ML18078B027
| ML18078B027 | |
| Person / Time | |
|---|---|
| Site: | Salem  |
| Issue date: | 12/31/1978 |
| From: | DELMARVA POWER & LIGHT CO. |
| To: | |
| Shared Package | |
| ML18078B026 | List: |
| References | |
| NUDOCS 7903160228 | |
| Download: ML18078B027 (40) | |
Text
Delmarva Power & Light Company 1978 Annual Report 190316 0 ~;?$
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Financial Highlights Revenues Net Income Earnings Per Share Dividends Declared Common Stock Outstanding (Average Shares)
Common Stock Book Value Construction Expenditures Financing Completed Electric Sales Electric Customers (Average)
Average Residential Usage Gas Sales Gas Customers (Average)
Average Residential Usage The map to the left shows the Delmarva Peninsula, our service area. It is located in the center of the Atlantic Flyway, an airway for the migratory waterfowl such as the Canada geese shown on the cover.
Delmarva Power provides electric service throughout most of the
,700 square-mile Delmarva Peninsula. This area includes the tate of Delaware, portions of nine astern Shore counties of aryland and the two Eastern hore counties of Virginia. In ddition, the Company distributes atural gas in a 270 square-mile rea in Northern Delaware.
ocations of the Company's major enerating stations on the eninsula are at Edge Moor, elaware City and Indian River in elaware and at Vienna in Maryland.
n addition, the Company receives eneration from two coal-burning
- tations in Western Pennsylvania nd from the Peach Bottom, ennsylvania, and Salem, New ersey, nuclear power stations.
1978 1977
$378.7 million
$337.8 million
$ 47.4 million
$ 39.3 million 1.85 1.65 1.30 1/2 1.22 21,581,575 19,403,032
$ 15.77
$ 15.27
$130.3 million
$130.4 million
$ 75.3 million
$ 31.9 million 7.25 billion kwh 6.91 billion kwh 266,042 262,646 8,406 kwh 8,285 kwh 13.17 million met 12.10 million met 71,416 71,289 102.8 met 100.2 met Annual Meeting Will be held on April 17, 1979 12:30 p.m., in the Grand Opera House 818 Market Street Mall Wilmington, Delaware 1
Percent Increase (Decrease) 12.1 20.6 12.1 7.0 11.2 3.3 136.1 5.0 1.3 1.5 8.9 2.6 Contents Letter to Stockholders 2
Financial Review 4
Administrative and Staff Services 6
Electric and Gas Production 8
Engineering and Operations 10 Financial Section 12 Senior Management and Staff 30 Board of Directors 32
To Our Stockholders:
We are pleased to report that encouraging progress was made last year toward attaining our vital objective of improving the Company's financial integrity. This was achieved partly through continued effective cost control measures and partly as a result of higher sales coupled with aggressive efforts to price our services more closely in line with continually rising costs.
Earnings per share of common stock were $1.85 in 1978, a 12.1 % increase over the $1.65 earned in 1977. The financial improvement is discussed more fully in the following financial section and in detail in the Management Review of Operations, pages 13 and 14 of this report.
Reflecting the improvement in earnings, the Board of Directors on December 27, 1978 voted a quarterly increase of 2.5¢ per share on common stock dividends, raising the equivalent annual rate from $1.28 to $1.38 per share. The Company fully recognizes its obligation to provide a reasonable return to its investors and will continue to make every effort, consistent with sound fiscal policy, to press vigorously to fulfill this obligation.
At year end in 1977, it became clear that even the Company's most stringent cost control measures would be inadequate to offset rising operating expenses.
Though not insensitive to public opinion, and well aware that regulatory authorities are under increasing political and consumer pressures to " hold the line" on rate increases, the Company felt obligated to take aggressive action in seeking rate relief in all jurisdictions in order to continue providing a good quality of utility service and to maintain our financial credit ratings.
For the first time, rate filings were made almost concurrently in all four jurisdictions of the Com-pany's service territory. Ap-plications were filed for total additional retail revenues of $49.1 million in Delaware, Maryland and Virginia and $7.9 million in the wholesale area. A total of $11.4 mil-lion was granted in the three states.
On December 1, 1978, $7.9 million was permitted to go into effect in the wholesale service area, under bond and subject to refund, pend-ing final order by the Federal Ener-gy Regulatory Commission (FERC).
Though disappointing in terms of the ratio of increases granted to those applied for, the Company was authorized to improve the quality of its earnings by utilizing certain accounting procedures.
This will increase the Company's cash flow and help moderate the need for future financing.
While the costs of electricity and gas have increased in recent years, they have not increased as fast as the Consumer Price Index over the past 20 years. Looking to the future, we must continue to take ap-propriate rate action, consistent with the 1979 Presidential wage/price guidelines in order to continue to maintain the financial integrity of the Company. Stock-holder support in rate proceedings would be greatly appreciated. The regulatory commissions are always pleased to hear from all interested parties during rate proceedings.
Though there has been a reduction in the rate of growth of electrical usage compared to the early 1970's, we project an average annual growth of 5% during the next ten years. Our service area, particularly the lower peninsula, is a growing area.
A marked improvement has been made in our gas supply situation.
An increased allocation of natural gas during the past year has made it possible for the Company to add a limited number of new customers, in contrast with our experience in 1977 when general shortages of natural gas made it necessary for the Company to restrict supplies to our customers.
During the past several years, an understandable concern about the company's operating efficiency has developed. This has been caused by inflation and rising prices and the fact that we must continue the construction of new generating facilities to meet future needs even though we now have a large gener-ating reserve. In recognition of these concerns, the Delaware Public Service Commission in 1978 instituted a general management
efficiency audit of Delmarva Power by the nationally known manage-ment consulting firm of Theodore Barry & Associates.
The result of this audit confirmed our contention that the Company is managed efficiently. We believe the conclusions reached by the audit firm were objective and well balanced and we concur in its summary assessment of Delmarva Power as "a company in tran-sition".
The major elements in the Com-pany's operations which led to this conclusion were the system-wide reorganization and the plans to merge Delmarva's Maryland and Virginia subsidiaries into the parent corporation. The reorganization was undertaken to reflect the changing management responsi-bilities that have resulted from the Company's growth in recent years.
The merger has been approved by the Delaware and Virginia regu-latory authorities and by the FERG and is pending before the Maryland Public Service Commis-sion.
The framework for the reorganization was largely com-pleted during 1978. The process is to consolidate systemwide func-tions from a number of segmented operating components into four major areas, each reporting to a senior vice president.
These senior officers are identified on the following pages of this report as they relate results of their individual responsibilities during the past year. They provide a proven professional and ag-gressive management team to guide the Company through the difficult years ahead.
Thomas C. Roe We feel fortunate to have as a member of this team, Senior Vice President and Chief Financial Officer Nevius M. Curtis who came to our Company in October 1978 after having served as Financial Vice President for the Detroit Edison Company. Mr.
Curtis brings to Delmarva 22 years of utility finance and accounting experience, having served in these capacities with other utilities prior to joining Detroit Edison.
We acknowledge our great in-debtedness to our employees for their loyalty and understanding as we mold the Company into a unified and progressive entity, and to our stockholders for their continued support and confidence.
Sincerely, Thomas C. Roe Chairman of the Board RN~
Robert D. Weimer President and Chief Executive Officer February 20, 1979
Financial Review Financial Results As you have read in the President's letter, 1978 was a year of financial progress for Delmarva Power & Light Company. Earnings have increased and the dividend rate was raised in December.
Coverage of fixed charges in-creased from 2.36 times in 1977 to 2.79 times in 1978.
Despite these significant financial improvements, the return on average common equity in 1978 was 11.8%, still well below that Construction Expenditure
& Internal Financing (Dollars in Millions) 140 -----------
74 75 76
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Construction Expenditure 77 -
78 Internal Financing found "fair and reasonable" by all of Delmarva Power's regulatory authorities. Even though this was a significant increase over the aver-age return of 10.8% in 1977, efforts must continue to bring earnings up to the authorized level in order to raise capital at the lowest economic cost.
Sales and Revenues Electricity sales in 1978 amounted to 7.25 billion kwh, an increase of 5.0% over those in 1977 and sales of natural gas totaled 13.17 million mcf in 1978, increasing 8.9% over 1977 sales. These increases resulted from greater usage by residential and industrial customers, partly due to colder than normal weather last winter and partly reflecting an improved economy.
