ML17297B651

Forwards Annual Financial Repts 1981

ML17297B651
Person / Time
Site:	Palo Verde
Issue date:	08/23/1982
From:	Van Brunt E ARIZONA PUBLIC SERVICE CO. (FORMERLY ARIZONA NUCLEAR
To:	Office of Nuclear Reactor Regulation
Shared Package
ML17297B653	List: ML17297B651 ML17297B655 ML17297B656 ML17297B657 ML20063C817
References
ANPP-21472-WFQ, NUDOCS 8208270375
Download: ML17297B651 (68)

Text

REGULATOR'FORMATION DISTRIBUTION S . I EM (R IDS)

ACCESSION NBR:8208270375 DOC ~ DATE: 82/08/23 NOTARI'ZED; NO DOCKET FACIL:STN 50 528 Palo Verde Nuclear StationP Unit 1E Arizona Publi 05000528 STN-50-529 Palo Verde Nuclear Stationi Unit 2P Arizona Publi 05000529 STN-50-530 Palo Verde Nuclear Stationi Unit BYNAME 3E Arizona Publi 05000530 AUTH AUTHOR AFFILIATION VAN BRUNTiE ~ E. Arizona Publ,ic Service Co, RECIP,NAME RECIPIENT AFFILIATION Office of Nuclear Reactor Regulationi Director

SUBJECT:

Forwards Annual Financia 1 R ept s 1 98 1.

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O a EWZLat5 KK2MOXE IWEMHW STA. P.o. BOX 21666 - PHOENIX, ARIZONA 85036 Augus t 23, 1982 ANPP-21472 -'"WFQ/NEH Director of Nuclear Reactor Regulation U. S. Nuclear Regulatory Commission Washington, D. C. 20555

Subject:

Palo Verde Nuclear Generating Station (PVNGS) Units 1, 2 and 3 Docket Nos. STN-50-528/529/530 File: 82-056-026

Dear Sir:

Pursuant to 10 CFR Part 50.71(b), Arizona Public Service Company (APS) submi0s herewith two (2) copies of the 1981 financial statements for each of the Participants who jointly own the Palo Verde Nuclear Generating Station.

Very truly yours, E. E. Van c~

Brunt, Jr.

niu APS Vice President, Nuclear Projects ANPP Proj".ect Director EEVBJr/NEM/sp Attachments cc: E. Licitra P. Hourihan A. Gehr L. Bernabei (w/a) 820823 8208270375 05000528 PDR ADOCK I PDR

• 4 h ON THE COVER-Corporate Information A late afternoon-after Figures appearing in this report are dark double exposure presented as general information and not in of the El Paso skyline connection with any sale or offer to sell or captures the theme of this year's annual solicitation of any offer to buy any securities report, "Energy for nor are they intended as a representation by the Sun Belt."

the Company of the value of its securities.

Annual Meeting of Shareholders All Shareholders are invited to attend the 1982 Annual Meeting of Shareholders on Monday, May 17, 1982, at 10 a.m.

El Paso time, in the El Paso Civic Center, the North Hall, El Paso, Texas.

Proxies for the meeting will be solicited by the Board of Directors in a communication to be mailed in early April. This Annual Report is not a part of such proxy solicitation and is not intended to be used as such.

A copy of the Company's most recent 10-K Report, filed by El Paso Electric Company with the Securities and Exchange Commission, willbe made available to Shareholders without charge upon written rectuest to:

Theta S. Fields, Secretary Contents-El Paso Electric Company Post Office Box 982 Highlights . . 2-3 El Paso, Texas 79960 Message to Shareholders.......... . 4-5 Dividend Reinvestment Communities, We Serve........... . 6-7 Another year of growth was noted in the Company's Dividend Reinvestment and Stock Purchase Plan. The Company Operations, 1981 ........ 8-11 plan is available to holders of record of Common Stock Serving Our Customers . 12 and is a convenient method of investing dividends and As An Employer 13 optional cash payments in new shares without payment of commissions and fees. The 1982 dividends reinvested Directors 6 Executive Officers under the plan are eligible for the exclusion provided by of the Company. 14 the Economic Recovery Tax Act of 1981. An enrollment card may be obtained by writing the Company Secretary. Management's Discussion and Common Stock Shareholders Analysis of Financial Condition and Results of Operations 15-17 The Common Stock of the Company is held in every state of the union, the District of Columbia, some Market for the Company's U.S. territories and many foreign countries. The number Common Stock and Related of Shareholders increased from 42,132 at December 31, 1980 to 45,952 at December 31, 1981. Our records Security Holder Matters........... 17 indicate that 79% of the Company's Shareholders own Selected Quarterly Financial Data .. 18 less than 500 shares each.

Report of Independent Certified Toll-Free Telephone System Installed The Company recently installed a toll-free telephone Public Accountants 19 system for the convenience of Shareholders who may Consolidated Financial have questions or inquiries concerning their accounts. If Statements ... 20-36 you are calling from within Texas the number is 800-592-1634. Elsewhere in the U.S. call 800-351-1621. Supplemental Information Concerning the Effects Transfer Agents of Inflation .. 37-39 National Bank of North America, 80 Pine Street, New York, New York 10005. (Common and Preferred Stock) Selected Financial Data........... 40-41 The State National Bank of El Paso Selected Operating and Post Office Box 1072 Statistical Data 42-43 E<Paso, Texas 79958 (Common Stock Only)

Operating Revenues (000) Operattng Expenses (000) Net Income (000) Net Income Per Common Highlights UP 18 9% over 1980 UP 16.1% over 1980 1981 - $ 200,094 UP 37.7% over 1980 1981 - $ 56,69?

Share UP 8.8% over 1980 1981 - $ 2.23 1981 -$ 250,379 At December 31, 1981 0 1981 Percentage 4

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1980 $ 210 513 I'980 . $ 172;296 1980- $ 41 177 1980. $ 2.05 Number of Customers Number of Employees Load Net Generating Capacity UP 3.0% over 1980 UP 4.0% over 1980 UP 2.5% over 1980 SAME as 1980 1981 - 186,388 1981 - 1,025 1981 -?36,000 KW 1981 - 9?7,000 KW j ip- 5R) r j jr 1980 - 180,922 1980- 986 1980 - 718,000 KW 1980 - 9?7,000 KW At December 31, 1981 1980 Operating Revenues (000).......... $ 250,379 $ 210,513 Operating Expenses (000)........... $ 200,094 $ 172,296 Net Income (000) $ 56,697 $ 41,177 Net Income Per Common Share..... $ 2.23 $ 2.05 Dividends Paid Per Common Share .. $ 1.25 $ 1.13 Book Value Per Common Share...... $ 11.54 $ 10.82 Common Shares Outstanding........ 25,110,066 20,485,067 Number of Common Shareholders.... 45,952 42,132

'umber of Customers............ 186,388 180,922 Number of Employees . 1,025 986 Peak Load .. 736,000 718,000 KW Net Generating Capacity........... 977,000 977,000 KW Average Annual Residential Use..... 5,849 6,065 KWH Fuel Expense (000) . $ 107,562 $ 95,461 Energy Sales . 3,698,872 MWH 3,728,022 MWH Utility Plant (000) .. $ 898,333 $ 715,190

?vtdends Paid Per Common Book Value Per Share Common Shares Outstanding Number of Common hare UP 10.6% over 1980 UP 6.Z% over 1980 UP 22.6% over 1980 Shareholders UP 9.1% over 1980 981 - $ 1.25 1981 - $ 11.54 1981 - 25,110,066 1981 - 45,952 5

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g ELECIXIC Isscs vss Ikvs fss ov sr@Vs ot 1980- $ 1.13 1980 - $ 10.82 1980 - 20 485 067 1980 - 42. 132 verage Annual Residential Fuel Expense (000) Energy Sales (MWH) UtilityPlant (000) se DOWN 3.6% from 1980 UP 12.Z% over 1980 DOWN .8% from 1980 UP -25.6% over 1980 981 - 5,849 KWH 1981 - $ 107,562 1981 - 3,698,8?2 1981 - $ 898,333 4

1980 - 6,065 KWH 1980 ~

$ 95,461 1980 - 3,728,022 1980 - $ 715,190

A share in the Sun Belt. Shareholders: "Energy for the Sun Belf."

To follow, we'l give you our unique view A message from of the Sun Belt as it relates to Texas, New Evern R. Wall, President. Mexico, Mexico, and how it also relates to our investors, our Company, our customers, our A sense of optimism and excitement employees and our communities.

describes our view of the future for El Paso It is generally recognized that the Sun Belt Electric, the people and the area we serve. begins on the west coast and follows the The Company finished 1981 much better southern tier of states to the east coast. It prepared to respond to the needs of customers, extends along the border with Mexico, a shareholders and employees in the coming country with a surging economy fueled by years. energy wealth just now being tapped.

Our optimism stems from the progress Growth, prosperity and a vibrant future made toward our goal of enhancing the characterize the prospects for the Sun Belt financial strength of the Company through in the coming years.

continued improvements in the overall financial "In sheer numbers," notes Edric Weld Jr.,

integrity. In addition, the innovation, a Cleveland State University urban affairs

--- dedication and foresight of our employees, expert, "five states California, Texas, Florida, t'g(( coupled with hard work, has projected our Arizona and Georgia accounted for half the Company toward its second goal of becoming growth in U.S. population from 1970-1980. We the number one corporate citizen in our have seldom seen such a uniform shift from one community. part of the country to another.... This is a shift Both goals were achieved while from the Old World to the New World."

maintaining a consistently high level of service While the nation's population rose in that and reliability to our customers and a period by 11.4%, Texas exploded by 27. 1%

competitive rate of return to our Shareholders. and New Mexico by 17%.

We live in an important region of the The Sun Belt dominates a Chase nation The Buckle on the Sun Belt and for Econometrics forecast of the 50 fastest that reason we have titled this Annual Report to growing job markets because "lower wages, lower taxes and good weather have drawn "Growth, business away from the Northeast and prosperity and a Midwest." Of the ten fastest growing vibrant future metropolitan centers, according to the national characteri ze the forecasting firm, four are in Texas, one of which prospects for the is El Paso.

Sun Belt..." Newsweek has called Texas an "Economic Zvern R. Wall, Superstate."

President and Money Magazine calls Texas "...an Chairman of empire to itself" and continues to note in a the Board report on "The Surging States" that: "The West's appeal today and tomorrow rests on two promises, sometimes kept, sometimes not. They are the promises of prosperity and that elusive abstraction known as quality of life."

The report continued: "Whatever the problems of the West, its energy resources alone are sufficient grounds for optimism over its future...they are creating across the West a demand for construction, health facilities, transportation planning, social services, hotels, restaurants and plenty of other retail businesses."

Today, the El Paso Electric service area holds more potential than ever for people who want to work, attend school, retire, start a business or invest from afar in a company that' Mills Building likely to thrive. In short, the spirit of the El Paso Electric Company El Paso Southwest characterizes the entire Sul Headquarters Belt region and will offer tempting investments

in companies that stand to grow along with the ownership in the Palo Verde Station to M-S-R region. Public Power Agency in California.

El Paso Electric, serving South Central ~ We have continued to excel in New Mexico and Far West Texas, has been one providing reliable, efficient service to our of those growing companies during 1981. customers and in assuming a leadership role in We. are convinced that we can achieve the our communities, both of which are covered in quantity and quality of growth that is necessary detail in this report.

to create jobs for an increasing population and at the same time afford the people of this area ~ In order to provide an opportunity to its an acceptable standard of living, encompassing customers to become owners of the Company, a a higher quality of life while safeguarding the Customer Stock Purchase Plan has been environment. At the same time we will strive adopted. We anticipate the plan will attract as toward assuring the maintenance of a many as 2,000 new shareholders from our reasonable social balance and improving the customer base during 1982.

average level of consumption of goods and We'e proud of our participation in the services through the availability of an abundant Sun Belt's growth; and our accomplishments supply of electrical energy. and vital role in the community as a company, You'e already seen our expanded graphic as a servant to our customers, as an employer highlights but I would like to draw your and as an investment opportunity. We invite attention further to some important points: you to explore these accomplishments in the

~ Income growth continued in 1981 as net details which follow.

income per share of common stock increased to

$ 2.23 in 1981 from $ 2.05 in 1980. Operating revenues for the year increased to $ 250.4 million from $ 210.5 million a year ago, while operating expenses increased to $ X0.1 million in 1981 from $ 172.3 million the previous year.

~ The Board of Directors increased quarterly dividends on Common Stock by 1.5 Evern R. Wall cents in March and an additional 1.5 cents in President and Chairman of the Board September, increasing the indicated quarterly dividend on Common Stock to 32 cents;or $ 1.28 for the year.

~ The Company continued in 1981 to make substantial sales of energy to Southern California Edison Company which provided approximately $ 6.9 million in annual revenues.

~ We have for the past eight years aggressively pursued a large-scale fuel conversion program through our involvement in the Palo Verde Nuclear Generating Station designed to reduce dependence on petroleum-based fuel and meet the growing energy demands of our customers. Palo Verde is on 1977-1981 the threshold of beginning commercial $7 f%

RETURN ON operation in 1983. COMMON EQUITY

~ The Company plans to open a vital 0 Industry Average.

interconnection with Southwestern Public 0 El Paso Electric Service Company in the next 2 years to provide return above neo industry average.

an additional source of needed electricity QSA to our service area. The agreement calls for 'Projected estimate from previous 5-year the purchase of 100 megawatts (MW) of average.

interruptible electric energy from Southwestern.

~ While our support for nuclear energy remains strong, the Company in 1981 entered into an agreement to sell a portion of its

According to Chase Econometrics, a The Sun Belt national forecaster, El Paso is expected to be communities we serve. the eighth fastest growing population center in the United States with annual growth projected The Electric Company supplies electricity at 3.6%.

to approximately 10,000 square miles of West El Paso has grown so fast that, in terms Texas and South Central New Mexico. The of percentage of population change, it was communities served by the Company extend surpassed in the last decade only by San Jose, from Van Horn, Texas to Caballo Dam in California and equaled only by Phoenix, Central New Mexico. Arizona.

The cities of El Paso, Texas, and Las El Paso is the largest border port of entry Cruces, New Mexico, hold the majority of the for imports fromMexico. Last year over one population of our service area. From 1970 to billion dollars worth of goods passed through 1980 the population of the City of El Paso rose the border cities of Juarez, Mexico, and El Paso to over 425,000; Las Cruces to approximately destined for locations throughout the U.S. The 51,000. El Paso is the 28th largest city in the fact remains: Juarez is good for the El Paso U.S. and fourth largest in Texas. Las Cruces is economy and vice versa.

the second largest city in New Mexico. Two factors attributable to our border location continued to inject optimism into the unique border economy during 1981.

First, the "Twin Plant" program continued to attract major new businesses to the area; FOUR CORNERS. N.M. construction assembly and manufacturing 40 MILES ELEPHANT BUTTE DAM TO ALBUQUERQUE ALAMOGORDO CABALLO DAM HOLLOMANA.F.B.

MAR APOLLO HATCH WHITE SANDS MISSILE RANGE LAS CRUCES 1Pte McGREGOR RANGE PALO VERDE NEW MEXICO I TEXAS NEWMAN FORT BLISS WM. BEAUMONT RIO GRANDE NEW MEXICO EL PASO MEXICO T

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~ COMPANY 345KV OTHER LINES 1 IOI POWER STATION

operations in Juarez and technical, distribution and management payrolls in El Paso facilities.

The El Paso Times noted: "Political stability compared to other Third World countries, a large low-cost labor force, high productivity and an adequate framework of government regulations that allow companies to work in their own environment are the major selling points to be offered businessmen building plants in Mexico."

These "smokeless" industries are, by and large, centered around electronics and apparel. In 1981 nine major firms moved operations into the El Paso area including Contico International, Woodhead El Paso, El Paso Wire Inc. and Dietzgen Corporation.

Two major expansions include ATARI Inc. and Dale Electronics.

Also, 1981 was a "boom" year for industrial development in the Las Cruces and Santa Teresa, New Mexico, industrial areas. Eight firms located new facilities in these areas during the first eleven months of the year. Among these companies were Entersteel Products Co.,

Farah Manufacturing Co., Inc., Micro-Switch (a division of Honeywell Corp.), Prepared Foods Inc., Semco Manufacturing Inc., Septor Company, SWIG (pecan processing) and Tri-Color, Inc.

One factor which could have a positive effect on the local economy is the completion of a 16-inch natural gas pipeline from the heart of Las Cruces, United Way, the League of United "Planning for fuel-rich Mexico to Juarez. It is expected to Latin American Citizens (LULAC), Junior future energy eventually attract heavy industry to the border Achievement, The Boys'lub and the "hands- needs is an area. on" Insights Science Museum housed in Another economic plus was the the basement of the Company's corporate important designation and the start of construction headquarters.

function at of a Foreign Trade Zone, as well as the Key to the Company's continuing The Electric construction of a 300-room Marriott Hotel corporate responsibility role in the community Company."

in El Paso and the opening of a $ 12.2 million is El Paso Renaissance 400, a broad community Harry Zimmer, regional shopping mall in Las Cruces. revitalization program which recruited Vice President, During 1981 the relocation and expansion Company President Evern Wall as its chairman. Engineering, Transmission of firms to El Paso has resulted in nearly 4,000 The goal of Renaissance 400 is to promote and Distribution new manufacturing jobs in the city. and coordinate an increased and broader Division Approximately 5,000 indirect jobs, mainly in involvement of private enterprise in the the service sector, have also resulted. In El Paso continuing development and improvement of alone, employment is up 3.3/o over 1980 the economic and social growth of our city.

figures to 163,400. The Company has assumed this leadership In Las Cruces, nonagricultural jobs have role and very strongly supports sound, planned risen by approximately 15.6/o since 1974. This area growth because it enhances the area's has resulted in a total employed work force of overall economy and broadens the base on 35,000, up 5.2/o since 1980. which the city levies taxes, consequently El Paso Electric has made major enhancing the ability of the city to provide contributions in the communities it serves by needed services.

accepting the responsibility of being one of the "Allof the people in this area are our area's major home-based, home-managed customers," says Wall, "and we have a very corporations. unique responsibility to our communities. We Corporate responsibility to the community are a leading corporation in the support of was reflected in the Company's leadership role major civic projects. I believe that 1981 during 1981 in El Paso's quadricentennial, the proved that and in 1982 The Electric Company 4 Centuries '81 celebration, as well as strong will continue to accept a more responsible role support for public television in El Paso and in the community."

customers added during 1981, and the average The Company's operations residential customer used 5,849 KWH during and new developments the year, a decrease from 6,065 KWH in 1980.

~ Commercial and industrial customers during 1981. used 1,736,182 MWH, an increase of 129,182 Major factors and indicators contributing from 1980. The Company had a net gain of over to the Company's operating revenues during 500 new customers in this category which 1981 were: includes schools, hospitals, other public

~ Total sales of electricity decreased facilities, stores and offices.

slightly in 1981, but sales to customers in the ~ Southern California Edison Company Company's service area increased to 3,564,000 paid approximately $ 6.9 million to the megawatt-hours (MWH). This reflects an Company for electricity and firm capacity in increase of 4.1%. A record-breaking system 1981 the second year of a three year contract.

peak load of 736,000 KW was reached on June ~ Rates and regulations: Retail base 22, an increase of 2.5% over 1980. During electric rates did not increase in either the 1977-1981 Company's Texas or New Mexico jurisdictions MEGAWATTHOUR in 1981.

(MWH) SALES In Texas the Company is operating in Commercial and 0 compliance with an agreement reached in Industrial Sales August 1980 between the Company, the City of Residential Sales C3 El Paso and the Public UtilityCommission of Other Sales 0 Texas. The Company agreed not to implement

• In millions. a base rate increase until after April 1, 1982, which was voluntarily extended by the Company to October 1, 1982.

As part of the final agreement, the Company agreed to a hearing regarding its level of participation in the Palo Verde Nuclear Generating Station. The hearing is tentatively-77 78 79 80 81 scheduled to take place during 1982 but it could be postponed indefinitely or canceled 1981 approximately 78% of the Company's due to the Company's agreement to sell a revenues were derived from Texas customers, portion of its Palo Verde entitlement. The 16% from New Mexico customers, 3% from Commission has on two previous occasions sales for resale customers and 3% from off- certified the Company's full participation system sales. in the project.

~ El Paso Electric's net generating In New Mexico the Company is operating capacity is 977 megawatts (MW) from four under a July 1980 rate order.

power stations: Rio Grande Power Station While the Company is keenly aware of the (333 MW), Newman Power Station (463 MW), effects of rising energy costs on its customers, it Copper Power Station (69 MW) and an has been able to hold the line on further base entitlement from the Four Corners Power rate increases, even with its heavy construction Station in northwestern New Mexico (112 MW). schedule. Although financial indicators were

~ Residential electricity usage was strong in 1981, increasing costs affecting the 966,487 (MWH) in 1981, a slight decrease from Company will make it necessary to seek rate 1980. There were 4,855 new residential increases in both jurisdictions sometime in late 1981 REVENUE 1982 for implementation in early 1983.

Residential DOLLAR SOURCE Major expense items and developments Commercial, Large during 1981 included:

~ Fuel expenses for the year were up Sales to Public Authorities 12.7% to $ 107.6 million. Approximately 43 Other cents of each revenue dollar went to pay the Sales for Resale Company's fuel bill.

Off System Sales In 1981, the Company's fuel mix to generate electricity was 86% natural gas, 13%

Commercial, Small coal and 1% oil. Approximately 96% of fuel l costs went for natural gas, 3% for coal and 1%

for oil. The Company paid an average of $ 2.93 iiii gpss. ~i~)i'lllili-'-"

per million BTUs for natural gas, up 17% over jliillli I l-"jjl l 1980; 63 cents per million BTUs for coal, up

[lllljjjjj 37% and $ 5.02 per million BTUs for oil, up

1981 FUEL MIX allow the Company to purchase electricity at a 1981 COST PER MILLIONBTUs AND COST PER BTUs lower cost than that generated locally by fuel oil OF ENERGY GENERATION or natural gas.

