ML17252B187
ML17252B187 | |
Person / Time | |
---|---|
Site: | Dresden ![]() |
Issue date: | 12/31/1969 |
From: | Commonwealth Edison Co |
To: | US Atomic Energy Commission (AEC) |
References | |
Download: ML17252B187 (28) | |
Text
G Commonwealth Edison Company Annual Report fteO'ulatory
~0-J, c/-9 1969 i a ey:
f--Jl-}o
Our front cover shows the area north of Chicago's loop at the end of the day.
The outer drive, Lincoln Park, and the high-rise array above the gold coast glitter like jewels on black velvet. The picture was taken from the top of the 100 story all-electric John Hancock Center.
The annual meeting of stockholders will be held in Chicago on April 27, 1970, and you are cordially invited to attend.
Formal notice of the meeting along with your proxy material will be mailed about March 25. After the meeting, a summary of the proceedings will be sent to you.
This 1969 Annual Report has been approved by your Board of Directors. If you have any questions about the Report or the Company, please write our Secretary, William H. Colwell, P. 0. Box 767, Chicago, Illinois 60690.
1969 Highlights 1969 Change Since 1968 Net Income on Common Stock
$126.1 million up 0.5%
Earnings per Common Share
$3.00 up 0.3%
Cash Dividends Paid per Share
$2.20 Electric Operating Revenues
$801.1 million up 7.5%
Average Residential Revenue2 2.53¢/ kwh down 1.2%
Sales to Ultimate Consumers 42.9 billion kwh up 8.1%
Average Residential Use 5,174 kwh up 6.9%
Electric Customers at December 31 2.54 million up 2.2%
Peak Load 9.27 million kw up 3.5%
(1) Central Illinois Electric and Gas Co. figures included for periods prior to the December 9, 1966 merger.
(2) Excludes light bulb service.
1 Average Annual Change Since 19641 up 4.8%
up 4.6%
up 8.7%
up 6.4%
down 1.7%
up 7.8%
up 7.0%
up 1.7%
up 8.4%
Letter to stockholders 2
How to preserve our air, water and land is the question of the day. Our public is concerned and so are we. We also are concerned in the public interest about an adequate and uninterrupted supply of energy. We know from experience that the public demands it.
Because of these concerns I feel I should give you my views as to how electric power supply should be handled in the long-term future to minimize intrusion upon our environment.
First, large generating complexes should be located away from urban areas.
These complexes can make use of several power sources. They may be fossi 1-fi red, present-day nuclear machines, or breeder or fusion reactors.
Nuclear units and their successors will be in every way fine neighbors. Quiet.
Absolutely safe. No long strings of coal cars. Not a trace of smoke or soot. And designed to satisfy tough water temperature standards.
These generating complexes should be linked to each other and to city and industrial load centers. The result will be a grid with stations and transmission lines of great capacity.
Huge power demands require big units and big interconnecting lines.
Even with our present technology we are building them with almost no adverse ecological effect. Fortunately, such a bulk power system is not only the most reliable but also the most economical.
This means smaller power systems may increasingly choose not to make their own electricity, but instead to buy it from larger complexes built by larger companies. Law and custom may resist this, but technology, economy and environment may require it.
In our business, we must plan and begin construction years ahead of need.
To anticipate public wishes in a timely way, we can accent one or another of the environmental alternatives which technology and economy allow. But stations cannot be rebuilt overnight.
New nuclear units do not spring magically from the ground. Fuel sources take time to develop and to modify.
Nevertheless, we have done much quickly, and we shall do more soon. We will eliminate our share of pollution in just as short a period as meeting our electrical commitments to the people of Illinois will allow.
And there is no doubt in my mind that we will furnish power in the future in a way that makes northern 111 i no is a better place in which to live.
Sincerely, J. Harris Ward Chairman
1969 Review Earnings, dividends flat Our earnings for 1969 were $3.00 per common share, virtually unchanged from 1968's level of$2.99or1967's
$2.98. Net income on common stock totaled $126 million, about the same as that of the prior year.
Dividend payments during 1969 were
$2.20 a common share, the same as in 1968, and only 10 cents more than in 1967. This leveling off in earnings and dividend growth contrasts with good increases in the preceding years.
1969 Revenues and Sales Residential Small commercial and industrial Large commercial and industrial Public authorities Electric railroads Ultimate consumers Sales for resale Other revenues Total Stockholders are entitled to a competitive return on their investment.
To supply this and to compete effectively in the money markets, we require a rate increase.
Good sales performance This need for rate relief is not caused by lagging sales growth. During 1969, each of our four major classifications of kilowatthour sales and revenues had fine increases. Electricity sales to ultimate consumers increased 8.1 percent over 1968, and related revenues Electric Operating Increase Revenues Over (thousands) 1968
$303,981 7.9%
286,199 6.0%
139,443 10.2%
48,650 9.0%
5,355
$783,628 7.6%
9,767 7,754
$801,149 had a 7.6 percent gain. These compare with average annual increases of sales and revenues during the 1960's of 7.4 and 5.4 percent. It is nice to close out the soaring sixties with increases which are well above average for the decade. We are confident about Edison's ability to continue to increase-at a good pace-its sales and revenues during the 1970's.
At December 31, we had 2.54 million customers on our lines, 2.2 percent or 55 thousand more than at the end of 1968.
