0CAN048501, 1984 Annual Rept
| ML20100J684 | |
| Person / Time | |
|---|---|
| Site: | Arkansas Nuclear  |
| Issue date: | 12/31/1984 |
| From: | Maulden J ARKANSAS POWER & LIGHT CO. |
| To: | Harold Denton NRC OFFICE OF ADMINISTRATION (ADM), Office of Nuclear Reactor Regulation |
| References | |
| 0CAN048501, CAN48501, NUDOCS 8504110133 | |
| Download: ML20100J684 (41) | |
Text
{{#Wiki_filter:- o ... , ARKANSAS POWER & LIGHT COMPANY POST OFFICE BOX 551 LITTLE ROCK. ARKANSAS 72203 (501)371-4000 April 2, 1985 0CAN048501 Mr. Harold R. Denton, Director Office of Nuclear Reactor Regulation U. S. Nuclear Regulatory Commission Washington, DC 20555 Attention: Document Control Desk
SUBJECT:
Arkansas Nuclear One - Units 1 & 2 Docket Nos. 50-313 and 50-368 License Nos. DPR-51 and NPF-6 Annual Financial Report Gentlemen: As required by 10CFR140.15(b)1 and 10CFR50.71(b), enclosed are thirteen (13) copies of the 1984 Annual Financial Report for Arkansas Power & Light Company. This report contains financial statements for the fiscal years 1982, 1983, and 1984. It also includes balance sheets, operating statements and supporting schedules which may be needed for interpretation of the balance sheets and operating statements. Ve truly yours, e J. Ted Enos Manager, Licensing JTE:MB:ds (($4 Mi 0504110133 041231 PDR ADOCK 05000313 I PDR 1 MEMOEF1 MtOO E GOufM Lieut.EU SY6 TEM L 1
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1 Arkansas Wildlife Federation Honors AP&L l As 1984 Conservation Organization of the Year l l l l Rei ogni/ing a hentage ot ens ironmental cont em and care to r A. Lm sas natural beauts and resources the Arkinsas l Wildhte Federation named Arkmsas Power & bght Compans as the 1%4 Consenatmn Organi/atmn of the T ear T hat histonc award is shown on the tront cover of this Annual Report In presenting the award, the Federation said "Our state is quite luckv to have a utihty compans that works closels with the environmental t ommunity to help maintain and impros e our quality of hie AP&l has repeatediv demonstrated a . . .m j genuine concern for w ildhte conservation and the preservation : of vulnerable habitat lerry L Maulden. AP& L president and t hiet exet utive ottner, accepted the award for the Compans suing that "we ' g hase alwass been and will ilwav' be a strong supporter of " g,. preserving the natural assets of our state That same corporate ". t ill/enship extends throughout the i>perations tit AP&l as we seek to be nundtul about environmental considerations As esidente t)t that i timpanvwide t(incem the Wildlife Federation named Nesbit R Ilowers an emplovce in Al'&l s t ustomi r Serne Dn ision at Pine Blutt. as Consen ationist til the h car l$(1w ers Was reatgnl/ed as dn active t hampitin ill ) i onservation causes Recentls he led campaigns against ,{^~u.g MA% g diti hmg in watertowl areas. t hannelization or waterwavs and ., q . gpig. Cf g*A.y < timbt r harvesting that threatened wildliti _yd.P - i l'resentatitin tit th se Wildlife I t deratiiin awards is inda a- -? v tis e til AP& l. s t'sintintied invtilvement in tlutreat h pri> grams across a broad spet trt: , of its sers a r area While the
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I l ' tim pa nv's first rt'splinsibilits is tti prin ide t tim petitis els pIk ed and reliable elet trh st'rs h e -\l'& I a nd its emphis ces p are at work m numerous at tnities that demonstrate a . t t)mmitment I41 helping pi iiplt. and advant ing A rkansas and Siititheast Missi>uri b Vanous aspects of the CompanvN public4pinted leadership are highhghted in this Annual Report. begmning on Page 4
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Performance Highlights s 1984 1983 Increase Resenues from operations (000) 51,307,683 51,206,145 8 Operation and maintenance expenses (000) 5 806,771 5 770,603 5 Allowance for funds used during construction (000) $ 24,327 5 27,780 (11) Net income (000) 5 143,367 5 126,896 13 Capitalization-end of year (000) (investment required to provide service) 52,259,818 $2.179,864 4 Construction espenditures (000) $ 205,050 $ 247,449 (17) Total utility plant investment-end of year (000) 53,440,991 53,241,847 6 Customers: Electric (end . year) 555,694 545,309 2 Gas (end of year) 65,687 65,710 - Energy sales to retail customers: Electric (millions of kilowatt-hours) 15,719 14,755 7 Natural gas (millions of cubic feet) 12,053 10,960 10 Employees (end of year) 5,311 5,285 - Peak demand (megawatts) 3,650 3,748 (3) Average use per customer (kilowatt-hours): Residential 9,801 9,867 (1) Commercial 53,297 51,445 4 Table of Contents President's Perspective 2 Commitment to Caring . . . 4 Board of Directors 8 Management's Discussion and Analysis 12 Financial Statements 14 Notes to Financial Statements . 18 Ten Years of Progress . 32 Associated Natural Gas Company Message and Listing . 36 Officers and Company Directory inside llack Cover Service Area . Outside llack Cover I
President's Perspective - For Arkansas Power & Light Company,1984 was a year AP&L has vigorously . marked both by historic achievement and significant regula- opposed the concept of . tory uncertainty. System average production
*N1ost notably, we completed our 17-year fuel diversifi- costing since it would raise cation program. The commercial operation in December of our rates by approximately .
our fourth western coal unit, coupled with our two nuclear 50% in the other case, we , units, gives the Company a solid base of American energy have pursued a regulatory ' sources for the 21st Century. and legal course to lessen /, -
*Our nuclear units performed well, providing 53% of the 36% allocation of Grand =
our generated electricity. Unit 1 of Arkansas Nuclear One Gulf assigned to our Com- , (ANO) completed its tenth year of operation, and during pany by a FERC law judge in that time has saved our customers hundreds of millions of February of last year. dollars. Unit 2 of ANO was one of the better performing In January 1985, all of the units in the nation, setting a new h1iddle South System operating companies of the generation record. Niiddle South System joined
*Our new marketing department began to take shape in together proposing a settle-1984 and scored impressive achievements. ment agreement that
- And in 1984 our Company continued its trend of included mutually-agreed-to allocation amounts for Grand improved financial performance. Several factors contrib- Gulf and also carried the stipulation that the concept of uted to this accomplishment. Retail energy sales were u p 7%, System average production costing would be rejected.
reflecting the improved and growing economy of our Under the agreement, AP&L would be allocated 17% of service area. We also benefited from the first full year's Grand Gulf initially, with another 11% coming in 1991. effectsof1983 rateincreasesgrantedin both Arkansas ($39.8 Under the settlement agreement the stockholders of Niiddle million) and N1issouri (53.2 million). Net income was up South Utilities would shoulder a portion of the early years' 13% to $143.4 million, and the quality of earnings cost of Grand Gulf. (For more details, see Note 4 to the improved. Only 17% of net income was attributable to Finan ialStatements "Commitmentsand Contingencies.") Allowance for Funds Used During Constructen (AFDC). We believe the proposed settlement would have resolved The " winding down" of our construction program and these cases in a fair and equitable manner. Unfortunately, tight budgetary controls throughout the Company were the other parties to these cases have been unwilling to agree principal reasons internally generated funds accounted for to this settlement. The reasonableness of this settlement agree-58% of our '84 construction costs. ment 5 asfurtherunderscoredin Februaryof thisyearwhen It was, however, the regulatory arena that seemed to a second administrative law judge hearing the System dominate public attention, especially on the federal level. Agreement case ruled against the System average produc-Two vitally important Company and Aliddle South System tion costing concept. However, in making that ruling, he did questions are presently pending before the Federal Energy recommend a systemwide allocation of Grand Gulf which is Regulatory Commission (FERC). The first concerns the differeqt from that in last yea r's ruling, and it is different from capacity and energy allocation from the Gra :J Gulf nuclear the one contained in the settlement agreement. Under this l plant in hiississippi to the operating companies that com- ruling, AP&L would be assigned about 33% of the unit. I prise the Aliddle South System (Arkansas Power & Light, Consequently, the FERC now has before it two law judges' louisiana Power & Light, hiississippi Power & Light, and rulings, and the operating companies' settlement agree-New Orleans Public Service). ment. We believe 1985 will be the year we get a final decision The second, and equally volatile, issue is the proposal from the FERC. In light of the recent rejection of System to " average" System production costs on the N1iddle South average production costing by the administrative law judge System. This pricing concept is an outgrowth of hearings in the System Agreement case, we are more optimistic than , . on a proposed new h1iddle South " System Agreement." ever that the outcome will be a reasonable ore. l l The System Agreement sets forth the pricing of power On the state regulatory scene, the staff of the Arkansas sales within the System. It was during hearings to routinely Public Service Commission has proposed a $54 million rate modify the System Agreement that the concept of System decrease for the Company. During hearings on the reduc-average production costing was proposed by the FERC tion proposal, the Company presented what we feel was staff and others if that conctpt were ultimately approved overwhelming evidence that the staff proposal was without by the FERC,it would make the ownership of any hiiddle merit. A decision is expected at any time. South unit-including Grand Gulf-moot. We have retail rate cases filed before both the Arkansas and Niissouri Public Service Commissions. We are seeking annualincreases of $140 million in Arkansas and 57 million in N1issouri. We also expect to file wholesale cases this year. Decisions for the various rate filings are expected by fall. 2
In connection with both the Arkansas and Missouri of expensive oil, and today, oil has been virtually eliminated l filings, we have added " riders" to permit a phase-in recovery from use on our System. I of any Grand Gulf allocation. A phase-in would moderate *Our electric energy sources are complete and in place, the impact of any Grand Gulf alk> cation. For example, if the ready to provide the electricity of today and tomorrow. highest allocation proposed (36%) were ordered-the phase- *Our economy is growing, and we're helping existing in rate increase would be a ten-year cumulative total of about industries to expand, while attracting new industries to 14% If the lower allocation of the settlement agreement locate within our service area. were implemented-17% of Grand Gulf now and an addi- *We see outstanding opportunities for market expan-tional 11% in 1991-the increase would total about 8% at sion. Our All-Season Heat Pump program in 1984 had the the end of the ten-year phase-in. highest market penetration of new home construction in Quite naturally, the regulatory uncertainties facing our our Company's history. Company have tended to dominate our corporate life this *We're striving to be the kind of corporate citizen our
- past year. They have created unprecedented media, regula- area deserves. Recent environmental and humanitarian I
tory and political commentary. The fair and equitable awards point to how we are achieving this goal. solution of these issues has been a top priority throughout *We recognize that education is the key to both our 1984. Ho,vever, we have not lost sight of our commitment state's economic future and the personal future of the young and responsibility to serve. Elsewhere in this Annual Report, people who live here. That's why we have taken a lead in you'll see some of the ways we are demonstrating our building educational opportunities for our students and corporate citizenship. teachers and why we have made such a substantial corpor-It is easy in times of controversy to lose sight of your long- ate commitment to support all areas of education range goals-a tendency we have sought to avoid. Nor, do
- And while we have felt the effects of controversy on our we want our customers to lose sight of the character of the corporate image, most of our customers are supportive and men and women who make up this Company. recognize we are working toward their long-range best We believe that, especially in times of controversy, our interest.
need to communicate with our public is more important in 1968, when we began breaking ground on the banks of than ever. We have not and are not going to abandon the the Arkansas River fer our first nuclear unit, no one could public platform to our critics. We know we're a caring have possibly foreseen the events ahead. Still to come were Company, staffed by men and women who feel a deep sense the energy crisis, double-digit inflation, soaring interest of responsibility and pride in their job, and the product and rates, Three Afile Island, and all the other economic and - service they provide. We've got a positive story to tell, and governmental tremors that would bring monumental and we're telling it. unprecedented change to our industry. But change has cour rates are among the nation's lowest, and an always been the real challenge of management. allocation of Grand Gulf is not going to change that. We've built a solid managerial team at AP&L We also owe've built an outstanding electric energy supply sys- have outstanding leadership from our Board oi Directors. tem that is based on American resources of coaland uranium. I urge you to take a few moments and review the back-ojust a few years ago, we were burning millions of barrels grounds of our Board (pages 8 and 9) and the broad base of expertise they bring to our Company. 77 .,,j We are proud of our record of service to drkansas and Southeast Niissouri and are optimistic about the future
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, development of our service area and Company. While we
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y~ d ; reliable, competitwely-priced electric service, we are also dedicated to being a partner in progress that will enhance , pl (
*- this area's economic development, will protect its environ-l b'
,.. mental beauty and will advance its quality of life. As you M. Fi - review this report, I believe you will see this pledge at work throughout our operations. " Helping Build Arkansas and Southeast hiissouri" isn't just a slogan; it's a commitment.