4 Environmental protection measures are 0 Oil important to El Paso Electric. The Company's 0 Natural Gas Newman, Copper and Rio Grande Power OIL 0 Coal Stations are in compliance with all existing

$ S.02 environmental regulations and standards. A PEN MILUON large-scale environmental protection installation is currently under way at the coal-fired Four Corners Power Station (shared with 5 other utilities in the west). Particulate removal equipment construction at the Station is NATURAL scheduled for completion in December 1982, GAS

$ 2.93 while sulfur dioxide removal equipment is still PER MILUON Bms in design stages and not scheduled for completion until late 1984.

~ Research and development programs on new energy producing sources and COAL S3C techniques are actively supported by the PHI MILUON Bilb Company through a variety of means.

El Paso Electric is currently producing electricity from an experimental 20-KW OIL 1% COAL photovoltaic solar cell system installed at the 13% Newman Power Station. The project, the first such installation in the country, started a two-NATURALGAS year research-demonstration test period in June 86% 1981. A joint effort with the New Mexico Solar Energy Institute (NMSEI), and supported in 1981 FUEL MIX part by a grant from the Department of Energy (DOE), the sun-to-electricity system is 19%. The Company has fuel cost recovery "There was no providing electricity to the control computer provisions in all of its jurisdictions. rate increase in of Newman Unit No. 4.

Fuel cost control was enhanced by the Texas or New The Electric Company along with the modification of natural gas facilities at Newman Mexico in NMSEI has also applied for a grant from the Station during the year, allowing it to utilize 1981 ...the Texas Energy Resources Advisory Council to interstate gas (the lowest cost fuel for local Company's conduct a feasibility study for a "solar pond" generation) as well as intrastate gas (higher, yet financial to be located at Newman Station. A solar pond less expensive than oil) depending upon indi cators were would utilize high concentrations of salt water availability of the different fuel sources. to trap heat which would, in turn, boil a El Paso Electric will gain even further strong enough for us to be successful secondary fluid and power a generator.

control over fuel and purchased power costs Because of the storage properties of salt water, with the addition of nuclear energy and a without one...." this technology could feasibly work at night as proposed interconnection with Southwestern Billye E. Bostic, well as during cloudy days. With funding, the Public Service Company. Senior Vice President, project could begin as early as spring 1982.

~ New interconnection agreements were Financial Division completed in late 1981 for the construction of a 1981 REVENUE 125-mile, 345-kilovolt (KV) transmission line Fuel Depreciation DOLLAR from the El Paso area to Artesia, New Mexico. EXPENDITURE The line is being constructed in conjunction Other Operating with Texas-New Mexico Power Company which Expense will own one-third of the line. Construction is Interest Expense scheduled to begin in 1983 and when completed will provide an interconnection with Southwestern Public Service Company. A Retained Earnings direct current terminal to connect the two systems, which are not synchronized electrically, will be built by Southwestern.

The interconnection will make available 100 Dividends MW of interruptible electric energy beginning in 1984 and will Taxes

10 Four Corners Power Station "The attention the An advanced study on a solar repowering Palo Verde: nuclear power Company is project was started under a DOE grant in 1981.

The initial conceptual design study was for the Sun Belt.

directing to coal conducted in 1979- 1980. The proposal calls for El Paso Electric is a participant with four and nuclear a field of mirrors ("heliostats") focusing the other Sun Belt utilities in the construction of the energy does not sun's energy on a central receiver, or power three-unit, Palo Verde Nuclear Generating mean itis tower, where water would boil generating Station, 50 miles west of Phoenix, Arizona.

disregarding enough steam to provide an estimated 50% Construction started in 1976 and the first of alternative of the energy needed to operate Unit No. 1 the three 1,250-MW units is scheduled to begin energy sources." at Newman Station. The new study will commercial operation in May 1983.

Donald Isbell, incorporate and refine new information into At the close of 1981, Unit No. 1 was 95%

Vice President, the previous design and is expected to be complete with fuel scheduled to be on-site and Energy Resource completed in April 1982 and could lead to a loaded in late 1982. Unit No. 2 was 75%

and Development preliminary'engineering design grant during complete and due to begin operation a year Division the year. later in May 1984; and Unit No. 3 was 30%

The Company initiated a wind turbine site selection and installation project in 1981 with two goals: (1) to determine the power producing potential of small wind-electric generating systems in the Company's service area; and (2) to investigate interconnection requirements, effects on the electric system and the actual power producing potential of a small (25 KW) wind turbine system.

KQ In addition to conducting its own research, El Paso Electric also participated in research and development through its membership in organizations including The Electric Power Research Institute, Texas Atomic Energy Research Foundation and Western Energy Supply and Transmission Associates (WEST).

11 The first of three nuclear units at Palo Verde comes on line in May 1983.

complete and scheduled for operation in 1986. some parts of the country. There are now about "As long as the Other participants in the Palo Verde 78 nuclear power plants in the United States nation needs Project include Arizona Public Service licensed to operate, supplying the nation with electricity, itis Company, Salt River Project Agricultural electricity that otherwise could require burning going to need Improvement District, Public Service Company nearly one and a half million barrels of oil nuclear energy to of New Mexico and Southern California Edison. per day.

El Paso Electric owns a 15.8% undivided When electric power begins flowing to The supply much of its interest (200 MW from each unit) in Palo Electric Company's service area from the Palo electrical Verde, but late in 1981 entered into an Verde Station in 1983, uranium fuel will be requirements. The assignment agreement to sell 25% of its added to the Company's fuel mix. One of the consumer willbe participation (a total of 150 MW) to the M-S-R principal objectives of the Company for the the ultimate Public Power Agency. M-S-R is a California past several years has been to convert from its beneficiary."

consortium composed of the cities of Modesto, reliance on petroleum fuels toward the use of Holland York Santa Clara and Redding. more abundant and less costly coal and nuclear Senior Vice The sale to M-S-R is contingent upon both energy. Palo Verde represents a major step in President, parties obtaining all requisite approvals. M-S-R that direction. Power Supply A successful energy production program is Dzvxsion is making monthly deposits of earnest money with the Company and will continue to do so based on sound planning principles. Planning until the sale is completed. The closing for the for future energy needs is an important function sale is projected to take place in August 1982. at The Electric Company and is, at the same The addition of nuclear fuel to El Paso time, growing in complexity. Just as the Electric's fuel mix is expected to have a Company began preparing almost a decade stabilizing affect on fuel costs extending ago for Palo Verde it is also planning today through the 1990's. in order to meet the needs of tomorrow's To generate electricity today and in the customers.

future, energy supplies are needed that are safe, clean, economical and available. That limits the choices to a very few. Clearly, nuclear energy is already an integral part of the nation's electric power supply system, approaching 50 percent of the generation in

12 Residential energy audit 1

i IMi "As a Company one full-time employee in Las Cruces.

we manufacture Serving our customers. The Company's Community Services Section offers a number of programs ranging and distribute The Company's primary function is to from present and future energy-related topics electri atty, but manufacture and distribute electricity, but its and electrical safety as well as conservation our product is product is service and this philosophy information. The programs are designed to service... continued to be accented during 1981 in help answer questions about energy and the James Jones, a myriad of customer service programs. electric utility industry. During 1981 over Vice Presi derr t, In an Area Development Department 26,000 personal contacts were made by Mesilla Valley Program, 50 major industrial customers were employees of Community Services.

Division called upon in 1981 by a management-service Several special customer programs team to discuss Company services. continued to be offered to the public, including Under another program, mandated by a do-it-yourself Solar Water Heating Workshop Congress and implemented through the DOE, in which over 100 customers participated in the Company conducted over 1,700 1981. These individuals built a total of 268 solar conservation energy audits on request panels with a net result of 104 new solar water by commercial and residential customers. heating systems being placed in service.

The program is the continuation of a Contacts and communications with the valuable service offered by the Company customer, while most relevant on a one-to-one for many years. personal basis, remains most cost-efficient "Star Services," a service-oriented section through the use of mass media including active offering special assistance to eligible customers, advertising and public affairs programs.

including alternative methods of bill payment to customers over 62 years of age on a fixed income, low income persons or those with other financial difficulties, has been fully implemented now. In 1981 Star Services employees handled over 2,900 personal contacts. The section consists of four specially trained employees. A Star Services office was also implemented and staffed with

13 V

The Electric Company as a Sun Belt employer.

For the first time in 1981, the number of Company employees topped the one thousand mark at 1,025, up from 986 in 1980.

Of this total:

~ On the management level, of the 145 officers and managers, 14.5% are female and minorities represent 22%.

~ In the professional fields (151 employees), '

w, jf~F'4~

39.7% are minorities and 23.8%

of the total are female.

~ 29.6% are female (compared to 28.7% in 1980) and 53.6% are minorities (up from 52.7%

in 1980).

~ 332 (32.4%) are members of Local 960 of the International Brotherhood of Electrical Workers. A two-year labor agreement between the Company and Local 960 was finalized in February 1982, and became effective on Monday, March 1, 1982. The contract contains a mutually acceptable wage agreement.

The Company actively supports an affirmative action program and is an equal opportunity employer.

The Company provides many training programs for its employees. In 1981 a super visor orientation program was initiated to better prepare employees advancing to higher positions. The program was instituted to Dedication and Employees are also offered Company stock provide supervisory personnel new to high performance through two plans. The Employee Stock supervision with the basics for operating and are not cliches Purchase Plan allows for payroll deductions to managing their departments and sections. at El Paso purchase stock while the Employee Stock An education tuition aid program provides Electric...they Ownership Plan (ESOP) provides common reimbursement to employees of 90% of the cost are the norm." stock to those employees who have been with of tuition for courses (completed with a the Company a minimum of three years.

Charles Mais, specified grade) at a university, college or Management changes in 1981 included Vice President, business/trade school. Over 170 employees Administrative William W. Royer who joined the Company as participated in the program in 1981. Division General Counsel in 1981 to establish, for the In addition, the Intex Communications first time, a corporate legal division. Lawrence System correspondence program offers a M. Downum, Jr. was appointed Assistant Vice myriad of job-related course programs President of the Mesilla Valley Division.

through the correspondence method. Downum has been with the Company 21 years, most recently as Manager of Public Affairs.

53.66%

192?-1981 AFFIRMATIVE 60.23% ACTION PROGRESS 0 Minority 45.22% Employment-29.66% AliEmployees 39.06% j C3 Hispanic Percentage of Total 0 Female Percentage of Total 23.15%

M!netty Hispanics lgpg o omale

Wall Harvey Boney smith Mattttn Ivey Cutler Salas Porrae Goottrnan Directors Of Officers Of The Company The Company Evern R. Wall*, Evern R. Wall, President and Chairman of the Board [7). President and Chairman of the Board [24).

Paul Harvey*, Rolland E. York, Honorary Chairman of the Board of the Senior Vice President [31].

Company, Investments [41). Billye E. Bostic, Robert E. Boney*, Senior Vice President [34).

Investments, Las Cruces, New Mexico [34]. James H. Jones, Tad R. Smith, Vice President [18).

Attorney, Kemp, Smith, Harry I. Zimmer, Duncan 6 Hammond; Vice President [36).

Counsel for the Company [21]. Donald G. Isbell, George G. Matkin, Vice President [17].

Senior Chairman of the Board, Charles Mais, State National Bank of El Paso and Vice President [27].

PanNational Group, Inc. [15).

Ralph G. Crocker, Ben L. Ivey, Treasurer [42].

Farming, Chairman of the Board, Bank of Ysleta [12]. William J. Johnson, Controller [4].

Robert H. Cutler*,

Chairman of the Board, Illinois-California Theta S. Fields, Express, Inc. (common carrier, Secretary [31].

motor transportation) [11). William W. Royer Leonard A. Goodman, Jr., General Counsel [1].

Chartered Life Underwriter/General Agent, Robert N. Hackett, John Hancock Mutual Life Insurance Assistant Vice President [11].

Company [3]. Lawrence M. Downum, Jr.

Josefina A. Salas-Porras, Assistant Vice President [21].

Executive Director, Robert L. Corbin, BI Language Services [3). Assistant Treasurer 6

• Members of the Executive Committee.

Assistant Secretary [33].

[ ) Years of service on the board. Richard E. Farlow, Assistant Treasurer [33).

Cecelia R. Shea, Assistant Secretary [24].

Years of service ( i.

15 Financial

~

EL PASO ELECTRIC COMPANY AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITYAND CAPITAL RESOURCES Liquidity is a measure of a business'bility to provide cash for normal operations and for expansion of its facilities necessary to provide its product at a reasonable cost. Capital resources are those sources of cash available to the business for liquidity and include internal cash generation, short-term and long-term obligations, preferred and common stock and other financial arrangements. During a major construction program a utility's ability to secure capital resources from external financings, such as selling common stock, preferred stock and long-term obligations, may be the best measure of its liquidity.

The Company is participating in the construction of the Palo Verde Nuclear Generating Station (Palo Verde Station) which has required substantial amounts of capital. To date the Company has been successful in securing the resources needed as.

shown in the table below. The Company expects to be able to continue to secure the funds necessary for its continuing construction program; however, due to market conditions, rate relief allowed and other uncontrollable factors, there can be no assurance that it will. The principal cash requirements of the Company and sources of such cash were approximately as follows:

1981 1980 1979 (In thousands)

Requirements:

Construction $ 148,000 $ 130,000 $ 114,000 Sources:

Common stock 48,000 56,000 35,000 Preferred stock 15,000 26,000 Long-term obligations and other 58,000 25,000 55,000 Short-term obligations, net of repayments. 43,000 21,000 (8,000)

Internally generated . 11,000 15,000 10,000 The Company's capital structure has changed from 45'/o long-term obligations, 15/0 preferred stock and 40/0 common

'quity at December 31, 1978, to 41/0 long-term obligations, 13/0 preferred stock and 46/0 common equity at December 31, 1981 The change in the Company's capitalization structure has improved the Company's indenture of mortgage coverage from

~

3.02 at December 31, 1978, to 4.84 at December 31, 1981, and would have allowed the issuance of an additional $ 162,700,000 in first mortgage bonds at an assumed rate of 160/o. The Company's Restated Articles of Incorporation contain restrictions on the issuance of preferred stock. The most restrictive of these conditions would have allowed the issuance of an additional

$ 97,300,000 in preferred stock at December 31, 1981, at an assumed dividend rate of 13'io.

Rate relief to support construction and financing has'been aggressively pursued and has resulted in the granting of rate increases of approximately $ 52,300,000 over the past three years from all jurlsdtctions. Whtle the Company has been successful in the past, there can be no assurance that the Company will continue to receive rate increases or that the rate increases, if granted, will be in the amounts requested.

The Company's estimated construction expenditures for 1982 through 1985, including allowance for funds used during construction, are approximately $ 677,300,000. Of this amount, approximately $ 481,900,000 will be spent for the construction of the Palo Verde Station. External financing for the 1982 through 1985 construction program will be approximately $ 373,000,000 and will be accomplished through a combination of first mortgage bonds, preferred stock, common stock, other secured and unsecured debt and pollution control bonds. The timing and amount of additional external financing will depend upon market conditions, rate increases, the possible sale by the Company of 250/0 of its ownership interest in the Palo Verde Station and other factors. The above construction and financing estimates do not take into account the possible Palo Verde sale. Such sale, if consummated in August 1982 as currently scheduled, would provide approximately $ 180,000,000 to $ 200,000,000 cash proceeds to the Company either at such time or within a twelve-month period after August 1982. In addition, the purchaser would assume responsibility for future construction costs applicable to its interest in the Palo Verde Station, thereby substantially reducing the Company's estimated construction expenditures for the Palo Verde Station during the 1982-1985 period.

The Company expects that its current capitalization ratio, as discussed above, will not change substantially for the next several years.

16 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY RESULTS OF OPERATIONS Operating Revenues Operating revenues increased approximately $ 39,900,000 in 1981 over 1980 representing an 18.9/o increase. While recovery of escalating fuel costs represented approximately $ 15,300,000 of this increase, the balance of the increase resulted from base rate increases authorized by the Public UtilityCommission of Texas (Texas Commission) and the New Mexico Public Service Commission (New Mexico Commission), partially offset by a slight decrease in volume. Special sales to Southern California Edison Company (SCE), including fuel, were approximately the same in 1981 and 1980. Special sales to Comision Federal de Electricidad (CFE), Ciudad Juarez, Mexico, decreased in 1981 as compared to 1980 by approximately $ 14,200,000, including fuel.

Operating revenues increased approximately $ 50,800,000 in 1980 over 1979 representing a 31.8~/o increase. While recovery of escalating fuel costs represented approximately $ 17,000,000 of this increase, the major portion resulted from base rate increases authorized by the Texas and New Mexico Commissions and special sales to SCE and CFE. Sales to SCE and CFE totaled approximately $ 21,400,000, including fuel, during 1980. There were no special sales to SCE and CFE in 1979. Of the increase in base revenues, average base rates and volume accounted for 79'/0 and 21/0, respectively.

The increases in average base rates for all periods reflect increases in rates allowed by the various regulatory bodies which became effective in June and November 1979, and April, July and November 1980.

Operating Expenses Increases in operating expenses for 1981 over 1980 and 1980 over 1979 were primarily due to increases in fuel expense and Federal income taxes. Increases in other operations expense also contributed to the increase for 1981 over 1980. Fuel expense, Federal income taxes and other operations expense accounted for 44/o, 18/o and 15/0, respectively, of the total increase for 1981 over 1980. Fuel expense and Federal income taxes accounted for 38/0 and 34/0, respectively, of the total increase for 1980 over 1979.

Fuel expense increased in 1981 over 1980 and 1980 over 1979 primarily due to escalating fuel costs. The Company's primary fuel source for generation of electricity for all periods has been natural gas (86'/o in 1981, 81/0 in 1980 and 79'/0 in 1979). It is anticipated that fuel expense will increase during the coming year based upon increased natural gas prices recently announced by the Company's supplier. Natural gas will likely continue to be the Company's primary fuel source until the Palo Verde Station starts commercial operation. Unit 1 of this station is scheduled to start operation in 1983. The Company also has an interest in an electrical interconnection system scheduled to start operation in early 1984. With this system, the Company will be supplied with interruptible electric energy and it is anticipated that this will save on overall fuel and purchased power expenditures.

Total Federal income tax expenses increased in 1981 over 1980 primarily due to increased taxable income and increased provision for deferred income taxes relating to the borrowed portion of allowance for funds used during construction. Total Federal income tax expenses increased in 1980 over 1979 primarily due to increased taxable income and increased provision for deferred income taxes relating to the borrowed portion of allowance for funds used during construction, changes in deferred fuel balances and taxes capitalized.

Other operations expense increased in 1981 over 1980 primarily as a result of increased payroll, provision for uncollectible accounts, employee benefits and pensions, travel, automobile usage, general office supplies and property insurance.

Allowance for Funds Used During Construction (AFUDC)

AFUDC increased in 1981 over 1980 and in 1980 over 1979 due to the increased cumulative construction expenditures principally associated with the Palo Verde Station and the adoption of AFUDC compounding in 1980 on major projects, as well as increased accrual rates.

AFUDC amounted to 70/0, 630/0 and 63/0 of net income applicable to common stock during the years ended December 31, 1981, 1980 and 1979, respectively. AFUDC's contribution to net income is net of the effect of deferred Federal income taxes on the borrowed portion of AFUDC. See Note I of Notes to Consolidated Financial Statements for further details and a discussion of the non-cash nature of AFUDC.

17 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY Other Income, Net of Other Expenses and Federal Income Taxes The increase in.1981 as compared to 1980 is primarily due to interest earned on pollution control bond proceeds held in trust during 1981.

Interest Charges Interest on long-term obligations increased in all periods primarily due to the issuance of an additional first mortgage bond series, long-term floating rate notes and pollution control bonds. Additionally, average prime interest rates used to determine interest costs on the floating rate notes increased in all periods.

The changes in other interest in 1981 and 1980 over the respective prior years reflect increased short-term borrowing and higher prevailing average interest rates.

Supplemental Information Concerning the Effects of Inflation Information required in regard to the effects of inflation is included on pages 37 through 39 of this report.

MARKET FOR THE COMPANYS COMMON STOCK AND RELATED SECURITY HOLDER MATTERS The Company's Common Stock is traded in the over-the-counter market. The bid quotations as reported on the National Association of Securit1es Dealers Automated Quotations System (NASDAQ) and published by The Wall Street Journal and the quarterly dividends per share for the periods indicated were as follows:

Bid otation

~Hi h 1980 First Quarter Second Quarter 10 9~re 10'ividends 774 $ 0.275 0.275 Third Quarter 0.29 Fourth Quarter 83'l~ 0.29 1981 10'0>n First Quarter 0.305 Second Quarter 9 0.305 Third Quarter 11 gs>i 0.32 Fourth Quarter I le 0.32 The above quotations do not include retail mark-ups, mark-downs, or comm1ssions and do not necessarily represent actual transactions.

At February 25, 1982 there were 47,657 holders of record of the Company's common stock.

The Company's Restated Articles of Incorporation, the original Indenture of Mortgage and certain of the supplemental indentures relating to the various series of first mortgage bonds contain restrictions as to the payment of dividends on the common stock of the Company and as to the purchase or retirement of capital stock of the Company. At December 31, 1981 the amount available for dividends on the common stock under the most restrictive of those provisions was approximately

$ 54,000,000.

The Company hns paid quarterly dividends on its common stock without interruption since distribution of the common stock to the public in 1947 (34 years).

