ML17139A426

Annual Financial Rept 1980

ML17139A426
Person / Time
Site:	Susquehanna
Issue date:	09/30/1981
From:	ALLEGHENY ELECTRIC COOPERATIVE, INC.
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ML17139A427	List: ML17139A426 ML18030A565
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~r Allegheny Electric Cooperative Members Providing low cost dependable electrlcty to 158,000 member/consumers In Pennsylvania and New Jersey.

sewing In 44 counties 23,689 miles of line 158,000 member/consumers 156 directors - 698 employees 1.7 billion KWH purchased annually

$242,000,000 invested in plant

6~el'gy Projects NUCLEAR 10% ownership in the Susquehanna Steam Electric Station.

HYDRO Identifying and planning the use ofexisting dams for electric generation.

ANTHRACITECOAL Exploring the feasibility of a large mine-mouth generating plant in the, anthracite region.

SYNTHETIC FUELS Exploring the potential of a generating station fueled by medium BTU coal-derived gas, to be built in conjunction witha major synfuels plant under study in Western Pennsylvania.

WIND Operation oftwowind turbines to study the economic and technical feasibility of this form of generation in Pennsylvania.

GROUND WATER Installation of ground water heat pumps to determine economic and technical impact on water and space heating and

cooling, LOAD MANAGEMENT Operation of test systems to control water heaters in order to reduce electricity consumption during peak demand periods.

President's Repoirl' am pleased to report that substantial progress was made during'1980.

Perhaps the most important progress in the viewpoint of the member systems was the Transmission Committee progress in developing guidelines under which Allegheny Electric Cooperative will pro-vide transmission facilities. As Allegheny Electric Cooperative evolves into a "full service" generation and transmission cooperative, the "T

transmission portion will become very im-portant in reducing outages and Im-proving continuity of ivice.

On the energy management and JOMSS HSACISFSOll conservation

front, Resident Allegheny was one offiveCooperatives inthe United States selected to receive the President's Award for Energy Efficiency.

Additionally, Allegheny was awarded grants by the Electric Power Research Institute and the U.S. Department of Energy to continue research into the ground water and ground-coupled heat pump.

I regret the further delays on the operation schedule of the Susquehanna nuclear station.

There are two good news events pertaining to nuclear power. The first Is that Congress made a small start on waste disposal legislation in 1980. We are optimistic for additional legislation in this "key" area in 1981. The second is that the NRC has started to make some progress in licensing activities on nuclear plants. All license work had come to a complete halt as a result of TMI.We look forward to license progress on Susquehanna in 1981.

As 1980 ended, it began to look like the anti-nuclear tide had turned and maybe the nation wili once again look at the alternatives and decide that nuclear power is not as dangerous as the scare tactics. put forth by the anti-nuclear groups, would lead the public-at-large to believe. YourAllegheny Electric Cooperative has a lot at stake in this area due to our 10% ownership of the Susquehanna Nuclear Plant. Printed elsewhere in this report is Allegheny Electric Cooperative's statement on nuclear energy adopted by the Board ln 1980.

Speaking of nuclear energy and how public policy changed from nuclear development to one of opposition, it is fascinating to look at nuclear energy inother nations. Forexample, France expects to bring a new nuclear unit on line EVERY TWO MONTHS on the average between 1980 and 1985. It Is also 'interesting to note that France is going forward in developing and building "fast breeder reactors" to generate electric power. It is estimated that the fast breeder reactor multiplies the energy potential of natural uranium sixty to seventy times.

All of us in rural electrification, dedicated to providing paver at as Iow a cost as possible, must work to get nuclear power to the point where itcan provide a substantial portion of our generation capacity.

Although there are many obstacles and challenges to overcome in planning ahead foryour future power supply. the true spirit of cooperation and working together for mutual benefits, will provide the energy to accomplish our objectives.

Board of Directors

> t, <<.'r James Henderson Prsldenl ~ Sussex Myron Ludwlck Vlccprestdent a Warren John Anstadt Secrelary 0 Sutttran j

Robetrtt Stetrett Treasurer ~ Central Clair O..Butetbaugh uuttrwest Central John Drake po~i Uoyd Dugan, Sr.

