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UTILITY COMMITTEE AGENDA JUNE 9, 2014 - 6:00 P.M. CITY HALL COUNCIL CHAMBERS 15 LOOCKERMAN PLAZA DOVER, DELAWARE Public comments are welcomed on any item and will be permitted at appropriate times. When possible, please notify the City Clerk (736-7008 or e-mail at CityClerk@dover.de.us) should you wish to be recognized. AGENDA ADDITIONS/DELETIONS 1. Annual Engineering Consultant's Report on the Operation and Maintenance of the Electric System - Fiscal Year 2013 (Staff recommends acceptance of the report) 2. TEA/NAES Report (April) (Staff recommends acceptance of the report) 3. Updates (Committee action not required on the below items) A. Garrison Oak Technical Park Project Updates a-1. City Infrastructure a-2. Calpine Energy Center a-3. Dover Sun Park B. Progress Update on Purchase Power Agreement 4. Adjournment by 7:00 p.m. /tm S:\AGENDAS-MINUTES-PACKETS-PRESENTATIONS-ATT&EXH\Committee-Agendas\2014\06-09-2014 UTILITY.wpd THE AGENDA ITEMS AS LISTED MAY NOT BE CONSIDERED IN SEQUENCE. THIS AGENDA IS SUBJECT TO CHANGE TO INCLUDE THE ADDITION OR THE DELETION OF ITEMS, INCLUDING EXECUTIVE SESSIONS.

Annual Engineering Consultant’s Report on the Operation and Maintenance of the Electric System Fiscal Year 2013 City of Dover, Delaware Project No. 78609 June 2014

Annual Engineering Consultant’s Report on the Operation and Maintenance of the Electric System Fiscal Year 2013 prepared for City of Dover, Delaware Dover, Delaware June 2014 Project No. 78609 prepared by Burns & McDonnell Engineering Company, Inc. Missouri City, Missouri COPYRIGHT © 2014 BURNS & McDONNELL ENGINEERING COMPANY, INC.

June 4, 2014 Ms. Donna S. Mitchell, CPA Controller/Treasurer City of Dover 5 East Reed Street Weyandt Hall, Suite 300 Dover, Delaware 19901 RE: Annual Engineering Consultant’s Report Project No. 78609 Dear Ms. Mitchell: In compliance with the requirements of Section 705 and Section 504 of the City of Dover, Delaware Resolution Authorizing and Securing Electric Revenue Bonds, adopted December 23, 1985 (Resolution), Burns & McDonnell submits this Annual Engineering Consultant’s Report for the fiscal year ended June 30, 2013. This report summarizes our review and assessment of the City of Dover’s (City) Electric System, its existing retail electric rates, its insurance coverage in effect, and its reserve funds. Financial, statistical, and operating data used in preparing the report were initially reported in the City’s annual financial statements and accounting records. Additional information was furnished by City and Electric Division staff. In the preparation of this Engineering Consultant’s Report, Burns & McDonnell completed assessments of the electric generating stations and the transmission and distribution system of the City’s Electric Division. Assessments involved interviews, observations, and review of fiscal year 2013 expenditures and fiscal year 2014 budgets. In addition, an analysis of the balances of the Improvement and Extension Fund as well as other funds supporting the Electric Division was performed. Burns & McDonnell also reviewed the adequacy of revenues provided by current retail rates in relation to the requirements of the Resolution. Finally, a high-level assessment of the City’s insurance coverage related to the Electric Division was completed. Based on these reviews and assessments, it is the opinion of Burns & McDonnell that the Electric System is being operated and maintained, including replacements and upgrades as appropriate, in a manner that is consistent with current electric utility practices. In addition, the current retail rates have provided sufficient revenues to satisfy the debt service coverage requirement in the Resolution. Further, it is the opinion of Burns & McDonnell that the balances in the various reserve funds maintained by the City for the Electric Division are sufficient for their intended purposes. 9400 Ward Parkway • Kansas City, MO 64114-3319 Tel: 816 333-9400 • Fax: 816 333-3690 • www.burnsmcd.com

We appreciate the cooperation and assistance provided by the City and the Electric Division staff in the preparation of this report. We will be happy to discuss the report with you at your convenience. Sincerely, BURNS & McDONNELL Ted J. Kelly Principal & Senior Project Manager Business & Technology Services TJK/pcf

2014 Engineering Consultant’s Report Table of Contents TABLE OF CONTENTS Page No. 1.0 EXECUTIVE SUMMARY ................................................................................... 1-1 1.1 Introduction .......................................................................................................... 1-1 1.2 Electric System Overview and Assessment ......................................................... 1-1 1.2.1 General Plant ......................................................................................... 1-2 1.2.2 Production Plant .................................................................................... 1-2 1.2.3 Transmission and Distribution Plant ..................................................... 1-3 1.3 Financial Assessment ........................................................................................... 1-3 1.4 Conclusions .......................................................................................................... 1-5 2.0 INTRODUCTION ............................................................................................... 2-1 2.1 Purpose of Report ................................................................................................ 2-1 2.2 Organization ......................................................................................................... 2-2 3.0 ELECTRIC SYSTEM OVERVIEW AND ASSESSMENT .................................. 3-1 3.1 Electric System Overview.................................................................................... 3-1 3.1.1 Production Plant .................................................................................... 3-2 3.1.2 Transmission and Distribution Plant ..................................................... 3-3 3.1.3 General Plant ......................................................................................... 3-3 3.2 Electric System Assessment ................................................................................ 3-3 3.2.1 Electric Generating Stations ................................................................. 3-4 3.3 Transmission and Distribution Systems............................................................. 3-13 3.3.1 Safety .................................................................................................. 3-13 3.3.2 System Reliability ............................................................................... 3-13 3.3.3 Power Quality ..................................................................................... 3-14 3.3.4 Operations and Maintenance............................................................... 3-14 3.3.5 Design Standards and Specifications .................................................. 3-15 3.3.6 Transmission and Distribution Capital Improvements ....................... 3-15 3.3.7 Condition Assessment ......................................................................... 3-17 3.4 Conclusions ........................................................................................................ 3-18 4.0 FINANCIAL ASSESSMENT.............................................................................. 4-1 4.1 Financial Results .................................................................................................. 4-1 4.1.1 Required Revenue Level ....................................................................... 4-1 4.1.2 Electric Rates ........................................................................................ 4-1 4.1.3 Operating Results .................................................................................. 4-2 4.1.4 Adequacy of Electric Rates ................................................................... 4-6 4.2 Status of Revenue Bonds ..................................................................................... 4-7 4.3 Insurance .............................................................................................................. 4-8 4.4 Operating and Reserve Accounts ....................................................................... 4-10 City of Dover, Delaware TOC-1 Burns & McDonnell

2014 Engineering Consultant’s Report Table of Contents 4.4.1 Electric Revenue Fund ........................................................................ 4-11 4.4.2 Electric Improvement and Extension Fund......................................... 4-12 5.0 CONCLUSIONS ................................................................................................ 5-1 City of Dover, Delaware TOC-2 Burns & McDonnell

2014 Engineering Consultant’s Report Table of Contents LIST OF TABLES Page No. Table 3-1: Year-End Plant in Service ...................................................................................... 3-1 Table 3-2: Fiscal Year 2014 Planned Capital Expenditures .................................................... 3-2 Table 3-3: FY 2013 Generating Plant Operating Statistics ..................................................... 3-6 Table 4-1: Annual Sales and Customer Accounts ................................................................... 4-3 Table 4-2: Annual Revenues and Sales Ratios ........................................................................ 4-4 Table 4-3: Revenue Margins and Unaccounted for Energy .................................................... 4-5 Table 4-4: Comparative Statement of Revenues, Expense, ..................................................... 4-6 Table 4-5: Debt Service Coverage ........................................................................................... 4-7 Table 4-6: Debt Service Schedule of Electric Revenue Bonds ............................................... 4-8 Table 4-7: Schedule of Insurance Coverage in Effect ............................................................. 4-9 Table 4-8: Reserve Account Activity and Balances .............................................................. 4-14 City of Dover, Delaware TOC-3 Burns & McDonnell

2014 Engineering Consultant’s Report Table of Contents LIST OF FIGURES Page No. Figure 2-1: Organization ........................................................................................................... 2-3 Figure 2-2: Administration ........................................................................................................ 2-3 Figure 2-3: System Operations.................................................................................................. 2-4 Figure 2-4: Electric Engineering ............................................................................................... 2-4 Figure 2-5: Electric Transmission and Distribution .................................................................. 2-5 City of Dover, Delaware TOC-4 Burns & McDonnell

2014 Engineering Consultant’s Report Statement of Limitations LIST OF ABBREVIATIONS Abbreviation Term/Phrase/Name Burns & McDonnell Burns & McDonnell Engineering Company, Inc. City City of Dover, Delaware DCS distributed control system EDQP Employee Development and Qualification Program EIA U.S. Energy Information Administration FY Fiscal Year GWh gigawatt-hour I&E Fund Electric Improvement & Extension Fund kV kilovolt kW kilowatt kWh kilowatt-hour LAN local area network McKee Run McKee Run Generating Station MW megawatt MWh megawatt-hour NAES North American Energy Services Corporation NERC North American Electric Reliability Corporation NRG NRG Energy Center Ohm standard unit of electrical resistance PJM Pennsylvania New Jersey Maryland Interconnection Report 2014 Engineering Consultant’s Report on the Operation and Maintenance of the Electric System Resolution Resolution Authorizing and Securing Electric Revenue Bonds, adopted December 23, 1985 City of Dover, Delaware i Burns & McDonnell

2014 Engineering Consultant’s Report Statement of Limitations VanSant VanSant Generating Station TEA The Energy Authority, Inc. City of Dover, Delaware ii Burns & McDonnell

2014 Engineering Consultant’s Report Statement of Limitations STATEMENT OF LIMITATIONS In preparation of the 2014 Engineering Consultant’s Report on the Operation and Maintenance of the Electric System (the Report), Burns & McDonnell relied upon information provided by the City of Dover, Delaware (the City). The information included various analyses, computer-generated information and reports, audited financial reports, and other financial and statistical information, as well as other documents such as operating budgets and current retail electric rate schedules. While Burns & McDonnell has no reason to believe that the information provided, and upon which Burns & McDonnell has relied, is inaccurate or incomplete in any material respect, Burns & McDonnell has not independently verified such information and cannot guarantee its accuracy or completeness. In addition, Burns & McDonnell has used the information provided to make certain assumptions with respect to conditions that may exist in the future. While Burns & McDonnell believes the assumptions made are reasonable for the purposes of the Report, it makes no representation that the conditions assumed will occur. City of Dover, Delaware iii Burns & McDonnell

1.0 – EXECUTIVE SUMMARY

2014 Engineering Consultant’s Report Executive Summary 1.0 EXECUTIVE SUMMARY 1.1 Introduction The 2014 Engineering Consultant’s Report on the Operation and Maintenance of the Electric System (Report) has been prepared in compliance with the requirements of the City of Dover, Delaware Resolution Authorizing and Securing Electric Revenue Bonds, adopted December 23, 1985 (Resolution). Burns & McDonnell was retained as the Engineering Consultant by the City of Dover, Delaware (City) to complete an inspection of the Electric System and prepare a report on findings. The Resolution requires that the Engineering Consultant complete the following: “The City covenants that it will cause the Engineering Consultants employed under the provisions of Section 705 of this Resolution . . . to make an inspection of the Electric System at least once each fiscal year and . . . to submit to the City Manager a report setting forth (a) their findings whether the properties of the Electric System have been maintained in good repair, working order and condition and whether they have been operated efficiently and economically and (b) their recommendation as to (i) the proper maintenance, repair and condition of the Electric System during the ensuing fiscal year and an estimate of the appropriations which should be made for such purposes, (ii) the insurance to be carried under the provisions of Article VII of this Resolution, (iii) the amount that should be deposited during the ensuing fiscal year to the credit of the Improvement and Extension Fund for the purposes set forth in Section 510 of this Article, (iv) the extensions, improvements, renewals and replacements which should be made during the ensuing fiscal year, and (v) any necessary or advisable revisions of the electric rates.” This is the eleventh annual Engineering Consultant’s Report prepared for the City by Burns & McDonnell. 1.2 Electric System Overview and Assessment The Electric Division served 23,446 customers at the end of fiscal year (FY) 2013, 19,993 of which were residential customers. Four of the Electric Division customers take service from the 69-kV transmission system. These customers include the Dover Air Force Base, Kraft, Proctor & Gamble, and NRG Energy City of Dover, Delaware 1-1 Burns & McDonnell

2014 Engineering Consultant’s Report Executive Summary Center (NRG). NRG is an exempt wholesale generator that sells power that must be transmitted through the City’s transmission system to third party purchasers. When the NRG plant is not operational, the Electric Division provides power for the plant site. 1.2.1 General Plant General plant facilities consist primarily of Electric Division administrative and operations facilities and pollution control related equipment on McKee Run Generating Station (McKee Run) and VanSant Generating Station (VanSant). Other types of general plant include office furniture and equipment, transportation and power-operated equipment, and communication equipment. Effective July 1, 2011, the City entered into an Energy Management Agreement with The Energy Authority, Inc. (TEA) to assist the City with its energy procurement, energy sale, purchase of fuels, establishment and management of risk policies, and the development and management of hedging protocols and related energy procurement challenges. Headquartered in Jacksonville, Florida, TEA is a non-profit energy manager owned by seven public utility systems operating across the nation. 1.2.2 Production Plant The City owns two generating plants, the McKee Run and VanSant generating stations. McKee Run consists of three steam turbine generating units with a total combined capacity of 136 megawatts (MW). VanSant is a 39 MW simple-cycle combustion turbine unit. North American Energy Services Corporation (NAES Corporation) operates the generating plants. The agreement between the City and NAES Corporation has been in effect since July 1, 2006. The various systems and components of the generating plants reviewed by the Engineering Consultant are listed below: Major Equipment  Steam turbines/generators  Boilers and auxiliaries  Station cooling water systems  Fuel handling systems  Water treatment systems  Station electrical systems  Station control systems  General facilities City of Dover, Delaware 1-2 Burns & McDonnell

2014 Engineering Consultant’s Report Executive Summary Management and Organization  Safety  Training  Staffing Based on statements and information provided by the City, as well as the observations and reviews performed, it is the Engineering Consultant’s opinion that the City’s power generation facilities are being operated and maintained consistent with generally accepted electric utility practice in the United States. In general, the performance, operation, maintenance, staff, planning, and training aspects for the McKee Run and VanSant were found to be above average. Specifically, the generation facilities have demonstrated a high level of availability despite the dispatching of the units primarily for peak demand. 1.2.3 Transmission and Distribution Plant The transmission and distribution network includes 44 miles of overhead transmission lines, 0.12 miles of underground transmission lines, 190 miles of overhead distribution lines and 268 miles of underground distribution lines. Four Electric Division customers take service off of the 69-kV transmission system. The following list includes areas of the transmission and distribution system that were considered and reviewed.  System reliability  Power quality  Operations and maintenance  Design standards and specifications  Transmission and distribution improvements It is the Engineering Consultant’s opinion that the design, construction, operation, and maintenance of the City’s electric transmission and distribution system and the associated facilities are consistent with current generally accepted electric utility standards. In recent years, the City has made appropriate upgrades and improvements which the Engineering Consultant has observed while conducting the reviews and assessments to complete the annual reports. 1.3 Financial Assessment The level of revenues required from the retail electric rates for the Electric Division were determined through the analysis of the financial results and net income or net margins for FY 2013. The Resolution requires that the Electric Division maintain a debt service coverage ratio of 1.25. City of Dover, Delaware 1-3 Burns & McDonnell

2014 Engineering Consultant’s Report Executive Summary Customers of the Electric Division of the City were charged for the electric service they received based on the City’s rate schedules and contracts that were in place in FY 2013. A comprehensive cost-of-service and rate design study was completed in 2006 and subsequent rate analyses were completed in 2007, 2008, 2012, and 2013 to examine revenue requirements and revenue generation. Specifically, the 2006 rate study was conducted to address increased costs associated with a new power supply contract that became effective on July 1, 2006. The rate study recommended combining a number of rate classes and implementing rate increases on July 1, 2006. The 2006 rate study also recommended an additional increase be implemented on January 1, 2007 to cover increased costs associated with operating the generating station. The 2007 and 2008 rate analyses re-examined Electric Division revenues and expenses and recognized additional revisions to power supply costs. As a result of these analyses, additional rate increases were implemented on July 1, 2007, July 1, 2008, and July 2012. The July 2013 rate adjustments established the rate schedules utilized by the Electric Division today. Total energy sales increased from 710.3 GWh in FY 2012 to 723.1 GWh in FY 2013, an increase of 1.8 percent. Total revenue from sales to electric customers in FY 2013 was $88.3 million, representing a decrease of $3.6 million from FY 2012 rate revenue of $91.9 million. In FY 2013, the average revenue per kWh for residential customers was 14.00 cents and the system-wide average price was 12.22 cents per kWh. The Electric Division’s largest cost in providing electric service to its customers is the wholesale cost of power purchased from the Pennsylvania New Jersey Maryland Interconnection (PJM) marketplace through its energy manager, TEA. From FY 2012 to FY 2013, the cost of power increased from $58.9 million to $65.4 million. Net income decreased from $8.5 million in FY 2012 to $6.2 million in FY 2013. The net income decrease in FY 2013 was due in large part to the increase in transfers out of the Electric Revenue Fund. Following is an excerpt from Section 502(c) of the Resolution. “(c) The total amount of the Revenues of the Electric System during the preceding fiscal year shall have been not less than the total of the following: The Current Expenses of the Electric System during the current fiscal years shown by the Annual Budget . . . for such fiscal year, and City of Dover, Delaware 1-4 Burns & McDonnell

