ML18078B028
| ML18078B028 | |
| Person / Time | |
|---|---|
| Site: | Salem  |
| Issue date: | 12/31/1978 |
| From: | ATLANTIC ELECTRIC OF NEW JERSEY |
| To: | |
| Shared Package | |
| ML18078B026 | List: |
| References | |
| NUDOCS 7903160231 | |
| Download: ML18078B028 (32) | |
Text
Atlantic Electric SERVING A MILLION PEOPLE IN SOUTHERN NEW JERSEY A Year of Challenge A Year of Decision A Year of Progress I CASH CONSTRUCTION REQUIREMENTS I ANNUAL
$150 en c:::
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Cl 0
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0 I
I i
100 50 REPORT FOR THE YEAR 1978
A Year of Challenge A Year of Decision A Year of Progress A summary of remarks of John D. Feehan at the 1978 Annual Meeting of Shareholders:
In order to meet Atlantic City Electric Company's projected load growth rate in electrical demand over the next lO to 15 years (as well as replace worn-out facilities) the Company must make substantial commitments and expenditures for new facilities. New generating facilities to which we are already committed include shares of Salem Unit #2, scheduled for service in 1979, and Hope Creek Units #land #21 scheduled for service in 1984 and 1986. The rescheduling of Atlantic Generating Station Units # l and #2 to 1988 and 1990,
- requires that we seek other generating capacity in the mid-80's to meet our needs. We are considering a number of possible approaches to meet this capacity requirement and after extensive study expect to make a decision this year. This is one of three critical decisions which must be made this year, 1978, a Year of Decision.
The second critical decision has to be made by New Jersey's energy regulators. The critical decision they must make is a commitment to increase production of energy. Both the State and Federal energy regulators must ultimately conclude that conservation, essential as it is, cannot do the job alone and that we should get on with increased energy production from such conventional sources as coal and uranium.
The third critical decision lies with the New Jersey Board of Public Utilities. Based on a clear recognition that additional el.ectrical facilities are needed in New Jersey, the Board of Public Utilities must make a critical decision. They have to decide that electric utilities must be allowed to earn a fair return on their investment in the energy needs of this State.
They must recognize that their objectives, their mandates, are exactly the same as Atlantic Electric's.
These matters are discussed in the President's and Chairman's Letter to Shareholders and in the special section appearing on pages l l through 13 of this Report.
"These Units were cancelled late in 1978.
Results of Operations 1978-1974 Sales of Electricity (Billions of Kilowatt-hours)................
Electric Operating Revenues (Millions).....................
Net Income (Millions)............
Earnings per Share...............
Dividends Paid per Share.........
Gross Additions to Utility Plant (Millions).....................
Generating Capacity (Kilowatts)..
Utility System Peak Load (Kilowatts)....................
Average Annual Residential Kilowatt-hour Use.............
Electrically Heated Dwelling Units (Year-end)...............
Customer Service Installations (Year-end).....................
Contents Letter to Shareholders The Area We Serve Our Shareholders Earnings and Dividends nergy Sales and Revenues mployees ommunity Involvem ent ustom er Service onservation ate Matters inancing uel and Fuel Costs nvironment onstruction Program inancial Statements anagem ent's Discussion and Analysis of the Statements of Income 978-1 968 Statistical Profile and Summary of Operations ther Information for Investors 1978 5.275
$ 255.1 30.1 2.21 1.67 58.1 1,414,700 1,177,400 7,95 1 48,778 362, 13 l 2
4 4
4 4
6 6
6 8
8 10 10 10 11 14-23 24 26 25 & 28 28 fficers irectors Inside Back Cover 1977 1976 1975 1974 4.979 4.664 4.378 4.376
$ 235.0
$ 212.0
$ 199.1
$ 176.6 27.4 30.8 28.3 27.0 2.06 2.60 2.41 2.54 1.62 1.56 1.51 1.50 48.7 41.7 46.7 71.2 1,414, 700 1,334, 700 1,334, 700 1,278,700 l, 176,000 1,030,300 1,069,400 1,004,400 7,653 7,320 7,018 6,982 45,389 42,878 41,026 38, 146 352,205 343, 147 336,105 330, 758 Advance Notice The 1979 Annual Meeting of Shareholders will be held Tuesday, April 24, 1979, at the Company's Data Pro-cessing Center, Black Horse Pike and Fire Road, near Pleasantville, New Jersey. A Notice of Meeting will be mailed in March to those shareholders entitled to vote.
1
Mr. Alfred C. Linkletter, Chairman of the Board of Directors and Mr. John D. Feehan, President and Chief Executive Officer.
2 To Our Shareholders Our cover and the contents of this 1978 Annual Report portray and describe our theme of "A Year of Challenge, A Year of Decision, A Year of Progress." We are pleased to report that substantial progress was made in a number of key financial areas and in other phases of operations of th Company in 1978.
Earnings available for Common Stock rebounded to $2.2 per share from the $2.06 earned in 1977. Reflecting our progress and our sensitivity to the critical needs of shareholders, your Board of Directors increased the quarte dividend twice in 1978, bringing it to a new level of 43V2¢ per share for a total increase of 3¢ per quarter. Thus, the n rate is equivalent to $1.74 on an annual basis.
In addition to progress in earnings and dividends, most other parameters improved in 1978:
Kilowatt-hour sales grew Load factor improved Bond coverage improved Fuel cost declined Nuclear generation increased System kilowatt-hour losses declined One of the most significant developments in 1978, was improved regulatory climate in New Jersey. After a totall inadequate rate decision in January 1978, the aggressive actions of the Company resulted in a more appropriate ra increase in the Summer of 1978.
Yes, we made progress in 1978, in many areas; but, at t same time, the customer fared very well. Our customers enjoyed reliable electricity at reasonable cost. Atlantic Electric has demonstrated its ability to provide electricit over the years. We have coped with oil embargoes, ice storms and coal strikes, and we are prepared to handle ne challenges including developments in the world supplies oil. We are very proud of this performance.
Atlantic Electric has delivered this reliable energy at remarkably stable rates. During 1976, the average cost pe kilowatt-hour to a residential customer rose only 2% ave 1975. 1977's average rose only 3% over 1976, and the ave rate for 1978 rose only 3% over the prior year's average.
three-year performance was substantially less than the r of inflation. It is remarkable but seldom remarked about because all classes of customers are using more electric energy every year and the resultant higher bills mask the facts regarding the stability of the unit costs of electricit In this Year of Decision, Atlantic Electric has made m
of its critical decisions with regard to providing generating capacity for the next 10 to 15 years and is currently in the process of implementing those decisions. Additional capacity over and above our current commitments will come from a number of units being constructed by neighboring utilities.
Negotiations are currently underway with those utilities.
Atlantic Electric could only proceed to implement its critical decisions of 1978 if there were agreement on the part of State regulators that additional electrical facilities are needed for Southern New Jersey. Every indication is that the State authorities do concur in the need for additional facilities and it is anticipated that the Board of Public Utilities (BPU) will formalize that decision.
In addition, your management determined that it would only proceed to implement its critical decisions if there were assurances that the BPU would in fact allow reasonable rates of return to finance such a costly capital program. On the basis of our latest rate decision and the official order approving our latest financing, we are confident that the New Jersey BPU recognizes that electric utilities must be allowed to earn a fair return on their investment in the energy needs of New Jersey.
Your Company has made progress in the challenging year of 1978. It has made many of its critical decisions. We expect to show further improvement in 1979, and we expect to make progress on our program to meet the needs of the future. We expect to do this in a reliable fashion with reasonable rates and we expect and insist that it will be done while providing a fair return to the shareholder.
For the Board of Directors a.c.~
A. C. Linkletter Chairman of the Board
~~
President Earnings and Dividends (Per Share of Common Stock)
$3.50------------
3.00------------
1973 1974 1975 1976 1977 1978 Earnings per share Dividends paid per share 3
0
~
a:
Times Fixed Charges Earned (Before Income Taxes)
(Total interest and similar charges divided into earnings before taxes) v v
3 -------1-: -
-: io--
M M
-lil 2 -
C\\i -~ -
1-1973 1974 1975 1976 1977 1978 4
For Atlantic Electric, 1978 was a year of challenge, a year of decision and a year of progress We were challenged with providing electric energy to our 362 000 customers in Southern New Jersey in an economy continuing to suffer from infla~ion. We made important decisions concerning our customers' future energy requirements and their economic impact on our Company... and, most importantly, we made progress in several key areas in 1978.
In addition to our customary review of the Company's operations for the year, we have included additional discussion of some of the most significant challenges experienced and decisions and areas of progress that we made this year. This special section begins on page 11.
The Area We Serve A most pleasing aspect of Southern New Jersey is its fascinating diversity. Pleasant communities, productive farms, important industrial and commercial complexes, unique pinelands and popular resort areas, coupled with a proximity to such major cities as Philadelphia and New York, are a few of the assets that make this 2, 700 square mile area so attractive. Atlantic Electric and its predecessor companies have been a responsible and responsive force in the development of Southern New Jersey for almost 100 years... a relationship which has been very beneficial to both the Company and its customers.
Our Shareholders We recently completed our first year as record-keeping and dividend disbursing agent for the holders of Common and Preferred Stock; those services were previously performed by banks. Dividends for the year totaling $17,960,000 and $6, 149,000 were paid to the holders of Common and Preferred Stock, respectively. We also served as Administrator of the very successful Dividend Reinvestment and Stock Purchase Plan which resulted in the issuance and sale of an additional 126,680 shares of Common Stock of the Company to existing shareholders and employees, and provided an additional $2,690,000 of equity in the Company. Therefore, we believe our goal of providing improved and expanded service to our shareholders was accomplished quite successfully in 1978 and we look forward to further improvements in this area in 1979. At year-end, Atlantic Electric had 44,490 holders of Common Stock and 2,305 holders of Preferred Stock.
Earnings and Dividends At the beginning of this Report, we mentioned progress. One of our most significant areas of progress in 1978 was our growth in earnings which increased to $2.21 per share of Common Stock outstanding compared with $2.06 per share in 1977 on fewer average shares outstanding. We were able to achieve this level of earnings due to higher revenues permitted by the rate increases granted to Atlantic Electric in Januaq and July, additional revenues from increased kilowatt-hour sales and our continuing efforts to hold the line on expenses over which we have some control. Nevertheless, operating expenses continued to climb; operation and maintenance expenses were up
$5.8 million; taxes increased $8. 7 million and depreciation expense increased $2.2 million. A noteworthy area of progress in 1978 is that the dividend rate on shares of Common Stock was increased twice by the Board of Directors. Effective with the October 16, 1978 dividend payment, the Board increased the dividend rate to 43V2 ¢ p~
share, an increase of 4.8% over the dividend of 41 V2 ¢per share which had become effective with the April 15, 1978 dividend payment and which represented a 2.5%
increase over the previous rate. With the increased dividend, the dividend rate is now equivalent to $1.74 on an annual basis. The total dividend paid on a share of Atlantic Electric Common Stock in 1978 was $1.67.