Zrtoounty Don Hill Voaey t

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Benlamln Slick Hew EnNrpdse 1j Q

I Hiram Walker Employees 1

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I David L Mohre Engtneertng/Power Supply otrector Wllllam E. Mowalt Oeneral Counsel 5 Assisant Secretary Wllllam F. Matson ExecuNve Vlcc Presldenl b

Oenend Manager

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General Manager' Report In spite of rapldly-escalatlng

prices, constant increases in the energy

markets, and two reductions in our allocation of low-cost PASNY

power, Allegheny Electric Cooperative can report to its member-ship that 1980 has been successful in several areas.

First and

foremost, Allegheny was able to refund to our members over $4 g l 1

(pe 7

million ln rate settle-WllllcmrAF. Mafson ments from our major power suppliers. These General Manager refunds helped to keep the Increases in our wholesale power cost to our members within reason In this extremely Inflationary period. The added good news is that our projections for 1981 suggest that little or no increase in our basic wholesale power rates will be required.

As mentioned, Allegheny experienced two reductions in our allocation oflow-cost PASNY power during the year. These actions contributedheavlly to the need for Allegheny to Increase its rates to members.

It was fifteen years ago - July 28, 1966-when the original deliveries of hydroelectric power from the Power Authority of the State of New York (PASNY) began to flowto our members. Through the years, our share of that economical power has shrunk considerably.

Nevertheless, if in 1980 our PASNY power had been replaced by wholesale purchases from Penelec and Met-Ed, the additional cost to our members would have been S16,200,000.

At present, Allegheny is fighting for that already-curtailed allocation of Niagara power, now being challenged by several northeastern states. We feel under the law these states have no right to expect any allocation - and certainly not a share of ours. In years to come we can continue to expect significant activity by Allegheny in an area ~hlch was virtually unknown a short time ago, that of the almost never-ending challenges to the Federal Energy Regulatory Commission (FERC) with regard to this low-cost source of power.

Our efforts to become more Independent of our major power suppliers moved ahead well during 1980. Considerable progresswas made on our hydro development activities. A license application was filed with FERC on the Raystown project, and we received funding from DOE for detailed feasibility studies of Allegheny Locks and Dams 8 and 9.

The Susquehanna Steam Electric Station can be categorized as progressing predictably, though not without its share of frustrations. Inactivityon the part of the Nuclear Regulatory Commission may account for licensing delays on the Susquehanna Plant that could cost electric consumers in Pennsylvania more than S1 million per day on this plant atone.

Add to that the

$400,000 a day attributed to a dormant Three MileIsland Unit I and it becomes clear what Inaction on the part of a regulatoiy agency can cost consumers.

Allegheny's Investigations into the feasibilityofan anthracite-fired generating plant, which would boost the sagging economy ofthe hard coal region in northeastern Pennsylvania, has moved along more rapidly than anticipated. We are expecting "first draft" price quotes from Consolidation Coal Company, one ofthe potential coal suppliers forthe proJect, in mid-1981.

There was also good news on the nuclear fuels front. Our partners in the Susquehanna Plant settled a damage suit with General Atomic Corporation (GAC). As a party to that suit, Allegheny willshare In the settlement which will allow us to completely recover our investment in the URADCO mining venture, plus provide us with an assured supply of yellowcake at'well below proJect market costs fora number of years In the future.

In 1980, Allegheny also received a refund of S3,373,180.00 from the treasury of the Commonwealth of Pennsylvania. This was the result of an order of the Board of Finance and Revenue, granting Allegheny's Petition for Refund of this amount paid under protest during 1979 under the Pennsylvania Public UtilityRealty Tax Act (PURTA).

During the last part of 1980, the new team in Washington made attacks on the REA Loan Program. Responding to these initiatives has taken its share oftime, expense, and nervous energy from us all. At stake, of course, is access to the Federal Financing Bank (FFB) for G&T cooperatives with Federal loan guarantees.

We have every reason to believe that if a strong, united, national effort In defense of the REA program continues, we willbe able to retain a strong rural electric credit program.

While most of the Forbes 500 corporations probably would have to agree that it was just another

year, those of us deeply involved in Allegheny have to say that itseemed likeone ofthe toughest ever, but then we haven't seen what the next fewyears may bring. Throughout1980, the close working relationships between Allegheny board members, employees ofmember cooperatives, and Allegheny staff has been responsible for timely completion of many Important projects which have significantly enhanced our overall operation.

For the cooperation, we are grateful.

I'INANCIAlREVIEW Operating Revenue The operating revenue ofAllegheny increased by 8.5 million (20% for the fiscal year which ended December 31, 1981) and is comprised solely ofsales to members.