Electric operating revenues of
$318.1 million were 9.1 % higher in 1978 than in 1977, while gas revenues of $49.6 million were 37.0% greater than those in 1977.
Both increases were primarily at-tributable to greater sales and higher base rates.
Operating Expenses Operation and maintenance ex-penses increased during 1978 by
$14.7 million to $237.7 million. This 6.6% increase reflects the Com-pany's stringent cost control measures. Taxes, however, in-creased 53.8% to $38.0 million.
Financing and Capitalization During 1978, the Company con-tinued financing in the public market in order to provide funds for its construction program. Total capital requirements for the year amounted to $130.3 million of which
$75.3 million was raised from the public market.
In June, a $50 million offering of 9Y8 % First Mortgage and Collateral Trust Bonds was completed. In November, Delmarva Power raised $20 million through the sale of 200,000 shares of 9% $100 par cumulative preferred stock. This issue has a 4% sinking fund starting in 1984.
In addition to these two issues, the Company raised $5.3 million through the sale of 391,596 shares Nevius M. Cu Senior Vice President Chief Financial Ollie
of common stock through the Dividend Reinvestment and Common Share Purchase Plan.
At the end of 1978, Delmarva's capitalization consisted of 50.6% debt, 13.2% preferred stock and 36.2% common equity. This is a significant im-provement over the capital structure existing 10 years ago which was 55.9%, 10.7% and 33.4%, respectively. Reducing the debt component and increasing the equity component provides better protection to those who loan funds to the business, tend-ing to improve our ratings and to reduce the costs of capital.
Construction and Capital Needs The improvement in capitalization provides a strong base to meet the financial requirements related to the construction program.
Capital needs are expected to peak in 1979, reflecting the financial re-quirements for completing the Salem No. 2 nuclear plant in 1979, Indian River No. 4 in 1980 and the 1979 refunding of the 2'la% Series of First Mortgage Bonds.
Financing requirements, amount-ing to $110 million in 1979, will also peak in that year. The exact type and timing of the issues to meet those requirements has not been determined at this time, but they are expected to include mortgage bonds and both preferred and common stock.
Rate Matters The table below shows the in-creases granted in 1978. Rate increases for each type of service have generally been applied across the board. Changes in rate design are actively being studied in Delaware and Maryland. All fuel related costs are covered by fuel clauses or fuel rates in all jurisdic-tions.
Organization The financial area encompasses rate, accounting, treasury, tax and investor relations matters. Con-tinued effort is being made to ensure that these groups are able to meet the increasingly complex demands placed on them by the regulatory process. This takes the form of more sophisticated use of computerization and continued consolidation of functions in the corporate headquarters.
STATUS OF 1978 RATE CASES (Dollars in Millions)
Requested Jurisdiction Amount Date Virginia
$ 1.9 12/15/77 Delaware 33.7 2128178 Maryland 13.5 5/31/78 FERG 7.9 5/31/78
- Under bond, subject to refund.
Sources of Revenue by Regulatory Jurisdiction (Percent)
<llil Delaware 65%
<llil Maryland 18%
1---.c:-**:,--
... ""--1 <llil FERG 10%
1-----
- ----1
~ Virginia 3%
Other 4%
1978 Granted Amount Date
$1.5 10/1/78 8.0 9/29/78 1. 9 12/28/78 7.9*
12/1/78 J
Administrative and Staff Services Management Efficiency Audit As a condition of its order granting a rate increase to the Company in August 1977, the Delaware Public Service Com-mission instituted proceedings whereby Delmarva Power would undergo a management efficiency audit. The audit conducted by Theodore Barry & Associates (TB&A) began in February 1978 and findings were presented to the Commission in September 1978.
The overall assessment by TB&A was that the Company "appears to be developing an effective top management organization characterized by high levels of communication, a problem solving focus, and excellent policy development."
Although favorable, the report noted that "there are numerous challenges remaining," as there would be with any large company.
The audit identified potential savings of $4.8 to $6.3 million. To put these figures in perspective, a
$6.3 million saving represents only about 2% of the Company's total operating revenues. Moreover, according to TB&A's audit director, these savings are at " the low end of the scale of the types of savings we have found" at other utilities.
The Company is giving close attention to these recom-mendations, some of which are already being implemented.
Others will be carefully studied from a cost-benefit standpoint and will be adopted as warranted.
Marketing Marketing's traditional role of promoting increased use of electricity and gas has been redirected toward a load management concept. The main thrust is now in leveling seasonal and daily peak uses while at the same time helping customers make more efficient use of energy.
In this manner, maximum em-phasis is placed upon efficient use of capacity and invested capital.
During the year, the Company participated with the University of Delaware in " Project Conserve," a computerized energy audit program designed to aid homeowners in assessing their energy use efficiency.
Average Annual Residential Electric Usage Per Customer (Kilowatt Hours)
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7,645 7,953 8,285 7,01<:::
74 75 76 77 78 Public Relations The necessity of filing rate in-crease applications in four jurisdictions within the space of six months thrust the Company into the public arena and created vocal opposition by customers which was at times fanned by the news media. Many of the rate increase issues were technical and complex and difficult to convey in layman's terms.
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Total Electric Sales (Years Growth Rate-%)
74 75 76 H. Ray Landon Senior Vice President 77 78 To dispel rumors and clear up misunderstandings about the reasons for the increase ap-plications, the Company created community contact teams which made personal appearances at well-publicized meetings at various locations. In addition, a speakers bureau was established to communicate with service clubs and other community groups.
As a part of the drive to improve management techniques, the Chicago-based firm of Hill and Knowlton, Inc. was engaged to conduct a thorough review of past and present public relations practices, assessing our strengths and weaknesses. Their report is expected to provide recom-mendations and guidelines for future courses of action.
Personnel and Industrial Relations The personnel function has under-gone considerable changes in recent years, culminating in combining the formerly separate Northern and Southern functions in one department.
Modern management methods have been applied to encourage and retain good employees. These include motivational programs dealing with salary administration, benefits, performance appraisal and management by objectives approaches.
General Services New efforts were instituted to coordinate and control systems development through the use of data processing as a central service. Under the guidance of the firm of Booz, Allen & Hamilton, Inc., a thorough review of the information needs of the Company is in progress.
As another consolidation step, newly centralized management of purchasing and transportation will allow additional economies of scale as well as standardization of inventories.
Electric and Gas Production Electric and Gas Supply During the past year the Company did not have to curtail electric sales to our customers as a result of the national coal strike. This was made possible because of sufficient reserve capacity and the ability of the Company to sub-stitute oil-fired generation for coal.
This situation permitted the Company to sell significant amounts of electricity to the Pennsylvania-New Jersey-Maryland (PJM) power pool. Conversely, this power pool arrangement allows Delmarva the security of being able to purchase power from other com-panies when the need arises.
In March 1978 the Company applied for full membership in the PJM. This is expected to take about two years to accomplish and will enable Delmarva Power to effect additional savings in in-terchange energy costs.
This past summer was relatively cool as compared to the previous year. Thus, the 1978 annual peak of 1476 kw was lower than the 1977 annual peak of 1499 kw.
However, based on normalized temperature and humidity con-ditions, the summertime peak demand would have increased 5.1 % over1977, continuing the upward growth partially due to 4,819 new residential customers added to our system during the year.
Despite a severe winter, it was not necessary to curtail gas supply to our customers. Both supply and storage capabilities improved in 1978 with the result that the Gas exploration efforts by the Company's wholly-owned sub-sidiary, the Delmarva Energy Company, resulted in the supply of approximately 30,000 mcf of gas.
Current Generating Construction Construction continued during the year on the 400 megawatt coal-f ired Unit No. 4 at Indian River with operation still targeted for 1980. The projected cost is
$578/kw. The total cost is estimated to be $231 million.
The Company expects to begin receiving in 1979 its 80 Megawatt share of the Salem No. 2 nuclear unit located near Salem, New Jersey.
Company was able to add ap-William G. Price proximately 200 new gas Senior Vice President customers.
Ten-Year Generation Plan Early in the year, the Company filed a 10-year future generation construction plan with the Public Service Commissions of Delaware and Maryland and with the Virginia State Corporation Commission. The plan can be separated into three general components:
- 1) Construction of a 400 to 600 megawatt coal-fired plant at Vienna, MD to be on line in 1987.
- 2) Installation of combustion tur-bine peaking units, if needed in the interim.
- 3) Continuing work on site quali-fication for capacity beyond 1987.
s shown on the graph below, the orporate objective is to reduce the mount of electricity generated rom oil. Besides the need for less ependence on oil, which is in eeping with national policy, the rice of coal and nuclear is much ess than the price of oil.
