ML17320A874

Forwards Annual Financial Rept,1983,consisting of Annual Financial Statements & Projected Cash Flow for 1983

ML17320A874
Person / Time
Site:	Cook
Issue date:	12/05/1983
From:	Alexich M AMERICAN ELECTRIC POWER SERVICE CORP., INDIANA MICHIGAN POWER CO. (FORMERLY INDIANA & MICHIG
To:	Harold Denton Office of Nuclear Reactor Regulation
References
AEP:NRC:0740A, AEP:NRC:740A, NUDOCS 8312090260
Download: ML17320A874 (37)

Text

REGULATO INFORMATION DISTRIBUTION TEM, (RIDS) r ACCESSION NBR 8312090260 DOC ~ DATE'! 83/12/05 NOTARIZEDj NO DOCKET FAGIL!50 315" Donald 0; Cook. Nuclear'ower Plantr Uni,t 1r =Indiana 8

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'UTHOR AFFILIATION ALEXICH<M,P,

• Indiana-8 Michigan E~lectr ic ~Co, ALEXICH,M~ P, Amer ican Electr ic.Power-'Ser vice Corp.

!REC IP ~ NAME REC IP LENT AF F ILIATION

.DENTONrH',Ro Office>> of Nuclear ">Reactor Regulationr Director

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AMERICANELECTRIC POWER Service Corporation 1 Riverside Plaza (614) 223-1000 P. O. Box 16631 Columbus, Ohio 43216-6631 December 5, l983 AEP:NRC:0740A r

Donald C.

Cook Nuclear Plant Unit Nos.

1 and 2

Docket Nos.

50-315 and 50-316 License Nos.

DPR-58 and DPR-74 FINANCIAL INFORMATION FOR INDIANA 6 MICHIGAN ELECTRIC COMPANY Mr. Harold R. Denton, Director Office of Nuclear Reactor Regulation U.S. Nuclear Regulatory Commission Washington, D.C.

20555

Dear Mr. Denton:

Enclosure 1 contains three copies of the Indiana 6 Michigan Electric Company's (ISMECo) Annual Report for 1982.

Enclosure 2 contains three copies of IaMECo's projected cash flow for 1983.

These reports are submitted pursuant to 10 CFR 50.71(b) and 10 CFR 140.21(e).

This document has been prepared following Corporate procedures which incorporate a reasonable set of controls to ensure its accuracy and completeness prior to signature by the undersigned.

Very truly yours, Milton P. Alexich Vice President th Enclosures cc:

John E. Dolan W.

G. Smith, Jr.

Bridgman R.

C. Callen G. Charnoff E.

R.

Swanson, NRC Resident Inspector Bridgman 83i2090260 83i205 PDR ADOCK 050003i5 I

PDR f,,t

Y

P 0

II

ANNUALREPORT 1982 AMERICANELECTRIC POWER SYSTEM

Contents Background of the Company Directors and Officers of the Company Selected Financial Data Management's Discussion and Analysis of Results of Operations and Financial Condition Auditors'pinion Consolidated Statements of Income Consolidated Balance Sheets Consolidated Statements of Sources and Applications of Funds Consolidated Statements of Retained Earnings Notes to Consolidated Financial Statements Operating Statistics Price Range of Cumulative Preferred Stock 10-11 12 13 14-26 27-28 29

INDIANA&MICHIGANELECTRIC COMPANY One Summit Square~.

Box 60, Fort Wayne, Indiana 46801 Background of the Company INDIANA& MIGHIGAN ELEGTRlc CohfPANY (the Company), a subsidiary of American Electric Power Company, Inc. (AEP) is engaged in the generation, purchase, transmission and distribution ofelectric power. The Company was organized under the laws ofIndiana on February 21, 1925, and is also authorized to transact business in Michigan and West Virginia. Its principal executive offices are in Fort Wayne, Indiana.

The Company has two wholly owned subsidiaries; they are Blackhawk Coal Company, which owns coal mines and related mining assets, and Price River Coal Company, which mines coal from land owned by Blackhawk that is purchased largely by'the Company.

The Company serves approximately 444,000 customers in northern and eastern Indiana and a portion ofsouthwestern Michigan. Among the principal industries served are stone, clay, glass and concrete products, primary metals, fabricated metal products, electrical and electronic machinery and transportation equipment. In addition, the Company supplies wholesale electric power to other electric utilities, municipalities and cooperatives.

The Company's generating plants and important load centers are interconnected by a high-voltage transmission network. This network in turn is interconnected either directly or indirectly with the followingother AEP System companies to form a single integrated power system: Appa-lachian Power Company, Columbus and Southern Ohio Electric Company, Kentucky Power Company, Kingsport Power Company, Michigan Power Company, Ohio Power Company and Wheeling Electric Company. The Company is also interconnected with the followingother utilities:

Central IllinoisPublic Service Company, The Cincinnati Gas &Electric Company, Commonwealth Edison Company, Consumers Power Company, IllinoisPower Company, Indiana-Kentucky Elec-tric Corporation (a subsidiary of Ohio Valley Electric Corporation), Indianapolis Power &Light Company, Northern Indiana Public Service Company and Public Service Company ofIndiana, Inc.

Directors FRANK N. BIEN W. A. BLACK LAWRENCE R. BRUNKE (a)

RICHARD E. DISBROW JOHN E. DOLAN M. R. HARRELL (a)

G. E. LEMASTERS (b)

GERALD P. MALONEY RIGHARD C. MENGE C. W. ROAHRIG (b)

J. F. STARK BEVERLY I. STEARS W. S. WHITE, JR.

Officers W. S. WHITE, JR.

Chairman of the Board and Chief Executive Officer W. A. BLACK President and CltiefOperating Officer J. F. STARK Senior Vice President FRANK N. BIEN Vice President RICHARD E. DISBROW Vice President JOHN E. DOLAN Vice President A. JosEPH DowD Vice President RICHARD F. HERING Vice President ROBERT S. HUNTER Vice President GERALD P. MALONEY Vice President RICHARD C. MENGE Vice President BEVERLY I. STEARS Vice President PETER J. DEMARIA Treasurer JOHN R. BURTON Secretary ALLEN H. STUHLMANN Assistant Secretary and Assistant Treasurer JOHN F. DILORENZO, JR.

Assistant Secretary CARL J. Moos Assistant Secretary WILLIAME. OLSON Assistant Secretary WILLIAMJ. PROCHASKA Assistant Secretary JOAN ST. JAMES (C)

Assistant Secretary LEONARD V. ASSANTE Assistant Treasurer BRUCE M. BARBER Assistant Treasurer WILLIAMN. D'ONOFRIO Assistant Treasurer GERALD R. KNORR Assistant Treasurer The principal occupation ofench ofthe above directors nnd officers ofIndiana 4 Michigan Electric Company, with eight exceptions, is as an employee ofAmerican Electric Power Service Corporation. The exceptions are IV.A. Black, Lawrence R.

Branke,'t. R. Harrell, Richnrd C. Menge, Carl J. Moos, J. F. Stark, Beverly I.

Stears, nnd Allen H. Stahlmann whose principal occupations are as officers or employees ofIndinna 4 hHchigan Electric Company.

(a) Elected April27, l982 (b) Resigned April 27, l982 (c) Elected February l, 1982

INDIANA& MICHIGANELECTRIC COMPANY I

AND SUBSIDIARIES Selected Financial Data Year Ended December 31, 1982 1981 1980 (in thousands) 1979 1978 INCOME STATEMENTS DATA:

OPERATING REVENUES ELECrRIC TOTAL OPERATING EXPENSES OPERATING INCohIE TOTAL OTHER INCOME AND DEDUCTIONS INCOME BEFORE INTEREST CHARGES NET INTEREST CHARGES CGNsoLIDATBD NET INcohfEbefore preferred stock dividend requirements...

PREFERRED STOCK DIVIDENDREQUIREMENTS EARNINGS APPLICABLBTo COMMON STOCK

$809,803 634,858, 174,945 48,725 223,670 102,647

$812,149 634,209 177,940 29,713 207,653 104,313

$742,683 577,502 165,181 30,541 195,722 99,151

$683,013 524,800 158,213 29,042 187,255 91,475

$595,845 438,608 157,237 29,749 186,986 75,439 121,023 28,628 103,340 23,624 96,571 23,242 95,780 19,995 111,547 18,357

$ 92,395

$ 79,716

$ 73,329

$ 75,785

$ 93,190 1982 1981 December 31, 1980 (in thousands) 1979 1978 BALANCESHEETS DATA:

ELECTRIC UTILITYPLANT ACCUMULATEDPROVISIONS FOR DEPRECIATION, DEPLETION AND AMORTIZATION... ~.......

NET ELECTRIC UTILITYPI.ANT TOTAL ASSETS

$3,541,114

$3,356,987

$3,1 17,381

$2,657,930

$2,397,245 685,789 611,699 561,773 475,643 410,520 2,855,325 2,745,288 2,555,608 2,182,287 1,986,725 3,135,884 3,035,614 2,826,172 2,616,996 2,360,813 COMMON STOCK, PREMIUMS ON CAPITALSTOCK AND OTHER PAID-IN CAPITAL RETAINED EARNINGS

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CUMULATIVEPREFERRED STOCK:

NOT SUBJECT To MANDATORYREDEMPTION SUBJEGT To MANDAToRYREDBMPI'IQN (a)

LONG-TERM DEBT (a) 777,783 91,756 197,000 104,447 1,397,475 727,652 100,170 197,000 105,509 1,404,044 637,287 114,495 197,000 68,348 1,264,673 587,193 130,480 197,000 70,000 1,124,255 527,193 133,057 197,000 30,000 1,050,626 (a) Including portion due within one year.

Management's Discussion and Analysis of Results of Operations and Financial Condition The followingare the more significant factors bearing on the financial condition ofIndiana A Michigan Elec-tric Company and its subsidiaries as reflected in the consolidated results of operations. This discussion re-fers to the consolidated financial statements that fol-low.

Operating Revenues and Expenses Consolidated operating revenues decreased 0.3% in 1982 in contrast to a 9.4% increase in 1981. Kilowatt-hours sold decreased by 8.3% in 1982 and 1.7% in 1981.

The primary reason for the decrease in the sales of electric energy and operating revenues was the con-tinued depressed economic activity in the Company's service area as well as the extraordinarily mild weather experienced throughout most of the year in the service area.

