                                                                                                MSD 2
                   60
                   55
                   50                                                                                                                           MSD 1
                   45
                   40
                   35                                                                                                                           Load

                   30
                   25                                                                                                                           Capacity
                   20
                   15
                   10
                    5
                    0
                        Dec-09   Jan-10   Feb-10   Mar-10   Apr-10   May-10   Jun-10   Jul-10   Aug-10   Sep-10   Oct-10     Nov-10    Dec-10
                                                                          MWs Available
                                                            Residential Customer  ‐ Cost of a kWh
                                                                                                                                                 KEYS Billing for 
                   16.00                                                            In Cents                                                         Jan is
                                                                                                                                                    $13.89
                   14.00 


                   12.00 


                   10.00 
        r kWh




                    8.00 
Cents per




                    6.00 


                    4.00                                                                                                                                    FKEC
                                                                                                                                                            KEYS
                    2.00 
                                                                                                                                                            MUNI
                                                                                                                                                            IOU
                      ‐
                               Jan‐10



                                         Feb‐10



                                                   Mar‐10



                                                             Apr‐10



                                                                        May‐10



                                                                                    Jun‐10



                                                                                               Jul‐10



                                                                                                        Aug‐10



                                                                                                                 Sep‐10



                                                                                                                          Oct‐10



                                                                                                                                       Nov‐10



                                                                                                                                                Dec‐10
                Munis ‐ applicable additional tax on the base rate is included                                                     Prepared by : Finance
                IOUs ‐ a state wide average of 6% additional tax is included                                                       January 19, 2011
                All ‐ includes all billing determinants except gross receipts tax
                                   Agenda Item Summary Sheet
                                                 Meeting Date: January 26, 2011
                              Proposer: Lynne E. Tejeda, General Manager &CEO
                                                          Department: Manager’s
                                                               Agenda Item #: 6a




AGENDA ITEM WORDING: Approve the Minutes of the Regular
Utility Board Meeting – January 12, 2011_________

REQUESTED ACTION:       Approve the Minutes of the Regular Utility
Board Meeting – January 12, 2011

FINANCIAL IMPACT:
Total Cost: N/A   Budgeted: N/A
MINUTES FROM A REGULAR MEETING OF THE UTILITY BOARD OF
THE CITY OF KEY WEST, FLORIDA, HELD AT 5:00 P.M. ON JANUARY
12, 2011 AT THE WILLIAM ARNOLD SERVICE BUILDING LOCATED
AT 1001 JAMES STREET, KEY WEST, FLORIDA


       The above referenced meeting of the Utility Board of the City of Key West, Florida,
convened at 5:00 P.M., on the above date and location and was called to order by
Chairman Hernandez. Present and answering to the roll call were Utility Board members:
Charles Bradford, Peter Batty, Mona Clark and Ty Symroski. Also present at the meeting:
Lynne Tejeda, General Manager & CEO; Nathan Eden, Board Attorney; Jack Wetzler,
Assistant General Manager & CFO; Suzanne Greager, Management Services Director; David
Price, Transmission/Distribution Director; Dale Finigan, Engineering/Control Center
Director; Alex Tejeda, Customer Services Director; and Stan Rzad, Compliance
Administrator.

                          AGENDA ITEM #4 – SET AGENDA

      There were no changes to the agenda and the agenda was set.

                   AGENDA ITEM #5 – INFORMATIONAL ITEMS

                     Agenda Item #5a – Power Supply Report

      Mrs. Tejeda informed the Board that the Power Supply Report is included in the
Board meeting packet and staff is prepared to answer any questions they may have.

       Mrs. Tejeda reported that KEYS experienced a tieline outage yesterday. There
have been six transmission outages since September and four of the six originated in
Florida Keys Electric Cooperative (FKEC) service area. She said that the four outages
that originated in FKEC were all on Line 5.

        Mrs. Tejeda stated that KEYS staff has had many communications with FKEC
regarding the outages and they share the same frustrations. She said it appears they
are taking the same precautions KEYS would take and are not able to pinpoint a fault to
fix at this time.

      Mrs. Tejeda said that the duration of the outages from FKEC improved, since
KEYS voiced concerns on the durations of transmission outage in December.

      Mrs. Tejeda stated that KEYS staff will continue to work with FKEC staff on tieline
maintenance.
            Agenda Item #5b – Financial and Operational Indicators

       Mrs. Tejeda informed the Board that the Financial and Operational Indicators
Report is included in the Board meeting packet and staff is prepared to answer any
questions they may have.

                   Agenda Item #5c – Quarterly Safety Update

      Mrs. Tejeda informed the Board that the Quarterly Safety Update is included in
the Board meeting packet and staff is prepared to answer any questions they may have.

           Agenda Item #5d – Schedule of Unit Price Purchase Orders

       Mrs. Tejeda informed the Board that the Schedule of Unit Price Purchase Orders is
included in the Board meeting packet and staff is prepared to answer any questions they
may have.

           Agenda Item #5e – Power Cost Adjustment (PCA) Update

      Mrs. Tejeda reported that the PCA will remain the same in February. She said
KEYS has had a negative PCA since May 2010.

      Mrs. Tejeda stated that the total bill for 1000 kwh is currently $138.95 and that
energy costs from Florida Municipal Power Agency (FMPA) have remained low.

      Mrs. Tejeda said that FMPA have projects that increase through this calendar year
and KEYS will continue to monitor power cost closely and adjust as needed.

      Mrs. Tejeda stated that KEYS anticipates an increase in the PCA in 2011.

          Agenda Item #5f – Investment Planning Committee Report

        Mrs. Tejeda informed the Board that the Investment Planning Committee Report
is included in the Board meeting packet and staff is prepared to answer any questions
they may have.

  Agenda Item #6g – Annual KEYS’ Self Insurance Health Plan Certification

       Mrs. Tejeda informed the Board that the Health Plan Actuarial Certification is
included in the Board meeting packet and staff is prepared to answer any questions they
may have.

      Mrs. Tejeda the report was good on the actuarial soundness of the Plan through
September 30, 2010. She said the report will be filed with the State.




                                            2
                                   Financial Update

       Mrs. Tejeda stated that in previous meetings the Board has had brief discussions
regarding a plan to updates the Board on significant changes in revenues and expenses.
She said staff has nearly finished a review if significant changes including excessive
revenues from Fiscal Year 2010 due to higher than budgeted sales; reduced expenses
and the capacity payment associated with TARP; projections regarding this year’s sales
being considerably less than budgeted the first quarter; KEYS health insurance cash
balance being below the Board’s established threshold and some additional
miscellaneous expenses for capital projects.

       Mrs. Tejeda gave the Board the option for staff to provide an update during the
next regularly scheduled Board meeting and have Board discussion or staff could
schedule a workshop prior to the next Board meeting.

       After discussion the Board agreed that staff will provide the Board with an update
at the next regularly scheduled Board meeting and the Board will discuss at that time.

                      AGENDA ITEM #6 – CONSENT AGENDA

     a) Approve Minutes - Regular Meeting - December 15, 2010
     b) Approve Disbursements Report and Budget Amendment #11-05 Stack Painting

     Motion was made by Mr. Bradford and seconded by Ms. Clark to Approve the
Consent Agenda. The motion passed unanimously.

                     AGENDA ITEM #7 – ACTION ITEMS

          Agenda Item #7a – Approve Electric Extension Agreement (Line
       Extension #746) with No Name Key Property Owners Association, Inc.

       Chairman Hernandez welcomed and thanked the audience for their interest on the
item and thanked them in advance for being respectful of the speakers and the Utility
Board.

       Mrs. Tejeda said this agenda item comes before the Board asking for
consideration of a Line Extension (LE) to No Name Key (NNK). She said that NNK is an
island within KEYS service territory that currently is not tied to the grid.

       Mrs. Tejeda said that over the last two decades, KEYS has been approached about
extending service to the island. In the past, the requests disappeared when the cost
associated with the LE was discussed. In late, 2008 Florida Keys Aqueduct Authority
(FKAA) were looking to provide wastewater services to No Name Key and after
conversations started, FKAA dropped out. At that time No Name Key Property Owners
Association (NNKHOA) decided to pursue electrification on their own.




                                            3
        Mrs. Tejeda said KEYS prepared rough estimates of the cost, and the NNKPOA
asked KEYS to proceed. Throughout 2009 KEYS, worked on preliminary designs and
identifying what types of permits might be required. By September 2009, the Monroe
County Board of County Commissioners (BOCC) urged NNKPOA and KEYS to seek an
opinion from the United Stated Florida Fish and Wildlife (USFWS) regarding how power
line construction might impact the environment. KEYS staff sent a letter and information
regarding the project to USFWS in October 2009.

       Mrs. Tejeda stated that in December 2009 – KEYS Staff and NNKPOA entered into
a preliminary line design agreement that required NNKPOA to pay 2% of the total
estimated construction cost to help pay staff expenses associated with design work and
with developing the plans to submit to USFWS. NNKPOA provided KEYS a check in the
amount of $13,800, which equaled the 2%.

         Mrs. Tejeda informed the Board that in January 2010 USFWS replied to KEYS
initial letter and requested additional information.

       Mrs. Tejeda said that throughout the Spring of 2010, KEYS continued to fine tune
the preliminary designs and issued bids for both the Pole and overhead line installation
and the bridge attachment installation, which allowed KEYS to determine a cost.

       Mrs. Tejeda said in August 2010, KEYS and NNKPOA provided a response to
USFWS. The NNKPOA asked that work continue to move forward so, KEYS sought and
received additional payments from NNKPOA for KEYS staff time, outsourced survey work,
and bridge attachment design work. She said by October, NNKPOA had paid for more
than $90k for the all the work completed on the project.

       Mrs. Tejeda reported that in October KEYS received approval from USFWS to
move forward with the project. She said that USFWS stated “ The Service concurs with
your view that the proposed extension of electrical service to No Name Key is not likely
to adversely affect the Key deer, Lower Keys marsh rabbit , silver rice rate, eastern
indigo snake, stock island tree snail, key tree cactus or garber’s spurge and formal
consultation is not required.” Mrs. Tejeda said that that USFWS letter did provide for
minor construction requirements that will be followed if the project moves forward.

        Mrs. Tejeda informed the Board that on behalf of NNKPOA, KEYS requested an
easement on the four (4) lots owned by Monroe County and one (1) lot owned by the
Land Authority. KEYS also requested permission to attach to the bridge. She said the
(5) lots that are not in the public right-of -way, which KEYS has the right to construct.
KEYS received permission from DOT on bridge attachment in November.

        Mrs. Tejeda said that on December 15, 2010, the Monroe Board of County
Commissioners 1) denied KEYS request for four easements across four County-owned
lots, 2) denied any amendments to the Comprehensive Plan and Land Development
Regulations to allow the extension of utility services to Coastal Barrier Resource System
units and/or private development on No Name Key, and 3) moved to file an action for
Declaratory Judgment regarding whether Bimini and Tortuga lanes constitute rights-of-
way, upon which KEYS does not need a county permit to construct poles and to

                                             4
determine the county’s responsibility regarding issuance of building permits for
connections between utility lines in rights-of-ways and structures on private property.

       Mrs. Tejeda stated that the NNKPOA requested that poles be ordered. She said
there is a three-month lead time on the poles that will be installed and the NNKPOA has
already paid KEYS $98,924.42 for the poles. If the project doesn’t go through KEYS will
purchase the poles form NNKPOA and charge NNKPOA a 20% restocking fee.

       Mrs. Tejeda said that the BOCC has denied the easement on the five lots,
however from a design perspective the line can be rerouted with minor construction
costs and the new route will require seeking easements from private land holders and
from USFWS. There may be costs associated with obtaining these easements, which will
add to the total LE cost and paid by the NNKPOA.

       Mrs. Tejeda said due to the special circumstances on No Name Key, the typical LE
that staff can sign with customers will not suffice. Staff, Mr. Eden and even our land
attorney, Mr. Decubellis prepared the LE before the Board tonight.

      Mrs. Tejeda reviewed the line extension provisions which include the following:

      Remitting payment of $660,384.63 in advance of executing the contract, which
      was collected
      Placing responsibility for litigation, permitting, construction overruns, construction
      delays and contractor mobilization on NNKPOA
      Requiring NNKPOA to provide for an on-site biologist to oversee initial
      construction
      Placing responsibility for deconstruction costs on NNKPOA if the project is stopped
      Allowing for homes that do not initially participate in the Line Extension
      Agreement to connect and pay a portion of the total costs back to NNKPOA
      Having NNKPOA develop an appropriate tree trimming training program to
      address the “Stock Island Tree Snail and Garber’s Spurge Impact Avoidance
      Procedures Plan.”
      Acknowledging that parts of No Name Keys are within the Coastal Barrier
      Resources Act and requiring a $50,000.00 escrow account held by KEYS to cover
      repairs to the system that are typically covered by FEMA.
      Establishing that each customer, prior to signing up for service, must file a “Notice
      and Agreement Regarding Provision of Electric Service to No Name Key” as public
      record with the Monroe County, which will be attached to their deeds.

      Mrs. Tejeda said since the contract was placed in the Board packet there have
been some minor changes;

   1. There were two Exhibit G’s and the second Exhibit G has now been relabeled to
      Exhibit H

   2. There were inconsistency in Article VII, VIII and IX referring to homes /
      residential homes and of lots / and residential home and lots, which has been
      standardized to existing homes/lots

                                            5
   3. Article VII and VIII references existing 43 homes/lots and exhibit J will be added
      and will provide the RE numbers and legal descriptions of those homes/lots and in
      article VIII it states 25 are participating with NNKPOA and 18 are not, which the
      numbers will need to be trued up by the NNKPOA at a future date

      Mrs. Tejeda informed the Board that if the LE is approved tonight, staff will still
need to seek Board approval on the contracts for the overhead line work and bridge
attachment work and staff would anticipate construction would begin at the end of
March once all poles have been received.

       Mrs. Tejeda reported that this week she have received 14 emails either addressed
to herself or the Utility Board regarding NNK and 13 have been against the project and 1
has been in favor.

        Chairman Hernandez asked Mr. Eden to provide the Board with an update on any
legal issues.

       Mr. Eden stated he spoke with Mr. Bob Shillinger, Monroe County Attorney, who is
the Attorney responsible for the drafting of the complaint for the Declaratory Judgment
that the BOCC is seeking. Mr. Shillinger advised Mr. Eden that he has not had a chance
to start drafting the Declaratory Judgment but thought it might be prepared in about two
(2) weeks.

       Mr. Eden said it is very important for the Board to understand that KEYS should
be considered a stakeholder and has no vested interest one way or the other and with
that being said, he said his advice from a legal stand point at a minimum is to wait and
see what the BOCC actually files. He said the components of the issues in the
Declaratory Judgment are unknown to KEYS and will not be known until the BOCC files.

       Mr. Eden informed the Board that he believes there have been accomplishments
and the contract was worked on diligently and was ready for execution but there are to
many uncertainties and until uncertainties are addressed he is unable to give the Board
legal direction.

       Mr. Eden said that KEYS participation in the lawsuit should be minimal since KEYS
is considered a stakeholder. He also explained that the Declaratory Judgment process
goes before a local judge and should be forthcoming and in short order due to fact that
there are no issues of fact and the judge should consider the law. He said there will not
be a jury, any fact finding or a trial, it will come down to what the judge orders.

      Mr. Eden stated he does not anticipate a long drawn out process, although an
appeal is possible.

        Mr. Eden advised the Board to wait for the BOCC to file the Declaratory Judgment
until the Utility Board votes on the item before them tonight.




                                             6
        Mr. Bradford asked Mr. Eden if he is advising the Board to table the item until
after the BOCC has filed the Declaratory Judgment. Mr. Eden said yes but he would like
the Board to add to table until the BOCC files the Declaratory Judgment and both
respective parties have responded.

       Mr. Batty asked Mr. Eden if the Board made a motion to table which was
seconded, this would not allow for any further discussion from the Board as well as no
public input. Mr. Eden replied, yes that is correct there would be no further discussion
from the Board and no public input.

       Mr. Batty asked if the Board approves the LE tonight would it still have to go to
Monroe County for review or could KEYS start construction. Mrs. Tejeda replied that if
KEYS received approval from the Board, crews could start construction on the front
section where it is clear KEYS has the right-of-way according to the Resolution from
1951. She said the five (5) lots that are in questions are in the back of the project and
would begin the redesign and seek approval from the private easements.

       Mr. Batty asked if the Board was to vote to table or postpone until after the
Declaratory Judgment how much time would be lost if the judge ruled in favor of the
NNKPOA and KEYS was authorized to move forward. Mrs. Tejeda said two (2) weeks to
come before the Board again but the contractors’ bid prices are binding through March
31, 2011 and if there has not been a decision the contractor may not honor the current
prices and KEYS would have to re-bid which could take two (2) months.

       Mr. Eden informed the Board that the Court has the ability, pending such time as
it renders the decision to stop the project.

       Mr. Batty asked Mr. Eden if the opposing party of the LE could ask for an
injunction for KEYS not to install the poles if crews were to start construction. Mr. Eden
replied yes.

      Ms. Clark asked what would happen if KEYS proceeded with the work and in the
end the LE was denied. Mrs. Tejeda replied that KEYS would have to remove the poles
and the LE Agreement has provisions that require NNKPOA to pay for the removal.

        Mr. Bradford stated it is his opinion for the Board to proceed without having all
permission needed in ridiculous and the item should be tabled until the Utility Board
meeting in March to allow time for the Declaratory Judgment to be filed and then the
Utility Board can readdress at that time. He said that he appreciates that it is the Board
responsibility to provide service within Keys Service Area when requested but he has a
problem with the BOCC suing KEYS if KEYS decides to proceed with the project. He does
not want to put the Utility Board or KEYS ratepayers in the situation if KEYS was to be
sued.

        Motion was made by Mr. Bradford and seconded by Mr. Batty to table the
Approval of the Electric Extension Agreement (Line Extension #746) with No Name Key
Property Owners Association, Inc., until the Regular Utility Board meeting in March or
until the BOCC files the Declaratory Judgment. .
                                             7
      The roll was called and the following vote was recorded:

                   Mr. Batty                     Yes
                   Mr. Bradford                  Yes
                   Ms. Clark                     Yes
                   Mr. Symroski                  Yes
                   Chairman Hernandez            Yes

                                  OTHER BUSINESS

      There was no other business to come before the Board.

                                   ADJOURNMENT

      Motion was made by Mr. Symroski to adjourn the Regular Utility Board meeting of
January 12, 2011 at 5:42 p.m.


                                                  APPROVE:


                                                  ____________________________
                                                  Lou Hernandez, Chairman

ATTEST:



__________________________________________
Lynne E. Tejeda, General Manager/CEO & Secretary


/ed




                                           8
                                UTILITY BOARD OF THE CITY OF KEY WEST
                                     AGENDA ITEM SUMMARY SHEET


MEETING DATE:                          January 26, 2011

FROM:                                  Jack Wetzler, Assistant General Manager & CFO

AGENDA ITEM #:                                    6b

PROPOSER:                              Lynne Tejeda, General Manager & CEO



AGENDA ITEM WORDING:                   Approve Disbursement Report



BRIEF BACKGROUND:
  Payments are processed under Section 11 of Florida Statute 69-1191 and in accordance with Resolution No. 679 approved
October 13, 1999. Staff has processed payments from the Operation & Maintenance Fund, from the Renewal & Replacement
                  Fund and the Construction Fund . Check Registers and listings are attached for review.


                                                                       Renewal &
                                          Operation &                 Replacement
Type of Disbursement                   Maintenance Fund:                 Fund:                Construction Fund:

Check Payments                          $        383,757.47       $       106,624.00     $                201,284.97

Electronic Payments                            1,007,098.40                        -                              -

Voided Checks                                          (139.60)                                                   -

To Be Paid List                                            -                       -                              -

Total Disbursements                      $   1,390,716.27         $      106,624.00       $             201,284.97


STAFF RECOMMENDATION:

  Approve the Disbursement Report for the Operation & Maintenance Fund, Renewal & Replacement Fund and Construction
                                                         Fund




DISPOSITION:




                                                 Page 1 of 7
                             Utility Board of the City of Key West
                                      Disbursement Report
                        For the Periods January 7 to January 26, 2011


Ref # Date       Amount           Payee                             Purpose
OM Wire Payments
   2008 01/07/11     333,099.78   ADP ACH NET PR                    NET PAYROLL
   2009 01/07/11      77,881.74   ADP TAXES                         PAYROLL TAXES
   2010 01/07/11       2,848.64   ADP WAGE GARNISHMENT              NET PAYROLL
   2011 01/07/11       4,073.04   FL LEAGUE OF CITIES               DEFERRED COMPENSATION
   2012 01/07/11         511.13   FL PREPAID COLLEGE PROGRAM        EMPLOYEE DEDUCTIONS
   2013 01/07/11       1,410.00   ING DEFERRED COMPENSATION         DEFERRED COMPENSATION
   2014 01/07/11       8,467.83   NATIONWIDE RETIRE SOLUTIONS       DEFERRED COMPENSATION
   2015 01/07/11      54,629.84   FLORIDA KEYS ELECTRIC COOP        SERVICES
   2016 01/18/11     190,999.63   DEPARTMENT OF REVENUE             SALES TAX
   2017 01/18/11     165,307.09   DEPARTMENT OF REVENUE             GROSS RECEIPT TAX
   2018 01/18/11      22,173.05   FIRST TENNESSEE                   P CARD PURCHASES
   2019 01/18/11         272.72   FL DEPARTMENT OF REVENUE          UNEMPLOYMENT TAX
   2020 01/18/11      45,785.90   PREFERRED BENEFIT ADMIN CLAIMS    EMPLOYEE & RETIREE BENEFITS
   2021 01/20/11      99,638.01   PREFERRED BENEFIT ADMIN- CLAIMS   EMPLOYEE & RETIREE BENEFITS
Total OM Wire      1,007,098.40


Disbursements from the Renewal & Replacement Fund (Capital Projects):
  10112 01/13/11      81,674.00 ELECTRIC SUPPLY OF TAMPA INC      LINE MATERIAL
  10113 01/20/11      24,950.00 KEY IRON WORKS INC                LABOR, SERVICE, MATERIAL
Total R&R            106,624.00


Disbursements from the Construction Fund
  20381 01/13/11     142,147.85 ASSOCIATED DIVERSIFIED SERVICES, IN ENGINEERING SERVICES
  20382 01/20/11      59,137.12 ASSOCIATED DIVERSIFIED SERVICES, IN ENGINEERING SERVICES
Total CF             201,284.97


Disbursements from the Operations & Maintenance Fund (Expenses):
 134429 01/07/11          25.00 CANCER FOUND OF THE FL KEYS         DONATION
 134430 01/07/11       2,282.88 IBEW LOCAL 1990                     EMPLOYEE DEDUCTIONS
 134431 01/07/11     117,142.80 KEYS PENSION FUND                   UTILITY BOARD CONTRIBUTION
 134432 01/07/11          69.00 UNITED WAY OF MONROE COUNTY         EMPLOYEE DEDUCTIONS
 134433 01/13/11         134.57 AAA COOPER TRANSPORTATION           FREIGHT
 134434 01/13/11      15,894.00 ABB, INC.                           ELECTRICAL SUPPLIES
 134435 01/13/11       1,400.87 ADP INC                             PAYROLL SERVICES
 134436 01/13/11          29.30 ALTEC INDUSTRIES INC                EQUIPMENT SERVICE
 134437 01/13/11         148.31 AMSAN FLORIDA                       SUPPLIES
 134438 01/13/11      13,200.00 ASPLUNDH TREE EXPERT CO             TREE TRIMMING SERVICES
 134439 01/13/11       5,450.85 AT&T                                SERVICES
 134440 01/13/11       7,400.53 AT&T                                SERVICES
 134441 01/13/11       1,605.63 BARRETT & CO INC                    OFFICE SUPPLIES
 134442 01/13/11      11,660.87 BV OIL COMPANY, INC.                FUEL
 134443 01/13/11         304.00 CAR PARTS AUTO                      AUTO PARTS/SUPPLIES
 134444 01/13/11         456.58 CINTAS CORPORATION                  UNIFORM SERVICES
 134445 01/13/11       2,048.90 COLLECTOR SOLUTIONS INC             SERVICES
 134446 01/13/11         104.09 COMCAST                             CABLE SERVICES
 134447 01/13/11          66.48 CONNEY SAFETY                       SUPPLIES
 134448 01/13/11         228.65 COOKE COMMUNICATIONS LLC            ADVERTISING
 134449 01/13/11          75.10 CURRY & SONS PRINTING               PRINTING SERVICES
 134450 01/13/11         640.98 D&V COMMERCIAL A/C                  AIR CONDITIONING SERVICES
 134451 01/13/11          30.00 DESIGN GROUP KEY WEST               SERVICES
 134452 01/13/11       3,501.00 DIVERSIFIED SERVICES CO             JANITORIAL SERVICES
                                                      Page 2 of 7
                            Utility Board of the City of Key West
                                     Disbursement Report
                       For the Periods January 7 to January 26, 2011


Ref # Date       Amount        Payee                             Purpose
 134453 01/13/11      8,670.02 ELECTRIC SUPPLY OF TAMPA INC      LINE MATERIAL
 134454 01/13/11      1,918.80 FARWEST LINE SPECIALTIES LLC      SUPPLIES
 134455 01/13/11      1,661.14 FASTENAL                          ELECTRICAL SUPPLIES
 134456 01/13/11        356.76 FEDERAL EXPRESS                   FREIGHT
 134457 01/13/11      3,611.38 FIRST STATE BANK OF FL KEYS       BANKING SERVICES
 134458 01/13/11        251.51 FL KEYS AQUEDUCT AUTHORITY        WATER
 134459 01/13/11      1,050.10 FL KEYS COMMUNITY COLLEGE         SEMINARS, TRAINING
 134460 01/13/11        423.00 G.S.S. ENTERPRISES                AUTO PARTS/SUPPLIES
 134461 01/13/11      1,248.52 GULF CONTROLS CORP                PARTS
 134462 01/13/11        860.00 HASKINS PLUMBING                  FACILITIES SERVICES
 134463 01/13/11        452.43 HD SUPPLYS UTILITIES LTD          EQUIPMENT
 134464 01/13/11         57.49 HEATHER ARENCIBIA                 MEDICAL SERVICES
 134465 01/13/11        629.82 HUSKIE TOOLS INC                  TOOLS
 134466 01/13/11         94.62 JENNIFER BEVIS-PINDUR             REIMBURSEMENT
 134467 01/13/11        500.00 KEY WEST GATOR CLUB               DONATION
 134468 01/13/11        292.94 KEY WEST RESORT UTILITIES CORP    ANNUAL PAYMENT
 134469 01/13/11      1,443.91 KEYS MARINE SERVICE               AUTO REPAIRS/SERVICES
 134470 01/13/11        410.00 KONK 1500 AM                      ADVERTISING
 134471 01/13/11        186.30 L&E PRODUCTS                      MATERIALS
 134472 01/13/11        108.85 LANDS END CORPORATE SALES         MATERIALS
 134473 01/13/11        194.37 LAUREL WILKES                     REIMBURSEMENT
 134474 01/13/11        669.60 LOW KEY                           JANITORIAL SUPPLIES
 134475 01/13/11         99.95 MAC TOOLS                         SUPPLIES
 134476 01/13/11        101.78 NILES SALES & SERVICE             PARTS, SUPPLIES
 134477 01/13/11        238.16 PALMETTO FORD TRUCK SALES INC     VEHICLES, PARTS, SERVICES
 134478 01/13/11      5,000.00 POSTAGE BY PHONE                  POSTAGE EXPENSE
 134479 01/13/11        673.88 RECHTIEN INTERNATIONAL            FACILITIES SUPPLIES
 134480 01/13/11      4,545.17 RIVERSIDE MANUFACTURING           APPAREL
 134481 01/13/11      3,016.50 STUART C IRBY CO                  LINE MATERIAL
 134482 01/13/11        176.94 SUZANNE GREAGER                   REIMBURSEMENT
 134483 01/13/11        145.00 TERMINIX                          FACILITIES SERVICES
 134484 01/13/11      3,290.00 THE DOCTORS CENTER                MEDICAL SERVICES
 134485 01/13/11      5,806.68 UTILITIES STRUCTURES INC          ELECTRICAL SUPPLIES
 134486 01/13/11        400.00 WIIS - FM 107.1 RADIO             PROMOTIONAL ITEMS
 134487 01/13/11         88.15 XEROX CORP                        SUPPLIES
 134488 01/13/11        139.60 MEGAN M THIEME                    CUSTOMER REFUND REISSUE
 134489 01/18/11         69.83 ALFRED GONZALEZ                   CUSTOMER REFUND
 134490 01/18/11         28.62 AT HOME IN KEY WEST INC           CUSTOMER REFUND
 134491 01/18/11         41.50 BRANCH BANKING AND TRUST CO       CUSTOMER REFUND
 134492 01/18/11        123.43 CHRISTIAN G STOLL                 CUSTOMER REFUND
 134493 01/18/11         83.13 DALE C SILVA                      CUSTOMER REFUND
 134494 01/18/11         18.04 DANIEL HILMAR HAMILTON            CUSTOMER REFUND
 134495 01/18/11        130.03 DICK L MADSON                     CUSTOMER REFUND
 134496 01/18/11        104.72 DION RENTAL PROPERTIES LLC        CUSTOMER REFUND
 134497 01/18/11        273.22 EASTER SEAL THERAPY CENTR         CUSTOMER REFUND
 134498 01/18/11        129.89 EMILY ANN RIVAS                   CUSTOMER REFUND
 134499 01/18/11         65.22 ERIN MELISSA NAGEL                CUSTOMER REFUND
 134500 01/18/11        209.21 FAS AHM UTILITIES LLC             CUSTOMER REFUND
 134501 01/18/11         47.20 FAS AHM UTILITIES LLC             CUSTOMER REFUND
 134502 01/18/11         21.57 FAS AHM UTILITIES LLC             CUSTOMER REFUND
 134503 01/18/11        238.77 GVILIS INVESTMENTS LLC            CUSTOMER REFUND
 134504 01/18/11         83.32 HARRY CLAYTON WEBSTER II          CUSTOMER REFUND
 134505 01/18/11        124.97 J N SPARKS                        CUSTOMER REFUND
 134506 01/18/11          0.37 JODY SMITH                        CUSTOMER REFUND
 134507 01/18/11         19.54 JOHN POZZI JR                     CUSTOMER REFUND

