ML17326B034
| ML17326B034 | |
| Person / Time | |
|---|---|
| Site: | Cook  |
| Issue date: | 12/18/1985 |
| From: | Alexich M INDIANA MICHIGAN POWER CO. (FORMERLY INDIANA & MICHIG |
| To: | Office of Nuclear Reactor Regulation |
| References | |
| AEP:NRC-0909B, AEP:NRC-909B, NUDOCS 8512270045 | |
| Download: ML17326B034 (39) | |
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ACCESSION NSR: 8512270045 DOC. DATE: 85/12/18 NOTARIZED:
NO DOCRET FACIL:50-315 Donald C.
Cook Nuclear Power Pianti Unit 1> Indiana 5
05000315 50-31b Donald C.
Cook Nuclear Power Plant> Unit 2> Indiana 5
0500031b AUTH. MANE AUTHOR AFFILIATION ALEXICHpN. P.
Indiana Rc Michigan Electric Co.
REC IP. NANE RECIPIENT AFFILIATION Office of Nuclear Reactor Regulation>
Director (post 851125
SUBJECT:
'Forwards financial info {'r 1984 5 pro)ected cash flow for 1985.
DISTRIBUTION CODE:
N004L COPIEB RECEIVED: LTR ENCL SIZE:
TITLE: Annual Financial Reports NOTES:
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INDIANA 8 MICHIGAN ELECTRIC COMPANY P.O. BOX 16631 COLUMBUS, OHIO 43216 December 18, 1985 AEP:NRC:0909B 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:
Attachment 1 contains three copies of the Indiana s Michigan Electric Company's (IGMECo) Annual Report for 1984.
Attachment 2 contains three copies of IsMECo's projected cash flow for 1985.
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 insure its accuracy and completeness prior to signature by the undersigned.
Very truly yours, I
/
M. P.
exichQ 1 gf~
Vice President@I 11 Attachments cc:
John E. Dolan W. G. Smith, Jr.
Bridgman G. Bruchmann R. C. Callen G. Charnoff NRC Resident Inspector Bridgman 8SIP
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1985 Internal Cash Flow Projection for Donald C.
Cook Nuclear Plant (Millions)
Actual 1984 Projected 1985 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 142.2 143.5 (1.3) 88.3 112.7 (116.8) 84.2 82.9 20.7 42.0 62.7 140 143 (3) 92 72 (50) 114 27 45 72
% Ownership in all operating nuclear units:
Unit 1 and Unit 2
100%
Maximum Total Contingent Liability $ 20.0 million (2 units)
ANNUALREPORT t984 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 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 Auditors'pinion Operating Statistics Dividends and Price Ranges of Cumulative Preferred Stock 6-8 10-11 12 13 14-26 27 28-29 30
INDIANA& MICHIGANELECTRIC COMPANY One Sutntnit Square, P.O.
60, Fort Wayne, India'na 46801 Background of the Company INDIANAk MlcHIGAN ELEGTRlc CQMPANY (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 449,000 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 electric 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 following other AEP System companies to form a single integrated power system: AEP Generating Company, Appalachian Power Company, Columbus and Southern Ohio Electric Com-pany, Kentucky Power Company, Kingsport Power Company, Michigan Power Company, Ohio Power Company and Wheeling Electric Company. The Company is also interconnected with the following other utilities: Central Illinois Public Service Company, The Cincinnati Gas &, Electric Company, Commonwealth Edison Company, Consumers Power Company, Illinois Power Com-pany, Indiana-Kentucky Electric Corporation (a subsidiary of Ohio Valley Electric Corporation),
Indianapolis Power & Light Company, Northern Indiana Public Service Company and Public Service Company of Indiana, Inc.
Directors FRANK N. BIEN (a)
W. A. BLACK LAWRENCE R. BRUNKE (b)
P. F. CARL, JR. (C)
RrCHARD E. DISBROW JOHN E. DOLAN WILLIAMN. D'ONOFRIO (d)
G. E. LEMAsTERs (c)
GERALD P. MALONEY RIcHARD C. MENGE C. W. ROAHRIG (b)
J. F. STARK BEYERLY I. STEARs (e)
JosEPH H. VIPPERMAN (f)
W. S. WHITE, JR.
Overs W. S. WHITE, JR.
Chairman of tire Board and Chief Exectt tive Officer W. A. BLAcK President and Chief Operating Officer J. F. STARK Senior Vice President Mtt.TGN P. At.ExtcH, Adm. USN Ret.
Vice President FRANK N. BIEN (a)
Vice President RrCHARD E. DISBROW Vice President JOHN E. DOLAN Vice President WILLIAMN. D'ONOFRIO (d)
Vice President A. JOSEPH DOWD Vice President RICHARD F. HERING Vice President GERALD P. MALONEY Vice President RICHARD C. MENGE Vice President BEVERLY I. STEARs (e)
Vice President JOSEPH H. VIPPERMAN (f)
Vice President PETER J. DEMARIA Treasurer JOHN R. BURTON Secretary ELIO BAFILE (g)
Assistant Secretary and Assistant Treasurer ALLENH. STUHLMANN(h)
Assistant Secretary and Assistant Treasurer JOHN F. DrLORBNZO, JR.
Assistant Secretary WILLIAhtC. HARVEY Assistant Secretary CARL J. Moos Assistant Secrelary Wtr.r.rAht E. OLSON (e)
Assistant Secretary JoHN B. SHINNocK (d)
Assistant Secretary JOAN ST. JAhtES Assistant Secretary LEQNARD V. AssAma Assistant Treasurer BRUCE M. BARBER Assistant Treasurer JAhrES D. HUEBNER (i)
Assistant Treasurer GERALD R. KNORR Assistant Treasurer The principal occupation ofeach ofthe above directors and ofjicers ofIndiana &
Michigan Electric Company, with ten exceptions, ls as an employee ofAmerican Electric Power Service Corporation. The exceptions arc Elio Bafile, W. A. Black, Lawrence R. Brunke, IVilliamiV. D'Onofrio, Richard C. htenge, Carl J. htoos, C. IV. Roahrig, J. F. Stark, Beverly I. Stears, and Allen H. Sruhlmann whose principal occupauons are as officers or employees ofIndiana &Michigan Electric Company.
(a) Resigned January I, 1985 (b) Elected April24, 1984 (c) Resigned April24, 1984 (d) Elected January I, 1984 (e) Resigned January 1, 1984 (I) Elected January I, 1985 (g) Elected April 16, 1984 (h) Resigned April 16, 1984 (i) Elected September 1, 1984
INDIANA4%. MICHIGANELECTRIC COMFANY AND SUBSIDIARIES Selected Financial Data Year Ended December 31, 1984 1983 1982 (in thousands) 1981 1980 INCOME STATEMENTS DATA:
OPERATING REVENUES ELECTRIC TOTAL OPERATING EXPENSES OPERATING INCOME TOTAL OTHER INCOME AND DEDUCTIONS INCOME BEFORE INTEREST CHARGES NET INTEREST CHARGES CQNsoLIDATED NET INcoMEbefore, preferred stock dividend requirements PREFERRED STOCK DIVIDENDREQUIREMENTS EARNINGS APPLICABLBTo COMMON STOCK
$965,972 785 814 180,158 53,044 233,202 91,017
$868,980 686,237 182,743 53,629 236,372 96,496
$809,803 634,858 174,945 48,725 223,670 102,647 139,876 28,384 121,023 28,628 142,185 27,705
$114 488
$ 111,492
$ 92,395
$812,149 634,209 177,940 29,713 207,653 104,313
$742,683 577,502 165,181 30,541 195,722 99,151 103,340 23,624 96,571 23,242
$ 79,716
$ 73,329 1984 1983 December 31, 1982 (in thousands) 1981 1980 BALANCESHEETS DATA:
ELECTRIC UTILITYPLANT ACCUMULATEDPROVISIONS FOR DEPRECIATION, DEPLETION AND AMORTIZATION NET ELECTRIC UTILITYPLANT TOTAL ASSETS 836,963 760,889 685,789 611,699 2,878,042 2,905,934 2,855,325 2,745,288 3,463,874 3,343,963 3,135,884 3,035,614 561,773 2,555,608 2,826,172
$3,715,005
$3,666,823
$3,541,114
$3,356,987
$3,117,381 COMMON STOCK, PREMIUMS ON CAPITAL STOCK AND OTHER PAID-IN CAPITAL........