Revenues from retail customers (residential, com-mercial and industrial) were up 7.2% in 1982 on a 2.1%

decline in kwh sales and increased 11.1% in 1981 on a 0.6% increase in kwh sales. The increase in revenues can be attributed to higher rates which went into effect during the period and the recovery ofhigher fuel costs, a portion of which is passed on to customers through fuel-adjustment charges.

The reduction in kwh sales was due principally to decreased sales to industrial customers.

Wholesale revenues decreased by 9.6% in 1982 and increased 3.9% in 1981. This decrease in 1982 revenues was the result of a decrease of 13.7% in kwh sales compared to a 3.6% decrease of kwh sales in 1981.

Wholesale sales to municipalities, electric cooperatives and other electric utilities, while lower in 1982, are expected to continue to be significant during the next few years as well; however, much willdepend upon the timing and extent ofimprovements in the economy and the return to more normal weather patterns.

In 1982 purchased and interchange power costs in-creased by 11.2% due to increased kwh purchases of 12.4%. In 1981 these costs increased 8.1% because ofa higher cost per unit purchased, which more than offset 5% decrease in kwh purchased.

Because of AEP's powerful interconnection and transmission

capacity, normally during periods of peak demand that exceed the available generating capacity, wholesale custom-ers'equirements are able to be met by purchasing power from neighboring utilities for resale to others.

Fuel expenses decreased 18.8% in 1982 as a result of decreased sales and a change in fuel mix, and increased 2.4% in 1981 mainly due to the increased cost offuel for generation.

Future fuel expenses will be affected by generation levels, contractual agreements between the coal industry and the United Mine Workers ofAmerica, foreign purchases ofUnited States coal and the possibil-ity of yet more stringent environmental restrictions on burning certain types ofcoal. Whether or not continued increases infuel costs willadversely affect earnings will depend on the Company's continued ability to recover those costs promptly in the face ofefforts by consumer groups and others to delay or reduce rate increases and to eliminate or reduce the extent of coverage of fuel-adjustment clauses.

Construction and Financing Program Expenditures for the Company's construction pro-gram over the three-year period 1983-1985 are esti-mated to be approximately

$609 million. Substantial additional expenditures may be required if existing generating plants require modification or additional facilities to comply with present and future environ-mental quality standards. In recent years, the construc-tion program has been affected by substantial increases in construction costs and difficultiesin obtaining financ-ing for the program due to high costs of capital. The construction program is reviewed continuously and re-vised from time to time in response to revised projec-tions ofload growth and changes in the cost and avail-ability of capital. In recent years, these reviews have resulted in extending construction schedules ofa num-ber ofprojects with the objective ofreducing the level of annual construction expenditures. However, deferrals ofconstruction projects may have an adverse effect on the quality ofthe Company's service to its customers in the future, and any resulting reductions in current con-struction costs may, in the long run, be at least partially offset by cancellation charges and general inflationary trends. In addition, when the completion date ofa proj-ect under construction is substantially delayed, it be-comes more expensive, both because of the foregoing factors and because certain costs, principally financing costs, continue to accrue until the facility is placed in commercial operation.

As a result of the assumption ofpartial ownership of the Rockport Plant by AEP Generating Company and possibly Kentucky Power Company (see Note 9 of the Notes to Consolidated Financial Statements), itis antic-ipated that the Company willrequire minimal external financings to meet its 1983-1985 construction program.

Any additional amounts needed willhave to be raised externally, as in the past, through sales ofsecurities and investments in the Company's common equity by AEP.

The Company initially finances current construction

INDIANA

~ MICHIGANELECTRIC COMPANY ANDSUBSIDIARIES expenditures in excess ofavailable internally generated funds by issuing unsecured short-term debt (commer-cial paper and bank loans) and then periodically reduces short-term debt with the proceeds from sales of long-term securities and preferred stock and with invest-ments in the Company's common equity by AEP.

The amounts ofshort-term debt which the Company may issue are limited by regulatory restrictions under the Public UtilityHolding Company Act of 1935 and by restrictions in its charter and in certain debt instru-ments. At December 31, 1982, the Company had re-ceived authorizations from the Securities and Ex-change Commission to issue a total of approximately

$ 135 million of short-term debt. Note 7 of Notes to Consolidated Financial Statements contains informa-tion on the Company's short-term bank lines of credit and revolving credit agreements.

Bank lines of credit may be withdrawn at any time by the banks extending them and in most cases the banks require the mainte-nance ofcompensating deposit balances or the payment of fees in lieu of deposits.

In order for the Company to issue additional long-term debt and preferred stock, it is necessary for it to comply with earnings-coverage requirements con-tained in its mortgage bond and debenture indentures and in its charter. In order to issue additional long-term debt (except to refund maturing long-term debt), the Company must have pre-tax earnings equal to at least twice the annual interest charges on long-term debt, giving effect to the issuance ofthe new debt, fora period of 12 consecutive months within the 15 months immedi-ately preceding the date of the new issue. To issue additional preferred stock, the Company must have after tax gross income at least equal to one and one-half times annual interest charges and preferred dividends, giving effect to the issuance ofthe new preferred stock, for the same period. These provisions do not prevent certain types ofpollution control revenue bond financ-ings by public bodies on behalf ofthe Company, but the levels of coverage under them may affect the cost and marketability ofsuch bonds. AtDecember 31, 1982, the coverages ofthe Company under these provisions were at least 1.79 for long-term debt and 1.51 for preferred stock.

In view of these restrictions on the issuance of addi-tional debt securities and preferred stock, the Company believes that it will be possible to meet the capital requirements of its construction program only if the Company receives rate increases over the next several years sufficient to meet the earnings levels required to issue the necessary amounts oflong-term debt and pre-ferred stock and to provide an appropriate return on new equity investment.

Net Income Consolidated net income before preferred dividend requirements increased in 1982 by 17.1% and in 1981 by 7%. These changes in net income were accompanied by an increase in the total proportion of allowance for funds used during construction (AFUDC) reflected in net income, 92% in 1982 and 77.3% in 1981. AFUDC does not represent cash income or a reduction in actual interest expense, but is an accounting convention re-quired by regulatory systems ofaccounts. By means of AFUDC, the net cost ofborrowed funds used for con-struction and a reasonable rate ofreturn on other funds, when so used, is capitalized as a cost of construction projects with a concurrent credit to the Income State-ment. The amount capitalized is added to the cost of construction projects and generally included in the plant investment base for setting rates and recovered through depreciation charges included in rates after the project is placed in commercial operation.

Effects of Inflation In recent years inflation has had a substantial effect on the Company's consolidated

revenues, expenses and net income that is not readily evident in conven-tional financial statements. For additional information on the effects ofinflation, refer to Note 12 ofthe Notes to Consolidated Financial Statements, which presents a consolidated statement ofincome for 1982, adjusted for effects of inflation, and a comparison of selected sup-plementary data for a four-year period, similarly ad-justed.

0 Auditors'pinion Deloije HaakinS+se IS 155 East Broad Street Columbus, Ohio 43215 (614) 221-1000 Cable OEHANOS To the Shareowners and the Board of Directors of Indiana E Michigan Electric Company:

We have examined the consolidated balance sheets of Indiana E

Michigan Electric Company and its subsidiaries as of December 31, 1982 and 1981 and the related consolidated statements of income, retained earnings and sources and applications of funds for each of the three years in the period ended December 31, 1982.

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, such consolidated financial statements present fairly the financial position of the Company and its subsidiaries at December 31, 1982 and 1981 and the results of their operations and their sources and applications of funds for each of the three years in the period ended December 31, 1982, in conformity with generally accepted accounting principles applied on a consistent basis.

February 22, 1983

INDIANA& MICHIGANELECTRIC COMPANY AND S UBSIDIARIES Consolidated Statements of Income OPERATING RBVBNUEsELEcrRIc Year Ended December 31, 1980 1982 1981 (in thousands)

$809,803

$812,149

$742,683 OPERATING EXPENSES:

Operation:

Fuel for Electric Generation Purchased and Interchange Power (net)

Other Maintenance Depreciation, Depletion and Amortization Taxes Other Than Federal Income Taxes Federal Income Taxes Total Operating Expenses OPERATING INCOME OTHER INCohIE AND DEDUCTIONS:

Allowance for Other Funds Used During Construction...

Miscellaneous Nonoperating Income Less Deductions Total Other Income and Deductions INcoME BBFQRB INTEREsT CHARGEs INTEREST CHARGES:

Interest on Long-term Debt Interest on Short-term Debt Miscellaneous Interest Charges Total Interest Charges Allowance for Borrowed Funds Used During Construction (credit)

Net Interest Charges.....-........

CoNsoLIDATED NET INcohIEbefore preferred stock dividend requirements..........................

PREFERRED STOCK DIVIDENDREQUIREMENTS EARNINGS APPLICABLETo COMMON STOCK 143,025 154,683 126,922 56,431 83,031 32,567 38,199 634,858 174,945 57,889 (9,164) 48,725 223,670 142,841 8,974 4,258 156,073 (53,426) 102,647 121,023 28,628

$ 92,395 176,074 139,119 101,792 48,895 81,458 32,698 54,173 634,209 177,940 32,885

~(3, 172 29,713 207,653 129,023 18,042 4,228 151,293 (46,980) 104,313 103,340 23,624

$ 79,716 171,943 128,645 79,788 41,377 77,668 26,296 51,785 577,502 165,181 18,438 12,103 30,541 195,722 109,138 18,847 2,993 130,978 (31,827) 99,151 96,571 23,242

$ 73,329 See Notes to Consolidated Financial Statements.

Consolidated Balance Sheets ASSETS December 31, 1982 1981 (in thousands)

ELECTRIC UTILITYPLANT:

Production Transmission Distribution General and Miscellaneous (includes mining plant)

Construction Work in Progress Total Electric UtilityPlant Less Accumulated Provisions for Depreciation, Depletion and Amortization Electric UtilityPlant Less Provisions

$1,532,241 441,241 305,528 186,890 1,075,214 3,541,114 685,789 2,855,325

$1,512,548 438,849 296,677 194,177 914,736 3,356,987 611,699 2,745,288 OTHER PROPERTY AND INVESTMENTS 28,319 24,838 CURRENT ASSETS:

Cash Special Deposits and Working Funds Accounts Receivable:

Customers Associated Companies Miscellaneous Accumulated Provision for Uncollectible Accounts Materials and Supplies (at average cost or less):

Fuel Construction and Operation Materials and Supplies Accrued UtilityRevenues Prepayments and Other Current Assets Total Current Assets 10,000 4,098 56,739 9,214 4,148 (414) 72,811 19,821 21,874 5,134 203,425 7,486 18,574 73,978 9,995 9,037 (375) 48,644 19,947 19,994 5,076 212,356 DEFERRED DEBITS:

Unamortized Debt Expense Property Taxes Deferred Collection of Fuel Costs Deferred Strike Costs Other Work in Progress Other Deferred Debits Total Deferred Debits Total.........

