ML18040B142
| ML18040B142 | |
| Person / Time | |
|---|---|
| Site: | Susquehanna  |
| Issue date: | 12/31/1985 |
| From: | Campbell R, Keiser H PENNSYLVANIA POWER & LIGHT CO. |
| To: | Harold Denton Office of Nuclear Reactor Regulation |
| References | |
| PLA-2623, NUDOCS 8604210167 | |
| Download: ML18040B142 (49) | |
Text
Pennsylvania Power 8 Light Company Two North Ninth Street ~ Allentown, PA 18101 ~ 215/ 770.5151 Harold W. Kelser Vice President-Nuclear Operations 21 5/770-7502
'PR 0 4 kg86 Mr. Harold Denton, Director Office of Nuclear Reactor Regulation U.S. Nuclear Regulatory Commission Washington, D.C. 20555 SUSQUEHANNA STEAM ELECTRIC STATION ANNUAL FINANCIAL REPORT Docket Nos. 50-387 PLA-2623 FILE R41-2A 50-388
Dear Mr. Denton:
In accordance with 10CFR50.71(b), attached are ten copies of the 1985 annual report for Pennsylvania Power & Light Co. The annual report for Allegheny=
Electric Cooperative, Inc., will be forwarded later.
Very truly yours, H. W. Keiser Vice President-Nuclear Operations Attachments cc: Mr. R. H. Jacobs USNRC Ms. M. J. Campagnone << USNRC
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V '+"), y NOTIGE THE ATTACHED FILES ARE OFFICIAL RECORDS OF THE DIVISION OF DOCUMENT CONTROL. THEY HAVE BEEN CHARGED TO YOU FOR A LIMITED TIME PERIOD AND MUST BE RETURNED TO THE RECORDS FACILITY BRANCH 016. PLEASE DO NOT SEND DOCUMENTS CHARGED OUT THROUGH THE MAIL. REMOVAL OF ANY PAGE(S) FROM DOCUMENT FOR REPRODUCTION MUST BE REFERRED TO FILE PERSONNEL.
DfADLINE RETURN DATE Qaoq21 o(47
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Cover Contents Harrisburg, capital of Pennsylvania, is the seat of state government and Highlights 1 the home of the Pennsylvania Public Utility Commission, which regulates President's Letter 2 the activities of PP8L and other state utilities. The company is proud to Year In Review 4 serve Harrisburg, and all the other communities that make up its service Financial Review 18 area. With an abundant supply of reliable, economical electric energy, PP8L's service area is poised at the core of an industrial and commercial Financial Statements 24 market area where 70 million people live within a 300-mile radius. Please Notes to Financial Statements 32 contact Joseph R. Lesko, manager of economic development, toll-free at Selected Financial and (800) 523-9854 to talk about plant location opportunities. Operating Data 40 Common Stock and Dividend Data 42 Officers and Directors 44 PP8L Among the Best PPSL power plants consistently have among the best operating records in the electric utility Industry. For 1985, the company's fossil fuel units ran at 81.7 percent equivalent availability a standard measure of the percent-age of time a unit is available to operate at Its rated capacity. That measure was the best-ever for PP&L with its existing mix of plants. The company's nuclear units also ran exceptionally well, as described elsewhere in this report. This excellent performance doesn't just happen. As highlighted in the photographs and captions in this report, PP8L people plan and work very hard to maintain, overhaul and operate generating units at their peak efficiency. Most of the plant overhaul, maintenance and life-extension programs are performed in-house a partnership between Power Production, Nuclear, Construction, Project Management, Power Plant Engineering and Procurement employees throughout the company. Their dedication to excellence keeps PPSL's generating performance among the best.
Service Area Pennsylvania Power & Light Co., based ln Allentown, Pa., provides elec-tric service to more than a million homes and businesses throughout a Notice oF 10,000-square. mile area In 29 counties of Central Eastern Pennsylvania. Annual iNeeting Principal cities ln the PP8L service area are Allentown, Bethlehem, Har-risburg, Hazleton, Lancaster, Scranton, Wilkes-Barre and Wllliamsport.
The 1986 annual meeting of share-owners will be held at 1:30 p.m. on Wednesday, April 23, 1986, at Lehigh Throughout the photo section of this University's Stabler Arena located report are small maps that locate on the Lower Saucon Valley campus PPKL's seven power plants in relation complex south of Bethlehem and to the company's service area. west of Hellertown, Pa. Formal notice of the meeting, together with a reservation card for meeting attendance are included with share-owners'roxy material.
Highlights 1985 1984 Customers (a) 1,055,546 1,039,381 Common Shareowners (a) ~.............. 151,025 162,903 Electric Energy Sales, Kilowatt-hours... 28.1 Billion 24.5 Billion Interchange Power Sales, Kilowatt-hours 16.2 Billion 15.4 Billion Electricity Generated, Kilowatt-hours .... 42.7 Billion 37.9 Billion Operating Revenues $ 2.0 Billion $ 1.6 Billion Capital Provided by Investors (a)......... $ 5.5 Billion $ 5.6 Billion UtilityPlant (a)
Net Plant in Service $ 5.8 Billion $ 3.9 Billion Construction Work in Progress.... ~.... $ 0.2 Billion $ 2.0 Billion Common Stock Data Return on Average Common Equity . ~ .. 10.42% 12.309o Earnings Per Share $ 2.68 $ 3.12 Dividends Declared Per Share ......... $ 2.56 $ 2.48 Market Price Per Share(a) ............ $ 28/4 $ 25t/s Book Value Per Share(a) ......:....... $ 25.58 $ 25.46 Times Interest Earned Before Income Taxes. 2.37 2.35 (a) At year-end.
Where the PP&L Income Dollar Went in 1985 170 Net Cost of Energy I l I 17C Taxes 16% Interest 154 Materials, Services, Rents, etc.
14% Dividends 13% Employees 7C Depreciation 1C Earnings Reinvested Income includes revenues, other income and the allowance for funds used during construction.
President's Letter A promising new era for PP&L be- lion of the $ 330 million rate increase While Susquehanna was being con-gan in February 1985 when Susque- we had requested. The rate increase structed, the company's liquidity de-hanna Unit 2 was put into commercial request reflected additional revenue creased sharply at the same time that operation. This significant turning required due to the commercial oper- earnings were increasing through the point officiallyended the largest con- ation of Susquehanna Unit 2. recording of the non-cash allowance struction and financing program in The reason given for most of the for funds used during construction.
the company's history. PP&L is now disallowance was that the company Now that both Susquehanna units are entering a period when our exception- presently has too much generating in commercial operation, the com-ally strong coal and nuclear generat- capacity. The fact remains, however, pany's liquidity is improving, but we ing capacity can be used to meet the that all of PP&L's existing generat- are experiencing a decline in earnings needs of our customers and share- ing capacity is necessary to assure due to the PUC's excess capacity dis-owners without the necessity, for at long-term reliable and economic elec- allowance in April 1985.
least the balance of this century, of tric service. Since the company filed Looking ahead, we expect that our constructing major new generating a conservative and fullyjustified re- efforts to increase sales, combined plants. quest, we have appealed the PUC with our continued emphasis on cost decision to the Commonwealth Court containment, including lower fi-Sales and Earnings of Pennsylvania. nancing costs, will improve the com-Although kilowatt-hour sales to The company, however, is recov- pany's earnings per share perform-service area customers declined ering the return on investment dis- ance by the end of 1986.
slightly in 1985, total sales increased allowed as excess capacity in the by 14.8 percent, compared to 1984, Susquehanna Unit 1 rate case Marketing and due to the substantial growth in elec- through our contract to sell power to Economic Development tric energy sales to Jersey Central Jersey Central. Under the terms of Higher sales revenues reduce the Power & Light Co. and Atlantic City that contract, which went into effect need for rate increases. This is the Electric Co. in April 1985, PP&L will be sell- purpose and primary benefit of The revenues PP&L received from ing the electric output from 945,000 PP&L's marketing and economic these two long-term contracts helped kilowatts of our total generating development programs, because to offset weather-related reductions system at full cost of service until holding our electric power rates be-in electricity usage by service area 1995, with declining amounts each low the average charged regionally customers. Those reductions oc- year until 1999. and nationally is vital in retaining curred primarily because in 1985 we We are actively pursuing addition- and attracting job-producing busi-experienced a much warmer winter al contractual power sales to utilities nesses for our service area. This basic than normal. in an effort to recover as much as pos- objective of our marketing strategy Industrial sales also declined last sible of the return on investment dis- recognizes the tie between the finan-year, due in large part to reduced op- allowed in the Susquehanna Unit 2 cial health of the company and the erations by a few of our larger manu- rate case. prosperity of the communities we facturing customers further Although earnings declined in serve.
evidence that our service area econ- 1985, the quality of the company's The company's marketing pro-omy is continuing to shift from a earnings has improved significantly grams continued to score impressive heavy industrial base to a more diver- due to the fact that the large, non- gains in 1985 among residential, sified small business base. cash earnings associated with funds commercial and industrial cus-The company's 1985 earnings of invested in construction have ended tomers.
$ 2.68 per share were down 44 cents now that both Susquehanna nuclear For example, over 80 percent of all per share from 1984. The main rea- units are in commercial operation. new residential customers in our son for the earnings decline was the The resulting increase in the com- service area now choose electric decision of the Pennsylvania Public pany's liquidity underscores the space heating. This impressive UtilityCommission, in April 1985, financial transition occurring penetration of the home heating to grant the company only $ 121 mil- at PP&L. market is the result of the competi-
tive price of PP&L's electric service Operating Performance Susquehanna output, permitted the and the effectiveness of PP&L people company last year to sell 16.2 billion The continued outstanding per- kilowatt-hours within our power pool in promoting the conveniences and formance of the company's gener-cost advantages to be gained from and to other utilities in neighboring ating plants demonstrates the states. These sales, which resulted the wise use of'electricity. commitment of PP&L people to ex-Since many businesses in Central in energy savings of $ 118.8 million cellence in all aspects of our oper-Eastern Pennsylvania are compet- for PP&L's customers, were im-ations. The special contribution of portant to holding down our cost ing in difficultdomestic and world our generating plants in achieving markets, we also are well aware of of service.
PP&L's service-oriented mission is the importance of our efforts to help With the construction of Susque-highlighted in this annual report. hanna now complete, the company them be competitive by keeping Our Susquehanna nuclear units PP&L's price for electric service as has allocated about $ 136 million for made an essential contribution to the capital expenditures over the next low as possible. company's record 1985 production An important part of our ongoing fiveyears to extend the life of PP&L's output and demonstrated the value non-nuclear power plants. This im-economic development effort is to of these generating units in meeting provide industrial and commercial portant objective recognizes that the the energy needs of our customers. company's existing, highly efficient customers special rate incentives Following a very smooth startup designed to encourage them to locate generating system is the essential re-leading to commercial operation in source that willpermit us to meet our or expand operations in our service February 1985, Susquehanna Unit 2 area. customers'ongoing needs for reliable The latest in a series of PP&L in-operated at a capacity factor of 85.4 and economic electric service with-percent, while generating more elec- out taking on the financial risk of centive rates, which became effec- tricity than any other American tive in January 1986, eliminates new plant construction.
boiling water reactor during 1985. The strong commitment by PP&L the off-peak demand charge in order Unit 1, operating for 138 consecutive to encourage increased production people to achieving excellence in all days following the successful com- phases of our operations brought during off-peak hours when lower- pletion of its first refueling outage, cost electricity is available. These about the company's outstanding also exceeded its 1985 capacity factor performance last year. Our confi-new rate changes also include ex- and energy output budget objectives.
perimental demand-free days and dence in the future is based on their PP&L's non-nuclear power plants record of accomplishment and dedi-expand the number of industrial and turned in another outstanding commercial customers that can take cation to service.
year in 1985, with an equivalent In 1986, we will continue to work advantage of interruptible rates. availability of 81.7 percent the hard to achieve the expectations of These new economic development best ever for our current mix of fossil-rates are directed to off-peak time you, our shareowners, and to meet fuel units. This excellent record, com- the needs of the people of Central periods which occur at night and over bined with the exceptionally high weekends. This permits us to make Eastern Pennsylvania for reliable more effective use of the company's electric service at the lowest possible generating plants, while strengthen- cost.
ing our efforts to defer the need for .P new generating capacity through at least the balance of this century. Respectfully submitted, Programs that shift significant portions of electric usage to off-peak hours support PP&L's broad-based objectives, because they minimize future generating plant investment, and result in significant savings for Robert K. Campbell our customers. March 1, 1986
Brunner Island Plant PP8L's Brunner Island Plant is located In York County, along the west bank of the Susquehanna River about 15 mlles south of
. I;
~1 /~g Harrisburg. Three bituminous coal-fired 4 ~ II units provide a total of 1,464,000 kilowatts g1 of capacity. The plant employs 211 people.
Sales and Revenues suiting air-conditioning load pushed Year in Review Revenues for 1985 were $ 1.98 bil- the PP&L peak summer demand to lion, up $ 414 million over the previ- new highs on two successive August OPERATIONS ous year. The increase came from days. Peak demand from PP&L cus-higher sales primarily to other tomers reached 4.24 million kilo-Employee safety continues to be PP&L's number one operating pri-utilities and from the $ 121 million watts on Aug. 14, and 4.27 million ority. The company takes very seri- rate increase which went into effect kilowatts on Aug. 15. The previ-ously its obligation to provide the April 26, 1985. ous record summer demand of 4.19 tools, equipment and training that Residential customers in PP&L's million kilowatts occurred in June service territory used 1.2 percent 1984. Demand on all of the PJM com-employees need to help them achieve a safe work environment. At the end less electricity in 1985 than in 1984, panies reached 36.7 million and 37.0 of 1985, PP&L employees marked primarily because of warmer than million kilowatts, respectively, on the fifth straight calendar year normal temperatures during the the same two August days. The pre-without an on-the-job fatality. home-heating season. Commercial vious PJM record was 35.3 million The incidence of lost-time acci- usage was up 3.1 percent, reflecting kilowatts, also reached in June 1984.
dents was the lowest in PP&L's 65- about-normal growth in the service year history, bettering 1984 the area economy, while industrial previous best year by nearly 30 usage fell 2.6 percent, primarily due Power Sale Einalized percent. Twelve work groups in the to lower steel manufacturing sales. In April 1985, the company began company won acclaim for working a Overall, kilowatt-hour sales were selling the output from 945,000 kilo-million hours without a lost-time ac- up 14.8 percent. Essentially all of the watts of its electrical generating cident during the year. PP&L also 3.6 billion kilowatt-hour increase re- capacity to Jersey Central Power &
had the best 1985 lost-time accident sulted from higher sales to other Light Co. after the New Jersey record of the seven major Pennsyl- utilities primarily under long- Board of Public Utilities ruled the vania electric utilities. The positive term contracts. transaction was in the public inter-attitude that PP&L employees dis- est. The agreement had previously play every day toward safety make been approved by the Federal Ener-these gratifying statistics possible. Demand Breaks Records gy Regulatory Commission (FERC).
PP&L customers in Central Terms of the sale had been negoti-Eastern Pennsylvania and energy ated with JCP&L in 1984 after the Earnings and Dividends users in the Pennsylvania-New PUC ruled in August 1983 that Earnings for 1985 were $ 2.68 per Jersey-Maryland Interconnection 945,000 kilowatts of PP&L generat-share of common stock, compared to (P JM) the 11-company power pool ing capacity was surplus, and that
$ 3.12 for 1984. Earnings for the year in which PP&L operates broke the company could not earn a return were adversely affected by an April records in 1985 for both winter and on $ 287 million of its net investment 1985 decision by the Pennsylvania summer peak use of electric power. in generating facilities representing Public UtilityCommission (PUC) The PP&L winter peak use record that surplus.
which granted only $ 121 million of a of 5.21 million kilowatts, set in Jan- The power being sold to JCP&L
$ 330 million net rate increase re- uary 1982, was exceeded on Jan. 21, represents a proportionate share of quested by the company. 1985, when sub-zero temperatures each generating unit on the PP&L The quarterly dividend on PP&L's pushed electric demand to 5.52 mil- system. The sale provides JCP&L common stock was increased 2 cents lion kilowatts. The PJM winter with 945,000 kilowatts of PP&L per share to 64 cents, beginning peak-demand figure increased from capacity and related energy output with the April 1, 1985, dividend. It 30.6 million kilowatts to 33.3 million through 1995, and decreasing had been 62 cents per share since kilowatts on the same day. amounts after that until the contract April 1, 1984. Hot, humid weather and the re- expires in 1999.