2014 Engineering Consultant’s Report Executive Summary One hundred twenty-five percent (125%) of the maximum amount of the Principal and Interest Requirements for any fiscal year thereafter on account of all bonds then Outstanding under the provisions of this Resolution.” The Resolution requires that annual revenues of the Electric Division be no less than the total current expenses plus 125 percent of the greatest remaining annual debt service. The Electric Division achieved debt service coverage ratios for FY 2011, FY 2012, and FY 2013 of 5.45, 6.48, and 6.56 respectively; therefore, the revenues generated by the current electric rates have been sufficient to meet the applicable covenant of the Resolution. The City maintains a comprehensive insurance program to cover varying types of liabilities, as well as significant losses related to various Electric Division properties. It is the opinion of Burns & McDonnell as Engineering Consultant, and not as insurance counselor, the insurance in full force and affect appears to satisfy the requirements of Section 706 of the Resolution. The City established the Electric Revenue Fund and the Electric Improvement & Extension (I&E) Fund to make moneys available for specific purposes when they are needed. The following is a list of these funds’ respective cash accounts: Electric Revenue Fund  Insurance Reserve Account  Contingency Reserve Account  Electric Rate Stabilization Reserve Account  Interest and Sinking Account Electric Improvement and Extension Fund  Depreciation Reserve Account  Future Capacity Reserve Account The Engineering Consultant reviewed activity information on the accounts listed above and found that the balances in those accounts as of June 30, 2013, were consistent with the required or target balances. 1.4 Conclusions Based on the reviews and assessments completed, it is the opinion of Burns & McDonnell that: City of Dover, Delaware 1-5 Burns & McDonnell

2014 Engineering Consultant’s Report Executive Summary 1. The City’s power generation facilities are being operated and maintained consistent with generally accepted electric utility practice in the United States. 2. The design, construction, operation, and maintenance of the City’s electric transmission and distribution system and the associated facilities are consistent with current generally accepted electric utility standards and over the past few years, the system has been upgraded in order to improve operation and service to customers. 3. The Electric Division capital projects included in the City’s Capital Investment Plan and the FY 2014 Operating Budget are necessary and should provide improved reliability and power quality for the Electric System. 4. The cash balances as of June 30, 2013 for the various accounts maintained by the City for the Electric Division appear to be sufficient for their defined purposes. 5. The insurance coverage in full force and effect as maintained by the City related to the various assets of the Electric Division appears to satisfy the requirements of Section 706 of the Resolution. 6. The electric revenues generated by the City’s current retail rates are more than sufficient to fulfill the debt service coverage requirement (125 percent of current expenses) defined in Section 502(c) of the Resolution. City of Dover, Delaware 1-6 Burns & McDonnell

2.0 – INTRODUCTION

2014 Engineering Consultant’s Report Introduction 2.0 INTRODUCTION The City of Dover, Delaware (City) operates a municipally-owned electric utility system that served 23,446 customers within the City and surrounding areas at the end of fiscal year (FY) 2013. The service area of the electric utility is located in central Delaware; with the City itself located approximately 70 miles south of Philadelphia, Pennsylvania. 2.1 Purpose of Report This 2014 Annual Engineering Consultant’s Report (Report) has been prepared in compliance with the requirements adopted December 23, 1985 of the City of Dover Electric Bond Resolution (Resolution). Burns & McDonnell was retained by the City as the Engineering Consultant defined in Section 705 of the Resolution, as follows. “The City covenants that it will, for the purpose of performing and carrying out the duties imposed on the Engineering Consultants under the provisions of this Resolution, employ an independent engineer or engineering firm or corporation having a nationwide and favorable repute for skill and experience in such work.” The required scope of the Report is described in Section 504 of the Resolution, as follows. “The City covenants that it will cause the Engineering Consultants employed under the provisions of Section 705 of this Resolution . . . to make an inspection of the Electric System at least once each fiscal year and . . . to submit to the City Manager a report setting forth (a) their findings whether the properties of the Electric System have been maintained in good repair, working order and condition and whether they have been operated efficiently and economically and (b) their recommendation as to (vi) the proper maintenance, repair and condition of the Electric System during the ensuing fiscal year and a estimate of the appropriations which should be made for such purposes, (vii) the insurance to be carried under the provisions of Article VII of this Resolution, (viii) the amount that should be deposited during the ensuing fiscal year to the credit of the Improvement and Extension Fund for the purposes set forth in Section 510 of this Article, (ix) the extensions, improvements, renewals and replacements which should be made during the ensuing fiscal year, and City of Dover, Delaware 2-1 Burns & McDonnell

2014 Engineering Consultant’s Report Introduction (x) any necessary or advisable revisions of the electric rates.” 2.2 Organization The Electric Utility Director is responsible for the overall management of the Electric Utility Division. (The Electric Utility Director position is currently vacant.) The Electric Director oversees the day-to-day operations of the Electric Division and manages the Division’s staff. The Director also provides oversight of the Power Plant budget, monitors the contracts of the energy coordinator and the power generation operator/manager, and is responsible for North American Energy Services Corporation (NAES Corporation) contracts and oversight. The Electric Division is organized into four separate operating sections. Descriptions of the current Electric Division sections are provided below. Administration Section – Administration provides the overall management of the Electric Division’s Engineering and Transmission & Distribution Sections. This section performs all planning and budgeting, monitors all construction projects, administers all power supply and generating station operations agreements, and coordinates with customer service and public relations for the Electric Division. System Operations Section – System Operations is responsible for the operation of a 24/7 system operations control center. This section was formally a part of the Electric Engineering Section, but now has been identified as its own section comprising of the System Operators Crew Leader and the Operators. Electric Engineering Section – Electric Engineering provides design, specifications, construction management, and project inspection for all capital investment projects of the Electric Division. This section also develops and maintains maps, plans, and specifications, as well as engineering standards for construction and maintenance of the Electric System. Transmission & Distribution Section – Transmission & Distribution constructs, operates, and maintains the overhead and underground electric systems and fiber optic communication facilities. This section installs and maintains all electric metering, as well as street and security lighting. This section also investigates and resolves customers’ power problems and oversees the work of tree trimming contractors. Figures 2-1 through 2-4 provide organizational charts illustrating the staffing hierarchies of the various sections in the Electric Division. The number of individuals in each position was indicated as appropriate. Electric Division staff totaled 38 at the time the FY 2014 budget was issued. City of Dover, Delaware 2-2 Burns & McDonnell

2014 Engineering Consultant’s Report Introduction The subsequent sections of the Report provide a discussion of the required reviews and inspections conducted pursuant to Section 504 of the Resolution. Section 3 describes the assessment of the Electric System and its condition. Section 4 presents the financial results for the Electric Division, including an analysis of the adequacy of revenues provided by the electric rates. Section 5 summarizes the conclusions of Burns & McDonnell regarding the operation and maintenance of the Dover Electric System. Figure 2-1: Organization City Manager Electric Director (Vacant) Electric Transmission & Administration (2) System Operations (5) Electric Engineering (9) Distribution (22) Figure 2-2: Administration Administration Administrative Assistant (1) Account Clerk II (1) City of Dover, Delaware 2-3 Burns & McDonnell

2014 Engineering Consultant’s Report Introduction Figure 2-3: System Operations Figure 2-4: Electric Engineering City of Dover, Delaware 2-4 Burns & McDonnell

2014 Engineering Consultant’s Report Introduction Figure 2-5: Electric Transmission and Distribution City of Dover, Delaware 2-5 Burns & McDonnell

3.0 – ELECTRIC SYSTEM OVERVIEW AND ASSESSMENT

2014 Engineering Consultant’s Report Electric System Overview and Assessment 3.0 ELECTRIC SYSTEM OVERVIEW AND ASSESSMENT 3.1 Electric System Overview The Electric System owned by the City primarily consists of production plant, transmission plant, distribution plant, and general plant facilities, and construction work in progress. Table 3-1 displays the year-end balances of the various plant components for FY 2011 through FY 2013. Table 3-2 itemizes the specific capital investment plan projects and anticipated expenditures included in the FY 2014 budget. Table 3-1: Year-End Plant in Service FY 2011 FY 2012 FY 2013 Capital assets, not being depreciated Land $ 1,458,066 $ 1,458,066 $ 1,458,066 Construction in progress 424,809 789,014 1,338,909 Total capital assets, non-depreciable $ 1,882,875 $ 2,247,080 $ 2,796,975 Capital assets, being depreciated Buildings $ 17,383,566 $ 17,456,628 $ 17,619,349 Production 63,408,937 64,610,399 65,040,049 Transmission 32,558,944 33,106,748 34,010,686 Distribution 59,824,248 60,680,365 61,752,469 Administration 1,551,280 1,634,017 1,743,754 Vehicles 622,236 640,096 625,876 Total capital assets, being depreciated $ 175,349,211 $ 178,128,253 $ 180,792,183 Less accumulated depreciation for: Buildings $ (10,992,065) $ (11,400,308) $ (11,795,879) Production (39,931,442) (41,416,622) (42,682,428) Transmission (9,206,982) (10,344,554) (11,537,017) Distribution (23,817,302) (25,322,267) (26,832,246) Administration (1,102,778) (1,196,545) (1,316,532) Vehicles (435,188) (464,219) (481,527) Total accumulated depreciation $ (85,485,757) $ (90,144,515) $ (94,645,629) Total capital assets, being depreciated, net 89,863,454 87,983,738 86,146,554 Total capital assets, net $ 91,746,329 $ 90,230,818 $ 88,943,529 In FY 2013, the Electric System experienced a decrease in the annual system peak demand and an increase in annual energy sales from the previous year. The Electric System experienced its peak at 2 p.m. on July 8, 2012 of 171.6 MW. For the year, 723.1 GWh of energy were sold, an increase of 1.8 percent from the preceding year. The Electric Division projects energy sales in FY 2014 to total 721.2 GWh, a decrease of 0.3 percent. The Electric Division expects annual energy sales to remain relatively constant from FY 2014 through FY 2018. City of Dover, Delaware 3-1 Burns & McDonnell

2014 Engineering Consultant’s Report Electric System Overview and Assessment Table 3-2: Fiscal Year 2014 Planned Capital Expenditures Electric Engineering Projects: General Scott Switchgear $ 800,000 Air Conditioner Replacement/Monitors 12,000 Substation Battery Replacement 24,500 Distribution Upgrades 400,000 Lighting Project and Rehabilitation 50,000 Distribution Feeder Replacement Program 277,500 Distribution Capacitors and Controls 60,000 Transmission Line Maintenance Program 75,000 69 kV Substation Switch Replacement 80,000 Horsepond Substation Reliability Upgrade 591,800 Subtotal Electric Engineering Division $ 2,370,800 Electric Transmission & Distribution Projects: New Developments $ 600,000 Advanced Metering Infrastructure 150,000 Subtotal Electric Transmission Division $ 750,000 Electric Generation Projects: Unit 3 Cooling Tower Repairs $ 42,000 McKee Run Unit 3 Auxiliary System Components 116,000 VanSant Unit 11 Component Replacements 32,000 McKee Run High Energy Piping Repairs 80,000 Metering Systems Upgrades 25,000 McKee Run & VanSant Safety & Compliance Improvemetns 86,000 McKee Run Natural Gas System Block/Bleed Valves 65,000 McKee Run & VanSant Mobile Crane Repair/Replace 125,000 McKee Run & VanSant Preservation of Structures 42,000 McKee Run Unit 3 Turbine Repairs 1,149,800 McKee Run Units 1 & 2 Component Repairs 105,000 Van Sant Capacity Increase 250,000 Subtotal Electric Generation Division $ 2,117,800 Total Planned Capital Investment Projects $ 5,238,600 3.1.1 Production Plant The City owns two plants, the McKee Run and VanSant generating stations. McKee Run consists of three steam turbine generating units with a total combined capacity of 136 megawatts (MW). VanSant is a 39- MW simple-cycle combustion turbine unit. North American Energy Services Corporation (NAES Corporation) operates the generating plants. The agreement between the City and NAES Corporation has been in effect since July 1, 2006. The Engineering Consultant’s observations regarding the generating stations and units are described later in this section of the Report. City of Dover, Delaware 3-2 Burns & McDonnell

2014 Engineering Consultant’s Report Electric System Overview and Assessment Effective July 1, 2011, the City entered into an Energy Management Agreement with The Energy Authority, Inc. (TEA) to assist the City with its energy procurement, energy sales, purchase of fuels, establishment and management of risk policies, the development and management of hedging protocols and related energy procurement challenges. 3.1.2 Transmission and Distribution Plant The service area includes 44 miles of overhead transmission lines, 0.12 miles of underground transmission lines, 190 miles of overhead distribution lines and 268 miles of underground distribution lines. Four Electric Division customers take service off of the 69-kV transmission system. These customers include the Dover Air Force Base, Kraft, Proctor & Gamble, and NRG Energy Center (NRG). NRG is an exempt wholesale generator that sells power that must be transmitted through the City’s transmission system to third party purchasers. When the NRG plant is not operating the Electric Division provides power for the plant site. The Electric Division has two contracts for providing transmission service through the Electric System. The Electric Division provides transmission service to NRG for the output of its 16 MW electric generator. The Electric Division also has a point-to-point contract for the output of an NRG Combustion Turbine which ties directly to the Kent Substation and is not part of the Dover transmission system. 3.1.3 General Plant The general plant category consists primarily of Electric Division administrative and operations facilities, and pollution control-related equipment at McKee Run and VanSant. The agreement with NAES Corporation stipulates NAES Corporation manage the operation and maintenance of the facilities while the City funds all replacements and upgrades required to maintain the capability of the two generating stations. The City is also responsible for the costs of compliance with new regulations promulgated. Other types of items included in the general plant category include office furniture and equipment, computer- related equipment, transportation and power-operated equipment, and communication equipment. Burns & McDonnell did not specifically assess the items in the general plant category for the Report. 3.2 Electric System Assessment Burns & McDonnell made observations and conducted assessments of the Electric System assets in support of the development of this annual Engineering Consultant’s Report. The findings of Burns & McDonnell from the review of the City’s Electric System are documented herein. City of Dover, Delaware 3-3 Burns & McDonnell

2014 Engineering Consultant’s Report Electric System Overview and Assessment 3.2.1 Electric Generating Stations On April 17, 2014, Mr. Ted Kelly of Burns & McDonnell met with representatives of NAES Corporation to discuss the condition of the McKee Run and VanSant generating stations. Mr. Kenneth Beard, the Plant O&M Manager, coordinated the visit along with Mr. Vince Scire, the Plant Manager. 3.2.1.1 Description McKee Run consists of three units. Units 1 and 2 were originally coal-fired units, which began operations in 1961 and 1962, respectively. In 1972, these units were converted to burn No. 6 fuel oil. Units 1 and 2 each have rated capacities of 17 MW. Unit 3 began operations in 1975 and was designed to fire No. 6 fuel oil and natural gas. Unit 3 has a rated capacity of 102 MW. In FY 2008, the City began work to convert all three units at McKee Run to burn No. 2 fuel oil in order to reduce pollution from the plant. To date, the necessary upgrades and new equipment had been installed allowing each of the units to burn both natural gas and No. 2 fuel oil. VanSant consists of a simple cycle combustion turbine with a rated capacity of 39 MW. This unit commenced operation in 1991. VanSant remains unmanned, except when it is dispatched into service. On the occasions when the unit is dispatched, personnel from McKee Run are transferred to VanSant to startup and operate the unit. 3.2.1.2 Management and Organization Station management is very well organized and knowledgeable. Personnel take a logical approach to the operation and maintenance of the generation facilities. Mr. Vince Scire serves as the Plant Manager. The management/leadership team consists of eight positions including Mr. Scire’s position. The Administrative Manager, O&M Manager, Compliance Coordinator, and Materials Coordinator, all report directly to Mr. Scire. One Operations Supervisor and two Day Shift Operator positions are currently open at the plant. The open Operations Supervisor position is part of the management/leadership team. The O&M Manager oversees a Maintenance Supervisor and four Operations teams. Each operations team consists of two supervisors and three operators working 12-hour rotating shifts. Two operators work eight-hour flex time shifts Monday through Friday, and fill in as needed. The maintenance team consists of a planner, a supervisor and five employees working eight-hour shifts. The operations and maintenance personnel are all union employees. The relationship between the union and management was reported to be excellent. McKee Run is currently at a staff level of 29 employees, with 32 approved positions. City of Dover, Delaware 3-4 Burns & McDonnell