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RETAINED EARNINGS CUMULATIVEPREFERRED STOCK:
NOT SUBJECT TO MANDATORYREDEMPTION SUBJEcTTo MANDATQRYREDEMPTIGN (a)
LONG-TERM DEBT (a) 828,344 94,317 197,000 93,197 1,347,623 807,925 95,616 197,000 99,497 1,445,704 777,783 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 (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 &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 increased 11.2% in 1984 compared to 'a 7.3% increase in 1983, while kilowatt-hours sales increased 9.7% and 1.6% in the
'same periods. The increase in operating revenues dur-ing 1984 was primarily due to the increase in kwh sales along with additional rate reliefand increased recovery of fuel costs. This increase was partially offset by a provision for refund relating to the Federal Energy Regulatory Commission investigation of the AEP Sys-tem's policies withrespect to coal purchasing and prac-tices (see "Regulatory Matter" in Note 9 of the Notes to Consolidated Financial Statements).
The 1983 in-crease in operating revenues was mostly due to addi-tional rate relief and increased kwh sales.
The im-provement in energy sales in 1983 reflects the hot sum-mer and colder weather in late fall and early winter as well as the gradual recovery of the economy in the Company's service area.
Revenues from retail customers (residential, com-mercial and industrial) were up 9.9% in 1984 on an increase of 3.4% in kwh sales while in 1983 these rev-enues were up 10.6% with a corresponding increase of 2.7% in kwh sales. The 1984 increase in energy sales includes a 6.6% increase in sales to industrial custom-ers, reflecting the continued improvements in the economy in the Company's service area. This, along with rate relief and increased fuel cost recovery, ac-counts for the retail revenue increase realized during 1984. The 1983 increase in revenues was largely due to higher rates which went into effect during 1983.,
The rebound in energy sales to other utilities that began in the last half of 1983 continued in 1984.
Wholesale revenues increased 16.7% in 1984 on an in-crease of 16.1% in kwh sales. Prior-year wholesale rev-enues increased 5.5% on an increase of 0.6% in kwh sales.
The continued recovery in wholesale sales to other electric utilities is a reflection of how the Com-pany is able to take advantage of its high operating availability, low operating costs and efficien transmis-sion system to increase its "opportunity sales" to neighboring utilities.
Purchased and interchange power expense increased 6.4% in 1984 and 2.8% in 1983. The 1984 increase is the result of the purchase of an affiliated company's share of the generation of the Rockport Plant Unit No.
1 which began producing test energy in September 1984 and was placed in commercial operation on December 10, 1984. This purchase was partially offset by de-creased interchange transactions with other AEP Sys-tem companies and other utilities. The 1983 increase largely reflects increased purchases from nonaffiliated utilities and decreased interchange transactions with other AEP System companies.
Total operating expenses increased 14.5% in 1984 compared to an 8.1% increase during 1983. The 1984 increase was primarily due to increases in fuel expense and other operation expenses.
Fuel expense increased by 20.4% mostly because ofa higher average cost offuel and increased internal generation. Other operation ex-penses increased 32.2% primarily as a result of the refueling and general maintenance at the Company's nuclear plant as well as the completion and placing in commercial operation ofRockport Plant Unit No. 1. In 1983 Federal income taxes increased 85.8% due largely to an increase in pre-tax book income and fuel expense increased 11.9% as a result of increased generation levels. Future fuel expenses willbe affected by gener-ation levels, contractual agreements between the coal industry and the.United Mine Workers ofAmerica and the possibility of yet more stringent environmental re-strictions on burning certain types ofcoal. Whether or not future increases in fuel costs willadversely affect earnings willdepend on the Company's continued abil-ity to recover such costs promptly in the face ofefforts by certain 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-
INDIANA& MICHIGANELECTRIC COMPANy AND SUBSIDIARIES gram over the three-year period 1985-1987 are esti-mated to be approximately
$692 million. Substantial additional expenditures may be required if existing generating plants require modification or additional facilities to comply with future environmental quality standards.
See "Environmental Matters" in Note 9 of the Notes to Consolidated Financial Statements for additional information. The construction program is reviewed continuously and revised from time to time in response to revised projections of load growth and changes in the cost and availability of capital. These reviews have resulted in extending construction schedules ofa number ofprojects with the objective of reducing the level ofannual construction expenditures.
However, deferrals of construction projects may have an adverse effect on the quality ofthe Company's serv-ice to its customers in the future, and any resulting reductions in current construction costs will,in the long run, be at least partially offset by general inflationary trends as well as possible cancellation charges. In addi-tion, when the completion date of a project under con-struction is substantially delayed, it becomes more ex-pensive, both because ofthe foregoing factors and be-
.cause certain costs, principally financing costs, con-tinue to accrue until the facilityis placed in commercial operation.
It is estimated that 76% ofthe Company's projected construction expenditures for 1985-1987 will be fi-nanced with internally generated funds. The additional amounts needed, in excess ofother available funds, will have to be raised externally, as in the past, through sales of securities and investments in the Company's common equity by AEP. The Company initially fi-nances current construction expenditures in excess of available internally generated and other funds by issu-ing unsecured short-term debt (commercial paper and bank loans) and then periodically reduces short-term debt with the proceeds of sales of long-term debt se-curities and preferred stock and withinvestments 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 Actof 1935 and by restrictions in its charter and in certain debt instru-ments. At December 31, 1984, the Company had re-ceived authorizations from the Securities and Ex-change Commission to issue a total of approximately
$ 135 millionofshort-term debt. Note 7 of the Notes to Consolidated Financial Statements contains informa-tion on the Company's short-term bank lines ofcredit.
Bank lines of credit may be withdrawn at any time by the banks extending them, and in most cases the banks require the maintenance of compensating deposit bal-ance'r 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 charter. In order to issue additional long-term debt (except to refund maturing long-term debt), the Com-pany 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, for a period of 12 consecutive months within the 15 months immediately preceding the date ofthe 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 of pollution-control revenue bond financings by public bodies on behalf of the Company, but the levels of coverage under them may affect the cost and marketa-bilityof such bonds. At December 31, 1984, the cover-ages of the Company under these provisions were at least 2.12 for long-term debt and 1.69 for preferred stock.
In view ofthese 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 and Dividends Consolidated net income before preferred dividend requirements increased by 1.7% in 1984 and 15.6% in 1983. The total proportion ofallowance for funds used during construction (AFUDC) reflected in net income was 82.1% (66.0% net of income taxes) in 1984 and 85.2% (68.8% net of income taxes) in 1983. AFUDC does not represent cash income or a reduction in actual interest expense, but is an accounting convention per-mitted by regulatory systems ofaccounts. AFUDCrep-resents the net cost of borrowed funds used for con-struction and a reasonable rate ofreturn on other funds when so used. Such amounts are capitalized as a cost of construction projects with a concurrent credit to'the Income Statement. The amount capitalized is added to the cost ofconstruction projects and generally included in the plant investment base for setting rates and recov-ered through depreciation charges included in rates after the project is placed in commercial operation.
Eff'ects of Inflation In recent years inflation has had an effect on the Company's consolidated
- revenues, expenses and net income that is not readily evident in conventional finan-cial statements.
For additional information on the ef-fects ofinflation, refer to Note 12 of the Notes to Con-solidated Financial Statements, which presents a con-solidated statement of income for 1984, adjusted for effects of inflation, and a comparison of selected sup-plementary data for a five-year period, similarly ad-justed.
INDIANA& MICHIGANELECTRIC COMPANY AND S UBSIDIARIES Consolidated Statements of Income OPERATING REVENUES ELECTRIC Year Ended December 31, 1982 1984 1983 (in thousands)
$965,972
$868,980
$809,803 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 INCOME AND DEDUCTIONS:
Allowance for Other Funds Used During Construction...
Miscellaneous Nonoperating Income Less Deductions Total Other Income and Deductions INcoME BEFoRE INTEREsT CHARGEs.
192,592 169,217 1617430 63,002 85,268 44,921 69,384 785 814 180 158 61,361 (8 317) 53 044 233,202 159,998 159,086 122,127 53,049 83,963 37,053 70,961 686,237 182,743 60,588
~6,959 53,629 236,372 143,025 154,683 126,922 56,431 83,031 32,567 38,199 634,858 174,945 57,889
~9,164 48,725 223,670 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 1425719 1,809 1,884 146,412 144,430 8,998 1,714 155,142 142,841 8,974 4,258 156,073.
102,647 96,496 91 017 (55,395)
~58,646
~53,426 CoNsoLIDATED NET INcoMEbefore preferred stock dividend requirements......
PREFERRED STOCK DIVIDENDREQUIREMENTS EARNINGS APPLICABLETo COMMON STOCK 142,185 27 705
$114,480 139,876 28,384
$ 111,492 121,023 28,628
$ 92,395 See Notes to Consolidated Financial Statements.