PP8L Construction Department worker uses a sonic measuring device to adjust, within thousandths of an inch, the clearance between sta-tionary steam nozzles and the turbine rotor which is to be put in place.
A thin wire is stretched along the exact center line of the rotor bed.
When the device contacts the wire, an audible signal means the mea-surement is exact. Such close tolerances assure minimal friction and vibration, allowing up to five years between major overhauls.
"Our basic aim is to correct all potential problems within the confines of'n over-haul schedule to avoid a forced out-age later. Oepend-ing on the job mag-nitude, it's not unusual to do our planning several years ahead of the overhaul. We plan our cwork carefully then carefully work our plan."
(
0 Harry Spagnola Technical Supervisor
PPSL has earmarked S40 million for a nine-year program of moderni-zation at the 75-year-old Holtwood hydroelectric generating station that will allow the plant to stay in service for the indefinite future.
Projects such as the resurfacing of the dam face and the refurbishing of the plant exterior have already begun. Engineer Chris Porse, below right, discusses progress of gunite application to the face of the dam with the contractor's on-site supervisor.
"For 75 years this dam has taken ev-erything the unpre-dictable side of'he Susquehanna River could throw at it.
By resurfacing the face of'he dam we will correct what floods and ice have claimed. We expect to make 1
the dam as good
,i/ as new for many F
years to come."
Chris Porse Technical Supervisor
Holtwood Operations Holtwood Operations, located in southern Lancaster County, consist of 10 hydro-
' M U
~ c tlhl%&h, electric generating units totaling 102,000 kilowatts of capacity, and a 73,000-kilo-watt steam unit which burns a mix of fos-sil fuels. Holtwood employs 133 people.
Lansdale Joins PPckL Steam Eacility Sold PPckL Helps Out The Borough of Lansdale in Mont- PP&L is essentially no longer in Record numbers of PP&L line gomery County in July 1985 was the steam heat business. The Harris- crews were sent to assist New York, connected to the PP&L system as a burg steam heat system including Connecticut, Rhode Island and wholesale customer. The borough the Walnut Steam Heat Plant owned Massachusetts utilities after Hurri-had been purchasing electricity for by PP&L since 1926 was sold on cane Gloria swept through their its 7,000 customers from Philadel- Dec. 10, 1985, to Harrisburg Steam service areas on Sept. 27, 1985. The phia Electric Co. Lansdale adds Works Ltd. (HSW). high winds and downed trees and about 120 million kilowatt-hours to That firm will provide steam to limbs destroyed electric service fa-PP&L annual sales and increases about 450 customers in downtown cilities over a wide area, leaving system demand by about 20,000 kilo- Harrisburg through seven miles of millions of people without elec-watts. Fifteen other municipalities underground distribution lines. tricity.
are also PP&L wholesale customers. Four oil-fired boilers at the Walnut In all, 220 linemen, 20 foremen, 12 plant provide a capacity of 530,000 mechanics and 126 vehicles were as-pounds of steam an hour. signed to the stricken areas. This Construction Exy endi tures PP&L will operate the steam sys- was the company's largest effort Even with the Susquehanna plant tem for HSW during most of 1986 to ever to help other utilities rebuild completed, construction expendi- give the new owners time to become power lines and restore service.
tures willstill be needed to meet cus- familiar with the operation. An af- The affected utilities subsequently tomers'ngoing needs for reliable filiate of HSW plans to install facili- reimbursed PP&L for the costs of electric service. ties to cogenerate electricity at the its storm-aid efforts under provi-Budget figures call for construc- Walnut plant. Cogeneration is the sions of emergency mutual-aid tion expenditures of $ 288 million in simultaneous production of steam p acts.
1986, and $ 234 million in 1987. A and electricity using the same fuel. After the relief effort, scores of large portion of the outlay, about PP&L has agreed to purchase elec- unsolicited letters poured into
$ 144 million for the two years, is tricity cogenerated at the facility. PP&L offices from the affected com-earmarked for ongoing improve- panies, and from grateful residents, ments, replacements and life-exten- complimenting PP&L crews on sion programs at the company's their hard work, professionalism, fossil-fuel generating plants. An- New Labor Contract A new three-year labor contract dedication and friendliness under other $ 113 million is budgeted for adverse conditions.
ongoing modifications at the Susque- was negotiated and ratified during hanna nuclear plant during the two the summer between PP&L and two years. locals of the International Brother- Reservoir Begun hood of Electrical Workers, which After seven years of planning, en-represent more than 5,300 of PP&L's gineering and environmental re-Proj ects Postponed employees. view, construction began in late Sep-As part of a cost-containment The contract provides a wage in- tember 1985 on a 650-acre reservoir program, PP&L in May postponed crease of 4.75 percent in the first in Harmony Township, N.J., that a number of major projects in its year, and 4.5 percent in the second will help ensure continued genera-10-year building program. Included and third years. The contract also tion of electricity during drought were renovations of the company's provides for several changes in the periods.
23-story corporate headquarters in company's retirement plan to com- The Merrill Creek Reservoir will Allentown, as well as new division ply with federal legislation enacted store 15 billion gallons of water to service centers for the Harrisburg, in 1984, and cost-containment meas- replace during low-flow periods Hazleton and Scranton operating ures in the company's medical bene- water used by PP&L and six other areas. fit plans. utilities with generating facilities in
Lake WallenpaLipack Hydro I ~
l.ake wallenpaupack hydroelectric genera-tion consists of a 4,700-acre lake ln the Po-
/ cono Mountains, associated recreation facil-ities, an 870-foot-long concrete dam, a 3.5-mile pipeline, and a powerhouse with two units totaling 44,000 kilowatts of capacity.
the Delaware River Basin region. This is one in a number of steps ties an opportunity to buy capacity Water will be pumped from the PMC is taking to make the Green- and energy from the company.
Delaware during periods of high wich mines more cost-efficient. The For utilities that will need addi-river flow, and stored for release Greenwich mines provide about 18 tional generating capacity, this rep-during periods of drought, such as percent of the bituminous coal used resents an opportunity to purchase experienced in the region during at PP&L's power plants. that capacity on a long-term basis 1985. PP&L's share of the project Another PP&L coal-mining sub- without the uncertainties of new will provide replacement water sidiary, The Arcadia Company Inc., construction. At year-end, discus-for the two 820,000-kilowatt was sold at the end of 1985. Arcadia sions with other utilities were being oil-fired units at the company's assets consist primarily of surface conducted, but no firm commitments Martins Creek plant, north of coal reserves. had been made.
Easton, Pa.
WholesaLe Rates 78th Anniversary RATE-RELATED A rate increase of $ 5.7 million PP&L's Holtwood hydroelectric ACTIVITIES went into effect on Jan. 1, 1986, power plant celebrated its 75th an- The PUC, late in April 1985, under provisions of a settlement niversary in October 1985. The granted about $ 121 million of the agreement between PP&L and 17 102,000-kilowatt plant is located on $ 330 million net rate increase re- wholesale customers, which was the east shore of the Susquehanna quested by the company in July 1984. accepted by the FERC.
River in southern Lancaster The PUC denied the company a Rates increased about 20 percent County. return on the common equity invest- for the 16 boroughs and one investor-Holtwood was the largest and ment in the second unit at its Sus- owned utility that buy their electric most advanced hydroelectric facility quehanna nuclear plant based on power from PP&L for resale to their in the country when it was put into a judgment that PP&L has too much own customers. PP&L had filed the service in 1910. With careful pre- generating capacity. This adjust- $ 5.7 million request for the higher ventive maintenance and upgrading ment reduced requested revenues rates with the FERC in August 1985, of various components over the by about $ 161 million. Other adjust- asking that the increase go into ef-years, Holtwood is as productive as ments in the PUC decision reduced fect at the end of October 1985.
ever. Since its fuel falling water the PP&L request by another $ 48 In the settlement negotiations, the costs nothing, the plant's value in- million. wholesale customers agreed to the creases over the years as other gener- The company filed a conservative requested increase and PP&L ating fuels become more expensive. request and believes the evidence agreed to delay the start of the In the next several years, PP&L presented to the commission clearly higher rates for an additional two plans to allocate about $ 40 million of established the reasonableness of months.
capital improvements to extend the the full amount. On May 17, 1985, life of Holtwood's hydro units. PP&L appealed the PUC rate case decision to the Commonwealth Court Weatherizati on Begum of Pennsylvania, where it is still A new weatherization program Mining Oyerati ons pending. called WRAP (Winter Relief As-Pennsylvania Mines Corp. (PMC), sistance Program) was imple-PP&L's coal mining subsidiary, mented during 1985. WRAP is de-completed an agreement in Decem- Capacity For Sale signed to help cut energy costs for ber 1985 to have Rochester & Pitts- In an effort to improve earnings single-family homes owned or rented burgh Coal Co. manage PMC's performance, which is being ad- by low-income people, and multi-Greenwich mines beginning Jan. 1, versely affected by the PUC deci- family rental units occupied pri-1986. sion, PP&L has offered other utili- marily by low-income tenants.
Even though the Wallenpaupack hydro plant is in its 60th year of operation, it is as reliable as ever. Because the pipeline to the power house traverses rugged Pocono mountain terrain, it must be main-tained free of overgrowth and accessible for patrol or repair throughout the year. Ongoing scheduled maintenance, such as the re-placement of weathered concrete shown below, keeps all of the Wallenpaupack facilities in optimum operating condition.
"Since thisis a peak-load hydro unit, remotely con-trolled by Allentown system operators, ~
our construction crews are counted on to be the eyes, ears and hands of the operating forces bilityy found at other plants. These folks take that responsi-seriously.
When the Wallen-paupack units are needed, they'e i/Q
/
ready."
Joseph Sullma Construction Foreman
PP&L Construction Department mechanic uses a hydraulic device to remove pins securing turbine blades in place. Several blades in the high pressure stage of the big Martins Creek Unit 3 turbine were found to have slight cracks. Replacement blades were located, procured on an expedited basis, and replaced by the end of the overhaul period. The blades must be finely machined to fit within tolerances of tens of thou-sandths of an inch, so they won't vibrate in use and wear prematurely.
"It was a joy watch-ing our people put these new blades in place. They wouldn't tolerate a sloppy fit. Nothing was forced into place. They put it together like they were building a watch. I haven' seen anybody that didn't simply de-mand the best of themselves."
Allan Scott Mechanical Repairs Foreman
MarI:ins Creek Plant <<Q L
The Martins Creek plant has two 150,000-kilowatt coal-fired units and two 820,000-kilowatt oil.fired peak-load units. The plant @a =--
is located in Northampton County on the h Delaware River about 15 miles north of Easton. The plant employs 229 people.
During the year, 2,508 single-family sistance program begun by PP&L in used for general corporate purposes, dwellings were weatherized, and March 1983, is continuing into 1986. including the retirement of debt in-1,687 multifamily apartment units During its three-year trial period, curred earlier to provide funds for were committed to the weatheriza- Operation HELP provided about construction expenditures.
tion program. $ 760,000 to assist 4,200 needy In contrast to other programs im- families in PP&L's service area.
plemented to help people pay their More than half of this money came SUSQUEHANNA home energy bills, WRAP helps to from contributions by PP&L cus- PROJECT treat one of the root causes of high tomers who added an extra dollar to The most significant 1985 mile-bills poorly insulated dwellings. their electric bill payments. The rest stone for the company's Susquehan-PP&L is allocating $ 2 million a year came from PP&L, and from contribu- na nuclear plant near Berwick, Pa.,
to the program. tions by company employees. was the completion of testing and the Additionally, the Pennsylvania The program provides funds to start of commercial operation for Governor's Energy Council awarded selected social service agencies and Unit 2 on Feb. 12, 1985. This PP&L another $ 252,000 for the community groups that have agreed culminated more than 11 years of WRAP program. These funds are to administer the assistance. The dedication and hard work by the from the Solar Energy and Energy funds help pay any type of home thousands of people connected with Conservation Bank of the U.S. energy bill oil, natural gas, coal, the construction of Susquehanna, Department of Housing and Urban wood or electric for elderly and With both units in service, PP&L Development. The money is being handicapped people, and others should have sufficient generating used to match PP&L funds for with special hardships. capacity for the remainder of this single-family homes, and to re- century.
duce the principal amount on energy conservation loans made SECURITY SALES Unit 1 Refueled by banks to landlords of multi- With both Susquehanna nuclear Concurrent with Unit 2 commer-family units. units in commercial operation, the cial operation, Unit 1 was shut down Under the program, the company company's capital requirements for a 122-day refueling and main-first conducts home energy audits to dropped drastically in 1985. Sales of tenance outage. This was the first determine needed weatherization securities declined from $ 538 mil- refueling for Unit 1 since it went into measures. Depending on the find- lion in 1984 to $ 180 million in 1985. commercial operation on June 8, ings of the audit, qualified customers The Lehigh County Industrial De- 1983. During this initial operating who use electric heat can receive velopment Authority in late June period, Unit 1 ran at a capacity fac-window and baseboard caulking, 1985 authorized $ 55 million of its tor of 67.2 percent. Capacity factor is door and window weatherstripping, tax-exempt revenue bonds to fi- a measure of electricity actually water heater wrapping, attic and nance pollution-control and solid- produced compared to what would duct insulation and storm windows. waste-disposal equipment at the have been produced if the unit had In another part of the program, Susquehanna plant. The bonds were operated continuously at full power.
the company provides funds to re- offered to the public by underwrit- The average annual capacity factor duce the interest on energy conser- ers at a 9.375 percent interest rate. for all nuclear units in the United vation loans for landlords, or to in- The authority bonds were backed by States is about 60 percent.
stall low-cost energy conservation PP&L first-mortgage bonds with About one-quarter of its original measures in multifamily rental terms identical to the revenue bonds. 764 uranium fuel bundles were re-units. In September 1985, $ 125 million placed, and more than 1,200 main-of first-mortgage bonds were sold tenance tasks were completed before HELP Continues through underwriters at a 12 per- Unit 1 was put back into service in Operation HELP, an energy as- cent interest rate. Proceeds were mid-June 1985.
Montoui Plant k 0 The Montour plant is located in IVlontour County, near Washingtonville, about 12 mlles east of the Susquehanna River. The plant consists of two modern, 1970s vin-tage 750,000-kilowatt bituminous coal. burn-ing units. The plant employs 192 people.
Unit 1 is scheduled to be taken out NRC Eeahcation Safety Milestone of service, in mid-February 1986, Another NRC evaluation pro- A safety milestone was reached at for its second refueling. This will vided a vote of confidence in late Susquehanna in early September allow both units to move into a rotat- July for the operating and support 1985 as plant personnel accumu-ing 18-month schedule. Subsequent teams at the Susquehanna plant. lated 3 million consecutive em-refueling outages will be scheduled The NRC gave Susquehanna the ployee-hours worked without a for the spring and fall months when highest ratings possible in seven of lost-time injury. The record-break-energy demand is lowest. The first 10 areas examined, and a satisfac- ing safety streak began Aug. 30, refueling for Unit 2 is scheduled to tory rating in the other three areas. 1983. At no other point in PP&L's begin in August 1986. The agency's Systematic Assessment history had any facility or group of Licensee Performance covered a gone 3 million accident-free hours in period from February 1984 through one stretch.
Emergency Prey aredness April 1985.