1980 S51,123,060 1979 S42,589.089 Other Revenue Allegheny's interest Income for 1980 was S555,776.

This Is compared to S146,816 in 1979, or an increase of 279%. During 1980,.because ofthe extremely high tnterest rates available on investments, continued emphasis was placed on the matter of money rnanagernenf.

At all times during the

year, Allegheny was able fo keep Its funds working,

%hereby making the optimum use ofeach available dollar. We feel that this money management program ls well worth the time and effortexpended.

Interest Charges The interest on the tong-term debt increased by S6,300000 (489%). This isthe interest chargedby the Federal Financing Bank on the monies which have been advanced to Allegheny for its involvement tn the Susquehanna Steam Electric Station in Beiwlck, Pennsylvania. Thisfigure willcontinue togrow in 1981 because ofAllegheny's continued involvementwith the Susquehanna Plant and also because of the tncreased interest rates now in effect. During the year of 1980,Allegheny did not use Its line of credit with CFC and at no time during the year were any short-term funds borrowed.

Therefore, atl of the Interest charges are on a long-term basis, Aliwere The revenue generated from sales increased S8.5 million even though the kilowatt hour sales increased by only 12.9 million KWH (0.8%). The revenue increase from sales Is due largely tothe rate increases which were necessitated bythe reduction of previously-apportioned PASNY power, and the continuing pass-through of the fuel charges.

Operating Expenses The general operating expenses Increased in 1980 by S7.6 mlllton, This was due largely to the increased costs ofpurchased power (19.3%). Also during 1980, general and administrative expenses increased S123 000 or 166%. Thiswas mainly'due toAllegheny's increased Involvement with EPRI as wellas a number of engineering feasibility studies and projects undertaken in 1980.

capitalized and allocated to the Susquehanna Plant.

Net Margins Allegheny's net margin for 1980 was S2.9 million compared to S2.1 million In 1979. This is an Increase of 35%. The Increase In net margins was because

'Allegheny's actual sales were less than what was budgeted in 1980 and at the same time, expenses were under the proJected budgeted amount.

Financing Allegheny's continued Involvement In the Susquehanna Plant will require additional funds during 1981 to be advanced by the Federal Financing Bank. There is a possibility that during 1981, Allegheny may be forced to go to the open market to obtain future financing, However, it Is hoped that the Federal Financing Bank willremain intact as Allegheny's prime source of borrowing.

There are a

number of projects Allegheny is anticipating or considering at this time, and front-end monies needed for these proJects will come from either CFC or RFA During the calendar year Allegheny was issued an additional S56,919,000 In long-term debt from the Federal Financing Bank.

The current combined rate of interest for these monies Is 11.631%.

It fs essential In the coming years ghat Allegheny be able to maintain a strong financial base and that its equity level continue to strengthen. We are currently striving to maintain these positions by using a

sound money management program.

negotiating the best possible power purchase contracts, apd by our continued effort In monitoring Allegheny's expenses in order that our overhead be kept at a minimum.

During 1980,Allegheny received from EPRI a grant In the amount of S50.000. This grant Is forresearch in the fieldofenergyconseivatton.

The funds are forthe purchase of monitoring equipment such as computers and meters, travel, and related expenses tn the operation of this equipment In order that a proper evaluation carl be performed on the systems being tested.

The systems consist of two ground water heat pumps Installed In two homes In the Bedford and New Enterprise areas.

Also during 1980, Allegheny applied for and received from the Department of Energy a

forgivabIe loan inthe amount ofS100,000. This loan is for a feasibility study for Locks and Dams 8 and 9 located on the Allegheny River In Western Pennsylvania.

These funds were receivedfor the purpose of determining the feasibilityofthese small scale hydro projects.

If the projects are deemed infeaslbte, then the loan funds may be forgiven by the Secretaiy of Energy.