Consolidated Balance Sheets ASSETS 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 December 31, 1984 1983 (in thousands)
$2,150',197 591,491 328,192 225,295 419 830 3,715,005
$ 1,561,791 443,280 316,324 195,444 1,149,984 3,666,823 2,878 042 2,905,934 836 963 760,889 OTHER PROPERTY AND INVESTMENTS 50,488 39,691 CURRENT ASSETS:
Cash Special Deposits and Working Funds Temporary Cash Investments (at cost, which approximates market)
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 4,702 38,797 99,736 93,250 4,942 8,703 (453) 72,783 19,668 45,379 6,543 394 050 7,283 5,966 113,674 5,549 3 327 (470) 75,203 18,130 48,550 5,967 283,179 DEFERRED DEBITS:
Unamortized Debt Expense Property Taxes Deferred Strike Costs Other Work in Progress Deferred Nuclear Fuel Disposal Costs Other Deferred Debits Total Deferred Debits Total See ivotes to Consolidated Financial Statements.
3,298 2,587 2,978 75,536 56 895 141 294 53,463,874 3,415 2,029 1,035 3,254 72,575 32,851 115,159
$3,343,963
INDIANAP. MICHIGANELECTRIC COMPANY AND SUBSIDIARIES December 31, 1984 1983 (in thousands)
CAPITALIZATIONAND LIABILITIES 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).
OTHER NONCURRENT LIABILITIES:
Obligations under Capital Leases Operating Reserves and Other Total Other Noncurrent Liabilities CURRENT LIABILITIES:
Cumulative Preferred Stock Sinking Fund Requirements Due Within One Year Long-term Debt Due Within One Year Short-term Debt:
Notes Payable to Banks Commercial Paper Installment Purchase Contracts Accounts Payable:
General Associated Companies Dividends Declared:
Common Stock Cumulative Preferred Stock Customer Deposits Taxes Accrued Interest Accrued Revenue Refunds Accrued Other Current Liabilities I
Total Current Liabilities 56,584 381 771,379 94,317 922,661 197,000 93,197 1 331 127 2 543 985 5,143 30 769 35 912 16,496 109,055 49,993 21,694 2,660 6,865 2,950 26,822 35,085 19,677 42 306 333 603 56,584 381 750,960 95,616 903,541 197,000 99,345 1,358,830 2,558,716 16,319 16,319 152 86,874 39,950 22,500 40,318 55,403 17,616 6,999 2,990 14,968 35,998 98 37,904 361,770 CoMMITMENTsAND CQNTINGENcIEs (Note 9)
DEFERRED CREDITS:
Deferred Income Taxes Deferred Investment Tax Credits Other Deferred Credits Total Deferred Credits Total 415,798 108,891 25 685 550 374 338,350 32,287 36,521 407,158
$3 463,874
$3,343,963
t Consolidated Statements of Sources and Applications of Funds SQURcES 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 Amortization of Deferred Nuclear Fuel Disposal 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 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 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 Taxes Accrued Revenue Refunds Accrued Other (net)
$142,185 88,298 549638 58,078 1,035 4,163 (61,361) 751 287 787
$ 139,876 86,025 84,296 5,556 1,378 215 3,092 (60,588) 1,977 261,827
$ 121,023 87,459 22,533 25,638 1,378 287 (57,889) 1,141 201,570 20,000 46 605 66,605 103 982 30,000 69,239
~29,700 69,539 98,290 50,000 99,167 38,550 187,717 106,997
~37 377
~28,751 80,720 243 579
$493 989 71,212
$304,288 77,745
$360,035
$297,232 122 297,354
~61 361 235,993 115,779 27,705 (601) 115 113
$493 989
$201,793 428 202,221
~60,588 141,633 107,632 28,384 17,070 9,569
$304,288
$267,783 326 268,109
~57,889 210,220 100,800 28,628 (4,103) 24,490
$360,035
$129,986 (15,638)
(882)
(3,171) 24,034 149956 (11,854)
(19,579)
~2739 (849) 52,393 701 26,676 (47,988)
(17,616)
(3,504) 11,823
~12,067
$ (11,962)
(22,948) 24,041 1,880 84 1,124 18,479 11, 174 2,618 Year Ended December 31, 1984 1983 1982 (in thousands)
See ivotes to Consolidated Financial Statements.
$115,113 9,569
$ 24,490 12
INDIANAck CHIGANELECTRIC COMFANY AND S UBSIDIARIES Consolidated Statements of Retained Earnings Year Ended December 31, Balance at Beginning of Year Consolidated Net Income Total 1984
$ 95,616 142,185 237 801 1983 (in thousands)
$ 91,756 139,876 231,632 1982
$ 100,170 121,023 221,193 Deductions:
Cash Dividends Declared:
Common Stock Cumulative Preferred Stock:
4V8 % Series 4.56% Series 4.12% Series 7.08% Series 7.76% Series 8.68% Series 12
% Series
$2.15 Series
$2.25 Series
$2.75 Series
$3.63 Series'otal Cash Dividends Declared Capital Stock Expense Total Deductions Balance at End of Year 115,779 495 273 165 2,124 2,716 2,604 2,615 3,440 3,600 3,865 5,808 143,484 143 484
$ 94 317 107,632 495 273 165 2,124 2,716 2,604 2,873 3,440 3,600 4,286 5,808 136,016 136,016
$ 95,616 100,800 495 273 165 2,124 2,716 2,604 3,003 3,440 3,600 4,400 5,808 129,428 9
129,437
$ 91,756 See Notes to Consolidated Financial Statements.
13
Notes to Consolidated Financial Statements
- 1. Slgnlflicant Accounting Policies:
The common stock of the 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; Other Property and Investments; 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 12.5% in 1984 and 1983 and 12.75% in 1982 applied on a semi-annual compound basis.
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%%uo Steam Fossil. fired 3.6%
Transmission 2.1%
Distribution 3.6%
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 of the following methods:
Description Method Mining Structures and Straight-line method (original lives Equipment range from 3 to 32 years)
Coal Interests and Mine Units-of-production method Development Costs (based on estimated recoverable tonnages; current rate averages
$ 1.13 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 are provided to the extent that such amounts are reflected in revenue levels. The Company normalizes the effect oftax reduc-tions resulting from investment tax credits utilized in connection with current Federal income tax accruals consistent with rate-making policies.
The Company's consolidated coal subsidiaries gen-erally use the flow-through method of accounting 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, 1984, 1983 and 1982 were approximately
$2,713,000,
$3,162,000 and $3,057,000, respectively. The amounts 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. In addi-tion to providing pension benefits, the companies pro-14
INDIANA&
CHIGANELECTRIC COMPANY AND S UBSIDIARIES vide certain health care benefits for retired employees.
Substantially all of the companies'mployees may be-come eligible for these benefits ifthey have completed 10 years of continuous service. The cost of retiree health care benefits is recognized as expense as paid. In 1984, these costs totaled $852,000.
Acomparison ofthe plan's accumulated benefits and net assets as of January 1, 1984, the date of the most recent actuarial study, is presented below:
January 1,
1984 1983 (in thousands)
Actuarial present value of accumulated plan benefits Vested Nonvested Blacl< Lung Benefits The coal-mining subsidiaries are liable under the Federal Coal Mine Health and Safety Actof 1969 (Act),
$54,976
$51,088 7,436 5,913
$62,412
$57,001 Net assets available for benefits......
$ 103,364
$88,400 The assumed rate of return used by the actuary in determining the actuarial present value of accrued benefits was 8't each valuation date.
The Company is of the opinion that comparing the actuarial value of accumulated plan benefits with net assets available for benefits, as in the above table, may tend to be misleading. The plan as required by the Employee Retirement Income Security Act of 1974 (ERISA)is being funded on an ongoing basis on the assumption that itwillbe in existence for many years to come. However, the statement of actuarial value of accumulated plan benefits as required by the Finan-cial Accounting Standards Board (FASB)is essen-tially a hypothetical plan termination calculation not taking into account future salary and wage increases or future service. Additionally, it should be recognized that net assets, which are at fair value, willfluctuate from time to time, which may create erroneous impres-sions of the status of the long-term funding process.
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
$ 1,120,000 in 1984, $713,000 in 1983 and $2,442,000 in 1982. As ofJune 30, 1984, the Company's actuary esti-mates, based on information that is available, that the subsidiary's share of the unfunded vested liabilities of the UMWApension plans approximates
$4,090,000.
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 and future liabilities for such benefits as a level percentage of pay over the future working lifetime of the employees, taking into account the remaining lifeofthe mines. Such provisions were approximately $ 139,000, $ 131,000 and $530,000 in 1984, 1983 and 1982, respectively. A Black Lung Bene-fits Trust is maintained under the Internal Revenue Code. As ofJanuary 1, 1984 (the latest valuation date),
the companies'ctuary estimates the unfunded actuari-al value of medical and liabilitybenefits under the Act, as well as comparable state legislation, was approxi-mately $ 1,080,000. The companies fund the actuarially determined liabilities at a level which currently approx-imates the recorded expense provisions.