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Jerry L N!aulden m cn u,nt 2 er ih< war-fucted inacIvnden,c sr.a.n fin tm starwn near wa art President & Chief Executive Officer wa, plas ed ents s omnwrual ogvratwn un Da cmber 19M. rt marked the end of Alwi % intenmv fucI Juvrgus atwo program that hyan in the late satws 3
AP&L's Commitment to Caring l At Arkansas Power & Light, we recognize the Working for a Diversified Economy important bond that exists between our Company Ever since founding president Harvey Couch learned that and the communities we serve. outside investment capital was hard to obtain for a primarily gricultur I state, AP&L has been a leader in Arkansas' Our successes track the 8rowth and develop- industrial and economic development efforts. We still are. ment of our service area. As a result, we gladly President Jerry L Maulden's strong personal commitment accept an obligation to the people of Arkansas and to economic develepment culminated in 1984 with a leader-Southeast hiissouri that goes far beyond provid. ship role in three important state organizations at the same time. He was chairman of the Arkansas Industrial Develop-ing electricity, , ment Commission, vice president of the Arkansas State We have a responsibility to work toward the Chamber of Commerce, and president of the Greater Little Rock Chamber of Commerce, all of which gave him a betterment and prosperity of these areas and are respected forum for his views on economic and industrial fulfillm.g that public trust w.th both corporate i development. He continues to actively support their goals and individual involvement. and objectives. Manager of Economic Development, G.B." Bill" Fountain, We encourage each of our employees to actively and his staff conduct numerous community ch,nics and serve their commumties m whatever ways they industrial seminars to train local leaders to position can, ranging from volunteer activities to holding their communities to attract and keep industry. 'Iheir elected public office, from helping with local expertise is respected and widely sought. During 1984 the Company's Corporate Communications Department youth programs to serving in economic develop- completed three videotape programs about Arkansas ment roles. communities-Batesville, Newport and El Dorado-that From a corporate perspective, AP&L works ? vill be used by their chambers of commerce to help " sell" mdustrial pro 3pects on what these commumties have to diligently to earn a reputation as a caring member offer. Other such videotapes are being produced, as time of the community. We are committed to those less permits, to help other communities. fortunate in our society and are aroud of such AP&L has also targeted specific industries. We were the first electric utility to be an exhibitor at an international efforts as our "Hel Pin8 Hand" Pro 8 rams which Electric Furnace Conference, which has resulted m have aided virtually thous.mds of people since Arkansas being considered as the site for a future steel their inception in 1982. mill expansion. We have renewed our dedication to and support of minority owned and operated business ven- ggj , , W"[~ma:n tures, promoted preservation of wildlife and jb3M , gram EI@g natural beauty, broadened the educational !L :
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f . 1 The following capsule reportsillustrate sig- 4 ,$ nificant programs that demonstrate how we at [ , h j) AP&L are " Helping Build Arkansas and South-cast hfissouri." 1- ~ ~] f O. ~. l L. AlYrL made hi tory sn 1984 when ut hcame the far>t utthty to be an nhuhtor at the internatwnal rintric rurnas e Conference held in Toronto. Canada. Alton Bu h (rQht) and Randy Ikrdue helgvd staff the Company's hvth 4
A . The Company's new marketing department. established common switch on the wall that is now such an integral pa rt in 1984 under Vice President Kenneth R. Breeden, has of their lives. economic development as one of its major goak And our emphasis on quality education goes beyond the AP& L continues to premote its servicc a rea through such customary teaching aids. List summer the Company, in established successful programs as the Arkansas Com munity cooperation with the Arkansas Department of Education, Development Program and the Arkansas Farm Famuy of the financed scholarships to help certain teachers obtain certi-Yea r Progra m. It was aiso able to sponsor the an n ual meeting fication to teach math and science subjects-a critical need of the Southern Industrial Development Council at Little in Arkansas. Also, AP&L funded a special summer Rock in 1984. course in physics and computer graphics for qualified high school students who needed the credits to pursue college
. courses in engineering, science and medicine but could not Taking Energy Into the Classroom obtain ohysics credits in their local schools.
Functioning as a readily available reservoir of accurate In another educational effort aimed at adults, AP&L information on all the complex issues involving energy in spearheaded the massive publicity effort needed for the our technological society, AP&L's Education / Youth successful" Project Second Chance" series on the Arkansas Services Section of Corporate Communications is a resource Educational Television Network that enabled more than education professionals can draw from. And an increasing 1,500 Arkansans to earn a high school equivalency diploma number of teachers are tapping this source of in-house at home. The program, aired in the fall of 1984, will be espertise as the section enters its fourth year. repeated in the spring of 1985. Education is the fuel that will power Arkansas' economic progress and AP&L is helping see that our youngsters et set the aia iher neca. E$g M i Bringing Minorities into the Mainstream AP&L's corporate commitment is based on the premise fa88 n,ia#3 that our service area cannot reach its full potential without
" # equal opportunity for all its citizens.
- w s / am The Company was one of the first in the nation to join
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l the NAACP in a " Fair Share Principles Agreement" program and increase its existing efforts to obtain moe employee
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4 = advancement for minorities within the Companyand more y: g s business opportunities for minority vendors outside the
- p \ h Company. AP&L President Jerry L Maulden now serveson 4g )h . the NAACP's National Board of Directors.
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Kerrn Hayes of la k<onvolle was a partusspant un "Diergy Tornorrow M"an arntual event desegncJ to enwuray young peopie lront throughout our servese area la engage in vientituc investtgaban in the energy field. l 1 - L ,9 f l The basic goal of this section and its highly-trained personnel is to acquaint and educate our young people-from kindergarten to college-about energy and its inter-
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w . 1 relationship with our economy, the environment and society as a whole. I fd a ; From written material to hands-on computer-graded v classroom decisions in the " business game"-which is designed to teach youngsters the type of day-to-day problem , solving every businessman must cope with in our society-
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the section's Soal is to disseminate accurate information .cith LJ Jawi ~ of Atlan~a~ lhuru M.nJor, The comp nry , soninntment to about energy. We want these students-our customers of n,, ,cos,,,y n,1,,n,,a, ngn. ,cah ,,,n, gray n,n,, ,,,ade a rg a narn,yaileader ,,, tin, tomorrow-to know the entire fascinating story behind that i.u-, ne - ,ci tr.- i s
In 1984, its first year of operation, AP&L's new two million acres of natural areas throughout the nation hiinority Business Development Section established since 1950, commended corporate citizens such as AP& L for i communications with many qualified vendors and increased making much of its preservation program possible. their share of AP& L's business from approximately S200,000 in 1983 to approximately $5 million. Seminars have been held, and more are planned in 1985, to identify minority businesses and acquaint their management with the proper procedures for doing business with AP&L And this co-operative spirit of"show us what you can do" within the competitive framework of the free-enterprise system has , y paid off in new business for vendors and quality goods .N X, ;
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- and services for AP&L at savings to our customers. gy i 'f y The Company has minority representation on its board of ,,
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directors, in top management and in supervisory positions of great responsibility and has pledged to provide even 3{\ 4
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i W - . And our sincere efforts to extend a helping hand to 4>' minorities wherever possible have been recognized and - x appreciated. Last year, AP&L and its president, Jerry L ' hg .. j, *) hiaulden, were honored for their contributions to the success ap3n scaga,yn ,g wasfgg,,,a natu ralwauto awuencca v, .h m witcn of the Watershed Project, a community setf-help endeavor senwr rice Presucnt lanmx ctr> a tunma occr the acca to nutric istana to Kay in the impoverished College Station area led b Rev. ulcy Arnou 6cnicr) of tiv Artan# xarure conscrea,,cy ans stme wa,on of Hezekiah Stewart and the hit. Nebo AN1E Church. The d" A d"'d' C"" 6 Sh C**"**"- Watershed Project weatherized essentially all of the honies in the College Station area that qualified for the Project Continuing a 71-year Tradition of Community Conserve program. Our Company also participated in the Voluntecrism NAACP's 75th anniversary benefit concert by entertainer Ray Charles, which netted more than $50,000' for NAACP From the frenzied Saturday afternoon competition of a projects. President hiaulden was co-chairman of the event. Little League baseball game to the studied deliberation of a The Company's involvement in a wide range of minority ' school board financial crisis, AP&L employees have a projects is based on the principle that Arkansas' future tradition of serving their communities in a host of ways depends on uplifting allits citizens and we have no intention long after their normal working hours are over. of losing sight of that goal. Name a volunteer community service activity and some-where within AP& L's service a rea you will find an em ployee A Gift of ' Quiet Beauty' fiHing that need-from providing telephone counseling for a troubled youth to leading a United Way campaign or In N1ay of 1984, AP&L officially deeded Electric Island, working on an industrial development program. Our more a 118-acre " island of quiet beauty" on Lake Hamilton near than 5,300 employees are intensely involved in a staggering l Hot Springs, to The Arkansas Nature Conservancy, the number of community service programs. It's a tradition that state field office for The Nature Conservancy, a national dates back to the Company's founding in 1913. l organization. Two years ago we initiated a special program to recog-The Company made the gift because of its belief that nize the commu nity leadership qualities of these individuals Electric Island should remain a place of tranquil beauty and say "thank you" for a job well done. The honorees for all citizens to enjoy. are nominated and selected by their fellow employees and The island was created in 1931 when Carpenter Dam on a banquet is held in their honor. N1any more volunteer the Ouachita River formed Lake Hamilton. community leaders will be honored in 1985 as this program The Arkansas Nature Conservancy is leasing the island to continues to gain recognition both within and without our the Arkansas Game and Fish Commission for its non-game Company. wildlife program. In 1983, AP& L became the first utility company to receive Game and Fish Commission representatives, commenting the Arkansas Corporate Humanitarian of the year award , on the donation, emphasized that AP&L has a history of from the Governor's Office of Volunteerism and KARK-TV, cooperation and encouragement of outdoor sports. The Little Rock. The Company was also honored as the Company previously donated land for Lake Catherine State " Arkansas Conservation Organization of the Year" for 1984 Park and the Lake Hamilton Fish Hatchery. by the Arkansas Wildlife Federation, and one ofits employees-The Nature Conservancy, which has acquired more than Commercial Service Representative Nesbit Bowers of Pine i I 6 L
l l Bluff-was named the " Arkansas Conservationist of the term, energy-related emergencies during the first three Year." Also, AP&L board member Kaneaster Hodges, Jr., years of the program. l of Newport was honored for his many contributions to the It is gratifying to note that the primary recipients of the i " Arkansas Acres for Wildlife" program of the Arkansas funds collected through Project Deserve have included , Game and Fish Commission. people who are ill, the elderly with no dependent support, i in every field where volunteers are needed, the AP&L and the unemployed who have been burdened with ) tradition lives on. mounting bills. l While our stockholders have donated over $135,000 to ' l this worthwhile effort, a majority of the tax-deductible l . contributions to this continuing program have come from AP&L customers who have faithfully added $1 to their bill each month, earmarked for Project Deserve. j Helping Reduce Energy Costs
'a yj. Approximately 50 volunteer groups, churches and other organizations in Arkansas and Southeast Missouri partici-0 , 1 pated in Project Conservein 1984, broadening the influence
! of this innovative program which offers financial assistance and training to volunteers who assist the less fortunate with home weatherization projects to reduce energy costs.
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p u 1- . w,,% f i Th~.y \ Gvege Ihil, aJnnmutratuve a+i> tant un telecmnmu owatums, di~. u~,e> scarr h and + re~ cue tar tu s irrh bttle R.t L area s adets of the Cini Air Patrol. Itill, icho is a fir >r heutenant icallt the CAP.. t, depurv wmn.ander for cadets ;cith the Patrol's ' bttle Ral Conytte Sanadron. Q Nearly 9,000 Families Assisted i We are indebted to the thousands of AP&L customers, i employees and stockholders who have generously con-tr buted $449,597 to Project Deserve since it and the other i N(A L,
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, " Helping Hand" programs were established in the spring l of 1982. '
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. This mone>, which is administered b> American Red mme enerxu cyiaent through Protea Conserw. a pngram fund,J tv our Cross chapters throughout our service territory, provided Cgmpany s sta uu uers. Our s2nwoo ha' hun sre"t throux4 thb rnxram 3
direct aid to 8,797 families who were faced with short- smic n begun m 1931 I In the last three years, more than 150 organizations have
- participated in this special effort.
j Over 400 homes were weatherized in 1984, with more
. than 1,300 homes becoming more energy efficient as a result
- 2 " of Project Conserve since 1982.
. 0 /. . With funding from AP& L stockholders, Project Conserve J U hpi Wd * / has provided in excess of $250,000 toward the purchase of
, insulation, weatherstripping and caulking.
4
* . . . Other " Helping Hand" programs that have assisted our i y .!l customers include Project Billsaver, Project Timepay and j v y 7 Levelized Billing. As an example of the impact of these j b
- d.
'cJ programs, Project Billsaver has helped an average of The Company.s cu~tomers. emplowes and sta Lholders m 1984 wntnbuted more 270,000 AP&L customers lower their electric costs each ycar, k* . .
than SI30D0 to Proin t Deserve. The funds. rehich are admmi3tered by the with the savings totalling over $2.6 milh.on m the past three a Amerisan Red Crou s hapters throughout our scrnce terntory, have assisted years. l nearly 9.000 familws. 7
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l l Board of Directors i
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/# .- m John A. Cooper, Jr. Cathy Cunningham Richard P. IIerget, Jr. Kaneaster flodges, Jr.
Combining her expertise in real Born into a pioneering family A former U.S Senator, a farmer, As president of Cooper Communities, Inc., this University estate, secu nties and insurance with insurance agency at Paragould,' he lav minister in the United hiethodist of Arkansas graduate oversees a a love for llelena's historic past, her is nationally recognized as a leader Church, and an attorney at company that has pioneered the restoration of the elegant homes of in the operation and management Newport since 1967, he is a man this riverport city into unique inns of insurance agencies and has who has excelled in many fields. concept of ~ graduated retire- lie filled the unexpired term of ment' in suth thnymg people- and business othces has earned authored three books on the sub-oriented recreation-retirement acclaim from preservationists and lect. Now the president of Atkins the late Senator John L McClellan communities as Cherokee Village, today's traveler and businessman. Insurance Corporation at Little with distinction (1977-79) and his Bella Vista and llot Springs Village. Wlufe rescuing the best of the past Rock, he is active in the state varied business interests include Active in the civic, cultural and from ruin, she works to ensure a Democratic Partyand the education beinga directorof Worthen Banking political hfe of northwest Arkansas brighter future. She is immediate field, havmg served as chairman of Corporation. An avid conservation-he is also a director of Wal-Mart past president of the IIelena/ West the Board of Trustees of Arkansas ist, he is a former member of the Stores, Inc., and Worthen Banking Helena Chamber of Commt rce and State University and is currently a Arkansas Game and Fish Commis. is a former member of the Arkan- member of the University's sion and has won awards from Corporation. several organizations for his con-sas Industrial Development Com- Foundation. mission. servation work in Arkansas.
