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 AYear of Challenge AYear of Decision AYear of Progress I CASH CONSTRUCTION REQUIREMENTS I ANNUAL
$150 REPORT FOR THE YEAR 100 1978 en c:::
'.:i 0
Cl 0
cn z
0 50
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 #2 scheduled for service in 1984 1
and 1986. The rescheduling of Atlantic Generating Station Units # l and #2 to 1988 and 1990,
- requires that we seek other A Year of generating capacity in the mid-80's to meet our needs. We are considering a number of possible Challenge approaches to meet this capacity requirement and after extensive study expect to make a decision this year. This is one of three critical A Year of decisions which must be made this year, 1978, a Year of Decision.
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 A Year of increase production of energy. Both the State and Federal energy regulators must ultimately Progress 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.e ctrical 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 1978 1977 1976 1975 1974 Sales of Electricity (Billion s of Kilowatt-hours) . .. .. . . ... . .. . . . 5.275 4.979 4.664 4.378 4.376 Electric Operating Revenues (Millions) .. .. ..... . . .. . . .... . . $ 255.1 $ 235 .0 $ 212.0 $ 199.1 $ 176.6 N et Income (Millions) . ... . .. . . ... $ 30.1 $ 27.4 $ 30.8 $ 28 .3 $ 27.0 Earnings per Share . . .. . . . . .. . .. . . $ 2.21 $ 2.06 $ 2.60 $ 2.41 $ 2.54 Dividends Paid per Share ..... .. . . $ 1.67 $ 1.62 $ 1. 56 $ 1.51 $ 1.50 Gross Additions to Utility Plant (Millions) . . . . . . . . ...... . .. . . .. $ 58.1 $ 48 .7 $ 41.7 $ 46.7 $ 71.2 Generating Capacity (Kilowatts) .. 1,414,700 1,414, 700 1,334, 700 1,334, 700 1,278,700 Utility System Peak Load (Kilowatts) .. ... ... .. . .. ... .... 1,177,400 l, 176,000 1,030,300 1,069,400 1,004,400 Average Annual Residential Kilowatt-hour U se .. ........... 7,95 1 7,653 7,320 7,018 6,982 Electrically Heated Dwelling Units (Year-end) . . . ...... . . ... . 48,778 45,389 42,878 41 ,026 38, 146 Customer Service Installations (Year-end) . . .. ..... . . .... . . . . .. 362, 13 l 352,205 343, 147 336, 105 330, 758 Contents Advance Notice Letter to Shareholders 2 The 1979 Annual Mee ting of Shareholders will be held The Area We Serve 4 Tuesday, April 24, 19 79, at the Company 's Data Pro-Our Shareholders 4 cessing Center, Black Horse Pike and Fire Road, near Earnings and Dividends 4 n ergy Sales and Revenues 4 Pleasantville, N ew Jersey. A N otice of Meeting will be mployees 6 mailed in March to those shareholders entitled to vote.
ommunity Involvem ent 6 u stom er Service 6 on servation 8 ate Matters 8 inancing 10 uel and Fuel Costs 10 nvironment 10 onstruction Program 11 inancial Statem ents 14-23 anagem ent 's Discussi on and Analysi s of the Statem ents of Incom e 24 978-1 968 Statisti cal Profil e and Summary of Operations 26 ther Info rmation for Investors 25 & 28 ffi cers 28 irectors Inside Back Cover 1
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 declin ed 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 Mr. Alfred C. Linkletter, Chairman of the Board of Directors actions of the Company resulted in a more appropriate ra and Mr. John D. Feehan, President and Chief Executive increase in the Summer of 1978.
Officer. 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 2
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 Earnings and Dividends finance such a costly capital program. On the basis of (Per Share of Common Stock) our latest rate decision and the official order
$ 3 . 5 0 - - - - - -- - - - - -
approving our latest financing, we are confident that the New Jersey BPU recognizes that electric utilities 3.0 0 - - - - - - - - - - - -
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 1973 1974 1975 1976 1977 1978 a.c.~
- Earnings per share
- Dividends paid per share A. C. Linkletter Chairman of th e Board
~~ President 3
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 Times Fixed Charges Earned for almost 100 years ... a relationship which has been very beneficial to both the (Before Income Taxes) Company and its customers.
(Total interest and similar charges Our Shareholders divided into earnings before taxes)
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 v v 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 0
~ -lil -
3 - - - - - - : -
M M
io--
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 a: - Stock of the Company to existing shareholders and employees, and provided an 2 - C\i -~ - - 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 1- 1979. At year-end, Atlantic Electric had 44,490 holders of Common Stock and 2,305 holders of Preferred Stock.
1973 1974 1975 1976 1977 1978 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 4
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
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 Average Annual Residential employee's daily work routine. The Company has stringent safety regulations ... for Use Per Customer the benefit of each and every employee. Here again, an effort is made to reach 8 5 0 0 - - - - - - - -- - 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.
8000 - --------- 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 5 7500-------~ 6. 788% went into effect December 11, 1978. This increase, together with improved
.c
~ benefits, will add approximately $2.9 million to the Company's 1979 payroll costs.
~ 7000 -~---~'----- A Speakers Bureau, comprised of 40 knowledgeable Atlantic Electric employees, made i'.
200 presentations in 1978. These employees, usually on their own time, take the 6500 - -- - -- -- - - 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 6000 '---'----'---'---~~ face of these challenges.
1973 1974 1975 1976 1977 1978 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.
6
The opening of the new Seabrook Brothers and Sons vegetable processing plant had a significant and favorabl e impact on Cumberland Count y agriculture in 1978.
The new treatment plant was completed in 1978 by the Atlantic Count y Sewerage Authority and will service this rapidly growing area.
7
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 sys tem, 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 Average Cost of Fuels information of electric energy use by each customer and other required data. The van (Cents per gallon or equivalent) 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 30 ,.....----~ -- - - "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
<J)
~ 20 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 10 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.
o ~~~~~~~~~~~~~
1973 1974 1975 1976 1977 1978
- oi1 Rate Matters
- coal As reported in our 1977 Annual Report to Shareholders, Atlantic Electric was granted D Nuclear 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 8
Company linemen replacing insulators and hardware on the Deepwater-Lewis 138 KV transmission line .
Maintenance of a combustion turbine .
9
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.
10
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 to delay and ultimately cancel plans to construct the how the Board of Directors, Officers, various levels of units required that Atlantic Electric accelerate its plans management and employees work as a team to see that for additional generating capacity to meet its needs
.various segments of the corporate objective are achieved. through the 1980's .
As in any large, publicly-owned business enterprise, Studies to determine the amount of generating and important decisions must be made, on a regular basis, on other facilities required and the associated cost estimates behalf of the shareholders and the customers. were completed in 1978.
In his remarks to shareholders at the Annual Meeting of The initial phase of the decision-making process Shareholders, President Feehan stated that there were involved the Officers and their staffs gathering and three critical decisions affecting the Company in 1978 ... analyzing extensive information and preparing and one decision would be the sole responsibility of the presenting studies to the Board of Directors regarding:
Company and the other two decisions would have to be (1) Forecasts of growth in demand and energy made by regulatory agencies of the State of New Jersey.
requirements of customers and reserve generating The appropriate quotes from Mr. Feehan's remarks have capacity required.
een included on the inside of the front cover of this eport. (2) The amount of additional generating capacity, transmission, distribution and related service facilities required to be constructed.
he Company's Decision (3) Economic evaluations of various capacity options available.