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, 1984, 1983 and 1982 includes gains amounting to $474,000, $274,000 and $496,000, 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.
Operating revenues derived from a certain wholesale customer represent approximately 11% oftotal operat-ing revenues for 1984 and 1983 and 10'or 1982.
'ertain prior year amounts have been reclassified to conform to current year presentation.
- 2. Rate Matters:,
The Public Service Commission ofIndiana approved a two-step rate increase of$48,500,000 and $23,000,000, respectively, for the Company. The first step, effective December 10, 1984, concurrent with the commercial operating date ofUnit No.
1 ofRockport Plant, and the second step, effective one year later, excluded from rate base $315,153,000 and $245,000,000, respectively, of construction costs associated with Rockport Plant but allowed the Company to accrue a deferred return based on its current AFUDC rate and to defer annual depreciation expense on the amounts excluded from rate base.
Based on the AFUDC rate in effect at De-15
NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued) cember 31, 1984, such deferred return amounts for the next two years would be approximately $39,394,000 and $30,625,000, respectively. Depreciation expense of
$ 10,957,000 and $8,624,000, respectively, will be de-ferred on the amounts excluded from rate base. The two-step rate increase further provided for amortiza-tion to cost ofservice of the deferred return and depre-ciation expense over a 30-year period.
The Company also filedwiththe FERC fora two-step increase in wholesale rates.
Settlement agreements were agreed to in principle in November 1984 for a total increase of $35,000,000, one half to be effective in Oc-tober 1984 and the other half effective in December 1984. As agreed by the parties, construction costs as-sociated with the Rockport Plant of $ 170,724,000 are not included in rate base, but the Company willaccrue a deferred return based on its current AFUDC rate and defer annual depreciation expense on such costs. Based on the AFUDC rate in effect at December 31, 1984, such deferred return amount would be approximately
$21,340,000 during 1985. Depreciation expense of
$5,936,000 will be deferred. These deferred amounts are expected to be recovered through amortization to cost of service in future periods.
On September 26, 1984, the Michigan Public Service Commission approved a two-step increase for the Company in response to a December 1983 request for approximately $27,600,000 annually. The first step of
$ 12,000,000 annually became effective with the com-mercial operation of Rockport Plant and the second step of $3,000,000 annually will become effective one year from the date of implementation of the first step.
3, Federal Income Taxes:
The details of Federal income taxes as reported are as follows:
(8,429)
(1,704)
(10,133)
$ 59,251 Year Ended December 31, Year Ended December 31, 1984 1983 1982 (in thousands)
Charged (Credited) to Operating Expenses:
Current (nct)
$(45,036)
$(14,004)
$(16,503)
Deferred (net) 56,342 79,409 29,064 Deferred Investment Tax Credits (net) 58,078 5,556 25,638 Total 69,384 70,961 38,199 Charged (Credited) to Other Income and Deductions:
Current (11,112)
(890)
Defcrrcd (net) 4,887 (6,531)
Total (6,225)
(7,421)
Total Federal Income Taxes as Reported
$ 64,736
$ 30,778
. The following is a reconciliation of the difference between the amount of Federal income taxes computed by multiplyingbook income before Federal income taxes by the statutory tax rate, and the amount of Federal income taxes reported in the Consolidated Statements of Income.
Consolidated Net Income Before Preferred Stock Dividend Requirements Federal Income Taxes Pre-tax Book Income 1984
$ 142,185 59,251
$201,436 1983 1982 (in thousands)
$ 139,876
$ 121,023 64,736 30,778
$204,612, $ 151,801 Federal Income Taxes on Pre-tax Book Income at Statutory Rate (46%)
Increase (Decrease) in Federal Income Taxes Resulting From the Following Items on'hich Deferred Taxes Are Not Provided:
Excess of Book Over Tax Depreciation 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 Deferred Investment Tax Credits Other Total Federal Income Taxes as Reported Effective Federal Income Tax Rate 2,659 (31,437) 227 295 (2,233)
(2,921)
$ 59,251 29.4%
1,185 (32,019) 144 1,144 (267) 427
$ 64,736 31.6%%uo 5,009 (32,040)
(4,771)
(1,727)
(931)
(4,590)
$ 30,778 "20.3%
$ 92,661
$ 94,122
$ 69,828 16
INDIANA&
ICHIGANELECTRIC COMPANY AND S UBSIDIARIES The following are the principal components of Federal income taxes as reported:
Year Ended December 31, 1984 1983 1982 (in thousands) agreement and are subject to future disposition. Re-turns forthe years 1977-1980 have been reviewed by the IRS, and additional taxes for these years have been proposed, some of-which the System companies have protested. In the opinion of management, the final res-olution ofopen matters willnot have a material effect on the earnings of the Company.
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 $45,900,000 at December 31, 1984, was so restricted.
17 Current:
Federal Income Taxes
$ 26,589
$(26,903)
$ (4,008)(a)
Investment Tax Credits (80,054K0):(.787
((3,385)(II)
Total Current Federal Income Taxes (net)
(53,465)
(25.116)
(17.393)
Deferred:
Depreciation (liberalized, ADR and ACRS) 22,582 26,993 12,441 Allowance forBorrowed Funds Used During Construction and Miscellaneous Items Capitalized 24,168 23,986 20,410 Percentage Repair Allowance 14,420 (c)
(278)
(1,539)
Nuclear Decommissioning Costs (4,945)
(4,287)
Deferred Fuel.
(415) 8,470 (1,158)
Adjustments for Revenue Refunds (9,052) 2,401 8,304 Nuclear Fuel Lease Adjustments (4,141)
(2,338) 4,033 Spent Nuclear Fuel Fee (4,084) 31,671 Book Provision for Subsidiary Mine Standby Costs 6,900 (6,900)
Other
~
~ 4 ~
~
~ ~
~
~ ~
~
~
~ ~
(3,933)
(2,756) 1,853 Investment Tax Credits Applicable to Certain Dcfcrred Income Taxes...................
20,038 (6,466)
(14,911)
Total Deferred Federal Income Taxes (net) 54,638 84,296 22,533 Total Deferred Investment Tax Credits (net) 58,078 5,556 25,638 Total Federal Income Taxes as Reported
$ 59,251
$ 64,736
$ 30,778 (a) The consolidated current Federal income taxes werc signiTicantiy decreased in 1982 by the tax loss ofa coal mining subsidiary, the tax effect of which was not reduced by investment tax credits.
(b) The Company was able to utilize investment tax credits in excess ofthe statutory limitationas a result ofthe lack ofavailablc credits ofother System companies with taxable income.
(c) Based on Internal Revenue Service regulations issued in 1984, thc Company elected percentage repair allowance on the 1983 tax return and filed amended tax returns for 1981 and 1982. The deferred taxes provided in 1984 represent the cumulative effect ofthese elections as well as amounts for the current year.
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. These rules per-mit the allocation of the benefit ofcurrent tax losses to the System companies giving rise to such losses in
- 4. Common Stock, P~emiums on CaPital Stock and determining taxes currently payable. The tax loss ofthe
" r '"
p'
'ystem parent company, American Electric Power The Company received from its parent cash capital Company, Inc., is allocated to its subsidiaries with tax-contributions of $20,000,000 in 1984,
$30,000,000 in able income. Withthe exception ofthe loss ofthe parent 1983 and $50,000,000 in 1982. In 1984, 1983 and 1982 a
- company, the method of allocation approximates a
credit to other paid-in capital of$419,000, $ 142,000 and separate return result for each company in the consoli-
$ 131,000, respectively, represented the excess of par dated group. Consolidated investment tax credits value over cost of cumulative preferred stock reac-utilized are generally allocated to the System corn-quired by the Company to meet sinking fund require-panies giving rise to them.
ments. There were no other changes in any of the At December 31, 1984, the comPanies'umulative aforementioned accounts in 1984, 1983 or 1982.
net amount of income tax timing differences on which deferred taxes have not been provided totaled
- 5. Retained Earnings:
$445,000,000.
Unused System investment tax credits at December 31, 1984, aggregated approximately $ 105,000,000.
The System has reached a settlement with the Inter-nal Revenue Service (IRS) for the m@ority of issues from the audit of the consolidated Federal income tax returns for the years 1974-1976. Several issues regard-ing these returns are not covered by the settlement
NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)
- 6. Cumulative Preferred Stock:
At December 31, 1984, 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 reacquired 141,900 shares of the
$2.75 series in 1984 and 126,200 shares in 1983 and 27,527, 17,940 and 10,620 shares ofthe 12% series in 1984, 1983 and 1982, respectively.
