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10 Attachment 9 Electric Official Statement Truckee Donner PUD 2022 Electric COPs
Stradling Yocca Carlson & Rauth Draft of 5111122 PRELIMINARY OFFICIAL STATEMENT DATED JUNE 2022 In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Special Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described in this Official Statement, interest (and original issue discount) with respect to the Certificates is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. In the further opinion of Special Counsel, interest (and original issue discount) with respect to the Certificates is exempt from State of California personal income tax. See the caption "TAXMATTERS. " NEW ISSUE —BOOK -ENTRY ONLY RATING: S&P: " " See the caption "RATING" TRUCKEE DONNER PUBLIC UTILITY DISTRICT ELECTIC SYSTEM REVENUE CERTIFICATES OF PARTICIPATION, SERIES 2022A Dated: Date of Delivery Due: November 15, as shown on the inside cover The Certificates are being executed and delivered to provide funds to finance certain capital improvements to the District's Electric System and to pay certain costs of delivery of the Certificates. Interest due with respect to the Certificates is payable on November 15, 2022 and each May 15 and November 1 thereafter. The Certificates are being executed and delivered in fully registered form and when executed and delivered will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York. Purchasers of the Certificates will not receive certificates representing their beneficial ownership in the Certificates purchased. The principal and interest with respect to the Certificates are payable by the Trustee to Cede & Co. and such interest and principal payments are to be disbursed to the beneficial owners of the Certificates through their nominees. Individual purchases will be made in multiple denominations of $5,000. The Certificates are subject to optional and mandatory sinking fund prepayment prior to maturity as described in this Official Statement. The Certificates are payable from Series 2022 Installment Payments payable by the District and amounts on deposit in certain funds and accounts established under the Trust Agreement. The obligation of the District to make Series 2022 Installment Payments is a special obligation of the District payable solely from Net Revenues, consisting of Revenues of the District's Electric System remaining after payment of Operation and Maintenance Costs, and from certain other funds and accounts created under the Installment Purchase Agreement. The District has covenanted not to incur additional obligations payable from Net Revenues senior to the Series 2022 Installment Payments. The District may incur additional obligations on a parity to the Series 2022 Installment Payments, subject to the terms and conditions set forth in the Installment Purchase Agreement. No such parity obligations are currently outstanding. No reserve fund has been established in connection with the execution and delivery of the Certificates. THE OBLIGATION OF THE DISTRICT TO MAKE THE SERIES 2022 INSTALLMENT PAYMENTS IS A SPECIAL OBLIGATION OF THE DISTRICT PAYABLE SOLELY FROM NET REVENUES OF THE DISTRICT AND OTHER FUNDS DESCRIBED IN THE INSTALLMENT PURCHASE AGREEMENT, AND DOES NOT CONSTITUTE AN OBLIGATION OF THE DISTRICT FOR WHICH THE DISTRICT IS OBLIGATED TO PAY FROM ANY OTHER REVENUES OR TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE DISTRICT HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE DISTRICT TO MAKE THE SERIES 2022 INSTALLMENT PAYMENTS UNDER THE INSTALLMENT PURCHASE AGREEMENT DOES NOT CONSTITUTE A DEBT OF THE DISTRICT OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. This cover page contains certain information for quick reference only. It is not a summary of this issue. Potential investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. Capitalized terms used on this cover have the definitions ascribed thereto in this Official Statement. The Certificates will be offered when, as and if executed and received by the Underwriter, subject to the approval as to their validity by Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, Special Counsel. Certain legal matters will be passed upon for the District and the Corporation by Porter Simon, Truckee, California, as General Counsel to the District and the Corporation. Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, is acting as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by Kutak Rock LLP, Irvine, California, as Underwriter's Counsel, and for the Trustee by its counsel. It is anticipated that the Certificates in definitive form will be available for delivery to DTC on or about July —, 2022. [Brandis Tallman A Division of Oppenheimer & Co. Inc.] Dated: June—, 2022 . Preliminary; subject to change. 4864-8204-9305v7/022925-0111 MATURITY SCHEDULE BASE CUSIPt TRUCKEE DONNER PUBLIC UTILITY DISTRICT ELECTRIC SYSTEM REVENUE CERTIFICATES OF PARTICIPATION, SERIES 2022A Maturity Principal (November 1 S) Amount Interest Rate Yield Price CIISIPt % Term Certificates due November 15, 20_, Yield I %, Price: , CUSIPt Preliminary; subject to change t CUSIPS is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by FactSet Research Systems Inc. Copyright© CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. None of the District, the Corporation, the Underwriter or their agents or counsel assume responsibility for the accuracy of such numbers. 4864-8204-9305v7/022925-0111 TRUCKEE DONNER PUBLIC UTILITY DISTRICT BOARD OF DIRECTORS Christa Finn, President Jeff Bender, Vice President Joe Aguera, Director Kim Harris, Director Anthony Laliotis, Director DISTRICT STAFF Brian C. Wright, General Manager Michael Salmon, Chief Financial Officer Joe Horvath, Electric Utility Director Shanna Kuhlemier, District Clerk SERVICES General Counsel Porter Simon Truckee, California Special Counsel and Disclosure Counsel Stradling Yocca Carlson & Rauth, A Professional Corporation San Francisco, California Municipal Advisor Fieldman, Rolapp & Associates, Inc. Irvine, California Trustee The Bank of New York Mellon Trust Company, N.A. [Los Angeles], California 4864-8204-9305v7/022925-0111 Table of Contents INTRODUCTION ................................................ 1 THE 2022 PROJECT ............................................ 2 ESTIMATED SOURCES AND USES OF FUNDS .............................................................................. 3 THE CERTIFICATES .......................................... 3 Terms of the Certificates ................................ 3 Prepayment of Certificates ............................. 3 Notice of Prepayment ..................................... 4 Book -Entry Only System ............................... 4 Transfers and Exchanges Upon Termination of Book -Entry Only System ............................... 5 Debt Service Schedule ................................... 6 SECURITY FOR THE CERTIFICATES ............. 6 General........................................................... 6 Revenue Pledge .............................................. 7 Allocation of Revenues .................................. 7 Certificate Payment Fund ............................... 8 Rate Covenant ................................................ 9 Limitations on Parity and Superior Obligations; Subordinate Obligations ................................. 9 No Reserve Fund .......................................... 10 Rate Stabilization Fund ................................ 11 THE DISTRICT .................................................. 11 General......................................................... 11 Land Use and Service Area .......................... 12 Seismic Considerations ................................ 12 Governance and Management ...................... 13 Employees.................................................... 15 Budget Process ............................................. 15 District Insurance ......................................... 15 No Outstanding Obligations ......................... 16 Financial Statements .................................... 16 COVID-19 Pandemic ................................... 17 THE ELECTRIC SYSTEM ................................ 19 General......................................................... 19 Transmission and Scheduling ...................... 20 Power Supply Resources .............................. 20 Renewable Resources; District Renewable Portfolio Standard ........................................ 23 Energy Efficiency Programs ........................ 24 Future Power Supply Resources .................. 24 Wildfire Mitigation Measures ...................... 25 Wholesale Power ......................................... 25 Cybersecurity Program ................................ 26 Rates and Charges ........................................ 26 Electric System Collection Procedures ........ 28 Largest Customers ....................................... 29 Future Electric System Improvements ......... 29 Customers, Energy Sales, Billed Revenues and Demand........................................................ 30 FINANCIAL INFORMATION .......................... 31 Available Cash ............................................. 31 Historical Operating Results ........................ 31 Projected Operating Results and Debt Service Coverage...................................................... 31 Employee Benefits ....................................... 32 RATE REGULATION ....................................... 36 CERTAIN FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY .................... 37 Federal Energy and Environmental Policies and Legislation.................................................... 37 State Legislation and Regulatory Proceedings40 Changing Laws and Requirements Generally45 PG&E Bankruptcy.......................................45 Other Factors ................................................ 46 RISK FACTORS ................................................. 47 Accuracy of Assumptions ............................ 47 System Demand ........................................... 48 System Expenses .......................................... 48 Limited Recourse on Default ....................... 48 Natural Disasters .......................................... 48 Limitations on Remedies Available; Bankruptcy................................................... 49 Limited Obligations ...................................... 50 Statutory and Regulatory Compliance ......... 51 Parity Obligations ......................................... 51 Loss of Tax Exemption ................................ 52 Secondary Market for the Certificates.......... 52 Limited Service Area; Concentration of Customers..................................................... 52 CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES .............. 52 Proposition 218 and Proposition 26 ............. 52 THE CORPORATION ....................................... 54 TAX MATTERS ................................................. 54 CERTAIN LEGAL MATTERS .......................... 56 MUNICIPAL ADVISOR .................................... 56 LITIGATION...................................................... 56 RATING............................................................. 56 UNDERWRITING .............................................. 57 CONTINUING DISCLOSURE UNDERTAKING ............................................................................ 57 MISCELLANEOUS ........................................... 57 APPENDIX A AUDITED FINANCIAL STATEMENTS ........................A-1 APPENDIX B SUMMARY OF PRINCIPAL LEGAL DOCUMENTS .......... B-1 APPENDIX C FORM OF LEGAL OPINION .................... C-1 APPENDIX D DTC AND BOOK -ENTRY ONLY SYSTEM..................................D-1 4864-8204-9305v7/022925-0111 Table of Contents (continued) Page APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE ......................... E-1 4864-8204-9305v7/022925-0111 NO DEALER, BROKER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFER OR SALE OF THE CERTIFICATES, OTHER THAN AS CONTAINED IN THIS OFFICIAL STATEMENT, AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE DISTRICT, THE CORPORATION OR THE UNDERWRITER. THIS OFFICIAL STATEMENT DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE DESCRIBED ON THE COVER PAGE, AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BY ANY SALE OF THE CERTIFICATES BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OR SALE. THE OFFICIAL STATEMENT IS NOT TO BE CONSTRUED AS A CONTRACT WITH THE PURCHASERS OF THE CERTIFICATES. The information contained in this Official Statement has been obtained from sources that are believed to be reliable, but this information is not guaranteed as to accuracy or completeness. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of this information. The information and expressions of opinion in this Official Statement are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District since the date hereof. This Official Statement contains forward -looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended, including: (a) statements containing projections of Net Revenues, expenditures and other financial items; (b) statements of the plans and objectives of the District for future operations of its electric system; (c) statements of future economic performance of the electric system; and (d) statements of the assumptions underlying or relating to statements described in (a), (b) and (c) above (collectively, "Forward -Looking Statements"). All statements other than statements of historical facts included in this Official Statement regarding the District's financial position, business strategy, capital resources and plans and objectives for future operations of the electric system, are Forward -Looking Statements. Although such expectations reflected in such Forward -Looking Statements are believed to be reasonable, there can be no assurance that such expectations will prove to have been correct. Statements of important factors (collectively, the "Cautionary Statements") that could cause actual results to differ materially from expectations of the District are disclosed in this Official Statement. All subsequent written and oral Forward -Looking Statements attributable to the District or any person acting on behalf of the District are expressly qualified in their entirety by the Cautionary Statements. This Official Statement is submitted in connection with the sale of the Certificates and may not be reproduced or be used, as a whole or in part, for any other purpose. In connection with the offering of the Certificates, the Underwriter may overallot or effect transactions which stabilize or maintain the market price of the certificates at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter may offer and sell the certificates to certain dealers and dealer banks and banks acting as agent and others at prices lower than the public offering prices stated on the cover page of this Official Statement, and the Underwriter may change those public offering prices from time to time. THE CERTIFICATES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), IN RELIANCE UPON AN EXEMPTION CONTAINED IN THE ACT. THE CERTIFICATES HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. The District maintains a website and certain social media accounts. However, the information presented there is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the Certificates. 4864-8204-9305v7/022925-0111 TRUCKEE DONNER PUBLIC UTILITY DISTRICT ELECTRIC SYSTEM REVENUE CERTIFICATES OF PARTICIPATION, SERIES 2022A INTRODUCTION This Official Statement sets forth information concerning the sale and delivery of the Truckee Donner Public Utility District Electric System Revenue Certificates of Participation, Series 2022A (the "Certificates") to be delivered by The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"). See the caption "THE CERTIFICATES" for a detailed description of the terms of the Certificates. The Certificates are being executed and delivered to provide funds to finance certain capital improvements to the District's Electric System (the "2022 Project"), as described under the caption "THE 2022 PROJECT," and to pay certain costs of delivery of the Certificates. The Certificates are being executed and delivered under a Trust Agreement, dated as of July 1, 2022 (the "Trust Agreement"), by and among the Trustee, the Truckee Donner Public Utility District (the "District") and Truckee Donner Public Utility District Financing Corporation (the "Corporation"). The Corporation has assigned to the Trustee the right of the Corporation to receive and collect the installment payments (the "Series 2022 Installment Payments") payable by the District to the Corporation under the Installment Purchase Agreement, dated as of July 1, 2022 (the "Installment Purchase Agreement"), by and between the District and the Corporation, and other amounts payable by the District to the Corporation, pursuant to the Assignment Agreement, dated as of July 1, 2022 (the "Assignment Agreement"), by and between the Trustee and the Corporation. The Certificates are payable from the Series 2022 Installment Payments made by the District and amounts on deposit in certain funds and accounts established under the Trust Agreement. The obligation of the District to make the Series 2022 Installment Payments is a special obligation of the District payable solely from Net Revenues, consisting of Revenues of the District's Electric System remaining after payment of Operation and Maintenance Costs, and from certain other funds and accounts created under the Installment Purchase Agreement. See the caption "SECURITY FOR THE CERTIFICATES." The obligation of the District to pay the Series 2022 Installment Payments does not constitute an obligation of the District for which the District is obligated to levy any form of taxation or for which the District has levied any form of taxation. The obligation of the District to make the Series 2022 Installment Payments under the Installment Purchase Agreement does not constitute a debt of the District or of the State of California (the "State") or of any political subdivision of the State, including the Counties of Nevada or Placer, within the meaning of any constitutional or statutory debt limitation or restriction. Under no circumstances is the District required to advance any moneys derived from any source of income other than the funds described above, nor are any other funds or property of the District liable for the payment of the Series 2022 Installment Payments, including but not limited funds of the District's water system. See the caption "SECURITY FOR THE CERTIFICATES —Revenue Pledge." No reserve fund has been established in connection with the execution and delivery of the Certificates. The District has covenanted not to incur additional obligations payable from Net Revenues senior to the Series 2022 Installment Payments. The District may incur additional obligations on a parity with the Series 2022 Installment Payments, subject to the terms and conditions described under the caption "SECURITY FOR THE CERTIFICATES —Limitations on Parity and Superior Obligations; Subordinate Obligations —Additional Obligations on a Parity with the Installment Payments." No such parity obligations are currently outstanding. Preliminary; subject to change. 4864-8204-9305v7/022925-0111 The Bank of New York Mellon Trust Company, N.A., will act as Trustee with respect to the Certificates. Certain proceedings in connection with the execution and delivery of the Installment Purchase Agreement and the Trust Agreement are subject to the approval of Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, Special Counsel to the District ("Special Counsel'). Certain legal matters will be passed upon for the District and the Corporation by Porter Simon, Truckee, California, General Counsel to the District and the Corporation. Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, is acting as Disclosure Counsel. Fieldman, Rolapp & Associates, Inc., Irvine, California is acting as municipal advisor to the District (the "Municipal Advisor"). There follows in this Official Statement (and attached appendices) a brief description of the Certificates, the security for the Certificates, the District, the Electric System and certain other information that is relevant to the execution and delivery of the Certificates. The descriptions and summaries of various documents in this Official Statement do not purport to be comprehensive or definitive, and reference is made to each document for complete details of all terms and conditions. All statements in this Official Statement are qualified in their entirety by reference to each document. All capitalized terms which are used in this Official Statement and not normally capitalized have the meanings assigned to them in the Trust Agreement and the Installment Purchase Agreement, the summaries of which are included in Appendix B, unless otherwise stated in this Official Statement. The Appendices are integral parts of this Official Statement and must be read together with all other parts of this Official Statement. THE 2022 PROJECT The 2022 Project consists of the following: 2022 Project Component Estimated Cost Construction of New Corporate Yard Building $6,500,000 The District intends to apply a portion of the proceeds of the Certificates to pay for the costs of the 2022 Project. The District expects to comply with all governmental approval, environmental review, public bidding and other permitting requirements for each component of the 2022 Project as required by law, and to complete the 2022 Project by mid-2025. Pursuant to the Installment Purchase Agreement, the District may substitute or add additional projects to the 2022 Project. See Appendix B under the caption "INSTALLMENT PURCHASE AGREEMENT — ACQUISITION OF THE 2022 PROJECT —Changes to the 2022 Project." 2 4864-8204-9305v7/022925-0111 ESTIMATED SOURCES AND USES OF FUNDS The estimated sources and uses of funds with respect to the Certificates are set forth below. Sources0) Principal Amount of Certificates $ Plus/Less Net Original Issue Premium/Discount Total Sources $ UsesM Deposit in Acquisition Fund Costs of Issuance(2) Total Uses 0) Amounts rounded to the nearest dollar. (2) Includes fees of Trustee, Municipal Advisor, Special Counsel and Disclosure Counsel, Underwriter's discount, printing costs, rating agency fees and other costs of delivery. THE CERTIFICATES Terms of the Certificates The Certificates will be dated as of their date of initial execution and delivery. Interest with respect to the Certificates (other than at maturity) is payable by check or draft of the Trustee mailed by first class mail on November 15, 2022 and each May 15 and November 15 thereafter (each an "Interest Payment Date"). Interest is payable to the registered Owner of the Certificates at the close of business on the first day of the calendar month in which such Interest Payment Date falls (the "Record Date"), provided, that in the case of an Owner of $1,000,000 or more in aggregate principal amount of Certificates, upon written request of such Owner to the Trustee 15 days prior to any Interest Payment Date, such interest will be paid on the Interest Payment Date in immediately available funds by wire transfer to an account in the United States of America. Interest with respect to any Certificate which is payable but has not been punctually paid or duly provided for on any Interest Payment Date will immediately cease to be payable to the owner on the relevant Record Date by virtue of having been such owner and such interest will be payable to the person in whose name such Certificate is registered at the close of business on a special record date as determined by the Trustee. Interest with respect to the Certificates will accrue at the rates per annum and will mature on the dates set forth on the inside front cover page of this Official Statement. Interest with respect to the Certificates will be computed based on a year consisting of 360 days and twelve 30-day months. Individual purchases will be made in $5,000 multiples. Principal of the Certificates is payable in lawful money of the United States of America at the principal corporate trust office of the Trustee in [Los Angeles], California. Prepayment of Certificates Optional Prepayment. The Certificates maturing on or after November 15, 20 are subject to optional prepayment prior to their respective stated maturities, as a whole or in part on 15, 20 or any date thereafter in the order of maturity as directed by the District in a written request to the Trustee at least 60 days (or such lesser number of days acceptable to the Trustee) prior to such date and by lot within each maturity, in integral multiples of $5,000 from amounts prepaid by the District pursuant to the Installment Purchase Agreement at a Prepayment Price equal to the principal amount of the Certificates to be prepaid, plus accrued interest represented thereby to the date fixed for prepayment, without premium. 4864-8204-9305v7/022925-0111 Mandatory Sinking Fund Prepayment. The Certificates with stated maturities on November 15, 20_ are subject to mandatory sinking fund prepayment in part (by lot) on November 15, 20 and each November 15 thereafter, in integral multiples of $5,000 at a Prepayment Price of the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule: Redemption Date Principal (November 15) Amount 20 * Maturity. If some but not all of the Certificates maturing on November 15, 20 are optionally prepaid, the principal amount of the applicable Certificates subject to mandatory sinking fund redemption on any subsequent November 1 will be reduced, by $5,000 or an integral multiple thereof, as designated by the District in a Written Order of the District filed with the Trustee; provided, however, that the aggregate amount of such reductions may not exceed the aggregate amount of the applicable Certificates that were optionally prepaid. Notice of Prepayment Notice of prepayment will be mailed, first class postage prepaid, to the respective Owners of any Certificates designated for prepayment at their addresses appearing on the Certificate registration books and to the Information Services and by registered or certified or overnight mail or electronically to the Securities Depositories at least 20 days but not more than 60 days prior to the prepayment date. Each such notice of prepayment will state the date of notice, the prepayment date, the place or places of prepayment and the Prepayment Price, will designate the maturities, CUSIP numbers, if any, and, if less than all of any such maturity is to be prepaid, the respective portions of the principal amount thereof to be prepaid. Each such notice will also state that on said date there will become due and payable on each of said Certificates the Prepayment Price thereof or of said specified portion of the principal represented thereby in the case of a Certificate to be prepaid in part only, together with interest accrued with respect thereto to the prepayment date, and that (provided that moneys for prepayment have been deposited with the Trustee) from and after such prepayment date interest with respect thereto will cease to accrue, and will require that such Certificate be then surrendered to the Trustee. Any defect in the notice or the mailing will not affect the validity of the prepayment of any Certificate. With respect to any notice of optional prepayment of Certificates, such notice may state that such prepayment will be conditional upon the receipt by the Trustee on or prior to the date fixed for such prepayment of moneys that are sufficient to pay the principal of, premium, if any, and interest with respect to such Certificates to be prepaid and that, if such moneys shall not have been so received, said notice will be of no force and effect and the Trustee will not be required to prepay such Certificates. In the event that such notice of prepayment contains such a condition and such moneys are not so received, the prepayment will not be made, and the Trustee will within a reasonable time thereafter give notice, in the manner in which the notice of prepayment was given, that such moneys were not so received. Book -Entry Only System One fully -registered Certificate for each maturity of the Certificates will be executed and delivered in the principal amount of such Certificate. Such Certificates will be registered in the name of Cede & Co. and will be deposited with The Depository Trust Company ("DTC"). 4 4864-8204-9305v7/022925-0111 The District may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities depository). In that event, the Certificates will be printed and delivered and will be governed by the provisions of the Trust Agreement with respect to payment of principal and interest and rights of exchange and transfer. The District cannot and does not give any assurances that DTC participants or others will distribute payments with respect to the Certificates received by DTC or its nominee as the registered Owner, or any prepayment or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or that DTC will service and act in the manner described in this Official Statement. See Appendix D for additional information concerning DTC. Transfers and Exchanges Upon Termination of Book -Entry Only System In the event that the book -entry system described above is abandoned, the Certificates will be printed and delivered as provided in the Trust Agreement. Thereafter, any Certificate may, in accordance with its terms, be transferred upon the Certificate registration books by the person in whose name it is registered, in person or by such person's duly authorized attorney, upon surrender of such Certificate for cancellation at the corporate trust office of the Trustee in [Los Angeles], California, accompanied by delivery of a duly executed instrument of transfer in a form approved by the Trustee. Whenever any Certificate or Certificates are surrendered for transfer, the Trustee will execute and deliver a new Certificate or Certificates of the same series and maturity, for a like aggregate principal amount, and of authorized denomination or denominations. The Trustee may charge a sum for each new Certificate executed and delivered upon any transfer. The Trustee may require the payment by any Owner requesting any such transfer of any tax or other governmental charge required to be paid with respect to such transfer. Following any transfer of Certificates the Trustee will cancel and destroy the Certificates it has received in accordance with its customary procedures. The transferor will also provide or cause to be provided to the Trustee all information necessary to allow the Trustee to comply with any applicable tax reporting obligations, including without limitation any cost basis reporting obligations under Section 6045 of the Code. The Trustee may rely on the information provided to it and has no responsibility to verify or ensure the accuracy of such information. Certificates may be exchanged at the corporate trust office of the Trustee, for a like aggregate principal amount of Certificates of other authorized denominations of the same series and maturity. The Trustee may charge a sum for each new Certificate executed and delivered upon any exchange except in the case of any exchange of temporary Certificates for definitive Certificates. The Trustee may require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. Following any exchange of Certificates the Trustee will cancel and destroy the Certificates it has received in accordance with its customary procedures. The Trustee is not required to register the exchange or transfer of any Certificate: (i) within 15 days preceding selection of Certificates for prepayment; or (ii) selected for prepayment (except for any non -prepaid portion thereof). 