ML13322A755
| ML13322A755 | |
| Person / Time | |
|---|---|
| Site: | San Onofre  |
| Issue date: | 04/28/1980 |
| From: | Hughes W Southern California Edison Co |
| To: | Saltzman J Office of Nuclear Reactor Regulation |
| References | |
| NUDOCS 8005060195 | |
| Download: ML13322A755 (61) | |
Text
- ~8005060
- i Southern California Edison Company P. 0. BOX 800 2244 WALNUTGROVEAVENUE ROSEMEAD. CALIFORNIA 91770 W. G. HUGHES, JR.
TELEPHONE MANAGER OF INSURANCE (213) 572-1079 April 28, 1980 Mr. Jerome Saltzman Chief, Antitrust & Indemnity Group Nuclear Reactor Regulation Nuclear Regulatory Commission Washington, D.C. 20555 Re:
Docket No. 50-206
Dear Mr. Saltzman:
In compliance with Section 140.21 of 10 CFR Part 140, the following materials are submitted on behalf of Southern California Edison Company and San Diego Gas F Electric Company, as 80% -
20% owners of San Onofre Nuclear Generating Station Unit 1:
- 1. One copy of Annual Report to the Securities and Exchange Commission (Form 10-K) for the fiscal year ended December 31, 1979.
- 2. Cash Flow Statement for the fiscal year ended December 31, 1979.
Sincerely WGH:JR Enclosures cc:
Messrs. H. Fred Christie Michael L. Noel D. N. Barry III F. P. Williams
SOUTHERN CALIFORNIA EDISON COMPANY 1980 Internal Cash Flow Projection for San Onofre Nuclear Generating Station Unit 1 (Dollars in Thousands) 1979 1979 Actual Projected Net Income After Taxes
$346,219 Less Dividends Paid 221,400 Retained Earnings
$124,819 Adjustments:
Depreciation and Amortization
$178,637 192,000 Deferred Income Taxes and Investment Tax Credits 66,037 28,000 Allowance for Funds Used during Construction (118,566)
(167,000)
Total Adjustments
$126,108
$ 53,000 Internal Cash Flow
$250,927 Average Quarterly Cash Flow
$ 62,732 Percentage Ownership Unit #1 80%
Southern California in All Operating Edison Company Nuclear Units 20%
San Diego Gas &
Electric Company Maximum Total Contingent Liability
$ 10,000 Company policy prohibits disclosure of financial data which will enable unauthorized persons to forecast earnings or dividends, unless assured confidentiality. The Net Estimated Cash Flow for 1980 is expected to be comparable to the Actual Cash Flow for 1979.
4/28/79
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1979 Commission File Number 1-2313 SOUTHERN CALIFORNIA EDISON COMPANY (Exact name of registrant as specified in its charter)
California 95-1240335 (State or other jurisdiction of Incorporation or organization)
(IRS Employer Identification No.)
2244 WALNUT GROVE AVENUE (P.O. BOX 800), ROSEMEAD, CALIFORNIA 91770 (Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code (213) 572-1212 Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange Title of each class on which registered Capital Stock Original Preferred American and Pacific (Par Value $8V/ per share)
Cumulative Preferred (Par Value $25 per share)
American and Pacific 4.08% Series 4.24% Series 4.32% Series 4.78% Series 5.80% Series 8.85% Series 9.20% Series
$100 Cumulative Preferred (Par Value $100 per share)
American and Pacific 7.58% Series 8.54% Series 8.70% Series 8.96% Series Preference (Par Value $25 per share)
American and Pacific 5.20% Convertible Series Common Stock New York and Pacific (Par Value $8V3 per share)
Funded Debt First and Refunding Mortgage Bonds American (Series F through Series S, Series Y through Series CC, Series EE through Series JJ and Series MM) 31/e % Convertible Debentures, New York and Pacific Due 1980 Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes t/.
No The total number of shares outstanding at December 31, 1979 of the Company's Common Stock, $8/3 par value, was 64,894,936.
Docket#
1o-2.06 Control # 6Opso 66 /5 Date of Documenti REGELAIPORY DOC-NUT FILE COPY RiEGULAORYD O;CKET FILE
TABLE OF CONTENTS PART I Item Page 1. B u s in e s s.................................................................
3
- 2. S um m ary of O perations.......................................
11
- 3. Properties 11
- 4. Parents and Subsidiaries 15
- 5. Legal Proceedings 15
- 6. Increases and Decreases in Outstanding Securities and Indebtedness 19
- 7. Changes in Securities and Changes in Security for Registered Securities 20
- 8. Defaults upon Senior Securities 20
- 9. Approximate Number of Equity Security Holders 20
- 10. Submission of Matters to a Vote of Security Holders 21
- 11.
Indemnification of Directors and Officers 21
- 12. Financial Statements, Exhibits Filed and Reports on Form 8-K 21 PART II
- 13. Security Ownership of Certain Beneficial Owners and Management.............. 56
- 14. Directors and Executive Officers of the Registrant 56
- 15. Management Remuneration and Transactions 56 S ig n a tu re s....................................................................
5 7 E x h ib it 1..........
5 9 2
PART I Item 1. Business J
Southern California Edison Company ("Company") was incorporated in 1909 under Cali fornia law and is a public utility primarily engaged in the business of supplying electric energy to a 50,000 square-mile area of central and southern California, excluding the City of Los Angeles and certain other cities. This area includes some 800 cities and communities and a population of more than eight million people. As of December 31, 1979, the Company had 12,917 employees.
General problems of the industry The electric utility industry in general is currently experiencing problems relating to (i) high costs of fuel, wages and materials, (ii) vast capital outlays and longer construction periods for the larger and more complex new generating units needed to meet current and future service requirements of customers, (iii) greater reliance on capital markets with high costs of both equity and borrowed capital, (iv) an uncertain supply of natural gas, (v) effects of compliance with numerous regulatory and environmental requirements, and (vi) difficulties and delays in obtaining needed rate increases. The Company is, to varying degrees, currently experiencing all of these problems.
Regulation The retail operations of the Company are subject to regulation by the California Public Utilities Commission ("CPUC"), which has the authority to regulate, among other things, retail rates, issuances of securities and accounting and depreciation practices. The Company's resale operations are subject to regulation by the Federal Energy Regulatory Commission
("FERC") as to rates on sales for resale, as well as other matters, including accounting and depreciation practices.
The Company is subject to the jurisdiction of the Nuclear Regulatory Commission ("NRC")
with respect to nuclear power plants. NRC regulations govern the granting of operating licenses for the construction and operation of nuclear power plants and subject such power plants to continuing review and regulation.
The Company's plant construction, planning and siting are subject to the jurisdiction of the California Energy Commission. The Company is subject to rules and regulations promul gated by the California Air Resources Board ("ARB") and local air pollution control districts with respect to the emission of pollutants into the atmosphere, and the regulatory requirements of the California Water Resources Control Board and regional boards with respect to the dis charge of pollutants into waters of the state. The Company is also subject to regulation by the Environmental Protection Agency ("EPA"), which administers certain federal statutes relating to environmental matters, and to certain other federal, state and local laws and regula tions relating to environmental protection and land use.
The Department of Energy has regulatory authority over certain aspects of energy con servation, solar energy development, power plant fuel use, coal conversion, public utility regulatory policy and natural gas pricing.
RATE MATTERS Retail rates Effective January 1, 1979, the Company was granted a general rate increase designed to produce annual revenues of approximately $124,000,000, based on a 1979 test year. This amount included a $102,000,000 interim rate increase which became effective in July 1978.
The 3
EGU IRY BCKEI FILE COPY
decision authorized an increase in rate of return on common equity from 12.63% to 13.49%
and raised the authorized rate of return on rate base from 8.98% to 9.60%.
On December 26, 1979, the Company filed with the CPUC a general rate application designed to increase annual revenues by approximately $340,000,000, based on a 1981 test year. The application requests rate relief as a result of a general increase in operating expenses and financing costs. In addition, the application requests an average annual rate of return on common equity of 15% and on rate base of 10.78% for the period 1981-82. Because of the two-year cycle adopted by the CPUC in granting general rate increases, the rate request takes into consideration increases in costs expected to occur in the year following the test year.
Energy cost adjustment clause The Company's Energy Cost Adjustment Clause ("ECAC"), adopted by the CPUC in 1976, provides for adjustments in rates, subject to CPUC approval, to reflect changes in energy costs.
Under the ECAC procedure, a balancing account has been established in which energy costs above or below those used in establishing rates are accumulated, and the accumulated amount is reflected in succeeding rate adjustments. The balance in the ECAC balancing account, repre senting accumulated net undercollections and accrued interest, was approximately $303,600,000 at December 31, 1979. Under present ECAC procedures, changes in energy costs subject to CPUC jurisdiction should not affect the Company's reported earnings because such costs are reported as operating expenses only as they are reflected in electric rates and thereby offset by revenues.
From January 1, 1979 to March 1, 1980, the Company experienced an increase of approxi mately 80% in fuel oil costs (see "Fuel Supply" below), a portion of which has been recognized in previous ECAC adjustments. This increase (as well as increases in other energy costs),
coupled with an inherent lag in the recovery of cost increases under the ECAC procedure and past delays in receiving CPUC approvals, has resulted in increased short-term borrowing requirements.
On October 23, 1979, the CPUC granted, effective November 1, 1979, an annual increase in ECAC revenues of approximately $431,600,000 out of the Company's $466,600,000 ECAC request.
The CPUC decision deferred consideration of approximately $35,000,000 of ECAC undercollec tions pending evaluation of the results of a consultant's report on the reasonableness of oper ating capacity factors at the Company's coal-fired power plants. The Company believes that operating practices at its coal-fired plants have been prudent and reasonable.
On January 29, 1980, the CPUC issued three orders designed to improve the operation of the ECAC. First, the CPUC granted a Company petition to modify the October 23 ECAC decision by accelerating the collection of approximately $81,000,000 in revenues during the period February 3 through April 30, 1980.
Second, as part of its continuing investigation into the operation of the ECAC, the CPUC issued an interim order providing for more timely recovery of increases in energy costs. This interim order provides for adjustments in rates three times a year rather than twice yearly, with each adjustment based on estimates of fuel prices and balancing account amounts at the adjustment date and forecasted energy mix and sales estimates, in contrast to historical data. In addition, the period over which amounts in the balancing account are to be amortized will be determined at the time of each adjustment, and will no longer be a fixed 12-month period as previously called for.
Third, the CPUC increased the rate for accruing interest on undercollections or over collections in the balancing account from a fixed rate of 7% to a variable rate equal to the Federal Reserve Bank three-month Prime Commercial Paper rate.
4
On March 5, 1980, the Company filed an application under the revised ECAC procedure requesting an increase in ECAC revenues, effective May 1, 1980, of approximately $740,600,000 annually and amortization of undercollections in the balancing account over a six-month period.
The Company believes that the revised interim ECAC procedures should provide more timely recovery of accumulated undercollections in the balancing account and should reduce its short-term borrowing requirements from those which would otherwise be required. However, any significant delay in receiving ECAC adjustments or recovering ECAC undercollections could result in serious financing and cash flow problems for the Company.
Resale rates Under FERC procedures, increases in resale rates are permitted to become effective, subject to refund with interest to the extent that the FERC subsequently determines that the requested increases are inappropriate. The Company's January 15, 1979 filing with the FERC, designed to increase resale rates at an annual level of approximately $5,500,000, became effective, subject to refund, on August 16, 1979. On August 1 and August 22, 1979, the FERC issued decisions on the Company's rate filings which became effective, subject to refund, on August 4, 1974 and February 1, 1976, respectively. Certain of the Company's municipal resale customers have intervened in these proceedings, alleging an anti-competitive "price squeeze" with respect to the filed rates.
The August 1 decision affirmed the August 4, 1974 rate increase filed by the Company with respect to cost of service issues, but provided that it remain subject to refund pending resolution of the "price squeeze" issues. The August 22 decision ordered the Company to file a revised tariff to reduce annual revenues by approximately $3,600,000. Although such decision, if it were to become final, would require a refund of approximately $13,700,000, revenues in excess of this amount had been deferred in the Company's financial statements and the related interest accrued. The decision also found that the Company's resale customers had established a prima facie case of a price squeeze with respect to the filed rates and ordered the case re manded to an administrative law judge for hearings to determine the extent of a price squeeze, if any, with respect to the filed revised rates. Both the Company and certain intervenors have petitioned for a rehearing.
If a price squeeze is ultimately determined with respect to the above proceedings, the FERC may impose further rate reductions as a remedy, which would result in additional refunds.
The FERC decisions could also affect the pending antitrust litigation in federal district court discussed under "Antitrust litigation" under Item 5.
As of December 31, 1979, approximately $377,800,000 in incremental revenues attributable to resale rate increases had been billed, of which approximately $364,100,000 has been recorded as revenues. Of the amount billed, approximately $46,600,000 is no longer subject to refund by virtue of the appeals relative to a May 2, 1974 fuel clause adjustment having become final sub sequent to December 31, 1979. The Company does not believe that any other amounts which the FERC may require the Company to refund as a result of the proceedings relative to these increases will have a material financial effect. (See Note 3 to Financial Statements.)
5
FUEL SUPPLY Fuel costs Fuel and purchased power costs amounted to approximately $1.5 billion in 1979, 27.2%
higher than in 1978. Sources of energy and unit costs of fuel for 1975 through 1979 were as follows:
Sources of energy Average cost per million BTU's 1975 1976 1977 1978 1979 1975 1976 1977 1978 1979 Oil 46%
47%
56%
43%
44%
2670 2520 2540 2910 3400 Natural gas..........
13 11 15 18 23 87 125 185 205 239 Coal 14 14 14 10 11 28 36 41 53 71 Nuclear 5
3 3
3 4
17 29 34 36 43 All fuels.............
78 75 88 74 82 176 180 200 224 258 Hydroelectric 8
4 2
9 8
(1)
Purchased and interchanged power 14 21 10 17 10 (2) 100%
100%
100%
100%
100%
(1) There are no fuel costs associated with the Company's hydroelectric generation.
(2) For the year ended December 31, 1979, the cost of purchased power (primarily hydro electric) was 1.631 cents per kilowatt-hour.
The prices for oil now under contract are subject to various adjustments based on, among other factors, specified foreign prices for crude oil (including prices established by OPEC nations), import license fees and duties, royalties, taxes and transportation charges. From January 1, 1979 to March 1, 1980 the Company experienced an increase of approximately 80% in fuel oil costs. (See "Energy cost adjustment clause" under "Rate Matters" above.)
Average fuel costs, expressed in cents per kilowatt-hour for the year ended December 31, 1979 were: oil 3.3000; natural gas 2.5160; coal 0.8230; and nuclear 0.4640. Fuel costs per kilowatt-hour for the month of February 1980 were: oil 4.2380; natural gas 3.2690; coal 0.7870; and nuclear 0.5650.
Natural gas supply A number of the Company's major steam electric generating units are designed to burn oil or natural gas as a primary boiler fuel. The Company's use of natural gas boiler fuel is dependent upon the amount of gas available from the Company's primary gas supplier as well as upon applicable federal and state laws and regulations. The Company cannot predict with any certainty the extent to which natural gas will continue to be a significant source of fuel for the generation of electric energy. To the extent the Company's use of natural gas is restricted, it will be forced to rely more heavily on fuel oil, with resulting increases in fuel expenses.
Fuel oil supply Air pollution control laws and regulations applicable to the Company's oil-and gas-fired steam electric generating units have required the Company to depend to an increasing extent on more costly 0.25% low-sulphur fuel oil. The Company now has under contract approximately 90% of its estimated requirements for 0.25% sulphur oil through 1986. The balance of its fuel oil requirements is expected to be met with oil to be purchased on the spot market and under short-term contracts or through flexibility in existing long-term contracts.
6
At March 1, 1980, the Company had in inventory enough low-sulphur fuel oil to supply the Company's oil-burning facilities for at least 90 days, assuming projected utilization of the Company's coal-burning, nuclear and hydroelectric facilities and purchased and interchanged power. If the Company cannot purchase enough low-sulphur fuel oil to meet its fuel oil re quirements in the future, it may still be able to acquire higher-sulphur fuel oil. However, the Company's ability to burn such higher-sulphur fuel oil would be dependent upon obtaining variances under air pollution control regulations.