At its meeting in January 1982 the Board of Directors declared a cash dividend of $ 0.32 per share of common stock, payable March 15, 1982, to shareholders of record at the close of business on February 25, 1982. The current 1ndicated annual dividend rate is $ 1.28 per share. The Company intends to continue to pay quarterly dividends on its common stock, but future dividends will depend upon earnings, cash flow, the financial condition of the Company and other factors.

18 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY SELECTED QUARTERLY FINANCIALDATA For the years ended December 31, 1981 and 1980 (Unaudited)

Net Net Income Income Applicable Per Share Operating Operating Operating Net to Common of Common Revenues ~Ex nses Income Income Stock Stock (In thousands of dollars except for per share data) 1981 First Quarter $ 54,400 $ 42,142 $ 12,258 $ 12,520 $ 10,741 $ .52 Second Quarter 61,933 49,302 12,631 13,145 11,365 .55 Third Quarter 73,532 57,465 16,067 17,864 16,085 .70 Fourth Quarter 60,514 51,185 9,329 13,168 11,388 .46 1980 First Quarter 38,761 31,993 6,768 6,415 4,972 .32 Second Quarter 49,372 41,187 8,185 9,107 7,665 .48 Third Quarter 65,860 53,519 12,341 14,131 12,688 .74 Fourth Quarter 56,520 45,597 10,923 11,524 9,734 .50

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors El Paso Electric Company:

We have examined the consolidated balance sheets of El Paso Electric Company and Subsidiary at December 31, 1981 and 1980, and the related consolidated statements of income, retained earnings and changes in financial position for the three years ended December 31, 1981, 1980 and 1979. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the consolidated financial statements referred to above present

• fairly the consolidated financial position of El Paso Electric Company and Subsidiary at December 31, 1981 and 1980, and the consolidated results of operations and changes in financial position for the three years ended December 31, 1981, 1980 and 1979, in conformity with generally accepted accounting principles applied on a consistent basis.

COOPERS 6 LYBRAND Dallas, Texas February 12, 1982

Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS ASSETS December 31 1981 1980 (In thousands)

Utility plant (Notes B, E and H):

Electric plant in service $ 328,694 $ 315,551 Less accumulated depreciation and amortization 92,565 62 239 Net plant in service . 236,129 233,312 Construction work in progress. 561,851 386,149 Held for future use . 7,788 397 Other investments . 13 093 Net utility plant 805,768 632 951 Nonutility property and investments, at cost net of accumulated depreciation of $ 268,000 and $ 150,000, respectively 11,656 2 239 Current assets:

Cash (Note F) . 13,555 7,799 Accounts receivable, principally trade (less allowance for doubtful accounts of $ 436,000 and $ 371,000, respectively) . 24,486 25,042 Federal income taxes refundable 2.694 2,694 Inventories:

Materials and supplies. 4,868 4,572 Fuel (Note H) 14,380 10,551 P repayments 2,896 1,961 Other 567 11 Total current assets. 63,446 52 630 Deferred charges and other assets 9,201 3 172 Total assets $ 890,071 $ 690 992 The accompanying notes are an integral part of the consolidated financial statements.

21 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY CONSOLIDATED BALANCESHEETS CAPITALIZATIONAND LIABILITIES December 31 1981 1980 (In thousands)

Capitalization:

Common stock, no par value, 40,000,000 and 30,000,000 shares authorized, respectively. Issued and outstanding 25,110,066 and 20,485,067 shares, respectively (Note C) . $ 210,148 $ 162,303 Retained earnings (Note E) . 79,602 59 383 Common stock equity. 289,750 221,686 Preferred stock, cumulative, no par value, 2,000,000 and 1,000,000 shares authorized, respectively (Note D):

Redemption required, issued and outstanding 642,000 and 646,000 shares, respectively 64,200 Redemption not required, issued and outstanding 190,000 shares. 18,873 18,873 Long-term obligations (Note E) . 252,415 202 263 Total capitalization . 625,238 507 422 Current liabilities:

Current portion of long-term obligations (Note E). 1,736 54 Notes payable banks (Note F) 54,200 16,225 Notes payable other (Note F) . 2,265 15,850 Commercial paper (Note F) 63,508 44,836 Fuel purchase commitment (Note H) 14,279 10,449 Accounts payable, principally trade. 13,682 9,244 Taxes accrued . 7,563 9,121 Interest accrued 6,042 4,351 Other 4,515 4 594 Total current liabilities. 167.790 114 724 Deferred credits and other liabilities:

Accumulated deferred Federal income taxes 46,554 33,260 Accumulated deferred investment tax credit . 42,499 31,721 Other (Note H) . 7,990 3 865 Total deferred credits and other liabilities . 97,043 Commitments and contingencies (Notes H and J)

Total capitalization and liabilities . $ 890,071 $ 690 992 The accompanying notes are an integral part of the consolidated financial statements.

Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME For the years ended December 31, 1981, 1980 and 1979 1981 1980 1979 (In thousands)

Operating revenues 5250.579 $ 210 513 $ 159 712 Operating expenses (Note I):

Operations:

Fuel 107,562 95,461 81,669 Purchased and interchanged power 2,551 (820) (3,531)

Other 29,113 24,839 20,962 Maintenance 10,087 7,925 6,725 Depreciation and amortization (Note B) . 10,508 9,090 8,245 Taxes (Note G):

Federal income, current 3,691 5,396 1,238 Federal income, deferred. 13,005 8,743 6,138 Charge equivalent to investment tax credit, net of amortization. 12,505 9,941 4,083 Other 11,072 11 721 10 114 200.094 172 296 135 643 Operating income. 50.285 38 217 24 069 Other income (deductions):

Allowance for equity funds used during construction (Note I). 22,813 14,377 7,450 Other income, net of other expenses and Federal income taxes (Note G) . 1.842 ~366) 292 24.155 14 011 7 742 Income before interest charges. 74.440 52 228 31 811 Interest charges (credits):

Interest on long-term obligations. 27,401 16,875 11,589 Other interest (Note B) . 14,218 10,533 7,420 Other interest capitalized (Note B). (1.498) (1,980) (1,643)

Allowance for borrowed funds used during construction (Note I) . ~22.978) ~14 377) ~8745) 17.745 11 051 8 621 Net income (Note I). 56,697 41,177 23,190 Preferred stock dividend requirements. 7,118 6 118 3 948 Net income applicable to common stock (Notes C and I) . 5 49.579 $ 35 059 $ 19 242 Net income per share of common stock, based on weighted average number of shares outstanding during the year (Notes C and I) . $ 2.23 $ 2.05 $ 1.45 Weighted average number of common shares outstanding (Note C). 22.250.664 17 063 864 13 252 102 The accompanying notes are an integral part of the consolidated financial statements.

Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF RETAINED EARNINGS For the years ended December 31, 1981, 1980 and 1979 1981 1980 1979 (In thousands)

Retained earnings at beginning of year. 8 59,383 $ 45,097 $ 40,753 Add:

Net income 56,697 41 177 116,080 86 274 63 943 Deduct:

Cash dividends:

Preferred stock. 7.118 6,118 3,948 Common stock 28,448 20,012 14,523 Capital stock expense. 912 761 375 36,478 26 891 18 846 Retained earnings at end of year. $ 79.602 $ 59 383 $ 45 097 The accompanying notes are an integral part of the consolidated financial statements.

24 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIALPOSITION For the years ended December 31, 1981, 1980 and 1979 1981 1980 1979 (In thousands)

Source of funds:

From operations:

Net income. $ 56,697 $ 41,177 $ 23,190 Items not requiring (providing) working capital:

Depreciation and amortization. 10,508 9,090 8,245 Deferred Federal income taxes. 12,979 8,387 6,875 Investment tax credit 12,492 10,641 4,083 Allowance for equity funds used during construction (22,813) (14,377) (7,450)

Other ~1.7101 337 278 Funds provided by operations. 68,153 55 255 35 221 From financings and external sources:

Sale of common stock... 47,845 55,974 35,060 Sale of preferred stock 15,000 26,000 Long-term obligations:

Sale of first mortgage bonds. 40,000 Pollution control obligation, net of amount on deposit with trustee 7,366 Sale of unsecured promissory notes 18,000 Other 4,401 12,477 Earnest money deposits on proposed sale. 3,500 Sale of uranium venture and nuclear fuel to trust. 4,376 4,712 Sale of assets. 1,284 Deferred gain on capital lease. 2,386 Long-term purchase commitment 591 Short-term obligations 44.744 Total from financings and external sources. 153,516 124 506 116 363 Decrease in working capital other than short-term obligations*. 6 789 Total source of funds. $ 221,669 $ 179 761 $ 168 373 Application of funds:

Gross additions to plant. $ 191,969 $ 158,008 $ 130,048 Allowance for equity funds used during construction. (22,813) (14,377) (7,450)

Gross additions to nonutility prdperty. 9,535 32 794 Dividends on preferred stock 7,118 6,118 3,948 Dividends on common stock 28,448 20,012 14,523 Redemption of preferred stock 400 400 Reduction of long-term obligations .. 1,736 4,549 Increase (decrease) in deferred charges and other assets. (1,059) (380) 876 Transfer of long-term purchase commitment to current liabilities .. 7,754 Other, net. 3,841 865 (193)

Short-term obligations*. 3,524 Increase in working capital other than short-term obligations" . 2,494 9 083 Total application of funds. $ 221,669 $ 179 761 $ 158 373

e Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIALPOSITION - (Continued)

For the years ended December 31, 1981, 1980 and 1979 1981 1980 1979 (In thousands)

Increase (decrease) in components of working capital other than short-term obligations*:

Current assets:

Cash $ 5,756 $ (2,885) $ 4,652 Accounts receivable, principally trade. (556) 6,715 3,002 Federal income taxes refundable. (3,344)

Materials and supplies. 296 692 1,059 Fuel 3,829 2,491 (789)

Prepayments 935 249 (76)

Other 556 ~10)9) ~1096) 10,816 6 243 3 408 Current liabilities:

Turbine contract payable. (7,754) 7,754 Fuel purchase commitment. 3,830 2,491 (789)

Accounts payable, principally trade. 4,438 (1,363) 1,625 Taxes accrued. (1,558) 2,998 704 Interest accrued. 1,691 1,168 352 Other ~79) ~380) 551 8,322 ~2840) 10 197 Increase (decrease) in working capital other than short-term obligations. $ 2.494 $ 9 083 ~$ 6 789)

• Short-term obligations are represented by the current portion of long-term obligations, notes payable banks, notes payable other and commercial paper.

The accompanying notes are an integral part of the consolidated financial statements.

26 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIALSTATEMENTS A. Summary of Significant Accounting Policies General The Company maintains its accounts in accordance with the Uniform System of Accounts prescribed for electric utilities by the Federal Energy Regulatory Commission (FERC).

Reclassification In accordance with an FERC requirement, during 1980 the Company began charging all capital stock expense incurred directly to retained earnings. The Consolidated Statement of Retained Earnings for the year ended December 31, 1979 has been reclassified to reflect the amount of capital stock expense incurred. Certain immaterial amounts in the consolidated financial statements for 1980 and 1979 have been reclassified to be consistent with classifications in 1981.

Princi les of Consolidation The consolidated financial statements include El Paso Electric Company and its wholly-owned subsidiary. All intercompany balances and significant intercompany transactions have been eliminated in consolidation.

~Utllll Plant Utilityplant is stated at original cost. The Company provides for depreciation on a straight-line basis at annual rates which will amortize the undepreciated cost of depreciable property over estimated remaining service lives.

The Company charges the cost of repairs and minor replacements to the appropriate operating expense and capitalizes the cost of renewals and betterments. The cost of depreciable plant retired or sold and the cost of removal, less salvage, are charged to accumulated depreciation.

Inventories Inventories are valued at the lower of average cost or market.

Revenues Revenues are recognized based on cycle billings rendered to customers monthly. The Company does not accrue revenues with respect to energy consumed but not billed at the end of a fiscal period.

Unamortized Debt nse and Premium or Discount on Debt Unamortized amounts apply to outstanding issues and are being amortized ratably over the lives of such issues.

Federal Income Taxes and Investment Tax Credit Accelerated methods of computing depreciation of utility plant are used for Federal income tax reporting purposes which differ from the methods used for financial reporting purposes. Differences in the tax and financial methods of accounting for fuel costs and other capitalized costs also exist. In accordance with regulatory authority requirements, provision has been made in the financial statements for Federal income taxes deferred to future years as a result of these items. In addition, deferred Federal income taxes are provided on the borrowed portion of AFUDC.

Investment tax credit utilized is deferred and amortized to income over the estimated useful lives of the related properties after such properties are placed in service.

Net Income'Per Share of Common Stock Net income per share of common stock is computed using the weighted average number of common shares outstanding during the year. Common equivalent shares related to the Amended Employee Stock Purchase Plan are not significant.

Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIALSTATEMENTS - (Continued)

B. UtilityPlant During the years ended December 31, 1981, 1980 and 1979, interest in the amount of $ 1,498,000, $ 1,980,000 and

$ 1,643,000, respectively, relative to funds borrowed by a turbine trust and the Company's subsidiary has been capitalized. The borrowed funds, at rates ranging from 4-1/4% to 21-1/2%, were used to acquire utility plant and various other assets. The interest amount has been included in the Consolidated Statements of Income as "Other Interest" with a corresponding amount included in "Other Interest Capitalized."

The Company has a 7% undivided interest in Units 4 and 5 of the Four Corners Project (coal-fired generating station) located in northwestern New Mexico and a 15.8% undivided interest in Units 1, 2 and 3 of the Palo Verde Station which is under construction near Phoenix, Arizona. The Company also has an interest in constructing transmission facilities related to the Palo Verde Station. Participants in the joint plants are responsible for obtaining their respective financing. The extent of the Company's interests in these facilities (Palo Verde Project and Four Corners Project), excluding nuclear fuel, is as follows:

December 31 1981 1980 Four Four Palo Verde Corners Palo Verde Corners

~Pro'ect ~Pro ect ~Pro'ect ~Pro ect (In thousands)

Electric plant in service. $ 17,095 $ $ 15,425 Accumulated depreciation. (3,986) (3,500)

Construction work in progress. 547,648 10,317 378,516 3,108 The Company's direct expenses associated with the in-service portion of the Four Corners Project are included in the applicable operating expense categories of the Consolidated Statements of Income.

Total depreciation was $ 10,201,000 in 1981, $ 9,004,000 in 1980 and $ 8,531,000 in 1979, of which $ 281,000, $ 257,000 and

$ 286,000, respectively, was applicable to transportation equipment and has been charged to other accounts. Additionally, amortization of electric plant under capital lease, commencing in June 1980, amounted to $ 588,000 for 1981 and $ 343,000 for 1980.

The average annual depreciation rate used by the Company for the year ended December 31, 1979 was 2.93%. Effective November 1980, in accordance with a Texas Commission order, the rate was changed from 2.93% to 3.28%. That rate was in effect through December 31, 1981.

C. Common Stock Under a shareholder approved employee stock purchase plan, qualified employees may purchase shares of the Company's common stock at two specified dates each year for a period ending no later than June 30, 1984. The purchase price is 90% of the average bid price of the stock at the option dates. In the event the option price exceeds the average of the bid and ask prices at the purchase date, then the options lapse and shares are purchased in the open market by the Company. During 1981, 1980 and 1979, 14,305, 12,388 and 6,717 shares of common stock, respectively, were issued at an aggregate amount of

$ 124,000, $ 106,000 and $ 63,000, respectively. The cumulative aggregate corresponding fair market values as of the option dates were $ 138,000, $ 117,000 and $ 70,000 in 1981, 1980 and 1979, respectively. At December 31, 1981, 40,185 shares were reserved for future purchases under the plan. Proceeds from issuances are credited to common stock and no charges are reflected in income with respect to the plan.

Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIALSTATEMENTS - (Continued)

The Company has a dividend reinvestment and stock purchase plan which provides holders of its common stock the option to invest cash dividends and/or optional cash payments (up to $ 3,000 per calendar quarter) in additional shares of the Company's common stock. During 1981, 1980 and 1979, 405,360, 292,136 and 178,652 shares, respectively, were purchased by shareholders who reinvested dividends and invested cash in the amounts of $ 4,210,000, $ 2,711,000 and $ 1,854,000, respectively. The purchase price is the average of the highest closing bid and lowest closing ask price of the stock on the purchase date. At December 31, 1981, 384,699 shares were reserved for future purchases under the plan. In January 1982, an additional 1,500,000 shares were reserved.

The Company has an employee stock ownership plan (ESOP). In accordance with Federal income tax provisions, effective through 1982, common stock with a value equal to the sum of a specified amount of the Company's investment tax credit and employee cash participation will be contributed to the plan. Under the provisions of the Economic Recovery Tax Act of 1981, the ESOP investment tax credit based on investment in property will terminate with respect to qualifying investments made after 1982. Beginning in 1983, the ESOP investment tax credit will be based upon payroll costs. In October 1981, 1980 and 1979, the Company and participating employees contributed 205,334, 177,170 and 126,633 shares of stock, respectively, with a market value of $ 2,191,000, $ 1,709,000 and $ 1,287,000, respectively, to the plan. At December 31, 1981, 714,334 shares were reserved for future contributions under the plan.

In November 1981, the Company implemented a customer stock purchase plan. The shares are being offered to the Company's Texas and New Mexico customers who enroll in the plan. The purchase price per share is the average of the highest closing bid and lowest closing ask price on the investment date. Customers may purchase shares by making cash payments in amounts of not less than $ 25 per payment nor more than $ 3,000 total investment per calendar quarter. Dividends paid on all shares purchased by a participant will be automatically reinvested in additional shares, except for those participants who request the stock certificates and cash dividends. At December 31, 1981, 500,000 shares were reserved for future purchases under the plan. In January and February 1S82, a total of 61,417 shares were purchased by participants.

The Company's Restated Articles of Incorporation were amended in June 1S81, to increase the number of authorized shares of common stock from 30,000,000 to 40,000,000.

Changes in common stock are as follows:

Common Stock Shares Amount (In thousands)

Balance, December 31, 1978. 11,191,371 $ 71,269 Sales of Common Stock:

1979 3,312,002 35,060 1980. 5,981,694 55,974 1981. 4 624 999 47 846 Balance, December 31, 1981 26 110 066 $ 210 148 Net income applicable to common stock, net income per share of common stock and weighted average number of common shares outstanding for the year ended December 31, 1981, would have been $ 52,221,000, $ 2.08 and 25,110,066, respectively, assuming that the proceeds (before expenses of sale) of $ 47,845,000 from the sale of common stock during the year were used to retire short-term obligations outstanding during the year.

~ Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIALSTATEMENTS - (Continued)

D. Preferred Stock (1) Preferred Stock Redem tion r uired Following is a summary of outstanding preferred stock - redemption required:

Optional Redemption Price Per December 31 Share at 1981 1980 December 31, Shares Amount Shares Amount 1981 (In thousands) (In thousands)

$ 10.75 Dividend. 92,000 $ 9,200 96,000 $ 9,600 $ 108.00

$ 8.44 Dividend. 150,000 15,000 150,000 15,000 108.44

$ 8.95 Dividend. 150,000 15,000 150,000 15,000 108.95

$ 9.00 Dividend. 100,000 10,000 100,000 10,000

$ 8.80 Dividend. 50,000 5,000 50,000 5,000

$ 9.50 Dividend. 100 000 10 000 100 000 10 000 642 000 $ 64 200 646 000 $ 64 600 The $ 10.75 preferred shares are entitled to the benefits of an annual sinking fund whereby on January 1 of each year, beginning in 1980, the Company will redeem 4,000 shares at the sinking fund redemption price of $ 100 per share plus accrued dividends. The $ 10.75 preferred shares are redeemable at the option of the Company; however, no optional redemption of the shares may be made prior to January 1, 1985, as a part of, or in anticipation of, any refunding involving the issue of indebtedness or preferred stock having an effective interest or dividend cost of less than 10.75% per annum.

The $ 8.44 preferred shares are entitled to the benefits of an annual sinking fund whereby on October 1 of each year,

.- beginning in 1984, the Company will redeem 4% (and may, at its option, redeem an additional 4%) of the aggregate maximum number of shares outstanding at the sinking fund redemption price of $ 100 per share plus accrued dividends. The $ 8.44 preferred shares are redeemable at the option of the Company; however, except as set forth above, no optional redemption of the shares may be made prior to October 1, 1988, as a part of, or in anticipation of, any refunding involving the issue of indebtedness or preferred stock having an effective interest or dividend cost of less than 8.44% per annum.

The $ 8.95 preferred shares are entitled to the benefits of an annual sinking fund whereby on October 1 of each year, beginning in 1985, the Company will redeem 5% (and may, at its option, redeem an additional 5%) of the aggregate maximum number of shares outstanding at the sinking fund redemption price of $ 100 per share plus accrued dividends. The $ 8.95 preferred shares are redeemable at the option of the Company; however, no optional redemption of the shares may be made prior to October 1, 1984, as a part of, or in anticipation of, any refunding involving the issue of indebtedness or preferred stock having an effective interest or dividend cost of less than 8.95% per annum.

The $ 9.50 preferred shares are entitled to the benefits of an annual sinking fund whereby on July 1 of each year, beginning in 1986, the Company will offer to purchase on the next succeeding October 1, out of funds legally available for the purchase or redemption of $ 9.50 preferred shares, not less than 20,000 shares (or the number of such shares then outstanding if less than 20,000) at a purchase price of $ 100 per share, plus accrued dividends. The Company is required to redeem on October 1, 1990, all shares then outstanding at a redemption price equal to $ 100 per share plus an amount equal to accrued and unpaid dividends to and including the date of redemption. The $9.50 preferred shares are redeemable at the option of the Company, however, no optional redemption of the shares may be made prior to October 1, 1987.

Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIALSTATEMENTS - (Continued)

Sinking fund requirements for each of the above series are cumulative and, in the event they are not satisfied at any redemption date, the Company is restricted from paying any dividends on its common stock (other than dividends in common stock or other class of stock ranking junior to the preferred stock as to dividends or assets).