The Company 's decision relates to the substantial (4) Estimated amount of securities required to finance ommitments and expenditures that have been made and the cost of the most viable options.
ew commitments which must be made for new (5) Prospective financial results.
enerating capacity facilities and other energy facilities (6) Impact on customers and shareholders.
hat the Company will require over the next 10 to 15 ears. This initial phase of the process was developed and
- Your Company had previously entered into agreements completed in about one year. The studies and revisions of ith Public Service Electric and Gas Company which the data were presented for consideration at a number of ould entitle the Company to a 10% ownership interest meetings of the Energy, Operations and Research n four floating nuclear generating units proposed to be Committee of the Board of Directors and at regular onstructed by Public Service. Decisions by Public Service meetings of the Board.
Kilowatt-hours Produced from Various Fuels Electric Generating Capacity vs. Utility System Demand 1900 - - - - - - - - - - -
1700 _ _ _ _ _ _ _ __ __
1500 - - - - - -- - - --
4 3
2 700 500 o~--~~.._~....,__~.._~~ 300 ~~~~~~~~~~~
1973 1974 1975 1976 1977 1978 1973 1974 1975 1976 1977 1978
. Coal
- Utility system capability at time of peak
- Annual Peak Load D oi1 0 Nuclear
[ill Gas 11
In September 1978, after careful review, the Board authorized the Officers to proceed with plans which Providing for Load Growth 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 Responsibility for the second critical decision rests with New Jersey's energy regulators. They must make a 1983, is being constructed by Jersey Central Power &
Light Company at a site along the coast a few miles north decision that Atlantic Electric does indeed need to add of the boundary line of the service f!reas of the two new facilities to meet growing load. It is anticipated that the New Jersey Board of Public Utilities will soon companies. The Company's ownership interest is expected to be 112,000 kilowatts and action is being taken to acknowledge the reasonableness of the load forecasts of Atlantic Electric and concur in the need to provide for obtain the required regulatory approvals and to prepare appropriate agreements to formalize the Company's additional generating capacity in the years ahead. Such a decision is an essential ingredient in providing for and participation in the project. Officers also are negotiating arrangements which would enable the Company to financing such needed facilities . Timely approval of rate increases to help finance these facilities is a logical contract for approximately 300,000 kilowatts of capacity from several other nuclear fueled units of other utility extension of that decision.
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 The New Jersey Board of Public Utilities would provide for the Company's base load generating capacity requirements during the next ten years. The third critical decision resided with the New Jersey Additional internal combustion turbine units for use Board of Public Utilities. President Feehan, in his Annual during times of peak demand will be installed as required. Meeting address, asked that Board to recognize that their Decisions made many years ago provided additional objectives and their mandates are exactly the same as capacity for use in the 1980's. The 1,115,000 kilowatt Atlantic Electric's. He urged them to decide that electric Unit No. 2 of the Salem Nuclear Generating Station is utilities must be allowed to earn a fair return on their scheduled for service in 1979 and will provide th e investment in the energy needs of th e State of New Jerse Company with 83,000 kilowatts of capacity. Two Such a decision would permit sufficient rates ... and 1,100,000 kilowatt Units of the Hope Creek Nuclear would allow us to achieve a fair return so that our Generating Station are under construction near the Salem shareholders would not be shortchanged. Under the Station; Unit No . 1 is scheduled for service in 1984 and heading Rate Matters on page 8 of this Report we Unit No. 2 in 1986. The Company's total ownership discussed the failure of the Board of Public Utilities to interest in the two Units will be 107,000 kilowatts. provide adequate and timely rate relief to the Company i Through 1978, as indicated on the chart on the cover of its January 1978 rate order. However, in July, they this Report, cash construction requirements have been approved additional rate relief for the Company and held to a level below the all-time peak reached in 1973. allowed the Company's rate case to remain open until Also, as shown, those requirements are expected to September 30, 1979 so that consideration could be given
- increase substantially over the near term. Cash to the balance of the Company's request. This is the construction expenditures by the Company during 1978 responsiveness that is needed if we are to be allowed to and the amount expended in each principal category are as earn a fair return on your investment.
follows:
Millions of Dollars Reason for expenditure Progress
$23.6 Construction of new production faciliti es.
We are pleased that substantial progress was made 26.4 Construction of additional sub- during 1978 toward achieving th e long-range objectives stations, improvement and the three critical decisions. The magnitude and effects o extension of transmission and the decisions will be more evident in future years and w distribution systems and believe the decisions will demonstrate that all of those general plant. involved-customers, regulators, shareholders, the Boar 2.7 Purchase of nuclear fuel. of Directors and Officers and other employees of the Company-are deeply committed to the continuing
$52.7 Total* achievement of "The Corporate Objective of Atlantic Electric ".
- In addition, allowance for funds used during construction amounted to $5 .5 million.
It is estimated that cash construction requiremen ts 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
To the left- Sale m Nuclear Station Units # l and #2 .
To th e right-Construction proceeds on Hope Creek Nuclear Generating Stati on.