Evaluations by outside agencies In the report, the NRC concluded Units Run Well have given Susquehanna high marks that PP&L's management approach Year-end capacity factor calcula-in a number of areas. "encourages conservatism, aggres- tions show that both Susquehanna A full-scale 12-hour emergency siveness, openness and a straight- units are running extremely well.
exercise at Susquehanna involving forward approach to problem reso- Unit 1, from the time it was put two primary county emergency or- lution," and that "the staff is com- back in service after its refueling ganizations, 26 municipalities, vari- posed of professional, well-qualified outage, through the end of the year, ous state agencies, and PP&L, was individuals guided by well-defined had an 88.7 percent capacity factor.
conducted on May 1, 1985. programs." Unit 2, from its February 1985 com-The exercise, which tested the mercial operation date through emergency preparedness and re- INPO Reyort year-end, ran at an 85.4 percent sponse capabilities of PP&L person- For the second straight year, an capacity factor. Both compare very nel and the Pennsylvania Emergen- evaluation by a team from the Insti- well to the 60 percent average an-cy Management Agency, as well as tute of Nuclear Power Operations nual rate for all U.S. nuclear reac-emergency management personnel (INFO) also gave the plant high tor units. Additionally, Unit 2 pro-in a 10-mile radius of the nuclear marks. duced more kilowatt-hours of elec-plant, was observed by the Nuclear INFO is an independent nonprofit tricity than any other boiling water Regulatory Commission (NRC) and association organized by the electric reactor in the U.S. during 1985.
the Federal Emergency Manage- utility industry to assist members in ment Agency. achieving the highest standards of Exercises of this scale are held excellence in nuclear plant opera- MARKETING/ECONOMIC every two years under federal regu- tions. The INPO evaluation included DEVELOPMENT lations. The exercise revolved examination of station organiza- PP&L in 1985 continued its ag-around a simulated accident and tion and administration, operations, gressive marketing efforts to pro-other unusual situations at the maintenance, technical support, mote new jobs and increased produc-plant. Details of the scenario are training and qualification, radio- tion among industrial and commer-not disclosed to drill participants logical protection, chemistry and cial firms in the company's service until the simulated incidents occur. emergency preparedness. area. The company's strategy is to The exercise included sounding of Additionally, PP&L in 1985 be- market its strong capacity situation, 111 emergency sirens in the 10-mile came the first utility in the country and its abundant supply of electric zone, and activation of the region's to receive accreditation for all 10 energy, in ways that will provide emergency radio broadcast system. training programs for which INFO economic benefits for Central PP&L scored well in the exercise. provides accreditation criteria. Eastern Pennsylvania.
12
PPBL Construction Department employees make adjustments to steam piping on a boiler feed pump turbine during a Montour Unit 2 over-haul. Inspection and preventive maintenance work during outages allows repair or replacement before worn parts lead to a forced out-age. Typically more than 500 people are involved in an overhaul so all tasks can be performed expediently and the unit placed back in use.
"By using PP&L people, for the most part, during overhauls, we see a lot of personal pride in workman-ship. They see these as their own units and they strive for quality work. When the units are put back together they want h
to see them run at )p the top end of I their efficiency."
Gene Baker Construction Foreman
When the first unit at the Sunbury plant went into commercial oper-ation in 1949, its boiler was controlled by the most up.to.date pneu-matic and vacuum-tube instrumentation. Unfortunately, such mecha-nisms are subject to a lot of wear and tear and seldom last for more than 50 or 55 years. As part of a systemwide extended-life program, nearly S20 million worth of new microprocessor-operated controls are being installed, part of which are shown below being wired into place.
IIIIIIIIIIIIIII "lt's much less ex-IIIIIIIIIIIIIII pensive to reno-vate, update and IIIIIIIIIIIIIII replace equipment IIIIIIIIIIIIIII than to build new Illilllllllllll power plants. At Sunbury we now ii . IIIIII have a state-of-the-art control system that should help Sunbury maintain its workhorse repu-tation for many years to come."
I I l I i
James Batug Senior Project Engineer 8
Sunbury Plant The Sunbury plant is located in Snyder County on the Susquehanna River. It con-sists of two anthracite, bituminous and coke-burning units and two bituminous-only units for a plant capacity of 389,000 kilowatts. The plant employs 205 people.
Job Goal effectively through the use of lower- cessful, showing that it does indeed A 1985 corporate goal of achieving priced electricity, and through in- cost much less to heat a greenhouse a net increase of 5,000 new jobs in creased off-peak use. The economic with warm water than with conven-PP&L's service territory was ex- development initiatives eliminate tional fossil fuels. The company's ceeded by a wide margin as 172 new demand charges for off-peak energy goal is to now turn the project into a or expanding firms provided a net use, and create experimental de- commercial center that will stimu-increase of 5,739 jobs. mand-free days for industrial and late economic development in the commercial customers. Demand is a region.
Marketing Results measure of a customer's maximum A new addition to the center is In addition to aiding the service need for energy. Connecticut-based AgrowNautics area economy and helping to provide Another provision of the new rate Inc., which began construction of a new jobs throughout Central Eastern reduces the threshold demand level 1-acre greenhouse in July 1985 and Pennsylvania, PP&L's economic required to qualify for the interrupt- by year-end was growing lettuce development efforts boosted electric ible rate structure first introduced under controlled-environment con-energy sales more than 143 million in 1984. Also included in the incen- ditions. Besides using Montour's kilowatt-hours above what they tive rate package was a reduction in warm water to heat the greenhouse, otherwise would have been. charges for residential customers the facility also is taking advan-Sales efforts among PP&L indus- who use off-peak storage systems to tage of PP&L's special greenhouse trial and commercial customers heat their homes. This new incentive electric rates for high-intensity added more than 85 million kilowatt- also will contribute to the company's lighting. These lights supplement hours of sales, and residential mar- goal of managing residential peak natural daylight to shorten the time keting programs added almost 29 load growth. needed from planting to harvest, million more kilowatt-hours. and also contribute to the total heat-In all, 257 million kilowatt-hours Greenhouse Marketing ing requirement.
of added sales were attributable to The company initiated a major Other successful commercial op-company marketing programs effort in September 1985 to attract erators at the site include Bryfogle's exceeding sales goals by about 15 greenhouse operators to PP&L's ex- Inc., with six acres of flowers and percent. panding greenhouse project where bedding plants, and Campbell Soup As an example of the strong allure waste heat recovered from the com- and Pepperidge Farm Inc., with six that electric heat has in the resi- pany's Montour power plant is used acres of tomatoes and agricultural dential energy market in PP&L's as a prime heat source. experiments. Green Empire Inc.,
service area, 82 percent of the new The complex, known as the which grows gourmet Shiitake residences served by PP&L chose to Montour Agribusiness Center, now mushrooms in a 93-acre wooded area heat electrically. houses four commercial growers near the site, also has leased land at that cultivate a variety of flowers, the center.
Incentive Rates vegetables and bedding plants for New incentive rates proposed by retail and wholesale markets.
the company in 1985 were condi- The center began in 1980 as a MANAGEMENT tionally approved by the PUC and waste-heat utilization research pro- CHANGES went into effect Jan. 1, 1986. The ject to determine whether warm Jack R. Calhoun, senior vice rates are designed to help PP&L's water that is normally circulated president-Nuclear, retired from commercial and industrial custom- through the nearby coal-fired power PP&Lon July 1, 1985, after five ers increase productivity. plant's cooling towers could econom- years as the senior officer in the The new rates can provide sig- ically be used to heat commercial company's Nuclear Department.
nificant benefits to local industries greenhouses. Calhoun came to PP&L in 1980 by enabling them to compete more The research project was very suc- from the Tennessee Valley Authori-
Susquehanna Plant PP&L's Susquehanna nuclear plant is lo-cated in Luzerne County about five miles northeast of Berwick. It's twin boiling-water reactors provide 2,100,000 kilowatts of capacity 90 percent owned by PP8L.
The plant employs about a 1,000 people.
ty where he had been director of utility's Palisades nuclear plant. 1950 and progressed through a num-nuclear power. He provided leader- On Aug. 1, 1985, functions of the ber of foreman and project engineer ship for PP&L's nuclear operations company's Legal and Regulatory jobs. Among his early experience for the critical period during which Affairs departments were com- had been assignments in the com-construction of the Susquehanna bined. pany's former Atomic Power Divi-plant was completed and its two Gennaro D. Caliendo, vice presi- sion from 1956 through 1965. He also units placed into commercial opera- dent and chief counsel-Regulatory had been superintendent of System tion. He was instrumental in map- Affairs was appointed vice presi- Operation, manager-Power Supply ping key strategies to maintain dent and general counsel to head the and Construction manager.
PP&L's commitment to excellence new Office of General Counsel. He was manager-Engineering &
in operating the plant. Edward M. Nagel, vice president, Construction when ground was Succeeding Calhoun on July 1, as general counsel and secretary, was broken for the Susquehanna plant in senior vice president-Nuclear, and appointed vice president and secre- November 1973, and in January as a member of PP&L's Corporate tary. Nagel will concentrate on 1974 he was promoted to vice presi-Management Committee, was Bruce matters pertaining to the board of dent in the System Power & Engi-D. Kenyon, former vice president- directors, and priority assignments neering Department. Six months Nuclear Operations. such as bulk power marketing. later, he assumed project manage-Kenyon stepped into the principal Caliendo joined PP&L's Legal ment responsibility for the Susque-management role of a department Department in 1968 as an attorney. hanna plant, an assignment he he helped mold. He had been a lead- He was named assistant counsel in retained until his retirement.
ing force in the successful develop- 1975, and appointed chief counsel-ment of Susquehanna plant opera- Regulatory Affairs in 1978 when tions and its support functions. the Regulatory Affairs Section was BOARD OF DIRECTORS Kenyon joined PP&L in 1976 as established. He was appointed vice Dr. Elizabeth E. Bailey, dean of manager-Nuclear Support in the president and chief counsel-Regula- the Graduate School of Industrial Power Production Department. He tory Affairs in November 1981 when Administration at Carnegie-Mellon was named manager-Construction the Regulatory Affairs Department University in Pittsburgh, did not Department in 1978, and a year later was established. stand for re-election to the board at he was promoted to assistant vice Nagel joined PP&L in 1952 as an the company's annual meeting in president-Nuclear. He had been attorney, and in 1962 was promoted April 1985. Conflicts in her busi-vice president-Nuclear Operations to assistant counsel. In 1968 he was ness schedule would have interfered since 1980. appointed assistant general counsel. with her attendance at PP&L board Kenyon came to PP&L from Three years later he was named meetings. Dr. Bailey had joined the Northeast Utilities, Waterford, general counsel, head of the Legal board in mid-1983.
Conn., where he had been superin- Department and secretary of the Dr. W. Deming Lewis, president tendent of the Millstone nuclear company. He became a vice presi- emeritus of Lehigh University, a plant. dent in 1973. PP&L director since 1967, resigned Succeeding Kenyon as vice Norman W. Curtis, vice president- from the board effective Sept. 30, president-Nuclear Operations on Engineering & Construction- 1985, for health reasons.
July 1, was Harold W. Keiser, who Nuclear, retired Oct. 1, 1985, after With his strong educational excel-had been superintendent of the a 35-year career with PP&L. lence, and his long-term ties to Susquehanna plant. Curtis played a pivotal role in the eastern Pennsylvania, Dr. Lewis Keiser came to PP&L in 1980 from building of Susquehanna, the largest brought a special perspective to the Consumers Power Co. in Covert, construction project ever under- board, and to his service on several Mich., where he had been operations/ taken by PP&L. He joined PP&L as board committees over his 18 years maintenance superintendent at that a Construction wireman's helper in with PP&L.
During its first refueling, about one-quarter of the Susquehanna Unit 1 reactor's fuel assemblies were replaced. The operation is con-ducted underwater to shield workers from radioactivity. While the unit was out of service, about 4,000 individual work activities of pre-ventive and corrective maintenance were performed. Refueling and maintenance outages are scheduled for both Units 1 and 2 during 1986, then at 18-month intervals throughout the life of the plant.
'With hundreds of dol-of'housands lars of revenues riding on each day out of service, a lot of'eople work a lJ I lot of hours to complete tasks that have been
/
planned many months before.
Everything has to mesh perfectly.
Our goal of operat-ing excellence a/so )
extends to the times when we'e f down for 1 p
maintenance." i~
Ardle Kisslnger Assistant Unit Supervisor
Review of the Company's Financial Condition and Results of Operations This review provides a discussion of the Company's financial condition and results of operations. Additional infor-mation on these matters is set forth in the financiaL statements, schedules and notes on pages 84-89 and the seLected financiaL and operating data on pages 40 and 41.
Results of Operations ly attributable to a 6.3% increase in of about $ 37 million of the cost of Earnings per share of common electric energy sales during the electricity purchased from Alle-stock were $ 2.68 in 1985, $ 3.12 in year. Increased revenues from the gheny Electric Cooperative, Inc.'s 1984 and $ 3.06 in 1983. The primary higher sales helped offset the effects (Allegheny) 10% undivided interest reason for the earnings decline in of an inadequate rate increase al- in the Susquehanna units. The Com-1985 was related to the Pennsylva- lowed by the PUC in its August 1983 pany has agreed to purchase declin-nia Public UtilityCommission's rate decision. ing amounts of electricity from Al-(PUC) April 1985 rate decision legheny through 1990. The PUC did which granted about one-third of the permit the Company to recover all net rate increase requested by the 1985 Rate Decision operating costs associated with Company. In April 1985, the PUC issued a Unit 2 and to earn a return on the The Company expects that the de- final order on the Company's re- preferred and preference stock and cline in earnings per share will end quest for an increase in electric rates debt investment in the unit.
in the first half of 1986. A combi- to reflect the effect of placing Sus- The Company has appealed to the nation of cost-containment meas- quehanna Unit 2 in commercial Commonwealth Court of Pennsyl-ures, an improved sales outlook and operation and to recover other in- vania the PUC decisions regarding refinancing high-costsecurities at a creased costs. The PUC granted the excess capacity and the purchase of lower cost are expected to improve Company approximately $ 121 mil- electricity from Allegheny. Other year-end earnings per share per- lion of the $ 330 million net rate in- parties have filed cross-appeals and formance, as compared to 1985. crease requested. the Company is unable to predict The Company is pursuing the sale The PUC denied the Company a what action the Court will take.
of generating capacity and energy to return on the common equity invest-other utilities. To the extent a sale is ment in Susquehanna Unit 2, based concluded, the Company would re- on the PUC's conclusion that the 1983 Rate Decision cover some portion of the revenues Company has too much generating In August 1983, the PUC issued a and earnings disallowed by the PUC capacity. This adjustment reduced final order on the Company's re-in its 1985 rate decision.
The earnings improvement'in- ' requested revenues by about $ 161 million. The othe'r'ajor adjustment quest to increase rates to reflect the effectof placing Susquehanna Unit1 1984 compared to 1983 was primari- by the PUC was to disallow recovery in commercial operation and to re-Earnings and Dividends Times Interest Charges Earned Per Share (12 Months Ended Each Quarter)
Dolla ra Per Share Time Earned (Pre Taz) 84.00 3.00 2.00 1.00 81 82 83 84 86 81 82 83 84 86
~
~ Earnings Dividends declared
cover other increased costs. The rily due to increased contractual 1983-1984 winter season.