4864-8204-9305v7/022925-0111 Debt Service Schedule Set forth below is a schedule of Series 2022 Installment Payments and debt service on the 2015 Bonds for each annual period ending on December 31 in the years indicated, assuming no optional prepayments. Period Ending December 31 2022 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 2051 2052 TOTAL Source: Underwriter. General Principal Interest N A SECURITY FOR THE CERTIFICATES Total Each Certificate represents an undivided interest in the Series 2022 Installment Payments to be made by the District under the Installment Purchase Agreement. Pursuant to the Assignment Agreement, the Corporation has assigned substantially all of its right, title and interest in the Installment Purchase Agreement to the Trustee, for the benefit of the Owners of the Certificates, including its right to receive the Series 2022 Installment Payments thereunder and its right to exercise all of the rights and remedies conferred on the Corporation under the Installment Purchase Agreement. 6 4864-8204-9305v7/022925-0111 The obligation of the District to make the Series 2022 Installment Payments is a special obligation of the District payable solely from Net Revenues, consisting of Revenues of the District's Electric System remaining after the payment of Operation and Maintenance Costs of the District's Electric System, and from certain other funds and accounts created under the Installment Purchase Agreement. Revenue Pledge All Revenues and all amounts on deposit in the Revenue Fund and the Rate Stabilization Fund are irrevocably pledged to the payment of the Series 2022 Installment Payments as provided in the Installment Purchase Agreement, and the Revenues will not be used for any other purpose while any of the Series 2022 Installment Payments remain unpaid; provided that out of the Revenues there may be apportioned such sums for such purposes as are expressly permitted in the Installment Purchase Agreement. Such pledge, together with the pledge created by all other Contracts and Bonds, constitutes a first lien on Revenues, the Revenue Fund, the Rate Stabilization Fund and all amounts on deposit in such funds as permitted in the Installment Purchase Agreement and is subject to the application of Revenues in accordance with the Installment Purchase Agreement. The obligation of the District to make the Series 2022 Installment Payments is payable from Net Revenues. Net Revenues means, for any Fiscal Year of the District (currently, the District's Fiscal Year begins January 1) (each, a "Fiscal Year"), the Revenues for such Fiscal Year less the Operation and Maintenance Costs for such Fiscal Year, as such terms are defined in Appendix B under the caption "INSTALLMENT PURCHASE AGREEMENT —DEFINITIONS." Allocation of Revenues In order to carry out and effectuate the pledge and lien of Revenues contained in the Installment Purchase Agreement, the District has agreed and covenanted that all Revenues will be received in the "Revenue Fund," which fund the District has agreed and covenanted to maintain and to hold separate and apart from other funds so long as any Installment Payments or Bonds remain unpaid. Moneys in the Revenue Fund will be used and applied by the District as provided in the Installment Purchase Agreement. The District will, from the moneys in the Revenue Fund, pay all Operation and Maintenance Costs (including amounts reasonably required to be set aside in contingency reserves for Operation and Maintenance Costs, the payment of which is not then immediately required) as such Operation and Maintenance Costs become due and payable. All remaining moneys in the Revenue Fund will be set aside by the District at the following times in the following respective special funds in the following order of priority and all moneys in each of such funds will be held in trust and applied, used and withdrawn only for the purposes authorized in the Installment Purchase Agreement: Certificate Payment Fund. On or before each Series 2022 Installment Payment Date, the District will, from the moneys in the Revenue Fund, transfer to the Trustee for deposit in the Certificate Payment Fund (as described below under the caption "—Certificate Payment Fund") a sum equal to the Series 2022 Installment Payment coming due on such Series 2022 Installment Payment Date. The District will also, from the moneys in the Revenue Fund, transfer to the applicable trustee or payee for deposit in the applicable payment fund, without preference or priority, and in the event of any insufficiency of such moneys ratably without any discrimination or preference, any other Debt Service in accordance with the provisions of the Contract, resolution or indenture relating thereto. No deposit need be made in the Certificate Payment Fund as Series 2022 Installment Payments if the amount in the Certificate Payment Fund is at least equal to the amount of the Series 2022 Installment Payment due and payable on the next succeeding Series 2022 Installment Payment Date. All money in the Certificate Payment Fund will be used and withdrawn by the Trustee in accordance with the Trust Agreement. 7 4864-8204-9305v7/022925-0111 Reserve Funds. On or before each Series 2022 Installment Payment Date the District will, from the remaining moneys in the Revenue Fund, thereafter, without preference or priority and in the event of any insufficiency of such moneys ratably without any discrimination or preference, transfer to the applicable trustee for such reserve funds and/or accounts, if any, as may have been established in connection with Bonds or Contracts, that sum, if any, necessary to restore such funds or accounts to an amount equal to the reserve requirement with respect thereto. Subordinate Obligations. On or before the payment of principal or interest is due with respect to any Subordinate Obligations, the District will, from moneys in the Revenue Fund, transfer to the applicable trustee or payee for deposit in the applicable payment fund, without preference or priority, and in the event of any insufficiency of such moneys ratably without discrimination or preference, payment on such Subordinate Obligations, in accordance with the provisions of such Subordinate Obligation. Su lus. Moneys on deposit in the Revenue Fund on each Installment Payment Date not required to make any of the payments required above may be expended by the District at any time for any purpose permitted by law, including but not limited to transfers to the Rate Stabilization Fund. THE OBLIGATION OF THE DISTRICT TO MAKE THE SERIES 2022 INSTALLMENT PAYMENTS IS A SPECIAL OBLIGATION OF THE DISTRICT PAYABLE SOLELY FROM NET REVENUES OF THE DISTRICT AND OTHER FUNDS DESCRIBED IN THE INSTALLMENT PURCHASE AGREEMENT, AND DOES NOT CONSTITUTE AN OBLIGATION OF THE DISTRICT FOR WHICH THE DISTRICT IS OBLIGATED TO PAY FROM ANY OTHER REVENUES OR TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE DISTRICT HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE DISTRICT TO MAKE THE SERIES 2022 INSTALLMENT PAYMENTS UNDER THE INSTALLMENT PURCHASE AGREEMENT DOES NOT CONSTITUTE A DEBT OF THE DISTRICT OR OF THE STATE OR OF ANY POLITICAL SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CON ,�TITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. Certificate Payment Fund There has been established with the Trustee the Certificate Payment Fund, which the Trustee has covenanted to maintain and hold in trust separate and apart from other funds held by it so long as any Series 2022 Installment Payments remain unpaid. The Trustee will transfer from the Certificate Payment Fund the following amounts at the times and in the manner provided in the Trust Agreement, and will deposit such amounts in one or more of the following respective funds, each of which the Trustee will establish and maintain and hold in trust separate and apart from other funds held by it, and each of which will be disbursed and applied only as authorized in the Trust Agreement. Such amounts will be so transferred to and deposited in the following respective funds in the following order of priority, the requirements of each such fund at the time of deposit to be satisfied before any transfer is made to any fund subsequent in priority: Interest Fund. The Trustee will, on each Series 2022 Installment Payment Date (commencing on the Series 2022 Installment Payment Date preceding November 15, 2022), deposit in the Interest Fund an amount representing the portion of the Series 2022 Installment Payments designated as interest coming due on the next succeeding May 15 and November 15, as the case may be. No deposit need be made into the Interest Fund so long as there is in such fund moneys sufficient to pay the interest portion of all Certificates then Outstanding on the next May 15 or November 15, as the case may be. Except as provided in the Trust Agreement, moneys in the Interest Fund will be used and withdrawn by the Trustee solely for the purpose of paying the interest with respect to the Certificates when due and payable (including accrued interest with respect to any Certificates prepaid prior to maturity pursuant to the Trust Agreement). 4864-8204-9305v7/022925-0111 Principal Fund. The Trustee will, on the Series 2022 Installment Payment Date prior to each November 15 (commencing on the Series 2022 Installment Payment Date preceding November 15, 2022), deposit in the Principal Fund an amount equal to the principal coming due with respect to the Certificates on the next succeeding November 15. No deposit need be made into the Principal Fund so long as there is in such fund moneys sufficient to pay the portion of all Certificates then Outstanding designated as principal and coming due on the next succeeding November 15. Except as provided in the Trust Agreement, moneys in the Principal Fund will be used and withdrawn by the Trustee solely for the purpose of paying the principal with respect to the Certificates when due and payable. Prepayment Fund. Moneys to be used for prepayment of Certificates will be transferred by the Trustee from the Certificate Payment Fund and deposited in the Prepayment Fund on the prepayment date specified in the Written Request of the District filed with the Trustee pursuant to the Installment Purchase Agreement. Said moneys will be set aside in the Prepayment Fund solely for the purpose of prepaying the Certificates in advance of their respective stated maturities and will be applied on or after the date specified for prepayment pursuant to the Trust Agreement to the payment of the Prepayment Price with respect to the Certificates to be prepaid upon presentation and surrender of such Certificates. Rate Covenant To the fullest extent permitted by law, the District will fix and prescribe, at the commencement of each Fiscal Year, rates and charges for the Electric Service provided by the Electric System which are reasonably expected to be at least sufficient to yield during each Fiscal Year Net Revenues equal to 125% of Debt Service payable in such Fiscal Year; provided, however, that for purposes of the Installment Purchase Agreement, Revenues in such Fiscal Year do not include any amount transferred from the Rate Stabilization Fund to the Revenue Fund in excess of 25% of Debt Service payable in such Fiscal Year. The District may make adjustments from time to time in such rates and charges and may make such classification thereof as it deems necessary, but may not reduce the rates and charges then in effect unless the Net Revenues, from such reduced rates and charges are reasonably expected to be sufficient to meet the foregoing requirements. So long as the District has complied with its obligations set forth in the above paragraph, the failure of Net Revenues to equal 125% of Debt Service at the end of a Fiscal Year does not constitute a default or an Event of Default under the Installment Purchase Agreement. Limitations on Parity and Superior Obligations; Subordinate Obligations Additional Obligations Superior to Installment Payments. The District has covenanted in the Installment Purchase Agreement that the District will not issue any additional evidences of indebtedness or incur other additional obligations that are payable from or secured by a pledge of and lien on Revenues or any money in the Revenue Fund superior to the pledge securing the Series 2022 Installment Payments. Additional Obligations on a Parity with the Installment Payments. The District may at any time execute any parity Contract or issue any parity Bonds, as the case may be, in accordance with the Installment Purchase Agreement; provided: (a) The Net Revenues (not including amounts transferred from the Rate Stabilization Fund to the Revenue Fund in excess of 25% of Debt Service for such Fiscal Year) for the most recent audited Fiscal Year preceding the date of adoption by the Board of Directors of the District of the resolution authorizing the issuance of such Bonds or the date of the execution of such Contract, as the case may be, as evidenced by both a calculation prepared by the District and a special report prepared by an Independent Certified Public Accountant or an Independent Municipal Advisor on such calculation on file with the District, produces a sum equal to at least 125% of the Debt Service for such Fiscal Year; and 9 4864-8204-9305v7/022925-0111 (b) The Net Revenues (not including amounts transferred from the Rate Stabilization Fund to the Revenue Fund in excess of 25% of Debt Service for such Fiscal Year) for the most recent audited Fiscal Year preceding the date of the execution of such Contract or the date of adoption by the Board of Directors of the District of the resolution authorizing the issuance of such Bonds, as the case may be, including adjustments to give effect as of the first day of such Fiscal Year: (i) to increases or decreases in rates and charges for the Electric Service approved and in effect as of the date of calculation, as evidenced by a calculation prepared by the District; and (ii) to each new connection to the Electric System that, during all or any part of such Fiscal Year, was not in existence and that would have been derived from such connection if it had been made prior to the beginning of such Fiscal Year, produces a sum equal to at least 125% of: (1) the Debt Service for such Fiscal Year; plus (2) the Debt Service which would have accrued on any Contracts executed or Bonds issued since the end of such Fiscal Year, assuming that such Contracts had been executed or Bonds had been issued at the beginning of such Fiscal Year; plus (3) the Debt Service which would have accrued had such proposed additional Contract been executed or such proposed additional Bonds been issued at the beginning of such Fiscal Year; and (c) The estimated Net Revenues (not including amounts transferred from the Rate Stabilization Fund to the Revenue Fund in excess of 25% of Debt Service for such Fiscal Year) for the then current Fiscal Year and for each Fiscal Year thereafter to and including the first complete Fiscal Year after the latest date of operation of any uncompleted Project, as evidenced by a certificate of the Manager on file with the District, including (after giving effect to the completion of all such uncompleted Projects) an allowance for estimated Net Revenues (not including amounts transferred from the Rate Stabilization Fund to the Revenue Fund in excess of 25% of Debt Service for such Fiscal Year) for each of such Fiscal Years arising from any increase in the income, rents, fees, rates and charges estimated to be fixed, prescribed or received for the Electric Service and which are economically feasible and reasonably considered necessary based on projected operations for such period, as evidenced by a certificate of the Manager on file with the District, produce a sum equal to at least 125% of the estimated Debt Service for each of such Fiscal Years, after giving effect to the execution of all Contracts and the issuance of all Bonds estimated to be required to be executed or issued to pay the costs of completing all uncompleted Projects within such Fiscal Years, assuming that all such Contracts and Bonds have maturities, interest rates and proportionate principal repayment provisions similar to the Contract last executed or then being executed or the Bonds last issued or then being issued for the purpose of acquiring and constructing any of such uncompleted Projects; and Notwithstanding the foregoing, Bonds or Contracts may be issued or incurred to refund outstanding Bonds or Contracts if, after giving effect to the application of the proceeds thereof, total Debt Service will not be increased in any Fiscal Year in which Bonds or Contracts (outstanding on the date of issuance or incurrence of such refunding Bonds or Contracts, but excluding such refunding Bonds or Contracts) not being refunded are outstanding. Notwithstanding satisfaction of the other conditions to the execution of any Contract or the issuance of Bonds set forth in the Installment Purchase Agreement, no such execution or issuance may occur if an Event of Default (or any event which, once all notice or grace periods have passed, would constitute an Event of Default) exists, unless such Event of Default will be cured upon such execution or issuance. Subordinate Obligations. The District may at any time issue evidence of indebtedness or incur other obligations for any lawful purpose that are payable from and secured by a lien on Revenues or moneys in the Revenue Fund as may from time to time be deposited therein subordinate to the Series 2022 Installment Payments. Currently, there are no Subordinate Obligations outstanding. No Reserve Fund No reserve fund has been established under the Trust Agreement, the Installment Purchase Agreement or any other document in connection with the execution and delivery of the Certificates. 10 4864-8204-9305v7/022925-0111 Rate Stabilization Fund There has been established with the District a fund called the "Rate Stabilization Fund." The District has agreed and covenanted to maintain the Rate Stabilization Fund so long as any Certificates remain outstanding. There is $[-1 on deposit in the Rate Stabilization Fund as of the date of the initial execution and delivery of the Certificates. The District may withdraw and deposit amounts therein from time to time in its sole discretion. Amounts in the Rate Stabilization Fund will be disbursed, allocated and applied by the District solely to the uses and purposes described in the Installment Purchase Agreement, and the Rate Stabilization Fund will be accounted for separately and apart from all other accounts, funds, money or other resources of the District. The Rate Stabilization Fund and all amounts on deposit therein have been irrevocably pledged to the payment of the Bonds and Contracts as provided in the Installment Purchase Agreement; provided that amounts on deposit in the Rate Stabilization Fund may be apportioned for such purposes as are expressly permitted therein. The foregoing pledge constitutes a first lien on amounts on deposit in the Rate Stabilization Fund for the payment of Contracts and Bonds in accordance with the terms of the Installment Purchase Agreement. The District may withdraw all or any portion of the amounts on deposit in the Rate Stabilization Fund from time to time and transfer such amounts to the Revenue Fund for application in accordance with the Instalment Purchase Agreement. Amounts transferred from the Rate Stabilization Fund to the Revenue Fund pursuant to the Installment Purchase Agreement during or within 270 days after the end of a Fiscal Year may be taken into account as Revenues for purposes of the calculations that are described under the captions "—Rate Covenant" and "—Limitations on Parity and Superior Obligations; Subordinate Obligations —Additional Obligations on a Parity with the Installment Payments" for such Fiscal Year to the extent provided in the definition of "Revenues." See Appendix B under the caption "INSTALLMENT PURCHASE AGREEMENT — Definitions." THE DISTRICT General The District is primarily located in eastern Nevada County (the "County"), with a small area of the District (approximately 1.5 square miles) located in neighboring Placer County. The District is situated in the Sierra Nevada mountains approximately 180 miles northeast of San Francisco and 32 miles west of Reno, Nevada. Lake Tahoe is approximately 12 miles south of the District's boundaries. The current population within the District's 47 square mile service area is estimated to be approximately 16,200 residents. The Town of Truckee, the largest city within the District's boundaries, was established in 1862 and became an important location on the Central Pacific Railroad, the first transcontinental railroad, which was completed in 1869. At the eastern end of Donner Pass, Truckee has remained an important transportation center as the gateway to the mountain pass between California and Nevada. Truckee was incorporated in 1993 and has become a center of tourism due to its proximity to the Dormer Pass and Lake Tahoe area ski resorts as well as summer recreational activities. The District was established on August 9, 1927 as a Public Utility District under Division 7 of the State Public Utility Code. At the time of its establishment, the District provided electric service only. Since 1935, the District has also provided water service within the Truckee and Donner Lake areas, with the Electric System and the District's water system maintained and operated separately. Revenues of the District's water system are not available to pay the Series 2022 Installment Payments, and operation and maintenance costs of the District's water system do not constitute Operation and Maintenance Costs of the Electric System. 11 4864-8204-9305v7/022925-0111 The District has broad general powers over the generation of electricity within District boundaries, including the powers of eminent domain, to contract, to construct works, to fix rates and charges for commodities or services furnished, to lease its properties and to incur indebtedness. As of December 31, 2021, the District provided electric service to 12,931 residential and 1,619 commercial, governmental, institutional and other customers. The District is the sole provider of retail electric service within its service area. The District is a network transmission service customer under the currently effective joint Open Access Transmission Tariff ("OATT") with NV Energy, an investor -owned utility (an "IOU"). The District uses NV Energy's network service to import into and transport across NV Energy's transmission grid all of the energy that is necessary to serve the District's load. This load is served from four substations and one distribution interconnection with NV Energy. The substations and interconnection voltages include Donner Lake Substation (60 kilovolts ("kV")), Tahoe Donner Substation (60 kV), Truckee Substation (60 kV), Martis Valley Substation (120 kV) and the Glenshire metering point (14.4 kV). The District does not generate electricity itself. The District's sources of electrical power include resources owned and/or operated by Utah Association of Municipal Power Systems ("UAMPS"), Western Area Power Administration ("WAPA"), and Truckee -Carson Irrigation District ("TCID"). The District has entered into various agreements with these entities for electrical power which is generated from wind, landfill gas, hydroelectric projects, natural gas, and other sources. See the caption "THE ELECTRIC SYSTEM —Power Supply Resources." The Electric System includes more than 232 miles of 12.47 kV and 14.4 kV distribution lines, including approximately 97 miles of underground distribution cables and approximately 135 miles of overhead pole lines. Land Use and Service Area The District serves a region that ranges in elevation from less than 5,700 feet above sea level in Hirschdale to over 7,400 feet above sea level at the western end of the District, which is located close to the crest of the Sierra Nevada mountains. The District's service area includes the Town of Truckee and the communities of Armstrong Tract, Blitz Tract, Glenshire, Tahoe Donner, Meadow Park, Gateway, Prosser Heights, Prosser Lakeview, Donner Lake and Hirschdale. Interstate 80 bisects the District's service area and provides easy access to San Francisco to the west and Reno, Nevada to the east. The District is approximately 75% developed (69% residential and 80% commercial), with buildout of both residential and commercial development projected to occur in the 2040 to 2050 timeframe. The District estimates that the population within the District's service area at buildout will be approximately 28,300. Seismic Considerations The District is located in a seismically active region. Significant faults in or near the District's service area include the West Tahoe Fault, the Incline Village Fault, the Stateline Fault and the Mohawk Fault Zone. There is potential for destructive ground shaking during the occurrence of a major seismic event and land along fault lines may be subject to liquefaction. In the event of a severe earthquake, there may be significant damage to both property and infrastructure within the District, including the Electric System. The District maintains $2.5 million in earthquake insurance. See the caption "—District Insurance." Newer Electric System facilities are designed to withstand earthquakes with minimal damage, as earthquake loads are taken into consideration in the design of project structures. The District has also undertaken a vulnerability assessment of critical Electric System facilities. The vulnerability assessment ranks the District's infrastructure by importance, builds redundancy into existing operations, and includes contingency plans in the event of damage to assets and succession plans for critical staff. The impact of lesser magnitude events is 12 4864-8204-9305v7/022925-0111 expected by the District to be temporary, localized and repairable. The Electric System has never sustained major damage to its facilities or experienced extended incidences of service interruptions as a result of seismic disturbances. See the caption "RISK FACTORS —Natural Disasters." Governance and Management General. The District is governed by a five -person Board of Directors (the "Board") elected at large for staggered four-year terms. The Board selects a President and a Vice President from among its members, each of whom serves in such capacity for a one-year term. Current Board members are listed below: Board Member Christa Finn, President Jeff Bender, Vice President Joe Aguera Kim Harris Tony Laliotis Truckee Donner Public Utility District Board of Directors Occupation Small Business Owner Small Business Owner Retired Business Owner Local Government Employee Public Utility Executive Expiration of Term 2022 2024 2024 2024 2022 Day-to-day management of the District is delegated to Brian C. Wright, General Manager since May 2021. Mr. Wright has been with the District since 2013, previously serving as Interim General Manager, Assistant General Manager and Water Utility Director, among other positions. Prior to coming to the District, Mr. Wright served as a Water Utility Supervisor for the City of Manhattan Beach, California, and in various roles for a private water company. In his role as General Manager, Mr. Wright is responsible for implementing policies adopted by the Board and managing day-to-day operations associated with all aspects of water and electric services. Michael Salmon serves as the Chief Financial Officer of the District. Mr. Salmon has been with the District since April 2020. Prior to coming to the District, Mr. Salmon served as a director of finance and corporate controller for several ski resorts in the Lake Tahoe region, and served in public accounting as a Certified Public Accountant (license inactive). Mr. Salmon's public accounting experience included utility audits and utility rate making consulting services. Mr. Salmon has a Bachelor's Degrees in Accounting and Finance from Florida State University. Joe Horvath has served as the Electric Utility Director of the District since 2018. Prior to assuming his current role, he served as the District's System Engineer and Electrical Engineering Manager. Mr. Horvath has been with the District since December 1997. Prior to coming to the District, Mr. Horvath served as a senior engineer for an engineering consulting firm. He is a registered professional engineer in California and Washington. Mr. Horvath has a Bachelor of Science degree in Electrical Engineering from the University of Washington. Management Policies. The District has adopted several policies which are designed to ensure the prudent and effective management of its operations, including a Debt Management Policy, an Investment Policy and a Reserve Policy (part of a broader set of finance and accounting policies). Further information about these policies is set forth below. Debt Management Policy. The District has adopted a Debt Management Policy in accordance with Government Code Section 8855 to establish guidelines and parameters for the effective governance, management and administration of debt issued by the District and its related entities and to ensure compliance with legislation, statutes and laws that place regulations on local agency debt. The following elements have been incorporated into this policy: 13 4864-8204-9305v7/022925-0111 • The purposes for which debt may be incurred; • The types of debt that may be issued; • The relationship of the debt to, and integration with, the District's capital improvement program or budget; • Policy goals related to the District's planning goals and objectives; and • Debt management practices, including the investment of proceeds and monitoring of expenditures. Investment Policy. The District invests its funds in accordance with the District's investment policy (the "Investment Policy"), which was established in 2006 and is reviewed by the Board annually. The Investment Policy: (a) describes the policies and procedures which govern the investment of District cash; (b) establishes guidelines for the prudent investment of the District's funds, and (c) lists and describes suitable investments. The goals of the District's investment policy and investment management function are compliance with law, enhancement of the economic status of the District and protection of the District's funds by limiting credit and interest rate risks. In accordance with Government Code Section 53600 et seq., idle cash management and investment transactions are the responsibility of the Chief Financial Officer, who serves as the District Treasurer. Eligible investments are generally limited to the Local Agency Investment Fund which is operated by the State Treasurer and other investments which are authorized for public agencies under Government Code Section 53600 et seq. Funds are invested in the following order of priority: • Safety of Principal; • Liquidity; and • Return on Investment. Staff provides a quarterly report to the Board showing the type of investment, date of maturity, amount invested, current market value, rate of interest and other such information as may be requested by the Board. See the caption "FINANCIAL INFORMATION —Available Cash" for current information with respect to the District's investments. Reserve Policy. The Board has adopted a wide-ranging set of finance and accounting policies, including policies related to financial goals, budgeting, procurement, purchasing, asset capitalization and reserves. Under the Reserve Policy: (i) the Electric System will maintain a cash reserve in an amount that is equal to one half of annual budgeted operating expenses, excluding depreciation; (ii) the Electric System will maintain a Board -designated reserve fund (known as the Deferred Liability fund) to fund unfunded liabilities such as pension costs, with the reserve target determined by the Board on an annual basis; (iii) the Electric System will maintain a revolving electric capital reserve in an amount that is equal to the average annual budget for capital replacements; (iv) the Electric System will maintain a rate stabilization fund to mitigate the impact of future increases in the cost of electrical power that is equal to one-half of annual budgeted purchased power costs; and (v) The Electric System will maintain a reserve to pay for vehicle and equipment purchases as needed. Long term financing for these purposes should only be used when necessary and when the life of the asset purchased is greater than 15 years. 