                                                   Page 3 of 7
                           Utility Board of the City of Key West
                                    Disbursement Report
                      For the Periods January 7 to January 26, 2011


Ref # Date       Amount        Payee                            Purpose
 134508 01/18/11        114.89 JON A PERETTE                    CUSTOMER REFUND
 134509 01/18/11          0.75 JOSEPH C RABUS                   CUSTOMER REFUND
 134510 01/18/11         29.97 JOYCE ERIKSSON RYLANDER          CUSTOMER REFUND
 134511 01/18/11         73.56 KELLY HEDGES PEERMAN             CUSTOMER REFUND
 134512 01/18/11        193.35 KEY WEST BEACH CLUB TWO          CUSTOMER REFUND
 134513 01/18/11        154.04 LUCY CLARK                       CUSTOMER REFUND
 134514 01/18/11         56.14 MARGARET C BURNS                 CUSTOMER REFUND
 134515 01/18/11         29.70 MARY ANNE WILLIAMS               CUSTOMER REFUND
 134516 01/18/11          4.47 MELCO INC                        CUSTOMER REFUND
 134517 01/18/11        273.83 MERRILL LYNCH 26V                CUSTOMER REFUND
 134518 01/18/11         40.00 MICHAEL FREDERICK RUEHL          CUSTOMER REFUND
 134519 01/18/11        124.47 NORMA P SONZOGNI                 CUSTOMER REFUND
 134520 01/18/11         61.34 PARROT KEY ASSOCIATES LLC        CUSTOMER REFUND
 134521 01/18/11         80.48 PETER E COWLING                  CUSTOMER REFUND
 134522 01/18/11          7.13 PETER E COWLING                  CUSTOMER REFUND
 134523 01/18/11         36.45 PREMIER INVESTMENT PROPERTIES    CUSTOMER REFUND
 134524 01/18/11         51.72 RANDALL B SMITH                  CUSTOMER REFUND
 134525 01/18/11         35.08 RAYMOND JOHN PACK                CUSTOMER REFUND
 134526 01/18/11        106.57 RYAN RAE CANNIZZO                CUSTOMER REFUND
 134527 01/18/11         38.56 SILTEK GROUP INC                 CUSTOMER REFUND
 134528 01/18/11         22.97 SILTEK GROUP INC                 CUSTOMER REFUND
 134529 01/18/11         36.25 SILTEK GROUP INC                 CUSTOMER REFUND
 134530 01/18/11         23.88 SILTEK GROUP INC                 CUSTOMER REFUND
 134531 01/18/11         20.51 SILTEK GROUP INC                 CUSTOMER REFUND
 134532 01/18/11         18.09 SILTEK GROUP INC                 CUSTOMER REFUND
 134533 01/18/11         20.06 SILTEK GROUP INC                 CUSTOMER REFUND
 134534 01/18/11         19.91 SILTEK GROUP INC                 CUSTOMER REFUND
 134535 01/18/11         27.08 SILTEK GROUP INC                 CUSTOMER REFUND
 134536 01/18/11         17.47 SILTEK GROUP INC                 CUSTOMER REFUND
 134537 01/18/11         30.44 SILTEK GROUP INC                 CUSTOMER REFUND
 134538 01/18/11         18.54 SILTEK GROUP INC                 CUSTOMER REFUND
 134539 01/18/11         18.54 SILTEK GROUP INC                 CUSTOMER REFUND
 134540 01/18/11         87.24 TODD A BAGLEY                    CUSTOMER REFUND
 134541 01/18/11        100.00 TRACEY T MULLER                  CUSTOMER REFUND
 134542 01/18/11         78.50 WOODROW ALLEN HOUGH              CUSTOMER REFUND
 134543 01/18/11         47.24 AMY NADINE KATHLEEN MACH         CUSTOMER REFUND   REISSUE
 134544 01/18/11         14.18 JAMES S BROOMFIELD               CUSTOMER REFUND   REISSUE
 134545 01/18/11      3,575.64 JAMES THOMAS                     DAMAGE CLAIMS
 134546 01/18/11        139.60 MEGAN M THIEME                   CUSTOMER REFUND   REISSUE
 134547 01/18/11      3,350.00 RICHARD A GILLING                CUSTOMER REFUND   REISSUE
 134548 01/18/11         11.19 ALBERT F RIFFLE ESTATE           CUSTOMER REFUND
 134549 01/18/11         38.29 ANDREW C REED                    CUSTOMER REFUND
 134550 01/18/11         64.19 ARLINDA WHITE ATWOOD             CUSTOMER REFUND
 134551 01/18/11         66.70 BEACH CLUB BROKERS INC           CUSTOMER REFUND
 134552 01/18/11        106.38 BEATA JUDIT EMMER                CUSTOMER REFUND
 134553 01/18/11         28.63 BEATRIZ MARQUEZ MARTINEZ         CUSTOMER REFUND
 134554 01/18/11        102.33 BENHAM REAL ESTATE GRP OF SW     CUSTOMER REFUND
 134555 01/18/11         48.12 BROOKE S WOOD                    CUSTOMER REFUND
 134556 01/18/11        373.23 CENTENNIAL BANK                  CUSTOMER REFUND
 134557 01/18/11         66.53 CHAD ERIK YOKEL                  CUSTOMER REFUND
 134558 01/18/11         83.32 CHAUNCEY GOODRICH ALYEA II       CUSTOMER REFUND
 134559 01/18/11         12.26 CHRISTOPHER DEWAYNE STOGSDILL    CUSTOMER REFUND
 134560 01/18/11         77.11 CHRISTOPHER SCOTT OPRZADEK       CUSTOMER REFUND
 134561 01/18/11         63.81 DANIEL E LONG                    CUSTOMER REFUND
 134562 01/18/11        108.82 DOMINIC GUARINO                  CUSTOMER REFUND

                                                  Page 4 of 7
                           Utility Board of the City of Key West
                                    Disbursement Report
                      For the Periods January 7 to January 26, 2011


Ref # Date       Amount        Payee                            Purpose
 134563 01/18/11         35.65 DONALD KEVIN GROH                CUSTOMER REFUND
 134564 01/18/11         16.23 ELIZABETH NICOLE DEMPSEY         CUSTOMER REFUND
 134565 01/18/11         79.93 FIRST STATE BANK OF THE FL KEY   CUSTOMER REFUND
 134566 01/18/11        115.39 FLOYD SWEETING                   CUSTOMER REFUND
 134567 01/18/11         38.28 FRANK LEE SHELDON                CUSTOMER REFUND
 134568 01/18/11         22.48 GHEORGHE BUDEI                   CUSTOMER REFUND
 134569 01/18/11      1,392.85 INDEPENDENT PAPERBOARD MARKET    CUSTOMER REFUND
 134570 01/18/11         44.42 IVAN CAVANJI                     CUSTOMER REFUND
 134571 01/18/11      5,153.03 JAMES A LOWRY                    CUSTOMER REFUND
 134572 01/18/11        125.00 JANICE CLARISSA                  CUSTOMER REFUND
 134573 01/18/11         29.64 JESSE THOMAS MOORE IV            CUSTOMER REFUND
 134574 01/18/11         57.42 JOHN D RUDOLPH                   CUSTOMER REFUND
 134575 01/18/11         74.79 JOHN MARTIN NICHOLS              CUSTOMER REFUND
 134576 01/18/11         25.23 JOHN THOMAS BOOKER JR            CUSTOMER REFUND
 134577 01/18/11         18.17 JOHN WILLIAM SCOTT               CUSTOMER REFUND
 134578 01/18/11        164.02 JOSEPH J KUKELLA                 CUSTOMER REFUND
 134579 01/18/11         60.28 JOSHUA DAVID BECK                CUSTOMER REFUND
 134580 01/18/11         44.81 JRJ & K PROPERTIES LLC           CUSTOMER REFUND
 134581 01/18/11         26.80 KARLA ERICA MALSHEIMER           CUSTOMER REFUND
 134582 01/18/11         72.09 KELLY DAWN KLINE                 CUSTOMER REFUND
 134583 01/18/11         60.87 KEY WEST BANK                    CUSTOMER REFUND
 134584 01/18/11         92.63 KEYS FEDERAL CREDIT UNION        CUSTOMER REFUND
 134585 01/18/11        547.56 KY NGUYEN                        CUSTOMER REFUND
 134586 01/18/11         10.08 LINDA P FRAILEY                  CUSTOMER REFUND
 134587 01/18/11        103.53 LISA G ROWE                      CUSTOMER REFUND
 134588 01/18/11        101.50 LUCAS P BALDE                    CUSTOMER REFUND
 134589 01/18/11        570.62 M&M AUTOMOTIVE                   CUSTOMER REFUND
 134590 01/18/11         37.93 MARCELLA DENISE LLOYD            CUSTOMER REFUND
 134591 01/18/11         47.94 MARK EDGAR WHITE JR              CUSTOMER REFUND
 134592 01/18/11         70.37 MATTHEW DENNIS PISCOPINK         CUSTOMER REFUND
 134593 01/18/11         88.75 MICHAEL BARTON BOEHMLER          CUSTOMER REFUND
 134594 01/18/11         31.41 MIGUEL A MARTINEZ                CUSTOMER REFUND
 134595 01/18/11         48.80 MILTON E HUFFMAN                 CUSTOMER REFUND
 134596 01/18/11         29.23 NATASHA COLE                     CUSTOMER REFUND
 134597 01/18/11        171.39 NEAL QUINN                       CUSTOMER REFUND
 134598 01/18/11        123.69 PATTI A STIFF                    CUSTOMER REFUND
 134599 01/18/11        118.19 RAUL ALBERTO PEREZ               CUSTOMER REFUND
 134600 01/18/11         73.88 RAYMOND VAZQUEZ                  CUSTOMER REFUND
 134601 01/18/11          0.43 RAYMOND VAZQUEZ                  CUSTOMER REFUND
 134602 01/18/11        189.13 SALVATION ARMY INC               CUSTOMER REFUND
 134603 01/18/11         37.64 SANDRA LEE HOWELL                CUSTOMER REFUND
 134604 01/18/11        219.40 SOUTH FLORIDA COUNCIL INC 8      CUSTOMER REFUND
 134605 01/18/11        364.70 STEPHEN CONRAD SUNKEL            CUSTOMER REFUND
 134606 01/18/11         92.41 TIMOTHY MICHAEL STOJKIC          CUSTOMER REFUND
 134607 01/18/11        117.02 TRG KEY WEST GP LLC              CUSTOMER REFUND
 134608 01/18/11         48.63 WARREN LEE HILLS                 CUSTOMER REFUND
 134609 01/18/11         35.16 WOODROW ALLEN HOUGH              CUSTOMER REFUND
 134610 01/20/11      8,236.88 ALL ROAD COMMUNICATIONS          CELLULAR TELEPHONE
 134611 01/20/11      1,322.70 AMERICAN SAFETY UTILITY CORP     LINE EQUIPMENT
 134612 01/20/11     14,862.00 ARDAMAN & ASSOCIATES, INC.       ENGINEERING SERVICES
 134613 01/20/11      2,085.66 BANNER TIRE OF KW INC            AUTO PARTS/SUPPLIES
 134614 01/20/11      4,100.30 ORR PROTECTION SYSTEMS, INC.     MISCELLANEOUS
 134615 01/20/11        240.00 CAR PARTS AUTO                   AUTO PARTS/SUPPLIES
 134616 01/20/11        231.74 CINTAS CORPORATION               UNIFORM SERVICES
 134617 01/20/11         82.19 COMCAST                          CABLE SERVICES

                                                  Page 5 of 7
                           Utility Board of the City of Key West
                                    Disbursement Report
                      For the Periods January 7 to January 26, 2011


Ref # Date       Amount        Payee                             Purpose
 134618 01/20/11        102.11 CONNEY SAFETY                     SUPPLIES
 134619 01/20/11        525.57 DYNA SYSTEMS                      SUPPLIES
 134620 01/20/11     17,320.00 ELECTRIC SUPPLY OF TAMPA INC      LINE MATERIAL
 134621 01/20/11          6.50 FASTENAL                          ELECTRICAL SUPPLIES
 134622 01/20/11        208.00 FL HOTEL AND CONFERENCE CENTER    ACCOMODATIONS
 134623 01/20/11         12.92 FL KEYS AQUEDUCT AUTHORITY        WATER
 134624 01/20/11      2,505.10 FL MUNICIPAL POWER AGENCY         SEMINARS, TRAINING
 134625 01/20/11      5,416.66 GEHRING GROUP                     CONSULTING SERVICES
 134626 01/20/11      7,685.40 GRESCO CAPSTONE UTIL SUPPLY       LINE MATERIAL
 134627 01/20/11        581.32 HD SUPPLYS UTILITIES LTD          EQUIPMENT
 134628 01/20/11      2,240.00 HERTZ FURNITURE SYSTEMS CORP      OFFICE FURNITURE
 134629 01/20/11        404.99 HUSKIE TOOLS INC                  TOOLS
 134630 01/20/11      1,026.61 INSIGHT PUBLIC SECTOR             COMPUTER PARTS/SUPPLIES
 134631 01/20/11      2,726.50 INTERFLEET, INC.                  COMPUTER SOFTWARE/MAINT
 134632 01/20/11      7,319.67 IRON MOUNTAIN                     STORAGE
 134633 01/20/11        587.77 KW CHEMICAL & PAPER SUPPLY        SUPPLIES
 134634 01/20/11        495.00 KEY WEST TRANSFER STATION         DISPOSAL SERVICES
 134635 01/20/11        569.98 KEYS YAMAHA SERVICE, INC          LINE EQUIPMENT
 134636 01/20/11        400.75 LOW KEY                           JANITORIAL SUPPLIES
 134637 01/20/11        158.63 MATHESON TRI GAS                  CHEMICAL SUPPLIES
 134638 01/20/11         63.91 MCI TELECOMMUNICATIONS            TELEPHONE EXPENSE
 134639 01/20/11        740.00 MCNEARY INSURANCE CONSULTING      SERVICES
 134640 01/20/11      3,136.81 NATHAN EDEN                       LEGAL SERVICES
 134641 01/20/11      5,450.00 PRECAST SPECIALTIES INC           LINE MATERIAL
 134642 01/20/11      1,042.41 RECHTIEN INTERNATIONAL            FACILITIES SUPPLIES
 134643 01/20/11         21.50 RITZ SAFETY                       SAFETY SUPPLIES
 134644 01/20/11        180.00 SOCIETY FOR HUMAN RES MGMT        SUBSCRIPTIONS
 134645 01/20/11         93.56 SUNSHINE STATE ONE CALL           SERVICES
 134646 01/20/11        200.00 LODGING ASSOC OF FL KEYS & KW     COMMUNITY SPONSORSHIP
 134647 01/20/11      2,001.02 THYSSENKRUPP ELEVATOR             SERVICES
 134648 01/20/11      7,756.02 UTILITIES STRUCTURES INC          ELECTRICAL SUPPLIES
 134649 01/20/11        960.34 VERIZON WIRELESS                  SERVICES
 134650 01/20/11         60.00 VISITING NURSE ASSOCIATION        MEDICAL SERVICES
 134651 01/20/11      1,012.00 WCNK 987 FM                       ADVERTISING
 134652 01/20/11        178.00 WEATHER DECISION TECHNOLOGIE      ENGINEERING SERVICES
 134653 01/20/11     20,966.50 WESCO DISTRIBUTION                LINE MATERIAL
 134654 01/20/11      1,633.00 WWUS 1 RADIO                      ADVERTISING
 134655 01/20/11        450.00 XEROX CAPITAL SERVICES            SERVICES
 134656 01/20/11        372.16 XEROX CORP                        SUPPLIES
Total O&M           383,757.47




                                                   Page 6 of 7
                          Utility Board of the City of Key West, FL
                                    Voided Payment List
                                   Utility Board Meeting 1/26/11


         O&M                                                   Reason
REF    Check #                Vendor Name                       Code  Check Date        Check Amount
  1     134488    MEGAN M THIEME                                 H     01/13/11                139.60
  2
  3
  4
  5
  6
  7
  8
  9
 10
 11
 12
 13
 14
 15
 16
 17
 18
                                                                         Total O&M             139.60

                                                               Reason
REF CF Check #                  Vendor Name                     Code  Check Date        Check Amount
 1
                                                                         Total for CF           $0.00

    R&R Check                                                  Reason
REF     #                       Vendor Name                     Code  Check Date        Check Amount

                                                                   Total for R&R                $0.00
                                                      TOTAL FOR O&M, CF and R&R               $139.60
Reason Code:
 A Cust/Vendor did not receive, lost check or staledate, stop payment search performed and ck replaced
 B Wrong vendor entered into system and detected when matching check with invoice
 C Customer service processed a work ticket requesting check to be voided (i.e. deposit
     should have been transferred and not refunded, change of name, etc.)
 D Wrong amount
 E Printed check in error, should not be paid at this time
 F Vouched in error
 G Research performed on stale dated checks
 H Other




                                                 Page 7 of 7
                                                Agenda Item Summary Sheet
                                                                Meeting Date: January 26, 2011
                                              Proposer: Lynne E. Tejeda, General Manager & CEO
                                                                            Department: Finance
                                                                             Agenda Item #: 6c




AGENDA ITEM WORDING:                 Award Bid for Purchase of Programmable Meters - Bid
#03-11


REQUESTED ACTION:             Motion to award the Purchase of Programmable Meters,
KEYS Bid #03-11, to HD Supply in accordance with the unit prices on the attached
schedule for quantities with a total estimated cost of $256,522.00.


DISCUSSION:         KEYS purchases an annual supply of Programmable Meters. The
meters will be used to read Residential and Commercial accounts and for replacement
of existing meters that are damaged or malfunctioning.



                                                                 Complies with    Complies with
     Vendor                Item #              Extended Price      Technical      General Terms
                                                                 Specifications    & Conditions

 HD Supply          1, 2, 3, 4, 5, 6, 7 & 8      $256,522.00          Yes              Yes




SUPPORTS STRATEGIC PLAN: Supports Strategic Plan #4 - Maintain a high level of
customer service and satisfaction.


ENVIRONMENTAL IMPACT: The installation of E-meters has reduced the amount of
time spent driving in company vehicles as these meters can be automatically read by
the handheld Itron using a radio signal. This reduces the amount of carbon monoxide
emissions produced by that vehicle.


FINANCIAL IMPACT:
 Total Estimated Cost: $ 256,522.00               Budgeted: Yes
                                                  Source of Funds: Capital
                      Utility Board of the City of Key West
                        Keys Energy Services
 Schedule of Award for Bid 03-11: Purchase of Programmable Meters

                                                        HD Supply Utilities
                                                   3671 Old Winter Garden Road
                                                        Orlando, FL 32805
                                                         (407) 893-9125

Item               Description            QTY     Unit Price       Ext. Price
  1    KEYS STOCK #: 015-0690               500   $ 152.00     $        76,000.00
  2    KEYS STOCK #: 015-0440              3000   $    39.25   $       117,750.00
  3    KEYS STOCK #: 015-0410               200   $ 161.00     $        32,200.00
  4    KEYS STOCK #: 015-0420                20   $ 163.00     $         3,260.00
  5    KEYS STOCK #: 015-0580                46   $ 215.00     $         9,890.00
  6    KEYS STOCK #: 015-0480                74   $ 215.00     $        15,910.00
  7    KEYS STOCK #: 015-0610                 4   $ 215.00     $           860.00
  8    New Item - 3 wire single phase         4   $ 163.00     $           652.00
                      Total                                    $   256,522.00
       Complies with T&C                                               Y
       Complies with Technical Specifications                          Y
                                             Agenda Item Summary Sheet
                                                            Meeting Date: January 26, 2011
                                         Proposer: Lynne E. Tejeda, General Manager & CEO
                                                                       Department: Finance
                                                                        Agenda Item #: 6d




AGENDA ITEM WORDING:               _Declare KEYS’ Vehicle #95 and Unit #88 as Surplus



REQUESTED ACTION: __Motion to declare Vehicle_#95 and Unit #88 as Surplus


DISCUSSION:        KEYS’ Vehicle #95, a 2001 Chevy S-10 pickup truck with 58,109
miles, and Unit #88, a 1989 Empire Portable Generator with trailer, meet the criteria
under the KEYS Vehicle Replacement Policy. Vehicle #95 was driven in Hurricane
“Wilma”; the under-carriage of the vehicle is in poor condition. Unit #88 is Out of
Service because of equipment failure and replacement parts are not available due to
the age of the unit. The pickup truck will be replaced in accordance with KEYS
Enabling Act Requirements while the Empire Portable Generator will not be replaced at
this time.



SUPPORTS STRATEGIC PLAN:                 Goal #3 – Maintain a safe and healthy system for
employees and the public at large.



ENVIRONMENTAL IMPACT:            KEYS’ will replace Vehicle #95 with a new Compact
SUV that meets the latest E.P.A. guidelines in accordance with the “Clean Air Act” for
engine emissions.



FINANCIAL IMPACT:
 Estimated surplus proceeds: $1,750.00        Budgeted:   Yes
                                                         Agenda Item Summary Sheet
                                                                       Meeting Date: January 26, 2011
                                                     Proposer: Lynne E. Tejeda, General Manager & CEO
                                                                                  Department: Finance
                                                                                    Agenda Item #: _6e




AGENDA ITEM WORDING:                      Declare Miscellaneous Wire and Metal as Surplus

REQUESTED ACTION:                  Motion to Declare Miscellaneous Wire and Metal as Surplus

DISCUSSION: The following wire has been determined to be Surplus to KEYS’ needs
by David Price, Director of T&D. After the Utility Board declares Bare Copper, Insulated
Aluminum Wire and Mast Arms as Surplus, KEYS will contact Paradise Recycling to pick
up the Bare Copper and Alex Auto Wrecking to pick up the Insulated Aluminum and
Mast Arms. KEYS quoted out this surplus, Paradise Recycling and Alex Auto Wrecking
offered the highest revenue to KEYS among the three responses.

KEYS has previously obtained written permission from the local governmental agencies
relinquishing any interest in submitting a bid, thus, KEYS can immediately order a pick
up from the contractor after Board action.


 Item           Awarded              Type of Material             Est.           Revenue    Estimated
   #             Vendor                                         Quantity          per lb.   Proceeds
                                                                 (lbs.)
   1       Paradise Recycling             Copper                  1,500           $3.1000    $4,650.00
   2       Alex Auto Wrecking       Insulated Aluminum            2,000           $0.3300   $ 660.00
   3       Alex Auto Wrecking            Mast Arms               2,000            $0.4000    $ 800.00
                                           Total                                            $6,110.00


Paradise Recycling & Alex Auto Wrecking do not charge a handling fee or freight charges.


SUPPORTS STRATEGIC PLAN:                Goal #1 – Provide KEYS’ customers with electric power
at the most reasonable cost for our service area.

ENVIRONMENTAL IMPACT: Recycling miscellaneous wire and metal supports Goal
#5 – Operate KEYS in an environmentally responsible manner.

FINANCIAL IMPACT:
 Estimated Proceeds: $6,110.00                         Budget: No
                                                       Source of Funds: Not Applicable
                                           Agenda Item Summary Sheet
                                                            Meeting Date: January 26, 2011
                                        Proposer: Lynne E. Tejeda, General Manager & CEO
                                                                       Department: Finance
                                                                       Agenda Item #: 7a




AGENDA ITEM WORDING:                     Approve Financial Audit and Comprehensive Annual
Financial Report (CAFR) for Fiscal Year Ended September 30, 2010.



REQUESTED ACTION:               Motion to approve Financial Audit and Comprehensive Annual
Financial Report (CAFR) for Fiscal Year Ended September 30, 2010.



DISCUSSION:          Per Bond Resolution #532, Article V, Covenants, Section 5.01 (H),
Annual Audit, the Utility Board shall also, at least once a year, within one hundred and
eight (180) days after the close of the fiscal year, cause the financial statement of the
Board to be audited by the accountant. A copy of such annual audit shall regularly be
furnished to any Credit Facility and to any Registered Owner of any Bonds. Additional
details for this requirement are provided in said Bond Resolution.

The Audit Committee reviewed the draft Financial Audit and CAFR and presented a
Committee Report earlier during this meeting.


The independent auditor’s management memorandum contained internal control and
other operational matters for KEYS consideration. These comments, along with
management’s response were also discussed during the Audit Committee meeting.



FINANCIAL IMPACT:
 Total Cost:                            Budgeted:
                                        Source of Funds:
                                               DRAFT




   Comprehensive Annual
     Financial Report




           Utility Board
                  of the
 City of Key West, Florida
For the Fiscal Year Ended September 30, 2010
                                                                DRAFT



                    UTILITY BOARD OF THE CITY OF
                          KEY WEST, FLORIDA




           COMPREHENSIVE ANNUAL FINANCIAL REPORT




        FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2010




JACK WETZLER                               LYNNE E. TEJEDA
ASSISTANT GENERAL MANAGER &                GENERAL MANAGER &
CHIEF FINANCIAL OFFICER                    CHIEF EXECUTIVE OFFICER

PEGGY WALLS                                CINDY McVEIGH
ASSISTANT FINANCE DIRECTOR                 SUPERVISOR of ACCOUNTING
                                                                                                 DRAFT
                       UTILITY BOARD OF THE CITY OF KEY WEST

                          Comprehensive Annual Financial Report

                      For the Fiscal Year Ended September 30, 2010

                                     TABLE OF CONTENTS
                                                                                           Page
INTRODUCTORY SECTION
 Letter of Transmittal                                                                       i
 GFOA Certificate of Achievement of Excellence of Financial Reporting                       x
 Officials and Employees                                                                    xi

FINANCIAL SECTION
 Independent Auditor's Report                                                               1
 Management's Discussion and Analysis                                                       3
 Financial Statements:
    Balance Sheet                                                                          10
    Statement of Revenues, Expenses and Changes in Net Assets                              12
    Statements of Cash Flow                                                                13
 Notes to Financial Statements                                                             15
 Required Supplementary Information                                                        33
 Schedule of Revenues Earned                                                               34
 Schedule of Revenues and Expenditures - Budget to Actual                                  35

STATISTICAL SECTION
 Statistical Section Description                                                           36
 Financial Trends - Condensed Balance Sheets - Last 10 Fiscal Years                        37
 Financial Trends - Changes in Net Assets - Last 10 Fiscal Years                           39
 Financial Trends - Net Assets by Component - Last 10 Fiscal Years                         42
 Revenue Capacity - Revenues by Type of Customer - Last 10 Fiscal Years                    43
 Revenue Capacity - Actual Number of Customers Billed (September) - Last 10 Fiscal Years   44
 Revenue Capacity - kWh Sales by Type of Customer - Last 10 Fiscal Years                   45
 Revenue Capacity - Average Monthly Bill - Last 10 Fiscal Years                            46
 Revenue Capacity - Residential Rate Analysis (September) - Last 10 Fiscal Years           47
 Revenue Capacity - Rate Increases - Last 10 Fiscal Years                                  48
 Debt Capacity - Computation of Debt Service Coverage - Last 10 Fiscal Years               49
 Debt Capacity - Principal Payments Payable of all Debt Issues Through 2032                50
 Demographic and Economic Information - Last 10 Fiscal Years                               51
 Operating Information - Operating Expenses - Last 10 Fiscal Years                         52
 Operating Information - Energy Sources - Last 10 Fiscal Years                             53
 Operating Information - Generating Capacity - Last 10 Fiscal Years                        54
 Operating Information - Employee Information - Last 10 Fiscal Years                       55
 Operating Information - Ten Highest Consumption Locations                                 56

COMPLIANCE SECTION
 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters
 Based on an Audit of Financial Statements Performed in Accordance with Government
 Auditing Standards                                                                         57
                                                                                               DRAFT
                                                                                          (305) 295-1000
                                                                                       1001 James Street
                                                                                             PO Box 6100
                                                                                 Key West, FL 33040-6100
                                                                                    www.KeysEnergy.com


  U T I L I T Y       B O A R D       O F      T H E     C I T Y      O F     K E Y       W E S T


January 26, 2011

To the Chairman and Members
of the Utility Board of the
City of Key West, Florida


The Comprehensive Annual Financial Report (CAFR) of the Utility Board of the City of Key West,
Florida, for the Fiscal Year ended September 30, 2010, is submitted herewith, pursuant to and by the
authority of Chapter 69-1191, Laws of Florida, as amended, and Resolution No. 532 of the Utility
Board, Article V, Section 5.01 (H), adopted November 13, 1985, as amended and supplemented. The
CAFR was compiled by the staff of the Finance Department with the close cooperation of our
independent auditor and represents the official report of the Utility’s financial operations and conditions
to the citizens, Utility Board, management personnel, rating agencies, bond holders and other
interested parties. Management is responsible for the contents of the CAFR.