Nuclear fuel supply The Company has contractual arrangements covering 100% of the nuclear fuel cycle for San Onofre Nuclear Generating Station ("San Onofre") through the years indicated below:
Units Unit 1 2 & 3 Mining and milling to produce concentrates()
1984 1984 Conversion 1990 1990 Enrichment..............
2014 2009 Fabrication 1992 1984 Spent fuel storage(2) 1992 1992 (1) The Company has contracted for approximately 50% of the uranium concentrates required for San Onofre Units 1, 2 and 3 from 1985 through 1990. Approximately 47% of the Com pany's uranium concentrate requirements for the period 1980 through 1990 are expected to be provided by a mine and mill in which Mono Power Company ("Mono"), a wholly-owned subsidiary of the Company, is a participant. (See Note 1 to Financial Statements for more information on Mono's activities.)
(2) The dates indicated assume full utilization of the capacities of on-site storage now existing and under construction and off-site storage currently under contract for normal operations of these Units, including interpool transfers. If additional storage or permanent disposal is unavailable when storage limits are reached, other arrangements will be required, the availability or cost of which the Company cannot predict at this time.
Participants in the Palo Verde Nuclear Generating Station Units 1, 2 and 3 ("Palo Verde")
have contractual commitments for the supply of uranium concentrates, conversion services and related fuel fabrication services required for approximately 17 years of operation for all three nuclear units. Contracts have also been entered into with the Department of Energy for uranium enrichment services covering the estimated life of the three units.
Although the Palo Verde participants have no commitments for off-site storage of fuel discharged from reactors, on-site storage for spent fuel is being planned to accommodate normal operation through 1990 for Unit 1 and through later dates for Units 2 and 3. The timing of when and the extent to which off-site storage may be required cannot be accurately predicted at this time.
Coal supply Coal supplies for the operation of the Mohave and Four Corners Projects (see Item 3) are obtained pursuant to purchase contracts which extend over the expected useful lives of those projects and provide for the purchase of low-sulphur coal to support anticipated levels of operation during such periods.
7
Powerplant and Industrial Fuel Use Act of 1978 Full implementation of the Powerplant and Industrial Fuel Use Act of 1978, administered by the Department of Energy through the Economic Regulatory Administration, could preclude the utilization of natural gas and petroleum fuels in new power plants and could limit the utilization of natural gas and petroleum fuels in existing power plants, unless reasonable exemption stand ards and procedures are implemented. The Act's impact on the Company is not presently determinable.
President's energy proposals In July 1979, President Carter announced a program calling for, among other things, reduc ing oil imports over the next ten years, requiring utilities to reduce current oil usage by 50% by 1990 and requiring electric and gas utilities to offer long-term financing to their residential and commercial customers for conservation improvements to structures, with the loans being included in utility rate bases and being repaid when the structures are sold. The President's proposed program has now evolved to include as its goal a reduction of oil and gas consumption by electric utilities by one million barrels of oil (equivalent) per day, to be accomplished by a mandatory Phase I conversion to coal program and a voluntary Phase II oil and gas displacement program with partial federal grant assistance in both phases. The Company has no plants anticipated to be included in Phase I, and it is unable at this time to determine the extent to which any such program, if implemented, would affect its operating cost and capital expenditure levels.
ENVIRONMENTAL MATTERS Legislation and regulation Legislative and regulatory activities in the areas of air pollution, water pollution, waste management, noise abatement, land use, aesthetics and nuclear control continue to result in the imposition of numerous restrictions on the operation by the Company of its existing facilities and on the timing, cost, location, design, construction and operation by the Company of new facilities required to meet its future load requirements. These activities substantially affect future planning and will continue to require modifications of the Company's existing facilities and operating procedures. They also increase the risk of forced abandonment of construction projects with a resultant loss of design, engineering and construction costs and the payment of cancellation charges which in the aggregate could be substantial.
The two principal federal environmental statutes are the Clean Air Act, as amended, and the Clean Water Act. Both regulatory schemes are administered by the EPA in conjunction with state and local governments.
The Clean Air Act provides the statutory framework to implement a program for achieving national ambient air quality standards and provides for maintenance of air quality in areas exceeding such standards. As a result, the Company may incur additional expenses in reducing or eliminating emissions at existing facilities and in constructing new facilities.
However, because major regulations relating to the 1977 amendments to the Act have not as yet been finalized, the Company is unable at this time to determine the extent to which such amendments will affect its operations and capital expenditures.
Regulations under the Clean Water Act require the obtaining of permits for the discharge of certain pollutants into the waters of the United States. Under the Act, the EPA issues effluent limitation guidelines, pretreatment standards and new source performance standards 8
for the control of certain pollutants. Individual states may impose still more stringent limitations.
In order to comply with guidelines and standards applicable to steam electric power plants, the Company is incurring additional expenses and capital expenditures. Additional regulations will be issued but the Company is unable to predict the extent to which such additional regula tions will affect its operations and capital expenditure requirements. The Company presently has discharge permits for all its facilities.
The State of California has adopted a policy discouraging the use of fresh water for plant cooling purposes at inland locations. Such a policy, when taken in conjunction with existing federal and state water quality regulations and coastal zone land use restrictions, could sub stantially increase the difficulty of siting new generating plants anywhere in California.
Currently pending environmental rulemaking and compliance proceedings and litigation involving the Company are discussed under "Environmental administrative proceedings and litigation" under Item 5. The effect of the Company's use of low-sulphur fuel required by air quality regulations is discussed under "Fuel Supply" above.
Environmental expenditures The Company's estimated capitalized expenditures for environmental protection for the years 1969 through 1979 and its projected capital expenditures for such purposes for the years 1980 through 1984 (based upon the Company's December 20, 1979 plant budget/forecast) are:
(Thousands of Dollars)
Air Water Solid Noise Additional pollution pollution waste abate-plant Miscel Years Total control control disposal ment Aesthetics capacity laneous 1969-1979
$672,098
$ 55,851
$ 24,060
$ 2,750 4,153
$536,713
$ 3,746
$ 44,825 1980 212,874 29,090 21,293 280 5,488 108,758 168 47,797 1981 185,619 61,593 9,907 15 483 89,876 23,745 1982 151,121 60,141 2,178 18 174 81,588 25 6,997 1983 94,442 14,557 174 78,039 106 1,566 1984 80,026 19 83 78,172 357 1,395 These estimates include currently effective legislation and do not include potential costs associated with certain environmental proceedings. (See "Environmental administrative pro ceedings and litigation" under Item 5.)
Projected capital expenditures for environmental pro tection are subject to continuous review and periodic revisions because of escalation in engineering and construction costs, additions and deletions of planned facilities, changes in technology, evolving environmental regulatory requirements and other factors beyond the Company's control. The Company believes that costs incurred for these environmental pur poses will be recognized by the CPUC and the FERC as reasonable and necessary costs of service for rate purposes.
9
SOUTHERN CALIFORNIA EDISON COMPANY OPERATING STATISTICS Year Ended December 31,
%7 1979 1975 1976 1977 1978 1979 Total Energy Generated and Purchased -
KWH (000):
Generated -
Net Station Output Hydroelectric Plants...................
4,732,201 2,550,415 1,509,058 5,887,687 5,009,320 7.6 Thermal Plants........................
42,925,421 44,671,019 55,417,884 47,183,394 54,389,360 82.1 Total Generated.................
47,657,622 47,221,434 56,926,942 53,071,081 59,398,680 89.7 Purchased Power......................
4,773,360 11,933,835 6,009,426 10,535,636 6,084,396 9.2 Power Interchanged (Net)..............
2,692,853 272,658 408,338 270,399 733,834 1.1 Total Generated, Purchased and Interchanged...................
55,123,835 59,427,927 63,344,706 63,877,116 66,216,910 100.0 Company Use.................
(116,100)
(94,364)
(119,748)
(115,050)
(110,334)
Losses and Unaccounted for............
(3,680,227)
(5,648,185)
(5,498,685)
(6,735,031)
(6,588,715)
Total Energy Consumption........
51,327,508 53,685,378 57,726,273 57,027,035 59,517,861 Energy Consumption -
KWH (000):
Residential.............................
13,493,387 13,946,809 14,285,971 15,369,184 16,191,091 27.2 Agricultural............................
1,074,606 1,275,643 1,377,939 851,017 975,311 1.6 Commercial............................
12,036,129 12,951,697 13,388,075 13,937,000 14,454,319 24.3 Industrial..............................
15,055,646 15,622,603 16,393,105 16,652,243 17,351,728 29.2 Public Authorities.......................
5,578,669 5,621,955 5,666,173 5,813,443 5,559,687 9.3 Interdepartmental 962 914 731 1,015 1,134 Resale 4,088,109 4,265,757 6,614,279 4,403,133 4,984,591 8.4 Total Energy Consumption........
51,327,508 53,685,378 57,726,273 57,027,035 59,517,861 100.0 Operating Revenues -
(000):
Residential.............................
$ 564,389
$ 589,397
$ 616,520
$ 704,658
$ 764,595 29.8 Agricultural............................
37,521 45,338 50,781 40,449 47,146 1.8 Commercial............................
413,458 464,254 505,469 610,735 663,678 25.9 Industrial..............................
389,829 430,427 481,587 593,580 683,013 26.7 Public Authorities.......................
153,850 166,038 188,054 206,838 225,351 8.8 Interdepartmental......................
29 27 22 30 39 Resale 97,439 120,459 208,145 138,253 169,304 6.6 Customer Refunds......................
(20,881) 17,072 Operating Revenues -Sales 1,635,634 1,833,012 2,050,578 2,294,543 2,553,126 99.6 Other.................................
11,500 13,528 14,336 34,255 10,848 0.4 Total Operating Revenues.........
$1,647,134
$1,846,540
$2,064,914
$2,328,798
$2,563,974 100.0 Number of Customers:
Residential..
2,438,903 2,497,076 2,572,826 2,648,841 2,733,435 88.7 Agricultural...........................
24,997 25,465 25,888 25,802 25,768 0.8 Commercial............................
222,694 227,143 234,276 242,264 252,594 8.2 Industrial..............................
30,410 31,405 33,791 35,126 35,792 1.2 Public Authorities........................
32,658 33,294 34,053 34,491 34,769 1.1 Interdepartmental.......................
2 2
2 2
2 Resale 16 18 20 19 22 Total Customers.................
2,749,680 2,814,403 2,900,856 2,986,545 3,082,382 100.0 Averages:
Annual Use Per Residential Customer (KWH) 5,596 5,650 5,630 5,883 6,010 Annual Revenue Per Residential Customer(a)
$234.07
$238.77
$242.98
$269.73
$283.81 Revenue Per KWH (a):
Residential............................
4.180 4.230 4.320 4.580 4.720 Commercial...........................
3.440 3.580 3.780 4.380 4.590 Industrial.............................
2.590 2.760 2.940 3.560 3.940 (a) Does not reflect Customer Refunds.
10
Item 2. Summary of Operations Information responding to this item is included with the financial statements in Item 12(a) (1) beginning on page 21 and in Exhibit 1, and should be read in conjunction with Management's Discussion and Analysis of Statements of Income beginning on page 22.
Item 3. Properties Existing generating facilities The Company owns and operates 11 oil-and gas-fueled electric generating plants, one diesel-fueled generating plant, 36 hydroelectric plants and San Onofre (in which the Company owns an undivided 80% interest), all located in central and southern California. In addition, the Company owns two small fossil-fueled electric generating units in Arizona and a 48%
undivided interest (768 megawatts ("MW")) in Four Corners Units 4 and 5, a coal-fueled steam electric generating plant in New Mexico (the "Four Corners Project") all of which are op erated by another utility. The Company also operates and owns a 56% undivided interest (885 MW) in the Mohave Project, two coal-fueled steam electric generating units in Clark County, Nevada (the "Mohave Project"). The Company also operates certain hydroelectric generating units owned by others in Arizona. Of the existing Company-owned generating capacity, approximately 79% is dependent on gas and oil fuel, 12% on coal, 3% on nuclear fuel and 6% is hydroelectric.
San Onofre, the Four Corners Project, certain of the Company's substations and certain portions of its transmission, distribution and communication systems are located on lands of the United States or others under (with minor exceptions) licenses, permits, easements or leases or on public streets or highways pursuant to franchises. Certain of such documents obligate the Company, under specified circumstances, at its expense to relocate transmission, distribution and communication facilities located on lands owned or controlled by federal, state or local governments.
With certain exceptions, major and certain minor hydroelectric plants, with related reservoirs, having an effective operating capacity of 875 MW and located in whole or in part on lands of the United States, are owned and operated under government licenses which expire at various times between 1980 and 2009. Such licenses impose numerous restrictions and obligations on the Company, including the right of the United States to acquire the project or the FERC to issue a license to a new licensee under certain conditions upon payment of specified compensation. Any new licenses issued to the Company are expected to be issued upon terms and conditions less favorable than those of the expired licenses. Applications of the Company for the relicensing of certain of the hydroelectric plants referred to above with an aggregate effective operating capacity of 21.4 MW are pending, and until such proceedings are completed, the Company has been issued annual license renewals for such projects.
As of March 1, 1980, the total Company area system operating capacity (summer rating) available to the Company under favorable operating conditions was approximately 15,163 MW.
The record peak area instantaneous demand experienced on the Company's interconnected system through March 1, 1980, was 12,662 MW on September 11, 1979.
Substantially all of the properties of the Company are subject to the lien of a trust indenture securing First and Refunding Mortgage Bonds, of which $2,627,530,000 principal amount was outstanding on December 31, 1979. Such lien and the Company's title to its properties are subject to the terms of franchises, licenses, easements, leases, permits, contracts and other instruments under which properties are held or operated, certain statutes and governmental regulations, liens for taxes and assessments, the lien of another trust indenture to the extent referred to below, and liens of the trustees under such indentures. In addition 11
such liens and the Company's title to its properties are subject to certain other liens, prior rights and other encumbrances, none of which, with minor or unsubstantial exceptions, affects the Company's right to use such properties in its business, unless the matters with respect to the Company's interest in the Four Corners Project and the related easement and lease referred to below may be so considered.
The properties acquired by the Company pursuant to the merger in 1963 of California Electric Power Company, together with all substitutions, replacements, additions, alterations, improvements and enlargements to, of, or upon such properties are, with certain exceptions, also subject to the prior lien of another trust indenture securing $66,000,000 principal amount of First Mortgage Bonds originally issued by that company and now outstanding.
The Company's rights in the Four Corners Project, which is located on land of the Navajo Tribe of Indians under an easement from the United States and a lease from the Navajo Tribe, may be subject to possible defects, including possible conflicting grants or encumbrances not ascertainable because of the absence of or inadequacies in the applicable recording law and the record system of the Bureau of Indian Affairs and the Navajo Tribe, the possible inability of the Company to resort to legal process to enforce its rights against the Navajo Tribe without Con gressional consent and, in the case of the lease, possible impairment or termination under cer tain circumstances by Congress or the Secretary of the Interior. The Company cannot predict what effect, if any, such possible defects may have on its interest in the Four Corners Project.
Generating facilities under construction The Company currently has approximately 5,000 MW of new generating facilities and 1,000 MW of new purchased power planned through 1989. Of the new generating facilities, 47% will use nuclear fuel, 28% will use natural gas and fuel oil, 19% will use coal, 4% will be hydroelectric and 2% will use other energy sources. The major generating facilities under construction are the following nuclear plants being built jointly with other utilities:
Company's share of Recorded Percent costs completed Estimated as of as of Net total December December Initial Full capacity cost(1) 31, 1979(1)
Facility Location 31, 1979 Power Facility (MW)
(000)
(000)
San Onofre San Clemente, 76 1981-1983 80.0%
1,760
$2,597,000
$1,536,327 2,3 CA Palo Verde Wintersburg, 28 1983-1984 15.8%
579 899,000 235,529 1, 2 & 3 AZ
& 1986 (1) Exclusive of fuel and related off-site transmission facilities. Estimates are subject to revision because of numerous factors, some of which are beyond the Company's control.
The application for an operating license for San Onofre Units 2 and 3 currently is under administrative review by an Atomic Safety Licensing Board, which has given persons-opposed to operation of the units permission to intervene in the proceedings.
Nuclear power developments As a result of evaluations of the accident at Three Mile Island Nuclear Power Plant ("TMI"),
the NRC required a review of the design and operating procedures of all operating nuclear power plants and in March 1979 initiated a pause in issuing licenses for nuclear power plants not yet in operation. On February 28, 1980, the NRC voted to resume licensing nuclear power plants.
