NOTE 4—Power Purchase Agreements

In 2016, 2015, and 2014, our owned generating facilities together furnished approximately 45.2%, 43.0%, and 40.2%, respectively, of our energy requirements. The remaining needs were satisfied through purchases of power in the market from investor owned utilities and power marketers through long-term and short-term physically-delivered forward power purchase contracts. We also purchase power in the spot energy market. This approach to meeting our member distribution cooperatives’ energy requirements is not without risks. To mitigate these risks, we attempt to match our energy purchases with our energy needs to reduce our spot market purchases of energy and sales of excess energy. Additionally, we utilize policies, procedures, and various hedging instruments to manage our power market price risks. These policies and procedures, developed in consultation with ACES, an energy trading and risk management company, are designed to strike an appropriate balance between minimizing costs and reducing energy cost volatility. We are required to post collateral from time to time due to changes in power prices. As of December 31, 2016, we had posted $5.0 million in letters of credit and as of December 31, 2015, we had posted cash collateral of $1.2 million, and $8.0 million in letters of credit.

Our purchased power costs for 2016, 2015, and 2014 were $408.0 million, $494.9 million, and $518.8 million, respectively.

As of December 31, 2016, our capacity and energy purchase obligations under the various agreements were as follows:

Year Ending December 31,	Capacity and Energy Obligations
	(in millions)
2017	$	180.0
2018		170.1
2019		182.0
	$	532.1