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1 f .,a 1 Roy L. Murphy William C. Nolan, Jr. Robert D. Pugh George K. Reeves ! The chairman and president of A partner a thelaw firm of Nolan As chairman of the Portland A former special agent with the Mid-South Engineering Company & Aldersonat EIDorado.hisdiverse Gin Company,he headsa diversified Federal Bureau ofinvestigation and at Hot Springs combined an educa- business interests range from radio family farming operation that has a partner in the law firm of Ward tion in mechanical engineering and broadcast executive to timber a long history of leadership in the & Reeves at Caruthersville, Missourt industrial management with a love corporation entrepreneur. He is Arkansas agricultural community. this distinguished Missourian for the outdoors to first earn promi- also a board member of Warner A st rong personal interest in fu nher- now resides at Memphis. After nence as a leader in the state's Brown Hospital, Murphy Oil ing education in Arkansas has led earning his undergraduate degree important forest products industry. Corporation and First Financial him to the chairmanship of the at the University of Alabama, he Now active in many business Federal Savings and loan Associa- University of Arkansas' Board of received his law degree from the ventures, he is also a member of tion. leng interested in state govern- Trustees and he is a former member University of Missouri. He al3c the Arkansas State Chamber of ment, he was a delegate to the of the University's Development served asa director of the Arkansas-Commerce board, the University of Aikansas Constitutional Conven- Council. Abankerandbusinessman, Missouri Power Company prior to Arkansas at Little Rock's Board of tion of 1970 and served as a legal he is past president of the itsconsolidation with AP&Lm1981 Visitors, and basserwd as president advisor to former Governor and prestigious Cotton Counal Inter- as the Ark-Mo Division. of the Garland County United Way now Senator David Pryor. lie is national. organization. The Ouachita Area also a supporter of the South Council of the Boy Scouts has Arkansas Arts Center and the El honored him with its " Silver Dorado Boys Club. Beaver" award. Advisory Directors lawrence Blackwell Richard C. Butler Attorney Past Chairman of the Board of Cynmercial National Bank All Past Directors o{ the Company Pi"' %!! ^"*"* and People, sannxs o toan A,swiation httle RosL, Arkansas 8
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i: k l Hal E. Ilunter, Jr. b: Floyd W. Lewis Jerry L. Maulden ( X so
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/m.E s Rayrnond P. Miller, Sr., M.D.
l' l One of Minoun's most dis- The chairman, president and The president and chief esecutive A speciahst in internal medicme, , tmguished attorneys, the senior dinwtor of Middle South Utihties, officer of Arkansas Power & Light this native of Cotton Plant has been l member of the firm of flunter and inc., has long been actise in all Company is a leader in the state's in private prattite smce 1970 and flunter is a 1944 graduate of phases of the tiettric ut lity indus- economic deselopment ciforts and is turrently assistant chnical Notre Dame University who try and cu rrentiv has an intemational in 1984 served as chairman of the professor at the Unisersity of returned to his home town of New rJputation for hn espertise in Arkansas Industrial Development Arkansas School ef Mednine. A Madrid to estabhsh a law practice. nuclear power. IIe helped form the Commission, vwe president of the past chairman of the University of He has served as prosecutmg industry's Institute for Nuclear Arkansas State Chamber of Arkansas Board of Trustees (1980), f attorney of New Madrid County Power Operations and is a former Commerce, and president of the he now serves on the board of the i !, since 1952 and has been city chairman of the board of both the Greater Little Rock Chamber of University of Arkansas Foundation, j attorney at New Madrid since 1946. Edison Elettric Institute and the Commerce. lie is also a member Inc. Ilis cnampionship of quality
- in 1984 he was re-elected to the Electric Power Research Institute. of the National Board of Directors education was recognized in 1982 Demot ratic State Committee for a lie is a member of the Board of of the NAACP. A "llall of Fame" when he was presented the two-year term. Direttorsof the U S Committee for honoree at the North Little Rotk Distmguished Senice Award by Energy Awareness. Boys Club he is now on the the Awociation of Governing l
Nation.d Board of Trustees. Boys Boardsof Universitiesand Colleges. t Clubs of Amenca. JJ [ t '
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{ l , '3 ! Reeves E. Ritchie Mary Anne Stephens Gus B. Walton, Jr. Michael E. Wilson { j As president of Arkansas Power A philanthropist and supporter An attorney by professiort he The president of tre Wdson & a & Light Company from 1962 untd of the arts, she sees an improved also is devoted to the development Company at Wdson, he has been a j 1976 and chairman from 1976 until educational system as the key to of Arkansas tourism and is now an leader in many state and national . 1979, this utility industry pioneer Arkansas' future and has become owner of Poe Travel in Uttle Rock. agricultural organiistions. This j set in motion many of the com- widely recognized as an authonty lie also serves as vice president of esperience hasled him to an aware-q pleted programs that now ensure on the state's comples and varied the Arkansas Valley Travel Associ- ness of the importance of economic g AP& L customers an ample electric edwational needs. She now serves ation in his legal career, he served education anti he is active in this
; energy supply from stable domestic on the Board of Trustees of the as a member of the Esecutive field as a trustee of the prestigious
- fuels. In retirement, he serves College of the Ozarks at Clarksville Couned and the llouse of Delegates Joint Councd on Economic Educa-j on the Little Rock Civil Service and on the International Advisory of the Arkansas Bar Association.lfe tion, the New York-based coordi-Commission, the Advisory Board Board of the J. Wdliam fulbright is a member of the Board of Direc- nating agency for all state councils l
4 of Directors of Superior F'ederal College of Arts and Sciences at the tors of Friends of the Zoo and is on economic education. He is j Bank and the Board of Trustees of University of Arkansas at Fayette- the immediate past president of immediate past chairman of the 4 the First Christian Chunh. ville. the organization. Arkansas State Couned on Economic j Education f
}
l 'i L.C. Carter Dr. Marshall T. Steel RE.L Wdson Past Prestdent Pa~t President of Chatrma>r of the lhard & Chuef F3ecutuve offucer Rucciand Fmh. Retured Hendrux College RetircJ Ire tyd<en and Company Stuttgart. Arkansas Pme Bluff. Arlan>as Wdson, Arkansas 9
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Report of Management - - The management of Arkansas Power & Light Company has prepared and is responsible for the financial statements and related financial information included in this annual report. The financial statements are based on generally accepted accounting principles, consistently applied. Financial information included elsewhere in this report is consistent with the financial statements. To meet its responsibilRies with respect to financial information, management maintains and enforces a sy-tem of internal accounting controls which provides reasonable assurance, on a cost effective basis, as to the integrity, objectivity and reliability of the financial records and as to the protection of assets. This system includes communication through written policies and procedures, an organizational structure that provides for appropriate division of responsibility, the selection and training of qualified personnel, a performance accountability program and a comprehensive internal audit program. The Board of Directors pursues its responsibility for reported financial information through its audit committee, composed of outside directors. The audit committee meets periodically with management, the internal auditors and the independent certified public accountants to discuss auditing, internal control and financial reporting matters and reports thereon to the Board of Directors. The independent certified public accountants have full and free access to meet with the audit committee at any time without members of Company management being present. The independent certified public accountants provide an objective assessment of the degree to which management meets its responsibility for fairness of financial reporting. They regularly evaluate the system of internal accounting control and perform such tests and other procedures they deem necessary to reach and express an opinion of the fairness of the financial statements. We believe that these policies and procedures provide reasonable assurance that our operations are carried out with a high standard of business conduct. 7 l /$k s Jerry L Maulden President & Chief Executive Officer l I e 11 e R _ _ _ _ _ _ _ _ _ _ _ _ _ . _
Manrgem:nt's Discussi:n and Analysis cf Financial Condition and Results of 0;ferations Financial Condition The Company's financial condition continued to improve The earnings ratio for preferred stock, which must be in 1984. With the commercial operation in December 1984 a minimum of 1.5 times the Company's annual interest of the second coal-fueled Unit of the Independence Steam charges and preferred stock dividend require ments to allow Electric Station (ISES 2), the Company completed imple- the issuance of new preferred stock, was 1.73,1.73 and 1.54 mentation of a major fuel diversification program. As a at December 31,1984,1983 and 1982, respectively. At result, construction work in progress decreased from December 31,1984, assuming a dividend rate of 15% $306.4 million at December 31,1983 to $105.8 million at the Company could have issued $171.0 million additional December 31,1984. Cash earnings should continue to preferred stock. improve as these costs are included in rates. Mortgage At December 31,1984, the Company had temporary cash and charter coverage ratios remained well above the investmentsofs95.4 million.Thislevelof temporaryinvest-minimum requirements for issuance of additional first ments was primarily the result of the issuance of $100 million mortgage bends (Bonds) and preferred stock. For the first new Bonds in December 1984, and lower than expected time since 1978 the Company earned the return on equity construction expenditures. authorized by the Arkansas Public Service Commission, During the three-year period ending February 1982, its primary regulatory agency. During the past ten the Company sold $225 million Bonds with an average years the Company earned an average return on equity maturity of 7 years and a weighted average interest rate of approximately 12% compared to an average of the returns of approximately 16% Since February 1982, $200 million authorized during the ten-year period of approximately 30 year maturity Bonds have been issued with a weighted 14 % average interest rate of approximately 14% This access to longer maturity, lower cost capital is an important factor in Liquidity and Capital Resources the liquidity position of capital intensive utilities. In 1985 $1.4 million Bonds and $7.5 million preferred Increased liquidity and access to capital markets were stock will be retired pursuant to sinking fund requirements important indicators of the Company's improving financial and an additional $18 million Bonds will mature. condition. Improvement resulted primarily from increased Construction expenditures (excluding AFDC and cash earnings, reductions in construction expenditures and nuclear fuel) were $181 million, $220 million and $185 increased rate levels authorized in the third quarter of 1983 million in 1984,1983 and 1982, respectively. Projected which allowed the Company to earn its authorized rate of expenditures (excluding AFDC and nuclear fuel) for 1985, return during 1984. 1986 and 1987 are S213 million, $206 million and $193 million, The Company has short-term borrowing authority for respectively. the lesser of 5125 million or ten percent of capitalization. Internally generated funds, after preferred and common The Company had no short-term debt at December 31,1983 stock dividends, amounted to 58% 63% and 58% of 1984, or 1984. 1983 and 1982 construction expenditures (excluding AFDC), The Company's interest coverage ratio for Bonds, which respectively. Due to the uncertainties surrounding the must be a minimum of 2.0 times the annual mortgage interest Grand Gulf allocation, the conflicting proposals before the requirement for issuance of additional bonds, was 3.26, Federal Energy Regulatory Commission (FERC) for alloca-3.14 and 2.65 at December 31,1984,1983 and 1982, tion of Middle' South System production costs, timely respectively. The steady improvement in this ratio, and the recovery through rates of any resulting costs (see preferred stock earnings ratio discussed below,is significant Note 4 to the Financial Statements " Commitments and considering outstanding Bonds increased approximately Contingencies"), and the possible requirement to finance $114 million between 1982 and 1984. While the December deferred recoveries of such costs (see Note 2 to the Financial 31,1984, interest coverage ratio of 3.26 would have per- Statements " Rate Matters"), the Company's overall mitted the Company to issue an additional $515.9 million financing requirements in 1985 and thereafter might be Bonds, assuming an interest rate of 15% the Com pa ny could significantly increased and the availability of internally have issued only $417.4 million additional Bonds, based generated fimds to support projected construction expendi-on available fundable property at that date, plus any tures diminished. i Bonds issued for refunding purposes. I 1 12
i ) Results of Operations Overview { Net income increased to $143.4 million in 1984 from its The Company's financial position has progressively i 1983 and 1982 levels of $126.9 million and $107.4 million, improved during the past four years. Maintaining and/or I respectively. The improved quality of income is illustrated continuing such improvement is largely contingent on the by increases in 1984 net income excluding AFDC of $19.9 receipt of timely and adequate rate reliefin connection with million and S34.9 million over corresponding 1983 a nd 1982 the Company's pending rate applications seeking to recover levels. With the commercial operation of ISES 2 in Decem- costs and allow for a fair rate of return on its owners' invest-ber 1984 and with the construction of no new generating ment.(See Note 2 to the Financial Statements " Rate unitsincluded in projected expenditures, AFDC asa percent Matters.") The Company's costs could increase substantially of net income can be expected to remain low. if the Companyis allocated a material portion of the Grand Revenues for 1984 increased $101.5 million,8.4% and Gulf Nuclear Station, located in Mississippi, which is owned
$261.5 million,25.0%, when compared to 1983 and 1982, by Middle South Energy, Inc., a wholly-owned respectively. Electric revenues increased $98.7 million over subsidiary of Middle South Utilities, Inc. as recommended 1983 of which $37.4 million can be attributed to increased by administrative law judges in two separate FERC sales to Reynolds Metals Company (Reynolds). Reynolds proceedings, or if, in one of these two cases, a proposal for increased energy requirements in 1984 over 1983 are the averaging system production costs among the Middle South result of increased operation levels in 1984 as compared System operating companies is accepted by the FERC.
to reductions in their normal operations in 1983. Reynolds Neither the allocation nor the proposal is supported by the reduced their level of operations again in the fourth quarter Company.The Com pany joined with the other Middle South of 1984. Other increases in electric revenues for 1984 are System operating companies in proposing to the FERC a , due primarily to increases in usage, rate increases imple- settlement agreement, filed on January 4,1985, which mented in the third quarter of 1983 (annual retail and would resolve both of the matters discussed above. The wholesale increases of approximately $39.8 million and Company believes the settlement agreement is in the best
$3.2 million, respectively) and to an increase in the number interest of the customers, the Company and the Middle of average retail customers of 1.8% South System. Acceptance by the Company's regulatory Operation expense in 1984 increased $27.4 million,3.9%, agencies of this settlement agreement and a Company and $114.7 million,18.4% over 1983 and 1982, respectively. proposed plan for deferral of the recovery of Grand Gulf Fue! and fuel related costs increased $75.5 million over costs would reduce the initial impact to customers while 1982 but decreased $18.5 million compared to 1983. The allowing the Company to continue to earn a fair return.
decrease in 1984 fuel cost is directly related toa 42.0% increase (See Note 4 to the Financial Statements " Commitments in more cost efficient nuclear generation and a 26.5% and Contingencies.") decrease in purchased power. Maintenance expense in 1984 increased $8.7 million,14.8% and $22.6 million,49.9% over 1983 and 1982, respectively. In the second quarter of 1984, the Company established a nuclear-refueling maintenance reserve for Unit 2 of Arkansas Nuclear One (ANO) in order to accrue such costs ratably over the fuel cycle. These costs are associated with nuclear power plant refueling outage cycles and do not reflect a permanent increase in the Company's overall nuclear maintenance expense for the unit. The Company plans to establish a maintenance reserve for ANO Unit 1 in the first quarter of 1985. Effects of Inflatien Despite th 3 red uced level of inflation in 1984, its impact on the Compar,y's operations in recent years has been sig-nificant. (See Note 13 to the Financial Statements " Effects of Inflation on Operations (Unaudited).") 13
)
i
Arkartsas Power & Light Company and Subsidiary Consolidated Balance Sheets - December 31, ASSETS 1984 1983 (in thousands) Utility Plant (Notes 4 and 5): Electric plant. . 53,269,726 $2,871,858 Gas plant. . 38,182 38,612 Construction work in progress. 105,762 306,398 Nuclear fuel . . 27,321 24,979 Total . 3,440,991 3,241,847 Less-accumulated depreciation and amortization 766,537 679,232 Utility plant-net. . 2,674,454 2,562,615 Other Property and Investments: Investments in associated companies, at equity (Note 4). . 39,716 36,165 Other, at cost (less accumulated depreciation) . 279 664 Total. . 39,995 36,829 Current Assets: Cash and special deposits 12,967 7,831 Temporary investments, at cost which approximates market: Associated companies (Note 7) 91,500 29,000 Other . 3,925 2,060 Notes receivable-net 1,939 1,622 Accounts receivable: Associated companies 33,044 23,555 Customer (less allowance for doubtful accounts
-52,179,000 in 1984 and 1983). . 41,149 71,007 Other. . 13,003 17,918 Deferred fuel cost . (14,178) 5,717 Fuel inventory, at average cost. 83,998 44,610 Materials and supplies, at average cost. 42,245 33,711 Prepayments and other. . 8,066 10,750 Total . 317,658 247,781 Dcferred Debits. . 28,710 12,292 Total . $3,060,817 $2,859,517 See Notes to Consolidated Financial Staternents.
