ML18082A343
| ML18082A343 | |
| Person / Time | |
|---|---|
| Site: | Salem  |
| Issue date: | 02/25/1980 |
| From: | Gilkeson R PECO ENERGY CO., (FORMERLY PHILADELPHIA ELECTRIC |
| To: | |
| Shared Package | |
| ML18082A342 | List: |
| References | |
| NUDOCS 8005090407 | |
| Download: ML18082A343 (36) | |
Text
Philadelphia Electric Company Annual Report 1979 REGULATORY DOCKET FILE COPY 8 0 0 5 (J 9 U?'O
Corporate Objectives Philadelphia Electric Company has five clear corporate objectives which are the building blocks of the entire organization. The objec-tives are:
Reliable Service To provide customers with reliable service at reasonable rates.
Financial Strength To be financially strong and pay investors a fair return on their investment.
Employee Relations To be fair to employees and offer opportunities for personal growth and increased productivity.
Communications To communicate so others can better understand the role of the Company and the challenges it faces.
Corporate Citizenship To contribute to the common good of the community and utility industry.
PE's formal corporate objectives program began in 1975. Each year departments of the Company develop plans for meeting these corporate objectives. Management uses these plans as a basis for measuring accomplishments.
PE lineman Allen Turber-ville installing fuse with "hotstick. " Reliability of service is not the respon-sibility of any one per-son, nor of one Company department. It is the contribution of every PE man and woman at work.
Linda Gordy of Stock Transfer displays stock certificate. The support and loyalty of share-holders make up the main framework for the Company's financial strength.
Gas Operations Vice President Marty Gavet discusses gas line instal-lation with George Pres-cott. The performance of employees is the Com-pany's greatest asset.
Neil McDermott of Cor-porate Communications and Action News report -
er Rob Jennings. PE communicates through the media to create bet-ter understanding of the Company's role in pro-viding energy.
PE President and Chief Executive Officer Lee Everett was the Chair-man of the 1980 cam-paign of United Way of Southeastern Pennsylva-nia. The Company and its employee take an active role in providing leadership for commu-nity programs.
Contents 1 Letter to Shareholders 2 Financial Highlights 3 Providing Reliable Service 6 Bui lding Financial Strength 8 Employee Relations 10 Communications 12 Corporate Citizenship 14 Special Report 15 Financial Section 32 Officers and Directors
To Our Shareholders:
1979 was another year with both "Good News" and "Bad News" for the Company. Common stock earn-ings were $1.86 per share, primar-ily because most of the "Bad News" adversely affected our abil-ity to earn a reasonable return.
Specifically, the "Bad News" we've been wrestling with this year has been:
- Double-digit inflation, that increased most of our costs.
- Record high interest rates, which had a significant impact on earnings.
- Nearly doubled prices for oil that substantially raised electric and steam rates to our customers and added costs to the Company.
- Low sales growth, because of the weakness in both our national and regional economies and appro-priate reductions in energy use by our customers.
- The Three Mile Island accident that was a severe setback for the nation's nuclear power program.
We've covered this subject in some detail in a special section on page 14.
But, there was "Good News" too, highlighted by:
- The resumption of gas sales at a record-breaking rate. This was brought about by greatly in-creased supplies of natural gas to the Company because of the deregulation of natural gas prices, which are still substantially below the equivalent price of heating oil to home heating customers.
- The continued excellent perfor-mance of our Peach Bottom nuclear units, that saved our cus-tomers $210 million in fuel charges. The total plant saved the nation 27 million barrels of oil.
- The completion of a PUC-mandated management audit by Cresap, McCormick & Paget, an independent firm of management experts, that gave the Company high marks in all key areas and made valuable suggestions for improving some of our operations.
We're diligently following up their recommendations.
- A continuation of our construc-tion activities to replace old oil burning plants and to prepare for increases in future energy use.
- A vigorous pursuit of much-needed rate increases before the PUC, to offset the impact of infla-tion on operating costs and to earn a fair return for our shareholders.
We were granted a $2.9 million annual increase in steam rates October 1, 1979, and a $10.7 million annual increase in gas rates January 5, 1980; and we are pursuing an electric rate increase that should be decided by the PUC this spring.
While we are not satisfied with our earnings performance, we feel we made the best of a difficult year, primarily because of the excellent response of our fine organization to the adverse circum-stances we had to contend with in 1979. Your Company has a strong capital base, it has a group of dedicated employees, and it is looking forward to the new decade with confidence.
This year's report is organized around the Company's "Corporate Objectives." These objectives form REGULA ORY DOCKET FILE COPY the cornerstone of the Company's system of "Management by Objec-tives," which is a key element in a management tool we use to ana-lyze our problems, plan for improvement, and measure our results each year. Our five "Corpo-rate Objectives" serve to focus all of our activities in the right direction.
We have also included informa-tion, beginning on page 24, which estimates what inflation is doing to the Company's financial state-ments. It highlights in a quantita-tive way what we already knew, that we must receive more timely rate increases if we are to offset inflation, improve our earnings, and attract the new capital we need to continue to serve our customers' needs.
While 1979 won't go down in our "memory banks" as a good year, it was a year of progress. We are in a stronger position today to improve future results than we were at the beginning of the year.
We are grateful for the loyalty and support of our shareholders, and pledge to you our continued dedication.
February 25, 1980 Chairman of the Board President and Chief Executive Officer Executive Vice President and Chief Operating Officer
Financial Highlights Operating Revenues..................................
Operating Expenses..................................
Taxes Charged to Operations..........................
Operating Income....................................
Earnings Applicable to Common Stock.................
Earnings per Average Common Share..................
Cash Dividends Paid per Common Share...............
Average Shares of Common Stock Outstanding.........
Construction Expenditures............................
Total Assets.........................................
Where the Income Dollar Came From 1979 1978
$1,578,505,000 $1,456,758,000
$1,332,706,000 $1,215,110,000
$ 185,731,000 $ 194,728,000
$ 245,799,000 $ 241,648,000
$ 149,698,000 $ 141,349,000
$1.86
$1.87
$1.80
$1.80 80,529,000 75,391,000
$ 429,336,000 $ 411,716,000
$5,241,260,000 $4,850,625,000 Other Income 5¢ Steam 3¢
~:=:.----;
Where the Income Dollar Went Fuel 40¢ Wages & Benefits 12¢ The Company Compensation to Investors for Use ofTheir Funds 20¢ Interest 811:
Preferred Stock Dividends 311:
Common Dividends 911:
Depreciation 7¢ Percent Change 8%
10%
(5%)
2%
6%
(1 %)
7%
4%
8%
The Company's predecessors provided electric service starting in 1881. The current Company, incorporated in Pennsylvania in 1929, is an operating utility providing electric, gas and steam service in southeastern Pennsylvania and providing, through its subsidiaries, electric service in two counties in northeastern Maryland. General Office: 2301 Market Street, P.O. Box 8699, Philadelphia, Pennsylvania 19101.
The total area served by the Company and subsidiaries covers 2,475 square miles, with a population of 3, 700,000. The City of Philadelphia represents only 5 percent of this total area.
Annual Meeting The annual meeting of the shareholders of the Company will be held on April 9, 1980, at eleven a.m. in the Crystal Ballroom, Benjamin Franklin Hotel, Ninth and Chestnut Streets, Philadelphia, Pennsylvania.
Shareholders of record at the close of business February 22, 1980 are entitled to vote at this meeting.
Notice of the meeting, proxy statement and proxy will be mailed under separate cover. Prompt return of the proxies will be appreciated.
2
"To provide customers with reliable service at reasonable rates."