GAAP requires that management provide a narrative introduction, overview, and analysis to accompany
the basic financial statement in the form of Management’s Discussion and Analysis (MD&A). This letter
of transmittal is designed to complement the MD&A and should be read in conjunction with it. The
Utility Board’s MD&A can be found immediately following the report of the independent auditors.

The Utility Board of the City of Key West realizes its role, as a public power entity, has never been
more important. The present organization was created by provisions of Chapter 69-1191, Laws of
Florida (1969), as amended, to manage, operate, and maintain the electric utility serving the citizens of
the City of Key West, Florida and the Lower Florida Keys.




                                                    i
                            A Reliable Constant In Changing Times
                                                                                                    DRAFT
In Fiscal Year (FY) 2010 KEYS maintained a high level of reliability, continued to grow its green
practices, and expanded communication platforms to remain in touch with its customers.

                                              DEPENDABLE

KEYS was named one of 94 of the nation’s more than 2,000 public power utilities to earn the Reliable
Public Power ProviderTM (RP3) designation from the American Public Power Association (APPA), and only
one of six to achieve the diamond level for providing consumers with the highest degree of reliable and
safe electric service.

The RP3 recognizes public power utilities that demonstrate proficiency in four key disciplines: reliability,
safety, training, and system improvement. Criteria within each category are based on sound business
practices and represent utility-wide commitment to safe and reliable delivery of electricity.

KEYS was previously awarded the RP3 designation in 2008 at the platinum level. After working to
continue to improve its operations KEYS was awarded the RP3 designation at the diamond level – the
highest level achievable.

As part of ongoing reliability improvements, KEYS’ multi-year pole restoration project worked its way
through the Lower Keys and entered Key West. As of the end of the fiscal year, KEYS had replaced
1,700 poles within the Lower Keys and has plans on replacing approximately 500 poles within the City
of Key West in FY 2011.

KEYS also began re-wiring approximately three-miles of the existing 69 Kilovolt (kV)* Transmission Line
(TIELINE) that was constructed in 1962 of which approximately two-miles of the span are over water
and one-mile is over land. The existing wire was in poor condition due to age and the extreme
corrosive environment of the Florida Keys.

Both the pole restoration and TIELINE re-wiring projects represent approximately $20 million in
upgrades to KEYS’ electric grid.


                                             CONSCIENTIOUS

Continuing our efforts to remain good stewards of the environment, KEYS, along with the Florida
Municipal Power Agency (FMPA), and the National Oceanic and Atmospheric Administration’s (NOAA)
Florida Keys National Marine Sanctuary dedicated a solar demonstration project.

The 26 kilowatt (AC) solar photovoltaic system was installed at the Florida Keys Eco-Discovery Center
(the Center), is jointly owned by FMPA and NOAA and is operated by KEYS. The system provides about
30 percent of the Center’s power needs and is part of FMPA’s statewide network of power generating
resources serving 14 communities located throughout Florida.

The solar system is accompanied by an educational kiosk at the Eco-Discovery Center. The interactive
display educates visitors about climate change, energy conservation, and solar power generation.

This project used a “peel and stick” solar system. Electricity is generated with an innovative thin-film
solar panel mounted to the Center’s rooftop using an adhesive material. The technology was selected
as the best match for the Florida Keys’ unique environmental conditions.



                                                    ii
                                                                                              DRAFT
Other advantages of the technology include the ability to capture the complete solar spectrum more
efficiently and the ability to generate at low-light conditions. Additionally, the panels’ flexible,
lightweight construction made it possible to complete installation over a period of only 10 days.

The project cost $235,928, with FMPA’s All-Requirements Project paying 62 percent and NOAA’s Office
of National Marine Sanctuaries paying 38 percent. KEYS, through an existing agreement with FMPA, will
provide operation and maintenance support for the system.

In other GREEN news, KEYS celebrated the one year anniversary of its recycling program which has
helped to save the utility over $8,000 in waste disposal services. Prior to implementing the recycling
program, KEYS annually budgeted $16,000 for waste disposal.

Working in conjunction with Waste Management, KEYS provided recycling containers throughout KEYS’
facilities to encourage employees and customers to dispose of waste accordingly. Given recent
technological breakthroughs, there is no longer a need to extensively sort recyclables, which makes it
easier for employees to play a role in helping the environment.

                                           FORWARD-THINKING

In an effort to better disseminate video content and make it more accessible to customers, KEYS
unveiled its very own YouTube channel. KEYS’ YouTube channel joins its Facebook and Twitter pages
as social media platforms which allow the Utility the ability to communicate with customers more
directly and immediately. The inaugural content on KEYS’ YouTube channel was sixteen video
segments from an energy conservation DVD produced in conjunction with FMPA.

At the close of the fiscal year, KEYS unveiled a redesigned website with a new look and expanded
features designed to improve usability. Simplified navigational tools, new fonts, and updated graphics
and layouts were added to help KEYS’ customers access information more quickly and easily. The
redesign was intended to ensure that www.KeysEnergy.com remains effective, interactive, and user-
friendly to customers well into the future.


*Kilovolt – A unit of electrical force equal to 1,000 volts.




                                                     iii
                                           Entity Definition
                                                                                                     DRAFT
Enabling Legislation - Pursuant to the provisions of Chapter 69-1191, Laws of Florida, Special Act of
1969, as amended and supplemented, Section 11, the said Utility Board shall have full and complete
power and exclusive authority to fix rates and charges for electricity and charges or prices for any
other real and personal property, products and services, materials and commodities, by-products of
and from all or any of its activities or operations, furnished or sold by said Utility Board, and to provide
for the collection of the same.

Bond Resolution - Pursuant to the provisions of the Original Bond Resolution, 532, adopted on
November 13, 1985, as amended and supplemented, Article V, Section 5.01, (B), the Board covenants
to fix, establish, revise from time to time whenever necessary, maintain and collect always such fees,
rates, rentals and other charges for the use of the product, services and facilities of the Utility which
will always provide Revenues in each Fiscal Year sufficient to pay, and out of such funds pay, 100% of
all Operating Expenses of the Utility in such year and all reserve or other payments herein required,
and 125% of the Debt Service Requirement in such Fiscal Year on the Bonds. Such rates, fees, rentals
or other charges shall not be reduced so as to be insufficient to provide Revenues for such purposes.

The Board further covenants and agrees that the Board will annually within thirty (30) days after
adoption of the budget revise such fees, rates, rentals and other charges for the use of the product,
services and facilities of the Utility to the extent necessary for the estimated Gross Revenues during the
next succeeding Fiscal Year to increase over the amount of actual Gross Revenues for the next
preceding Fiscal Year by the amount that the estimated Operating Expenditures during such next
succeeding Fiscal Year shall exceed the actual Operating Expenses of the Utility during such next
preceding Fiscal Year.

The Florida Public Service Commission (FPSC) – Since KEYS is a public utility the FPSC has rate
structure jurisdiction. No rules and regulations, or schedules of rates and charges, or modifications or
revisions of the same, shall be effective until filed with and approved by the FPSC as provided by law.
Upon acceptable showing by any utility, the FPSC may waive or modify, as to that utility, the provisions
of any rule, except when such provisions are fixed by Statute. No deviation from these rules shall be
permitted unless authorized in writing by the FPSC.

Each utility shall file with the FPSC tariffs applicable to all territory served by it, showing all rates,
classifications, and charges for service subject to the jurisdiction of the FPSC, furnished by the utility,
and all rules and regulations relating thereto. A letter of transmittal shall be accompanied by various
items in connection with each service classification in which any change is proposed. Where the
change involves a rate or charge and the electric utility elects to make a cost study, the utility shall file
a cost information statement containing a summary of the cost study performed. After acceptance,
one stamped copy will be returned to the utility, which shall be the notice to the utility that the filing
has been accepted and approved.

Florida Municipal Power Agency (FMPA) - The Utility is a member of, and receives all of its power needs
from FMPA’s All-Requirements Project. Each member appoints one representative to FMPA’s Board of
Directors, which governs the Agency’s activities. The governance of rates charged to members
includes the All-Requirements Project Committee (one vote per member) and the FMPA Board of
Directors (a member’s vote is weighted based on the Member City’s net energy for load).

Basis of Accounting
The financial statements are prepared on the basis of accounting required by the Federal Energy
Regulatory Commission (FERC), which is an application of generally accepted accounting principles that
is peculiar to utilities. Revenues are recognized in the period earned and expenses are recognized in
the period incurred.

                                                     iv
                                                                                                 DRAFT
Budgetary control is maintained through the use of monthly financial reports and the use of purchase
orders, work orders, and miscellaneous cash disbursements and approval procedures. Property, Plant
and Equipment is stated at cost, which includes costs of contract work, labor, materials, allocated
indirect charges, and capitalized interest. Major renewals and betterments are capitalized while minor
replacements and repairs are expensed as incurred. The cost of electric plant retired, together with
removal costs less salvage, is charged to accumulated depreciation at such time as property is removed
from service.

Internal Accounting Controls
In developing and maintaining the accounting system, consideration is given by the administration as
to the adequacy of internal controls. Internal controls are designed to provide reasonable, but not
absolute, assurance as to the safeguarding of assets against loss from unauthorized use or disposition;
the reliability of financial records for preparing financial statements in conformity with generally
accepted accounting principles; and maintaining accountability for assets. The concept of reasonable
assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived
and (2) the evaluation of costs and benefits requires estimates and judgments by management.

The first level of control comes directly from the Enabling Act (69-1161). Section 17 requires that the
Utility Board hire an independent certified public accountant to complete an annual audit. The second
level of control comes from the covenants made by the Utility Board to the bondholders. Among other
requirements, the Utility Board must keep accounts in accordance with generally accepted accounting
principles and to file audited annual financial statements with the Auditor General of the State of
Florida within 180 days after the close of its fiscal year. As an additional level of control the Utility
Board has established an audit committee consisting of two board members.

Budgetary Control
In accordance with the Enabling Legislation, the Utility Board holds public hearings and subsequently
adopts an annual budget for operating expenses and capital outlay prior to October 1 of the fiscal year.
Actual revenues and expenses are compared to the budget on a line item basis (which is the legal level
of control) within cost centers, and an Analysis of Variances Report is prepared and submitted to the
Utility Board quarterly as required by bond indentures. During the year, staff can make amendments
within the operating budget or the capital budget that do not change the total budget for those
categories, provided that the change is within the same limitations established by Resolution adopted
by the Utility Board. The Utility Board approves all other budget changes. Supplemental appropriations
were necessary and the Utility Board in accordance with Utility Board policies amended the budgetary
data presented herein. Budget appropriations lapse at each fiscal year-end, except for the Capital
Budget. The budget is adopted on a basis consistent with KEYS’ accrual basis of accounting.




                                                   v
Rates for Service
                                                                                                                                                                         DRAFT
The following table compares average monthly charges for electric service among selected utilities in
Florida for the fiscal year ended September 30, 2010.


                                   COMPARISON OF AVERAGE MONTHLY ELECTRIC BILLS
                                                                                                          Residential                                Commercial
                                                                                                          1,000 kWh                                30KW - 6,000 kWh

                   Utility Board of the City of Key West                                        $                    138.95                        $                831.12
                   Bushnell                                                                     $                    145.05                        $                912.55
   Other Municipal Fort Meade                                                                   $                    151.56                        $                932.88
     Utilities and Fort Pierce                                                                  $                    139.84                        $                892.74
                   Kissimmee                                                                    $                    113.81                        $                814.18
     Cooperatives Lake Worth                                                                    $                    126.00                        $              1,013.70
            in     Leesburg                                                                     $                    129.91                        $                797.88
        Florida    Newberry                                                                     $                    136.36                        $                894.96
                   Ocala                                                                        $                    137.20                        $                821.37
                   Starke                                                                       $                    109.09                        $                747.84
                   Vero Beach                                                                   $                    121.45                        $                773.30
                   FL Keys Electric Coop                                                        $                    122.61                        $                789.34
   Investor-Owned FL Power & Light                                                              $                     92.69                        $                635.79
      Utilities in Progress Energy                                                              $                    123.73                        $                676.15
        Florida    Tampa Electric Co                                                            $                    109.91                        $                647.88
                                   Source: Florida Municipal Electric Association, Inc. Tallahassee, Florida




                                                                    Residential 1,000 kWh


   $160.00
   $135.00
   $110.00
     $85.00
                                                                                                                                Beach
                        Bushnell




                                                                     Worth




                                                                                                                                                                         Electric Co
                                      Meade




                                                        Kissimmee




                                                                                                             Ocala


                                                                                                                       Starke
                                              Pierce




                                                                              Leesburg


                                                                                               Newberry




                                                                                                                                        FL Keys




                                                                                                                                                              Progress
         the City of




                                                                                                                                                   FL Power
                                                                                                                                        Electric
                                                                                                                                 Vero
                                                                     Lake




                                                                                                                                                               Energy
          Board of




                                                                                                                                                    & Light
                                               Fort
                                       Fort




                                                                                                                                         Coop




                                                                                                                                                                           Tampa
           Utility




                                                       Commercial 30 KW - 6,000 kWh


  $1,300.00
  $1,000.00
   $700.00
   $400.00
   $100.00
                                                                                                                                Beach
                       Bushnell




                                                                                                                                                                         Electric Co
                                                                     Worth
                                     Meade


                                              Pierce


                                                       Kissimmee




                                                                                              Newberry


                                                                                                            Ocala


                                                                                                                      Starke




                                                                                                                                                   FL Power
                                                                             Leesburg




                                                                                                                                        FL Keys




                                                                                                                                                              Progress
         the City of




                                                                                                                                        Electric
                                                                                                                                 Vero
                                                                     Lake




                                                                                                                                                               Energy
          Board of




                                                                                                                                                    & Light
                                               Fort
                                      Fort




                                                                                                                                         Coop




                                                                                                                                                                           Tampa
           Utility




                                                                                         vi
Customer Statistics
                                                                                                                                                DRAFT
At fiscal year-end 2010, the Utility’s total customer base was 29,837 or 93 more customers than the FY
2009 level of 29,744. The number of residential customers increased 53 to 24,388. The number of
commercial customers increased 40 to 4,001.

The average monthly residential consumption of 1,137 kWh was higher than the FY 2009 level by 75
kWh. The average monthly commercial consumption of 7,726 kWh was higher than the FY 2009 level
by 1,410 kWh. The consumption for the military decreased 3.2 million kWh.

Peak Demand (60 minute net) increased to 138.1 MW from the FY 2009 peak of 137.4 MW. Load
Factor was 61.9% in FY 2010 compared to 60.9% in FY 2009.



                   Comparison of Number of Customers                                                 Comparison of MWh Sold
   25,000                                                                    350,000
                                                                             300,000                                           2010
   20,000                                        2010      2009
                                                                             250,000                                           2009
   15,000                                                                    200,000
   10,000                                                                    150,000
                                                                             100,000
    5,000                                                                     50,000
       0                                                                           0
            Residential   Commercial   Miltary          City & Other                   Residential     Commercial    Miltary     City & Other
                                                          Accounts                                                                 Accounts




Purchased Power
The Utility Board voted on July 7, 1997, to participate in the FMPA All-Requirements Project (ARP)
whereby the Utility will purchase their bulk power supply requirements, in excess of certain excluded
resources, from the ARP. The Utility began operations as a project participant effective April 1, 1998.
The Utility Board has previously entered into several purchased power arrangements including (i) the
FMPA Tri-City Project (Stanton 1); (ii) the FMPA Stanton 2 Project, and (iii) long-term purchase
agreement from Florida Power & Light Company (FPL). As a member of the ARP, the Utility Board’s
resources and costs under these three contracts have been assigned to FMPA. Other power resource
include the sale of power to the Florida Keys Electric Cooperative Association, Inc. (FKEC) and
interchange service arrangements with other Florida utilities and with power marketers.

All of the power purchases listed above requires transmission over the FKEC transmission system. On
January 1, 1992, this became a jointly owned system between KEYS and FKEC and is covered by a
Long-Term Joint Investment Transmission Agreement. Please see Notes to Financial Statements for
further information.

Transmission Facilities
KEYS is connected to the mainland Florida transmission network through a 61-mile long, 138 kV
transmission line jointly owned by the Utility Board and the FKEC which allows interconnection between
KEYS and FKEC at its Marathon Substation. The 138 kV transmission line extends northeast along U.S.
1 through FKEC’s service territory and ties in with FPL at the Monroe-Dade County line. The Utility
Board’s solely-owned portion of the 138 kV line extends from Marathon Key, in the FKEC service
territory, to the Stock Island (U.S. 1) Substation. Along this route, the line loops in and out of the
Utility Board’s Big Pine and Big Coppitt substations.



                                                                       vii
                                                                                                 DRAFT
Pursuant to the current transmission agreement with FKEC, the Utility Board constructed and jointly
owns with FKEC a second 138 kV transmission line, which extends 21 miles from the Tavernier
Substation in the FKEC service territory to the Monroe-Dade County line, where it ties into the FPL 138
kV transmission line. The two transmission lines between Florida City and Tavernier provide greater
reliability and increased import capability to KEYS. With the addition of this latest segment of 138 kV
line and the conversion of the decommissioned steam generating unit at the Stock Island Plant to a
synchronous condenser, the firm MW transfer allocation for KEYS over the Transmission Line is
approximately 110 MW. The transfer capability of the transmission line is approximately 277 MW.
KEYS local transmission facilities consist of seven-69 kV lines (14.9 miles) in Key West/Stock Island and
four-138 kV lines (51.2 miles) from Key West to Marathon. Distribution is supplied from the 69/138 kV
system to KEYS’ nine distribution substations.

Distribution Facilities
KEYS’ distribution system comprises approximately 221.2 miles of three-phase equivalent 13.8 kV lines
from the Utility’s power plants and nine distribution substations. Switching for the 13.8 kV distribution
is provided by 13.8 kV metal-clad switchgear. Distribution at 13.8 kV is provided via substation power
transformers with varying capacities. There are numerous sectionalizing and isolation switches on the
13.8 kV distribution systems. Additionally, transformer vaults are used on the distribution systems to
step down from distribution voltage to utilization voltage at hotels and other large loads.

Local Generation Facilities
The Utility Board currently owns, operates and maintains three generating units with a total
synchronized rating of 32 MW. This includes a combustion turbine (CT) unit and two medium speed
diesel units. Three peaking diesel units located at Stock Island were decommissioned.

Additionally, FMPA owns three combustion turbines at Stock Island. Their combined synchronized
ratings are 76 MW. These units contribute to the total synchronized rating of 108 MW. The Utility
operates all the units with No. 2 oil. Under provisions of the ARP Supply Contract, the output of the
Utility-owned generating facilities is being purchased in its entirety by FMPA as part of the ARP. The
table entitled “Generating Capacity” in the Statistical Section provides more detailed information.

Debt Administration
The principal amount of Long Term Debt, net of the current portion, was $73.1 million at September
30, 2010, compared to $79.8 million at September 30, 2009. All outstanding debt had fixed interest
rates. Total revenue bond debt was comprised of three refunding bond issues 1991, 2000 and 2001,
and one revenue bond issue 2006. All issues are rated AAA by Standard & Poor’s (S&P) and insured by
AMBAC Indemnity Corporation.

Long Term Financial Planning
On October 31, 2006, KEYS issued $42.0 million of Electric System Refunding and Capital Improvement
Revenue Bonds, Series 2006. The bond refunded the FMPA loan of $948,000 and is funding several
capital projects, including a pole hardening program, transmission and distribution improvements, a
new substation located in Stock Island, installation of new feeders at the Big Pine substation, and
installment of fin fan coolers at the Stock Island Generating Facilities. Since many of the projects
rehabilitate deteriorating lines, the impact on operating and maintenance expense is expected to be
favorable. The issue is rated AAA by Standard & Poor’s (S&P) and Fitch and Aaa by Moody’s and is
insured by the MBIA Insurance Company. In addition, KEYS obtained an underlying bond rating of A2
from Moody’s and A- from Standard & Poor’s (S&P).

Pension and Other Post Employment Benefits (OPEB)
KEYS sponsors’ one single-employer defined benefit pension plan, the Retirement System for General
Employees.


                                                 viii
                                                                                                DRAFT
Each year an actuary engaged by the Utility Board calculates the amount of the annual contribution
that KEYS must make to the pension plan to ensure that the plan will be able to fully meet its
obligations to retired employees on a timely basis. KEYS fully funds each year’s annual required
contribution to the pension plan as determined by the actuary.

KEYS also provides post retirement healthcare benefits for retirees and their dependents. As of the
end of the current fiscal year there were 122 retired employees receiving these benefits, which are
financed on a pay-as-you-go basis. The Government Accounting Standards Board (GASB) has issued
statement number 45 that requires governments to report a liability in the financial statements in
connection with the obligation to provide these benefits. The liability reported by KEYS in 2010 for
these benefits is $5,657,018. Additional information on KEYS pension arrangements and post
employment benefits can be found in Note 8 and Note 15 in the notes to the financial statements.

Independent Audit
Resolution No. 532 of the Utility Board, Article V, Section 5.01 (H), adopted November 13, 1985, as
amended and supplemented requires an annual audit by independent certified public accountants. For
Fiscal Years 2010 and 2009 the Utility Board selected the accounting firm of Oropeza & Parks, CPAs.
The auditor’s report on the financial statements is included in the Financial Section of this report.

Certificate of Achievement
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a
Certificate of Achievement for Excellence in Financial Reporting to the Utility Board of the City of Key
West for its comprehensive annual financial report for the fiscal year ended September 30, 2009.

This was the 18th consecutive year that the Utility Board has achieved this prestigious national award.
In order to be awarded a Certificate of Achievement, a government unit must publish an easy to read
and efficiently organized comprehensive annual financial report. This report must satisfy both
generally accepted accounting principles and applicable legal requirements.           A Certificate of
Achievement is valid for a period of one year only.

We believe that our current comprehensive annual financial report continues to conform to the
Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine
its eligibility for another certificate.

Acknowledgments
We extend our personal thanks to the dedicated efforts of the Finance Department and efforts of the
many other employees from throughout the Company who spent many hours preparing, revising and
finalizing this document. We are grateful to Oropeza & Parks, CPAs whose professional skill and
integrity have allowed us to present a report that meets the highest standards of financial reporting.
Finally, we would like to thank the members of the Utility Board of the City of Key West for their
interest and support in planning and conducting the operations of the Utility in a responsible and
progressive manner.

Respectfully submitted,




                                                  ix
    DRAFT




x
                                                                                                                                  DRAFT
                     Utility Board of the City of Key West, Florida




Chairman Lou Hernandez has served on the Utility Board since 1997. He is the Executive Director of HELPLINE, Inc.; a crisis intervention
and information referral telephone hotline in Monroe County. Upon graduation from Texas A&M University, Mr. Hernandez was commissioned
by the U.S. Army and served as an Infantry Officer in Vietnam. After completing his Armed Services commitment, Mr. Hernandez secured a
Federal internship with the US Department of Transportation in the Human Resources Development area. He worked with several Federal
agencies, completing his career in Washington as the Director of Training and Employee Development with the General Services
Administration. He moved to Key West in 1983 and has worked in the home renovation business and as a counselor at FTPA and the Public
Health Department. Mr. Hernandez has served on the Florida Municipal Power Agency’s Board since 2007 and as its Secretary in 2009 and in
2010. Mr. Hernandez has served as president of the Old Island Restoration Foundation, Chairman of the Historic Architectural Review
Commission, Chairman of the Monroe County Democratic Party, Secretary/Treasurer of the Key West Redevelopment Land Agency, a Director
of the Private Industry Council of Dade/Monroe, member of the Key West AIDS Memorial Board of Directors, president of the Key West
Business Guild, and served as Chairman of the Citizen's Review Board of the City of Key West.

Vice Chairman Peter Batty has served on the Utility Board since 2005. He is a Florida Licensed Real Estate Broker and has lived in the
Florida Keys since 1989. On November 18, 2000, he was ordained as a Permanent Deacon to the Archdiocese of Miami. Mr. Batty received his
Bachelor of Science degree from Eastern Michigan University and his Masters degree from St. Thomas University. Mr. Batty is a board member
of the Star of the Sea Foundation and a former member of the Florida Keys Community College Board and former Vice President of Wesley
House Family Services Board of Directors. Mr. Batty was born in Salisbury, England, and immigrated to the United States in 1955. He and his
wife Ellen have raised four children in the Florida Keys.

Mr. Charles A. Bradford Jr. has served on the Utility Board since 2006. He works for Heartland Payment Systems and has worked in the
Banking and Finance industry for 35 years. Mr. Bradford received his Bachelor’s degree in Banking and Finance from the University of North
Florida and has certifications in Consumer Lending, Cash Flow analysis, and Accounting. He is a member of St. Paul’s Episcopal Church and
serves on a number of other boards in Key West. In addition, Mr. Bradford is past chair of the Key West Chamber of Commerce and former
member of KEYS’ Advisory Committee. Mr. Bradford has lived in the Florida Keys since 1980.

Ms. Mona C. Clark has served on the Utility Board since 2004 and holds the distinction of being the first female Board member in the
Utility’s history. She is a retired educator and administrator for the Monroe County School District, where she worked for over 30 years. Ms.
Clark received her Bachelor of Science in Education degree from Florida A & M University and her Masters of Education/Leadership degree
from the University of South Florida. Ms. Clark has served as Chair of the Mayor’s Revolving Loan Fund for the City of Key West and Chair of
the Citizen’s Advisory Task Force for the Florida Keys Housing Authority. Ms. Clark also served on the Florida Keys Community College Board
of Trustees from 1993 to 2001, serving as Board Chair from 1999 to 2001. Additionally, Ms. Clark is a Board member of Womankind, past
Sponsor/Director of Tomorrow’s Leaders Today, Mentor for the Take Stock in Children program, past Secretary for the Wesley House Family
Services Board of Directors, and past Treasurer and Vice President of the local branch of the N.A.A.C.P.

Mr. Ty Symroski has served on the Utility Board since 2007. He is the owner of Ty Symroski Land Use Planning, LLC, and previously served
as the Monroe County Growth Management Director and Key West City Planner. Mr. Symroski received his Bachelor’s degree in Land Use
Planning from the University of Michigan and Master’s degree in Regional Planning from the University of North Carolina. He is a member of
the Sunrise Rotary Club, construction committee of Habitat for Humanity of Key West and the Lower Keys, advisory member of the Florida
Keys Scenic Corridor Alliance, and past Chair of the Resort and Tourism Division of the American Planning Association. Mr. Symroski has lived
in Key West and the Lower Keys since 1984.