PUC granted the Company approxi- sales to other utilities from specific Sales under tariffs subject to PUC mately $ 203 million of the $ 315 mil- generating units. Contractual sales jurisdiction accounted for approxi-lion net rate increase requested. to other utilities represent the ener- mately 86% of the Company's reve-The PUC decided that 945,000 gy sold to Atlantic City E<lectric nues from electric energy sales in kilowatts of the Company's total Company from the Susquehanna 1985. The remaining 14% of these generating capacity was excess, and units and the energy sold to JCP&L. revenues related to sales to others therefore did not permit the Com- These sales were 3.7 billion kwh for resale, which are regulated by pany to earn a return on $ 287 million higher in 1985 than in 1984 due to the Federal Energy Regulatory of its net investment in total gener- the commencement of sales to Commission (FERC).
ating facilities. This reduced annual JCP&L and the commercial opera- The FERC also regulates inter-revenues by about $ 59 million which tion of Susquehanna Unit 2. change power sales which are classi-adversely affected earnings through Excluding contractual sales to fied as a credit to operating ex-March 1985. other utilities, electric energy sales penses and serve to reduce the cost Since April 1985, the Company, were 71 million kwh or 0.3% lower in of energy included in The percentage of electric rev-customers'ills.
has provided Jersey Central Power 1985 than in 1984. Sales to resi-
& Light Company (JCP&L) with dential customers were down 100 enues subject to F<ERC regulation 945,000 kilowatts of generating million kwh or 1.2%, sales to com- was higher in 1985 than in previous capacity and related energy from mercial customers increased 201 years due to the contractual sales to the Company's generating facilities. million kwh or 3.1% and sales to in- other utilities.
With commencement of this sale, the dustrial customers decreased 211 Billings to customers under PUC Company began to recover from million kwh or 2.6%. The decline in jurisdiction include base rate JCP&L the $ 59 million a year in re- residential sales was primarily due charges along with supplemental turn on investment in generating to milder weather during the 1985 charges for energy costs and state facilities disallowed by the PUC in heating season. Sales to steel man- taxes over the levels included in base its 1983 rate decision. ufacturing customers were down rates. Billings to FERC customers 14.3% in 1985. This decline was a (excluding contractual sales to other major factor in the decrease in sales utilities) include base rate charges to industrial customers. and a supplemental charge for fuel Energy Sales and Energy sales for 1984 were 6.3% costs over the level included in base Operating Revenues higher than 1983, reflecting im- rates. Details of the changes from Electric energy sales were 14.8% proved economic conditions and the prior year in operating revenues higher in 1985 than in 1984, prima- extremely cold weather during the are shown at the top of page 20.
Sources of Energy Disposition of Energy Billions of K<rh Biiiio<<s of K<rh 60 60 40 40 30 30 20 20 10 10 81 82 83 84 85 81 82 83 84 85
~
~
~
Hydro and purchased power ~
~
~
Company use, line losses and other
~
Oil fired generation Interchange power sales Nuclear generation Coal fired generation ~ Contractual sales to other utilities System sales to customers 19
Changes in Operating Revenues with the balance coming from oil-fired and hydro units.
1985 1984 1983 Fuel expense in 1985 was 4.9%
(Mtqlt'ons of Dollars) higher than in 1984 due principally Electric to the increased power produced.
Base rate increases $ 138.2 $ 257.5 $ 141.1 The average cost of fuel per kwh Recovery of fuel and energy costs... 50.3 (17.0) (153.9) generated by coal-fired stations was Change in customer usage ......... 13.1 31.1 15.2 1.7% higher in 1985 than in 1984, Contractual sales to other utilities .. 200.8 13.3 18.5 while the fuel cost per kwh of oil-Other (principally tax surcharge) .. 12.1 28.1 9.5 fired generation declined 5.5%.
Total electric. 414.5 313.0 30.4 Interchange power sales in 1985 Steam heat (0.8) 1.4 (1.6) were 16.2 billion kwh or 5.6% higher Total . ....................... $ 413.7 $ 314.4 $ 28.8 than in 1984. The increase was pri-marily attributable to the additional energy available for sale from in-creased production. The amount re-ceived for interchange power sales in 1985, however, was $ 59.6 million Base rate increases for customers caused a substantial reduction in less than in 1984 due to a reduction in under the jurisdiction of the PUC revenues applicable to recovery of the selling price of interchange went into effect August 1983 and energy costs in that year. sales. The average price received for April 1985. The amounts shown in interchange power sales was 3.62 the schedule above for base rate in- cents per kwh in 1985 and 4.21 cents creases exclude reductions in ener- Net Cost of Energy per kwh in 1984. The decline pri-gy costs which were included in base In 1985, the output from the Com- marily reflects the impact of lower rates as part of the rate filing. pany's generating units was 42.7 bil-, oil prices on the pricing of inter-The substantial increase in con- lion kwh, an all-time high, reflecting change power sales.
tractual sales to other utilities in excellent performance of all the In 1984, the quantity of inter-1985 was principally due to the sale units and the commercial operation change power sold to other utilities of capacity and energy to JCP&L. A of Susquehanna Unit 2. The two was 1.0 billion kwh lower than the large increase in interchange power Susquehanna units generated about 16.4 billion kwh sold in 1983. Dur-sales to other utilities during 1983 11.5 billion kwh. Coal-fired units ing 1984, increased sales to the Com-resulted in lower energy costs. This generated about 26.2 billion kwh pany's own customers, equipment Common StocK Book Value Construction Work in Progress vs. Market Price vs. Net Plant in Service Near End)
Bilhoas o/Dollars Dollars Per Sharc 88 20 10 81 82 83 84 85 81 82 83 84 85
~
~ Construction work in progress Net plant in service
~
~ Bookvaiuepershare Market price per share 20
outages and less need for energy by the large amount of construction in- crating units will be under con-other utilities resulted in a decline terest incurred in those years to fi- struction.
in interchange sales. nance construction expenditures. The schedule below shows actual The Company's construction ex- construction and nuclear fuel ex-penditures have enabled it to qualify penditures for the years 1983-1985 Wages and Benefits, for substantial investment tax and current projections for the years Other Operating Costs credits. At the end of 1985, an esti- 1986-1988. Construction expendi-and Depreciation mated $ 256 million of unused invest- tures during the three years 1983-ment and payroll-based tax credits . 1985 totaled $ 1.3 billion and are ex-Wages and employee benefits and were available to reduce federal in- pected to be about $ 0.8 billion during other operating costs increased come tax liabilities in future years. the three years 1986-1988, a decline over the prior year in both 1985 and For additional information con- of approximately $ 0.5 billion from 1984 due to higher prices and costs cerning income taxes, see the Sched- the prior three years.
related to operating the Susquehan- ule of Taxes on page 31 and Notes 5 na units. Increases in depreciation and 6 to Financial Statements.
reflect additions to plant in service, Allowance for Funds including the Susquehanna units. Used During Construction The provision for depreciation, as a Capital Expenditure (AFUDC) percent of average depreciable Requirements The amount of AFUDC recorded property, declined from approxi- Construction of the two Susque- in 1985 was substantially less than in mately 2.7% in 1983 to 2.2% in 1985 hanna generating units has domi- 1984. The decrease resulted from a primarily due to the use of a modi- nated the Company's construction large reduction in construction work fied sinking fund method of depreci- program for the past, several years. in progress due to the commercial ation for the Susquehanna units. Unit 1 was placed in commercial op- operation of Susquehanna Unit 2 eration in June 1983 and Unit 2 in and an adjustment of the income tax February 1985. The Company's in- componentof AFUDC due to utiliza-Income Taxes vestment in its 90% share of the two tion of tax loss carryforwards. The In 1985, the Company utilized tax Susquehanna units was $ 3.8 billion Susquehanna units accounted for loss carryforwards of approximately at December 31, 1985. Construction about $ 379 million of the total $ 391
$ 100 million for both federal and expenditures for the next several million of AFUDC recorded during state income tax purposes. The tax years are expected to decrease sub- the three years 1983-1985. With no losses arose during the period stantially from the levels recently new generating facilities under 1982-1984 and were due in part to experienced because no new gen- construction, AFUDC is not ex-Construction and Nuclear Fuel Expenditures 1983 Actuet-1984 1985 1986 Projected 1987 1988 (Milhons of Dollars)
Construction expenditures (a)
Generating facilities (b) $ 581 $ 322 $ 84 $ 139 $ 91 $ 120 Transmission and distribution facilities . 62 84 93 101 108 126 t.
Envirorimental .
Other 4
2 649 11, 5
422 6
17 200 20 28 288 13 22 234 7
25 278 Nuclear fuel (c) 100 103 74 51 42 27 Total . $ 749 $ 525 $ 274 $ 339 $ 276 $ 305 (a) Construction plans are revised from tions and other factors. Construc- piete the Susquehanna units and time to time to reflect changes in tion expenditures include AFUDC amounts for modifications and im-conditions. Actual construction which is expected to be less than provements to all generating costs may vary from those projected $ 20 million in each of the years facilities.
because of changes in plans, cost 1986-1988. (c) Includes both owned and leased fluctuations, environmental regula- (b) Expenditures for generating facili- nuclear fuel.
ties include amounts spent to com-21
pected to be a material amount in the sources are expected to provide and bonds currently outstanding.
foreseeable future. See Note 6 to about 78% of total funds required Current plans are to retire in the Financial Statements for additional during the three years 1986-1988 first half of 1986 the 14% series information concerning AFUDC. compared with 48% during the bonds due 1990, the 15/8% series three years 1983-1985. bonds due 2010, the $ 15.00 prefer-Financing ence stock and the $ 13.68 prefer-Outside financing was about ence stock. The funds required to billion during the three years Tentative Plans redeem these securities will be ob-
$ 1.0 1983-1985. During the same period, for Securities Sales tained from either internally gener-the Company also incurred $ 280 The Company intends to issue ated funds or the issuance of million of obligations under capital $ 375 million of long-term debt in lower-cost securities.
leases (primarily nuclear fuel). De- 1986. The exact amount, nature and Future financial condition and tails of the amount of securities sold timing of sales of securities in 1986 earnings performance will depend and other information on sources and subsequent years will be de- on many factors including the Com-and uses of funds during 1983-1985 termined in the light of market con- pany's ability to sell the capacity are set forth in the Statement of ditions and other factors. designated as being excess by the Changes in Financial Position on PUC, the success of the Company's page 25. appeal of the PUC's rate decision, The Company presently estimates Financial Condition unanticipated increases in future that outside financing during the Although earnings have been ad- capital requirements, the level of three years 1986-1988 will be about versely affected by the PUC's April economic activity in the Company's
$ 400 million, or about $ 600 million 1985 rate decision, the Company's service area, future action that the less than the amount required dur- financing capability and financial PUC may take in establishing a coal ing the prior three years. Funds flexibilityremain strong. Currently, cost standard applicable to the Com-from securities sales and from in- Company's mortgage indenture 'he pany's affiliated coal mines and ternal sources will be used to fi- and charter do not materially re- possible action by the Company to nance construction expenditures, strict the amount of additional se- divest or phase-out its affiliated repay $ 167 million of maturing curities that the Company can issue. coal-mining operations.
long-term debt obligations, meet The reduced level of construction
$ 209 million of preferred and pref- expenditures will result in the need Impacts of Inflation erence stock sinking fund require- for less outside financing. As a re- Certain effects of inflation on the ments and for the early retirement sult, the Company has an opportuni- operations of the Company have been of $ 525 million of certain high-cost ty to lower its current financing estimated on the basis prescribed by issues of preference stock and long- costs. the Financial Accounting Standards term debt. The Company intends to redeem Board and are set forth in Note 17 to Funds generated from internal certain high-cost preference stock Financial Statements.
Capital Requirements Sources of Capital hfilHono o/Dogara hfillions ojDollara 81,200 81,200 1.000 1,000 800 800 600 600 400 400 200 200
~
~
83 84 Aolaa/ 85 86 Construction and nuclear fuel Proj 87 colrd 88
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~
83 84 Actual 85 Capital lease obligations 86 87 Projrolrd 88
~ Security retirements Other
~ Outside financing (sales of debt and equity securities)
Internal sources (principally from opera-tions plus AFUDG less dividends) 22
Management's Report on the Financial Statements The management of Pennsylva- assurance recognizes that the cost of accounting principles. Their exami-nia Power & Light Company is re- a system of internal accounting con- nation is conducted in accordance sponsible for the preparation, trols should not exceed the benefits with generally accepted auditing integrity and objectivity of the fi- derived and that there are inherent standards and includes such pro-nancial statements and other limitations in the effectiveness of cedures believed by them to be sections of this annual report. The any system of internal accounting sufficient to provide reasonable financial statements have been pre- controls. Fundamental to the con- assurance that the financial state-pared in conformity with generally trol system is the selection and ments are not materially misleading accepted accounting principles and training of qualified personnel, an and do not contain material errors.
the Uniform System of Accounts organizational structure that pro- The Board of Directors, acting
. prescribed by the Federal Energy vides appropriate segregation of through its Audit Committee, over-Regulatory Commission. In prepar- and the utilization of written
'uties sees inanagement's responsibilities ing the financial statements, man- policies and procedures. In addi- in the preparation of the financial agement makes informed estimates tion, the Company maintains an in- statements. In performing this func-and judgments of the expected ternal auditing program to evaluate tion, the Audit Committee, which effects of events and transactions the Company's internal accounting is composed of directors who are not based upon currently available facts controls, policies and procedures as employees of the Company, meets and circumstances. to adequacy, application and com- periodically with management, the The Company maintains a system pliance. internal auditors and the indepen-of internal accounting controls de- Deloitte Haskins & Sells, inde- dent certified public accountants to signed to provide reasonable, but not pendent certified public account- review the work of each. Deloitte absolute, assurance that assets are ants, have been engaged to examine Haskins & Sells and the internal safeguarded and that transactions the Company's financial statements auditors have free access to the and events are executed in accord- and to render an opinion as to Audit Committee and to the Board ance with management's authoriza- whether such financial statements, of Directors, without management tion and are recorded properly to considered in their entirety, pre- present, to discuss internal account-permit preparation of financial sent fairly the Company's financial ing control, auditing and financial.
statements in accordance with gen- position, operating results and reporting matters.
erally accepted accounting princi- changes in financial position, in ples. The concept of reasonable conformity with generally accepted Auditors'pinion Deloitte Haskios+Sells One World Trade Center Certified Public Accountants New York, New York 10048 To the Shareowners and Board of Directors of Pennsylvania Power & Light Company:
We have examined the balance sheets of Pennsylvania Power & Light Company as of December 31, 1985 and 1984 and the related statements of income, earnings reinvested, and changes in financial position for each of the three years in the period ended December 31, 1985. 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 financial statements present fairly the financial position of the Company at December 31, 1985 and 1984 and the results of its operations and the changes in its financial position for each of the three years in the period ended December 31, 1985, in conformity with generally accepted accounting principles applied on a consistent basis.
February 4, 1986
Statement of Income 1985 1984 1983 (Thousands of Dollars)
Operating Revenues (Note 2) $ 1,976,502. $ 1,562,782 $ 1,248,397 Operating Expenses Net cost of energy Fuel 756,295 720,670 768,583 Power purchases . 164,963 171,953 186,955 Interchange power sales ~587,618) (647,186) (740,964) 333,645 245,437 214,574 Wages and employee benefits . 259,670 232,632 211,752 Other operating costs 272,147 219,002 166,839 Depreciation 141,912 118,763 107,885 Income taxes (Note 5) . 243,160 185,784 112,055 Taxes, other than income . 170,405 154,206 125,470 Deferred Susquehanna energy savings net of operating expenses (Note 3) . 29,075 19,892 1,450,014 1,155,824 958,467 Operating Income 526,488 406,958 289,930 Other Income and (Deductions)
Allowance for equity funds used during construction (Note 6). (51,490) 64,743 131,362 Deferred Susquehanna capital costs (Note 3) .. 31,742 (718) 29,935 Income tax credits (Note 5). 80,764 62,623 21,976 Other net. ~7,670) (4,830) (9,518) 53,346 121,818 173,755 Income Before Interest Charges 579,834 528,776 463,685 Interest Charges Long-term debt ........ 284,538 280,328 258,629 Short-term debt and other 26,872 33,740 29,231 Allowance for borrowed funds used during construction (Note 6) ~22,189) (104,195) (120,186) 289,221 209,873 167,674 Net Income. 290,613 318,903 296,011 Dividends on Preferred and Preference Stock......... 91,286 92,145 85,838 Earnings Applicable to Common Stock............. $ 199,327 $ 226,758 $ 210,173 Earnings Per Share of Common Stock (a) $ 2.68 $ 3.12 $ 3.06 Average Number of Shares Outstanding (thousands) .. 74,513 72,767 68,642 Dividends Declared Per Share of Common Stock ..... 2.56 $ 2.48 $ 2.40 (a) Based on average number of shares outstanding.