12
In October 1979 the President's Commission on the accident at TMI submitted its report (the "Kemeny Report") to President Carter and released its findings and recommendations to the public. The Kemeny Report recommends a restructuring of the NRC and numerous changes in existing policies and procedures in order to emphasize safety. A number of such recommen dations have been or are in the process of being implemented by the Company.
San Onofre Unit 1 has been operating under a provisional operating license since 1968.
Although the Unit is different in design from TMI, the Company has been ordered to implement certain design and operating procedure changes. Pursuant to an NRC order, the Company removed Unit 1 from service on January 26, 1980 to perform the initial required design changes, and on February 10, 1980 the Company returned the Unit to service. The Company expects to remove the Unit from service in April 1980 for routine refueling, at which time additional TMI design changes will be implemented. The Company expects to remove the Unit from service again in late 1980 to perform the remaining currently required design changes.
San Onofre Units 2 and 3, which are currently under construction, will also require certain design modifications as a result of the TMI accident. The Company believes that currently required modifications can be accomplished without delaying the construction of such Units.
However, because the NRC pause resulted in slowed administrative procedures in processing licenses by the NRC staff, the completion and operation dates of the Units have been rescheduled to April 1981 and December 1981, respectively, for Unit 2 and to mid-1982 and early 1983, respectively, for Unit 3. The Company estimates that the delays will increase its share of the total project cost for the Units by approximately $112,000,000, resulting primarily from the cost of carrying money invested in the project for the longer period. The Company will incur addi tional costs to make up any necessary generating capacity.
The Company cannot predict what other effects, if any, including legislative or regulatory actions, the TMI accident may have upon it or upon the construction, licensing or future opera tion of its San Onofre Units or the extent of any additional costs it may incur as a result thereof.
Construction expenditures Funds used by the Company for construction expenditures totaled $500,269,000 in 1977,
$567,831,000 in 1978 and $674,147,000 in 1979. Construction expenditures for the 1980-1984 period are estimated as of February 22, 1980, as follows:
(Thousands of dollars) 1980 1981 1982 1983 1984 Electric generating plants............................
$621,052 $ 730,568
$544,027 $384,046
$519,042 Electric transmission lines and substations..............
67,115 95,502 56,205 110,761 156,437 Electric distribution lines and substations..............
179,631 168,850 178,580 187,605 187,182 Other expenditures...............................
27,033 14,888 9,852 12,276 20,112 Total construction additions..........................
894,831 1,009,808 788,664 694,688 882,773 Less allowance for funds used during construction......
167,000 212,000 148,000 73,000 60,000 Funds required for construction expenditures............
$727,831
$ 797,808
$640,664
$621,688
$822,773 Approximately 50% of the total electric generating plant expenditures for the years 1980 through 1984 are related to the construction of the new nuclear units at San Onofre and Palo Verde. The Company's construction program and related expenditures are subject to con tinuous review and periodic revisions because of changes in estimated system load growth, rates of inflation, receipt of adequate and timely rate relief, the availability and timing of environmental, siting and other regulatory approvals, the scope of modifications required by 13
regulatory agencies, the availability and costs of external sources of capital and other factors beyond the Company's control.
To finance its construction program as shown in the above table for the five years through 1984, and to meet long-term debt maturities and preferred stock sinking fund requirements aggregating $507,017,000 during such years, the Company estimates that approximately
$2.5 billion will be required from external sources. (For more information concerning long-term debt and sinking fund requirements of the Company, see Notes 8 and 9 to Financial Statements).
The balance of funds required for those purposes is expected to be obtained from internal sources. The Company's ability to finance a portion of its continuing construction program from internal sources is largely dependent upon the timely recovery of increased energy costs through the operation of its ECAC. (See "Energy cost adjustment clause" under "Rate Matters" under Item 1.)
The timing, type and amount of all additional external financing are dependent upon market conditions, rate relief and other factors, including restrictions imposed by the Company's Articles of Incorporation and trust indenture.
Effect of governmental utilities and utility districts Under various acts of Congress, federal power projects have been constructed in California and neighboring states. Municipally-owned utilities, cooperative utilities and other public bodies have certain preference over investor-owned utilities in the purchase of electric power provided by federally funded power projects and, in addition, have certain preference over investor-owned utilities in connection with the acquisition of licenses to build hydroelectric power plants on federal lands. Any energy which is or may be generated at these projects and transmitted for the account of such other utilities and public bodies over present or future government or utility-owned lines into the territory or markets served by the Company would result in a loss of sales by the Company.
Under the laws of California, utility districts may be formed and may include incorporated as well as unincorporated territory. Such districts, as well as municipalities, have the right to construct, purchase or condemn and operate electric facilities. In addition, when a city owning an electric system annexes adjacent unincorporated territory which the Company has previously served, the Company may experience a loss of customers.
The Company's construction permits for San Onofre Units 2 and 3 contain certain condi tions, the terms of which require the Company (i) to permit privately or publicly-owned utilities, including the Company's resale customers, within or adjacent to the Company's service area, on timely notice, to participate on mutually agreeable terms in future nuclear units initiated by the Company, and (ii) to interconnect and coordinate reserves with, furnish emergency service to, sell to and purchase bulk power from, and provide certain transmission services for, such utilities.
The Company has also entered into agreements with certain of its resale customers which contemplate their possible participation in jointly-owned generating projects initiated by the Company, and the integration of power sources acquired by each such customer, including the dispatching, reserve sharing, partial power supply requirements and transmission services required in conjunction with such integrated operations. Pursuant to these agreements, two resale customers have exercised an option to participate in the Company's ownership entitle ment in San Onofre Units 2 and 3. The Company has recently negotiated definitive agreements with these two resale customers which specify the services to be provided. The foregoing conditions and agreements involve the potential loss of generation and transmission capacity and sales of power. The Company is unable to determine what effect, if any, these potential losses will have on its business and operations.
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Item 4. Parents and Subsidiaries All subsidiaries of the Company are California corporations and are wholly-owned by the Company. The subsidiaries, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary. Investments in these subsidiaries are accounted for by the equity method. (See Note 1 to Financial Statements.)
Item 5. Legal Proceedings Antitrust litigation In 1978, five of the Company's resale customers, the California cities of Anaheim, Riverside, Banning, Colton and Azusa, filed a suit against the Company in the U.S. District Court for the Central District of California alleging violation of certain antitrust laws. The complaint seeks certain injunctive relief and damages in excess of $23,000,000, consequential damages and the trebling of such damages.
One principal contention set forth in the complaint is that the Company is engaging in anti-competitive behavior by charging more for wholesale electricity sold to the resale customers than the Company charges certain classes of its retail customers. The plaintiffs have alleged that there is a resulting anti-competitive "price squeeze" in that the resale customers, to recover their higher costs of supply, are required to raise some or all of their retail rates to levels exceeding the Company's comparable retail rates. The plaintiffs allege that this has the effect of inhibiting the resale customers' ability to persuade their existing or potential customers to remain or locate within their service areas and preventing such resale customers from remaining as viable electric systems.
Another principal contention is that the Company, in violation of the antitrust laws, has taken actions alone and in concert with other utilities to prevent or limit such resale customers from obtaining bulktpower supplies from other sources to reduce or replace the resale customers' wholesale purchases from the Company. The Company is alleged to have entered into agreements and understandings with other investor-owned utilities to preempt bulk power supplies available from other utilities in the Pacific Northwest and in California and to have unilaterally restricted the sale of transmission services to and within California in such a way that the resale customers are prevented from obtaining transmission services to transmit bulk power supplies from outside California.
In May 1979, the Court continued a stay of the proceedings pending resolution of the FERC proceedings described below. On February 15, 1980, the Court lifted the stay on discovery and set February 10, 1981, for the next status conference.
The same five resale customers have intervened in the Company's three resale rate proceedings currently before the FERC alleging, among other things, that the Company has engaged in certain anti-competitive activities similar to those described above. (See "Resale rates" under "Rate Matters" under Item 1.)
Four of the same resale customers also have made charges with the FERC in separate pro ceedings alleging that the Company, through contracts for the purchase of power over the Pacific Intertie and through its participation in the California Power Pool Agreement, has engaged in anti-competitive conduct by restricting access to the Intertie transmission facilities and by preventing the resale customers from purchasing power from suppliers in the Pacific Northwest. The resale customers have asked the FERC to modify these contracts and to order the Company to provide transmission service to them. Hearings before the FERC are currently in progress in connection with this latter proceeding.
These FERC proceedings could adversely affect the pending district court antitrust litigation described above. However, these judicial and administrative proceedings involve complex 15
issues of law and fact, and, although the Company is unable to predict their final outcome or the possible effect of the FERC proceedings on the district court case, it categorically denies the allegations of these resale customers.
Fair employment practices matters In 1972 a charge was filed with the Federal Equal Employment Opportunity Commission
("EEOC"), and in 1974 a class action lawsuit was filed in federal court, both of which alleged that the Company had engaged in unlawful, discriminatory employment practices against women and certain minorities.
Although denying that it had engaged in any unlawful employment practices, the Company entered into a Conditional Settlement with the EEOC and the representatives of most of the class action plaintiffs which was submitted to the federal court for approval as a consent decree in 1977. The estimated cost of this settlement is initially $700,000 with the possibility of an addi tional estimated $300,000 in payment on individual awards after hearings.
On December 31, 1979, the Court filed a memorandum indicating that it intends to approve the Conditional Settlement. It is not known at this time whether an appeal would be taken from any such approval. If the Court's approval were to be reversed on appeal and the case tried, it is the opinion of Company counsel that the Company has a number of defenses which should be sustained by a court and which, among other things, have the effect of limiting monetary damages. The Company believes, based on a current analysis of the applicable law and facts, that the amount of any recovery for monetary damages, including back pay, should not have a material financial effect.
Environmental administrative proceedings and litigation Four Corners Project In 1978 the EPA issued citations alleging excessive emissions of particulates and violations of the opacity regulations applicable to Four Corners Units 4 and 5. Because of the way the standards have evolved, Arizona Public Service Company, the operating agent, believes that no such violations of applicable standards have occurred to date. However, if more recently enacted New Mexico regulations are rejected by the EPA, that agency might attempt to exact fines from the participants of up to $25,000 per pollutant per day for past alleged violations.
Such an attempt would be resisted by the Company and the other participants as being without merit.
In 1978, the Four Corners participants, New Mexico regulatory agencies and environmental groups reached a settlement providing for the installation of emission control systems for com pliance with state sulphur dioxide ("SO2 ") and particulate emission rules. The Company's share of the total project cost had been estimated at $163,680,000 and was scheduled for operation in December 1982. However, as a result of technical problems relating to a proposed horizontal scrubber system, the Four Corners participants have elected not to proceed further with the application of horizontal scrubbers for SO 2 removal, but rather to pursue alternate technologies for that purpose. While the cost of an alternative technology is presently unknown, the par ticulate removal program continues as planned at an estimated cost to the Company of
$86,400,000.
In June 1979, the New Mexico Environmental Improvement Board was requested to recon sider the applicable SO2 emission requirement. The reconsideration could lead to the adoption of a more stringent regulation, further increasing the costs of the Four Corners Project. To date, however, data indicates that emission levels are well below ambient standards and it is possible that the Board may eliminate or substantially ease the SO2 regulation. Other parties to the settlement have brought suit in a New Mexico state court seeking to enjoin Arizona Public 16
Service Company from pursuing such a change in the regulation, citing a provision in the settlement document to the effect that the regulation was to remain unchanged if initial monitor ing indicated that the regulation's emission limitations were sufficient to achieve the ambient standards.
If SO2 controls are required, it now appears doubtful that the design and installation of S02 equipment could be completed before December 1982, the compliance date required by the Clear Air Act, even if a necessity for such equipment were established at an early date. Further, if the New Mexico rule is approved by the EPA as part of New Mexico's State Implementation Plan, noncompliance penalties, which are the current subject of EPA rulemaking, could be assessed according to a formula based upon the "economic benefit" of delay. An extension of the final compliance period of a federally-approved rule can only be adopted by the Congress through an amendment to the Clean Air Act. Several bills have been introduced in the Congress to extend the compliance period.
The design and compliance date problems are further complicated by receipt of conflicting indications from the EPA as to the acceptability of the New Mexico regulations. Regardless of the EPA's decision, however, the rule could continue to have the effect of state law in New Mexico. In such event, the December 1982 final compliance date does not permit delay for an orderly progression of design, procurement, and construction of the equipment needed for compliance. While it is not certain what approach the State would take in the event of delayed compliance, any attempt to enjoin the plant's operation would be resisted by all of the partici pants.
Oxides of Nitrogen Rules All of the Company's conventional oil-and gas-fueled generating plants, which are located in South Coast Air Basin, are subject to oxides of nitrogen rules ("NOx Rules")
promulgated by the ARB for the South Coast Air Quality Management District ("SCAQMD")
and the Ventura County Air Pollution Control District. The NOx Rules are designed to achieve (1) a 90% reduction in NOx on a demonstration unit equal to or greater than 100 MW by January 1, 1982; (2) a 50% reduction in NOx on conventional generating units in the South Coast Air Basin by December 31, 1982; and (3) a 90% reduction in NOx on conventional generating units in the South Coast Air Basin by January 1, 1990.
The NOx Rules could require the Company to make substantial expenditures for pollution.
control equipment. It has been estimated that 50% reduction and 90% reduction would cost the Company $180,000,000 (1981 dollars) and $1.3 billion (1981 dollars), respectively, in capital and outage costs to retrofit the affected generating units. The ARB, however, is presently reconsidering the NOx Rules because the Congress may ultimately require the Company to reduce its use of oil, which could make some controls unnecessary. Due to these efforts to reconsider the NOx Rules, the Company appeared before the SCAQMD Hearing Board and obtained a variance until March 31, 1980. It is expected that the ARB will hold a hearing prior to the expiration of the variance to reconsider the NOx rule.
Alamitos and Redondo Generating Stations On April 11, 1979, the Company stipulated to an order with the SCAQMD to implement measures designed to prevent further emissions of particulates near the Company's Alamitos and Redondo Generating Stations. Compliance with the order will involve the expeditious refitting of certain of the power plants' machinery and equipment with more corrosion-resistant materials, and the early implementation of specific stack washing and boiler cleaning tech niques. Some disagreement exists between the technical staffs of the SCAQMD and the Company as to the extent of action required under certain of the order's provisions. Cost 17
estimates for implementation, therefore, presently range between $15,000,000 and $25,000,000.
A further hearing before the SCAQMD hearing board may be held to resolve these disagreements.
The Company will conduct a final test of the above particulate reduction measures between March 1981 and September 1981 and submit the data to the SCAQMD for consideration. If the implemented measures are accepted by the SCAQMD, the orders will be lifted in March 1982.
The Company would then be required to maintain the effectiveness of such measures.
In October 1979 the Company filed an answer to a SCAQMD civil complaint alleging a smoking violation at the Alamitos Generating Station in May 1979. The maximum exposure is a $500 fine.
In January 1980 the Company received notice of a SCAQMD misdemeanor criminal com plaint alleging a smoking violation at the Alamitos Station in November 1979. The maximum possible fine is $500.
Other Matters In November 1979 the Company received a notice from the San Diego County Air Pollu tion Control District alleging that the Company had operated an abrasive blast machine and a paint spray booth at the San Onofre construction site without a permit from the district.
In December 1979 the Company received notice of another such alleged violation. The alleged violations could result in civil complaints being issued. The maximum exposure is a $500 fine in each case.
In February 1980 the Company was served with an EPA civil administrative complaint alleging certain violations of the Toxic Substance Control Act concerning the handling, storage and disposal of polychlorinated biphenyls. The complaint proposes to assess a civil penalty of $9,000.
Tax litigation The Navajo Tribal Council has adopted, but not yet implemented, a possessory interest tax, a business activity tax and a sulphur emissions tax which could apply to the Four Corners Project. The validity of these taxes is currently being litigated by participants in the Project.
The Company cannot predict the ultimate effect of these taxes, if implemented, upon future costs associated with the Four Corners Project or their effect upon costs of power or fuel derived from certain other Arizona and New Mexico operations.
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Item 6. Increases and Decreases in Outstanding Securities and Indebtedness Changes in the amount of equity securities Common stock sold by the Company during 1979 which is registered under the Securities Act of 1933:
Number of Net proceeds shares to Company Common stock outstanding as of December 31, 1978....