14
December 31, 1984 1983 LIABILITIES (in IIwusands) Capitalization: Common stock, $12.50 par value: authorized 325,000,000 shares; issued and outstanding, 54,980,196 shares in 1984 and in 1983 (Note 9) . . S 687,252 $ 687,252 Paid-in capital .. .. ... 7,053 6,045 Retained earnings (Note 8). 26,101 28,158 Total common shareholder's equity . . 720,406 721,455 Preferred stock and premium, without sinking fund (Note 9) 126,890 126,890 Preferred stock and premium, with sinking fund (Note 9) . 124,170 133,931 Long-term debt (Note 10) . . 1,288,352 1,197,588 Total. . . .. . 2,259,818 2,179,864 Other Non-current Liabilities (Note 1). . 23,030 14,352 Current Liabilities: Currently maturing long-term debt (Note 10) . 19,365 9,865 Accounts payable: Associated companies . . . 2,649 6,896 Other . .. . . . 90,928 87,007 Customer deposits . 7,519 6,723 Taxes accrued. . 55,201 35,784 Accumulated deferred income taxes (Note 3) . . (6,987) 2,798 Interest accrued. . .. .. . 45,185 43,975 Dividends declared. . . . . 35,791 26,254 Nuclear refueling reserve . 19,104 12,651 Fuel inventory advances, co-owners. . . 54,729 27,370 Other . . .. . 13,985 14,590 Total. . . . .. . . . 337,469 273,913 Deferred Credits and Other Liabilities: Accumulated deferred income taxes (Note 3) . 260,309 246,640 Accumulated deferred investment tax credits (Note 3) . 160,067 129,252 Other . . . 20,124 15,496 Total. . . 440,500 391,388 Commitments and Contingencies (Notes 2,4 and 5) Total. 53,060,817 $2,859,517 See Notes to Consolidated Financ:al Statements. 15
l l Arkansas Power & Light Cornpany and Subsidiary Consolidated Statements of Income and Retained Earnings Years ended December 31, 1984 1983 1982 (in thousands) Statements of Income Operating Revenues (Notes 2 and 11): Electric. .. .. . . 51,247,597 $1,148,891 S 994,124 Natural gas . . . .. . . 60,086 57,254 52,019 Total . . . . .. . 1,307,683 1,206,145 1,046,143 Operating Expenses: Operation: Fuel. .. 338,429 322,658 262,604 Purchased power. .. . 133,964 166,126 178,841 Gas purchased for resale . 44,894 44,150 40,986 Other . . . 221,679 178,610 141,824 Maintenance . . . . . 67,805 59,059 45,242 Depreciation . . . 97,451 92,621 84,194 Taxes other than income taxes . .. 34,818 32,813 31,861 Income taxes (Note 3) . . 126,457 98,831 69,285 Total . . . . 1,065,497 994,868 854,837 Operating Income . .. 242,186 211,277 191,306 Other Income and Deductions: Allowance for equity funds used during construction. 15,844 18,095 12,722 Miscellaneous-net . ... . 9,216 6,372 7,062 Income taxes (Note 3) .. . . 1,988 8,085 5,625 Total . .. . 27,048 32,552 25,409 Interest Charges: Interest on long-term debt. 126,974 119,466 108,557 Other interest-net of debt premium . . 7,376 7,152 11,272 Allowance for borrowed funds used during construction. . . (8,483) (9,685) (10,486) Total . . . . . 125,867 116,933 109,343 Net Income . ..
. 5 143,367 $ 126,896 $ 107,372 Statements of Retained Earnings Retained Earnings-January 1. . .$ 28,158 5 33,365 5 43,134 Add-Net income . .. . . .. 143,367 126,896 107,372 Total . .. . . 171,525 160,261 150,506 Deduct-Cash dividends:
Preferred stock. . . . . 23,753 24,715 25,274 Common stock. .. . . 121,671 107,388 91,867 Total . . .. .. . .. .. . . . 145,424 132,103 117,141 Rttained Earnings-December 31 (Note 8) . . . . .. .. . . .5 26,101 S 28,158 5 33,365 See Notes to Consolidated Financial Staternents. l l i 16
Arkansas Power & Light Company ami Subsidiary C:nsolidated Statements of Changes in Financial Position Years ended December 31, 1984 _1983 1982 (in thousands) l Funds Provided By: Operations: i Net income. $143,367 $126,896 $107,372 ! Depreciation. .. ... ...
. 97,451 92,621 84,194
( Deferred income taxes and investment tax credit adjustments-net . 34,583 78,127 56,696 l Allowance for equity funds used during construction (15,844) (18,095) (12,722) Total funds provided by operations . 259,557 279,549 235,540 Other: Allowance for equity funds used during construction . 15,844 18,095 12,722 Decrease in working capital * . . . . ... 58,329 - - Reserve for spent nuclear fuel disposal . - - 12,341 Miscellaneous-net. - 12,943 2,987 Total funds provided excluding financing transactions. 333,730 310,587 263,590 Financing transactions: Common stock . . . . . - 65,000 80,000 First mortgage bonds. 100,000 25,000 155,000 Installment purchase transactions . 2,553 44,900 8,325 Imng-term bank loans . . . ..... .... ...
- - 6,000 Long-term obligation-Department of Energy (Note 4). 8,509 49,400 -
Obligations under capital leases. 4,164 - - Book value of utility plant sold . 628 291 10,302 Total funds provided by financing . 115,854 184,591 259,627 Total funds provided . $449,584 $495,178 $523,217 Funds Applied To: Utility plant additions: Construction expenditures for utility plant . $205,050 $247,449 $208,248 Expenditures for nuclear fuel. 2,342 8,110 6,655 Capital leases. 5,000 - - Other-net . (2,472) 932 (837) Total gross additions (includes allowance for funds used during construction). 209,920 256,491 214,066 Other-Dividends declared on preferred stock 23,753 24,715 25,274 Dividends declared on common stock. 121,671 107,388 91,867 Increase in working capital * . . . . . ... .. ... 11,778 67,389 Reserve for spent nuclear fuel disposal (Note 4) . - 36,019 - Miscellaneous-net. 10,301 - - Total other funds applied . _155,725 179,900 184,530 Financing transactions: Redemption of preferred stock . . . 9,704 7,175 2,979 Retirement of first mortgage bonds. 8,865 2,297 16,719 Repayment of installment purchase transactions . 1,005 40,050 - Repayment of long-term bank loans. ... - - 29,052 Repayment of short-term debt and investment in short-term securities-net . 64,365 9,265 75,871 Total funds applied to financing . 83,939 58,787 124,621 Total funds applied. $449,584 $495,178 $523,217
- Increase (Decrease) in Working Capital:
Current Assets 1984 1983 1982 Current Liabilities 1984 1983 1982 Cash . $ 5,709 $ (992) $ 421 Accounts payable . . $ (3,921) $ 229 $31.4eo Accounts recewable (34,773) 41.023 6.197 Tates accrued . (19,417) (2.088) (1.323) Intercompany recervablet interent accrued . (1,210) (s.057) (5.079) payable-net . 13,736 6.209 2.016 Durndends dettarcJ (9,537) (1.624) (1.182) Ikferred fuel cmt . (19,835) (16.235) 21.773 fuel uneentory advances. (27,359) 5.619 (9.157) Fuel unventory 39,388 (l3.210) 23.483 Other surrent hahhties _{6,64 4 > __{ 5.124) f 3_90) Afaterials anJ 3upphes . 8,534 761 12.197 Total hange m e urrent haNhties . . $[68,088) $_(9.041) $ 7.329 Other current assels. . {2,940) _2p 6 7 _(b.02 7)
~
Net increase (Jes rease) an Total n hange in cu rrent awts $ 9,759 $27823 $bo Oto worlung capital . ${58,329) $I1.778 $b 7.384 See Notes to ConsolidatcJ Tinancial Stateinents. 17
Notes to Consolidated Financial Statements L Summary of Significant Accounting Policies stations to the extent of its ownership interests in the A. Principles of Consolidation generating stations. The Company's investment and percent The accompanying consolidated financial statements ownership m these stations are as follows: include the accoonts of Arkansas Power & Light Company Investment at Percent and its wholly-owned subsidiary, Associated Natural Cas' Generating Stations Dec. 31,1984 Ownership Company. ' White Bluff Steam Electric Station $394,836,000 57.0 % B. System of Accounts Independence The accounts of the Company are maintained in accordance Steam Electric Station $292,149.000 31 5 % with the uniform system of accounts prescribed by the F. Postretirement Benefits Federal Energy Regulatory Commission (FERC). The Company has postretirement plans covering substan-C. Revenues and Fuel Costs tially all of its employees. The policy of the Company is to fund pension costs accrued and other postretirement plan The ComPan)> records revenues as billed to its customers
. costs as mcurred.
on a cycle billing basis. Revenue is not accrued for energy delivered but not billed at the end of the fiscal period. G. Income Taxes Substantially all of the rate schedules ci the Company The Company joins its parent in filing a consolidated include adjustment clauses under which fuel costs above or Federal income tax return. Income taxes are allocated to the below the levels allowed in the various cate schedules are Company in proportion to its contribution to consolidated permitted to be billed or required to be credited to customers. taxable income. Deferred income taxes are provided for differ-The Company has adopted a deferral method of accounting ences between book and taxable income to the extent for those fuel costs recoverable under fuel adjustment clauses. e th mgulatory Mes for ratemaking purposes. 5n estment tax credits allocated to the Company are defer [n"s Under th.is method, such costs are deferred to the month m. and amortized over the average useful life of the related which the related revenues are bil'ed. property, beginning with the yea r allowed in the consolidated The fuel adjustment factor contains an amount for a nuclear tax return. reserve, estimated to cover the cost of replacement energy All wance f r Funds Used During Construction when the nuclear plant is down for scheduled maintenance . and refueling. The reserve bears m. terest and is used to reduce
. .To the extent that the Company is not permitted by its regulatory bodies to recover in current rates the carryin fuel expense for fuel adjustment purposes during the of funds used for construction, the Company capitaliies,g asan c shutdown period. appropriate cost of utility plant, an allowance for funds used D. Utility Plant and Depreciation du ring construction ( A FDC) which is calculated and recorded as provided by the regulatory uniform system of accounts.
Utilit)* Pl ant is stated at ori8inal cost which is less than Under this utility industry practice, construction work in current cost set forth in Note 13 to the Financial Statements . progress on the tsalance sheet is cha rged and the income state- " Effects of inflation on Operations (Unaudited)." The cost of ment is credited for the approximate composite interest cost additions to utility plant includes contracted work, direct labor of borrowed funds and for a reasonable return on the equity and materials, allocable overheads and an allowance for the funds used for construction. This procedure is intended to composite cost of funds used during construction. The costs remove from the income statement the effect of the cost of of units of property retired are removed from utility plant and financing the construction program and results in treating the such costs, plus removal costs, less salvage, are charged to AFDC charges in the same manner as construction labor and matenal costs. As non-cash items, these credits to the income accumulated depreciation. Maintenance and repair of statement haw no etht on current cash earnings. After the P'(?Perty and repl acement ofitems determined to be less than property is placed in service the AFDC charged to construc-umts of property are c,narged to operating expenses. tion costs is recoverable from customers through depreciation Depreciation is computed on the straight-line basis at rates provisions included in rates charged for utihty service. The based on the estimated service lives of the various classes of effective com property. Depreciation on average depreciable property in 8.8% and 9.1%posite AFDC rate for 1984,1983 for therespectively. and 1982, Company was 9.1% 1984,1983 and 1982 amounted to approximately 3.3% each The Company's policy is to capitalize AFDC on projects year. Principally all the Company's utility plant is subject to $1 uring periods of mterrupted construction when such the lien of its first mortgage bond indenture. mterruption is temporary and the continuation can be justified as being reasonable under the circumstances. E. Dintly-Owned Generating Stations The Company jointly owns two coal-fueled generating I. Non-current Liabilities , stations, both of which have two units. The Company is the It is the policy of tlye Company to provide reserves for a8ent for the respective co-owners and operates the s'tations. uninsured property nsks, for certam employee benefits, and for claims for m;unes and damages through charges to It records its m. vestment and expenses associated with these operating expense on an accrual basis. Accruals for these reserves have been allowed for ratemaking purposes. 18
- 2. Rate Matters in the United States District Court for the Eas; era District of The Cc>mpany is a party to certain agreements and proceed- Arkansas seeking (i) preliminary and permanent injunctions ings concerning h1iddle South Energy, Inc. (htSE) and the enjoining the APSC from taking any further actions in the Grand Gulf Station owned by htSE. (See Note 4 to the proceeding described above and (ii) a declaratory judgment Financial Statements ~ Commitments and Contingencies" stating that the APSC has no jurisdiction over the validityand with respect to these matters.) enforceability of the agreements encompassed by the APSC On hlay 1,1981, the Company filed an application with the order of August 1,1984, and that all past proceedings and Arkansas Public Service Commission (APSC) to increase orders of the APSC in such proceedings are null and void.