Generation Output by Fuel Source (Percent) 00 '--~'--~~~~~~~~
40 0
0 76 77 Nuclear Coal 78 79 80 L_Projected----1 Environmental Matters The Company completed con-struction of a $3 million wastewater treatment facility at the Edge Moor Power Station. A similar $5 million facility is being built at the Indian River Power Station. In addition, as part of the $29 million environmental protection system at Indian River, a cooling tower (see picture) is nearing completion. The $29 million cost represents about 12.5% of the estimated total cost of the new generating unit.
Energy Control System As an integral part of the new Northern Division General Office being built at Christiana, DE, the Fuel Costs (Cents per Million BTU) 250 ~~~~~~~~~~~
200 150 Coal 100 50 Nuclear 0
1978 Company is installing a new computerized energy control system. This system will utilize the most advanced equipment available for monitoring and dispatching bulk power throughout the entire service area and will coordinate with the Pennsylvania-New Jersey-Maryland power pool. It will also provide the capability to determine on a minute-by-minute basis which of Delmarva Power's generating stations is operating at the greatest efficiency in order to dispatch to our customers the lowest cost power available at any given moment.
Reorganization As a part of the reorganization process, the Production Depart-ment is being structured to provide for more centralized control and uniformity in monitoring and directing the operation, performance and maintenance of the Company's power production facilities.
10 Engineering and Operations Consolidation of Functions All systemwide functions involving engineering and operating responsibilities were consolidated during the year. A major benefit was the ability to select and implement the most efficient methods of operation from the parent and subsidiary companies and to incorporate these into a new Division Operations structure.
For operating purposes, the Company is now divided into a Northern and Southern Division with the geographic dividing line roughly bisecting the Delmarva Northern Division Office, Christiana, Delaware.
Peninsula. Each division has a general office headquarters: the Southern Division's remaining at Salisbury, MD, and the Northern Division's to be housed in a new building complex nearing com-pletion at Christiana, DE.
Each division is comprised of a number of districts, the operating structure which has existed in the Southern portion of the Company for many years. The localized district system permits quick response to trouble calls and customer problems, thus providing the ability for prompt service as the number of customers continues J. Kenneth Wiley to grow.
Senior Vice President Customer service remains our paramount concern. In this regard, our computerized Customer In-formation System (CIS) has proved an invaluable tool. The complexity of the system created problems during its initial implementation, which began in November 1977, but a year of experience has eliminated most of the troublesome problems. We are now able to access customer information quickly and efficiently while the computerized control of record-keeping and customer billing has greatly reduced the possibility of human error.
Combining Southern and Northern engineering functions has also per-mitted incorporation of the best procedures of each. The consolida-tion of the two functions will im-prove efficiency, reduce waste and generally eliminate overlap and duplication of work.
Transmission and Distribution Construction The Engineering Department is standardizing the design of the Company's distribution system in line with the systemwide objective of unified operations. When fully implemented, these standards will ensure a consistent design philosophy throughout the Company.
As an illustration of this approach, the distribution systems in por-tions of Southern New Castle County, DE, were converted from outhern Division Office, Salisbury, Maryland.
12,000 volts to 25,000 volts with the completion of work at Townsend and Cedar Creek Substations. Go-ing to a higher distribution voltage results in economies in the con-struction and operation of the distribution system.
During the year, preparations were made in the Southern Division for future 230 kV transmission in anticipation of the scheduled addition of Indian River Unit No. 4 to the generating system. The 26-mile line from Indian River to Piney Grove in Delaware was rebuilt for 230 kV and a new 230 kV line will be built between In-dian River and Milford. These lines will support the 138 kV and 69 kV transmission systems and deliver the system generation to the load centers more efficiently.
In an ongoing effort to provide the most efficient transmission facilities, while ensuring that they are aesthetically and environ-mentally acceptable, the Company is making increased use of 138 kV underground cable. Two sections will be installed to supply the Brandywine Substation in the City of Wilmington and a third section under the Assawoman Bay to better serve the growing seaside resort of Ocean City, MD.
Financial Section First Mortgage And Collateral Trust Bonds-Trustee, Chemical Bank, New York, N.Y.
Pollution Control Revenue Bonds-Trustees, Farmers Bank of the State of Delaware, Wilmington, DE, and Bank of Delaware, Wilmington, DE.
Preferred Stock-Transfer Agent, Wilmington Trust Company, Wil-mington, DE, Registrar-Delaware Trust Company, Wilmington, DE.
Common Stock-Stock symbol, DEW, Listed on the New York and Philadelphia Stock Exchanges.
Transfer Agents-Wilmington Trust Company, Wilmington, DE, and Irving Trust Company, New York, N.Y.
Registrars-Delaware Trust Company, Wilmington, DE, and Irving Trust Company, New York, N.Y.
Regulatory Commissions Federal Energy Regulatory Commission 825 North Capitol Street, N.E.
Washington, D.C. 20426 Delaware Public Service Commission 1560 S. DuPont Highway Dover, DE 19901 Maryland Public Service Commission 301 W. Preston Street Baltimore, MD 21201 Virginia State Corporation Commission P.O. Box 1197 Richmond, VA 23209 Quarterly Common Stock Dividends and Price Ranges Corporate Address Delmarva Power 800 King Street P.O. Box 231 Wilmington, DE 19899 Telephone (302) 429-3011 To supplement information in this Annual Report, a statistical review, 1968-1978, and the Form 10-K are available upon request.
Please write to Stockholders Rela-tions, Delmarva Power, 800 King Street, P.O. Box 231, Wilmington, DE 19899 The Company's common stock is listed on the New York and Philadelphia Stock Exchanges and has unlisted trading privileges on the Midwest and Pacific Exchanges.
1978 1977 Dividend Price Dividend Price Declared High Low Declared High Low First Quarter
$.32 14%
13%
First Quarter
$.30 14%
13 Second Quarter
.32 14Ya 13%
Second Quarter
.30 15 13 Third Quarter
.32 14%
13%
Third Quarter
.30 14%
13%
Fourth Quarter
.34 112 14Ya 12rs Fourth Quarter
.32 14rs 13%
Management Review of Operations Consolidated Summary of Earnings (Dollars in Thousands)
Operating Revenues.............
Operating Expenses Operation....................
Maintenance.................
Depreciation.................
Taxes.......................
Total operating expenses...
Operating Income................
Other Income....................
Income Before Interest Charges...
Interest Charges.................
Net Income.....................
Dividends on Preferred Stock......
Earnings Applicable to Common Stock................
Dividends on Common Stock................
Addition to Retained Earnings.....
Common Stock Average shares outstanding (thousands)................
Earnings per share.............
Divideods declared per share....
1978
$378,702 212,498 25,214 31,383 38,044 307,139 71,563 8,044 79,607 32,159 47,448 7,474 39,974 28,189
$ 11,785 21,582
$1.85
$1.30 112 1977 1976
$337,818
$286,388 198,020 167,215 24,989 21,596 28,046 25,367 24,736 17,857 275,791 232,035 62,027 54,353 8,069 8,519 70,096 62,872 30,768 26,437 39,328 36,435 7,250 7,250 32,078 29,185 24,127 22,618 7,951 6,567 19,403 18,821
$1.65
$1.55
$1.22
$1.20 1975 1974 1973
$276,026
$261,494
$188,359 165,165 153,494 99,323 17,769 16,289 13,715 24,579 21,656 18,278 16,689 18,684 15,545 224,202 210,123 146,861 51,824 51,371 41,498 6,203 6,585 7,947 58,027 57,956 49,445 26,488 25,223 18,783 31,539 32,733 30,662 7,250 7,250 6,360 24,289 25,483 24,302 21,107 17,995 15,851 3,182 7,488 8,451 17,580 14,862 13,547
$1.38
$1.72
$1.79
$1.20
$1.20
$1.17
r Management's Review of Operations, continued Operating Revenues Operating revenues were up 12.1% in1978 and 18.0%
in 1977 because of the following:
Cause Electric Changes in-Gas Base rates due to rate increases Increased sales Recovery of fuel costs Other electric revenues Changes in-Base rates due to rate increases Increased sales Recovery of purchased gas costs Revenue Increase (Decrease) from the Prior Year (in millions) 1978 1977
$17.6 8.6 (1.4) 1.8
$26.6
$ 3.0 1.9 8.5
$21.8 6.5 18.7 2.3
$49.3
$ 2.9 (1.8) 2.9
$13.4
$4.0 Electric sales increased 5.b% in 1978, reflecting in-creased usage by all classes of customers, and 3.7% in 1977, primarily due to increased residential and com-mercial usage. Gas sales increased 8.9% in 1978, primarily due to increased commercial and industrial sales, whereas in 1977 sales decreased by 12.2% due to curtailments by the Company's pipeline suppliers which were necessitated by the severe winter weather.