14 4864-8204-9305v7/022925-0111 See the caption "SECURITY FOR THE CERTIFICATES —Rate Stabilization Fund" for a discussion of the pledge of moneys in the Rate Stabilization Fund to the Series 2022 Installment Payments. Employees As of December 31, 2021, the District had 81.5 authorized full-time equivalent employees, of whom 18 were authorized for water operations, 38 worked in general and administrative functions, and 25.5 worked in electric operations. The District has one bargaining unit — the International Brotherhood of Electrical Workers, Local 1245 (the "IBEW"). Relations between the District and the IBEW are governed by a memorandum of understanding which expires on December 31, 2024. Certain senior managers are unrepresented. The District has never experienced a strike, slowdown or work stoppage. See the caption "FINANCIAL INFORMATION —Employee Benefits" for a discussion of pension and other post -employment benefits offered to retired employees. Budget Process The District prepares and adopts a balanced budget for each Fiscal Year which includes proposed expenditures and the means of financing such expenditures. The budget takes the form of a two-year financial plan which is adopted by the Board. The budgetary process begins each year on or about August 1, with final approval generally occurring in November. The Board reviews the adopted budget semiannually to determine whether amendments are necessary. The General Manager is authorized to transfer budgeted amounts between line items within a department or activity provided that the total appropriation does not exceed the budgeted amount. Most other budget amendments require authorization by the Board. The General Manager is responsible for controlling expenditures within budgeted appropriations. The Board adopted the budget for Fiscal Year 2022 on November 3, 2021. District Insurance The District maintains a self -funded vision insurance program, with claims processed on behalf of the District. The District does not maintain a claim liability; rather, claims were expensed as paid. The amount of claims paid for each of the past three years has not been material. The District is exposed to various risks of loss related to torts, theft of, damage to and destruction of assets, errors and omissions, injuries to employees and natural disasters. The District purchases insurance coverage for these risks from commercial insurers. The District currently maintains the following coverages: • Liability (general, automobile, public officials and employee errors and omissions: $55 million per occurrence, with various sublimity); • Workers Compensation (statutory limits); • Employers' Liability ($4 million); • Property (scheduled value up to $500 million limit; boiler and machinery sublimit $100 million, with a $25,000 — $50,000 deductible for scheduled assets; earthquake: $2.5 million, with a deductible of 5% per unit of insurance subject to minimum $75,000 of total insurable value (currently approximately $107,742,579); and flood: $25 million, except Zones A&V, limit of $10 million, with a $100,000 deductible); 15 4864-8204-9305v7/022925-0111 • Excess carriers pooled limits; Liability $5 million, Property $100,000 (including earthquake and flood); • Cyber liability; limit $5 million (no pooled layer); and • Employee Dishonesty Coverage (Crime); pooled layer $100,000, excess limit $3 million. Certain portions of the Electric System, including distribution poles and overhead lines, are not covered by the District's property insurance. No assurance can be given as to the adequacy of the insurance maintained now or in the future by the District to fund necessary repairs or replacement of any portion of the Electric System, and the District does not have any obligation under the Installment Purchase Agreement to maintain earthquake coverage or to maintain other coverages in the current coverage amounts. Significant damage to the Electric System could affect the District's ability to generate sufficient Net Revenues to pay the Series 2022 Installment Payments. See the caption "RISK FACTORS —Natural Disasters." The District has not settled any claims that exceeded its insurance coverage in the past three years. See Appendix B under the caption "INSTALLMENT PURCHASE AGREEMENT —COVENANTS OF THE DISTRICT —Insurance" for a description of insurance coverages that are required to be maintained while the Certificates are outstanding. No Outstanding Obligations The District has no outstanding obligations that are payable from Net Revenues on a senior or parity basis to the District's obligation to pay the Series 2022 Installment Payments. The District is permitted to incur additional obligations that are payable from Net Revenues on a parity with the Series 2022 Installment Payments in the future upon satisfaction of the conditions that are described under the caption "SECURITY FOR THE CERTIFICATES— Limitations on Parity and Superior Obligations; Subordinate Obligations —Additional Obligations on a Parity with the Installment Payments." Financial Statements A copy of the most recent audited financial statements of the District prepared by Moss Adams LLP, Portland, Oregon (the "Auditor") is set forth in Appendix A. The Auditor's letter dated May 10, 2022 is located at the beginning of the Financial Section therein. The summary operating results that are contained under the caption "FINANCIAL INFORMATION — Historical Operating Results and Debt Service Coverage" are derived from these financial statements and audited financial statements for prior Fiscal Years (excluding certain non -cash items and after certain other adjustments), and are qualified in their entirety by reference to such statements, including the notes thereto. The District accounts for moneys received and expenses paid in accordance with generally accepted accounting principles applicable to public entities ("GAAP"). Generally, the District recognizes revenues and expenses on the full accrual basis of accounting, meaning that revenues are recognized in the accounting period in which they are earned and expenses are recognized in the period in which they are incurred, regardless of when the related cash flows take place. However, in certain cases, GAAP requires or permits moneys that are collected in one Fiscal Year to be recognized as revenue in a subsequent Fiscal Year and requires or permits expenses that are paid or incurred in one Fiscal Year to be recognized as expenses in a subsequent Fiscal Year. See Note LB to the financial statements that are set forth in Appendix A. Except as otherwise expressly noted herein, all financial information that has been derived from the District's audited financial statements reflects the application of GAAP. 16 4864-8204-9305v7/022925-0111 For financial reporting purposes, the District operates the Electric System as an enterprise fund with a set of self -balancing accounts that is accounted for as a proprietary fund type using the economic resources measurement focus. In governmental accounting, enterprise funds are used to account for operations that are financed and operated in a manner similar to private business enterprises, where the intent is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis are to be financed or recovered primarily through user charges, or where periodic determination of revenues earned, expenses incurred and/or net income is deemed appropriate for capital maintenance, public policy, management control, accountability or other purposes. COVID-19 Pandemic The spread of the strains of coronavirus which are collectively called SARS-CoV-2, which cause the disease known as COVID-19 ("COVID-19"), and local, State and federal actions in response to COVID-19, have impacted the District's operations and finances. In response to the increasing number of COVID-19 infections and fatalities, health officials and experts recommended, and some governments mandated, a variety of responses ranging from travel bans and social distancing practices to complete shutdowns of certain services and facilities. The World Health Organization declared the COVID-19 outbreak as a pandemic and, on March 4, 2020, as part of the State's response to address the outbreak, the Governor declared a state of emergency. On March 13, 2020, the President declared a national emergency, freeing up funding for federal assistance to state and local governments. Many school districts across the State temporarily closed some or all school campuses (including schools within the District) in response to local and State directives or guidance. On March 19, 2020, the Governor issued Executive Order N-33-20, a mandatory Statewide shelter -in - place order applicable to all non -essential services. Certain aspects of the shelter -in -place directives were extended indefinitely until indicators for modifying the stay-at-home order were met. The County and Placer County also declared states of emergency in response to the COVID-19 outbreak. On May 4, 2020, the Governor issued an executive order informing local health jurisdictions and industry sectors that they could gradually re- open under new modifications and guidance provided by the State. A phased re -opening of various sectors was underway beginning in mid-2020 in accordance with a four -stage re -opening plan that ended with a full reopening of the economy on June 15, 2021. Although pursuant to the re -opening plan certain restrictions on activities were eased, restrictions were also re -imposed in various jurisdictions as local conditions warranted, and such restrictions may be renewed as the pandemic continues. On March 27, 2020, the President signed the $2.2 trillion Coronavirus Aid, Relief, and Economic Stabilization Act (the "CARES Act") which provided, among other measures, $150 billion in financial aid to states, tribal governments and local governments to provide emergency assistance to those most significantly impacted by COVID-19. Under the CARES Act, local governments were eligible for reimbursement of certain costs which were expended to address the impacts of the pandemic. The District does not expect to receive any funds under the CARES Act. On December 27, 2020, the President signed the $900 billion Coronavirus Response and Relief Supplemental Appropriations Act. Although the act did not provide additional financial assistance to state and local governments, it did extend the deadline (to October 2021) for them to use unspent funds that were previously approved under the CARES Act. On March 11, 2021, the President signed the American Rescue Plan Act of 2021 (the "ARP Act"), a $1.9 trillion economic stimulus package that was designed to help the United States' economy recover from the adverse impacts of the COVID-19 pandemic. The ARP Act includes approximately $350 billion in aid to state and local governments such as the District, consisting of both direct funding from the United States Department of Treasury and program moneys that will flow from other federal agencies. Half of the aid to state and local governments was distributed in spring 2021, with the other half following in 2022. County governments have been allocated a total of approximately $65.1 billion under the ARP Act and any District funding received under the ARP Act will be allocated through the County. In 2022, the District received reimbursement of $216,665 17 4864-8204-9305v7/022925-0111 under the ARP Act, consisting of $113,135 received for the Electric System through the State Department of Community Services and Development and $103,530 received for the District's water system through the California Water and Wastewater Arrearage Payment Program operated by the State Water Resources Control Board. Any ARP Act funds received by the District must be used: (i) to assist households, small businesses, nonprofit entities and impacted industries including hospitality, travel and tourism; (ii) to pay a salary premium to essential workers up to $13 an hour with an annual cap of $25,000; (iii) to cover for lost revenue in providing services; and (iv) to make investments in water, sewer or broadband infrastructure. The State Legislature established in the Fiscal Year 2021-22 State Budget the California Arrearage Payment Program ("CAPP") to provide financial assistance for State energy utility customers to reduce past due energy bill balances during the COVID-19 pandemic. Administered by the State Department of Community Services and Development ("CSD"), CAPP dedicates $1 billion in ARP Act funding to address energy debts. CAPP implementation is divided into four distinct phases. During Phase 1, the total residential energy arrearages are quantified. During Phase 2, applications are submitted for assistance. During Phase 3, CAPP benefits are applied directly to eligible residential and commercial customer accounts. During Phase 4, required reports are submitted to CSD to confirm the outcome of delivered CAPP benefits. The District submitted its quantification survey pursuant to Phase 1 of CAPP on September 21, 2021, including a funding request of approximately $156,932 for residential customers and $16,545 for commercial customers, and submitted a CAPP application on January 6, 2022. The District has received a proportional share of requested funds of $113,135 in January 2022 and has delivered this amount to delinquent customers through bill credit to applicable customers. The effects of the COVID-19 outbreak and governmental actions responsive to it have altered the behavior of businesses and people in a manner that has had significant negative impacts on global and local economies. In addition, financial markets in the United States and globally have experienced significant volatility attributed to COVID-19 concerns. The outbreak resulted in increased pressure on State finances as budgetary resources were directed towards containing the pandemic and tax revenues sharply declined in early 2020. Identified cases of COVID-19 and deaths attributable to the COVID-19 outbreak continue to occur throughout the United States, including the County. Potential impacts to the District associated with the COVID-19 outbreak include, but are not limited to, increased costs and challenges to the public health system in and around the District, cancellations of public events and disruption of the regional and local economy, with corresponding decreases in the District's revenues, including as a result of reduced electricity usage (particularly among commercial and hotel establishments). In addition, the Governor suspended utility service shutoffs and the collection (although not the imposition) of late fees and penalties for residential customers (including Electric System customers) through December 31, 2021. Despite the foregoing actions, the District has not accumulated a significant number of uncollectible accounts and has written off approximately $20,705 (for 2020 and 2021 combined) of nonpayment, including uncollected late fees. The District has an allowance for doubtful accounts as of December 31, 2021 of $47,300 and in May 2022, re -instituted the pandemic -paused standard collection procedures. Many delinquent customers were credited payments that the District received through the CAPP, as described above. The District's Electric System is in a federally designated critical infrastructure sector with exemptions under Executive Order N-33-20, as needed to maintain continuity of operations. However, in response to the COVID-19 outbreak, the District temporarily modified its operations to implement remote work opportunities for employees, shift employees to alternate locations and provide services online, closed the District's administrative building to the public and deferred several non -essential capital improvement projects. In order to transition District employees to working from home, the District procured additional hardware, established secure access to District computer systems and remote access to District telephone systems and deployed tele- conferencing applications. In addition, large gatherings of District personnel at any one time were prohibited for much of 2020 and early 2021 per health officer orders. Board meetings occurred via teleconference, and public comment and participation for Board meetings was also conducted via teleconference and electronic means. With improvements in local case rates, the District has phased in the resumption of normal operations 18 4864-8204-9305v7/022925-0111 and activities while complying with public health orders and California Occupational Safety and Health Administration COVID-19 Prevention Plan mandates. The District has not experienced and does not at this time foresee a future negative impact on the execution of District services as a result of the COVID-19 pandemic. The District has worked diligently to provide its employees with personal protective equipment and voluntary access to screening and vaccinations. However, there can be no assurance that absences of employees or District leadership due to COVID-19 will not adversely impact District operations. The District reports that Fiscal Year 2020 and 2021 Electric System revenues and expenses were not materially affected by the COVID-19 pandemic, although the District experienced increases in Operation and Maintenance Costs related to sanitation and technology costs to protect employee health and make remote work opportunities available to employees and reductions in revenues from non-residential customers during the State - mandated economic shutdown in 2020 and 2021. In addition, supply chain disruptions attributable to the COVID-19 pandemic have made certain equipment more expensive and extended the timeline for certain capital improvements. The District's customer base is primarily residential and its electric rate structure consists of variable and fixed rate components, which partially mitigated the effect of reduced electric usage by non- residential customers. The District experienced an increase in electricity usage in 2020 and 2021 as compared to the three-year historical average, attributed primarily to an increased occupancy of residential primary and secondary homes during the pandemic. See the caption "FINANCIAL INFORMATION —Historical Operating Results" for historical operating results of the Electric System in 2020 and 2021. The COVID-19 pandemic is ongoing, and the duration and severity of the outbreak and the economic and other actions that may be taken by governmental authorities to contain the outbreak or to treat its impact are uncertain. The ultimate impact of COVID-19 on the operations and finances of the District and the Electric System is unknown. The District continues to actively monitor Electric System usage, payment delinquencies, and revenues and expenditures, so that any further impacts of the COVID-19 pandemic can be anticipated. The District does not currently expect that the COVID-19 pandemic will have a material adverse effect on the District's ability to pay the Series 2022 Installment Payments. THE ELECTRIC SYSTEM General The District has provided electric service since its inception in 1927. As of December 31, 2021, the District provided electric service to 12,931 residential and 1,619 commercial, governmental, institutional and other customers. The District is the sole provider of retail electric service within its service area. The District is a network transmission service customer under the currently effective joint OATT with NV Energy, an IOU. The District uses NV Energy's network service to import into and transport across NV Energy's transmission grid all of the energy that is necessary to serve the District's load. This load is served from four substations and one distribution interconnection with NV Energy. The substations and interconnection voltages include Donner Lake Substation (60 W), Tahoe Donner Substation (60 W), Truckee Substation (60 W), Martis Valley Substation (120 kV) and the Glenshire metering point (14.4 W). The District does not generate electricity itself. The District's sources of electrical power include UAMPS, WAPA, and TCID. The District has entered into various agreements with these entities for electrical power which is generated from wind, landfill gas, hydroelectric projects, natural gas, and other sources. See the caption "—Power Supply Resources." The Electric System includes more than 232 miles of 12.47 kV and 14.4 kV distribution lines, including approximately 97 miles of underground distribution cables and approximately 135 miles of overhead pole lines. 19 4864-8204-9305v7/022925-0111 The District has earned the highest Reliable Public Power Provider ("RP3") designation from the American Public Power Association for providing consumers with reliable and safe electric service. On March 24, 2021, the District achieved the Diamond RP3 level designation, representing the top 2% of public power utilities across the United States. Previously, the District received the Gold Level designation in 2014 and the Platinum level designation, which is the second highest RP3 award level, in 2017. All RP3 designations are valid for three years. The current Diamond RP3 level designation is valid through May 1, 2024. Transmission and Scheduling In 1999, the District entered into a contract with NV Energy under which NV Energy has agreed to provide electric transmission services to the District through December 31, 2027. Under this agreement, the District uses NV Energy's transmission infrastructure to import energy from its power supply providers (UAMPS, WAPA, and TCID) in order to serve the District's load. The District anticipates starting discussions to renegotiate its transmission contract with NV Energy at least 12 to 18 months before end of the contract term. The District also purchases electricity scheduling services from UAMPS which are included in the District's monthly power bills from DAMPS. See the caption "—Power Supply Resources—UAMPS." The purchase of transmission and scheduling services from NV Energy and UAMPS, respectively, constitute Operation and Maintenance Costs of the Electric System. Such costs comprised approximately 8.7%, 10.9% and [-1% of the Electric System's purchased power costs in Fiscal Years 2019, 2020 and 2021, respectively. Power Supply Resources The District has entered into power purchase agreements and other contracts with UAMPS, WAPA, and TCID for electrical power from generating facilities that are operated by these entities. A summary of these resources is set forth below. UAMPS. UAMPS is an energy services interlocal agency (a public entity) of the State of Utah, and was originally established in 1980. UAMPS provides a variety of power supply, transmission and other services to its 47 members, which include public power utilities in six western states: Utah, California, Idaho, Nevada, New Mexico and Wyoming. The District has received electricity from UAMPS since 2005, and has entered into a master power pooling agreement with UAMPS governing the purchase of electrical energy and capacity. The Master Agreement expires on March 31, 2049. The District is billed monthly by UAMPS under the Master Agreement. Currently, the following agreements with UAMPS, which take the form of appendices to the Master Agreement, are in effect: In 2005, the District entered into an agreement with UAMPS under which the District is obligated to purchase from the UAMPS Pool Project all of its power and energy requirements in excess of its purchased or owned resources. The Pool Project provides an hourly resource clearinghouse in which UAMPS acts as an agent on behalf of all members for the scheduling and dispatch of member energy resources. This includes the purchase of any resources from the market to meet member's load, the sale of any member's resources which are deemed surplus to meet load, and the utilization of transmission rights to effect resource deliveries to, and sales by, each member including the District. The Pool Project allows members to sell excess generation to other members, and purchase required energy to meet each member's load, including the District, on an hourly basis. In 2009, the District entered into an agreement with UAMPS and the City of Hildale City, Utah ("Hildale") under which Hildale assigned to the District its 200 kilowatt ("kW") entitlement to electrical energy generated from a wind turbine facility in the southwestern Wyoming county of Uinta (the "Uinta Project"). 20 4864-8204-9305v7/022925-0111 Under the agreement, the District agreed to purchase Hildale's entitlement at a rate of $48.11 per megawatt hour ("MWh"). The agreement runs through December 31, 2028. In 2009, the District entered into an agreement with UAMPS under which the District is entitled to approximately 5 megawatts ("MW") of the electrical power generated at the Nebo Power Station, a natural gas - fired power plant. The Nebo Power Station, which is located in the central Utah city of Payson, commenced operations in 2004 and has a maximum capacity of 146 MW. The District's agreement with UAMPS for electricity from the Nebo Power Station runs through 2049. In 2009, the District entered into an agreement with UAMPS under which the District is entitled to approximately 228 kW of the nameplate capacity of the Pleasant Valley Wind generating facility, which consists of 80 wind turbines. The Pleasant Valley Wind facility, which is located in the southwestern Wyoming county of Uinta, commenced operations in 2003 and has a maximum nameplate capacity of 144 MW. The District's agreement with UAMPS for electricity from the Pleasant Valley Wind facility runs through 2028. In 2010, the District entered into an agreement with UAMPS under which the District is entitled to approximately 3.2 MW of the electrical power generated at the Trans-Jordan Land Fill Gas Generation Plant (the "Trans-Jordan Plant"), a biogas-fired power plant which generates electrical energy from landfill biogas. The Trans-Jordan Plant, which is located near the City of Murray City, Utah, commenced operations in 2010 and has a maximum capacity of 4.5 MW. The District's agreement with UAMPS for electricity from the Trans- Jordan Plant runs through 2023. The District anticipates starting discussions to renegotiate at least 12 months before end of the agreement term. In 2010, the District entered into an agreement with UAMPS under which the District is entitled to approximately 15 MW of the nameplate capacity of the Horse Butte generating facility, which consists of 32 wind turbines. The Horse Butte facility, which is located in the southeastern Idaho county of Bonneville, commenced operations in 2012 and has a maximum nameplate capacity of 57.6 MW. Under the District's agreement with UAMPS, the District pays a [_]% share of debt service on bonds that were issued to finance the facility (structured as a prepayment for the output of the facility), as well as power supply and transmission costs which are attributable to the District's entitlement. The District has agreed to maintain rates and charges that are sufficient to enable the District to meet its obligations under the Horse Butte agreement as well as the costs of operating and maintaining the Electric System. The agreement will continue indefinitely unless the Horse Butte facility's management committee (on which the District and each of the several dozen other participants in the project has one voting member) decides to terminate operations. In 2011, the District entered into an agreement with UAMPS and the City of Parowan, Utah ("Parowan") under which Parowan assigned to the District its 27.5 kW entitlement to electrical energy generated from the Uinta Project. Under the agreement, the District agreed to purchase Parowan's entitlement at a rate of $48.11 per MWh. The agreement runs through December 31, 2028. In 2016, the District entered into an agreement with UAMPS under which the District is entitled to 1.792 MW of the electrical power generated at the Veyo Heat Recovery Project, which makes use of heat exhaust from three 15,000 horsepower combustion turbines at an adjacent natural gas transmission compressor station. The heat exhaust would otherwise be dissipated into the atmosphere and lost. Because the Veyo Heat Recovery Project uses heat exhaust that is already present from operation of the compressor station, the generation of electricity does not require any additional fuel to be burned. The Veyo Heat Recovery Project, which is located in the southwestern Utah city of Veyo, commenced operations in 2016 and has a maximum capacity of 7.8 MW. The District's agreement with UAMPS for power from the Veyo Heat Recovery Project runs through 2049. In 2019, the District entered into an agreement with UAMPS under which the District is entitled to approximately 6 MW of the electricity generated at the Red Mesa Tapaha Solar Project, which consists of a solar photovoltaic generating facility spread over 600 acres. The Red Mesa Tapaha Solar Project, which is located on the Navajo Indian Reservation in southeastern Utah, is expected to commence operations in late 2022 and will 21 4864-8204-9305v7/022925-0111 have a maximum capacity of 66 MW. The District's agreement with UAMPS for electricity from the Red Mesa Tapaha Solar Project runs through 2047. In 2014, the District entered into an agreement with UAMPS under which the District is entitled to fixed amounts electrical energy (unspecified firm market energy product) delivered to UAMPS by Shell Energy North America. The fixed amounts of electric energy vary by month and are shaped to the District's load. This agreement is referred to as the 5-Year Market Purchase. The District's agreement with UAMPS for electricity from the 5-Year Market Purchase ran through March 2022. In December 2020, the District entered into an agreement with UAMPS for an additional 5-Year Market Purchase for energy delivered to UAMPS by Shell Energy North America. The new agreement starts in April 2022 and runs through March 2027. WAPA. In October 2000, the District entered into an agreement with WAPA for the purchase of a share of the wholesale generation, termed Base Resource energy, from the Central Valley Project (the "CVP") starting in 2005 through 2024. The CVP is a series of federal hydroelectric facilities in northern California operated by the United States Bureau of Reclamation, for which WAPA serves as marketing agency. The District's current allocation of Base Resource energy is approximately 0.2210%. The District is obligated under its contract with WAPA to pay for its allocated share of costs, whether or not it receives any power. The contract may be terminated if the District opposes new rate changes, which the District has not challenged to date. In addition, the District participates in additional opportunities and receives additional energy on an as available basis. Under WAPA's marketing plan, the District has the opportunity to evaluate the potential additional acquisition or surrender of its current share of CVP power. On September 16, 2020, WAPA offered the new 2025 CVP Base Resource contract to existing Base Resource customers, including the District. The new contract has a term of 30 years, beginning January 1, 2025, and ending December 31, 2054. As part of the new contract, all existing Base Resource customers retained 98% of their existing Base Resource percentage. The District also received an additional percentage of Base Resource allocation through the 2025 Resource Pool process, resulting in a total CVP Base Resource allocation amount of 0.30862%. This share for the new contract represents a 42% increase from the District's existing contract share of 0.2210%. It is estimated that the new Base Resource contract could supply approximately 6% of the District's energy usage based on average hydrological conditions. The Board approved the new 30-year Base Resource contract with WAPA for CVP generation on February 3, 2021. Contractually, the term Base Resource includes the CVP and the Washoe Project. The Washoe Project is better known as the Stampede Dam and Power Plant ("Stampede"). Stampede is located on the Little Truckee River near the District's service area, approximately 15 miles northeast of the City of Truckee. Stampede commenced operations in 1988 and has a maximum capacity of 4 MW. The output from Stampede produces approximately 5 to 6 percent of District energy requirements in an average water year. The District, along with the City of Fallon, Nevada, are parties to a separate contract with WAPA to receive 100% of Stampede energy generation. The District Board approved the existing Stampede contract with WAPA on April 4, 2007 and it expires on December 31, 2024. WAPA has informed the District that a proposed 2025 Stampede contract will be forthcoming sometime in 2022 or 2023. The District anticipates bringing the proposed 2025 Stampede contract to the Board for review and consideration in late 2022 or early 2023. TCID. TCID is a political subdivision of the State of Nevada, organized and chartered in 1918 for the purpose of representing the water right holders within the boundaries of the Newlands Project in connection with the operation of the Project located in Fallon, Nevada. TCID was formed, and is paid for, by landowners within the boundaries of the Newlands Project who own water rights appurtenant to their land, which water rights the federal government is obligated, both contractually and statutorily, to serve. TCID, by contract with the United States, took over the operation and maintenance of the Newlands Project (renamed Newlands Reclamation Project) in January 1927. Since then, TCID has been responsible for the operation and maintenance of the entire federal project which includes the dam at Lake Tahoe, Derby Dam, the Truckee Canal, Lahontan Dam and approximately 380 miles of canals and 345 miles of drains. During a normal water year, TCID delivers water to about 2,500 water users and delivers 215,000 acre feet of water primarily for agricultural use. TCID has 22 4864-8204-9305v7/022925-0111 hydroelectric generation facilities at Lahontan Dam, Old Lahontan Dam, and the 26 Foot Drop Power Station, which is located along a major canal. In February 2017, the District signed an agreement with TCID for the purchase of energy generation from 2 of TCID's hydroelectric generating plants. These facilities are the 26 Foot Drop Power Station with a nameplate capacity of 0.8MW and Old Lahontan Dam with a nameplate capacity of 1.92MW. This generation results from water deliveries to TCID's agricultural customers and is dependent on winter snowpack and yearly precipitation amounts. Although these generation facilities are relatively small, the combined output from these units produces approximately 4% to 5% of District energy requirements in an average water delivery year. This is a carbon -free energy resource, which assists the District to comply with State mandates. The current agreement expires on November 30, 2022. The District anticipates starting discussions to renegotiate the agreement in the third quarter of 2022. The following table sets forth information concerning the District's power supply resources and the energy supplied by each during the year ended December 31, 2021. Table 1 Truckee Donner Public Utility District Power Supply Resources as of December 31, 2021 and Energy Generation in 2021 Source UAMPS: Hildale (Wind) Nebo Power Station (Natural Gas) Horse Butte (Wind) Pleasant Valley (Wind) Parowan (Wind) Veyo Heat Recovery Project (Heat Recovery) Red Mesa Tapaha Solar Project (Solar)(') Trans-Jordan Land Fill (Biogas) 5-Year Market Purchase (Unspecified) Pool Project (Unspecified) Total(2) WAPA and TCID: Stampede Dam Hydroelectric Project (Hydro) TCID Hydroelectric Projects (Hydro) Total(2) .................................................................. Total(3) ......................................................................... Total Energy Resources (Generation + Load Reduction + Purchases) .................................. Load: Electric System 2021 Retail Sales G) Coming online in 2022. (2) Totals may not add due to rounding. 