Kilowatthour Increase Sales Over (millions) 1968 11,826 9.2%
13,378 6.6%
13,781 9.4%
3,563 6.8%
385 42,933 8.1 %
1,454 44,387 3
4 Expenses up $47 million Electric operating expenses during 1969 totaled $426 million, $47 million or 12.4 percent higher than last year. $28 million of the increase was due to higher fuel and purchased power expenses. This was a result of having to buy higher cost fuel and more of it, and-among other purchases-of having to import power to cover Dresden 2's delay.
1969 Electric Operating Expenses Fuel and purchased and interchanged power (net)
Other operation and maintenance Depreciation (straight line)
Total Power for People in the '70's is the theme of this report. Edison facilities, like this strain insulator, tie together the vital activities of northern Illinois. Shown here are a man on Ford's Chicago assembly line, one of our nuclear plants under construction, and Amoco's refinery near Joliet.
Other operation and maintenance increased $12 million or 7.6 percent, due mainly to higher payroll costs. Added plant pushed depreciation expense up
$7 million or 7.4 percent.
Taxes cut earnings During 1969 we paid or set aside $207 million in state, federal and local taxes of all kinds and sizes.
A burdensome new 1969 tax was the Illinois income tax, levied at 4 percent for corporations. The state income tax was effective on August 1 and cost stockholders 3 cents per share on 1969 earnings. We estimate the 1970 effect to be on the order of 8 cents. On the other hand, reduction in the federal income tax surcharge should help to offset 1970 increases in taxes and other operating costs.
1969 Increase (thousands)
Over 1968
$154,351 22.2%
170,615 7.6%
100,941 7.4%
$425,907 12.4%
Interest costs jump 28%
Interest charges on debt during the year were $62 million, up $13 million or 28 percent over 1968. This big increase was due to new bond issues and interim short-term financing at record-breaking interest rates. Regardless of capital costs, we must raise the money required to carry out our construction program.
We expect another sizeable increase in interest costs during 1970.
Progress on rate request On August 15, 1969 we filed with Illinois Commerce Commission proposed new rates which provided for a 6.1 percent revenue increase. The Commission must render a decision within 11 months of initial filing or, in our case, by July 13, 1970. We, of course, hope for an earlier ruling and are doing all we can to hasten the hearings.
Under Illinois law, we are entitled to rates which give us the opportunity to earn a fair return upon the fair value of our plant. Establishment of fair plant value involves among other things "the fair consideration of current price levels,
... the ultimate purpose being to determine and allow a fair return to the owners... " Fair value is less than today's replacement cost, but it ought to be substantially more than original cost.
In these inflationary times, fair value is a far more just standard than original cost.
We do not like rate increases because they impair our ability to compete in the energy market. Indeed, in the 1960's we reduced our customers' rates time after time. However, inflation has more than counterbalanced our cost-control efforts, and we have reluctantly applied for a rate increase.
5
6 Why rate relief vital The captions in this annual report tell the story: "Earnings, dividends flat",
"Expenses up $47 million", " Taxes cut earnings", "Interest costs jump 28%",
"Plant budget up $250 million", "$396 million for 1969 construction", "$1 billion of new securities needed", "Wages up 6%, benefits higher". The pressures of rising expenses are heavy and have in turn leveled our earnings.
These finely machined control rod drive housings in an Edison nuclear plant help provide electricity to people in farms and homes across our 13 thousand square mile service area.
Our business is growing rapidly and we must expand our facilities to serve it. But since 1963, our generating station construction costs per kilowatt have risen by up to 80 percent, and interest rates have nearly doubled. We must meet expanding load commitments with far more expensive new facilities. The result is the largest construction budget in our history which must be financed at near-record interest rates.
Today's investors require far higher returns than they once did, and we must pay their price to use their money. To attract capital we need greater earnings.
In short, we need a rate increase.
A modest request A 6.1 percent rate increase request is modest. Other electric power companies around the country have asked for far more. We did not request 6.1 percent in the hope of getting something less.
Instead, we asked only for the amount we must have, and we hope to receive that amount in full.
Preserving Lake Michigan Clean air and water is an idea whose hour has come. The center insert of this report outlines what Edison is doing to reduce pollution. We are deeply concerned, and recognize that others are, too. Not all concerns, however, have equal basis in fact, and a recent exam ple of this has to do with Lake Michigan.
Zion safe for lake Two suits were brought last fall to halt construction of our Zion Nuclear Power Station. Each claimed that Zion would damage Lake Michigan. Zion Station will not harm Lake Michigan.
Zion Station is being built under rigorous Atomic Energy Commission standards.
The water returned to the lake at Zion will be safe. In fact, insofar as radioactivity is concerned, one could drink it for a lifetime without harm.
Our extensive studies indicate that fish and plant life will not be injured. Indeed, one of the best fishing spots in our area is off our Waukegan plant, south of Zion. The amount of water passed daily through Zion's sealed condensing system will be roughly equivalent to circulating one pint of tepid water in a good sized swimming pool.
The temperature of the water returned to the lake will be under 85 degrees, meeting the limits set by the State of Illinois and approved by the U.S.
Department of the Interior. Indeed, the Federal Water Pollution Control Administration has stated that the combined annual effect of all existing plants plus all proposed nuclear plants on Lake Michigan would raise overall lake temperature by less than 1/ 10th of one degree Fahrenheit. Even this small rise tends to cancel out each winter.
Interestingly, the average annual temperature of the lake has actually dropped about two degrees in the past century.
Gas negotiations begin In December, Edison made a joint announcement with Northern Illinois Gas Company that negotiations were under way for acquisition of our subsidiary, Mid-Illinois Gas Company.
We have been approached by several companies in addition to Northern Illinois. Since we have a valuable commodity, we expect to be able to make an agreement which is fair to our stockholders, protects our gas employes, and is in the public interest. We anticipate that arrangements will be completed during 1970.