Operation and Maintenance Operation expense (which includes fuel for electric generation, energy interchange, gas purchased and other operation costs) and maintenance increased
$14.7 million and $34.2 million during the years 1978 and 1977, respectively. The increase in 1978 results from greater generation of electricity and higher costs of gas purchased, labor and operating supplies. Partial-ly offsetting these increases was a decrease in the price of fuel and greater sales to the PJM pool as a result of the coal strike in early 1978. The larger ex-penses in 1977 reflect higher coal, oil and gas costs as well as a decrease in sales to the PJM pool because of prolonged overhauls and extensive maintenance at the Company's generating facilities.
Depreciation Depreciation expense increased due to the placing in service of the Salem 1 nuclear plant in June, 1977 and other additions to depreciable plant.
Taxes Taxes on income increased primarily due to substantial increases in taxable income. Taxes other than income increased primarily due to increased tax rates and higher gross receipts taxes which are based upon operating revenues.
Other Income Other income decreased in each of the comparable years due mainly to lower interest income which was partially offset by increases in Allowance for Other Funds Used During Construction.
Interest Charges The higher interest charges of $1.4 million in 1978 reflect the sale of additional first mortgage bonds in June, 1978, partially offset by a larger AFUDC credit.
The 1977 increase reflects the sale of pollution control notes issued in December, 1976, along with the incur-rence of short-term debt in the latter part of 1977.
Net Income and Earnings per Share Net income increased $8.1 million in 1978 and $2.9 million in 1977 due primarily to the fact that rate in-creases and higher electric sales increased revenues faster than expenses. However, the increase in net income for 1978 over that for 1977 was proportion-ately greater than the increase in earnings per share of common stock due to the dilutive effect of the in-creased average number of shares outstanding result-ing from the sale of 2,000,000 shares in November, 1977.
Consolidated Statements of Income Delmarva Power & Light Company and Subsidiary Companies For the years ended December 31 (Dollars in Thousands)
Operating Revenues Electric..................................................
Gas....................................................
Steam..................................................
Operating Expenses Operation:
Fuel for electric generation................................
Energy interchange, net..................................
Gas purchased.........................................
Other operation.........................................
Maintenance.............................................
Depreciation.............................................
Taxes on income..........................................
Taxes other than income....................................
Operating Income Other Income Allowance for other funds used during construction..............
Other, net of taxes........................................
Income Before Interest Charges.............................
Interest Charges Long-term debt...........................................
Short-term debt and other...................................
Allowance for borrowed funds used during construction...........
Net Income...............................................
Dividends on Preferred Stock................................
Earnings Applicable to Common Stock.......................
Common Stock Average shares outstanding (thousands).......................
Earnings per average share..................................
Dividends declared per share................................
See accompanying Notes to Consolidated Financial Statements.
1978
$318,106 49,640 10,956 378,702 155,461 (32,701) 31,135 58,603 25,214 31,383 18,858 19,186 307,139 71,563 7,916 128 8,044 79,607 33,506 1,585 (2,932) 32,159 47,448 7,474
$ 39,974 21,582
$1.85
$1.30V2 1977
$291,568 36,233 10,017 337,818 137,066 (12,902) 20,429 53,427 24,989 28,046 7,662 17,074 275,791 62,027 7,139 930 8,069 70,096 31,601 1,814 (2,647) 30,768 39,328 7,250
$ 32,078 19,403
$1.65
$1.22
Consolidated Balance Sheets Delmarva Power & Light Company and Subsidiary Companies As of December 31 (Dollars in Thousands)
Assets Utility Plant-at original cost Electric..................................................
Gas....................................................
Steam..................................................
Common................................................
Less: accumulated depreciation..............................
Net utility plant in service...................................
Construction work in progress...............................
Nuclear fuel, at amortized cost...............................
Nonutility Property and Other Investments....................
Current Assets Cash....................................................
Special deposit tor pollution equipment........................
Accounts receivable.......................................
Deterred fuel costs.......................................
Materials and supplies, at average cost:
Fuel (coal, oil and gas)....................................
Operation and construction...............................
Prepayments.............................................
Deferred Debits Preliminary survey and investigation charges...................
Deterred income taxes relating to the credit arising from sale of contracts (Note 7)........................
Other...................................................
Total.....................................................
- Reclassified for comparative purposes.
See accompanying Notes to Consolidated Financial Statements.
1978
$ 912,366 58,884 22,322 18,176 1,011,748 270,756 740,992 252,266 8,910 1,002,168 4,620 16,845 1,432 33,637 (2,290) 28,061 14,599 3,013 95,297 2,676 9,888 5,656 18,220
$1,120,305 1977
$ 875,445 56,462 22,273 18,179 972,359 244,611 727,748 158,685 6,982 893,415 4,008 15,317 11,857 30,470 8,084 26,179 15,432 3,118 110,457 11,481 5,958*
8,059 25,498
$1,033,378
ividend einvestment &
ommonShare urchase Pia
For more than 4 years, the Company has offered the owners of Common Stock the opportunity to reinvest cash dividends and/or invest additional cash monthly in amounts from $25 up to $3,000 per quarter to purchase additional shares of Common Stock without paying any brokerage or service charges. More than 11d400 of the common sharehol ers are participating in the Plan. They have invested their dividends and/or optional cash payments amounting to more than $14.5 million to purchase 1, 170,000 new shares of the Company's Common Stock.
If you are not participating, you may want to consider the benefits of joining the Plan. To receive a Summary Prospectus containing details of the Pf an, please complete and mail the attached form to the Company.
Yes, please send me additional information about the dividend reinvestment plan.
Name Address City State Zip Code
DelmoNo Power Attention: Stockholders Relations P. 0. Box 231 Wilmington, DE 19899 Please Affix 10¢ Postage
1978 1977 Liabilities Capitalization (see accompanying statements)
Common stock...........................................
73,407 72,085 Additional paid-in capital...................................
150,283 146,521 Retained earnings.........................................
119,392 107,607 Total common stockholders' equity.........................
343,082 326,213 Preferred stock...........................................
125,175 105,226 Long-term debt...........................................
468,955 428,905 Total capitalization......................................
937,212 860,344 Current Liabilities Short-term debt...........................................
32,100 Current maturity of long-term debt............................
10,000 Accounts payable.........................................
13,261 8,180 Taxes:
Accrued...............................................
18,284 4,877 Deferred (fuel costs).....................................
(1,270) 4,118 Interest accrued...........................................
11,303 8,910 Dividends declared........................................
7,504 6,835 Other...................................................
3,477 3,184 62,559 68,204 Deferred Credits Credit arising from sale of contracts (Note 7)....................
77,383 77,383*
Accumulated deferred income taxes..........................
15,490 11,530 Accumulated deferred investment tax credits...................
24,772 15,071
- Other...................................................
2,889 846 120,534 104,830 Commitments (Note 10) and Contingencies (Note 11)
Total.....................................................
$1,120,305
$1,033,378
- Reclassified for comparative purposes.
See accompanying Notes to Consolidated Financial Statements.
18 Consolidated Statements of Sources of Funds for Construction Expenditures Delmarva Power & Light Company and Subsidiary Companies For the years ended December 31 (Dollars in Thousands)
Sources of Funds Internally generated:
Net income............................................
Items not requiring (providing) funds:
Depreciation.........................................
Amortization of nuclear fuel.............................
Allowance for funds used during construction...............
Investment tax credit adjustments, net.....................
Deferred income taxes, net..............................
Funds from operations...............................
Less: Dividends on common and preferred stock...............
Internally generated funds............................
External financing:
Net proceeds from sale of:
Long-term debt.......................................
Common stock.......................................
Preferred stock.......................................
Change in short-term debt.................................
Redemption of long-term debt.............................
Externally financed funds.............................
Other sources:
Decrease in working capital*..............................
Other, net..............................................
Other funds........................................
Construction Expenditures (excluding allowance for funds used during construction)...........................