Balance Sheet (Audited)

Assets UtilityPlant In Service Construction Work In Progress Total Plant Accumulated Provision for Depreciation Net Plant Non-UtilityProperly - Net

, Capital Credits - NRUCFC Investments in Associated Organizations Cash - General Funds Cash - Construction/Working, Funds Temporal Investments Accounts Receivable Other Current &Accrued Assets Deferred Debits Total Assets

'i980 S

12.039,819 229,748,469 241,788,288 (66,654)

S241,721,634 6,658,496 612,056 1,634,964 27,795 3,725,852 3,305,000 9,344,654 143,240 1A44A35 S268,318,126 1979 S

7,438,926 173,701,203 181,140,129 (41.352)

S181,098,777 607,240 4,381,064

'25,656 3.587A10 1,037.000 8,685,866 42,921 1,618,397 S201,084,331 Liabilities Memberships Patronage Capital Donated Capital Long Term Debt - REA Long Term Debt - Other Accounts Payable Accrued Interest Other Current &.Accrued Uabllities Deferred Credits Total Liabilities 1980 S

2,800 11,329,301 29,665 239,956,000 3,243,529 9,429,191 84,038 1,085,989 3,157,613 S268,318.126

'f979 S

2,800 8,M9,752 29,665 183.037,000

,8,386.064 35,162 1,075,734 8,154 S201,084,331 Member Revenues Adams Electric Cooperative, Inc, Bedford Rural Electric Cooperative, Inc.

Central'Electric Cooperative, Inc.

Claverack Rural Electric Cooperative, Inc.

New Enterprise Rural Electric Cooperative, inc.

Northwestern Rural Electric Cooperative Assn. Inc.

Somerset Rural Electric Cooperative, Inc.

Southwest Central Rural Electric Cooperative Corp.

Sullivan County Rural Electric Cooperative, Inc.

Sussex Rural Electric Cooperative Triounty Rural Electric Cooperative, inc.

United Electric Cooperative, Inc.

Valley Rural Electric Cooperative, Inc.

Warren Electric Cooperative, Inc.

TOTAL 1980 S

6,225,061.93 2,316,682.84 4,975,920.66 3,906,778.58 941,901.57 5,242,740.22 4.919.086.65 6A30,996.83 1,092507.74 2A53,578.40 3,364,007.50 3,603,828.16 4,376,195.66 1,273,773.70 S51,123,060A4

'1979 S 5,213560.16 1,965,522.59 4,080,577.51 3,311386.00 796.629.29 4A68,199.71 4,063,345.84 5,31 7,066.82 895,240.27 1,962,059.49 2,821,159.36 2,970,617.28 3,711 A42.02 1,020,639.17 S42,597A46.51

Wholesale Power Cost Power Authority of the State of New York (PASNY)

West Penn JCP&L Metropolitan Edison Peneiec Sub-Total Transmission Costs (Wheeling for PASNY Power)

New York Companies G.P.U. Companies Sub-Total Total Power Supply Expense Other Expenses Customer Accts.

Admln. &General Depreciation &.Amortization Total Operating Expense COST IN DOLLARS S3,007,771 3,343,993 3,812,234 5,079,141 28,788,825

$44,031,964 S 676,080 2,715,762 3,391,842 S47A23,806 S1,064,200 S48,488,006 COST IN MILLS/KWH 5.42 M/KWH 23.56 M/KWH 47.66 M/KWH 50.39 M/KWH 36.09 M/KWH 26.28 M/KWH 0.40 M/KWH 1.62 M/KWH 2.02 M/KWH 28.30 M/KWH 0.64 M/KWH 28.94 M/KWH PERCENTAGE OF.

TOTAL COST 6.20%

6.90%

7.86%

10.48%

59.37%

, 90.81%

1.40%

5.60%

7.00%

97.81%

2.19%

1980 COST OF OPERATIONS DOLLAR DISTRIBUTION PURCHASED POWER SOURCES BY PERCENTAGE31 DECEMBER 1980 TOTAL KWH 1,675,479,842 1C 2C 6cfg

'C 7c [g~gp~

8C PASNY WHEELING ADMINISTRATION& GENERAL PASNY GPU WHEEUNG WEST PENN JCP&L MET-ED 59C PENELEC PASNY

'ENELEC 47.6%

JCP&L 4.8%

WEST PENN MET-ED 8.5%

6%

'onthly MW Demand Ij 1979 385 389 372 31S 267 256, 245 251

~ 1980 362 371 362 318 281 254 254 261 261 269 283 311 369 280 329 374 J

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8 0

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Purchased power fuel types Coal 56% C3

'9%

Oil Hydro 34% H O 1%

Nuclear Yearly KWH Percentage of Increase 1700 1600 1500 1400 6.77%

1200 1300 688%,

IIM gg 10OO e

1973 1974 8.75%

7A5%

1975 1976 4.98%

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ptI) 1977 1978 29',

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=-'0 1979 1980 I

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22.0 Average Wholesale Power Cost 1970 - 'l980 C~p'llegl~

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70 71 72 73 74 75 19.4

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Review of Power Cosh As of December 31, 1980, Allegheny's average purchased power cost from its fivewholesale power suppliers reached 28.30 MILLS/KWHor 2.830'/KWH, Last year, average cost reached 23.93 MILLS/KWH.