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 4,8 19,194 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 .................. . . . . . 46,497,9 79 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 Year Ended December 31, 1978 1977 1976 1975 1974 SOURCE OF FUNDS Funds from Operations:
Net Income .. .............. .. ....... . $ 30,063,760 $27,358,295 $30, 795,696 $28,279,735 $ 27,010,019 Principal Non-Cash Charges (Credits) to Income:
Depreciation ..... . ................. . 21,614,195 19,368,780 17,394,673 16,846,038 12,946,590 Amortization of Nuclear Fuel . . . . ... . 1,376, 147 1,037,980 Allowance for Funds Used During Construction .... . . .... ... .. . .... . (5,540,476) (6,677,466) (7,456,612) (7,229, 745) (10,567,696)
Federal Income Taxes-Deferred-Net . . . 8,115,670 7,866,279 4,697,375 3,962,654 574,254 Investment Tax Credit Adjust-ments-Net ....... . ............. . 4,963,094 2,850,249 6,419,859 3,735,421 (602,731)
Other-Net .. . ..... . .............. . . (199,869) (166,944) 132, 117 471, 723 (59,950)
~~=-=--=~~
Total Funds from Operations ...... . 60,392,521 51,637, l 73 51 ,983, 108 46,065,826 29,300,486 Funds from Outside Sources:
Long-Term Debt ..... ..... . .. .. . . .... . 15,000,000 2,500,000 51,500,000 5,000,000 Sale of Common Stock . . ... . ......... . 5,023,199 3,349,523 20,790,854 7,595,804 Sale of Preferred Stock .... .... . .. .... . 10,000,000 29,826,200 Capital Stock Purchase Plan . . ..... ... . 792 24,446 Increase in Short-Term Debt .......... . 24,800,000 Total Funds from Outside Sources 5,023,991 28,373,969 23,290,854 51,500,000 67,222,004 Hop e Creek Transfer-Net .............. . 3,262,031 Other Sources-Net .. .. .... .... ... ..... . 1,251,428 22,750 (126,801) (793,301) 1,206, 182 Total Source of Funds .... . . . . .... . $ 66,667,940 $80,033,892 $78,409, 192 $96,772,525 $ 97, 728,6 72 APPLICATION OF FUNDS Gross Additions to Utility Plant ...... . . . $ 58,072,808 $48,733,032 $41,701,515 $46,744,820 $ 71 ,219,796 Allowance for Funds Used During Con-struction .................... ..... . .. . (5,540,476) (6,6 77,466) (7,456,612) (7,229,745) (10,567,696)
Property Abandonment Costs (Note 8) .. . . (4,888,393) ~~~~
Net ....................... . ..... . 47,643,939 42,055,566 34,244,903 39,5 15,075 60,652,100 Dividends on Preferred Stock . . .. .. . .... . 6,240,751 5,549,678 5,483,936 5,483,936 4,471,602 Dividends on Common Stock ... ....... . . 18,371 ,494 17,235,204 15,449,999 14,394,717 13,530,313 Retirement and Maturity of Long-Term Debt ................................ . 228,000 15,400,000 10,592,000 15, 125,000 255,000 Conversion of Preferred Stock ........... . 1,729,300 512,000 25,000 Decrease in Short-Term Debt .. .... .. ... . 13,650,000 23,650,000 Property Abandonment Costs (Note 8) ... . 4,888,393 Investments in Subsidiary Companies ... . 135,414 (2,802,950) 1, 161,473 894,446 478,761 Increase (Decrease) in Working Capital .. . (12,569,351) 2,084,394 (2, 198, l 19) (2,290,649) 18,340,896 Total Application of Funds ........ . $ 66,667,940 $80,033,892 $78,409, 192 $96, 772,525 $ 97, 728,672 NET INCREASE (DECREASE) IN COMPONENTS OF WORKING CAPITAL*
Current Assets:
Cash and Cash Items ........... . ..... . $ (3,334,033) $ 2,253,616 $ (993,958) $ (2,812,009) $ 4,780,609 Accounts Receivable ............ .. ... . 3,905,991 94,824 1,366,882 157,868 3,815,287 Fuel .... . . ...... .. .... ......... . . . ... . 753,023 3,388,800 (2,082,246) 2,391,684 6,294,209 Materials and Supplies . .......... . ... . 1,449,818 1,028,650 68,915 (70,487) 1,311,103 Prepayments . ............ . .. .. ....... . 242,633 319,558 134,299 207,626 313,270 Other ... ... . . . ..... . . . .............. . (3,262,031) 3,262,031 (2, 106,348) 2,106,348 Total ............................ . 3,017,432 3,823,417 l, 755,923 (2,231,666) 18,620,826 urrent Liabilities:
Accounts Payable .......... . .. . . . . . .. . 983,464 (193,576) 2,526,763 (1,633,447) (2, 72 7,265)
Taxes Accrued ....................... . 4,601 ,407 3,661,828 336,836 252,268 438,683 Interest Accrued .......... . ... . .... .. . 32,398 35,621 (291 , 120) (32,377) 373,440 Levelized Energy Clause .......... . ... . 4,989, 174 Other ................ . . .. ... . ....... . 4,980,340 ( l, 764,850) 1,381,563 1,472,539 2,195,072 Total ........ .. . . ................ . 15,5 86,783 1,739,023 3,954,042 58,983 279,930 et Increase (Decrease) in Working Capital ... . ............... . . . ........ . $(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 Fin ancia l Statements 15
Balance Sheets December 31, Assets 1978 1977 ELECTRIC UTILITY PLANT (Note 1):
In Service:
Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $32 8,562,940 $324,354,058 Transmission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,361,924 106,353,003 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 7,538,323 86,700,308 Nuclear Fuel .. ... .. ... ... . . . . . . .. . . .. .. ... ..... .... .... ..... . . . . . 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) . . . . . . . .... . 3,080,692 2,955,832 Land Purchase Contracts .. .... ... ... ....... . .... .. . .. .. . . . ... ... . 793,767 638,231 Other .... . . . .... . .... . .. . .. . . .... .... . .. . .. . .. .. . . .. . .. ... . . . . . . 561,510 499,645 Total Investments . . .......... ... ... . .. ... ..... . .. . . .. . . ..... . 4,435,969 4,093,708 CURRENT ASSETS :
Cash (Note 6) ....... . .. .. ... ... .... . ..... . ... ... ... . . . .... .. ... . . 3,657,228 4,993,103 Temporary Cash Investments .... ... . ... . ..... . . ... . . . ... . ... .. . . . - 2,700,000 Special Deposits and Working Funds . ... .. ... ...... ... .... . ... ... . . 1,037, 727 335,886 Accounts Receivable:
U tility Services . .... .... . ... .. ... . .. . . .. . .. ... . . . ... .... ... . .. . 17,408,975 15, 123,741 Miscellaneous . .. .... . ....... . ... . . . . . .. ... ....... . .. ... .. . .. . . 3,010, 775 1,390,018 Allowance for Doubtful Accounts .. ... .. .. . ...... . . . .. . . .. . . .. . . (200,000) (200,000)
Fuel (at average cost) . . ..... . . ...... .. .. ... ....... ... .. . .. .. ..... . 19,024,525 18, 271 ,502 Materials and Supplies (at average cost) . . . ....... . . . .. . .. ....... . . . 9, 745,736 8,295,918 Prepayments . ... .. .. .. ... . .. .. ... . .. . ..... .... ...... .. ... . ... .. . . 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) ..... . ... .. ... . ..... . . . 4,888,393 -
Unamortized Debt Expense (Note 1) .. .. .... . .. ... .... .. .... . .. .. . . 1,878,072 2,028,635 Other .... .. . .. .. . . . .. . . .. . ... .. .. . ... . . .. .. .... . ..... .. . . . . . ... . 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 N otes to Financial Statem ents 16
December 31, 1978 1977 Liabilities and Shareholders' Equity SHAREHOLDERS' EQUITY (Note 2):
Cumulative Preferred Stock .................. . . . ..... . ........... . $ 87,824,745 $ 89,554,045 Common Stock, Par Value $3:
Authorized Shares, 14,000,000 Outstanding Shares 1978-10,916,308; 1977-10,702,557 ......... . 32,748,924 32,107,671 Premium on Common Stock ................................... . 107,077, 739 102,695,63 1 Total Common Stock ... . ............... . ................. . 139,826,663 134,803,302 Capital Stock Purchase Plan ................. . .............. . .... . 25,238 24,446 Capital Stock Expense (not being amortized) . .. . .... .. ..... . . . .... . (1,832,06 1) (1,848,1 77)
Retained Earnings ............................................... . 94,052,367 88,600,852 Total Shareholders' Equity ............ ... .... ..... . . . . .. ... . 319,896,952 311,134,468 LONG-TERM DEBT (Note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 286,780,526 290,120,223 CURRENT LIABILITIES :
Current Portion of Long-Term Debt .............................. . 3,000,000 Accounts Payable ...... . ....... . . . .............................. . 5,030,531 4,047,067 Customer Deposits .............................................. . 2,819,544 2,915,418 Taxes Accrued .................................................. . 10,617,636 6,016,229 Interest Accrued ................................................ . 3,596,892 3,564,494 Dividends Declared . .. ................... . ...................... . 6,291,753 5, 784,550 Levelized Energy Clause (Note 1) ........ . ................... ..... . 4,989, l 74 Other .......... ...... ...................... . .. . ....... . ........ . 8,103,279 3,534,269 Total Current Liabilities ... .. ........... ..... ...... . .. .. ... . 44,448,809 25,862,027 DEFERRED CREDITS:
Customer Advances for Construction ............................. . 726,347 597,960 Accumulated Deferred Investment Tax Credits (Notes 1 and 3) ..... . 20,184, 796 15,221,703 Accumulated Deferred Income Taxes (Notes 1 and 3) .............. . 26,421,898 18,306,228 Operating Reserves .............................................. . 739,500 990,000 Other Deferred Credi ts .. . ...................................... . . 662,819 38 1,557 Total Deferred Credits ..................................... . 48, 735,360 35,497,448 COMMITMENTS AND CONTINGENCIES (Notes 7 and 8)
Total Liabilities and Shareholders' Equity . . . . . . . . . . . . . . . . . . . . $699,86 1,647 $662,6 14, 166 See Notes to Financial Statements 17
Notes to Financial Statements NOTE 1: SIGNIFICANT ACCOUNTING POLICIES : DEBT EXPENSE AND PREMIUM-Debt issuance ex-REGULATION-The accounting and rates of the Com- pense and premium are being amortized over the lives of pany are subject to the requirements of the Board of Public the issues to which they pertain . In conformity with al-Utilities of the State of New Jersey (BPU) and in certain lowed BPU ratemaking accounting, all gains or losses respects to the Federal Energy Regulatory Commission relating to reacquired debt are recognized currently.