Meeting Customers' Needs In 1979, Philadelphia Electric Company met all of its customers' energy needs. Electric sales were the highest in the Company's 98-year history. And, gas sales were again on the upswing as additional supplies of gas enabled us to resume adding new customers.
Electric sales were 28 billion kilowatt-hours, 1 percent higher than 1978. One of the factors contributing to this low growth is customer conservation.
During the summer, the Company experiences the greatest demand for electricity because of air condi-tioning usage. The biggest challenge for 1979 came on August 1, when the peak hourly demand was 5,641,000 kilowatts.
Gas sales increased 5 percent over 1978. For the first time since 1972, the Company was able to connect new customers desiring gas. This marks an upswing in PE's gas business which has been accel-erated by high oil costs, encourag-ing customers to make an economic selection of gas.
Maintaining High Reliability Providing high quality electric service to 1.3 million customers is a formidable job. In 1979, PE's envi-able record of reliability continued.
On the average, uninterrupted ser-vice was maintained 99.99% of the year. Storms, cars hitting poles, trees falling on wires and equipment failure prevented the achievement of 100 percent reliability.
To provide reliable service, the Company must work constantly to prevent service interruptions. PE has a well-constructed system which is properly maintained. It is equally important to restore service quickly if it is interrupted. Philadel-phia Electric is ready to respond to problems with a well-trained work force and the most modern equipment.
The Company realizes it cannot rest on its long record of reliability. It is determined to keep up with the changes of customers, technology, and working methods. And, it must always fight higher costs.
Keeping Costs Down With Nuclear Power Philadelphia Electric Company's goal is to provide this reliable service at the lowest possible cost to customers. One reason for using nuclear power is the relative low cost of fuel, which is less than one tenth the cost of heavy oil.
Nuclear plants continue to pro-vide a substantial economic benefit for customers. During 1979, 24 percent of PE's electric power was generated by nuclear units which saved PE's customers $240 million in fuel charges.
The Peach Bottom nuclear units continued to perform well. These two units operated at 80 percent of maximum possible output, surpass-ing the excellent 75 percent achieved in 1978.
The Salem No. 1 nuclear unit, which is operated by Public Service Electric and Gas Company of New Jersey, was out of service for 9 months in 1979 due to an extended maintenance outage in conjunction with its first refueling. Major work included repairs to the turbine blades, replacement of main con-denser tubing, repair of concrete anchor bolts and modification of piping hanger supports to meet new NRC requirements.
3 Ronald Pugh of Stores Division receives material requirements from service build-ings. With the aid of the new computer system, providing materials and supplies to operating forces is done at a lower cost and with greater efficiency.
$3.50 3.00 2.50 2.00 1.50 1.00
.50
$3.34
$1 48
$.32
~
1970 1973 1976 1979 Comparison of Fuel Costs Average $ Per Million BTU
Although it is normal for large new plants to need work after their initial "shakedown" run, the length of this outage was a disappointment.
PE owns 43% of the unit.
Construction of the Salem No. 2 unit is complete and it is scheduled for commercial operation in 1980.
Licensing of this unit has been delayed due to the Nuclear Regula-tory Commission's moratorium on issuing new licenses.
Construction progress continues at the Limerick nuclear generating station. When completed in the mid-1980's, this 2,110,000 kilowatt station will save the equivalent of more than 20 million barrels of oil each year.
Oil Costs Rise Significantly During 1979, the price of oil increased about 70%. Because of this price rise and its effect on the cost of energy purchased from neighboring utilities, the Company's total electric fuel and energy bill in 1979 rose to about $570 million, an increase of $150 mi 11 ion over the previous year. This significant rise in the largest element in PE's cost of doing business had two other effects. First, customer bills rose because of increases in the energy charge which enables the Company to recover actual fuel costs, without Construction at PE's Limerick nuclear gen-erating station continues. The plant is now 50% complete.
Cumulative
% Increase 30 20 10 1975 Annual Consumer Price Index (CPI) 1976 1977 1978 35%
23%
1979 PE Electric Rates Have Increased Less Than the Consumer Price Index profit, but with a lag of 4 to 5 months. Second, it was necessary to borrow funds to finance the higher fuel costs pending collection from our customers. The interest on these borrowings, coming at a time when interest rates were at record high levels, decreased our earnings approximately 5 cents per share.
The need to recover higher costs, particularly higher fossil fuel costs, had a significant impact on the Company's rates in 1979. However, as illustrated on the chart above, the Company's average electric rate has increased less than the Consumer Price Index (CPI) during the past four years. And during the same four year period, the increase in the price of oil was almost double the CPI.
This record demonstrates nuclear power's role in holding down custom-er costs.
Gas Service Expanding As new gas supplies became available, the Company reopened gas sales to all classes of custom-ers in 1979. New gas connec-tions had been stopped by the PUC in 1972 because of dwindling reserves in the gas producing regions of the nation. Limited new residential sales were permitted in 1978 to replace customers lost th rough attrition.
With oil prices soaring, the re-opening of gas sales was more than welcome to customers. During 4
Allen Yahemsky, Electric Production, instructs Kirby Jones, a Pre-Engineering Exposure Program student, on the use of latest computer equipment accessible to a boiling water reactor core simulation program.
Barbara Ireland of Customers Service talks to a customer. PE is available to help customers and respond to their needs.
PE linemen in helicopter inspect transmis-sion lines.
1979, gas heat was installed in the homes of 6,500 residential custom-ers, and it is expected that in 1980, 8,000 additional residential gas heating customers will be added to the system. In addition, there has been significant load growth by existing commerical and industrial customers, and many 4
6
'fllr_
- J CJ
- i z;:;;J
- 1
,.. 40 100200.,.,
12900 6000 110100 ea<>
221eoo zeaoo 141aoo 1100 eiOOOO
&000 2!l700 lllO Jim Malloy of Electric Transmission and Distribution updates statistics in the Storm Control Center during Hurricane David.
When interruptions do occur, PE employees work to restore service in a minimum of time.
Ed A/wood, a Peach Bottom operator, at the plant's control panel.
new customers in these classifica-tions have been added to the system. Increased gas supplies have also permitted PE to make interruptible gas available to some large industrial and commerical customers.
Gas forecasts for the future are bright. Philadelphia Electric Com-pany expects about a 7 percent increase in the amount of gas from existing suppliers in 1980. Also, the Company's exploration subsid-iary's joint drilling ventures con-tinue with success. Through 1979, the Company has participated in the drilling of 218 natural gas wells. To date, there have been 69 successful wells, an above-average record for the gas production industry.
PUC Audit Gives PE High Marks for Reliable Service A management audit of Philadel-phia Electric Company, ordered by the Pennsylvania Publ ic Utility Commission and completed in 1979, reveals PE is doing a good job, especially where it counts most -
in delivery of reliable and economical service to customers.
The audit conducted by the New York management consulting firm of Cresap, McCormick & Paget, was ordered by the PUC as a part of its new program to audit the state's major utilities to find ways of improving operating efficiency and cutting costs, thus insuring adequate service at the most rea-sonable rates possible.
The management audit verified that PE's rates compare very favor-ably with other major metropolitan areas. The audit reported that PE's revenues per kilowatt-hour have consistently been substantially lower than the average of five comparable east coast utilities. In 1978, PE's customer bills were about $145 million lower than the average of the comparison group.
The audit identified 74 strengths and accomplishments of the Com-5 Robert Lenderman of Gas Operations takes monthly reading on a rectifier to determine that the cathodic protection system is functioning. The system prevents gas pipe-line corrosion.
pany and gives the Company par-ticularly high marks for technical competence; service reliability; financial, construction and fuels management; employee capability and dedication.