                                                                    xi
                             Organizational Chart Fiscal Year Ended September 30, 2010
                                                                                                                       DRAFT

                        Citizens of Key West


                                Utility Board
                           Lou Hernandez, Chairman
                           Peter Batty, Vice Chairman
                           Charles Bradford, Member
                              Mona Clark, Member
                             Ty Symroski, Member

                                                                      General Counsel
                                                                       Nathan E. Eden



                               General Manager &                  Executive Assistant to the
                              Chief Executive Officer           General Manager & Utility Board
                                    Lynne Tejeda                          Edee Delph


                                                                                 Assistant General Manager &
                                                                                    Chief Financial Officer
                                                                                          Jack Wetzler


   Management Services
  Suzanne Greager, Director
  ▪   Human Resources & Training                                     Finance
  ▪   Risk Management                                   Peggy Walls, Asst. Finance Director        Executive Assistant to the
  ▪   Compliance                                          ▪ Accounting                             Assistant General Manager
  ▪   Safety                                              ▪ Purchasing and Warehouse                         Kim Free


  Engineering & Control
   Dale Finigan, Director                                            Customer Services
          ▪ Engineering                                              Alex Tejeda, Director                  Generation
          ▪ Control Room                                                ▪ Customer Services       Edward Garcia, Director
                                                                        ▪ Meter Services                     ▪ Generation
                                                                        ▪ Collections

Transmission & Distribution
    David Price, Director                                                                             Fleets and Facilities
          ▪ T&D Line
          ▪ T&D Substation


                                                                                                       Information Services

Communications/Marketing




                                                                  xii
               Keys Energy Services Employees as of September 30, 2010                        DRAFT
                          William Duran                 Robert Mesa         Barry Travis
Sylvia Adams**
                          Cassie Dziatlik               Elizabeth Miller    Ivan Urbay
John Albury
                          Manuel Estevez                Armando Mira III    Hugo Valdes
Matthew Alfonso
                          Michael Euliss                Horace Mobley       Bryan Veliz
Barbara Archer
                          John Fallon                   Sharon Moore        Mary Vidal
Frank Arencibia
                          Albert Fernandez              James Newton        Chuck Vinson
Heather Arencibia
                          Dale Finigan                  Griff Niekerk       Dane’lle Waldon
Marcos Arencibia
                          Nancy Flores                  Catherine Nix       Peggy Walls
Pedro Arencibia
                          Elizabeth Franco              Patrick Nolan       Charles Walterson*
Eric Balbuena
                          Kim Free                      Glicel Owen         Stefan Washington
Deborah Barnett
                          Daniel Garcia                 Allen Palka         Jack Wetzler
Robert Barrios
                          Eddie Garcia                  Jeff Partington     Hershel White
Julio J. Barroso
                          Frankie Garcia                Don Paxson          Bruce Woodard
James Barry
                          Mark Garcia                   Catherine Peace     Donnie Yarbrough
Terry Beeman
                          Milagros Gartenmayer          Chasity Perez       Joshua Yarbrough
Tony Bethel
                          Roger George                  Dina Perez          Erica Zarate
Mayra Bethel
                          Dave Gerstenkorn              Jerry Pita
Jennifer Bevis-Pindur
                          Edward Giesler                Eva Pope
Laurel Bogoeff                                                             * Employee of the Quarter 2010
                          Zahny Gonzalez                David Price
Alan Bradley                                                               **Employee of the Year 2010
                          Tennille Grassi               Alberto Pumar
Karla Bravo
                          Thomas Grassi                 Martha Ramas
Kris Bremer
                          Suzanne Greager               Beverly Ray
Lynda Bringle
                          Michael Griffin               Milton Roberts
Eric Cyrus Brown
                          Sabrina Hall                  Randy Roberts
Robert Burchett
                          Susan Ham                     Alvaro Rodriguez
Harry Carey
                          Brittani Harden               Amanda Rodriguez
Julissa Caridad
                          Kevin Hawthorne               David Rodriguez
Walter Cashwell*
                          Timothy Hertzog               Manuel Rodriguez
George Castellon
                          Randy Huss                    Steve Rodriguez
Nick Ckonjevic
                          Ana Kerr                      Armando Rojas
Michael Commander
                          Steven Key                    Matthew Roy
David Cottar, Jr.
                          Sean Kipp                     Bobby Ruble
David Cottar
                          Phil Klausing*                Stan Rzad
Kevin Crockett
                          Harold Knowles                Daniel Sabino
Fred Culpepper
                          Brenda LaLama                 Diane Sanchez
Jamie Curry
                          Victor Linares                Manuel Sanchez
Wayne Davila
                          Jacek Majewski                Paul Sanchez
James Davis
                          Herschell Major               Mark Schimizze
Maria De La Torre
                          Laurence Marius               Thomas Schuler
Jose Del Rio
                          James McClendon               Vin Smith
Daniel Delice
                          Cindy McVeigh                 Dennis Stone
Edee Delph
                          Neil Mellies                  Robert Stover
Joseph Diaz
                          Ony Mendez                    Alex Tejeda
Patty Dixon
                          Amber Menedez                 Lynne Tejeda
Michael Domenech
                          Juan Menendez                 Larry Thomas



                                                 xiii
    DRAFT




1
    DRAFT




2
                                                                                                                                      DRAFT
                                     Management’s Discussion and Analysis
As management of the Utility Board of the City of Key West, Florida, we offer readers of the Utility
Board’s financial statements this narrative overview and analysis of the financial activities of the Utility
Board of the City of Key West for the fiscal year ended September 30, 2010. We encourage readers to
consider the information presented here in conjunction with additional information we have furnished
in our Letter of Transmittal.

Required Financial Statements
The financial statements consist of the Balance Sheet, Statement of Revenues, Expenses and Changes
in Net Assets, and Statement of Cash Flows. The Balance Sheet provides information about the nature
and amounts of investments in resources (assets) and the obligations to creditors (liabilities). It also
provides the basis for assessing the liquidity and financial flexibility of the Utility. All of the current
year’s revenues and expenses are accounted for in the Statement of Revenues, Expenses and Changes
in Net Assets. This statement reports all the revenues and expenses during the time periods indicated,
and can be used to determine whether the Utility has successfully recovered all its costs. The primary
purpose of the Statement of Cash Flows is to provide information about the Utility’s cash receipts and
cash payments. This statement reports cash receipts, cash payments, and net changes in cash
resulting from activities related to operations, non-capital financing, and capital and related financing.
The statement also provides answers to such questions as “where did cash come from?”, “What was
cash used for?” and “what was the change in cash balance during the reporting period?”

Balance Sheet
The Utility’s Net Assets increased in FY 2010 by $3.1 million, or 3.5%.



                                                                                                                2009 to 2010 Increase (Decrease)
                                                            2008             2009               2010               Amount            Percent
                Total Unrestricted Current Assets $        35,515,732   $    34,729,426   $    35,176,199   $         446,773               1.3%
                  Total Restricted Current Assets          37,964,867        30,053,107        17,965,260         (12,087,847)            -40.2%
                               Total Capital Assets       129,110,578       141,343,015       154,937,272          13,594,257               9.6%
             Total Restricted Non-Current Assets            2,266,539         2,266,539         2,266,539                   -               0.0%
           Total Unrestricted Non-Current Assets            8,512,488         8,139,388         7,542,314            (597,074)             -7.3%
                                       Total Assets $ 213,370,204       $   216,531,475   $ 217,887,584     $       1,356,109               0.6%

         Long-Term Debt, Net of Current Portion           104,682,190       100,293,063        95,687,374          (4,605,689)             -4.6%
             Total Unrestricted Current Liabilities        10,099,159         9,053,032         7,542,445          (1,510,587)            -16.7%
                Total Restricted Current Liabilities       13,916,362        14,878,190        15,168,507             290,317              2.0%
                      Total Non-Current Liabilities         1,593,715         3,297,460         7,399,980           4,102,520            124.4%
                                    Total Liabilities     130,291,426       127,521,745       125,798,306          (1,723,439)             -1.4%

                                       Net Assets:
    Invested in Capital Assets, net of related debt $      66,814,871   $    76,593,445   $    82,248,111   $       5,654,666               7.4%
                                         Restricted        10,830,859         3,188,316         2,997,107            (191,209)            -6.0%
                                       Unrestricted         5,433,048         9,227,969         6,844,060          (2,383,909)           -25.8%
                                        Net Assets         83,078,778        89,009,730        92,089,278           3,079,548               3.5%

                   Total Liabilities and Net Assets     $ 213,370,204   $   216,531,475   $ 217,887,584     $       1,356,109               0.6%




                                                                        3
                                                                                             DRAFT
The changes in Assets from FY 2008 to FY 2009 are listed as follows:
      Decrease in Total Unrestricted Current Assets – $786,000.
         o Increase in Cash – $1.7 million due to receipt of funds from Florida Municipal Power
            Agency (FMPA) for KEYS portion of a gas contract that was terminated and receipt of
            funds from the US Navy for an underground line extension project.
         o Decrease in Customer Receivables – $1.8 million due to lower kWh Sales and the US
            Navy payment received within the billing month.
         o Decrease in Other Accounts Receivable Uncollected Sales Tax – $308,000 due to sales
            tax billing error. All sales tax due was collected.
         o Decrease in Other Receivables – $455,000 previous year billings for pole attachments
            received, previous billings to FMPA received, and lower miscellaneous receivables.
         o Decrease in Due from Other Governments – $55,000 payments received from FEMA.
         o Increase in Inventory – $187,000 inventory maximum levels were raised for the Storm
            Hardening Project and for hurricane season.
         o Decrease Prepaid Expense – $29,000 reclassified prepaid.

      Decrease in Total Restricted Current Assets – $7.9 million due to the spending of Series 2006
      Bond Proceeds.

      Increase in Total Capital Assets – $12.2 million.
          o Increase in Capital Assets – Net Utility Plant – $8.9 million. The larger assets added to
             Utility Plant are as follows:
                        Distribution Improvements & Storm Hardening        $ 7,200,000
                        Purchase Transformers                              $ 1,600,000

          o   Net Increase in Construction Work in Progress – $3.3 million includes the following
              projects:
                        Construction of New Substation                  $ 1,400,000
                        Purchase & Install Power Transformer            $ 1,000,000
                        Upgrade Transmission Relay Panels               $ 897,000

      Decrease in Total Unrestricted Non-Current Assets – $373,000 due to a change in the base
      market rate of long term lease and accrued amortization of bond discount and issuance costs.

The changes in Assets from FY 2009 to FY 2010 are listed as follows:
      Increase in Total Unrestricted Current Assets – $447,000.
          o Increase in Cash – $874,000
          o Decrease in Customer Receivables – $298,000 due to lower kWh Sales offset by timing
             of Navy receivable.
          o Increase in Other Receivables – $71,000 outstanding receivables from FMPA, No Name
             Key, and pole replacements.
          o Decrease in Due from Other Governments – $291,000 payments received and
             adjustments to FEMA receivable.
          o Increase in Current Portion of Lease Receivable – $3,000 due to a change in the
             Consumer Price Index.
          o Decrease in Inventory – $127,000 inventory for three retired High Speed Diesels was
             removed from inventory.
          o Increase in Prepaid Expense – $215,000 due to timing of payments of annual insurance
             renewals.




                                                 4
                                                                                               DRAFT
       Decrease in Total Restricted Current Assets – $12.1 million.
          o Decrease in Cash – $20.7 million due to spending of 2006 Bond proceeds and October 1,
             2010 bond payments paid on September 30, 2010.
          o Increase in Prepaid Expense – $8.5 million prepayment of October 1, 2010 bond
             installment.

       Increase in Total Capital Assets – $13.6 million.
           o Increase in Capital Assets – Net Utility Plant – $20.1 million. The larger assets added to
              Utility Plant are as follows:
                           Distribution Improvements                        $ 5,300,000
                           Purchase & Install Substation Transformers       $ 4,000,000
                           Construct New Stock Island Substation            $ 2,500,000
                           Switchgear Replacement at US1 Substation         $ 1,600,000
                           Construct Non Capacity Station Service           $ 1,100,000
                           Upgrade Transmission Relays                      $ 919,000
           o Net Decrease in Construction Work in Progress – $6.5 million due to projects placed into
              service.

       Decrease in Total Unrestricted Non-Current Assets – $597,000 due to a change in the estimated
       sales proceeds related to Other Long Term Receivables and amortization of bond discount and
       issuance costs.

The changes in Liabilities from FY 2008 to FY 2009 are listed as follows:
      Net Decrease in Long Term Debt – $4.4 million as a result of the annual fiscal year debt service
      payment.

       Decrease in Unrestricted Current Liabilities - $1.0 million due to lower accounts payable and
       accrued expenses.

       Increase in Restricted Current Liabilities – $962,000 due to higher accounts payable, accrued
       expenses, and current portion of long term debt.

       Increase in Non-Current Liabilities – $1.7 million due to the implementation of GASB 45 – Other
       Post Employment Benefits (OPEB).

The changes in Liabilities from FY 2009 to FY 2010 are listed as follows:
      Net Decrease in Long Term Debt – $4.6 million as a result of the annual fiscal year debt service
      payment.

       Decrease in Unrestricted Current Liabilities – $1.5 million due to lower accounts payable and
       accrued expenses.

       Increase in Restricted Current Liabilities – $290,000 due to higher accounts payable and current
       portion of long term debt offset by security deposit previously held for sale property was
       forfeited by buyer.

       Increase in Non-Current Liabilities – $4.1 million due to an increase in the Other Post
       Employment Benefits (OPEB) expense.




                                                  5
                                                                                                                  DRAFT
Statement of Revenues, Expenses and Changes in Net Assets
Electric sales of 707.8 Gigawatt hours (GWh’s) in FY 2010 were higher than FY 2009 sales of 681.9
GWh’s, by 3.8%.

                                                                                              2009 to 2010 Increase (Decrease)
                                                        2008          2009          2010         Amount           Percent
                                  Electric Revenues $ 109,518,342 $ 105,925,446 $ 101,264,428 $ (4,661,018)        -4.4%
                            Other Electric Revenues     3,639,751     3,574,040     3,700,174      126,134         3.5%
                          Total Operating Revenues 113,158,093      109,499,486   104,964,602   (4,534,884)        -4.1%

                       Production Expense - Diesel       1,625,066      2,186,002     1,557,898      (628,104)    -28.7%
                                   Purchased Power      71,009,513     66,847,376    63,272,371    (3,575,005)     -5.3%
                            Transmission Expenses        3,938,264      4,648,803     4,519,506      (129,297)     -2.8%
                              Distribution Expenses      4,070,472      4,065,166     3,939,956      (125,210)     -3.1%
        Customer Accounts and Collection Expenses        1,571,014      1,675,437     1,663,487       (11,950)     -0.7%
              Administrative and General Expenses       11,850,327     12,620,134    14,288,249     1,668,115     13.2%
                                        Depreciation     6,632,858      7,190,781     7,925,719       734,938      10.2%
                  Taxes Other than Income Taxes          2,883,446      2,793,943     2,666,194      (127,749)     -4.6%
                         Total Operating Expenses      103,580,960    102,027,642    99,833,380    (2,194,262)     -2.2%

                                    Interest Income        751,008        388,391       266,524     (121,867)     -31.4%
             Miscellaneous Non-Operating Revenue         1,788,124      2,523,179     2,014,620     (508,559)     -20.2%
                       Payment to City of Key West        (368,741)      (386,188)     (393,368)      (7,180)       1.9%
                                   Interest on Debt     (4,228,875)    (4,034,263)   (3,809,889)     224,374       -5.6%
                     Interest on Customer Deposits         (67,621)       (10,807)       (8,998)       1,809      -16.7%
     Amortization of Bond Discount and Issue Costs        (114,040)      (115,548)     (115,548)         -          0.0%
                          Hurricane-Grant Revenue          292,960           (479)     (125,000)    (124,521)    25996.0%
                                Hurricane-Expenses        (256,796)           -             -            -         0.0%
      Total Non-Operating Revenue and (Expenses)        (2,203,981)    (1,635,715)   (2,171,659)    (535,944)      32.8%

   Change in Net Assets Before Capital Contributions   7,373,152    5,836,129    2,959,563         (2,876,566)    -49.3%
                               Capital Contributions     175,860       94,823      119,985             25,162     26.5%
                              Change in Net Assets     7,549,012    5,930,952    3,079,548         (2,851,404)    -48.1%
                      Net Assets, Beginning of Year   75,529,766   83,078,778   89,009,730          5,930,952      7.1%
                            Net Assets, End of Year $ 83,078,778 $ 89,009,730 $ 92,089,278 $        3,079,548      3.5%




The Change in Net Assets was an increase of $5.9 million in FY 2009. This was primarily
due to:
      Decrease in Total Operating Revenues – $3.7 million.
         o Decrease in Electric Revenue – $3.6 million is primarily a result of lower kWh Sales.

       Decrease in Total Operating Expenses – $1.6 million.
          o Increase in Production expenses – $560,000 primarily due to unexpected remediation
             costs at the decommissioned Cudjoe Diesel Peaker site.
          o Decrease in Purchased Power Costs – $4.2 million primarily due to lower kWh purchased
             as well as lower rates.
          o Increase in Transmission expenses – $711,000 is a result of higher demand charge for
             transmission by FMPA and steel pole painting costs.
          o Increase in Customer Accounts and Collection expenses – $104,000 is largely due to
             increases in collection services and green initiatives.


                                                               6
                                                                                              DRAFT
          o   Increase in Administrative and General expenses – $770,000 is primarily a result of $1.7
              million in OPEB costs, $628,000 in pension contribution costs which is offset by
              $993,000 in administrative transfers, $145,000 lower insurance costs, $250,000 lower
              land use costs, and $117,000 lower wages.
          o   Increase in Depreciation expense – $558,000 is a result of more capital projects being
              placed into service
          o   Decrease in Taxes Other than Income Tax expenses – $90,000 is due to lower Gross
              Receipts Tax which is consistent with lower revenue.

      Decrease in Total Non-Operating Revenue & Expenses – $568,000.
         o Decrease in Interest Income – $363,000 due to lower interest rates.
         o Increase in Miscellaneous Non-Operating Revenue – $735,000 is primarily due to an
            increase in payroll reimbursement from FMPA, receipt of payment from FMPA for
            termination of gas contract, and higher attachment and tree trimming income.
         o Decrease in the Interest on Debt – $194,000 is primarily due to continued principal
            reduction of revenue bonds.

The Change in Net Assets was an increase of $3.1 million in FY 2010. This was primarily
due to:
      Decrease in Total Operating Revenues – $4.5 million.
         o Decrease in Electric Revenue – $4.7 million is primarily a result of lower kWh Sales.
         o Increase in Other Electric Revenues – $126,000 is primarily a result of higher line
            extension revenue partially offset by lower capacity credits.

      Decrease in Total Operating Expenses – $2.2 million.
         o Decrease in Production expenses – $628,000 primarily due to no soil remediation costs
            incurred in FY10 compared to prior year.
         o Decrease in Purchased Power Costs – $3.6 million primarily due to lower kWh purchased
            as well as lower energy rates.
         o Decrease in Transmission expenses – $129,000 is a result of lower demand charge for
            transmission by FMPA offset by higher steel pole painting costs.
         o Decrease in Distribution expenses – $125,000 is a result of lower equipment costs, lower
            outside services and material costs.
         o Increase in Administrative and General (A&G) expenses – $1.7 million is primarily due to
            increase in employee benefits of $2.3 million mainly related to OPEB, offset by $600,000
            higher administrative transfers from A&G to capital projects.
         o Increase in Depreciation expense – $735,000 is a result of more capital projects being
            placed into service.
         o Decrease in Taxes Other than Income Tax expenses – $128,000 is due primarily to
            lower Gross Receipts Tax which is consistent with lower revenue.

      Decrease in Total Non-Operating Revenue & Expenses – $535,000.
         o Decrease in Interest Income – $122,000 due to interest earned related to potential sale
            of property in FY 2009.
         o Decrease in Miscellaneous Non-Operating Revenue – $509,000 due to receipt of
            forfeited security deposit in FY 2010 related to terminated contract for sale of property
            and receipt of $1.0 million from FMPA for termination of gas contract in FY 2009.
         o Decrease in the Interest on Debt – $224,000 is primarily due to continued principal
            reduction of revenue bonds.
         o Decrease in Hurricane-Grant Revenue – $125,000 receivable reversed due to
            cancellation of the mitigation project.


                                                  7
                                                                                                                DRAFT
Statement of Cash Flows
The Utility’s rate structure is designed to collect sufficient revenues to pay debt service and recover
operating and maintenance expenses. The Utility successfully accomplished this objective during FY
2010. The same situation held true for the prior fiscal year. The Utility increased net assets by $3.1
million while paying down debt of $6.3 million in principal and $1.9 million in interest.

Restricted Assets
Total restricted current assets were $18.0 million at September 30, 2010, compared to $30.0 million at
September 30, 2009. The Utility’s bond resolution specifies the manner in which monies on deposit in
the various funds must be used. The Renewal and Replacement Fund is used only for paying the cost
of extensions, enlargements, replacements or additions to the capital assets of the Utility. The Sinking
Fund is used only to pay principal and interest on Bonds as they mature and become due. The
Construction Fund is used only for paying the cost of large additions to the capital assets of the Utility.

Significant Capital Assets
Capital Assets totaled $154.9 million at the end of Fiscal 2010 compared to $141.3 million the prior
year, an increase of $13.6 million which includes $1.4 million in capitalized interest.

Significant projects placed in service were Distribution Improvements, Purchase & Install Substation
Transformers, and Construction of the New Stock Island Substation. Please see Note 1 in Notes to
Financial Statements for further information.

Capital additions are illustrated in the following graph:


                                           Capital Additions FY 2010

  General Plant


    Distribution


  Transmission


    Generation


                00 0 0 0 0 0 0 0 0 0 0 0 0 00                         0      0      0      0 00 00 0 0 00 0 0
             $ 6 $ 2 ,1 $ 3 ,6 $ 5 ,1 $ 6 ,6 $ 8 ,1 $ 9 ,6 1 ,1 2 ,6 0 4 ,1 0 5 ,6 0 7 ,1 0 1 8 ,6 0 ,1 1 ,6 3 ,1 4 ,6
                                                          $ 1 $1 $1 $1 $1 $                       $2 $2 $2 $2
                                       Dollars in Thousands ($000s)



Long Term Debt
The Utility’s trustee will pay to the bondholders a principal payment of $6.7 million on October 1, 2010.
In accordance with the Bond covenants, monthly transfers are made from the Revenue Fund to the
Sinking Fund. The bondholders are paid annual principal payments on October 1st and semiannual
interest payments on April 1st and October 1st of each year.




                                                          8
                                                                                                DRAFT
In anticipation of a Florida Public Service Commission ruling that will compel utilities to storm harden
their infrastructure KEYS’ has taken steps to meet this requirement. On October 31, 2006, KEYS issued
$42.0 million of Electric System Refunding and Capital Improvement Revenue Bonds, Series 2006. The
bonds refunded the FMPA loan of $948,000 and are funding several capital projects, including a pole
hardening program, transmission and distribution improvements, a new substation located in Stock
Island, installation of new feeders at the Big Pine substation, replacement of certain substation
transformers and installation of fin fan coolers at the Stock Island Generating Facilities. The issue is
rated AAA by Standard & Poor’s (S&P) and Fitch and Aaa by Moody’s and is insured by the MBIA
Insurance Company. In addition, KEYS obtained an underlying bond rating of A2 from Moody’s and A-
from S&P. The Utility’s total debt service payments have been structured to average approximately
$10.7 million a year through 2015, $8.5 million a year through 2020 and $4.4 million a year through
2031. Please see Note 5 in Notes to Financial Statements for further information.

Summary
This report is intended to provide our customers, bondholders, and other interested parties with a
general overview of the financial position of the Utility Board of the City of Key West and to indicate
accountability for the revenues received. Questions about this report or requests for additional
information should be directed to the Assistant General Manager & Chief Financial Officer, 305-295-
1013, or to our offices located at 1001 James Street, Key West, Florida 33040.




                                                   9
                   UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA                               DRAFT
                                         BALANCE SHEETS
                                 SEPTEMBER 30, 2010 AND 2009
                                             ASSETS

                                                                 2010               2009
Current Assets
 Cash and Cash Equivalents                                 $     22,556,707   $     21,682,666
 Customer Accounts Receivable, net of Allowance for
   Bad Debts of $167,195 and $172,733 for FY 10 and
   FY 09 respectively                                             7,296,861          7,594,719
 Other Accounts Receivable                                          405,009            334,331
 Due From Other Governments                                         171,170            461,951
 Current Portion of Lease Receivable                                102,646            100,000
 Plant Material and Operating Supplies Inventory                  3,851,035          3,978,064
 Prepaid Expenses                                                   792,771            577,695

   Total Unrestricted Current Assets                             35,176,199         34,729,426

 Restricted Current Assets:
 Cash and Cash Equivalents                                        9,383,394         30,050,392
 Prepaid Expenses                                                 8,534,034                  -
 Interest Receivable                                                 47,832              2,715

   Total Restricted Current Assets                               17,965,260         30,053,107

   Total Current Assets                                          53,141,459         64,782,533
Non-Current Assets
 Capital Assets
   Utility Plant                                                242,709,897        223,909,526
   Less Accumulated Depreciation                                 91,219,030         92,491,478
    Net Utility Plant                                           151,490,867        131,418,048
   Construction in Progress                                       3,446,405          9,924,967

   Total Capital Assets                                         154,937,272        141,343,015

 Restricted Non-Current Assets
   Deposits-Restricted                                            2,266,539          2,266,539

   Total Restricted Non-Current Assets                            2,266,539          2,266,539

 Unrestricted Non-Current Assets
   Long Term Lease Receivable                                     6,372,920          6,228,096
   Other Long Term Receivable                                       541,801          1,168,151
   Bond Discount and Issue Costs, Net                               627,593            743,141

   Total Unrestricted Non-Current Assets                          7,542,314          8,139,388

   Total Non-Current Assets                                     164,746,125        151,748,942

   Total Assets                                            $    217,887,584   $    216,531,475
                                                               (Continued)        (Continued)

                              The accompanying notes are an integral
                                part of these financial statements.
                                               10
                      UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA                              DRAFT
                                    BALANCE SHEETS (CONTINUED)
                                    SEPTEMBER 30, 2010 AND 2009
                                                                  2010              2009
Current Liabilities
 Unrestricted Current Liabilities
   Accounts Payable                                           $     5,315,703   $     5,504,682
   Accrued Expenses                                                   988,711         1,907,476
   Compensated absences and accrued wages                             990,505           969,612
   Deferred Revenues                                                  247,526           671,262

   Total Unrestricted Current Liabilities                           7,542,445         9,053,032

 Restricted Current Liabilities
   Current Portion of Long-Term Debt                                6,666,707         6,311,707
   Accounts Payable                                                 2,088,337         1,620,382
   Accrued Interest                                                 1,839,035         2,020,441
   Security Deposits Payable                                          112,390           610,000
   Due to Customers                                                 4,462,038         4,315,660

   Total Restricted Current Liabilities                            15,168,507        14,878,190

   Total Current Liabilities                                       22,710,952        23,931,222

Non Current Liabilities
 Compensated absences                                               1,742,962         1,668,691
 Accrued OPEB Liability                                             5,657,018         1,628,769

   Total Non-Current Liabilities                                    7,399,980         3,297,460

Long Term Debt
  Revenue Bonds                                                    73,090,933        79,757,640
  Accrued Interest                                                 22,596,441        20,535,423
    Total Long Term Debt                                           95,687,374       100,293,063

   Total Liabilites                                               125,798,306       127,521,745

Net Assets
 Invested in Capital Assets
   net of related debt                                             82,248,111        76,593,445
 Restricted for:
   FMPA working capital assessment                                  2,266,539         2,266,539
   Renewal and replacement                                            730,568           921,777
 Unrestricted                                                       6,844,060         9,227,969

   Total Net Assets                                                92,089,278        89,009,730

   Total Net Assets and Liabilities                           $   217,887,584   $   216,531,475




                                   The accompanying notes are an integral
                                     part of these financial statements.

                                                    11
                      UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA                        DRAFT
             STATEMENTS OF REVENUE, EXPENSES, AND CHANGES IN NET ASSETS
                    FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

                                                               2010               2009

Operating Revenues                                        $   104,964,602     $   109,499,486

Operating Expenses
 Production Expenses                                            1,557,898           2,186,002
 Purchased Power                                               63,272,371          66,847,376
 Transmission Expenses                                          4,519,506           4,648,803
 Distribution Expenses                                          3,939,956           4,065,166
 Customer Accounts and Collection Expenses                      1,663,487           1,675,437
 Administrative and General Expenses                           14,288,249          12,620,134
 Depreciation                                                   7,925,719           7,190,781
 Taxes Other than Income Taxes                                  2,666,194           2,793,943

    Total Operating Expenses                                   99,833,380         102,027,642

    Operating Income                                            5,131,222           7,471,844

Non-Operating Revenue and (Expenses)
 Interest Income                                                   266,524            388,391
 Miscellaneous Non-Operating Revenue                             2,014,620          2,523,179
 Payment to City of Key West                                      (393,368)          (386,188)
 Interest on Debt                                               (3,809,889)        (4,034,263)
 Interest on Customer Deposit                                       (8,998)           (10,807)
 Amortization of Bond Discount and Issue Costs                    (115,548)          (115,548)
 Hurricane-Grant Revenue                                          (125,000)              (479)

    Total Non-Operating Revenue and (Expenses)                  (2,171,659)        (1,635,715)

Change in Net Assets Before Capital Contributions               2,959,563           5,836,129

Capital Contributions                                             119,985             94,823

    Change in Net Assets                                        3,079,548           5,930,952

Net Assets, Beginning of Year                                  89,009,730          83,078,778

Net Assets, End of Period                                 $    92,089,278     $    89,009,730




                                The accompanying notes are an integral
                                  part of these financial statements.