its Arkansas retail rates by approximately $101.4 million On September 14,1984, the Court concluded as a matter of annually. On Atarch 1,1982, the APSC entered an order law that the agreements encompassed by the APSC order authorizing a., annual increase in retail rates of $26.2 million. of August 1 are agreements "for the purchase of wholesale The APSC also ordered the Company to refund approxi- power in interstate commerce or are so integrally related to mately $19.3 million related to collections that the APSC such purchases that they are subject to the exclusive jurisdic-stated resulted from the Company's past practice of tax tion of the Federal Energy Regulatory Commission (FERC)" or normalization. The Company placed into effect in Atarch are agreements " essential to the interstate wholesale sale of 1982, the $26.2 million approved by the APSC. Following power and therefore are not subject to state jurisdiction." On a rehearing, on September 8,1982 the APSC ;t ranted an that date, the Court permanently enjoined the APSC from additional $2.8 million increase, raising the amount allowed further proceedings in this matter. This decision has been to $29 million. The Company appealed to the Circuit Court appealed to the United States Court of Appeals for the Eighth of Pulaski County, Arkansas both the amount of the increase Circuit by the Arkansas Attorney General, the APSC and others. as well as the obligation to refund the approximate $19.3 The Company beheves that it has complied with all applicable million. On October 24,1984, the Pulaski County Circuit federal and state laws and that such agreements are valid. Court ruled the Company had the right to collect an addi- On August 24,1984, the APSC, in response to a Staff tional amount through a temporary surcharge to retail cus- motion, inued an order opening a proceeding to investigate tomers. With respect to the $19.3 million refund Jered by the reasonableness of the Company's present rates. The Staff the APSC on the issue of tax normalization, the _ ar r@d had alleged in its motion that the Company's rates were partially in favor of both the Company and the A?SC. m excessive. The Ccmpany's response requested the APSC to a result, the Company will be required to refund to retail dismiss the docket and review the Company's rates in the customers approximately $4.8 million as of December 31, context of the Company's new rate applicauon which was 1984. In January 1985, the APSC approved a : urcharge, as filed on November 9,1984,as discussed in the next paragraph. directed by the Court, covering all issues decided in fan,r of Subsequently, the APSC Staff filed testimony in this proceed-the Company with the exception of a $17.9 million un- ing recommending a reduction in rates of approximately recovered fuel cost issue which is still unresolved.The $54 million on an annual basis. The Company's position is Company implemented the surcharge on February 1,1985 that its rates, based on the time period reviewed by Staff designed to collect $32.4 million including in'erest over (the year ended N1 arch 1984), were not excessive and, in fact, a period of 31 months. were deficient by approximately $70 million. Ilearings were On July 18,1984, the Company filed an application with the held in November 1984 on this matter and it is presently Public Service Commission of hiissouri for an annual increase pending before the APSC. in Niissouri retail rates of approximately $6.9 million. In addi- On November 9,1984, the Company filed an application tion the application includes approximately $11.2 million for with the APSC requesting an annual increase in Arkansas Grand Gulf I costs in a Grand Gulf rider with implementation retail rates, based on the test year ended December 1984, of contingent on the Company being obligated to pay a portion approximately $139.7 million above the level of rates currently of the costs associated with Grand Gulf 1. The Grand Gulf 1 approved. In addition the application includes a proposed rider includes a phase-in plan under which recovery of rate rider, to be effective in the event the Company is required portions of any payments the Company is requir-d to make to make payments to htSE for costs associated with Grand Gulf associated with the Grand Gulf Station cou:d be deferred. 1. Based on the FERC admiaistrative law judge's initial decision On August 1,1984, the APSC issued an order directing on the allocation of Grand Gulf I costs in the Unit Power Sales the Company to appear and show cause "why all contracts Agreement proceeding, this rate rider contains a phase-in plan and agreements made by it with respect to any obligations to under which recovery of portions of any payments the Com-purchase power from or to pay for construction and operation pany is reci uired to make associated with Grand Gulf I could costs of the Grand Gulf Project should not be held to be void be deferred. The Jeferred amount filed was estimated to aggre-ab initio as a matter of law" because prior APSC approval had gate approximately $470 million during the first three years of not been obtained. The APSC asserted that the obligations commercial operation. The deferred amount would be re-imposed upon the Company by the agreements entered into covered within the following seven years. Carrying charges in connection with the financing and construction of the on the deferral would be collected currently. The APSC has Grand Gulf Station constituteprimafacre violations of Arkansas scheduled hearings regarding this application to commence statutes requiring APSC authorization foracquisition orlease on Ntay 30,1985. of certain assets and issuances of certain securities and evidences of indebtedness. NISE filed suit against the APSC W
- 3. Income Taxes income tax expense (credit) consists of the following:
1984 1983 1982 (in thousands) Current: Federal . . . . . $ 75,725 $ 6,396 5 3,713 State . . . . 14,161 6,223 3,251 Total . . . . . 89,886 12,619 6,964 Deferred-net: Liberalized depreciation . . . 21,383 24,776 30,744 Deferred fuel cost. . .. . (9,785) (7,994) 10,748 j Nuclear fuel disposal costs. . .
- 17,729 (6.074) l Nuclear maintenance and refueling costs . (4,169) - -
I Other . . . . . . (3,544) (4,824) (4,351) : Total . . 3,885 29,687 31,067 Investment tax credit adjustments-net . 30,698 48,440 25,629 Recorded income tax expense. $124,469 $90,746 $63,660 Charged to operations . . . . . . $126,457 $98,831 $69,285 Charged (credited) to other income . . (1,988) (8,085) (5,625) Recorded income tax expense . . 124,469 90,746 63,660 Income taxes applied against the debt component of AFDC. 6,001 9,190 7,669 Total income taxes. $130,470 $99,936 $71,329 Total income taxes differ from the amounts computed by applying the statutory Federal income tax rate to income before taxes. The reasons for the differences are as follows: 1984 1983 1982
% of % of % of Pre-Tax Pre-Tax Pre-Tax Amount income Amount income Amount income Computed at statutory rate . . $123,204 46.0 $100,115 46.0 $78,675 46.0 Increases (reductions) in tax resulting from:
Allowance for funds used during construction . (10,137) (3.8) (12,686) (5.8) (9,492) (5.6) State income taxes net of Federal income tax effect . 8,339 3.1 6.086 2.8 4,406 2.6 Other-net. . . . . . 3,063 1.2 (2,769) (1.3) (9,929) (5.8) Recorded income tax expense. . ... 124,469 46.5 90,746 41.7 63,660 37.2 Income taxes applied against debt component of AFDC . . . . 6,001 1.1 9,190 2.4 7,669 2.7 Total income taxes. ... .. . $130,470 47.6 $ 99,936 44.1 $71,329 39.9 _ .- Unused investment tax credits at December 31,1984 timing differences which are required by the Internal Revenue amounted to $40.0 million, which if not used will expire in Code or State law. During 1983, as a result of the nuclear fuel 1992 through 1999. disposal contract with the Department of Energy, disposal Pursuant to an order of the Arkansas Public Service costs for spent nuclear fuel became deductible for tax Commission dated March 1,1982, the Company ceased purposes. providing deferred taxes on certain timing differences which Cumulative income tax timing differences for which were previously normalized. However, the order requires deferred income tax expense has not been provided are the Company to continue providing deferred taxes on $220.5 million, $214.9 million and $163.7 million in 1984, decommissioning costs of nuclear plant and disposal costs 1983 and 1982, respectively, of nuclear fuel, and provides for continued normalization of 20 t.
- 4. Commitments and Contingencies Unit Power Sales Agreement Cr nstruction and New System Agreement The construction program contemplates Company The System operating companies, including the Company, construction expenditures (excluding AFDC and nuclear have requested from their respective state public utility com-fuel) of approximately $213 million in 1985,$206 million in missions rate adjustments adequate to permit them to meet 1986 and $193 million in 1987. their obligations to NISE to purchase power under the Unit Power Sales Agreement. Under the Unit Power Sales Agree-Avtilability Agreement and ment, as filed with the FERC, the capacity and energy available Pcwcr Purchase Advance Payment Agreement to htSE from the Grand Gulf Station would be sold to LP&L, The Company, together with the other hiiddle South h1P& L and NOPSI in accordance with the percentages set forth System operating companies, is obligated under the Availability in the Reallocation Agreement. An Administrative LawJudge Agreement, as amended, to Niiddle South Energy, Inc. (h1SE) ( ALJ) of the FERC has rendered his initial decision regarding in accordance with stated percentages (the Company 17.1%, such Agreement. The ALJ has deferred any decision on Louisiana Power & Light Company (LP& L) 26.9% Mississippi Grand Gulf 2 and has recommended that capacityand energy Power & Light Company (h1P&L) 31.3% New Orleans Public from Grand Gulf 1 be allocated to the Company as well as the Scrvice Inc. (NOPSI) 24.7%) to make payments or subordi- other System operating companies. The ALJ's decision nated advances adequate to cover all of the operating expenses allocates N1SE's share of the capacity and energy from Grand and certain of the capital costs of htSE. In addition, under the Gulf 1 as follows: 36% to the Company,14% to LP& L,33% to Power Purchase Advance Payment Agreement the Company, ATP&L and 17% to NOPSI, compared to the percentage together with the other hiiddle South System operating entitlements set forth in the Unit Power Sales Agreement of companies, agreed,if Grand Gulf I were not placed in 38.6% to I.P&L,316% to N1P&L, and 29.8% to NOPSI. This commercial operation by December 31,1983, to make advance decision, which the Company is opposing,is subject to review payments to h1SE for power purchases which in the aggregate of the FERC. In addition to the Company, the other three total $12.5 million per month. Such payments, adjusted to System operating companies have also intervened in the exclude the Company as contemplated by the Reallocation Proceeding. The Company has filed with the Arkansas Public Agreement as discussed in the next paragraph, commenced Service Commission (APSC) and the Public Service J:nuary 2,1984 and will continue until commercial operation Commission of hiissouri (PSCN1) for increases in rates to cover of Grand Gulf I or December 31,1985, whichever occurs any increased revenue requirements in the event the Company cirlicr. Through 1984, 53.9 billion had been expended is required to make payments to htSE for costs associated with by htSE on the Grand Gulf Station's two units, the first unit the Grand Gulf Station. See Note 2 to the Financial Statements-of which is scheduled for commercial operation in the second " Rate Ntatters" for discussions of these rate increase appli-quarter of 1985. cations, including the Company's proposed phase-in plans under which recoverv of portions of any payments the Com-Reallocation Agreement pany is required to m'ake associated with Grand Gulf I could Effective November 1981, the Company, together with the be deferred.
other hiiddle South System operating companies, entered On April 30,1982, Niiddle South Services, Inc. (htSS), into a Reallocation Agreement related to the Grand Gulf Station on behalf of the Company and the other hiiddle South which provides that the other System operating companies System operating corr.panies, filed with the FERC forapproval have assumed all of the responsibilities and obligations of of the New System Agreement that provides for the coordi-the Company with respect to these units under the Avail- nated planning, construction and operation of its generation ability Agreement and the Power Purchase Advance Payment and transmission facilities. Rates under the New System Agreement, and, in consideration thereof, the Company has Agreement became effective January 1,1983, subject to relinquished its rights in the Grand Gulf Station. However, refund. Various parties have intervened in these proceedings. e:ch of the System operating companies, including the Some parties are contesting the method by which the agree-Company, remain liable to htSE and its assignees for pay- ment equalizes capacity and energy among the System mcnts or advances under the Availability Agreement and the operating companies and certain proposals,if adopted, could Power Purchase Advance Payment Agreement in accordance cause significant changes in the allocation of production costs with the respective original percentages set forth in the among the companies. Hearings concluded in December immcdiately preceding paragraph. The Company would be 1983. On February 2,1984, htSS notified the presiding ALJ obligated to make its share of the payments or advances only that the other Niiddle South System operating companies if the other System operating companies were unable to meet would support an alternate cost allocation method designed their contractual obligations. The percentage allocation to to bring about a form of equalization of production costs the System operating companies of capacity and energy among the operating companies and that the Company would cvailable to htSE from Grand Gulf 1 and 2, as set forth in continue to support the original proposal. Subsequently, each the agreements referred to above, are subject to the approval of the operating companies filed a separate statement of of the Federal Energy Regulatory Commission (FERC), which position. On February 4,1985, the ALJ hearing the New System hts jurisdiction in the matter. See the next paragraph for a Agreement proceeding issued his initial decision recommend-more detailed discussion of the percentage allocations of ing that the New System Agreement be adopted, as filed Grand Gulf to the System operating companies, including with the FERC, with certain modifications. Principally, the the Company. decision recommended that a 15.75% return on common 21