0) See the caption "—Wholesale Power." Source: District. Capacity Contracted (MW) 11 _5 15 0.23 11 1.7 6 3.2 n/a 4 2.7 n/a n/a n/a 163,176 Renewable Resources; District Renewable Portfolio Standard Actual Energy Percent of (Megawatt Total Hours) Energy [ ] [] 16,203 9.5% 46,067 27.1 405 0.2 6,108 3.6 26,029 15.3 33,114 19.5 32,771 19.3 160,696 94.5 5,597 3.3 3,741 2.2 9,337 5.5 170,033 100 170,033 100% Over the last several years, the District has taken numerous steps towards satisfying the renewables portfolio standard ("RPS") targets set forth in State legislation. See the caption "CERTAIN FACTORS 23 4864-8204-9305v7/022925-0111 AFFECTING THE ELECTRIC UTILITY INDUSTRY —State Legislation and Regulatory Proceedings — California Renewables Portfolio Standard." The District has a diverse portfolio of renewable resources, including output from [four] wind generation projects (Hildale, Horse Butte, Parowan and Pleasant Valley), a biogas generation project (Trans-Jordan), a heat exhaust recapture project (Veyo Heat Recovery Project), a solar generation project (Red Mesa Tapaha Solar Project), and hydroelectric projects from WAPA (Stampede) and TCID (Old Lahontan Dam and 26 Foot Drop Power Station), each of which is discussed above under the caption "—Power Supply Resources." Several of these resources do not bundle the energy delivered with the underlying Renewable Energy Certificate ("REC") attribute, including the Stampede hydroelectric, TCID hydroelectric, and Veyo Heat Recovery Projects. These resources come with a partial amount of RECs, or no RECs at all. Since these are RPS-eligible and/or carbon -free resources, the District purchases additional unbundled RECs to supply the RECs that were lacking from these resources. The District adopted a Renewable Portfolio Standard Procurement Plan in 2011 to comply with regulations adopted by the California Energy Commission (the "CEC"), a State energy planning and policy authority. The CEC regulations established a mandate for the District to meet 33% of its retail load with renewable energy by 2020, with interim targets beginning in 2011 and increasing to 33% by 2020. The District's actual RPS achievements have always been significantly ahead of State mandates and interim targets for each reporting period. Legislation enacted in 2018, California Senate Bill 100 ("SB 100"), requires that the amount of electricity generated each year from eligible renewable energy resources be increased to at least 60% by December 31, 2030, and the remaining 40% from carbon -free resources by 2045. The District has achieved an RPS value at or above 60% since 2016, well ahead of State mandates. With the planned addition of the UAMPS Red Mesa Tapaha Solar Project late this year, the District's RPS achievements will be approximately 70 to 75% starting in 2023. The District intends to continue to meet its RPS compliance obligations by banking and carrying forward excess procurement from grandfathered and new renewable energy resources to future compliance periods whenever possible, and by negotiating extensions or replacing existing renewable energy resources to maintain and/or exceed compliance with State RPS targets and mandates. Energy Efficiency Programs Pursuant to various State legislative and regulatory initiatives (including Assembly Bills 2021 and 2227 and Senate Bills 1037 and 350), electric utilities in the State are required to implement programs to ensure energy efficiency savings from their customers. Since the [1980s], the District has operated customer -based, energy efficiency programs and program targets are set on a [quadrennial] cycle. In 20[_], the Board approved the current 10-year energy efficiency targets covering the period from 20[—] to 20[—]. The targets are quantified via a modeling methodology that is vetted with the CEC. The targets represent new, additional savings for each program year. As such, they are incremental to the residual savings from prior program years and additional to the energy savings that result from State energy efficiency codes and standards relating to buildings and electrical appliances. As of the end of 2021, the District had achieved approximately [—] Gigawatt hours in energy savings from its energy efficiency programs (equipment still within its estimated useful life). Future Power Supply Resources The District's current resource mix is anticipated to provide the District with sufficient capacity reserves in the near term. The District expects to continue procuring additional resources as needed in order to meet its RPS requirements while contributing to its capacity and long-term procurement requirements through at least 2030. 24 4864-8204-9305v7/022925-0111 Wildfire Mitigation Measures The District is located in a Tier 3 fire threat area, as determined by the California Public Utilities Commission (the "CPUC"), meaning that there is an extreme risk (including likelihood and potential impacts on people and property) from utility -related wildfires. In order to mitigate such risk, the District has adopted a Wildfire Mitigation Plan, the goals of which are to minimize the probability of the District's electric system igniting a wildfire, improve the resiliency of the Electric System, and measure the effectiveness of District mitigation strategies. Coordination between the District's water system and the Electric System during wildfire events is embedded in the plan. Among other matters, the Wildfire Mitigation Plan establishes: (i) procedures to monitor weather conditions; (ii) construction and design standards that foster resiliency against wildfire events; (iii) vegetation management and equipment inspection practices to reduce fire ignition risks; (iv) standards for power shutoffs during times of high wildfire risk; and (v) an employee training program. The Wildfire Mitigation Plan (accompanied by an Independent Evaluator Report) was submitted to the California Wildfire Safety Advisory Board in late 2019. See the captions "CERTAIN FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY —State Legislation and Regulatory Proceedings —Legislation Relating to Wildfires; Related Risks" and "THE DISTRICT —Insurance." Because the District does not generate its own electricity, its supplies can be interrupted should NV Energy's transmission facilities be temporarily de -energized during a public safety outage, most commonly in the event of high wildfire risk due to factors such as the outbreak of a wildfire, heat and humidity, the presence of dry vegetation and/or wind conditions. Under NV Energy's Public Safety Outage Management Program, NV Energy strives to provide between 24 and 48 hours of notice of upcoming outages. Such outages may last several days, and the District has no control over NV Energy's decisions to de -energize or re -energize its transmission infrastructure. During public safety outages, District customers may elect to use generators to ensure a supply of electricity to their homes and businesses. Improperly connected generators can send electricity back through power lines (back -feeding), endangering lives, especially the lives of unsuspecting utility crews who are working to restore power. The District has undertaken a safety education campaign to inform customers of these risks and provide guidelines for proper generator use. To date, public safety outages and the use of generators have not had a significant effect on Net Revenues of the Electric System. However, there can be no assurance that future outages may not reduce Revenues or increase Operation and Maintenance Costs such that the District experiences a material negative effect on Net Revenues. See the caption "RISK FACTORS —Climate Change." Wholesale Power The District remains active in the wholesale energy markets as shown in Table 1 under the caption "— Power Supply Resources." Because generation and transmission resources available in any given year do not perfectly match annual load requirements, in addition to making market purchases when economical, [CONFIRM] [the District also sells excess capacity and energy that is surplus to that needed to serve its retail load from time to time]. The District's wholesale power activities are backed up by its generation and transmission assets. The objectives of the wholesale power program are to capture the maximum value of these assets and to minimize the net cost of purchased power. The District is a price taker in the wholesale market and does not assume positive net revenues from wholesale activities for purposes of financial forecasting. In Fiscal Years 2020 and 2021, wholesale sales generated a total of approximately $[ ] million in gross revenue. 25 4864-8204-9305v7/022925-0111 Cybersecurity Program The federal Energy Policy Act of 2005 ("EP Act 2005") gave the Federal Energy Regulatory Commission ("FERC") authority to oversee the reliability of the bulk power system. This includes authority to approve mandatory cybersecurity reliability standards. The North American Electric Reliability Corporation ("NERC"), which FERC has certified as the nation's Electric Reliability Organization, has developed Critical Infrastructure Protection ("CIP") cybersecurity reliability standards. The District has implemented a robust cybersecurity program that complies with FERC Order No. 791, which approved NERC's Version 5 CIP Reliability Standards. The District's cybersecurity program is audited by the Western Electricity Coordinating Council ("WECC") under the direction of NERC and addresses the following general cybersecurity areas: • Cyber System Categorization; • Cyber Security Management Controls; • Electronic Security Perimeters; • Physical Security of Cyber Systems; • Supply Chain Risk Management; • Cyber System Security Management; • Cyber Incident Reporting and Response Planning; • Cyber System Recovery Plans; • Configuration Change Management and Vulnerability Assessments; and • Information Protection. The District's cybersecurity program consists of policies, procedures and technical controls that address each of the identified areas to ensure the secure and reliable operation of the District's critical infrastructure. The District self -certifies its compliance with the above standards annually, and is audited every three years by WECC. The District undertakes certain cybersecurity functions internally and contracts with third party vendors for certain aspects of its cybersecurity program. The District regularly monitors its network and server, undertakes desktop and server virus scanning and security and maintains firewall. The District and its consultants also regularly analyze the network for potential weaknesses in cybersecurity and promptly implements solutions for identified shortfalls. District staff is regularly trained to spot potential scams or inconsistencies in network performance which may indicate system vulnerability. Since implementation of its cybersecurity program, the District has not experienced a successful attack against its network or servers leading to any data exposure or loss or service downtime. However, there can be no assurance that a future attack or attempted attack would not result in disruption of District operations. The District expects that any such disruptions would be temporary in nature due to its backup/restore procedures and disaster recovery planning. See the caption "CERTAIN FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY — Federal Energy and Environmental Policies and Legislation —Federal Policy on Cybersecurity." Rates and Charges Current Rates and Charges. The Board has full and independent power to establish revenue levels and rate schedules for all electric service provided by the District. The District is not subject to rate regulation by the CEC, the CPUC, FERC or any other State or federal regulatory body, and is empowered to set rates effective at any time. 26 4864-8204-9305v7/022925-0111 State law (Assembly Bill 1890) requires that the District spend approximately 2.85% of annual retail revenue on public benefit programs. The District recovers its public benefit revenue as part of its normal rates and has not established a public benefit surcharge. The District's rates and charges include a fixed monthly charge and a commodity charge per kilowatt- hour ("kWh"). Medium and Large Commercial customers also pay a demand charge per kilowatt ("kW") of demand. In December 2021, the District's Board approved rate changes for 2022 and 2023, with overall revenue impacts of 8.5% and 6.5%, 2022 and 2023 respectively. Current rates and charges are as follows: Table 2 Truckee Donner Public Utility District Electric System Rates and Charges Type Amount Energy Commodity Rate Domestic (Permanent Resident) $ 0.132 Domestic (Non -Permanent Resident) 0.151 Commercial (Small (<50 kW)) 0.170 Commercial (Medium (50-200 kW)) 0.110 Commercial (Large (>200kW)) 0.104 Monthly Charge Domestic (Permanent Resident) 18.55 Domestic (Non -Permanent Resident) 18.55 Commercial (Small (<50 kW('))) 27.32 Commercial (Medium (50-200 kW)) 272.84 Commercial (Large (>200M)) 1,196.79 Demand Charge per kW Commercial (Medium (50-200 kW)) 13.67 Commercial (Large (>200M)) 13.06 Source: District. The projected Electric System operating results which are set forth under the caption "FINANCIAL INFORMATION —Projected Operating Results and Debt Service Coverage" reflect the adoption of rate increases averaging approximately [7%] in Fiscal Year 2023 and approximately [3]% per annum thereafter. There can be no assurance that the Board will adopt such rate increases as currently contemplated. See the caption "CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES" for a discussion of certain voter -approved constitutional measures affecting the imposition of fees and charges by governmental agencies in the State. In the event that the Board does not adopt the rate increases that are described above, the District's future operating results will necessarily differ from the projections that are set forth herein. Facilities Fees. The District charges customers for new connections to the Electric System. For residential customers, the fees are $1,298 for connections of 200 amperes or less and $2,595 for connections of 400 amperes. For commercial customers, the fees range from $1,298 for panels of 200 amperes or less (120/240 volts) to $44,596 for panels of 2,000 amperes (277/480 volts). Commercial facilities fees are payable upon the execution of a development agreement with the District. State Wildfire Fund Charge. On October 24, 2019, pursuant to California Public Utilities Code Section 3289, the CPUC issued a decision imposing a non-bypassable charge on ratepayers of IOUs that elect to participate in the State Wildfire Fund. Effective October 1, 2020, the non-bypassable Wildfire Fund Charge is 27 4864-8204-9305v7/022925-0111 collected from IOU ratepayers. The District is a public -owned utility and provides exclusive electric service within its service and is not obligated to collect the State Wildfire Fund charge. Comparison of Rates. The following table shows a comparison of selected monthly electric bills for the District and other nearby electric utilities of as of 2021. The District notes that State -mandated surcharge and taxes, if any, are excludes, and that differences in time -of -use periods and rate adjustments make exact comparisons difficult. Table 3 Truckee Donner Public Utility District Comparison of Selected Monthly Electric Bills Santa Clara Public Utility District Lompoc Public Utility District Palo Alto Public Utility District Truckee Donner Public Utility District Primary(') Riverside Public Utility District* Truckee Donner Public Utility District Blended(') Anaheim Public Utility District Redding Public Utility District Truckee Donner Public Utility District Secondary(3) Liberty Public Utility District Plumas-Sierra Public Utility District Pasadena Public Utility District* Pacific Gas &Electric* San Diego Gas & Electric* 0) Primary residence accounts 39%. P) Second home residence accounts 61%. 0) Weighted average of tl> and (2). * Weighted average for utilities with summer and winter rates. Source: District. Electric System Collection Procedures 500 kWh Average Monthly Usage $ 64.53 81.66 82.39 84.70 90.02 90.40 91.10 92.55 94.20 95.82 103.04 118.84 136.88 183.69 The District is on a monthly billing cycle for Electric System customers. The electric bill is consolidated with the water bill, with separate sections for electricity and water, and a total of the two amounts combined. All accounts with charges for services that are at least 60 days past due are subject to discontinuation of service proceedings upon notice to the accountholder. Accounts for which service is discontinued will not be reinstated until all charges, including a reconnection fee of $40, have been paid. As of December 31, 2021, less than 4% of the District's customers were delinquent (30 or more days past due) in the payment of their bills, which is slightly higher than historical averages of less than approximately 2%. The higher delinquencies are the result of the COVID-19 pandemic and the suspension of electricity shutoffs during the outbreak. The amount of delinquencies reflects an aging report and includes the total of all bills not paid during prior Fiscal Years, including amounts shown as delinquent prior to the COVID-19 outbreak. The District reports that most customers pay their bills in full, including late charges, prior to shutoff. See the caption "THE DISTRICT—COVID-19 Pandemic" for a discussion of the suspension of electricity shutoffs through December 31, 2021. The suspension prevented the District from shutting off delinquent accounts as described in this section. Considering the continuing potential impacts of the pandemic, the District anticipates that its allowance for the write-off of uncollectible accounts will be approximately 28 4864-8204-9305v7/022925-0111 $40,000 for Fiscal Year 2022, representing approximately 0.13% of Fiscal Year 2022 projected Electric System Revenues. The District plans to offer delinquent customers longer -term payment arrangements and to apply grant funds to cover write-offs, including potentially additional grant funds under CAPP. See the caption "THE DISTRICT—COVID-19 Pandemic" for a discussion of CAPP. Largest Customers The five largest customers of the District's Electric System for Fiscal Year 2021 accounted for approximately 15.86% of total Electric System sales of 163,176,310 kWh and approximately 14.10% of total Electric System sales revenues of $27,927,720 for such period. Such customers are shown in the following table. Table 40) Truckee Donner Public Utility District Largest Customers Customer Name Truckee Donner Public Utility District Water System Tahoe Forest Hospital Tahoe Truckee Sanitation Agency Tahoe Truckee Unified School District Tahoe Donner Association TOTAL Percentage of Total Electric Annual System Sales Customer Type Kwh Sold Billing Revenues Water Utility 7,516,515 $1,264,423 4.53% Hospital 6,974,945 1,022,389 3.66 Wastewater Treatment 6,684,391 869,245 3.11 School District 2,855,574 468,265 1.68 Homeowners Association 1,841,847 312,319 1.12 25,873,272 $3,936,641 14.10% (1) Revenues and kWh are billed for the year, and exclude any year-end accruals for unbilled. Source: District. Future Electric System Improvements The District projects total capital improvements to the Electric System of approximately $44.7 million during Fiscal Years 2022 through 2026, including: (i) the 2022 Project (as discussed under the caption "THE 2022 PROJECT"); and (ii) the following additional projects, among others: $4.5 million in existing building and grounds remodel/improvements, $4.4 million in substation rebuilds/modernizations, $4.3 million in pole replacements, $4.0 million in fiber loop SCADA backbone, $2.9 million in overhead rebuilds and undergrounding, $2.8 million in line extensions and upgrades, $1.7 million in system hardening projects, $1.0 million in various master plan projects, $2.8 million in Information Technology, and $2.7 million in Vehicles and Equipment. Such capital improvements are expected to be financed by a combination of the Certificates, Electric System capital facility reserves accumulated in prior years and Revenues remaining after the payment of the Series 2022 Installment Payments. The District does not currently anticipate that it will issue additional Bonds or Contracts to finance such capital improvements in Fiscal Years 2022 through 2026. 29 4864-8204-9305v7/022925-0111 Customers, Energy Sales, Billed Revenues and Demand The District's number of customers, kWh sales and billed revenues derived from sales, by classification of service, as well as peak demand, during the past five Fiscal Years, are listed below. Table 5 Truckee Donner Public Utility District Electric System Historical Customers, Energy Sales, Billed Revenues and Demand Fiscal Year Ended December 31, 2017 2018 2019 2020 2021 Number of Customers (Dec.) Residential 12,237 12,332 12,528 12,635 12,896 Commercial/Other 1,531 1,555 1,583 1,633 1,654 Total 13,768 13,887 14,111 14,268 14,550 Sales in kWh0) Residential 87,015,973 82,316,629 85,355,620 89,748,580 90,823,657 Commercial/Other 69,546,480 69,627,207 71,358,716 69,385,248 72,352,653 Total 156,562,453 151,943,836 156,714,336 159,133,828 163,176,310 Revenues from Energy Sales Residential $13,578,059 $13,260,663 $14,137,739 $15,117,588 $15,664,400 Commercial/Other 10,628,286 10,788,884 11,292,767 11,487,685 12,263,320 Total $24,206,345 $24,049,547 $25,430,506 $26,605,273 $27,927,720 Peak Demand in 33,307 36,233 34,314 34,730 35,994 After transmission and distribution line losses. Revenues and kWh are billed for the year, and exclude any year end accruals for unbilled. Source: District. 30 4864-8204-9305v7/022925-0111 FINANCIAL INFORMATION Available Cash As of December 31, 2021, the Electric System enterprise fund had approximately $26.8 million in available cash and investments, including $1.1 million in restricted cash. Historical Operating Results The following table is a summary of operating results of the Electric System for the last five Fiscal Years. These results have been derived from the audited financial statements of the District but exclude certain receipts which are not included as Revenues under the Installment Purchase Agreement and certain non -cash items and include certain other adjustments. Table 6 Truckee Donner Public Utility District Historical Operating Results and Debt Service Coverage Fiscal Years Ended December 31 2017 2018 2019 2020 202](3) Revenues Sales to Customers $22,660,258 $23,045,437 $24,239,706 $25,451,966 $26,884,635 Standby Charges 21,530 20,040 19,260 18,670 17,450 Investment Income 185,873 372,985 483,561 248,335 92,961 Facilities Fees0) 175,169 174,785 297,375 342,364 270,217 Connection Fees 290,987 730,297 559,061 242,988 945,760 Other(2) 3,884,960 2,248,478 2,045,517 2,556,279 2,140,865 Total Revenues $27,218,777 $26,592,022 $27,644,481 $28,860,603 $30,3519888 Operation and Maintenance Costs Purchased Power $11,327,300 $11,001,858 $10,754,898 $11,285,537 $13,560,417 Operations and Maintenance 4,997,232 4,868,872 5,197,190 6,748,580 7,947,145 Administration and General 2,522,038 2,976,190 3,362,107 3,635,774 3,757,511 Customer Service 1,661,708 1,389,855 1,779,030 1,340,108 1,454,859 Pension Expense — GASB 68 1,361,766 - - - - OPEB Expense 238,410 - - - - Total Operation and Maintenance Costs $22,108,454 $20,236,775 $21,093,225 $23,009,999 $26,719,932 Net Revenues $ 5,110,323 $ 6,355,247 $ 6,551,256 $ 5,850,604 $ 3,631,956 0) Labeled "Contributed Capital" in the District's audited financial statements (2) Excludes restricted cap and trade revenues. (3) Reflects unaudited actual results. Source: District. Projected Operating Results and Debt Service Coverage Projected operating results for the Electric System for the current and next four Fiscal Years, reflecting certain significant assumptions concerning future events and circumstances (including projected impacts of the COVID-19 pandemic as discussed under the caption "THE DISTRICT—COVID-19 Pandemic"), are set forth below. All of such assumptions are material in the development of the District's financial projections, and variations in the assumptions may produce substantially different financial results. Actual operating results achieved during the projection period may vary from those presented in the forecast and such variations may be material. 31 4864-8204-9305v7/022925-0111 Table 7 Truckee Donner Public Utility District Projected Operating Results and Debt Service Coverage Fiscal Years Ended December 31 2022 2023 2024 2025 2026 Revenues Sales to Customers(') $29,379,500 $31,445,600 $32,389,000 $33,361,000 $34,362,000 Standby Charges 17,000 16,600 16000 16,000 15,000 Investment Income 98,000 109,000 115:000 ` 120,000 130,000 Facilities Fees(2) 200,000 200,000 200,000 200,000 200,000 Connection Fees 500,000 500,000 500,000 500,000 500,000 Other(') 2,257,100 2,457,000 2,506,000 2,556,000 2,607,000 Total Revenues $32,451,600 $34,728,200 $35,726,000 $36,7539000 $37,8149000 Operation and Maintenance Costs(4) Purchased Power $13,509,000 $13,982,000 $14,401,000 $14,833,000 $15,278,000 Operations and Maintenance 8,304,000 8,597,100 8,855,000 9,121,000 9,395,000 Administration and General 3,926,200 4,064,800 4,187,000 4,313,000 4,442,000 Customer Service 1,520,200 1,573,900 1,621,000 1,670,000 1,720,000 Total Operation and Maintenance Costs $27,259,400 $28,217,800 $29,064,000 $29,937,000 $30,835,000 Net Revenues $ 5,192,200 $ 6,510,400 $ 6,662,000 W16 $ 6,979,000 Series 2022 Installment Payments* $I— $ $ $J Remaining Revenues* Debt Service Coverage 0) Projected to increase by approximately 7% in Fiscal Year 2023 and by approximately 3% per annum thereafter, primarily reflecting rate increases which have not yet been adopted by the Board. See the caption "THE ELECTRIC SYSTEM —Rates and Charges --Current Rates and Charges." cz Labeled "Contributed Capital" in the District's audited financial statements. 0) Excludes restricted cap and trade revenues. Projected to increase by approximately 9% in Fiscal Year 2023 and by approximately 2% per annum thereafter. 0) Projected to increase by approximately 3.5% in Fiscal Year 2023 and by approximately 3% per annum thereafter. Source: District. Employee Benefits Pension Obligations. Accounting and financial reporting by state and local government employers for defined benefit pension plans is governed by Governmental Accounting Standards Board Statement No. 68 ("GASB 68"). GASB 68 includes the following components: (i) unfunded pension liabilities are included on the employer's balance sheet; (ii) pension expense incorporates rapid recognition of actuarial experience and investment returns and is not based on the employer's actual contribution amounts; (iii) lower actuarial discount rates are required to be used for underfunded plans in certain cases for purposes of the financial statements; (iv) closed amortization periods for unfunded liabilities are required to be used for certain purposes of the financial statements; and (v) the difference between expected and actual investment returns will be recognized over a closed five-year smoothing period. GASB 68 affects the District's accounting and reporting requirements, but it does not change the District's pension plan funding obligations. The District participates in a Miscellaneous Plan to fund pension benefits for employees that serve the Electric System. The District's pension plan is administered by the California Public Employees Retirement System ("Ca1PERS"). CalPERS administers agent multiple -employer public employee defined benefit pension plans for all qualified permanent and probationary employees of the District. Ca1PERS provides retirement, disability and death benefits to plan members and beneficiaries and acts as a common investment and Preliminary; subject to change. 