                                                 12
                           UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA                              DRAFT
                                          STATEMENTS OF CASH FLOWS

                          FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

                                                                                   2010             2009
Cash Flows Provided (Used) by Operating Activities
     Cash Received from Customers                                               $ 104,840,731    $ 110,902,422
     Cash Payments to Suppliers for Goods and Services                            (85,486,021)     (75,155,361)
     Cash Payments to Employees for Services                                      (11,198,121)     (10,209,716)
     Cash Received for Deposits                                                       930,760          886,146
     Cash Deposits Refunded                                                        (1,281,992)        (849,487)
     Cash Received from Other Operating revenue                                     1,590,884        3,140,450
     Cash Received for Hurricane                                                      165,781           54,259

          Net Cash Provided by Operating Activities                                9,562,022        28,768,713

Cash Flows (Used) by Non-Capital Financing Activities
     Cash Paid to City of Key West, Florida                                         (393,368)         (386,188)

          Net Cash (Used) by Non-Capital Financing Activities                       (393,368)         (386,188)

Cash Flows Provided (Used) by Capital and Related Financing Activities
     Principal Paid on Long-Term Debt                                             (6,340,000)       (6,005,000)
     Interest Paid on Revenue Bond Maturities                                     (1,910,982)       (2,259,000)
     Contributions in Aid of Construction                                            119,985            94,823
     Acquisitions and Construction of Capital Assets                             (21,200,104)      (18,719,034)
     Proceeds from Disposal of Assets                                                148,083            50,788

          Net Cash (Used) by Capital and Related Financing Activities             (29,183,018)     (26,837,423)

Cash Flows Provided by Investing Activities
     Interest Received on Investments                                                221,407           388,391

          Net Cash Provided by Investing Activities                                  221,407           388,391

          Net Increase (Decrease) in Cash and Cash Equivalents                    (19,792,957)       1,933,493

          Cash and Cash Equivalents at Beginning of year                          51,733,058        49,799,565

          Cash and Cash Equivalents at End of Year                              $ 31,940,101     $ 51,733,058




                                       The accompanying notes are an integral
                                         part of these financial statements.



                                                         13
                      UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA                               DRAFT
                                    STATEMENTS OF CASH FLOWS

                    FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

                               Reconciliation of Operating Income to
                              Net Cash Provided by Operating Activities


                                                                                2010               2009

Operating Income                                                            $   5,131,222      $    7,471,844

  Adjustments to Reconcile Operating Income to Net Cash Provided by
                              Operating Activities
   Depreciation                                                                 7,925,719           7,190,781
   Provision for Uncollectible Accounts                                           392,918             355,878
   Amortization of Deferred Revenue                                              (671,262)            (53,991)
   Receipt of Deferred Revenue                                                    247,526             671,262
   Other Non-Operating Sources of Revenue                                       2,014,620           2,523,179
   Hurricane Revenue Net                                                         (125,000)               (479)

Changes in Assets and Liabilities
   Decrease in Accounts Receivable                                                 313,142          2,446,242
   (Increase) Decrease in Plant Material & Inventory                               127,029           (186,852)
   (Increase) Decrease in Prepaid Expenses                                      (8,749,110)         8,219,105
   Decrease in Due from Other Governments                                          290,781             54,738
   Decrease in Accounts Payable                                                  3,839,270             65,360
   (Decrease) in Accrued Expenses                                                 (823,601)           (25,013)
   Increase in Customer Deposits                                                   146,378             36,659
   (Decrease) in Security Deposits                                                (497,610)                 -

Total Adjustments                                                               4,430,800          21,296,869

Net Cash Provided by Operating Activities                                   $   9,562,022      $   28,768,713

               Supplemental Schedule of Non-Cash Financing, Capital and Investing Activities


        In 2010 and 2009, amortization of bond discount and issue costs remained constant at $115,548.




                                 The accompanying notes are an integral
                                   part of these financial statements.



                                                       14
                        UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA                           DRAFT
                                 NOTES TO FINANCIAL STATEMENTS
                       FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies and the presentation of the financial report of the Utility Board of the City of
Key West, Florida "Keys Energy Services" (KEYS) have been designed to conform to generally accepted
accounting principles as applicable to governmental units, in accordance with the Governmental
Accounting Standards Board (GASB). The GASB embodies the official pronouncements previously
issued by the National Council on Governmental Accounting (NCGA). KEYS applies Financial
Accounting Standards Board (FASB) pronouncements and Accounting Principles Board (APB) opinions
issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB
pronouncements, in which case, GASB prevails. The following is a summary of the significant
accounting policies.

Entity Definition – KEYS was created by an Act of the Florida Legislature to manage, operate and
maintain the electric utility servicing the citizens of the City of Key West, Florida (the City) and the
lower Florida Keys. KEYS is the successor of the electric public utility once owned by the City and was
given all powers and rights necessary to manage, operate, maintain, control, and extend the electric
utility property owned by the City of Key West at the time of its creation. The Board is composed of a
Chairman who is elected every four years and four members who are elected every four years by the
voters of the City. Effective January 2007, the members select the chairman during the Organizational
Meeting following an election. The General Manager & CEO of KEYS serves as Secretary to the Board
and is responsible for the day-to-day operations of KEYS. KEYS is not a component unit of the City.

Measurement Focus - The accounting and financial reporting treatment applied to a fund is
determined by its measurement focus. KEYS’ operations are accounted for on a flow of economic
resources measurement focus. With this measurement focus, all assets and all liabilities associated
with the operation of the enterprise fund are included on the balance sheet. Operating statements
present increases (e.g. revenue) and decreases (e.g. expenses) in net assets.

Basis of Accounting - KEYS’ financial statements are accounted for based on accounting required by
the Federal Energy Regulatory Commission (FERC), which is an application of generally accepted
accounting principles that is peculiar to utilities. Revenues are recognized in the period earned and
expenses are recognized in the period incurred, regardless of the timing of the related cash flows.

Budget - In accordance with KEYS’ enabling Legislation, the Utility Board holds public hearings and
subsequently adopts an annual budget for operating expenses and capital outlay. Actual revenues and
expenses are compared to the budget on a line item basis (which is the legal level of control) within
cost centers and an analysis of variances report is prepared and submitted to the Utility Board quarterly
as required by bond indentures. During the year, staff can make amendments within the operating
budget or the capital budget that do not change the total budget for those categories. The Utility
Board approves all other budget changes. Budget appropriations lapse at each fiscal year-end except
for the Capital Budget. The budget is adopted on a basis consistent with KEYS’ basis of accounting.

Cash and Investments – Cash and investments in U.S. Government Securities are recorded at cost
or amortized cost. Amortized cost does not significantly vary from market value. Any other
investments are stated at fair value in accordance with GASB 31. Florida Statutes govern KEYS’
investment policies. These policies are described in more detail in Note 3.




                                                   15
                          UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA                                 DRAFT
                                    NOTES TO FINANCIAL STATEMENTS
                         FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue – Revenue is recognized based on monthly route billings to customers. Revenue is not
accrued for services supplied but unbilled at the end of the fiscal period. Charges for new service are
reported as revenue only to the extent of connection costs, while amounts exceeding this cost are
recorded as contributed capital revenue.

Bond Discount and Issue Costs – Bond discount and issue costs consist of debt issue costs, original
issue discounts, and underwriter discounts, which are capitalized and amortized over the term of the
related indebtedness.

Property, Plant and Equipment – Property, Plant and Equipment is stated at cost. Transmission,
Distribution and Generation Plant are defined by KEYS as assets with an initial, individual cost of
$5,000 or more and an estimated useful life of more than one year. General Plant assets are defined as
assets with an initial, individual cost of $2,500 or more and an estimated useful life of more than one
year. Under FERC accounting practices and procedures, the cost of electric plant retired, together with
removal costs less salvage, is charged to accumulated depreciation when property is removed from
service.

The following is a summary of property, plant and equipment for the year ended September 30, 2010:

                                         Balance                                                  Balance
                                          2009              Additions          Deletions           2010
 Utility Plant in Service:
  Generation Plant                   $    48,440,652    $     2,546,445    $    (4,371,390)   $    46,615,707
  Transmission Plant                      74,684,829          2,124,277             (3,251)        76,805,855
  Distribution Plant                      79,031,961         22,792,871         (4,769,581)        97,055,251
  General Plant                           21,531,820            683,028           (202,028)        22,012,820
  Other                                      220,264                  -                  -            220,264
      Total Utility Plant in Service     223,909,526         28,146,621         (9,346,250)       242,709,897
 Accumulated Depreciation:
  Generation Plant                       (28,027,834)        (1,702,753)         4,371,390        (25,359,197)
  Transmission Plant                     (33,334,901)        (1,850,697)             3,246        (35,182,352)
  Distribution Plant                     (23,183,793)        (2,856,411)         4,633,372        (21,406,832)
  General Plant                           (7,944,950)        (1,515,859)           190,160         (9,270,649)
      Total Accumulated Depreciation     (92,491,478)        (7,925,720)         9,198,168        (91,219,030)

    Net Utility Plant in Service    $ 131,418,048       $ 20,220,901       $     (148,082)    $ 151,490,867

 Construction Work in Progress      $    9,924,967      $ 21,668,059       $ (28,146,621)     $   3,446,405




KEYS’ policy concerning capitalized interest costs is in accordance with Statement of Financial
Accounting Standards No. 62, which requires the capitalization of interest costs of restricted tax-
exempt borrowings less any interest earned on investment funds during the construction period.




                                                        16
                        UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA                                        DRAFT
                                  NOTES TO FINANCIAL STATEMENTS
                        FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

For the fiscal years ended September 30, 2010 and 2009, interest costs of $1,380,701 and $879,758,
respectively were capitalized as utility plant construction costs which is detailed below.

                                                                2010                    2009

              Interest Expense                         $         1,988,587       $          1,988,558
              Amortization of Issue Premium                        (31,096)                   (31,096)
                                                                 1,957,491                  1,957,462
              Interest Earnings                                   (576,790)                (1,077,704)
              Net Interest Expense to Capitalize       $        1,380,701        $          879,758



Property, Plant and Equipment is depreciated using the straight-line method at rates which will
amortize costs over the estimated useful lives of the assets. The estimated useful lives of the electric
plant assets are as follows:

               Generation Plant                                       25 Years
               Transmission Plant                                31 - 45 Years
               Distribution Plant                                20 - 45 Years
               General Plant                                     5 - 40 Years


Inventory – Inventories are stated at the lower of cost (determined on an average cost basis) or
market.

Compensated Absences – KEYS employees are granted sick and vacation leave in varying amounts
in accordance with administrative policies. Employees may accumulate unused sick and vacation leave.
The number of sick and vacation days allowed to accumulate is subject to limitations as set forth in
KEYS policies. Vacation leave is payable to employees upon termination or retirement. Sick leave,
subject to policy limitations, is payable to employees with 20 or more years of service. Compensation
expense is recorded for unused vacation and sick leave in the year in which the vacation and sick leave
is earned in accordance with GASB Statement No. 16. At September 30, 2010, annual vacation leave
earned but not taken is $544,638 and sick leave accumulated by employees with 20 or more years of
service is $1,374,253. The estimated portion of compensated absences due within one year for
vacation and sick leave are $82,724 and $93,205, respectively.

                               Balance                                                           Balance
                                2009                   Increases            Decreases             2010

       Vacation Leave      $       547,532     $             51,747     $       (54,641)     $      544,638
       Sick Leave                1,306,157                  167,303             (99,207)          1,374,253
              Total        $    1,853,689          $       219,050      $     (153,848)      $   1,918,891




                                                           17
                         UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA                                      DRAFT
                                   NOTES TO FINANCIAL STATEMENTS
                        FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Compensated Absences (continued) – The current and long term compensated absences are as
follows:
                                         Current                 Long-Term
                                         Liability                Liability             Total

                Vacation Leave       $        82,724        $         461,914      $       544,638
                Sick Leave                    93,205                1,281,048            1,374,253
                       Total         $      175,929          $    1,742,962        $   1,918,891

Operating Revenues and Expenses – Operating revenues and expenses generally result from
providing services and producing and delivering goods in connection with KEYS principal ongoing
operations. The principal operating revenues of KEYS are charges to customers for sales and services.

Operating expenses include the cost of sales and services, administrative expenses, and depreciation
on capital assets. All revenues and expenses not meeting this definition are reported as non-operating
revenues and expenses.

Interest Expense – Interest expense for the years ended September 30, 2010 and 2009 is
summarized as follows:

                                                                      2010                      2009

     Electric Refunding Revenue Bonds, Series 1991                $    2,061,018         $       1,922,580
     Electric Forward Refunding Revenue Bonds, Series 2000             1,482,900                 1,803,000
     Electric Forward Refunding Revenue Bonds, Series 2001               206,582                   249,294
     Series 2001 Loss on Refunding                                        59,389                    59,389
     Interest on Customer Deposits                                         8,998                    10,807
       Total Interest Expense                                     $   3,818,887          $      4,045,070

Use of Estimates – The preparation of financial statements in conformity with generally accepted
accounting principles 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 expenditures/expenses during
the reporting period. Actual results could differ from those estimates.

Net Assets – Equity is classified as net assets and displayed in three components:
       Invested in Capital Assets, net of related debt – Consists of capital assets, net of
       accumulated depreciation and reduced by the outstanding balances of any bonds that
       are attributable to the acquisition, construction, or improvement of those assets.

       Restricted – Consists of net assets restricted by constraints that are externally imposed
       or are imposed by law.

       Unrestricted – All other net assets that do not meet the definition of “restricted for debt
       service” or “invested in capital assets, net of related debt.”



                                                       18
                         UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA                         DRAFT
                                   NOTES TO FINANCIAL STATEMENTS
                        FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes – No provision for income taxes is reflected in the financial statements as KEYS is
considered a unit of local government.

Comparative Data/Reclassifications – Certain amounts presented in the prior year data have been
reclassified in order to be consistent with the current year’s presentation.

Pollution Remediation Obligations – KEYS implemented GASB 49 – “Pollution Remediation
Obligations” in Fiscal Year 2009. KEYS remediation outlays for pollution at the Cudjoe Key Diesel
Peaking site was completed and fully expensed in Fiscal Year 2009. These outlays were not capitalized
as they did not meet the criteria for capitalization as outlined in GASB 49.

NOTE 2 – OTHER PROPERTY AND INVESTMENTS

Restricted Assets – Certain assets consisting of cash, cash equivalents and investments are restricted
by bond resolutions; additionally, some assets have been classified as restricted in accordance with
FERC. KEYS is required by revenue bond covenants to maintain a debt service reserve account in the
amount of its highest debt service, which requirement is satisfied by a debt surety bond.

KEYS’ Current Restricted cash and cash equivalents as of September 30, 2010 and 2009, respectively
consist of the following:
                                                           2010                   2009

               Renewal and Replacement Fund       $        730,568        $      921,777
               Construction Fund                         8,550,213           19,772,972
               Sinking Fund                                    134             9,355,643
               Steam Plant Security Deposit                102,479                     -
                  Total                           $    9,383,394          $ 30,050,392



Restricted Deposits – Florida Municipal Power Agency (FMPA) has required a working capital
contribution. As of September 30, 2010 this remained at $2,266,539.


NOTE 3 – CASH, CASH EQUIVALENTS, AND INVESTMENTS

KEYS’ cash and cash equivalents as of September 30, 2010 and 2009 respectively consist of the
following:
                                                             2010                  2009

             Cash                                      $     29,246,916       $    36,927,338
             Cash Equivalents:
               Repurchase agreements                       2,693,185             14,805,720
                Total cash and cash equivalents        $ 31,940,101           $ 51,733,058



All cash and cash equivalents are fully liquid.



                                                      19
                        UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA                             DRAFT
                                  NOTES TO FINANCIAL STATEMENTS
                       FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

NOTE 3 – CASH, CASH EQUIVALENTS, AND INVESTMENTS (Continued)

State Statutes govern KEYS’ investment policies. In addition, KEYS has its own investment practices.
Monies must be deposited in banks designated as qualified public depositories by the State of Florida,
Department of Insurance and Treasurer. Permissible investments include the obligations of the U.S.
Treasury and U.S. agencies, certificates of deposit, commercial paper, repurchase agreements, and
other securities meeting KEYS’ criteria for risk and return.

Collateral is provided for demand deposits and certificates of deposit through the Florida Security for
Public Deposits Act. This Act established guidelines for qualification and participation by banks and
savings associations, procedures for the administration of the collateral requirements and
characteristics of eligible collateral. Under the Act, the qualified public depository must pledge at least
50% of the average daily balance for each month of all public deposits in excess of any applicable
deposit insurance.

Additional collateral, up to a maximum of 125%, may be required if deemed necessary under the
conditions set forth in the Act. Eligible collateral consists of obligations of the United States and its
agencies and obligations of states and their political subdivisions, and unaffiliated corporations.

Obligations pledged to secure deposits must be delivered to the State Treasurer or, with the approval
of the State Treasurer, to a bank, savings association, or trust company provided a power of attorney
is delivered to the Treasurer.

On a monthly basis, the State Treasurer determines that the collateral has a market value adequate to
cover the deposits under the provisions of the Act.

Interest Rate Risk – As a means of limiting its exposure to fair value losses arising from rising interest
rates KEYS investment policy limits its portfolio to maturities of no more than five years unless matched
to a specific cash flow.

Credit Risk – KEYS general investment policy is to apply the prudent person rule: investments are
made as a prudent person would be expected to act, with discretion and intelligence, to seek
reasonable income, preserve capital and, in general avoid speculative investments. KEYS investment
policy allows investments in U. S. Treasury, U. S. Agencies, and any U. S. state, certificates of deposits,
repurchase agreements, and units of participation in the State of Florida Local Government Surplus
Trust Fund.

In addition to these, KEYS also allows investment in commercial paper which is rated at the time of
purchase in the single highest classification by Moody’s and S&P and does not mature more than 270
calendar days after the date of purchase and agreements with a bank or insurance company which has
an unsecured, uninsured and unguaranteed obligation (or claims-paying ability) rated “A3” or better by
Moody’s and a rating of “A- or better by Standard & Poor’s.




                                                    20
                         UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA                             DRAFT
                                  NOTES TO FINANCIAL STATEMENTS
                       FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

NOTE 3 – CASH, CASH EQUIVALENTS, AND INVESTMENTS (Continued)

Custodial Credit Risk – Custodial credit risk is the risk that in the event of a bank failure, KEYS deposits
may not be returned. KEYS’ does not have a deposit policy for custodial risk. As of September 30,
2010 and 2009, the bank balances were $32,499,503 and $52,409,835 respectively. The bank
balances were covered by federal depository insurance and for the amount in excess of such federal
depository insurance, by the State of Florida’s Security of Public Deposits Act. The Act requires each
qualified public depository to deposit with the State Treasurer eligible collateral equal to or in excess of
the required collateral as determined by the provisions of the Act. In the event of a failure by a
qualified public depository, losses in excess of federal depository insurance and proceeds from the sale
of securities pledged by the depository are assessed against the other qualified public depositories of
the same type as the depository in default.

NOTE 4 – UNRESTRICTED NON-CURRENT ASSETS

Long Term Lease Receivable – The Key West Steam Plant was decommissioned in 1991. In Fiscal
Year 2005 a developer received all the permitting and financing to begin construction to redevelop the
Steam Plant site. The Utility Board executed two 99-year lease agreements in 2005: one with Steam
Plant Condominiums, LLC for 19 luxury condominiums, and one with Old Town Key West Development,
LLC for 38 affordable housing units.

The two long-term lease receivables totaling $6,475,566 are as follows:

1) The base rent of the luxury units for $6,475,479; $100,000 per year adjusted annually for CPI,
monthly payments began May 1, 2008.

2) The rent for the affordable housing units of $87, at $1 per year.


Summary of Lease Receivable is as follows:

        Year           Receivable
        2011            $        102,646
        2012                     104,485
        2013                     108,090
        2014                     111,819        Lease Receivable - Current                   102,646
        2015                     115,677
      2016-2107                5,932,849        Lease Receivable - Long Term               6,372,920
                        $    6,475,566              Total Lease Receivable          $     6,475,566



Other Long Term Receivable – The percentage rent of luxury units of $541,801 is based on a
percentage of sales prices due after sale and/or occupancy of unit. Due to changes to the economy
and real estate market, the receivable has been adjusted to reflect estimated current prices.




                                                    21
                            UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA                                DRAFT
                                       NOTES TO FINANCIAL STATEMENTS
                            FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

NOTE 5 – LONG-TERM DEBT

Net Revenues, as defined for purposes of bond security, is all income or earnings derived from the
operation of KEYS, except Capital Improvement Charges, investment earnings on Construction and
Bond Amortization Funds, and transfers to the Rate Stabilization Fund, less costs of operation and
maintenance which do not include capital expenditures, extraordinary repairs, amortization of the costs
of issuance of debt obligations, payments under Unconditional Output Contracts, or depreciation. See
Note 7 for the rate covenant pertaining to revenues.


                    Summary of Debt Service Funding Requirements to Maturity


        Payment 12 mos
        ending October 1,            Principal                 Interest                 Total
              2011                 $    7,090,000            $    3,293,432         $   10,383,432
              2012                      7,495,000                 2,885,906             10,380,906
              2013                      7,925,000                 2,447,656             10,372,656
              2014                      1,859,840                 9,398,748             11,258,588
              2015                      1,735,344                 9,523,244             11,258,588
            2016-2020                   9,447,601               33,172,935              42,620,536
            2021-2025                  14,570,000                 7,542,310             22,112,310
            2026-2030                  18,255,000                 3,856,750             22,111,750
              2031                      4,210,000                   210,501               4,420,501
                                   $ 72,587,785              $ 72,331,482           $ 144,919,267

                 2010                      6,695,000
                                   $    79,282,785
    Deferred Loss, series 2001              (178,168)
    Premium, series 2006                     653,023
               Total               $    79,757,640

Prior to the due date of each series of revenue bonds, KEYS is required to set aside sufficient funds to
retire the matured principal amounts in equal, monthly amounts.

Changes in Long-Term Debt during Fiscal Year 2010 are as follows:

                               September 30,                                            September 30,
                                   2009              Additions          Retired              2010
       Series   1991           $    8,077,785       $          -    $           -        $    8,077,785
       Series   2000               30,050,000                  -        5,335,000           24,715,000
       Series   2001, net           5,288,538                  -          945,611             4,342,927
       Series   2006, net          42,653,024                  -           31,096           42,621,928
                 Total         $ 86,069,347         $         -     $ 6,311,707          $ 79,757,640




                                                        22
                           UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA                       DRAFT
                                     NOTES TO FINANCIAL STATEMENTS
                          FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

NOTE 5 – LONG-TERM DEBT (Continued)

                                                                     2010               2009
 Revenue Bonds:
 Electric System Refunding Revenue Bonds, Series 1991,
 collateralized by Net Revenues and certain Reserve Funds,
 payable October 1, 2014 to October 1, 2018 in installments
 of various amounts, bearing interest at rates from 7.05% to
 7.10%.                                                         $     8,077,785    $     8,077,785

 Electric System Refunding Revenue Bonds, Series 2000,
 collateralized by Net Revenues and certain Reserve Funds,
 payable October 1, 2010 to October 1, 2013 in installments
 of various amounts, bearing interest at rate of 6%.                 24,715,000         30,050,000


 Electric System Refunding Revenue Bonds, Series 2001,
 collateralized by Net Revenues and certain Reserve Funds,
 payable October 1, 2010 to October 1, 2013 in installments
 of various amounts, bearing interest at rates from 4.375% to
 5%.                                                                  4,490,000          5,495,000

 Deferred Loss on Refunding-net, amortized on the straight
 line basis over the term of the Series 2001 Revenue Bonds             (178,168)          (237,557)

  Series 2001, net                                                    4,311,832          5,257,443

 Electric System Refunding and Capital Improvement Revenue
 Bonds, Series 2006, collateralized by Net Revenues and
 certain Reserve Funds, payable October 1, 2019 to October 1,
 2031 in installments of various amounts, bearing interest at
 rates from 4.0% to 5.0%                                             42,000,000         42,000,000

 Net Original Premium, amortized on the straight line basis
 over the term of the Series 2006 Refunding and Capital
 Improvement Bonds                                                     653,023            684,119

  Series 2006, net                                                   42,653,023         42,684,119

                        Total Long-Term Debt                        79,757,640         86,069,347

 Less Current Portion                                                 6,666,707          6,311,707

 Net Long-Term Debt                                             $   73,090,933     $   79,757,640




                                                          23
                        UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA                           DRAFT
                                 NOTES TO FINANCIAL STATEMENTS
                       FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

NOTE 6 – PRIOR YEAR DEFEASANCE OF DEBT

During 1986, 1987, 1991, 1995, 2000 and 2001, KEYS defeased certain revenue bonds by placing
proceeds of new bonds in an irrevocable trust to provide for all future debt service payments of the old
bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included
in KEYS’ financial statements. At September 30, 2010, $20,044,725 of bonds outstanding relative to
the 1980C, 1983, 1984 and 1980D issues, $11,657,884 relative to the 1985 issue, $5,015,472 relative
to the 1987 issue, $10,591,919 relative to the 1988 issue, and $6,610,000 relative to the 1991 issue
are considered defeased.

NOTE 7 – RATE COVENANT

KEYS has agreed to establish and revise rates such that revenues will be sufficient to pay 100% of its
costs of operations and maintenance, all required reserve payments, and 125% of the principal and
interest becoming due on all outstanding bonds.

NOTE 8 – PENSION PLAN

Plan Description – The Retirement System for General Employees (the Plan) is a single-employer
defined benefit pension plan administered by the Board of Trustees of the Plan. The Plan provides
retirement, disability and death benefits to plan members and beneficiaries. Annual cost of living
adjustments of 3% are provided to members and beneficiaries. The Plan was created by resolution of
the Utility Board, which the Plan by resolution assigns the authority to establish and amend its
provisions to the Utility Board. The Plan issues a publicly available financial report that includes
financial statements and required supplementary information. That report may be obtained by writing
to the Retirement System for General Employees, P.O. Drawer 6100, Key West, FL 33041-6100.

Basis of Accounting The financial statements of the Plan are prepared using the accrual basis of
accounting. KEYS’ contributions are recognized when due and a formal commitment to provide the
contributions has been made. Benefits are recognized when due and payable in accordance with the
terms of the Plan.

Plan investments are reported at fair value. Short-term investments are reported at cost, which
approximates fair value. Securities traded on a national or international exchange are valued at the last
reported sales price at current exchange rates. Plan investments do not include any of KEYS’ debt
securities. All individual investments represent less than 5% of Plan net assets.

Funding Policy – The contribution requirements of plan members and KEYS are established and may
be amended by the Utility Board. Plan members have not been required to contribute to the Plan since
October 1, 1985. A former member who takes a refund of accumulated contributions and who is later
re-employed by KEYS within three years of his termination of service shall have the right to repay the
Plan for amounts received. Upon such re-payment, the member shall receive credit for his years of
credited service as of his last termination date. KEYS is required to contribute at a rate based on the
annual actuarial valuation, which indicates the minimum required contribution. The minimum required
contribution rate of covered payroll would be adjusted to include any benefit changes approved by the
Utility Board.




                                                   24
                                UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA                                                     DRAFT
                                               NOTES TO FINANCIAL STATEMENTS
                              FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

NOTE 8 – PENSION PLAN (Continued)

Schedule of Funding Progress – KEYS’ estimated annual contribution for the calendar year 2010 of
$3,141,959 (31.3%) was determined as part of the January 1, 2010 actuarial valuation using the entry
age normal actuarial cost method. The actuarial assumptions included (a) 8.0% investment rate of
return and (b) projected salary increases of 6% – 10% per year. Both (a) and (b) included an inflation
component of 3.0%. The actuarial value of the Plan assets is the fair value of assets as reported in the
Plan financial statements. The unfunded actuarial accrued liability is being amortized as a level
payment on a closed basis. The remaining amortization period at January 1, 2010 was 26 years. KEYS
had an unfunded actuarial accrued liability of $17,806,339 and $19,618,939 as of January 1, 2010 and
2009 respectively. The negative net pension obligation of $79,679 at December 31, 2009 represents
an over funding/prepayment of the Annual Required Contribution. This prepayment is not recorded in
the financial statements as it is deemed immaterial.