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8 CILCo merger talks ended During 1968 and 1969, we conducted talks with Central Illinois Light Company on the possibility of merger with Edison.
In June, 1969 we made an offer whi ch would have allowed CILCo's common stockholders to elect securities giving them premiums of over 85 percent on income and 25 percent on market price.
In October, CILCo's management rejected our terms and broke off negotiations. We do not expect the talks to be reopened.
Homes are heated with the help of these insulators at one of our 125 transmission substations.
Generating capacity additions Unit Dresden 2 Peaking Dresden 3 Quad-Cities 1 Quad-Cities 2 Zion 1 Powerton 5 Zion 2 None None Peak summer load A record peak load of 9.3 million kilowatts was set July 16. This was only a 3.5 percent increase over 1968's highest load, compared with an unusual 17 percent rise between 1967 and 1968.
Because of the variability of summer weather, we have come to expect that heat sensitive loads will not march evenly upward year after year.
On the average, however, our summer peak loads are growing at over 8 percent each year. To meet them our engineers, purchasing and construction people must plan, buy, build and bring into effective service hundreds of millions of dollars worth of new plant each year. The range between extravagance and perfect investment Type Scheduled for Nuclear Spring
'70 Gas & Oil Spring, Summer '70 Nuclear Winter
'70-'71 Nuclear Spring
'71 Nuclear Spring
'72 Nuclear Spring
'72 Coal Spring
'72 Nuclear Spring
'73
'74
'75
- Iowa-Illinois Gas and Electric Company has a. one-quarter ownership interest in the two Quad-Cities units.
economy on a system the size of Commonwealth Edison's must surely exceed several hundred millions of dollars. For example, last fall a national magazine estimated that by purchasing four nuclear units at fixed prices Edison had saved "about $200 mil lion."
Fast-start peaking units During 1969 we placed on our system 575 thousand kilowatts of fast-start peaking capacity, bringing our total of such equipment to 1.24 million kilowatts, more than any company in the country. An additional 380 thousand kilowatts have been ordered for 1970 service, though about 200 thousand ki lowatts may miss the summer peak due to the General Electric strike.
Net Capacity (kilowatts) 809,000 380,000 809,000 809,000*
809,000*
1,100,000 840,000 1,100,000
These machines are economical for meeting short periods of peak demand because their low capital costs offset their higher fuel costs. They burn gas or oil and can be brought on line in small increments on short notice. Perhaps best of all, the fast-start units allow us to retire smaller coal-fired boilers around the City of Chicago, and thus contribute to our efforts to curb air pollution.
First big nuclear unit This spring Dresden 2, the first of our large second generation nuclear units will be placed in commercial service, and should be starting up as you read this report. Dresden 2 has an ultimate Skilled people controlling intricate machines-computers, airplanes and Edison junction boxes-make our electrified urban society possible.
capacity of 809 thousand kilowatts and will be followed within about a year by two more nuclear units, Dresden 3 and Quad-Cities 1.
These plants must meet rigorous construction standards before being granted an operating license by the Atomic Energy Commission. Because of the care with which they have been built, we expect them to be absolutely safe, and more reliable than any of our large coal-fired units. Nuclear units produce electricity without smoke, soot or dust, and are, therefore, the keystone of our clean air program.
Pumped hydro power Nuclear generation also fits well with pumped hydro generation. We are negotiating with Consumers Power and Detroit Edison for a 624 thousand kilowatt share of their Ludington, Michigan pumped hydro generating plant. Power would be purchased under a long-term agreement to begin in 1974.
Electrical demands are lower at night and so nighttime energy is most economical for us to produce. During the night, energy from our nuclear units would be employed to pump water to an elevated storage reservoir on the eastern shore of Lake Michigan. During daylight hours the water would be released, electricity generated, and the energy returned to us over high voltage transmission lines.
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On average, about three off-peak kilowatthours would be used up for every two on-peak kilowatthours generated. However, high daytime and low nighttime demands plus around-the-clock loading of our nuclear machines make the transaction an economic one. Also, this and other power purchase agreements will allow us to forego construction of any major generating units for 1974 and 1975 service.
In the nearer term, purchased power contracts, strong interconnections, our fast-start peaking units, and the larger units coming on in the early 1970's should provide adequate reserve margins for meeting the needs of our northern Illinois service area.
10 A man involved in his work and a steel furnace ladle are both served by graceful 138 thousand volt transmission lines.
Plant budget up $250 million For electric generating units, transmission lines, distribution facilities and other plant, we plan to spend $1.95 billion during the five years 1970 through 1974. This compares with $1.7 billion budgeted for the period 1969-1973.
The increase from $1.7 to $1.95 billion for the different budgeting periods results in part from the strong sales growth we expect. However, inflation and environmental considerations also play their parts.
The new $1.95 billion budget includes expenditures of $520 million in 1970,
$470 million in 1971, $305 million in 1972,
$280 million in 1973, and $375 million in 1974.
The totals after 1971 are somewhat lower than they would otherwise be because no major generating units are scheduled to begin service in 1974 or 1975. Allowance has been made, however, for initial outlays for construction of 1976 and 1977 units.
Air Pollution in the Chicago Area What Commonwealth Edison is doing to help reduce it, and what we will do, and when.
Air pollution is a serious matter, for all citizens in every city, in every developed country in the world.
It is too serious to become a political football, or an emotional and partisan issue, or a platform on which companies can thump their chests and proclaim their virtue and good citizenship. Deeds, not words, are what the public is looking for-and has a right to get.