1978
$ 47,448 31,383 1,307 (10,848) 9,701 (1,428) 77,563 35,663 41,900 49,620 5,084 19,949 (32,100) 42,553 36,962 8,857 45,819
$130,272
- Other than short-term debt, current maturity of long-term debt and current deferred income taxes.
See accompanying Notes to Consolidated Financial Statements.
1977
$ 39,328 28,046 605 (9,786) 164 6,404 64,761 31,377 33,384 30,870 32,100 (11,950) 51,020 44,708 1,259 45,967
$130,371
Consolidated Statements of Capitalization Delmarva Power & Light Company and Subsidiary Companies As of December 31 (Dollars in Thousands)
Common Stockholders' Equity Common stock, par value $3.375 authorized-35,000,000 and 25,000,000 shares outstanding-21,750, 139 and 21,358,543 shares.............................
Additional paid-in capital.................................................
Retained earnings.......................................................
Total Common Stockholders' Equity..............................
Cumulative Preferred Stock Par value $25 per share, 3,000,000 shares authorized, none outstanding Par value $100 per share, 1,800,000 shares authorized:
4.00% Series-outstanding 40,000 shares.................................
3.70% Series-outstanding 50,000 shares.................................
4.28% Series-outstanding 50,000 shares.................................
4.56% Series-outstanding 50,000 shares.................................
4.20% Series-outstanding 50,000 shares.................................
5.00% Series-outstanding 80,000 shares.................................
7.84% Series-outstanding 100,000 shares.................................
8.96% Series-outstanding 130,000 shares.................................
7.52% Series-outstanding 150,000 shares.................................
7.88% Series-outstanding 200,000 shares.................................
8.00% Series-outstanding 150,000 shares.................................
9.00% Series-outstanding 200,000 shares (with mandatory redemption).........
Premium..............................................................
Total Preferred Stock..........................................
Long-Term Debt First Mortgage and Collateral Trust Bonds:
2J8°/o Series-issued 7/7/49, due 7/1/79..................................
2%% Series-issued 10/6/50, due 9/1/80..................................
9Y8°/o Series-issued 1/14/75, due 1/1/83..................................
3Y8 °/o Series-issued 5/11/54, due 5/1/84..................................
3%% Series-issued 12/20/55, due 12/1/85..................................
3%% Series-issued 6/17/58, due 6/1/88..................................
4r8°/o Series-issued 9/22/64, due 10/1/94..................................
6%% Series-issued 9/13/67, due 9/1/97..................................
7 % Series-issued 10/28/68, due 11/1/98..................................
8Y4% Series-issued 1/12/70, due 1/1/00..................................
8%% Series-issued 11/30/70, due 12/1/00..................................
7r8°/o Series-issued 11/30/71, due 12/1/01..................................
7Y2 °/o Series-issued 8/3/72, due 8/1/02..................................
8 % Series-issued 6/27/73, due 7/1/03..................................
10 % Series-issued 6/13/74, due 6/1/04..................................
11 % Series-issued 7/2/75, due 6/1/05..................................
9r8 °/o Series-issued 6/22/78, due 7/1/08..................................
Pollution Control Notes:
Series 1973, 5.9% effective rate, due 1983-1998.............................
Series 1975, 7.3% effective rate, due 1992-2006.............................
Unamortized premium and discount on debt, net.......................
Current maturity of long-term debt...................................
Total Long-Term Debt..........................................
Total Capitalization............................................
See accompanying Notes to Consolidated Financial Statements.
1978
$ 73,407 150,283 119,392
$343,082 4,000 5,000 5,000 5,000 5,000 8,000 10,000 13,000 15,000 20,000 15,000 20,000 125,000 175
$125,175
$ 10,000 12,000 30,000 10,000 10,000 25,000 25,000 25,000 25,000 30,000 30,000 35,000 30,000 25,000 33,950 29,100 50,000 435,050 8,000 34,500 42,500 1,405 478,955 (10,000)
$468,955
$937,212 1977
$ 72,085 146,521 107,607 36%
$326,21 3 4,000 5,000 5,000 5,000 5,000 8,000 10,000 13,000 15,000 20,000 15,000 105,000 226 13%
$105,226
$ 10,000 12,000 30,000 10,000 10,000 25,000 25,000 25,000 25,000 30,000 30,000 35,000 30,000 25,000 33,950 29,100 385,050 8,000 34,500 42,500 1,355 51%
428,905
$428,905 100%
$860,344 38%
12%
50%
100%
Consolidated Statement of Changes in Common Stockholders' Equity Delmarva Power & Light Company and Subsidiary Companies For the Two Years Ended December 31, 1978 (Dollars in Thousands)
Shares Balance-January 1, 1977 19,076,019 Net Income Cash dividends declared:
Common stock Preferred stock Sale of Common Stock-November22 2,000,000 Issuance of common stock under dividend reinvestment plan 282,524 Balance-December 31, 1977 21,358,543 Net income Cash dividends declared:
Common stock Preferred stock Issuance of common stock under dividend reinvestment plan 391,596 Balance-December 31, 1978 21,750,139 See accompanying Notes to Consolidated Financial Statements.
Additional Paid-in Retained Par Value Capital Earnings
$64,382
$123,354
$ 99,656 39,328 (24,127)
(7,250) 6,750 20,330 953 2,837 72,085 146,521 107,607 47,448 (28,189)
(7,474) 1,322 3,762
$73,407
$150,283
$119,392 Total
$287,392 39,328 (24,127)
(7,250) 27,080 3,790 326,213 47,448 (28,189)
(7,474) 5,084
$343,082
Notes to Consolidated Financial Statements
- 1. Significant Accounting Policies Financial Statements:
The consolidated financial statements include the accounts of the Company and its subsidiary com-panies, all of which are totally held. Accounting policies are in accordance with those prescribed by the regulatory commissions having jurisdiction with respect to accounting matters.
Revenue:
Revenues are billed to customers on a monthly cy-cle basis and include rate increases permitted to be billed subject to refund pending final approval. At the end of each month, there is an amount of unbilled electric and gas service which has been rendered from the last meter reading to the month end.
Fuel Costs:
Fuel costs (electric and gas) are deferred and charged to operations on the basis of fuel costs in-cluded in customer billings under the Company's tariffs, which are subject to periodic regulatory review and approval.
The Company's share of nuclear fuel costs relat-ing to jointly-owned nuclear generating stations (in-cluding estimated costs of storing spent fuel) is charged to fuel expense on a unit of production basis.
Depreciation and Maintenance:
The annual provision for depreciation is computed on the straight-line basis using composite rates by classes of depreciable property. For the years 1978 and 1977, the annual provisions expressed as a per-cent of average depreciable utility plant in service were 3.4% and 3.3%, respectively. Provision for decommissioning costs relating to jointly-owned nuclear generating units is made to the extent of the net cost of removal allowed for rate purposes (ap-proximately 20% of the plant cost).
The cost of maintenance and repairs, including renewals of minor items of property, is charged to operating expenses. A replacement of a unit of prop-erty is accounted for as an addition to and a retire-ment from the utility plant account. The original cost of the property retired is charged to accumulated depreciation together with the net cost of removal.
For income tax purposes the cost of removing retired property is deducted as an expense.
Allowance for Funds Used During Construction:
Allowance for funds used during construction (AFUDC) is a noncash item and is defined in the regulatory system of accounts as "the net cost for the period of construction of borrowed funds used for construction purposes and a reasonable rate on other funds so used." AFUDC is segregated into two components: (1) the interest on debt component
("allowance for borrowed funds used during con-struction"), which is net of taxes and classified as a credit to interest charges, and (2) the common stock equity and preferred dividend component ("allow-ance for other funds used during construction"),
which is classified as an item of other income.
AFUDC is considered a cost of utility plant with a concurrent credit to income. It is excluded from taxable income for income tax purposes. The rate used in determining AFUDC was 7.4% in 1978 and 1977.
Pension Plan:
The Company and subsidiaries have a trusteed noncontributory pension plan covering all of their regular employees. Pension contributions were
$6,619,000 in 1978 and $5,807,000 in 1977, including
$1,221,000 and $944,000 charged to construction, respectively. The contributions provide for normal cost and amortization of prior service costs over a period of approximately twenty years. At December 31, 1978, the prior service costs exceeded the market value of the assets in the retirement fund by approx-imately $14,800,000. As of the same date, the market value of the fund assets exceeded the actuarially computed value of vested benefits.