See accompantiing Schedules and Notes to Financial Statements.
24
Statement of Changes in Financial Position 1985 1984 1988 Source of Funds (Thousands of Dollars)
Funds from operations Net income $ 290,613 $ 318,903 $ 296,011 Charges (credits) to income not involving working capital Depreciation 141,912 118,768 107,885 Amortization of property under capital leases... 77,850 38,649 29,669 Noncurrent deferred income taxes and investment tax credits net ................ 133,108 125,038 78,178 Deferred Susquehanna costs net ............ (2,667) 718 (10,043)
Allowance for funds used during construction .. 29,801 (168,938) (251,548)
~2,740) 2,502 694 667,372 435,635 250,846 Outside financing Common stock 84,203 81,415 Preferred and preference stock 50,000 106,000 First mortgage bonds. 180,000 403,250 175,000 Short-term debt net increase (decrease) ......... (9,800) (85,200) 29,455 170,700 452,253 391,870 Noncurrent capital lease obligations................ 89,852 53,424 104,644 Working capital (excluding de6t) decrease (a)...... 176,767
$ 927,924 $ 941,312 $ 924,127 Application of Funds Construction expenditures Additions to nuclear fuel owned and leased ........
$ 199,852 $ 421,697 $ 648,661 74,845 103,518 100,157 Allowance for funds used during construction....... 29,301 (168,938) (251,548) 303,498 356,277 497,270 Securities retired Preferred and preference stock 47,017 26,808 12,804 First mortgage bonds. 76,534 80,154 59,842 Secured term notes . 100,000 100,000 Nuclear fuel trust notes net decrease............ 50,000 223,551 206,957 122,646 Reduction in noncurrent capital lease obligations.... 94,616 47,492 39,515 Dividends on preferred, preference and common stock .. 282,036 273,236 251,182 Working capital (excluding debt) increase (a)...... 14,577 89,762 Other net .................... 9,646 17,588 13,514
$ 927,924 $ 941,312 $ 924,127 (a) Changes in components of working capital (excluding debt)
Cash $ (1,839) $ (299) $ 191 Accounts receivable . 48,234 1,917 7,889 Unbilled and refundable revenues, net of deferred taxes .. 70,594 (7,438) (130,805)
Fuel (coal and oil) (43,289) 70,771 (29,992)
Accounts payable and accrued taxes......'............ (20,053) (32,277) (7,377)
Capital lease obligations due within one year.......... 233 (26,267) (5,999)
Other net .. (39,303) 33,355 (10,674)
Increase (Decrease) $ 14,577 $ 39,762 $ (176.767)
See accompanying Schedules and Notes to Financial Statements.
Balance Sheet at December 51 Assets 1985 1984 (Thousands of Dollars)
UtilityPlant Plant in service at original cost Electric . $ 6,916,733 $ 4,876,163 Steam heat (Note 14) 8,661 6,916,733 4,884,824 Less accumulated depreciation 1,140,046 1,023,864 5,776,687 3,860,960 Construction work in progress at cost. 161,684 2,020,839 Nuclear fuel owned and leased net of amortization (Note 8) ....... 372,446 377,105 Other leased property net of amortization (Note 8)................ 79,318 71,897 6,390,135 6,330,801 Investments Associated companies at equity. 18,099 17,714 Receivable from litigation settlement .......... 19,200 27,500 Nonutility property and other at cost or less. 13,023 11,413 50,322 56,627 Current Assets Cash 4,615 6,454 Accounts receivable (less reserve: 1985, $ 6,223; 1984, $ 5,486)
Customers. 152,483 105,857 Interchange power sales. 46,086 46,468 Other 7,231 5,241 Unbilled revenues 68,840 52,064 F<uel (coal and oil) at average cost . 154,572 197,861 Materials and supplies at average cost 23,609 21,222 Common stock held for dividend reinvestment program (Note 7) 11,878 12,820 Other ~ 25,121 50,718 494,435 498,705 Deferred Debits 30,747 24,650
$ 6,965,639 $ 6,910,783 See acco~npanying Schedules and Notes to Financial Statements.
26
Liabilities 1985 1984 (Thousands of Dollars)
Capitalization Common equity Common stock $ 1,307,267 81,307,267 Capital stock expense . (16,669) (16,805)
Earnings reinvested . 615,102 606,525 1,905,700 1,896,987 Preferred and preference stock With sinking fund requirements. 691,010 738,027 Without sinking fund requirements . 231,375 231,375 Long-term debt 2,507,213 2,528,531 5,335,298 5,394,920 Current Liabilities Commercial paper and other notes .. ~ ~ 95,500 104,800 Long-term debt due within one year 97,723 75,975 Capital lease obligations due within one year (Note 8) . 70,420 70,653 Accounts payable......... 114,450 117,054 Taxes accrued 57,506 34,849 Interest accrued 69,714 69,500 Dividends payable . 70,104 69,546 Deferred income taxes . ~ 33,437 25,486 Energy revenues to be refunded 36,672 98,441 Other ....... ~ ~ 0 ' \ I\ ~ 51,416 37,037 696,942 703,341 Deferred Credits and Other Noncurrent Liabilities Deferred investment tax credits ..................... 120,482 107,130 Deferred income taxes 432,806 336,617 Capital lease obligations (Note 8) 326,110 330,874 Other ............... 54,001 37,901 933,399 812,522 Commitments and Contingent Liabilities (Note 15)
$ 6,965,639 $ 6,910,783 See accompanying Schedules and Notes to Financial Statements.
27
Schedule of Capital Stock at December 51 Shares Outstanding Outstanding Shares 1985 1984 1985 Authorized (Thousands of Dollars)
Preferred Stock $ 100 par, cumulative (a) 4~/s%. $ 53,019 $ 53,019 530,189 629,936 Series. 451,046 497,211 4,510,456 10,000,000
$ 504,065 $ 550,230 Preference Stock no par, cumulative (a) $ 418,320 $ 419,172 4,183,197 5,000,000 Common Stock no par (a) $ 1,307,267 $ 1,307,267 74,512,797 85,000,000 Details of Preferred and Preference Stock (b)
Optional Redemption Sinking Fund Provisions(c)
Shares Price Per Shares to be Outstanding Outstanding Share Redeemed Redemption 1985 1984 1985 1985 Annually Period (Thousands of Dollars)
With Sinking Fund Requirements Series Preferred 7.40% $ 28,800 $ 30,400 288,000 $ 103.85 16,000 1986-2003 7.50% 15,000 150,000 7.75% 36,000 48,000 360,000 101.73 120,000 1986-1988 8.00% 42,500 45,000 425,000 112.00 25,000 1986-2002 8.00%,'Second.............. 8,000 10,000 80,000 102.67 20,000 1986-1989 8.25% 40,000 50,000 400,000 102.76 100,000 1986-1989 8.75% (d) 57,000 60,000 570,000 110.00 30,000 1986-2004 9.24% (d) 58,890 58,955 588,900 115.00 30,000 1986-2005 10.75% (d) (i)............... 26,500 26,500 265,000 104.78 53,000 1986-1990 11.00%, Adjustable (g) (i) ... 15,000 15,000 150,000 125.00 30,000 1989-1993 11.00% (i).... ~ 26,000 26,000 260,000 125.00 260,000 1988 11.25% (i) 15,000 15,000 150,000 125.00 15,000 1989-1998 14.00% (i) 34,000 34,000 340,000 122.00 (e) (e)
Preference
$ 8.625 (i) 51,000 51,000 510,000 None 102,000 1986-1990
$ 11.00 (d). 37,349 37,770 373,492 105.50 25,000 1986-2000
$ 11.60 (d) (h) .............. 50,000 50,000 500,000 114.00 25,000 1989-2008
$ 13.00 (d). 14,971 15,402 149,705 105.85 12,500 1986-1998
$ 13.00, Second (d) (h)....... 50,000 50,000 500,000 114.00 25,000 1989-2008
$ 13.68 (d) (f) (h)............ 50,000 50,000 500,000 114.00 25,000 1990-2009
$ 15.00 (d) (f) (h)............ 50,000 50,000 500,000 120.00 25,000 1988-2007
$ 691,010 $ 738,027 Without Sinking Fund Requirements 4/'%referred...... ~........ $ 53,019 $ 53,019 530,189 110.00 Series Preferred 3.35% .. 4,178 4,178 41,783 103.50 4.40% 22,878 22,878 228,773 102.00 4.60% 6,300 6,300 63,000 103.00 8.60% 22 237 22 237 222,370 104.00 9.00% 7,763 7,763 77,630 104.00 Preference
$ 8.00 35,000 35,000 350,000 103.00
$ 8.40 40,000 40,000 400,000 104.00
$ 8.70 40,000 40,000 400,000 101.00
$ 231,375 $ 231,375 See accompanying Notes to Financial Statements.
28
Increases (Decreases) in Capital Stock (Thousands of Dollars) 1986 1984 1983 Shares Amount Shares Amount Shares Amount Common Stock issued under dividend reinvestment plan (j).... ~..... 4,177,927 $ 84,874 3,873,726 $ 81,843 Series Preferred Stock 7.40%%d 7.50%
7.75%
8.00%%d 8.00%,
8.25%
.......................(16,00 0 Second.......
~
........(25,00 (150,000 (120,000 (20,000 (100,000
$ (1,600 (15,000 (12,000 0(2,500 (2,000 (10,000 (16,000) (1,600)
(120,000) (12,000)
(25,000) (2,500)
(16,000)
(25,000)
(1,600)
(2,500) 8.75% .. (30,000 (3,000 9.24% (650 (65 (58,660) (5,866) (29,350) (2,935) 11.00%, Adjustable 150,000 15,000 11.00% 260,000 26,000 11.25% 150,000 15,000 Preference Stock
$ 11.00
$ 11.60
..................... (4,210) (421) (30,498) (3,050) (32,680) (3,268) 500,000 50,000
$ 13.00 ..................... (4,317) (432) (17,875) (1,787) (25,000) (2,500)
$ 13.68 500,000 50,000 Decreases in Preferred and Preference Stocks represent: (i) the redemption of stock pursuant to sinking fund requirements, or (ii) shares reacquired through market purchases and subsequently cancelled. The reacquired and cancelled shares are used to meet sinking fund requirements.
(a) Each share of preferred, preference (e) The 14.00% Preferred Stock has a (h) Ownership of the $ 11.60, $ 13.00, and common stock entitles the sinking fund provision which re- Second Series, $ 13.68 and $ 15.00 holder to one vote on any question quires redemption of the following Preference Stocks is evidenced by presented to any shareowners'eeting.
number of shares annually at $ 100 Depositary Preference Shares, each per share: October 1, 1986-1987, representing ~/4 share of Preference (b) The involuntary liquidation price of 85,000; 1988-1989, 51,000; 1990, Stock.
the preferred and preference stock 68,000. (i) IntheeventcertainFederalincome is $ 100 per share, and the optional The Company intends to redeem all tax benefits are lost to corporate voluntary liquidation price is the of the outstanding $ 15.00 Series holders of these stocks, the Company redemption price per share in ef- Preference Stock on February 19, may be required to make indemnity fect, except for the 4~%%d% Preferred 1986 at the optional redemption payments sufficient to provide the and the $ 8.625 Series Preference price of $ 122 per.share ($ 30.50 per holders with an agreed upon effec-Stocks which are $ 100 per share depositary share) which includes tive yield after Federal income (plus in each case any unpaid divi- $ 2.00 per share ($ 0.60 per depositary taxes. Such payments are payable dends). Liquidation payments on share) representingan amountequal only after the holders sell or redeem preferred stock are payablein pref- to the accrued dividends from Janu- the stock. At December 31, 1985, the erence over the preference stock. ary 1, 1986. The Company also in- Company estimates that future in-tends to redeem all of the outstand- demnity payments would not ex-(c) The aggregate amount of sinking fund redemption requirements ing $ 13.68 Series Preference Stock ceed $ 5.0 million.
through 1990 are (thousands of dol- on April 1, 1986 at the optional re- (j) For 1985, the Company's dividend lars): 1986, $ 60,560; 1987, $ 61,850; demption price of $ 114 per share reinvestment plan was amended to 1988, $ 86,950; 1989, $ 58,460; 1990, ($ 28.50 per depositary share). The provide for shares to be acquired
$ 50,650.
April 1, 1986 dividend will be paid in the open market.
separately.
(d) On certain sinking fund redemp- Effective April 1, 1988, the divi-tion dates, additional shares may be dend rate is subject to a one-time redeemed up to the number of adjustment pursuant to a formula shares required to be redeemed based on the then current prime annually. rate.
Sce accompanying Notes to Financial Statements.
29
Schedule of Long-Term Debt at December B1 Outstanding 1985 1984 Maturity (b)
(Thousands of Dollars)
First Mortgage Bonds (a) 15% $ 16,665 February 1, 1985 97/e%. ~ ~ ~ 38,329 June 1, 1985 3s/s%. 25,000 August 1, 1985 15% 16,670 16,670 February 1, 1986 16'/s% 80,900 80,900 August 1, 1986 14s/4% . 50,000 50,000 December 12, 1986 16'/2% 86,000 36,000 August 1, 1987 16'/s% . 10,400 10,400 September 1, 1987 16'/s% . 10,100 10,100 August 1988 1,
16'/s% . 10,400 10,400 September 1, 1988 12'/s% . 10,000 10,000 February 19891, 16/'% 7,000 7,000 August 1989 1,
16'/2% . 10,400 10,400 September 1, 1989 12'/s% . 10,000 10,000 February 1, 1990 16'/% 8,500 8,500 August 1, 1990 16'/2% . 10,400 10,400 September 1, 1990 14% 125,000 125,000 December 1, 1990 45/% to 16~/2%. 825,400 825,400 1991-1995 5s/s% to 9% . 190,000 190,000 1996-2000 7i/4% to 9s/4%. 520,000 520,000 2001-2005 8~/4% to 15s/s% (c) . 850,000 350,000 2006-2010 12% to 13i/4% . 475,000 350,000 2011-2015 First Mortgage Pollution Control Bonds (a) 5/s% Series A 21,800 28,340 (d) 7~/s% to 8~/s% Series C 20,000 20,000 (d) 11~/4% to 11~/2% Series D . 70,000 70,000 (d) 10/s% Series E 87,750 37,750 March 1, 2014 105/s% Series F 115,500 115,500 September 1, 2014 9/s% Series G . 55,000 July 1, 2015 2,526,220 2,422,754 Other Long-Term Debt Secured term notes (a) (e) . 100,000 200,000 March 31, 1991 Miscellaneous promissory notes... 468 809 1986-1989 2,626,688 2,623,563 Unamortized (discount) and premium net (21,752) (19,057) 2,604,986 2,604,506 Less amount due within one year ......... 97,728 75,975 82,507,213 $ 2,528,531 (a) Substantially all utilityplant is sub- sinking fund requirements aggre- Bonds, 155/8% Series due 2010.
ject to the lien of the Company's first gate $ 33.7 million through 1990 and (d) Bonds mature annually as follows mortgage. Certain utility plant is may be met with property additions (thousands of dollars): (i) Series A also subject to the lien of a second or retirement of bonds. on May 1, 1987-2002, $ 900; 2003, mortgage issued as security for (c) In January1986, the Companysold $ 7,400 (ii) Series C on April 1, 2000, term notes. $ 125 million principal amount of $ 4,000; 2006-2009, $ 2,000; 2010, (b) Aggregate long-term debt maturi- First Mortgage Bonds, 107/8% Series $ 8,000 (iii)Series D on November 1, ties through 1990 are (thousands of due 2016. A portion of the proceeds 2002, $ 15,000; 2012, $ 55,000.
dollars): 1986, $ 97,723; 1987, from the sale willbe used to redeem (e) Variable interest rate.