The audit also lists 58 opportuni-ties for improvement. Among the major opportunities identified by the consultant are: improving the performance of the Eddystone coal-fired generating station, accel-erating completion of the Limerick nuclear plant, pursuing cost reduc-tion opportunities, particularly in personnel-related expenditures, greater unification of responsibili -
ties in the area of customer service and improving the Company's rela-tionship with the PUC.
The remaining recommenda-tions are primarily in the areas of organizational changes, modifica-tion of various controls and proce-dures, and acceleration of the development of various work man-agement systems.
In summary, the report shows PE is a well-managed Company doing a good job where it counts -
in providing reliable service, the Company's number one objective.
Building Financial Strength "To be financially strong and pay investors a fair return on their investment."
Million Dollars
$1.500 1,000 Million Dollars 500
$2.00
$1,579
$1,224
$1.135 1975 1976 1977 1978 1979 Operating Revenues 1976 1977 1978 1979 Operating Expenses 1975 1976 1977 1978 1979 Total Earnings Dividends Paid Earnings Per Share 1979 Financial Results Common stock earnings were
$1.86 per share in 1979, 1 cent below the previous year. Average shares for 1979 were 80.5 million, an increase of 7 percent over the previous year. Common stock earn-ings were $150 million, an increase of $8 million over 1978.
The Company continued to pay dividends at $1.80 per share, the same level paid since mid-1977 when the annual rate was increased from $1.64.
Regular common stock divi-dends are an uninterrupted tradi-tion for the Company since 1902.
1979 operating revenues were
$1.6 billion, or 8 percent over the previous year. Electric revenues increased $87 million as a result of higher electric rates and a 1 per-cent increase in sales. Gas revenues increased $32 million due to higher fuel revenues and a 5 percent increase in sales, and steam revenues increased $3 mil-l ion as a result of the higher fuel revenues.
Operating expenses increased 10 percent as a result of higher fuel costs, increased wages and higher depreciation.
Earnings per share in 1979 were adversely affected by these rising costs not offset by growth in sales, and by higher interest rates.
Rate Increases On July 27, 1979, the Company filed with the Pennsylvania Public Utility Commission (PUC) a request for an additional $123 million (10%) in electric revenues. This rate request has been suspended by the PUC until April 25, 1980.
6 Hearings were completed on December 21, 1979, and a final order is expected prior to the end of April.
This rate increase request was necessary mainly because inflation continues to push up operating and maintenance expenses.
Between the last request for a rate increase in 1977 and this filing, the cost-of-living rose over 15 per-cent and is still rising. About $90 million of the rate increase covers the higher costs of labor, deprecia-tion, equipment, taxes, and sup-plies. The remaining portion of the increase is required to achieve a level of earnings that will continue to attract investors so the Company can replace and improve facilities and continue its record of reliable service.
In March 1979, the Company requested a $15.4 million gas rate increase. In December, The Penn-sylvania Public Utility Commis-sion (PUC) approved a $10.7 million increase which became effective on January 5, 1980 and affects all gas customers. This increase is only the second residential gas rate increase in the last twenty-six years.
In April 1979, a $4.3 million steam rate increase request was filed with the PUC. The PUC approved $2.9 million which became effective on October 1, 1979.
In December 1979, Conowingo Power Company filed a request for a $4.2 million rate increase. The request has been suspended by the Maryland Public Service Com-mission pending an investigation.
The Salem No. 2 nuclear gener-ating unit, constructed and oper-ated by Public Service Electric and Gas Company of New Jersey, is expected to be placed in commer-
cial operation after the Nuclear Regulatory Commission lifts its moratorium on new licenses. The Company owns a 43 percent share of the unit (about 474,000 kilo-watts). Since demand is growing at a lower rate than expected, PE's present system generating capacity is adequate to meet customers' needs. Therefore, in April 1979, the Company reached an agree-ment with Jersey Central Power and Light Company, a subsidiary of General Public Utilities Corpora-tion, to sell the output of Salem No.
2 to Jersey Central at least through 1984. During the term of the agreement, PE's customers will not be charged for any costs related to Salem No. 2. Revenues from Jersey Central are expected to cover the unit's operating and capital costs and provide a return for investors until the plant is needed on the PE system.
Financing Program 1979 construction expenditures were $429 million. Internal sources of funds, which are primarily depreciation, deferred taxes and investment tax credits, provided
$169 million. Internal sources help the Company to hold down financ-ing costs for construction and pro-vide energy at a lower cost to customers.
The 1979 financing program began in April when the Company sold 4 million shares of common stock through a public offering.
Also in April, $50 million of bank notes were issued. This was the remaining portion of a $100 million 7-yearterm bank loan arranged in 1978. In May, the Company arranged a $50 million 8-year term loan, using the proceeds to refund a portion of an existing loan.
In October, $100 million of first and refunding mortgage bonds due 2005 were sold at a coupon rate of 12 Y2 percent.
During 1979, over 2 million shares of common stock were issued through our Dividend Rein-vestment and Employee Stock Pur-chase Plans. The continued suc-cess of these plans demonstrates the shareholders' and employees' confidence in the Company.
For 1980, construction expendi-tures including acquisition of nuclear fuel are expected to be
$610 million, $180 million above the 1979 level. Approximately
$190 million will be provided by internal sources.
To finance the remainder of the 1980 construction program and to refund $128 million of maturing long-term debt, approximately
$550 million of new financings will be required. Bonds, Preferred Stock and Common Stock, includ-ing sales through the Dividend Reinvestment and Employee Stock Purchase Plans will be issued, subject to market conditions.
However, the Company's ability to issue additional mortgage bonds and preferred stock in 1980 has been severely limited because the Company's income has not kept pace with the higher interest rates which now prevail. This situation increases the need for timely and substantial rate relief now pending before the PUC.
Million Dollars S400 300 200 100 1975 1976 1977 1978 Internal sources Funds provided by new financing Construction Spending and Sources of Financing 1979 The Company owns 43 percent of Salem nuclear generating station's two units.
7
Employee Relations "To be fair to employees and offer opportunities for personal growth and increased productivity."
Beth Kelly, Financial Division, operates the word processing system. Most of the Com-pany's documents pertaining to rate increase filings and securities registrations are stored in the computer memory.
Joellen Coyle, Customer Accounts, operat-ing the remittance sorting system. Use of this system enables the Company to expe-dite and reduce handling of checks sent in by the customers.
Managerial personnel attending manage-ment development program class.
Our Efficient Work Force Philadelphia Electric employees are dedicated to searching for and finding better ways to do their jobs.
They have succeeded so well that the Company work force today is about the same as it was 20 years ago, while serving some 237,000 more electric and 48,000 more gas customers. In the same period, energy sales have doubled. Sim-ilarly, 20 years ago it took 9 employees to serve each 1,000 customers. Today, it requires only 7.
Better productivity results from two elements: improved technology and the efforts of men and women to use the tools furnished to them to do a good job in an efficient way. PE has both.
Most important is that PE people realize the need to help control costs. They are willing to put forth efforts and ideas to help the Com-pany operate more efficiently.
Through the Employee Suggestion System, PE people share in the savings that result from improved working conditions. Savings of
$230,000 resulted from employee suggestions in 1979. Suggestions have included equipment modifica-tions, inventions and ideas for modifying working methods. PE's Employee Suggestion System, which was founded in 1909, is the second oldest suggestion system in the country.
8 Turnover among PE people is low and more than 88 percent of employees have been with the Company five years or longer. More than 2,200 of the 9,400 employees have more than 25 years of com-pany experience. Low turnover reflects good morale and is an asset to the Company. The Com-pany is proud of this high degree of motivation and loyalty. PE peo-ple have met the challenges facing the Company.