The $ 9.00 preferred shares have no provision for a sinking fund, are not redeemable at the option of the Company, and must be redeemed in full on October 1, 1986, at $ 100 per share plus accrued dividends. In the event the Company fails to provide sufficient funds for redemption, the Company is restricted from paying any dividends on its common stock (other than dividends in common stock or other class of stock ranking junior to the the preferred stock as to dividends and assets).

The $ 8.80 preferred shares have no provision for a sinking fund and are not redeemable at the option of the Company until October 1, 1987. On October 1 of each year, beginning in 1990, the Company will offer to purchase on the next succeeding February 1, out of funds legally available for the purchase or redemption of the $ 8.80 preferred shares, any or all outstanding shares of $ 8.80 preferred shares at a purchase price of $ 100 per share, plus accrued dividends. In the event the Company fails to provide sufficient funds for redemption, the Company is restricted from paying any dividends on its common stock (other than dividends in common stock or other stock ranking junior to the preferred stock as to dividends and assets).

The aggregate amounts of the above preferred stock required to be retired for each of the next five years are as follows:

In thousands 1982 $ 400 1983.. 400 1984.. 1,000 1985 1,750 1986 13,750 Sales and redemption of preferred stock redemption required were as follows:

Shares Amount (In thousands)

Balance, December 31, 1978. 240,000 $ 24,000 Issuance of Preferred Stock, $ 8.44 Dividend 10,000 1,000 Issuance of Preferred Stock, $ 8.95 Dividend 150,000 15,000 Issuance of Preferred Stock, $ 9.00 Dividend 100 000 10 000 Balance, December 31, 1979. 500,000 50,000 Redemption of Preferred Stock, $ 10.75 Dividend. ~ ~ (4,000) (400)

Issuance of Preferred Stock, $ 8.80 Dividend 50,000 5,000 Issuance of Preferred Stock, $ 9.50 Dividend. 100 000 10 OCO Balance, December 31, 1980. 646,000 64,600 Redemption of Preferred Stock, $ 10.75 Dividend. ~40001 ~40D Balance, December 31, 1981 642 000 $64 2CO

31 Financial

. EL PASO ELECTRIC COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIALSTATEMENTS - (Continued)

(2) Preferred Stock Redem tion not r uired Following is a summary of preferred stock which is not redeemable except at the option of the Company:

Optional Redemption Price Per Amount Share at December 31 December 31, Shares 1981 1980 1981 (In thousands)

$ 4.50 Dividend. 15,000 $ 1,534 $ 1,534 $ 109.00

$ 4.12 Dividend. 15,000 1,506 1,506 103.98

$ 4.72 Dividend. 20,000 2,001 2,001 104.00

$ 4.56 Dividend. 40,000 4,000 4,000 100.00

$ 8.24 Dividend. 100 000 9 832 9 832 107.52

$ 18 873 $ 18 873 The above preferred shares are redeemable at the option of the Company; however, no optional redemption of the $ 8.24 shares may be made prior to April 1, 1982, directly or indirectly as part of, or in anticipation of, any refunding involving the issue of indebtedness or preferred stock having an effective interest or dividend cost less than 8.38% per annum.

There have been no changes in preferred stock - redemption not required during the three years ended December 31, 1981.

All preferred stock issues (redemption required and redemption not required) are entitled, in preference to common stock, to $ 100.00 per share, plus accrued dividends, upon involuntary liquidation. All issues except the $ 9.00, $ 8.80 and $ 9.50 preferred stock issues, are entitled to an amount per share equal to the applicable optional redemption price, plus accrued

- dividends, upon voluntary liquidation. The $ 9.00, $ 8.80 and $ 9.50 preferred stock issues are entitled to a fixed price ($ 109.00,

$ 108.80 and $ 109.50 per share at December 31, 1981, respectively), plus accrued dividends, upon voluntary liquidation.

The Company's Restated Articles of Incorporation were amended in June 1981, to increase the number of authorized shares of preferred stock from 1,000,000 to 2,000,000.

32 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIALSTATEMENTS - (Continued)

E. Long-term Obligations Outstanding long-term obligations are as follows:

Redemption Price at December 31 December 31, 1981 1980 1981 (In thousands)

First mortgage bonds:

3~/s% Series, due 1984.. $ 4,950 $ 4,950 $ 100.45 4~/4% Series, due 1988. 6,100 6,100 101.45 16.35% Series, due 1991. 40,000 4s/s% Series, due 1992. 10,385 10,385 102.02 6s/4% Series, due 1998. 24,800 24,800 103.73 7s/4% Series, due 2001. 15,838 15,838 105.85 9% Series, due 2004. 20,000 20,000 106.45 9.95% Series, due 2004. 25,000 25,000 109.95 10~/z% Series, due 2005. 15,000 15,000 109.05 87/z% Series, due 2007. 25 000 25 000 107.55 187,073 147,073 9% Pollution Control Revenue Bonds 1981 Series A, due 1984, net of

$ 28,074,000 on deposit with trustee, collateralized by second mortgage bonds. 7,366 Unsecured promissory notes, floating rate (15.75fo at December 31, 1981 and 20.50% to 21.50% at December 31, 1980):

Due 1984. 25,000 25,000 Due 1985.. 18,000 18,000 Obligation under capital lease. 13,725 12,477 Other secured and unsecured notes payable, interest at rates ranging from 8.8125% to 14% per annum, due in installments through 1998... 5 174 2 075 256,338 204,625 Current maturities of long-term obligations... (1,736) (54)

Unamortized premium and discount. ~2187) ~2308)

$ 252 415 $ 202 253 The premiums reflected in the redemption prices shown above continue at reduced amounts in future years, finally resulting in each case in redemption at par at maturity.

The Company's indenture of mortgage securing its first mortgage bonds provides for sinking and improvement funds. For each series other than the 9.95% and 16.35% series, the Company is required to make annual payments to the trustee equivalent to 1% ($ 1,230,000 at December 31, 1981 and 1980) of the greatest aggregate principal amount of such series outstanding prior to a specified date. The Company has generally satisfied the 1% requirements by relinquishing the right to use a net amount of additional property for the issuance of bonds or by purchasing bonds in the open market and expects to continue this practice. With respect to the 9.95% series, commencing April 30, 1985, the Company will be required to make annual cash payments to the trustee equivalent to 4-1/4% of the greatest aggregate principal amount of such series outstanding at any one time prior to a specified date. The 4-1/4% cash payments must be applied to redeem bonds of the 9.95% series at 100% of the principal amount thereof plus accrued interest. No sinking fund is required for the 16.35% series.

Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIALSTATEMENTS - (Continued)

Scheduled maturities of long-term obligations at December 31, 1981, excluding obligation under capital lease and sinking fund requirements are as follows (in thousands):

1982 $ 298 1983. 408 1984. 37,652 1985 18,374 1986. 417 Thereafter 185,464 The funds on deposit with a trustee at December 31, 1981 represent a portion of the proceeds from pollution control revenue bonds issued in June 1981. The Company can draw funds from the trustee account as qualified construction expenditures for pollution control are made.

Substantially all of the Company's utility plant is subject to a lien under the indenture of mortgage collateralizing the Company's first mortage bonds and a lien collateralizing the Company's second mortgage bonds. The second mortgage bonds in the amount of $ 35,440,000 were issued solely to secure $ 35,440,000 principal amount of 9% Pollution Control Revenue Bonds 1981 Series A, due 1984.

In accordance with certain provisions of the indenture covering the first mortgage bonds, payments of cash dividends on common stock are restricted to an amount equal to retained earnings accumulated after December 31, 1966, plus $ 4,100,000.

Retained earnings in the amount of approximately $ 54,000,000 are unrestricted as to the payment of cash dividends at December 31, 1981.

The unsecured floating rate notes due in 1984 and 1985 may be prepaid at the option of the Company without premium.

At December 31, 1979 the Company had a commitment in the amount of $7,754,000 to purchase a turbine from an independent trust no later than a specified date in 1980. During 1980 the turbine and related equipment were sold to a second independent trust and an arrangement was made whereby the Company leased the turbine and certain other related equipment

~ from the trust-lessor for a twenty-year period with renewal options for up to seven more years. Semi-annual lease payments, including interest, commencing in January 1982, are $ 719,000 through January 1991 and $ 861,000 thereafter to July 2000. The effective annual interest rate implicit in this lease is calculated to be 9.6%. The total cost of the equipment to the trust-lessor of

$ 11,800,000 plus $ 1,925,000 interest accrued is reflected in long-term obligations at December 31, 1981. Of the $ 11,800,000 approximately $ 8,400,000 was paid to the equipment trust which owned the turbine and approximately $3,400,000 was paid to the Company for its interest in the turbine and certain other related equipment. The difference between the sales price and the original basis of the turbine and related equipment is being amortized to income over the lease term.

F. Notes Payable and Commercial Paper The Company and its subsidiary have informal lines of credit with various lenders. Certain of these arrangements provide for the maintenance of compensating balances for the available lines of credit and the loans outstanding. At December 31, 1981 the lines of credit available under these arrangements totaled $ 127,316,000 (including subsidiary lines of $ 9,316,000 not guaranteed by the Company). Average bank balances of $9,788,000 were maintained a's compensating balances at December 31, 1981 in connection with the informal lines of credit. The amount of unused lines of credit at December 31, 1981 was

$ 84,165,000. In January 1982, an independent trust increased the available line of credit to the Company and subsidiary from

$ 30,000,000 to $ 70,000,000 which increased the unused line of credit by $ 40,000,000 pending expenditures by the trust for nuclear fuel.

Through December 31, 1982, the FERC has authorized the Company to incur short-term debt (in the form of promissory notes or commercial paper) in an amount not to exceed $ 175,000,000 outstanding at any one time, exclusive of short-term debt of the Company's subsidiary. The interest rates are to be at the prime rate in effect at the time of issuance, plus in some cases, provisions for compensating balances of 20% under certain conditions. The net proceeds from the issuance of the short-term debt are to be used primarily for construction expenditures.

Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIALSTATEMENTS - (Continued)

G. Federal Income Taxes The provisions (credits) for deferred Federal income taxes, which arise from timing differences between financial and tax reporting, are as follows:

Years Ended December 31 1981 1980 1979 (In thousands)

Tax effect of:

Operating income:

Depreciation differences. $ 1,550 $ 1,566 $ 1,769 Deferred fuel costs. 270 226 (1,074)

Allowance for borrowed funds used during construction 10,294 6,613 4,023 Other 891 338 1,420 Other income. 48 ~609)

$ 13 063 $ 8 134 $ 6 138 Federal income tax provisions are less than the amounts computed by applying the statutory rate of 46% to book income before Federal income taxes. Details are as follows:

Years Ended December 31 1981 1980 1979 (In thousands)

Tax computed at statutory rate. $ 40,003 $ 30,103 $ 16,062 Decreases due to:

Allowance for equity funds used during construction (10,494) (6,613) (3,427)

Other 757 774 ~907)

Total Federal income tax expense. $ 30 266 $ 24 264 $ 11 728 Effective Federal income tax rate. 34.8 37.1% 33 Total Federal income tax expense is as follows:

Years Ended December 31 1981 1980 1979 (In thousands)

Current income taxes operating. $ 3,691 $ 5,396 $ 1,238 Current income taxes other income. 1 030 93 269 Total current. 4,721 5,489 1,507 Deferred income taxes operating. 13,005 8,743 6,138 Deferred income taxes (credit) other income. 48 (609)

Deferred investment tax credit operating. 12,939 10,355 4,379 Deferred investment tax credit other income. (13) 700 Amortization of deferred investment tax credit operating ~434) ~4) 4) ~296)

$ 30 266 $ 24 264 $ 11 728 At December 31, 1981, the Company had available for Federal income tax purposes an investment tax credit carryforward of approximately $ 16,100,000 expiring in 1996.

Financial

~

EL PASO ELECTRIC COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIALSTATEMENTS - (Continued)

H. Commitments and Contingencies The Company has approximately a 15.8% interest in three units of a nuclear plant (Palo Verde Station) and related transmission lines and switchyard facilities presently under construction. Transmission lines represent approximately 6% of the aggregate costs of these projects. The estimated aggregate costs of these projects to be incurred by the Company subsequent to December 31', 1981, are approximately $ 507,000,000, including approximately $ 219,700,000 of allowance for funds used during construction (AFUDC).

The Company has entered into an assignment agreement, subject to certain conditions, for the sale of 25% of the Company's interest in the Palo Verde Station and related switchyard as well as nuclear fuel and uranium venture interest held by the trust discussed below. The proposed sales price is expected to exceed the carrying value of the assets. As of December 31, 1981, the Company had received $ 3,500,000 in earnest money deposits related to the sale which are included in other deferred credits. The estimated costs in the preceding paragraph do not give effect to the sale.

The Company is also'committed at December 31, 1981 for construction of pollution control facilities in the amount of approximately $ 39,300,000, including approximately $ 13,700,000 of AFUDC.

The above estimated amounts were computed assuming an estimated average annual inflation rate of 9% and an average AFUDC rate of 13.5%.

The Company has an agreement with an independent trust whereby the trust purchases, at cost, all of the Company's nuclear fuel requirements and amounts related to a uranium venture. Under the trust agreement the Company has the option of either repurchasing the fuel from the trust or leasing the heat generated by the fuel. Management of the Company intends to enter into a basic heat supply contract whereby title to the fuel remains with the trust and the Company will make lease payments for the heat generated. Based on this intention and in accordance with industry practice, the nuclear fuel and uranium venture assets and their related liabilities are not included in the accompanying balance sheets. The aggregate investment at December 31, 1981 amounted to approximately $ 27,700,000. The Company is committed to reimburse the trust for its cash investment in nuclear fuel and uranium venture costs, not expected to exceed a maximum cash amount of $ 93,000,000 during the ten-year period ending December 31, 1991, as well as for interest and other carrying costs of the trust.

Included in the aggregate investment of the trust, described in the preceding paragraph, at December 31, 1981, is a

$ 4,900,000 joint venture interest in certain mining claims and leases. In 1981, two of the participants in the venture expensed their investment in the venture due to their determination that production from the venture's mining claims and leases was not feasible in view of limited reserves and depressed market prices. The Company believes these revaluations to be inappropriate and at this time does not intend to provide for a reduction in the value of the investment of the trust. A minimum amount of exploration and development work is presently being performed.

The Company's fuel supply arrangements include short-term commitments under a fuel supply arrangement with a trust, whereby the Company concurrently assigned its principal long-term fuel supply contract to the trust and agreed to purchase all fuel oil delivered to the trust by the fuel supplier. Payments to the trust for fuel oil purchases consist of the trust's cost of oil determined on an average cost basis plus related administrative and carrying costs. For financial reporting purposes, purchases of the trust are assumed to have been made on behalf of the Company. Accordingly, the balance sheets at December 31, 1981 and 1980, include $ 14,279,000 and $ 10,449,000, respectively, recorded as fuel and fuel purchase commitment, representing the Company's commitment to purchase the trust's fuel oil inventory as of those dates.

In December 1981, the Company entered into an agreement with Texas-New Mexico Power Company (TNP) for the purpose of constructing, operating and maintaining a transmission system. This system includes a transmission line connecting with an existing switchyard in New Mexico, related switchyards and communication equipment. Completion of this system will allow the Company to purchase interruptible electric energy from another utility. In the performance of this agreement, the Company has been named Project Manager and will be responsible for all construction, operation and maintenance work. The agreement provides for the Company to receive advance funds, on a monthly basis, from TNP in order to perform all required work. The Company's interest in the construction, operation and maintenance costs is approximately 67%. The estimated cost of construction to be incurred by the Company subsequent to December 31, 1981, is approximately $ 14,600,000, including

$ 900,000 of AFUDC.

In December" 1981, the Company entered into an agreement with Southwestern Public Service Company (SPS) for the purpose of constructing a direct current terminal in New Mexico. The Company is obligated to advance funds, on a monthly basis, to SPS who will perform the construction work. The Company's interest in the construction is approximately 67%. The estimated cost of construction to be incurred by the Company subsequent to December 31, 1981, is $ 19,400,000, including

$ 1,800,000 of AFUDC.

Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIALSTATEMENTS - (Continued)

I. Allowance for Funds Used During Construction (AFUDC)

The applicable regulatory uniform system of accounts provides for AFUDC which is defined as an amount which includes the net cost during a period of construction of borrowed funds used for construction purposes plus a reasonable rate on other funds when so used. While AFUDC results in an increase in utility plant under construction for ratemaking purposes with a corresponding credit to income, it is not a current cash item. AFUDC is realized in cash net of certain tax effects after the related plant is placed in service and the depreciation charges based on the total cost of the plant, including AFUDC, are allowed in cost of service amounts by regulatory authorities.

The amount of AFUDC is determined by applying an accrual rate to the balance of certain utility plant construction. In this connection, the FERC has promulgated procedures for the computation (a prescribed formula) of the accrual rate. The rates used by the Company do not exceed those permitted by the FERC.

The Company used an accrual rate of 11.0% in 1979. Effective January 1, 1980, the Company increased the accrual rate to 11.9%. During 1981, the Company increased the accrual rate to an effective rate of 13.8%.

The increase in the AFUDC rate used during 1980 increased net income and net income applicable to common stock (excluding effect of compounded AFUDC) by $ 1,490,000 and net income per share by $ .09. The increase in the AFUDC rate used during 1981 increased net income and net income applicable to common stock (excluding effect of compounded AFUDC) by $ 4,060,000 and net income per share by, $ .18.

Effective January 1, 1980, the Company began semi-annual compounding of AFUDC on major construction projects.

Compounding involves using previously capitalized AFUDC as part of the cost base on which to apply the AFUDC rate. The increase in net income and net income applicable to common stock related to compounded AFUDC for 1980 and 1981 was

$ 2,444,000 and $ 2,965,000, respectively. The increase in net income per share of common stock related to compounded AFUDC for 1980 and 1981 was $ .14 and $ .13, respectively.

J. Pension Plan The Retirement Income Plan (the plan) covers employees who have completed one year of service with the Company. The plan is a noncontributory defined benefit plan. Upon retirement or death of a vested plan participant, assets of the plan are used to purchase an annuity contract with an insurance company. Therefore, assets available for plan benefits and the present value of vested benefits represent amounts attributable to active employees only.

The financial statements of the plan are presented on a cash basis. Under this method of accounting, certain revenue and expense items are not recognized when earned and incurred, but rather when cash is actually received or paid.

Contributions from the Company are based on the amounts required to be funded under provisions of the plan as actuarially calculated. The benefits to be provided under the plan are valued using the Frozen Initial Liabilityvariation of the Entry Age Normal Cost Method. The weighted average assumed rate of return used in determining the actuarial present value of accumulated plan benefits presented below was 6%, compounded annually.

Accumulated net assets available for plan benefits and the actuarial present value of accumulated plan benefits as of the most recent actuarial determination date are presented below:

June 30, 1981 1980 (In thousands)

Net assets available for plan benefits. $ 7 682 $6 440 Actuarial present value of accumulated plan benefits:

Vested benefits:

Participants currently receiving payments. $ 225 $ 180 Other participants 8 239 7 736 8,464 7,916 Nonvested benefits. 695 401 Total actuarial present value of accumulated plan benefits. $ 9 159 $ 8 317 The pension expense in 1981, 1980 and 1979 was $ 920,000, $ 800,000 and $ 751,000, respectively, which includes amortization of past service cost over a 30-year period beginning in 1972.

37

" Financial

, EL PASO ELECTRIC COMPANY AND SUBSIDIARY SUPPLEMENTAL INFORMATIONCONCERNING THE EFFECTS OF INFLATION(Unaudited)

The following supplementary information is supplied in accordance with the requirements of Financial Accounting Standards Board (FASB) Statement No. 33, Financial Reporting and Changing Prices, for the purpose of providing certain information about the effects of changing prices. It should be viewed as an estimate of the approximate effect of inflation, rather than as a precise measure.

Constant dollar amounts represent historical costs stated in terms of dollars of equal purchasing power, as measured by the Consumer Price Index for All Urban Consumers. Current cost amounts reflect the changes in specific prices from the date the plant was acquired to the present, and differ from constant dollar amounts to the extent that specific prices have increased more or less rapidly than prices in general.

The current cost of plant net of accumulated depreciation and amortization, which includes electric plant in service, construction work in progress, other investments and nonutility property, represents the estimated cost of replacing existing plant assets and was determined by indexing the surviving plant by the Handy-Whitman Index of Public UtilityConstruction Costs. The current year's provision for depreciation and amortization on the constant dollar and current cost amounts of plant was determined by applying effective depreciation and amortization rates to the indexed plant amounts.

Fuel inventories and the cost of fuel used in generation have not been restated from their historical cost in nominal dollars.

Regulation limits the recovery of fuel costs through the operation of adjustment clauses or adjustments in basic rate schedules to actual costs. For this reason fuel inventories are effectively monetary assets.

As prescribed in FASB Statement 33, income taxes were not adjusted.

Under the rate making prescribed by the regulatory commissions to which the Company is subject, only the historical cost of plant is recoverable in revenues as depreciation. Therefore, the excess of the cost of plant stated in terms of constant dollars or current cost over the historical cost of plant is not presently recoverable in rates as depreciation, and is reflected as a reduction to net recoverable cost. While the rate making process gives no recognition to the current cost of replacing plant

'ssets,'based on past practices, the Company believes it will be allowed to earn on the increased cost of its net investment when replacement of facilities actually occurs.