A. Cumulative Preferred Stock Not Subject to Mandatory Redemption:
Series Current Call Price Redemption Restricted Prior to Par Value Shares Outstanding Amount December 31, 1984 1983 (in thousands) 4Ys%
4.56%
4.12%
7.08%
7.76%
8.68%
$2.15
$2.25
.. $ 106.125 102 102.728 104.68 105.38 105.27 26.61 26.69
$ 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:
Amount Series (a)
Current Call Price Redemption Restricted Prior to Par Value Shares Outstanding December 31, 1984 1983 (in thousands) 12% (b)
$2.75 (c)
$3.63 (d)
$ 112 27.07 28.63
$ 100 25 25 Less Sinking Fund Requirements Due Within One Year
$ 19,900
$22,652 33,297 36,845 11/1/86 40,000 40,000 93,197 99,497 152
$93,197
$99,345 (a) The sinking fund provisions ofthe series subject to mandatory redemption aggregate $399,800 in 1986, $4,797,500 in 1987, and $5,500,000 in 1988 and 1989.
(b) Asinking fund for the 12% series requires the Company to provide, on or before October 1 ofeach year, for the 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, 1984, the Company had reacquired 26,002 shares in anticipation of future sinking fund requirements.
Unless all sinking fund provisions have been met, no distribution may be made on the common stock.
(c) A cumulative sinking fund for the $2.75 series requires the Company to redeem 80,000 shares on each October 1. The Company has the option to credit shares purchased or otherwise acquired in lieu ofredeeming shares forthe sinking fund and has the noncumulative option to double the number ofshares to be redeemed inany year. AtDecember 31, 1984, the Company had acquired 188, 100 shares in anticipation offuture sinking fund requirements.
(d) A cumulative sinking fund for the $3.63 series requires the Company to redeem 80,000 shares on each January 1 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 1, 1987.
INDIANA&
HIGANELECTRIC COMPANY AND S UBSIDIARIES First Mortgage Bonds Sinking Fund Debentures Installment Purchase Contracts Other Long-term Debt
$ 1,093,884 17,434 159,346 76,959'1,184,598 20,166 159,209 81,731 Less Portion Due Within One Year
~
Total 1>347>623 16,496 1,445,704 86,874
$ 1,331,127
$ 1,358,830 First mortgage bonds outstanding were as follows:
December 31, 1984 1983 (in thousands)
% Rate 3I(>
10N 10 10Y4 137%
I 3384' 14'1%
I5S 16'%i I
7 I
8I(>
9'I(>
9'3M Unamortize Due 1984 October I 1984 December I 1985 March I 1987 January I 987 February I 1988 February I 988 November I 1989 March I 1990 June I 1991 November I 1992 April I 993 August I 998 May I 2000 April I 2003 June I (a) 2003 December I 2008 March I 2013 August I d Discount (net)....
80,000 55,000 22,974 17,557 120,000 80,000 40,000 100,000 42,902 35,000 50,000 242,500 40,000 100,000 70,000 (2,049) 15,082 54,750 9,750 80,000 55,000 22,974 17,557 120,000 80,000 40,000 100,000 42,902 35,000 50,000 254,000 40,000 100,000 70,000 (2,417)
Less Portion Duc Within One Year Total 1,093,884 11,500 1,184,598 82,082
$ 1,082,384
$ 1,102,516 (a) The 9Y% series due 2003 requires sinking fund payments of
$ 11,500,000 annually on June I, through 1991 and $ 13,500,000 annu-ally on June I, 1992 through 2002 with the noncumulative option to redeem an additional amount in each of the specified years from a minimum of $ 100,000 to a maximum equal to the scheduled require-ment foreach year, but witha maximum optional redemption, as to all years in the aggregate, of $75,000,000.
The indentures relating to the first mortgage bonds contain improvement, mairitenance and replacement provisions requiring the deposit of cash or bonds with the trustee, or in lieu thereof, certification ofunfunded property additions. The Company has generally elected to use unfunded property additions to meet these provi-sions in the past.
- 7. Long-term Debt, Lines of Credit, and Compensating Balances:
Long-term debt by major category was outstanding as follows:
December 31, 1984 1983 (in thousands)
Sinking fund debentures outstanding were as follows:
December 31, 1984 '983 (in thousands) 5H>% Due 1986 June I 7Y~% Due 1998 May I Unamortized Premium Less Portion Due Within One Year Total
$ 7,758 9,663 13 17,434
$ 17,434
$ 10,022 10,123 21 20,166 22
$20,144 At December 31, 1984 and 1983, the principal amounts of debentures reacquired in anticipation of sinking fund requirements were
$3,979,000 and
$2,055,000, respectively. The Company may make ad-ditional debenture payments ofup to $800,000 annually.
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, 1984 1983 (in thousands)
% Rate Due City of Lawrenceburg, Indiana:
8'006 July I 7
2006 May I 6N 2006 May I City of Rockport, Indiana:
914>
2005 June I 9Y~
2010 June I City of Sullivan, Indiana:
7S 2004 May I 63(>
2006 May I 7'009 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 (2,791)
$ 159,209 7,000 25,000 13,000 (2,654)
'$159,346 Under the terms ofcertain installment purchase con-tracts, the Company is required to pay purchase price installments in amounts sufficient 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.
19
NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)
Other long-term debt outstanding consisted of:
December 31, 1984 1983 (in thousands)
$71,964
$71,964 Nuclear Fuel Disposal Costs (a)
Coal Reserve Obligations Payable in Equal Annual Installments Through 1985 with Interest at 8%
Notes Payable due 1985, 6%%uo-7%......
9,475 292 81,731 4,770
$76,961 4,737 258 76,959 4,996
$71,963 Less Portion Due Within One Year Total (a) See Note 9.
Long-term debt, excluding premium or discount, outstanding at December 31, 1984 is due as follows:
Principal Amount (in thousands) 1985 16,496 1986 19,258 1987 146,500 1988 52,031 1989 131,500 Later Years 986,529 Total
$ 1,352,314
- 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 $27,000,000,
$25,000,000 and $ 18,800,000 for the years ended De-cember 31, 1984, 1983 and 1982, respectively.
The Company had unused short-term bank lines of credit ofapproximately $454,000,000 and $383,000,000 at December 31, 1984 and 1983, respectively, under which notes could be issued withno maturity more than 270 days. The available lines of credit are subject to withdrawal at the banks'ption, and $417,000,000 and
$343,000,000 at December 31, 1984 and 1983, respec-tively, of such 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.
The Company has a letter ofcredit from a bank sup-porting the short-term installment purchase contracts.
Purchased Power (a)
Interchange Power (net):
AEP System Electric Utilities Other Compames (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
$ 106,755
$ 82,245
$ 40,817 76,271 104,271 116,666 (13,809)
(27,430)
(2,800)
$ 169,217
$ 159,086
$ 154,683
$25,263
$22,062
$ 19,485 13,023 2,113 4,522
$44,921 11,269 (193) 3,915
$37,053 8,567 708 3,807
$32,567 Fuel for Electric Generation includes charges relating to mining operations, as follows:
Maintenance 765
$3,424 Depreciation, Depletion and Amortization.....
2,698 4,284 Taxes Other Than Federal Income Taxes........
1,656 1,184 2,109 (a) Includes power purchased from Ohio Valley Electric Corpora-tion (OVEC) of approximately $ 17,688,000 in 1984, $45,787,000 in 1983 and $20,229,000 in 1982. Also includes power purchased from AEP Generating Company of approximately $26,034,000 in 1984.
(b) Includes interchange power sold to OVEC of approximately
$ 105,000 in 1984, $66,000 in 1983 and $ 143,000 in 1982.
Charges to operating expenses for royalties and for advertising are less than 1% ofgross 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 aQiliated 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.
$ 1,582 1,826 Operating expenses shown in the Consolidated Statements of Income include certain items not shown separately, as follows:
Year Ended December 31, 1984 1983 1982 (in thousands) 20
INDIANA& MICHIGANELECTRIC COMPANY AND SUBSIDIARIES
- 9. Commitments and Contingencies:
Construction The construction budget of the companies for the year 1985 is estimated at $232,000,000 and, in connec-tion therewith, commitments have been made.
AEP Generating Company (AEGCo), a subsidiary of AEP, organized in 1982, commenced in April 1982 to acquire a 35% interest in the Company's 2.6 million kilowatt capacity Rockport Plant. The total estimated cost ofthe Rockport Plant is $2.41 billion. It was antic-ipated that Kentucky Power Company (KEPCo) would also acquire a 15% interest in the Rockport Plant on a buy-in basis; however, in August 1984, the Kentucky Public Service Commission (KPSC) issued an order denying KEPCo's request to purchase a 15% ownership interest and revoked a March 1983 KPSC order in that regard. As a result, AEGCo has now acquired this 15%
ownership interest. In September 1984, the Company received approximately $ 174,000,000 from AEGCo in order to bring AEGCo's ownership interest in the Rockport Plant to 50%.