Affirmative Action Is A Continuing Objective In 1979, the Company made significant progress in increasing the number of minorities and women throughout the labor force.
PE is in compliance with the Equal Opportunity consent decree signed in 1973 and has met the targets for 1979. The goal of the affirma-tive action program is to have the proportion of minorities in PE's work force equal to that in the labor market throughout the Com-pany's 2,475-square-mile service territory. The Company continues to recruit females and minorities, as well as the handicapped. In fact, PE has become an industry leader in the employment and training of the handicapped.
Training To Keep Up With Technology And New Challenges The Company's training efforts are aimed primarily at keeping employees abreast of their chang-ing job requirements and preparing them for advancement to new responsibilities when the opportu-nity occurs.
Both on-the-job training tech-niques and Company-sponsored classes are used. Training is aimed at meeting the specific needs of employees. Employee training needs are undergoing rapid change as the Company strives to use the latest technology. To meet this training challenge, the Company has been innovative in establishing training programs. These include programs for nuclear plant opera-tors, linemen, meter readers, cus-tomer service personnel, and many other occupations.
During 1979, an in-depth devel-opment program for management/
supervisory employees continued.
Since 1976, 1,800 have undergone training to improve and upgrade managerial skills. It is the aim of Philadelphia Electric to provide managerial personnel with the tools to develop to the fullest extent of their capabilities.
The Company encourages employees to enroll in classes at local educational institutions by paying tuition expenses for job-related courses.
Safety Is A Way Of Life Safety is more than a program at Philadelphia Electric. It is a way of life. Observance of safety rules both on-the-job and at home is emphasized at every level of the organization. Consequently, PE men and women are able to keep accidents on-the-job to a min-imum, and bring good safety habits into their family and community lives.
President Everett congratulates Martin J.
Westerman, who was named "1978 Suggest-er of the Year."
Edwin Breeser of Electric Production gives instructions on working in containment areas at nuclear power plants.
Employees receiving training at the Com-pany's Fire School.
9 John Roberts and Larry Murray of Commer-cial Operations use the Company's new video training equipment.
PE meter readers visit all of the 1.3 million customers each month. Here, Linda Camp-bell reads a meter on one of the coldest days in February.
Communications "To communicate so others can better understand the role of the Company and the challenges it faces."
Jim Griffin and Dave Schanzer of Finance and Accounting Department respond to shareholder questions.
Joe Paquette, PE's Chief Financial Officer, discusses our electric rate increase request with Dick Sheeran, of Channel 3's Eyewit-ness news.
Responding To Customers' Concerns Utilities these days are in the public eye more than ever before.
Criticism of rates continues at a high level. Rate increases, which are a direct result of the overall problem of inflation, are the main concern of customers. And envi-ronment and nuclear issues have created significant communication challenges for the Company.
A logical consequence of this high visibility has been to step up the corporate communications pro-gram. PE did just that. The Company uses the envelopes holding custom-ers' bills to insert leaflets to explain rate increases, safety and energy conservation tips.
The Speakers Bureau was given increased attention because of its importance as a way to talk face to face with the community.
In 1979, the Speakers Bureau gave 930 presentations before more than 100,000 persons. Nearly 37,000 visited the Limerick Atomic Information Center. And about 37,000 visited the Peach Bottom Atomic Information Center. The Company sponsored educational programs for 60,000 students.
More than 240,000 visited the Muddy Run Recreation Park.
Communicating With Investors PE communicates with investors every day -
by face to face contact, through telephone or writ-ten correspondence.
The annual meeting provides an opportunity for management to dis-cuss its achievements with share-holders. ln.1978, this face to face 10 communications approach was expanded by holding regional shareholders' meetings. Two regional shareholders' meetings were held in the Fall of 1979. The Company looks forward to continu-ing this contact in 1980.
Daily contact with investors
")
occurs at the shareholder informa-tion office located at the Com-pany's general offices. A staff is available to assist investors and provide information, both in person and by telephone. The Company is always pleased to answer questions and provide information.
In addition to direct contact with investors, PE keeps the financia l community updated on the Com-pany's progress through meetings, publications and detailed informa-tion mailed to security analysts, stockbrokers, and institutional investors.
Around The Clock Communications With The Media Philadelphia Electric Company operates 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br /> a day. And so do the media. PE keeps the Larry Eckman of Corporate Communications explains to students the reasons for building Limerick Generating Station. In 1979, 37, 000 visited the Limerick Atomic Informa-tion Center.
media up-to-date and responds to their needs day and night. The media are especially important because they offer both opportuni-ties to initiate stories and to respond promptly to issues of cur-rent concern.
PE's communications efforts are extensive. In 1979, the Company issued 440 news releases, had 330 radio interviews, and 185 television spots. Philadelphia Electric Com-pany continues to work diligently through the media -
newspapers, radio and TV stations -
in attempting to reach those who want to hear the Company's story.
Informing Employees Well -informed employees have long been recognized as one of the Company's greatest assets. Public understanding of the Company and its challenges is enhanced when employees have the ability to com-municate effectively. Management has given a high priority to inform-ing employees. Employees receive daily, bi-weekly and monthly com-munications concerning the Com-pany and its operations. And, throughout the year, informational meetings give employees an oppor-tunity to exchange ideas and ask questions.
Through PE's Hispanic Council, PE can discuss energy concerns with Spanish-speaking customers.
Charles Martin of Corporate Communica-tions assists shareholder in asking a ques-tion at regional shareholder meeting at Archbishop Ryan High School. Regional shareholder meetings give management an opportunity to discuss the challenges facing the Company.
Joe McKenna, left, of Business Services talks with customer. The new Fairmont Hotel opened in 1979.
11 Octavia Jones Spencer of PE's Speakers Bureau discusses uses of electricity with students.
Customers Service representatives use com-puter terminals to help in answering custom-er inquiries. As many as 4,000 calls are handled each day at the Main Office location.
Corporate Citizenship "To contribute to the common good of the community and utility industry."
Susan Campbell is one of over 100 PE employees that responded to the Red Cross emergency appeal for blood after a train collision.
Edward Pearl of Electric Transmission and Distribution Department visits a local hospi-tal, bringing laughter and gifts to the children.
Employees Active In Community Philadelphia Electric Company strives, both through individuals and as a Company, to be a good citizen of local communities. Some 112 employees held positions of responsibility during 1979 in local government, while thousands of others actively participated in the affairs of local civic, school and church organizations. Employees played leadership roles in a variety of charitable fund drives. The Com-pany encourages employees to be active in functions that help the communities in which they live.
Employees Give $572,000 To United Way Philadelphia Electric employees contributed $572,000 to the 1980 United Way Campaign -
a new record high for the Company cam-paign. Employees have participated in the United Way and other chari-table campaigns for over 50 years.
Not only do PE employees contrib-ute to this worthwhile effort, they assist in running it. This year PE president Lee Everett headed the Southeastern Pennsylvania cam-paign and PE was a leader in starting its employee campaign early. United Way is one of the many ways PE people help people within the community.
The 1979 Variety Club Telethon was consid-ered one of the most successful telethons held by the club. The Independent Group Association with full cooperation by the Company recruited about 200 PE employees to volunteer for the event.
12 Employees Are Blood Donors In 1979, PE employees donated 1,600 pints of blood to the Ameri-can Red Cross. Twice each year, the Red Cross sets up a blood donor center at Company head-quarters while the Bloodmobile reaches employees throughout the system. Pre-arranged appointments permit an orderly operation of the event -
an event PE employees view as an opportunity to help others in need.