To properly reflect the economics of rate regulation in the Supplemental Consolidated Statement of Income from Operations Adjusted for Changing Prices, the reduction of plant to net recoverable amount should be offset by the gain from the decline in purchasing power of net amounts owed on a constant dollar basis. Meanwhile, on a current cost basis the excess of the increase in general price level over the increase in specific prices at the net recoverable amount should be offset by the gain from the decline in purchasing power of net amounts owed. During a period of inflation, holders of monetary assets suffer a loss of general purchasing power while holders of monetary liabilities experience a gain. The purchasing power gain on net monetary items owed is equal to the net gain found by restating in constant dollars the opening and closing balances of, and transactions in, monetary assets and liabilities. The gain from the decline in purchasing power of net amounts owed is primarily attributable to the substantial amount of debt which has been used to finance plant assets. Since the depreciation of plant is limited to the recovery of historical costs, the Company does not have the opportunity to realize a holding gain on debt and is limited to recovery only of the embedded cost of debt capital.

Restated net assets (which is equal to common stock equity and preferred stock) is measurable by adjusting the amount reported for net assets in the balance sheet for the difference between the historical cost and the restated constant dollar amounts or lower recoverable amounts of property less reserves. Because of the "lower recoverable amounts" provision, the determination of net assets for a utility company is based on the historical cost at year end, after conversion to constant dollars, with no aging of property required. FASB Statement 33 did not define what should be included in net assets, leaving the calculation open to experimentation. The Company calculates net assets by restating net utility plant, net nonutility property and monetary items on a constant dollar and current cost basis.

Inferences which, in the case of some industries may be drawn from information in the nature of that presented below as to the adequacy of future cash flows in relation to future plant replacement requirements are believed by the Company to be less valid in the case of public utilities which, like itself, should be able to establish rates to cover increased costs of new plant.

However, the information may provide some indication of the expanded capital structure that will be required for making plant replacements and additions with inflated dollars.

38 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY SUPPLEMENTAL INFORMATION CONCERNING THE EFFECTS OF INFLATION (Unaudited) (Continued)

Supplemental Consolidated Statement Of Income From Operations Adjusted For Changing Prices For the year ended December 31, 1981 (Unaudited)

Constant Current Dollar Cost Conventional Average Average Historical 1981 1981 Cost Dollars Dollars (ln thousands)

Operating revenues. $ 250 379 $ 250 379 $ 250 379 Fuel, purchased and interchanged power 110,113 110,113 110,113 Other operating and maintenance expenses. 50,272 50,272 50,272 Depreciation and amortization. 10,508 22,479 23,180 Federal income taxes. 29,201 29,201 29,201 Interest expense 17,743 17,743 17,743 Other income. ~24 1SS ~24 155 ~24 155 193 682 205 653 206 3S4 Net income. $ 56 697 $ 44 726 (2) $ 44 025 Increase in specific prices (current cost) of plant held during the year (1) $ 84,494, Reduction of plant to net recoverable amount. $ (48,922)(2) (38,062)

Effect of increase in general price level. ~91 022 Excess of increase in general price level over increase in specific prices at net recoverable amount (44,590)

Gain from decline in purchasing power of net amounts owed. 32 306 32 306 Net ~$ 16 616 ~$ 12 284 (1) At December 31, 1981, current cost of plant net of accumulated depreciation was $ 1,219,234,000 while historical cost or net amount recoverable through depreciation was $ 817,424,000.

(2) Inclusion of the reduction to net recoverable amount in net income on a constant dollar basis produces a loss of $ 4,196,000.

W Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY SUPPLEMENTAL INFORMATION CONCERNING THE EFFECTS OF INFLATION (Unaudited) (Continued)

Five Year Comparison Of Selected Supplementary Financial Data Adjusted For Effects Of Changing Prices (1)

(Unaudited)

Years ended December 31 1981 1980 1979 1978 1977 (In thousands except for per share amounts) 0 ratin revenues Historical cost. $ 250,379 $ 210,513 $ 159,712 $ 136,556 $ 112,339 Constant dollars 250,379 232,349 200,118 190,368 168,601 Net income Historical cost. $ 56,697 $ 41,177 $ 23,190 Constant dollars 44,726 35,195 19,824 Current cost. 44,025 33,663 16,925 Net income r share of common stock Historical cost. $ 2.23 $ 2.05 $ 1.45 Constant dollars 1.69 1.67 1.13 Current cost. 1.66 1.58 Net assets at ear-end at net recoverable amounts Historical cost. $ 372,823 $ 305,159 $ 220,299 Constant dollars 360,770 321,693 261,024 Current cost. 360,770 321,693 261,024 Excess of increase in eneral rice level over increase in s cific rices at net recoverable amount current cost $ 44,590 $ 59,204 $ 53,762 Other information Gain from decline in purchasing power of net amounts owed, constant dollars. $ 32,306 $ 38,130 $ 37,585 Cash dividends declared per share of common stock:

Historical cost. $ 1.25 $ 1.13 $ 1.07 $ 1.02 $ .99 Constant dollars 1.25 1.25 1.34 1.42 Market price per share of common stock at year-end: 1.49'1)

Historical cost. $ 10.88 $ 9.50 $ 9.38 $ 10.88 $ 12.00 Constant dollars 10.53 10.01 11.11 14.61 17.56 Average consumer price index. 272.4 246.8 217.4 195.4 181.5 Constant dollars and current cost amounts are stated in average 1981 dollars.

40 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY SELECTED FINANCIALDATA For the years ended December 31 (In thousands except for per share amounts) 1981 1980 1979 Operating revenues. $ 250 379 $ 210 513 $ 159 712 Fuel 107,562 95,461 81,669 Operation and maintenance. 41,751 31,944 24,156 Depreciation and amortization. 10,508 9,090 8,245 Taxes. 40,273 35,801 21,573 Other income ~24 165 ~14 011 ~7742 175 939 127 901 Income before interest charges 74,440 52,228 31,811 Total interest charges. 17 743 11 051 8 621 Income before cumulative effect on prior years of change in accounting method. 56,697 41,177 23,190 Cumulative effect to January 1, 1974, of change in accounting for fuel costs, net of related income taxes ($ 912,000) .

Net income. $ 56 697 $ 41 177 $ 23 190 Net income per share of common stock, based on weighted average number of shares outstanding during each year:

Income applicable to common stock before cumulative effect of change in accounting method... $ 2.23 $ 2.05 $ 1.45 Cumulative effect to January 1, 1974, of change in accounting for fuel costs.

Net income applicable to common stock $ 2.23 $ 2.05 $ 1.45 Pro forma amounts assuming the new method of accounting for fuel costs is applied retroactively:

Net income applicable to common stock Net income per share of common stock Dividends per share paid on common stock $ 1.25 $ 1.13 $ 1.07 Gross utility plant $ 898 333 $ 715 190 $ 560 932 Total assets. $ 890 071 $ 690 992 $ 537 118 Long-term obligations and preferred stock redemption required $ 316 615 $ 266 863 $ 221 721

1978 1977 1976 1975 1974 1973 1972

$ 136 556 $ 112 339 $ 111 188 $ 91 461 $ 63 072 $ 49 483 $ 43 284 73,447 59,442 53,154 44,714 24,914 15,766 10,951 21,171 16,68S 17,954 14,516 11,463 8,160 8,101 7,361 6,498 6,233 5,506 4,345 4,102 3,776

~3688 14,128 112 419

~1689 12,377 93 313

~838 15,727 92 230

~l 11,197 423 74 510

~770 9,809 49 761 9,573 84 37 517

~668 9,279 31 439 24,137 19,026 18,958 16,951 13,311 11,966 11,845 8,113 7 604 7 442 6,853 5 280 3 962 3 591 16,024 11,422 11,516 10,098 8,031 8,004 8,254 988

$ 16 024 $ 11 422 $ ll 516 $ 10 098 $ 9 019 $ 8 004 $ 8 254

$ 1.30 $ 1.11 $ 1.29 $ 1.30 $ 1.19 $ 1.19 $ 1.22 15

$ 1.30 $ 1.11 $ 1.29 $ 1.30 $ 1.34 $ 1.19 $ 1.22

$ 8 270 $ 8 035

$ 1.29 $ 1.25

$ 1.02 $ .99 $ .95 $ .91 $ .86 $ .83

$ 437,468 $ 338 598 $ 274 502 $ 250 375 $ 227 196 $ 185 058 $ 174,485

$ 415 975 $ 326 910 $ 258 407 $ 240 659 $ 206 490 $ 156 435 $ 146 401

$ 150,152 $ 128 171 $ 102 290 $ 103 104 $ 85 906 $ 66 309 $ 66 299

Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY SELECTED OPERATING AND STATISTICAL DATA 1981 1979 Population served at retail, estimated. 610 000 Number of customers:

Residential 167,625 162,770 157,601 Commercial and industrial, small. 16,724 16,169 15,791 Commercial and industrial, large. 43 42 44 Other 1 996 1 94! 1 875 Total 180 922 175 311 Annual native system peak load, net kilowatts. 736 000 718 000 Output, net generated and purchased, thousand kilowatt-hours:

Steam 3,790,666 3,928,860 3,771,043 Other 25,704 47,969 Purchased and interchanged. 138 104 9 794 ~119 166 Total (a) . 3 954 474 3 986 623 3 651 877 Sales of electricity, thousands of dollars:

Residential . $ 79,019 $ 63,659 $ 52,899 Commercial and industrial, small. 76,585 58,679 46,741 Commercial and industrial, large. 38,625 28,155 26,402 Other 55 128 59 043 32 577 Total $ 249 357 $ 209 536 $ 158 619 c Sales, thousand kilowatt-hours:

Residential . 966,487 972,070 937,858~

Commercial and industrial, small. 1,033;859 985,123 949,514 Commercial and industrial, large 702,323 621,877 682,163 Other 996 203 1 148 952 854 749 Total (a). 3 698 872 3 728 022 3 424 284 Average annual use per residential customer, KWH 5 849 6 065 6 072 Average annual revenue per residential customer. $ 478.21 $ 397.74 $ 342.49 Average revenue per KWH sold, cents (b):

Residential 8.184 6.564 5.64'.92 Commercial and industrial, small. 7.41 5.96 Commercial and industrial, large......... 5.50 4.53 3.87 Average revenue per KWH; total sales. 6.74 5.64 4.63 Electric line, pole miles:

Over 15,000 volts. 2,157 2,131 2,070 Less than 15,000 volts (c) . 2 865 2 841 2 794 Total . 5 022 4 972 4 864 Total employees. 1,025 (a) Differences between total output and total sales represent Company use and line losses.

(b) Includes adjustments under existing fuel clauses.

(c) Includes minor amounts of line on poles owned by telephone utility.

43 1978 1977 1976 1975 1974 1973 1972 544 000 532 000 520 000 495 000 475 ODO 150,739 143,645 135,344 130,010 126,760 123,653 119,170 15,381 14,518 14,203 13,294 13,163 12,816 12,333 47 46 39 32 29 27 27 1 842 1 715 1 748 1 663 1 S45 1 445 1 351 168 009 159 924 151 334 144 999 141 497 137 941 132 881 690 000 677 000 618 000 543 400 3,673,685 3,475,753 3,501,416 3,433,698 3,369,606 3,450,021 3,075,013

~84 609 ~3574 51 013 15 837 ~13 709 ~180 767 ~112 435 3 589 076 3 472 179 3 552 429 3 449 53S 3 355 897 3 269 254 2 962 578

$ 44,178 $ 34,484 $ 31,415 $ 27,080 $ 20,126 $ 16,749 $ 15,133 39,780 33,583 33,628 28,870 19,192 14,942 12,948 22,402 17,666 15,709 11,816 7,824 6,061 5,231 29 289 25 581 29 537 22 880 15 595 11 416 9 696

$ 135 649 $ 111 314 $ 110 289 $ 90 646 $ 62 737 $ 49 168 $ 43 008 907,956 874,140 816,169 782,285 765,636 755,701 694,855 913,038 902,699 929,556 909,967 853,960 799,997 696,584 650,542 ~

617,955 582,125 513,637 508,482 536,754 487,945 849 113 847 930 1 030 812 1 006 311 980 175 958 252 853 978 3 320 649 3 242 724 3 3SB 662 3 212 200 3 108 253 3 050 704 2 733 362 6 153 6 261 6 193 6 097 6 116 6 211 5 948

$ 299.40 $ 246.99 $ 238.36 $ 211.04 $ 160.72 $ 137.59 $ 129.53 4.874 3.944 3.85'.62 3.461t'.17 2.634 2.224 2.18<

4.36 3.72 2.25 1.87 1.86 3.44 3.47 2.70 2.30 1.54 1.13 1.07 4.09 3.45 3.30 2.82 2.02 1.61 1.57 1,999 1,811 1,759 1,706 1,647 1,581 1,539 2 759 2 755 2 727 2 691 2 673 2 616 2 565 4 758 4 566 4 486 4 397 4 320 4 197 4 104 816 778 726 704 659

El Paso Electric Company BULK RAT P.O. Box 982 U.S. POSTAL El Paso, Texas 79960 PAID ---..',,'L PASO, TERt',

PERMIT NO. 153

Southern California Edison Company l982 IFjtjntz11e1zl a118 Stzt1st1ezl Repoxt Contents Tnble Page iVurnber iVuraber 1 Highlights 2 Statements of Income 3 Operating Ratios 4 Pcr Share Data Common Stock 5 Operating Revenues 6 Kilowatt-Hour Sales r

7 Customers and Population 8 Energy 9 Taxes 10 Balance Sheets 11 Statements of Sources of Funds Used for Construction Expenditures 12 Statements of Earnings Rcinvested in thc Business and Additional Paid-in Capital 10 13 System Rate Base 10 14 Statements of Long-term Debt

.15 Detail of Utility Plant 16 Statements of Capital Stock 12 17 Capitalization and Plant Ratios 12 18 Operating Statistics 13 19 Existing Generating Capacity Resources 14 20 Projected Generating Resource Additions 14 21 Regulation 15 22 Projections Sales, Demand, Capital Requirements and Generation Mix 17 Directors and OAicers 18

Foreword Southern California Edison Company provides electric service in WASHINGTON MONTANA a 50,000 square-mile area of Central and Southern California.

~ CM This area includes some 800 cities and communities with a Pe lee H population of more than nine million people. Edison's gross ORTGON IDAHO investment in utility plant totals nearly $ 10.8 billion. Area WTO generating capacity at peak during 1982 totaled 15,349 mega-watts (MW), which included 13,269 MW of Company-owned facilities and 2,080 MW of capacity from other sources. Of thc ei TVAOA VTAH O

O Company-owned facilities, 78% was comprised of oil- and gas- c 8

fired generating units. SCE's interest in coal-fired generating 0 ro. 8 Lee oen ~

units accounted for another 12%, and 7% was in renewable/ V ~

A 'Y alternate generation (including hydro). The Company's 80% Moiovo interest in a nuclear plant accounted for thc remaining 3%. ARI?ONA Lee Aeeel ~ e Scn Onofe ~ Pace ee e Q Serene TCHHCIT CIIN.Heec Veneee HV)

TN*HHeelee Lleee 1 Highlights (a) 5-Year l0-Year 1982 1977 Contpound 1972 Compound Annual Annual Growth Rate Growth Rate Earnings Per Share $ 5.13 $ 3.80 6.2% $ 2.51 7.4%

Common Dividends Paid Per Share (b)...... $ 3.31 $ 1.92 I 1.5 $ 1.56 7.8 Rate of Return on Common Equity........ 14.89% 11.98% 4,4 9.42% 4.7 Operating Revenues................ $ 4,302,602 $ 2,064,914 15.8 $ 927,674 16.6 Fuel and Purchased Power Costs $ 2,227,901 $ 1,189,597 13.4 $ 240,135 25.0 Operating Expenses Net of Fuel Costs and Taxes on Income (c).................. $ 993,158 $ 625,309 9.7 S 425,047 8.9 Taxes on Operating Income............ $ 177,251 $ 68,792 20.8 $ 44,542 14.8 Net Income $ 555,754 $ 251,979 17.1 $ 135,648 15.1 Earnings Available for Common and Original Preferred Stock................. S 483,358 S 206,330 18.6 $ 110,469 15.9 Payroll....................... S 521,072 $ 267,216 14.3 $ 177,422 I 1.4 Employees..................... 15,797 12,671 4.5 12,907 2.0 Population of Service Area 9,134,000 8,258,000 2.0 7,523,000 2.0 Total Customers.................. 3,275,144 2,900,856 2.5 2,566,341 2.5 Kilowatt-Hour Sales (000) 59,326,853 57,726,273 0.5 52,309,906 1.3 Area Peak Demand (Mw)............. 13,149 11,564 2.6 10,317 2.5 Area Generating Capacity at Peak (Mw)..... 15,349 14,278 1.5 12,819 1.8 Gross Utility Plant................. $ 10,764,078 S 6,191,733 I 1.7 $ 4,233,067 9.8 (a) Dollars in thousands, except per share data.

(bJ On September 16, 1982, SCF's Board of Directors authorized anincreasein the Common Stack quarterly dividend to $ 0.88 from $ 0.8l per share effective with the October 3l. 1982 payment, which is equivalent to $3.52 per share on an annual basis.

(c) Fuel costs include fuel, purchased power, and the provision for energy cost adjustments.

t 2 Statements of Income l0-Year Thousands of Dollars Cotnpound Annual Year Ended December 3l, Growth 1982 1981 1980 1979 1978 1977 1972 Rate OPERATING REVENUES:

Sales $ 4,266,950 $ 4,026,548 $ 3,631,373 $ 2,553,126 $ 2,294,543 $ 2,050,578 $ 918,767 16.6%

Other........ 35,652 27,808 29,744 10,848 34,255 14,336 8,907 14.9 Total operating revenues .. 4,302,602 4,054,356 3,661,117 2,563,974 2,328,798 2,064,914 927,674 16.6 OPERATING EXPENSES:

Fuel...........

Purchased power....

1,778,553 449,348 2,078,393 479,813 1,729,552 280,675 1,433,658 99,245 1,086,051 118,698 1,113,028 76,569 220,630 19,505 23.2 36.8 Provision for energy cost adjustments... 367,565 (90,273) 361,600 (188,880) 35,280 (149,506)

Other operation expenses....... 496,585 441,939 392,593 322,191 283,622 241,963 162,634 I I.S Maintenance 210,160 193,397 228,269 177,407 164,111 133,166 70,586 I 1.5 Provision for depreciation..... 220,927 202,182 187,959 178,637 157,203 140,520 104,434 7.8 Taxes on income-currcnt and deferred 177,251 197,865 38,683 100,292 72,803 68,792 44,542 14.8 Property and other taxes......... 65,486 59,885 69,652 56,428 86,429 109,660 87,393 (2.8)

Total operating expenses .... 3,765,875 3,563,201 3,288,983 2,178,978 2,004,197 1,734,192 709,724 18.2 OPERATING INCOME 536,727 491,155 372,134 384,996 324,601 330,722 2i7,950 9.4 OTHER INCOME AND INCOME DEDUCTIONS:

Allowance for equity funds used during construction..... 209,485 162,879 121,488 92,019 58,471 46,233 5,489 43.9 interest income..... 34,571 39,025 33,889 22,860 15,337 12,803 4,091 23.8 Taxes on non-operating income credit 100,655 54,261 30,358 23,519 20,782 11,902 234 83.4 Other net 965 13,896 1,524 1,360 (4,800) (2,608) (2,027)

Total other income and income deductions... 345,676 270,061 187,259 139,758 89,790 68,330 7,787 46.1 TOTAI. INCOME BEFORE INTEREST CHARGES... 882,403 761,216 559,393 524,754 414,391 399,052 225,737 14.6 INTEREST CHARGES:

interest on long-term debt.........

Other interest and 360,915 281,626 227,163 179,626 154,301 143,152 90,888 14.8 amortization..... 59,367 59,351 55,493 25,456 28,357 17,926 864 52.7 Total interest charges 420,282 340,977 282,656 205,082 182,658 161,078 91,752 16.4 Allowance for debt funds used during construction..... (93,633) (69,673) (40,799) (26,547) (19,950) (14,005) (1,663) 49.6 Net interest charges.... 326,649 271,304 241,857 178,535 162,708 147,073 90,089 13.7 NET INCOME 555,754 489,912 317,536 346,219 251,683 251,979 135,648 15.1 DIVIDENDS ON CUMULATIVE PREFERRED AND PREFERENCE STOCK . 72,396 67,888 60,950 53,738 49,457 45,649 25,179 I I. I EARNINGS AVAILABLEFOR COMMON AND ORIGINAL PREFERRED STOCK $ 483,358 $ 422,024 $ 256,586 $ 292,481 $ 202,226 $ 206,330 $ 110,469 15.9%

iVEIGHTED AVERAGE SHARES OF COMMON AND ORIGINAL PREFERRED STOCK AND COMMON STOCK EqulvALENTs <oooo'.. 94,257 85,610 73,241 64,202 57,477 54,347 43,965 7.9%

EARNINGS PCR SHARE... ~

$ 5.13 $ 4.93 $ 3.50 $ 4.56 $ 3.52 $ 3.80 $ 2.51 7.4%

Hole: For operating ratios and per share data see page 3 of this report.

3 Operating Ratios 1982 1981 1980 1979 1978 1977 1972 PERCENT OF OPERATING REVENUES:

Fuel 41.3 % 51.3 % 47.2 % 55.9 % 46.6 % 53.9 % 23.8 %

Purchased power 10.5 1 1.8 7.7 3.9 5.1 3.7 2.1 Energy cost adjustments 8.5 (2.2) 9.9 (7.4) 1.5 (7.2)

Other operation expenses 1 1.6 10.9 10.7 12.6 12.2 11.7 17.5 Maintenance.................. 4.9 4.8 6.2 6.9 7.1 6.5 7.6 Provision for depreciation........... 5.1 5.0 5.1 7.0 6.8 6.8 1 1.3 Property and other taxes 1.5 1.4 1.9 2.2 3.7 5.3 9.4 Operating expenses (bel'ore taxes on income) .. 83.4 83.0 88.7 81.1 83.0 80.7 71.7 Taxes on income current and deferred... 4.1 4.9 1.1 3.9 3.1 3.3 4.8 Operating income............... 12.5 12.1 10.2 15.0 13.9 16.0 23.5 Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

RATE OF RETURN ON WEIGHTED AVERAGE:

Rate base................... '2.5 10.4 % 10.1 % 8.1 % 9.2 % 7.9 % 8.5 % 6.9 %

Net utility plant................ 12.3 9.6 10.1 8.8 9.4 7.3 capital................