    Actuarial             Entry Age               Actuarial                                                               UAAL as a
    Valuation             Actuarial               Accrued          Unfunded                                               Percentage
      Date                 Value of               Liability           AAL             Funded               Covered        of Covered
   January 1,               Assets                 (AAL)            (UAAL)             Ratio                Payroll         Payroll
      2005            $       53,036       $          57,511   $        4,475               92.2%     $         6,934              64.5%
      2006            $       54,266       $          61,004   $        6,738               89.0%     $         7,644              88.1%
      2007            $       55,876       $          64,344   $        8,468               86.8%     $         8,344             101.5%
      2008            $       59,924       $          68,109   $        8,185               88.0%     $         9,203              88.9%
      2009            $       54,593       $          74,212   $       19,619               73.6%     $         9,782             200.6%
      2010            $       60,033       $          77,840   $       17,807               77.1%     $        10,025             177.6%
               Historical Trend Information                                Annual Pension Cost and Net Pension Obligation (NPO)
                          Percentage                                                                         2009           2010
  Calendar Annual Pension    APC              Net Pension      Annual Required Contribution (ARC)         $ 3,318,721    $ 3,141,959
    Year     Cost (APC)   Contributed          Obligation      Interest on NPO                                 (6,307)        (6,374)
                                                               Adjustment to ARC                                5,460          5,624
   2004    $    1,911,019           100% $         (42,578)    APC                                        $ 3,317,874    $ 3,141,209
   2005    $    1,979,611           102%      $    (77,580)    Utility Board Contribution                  (3,318,721)
   2006    $    2,209,590           100%      $    (76,895)    Increase (Decrease) in NPO                        (847)
   2007    $    2,461,841           100%      $    (77,901)    NPO (beginning of year)                        (78,832)
   2008    $    2,536,372           100%      $    (78,832)    NPO (end of year)                              (79,679)
   2009    $    3,317,874           100% $         (79,679)



NOTE 9 – LEASES

Rent expense under cancelable operating leases related to copiers, mailing equipment and time clocks
was $197,270 and $208,524 in 2010 and 2009, respectively.

NOTE 10 – JOINT INVESTMENT

FKEC Transmission Agreement – To provide the long-term transmission needs of both KEYS and
the Florida Keys Electric Cooperative (FKEC), the parties entered into an agreement in which both KEYS
and FKEC will maintain an appropriate ownership investment in the transmission line between the
Monroe/Dade County line and the north end of the Seven Mile Bridge, at the north end of KEYS’ service
area.



                                                                      25
                         UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA                             DRAFT
                                  NOTES TO FINANCIAL STATEMENTS
                       FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

NOTE 10 – JOINT INVESTMENT (continued)

The Transmission Agreement is effective for 40 years from its effective date of January 1, 1992, or
until all property, comprising the transmission line has been disposed of and all termination costs have
been paid, whichever occurs last. Based on the estimated usage of the transmission system in 1993
and 2020, and other considerations such as allocations of losses, the parties agreed that KEYS will be
required to maintain 56.5% of the investment in the transmission system, and FKEC will be required to
maintain 43.5% of the investment in the transmission system. Based on the agreement, KEYS is
entitled, at all times, to 40% of the approximately 270 MW transfer limit of the 138 KV transmission
system, which is currently estimated to be approximately 110 MW.

The foregoing allocation percentages are used: (1) to set transmission capacity entitlements, including
circumstances where the capacity is fully utilized or limited (provisions have been made for either party
to use the unused capacity of the other party by paying a non-firm rate based on the previous year’s
costs); (2) to allocate a net investment responsibility, for which capital costs are borne by each owning
party, and which costs are used to calculate a fixed charge rate that is paid by either party if their net
investment is less than the required investment (in addition to the fixed charge for deficit investments,
the deficit party has the responsibility to make the next investment or portion thereof to establish its
total net investment approximately equal to the required allocation); and (3) to determine the
allocation of operation and maintenance, administration and general, renewals and replacements,
upgrades, and other appropriate expenses including taxes (FKEC is responsible for the operation and
maintenance of the transmission facilities within its service territory, based on recommendations from a
joint operating committee, with the associated costs allocated to the parties).

Each party is responsible for losses on the transmission system based upon a loss allocation factor for
each line segment, which is determined by dividing the energy flow for each party on the line segment
by the total flow on the line segment. FKEC has installed substation-metering necessary to calculate
the loss allocation factor, and FKEC is, therefore, responsible for performing the calculation, which is
calculated on an hourly basis.

The Transmission Agreement provides for the construction of future capital additions to the
transmission system, which would be paid jointly by FKEC and KEYS based on the allocation
percentages. Once parity of investment is achieved under the Transmission Agreement, any
subsequent investment deficiency requires the deficient party to pay a monthly penalty to the other
party, based upon a formula set out in the Transmission Agreement, which is based in part on the non-
deficient party’s embedded cost of debt capital.

Since the joint investment does not constitute a separate legal entity and no joint debt was issued to
fund this project, KEYS investment in these facilities is included as part of Utility Plant on KEYS’ balance
sheet.

NOTE 11 - PURCHASED POWER COMMITMENTS

All Requirements Power Supply Project – In July 1997, KEYS agreed to become a member of the
Florida Municipal Power Agency (FMPA) All-Requirements Power Supply Project (the “All-Requirements
Project”) and began operations as a project participant effective April 1, 1998.




                                                    26
                       UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA                        DRAFT
                                NOTES TO FINANCIAL STATEMENTS
                      FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

NOTE 11 - PURCHASED POWER COMMITMENTS (continued)

Under the contractual arrangement with FMPA, KEYS has assigned all of its generating and firm
purchased power resources to FMPA, and FMPA will serve all of KEYS’ requirements (net of up to 2 MW
of non-firm capacity when available from the local resource recovery facility).

Further, in the event that power cannot be delivered to the KEYS’ service area over the tie line from
the mainland, KEYS established a policy to have island generation capability equal to at least 60% of
KEYS’ peak load. KEYS and FMPA have agreed to meet these criteria through a combination of KEYS’
32.0 MW of existing synchronized generating resources and three combustion turbine units that are
owned by FMPA, which currently total 76.0 MW. As part of the All-Requirements Project contract, the
Florida Municipal Power Agency is required to maintain generation assets within KEYS’ Service Area
equal to or above 60% of the KEYS’ load. The FMPA All-Requirements Project, the related assignment
of resources by KEYS to FMPA, and other matters pertaining to KEYS’ power supply are discussed in
the paragraphs following.

KEYS has previously entered into several purchased power agreements with other parties including (i)
the FMPA Tri-City Project, (ii) the FMPA Stanton 2 Project; and (iii) a long-term purchase agreement
with FPL. As a member of the All-Requirements Project, KEYS’ resources and costs under these three
contracts have been assigned to FMPA.

KEYS appoints one representative to FMPA’s Board of Directors, which governs the Agency’s activities.
The governance of rates charged to members includes the All-Requirements Project Committee (KEYS
has one vote) and the FMPA Board of Directors (KEYS’ vote is weighted based on KEYS’ net energy for
load).

FMPA Tri-City Project (Stanton 1) – KEYS is a member of the FMPA Tri-City Project (Stanton 1).
KEYS and FMPA have entered into a Tri-City Project Power Sales Contract and a Tri-City Project
Support Contract wherein KEYS has agreed to purchase 54.546% of FMPA’s Tri-City Project. The
Project consists of a 5.301% undivided ownership interest in Curtis H. Stanton Energy Center
(“Stanton”) unit No. 1, a 425 MW coal-fired generating unit jointly owned by the Orlando Utilities
Commission (“OUC”), the Kissimmee Utility Authority, and FMPA, and operated by the OUC. Stanton
Unit No. 1 began commercial operation in July 1987. Based upon the unit’s high dispatch rating of
425 MW, the Tri-City Project consists of a 22 MW undivided ownership and KEYS’ power entitlement
share is approximately 12 MW at the plant bus bar.

FMPA Stanton 2 Project – KEYS is a member of the FMPA Stanton 2 Project. KEYS and FMPA have
entered into a Stanton 2 Project Power Sales Contract and a Project Support Contract wherein KEYS
has agreed to purchase 9.8932% of FMPA’s Stanton 2 Project. FMPA’s Stanton 2 Project consists of a
23.2367% undivided ownership interest in Stanton Unit No. 2, a 429 MW coal-fired generating unit
jointly owned by OUC and FMPA, and operated by OUC. Stanton Unit No. 2 began commercial
operation in June 1996. Based on the unit’s 429 MW high dispatch rating, the Stanton 2 Project
consists of 100 MW undivided ownership and KEYS’ power entitlement share is approximately 9.9 MW
at the plant bus bar.




                                                 27
                        UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA                           DRAFT
                                 NOTES TO FINANCIAL STATEMENTS
                       FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

NOTE 11 - PURCHASED POWER COMMITMENTS (continued)

Florida Power & Light (FPL) Long-Term Purchase – KEYS entered into an agreement with FPL on
August 15, 1991, entitled the Long-Term Agreement to Provide Capacity and Energy by Florida Power
& Light Company to Keys Energy Services, the Utility Board of the City of Key West, Florida (the “FPL
Long-Term Agreement”) which became effective on June 1, 1993 after the termination of a short-term
purchase agreement with FPL. The FPL Long-Term Agreement will continue in effect for 20 years. The
initial purchase amount (the “Initial Contract Demand”) is 45 MW. The contract demand for each year
is to be designated by September 1 of each prior year, but the contract demand cannot be less than
the initial contract demand during the term of the agreement.

In the event KEYS’ peak load during a year is lower than the KEYS peak load in the immediately
preceding year, KEYS may decrease the portion of its contract demand in excess of the Initial Contract
Demand, subject to certain limitations.

NOTE 12 – COMMITMENTS AND CONTINGENCIES

Risk Management - KEYS is exposed to various risks of loss related to torts, damage, theft or
destruction of assets, errors or omissions, injuries to employees, and natural disasters. Currently, KEYS
is defending a claim arising from the normal course of business. KEYS expects to prevail in this matter;
however, the final outcomes have not yet been determined.

KEYS purchases commercial insurance policies from a commercial insurance carrier and other insurance
carriers to minimize its risk of loss in these areas. KEYS’ has not experienced an insurance settlement
in excess of insurance coverage during the past four fiscal years. KEYS’ bears the risk of loss up to the
deductible amounts.

NOTE 13 – NAVY CONTRACT

The United States Navy is the largest customer of KEYS and accounted for approximately 9.1% of
kilowatt hours sold in Fiscal Year 2010 and approximately 9.9% in Fiscal Year 2009. KEYS’ contract
with the Navy is for a term of ten years with a provision which requires the parties to commence
negotiations for a new contract at least two years prior to the end of the current contract. The
contract also contains provisions for minimum billing, service reduction and exclusive service
provisions. Pursuant to this contract, KEYS has agreed to provide a maximum of 15 megawatts of
power at multiple locations.

KEYS executed an amendment to the Navy’s service contract on December 8, 1999, which modified the
existing rate schedule. On September 12, 2007, both parties signed a new contract that shall continue
in effect through August 31, 2017. All terms and conditions remain unchanged and in full force and
effect.

NOTE 14 – REGULATION

According to existing laws of the State of Florida, the five members of the Utility Board act as the
regulatory authority for the establishment of electric rates.




                                                   28
                        UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA                            DRAFT
                                  NOTES TO FINANCIAL STATEMENTS
                       FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

NOTE 14 – REGULATION (continued)

The Florida Public Service Commission (FPSC) has authority to regulate the electric "rate structures" of
municipal utilities in Florida. It is believed that "rate structures" are clearly distinguishable from the
total amount of revenues which a particular utility may receive from rates, and that distinction has thus
far been carefully made by the FPSC. Prior to implementation of any rate change, KEYS files the
proposed tariff with the Florida Public Service Commission and has established the prerequisite of a
Public Notice and the holding of a Public Hearing.

The Florida Electric Power Plant Siting Act has given the FPSC exclusive authority to approve the
construction of new power plants. The FPSC also exercises jurisdiction under the National Energy and
the Florida Energy Efficiency and Conservation Acts as related to electric use conservation programs
and prescribes conformance to the Federal Energy Regulatory Commission's Uniform System of
Accounts.

Operations of KEYS are subject to environmental regulation by Federal, State and local authorities and
to zoning regulations by local authorities. Federal and State standards and procedures that govern
control of the environment can change. These changes can arise from continuing legislative,
regulatory, and judicial action respecting the standards and procedures.

Therefore, there is no assurance that the electric plants in operation, under construction or
contemplated will always remain subject to the regulations currently in effect, or will always comply
with future regulations. An inability to comply with environmental standards or deadlines could result
in reduced operating levels or complete shutdown of individual electric generating units not in
compliance. Furthermore, compliance with environmental standards or deadlines may substantially
increase capital and operating costs.

NOTE 15 – POST EMPLOYMENT HEALTH CARE BENEFITS

KEYS implemented GASB No. 45, “Accounting and Financial Reporting by Employers for Post
Employment Benefits Other Than Pensions (OPEB)”, for certain post employment health care benefits
effective fiscal year ended September 30, 2009. The most recent actuarial study is as of October 1,
2009.

Plan Description
In addition to providing pension benefits, KEYS provides life insurance and health care benefits
including prescription drug coverage, to retired employees. These benefits are provided pursuant to
KEYS’ personnel policies as adopted and amended by the Utility Board. KEYS is not required to provide
contributions to this benefit by any statutory, contractual or other authority. KEYS employees hired
before June 9, 1999 are eligible for these benefits, at a cost determined by the Utility Board, if they
qualify for retirement status while working for KEYS. KEYS employees hired after June 9, 1999, who
attain retirement eligibility, have the opportunity to purchase health insurance through KEYS insurance
provider at the same rate KEYS pays for its active members. At September 30, 2010, 122 retirees were
eligible for and were receiving these benefits. These and similar benefits for active employees are
provided through an insurance company whose premiums are based on the benefits paid during the
year. The costs of the monthly premiums and OPEB costs are included in these financial statements.




                                                   29
                        UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA                          DRAFT
                                 NOTES TO FINANCIAL STATEMENTS
                      FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

NOTE 15 – POST EMPLOYMENT HEALTH CARE BENEFITS (continued)

Funding Policy
KEYS follows a pay as you go funding policy contributing an amount to provide for its portion of current
year benefit costs, as well as, amounts to establish a reserve for costs incurred but not yet reported.
The benefits provided, funding levels, and participant contribution amounts are determined through
recommendations by KEYS staff with assistance from outside consultants, and by action of the Utility
Board. As of October 1, 2007 the monthly premium for retirees’ life insurance and health care benefits
was $671 per month for pre age 65 coverage, and $335 for post age 65 coverage.

Effective February 2009, these premiums were reduced to $600 per month for pre age 65 coverage,
and $300 per month for post age 65 coverage. If a retiree is eligible for Medicare they are required
enroll in the Medicare program as their primary coverage as soon as they are eligible, thereby reducing
KEYS costs. Currently, the Utility Board does not require retirees to contribute to the monthly premium
for retiree coverage. The entire monthly premium for retiree coverage is paid by KEYS. Retirees may
choose to purchase and pay for coverage for spouses or domestic partners at the current monthly
premium of $399.

Annual OPEB Cost and Net OPEB Obligation
KEYS Annual OPEB Cost (expense) and Net OPEB Obligation (NOO) for fiscal years ended September
30, 2010 and 2009 are shown below:
                                                                2010             2009
            Annual Required Contribution (ARC)             $     4,545,184 $ 3,537,000
            Interest on Net OPEB Obligation                         96,940         -
            Adjustment to ARC                                     (124,402)        -
            Annual OPEB Cost                                     4,517,722   3,537,000
            Employer Contribution                                 (489,473) (1,908,231)
            Increase (Decrease) in OPEB Obligation               4,028,249   1,628,769
            Net OPEB Obligation Beginning of Year                1,628,769         -
            Net OPEB Obligation End of Year                $     5,657,018 $ 1,628,769

Annual OPEB cost, the percentage of annual OPEB cost contributed, and the net OPEB obligation for
fiscal year ended September 30, 2010 and 2009 are shown below. KEYS implemented GASB 45
effective October 1, 2008 and elected to implement prospectively. Starting with the fiscal year ending
September 30, 2011, three-year trend information will be presented.


                                                     Percentage
                     Fiscal Year      Annual        of OPEB Cost       Net OPEB
                        Ended       OPEB Cost       Contributed       Obligation
                      9/30/2010     $ 4,517,722         11%           $ 5,657,018
                      9/30/2009     $ 3,537,000         54%           $ 1,628,769




                                                  30
                        UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA                          DRAFT
                                 NOTES TO FINANCIAL STATEMENTS
                      FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

NOTE 15 – POST EMPLOYMENT HEALTH CARE BENEFITS (continued)

Funded Status and Funding Progress

The funded status as of October 1, 2009, was as follows:

                    Actuarial accrued liability                    $   60,160,966
                    Actuarial value of plan assets                            -
                    Unfunded actuarial accrued liability (UAAL)    $   60,160,966


                    Funded ratio                                             0.0%
                    Covered payroll                                $   10,063,814
                    Unfunded actuarial accrued liability as
                     as percentage of covered payroll                      597.8%


Actuarial Methods and Assumptions
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and
assumptions about the probability of events in the future. Examples of these estimates include
assumptions about future employment and termination rates, mortality, and healthcare cost trend
rates. Actuarially determined amounts are subject to continual revision as actual results are compared
to past expectations and new estimates are made about the future. Projections of future benefits for
financial reporting purposes are based on the substantive plan (the plan as understood by the
employer and plan members) and include the types of benefits in place at the time of each valuation
date and on the historical pattern of sharing of costs between the employer and plan members to that
point. Actuarial calculations reflect a long term perspective and utilize methods and assumptions that
are designed to reduce short term volatility in actuarial accrued liabilities and the actuarial value of
assets.

Annual other postemployment benefit cost (expense) is calculated based on the annual required
contribution (ARC) of the employer, an amount actuarially determined in accordance with GASB
Statement 45. KEYS elected to calculate the ARC and related information using the Project Unit Credit
(PUC) actuarial cost method. The ARC represents an amount that if paid on an ongoing basis, would be
expected to provide sufficient resources to fund both the normal cost for each year and the amortized
unfunded liability over a period not to exceed 30 years utilizing the level percentage of projected
payroll on a closed basis. The liability and resulting ARC were calculated using 4.0% rate of return on
invested assets, annual health care cost trend of 9.0% at October 1, 2009 declining gradually to 4.5%
at 2018 and later, an inflation rate of 3.0% per year, payroll growth rate of 1.0% per year and
projected salary increases between 6.0% and 10.0% per year.

The required schedule of funding progress immediately following the notes to the financial statements
presents multiyear trend information about whether the actuarial value of plan assets is increasing or
decreasing over time relative to the actuarial liability for benefits.




                                                   31
                        UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA                            DRAFT
                                  NOTES TO FINANCIAL STATEMENTS
                       FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009

NOTE 16 – PAYMENT TO THE CITY OF KEY WEST

KEYS is the successor of the electric public utility once owned by the City. All electric utility property
owned by the City of Key West was transferred to KEYS at the time of KEYS’ creation. KEYS pays the
City an annual amount as a return on the City’s contribution to KEYS.

Paragraph (11) of Section 3.03 (B) of the Original Resolution 532 was amended on September 8, 1999
by Resolution 678 to be effective for the amount paid in 2001. The Board will pay to the City a sum
equal to the greater of (a) $200,000 (adjusted annually for changes in the Consumer Price index or (b)
one percent (1%) of the Gross Revenues derived from sales of electricity at retail (exclusive of Power
Cost Revenues which are defined as (i) revenues determined by reference to the power cost
component of base rates, plus or minus (ii) power cost adjustment charges or credits.)

The annual payments were $393,368 and $386,188 for 2010 and 2009, respectively.


NOTE 17 – SUBSEQUENT EVENT

On December 15, 2010 the Utility Board of the City of Key West approved and signed the Revised,
Amended, and Restated Capacity and Energy Sales Contract which will take effect on January 1, 2011
and remains in effect until October 1, 2024. Under the terms of this contract FMPA will take over
operational control and ownership risk for KEYS Stock Island generating units.

FMPA will utilize the generating units to provide capacity and energy to the All-Requirements Power
Supply Project in exchange for the fixed Capacity Credits of $670,000 per year for ten years to be given
by FMPA to KEYS, and the other negotiated agreements of the parties to affect a True All-
Requirements Project (“TARP”). At the end of ten years, full ownership will transfer to FMPA.

As part of the TARP contract, FMPA is required to maintain generation assets to power 60 percent of
KEYS’ peak power needs in the event that power cannot be imported from the mainland via the
Transmission Line.

KEYS will retain ownership of the Stock Island land. In addition an Operations & Maintenance
agreement will accompany this contract, under which FMPA hires KEYS as its agent to be responsible
for operating and maintaining the generating units.




                                                   32
                              UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA                              DRAFT
                                   REQUIRED SUPPLEMENTARY INFORMATION


                                         Other Post Employment Benefits

                                          Schedule of Funding Progress

                                     Actuarial
 Actuarial     Acutarial             Accrued                                                           UAAL as a
 Valuation      Value                Liability         Unfunded                                        Percentage
   Date          of                   (AAL)               AAL           Funded          Covered        of Covered
October 1,      Assets                -PUC              (UAAL)           Ratio           Payroll         Payroll

   2007        $          -        $ 46,294,714       $ 46,294,714        0.0% $         9,175,835          504.5%
   2009                   -          60,160,966         60,160,966        0.0%          10,063,814          597.8%




                          The Retirement System for the General Employees of
                                the Utility Board of the City of Key West

                                          Schedule of Funding Progress




   Actuarial           Entry Age         Actuarial                                                   UAAL as a
   Valuation           Actuarial         Accrued           Unfunded                                  Percentage
     Date               Value of         Liability            AAL       Funded          Covered      of Covered
  January 1,             Assets           (AAL)             (UAAL)       Ratio           Payroll       Payroll
    2005           $       53,036    $       57,511    $        4,475       92.2%   $       6,934         64.5%
    2006           $       54,266    $       61,004    $        6,738       89.0%   $       7,644         88.1%
    2007           $       55,876    $       64,344    $        8,468       86.8%   $       8,344        101.5%
    2008           $       59,924    $       68,109    $        8,185       88.0%   $       9,203         88.9%
    2009           $       54,593    $       74,212    $       19,619       73.6%   $       9,782        200.6%
    2010           $       60,033    $       77,840    $       17,807       77.1%   $      10,025        177.6%




                                                              33
                                                                             DRAFT
           UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA
                    SCHEDULES OF REVENUES EARNED
           FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009
                                               2010             2009

Operating Revenues:
 Electric Revenues                        $    98,111,931    $ 91,032,584
 Power Cost Adjustment                          3,152,497      14,892,862
 Service Charges                                  423,187         255,514
 Penalty Charges                                  803,952       1,023,502
 Reserve Capacity                               1,611,873       1,777,614
 Charges for New Service                          814,739         352,151
 Other                                             46,423         165,259

   Total                                      104,964,602     109,499,486

Other Income:
  Interest                                        266,524         388,391
  Hurricane-Grant Revenue                        (125,000)           (479)
  Pole Attachment                                 489,990         451,196
  Generating Unit Expense Reimbursement           869,358         879,070
  Tree Trimming                                   129,888         135,008
  Rental Income                                  (247,746)       (158,989)
  FMPA gas contract termination                         -       1,037,036
  Miscellaneous Non-Operating Revenue             773,130         179,858

   Total Other Income                           2,156,144       2,911,091

   Total Revenues                         $ 107,120,746      $ 112,410,577




                                     34
                                                                                                                   DRAFT
                                      UTILITY BOARD OF THE CITY OF KEY WEST
                  SCHEDULES OF REVENUES AND EXPENDITURES – BUDGET TO ACTUAL
                                   FOR THE YEAR ENDED SEPTEMBER 30, 2010
                                                                                                            Variance-
                                                             Annual Budget             Year to Date         Favorable
                                                      Original           Current          Actual          (Unfavorable)

Revenues
 Operating Revenues                              $ 109,198,951       $ 109,198,951     $ 101,264,428      $ (7,934,523)
 Other Operating Revenues                            2,916,850           2,916,850         3,700,174           783,324
 Interest Income                                       140,748             138,419           266,524           128,105
 Hurricane - Grant Revenue                                   -                   -          (125,000)         (125,000)
 Non-Operating Revenues                              1,648,728           1,541,728         2,014,620           472,892

    Total Revenue                                    113,905,277         113,795,948       107,120,746        (6,675,202)

Expenditures
  Production Expenses - Diesel                         2,065,585           1,989,468         1,557,898           431,570
  Purchased Power                                     69,903,051          69,903,051        63,272,371         6,630,680
  Transmission Expenses                                4,255,246           4,406,676         4,519,506          (112,830)
  Distribution Expenses                                4,584,779           4,554,341         3,939,956           614,385
  Customer Accounts and Collection Expenses            1,383,537           1,409,609         1,663,487          (253,878)
  Interest on Customer Deposits                           10,867              10,867             8,998             1,869
  Administrative and General Expenses                 19,099,643          19,095,094        20,751,036        (1,655,942)
  Senior Lien Debt Service                             8,384,481           8,384,481         8,384,481                 -
  Payment to City of Key West                            422,128             422,128           393,368            28,760

    Total Expenditures                               110,109,317         110,175,715       104,491,101        5,684,614

    Excess of Revenues Over Expenditures         $     3,795,960     $     3,620,233   $     2,629,645    $    (990,588)

Adjustments
 Depreciation                                                                               (7,925,719)
 Principal Portion of Budgeted Debt Service                                                  6,695,000
 Capitalized Overhead                                                                        3,796,592
 Interest Accrued but Unfunded                                                              (2,061,018)
 Amortization of Issuance Costs                                                               (115,548)
 Capital Contributions                                                                         119,985
  Amortization of Loss on Refunding                                                            (59,389)

Change in Net Assets, GAAP Basis                                                       $     3,079,548




                                                           35
                                                                                               DRAFT
                          UTILITY BOARD OF THE CITY OF KEY WEST
                              STATISTICAL SECTION DESCRIPTION



This part of the Keys Energy Services’ (KEYS) Comprehensive Annual Financial Report presents detailed
information as a context for understanding what the data in the financial statements, note disclosure,
and required supplementary information says about KEYS overall financial health.            Statistical
information for current period, as well as nine years prior is presented in this section.



Financial Trends – These schedules contain trend information to help the reader understand how
KEYS financial performance and well being has changed over time.



Revenue Capacity – These schedules contain information to help the reader assess KEYS local
revenue source.



Debt Capacity – These schedules present information to help the reader assess KEYS debt burden
and its ability to issue additional debt in the future.



Demographic and Economic Information – This schedule offers demographic and economic
indicators to help the reader understand the environment in which KEYS financial activities take place.



Operating Information – These schedules contain service and infrastructure data to help the reader
understand how the information in KEYS financial report relates to the services KEYS provides and the
activities it performs.