See Notes to Consolidated Financial Statements.

3,570 1,740 215 2,413 3,961 36,916 48,815 3,715 1,729 502 3,791 6,048 37,347 53,132

$3,135,884

$3,035,614 10

INDIANA& MICHIGANELECTRIC COMPANY S UBSIDIARIES CAPITALIZATIONAND LIABILITIES December 31, 1982 1981 (in thousands)

CAPITALIZATION:

Common Stock No Par Value:

Authorized 2,500,000 Shares Outstanding 1,400,000 Shares Premiums on Capital Stock Other Paid-in Capital..

Retained Earnings Total Common Shareowner's Equity...............

Cumulative Preferred Stock:

Not Subject to Mandatory Redemption Subject to Mandatory Redemption (less sinking fund requirements due within one year)

Long-term Debt (less portion due within one year)

Total Capitalization (less amounts due withinone year).

56,584 381 720,818 91,756 869,539 197,000 104,000 1,304,505 2,475,044 56,584 381 670,687 100, 170 827,822 197,000 105,500 1,298,502 2,428,824 nd Requirements CURRENT LIABILITIES:

Cumulative Preferred Stock Sinking Fu Due Within One Year Long-term Debt Due Within One Year Short-term Debt:

Notes Payable to Banks Commercial Paper Accounts Payable:

General Associated Companies Dividends Declared:

Common Stock Cumulative Preferred Stock Customer Deposits Taxes Accrued Interest Accrued Revenue Refunds Accrued Other Current Liabilities Total Current Liabilities 447 92,970 89,150 3,000 35,147 12,586 7,140 2,836 11,464 35,120 11,921 259895 327,676 9

105,542 15,500 38,100 38,440 9,377 1,124 6,303 2,483 29,943 31,583 23,095 33,182 334,681 CohIMIThIENTs AND CGNTINGENcIEs (Note 9)

DEFERRED CREDITS AND OPERATING RESERVES:

Deferred Income Taxes Deferred Investment Tax Credits Other Deferred Credits and Operating Reserves.........

Total Deferred Credits and Operating Reserves Total 2559098 35,877 42,189 333,164 230,223 22,907 18,979 272,109

$3,135,884

$3,035,614

Consolidated Statements of Sources and Applications of Funds Year Ended December 31, 1982 1981 1980 (in thousands)

SDURcES oF FUNDS:

Funds from Operations:

Consolidated Net Income Principal Non-fund Charges (Credits) to Income:

Depreciation, Depletion and Amortization Provision for Deferred Income Taxes (net)

Deferred Investment Tax Credits (net)

Amortization of Deferred Strike Costs Amortization of Deferred Collection of Fuel Costs Allowance for Other Funds Used During Construction Other (net)

Total Funds from Operations Funds from Contributions and Financings:

Contributions and Financings:

Capital Contributions from Parent Company Cumulative Preferred Stock Long-term Debt Short-term Debt (net)

Total Less Retirements of Cumulative Preferred Stock and Long-term Debt Net Funds from Contributions and Financings Sales of Property Total Sources of Funds APPLIcATIQNS oF FUNDS:

Plant and Property Additions:

Gross Additions to UtilityPlant Gross Other Additions Total Gross Additions Allowance for Other Funds Used During Construction Net Plant and Property Additions Dividends on Common Stock Dividends on Cumulative Preferred Stock Deferred Strike Costs Other Changes (net)

Increase in Working Capital (a)

Total Applications of Funds (a) Excludes Cumulative Preferred Stock Sinking Fund Requirements Due Within One Year, Long-term Debt Due Within One Year and Short-term Debt and is represented by increase (decrease) as follows:

Cash and Cash Items Accounts Receivable Materials and Supplies Accrued UtilityRevenues Accounts Payable Dividends Declared on Common Stock Revenue Refunds Accrued Taxes Accrued Other (net)

See Notes to Consolidated Financial Statements.

$121,023 87,459 225533 25,638 1,378 287 (57,889) 1,141 201,570

$ 103,340 85,978 36,082 9,247 3,195 287 (32,885) 710 205,954 505000 99,167 38,550 187,717 106,997 80,720 775745

$360,035 90,000 38,734 158,922

~(92,925 194,731 22,019 172,712 40,845

$419,511 268,109 (57,889)

~(32,885 275,365 92,624 23,624 6,986 2,415 18,497

$419,511 210,220 100,800 28,628 (4,103) 24,490

$360,035

$ (11,962)

(22,948) 24,041 1,880 84 1,124 11,174 18,479 2,618

$ 24,490

$ 11,765 2,405 (16,505) 8,198 6,936 10,376 15,121 (6,139)

~(3,660

$ 18,497

$267,783

$307,672 326 578 308,250

$ 96,571 83,393 34,840 11,124 508 (18,438) 767 208,765 50,000 177,021 (2,770) 224,251 38,149 I86,(02 50,673

$445,540

$304,678 6,013 310,691

~I8,438) 292,253 89,320 23,242 11,117 29,608

$445,540 5,707 9,334 18,503 (8,308) 6,933 18,630 (10,038)

(3,670)

~7,483

$ 29,608

INDIANA& MICHIGANELECTRIC COMPANY AND S UBSIDIARIES Consolidated Statements of Retained Earnings Year Ended December 31, 1982 1981 (in thousands) 1980 Balance at Beginning of Year:

As Previously Reported Restatement (Note 2)

As Restated Consolidated Net Income.....

Total

$101,725 (1,555) 100,170 121,023 221,193

$ 116,050 (1,555) 114,495 103,340 217,835

$ 132,035 (1,555) 130,480 96,571 227,051 Deductions:

Cash Dividends Declared:

Common Stock Cumulative Preferred Stock:

4Va % Series 4.56% Series 4.12%%uo Series 7.08% Series 7.76% Series 8.68% Series 12

% Series

$2.15 Series

$2.25 Series

$2.75 Series

$3.63 Series Total Cash Dividends Declared Capital Stock Expense Total Deductions Balance at End of Year 100,800 495 273 165 2,124 2,716 2,604 3,003 3,440 3,600 4,400 5,808 129,428 9

129,437

$ 91,756 92,624 495 273 165 2,124 2,716 2,604 3,226 3,440 3,600 4,400 581 116,248 1,417 117,665

$ 100,170 89,320 495 273 165 2,124 2,716 2,604 3,425 3,440 3,600 4,400 112,562 (6) 112,556

$ 114,495 See Notes to Consolidated Financial Statements.

Notes to Consolidated Financial Statements

1. Significant Accounting Policies:

The common stock ofthe Company is wholly owned by American Electric Power Company, Inc. (AEP).

The accounting and rates ofthe Company are subject in certain respects to the requirements of state regula-tory bodies and in certain respects to the requirements of the Federal Energy Regulatory Commission (FERC).

The consolidated financial statements include the ac-counts of the Company and two wholly owned sub-sidiaries engaged in coal mining. Significant inter-company items have been eliminated in consolidation.

The consolidated financial statements have been pre-pared on the basis ofthe accounts which are maintained for FERC purposes.

Electric UtilityPlant; Otlier Property and Investtnents; Depreciation, Depletion and Atnortization Electric utilityplant is stated at original cost. Gener-ally, the plant of the Company is subject to first mortgage liens.

The Company capitalizes, as a construction cost, an allowance for funds used during construction, an item not representing cash income, which is defined in the applicable regulatory systems of accounts as the net cost ofborrowed funds used for construction purposes and a reasonable rate on other funds when so used. The composite rates used by the Company were 12.75% in

1982, 12% in 1981 and 10.75% in 1980 applied on a semi-annual compound basis during 1982 and 1981.

The Company provides for depreciation on a straight-line basis over the estimated useful lives ofthe property. The current provisions are determined largely with the use of functional composite rates as follows:

Functional Composite Class of Annual Property Rates Production:

Steam Nuclear 4.0%

Steam Fossil-fired 3.7%

Transmission

2. l%

Distribution 3.7%

General 2.8%

Depreciation, depletion and amortization of coal-mining property are provided in amounts estimated to be sufficient to amortize the costs ofthe related assets, less any estimated salvage (which is not significant),

over their useful lives and are calculated by use ofthe following methods:

Description Method Mining Structures and Straight-line method (original lives Equipment range from 2 to 30 years)

Coal Interests and Mine Units-of-production method Development Costs (based onestimatedrecoverable tonnages; current rate averages

$ 1.07 per ton)

Substantially all of the amount of the provisions for depreciation, depletion and amortization ofcoal-mining property is classified in the Consolidated Statements of Income as fuel for electric generation.

Operating expenses are charged with the costs of labor, materials, supervision and other costs incurred in maintaining the properties.

Property accounts are charged with costs of betterments and major replace-ments of property and the accumulated provisions for depreciation are charged with retirements, together with removal costs less salvage.

Other property and investments are generally stated at cost.

Income Taxes Deferred Federal income taxes, reduced where applicable by investment tax credits, are provided by the Company generally to the extent that such amounts are allowed for rate-making purposes.

The Company normalizes the effect oftax reductions resulting from investment tax credits recognized in connection with accruals of current income taxes and provisions for certain deferred Federal income taxes, consistent with rate-making policies. The tax benefits associated with investment tax credits and the Acceler-ated Cost Recovery System have been normalized for rate-making and accounting purposes as required by the Economic Recovery Tax Act of 1981.

The Company's consolidated coal subsidiaries gen-erally use the "flow-through"method ofaccounting for investment tax credits and practice deferred tax ac-counting for the effects of certain timing differences.

Pension Plans The companies participate with other companies in the AEP System in a non-contributory trusteed plan to provide pensions for all their employees who are not participants in pension plans ofthe United Mine Work-ers of America (UMWA),subject to certain eligibility requirements.

Pension costs forthe years ended December 31, 1982, 1981 and 1980 were approximately

$3,057,000,

$3,201,000 and $3,416,000, respectively. The amounts 14

INDIANA8, MICHIGANELECTRIC COMPANY t

AND S UBSIDIARIES cover the costs ofcurrently accruing benefits and amor-tization of, and interest on, unfunded prior-service costs, which are being amortized over 30 years. The companies make annual contributions to the plan equal to the amounts accrued for pension expense.