Invested Common equity (a) ..............

INTEREST COVERAGE BEFORE INCOME TAXES:

11.7 14.9 11.1 14.9 8.8 10.4 9.6 13.6 8.2 10.7 8.6 12.0 6.9 9.4 Mortgage bond interest............ 2.96 3.31 2.44 3.39 3.01 3.21 3.04 interest...............

~

Total debt 2.64 2.96 2.21 3.21 2.78 3.07 2.97 Fixed charges (b) 2.44 2.72 2.09 2.90 2.53 2.78 2.89 INTEREST COVERAGE AFrER INCOME TAXES:

Mortgage bond interest............ 2.72 2.78 2.40 2.95 2.67 2.80 2.53 intcrcst...............

Total debt Fixed charges (b) ...............

EMBEDDED COST OF CAPITAL (AT YEAR END):

2.44 2.26 2.51 2.33 2.18 2.06 2.80 2.55 2.47 2.27 2.69 2.45 2.49 2.42 Long-term debt 10.41% 9.66% 8.40% 7.41% 6.84% 6.55% 5.46%

Preferred and preference stock 8.26 7.99 7.94 7.53 7.25 7.21 6.45 (a) Includes Original Preferred Stack.

(b) Fixed charges include interest on long- and short-term debt, antortization ofdebt discount, expense and preinium, interest on Iong-term purchased power contracts, interest on affiliate indebtedness, and the interest factor relating to certain significant rentals plus one-third of all remaining annual rentals. The ratios exclude fixed charges applicable to indebtedness of a nuclear fuel supplier far nuclear fiiel not yet in use.

4 Per Share Data Common Stock 1982 1981 1980 1979 1978 1977 1972 Earnings per share (a):

Primary.................. S 5.13 $ 4.93 S 3.50 $ 4.56 $ 3.52 $ 3.80 $ 2.51 Fully diluted................ S 5.09 $ 4.91 S 3.48 $ 4.39 $ 3.38 $ 3.63 $ 2.43 Dividends pcr sharc:

Paid S 3.31 S 3.03 $ 2.78 $ 2.54 $ 2.24 $ 1.92 $ 1.56 Declared.................. S 3.38 S 3.10 $ 2.84 $ 2.60 $ 2.30 S 2.06 S 1.56 Year-end data:

Dividend rate $ 3.52 S 3.24 $ 2.96 $ 2.72 $ 2.48 S 2.24 S 1.56 Dividend yield (rate) 10.0 % 11.3 lo 1 1.6 % 1 1.1  % 9.6 % 8.5 % 5.6 %

Dividend payout ratio (paid) 64.5 % 61.5 % 79.4 % 55.7 % 63.6 % 50.5 % 62.2 %

Book value(a)............... $ 34.96 $ 33.74 $ 33.19 $ 34.22 $ 32.57 $ 32.30 $ 27.14 Market/book ratio 100.5 % 85.2 % 77.2 % 71.6 % 79.1 % 81.7 % 102.2 %

Price/earnings ratio............ 6.8 5.8 7.3 5.4 S 27'ls 7.3 6.9

$ 27'/s 1 1.1 Prices High $ 37'/s $ 30% S 27'/s $ 27 $ 317/s Low $ 28 S 227/s S 20'/s S 23'/s $ 22'/s $ 2 1 '/s $ 23 Year-end.............. $ 35i/s $ 283/s S 25Ys S 24'/s $ 25'li $ 26s/s $ 27s/s Shares outstanding at year end (000) 96,692 87,603 75,854 64,895 62,537 54,646 43,485 Weighted avcragc shares of Common and Original Preferred Stock Outstanding and Common Stock Equivalents (000) 94,257 85,610 73,241 64,202 57,477 54,347 43,965 (a) Includes Original Preferred Stock.

6 5 Operating Revenues Year Ended December 31, 1982 1981 1980 1979 1978 1977 1972 cLAss oF sERYIcE DoLLARs (000):

Residential............ $ 1,233,338 $ 1,115,758 $ 1,026,778 S 764,595 S 704,658 $ 616,520 $ 350,027 Agricultural 68,281 75,257 68,503 47,146 40,449 50,781 23,306 Commercial 1,226,532 1,090,694 979,051 663,678 610,735 505,469 237,120 Industrial............. 1,112,784 1,063,823 997,831 683,013 593,580 481,587 183,822 Public Authorities 370,726 336,979 315,985 225,351 206,838 188,054 89,299 Interdepartmental 127 77 51 39 30 22 24 Resale (a) 255,162 343,960 243,174 169,304 138,253 208,145 38,711 Customer refunds (3,542)

Sales of electric energy.... 4,266,950 4,026,548 3,631,373 2,553,126 2,294,543 Other............... 35,652 27,808 29,744 10,848 34,255 2,050,578 14,336 918,767 8,907 Total operating rcvcnucs .. $ 4,302,602 $ 4,054,356 $ 3,661,117 $ 2,563,974 $ 2,328,798 $ 2,064,914 $ 927,674 CLASS OF SERVICE PERCENT:

Residential......... 28.7% 27.5% 28.1% 29.8% 30.2% 29.8% 37.7%

Agricultural 1.6 1.9 1.9 1.8 1.7 2.5 2.5 Commercial 28.5 26.9 26.7 25.9 26.2 24.5 25.6 Industrial.......... 25.9 26.2 27.3 26.7 25.5 23.3 19.8 Public Authorities 8.6 8.3 8.6 8.8 8.9 9.1 9.6 Resale (a) 5.9 8.5 6.6 6.6 6.0 10.1 4.2 Customer refunds (0.4)

Sales of electric energy 99.2 99.3 99.2 99.6 98.5 99.3 99.0 Other............ .

0.8 0.7 0.8 0.4 1.5 0.7 1.0 Total......... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

RESIDENTIAL SALES DATA:

Average sales per residential customer (Kwtl)........ 5,685 5,879 5,939 6,010 5,883 5,630 5,777 Average monthly revenue per residential customer...... $ 35.62 $ 32.76 $ 30.85 $ 23.65 $ 22.48 S 20.25 $ 13.03 Average revenue per residential customer per Kwu L 7.524 6.69'.23) 4.72( 4.58$ 4.32) 2.714 (a) Includes revenues attributable to sale s ofelectricity to other electric utilities and to cities or other public authorities for distribution to ultitnate consumers.

6 Kilowatt-Hour Sales Year Ended December 31, 1982 1981 1980 1979 1978 1977 1972 cLAss oF sERvtcE Kwtl (000):

Residential............ 16,403,116 16,688,956 16,471,840 16,191,091 15,369,184 14,285,971 12,933,823 Agricultural 856,929 1,116,308 964,452 975,311 851,017 1,377,939 1,279,186 Commercial 15,557,692 15,562,087 14,778,843 14,454,319 13,937,000 13,388,075 12,043,940 Industrial.............

Authorities 15,675,707 17,000,598 16,777,563 17,351,728 16,652,243 16,393,105 15,742,819 Public 4,515,855 4,667,700 4,623,886 4,701,251 4,656,895 4,646,504 4,497,110 Interdepartmental 1,279 1,218 1,138 1,134 1,015 731 797 Resale (a) 4,237,698 4,539,467 4,415,038 4,426,206 4,170,027 4,061,526 3,825,777 SUB-TOTA I. 57,248,276 59,576,334 58,032,760 58,101,040 55,637,381 54,153,851 50,323,452 Special Contracts......... 2,078,577 2,874,985 1,882,427 1,416,821 1,389,654 3,572,422 1,986,454 Total kilowatt-hour sales .. 59,326,853 62,4 5 1,3 19 59,915,107 59,517,361 57,027,035 57,726,273 52,309,906 CLASS OF SERVICE PERCENT:

Residential............ 27.7% 26.7% 27.5% 27.2% 27.0% 24.8%%u 24.7%

Agricultural 1.5 1.8 1.6 1.6 1.5 2.4 2.5 Commercial 26.2 24.9 24.7 24.3 24.4 23.2 23.0 Industrial.............

Authorities 26.4 27.2 28.0 29.2 7.9 29.2 8.2 28.4 8.0 30.1 Public 7.6 7.5 7.7 8.6 Resale (a) 7.1 7.3 7.4 7.4 73 7.0 73 SUB-TOTAL 96.5 95.4 96.9 97.6 97.6 93.8 96.2 Special Contracts......... 3.5 4.6 3.1 2.4 2.4 6.2 3.8 Total,............ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%%u 100.0%

(a) lnpludes kilowatt-hour sales to other electric utilities and to cities or other public authorities for distribution to ultimate consumers.

7 Customers and Population December 31, 1982 1981 1980 1979 1978 1977 1972 CUSIOMERS:

Residential 2,900,529 2,865,364 2,806,085 2,733,435 2,648,841 2,572,826 2,268,723 Agricultural.... 27,236 26,847 25,852 25,768 25,802 25,888 24,418 Commercial.... 278,643 271,093 262,320 252,594 242,264 234,276 212,714 Industrial 32,857 34,006 34,580 35,792 35,126 33,791 30,510 Public Authorities . 35,858 35,358 35,109 34,769 34,491 34,053 29,954 Interdepartmental . 2 2 2 2 2 2 2 Resale....... 19 17 20 22 19 20 20 Total customers 3,275,144 3,232,687 3,163,968 3,082,382 2,986,545 2,900,856 2,566,341 APPROXIMATE POPULATION OF SERVICE AREA 9,134,000 8,964,000 8,798,000 8,648,000 8,441,000 8,258,000 7,523,000 8 Energy Year Ended December 31, 1982 1981 1980 1979 1978 1977 1972 AVERAGE ANNUALENERGY COST UNIT OF EXPENSE (a):

Oil ($ /bbl) $ 44.69 $ 43.52 $ 32.16 $ 20.65 S 17.69 $ 15.42 $ 4.80 Gas ($ /mcf) 5.25 3.97 3.50 2.52 2.17 1.94 .39 Coal ($ /ton) 16.60 16.12 13.24 13.90 10.28 8.09 4.09 AVERAGE COST ($ /m'btu):

Oil.............

Gas

$ 7.30 4.99 S 7.10 3.77 S 5.31 3.33

$ 3.40 2.39

$ 2.91 2.05

$ 2.54 1.85 S .78

.37 Coal............ .84 .81 .69 .71 .53 .41 .21 Nuclear.......... (b) (b) .82 .43 .36 .34 .19 Average cost all sources 4.41 4.20 3.58 2.58 2.24 2.00 .46 AVERAGE COST ((/KWH):

Oil............... 7.570$ i 6.733) 5.0814 3.3304 2.9204 2.499( 0.7574 Gas 5.499 4.046 3.506 2.516 2.138 1.890 0.368 Coal.............. 0.982 0.953 0.804 0.823 0.605 0.462 0.233 Nuclear............ (b) (b) 0.899 0.464 0.391 0.363 0.198 Purchased Power 1.988 2.708 2.252 1.631 1.127 1.274 0.764 Average cost all sources .. 3.346 3.698 3.071 2.315 1.886 1.878 0.431 ENERGY CONSUMPTION:

Oil (bbls) (000) . 4,454 23,588 30,206 47,665 45,121 57,691 23,908 Gas (mcf) (000) 257,328 244,459 197,866 152,257 109,964 90,093 4,765 Coal (tons) (000) 5,059 4,340 4,457 3,887 3,487 4,491 424 OIL INVENTORY YEAR END (bbls) (000) ........... i 14,238 13,153 16,145 10,302 9,075 17,400 5,978 (af There is no uniform unit of expense for nuclear fuel.

(b) San Onofre Nuclear Unit l was not in service for a significant portion of l 982 and l98l, therefore no comparable average cost is available.

9 Taxes Tlrousands of Dollars Year Ended December 3l, 1982 1981 1980 1979 1978 1977 1972 Current:

Federal $ 140,350 I

$ 44,800 $ 38,582 $ 6,717 $ (49,219) $ (48,360) $ 40,999 State 55,621 '5,629 36,909 4,019 3,567 1,233 8,031 195,971 70,429 75,491 10,736 (45,652) (47,127) 49,030 Deferred Federal and State:

Investment tax credits net '4,612 47,386 25,235 45,533 32,568 26,886 (781)

Regulatory balancing accounts . (192,726) 26,548 (107,322) 34,148 (15,904) 81,101 Customer refunds 78,801 (5,315) (1,840)

Other 8,739 (759) 14,921 (13,644) 2,208 1,345 (2,101)

(119,375) 73,175 (67,166) 66,037 97,673 104,017 (4,722)

Total taxes on income S 76,596, $ 143,604 $ 8,325 $ 76,773 $ 52,021 $ 56,890 $ 44,308 Taxes on income included in operating expenses ... $ 177,251 $ 197,865 $ 38,683 $ 100,292 $ 72,803 $ 68,792 $ 44,542 I

Taxes on income included in other income 'I (100,655),'54,261) (30,358) (23,519) (20,782) (11,902) (234)

Total taxes on income '76,596 I

$ 143,604 $ 8,325 $ 76,773 $ 52,021 S 56,890 S 44,308 Diffcrcnces between the federal statutory tax rate and thc Company's elfective tax rate are reconciled as follows:

Computed "expected" current federal income tax . I $ 290,861 I $ 291,398 $ 149,877 $ 194,557 $ 145,765 $ 148,244 $ 86,373 Adjustments:

Allowance for debt and equity funds used during construction (139,434) I (106,974) (74,652) (54,540) (37,642) (28,914) (3,433)

Excess of tax over book depreciation...... (33) 10,176 (3,902) (16) (10,483) (18,408) (27,591)

Percentage repair allowance (11,500) (13,800) (14,400) (8,880)

Administrative and general expenses capitalized (13,449), (9,756) (11,160) (9,292) (8,162) (7,082) (2,678)

Investment tax credits net.......... (31,502) (27,232) (22,214) (34,043) (25,459) (20,355) (4,475)

Ad valorem lien date adjustment........ '2,692)

(1,314) (951) (1,019) 12,776 (1,720) (294)

Federal deduction for state taxes on income .. (5,518) (14,253) (3,219) (9,084) (8,114) (8,972) 1,521 Nuclear fuel lease interest capitalized (20,555) l (18,917) (10,810) (3,997) (1,773) (281)

Taxes capitalized (20,721) (14,877) (7,383) (6,306) (5,322) (5,581) (1,629)

State tax provision '1,997,',642 30,985 6,997 19,747 14,565 14,363 7,762 All other dilfcrenccs i 4,368 (2,758) (5,434) (9,730) (5,524) (11,248)

Total taxes on income $ 76,596 $ 143,604 S 8,325 $ 76,773 S 52,021 S 56,890 $ 44,308 Pretax income.....................

Effective tax rate (Total taxes on income

$ 632,350 $ 633,516 $ 325,861 $ 422,992 $ 303,704 $ 308,869 $ 179,956 pretax income)................... 12.1% i 22.7% 2.6% 18.1% 17.1% 18.4% 24.6%

Other taxes included in operating expenses:

Property $ 46,126 $ 41,632 $ 54,114 $ 48,300 $ 74,665 $ 98,370 $ 82,019 Payroll and other .................. 19,360 18,253 15,538 8,128 11,764 11,290 5,374

$ 65,486 $ 59,885 8 69,652 $ 56,428 8 86,429 SI09,660 8 87,393

10 Balance Sheets Thousands of Dollars December 31, 1982 1981 1980 1979 1978 1977 1972 ASSETS UTILITY PLANT:

Utility plant, at original cost... ~

$ 6,6O9,54O $ 6,115,484 $ 5,785,200 $ 5,502,984 $ 5,303,746 $ 4,964,888 $ 3,935,689 Less Accumulated provision for depreciation........ 2,185,667 2,015,212 1,840,233 1,676,148 1,519,174 1,383,009 851,910 4,423,873 4,100,272 3,944,967 3,826,836 3,784,572 3,581,879 3,083,779 Construction work in progress . 4,108,878 3,377,644 2,600,460 2,058,958 1,493,573 1,209,502 280,737 Nuclear fuel, at amortized cost 45,660 24,542 20,649 15,728 13,572 17,343 16,641 8,578,411 7,502,458 6,566,076 5,901,522 5,291,717 4,808,724 3,381,157 Less Accumulated deferred I income taxes (a) 79,084 25,972 26,965 27,320 27,652 27,198 33,921 8,499,327 7,476,486 6,539,111 5,874,202 5,264,065 4,781,526 3,347,236 OTIIER PROPERTY AND INVESTMENTS:

Real estate and other, at cost-less accumulated provision for dcprcciation.......... 11,383 9,194 9,754 11,110 7,658 6,024 11,619 Subsidiary companies 104,378 124,558 96,757 93,725 85,818 82,579 44,844 115,761 133,752 106,511 104,835 93,476 88,603 56,463 CURRENT ASSETS:

Cash and cquivalcnts....... 120,661 10,409 7,642 4,705 87,990 9,245 118,668 Cash investments financing subsidiary........... 127,849 Rcccivables, less reserves for uncollectible accounts..... 306,041 306,267 288,979 212,728 211,625 213,002 75,080 Fuel stock, at cost (first-in, first-out).............. 605,162 579,633 593,008 317,908 163,021 277,586 54,079 Materials and supplies, at avcragc cost......... ~ 64,185 63,197 48,942 39,388 28,463 28,016 22,837 Regulatory balancing accounts-net(b)............. 39,441 307,090 115,408 135,062 Accumulated deferred income taxes net.......... 198,939 4,872 29,343 Prepayments and other (taxes, insurance, ctc.) 42,563 38,943 54,040 43,717 28,983 60,973 42,832 1,465,400 1,042,762 1,021,954 925,536 635,490 723,884 313,496 DEFERRED cnARGES:

Unamortized debt expense .. 29,169 22,368 18,880 16,589 14,709 14,110 2,844 Accumulated deferred income taxes net........ 21,892 78,801 1,840 Other deferred charges.... 26,015 27,203 20,477 28,755 22,305 11,144 18,864 77,076 49,571 39,357 45,344 37,014 104,055 23,548

$ 10,157,564 $ 8,702,571 $ 7,706,933 $ 6,949,917 $ 6,030,045 $ 5,698,068 $ 3,740,743 (a) The balance sheets for l972 through l98I have been restated to conform with the current year classifications of accumulated deferred income taxes.

(b) Regulatory balancing accounts result principallyfrorn the Company's Energy Cost Adjustment Clause established in 1976.

Thousands of Dollars December 3I, 1982 1981 1980 1979 1978 1977 1972 CAPITALIZATIONAND LIABILITIES CAPITALIZATION:

Preferred Stock subject to mandatory redemption/

repurchase requirements:

Cumulative Preferred... $ 383,000 $ 337,500 $ 337,500 $ 262,500 $ 135,000 $ 135,000 Preference Stock 62,000 62,000 62,000 62,000 Preferred Stock other:

62,000 62,000 Original Preferred 4,000 4,000 4,000 4,000 4,000 4,000 4,000 Cumulative Preferred... 458,755 458,755 458,755 458,755 458,755 458,755 358,755 Preference Stock 8,265 13,553 19,897 27,067 40,895 55,417 74,998 Common Stock, including additional stated capital 856,152 776,523 673,921 577,259 547,166 470,374 362,376 Additional paid-in capital 1,142,932 953,268 763,519 601,578 569,673 443,109 316,636 Capital Stock expense (1,981)

Earnings reinvested in the business.......... 1,393,780 1,238,317 1,092,137 1,054,296 931,217 862,956 512,164 Long-term Debt:

Bonds...........

Debentures 3,529,647 3,224,867 2,938,796 2,685,632 2,388,212 2,219,716 1,705,139 75,046 75,135 75,579 Other 440,753 219,213 7,028 60,575 14,216 20,023 7,991 8,279,284 7,287,996 6,357,553 5,793,662 5,226,180 4,806,485 3,415,657 CURRENT LIABILITIES:

Accounts payable......... 411,240 360,018 356,340 288,897 154,495 169,128 64,667 Commercial paper payablc.... 266,500 164,975 134,340 135,365 Notes payable to banks 23,992 28,687 19,998 19,840 19,986 Short-term borrowings-financing subsidiary........... 123,300 Long-term debt due within one year..............

Preferred stock to be redeemed 53,500 121,025 143,548 84,544 33 737 35,500 within one Customer refunds year........ 4,500 3,939 66,160 58,139 52,724 Taxes accrued 166,139 61,774 121,916 73,312 92,550 95,753 54,558 Interest accrued 112,666 85,089 66,124 55,619 51,069 47,802 26,814 Customer deposits 16,732 12,518 11,242 14,583 15,601 14,267 7,456 Dividends declared........ 90,636 75,036 60,292 48,381 43,205 35,223 19,355 Regulatory balancing accounts-net(b).............

Accumulated deferred income 362,187 37,518 taxes net..........

Other............... 38,094 '2,330 26,167 89,893 18,130 60,797 16,743 71,150 13,809 10,406 1,402,986 1,086,916 1,074,280 885,678 540,907 617,997 183,256 CONTRIBUTIONS IN AID OF CONSTRUCTION (c) .. 94,311 RESERVES AND DEFERRED CREDITS:

Customer advances and other dcfcrred credits........ 146,877 66,697 63,652 51,598 46,115 40,804 19,667 Customer refunds 58,454 107,774 149,657 3,542 Accumulated deferred investment tax credits...........