2014 Engineering Consultant’s Report Electric System Overview and Assessment 3.2.1.3 Safety “Safety First” is an overall theme and attitude of the Electric Division. Near-miss incidents are documented, reviewed, and corrective follow-up actions are taken as required with an employee-run safety committee actively in place. This committee conducts monthly safety meetings, completes safety equipment inspections, and defines and implements tasks to improve safety in all areas. Members of the safety committee complete periodic visual inspections of employee work activities utilizing an observation checklist to detail their findings. Recorded observations are discussed and infractions corrected. Safety is the first topic discussed at all meetings at the generating plant. An indoctrination video emphasizing safety is shown to all visitors when entering the Station. There were no restricted work days or lost time accidents reported in FY 2013. NAES ended the year with 51,786 man-hours worked with no OSHA recordable accidents. 3.2.1.4 Training The required annual OSHA compliance training is completed and documented for each employee. A formal two-day employee orientation program is required for all new employees. This orientation covers a multitude of subjects from employee benefits to a review of the various Station operating manuals. For operator training, the Employee Development and Qualification Program (EDQP) has been established. EDQP is a formal program for training operators to progressively advance to positions with additional responsibilities. In addition to the above programs, cross training of various disciplines also occurs. An example of cross training would be plant operators training with maintenance staff. Plant staff receive environmental and safety training online via the GPi Learning website. The training includes tutorials and exams to ensure comprehension of the subject matter. Plant manuals, meetings, etc. offer additional safety training. Plant staff continues to receive appropriate operator certification training for the Pennsylvania New Jersey Maryland Interconnection (PJM) market. This training should continue in the future. The plant also completes planning and scheduling training on a regular basis for plant operators. 3.2.1.5 Major Equipment Operation and Maintenance In general, the generation facilities appear to have been properly operated and maintained, and in good condition as evidenced by the high availability of the units. The generation facilities are dispatched sparingly and operate primarily as peaking units. As such, the individual units incur a relatively large City of Dover, Delaware 3-5 Burns & McDonnell

2014 Engineering Consultant’s Report Electric System Overview and Assessment number of starts per year and low annual capacity factor. Table 3-3 summarizes the major FY 2013 operating statistics. The large amount of time that units are not operating allows for maintenance and repair of the units. As a result, the FY 2013 overall equivalent availability factor for the generation facilities averaged 58.99 percent. Low net capacity factors are partially offset by PJM capacity credits. In FY 2013, $14.3 million of PJM capacity credits helped cover the fixed operating and maintenance costs of the Electric System. PJM capacity credits are expected to continue to provide similar benefits in FY 2014 and beyond. 3.2.1.6 Electronic Management System Maintenance activities are organized, planned, and managed using MP2tm by CMMS Data Group, a computer-based management system. All three major categories of maintenance activities (corrective, preventative, and predictive) are electronically managed by MP2tm. Table 3-3: FY 2013 Generating Plant Operating Statistics Rated Net Net Heat Capacity - Production - Net Capacity Rate Number of Unit Number MW MWh Factor Btu/kWh Starts VanSant 39 1,568.4 0.46% 12,096 8 McKee Run Unit 1 17 545.5 0.37% 15,866 2 Unit 2 17 1,024.4 0.69% 14,812 4 Unit 3 102 12,692.5 1.42% 11,715 18 Total 175 15,830.7 1.03% 32 Forced Equivalent Outage Operating Service Availability Unit Number Hours Hours Factor Factor VanSant - 52.1 0.59% 59.45% McKee Run Unit 1 80.0 74.8 0.85% 57.62% Unit 2 - 170.3 1.94% 59.45% Unit 3 - 201.8 2.30% 59.45% Total 80.0 499.0 5.70% For corrective maintenance activities, any station operator or mechanic can enter a work order into the system at any terminal on the Station local area network (LAN). A supervisor reviews the request, turns it into a work order, and assigns a priority according to a predetermined categorization. The work order is planned, parts are ordered, and then the work order is assigned to an operator or maintenance technician for completion once the material has been received. City of Dover, Delaware 3-6 Burns & McDonnell

2014 Engineering Consultant’s Report Electric System Overview and Assessment This system is also used to manage and track preventative maintenance activities that follow a schedule. Changing filters, and turning on and off heat tracing are examples of preventative maintenance. Predictive maintenance activities practiced include oil analyses, vibration testing, and infrared surveys. Portable vibration testing equipment is used at the Stations to improve the frequency of and capabilities to trouble- shoot rotating equipment. The technology allows personnel to identify problems and take corrective actions before equipment failure occurs. 3.2.1.7 Electric Generation Improvements The following describes completed, on-going, and planned improvements to the City’s generation assets: Recently Completed:  DOE Grant - Photovoltaic Panels  McKee Run & VanSant Arc Flash  McKee Run Driveway Repaving  Unit 3 Fire Protection System  Unit 3 Cooling Tower Life Extension  Unit 1 Outage FY 2011  Unit 2 - Boiler Inspection & Repair  VanSant CT Mark IV Upgrades  Work Management Software Replacement  Unit 3 - Gas Modification  Unit 3 Air Heater Expansion Joint  Units 1 and 2 Control Modifications  Units 1 and 2 Stack Repairs Inspection  Unit 3 - Stack Repairs Inspection  Unit 3 Boiler Air Heater  Unit 3 FD and ID Fan Controller Upgrade  Unit 3 DCS Computers & Software Upgrades  Units 1 and 2 Component Repairs  VanSant Component Replacements  Unit 3 Auxiliary System Components  Industrial Wastewater Discharge System  Unit 3 Air Heater Expansion Joint  Unit 3 Generator Repairs City of Dover, Delaware 3-7 Burns & McDonnell

2014 Engineering Consultant’s Report Electric System Overview and Assessment  Units 1 & 2 Stack Repairs  Unit 1 Gasket Leak Repair On-Going:  McKee Run Preservation of Structures  Unit 3 Boiler Systems  Unit 3 Auxiliary System Components  Unit 3 Turbine Outage – Inspections & Repairs  Units 1 & 2 Component Repairs Planned:  McKee Run Building Equipment Replacements  McKee Run High Energy Piping  McKee Run Natural Gas System Block/Bleed Valves  McKee Run Fuel Oil System Refurbishment  Unit 3 – Stack Repairs  Unit 3 – Cooling Water Line Replacement  Unit 3 – Cooling Tower Life Extension  Units 1, 2 & 3 Hydrogen Purity Analyzers  VanSant Capacity Increase  VanSant Major Overhaul & Inspection  VanSant Component Replacements  Metering System Upgrades  Safety & Compliance Improvements  Vehicles, Trucks & Equipment 3.2.1.8 Condition Assessment The following is a summary of the condition assessment of major equipment at McKee Run and VanSant as presented by the NAES corporation staff. Burns & McDonnell made no internal assessments of equipment during the facility tour. City of Dover, Delaware 3-8 Burns & McDonnell

2014 Engineering Consultant’s Report Electric System Overview and Assessment 3.2.1.9 Steam Turbines/Generators The steam turbines and generators for VanSant and McKee Run Units 1 and 2 were reported to be in satisfactory condition with no major problems. McKee Run Unit 3 turning gear engagement problems were reported in the summer 2010 outage report and repairs were completed in FY 2012. XL Insurance completes inspections of the Electric Division production facilities on an annual basis. After each inspection the insurance provider issues a report detailing its risk reduction recommendations. A recommendation following the FY 2011 inspection addressed safety. XL Insurance recommended the installation of a permanent fire protection system for the turbine generator bearings at McKee Run. The City completed the installation of the system in FY 2011 for Unit 3. The City and XL Insurance agree that portable foam generating carts are sufficient fire protection for Units 1 and 2, due to their light use. For FY 2012, Unit 1 conducted turbine generator checks and found a bearing steam seal leak. Steam seals were removed and sent out for refurbishment by Siemens Energy Services during the fall 2012 outage. Bearing was inspected and checked for wear. Bearing did have some wear and did not meet acceptable tolerance, so it was sent out for refurbishment by Fusion Babbiting. Turbine condition assessment was conducted during the fall outage and the Units were found to be in satisfactory working condition. For Spring 2013, an extensive inspection and testing was performed on Unit 3’s turbine and generator. The inspection showed signs of seam oil, hydrogen, and busing box leakages. All issues were fixed and brought to acceptable operating standards. NAES Instrument, Control and Electrical (IC&E) Technicians completed four recommended General Electric Technical Information Letters (TIL) projects for VanSant Unit 11 in both spring and fall 2013 outages as shown below: 1. Annual TIL 1004-2R1 (IGV’s and first stage corrosion/pitting inspection) 2. Annual TIL 1068-2R1 (IGV’s bushing inspection) 3. Annual TIL 1132-2 (IGV thrust washer corrosion inspection) 4. Annual TIL 1049-2R1 (Inspect and measure dovetail material loss) During the fall 2013 outage, NAES mechanics installed new hand wheel throttle valve mechanical parts. Thereafter, the IC&E installed a portable vacuum pump to the Unit 1 turbine to simulate vacuum. The turbine was reset and the throttle valve was closed. The throttle valve was then fully opened with no issues and the handle was freewheeling. City of Dover, Delaware 3-9 Burns & McDonnell

2014 Engineering Consultant’s Report Electric System Overview and Assessment 3.2.1.10 Boilers and Auxiliaries Boiler inspections are conducted every year on each of the boilers. The annual inspections typically include the inspection and cleaning of the major boiler components, including the mud and steam drums, the forced draft and induced draft fans, the windbox, condenser water box, condenser tubes, hotwell, air preheater components, and safety valves. In FY 2011, the outlet duct expansion joint was replaced on Unit 3. Operations removed the appropriate insulation and lagging to prepare the duct. The Electric Division contracted Apex to complete the installation the equipment. A complete seam weld was utilized to seal the joint and the job site was cleaned. No additional problems with this joint developed in FY 2012. In FY 2012, several principle changes were made on the generating system’s boiler and auxiliary units at McKee Run. New beck drives were installed on Unit 3 induced draft and forced draft fans. Also, sector plates and seals were replaced in the Unit 3 air heater. Following its FY 2010 annual inspection of the production facilities, XL Insurance recommended the City implement a program that tracks annual hot and cold settings of hangers in the steam, reheat, feedwater and boiler systems. In FY 2011 and FY 2012, the City met the recommendation by implementing a program that will examine the high energy piping systems on a five-year basis, beginning in 2014. During FY 2013 inspections, no major issues were found within the Unit 1 or Unit 2 boiler. Unit 3 had an issue during the startup of the boiler while attempting to obtain a boiler purge. The issue was fixed by replacing a Gas Fuel Trip Relay. Waterwall tubing sections were replaced within Unit 3’s A-2 burner. 3.2.1.11 Station Cooling Water Systems The Station has split cooling water systems with one system serving Unit 1 and Unit 2 and a separate system serving Unit 3. Projectile tube cleaning was completed on the Unit 1 and Unit 2 condensers during the spring FY 2011 outage. All the tubes in each unit were cleaned utilizing the scraper blade plug method. Samples were taken from the tube cleanings and retained for inspection. No leaks were detected in the expansion joint or condenser tubes. Each condenser box was cleaned. Projectile tube cleaning was last completed in the 1980’s. The cooling water systems are reported to be sufficiently sized and in satisfactory condition, with no major issues reported at the time of this Report. 3.2.1.12 Fuel Handling Systems Natural gas is delivered to the Station via a 4-inch pipeline for Unit 1 and Unit 2 and in a 10-inch diameter pipeline for Unit 3. No. 2 fuel oil is delivered to the Station by truck and unloaded into tanks. City of Dover, Delaware 3-10 Burns & McDonnell

2014 Engineering Consultant’s Report Electric System Overview and Assessment Forwarding pumps deliver the fuel oil to each of the units. No major fuel projects were reported to be completed in FY 2012. 3.2.1.13 Water Treatment/Steam Purity Quality control parameters for boiler feed-water, internal boiler water, cooling tower water, and steam purity are checked at a minimum of twice per day when systems are operating. Results are recorded and graphically compared to control limits. Adjustments are then made as required. Boiler feed water is treated city water (well water from the City) using a regenerative ion resin demineralizer system, along with deaeration for oxygen control. Boilers 1 and 2 use a coordinated phosphate control for boiler internal purity control and Boiler 3 uses a balanced trisodium phosphate and disodium phosphate within a narrow pH range. A deep-bored water well was installed to provide water in addition to the City supplied water. City water has a high chlorine level which may exceed the Station permitted limits. By combining City water with the well water, the chlorine levels can be maintained at the permitted limits. Water for cooling tower makeup is also obtained from City water. The primary control parameter is silica concentration. Blow down is adjusted as required to maintain control. The City is currently undergoing the approval process with Kent County to obtain an integrated waste water permit to be able to discharge cooling water to the sewer system. No major water treatment issues were reported at the time of this Report. Steam purity is not continuously monitored. Samples are taken twice daily and tested for pH, conductivity, and silica. There have not been any problems with steam purity. Annual inspections of the boiler drums and separation internals have verified that these systems are intact and operating properly. Following its FY 2010 annual inspection of the production facilities, XL Insurance recommended the City implement lay-up procedures to protect water systems from corrosion. In FY 2011 and FY 2012, NAES worked to update plant procedures to conform to best practices/OSHA standards. In FY 2012, the station did not experience any internal corrosion related failures, steam path deposits, or excessive condenser fouling. NALCO provides water treatment consulting services and chemicals. A representative visits the Station periodically to review test data and check chemical usage rates. No major issues were reported at the time of this Report. 3.2.1.14 Station Electrical Systems Overall, Station electrical systems and transformers are considered to be in satisfactory condition. A condition assessment of the generation facilities’ transformers was conducted in February 2011. Oil inspections and analyses were conducted. The inspector recommended that normal operation continue for City of Dover, Delaware 3-11 Burns & McDonnell

2014 Engineering Consultant’s Report Electric System Overview and Assessment all the transformers at the plant. Oil sampling is now completed twice per year on the generator step-up transformers (GSUs). All plant transformers are examined annually. Following its FY 2008 annual inspection of the production facilities, XL Insurance recommended the City build blast walls around transformers at the plant. In FY 2011, the City continued to research blast wall protection. Fire barrier walls were installed between the Unit 1 and 2 auxiliary transformers and the Unit 3 start-up transformer. Based on the 2012 XL Insurance annual inspection, there is still no sprinkler protection for GSU’s 1-3. 3.2.1.15 Station Control Systems Unit 1 and Unit 2 controls are electro-pneumatic and Unit 3 controls are a distributed control system (DCS). During the March FY 2011 spring outage, a controls upgrade was completed at McKee Run Units 1 and 2. The new devices control igniters, pilots and shut down main fuel to protect the boiler. The project included the installation of new limit switches on main gas, pilot gas, and oil supply/return valves. The controls upgrades help the system meet national fire protection codes. Following its 2007 annual inspection of the production facilities, XL Insurance recommended the City seal openings in fire barriers through which cables pass. The City has worked each year since to make progress on sealing openings in fire barriers. The City completed sealing the rest of the openings as part of its boiler controls and control room upgrades in 2013. In general, the station control systems are considered to be in satisfactory condition. The Unit 1 and Unit 2 control systems are outdated but perform satisfactorily. All relays have recently been inspected at both McKee Run and VanSant for North American Electric Reliability Corporation, PJM Interconnection and Mid-Atlantic Area Council compliance. The electro hydraulic control system was modified to become a primary/primary system in 2013. In 2013 additional control wiring was installed to upgrade the Unit 1 and Unit 2 gas control system. No major controls issues were reported at the time of this Report. 3.2.1.16 General Facilities No major projects or improvements were completed to the General Facilities in FY 2013 other than routine maintenance and repairs. In general, the station facilities appeared clean and well maintained during the site visit. 3.2.1.17 VanSant Generating Station In general, the unit is operated infrequently, but is well maintained. Although the station is only manned when operating, an operator performs a twice daily walk through with a checklist of items to review and City of Dover, Delaware 3-12 Burns & McDonnell

2014 Engineering Consultant’s Report Electric System Overview and Assessment the results are logged. The annual overhaul and inspections were conducted at VanSant during FY 2013. No major problems were found. The VanSant unit has the capability of black starts. The unit has the capability of remote control; however, the unit is not permitted for remote control. XL Insurance completes inspections of the Electric Division production facilities on an annual basis. After each inspection the insurance provider issues a report detailing its risk reduction recommendations. The lone recommendation for VanSant following the FY 2012 inspection addressed safety. XL Insurance recommended the installation of gas detection equipment at the plant. A gas detection system has been installed. The gas detectors will activate the fire suppression system and alarm to the central control system. No other major repairs or upgrades were made at VanSant in FY 2013. 3.3 Transmission and Distribution Systems On April 17, 2014, Mr. Ted Kelly visited the City to collect information and to observe the City transmission and distribution system, as operated and maintained by the Electric Division. Mr. Bill Hewlett provided information related to the transmission and distribution system. Mr. Hewlett also led a tour of the electric transmission and distribution system. The Electric Division distributes power to its customers by a network of transmission lines, distribution substations, and distribution lines. The transmission lines are rated at 69 kV and are connected to fifteen distribution substations located throughout the service area. The distribution substations reduce the power from transmission voltages to the primary distribution voltages of 12 kV to facilitate distribution of electric power to customers. 3.3.1 Safety Mr. Hewlett reported to Burns & McDonnell that there were no reportable injuries or lost workdays in FY 2013. 3.3.2 System Reliability The Electric Division provides for reliability of its distribution system by configuring a majority of its distribution circuits in primary open loop arrangements, improving existing circuits, and installing adequate substation transformer capacity. Normal transformer and line loading are limited to provide sufficient margin to convey firm power requirements during an emergency or a switching operation, or for maintenance. City of Dover, Delaware 3-13 Burns & McDonnell