                                                  36
                                                                  UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA

                                                                                            FINANCIAL TRENDS

                                                                                    CONDENSED BALANCE SHEETS

                                                                                       FISCAL YEARS 2010 - 2001

                                                                                                    Restated                                                                 Restated          Restated
                                                2010              2009              2008             2007                2006              2005              2004             2003              2002                2001
ASSETS

Current Assets
  Cash and Investments                    $    22,556,707   $    21,682,666   $    20,027,657   $     4,878,731    $     7,064,406   $     6,657,203   $     5,950,771   $     5,897,131   $     6,094,567    $     1,764,083

  Accounts Receivable, net                      7,296,861         7,594,719         9,374,828         6,930,502          6,152,177         5,729,570         5,252,346         4,317,862         4,514,931          6,723,727

  Plant Material and Operating Supplies
                                                3,851,035         3,978,064         3,791,212         3,422,943          2,722,320         2,454,805         2,659,814         2,496,248         3,408,455          3,282,355
  Inventory

  Other Current Assets                          1,471,596         1,473,977         2,322,035        10,201,069          9,237,560        10,203,625         1,483,817         1,159,438           809,915            355,942
   Total Unrestricted Current Assets           35,176,199        34,729,426        35,515,732        25,433,245         25,176,463        25,045,203        15,346,748        13,870,679        14,827,868         12,126,107


  Cash and Investments-Restricted               9,383,394        30,050,392        29,771,908        49,983,884         12,833,724        11,466,147        19,538,828        19,329,440        22,871,985         26,276,639
  Prepaid Expenses                              8,534,034                 -         8,190,244
  Interest Receivable                              47,832             2,715             2,715             2,715                  -                 -                 -                 -                 -             43,320
  Total Restricted Current Assets              17,965,260        30,053,107        37,964,867        49,986,599         12,833,724        11,466,147        19,538,828        19,329,440        22,871,985         26,319,959

Total Current Assets                           53,141,459        64,782,533        73,480,599        75,419,844         38,010,187        36,511,350        34,885,576        33,200,119        37,699,853         38,446,066

Non Current Assets
 Capital Assets
  Net Utility Plant                           151,490,867       131,418,048       122,510,168       117,452,090        113,676,371       111,804,113       111,753,669       110,314,331       110,624,848        110,529,716
  Construction in Progress                      3,446,405         9,924,967         6,600,410         3,398,149          1,156,438         2,307,807         3,278,081         5,021,562         2,336,476          2,158,024
 Total Net Capital Assets                     154,937,272       141,343,015       129,110,578       120,850,239        114,832,809       114,111,920       115,031,750       115,335,893       112,961,324        112,687,740

  Other Property
   Net Non-Utility Plant                                -                 -                 -                  -                 -                 -         3,009,773         3,009,773         3,009,773          3,009,773
  Total Other Property                                  -                 -                 -                  -                 -                 -         3,009,773         3,009,773         3,009,773          3,009,773

  Restricted Non-Current Assets
   Deposits-Restricted                          2,266,539         2,266,539         2,266,539         2,266,539          3,243,009         3,243,009         3,243,009         1,621,505                  -                 -
  Total Restricted Non-Current Assets           2,266,539         2,266,539         2,266,539         2,266,539          3,243,009         3,243,009         3,243,009         1,621,505                  -                 -

  Unrestricted Non-Current Assets
   Investments                                          -                 -                 -                 -                  -                 -            44,075           554,913         1,035,667          4,506,094
   Long Term Receivable                         6,372,920         6,228,096         6,485,648         6,944,377          6,765,007         6,591,659                 -                 -                 -                  -
   Other Accounts Receivable                      541,801         1,168,151         1,168,151         1,177,205          1,177,205         1,177,205                 -                 -                 -                  -
   Deferred Charges                               627,593           743,141           858,689           972,729            804,746           909,254         1,013,762         1,118,270         1,222,778          1,481,546
  Total Unrestricted Non-Current Assets         7,542,314         8,139,388         8,512,488         9,094,311          8,746,958         8,678,118         1,057,837         1,673,183         2,258,445          5,987,640

  Total Non-Current Assets                    164,746,125       151,748,942       139,889,605       132,211,089        126,822,776       126,033,047       122,342,369       121,640,354       118,229,542        121,685,153

  Total Assets                            $ 217,887,584     $ 216,531,475     $ 213,370,204     $ 207,630,933      $ 164,832,963     $ 162,544,397     $ 157,227,945     $ 154,840,473     $ 155,929,395      $ 160,131,219

                                                                                                       (Continued)

                                                                                                          37
                                                                        UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA

                                                                                               FINANCIAL TRENDS

                                                                             CONDENSED BALANCE SHEETS (CONTINUED)

                                                                                          FISCAL YEARS 2010 - 2001

                                                                                                   Restated                                                               Restated           Restated
                                               2010              2009              2008             2007               2006             2005             2004              2003               2002                2001

NET ASSETS AND LIABILITIES

Current Liabilities
Unrestricted Current Liabilities
 Accounts Payable                        $     5,315,703   $     5,504,682   $     7,068,091   $     6,685,677     $    5,709,921   $    6,751,776   $    5,135,018   $    4,657,297     $     3,864,900    $     3,917,568
 Accrued Expenses                              1,979,216         2,877,088         2,977,077         3,149,004          2,508,409        2,133,812        1,697,905        1,457,832           1,250,345          1,190,933
 Deferred Revenues                               247,526           671,262            53,991           132,365            316,128           82,286          108,397           64,835             112,201            274,301
Total Unrestricted Current Liabilities         7,542,445         9,053,032        10,099,159         9,967,046          8,534,458        8,967,874        6,941,320        6,179,964           5,227,446          5,382,802


Restricted Current Liabilities
 Current Portion of Long-Term Debt             6,666,707         6,311,707         5,976,707         5,694,373          5,454,373        5,169,373        4,909,373        5,009,373           4,790,611          4,240,611
 Accounts Payable                              2,088,337         1,620,382           865,410           744,959            914,510          196,656          298,888          518,400             424,638            268,384
 Accrued Interest                              1,839,035         2,020,441         2,185,244         2,342,556          1,498,275        1,639,823        1,768,198        1,889,160           1,998,717          2,069,870
 Due to Customers                              4,462,038         4,315,660         4,279,001         4,125,296          4,020,894        4,084,228        4,012,967        3,924,232           4,001,563          4,058,346
 Due to Other Governments                              -                 -                 -                 -                  -                -                -                -             224,018                  -
 Accrued Expenses                                      -                 -                 -           205,950                  -                -                -                -                   -                  -
 Security Deposits Payable                       112,390           610,000           610,000           110,000            110,000          110,000                -                -                   -                  -
Total Restricted Current Liabilities          15,168,507        14,878,190        13,916,362        13,223,134         11,998,052       11,200,080       10,989,426       11,341,165          11,439,547         10,637,211

Total Current Liabilities                     22,710,952        23,931,222        24,015,521        23,190,180         20,532,510       20,167,954       17,930,746       17,521,129          16,666,993         16,020,013


Non Current Liabilities
 Compensated absences                          1,742,962         1,668,691         1,593,715                  -                 -                -                -                  -                  -                 -
 Accrued OPEB Expenses                         5,657,018         1,628,769                 -                  -                 -                -                -                  -                  -                 -
Total Non Current Liabilities                  7,399,980         3,297,460         1,593,715                  -                 -                -                -                  -                  -                 -


Long-Term Debt
 Revenue Bonds                                73,090,933        79,757,640        86,069,346        92,091,536         55,032,256       60,486,629       65,656,003       70,565,376          75,233,511         83,636,135
 Accrued Interest                             22,596,441        20,535,423        18,612,844        16,819,451         15,146,568       13,586,094       12,130,463       10,772,630           9,506,029          8,992,072
 Loan Payable                                          -                 -                 -                 -            948,000        1,185,000                -                -             340,000            680,000
Total Long-Term Debt                          95,687,374       100,293,063       104,682,190       108,910,987         71,126,824       75,257,723       77,786,466       81,338,006          85,079,540         93,308,207

Total Liabilities                            125,798,306       127,521,745       130,291,426       132,101,167         91,659,334       95,425,677       95,717,212       98,859,135         101,746,533        109,328,220

                            Net Assets        92,089,278        89,009,730        83,078,778        75,529,766         73,173,629       67,118,720       61,510,733       55,981,338          54,182,862         50,802,999

 Total Net Assets and Liabilities        $ 217,887,584     $ 216,531,475     $ 213,370,204     $ 207,630,933       $ 164,832,963    $ 162,544,397    $ 157,227,945    $ 154,840,473      $ 155,929,395      $ 160,131,219




                                                                                                              38
                                                                  UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA

                                                                                          FINANCIAL TRENDS

                                                                                      CHANGES IN NET ASSETS

                                                                                     FISCAL YEARS 2010 - 2001

                                                                                                  Restated                                                    Restated       Restated
                                             2010              2009               2008             2007           2006            2005          2004           2003           2002           2001
Revenues
Utility Activities:
    Charges for Electric:
        Customer Charge                $     2,387,069   $     2,273,622    $     2,196,785   $    2,182,999 $ 2,097,779       $ 2,106,597    $ 2,076,473    $ 2,062,558    $ 2,046,854    $ 2,027,916
        Energy                              87,979,773        81,257,201         85,037,568       81,175,294   50,721,562       52,074,914     52,842,391     51,946,140     50,539,343     49,849,743
        Demand                               5,218,362         4,856,126          4,868,544        4,786,021    4,586,551        4,767,462      4,741,167      4,774,887      4,636,591      4,480,583
        Power Cost Adjustment                3,152,497        14,892,862         14,681,817         (312,369)  34,217,993       19,451,323     16,695,062      9,892,463      5,624,742      9,751,318
        Gross Receipts                       2,526,727         2,645,635          2,733,628        2,248,446    2,344,483        2,005,905      1,929,535      1,782,729      1,607,900      1,691,395
    Total Charges for Electric             101,264,428       105,925,446        109,518,342       90,080,391   93,968,368       80,406,201     78,284,628     70,458,777     64,455,430     67,800,955
    Charges for Service:
        Penalty Charge                        803,952          1,023,502           663,025           601,588        470,133        482,655        523,623        457,717        387,600        515,682
        Service Charge                        423,187            255,514           245,480           248,140        134,068        141,677        132,024        159,050        116,349        118,541
        Initial Permanent Service              90,500             83,575           169,040           217,610         31,400         57,800         57,625         35,050         37,575         41,750
        Line Extension                        724,859            268,576           631,091           500,738        697,538         69,354        195,370        108,115        135,202          4,575
        Contributions in Aid of
                                              119,985            94,823            175,860           225,468         85,983        119,347         81,417        146,587        127,323        185,059
        Construction
    Total Charges for Service                2,162,483         1,725,990          1,884,496        1,793,544      1,419,122        870,833        990,059        906,519        804,049        865,607
    Charges for Other Services:
        Green Power                             10,815            13,845             11,700            5,374          3,547          3,601          1,985              -              -              -
        Capacity Credits                     1,611,873         1,777,614          1,767,171        1,931,766      1,804,033      2,029,173      1,909,808      1,883,557      1,598,265      1,471,961
        Other                                   34,988           151,414            152,244          163,265         90,978        288,275        234,374         34,979         99,870         80,883
    Total Charges for Other Services         1,657,676         1,942,873          1,931,115        2,100,405      1,898,558      2,321,049      2,146,167      1,918,536      1,698,135      1,552,844
Total Utility Activities                   105,084,587       109,594,309        113,333,953       93,974,340     97,286,048     83,598,083     81,420,854     73,283,832     66,957,614     70,219,406


Non-Utility Activities:
   Rental Income                              854,843            389,888            614,805          644,179        633,419        402,898        316,060        266,547        247,632        224,991
   Miscellaneous                              978,959          1,998,283            983,232          644,012      1,529,184        269,151        129,512         11,032        657,534        854,732
   Tree Trimming                              129,888            135,008            118,022          110,550         92,565         81,573        181,774        175,290        188,974              -
   Investment Earnings                        266,524            388,391            751,008        1,392,012      1,047,716        613,525        301,862        396,649        655,969      1,815,338
   Special Item-Hurricane                                           (479)           292,960          550,209      3,281,600      1,900,702              -              -              -              -
   Special Item-Insurance Proceeds                   -                 -                  -                -        273,306              -              -              -              -              -
   Special Item-SO2 Credits                     50,930                 -             72,065                -              -              -              -              -              -              -
   Grant Revenue                                     -                 -                  -                -              -        119,367        110,937          3,022          6,500        193,019
   Gain on Disposition of Property                   -                 -                  -                -              -      4,568,719              -              -              -              -
Total Non-Utility Activities                 2,281,144         2,911,091          2,832,092        3,340,962      6,857,790      7,955,935      1,040,145        852,540      1,756,609      3,088,080

      Total Revenues                   $ 107,365,731     $ 112,505,400      $ 116,166,045     $   97,315,302   $ 104,143,838   $ 91,554,018   $ 82,460,999   $ 74,136,372   $ 68,714,223   $ 73,307,486



                                                                                                       39
                                                         UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA

                                                                              FINANCIAL TRENDS

                                                                    CHANGES IN NET ASSETS (Continued)

                                                                        FISCAL YEARS 2010 - 2001


                                                                                   Restated                                            Restated     Restated
                                           2010         2009           2008         2007          2006         2005         2004        2003          2002        2001
Expenses
Utility Activities:
    Operating Expenses
        Production - Diesel            $    1,557,898 $ 2,186,002 $ 1,625,066 $ 1,623,810 $ 1,482,077 $ 1,074,167 $ 887,371 $ 916,557 $ 779,761 $ 816,946
        Purchased Power                    63,272,371   66,847,376  71,009,513  58,531,619 59,946,424  49,287,046  44,523,179 41,311,655 34,230,472 36,742,561
        Transmission                        4,519,506    4,648,803   3,938,264   3,857,363  3,539,845   3,646,679   3,298,491  3,711,111  3,485,983  3,589,637
        Distribution                        3,939,956    4,065,166   4,070,472   3,984,022  3,366,439   3,017,736   3,250,018  2,832,211  3,075,612  2,985,558
        Customer Service                    1,663,487    1,675,437   1,571,014   1,332,355  1,243,322   1,280,590   1,085,522  1,015,116    985,698  1,033,617
        Administrative & General           14,288,249   12,620,134  11,850,327  11,812,589 11,452,519  11,540,112  10,004,675  8,757,455  8,460,644  5,977,699
        Depreciation                        7,925,719    7,190,781   6,632,858   6,339,122  6,182,488   6,391,999   6,441,587  6,367,595  6,500,687  5,680,618
        Gross Receipts Tax                  2,531,611    2,648,136   2,738,286   2,252,740  2,348,479   2,010,155   1,932,116  1,786,472  1,611,989  1,695,508
        Employer Payroll Tax                  134,583      145,807     145,160     137,946    119,476     116,919      89,107     68,831     65,945     63,034
Total Utility Activities                   99,833,380  102,027,642 103,580,960  89,871,566 89,681,069  78,365,403  71,512,066 66,767,003 59,196,791 58,585,178


Non-Utility Activities
   Debt Expenses
       Interest on Debt                    3,809,889    4,034,263      4,228,875     4,435,260    4,670,672    4,811,456   4,959,686    5,116,455     5,468,680   5,788,814
       Interest Customer Deposit               8,998       10,807         67,621       197,964      194,367      109,429      29,345       31,538        74,701     279,513
       Amortization of Bond Discount         115,548      115,548        114,040       113,096      104,508      104,508     104,508      104,508       259,703     127,714
   Payment to City of Key West               393,368      386,188        368,741       341,279      343,341      340,548     325,998      318,394       334,485     323,851
   Special Item - Hurricane                  125,000            -        256,796             -    3,094,972    2,214,686           -            -             -           -
   Retirement of Steam Plant                       -            -              -             -            -            -           -            -             -           -
Total Non-Utility Activities               4,452,803    4,546,806      5,036,073     5,087,599    8,407,860    7,580,627   5,419,537    5,570,895     6,137,569   6,519,892

      Total Expenses                   $ 104,286,183 $ 106,574,448 $ 108,617,033 $ 94,959,165 $ 98,088,929 $ 85,946,030 $ 76,931,603 $ 72,337,898 $ 65,334,360 $ 65,105,070




                                                                                      40
                                                      UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA

                                                                             FINANCIAL TRENDS

                                                                   CHANGES IN NET ASSETS (Continued)

                                                                       FISCAL YEARS 2010 – 2001

                                                                                    Restated                                               Restated      Restated
                                       2010          2009             2008           2007          2006          2005        2004           2003           2002         2001
Change in Net Assets
Utility Activities
    Total Utility Revenues         $ 105,084,587 $ 109,594,309 $ 113,333,953 $ 93,974,340 $ 97,286,048 $ 83,598,083 $ 81,420,854 $ 73,283,832 $ 66,957,614 $ 70,219,406
    Total Utility Expenses            99,833,380   102,027,642   103,580,960   89,871,566   89,681,069   78,365,403   71,512,066   66,767,003   59,196,791   58,585,178
Utility Change in Net Assets           5,251,207     7,566,667     9,752,993    4,102,774    7,604,979    5,232,680    9,908,788    6,516,829    7,760,823   11,634,228

Non-Utility Activities
   Total Non-Utility Revenues           2,281,144     2,911,091       2,832,092       3,340,962     6,857,790    7,955,935    1,040,145       852,540      1,756,609     3,088,080
   Total Non-Utility Expenses           4,452,803     4,546,806       5,036,073       5,087,599     8,407,860    7,580,627    5,419,537     5,570,895      6,137,569     6,519,892
Non-Utility Change in Net Assets       (2,171,659)   (1,635,715)     (2,203,981)     (1,746,637)   (1,550,070)     375,308   (4,379,392)   (4,718,355)    (4,380,960)   (3,431,812)

Change in Net Assets               $   3,079,548 $   5,930,952 $      7,549,012 $    2,356,137 $   6,054,909 $ 5,607,988 $ 5,529,396 $ 1,798,474 $ 3,379,863 $ 8,202,416




                                                                                        41
                                                       UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA

                                                                            FINANCIAL TRENDS

                                                                      NET ASSETS BY COMPONENT

                                                                       FISCAL YEARS 2010 - 2001

                                                                            Restated                                                      Restated       Restated
                                 2010           2009           2008          2007              2006           2005           2004          2003           2002             2001
Utility Activities

Invested in capital assets,
net of related debt           $ 82,248,111   $ 76,593,445   $ 66,814,871   $ 60,991,269     $ 53,995,651   $ 48,044,762   $ 47,004,365   $ 42,238,508   $ 34,953,312    $ 26,426,478

Restricted                      2,996,926      3,188,316     10,830,859      2,266,539        3,243,009      3,243,009      3,243,009      1,621,505                -              -

Unrestricted                    6,844,241      9,227,969      5,433,048     12,271,958       15,934,969     15,830,949     11,263,359     12,121,325     19,229,550      24,376,521

Total Net Assets              $ 92,089,278   $ 89,009,730   $ 83,078,778   $ 75,529,766     $ 73,173,629   $ 67,118,720   $ 61,510,733   $ 55,981,338   $ 54,182,862    $ 50,802,999




                                                                                       42
                                                      UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA

                                                                          REVENUE CAPACITY

                                                                 REVENUES BY TYPE OF CUSTOMER

                                                                      FISCAL YEARS 2010 - 2001

                                                                           Restated                                                      Restated       Restated
                              2010           2009            2008           2007             2006           2005           2004           2003           2002           2001

Residential                $ 48,205,995   $ 48,875,062    $ 51,560,478    $ 42,438,131     $ 44,302,430   $ 37,767,031   $ 36,658,912   $ 33,526,793   $ 29,945,374   $ 30,573,275

Senior Citizen                  679,315        567,634         498,448        428,097          452,712        369,301        314,552        229,184        195,524        207,605

Small Commercial             10,258,593      11,430,140      11,598,413     9,595,506        9,861,649      8,386,852      8,170,521      7,209,746      6,980,914      7,723,758

Large Commercial             30,124,699      31,847,083      33,354,993    27,432,935       28,882,226     24,131,212     23,690,538     20,955,224     18,998,550     20,122,328

Large Commercial-Primary      2,842,446       2,686,606       2,109,808     1,653,887        1,783,289      1,503,875      1,516,123      1,382,608      1,431,486      1,666,483

Industrial                            -               -               -               -               -              -              -         7,313         46,533         25,134

Military                      8,478,864       9,708,708       9,587,871     7,797,799        7,986,754      7,618,487      7,296,000      6,561,783      6,285,413      6,848,174

Churches                         97,813        106,856         120,566         96,087          103,375         87,974         94,843         81,599         73,457         77,890

Recreating Lighting              20,202         21,428          25,540         30,242           28,274         28,956         25,102         23,384         22,505         23,827

Street Lighting                 332,508        461,627         441,036        382,452          397,735        339,410        327,408        302,405        289,625        345,077

Area Lights                     223,993        220,302         221,189        225,255          169,924        173,103        190,629        178,738        186,049        187,404

Total Electric Revenues $ 101,264,428     $ 105,925,446   $ 109,518,342   $ 90,080,391     $ 93,968,368   $ 80,406,201   $ 78,284,628   $ 70,458,777   $ 64,455,430   $ 67,800,955




                                                                                      43
                                             UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA

                                                              REVENUE CAPACITY

                                                  ACTUAL NUMBER OF CUSTOMERS BILLED

                                                             (Month of September)

                                                           FISCAL YEARS 2010 - 2001

                                                            Restated                                     Restated    Restated
                           2010     2009           2008         2007          2006     2005     2004         2003        2002    2001

Residential                23,884   23,857        23,728        23,602        23,626   23,722   23,485      23,430      23,244   23,002

Senior Citizen               504      478           365           365           385      359      328         273         227      266

Small Commercial            3,327    3,279         3,275         3,135         3,083    3,003    2,981       2,867       2,847    2,885

Large Commercial             655      658           650           666           641      689      682         676         663      611

Large Commercial-Primary       6        8             6             5             5        5        5           6           6        9

Military                       1        1             1             1             1        1        1           1           1        1

Churches                      13       16            17            15            14       14       14          16          14       15

Recreating Lighting            3        3             3             3             4        4        4           4           4        4

Street Lighting                5        5             5             5             5        5        5           5           5        5

Area Lights                 1,439    1,439         1,452         1,743         1,743    1,743    1,743       1,743       1,743    1,743

Total Customers            29,837   29,744        29,502        29,540        29,507   29,545   29,248      29,021      28,754   28,541




                                                                         44
                                                       UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA

                                                                         REVENUE CAPACITY

                                                                 kWh SALES BY TYPE OF CUSTOMER

                                                                      FISCAL YEARS 2010 - 2001

                                                                       Restated                                                     Restated      Restated
                             2010          2009           2008          2007                2006          2005          2004         2003          2002           2001

Residential                327,891,790   306,412,074    338,662,570    322,694,803     322,821,261      328,463,571   331,255,087   336,527,072   313,373,473   297,876,406

Senior Citizen               4,813,342     3,708,660      3,395,803      3,390,179          3,433,442     3,367,914     2,990,238     2,421,557     2,162,669     2,132,083

Small Commercial            68,036,855    70,227,949     74,675,605     71,492,573         70,301,646    71,315,388    72,215,876    70,546,836    71,191,876    69,505,253

Large Commercial           216,912,387   210,898,837    233,186,440    223,211,328     223,397,382      225,840,948   232,357,842   229,252,417   217,523,554   204,191,750

Large Commercial-Primary    21,234,670    18,498,199     15,283,453     14,028,201         14,390,129    14,745,675    15,445,343    15,697,282    17,088,655    17,725,220

Industrial                           -             -              -               -                 -             -             -       71,760       472,400       250,800

Military                    64,148,957    67,370,482     69,584,689     66,557,591         64,737,435    75,332,040    75,596,527    76,739,131    76,916,836    73,989,067

Churches                      591,294       602,154        718,511        648,111            671,840       669,595       757,371       743,337       649,482       605,706

Recreating Lighting           114,580       114,100        145,520        194,740            175,760       210,460       188,060       191,100       188,600       188,620

Street Lighting              2,709,204     2,697,333      2,694,288      2,750,949          2,817,954     2,654,569     2,651,128     2,652,752     2,655,220     2,955,277

Area Lights                  1,377,516     1,377,516      1,377,516      1,377,516          1,377,516     1,377,516     1,377,516     1,377,516     1,410,415     1,443,168

Total kWh                  707,830,595   681,907,304    739,724,395    706,345,991     704,124,365      723,977,676   734,834,988   736,220,760   703,633,180   670,863,350




                                                                                      45
                                        UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA

                                                        REVENUE CAPACITY

                                                      AVERAGE MONTHLY BILL

                                                     FISCAL YEARS 2010 – 2001



                                                  Average Monthly Residential Bill
                                                                                                            Electric 1000 kWh

          $180.00

          $160.00

          $140.00

          $120.00
Dollars




          $100.00

           $80.00

           $60.00

           $40.00

           $20.00

             $-
                    FY 2010   FY 2009   FY 2008    FY 2007    FY 2006    FY 2005     FY 2004   FY 2003   FY 2002    FY 2001


                                                                 Fiscal Years




                                                                 46
                                               UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA

                                                               REVENUE CAPACITY

                                                        RESIDENTIAL RATE ANALYSIS

                                                              (Month of September)

                                                            FISCAL YEARS 2010 - 2001


                      2010         2009        2008         2007         2006            2005        2004         2003         2002         2001

Customer Charge   $       6.75 $      6.47 $       6.24 $       6.24 $          6.00 $      6.00 $       6.00 $       6.00 $       6.00 $       6.00
Rate Per kWh            0.1332      0.1277       0.1231       0.1231          0.0799      0.0799       0.0799       0.0799       0.0799       0.0799
PCA Per kWh            -0.0010      0.0195       0.0370       0.0035          0.0450      0.0328       0.0244       0.0175       0.0041       0.0170




                                                                         47
                                                  DRAFT
 UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA

               REVENUE CAPACITY

                RATE INCREASES

            FISCAL YEARS 2010 - 2001


FISCAL            RATE           RATE
 YEAR          INCREASES       DECREASES

FY 2010          4.30%            0.0%

FY 2009          3.75%            0.0%

FY 2008           0.0%            0.0%

FY 2007           4.5%            0.0%

FY 2006           0.0%            0.0%

FY 2005           0.0%            0.0%

FY 2004           0.0%            0.0%

FY 2003           0.0%            0.0%

FY 2002           0.0%            0.0%

FY 2001           0.0%            0.0%




                         48
                                                   UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA

                                                                            DEBT CAPACITY

                                                                    FISCAL YEARS 2010 - 2001

                                                                                 Restated                                            Restated     Restated
                                     2010           2009           2008            2007        2006         2005         2004          2003         2002        2001

Operating Revenue                 $ 104,964,602 $ 109,499,486 $ 113,158,093 $ 93,748,872 $ 97,200,065 $ 83,478,736 $ 81,339,438 $ 73,137,245 $ 66,830,291 $ 69,988,022
Other Income                          2,281,144     2,911,570     2,539,133    2,790,753    3,302,844    1,486,514    1,040,145      849,518    1,750,109    3,134,405
Rate Stabilization Transfers             (1,357)    2,662,964      (700,000)    (677,808) (1,000,535)      235,272       (1,020)    (617,148)   2,330,599   (2,082,435)
Bond Amortization Fund Interest                                                                                               -            -            -     (120,475)
Total Revenues Available            107,244,389   115,074,020 114,997,226     95,861,817   99,502,374   85,200,522   82,378,563   73,369,615   70,910,999   70,919,517
Total Operating Expenses            91,916,658     94,847,669     97,015,782     83,730,408   83,692,856   72,085,736   65,099,824   60,430,945   54,085,176   53,184,073

Net Revenues Available for Coverage $ 15,327,731 $ 20,226,351 $ 17,981,444 $ 12,131,409 $ 15,809,518 $ 13,114,786 $ 17,278,739 $ 12,938,670 $ 16,825,823 $ 17,735,444

Annual Debt Service               $ 10,373,069 $    8,392,294 $ 8,386,900 $ 8,451,538 $ 8,511,550 $ 8,509,645 $ 8,506,395 $ 8,508,320 $ 8,493,242 $ 9,293,376

Debt Service Coverage Ratio                 1.48           2.41           2.14         1.44         1.86         1.54         2.03         1.52         1.98         1.91




                                                                                     49
                                                                                                  DRAFT
                  UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA

                                      DEBT CAPACITY

           PRINCIPAL PAYMENTS PAYABLE FOR ALL DEBT ISSUES THROUGH 2032



Payments Due    Total for all   1991 Series          2000 Series    2001 Series     2006 Series
   for FY       Debt Issues     Bond Issue           Bond Issue     Bond Issue      Bond Issue

    2011           6,695,000                -           5,645,000       1,050,000              -
    2012           7,090,000                -           5,990,000       1,100,000              -
    2013           7,495,000                -           6,350,000       1,145,000              -
    2014           7,925,000                            6,730,000       1,195,000              -
    2015           1,859,840        1,859,840                   -               -              -
    2016           1,735,344        1,735,344                   -               -              -
    2017           1,599,539        1,599,539                   -               -              -
    2018           1,491,821        1,491,821                   -               -              -
    2019           1,391,241        1,391,241                   -               -
    2020           2,435,000                -                   -               -      2,435,000
    2021           2,530,000                -                   -               -      2,530,000
    2022           2,660,000                -                   -               -      2,660,000
    2023           2,780,000                -                   -               -      2,780,000
    2024           2,900,000                -                   -               -      2,900,000
    2025           3,045,000                -                   -               -      3,045,000
    2026           3,185,000                -                   -               -      3,185,000
    2027           3,320,000                -                   -               -      3,320,000
    2028           3,465,000                -                   -               -      3,465,000
    2029           3,640,000                -                   -               -      3,640,000
    2030           3,820,000                -                   -               -      3,820,000
    2031           4,010,000                -                   -               -      4,010,000
    2032           4,210,000                                                           4,210,000

                $ 79,282,785    $   8,077,785    $ 24,715,000       $   4,490,000   $ 42,000,000




                                                50
                                                                                               DRAFT
                                 UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA

                                     DEMOGRAPHIC AND ECONOMIC INFORMATION

                                               FISCAL YEARS 2010 - 2001


                                            Key West      Monroe County   Monroe County   Monroe County
                      Key West               Personal       Per Capita       Median       Unemployment
      Year          Population (1)          Income(3)       Income(2)        Age (1)         Rate (2)

      2010                 (4)                 (4)             (4)             (4)           8.7%*

      2009                 22,364              (4)             (4)             (4)           7.5%*

      2008                 22,364       $       61,825    $      34,174        47             4.7%

      2007                 22,682       $       61,216    $      39,254        53             2.8%

      2006                 23,262       $       54,955    $      36,564        53             3.3%

      2005                 23,935*      $       50,024    $      35,612        (4)            3.0%

      2004                 25,811       $       43,905    $      35,423        (4)            2.3%

      2003                 25,811       $       38,353    $      35,423        43             3.1%

      2002                 25,853       $       37,085    $      33,549        43             2.6%

      2001                 25,735       $       37,198    $      38,309        43             2.6%



Sources:
(1)
      Key West Chamber of Commerce

(2)
      US Department of Labor Bureau of Labor Statistics

(3)
      Bureau of Economic Analysis

(4)
      Data not available

* Data updated based on most recent statistics published by source.