32 4864-8204-9305v7/022925-0111 administrative agent for participating public entities within the State, including the District. Ca1PERS plan benefit provisions and all other requirements are established by State statute and the Board. Electric System employees are subject to different benefit levels based on their hire date. Current benefit provisions for Electric System employees are set forth below. Table 7 Truckee Donner Public Utility District Ca1PERS Miscellaneous Plan — Summary of Benefit Provisions Employees Hired Employees Hired On or Before After January 1, 2013 (Not January 1, 2013 Prior CaIPERS Members) Benefit Formula 2.7% @ age 55 2.0% @ age 62 Benefit Vesting 5 years of service 5 years of service Benefit Payments Monthly for life Monthly for life Minimum Retirement Age 50+ 52+ Monthly Benefits as % of 2.0% — 2.7% 1.0% — 2.5% Eligible Compensation Employee Normal Cost [8.0]%0) [6.75]%0) Employer Normal Cost Rate [13.35]% [7.59]% [CONFIRM] [Employees are required to make the full employee contribution themselves. The District does not make any portion of the employee contribution.] Source: District. Contributions to the District's pension plan consist of. (a) contributions from plan participants (i.e., employees); and (b) contributions by the District. The District's contributions constitute an Operation and Maintenance Cost of the Electric System that is payable prior to the Series 2022 Installment Payments. District employees who were hired on or after January 1, 2013 and who were not previously Ca1PERS members receive benefits based on 2.0% at age 62 formula. Such employees are required to make the full amount of required employee contributions themselves under the California Public Employees' Pension Reform Act of 2013 ("AB 340"), which was signed by the State Governor on September 12, 2012. AB 340 established a new pension tier for such employees. Benefits for such participants are calculated on the highest average annual compensation over a consecutive 36-month period. Employees are required to pay at least 50% of the total normal cost rate. AB 340 also capped pensionable income. Amounts are set annually, subject to Consumer Price Index increases, and retroactive benefits increases are prohibited, as are contribution holidays and purchases of additional non -qualified service credit. Additional employee contributions, limits on pensionable compensation and higher retirement ages for new members as a result of the passage of AB 340 are expected to reduce the District's unfunded pension lability and potentially reduce District contribution levels in the long term. The District is also required to contribute the actuarially determined remaining amounts necessary to fund benefits for its members. Employer contribution rates for all public employers are determined on an annual basis by the Ca1PERS actuary and are effective on the July 1 following notice of a change in the rate. Total plan contributions are determined through the CalPERS annual actuarial valuation process. The total minimum required employer contribution is the sum of. (i) the plan's employer normal cost rate, which funds pension 33 4864-8204-9305v7/022925-0111 benefits for current employees for the upcoming Fiscal Year (expressed as a percentage of payroll); plus (ii) the employer unfunded accrued liability contribution amount, which funds pension benefits that were previously earned by current and former employees (billed monthly). For Fiscal Year 2021, required employer normal cost rates as a percentage of payroll were 13.515% for non -AB 340 employees and 7.732% for AB 340 employees. For Fiscal Year 2022, required employer normal cost rates as a percentage of payroll are 13.35% for non -AB 340 employees and 7.59% for AB 340 employees. For Fiscal Year 2021, the total required employer payment of the unfunded accrued liability for the District's Miscellaneous Plan was $921,640, of which $[_] was allocable to the Electric System. For Fiscal Year 2022, the total required employer payment of the unfunded accrued liability for the District's Miscellaneous Plan is $1,086,728, of which $[_] is allocable to the Electric System. The District's required contributions to CalPERS fluctuate each year. Many assumptions are used to estimate the ultimate liability of pensions and the contributions that will be required to meet those obligations. The CalPERS Board of Administration has adjusted and may in the future further adjust certain assumptions used in the CalPERS actuarial valuations, which adjustments may increase the District's required contributions to CalPERS in future years. Accordingly, the District cannot provide any assurances that the District's required contributions to CalPERS in future years will not significantly increase (or otherwise vary) from any past or current projected levels of contributions. CalPERS earnings reports for Fiscal Years 2011 through 2021 report investment gains of approximately 21.7%, 0.1%, 13.2%, 18.4%, 2.4%, 0.6%, 11.2%, 8.6%, 6.7%, 4.7% and 21.3%, respectively. Future earnings performance may increase or decrease future contribution rates for plan participants, including the District. The announcement on July 12, 2021 that CalPERS achieved investment returns of 21.3% in Fiscal Year 2021 caused the CalPERS Board of Administration to lower CaIPERS' discount rate from 7.00% to 6.80% in fall 2021 in accordance with a risk mitigation policy that was adopted in 2015, which calls for the discount rate to be lowered if returns exceed the then -current discount rate by two or more percentage points. Lowering the discount rate means that employers that contract with CalPERS to administer their pension plans will see increases in their normal costs and unfunded actuarial liabilities. Table 16 Truckee Donner Public Utility District Funding Status of CalPERS Miscellaneous Plan June 30 Actuarial UAAL as a Actuarial Accrued % of Valuation Liability Market Value Unfunded Funded Covered Covered Date (AAL) of Assets AAL (UAAL) Ratio Payroll Payroll 2016 $42,998,933 $31,481,007 $11,517,926 73.2% $6,838,854 168.4% 2017 46,567,451 35,129,407 11,438,044 75.4 7,124,806 160.5 2018 51,694,097 38,354,255 13,339,842 74.2 7,254,827 183.9 2019 56,009,055 41,883,355 14,125,700 74.8 7,255,884 194.7 2020 59,555,640 43,986,286 15,569,354 73.9 7,319,112 212.7 Source: CaIPERS. Portions of the above disclosures are primarily derived from information that has been produced by CaIPERS, its independent accountants and its actuaries. The District has not independently verified such information and neither makes any representations nor expresses any opinion as to the accuracy of the information that has been provided by CaIPERS. 34 4864-8204-9305v7/022925-0111 The comprehensive annual financial reports of CalPERS are available on CalPERS' Internet website at www.calpers.ca.gov. The CalPERS website also contains CalPERS' most recent actuarial valuation reports and other information that concerns benefits and other matters. The textual reference to such Internet website is provided for convenience only. None of the information on such Internet website is incorporated by reference herein. The District, the Corporation and the Underwriter cannot guarantee the accuracy of such information. Actuarial assessments are `forward -looking" statements that reflect the judgment of the fiduciaries of the pension plans, and are based upon a variety of assumptions, one or more of which may not materialize or be changed in the future. The District does not expect that any increased funding of pension benefits will have a material adverse effect on the ability of the District to pay the Series 2022 Installment Payments. For additional information relating to the District's Ca1PERS Miscellaneous pension plan, see Note 9 to the District's audited financial statements set forth in Appendix A. Other Post -Employment Benefits. The District administers a single employer defined benefit healthcare plan which provides medical and prescription drug coverage to eligible retirees and their spouses. As of December 31, 2021, 65 District retirees and covered dependents received such post -employment benefits and 64 active employees met the eligibility requirements for such post -employment benefits. For the measurement periods ended December 31, 2021 and December 31, 2020, the District contributed $113,300 and $110,006, respectively, to pay post -employment benefits for eligible retirees. District contributions are made on a pay-as-you-go basis and include an implied subsidy as determined by an actuary (as discussed below). The District has elected to fund its OPEB contributions through the California Employers' Retiree Benefit Trust Fund ("CERBT"), an irrevocable agent, multiple -employer plan administered by CalPERS, which acts as a common investment and administrative agent for participating public employers. Governmental Accounting Standards Board Statement No. 75 ("GASB 75") requires governmental agencies that fund post -employment benefits on a pay-as-you-go basis, such as the District, to account for and report such outstanding obligations and commitments in essentially the same manner as for pensions. While requiring the District to disclose the unfunded actuarial accrued liability and the annual required contribution (the actuarial value of benefits earned during a Fiscal Year plus costs to amortize the unfunded actuarial accrued liability, or "OPEB ARC") in its financial statements, GASB 75 does not require the District to fund the OPEB ARC. In 2021, the District engaged an actuarial consultant (the "Consultant") to calculate the District's post - employment benefits current funding status. The Consultant's report concluded that: (i) the District's actuarial accrued liability for post -employment benefits based upon a 6.61 % discount rate was $8,478,479 as of December 31, 2021; and (ii) the unfunded actuarial accrued liability was $5,273,457 as of December 31, 2021. GASB 75 requires that a valuation of the District's post -employment benefit liability include the value of the "implied subsidy" of older retired participants by a younger active workforce in a pooled rate medical plan. For Fiscal Year 2021, the actuarially determined value of the implied subsidy was $4,274,217. 35 4864-8204-9305v7/022925-0111 Changes in the net liability for the District's post -employment benefit plan were as follows. Balance at December 31, 2019 Balance at December 31, 2020 Net Changes for period from January 1, 2020 through December 31, 2020 Source: District. Truckee Donner Public Utility District Changes in Post -Employment Benefit Plan Liability Total Post -Employment Benefit Plan Liability $ 6,473,886 8,693,052 $ 2,219,166 Increase/(Decrease) Post -Employment Benefit Plan Fiduciary Net Position $2,145,534 2,717,465 $ 571,931 Net Post - Employment Benefit Plan Funded Liability/(Asset) Percentage $4,328,352 33.14% 5,975,587 31.26 $ 1,647,235 The following table presents the net liability of the District's post -employment benefits plan, calculated using the discount rate applicable to Fiscal 2020 (7.33%), as well as what the net post -employment benefit liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.33%) or 1 percentage point higher (8.33%) than the Fiscal Year 2020 rate: Truckee Donner Public Utility District Sensitivity of the Post -Employment Benefit Plan Net Liability to Changes in the Discount Rate Net Liability/(Asset) Source: District. Discount Rate — I % Applicable Discount Discount Rate + I % Decrease (6.33%) Rate (7.33%) Increase (8.3301o) $6,700,987 $5,975,587 $5,341,808 Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. Future changes in funding policies and assumptions, including those related to assumed rates of investment return and healthcare cost inflation, could trigger increases in the District's annual required contributions, and such increases could be material to the finances of the District. No assurance can be provided that such expenses will not increase significantly in the future. The District does not expect that any increased funding of post -employment benefits will have a material adverse effect on the ability of the District to pay the Series 2022 Installment Payments. See Note 9 to the District's Financial Statements set forth in Appendix A for further information with respect to post -employment benefits. RATE REGULATION The District sets rates, fees and charges for electric service. The authority of the District to impose and collect rates and charges for electric power and energy sold and delivered is not subject to the general regulatory 36 4864-8204-9305v7/022925-0111 jurisdiction of the CPUC and presently neither the CPUC nor any other regulatory authority of the State of California nor FERC approves such rates and charges. It is possible that future statutory and/or regulatory changes could subject the rates and/or service area of the District to the jurisdiction of the CPUC or to other limitations or requirements. See the caption "CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES" for a discussion of certain voter -approved constitutional measures affecting the imposition of fees and charges by governmental agencies in the State. FERC could potentially assert jurisdiction over rates of licensees of hydroelectric projects and customers of such licensees under Part I of the Federal Power Act, although it has not as a practical matter exercised or sought to exercise such jurisdiction to modify rates that would legitimately be charged. If it did assert such jurisdiction, the District may be indirectly affected in that the price of electricity from the Stampede Dam Hydroelectric Project could change. Under provisions of the Federal Power Act, FERC has the authority, under certain circumstances and pursuant to certain procedures, to order certain utilities (municipal, distribution cooperative or otherwise) to provide transmission access to others at FERC-approved rates. See the caption "CERTAIN FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY." The CEC is authorized to evaluate rate policies for electric energy as related to the goals of the Energy Resources Conservation and Development Act and to make recommendations to the Governor, the Legislature and publicly owned electric utilities. CERTAIN FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY The following discussion of legislative, regulatory and other factors affecting the electric utility industry should be considered when evaluating the District and considering an investment in the Certificates. This discussion does not purport to be comprehensive or definitive, and these matters are subject to change subsequent to the date hereof. The electric industry has historically been subject to continuing legislative and administrative reform. The District cannot predict at this time whether any additional legislation or rules will be enacted which will affect the District's finances or Electric System operations, but the impacts could be significant. Extensive information on the electric utility industry is available from the legislative and regulatory bodies and other sources in the public domain, and potential purchasers of the Certificates should obtain and review such information. Such information is not incorporated herein by reference. Federal Energy and Environmental Policies and Legislation Energy Policy Act of 2005. Although the District is exempt from most federal rate regulation pursuant to Section 201(f) of the Federal Power Act (as discussed under the caption "RATE REGULATION"), EP Act 2005 imposed specific exceptions. In particular, FERC was given authority over the behavior of market participants. Under FERC's authority, it can impose penalties on any seller for using a manipulative or deceptive device, including market manipulation, in connection with the purchase or sale of energy or of transmission service. The Commodity Futures Trading Commission also has jurisdiction to enforce certain types of market manipulation or deception claims under the Commodity Exchange Act. EP Act 2005 authorized FERC to issue permits to construct or modify transmission facilities located in a national interest electric transmission corridor if FERC determines that the statutory conditions are met. EP Act 2005 also required the creation of an electric reliability organization (the "ERO") to establish and enforce, under FERC supervision, mandatory Reliability Standards to increase system reliability and minimize blackouts. The Reliability Standards apply to users, owners and operators of the Bulk -Power System, as more specifically set forth in each Reliability Standard. On February 3, 2006, FERC issued Order 672, which certified NERC as the ERO. Many Reliability Standards have since been approved by FERC. The Reliability Standards include requirements related to cyber and physical security of systems that could affect the reliable operation of the electric grid. 37 4864-8204-9305v7/022925-0111 The ERO or the entities to which NERC has delegated enforcement authority through an agreement approved by FERC (the "Regional Entities"), such as WECC, may enforce the Reliability Standards, subject to FERC oversight, or FERC may independently enforce them. Potential monetary sanctions include fines in excess of $1 million per violation per day. FERC Order 693 further provided the ERO and Regional Entities with the discretion necessary to assess penalties for such violations, while also having discretion to calculate a penalty without collecting the penalty if circumstances warrant. Federal Regulation of Transmission Access. EP Act 2005 authorizes FERC to compel "open access" to the transmission systems of certain utilities that are not generally regulated by FERC, including municipal utilities if the utility sells more than four million megawatt hours of electricity per year. Under open access, a transmission provider must allow all customers to use the system under standardized rates, terms and conditions of service. FERC Order No. 888 requires the provision of open access transmission services on a nondiscriminatory basis by all "jurisdictional utilities" (which, by definition, does not include municipal entities like the District) by requiring all such utilities to file OATTs. Order No. 888 also requires "non jurisdictional utilities" (which, by definition, does include the District) that purchase transmission services from a jurisdictional utility under an OATT and that owns or controls transmission facilities to provide open access service to the jurisdictional utility under terms that are comparable to the service that the non jurisdictional utility provides itself. Section 2l lA of the EP Act 2005 authorizes, but does not require, FERC to order unregulated transmission utilities to provide transmission services. Specifically, FERC may require an unregulated transmitting utility to provide access to its transmission facilities: (i) at rates that are comparable to those that the unregulated transmitting utility charges to itself; and (ii) on terms and conditions (not relating to rates) that are comparable to those under which the unregulated transmitting utility provides transmission services to itself that are not unduly discriminatory or preferential. On February 16, 2007, FERC issued Order 890, which concluded that reform of its pro forma OATT was necessary to reduce the potential for undue discrimination and provide clarity in the obligations of transmission providers and customers. Significantly, FERC stated in Order 890 that it will implement its authority under Section 211A with respect to unregulated transmitting utilities on a case -by -case basis and retain the current reciprocity provisions. On July 21, 2011, FERC issued Order 1000, which among other things requires public utility (jurisdictional) transmission providers to participate in a regional transmission planning process that produces a regional transmission plan and that incorporates a regional and inter -regional cost allocation methodology. Further, FERC stated that it has the authority to allocate costs to beneficiaries of transmission services, even in the absence of a contractual relationship between the owner of the transmission facilities and the beneficiary. Under EP Act 2005, FERC may not require municipal utilities to join regional transmission organizations in which participating utilities allow an independent entity to oversee operation of the utilities' transmission facilities. FERC has stated, however, that FERC expects such utilities to participate in the regional processes for transmission planning and that FERC will pursue associated complaints against such utilities on a case -by - case basis. Federal Policy on Cybersecurity. In February 2013, then -President Obama issued an Executive Order "Improving Critical Infrastructure Security" (the "Cybersecurity Order"). Among other things, the Cybersecurity Order called for improved information sharing and processing of security clearances for owners and operators of critical infrastructure. The Cybersecurity Order further required the Secretary of Commerce to direct the National Institute of Standards and Technology to lead the development of a framework (the "Framework") to reduce cyber risks to critical infrastructure. The voluntary Framework will continue to be updated and improved as industry provides feedback on implementation. The Cybersecurity Information Sharing Act of 2015 was signed into law in December 2015. It creates an industry -supported, voluntary cybersecurity information sharing program which facilitates the secure sharing 38 4864-8204-9305v7/022925-0111 of cyber-related threat information among both public and private sector entities. [EDIT AS NEEDED] [The District participates in sharing and receiving information about cybersecurity threats in real time through several hubs, including the Electricity Information Sharing and Analysis Center and the National Cybersecurity and Communication Integration Center, as tools to actively manage risk related to potential cyber intrusion.] Regulatory Actions Under the Clean Air Act. The United States Environmental Protection Agency (the "EPA") regulates greenhouse gas ("GHG") emissions under existing law by imposing monitoring and reporting requirements, and through its permitting programs. Like other air pollutants, GHGs are regulated under the Clean Air Act through the Prevention of Significant Deterioration ("PSD") Permit Program and the Title V Permit Program. A PSD permit is required before commencement of construction of new major stationary sources or major modifications of a major stationary source and requires best available control technologies to control emissions at a facility. Title V permits are operating permits for major sources that consolidate all Clean Air Act requirements (arising, for example, under the Acid Rain, New Source Performance Standards, National Emission Standards for Hazardous Air Pollutants, and/or PSD programs) into a single document and the permit process provides for review of the documents by the EPA, state agencies and the public. GHGs from major natural gas -fired facilities are regulated under both permitting programs through performance standards imposing efficiency and emissions standards. On October 23, 2015, under the Obama Administration, the EPA published the Clean Power Plan and final regulations for: (i) carbon pollution standards for new, modified and reconstructed power plants; and (ii) carbon pollution emission guidelines for existing electric generating units ("EGUs"). The total national emissions reduction goal under the Clean Power Plan targeted an average of a 32% reduction from 2005 levels by 2030, with incremental interim goals for the years from 2022 through 2029. The Clean Power Plan allowed states multiple options for measuring reductions and established different reduction goals depending upon the regulatory program set forth in the state plan. On March 28, 2017, President Trump signed the Executive Order on Energy Independence (E.O. 13783), which called for a review of the Clean Power Plan. On October 16, 2017, a Notice of Proposed Rulemaking was published in the Federal Register that proposed to repeal the Clean Power Plan, under the premise that it exceeded EPA's statutory authority under Section 111 of the Clean Air Act. On December 28, 2017, an Advance Notice of Proposed Rulemaking was published in the Federal Register proposing a new GHG emission limit rule for existing EGUs. On July 8, 2019, the EPA published its final "Affordable Clean Energy" rule in the Federal Register, and on September 6, 2019, the final rule became effective. The final Affordable Clean Energy rule: (i) replaced the Clean Power Plan with revised emissions guidelines that inform the development, submittal and implementation of state plans to reduce GHG emissions from fossil fuel steam EGUs, primarily coal-fired plants; and (ii) implemented new regulations that provided direction to both the EPA and the states on the implementation of emission guidelines. The final rule identified heat rate improvements as the best system of emission reduction from coal-fired power plants, to be made at the individual facilities. Under the Affordable Clean Energy rule, states would have three years to submit implementation plans. The EPA would have 12 months to approve or disapprove a state's plan. A number of environmental advocates and state attorneys general have filed lawsuits challenging the Affordable Clean Energy rule. On January 19, 2021, the United States Court of Appeals for the District of Columbia struck down the Affordable Clean Energy rule, determining that the EPA did not act lawfully when it adopted the Affordable Clean Energy rule. As a result, the Affordable Clean Energy rule has been vacated and remanded to EPA. In addition, pursuant to the 2021 Review Order, the Biden Administration has directed the EPA to review the repeal of the Clean Power Plan and the rulemaking for the Affordable Clean Energy rule. The District is unable to predict the outcome of any ongoing legal challenges to the EPA rulemaking regulating GHG 39 4864-8204-9305v7/022925-0111 emissions or, given the legal uncertainties regarding the Clean Power Plan and the Affordable Clean Energy rule, what the ultimate impact of any such rulemaking will be. Electric and Magnetic Fields. A number of studies have been conducted regarding the potential long- term health effects of exposure to electric and magnetic fields created by high voltage transmission and distribution equipment. Additional studies are being conducted to determine the relationship between electric and magnetic fields and certain adverse health effects, if any. At this time, it is not possible to predict the extent of the costs and other impacts, if any, which the electric and magnetic fields concerns may have on electric utilities, including the Electric System. State Legislation and Regulatory Proceedings A number of bills affecting the District and the electric utility industry have been introduced or enacted by the State Legislature in recent years. In general, these bills reflect California climate policy developments by regulating GHG emissions and providing for greater investment in energy efficiency and environmentally friendly generation and storage alternatives, principally through more stringent RPS requirements. Legislation enacted in recent years has also focused on addressing issues relating to wildfire risks and occurrences in the State, including imposing certain requirements on electric utilities in connection with planning for and mitigation of such occurrences and risks. Pursuant to enacted legislation, State regulatory agencies such as the California Air Resources Board ("CARB") and the CEC are also pursuing a number of regulatory programs designed to reduce GHG emissions and encourage or mandate renewable energy generation. Set forth below is a brief summary of certain of these bills and regulatory proceedings. GHG Regulations; Cap -and -Trade. In September 2006, then -Governor Arnold Schwarzenegger signed into law Assembly Bill 32, the California Global Warming Solutions Act of 2006 ("AB 32" or the "Global Warming Solutions Act"). This law, which became effective on January 1, 2007, required CARB to adopt enforceable GHG emission limits and emission reduction measures in order to reduce GHG emissions from within the State to 1990 levels by 2020. In September 2016, then -Governor Jerry Brown signed into law Senate Bill 32, an amendment to the Global Warming Solutions Act which requires CARB to take actions to ensure that statewide GHG emissions from within the State are reduced to at least 40% below 1990 levels by 2030. The Global Warming Solutions Act established an annual mandatory reporting requirement for all IOUs, local publicly -owned electric utilities ("POUs"), such as the District, and other load -serving entities (electric utilities providing energy to end -use customers). Under this requirement, GHG emissions are inventoried and reported to CARB, and CARB is required to adopt regulations for significant GHG emission sources. CARB has the authority to enforce such regulations beginning in 2012. [CONFIRM] [The District is complying with the applicable reporting requirements under the Global Warming Solutions Act.] CARB implemented the Global Warming Solutions Act through a series of regulations (collectively referred to as the "Cap -and -Trade Regulations") that imposed declining aggregate emissions limitations on entities in California that meet minimum reporting thresholds. The Cap -and -Trade Regulations require all regulated entities to obtain and submit to CARB compliance instruments (allowances and/or offsets) that represent GHG emissions related to its industrial processes within the State; for electric utilities this includes generation and GHG emissions associated with imported electricity from out-of-state resources. The District, like other electric utilities, receives an administrative allocation of allowances for compliance. Entities that emit GHGs at levels above those for which they receive administrative allocations, if any, must purchase the additional allowances they require at quarterly CARB auctions or from other covered entities with surplus allowances. In July 2017, then -Governor Brown signed into law Assembly Bill 398 ("AB 398"), which extends the Cap -and -Trade Regulations from 2021 to 2030. AB 398 passed both chambers with a 2/3 supermajority vote, which protects the legislation from certain legal challenges. Under AB 398, CARB was directed to address the following: establish a price ceiling, offer non -tradeable allowances at two price containment points below the 40 4864-8204-9305v7/022925-0111 price ceiling, transfer current vintages unsold for more than 24 months to the allowance price containment reserve, evaluate and address allowance over -allocation concerns, set industry assistance factors for allowance allocation and establish allowance banking rules. Under AB 398, CARB was directed to include cost containment provisions to keep allowance prices from rising too high and pushing business expansion outside of the state (referred to as "leakage"). AB 398 was passed in conjunction with Assembly Bill 617, which strengthens the