Commonwealth Edison has already spent
$53 million on facilities to prevent contaminants from getting into the air; and is spending hundreds of mil lions on new nuclear stations which add no fumes or dirt to the air.
But it is beside the point that we have spent "x" mill ions of dollars, and committed millions more.
What is important is not so much what we have done as what we will do. We recognize the gravity of the problem, and accept the plain fact that everybody-beginning with ourselves-must do more to make our city, our nation, our world, a better, brighter, sweeter (and not just ri ch-er) place for us and our children to enjoy.
"... everybody-beginning with ourselves-must do more to make our city, our nation, our world, a better, brighter, sweeter (and not just richer) place for us and our children to enjoy."
The Rules We Live By Years ago, Commonwealth Edison decided that we had these obligations to the community:
- 1. To provide the amounts of electricity needed, where needed and when needed, within the area we serve, and reserve margins to handle emergency conditions.
- 2. To do this at the lowest possible cost to the consumer.
- 3. To anti cipate future needs, often involving years of lead-time for the manufacture and installation of necessary faciliti es.
- 4. To do all this wh ile minimizing actual and potential pollution.
Electric Power and Air Pollution Commonwealth Edison produces and distributes the electricity on which practically every home, office, store, and industry in our entire area depends.
Our product heats and air-conditions the 100 story John Hancock Center and runs the elevators that make such a building possible. It lights your home, operates your TV set, and may even brush your teeth.
Electricity must be always on tap, day or night, at the flick of a switch. It can't be stored until you need it. Most people have come to take it for granted.
How does Commonwealth Edison pro-duce electricity? Chiefl y by heating water in giant boilers to make steam power, which turbines and generators convert into electric power.
We have three types of boilers: coal-fired, natural gas or oil-fired, and nuclear-powered.
Nuclear reaction emits no fumes or smoke. Natural gas or oil burning releases some, but not much. Coal burning releases more, including sulfur oxides, but the waste particles which people call "smoke" can be almost entirely prevented from escaping into the air by the use of modern electrostatic precipitators.
Before This stack at our Joliet Station has its electrostatic precipitator disconnected to show how much smoke would escape.
"... the waste particles which people call 'smoke' can be almost entirely prevented from escaping into the air... "
After Soon afterward this unretouched photo shows the unit still in full operation-but with its modern precipitator connected.
Our Plan of Action
- 1. To cut in half, within the near future, the amount of coal we burn in and around Chicago, and then to reduce it still more.
- 2. To continue to improve our electrostatic precipitators. Our goal is to try to have every preci pitator prevent 98 percent or more of waste particles from the coal we burn from getting into the air.
- 3. To increase as rapidly as possible the share of nuclear power in our total production.
4: To use all the natural gas we can get.
To introduce new low-sulfur oil. And to continue our efforts to obtain and burn low-sulfur coal.
Here are details of our Plan of Action:
- 1. We Are Reducing the Amount of Coal We Burn The best way for us to help reduce air pollution is to burn less coal. This is not easy when the demand for electricity continues to grow.
Stil l, this is what we are achieving:
Coal (million tons) burned in Chicago area 1965..........
6X 1970 (Est.)......
4 1975 (Est.)...... 3;{
Electricity (billion kwh) used in Chicago 14 18 24
"... we account for less than 5 percent of all contaminants in the air you breathe."
These reductions are made possible in part by our nuclear program and by converting an entire generating station from coal to low-sulfur oil.
Also, within the last two years we have installed 1.24 million kilowatts of fast-start generating units (another 380 thousand in 1970), which burn only gas or oil and will permit retirement of an entire Chicago coal-fired station.
- 2. We Are Installing More and Better Precipitators Commonwealth Edison began installing precipitators as long ago as 1929. They have been steadily improved to reach their present levels of efficiency. The newest electrostatic precipitators prevent all but a small amount of the "particulates," or waste particles from the coal we burn, from getting into the air.
All coal-fired boilers in our metropolitan area stations are equipped with precipitators. We have a few preci pitators left that are not yet 98 percent efficient, but we're working hard to finish upgrading them.
We have retired 47 coal-fired boilers in Chicago within the past ten years. We presently plan to have only nine left in Chicago by the end of this year.
Sources of Ai r Pollution The principal sources of air pollution nationally, according to an authoritative report by the National Academy of Sciences ("Waste Management and Control"), are about as follows:
Cars, trucks, buses and - --------.
other transportation Industry Electric generation Space heating and refuse disposal These are national figures. In the case of Commonwealth Edison, although we burn two-thirds of all the coal burned in the Chicago area, our control and dispersion methods are so effective that we account for less than 5 percent of all contaminants in the air you breathe. Included in this 5 percent figure are sulfur oxide emissions. Most of the ground-level sulfur oxides come from homes, stores, factories and apartment buildings which Jack the tall stacks of our stations.
- 3. We Are Rapidly Increasing Our Nuclear Production of Electricity Commonwealth Edison pioneered in the development of nuclear power nearly 20 years ago. Our first nuclear unit has been operating successfully at Dresden for ten years.
We now have six large nuclear units under construction, two each at Dresden, Quad-Cities and Zion.
The first is scheduled to be in operation this spring. All will be in operation by 1973.
About 40 percent of our vastly greater production of electricity will then be from nuclear stations, which emit no fumes or smoke. Our $900 million nuclear program is the largest of any investor-owned electric power company in the United States.
- 4. We Are Using Natural Gas and Low-Sulfur Oil, Testing Low-Sulfur Coal, Researching the Removal of Sulfur Oxides Natural gas is available to us only in limited quantities. We are using all we can get.