62,536,581 Add:
Issuances through the Company's Dividend Reinvestment and Stock Purchase Plan (Registration File No. 2-62625)
- February 16, 1979 223,657
$5,707,730 May 16,1979 285,177 6,720,706 August 16,1979 294,868 7,232,456 November 16,1979 361,371 8,307,023 Issuances through the Company's Employee Stock Purchase Plan (Registration File No. 2-54685)
- April 2,1979 170,344 4,539,157 July 2, 1979 183,717 4,721,600 October 1, 1979 190,015 4,882,492 December 31, 1979 212,351 5,296,544 Issuances through the Company's Employee Stock Ownership Plan (Registration File No.
2-65941)**
February 16, 1979 6,921 184,445 May 16,1979 7,647 190,984 August 16,1979 7,633 195,596 November 16,1979 8,081 194,752 Miscellaneous issuances of common stock resulting from the conversion of 553,140 shares of Preference Stock, 5.20%
Convertible Series, at various times throughout the year*......
406,573 Total common stock outstanding as of December 31, 1979....
64,894,936
- Not previously reported because the aggregate number of shares issued did not exceed 5%
of total outstanding common stock.
"*Not previously reported because common stock issued and sold thr ough the Company's Employee Stock Ownership Plan was not registered under the Securities Act of 1933 prior to December 3,$1979.
On April 25, 1979 the Company issued and sold 525,000 shares of $100 Cumulative Preferred Stock, 8.70% Series A. (Reported on Form 10-Q for the quarter ended March 31, 1979.)
On September 13, 1979 the Company issued and sold 750'000 shares of $100 Cumulative Preferred Stock, 8.54% Series. (Reported on Form 10-Q for the quarter ended September 30, 1979.)
On February 13, 1980, the Company issued and sold 7,000,000 shares of common stock (Registration File No. 2-66416).
19
The net proceeds from the sales of the above common stock and Preferred Stock were used to reimburse the Company for monies expended for its construction program, exclusive of maintenance of service and replacements. The amounts so reimbursed became a part of the general treasury funds of the Company and, among other things, were used to retire short-term obligations outstanding at the date of such issuances.
Increase in the amount of debt securities On June 29, 1979 the Company issued and sold by private placement $105,000,000 principal amount of First and Refunding Mortgage Bonds, Series KK, Due 2004. (Reported on Form 10-Q for the quarter ended June 30, 1979.)
In September 1979, the Company entered into a financing agreement with certain foreign banks that permits the Company to borrow up to $50,000,000 at any time before September 18, 1980, at which time the Company is required to borrow any additional amount necessary to bring the total borrowings up to $50,000,000. The borrowings will be secured by the concurrent issuance of an equal principal amount of First and Refunding Mortgage Bonds, Series LL, Due 1987. There were no outstanding borrowings under this agreement at December 31, 1979.
(See Note 8 to Financial Statements.) (Reported on Form 10-Q for the quarter ended September 30, 1979.)
On October 18, 1979, the Company issued and sold $200,000,000 principal amount of First and Refunding Mortgage Bonds, Series MM, Due 2004. (Reported on Form 10-Q for the quarter ended September 30, 1979.)
Item 7. Changes in Securities and Changes in Security for Registered Securities On May 17, 1979, as a result of the cumulative effect of issuances of additional shares of common stock through the Company's Dividend Reinvestment and Stock Purchase Plan, Em ployee Stock Ownership Plan and Employee Stock Purchase Plan, the conversion price at which the 3%/%
Convertible Debentures, Due 1980, may be converted into the Company's common stock was reduced from $37.50 to $37.00.
Item 8. Defaults Upon Senior Securities None.
Item 9. Approximate Number of Equity Security Holders Approximate Number of Title of Class Record Holders*
Original Preferred.........................................
1,454 Cumulative Preferred (all series).........................
30,060
$100 Cumulative Preferred (all series).......................
8,664 Preference (all series)....................................
2,510 Common.........
138,441 3V8% Convertible Debentures, Due 1980 1,053 182,182
- Data shown for various classes of equity securities is as of January 5, 1980. Data shown for 31/a%
Convertible Debentures is as of December 31, 1979.
20
Item 10. Submission of Matters to a Vote of Security Holders (a)
Date and type of meeting:
Annual Meeting of Shareholders held April 19, 1979.
(b) Proxies for the meeting were solicited pursuant to Regulation 14A; there was no solicitation in opposition to the management's nominees as listed in the proxy statement and all of such nominees were elected.
(c)
No matters were voted upon other than election of directors and approval of inde pendent public accountants.
Item 11.
Indemnification of Directors and Officers The information required is unchanged from the 1976 Form 10-K.
Item 12. Financial Statements, Exhibits Filed and Reports on Form 8-K 12(a)(1) Financial Statements Page Management's Discussion and Analysis of Statements of Income 22 Report of Independent Public Accountants 24 Statements of Income -
Five Years Ended December 31, 1979 25 Balance Sheets -
December 31, 1978 and 1979 26 Statements of Changes in Financial Position -
Five Years Ended December 31, 1979....
28 Statements of Earnings Reinvested in the Business and Statements of Additional Paid-In Capital -
Five Years Ended December 31, 1979 29 Notes to Financial Statements 30 Supplementary Information to Disclose the Effects of Changing Prices (Unaudited)....
45 Schedules Supporting Financial Statements:
Schedule V -Property, Plant and Equipment for the Years Ended December 31, 1978 a n d 1 9 7 9................................
4 8 Schedule VI -
Accumulated Depreciation and Amortization of Property, Plant and Equipment for the Years Ended December 31, 1978 and 1979 50 Schedule XII -
Reserves for the Years Ended December 31, 1978 and 1979..
52 Information Required by Schedules IX, XIII and XVI is shown in the Financial Statements or Notes thereto.
Schedules I to XIX, inclusive, except those referred to above, are omitted as not required or not applicable.
21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF STATEMENTS OF INCOME 1979 compared with 1978 Primary earnings per share increased $1.04, or 29.5%, reflecting an increase in earnings available for common and original preferred stock of $90,255,000, or 44.6%, principally due to the net effect of the items discussed below.
Operating revenues increased by $235,176,000, or 10.1%, primarily due to the combined effect of a 7% increase in average revenue per kilowatt-hour ("KWH") and an increase in KWH consumption of 4.4%. The higher average revenue was largely attributable to a general rate increase, a substantial portion of which became effective in July 1978, and the balance of which became effective January 1, 1979. Approximately 32% of the increase in revenues, however, was attributable to the Company's Energy Cost Adjustment Clause ("ECAC"). The increase in KWH consumption resulted primarily from an increase of nearly 96,000 in the total number of customers.
Fuel expense increased by $347,607,000, or 32%, primarily because of increases in fuel oil and gas costs. However, energy costs increased only $103,994,000, or 8.4%, due primarily to the impact of the ECAC, which defers energy costs until reflected in succeeding rate adjust ments. (See "Energy cost adjustment clause" under "Rate Matters" under Item 1)
Other operation expenses increased $38,569,000, or 13.6%, primarily due to the impact of inflation on the costs of labor, materials and services and additional operation costs associated with system growth. The lower rate of increase over 1978, as compared with that of 1978 over 1977, reflected the increased emphasis by the Company on productivity improvement.
Maintenance expenses increased $13,296,000, or 8.1%, resulting primarily from the impact of inflation.
Depreciation expense increased by $21,434,000, or 13.6%, reflecting, in part, additional plant, but primarily the implementation, effective September 1, 1978, of higher depreciation rates authorized by the CPUC.
The increase in taxes on income of $27,489,000, or 37.8%, reflected the net effect of higher pre-tax net income, which was due primarily to the rate increase which became effective January 1, 1979, partially offset by the reduction from 48% to 46% in the federal statutory tax rate and an increase in the net investment tax credit.
ADC increased 51.2% in 1979 due to more construction work-in-progress, approximately two-thirds of which was related to the San Onofre Nuclear Generating Station. In addition, there was an increase in the ADC rate from 6.96% to 7.76% effective January 1, 1979.
The increase in total interest charges of $22,424,000, or 12.3%, reflected the combined effects of higher short-term interest rates and additional long-term debt outstanding during 1979.
1978 compared with 1977 Primary earnings per share decreased 280, or 7.4%, reflecting a decrease in earnings available for common and original preferred stock of $4,104,000, or 2.0%, principally due to the net effect of the items discussed below.
Operating revenues increased by $263,884,000, or 12.8%, due largely to higher ECAC revenues, which do not affect earnings but do represent cash flow. Total KWH consumption decreased by 1.2% as sales to special contract customers were down sharply due to the easing of drought conditions and consumption by customers, other than special contract customers, was up by only 2.7%.
22
Although fuel expense declined $26,977,000, or 2.4%, and purchased power expense increased $42,129,000, or 55.0%, each reflecting primarily the greater availability of energy from off-system sources due to easing of drought conditions, energy costs increased by
$199,938,000, or 19.2%, due to the effect of the ECAC. Such provision for 1978 of $35,280,000 reflected the amount by which ECAC revenues for the year recovered energy costs previously deferred.
Other operation expenses increased by $41,659,000, or 17.2%, primarily due to the impact of inflation on costs of labor, materials and services and additional operating costs associated with system growth.
Maintenance expenses increased by $30,945,000, or 23.2%, primarily as a result of mainte nance necessitated by severe storm damage in the first quarter of 1978.
Allowance for debt and equity funds used during construction ("ADC") increased by
$18,183,000, or 30.2%, due to more construction work-in-progress primarily related to the San Onofre Nuclear Generating Station.
The increase in total interest charges of $21,580,000, or 13.4%, reflected the combined effects of higher short-term interest rates and additional long-term debt outstanding during 1978.
23
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Southern California Edison Company:
We have examined the balance sheets of Southern California Edison Company (a California corporation, hereinafter referred to as the "Company") as of December 31, 1978 and 1979, and the related statements of income, earnings reinvested in the business, additional paid-in capital and changes in financial position for each of the five years in the period ended December 31, 1979, and the supporting schedules listed in the accompanying index. 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, and also included similar examinations of the financial statements for each quarter within 1978 and 1979.
In our opinion, the financial statements referred to above present fairly the financial position of the Company as of December 31, 1978 and 1979, and the results of its operations and the changes in its financial position for each of the five years in the period ended December 31, 1979, the quarterly financial data set forth in Note 2 of "Notes to Financial Statements" summarize fairly the results of operations for each quarter within 1978 and 1979, and the supporting schedules referred to above present fairly the information required to be set forth therein, all in conformity with generally accepted accounting principles applied on a consistent basis.
ARTHUR ANDERSEN & CO.
Los Angeles, California February 8, 1980.
24
SOUTHERN CALIFORNIA EDISON COMPANY STATEMENTS OF INCOME The Statements of Income should be read in conjunction with the other financial statements, related notes and "Management's Discussion and Analysis of Statements of Income" included in this Report.
The Statements of Income for the five years ended December 31, 1979 have been examined by Arthur
-Andersen & Co., independent public accountants, as set forth in their report included herein.
(Thousands of Dollars)
Year Ended December 31, 1975 1976 1977 1978 1979 Operating Revenues:
Sales (Notes 1 and 3).......
$1,635,634
$1,833,012
$2,050,578
$2,294,543
$2,553,126 Other......................................
11,500 13,528 14,336 34,255 10,848 Total operating revenues (Note 2)......
1,647,134 1,846,540 2,064,914 2,328,798 2,563,974 Operating Expenses:
Fuel (Note 3)..............................
768,843 818,932 1,113,028 1,086,051 1,433,658 Purchased power (Note 11)..................
55,983 84,515 76,569 118,698 99,245 Provision for energy cost adjustments (Notes 1, 3 and 5).............
12,684 (149,506) 35,280 (188,880)
Subtotal -energy costs...................
824,826 916,131 1,040,091 1,240,029 1,344,023 Other operation expenses (Notes 3, 6 and 7)....
201,385 223,647 241,963 283,622 322,191 Maintenance (Note 1)........................
93,716 113,188 133,166 164,111 177,407 Provision for depreciation (Note 1)...........
120,410 124,802 140,520 157,203 178,637 Taxes on Income -
current and deferred (Notes 1 and 5)..................
46,623 59,506 68,792 72,803 100,292 Property and other taxes....................
93,568 102,126 109,660 86,429 56,428 Total operating expenses (Note 10)......
1,380,528 1,539,400 1,734,192 2,004,197 2,178,978 Operating Income (Note 2).....................
266,606 307,140 330,722 324,601 384,996 Other Income and Income Deductions:
Allowance for equity funds used during construction (Note 1)......................
20,548 36,541 46,233 58,471 92,019 Other -
Net (Notes 1 and 5)................
9,587 16,416 22,097 31,319 47,739 Total other income and income deductions 30,135 52,957 68,330 89,790 139,758 Total Income before Interest Charges............
296,741 360,097 399,052 414,391 524,754 Interest Charges:
Interest on long-term debt (Note 8)............
124,674 134,423 143,152 154,301 179,626 Other interest and amortization (Notes 1 and 8) 1,511 9,945 17,926 28,357 25,456 Total interest charges....................
126,185 144,368 161,078 182,658 205,082 Allowance for debt funds used during construction (Note 1).....................
(6,225)
(11,069)
(14,005)
(19,950)
(26,547)
Net interest charges.....................
119,960 133,299 147,073 162,708 178,535 Net Income (Note 2)..........................
176,781 226,798 251,979 251,683 346,219 Dividends on Cumulative Preferred and Preference Stock............................
39,604 41,751 45,649 49,457 53,738 Earnings Available for Common and Original Preferred Stock..
$ 137,177
$ 185,047
$ 206,330
$ 202,226
$ 292,481 Weighted Average Shares of Common and Original Preferred Stock Outstanding and Common Stock Equivalents (000)...........................
47,965 48,678 54,347 57,477 64,202 Earnings Per Share (Notes 1 and 2)
Primary..............
$2.86
$3.80
$3.80
$3.52
$4.56 Fully Diluted (Exhibit 1)......................
$2.75
$3.61
$3.63
$3.38
$4.39 Dividends Declared per Common Share (Note 9)...
$1.68
$1.68
$2.06
$2.30
$2.60 The accompanying notes are an integral part of these statements.
25
SOUTHERN CALIFORNIA EDISON COMPANY BALANCE SHEETS ASSETS (Thousands of Dollars)
December 31, 1978 1979 UTILITY PLANT:
Utility plant, at original cost less contributions (Notes 1, 3, 10 and Schedule V)
$5,303,746
$5,502,984 Less -Accumulated provision for depreciation (Notes 1, 10 and Schedule VI)....................................
1,519,174 1,676,148 Net utility plant.......................
3,784,572 3,826,836 Construction work in progress (Notes 6, 10 and Schedule V) 1,493,573 2,058,958 Nuclear fuel, at amortized cost (Schedules V and VI) 13,572 15,728 Total utility plant 5,291,717 5,901,522 OTHER PROPERTY AND INVESTMENTS:
Real estate and other, at cost -
less accumulated provision for depreciation....................
7,658 11,110 Subsidiary companies (Note 1).......................
85,818 93,725 Total other property and investments 93,476 104,835 CURRENT ASSETS:
C ash (N ote 4 )..................
7,458 4,705 Temporary cash investments..................
80,532 Receivables, less reserves of $5,608,000 and $8,496,000 for uncollectible accounts at respective dates (Notes 1, 8 and Schedule XII) 211,625 212,728 Fuel stock, at cost (first-in, first-out) (Notes 3 and 4) 163,021 284,827 Materials and supplies, at average cost 28,463 39,388 Deferred energy costs (Notes 1, 3 and 5).....
102,369 303,622 Prepayments and other (taxes, insurance, etc.)
42,022 80,266 Total current assets..............
635,490 925,536 DEFERRED CHARGES:
Unamortized debt expense (Note 1) 14,709 16,589 Other deferred charges 22,305 28,755 Total deferred charges 37,014 45,344
$6,057,697
$6,977,237 The accompanying notes are an integral part of these balance sheets.
26
SOUTHERN CALIFORNIA EDISON COMPANY BALANCE SHEETS CAPITALIZATION AND LIABILITIES (Thousands of Dollars)
December 31, 1978 1979 CAPITALIZATION:
Preferred Stock -
Subject to mandatory redemption requirements (Note 9):
Cumulative preferred stock
$ 135,000
$ 262,500 Preference stock 62,000 62,000 Preferred Stock -
Other (Note 9):
Original preferred stock 4,000 4,000 Cumulative preferred stock 458,755 458,755 Preference stock....................