2014 Engineering Consultant’s Report Electric System Overview and Assessment 3.3.3 Power Quality The Electric Division does not have any significant power quality problems. The overall power factor for the Electric System decreased from 99.86 percent in FY 2012 to 98.43 percent in FY 2013. Power transformers are equipped with load tap changers that regulate bus voltages at the distribution substations. Distribution transformers are equipped with no-load taps to make voltage adjustments. There are capacitors and voltage regulators on the Electric System that control voltage and vars on the portion of the system furthest away from the current source and generation. The system operators monitor the power factor closely and turn on capacitors or adjust the generation to compensate for low power factors. 3.3.4 Operations and Maintenance The Electric Division has a SCADA system that is monitored continuously for any problems that may arise in the Electric System. The main control room has two system operator desks and a large screen where system operating information is displayed. System operators can monitor the Electric System operation, such as voltage levels, current flows, etc. and make necessary adjustments as problems arise. The systems operators have received some PJM training, but are not required to be certified as Delmarva Power is the controlling agency. Loading on substation transformers used for an emergency, a switching operation, or maintenance is limited to 120 percent of the rated capacity, followed by a twelve-hour cool-down period. The Electric Division has eight line crews to work on the system. Four crews are responsible for overhead lines, four crews are responsible for underground lines, and one crew is responsible for maintenance. The primary responsibilities of the eight line crews are installation of new service connections and construction of new lines. The trouble crew maintains the street lights, repairs underground services and is the first responder to outages. Tree trimming is contracted out and is no longer performed by the Electrical Division; however, performance of the contractor is monitored by the Line Crew Superintendent. The Substation/Relay Maintenance Division is responsible for operation and maintenance of the substations and associated equipment. Visual inspections of substations, associated equipment, trip counter checks and battery systems checks are performed regularly. The Substation/Relay Maintenance Division is also responsible for contractor oversight during annual transformer condition assessments. TJ/H2b Analytical Services completed the annual transformer condition assessments in February 2011. No abnormal gas was indicated and since the oil condition was within acceptable parameters, TJ/H2b recommended the continuation of normal operation. The City has a contract with an environmental City of Dover, Delaware 3-14 Burns & McDonnell

2014 Engineering Consultant’s Report Electric System Overview and Assessment consultant to check each substation for oil leaks and to provide instruction on cleaning up in the event of an oil spill. The City contracts with an outside firm to inspect and chemically treat each wood pole in the Electric System every ten years. This is accomplished by awarding a five-year contract to spread out the expenses. Pole treatments were completed in May of 2013. Dover treated and inspected over 760 poles during 2013, of which, only one pole was rejected providing a 99.9% pass rate. 3.3.5 Design Standards and Specifications The Electric Division designs the transmission and distribution circuits and some substation upgrades in conformance with national safety standards. Other substation and transmission design is contracted to Pike Electric, Inc. The underground distribution design utilizes road or alley front access construction. This design means the electrical equipment, such as transformers and underground cable, are installed beside the road instead of behind houses or buildings. The advantage of front access construction is the accessibility for maintenance and repairs to cable and electric equipment. The underground cables are installed in polymerized vinyl chloride pipe for added protection and for easy cable replacement. The Electric Division installs jacketed, concentric cable that is rated at 15 kV, with 133 percent ethylene propylene rubber insulation. The standard overhead distribution design utilizes a flat construction with a single cross-arm and insulators on 45-foot class 2 poles. Typically all electrical equipment locations have ground rods installed with measured readings of 25 ohms or less. The substation design is generally a low-profile rigid bus design. The circuit breakers are SF6 gas-filled and the relays are microprocessor based with SCADA control and monitoring. 3.3.6 Transmission and Distribution Capital Improvements The following describes completed, on-going, and planned improvements to the City’s transmission and distribution assets: Recently Completed:  69-kV Feeders 3 and 4  Replacement of 69-kV Breakers & Design  Governors Avenue Rebuild City of Dover, Delaware 3-15 Burns & McDonnell

2014 Engineering Consultant’s Report Electric System Overview and Assessment  Mid-City Substation Upgrades  Substation PT and CT Replacement  Transmission Relaying, Replacement and Calibrations  Outage Management System  Wyoming Avenue – Underground  Pleasanton Acres – Underground  Royal Grant – New Underground Service  Dover Downs Switchgear  Substation Equipment & Fencing  69kV Switch Replacement  Frazier Substation Reliability Upgrade On-Going:  Capitol Park – Underground  Morris Estates – Underground  Bayside Drive (Persimmon to White Oak Road)  Lighting Project and Rehabilitation  Horsepond Road Substation Reliability Upgrade  Transmission Line Maintenance Program  Distribution Capacitors – Overhead  Distribution Capacitors – Underground  New Developments – UG Transformers  New Developments – UG Conductors/Devices  Meter Replacements  Vehicles, Trucks, & Equipment Planned:  Substation Battery Replacement  Richardson Circle  Lebanon 400 Feeder  Townpoint Distribution Upgrades  Distribution System Upgrades – Unidentified  Horsepond Road URD – Distribution Feeders City of Dover, Delaware 3-16 Burns & McDonnell

2014 Engineering Consultant’s Report Electric System Overview and Assessment  McKee Run Yard Rebuild (Transmission)  Distribution Feeder Replacement Program  McKee Run & State College Road Feeder Replacements  GOTP Transmission Line Relocation  McKee Run Transformer/Substation Repairs  Horsepond SS to Cartanza 69kV Rebuild  69kV Substation Cable Replacement North Street  General Scott Switchgear  Dover Air Force Base Substation Rebuild  System Automation  DNREC R&R Metering  West Dover Connector  Meadows at Jefferson Terrace  Chestnut Grove Development  Garrison Oak Technical Park  Uzin Utz Manufacturing 3.3.7 Condition Assessment The transmission and distribution system assessment included drive-by observations of a sample of the transmission circuits, distribution circuits, and substations. Many of the fifteen substations were physically observed during the tour. The following substations were observed during the tour:  McKee Substation  College Park Substation  Dover Downs Substation  Frazier Substation  VanSant Substation  General Scott Substation  Division Street Substation  Mid-City Substation  Mayfair Substation  St. Joan’s Substation  Cartanza Substation City of Dover, Delaware 3-17 Burns & McDonnell

2014 Engineering Consultant’s Report Electric System Overview and Assessment  Horsepond Substation  Danner Farm Substation  Lebanon Substation In general, the substations were in acceptable operating conditions. Bill Hewlett provided a tour of the substations with Ted Kelly on April 17, 2014. The Frazier Substation was rebuilt last year; an additional 3 breaker system was added for a 69 kV bus. The General Scott Substation has relatively new breakers, and the controls are scheduled to be upgraded in FY 2014 or 2015. Horsepond Substation is currently being rebuilt. Work started in late February and scheduled to be back in service by June, 2014. Conductor line was replaced at the Savannah and White Oak Substation areas. The City’s in the process of replacing conductor throughout the entire 69 kV system. Moving forward, a greater portion of the system will be converted from overhead to underground distribution. 3.4 Conclusions Based on statements and information provided, as well as the observations and reviews performed, it is the opinion of Burns & McDonnell that the City’s power generation facilities are being operated and maintained consistent with accepted electric utility practice in the United States. In general, the performance, operation, maintenance, staff, planning, and training aspects for the McKee Run and VanSant stations were found to be above average. Specifically, the generation facilities have demonstrated a high level of availability despite the dispatching of the units primarily for peak demand. It is the opinion of Burns & McDonnell that the design, construction, operation and maintenance of the City’s electric transmission and distribution system and the associated facilities are consistent with current generally accepted electric utility standards. In completing Annual Engineering Consultant’s Reports over the past several years, Burns & McDonnell has observed that the City has made appropriate system upgrades and improvements. The City and the Electric Division are proactive in preventative maintenance and expansion of the Electric System before problems arise. City of Dover, Delaware 3-18 Burns & McDonnell

4.0 – FINANCIAL ASSESSMENT

2014 Engineering Consultant’s Report Financial Assessment 4.0 FINANCIAL ASSESSMENT A review of the financial results of the Electric System for the fiscal year ended June 30, 2013, is provided below. 4.1 Financial Results The total revenue of the Electric Division during FY 2013 included revenue from charges for electric service, as well as miscellaneous revenues from items such as rents, penalties, reconnection fees, and development fees. On Table 4-4, revenues were compared to the Electric Division’s costs of providing services to its customers to determine whether the financial requirements of the Electric Division were met. 4.1.1 Required Revenue Level The level of revenues required from the retail electric rates for the Electric Division was determined through the analysis of the financial results and net income or net margins for the most recent fiscal year. The City of Dover, Delaware Resolution Authorizing and Securing Electric Revenue Bonds, adopted December 23, 1985 requires that the Electric Division maintain a debt service coverage ratio of 1.25. The following is an excerpt from Section 502(c) of the resolution. “(c) The total amount of the Revenues of the Electric System during the preceding fiscal year shall have been not less than the total of the following: (3) The Current Expenses of the Electric System during the current fiscal years shown by the Annual Budget . . . for such fiscal year, and (4) One hundred twenty-five percent (125%) of the maximum amount of the Principal and Interest Requirements for any fiscal year thereafter on account of all bonds then Outstanding under the provisions of this Resolution. The City further covenants that, from time to time and as often as it shall appear necessary, it will adjust the electric rates as may be necessary or proper so that the revenues of the Electric System in each fiscal year will not be less than the total of the amounts set forth in subdivision (c) of this section.” 4.1.2 Electric Rates Customers of the Electric Division are charged for the electric service based on rate schedules, tariffs, or contracts that reflect the costs to the Electric Division of providing that service. For purposes of setting City of Dover, Delaware 4-1 Burns & McDonnell

2014 Engineering Consultant’s Report Financial Assessment electric rates, customers with similar load and service characteristics should be placed in the same rate classification. A comprehensive cost-of-service and rate design study was completed in 2006 and subsequent rate analyses were completed in 2007 and 2008 to examine revenue requirements and revenue generation. Specifically, the 2006 rate study was conducted to address increased costs associated with a new power supply contract that became effective on July 1, 2006. The rate study recommended combining a number of rate classes and implementing rate increases on July 1, 2006. The 2006 rate study also recommended an additional increase be implemented on January 1, 2007 to cover increased costs associated with operating the generating station. The 2007 and 2008 rate analyses re-examined Electric Division revenues and expenses and recognized additional revisions to power supply costs. As a result of these analyses, additional rate increases were implemented on July 1, 2007 and July 1, 2008. The City retained Burns & McDonnell to conduct cost-of-service and rate design study in 2012 followed by an update in 2013. The 2012 study examined revenue adequacy, revenue responsibility, and revenue recovery for the Electric Division. It scrutinized customer classes and proposed adjustments for demand rate components and corresponding changes to energy charges. In May 2013, the City retained Burns & McDonnell to incorporate updated power supply cost projections, and other updates, into the model it developed as part of the 2012 Study. The current rate classes are listed below.  Residential  Small Commercial (1 Phase, 3 Phase, 1 Phase Heating, Church, and Municipal)  Medium Commercial (1 Phase & 3 Phase)  Large Commercial (3 Phase with Reactive Metering)  Primary  Transmission  Outdoor Development Lighting  Private Outdoor Lighting 4.1.3 Operating Results Table 4-1 presents a summary of the annual energy sales, the average monthly number of customer accounts, and the annual average kilowatt-hour (kWh) energy per customer of the Electric Division for FY 2011 through FY 2013. Annual energy sales decreased in FY 2012 to 710.3 GWh, a decrease of 3.2 percent from 734.1 GWh in FY 2011. Energy sales increased to 723.1 GWh in FY 2013, a 1.8 percent increase from FY 2012. City of Dover, Delaware 4-2 Burns & McDonnell

2014 Engineering Consultant’s Report Financial Assessment Table 4-1: Annual Sales and Customer Accounts FY 2011 FY 2012 FY 2013 Energy Sales (kWh) Residential 208,092,047 196,388,942 204,759,680 Commercial 243,985,517 230,814,311 232,220,877 Primary 153,879,249 160,560,686 167,144,717 Transmission 128,146,159 122,563,783 119,003,804 Total Energy Sales 734,102,972 710,327,722 723,129,078 Average Number of Monthly Customers (bills) Residential 19,730 19,910 19,990 Commercial 3,140 3,355 3,412 Primary 42 39 37 Transmission 3 4 4 Total Customers Accounts 22,915 23,308 23,443 Energy Usage Per Customer (kWh/cust./yr.) Residential 10,547 9,864 10,243 Commercial 77,702 68,797 68,060 Primary 3,663,792 4,116,941 4,517,425 Transmission 42,715,386 30,640,946 29,750,951 Average Usage Per Customer 32,036 30,476 30,846 Table 4-2 presents revenues from sales, revenue per kWh ratios, and average revenue per customer ratios for each revenue classification. Total revenue from sales to electric customers in FY 2013 was $88.3 million, representing a decrease of $3.6 million, or 3.9 percent from FY 2012. Total revenue from sales to electric customers includes utility tax revenue and power cost adjustment revenue. In FY 2013, the average rate revenue per kWh for residential customers was 14.00 cents and the total average rate revenue was 12.22 cents per kWh. The July 2012, through June 2013 national average monthly utility-level retail sales of electricity and associated revenue per kWh, as published by the US Energy Information Administration (EIA), were 11.88 and 9.84 cents per kWh, respectively. For a state- wide comparison, the EIA summarized the Delaware July 2012 through June 2013 average monthly utility-level retail sales of electricity and associated revenue per kWh to be 13.58 cents per kWh for residential customers and 11.06 cents per kWh across all sectors.1 1 US Energy Information Administration, Form EIA-826 Data Monthly Electric Utility Sales and Revenue Data, http://www.eia.gov/electricity/data/state/avgprice_annual.xls (May 22, 2014) City of Dover, Delaware 4-3 Burns & McDonnell

2014 Engineering Consultant’s Report Financial Assessment Table 4-2: Annual Revenues and Sales Ratios FY 2011 FY 2012 FY 2013 Revenue Residential $ 30,774,462 $ 28,072,775 $ 28,668,248 Commercial 36,572,134 33,381,554 30,520,784 Primary 18,450,238 17,986,987 17,699,865 Transmission 13,716,322 12,506,664 11,442,299 Total Revenue $ 99,513,156 $ 91,947,980 $ 88,331,196 Revenue/kWh Residential $ 0.1479 $ 0.1429 $ 0.1400 Commercial 0.1499 0.1446 0.1314 Primary 0.1199 0.1120 0.1059 Transmission 0.1070 0.1020 0.0962 Total Revenue/kWh $ 0.1356 $ 0.1294 $ 0.1222 Revenue Per Customer Residential $ 1,560 $ 1,410 $ 1,434 Commercial 11,647 9,950 8,945 Primary 439,291 461,205 478,375 Transmission 4,572,107 3,126,666 2,860,575 Average Revenue Per Customer $ 4,343 $ 3,945 $ 3,768 The Electric Division’s largest cost in providing electric service to its customers in FY 2013 was the wholesale cost of power. The Electric Division purchased power from the PJM Interconnection marketplace through its Energy Manager, TEA. The cost of non-generated power includes energy and demand costs, power supply management expense, PJM charges and credits, generation fuels cost, and capacity charges and credits. The significance of power supply cost to the Electric Division is illustrated in Table 4-3. The top portion of the Table shows net operating revenue as the difference between total revenues generated by the rates and the cost of power supply.2 The ratios of power supply cost to sales revenues were calculated for FY 2011 through FY 2013. As illustrated, the Electric Division’s power supply cost as a percentage of rate revenue increased from 64.1 percent in FY 2012 to 63.0 percent in FY 2013. 2 For the purposes of this Report, the phrase “Power Supply” refers to the sum of the costs of power purchased and power generated. This includes plant costs and the cost of fuel. Power Supply also includes any expenses in the CIP Fund that are not capital expenses. The phrase “Purchased Power” refers only to the cost of power purchased from the market and other directly associated costs. City of Dover, Delaware 4-4 Burns & McDonnell

2014 Engineering Consultant’s Report Financial Assessment Table 4-3: Revenue Margins and Unaccounted for Energy FY 2011 FY 2012 FY 2013 Net Revenue Margins ($) Sales Revenues $ 99,513,156 $ 91,947,980 $ 88,331,196 Power Supply 69,616,076 58,929,133 55,681,251 Net Revenue Margin $ 29,897,080 $ 33,018,847 $ 32,649,945 Net Revenue Ratio 70.0% 64.1% 63.0% Unaccounted for Energy (kWh) Power Supply 768,254,000 738,190,000 752,869,000 Energy Sales 734,102,972 710,327,722 723,129,078 Unaccounted for Energy (Losses) [1] 34,151,028 27,862,278 29,739,922 Percentage 4.4% 3.8% 4.0% [1] Unaccounted for Energy (Losses) includes street lighting energy Table 4-3 also illustrates the ratio of the amount of energy purchased and delivered to the electric system to total energy sales. This relationship identifies the level of unaccounted for energy in the Electric System. This unaccounted for energy may include energy that was unmetered, metered inaccurately, stolen, lost, PJM transmission line losses, local system line/transformer losses, etc. The bottom portion of Table 4-3 presents these comparisons for the Electric Division for FY 2011 through FY 2013. As shown, the percentage ratio of the unaccounted for energy to the total energy purchased for FY 2013 was 4.0 percent. This is up from 3.8 percent in FY 2012. Table 4-4 presents a re-creation of the Electric Division’s Statement of Revenues, Expenses, and Changes in Unreserved Retained Earnings for the Electric Revenue Fund for FY 2011 through FY 2013. Net income decreased from FY 2012, totaling $6.2 million in FY 2013. An increase in Operating – Transfers Out resulted in a $2.3 million decrease in net income for the year. The General Fund Transfer was increased by $2.0 million to help finance the Calpine Project which the City is currently negotiating with for a Purchase Power Agreement and Capacity Agreement in light of the decommissioning Units 1 and 2. City of Dover, Delaware 4-5 Burns & McDonnell