Accumulated deferred income 274,280 200,598 153,212 127,977 82,444 49,876 1,561 taxes (a)........

net 21,141 18,299 3,796 Reserves for pensions, insurance, etc. 54,137 39,223 39,937 32,548 26,625 29,453 22,749 475,294 327,659 275,100 270,577 262,958 273,586 47,519

$ 10,157,564 $ 8,702,571 $ 7,706,933 $ 6,949,917 $ 6,030,045 $ 5,698,068 $ 3,740,743 (cf In 1974 Contributions in Aid of Construction (C/ACj were disposed of in contpliance with FERC orders. Since l 974 CIAC have been reJlected in Plant in Service and the Depreciation Reserve.

11 Statements of Sources of Funds Used for Construction Expenditures Thousands of Dollars Year Ended December 3l, 1982 1981 1980 1979 1978 1977 1972 Funds Provided By Operations:

Net income............ $ 555,754 $ 489,912 $ 317,536 $ 346,219 $ 251,683 $ 251,979 $ 135,648 Non-cash items in net income:

Depreciation........ 220,927 202,182 187,959 178,637 157,203 140,520 104,434 Allowance for debt and equity funds used during construction... (303,118) (232,552) (162,287) (118,566) (78,421) (60,238) (7,152)

Investment tax credits deferred net..... 64,612 47,386 25,235 45,533 32,568 26,886 (781)

Other net........ 99,609 3,701 29,271 7,136 5,180 8,601 3,347 Total funds from operations 637,784 510,629 397,714 458,959 368,213 367,748 235,496 Dividends.......... (395,103) (336,546) (273,312) (221,400) (182,738) (157,561) (94,238)

Total funds from operations-reinvested.......... 242,681 '74,083 124,402 237,559 185,475 210,187 141,258 Funds Provided By Long-term Financing:

Sales of securities:

Long-term debt........ 576,864 634,435 350,000 355,000 200,000 200,000 125,000 Preferred Stock........ 49,474 75,000 127,500 60,000 75,000 Common Stock(a) 264,634 292,356 258,607 62,002 203,364 43,323 Reduction for long-term debt due within one year........ (53,500) (121,025) (143,548) (84,544) (33,736) (35,500)

Reduction for preferred stock to be redeemed within onc year ., (4,500),

Conversion of preference stock... (5,290) (6,344) (7,169) (13,828) (14,522) 42,419 Total funds from long-term financing

'27,682 799,422 532,890 446,130 355,106 310,242 200,000 Other Sources (Uses) Of Funds:

Working capital changes:

Cash and equivalents..... (238,101) (2,767) (2,937) 83,285 78,745 833 109,881 l

Receivables net 226 (17,288) (76,251) (1,103) 1,377 (86,554) (85,677)

Fuel stock and materials and supplies (26,517), (880) (284,654) (165,812) 114,118 (84,672) (15,492)

Regulatory balancing accounts net 196,059 (37,568) 235,512 (162,586) 9,301 (74,034)

Accounts payable....... 51,222 3,678 67,443 134,402 (14,633) 43,998 12,199 Nct short-term borrowings (147,895), 110,214 30,793 134,194 (115,379) 99,315 Long-term debt and preferred stock due within one year . (63,025)'(22,523) 59,004 50,808 (1,764) 35,500 Other changes in working capital 121,463 (41,038) 63,274 (18,462) (60,462) 21,711 (95,457) ~

Net (increase) decrease in working capital..... (106,568) (8,172) 92,184 54,726 11,303 (43,903) (74,546)

Sale of non-current assets 50,623 89,557 10,883 Other-net............. 30,108 (59,193) (57,523) (64,268) 15,947 12,860 (13,068)

Total other sources (uses) of funds (76,460) (16,742) 124,218 (9,542) 27,250 (20,160) (87,614)

Funds Used For Construction Expenditures........ $ 993,903 $ 956,763 $ 781,510 $ 674.147 $ 567,831 $ 500,269 $ 253,644 (a) includes conversions of Preference Stock, 5.20%%uo Convertible Series, to Contnton Stack.

12 Statements of Earnings Reinvested in the Business and Additional Paid-in Capital Thousands of Dollars Year Ended December 3I, 1982 1981 1980 1979 1978 1977 1972 EARNINGS REIN VESTED IN TIIE BUSINESS:

Balance at January I $ 1,238,317 I

$ 1,092,137 $ 1,054,296 $ 931,217 $ 862,956 $ 769,425 $ 470,754 ADD:

Net income 555,754 489,912 317,536 346,219 251,683 251,979 135,648 Transfer of amortization rcscrvc-Federal(a)............ 3,801 1,794,071 1,582,049 1,371,832 1,277,436 1,118,440 1,021,404 606,402 DEDUCT:

Dividends declared on capital stock:

Original Preferred......... 1,589 1,454 1,334 1,219 1,075 922 749 Cumulative Prcfcrred....... 67,291 62,504 55,230 47,574 42,532 38,423 21,753 Preference............. 5,105 5,384 5,720 6,164 6,926 6,844 3,900 Common.............. 321,118 267,204 211,028 166,443 132,205 111,372 67,836 Capital Stock expense........ 5,188 7,186 6,383 1,740 4,485 887 400,291 343,732 279,695 223,140 187,223 158,448 94,238 Balance at December 31(b) $ 1,393,780 $ 1,238,317 $ 1,092,137 $ 1,054,296 $ 931,217 $ 862,956 $ 512,164 ADDITIONALPAID. IN CAPITAL:

Balance at January I $ 953,268 $ 763,519 $ 601,578 $ 569,673 $ 443,109 $ 427,422 $ 316,636 Premium received on sale of Common Stock 189,668 189,754 161,949 31,908 126,572 15,690 Payments made in lieu of issuing fractional shares of Common Stock . (4) (5) (8) (3) (8) (3)

Balance at December 31......... $ 1,142,932 $ 953,268 $ 763,519 $ 601,578 $ 569,673 $ 443,109 $ 316,636 (a) In 1978, pursuant lo a FERC order, an operating reserve relating to cerlain federally-licensed hydroelectric projects was transferred to Earnings Reinvested in the Business and became an appropriation thereof.

(b) Includes Imdistributed earnings of unconsolidated subsidiaries of $ 4,867,000 and appropriated earnings related to certain federally-licensed hydroelectric projects of $ 4,/77,000 al December 3I, 1982.

13 System Rate Base (a)

Thousands of Dollars December 3I ~

1982 1981 1980 1979 1978 1977 1972 FIXED CAPITAL:

Plant in service $ 6,339,407 $ 5,878,200 $ 5,596,989 $ 5,355,301 $ 5,080,680 $ 4,796,029 $ 3,837,984 Construction work in progress (b)... 228,380 200,354 137,525 100,297 64,976 73,714 102,838 Property held for future usc and other. 77,801 71,190 70,826 76,435 74,561 78,595 41,174 Total lixed capital........... 6,645,588 6,149,744 5,805,340 5,532,033 5,220,217 4,948,338 3,981,996 ADJUSTMENTS (c) (36,868) (36,484) (35,089) (32,723) (29,691) (24,664) (99,827)

WORKING CAPITAL 694,616 730,124 635,265 313,424 388,255 311,331 135,403 RESERVES:

Depreciation............. (2,104,389) (1,925,204) (1,757,223) (1,597,469) (1,446,570) (1,317,901) (814,304)

Accumulated deferred income taxes . (14,178) (16,076) (18,019) (20,068) (22,175) (24,319) (34,972)

Other................. (20,248) (19,140) (17,111) (12,737) (12,661) (13,571) (20,300)

Total reserves (2,138,815) (1,960,420) (1,792,353) (1,630,274) (1,481,406) (1,355,791) (869,576)

SYSTEM RATE BASE $ 5,164,521 $ 4,882,964 $ 4,613,163, $ 4,182,460 $ 4,097,375 $ 3,879,214 $ 3,147,996 (a) IVeighted average depreciated book costs. Calculations are in accordance with CPUC rate procedures.

(b) Represents that portion not included in the allowance for fimds used during consiruction base.

(c) Primarily Custonter Advances for Conslruclion. Contributions ht Aid of Construction (CIAC) were includedin l972. In l974 CIAC were disposed of in contpliance with FERC orders. Since 1974 CIAC have been reflected in Plant in Service and the Depreciation Reserve.

10

14 Statements of December 3l, Thousands of Dollars December 3l, Long-term Debt 1982 1981 1982 1981 FIRST AND REFUNDING MORTGAGE BONDS FIRST MORTGAGE BONDS (CALECTRIC):

Series H Due 2/15 1982 4'/4% $ 37,500 3i/e% Series, Due 5/1 1984 . $ 8,000 $ 8,000 Series I Due 7/1 1982 4'/e% 40,000 3e/e% Series, Due 9/ I 1985 6,000 6,000 Series J Due 9/1 1982 4i/e% 40,000 4'/e% Series, Due 10/1 1986 8,000 8,000 Series K Due 9/1 1983 411'%i/e% 50,000 50,000 4'%eries, Due 4/1 1987 6,000 6,000 Series II Due 7/1 1984 75,000 75,000 4i/e% Series, Duc 3/1 1988 12,000 12,000 Series SSP Due 1/15 1985 10%) 176,800 5'/e% Scrics, Due 5/1 1990 12,000 12,000 Series L Due 2/1 1985 5%) . 30,000 30,000 5% Series, Due 7/1 1991 8,000 8,000 Series M Due 9/1 1985 4e/e% 60,000 60,000 Series N Due 4/1 1986 4'h% 30,000 30,000 60,000 60,000 Series LL Due 3/18 1987 9/e% 50,000 50,000 Series 0 Due 5/1 1987 4i/e% 40,000 40,000 PROMISSORY NOTES (5'/e%):

Series P Due 11/1 1987 4'/i% 50,000 50,000 Series Due 5/15 1988 4e/e% 60,000 60,000 Due 2/28 & 8/31 1982 . 4,635 Q

Series R Due 3/1 1989 4e/e lo 60,000 60,000 Due 2/28 & 8/31 1983 . 3,500 4,220 Series S Due 2/15 1990 4 /e% 60,000 60,000 Foreign exchange gain (1,828)

Series T Due 5/15 1991 5i/e% 75,000 75,000 3,500 7,027 Series PP Due 5/15 1991 15i/e o) 200,000 200,000 Series U Due 8/15 1991 6i/e% 80,000 80,000 PROMISSORY NOTES:

Series V Due 5/15 1992 5e/e% 80,000 80,000 16'/e% Series, Due 11/15 1986 75,000 75,000 Series W Due 2/15 1993 6'le% 100,000 100,000 50,000 Series X Due 1/15 1994 7'/e% 75,000 75,000 14% Series, Due 4/1 1987 50,000 Series Y Due 10/15 1994 8'le% 100,000 100,000 14e/e% Scrics, Duc 7/I 1988 50,000 50,000 Series Z Due 12/1 1995 7i/e% 100,000 100,000 12% Series, Duc 11/ I 1988 75,000 Series AA Due 9/15 1996 8%)... 100,000 100,000 151re% Scrics, Due 5/I 1989 75,000 Series BB Due 8/15 1997 7'/e%) .... 125,000 125,000 13% Scrics, Duc 8/ I 1994 50,000 Series CC Due 2/1 1999 8i/e%) 100,000 100,000 Series DDP Due 7/1 1999 7%)... 15,030 15,030 375,000 175,000 Series FF Due 3/1 2000 ge/e% 150,000 150,000 Series GG Due 3/15 2001 8'/e% 125,000 125,000 POLLUTION CONTROI. INDEBTEDNESS:

Series HH Due 7/1 2002 8i/e% 125,000 125,000 1981 Series A, Duc 3/I 1984 Series JJ Due 11/1 2003 9/e% 200,000 200,000 (8i/e%) 92,500 92,500 Series KK Due 6/15 2004 9.95 o 105,000 105,000 Series Series MM NN Duc Due 10/15 2004 4/1 2005 1 I e/e%

15'le%

200,000 200,000 200,000 200,000 Principal amounts outstanding .. 4,291,130 3,630,357 OO 13/i% Long-term debt duc within one Series Due 11/15 2010 150,000 150,000 Series RR Due 12/1 2011 15'/e% 200,000 200,000 year (53,500) (121,025)

Series TT Due 4/15 2012 125,000 Unamortized premium Series UU Due 11/I 2012 I 2%I 200,000 (discount) nct........ (22,024) (16,252)

Series VVP Due 11/1 2012 IO'/e%) 80,000 Securities held by trustees.... (245,206) (49,000)

Series QQP Due 8/1 2021 I Oi/e%) 8,300 8,300 Total long-term debt $ 3,970,400(a) $ 3,444,080 3,760,130 3,295,830 (al The Comp any >ss ued First and Refundin g hiorrgage Bonds, Series IVIYP, DLIe 2003 in the principal amounr of $ 88,000,000 on Febru-ary 3, i983 15 Detail of Utility Plant Thousands of Dollars December 3l, 1982 1981 1980 1979 1978 1977 1972 Production:

Stcam I $ 1,426,380 $ 1,380,217 $ 1,357,301 $ 1,340,840 $ 1,323,603 $ 1,302,084 $ 1,104,993 Nuclear 300,708 256,794 169,779 156,027 145,565 133,516 68,482 216,809 215,647 215,523 214,287 Other.................

Hydro 239,820 373,471 236,458 358,527 234,723 354,637 354,680 350,002 201,088 57,155 Total production...........

Transmission..............

2,340,379 2,231,996 1,257,728 2,116,440 1,236,762 2,068,356 1,186,035 2,034,817 1,164,523 1,852,211 1,127,702 1,444,917 925,546 1,401,848 Distribution 2,573,793 2,397,367 2,215,891 2,069,431 1,930,266 1,820,103 1,449,115 General.................

Plant held for future use and other 196,102 25,766 181,990 25,875 169,803 25,781 146,706 26,184 139,258 28,489 130,863 29,341 99,594 13,055 Experimental electric plant unclassified 65,062 14,245 14,283 107 217 699 Gas and water (Catalina) 6,590 6,283 6,240 6,165 6,176 3,969 3,462 Utility plant, at original cost 6,609,540 6,115,484 5,785,200 5,502,984 5,303,746 4,964,888 3,935,689 Less accumulated provision for depreciation............. 2,185,667 2,015,212 1,840,233 1,676,148 1,519,174 1,383,009 851,910 4,423,873 4,100,272 3,944,967 3,826,836 3,784,572 3,581,879 3,083,779 Construction work in progress . 4,108,878 3,377,644 2,600,460 2,058,958 1,493,573 1,209,502 280,737 Nuclear fuel, at amortized cost 45,660 24,542 20,649 15,728 13,572 17,343 ~ 16,641 7,502,458 6,566,076 5,901,522 5,291,717 4,808,724 3,381,157 accumulated deferred income ',578,411 Less taxes................ 79,084 25,972 26,965 27,320 27,652 27,198 33,921

$ 8,499,327 $ 7,476,486 $ 6,539,111 $ 5,874,202 $ 5,264,065 $ 4,781,526 $ 3,347,236 11

16 Statements of Capital Stock Decetnber 31, l982 Thousands of Dollars Shares Redemption December 3I, Outstanding Price Per Share l982 /98I PREFERRED STocK Subject to Mandatory Redemption/Repurchase Requirements:

$ 100 Cumulative Preferred (a):

7.325% Series.......... 750,000 $ 110.00 $ 75,000 $ 75,000 7.80 % Series.......... 600,000 110.00 60,000 60,000 8.54  % Series.......... 750,000 108.54 75,000 75,000 8.70  % Series A 525,000 110.00 52,500 52,500 12.00  % Series.......... 750,000 112.00 75,000 75,000 12.31  % Series.......... 500,000 105.83 50,000 387,500 337,500 Less: Preferred Stock to be redeemed within one year 4,500

$ 383,000 $ 337,500 Preference (b) 7.375% Series 2,480,000 $ 25.25 S 62,000 S 62,000 PREFERRED STocK Original Preferred Other:

(c).................. 480,000 $ 4,000 S 4,000 Cumulative Preferred authorized 24,000,000 shares, par value $ 25 pcr share:

4.08% Series 1,000,000 $ 25.50 $ 25,000 S 25,000 4.24% Series 1,200,000 25.80 30,000 30,000 4.32% Series 1,653,429 28.75 41,336 41,336 4.78% Series 1,296,769 25.80 32,419 32,419 5.80% Scrics 2,200,000 25.25 55,000 55,000 8.85% Series 2,000,000 26.50 50,000 50,000 9.20% Series 2,000,000 26.50 50,000 50,000

$ 100 Cumulative Prcfcrred (a):

7.58% Series 750,000 102.50 75,000 75,000 8.70% Series 500,000 107.00 50,000 50,000 8.96% Series 500,000 107.00 50,000 50,000

$ 458,755 $ 458,755 Preference (b) 5.20% Convertible Series 330,617 $ 25.00 S 8,265 S 13,553

$ 100 Preference authorized 2,000,000 shares, par value $ 100 per share................

COMt4ott SrocK authorized 140,000,000 shares, par value

$ 8N per sharc, including additional stated capital.... 96,691,973 $ 856,152 $ 776,523 (a) Authorized l2,000,000 shares, par value $ 100 per share.

(b) Authorized l0,000,000 shares, par value $ 25 per share.

(c) 5%, prior, cumulative, participating, not redeentable, authorized 480,000 shares, par value $ 8Yi per share.

17 Capitalization and Plant Ratios r 1982 1981 1980 1979 1978 1977 1972 CAPITALIZATIONRATIOS (a):

Long-term debt:

Bonds 42.6% 44.3% 46.2% 46.4% 45.7% 46.2% 49.9%

Dcbenturcs...... 1.4 1.5 2.2 Other 5.3 3.0 0.1 1.0 0.3 0.4 0.3 47.9 47.3 46.3 47.4 47.4 48.1 52.4 Prcferrcd Stock rcdcmption required 5.4 5.5 6.3 5.6 3.8 4.1 Preferred Stock other........ 5.7 6.5 7.6 8.5 9.6 10.8 12.8 Common Equity 41.0 40.7 39.8 38.5 39.2 37.0 34.8 Total................. 100.0% 100.0% 100.0% 100.0% 100.0% '00.0%

100.0%

PLANT RATIOS:

Gross utility plant to (b):

Operating revenues 2.5 2.3 2.3 3.0 2.9 3.0 4.5 Kilowatts of system peak $ 835.59 $ 709.22 $ 666.53 $ 607.96 $ 567.72 $ 550.52 $ 431.29 Net utility plant in service to (c):

Operating revenues 1.0 1.0 1.1 1.5 1.6 1.7 3.3 Kilowatts of system peak $ 343.42 $ 305.53 $ 312.79 $ 307.03 $ 315.46 $ 318.47 $ 314.19 Accumulated depreciation as a percent of gross utility plant(b) 20.3% 21.2% 21.9% 22. 1% 22.3% 22.3% 20. 1%

(a) Excludes long-term debt and preferred stock due within one year.

(b) Gross utility plant consists of utility plant at original cost, construction work in progress and nuclear fuel at amortized cost.

(c) ¹I utility plant in service consists of utility plant at original cost less the accumulated provision for depreciation.

12

18 Operating Statistics Year Ended December 3I, 1982 1981 1980 1979 1978 1977 1972 AREA GENERATING CAPACITY AT PEAK (MtV):

Edison Owned:

Oil and Gas.................

Coal..................... 10,400 1,631

~

I 10,400 1,631 10,354 1,631 10,293 1,631 10,246 1,631 9,886 1,631 8,647 1,564 Nuclear 349 349 349 349 349 349 344 Renewable/Altcrnatc Including Hydro... 889 887 854 854 854 854

'89 Non-Edison Owned Purchase/Interchange:

System (a)..................

Renewable/Alternate Including Hydro... 1,081

'99 1252 1,071 1253 1,030 914 1,030 914 972 586 972 504 906 Total '5,349 15,592 15,504 15,071 14,966 14,278 12,819 AREA GENERATING CAPACITY AT PEAK PERCENT:

Edison Owned:

Oil and Gas.................

Coal..................... 67.8%

10.6 66.7%

10.5 66.8%

10.5 68.3%

10.8 68.5%

10.9 69.2%

I 1.5 67.5%

12.2 Nuclear 2.3 2.2 2.3 2.3 2.3 2.4 2.7 Renewable/Alternate Including Hydro... 5.8 5.7 5.7 5.7 5.7 6.0 6.6 Non-Edison Owned Purchase/Interchange:

System (a)..................

Renewable/Alternate Including Hydro...

65 7.0 8.0 6.9 8.1 6.6 6.1 6.8 6.1 6.5 4.1 6.8 3.9 7.1 Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

GENERATION (MtVH):

Edison Owned:

Oil and Gas.................

Coal..................... 27,027,650 38,128,951 37,923,981 44,502,704 38,490,674 44,843,511 9,493,153 8,042,190 8,024,940 7,136,144 6,500,969 8,642,291 36,961,761 8,918,738 Nuclear 388,348, 623,633 637,752 2,665,312 2,127,008 1,855,304 2,249,624 Rencwablc/Alternate Including Hydro... 6,488,165 3,977,840 6,007,589 5,094,520 5,952,430 1,585,836 3,639,245 Non-Edison Owned Purchase/Interchange:

System (a)..................

Renewable/Alternate Including Hydro... 1,994,604,

'1,186,620, 17,267,868 1,139,159 11,075,412 1,789,604 5,789,265 1,028,965 9,672,101 1,133,934 5,886,416 531,348 2,965,380 952,028 Total 66,578,540 69,179,641 65,459,278 66,216,910 63,877,116 63,344,706 55,686,776 GENERATION PERCENT:

Edison Owned:

Oil and Gas.................

Coal..................... 40.6%

'4.3 55.1%

I 1.6 57.9%

12.3 67.2%

10.8 60.3%

10.2 70.8%

13.7 66.4%

16.0 Nuclear 0.6 0.9 1.0 4.0 3.3 2.9 4.0 Renewable/Alternate Including Hydro... 9.7 5.8 9.2 7.7 9.3 2.5 6.6 Non-Edison Owned Purchase/Intcrchangc:

System (a)..................