Acomparison ofthe plan's accumulated benefits and net assets as of January 1, 1982, the date of the most recent actuarial study, is presented below:

January 1,

1982 1981 (in thousands)

Actuarial present value of accumulated plan benefits Vested Nonvested Black Lung Benefits The coal-mining subsidiaries are liable under the Federal Coal Mine Health and Safety Actof 1969 (Act),

as amended, to pay certain black lung benefits to eligi-ble present and former employees.

The subsidiaries provide self-insurance accruals sufficient to amortize the actuarially computed present arid future liabilities for such benefits as a level percentage ofpay over the future working lifetime of the employees, taking into account the remaining lifeofthe mines. Such provisions were approximately $530,000, $398,000 and $391,000 in 1982, 1981 and 1980, respectively. A Black Lung Bene-'its Trust is maintained under Section 501(c)(21) of the Internal Revenue Code. As of January 1, 1982 (the latest valuation date), the companies'ctuary estimates the unfunded actuarial value of medical and liability benefits under the Act, as well as comparable state legislation, was approximately $6,000,000. The com-panies fund the actuarially determined liabilities at a level which currently approximates the recorded ex-pense provisions.

$46,652

$46,410 4,830 5,030

$51,482

$51,440 Net assets available for benefits......

$76,659

$77,283 The assumed rate of return used by the actuary in determining the actuarial present value of accrued benefits was 8% at each valuation date.

Under a contract with the UMWA, a subsidiary is required to make payments into two multi-employer pension plans based on coal production and hours worked. The cost of the plans was approximately

$2,442,000 in 1982 and $ 1,700,000 in 1981. As of June 30, 1982, the Company's actuary estimates, based on information that is available, that the subsidiary's share ofthe unfunded vested liabilitiesofthe UMWApension plans approximates

$9,160,000.

Other The Company accrues unbilled revenues for electric service rendered subsequent to the last billing cycle through month-end.

Miscellaneous nonoperating income for the years ended December 31, 1982, 1981 and 1980 includes gains amounting to $496,000, $489,000 and $397,000, respec-tively, on certain long-term debt reacquired.

Debt discount or premium and debt expenses are being amortized over the lives ofthe related debt issues and the amortization thereof is included within miscel-laneous interest charges.

2. Restatements, Operating Revenues and Operating Expenses:

Prior year financial statements have been restated to reflect the effects ofcertain revenue refunds as ordered by state regulatory commissions during the third quar-ter of 1982. The effects of such restatements were to decrease consolidated net income by $ 1,065,000 in 1978 and $490,000 in 1977.

In March 1982, the Company filed an application with the Public Service Commission ofIndiana (PSCI) for a r'ate increase of $52,145,000 annually. In December 1982, the PSCI issued an order granting the Company an increase of$23,800,000 annually, a portion ofwhich is being collected subject to refund pending the out-come ofadditional proceedings relating to the ratemak-ing treatment of the Company's coal subsidiaries and Western coal properties.

In May 1982, the Company filed with the FERC ap-plications for authority to increase its rates to its wholesale customers.

In July 1982, the FERC au-thorized the increase to take effect in two steps, subject to refund; the first step representing an increase of

$26,900,000 became effective July 29, 1982, and the second step increase of $28,900,000 became effective on December 28, 1982. As of December 31, 1982, the Company has collected, subject to refund, approxi-mately $ 11,207,000 as a result of that authorization.

Operating revenues derived from a certain wholesale customer represent approximately 10% oftotal operat-ing revenues for 1982 and 9% for 1981 and 1980.

In December 1982, Price River Coal Company tem-porarily discontinued mining operations. Miningopera-tions are expected to resume during the second quarter of 1983. As a result thereof, the Company recorded a

$ 15,000,000 provision for losses ($8,100,000 net of de-ferred income taxes) to be incurred during 1983 repre-senting the effects of nonrecoverable mine standby costs.

15

NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)

3. Federal Income Taxes:

The details of Federal income taxes as reported are as follows:

Year Ended December 31, 1982 1981 (in thousands) 1980

$ 8,672 36,254 9,247 54,173 Year Ended December 31, Charged (Credited) to Operating Expenses:

Current (net)

$(16,503)

$ 6,984 Deferred (net) 29,064 33,677 Deferred Investment Tax Credits (net) 25,638 11,124 Total 38,199 51,785 Charged (Credited) to Other Income and Deductions:

Current (net)

(890)

(1,988) 1,525 Deferred (net)

(6,531)

(172) 1,163 Total P,421)

(2,160) 2,688 Total Federal Income Taxes as Reported

$ 30,778

$52,013

$54,473 The following is a reconciliation of the difference between the amount of Federal income taxes computed by multiplying book income before Federal income taxes by the statutory tax rate, and the amount ofFederal income taxes reported in the Consolidated Statements of Income.

Consolidated Net Income Before Preferred Stock Dividend Requirements Federal Income Taxes Pre-tax Book Income Federal Income Taxes on Pre-tax Book Income at Statutory Rate (46%)

Increase (Decrease) in Federal Income Taxes Resulting From the Following Items on Which Deferred Taxes Are Not Provided:

Excess of Book Over (Under) Tax Dcprcciation Allowance for Funds Used During Construction and Miscellaneous Items Capitalized on the Books but Deducted for Tax Purposes Mine Development Costs Investment Tax Credits Not Deferred Amortization of Prior Years Deferred Investment Tax Credits Other Total Federal Income Taxes as Reported 1982

$ 121,023 30,778

$151,801

$ 69,828 5,009 (32,040)

(4,771)

(1,727)

(931)

(4,590)

$ 30,778 1981 (in thousands)

$103,340 52,013

$155,353 1980

$ 96,571 54,473

$ 151,044 1,107 (19,658) 311 (1,799)

(327) 917

$ 52,013 (104)

(11,203)

(211)

(409)

(641)

(2,439)

$ 54,473

$ 71,462

$ 69,480 Effective Federal Income Tax Rate 20.3%

33.5%

36.1%

The following are the principal components of Federal income taxes as reported:

Year Ended December 31, Current:

Federal Income Taxes Investment Tax Credits Total Current Federal Income Taxes (net)

Deferred:

Depreciation (liberalized, ADR and ACRS)

Allowance for Borrowed Funds Used During Construction and Miscellaneous Items Capitalized Unbillcd Revenue Attiustments for Rcvcnuc Refunds Amortization of Pollution Control Equipment Percentage Repair Allowance Nuclear Fuel Lease Adjustments Book Provision for Subsidiary Mine Standby Costs Other Investment Tax Credits Applicable to Certain Deferred Income Taxes Total Defcrrcd Federal Income Taxes (net)

Total Deferred Invcstmcnt Tax Credits (net)

Total Federal Income Taxes as Reported 16 1982

$ (4,008)

(13,385)

(17,393)

'2,441 20,410 894 8,304 1,981 (1,539) 4,033 (6,900)

(2,180)

(14,911) 22,533 25,638

$ 30,778 1981 (in thousands)

$ 11,598 (4,914) 6,684 13,440 18,465 3,660 3,134 2,874 1,315 1,258 (1,605)

(6,459) 36,082 9,247

$52,013 1980

$ 28,299 (19,790) 8,509 16,689 13,330 (3,822)

(5,469) 3,767 5,005 (2,350) 74 7,616 34,840 11,124

$ 54,473

INDIANA& MICHIGANELECTRIC COMPANY t

AND S UBSIDIARIES

'The consolidated current Federal income taxes were significantly decreased in 1982by the tax loss ofa coal mining subsidiary, the tax effect of which was not reduced by investment tax credits. In addition, the Company was able to utilize investment tax credits in excess ofthe statutory limitation as a result of the lack of available credits of other System companies with taxable income.

The companies join in the filing of a consolidated Federal income tax return with their affiliated com-panies in the AEP System. The allocation of the AEP System's consolidated Federal income tax to the Sys-tem companies is in accordance with Securities and Exchange Commission (SEC) rules under the Public UtilityHolding Company Actof 1935. In 1981, the SEC amended its rules to permit the allocation ofthe benefit of current tax losses to the System companies giving rise to such losses in determining taxes currently pay-able. In prior years, in order to be consistent with rate-making, the benefits of these tax losses, without affecting taxes payable, were reallocated to the AEP System companies giving rise to such losses in deter-mining each System company's Federal income tax expense. The tax loss of the System parent company, American Electric Power Company, Inc., continues to be allocated to its subsidiaries with taxable income.

With the exception of the loss of the parent company, the new method of allocation approximates a separate return result for each company in the consolidated group. Consolidated investment tax credits utilized are generally allocated to the System companies giving rise to them.

Unused System investment tax credits at December 31, 1982, aggregated approximately

$ 192,000,000, of which $73,000,000, generated by the companies are available for their future utilization. Ofthe companies'nvestment tax credit carryforwards, approximately

$ 16,000,000 has been applied as a reduction ofdeferred income taxes prior to December 31, 1982.

The System has entered into a preliminary agreement with the Internal Revenue Service MRS) for the settle-ment ofmost ofthe issues from the audit ofthe consoli-dated Federal income tax returns for the years 1970-1976. This settlement agreement is subject to final gov-ernmental approval. Several issues regarding the 1974-1976 returns are not covered by the settlement agree-ment and are subject to future disposition. Returns for the years 1977 and 1978 have been reviewed by the IRS, and additional taxes for these years have been pro-posed, some ofwhich the System companies have pro-tested. In the opinion of management, the final resolu-tion of open matters willnot have a material effect on the earnings of the Company.

4. Common Stock, Premiums on Capital Stock and Other Paid-in Capital:

The Company received from its parent cash capital contributions of $50,000,000 in 1982,

$90,000,000 in 1981 and $50,000,000 in 1980. In 1982, 1981 and 1980 a credit to other paid-in capital of$ 131,000, $365,000 and

$94,000, respectively, represented the excess of par value over cost of cumulative preferred stock reac-quired by the Company to meet sinking fund require-ments. There were no other changes in any of the aforementioned accounts in 1982, 1981 or 1980.

5. Retained Earnings:

Various restrictions on the use of retained earnings for cash dividends on common stock and other pur-poses are contained in or result from covenants in mortgage indentures, debenture and.bank loan agree-ments, charter provisions, and orders ofregulatory au-thorities. Approximately $48,400,000 at December 31, 1982, was so restricted.