PE Gets Andy Award For Area Development Publication The Company recently received an Andy award presented by the Advertising Club of New York for the area development insert which was a part of our 1977 annual report. The award is symbolic of the effort put forth by the Company in developing the service territory.
The exceptional construction activity in Center City Philadelphia indicates the confidence exhibited in the City's future. Company representatives work closely with City and community leaders in the effort to attract new business to the City. Similar efforts are made throughout the service territory.
Developing Technology Philadelphia Electric Company is a leader in the utility industry. As a major electric, gas and steam util-ity, the Company supports the efforts of trade associations. PE employees provide leadership in these associations and contribute to research and development proj-ects undertaken to improve the industry.
Customers' Use of Energy Recognizing the importance of an adequate energy supply for the econo_mic health of our area, the Company began advocating the wise use of energy -
increasing efficiency and eliminating waste -
long before the oil embargo of 1973 created a national awareness of this need.
Penny Saver ads at the begin-ning of the seventies won national recognition for educating custom-ers on the wise use of appliances.
The push to inform customers on the value of managing energy use and reducing oil imports has been intensifying for ten years.
In 1979, a Committee on Energy Marketing and Purchase (CEMAP) arranged the first interconnection of a windmill-generator on the PE system at Creamery, Pennsylvania.
Year-round testing continued on 13 residential solar water heating installations and several commer-cial solar-heat storage systems.
Efforts to help the nation reduce its dependency on oil paid off in the success of the heat-pump pro-gram. Electric heat pumps, which are more efficient than conven-tional heating systems, are being installed in half of new residential construction units.
As a result of the heat pump success, and coupled with the fact that ten percent of new homes are heated with electric resistance heat and 30 percent with gas, only about ten percent of new housing is being committed to oil heat, a marked shift from previous years' experience.
PE helped illuminate Pope John Paul /l 's visit to Philadelphia with the centuries-old greeting, "Long Live the Pope."
13
Special Report: The Accident at Three Mile Island l _ -
On March 28, 1979 a serious accident occurred at the Three Mile Island (TMI) nuclear power plant in Middletown, Pennsylva-nia, owned by General Public Utilities Corpora-tion. Many investigations into the design, operation, and regulation of nuclear power plants followed. In addition to the governmen-tal investigations such as the Kemeny Com-mission and the Nuclear Regulatory Commission's (NRC) Special Inquiry Group, the electric utility industry, through its Electric Power Research Institute, has established the Nuclear Safety Analysis Center (NSAC) to analyze in depth the TMI accident.
NRC "Lessons Learned" The Nuclear Regulatory Commission's review of the design and operation of all nuclear power plants, and the emergency response capabilities for coping with acci-dents, developed thirty-one recommendations for implementation in the immediate or near term. These short term recommendations deal with plant design, operations and emergency preparedness.
The Nuclear Regulatory Commission's review is continuing and more recommenda-tions will be made. These long term recom-mendations will deal with operator training and qualification and the licensing process.
The utility industry has established the Institute for Nuclear Power Operations (INPO),
which will set and maintain uniformly high standards for operator training and qualifica-tion throughout the industry and act as an accrediting agency for these programs.
PE Review PE set up its own task force to review independently the TMI experience and to make recommendations for improving the safety of the Peach Bottom and Limerick plants. While concluding that operations are extremely safe, the task force made twenty-two recommendations for improving operations.
Seventeen of these recommendations proved to be similar to the Nuclear Regulatory Commission's recommendation for which implementation was required. The five internal recommendations not addressed by the Nuclear Regulatory Commission have been or are in the process of being implemented.
Implementing Changes Implementing both the NRC's recommenda-14 tions and PE's internal recommendations has required, and will continue to require, a large commitment of manpower. The ultimate cost of implementing the short term recommenda-tions, and the full scope and cost of the long term recommendations from the NRC are still unknown; however, it is estimated $30 million may be required to cover plant modifications at the Peach Bottom and Salem stations in the next few years.
PE has always insisted on providing the best training possible for its nuclear reactor opera-tors. Peach Bottom No. 1, PE's first nuclear plant, had its own simulator which was used to train and retrain operating personnel through-out the operating lifetime of the unit. PE uses simulator facilities extensively in training oper-ators for Peach Bottom No. 2 and No. 3, and well over a year ago, the Company decided to build its own simulator and training center at Limerick, which is now underway.
As a further step in strengthening the Company's nuclear program, Vincent S. Boyer has been elected Senior Vice President, Nuclear Power. Mr. Boyer will be responsible for coordinating all of the Company's nuclear-related activities. Mr. Boyer was the Superin-tendent of the Company's first nuclear power plant. He is a past President of the American Nuclear Society and was Philadelphia's "1979 Engineer of the Year." John S. Kemper, 52, will succeed Mr. Boyer as Vice President of Engineering and Research. Mr. Kemper also has considerable experience in the Company's nuclear program.
Future of Nuclear Power The TM I accident was the most serious to date in the nuclear industry in economic terms, but resulted in no injuries or fatalities.
In the words of the Kemeny Commission, "We conclude that the most serious health effect of the accident was severe mental stress, which was short-lived."
Nuclear power has had an enviable record of safety and reliability. PE is convinced the changes produced in the TMI aftermath will improve upon the nuclear power industry's performance in providing a much-needed source of energy for the country. PE has taken the "lessons learned" at TM I seriously, and its confidence in the future of nuclear technology is as strong as ever.
Financial Section Contents 15 Report of Auditors 16 Management Discussion and Analysis of the Consolidated Statements of Income 17 Consolidated Statements of Income 18 Consolidated Balance Sheets 20 Consolidated Statements of Retained Earnings 20 Consolidated Statements of Changes in Financial Position 21 Notes to Financial Statements 26 Schedule of Long-Term Debt 27 Schedule of Capital Stock 28 Financial Statistics 30 Operating Statistics Report of Auditors To Shareholders and the Board of Directors Philadelphia Electric Company Philadelphia, Pennsylvania We have examined the consolidated balance sheets of Philadelphia Electric Company and Subsidiary Compa-nies as of December 31, 1979 and 1978, and the related consolidated statements of income, retained earnings, and changes in financial position for the years then ended. 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 consolidated financial statements referred to above (pages 17 to 27) present fairly the financial position of Philadephia Electric Company and Subsidiary Companies as of December 31, 1979 and 1978, and the results of their operations and the changes in their financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis.
1900 Three Girard Plaza Philadelphia, Pennsylvania February 8, 1980 COOPERS & LYBRAND 15 l
Management Discussion and Analysis of the Consolidated Statements of Income In General -
The revenue growth of recent years has been accompanied by substantial increases in operating costs and carrying charges on increased investment in plant and equipment. Any future increases in such costs and charges may be expected to affect future net income and earnings per average share adversely unless periodic rate relief is obtained to offset them. In addition, sluggish economic conditions in the Company's service area are continuing to have an adverse effect on operating results.
The Company estimates that 99% of the $1.80 per share dividend paid to common shareholders in 1979 represents a return of capital which is not taxable as dividend income for Federal Income Tax purposes. This percentage is substantially higher than the prior year because of the significant increase in fuel and inter-change expenses which were incurred in 1979 but deferred because they are not expected to be billed to customers until 1980.
Operating Revenue Electric -
An electric operating revenue increase of
$46.7 million in 1978 over 1977 principally reflects higher rates. The $87.5 million increase in 1979 over 1978 reflects both higher rates and recovery of higher fuel costs. Sales of electricity increased 1 percent in 1979 over 1978.