equity be granted; that no periodic review conditions be cluded with no agreement reached. On N1 arch 14,1985, the attached to approval of the New System Agreement; that three-judge panel submitted a report to the FERC stating that production cost equalization of all System generating units, since a negotiated settlement did not appear possible, further as proposed by various intervening parties, not be granted; formal settlement procedures would be fruitless and the cases and that the reserve equalization provisions in the New should go fonvard to decision. It is not possible to predict what System Agreement, as filed, be adopted. However, the ALJ decision or decisions the FERC will ultimately render in the went on to recommend that the Grand Gulf Station be New System Agreement and Umt Power Sales Agreement integrated into the New System Agreement by having each proceedings or with respect to the Offer of Settlement. If of the System operating companies pay fc,r the capacity and timely recovery of any costs allocated to the Companyas a result energy costs of Grand Gulf based on the ratio that each of FERC decisions in these cases is nat permitted by the Com-System operating company's annual demand bears to the pany's regulatory agencies, the Company's financial position annual demand of the entire System and to include each could be adversely affected. System operating company's share of Grand Gulf in cal- Unit Power Purchase A<;reement culating such company's capability and consequently the calculation of reserve ' equalization payments. This decision The Company and f '&L have entered into a Unit Power is subject to review of the FERC. Purchase Agreement ter sale to A1P&L of the Company's 31.5% share of capacity a nd energy from Independence Unit 2 in an effort to resolve the diff; cult and complex issues involved in the Unit Power Sales Agreement and the New I"' d I F#d' 'CT*' System Agreement proceedings, the System operating SFI companies, htSE, and htSS, as agent for the System operating The Company owns 3596 of System Fuels, Inc. (SFI), a companies, submitted an Offer of Settlement to the FERC on ointly-owned subsidiary of the four principal operating January 4,1985. Under the terms of the Settlement Offer, subsidiaries of Niiddle South Utilities, Inc. SFI operates on a the New System Agreement, as currently m effect would non-profit basis for the purpose of planning and implementing remain unchanged. The Unit Power Sales Agreement, as programs for the procurement of fuel supplies for all of the amended, would allocate A1SE's share of the capacity and . operating companies; its costs are primarily recovered energy from Grand Gulf Unit 1, from the date of commercial through charges for fuel delivered. operation through December 31,1990, as foilows: 17.196 to The parent companies of SFI have agreed to make loans to the Company,14% to LP&l,19% to h1P&L 17% to NOPSI SFI to f nance its fuel supply business under aloan agreement and 32.9% as Inventoried Capacity. Effective January 1,1991, dated January 1,1984, as amended January 1,1985, which the allocation would change as follows: 27.87% to the provides fodFI to borrow up to $120 million from its parent Company,27.48% to LP&L,24.42% to NIP &L and 20.23% to companies through December 31,1985. The Company's NOPSI. During the period from commercial operation through share of the loan commitment is $39 million. Notes under this December 31,1990, the Company would pay its pro rata share agreement mature December 31,2010. In addition, the of certam costs associated with the Inventoried Capacity. Company had loaned SFI $35 million under previous loan Through December 31,1990, NISE would have a right to sell agreements. Notes mature in 2002 and 2008 under provisions the capacity and energy from the Inventoned Capacity. To of the previous loan agreements. the extent that such sales are not made, the System operating in connection with certain of SFl's borrowing arrangements, companies would buy the energy on a monthly basis in SFI's parent companies, including the Company, have accordance with their respective responsibility ratio at a s ost covenanted and agreed severally in accordance with their equal to the cost of energy displaced by such energy on the respective shares of ownership of SFI's common stock, hiiddle South System. Accordingly, the Company would pay that they will take any and all action necessary to keep SFl in no more for the cost of such additional energy available to it a sound financial condition and to place SFI in a position to than if such energy were not available. Partial recovery by discharge its obligations under these arrangements. At htSE of the cost of capital on the inventoried Capacity would December 31,1984, the total loan commitment under these be accomplished by the accrual and deferral of carrying chsrges arrangements amounted to $225 million of which during the period from the date commercial operation begins $203h million was outstanding. Also, SFI's parent companies, through December 31,1990. The accumulated deferred costs ncluding the Company, have made similar covenants and would be amortized over the remaininglife of Grand Gulf Unit agreements in connection with long-term leases by SFl of oil { 1 begmning January 1,1991. Beginning January 1,1991, the Morage and handling facilities and coal hopper cars. At l Company would commence paying its respective share of the December 3L 1984, the aggregate discounted value of these full cost of service of Unit 1, including amortization of the lease arrangements was $80 8 million. l deferred carrying charges over the remaining life of Unit 1, The Company has agreed to purcha e 100 million tons of plus a return on the deferrea carrying charges. This proposed coal over an app'roximate 20-year period, which began in 1980, Offer of Settlement is subject to review of the FERC. for use at the White Bluff Steam Electric Station. SFI has Comments have been filed by most of the active partici- entered into a contract with a joint venture for a supply of coal pants in the two FERC proceedings in opposition to the Ofter from a mine in Wyoming which, based on estimated reserves, I of Settlement. 'Ihe FERC appointed a three-judge panel t" s presently expected to provide for at least thirty years of preside overa settlement conference which convened on N1 arch projected requirements of the Independence Steam Electric l 12,1985. On Alarch 13,1985, the settlenient conference con- Station (ISES). By separate agreement, the Company has 2:
contracted to purchase the coal from SFl. SFI's parent com- generation prior to April 7,1983. The Company has three panies, including the Company, each acting in accordance options for payment of the one-time fee and is presently with their respective shares of ownership of SFI's common stock, studying these options, the selection of which is not required joined in, ratified, confirmed and adopted the contract and until June 1985. The Company, through rates and settlement obligations of SFl thereunder. Under the contract, investment of a past disposal contract, has recorded the amount necessary in the mine for leases, plant and equipment is the responsibility for the one-time payment to the DOE and has accrued interest of the joint venture. In order to limit the joint venture's invest- on the obligation of approximately $8.5 million at December ment rights and, hence, the amount to be paid to it as a com- 31,1984. ponent of the price of coal, the contract provided that SFl in addition to the recovery of costs associated with the invest any funds for plant and equipment in excess of a specified disposal of spent nuclear fuel, the Company is recovering a amount. The Company, MP& L and Arkansas Electric Cooper- total of approximately $160 million for decommissioning costs ative Corporation ( AECC), as co-owners in part of ISES, have for its two nuclear units. Based upon a study performed by the agreed to make the investments rather than SFI and according- Company, nuclear plant decommissioning costs are projected ly, have reimbu rsed SFI for investments previously made by it. to be in excess of this amount. The Company is requesting Through December 31,1984, the Company had invested and will request recovery of estimated increased costs in $24.9 million in mine facilities and related capitalized assets. application. to its regulatory commissions. During 1985, it is presently estimated that an additional Nuclear Liability Insurance $1.5 million will be invested under this agreement. The Company's share of the additional investment would be The Company is a member of Nuclear Electric Insurance $0.6 million. The Company has made the required investment Limited, a mutual insurer which provides its members on behalf of the municipal co-owners of ISES and is billing with insurance coverage for certain costs of replacement them monthly for their share of the investment. power incurred due to prolonged outages of nuclear units and SFI executed a contract, as amended in November 1982, for for $500 million of coverage for property damage sustained in the purchase of lignite to be used at a future lignite-fueled excess of 5500 million caused by radioactive contamination or power plant in Arkansas. AECC has agreed to becomo an other specified damage. Members pay annual premiums and owner of 50% of the proposed plant and assume 50% of SFrs are subject to assessments if losses exceed the accumulated obligation to purchase lignite. Delivery of lignite is tied to the funds available to the insurer. The Company's present commercial operation of the plant, which may be delayed at maximum assessment for incidents occurring during a policy the owner's option until July 1995. The Company, SFI and year is approximately $22 million. AECC may undertake to cipand the size of the plant if As of December 31,1984, the Price-Anderson Act limited additional co-owners are available or, under certain circum- the public liability of a licensee of a nuclear power plant stances, to meet an increased need of the System operating to $620 million for a single nuclear incident. This limit will companies or AECC for power. The Company has guaranteed increase by $5 million for each additional operating license SFrs performance and agreed to purchase SFrs share of the issued by the Nuclear Regulatory Commission (NRC). Insur-lignite which, assuming half ownership, is approximately ance for this exposure is provided by private insurance and 33 million tons, over a 30-yea r period. The contract, including an indemnity agreement with the NRC. Every licensee of a the guaranty, is conditional upon the receipt of regulatory nudear power plant is obligated, in the event of a nuclear approvals fEr the construction of the plant. incident involving any commercial nuclear facility in the United States that results in damages in excess of private Nuclear Fuel and Plant Decommissioning insurance coverage, to pay retrospective assessments of up to The Company has agreements for the purchase and fabrica- $5 million per incident for each licensed reactor operated by it tion of fuel assemblies for its nuclear plant, Arkansas Nuclear or up to a maVmum per reactor owned of $10 million in any One. The Company has agreed to purchase from Kerr-McGee calendar year. At December 31,1984, the Company had Nuclear Corporation 1,118,250 kg of uranium over the next two licensed reactors. five years. The Company also has agreements with the Babcock Federal Income Tax Issues-IRS & Wilcox Company and the Combustion Engineering Company for the fabrication of fuel assemblies used at the The Federal income tax returns for the years 1971 through plant. 1978 have been examined by the IRS. For the years 1971 Under the terms of the Company's nuclear fuel leases, the through 1976, all issues, other than an issue involving the Company is responsible for the disposal of spent nuclear fuel. taxability of customer deposits, have been settled and a tax The Company considers all costs incurred or to be incurred in assessment of $1.4 million, plus interest of $1.6 million, has the use and disposal of nuclear fuel to be proper components been paid. Payment of the tax assessment and interest did of nuclear fuel expense, and provisions to recover such costs not have a material effect on net income. For the years 1977 have been and will be made in applications to regulatory com-
~
and 1978, the IRS has proposed certain adjustments that missions. SFI, on behalf of the Company, has contracted with are not material. A written protest has been filed with the IRS. the Department of Energy (DOE) whe'reby the DOE will Any additional tax liability that may result from resolution furnish disposal service for the Company's spent nuclear fuel of the customer deposits issue would not have a material at a cost of one mill per kilowatt-hour of gross generation on effect on net income. or after April 7,1983 and a one-time fee of 549.4 million for D
SeLeases The Company accounts for leases entered into prior to accordance with Statements of Financial Accounting 1983 on the same basis as that used by its regulatory authority Standards No.13 and No. 71. Application of criteria used to ; in the ratemaking process which determines the revenues define a capitallease entered into prior to 1983 would permit utilized to recover the lease costs. The Company accounts recording the following assets and liabilities on the balance for capital leases entered into subsequent to 1982 in sheet: 1984 1983 1982 (in thousands) Assets: Utility plant. . .. .. . .. . . $111,363 $115,549 $113,632 Accumulated amortization. . .. . . 17,535 16,742 14,505 Net leased property . . . .. . . $ 93,828 $ 98,807 $ 99,127 Liabilities: Noncurrent obligations under capital leases . . . .. . . $ 90,284 $ 94,882 $ 95,605 Current obligations under capital leases: Principal . .. .. . .. . . $ 3,544 $ 3,925 $ 3,522 Interest accrued. . . . . 4,598 4,419 3,566 Total . .. . . .. . S 8,142 $ 8,344 $ 7,088 Recording of such leases would not affect the amounts Not reflected in the schedule above are two lease agree-reported as either expense or net income, ments which together allow the Company to lease nuclear At December 31,1984, there were noncancellable leases, fuel up to a maximum of $150 million. Lease payments, presently accounted for as operating leases, with minimum which are not included in the tabulations above, are based on rental commitments as follows: nuclea r fuel use. Both leases, unless sooner terminated by one (in thousands) of the parties, will contmue until 2018. The unrecovered cost base of the leases at December 31,1984,1983 and 1982 was 1985. . .. . .. . $ 18,357
$136,068,000, $138,708,000 and $145,531,000, respectively.
1986 ... . .. .. 17,461 Nuclear fuel expense, exclusive of negative salvage, of 1987 . 16,352
$72,667,000 in 1984, $49,687,000 in 1983 and $40,091,000 in 1988 ... .. . 16,586 17,382 1982 was charged to operations.
1989 . . .... ... .. . .. Rental expense for capital and operating leases (excluding For years thereafter 165,079 nuclear fuel) amounted to approximately $21,949,000, Total . . . . .. . $251,217 $20,476,000 and $19,039,000 in 1984,1983 and 1982, respec-tively.
- 6. Postretirement Benefits The Company has various postretirement plans covering 1982 was 59,555,000, $7,294,000 and 58,266,000, respectively, substantially all of its employees. The comparison of the actuarial present values of Pension plans are administered by a trustee who is accumulated pension plan benefits and plan net assets for the responsible for pension payments to retired employees. Company's defined benefit plans is presented on page 25.
Various investment managers have responsibility for manage- This comparison was determined in accordance with the ment of the plans' assets. In addition, an independent actuary provisions of Statement of Financial Accounting Standards performs the necessary actuarial valuations for the individual No. 36 which requires the use of certain assumptions which company plans. are different from those used by the actuary in determining Total pension expense of the Company for 1984,1983, and an appropriate level of funding for the Company. I 24
l 1
, a--
January 1, These benefits and similiar benefits for active employees are 1984 1983 provided through various means including payments of (in llwusands) premiums to an insurance company and/or accruals for self Actuarial present value of insurance policies managed by an insurance company. The accumulated pension plan Company recognizes the cost of providing these benefits by benefits: expensing the payments made to the insurance company or Vested S 84,518 $ 71,498 accruing the cost as recommended by the managing insurance Nonvested . 4,661 4,444 company. The cost of providing these benefits for retired
$ 75,942 em ployees is not separable from the cost of providing benefits Total $ 89,179 for the actwe employees. The total cost of providing these Net assets available for benefits and the average number of active and retired pension benefits . $149,349 $128 255 employees for the last three fiscal years were as follmvs:
1984 1983 1982 The assumed rate of return used in determining the Total cost of health actuarial present value of accumulated plan benefits was 9%. care and life insur-The Company also provides certain health care and life ance (in thousands) . $6,501 $4,636 $4,829 insurance benefits for retired employees. Substantially all Average active employees 5,319 5,255 5,076 employees may become eligible for these benefits if they Average retired reach retirement age while still working for the Company. employees . 941 888 706
- 7. Lines of Credit and Short-Term Borrowings commercial paper dealer for the sale of its commercial paper.
The Company may borrow from these sources subject only to At December 31,1984, the Company had $70.2 million in its maximum authorized level of short-term borrowings. The lines of credit with Arkansas banks and participated with the Company has received authorization from the Securities and three other h1iddle South System operating companies in Exchange Commission under the Public Utility lloiding $180 million of consolidated lines of credit with banks outside Company Act of 1935 to have outstanding at any one time the htiddle South System service area. In February 1985, these short-term borrowings aggregating not more than the lesser non-territorial bank lines of credit were reduced to $140 of $125 million or 10% of the Company's capitalization. The million. Compensating balances or equivalent fees are aggregate amount of the unused lines of credit with Arkansas required by certain of the lending banks located outside the banks at the end of 1984 and 1983 was $70.2 million each year. Niiddle South service area. Additionally, the Company partici- The operating companies had available at the end of 1984 and pates with certain other companies of the htiddle South 1983, $180 million and $122.1 million, respectively, under the System in a money pool arrangement whereby those consolidated lines of credit. The short-term borrowings and companies with available funds make short-term loans to the applicable interest rates (determined by dividing other companies in the System having short-term borrowing applicable interest expense by the average a mount borrowed) requirements. The Company also has arrangements with a for the Company were as follows: 1984 1983 1982 (in Ilwusands) h1animum borrowing. $15,000 $31,000 $90,700 Year-end borrowing . - -
$ 750 Average borrowing:
Bank loans. $ 176 $ 977 $23,030 Associated companies. $ 1,002 $10,793 $13,122 Average interest rate during the period: Bank loans. 11.0700 10.31 % 13.66 % Associated companies. 10.220o 9.91 % 10.50 % Average interest rate at end of period: Bank loans. - - 11.50 %
- 8. Retained Earnings Restrictions The indenture relating to the Company's long-term debt payment of cash dividends on common stock. As of and provisions of the articles of incorporation relating to the December 31,1984, all retained earnings were free from such Company's preferred stock provide for restrictions on the restric tions.