$ 47,429; 1988, $ 21,511; 1989, on March 4, 1986 the $ 100 million
$ 28,375; 1990, $ 154,800. Maximum principal amountof First Mortgage See accompanying Notes to Financial Statemente.
30
Schedule ot Taxes 1985 1984 1988 (Thousands of Dollars)
Income Tax Expense (Note 5)
Included in operating expenses Provision F'ederal .. $ 78,648 51,790 $ 15,823 State .. 28,458 11,243 6,787 102,106 63,033 22,610 Deferred Federal 107,954 123,844 94,689 State. (2,808) 2,815 (938),
105,646 126,659 93,751 Investment tax credit, net Federal .... 85,408 (3,908) (4,306)
$ 243,160 $ 185,784 $ 112,055 Included in other income and deductions Provision (credit) Federal $ (67,005) $ (51,370) $ (15,216)
State (13,759) (11,258) (6,760)
$ (80,764) $ (62,623) $ (21,976)
Total income tax expense Federal....... $ 155,005 $ 120,356 $ 90,990 State ......... 7,891 2,805 (911)
$ 162,396 $ 128,161 $ 90,079 Detail of deferred taxes in operating expenses Tax depreciation . $ 180,287 $ 120,232 $ 101,728 Test operation of generating unit........ (5,781) (2,780) (10,856)
Deferred Susquehanna energy savings net of operating expenses (15,811) (11,411)
Unbi lied revenues . 7,951 (2,287) 11,266 State utility realty tax . (18,291) 14,888 Other . 2,291 (3,394) 3,024
$ 105,646 $ 126,659 $ 93,751 Reconciliation of Federal Income Tax Expense Indicated federal income tax on pre-tax income at statutory tax rate (46%%d) . $ 208,384 $ 208,350 $ 177,601 Reduction due to:
AFUDC (Note 6) (18,478) 77,656 65,088 Tax and pension cost.............. 5,245 5,719 6,314 Deferred Susquehanna capital costs ............ 14,601 (381) 13,770 Depreciation differences not normalized ........ (12,290) (1,439) 221 Utilization of loss carryforward 52,604 Other . (694) (1,416) 2,129 45,988 80,189 87,522 Total income tax expense $ 162,896 $ 123,161 $ 90,079 Effective income tax rate .. 35.80%%d 27.90%%d 23.30%%d Taxes, Other Than Income State gross receipts $ 78,549 $ 66,711 $ 60,112 State capital stock 28,557 28,044 20,074 State utility realty. 56,407 48,316 31,803 Social security and other............ 16,892 16,135 13,481
$ 170,405 $ 154,206 $ 125,470 See accompanying Notes to Financial Statements.
31
Statement of Earnings Reinvested 1985 1984 1983 (Thousands of Dollars)
Balance, January 1 $ 606,525 $ 560,858 $ 516,162 Add Net Income . 290,613 318,903 296,011 897,138 879,761 812,173 Deduct Cash dividends declared Preferred stock at required annual rates................ 44,537 47,437 47,268 Preference stock at required annual rates. 46,749 44,708 38,570 Common stock per share: 1985, $ 2.56; 1984, $ 2.48; 1983, $ 2.40... 190,750 181,091 165,344 Issuance cost of retired preferred and preference stock............. 133 282,036 273,236 251,315 Balance, December 31 $ 615,102 $ 606,525 $ 560,858 Notes to Financial Statements
- 1. Summary of Significant Accounting Policies Accounting Records removed from utilityplant accounts The U.S. Department of Energy Accounting records are main- and charged to accumulated depre- (DOE) is responsible for the perma-tained in accordance with the ciation. Expenditures for main- nent storage and disposal of spent Uniform System of Accounts pre- tenance and repairs of property nuclear fuel removed from nuclear scribed by the Federal Energy Reg- and the cost of replacement of items reactors. The Company currently ulatory Commission (FERC) and determined to be less than units of pays DOE a fee for future disposal adopted by the Pennsylvania Public property are charged to operating services and recovers such costs in UtilityCommission (PUC). expense. customer rates.
Affiliated Companies For financial reporting purposes, depreciation is being provided over Allowance for Funds Used Investments in unconsolidated During Construction (AFUDC) subsidiaries (all wholly owned) and the estimated useful lives of proper-ty and is computed using a modified As provided in the Uniform Sys-in Safe Harbor Water Power Corpo- sinking fund method for the Sus- tem of Accounts, the cost of funds ration (of which the Company owns quehanna nuclear plant and the used to finance construction pro-one-third of the outstanding capital straight-line method for all other jects is capitalized as part of con-stock representing one-half of the struction cost. The components of voting securities) are recorded us- property. These methods are also
. used for rate-making purposes. In AFUDC shown on the Statement of ing the equity method of accounting. accordance with an order of the Income under other income and Unconsolidated subsidiaries oper- deductions and interest charges are ate in the United States and are en- PUC, the modified sinking fund method will be used to depreciate iion-cash items equal to the cost of gaged in coal mining, holding coal the nuclear plant until the year 2000, funds capitalized during the period.
reserves, oil pipeline operations and The equity funds component is re-real estate investment. after which the straight-line method will be used for the plant's remain- duced by the income tax savings The Company believes that its fi- realized due to the tax deductibility nancial position and results of oper- , ing life. Provisions for depreciation, as a percent of average depreciable of construction-related interest.
ations are best reflected without AFUDC serves to offset on the consolidation of these subsidiaries property, approximated 2.2% in 1985, 2.5% in 1984 and 2.7% in 1983. Statement of Income the interest since they are not engaged in the charges on debt and dividends on business of generating or distribut- Nuclear Decommissioning preferred and preference stock in-ing electricity. All unconsolidated and Fuel Disposal curred to finance construction. In subsidiaries considered in the ag- An annual provision for decom- addition, a return on common equity gregate would not constitute a "sig- missioning costs of the Susquehan- used to finance construction is im-nificant subsidiary" as that term is na nuclear plant equal to the amount puted. (See Note 6).
defined by the Securities and Ex- allowed for rate-making purposes is change Commission. charged to operating expense. Such Capital Leases UtilityPlant and Depreciation amounts, net of income taxes, are in- Capital leased property is re-Additions to utility plant and re- vested in securities kept in a segre- corded at the present value of future placement of units of property are gated account which can be used lease payments and is amortized so capitalized at cost. The cost of units only for future decommissioning that the total of interest on the lease of property retired or replaced is costs. obligation and amortization of the 32
leased property equals the rental Company are allocated to operating tory retirement plan covering sub-expense allowed for rate-making expenses and other income and de- stantially all employees. Company purposes. (See Note 8). ductions on the Statementof Income. contributions to the plan include Under other income and deduc- current service costs and all Revenues tions, the income tax credits relate amounts required to amortize un-Revenues are recorded based on principally to the tax reductions funded prior service costs over associated with the interest expense periods of not more than 20 years.
the amount of electricity delivered to customers to the end of each ac-that is offset by the borrowed funds (See'ote 10).
component of the allowance for counting period. This includes funds used during construction.
amounts customers willbe billed for Proposed Accounting Statement electricity delivered from the time Deferred income taxes are re-corded for timing differences be- The Financial Accounting Stand-meters were last read to the end of tween book and taxable income to ards Board (FASB) issued a draft the respective accounting period. the extent they are permitted in accounting statement in December The Company's PUC tariffs contain rate determinations by regulatory 1985 that proposed certain account-an energy cost rate under which cus- ing rules to be used by rate-regulated agencies. The two principal items tomers are billed an estimated for which deferred taxes are notcur- utilities in accounting for rate phase-amount for fuel and other energy rently recorded are (i) certain pen- in plans, plant abandonments and costs. Any difference between the disallowed plant costs. Under cer-sion costs and employee-related actual and estimated amount for taxes capitalized for book purposes tain circumstances, the proposed such costs is collected from or re- accounting could require utilities to funded to customers in a subsequent but deducted currently for income taxes and (ii) a portion of tax depre- recognize an immediate charge period. Revenues applicable to en- ciation in excess of book deprecia- against net income that previously ergy cost rate billings are recorded tion related to property placed in may have been recognized over a at the level of actual energy costs service prior to 1980. period of time. The Company cannot and the difference is recorded as pay- predict what final accounting rules able to or receivable from customers.
Investment and payroll-based tax credits result in a reduction of the FASB may adopt, or the ulti-federal income taxes payable. Such mate effect, if any, that such ac-Income Taxes tax credits, other than credits re- counting may have on the Com-sulting from contributions to the pany's net income or financial The Company and its subsidiaries position.
file a consolidated federal income employee stock ownership plan, are tax return. Income taxes are allo- deferred when utilized and amor-cated to the individual companies tized over the average lives of the re- Reclassification based on their respective taxable in- lated property. (See Notes 5 and 6). Certain amounts from prior year come or loss and investment tax financial statements have been re-credits. Retirement Plan classified to conform to the current Income taxes applicable to the The Company has a noncontribu- year presentation.
- 2. Rate Matters In accordance with rate orders is- recovery of about $ 37 million of the net investment in all generating fa-sued by the PUC, electric base rates cost of electricity purchased from cilities. This adjustment, which were increased by approximately Allegheny Electric Cooperative, reduced requested revenues by
$ 203 million annually in August Inc.'s (Allegheny) 10% undivided about $ 59 million, resulted from a 1983 and $ 121 million annually in interest in the Susquehanna units. decision by the PUC that 945,000 April 1985. The agreement with Allegheny pro- kilowatts of the Company's gener-In April 1985, the PUC granted vides that the Company will pur- ating capacity was excess. In April
$ 121 million of the $ 330 million net chase declining amounts of electrici- 1985, the Company began to sell rate increase requested by the Com- ty from Allegheny through 1990. 945,000 kilowatts of capacity and pany to reflect the operation of Unit The Company has appealed to the energy to Jersey Central Power &
2 at the Susquehanna nuclear-fueled Commonwealth Court of Pennsyl- Light Company (JCP&L) and be-station and other increased costs of vania the PUC decisions regarding gan to recover from JCP&L the $ 59 doing business. excess capacity and the purchases million a year in return on invest-The PUC denied the Company a from Allegheny. Other parties to the ment disallowed by the PUC. (See return on the common equity, invest- rate proceeding before the PUC Note 4).
ment in Susquehanna Unit 2 based have filed cross-appeals with the The FERC permitted annual in-on the PUC's conclusion that the Courtor have intervened in all of the creases in rates for wholesale cus-Company has too much generating appeals. The Company is unable to :tomers of $ 3 million effective July capacity. This adjustment reduced predict the outcome of these appeals. 1982, $ 4 million effective March requested revenues by about $ 161 In its August 1983 rate order, the 1984 and $ 5.7 million effective million. The other major adjust- PUC did not permit the Company to January 1986.
ment by the PUC was to disallow earn a return on $ 287 million of its
- 3. Deferral of Costs Related to the Susquehanna Units In accordance with orders of the the date the units were placed in December 31, 1985. Recovery of this PUC, the Company deferred certain commercial operation until the ef- amount is subject to PUC review operating and capital costs, net of fective dates of the rate increases and approval. No return is being ac-energy savings, associated with reflecting operation of the units. The crued on the deferred costs.
Susquehanna Units 1 and 2. The deferred costs plus related deferred costs deferred were incurred from income taxes totaled $ 39.2 million at
- 4. Sales of Generating Capacity and Energy Since April 1985, the Company in generating capacity. JCP&L is 125,000 kilowatts of capacity and has been providing JCP &Lcapacity permitted to defer payment of a energy from the Company's coal-and energy from the Company's portion of the amount due under the fired stations until the year 2000.
generating facilities. Under the agreement until 1990. During 1985, The Company is pursuing addi-terms of the agreement, JCP&L is JCP&L did not elect to defer any tional sales of generating capacity entitled to 945,000 kilowatts of the payments. and energy to other utilities. The Company's generating capacity and The Company also has an agree- Company cannot predict whether it related energy through 1995, with ment which provides that Atlantic willbe successful in this effort, but if the amount then declining uniform- City Electric Company (Atlantic) a sale is completed, it would lessen ly each year until the end of the will purchase 125,000 kilowatts of the adverse earnings effect of the agreement in 1999. the Company's share of capacity and PUC's April 1985 rate decision re-Sales to JCP&L are made at a related energy from the Susque- garding excess capacity.
price equal to the Company's cost of hanna units. When this agreement providing service, which includes a expires in 1991, another agreement return on the Company's investment provides that Atlantic willpurchase
- 5. Income Taxes Taxable income for 1985 was suf- an equal decrease in the allowance The Company has not recorded ficient for the Company to utilize all for funds used during construction. deferred income taxes for certain of its loss carryforwards, which (See Note 6). timing differences in accordance were approximately $ 100 million The Company has unused invest- with PUC rate treatment. The cu-for both federal and state income tax ment and payroll-based tax credits mulative net amount of such timing purposes at the end of 1984. The cur- aggregating approximately $ 256 differences for which deferred in-rent provision for income tax ex- million ($ 32 million applicable to come taxes have not been recorded pense for 1985 has been reduced by the employee stock ownership plan) approximated $ 640 million at De-approximately $ 58.5 million to re- at December 31, 1985 which may be cember 31, 1985. The Company flect the utilization of the carryfor- used to reduce future federal income would expect to recover through wards. The reduction in the current tax liabilities. The carryforward electric revenues the taxes due when provision for income taxes has been period for these credits expires in such timing differences reverse.
offseton the Statementof Income by the years 1994 to 2000.
- 6. Allowance for Funds Used D uring Construction (AFUDC)
AFUDC is recorded on an after- in those years was limited to the tax ficient to permit the Company to tax basis with the equity component applicable to construction interest utilize all of its loss carryforwards reduced by the income tax savings determined to be usable as a tax de- that existed at the end of December realized due to the tax deductibility duction. The combined federal and 1984. Accordingly, AFUDC for of construction-related interest. The state income tax effect of the con- 1985 was reduced by the tax effect of Company had tax losses during the struction interest that could not be prior year construction interest in-period 1982-1984 due in part to the used as a deduction was approxi- cluded in the loss carryforwards.
large amount of construction inter- mately $ 60 million for the years est incurred. As a result, the income 1982-1984.
tax reduction reflected in AFUDC Taxable income for 1985 was suf-
- 7. Stock Held for Dividend Reinvestment Program At December 31, 1985, 424,259 tribution to participants under the on the open market and is carried at shares of Common Stock of the Com- Company's Dividend Reinvestment cost.
pany were held temporarily for dis- Program. The stock was purchased 34
- 8. Leases Property under capital leases consists of the following (thousands of dollars):
December 31 1985 1984 Nuclear fuel, net of accumulated amortization 1985, $ 137,974; 1984, $ 66,440. $ 317,212 $ 329,630 Vehicles, oil storage tanks and other property, net of accumulated amortization 1985, $ 44,259; 1984, $ 39,348. 79,318 71,897 Net property under capital lease . $ 396,530 $ 401,527 Future minimum lease payments electricity, were $ 78.5 million in in the followingamounts(thousands for capital leases at December 31, 1985 and $ 35.4 million in 1984. Fu- of dollars): 1985, $ 18,256; 1984, 1985 (excluding nuclear fuel) would ture nuclear fuel lease payments $ 18,836 and 1988, $ 10,914.
aggregate $ 110.3 million, including willbe based on the quantity of elec- Generally, capital leases contain
$ 31.0 million of imputed interest. tricity produced by the Susquehan- renewal options and obligate the During the five years ending 1990, na units. The maximum amount of Company to pay maintenance, in-such payments would decrease from unamortized nuclear fuel leasable surance and other related costs. The
$ 20.8 million per year to $ 9.9 million under current arrangements is Company also has entered into vari-per year. $ 850 million. ous operating leases which are not Nuclear fuel lease payments, Interest on capital lease obliga- material with respect to the Com-which are charged to expense as the tions was recorded as operating ex- pany's financial position.
fuel is used for the generation of penses on the Statement of Income
- 9. Credit Arrangements To provide short-term funds these credit arrangements would borrowing.
required for general corporate pur- mature on June 30, 1990 and, at the Reflecting the Company's re-poses, the Company issues commer- option of the Company, interest rates duced need for construction funds, cial paper notes and, from time to would be based upon domestic cer- the Company reduced its total credit time, borrows from banks. tificate of deposit rates, Eurodollar arrangements from $ 720 million at The Company maintains revolv- deposit rates or the prime rate. the end of 1984 to $ 285 million in ing credit arrangements with a The Company also maintains lines 1985. There were no borrowings out-group of domestic banks principally of credit aggregating $ 35 million standing at the end of 1985 under as a back-up for its commercial with various domestic banks in re- these credit arrangements.
paper issuances. The banks have turn for the maintenance of compen- Commitment fees incurred to committed to lend the Company up sating balances or the payment of maintain the Company's credit ar-to $ 200 million on a revolving basis commitment fees. Bank borrowings rangements were (millions of dol-in return for the payment of com- generally bear interest at rates lars): 1985, $ 1.6; 1984, $ 2.6 and mitment fees. Any loans made under negotiated at the time of the 1988, $ 2.6.