17

NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)

6. Cumulative Preferred Stock:

At December 31, 1982, authorized shares of cumulative preferred stock were as follows:

Par Value Shares Authorized

$ 100 2,250,000 25 11,200,000 The cumulative preferred stock is callable at the option ofthe Company at the price indicated plus accrued dividends.

The involuntary liquidation preference is par value. Unissued shares ofthe cumulative preferred stock may or may not possess mandatory redemption characteristics upon issuance. The Company issued and sold 1,600,000 shares of the $3.63 series in 1981.

A. Cumulative Preferred Stock Not Subject to Mandatory Redemption:

Series Current Call Price Redemption Restricted Prior to Par Value Shares Outstanding Amount December 31, 1982 1981 (in thousands) 4$%

4.56%

4.12%

7.08%

7.76%%uo 8.68%

$2.15

$2.25

.. $ 106.125 102 102.728 104.68 105.38 107.44 26.61 27.25 3/I/83

$ 100 100 100 100 100 100 25 25 120,000 60,000 40,000 300,000 350,000 300,000 1,600,000 1,600,000

$ 12,000 6,000 4,000 30,000 35,000 30,000 40,000 40,000

$ 197,000

$ 12,000 6,000 4,000 30,000 35,000 30,000 40,000 40,000

$ 197,000 B. Cumulative Preferred Stock Subject To Mandatory Redemption:

Series (a)

Current Call Price Redemption Restricted Prior to Par Value Shares Outstanding Amount December 31, 1982 1981 (in thousands) 12% (b)

$2.75 (c)

$3.63 (d)

.. $ 112 27.75 28.63 10/I/84 11/I/86 Less Sinking Fund Requirements Due Within One Year

$ 100 25 25 244,465 1,600,000 1,600,000

$ 24,447 40,000 40,000 104,447 447

$ 104,000

$ 25,509 40,000 40,000 105,509 9

$ 105,500 (a) The minimum sinking fund provisions ofthe series subject to mandatory redemption aggregate $ 1,500,000 in the year 1983, and $3,500,000 in 1984, 1985, 1986 and 1987.

(b) Asinking fund for the 12% series requires the Company to provide, on or before October I ofeach year, forthe redemption of 15,000 shares ofsuch series. This provision may be satisfied through shares previously purchased or by redemption at $ 100 a share. The Company has the right, on each sinking fund date, to redeem an additional 15,000 shares. AtDecember 31, 1982, the Company had reacquired 10,535 shares inanticipation of future sinking fund requirements.

Unless all sinking fund provisions have been met, no distribution may be made on the common stock.

(c) Acumulative sinking fund for the $2.75 series requires the Company to redeem 80,000 shares on each October I commencing on October I, 1984. The Company has the option to credit shares purchased or otherwise acquired in lieu ofredeeming shares for the sinking fund and has the noncumulative option to double the number of shares to be redeemed in any year on and after October I, 1984.

(d) Acumulative sinking fund for the $3.63 series requires the Company to redeem 80,000 shares on each January I commencing on January I, 1987. The Company has the option to credit shares purchased or otherwise acquired in lieu ofredeeming shares for the sinking fund and has the noncumulative option to double the number of shares to be redeemed in any year on and after January I, 1987.

INDIANA& MICHIGANELECTRIC COMPANY AND SUBSIDIARIES First Mortgage Bonds Sinking Fund Debentures Installment Purchase Contracts Other Long.term Debt

$ 1,202,904 20,964 159,073 14,534

$ 1,203,648 21,930 158,936 19,530 Less Portion Due Within One Year Total 1,397,475 92,970 1,404,044 105,542

$ 1,304,505

$ 1,298,502 First mortgage bonds outstanding were as follows:

December 31, 1982 1981 (in thousands)

% Rate Due 3Y4 1982 January I IOY4 1982 June I 3%

1983 September I I I 1983 September I

314i 1984 October I 101(i 1984 Dec. I (b)(c) 10 1985 March I (c)

IOY~

1987 January I 13$

1987 February I 37(i 1988 February I 4'988 November I 14N 1989 March I 11%

1990 Junc I 15%

1991 November I 16Yi 1992 April I (a) 4%

1993 August I 7

1998 May I 87(i 2000 April I 916 2003 June I (c) 8%

2003 December I 9Yi 2008 March I Unamortized Discount (net).....

13,762 60,000 15,082 56,938 10,500 80,000 55,000 22,974 17,557 120,000 80,000 40,000 100,000 42,902 35,000 50,000 265,500 40,000 100,000 (2,311) 16,046 70,000 13,762 60,000 15,082 59,250 11,250 80,000 55,000 22,974 17,557 120,000 80,000 40,000 42,902 35,000 50,000 277,000 40,000 100,000 (2,175)

Less Portion Due Within One Year Total 1,203,648 100,547 1,202,904 88,200

$ 1,114,704

$1,103,101 (a) Issued by the Company in April 1982.

(b) Guaranteed by American Electric Power Company, Inc.

(c) Sinking fund payments are required as follows:

10%%uo series duc 1985 $750,000 annually on March l.

10%% series due 1984 $2,250,000 annually on December I, through 1983, with the noncumulative election to redeem an additional $2,250,000 in each year.

916% series due 2003 $ 11,500,000 annually on June I, through 1991 and $ 13,500,000 annually on June I, 1992 through 2002 with the noncumulative option to redeem an additional amount in each ofthe specified years from a minimum of $ 100,000 to a maximum equal to the scheduled requirement for each year, but with a maximum optional redemption, as to all years in the aggregate, of $75,000,000.

7. Long-term Debt, Lines of Credit, and Compensating Balances:

Long-term debt by moor category was outstanding as follows:

December 31, 1982 1981 (in thousands)

The indentures relating to the first mortgage bonds contain improvement, maintenance and replacement provisions requiring the deposit of cash or bonds with the trustee, or in lieu thereof, certification ofunfunded property additions. The Company has elected to use unfunded property additions to meet these provisions in the past.

Sinking fund debentures outstanding were as follows:

December 31, 1982 1981 (in thousands)

$ 10,104

$ 10,690 10,829 11,201 31 39

$20,964

$21,930 5Vs% Due 1986 June I 7Y~% Due 1998 May I Unamortized Premium Total Installment purchase contracts have been entered into by the Company in connection with the issuance of pollution control revenue bonds by governmental authorities as follows:

December 31, 1982 1981 (in thousands)

% Rate Date City of Lawrenceburg, Indiana:

8Y, 2006 July I 7

2006 May I 6~4 2006 May I City of Rockport, Indiana:

9Vs 2005 June I 9Y4 2010 June I City of Sullivan, Indiana:

7%

2004 May I 67(i 2006 May I 716 2009 May I Unamortized Discount Total

$ 25,000 40,000 12,000

$ 25,000 40,000 12,000 6,500 33,500 6,500 33,500 7,000 25,000 13,000 (3,064)

$ 158,936 7,000 25,000 (2,927)

$ 159,073 Under the terms ofcertain installment purchase con-tracts, the Company is required to pay purchase price installments in amounts suAicient to enable the cities to pay interest on and the principal (at stated maturities and upon mandatory redemption) of related pollution control revenue bonds issued to finance the construc-tion of pollution control facilities at certain generating plants of the Company.

NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)

Other long-term debt outstanding consisted of:

December 31, 1982 1981 (in thousands)

Coal Reserve Obligations Payable in Equal Annual Installments Through 1985 with Interest at 8%

Notes Payable due 1983 Through 1985, 6%-7%

$ 14,212

$ 18,950 322 580 14,534 19,530 4,770 4,995

$ 9,764

$ 14,535 premium or discount, 982 is due as follows:

Principal Amount (in thousands)

Less Portion Due Within One Year Total Long-term debt, excluding outstanding at December 31, 1

1983 1984 1985 1986 1987 Later Years Total 92,970 86,955 25,996 21,029 146,800 1,028,933

$ 1,402,683

8. Supplementary Income Statement Information and Related-Party Transactions:

Electric operating revenues shown in the Consoli-dated Statements of Income include sales of energy to AEP System companies ofapproximately $ 18,800,000, At December 31, 1982 and 1981, the principal amounts of debentures reacquired in anticipation of sinking fund requirements were

$2,067,000 and

$ 1,909,000, respectively. The Company may make ad-ditional debenture or first mortgage bond sinking fund payments of up to $14,500,000 annually.

The Company had unused short-term bank lines of credit ofapproximately $330,000,000 and $387,000,000 at December 31, 1982 and 1981, respectively, under which notes could be issued with no maturity more than 270 days. The available lines of credit are subject to withdrawal at the banks'ption, and $276,000,000 and

$334,000,000 at December 31, 1982 and 1981, respec'-

tively, ofsuch lines are shared with other AEP System companies.

In accordance with informal agreements with the banks, compensating balance deposits ofup to 10% or equivalent fees are required to maintain the lines ofcredit and on any amounts actually borrowed, gener-ally either additional compensating balance deposits of up to 10% are maintained or adjustments in interest rates are made.

Substantially all bank balances are maintained by the Company to compensate the banks for services and for the Company's share ofboth used and available lines of credit.

Purchased Power (a)

Interchange Power (net):

AEP System Electric Utilities Other Companies (b)

Taxes Other Than Federal Income Taxes:

Real and Personal Property Taxes................

State Gross Sales, Excise and Franchise Taxes and Miscellaneous State and Local Taxes State Income Taxes Social Security Taxes Federal and State

$ 40,817

$ 38,557

$ 42,147 116,666 100,960 87,111 (2,800)

(398)

(613)

$ 154,683

$ 139,119

$ 128,645

$ 19,485

$ 18,958

$ 16,193 8,567 708 3,807

$32,567 9,399 1,074 3,267

$32,698 7,309 165 2,629

$26,296 Fuel for Electric Generation includes charges relating to mining operations, as follows:

Maintenance

$3,424

$5,680 Depreciation, Depletion and Amortization.....

4,284 5,653 Taxes Other Than Federal Income Taxes........

2,109 1,336 1,061 (a) Includes power purchased from Ohio Valley Electric Corpora-tion (OVEC) of approximately $20,229,000 in 1982, $ 15,066,000 in 1981 and $ 15,837,000 in 1980.

(b) Includes interchange power sold to OVEC of approximately

$143,000 in 1982, $ 186,000 in 1981 and $386,000 in 1980.

Charges to operating expenses for royalties and for advertising are less than 1% of gross revenues in each year.