Increases Recorded in the Number of Electrically Heated Homes, Kilowatt-hour Sales and Revenues There were 8, 100 new dwelling units connected to our lines during the year.
Approximately 7,200 of those were single family dwelling units indicating a trend away from apartment-style living. As in prior years, the number of electrically-heatec
Top-The interesting story describing the Company's new Conservation Van can be found under the heading "Conservation".
Bottom-Area residents, representing the various interests of our customers, meet regularly with Company Officers to discuss energy-related topics.
5
~
Average Annual Residential Use Per Customer 8500----------
8000 - ---------
5 7500-------~
.c
~
~ 7000 -~---~'-----
i'.
6500--- -------
6000 '---'----'---'---~~
1973 1974 1975 1976 1977 1978 6
dwelling units in our Company's service area continued to increase. During 1978, 3,389 additional units were bro.ught into service including 3,314 newly constructed homes and 75 units which were converted from other types of fuel. A significant part of the increase can be attributed to the increase in the number of electric heat pump installations in new homes. Heat pumps provide efficient winter and summer home comfort. There were 1,205 heat pump installations in 1978. Kilowatt-hour sales to residential customers increased 7% in 1978. Kilowatt-hour sales to commercial and industrial customers increased 7.3% and 2.5%, respectively, over 1977. Electric operating revenues in 1978 amounted to $255 million, up $20 million from the prior year.
Employees Each of the l, 797 employees of Atlantic Electric is congratulated for the accomplishments of the Company in 1978. These employees, and many, many dedicated workers before them, have helped to make Atlantic Electric what it is today
... a solid corporate citizen of Southern New Jersey.
Training is a very important part of each employee's career and the Company provides many useful and effective training programs. An example of this is the Apprentice Lineman Training Program which has trained approximately 119 employees since its inception in 1971. All employees are eligible for training through one or more of the Company's programs, including an Educational Assistance Program. Atlantic Electric also provides training in first aid treatment, Cardio-Pulmonary Resuscitation and other related areas for the employees and their families through evening courses available throughout the service area. Safety is an extremely important part of each employee's daily work routine. The Company has stringent safety regulations... for the benefit of each and every employee. Here again, an effort is made to reach employees and their families, by stressing that safety is a "family affair" and that gooc safety habits on the job begin with good safety habits at home.
Under the two-year agreement entered into by our Company and the International Brotherhood of Electrical Workers in December 1977, a general wage increase of
- 6. 788% went into effect December 11, 1978. This increase, together with improved benefits, will add approximately $2.9 million to the Company's 1979 payroll costs.
A Speakers Bureau, comprised of 40 knowledgeable Atlantic Electric employees, made 200 presentations in 1978. These employees, usually on their own time, take the Company's "story" to various organizations within its service area who are interested in hearing the challenges facing our Company and the decisions being made in the face of these challenges.
Community Involvement Atlantic Electric was pleased to receive the 1978 Atkins Award, given by the New Jersey Science Teachers Association for its efforts in energy education for youth in ou service area. Among the achievements cited by the Association were the Science-Energy Conferences, the linemen electric safety program for schools, and the unique classroom question-and-answer phone conversations.between students and President John Feehan.
The President's Energy Roundtable also has been of great importance in our efforts to gain Community involvement. The Roundtable aims to provide our consumers with an opportunity to serve as an informed customer advisory board to high level Company officials, and we are gaining valuable insight through this open exchange of viewpoints. Energy Roundtable discussions are held each month at various locations in the Company's service area, and cover a wide range of topics, no matter how controversial. Invitations are extended to a wide segment of area residents who are in some way representative of the various interests of our customer population. Atlantic Electric is especially grateful to those who participate in the Energy Roundtable and who are making it worthwhile.
Customer Service The Company took several important steps to improve customer service in 1978.
Among the improvements were the installation of modern automated mail and cash processing systems and a new centralized service order system and completion of centralization of customer inquiry facilities at the Data Processing Center.
The opening of the new Seabrook Brothers and Sons vegetable processing plant had a significant and favorable impact on Cumberland County agriculture in 1978.
The new treatment plant was completed in 1978 by the Atlantic County Sewerage Authority and will service this rapidly growing area.
7
30
<J)
~ 20
(.)
10 Average Cost of Fuels (Cents per gallon or equivalent)
,.....----~ -- - -
o ~~~~~~~~~~~~~
1973 1974 1975 1976 1977 1978 oi1
- coal D Nuclear 8
The new cash processing system involves use of equipment which automatically and rapidly opens, processes and records customer payments received by mail and processes and records bill payments made at collection agencies. The system enables Atlantic Electric to update customers' accounts more promptly after receipt of the payment, improves employee productivity and enhances cash flow by enabling faster depositing of funds in the bank. Under the new service order system, orders authorizing service connects or disconnects are automatically prepared through use of the computer system. These orders were formerly hand written or typewritten; about 591,000 were prepared in 1978.
Conservation The Company continues to provide its customers with factual data which will enable them to conserve energy and reduce or hold the line on energy costs. An energy conservation van (see the photo on page 5), completely outfitted by our Company, is used to provide up-to-date information on energy conserving devices and to display exhibits of such devices. Trained Company representatives operate the van, make presentations and answer customers' questions. In some locations, they utilize a video terminal linked directly to the Company's Data Processing Center to provide historic information of electric energy use by each customer and other required data. The van is displayed at various sites throughout our service area and has been warmly received by the public.
Also instituted in 1978 was an Energy Audit Program to enable customers to recognize those areas in their homes where energy conservation improvements could be made. Customers have the option of performing the audit themselves, or having a "personalized audit" performed by a Company representative for a nominal fee. Once the information is obtained and analyzed, the Company estimates, for the customer (1) the annual operating cost savings that should result from each improvement in insulating qualities and (2) the number of years it will take for the cost savings to pay back the total cost of the improvement. The suggested changes are then ranked, for the customer, in the order in which they should be performed from an economic standpoint.
A newspaper advertisement campaign, launched in the summer of 1978, was aimed at promoting conservation during periods of peak load, usually caused by heavy use of air conditioning equipment. The Company also encourages the use of energy efficient appliances and includes energy saving tips in the inserts mailed with monthly electric bills.
Rate Matters As reported in our 1977 Annual Report to Shareholders, Atlantic Electric was granted an $8 million rate increase on January 27, 1978 following hearings on the $16.5 million request filed by our Company in February, 1977. The Company filed a court appeal of the rate decision in the Superior Court of the State of New Jersey and, in March 1978, filed a new request for $35.7 million of rate relief. The inadequacy of the
$8 million increase is reflected in the fact that, while kilowatt-hour sales increased appreciably, earnings in the first half of 1978 were considerably less than in the corresponding period of 1977-67¢ per share of Common Stock vs. 92¢ per share.
On July 13, 1978, the New Jersey Board of Public Utilities (BPU) granted the Company
$14.8 million rate increase and ordered that the rate case remain open until September 30, 1979 to allow the BPU to consider the balance of the original $35. 7 million request. In March of 1979, the Company will file additional data with the BPU in support of our request for the remaining $20.9 million. Recognizing the additional rate relief, our Com-pany withdrew its court appeal in connection with the earlier request for $16.5 million.
The Company believes that the national Wage and Price Standards, issued by President Carter's Council on Wage and Price Stability, will not impact the Company's electric rates during 1979 nor should it have an impact on the amount of any rate increase which may be granted in 1979.
Prior to May 1, 1978, the Company'sfuel adjustment clause allowed us to recover the cost associated with the consumption of fossil fuels in the generation of electricity. Effective May 1, 1978, the BPU authorized the Company to convert to a levelized energy adjustmen clause which provides for the recovery of the cost of all fuels as well as purchase and
Maintenance of a combustion turbine.
Company linemen replacing insulators and hardware on the Deepwater-Lewis 138 KV transmission line.
9
10 interchange costs. The new energy adjustment is based on an estimate of future fuel and interchange costs and is effective for 12 month periods. At the end of a 12 month period, a reconciliation of actual and estimated costs is made with appropriate adjustments applied to the subsequent period. As a result of this, our customers will enjoy a slight reduction in the 1979 energy adjustment made possible by a credit from lower-than-anticipated energy costs in the preceding period. In addition, the current levelized energy adjustment clause has been modified to provide about 94% of energy cost recovery through base rates, with the remainder being recovered in the energy adjustment portion. While this transfer of cost recovery from the adjustment to the base rate schedule serves to reduce the adjustment charge, full recovery of energy costs is still provided.
Financing The sale of 1,000,000 shares of Common Stock was completed in January, 1979, the proceeds from this sale to be applied to the Company's ongoing construction program and for the payment of a portion of the Company's outstanding short-term loans incurred in connection with its construction program. It is expected that additional financing will be required later in the year in connection with additional construction expenditures and for the redemption of $3 million of long-term securities that will mature in June.
Fuel and Fuel Costs Coal and oil prices, which increased in the second half of the year, had very little impact on the operations of the Company in 1978... in fact, the average cost of fuel used by the Company decreased about 6%. The principal reason for this decrease is that increased costs of coal and oil were offset by the larger number of kilowatt-hours produced by nuclear fuel at lower cost than those produced by fossil fuels. Fuel costs would have been $12 million higher had the Company been required to burn oil at B. L. England Generating Station, rather than coal. However, as an example of our "fuel-flexibility", the Company converted Unit No. 1 at England Station to oil during the national coal miners' strike in early 1978 when coal was not readily available.
Because we were able to produce 24% of the electric energy used by our customers in :
1978 with nuclear fuel, rather than oil, an additional $25.4 million was saved for our customers. Another important fact is that due to the availability of our nuclear units, the amount of oil imported into the country was reduced by 104 million gallons in 1978. We estimate that 27% of our customers' electric needs will be supplied by nuclear fuel in 1979.
Fuel prices are expected to increase in 1979 primarily due to recent increases in oil prices by OPEC, coal miners' contract settlements and strip-mining regulations anticipated to be implemented in early 1979.
The Environment and the Cost of its Protection In our letter to shareholders dated January 15, 1979, we reported the Company has obtained authority to burn coal with a sulphur content of 3.5% in two Units at B. L.
England Generating Station until November 11, 1983, and may apply for a five year renewal of this authorization anytime after November 11, 1982. This was made possible by a decision of the Environmental Protection Agency, approving revisions to the New Jersey State Implementation Plan for the attainment and maintenance of air quality standards. With this Agency's ruling, the Company must proceed with the replacement of the existing electrostatic precipitators on the two Units. Installation should be completed by June 1, 1981 bringing each Unit into compliance with particulate emission standards. As has been stated, protection of our environment is a costly matter. The expense of installing precipitators is estimated to be $18.6 million.