Rcncwable/Alternate Including Hydro...

31.8 3.0 25.0 1.6 16.9 27 8.7 1.6 15.1 1.8 9.3 0.8 5.3 1.7 Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

(MW)............. 12,662 12,159 11,564 10,317 AREA PEAK DEMAND ANNUAI. AREA SYSTEM LOAD FACTOR HEAT RATE (I)TU per net KwH) 13,149 56.5%

10,913 'YERAGE 13,738 55.6%

10,572 12,841 56.9%

10,361 58.8%

10,200 59.1%

10,241 60.4%

10,016 62.7%

9,990 (a) Includes system and unit purchases and net interchange.

13

19 Existing Generating Capacity Resources As of December 31, 1982 (Summer Effective Rating) iVutnber Capacity Capacity Station of Urrits (Megawatts) Station (Megawatts)

EDISON OWNED GENERATION Renewable/Alternate (including hydro):

Oil and Gas (Main System): Northern Hydro Division 752.0 Alamitos.............. 1,950.0 Southern Hydro Division 100.1 Cool Water 628.0 Bishop Hydro Division 52.2 El Segundo 1,020.0 Cogeneration 12.5 Etiwanda 904.0 Highgrove............. 154.0 Subtotal 916.8 Huntington Beach......... 870.0 Total Edison Owned Generation .. 13,371.2 Long Beach 636.0 NON-EDISON OWNED Mandalay............. 430.0 PURCHASE/INTERCHANGE Ormond Beach 1,500.0 System:

Rcdondo.............. 1,602.0 BPA 550.0 San Bernardino 126.0 Navajo Project 327.5 Combustion Turbine........ 580.0 PGE Assignment 100.0 Subtotal 10,400.0 Washington Water and Power..... 60.0 Oil and Gas (Isolated System):

Arizona Power Pooling Assoc. Sale .. (36.7)

Combustion Turbine........ Subtotal 1,000.8 Axis................ 21.6 25.0(a) Renewable/Alternate (including hydro):

Pebbly Beach 6.2 Hoover, USBR to Edison....... 391.0 Subtotal 52.8 CDWR, Oroville-Thcmalito...... 340.0 Parker Davis, USBR Exchange.... 18.5 Coal:

Cogcncration 12.0 Four Corners 768.0(a) Wind 3.0 Mohave Subtotal 884.8(a) 1,652.8 Small Hydro.............. .5 Subtotal 765.0 Nuclear: Total Non-Edison Owned San Onofre 348.8(a) Purchase/Interchange 1,765.8 Total Thermal Generation... 12,454.4 TOTAL GENERATION CAPACITY RESOURCES............. 15,137.0(b)

(a) Represents the Company's share.

(b) l982 Peak main system area capacity was 15,349 M IV.

20 Projected Generating Resource Additions ScE Area Total Total Capacity Scheduled Capacity Scheduled (h(egawatts) Operating Date (Megawatts) Operating Date EDISON OWNED RESOURCES NoN-EDIsoN OwNED Nuclear PURCHASE/INTERCHANGE San Onofre 2 & 3... 1651 1983 (Continued)

Renewable/Alternate Palo Verde I, 2 &3 579 1984, 1985, 1986 Large Hydro 815(b) 1983-1988 Renewable/Alternate Small Hydro...... 149 1983-1992 Large Hydro 200 1988 Cogeneration 749 1982-1992 Small Hydro. 55 1982-1988 Wind 168 1982-1992 Geothermal 517 1984-1991 Wind 32(a) 1988-1992 Solar 197 1983-1991 Geothermal 88(a) 1982-1990 1985-1990 Fuel Cells....... 27 1987-1990 Solar 153(a)

Fuel Cells .. 28 1987-1990 EDISON RESEARCH AND DEYELOPMENT NDN-EDIsoN OIVNED- Coal Gasification Combined PURCHASE/INTERCHANGE Cycle 100 1984 System Cholla 4...........

San Onofre Resale 347 1984 CONTINGENT RESOURCES NEED SYSTEM Cities'hare...........

Capacity Retirements...... (1992) 1985, 1986 109 1983 Luccrne Valley Combined Cycle.

Palo Verde Resale 1160 Cities'hare...........

30 1986 Intermountain Rcsalc Cities'harc ....... 255 1987, 1988 (a) include's corrrrnercialization of units currently under Research and Development.

(b) includes replacement of existing contract for 340 h(IV which ternrinates in 1983.

14

21 Regulation CALIFORNIA PUBLIC UTILITIES COMMISSION (CPUC)

The Company is subject to regulation by thc CPUC which has thc cases. In addition, the CPUC uses a procedure to reduce regulatory authority to establish retail rates; to regulate security issues, lag in order to process decisions within one year from the filingof the accounting practices and depreciation; and to issue Certificates of application.

Public Convenience and Necessity for significant plant additions.

The CPUC currently provides for Energy Cost Adjustment Clause The California Constitution provides for a commission comprised of (ECAC) adjustmcnts in rates three times a year. Each adjustment is five members who are appointed for six-year terms by the Governor, based on estimates of fuel prices and balancing account amounts at subject to State Senate confirmation. the adjustmcnt date as well as forecasted energy mix and sales esti-mates. Thc period over which amounts in thc balancing account arc In setting rates, thc CPUC utilizes a forward test year for establish- to be amortized is determined at thc time of each adjustment, rather ing operating revenues and expenses, and average rate base. An than using a standard 12-month period. The rate for accruing inter-Electric Revenue Adjustment Mechanism provides a mechanism for est on undcrcollections or overcollcctions in the balancing account is collecting a target level of revenue authorized regardless of fluctua- a variable rate equal to the Federal Reserve Bank three-month Prime tion in the level of sales. Original plant cost, less depreciation and Commercial Paper Rate.

accumulated deferred income taxes, is used to determine the test year average rate base. Average-year embedded capital cost of senior Commencing with Edison's May 1983 ECAC revision, revised ECAC securities is utilized in establishing the allowable rate of return. An procedures will bc implemented which will recover 90% of all energy-Attrition Rate Adjustment helps ofl'set cost increases in operation rclated costs through a balancing account mechanism. The remain-and maintenance and capital-related expenses between biennial rate ing 10% of cncrgy-related costs will be recovcrcd through the Annual Energy Rate (AER) which is not subject to balancing account treatment.

Year First Ternl The present CPUC Commissioners are: Age Appointed Expires Leonard Grimes, President Democrat, former Secretary of the State Consumer Scrviccs Agency, past January I, Vice Prcsidcnt of Golden State Mutual Life Insurance Company.... 59 1979 1985 Victor Calvo Democrat, former member of state legislature; Chairman of Assembly January I, Resources, Land Use and Energy Committee.............. 59 1981 1987 Priscilla Grew Democrat, former director of the State Department of Conservation.... 41 1981 January I, 1987 Donald Vial Democrat, former director of thc State Dcpartmcnt of Industrial Relations January I, and member of Governor Brown's Cabinet. Replaces Richard Gravellc 58 1983 1989 Vacancy To bc filled by Governor Deukmejian subject to January I, California Senate confirmation. Rcplaccs John Bryson 1985 CPUC address: State Building, San Francisco, California 94162

SUMMARY

OF CPUC GENERAL RATE INCREASES Decision Additional Application Test Egective Revenue Rate of Return Authorized Date Year Date (Millions) Rate Base Common Equity 12/01/70 1972 07/15/71 $ 105.5 7.90% I 1.90%

08/01/72 1973 10/10/73 89.1 8.19 12.25 06/07/74 Partial 1976 12/31/75 79.6 8.70 12.25 Final 01/13/77 122.5(a) 8.80 12.63 10/07/77 Partial 1979 07/26/78 102.1 8.98 12.63 Final 01/01/79 124.0(a) 9.60 13.49 12/26/79 1981 01/01/81 294.2 11.20 14.95 12/26/79 (b) 01/01/81 91.9 11.20 14.95 12/18/81 1983 01/01/83 566.8(c) 12.55 16.00 (a) Includes revenues from the partial decision, but does not rejlect concurrent CPUC decisions related to energy costs.

(b) The CPUC authorized an additional attrition allowance of $ 9I.9 million effective January I, I982, in conjunction with the I98l General Rate Case.

(c) In a related decision, the CPUC granted a $23.2 million increase for conservation, load manageinent and fuel inventory costs.

15

SUMMARY

OF ECAC CHANGES Additional Decision Revenue Application Egective (Millions)

Date Date (Annualized) 10/19/76 01/13/77 S (44.5)(a) 04/01/77 06/08/77 82.8 06/22/77 09/13/77 136.8 09/21/77 01/17/78 146.7 04/01/78 07/26/78 (102.1)(a) 10/02/78 07/03/79 69.6 03/23/79 II/OI/79) 08/17/79 II/OI/79j 12/21/79 02/03/80 338.0 03/05/80 05/20/80 560.4 07/23/80 10/09/80 (236.3) 11/10/80 01/01/81 (193.8) 03/02/81 IO/25/811 07/01/81 10/25/8IJ 10/31/81 01/05/82 545.5 03/OI/82 05/04/82 (719.4) 07/01/82 09/22/82 11/01/82 01/01/83 (286.8)

(a) The reduction in ECAC revenue was offset by an increase in base rates of the satne amount, producing no net change in rates.

(b) Combined increase granted from two separate decisions. Base rates were reduced, ECAC rates increased and the Annual Energy Rate was established.

CALIFORNIA ENERGY COMMISSION (CEC)

The CEC is the sole state agency with the authority to license sites In addition to these three main functions, the CEC also coordinates a for power plants in California. One of the primary rcsponsibilitics of variety of energy research and development projects, sets appliance thc CEC is to develop statewide and utility service area electricity and building efficiency standards, and maintains a statewide plan of demand forecasts covering five, twelve, and twenty-year time hori- action in case of any energy shortage.

zons. Based on the forecasts, thc CEC determines the need for addi-tional power plants. If additional plants arc needed, the CEC also The Commission consists of five members appointed by the Governor determines the locations of the plants from among the alternatives for five-year terms, subject to State Senate confirmation.

proposed by the applicants.

Year First Term The present CEC Commissioners are: Age Appointed Expires Charles R. Imbrecht*, Attorney member, former State Assemblyman 34 1983 January 7, Chairman 1988 Russell L. Schwcickart Astronaut on Apollo 9............................

Scientist member, assistant to Governor Brown for Science and Technology, 47 1979 January 4, 1985 Arturo Gandara Economist member, former RAND Corp. energy program project leader. January 4, Member, L. A. Regional Water Quality Control Board 38 1981 1987 Karen Edson Environmental member, former legislative lobbyist for CEC 31 1981 January 7, 1984 Geoffrey Commons Public member, private economic development consultant 44 1982 January 6, 1986

• Requires Senate confirmation CEC address: 1516 Ninth Street, Sacramento, California 95814 OTHER REGULATION, Approximately 5.9%of SCE's revenues,and other matters including to various governmental licensing requirements, to Securities and accounting, depreciation and the acquisition and disposition of cer- Exchange Commission filing and financial disclosure requirements, tain property,aresubject torcgulation by the Fcdcral Energy Rcgu- and to certain other federal, state and local laws and regulations, latory Commission (FERC). This includes licensing of hydroelectric including those related to nuclear energy and nuclear plant construc-projects as well as SCE involvement in the transmission and sale for tion, environmental protection, fuel supplies and land use.

resale of electric energy in interstate commerce. SCE also is subject 16

22 Projections Sales, Demand, Capital Requirements and Generation Mix The data shown below include projections which are used for planning purposes. They are subject to frequent changes and, as the underlying assumptions and even the methods of forecasting are changed, such changes may produce material variations in the information shown below.

Compound Annual Recorded Estimated (as of February 1983J Growth Rate 1982 1983 1984 1985 1986 1987 1982-87 SALES AND DEMAND DATA Population at year end (000)............ 9,134 9,308 9,487 9,651 9,805 9,964 1.8%

Customers at year end (000)............ 3,275 59,327 3 333 59,462 3,398 59,917 3,477 60,530 3,556 61,890 3,634 63,280 2.1%

1.3%

Total Sales (million Kwn) (a)

Percent change from prior year......... (5.0)% .2% .8% 1.0% 2.2% 2.2%

Area peak demand (Mw)

Percent change from prior (a)............

year.........

13,149 (4.3)%

13,340 1.5%

13,680 2.5%

13,810 1.0%

13,950 1.0%

14,340 2.8%

1.7%

Edison generating capacity at peak (Mw) (b) (c) 13,269 13,974 15,007 14,827 13,429 13,435 .2%

Firm Purchase/Interchange at peak (Mw) (c) (d) . 2,080 2,288 2,561 2,839 3,266 3,544 11.2%

Area generating capacity at peak (Mw) (b) (c) (d) 15,349 16,262 17,568 17,666 17,695 16,979 2.0%

Installed area rescrvc margin at peak 16.7% 21.9% 28.4% 27.9% 26.8% IS.4%

cAPITAL REQUIREMENTs (millions) Total Construction expcnditurcs (e) (f): I983-1987 Production.................... $ 1,013 $ 933 $ 453 167

$ 423 104

$ 280 $ 252 112

$ 2,341 598 Transmission 63 124 91 Distribution................... 196 277 313 351 64 372 60 389 52 1,702 325 Other 25 80 69 Subtotal 1,297 1,414 1,002 942 803 805 4,966 Less:

Allowance for debt funds used during construction .. 94 89 39 26 23 23 200 Allowance for equity funds used during construction . 209 246 lll 69 57 57 540 Funds used/required for construction expenditures 994 1,079 852 847 723 725 4,226 Maturing securities issues 121 58 180 296 141 224 899 Total capital requirements $ 1,115 $ 1,137 $ 1,032 $ 1,143 $ 864 $ 949 $ 5,125 oTIIER slGNIFlcANT FQREchsT ITEMs (millions)

Effective annual AFUDC rate (net-of-tax method) 9.2% 9.9% 10.0% 10.0% 10.0% 10.0%

Dcprcciation expense (book) (g)...........

Deferred income taxes and investment tax credits (h)

$ 221 $ 309 $ 441 $ 499 $ 533 $ 563 Normalized ACRS dcprcciation $ 52 $ 129 $ 119 $ 110 $ 117 $ 119 Normalized investmcnt tax credits 69 90 70 70 70 70 Investment tax credits flowed through (i)..... (46) (9) (12) (16) (20) (24)

Deferred income taxes and ITC net $ 75 $ 210 $ 177 $ 164 $ 167 $ 165 GENERATION MIX PERCENT Oil and Gas.......................

Edison owned:

Coal........................... 40%

14 41%

14 33%

14 32%

13 30%

12 29%

12 Nuclear....................'.....

Renewable/Alternate (including hydro) ........ 10 I 5 9

18 7

19 6

20 6

20 6

Non-Edison owned Purchase/Interchange:

Purchases....................,

System Renewable/Alternate Purchases ............ 32 3

29 2

26 2

24 6

25 7

25 8

TOTAL ENERGY REQUIREMENT PERCENT .......... 100% 100% 100% 100% 100% 100%

TGTAL ENERGY REQUIREMENT Kwkt (Millions)......., 66,579 67,226 68,411 71,491 73,173 74,890 (aJ The Coinpany's long-term projections for this decade are for 2% annual growth in both total sales and peak deinand.

(bJ Reflect contingent retirements of oil and gas fired units totaling l,992 hIIVin I98S and I986.

(cJ Rated capacity for l982<6 reduced for "adverse year hydro" conditions.

(dJ Includes hietropolitan IVater District (hIIVDJ hydro capacity and Resale Cities Generation which is integrated into Edison's planning area.

(eJ iVuclear fuel requireinents for San Onofre were provided through leasing arrangements in 1982 and are expected to continue through at least 1987.

(f) Construction expenditure projections are escalated at 9%.

(gJ The l 982 composite rate was 3.6%. The current estimated eoinposite rate for l983 through I987 is 4.2%.

(hJ Economic Recovery Tax Aet of I98l.

(iJ For l982 includes the 4%%uoinvestment tax credit flowed through imder the transition rules of the l98I Tax Aet. In addition for all years, includes the ratable flow-back investinent tax credit deferred in previous years.

17

SOUTHERN CALIFORNIA EDISON COMPANY ORGANIZATION CHART (EXECUTIVE OFFICERS)

WILUAMR. COULD HOWARD P. ALI.EN orrosaos el rae dcord ssd Or<<os f oesave s Odc<<

H. FRED CHRISTIE DAVID J. FOGARTY fso<<are Yco dread<<d osd tsocroore Yrce Proao<<d Ohel Paosclol Odcw p~

i (Q

'e A.L MAXWELL EDWARD A. MYERS, Jr. MICHAELL NOEL HONOR MULLER IL ARENAL LT. PAPAY GA. BJORKLUND ROBER'T DIETCH JOE T. HEAD, Jl. R. H. SRIDENSECKER C.E. HATHAWAY P.L MARTIN ROBERT E. UMBAUGH JOHN R. BURY Yee Plead<<o <<d Vde Pread<<iC vlcc Re<<doss old Soccer<<s vice Plead<<e Vde Pre<<deal Yde Plead<<e Vice pre<<dere Yee Plead<<e

~orrooo Yroo as<< fodros<<ad osd dyorae Croroscpsrenl Vice Prosol<<d Oslo<<or fopsiewad Yce Plead<<e peri<< frdsrls RdrsOCed fsdrso<<ad F roo fsddrF ra<<so Rsoorsceo Vde Posed<<d rooosrsr dorrrce Yde Preadosl Rdlossoeoece vice plead<<d ood o<<a sl oaa<<r d Rsrssse des<<coo ~ sd +erorr<<re REPORTSTOTHECH A~OF~ REPORTS TO THE PRESKIENT

Board of Directors William R. Gould Chairman of the Board and Chief Executive OfJicer Howard P. Allen President Roy A. Anderson Chairman of the Board and Chief Executive OfJtcer, Lockheed Corporation, Burbank, California Norman Barker, Jr. Chairman of the Board and Chief Executive Ofltcer, First Interstate Bank of California, and Vice Chairman of the Board, First Interstate Bancorp, Los Angeles, California Edward W. Carter Chairman of the Board, Carter Haivley Hale Stores, Inc., Los Angeles, California Warren Christopher Senior Partner, Law Firm of O'Melveny dc Myers, Los Angeles, California Walter B. Gerken Chairman of the Board and Chief Executive Ojlicer, Pacific Mutual Life Insurance Company, Iileivport Beach, California Joan C. Hanley General Partner and Manager, Miramonte Vineyards, Rancho California, California Jack K. Horton Chairman of the Executive Committee and Consultant (Retired Chairman of the Board and Chief Executive Ofhcer, Southern California Edison Company), Los Angeles, California Southern California Edison Company Frederick G. Larkin, Jr. Chairman of the Executive Committee, Security Pacific iVational Bank, Los Angeles, 2244 Walnut Grove Avenue California Rosemead, California 91770 T. M. McDaniel, Jr. Corporate Director and Consultant (Retired President, Southern California Edison Company), Telephone (213) 572-1212 San Marino, California

• John V. Newman President, CBS-Sony California, Inc. (Citrus Production), Oxnard, California For Investor Relat Gerald H. Phipps %resident, Gerald H. Phipps, Inc., General Contractors (Building Construction), Denver, contact the Assist~

Colorado Manager of Invest Henry T. Segerstrom- Managing Partner, C.J. Segerstrom & Sons (Real Estate Development), Costa Mesa, -~ Telephone (213) 5 NOTICE California E. L. Shannon, Jr. Chairman of the Board and Chief Executive Ofltcer, Santa Fe International Corporation (Oil Stock Transfer Ag Service, Engineering, Petroleum Exploration and Production), Alhambra, California Southern CalifornI THE ATTACHED Fii slE OFFICIAL RECORDS OF THE DIVISION OF DOCUMENT CONTROL. THEY HAVE BEEN H. Russell Smith Chairman of the Board, Avery International (Manufacturer of Self-Adhesive Products), Rosemead, CHARGED TO YOU FOR A LIMITED TIME PERIOD AND Pasadena, California Califo'egistrar MUST BE RETURNED TO THE RECORDS FACILITY

• Richard R. Von Hagen President, Lloyd Corporation, Ltd. (Real Estate Development and Production of Oil and Gas), of Stock BRANCH '016. PLEASE DO NOT SEND DOCUMENTS Beverly Hills, California Security Pacific g CHARGED OUT THROUGH THE MAIL. REMOVAL OF ANY Los Angeles, Calij PAGEIS) FROM DOCUMENT FOR REPRODUCTION MUST BE REFERRED TO FILE PERSONNEL.

• Messrs. Newman and Von Hagen, having reached retireinent age, are not Nominees for reelection to the Board of Directors in Stock Exchange 1983. Common Stock:

New York Stock DEADLINE RETURN DATE Pacific Stock Exc(

London Stock ExtI Preferred and Pre SOUTHERN CALIFORNIA EDISON COMPANY American Stock Pacific Stock Exc ORGANIZATION CHART (Please turn this page)

Ticker Symbol SCE (Common S RECORDS FACILITYBRANCH Media Listing SCalEd This Financial and Statistical Report is designed to supplement the Annual Report to Shareholders. It is intended primarily to meet the needs of institutional investors and s'ecurity analysts in making a more thorough analysis of the Company than would otherwise be possible from the usual reference sources. The Notes to Financial Statements in the Annual Report to Shareholders are applicable to the financial statements presented in this report for the years 1982, 1981, and 1980.

This Finanetal and Statistical Report and the statements and statistics contained herein have been assembled for generalinformative purposes and are not intended to induce, orfor use in connection with. any sale or purchase ofsecurities. Under no circumstancesis this report or any part ofits contents to be considered a prospectus, or as an oper to sell, or the so1ieitation of an oPer to buy, any securities.

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