Gas -
Gas operating revenue increases of $14.7 mil-lion in 1978 over 1977 and $31.6 million in 1979 over 1978 principally reflect the recovery of higher fuel costs.
Sales of gas increased 5 percent in 1979over1978 due to the sale of interruptible gas which was not available in 1978.
Fuel and Energy Interchange Expense In 1978 fuel and energy interchange expense was $1.4 million below 1977 due to the 69 percent increase in nuclear generation replacing high-cost interchange pur-chases and higher Company sales to the interchange as a result of the nationwide coal strike. In 1979, fuel and energy interchange expense was $87.8 million above 1978 due primarily to higher fuel costs and higher inter-change purchases. Deferred fuel expenses increased
$98.1 million in 1979 over 1978.
16 Other Operation and Maintenance Expenses Other operation and maintenance expenses have increased in 1978 and 1979 due to inflation and growth in utility plant.
Depreciation Increases in depreciation in 1978 and 1979 reflect additions to new plant in service.
Taxes on Income 1978 income taxes were slightly above 1977 income taxes. In 1979, income taxes were $19.8 million less than in 1978 due to the lower federal tax rate, the flow-through of state deferred taxes and lower taxable income which was caused by higher deductions for operating and main-tenance expenses, interest charges and depreciation.
As a result of lower taxable income in 1979, the Com-pany was able to use only $0.6 million of Investment Tax Credits compared to $35.1 million in 1978. About $39.0 million of Investment Tax Credits available in 1979will be carried forward for use through 1986.
Income Tax Credits, net, have increased in 1978 and 1979 as a result of higher Allowance for Borrowed Funds Used During Construction.
Taxes, Other than Income Taxes, Other than Income, have increased due to increases in revenue, which is subject to a gross receipts tax, higher capital stock, realty and social security taxes.
Allowance for Funds Used During Construction (AFUDC)
The increase in AFUDC for 1978 over 1977 and 1979 over 1978 resulted from a higher cost of capital for con-struction and higher construction work in progress.
Interest Charges Interest charges on long-term debt increased in 1978 over 1977 and 1979 over 1978 because of higher costs of money and the sale of additional issues of debt. Interest charges on short-term debt were essentially the same in 1978 as 1977, but increased by $4.9 million in 1979 over 1978 due to higher interest rates and higher short term debt.
Consolidated Statements of Income Philadelphia Electric Company and Subsidiary Companies Operating Revenues Electric Gas...............................................................
Steam............................................................
Total Operating Revenues Operating Expenses Fuel and Energy Interchange.........................................
Other Operation Expense............................................
Maintenance.......................................................
Depreciation.......................................................
Taxes on Income...................................................
Taxes, Other than Income...........................................
Total Operating Expenses Operating Income...................................................
Other Income Allowance for Other Funds Used During Construction...................
Income Tax Credits, net.............................................
Other, net.........................................................
Total Other Income Income Before Interest Charges Interest Charges Long-Term Debt....................................................
Short-Term Debt...................................................
Allowance for Borrowed Funds Used During Construction................
Net Interest Charges Net Income........................................................
Preferred Stock Dividends...........................................
Earnings Applicable to Common Stock................................
Average Shares of Common Stock Outstanding (Thousands).............
Earnings Per Average Common Share (Dollars).........................
Dividends Per Common Share (Dollars)................................
See notes and schedules to financial statements.
17 For the Year Ended December 31 1979 1978 (Thousands of Dollars)
$1,311,891
$1,224,404 221,135 189,522 45,479 42,832 1,578,505 1,456,758 661,724 573,905 247,152 220,543 117,491 109,407 120,608 116,527 79,055 98,896 106,676 95,832 1.332,706 1,215,110 245,799 241,648 46,008 37,617 33,884 26,355 1,710 4,605 81,602 68,577 327,401 310,225 192,990 176,290 7,315 2,454 (67,375)
(53,380) 132,930 125,364 194,471 184,861 44,773 43,512 149,698 141,349 80,529 75,391
$1.86
$1.87
$1.80
$1.80
Consolidated Balance Sheets Philadelphia Electric Company and Subsidiary Companies ASSETS Utility Plant, at original cost In Service Electric..........................................................
Gas.............................................................
Steam..........................................................
Common, used in all services......................................
Less: Accumulated Depreciation..................................
Net Utility Plant in Service.........................................
Construction Work in Progress Nuclear Fuel, at amortized cost......................................
Nonutility Property and Other Investments.............................
Current Assets Cash and Temporary Cash Investments Accounts Receivable Customers.......................................................
Other...........................................................
Deferred Fuel Expense..............................................
Materials and Supplies, at average cost Fuel (coal, oil and gas)
Operating and Construction........................................
Prepayments.......................................................
Deferred Debits....................................................
Total See notes and schedules to financial statements.
18 December 31 1979 1978 (Thousands of Dollars)
$3,655,729
$3,580,178 296,658 289,954 53,477 52,434 118,176 117,639 4,124,040 4,040,205 1,144,119 1,053,284 2,979,921 2,986,921 1,619,806 1,345,931 141,655 116,320 4,741,382 4,449,172 47,431 29,963 10,592 38,644 210,732 151,718 20,165 71,812 83,512 4,227 74,432 60,535 35,569 32,769 4,567 4,270 439,569 363,975 12,878 7,515
$5,241,260
$4,850,625
LIABILITIES Capitalization Common Shareholders' Equity Common Stock-See Schedule, Page 27............................
Other Paid-In Capital..............................................
Retained Earnings................................................
Preferred Stock-See Schedule, Page 27 Series Without Mandatory Redemption Requirements.................
Series With Mandatory Redemption Requirements....................
Long-Term Debt-See Schedule, Page 26.............................
Current Liabilities Short-Term Debt Bank Loans......................................................
Commercial Paper................................................
Current Maturities of Long-Term Debt.................................
Accounts Payable Taxes Accrued.........................................................
Deferred.........................................................
Interest Accrued Dividends Declared.................................................
Other.............................................................
Deferred Credits Accumulated Deferred Income Taxes Accumulated Deferred Investment Tax Credits.........................
Other.............................................................
Total See notes and schedules to f inancial statements.
19 December 31 1979 1978 (Thousands of Dollars)
$1,239,647 2,203 338,154 1,580,004 372,472 206,851 2,241,890 4,401,217 35,350 49,837 127,790 111,176 22,046 43,086 58,143 22,248 13,899 483,575 202,815 135,294 18,359 356,468
$5,241,260
$1,139,659 1,968 333,649 1,475,276 372,472 210,900 2,173,226 4,231,874 4,650 11,569 52,934 106,864 23,881 20,650 50,958 13,409 7,977 292,892 177,286 138,421 10,152 325,859
$4,850,625
Consolidated Statements of Retained Earnings Philadelphia Electric Company and Subsidiary Companies Balance, January 1.................................................
Net Income........................................................
Cash Dividends Declared Preferred Stock..................................................
Common Stock...................................................
Expenses of Capital Stock Issues.....................................
Balance, December 31..............................................
For the Year Ended December 31 1979 1978 (Thousands of Dollars)
$333,649
$328,699 194,471 184,861 528,120 513,560 44,760 43,877 144,984 135,687 222 347 189,966 179,911
$338,154
$333,649 Consolidated Statements of Changes in Financial Position Source of Funds Net Income........................................................
Charges (Credits) Not Affecting Funds Depreciation and Amortization Deferred Income Taxes, net......................................
Investment Tax Credits, net of Amortization........................
Allowance for Other Funds Used During Construction...............
Total from Operations Sale of Long-Term Debt..................................................
Preferred Stock..................................................
Common Stock...................................................
Increase in Short-Term Debt.........................................