(FERC).
NUCLEAR FUEL-The Company's amortization of the ELECTRIC UTILITY PLANT-Property is stated at origi- Salem nuclear fu el is based on a rate using the number of nal cost (cost to the person first devoting the plant to units of thermal energy produced over the estimated total public service). Generally the plant is subject to a first thermal units to be produced during the life of the fuel, mortgage lien. The cost of property additions, including plus a factor representing the estimated future costs (stor-jointly-owned plant, replacement of units of property and age and disposal) for the disposition of spent nuclear fuel.
betterments, is capitalized. Included in additions is an Nuclear fuel requirements for Peach Bottom Units No. 2 Allowance for Funds Used During Construction (AFDC) and 3 are being provided by the operating company for which is defined in the applicable regulatory systems of Peach Bottom through a fuel purchase contract. Presently, accounts as the net cost, during the period of construction, such costs are calculated using a zero net salvage value.
of borrowed funds used for construction purposes and a The Company is responsible for payment of its propor-reasonable rate on other funds when so used. In February, tionate interest (7.51 % ) of the cost of the fuel consumed 1977, FERC issued an order relating to AFDC and revising and of certain operating costs and interest expense during the Uniform System of Accounts. Such order was effective the term of the contract. All nuclear fuel costs are charged January 1, 1977, and provides a formula for determining to Fuel Expense. The Company's share of other costs of the the maximum allowable AFDC rate. In addition, the order nuclear stations are charged to operations and mainte-requires the segregating of AFDC into two component nance as appropriate.
parts; borrowed funds (debt) and other funds (equity).
Since January 1, 1977, the debt component has been in- FEDERAL INCOME TAXES-Deferred Federal Income cluded in the Interest Charges section of the Statement of Taxes are provided in amounts equal to the tax effect of the Income as a credit, while the equity component continues difference between tax depreciation computed on depreci-to remain as a credit to Other Income. The Company has able property added after 1973 using accelerated methods not reclassified AFDC into its debt and equity components under the ADR System and the straight-line method using for periods prior to January 1, 1977, since prior periods asset guideline periods. Tax reductions relating to the dif-would not be comparable and the FERC order did not ferences between book depreciation and straight-line asset require reclassification. AFDC has been calculated using a guideline depreciation are reflected in Federal Income Tax rate of 8% for all years reported. The 1978 and 1977 rate is Expense currently as allowed by the ratemaking policy of less than the maximum allowed under the FERC formula. the BPU In addition, the Company provides deferred Fed-eral Income Taxes relating to the use of the repair allow -
LEVELIZED ENERGY COSTS-Effective May 1, 1978, the ance provisions of ADR (See Note 3 ). Investment tax cred-Company, at the direction of the BPU, adopted a Levelized its are deferred on the balance sheet and are res tored to Energy Adjustment Clause which utilizes estimated pro- income over the life of the related property.
spective energy costs based on an eight-month period for 1978 (changed to a twelve-month period beginning PENSION PLAN-The Company and Deepwater, referred January 1, 1979). Under this Clause, the recovery of such to in Note 4, have in effect a noncontributory insured energy costs is made through levelized monthly charges retirement annuity plan covering all regular employees.
over the period of projection. Any under or over recoveries The cost of the plan, determined under the aggregate cost are deferred in balance sheet accounts as a current asset or actuarial method was as follows:
current liability as appropriate. Such deferrals are reflected in the Income Statement in the period they are recovered. Company Cost* Amount Including Charged to Deepwater Construction Construction Cost DEPRECIATION AND MAINTENANCE-The Com- 1978 $3,529,000 $799,000 $573,000 pany provides for depreciation on the basis of the esti- 1977 3,076,000 678,000 498,000 mated service lives of depreciable property on a straight- 1976 2,544,000 582,000 414,000 line basis . Depreciation applicable to nuclear plant 1975 2, 164,000 510,000 362,000 provides for estimated cost of dismantling or decommis- 1974 2,069,000 518,000 392,000 sioning. The overall composite rate of depreciation was *Excludes Deepwater approximately 3.3% for 1978 and 1977, 3.2% for 1976 and Based on an actuarial study as of December 31 , 1977, the 1975 and 3.0% for 1974. In addition to the provisions for vested benefits computed under the Plan were in excess of depreciation, income is charged with the cost of labor, pension fund assets by approximately $519,000. The material, supervision and other expenses incurred in mak- Company's Plan is in compliance with the Employee ing repairs and minor replacements and in maintaining the Retirement Income Act of 1974.
properties in efficient condition. Accumulated deprecia- PROPERTY ABANDONMENT COSTS-Property Aban-tion is charged with the cost of depreciable property units donment Costs are deferred and amortized over periods retired, together with removal costs less salvage and other prescribed by the BPU (See Note 8).
recoveries.