However, the 3.5% sulphur content coal is readily available and less expensive than other fuels which would have to be used if the new precipitators were not installed.
The total cost of using this coal over the next five years will be less than if we had to use oil; and the resultant economies should more than offset the cost of installing the precipitators.
We expect to finance the precipitator installation through the issuance of Pollution Control Revenue Bonds late in 1979 or early 1980. Since the interest received by the purchasers of those bonds would not be taxable for Federal income tax purposes, the Company obtains the economic benefit of a lower than usual interest rate.
The Corporate Objective of Atlantic Electric To provide safe and reliable electric energy to Southern New fersey at the lowest reasonable cost with acceptable environmental impact while providing a fair return to the owners (the shareholders) for their investment in this Company.
As a shareholder of Atlantic Electric, you should know how the Board of Directors, Officers, various levels of management and employees work as a team to see that
. various segments of the corporate objective are achieved.
As in any large, publicly-owned business enterprise, important decisions must be made, on a regular basis, on behalf of the shareholders and the customers.
In his remarks to shareholders at the Annual Meeting of Shareholders, President Feehan stated that there were three critical decisions affecting the Company in 1978...
one decision would be the sole responsibility of the Company and the other two decisions would have to be made by regulatory agencies of the State of New Jersey.
The appropriate quotes from Mr. Feehan's remarks have een included on the inside of the front cover of this eport.
he Company's Decision The Company's decision relates to the substantial ommitments and expenditures that have been made and ew commitments which must be made for new enerating capacity facilities and other energy facilities hat the Company will require over the next 10 to 15 ears.
- Your Company had previously entered into agreements ith Public Service Electric and Gas Company which ould entitle the Company to a 10% ownership interest n four floating nuclear generating units proposed to be onstructed by Public Service. Decisions by Public Service 4
3 2
Kilowatt-hours Produced from Various Fuels o~--~~.._~....,__~.._~~
1973 1974 1975 1976 1977 1978 Coal D
oi1 0
Nuclear
[ill Gas to delay and ultimately cancel plans to construct the units required that Atlantic Electric accelerate its plans for additional generating capacity to meet its needs through the 1980's.
Studies to determine the amount of generating and other facilities required and the associated cost estimates were completed in 1978.
The initial phase of the decision-making process involved the Officers and their staffs gathering and analyzing extensive information and preparing and presenting studies to the Board of Directors regarding:
( 1) Forecasts of growth in demand and energy requirements of customers and reserve generating capacity required.
(2) The amount of additional generating capacity, transmission, distribution and related service facilities required to be constructed.
(3) Economic evaluations of various capacity options available.
(4) Estimated amount of securities required to finance the cost of the most viable options.
(5) Prospective financial results.
(6) Impact on customers and shareholders.
This initial phase of the process was developed and completed in about one year. The studies and revisions of the data were presented for consideration at a number of meetings of the Energy, Operations and Research Committee of the Board of Directors and at regular meetings of the Board.
Electric Generating Capacity vs. Utility System Demand 1900 -----------
1700 __________
1500 -
700 500 300 ~~~~~~~~~~~
1973 1974 1975 1976 1977 1978 Utility system capability at time of peak Annual Peak Load 11
In September 1978, after careful review, the Board authorized the Officers to proceed with plans which would enable the Company to participate in a 10%
ownership of Unit No. 1 of the Forked River Nuclear Generating Station. This unit, scheduled for operation in 1983, is being constructed by Jersey Central Power &
Light Company at a site along the coast a few miles north of the boundary line of the service f!reas of the two companies. The Company's ownership interest is expected to be 112,000 kilowatts and action is being taken to obtain the required regulatory approvals and to prepare appropriate agreements to formalize the Company's participation in the project. Officers also are negotiating arrangements which would enable the Company to contract for approximately 300,000 kilowatts of capacity from several other nuclear fueled units of other utility companies. Such "unit capacity purchases" over a period of many years would be in lieu of ownership. During 1979 the Company expects to enter into agreements which would provide for the Company's base load generating capacity requirements during the next ten years.
Additional internal combustion turbine units for use during times of peak demand will be installed as required.
Decisions made many years ago provided additional capacity for use in the 1980's. The 1,115,000 kilowatt Unit No. 2 of the Salem Nuclear Generating Station is scheduled for service in 1979 and will provide the Company with 83,000 kilowatts of capacity. Two 1,100,000 kilowatt Units of the Hope Creek Nuclear Generating Station are under construction near the Salem Station; Unit No. 1 is scheduled for service in 1984 and Unit No. 2 in 1986. The Company's total ownership interest in the two Units will be 107,000 kilowatts.
Through 1978, as indicated on the chart on the cover of this Report, cash construction requirements have been held to a level below the all-time peak reached in 1973.
Also, as shown, those requirements are expected to increase substantially over the near term. Cash construction expenditures by the Company during 1978 and the amount expended in each principal category are as follows:
Millions of Dollars
$23.6 26.4 2.7
$52.7 Reason for expenditure Construction of new production facilities.
Construction of additional sub-stations, improvement and extension of transmission and distribution systems and general plant.
Purchase of nuclear fuel.
Total*
- In addition, allowance for funds used during construction amounted to $5.5 million.
It is estimated that cash construction requirements will amount to $115 million during 1979 including some expenditures in connection with the expected participation in the Forked River Station. About 32% of the requirements are expected to be generated internally through retained earnings, depreciation accruals and similar items.
12 Providing for Load Growth Responsibility for the second critical decision rests with New Jersey's energy regulators. They must make a decision that Atlantic Electric does indeed need to add new facilities to meet growing load. It is anticipated that the New Jersey Board of Public Utilities will soon acknowledge the reasonableness of the load forecasts of Atlantic Electric and concur in the need to provide for additional generating capacity in the years ahead. Such a decision is an essential ingredient in providing for and financing such needed facilities. Timely approval of rate increases to help finance these facilities is a logical extension of that decision.
The New Jersey Board of Public Utilities The third critical decision resided with the New Jersey Board of Public Utilities. President Feehan, in his Annual Meeting address, asked that Board to recognize that their objectives and their mandates are exactly the same as Atlantic Electric's. He urged them to decide that electric utilities must be allowed to earn a fair return on their investment in the energy needs of the State of New Jerse Such a decision would permit sufficient rates... and would allow us to achieve a fair return so that our shareholders would not be shortchanged. Under the heading Rate Matters on page 8 of this Report we discussed the failure of the Board of Public Utilities to provide adequate and timely rate relief to the Company i its January 1978 rate order. However, in July, they approved additional rate relief for the Company and allowed the Company's rate case to remain open until September 30, 1979 so that consideration could be given
- to the balance of the Company's request. This is the responsiveness that is needed if we are to be allowed to earn a fair return on your investment.
Progress We are pleased that substantial progress was made during 1978 toward achieving the long-range objectives the three critical decisions. The magnitude and effects o the decisions will be more evident in future years and w believe the decisions will demonstrate that all of those involved-customers, regulators, shareholders, the Boar of Directors and Officers and other employees of the Company-are deeply committed to the continuing achievement of "The Corporate Objective of Atlantic Electric ".
To the left-Salem Nuclear Station Units # l and #2.
To the right-Construction proceeds on Hope Creek Nuclear Generating Station.
13
Statements of Income and Retained Earnings Year Ended December 31, 1978 1977 1976 1975 1974 OPERATING REVENUES-ELECTRIC (Note 9)............... $255,058,230
$234,994,695
$212,02 7,442
$199,079,150 $176,611,265 OPERATING EXPENSES:
Fuel (Note 1).....................
84,735,367 82,734,593 69,233,774 71,644,673 73,167,066 Interchange.......................
2, 170,833 3,735,245 4,819,194 2,855,059 5,862,224 Power Production-Operation and Maintenance...................
20,716,349 17,781,985 13,497,991 10,267,348 11,360, 196 Other Operation and Maintenance.
31, 718,407 29,262,922 26,333,575 24,631,477 21,729,600 Depreciation (Note 1).............
21,614,195 19,368,780 17,394,673 16,846,038 12,946,590 Taxes Other Than Federal Income Taxes..........................
31,999,525 29,069,476 26,341,778 23,394,142 17,832,852 Federal Income Tax Expense (Notes 1 and 3).................
18,955,719 13,188,156 11,495,656 8,689,091
( 1,629,889)
Total Operating Expenses......
211,910,395 195,141,157 169,116,641 158,327,828 141,268,639 OPERATING INCOME..............
43,147,835 39,853,538 42,910,801 40,751,322 35,342,626 OTHER INCOME:
Allowance for Funds Used During Construction (Note 1):
Debt and Equity (Prior to January 1, 1977)...............
7,456,612 7,229,745 10,567,696 Equity (After December 31, 1976) 3,237,675 3,906,318 Miscellaneous Non-Operating Income Less Income Deductions.
112,469 (24,754) 385,583 516,755 187,428 Other Income-Net............
3,350, 144 3,881,564 7,842,195 7,746,500 10,755,124 INCOME BEFORE INTEREST CHARGES.......................
46,497,979 43, 735, 102 50, 752,996 48,497,822 46,097,750 INTEREST CHARGES:
Interest on Long-Term Debt........
18,179,251 18,489,133 18,948,850 18,403,404 15,288,146 Amortization of Debt Expense and Premium-Net.................
40,076 62,993 52,023 25,335 (8,237)
Interest on Short-Term Debt.......
229,712 433,725 800,563 1,694,322 3,746,663 Other Interest Expense............
287,981 162, 104 155,864 95,026 61,159, Total Interest Charges.........
18,737,020 19,147,955 19,957,300 20,218,087 19,087,731 Allowance for Funds Used During Construction-Debt, after December 31, 1976 (Note 1).....
(2,302,801)
(2,771,148)
Net Interest Charges..........
16,434,219 16,376,807 19,957,300 20,218,087 19,087,731 NET INCOME......................
30,063, 760 27,358,295 30, 795,696 28,279,735 27,010,019 RETAINED EARNINGS AT BEGINNING OF YEAR...........
88,600,852 84,027,439 74,165,678 65,764,596 56,756,492 118,664,612 111,385,734 104,961,374 94,044,331 83,766,511 DIVIDENDS DECLARED:
Cumulative Preferred Stock.......
6,240, 751 5,549,678 5,483,936 5,483,936 4,471,602 Common Stock (per share 1978-1974, $1.70, $1.62,
$1.58, $1.52 and $1.50)..........
18,371,494 17,235,204 15,449,999 14,394,717 13,530,313 Total Dividends Declared......
24,612,245 22,784,882 20,933,935 19,878,653 18,001,915.
RETAINED EARNINGS AT END OF YEAR............................ $ 94,052,367
$ 88,600,852
$ 84,027,439
$ 74,165,678 $ 65,764,596 AVERAGE NUMBER OF COMMON SHARES OUTSTANDING.........