                                                          51
                                                              UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA

                                                                                OPERATING INFORMATION

                                                                                   OPERATING EXPENSES

                                                                                FISCAL YEARS 2010 - 2001


                                                                                                Restated                                                         Restated         Restated
                                                 2010             2009            2008           2007            2006           2005             2004             2003             2002             2001
Electric Operating Expenses
Production - Diesel                          $    1,557,898   $    2,186,002   $ 1,625,066     $ 1,623,810    $ 1,482,077    $ 1,074,167    $     887,371    $     916,557    $     779,761    $     816,946
Purchased Power                                  63,272,371       66,847,376     71,009,513     58,531,619     59,946,424     49,287,046        44,523,179       41,311,655       34,230,472       36,585,038
Transmission                                      4,519,506        4,648,803      3,938,264       3,857,363      3,539,845      3,646,679        3,298,491        3,711,111        3,485,983        3,589,637
Distribution                                      3,939,956        4,065,166      4,070,472       3,984,022      3,366,439      3,017,736        3,250,018        2,832,211        3,075,612        3,143,081
Customer Accounts, Collection and Services        1,663,487        1,675,437      1,571,014       1,332,355      1,243,322      1,280,590        1,085,522        1,015,116         985,698         1,033,617
Administrative and General                       14,288,249       12,620,134     11,850,327     11,812,589     11,452,519     11,540,112        10,004,675        8,757,455        8,460,644        5,977,699
Depreciation                                      7,925,719        7,190,781      6,632,858       6,339,122      6,182,488      6,391,999        6,441,587        6,367,595        6,500,687        5,680,618
Taxes Other Than Income Tax                       2,666,194        2,793,943      2,883,446       2,390,686      2,467,955      2,127,074        2,021,223        1,855,303        1,677,934        1,758,542

Total Electric Operating Expenses            $ 99,833,380     $ 102,027,642    $ 103,580,960   $ 89,871,566   $ 89,681,069   $ 78,365,403   $ 71,512,066     $ 66,767,003     $ 59,196,791     $ 58,585,178




                                                                                                  52
                                                                                                                                                            DRAFT
                                            UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA

                                                                OPERATING INFORMATION

                                                                         ENERGY SOURCES

                                                                FISCAL YEARS 2010 - 2001


                          Description                          2010        2009        2008          2007       2006      2005      2004       2003       2002      2001
Gross Generation in MW:
Diesel and Combustion Turbine                                    5,351       5,307          4,872     15,066    20,338    26,067     20,836     29,708    26,229    19,656
Less: Station Auxiliaries                                        4,595       4,459          4,367      4,073     3,566     3,463      3,372      3,310     3,232     3,063

Net Generation                                                     756         848           505     10,993     16,772    22,604     17,464     26,398    22,997    16,593
Sales To Other Distributors
Net Delivered Purchased Power and Stanton Generation           747,202     732,192     774,025       755,185 738,938 758,537 763,799 767,542 734,541 704,034

Net Energy for Load                                            747,958     733,040     774,530       766,178 755,710 781,141 781,263 793,940 757,538 720,627
Less: Losses                                                   (40,127)    (51,133)    (34,806)      (59,832) (51,586) (57,163) (46,428) (57,719) (53,905) (49,763)

Retail Energy Sales                                            707,831     681,907     739,724       706,346 704,124 723,978 734,835 736,221 703,633 670,864
Losses                                                            5.4%        7.0%        4.5%          7.8%    6.8%    7.3%    5.9%    7.3%    7.1%    6.9%

Generation Capacity (kW) - Name Plate Rating (1)               130,100     137,500     137,500       123,100 123,100      87,100     87,100     87,100    87,100    87,100

KEYS 60 Minute Net Peak Demand                                 138,100     137,400     139,100       142,000 135,511 145,500        139,700 138,900 133,800 129,900

Percentage of On Island Resources for Net Peak Demand (2)        94.2%      100.1%          98.8%      86.7%     90.8%     59.9%      62.3%      62.7%      65.1%   67.1%

Load Factor                                                      61.8%       60.9%          63.4%      61.6%     63.7%     61.3%      63.8%      65.3%      64.6%   63.3%

Delivered Purchased Power and Stanton Resources (kW):
FP&L Long - Term Power                                          45,000      45,000         45,000     45,000    45,000     45,000     45,000    45,000     45,000   45,000
FMPA Tri-City Project (Stanton 1)                               12,289      12,289         12,289     12,289    12,289     12,367     12,289    12,289     12,289   11,633
FMPA Stanton 2 Project                                           9,862       9,862          9,862      9,862     9,770      9,708      9,862     9,862      9,862    9,243
Other Short Term Firm                                                 0           0              0          0         0         0          0         0          0        0

Total Purchased                                                  67,151      67,151        67,151     67,151    67,059     67,075     67,151    67,151     67,151   65,876

Total Generating and Purchased Capability                       197,251     204,651     204,651      190,251 190,159 154,175 154,251 154,251 154,251 152,976

Net Reserve Margin Including Purchased Power (3)                 42.8%       48.9%          47.1%     34.0%      40.3%      6.0%      10.4%      11.1%      15.3%   17.8%


(1) KEYS has a "Capacity and Energy Sales Agreement" with the Florida Keys Electric Cooperative (FKEC) to provide a minimum capacity and energy in the event that
    the transmission line is interrupted. The minimum is based upon a formula in the contract.
(2) The Utility Board has revised the On Island Generation Capacity to meet its annual peak demand from 70% to 60%.
(3) Net Reserve Margin represents the amount of capacity in excess of KEYS peak demand, as a percentage of system peak demand. Commencing 2002, this
    calculation utilizes The Net 60 Minute Peak. The calculation is Total Generating and Purchased Capability less KEYS Net 60 Minute Net Peak Demand divided by
    KEYS 60 Minute Net Peak Demand.




                                                                                      53
                                                                                                                          DRAFT
                                 UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA

                                                  OPERATING INFORMATION

                                                    GENERATING CAPACITY

                                                  FISCAL YEARS 2010 - 2001

               Generating Units                  2010    2009     2008      2007   2006   2005     2004          2003     2002     2001
Name Plate                                                                  M e g a w a t t s     (MW)
Combustion Turbine #1                             23.5     23.5     23.5      20.0   20.0   20.0    20.0           20.0     20.0    20.0
Combustion Turbine #2                             19.8     19.8     19.8      18.6   18.6   18.6    18.6           18.6     18.6    18.6
Combustion Turbine #3                             19.8     19.8     19.8      18.1   18.1   18.1    18.1           18.1     18.1    18.1
Combustion Turbine #4                             48.0     48.0     48.0      43.0   43.0      -      -              -        -       -
Medium Speed Diesels #1                            9.5      9.5      9.5       8.7    8.7     8.7    8.7            8.7      8.7     8.7
Medium Speed Diesels #2                            9.5      9.5      9.5       8.7    8.7     8.7    8.7            8.7      8.7     8.7
Stock Island Peaking High Speed Diesel #1           -       2.5      2.5       2.0    2.0     2.0    2.0            2.0      2.0     2.0
Stock Island Peaking High Speed Diesel #2           -       2.5      2.5       2.0    2.0     2.0    2.0            2.0      2.0     2.0
Stock Island Peaking High Speed Diesel #3           -       2.5      2.5       2.0    2.0     2.0    2.0            2.0      2.0     2.0
Cudjoe Key Peaking High Speed Diesel #1             -        -        -         -      -      2.0    2.0            2.0      2.0     2.0
Cudjoe Key Peaking High Speed Diesel #2             -        -        -         -      -      2.5    2.5            2.5      2.5     2.5
Big Pine Key Peaking High Speed Diesel #1           -        -        -         -      -     2.5     2.5            2.5      2.5     2.5
                             Total Name Plate    130.1    137.6    137.6     123.1  123.1   87.1    87.1           87.1     87.1    87.1
Islanded
Combustion Turbine #1                             18.0     18.0     18.0     12.6      12.6     12.6      12.6     12.6     12.6    12.6
Combustion Turbine #2                             16.0     16.0     14.0     17.2      17.2     17.2      17.2     17.2     17.2    17.2
Combustion Turbine #3                             11.0     11.0      9.0     17.5      17.5     17.5      17.5     17.5     17.5    17.5
Combustion Turbine #4                             44.0     44.0     44.0     43.0      43.0       -         -        -        -       -
Medium Speed Diesels #1                            7.0      6.4      7.0      8.8       8.8      8.8       8.8      8.8      8.8     8.8
Medium Speed Diesels #2                            7.0      6.6      7.0      8.8       8.8      8.8       8.8      8.8      8.8     8.8
Stock Island Peaking High Speed Diesel #1           -       1.5      1.5      1.8       1.8      1.8       1.8      1.8      1.8     1.8
Stock Island Peaking High Speed Diesel #2           -       1.5      1.5      1.8       1.8      1.8       1.8      1.8      1.8     1.8
Stock Island Peaking High Speed Diesel #3           -       1.5      1.5      1.8       1.8      1.8       1.8      1.8      1.8     1.8
Cudjoe Key Peaking High Speed Diesel #1             -        -        -        -         -       1.8       1.8      1.8      1.8     1.8
Cudjoe Key Peaking High Speed Diesel #2             -        -        -        -         -       2.2       2.2      2.2      2.2     2.2
Big Pine Key Peaking High Speed Diesel #1           -        -        -        -         -       2.3       2.3      2.3      2.3     2.3
                                Total Islanded   103.0    106.5    103.5    113.3     113.3     76.6      76.6     76.6     76.6    76.6

Synchronized
Combustion Turbine #1                             18.0     18.0     18.0     18.0      18.0     18.0      18.0     18.0     18.0    18.0
Combustion Turbine #2                             16.0     16.0     14.0     17.2      17.2     17.2      17.2     17.2     17.2    17.2
Combustion Turbine #3                             16.0     16.0     14.0     17.5      17.5     17.5      17.5     17.5     17.5    17.5
Combustion Turbine #4                             44.0     44.0     44.0     43.0      43.0       -         -        -        -       -
Medium Speed Diesels #1                            7.0      6.4      7.0      8.8       8.8      8.8       8.8      8.8      8.8     8.8
Medium Speed Diesels #2                            7.0      6.6      7.0      8.8       8.8      8.8       8.8      8.8      8.8     8.8
Stock Island Peaking High Speed Diesel #1           -       1.5      1.5      1.8       1.8      1.8       1.8      1.8      1.8     1.8
Stock Island Peaking High Speed Diesel #2           -       1.5      1.5      1.8       1.8      1.8       1.8      1.8      1.8     1.8
Stock Island Peaking High Speed Diesel #3           -       1.5      1.5      1.8       1.8      1.8       1.8      1.8      1.8     1.8
Cudjoe Key Peaking High Speed Diesel #1             -        -        -        -         -       1.8       1.8      1.8      1.8     1.8
Cudjoe Key Peaking High Speed Diesel #2             -        -        -        -         -       2.2       2.2      2.2      2.2     2.2
Big Pine Key Peaking High Speed Diesel #1           -        -        -        -         -       2.3       2.3      2.3      2.3     2.3
                            Total Synchronized   108.0    111.5    108.5    118.7     118.7     82.0      82.0     82.0     82.0    82.0


Nameplate - Capacity provided by the manufacturer.
Islanded - Capacity when not connected to the mainland through the T-Line; used when calculating On-Island Generation Capacity.
Synchronized - Realistic capacity due to limiting factors associated with the units.
Cudjoe Key Peaking High Speed Diesels and Big Pine Key Peaking High Speed Diesel were decommissioned in FY2006.



                                                                  54
                                                                                                      DRAFT
                            UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA

                                            OPERATING INFORMATION

                                            EMPLOYEE INFORMATION

                                            FISCAL YEARS 2010 - 2001



                            2010     2009      2008     2007      2006   2005     2004        2003   2002   2001


  General Manager's
                              13       13       13        10       17     18       17          17     16     11
     Department
 Engineering & Control        21       22       22        22       20     19       19          19     20     20
   Customer Services          30       33       33        33       32     32       30          31     33     32
        Finance               16       16       16        17       10     10       15          13     13     21
    Transmission &
                              35       35       34        36       36     34       35          38     42     39
      Distribution
     General Plant            15       16       15        17       0       0        8          9      9      11
       Generation             19       22       22        23       38     39       22          21     18     20
          Total              149      157       155      158      153     152      146        148    151    154

Notes:
The numbers above do not include five (5) Utility Board Members

The approved budget was used for 2001.
Commencing 2002, actual employee head count is used.

The following departmental movements were made during Fiscal Year 2007:
Information Technologies has been moved from General Manager's Department to General Plant.
Fleets and Facilities have been moved from Generation to General Plant.
Purchasing and Warehouse have been moved from Generation to Finance.




                                                         55
                                                                                                     DRAFT
                          UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA

                                           OPERATING INFORMATION

                                   TEN HIGHEST CONSUMPTION LOCATIONS

                               FOR THE YEAR ENDED SEPTEMBER 30, 2010

                                                              Demand       Energy
             Ranking           Customer Account                 KW          kWh           Dollars

                1      U.S. Navy                              13,566.9   64,148,665   $ 8,529,684

                2      City of Key West                        3,507.8   12,609,120   $ 1,850,644

                3      Monroe County School Board              8,226.6    9,624,536   $ 1,495,720

                4      Monroe County Detention Cention         1,232.1    7,737,450   $ 1,009,684

                5      Winn Dixie Stores                       1,114.3    7,292,220   $ 1,032,344

                6      US Coast Guard Key West Sector          1,476.0    6,989,202   $    944,062

                7      Key West HMA Inc                        1,129.3    6,835,385   $    974,841

                8      Marriott Casa Marina Hotel               840.0     4,955,519   $    710,886

                9      Florida Keys Aqueduct Authority         1,337.8    4,185,843   $    609,958

               10      Tannex Development Corp.                 757.1     3,883,347   $    569,423




Since the customer information above is listed by rank and the rank changes yearly only the current year is
presented.




                                                         56
     DRAFT




57
     DRAFT




58
                                          Agenda Item Summary Sheet
                                                          Meeting Date: January 26, 2011
                                      Proposer: Lynne E. Tejeda, General Manager & CEO
                                                                     Department: Finance
                                                                      Agenda Item #: 7b




AGENDA ITEM WORDING:            Approve the Payment to the City of Key West for the Fiscal
Year Ended September 30, 2010




REQUESTED ACTION:           Motion to approve the Payment to the City of Key West in the
amount of $444,926.00 for the Fiscal Year Ended September 30, 2010




DISCUSSION:          The financial statements for the fiscal year ended September 30,
2010 have been audited and, on this date, the Utility Board has approved the audit.
Resolution No. 532, Article III, Section 3.03, Application of Revenues, Part B,
Disposition of Revenues, Paragraph (11), adopted by the Utility Board on November 13,
1985; and amended by Resolution No. 678, on September 8, 1999, to be effective on
October 1, 1999 details the annual payment calculation to be used to determine the
City of Key West’s return on the City’s equity in the Utility. The payment amount is
equal to: the greater of (A) $200,000 (adjusted annually for changes in the Consumer
Price Index) or (B) one percent (1%) of the Gross Revenues, derived from sales of
electricity at retail (exclusive of Power Cost Revenues, which are defined, as (i)
revenues determined by reference to power cost component of base rates, plus or
minus (ii) power cost adjustment charges or credits.)




 FINANCIAL IMPACT:
Total Cost: $444,926.00                   Budgeted: Yes
                                          Source of Funds: O&M
       UTILITY BOARD OF THE CITY OF KEY WEST, FLORIDA
Summary of Payments to City of Key West and In-Kind Services Provided
              For the Fiscal Years Ended September 30




                                          In-Kind
  Year           Payment                  Services             Total

  2010    $      444,926          $      881,649          $    1,326,575

  2009           393,368                 900,070               1,293,438

  2008           386,188                 843,436               1,229,624

  2007           368,741                 847,344               1,216,085

  2006           341,279                 364,416                 705,695

  2005           343,341                 456,443                 799,784

  2004           340,548                 419,204                 759,752

  2003           325,998                 339,389                 665,387

  2002           318,394                 256,106                 574,500

  2001           334,485                 198,287                 532,772

  2000           323,851                 205,733                 529,584

  1999           317,146                 163,492                 480,638

  1998           249,644                 140,419                 390,063

  1997           230,708                 314,605                 545,313

  Total   $    4,718,616          $    6,330,593          $   11,049,209
                                      Utility Board of the City of Key West
                              Analysis of City of Key West Municipal Contributions
                                        For Fiscal Year Ended 09/30/10

                       Description                          Amount                Note

         Unallocated Labor                                 $105,957.65                 1
         Recreational Lighting                                1,104.00                 2
         Traffic Lights                                      59,082.96                 3
         Street Lights                                       79,929.48                 4
         Underground                                          9,060.08                 5
         Miscellaneous Electrical                             1,779.00                 6
                       Sub Total                         $256,913.17

         Property Lease (Park-N-Ride)                        518,820.00                7
         Patterson Street Pocket Park                          9,000.00                8
         Flagler Street Pocket Park                            8,496.00                8
         Grinnell Village Pocket Park                         17,004.00                8
         Gato Village Pocket Park                             11,292.00                8
         Energy Savings from LED's                            45,983.76                9
         Waived Impact Fees                                   14,140.00                10


                           Total                         $881,648.93

Note 1   There has been a change in accounting for KETYS labor for In Kind Services all labor is charged to this unallocated labor
         line item.

Note 2   This account tracks all costs associated with the maintenance of the City of Key West recreational
         Parks. (example: Ball Fields, Tennis Courts, Bocce Ball Court lighting, and control, netting and digging.

Note 3   This account tracks all costs associated with the maintenance of the City of Key West traffic signals.

Note 4   This account tracks all costs associated with the maintenance of the City of Key West overhead lighting,
         which is not under a maintenance contract. (example: emergency lighting, parade lighting on Duval Street)

Note 5   This account tracks all costs associated with the maintenance of the City of Key West underground
         circuits. (example: Historical street light on Duval St and lighting at Key West Bight)

Note 6   This account tracks all costs associated with the City of Key West, other than the items listed separately above, for
         example Christmas Lights, Aids' Memorial, and Tree Planting.

Note 7   Net reduction in property lease proceeds (Park-N-Ride).

Note 8   Net reduction in property lease proceeds and out of pocket expenses.(Demolishing, Fencing,& Landscaping)

Note 9   Energy savings derived from the installation from LED traffic signal bulbs.

Note 10 Waived Impact Fees.
                                                     UTILITY BOARD OF THE CITY OF KEY WEST
                                                   Annual Payment to the City of Key West, Florida
                                                    For the Fiscal Year Ended September 30, 2010

                                                                                2010                  2010           2009           2010
Line                                                                           Source /              Audit          Audit         Amended
No.                           Description                                        Calc                Report         Report         Budget

 1     Base Rate Electric Revenues                                          CAFR,   pg   34      $98,111,931      $91,032,584     $93,149,655
 2     Power Cost Adjustment Revenues                                       CAFR,   pg   34        3,152,497       14,892,862      16,049,296
 3     Service Charges                                                      CAFR,   pg   34          423,187          255,514         245,500
 4     Penalty Charges                                                      CAFR,   pg   34          803,952        1,023,502         650,000
 5     Other Operating Revenues                                             CAFR,   pg   34        1,611,873        1,777,614       1,699,450
 6     Other Electric Revenues                                              CAFR,   pg   34           46,423          165,259         111,900
 7                                subtotal Operating Revenues                                    104,149,863      109,147,335     111,905,801
 8     Charges for New Service                                              CAFR, pg 34              814,739          352,151         210,000
 9                Total Gross Revenues from Sales of Electricity                                 104,964,602      109,499,486     112,115,801
10
11     Sales of Electricity (kWh)                                           CAFR, pg 45          707,830,595 681,907,304          667,771,922
12     Power Cost Rate in Base Rate                                         Tariff Sheet               0.0800      0.0800               0.0800
13     Total Power Cost in Base Electric Revenues                                                 56,626,448  54,552,584           53,421,754
                                                                      L2 + Credits Included in
14 Power Cost Adjustment Revenues                                                                    3,845,604     15,610,114      16,696,706
                                                                             the PCA
15     Less: Total Power Cost in Operating Revenues                         L13 + L14             60,472,052       70,162,698      70,118,460
16     Equals: Non-Power Related Revenues from Electricity                   L9 - L15            $44,492,550      $39,336,788     $41,997,341
17
18     Rate - Article III, Section 3.03, B, (11)                               Covenants                 1.0%           1.0%            1.0%
19     Payment to the City of Key West                                         L16 * L18             $444,926       $393,368        $419,973
20
21     Minimum Amount (Prior Year Adjusted Minimum Amt.)                    Workpaper                $303,045       $303,045        $272,442
22     Consumer Price Index                                                   L47                      1.01144        1.00000         1.03000
23                           total Adjusted Minimum Amount                                           $306,511       $303,045        $280,615
24                                                difference                   L23 - L19             (138,415)       (90,323)       (139,358)
25
26     Payment to the City of Key West                                    >of L19 or L23          $444,926         $393,368        $419,973
27                  Increase (Decrease) vs. Prior Year Actual                  %                     13.11%            1.86%
28
29
30     Resolution 532, Article III. Section 3.03, Application of Revenues, Part B, Disposition of Revenues
31     Paragraph (11) of Section 3.03 (B) of the Original Resolution is hereby amended to read as follows: (11) The Board will next pay
32     to the City as and for the return on the City's equity in the System a sum equal to the greater of (A) $200,000 (adjusted annually
33     for changes in the Consumer Price Index) or (B) one percent (1%) of the Gross Revenues derived from sales of electricity at retail
34     (exclusive of Power Cost Revenues, which are defined, for purposes of this paragraph, as (i) revenues determined by reference to
35     the power cost component of base rates, plus or minus (ii) power cost adjustment charges or credits). This amending resolution
36     became effective on October 1, 1999. Passed and Adopted at a meeting duly called and held this 8th day of September, 1999.
37
38     For purposes of the foregoing, the term "Consumer Price Index" shall mean the Consumer Price Index as announced by the United
39     States Department of Commerce, Bureau of Labor Statistics, provided that such adjustments shall not exceed five percent (5%) per
40     annum. Data available at the Bureau of Labor Statistics web site (Consumer Price Index-All Urban Consumers, U.S. City Average,
41     All Items).
42
43
44                                                                                                      Line 22         Line 22
45     Not Seasonally Adjusted CPI                                   Total                             218.439         215.969
46     Source: Bureau of Labor Statistics                            Change                               2.470          -2.814
47     Increase (Decrease)                                           Percent                           1.144%         -1.286%
                                              Agenda Item Summary Sheet
                                                              Meeting Date: January 26, 2011
                                          Proposer: Lynne E. Tejeda, General Manager & CEO
                                                                         Department: Finance
                                                                         Agenda Item #: 7c




AGENDA ITEM WORDING:           Approve Change Order #5 Contract to Power Engineers, Inc. for
Monitoring Services of Structural Repairs to Utility Poles Over Water – Bid #15-09 and Approve
Associated Budget Amendment #11-06.

REQUESTED ACTION:          Motion to Approve Change Order #5 Contract for Monitoring Services
of Structural Repairs to Utility Poles Over Water – Bid #15-09, to Power Engineers, Inc. in
the amount of $27,667.00 and Approve Associated Budget Amendment #11-06.

DISCUSSION:        On August 12, 2009, the Utility Board awarded a monthly unit cost contract
for monitoring services of structural repairs to utility poles over water, Bid #15-09. The
contractor will perform monitoring services under this contract, which shall include engineering
and inspection services. Additional services which are covered in the proposed cost is inclusive
of payment request authorizations, submittal reviews, field engineering changes, change orders,
review and approvals, conflict resolution, technical judgments, and other issues typically
assigned to the engineering firm.

Subsequently, on March 10, 2010, the Utility Board approved Change Order #1 which extended
the monitoring services for a four (4) month period. On July 28, 2010, Change Order #2 was
approved to extend monitoring services until August 12, 2010.        Change Order #3 was
approved on August 11, 2010 to cover the period through September 22, 2010. Change Order
#4 was approved September 22, 2010 which extended the monitoring services contract to
January 31, 2011.

Proposed Change Order #5 extends the monitoring services contract to the end of February 28,
2011. Structural Preservation Services (SPS) is scheduled to be substantially complete by the
end of January and will incur liquidated damages for failure to complete the project by mid-
February. If SPS fails to meet schedule, Power Engineers, Inc. will be needed on-site for a
longer period of time than previously scheduled.

SUPPORTS STRATEGIC PLAN:           Goal #2 – Maintain a long-term reliability level as compared
to industry benchmarks.

FINANCIAL IMPACT:
 Original Cost:            $138,335.00         Budgeted: Yes
 Previous Change Orders    $276,670.00
 Change Order #5           $ 27,667.00
 Revised Purchase Order    $442,672.00
                                               Source of Funds: Capital
                     UTILITY BOARD - CITY OF KEY WEST, FLORIDA
                                  CHANGE ORDER



BID NUMBER:            15-09                                       DATE: January 26, 2011
CONTRACTOR:            Power Engineers                     WORK ORDER #:
CHANGE ORDER #:        5                                          P.O. #: 9022



CHANGE ORDER DESCRIPTION:           Power Engineers is currently monitoring the work of Structural
Preservation Services (SPS). The current contract expires January 31, 2011. This Change Order
extends the monitoring services contract to the end of February. SPS is scheduled to be substantially
complete by the end of January and will incur liquidated damages for failure to complete in mid-
February. If SPS fails to meet schedule, POWER will be needed on-site for a longer period of time.
The change order will extend construction monitoring services until estimated completion, upon
that such change order is without prejudice to either party in the event that it is determined that
disputes arise out of past, present or future work by contractor on behalf of KEYS.


                                          Without Tax                     With Tax (If Applicable)
ORIGINAL CONTRACT COST:                                   $138,335.00
PREVIOUS CHANGE ORDERS:                                   $276,670.00
THIS CHANGE ORDER:                                        $ 27,667.00
ADJUSTED CONTRACT COST:                                   $442,672.00


 ACCEPTED BY CONTRACTOR:

 BY:
 TITLE:
 DATE:


                                                    APPROVED:
                                                    UTILITY BOARD - CITY OF KEY WEST

                                                    BY:
                                                    TITLE:
                                                    DATE:



 FOR-092                                                                               Revised: 04/22/02
                               UTILITY BOARD OF THE CITY OF KEY WEST
                                    AGENDA ITEM SUMMARY SHEET


                          BUDGET AMENDMENT FORM #11-06            Fiscal ‘11

                                                                        Date: January 26, 2011
MEETING DATE:          January 13, 2011

FROM: Jack Wetzler, Assistant General Manager & CFO

AGENDA ITEM: __7c _____

PROPOSER:      Lynne Tejeda, General Manager & CEO

ITEM SUBJECT: Monitoring Services

The following Budget amendment has not been made:

                                              Funds                          Funds
            Category                       Transferred                    Transferred
                                              From                            To
                                             Capital                        Capital
         Project Description         FY11 Excess Bond Capital       Repair Transmission Pole
                 And                         Budget                        Foundation
          Account Number              1-00-107350-00-10500           1-30-107350-50-07552
             Budget                        $30,998.89                    $2,219,846.08
          Amended Budget                   $ 3,331.89                    $2,247,513.08
             Change                       $(27,667.00)                   $   27,667.00


BRIEF BACKGROUND: The current monitoring contract expires January 31, 2011 and the
construction contractor will not complete work until mid-February. Additional funds are required to
maintain monitoring services through the end of February.

The funds are available from the Excess Bond Capital Budget account as other capital projects have
closed under budget. The funds are to be transferred the Capital Project – Repair Transmission Pole
Foundation.

STAFF RECOMMENDATION: Staff recommends approval of Budget Amendment #11-06.

REVIEWED BY: FINANCE                 ENGINEERING

DOCUMENTATION:         NO

FUND TRANSFER REQUIRED:         NO


DISPOSITION:
                                   Agenda Item Summary Sheet
                                                   Meeting Date: January 26, 2011
                                Proposer: Lynne E. Tejeda, General Manager & CEO
                                                              Department: Finance
                                                               Agenda Item #: 7d




AGENDA ITEM WORDING: Approve Granting Signatory Authority to
General Manager/CEO Regarding Florida Energy and Climate Commission
Grant Agreement

REQUESTED ACTION: Motion to Approve Granting Signatory Authority to
General Manager/CEO Regarding Florida Energy and Climate Commission
Grant Agreement

DISCUSSION:       In June, 2010, KEYS applied for a grant from the Florida
Energy and Climate Commission. The grant identified seven (7) projects:
     Install Thermal storage unit
     Install an energy management system
     Construct 34 kW photovoltaic system
     Install two (2) 2.4kW wind turbines
     Administer rebate program
     Residential energy audits
     Free energy efficiency workshops for commercial customers
The proposal requested $434,010 in grant funding and $335,762 in KEYS
match funding. KEYS has been notified that it was awarded full funding.
In order to move forward with the award, several agreements must be
executed. The Florida Energy and Climate Commission requires proof that
the General Manager/CEO is authorized to execute the agreement.

SUPPORTS STRATEGIC PLAN: Supports Strategic Goal #5 – Operate KEYS
in an environmentally responsible manner. The projects listed above will
contribute to many of the strategies and action plans to support Goal #5.

FINANCIAL IMPACT:
Total Cost: $769,772              Budgeted: Yes
Grant Funding:       $434,100     Source of Funds: Grant and KEYS
KEYS matching funds: $335,762

				
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