We recently announced the 1970 conversion of our Ridgeland Station (in Stickney, Illinois, immediately west of Chicago) to low-sulfur oil-burning equipment. Ridgeland was chosen because its stacks must be lower than those at other stations due to its nearness to Midway Airport.
This conversion alone will eliminate the burning of 1.3 million tons of coal a year.
Another way to reduce air pollution is to use coal with low-sulfur content. There is low-sulfur coal in Montana, Wyoming, and Colorado, and we have been testing it. We haven't yet found any we can Clean-Air Pellets: Each of these tiny nuclear pellets contains as much energy as a ton of coal. They produce electricity without any fumes, smoke or soot.
"Commonwealth Edison is complying, and will continue to comply in full, with all government laws and regulations on air pollution... "
burn successfully, because our boilers and precipitators were not designed for it. Eastern low-sulfur coal appears to present even more severe problems.
But we continue to test.
We have long participated in efforts to develop advanced methods of removing gaseous sulfur oxides from stack gas.
Recently we have joined with 15 other electric power companies, Esso Research and Engineering Company and Babcock & Wilcox Company in a
$7 million program for the development of an advanced air pollution control system of this kind.
Commonwealth Edison is complying, and will continue to comply in full, with all government laws and regulations on air pollution, including Chicago's Pollution Control Ordinance.
This ordinance, effective in July, 1970, requires that sulfur emissions be lowered in progressive steps through 1974. The ordinance can be complied with either by burning less coal or lower sulfur coal.
We are following the first route, by cutting our coal burn in half, and we will meet the timetable of the ordinance.
This is better than just cutting the sulfur content of the coal because all combustion products are reduced. The ordinance requires approval of our plan to do so, and we have applied for this.
$396 million for 1969 construction During 1969 construction expenditures were $396 million and plant retirements and adjustments $30 million. Our gross investment in plant and equipment at December 31, was $3.7 billion. In addition, our nuclear fuel investment totaled $71 million.
$1 billion of new securities needed In the five years 1970-1974, about$1 billion of new securities must be sold to help pay for new construction and nuclear fuel. This is in addition to our January, 1970 bonds and refunding of about $275 million of bonds during the period.
In the '70's, this young man probably will seek his first job. He might eventually become an editor, a skilled craftsman or a computer programmer.
Whatever his employment, he and hundreds of thousands like him will need increasing amounts of electricity.
1969 funds statement Funds provided by:
Net income less dividends Depreciation and tax deferrals Funds provided internally Sales of securities Bank loans and commercial paper (net)
Change in working capital and other items Total funds provided Funds applied to:
Construction expenditures Nuclear fuel expenditures Sinking fund debt retirements Total funds applied We have announced that we expect to market$100 million of equity securities during 1970, probably towards the end of the year.
Short-term bonds In the course of 1969, $175 million of first mortgage short-term bonds were sold. In April, $75 million of five-year bonds were issued at an annual cost to the Company of 7.42 percent before expenses. Because of strong demand, the issue was increased from
$50 million to $75 million. In July, $100 million of four-year bonds were sold by competitive bidding at an annual cost of 7.73 percent before expenses.
We postponed another $100 million of five-year first mortgage bonds from November, 1969 until early January, 1970 because of what appeared to be an interest rate peak. In the January negotiated sale these bonds had an annual before-expenses cost to Edison of 8.61 percent. Though it cannot be precisely determined, we seem to have saved about half a percent by delaying the issue. If true, this amounts to perhaps $2 million in interest savings over the five-year life of the bonds.
(Thousands)
$ 33,585 118,413
$151,998 179,728 86,075 21,487
$439,288
$396,261 36,285 6,742
$439,288 11
A new bond-buyi ng publ ic It appears that a new market is developing among smaller investors for these short-term issues. On the two 1969 sales totaling $175 million, about 10 thousand separate holders have been registered with the mortgage trustee.
This contrasts with about a third that number registered for $175 million of 30-year, long-term Edison bonds sold during 1968. We are glad to be reaching this mass market of smaller investors.
12 Food, clothes and exercise are three staples of human life. Electricity helps process coffee cakes at the Kitchens of Sara Lee, show merchandise to its best advantage at Goldblatt's, and light and heat the gym at Hampton Park's all-electric junior high school.
Other 1969 financing As we have done in the recent past, we used commercial paper (notes payable) in 1969 to allow ourselves choice in timing debt issues. At December 31, 1969 we had $86 million in commercial paper outstanding.
Commercial paper costs money. Short-term rates have been no cheaper than long-term ones and cut into earnings in the same manner. Our assumption in using short-term bonds, commercial paper and bank loans is that the staggering interest rates now being charged wi II decline sooner or later, and that we should avoid being locked into long-term obligations at the current high rates.
In the fall of 1969 Edison renewed $50 million in bank loans at the prime rate from Chicago banks, and at December 31 our subsidiary, Mid-Illinois, had $24 million of bank loans outstanding.
During the year we reacquired $11 million principal amount of sinking fund debentures. At year end, our capitalization was 56 percent bonds and debentures, 6 percent convertible preferred stock and 38 percent common stock equity.
The Midwest's refiner The Chicago area has struck oil.
Northern Illinois within five years may well become the refinery center of the Midwest. Most of the refineries are or will be located southwest of Chicago along the Illinois Waterway. The Union Oil plant at Lemont will use electricity to drive its huge 19 thousand horsepower centrifugal blower. Our salesmen helped to convince Union's management that an electric motor served from our lines is more economic than the steam-driven turbine traditional in oil refineries.