10, 790,977 10,629,930 9,747,012 9,470,073 8,973,400 EARNINGS PER SHARE OF COMMON STOCK (Note 5).......
$2.21
$2.06
$2.60
$2.41
$2.54 See Notes to Financial Statements 14
Statements of Changes in Financial Position SOURCE OF FUNDS Funds from Operations:
Net Income..........................
Principal Non-Cash Charges (Credits) to Income:
Depreciation........................
Amortization of Nuclear Fuel........
Allowance for Funds Used During Construction.....................
Federal Income Taxes-Deferred-Net...
Investment Tax Credit Adjust-ments-Net......................
Other-Net.........................
Total Funds from Operations.......
Funds from Outside Sources:
Long-Term Debt......................
Sale of Common Stock................
Sale of Preferred Stock................
Capital Stock Purchase Plan...........
Increase in Short-Term Debt...........
Total Funds from Outside Sources Hope Creek Transfer-Net...............
Other Sources-Net.....................
Total Source of Funds.............
APPLICATION OF FUNDS Gross Additions to Utility Plant.........
Allowance for Funds Used During Con-struction.............................
Property Abandonment Costs (Note 8)....
Net..............................
Dividends on Preferred Stock............
Dividends on Common Stock............
Retirement and Maturity of Long-Term Debt.................................
Conversion of Preferred Stock............
Decrease in Short-Term Debt............
Property Abandonment Costs (Note 8)....
Investments in Subsidiary Companies....
Increase (Decrease) in Working Capital...
Total Application of Funds.........
NET INCREASE (DECREASE) IN COMPONENTS OF WORKING CAPITAL*
Current Assets:
Cash and Cash Items..................
Accounts Receivable..................
Fuel..................................
Materials and Supplies................
Prepayments..........................
Other................................
Total.............................
urrent Liabilities:
Accounts Payable.....................
Taxes Accrued........................
Interest Accrued......................
Levelized Energy Clause...............
Other................................
Total.............................
et Increase (Decrease) in Working Capital...............................
Year Ended December 31, 1978 1977 1976 1975 1974
$ 30,063,760
$27,358,295 21,614,195 1,376,147 (5,540,476) 8,115,670 4,963,094 (199,869) 60,392,521 5,023,199 792 5,023,991 19,368,780 1,037,980 (6,677,466) 7,866,279 2,850,249
( 166,944) 51,637, l 73 15,000,000 3,349,523 10,000,000 24,446 28,373,969 1,251,428 22,750
$ 66,667,940
$80,033,892
$30, 795,696 17,394,673
( 7,456,612) 4,697,375 6,419,859 132,117 51,983, 108 2,500,000 20,790,854 23,290,854 3,262,031
( 126,801)
$78,409, 192
$28,279,735 $ 27,010,019 16,846,038 12,946,590 (7,229, 745)
( 10,567,696) 3,962,654 574,254 3,735,421 (602,731) 471, 723 (59,950)
~~=-=--=~~
46,065,826 29,300,486 51,500,000 5,000,000 51,500,000 7,595,804 29,826,200 24,800,000 67,222,004 (793,301) 1,206,182
$96,772,525 $ 97, 728,6 72
$ 58,072,808 (5,540,476)
(4,888,393)
$48,733,032
$41,701,515
$46,744,820 $ 71,219,796 (6,677,466)
(7,456,612)
(7,229,745)
( 10,567,696)
~~~~
47,643,939 42,055,566 6,240,751 5,549,678 18,371,494 17,235,204 228,000 15,400,000 1,729,300 512,000 34,244,903 5,483,936 15,449,999 10,592,000 25,000 13,650,000 39,5 15,075 5,483,936 14,394,717 15,125,000 23,650,000 60,652,100 4,471,602 13,530,313 255,000 4,888,393 135,414
( 12,569,351)
$ 66,667,940 (2,802,950) 1,161,473 894,446 478,761
$ (3,334,033) 3,905,991 753,023 1,449,818 242,633 3,017,432 983,464 4,601,407 32,398 4,989,174 4,980,340 15,586,783 2,084,394 (2, 198, l 19)
(2,290,649) 18,340,896
$80,033,892
$78,409, 192
$96, 772,525 $ 97, 728,672
$ 2,253,616 94,824 3,388,800 1,028,650 319,558 (3,262,031) 3,823,417 (193,576) 3,661,828 35,621
( l, 764,850) 1,739,023
$ (993,958) 1,366,882 (2,082,246) 68,915 134,299 3,262,031 l, 755,923 2,526,763 336,836 (291,120) 1,381,563 3,954,042
$ (2,812,009) $
157,868 2,391,684 (70,487) 207,626 (2, 106,348)
(2,231,666)
( 1,633,447) 252,268 (32,377) 1,472,539 58,983 4,780,609 3,815,287 6,294,209 1,311,103 313,270 2,106,348 18,620,826 (2, 72 7,265) 438,683 373,440 2,195,072 279,930
$(12,569,351)
$ 2,084,394 $ (2,198,119) $ (2,290,649) $ 18,340,896 Excludes Short-Term Debt, Notes and Current Maturities of Long-Term Debt ee Notes to Financial Statements 15
Balance Sheets Assets December 31, 1978 1977 ELECTRIC UTILITY PLANT (Note 1):
In Service:
Production.................................................... $32 8,562,940 $324,354,058 Transmission..................................................
12 0,361,924 106,353,003 Distribution...................................................
22 6,656,661 210,656,415 General.......................................................
16,763,949 15,821,460 Total........................................................
69 2,345,474 657,184,936 Less Accumulated Depreciation.............................
16 9,361,346 151,570,215 Net.....................................................
52 2,984,128 505,614,721 Construction Work in Progress....................................
9 Nuclear Fuel.....................................................
7,538,323 86,700,308 12,589,450 9,384,164 Less Accumulated Amortization..................................
2,414,127 1,037,980 Net.....................................................
10, 175,323 8,346,184 Electric Utility Plant-Net...................................
63 0,697,774 600,661,213 INVESTMENTS:
Investment in Subsidiary Companies, at Equity (Note 4)............
Land Purchase Contracts.........................................
3,080,692 2,955,832 793,767 638,231 Other...........................................................
561,510 499,645 Total Investments............................................
4,435,969 4,093,708 CURRENT ASSETS:
Cash (Note 6)....................................................
Temporary Cash Investments.....................................
Special Deposits and Working Funds...............................
3,657,228 4,993,103 2,700,000 1,037, 727 335,886 Accounts Receivable:
Utility Services................................................
Miscellaneous.................................................
Allowance for Doubtful Accounts...............................
17,408,975 15, 123,741 3,010, 775 1,390,018 (200,000)
(200,000)
Fuel (at average cost).............................................
Materials and Supplies (at average cost)............................
Prepayments.....................................................
19,024,525 18,271,502 9, 745,736 8,295,918 2,268,989 2,026,355 Total Current Assets.........................................
5 5,953,955 52,936,523 DEFERRED DEBITS:
Property Abandonment Costs (Notes 1 and 8).......................
Unamortized Debt Expense (Note 1)...............................
Other...........................................................
4,888,393 1,878,072 2,028,635 2,007,484 2,894,087 Total Deferred Debits........................................
8,773,949 4,922,722 Total Assets............................................... $69 9,861,647 $662,614,166 See Notes to Financial Statements 16
Liabilities and Shareholders' Equity SHAREHOLDERS' EQUITY (Note 2):
Cumulative Preferred Stock.......................................
Common Stock, Par Value $3:
Authorized Shares, 14,000,000 Outstanding Shares 1978-10,916,308; 1977-10,702,557..........
Premium on Common Stock....................................
Total Common Stock......................................
Capital Stock Purchase Plan......................................
Capital Stock Expense (not being amortized).......................
Retained Earnings................................................
Total Shareholders' Equity..................................
December 31, 1978 1977
$ 87,824,745 $ 89,554,045 32,748,924 107,077, 739 139,826,663 25,238 (1,832,061) 94,052,367 319,896,952 32,107,671 102,695,631 134,803,302 24,446 (1,848,1 77) 88,600,852 311,134,468 LONG-TERM DEBT (Note 12)......................................
286,780,526 290,120,223 CURRENT LIABILITIES:
Current Portion of Long-Term Debt...............................
Accounts Payable................................................
Customer Deposits...............................................
Taxes Accrued...................................................
Interest Accrued.................................................
Dividends Declared..............................................
Levelized Energy Clause (Note 1)..................................
Other...........................................................
Total Current Liabilities....................................
DEFERRED CREDITS:
Customer Advances for Construction..............................
Accumulated Deferred Investment Tax Credits (Notes 1 and 3)......
Accumulated Deferred Income Taxes (Notes 1 and 3)...............
Operating Reserves...............................................
Other Deferred Credi ts...........................................
Total Deferred Credits......................................
COMMITMENTS AND CONTINGENCIES (Notes 7 and 8) 3,000,000 5,030,531 2,819,544 10,617,636 3,596,892 6,291,753 4,989, l 74 8,103,279 44,448,809 726,347 20,184, 796 26,421,898 739,500 662,819 48, 735,360 4,047,067 2,915,418 6,016,229 3,564,494 5, 784,550 3,534,269 25,862,027 597,960 15,221,703 18,306,228 990,000 381,557 35,497,448 Total Liabilities and Shareholders' Equity....................
$699,861,647 $662,614, 166 See Notes to Financial Statements 17
Notes to Financial Statements NOTE 1: SIGNIFICANT ACCOUNTING POLICIES:
REGULATION-The accounting and rates of the Com-pany are subject to the requirements of the Board of Public Utilities of the State of New Jersey (BPU) and in certain respects to the Federal Energy Regulatory Commission (FERC).
ELECTRIC UTILITY PLANT-Property is stated at origi-nal cost (cost to the person first devoting the plant to public service). Generally the plant is subject to a first mortgage lien. The cost of property additions, including jointly-owned plant, replacement of units of property and betterments, is capitalized. Included in additions is an Allowance for Funds Used During Construction (AFDC) which is defined in the applicable regulatory systems of accounts as the net cost, during the period of construction, of borrowed funds used for construction purposes and a reasonable rate on other funds when so used. In February, 1977, FERC issued an order relating to AFDC and revising the Uniform System of Accounts. Such order was effective January 1, 1977, and provides a formula for determining the maximum allowable AFDC rate. In addition, the order requires the segregating of AFDC into two component parts; borrowed funds (debt) and other funds (equity).
Since January 1, 1977, the debt component has been in-cluded in the Interest Charges section of the Statement of Income as a credit, while the equity component continues to remain as a credit to Other Income. The Company has not reclassified AFDC into its debt and equity components for periods prior to January 1, 1977, since prior periods would not be comparable and the FERC order did not require reclassification. AFDC has been calculated using a rate of 8% for all years reported. The 1978 and 1977 rate is less than the maximum allowed under the FERC formula.