- 10. Retirement Plan and Other Postretirement Benefits Pension costs were (millions of the balance was charged to con- from 6.0% for 1984.
dollars): 1985, $ 27.8; 1984, $ 29.0 and struction and other accounts. The The actuarial present value of ac-1988, $ 27.7. Of these amounts, $ 18.9 decrease in pension costs for 1985, cumulated retirement plan benefits million in 1985, $ 18.0 million in compared to 1984, was due to an in- and net assets at the end of the plan's 1984 and $ 16.0 million in 1983 were crease in the assumed rate of return recent fiscal years were as follows charged to operating expenses, and on investments to 6.5% for 1985, (thousands of dollars):
June 30 1985 1984 Actuarial present value of accumulated plan benefits: (a)
Vested . $ 203,466 $ 191,284 Nonvested 12,584 10,185
$ 216,050 $ 201,469 Net assets available for benefits $ 369,371 $ 272,323 (a) Excludes accumulated plan benefits which are the obligation of four insurance companies under insurance contracts.
35
The assumed rate of return used Substantially all of the Company's expense when premiums are paid.
in determining the actuarial pres- employees will become eligible for Such costs were approximately ent value of accumulated plan certain health care and life insur- (millions of dollars): 1985, $ 2.0; benefits was 6.5% for both the June ance benefits upon retirement. The 1984, $ 2.3 and 1983, $ 2.2.
30, 1985 valuation and the June cost of these benefits for retired em-30, 1984 valuation. ployees is generally recognized as
- 11. Joint Ownership of Generating Plants At December 31, 1985, the Company owned undivided interests in three generating stations as follows (millions of dollars):
Susquehanna Keystone Conem augh
% Ownership 90.00% 12.34% 11.39%
UtilityPlant in Service $ 3,724 $ 36 $ 36 Accumulated Depreciation . 62 14 13 Construction Work in Progress 76 5 1 The Company receives a portion of ment of Income reflects the Com- stations. Each participant provides the total station output equal to its pany's share of fuel and other its own financing.
percentage ownership. The State- operating costs associated with the 12, Affiliated Company Transactions The principal transactions with transactions with affiliates aggre- lions of dollars): 1985, $ 2.6; 1984, affiliated companies involve the gated (millions of dollars): 1985, $ 4.1 and 1983, $ 4.2.
purchase of electricity from Safe $ 271.0; 1984, $ 291.9 and 1983, At December 31, 1985, the Com-Harbor Water Power Corporation, $ 290.9. pany had guaranteed $ 252.0 million the purchase of coal, the payment of Under equity accounting, the op- of the obligations of affiliated other costs related to coal reserves erations of affiliated companies companies.
and charges for transportation of oil resulted in after-tax charges against by pipeline. Costs related to these the Company's net income of (mil-
- 13. Affiliated Coal-Mining Op erations The Company purchased approxi- output levels and high costs. filiated companies in coal-mining mately $ 251 million of coal from its In this regard, the Company is operations amounted to about $ 103 affiliated mining companies in 1985 taking steps to reduce the cost of coal million.
at prices equal to the cost of mining. produced at the Greenwich mine The PUC staff is currently evalu-The cost of coal purchased is in- and is also evaluating its overall ating possible coal cost standards cluded in the energy costs collected - affiliated coal-mining operations. that could limitthe amount of affili-from customers. The PUC has noti- Theoutcomeof thatevaluation could ated coal costs that may be charged fied the Company that it is con- result in the phasing-out or divesti- to customers. In the event the Com-cerned with the relatively high cost ture of all or a part of those opera- pany's coal costs exceed any stan-of coal purchased from the Com- tions. Such action may adversely dard that may be adopted by the pany's affiliated mining companies. affect the Company's earnings in PUC, the Company may not be al-The comparison of the cost of coal amounts which are not presently de- lowed to recover the excess costs produced by affiliated companies terminable. The impacton earnings from customers.
with that acquired from other would be affected by a number of In December 1985, the Company sources has been affected in recent factors, including the investment in sold a subsidiary, The Arcadia years by low market prices due to affiliated mining operations, liabili- Company, Inc. which was involved the depressed condition of the coal ties arising due to a termination of in surface coal-mining operations.
industry. In addition, poor geologi- mining operations, income tax re- The sale resulted in an after-tax cal conditions and other problems at ductions and proceeds from the dis- charge against the Company's net the Company's affiliated Greenwich posal of assets. At December 31, income of approximately $ 1.6 mine have resulted in below normal 1985, the capital investment by af- million.
36
- 14. Sale of Steam Heat Plant In December 1985, the Company steam heat operations were less than charge against the Company's net sold its steam heat plant and associ- 1% of the Company's total operating income of approximately $ 2.3 ated distribution system in the city revenues. The sale of the steam heat million.
of Harrisburg. Revenues from property resulted in an after-tax
- 15. Commitments and Contingent Liabilities The Company's construction ex- replacement power during pro- the event of a nuclear incident at penditures are estimated to aggre- longed outages of nuclear units any of the facilities owned by others gate $ 288 million in 1986, $ 234 mil- caused by certain specified condi- and covered by the Act, the Com-lion in 1987 and $ 278 million in 1988, tions. pany could be assessed up to $ 10 mil-including the allowance for funds Under the property and replace- lion per incident, but not more than used during construction. See the ment power insurance programs, $ 20 million in a calendar year in the section entitled Capital Expendi- the Company could be assessed event more than one incident is ture Requirements on page 21 for retrospective premiums in the experienced.
additional information concerning event the insurers'osses exceed The Act is scheduled to expire in the Company's planned construction their reserves. The maximum August 1987, and Congress is con-expenditures. amount the Company could be as- sidering several proposals to amend The Company is a member of cer- sessed during the current policy the Act. The Company is unable to tain insurance programs which year is about $ 19 million. predict what action Congress might provide coverage for property dam- The Company's public liability ultimately take regarding the Act age to members'nuclear generating for claims resulting from a nuclear and what effect such action might plants. Facilities at the Susquehan- incident is currently limited to have on the Company's potential na plant are insured against proper- $ 650 million under provisions of . liability.
ty damage losses up to $ 1.1 billion the Price-Anderson Act (Act). The See Note 12 for information con-under these programs. The Com- Company is protected against this cerning the Company's guarantee of pany is also a member of an insur- potential liability by a combina- the obligations of certain affiliated ance program which provides in- tionof commercial insurance and an companies.
surance coverage for the cost of industry assessment program. In
- 16. Quarterly Financial Data (Unaudited)
Earnings Earnings Applicable Per Share to of Quarter Operating Operating Net Common Common Ended Revenues Income Income Stock Stock (a)
(Thousands of Dollars, Except Per Share Amounts) 1985 March . $ 486,495 $ 122,122 $ 104,651 $ 81,221 $ 1.09 June. 479,762 122,003 58,949 35,940 0.48 September .. 483,782 136,733 60,573 38,042 0.51 December ... 626,463 146,630 66,640 44,124 0.59 1984 March . $ 479,484 $ 119,964 $ 98,244 $ 76,059 $ 1.07 June. 351,310 93,055 66,003 42,851 0.59 September 349,994 99,132 76,609 53,049 0.72 December 381,994 94,807 78,147 64,799 0.74 (a) Based on the average number of shares outstanding during the quarter.
37
- 17. Supplementary Information on Changing Prices (Unaudited)
The following supplementary in- mentation problems and conceptual preciation expense are the only formation on the effects of changing differences regarding the manner items restated to reflect specific prices is presented in accordance in which the effects of changing price changes (current cost).
with the requirements of the FASB. prices should be measured. Fossil fuel inventories and the cost Customary financial reporting gen- The effects of changing prices set of such fuel have not been restated erally has not attempted to specific- forth below is presented using cur- from their historical cost because ally reflect the effects of inflation. rent cost information. In a period of they are stated close to current cost The FASB requires that certain inflation, prices of most goods and and the expense is generally recov-aspects of inflation be computed in services increase but not necessarily ered within a relatively short time accordance with prescribed tech- all at the same time. The current through adjustment clauses. Reve-niques and reported as supplemen- cost method shows the impact of in- nues, income taxes and expenses tary information on an experimental flation on a company by measuring other than nuclear fuel and depreci-basis. the estimated change in prices of the ation are presented at the amounts The FASB recognizes, and the specific goods and services used by reported in the basic financial Company cautions users of this in- that company. statements.
formation, that there is no consensus In the Supplementary Statement on the general practical usefulness of Income data shown below, utility Set forth under Other Impacts of of this supplementary information. plant, net of accumulated deprecia- Changing Prices are the following:
There are also unresolved imple- tion, nuclear fuel expense and de- 1. Gain from decline in purchasing Supplementary Statement of Income for 1985 As Reported Adjusted on In Financial the Basis of Statements Price Changes (Historicai Experienced Cost) (Current Cost) (a)
(Thousands of Dollars)
Operating revenues $ 1,976,502 $ 1,976,502 Operating expenses Fuel . 756,295 752,266 Depreciation (b) . 141,912 300,979 Other 551,807 551,807 1,450,014 1,605,052 Interest expense 289,221 289,221 Other income and deductions net. (53,346) (53,346)
Dividends on preferred and preference stock 91,286 91.286 1,777,175 1,932,213 Earnings applicable to common stock $ 199,327 $ 44,289 Other Impacts of Changing Prices Gain from decline in purchasing power of net amounts owed............ $ 157,290 Increase in net utility plant during the year due to price changes As a result of specific price changes experienced (c) . $ 114,252 As a result of changes in general price level. (391,128)
Excess of increase in general price level over increase in specific prices.. . $ (276,876)
Adjustment of net utility plant to net recoverable amount wr ite-up . $ 202,535 (a) Stated in average 1985 dollars. was determined by applying the (c) At December 31, 1985, the current (b) The current cost of utility plant was functional class depreciation ac- cost of net utility plant was $ 10.71 determined by applying construc- crual rates to the respective average billion, while the historical cost or tion cost indices maintained by the year-end balances of depreciable net amount recoverable through de.
Company to the historical cost. The plant adjusted for specific price preciation was $ 6.39 billion.
adjusted provision for depreciation changes.
38
power of net amounts owed. credits. The Company is in a net revenue as depreciation. There-Inflation also affects monetary monetary liability position. fore, any difference between the
'assets, such as cash and receiv-
- 2. Increase in net utility plant dur- amount of utility plant stated in ables, which lose purchasing terms of current cost (after de-ing the year due to price changes.
power during inflationary peri- The increase in net utilityplant ducting the effects of general in-ods since these assets willin time is shown as a result of both spe- flation) and historical cost must purchase fewer goods or services. cific price changes (current cost) be adjusted to net recoverable Conversely, holders of monetary and changes in the general price amount. The amount of such dif-liabilities benefit during such level as measured by the U.S. ference that occurred as a result periods because less purchasing Government Consumer Price of price changes in 1985 is shown power will be required to satisfy Index for All Urban Consumers as a write-up of net utility plant these obligations. to net recoverable amount be-(CPI-U).
Monetary liabilities include cause the general price level in-preferred and preference stock 8. Adjustment of net utilityplant to creased substantially more than issues with sinking fund require- net recoverable amount. specific prices.
ments, long-term debt, current Under the rate-making pre-liabilities, capital lease obliga- scribed by regulatory commis-tions, deferred taxes and tax sions, only the historical cost of credits and other deferred utility plant is recoverable in Supplementary Comparison of Selected Data The following schedule presents a summary of selected data comparing items as they are normally reported in financial statements or other statistical summaries to items adjusted for changing prices.
1985 1984 1983 1982 1981 (Thousands of Dollars, Except Per Share Amounts)
Operating revenues As reported. $ 1,976,602 $ 1,562,782 $ 1,248,397 $ 1,219,548 $ 1,133,278 Average 1985 dollars (a). 1,976,502 1,618,542 1,347,968 1,359,178 1,340,463 Earnings applicable to common stock (b)
As reported. 199,327 226,768 210,173 210,572 170,801 Current cost in average 1985 dollars ............ 44,289 65,263 84,020 98,138 80,466 Earnings per share of common stock (b)
As reported. 2.68 3.12 3.06 3.35 3.17 Current cost in average 1985 dollars ............ 0.59 0.90 1.22 1.56 1.49 Amount by which the increase in general price level of net utility plant is greater than or (less than) the increase in specific prices of net utility plant. 276,876 (82,142) (119,385) (297,921) (71,574)
Adjustment of net utility plant to net recoverable amount write-up (reduction) at current cost in average 1985 dollars .......... 202,535 (160,826) (186,862) (357,555) (365,516)
Gain from decline in purchasing power of net amounts owed . 157,290 163,862 135,694 125,656 265,427 Net assets at year-end (c)
As reported. 2,137,075 2,128,362 1,999,324 1,875,070 1,666,812 Current cost in average 1985 dollars ............ 2,103,132 2,173,561 2,122,511 2,066,168 1,907,804 Cash dividends declared pcr common share As reported. 2.56 2.48 2.40 2.32 2.24 Average 1985 dollars (a) . 2.56 2.57 2.60 2.58 2.67 Market price per common share at year-end As reported. 28.75 25.12 20.62 21.00 17.12 Average 1985 dollars (a) . 28.29 25.66 21.90 23.14 19.60 Average consumer price index (CPI-U)............ 322.2 311.1 298.4 289.1 272.4 (a) Adjusted to average 1985 dollars by recording unbilled revenues. without sinking fund requirements.
applying the CPI-U index to items (c) Net assets (shareowners'quity) for The preferred and preference stocks as normally reported. purposes of this supplementary dis- with sinking fund requirements (b) 1981 excludes a nonrecurring credit closure includes common equity and have been excluded since they were related to an accounting change in the preferred and preference stocks treated as monetary items.