Income Taxes:
The Company and its subsidiaries file a con-solidated federal income tax return. Federal income tax returns have been settled through 1973; the returns for 1974 through 1976 are in the process of being examined by the Internal Revenue Service.
Notes, continued Deferred income taxes result from timing dif-ferences in the recognition of certain expenses for tax and financial accounting purposes. The principal items accounting for deferred income taxes are:
(1) use of accelerated depreciation methods for in-come tax purposes and the straight-line method for financial accounting purposes, (2) unbilled fuel and gas purchased costs are deferred for financial ac-counting purposes, but deducted currently for in-come tax purposes, and (3) other timing differences involving rate refunds, spent nuclear fuel storage costs, and certain taxes and construction costs.
Investment tax credits utilized to reduce federal in-come taxes are deferred for financial accounting pur-poses. Substantially all credits utilized prior to 1978 are being amortized to income over subsequent five-year periods (ten years in Delaware jurisdiction effec-tive in 1978). Substantially all credits utilized after 1977 will be amortized over the useful lives of the re-lated utility plant, except in the Maryland jurisdiction which will continue to use five-year amortization.
- 2. Rate Matters Reference is made to " Financial Review-Rate Matters" in the accompanying text for information concerning the status of 1978 rate increases. Other matters relating to the 1978 rate proceedings are as follows:
Delaware:
A cash return was allowed on approximately
$27 million of construction work in progress which reduces the noncash AFUDC. In addition, the Delaware Commission authorized the Company to increase its depreciation rates; defer the tax benefit of certain construction overhead costs (largely payroll taxes and employee benefits) which are capitalized for accounting purposes and deducted for tax purposes; and change the period over which investment tax credits utilized are amortized to income from five years to service life of the property generating the credit (ten years for credits utilized prior to 1978).
Maryland:
The Maryland Commission also authorized the deferral of the tax benefit of construction over-head costs discussed above. In addition, the Com-mission approved the recovery, over thirty months, of the deferred fuel costs of $1,700,000 at October 1, 1978, when a new fuel rate became effective.
Virginia:
The Virginia Commission approved the deferral of the tax benefit of the construction overhead costs and the change in investment tax credit amortization from five years to service life.
FERC:
On the basis of a settlement agreement be-tween the Company and certain resale customers, the Company is only recognizing approximately 65% of the requested rate increase in revenues, subject to final FERG approval. The amount so in-cluded in 1978 revenues is not material.
- 3. Taxes on Income Operations:
Current:
Federal............
State..............
Deferred, net:
Federal............
State..............
Investment tax credit adjustments, net....
Other income............
1978
$ 6,849 3,736 (1, 105)
(323) 9,701 18,858 452
$19,310
($000) 1977
$ (35) 1,129 5,620 784 164 7,662 1,050
$8,712
Notes, continued The following is a reconciliation of the difference between income tax expense and the amount com-puted by multiplying income before tax by the federal statutory rate:
1978
($000) 1977 Amount Rate Amount Rate Statutory income tax expense
$32,044 48% $23,059 48%
Reduction in taxes resulting from:
Excess of tax depre-ciation over book depreciation not normalized...... (3,329) (5)
Exclusion of AFUDC tor income tax pur-poses.......... (5,207) (8)
Investment tax credits amortized to income....... (4, 196) (6)
Other, net......... ~
-=-
Income tax expense... $19,310 29%
(5,141)
(11)
(4,697)
(10)
(3,560)
(7)
(949) ~
$8,712 18%
Investment tax credits utilized to reduce federal in-come taxes payable amounted to approximately
$13,900,000 tor 1978 and $7,300,000 in 1977. The amount tor 1978 includes approximately $4,200,000 of investment tax credit carryforward from 1977.
The components of deterred income taxes relate to the following tax effects of timing differences be-tween book and tax income:
1978
($000)
Depreciation............. $ 5,379 Deterred fuel costs (5,254)
Rate refunds.............
(240)
Other...................
(1,313)
$(1,428) 1977
$4,835 (514) 2,632 (549)
$6,404
- 4. Taxes Other Than Income 1978
($000)
Delaware utility.......... $ 7,088 Property................
5, 113 Pennsylvania gross receipts..............
1,400 Other gross receipts......
1,843 Social security...........
1,942 Franchise and other.......
1,800
- 5. Capitalization Common Stock:
$19,186 1977
$ 6,238 4,896 1,045 1,623 1,681 1,591
$17,074 At December 31, 1978 there were 393,530 shares of common stock reserved tor issuance under the Divi-dend Reinvestment and Common Share Purchase Plan.
Retained Earnings:
The current supplemental indenture restricts the amount of consolidated retained earnings available tor cash dividend payments on common stock to
$35,000,000 plus accumulations after June 30, 1978, which available amount at December 31, 1978 was approximately $40,000,000.
Preferred Stock:
(1) On November 9, 1978, the Company sold 200,000 shares of 9% preferred stock. On Decemb~r 31, 1984, and annually thereafter, 8,000 shares of this series will be redeemed through the operation of a mandatory sinking fund at a redemption price of $100 per share. At the option of the Company, an addi-tional 8,000 shares may be redeemed on any sinking fund date, without premium. (2) Any series of prefer-red stock outstanding may be redeemed at the op-tion of the Company at any time, in whole or in part, at the various redemption prices fixed tor each series. (3) The annual preferred dividend re-quirements on the outstanding preferred stock at December 31, 1978 are $9,050,000.
Capital Stock Expenses:
The premiums on preferred and common stock are stated net of the expenses related to the issuance of such stock.
Long-term Debt:
(1) Substantially all utility plant of the Company now or hereafter owned and all securities issued by its subsidiaries are subject to the lien of the related Mortgage and Deed of Trust. (2) The annual interest requirements on the outstanding indebtedness at December 31, 1978 are $35,979,000.
Notes, continued
- 6. Short-term Debt and Lines of Credit Information regarding short-term borrowings (all commercial paper) is as follows:
1978 1977 Short-term debt out-standing at year end Average rate of interest on debt outstanding at end of period Average short-term debt outstanding during period
$17,700,000 Average rate of interest on short-term debt outstanding during period 7.2%
Maximum short-term borrowing during period
$36,000,000
$32, 100,000 6.7%
$25, 100,000 6.4%
$45,000,000 As of January 1, 1979, the Company had estab-lished but unused bank lines of credit of $75,750,000.
The Company is required to pay commitment fees or maintain 10% compensating balances on these lines.
- 7. Sale of Contracts for Nuclear Plant The proceeds received by the Company for the sale, in 1975, of the contracts for a nuclear steam supply system and related fuel, net of plant expen-ditures which were considered of no future value to the Company, are classified as a deferred credit in the balance sheet. It is the intention of the Company to reduce the cost of subsequent replacement plant capacity by the amount of the net proceeds.
The Company, under advice of Counsel, did not treat the sale of these contracts as taxable for federal and state income tax purposes. Accordingly, the tax basis of the Company's depreciable property was reduced by the amount of the net proceeds. The annual tax effect of the resulting decrease in tax depreciation is being recorded in a deferred income tax account with a corresponding direct credit to cur-rent taxes accrued. If this transaction is ultimately considered taxable, additional taxes payable at December 31, 1978 would approximate between $28 million and $17 million and would be charged to the deferred tax account.
- 8. Jointly-Owned Utility Plants In addition to nuclear fuel, utility plant in the ac-companying balance sheet as of December 31, 1978 includes the Company's interests in jointly-owned plants, as follows:
Propor*
tionate Share Nuclear Peach Bottom 2and 3 7.51 %
Salem 1 and 2 7.41 Coal-Fired Key-stone 3.70 Cone-ma ugh 3.72 Total Plant in Service
$ 60,017 68,994 8,005 11,279
$148,295
($000)
Accumu*
lated Depreciation
$ 9,482 4,152 2,443 2,821
$18,898 Construction Work in Progress
$ 1,080 43,381 108 844
$45,413 The Company finances its share of construction of jointly-owned projects. In addition, the Company is a joint guarantor of loans ($1,887,000 proportionate share) advanced for operation of the coal mines that supply the Keystone plant. The Company's share of operating expenses of the jointly-owned plants is in-cluded in the corresponding operating expenses on the accompanying statements of income.
Notes, continued
- 9. Segment Information Segment information is as follows:
1978
($000)
Electric Gas Steam Total Operating revenues....... $318,106 $49,640 $10,956 $ 378,702 Operating expenses:
Depreciation......
Other...........