LEVELIZED ENERGY COSTS-Effective May 1, 1978, the Company, at the direction of the BPU, adopted a Levelized Energy Adjustment Clause which utilizes estimated pro-spective energy costs based on an eight-month period for 1978 (changed to a twelve-month period beginning January 1, 1979). Under this Clause, the recovery of such energy costs is made through levelized monthly charges over the period of projection. Any under or over recoveries are deferred in balance sheet accounts as a current asset or current liability as appropriate. Such deferrals are reflected in the Income Statement in the period they are recovered.
DEPRECIATION AND MAINTENANCE-The Com-pany provides for depreciation on the basis of the esti-mated service lives of depreciable property on a straight-line basis. Depreciation applicable to nuclear plant provides for estimated cost of dismantling or decommis-sioning. The overall composite rate of depreciation was approximately 3.3% for 1978 and 1977, 3.2% for 1976 and 1975 and 3.0% for 1974. In addition to the provisions for depreciation, income is charged with the cost of labor, material, supervision and other expenses incurred in mak-ing repairs and minor replacements and in maintaining the properties in efficient condition. Accumulated deprecia-tion is charged with the cost of depreciable property units retired, together with removal costs less salvage and other recoveries.
18 DEBT EXPENSE AND PREMIUM-Debt issuance ex-pense and premium are being amortized over the lives of the issues to which they pertain. In conformity with al-lowed BPU ratemaking accounting, all gains or losses relating to reacquired debt are recognized currently.
NUCLEAR FUEL-The Company's amortization of the Salem nuclear fuel is based on a rate using the number of units of thermal energy produced over the estimated total thermal units to be produced during the life of the fuel, plus a factor representing the estimated future costs (stor-age and disposal) for the disposition of spent nuclear fuel.
Nuclear fuel requirements for Peach Bottom Units No. 2 and 3 are being provided by the operating company for Peach Bottom through a fuel purchase contract. Presently, such costs are calculated using a zero net salvage value.
The Company is responsible for payment of its propor-tionate interest ( 7.51 % ) of the cost of the fuel consumed and of certain operating costs and interest expense during the term of the contract. All nuclear fuel costs are charged to Fuel Expense. The Company's share of other costs of the nuclear stations are charged to operations and mainte-nance as appropriate.
FEDERAL INCOME TAXES-Deferred Federal Income Taxes are provided in amounts equal to the tax effect of the difference between tax depreciation computed on depreci-able property added after 1973 using accelerated methods under the ADR System and the straight-line method using asset guideline periods. Tax reductions relating to the dif-ferences between book depreciation and straight-line asset guideline depreciation are reflected in Federal Income Tax Expense currently as allowed by the ratemaking policy of the BPU In addition, the Company provides deferred Fed-eral Income Taxes relating to the use of the repair allow-ance provisions of ADR (See Note 3 ). Investment tax cred-its are deferred on the balance sheet and are restored to income over the life of the related property.
PENSION PLAN-The Company and Deepwater, referred to in Note 4, have in effect a noncontributory insured retirement annuity plan covering all regular employees.
The cost of the plan, determined under the aggregate cost actuarial method was as follows:
Company Cost*
Including Construction 1978
$3,529,000 1977 3,076,000 1976 2,544,000 1975 2, 164,000 1974 2,069,000
- Excludes Deepwater Amount Charged to Construction
$799,000 678,000 582,000 510,000 518,000 Deepwater Cost
$573,000 498,000 414,000 362,000 392,000 Based on an actuarial study as of December 31, 1977, the vested benefits computed under the Plan were in excess of pension fund assets by approximately $519,000. The Company's Plan is in compliance with the Employee Retirement Income Act of 1974.
PROPERTY ABANDONMENT COSTS-Property Aban-donment Costs are deferred and amortized over periods prescribed by the BPU (See Note 8).
NOTE 2: CAPITAL STOCK:
CUMULATIVE PREFERRED STOCK, Par Value $100 Authorized 799,979 Shares December 31, Issued and Outstanding Series:
4% Series--77,000 Shares 4.10% Series--72,000 Shares 4.35% Series--15,000 Shares 4.35% 2nd Series--36,000 Shares 4.75% Series--50,000 Shares 5% Series--50,000 Shares 5 'l's% Convertible Series--(B) 77,3 16 Shares (1978) 94,609 Shares ( 1977) 7.52% Series--100,000 Shares 8.40% Series--100,000 Shares (C) 9.96% Series--200,000 Shares (DJ Total Cumulative Preferred Stock PREFERRED STOCK, No Par Authorized 2,000,000 Shares Issued and Outstanding:
$8.25 Series (Cumulative}--
100,000 Shares issued December 22, 1977 (E)
Premium on Preferred Stock Total Preferred Stock 1978 1977
$ 7,700,000 7,200,000 1,500,000 3,600,000 5,000,000 5,000,000 7,731,600 10,000,000 10,000,000 20,000,000 77,731,600 10,000,000 87,731,600 93,145
$87,824,745
$ 7,700,000 7,200,000 1,500,000 3,600,000 5,000,000 5,000,000 9,460,900 10,000,000 10,000,000 20,000,000 79,460,900 10,000,000 89,460,900 93,145
$89,554,045 Current Redemption Price Per Share
$105.50 101.00 101.00 101.00 101.00 100.00 103.00 106.77 115.00 108.56 108.04 Preference Stock, without par value, 3,000,000 Shares authorized, none outstanding.
(A)
Prior to the date specified, no shares may be redeemed through certain refunding operations.
Refunding Restricted Prior to (A)
Feb. 1, 1979 Aug. 1, 1984 Nov. 1, 1987 (B)
The 5'l's% Convertible Series is convertible (subject to adjustment in certain events) into Common Stock at the rate of 3.5 shares of Common Stock for each share of Preferred (270,608 shares of authorized Common Stock are reserved for the conversion of the Series at December 31, 1978).
(C)
On February 1, 1985, and annually thereafter, 4,000 shares of the 8.40% Series must be redeemed through the operation of a sinking fund at a redemption price of $100.00 per share. At the option of the Company, an additional 4,000 shares may be redeemed on any sinking fund date, without premium, up to 32,000 shares in the aggregate.
(D)
On August 1, 1979, and annually thereafter, 8,000 shares of the 9.96% Series must be redeemed through the operation of a sinking fund at a redemption price of $100.00 per share. At the option of the Company, an additional 8,000 shares may be redeemed on any sinking fund date, without premium, up to 40,000 shares in the aggregate.
(E)
On November 1, 1983, and annually thereafter, 2,500 shares of the 8.25% No Par Preferred Stock Series must be redeemed through the operation of a sinking fund at a redemption price of $100.00 per share. At the option of the Company, an additional number of shares, not to exceed 2,500 may be redeemed, on any sinking fund date, without premium.
COMMON STOCK-Issues of common stock in 1978 and 1977 consisted of the following:
Dividend Reinvestment and Stock Purchase Employee Stock Ownership Plan Conversion of Preferred Stock Total 1978 1977 Shares 126,680 102,417 26,547 25,848 60,524 17,920 213,751 146,185 remium on Common Stock was credited in 1978 and 1977 with the amounts of $4,382,108 and $2,995,157, respec-ively, representing the excess of proceeds over the par value of shares of Common Stock issued, sold and converted. At ecember 31, 1978, the Company had reserved 135,479 shares of Common Stock under its Dividend Reinvestment and tock Purchase Plan which became effective in 1976 and 197,605 shares of Common Stock under its Employee Stock wnership Plan which became effective in 1977.
n January 31, 1979, the Company sold 1,000,000 shares of Common Stock. The net proceeds from the sale amounted to pproximately $19,300,000.
19
Notes to Financial Statements NOTE 3: FEDERAL INCOME TAXES:
Federal income tax expense applicable to current operations is less than the amount computed by applying the statutory rate on book income subject to tax for the following reasons:
Year Ended December 31, 1978 1977 1976 1975 Net Income........................
$30,063, 760
$27,358,295
$30,795,696
$28,279, 735 Federal Income Tax Expense (as below)........................
19,063,489 14,129,924 11,824,751 8,771,731 Book Income Subject to Tax.........
$49, 127,249
$41,488,219
$42,620,447
$37,051,466 Income Tax at Statutory Rate (48%)..
$23,581,080
$19,914,345
$20,457,81 5
$17,784,704 Less:
Excess of Tax over Book Depreciation (flow-through portion)...........
666,164 1,788,210 3,655, 710 3,844,262 Allowance for Funds Used During Construction...................
2,659,429 3,205, 184 3,579, 174 3,470,278 Capitalized Overheads.............
927,399 796,260 729,801 744,889 Investment Tax Credits-Used.....
610,064 378,974 288,882 426,347 Other............................
(345,465)
(384,207) 379,497 527,197 Total Federal Income Tax Expense....................
$19,063,489
$14,129,924
$11,824,751
$ 8,771,731 Federal income tax expense is comprised of the following:
Federal Income Tax Currently Payable...........................
Deferred Taxes (as below)............
Investment Tax Credit-Earned......
Investment Tax Credit-Used........
Federal Income Tax Expense.........
Federal Income Tax-Other Income...
Total Federal Income Tax Expense....
$ 5,414,276 8,115,670 6,035,837 (610,064) 18,955,719 107,770
$19,063,489
$ 1,850,404 7,866,279 3,850,447 (378,974) 13,188,156 941,768
$14,129,924 378,422 4,697,375 6,708,741 (288,882) 11,495,656 329,095
$11,824,751 991,016 3,962,654 4,161,768 (426,347) 8,689,091 82,640
$ 8,771,731 The provision for Deferred Federal income taxes, net, results from the following timing differences:
Liberalized Depreciation.............
$ 3,925, 175
$ 4,137,707
$ 3,264,227
$ 2,256, 100 Repair Allowance...................
2,993,962 4,062,510 1,920,000 1,845,016 Amor tiza tion-Accelera ted Depreciation and Repair Allowance (391,052)
(314,738)
(246,852)
(138,462)
Property Abandonment Costs........
1,467,345 Other..............................
120,240 (19,200)
(240,000)
Total Deferred Federal Income Taxes-Net...............
$ 8,115,670
$ 7,866,279
$ 4,697,375
$ 3,962,654 1974
$27,010,019 (1,597,278)
$25,412/ 41
$12,198,115 6,445,455 5,051,773 654,060 143,993 1,500,112
$ (1,597,278)
$ (1,601,412) 574,254 (458,738)
(143,993)
( 1,629,889) 32,611
$ ( 1,597,278) 690,000 (11 5,746) 574,254 Investment tax credit earned in 1978 and 1977 includes $462,679 and $621,224, respectively, representing the Company's use of the additional investment tax credit available under the Tax Reduction Act of 1975. The 1978 amount, plus employee contributions of $143,000, was used to purchase 26,547 shares of the Company's Common Stock, while the 1977 amount was used to purchase 25,848 shares (see Note 2).