40,895 27,067 Common stock, including additional stated capital, 90,000,000 shares authorized, 62,536,581 and 64,894,936 shares out standing at respective dates (Note 9)....................
547,166 577,259 Other Shareholders' Equity:
Additional paid-in capital.....
569,673 601,578 Earnings reinvested in the business 931,217 1,054,296 Long-Term Debt (Notes 1, 4 and 8) 2,477,474 2,746,207 Total capitalization.....
5,226,180 5,793,662 CURRENT LIABILITIES:
Accounts payable..
154,495 288,897 Commercial paper payable (Note 4) 134,340 Notes payable to banks (Note 4) 19,986 19,840 Current maturities of long-term debt (Note 8) 33,737 84,544 Customer refunds -current 52,724 58,139 Taxes accrued (Note 5) 92,550 73,312 Interest accrued.....
51,069 55,619 Customer deposits.15,601 14,583 Dividends declared
.43,205 48,381 Accumulated deferred income taxes -
net (Notes 1 and 5)...
53,928 88,076 Other.....................................
23,612 19,947 Total current liabilities 540,907 885,678 COMMITMENTS AND CONTINGENCIES (Note 3)
RESERVES AND DEFERRED CREDITS:
Customer advances and other deferred credits.
46,115 51,598 Customer refunds........................................107,774 58,454 Accumulated deferred income taxes and investment tax credits (Notes 1 and 5)......................
110,096 155,297 Reserves for pensions, insurance, etc. (Note 7 and Schedule XII) 26,625 32,548 Total reserves and deferred credits 290,610 297,897
$6,057,697
$6,977,237 The accompanying notes are an integral part of these balance sheets.
27
SOUTHERN CALIFORNIA EDISON COMPANY STATEMENTS OF CHANGES IN FINANCIAL POSITION (Thousands of Dollars)
Year Ended December 31, 1975 1976 1977 1978 1979 FUNDS PROVIDED BY:
Operations Net income (Note 2).........................
$ 176,781
$ 226,798
$ 251,979
$ 251,683
$ 346,219 Non-fund items:
Depreciation (Note 1)....................
120,410 124,802 140,520 157,203 178,637 Equity in earnings of unconsolidated subsidiaries (Note 1)...................
(290)
(968)
(551)
(608)
(3,133)
Allowance for debt and equity funds used during construction (Note 1)...........
(26,773)
(47,610)
(60,238)
(78,421)
(118,566)
Investment tax credit deferred -
net (Notes 1 and 5).......................
6,624 16,366 26,886 32,568 45,533 Other-net......................
5,746 15,417 8,152 4,788 9,269 Earnings distributed from unconsolidated subsidiaries....................
3,500 1,000 1,000 1,000 1,000 Total from operations........................
285,998 335,805 367,748 368,213 458,959 Long-term financing Preferred stock (Note 9)......................
50,000 60,000 127,500 Preference stock (Note 9)......................
42,419*
(14,522)'
(13,828)*
Common stock (Note 9).......................
123,951 43,323*
203,364*
62,002*
Long-term debt (Note 8)......................
161,641 126,263 200,000 200,000 355,000 Total from long-term financing.................
211,641 250,214 345,742 388,842 530,674 Other sources Construction advances and other..............
9,404 5,529 9,102 9,258 11,628 Sale of non-current assets.....................
10,883 Decrease in working capital....................
140,431 13,067 3,918 Total from other sources 9,404 145,960 19,985 22,325 15,546 Total funds provided.................
$ 507,043
$ 731,979
$ 733,475
$ 779,380
$1,005,179 FUNDS APPLIED TO:
Construction expenditures -
net.................
$ 407,903
$ 547,936
$ 560,507
$ 646,252
$ 792,713 Less -
allowance for debt and equity funds used during construction (Note 1)..................
26,773 47,610 60,238 78,421 118,566 Funds used for construction expenditures.......
381,130 500,326 500,269 567,831 674,147 Advances to unconsolidated subsidiaries..........
8,375 5,900 (999) 3,630 5,769 Dividends 120,186 125,101 157,561 182,738 221,400 Repayment of long-term debt (Note 8) 80,840 35,500 33,736 Customer refunds -net (9,881) 5,076 (4,774)
(36,918) 49,321 Other-net....................................
14,736 2,015 26,599 20,806 Increase in working capital.....................
7,233 79,403 Total funds applied..................
$ 507,043
$ 731,979
$ 733,475
$ 779,380
$1,005,179 WORKING CAPITAL CHANGES (Other than current maturities of long-term debt):
Receivables and temporary cash investments......
$ (66,401) 3,689 86,554 79,155
$ (79,429)
Fuel stock and materials and supplies (Notes 3 and 4).....................
42,729 (124,614) 84,672 (114,118) 132,731 Prepayments and other........................
(35,033) 6,418 9,243 (21,454) 38,244 Deferred energy costs -
net (Notes 1,3, and 5).
(10,122) 72,849 (14,286) 167,105 Notes and accounts payable......................
(10,350)
(2,418)
(145,639) 68,803 (270,346)
Taxes and interest accrued......................
70,243 (2,107)
(19,918)
(64) 14,688 Other -
net 6,045 (11,277)
(8,358)
(11,103)
(6,911)
Increase (Decrease) in working capital 7,233
$ (140,431) 79,403
$ (13,067)
(3,918)
- These amounts include conversions of Preference Stock, 5.20% Convertible Series, to Common Stock.
The accompanying notes are an integral part of these statements.
28 If
SOUTHERN CALIFORNIA EDISON COMPANY STATEMENTS OF EARNINGS REINVESTED IN THE BUSINESS d
(Thousands of Dollars)
Year Ended December 31, 1975 1976 1977 1978 1979 Balance at January 1..
$ 616,562
$ 671,548
$ 769,425
$ 862,956
$ 931,217 Add:
Net income (Note 5).....
176,781 226,798 251,979 251,683 346,219 Transfer of amortization reserve -
Federal (a) 3,801 793,343 898,346 1,021,404 1,118,440 1,277,436 Deduct:
Dividends declared on capital stock (Note 9):
Original Preferred.......
806 806 922 1,075 1,219 Cumulative Preferred....
35,705 37,851 38,423 42,532 47,574 Preference.............
3,900 3,900 6,844 6,926 6,164 Common 79,775 82,544 111,372 132,205 166,443 Capital stock expense....
1,609 3,820 887 4,485 1,740 121,795 128,921 158,448 187,223 223,140 Balance at December 31(b)
$ 671,548
$ 769,425
$ 862,956
$ 931,217
$1,054,296 (a) Pursuant to a regulatory order, an operating reserve relating to certain federally-licensed hydroelectric projects was transferred to Earnings Reinvested in the Business and became an appropriation thereof.
(b) Includes undistributed earnings of unconsolidated subsidiaries of $10,753,000 at Decem ber 31, 1979.
STATEMENTS OF ADDITIONAL PAID-IN CAPITAL (Thousands of Dollars)
Year Ended December 31, 1975 1976 1977 1978 1979 Balance at January 1.......
$ 350,503
$ 350,503
$ 427,422
$ 443,109 $ 569,673 Premium received on sale of Common Stock........
76,919 15,690 126,572 31,908 Payments made in lieu of issuing fractional shares of Common Stock (3)
(8)
(3)
Balance at December 31....
$ 350,503
$ 427,422
$ 443,109
$ 569,673
$ 601,578 The accompanying notes are an integral part of these statements.
29
SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS Note 1 -
Summary of Significant Accounting Policies General The Company is a public utility primarily engaged in the business of supplying electric energy in portions of central and southern California, excluding the City of Los Angeles and certain other cities. The accounting records of the Company are maintained in accordance with the Uniform System of Accounts as prescribed by the Federal Energy Regulatory Com mission (FERC) and adopted by the California Public Utilities Commission (CPUC).
Utility plant Additions to utility plant and replacements of retirement units of property are capitalized at original cost, which includes labor, material, indirect charges for engineering, supervision, transportation, etc., and an allowance for debt and equity funds used during construction.
Maintenance is charged with the cost of repairs and minor renewals; plant accounts with the replacement of property units; and the depreciation reserve with the cost, less net salvage, of property units retired.
Depreciation Depreciation of utility plant is computed on a straight-line remaining life basis for financial statement purposes, and approximated 2.9% of average depreciable plant for 1975 and 1976, 3.1% for 1977, 3.2% for 1978 and 3.5% for 1979. Although the eventual cost of retiring a nuclear generating unit cannot be predicted with certainty, the Company has estimated that decommis sioning costs will approximate $36,000,000 for nuclear generation facilities in service. The Company's rates are designed to recover such costs through depreciation expense over the estimated remaining useful lives of such facilities.
Income taxes Accounting policies with respect to income taxes, including investment tax credits applic able thereto, are set forth in Note 5, together with supplementary income tax information.
Debt premium and discount Debt premium or discount and related expenses are amortized to income over the lives of the issues to which they pertain.
Revenues Customers are billed monthly, except for most residential customers who are billed bi-monthly. Revenues are recorded when customers are billed.
Deferred energy costs Deferred energy costs result from the Company's Energy Cost Adjustment Clause (ECAC),
which requires monthly entries to adjust the results of operations and the maintenance of a balancing account for overcollections or undercollections. Variations between ECAC revenues and the related energy costs included in rates are deferred until such variations are refunded to, or recovered from, utility customers through CPUC-authorized rate adjustments. ECAC related energy costs include incurred transportation and storage costs related to spent nuclear 30
SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)
Note 1 -
Summary of Significant Accounting Policies (continued) fuel. The income tax effects of ECAC also are deferred. For income tax purposes, billed revenues and incurred energy costs are utilized in the determination of taxable income.
Subsidiaries Investments in unconsolidated subsidiary companies, all of which are wholly owned, are accounted for by the equity method. None of the Company's five wholly owned subsidiaries is considered significant for financial reporting purposes. Mono Power Company (Mono), a non-public utility, is engaged primarily in the acquisition and development of mineral properties and interests therein. Mono has entered into agreements to conduct uranium, oil, coal, gas and geothermal exploration and development, substantially all of the costs and benefits of which are being reflected in the Company's energy costs.
Allowance for funds used during construction (ADC)
ADC is the generally accepted utility accounting procedure designed to capitalize the cost of both debt and equity funds used to finance plant additions during construction periods and to restore net income to the level which would have been experienced without the construction program through a transfer of such costs from the income statement to the balance sheet as utility plant construction work in progress. Although ADC increases net income, it does not represent current cash earnings. Such costs are recovered from customers as a cost of service through provisions for depreciation in future periods. The ADC rate authorized by the CPUC was 8.0% for 1975 and 1976. Effective January 1, 1977, a FERC Order requires the use of a prescribed formula for computing the ADC rate and permits semi-annual compounding. Based upon the formula, an effective annual ADC rate of 6.96% was utilized during the years 1977 and 1978, and an effective annual ADC rate of 7.76% was utilized during 1979. The formula also provides for the separate computation of ADC applicable to debt funds and to equity funds.
Prior to 1977, separate rates were not required to be determined. ADC for periods prior to January 1, 1977 have been reclassified to conform to the new presentation. The reclassification was based upon the then current ratio of the debt and equity portions of ADC to total ADC as determined by the application of the formula.
Earnings per share Primary earnings per share are based on the weighted average shares of Common and Original Preferred Stock outstanding, giving effect to the participating provisions of the Original Preferred Stock and Common Stock Equivalents for funds held by the Employee Stock Purchase Plan Trustee in each period, and after providing for cumulative preferred and preference dividend requirements. Fully-diluted earnings per share also give effect to the dilution which would result from the conversion of the Preference Stock, 5.20% Convertible Series, and the 3Va%
Convertible Debentures, Due 1980.
31
SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)
Note 2 -
Quarterly Financial Data Earnings (Thousands of Dollars)
Per Share Operating Operating Net Fully Three Months Ended Revenues Income Income Primary Diluted March 31, 1978
$547,518
$ 64,050
$ 46,470
$0.62
$0.59 June 30, 1978....................
545,444 70,612 50,912 0.69 0.67 September 30, 1978...............
634,934 90,778 68,846 1.00 0.96 December 31, 1978................
600,902 99,162 85,455 1.19 1.15 March 31, 1979...................
603,733 96,159 83,677 1.13 1.09 June 30, 1979.....
566,656 81,748 71,183 0.91 0.88 September 30, 1979...............
684,334 106,738 98,822 1.32 1.27 December 31, 1979...............
709,252 100,352 92,538 1.19 1.15 Note 3-Commitments and Contingencies Construction program and fuel supply The Company has significant purchase commitments in connection with its continuing construction program. As of December 20, 1979 (the date of the Company's latest approved budget), funds required for construction expenditures are estimated at $767,831,000 for 1980,
$753,808,000 for 1981 and $627,864,000 for 1982.
Minimum long-term commitments of approximately $8.4 billion existed on December 31, 1979 under the Company's fuel supply and transportation arrangements.
Government licenses The terms and provisions of licenses granted by the United States covering the Company's major and certain minor hydroelectric plants, together with certain storage and regulating reservoirs and related transmission facilities, expire at various times between 1980 and 2009.
They contain numerous restrictions and obligations on the part of the Company, including the right of the United States to acquire Company properties or the FERC to issue a license to a new licensee under certain conditions upon the payment of specified compensation.
Resale revenues Pursuant to FERC procedures, on August 4, 1974, February 1, 1976, and August 16, 1979, increases in the Company's resale rates became effective, subject to refund with interest to the extent that any of the increases are subsequently determined to be inappropriate. Effective May 2, 1974, a Fuel Clause Adjustment (FCA) was added to the Company's resale rates and was modified effective February 1, 1976. As of December 31, 1979, approximately $377,800,000 has been billed subject to refund. Of this amount, approximately $46,600,000 is no longer subject to refund by virtue of appeals relative to the May 2, 1974 FCA becoming final subsequent to December 31, 1979. The Company believes that any other amounts which the FERC may require the Company to refund as a result of the proceedings relative to these increases should not have a material financial effect on the Company.
An August 1, 1979 FERC decision, which affirmed the August 4, 1974 rate increase with respect to cost of service, provided, however, that the rate increase remain subject to refund pending resolution of the "price squeeze" issue raised by the intervenors.
32
SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)
Note 3-Commitments and Contingencies (continued)
An August 22, 1979 FERC decision on the February 1, 1976 rate increase required the Company to file a revised cost of service which reduced the annual revenues by approximately
$3,600,000. Revenues billed in excess of this revised cost of service had previously been deferred and the related interest accrued. Both the Company and certain intervenors have petitioned for rehearing. The decision also provided that to determine the extent of a "price squeeze," if any, with respect to the filed revised rates, the case would be remanded to an Administrative Law Judge for hearings on that issue. If a "price squeeze" is determined, a further rate reduction may be imposed which could result in additional refunds, but the Com pany believes that they would not have a material financial effect.
Energy cost adjustment clause ("ECAC")
On October 23, 1979, the CPUC granted approximately $431,600,000 of the Company's requested $466,600,000 increase pursuant to the ECAC. Such increase became effective on November 1, 1979. The requested amount was reduced by approximately $35,000,000 as a result of the CPUC's determination to defer consideration of the reasonableness of operating capacity factors at the Company's coal-fired power plants until the results of a consultant's report on such plants can be evaluated. The Company believes that operating practices at its coal-fired power plants have been prudent and reasonable.
Legal matters -
antitrust and employment practices Antitrust -In March 1978, five resale customers filed a suit against the Company in Federal Court alleging violation of certain antitrust laws. The complaint seeks damages in excess of $23,000,000, consequential damages and a trebling of such damages and certain injunctive relief, and alleges that the Company (i) is engaging in anti-competitive behavior by charging more for wholesale electricity sold to the resale customers than the Company charges certain classes of its retail customers, and (ii) has taken actions alone and in concert with other utilities to prevent or limit such resale customers from obtaining bulk power supplies from other sources to reduce or replace the resale customers' wholesale purchases from the Company. In May 1979, the Federal Court continued a stay of the proceedings pending reso lution of the Company's FERC resale rate filing which became effective on February 1, 1976, and of the FERC proceedings involving bulk power contracts and substantially the same antitrust issues. The resale customers have asked the FERC to modify these contracts and to order the Company to provide additional transmission services to them. On February 15, 1980, the Court lifted the stay on discovery and set February 10, 1981 for the next status conference.