Sales and purchases ofenergy and interchange power transactions are regulated by the various commissions having jurisdiction.

American Electric Power Service Corporation pro-vides certain services to the Company and the affiliated companies in the AEP System. The costs ofthe services are determined by the service company on a direct charge basis to the extent practicable and on reasonable bases of proration for indirect costs. The charges for services are made on a cost basis and include no com-pensation for the use of equity capital, all of which is furnished to the service company by AEP. The service company is subject to the regulation of the SEC under the Public UtilityHolding Company Act of 1935.

$3,778 4,434

$ 19,100,000 and $ 17,400,000 for the years ended De-cember 31, 1982, 1981 and 1980, respectively.

Operating expenses shown in the Consolidated Statements ofIncome include certain items not shown separately, as follows:

Year Ended December 31, 1982 1981 1980 (in thousands) 20

INDIANA MICHIGANELECTRIC COMPANY AND SUBSIDIARIES

9. Commitments and Contingencies:

Constrnction The construction budget of the companies for the year 1983 is estimated at $ 127,000,000 and, in connec-tion therewith, commitments have been made.

AEP Generating Company (AEGCO), a newly or-ganized subsidiary company of AEP, commenced in April 1982 to acquire a 35% interest in the Company's 2.6 million kilowatt capacity Rockport Plant currently under construction, on a buy-in basis. The total esti-mated cost ofthe Rockport Plant is $2.16 billion. Itwas anticipated that Kentucky Power Company (KEPCO),

an operating subsidiary of AEP, would also acquire a 15% interest in the Rockport Plant on a buy-in basis; however, in August 1982 the order of the Kentucky Public Service Commission (KPSC) approving the ac-quisition was remanded back to itfor a specific finding offact with respect to the AEP System interconnection agreement.

Pending further order by KPSC, KEPCO ceased making expenditures in connection with the construction ofthe Rockport Plant and AEGCO is cur-rently providing for all construction expenditures. The 1983 estimate of construction costs for the Company reflects the assumption by the Company's affiliates of the responsibility of providing for additional construc-tion expenditures withrespect to the Rockport Plant, to reduce the Company's ownership interest in the Plant to 50% by late 1984, the estimated date of commercial operation of the first unit of the two-unit Plant.

Ohio Valley Electric Corporation AEP, Columbus and Southern Ohio Electric Com-pany (C&SOE), a subsidiary ofAEP, and several unaf-filiated utilitycompanies jointlyown Ohio Valley Elec-tric Corporation (OVEC), which supplies the power requirements of a gaseous diffusion plant near Portsmouth, Ohio owned by the Department ofEnergy (DOE). The aggregate equity participation ofAEP and C&SOE in OVEC is 42.1%. The proceeds from the sales of power by OVEC are designed to be sufficient for OVEC to meet its operating expenses and fixed costs, and to provide for a return on its equity capital.

The Company, as a sponsoring company, is entitled to receive from OVEC, and is obligated to pay for, the power not required by DOE in proportion to its power participation ratio, at present 7.6%. The DOE power agreement terminates in 1992.

Litigation On April 16, 1982, an action was commenced by 29 plaintiffs, almost all of whom are landowners, in the

'.S. District Court for the Southern DistrictofIndiana against the Army Corps of Engineers, the Company, AEP, five subsidiaries of AEP and two executive of-ficers ofcertain ofthese System companies, in connec-tion with the Rockport Plant and related transmission lines. The complaint contains three counts. The first count alleges that the Corps of Engineers improperly issued permits for the plant and transmission lines be-cause ofdeficiencies in an environmental impact state-ment. The plaintiffs are seeking an injunction to pro-hibit further land acquisition, construction and approv-als of construction until the defendants remedy the purported deficiencies.

The second count, which is brought as a purported derivative action on behalf of AEP and its shareowners, alleges that corporate assets have been dissipated by constructing the plant and re-lated transmission lines, and plaintiffs seek a judgment ofnot less than $700 millionand an irtjunction enjoining further waste and dissipation of corporate assets in connection with such construction. In the third count, the plaintiffs claim violations oftheir rights to due pro-cess, just compensation and equal protection ofthe law in connection with the use of condemnation proceed-ings, and they seek unspecified compensatory and exemplary damages from the two System executive officers named as defendants and the Company and another subsidiary, and injunctive relief enjoining the institution ofany further condemnation proceedings. A motion for summary judgment has been filed with re-spect to Count I, and motions to dismiss have been filed with respect to Counts II and III. The Company be-lieves that ithas meritorious defenses to the complaint.

In 1978, a retail customer of the Company com-menced an action, individuallyand as representative of an alleged class, in the U.S. District Court, alleging that the Company's lease of electric utilityassets from the City of Fort Wayne is in violation of Federal antitrust laws. The complaint seeks to have the lease declared null and void, asks that the Company be restrained from charging excessive prices for the purchase of electric power, seeks treble damages in an unspecified amount in respect ofallegedly excessive charges to residents of the CityofFort Wayne and seeks to restore the control of the electric utility assets in question to the City of Fort Wayne. In May, June and July, 1979 the Court granted in part and denied in part the Company's mo-tion to dismiss or for summary judgment. The Court dismissed plaintiff's allegations concerning abuse of a legally acquired monopoly but ruled that plaintiffs could continue to assert other theories of violation of Federal antitrust laws and certified a class ofresidential 21

NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued) customers who may maintain the action. The case was tried in March 1982 and is awaiting decision.

In 1975, the Federal Power Commission issued an order instituting an investigation under the Federal Power Act concerning the reasonableness and pru-dence of the coal purchasing policies and practices of members ofthe System, the manner in which wholesale fuel adjustment clauses are implemented by System members, and related matters. Acomplainant and eight intervenors are also participating in the proceeding. In 1978, the FERC staff issued a preliminary report which alleged overcharges on the part of the entire System, and of which only a portion relates to the Company's operations. The report also questioned certain aspects of the System's fuel policies, including the AEP Sys-tem's decision to expand its use of coal from mines owned by affiliates and its use of Western coal. In November 1979, the FERC staff submitted its final recommendations to the administrative law judge. The final recommendations urge refunds of alleged over-charges, corrections of alleged improper coal account-ing and pricing practices, disallowances ofcertain fuel costs associated with Western coal acquisitions, revi-sion of FERC regulations regarding affiliate fuel costs and establishment ofhearing procedures to resolve cer-tain of the issues and that a separate investigation be instituted concerning System administration of long-term fuel supply contracts.

The System companies have submitted a written response supporting the deci-sions previously made by the System companies.

On February 14, 1980, FERC issued an order directing the administrative law judge immediately to certify to FERC the entire record in the proceeding for review by the Commission and ordered that the procedural schedule be placed in abeyance, pending a further di-rective. On March 18, 1980, FERC ordered a new inves-tigation into the System's administration of certain long-term coal supply contracts with non-affiliated suppliers. On June 10, 1981 and July 29, 1981, FERC issued orders which included termination of certain portions of the original investigations, the referral of other portions to the Chief Accountant of FERC for resolution (which have been resolved), and the ordering of a hearing, which is currently in its discovery phase, relating to the procurement ofWestern coal from mines operated by the System and from non-affiliated sources in the lightofthe possible availability ofcoal from other sources. The Company cannot assess the outcome or significance of this proceeding.

Environmental Matters The companies are subject to regulation by Federal, state and local authorities with regard to air and water 22 quality control and other environmental matters, and are subject to zoning and other regulation by local au-thorities. Although the cumulative, long-term effect of changing environmental requirements upon the com-panies cannot be estimated at present, compliance with such requirements may make it necessary, at costs which may be substantial, to retrofit existing facilities with additional air pollution control equipment; to con-struct cooling towers or some other closed-cycle cool-ing systems; to undertake new measures in connection with the storage, transportation and disposal of by-products and wastes; to curtail or cease operations at existing facilities and to delay the commercial operation of, or make design changes with respect to, facilities under construction. Environmental requirements may also affect the abilityofthe Company to issue additional first mortgage bonds under its mortgage because of covenants and conditions relating to compliance with governmental requirements.

Legislative proposals are pending before the United States Congress which expressly seek to control acid deposition in the eastern portion ofthe United States. If any of these bills became law, stringent controls upon the emission ofsulfur dioxide willbe required at exist-ing Company generating plants. These controls would entail very substantial capital and operating costs.

Nuclear Insurance The Price-Anderson Actlimits the public liabilityofa licensee of a nuclear plant to $560 million for a single nuclear incident. The Company has insurance covering its two-unit Cook Nuclear Plant in the maximum avail-able amount of $ 160 million, and the balance of $400 millionis covered by a mandatory program ofdeferred premiums which would be assessed, after a nuclear incident, against all owners of nuclear reactors. When the 80th nuclear power reactor went into operation on November 15, 1982, the Nuclear Regulatory Commis-sion's indemnity obligation was eliminated. Now, as each new reactor is licensed to operate, the $560 million limitincreases by another $5 million. In the event of a nuclear incident the Company could be assessed

$5 million per incident for each of its units (subject to a maximum of $ 10 million per reactor in any year in the event of more than one incident).

The Company also has property insurance for dam-age to the Cook Plant facilities in the amount of $983 million. The primary layer of $500 million is provided through nuclear insurance pools. The excess coverage above $500 million is provided partially through insur-ance pools ($68 million), with the m@ority provided by Nuclear Electric Insurance Limited (NEIL), as de-scribed below.

lt

~

~

INDIANA& MICHIGANELECTRIC COMPANY AND S UBSIDIARIES The Company is a member ofNEILand has obtained insurance under NEIL's two programs. NEIL's extra-expense program provides insurance to cover extra costs ofreplacement power resulting from a prolonged accidental outage of a nuclear unit. The Company's policy insures against such increased costs up to $2.5 millionper week (starting 26 weeks after the outage) for one year and $ 1.25 millionper week forthe second year; or 80% ofthose amounts per unit ifboth units are down for the same reason. The Company would be subject to a retrospective premium of up to $7,765,630 per unit (five times annual premium) ifNEIL's losses exceed its accumulated funds. Additionally, the Company has also joined NEIL's excess property insurance program which presently provides $415 millionin coverage. The maximum assessment under this program could be

$9,016,020 (seven and one-half times the annual pre-mium on a 100% coverage basis).