20
NOTE 4: INVESTMENT IN SUBSIDIARY COMPANIES:
The Company's investment in Deepwater Operating Company (Deepwater), a wholly-owned subsidiary which operates generating and process steam units owned by the Company was $2,301,000 at December 31, 1978 and 1977.
The assets of Deepwater consist almost wholly of working capital in which the equity of the Company is fairly repre-sented by its investment in Deepwater. The net produc-tion costs of Deepwater (after deducting charges to E. I.
duPont deNemours & Company) are charged to the Com-pany. These costs are included in the Company's accounts classified as to operation, maintenance and taxes.
The Company also has an investment in Atlantic Hous-ing, Inc. (Housing), a wholly-owned subsidiary, which amounted to $779,692 at December 31, 1978. At De-cember 31, 1978, Housing had $2,124,157 invested in land and mortgages of which $1,780,032 is invested as a 20%
undivided interest as tenant in common in a future generating station and industrial site. This site is subject to a mortgage of which the Company at December 31, 1978 is liable for the payment of $660,000 principal amount and interest under a suretyship agreement.
NOTE 5: EARNINGS PER SHARE:
Earnings per share of Common Stock has been computed by dividing net income less applicable preferred stock div-idend requirements($6,253,193 in 1978, $5,484,691 in 1977, $5,483,936 in 1976, $5,483,936 in 1975 and
$4,233,384 in 1974) by the average common shares out-standing during the year.
NOTE 6: SHORT-TERM BORROWINGS AND COMPENSATING BALANCES:
The Company had arrangements for short-term borrow-ings as follows:
Maximum amount of short-term borrowings outstanding at any month end during 1978 the year.............. $7,000,000 Average amount outstand-ing during the year....
1,687,000 Average interest rate on above................
7.9%
Weighted average interest rate on short-term borrowings outstanding during the year:
Notes Payable to Banks............
8.5%
Commercial Paper..
7.9%
1977
$9,600,000 5,619,000 5.8%
6.8%
5.7%
The unused lines of credit available at December 31, 1978 and 1977 were $40,000,000 and $50,000,000, respec-tively. Demand deposits maintained with lending banks, certain of which are deemed to constitute compensating balances, are not legally restricted. Based on lines of credit available at December 31, 1978 and 1977 respectively, such compensating balances approximated $1,550,000 and
$2,000,000.
NOTE 7: LEASES:
Rents, principally charged to operations, were respec-tively: $2,430,000, $3,380,000, $3,500,000, $3,600,000 and
$3,805,000 for the years 1974 to 1978.
Certain of the Company's leases which meet the condi-tions for capitalization under the criteria established by FASB No. 13 and ASR No. 225 are accounted for as operat-ing leases in accordance with ratemaking treatment. Such leases, if capitalized, would have increased the Company's assets and liabilities by approximately $17,700,000 and would not have had a material impact on the Company's net income.
Future minimum rental commitments under noncan-celable leases as of December 31, 1978 are approximately as follows:
Capital Operating Total 1979-$ 2,400,000
$550,000
$ 2,950,000 1980-2,400,000 500,000 2,900,000 1981-2,400,000 400,000 2,800,000 1982-2,400,000 300,000 2,700,000 1983-2,400,000 300,000 2,700,000 Total Thereafter-24,800,000 800,000 25,600,000 The total minimum rental commitments for capital leases as of December 31, 1978 are applicable to combus-tion turbine generating units (69% ), fuel storage facilities (19%) and general plant (12%). Minimum rental commit-ments for operating leases are applicable to steam produc-tion (55%) and general plant (45% ).
NOTE 8: COMMITMENTS AND CONTINGENCIES:
Construction expenditures, including nuclear fuel but ex-cluding production plant, are estimated at $45,000,000 for 1979. Commitments for the construction of production plant amount to approximately $96,000,000 of which it is estimated that $33,000,000 will be expended in 1979.
The Price-Anderson Act places a liability limit of $560 million on each licensed nuclear generating unit for public liability claims that could arise from a nuclear incident. In the event of any such incident, all owners of nuclear generating units licensed to operate would be required to contribute toward satisfaction of such claims. The operators of the Peach Bottom and Salem Stations, have partially insured for this exposure by purchasing private insurance in the maximum available amount of $140 mil-lion per reactor. The remainder ($420 million) is provided by a combination of a mandatory program of retrospective premiums to be assessed against owners of nuclear reac-tors after a nuclear incident (up to $5 million per incident but not more than $10 million in any calendar year, for each licensed nuclear reactor in the United States) and by indemnity agreements with the Nuclear Regulatory Commission. Accordingly, in the event of a nuclear inci-dent involving any licensed nuclear reactor in the United States which was not covered by private insurance, the Company could be assessed, based on the three nuclear reactors now in service, a maximum amount equal to its ownership participation or approximately $1. l million for any such incident but not more than $2.2 million in any year.
21
Notes to Financial Statements In September 1978, the Company reached agreement in principle with Jersey Central Power & Light Company (Jersey Central) contemplating that the Company would acquire a 10% interest in the Forked River Generating Station, subject to terms and conditions to be negotiated and necessary regulatory authorizations. Negotiations of the terms of such acquisition are continuing, it being pre-sently contemplated that an ownership interest in the Forked River Station would be transferred to the Company in 1979. The estimated construction expenditures for a 10% interest in the Forked River Station are approxi-mately $99 million, of which it is expected that $75 mil-lion would be expended through 1981 ( $3 7 million in 1979). These amounts exclude nuclear fuel costs and al-lowance for funds used during construction. In addition, the construction expenditures for a 10% interest in EHV transmission facilities required in connection with the Forked River Station are estimated to be $7.7 million, excluding allowance for funds used during construction, all of which would be expended through 1981.
Further, the Company is discussing with other electnc utilities purchases of power from specific nuclear generat-ing units presently under construction.
The Company also planned to participate with a 10%
ownership in four 1,150 megawatt off-shore nuclear units planned for operation between 1988 and 1995. These units, to be located off the New Jersey Shore,Northeast of Atlan-tic City, were to be constructed in Florida by Offshore Powers Systems (OPS) and were to be operated by Public Service Electric and Gas Company (Public Service). On December 19, 1978, Public Service announced it had elected to cancel its contract with OPS for the four units.
The Company's investment in off-shore nuclear generat-ing units at December 31, 1978 was $4,161,400, including allowance for funds used during construction of
$1,104,431. Effective June 1, 1978, the Company discon-tinued providing an allowance for funds used during con-struction on this project. The Company, on December 27, 1978, advised the BPU that in its current rate case it would request authorization from the BPU to amortize all costs, including allowance for funds used during construction, associated with the project over 20 years commencing on the effective date of the next rate order of the BPU (See Note 9). Accordingly, in December, the Company trans-ferred these costs on the balance sheet from Construction Work in Progress to Property Abandonment Costs.
NOTE 9: RATE INCREASES:
During the period indicated below, rate increases have been approved by the BPU designed to increase annual revenues from electric service, based in each case on the applicable test year, as follows:
Amount Date of Requested Date Petition (Millions)
Effective August, 1975
$28.0 Feb. 5, 1976 Feb., 1977..
16.5 Jan. 27, 1978 Mar., 1978..
35.7 July 19, 1978 (a) Initial amount 22 Amount Increase Approved In (Millions) Revenue
$ 9.3 4.7%
8.0 3.8 14.8(a) 6.2 Test Year 1975 1976 1978 The Company has placed in effect the rates which result in an increase in annual revenue of $14.8 million effective July 19, 1978. The BPU Order approving this rate increase stipulated that all issues in the request of the Company filed in March remain open. The Company has accepted an extension of the statutory time period for reaching a deci-sion on the part of the BPU from December 31, 1978 to September 30, 1979. The Company also has withdrawn the appeal of the BPU's decision granting the $8 million increase which was effective January 27, 1978. The pro-ceedings under the rate request of March, 1978 will con-tinue early in 1979 for determination regarding the bal-ance of the request outstanding. No assurance can be given that the additional rate increase will be approved. How-ever, the effective date of any order in accordance with the BPU Order granting the July 19, 1978 increase is expected to be October 1, 1979.
NOTE 10: QUARTERLY FINANCIAL RESULTS (UNAUDITED):
Quarterly financial data which reflects all adjustments (normal recurring accruals) necessary in the opinion of the Company for a fair presentation of such amounts is as follows:
Operating Operating Net Quarter Revenues Income Income Earnings For Earnings Common Per Stock Share
_____ Thousands of Dollars. ____ _
1977 1st
$ 57,935 $ 8,956
$ 6,179
$ 4,812 $.45 2nd 52,338 9,025 6,325 4,959
.47 3rd 70,320 14,083 10,746 9,380
.88 4th 54,402 7,790 4,108 2,723
.25
$234,995 $39,854
$27,358
$21,874 $2.06*
1978 1st
$ 60,575 $ 8,603
$ 5,274
$ 3,705
$.35 2nd 58,198 8,240 4,991 3,422
.32 3rd 75,238 16,708 13,374 11,8 11 1.09 4th 61,047 9,597 6,425 4,873
.45
$255,058 $43, 148
$30,064
$23,8 11
$2.21 The revenues of the Company are subject to seasonal fluctuations due to increased sales and higher residential rates during the summer months.
- The individual quarters do not add to the total, due to the increasing average number of common shares out-standing at the end of each quarter.
NOTE 11: REPLACEMENT COSTS (UNAUDITED):
The impact of the rate of inflation experienced in recent years has resulted in replacement costs of productive ca-pacity that are significantly greater than the historical costs of such assets reported in the Company's Financial Statements. The Company's ability to maintain its pro-ductive capacity in the future will be contingent upon its ability to finance the needed additions. This, in turn, will depend on the Company's ability to obtain adequate and timely rate relief. In compliance with reporting require-ments, estimated replacement cost information is dis-closed in the Company's annual report to the Securities and Exchange Commission on Form 10-K.
NOTE 12: LONG-TERM DEBT:
Long-Term Debt consists of:
First Mortgage Bonds:
December 31, 1978 1977 H 's% Series due (June 1) 1979.......................................
3,000,000 2%% Series due (July 1) 1980........................................
4,600,000 4,600,000 2'l's% Series A due (Nov. 1) 1980.....................................
18,400,000 18,400,000 3V4% Series due (March 1) 1982.....................................
4,620,000 4,620,000 3Y4 % Series due (Jan. 1) 1983........................................
4,050,000 4,050,000 9Y4% Series due (May 1) 1983.......................................
35,000,000 35,000,000 3% Series due (March 1) 1984.......................................