2014 Engineering Consultant’s Report Financial Assessment Table 4-4: Comparative Statement of Revenues, Expense, and Changes in Unreserved Retained Earnings FY 2011 FY 2012 FY 2013 Operating Revenues: Charges for Electric Service $ 99,513,157 $ 91,947,980 $ 88,331,196 Miscellaneous Services/Incomes 2,389,462 1,581,421 2,354,497 Total Operating Revenues $ 101,902,619 $ 93,529,401 $ 90,685,693 Operating Expenses: General Administration $ 5,298,869 $ 5,223,149 $ 4,470,795 Power Supply 69,616,076 58,929,133 55,681,251 Transmission/Distribution 3,083,714 3,023,566 3,267,698 Engineering 1,722,244 1,163,379 1,107,231 Metering 204,352 205,791 219,010 System Operations 486,894 498,063 544,405 Utility Tax 1,944,543 1,548,208 1,443,853 Depreciation 4,710,658 4,783,444 4,621,501 Retirees Pension 1,115,765 Retiree Health Care 1,839,110 1,015,731 696,500 Total Operating Expenses $ 88,906,460 $ 76,390,464 $ 73,168,009 Net Operating Income $ 12,996,159 $ 17,138,937 $ 17,517,684 Non-operating Revenues (Expenses) Interest Earned Operating Fund $ 832,145 $ 120,876 $ 190,469 Reserved Funds 511,922 348,640 506,771 Net Increase in Fair Value of Investments (861,216) 45,200 (614,989) Interest and Fiscal Charges (1,385,035) (1,283,174) (1,432,779) Bond Discount Amortized (21,579) - Gain/(Loss) on Sale of Assets 16,830 47,966 5,203 Total Non-operating Revenues(Expenses) $ (906,933) $ (720,492) $ (1,345,325) Net Income Before Operating Transfers $ 12,089,226 $ 16,418,445 $ 16,172,359 Operating Transfers - In - - 8,282 Operating Transfers - Out (8,856,000) (7,876,288) (10,000,000) Total Net Operating Transfers $ (8,856,000) $ (7,876,288) $ (9,991,718) Net Income $ 3,233,226 $ 8,542,157 $ 6,180,641 4.1.4 Adequacy of Electric Rates The City’s Bond Resolution requires annual revenues of the Electric Division be no less than the total current expenses plus 125 percent of the greatest remaining annual debt service. “Current expenses”, as defined in the Resolution, includes all expenses necessary to maintain and repair the Electric System, all administrative expenses, and engineering, legal or other consultant fees. Transfers to reserve accounts and special purpose funds, and allowances for depreciation are specifically excluded from “current expenses.” City of Dover, Delaware 4-6 Burns & McDonnell

2014 Engineering Consultant’s Report Financial Assessment In order to determine if the City and the Electric Division have met this requirement, the net income shown in Table 4-4 was adjusted to include the interest on bonds, depreciation expense, and other non- cash income and expenses. Table 4-5 summarizes net income adjustments and the calculation of the revenues available for debt service for FY 2011 though FY 2013. Table 4-5: Debt Service Coverage FY 2011 FY 2012 FY 2013 Net Income $ 3,233,226 $ 8,542,157 $ 6,180,641 Plus Excluded Expenses: Operating Transfers - Out $ 8,856,000 $ 7,876,288 $ 10,000,000 Depreciation 4,710,658 4,783,444 4,621,501 Interest and Fiscal Charges 1,385,035 1,283,174 1,432,779 Bond Discount Amortized 21,579 - - Gain/(Loss) on Sale of Assets (16,830) (47,966) (5,203) Less Excluded Income: Net Increase in Fair Value of Investments 861,216 (45,200) 614,989 Interest Earned - Reserve Funds (511,922) (348,640) (506,771) Revenues Available for Debt Service $ 18,538,962 $ 22,043,257 $ 22,329,654 Maximum Principal and Interest in Any Year $ 3,401,954 $ 3,401,954 $ 3,401,954 Debt Service Coverage 5.45 6.48 6.56 Minimum Required Debt Service Ratio 1.25 1.25 1.25 As Table 4-5 illustrates, the City and the Electric Division maintained a debt service coverage ratio each year that exceeded the required 125 percent plus current expenses. Therefore, the revenues generated by the current electric rates have been sufficient to meet the applicable covenants of the Resolution. Section 502 of the Resolution requires that the annual debt service used in evaluating the revenues is to be the maximum amount for any fiscal year thereafter. Table 4-6 presents the annual totals of principal and interest amounts due on bonds currently outstanding. The calculation of the debt service coverage ratio in Table 4-5 is based on the total maximum debt service expense in any fiscal year. The FY 2013 calculation was based on the total FY 2016 debt service expense of $3,401,954. 4.2 Status of Revenue Bonds At the end of FY 2013, the City had two series of outstanding electric revenue bonds that were issued pursuant to the Resolution. On July 1, 2008, the City issued $22,200,000 in Electric Revenue Bonds (2008 Bonds). The proceeds from the sale of the 2008 Bonds were used (i) to finance or reimburse the City of Dover, Delaware 4-7 Burns & McDonnell

2014 Engineering Consultant’s Report Financial Assessment City for improvements to the City’s electric system; (ii) to fund a Debt Service Reserve Fund; and (4) to pay the costs of issuance of the 2008 Bonds. On November 17, 2010, the City issued $8,810,000 of Electric Revenue Refunding Bonds (Series 2010). The proceeds from the sale of the Series 2010 Bonds were used (i) to refund the Series 2004 Bonds, and (ii) to pay the costs of issuance of the Series 2010 Bonds. The non-taxable Series 2010 Bonds received an underlying rating of Aa2 by Moody’s Investors Services and an underlying rating of A+ by Fitch Ratings. Table 4-6 illustrates the debt service schedule for the Series 2008 and 2010 Bonds. The principal and interest and the annual total are shown for each series of bonds. At the time of issuance of the Series 2010 Bonds, the combined outstanding principal balance for both series of bonds was $30,280,000. Table 4-6: Debt Service Schedule of Electric Revenue Bonds 2008 Electric Revenue Bonds 2010 Electric Revenue Refunding Bonds Total Annual Period Principal Interest Debt Service Principal Interest Debt Service Debt Service FY 2014 430,000 986,454 1,416,454 1,740,000 219,100 1,959,100 3,375,554 FY 2015 450,000 964,954 1,414,954 1,810,000 166,900 1,976,900 3,391,854 FY 2016 475,000 942,454 1,417,454 1,890,000 94,500 1,984,500 3,401,954 FY 2017 695,000 918,704 1,613,704 - - - 1,613,704 FY 2018 730,000 883,954 1,613,954 - - - 1,613,954 FY 2019 765,000 847,454 1,612,454 - - - 1,612,454 FY 2020 800,000 815,706 1,615,706 - - - 1,615,706 FY21-34 16,325,000 6,618,185 22,943,185 - - - 22,943,185 Total $21,470,000 $ 15,013,223 $36,483,223 $ 8,810,000 $ 911,867 $ 9,721,867 $46,205,090 4.3 Insurance The City maintains a comprehensive insurance program to insure against varying types of liabilities and significant losses related to various Electric Division properties. Section 706 of the Resolution reads: "The City covenants that it will maintain a practical insurance program, with reasonable terms, conditions, provisions and costs, which the City Manager determines, with the approval of the Engineering Consultants, will afford adequate protection against loss, including loss of Revenues, caused by damage to or destruction of the Electric System or any part thereof and also comprehensive public liability insurance on the Electric System for bodily injury and property damage in such amounts as may be approved by the Engineering Consultants.” Table 4-7 summarizes itemized insurance coverage procured by the City for the period July 1, 2013, through June 30, 2014. Burns & McDonnell has reviewed this list of insurance, and in the opinion of City of Dover, Delaware 4-8 Burns & McDonnell

2014 Engineering Consultant’s Report Financial Assessment Burns & McDonnell, as Engineering Consultant and not as insurance counselor, the insurance in full force and affect appears to satisfy the requirements of Section 706 of the Resolution. Table 4-7: Schedule of Insurance Coverage in Effect July 1, 2013 - Starr Technical Risks Agency June 30, 2014 Coverage Property Earth Movement -Per Occurrence and in the $20,000,000 Annual Aggregate, except Earth Movement in High Hazard Earth Movement EXCLUDED Zones; Earth Movement in California; EXCLUDED Flood -Per Occurrence and in the Annual 10,000,000 Aggregate; Accounts Receivable; 100,000 Business Interruption; EXCLUDED Contingent Time Element Coverage; EXCLUDED Debris Removal (or 25% of Direct Property Loss, whichever the greater); 2,500,000 Demolition and Increased Cost of Construction; 10,000,000 EDP Media; 1,000,000 Errors and Omissions; 2,000,000 Expediting Expense; 1,000,000 Extra Expense, excluding replacement power or increased cost of generation, 2,000,000 transmission and/or distribution of electricity, water or natural gas; Fire Department Service Charges and Extinguishing Expenses; 500,000 Hazardous Substances -Per Occurrence and in the Annual Aggregate; 500,000 Inland Transit; 2,500,000 Newly Acquired Locations -90 Days reporting; 1,000,000 Personal Property Temporarily Off Premises; 100,000 Professional Fees; 250,000 Incidental Course of Construction; 5,000,000 Miscellaneous Unnamed Locations (except perils of Flood, Earth Movement and 500,000 Valuable Papers and Records; 100,000 Deductibles For each Occurrence giving rise to a claim under this policy, the Insured agrees to retain for its own account an initial amount of: In respect of Damage to Insured Property: $350,000 per Occurrence, except; $100,000 per Occurrence as respects Transit. In respect of Time Element loss (Extra Expense): 45 days per Occurrence, except; 72 hours per Occurrence in respect of Service Interruption. City of Dover, Delaware 4-9 Burns & McDonnell

2014 Engineering Consultant’s Report Financial Assessment July 1, 2013 - XL Insurance June 30, 2014 Coverage Property per Occurrence and in the Annual Aggregate in respect of Flood; $ 10,000,000 per Occurrence and in the Annual Aggregate in respect of Earth Movement, 20,000,000 Excluded. per Occurrence and in the Annual Aggregate applicable in High Hazard Movement zones; per Occurrence and in the Aggregate in respect Hazardous Substance; 500,000 per Occurrence in respect of Business Interruption; EXCLUDED per Occurrence in respect of Accounts Receivable; 100,000 per Occurrence in respect of scheduled, direct Contingent Time Element; EXCLUDED per Occurrence in respect of Incidental Course of Construction; 5,000,000 (or 25.00% of the direct physical loss, whichever greater) per Occurrence in 2,500,000 respect of Debris Removal; per Occurrence in respect of Demolition and Increased Cost of Construction; 10,000,000 per Occurrence in respect of Electronic Data Processing Media; 1,000,000 per Occurrence in respect of Errors and Omissions; 2,000,000 per Occurrence in respect of Expediting Expense; 1,000,000 per Occurrence in respect of Extra Expense excluding replacement power of 2,000,000 increased cost of generation, transmission and/or distribution of electricity, water or natural gas; per Occurrence in respect of Fire Department Service Charges and 500,000 Extinguishing Expenses; per Occurrence in respect of Newly Acquired Locations (ninety (90) days 1,000,000 reporting); per Occurrence in respect of property in Course of Inland Transit; 2,500,000 per Occurrence in respect of Miscellaneous Unnamed Locations, except: 500,000 Excluded. per Occurrence in respect of Flood; Excluded. per Occurrence in respect of Earth Movement; Excluded. per Occurrence in respect of Named Storm; per Occurrence in respect of Valuable Papers and Records; 100,000 per Occurrence in respect of Personal Property Temporarily Off Premise. 100,000 Deductibles / Retentions For each Occurrence giving rise to a claim under this policy, the Insured agrees to retain for its own account an initial amount of: In respect of Damage to Insured Property: $350,000, Per Occurrence, except; $100,000, per Occurrence as respect Transit; In respect of Time Element loss (Extra Expense): 45 days per Occurrence except; 72 hours Per Occurrence in respect of Service Interruption 4.4 Operating and Reserve Accounts The Electric Revenue Fund and the Electric Improvement & Extension (I&E) Fund are the City’s two funds devoted to the Electric Division. The funds are used to manage cash and transactions related to utility operations and capital expenditures, respectively. Each fund includes certain cash accounts established to make moneys available for specific purposes when they are needed. The accounts maintained within the Revenue and I&E Funds are listed herein. City of Dover, Delaware 4-10 Burns & McDonnell

2014 Engineering Consultant’s Report Financial Assessment Electric Revenue Fund  Insurance Reserve Account  Contingency Reserve Account  Electric Rate Stabilization Reserve Account  Interest and Sinking Account Electric Improvement & Extension Fund  Depreciation Reserve Account  Future Capacity Reserve Account The following are descriptions of each Fund, their respective accounts and their purposes. 4.4.1 Electric Revenue Fund The Electric Revenue Fund was established in Section 503 of the Resolution. All revenues are to be deposited into the Electric Revenue Fund when received. Current expenses are to be paid and other accounts are to be maintained from the Electric Revenue Fund. Moneys are transferred from the Electric Revenue Fund to the Electric Rate Stabilization Reserve Account, the Interest and Sinking Account, the I&E Fund, the Depreciation Reserve Account, and the Future Capacity Reserve Account. 4.4.1.1 Insurance Reserve Account The Insurance Reserve Account was established by the City to fund insurance deductibles in the event of loss(es) covered by the City’s insurance policies then in effect. The target minimum balance in the Insurance Reserve is $350,000. The reserve balance at the end of FY 2013 was $733,043. Dover will be proposing raising the minimum balance from $350,000 to $750,000 per insurance carrier recommendation in order to reduce premiums. This proposal will be taken to City Council in 2014. 4.4.1.2 Contingency Reserve Account The Contingency Reserve Account was established by the City in FY 2003 to provide for unplanned expenditures that may not be avoidable. The City’s Financial Policies require that a minimum balance be maintained in the Contingency Reserve Account equal to 1.0 percent of the current year revenues for the Electric Revenue Fund. The FY 2013 year-end balance was $814,236, which is equal to 0.92 percent of the FY 2013 revenues for the Electric Revenue Fund. City of Dover, Delaware 4-11 Burns & McDonnell

2014 Engineering Consultant’s Report Financial Assessment 4.4.1.3 Electric Rate Stabilization Account The Electric Rate Stabilization Reserve Account was established in FY 2005 to offset the costs of the power cost adjustment to the customers of Dover. The account’s target balance is a minimum of 3.0 percent, not to exceed 10.0 percent, of purchase power cost in any given year. Any excess of this amount will be refunded to customers in future years by reducing the rate of the power cost adjustment. The account’s FY 2013 end-of-year balance was $17,382,124, which was 31.2 percent of the FY 2013 purchased power cost. 4.4.1.4 Interest and Sinking Account The Interest and Sinking Account was established in Section 507 of the Resolution. This account consists of two restricted accounts: the Bond Service account and the Reserve Account. The Bond Service Account is funded with equal monthly transfers from the Electric Revenue Fund such that the balance, as of each payment date for interest or for principal and interest, will be equal to the amount of the payment due. The payments of principal and interest due on bonds are made from the Bond Service Account. The Reserve Account is funded by transfers from the Electric Revenue Fund, as necessary, to maintain a balance equal to the maximum combined principal and interest for any future fiscal year through the life of all bonds then outstanding. Moneys in the Reserve Account are used for paying interest on and principal of bonds when the balance in the Bond Service Account is insufficient for making those payments. Excess moneys in the Reserve Account are also used towards paying current interest payments. The total amount in the Restricted Accounts for the 2008 and 2010 bonds as of June 30, 2013, was $3,522,833. 4.4.2 Electric Improvement and Extension Fund The I&E Fund was established in Section 507 of the Resolution. Funds are added to the I&E Fund from the Electric Revenue Fund to the extent that the amount of funds available from the Electric Revenue Fund exceeds the total of the amounts required to be added to the Interest and Sinking Account. The I&E Fund also receives additional funding from the Depreciation Reserve Account, the Future Capacity Reserve Account, and from development receipts. Section 510 of the Resolution indicates that, except for certain situations, moneys held in the I&E Fund are to be used only for payment of costs of unusual maintenance or repairs, renewals or replacements, obtaining or replacing equipment, constructing extensions, additions, or improvements, and engineering expenses related to the foregoing activities. 4.4.2.1 Depreciation Reserve Account The Depreciation Reserve Account represents moneys that have been set aside for the sole purpose of funding renewals and replacements of the Electric System as components or equipment wear out, City of Dover, Delaware 4-12 Burns & McDonnell

2014 Engineering Consultant’s Report Financial Assessment deteriorate, or otherwise become unsuitable for the intended purpose. Transfers from the Electric Revenue Fund and investment earnings are the only sources of additional moneys for the Depreciation Reserve Account. Transfers to the I&E Fund are made as necessary to fund capital projects. The target appropriation for the Depreciation Reserve Account each year is the excess of depreciation expense for the year over the amount of principal included in debt service payments made during the year. The reserve balance at the end of FY 2013 was $9,855,704. 4.4.2.2 Future Capacity Reserve Account The Future Capacity Reserve Account was established to set aside and accumulate funds from the Electric Revenue Fund for use in evaluating and pursuing activities related to the Electric Division’s alternatives for power supply resources for future demand for electricity. The original target balance for this reserve was $5,000,000. The reserve balance at the end of FY 2013 was $10,004,190. Table 4-8 presents FY 2011 through FY 2013 year-end summaries of the activity within the cash accounts described above. The Insurance Reserve Account, the Contingency Reserve Account, the Electric Rate Stabilization Reserve Account, and the Interest and Sinking Account are accounts within the Electric Revenue Fund. The Depreciation Reserve Account and the Future Capacity Reserve Account are accounts within the I&E Fund. City of Dover, Delaware 4-13 Burns & McDonnell