The foregoing proceedings involve complex issues of law and fact, and, although the Company is unable to predict their final outcome, it has categorically denied the allegations of these resale customers. The August 22, 1979 FERC decision discussed above under "Resale revenues" could affect the pending antitrust litigation.
Employment Practices -In 1972, a charge was filed with the Federal Equal Employment Opportunity Commission ("EEOC") and a class action lawsuit was filed in Federal Court in 1974, both of which alleged that the Company had engaged in unlawful, discriminatory employment practices.
Although denying that it has engaged in any unlawful employment practices, the Company has entered into a Conditional Settlement with the EEOC and the representatives of most of the 33
SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)
Note 3-Commitments and Contingencies (continued) class action plaintiffs which, on November 7, 1977, was submitted to the Federal Court for approval as a consent decree. The estimated cost of this settlement is initially $700,000 with the possibility of an additional estimated $300,000 in payment on individual awards after hearings.
On December 31, 1979, the court filed a memorandum indicating it would approve the Agreement. It is not known at this time whether an appeal will be taken from a judgment.
If the decision were to be reversed on appeal and the cases tried, it is the opinion of Company counsel that the Company has a number of defenses which should be sustained by a court and which, among other things, have the effect of limiting monetary damages. The Company believes, based on a current analysis of the applicable law and facts, that the amount of any recovery for monetary damages, including back pay, should not have a material financial effect on the Company.
Leases and rentals The Company has entered into various arrangements to lease automotive equipment, computer equipment, nuclear fuel, office space and other incidental equipment and property which are accounted for as operating leases in accordance with ratemaking practices. Neither the annual gross lease expense nor the present value of the minimum commitments of capital leases are material.
Note 4 -
Compensating Balances and Short-Term Debt In order to continue lines of credit with various banks, which amounted to approximately
$170,000,000 on December 31, 1978 and $198,000,000 on December 31, 1979, the Company presently maintains deposits aggregating approximately $12,000,000 which are not legally restricted as to withdrawal. None of such lines of credit was used during 1978 and 1979.
The Company has an additional $150,000,000 line of credit which may be utilized only for the purchase of fuel oil through the use of bankers' acceptances. Notes issued under this agreement are secured by a pledge of the Company's fuel oil inventory. The maximum amount of bankers' acceptances outstanding during 1978 was $68,545,000 with average daily borrow ings of $24,259,000 and a weighted average annual interest rate (total interest divided by average daily borrowings) of 7.87%.
There were no bankers' acceptances outstanding during 1979.
The maximum amount of commercial paper outstanding during 1978 and 1979 was
$165,273,000 and $184,340,000, respectively. The average daily borrowings for these same periods were $113,414,000 and $65,057,000, respectively, with weighted average annual interest rates of 7.23% and 11.08%, respectively. Of the amount outstanding at December 31, 1979,
$50,000,000 is expected to be refinanced and has been classified in the balance sheet as long-term debt.
The maximum amount of notes payable outstanding during 1978 and 1979 was $87,970,000 and $20,078,000, respectively. The average daily borrowings for these same periods were
$41,402,000 and $20,052,000, respectively, with weighted average annual interest rates of 8.23%
and 11.01%, respectively. These notes are unrelated to the lines of credit referred to above.
34
SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)
Note 5 -
Taxes As required by the CPUC, no provisions are made for income tax reductions (net) which result from reporting certain transactions for income tax purposes in a period different from that in which they are reported in the financial statements, except for certain investment tax credits (ITC) discussed below, the tax effects of the ECAC balancing account provisions and certain resale revenues.
Effective January 1, 1976, pursuant to FERC procedure, the Company began providing deferred income taxes for certain timing differences allocable to resale rates. The revenues related to such deferred income taxes are being collected subject to refund, as discussed in Note 3, pending action by the FERC.
ITC not deferred have been applied as a current reduction of income tax expense. Ad ditional ITC, made available to the Company under the provisions of the Tax Reduction Act of 1975 and the Tax Reform Act of 1976, have been deferred and are being amortized to income tax expense ratably over the service lives of the properties generating such credits.
The Company has reduced its deferred income tax provision for 1979 and the balance of accumulated deferred income taxes -net, in the amount of $68,128,000, representing ITC in excess of those utilized to date or to be utilized on the 1979 federal income tax return, pending their utilization in future income tax returns. Such ITC were generated in 1979 and, if not utilized, would expire in 1986.
35
SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)
Note 5 -
Taxes (continued)
Supplementary information regarding taxes is set forth in the following table:
(Thousands of Dollars)
Year Ended December 31, 1975 1976 1977 1978 1979 Current:
Federal.......................
$ 37,897
$ 25,165
$(48,360)
$(49,219)
$ 6,717 State..
12,481 14,344 1,233 3,567 4,019 50,378 39,509 (47,127)
(45,652) 10,736 Deferred -
Federal and State:
Investment tax credits -
net 6,624 16,366 26,886 32,568 45,533 Deferred energy costs....................
(11,269) 81,101 (15,904) 34,148 Customer refunds (11,000) 5,651 (5,315) 78,801 Other.(2,144) 3,432 1,345 2,208 (13,644)
(6,520) 14,180 104,017 97,673 66,037 Total taxes on income
$ 43,858
$ 53,689
$ 56,890
$ 52,021
$ 76,773 Taxes on income included in operating expenses
$ 46,623
$ 59,506
$ 68,792
$ 72,803
$100,292 Taxes on income included in other income.(2,765)
(5,817)
(11,902)
(20,782)
(23,519)
Total taxes on income
$ 43,858
$ 53,689
$ 56,890
$ 52,021
$ 76,773 Differences between the federal statutory tax rate and the Company's effective tax rate are reconciled as follows:
Federal statutory tax rate..
48.0%
48.0%
48.0%
48.0%
46.0%
Excess of tax over book depreciation.(11.6)
(9.1)
(6.0)
(3.4)
Allowance for debt and equity funds used during construction (5.8)
(8.1)
(9.4)
(12.4)
(12.9)
Percentage repair allowance................
(2.1)
(2.9)
(4.7)
(3.3)
Administrative and general expenses capitalized....
(3.0)
(2.4)
(2.3)
(2.7)
(2.2)
Investment tax credits -
net.
(3.1)
(4.9)
(6.6)
(8.4)
(8.1)
Federal deduction for state taxes on income.
(4.6)
(1.9)
(2.9)
(2.7)
(2.2)
Ad valorem lien date deduction (0.6)
(0.7)
(0.5) 4.2 (0.2)
All other differences (4.0)
(4.7)
(3.5)
(5.5)
(3.7)
State tax provision 4.6 5.0 4.5 4.7 4.7 Effective tax rate 19.9%
19.1%
18.4%
17.1%
18.1%
Property and other taxes included in operating expenses:
Property..................
$ 84,965
$ 91,601
$ 98,370
$ 74,665
$ 48,300 Payroll and other.8,603 10,525 11,290 11,764 8,128
$ 93,568
$102,126
$109,660
$ 86,429
$ 56,428 Note 6-Research and Development Research and Development ("R&D") expenditures are expensed currently if they are of a general nature. Plant-related R&D expenditures are accumulated in construction work in progress ("OWIP") until a determination is made whether or not such projects will result in construction of electric plant. If no construction of electric plant ultimately results, the expendi tures are charged to operating expense. The balance of R&D expenditures included in OWIP at December 31, 1978 and 1979 was $17,178,000 and $29,438,000, respectively.
36
SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)
Note 6 -
Research and Development (continued)
(Thousands of Dollars)
Year Ended December 31, 1975 1976 1977 1978 1979 R&D expensed................
$ 9,636
$10,887
$12,710
$14,442
$15,778 R&D charged to CWIP -
net 4,814 5,551 2,407 3,847 12,260 Total R&D expenditures.....
$14,450
$16,438
$15,117
$18,289
$28,038 Note 7 -
Retirement Plans The Company's current pension program is based on a trusteed non-contributory pension plan. Company contributions are determined on the basis of a level premium funding method and prior service costs are funded. Pension costs are funded or reserved for on an actuarial basis and amounted to $23,702,000 for 1975; $23,417,000 for 1976; $27,689,000 for 1977;
$32,236,000 for 1978; and $37,456,000 for 1979. Accumulated pension funds and reserves exceed vested benefits under the program.
Under the Employee Stock Purchase Plan adopted to supplement employees' income after retirement, employees may elect to contribute specified percentages of their compensation to a trustee for the purchase of Company Common Stock and the Company contributes to the Plan an amount equal to one-half of the aggregate contributions of employees, less forfeitures.
The Company's contribution amounted to $2,473,000 for 1975; $2,461,000 for 1976; $2,591,000 for 1977; $2,785,000 for 1978; and $3,263,000 for 1979. In addition, employees may contribute up to 5% of their regular monthly base pay through supplemental contributions without regard to their years of service. These supplemental contributions are not matched by the Company.
The Tax Reduction Act of 1975 introduced a provision for an additional 1% ITC if the funds generated therefrom are invested in the purchase of employer securities for the benefit of employees and transferred into an Employee Stock Ownership Plan (ESOP). Eligible securities include Common Stock or securities convertible into Common Stock. The Company has established an ESOP and has elected the additional 1% ITC for the years 1976, 1977 and 1978.
As of December 31, 1979, 336,423 shares of Common Stock applicable to the plan have been issued in trust.
The Tax Reform Act of 1976 provided for an additional 1%
ITC for the purchase of employer securities, similar to the provision for the additional 1% ITC discussed above, for eligible employees who provide matching contributions. An election to obtain such additional
% ITC was made with respect to 1978. The availability of the additional 12% ITC is contingent upon a favorable determination by the Internal Revenue Service that the ESOP, as amended to incorporate the 1%
ITC, continues to qualify under the Internal Revenue Code.
The Company has recorded as a liability to ESOP approximately $13,681,000 for the 1%
ITC for the years 1978 and 1979 in excess of those utilized or to be utilized on the federal income tax returns for those years. An additional
% ITC of approximately $3,088,000 was elected for 1978, and it is expected that approximately $3,971,000 will be elected for 1979, both amounts of which are in excess of those utilized or to be utilized on the federal income tax returns for those years. Such 1% and
% ITC were generated in 1978 and 1979 and, if not utilized, would expire in 1985 and 1986, respectively.
37
SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)
Note 8 -
Long-Term Debt A summary of long-term debt outstanding follows:
(Thousands of Dollars)
December 31, 1978 1979 Interest Series Maturity Rate Principal Amount First and Refunding Mortgage Bonds.....
F 1979 3
30,000 G
1981 3%
40,000 40,000 H
1982 4
37,500 37,500 I
1982 4
40,000 40,000 J
1982 4/8 40,000 40,000 K
1983 45/
50,000 50,000 L
1985 5
30,000 30,000 M
1985 4%
60,000 60,000 N
1986 41/2 30,000 30,000 O
1987 4
40,000 40,000 P
1987 4
50,000 50,000 Q
1988 4%
60,000 60,000 R
1989 4%
60,000 60,000 S
1990 41/2 60,000 60,000 T
1991 5
75,000 75,000 U
1991 6/s 80,000 80,000 V
1992 57/a 80,000 80,000 W
1993 6%
100,000 100,000 X
1994 7/
75,000 75,000 Y
1994 8/a 100,000 100,000 Z
1995 7/8 100,000 100,000 AA 1996 8
100,000 100,000 BB 1997 7%
125,000 125,000 CC 1999 8
100,000 100,000 DDP 1999 7
15,030 15,030 EE 1981 9
100,000 100,000 FF 2000 8/6 150,000 150,000 GG 2001 87/8 125,000 125,000 HH 2002 8
125,000 125,000 II 1984 7
75,000 75,000 JJ 2003 9/8 200,000 200,000 KK 2004 9.95 105,000 LL 1987 9%
MM 2004 11 200,000 2,352,530 2,627,530 First Mortgage Bonds (Calectric).........
1980-1991 27/-51 66,000 66,000 Convertible Debentures.................
1980 31 74,902 74,902 Promissory Notes......................
1979-1983 51/2 17,953 14,217 Short-Term Debt Expected to be Refinanced -
Commercial Paper..................................
50,000 Principal Amounts Outstanding....................................
2,511,385 2,832,649 Current Maturities of Long-Term Debt..............................
(33,737)
(84,544)
Unamortized Premium or (Discount)-
net...........................
(174)
(1,898)
Total Long-Term Debt.....................................
$2,477,474
$2,746,207 38
SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)
Note 8 -
Long-Term Debt (continued)
The authorized principal amount of each series of First and Refunding Mortgage Bonds is equal to the amount outstanding. The Trust Indenture under which these bonds are issued permits the issuance from time to time of additional bonds, including additional bonds equal in principal amount to bonds retired, pursuant to the restrictions and conditions contained therein. Each of the bond indentures requires semiannual deposits with the Trustees of 1/2%
of the principal amount of its outstanding First and Refunding Mortgage Bonds and the First Mortgage Bonds of Calectric. The Calectric Indenture requires an annual deposit with the Trustee of 1% of the principal amount of First Mortgage Bonds issued less certain bonds retired, plus an amount equivalent to the excess of 15% of gross operating revenues over costs of maintenance of the property subject to the lien of such indenture. These deposit requirements of $77,780,900 in 1979 were satisfied by property additions and replacements, and by delivery and cancellation of bonds outstanding under the applicable indenture. The Series DDP and KK, First and Refunding Mortgage Bonds, are subject to mandatory sinking fund requirements commencing on July 1, 1990 and June 15, 1985, respectively.
In September 1979, the Company entered into a financing agreement with certain foreign banks that permits the Company to borrow, at any time through September 17, 1980, up to
$50,000,000 at a floating interest rate based on the London Interbank Offered Rate. On Sep tember 18, 1980, as required by the agreement, the Company will borrow the additional amount necessary to bring the total borrowings to $50,000,000. Commencing on that date, the principal outstanding will bear interest at the fixed rate of 9/8% per annum. The borrow ings will be secured by the concurrent issuance of an equal principal amount of the Company's First and Refunding Mortgage Bonds, Series LL, due March 18, 1987. The financing agreement contains no restrictive covenants. There were no outstanding borrowings under the agreement at December 31, 1979. Because the Company expects to refinance $50,000,000 of short-term obligations through the operation of the agreement, such amount has been classified as long term debt in the balance sheet at December 31, 1979.
Current maturities of long-term debt on December 31, 1979 included convertible deben tures, due August 15, 1980 (31/%), in the amount of $74,902,000; First Mortgage Bonds (Calectric), due June 1, 1980, in the amount of $6,000,000; 52% Promissory Notes, due February 28, 1980, in the amount of $1,832,000 and due August 31, 1980, in the amount of
$1,810,000. The amounts of long-term debt maturing in the four years subsequent to December 31, 1980 will be: $143,548,000 in 1981; $121,025,000 in 1982; $53,501,000 in 1983; and
$83,000,000 in 1984.
At December 31, 1978 and 1979, the 3V8%
Convertible Debentures, due 1980, were convertible at the adjusted rate of one share of Common Stock for each $37.50 and $37.00, respectively, of the principal amount of such debentures. Any such debentures which are converted may not be reissued.
The Company has entered into a financing agreement, as amended, with certain English banks pursuant to which it issued promissory notes payable in pounds sterling. These notes are secured by a pledge of the Company's customer accounts receivable. On June 28, 1976, the Company entered into forward exchange contracts with a United States bank to purchase, at various times from February 1979 to August 1983, pounds sterling to repay substantially all of the promissory notes.
39
SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)
Note 9 -
Capital Stock Transactions in the capital stock accounts for the five years ended December 31, 1979 were as follows:
In 1975, 2,000,000 shares of Cumulative Preferred Stock, 9.20% Series were issued; in 1976, 5,000,000 shares of Common Stock were issued at an initial public offering price of
$22V/ per share; in 1977, 2,480,000 shares of Preference Stock, 7.375% Series and 600,000 shares of $100 Cumulative Preferred Stock, 7.80% Series, were issued; in 1978, 6,000,000 shares of Common Stock were issued at an initial public offering price of $25.375 per share; and in 1979, 525,000 shares of $100 Cumulative Preferred Stock, 8.70% Series A, and 750,000 shares of $100 Cumulative Preferred Stock, 8.54% Series, were issued. Additional shares of Common Stock were issued as follows:
Shares Issued 1975 1976 1977 1978 1979 Dividend Reinvestment and Stock Purchase Plan 87,656 323,932 637,014 1,165,073 Employee Stock Purchase Plan..............