An Edison lineman puts his finishing touches on transformers added to serve the expanding power requirements of people. The vitality of our area's commerce and the quality of its goods are shown by pictures of Chicago's Board of Trade and of a gleaming row of electric ranges.
Th ree other large motors totaling another 20 thousand horsepower also went our way. The new Lemont refinery will be one of the most electrified in the world. It will have a demand of 70 thousand kilowatts and run at 95 percent load factor. Another oil company is now doing site work for a refinery even larger than Union's.
Chemical processors are first cousins to refineries and often locate near them. A number of such plants are in operation or building in our service area. They join a giant, the Northern Petrochemical complex, being developed in three stages over the next several years.
$10 million from giants Northern Petrochemical and Union Oil, when completed, will contribute close to
$10 million to our annual revenues. If fully operative today, these giants would rank th ird and fourth among our large customers.
Completion of new oil pipelines from Canada and the Gulf Coast to our area coupled with the market advantages of a northern Il linois address have led to this sudden blooming of massive new electrical loads.
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14 Wages up 6%, benefits higher As a result of union agreements signed last spring, hourly wage rates increased an average of 6.2 percent. Pensions, insurance and other fringe benefits added the equivalent of another 6.4 percent to payroll. These increases amount to about $12 million on an annual basis. Wages have been renegotiated each year. Fringe benefits, however, had not been negotiated for five years, and the increase in benefits should be looked at in this light.
At December 31, 1969 we had just under 14 thousand employes, an increase of 167 over the same date a year earlier.
The future of our whole metropolitan world depends upon children such as this. It is Commonwealth Edison's role to furnish clean, reliable, plentiful and economic electric power to him and to eight million others in the '70's.
181 thousand stockholders At year end, we had 181 thousand stockholders, down about 2 thousand from a year ago. The slight decrease probably is due to expansion by institutions of their holdings of Edison stock. There were 169 thousand holders of 42 million common shares. In addition, 12 thousand stockholders owned over 4 million shares of our convertible preferred stock.
About 120 thousand shares of common were acquired by employes during 1969 under the stock purchase plan, and 43 percent of Edison's employes were in the plan at December 31.
Board and management changes At the 1969 Annual Meeting last May, Joseph S. Wright was elected a Director of Commonwealth Edison. Mr. Wright is Chairman of the Board of Zenith Radio Corporation. At year end, John L.
Gordon, Chairman of the Board of the Central Illinois Electric and Gas Co.
Division, retired from active service.
During the year, Wallace B. Behnke, Jr.
was elected a Vice-President, Byron Lee, Jr. was named Assistant to the President, George P. Rifakes, was appointed Manager of Fuel, and Charles G. Harnach was promoted to Division Vice-President of our Southern Division.
Statements of consolidated income Commonwealth Edison Company and Subsidiary Companies Electric Operating Revenues Electric Operating Expenses and Taxes:
Fuel.........................................................................................................................
Purchased and interchanged power (net).........................*.......*..................... *..................*.......
Operation...................................................................................................................
Maintenance...............................*................*...............................................................
Depreciation (straight line).................................................................................................
Taxes (except income).....................................................................................................
Income taxes-Federal..*.....................*..........................................................................................
State.....................................................................................................................
Deferred (net)................................................ *............................................................
3% investment tax credit deferred (net)....................................................................................
Electric Operating Income Other Income:
Operating income of gas and steam heating properties prior to transfer to Mid-Illinois Gas Company......................
Net income of Mid-Illinois Gas Company...................................................................... *............
Miscellaneous (net).................................................................*........................................
Deductions:
Interest on debt..............................................................................................................
Other deductions...................................................................................................... '......
Interest charged to construction............................................................................................
Net Income......................................................................................................
Provision for Preferred Stock Dividends............................................................................
Net Income on Common Stock.....................................................................................
Average Number of Common Shares Outstanding.........................................................................
Earnings Per Common Share.....................................................................................
Notes:
(1) On December 30, 1968, the Company's gas and steam heating properties were transferred to Mid-Illinois Gas Company, a newly formed wholly-owned subsidiary.
(2) The Service Annuity Systems cover all regular employes. Contributions to the trust funds totalled
$16.6 million in 1969, $5.7 million greater than 1968 due principally to improvements in pension benefits. Payments were equivalent to actuarial normal costs based on the aggregate cost method. The $255 million book value of the funds at December 31, 1969 exceeded the estimated actuarially computed value of vested benefits at that date.
1969 1968 (Thousands)
$801,149
$745,345
$137,577
$123,281 16,774 3,080 123,301 112,084 47,314 46,424 100,941 94,021 117,617 104,721 73,409 85,640 2,483 2
13,645 11,947 3,827 5,983
$636,888
$587,183
$164,261
$158,162 3,688 15 2,727 6,952 6,248
$ 9,679 9,936
$173,940
$168,098
$ 61,672
$ 48,241 2,142 1,016 22,219 12,923
$ 41,595
$ 36,334
$132,345
$131,784 6,207 6,212
$126,138
$ 125,552 42,054 41,947
$3.00
$2.99
Consolidated balance sheets 16 Assets Utility Plant:
Plant and equipment, at original cost..................................................................................
Less-Accumulated provision for depreciation.......................................*..................................
Nuclear Fuel, at amortized cost..........................................................................................
Deposit With Mortgage Trustee.........................................................................................
Investments:
Subsidiary companies not consolidated-Mid-Illinois Gas Company, at underlying book value..................................................................
Other, at cost or less..................................................................................................
Other investments, at cost or less........................................................................................