2014 Engineering Consultant’s Report Financial Assessment Table 4-8: Reserve Account Activity and Balances Insurance Contingency Electric Rate Bond Depreciation Future Reserve Reserve Stabilization Reserve Reserve Capacity Account Account Account Account Account Account Year Ended June 30, 2011 Balance in Account on July 1 $ 396,530 $ 1,039,766 $ 4,776,519 $ 3,337,822 $ 8,021,155 $ 9,023,928 Receipts Interest Earned 6,804 17,022 83,648 108,706 141,066 154,843 Appropriations - - 1,300,000 3,588,881 2,250,000 - Total Funds Available $ 403,334 $ 1,056,788 $ 6,160,167 $ 7,035,409 $ 10,412,221 $ 9,178,771 Disbursements Debt Service Payments - - - (3,516,027) - - Transfer to Capital Projects - - - - - Balance in Account on June 30 $ 403,334 $ 1,056,788 $ 6,160,167 $ 3,519,382 $ 10,412,221 $ 9,178,771 Year Ended June 30, 2012 Balance in Account on July 1 $ 403,334 $ 1,056,788 $ 6,160,167 $ 3,519,382 $ 10,412,221 $ 9,178,771 Receipts Interest Earned 4,661 14,026 69,966 3,451 129,837 126,711 Appropriations - - 5,000,000 - - - Total Funds Available $ 407,995 $ 1,070,814 $ 11,230,133 $ 3,522,833 $ 10,542,058 $ 9,305,482 Disbursements Debt Service Payments - - - (500,000) - Transfer to Capital Projects (70,730) - (1,000,000) - (300,000) 500,000 Balance in Account on June 30 $ 337,265 $ 1,070,814 $ 10,230,133 $ 3,522,833 $ 9,742,058 $ 9,805,482 Year Ended June 30, 2013 Balance in Account on July 1 $ 337,265 $ 1,070,814 $ 10,230,133 $ 3,522,833 $ 9,742,058 $ 9,805,482 Receipts Interest Earned 10,178 16,022 151,991 3,224 172,146 153,208 Appropriations 385,600 - 12,400,000 3,375,534 - 2,100,000 Total Funds Available $ 733,043 $ 1,086,836 $ 22,782,124 $ 6,901,591 $ 9,914,204 $ 12,058,690 Disbursements Debt Service Payments - (272,600) - (3,375,534) (58,500) (54,500) Transfer to Capital Projects - - (5,400,000) - - (2,000,000) Balance in Account on June 30 $ 733,043 $ 814,236 $ 17,382,124 $ 3,526,057 $ 9,855,704 $ 10,004,190 City of Dover, Delaware 4-14 Burns & McDonnell

5.0 – CONCLUSIONS

2014 Engineering Consultant’s Report Conclusions 5.0 CONCLUSIONS In the preparation of this Engineering Consultant’s Report, Burns & McDonnell completed assessments of the electric generating stations and the transmission and distribution system of the City Electric Division. The investigations included interviews, observations, and reviews of FY 2013 expenditures and FY 2014 budgets. In addition, an analysis of the balances of the Improvement and Extension Fund and other funds benefiting the Electric Division was performed. Burns & McDonnell also reviewed the adequacy of the revenues provided by the current retail rates in relation to the requirements of the City of Dover, Delaware Resolution Authorizing and Securing Electric Revenue Bonds, adopted December 23, 1985. A high level assessment of the City’s insurance coverage related to the Electric Division was also completed. Based on these reviews and assessments, it is Burns & McDonnell’s opinion that: 1. The City’s power generation facilities are being operated and maintained consistent with accepted electric utility practice in the United States. 2. The design, construction, operation, and maintenance of the City's electric transmission and distribution system and the associated facilities are consistent with current generally accepted electric utility standards and over the past few years. The system has been upgraded in order to improve operation and service to customers. 3. The Electric Division capital projects included in the City’s Capital Investment Plan and the FY 2014 Operating Budget are necessary and should provide improved reliability and power quality for the Electric System. 4. The balances as of June 30, 2013 for the various reserve funds maintained by the City for the Electric Division appear to be sufficient for their defined purposes. 5. The insurance coverage in full force and affect as maintained by the City related to the various assets of the Electric Division appears to satisfy the requirements of Section 706 of the Resolution. 6. The electric revenues generated by the City’s current retail rates are more than sufficient to fulfill the debt service coverage requirement defined in Section 502(c) of the Resolution. City of Dover, Delaware 5-1 Burns & McDonnell

Burns & McDonnell World Headquarters 9400 Ward Parkway Missouri City, MO 64114 Phone: 816-333-9400 Fax: 816-333-3690 www.burnsmcd.com Burns & McDonnell: Making our clients successful for more than 100 years

The Energy Authority, Inc. Monthly Management Committee Update – April 2014 May 22, 2014 Prepared by: Robert Trinnear Client Services Manager 904.360.1309 rtrinnear@teainc.org

TABLE OF CONTENTS I. Executive Summary 1 II. Budget Report 12 III. Operations Management 15 IV. Appendix 29 i

I. Executive Summary A. Power Supply Summary: Overall Power Supply costs were $267,987 under budget due to lower hedge prices and a prior month adjustment which lowered energy costs. Dover’s budgeted cost for all power supply (capacity AND energy) was $83.79/MWh. The actual cost of all power supply (capacity AND energy) was $80.06/MWh. The cost of energy alone was $42.63/MWh, versus a budgeted energy cost of $49.20. Dover’s hedge purchases totaled 41,280 MWh, which was 79% of the actual load. The budgeted hedge purchase totaled 26,720, which was 50% of the budgeted load. Dover’s power purchases from hedge transactions totaled $1,977,556. Purchases from PJM (energy and fees) totaled $593,382 which included DA Energy purchases totaling $154,447 and Reactive Services Charges totaling $116,655. Dover’s total load was 52,517 MWh versus a forecasted load of 53,377 MWh. Dover’s planned energy purchase from the SunPark solar installation was 2,100 MWh. Dover’s actual energy purchase from the SunPark installation was 1,999 MWh. 1

Supply Source Summary: Supply Variance: Budget Actual Variance Gross Load 53,377 52,517 860 Wholesale Load 51,277 50,518 759 Hedged Volume (MWh) 26,720 41,280 (14,560) Unhedged Volume (MWh) 24,557 9,238 15,319 Dover SunPark Volume (MWh) 2,100 1,999 101 Renewable Energy Credits Volume 315 202 113 Hedged Cost ($/MWh) $ 55.67 $ 47.91 $ 8 Unhedged Energy Cost ($/MWh) $ 38.93 $ 6.10 $ 33 Solar Energy Cost ($/MWh) $ 87 $ 102 $ (15) Energy Costs ($/MWh) $49.20 $42.63 $6.57 All-in Costs - Energy, Capacity and RECs ($/MWh) $83.79 $80.06 $3.73 2

B. Generation Summary: Dover generated 1032 MWh in the month. Net generation revenue was $865,107 vs. a budget of $909,320. 3

Generation Breakdown: City of Dover Monthly Wholesale Generation April 2014 Net Generation 1031.91 All In Generation PJM - Generation Economic and Reliability Dispatch $ 61,669.61 Generation Capacity Credit $ 1,286,250.00 Black Start and Transmission Losses $ 45,238.81 Natural Gas & Oil Consumption Purchases for Generation $ (67,156.02) Natural Gas Transport $ (9,230.25) Eastern Shore Cashout $ 4,053.10 Oil Consumption $ - Production Margin PJM - Generation Economic and Reliability Dispatch $ 61,669.61 Natural Gas & Oil Consumption Purchases for Generation $ (67,156.02) Natural Gas Transport $ (9,230.25) Eastern Shore Cashout $ 4,053.10 Oil Consumption $ - Gross Production Margin $ (10,663.56) $/MWh Generation Production Gross Margin $ (10.33) 4

C. Emissions Summary: Emissions Allowance Summary through April 30, 2014 McKee Run3 did operate during the month of April for testing, so there were additional emissions during this period. CAIR EMISSION ALLOWANCE SUMMARY SO2 NOx Allowances1 Date Action Allowances Seasonal Annual 1/1/09 2008 Carryover 3,240 0 0 1/1/09 2009 Allocation 2,723 53 80 2/1/10 2010 Allocation 2,039 50 78 1/1/11 2011 Allocation 1,988 49 78 4/1/11 2011 Reallocation 2 4 1/11/12 2012 Allocation 1,988 51 80 10/4/2012 2013 Allocation 1,988 49 76 2014 Allocation 1,988 49 76 9/29/09 SO2 Sales (1,500) 11/12/09 NOx Ann. Sales (45) 11/13/09 SO2 Sales (1,410) 11/20/09 NOx Seas. Sales (25) 12/31/09 2009 Emissions2 (1) (6) (13) 12/31/10 2010 Emissions 0 (54) (54) 10/31/10 EPA Linearity Testing Req. (68) (68) 2011 2010 Deficit NOx Purchases 53 22 Aug 2011 Revised 2010 ECMPS data 30 30 Nov 2011 NOx Seas. Sales (DEMEC) (1) 12/31/11 2011 Emissions2 (1) (32) (36) 12/31/12 2012 Emissions2 (1) (37) (37) Nov 2012 NOx Seas. Sales (DEMEC) (2) 2/13/2013 NOx Annual. Sales (DEMEC) (3) 11/15/13 NOx Annual Sales (DEMEC) (5) 12/31/13 C.Y.T.D. 2013 Emissions (0) (20) (20) 4/30/14 2014 YTD Emissions (1) 0 (8) REMAINING ALLOWANCES 13,040 99 242 On August 21, 2012, a three-judge panel of the U.S. District Court of Appeals (DCA) in Washington vacated EPA’s Cross State Air Pollution Rule (CSAPR) which would have become effective on January 1, 2012. The DCA instructed EPA to continue 1 Per CAIR, starting in 2009, NOx emissions are governed by a seasonal and annual program. 2 Under CAIR, pre-CAIR SO2 allowances are retired at a rate of 2 allowances for each ton emitted. It is assumed that pre-CAIR allowances will be retired before CAIR allowances. 5

administering the Clean Air Interstate Rule (CAIR). EPA appealed the DCA ruling to the U.S. Supreme Court, which heard arguments on December 10th, 2013. On April 29th, 2014, the U.S. Supreme Court overturned the DCA opinion; however it did not immediately reinstate CSAPR. It sent the rule back to the DCA for further action consistent with the Supreme Court’s opinion. EPA will continue to administer CAIR until the DCA takes action and EPA is able to respond. Market liquidity for CAIR allowances continues to be low, with few transactions occurring. The following table shows estimated values for Dover’s banked allowances, based on settlement prices on the Intercontinental Exchange (ICE). Mark-to-Market for CAIR Allowances (May/16/2014) Commodity $/Ton Tons Extended (Bid/Offer Avg.) Value SO2 Allowances (2009 & earlier) $ 1.35 5,089 $ 6,870 SO2 Allowances (2010-13) $ 0.85 7,951 6,758 NOx Allowances - Seasonal $23.00 99 2,277 NOx Allowances - Annual $53.00 242 12,826 TOTAL $28,731 Regional Greenhouse Gas Initiative The State of Delaware is a participant in the Regional Greenhouse Gas Initiative (RGGI). The City of Dover must comply with RGGI by surrendering carbon dioxide (CO2) allowances pursuant to the State of Delaware’s laws (Title 7, Chapter 60, Sub-Title II-A). Delaware has elected a combined emissions allowance allocation/auction mechanism for RGGI, in which 40% of CO2 allowances were allocated to sources for 2009, declining by 8% per year so that by 2014, all CO2 allowances are auctioned. Dover had more than a sufficient number of RGGI allowances allocated to it to cover its requirements through the first compliance period (calendar years 2009-2011). Any unused allowances are carried over (“banked”) for subsequent years. The table below shows RGGI allowance allocations, deductions and the cumulative balance by year (column 8). 6

CO2 Allowance Summary (2/28/2014) 1 2 3 4 5 6 7 8 CO2 Allowances Annual CO2 CO2 (Per Facility, Allocated Cumulative CO2 Tons CO2 Allowance Allowances Prior to Sale) CO2 Vintage Sold YTD Allowances Emitted Allowance Balance McKee Balance VanSant Run 2009 0 60,128 2,056 62,184 (5,796) 56,388 56,388 2010 0 48,102 1,645 49,747 (32,971) 16,776 73,164 2011 0 36,077 1,234 37,311 (17,763) 19,548 92,712 2012 0 27,058 925 27,983 ( 15,265) 11,793 104,505 3 2013 0 15,032 514 24,818 (10,231) 16,091 119,091 2014 0 -0- -0- -0- (5,344) 113,748 Dover no longer receives allocations of RGGI allowances. The Cumulative Balance (column 8) – aka “Banked Allowances”) can be utilized for generation in 2014 and future years. Once the banked allowances have been fully utilized, Dover will be required to purchase RGGI allowances through the auctions or through over-the-counter markets. Assuming that Dover does not sell any banked allowances, it will be able to maintain a positive balance through 2016–2025, depending on actual annual energy production in 2012 and beyond. On February 7, 2013, RGGI proposed changes to its Model Rule. The Delaware Department of Natural Resources published the final rule on December 1, 2013 the Delaware Register of Regulations with an effective date of December 11, 20134. The new RGGI rule includes a provision which eliminates some portion of banked allowances in future years. Dover could elect to sell all or a portion of its banked allowances now and re-acquire allowances at a later date; however TEA is currently of the opinion that Dover will be better off retaining its banked allowances for use during future compliance years. The most recent RGGI auction occurred on March 5th, 2014; the auction cleared at $4.00/ton. The next auction will occur on June 4th, 2014. RGGI futures settlement prices posted on Intercontinental Exchange (ICE) on May 16th, 2014 ranged from $4.45 to $4.70/ton, depending settlement month and vintage. Based on the May 16th, 2014 3 Includes Q3 2013 allocations of 7,846,757 for McKee Run and 1,424,677 for VanSant. 4 http://regulations.delaware.gov/register/december2013/final/17%20DE%20Reg%20644%2012-01-13.pdf 7

ICE for June, 2014, Vintage 2013 ($4.47/ton), the value of Dover’s existing 114,634 ton RGGI allowance bank is $512,414. Renewable Energy Certificates Dover owns two photovoltaic systems totaling 15 kW, consisting of (one 5 kW unit at the Utilities Administration Building and two 5 kW units at the McKee Run generating station. Dover also receives solar energy produced by the 10 MW Dover Sun Park which is owned by White Oak Solar Energy, LLC. In addition to the all of the physical energy produced by the Sun Park, Dover receives 15% of Sun Park’s SRECS. Through the end of February 2014, Dover has accumulated a total of 7,004 SRECS from these renewable energy resources. The nearest viable market for Dover’s SRECs is Pennsylvania. Pennsylvania’s April 15, 2014 SREC auction cleared separately for 2012/2013 through 2013/2014 vintage allowances. Clearing prices and Dover’s SREC market value estimate are shown in the table below. SREC Vintage Auction Clearing Price SREC Quantity Market Value (June 1 – May 31) $ 4.01 2010/2011 13 $ 52 (Aug-13 Auction) $ 40.01 2011/2012 2,375 95,024 (Jan 2014 Auction) $40.00 2012/2013 2,725 109,000 (April 2014 Auction) $51.00 2013/2014 2,095 106,845 (April 2014 Auction) TOTAL 7,208 $310,921 TEA continues to recommend to Dover to retain these allowances for compliance with its Renewable Portfolio Standard which DEMEC is working on. Once Dover has an approved RPS in place, it may be required to retire a portion of its current SREC balance for compliance in the 2012/13 future compliance year. Any remaining SRECs could be used for the 2013/14 compliance year. NOTE: SRECs in both Delaware and Pennsylvania expire without value after 3 years. Dover currently has thirteen (13) 2010/2011. Based on a recent discussion with DEMEC staff, this expiration provision is not likely to be of concern within the current compliance year. If Dover has not accumulated adequate non-solar RECs, it will need to acquire some from DEMEC for the 2013/2014 compliance year. DEMEC has told TEA that it will likely have sufficient non-solar RECs for Dover’s requirements. Dover can purchase and retire a portion of these non-solar RECs during the current compliance and fiscal years, 8

or it can defer acquisition until the June – August, 2014 time frame, after the exact amount of non-solar REC requirements is known. D. Operations Management Summary: During the month of April, there were no restricted work days or lost time accidents. The facility has now gone 3 years and 196 days (1,291 days) through April, 2014 without an OSHA Recordable Accident or a Lost Time reportable accident. There were no Near Miss incidents during the month. The plant received no Notice of Violations (NOVs) during the month. The April (March Discharge) DMR was submitted for the McKee Run site with no NPDES exceedences. There were no opacity deviations during the month. During the month of April, there was one IWW discharge to the Kent County Sewer. Sampling occurred on 4/21/2014 and laboratory analytical data is expected the week of May 16, 2014.The March SIU Report was submitted to Kent County. The DNREC SLEIS (Air Emission Inventory Report) was submitted on April 30, 2014. Plant-wide hearing and respiratory testing was completed. Four individuals attended the annual DOT/RCRA refresher course on April 17, 2014. E. Risk Management Summary: Forward power prices in PJM are higher than last month, especially later in the hedging time horizon. The current projected cost of service is below: Blended Cost Monthly Change PY Hedge Ratio ($/MWh) ($/MWh) 2013-14 79% $ 51.17 $ (0.81) 2014-15 70% $ 46.58 $ (0.39) 2015-16 55% $ 43.92 $ 0.38 2016-17 18% $ 43.56 $ 0.93 2017-18 10% $ 45.37 $ 1.39 9