Disposal ofSpent Nuclear Fuel and Nuclear Deconunissioning

'The Nuclear Waste Policy Act of 1982 establishes Federal responsibility for the permanent disposal of spent nuclear fuel. Disposal costs willbe paid by fees assessed against owners ofnuclear plants and deposited into the Nuclear Waste Fund created by the Act. For electricity generated and sold after April6, 1983 by the Company's Cook Nuclear Plant, the Company willpay a fee of 1.0 millper kilowatthour to the Fund. Calcula-tion and payment ofa one-time fee forspent nuclear fuel associated with generation prior to April 7, 1983 are subject to a rule-making determination by DOE. With respect to decommissioning, the Public Service Com-mission ofIndiana held in its Order dated December 22, 1982 that "a reasonable estimate for the costs of de-commissioning the (Cook Plant), when measured in 1982 dollars, should be set at $ 155,000,000." In certain of its jurisdictions, the Company is currently recover-ing, through inclusion in its current charges to custom-ers, a portion of the future costs associated with the disposal of spent nuclear fuel and with decommission-ing. Furthermore, in all its jurisdictions the Company will attempt to obtain regulatory approval for the re-covery of the remainder of such future costs.

that in the normal course ofbusiness, leases willgener-ally be renewed or replaced by other leases. The major-ity of the various rentals are included in leases having purchase options or renewal options for substantially all of the economic lives of the properties.

Rentals are analyzed as follows:

Year Ended December 31, 1982 1981 1980 (in thousands)

$96,000

$95,000

$88,000 Gross Rentals Less Rental Recoveries (including sublease rentals) (a)

Net Rentals (b) 3,000 3,000

$93,000

$92,000 3,000

$85,000 (a) Includes amounts paid for or reimbursed by associated companies.

(b) Classified as:

Operating Expenses Clearing and Miscellaneous Accounts (portions of which are charged to income)

$88,000

$87,000

$82,000 Capital Operating Leases (a)

Leases (in thousands) 1983 1984 1985 1986 1987 Later Years Total Future Minimum Lease Payments

$ 12,000 11,000 9,000 8,000 7,000 60,000 107,000

$ 11,000 11,000 12,000 12,000 12,000 191,000

$249,000 Less Estimated Interest Element Included Therein (b)..............

54,000 Estimated Present Value of Future Minimum Lease Payments.........

$ 53,000 (a) Excludes leases ofnuclear fuel, all ofwhich are capital leases.

Nuclear fuel rentals comprise the unamortized balance ofthe lessor's cost (approximately $ 122,000,000 at December 31, 1982), less salvage value, ifany, to be paid in proportion to heat produced, and carrying charges on the lessor's unrecovered cost. It is contemplated that portions ofthe presently leased material willbe replenished by addi-tional leased material.

(b) Interest rates used range from 4.9% to 18%.

5,000 5,000 3,000

$93,000

$92,000

$85,000 Future minimum lease payments, by year and in the aggregate, ofthe Company's capital leases and noncan-celable operating leases consisted of the following at December 31, 1982:

10. Leases:

The Company, as part ofits operations, leases prop-erty, plant and equipment under leases ranging in length from 1 to 35 years. Most ofthe leases require the Com-pany to pay related property taxes, maintenance costs and other costs of operation. The Company expects 23

NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)

Nuclear Fuel Coal. mining and Coal. transportation Equipment Other Transportation Equipment Real Estate Electric Distribution System Property...

Gross Properties under Capital Leases Less Accumulated, Provision for Amortization Net Properties under Capital Leases Obligations under Capital Leases (a) 1982 1981 (in thousands)

$253,000

$203,000 28,000 13,000 13,000 13,000 320,000 153,000

$ 167,000 14,000 14,000 13,000 13,000 257,000 113,000

$ 144,000

$ 175,000

$ 151,000 (a) Including an estimated

$60,000,000 and $56,000,000 at De-cember 31, 1982 and 1981, respectively, due within one year.

A new accounting standard will require the com-panies to capitalize leases beginning in 1984 for all cap-ital leases entered into after December 31, 1982 and all earlier leases beginning in 1987. This willnot have any effect on the Consolidated Statements of Income.

Included in the above analysis of future minimum lease payments and of properties under capital leases and related obligations are certain leases as to which portion ofthe related rentals are paid for or reimbursed by associated companies in the AEP System based on their usage of the leased property. The Company can-not predict the extent to which or proportion in which the associated companies will utilize the properties under such leases in the future.

The following is a pro forma analysis of properties under capital leases and related obligations assuming that such leases are capitalized:

December 31,

12. Unaudited Information On Inflation and Changing Prices:

The supplementary information in the statements below is presented in compliance withthe requirements ofthe Financial Accounting Standards Board (FASB).

The information is intended to disclose the effects of both general inflation and changing prices; however,

. the amounts should be considered approximations of such effects rather than precise measures since a num-ber of subjective judgments and estimating techniques were employed in developing the information.

Constant dollar amounts represent historical costs stated in terms ofdollars of equal purchasing power as measured by the average level of the 1982 Consumer Price Index for AllUrban Customers (CPI-U).

Current cost amounts reflect the changes in specific prices of property, plant and equipment from the date such assets were acquired to the present, and differ from constant dollar amounts to the extent that specific prices have risen at a different rate than the general inflation rate as measured by the CPI-U. The current cost of property, plant and equipment represents the approximate cost of replacing such resources and in-cludes utility plant in service, construction work in progress, land, land rights and other property and in-vestments.

Current cost amounts were determined primarily by applying appropriate indexes from the Handy-Whitman Index of Public UtilityConstruction Costs.

11. Unaudited Quarterly Financial Information:

Net Income'perating Operating Revenues Income (in thousands)

The following consolidated quarterly financial infor-mation is unaudited but, in the opinion ofthe Company, includes all adjustments (consisting ofonly normal re-curring accruals) necessary for a fairpresentation ofthe amounts shown:

Quarterly Periods Ended 1982 Mar. 31 Junc 30 Sept. 30 Dec. 31 1981 Mar. 31 June 30 Sept. 30 Dec. 31

'Before preferred

$241,513 183,212 202,372 182,706

$52,967 43,628 35,882 42,468 202,158 48,607 209,533 40,347 203,816 44,099 196,642 44,887 stock dividend requirements.

$38,910 30,472 25,331 26,310 26,858 21,799 27,162 27,521 24

1

~

~

~

INDIANAE% MICHIGANELECTRIC COMPANY AND SUBSIDIARIES Year. Ended December 31, 1982 Consolidated Statement of Income Adjusted for Effects of Changing Prices As Stated in the Primary Financial Statements Adjusted for General Inflation (constant dollar)

Adjusted for Changes in Specific Prices (current cost)

Operating Revenues Operating Expenses:

Operation:

Fuel for Electric Generation (a)

Purchased and Interchange Power (net)

Other Maintenance Depreciation, Depletion and Amortization (a)

Taxes Other Than Federal Income Taxes......

Federal Income Taxes Total Operating Expenses Operating Income Other Income and Deductions Net Interest Charges Preferred Stock Dividend Requirements Earnings (Loss) Applicable to Common Stock (b)

S 809,803 143,025 154,683 126,922 56,431 83,031 32,567 38,199 634,858 174,945 48,725 (102,647)

(28,628) 92,395 (in thousands)

S 810,000 145,000 155,000 127,000 56,000 183,000 33,000 38,000 737,000 73,000 49,000 (103,000)

(29,000)

$ (10,000)

S 810,000 145,000 155,000 127,000 56,000 184,000 33,000 38,000 738,000 72,000 49,000 (103,000)

(29,000)

S (11,000)

$ (17,000)

Increase in Specific Prices (cwrent cost) of Property, Plant and Equipment Held During the Year (c)..............

$ 403,000 Reduction to Net Recoverable Cost (d)

(185,000)

Effect of Increase in General Price Level (227,000)

Excess ofIncrease in General Price Level over Increase in Specific Prices After Reduction to Net Recoverable Cost (9,000)

Gain from Decline in Purchasing Power ofNet Amounts Owed (e).

74,000 74,000 Net 57,000 65,000 (a) As prescribed by the FASB, the items in the Consolidated Statement of Income that have been a adjusted are depreciation, depletion and amortization (including portions classified as fuel for electric generation and other income and deductions).

Depreciation, depletion and amortization charges were computed by applying current accrual rates to the various plant accounts (production, transmission, distribution, general and miscellaneous) after adjusting such accounts for the elfects of changing prices.

(b) Including the reduction to net recoverable cost, the loss from operations on a constant dollar basis and current cost basis would have been

$27,000,000 and $ 196,000,000, respectively.

(c) At December 31, 1982, current cost of property, plant and equipment nct ofaccumulated depreciation, depletion and amortization was

$5,613,000,000 while historical cost or net cost recoverable through depreciation, depletion and amortization was $2,857,000,000.

(d) The reduction to net recoverable cost ofproperty, plant and equipment (as expressed in terms ofinflation.adjusted cost) to historical cost recognizes that thc rate-making process limits the Company to recovery of the historical cost of the subject assets.

(e) To rellect properly the economics ofrate regulation in the Consolidated Statement ofIncome Adjusted for Effects ofChanging Prices, the reduction to net recoverable cost should be offset by the gain that results from the decline in purchasing power ofthe net amounts owed by the Company. During a period ofinflation, holders of monetary assets such as cash and receivables suffer a loss ofgeneral purchasing power while holders ofmonetary liabilities, generally long-term debt, experience a gain (because debt willbe repaid in dollars having less purchasing power).

The Company's gain from the decline in purchasing power ofits net amounts owed is primarilyattributable to the substantial amount ofdebt and cumulative preferred stock subject to mandatory redemption which has been used to finance utilityplant.

25

NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Concluded)

Five-Year Comparison of Selected Supplementary Data Adjusted for Effects of Changing Prices (dollar amounts are expressed in terms ofaverage 1982 dollars)

Year Ended December 31, 1982 1981 1980 1979 (in thousands, except index data)

$863,000

$870,000

$909,000 1978

$(10,000)

$ 1,051,000

$(20,000)

$ 1,054,000

$(20,000)

$(11,000)

$(316,000)

$ 1,064,000

$(9,000)

$ 1,051,000

$74,000

$ 153,000

$213,000

$230,000 289.2 272.1 246.8 217.5 Operating Revenues

$810,000 Historical Cost Iqformation AtltitstcdforGeneral inflation Income (Loss) from Operations (excluding reduction to net recoverable cost)

$(5,000)

$27,000 Net Assets at Year-end at Net Recoverable Cost

$ 1,064,000

$ 1,152,000 Current Cost lqformation Income (Loss) from Operations (excluding reduction to net recoverable cost)

$(9,000)

$8,000 Excess ofIncrease in General Price Level over Increase in Specific Prices after Reduction to Net Recoverable Cost

~ ~.