Current Assets:
Cash..............................................................................................*....................
Temporary cash investments, at cost...................................................................................
Special deposits........................................................................................................
Receivables...........................................*................................................................
Provision tor uncollectible accounts..................................................................................
Coal (at average cost)...................................................................................................
Materials and supplies (at average cost)................................................................................
Prepaid insurance, taxes and other items..............................................................................
Deferred Charges.................................................... * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
- December 31 1969 1968 (Thousands)
$3,714,223 1,006,821
$2,707,402 70,933 18,471 7,749 1,019 27,239 12,631 3,259 7,748 72,117 1,500 20,809 20,824 2,940
$ 138,828 3,741
$2,948,143
$3,347,661 933,122
$2,414,539 36,117 25,000 14,231 7,749 1,231 23,211 7,383 15,536 3,807 60,032 1,850 18,344 16,858 2,729
$ 122,839 2,560
$2,624,266
Commonwealth Edison Company and subsidiary companies Liabilities Capitalization (see statements on page 18):
Stockholders' equity..................................................................................................
Long-term debt.........................................................................................................
Total Capitalization...................................... *..............................................................
Current Liabilities:
Notes payable..........................................................................................................
Accounts payable......................................................................................................
Accru ed interest.....................................*.................. *..............................................
Accrued taxes.............................................................................................. *. *. *. *. * * *
- Dividends payable......................................................................................................
Other..................................................................................................................
Deferred Liabilities:
Accumulated deferred income taxes.....................................................................................
Accumulated deferred 3% investment tax credits being amortized over the lives of related property................
Other............................................. * * *.. *.. * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
- Purchase commitments, principally related to constru ction, at December 31, 1969, approximated $745 million.
December 31 1969 1968 (Thousands)
$1,070,000 1,362,475
$2,432,475
$ 136,075 38,630 22,004 83,925 24,725 13,504
$ 318,863
$ 149,875 28,299 18,631
$ 196,805
$2,948,143
$1,031,834 1,198,769
$2,230,603 50,000 30,299 15,702 79,706 24,659 14,808
$ 215,174
$ 136,225 24,470 17,794
$ 178,489
$2,624,266 17
18 Statements of consolidated capitalization Stockholders' Equity:
Common stock, $12.50 par value per share-Authorized 60,000,000 shares (632,633 shares reserved for Employe Stock Purchase Plan and 2,611,823 shares reserved for conversion of preferred stock at December 31, 1969)
December 31 1969 1968 (Thousands)
Outstanding-1969-42,134,836 shares..........................
$ 526,685 1968-42,011,402 shares..........................
$1.425 convertible preferred stock, without par value-stated value
$31.80 per share (each share convertible into 6/ 10ths of a common share-redeemable on or after December 9, 1971 at
$42.00 per share)
Authorized and outstanding-1969-4,353,038 shares...........
1968-4,359, 104 shares...........
Prior preferred stock-1,850,000 shares auth.-None outstanding....
Prem ium on common stock (see statements on page 19).........
Retained earnings (see statements on page 19)..................
Total Stockholders' Equity..........................................
Long-Term Debt:
First Mortgage Bonds-8% due July 1, 1973................................................
7.30% due April 1, 1974.............................................
2.Ya% due January 1, 1975...........................................
3% due February 1, 1975............................................
3% due February 1, 1977...........................................
2%% due July 1, 1977..............................................
3% due June 1, 1978...............................................
3X% due January 1, 1982...........................................
3.Y.% due July 1, 1982..............................................
3% due May 1, 1984........................*.........................
3% due April 1, 1985.............................................
3%% due June 1, 1985.............................................
3X% due June 1, 1986..............................................
4.Y.% due March 1, 1987...........*... *............................
3%% due March 1, 1988............................................
4%% due March 1, 1990............................................
5% due July 1, 1990................................................
5.Y.% due April 1, 1996...........................................
5%% due November 1, 1996........................................
5%% due December 1, 1996........................................
5%% due April 1, 1997.............................................
6.Y.% due February 1, 1998..........................................
6%% due July 1, 1998..............................................
6%% due October 1, 1998..........................................
Sinking Fund Debentures-3% due April 1, 1999...............................................
2%% due April 1, 1999..............................................
2.Ya% due April 1, 2001.............................................
3Ys% due October 1, 2004...........................................
3Ys% due January 1, 2008...........................................
4%% due January 1, 2009...........................................
4%% due December 1, 201 1........................................
Total Long-Term Debt.......*.....................................
Total Capitalization.................................... *............
138,427 90,574 314,314
$1,070,000
$ 100,000 75,000 790 10,603 180,000 2,050 50,000 4,000 40,000 50,000 100,000 4,000 40,000 50,000 50,000 30,000 10,000 50,000 50,000 50,000 50,000 50,000 50,000 75,000
$1, 171,4431 24,693 24,996 29,241 32,704 34,672 13,832 30,894
$ 191,032
$1,362,475
$2,432,475
$ 525,143 138,619 87,343 280,729
$1,031,834 800 10,603 180,000 2,075 50,000 4,000 40,000 50,000 100,000 4,000 40,000 50,000 50,000 30,000 10,000 50,000 50,000 50,000 50,000 50,000 50,000 75,000
$ 996,478 27,546 28,367 29,527 34,232 35,035 15,225 32,359
$ 202,291
$1,198,769
$2,230,603 (1) Does not include $100 million of8:Y. % first mortgage bonds sold on January8, 1970and due January1, 1975.
Statements of consolidated retained earnings 1969 1968 (Thousands)
Balance Beginning of Year............................................