556,191 540,081 631,521 756,427 Employee Stock Ownership Plan..........
102,262 203,879 30,282 Conversion of 783,226, 580,854, and 553,140 shares in respective years of Preference Stock, 5.20% Convertible Series..................
551,452 417,710 406,573 The quarterly dividend rate was increased from 420 per share to 500 per share effective with the dividend paid on Common Stock on April 30, 1977, and with the dividend paid on Orig inal Preferred Stock on June 30, 1977; to 560 per share effective with the dividend paid on Common Stock on January 31, 1978, and with the dividend paid on Original Preferred Stock on March 31, 1978; to 620 per share effective with the dividend paid on Common Stock on January 31, 1979, and with the dividend paid on Original Preferred Stock on March 31, 1979; and to 680 per share effective with the dividend paid on Common Stock on October 31, 1979, and with the dividend paid on Original Preferred Stock on December 31, 1979.
40
SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)
Note 9-Capital Stock (continued)
A summary of the capital stock accounts follows:
December 31, 1979 (Thousands of Dollars)
Redemption December 31, Shares Price Per Outstanding Share 1978 1979 Preferred Stock -
Subject to Mandatory Redemption Requirements(a) (b):
$100 Cumulative Preferred:
7.325% Series...............................
750,000
$110.00
$ 75,000
$ 75,000 7.80% Series................................
600,000 110.00 60,000 60,000 8.54% Series...............................
750,000 108.54 75,000 8.70% Series A 525,000 110.00 52,500
$135,000
$262,500 Preference:
7.375% Series 2,480,000 26.25
$ 62,000
$ 62,000 Preferred Stock -
Other(a) (b):
Original Preferred -
5%, prior, cumulative, participat ing, not redeemable....
480,000
$ 4,000
$ 4,000 Cumulative Preferred:
4.08% Series 1,000,000
$ 25.50
$ 25,000
$ 25,000 4.24% Series.......
1,200,000 25.80 30,000 30,000 4.32% Series...............................
1,653,429 28.75 41,336 41,336 4.78% Series 1,296,769 25.80 32,419 32,419 5.80% Series 2,200,000 25.65 55,000 55,000 8.85% Series 2,000,000 26.50 50,000 50,000 9.20% Series...............................
2,000,000 27.25 50,000 50,000
$100 Cumulative Preferred:
7.58% Series....
750,000 105.00 75,000 75,000 8.70% Series.....................
500,000 111.00 50,000 50,000 8.96% Series.......................
500,000 111.00 50,000 50,000
$458,755
$458,755 Preference (c):
5.20% Convertible Series 1,082,680 25.00
$ 40,895
$ 27,067
$100 Preference Common Stock -
including additional stated capital (a) (c) (d) (e) (f)..........................
64,894,936
$547,166
$577,259 (a) The Company's Articles of Incorporation authorize the issuance of:
Shares Authorized Par Value Class of Stock (000)
Per Share Original Preferred...........................................
480
$ 81/
Cumulative Preferred..................................
24,000 25
$100 Cumulative Preferred...................................6,000 100 Preference................................................10,000 25
$100 Preference6...........................................2,000 100 Common.................................................90,000 8/3 41
SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)
Note 9 -
Capital Stock (continued)
(b) Cumulative Preferred and Preference Stock Redemption Provisions-All series of $100 Cumulative Preferred Stock, Cumulative Preferred Stock and Preference Stock are redeem able at the option of the Company. The various series of $100 Cumulative Preferred Stock, the Cumulative Preferred Stock, 8.85% Series and 9.20% Series, and the Preference Stock, 7.375% Series, are subject to certain restrictions on redemption for refunding purposes.
The $100 Cumulative Preferred Stock, 7.325% Series, has a cumulative sinking fund provi sion requiring the redemption of 30,000 shares annually at $100 per share plus accumulated unpaid dividends, commencing July 31, 1983, and continuing until all shares are redeemed.
Commencing November 30, 1983, and continuing until all shares are redeemed, the $100 Cumulative Preferred Stock, 7.80% Series, has a cumulative sinking fund provision requiring the annual redemption of a specified percentage of the shares originally outstanding (2.5%
in 1983 and increasing to 5.5% by 2003) at $100 per share plus accumulated unpaid dividends. Commencing September 1, 1984, and continuing until all shares are repurchased, the Company has a contractual obligation to offer to purchase a minimum of 496,000 shares annually of its Preference Stock, 7.375% Series, at $25 per share plus accumulated unpaid dividends. Commencing June 30, 1985, and continuing until all shares are redeemed, the
$100 Cumulative Preferred Stock, 8.70% Series A, has a cumulative sinking fund provision requiring the annual redemption of a specified percentage of shares originally outstanding (2.5% in 1985 and increasing to 9.5% by 2000) at $100 per share plus accumulated unpaid dividends. Commencing June 30, 1986, and continuing until all shares are redeemed, the
$100 Cumulative Preferred Stock, 8.54% Series, has a mandatory sinking fund provision requiring the annual redemption of 22,500 shares at $100 per share plus accumulated unpaid dividends. For each of the five years subsequent to 1979, the aggregate mandatory redemp tion requirements will be: none for 1980 through 1982, $4,500,000 for 1983, and $16,900,000 for 1984.
(c) Under a prescribed formula, the conversion prices of convertible securities are adjusted when additional shares of Common Stock are sold by the Company. At December 31, 1978 and 1979, the shares of Common Stock reserved for the conversion of the Preference Stock, 5.20% Convertible Series amounted to 1,202,809 and 796,088, respectively, at the adjusted conversion price of $34.00 per share. In addition, 1,997,388 and 2,024,380 shares of Common Stock were reserved at those respective dates for the conversion of 31/8%
Convertible Debentures, Due 1980, at the adjusted conversion prices of $37.50 and $37.00 per share, respectively.
(d) At December 31, 1979, there were 886,325, 3,315,780 and 663,577 authorized and unissued shares of Common Stock reserved for sale and issuance under provisions of the Company's Dividend Reinvestment and Stock Purchase Plan, Employee Stock Purchase Plan, and Employee Stock Ownership Plan, respectively. On February 14, 1980, the Company issued 378,842 shares of Common Stock under the Employee Stock Ownership Plan, and, on February 19, 1980, issued 415,281 shares of Common Stock under the Dividend Reinvest ment and Stock Purchase Plan.
(e) On February 13, 1980, 7,000,000 shares of Common Stock were issued at an initial public offering price of $23.125 per share.
(f) The book value per share of Common Stock, after giving effect to the participating provi sion of the Original Preferred Stock, was $32.57 and $34.22 at December 31, 1978 and 1979, respectively.
42
SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)
Note 10 -
Jointly-Owned Electric Utility Plants The Company owns undivided interests in several jointly-owned generating and transmis sion facilities for which each participant must provide its own financing. The Company's propor tionate share of expenses pertaining to such facilities is included in the appropriate category of operating expenses in the Statements of Income. In the table below, the dollar amounts repre sent the Company's share as recorded on the Balance Sheet for each such facility.
(Thousands of Dollars)
December 31, 1979 Estimated Electric Accumulated Construction Plant in Provision for Work in Ownership Facility Service Depreciation Progress Interest Axis Generating Station........
12,155 6,449 17 33.3%
800 KV DC System.............
67,506 14,451 40 50.0 El Dorado System............
19,414 4,578 205 60.0(1)
Four Corners Generating Station 97,049 26,978 16,373 48.0 Mohave Generating Station...
169,043 36,649 8,878 56.0 Palo Verde Generating Station 243,179 15.8 San Onofre Generating Station 163,453 39,340 1,553,466 80.0 Solar Power Project.........
2,128 80.0 Total................
$ 528,620
$ 128,445
$1,824,286 (1) Represents a composite rate.
43
SOUTHERN CALIFORNIA EDISON COMPANY NOTES TO FINANCIAL STATEMENTS (Continued)
Note 11 -
Long-Term Contracts for the Purchase of Power Under certain contracts, the Company has agreed to purchase portions of the generating output of certain facilities. Although the Company has no investment in such facilities, these contracts provide that the Company pay certain minimum amounts (which are based at least in part on the debt service requirements of the supplier) whether or not the plant is operating.
None of such contracts provides, or is expected to provide, in excess of five percent of the Company's current or estimated future operating capacity. The cost of power obtained under the contracts, including payments made when a plant is not operating, is included in Purchased Power in the Statements of Income. Information as of December 31, 1979 pertaining to such contracts is summarized in the following table:
Oroville-Thermalito Navajo Hoover Sales Power Sale Layoff Agreement Agreement Agreement Date of Expiration.....................
September 30, 1989 or May 31, 1987*
April 1,1983 upon five years' no tice from U.S. Bureau of Reclamation. Cur rent estimated termi nation date is Janu ary 1, 1985.
Share of Effective Operating Capacity.....
327.5 MW*
331 MW 340 MW Share of Energy Output 14.6%
7.9%
37.6%
Estimated Annual Cost
$32,596,000
$1,872,000
$5,985,000 Portion of Estimated Annual Cost Applicable to Supplier's Annual Minimum Debt Serv ice Requirement.......................
$ 1,978,000
$ 456,000
$5,234,000 Allocable Portion of Interest of Supplier In cluded in Annual Minimum Debt Service Requirement..........................
571,000 96,000
$4,601,000 Related Long-Term Debt or Lease Obliga tions Outstanding of Company......
None None None
- The Company has agreed to certain reductions in its share of effective operating capacity prior to the estimated January 1,A1985 termination date.
inThe Company has certain renewal rights under the existing agreement.
44
Supplementary Information to Disclose the Effects of Changing Prices (Unaudited)
In accordance with the requirements and guidelines of the Financial Accounting Standards Board, the supplementary information presented below is intended to provide certain information about the effects of both general inflation and changes in specific prices. It should be viewed as an estimate of the approximate effect of inflation, rather than as a precise measure.
STATEMENT OF EARNINGS AVAILABLE FOR COMMON AND ORIGINAL PREFERRED STOCK ADJUSTED FOR CHANGING PRICES For the Year Ended December 31, 1979 (Thousands of Dollars)
As Reported in the Primary Average 1979 Dollars Financial Statements Constant Dollar Current Cost Total Operating Revenues.......................
$2,563,974
$2,563,974
$2,563,974 Operating Expenses:
Energy costs............................................
1,344,023 1,344,023 1,344,023 Provision for depreciation.................................
178,637 350,000 415,000 Taxes on income........................................
100,292 100,292 100,292 Other operating expenses.................................
556,026 556,026 556,026 Other income and deductions................................
(139,758)
(139,758)
(139,758)
Net interest charges........................................
178,535 178,535 178,535 Dividends on cumulative preferred and preference stock.........
53,738 53,738 53,738 2,271,493 2,442,856 2,507,856 Earnings available for common and original preferred stock (exclud ing reduction of utility plant to net recoverable cost)............
$ 292,481
$ 121,118 56,118 Excess of increase in general price level of $1,468,000,000 over increase in specific prices of $1,417,000,000 of utility plant held during the vear(a)...................................
$ (51,000)
Reduction of utility plant to net recoverable cost
$ (561,000)
$ (445,000)
Gain from decline in purchasing power of net monetary liabilities
$ 452,000
$ 452,000 (a) At December 31, 1979, current cost of utility plant, net of accumulated depreciation, was
$12,133,000,000 while related historical cost and net recoverable cost was $5,902,000,000.
The difference of $6,231,000,000, which includes $1,417,000,000 for the current year, represents the changes in specific prices (current cost) of utility plant from the date the plant was originally acquired.
45
FIVE YEAR COMPARISON OF SELECTED SUPPLEMENTARY FINANCIAL DATA ADJUSTED FOR EFFECTS OF CHANGING PRICES (In Thousands of Dollars, Except Per Share Data)
Average 1979 Dollars 1975 1976 1977 1978 1979 Total Operating Revenues......................
$2,223,000 $2,357,000
$2,476,000 $2,593,000
$2,563,974 Historical Cost Information Adjusted for General Inflation (Constant Dollar):
Earnings available for common and original preferred stock*..........................
$121,118 Earnings per share on common and original preferred stock*..........................
$1.89 Net assets at year-end at net recoverable cost
$2,101,000 Current Cost Information:
Earnings available for common and original preferred stock*..........................
$56,118 Earnings per share on common and original preferred stock...........................
$.87 Excess of increase in general price level over increase in specific prices of utility plant after reduction to net recoverable cost............
$496,000 Net assets at year-end at net recoverable cost...
s
$2,101,000 General Information:
Gain from decline in purchasing power of net m onetary liabilities........................
$452,000 Cash dividends declared per common share....
$2.26
$2.14
$2.45
$2.53
$2.57 Market price per common share at year-end....
$25.68
$28.56
$30.84
$27.62
$23.05 Average consumer price index................
161.2 170.5 181.5 195.4 217.6**
- Excludes reduction of utility plant to net recoverable cost.
Estimated.
Constant dollar amounts represent historical costs of utility plant restated in terms of dollars of equal purchasing power, as measured by the Consumer Price Index for all Urban Consumers. Current cost amounts reflect the changes in specific prices of utility plant from the date the plant was acquired to the present, and differs from constant dollar amounts to the extent that prices in general have increased more or less rapidly than specific prices. The current cost of utility plant was determined by restating its historical cost using Company projections of year-end indices to be reported in the Handy-Whitman Index of Public Utility Construction Costs.
The provision for depreciation on constant dollar and current cost bases was determined by applying primary financial statement depreciation rates to restated utility plant accounts.
Since only historical costs are deductible for income tax purposes, the income tax expense in the primary financial statements was not adjusted.
Fuel inventories and the cost of fuel used in the generation of electricity have not been restated from their historical cost since rate regulation limits the recovery of fuel and purchased power costs to recorded costs. As such, fuel inventories are effectively monetary assets and have been included in the computation of purchasing power gain or loss.
Under ratemaking procedures prescribed by the regulatory commissions exercising rate jurisdiction over the Company, only the historical cost of utility plant is recoverable through future depreciation charges. Therefore, the cost of utility plant, stated in terms of constant dollars or current cost, exceeding the historical cost of utility plant is not presently recoverable 46
through depreciation charges, and, accordingly, the excess is reflected as a reduction of utility plant to net recoverable cost. While the ratemaking process gives no recognition to the current cost of replacing utility plant, based on past ratemaking practices the Company believes it will be allowed to recover and earn a return on the increased cost of its investment when replace ments of utility plant occur.
During a period of inflation, holders of monetary assets suffer a loss of general purchasing power while holders of monetary liabilities experience a gain. The gain from the decline in purchasing power of net monetary liabilities is primarily attributable to the substantial amount of debt which has been used to finance utility plant. However, to properly reflect the economics of rate regulation, the gain from the decline in purchasing power of net monetary liabilities, including Cumulative Preferred and Preference Stock, offsets the reduction to net recoverable cost of utility plant. The Company, therefore, does not have the opportunity to realize such holding gain on net monetary liabilities.
47
SOUTHERN CALIFORNIA EDISON COMPANY SCHEDULE V -
PROPERTY, PLANT AND EQUIPMENT FOR THE YEAR ENDED DECEMBER 31, 1978 (Thousands of Dollars)
Balance at Add (Deduct)
Balance at Beginning Additions Other End Classification of Period at Cost Retirements Changes of Period Steam Production.
$1,302,084 $
23,829 $
(2,310) $
$1,323,603 Nuclear Production..........
133,516 12,051 (2) 145,565 Hydro Production...........
215,523 391 (267) 215,647 Other Production...........
201,088 148,914 350,002 Transmission.
1,127,702 39,693 (3,058) 186 1,164,523 Distribution................
1,820,103 128,404 (18,052)
(189) 1,930,266 General....................
130,978 12,370 (3,968)
(6) 139,374 Plant Held for Future Use..
29,226 (851)
(2) 28,373 Experimental Electric Plant Unclassified.699 (482) 217 Other Utility Plant.3,969 2,245 (38) 6,176 Subtotal -
Utility Plant.