28,513 2, 118 223,336 43,141 752 9,279 31,383 275,756 251,849 45,259 10,031 307,139 Operating Income.... $ 66,257 $ 4,381 $
925 $
71,563 Assets at December 31, 1978:
Net utility plant...... $701,024 $42,886 $ 5,992 749,902 Construction work in progress........
250,616 352 1,298 252,266 Total utility plant........
951,640 43,238 7,290 1,002,168 Other identifiable assets.........
36,304 5,206 292 41,802 Unallocated assets...
Total assets.......
Operating revenues.......
Operating expenses:
Depreciation......
Other............
Operating income....
Assets at December31, 1977:
Net utility plant......
Construction work in progress........
Total utility plant........
Other identifiable assets.........
Unallocated assets...
Total assets.......
$987,944 $48,444 $ 7,582 1,043,970 1977
($000)
Electric Gas Steam
$291,568 $36,233 $10,017 25,611 1,683 752 208,519 30,884 8,342 234,130 32,567 9,094
$ 57,438 $ 3,666 $
923
$686,271
$41,800 $ 6,659 157,888 200 597 844,159 42,000 7,256 51,591 9,652 309
$895,750 $51,652 $ 7,565 76,335
$1,120,305 Total
$337,818 28,046 247,745 275,791
$ 62,027
$734,730 158,685 893,415 61,552 954,967 78,411
$1,033,378 Operating income by segments is reported in ac-cordance with generally accepted accounting and rate-making practices within the utility industry and, accordingly, includes each segment's proportionate share of taxes on income and general corporate ex-penses. Construction expenditures in 1978 and 1977 for other than electric facilities were not significant.
- 10. Commitments The Company estimates that approximately
$127,000,000, excluding AFUDC, will be expended for construction purposes in 1979, in connection with which substantial commitments have been incurred.
The Co * :pany also has commitments under long-term fue1 supply contracts.
Minimum rental commitments as of December 31,
1978 under all noncancelable lease agreements are as follows:
1979....................... $ 6,222,000 1980.......................
5,965,000 1981.......................
5,647,000 1982.......................
5,261,000 1983.......................
2,500,000 Remainder.................. 20,720,000 Total................... $46,315,000 The total minimum rental commitments are ap-plicable to the following types of property: Com-pany's share of Peach Bottom nuclear fuel,
$10,333,000 (estimated to be charged to operations over a four-year period); fuel storage and pipeline facil ities, $29,172,000; railroad coal cars, $3,464,000; other, principally computer equipment, $3,346,000.
Rentals charged to operating expenses aggregated
$10,385,000 in 1978 and $6,977,000 in 1977, including
$5,460,000 and $2,277,000 for nuclear fuel, respective-ly.
The aforementioned leases are generally operat-ing leases as defined by Statement of Financial Ac-counting Standards No. 13. Those leases that meet the criteria of capital leases are not accounted for as such in the rate-making process, and, if capitalized, would not have a significant effect on assets, liabilities or expenses.
Notes, continued
- 11. Contingencies See Note 7 for possible payment of income taxes relating to the sale of contracts.
The Company is a defendant in two anti-trust suits filed in 1977 in the U.S. District Court for Delaware by four Delaware municipal electric wholesale customers of the company, seeking declaratory, in-junctive, and treble damage relief under the Sherman and Clayton Acts. Plaintiffs allege that the Company has prevented them from competing for customers in their respective service areas by charging discriminatory and unreasonably high wholesale electric rates, monopolizing production, transmis-sion and sale of bulk power, and engaging in other such restraints of trade. The Company has filed answers denying the material allegations of the com-plaints, asserting affirmative defenses and setting forth counterclaims. On January 8, 1979, the Court ruled that plaintiffs could not recover damages for alleged "price-squeeze" violations. These actions are in their earliest stages and, until plaintiffs have ar-ticulated a theory of damages for their remaining allegations, it is not possible to quantify the Com-pany's exposure to liability, if any, or to comment on the validity, as a matter of law, of the damage claims.
The Company believes the suits to be without merit and legal counsel believes the Company has ma-terial substantive defenses available to it.
- 12. Quarterly Financial Information (Unaudited)
The Company is involved in certain other legal and administrative proceedings before various courts and governmental agencies concerning rates, en-vironmental issues, taxes, licensing and other mat-ters. In the opinion of management, the ultimate disposition of these proceedings will not have a material effect on the financial position or results of operations of the Company.
The Price-Anderson Act places a limit of liability of
$560 million on each nuclear generating facility for public liability claims that could arise from a nuclear incident. Public liability insurance on the nuclear generating units in which the Company has an ownership participation is currently provided by a combination of private insurance and indemnity agreements with the Nuclear Regulatory Commis-sion (NRC). Since August 1977, however, the indem-nity by the NRC has decreased and, in the event of a nuclear incident involving any facility covered by government indemnification, the Company could be assessed up to a maximum of $3 million in any one year. For property damage to the nuclear plant facilities, the Company and its co-owners have private insurance up to $175 million for the Salem Station and $220 million for the Peach Bottom Sta-tion. The Company is a self-insurer, to the extent of its ownership interest, for any property loss in excess of the aforementioned amounts.
The quarterly data presented below reflect all adjustments necessary in the opinion of the Company for a fair presentation of the results of operations.
Earnings Earnings Applicable Average per Operating Operating Net to Common Shares Average Revenue Income Income Stock Outstanding Share Quarter Ended (000)
(000)
(000)
(000)
(000)
(Dollars) 1977:
March 31
$ 87,118
$14,896
$ 9,546
$ 7,734 19, 130
$.40 June 30 78,412 13,889 7,918 6,105 19,203
.32 September 30 92,633 17,996 12,198 10,386 19,269
.54 December31 79,655 15,246 9,666 7,853 20,009
.39
$337,818
$62,027
$39,328
$32,078 19,403
$1.65 1978:
March 31
$105,172
$20,494
$14,663
$12,851 21,433
$.60 June 30 84,617 14,929 9,441 7,628 21,530
.35 September 30 96,716 19,773 13,881 12,069 21,627
.56 December 31 92,197 16,367 9,463 7,426 21,736
.34
$378,702
$71,563
$47,448
$39,974 21,582
$1.85 Quarterly data normally vary seasonably with temperature variations, the timing of rate in-creases and the scheduled down-time and maintenance of electric generating units.
Notes, continued
- 13. Replacement Cost Data (Unaudited)
The impact of inflation experienced in recent years has resulted in replacement costs of productive capacity that are significantly greater than the historical costs of such assets reported in the Company's financial statements. In compliance with reporting requirements, estimated replacement cost information will be available in the Company's annual report to the Securities and Exchange Commission on Form 10-K.
Report of Independent Certified Public Accountants To the Board of Directors and Stockholders Delmarva Power & Light Company Wilmington, Delaware We have examined the consolidated balance sheets and statements of capitalization of Delmarva Power & Light Company and subsidiary companies as of December 31, 1978 and 1977, and the related consolidated statements of in-come, changes in common stockholders' equity and sources of funds for construction expenditures for the years then ended. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, in-cluded such tests of the accounting records and such other auditing procedures as we considered necessary in the cir-cumstances.
In our opinion, the financial statements referred to above present fairly the consolidated financial position of Del-marva Power & Light Company and subsidiary companies at December 31, 1978 and 1977, and the consolidated results of their operations and sources of funds for construction expenditures for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis.
1900 Three Girard Plaza Philadelphia, Pennsylvania February 9, 1979 COOPERS & LYBRAND
28 Consolidated Statistics 10 Years of Review... 1968-1978 1978 1977 1976 1975 1974 Electric Revenues (thousands): Residential...........
$105,237
$ 97,691
$ 80,416
$ 77,069
$ 68,7 Commercial..........
82,796 74,641 60,111 58,169 51, 1 Industrial............
83,972 76,801 64,458 64,141 66,3 Other utilities, etc......
40,840 38,974 34,896 35,606 32,9 Miscellaneous revenues.........
5,261 3,461 2,398 4,370 9,1 Total electric revenues.........
$318,106
$291,568
$242,279
$239,355
$228,4 Electric Sales (1,000 kilowatt-hours): Residential...........
1,979,624 1,924,723 1,787,663 1,672,180 1,597,4 Commercial..........
1,568,600 1,495,796 1,412,259 1,359,673 1,303,0 Industrial............
2,418,527 2,277,630 2,260,661 2, 142, 151 2,461,3 Other utilities, etc......
1,281,498 1,207,941 1,199,155 1,218,785 1,230,5 Total electric sales...