On August 2, 1984, UnitPower Agreements between AEGCo and the Company and AEGCo and KEPCo were filed with FERC. The Company Unit Power Agreement provides for the sale by AEGCo to the Company of the output of the Rockport Plant to which AEGCo is entitled. Pursuant to an agreement between the Company and KEPCo, and the KEPCo UnitPower Agreement, AEGCo willsell to KEPCo the output of Rockport equivalent in amount to that associated with KEPCo's intended 15% ownership interest. As a result, the Company willeffectively purchase 35% of the out-put ofthe Rockport Plant from AEGCo. The Company has also entered into an agreement with an unaffiliated utility to sell this 35% output of Unit No.
1 of the Rockport Plant fromJanuary 1, 1987 through December 31, 1999. The effective date for the Unit Power Agree-ments was December 10, 1984, the date ofcommercial operation of Unit No.
1 at the Rockport Plant. Several parties including the KPSC, have intervened and pro-tested the filingin the FERC proceeding. On October 1, 1984, FERC issued an order accepting the application for filingand permitting the proposed rates to become effective, subject to refund. Hearings concerning the UnitPower Agreements are scheduled to commence in May 1985.
Oliio Valley Electric Corporation AEP and Columbus and Southern Ohio Electric Company own 42.1% ofOhio Valley Electric Corpora-tion (OVHC). which supplies the U.S. Department of Energy (DOE) with the power requirements oAts gase=
ous diffusion plant near Portsmouth, Ohio. The pro-ceeds from the sales of power by OVEC, aggregating
$290,000,000 in 1984, 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 re-ceive from OVEC, and is obligated to pay for, the power not required by DOE in proportion to its power participation ratio, which was 11.2% in December 1984.
The DOE power agreement terminates in 1992.
Regulatory Matter The Federal Power Commission in 1975 commenced an investigation of, among other things, the rea-sonableness and prudence of the coal-purchasing policies and practices ofcertain System companies. In 1981, the FERC ordered a hearing on the issue of the System's prudence in continuing to procure Western coal from affiliated mines in the light of the possible availability of coal from other sources.
On January 9, 1985, certain System companies entered into a settle-ment agreement with the FERC staff, subject to ap-proval by appropriate regulatory agencies and other conditions, under which the FERC proceeding would be dismissed on the followingterms: (i) certain System companies would refund $21,000,000 ($17,693,000 by the Company) to wholesale customers which purchased energy during the period 1982-1984 produced using Western coal from affiliated mines; (ii)depending upon the dates ofregulatory approvals, certain System com-panies might refund an additional $437,500 per month from June 1, 1985 until the settlement agreement be-comes effective; (iii)recovery of the cost of Western coal in electric rates to wholesale customers would be limited by a cap related to prices of similar coal deliv-ered to certain unaAiliated electric utilities, and (iv) subject to the cap, the Company could, during a period not to exceed 12 years, include in the cost ofcoal up to
$75,000,000 to be used to amortize part ofits investment in the Western coal mines. In December 1984, the Company recorded provisions aggregating $ 11,336,000, net of taxes, to reQect certain terms of the settlement agreement. The Company is unable to determine when all necessary approvals ofthe settlement agreement will be received or whether itwillcomplete the amortization program.
21
NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)
L~ili ation In 1978, several retail customers of the Company commenced an action, individually and as representa-tives of an alleged class, in the U.S. District Court, alleging that the Company's lease of electric utilityas-sets from the City of Fort Wayne was in violation of Federal antitrust laws. The complaint sought to have the lease declared null and void, asked that the Com-pany be restrained from charging excessive prices for the purchase of electric power, sought treble damages in an unspecified amount in respect ofallegedly exces-sive charges to residents ofthe City ofFort Wayne and sought to restore the control ofthe electric utilityassets in question to the CityofFort Wayne. In May, June and July, 1979 the court granted in part and denied in part the Company's motion to dismiss or for summary judgment. The court dismissed plaintifFs allegations concerning abuse of a legally acquired monopoly but ruled that plaintiffs could continue to assert other theories ofviolation ofFederal antitrust laws. The case was tried in March 1982 and in May 1984, the court ruled in favor of the Company on all issues. This deci-sion was upheld upon appeal by the plaintiffs to the U.S. Court of Appeals.
The Company terminated its contract with Terre Haute Industries, Inc. (THI) on the grounds that THI was not meeting the schedule for the construction ofan electro-static precipitator at the Breed Plant. THIinsti-tuted a suit for breach ofcontract against the Company in an Indiana circuit court claiming damages in an un-specified amount. THI also named the American Elec-tric Power Service Corporation as a defendant and re-quested damages from it for interference with THI's contract with the Company and for libel. The defend-ants denied THI's complaint and the Company coun-terclaimed for damages in the amount of $6,801,000 which the Company claims it suffered as a result ofthe delay in the construction work. On February 20, 1981, the Company's motion to add an insurance company-surety as a defendant to the Company's counterclaim was granted. The insurance company-surety was later dismissed. Trial of this action was completed in De-cember 1982. In an order dated January 9, 1984, the court awarded compensatory and punitive damages to THI in the amounts of $4,934,000 and $ 12,000,000, re-spectively, exclusive of interest. As a result of that judgment, the Company recorded in 1983 a liability, including interest, on the Consolidated Balance Sheet for the compensatory damages. The Company and the Service Corporation are appealing the court decision.
Envirotunental Matters The companies are subject to regulation by Federal, state and local authorities with regard to air-and water-quality control and other environmental matters, and are subject to zoning and other regulation by local authorities. Although the cumulative, long-term effect of changing environmental requirements upon the companies cannot be estimated at present, compliance withsuch requirements may make it necessary, at costs which may be substantial, to retrofit existing facilities withadditional 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.
Legislative proposals are pending before the Con-gress which expressly seek to control acid deposition in the eastern portion ofthe United States. Ifany ofthese bills become law, stringent controls upon the emission of sulfur dioxide would be required at various existing Company generating plants. These controls would en-tail very substantial capital and operating costs which, in turn, could necessitate substantial rate increases by the Company. In addition, a number of states have commenced proceedings under the Clean AirAct seek-ing to control the emission of sulfur dioxide in certain midwestern states.
Nuclear Insurance The Price-Anderson Actlimits the public liabilityofa licensee of a nuclear plant to $560 million for a single nuclear incident. When the 80th nuclear power reactor went into operation on November 15, 1982, the Nuclear Regulatory Commission's indemnity obligation was eliminated. Now, as each new reactor is licensed to operate, the $560 million limitincreases by another $5 million. The current level is $620,000,000. The Com-pany has insurance covering its two-unit Cook Nuclear Plant in the maximum available amount of$ 160 million, and the balance of $460 millionis covered by a manda-tory program of deferred premiums which would be
- assessed, after a nuclear incident, against all owners of nuclear reactors. In the event of a nuclear incident the Company could be assessed
$5 millionper incident for each ofits two generating units (subject to a maximum of $ 10 million per reactor in any year in the event of more than one incident).
22
INDIANA& MICHIGANELECTRIC COMPANY AND S UBSIDIARIES The Company also has property insurance for dam-age to the Cook Plant facilities in the amount of $ 1.06 billion. The primary layer of $500 million is provided through nuclear insurance pools. The excess coverage above $500 millionis provided through insurance pools
($85 million), and Nuclear Electric Insurance Limited (NEIL). NEIL's excess property insurance program provides $475 million in coverage. The maximum as-sessment under this program could be $9,347,000 (sev-en and one-half times the annual premium on a 100%
coverage basis).
NEIL's extra-expense program provides insurance to cover extra costs of replacement power resulting from a prolonged accidental outage of a nuclear unit.
The Company's policy insures against such increased costs up to $2.5 million per week (starting 26 weeks after the outage) forone year and $ 1.25 millionper week for the second year; or 80% ofthose amounts per unitif both units are down for the same reason. The Company would be subject to a retrospective premium of up to
$ 13,270,000 (five times annual premium) if NEIL's losses exceed its accumulated funds.
Disposal ofSpent Nuclear Fuel and Nuclear Decommissioning The Nuclear Waste Policy Act of 1982 establishes Federal responsibility for the permanent disposal of spent nuclear fuel. Disposal costs are paid by fees as-sessed against owners of nuclear plants and deposited into the Nuclear Waste Fund created by the Act. For the disposal ofnuclear fuel consumed after April6, 1983 by the Company's Cook Nuclear Plant, the Company must pay to the fund a fee ofone millper kilowatthour, which the Company is currently recovering from its customers. In June 1983, the Company entered into a contract with DOE for the disposal of spent nuclear fuel. Under terms of the contract the Company must pay to the U.S. Treasury a fee estimated at approxi-mately $71,964,000, exclusive of interest, for the dis-posal of nuclear fuel consumed prior to April7, 1983.