$280,729
$247,489 Add:
Net income.............................................................
132,345 131,764
$413,074
$379,253 Deduct:
Di vidends on-Common stock.........................................................
$ 92,553
$ 92,312
$1.425 convertible preferred stock.....................................
6,207 6,212
$ 98,760
$ 98,524 Balance End of Year....................................................
$314,314
$280,729 Statements of consolidated premium on common stock 1969 1968 (Thousands)
Balance Beginning of Year.............................................
$ 87,343
$ 84,501 Add:
Premium on issuance of common stock................................
3,231 2,842 Balance End of Year....................................................
$ 90,574
$ 87,343 Report of independent public accountants To the Stockholders of Commonwealth Edison Company:
We have examined the consolidated balance sheets and statements of capitalization of Commonwealth Edison Company (an Illi nois corporation) and subsidiary companies as of December 31, 1969 and 1968, and the related statements of income, retained earnings, and premium on common stock for the years then ended. Our examination was made in accordance with generally accepted auditing standards, and accord ing ly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the accompanying balance sheets and statements of capital ization, income, retained earnings, and premium on common stock present fairly the financial position of Commonwealth Edison Company and subsidiary companies as of December 31, 1969 and 1968, and the resu Its of their operations for the years then ended, in conformity with generally accepted accounting principles consistently applied during the periods.
Chicago, Il linois January 29, 1970 Arthur Andersen & Co.
19
20 Board of directors J. Harris Ward, Chairman Thomas G. Ayers, President John A. Barr, Dean, Graduate School of Management, Northwestern University Joseph L. Block, Chairman, Executive Committee, Inland Steel Company Lowell T. Coggeshall, Trustee, The University of Chicago Gordon R. Corey, Chairman of the Finance Committee Albert B. Dick Ill, Chairman of the Board, A. B. Dick Company Hubert H. Nexon, Vice-President Robert J. Schultz, Vice-President D. Robert Bower, Treasurer William H. Colwell, Secretary Ralph L. Heumann, Comptroller Managers Raymond P. Bachert. Assistant Vice-President Paul W. Boyer, Assistant Vice-President Oliver D. Butler, Assistant Vice-President Lawrence A. Cullen, Manager of Industrial Relations John L. Gordon, Former Chairman of the Byron Lee, Jr., Assistant to th e President Board, Central Illinois Electric and Gas Co.
Division Richard E. Meagher, Manager of Production Brooks McCormick, President, International Harvester Company Morgan F. Murphy, Chairman of the Executive Committee Edward Byron Smith, Chairman of the Board, The Northern Trust Company Joseph S. Wright, Chairman of the Board, Zenith Radio Corporation Officers J. Harris Ward, Chairman Thomas G. Ayers, President Gordon R. Corey, Chairman of the Finance Committee Morgan F. Murphy, Chairman of the Executive Committee Glen W. Beeman, Vice-President Wallace B. Behnke, Jr., Vice-President John G. Eilering, Vice-President Ludwig F. Lischer, Vice-President James J. O'Connor, Assistant Vice-President Harold W. Otto, Operating Manager George P. Rifakes, Manager of Fuel Ernest M. Roth, Manager of In vestments Roy A. Strobeck, Assistant Vice-President Grant H. Wier, Assistant Vice-President Division vice-presidents Paul J. Fenoglio, Chicago-South Clarence Hall, Chicago-Central Charles G. Harnach, Southern, Joliet Leslie W. Milligan, Northern, Northbrook Arthur J. Moore, Rock River, Rockford James A. Schneider, Chicago-North Robert B. Stringer, Western, Lombard Transfer agents The Northern Trust Company, 50 South LaSal le Street, Chicago, Illinois 60690 Manufacturers Hanover Trust Company, 4 New York Plaza, New York, New York 10015 Old Colony Trust Company, One Federal Street, Boston, Massachusetts 0211 O Registrars Continental Illinois National Bank and Trust Company of Chicago, 231 South LaSalle Street, Chicago, Illinois 60690 (common stock only)
The First National Bank of Chicago, One First National Plaza, Chicago, Illinois 60670 (preferred stock only)
Morgan Guaranty Trust Company of New York, 30 West Broadway, New York, New York 10015 State Street Bank and Trust Company, Corner of State and Congress Streets, Boston, Massachusetts 02101 Both the common and preferred stocks are listed on the Midwest, New York and Pacific Coast Stock Exchanges. Ticker Symbol-CW£ All photographs except those on page 2, the middle of page 5, and in the center section are credited to Stet Leinwohl.
Power for People in the '70's This map of Commonwealth Edison's northern Illinois service territory shows both the huge loads we now serve and the strong growth ahead of us. The color indicates the kilowatt demand by townships during our 1969 summer peak load. The bars show the percentage of load increase we expect by 1974-five years hence.
In the broad corridor running south from the Wisconsin border to below Joliet, growth often exceeds 100 percent.
In the areas around Rockford and south of Chicago we also are planning to meet big increases.
In Chicago itself load growth-aided by big steel furnace and all-electric high-rise additions-is respectable. For example, in one large section of the city we expect load to increase by 80 percent in the next five years. And as
'%~ ~~
'<Pi%~-~
Load Growth-Next 5 Years f:'Ci 9t; 'Ci 7-t 1969 Load Density-Kilowatts the map shows, there is plenty of room for growth in the years ahead outside the metropolitan area.
Probably no other electric power company in the nation can match Edison's service territory for balance between city, suburb and farm, trade and commerce, huge and small industry, and great concentrations of prosperous people.
Commonwealth Edison Company