18
NOTE 2: CAPITAL STOCK:
CUMULATIVE PREFERRED STOCK, Par Value $100 Current Refunding Authorized 799,979 Shares December 31, Redemption Restricted 1978 1977 Price Per Share Prior to (A)
Issued and Outstanding Series:
4% Series--77,000 Shares $ 7,700,000 $ 7,700,000 $105 .50 4.10% Series--72,000 Shares 7,200,000 7,200,000 101.00 4.35% Series--15,000 Shares 1,500,000 1,500,000 101.00 4.35% 2nd Series--36,000 Shares 3,600,000 3,600,000 101.00 4.75% Series--50,000 Shares 5,000,000 5,000,000 101.00 5% Series--50,000 Shares 5,000,000 5,000,000 100.00 5 'l's% Convertible Series--(B) 77,3 16 Shares (1978) 7,731,600 94,609 Shares (1977) 9,460,900 103.00 7.52% Series--100,000 Shares 10,000,000 10,000,000 106.77 8.40% Series--100,000 Shares (C) 10,000,000 10,000,000 115.00 Feb. 1, 1979 9.96% Series--200,000 Shares (DJ 20,000,000 20,000,000 108.56 Aug. 1, 1984 Total Cumulative Preferred Stock 77,731 ,600 79,460,900 PREFERRED STOCK, No Par Authorized 2,000,000 Shares Issued and Outstanding:
$8.25 Series (Cumulative}--
100,000 Shares issued December 22, 1977 (E) 10,000,000 10,000,000 108.04 Nov. 1, 1987 87,731,600 89,460,900 Premium on Preferred Stock 93,145 93,145 Total Preferred Stock $87,824,745 $89,554,045 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.
(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:
1978 1977 Shares Dividend Reinvestment and Stock Purchase 126,680 102,417 Employee Stock Ownership Plan 26,547 25,848 Conversion of Preferred Stock 60,524 17,920 Total 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 subj ect to tax for the following reasons :
Year Ended December 31 ,
1978 1977 1976 1975 1974 Net Income . . . . . . .. ......... . . .... . $30,063, 760 $27,358,295 $30,795, 696 $28,279, 735 $27,010,019 Federal Income Tax Expense (as below) . . .... .... ..... .. . ...... 19,063,489 14, 129,924 11 ,824,751 8,771,731 (1 ,597,278)
Book Income Subject to Tax ..... .... $49, 127,249 $41,488,219 $42,620,447 $37,051,466 $25,412/ 41 Income Tax at Statutory Rate (48% ) .. $23,581 ,080 $19,914,345 $20,457,81 5 $17,784,704 $12,198,115 Less:
Excess of Tax over Book Depreciation (flow-through portion) .. . . .. .. . .. 666,164 1,788,210 3,655, 710 3,844,262 6,445,455 Allowance for Funds Used During Construction .......... . ........ 2,659,429 3,205, 184 3,5 79, 174 3,470,278 5,051,773 Capitalized Overheads ............. 927,399 796,260 729,801 744,889 654,060 Investment Tax Credits-Used . .. . . 610,064 378,974 288,882 426,347 143,993 Other ... . ........ . . . .... . ...... . . (345,465) (384,207) 379,497 527,197 1,500, 112 Total Federal Income Tax Expense .. . . . ... .... ..... . . . $19,063,489 $14,129,924 $11 ,824,75 1 $ 8,771,731 $ (1 ,597,278)
Federal income tax expense is comprised of the following:
Federal Income Tax Currently Payable . ..... ... .. ...... . ... . .... . $ 5,414,276 $ 1,850,404 $ 378,422 $ 991 ,016 $ (1 ,601 ,412)
Deferred Taxes (as below) ...... . .. . . . 8, 11 5, 670 7,866,279 4,697,3 75 3,962,654 574,254 Investment Tax Credit-Earned . .. . . . 6,035,837 3,850,447 6,708,741 4,161 ,768 (458,738)
Investment Tax Credit-Used .. .... . . (610,064) (378,974) (288,882) (426,347) (143,993)
Federal Income Tax Expense .. . .... . . 18,955,719 13,188, 156 11 ,495,656 8,689,091 (1,629,889)
Federal Income Tax-Other Income . . . 107,770 941,768 329,095 82,640 32,611 Total Federal Income Tax Expense . . . . $19,063,489 $14, 129,924 $11 ,824,751 $ 8,771,731 $ (1,597,278)
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 $ 690,000 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) (11 5, 746)
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 $ 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: NOTE 7: LEASES:
The Company's investment in Deepwater Operating Rents, principally charged to operations, were respec-Company (Deepwater), a wholly-owned subsidiary which tively: $2,430,000, $3,380,000, $3,500,000, $3,600,000 and operates generating and process steam units owned by the $3,805,000 for the years 1974 to 1978.
Company was $2,301,000 at December 31, 1978 and 1977.
The assets of Deepwater consist almost wholly of working Certain of the Company's leases which meet the condi-capital in which the equity of the Company is fairly repre- tions for capitalization under the criteria established by sented by its investment in Deepwater. The net produc- FASB No. 13 and ASR No. 225 are accounted for as operat-tion costs of Deepwater (after deducting charges to E. I. ing leases in accordance with ratemaking treatment. Such duPont deNemours & Company) are charged to the Com- leases, if capitalized, would have increased the Company's pany. These costs are included in the Company's accounts assets and liabilities by approximately $17,700,000 and classified as to operation, maintenance and taxes. would not have had a material impact on the Company's net income.
The Company also has an investment in Atlantic Hous- Future minimum rental commitments under noncan-ing, Inc. (Housing), a wholly-owned subsidiary, which celable leases as of December 31, 1978 are approximately amounted to $779,692 at December 31, 1978. At De- as follows :
cember 31, 1978, Housing had $2,124, 157 invested in land Capital Operating Total and mortgages of which $1,780,032 is invested as a 20% - -
undivided interest as tenant in common in a future 1979-$ 2,400,000 $550,000 $ 2,950,000 generating station and industrial site. This site is subject 1980- 2,400,000 500,000 2,900,000 to a mortgage of which the Company at December 31, 1981- 2,400,000 400,000 2,800,000 1978 is liable for the payment of $660,000 principal 1982- 2,400,000 300,000 2,700,000 amount and interest under a suretyship agreement. 1983- 2,400,000 300,000 2,700,000 Total NOTE 5: EARNINGS PER SHARE: Thereafter- 24,800,000 800,000 25,600,000 Earnings per share of Common Stock has been computed by dividing net income less applicable preferred stock div- The total minimum rental commitments for capital idend requirements($6,253,193 in 1978, $5,484,691 in leases as of December 31, 1978 are applicable to combus-1977, $5,483,936 in 1976, $5,483,936 in 1975 and tion turbine generating units (69% ), fuel storage facilities
$4,233,384 in 1974) by the average common shares out- (19%) and general plant (12%). Minimum rental commit-standing during the year. ments for operating leases are applicable to steam produc-tion (55 %) and general plant (45 % ).