II. Budget Report Variance Report: Budget Actual Variance Apr-14 Apr-14 Gross Load 53,377 52,517 860 Power Supply Hedged Energy $1,487,372 $1,977,556 ($490,184) PJM - Energy, Congestion & Losses $955,908 $56,383 $899,525 PJM - ARR, Transmission and Fees $395,000 $536,999 ($141,999) Dover SUN Park Energy $182,770 $204,781 ($22,011) Dover SUN Park RECs $25,000 $28,882 ($3,882) Management Fees $83,000 $83,000 $0 PJM - Capacity UCAP Obligated Purchased $1,343,442 $ 1,316,904.00 $26,538 Subtotal - Power Supply $4,472,492 $4,204,505 $267,987 Power Generation O&M Plant O&M $407,510 $455,718 (48,208.00) Subtotal Generation O&M $407,510 $455,718 ($48,208) Power Generation Production Margin PJM - Economic and reliability dispatch $0 ($61,670) $61,670 Fixed Fuel and Transport Charges $0 $72,333 ($72,333) Subtotal Generation Production Margin $0 $10,664 ($10,664) Power Generation Non-Production Revenue PJM - Generation Capacity Credit ($1,286,250) $ (1,286,250.00) $0 Emissions Allowance Sales $0 $ - $0 PJM - Black Start & Transmission Losses ($30,580) $ (45,238.81) $14,659 Subtotal - Non-Production Revenue ($1,316,830) ($1,331,489) $14,659 SubTotal - All Generation ($909,320) ($865,107) ($44,213) Total - Utilities Cost $3,563,172 $3,339,398 $223,774 Unit Costs Total - Power Supply $83.79 $80.06 $3.73 Total - Power Generation ($17.04) ($16.47) ($0.56) Final Cost of Service to City of Dover Ratepayers $66.75 $63.59 $3.17 10

Variance Analysis: Power Supply  Dover consumed 860 MWh less than forecast for the month.  PJM energy costs were lower than expected as below budget market prices occurred during the month. Hedged costs were higher than forecasted due to an additional layering in of hedges. PJM Fees were higher than budget.  Hedges were placed at below budget levels and lower market prices offset the higher fees. This resulted in a net power supply cost of $80.06/MWh, $3.73/MWh below budget.  For the month, the city realized a favorable variance of $267,987 for power supply vs. the monthly budget.  Dover Sun Park generated 101 MWh less than forecast. Generation  Power generation had an unfavorable budget variance of $44,213.  Plant O&M expenses had an unfavorable budget variance of $48,208 for the month. 11

YTD Variance Report: Budget Actual Variance YTD YTD Gross Load 616,999 638,850 (21,851) Power Supply Hedged Energy $20,907,344 $24,506,047 ($3,598,703) PJM - Energy, Congestion & Losses $10,083,536 $14,251,611 ($4,168,075) PJM - ARR, Transmission and Fees $3,950,000 $6,676,599 ($2,726,599) Dover SUN Park Energy $1,195,473 $1,380,541 ($185,068) Dover SUN Park RECs $250,000 $295,076 ($45,076) Management Fees $830,000 $830,000 $0 PJM - Capacity UCAP Obligated Purchased $13,613,549 $13,361,950 $251,599 Subtotal - Power Supply $50,829,902 $61,301,825 ($10,471,922) Power Generation O&M Plant O&M $4,418,905 $4,451,516 ($32,611) Subtotal Generation O&M $4,418,905 $4,451,516 ($32,611) Power Generation Production Margin PJM - Economic and reliability dispatch ($230,472) ($5,432,915) $5,202,443 Fixed Fuel and Transport Charges $0 $2,199,196 ($2,199,196) Subtotal Generation Production Margin ($230,472) ($3,233,718) $3,003,247 Power Generation Non-Production Revenue PJM - Generation Capacity Credit ($13,034,000) ($13,034,000) $0 Emissions Allowance Sales $0 $0 $0 PJM - Black Start & Transmission Losses ($335,800) ($1,062,510) $726,710 Subtotal - Non-Production Revenue ($13,369,800) ($14,096,510) $726,710 SubTotal - All Generation ($9,181,367) ($12,878,713) $3,697,346 Total - Utilities Cost $41,648,536 $48,423,112 ($6,774,576) Unit Costs Total - Power Supply $82.38 $95.96 ($13.57) Total - Power Generation ($14.88) ($20.16) $5.28 Final Cost of Service to City of Dover Ratepayers $67.50 $75.80 ($8.30) 12

III. Operations Management NAES Corporation Dover, Delaware April 2014 Monthly Report Unit 3 Turbine Undergoing Overhaul in Spring 2014 13

Table of Contents 1.0 Environmental, Health, and Safety 2.0 Financial 3.0 Operations 4.0 Maintenance 5.0 CIP 6.0 General Plant Information 7.0 Summary of NAES Performance 14

1.0 Environmental, Health and Safety: During the month of April, there were no restricted work days or lost time accidents. The facility has now gone 3 years and 196 days (1,291 days) through April, 2014 without an OSHA Recordable Accident or a Lost Time reportable accident. There were no Near Miss incidents during the month. The plant received no Notice of Violations (NOVs) during the month. The April (March Discharge) DMR was submitted for the McKee Run site with no NPDES exceedences. There were no opacity deviations during the month. During the month of April, there was one IWW discharge to the Kent County Sewer. Sampling occurred on 4/21/2014 and laboratory analytical data is expected the week of May 16, 2014.The March SIU Report was submitted to Kent County. The DNREC SLEIS (Air Emission Inventory Report) was submitted on April 30, 2014. Plant-wide hearing and respiratory testing was completed. Four individuals attended the annual DOT/RCRA refresher course on April 17, 2014. Environmental, Health, and Safety Statistics Month Fiscal Year to Date (April) (7/1/13-6/30/14) NOVs 0 0 Opacity Deviations 0 11 Environmental Deviations 0 0 OSHA Recordable 0 0 OSHA LTA's 0 0 First Aid cases 0 0 Restricted Workday Accident 0 0 Near Miss 0 2 Man Hours Worked 4,926.50 43,743.00 Date last OSHA Recordable 10/14/10 Date last Lost Time Accident 10/14/10 Days since last OSHA recordable 1,291 Days since last Lost Time Accident 1,291 15

Emissions (NOx, CO2 & SO2) All data thru 4/30/14 NOx Summary – Ozone Season (May-Sep) Tons Year Unit #1 Unit #2 Unit #3 Unit #11 TOTAL 2011 1.8 1.5 31.4 1.4 36.1 2012 1.2 1.0 35.8 1.0 33.1 2013 1.1 1.7 19.3 1.3 23.4 2014 0.0 0.0 0.0 0.0 0.0 NOx Summary - Year (Jan-Dec) Tons Year Unit #1 Unit #2 Unit #3 Unit #11 TOTAL 2011 1.8 1.5 32.6 2.9 38.8 2012 1.2 1.1 35.8 1.0 36.9 2013 1.1 1.7 19.4 1.3 23.5 2014 0.5 0.5 4.8 2.9 8.7 SO2 Summary - Year (Jan-Dec) Tons Year Unit #1 Unit #2 Unit #3 Unit #11 TOTAL 2011 0.0 0.0 0.1 0.5 0.6 2012 0.0 0.0 0.0 0.1 0.1 2013 0.0 0.0 0.0 0.2 0.2 2014 0.0 0.0 0.4 0.6 1.1 CO2 Allowances Summary CO2 CO2 CO2 Allowances Available Total CO2 CO2 Allowance Allowances (Per Facility, Prior to Tons Emitted Allowance Vintage Sold YTD Sale) Balance McKee Run VanSant 2009 0 60,128 2,056 5,796 56,388 2010 0 48,102 1,645 32,971 16,776 2011 0 36,077 1,234 17,763 19,548 2012 0 27,058 925 15,265 11,793 2013 0 22,879# 1,939# 10,231 14,587 2014 0 0 0 5,344 (5,344) Total CO2 Allowance Balance 113,748 *Note: CO2 allowance values are provided by the RGGI CO2 Allowance Tracking System. Note: All emissions (NOx, SO2 and CO2) totals for 2013 are unofficial. #Note: Additional CO2 Emission Values were added to 2013 balances by RGGI COATS- 7,846.757 for McKee Run and 1,424.677 for VanSant 16

CAIR NOx Allowances Summary* NOx Allowances CAIR CAIR NOx Available Total NOx NOx Allowance Balance CAIR NOx NOx Allowances (Per Facility, Prior to Tons Emitted Allowances Allowance Sold YTD Sale) (Yr/ Season) Purchased Vintage McKee McKee VanSant YTD VanSant Run McKee Run - Run (Yr/Season) (Yr/Season) (Yr/Season) VanSant (Yr/Season) 2010 and 3*** 27/0 0/2 earlier 2011 0 77/48 5/3 33/31– 3/1 0/0 - 0/0 42/10 2/2 2012 2** 75/46 5/3 36/36 – 1/1 0/0 - 0/0 39/10 2/0 2013 5** 77/48 5/3 19/19 – 1/1 0/0 - 0/0 58/24 4/2 2014 0 71/46 5/3 5/0 - 3/0 0/0 – 0/0 66/46 2/3 Total NOx Allowance Balance 232/90 10/9 *Note – Emissions allowances are deducted according to oldest vintage first or unless otherwise directed. **Note – The facility transferred Ozone Season allowances to a third party. SO2 Allowances Summary SO2 Allowances Available Total SO2 Tons (Per Unit, Prior to Sale & Emitted – SO2 Allowances SO2 Allowance SO2 Allowances Reconciliation) U3 and U11 Balance Vintage Sold - YTD Unit #3 Unit #11 YTD 2010 and earlier 0 4815 276 0 5089 2011 0 1850 138 1 1988* 2012 0 1850 138 1 1988* 2013 0 1850 138 0 1988* 2014 0 1850 138 1 1987 Total SO2 Allowance Balance 13,040 *Note – Emissions allowances are deducted according to oldest vintage first, unless otherwise directed. 17

2.0 Financial Financial – Current Month Month – April Actual Budget Variance Personnel 243,667 257,110 13,443 Materials & Supplies 17,351 16,610 (741) Administrative Expenses 194,700 132,690 (62,010) Total $455,718 $406,410 ($49,308) Financial – Fiscal Year to Date Number of Months – 10 Actual Budget Variance Personnel 2,469,215 2,707,210 237,995 Materials & Supplies 164,841 196,275 31,434 Administrative Expenses 1,637,495 1,514,800 (122,695) Total $4,271,551 $4,418,285 $146,734 2.1 Variance analysis: The actual expenses for the month of April are $455,718 against a budgeted amount of $406,410 for an unfavorable variance of $49,308 or 12.13%. The variance was due to the following: PERSONNEL EXPENSES – A favorable monthly variance of $13,443 was due to having a less overtime and corresponding Labor Burdens. Overtime reduction resulted from not filling shifts to full complement where vacancies due to flex time occurred. MATERIALS AND SUPPLIES EXPENSES- An unfavorable monthly variance of $741 was due to the timing of the water – sewer invoices. There were two (2) months invoiced during the billing period for April. ADMINISTRATIVE EXPENSES – An unfavorable monthly variance of $62,010 due primarily to the timing of electricity monthly invoices and invoices for operator training that were originally budgeted in May. There were two (2) months of electricity costs invoiced during the billing period for April. The forecasted expenses for this fiscal year are $5,809,593 expensed versus an approved budget of $6,015,800 thereby realizing a 96.57% expenditure rate. 18

3.0 Operations Unit Operations / Outages / Trips; All units have been on spring outage since 0700 hours on March 3, 2014. Unit 3 has been run for testing four (4) times in the month of April to try to balance the turbine generator after repairs had been made to the unit during the overhaul. Month April 2014 McKee McKee McKee MRS VanSant Total Unit 1 Unit 2 Unit 3 Facility Unit 11 All Units Capacity MW 17 17 102 136 39 175 On Line Hours Hrs 0.0 0.0 24.732 24.732 0.0 24.372 Starts # 0 0 4 4 0 4 Gross Generation MWh 0.0 0.0 1,150.878 1,150.878 0.0 1,150.878 Net Generation MWh 0.0 0.0 1,040.065 1,040.065 0.0 1,040.065 Total Auxiliaries MWh 0.0 0.0 395.739 395.739 0.0 395.739 Auxiliaries purchased MWh 22.960 22.960 284.926 330.846 3.185 334.031 Fuel Gas Used MMBTU 0.0 0.0 14,310.388 14,310.388 0.0 14,310.388 Fuel Oil Used MMBTU 0.0 0.0 0.0 0.0 0.0 0.0 Fuel Oil Used Gallons 0.0 0.0 0.0 0.0 0.0 0.0 Total Fuel MMBTU 0.0 0.0 14,310.388 14,310.388 0.0 14,310.388 Net Heat Rate BTU/KWh 0.0 0.0 13.759 13.759 0.0 13.759 Unit Trips # 0.0 0.0 0.0 0.0 0.0 0.0 Capacity Factor % 0.00 0.00 0.00 0.00 0.00 0.00 Availability Factor % 0.0 0.0 0.0 0.0 0.0 0.0 Commercial % 0 0 0 0 0 0 Unavailability (CU) Planned Outage Hours Hours 720.00 720.00 720.00 2,160.00 720.00 2,880.00 Maintenance Outage Hours 0.0 0.0 0.0 0.0 0.0 0.0 Hours Forced Outage Hours Hours 0.0 0.0 0.0 0.0 0.0 0.0 Reserve Shutdown Hours 0.0 0.0 0.0 0.0 0.0 0.0 Hours HW Boiler Gas Usage MMBTU 0.0 0.0 Pilot Gas Usage MMBTU 0.0 0.0 0.0 0.0 # Note: Does not include HWB or Pilot Gas. Fuel usage numbers are taken from fuel flow instruments. 19

2013-2014 Fiscal Year-to-Date - April McKee McKee McKee MRS VanSant Total Unit 1 Unit 2 Unit 3 Facility Unit 11 All Units Capacity MW 17 17 102 136 39 175 On Line Hours Hrs 135.697 214.032 287.773 637.502 75.655 713.157 Starts # 7 7 20 34 20 54 Gross Generation MWh 959.877 1,413.560 17,575.585 19,949.022 2,615.094 22,564.116 Net Generation MWh 895.980 1,309.804 16,085.387 18,291.171 2,613.006 20,904.177 Total Auxiliaries MWh 358.547 463.504 3,313.873 4,135.924 40.967 4,176.891 Auxiliaries purchased MWh 337.273 379.803 1,824.119 2,541.195 38.150 2,579.345 Fuel Gas Used MMBTU 8,924.901 15,004.575 160,565.972 184,495.448 19,584.819 204,080.267 Fuel Oil Used MMBTU 5,504.840 4,463.354 36,178.243 46,146.437 15,380.547 61,526.984 Fuel Oil Used Gallons 38,567 31,228 252,473 322,268 108,053 430,321 Total Fuel MMBTU 14,429.741 19,467.929 196,744.215 230,641.885 34,965.366 265,607.251 Net Heat Rate BTU/KWh 15.641 14.141 12.613 14.131 13.198 13.898 Unit Trips # 1 1 0 2 5 7 Capacity Factor % 0.72 1.06 2.16 1.84 0.92 1.64 Availability Factor % 60.84 61.94 61.94 61.57 61.94 61.66 Commercial % 0.95 0.04 0.01 0.13 0.0 0.10 Unavailability (CU) Planned Outage Hours Hours 2,777.00 2,777.00 2,777.00 8,331.00 2,777.00 11,108.00 Maintenance Outage Hours 0.0 0.0 0.0 0.0 0.0 0.0 Hours Forced Outage Hours Hours 80.000 0.0 0.0 80.000 0.0 80.000 Reserve Shutdown Hours 4,303.303 4,268.968 4,258.555 12,830.826 4,443.345 17,274.171 Hours HW Boiler Gas Usage MMBTU 6,203.127 6,203.127 Pilot Gas Usage MMBTU 2,375.134 4,694.627 7,069.761 7,069.761 Fuel Oil Inventory Monthly Monthly Fuel Monthly FY 13-14 Fuel FY 13-14 Inventory Inventory Purchases Inventory Inventory Purchases Inventory (Start) (End) (Month) (Change) (Start) (YTD) (Change) McKee Run (#2 Fuel Oil) 461,775 462,656 0 881 454,725 378,003 7,931 VanSant 72,561 72,814 0 253 146,133 35,000 (73,319) (#2 Fuel Oil) Note: As measured by tank level instruments. Tank levels may change due to oil temperature. VanSant Lifetime through April 2014 Actual Starts Factored Starts Fired Hours VanSant 1350 2,311.25 4,306.00 Since HGP - Dec 2004 257 643.55 922.42 20