Accordingly, total power cost dollars rose from S39,790,671.48 ln 1979 to S47,423,806.47 in 1980. This represents a substantial increase of S7,633,134.99or 19.2 percent in only one year.

Asmall portion ofthis power cost increase can be directly attributed to normal system toad growth which automatically requires Allegheny to purchase additional high cost supplemental power from the Pennsylvania Electric Company and Metropolitan Edison.

Total system power requirements increased from 1,662,548,241 KWH in 1979 to 1,675A79,842 in 1980 an increase of only 12,931,601 KWH or 0.8 percent.

System peak demand actually decreased from 389 MW in 1979 to 374 MWIn 1980 or by 3.7 percent. However, a new system peak of 396 MWwas established in January of 1981.

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~Vnglneer Richard Osborne Slalt Engineer Aside from the increase caused by the PASNY reduction. Allegheny's total 1980 purchased power cost rose approximately two milliondollars because of increased wholesale power costs from Metropolitan Edison Company and Jersey Central Power and Light. Average cost from Met-Ed increased from 39.03 MILLS/KWH in 1979 to 50.39 MILLS/KWH in 1980.

Likewise, average cost from Jersey Central Increased from 35.26 MILLS/KWHin 1979 to 47.66 MILLS/KWH in 1980. Both of these significant Increases were a

direct result of increased fuel adjustment charges caused by the Three Mile Island accident.

Ironically, base rates charged by Met-Ed, Jersey Central, and Penelec were actually reduced in 1980 as a result of settlement agreements reached with the three companies.

r Alvaro Domlngos Stall Engineer Jan Ivanott Englneerlng Aide The majorityofthe purchased power cost Increase was due tothe reduction ofAllegheny's allocation of low-cost hydro power furnished by the Power Authority of the State of New York. On January 1,

1980, the Power Authority reduced Allegheny's hydro allocation from 130 MW of firm power and associated energy at system load factor to 105 MW offirm power and associated energy at system load factor and 25 MW of peaking power with a fixed load factor of 12.5 percent. Unfortunately, this low cost hydro power was replaced with additonal high cost supplemental power purchases from the Pennsylvania Electric Company. Subsequently, on June 1, 1980, Allegheny's PASNY allocation was further reduced to 86 MW of firm power and associated energy at system load factor and 21 MW of peaking power with a fixed load factor of 12.5 percent.

Again, additional supplemental power was purchased from Penelec.

Year-end figures indicate that Allegheny's total 1980 purchased power cost Increased by approximately five million dollars due to this allocation reduction.

Further reduction ofthe valuable energy resource wouldbe disastrous for Allegheny's member cooperatives.

Anthony Adontslo Asshhml Oenercd Counsel Edward Stevens Accounlanl During 1980, Allegheny's total purchased power cost represented 92.9 percent of the total required operating revenue.

Even though the PASNY allocation had been reduced, this non-polluting, dependable, low-cost hydro power from the Power Authority saved Allegheny and each of its member cooperatives a total ofS16,207,929.60 on purchased power expense.

Without PASNY power, average purchased power cost would have increased from 28.3Q.MILLS/KWHto 38.00 MILLS/KWHan increase of 9.70 MILLS or 34.2 percent.

Our legal and engineering departments continue toworkwiththe Federal Energy Regulatory Commission to maintain our PASNY current allocation through the end ofthe present contract which expires in 1985.

Robert S. Hom s a a oirector Wllllam Loaan Coorcs actor ot SpecTal Protects number of interrelated events, the restart of Unit 1 may occur near the end of 1981. Based upon this very significant assumption, Allegheny now projects that its total average purchased power cost for1981 should reach 29A1 MILLS/KWH.This represents an increase of only 1.09 MILLSor 3.8 percent over 1980.

Average power cost to member cooperatives is now projected at 31.13 MILLS/KWHin 1981 as compared to 30.51 MILLS/KWHduring 1980. This represents an increase of on/ 0.62 MILLS or 2.0 percent.

