Commitments and Contingencies

For the year ended December 31, 2018, approximately 13.7% of the Company’s energy output was obtained at an average cost of approximately $0.023 per Kilowatt Hour (kWh) through long-term contracts with three of the Washington Public Utility Districts (PUDs) that own hydroelectric projects on the Columbia River. The purchase of power from the Columbia River projects is on a pro rata share basis under which the Company pays a proportionate share of the annual debt service, operating and maintenance costs and other expenses associated with each project, in proportion to the contractual share of power that PSE obtains from that project. In these instances, PSE’s payments are not contingent upon the projects being operable; therefore, PSE is required to make the payments even if power is not delivered. These projects are financed substantially through debt service payments and their annual costs should not vary significantly over the term of the contracts unless additional financing is required to meet the costs of major maintenance, repairs or replacements, or license requirements. The Company’s share of the costs and the output of the projects is subject to reduction due to various withdrawal rights of the PUDs and others over the contract lives.

The Company's expenses under these PUD contracts were as follows for the years ended December 31:



(Dollars in Thousands)	2018		2017		2016
PUD contract costs	$	80,165	$	73,827	$	77,667

As of December 31, 2018, the Company purchased portions of the power output of the PUDs' projects as set forth in the following table:



		Company's Current Share of
(Dollars in Thousands)	Contract Expiration	Percent of Output		Megawatt Capacity	Estimated 2019 Costs		2019 Debt Service Costs		Interest included in 2019 Debt Service Costs		Debt Outstanding
Chelan County PUD:
Rock Island Project	2031	25.0	%	156	$	29,794	$	10,058	$	5,053	$	80,058
Rocky Reach Project	2031	25.0		325	30,378		5,240		2,297		36,289
Douglas County PUD:
Wells Project¹	2028	25.3		212	32,662		—		—		—
Grant County PUD:
Priest Rapids Development	2052	0.6		6	2,099		1,166		1,166		13,040
Wanapum Development	2052	0.6		7	2,099		1,166		1,166		13,040
Total				706	$	97,032	$	17,630	$	9,682	$	142,427

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¹	In March 2017, PSE entered a new PPA with Douglas County PUD for Wells Project output that begins upon expiration of the existing contract on August 31, 2018 and continues through September 30, 2028.

The following table summarizes the Company’s estimated payment obligations for power purchases from the Columbia River projects, contracts with other utilities, contracts with non-utilities and short term electric supply contracts. These contracts have varying terms and may include escalation and termination provisions.



(Dollars in Thousands)	2019		2020		2021		2022		2023		Thereafter		Total
Columbia River projects	$	92,905	$	86,691	$	76,378	$	85,807	$	87,452	$	631,283	$	1,060,516
Other utilities	888		—		—		—		—		—		888
Non-utility contracts	216,539		255,193		264,262		264,740		269,886		1,221,204		2,491,824
Short-term electric supply contracts	117,040		4,029		—		—		—		—		121,069
Total	$	427,372	$	345,913	$	340,640	$	350,547	$	357,338	$	1,852,487	$	3,674,297

Total purchased power contracts provided the Company with approximately 14.1 million, 14.5 million and 13.0 million MWhs of firm energy at a cost of approximately $508.2 million, $456.4 million and $402.5 million for the years 2018, 2017 and 2016, respectively.

Natural Gas Supply Obligations

The Company has entered into various firm supply, transportation and storage service contracts in order to ensure adequate availability of natural gas supply for its customers and generation requirements. The Company contracts for its long-term natural gas supply on a firm basis, which means the Company has a 100% daily take obligation and the supplier has a 100% daily delivery obligation to ensure service to PSE’s customers and generation requirements. The transportation and storage contracts, which have remaining terms from 1 year to 26 years, provide that the Company must pay a fixed demand charge each month, regardless of actual usage. The Company incurred demand charges for 2018 for firm transportation, storage and peaking services for its natural gas customers of $119.9 million. The Company incurred demand charges in 2018 for firm transportation and storage services for the natural gas supply for its combustion turbines in the amount of $44.5 million.

The following table summarizes the Company’s obligations for future natural gas supply and demand charges through the primary terms of its existing contracts. The quantified obligations are based on the FERC and NEB (National Energy Board) currently authorized rates, which are subject to change.



Natural Gas Supply and Demand Charge Obligations (Dollars in Thousands)	2019		2020		2021		2022		2023		Thereafter		Total
Natural gas supply	$	311,601	$	162,384	$	157,156	$	144,008	$	91,851	$	—	$	867,000
Firm transportation service	165,719		160,053		140,239		139,343		120,486		209,215		935,055
Firm storage service	8,899		7,908		3,108		1,619		504		353		22,391
Short-term natural gas supply contracts	37,589		5,734		931		—		—		—		44,254
Total	$	523,808	$	336,079	$	301,434	$	284,970	$	212,841	$	209,568	$	1,868,700

Service Contracts

The following table summarizes the Company’s estimated obligations for service contracts through the terms of its existing contracts.



Service Contract Obligations (Dollars in Thousands)	2019		2020		2021		2022		2023		Thereafter		Total
Energy production service contracts	$	27,243	$	27,915	$	28,650	$	29,345	$	30,056	$	124,646	$	267,855
Automated meter reading system	45,080		44,193		44,741		45,416		46,106		142,724		368,260
Total	$	72,323	$	72,108	$	73,391	$	74,761	$	76,162	$	267,370	$	636,115

Other Commitments and Contingencies

For information regarding PSE's environmental remediation obligations, see Note 4, "Regulation and Rates," to the consolidated financial statements included in Item 8 of this report.