Team Report: Operations personnel continue to support maintenance by working on Preventative Maintenance (PM) work orders and other work orders that they have the necessary skills to successfully complete the task. The Operations Department continues to utilize the Day Shift Worker in both the Operations and Maintenance areas to help in maintaining the plant. In addition, the Operations staff continues to support maintenance activities during the planned outage by serving as Confined Space Attendants for confined space areas as well as other support tasks. The Operations staff has also supported the outage Capacity Testing – FY 2013-2014 Summer 2013 (June 1- Aug 31) Winter 2013-2014 (Dec 1- Feb 28) Unit Rated Net Reported Net Unit Rated Net Reported Net Capability (MW) Capability (MW) Capability (MW) Capability (MW) 1 17 17.2 1 17 17.5 2 17 17.8 2 17 18.2 3 102 103.0 3 102 104.4 11 39 40.9# 11 39 44.05# Total 175 178.9 Total 175 184.1 Note: * Denotes Unit is qualified for the PJM Winter Demonstration Period Exemption Program and data has been submitted into the PJM eGADS Note: # Depicts Net Corrected Capacity for Ambient Air Conditions – VanSant Unit only by performing various LOTO tasks needed to test or place equipment in or out or service. 21

4.0 Maintenance During the month of April, the Plant Maintenance staff continued addressing the backlog of work orders. There were forty-six work orders issued with eighty-three work orders being completed during the month. No zero safety work orders were entered into the plant’s Computerized Maintenance Management System (MP2) during the month. The table below summarizes the monthly work order activities. Work Order Report April - 2014 Outstanding From Outstanding Previous Issued This Completed at the end of Priority # Month Month This Month the month 1 17 3 3 17 2 74 8 23 59 3 40 3 5 38 4 5 0 0 5 5 15 0 1 14 SW1 0 0 0 0 SW2 0 0 0 0 SW3 0 0 0 0 SW4 0 0 0 0 SW5 0 0 0 0 PM 100 32 51 81 EM 0 0 0 0 Totals 251 46 83 214 Note: PM Work Orders are included in the priority totals Notable activities during the month include: NAES Maintenance Staff completed the removal and replacement of the Units 1 and 2 boiler drain piping. The piping was replaced due to damage as a result of the lines freezing and cracking during a extreme cold spell this past winter. During the month, the turbine contractor completed the reassembly of the Unit 3 turbine. With the reassembly complete, a third party vibration monitoring vendor was contracted to perform vibration testing and balancing analysis. During the operation of the unit, it was determined that a shaft sealing steam packing rub was occurring which was part of the cause of the unit experience higher than normal vibration on the number three and two bearings. The turbine contractor team and NAES Maintenance staff removed the IP and LP hood to access the packing. The necessary repairs and adjustments were made to the packing and packing boxes and the equipment reassembled in preparation for further testing. 22

NAES IC&E Staff removed and replaced two charts recorders on Unit 3. The chart recorders were obsolete and replacement parts were no longer available for them. New digital recorders were installed and were tested for proper operation on all points. 5.0 Capital Improvement Projects (CIP) Project Description Update Number Progress: Cooling Tower decking is 100% complete. Inspection was conducted in March as a precursor for CIP work scope development next Unit #3 Cooling FY. EG1402 Schedule: Inspection work completion and work scope is being Tower Repairs modified to reflect deficiencies found during inspection. Bid requests and bid meeting to be set up for April-May time period. McKee Run Progress: Work planned for the Fall is 100% complete. Auxiliary Schedule: Remaining Fall outage items were completed in EG1404 Component December. Spring activities started in March. Replacement VanSant Station Progress: Work planned for the Fall is 100% complete. EG1405 Component Schedule: Project activities for this fiscal year have been completed. Replacement Progress: The recently completed hanger adjustments will need to be checked with the unit in the hot (running) position. McKee Run HEP Schedule: Final report was received which indicated one area that EG1406 Pipe Repairs should be addressed in the near future. Plans are underway to develop work scope to change out the section of pipe scheduled for the fall of 2014 Progress: Work scope is still being developed for an RFP. Metering System Schedule: Work activities are moving forward. Working with EG1407 Upgrades vendor to finalize RFP documents for release in late May or early June period. McKee Progress: Work scopes are being developed for RFP(s) to be put out EG1408 Run/VanSant Safety in June period. Will need to go out for bids once complete. Compliance Items Schedule: Work activities are behind due to Fall Outage activities. McKee Run Natural Progress: Work scheduled for the Spring Outage. EG1409 Gas Block-Bleed Schedule: Work activities are back on track for a Spring Outage Valves completion date. Expect to be complete in early May. McKee Progress: Plant staff completed development of paint specifications Run/VanSant and bid requests were received. EG1413 Structural Schedule: Bids were received in early September. Work is on hold Preservation due to budget restraints. Unit 3 Turbine Progress: Work commenced and is ongoing. Rotor was removed and EG1212 Repairs sent out to shop for 9th stage installation, inspection of the rotor, and 23

balancing and has been returned and reinstalled. Testing continues to determine balancing in-place. Schedule: Rotor returned and was reinstalled upon arrival. Testing of unit and balancing is underway. Progress: Cost to be incurred due to repairs on Unit 1 Boiler and McKee Run Units turbine were completed in November. EG1415 #1-#2 Component Schedule: Other scope activities being evaluated due to the Repairs announcement to stop operation of Units 1 and 2 in 2016. Progress: Submitted permit application to DNEC in March and currently discussing possible permit limitation. Constructions Bids were returned, evaluated and a recommendation provided to TEA VanSant Capacity EG1416 and to the COD. Approval of contractor is expected in early May. Increase Schedule: Construction vendor approval is on slate for early May COD Council Meeting. Continuing to work with DNRC on permit language and limits. 6.0 General Plant Information On April 4th, 2014, Senior Operator Ricardo Barber celebrated 20 years with the power plant. The plant held a congratulatory lunch in Rick’s honor on April 11, 2014. Training: Plant employees continue with General Physics safety training and environmental courses to enhance their overall knowledge of permit and safety requirements. Topics discussed during the monthly safety committee meeting were reviewed by the entire staff. The monthly safety topic was on “Ten Rules to Preserve Ten Fingers”. PJM Simulation training was completed on April 8-9 by a third party vendor. A total of six operators and one Operations supervisor attended from McKee Run plant. 24

Calendar of Events Date EIA-860 Report TBD EIA-923 Report TBD NPDES Permit Expires (DNREC has Extended) March 4, 2014 (TBD) Units 1, 2, and 3 Spring Outage March 3, 2014 – May 30, 2014 Unit 11 Spring Outage March 3, 2014 – May 30, 2014 Annual VanSant Black Start Test April, 2014 Air Emission Inventory April, 2014 NOx Ozone Season Starts May 1, 2014 PJM Summer Capacity Test Period June 1, 2014 – August 31, 2014 FY 2013-2014 Budget Year Ends June 30, 2014 Toxic Release Inventory (TRI) Annual Report July 1, 2014 Semi-Annual Title V Certification Due July 31, 2014 NOx Ozone Season Ends September 30, 2014 Units 1, 2, 3 and 11 Fall Outage October 1, 2014 Four Year Accident Free October 14, 2014 Winter Capacity Period December 1, 2014 to February 28, 2015 NOx Emissions Reconciliation Due March 1, 2015 SO2 Emissions Reconciliation Due March 1, 2015 SARA III / Tier II Report Due March 1, 2015 7.0 Summary of NAES Performance to Date Plant Performance FY 2013-2014 Measure Month Year to Date YTD FY Maximum Incentive Incentive Commercial 0.0% 0.10% $91,087 $94,882 Unavailability (CU) Safety 0 0 $17,790 $17,790 Environmental 0 0 $17,790 $17,790 Capacity Tests Summer Winter Summer Winter Completed Unit 1 No No Yes Yes $3,559 $3,559 Unit 2 No No Yes Yes $3,559 $3,559 Unit 3 No No Yes Yes $21,349 $21,349 Unit 11 No No Yes Yes $7,117 $7,117 Total YTD 97.71% Total YTD Incentive $162,249 $166,045 Incentive % Note: All units successfully completed the Summer and Winter Capacity (FY 2013-2104) Testing for PJM. 25

IV. Appendix 1 – PJM Invoice Breakdown Gen Load Grand Total 480-8102-592-95-49 Capacity Resource Deficiency ($2,826.00) ($2,826.00) Capacity Transfer Rights ($18,612.90) ($18,612.90) Incremental Capacity Transfer Rights ($1,632.90) ($1,632.90) Locational Reliability $1,339,975.80 $1,339,975.80 480-8102-592-95-49 Total $ 1,316,904.00 $ 1,316,904.00 480-8102-592-95-50 RPM Auction ($1,286,250.00) ($1,286,250.00) 480-8102-592-95-50 Total $ (1,286,250.00) $ (1,286,250.00) 480-8102-592-95-90 Auction Revenue Rights ($25,818.00) ($25,818.00) Balancing Operating Reserve $17,476.26 $17,476.26 Balancing Operating Reserve for Load Response ($19.19) ($19.19) Black Start Service $1,842.44 $1,842.44 CT Lost Opportunity Cost Allocation ($16.80) ($16.80) Day-Ahead Load Response Charge Allocation $2,285.96 $2,285.96 Day-ahead Operating Reserve $4,805.52 $4,805.52 Day-ahead Operating Reserve for Load Response $348.21 $348.21 Day-ahead Scheduling Reserve $1.12 $1.12 Demand Resource and ILR Compliance Penalty ($1,929.60) ($1,929.60) Expansion Cost Recovery $408.30 $408.30 FERC Annual Recovery $3,617.97 $3,617.97 Generation Deactivation Refund ($735.06) ($735.06) Load Management Test Failure ($42.90) ($42.90) Load Reconciliation for Transmission Losses $4,310.92 $4,310.92 Market Monitoring Unit (MMU) Funding $209.03 $209.03 Michigan - Ontario Interface Phase Angle Regulators $176.99 $176.99 Network Integration Transmission Service $316,178.40 $316,178.40 Non-Firm Point-to-Point Transmission Service ($424.66) ($424.66) Non-Synchronized Reserve $592.95 $592.95 North American Electric Reliability Corporation (NERC) $551.47 $551.47 Organization of PJM States, Inc. (OPSI) Funding $36.06 $36.06 PJM Scheduling, System Control and Dispatch Service - Advanced Second Control Center $1,365.13 $1,365.13 PJM Scheduling, System Control and Dispatch Service - Capacity Resource/Obligation Mgmt. $913.50 $913.50 PJM Scheduling, System Control and Dispatch Service - Control Area Administration $8,720.25 $8,720.25 PJM Scheduling, System Control and Dispatch Service - Market Support $2,037.93 $2,037.93 PJM Scheduling, System Control and Dispatch Service - Market Support Offset ($162.03) ($162.03) PJM Scheduling, System Control and Dispatch Service - Regulation Market Administration $81.08 $81.08 PJM Scheduling, System Control and Dispatch Service Refund - Capacity Resource/Obligation Mgmt. ($28.50) ($28.50) PJM Scheduling, System Control and Dispatch Service Refund - Control Area Administration ($345.43) ($345.43) PJM Scheduling, System Control and Dispatch Service Refund - Market Support ($83.62) ($83.62) PJM Scheduling, System Control and Dispatch Service Refund - Regulation Market Administration ($3.36) ($3.36) PJM Settlement, Inc. $162.03 $162.03 Reactive Services $116,654.91 $116,654.91 Reactive Supply and Voltage Control from Generation and Other Sources Service $35,523.17 $35,523.17 Real-Time Load Response Charge Allocation $1,616.63 $1,616.63 Regulation and Frequency Response Service $15,527.91 $15,527.91 Reliability First Corporation (RFC) $783.36 $783.36 Synchronized Reserve $16,579.15 $16,579.15 Transmission Enhancement $9,972.34 $9,972.34 Transmission Owner Scheduling, System Control and Dispatch Service $3,829.29 $3,829.29 480-8102-592-95-90 Total $ 536,999.13 $ 536,999.13 480-8102-592-95-91 Balancing Spot Market Energy ($132,651.22) ($132,651.22) Balancing Transmission Congestion ($5,916.77) ($5,916.77) Balancing Transmission Losses ($3,270.53) ($3,270.53) Day-ahead Spot Market Energy $549,022.30 $549,022.30 Day-ahead Transmission Congestion $33,549.02 $33,549.02 Day-ahead Transmission Losses $70,867.42 $70,867.42 Emergency Load Response $49.58 $49.58 Inadvertent Interchange ($101.37) ($101.37) Load Reconciliation for Balancing Operating Reserve ($1,163.95) ($1,163.95) Load Reconciliation for Day-ahead Scheduling Reserve ($53.76) ($53.76) Load Reconciliation for FERC Annual Recovery ($414.60) ($414.60) Load Reconciliation for Inadvertent Interchange $219.57 $219.57 Load Reconciliation for Market Monitoring Unit (MMU) Funding ($25.02) ($25.02) Load Reconciliation for Non-Synchronized Reserve ($65.77) ($65.77) Load Reconciliation for North American Electric Reliability Corporation (NERC) ($66.73) ($66.73) Load Reconciliation for Organization of PJM States, Inc. (OPSI) Funding ($4.50) ($4.50) Load Reconciliation for PJM Scheduling, System Control and Dispatch Service ($1,339.46) ($1,339.46) Load Reconciliation for PJM Scheduling, System Control and Dispatch Service Refund $98.66 $98.66 Load Reconciliation for Reactive Services ($8,931.33) ($8,931.33) Load Reconciliation for Regulation and Frequency Response Service ($2,385.81) ($2,385.81) Load Reconciliation for Reliability First Corporation (RFC) ($95.17) ($95.17) Load Reconciliation for Schedule 9-6 - Advanced Second Control Center ($180.31) ($180.31) Load Reconciliation for Spot Market Energy ($386,460.60) ($386,460.60) Load Reconciliation for Synchronized Reserve ($1,580.00) ($1,580.00) Load Reconciliation for Synchronous Condensing ($0.03) ($0.03) Load Reconciliation for Transmission Congestion ($27,963.55) ($27,963.55) Load Reconciliation for Transmission Losses ($20,200.02) ($20,200.02) Load Reconciliation for Transmission Owner Scheduling, System Control and Dispatch Service ($481.95) ($481.95) Meter Error Correction ($4,071.28) ($4,071.28) 480-8102-592-95-91 Total $ 56,382.82 $ 56,382.82 480-8102-592-95-92 Balancing Spot Market Energy ($60,123.63) ($60,123.63) Balancing Transmission Congestion ($92.58) ($92.58) Balancing Transmission Losses ($1,453.40) ($1,453.40) 480-8102-592-95-92 Total -61669.61 -61669.61 480-8102-592-95-93 Reactive Supply and Voltage Control from Generation and Other Sources Service ($29,467.58) ($29,467.58) Transmission Losses ($15,771.23) ($15,771.23) 480-8102-592-95-93 Total $ (45,238.81) $ (45,238.81) Grand Total $ (1,393,158.42) $ 1,910,285.95 $517,127.53 26

City of Dover Electric Revenue Fund FY14 - White Oak Solar Park Incremental Cost Original July August September October November December January February March April YTD Budget Power Supply & Generation Dover Sun Park - Energy $ 187,421 $ 176,372 $ 204,852 $ 120,839 $ 99,447 $ 64,684 $ 82,605 $ 101,681 $ 137,856 $ 204,781 $ 1,380,539 $ 1,565,800 Dover Sun Park - REC's 43,005 38,516 42,894 25,307 20,875 13,583 17,301 21,304 28,882 251,667 300,000 Total Power Supply Cost 230,426 214,888 247,746 146,146 120,322 78,267 99,906 122,985 166,738 204,781 1,632,206 1,865,800 Non-Solar Power Supply Cost (180,227) (154,545) (154,590) (100,770) (79,066) (52,006) (146,406) (90,909) (105,944) (158,303) (1,222,765) (1,186,411) Incremental Energy Cost $ 50,199 $ 60,343 $ 93,156 $ 45,376 $ 41,256 $ 26,261 $ (46,500) $ 32,077 $ 60,794 $ 46,478 $ 409,441 $ 679,389 Revenues Customer Sales - Electricity (9,404) (7,389) (7,538) (7,662) (7,721) (8,019) (8,071) (7,950) (7,648) (7,632) (79,034) (26,300) Rent Receipts (14,446) - - (14,446) - - (14,807) - (34,450) - (78,149) (58,300) Total Revenues (23,850) (7,389) (7,538) (22,108) (7,721) (8,019) (22,878) (7,950) (42,098) (7,632) (157,183) (84,600) Incremental Sun Park Cost $ 26,349 $ 52,954 $ 85,618 $ 23,268 $ 33,535 $ 18,242 $ (69,378) $ 24,127 $ 18,696 $ 38,846 $ 252,258 $ 594,789 MWh Purchased/Generated - Solar 2,052.584 1,815.656 2,000.128 1,179.844 970.972 631.556 806.536 992.788 1,345.984 1,999.428 13,795.476 18,159.000 MWh $ Solar Energy $ 91.31 $ 97.14 $ 102.42 $ 102.42 $ 102.42 $ 102.42 $ 102.42 $ 102.42 $ 102.42 $ 102.42 $ 100.07 $ 86.23 Solar REC's MWh 307.000 272.000 300.000 177.000 146.000 95.000 121.000 149.000 202.000 - 1,769.000 MWh $ Solar REC (one month lag)* $ 140.08 $ 141.60 142.98 142.98 142.98 142.98 142.98 142.98 142.98 $ - $ 142.27 MWh $ Non-Solar Energy $ 87.81 $ 85.12 $ 77.29 $ 85.41 $ 81.43 $ 82.35 $ 181.52 $ 91.57 $ 78.71 $ 79.17 Note: Solar REC's are one month behind due to the time the invoice is received.