5,000,000 5,000,000 3 Y4 % Series due (March 1) 1985.....................................
10,000,000 10,000,000 4V2% Series due (Jan. 1) 1987........................................
10,000,000 10,000,000 3 'l's% Series due (April 1) 1988......................................
10,000,000 10,000,000 4V2% Series due (April 1) 1989......................................
5,000,000 5,000,000 4 Y2 % Series due (March 1) 1991.....................................
10,000,000 10,000,000 4Y2% Series due (July 1) 1992........................................
15,000,000 15,000,000 43/s % Series due (March 1) 1993.....................................
15,000,000 15,000,000 5Ys% Series due (Feb. 1) 1996........................................
10,000,000 10,000,000 8 % % Series due (Sept. 1) 2000.......................................
20,000,000 20,000,000 8% Series due (May 1) 2001.........................................
27,000,000 27,000,000 71/2 % Series due (April 1) 2002......................................
20,000,000 20,000,000 7% % Series due (June 1) 2003.......................................
30,000,000 30,000,000 7%% Pollution Control Series due (Jan. 1) 2005......................
6,500,000 6,500,000 63/s % Pollution Control Series (a) due (Dec. 1) 2006...................
Debentures:
2,500,000 2,500,000
$262,670,000
$265,670,000 5 V4 % Sinking Fund Debentures due (Feb. 1) 1996.....................
3,732,000 3,862,000 71/4 % Sinking Fund Debentures due (May 1) 1998.....................
3,902,000 4,000,000 Notes:
7,634,000 7,862,000 7.90% Notes due (Dec. 15) 1982.....................................
15,000,000 15,000,000 285,304,000 288,532,000 Unamortized Premium (Note 1).......................................
1,476,526 1,588,223
$286, 780,526
$290,120,223
, *Classified as a current liability.
Deposits in sinking funds for retirement of debentures are required on February 1 of each year, from 1979 through 1995 for the 5V4 % debentures, and on May 1 of each year from 1979 to 1997 for the 7V4 % debentures, in amounts in each case sufficient to redeem $100,000 principal amount plus, at the election of the Company, up to an additional $100,000 principal amount in each year. At December 31, 1978, the Company had reacquired and cancelled $468,000 principal amount of the 5V4 % debentures and $498,000 principal amount of the 71/4 % debentures toward its requirements for 1979 and subsequent periods.
Annual sinking fund requirements of $1,246,700, in connection with certain first mortgage bonds outstanding, are being satisfied by certification of property additions as provided for in the related mortgage indentures.
Accountants' Opinion Deloitte Haskins &. Sells Certified Public Accountants Atlantic City Electric Company:
550 Broad Street Newark, New Jersey 07102 We have examined the balance sheets of Atlantic City Electric Company as of December 31, 1978 and 1977 and the related statements of income and retained earnings and of changes in financial position for each of the five years in the period ended December 31, 1978. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the accompanying financial statements present fairly the financial position of the Company at December 31, 1978 and 1977 and the results of its operations and the changes in its financial position for each of the five years in the period ended December 31, 1978 in conformity with generally accepted accounting principles applied on a consistent basis.
January 31, 1979 23
r Management's Discussion and Analysis of the Statements of Income The Statements of Income reflect the results of past operations and is not intended as any representation as to results <Jf operations for any future period.
The following Summary reflects the year-to-year changes, increase or (decrease), in the principal items of the Statements of Income.
Operating Revenues...............................
Fuel..............................................
Interchange.......................................
Power Production-Operation and Maintenance.....
Other Operations and Maintenance.................
Depreciation......................................
Taxes Other than Federal Income Taxes.............
Federal Income Tax Expense.......................
Other Income-Net...............................
Net Interest Charges...............................
- Amounts stated in thousands.
OPERA TING REVENUES-Increases are principally attributable to increases in energy sales in 1978 and 1977, rate increases in January and July of 1978 and increased energy clause revenues in 1977.
FUEL-The 1978 and 1977 increases are principally due to higher generation, which increased fuel con-sumption and to increasing fuel costs.
INTERCHAN"GE-The Company was a net importer of interchange energy in 1978 and 1977. Interchange reflects the net cost of energy interchanged to and from other utilities within the PJM. Decreases in interchange (credits) reflect the Company's ability to sell (export) interchange energy while increases in interchange (debits) reflect the Company's ability to acquire (import) such energy at a lower cost than if the Company had generated the energy.
POWER PRODUCTION-OPERATION AND MAINTENANCE-The increases in 1978 and 1977 are principally attributable to increased operational charges and major maintenance at our jointly-owned facilities and to higher operational and maintenance costs at our wholly-owned facilities.
OTHER OPERATION AND MAINTENANCE-Increases in 1978 and 1977 are due principally to higher transmission and distribution maintenance expenses and increased administration and general costs. The increased charges continue to result from inflationary pressures, including higher costs of ma-terial, supplies and wages.
DEPRECIATION-The increase in 1978 and 1977 is principally attributable to the Salem Nuclear Generating Unit being placed in service in June of 1977.
24 Comparison of*
1978 and 1977 1977 and 1976
$20,063 8.5%
$22,968 10.8%
2,000 2.4 13,501 19.5 (1,564)
(41.9)
(1,084)
(22.5) 2,934 16.5 4,284 31.7 2,456 8.4 2,929 11.1 2,245 11.6 1,974 11.4 2,930 10.1 2,727 10.4 5,768 43.7 1,693 14.8 (531)
(13.7)
(3,961)
(50.5) 57 0.4 (3,580)
(17.9)
TAXES OTHER THAN" FEDERAL INCOME TAX EXPENSE-These taxes are principally taxes on the Company's gross receipts. The increases in 1978 and 1977 are a direct result of increases in the Company's operating revenues. Also, in 1977, the Common-wealth of Pennsylvania enacted a gross receipts tax applicable to foreign utilities which own generating stations in the Commonwealth.
FEDERAL INCOME TAX EXPENSE-The increases
- in 1978 and 1977 are due principally to higher taxable income. Taxable income increased principally as a result of decreases in flow-through depreciation on pre-1974 additions.
OTHER INCOME-Other Income (principally Al-lowance for Funds Used During Construction (AFDC)) decreased in 1978 and 1977 primarily as a result of the exclusion of the debt portion of AFDC from Other Income (See Note 1 of Notes to Finan-cial Statements) and the transfer of the Salem Nu-clear Generating Unit into service in June, 1977.
NET INTEREST CHARGES-The increase in 1978 is principally due to a reduction in the debt portion of AFDC resulting from the Salem Nuclear Unit being placed in service in June, 1977. The decrease in 1977 is principally due to reductions in the amount of long and short term borrowings outstanding during 1977 and to the inclusion of the debt portion of AFDC (credit) as an element of Interest Charges (See Note 1 of Notes to Financial Statements).
Common Stock, Price Range and Dividends The Common Stock of the Company is traded on the New York Stock Exchange (principal market) and the Philadelphia Stock Exchange. The reported high and low sales prices of the Common Stock on the New York Stock Exchange for each quarterly period during 1978 and 1977 are listed below:
Dividends Paid 1978 High Low 1977 High Low 213/s 21 V2 22 1/ 4 203/s Per Share 1978 1977 First Quarter................
23 20 243/s 40V2 e 40 1/2 e Second Quarter..............
22112 20Vs 24 41 1/2 e 40 V2e Third Quarter...............
23'l's 20'l's 245/s 41 V2 e 40V2 e Fourth Quarter..............
21 'l's 175/s 23Vs 43 1/2 e 40 V2 e Other Information for Investors Number of holders of Common Stock (year-end)..........
Total cash dividends paid per share on Common Stock................
Pay-out ratio........................
Book value per share (year-end).......
Price Earnings Ratio (year-end).......
1978 44,490
$1.67 76%
$21.27 8
1977 43,826
$1.62 79%
$20.71 11 1976 42,516
$1.56 60%
$20.25 9
1975 1974 39,279 39,054
$1.51
$1.50 63%
59%
$19.34
$18.45 7
5 Times fixed charges earned (before income taxes)..............
3.66
- 3. 14 3.14 2.84 2.33 For your convenience, we have provided below the proposed 1979 record dates and payable dates for holders of Common Stock of the Company.
Record Dates for Dividends on Common Stock Payable Dates for Dividends on Common Stock March 15, 1979 June 14, 1979 September 13, 1979 December 13, 1979 April 16, 1979 July 16, 1979 October 15, 1979 January 15, 1980 If you wish to correspond with the Company concerning shareholder related matters, please write to the following address:
Atlantic City Electric Company Shareholder Records Department 1600 Pacific Avenue Atlantic City, N.J. 08404 or telephone Area Code 609/645-4506 or 4507 TRANSFER AGENTS For Common Stock Irving Trust Company 1 Wall Street ew York, N.Y. 10015 First National Bank of South Jersey Atlantic City, N.J. 08404 For Cumulative Preferred Stock Chemical Bank 20 Pine Street New York, N.Y. 10015 For Cumulative Convertible Preferred Stock rving Trust Company ew York, N.Y. 10015 REGISTRARS For Common Stock Irving Trust Company 1 Wall Street New York, N.Y. 1001 5 Guarantee Bank Atlantic City, N.J. 08404 For Cumulative Preferred Stock Irving Trust Company New York, N.Y. 10015 For Cumulative Convertible Preferred Stock Morgan Guaranty Trust Company of New York New York, N.Y. 10015 SHARE LISTINGS Common Stock of the Company is listed on the New York Stock Exchange and the Philadelphia Stock Exchange. The 5Vs%
Cumulative Convertible Preferred Stock of the Company is listed on the New York Stock Exchange.
Record-keeping and Dividend Disbursing Agent Atlantic City Electric Company.
See address on this page.
25
Statistical Review and Summary of Operations 1978-1968 Facilities for Service 1978 1977 1976 1975 Total Utility Plant (Thousands)................
802,473 753,269
$ 710,343
$ 675,61 Gross Additions to Utility Plant (Thousands)...
58,072 48,733 41,702 46,7'1 Pole Miles of Transmission and Distribution Lines 6,786 6,735 6,696 6,6'1 G
C (K' 1
)(a>
eneratmg apac1ty i owatts 1,414,700 1,414,700 1,334,700 1,334, 7(
Maximum Utility System Demand-Kw..........
1,177,400 1,176,000 1,030,300 1,069,4(
Source of Energy (Thousands of Kwh)
Net Generation...............................
5,625,988 5,293,019 4,918,906 4, 715,3~
Purchased and Interchanged-Net..............
130,037 224,169 324, 196 190,8:
Total...................................
5, 756,025 5,517,188 5,243, 102 4,906,2(
Electric Sales (Thousands of Kwh)
Residential...................................
2,377,202 2,221,250 2,070,766 1,938, 7' Commercial..................................