Use of Funds Total from Financings Total Expenditures for Utility Plant.........................................
Allowance for Other Funds Used During Construction (Deduction)......................................................
Dividends on Preferred and Common Stock............................
Increase (Decrease) in Deferred Fuel Expense..........................
Retirement of Long-Term Debt.......................................
Increase (Decrease) in Other Items of Working Capital...................
Other, net.........................................................
Total See notes and schedules to financial statements.
20
$194,471
$184,861 123,066 122, 116 44,854 39,340 (3,019) 31,717 (46,008)
(37,617) 313,364 340.417 200,000 150,000 50,000 99,988 32,975 68,968 1,344 368,956 234,319
$682,320
$574,736
$421,615
$405,606 (46,008)
(37,617) 189,744 179,564 79,285 (18,781) 56,169 31,422 (28,114) 5,436 9,629 9,106
$682,320
$574,736
Notes to Financial Statements
- 1. Significant Accounting Policies General. Al l utility subsidiary companies of Philadelphia Electric Company are wholly-owned and are included in the consolidated financial statements. Non-utility subsid-iaries, which are not significant, are included in invest-ments and accounted for by the equity method. The accounts are maintained in accordance with the uniform system of accounts prescribed by the regulatory authori-ties having jurisdiction.
Revenues. Revenues are recorded in the accounts upon billing to the customer. Rate increases are billed from dates authorized or permitted to become effective by regulatory authorities. Due to the cycle billing there is an amount of unbilled revenue at the end of any period.
The 1978 financ ial statements reflect recoupment revenue of $34,571,000 which was authorized by the Pennsylvania Public Utility Commission in December 1978 and billed to customers in 1979.
Fuel Expense. For financial reporting purposes the Com-pany defers that portion of fuel expense which is re-coverable under energy adjustment clauses until it is subsequently billed. For income tax purposes, fuel expense is considered an expense when incurred.
The Company both leases and owns nuclear fuel for use in its nuclear generating stations. Such fuel costs are charged to fuel expense on the basis of the number of units of thermal energy produced as they relate to the estimated total thermal units to be produced over the life of the fuel. Such charges are computed on the basis of a zero net salvage value (assuming reprocessing facilities will be available for spent fuel as needed). If such repro-cessing facilities are not available, the Company would incur additional costs to dispose of spent fuel. The Com-pany believes that any such additional costs would be recoverable through adjustments of rates charged to its customers.
Depreciation. For financial reporting purposes, deprecia-tion is provided over the estimated service lives of the plant on a straight-line basis. No provision is presently provided for the potential decommissioning cost of the nuclear plants. The Company believes that any such ad-ditional costs, which may be significant, would be re-coverable through adjustments of rates charged to its customers. The annual depreciation provisions, ex-pressed as a percent of average depreciable utility plant in service, were approximately 3.11% for1979 and 2.99% for 1978.
Income Taxes. Deferred income taxes are provided for differences between book and taxable income to the extent permitted by the regulatory authorities for rate-making purposes.
21 Investment tax credits, other than credits resulting from contributions to the Tax Reduction Act Stock Owner-ship Plan for employees which do not affect income, are deferred and amortized by credits to income over the estimated useful life of the related utility plant.
Allowance for Funds Used During Construction (AFUDC).
AFUDC is a non-cash item which is defined in the applica-ble regulatory system of accounts as "the net cost for the period of construction of borrowed funds used for con-struction purposes and a reasonable rate on other funds when so used." AFUDC is recorded as a charge to con-struction work in progress (CWIP), and the equivalent credits are to "Interest Charges" for the gross cost of borrowed funds and to "Other Income" for the cost of equity funds, less income tax credits arising from interest charges capitalized, which are also included in "Other Income." For income tax purposes, AFUDC is not included in taxable income nor is the depreciation of capitalized AFUDC a tax-deductible expense. The rate used for capitalizing AFUDC, which averaged 7.45% in 1979 and 7.20% in 1978, is computed under a method prescribed by the regulatory authorities which provides for its application to a CWIP base which includes prior AFUDC and which provides for semi-annual compound-ing. The rate is a "net after-tax rate" whereby the current income tax reductions arising from interest charges asso-ciated with debt used to finance construction,
$34,754,000 in 1979 and $28,346,000 in 19Z8, are recorded in "Other Income."
Retirement Plan. The Company has a non-contributory trusteed retirement plan applicable to all regular employees. Pension costs include normal cost for the year and amortization of unfunded prior service costs, over ten to twenty-year periods (see Note 5). Approxi-mately 80% of such costs were charged to operating expense and 20%, associated with construction labor, to the cost of new utility plant.
Gas Exploration and Development Costs. The Company has invested in several joint ventures for exploring and drilling for gas. In accordance with the accounting prac-tice prescribed by the Federal Energy Regulatory Com-mission these costs are capitalized under the full cost method. Such costs are charged to operations commen-surate with the use of gas arising from these ventures.
Non-utility property and other investments at December 31, 1979 and 197.8, include capitalized costs of
$25,488,000 and $14,496,000, respectively.
- 2. Taxes on Income Included in operating expenses:
Current income taxes Federal....................
State......................
Total....................
Deferred income taxes, net Federal....................
State......................
Total....................
Investment tax credits, net of amortization 1979 1978 (Thousands of Dollars)
$29,844
$15,710 7,376 12,129 37,220 41,058 3,796 44,854 27,839 34,484 4,856 39,340 Federal....................
(3,019) 31,717 Total Federal....................
67,883 81,911 State......................
11,172 16,985 Total.................... $79,055
$98,896 Included in other income:
Current income taxes Federal.................... (27,021) (21,189)
State......................
(6,863)
(5,166)
Total.................... $(33,884) $(26,355)
Total income tax provisions:
Federal....................
40,862 60,722 State......................
4,309 11,819 Total.................... $45,171
$72,541 Investment tax credits of $605,000 have been realized as a reduction of federal income taxes currently payable in 1979. Approximately $39,000,000 of investment tax credits available in 1979 have not been realized due to the limitations based on taxable income. These credits may be used to reduce federal income taxes in future years through 1986. Investment tax credits in the amount of
$35,118,000 were realized in 1978.
Investment tax credits consist of (a) the basic credits allowable of 10% plus (b) an additional credit of 1 V2%
($4,005,000 in 1978, none realized in 1979) allowed the Company to offset federal income tax. Since such addi-tional amount was passed on to the employees of the Company in the form of Philadelpha Electric Company common stock, such additional credit had no effect on net income.
Effective July 1, 1978, the Pennsylvania Public Utility Commission disallowed the normalization of state income tax deferrals associated with the use of acceler-ated depreciation for tax purposes.
The aforementioned income tax provisions differ from amounts computed by applying the Federal statutory tax rate to adjusted income before income taxes for the fol-lowing reasons:
22 1979 1978 (Thousands of Dollars)
Net income.................... $194,471 $184,861 Total income tax provisions......
45,171 72,541 Income before income taxes..... 239,642 257,402 Deduct -
allowances for funds used during construction (non-taxable)................. (113,383) (90,997)
Adjusted income before income taxes................. $126,259 $166,405 Income taxes on above at Federal statutory rate (46% in 1979, 48% in 1978)................ $58,079
$79,874 Increase (decrease) due to:
Excess of tax depreciation over book depreciation not normalized...............
(2,987)
(2,210)
State income tax, net of Federal income tax benefits....
2,327 6,146 Taxes and pension costs capitalized but expensed for tax purposes..............
(6,382)
(5,407)
Amortization of investment tax credits previously deferred.....................
(3,624)
(3,401)
Other, net.....................