monitoring of criteria air pollutants and toxic air contaminants in local communities. Amendments to the Cap -and -Trade Regulations to reflect the requirements of AB 398 were adopted by CARB and went into effect on April 1, 2019. The District is unable to predict at this time the full impact of the Cap -and -Trade Regulations over the long-term on the District's Electric System or on the electric utility industry generally or whether any additional changes to the adopted program will be made. Since the advent of the cap -and -trade program in 2012, regulations by CARB have provided the electric sector, including the District on behalf of its ratepayers, with sufficient allocated GHG allowances or credits to cover existing operations in meeting retail load obligations. However, the District could be adversely affected in the future if the GHG emissions of its resource portfolio are in excess of the allowances administratively allocated to it and it is required to purchase compliance instruments on the market to cover its emissions. Currently, the District believes that it is sufficiently positioned for compliance. GHG Emissions Performance Standard and Financial Commitment Limits. Senate Bill 1368 ("SB 1368") became effective on January 1, 2007. SB 1368 provided for an emission performance standard ("EPS") restricting new investments in baseload electric generating resources that exceed a specified rate of GHG emissions. SB 1368 allows the CEC to establish a regulatory framework to enforce the EPS for POUs. Pursuant to SB 1368, the CEC adopted a GHG EPS for electric generating facilities of 1,100 pounds of carbon dioxide per megawatt hour for "covered procurements" by POUs. SB 1368 also prohibits POUs from making any "long- term financial commitment" in connection with "baseload generation" that does not satisfy the EPS. Generally, a "long-term financial commitment" is any new or renewed power purchase agreement with a term of five years or more, the purchase of an interest in a new power plant, or any investment (other than routine maintenance) in an existing power plant that extends the life of the plant by more than five years or results in an increase in its rated capacity. "Baseload generation" means a power plant that is intended to operate at an annualized capacity factor of 60% or more. As modified, the EPS regulations require a POU to post a notice of a public meeting at which its governing board will consider any expenditure over $2.5 million to meet environmental regulatory requirements at a non-EPS compliant baseload facility. In addition, each POU is required to file an annual notice identifying all investments over $2.5 million that it anticipates making during the subsequent 12 months on non-EPS compliant baseload facilities to comply with environmental regulatory requirements. This requirement is waived for any POU that has entered into a binding agreement to divest within five years of all baseload facilities exceeding the EPS. CEC staff has confirmed that the $2.5 million threshold applies to an individual investment by each utility, and not the combined investment of all participants in a project. Senate Bill 350 ("SB 350"), the Clean Energy and Pollution Reduction Act of 2015, was signed by then - Governor Brown in October 2015. Among other things, SB 350 requires CARB, in consultation with the CPUC and the CEC, to establish 2030 GHG emission targets for each electric utility in the State. At present, these targets are non -binding, and primarily intended to help the State measure progress toward the 2030 statewide goal outlined in AB 32. The targets, however, are an input to the development of the Integrated Resource Plans that are required of the State's 16 largest POUs, which does not include the District. See the subcaption "— California Renewables Portfolio Standard" below for a discussion of certain other provisions of SB 350. Energy Procurement and Efficiency Reporting. Senate Bill 1037 ("SB 1037") was signed by then - Governor Schwarzenegger in September 2005. It requires that each POU, including the District, prior to procuring new energy generation resources, to acquire all available energy efficiency, demand reduction and renewable resources that are cost effective, reliable and feasible. SB 1037 also requires each POU to report 41 4864-8204-9305v7/022925-0111 annually to its customers and to the CEC its investment in energy efficiency and demand reduction programs. [CONFIRM] [The District is complying with these ongoing reporting requirements.] Further, Assembly Bill 2021 ("AB 2021"), signed by then -Governor Schwarzenegger in September 2006, requires that POUs establish, report, and explain the basis of the annual energy efficiency and demand reduction targets by June 1, 2007 and every three years thereafter for a ten-year horizon. A subsequent amendment, Assembly Bill 2227, extended the reporting timeframe from three to four years. [CONFIRM] [The District is complying with these ongoing reporting requirements.] The information obtained from the POUs is being used by the CEC to present progress made by the State to double energy efficiency savings in electricity and natural gas final end uses by 2030, to the extent doing so is cost effective, feasible and does not adversely impact public health and safety, as prescribed in SB 350. Biomass Legislation. Senate Bill 859 ("SB 859"), signed by then -Governor Brown in September 2016, requires IOUs and POUs that serve more than 100,000 customers (which does not include the District), to procure, through financial commitments of five years, their proportionate shares (based on the ratio of the utility's peak demand to the total statewide peak demand), of 125 MW of cumulative rated capacity from existing bioenergy projects that generate energy from: (a) a byproduct of sustainable forestry management; and (b) high fire -hazard zones. Senate Bill 901 ("SB 901"), signed into law in September 2018, requires certain of these biomass contracts to have their term extended five years past the original expiration date. [IS DISTRICT COMPLYING WITH THESE REQUIREMENTS ANYWAY?] Integrated Resource Plans. SB 350 requires that all POUs with demand greater than 700 gigawatt hours to develop an Integrated Resource Plans ("IRPs") at least once every five years, commencing no later than January 1, 2019. The District is not currently subject to this requirement. As required in the statute, all IRPs are to be submitted to the CEC, including information outlined in the CEC's POU IRP Guidelines that were finalized in August 2017. [DOES DISTRICT HAVE IRP ANYWAY?] California Renewables Portfolio Standard. The State Legislature and executive branch have been active in promoting increasingly stringent renewable energy procurement requirements since 2002. Early efforts established an RPS of 20% of renewable electricity generation by 2017. Since then, both legislative and executive branch initiatives have raised that standard in multiple phases. Senate Bill X1-2 ("SBX1-2"), the California Renewable Energy Resources Act, was signed into law by then -Governor Brown in April 2011. SBX1-2 requires each POU to adopt and implement a renewable energy resource procurement plan. The plan must require the utility to procure at least the following amounts of electricity products from eligible renewable energy resources, which may include renewable energy certificates ("RECs"), as a proportion of total kilowatt hours sold to the utility's retail end -use customers: (i) over the 2011- 2013 compliance period, an average of 20% of retail sales from January 1, 2011 to December 31, 2013, inclusive; (ii) over the 2014-2016 compliance period, a total equal to 20% of 2014 retail sales, 20% of 2015 retail sales, and 25% of 2016 retail sales; (iii) over the 2017-2020 compliance period, a total equal to 27% of 2017 retail sales, 29% of 2018 retail sales, 31% of 2019 retail sales, and 33% of 2020 retail sales; and (iv) for 2021 and each subsequent year, 33% of retail sales for the applicable year. The governing boards of POUs are responsible for implementing the requirements of SBX1-2. In addition, the CEC was given certain enforcement authority for POUs and CARB was given the authority to set penalties. The CEC has developed detailed rules to implement SBX1-2, and has adopted regulations for the enforcement of the RPS program requirements for POUs, which regulations have been subsequently amended from time to time. SB 350 establishes an RPS target of 50% by December 31, 2030 for the amount of electricity generated and sold to retail customers from eligible renewable energy resources for retail sellers and POUs, including interim targets of. (i) 40% of retail sales from eligible renewable energy resources by December 31, 2024; (ii) 45% of retail sales from eligible renewable energy resources by December 31, 2027; and (iii) 50% of retail sales from eligible renewable energy resources by December 31, 2030. 42 4864-8204-9305v7/022925-0111 Senate Bill 100 ("SB 100"), the 100 Percent Clean Energy Act of 2018, was signed into law by then - Governor Brown in September 2018. SB 100 accelerates the State's RPS target as established by SB 350 from 50% by 2030 to 60% by 2030 and sets a goal of 100% "clean energy" by the year 2045. SB 100 requires retail electric sellers and POUs to procure a minimum quantity of electricity products from eligible renewable energy resources so that the total kWhs of those products sold to retail end -use customers achieve: (i) 44% of retail sales by December 31, 2024; (ii) 52% of retail sales by December 31, 2027; and (iii) 60% of retail sales by December 31, 2030. SB 100 additionally establishes that it is the policy of the State that eligible renewable energy resources and zero -carbon resources supply 100% of retail sales of electricity to California end -use customers by December 31, 2045. Along with SB 100, Governor Brown signed an executive order that directs the State to achieve carbon neutrality by 2045 and net negative GHG emissions thereafter. The goal of carbon neutrality by 2045 is in addition to existing Statewide targets of reducing GHG emissions. By expanding the State's carbon reduction goal the State will also look to reduce carbon through sequestration in forests, soils and other natural landscapes. In December 2020, the CEC adopted regulations to update its RPS enforcement procedures for POUs, including to update regulations amended by both SB 350 and SB 100, among other enacted bills. This includes implementing a provision relating to the long-term procurement of renewable resources which requires, beginning January 1, 2021, that at least 65% of renewable procurement must be for a duration of 10 years or more. The regulations implement the new RPS procurement requirements for the compliance periods between 2021 and 2030, establish soft procurement targets for the intervening years of the compliance periods to demonstrate reasonable progress in meeting the RPS procurement target for the compliance periods, and establish three-year compliance periods beginning after 2030. The regulations also define requirements for 10- year procurement contracts for purposes of satisfying the long-term procurement requirement. [CONFIRM] [The District is meeting the above -described RPS targets and expects to be continue to be able to meet such targets in the future." See the caption "THE DISTRICT —Power Supply Resources." Legislation Relating to Wildfires; Related Risks. Senate Bill 1028 ("SB 1028") was signed into law by then -Governor Brown in September 2016. SB 1028 requires that each POU and electric cooperative in the State construct, maintain, and operate its electrical lines and equipment in a manner that will minimize the risk of catastrophic wildfire posed by those electrical lines and equipment. SB 1028 requires the governing board of each POU to determine, based on historical fire data and local conditions, and in consultation with the fire departments or other entities responsible for the control of wildfires within the geographical area where the utility's overhead electrical lines and equipment are located, whether any portion of that geographical area has a significant risk of wildfire resulting from those electrical lines and equipment, and if so, to present for board approval wildfire mitigation measures the utility intends to undertake to minimize the risk of its overhead electrical lines and equipment causing a catastrophic wildfire. SB 901 amends certain provisions of SB 1028 requiring POUs and electric cooperatives to prepare wildfire mitigation measures if the utilities' overhead electrical lines and equipment are located in an area that has a significant risk of wildfire resulting from those electrical lines and equipment. Under SB 901, each POU or electric cooperative is required to prepare by January 1, 2020 and annually thereafter, a wildfire mitigation plan. SB 901 requires specified information and elements to be considered as necessary, at minimum, in the wildfire mitigation plan. The POU or electric cooperative is required to present each wildfire mitigation plan in an appropriately noticed public meeting and to accept comments on its wildfire mitigation plan from the public, other local and state agencies and interested parties. In addition, SB 901 requires the POU or electric cooperative to contract with a qualified independent evaluator with experience in assessing the safe operation of electrical infrastructure to review and assess the comprehensiveness of its wildfire mitigation plan. The report of the independent evaluator is to be made available to the public and to be presented at a public meeting of the POU's governing board. In accordance with the requirements of SB 901, the District has adopted a wildfire mitigation plan was adopted and solicited a report of an independent evaluator. See the caption "THE DISTRICT — Wildfire Mitigation Measures." 43 4864-8204-9305v7/022925-0111 Assembly Bill 1054 ("AB 1054") was signed into law by Governor Newsom in July 2019. AB 1054 establishes a Wildfire Fund for IOUs to facilitate payment of eligible, uninsured third -party damage claims resulting from future catastrophic wildfires. POUs, such as the District, are not eligible to participate in or receive funding for wildfire claims from the Wildfire Fund. AB 1054 expands on the existing requirements for POUs established under SB 901 for wildfire mitigation plans. AB 1054 requires each POU, by July 1 of each year, to submit its wildfire mitigation plan to a newly created California Wildfire Safety Advisory Board (the "Wildfire Advisory Board") for review and comment. Under AB 1054, the Wildfire Advisory Board is required to provide comments and an advisory opinion to each POU regarding the content and sufficiency of its plan and to make recommendations on the mitigation of wildfire risks. AB 1054 requires each POU to comprehensively revise its wildfire mitigation plan at least once every three years. The District submitted its wildfire mitigation plan to the Wildfire Advisory Board in [CONFIRM] [2020] as required by AB 1054. The California Wildfire Safety Advisory Board adopted its final guidance advisory opinion for POUs on December 9, 2020. [CONFIRM] The District has reviewed the California Wildfire Safety Advisory Board advisory opinion and updated its wildfire mitigation plan in early 2021 to reflect such advisory opinion. The legality of AB 1054 is currently the subject on ongoing litigation. The District is unable to predict the ultimate outcome of this lawsuit. A number of wildfires have occurred in the State in recent years. See the subcaption "—PG&E Bankruptcy" below. Under the doctrine of inverse condemnation (a legal concept that entitles property owners to just compensation if their property is damaged by a public use), State courts have imposed liability on utilities in legal actions brought by property holders for damages caused by the utility's infrastructure. Thus, if the facilities of a utility, such as its electric distribution and transmission lines, are determined to be the substantial cause of a fire, and the doctrine of inverse condemnation applies, the utility could be liable for damages without having been found negligent. SB 1028, SB 901 and AB 1054 do not address the existing legal doctrine relating to utilities' liability for wildfires. How any future legislation addresses California's inverse condemnation and "strict liability" laws for utilities in the context of wildfires could be significant for the electric utility industry. Energy Storage. Assembly Bill 2514 ("AB 2514"), which then -Governor Brown signed into law on September 29, 2010, directs municipal electric utilities to consider setting targets for energy storage procurement but emphasizes that any such targets must be consistent with technological viability and cost effectiveness. The law's main directives and their respective deadlines are to adopt an energy storage system procurement target by October 1, 2014, if determined to be appropriate, to be achieved by each utility by December 31, 2016, and a second target to be achieved by December 31, 2020. Municipal electric utilities were required to submit compliance reports to the CEC of their first adopted target by January 1, 2017. The second adopted target compliance report was due to the CEC by January 1, 2021. Energy storage ("ES") has been advocated as an effective means for addressing the growing operational problems of integrating intermittent renewable resources, as well as contributing to other applications on and off the grid. In general, ES is a set of technologies which are capable of storing previously generated electric energy and releasing that energy at a later time. Currently, the commercially available ES technologies (or soon to be available technologies) consist of pumped hydroelectric generation, compressed air systems, batteries and thermal ES systems. The District is in compliance with AB 2514 and the Board has considered the viability of setting energy storage targets and did not find energy storage for the District to be technologically viable or cost effective. Impact of California Energy Market Developments on the District. The effect on the Electric System of the above -described developments in the California energy markets cannot be fully ascertained at this time. Volatility in energy prices in California may occur due to a variety of factors that affect both the supply and demand for electric energy in the western United States. These factors include, but are not limited to, the 44 4864-8204-9305v7/022925-0111 adequacy of generation resources to meet peak demands at all times, the availability and cost of renewable energy, the impact of economy -wide GHG emission legislation and regulations, fuel costs and availability, weather effects on customer demand, the impact of climate change, wildfire mitigation and potential liability cost recovery, insurance costs, transmission congestion, the strength of the economy in California and surrounding states and levels of hydroelectric generation within the region (including the Pacific Northwest). This price volatility may contribute to greater volatility in the District's revenues from the sale (and purchase) of electric energy and, therefore, could materially affect the District's financial condition. The District, individually and/or through joint powers agencies in which it participates, undertakes resource planning and risk management activities and manages its resource portfolio to mitigate such price volatility and spot market rate exposure. See "THE DISTRICT —Power Supply Resources." Changing Laws and Requirements Generally Electric utilities are subject to continuing environmental regulation. Federal, State and local standards and procedures which regulate the environmental impact of electric utilities are subject to change. These changes may arise from continuing legislative, regulatory and judicial action regarding such standards and procedures. Consequently, there is no assurance that any facilities or projects of the District will remain subject to the laws and regulations currently in effect, will always be in compliance with future laws and regulations or will always be able to obtain all required operating permits. In addition, the election of new administrations, including the President of the United States, could impact substantially the current environmental standards and regulations and other matters described herein. An inability to comply with environmental standards could result in, for example, additional capital expenditures, reduced operating levels or the shutdown of individual units not in compliance. In addition, increased environmental laws and regulations may create certain barriers to new facility development, may require modification of existing facilities and may result in additional costs for affected resources. In addition, on both the federal and State levels, legislation is introduced frequently addressing domestic energy policies and various environmental matters and impacts relating to energy, including the generation of energy using conventional and unconventional technologies. Issues raised in recent legislative proposals have included implementation of energy efficiency and renewable energy standards, addressing transmission planning, siting and cost allocation to support the construction of renewable energy facilities, cybersecurity legislation that would allow FERC to issue interim measures to protect critical electric infrastructure, a federal cap -and -trade program to reduce GHG emissions and renewable energy incentives that could provide grants and credits to municipal utilities to invest in renewable energy infrastructure. Congress has also considered other bills relating to energy supplies and development (such as expedited permitting for natural gas drilling projects, reducing regulatory burdens, climate change and water quality. The District is unable to predict at this time whether any of these or other legislative proposals will be enacted into law or what the impact of any such proposals that may ultimately be enacted will be. PG&E Bankruptcy The following statements in this section regarding PG&E's financial condition, potential wildfire liabilities and actions and developments in connection with its voluntary bankruptcy filing have been obtained from public sources that the District believes to be reliable, but such statements have not been independently verified by the District and the District assumes no responsibility for the accuracy or completeness thereof. On January 29, 2019, Pacific Gas & Electric ("PG&E"), an IOU in the State, and PG&E Corporation (collectively, the "PG&E Entities") filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code"). A Chapter 11 case under the Bankruptcy Code may be utilized by businesses to accomplish either a restructuring and/or a liquidation. Following their bankruptcy filing, and with the approval of the United States Bankruptcy Court for the Northern District of California (the "Bankruptcy Court"), the PG&E Entities continued to operate both their 45 4864-8204-9305v7/022925-0111 gas and electric systems. The PG&E Entities obtained, and the Bankruptcy Court approved, their access to approximately $5.5 billion in secured debtor -in -possession financing from a consortium of lenders to provide liquidity to the PG&E Entities to fund their ongoing operations during the Chapter 11 process. In their bankruptcy filings, the PG&E Entities indicated that their voluntary bankruptcy filings were initiated to address extraordinary financial challenges, which were largely attributed to their potential liabilities associated with a number of wildfires which occurred in Northern California in 2017 and 2018. On September 9, 2019, the PG&E Entities filed a proposed plan of reorganization with the Bankruptcy Court. Through a series of amendments, settlements with multiple groups of creditors with respect to the treatment and discharge of their claims, including a settlement with the official committee representing about 70% in number of the holders of wildfire victim claims, were integrated into the terms of the proposed plan of reorganization. See the caption "—State Legislation and Regulatory Proceedings —Legislation Relating to Wildfires; Related Risks" above. On June 20, 2020, the Bankruptcy Court confirmed PG&E's Chapter 11 plan of reorganization, determining that the plan met the necessary requirements for confirmation under the Bankruptcy Code. On July 1, 2020, the PG&E Entities emerged from bankruptcy. Notwithstanding the confirmation of the PG&E's bankruptcy plan, various subsidiary disputes among the PG&E Entities and their creditors, including appeals of various aspects of the reorganization plan, remain and the PG&E Entities' bankruptcy proceedings will continue. [CONFIRM] [The District is not a party to any interconnection, transmission, distribution, energy purchase or other agreements with PG&E, and the District was not directly affected by the PG&E bankruptcy filing. To, date the District has not experienced any material adverse effects of the PG&E bankruptcy filing.] However, the PG&E Entities' bankruptcy proceedings could have broader effects on the electric markets generally. It is possible that one or more other entities may ultimately assume or acquire all or a portion of PG&E's operations and activities in the future. Several public agencies submitted non -binding indications of interest to the PG&E Entities to purchase a portion of PG&E's electric transmission and distribution assets in connection with the PG&E Entities' bankruptcy proceedings, although the PG&E Entities generally rejected such offers. Legislation signed by the Governor on June 30, 2020 (Senate Bill 350), authorizes the creation of a non-profit public benefit corporation that could acquire PG&E in the future if the utility fails to meet certain enhanced safety obligations set forth in the CPUC's decision approving PG&E's reorganization plan. Other electric utilities, including the other major IOUs in the State (Southern California Edison and San Diego Gas & Electric) experienced credit rating downgrades as a result of potential wildfire liabilities exposure, which may also have implications for the electric market generally. As a result of the foregoing, the District is unable to predict what the ultimate impacts of the PG&E Entities' bankruptcy proceedings and the other challenges facing IOUs referenced above may be on the Electric System or the State electric markets or future legislative proposals at this time. Other Factors The electric utility industry in general has been, or in the future may be, affected by a number of other factors which could impact the financial condition and competitiveness of many electric utilities and the level of utilization of generating and transmission facilities. In addition to the factors which are discussed above, such factors include, among others: (a) effects of compliance with rapidly changing environmental, safety, licensing, regulatory and legislative requirements other than those described above (including those affecting nuclear power plants or potential new energy storage requirements); (b) changes resulting from conservation and demand -side management programs on the timing and use of electric energy; (c) effects on the integration and reliability of power supply from the increased usage of renewables; (d) changes resulting from a national energy policy; (e) effects of competition from other electric utilities (including increased competition resulting from a movement to allow direct access or expanded community choice aggregation or from mergers, acquisitions and "strategic alliances" of competing electric and natural gas utilities and from competitors transmitting less 46 4864-8204-9305v7/022925-0111 expensive electricity from much greater distances over an interconnected system) and new methods of, and new facilities for, producing low-cost electricity; (f) the repeal of certain federal statutes that would have the effect of increasing the competitiveness of many IOUs; (g) increased competition from independent power producers and marketers, brokers and federal power marketing agencies; (h) "self -generation" or "distributed generation" (such as microturbines, fuel cells and solar installations) by industrial and commercial customers and others; (i) issues relating to the ability to issue tax-exempt obligations, including severe restrictions on the ability to sell to nongovernmental entities electricity from generation projects and transmission service from transmission line projects financed with outstanding tax-exempt obligations; 0) effects of inflation on the operating and maintenance costs of an electric utility and its facilities; (k) changes from projected future load requirements; (1) increases in costs and uncertain availability of capital; (m) shifts in the availability and relative costs of different fuels (including the cost of natural gas and nuclear fuel); (n) sudden and dramatic increases in the price of energy purchased on the open market that may occur in times of high peak demand in an area of the country experiencing such high peak demand, such as has occurred in the past in the State; (o) issues relating to risk management procedures and practices with respect to, among other things, the purchase and sale of natural gas, energy and transmission capacity; (p) other legislative changes, voter initiatives, referenda and Statewide propositions; (q) effects of the changes in the economy, population and demand of customers within a utility's service area, including as a consequence of the COVID-19 pandemic and its impacts; (r) effects of possible manipulation of the electric markets; (s) acts of terrorism or cyber-terrorism impacting a utility and/or significant load customers; (t) changes to the climate; (u) natural disasters or other physical calamities, including, but not limited to, earthquakes, droughts, severe weather, floods and wildfires, and potential liabilities of electric utilities in connection therewith; (v) supply chain disruptions or delays which hinder the District's efforts to operate and maintain the Electric System; and (w) adverse impacts to the market for insurance relating to recent wildfires and other calamities, leading to higher costs or prohibitively expensive coverage, or limited or unavailability of coverage for certain types of risk. Any of these factors (as well as other factors) could have an adverse effect on the financial condition of any given electric utility, including the District, and likely will affect individual utilities in different ways. RISK FACTORS The following information, in addition to the other matters that are described in this Official Statement, should be considered by prospective investors in evaluating the Certificates. However, the following does not purport to be comprehensive, definitive or an exhaustive listing of risks and other considerations that may be relevant to making an investment decision with respect to the Certificates. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks. If any risk factor materializes to a sufficient degree, it alone could delay or preclude payment of principal or interest with respect to the Certificates. Accuracy of Assumptions The District has made certain assumptions with regard to various matters, including but not limited to future development within the District, the effect of the COVID-19 pandemic, the rates and charges to be imposed in future years, the expenses associated with operating the Electric System and the interest rate at which funds will be invested, and based on these assumptions, the District believes that it will have sufficient Net Revenues to pay the Series 2022 Installment Payments. The District believes these assumptions to be reasonable, but to the extent that any of such assumptions fail to materialize, the Net Revenues available to pay the Series 2022 Installment Payments could be less than currently expected by the District. The District may choose to maintain compliance with the rate covenant set forth in the Installment Purchase Agreement in part by means of contributions from available reserves or resources. In such event, Net Revenues may generate amounts which are less than 1.25 times Debt Service in any given Fiscal Year. See the caption "SECURITY FOR THE CERTIFICATES —Rate Covenant." 