NOTE 6: SHORT-TERM BORROWINGS AND COMPENSATING BALANCES :
The Company had arrangements for short-term borrow- NOTE 8: COMMITMENTS AND CONTINGENCIES:
ings as follows: Construction expenditures, including nuclear fuel but ex-cluding production plant, are estimated at $45,000,000 for 1978 1977 1979. Commitments for the construction of production Maximum amount of plant amount to approximately $96,000,000 of which it is short-term borrowings estimated that $33,000,000 will be expended in 1979.
outstanding at any The Price-Anderson Act places a liability limit of $560 month end during million on each licensed nuclear generating unit for public the year . . . . . . . . . . . . . . $7,000,000 $9,600,000 liability claims that could arise from a nuclear incident. In Average amount outstand- the event of any such incident, all owners of nuclear ing during the year . . . . 1,687,000 5,6 19,000 generating units licensed to operate would be required to contribute toward satisfaction of such claims. The Average interest rate on operators of the Peach Bottom and Salem Stations, have above . . . . . . . . . . . . . . . . 7.9% 5.8% partially insured for this exposure by purchasing private Weighted average interest insurance in the maximum available amount of $140 mil-rate on short-term lion per reactor. The remainder ($420 million) is provided borrowings outstanding by a combination of a mandatory program of retrospective during the year: premiums to be assessed against owners of nuclear reac-tors after a nuclear incident (up to $5 million per incident Notes Payable to but not more than $10 million in any calendar year, for Banks . . . . . . . . . . . . 8.5% 6.8% each licensed nuclear reactor in the United States) and by Commercial Paper . . 7.9% 5.7% indemnity agreements with the Nuclear Regulatory Commission. Accordingly, in the event of a nuclear inci-The unused lines of credit available at December 31 , dent involving any licensed nuclear reactor in the United 1978 and 1977 were $40,000,000 and $50,000,000, respec- States which was not covered by private insurance, the tively. Demand deposits maintained with lending banks, Company could be assessed, based on the three nuclear certain of which are deemed to constitute compensating reactors now in service, a maximum amount equal to its balances, are not legally restricted. Based on lines of credit ownership participation or approximately $1. l million for available at December 31, 1978 and 1977 respectively, any such incident but not more than $2 .2 million in any such compensating balances approximated $1,550,000 and year.
$2,000,000.
21
Notes to Financial Statements In September 1978, the Company reached agreement in The Company has placed in effect the rates which result principle with Jersey Central Power & Light Company in an increase in annual revenue of $14.8 million effective (Jersey Central) contemplating that the Company would July 19, 1978. The BPU Order approving this rate increase acquire a 10% interest in the Forked River Generating stipulated that all issues in the request of the Company Station, subject to terms and conditions to be negotiated filed in March remain open. The Company has accepted an and necessary regulatory authorizations. Negotiations of extension of the statutory time period for reaching a deci-the terms of such acquisition are continuing, it being pre- sion on the part of the BPU from December 31, 1978 to sently contemplated that an ownership interest in the September 30, 1979. The Company also has withdrawn Forked River Station would be transferred to the Company the appeal of the BPU's decision granting the $8 million in 1979. The es timated construction expenditures for a increase which was effective January 27, 1978 . The pro-10% interest in the Forked River Station are approxi - ceedings under the rate request of March, 1978 will con-mately $99 million, of which it is expected that $75 mil- tinue early in 1979 for determination regarding the bal-lion would be expended through 1981 ($3 7 million in ance of the request outstanding. No assurance can be given 1979). These amounts exclude nuclear fuel costs and al- that the additional rate increase will be approved. How-lowance for funds us ed during construction. In addition, ever, the effective date of any order in accordance with the the construction expenditures for a 10% interest in EHV BPU Order granting the July 19, 1978 increase is expected transmission facilities required in connection with the to be October 1, 1979.
Forked River Station are estimated to be $7.7 million, excluding allowance for funds used during construction, NOTE 10: QUARTERLY FINANCIAL RESULTS all of which would be expended through 1981. (UNAUDITED):
Further, the Company is discussing with other electnc Quarterly financial data which reflects all adjustments utilities purchases of power from specific nuclear generat- (normal recurring accruals) necessary in the opinion of the ing units presently under construction. Company for a fair presentation of such amounts is as The Company also planned to participate with a 10% follows: Earnings ownership in four 1,150 megawatt off-shore nuclear units For Earnings planned for operation between 1988 and 1995. These units, Operating Operating Net Common Per Quarter Revenues Income Income Stock Share to be located off the New Jersey Shore,Northeast of Atlan-tic City, were to be constructed in Florida by Offshore _ _ _ _ _ Thousands of Dollars._ _ _ __
Powers Systems (OPS) and were to be operated by Public 1977 Service Electric and Gas Company (Public Service). On 1st $ 57,935 $ 8,956 $ 6,179 $ 4,812 $ .45 December 19, 1978, Public Service announced it had 2nd 52,338 9,025 6,325 4,959 .47 elected to cancel its contract with OPS for the four units. 3rd 70,320 14,083 10,746 9,380 .88 The Company's investment in off-shore nuclear generat- 4th 54,402 7,790 4,108 2,723 -.25 -
ing units at December 31, 1978 was $4,161,400, including $234,995 $39,854 $27,358 $21,874 $2.06*
allowance for funds used during construction of
$1,104,431. Effective June 1, 1978, the Company discon- 1978 tinued providing an allowance for funds used during con- 1st $ 60,575 $ 8,603 $ 5,274 $ 3,705 $ .35 struction on this project. The Company, on December 27, 2nd 58,198 8,240 4,99 1 3,422 .32 1978, advised the BPU that in its current rate case it would 3rd 75,238 16,708 13,374 11 ,8 11 1.09 request authorization from the BPU to amortize all costs, 4th 61,047 9,597 6,425 4,873 .45 including allowance for funds used during construction, --
associated with the project over 20 years commencing on $255,058 $43, 148 $30,064 $23,8 11 $2 .21 the effective date of the next rate order of the BPU (See The revenues of the Company are subject to seasonal Note 9). Accordingly, in December, the Company trans-fluctuations due to increased sales and higher residential ferred these costs on the balance sheet from Construction rates during the summer months.
Work in Progress to Property Abandonment Costs.
- 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 9: RATE INCREASES : NOTE 11: REPLACEMENT COSTS (UNAUDITED):
During the period indicated below, rate increases have The impact of the rate of inflation experienced in recent been approved by the BPU designed to increase annual years has resulted in replacement costs of productive ca-revenues from electric service, based in each case on the pacity that are significantly greater than the historical applicable test year, as follows: costs of such assets reported in the Company's Financial Statements. The Company's ability to maintain its pro-Amount Amount Increase ductive capacity in the future will be contingent upon its Date of Requested Date Approved In Test ability to finance the needed additions. This, in turn, will Petition (Millions) Effective (Millions) Revenue Year depend on the Company's ability to obtain adequate and August, 1975 $28 .0 Feb. 5, 1976 $ 9.3 4.7% 1975 timely rate relief. In compliance with reporting require-Feb., 1977 . . 16.5 Jan. 27, 1978 8.0 3.8 1976 ments, estimated replacement cost information is dis-Mar., 1978 . . 35 .7 July 19, 1978 14.8 (a) 6.2 1978 closed in the Company's annual report to the Securities (a) Initial amount and Exchange Commission on Form 10-K.
22
NOTE 12: LONG-TERM DEBT:
Long-Term Debt consists of: December 31, 1978 1977 First Mortgage Bonds:
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 7 1/2 % 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 .................. . 2,500,000 2,500,000
$262,670,000 $265,670,000 Debentures:
5 V4 % Sinking Fund Debentures due (Feb. 1) 1996 ......... . ....... ... . 3,732,000 3,862,000 7 1/4 % Sinking Fund Debentures due (May 1) 1998 .... . .. . ... .. ...... . . 3,902,000 4,000,000 7,634,000 7,862,000 Notes:
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 7 1/4 % 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 550 Broad Street Certified Public Accountants Newark, New Jersey 07102 Atlantic City Electric Company:
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.