23
- 9. Preferred and Common Stock Preferred stock outstanding at December 31,1984 and 1983 consisted of the following:
Current Shares Shares Outstanding _ Call Price Cumulative, $100 Par Value Authorized 1984 1983 Per Share Without sinking fund: 4.32% series. 70,000 70,000 70,000 $103.647 4.72% series. 93,500 93,500 93,500 107.00 1 4.56% series. 75,000 75,000 75,000 102.83 ' 4.56 % 1965 series. 75,000 75,000 75,000 102.50 6.08% series. 100,000 100,000 100,000 102.83 7.32% series. 100,000 100,000 100,000 103.17 7.80% series. 150,000 150,000 150,000 105.20 7.40% series. 200,000 200,000 200,000 104.65 7.88% series. 150,000 150,000 150,000 104.97 Total . 1,013,500 1,013,500 1,013,500 With sinking fund *- 10.60% series. 135,997 135,997 149,967 109.39 11.04% series. 286,817 286,817 304,862 109.78 Total. 422,814 422,814 454,829 Unissued . 2,386,500 Total, $100 Par Value . 3,822,814 Cumulative, $25 Par Value Without sinking fund: 8.84% series. 400,000 400,000 400,000 27.66 10.40% series. 600,000 600,000 600,000 27.95 Total . 1,000,000 1,000,000 1,000.000 With sinking fund'- 9.92% series. 1,433,621 1,433,621 1,513,299 27.56 13.28% series. 1,811,626 1,811,626 1,992,060 29.88 Total . 3,245,247 3,245,247 3,505,359 Unissued . . 5,400,000 Total, $25 Par Value . 9,645,247 (Ill Yl0lisilllLl%) Without sinking fund: Stated at $100 a share . $101,350 $101,350 Stated at $25 a share 25,000 25,000 Premium. 540 540 Total preferred stock and premium, without sinking fund . . $126,890 $126,890 With sinking fund: Stated at $100 a share . $ 42,281 $ 45,483 Stated at $25 a share 81,131 87,634 Premium. 758 814 Total preferred stock and premium, with sinking fund . . $124,170 $133,931 The changes in the number of shares of common and preferred stock outstandmg in 1982,1983 and 1984 were: Common Stock Preferred Stock Shares Sold Shares Sold (Redeem _ed}
$100 Par $25 Par 1982. 6,400,000 (29,700) (360) 1983. 5,200,000 (48,180) (94,281) 1984. -
(32,015) (260,112) n, ,,~,c ,.. r,. , ,,, ,, , .al o,,. .e, n.c .., v,a,, ,, , s ,.a ,,, e .o ,s , n , m. . m ,+.,,, , i s m . ,,. , ,, .a m n . ,,, , a ,, ,, ,,x ,mi , ,,,<,i . . n o, a, ,u ,nc at .r?llu tkin. M th V hI nnd a.,J itk > thk) Jra,e ,c~ pes trwfy In a.[htron the e.wrpany h.s. the , m u mul,h.v ytv..s t, ,e.L a ,*, a. all tro,salM. ar rarn.ror ra,J Ju,, eas h oca, 26
- 10. Long-Term Debt Long-term debt outstanding consisted of the following:
1984 1983 (ist thousarids) FIRST MORTGAGE BONDS: 3-1/4% series due 1984 $ -
$ 7,500 3-3/8% series due 1985 18,000 18,000 16-1/8% series due 1986 70,000 70,000 5-1/2% series due 1988 418 463 17-3/8% series due 1988 75,000 75,000 5-5/8"6 series due 1990 1,000 1,100 4-7/8% series due 1991. 12,000 12,000 16-1/2% series due 1991. 80,000 80,000 4-3/8% series due 1993 15,000 15,000 9-3/8% series due 1993 5,460 5,880 4-5/8% series due 1995 25,000 25,000 5-3/4% series due 1996 25,000 25,000 6-1/4% series due 1996 , 2,760 2,960 5-7/8% series due 1997 30,000 30,000 8-3/4% series due 1998 8,200 8,600 7-3/8% series due 1998 15,000 15,000 9-1/4% series due 1999 25,000 25,000 9-5/8% series due 2000 25,000 25,000 9-3/4% series due 2000 3,800 4,000 7-5/8% series due 2001 30,000 30,000 8 % series due 2001 30,000 30,000 7-3/4% series due 2002 35,000 35,000 7-1/2% series due 2002 15,000 15,000 8 % series due 2003 40,000 40,000 8-1/896 series due 2003 40,000 40,000 10-1/2% series due 2004 40,000 40,000 10-1/8% series due 2005 40,000 40,000 9-1/8% series due 2007 . 75,000 75,000 9-7/8% series due 2008 75,000 75,000 10-1/4% series due 2009 60,000 60,000 13-3/8% series due 2012 75,000 75,000 13-1/4% series due 2013 25,000 25,000 14-1/8% series due 2014 100,000 -
TOTAL FIRST MORTGAGE BONDS . 1,116,638 1,025,503 INSTALLMENT PURCliASE CONTRACTS: Pope County, Arkansas; due 1986 to 2008 at rates ranging from 7-1/4% to 10$ 20,800 20,800 Jefferson County, Arkansas; due 1986 to 2008 at rates ranging from 6-1/8% to 10% 71,645 71,650 Independence County, Arkansas; due 1984 at rate of 9-1/4% - 1,000 Independence County, Arkansas; due 2013 at rate of 11-1/8% 45,000 45,000
- lxss
- Amount held in construction funds . 65 2.618 TOTAL INSTALLMENT PURCIIASE CONTRACTS . 137,380 135,832 LONG-TERM OBLIGATION-Department of Energy (See Note 4). 57,908 49,400 UNAMORT17.ED PREMlUM AND DISCOUNT ON DEBT-NET. (4,209) (3,282)
TOTAL. 1,307,717 1,207,453 LESS: CURRENTLY MATURING PORTION. 19,365 4.865 LONG-TERM DEBT EXCLUDING AMOUNT DUE WITillN ONE YEAR. $1,288,352 $1,197,588 i 27
At December 31,1984, the sinking fund requirements and maturities for long-term debt for the years 1985 through 1989 are as follows: Cash Sinking Fund Sinking Fund
- Maturities (in Ilwusands) 1985 $1,365 $7,358 $18,000 1986 1,365 7,838 70,725 1987 1,365 7,718 810 1988 1,320 8,513 76,148 1989 1,320 8,688 925
- The~c annual smanngfund requurement~ may k met Fu arrdn ati.m of pregwrty ad.htum~ at a rat 'of Io?c ot rus h ec.guuremenN
- 11. Transactions With Associated Companies Operating revenues include revenues from sales to The Company buys from and sells electricity to the associated companies amounting to $286.8 million in 1984, operating companies of Middle South Utilities, Inc., its $305.5 million in 1983 and $223.'7 million in 1982. Operating parent, under rate schedules filed with the Federal Energy expenses include charges from affiliates for fuel cost, Regulatory Commission. In addition, the Company pur- purchased power, and technical and advisory services chases fuel from System Fuels, Inc., and receives technical totaling $48.1 million in 1984, $34.8 million in 1983 and and advisory services from Middle South Services, Inc. $68 million in 1982.
- 12. Consolidated Quarterly Results (Unaudited)
Operating results for the four quarters of 1984 and 1983 were as follows (in thousands): Quarter ended 1984 March June September December Operating Revenue. $315,704 $317,149 $387,468 $287,362 Operating income. 57,867 51,994 90,356 41,969 Net Income. 37,307 27,389 64,409 14,262 1983 Operating Revenue. $248,372 $266,508 $391,022 $300,243 Operating income . 34,517 49,250 81,901 45,609 Net Income. 15,789 28,385 60,530 22,192 The business of the Company is subject to seasonal any three-month period should not be considered as a fluctuations with the peak period occurring during the basis for estimating the results for a full year. summer months. Accordingly, earnings information for 28
- 13. Effects of Inflation on Operations (Unaudited)
The following supplementary information about the and Changing Prices," as amended by Statement of Financial effects of changing prices on the Company is provided in Accounting Standards No. 82. It should be viewed as an accordance with the requirements of Statement of Financial estimate of the effect of changing prices, rather than a precise Accounting Standards No. 33, " Financial Reporting measure. STATEMENT OF INCOME FROM OPERATIONS AND OTiiER FINANCIAL DATA ADJUSTED FOR EFFECTS OF CliANGING PRICES FOR THE YEAR ENDED DECEMBER 31,1984 (in timusands) Adjusted For As Reported In Changes In The Financial Specific Prices Statements (Current Costs) Revenues i $1,307,683 $1,307,683 Operating expenses (excluding depreciation)I 968,046 968,046 Depreciation . 97,451 197,669 Total operating expenses. 1,065,497 1,165,715 Operating income 242,186 141,968 Other income l .. 27,048 27,048 Interest and other charges! 125,867 125,867 income from operations (excluding adjustment to net recoverable cost) . $ 143,367 $ 43,149 increase in specific prices (current costs) of property, plant and equipment held during the year2 . $ 156,639 Adjustment to net recoverable cost . 39,695 Effect of increase in general price level. (197,585) Excess (deficiency) of increase in specific prices, a.ler .sdjustment to net recoverable cost, over increase in general price level (1,251) Gains from decline in purchasing power of net amounts owed . 73,356 Net . $ 72,105 1 Assanrtwd to be unt "u;Yragr for llw year" sMlars and linus are not restarcJ 2 At N a rrrist 31. IU4. cierrent c.wt .1 rworiviv. plant gard equi; ers. rit. er,14 aicu rrut.st.'ef . hire $ ,arnier, a its $12 7atisk3 (six) wirste spist irri al canst <>r rict cirst re% <nYvabic iltstmgin Jcyrccullsors was $:,b:4 4 54 lkN1 29
l i l l FIVE-YEAR COMPARISONS OF SELECTED SUPPLEMENTARY FINANCIAL DATA ADJUSTED FOR EFFECTS OF CilANGING PRICES (in Ilwusands of average 1934 dollars) Years ended December 31, 1984 1983 1982 1981 1980 Operating revenues. . $1,307,683 $1,257,479 $1,125,753 $1,159,842 $ 946,028 Current cost information: Income from operations (excluding adjustment to net recoverable cost). $ 43,149 $ 25,803 $ 13,708 5 14,370 $ (1,428) Excess (deficiency) of increase in specific prices after adiustment to net recoverable cost, over increase in general price level . $ (1,251) $ 29,674 $ 18,366 $ (110,361) $(192,356) Net assets at year-end at net recoverable cost . $ 710,359 $ 739,521 $ 703,352 5 652,392 $ 617,949 Gen:ral information: Gain from decline in purchasing power of net amounts owed .. $ 73.356 5 59,136 $ 58,927 $ 146,763 $ 206,965 Average consumer price index . 311.1 298.4 289.1 272.4 246.8 Current cost amounts reflect the changes in specific prices subject allow only tl.e historical cost of plant to be recovered of property, plant and equipment from the year of acquisition in revenues as depreciation. Therefore, the excess cost of plant to the present. The current costs of property, plant and is not p sently recoverable in rates. This excess (deficiency) is equipment, which represent the estimated costs of replacing reflected as an adjustment to net recoverable cost. While the existing plant assets, are determined by applying the ratemaking process gives no recognition to the current cost liandy-Whitman Index of Public Utihty Construction Costs of replacing property, plant and equipment, the Company (tiWI) to the cost of the surviving plant by year of acquisition. believes, based on past experiences, that it will be allowed to Land and certain other plant assets which are not included in earn on the increased cost of its net investment when the 11WI were converted using the Consumer Price Index for replacement of facilities actually occurs. all Urban Consumers (CPI-U). To properly reflect the economics of rate regulation in the The current year's depreciation expense on the current Statement of Income from Operations presented above, the cost amounts of property, plant and equipment was adjustment of net property, plant and equipment to net determined by applying the Company's depreciation rates to recoverable cost is adjusted by the gain from the decline in the indexed amounts. purchasing power of net amounts owed. During a period of Fuel inventories, the cost of fuel used in generation, and gas inflation, holders of monetary assets suffer a loss of general purchased for resale have not been restated from their purchasing power while holders of monetary liabilities historical cost in nominal dollars. Regulation limits the experience a gain. The gain from the decline in purchasing recovery of fuel and purchased gas costs to actual costs power of net amounts owed is primarily attributable to the incurred through the operation of adjustment clauses or substaatial amount of debt which has been used to finance adjustments in basic rate schedules. For this reason, fuel property, plant and equipment. Since the depreciation on this inventories are effectively monetary assets. plant is limited to the recovery of historical costs, the As prescribed in Statement of Financial Accounting Company does not have the opportunity to realize a holding Standards No. 33, income taxes were not adjusted. gain on debt and is limited to recovery only of the embedded The regulatory commissions to which the Company is cost of debt capital. 30
Deloitte Haskins+ Sells t 39th Floor One Shell Square New Orleans. Louisiana 70139 (504) 581-2727 Cable DEHANDS OPINION OF INDEPENDENT PUBLIC ACCOUNTANTS Arkansas Power & Light Company: We have examined the consolidated balance sheets of Arkansas Power & Light Company and its subsidiary as of December 31, 1984 and 1983 and the related consolidated statements of income and retained earnings and of changes in financial position fo-each of the three years in the period ended December 31, 1934. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances In our opinion, the above-mentioned consolidated finan".ial statements present f airly the financial pc,sition of the Company and its subsidiary at December 31, 1984 and 1983 and the results of their operations and the changes in their financial position for each of the three years in the period ended December 31, 1984, in conformity with generally accepted accounting principles applied on a consistent basis. f b February 22, 1985 l _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ .
Arkansas Power & Light Company Ten Years of Progress / Financial (Consolidated)' (in thousands of dollars) Selected Financial Data: Capitalization and Capitalization Ratios Operating revenues. . $1,307,683 uwONS OF DOLLARS Net income. 143,367 3000 Total assets . . . . 3,060,817 Iong-term debt . ... .... ...... . 1,288,352 _ [E** Preferred stock, with sinking fund. 124,170 Capitalization (end of period): Preferred stock and premium. .. 5 251,060 2000 Common stock and paid-in capital . 694,305 Retained earnings . 26,101 ! 1500 To ta l . . . . . . 971,466 l Long-term debt: iggg First mortgage bonds 2 .j. 1,093,063 Installment purchase contracts 137,379 Long-term obligation-DOE 3 57,908 i
- Total. 1,288,352 Total capitalization . 52,259,818 1976 1978 1980 1982 1983 1984 Annual Payment Requ.irements:
Interest on: First mortgage bonds . S 122,494 Installment purchase contracts. 11,595 Utility Plant 23,222 Dividends on preferred stock. MwONS OF DOu" Utility Plant (end of period): 4@ Plant completed. . . . 53,307,908 w uu, % Construction work in progress. . 105,762 3# - 27,321 Na uu vm Nuclear fuel in excess of fuel leases . 3000 E Total utility plant. 3,440,991 Less-accumulated depreciation. 766,537 2500 Net utility plant. $2,674,454 I 2m M income Statement: 1500 M Operating revenues. $1,307,683 Operating expenses: I 1000 s Fuel.. ... 338,429 Purchased power. ... 133,964
- g g g g
~
g Gas purchased for resale. 44,894 g g g g g g Payroll-operation and 1975 76 77 78 79 '80 '81 '82 '83 1984 maintenance. ... 97,659 Other operation and maintenance. 191,825 Depreciation. 97,451 Net incomo Taxes. 161,275 uwONS OF DOLLARS Total. 1,065,497 150 Operating income . 242,186
%,, m -.m_. Other income and deductions-net 125 -
" ^ * * * ~ -
(excluding AFDC4 ). 11,204
~ ~ " ~
Interest and other charges: 300 M Interest on long-term debt. 126,974 Other interest-net of g debt premium . 7,376 Total (excluding AFDC4 ). 134,350 Income from revenues. . . _ . . . . . 119,040 50 24,327 Non-cash income from AFDC4... income from accounting change 5 - 25 - Net income. $ 143,367 0 1. on la ruaru 1.1981 ArLan+ n ar t< Ligla com;wnw an qusred Anan~ansfu~,ouru n,wr Comtung Tire 197S '76 77 78 79 '80 '81 '82 '83 1984 finanaal Jara m tin, rep,rt for trie vear~;,ru,r ta 19811save not heen rc~tatedy. r tisc. on~oirdatum ~ma e tloc er !en t e. rmmarenal 1 Enlude~ < urrent!v maturung p>rtum. 3 [X >[- Degurtment of l.nergit 4 AFDC-Alloa ans e for funds u~ed Junng wn~trun tuen s Cumus.ntar etresI to lanuarnt 1. !97s, ,*f,luange art ats'ounting for fua'l no~ts 33
1983 1982 1981 1980 1979 1978 1977 1976 1975 $1,206,145 $1,046,143 $1,015,561 5 750,497 $ 582,610 $ 553,605 $ 535,298 $ 396,597 $ 316,831 126,896 107,372 96,140 65,230 82,404 86,014 69,305 46,963 40,713 2,859,517 2,669,417 2,474,249 2,147,983 1,940,643 1,693,906 1,562,999 1,421,940 1,311,433 1,197,588 1,129,440 992,163 848,667 819,716 749,262 667,484 591,382 586,318 133,931 141,138 144,120 147,065 100,518 60,063 60,063 60,063 60,063 $ 260,821 $ 268,028 $ 271,010 $ 273,955 $ 227,408 $ 171,772 $ 171,772 $ 171,772 $ 161,720 693,297 627,709 547,185 458,569 427,960 397,960 382,960 367,960 337,375 28,158 33,365 43,134 54,700 86,333 78,462 54,261 39,040 41,297 982,276 929,102 861,329 787,224 741,701 648,194 608,993 578,772 540,392 1,014,797 1,000,255 849,585 763,430 763,549 709,549 642,979 575,184 586,318 133,391 129,185 143,578 83,237 56,167 39,713 24,505 16,198 - 49,400 - - - - -- - - - 1,197,588 1,129,440 993,163 848,667 819,716 749,262 667,484 591,382 586,318 $2,179,864 $2,058,542 $1,854,492 $1,635,891 $1,561,417 $1,397,456 $1,276,477 $1,170,154 $1,126,710 $ 108,727 $ 105,568 $ 82,986 $ 73,551 5 62,436 5 56,536 $ 49,364 $ 42,837 5 42,837 11,688 10,386 14,016 6,593 4,980 4,980 4,103 1,224 - 24,366 25,131 25,456 25,778 19,548 14,020 14.020 14,020 13,136 $2,910,470 $2,623,319 $2,546,046 $2,133,704 $1,231,832 $1,178,601 $1,139,511 $1,111,119 $1,097,913 306,398 364,252 255,468 282,376 980,054 785,684 610,557 505,669 350,941 24,979 16,869 10,214 7,151 - - 12,747 4,562 8,179 3,241,847 3,004,440 2,811,728 2,423,231 2,211,886 1,964,285 1,762,815 1,621,350 1,457,033 679,232 605,404 532,261 417,435 364,447 331,231 297,464 265,099 240,014 $2,562,615 $2,399,036 $2,279,467 $2,005,796 $1,847,439 $1,633,054 $1,465,351 $1,356,251 $1,217,019 $1,206,145 $1,046,143 $1,015,561 $ 750,497 $ 582,610 $ 553,605 $ 535,298 5 396,597 $ 316,831 322,658 262,604 307,213 237,346 174,667 167,681 169,890 107,213 76,322 166,126 178,841 141,316 154,126 171,425 120,804 114,225 107,983 56,022 44,150 40,986 30,637 - - - - - - 87,210 77,566 67,897 49,774 40,607 35,400 29,448 26,626 24,286 150,459 109,500 132,862 100,700 50,991 55,478 53,014 31,224 30,637 92,621 84,194 77,923 59,574 39,708 38,365 36,768 35,025 33,790 131,644 101,146 90,530 54,033 34,948 55,693 62,753 36,022 38,352 994,868 854,837 848,378 655,553 512,349 473,421 466,098 344,093 259,409 211,277 191,306 167,183 94,944 70,261 80,184 69,200 52,504 57,422 14,457 12,687 17,497 17,468 23,627 16,986 12,466 10,328 8,131 119,466 108,557 90,755 67,036 67,091 56,949 45,047 43,152 40,553 7,152 11,272 21,038 17,649 10,296 4,469 3,980 2,703 3,265 126,618 119,829 111,793 84,685 77,387 61,418 49,027 45,855 43,818 99,116 84,164 72,887 27,727 16,501 35,752 32,639 16,977 21,735 27,780 23,208 23,253 37,503 65,903 50,262 36,666 26,445 18,978 3,541 - $ 126,896 $ 107,372 $ 96,140 $ 65,230 $ 82,404 $ 86,014 5 69,305 $ 46,963 $ 40,713 33
Arkansas Power & Light Company Ten Years of Progress / Operating (Electric)' 1984 Electric Operating Revenues (thousands of dollars): Average A,nnual Kilowatt Hour Use Residential . . S 334,693 Residential Customers Commercial . 187,595 mOUSANDS OF KWH 14 0 Industrial-aluminum processing. 94,067 l m, Industrial-other. 224,392 12.0 - tu,ona . Government and municipal . . 23,288
,g g - Total from retail customers. 864,035 .
Public utilities . 364,581 Miscellaneous revenues. 18,981 80 Total electric operating revenues. . $1,247,597 6.0 Electric Sales (millions of kilowatt-hours): 40 - Residential . 4,664 Commercial . 3,079 2.o Industrial-aluminum processing. 3,060 Industrial-other. 4,511 0 Government and municipal . 405 1975 76 77 78 79 B0 '81 '82 '83 1984 Total to retail customers . 15,719 Public utilities . 8,918 Total energy sold . 24,637 Kilowatt-Hour Sales To Retail Customers Number of Customers (end of year): suoss or xwH 20 0 Residential . 480,133 Commercial . 58,080 17 5 Industrial-aluminum processing. I mus Industrial-other. 14,811 15 0 Government and municipal . 2,652 12 5
-- M '
Total retail customers. 555,677 M Public utilities . 17
,o g Total customers. 555,694 7.5 - -
Electric Energy (millions of kilowatt-hours): 50 - Source and disposition 25 - Generated-net station output: Coal. 7,191 1975 76 77 78 79 B0 '81 '82 '83 1984 Nuclear. 10,770 Hydro . 235 Generati,on By Fuel Total generated . 20,310 (Excluding Hydro) Purchased. 5,440 suCNS oF KWH 25 o Net interchange 165 l com Total . 25,915
"" --- Less: Company uses, losses and 20 0 -
1,278 Ga unaccounted for .
- 24,637 Total energy sold .
iso 3,650 Peak demand (megawatts) 2
. . Du g .
L***'"" "'""'""""*'" 50 2 The .ucar lost sn lude 318 rnegacatt, to ~upply Arkan~a~ lle.tnn Cooperatuir Corpratton% {Al CC) 1 uj whr.h 1, no.e h ung ~npphed h tiu ir. .cn apahiste
\ car ~ pruor to 1981 alw un.luk wwung arnount, ef I.ud ~upphed to AlCC.
1975 '76 77 78 79 BO '81 '82 '83 1984 34
i I ( 1983 1982 1981 1980 1979 1978 1977 1976 1975 $ 315,960 $282,204 $257,801 $212,833 $160,992 5164,224 $154,403 $121,267 $104,440 169,367 153,393 148,938 128,477 100,741 98,293 92,999 75,641 62,325 56,629 50,175 69,527 69,171 65,861 43,972 40,482 33,100 12,652 200,296 183,975 179,331 140,422 112,515 104,930 102,264 83,844 61,619 20,989 19,081 14,787 12,824 11,447 11,234 10,468 8,536 7,144 763,241 688,828 670,384 563,727 451,556 422,653 400,616 322,388 248,180 379,598 299,724 298,781 181,650 125,980 124,653 128,174 70,362 65,346 6,052 5,572 5,569 5,120 5,074 6,299 6,508 3,847 3,305 $1,148,891 $994,124 $974,734 $750,497 $582,610 $553,605 $535,298 $396,597 $316,831 4,612 4,514 4,418 4,480 3,884 4,062 3,838 3,369 3,386 2,927 2,870 2,819 2,682 2,444 2,472 2,353 2,162 2,072 2,571 2,081 3,064 3,411 3,349 2,686 2,597 2,145 1,011 4,251 4,246 4,311 3,675 3,681 3,545 3,443 3,160 2,840 394 410 312 292 326 334 325 307 297 14,755 14,121 14,924 14,540 13,684 13,099 12,556 11,143 9,606 8,965 7,388 8,358 5,445 4,204 4,475 5,170 3,247 3,548 23,720 21,509 23,282 19,985 17,888 17,574 17,726 14,390 13,154 471,508 462,753 458,941 405,717 400,290 394,766 387,495 379,556 371,491 57,141 56,709 57,133 49,444 49,009 48,4z4 47,580 46,844 45,657 1 1 1 1 1 1 1 1 1 14,161 13,528 13,529 12,284 12,151 11,724 11,182 10,913 10,431 2,481 2,372 2,332 1,548 1,617 1,573 1,519 1,500 1,446 545,292 535,363 531,936 468,994 463,068 456,488 447,777 438,814 429,026 17 18 23 19 19 19 25 25 25 545,309 535,381 531,959 469,013 463,087 456,507 447,802 438,839 429,051 7,237 5,224 4,293 601 - - - - - 2,978 2,660 4,727 4,741 2,468 470 487 1,168 2,645 35 72 389 1,653 4,050 6,741 6,973 4,010 2,242 7,583 7,463 9,173 7,831 4,101 5,220 5,085 3,858 4,874 201 176 140 103 251 131 98 94 172 18,034 15,595 18,722 14,929 10,870 12,562 12,643 9,130 9,933 7,402 7,241 5,980 6,459 7,740 6,162 6,133 6,172 4,070 100 82 12 (209) 296 8 (65) 43 101 25,536 22,918 24,714 21,179 18,906 18,732 18,711 15,345 14,104 1,816 1,409 1,432 1,194 1,018 1,158 985 955 950 23,720 21,509 23,282 19,985 17,888 17,574 17,726 14,390 13,154 3,748 3,541 4,369 4,179 3,521 3,654 3,336 3,242 2,868 35
f [F h Presid::nt's 1984 Message Associated Natural Gas Company [% A Wholly-Giened Subsidiary of Arkansas Poteer & Light Company The favorable trends needs of its residential and commercial customers. A loss which the natural gas of industrial sales to this direct purchase market would industry experienced cause a shift in the cost of service to the detriment of the small in the previous year consumer. carried forward into 1984. . Aug Cooler than normal weather during the first quarter of What has been referred
'
- 1984 produced a substantial increase in residential and to as the " gas bubble" .
commercial sales. Industrial sales increased even though gives indications of , \' there was a fourth quarter slump when a number of textile industries either reduced or ceased production because of becoming a proven long-term supply. (M ~ foreign competition. System sales showed an overall gain While there were of 10 percent when compared with 1983. minor fluctuations in + As a result of research being carried on by the Gas the Company's cost of gas, %y Research Institute and the American Gas Association, new G.sdh the average unit price "g and expanded markets are being developed. Afore efficient was approximately 7 percent below the prior h ?
\-Q$ heating equipment and other improved gas-consuming appliances are already on the market. The public interest year. This benefit was passed on to the ultimate consumer being stimulated by this new equipment should hase a in the form of a reduced Purchased Gas Adjustment charge. beneficial effect upon future gas sales.
The deregulation of a substantial portion of the gas supply To meet the requirements of this more complex and on January 1,1985, went largely unnoticed in the industry. competitive market, greater emphasis is being placed on Present indications are that competition with other fuels, employee training and skills development. The Company particularly oil, will have a greater impact on future gas remains confident that it can successfully cope with the prices than will deregulation. challenges in this transition phase of the naturalgasindustry. The abundance of supply has produced gas-to-gas competition. A large number of brokers seeking to arrange g short-term, spot-market sales has created a demand among major industrial users for contract carriage. This develop- L Thurl hicSpadden ment may cause problems for the Company which must President and Chief Operating Officer have some assurance of a long-term supply to meet the Associated Natural Gas Company Associated Natural Gas Company Associated Natural Gas Company Officers Directors Jerry L Afaulden Paul C. flughes L Thurl hicSpadden Chairman of the Board and President and Chief Taccutive Officer President and Cluef Operating Ofjicer Chief hecutive Officer Farmers Soybean Corporation of the Company Age 48 Blytheville. Arkansas Blytheville, Arkansas L. Thurt hicSpadden Fial E. Ilunter, Jr. Guy Newcomb President and Chief Operating Olficer Attorney, Hunter & Hunter President Age 63 Neic Atadrid. Atissouri Commomvealth Savings and Iran Association O'""#d' A' A d"* Ernest L. AlcKenzie Jerry L Nfaulden Vice President. Secretarv. Treasurer Chairman of the Board and Kenneth E. Storey and Chief Fmancial 01fiser Chief hecutive officer President and Chief hecutive Officer Age 62 of the Company Tood Giant Super Atarlets, Inc.
### *d' Add"* " #d""' M """'i Ralph M. Wafter Vice Pre 3rdent. Operations Robert G. Mclianey Ralph M. Wafler Age 57 Vice President Vice President. Operations AI'"d"#" AI""""'#"" "l#"'C"*Td"V Glen E Veteto BlydumHe, Manw Assistant Treasurer Y """ A a n w Age 42 Ernest L McKenzie Var Pwudent Smdary. Tuasuur Ricky A. Gunter and Chief TinancialOfficer Asistant Treasurer oy,y,(o , pan, AX# b' Blytheville, Arnadsas Peggy Warrington Assistant Ses retary Age 61 3u
Arkansas Power & Light Company Officers Jerry L. Maulden Charles L. Steel John J. IIanton President and Chief Executive Officer Senior Vice President and Assistant Vice President, Chief Financial Officer, Age 49 to the President Treasurerand Assistant Secretary . Age 60 Age 43 I Michael B. Bemis Senior Vice President, Finance, Cecil L. Alexander Charles Kelly Regulation and Legal Services; Vice President, Public Affairs Vice President, Corporate Secretary and Assistant Treasurer Age 49 Communications Age 37 ^# R. A. Allen J hn M. Griffin Vice President, Customer Senices W. R. Soutnern Senior Vice President, Energy Supply Age 63 Vice President, Administrative Services
^E ^E" Kenneth R. Breeden Jack L. King Vice President, Marketing Louis Burgess Senior Vice President, Energy Delivery Age 36 Assistant Vice President and Special and Senices Assistant to the Senior Vice President, Age 45 Gene Campbell Energy Delivery and Services Vice President, Nuclear Operations Age 50 Age 44 Ccmpany Directory Transfer Agents for Preferred Stock-Union National Bank of Little Rock 1 Union National Plaza Little Rock, Arkansas 72203 First Commercial Bank Post Office Box 1471 Little Rock, Arkansas 72203 Registrar of Preferred Stock-First Commercial Bank Post Office Box 1471 Little Rock, Arkansas 72203 Certified Public Accountants-Deloitte liaskins & Sells One Shell Square New Orleans, Louisiana 70139 Executive Offices-Arkansas Power & Light Company First Commercial Building Capitol and Broadway Streets Little Rock, Arkansas 72203 (501) 371-4000 Associated Natural Gas Company 401 West Park Street i
Blytheville, Arkansas 72315 (501) 762-3660 Annual Meeting-Third Wednesda , of May The Company's 1984 Annual Report to the Securities and Eschange Commission on Form 10-K (including Financial Stit:ments and Financial Statement whedules) is available to any stockholder upon request, without charge. Persons interested in obtaining a copy should contact Mr. Michael B. Bemis, Sr. Vice President and Secretary, tt the address below: ARKANSAS POWER & LIGIIT COMPANY P.O. Bos 551 Little Rock, Arkansas 72203
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