These minimal power cost increases are a direct result of reduced system load growth.

In conjunction with Allegheny's average cost of purchased power, the cost of wholesale power purchased by member cooperatives from Allegheny increased from 25.62 MILLS/KWHin 1979 to an average of 30.51 MILLS/KWH in 1980 an increase of 4.89 MILLS. In total dollars, member purchased power cost Allegheny's revenue increased from

$42,589,089.06 in 1979 to

$51,123,060.43 in 1980. This represents an increase of S8,533,971.37 or 20.0 percent over last year. Of this total increase, 90.0 percent was required to cover the increased purchased power costs discussed previously. The remaining 10.0 percent contributed to increased engineering expenses and margins as approved by the Board of Directors.

Denelce Chubb Sookkeeper t

t Fred Fritz S e JT Inshuctor Turning now to current rate-related

matters, through the efforts of Allegheny's special counsel William C. Wise, Southern Engineering Company of Georgia, and the Allegheny staff, the three major wholesale rate cases filed by Penelec, Met-Ed, and Jersey Central were contested before the federal Energy Regulatory Commission and eventually settled withoutfERC hearings. Both the Penelec and Jersey Central rate reductions became effective with the March, 1980 power billings to Allegheny. In July, the Met-Ed wholesale rate was also reduced in accordance with the settlement terms. These rate settlements reduced Allegheny's total purchased power cost by approximately four million dollars or 7.2 percent.

As of this writing,Allegheny expects that the GPU companies (Penelec, Met-Ed, and Jersey Central) willnot filemajor wholesale rate increases before the fERC until sometime after Unit 1 of the Three Mile Island Nuclear Generating Station returns to commercial operation.

Depending upon a

David MoffN Elizabeth Brcwrn production upenrtsor Allegheny's policy is and has always been, that any cash refund received from a wholesale power supplier as a result ofa rate case settlement before the fERC will be refunded fn its entirety, plus any accumulated interest, to member cooperatives.

In April 1980, Allegheny refunded S2,901,513.19 to members as a result of rate case settlements reached with Penelec and Jersey Central. InAugust, Allegheny refunded an additional S708,668.79 to members as a result ofa similarrate case settlement negotiated with Met-Ed. In total, 1980 power cost refunds amounted to S3,610.181.98.

No further refunds are pending during 1981.

c

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'I I,. I'.-.

Roseann Kovach legislative Res>>each Assistant Joanne 2fnn SxecutN>> Sect>>larr Hopefully, next year's Annual Report willconfirm that aveiage purchased power costs to member cooperatives

.remained relatively constant during 1981. Keeping the price of electricity our most dependable and economical energy resource reasonable has always been one of Allegheny's primary functions; to the ummate benefit of member/consumers in Pennsylvania and New Jersey.

~

~

Charteen Beachler

~crelary MaiyJane Branlgan CFnhal Rle/Secnkuy RAYSTOWN Application to the Federal Energy Regulatoiy Commission (FERC) for a construction and Energy Update SUSQUEHANNA STEAM ELECTRIC STATION Construction of the

- Susquehanna plant continued at an accelerated pace during 1980.

Unit 1

is essentially complete.

Unit 2 is approximately HK complete. Should the Nuclear Regulatory Commission (NRC) grant the plant an Operating License consistent with construction progress, the units willgo into service in Mayof 1982 and March of 1983 respectively.

Unfortunately, although many of the post-TMI issues have now been addressed, the NRC has found it difficultto "catch up" withtheir existing workload, giving rise to fears of a delay in the granting of an Operating License for the Susquehanna units. Both Allegheny and PP&L have been working diligently to prevent such a delay, one that could cost Allegheny's members millions of dollars annually.

Contracts for nuclear fuel for the Susquehanna plant have been executed through 1995.

The majority of the contracts willprovide fuel at a price substantially below that anticipated prior to the recent softening of the uranium market. The first delivery of fuel to the site is currently scheduled for June, 1981.

Several important construction milestones were completed during 1980. First the reactor vessel of Unit 1 was flushed with a milliongallons ofwater to remove construction debris. Second, the vessel was subjected to and passed a hydrostatic test that subjected fhe reactor vessel to 1,600 pounds per square inch of pressure for a short duration with longer duration tests at 1,100 psi. Third, the 540 foot cooling tower for Unit 1 was completed in October.