47 4864-8204-9305v7/022925-0111 System Demand There can be no assurance that the demand for Electric Service will occur as described in this Official Statement. Reduction in levels of demand could require an increase in rates or charges in order to comply with the rate covenant. See the caption "SECURITY FOR THE CERTIFICATES —Rate Covenant." Demand for Electric Service could be reduced or may not occur as projected by the District as a result of reduced levels of development in the District's service area, an economic downturn, changes in the ability of UAMPS or WAPA to generate electricity and other factors. See the caption "THE ELECTRIC SYSTEM —Power Supply Resources." System Expenses There can be no assurance that the District's expenses will be consistent with the descriptions in this Official Statement. Operation and Maintenance Costs may vary with electrical generation costs, transmission costs, regulatory compliance costs, labor costs (including costs related to pension and other post -employment benefits) and other factors. Increases in Operation and Maintenance Costs could require an increase in rates or charges in order to comply with the rate covenant. See the caption "SECURITY FOR THE CERTIFICATES — Rate Covenant." Limited Recourse on Default If the District defaults on its obligation to pay the Series 2022 Installment Payments, the Trustee, as assignee of the Corporation, has the right to declare the total unpaid principal amount of the Series 2022 Installment Payments, together with the accrued interest thereon, to be immediately due and payable. However, in the event of a default and such acceleration, there can be no assurance that the District will have sufficient funds to pay such accelerated amounts from Net Revenues. Natural Disasters General. The District, like all State communities, is subject to unpredictable seismic activity, wildfires, floods, high winds, landslides, drought or other natural disasters. A severe natural disaster, such as an earthquake, wildfire, flood, high wind event or landslide, could result in substantial damage to the District, including the Electric System. Although the District maintains insurance for damage to the Electric System, including limited earthquake insurance, as described under the caption "THE DISTRICT —District Insurance," there can be no assurance that specific losses will be covered by insurance or, if covered, that claims will be paid in full by the applicable insurers. Furthermore, significant portions of the Electric System, including distribution poles and overhead lines, are not covered by property casualty insurance. Damage to such portions of the Electric System as a result of natural disasters could result in uninsured losses to the District. The District maintains earthquake insurance on Electric System facilities. See the caption "THE DISTRICT —District Insurance." Fire. The District is located in a Tier 3 fire threat area, as determined by the California Public Utilities Commission, and wildfires have occurred in recent years in different regions of the State, including in areas in and near the District's service area. [To date, none of such fires have affected the Electric System infrastructure]. However, there can be no assurance that fires will not occur within the boundaries of the District in the future, leading to the destruction of the property of District customers, decreased usage of the District's Electric System and a decline in Net Revenues. The District carries property insurance for fire damage to Electric System facilities. In the event of an unusual or sustained heat wave in Northern California, the District may choose to shut off electric power to customers with little or no advance warning in order to prevent electrical distribution 48 4864-8204-9305v7/022925-0111 facilities from sparking a wildfire. Such an event is known as a Public Safety Power Shutoff, and would be undertaken in accordance with the District's Wildfire Mitigation Plan, but there can be no assurance that Electric System operations and Revenues would not be affected. See the captions "THE ELECTRIC SYSTEM —Wildfire Mitigation Measures" and "—Climate Change" for a detailed discussion of the District's Wildfire Mitigation Plan. Limitations on Remedies Available; Bankruptcy The enforceability of the rights and remedies of the Owners and the obligations of the District may become subject to the following: the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect; equitable principles which may limit the specific enforcement under State law of certain remedies; the exercise by the United States of America of the powers delegated to it by the federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State and its governmental bodies in the interest of a significant and legitimate public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or State government, if initiated, could subject the Owners to judicial discretion and interpretation of their rights in bankruptcy or otherwise and consequently may entail risks of delay, limitation or modification of their rights. If the Net Revenues are "special revenues" under the federal bankruptcy code, then Net Revenues collected after the date of the bankruptcy filing should be subject to the lien of the Installment Purchase Agreement. "Special revenues" are defined to include receipts derived from the ownership or operation of projects or systems that are primarily used to provide utility services. Although the Net Revenues appear to satisfy this definition and thus be "special revenues," no assurance can be given that a court would hold that the Net Revenues are special revenues or are otherwise subject to the lien of the Installment Purchase Agreement post -bankruptcy. In addition, the determination of whether or not particular revenues are "special revenues," and (if they are special revenues) the parallel determination of whether the federal bankruptcy code mandates that such revenues continue to be used to pay obligations to Owners or Beneficial Owners post -bankruptcy, are subject to broad judicial discretion, and may evolve over time as decisions are rendered in various Chapter 9 bankruptcy cases throughout the United States. If the Net Revenues are determined not to be "special revenues," then Net Revenues collected after the commencement of the bankruptcy case will likely not be subject to the lien of the Installment Purchase Agreement. The Owners or Beneficial Owners of the Certificates may not be able to assert a claim against any property of the District other than the Net Revenues, and if these amounts are no longer subject to the lien of the Installment Purchase Agreement, then there may be no amounts from which the Owners or Beneficial Owners of the Certificates are entitled to be paid. The federal bankruptcy code provides that special revenues can be applied to necessary operating expenses of the project or system before they are applied to other obligations. This rule applies regardless of the provisions of the transaction documents. Thus, the District may be able to use Net Revenues to pay necessary operating expenses of the Electric System that are greater or different than the Operation and Maintenance Costs as defined in the Installment Purchase Agreement, before the remaining Net Revenues are made available to the Trustee to pay amounts owed to the Owners of the Certificates. It is not clear precisely which expenses would constitute necessary operating expenses. If the District is in bankruptcy, the District's creditors (including the Owners of the Certificates) may be prohibited from taking any action to collect any amount from the District (including but not limited to the Net Revenues constituting "special revenues") or to enforce any obligation of the District, unless the permission of the bankruptcy court is obtained. These restrictions may also prevent the Trustee from making payments to the Owners of the Certificates from funds in the Trustee's possession. In addition, the rate covenant that is described under the caption "SECURITY FOR THE CERTIFICATES —Rate Covenant" may not be enforceable in bankruptcy by the Trustee or the Owners of the Certificates. 49 4864-8204-9305v7/022925-0111 The provisions of the Installment Purchase Agreement that provide that the commencement of a bankruptcy case by the District is an Event of Default, and that certain other insolvency -related events with respect to the District are also Events of Default, may also be unenforceable. This may limit the ability of the Trustee to require the District to turn over to the Trustee Net Revenues and may allow the District to continue to spend Net Revenues for any lawful purpose as provided in the Installment Purchase Agreement free and clear of the lien of the Installment Purchase Agreement, notwithstanding the fact that the District is in bankruptcy. With respect to Net Revenues collected after the bankruptcy filing, if the District does not voluntarily turn over such Net Revenues to the Trustee, it is not entirely clear what procedures the Trustee and the Owners of the Certificates would have to follow to attempt to obtain possession of such Net Revenues, how much time it would take for such procedures to be completed, or whether such procedures would ultimately be successful. Under such circumstances, there may be delays or reductions in payments on the Certificates. The District may be able to borrow additional money that is secured by a lien on any of its property (including the Net Revenues), which lien could have priority over the lien of the Installment Purchase Agreement, as long as the bankruptcy court determines that the rights of the Trustee and the Owners of the Certificates will be adequately protected. The District may also be able to cause some of the Net Revenues to be released to it, free and clear of lien of the Installment Purchase Agreement, as long as the bankruptcy court determines that the rights of the Trustee and the owners of the Certificates will be adequately protected. The District may be able, without the consent and over the objection of the Trustee and the Owners of the Certificates, to alter the priority, interest rate, principal amount, payment terms, collateral, maturity dates, payment sources, covenants (including tax -related covenants), and other terms or provisions of the Installment Purchase Agreement, the Trust Agreement and the Certificates, as long as the bankruptcy court determines that the alterations are fair and equitable. There may be delays in payments on the Certificates while a bankruptcy court considers any of these issues. There may be other possible effects of a bankruptcy of the District that could result in delays or reductions in payments on the Certificates, or result in losses to the Owners of the Certificates. Regardless of any specific adverse determinations in a bankruptcy proceeding, the fact of a bankruptcy proceeding could have an adverse effect on the liquidity and value of the Certificates. The opinion to be delivered by Special Counsel concurrently with the execution and delivery of the Certificates will be subject to the above -described limitations and the various other legal opinions to be delivered concurrently with the execution and delivery of the Certificates will be similarly qualified. See Appendix C. In the event that the District fails to comply with its covenants under the Installment Purchase Agreement or fails to pay the Series 2022 Installment Payments, which secure the payments of principal and interest with respect to the Certificates, there can be no assurance of the availability of remedies adequate to protect the interest of the Owners of the Certificates. Limited Obligations The Installment Purchase Agreement is a limited obligation of the District payable solely from Net Revenues and secured solely by the Revenues pledged in the Installment Purchase Agreement. If for any reason, the District does not collect sufficient Revenues to pay the Series 2022 Installment Payments, the District will not be obligated to utilize any other of its funds, other than certain amounts on deposit in the funds and accounts established under the Trust Agreement, to pay the Certificates. The District has no taxing power. The obligation of the District does not constitute an indebtedness in contravention of any constitutional or statutory debt limitation or restriction. 50 4864-8204-9305v7/022925-0111 Statutory and Regulatory Compliance Laws and regulations governing the delivery of electricity are enacted and promulgated by federal, State and local government agencies. Compliance with these laws and regulations is and will continue to be costly, and, as more stringent standards are developed, such costs will likely increase. Claims against the Electric System for failure to comply with applicable laws and regulations could be significant. Such claims may be payable from assets of the Electric System and constitute Operation and Maintenance Costs or from other legally available sources. In addition to claims by private parties, changes in the scope and standards for retail electric systems such as that operated by the District may also lead to administrative orders issued by federal or State regulators. Future compliance with such orders could also impose substantial additional costs on the District. In addition to the other limitations described herein, the State electorate or Legislature could adopt a Constitutional amendment, legislation or an initiative with the effect of reducing revenues payable to or collected by the District. No assurance can be given that the cost of compliance with such laws, regulations and orders would not adversely affect the ability of the District to generate Net Revenues in amounts that are sufficient to pay the Series 2022 Installment Payments. Electric utilities are subject to continuing environmental regulation. Federal, State and local standards and procedures which regulate the environmental impact of electric utilities are subject to change. These changes may arise from continuing legislative, regulatory and judicial action regarding such standards and procedures. Although the District currently does not own or operate any generation facilities, the District may seek to acquire and/or construct generation facilities in the future. There is no assurance that any facilities or projects of the District will remain subject to the laws and regulations currently in effect, will always be in compliance with future laws and regulations or will always be able to obtain all required operating permits. An inability to comply with environmental standards could require, for example, additional capital expenditures, reduced operating levels or the shutdown of individual units which are not in compliance. In addition, increased environmental laws and regulations may create certain barriers to new facility development, may require modification of existing facilities and may result in additional costs for affected resources. In addition, at both the federal and State levels, legislation is introduced frequently addressing domestic energy policies and various environmental matters and impacts relating to energy, including the generation of energy using conventional and unconventional technologies. Issues raised in legislative proposals in recent years have included implementation of energy efficiency and renewable energy standards, addressing transmission planning, siting and cost allocation to support the construction of renewable energy facilities, cybersecurity legislation that would allow FERC to issue interim measures to protect critical electric infrastructure, a federal cap -and -trade program to reduce GHG emissions and renewable energy incentives that could provide grants and credits to municipal utilities to invest in renewable energy infrastructure. Congress has also considered other bills relating to energy supplies and development. The District is unable to predict at this time whether any of these or other legislative proposals will be enacted into law or what the impact of any such proposals that may ultimately be enacted will be. See also the caption "CERTAIN FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY." Parity Obligations The Installment Purchase Agreement permits the District to enter into Bonds and Contracts payable from Net Revenues on a parity with the Series 2022 Installment Payments, which secure the Certificates, subject to the terms and conditions set forth therein. The entry into of additional Bonds and Contracts could result in reduced Net Revenues available to pay the Series 2022 Installment Payments. The District has covenanted to maintain coverage of at least 125% of Debt Service, as further described under the caption "SECURITY FOR THE CERTIFICATES —Limitations on Parity and Superior Obligations; Subordinate Obligations —Additional Obligations on a Parity with the Installment Payments." 51 4864-8204-9305v7/022925-0111 Loss of Tax Exemption Interest with respect to the Certificates could become includable in gross income for purposes of federal income taxation retroactive to the date that the Certificates were executed and delivered as a result of future acts or omissions of the District in violation of its covenants in the Installment Purchase Agreement and Trust Agreement. In addition, current and future legislative proposals, if enacted into law, may cause interest with respect to the Certificates to be subject, directly or indirectly, to federal income taxation by, for example, changing the current exclusion or deduction rules to limit the aggregate amount of interest on state and local government bonds that maybe treated as tax exempt by individuals. Seethe caption "TAX MATTERS." Should such an event of taxability occur, the Certificates are not subject to a special prepayment or increased interest rate and will remain outstanding until maturity. Secondary Market for the Certificates There can be no guarantee that there will be a secondary market for the Certificates or, if a secondary market exists, that any Certificates can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then -prevailing circumstances, including the availability of continuing disclosures from the District. Such prices could be substantially different from the original purchase price. Limited Service Area; Concentration of Customers The Electric System's five largest customers accounted for approximately 14% of Electric System sales revenues in Fiscal Year 2021. See the caption "THE ELECTRIC SYSTEM —Largest Customers." Customer concentration presents a risk in that if one or more of the Electric System's largest customers were to default on their payments for retail energy sales, or were to relocate their operations outside of the District's service area or otherwise cease their operations in the District's service area, such failure to pay, relocation of operations or ceasing of operations could have a material adverse impact on the Electric System Revenues and finances. No assurances can be given by the District that any such failure to pay, relocation or cessation of operations will not occur while the Certificates are outstanding. CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES Proposition 218 and Proposition 26 Proposition 218, a State ballot initiative known as the "Right to Vote on Taxes Act," was approved by the voters of the State of California on November 5, 1996. Proposition 218 added Articles XIIIC and XIIID to the State Constitution. Article XIIIC imposes a majority voter approval requirement on local governments (including the District) with respect to taxes for general purposes, and a two-thirds voter approval requirement with respect to taxes for special purposes. Article XIIID creates additional requirements for the imposition by most local governments of general taxes, special taxes, assessments and "property -related" fees and charges. Article XIIID explicitly exempts fees for the provision of electric service from the provisions of such article. Article XIIIC expressly extends the people's initiative power to the reduction or repeal of local taxes, assessments, and fees and charges imposed prior to its effective date (November 1996). The State Supreme Court held in Bighorn -Desert View Water Agency v. Verid, 39 CalAth 205 (2006), that, under Article XIIIC, local voters by initiative may reduce a public agency's water rates and delivery charges, as those are property - related fees or charges within the meaning of Article XIIID, and noted that the initiative power described in Article XIIIC may extend to a broader category of fees and charges than the property -related fees and charges governed by Article XIIID. Moreover, in the case of Bock v. City Council of Lompoc, 109 Cal.App.3d 52 (1980), the State Court of Appeal determined that an electric rate ordinance was not subject to the same constitutional 52 4864-8204-9305v7/022925-0111 restrictions that are applied to the use of the initiative process for tax measures so as to render it an improper subject of the initiative process. Thus, even electric service charges (which are expressly exempted from the provisions of Article XIIID) might be subject to the initiative provision of Article XIIIC, thereby subjecting such fees and charges imposed by the District to reduction by the electorate. However, the District believes that even if the electric rates of the District are subject to the initiative power, the electorate of the District would be precluded from reducing electric rates and charges in a manner that would adversely affect the payment of the Series 2022 Installment Payments by virtue of the "impairments clause" of the United States Constitution. The State electorate approved Proposition 26 at the November 2, 2010 election, amending Article XIIIC of the State Constitution. Proposition 26 was designed to supplement tax limitations that State voters had previously adopted when they approved Proposition 13 in 1978 and Proposition 218 in 1996. Proposition 26 applies by its terms to any levy, charge or exaction imposed, increased or extended by a local government on or after November 3, 2010. Proposition 26 deems any such levy, charge or fee to be a "tax" requiring voter approval unless it comes within one of the listed exceptions. Proposition 26 expressly excludes from its definition of a "tax," among other things, a "charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product." Proposition 26 is subject to interpretation by California courts, including the extent to which it is applicable to pre-existing electric rates and general fund transfers. A number of lawsuits have been filed against public agencies in the State relating to electric utility fund transfers. In Citizens for Fair REU Rates v. City of Redding (filed on January 20, 2015 and modified on February 19, 2015), for example, the State Court of Appeal considered a ratepayer challenge to a "payment in lieu of taxes" (or "PILOT") required by the city of Redding to be made by its electric utility as an annual budgetary transfer amount without voter approval. The city's PILOT was designed to compensate the general fund for the costs of services that other city departments provide to the electric utility. The amount of the PILOT was equivalent to the ad valorem taxes that the electric utility would have had to pay if the electric utility were privately owned. The suits alleged that the PILOT was passed through to the city's electric utility customers as part of the rates and charges for electric service in excess of the reasonable costs to the city of providing electric service. The State Court of Appeal determined that Proposition 26 has no retroactive effect as to local taxes that existed prior to November 3, 2010, but found that since the PILOT was subject to the City Council's recurring discretion, the PILOT did not escape the purview of Proposition 26. The State Court of Appeal concluded that the PILOT constituted a "tax" under Proposition 26 for which the city must secure voter approval unless the city proved that the amount collected was necessary to cover the reasonable costs to the city of providing electric service. On April 29, 2015, the State Supreme Court granted review of the decision of the State Court of Appeal. The State Supreme Court rendered its decision on August 27, 2018, reversing the judgment of the State Court of Appeal. The State Supreme Court determined that the budgetary transfer from the electric utility to the city's general fund, calculated by using the PILOT, itself is not the type of exaction that is subject to Article XIIIC of the State Constitution. The court reasoned that it is only the electric utility rate, not the PILOT, that is imposed on customers for electric service. The State Supreme Court concluded that the challenged rate did not exceed the reasonable costs of providing electric service, and therefore did not constitute a tax. Proposition 26 may, however, be interpreted to limit fees and charges for electric utility services charged by governmental entities such as the District to preclude future transfers of electric utility generated funds to a local government's general fund or another enterprise fund (such as the District's water system fund) and/or require stricter standards for the allocation of costs among customer classes. Proposition 26 is subject to interpretation by State courts. A number of lawsuits have been filed against public agencies in California under Proposition 26, including particularly with respect to electric utility fund transfers. The District is unable to predict at this time how Proposition 26 will ultimately be interpreted or the long-term impact of Proposition 26 on the Electric System. 53 4864-8204-9305v7/022925-0111 Other Initiatives Articles XIIIC and XIIID and Proposition 26 were adopted as measures that qualified for the ballot pursuant to the State's initiative process. From time to time, including presently, other initiatives have been, and could be, proposed, and if qualified for the ballot and approved by voters, could affect the District's revenues or operations. Neither the nature and impact of these measures nor the likelihood of qualification for ballot or passage can be anticipated by the District. THE CORPORATION The Corporation was organized on April 24, 1986 pursuant to the Nonprofit Public Benefit Corporation Law of the State (Title 1, Division 2, Part 2 of the Corporations Code), for the purpose of providing financial assistance to the District by acquiring, constructing and financing various public facilities, land and equipment, and the leasing of facilities, land and equipment for the use, benefit and enjoyment of the public. The Corporation was formed at the request of the District to assist in financings such as the installment purchase that is described in this Official Statement. The members of the District Board serve as the Board of Directors of the Corporation. The Corporation has no liability to the Owners, and has pledged none of its moneys, funds or assets to any Series 2022 Installment Payments or any payments under the Certificates. TAX MATTERS In the opinion of Special Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) with respect to the Certificates is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. In the further opinion of Special Counsel, interest (and original issue discount) with respect to the Certificates is exempt from State personal income tax. Special Counsel's opinion as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) with respect to the Certificates is based upon certain representations of fact and certifications made by the Corporation, the District and others and is subject to the condition that the Corporation and the District comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Code") that must be satisfied subsequent to the issuance of the Certificates to assure that interest (and original issue discount) with respect to the Certificates will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) with respect to the Certificates to be included in gross income for federal income tax purposes retroactive to the date of execution and delivery of the Certificates. The Corporation and the District have covenanted to comply with all such requirements. In the opinion of Special Counsel, the difference between the issue price of a Certificate (the first price at which a substantial amount of the Certificates of a maturity is to be sold to the public) and the stated prepayment price at maturity of such Certificate constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Beneficial Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Beneficial Owner will increase the Beneficial Owner's basis in the applicable Certificate. The amount of original issue discount that accrues to the Beneficial Owner of a Certificate is excluded from the gross income of such Beneficial Owner for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals. The amount by which a Certificate Owner's original basis for determining loss on sale or exchange in the applicable Certificate (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable premium, which must be amortized under Section 171 of the Code; such amortizable premium reduces the Certificate Owner's basis in the applicable Certificate (and the amount of tax- 54 4864-8204-9305v7/022925-0111 exempt interest received with respect to the Certificates), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Certificate premium may result in a Certificate Owner realizing a taxable gain when a Certificate is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Certificate to the Owner. Purchasers of the Certificates should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable Certificate premium. The Internal Revenue Service (the "IRS") has initiated an expanded program for the auditing of tax-exempt obligations, including both random and targeted audits. It is possible that the Certificates will be selected for audit by the IRS. It is also possible that the market value of the Certificates might be affected as a result of such an audit of the Certificates (or by an audit of similar municipal obligations). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof) subsequent to the execution and delivery of the Certificates to the extent that it adversely affects the exclusion from gross income of interest (and original issue discount) with respect to the Certificates or their market value. SUBSEQUENT TO THE EXECUTION AND DELIVERY OF THE CERTIFICATES THERE MIGHT BE FEDERAL, STATE OR LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY CHANGES TO OR INTERPRETATIONS OF FEDERAL, STATE OR LOCAL LAW) THAT AFFECT THE FEDERAL, STATE OR LOCAL TAX TREATMENT OF THE CERTIFICATES, INCLUDING THE IMPOSITION OF ADDITIONAL FEDERAL INCOME OR STATE TAXES ON OWNERS OF TAX- EXEMPT STATE OR LOCAL OBLIGATIONS, SUCH AS THE CERTIFICATES. THESE CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE CERTIFICATES. NO ASSURANCE CAN BE GIVEN THAT SUBSEQUENT TO THE ISSUANCE OF THE CERTIFICATES STATUTORY CHANGES WILL NOT BE INTRODUCED OR ENACTED OR JUDICIAL OR REGULATORY INTERPRETATIONS WILL NOT OCCUR HAVING THE EFFECTS DESCRIBED ABOVE. BEFORE PURCHASING ANY OF THE CERTIFICATES, ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING POSSIBLE STATUTORY CHANGES OR JUDICIAL OR REGULATORY CHANGES OR INTERPRETATIONS, AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE CERTIFICATES. Special Counsel's opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Special Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Trust Agreement, the Installment Purchase Agreement and the Tax Certificate relating to the Certificates permit certain actions to be taken or to be omitted if a favorable opinion of Special Counsel is provided with respect thereto. Special Counsel expresses no opinion as to the effect on the exclusion from gross income of interest (and original issue discount) for federal income tax purposes with respect to any Certificate if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation. Although Special Counsel has rendered an opinion that interest (and original issue discount) with respect to the Certificates is excluded from gross income for federal income tax purposes provided that the Corporation and the District continue to comply with certain requirements of the Code, the ownership of the Certificates and the accrual or receipt of interest (and original issue discount) with respect to the Certificates may otherwise affect the tax liability of certain persons. Special Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Certificates, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Certificates. Should interest (and original issue discount) with respect to the Certificates become includable in gross income for federal income tax purposes, the Certificates are not subject to early prepayment and will remain outstanding until maturity or until prepayment in accordance with the Trust Agreement. A copy of the proposed form of opinion of Special Counsel is set forth in Appendix C. 55 4864-8204-9305v7/022925-0111 CERTAIN LEGAL MATTERS The validity of the Installment Purchase Agreement and the Trust Agreement are subject to the approval of Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, acting as Special Counsel. The form of such legal opinion is set forth in Appendix C and such legal opinion will be attached to each Certificate. Certain legal matters will be passed upon for the District and the Corporation by Porter Simon, Truckee, California, as General Counsel to the District and the Corporation. Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, is acting as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by its counsel Kutak Rock LLP and for the Trustee by its counsel. Payment of the fees of Special Counsel is contingent upon execution and delivery of the Certificates. MUNICIPAL ADVISOR The District has retained Fieldman, Rolapp & Associates, Inc., Irvine, California, as its Municipal Advisor in connection with the execution and delivery of the Certificates. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or assume responsibility for the accuracy, completeness, or fairness of the information contained in this Official Statement. The Municipal Advisor is an independent financial advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities. The payment of the fees of the Municipal Advisor is contingent upon the execution and delivery of the Certificates. LITIGATION Except as otherwise described in this Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body, pending or, to the knowledge of the District or the Corporation, threatened against the District or the Corporation affecting the existence of the District or the Corporation or the titles of their officers to their respective offices or seeking to restrain or to enjoin the sale or delivery of the Certificates, the application of the proceeds thereof in accordance with the Trust Agreement, or in any way contesting or affecting the action of the District or the Corporation contemplated by any of said documents, or in any way contesting the completeness or accuracy of this Official Statement or any amendment or supplement thereto, or contesting the powers of the District or the Corporation or their respective authority with respect to the Certificates or any action of the District or the Corporation contemplated by any of said documents. RATING S&P Global Ratings, a Standard & Poor's Financial Services LLC business ("S&P"), has assigned the Certificates the rating of Future events, including the impacts of the COVID-19 pandemic that is described under the caption "THE DISTRICT—COVID-19 Pandemic," could have an adverse impact on the rating of the Certificates, and there is no assurance that any credit rating that is given to the Certificates will be maintained for any period of time or that a rating may not be qualified, downgraded, lowered or withdrawn entirely by a rating agency if, in the judgment of such rating agency, circumstances so warrant, nor can there be any assurance that the criteria required to achieve a rating on the Certificates will not change during the period that the Certificates remain outstanding. Any such qualification, downgrade, lowering or withdrawal of the rating may have an adverse effect on the market price of the Certificates. The rating reflects only the current views and current rating criteria of S&P (which views and criteria could change at any time), and an explanation of the significance of such rating may be obtained from S&P. Generally, rating agencies base their ratings on information and materials furnished 56 4864-8204-9305v7/022925-0111 to them (which may include information and material from the District that is not included in this Official Statement) and on investigations, studies and assumptions by the rating agencies. The District has covenanted in the Continuing Disclosure Certificate to file notices of any rating changes on the Certificates with EMMA. See the caption "CONTINUING DISCLOSURE UNDERTAKING" and Appendix E. Notwithstanding such covenant, information relating to rating changes on the Certificates may be publicly available from S&P prior to such information being provided to the District and prior to the date by which the District is obligated to file a notice of rating change. Purchasers of the Certificates are directed to S&P and their respective websites and official media outlets for the most current rating with respect to the Certificates after the initial execution and delivery thereof. In providing a rating on the Certificates, S&P may have performed independent calculations of coverage ratios using its own internal formulas and methodology, which may not reflect the provisions of the Trust Agreement or the Installment Purchase Agreement. The District makes no representations as to any such calculations, and such calculations should not be construed as a representation by the District as to past or future compliance with any financial covenants, the availability of particular revenues for the payment of debt service or for any other purpose. UNDERWRITING The Certificates are being purchased by Oppenheimer & Co., Inc. (the "Underwriter") pursuant to a purchase agreement, dated the date hereof (the "Purchase Agreement"), by and between the District and the Underwriter. The Underwriter will purchase the Certificates at an aggregate purchase price of $ , representing the principal amount of the Certificates, plus/less $ of net original issue premium/discount and less $ of Underwriter's discount. The Purchase Agreement provides that the Underwriter will purchase all of the Certificates if any are purchased, the obligation to make such a purchase being subject to certain terms and conditions set forth in the Purchase Agreement, the approval of certain legal matters by counsel and certain other conditions Under certain circumstances, the initial public offering yields stated on the page immediately following the cover of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell the Certificates to certain dealers (including dealers depositing the Certificates into investment trusts), dealer banks, banks acting as agent and others at yields higher than said public offering yields. CONTINUING DISCLOSURE UNDERTAKING The District has covenanted in a Continuing Disclosure Certificate, dated the date of execution and delivery of the Certificates (the "Continuing Disclosure Certificate"), to provide annually certain financial information and operating data relating to the Electric System of the District by not later than 270 days following the end of its Fiscal Year, including the audited financial statements of the District for each such Fiscal Year (together, the "Annual Report"), commencing September 27, 2022 with the Annual Report for Fiscal Year 2021 (which, for Fiscal Year 2021, will consist solely of this Official Statement), and to provide notices of the occurrence of certain enumerated events. The specific nature of the information to be contained in the Annual Report and the notices of enumerated events is set forth in Appendix E. These covenants have been made in order to assist the Underwriter in complying with Section (b)(5) of Rule 15c2-12 adopted by the Securities and Exchange Commission. [DISCLOSURE REGARDING PAST COMPLIANCE TO COME]. MISCELLANEOUS Insofar as any statements made in this Official Statement involve matters of opinion or of estimates, whether or not expressly stated, they are set forth as such and not as representations of fact. No representation 57 4864-8204-9305v7/022925-0111 is made that any of the statements will be realized. Neither this Official Statement nor any statement which may have been made verbally or in writing is to be construed as a contract with the Owners of the Certificates. The execution and delivery of this Official Statement have been duly authorized by the District. TRUCKEE DONNER PUBLIC UTILITY DISTRICT General Manager I� 58 4864-8204-9305v7/022925-0111 APPENDIX A AUDITED FINANCIAL STATEMENTS J A-1 4864-8204-9305v7/022925-0111 APPENDIX B SUMMARY OF PRINCIPAL LEGAL DOCUMENTS The following is a summary of certain provisions of the Installment Purchase Agreement and the Trust Agreement which are not described elsewhere. This summary does not purport to be comprehensive and reference should be made to the respective agreement for a full and complete statement of the provisions thereof [TO COME FROM STRADLING] B-1 4864-8204-9305v7/022925-0111 APPENDIX C FORM OF LEGAL OPINION Upon execution and delivery of the Certificates, Stradling Yocca Carlson & Rauth, a Professional Corporation, Special Counsel, proposes to render its final approving opinion in substantially thefollowingform: July _, 2022 Truckee Donner Public Utility District Truckee, California Re: $ Truckee Donner Public Utility District Electric System Revenue Certificates of Participation, Series 2022A Members of the Board of Directors: We have acted as Special Counsel to the Truckee Donner Public Utility District (the "District") in connection with the execution and delivery of $ aggregate principal amount of the Truckee Donner Public Utility District Electric System Revenue Certificates of Participation, Series 2022A (the "Certificates"), dated the date hereof, evidencing and representing an interest of the registered owner thereof in the right to receive a portion of certain Installment Payments (as that term is defined in the Trust Agreement hereinafter mentioned) under and pursuant to an Installment Purchase Agreement, dated as of July 1, 2022 (the "Agreement'), by and between the District and the Truckee Donner Public Utility District Financing Corporation (the "Corporation"), which right to receive such Installment Payments has been assigned by the Corporation to The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"), pursuant to an Assignment Agreement, dated as of July 1, 2022, by and between the Trustee and the Corporation. The Certificates have been executed by the Trustee pursuant to the terms of a Trust Agreement, dated as of July 1, 2022 (the "Trust Agreement'), by and among the District, the Corporation and the Trustee. In connection with our representation we have examined a certified copy of the proceedings relating to the Certificates. As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigations. Based upon the foregoing and after examination of such questions of law as we have deemed relevant in the circumstances, but subject to the limitations set forth herein, we are of the opinion that: 1. The proceedings show lawful authority for the execution and delivery by the District of the Agreement and the Trust Agreement under the laws of the State of California now in force, the Agreement and the Trust Agreement have been duly authorized, executed and delivered by the District, and, assuming due authorization, execution and delivery by the Trustee and the Corporation, as appropriate, are valid and binding obligations of the District enforceable against the District in accordance with their respective terms. 2. The Certificates, assuming due execution and delivery by the Trustee, are entitled to the benefits of the Trust Agreement. 3. The obligation of the District to make the Installment Payments from Net Revenues (as defined in the Agreement) is an enforceable obligation of the District and does not constitute a debt of the District, or of the State of California or of any political subdivision thereof in contravention of any constitutional or statutory debt limit or restriction, and does not constitute an obligation for which the District is obligated to levy or pledge any form of taxation or for which the District has levied or pledged any form of taxation. C-1 4864-8204-9305v7/022925-0111 4. Under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, the portion of each Installment Payment constituting interest (and original issue discount) with respect to the Certificates is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. 5. The portion of each Installment Payment constituting interest (and original issue discount) is exempt from State of California personal income tax. 6. The difference between the issue price of a Certificate (the first price at which a substantial amount of the Certificates of a maturity is to be sold to the public) and the stated prepayment price at maturity with respect to such Certificate constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Certificate Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Certificate Owner will increase the Certificate Owner's basis in the applicable Certificate. In the opinion of Special Counsel, the amount of original issue discount that accrues to the Owner of a Certificate is excluded from the gross income of such Owner for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. 7. The amount by which a Certificate Owner's original basis for determining loss on sale or exchange in the applicable Certificate (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable premium, which must be amortized under Section 171 of the Internal Revenue Code of 1986, as amended (the "Code"); such amortizable premium reduces the Certificate Owner's basis in the applicable Certificate (and the amount of tax-exempt interest received with respect thereto), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Certificate premium may result in a Certificate Owner realizing a taxable gain when a Certificate is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Certificates to the Owner. Purchasers of the Certificates should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable Certificate premium. The opinions expressed herein as to the exclusion from gross income of the portion of each Installment Payment constituting interest with respect to the Certificates are based upon certain representations of fact and certifications made by the District and others and are subject to the condition that the District and complies with all requirements of the Code that must be satisfied subsequent to the execution and delivery of the Certificates to assure that such portion of each Installment Payment constituting interest with respect to the Certificates will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause the portion of each Installment Payment with respect to the Certificates constituting interest to be included in gross income for federal income tax purposes retroactive to the date of execution and delivery of the Certificates. The District has covenanted to comply with all such requirements. The opinions expressed herein may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. Our engagement with respect to the Certificates terminates on the date of their execution and delivery. The Trust Agreement, the Agreement and the Tax Certificate relating to the Certificates permit certain actions to be taken or to be omitted if a favorable opinion of Special Counsel is provided with respect thereto. No opinion is expressed herein as to the effect on the exclusion from gross income of the portion of each Installment Payment constituting interest (and original issue discount) with respect to the Certificates for federal income tax purposes with respect to any Certificate if any such action is taken or omitted based upon the opinion or advice of counsel other than ourselves. Other than expressly stated herein, we express no other opinion regarding tax consequences with respect to the Certificates. The opinions expressed herein are based upon our analysis and interpretation of existing laws, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities. C-2 4864-8204-9305v7/022925-0111 We call attention to the fact that the rights and obligations under the Trust Agreement, the Agreement and the Certificates are subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors' rights, to the application of equitable principles if equitable remedies are sought, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public agencies in the State of California. Our opinion is limited to matters governed by the laws of the State of California and federal law. We assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction. We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Certificates and expressly disclaim any duty to advise the Owners of the Certificates with respect to matters contained in the Official Statement. Respectfully submitted, VA C-3 4864-8204-9305v7/022925-0111 APPENDIX D DTC AND BOOK -ENTRY ONLY SYSTEM The information in this section concerning DTC and DTC's book -entry only system has been obtained from sources that the District and the Underwriter believe to be reliable, but neither the District nor the Underwriter takes any responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the Certificates, payment of principal, premium, if any, accreted value, if any, and interest with respect to the Certificates to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Certificates and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Certificates. The Certificates will be issued as fully -registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered certificate will be issued for each annual maturity of the Certificates, each in the aggregate principal amount of such annual maturity, and will be deposited with DTC. DTC, the world's largest securities depository, is a limited -purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post -trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book -entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly -owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor's rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of Certificates under the DTC system must be made by or through Direct Participants, which will receive a credit for the Certificates on DTC's records. The ownership interest of each actual purchaser of each Certificates (`Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Certificates are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Certificates, except in the event that use of the book -entry system for the Certificates is discontinued. To facilitate subsequent transfers, all Certificates deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Certificates with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Certificates; DTC's records reflect only the identity of the Direct Participants to whose accounts such D-1 4864-8204-9305v7/022925-0111 Certificates are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Certificates may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Certificates, such as prepayments, tenders, defaults, and proposed amendments to the Certificate documents. For example, Beneficial Owners of Certificates may wish to ascertain that the nominee holding the Certificates for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Prepayment notices shall be sent to DTC. If less than all of the Certificates within a maturity are being prepaid, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be prepaid. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Certificates unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Certificates are credited on the record date (identified in a listing attached to the Omnibus Proxy). Prepayment proceeds, distributions, and dividend payments with respect to the Certificates will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the District or the Trustee, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Trustee, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of prepayment proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. A Certificate Owner shall give notice to elect to have its Certificates purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such Certificates by causing the Direct Participant to transfer the Participant's interest in the Certificates, on DTC's records, to the Trustee. The requirement for physical delivery of Certificates in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Certificates are transferred by Direct Participants on DTC's records and followed by a book - entry credit of tendered Certificates to the Trustee's DTC account. DTC may discontinue providing its services as depository with respect to the Certificates at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered. The District may decide to discontinue use of the system of book -entry only transfers through DTC (or a successor securities depository). In that event, certificates will be printed and delivered to DTC. THE TRUSTEE, AS LONG AS A BOOK -ENTRY ONLY SYSTEM IS USED FOR THE CERTIFICATES, WILL SEND ANY NOTICE OF PREPAYMENT OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE PREPAYMENT OF THE CERTIFICATES CALLED FOR PREPAYMENT OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. D-2 4864-8204-9305v7/022925-0111 APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE Upon the execution and delivery of the Certificates, the District proposes to enter into a Continuing Disclosure Certificate in substantially the following form: This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered by the Truckee Donner Public Utility District (the "District") in connection with the execution and delivery of the Truckee Donner Public Utility District Electric System Revenue Certificates of Participation, Series 2022A (the "Certificates") pursuant to a Trust Agreement, dated as of July 1, 2022 (the "Trust Agreement"), by and among the District, the Truckee Donner Public Utility District Financing Corporation (the "Corporation") and The Bank of New York Mellon Trust Company, N.A., as trustee. The District covenants and agrees as follows: 1. Purpose of this Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the District for the benefit of the Holders and Beneficial Owners of the Certificates and in order to assist the Participating Underwriter in complying with the Rule. 2. Definitions. In addition to the definitions set forth in the Trust Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: Annual Report. The term "Annual Report" means any Annual Report provided by the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. Beneficial Owner. The term "Beneficial Owner" means any person which: (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Certificates (including persons holding Certificates through nominees, depositories or other intermediaries); or (b) is treated as the owner of any Certificates for federal income tax purposes. EMMA. The term "EMMA" means the Municipal Securities Rulemaking Board's Electronic Municipal Market Access System for municipal securities disclosures, maintained on the Internet at http://emma.msrb.org/. Financial Obligation. The term "Financial Obligation" means a: (A) debt obligation; (B) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (C) guarantee of (A) or (B). The term "Financial Obligation" does not include municipal securities as to which a final official statement has been provided to the Municipal Securities Rulemaking Board consistent with the Rule. Fiscal Year. The term "Fiscal Year" means the one-year period ending on the last day of December of each year. Holder. The term "Holder" means a registered owner of the Certificates. Listed Events. The term "Listed Events" means any of the events listed in Sections 5(a) and (b) of this Disclosure Certificate. Official Statement. The term "Official Statement" means the Official Statement relating to the Certificates dated June _, 2022 delivered in connection with the execution and delivery of the Certificates. Participating Underwriter. The term "Participating Underwriter" means the original underwriters of the Certificates required to comply with the Rule in connection with offering of the Certificates. E-1 4864-8204-9305v7/022925-0111 Rule. The term "Rule" means Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. 3. Provision of Annual Reports. (a) The District shall provide not later than 270 days following the end of its Fiscal Year (commencing September 27, 2022 with the Annual Report for Fiscal Year 2021) to EMMA an Annual Report relating to the immediately preceding Fiscal Year which is consistent with the requirements of Section 4 of this Disclosure Certificate, which Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate. Notwithstanding the foregoing, the filing of the first Annual Report due September 27, 2022 shall be satisfied by the filing of the Official Statement on EMMA. (b) If the District is unable to provide to EMMA an Annual Report by the date required in subsection (a), the District shall send to EMMA a notice in substantially the manner prescribed by the Municipal Securities Rulemaking Board. 4. Content of Annual Reports. The Annual Report shall contain or incorporatc by rcfcrcncc the following: (a) The audited financial statements of the District for the prior Fiscal Year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If such audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Principal amount of the Certificates outstanding as of the last day of the prior Fiscal Year. (c) To the extent not contained in the audited financial statements filed under the preceding clause (a), the Annual Report shall contain information showing the following information for the most recently completed Fiscal Year: (i) an update of the information in Tables 1, 4, 5 under the caption "THE ELECTRIC SYSTEM" in the Official Statement; (ii) an update of the information in Table 6 under the caption "FINANCIAL INFORMATION" in the Official Statement; and (iii) a description of additional Contracts or Bonds (as such terms are defined in the Installment Purchase Agreement) executed or issued by the District during the most recently completed Fiscal Year. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which have been submitted to EMMA or the Securities and Exchange Commission; provided that if any document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board; and provided further that the District shall clearly identify each such document so included by reference. 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Certificates in a timely manner not more than ten (10) Business Days after the event: principal and interest payment delinquencies; E-2 4864-8204-9305v7/022925-0111 2. unscheduled draws on debt service reserves reflecting financial difficulties; unscheduled draws on credit enhancements reflecting financial difficulties; 4. substitution of credit or liquidity providers, or their failure to perform; 5. issuance by the Internal Revenue Service of proposed or final determination of taxability or of a Notice of Proposed Issue (IRS Form 5701 TEB); 6. tender offers; defeasances; 8. ratings changes; 9. bankruptcy, insolvency, receivership or similar proceedings; Note: For the purposes of the event identified in subparagraph (9), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person; and 10. default, event of acceleration, termination event, modification of terms or other similar events under the terms of a Financial Obligation of the District, any of which reflect financial difficulties. (b) Pursuant to the provisions of this Section 5, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Certificates, if material, in a timely manner not more than ten (10) Business Days after the event: 1. unless described in Section 5(a)(5), other notices or determinations by the Internal Revenue Service with respect to the tax status of the Certificates or other events affecting the tax status of the Certific 2. modifications to the rights of Certificate holders; 3. optional, unscheduled or contingent Certificate calls; 4. release, substitution or sale of property securing repayment of the Certificates; non-payment related defaults; 6. the consummation of a merger, consolidation, or acquisition involving the District or the sale of all or substantially all of the assets of the District, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms; appointment of a successor or additional trustee or the change of the name of a trustee; and 8. incurrence of a Financial Obligation of the District, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the District, any of which affect security holders. E-3 4864-8204-9305v7/022925-0111 (c) If the District determines that knowledge of the occurrence of a Listed Event under Section 5(b) would be material under applicable federal securities laws, the District shall file a notice of such occurrence with EMMA in a timely manner not more than ten (10) Business Days after the event. 6. Customarily Prepared and Public Information. Upon request, the District shall provide to any person financial information and operating data regarding the District which is customarily prepared by the District and is publicly available. 7. Termination of Obligation. The District's obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior prepayment or payment in full of all of the Certificates. If such termination occurs prior to the final maturity of the Certificates, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that, in the opinion of nationally recognized bond counsel, such amendment or waiver is permitted by the Rule. 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall not thereby have any obligation under this Disclosure Certificate to update such information or include it in any future notice of occurrence of a Listed Event. 10. Default. In the event of a failure of the District to comply with any provision of this Disclosure Certificate, any Holders or Beneficial Owners of the Certificates may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the District to comply with this Disclosure Certificate shall be an action to compel performance. No Holder or Beneficial Owner of the Certificates may institute such action, suit or proceeding to compel performance unless they shall have first delivered to the District satisfactory written evidence of their status as such, and a written notice of and request to cure such failure, and the District shall have refused to comply therewith within a reasonable time. 11. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Corporation, the District, the Participating Underwriter and Holders and Beneficial Owners from time to time of the Certificates, and shall create no rights in any other person or entity. Dated: July_, 2022 TRUCKEE DONNER PUBLIC UTILITY DISTRICT By: Its: General Manager E-4 4864-8204-9305v7/022925-0111