39
Selected Financial and Operating Data 1985 1984 1983 1982 1981 Income Items-thousands Operating revenues . $ 1,976,502 $ 1,562,782 $ 1,248,397 $ 1,219,548 $ 1,133,278 Operating income. 526,488 406,958 289,930 223,083 211,050 Allowance for funds used during construction .. (29,301) 168,938 251,548 246,423 193,861 Net income (a) 290,613 318,903 296,011 278,886 244,077 Earnings applicable to common stock (a) ....... 199,327 226,758 210,173 210,572 183,182 Balance Sheet Items thousands (b)
Net utility plant in service. $ 5,776,687 $ 3,860,960 $ 3,847,301 $ 2,112,169 $ 2,054,039 Construction work in progress..... 161,684 2,020,839 1,730,228 2,923,841 2,312,292 Total assets . 6,965,639 6,910,783 6,418,509 5,829,138 5,097,550 Long-term debt 2,604,936 2,604,506 2,387,249 2,323,318 2,165,381 Preferred and preference stock With sinking fund requirements............. 691,010 738,027 714,830 621,634 544,231 Without sinking fund requirements.......... 231,375 231,375 231,375 231,375 231,375 Common equity 1,905,700 1,896,987 1,767,949 1,643,695 1,435,437 Short-term debt ...... 95,500 104,800 190,000 160,545 175,489 Total capital provided by investors............. 5,528,521 5,575,695 5,291,403 4,980,567 4,551,913 Financial Ratios Return on average common equity % (a)....... 10.42 12.30 12.29 13.60 12.74 Embedded cost rates (b)
Long-term 'debt-% 11.24 11.12 10.98 10.81 10.80 Preferred and preference stock-%........... 10.02 9.94 9.66 9.41 8.93 Times interest earned before income taxes (a)... 2.37 2.35 2.29 2.05 1.91 Ratio of earnings to fixed charges total enterprise basis (a) (c) . 2.19 2.06 2.04 1.81 1.78 Depreciation as% of average depreciable property . 2.2 2.5 2.7 3.3 3.2 Common Stock Data Number of shares outstanding thousands Year-end 74,513 74,513 70,335 66,461 58,447 Average 74,513 72,767 68,642 62,809 53,912 Earnings per share (a) . $ 2.68 $ 3.12 $ 3.06 $ 3.35 $ 3.17 Dividends declared per share . $ 2,56 $ 2.48 $ 2.40 $ 2.32 $ 2.24 Taxability of dividend income % (d)........... 100.00 63.29 0 0 0 Book value per share (b) . $ 25.58 $ 25.46 $ 25.12 $ 24.71 $ 24.52 Market price per share (b) $ 283/~ $ 25~!s $ 20Ys 21 $ 17Ys Dividend payout rate % (a) . 96 80 79 70 72 Dividend yield % (d) (e) . 9.81 11.00 10.48 11.95 13.34 Price earnings ratio (a) (e) 9.76 7.24 7.48 5.79 5.30 Fuel Cost Data Cost per kwh generated cents Coal-fired steam stations 1.78 1.75 1.68 1.77 1.64 Nuclear steam station (g) . 0.61 0.54 0.66 Oil-fired steam station 5.02 5.31 5.23 5.62 5.75 Combustion turbines and diesels (oil)......... 9.31 9.82 10.21 10.74 10.51 Average 1.81 1.98 2.15 2.20 2.30 Cost of fossil fuel received at steam stations Coal-per ton $ 42.00 $ 42.75 $ 39.37 $ 42.32 $ 39.59 Residual oil-per bbl. $ 28.42 $ 31.32 $ 29.79 $ 30.94 $ 33.47 Employees (b) 8,433 8,386 8,160 8,208 7,999 (a) 1981 net income and earnings ap- (b) Year-end. (e) Based on average of month-end plicable to common stock include a (c) Fixed charges consist of interest on market prices.
nonrecurring credit related to an short- and long-term debt, other in- (f) The winter peaks shown were accounting change, while indicated terest charges, interest on capital reached early in the subsequent financial ratios and common stock lease obligations and the estimated year.
data for that year are computed ex- interest component of other rentals. (g) The Company's first nuclear unit cluding the nonrecurring credit (d) Based on holding one share of com- was placed in commercial operation from earnings. mon stock for the entire year. on June 8, 1983 and the second unit on February 12, 1985.
40
1985 1984 1983 1982 1981 Sales Data Electric customers (b) 1,055,546 1,039,381 1,026,144 1,013,623 1,006,570 Average annual residential kwh use.......... 9,034 9,282 9,051 9,039 9,157 Electric energy sales billed millions of kwh Residential 8,354 8,454 8,138 8,045 8,088 Commercial 6,728 6,527 6,119 5,946 5,893 Industrial . 7,907 8,117 7,623 7,324 7,968 Other . 1,082 1.043 968 982 1,005 System sales 24,071 24,141 22,848 22,297 22,954 Contractual sales to other utilities.......... 4,048 357 209 Total electric energy sales billed ......... 28,119 24,498 23,057 22,297 22,954 Sources of energy sold millions of kwh Generated Coal-fired steam stations 26,237 26,695 26,885 25,477 24,841 Nuclear steam station (g) ... 11,534 6,295 4,509 293 Oil-fired steam station . 4,316 4,121 5,581 3,186 4,705 Combustion turbines and diesels (oil)..... 18 32 45 13 32 Hydroelectric stations. 612 747 700 612 622 42,717 37,890 37,720 29,581 30,200 Power purchases. 3,716 3,765 3,880 1,414 744 Interchange power sales. (16,235) (15,377) (16,405) (6,900) (6,274)
Company use, line losses and other .. (2,079) (1,780) (2,138) (1,798) (1,716)
Total electric energy sales billed .. 28,119 24,498 23,057 22,297 22,954 Electric Revenue Data Hy class of service thousands Residential 634,669 591,922 $ 529,911 $ 503,557 411,668 Commercial . 492,686 441,651 386,617 363,233 292,984
~
Industrial 438,427 411,533 367,950 347,726 295,006 Other energy sales . 64,223 59,526 47,275 47.731 39,484 System sales . 1,630,005 1,504,632 1,331,753 1,262,247 1,039,142 Contractual sales to other utilities... 232,598 31,809 18,494 Total from energy sales billed .... 1,862,603 1,536,441 1,350,247 1,262,247 1,039,142 Unbilled revenues, net 78,545 (9,725) (119,539) (61,652) 76,884 Other operating revenues. 30,059 29,960 12,972 12,708 10,142 Total electric operating revenues . 81,971,207 $ 1,556,676 $ 1,243,680 $ 1,213,303 $ 1,126,168 Average price per kwh billed cents Residential 7.60 7.00 6.51 6.26 5.09 Commercial 7.32 6.77 6.32 6.11 4.97 Industrial 5.55 5.07 4.83 4.75 3.70 Total for ultimate customers...... 6.85 6.30 5.91 5.74 4.59 Total for all customers 6.62 6.27 5.86 5.66 4.53 Total for system sales 6.77 6.23 5.83 5.66 4.53 Generation Data Generating capability thousands of kw (b) .. 7,513 7,484 7,494 6,546 6,546 Winter peak demand thousands of kw (f)... 4,981 5,519 4,869 4,489 5,207 Generation by fuel source %
Coal. 61.4 70.4 71.3 86.1 82.2 Nuclear (g) . 27.0 16.6 11.9 1.0 Oil 10.2 11.0 14.9 10.8 15.7 Hydroelectric 1.4 2.0 1.9 2.1 2.1 Steam station availability %
Coal-fired . 78.6 75.2 78.8 79.1 74.7 Nuclear (g) . 70.7 66.7 67.7 Oil-fired 87.2 68.0 75.8 80.4 73.4 Steam station utilization %
Coal-fired 72.3 73.3 74.0 70.2 68.4 Nuclear (g) . 70.5 65.7 67.5 Oil-fired 30.0 28.6 38.8 22.2 32.8 41
Common Stock Price and Dividend Data The principal trading market for Quarter The Company has paid quarterly the Company's common stock is the Ended High Low cash dividends on its common stock New York Stock Exchange. The 1985 in every year since 1946. The divi-
....... dends paid per share in 1985 and common stock is also listed on the March $ 27/s $ 24/s 1984 were $ 2.54 and $ 2.46, respec-Philadelphia Stock Exchange. The June......... 273/4 237/8 tively. The most recent regular number of record holders of common September... 27~/8 23/ uarterly dividend declared by the stock was 151,025 as of December 10, December ... 29 233/4 ompany was 64 cents per share 1985. The high and low sales prices 1984 (equ>valent to $ 2.56 per annum) of the Company's common stock on March....... $ 22~/8 $ 193/i paid January 1, 1986. Future divi-the Composite Tape for the past two June......... 22~/s 19~$ dends willbe dependent upon future years as reported by The Wall Street September... 237/8 21 earnings, financial requirements Journal were as follows: December ... 25gs 23 and other factors.
42
Fiscal Agents TRANSFER AGENTS FOR PREFERRED, PREFERENCE AND COMMON STOCK Morgan Guaranty Trust Company, of New York 30 West Broadway New York, New York 10015 Pennsylvania Power & Light Company Two North Ninth Street Allentown, Pennsylvania 18101 REGISTRARS FOR PREFERRED, PREFERENCE AND COMMON STOCK Morgan Guaranty Trust Company of New York 30 West Broadway York, New York 10015
'ew Pennsylvania Power & Light Company Two North Ninth Street Allentown, Pennsylvania 18101 DEPOSITARY FOR DEPOSITARY PREFERENCE SHARES Morgan Guaranty Trust Company of New York 30 West Broadway New York, New York 10015 DIVIDENDDISBURSING OFFICE AND DIVIDENDREINVESTMENT PLAN AGENT Vice President and Treasurer Pennsylvania Power & Light Company Two North Ninth Street Allentown, Pennsylvania 18101 Securities Listed on Exchanges NEW YORK STOCK EXCHANGE 4~/% Preferred Stock (Code: PPLPRB) 4.40% Series Preferred Stock Code: PPLPRA) 8.60% Series Preferred Stock Code: PPLPRG) 9.24% Series Preferred Stock Code: PPLPRM)
Preference Stock, $ 8.00 Series Code: PPLPRJ)
Preference Stock, $ 8.40 Series Code: PPLPRH)
Preference Stock, $ 8.70 Series Code: PPLPRI)
Preference Stock, $ 11.00 Series (Code: PPLPRL)
Preference Stock, $ 13.00 Series (Code: PPLPRK)
Depositary Preference Shares, $ 2.90 Series (Code: PPLPRP)
Depositary Preference Shares, $ 3.25 Series (Code: PPLPRO)
Common Stock (Code: PPL)
PHILADELPHIASTOCK EXCHANGE 4~/% Preferred Stock 3.35% Series Preferred Stock 4.40% Series Preferred Stock 4.60% Series Preferred Stock 8.60% Series Preferred Stock 9% Series Preferred Stock.
9.24% Series Preferred Stock Preference Stock, $ 8.00 Series Preference Stock, $ 8.40 Series Preference Stock, $ 8.70 Series Preference Stock, $ 11.00 Series Preference Stock, $ 13.00 Series Depositary Preference Shares, $ 2.90 Series Depositary Preference Shares, $ 3.25 Series Common Stock 43
Officers Directors ROBERT K. CAMPBELL, President CLIFFORD L. ALEXANDERJR., Washington, D.C.
and Chief Executive Officer President, Alexander I; Associates Inc.
Consultants to business, government and industry MERLIN F. HERTZOG, Executive Vice President-Corporate Services ROSWELL BRAYTON SR., Woolrich Chairman ofthe Board and Chief Executive Officer, 1Voolrich 1Voolen JOHN T. KAUFFMAN,Executive Vice President-Operations MillsInc. Manufacturer of garments for outdoor activities BRUCE D. KENYON, Senior Vice President-Nuc(ear JEFFREY J. BURDGE, Camp Hill LEON L. NONEMAKER, Senior Vice President- Chairman of the Board and Chief Executive Officer, Harsco Division Operations Corporation. Manufacturer of processed and fabricated metals CHARLES E. RUSSOLI, Senior Vice President-Financial ROBERT K. CAMPBELL, Allentown
, President and Chief Executire Officer EDGAR L. DESSEN, Hazleton Physician-Radiologist JOHN R. BIGGAR, Vice President-Finance EDWARD DONLEY, Allentown Chairman of the Board and Chief Executive Officer, Air Products GENNARO D. CALIENDO, Vice President and Chemicals Inc. Manufacturer ofindustrial and commercial and General Counsel gases and chemicals ROBERT S. GOMBOS, Vice President- MERLIN F. HERTZOG, Allentown Human Resource d'c Development Executive Vice President-Corporate Services CHARLES J. GREEN, Vice President-Harrisburg Division FRANCES R. HESSELBEIN, New York City WILLIAMF. HECHT, Vice President-System Pouer National Executive Director, Girl Scouts of the U.S.A.
HAROLD W. KEISER, Vice President-Nuclear Operations HARRY A. JENSEN, Lancaster JOHN P. KIERZKOWSKI, Vice President and Treasurer Director and former Chief Executive Officer, Armstrong 1Vorld Industries Inc. 1ifanufacturer of interior furnishings and CARL R. MAIO, Vice President-Lehigh Division specialty products GRAYSON E. McNAIR, Vice President- JOHN T. KAUFFMAN,Allentown Marketing P. Customer Services Executive Vice President-Operations EDWARD M. NAGEL, Vice President and Secretary HAROLD S. MOHLER, Hershey HERBERT D. NASH JR., Vice President-Central Division Former Chairman of the Board, Hershey Foods Corporation. Diversified manufacturer offood products CLAIR W. NOLL, Vice President-Procurement P. Computer Services RALPH W. RICHARDSON JR., State College Consultant, agricuRural and environmental sciences JOHN E. ROTH, Vice President-Northern Division JOHN H. SAEGER, Vice President-Susquehanna Division NORMAN ROBERTSON, Pittsburgh Senior Vice President and Chief Economist, EDWIN H. SEIDLER, Vice President-Engineering d'." MeQon Bank, N.A.
Construction-System Pou'er ck Engineering DAVIDL. TRESSLER, Scranton BRENT S. SHUNK, Vice President-Lancaster Division Chairman of the Board and Chief Executive Officer, Northeastern Bank of Pennsylvania JEAN A. SMOLICK, Assistant Secretary GEORGE F. VANDERSLICE, Vice President and Comptroller Executive Committee: Robert K. Campbell. chairman; Edgar L. Dessen, PAULINE L. VETOVITZ,Assistant Secretary Harry A. Jensen and Norman Robertson.
WILLIAMR. WHITE, Vice President-Pou:er Production Audit Committee: David L. Tressler, chairman; Clifford L. Alexander Jr.,
Roswen Brayton Sr., Harold S. Mohier and Ralph 1V. Richardson Jr.
HELEN J. WOLFER, Assistant Secretary Corporato Responsibility Commntce: Edgar L. Dessen, chairman; Jeffrey and Assistant Treasurer J. Burdge, Frances R. Hesselbein, Harold S. hfohler and David L. Tressier.
hfanagemcnt Development and Compensation Committee: Roswell Brayton Sr., chairman; Clifford L. Alexander Jr., Edward Doniey and Corporate Management Committee: Robert K. Campbell, chairman; Norman Robertson.
hierlin F. Hcrtzog, John T. Kauffman. Bruce D. Kenyon, Leon L. Nonemaker, Charles E. Russoli and Edward F. Reis, Director. Corporate Planning,
~ Nominating Committee: Ralph W. Richardson Jr., chairman; Jeffrey J.
serving as the committee's executive secretary. Burdge, Edward Doniey, Frances R. Heszelbein and harry A. Jensen.
10-K and PP8L Profile The company's annual report filed with the Securities and Exchange Commission on Form 10-K willbe available mid-March. Each year tho company publishes the PP &LProfile, a 10-year statistical review, containing in-depth information about the company. The 1975-1985 Profile willbe available in May. A shareowner may obtain a copy of these publications, at no cost, by writingto Pennsylvania Power & Light Company, Two North Ninth Street, Allentown, Pa. 18101, attention: Mr. George I. Klino, Manager-Investor Services.
44
Board of Directors rg+
Alexander 8rayton Burdge Dessen t)(
,--, RSCOU Donley Hesselbein Jensen Mohler IRAQI(
Corporate l~ IVlanagement Richardson Robertson Tressler Committee
.'Ou0ell nu avian II N 5 r
ahs)I'l I 1 L"'t,i']
Reis Nonemaker Hertzog Campbell Kauffman Russoli Kenyon
~ggjrIO, Pennsylvania Power L Light Company TWO NOrth Ninth Street ~ AllentOWn, PA 18101 ~ 215/ 7705151 Tl BrislTlISSIOn In addition to keeping its plants well-maintained, and in good operating condition to make electricity, PP8 L must be able to deliver its product wherever it's needed. This means building, rebuilding and maintaining nearly',400 miles of PP8L transmis-sion lines, like this new line being constructed near Allentown. The loading and dispatch of power from PP8L's plants is centrally coordinated in the Power Control Center two stories underground in the company's Allentown General Office complex.
The specially lighted map board shows the condition of major trans-mission lines and substations across PP8L's service territory.