7,248,249 6,906,090 6,659,738 6,392,789 6,592,3 Electric Customers (end of period): Residential...........
237,925 233,106 230,579 221,780 215,E Commercial..........
28,421 29,648 28,345 27,345 27,1 Industrial............
858 921 1,002 923 E
Other utilities, etc......
480 561 550 545 E
Total electric customers.......
267,684 264,236 260,476 250,593 244,C Gas Revenues (thousands): Residential...........
$28,370
$21,829
$18,826
$15,365
$14,~
Commercial..........
10,154 7,1 33 6,062 4,676 4,~
Industrial............
10,191 6,950 5,984 4,343 3,i Interruptible..........
716 169 1,301 1,211 1,!:
Other utilities, etc......
93 49 44 33 Miscellaneous revenues.........
116 103 31 45 Total gas revenues...
$49,640
$36,233
$32,248
$25,673
$23,!
Gas Sales (million cubic feet): Residential...........
6,941 6,751 6,956 6,540 6,!
Commercial..........
2,593 2,439 2,586 2,429 2'
Industrial............
3,290 2,811 3,264 2,849 3,,
Interruptible..........
319 81 953 1,073 2,:
Other utilities, etc......
29 17 20 18 Total gas sales......
13,172 12,099 13,779 12,909 14, Gas Customers (end of period): Residential...........
67,550 67,400 68,978 69,418 69, 1 Commercial..........
3,773 3,738 4,154 4,189 4,
Industrial............
163 163 198 198 Interruptible..........
21 21 21 21 Other utilities, etc.....
1 1
1 1
Total gas customers.
71,508 71,323 73,352 73,827 74, Refinery Service Electricity delivered....
270,006 289,049 318,389 297,282 350,1 (1,000 kilowatt-hours)
Steam delivered.......
6,251,194 4,888,366 5,301,421 5,517,000 5,921,1 (1,000 pounds)
Average Annual Compound %
1973 1972 1971 1970 1969 1968 Rate of Growth Electric Revenues 51,799
$ 43,878
$ 36,198
$30,992
$27,857
$25,487 15.24 Residential 37,888 31,810 25,468 21,430 19,333 17,754 16.65 Commercial 41,284 35,962 28,903 24,069 22,483 20,120 15.36 Industrial 21,518 16,833 12,964 10,175 8,936 7,962 17.76 Other utilities, etc.
5,287 2,857 1,209 530 513 504 26.43 Miscellaneous revenues 157,776
$131,340
$104,742
$87,196
$79,122
$71,827 16.05 Total electric revenues Electric Sales 29,641 1,463,821 1,380,763 1,280,420 1,151,108 1,037,223 6.68 Residential 60,216 1,227,230 1,099,897 1,009,488 923,064 856,258 6.24 Commercial 12,877 2,412,239 2,252,219 2,264,084 2,217,655 2,048,776 1.67 Industrial 52,977 1, 137,272 1,014,972 885,720 792, 151 708,899 6.10 Other utilities, etc.
55,711 6,240,562 5,747,851 5,439,712 5,083,978 4,651,156 4.54 Total electric sales Electric Customers 08,073 200,595 193,282 187,683 183,458 178,948 2.89 Residential 26,708 25,856 25,139 24,383 24,058 23,474 1.93 Commercial 867 869 810 834 815 806 0.63 Industrial 506 496 460 375 283 281 5.50 Other utilities, etc.
36,154 227,816 219,691 213,275 208,614 203,509 2.78 Total electric customers Gas Revenues 13,018
$12,944
$11,948
$11,283
$10,708
$10,290 10.67 Residential 3,715 3,532 3,126 2,861 2,555 2,207 16.49 Commercial 3,505 3,265 2,998 2,618 2,641 2,536 14.92 Industrial 1,363 1,035 1,153 1,340 1,222 1,155 (4.67)
I nterru pti ble 30 25 16 10 7
8 27.80 Other utilities, etc.
22 18 39 225 251 215 (5.98)
Miscellaneous revenues 21,653
$20,819
$19,280
$18,337
$17,384
$16,411 11.70 Total gas revenues Gas Sales 7,134 7,737 7,583 7,406 6,942 6,601 0.50 Residential 2,614 2,696 2,534 2,384 2,097 1,770 3.89 Commercial 3,653 3,875 3,797 3,549 3,700 3,455 (0.49)
Industrial 2,346 2,134 2,708 3,423 3,263 3,089 (20.31)
Interruptible 23 20 13 8
6 6
17.06 Other utilities, etc.
15,770 16,462 16,635 16,770 16,008 14,921 (1.24)
Total gas sales Gas Customers 9,833 69,891 69,604 68,614 68,074 67,270 0.04 Residential 4,418 4,407 4,426 4,444 4,423 4,341 (1.39)
Commercial 197 195 204 206 103 93 5.77 Industrial 21 21 21 21 19 19 1.01 Interruptible 1
1 1
1 1
1 Other utilities 4,470 74,515 74,256 73,286 72,620 71,724 (0.03)
Total gas customers Refinery Service 1,700 295,236 272,649 244,614 281,120 265,824 0.16 Electricity delivered (1,000 kilowatt-hours) 6,000 7,261,000 7,564,000 7,779,000 7,536,000 7,296,000 (1.53)
Steam delivered (1,000 pounds)
Senior Management and Staff (Above, Left to Right) Robert D. Weimer, President Chief Executive Officer; Thomas C. Roe, Chairman of the Board.
(Left, Left to Right) Howard E. Cosgrove, Jr., Manager of Finance; William E. Rossell, Sr., Comptroller; Alfred C. Thawley, Jr.,
Secretary & Treasurer; Nevius M. Curtis, Senior Vice President & Chief Financial Officer; Earl D. Krapf, Vice President, Regulatory Practices.
(Above, Clockwise) Edward F. Spear, Vice President, Public Relations; Kent A Williams, General Manager, Personnel &
Industrial Relations; George J. Pinto, Vice President, Administrative Services; H. Ray Landon, Senior Vice President; Hudson P. Hoen, Ill, General Manager, Marketing.
(Right, Left to Right) Robert F. Molzahn, Manager, Environmental Affairs; James A Clark, Jr., Vice President, System Opera-tion & Energy Supply; Frank A Cook, Vice President, Production; William G. Price, Senior Vice President; James I. Owens, Manager of Production Engineering and Construction.
(Left, Left to Right) J. Edwin Hobbs, Divi-sion Vice President, Southern Division; J.
Kenneth Wiley, Senior Vice President; Harland M. Wakefield, Jr., Division Vice President, Northern Division; Elwood R.
Thompson, General Manager Engineering.
31
32 Board of Directors In Memory Werner C. Brown Mrs. Henry P. Cannon, II Oscar L. Carey lrenee du Pont, Jr.
Sally V. Hawkins Dr. Earl C. Jackson, Sr.
William G. Price Thomas C. Roe Dr. E. Arthur Trabant James M. Tunnell, Jr.
Robert D. Weimer Executive Committee Audit Committee Nominating Committee Chairman of the Board of Hercules Incorporated (chemical manufacturer)
Wilmington, Delaware Director of H.P. Cannon & Son, Inc. (food processing firm) Bridgeville, Delaware President and Director of Larmar Corporation (general real estate and home builders) Salisbury, Maryland Director and Retired Senior Vice President of E.I. du Pont de Nemours & Company (chemical manufacturer) Wilmington, Delaware Director and President of Delaware Broadcasting Company and General Manager of Station WILM (radio broad-casting), Wilmington, Delaware Retired Superintendent of the Wilmington Public Schools Wilmington, Delaware Senior Vice President of the Company Chairman of the Board of the Company President of the University of Delaware Newark, Delaware Partner of Morris, Nichols, A rs ht &
Tunnell, attorneys Wilmington, Delaware President and Chief Executive Officer of the Company Werner c. Brown, Chairman; lrenee du Pont, Jr.; Thomas C. Roe; James M.
Tunnell, Jr.; Robert D. Weimer James M. Tunnell, Jr., Chairman; Werner C. Brown; Oscar L. Carey lrenee du Pont, Jr., Chairman; Dr. E. ArthurTrabant; Robert D. Weimer The Board of Directors and the Company record with deep regret the passing of Austin T. Gardner, Retired President and Chief Executive Officer and Chairman of the Board, on December 22, 1978. Mr. Gard-ner served the Company with notable distinction in these capacities for various lengths of time between 1960 and 1976. He was a member of the Board at the time of his death.
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