Approval by DOE of the calculation of the fee is cur-rently pending.
The Company has deferred the
$71,964,000 on its balance sheet pending recovery through the rate-making process.
The Company has received regulatory approval in certain of its jurisdic-tions for the recovery of a portion of this amount and has begun to reduce the amount deferred as it is being recovered.
Withrespect to decommissioning, the Public Service Commission of Indiana held in an order dated De-cember 22, 1982 that "a reasonable estimate for the costs ofdecommissioning the (Cook Plant), when mea-sured in 1982 dollars, should be set at $155,000,000." In certain of its jurisdictions, the Company is currently recovering, through inclusion in its current charges to customers, a portion ofthe future costs associated with decommissioning.
Funds recovered through the rate-making process for disposal ofspent nuclear fuel consumed priorto April7, 1983 and for nuclear decommissioning generally have been deposited in either external trust funds or internal special funds for the future payment ofsuch costs. The Company willattempt to obtain in all its jurisdictions regulatory approval forthe recovery ofthe remainder of such future costs.
- 10. Leases:
December 31, 1984 (in thousands)
Electric UtilityPlant:
Production General and miscellaneous (includes mining plant)
Total Electric UtilityPlant Less Accumulated Provision for Amortization Net Properties under Capital Leases Obligation under Capital Leases (a)
$ 1,998 5,008 7,006 904
$6,102
$6,102 31, 1984 due (a) Including an estimated
$959,000 at December within one year.
The companies, as part of their operations, lease property, plant and equipment under leases ranging in length from 1 to 35 years. Most ofthe leases require the companies to pay related property taxes, maintenance costs and other costs of operation. The companies ex-pect that in the normal course of business, leases will generally be renewed or replaced by other leases. The majority of the various rentals are included in leases having purchase options or renewal options for sub-stantially all of the economic lives of the properties.
An accounting standard now requires the companies to capitalize leases beginning in 1984 for all capital leases entered into after December 31, 1982 and all earlier leases beginning in 1987. This standard requires the companies to record rental expense in a manner consistent with rate-making treatment, therefore there is no effect on the Consolidated Statements ofIncome.
The followingis an analysis ofproperties under cap-ital leapes and related obligations entered into after December 31, 1982:
23
NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Continued)
Payments made under capital leases entered into after December 31, 1982 include $710,000 ofamortiza-tion expense for the year ended December 31, 1984.
The following is a pro forma analysis of properties under capital leases and related obligations assuming that leases entered into prior to January 1, 1983 were capitalized:
December 31, 19&4 1983 (in thousands)
Nuclear Fuel Coal-mining and Coal-transportation Equipmcnt Other Transportation Equipment Real Estate Electric Distribution System Property...
Gross Properties under Capital Leases Less Accumulated Provision for Amortization Net Properties under Capital Leases
$289,000
$285,000 28,000 19,000 12,000 13,000 357,000 25,000 9,000 12,000 20,000 355,000 163,000 162,000
$ 192,000
$ 195,000
$ 192,000
$ 196,000 Capital Operating Leases (a)(b)
Leases Obligations under Capital Leases (a)
(a) Including an estimated
$65,000,000 and $69,000,000 at De-cember 31, 1984 and 1983, respectively, due within one year.
Future minimum lease payments, by year and in the aggregate, ofthe companies'apital leases and noncan-celable operating leases consisted of the following at December 31, 1984:
Rentals for all operating leases are classified approx-imately as follows:
Year Ended December 31, 1984 1983 1982 (in thousands)
Gross Rentals Less Rental Recoverics (including sublease rentals) (a)
Net Rentals (b)
$ 100,000
$92,000
$96,000 3,000
$ 97,000 3,000
$89,000 3,000
$93,000 (a) Includes amounts paid for or reimbursed by associated companies.
(b) Classified approximately as:
Operating Expenses Clearing and Miscellaneous Accounts (portions of which are charged to income).....
$ 90,000
$82,000
$88,000
- 11. Unaudited Quarterly Financial Information:
7,000 7,000 5,000
$ 97,000
$89,000
$93,000 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 portions ofthe related rentals are paid foror reimbursed by associated companies in the AEP System based on their usage ofthe leased property. The'companies can-not predict the extent to which or proportion in which the associated companies will utilize the properties under such leases in the future.
1985 1986 1987 1988 1989 Later Years Total Future Minimum Lease Payments (in thousands)
$ 12,000
$ 19,000 10,000 19,000 8,000 19,000 7,000 18,000 5,000 18,000 51,000 232,000 93,000
$325,000 Operating Operating Revenues Income (in thousands)
Net Income'he followingconsolidated quarterly financial infor-mation is unaudited but, in the opinion ofthe Company, includes all adjustments (consisting of only normal re-curring accruals) necessary fora fairpresentation ofthe amounts shown:
Quarterly Periods Ended Less Estimated Interest Element Included Thcrcin 46,000 Estimated Present Value of Future Minimum Lease Payments
$47,000 (a) Includes capital leases entered into prior to January 1, 1983 assuming that such leases were capitalized.
(b) Minimum payments do not include leases of nuclear fuel. Nu-clear fuel rentals comprise the unamortized balance of the lessor's cost (approximately $ 151,000,000) less salvage value, ifany, to be paid in proportion to heat produced, and carrying charges on the lessor's unrecovered costs. It is contemplated that portions of the presently leased material will be replenished by additional leased material.
1984 March 31 June 30 September 30 December 31 1983 ~
March 31 June 30 September 30 December 31
'Before preferred
$252,092
$57,030 227i872 36,371 242,720 46,059 243,288 40,698 197,685 47,323 191,193 43,199 2351221 431959 244,8& 1 48,262 stock dividend requirements.
- 12. Unaudited Information On Inflation and Changing Prices:
$45,535 28,771 38,368 29,511 32,338 30,142 38,955 38,441 The supplementary information in the statements below is presented in compliance withthe requirements of the FASB. The information is intended to disclose 24
INDIANA& M.HIGANELECTRIC COMFANY AND S UBSIDIARIES the effects ofboth general inflationand changing prices; however, the amounts should be considered approxi-mations of such effects rather than precise measures since a number ofsubjective judgments and estimating techniques were employed in developing the informa-tion.
Current cost amounts reflect the changes in specific prices of property, plant and equipment from the date such assets were acquired to the present. 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.
Year Ended December 31, 1984 Consolidated Statement of Income Adjusted f'or Effects of Changing Prices As Stated in the Primary Financial Statements 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 Dcprcciation, 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)
(in thousands)
$965,972 192,592 169,217 161,430 63,002 85,268 44,921 69,384 785,814 180,158 53,044 (91,017)
(27,705)
$ 114,480
$966,000 194,000 169,000 161,000 63,000 201,000 45,000 69,000 902,000 64,000
'3,000 (91,000)
(28,000)
$ (2,000)
Increase in SpeciTic Prices (current cost) of Property, Plant and Equipment Held During the Year (c)
Adjustment to Net Recoverable Cost (d)
Effect of Increase in General Price Level Excess of Increase in SpeciTic Prices after Adjustment to Net Recoverable Cost over Increase in General Price Level Gain from Decline in Purchasing Power of Net Amounts Owed (e)
Net
$ 161,000 73,000 (231,000) 3,000 70,000 73,000 (a) As prescribed by the FASB, the items in the Consolidated Statement of Income that have been adjusted are depreciation, depletion and amortization (including portions classiTied as fuel for electric generation and other income and deductions).
Depreciation, depletion and amortization charges were computed by applying current accrual rates to thc various plant accounts (production, transmission, distribution, general and miscellaneous) after adjusting such accounts for the effects of changing prices.
(b) Including the a<tjustment to net recoverable cost, the income from operations on a current cost basis would have been $71,000,000.
(c) At December 31, 1984, current cost of property, plant and equipment net of accumulated depreciation, depletion and amortization was
$5,820,000,000 while historical cost or net cost recoverable through dcprcciation, depletion and amortization was $2,881,000,000.
(d) The adjustment to net recoverable cost ofproperty, plant and equipment (as expressed in terms ofinflation-adjusted cost) to historical cost recognizes that the rate-making process limits the Company to recovery of the historical cost of the subject assets.
(e) To reflect properly the economics ofrate regulation in the Consolidated Statement ofIncome Adjusted for Effects ofChanging prices, the adjustment 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 ofmonetary assets such as cash and receivables suffer a loss ofgeneral purcliasing 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 Adlustcd for Effects of Changing Prices (dollar amounts are expressed in terms of average 1984 dollars)
Year Ended December 31, 1980 1984 1983 1982 1981 (in thousands, except index data)
$906,000
$872,000
$928,000
$966,000
$937,000
$(11,000)
$(22,000)
$(2,000)
$3,000
$ 1,104,000
$79,000 289.2
$229,000 246.8 Operating Revenues Current Cost Information Income (Loss) from Operations (excluding adjustment to net recoverable cost)
$ 1,000
$(9,000)
Excess (Deficit) of Increase in SpeciTic Prices after Adjustment to Net Recoverable Cost over Increase in General Price Level
$ 10,000
$(9,000)
$(132,000)
$(340,000)
Net Assets at Year-end at Net Recoverable Cost....