Comparison of*
1978 and 1977 1977 and 1976 Operating Revenues . . ........... .. ... . . .... . ..... . $20,063 8.5% $22,968 10.8%
Fuel .... . ... .... .. . ........ .. .. .. . . ..... . ... . ... . . 2,000 2.4 13,501 19.5 Interchange ...... . . . ....... . .. . . . ....... .. ....... . (1,564) (41.9) (1,084) (22.5)
Power Production-Operation and Maintenance . . . . . 2,934 16.5 4,284 31.7 Other Operations and Maintenance .. . . ..... .. ..... . 2,456 8.4 2,929 11.1 Depreciation ........ . .... .. . . .. .. .. . ......... . ... . 2,245 11.6 1,974 11.4 Taxes Other than Federal Income Taxes .... . ..... . . . 2,930 10.1 2,727 10.4 Federal Income Tax Expense ........ ... .... . ..... . . 5,768 43 .7 1,693 14.8 Other Income- Net . .. ...................... . .. . . . (531) (13.7) (3,961) (50.5)
Net Interest Charges . ... . .... . .... .. .. .. . . ... . ... . . 57 0.4 (3,580) (17 .9)
- Amounts stated in thousands.
OPERATING REVENUES-Increases are principally TAXES OTHER THAN" FEDERAL INCOME TAX attributable to increases in energy sales in 1978 and EXPENSE-These taxes are principally taxes on the 1977, rate increases in January and July of 1978 and Company's gross receipts. The increases in 1978 and increased energy clause revenues in 1977. 1977 are a direct result of increases in the Company's operating revenues. Also, in 1977, the Common-FUEL-The 1978 and 1977 increases are principally wealth of Pennsylvania enacted a gross receipts tax due to higher generation, which increased fuel con- applicable to foreign utilities which own generating sumption and to increasing fuel costs. stations in the Commonwealth.
INTERCHAN"GE-The Company was a net importer FEDERAL INCOME TAX EXPENSE-The increases
- of interchange energy in 1978 and 1977. Interchange in 1978 and 1977 are due principally to higher taxable reflects the net cost of energy interchanged to and income. Taxable income increased principally as a from other utilities within the PJM. Decreases in result of decreases in flow-through depreciation on interchange (credits) reflect the Company's ability to pre-1974 additions.
sell (export) interchange energy while increases in interchange (debits) reflect the Company's ability to OTHER INCOME- Other Income (principally Al-acquire (import) such energy at a lower cost than if lowance for Funds Used During Construction the Company had generated the energy. (AFDC)) decreased in 1978 and 1977 primarily as a result of the exclusion of the debt portion of AFDC POWER PRODUCTION-OPERATION AND from Other Income (See Note 1 of Notes to Finan-MAINTENANCE- The increases in 1978 and 1977 cial Statements) and the transfer of the Salem Nu-are principally attributable to increased operational clear Generating Unit into service in June, 1977.
charges and major maintenance at our jointly-owned facilities and to higher operational and maintenance NET INTEREST CHARGES-The increase in 1978 is costs at our wholly-owned facilities. principally due to a reduction in the debt portion of AFDC resulting from the Salem Nuclear Unit being OTHER OPERATION AND MAINTENANCE- placed in service in June, 1977. The decrease in 1977 Increases in 1978 and 1977 are due principally to is principally due to reductions in the amount of long higher transmission and distribution maintenance and short term borrowings outstanding during 1977 expenses and increased administration and general and to the inclusion of the debt portion of AFDC costs. The increased charges continue to result from (credit) as an element of Interest Charges (See Note 1 inflationary pressures, including higher costs of ma- of Notes to Financial Statements).
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
Common Stock, Price Range and Dividends The Common Stock of the Company is traded on the N ew 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 1977 Per Share High Low High Low 1978 1977 First Quarter ...... ... ...... . 23 20 243/s 213/s 40V2 e 40 1/2 e Second Quarter ............. . 22 112 20Vs 24 21 V2 41 1/2 e 40 V2e Third Quarter .............. . 23'l's 20'l's 245/s 22 1/ 4 41 V2 e 40 V2 e Fourth Quarter ....... . ..... . 21 'l's 175/s 23Vs 203/s 43 1/2 e 40 V2 e Other Information for Investors 1978 1977 1976 1975 1974 Number of holders of Common Stock (year-end) ........ . . 44,490 43,826 42,516 39,279 39,054 Total cash dividends paid per share on Common Stock ............ .. . . $1.67 $1.62 $1.56 $1.51 $1.50 Pay-out ratio .............. ...... ... . 76% 79% 60% 63% 59%
Book value per share (year-end) ...... . $21.27 $20.71 $20.25 $19.34 $18.45 Price Earnings Ratio (year-end) .. . ... . 8 11 9 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 Payable Dates for Dividends on Common Stock Dividends on Common Stock March 15, 1979 April 16, 1979 June 14, 1979 July 16, 1979 September 13, 1979 October 15, 1979 December 13, 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 t elephone Area Code 609/645-4506 or 4507 TRANSFER AGENTS REGISTRARS SHARE LISTINGS For Common Stock For Common Stock Common Stock of the Company Irving Trust Company Irving Trust Company is listed on the New York Stock 1 Wall Street 1 Wall Street Exchange and the Philadelphia ew York, N.Y. 10015 New York, N.Y. 1001 5 Stock Exchange . The 5Vs %
Cumulative Convertible Preferred First National Bank of South Jersey Guarantee Bank Stock of the Company is listed Atlantic City, N.J . 08404 Atlantic City, N .J. 08404 on the New York Stock Exchange.
For Cumulative Preferred Stock For Cumulative Preferred Stock Record-keeping and Chemical Bank Irving Trust Company Dividend Disbursing Agent 20 Pine Street N ew York, N .Y. 1001 5 Atlantic City Electric Company.
New York, N .Y. 1001 5 See address on this page.