Finally, the massive turbine generator at Unit 1 was placed on the turning gear in mid-December. The turning gear willrotate the turbine generator three times per minute to prevent thewelght ofthe system from bending its shalts. The placing of the turbine generator on the turning gear is considered a major mlleslone for any large generating station.

operating license was made on March 31, 1980 by Allegheny and Pennsylvania Electric Company (joint owners). The 20.3 run-of-the-river project will produce an average of 77 million KWH of energy annually.

Although the project has generally received positive support from state and local interests, Allegheny has been required to perform a number of baseline environmental studies to insure that the project will prove to be environmentally benign.

For instance, a fish sampling study has continued throughout the year to determine the types and quantity of fish in the proposed water intake area. The FERC license is expected in 1981, Construction should begin in 1982 with plant operation scheduled for 1985.

ALLEGHENYRIVER LOCKSANDDAMS8 and 9 ln June, Allegheny received a preliminary permit from FERC, giving it the exclusive right to study the feasibility of hydroelectric generation at these sites for a two-year period. The two sites, located in the same general area of the Allegheny River in Armstrong County, are being evaluated as a single project. Acres American of Columbia, Maryland, was awarded a contract to complete the feasibility study and license application. Preliminary results from analysis to date indicate excellent project potential withan estimated capacity of 13 MWand 17 MW at No. 8 and No. 9 respectively. Combined annual generation from the two units willapproach 190 million KWH.

The two sites have also been granted a

forgivable feasibility study loan from the Department of Energy.

This foan, intended to encourage the development 'of small hydro generation at existing

dams, will greatly assist Allegheny in the costly front-end studies required for projects of this type.

EMSWORTH AND MONTGOMERY A three-year preliminary permit was granted to Allegheny by FERC in March to study the feasibilityof a hydroelectric installation at the existing Emsworth Lock and Dam site on the Ohio River. The Chas.

T.

Main Company of Boston was selectecf to perform the project feasibility study and prepare the license application should the project prove feasible.

Preliminary studies place the installed capacity at 20-25 MW, generating an average of 135 million KWH annually.

Asister project at the Montgomeiy Lock and Dam is still uncter review by FERC to determine which of several competing license applicants will be awarded a

preliminary permit for study and licensing. Allegheny is expecting to receive the preliminary permit based on earlier filingdate and competitive project development.

ANTHRACITE GENERATING STATION Through the continued good efforts ofLt.Governor Scranton and his office, an agreement was reached between Consolidation Coal Company of Pittsburgh and Reading Anthracite Company to begin evaluating 3,500 acres in Tamaqua, Pennsylvania as a possible site fora large anthracite coal mine. This development is a major step forward forAllegheny and its partners Pennsylvania Power and Light and Philadelphia Electric Company-who together are investigating the economic feasibility of a large anthracite-fired generating station in the area. Both the federal Environmental Protection Agency and state offices such as the Department of Environmental Resources have lent active support to the project, which, ifconstructed, will provide both economic and environmental benefit to the local area and to Pennsylvania consumers.

During

1981, Allegheny and its partners will continue to evaluate the social, economic and environmental parameters associated with the project based on preliminary cost data output from Consolidation Coal. By year end, Allegheny and its partners expect to be able to make a go, n~o decision on more detailed project planning studies.

Given the current licensing and construction lead times for a project of this size, the plant could be placed in service in the early to mid-1990's.

SYNTHETIC FUELS GENERATING PROJECT Allegheny is evaluating the potential of a medium-scale 75-225 MW combined cycle generating station fueled by medium BTU coal-derived gas.

The project would be built in conjunction with a large synthetic fuels plant currently under study by the federal Synthetic Fuels Corporation and the AC. Valley Corporation. AC.

Valley has a proposal before the Synthetic Fuels Corporation requesting loan guarantees for the project which, as proposed, would be capable of producing 10,000 barrels per day of gasoline

.derived from high-sulphur bituminous coal.

The process would first convert coal to medium BTU gas using the Koppers gasification process.

Next the medium BTU gas would be converted to methanol using the ICI gas-to-methanol technology. Finally the methanol would be catalytically converted to gasoline. The generating unit would utilize gaseous fuel from the Initial gasification process.

LOAD MANAGEMENT In order to reduce its system peak loads and help keep its members'lectric costs reasonable Allegheny embarked on a two-year test of load management systems for control of water heater loads. During 1980, the test period for the installed equipment commenced at four member cooperatives.