$ 1,128,000
$ 1,131,000
$ 1,135,000
$ 1,145,000 General Financial Data Gain from Decline in Purchasing Power of Net Amounts Owed
$70,000
$71,000
$ 165,000 Average Consumer Price Index 311.2 298.4 272.1 General Information on hfining Operations Proven and Probable Coal Reserves at End of Year (thousands of tons) (Note) 413,672 414,207 411,377 412,546 413,964 Tons of Coal Mined (thousands)...................
535 360 1,168 779 1,059 Average Market Price (at current cost per ton)......
$72.05
$88.29
$53.07
$68.78
$66.52 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 reserves The estimated quantitics ofcommercially recoverable reserves that are less welldefined than proven reserves and that may be estimated or indicated to exist on the basis of geological, geophysical and engineering data.
26
INDIANA&
ICHIGANELECTRIC COMPANY-AND S UBSIDIARIES
'I Auditors'pinion Deloitte Has kins+Sells 155 East Broad Street Columbus. Ohio 43215 (514) 221-1000 Cable DEHANOS To the Shareowners and the Board of Directors of Indiana 4 Michigan Electric Company:
We have examined the. consolidated balance sheets of Indiana 5
Michigan Electric Company and its subsidiaries as of December 31, 1984 and 1983 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, 1984.
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 report dated February 21, 1984, our opinion on the 1983 and 1982 consolidated financial statements was qualified as being subJect to the effects on the 1983 and 1982 consolidated financial statements of such adjustments, if any, as might have been required had the outcome of the uncertainty been known concerning the claim by the Federal Energy Regulatory Commission staff that the Company paid excessive prices for coal from affiliated mines resulting in overcharges to customers which may have to be refunded.
As discussed in Note 9 of Notes to Consolidated Financial Statements, the Company recorded a
provision for refund in 1984 of $ 17,693,000 as agreed to in a settlement agreement with the Federal Energy Regulatory Commission.
Accordingly, our present opinion on the 1983 and 1982 consolidated financial statements, as expressed herein, is different from that expressed in our previous report.
In our opinion, such consolidated financial statements present fairly the financial position of the Company and its subsidiaries at December 31, 1984 and 1983 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,
- 1984, in conformity with generally accepted accounting principles applied on a consistent basis.
February 26, 1985 27
Operating Statistics 1984 1983 1982 1981 1980 ELEGTRIc OPERATING REvENUEs (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..
Less: Provision for Revenue Refunds Total Net of Provision for
. Revenue Refunds Other Operating Revenues Total Electric Operating Revenues.
$150,334 82 739
$ 144,370 70,851
$ 125,798
$116,340 68,793 59,826
$ 106,488 54,277 194,591 127,470 137,152 7,568 215,221 137,616 154,751 8,696 233,073 150,733 173,986 9 666 176,166 117,725 134,519 6,953 160,765 108,764 116,165 6,150 391,844 346,513 435,363 360,096 466,781 325,468 792,249 516,284 343,427 859,711 567,458 400,811 738,357 795,459 968,269
~12 494 738,357 4,326 792,249 17,554 859,711 9,269 955,775 10,197 795,459 16,690
$966972
$868,980
$809,803
$812,149
$742,683 SGURcEs AND SALEs QF 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 7,071 12,913 68 20,052 4,905 748 25,705
~1508 24,197 2,534 1,561 4,095 2,870 4,201 209 11,375
~12 822 24,197 5,684 12,301 55 18,040 4,881 573 23,494 1,441 22,053 2,596 1,458 4,054 2,807 3,941 204 11,006 11,047 22,053 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 28
INDIANA&
ICHIGANELECTRIC COMPANY AND S UBSIDIARIES OPERATING STATISTICS (Concluded)
ANNUALCQSTQF FUEL CQNsUMED (in cents): (a)
Cents per MillionBtu:
Coal Nuclear Overall Cents per Kilowatt-hour Generated:
Coal Nuclear Overall 1984 189.11 65.05 103,02 1.83
.70 1.08 1983 183.97 54.37 91.99 1.76
.59
.96 1982 189.59
'9.55 84.85 1.85
.53
.89 1981 187.13 49.90
. 91.35 1.81
.54
.95 1980 164.49 48.44 84.95 1.59
.52
.89 RESIDENTIAL SERvlcE AVERAGES:
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 10,249 19,771
$583
$1,048 5.69 5.30 10,187 18,780
$541
$912 5.31 4.86 10,084 19,990
$489
$893 4.85 4.47 10,008 19,866 10,206 20,584
$443
$406
$785
$721 4.43 3.98 3.95 3.50 NUhIDER GF ELEGTRIc CUSTohIERs:
Year-End:
Retail:
Residential:
Without Electric Heating......
With Electric Heating Total Residential...........
Commercial Industrial Miscellaneous Total Retail Wholesale (sales for resale)
Total Electric Customers
~
~
321,286 79 823 401,109 42,912 3,415 1 584 4499020 105 449 125 320,655 78,311 398,966 42,552 3,253 1,571 446,342 106 446,448 320,097 77,335 397,432 42,233 3,249 1,458 444,372 105 444,477 321,850 77,002
, 398,852 42,957
, 2,873 1,440 446,122 104 446,226 321,432 75,618 397,050 42,758 2,802 1,424 444,034 105 444,139 (a) Excludes effect of deferred collection of fuel costs.
29
Dividends and Price Ranges of Cumulative Preferred Stock By t2uarters (1984 and 1983)
Cumulative Pre erred Stock 1st 1984 Quarters 2nd 3rd 4th 1st 1983 Quarters 2nd 3rd 4th
($ 100 Par Value) 4Va% Series Dividends Paid Per Share Market Price $ Per Share (MSE)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 $ Pcr Share (NYSE)High Low 8.68%%uo 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 30 59 30Va 27 29V4 298 558 30
$ 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 53 49K 51Yi 456 50Yi 45 54
-48
$ 1.94
$ 1.94
$ 1.94
$ 1.94 59'853'549 52N 49 59 51
$2.17
$2.17
$2.17
$2.17 65 60 62Y,t 558 58Fe 54AA 66Va 57
$3.00
$3.00
$3.00
$3.00 99k 95K 98 93 95V4 914 102'4
$ 1.77
$ 1.77
$ 1.77
$ 1.77 58 598 55 56 52Yi 54Va 514 4%k
$ 1.94
$ 1.94
$ 1.94
$ 1.94 62V4 64Fs 61 61'7 57'6 54
$2.17
$2.17
$2.17
$2.17 70 73Ys 70'0 63'58 65Ys 60N
$3.00
$3.00
$3.00
$3.00 100'03 Yi 103 V4 101N 94 99 97 96Yi
$0.5375
$0.5375
$0.5375
$0.5375
$0.5375
$0.5375
$0.5375
$0.5375 16N 15Va 16 14 154 14Ve 17Ya 14%
177ik 15N 18M 17'6%15N 17'4N
$0.5625
$0.5625
$0.5625
$0.5625
$0.5625
$0.5625
$0.5625
$0.5625 17N 16
$0.6875 16Ye 15 1Qse les 17'5Y't 18Va 16Yt 19Ve 18V4 17V4 16Yi 18 15'0.6875
$0.6875
$0.6875
$0.6875
$0.6875
$0.6875
$0.6875 23N 22V4 22V4 21 21V4 20Yi 22%
21 23N 21N 25 24 23Va 23Va 24 23
$0.9075
$0.9075
$0.9075
$0.9075
$0.9075
$0.9075
$0.9075
$0.9075 28Yi 26 26Vi 23Va 26Va 23%
28 25Ya
.29Vs 26V4 30Ye 28N 27N 27 28N 26Yi
$ 1.03125
$ 1.03125
$ 1.03125
$ 1.03125
$ 1.03125
$ 1.03125
$1.03125
$ 1.03125 MSE Midwest Stock Exchange OTC Over-the-Counter NYSE New York Stock Exchange Note The above bid and asked quotations represent prices between dealers and do not Market quotations provided by National Quotation Bureau, Inc.
Dash indicates quotation not available.
represent actual transactions.
30
The Company's Annual Report (Form 10-K) to the Securities and Exchange Commission willbe available on or about March 31, 1985 to shareowners upon written request and at no cost.
Please address such requests to:
Mr. T. P. Bowman American Electric Power Service Corporation 1 Riverside Plaza 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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