~........................

$(123,000)

$(254,000)

Net Assets at Year-end at Net Recoverable Cost....

$ 1,054,000

$ 1,152,000 General Financial Data Gain from Decline in Purchasing Power of Net Amounts Owed Average Consumer Price Index 195.4 General lqformation on Mining Operations Proven and Probable Coal Reserves at End of Year (thousands of tons) (Note) 411,377 412,546 413,964 415,023 Tons of Coal Mined (thousands)...................

1,168 779 1,059 669 Avcragc Market Price (at current cost per ton)......

$49.32

$63.92

$61.81

$61.16 Note: Proven reserves The estimated quantities of commercially recoverable reserves that, on the basis of geological, geophysical and engineering data, can be demonstrated with a reasonably high degree of certainty to be recoverable in the future from known mineral deposits by either primary or improved methods.

Probable rcscr ves The estimated quantities ofcommercially recoverable reserves that are less welldefined than proven reserves and that may be estimated or indicated to exist on the basis ofgeological, geophysical and engineering data.

26

INDIANAE% MICHIGANELECTRIC COMPANY AND SUBSIDIARIES Operating Statistics 1982 1981 1980 1979 1978 ELEcTRIc OPERATING REVBNUHs (in thousands):

From Kilowatt-hour Sales:

Retail:

Residential:

Without Electric Heating With Electric Heating Total Residential...............

Commercial Industrial Miscellaneous Total Retail Wholesale (sales for resale)

Total from Kilowatt-hour Sales..

Other Operating Revenues..............

Total Electric Operating Revenues

$125,798 68,793

$ 106,488 54,277

$ 95,474 53,455

$ 116,340 59,826

$ 102,543 55,458 148,929 95,229 119,856 7,644 158,001 106,151 127,815 6,099 160,765 108,764 116,165 6,150 176,166 117,725 134,519 6,953 194,591 127,470 137,152 7,568 371,658 220,137 398,066 280,639 391,844 346,513 435,363 360,096 466,781 325,468 591,795 4,050 678,705 4,308 738,357 4,326 795,459 16,690 792,249 17,554

$809,803

$812,149

$742,683

$683,013

$595,845 SQURcEs AND SALEs oF ENERGY (in millions of kilowatt-hours):

Sources:

Net Generated Steam:

Fossil Fuel Nuclear Fuel Net Generated Hydroelectric..

Subtotal Purchased Net Interchange Total Sources Less: Losses, Company Use, Etc.

Net Sources Sales:

Retail:

Residential:

Without Electric Heating With Electric Heating Total Residential..............

Commercial Industrial Miscellaneous Total Retail Wholesale (sales for resale)

Total Sales 4,587 12,349 77 17,013 2,154 3,775 22,942 1,243 21,699 2,472 1,540 4,012 2,803 3,701 197 10,713 10,986 21,699 6,373 13,167 98 19,638 1,570 3,704 24,912 1,239 23,673 2,467 1,513 3,980 2,748 4,021 199 10,948 12,725 23,673 6,719 13,153 85 19,957 1,883 3,669 25,509 1,426 24,083 2,493 1,549 4,042 2,716 3,932 195 10,885 13,198 24,083 6,443 11,614 79 18,136 811 5,389 24,336 1,386 22,950 2,389 1,619 4,008 2,629 4,380 194 11,211 11,739 22,950 7,231 10,101(a) 75 17,407 301 4,475 22,183 1,340 20,843 2,352 1,622 3,974 2,498 4,319 185 10,976 9,867 20,843 (a) Includes 69l millionkilowatt.hours as test generatiott. The fuel cost associated with such generation is charged to other operating expense.

27

OPERATING STATISTICS (Concluded) 1982 1981 1980 1979 1978 ANNUALCosTGF FUEL CoNsUMED (in cents): (a)

Cents per MillionBtu:

Coal Nuclear Overall Cents per Kilowatt-hour Generated:

Coal Nuclear Overall 189.59 49.55.

84.85 1.85

.53

.89 187.13 164.49 49.90 48.44 91.35 84.95 1.81 1.59

.54

.52

.95

.89 151.91 37.82 76.25 1.52

.41

.81 109.68 34.65 71.16 1.11

.38

.75 RBsIDENTIALSERVIGB AVBRAGEs:

Annual Kwh Use per Customer:

Total With Electric Heating Annual Electric Bill:

Total With Electric Heating Price per Kwh (in cents):

Total With Electric Heating 10,084 19,990

$489

$893 4.85 4.47 10,008 19,866 10,206 20,584

$443

$406

$785

$721 4.43 3.98 3.95 3.50 10,210 21,611

$402

$740 3.94 3.43 10,260 22,067

$389

$736 3.79 3.34 NuhIBER OF ELECTRIC CUSTohtERS:

Year-End:

Retail:

Residential:

Without Electric Heating With Electric Heating Total Residential.........

Commercial Industrial Miscellaneous Total Retail Wholesale (sales for resale)

Total Electric Customers 320,097 77,335 397,432 42,233 3,249 1,458 444,372 105 444,477 321,850 77,002 398,852 42,957 2,873 1,440 446,122 104 446,226 321,432 75,618 397,050 42,758 2,802 1,424 444,034 105 444,139 319,477 75,606 395,083 42,563 2,748 1,373 441,767 103 441,870 315,472 74,900 390,372 42,106 2,689 1,331 436,498 107 436,605 (a) Excludes effect of deferred collection of fuel costs.

28

INDIANA ICHIGANELECTRIC COMPANY Price Range of Cumulative Preferred Stock By Quarters (1982 and I98I)

Cumulative Preferred Stock 1982 Quarters 1st 2nd 3rd 4th 1981 Quarters 1st 2nd 3rd 4th

($ 100 Par Value) 4Ya% Series Dividends Paid Per Share Market Price $ Per Share (OTC)

Ask (high/low)

Bid (high/low) 4.56% Series Dividends Paid Per Share Market Price $ Per Share (OTC)

Ask (high/low)

Bid (high/low) 4.12% Series Dividends Paid Per Share Market Price $ Per Share (OTC)

Ask (high/low)

Bid (high/low) 7.08% Series Dividends Paid Per Share Market Price $ Per Share (NYSE) High Low 7.76% Series Dividends Paid Per Share Market Price $ Per Share (NYSE)High Low 8.68% Series Dividends Paid Per Share Market Price $ Per Share (NYSE)High Low 12% Series Dividends Paid Per Share Market Price $ Per Share (NYSE) High Low

($25 Par Value)

$2.15 Series Dividends Paid Per Share Market Price $ Per Share (NYSE)High Low

$2.25 Series Dividends Paid Per Share Market Price $ Per Share (NYSE) High Low

$2.75 Series Dividends Paid Per Share Market Price $ Per Share (NYSE) High Low

$3.63 Series*

Dividends Paid Per Share Market Price $ Per Share (NYSE)High Low

$ 1.14

$ 1.14

$ 1.14

$ 1.14

$ 1.14

$ 1.14

$ 1.14

$ 1.14

$ 1.03

$ 1.03

$ 1.03

$ 1.03

$ 1.03

$ 1.03

$ 1.03

$ 1.03

$ 1.77

$ 1.77

$ 1.77

$ 1.77 46N42'744 50 44 55 48

$ 1.94

$ 1.94

$ 1.94

$ 1.94 50845'2 47Ya 56'8 61 Ye 52V4

$2.17

$2.17

$2.17

$2. 17 55 50N 58'2 59V457'757%

$3.00

$3.00 SIC77'6'9'479V4 98'9

$ 1.77

$ 1.77

$ 1.77

$ 1.77 49'7'6 47'6 44 42 4IN

$ 1.94

$ 1.94

$ 1.94

$ 1.94 54 53'0 51V4 51Va 486 48 45

$2.17

$2.17

$2.17

$2.17 61 58 56 56'5Ya 55 50'4

$3.00

$3.00

$3.00

$3.00 93'1 SSYe 84 85 SSN 78 78Ve

$0.5375

$0.5375

$0.5375

$0.5375

$0.5375

$0.5375

$0.5375

$0.5375 14'3Ye 1513'5Ys 13V4 17Ya 15Va 15'3N 14N 13N ISV~

12N

$0.5625

$0.5625

$0.5625

$0.5625

$0.5625

$0.5625

$0.5625

$0.5625 147813'5%13'6'4V4 ISV~

15%

1614'613%

15 13Ys 16 13

$0.6875

$0.6875

$0.6875

$0.6875

$0.6875

$0.6875

$0.6875

$0.6875 ISV~

I7V~

18%

18%

20 164 21 20 20 ISYe 22'9N 22 17 ISYs 18

$0.63

$0.90375

$0.90375

$0.90375 25%

22N 26N 23 29K 25'1.03125

$ 1.03125

$ 1.03125

$ 1.03125

$ 1.03125

$ 1.03125

$ 1.03125

$ 1.03125 OTC Over-the-Counter NYSE New York Stock Exchange

'Issued in November 1981 Note The above bid and asked quotations represent prices between dealers and do not represent actual transactions.

Market quotations provided by National Quotation Bureau, Inc.

Dash indicates quotation not available.

29

The Company's Annual Report (Form 10-K) to the Securities and Exchange Commission will be available-on or about March 31, 1983 to shareowners upon written request and at no cost.

Please address such requests to:

Mr. T. P. Bowman American Electric Power Service Corporation 180 East Broad Street Columbus, Ohio 43215 Transfer Agent and Registrar of Cumulative Preferred Stock Morgan Guaranty Trust Company of New York 30 West Broadway, New York, N.Y. 10007

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1983 Internal Cash Flow Projection for Donald C.

Cook Nuclear Plant (Millions)

Actual 1982 Projected 1983 Net income after taxes Less dividends paid Retained earnings Adjustments:

Depreciation and amortization Deferred income taxes and investment tax credits AFUDC Total adjustments Internal cash flow Average quarterly cash flow Average cash balances and short term investments Total 121.0 129.4

~8. 4 87.5 48.2 (111.3)

24. 4 16.0 4.0 20.0 24.0 134 136 91 61 (117) 35 33 8.2

14. 0 22.2

% Ownership in all operating nuclear units:

Unit 1 and Unit 2 100%

Maximum Total Contingent. Liability $ 20.0 million (2 units)

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