Two af the projects, located at Claverack Rural Electric Cooperative and Northwestern Rural Electric Cooperatvice began operation in Februaiy and March respectively. Withthe exception ofdowntime for repair and some modification of equipment, each systemhas controlled about150water heaters during peak demand

periods, allowing the cooperatives to experiment with different control schedules for shedding and restoring water heater load. This willprovide a good working knowledge of load use patterns, especially as they change from season to season.

The other two projects at Somerset Rural Electric Cooperative and Adams Electric Cooperative have been delayed by redesign work on water heater switches and in the Adams case, relocation of the load management transmitter.

WIND ENERGY Through the combined efforts of Allegheny, Southwest Central Rural Electric Cooperative, NRECA and Alcoa, an 8 KW Vertical Axis Wind Turbine was installed near Ebensburg, Pennsylvania.

From the very beginning, the windmill has been plagued with mechanical equipment problems.

Throughout most of the year, the unitwas operated for only short testing periods generally when technicians were at fhe site. These tests Indicated the need for major redesign of the unit's blade supports and main bearing equipment.

The recently-installed redesigned unit has generated 80 KWHto date whileusing 60KWHforstarting purposes (this windmill requires motor starting to get up to speed).

PcNclcr Pc4oloer 0 e JT secnloy r

I Vonnle Zobltne RocepNcnlst Asimilar test ofan identical Alcoa unitplanned for Adams Electric Cooperative was cancelled due to the poor performance of the Alcoa unit. Adams personnel are continuing to work with Allegheny to develop an alternative project utilizing a significantly larger capacity unit of perhaps 40 KW.

Although success to date has proven minimal, Allegheny will continue to pursue this potential energy resource for its member/consumers.

Position Statement on Nuclear Power It Is the primary purpose of Allegheny Electric Cooperative, Inc. to secure and deliver economic, wholesale power suIIIcient to meet our members'eeds, consistent with the membership corporation's stated objectives.

We clarify our position on nuclear power with the following statements:

1.

We believe this Nation must achieve energy independence to insure our economic future and retain control ofour foreign and domestic policies.

We sincerely believe that a major portion ofour inflation can be attributed to the increase in OPEC oil prices, resulting in unemployment and high cost for those least able to afford them (e.g. elderly on fixed Income).

3.

We believe America's economic future well being requires continual energy usage, with electric power playing an increasingly vital role. We further believe that all forms of domestically available energy resources should be pursued and utilized where found to be economic; and in particular, conservation and renewable energy resources must play an important role in America's energy future.

We believe that the nation's electric generating capacity should be as diverse as possible to assure continued production in the face of energy supply disruptions (e.g.

oil embargoes). Asubstantial part of this diversity should be nuclear generation.

It is a generally-accepted principle that some of the Nation's energy usage now cfependent upon OPEC oil can be converted to electricity based on

coal, nuclear, and renewable energy sources.

We do not favor the use of nuclear power over other means of generation for the sake of nuclear power alone but from the realization that closing out of this option would exacerbate our present weak energy position.

We have no vested interest in the promotion of nuclear power other than the fact that we sincerely believe that nuclear power has added diversity to this Nation's energy resources at a critical time in our history and, if the breeder reactor concept is allowed to be developed as other nations in the world have developed it, fuel exists for continued long-term economic operation of existing and planned nuclear plants.

8.

We believe that this Nation's media has made "anti-nuclear" protest movements a major news story regardless ofmerit and/or credibility to the detriment ofthe public's understanding and knowledge of this important energy option.

George Black Wnlng Speda Hat Wendv Bralton Pholofypeseler 9.

We believewe havean obligationto Infoimall

people, including elected officials, of the scientific facts regarding nuclear powerwhich will eventually bring forth an accurate understanding ofnuclear power bythe citizens of Pennsylvania and this country.

10.

We emphasize that Allegheny Electric Cooperative. Inc., ls not "pro-nuclear" or "anti-nucleal" but rather that we pledge our efforts to energy incfepencfence and to reduce our balance ofpayment deficits whileat the same time doing our share In combatting one ofthis Nation's most serious problems, Inflation, by supplying our consumer-owners with sufficient low-cost, reliable electric power to meet their neecfs.

ALLEGHENYELECTRIC COOPERATIVE, INC.

212 LOCUST ST. P.O. 1266 ~ HARRISBURG. PENNSYLVANIA17108 ~ PHONE 717 233-5704