4,964,888 366,564 (27,697)
(9) 5,303,746 Construction Work in Progress 1,209,502 285,122 (1,051) 1,493,573 Nuclear Fuel 37,213 608 (1,468) (a) 36,353 Gross Utility Plant.$6,211,603
$ 652,294 $ (28,748) $
(1,477) $6,833,672 Nonutility Property 5,725 $
1,123 (2,783) $
3,117 7,182 (a) Represents nuclear fuel sold and leased back.
48
SOUTHERN CALIFORNIA EDISON COMPANY SCHEDULE V -
PROPERTY, PLANT AND EQUIPMENT FOR THE YEAR ENDED DECEMBER 31, 1979 (Thousands of Dollars)
Balance at Add (Deduct)
Balance Beginning of Additions Other at End Classification Period at Cost Retirements Changes of Period Steam Production
$1,323,603 18,515 (1,278)
$1,340,840 Nuclear Production 145,565 10,493 (31) 156,027 Hydro Production 215,647 1,333 (161)
(10) 216,809 Other Production.
350,002 4,678 354,680 Transmission.....
1,164,523 30,276 (6,628)
(2,136) 1,186,035 Distribution......
1,930,266 158,939 (19,576)
(198) 2,069,431 General..........
139,374 7,496 (2,999) 2,950 146,821 Plant Held for Future Use.....
28,373 1,615 (1,636)
(2,283) 26,069 Experimental Electric Plant Unclassified...
217 107 (217) 107 Other Utility Plant 6,176 1,019 (10)
(1,020) 6,165 Subtotal Utility Plant 5,303,746 234,471 (32,319)
(2,914) 5,502,984 Construction Work in Progress....
1,493,573 564,504 881 2,058,958 Nuclear Fuel.....
36,353 4,263 40,616 Gross Utility Plant......
$6,833,672
$ 803,238
$ (31,438)
(2,914)
$7,602,558 Nonutility Property 7,182 4,438 (2,411) 9,209 49
SOUTHERN CALIFORNIA EDISON COMPANY SCHEDULE VI-ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT(a)
FOR THE YEAR ENDED DECEMBER 31, 1978 (Thousands of Dollars)
Additions Add (Deduct)
Balance at Charged to Balance at Beginning Costs and Other End Description of Period Expenses Retirements Changes(b)
Salvage of Period Steam Production.......
$ 500,979 39,503 (472) $
242 $
2 $ 540,254 Nuclear Production......
24,405 5,800 30,205 Hydro Production........
82,163 3,119 (265)
(40) 2 84,979 Other Production........
32,258 11,469 (1,318) 42,409 Transmission............
189,057 25,026 (2,926) 599 1,188 212,944 Distribution.............
526,102 69,197 (17,541)
(4,221) 5,779 579,316 General................
29,205 5,791 (3,989)
(71) 463 31,399 Experimental Electric Plant Unclassified 208 95 (302) 1 Retirement Work in Progress.............
(2,172)
(925) 426 (536)
(3,207)
Other Utility Plant Reserves 804 103 (34) 1 874 Subtotal.............
1,383,009 160,103 (26,152)
(4,685) 6,899 1,519,174 Nuclear Fuel Amortization 19,870 2,911 22,781 Total Utility Plant Reserves.........
$1,402,879 $ 163,014 $ (26,152) $
(4,685) $
6,899 $1,541,955 Nonutility Property Reserves.............
1,133 134 1,267 (a) Depletion is not applicable.
(b) Includes removal costs related to facilities retired, damage claims and relocation costs collected from others, and various other adjustments of depreciation and amortization.
50
SOUTHERN CALIFORNIA EDISON COMPANY SCHEDULE VI-ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT(a)
FOR THE YEAR ENDED DECEMBER 31, 1979 (Thousands of Dollars)
Additions Add (Deduct)
Balance at Charged to Balance at Beginning Costs and Other End Description of Period Expenses Retirements Changes(b)
Salvage of Period Steam Production........
$ 540,254 $
38,876 $
(1,140) $
11 31
$ 578,032 Nuclear Production 30,205 9,009 (30)
(15) 39,169 Hydro Production...
84,979 3,322 (172)
(40) 20 88,109 Other Production...
42,409 15,250 (12) 57,647 Transmission.......
212,944 32,026 (6,265)
(760) 2,943 240,888 Distribution.......
579,316 76,292 (19,453)
(4,120) 7,228 639,263 General...
31,399 6,719 (2,877)
(240) 791 35,792 Experimental Electric Plant Unclassified..........
1 5
6 Retirement Work in Progress.............
(3,207) 774 (1,560) 227 (3,766)
Other Utility Plant Reserves 874 143 (9)
(1) 1 1,008 Subtotal.............
1,519,174 181,642 (29,172)
(6,737) 11,241 1,676,148 Nuclear Fuel Amortization.
22,781 2,107 24,888 Total Utility Plant Reserves.........
$1,541,955
$ 183,749 $ (29,172) $
(6,737) $
11,241
$1,701,036 Nonutility Property Reserves..............$
1,267 $
78 $
(872) $
478 $
951 (a) Depletion is not applicable.
(b) Includes removal costs related to facilities retired, damage claims and relocation costs collected from others, and various other adjustments of depreciation and amortization.
51
SOUTHERN CALIFORNIA EDISON COMPANY SCHEDULE XII -
RESERVES FOR THE YEAR ENDED DECEMBER 31, 1978 (Thousands of Dollars)
Additions Balance at Charged to Charged to Balance at Beginning Costs and Other End Description of Period Expenses Accounts Deductions of Period Group A:
Uncollectible Accounts Customers................
$ 2,050
$ 4,110 15
$ 4,116
$ 2,059 All Other.................
3,664 1,097 1,212 3,549 Total.............
$ 5,714
$ 5,207 15
$ 5,328 (a) $ 5,608 Group B:
Pensions and Benefits........
$17,497 869
$ 8,335(b) $11,165(c) $15,536 Insurance, Casualty and Other 11,956 28,757 29,624(d) 11,089 Total
$29,453
$29,626
$ 8,335
$40,789
$26,625 (a) Accounts written off, net.
(b) Principally, charges are to various plant and expense accounts as a. payroll additive for employees' paid absences.
(c) Includes pension payments to retired employees, amounts paid to active employees during periods of illness and the funding of certain pension benefits.
(d) Pursuant to a FERC order, operating reserves relating to certain federally-licensed hydro electric projects in the amount of $3,801,000 were transferred to Earnings Reinvested in the Business and became an appropriation thereof. Other deductions were principally charges from work orders closed and amounts charged to operations that were not covered by insurance.
52
SOUTHERN CALIFORNIA EDISON COMPANY SCHEDULE XII -
RESERVES FOR THE YEAR ENDED DECEMBER 31, 1979 (Thousands of Dollars)
Additions Balance at Charged to Charged to Balance at Beginning Costs and Other End Description of Period Expenses Accounts Deductions of Period Group A:
Uncollectible Accounts Customers........
$ 2,059
$ 4,770
$ 4,566
$ 2,263 All Other..................
3,549 3,565 881 6,233 Total.............
$ 5,608
$ 8,335
$ 5,447(a) $ 8,496 Group B:
Pensions and Benefits.....
$15,536
$ 5,728
$ 8,705(b) $12,230(c) $17,739 Insurance, Casualty and Other 11,089 23,282 19,562(d) 14,809 Total.............
$26,625
$29,010
$ 8,705
$31,792
$32,548 (a) Accounts written off, net.
(b) Principally, charges are to various plant and expense accounts as a payroll additive for employees' paid absences.
(c) Includes pension payments to retired employees, amounts paid to active employees during periods of illness and the funding of certain pension benefits.
(d) Principally charges from work orders closed and amounts charged to operations that were not covered by insurance.
53
12(a) (2) Exhibits Filed Exhibit 1.-Computation of Fully Diluted Earnings Per Share Exhibit 2. -
Forty-Third Supplemental Indenture, dated as of September 15, 1979 Exhibit 3.-
Resolution creating First and Refunding Mortgage Bonds, Series LL, Due 1987, dated August 16, 1979 The following exhibits have heretofore been physically filed with the Securities and Exchange Commission ("Commission") (specified document and file number noted) and are incorporated herein by reference pursuant to Rule 12b-32:
(a) Trust Indenture, dated as of October 1, 1923 (Form A-2, File Number 2-1369, effective April 19, 1935)
(b) Third Supplemental Indenture, dated as of June 24, 1935 (Form A-2, File Number 2-1602, effective September 16, 1935)
(c) Fourth Supplemental Indenture, dated as of September 1, 1935 (Form A-2, File Number 2-4522, effective October 8, 1940)
(d) Sixth Supplemental Indenture, dated as of September 1, 1940 (Form S-7, File Number 2-59199, effective June 30, 1977)
(e) Eighth Supplemental Indenture, dated as of August 15, 1948 (Form S-1, File Number 2-7610, effective August 10, 1948)
(f)
Twenty-Fourth Supplemental Indenture, dated as of February 15, 1964 (Form S-9, File Number 2-22056, effective February 17, 1964)
(g) Forty-Fourth Supplemental Indenture, dated as of October 1, 1979 (Form S-16, File Number 2-65493, effective October 3, 1979)
(h) Resolution creating First and Refunding Mortgage Bonds, Series MM, Due 2004, dated October 11, 1979 (Form S-16, File Number 2-65493, effective October 3, 1979) 12(b) Reports on Form 8-K No reports on Form 8-K have been filed during the last quarter of 1979.
Executive Officers of the Registrant Age at December 31, Effective Executive Officer 1979 Company Position Date Jack K. Horton 63 Chairman of the Board, Chief Executive Officer April 18, 1968 and Director William R. Gould 60 President and Director February 1, 1978 Howard P. Allen 54 Executive Vice President December 20, 1973 H. Fred Christie 46 Senior Vice President and Chief Financial Officer January 1, 1977 David J. Fogarty 52 Senior Vice President September 1, 1977 A. Arenal 54 Vice President (Engineering and Construction)
January 1, 1980 Glenn J. Bjorklund 47 Vice President (System Development)
August 1, 1979 Robert Dietch 41 Vice President (Nuclear Engineering and Operations)
January 1, 1980 C. E. Hathaway 45 Vice President (Personnel)
January 1, 1980 54
Age at December 31, Effective Executive Officer 1979 Company Position Date Joe T. Head, Jr.
58 Vice President (Power Supply)
November 21, 1974 P. L. Martin 50 Vice President (Customer Service)
September 1,1978 A. L. Maxwell 58 Vice President and Comptroller July 17, 1975 Edward A. Myers, Jr.
56 Vice President (Conservation, Communications August 19,1971 and Revenue Services)
Lawrence T. Papay 43 Vice President (Advanced Engineering)
January 1,1980 William H. Seaman 62 Vice President (Fuel Supply)
July 17, 1969 Robert E. Umbaugh 42 Vice President (Administration)
September 1,1976 John R. Bury 52 General Counsel September 1,1978 Michael L. Noel 38 Treasurer September 1,1976 Honor Muller 51 Secretary November 1, 1979 None of the Company's executive officers are related to each other by blood or marriage.
All of the executive officers have been actively engaged in the business of the Company for more than five years.
All officers have been employees of the Company for the past five years. Those officers who have not held their present position for the past five years had the following business experience during that period:
William R. Gould Executive Vice President December 1973 to January 1978 AH.
Fred Christie Senior Vice President September 1976 to December 1976 Vice President and Treasurer July 1975 to August 1976 Treasurer March 1970 to July 1975 David J. Fogarty Vice President -
Customer Service September 1976 to August 1977 Vice President -
Power Supply December 1974 to August 1976 A. Arenal Vice President -Advanced August 1979 to Engineering December 1979 Vice President -
System September 1976 to Development July 1979 Manager of Engineering and November 1971 to Construction August 1976 Glenn J. Biorkund Division Vice President -
Eastern Division May 1978 to August 1979 Administrator of Department Operations -
May 1975 to Customer Service Statf May 1978 Robert Dietch Division Manager-Southeastern Division August 1979 to December 1979 Assistant Division Manager-October 1978 to Southeastern Division July 1979 Manager of Projects -to Project Management Organization Januamry 1978 Septemer97 97 Manager of Engineering -
Design Organization January 1976 to December 1978 Manager of Construction and Transmission/
February 1975 to Substation Engineering December 1976 55
C. E. Hathaway Division Vice President -
Eastern Division August 1979 to December 1979 Division Vice President -
Southeastern Division September 1978 to July 1979 Division Vice President -
Central Division January 1978 to August 1978 Assistant Division Manager -
Central Division May 1975 to December 1977 Joe T. Head, Jr.
Vice President -
System Development December 1974 to August 1976 P. L. Martin Division Vice President -
Southeastern September 1977 to Division August 1978 Manager of Customer Service -
Southeastern December 1973 to Division August 1977 A. L. Maxwell Comptroller November 1968 to July 1975 Lawrence T. Papay General Superintendent -
Power Supply October 1978 to December 1979 Director of Research and Development August 1970 to September 1978 Robert E. Umbaugh Manager of Data Processing January 1974 to August 1976 John R. Bury Assistant General Counsel December 1973 to August 1978 Michael L. Noel Assistant Treasurer December 1975 to August 1976 Manager of Corporate Planning September 1974 to November 1975 Honor Muller Assistant Secretary December 1978 to October 1979 Executive Secretary February 1959 to December 1978 PART II Item 13. Security Ownership of Certain Beneficial Owners and Management Information responding to Item 13 was included in a proxy statement filed by the Company on or about February 29, 1980 with the Commission pursuant to Regulation 14A and is omitted herein pursuant to General Instruction H.
Item 14. Directors and Officers of the Registrant Information concerning directors and officers of the Company is set forth after Item 12 in Part I, pursuant to Instruction 4 to Item 3(b) of Regulation S-K. Other information responding to Item 14 was included in a proxy statement filed by the Company on or about February 27, 1980 with the Commission pursuant to Regulation 14A and is omitted herein pursuant to General Instruction H.
Item 15. Management Remuneration and Transactions Information responding to Item 15 was included in a proxy statement filed by the Company on or about February 29, 1980 with the Commission pursuant to Regulation 14A and is omitted herein pursuant to General Instruction H.
56
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SOUTHERN CALIFORNIA EDISON COMPANY (Registrant)
By H. FRED CHRISTIE H. Fred Christie Senior Vice President and Chief Financial Officer DATE: March 11, 1980 57
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our report appearing in the annual report on Form 10-K for the year ended December 31, 1979 of Southern California Edison Company in the Registration Statement on Form S-16 which became effective on October 19, 1978 (File No. 2-62625).
ARTHUR ANDERSEN & CO.
March 11, 1980 58
Exhibit 1 SOUTHERN CALIFORNIA EDISON COMPANY COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE (Thousands of Dollars)
Year Ended December 31, 1975 1976 1977 1978 1979 Net Income...............
$176,781
$226,798
$251,979
$251,683
$346,219 Less: Preferred and Prefer ence dividend requirements 40,410 42,557 46,571 50,532 54,967 Add: Original Preferred dividends.................
806 806 922 1,075 1,229 Add: Convertible Preference dividend requirements.....
3,900 3,900 3,212 2,354 1,592 Add: Interest on 3%/%
Con vertible Debentures.......
2,341 2,341 2,341 2,341 2,341 Less: Tax effect of interest on 3%% Convertible Deben tures(A).................
1,233 1,233 1,233 1,233 1,190 Adjusted amount available
$142,185
$190,055
$210,650
$205,688
$295,224 Weighted average shares Original Preferred........
480,000 480,000 480,000 480,000 480,000 Common(B)............
47,484,883 48,198,116 54,136,673 57,199,490 63,887,178 Common shares reserved for conversion of:
31/% Convertible Debentures............
1,804,868 1,896,254 1,920,565 1,997,388 2,024,380 Preference Stock, 5.20%
Convertible Series......
2,026,960 2,112,606 1,561,039 1,202,809 796,088 Total weighted average shares 51,796,711 52,686,976 58,098,277 60,879,687 67,187,646 Fully diluted earnings per share(C)................
$2.75
$3.61
$3.63
$3.38
$4.39 Notes:
(A)
Composite tax rate 52.68%
52.68%
52.68%
52.68%
50.86%
(B) Includes Common Stock equivalents and Common Stock issued due to conversions during 1977, 1978 and 1979, adjusted as if they were outstanding at the beginning of the year.
(C) Adjusted amount available divided by total weighted average shares.
59