For Cumulative Convertible For Cumulative Convertible Preferred Stock Preferred Stock Morgan Guaranty Trust Company rving Trust Company of New York ew York, N.Y. 10015 New York, N .Y. 10015 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 eneratmg
. C apac1ty . (K'i 1owatts )(a> .. .. .......... 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 4,9 18,906 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 42,9 11 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 ....... . .... $2.2 1 $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 1973 1972 1971 1970 1969 1968
$ 637,250 $ 572,555 $ 511,274 $ 455,956 $ 404,364 $ 357,863 $ 324,561
$ 71,220 $ 67,864 $ 58,434 $ 54,151 $ 48,200 $ 35,306 $ 25,406 6,580 6,506 6,408 6,333 6,252 6,187 6,109 1,278,700 1,0 13,500 965,900 897,600 821,400 757,800 700,800 1,004,400 1,051,400 920,400 829,300 755,500 721,800 671,600 4,65 1,334 4,236,083 4,071 ,225 4,262,062 4,294,352 4,227,3 15 3,929,222 229,197 665,558 458,050 - 74,395 - 358,203 -566,932 - 615,766 4,880,531 4,901 ,641 4,529,275 4,187,667 3,936,149 3,660,383 3,313,456 1,882,560 1,899, 122 1,741,895 1,624, 793 1,520,939 1,375,546 1,253,772 1,298,858 1,351,974 1,183,668 1,059,498 977,210 879,916 821,538 1,136,935 1,119,478 1,061 ,932 990,363 954,111 911,138 801 ,664 57,477 58,129 64,53 1 88,963 101,703 116,021 91,467 4,375,830 4,428,703 4,052,026 3,763,617 3,553,963 3,282,621 2,968,441
$ 78,5 12 $ 59,856 $ 51,544 $ 42,623 $ 36,979 $ 32,672 $ 29,850 55,713 42,804 35,868 28,648 23,933 20,584 18,912 33,565 22,008 19,350 16,529 13,036 11 ,303 9,738 4,207 3,861 3,763 3,919 3,795 3,753 3,302 171 ,997 128,529 110,525 91,719 77,743 68,312 61,802 4,614 4,365 4,128 3,687 3,648 3,731 3,688
$ 176,611 $ 132,894 $ 114,653 $ 95,406 $ 81,391 $ 72,043 $ 65,490 6,982 7,303 7,008 6,793 6,542 6,072 5,685
$ 291.21 $ 230.19 $ 207 .37 $ 178.19 $ 159.06 $ 144.22 $ 135 .34 4.17* 3.15* 2.96* 2.62* 2.43* 2.38* 2.38*
330,758 320,834 309,393 297,437 288,538 282,274 279,976 894,000 865,000 828,000 796,000 773,000 753,000 733,000
$ 176,611 $ 132,894 $ 114,653 $ 95,406 $ 81,391 $ 72,043 $ 65,490 73,167 37, 144 29,944 28,705 22,457 15,691 13,057 5,862 8,155 3,979 (815) (2,941) (3, 165) (3, 130) 11 ,360 8,810 8,060 6,686 5, 111 5, 074 3,971 21,730 21,119 19,388 17,462 15,692 14,194 13,123 12,946 11,749 l l , 190 10,355 9,632 9,043 7,892 Ii 16,203 16,616 15,359 10,603 l l , 129 12,292 12,748 141 ,268 103,593 87,920 72,996 61 ,080 53,129 47,661 35,343 29,301 26,733 22,410 20,311 18,9 14 17,829
' 10,755 8,745 6,647 5,164 3,520 1,773 1,097 46,098 38,046 33,380 27,574 23,831 20,687 18,926 19,088 15, 129 13,297 11 ,641 9,276 6,302 6,226 27,010 22,917 20,083 15,933 14,555 14,385 12,700 4,233 2,652 2,456 1,900 1,900 1,900 1,672
$ 22,777 $ 20,265 $ 17,627 $ 14,033 $ 12,655 $ 12,485 $ 11 ,028 8,973,400 8,453,400 7,8 10,073 7,436,740 6,920,073 6,817,083 6,270,000
$2.54 $2.40 $2.26 $1.89 $1.83 $1.83 $1.76
$1.50 $1.4766 $1.4316 $1.37 $1.345 $1 .3 1 $1 .27
$1.50 $1.4688 $1.4144 $1.36 $1 .34 $1.30 $1 .26 This Annual Report ha s been prepared fo r th e purpose of providing general and statistical informatio n concerning th e Company an d not in connection with any sa le, offer for sale or so licitation of an offer to buy any sec urities .
27 Printed in U.S.A.
Officers Joh n D. Feehan Frank J. Ficadenti Joseph T. Kelly, Jr.
President and Chief Executive Officer Vice Pres ident- Assistant Vice President-Enginecring, Resea rch and Rates and Regul ations Richard M. Wilson Development Senior Vice President William F. Symons Ernest D. Huggard Assistant Vice President-William S. Cowart, Jr. Vice President- Personnel and Public Relations Senior Vice President Control Brian A. Parent Charles F. Morgan Jerrold L. Jacobs Assistant Treasurer and Senior Vice President and Treasurer Vice President- Assistant Secretary Produ ction David V. Boney Joseph G. Salomone Vice Presid ent- Michael A. Jarrett Controller Customer and Community Services Vice President-Corporate Services John F. Born Vice President- Martin R. Meyer Electric Operations Secretary and Assistant Treasurer Results of Shareholders' Survey 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 achievem ent 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 wi th 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:
Percen tage of Shareholders Responding Reasons for Investing in Age Distribution of Those (In Share-Range Categories) Atlantic Electric Common Stock Willing to Participate (By Joining the Shareholder Organization or Contacting Public Officials) 50-- - -- - - -
Return on 40 Investment 40 c 25% c
"'u(i; 30 "'~ 30 (l_
Reliable Income (l_
20 52% 20 Potential Growth 10 10 O* __L-._11......__........,__._
O Less 100* 301* 50 1* More Other Age Over 65 46-65 25-45 Under 25 i~~~
Shares than 300 500 1000 5°/o
- Willing to Join Owned 100 Shareholder Association
- Percentage of the 6, 100 shareholders who responded Willing to Contact Public Official.
- Percentage in this category of the 44 ,490 shareholders Note : Th is distribution closely parallels previou analyses of age distribution of al l shareholders.
Dividend Reinvestment Program The Company continues to offer a Dividend Reinvestment and Stock Purchase Plan which enable shareholders and employees to au tomatically invest their cash dividends in Company Stock, and also mak optional cash payments wi thout 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 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 excep t 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., Chai rman Eleanor S. Daniel Mack C. Jones John M. Miner Eleanor S. Daniel Richard M. Dicke John D. Feehan Self employed. Vice Counselor at Law. President and Chief President and Director Senior Partner of the Executive Officer of Energy, Operations and of several real estate law firm of Simpson the Company. Research Committee corporations. Thacher & Bartlett.
Mack C. Jones, Chairman Richard M. Dicke Richard M. Wilson Finance Committee John M. Miner, Chairman Eleanor S. Daniel Richard M. Dick e 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, Chairm an Joseph M. Galvin, Jr.
Frank H. Wheaton, Jr.
Richard M. Wilson Frank H. Wheaton, Jr.
President of Wheaton Industri es.
Manufacturer of glass and plastic containers.
6 A!t~~!i5L~~~,~~,ic
~ IN SOUTHERN NEW JERSEY NOTICE -
THE ATTACHED FILES ARE OFFICIAL RECORDS OF THE DIVISION OF DOCUMENT CONTROL. THEY HAVE BEEN 1600 PACIFIC AV.E. ,
ATLANTIC CITY, N.J . 08404 CHARGED TO YOU FOR A LIMITED TIME PERIOD AND MUST BE RETURNED TO THE RECORDS FACILITY BRANCH 016. PLEASE DO NOT SEND DOCUMENTS CHARGED OUT THROUGH THE MAIL. REMOVAL OF ANY PAGE(S) FROM DOCUMENT FOR REPRODUCTION MUST BE REFERRE D TO FILE PERSONNEL.
DEAD LINE RETURN DATE RECORDS FACILITY BRANCH THE AREA WE SERVE . ..
One Third of the State of New Jersey