1,586,097 1,478,559 1,392,029 1,346,2 Industrial.....................................
1,250,636 1,220,260 l, 143, l 70 1,036,7' All Others....................................
60,705 58,866 57,667 56,4<
Total...................................
5,274,640 4,978,935 4,663,632 4,378,11 Gross Revenue (Thousands of Dollars)
Energy Sales Residential.................................
121,440 109,818 98,904 90,9 ~
Commercial................................
80,539 73,354 66,354 63,5<
Industrial...................................
42,185 40,885 36,438 34,9 All Others..................................
5,973 5,631 5,406 4,81 Total...................................
250,137 229,688 207, 102 194,3 Other Electric Revenue........................
4,921 5,307 4,925 4,7' Total...................................
255,058 234,995
$ 212,027
$ 199,0 Residential Electric Service (Average per Customer)
Amount of Electricity used during the year (Kwh) 7,951 7,653 7,320 7,0 Amount paid for a year's service...............
406.18 378.36 349.64 329.
Price paid per Kilowatt-hour...................
5.11 ~
4. 94~
4. 78~
- 4.
Customer Service Locations-Electric (Year-End)..
362, 131 352,205 343,147 336,1 Population Served.............................
990,000 961,000 937,000 915,0 Summary of Operations (Thousands of Dollars)
Operating Revenues-Electric..................
255,058 234,995
$ 212,027
$ 199,0 Operating Expenses
---~
Fuel........................................
84,735 82,735 69,234 71,6 Interchange.................................
2,171 3,735 4,8 19 2,8 Power Production...........................
20,716 l 7, 782 13,498 10,2 Other Operating and Maintenance Expenses..
31,719 29,263 26,333 24,6 Depreciation................................
21,614 19,369 17,395 16,8 Taxes......................................
50,955 42,257 37,837 32,0 Total Operating Expenses................
211,910 195,141 169,116 158,3 Operating Income.....................
43,148 39,854 42,911 40,f Other Income and Deductions-Net............
3,350 3,881 7,842 7,7 Income before interest charges.........
46,498 43,735 50,753 48,4 Interest Charges-Net.........................
16,434 16,377 19,957 20,2 Net Income..........................
30,064 27,358 30,796 28,2 Dividends Paid or Accrued on Preferred Stock...
6,253 5,485 5,484 5,4 Earnings for Common Stock........ _..
23,811 21,873 25,312 22,7 Average Shares of Common Stock Outstanding....
10,790,977 10,629,930 9,747,012 9,470,L Earnings Per Share of Common Stock............
$2.21
$2.06
$2.60
$2 Dividends Declared Per Share of Common Stock..
$1.70
$1.62
$1.58
$1 Dividends Paid on Common Stock (Cash).........
$1.67
$1.62
$1.56
$1 (a) Excludes capacity allocated to a large industrial cu stomer.
I 26
1974
$ 637,250 71,220 6,580 1,278,700 1,004,400 4,651,334 229,197 4,880,531 1,882,560 1,298,858 1,136,935 57,477 4,375,830 78,5 12 55,713 33,565 4,207 171,997 4,614
$ 176,611 6,982 291.21 4.17*
330,758 894,000
$ 176,611 73,167 5,862 11,360 21,730 12,946 Ii 16,203 141,268 35,343 10,755 46,098 19,088 27,010 4,233 22,777 8,973,400
$2.54
$1.50
$1.50 Printed in U.S.A.
1973 1972 1971
$ 572,555
$ 511,274
$ 455,956 67,864 58,434 54,151 6,506 6,408 6,333 1,013,500 965,900 897,600 1,051,400 920,400 829,300 4,236,083 4,071,225 4,262,062 665,558 458,050
- 74,395 4,901,641 4,529,275 4,187,667 1,899, 122 1,741,895 1,624, 793 1,351,974 1,183,668 1,059,498 1,119,478 1,061,932 990,363 58,129 64,531 88,963 4,428,703 4,052,026 3,763,617 59,856 51,544 42,623 42,804 35,868 28,648 22,008 19,350 16,529 3,861 3,763 3,919 128,529 110,525 91,719 4,365 4,128 3,687
$ 132,894
$ 114,653 95,406 7,303 7,008 6,793 230.19 207.37 178.19 3.15*
2.96*
2.62*
320,834 309,393 297,437 865,000 828,000 796,000
$ 132,894
$ 114,653 95,406 37, 144 29,944 28,705 8,155 3,979 (815) 8,810 8,060 6,686 21,119 19,388 17,462 11,749 l l, 190 10,355 16,616 15,359 10,603 103,593 87,920 72,996 29,301 26,733 22,410 8,745 6,647 5,164 38,046 33,380 27,574 15,129 13,297 11,641 22,917 20,083 15,933 2,652 2,456 1,900 1970 404,364 48,200 6,252 821,400 755,500 4,294,352
- 358,203 3,936,149 1,520,939 977,210 954,111 101,703 3,553,963 36,979 23,933 13,036 3,795 77,743 3,648 81,391 6,542 159.06 2.43*
288,538 773,000 81,391 22,457 (2,941) 5, 111 15,692 9,632 l l, 129 61,080 20,311 3,520 23,831 9,276 14,555 1,900 1969 1968
$ 357,863
$ 324,561 35,306 25,406 6,187 6,109 757,800 700,800 721,800 671,600 4,227,3 15 3,929,222
-566,932
- 615,766 3,660,383 3,313,456 1,375,546 1,253,772 879,916 821,538 911,138 801,664 116,021 91,467 3,282,621 2,968,441 32,672 29,850 20,584 18,912 11,303 9,738 3,753 3,302 68,312 61,802 3,731 3,688 72,043 65,490 6,072 5,685 144.22 135.34 2.38*
2.38*
282,274 279,976 753,000 733,000 72,043 65,490 15,691 13,057 (3,165)
(3,130) 5,074 3,971 14,194 13,123 9,043 7,892 12,292 12,748 53,129 47,661 18,914 17,829 1,773 1,097 20,687 18,926 6,302 6,226 14,385 12,700 1,900 1,672 20,265 17,627 14,033 12,655 12,485 11,028 8,453,400 7,8 10,073 7,436,740
$2.40
$2.26
$1.89
$1.4766
$1.4316
$1.37
$1.4688
$1.4144
$1.36 This Annual Report has been prepared for information concerning the Company an or solicitation of an offer to buy any sec 6,920,073 6,817,083 6,270,000
$1.83
$1.83
$1.76
$1.345
$1.3 1
$1.27
$1.34
$1.30
$1.26 the purpose of providing general and statistical d not in connection with any sale, offer for sale urities.
27
Officers John D. Feehan President and Chief Executive Officer Richard M. Wilson Senior Vice President William S. Cowart, Jr.
Senior Vice President Charles F. Morgan Senior Vice President and Treasurer David V. Boney Vice President-Customer and Community Services John F. Born Vice President-Electric Operations Frank J. Ficadenti Vice President-Enginecring, Research and Development Ernest D. Huggard Vice President-Control Jerrold L. Jacobs Vice President-Production Michael A. Jarrett Vice President-Corporate Services Martin R. Meyer Secretary and Assistant Treasurer Results of Shareholders' Survey Joseph T. Kelly, Jr.
Assistant Vice President-Rates and Regulations William F. Symons Assistant Vice President-Personnel and Public Relations Brian A. Parent Assistant Treasurer and Assistant Secretary Joseph G. Salomone Controller Atlantic Electric recently concluded its first shareholder survey. The survey attracted more than 6, 100 responses, approximately 13.5% of the Company's owners of Common Stock. The number of responses was encouraging and indicates shareholders have recognized that they can assist in the achievement of the Company's goals by becoming more active on behalf of the Company. We are pleased that the responses came from a wide geographical area and believe the results of the survey accurately and fairly assessed the viewpoint of the total shareholder body in regard to the content of the questionnaire.
The data from the survey will be an important instrument in helping Atlantic Electric to continue to focus on the needs of its shareholders, to communicate more effectively with them and to continue to make their investment in the Company worthwhile. Additional data regarding the survey will be pre-sented in future communications. Charts showing the most significant results are below:
Percentage of Shareholders Responding (In Share-Range Categories)
Reasons for Investing in Atlantic Electric Common Stock 40 c
u 30 (i;
(l_
20 10 O Less Shares than Owned 100 100*
301*
501*
More 300 500 1000 i~~~
Return on Investment 25%
Potential Growth
- Percentage of the 6, 100 shareholders who responded Percentage in this category of the 44,490 shareholders Dividend Reinvestment Program Reliable Income Other 5°/o 52%
Age Distribution of Those Willing to Participate (By Joining the Shareholder Organization or Contacting Public Officials) 50--------
40 c
~ 30 (l_
20 10 O* __ L-._11......__........,__._
Age Over 65 46-65 25-45 Under 25 Willing to Join Shareholder Association Willing to Contact Public Official.
Note: This distribution closely parallels previou analyses of age distribution of all shareholders.
The Company continues to offer a Dividend Reinvestment and Stock Purchase Plan which enable shareholders and employees to automatically invest their cash dividends in Company Stock, and also mak optional cash payments without paying brokerage commissions or service charges. More than 126,00 shares were purchased through the Plan in 1978 with proceeds to the Company in excess of $2.6 million There were 7,625 participants in the Plan at year-end. To enroll, please contact our Shareholder Record Department. (See address on page 25.)
28
Directors Eleanor S. Daniel Self employed. Vice President and Director of several real estate corporations.
Richard M. Dicke Counselor at Law.
Senior Partner of the law firm of Simpson Thacher & Bartlett.
Frank H. Wheaton, Jr.
President of Wheaton Industries.
Manufacturer of glass and plastic containers.
John D. Feehan President and Chief Executive Officer of the Company.
Board of Directors Committee Listings Mr. Linkletter, Chairman of the Board, serves as an ex-officio member of all committees and Mr.
Feehan, President, serves as an ex-officio member of all committees except the Audit Committee.
Audit Committee John M. Miner, Chairman Eleanor S. Daniel Joseph M. Galvin, Jr.
Mack C. Jones Corporate Development Committee Frank H. Wheaton, Jr., Chairman Eleanor S. Daniel Mack C. Jones John M. Miner Energy, Operations and Research Committee Mack C. Jones, Chairman Richard M. Dicke Richard M. Wilson Finance Committee John M. Miner, Chairman Eleanor S. Daniel Richard M. Dicke Mack C. Jones Pension and Insurance Committee Richard M. Dicke, Chairman John M. Miner Frank H. Wheaton, Jr.
Richard M. Wilson Personnel Committee Richard M. Dicke, Chairman Eleanor S. Daniel Frank H. Wheaton, Jr.
Shareholder, Community and Government Relations Eleanor S. Daniel, Chairman Joseph M. Galvin, Jr.
Frank H. Wheaton, Jr.
Richard M. Wilson
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