(2,242)
(2,461)
Total income tax provisions
$45,171
$72,541 Provision for income taxes as a percent of:
Income before income taxes....
18.8%
28.2%
Adjusted income before income*taxes..................
35.8%
43.6%
Provisions for deferred income taxes consist of the follow-ing tax effects of timing differences betweeen tax and book income:
Depreciation and amortization...
Recoupment revenue...........
Deferred fuel expense...........
Other..........................
- 3.
Taxes, Other than Income Gross receipts..................
Capital Stock...................
Realty.........................
Other, principally social security..
1979 1978 (Thousands of Dollars)
$26,981 (18,462) 40,899 (4,564)
$32,849 18,462 (10,029)
(1,942)
$44,854
$39,340 1979 1978 (Thousands of Dollars)
$67,385 17,030 8,819 13,442
$106,676
$62,115 15,102 6,873 11,742
$95,832
- 4. Short-Term Debt The average short-term borrowings during 1979 aggre-gated $54,466,725 at an.average rate of 12.72% and during 1978 aggregated $20,356,000 at an average rate of 10.55%. The average rates are computed on a daily basis. The maximum short-term borrowings outstanding were $135,525,000 in 1979 and $60,484,000 in 1978.
The average rate of interest on short-term borrowings was 15.11 % for bank loans and 14.00% for commercial paper at December 31, 1979, and 11.31 % for bank loans and 10.20% for commercial paper at December 31, 1978. As of December 31, 1979 the Company had informal lines of credit with banks aggregating $214,875,000. The Com-pany generally does not have formal compensating bal-ance arrangements with these banks. The Company maintains deposits with banks for working funds for nor-mal operations.
- 5. Retirement Plan Costs Retirement plan costs, which are funded as accrued, aggregated $25,713,000 in 1979 and $21,396,000 in 1978. Based on the most recent available actuarial report as of January 1, 1979, the unfunded liability of the plan amounted to approximately $24,000,000 and the actuar-ially computed vested benefits exceeded the actuarial value of the plan assets by approximately $9,000,000.
Included in the aforementioned unfunded liability is approximately $17,000,000, relating to the cost of an early retirement amendmenttothe plan effective in 1978, which amount is being amortized over a ten-year period beginning in 1979.
- 6. Jointly-Owned Electric Utility Plant The Company's ownership interests in jointly-owned util-ity plant, excluding nuclear fuel, at December 31, 1979 were as follows:
Production Participating Company's Share of Plant Interest Utility Plant, Net Peach Bottom 42.49%
$302,317,000 Salem 42.59%
$676,716,000 Keystone 20.99%
$ 31,900,000 Conemaugh 20.72%
$ 43,220,000 Transmission Plant 21 % to 43%
$ 62,254,000 The Company's participating interests are.financed with Company funds and when placed in service all operations are accounted for as if such participating interests were wholly-owned facilities.
- 7. Commitments and Contingencies The Company has incurred substantial commitments in connection with its construction program. Construction expenditures are estimated to be $610,000,000 for 1980 and $1,886,000,000 for 1981-1983. These estimates, which are based on current circumstances, are reviewed and revised periodically to reflect changes in economic conditions, revised load forecasts and other appropriate factors.
The nuclear plant facilities under construction require numerous permits and licenses culminating in an operat-ing license for a facility. The Company cannot be assured that such operating licenses will be issued at completion of the facilities. Subsequent to the nuclear incident at Three Mile Island, the Nuclear Regulatory Commission 23 (NRC) declared a moratorium on the issuance of operat-ing licenses for nuclear plants pending further study.
The Price-Anderson Act places a "Limit of Liability" of
$560,000,000 on each licensed nuclear facility for public liability claims that could arise from a nuclear incident involving any licensed facility in the nation. The Company and its co-owners of the Peach Bottom and Salem Sta-tions have insured for this exposure by purchasing private insurance in the maximum available amount of
$160,000,000, and the remainder is currently provided by indemnity agreements with the NRC. However, since August 1977, the indemnity by the NRC has decreased and in the event of a nuclear incident, the Company, to the extent of its ownership participation (42.5%), could be assessed $5,000,000 per incident for each licensed reac-tor, subject to a maximum of $10,000,000 per licensed reactor in any one year in the event of more than one incident. The Company is currently a participant in three licensed reactors; therefore, its maximum assessment would be $6,375,000 per incident with a maximum amount of $12,750,000 in any one year.
For damage to the nuclear plant facilities which could arise from an incident at the Peach Bottom Station, the Company and its co-owners have private insurance up to
$300,000,000; for the Salem Station, the Company through the operator of the Station is a member of Nuclear Mutual Limited (NML) which provides for cover-age up to $300,000,000. In the event of losses at any plants insured by NML, the Company may be subject to an additional premium assessment of approximately
$13,000,000. The Company is a self-insurer, to the extent of its ownership interests, for any property loss in excess of the aforementioned amounts of insurance coverage.
The Company's proportionate share of a commitment to purchase nuclear fuel for the Peach Bottom Station as of December 31, 1979 was $59,383,000. An independent fuel company has been authorized to acquire and own up to a maximum of $200,000,000 of nuclear fuel at any one time and has contracted to sell the energy therefrom to the Company, as the operator of the Station.
The minimum rental commitments under all noncan-ce la ble agreements aggregated $188,296,000 at December 31, 1979. Annual rental commitments are estimated to be $30,036,000 for 1980; $30,514,000 for 1981; $27,184,000 for 1982; $24,323,000for1983; and
$7,772,000 for 1984. Rentals charged to operating expenses were $41,659,000 in 1979 and $36,232,000 in 1978.
Certain leases, including the nuclear fuel contract, meet the criteria of a capital lease as defined by State-ment of Financial Accounting Standards No. 13, but are not accounted for as such in accordance with the rate-ma king process. If such leases were capitalized, the amounts thereof would not have a material effect on assets, liabilities, or related expenses.
Actions have been filed in the U.S. District Court against the Company with respect to alleged discrimination in its employment or promotion practices. Counsel is of the opinion that the ultimate outcome of these actions would not have a material adverse effect on the financial posi-tion of the Company.
- 8. Segment Information:
1979 1978 Electric Gas Steam Total Electric Gas Steam Total (Thousands of Dollars)
(Thousands of Dollars)
Operating revenues...... $1,311,891 $221,135
$45,479 $1,578,505 $1,224,404 $189,522
$42,832 $1,456,758 Operating expenses, excluding depreciation 975,414 194,416 42,268 1,212,098 896,339 162,983 39,261 1,098,583 Depreciation............
109,990 8,944 1,674 120,608 106,253 8,618 1,656 116,527 Total operating expenses............. 1,085,404 203,360 43,942 1,332,706 1,002,592 171,601 40,917 1,215,110 Operating income....... $ 226,487 $ 17,775 $ 1,537 $ 245,799 $ 221,812 $ 17,921
$ 1,915 $ 241,648 Utility plant additions............. $ 401,674 $ 19,490 $
451 $ 421,615 $ 395,271 $ 10,010 $
325 $ 405,606 December 31:
Allocable assets:
Net utility plant(*).... $4,449,522 $261,719
$30,141 $4,741,382 Materials and supplies 91,685 18,017 299 110,001
$4,167,122 $250,466
$31,584 $4,449,172 78,452 14,456 396 93,304
$4,541,207 $279,736
$30,440 $4,851,383 $4,245,574 $264,922
$31,980 4,542,476 308,149
$4,850,625 Nonallocable assets.....
Tota I assets
(*) Includes construction wo rk in progress and allocated common utility property.
- 9. Quarterly Data (Unaudited):
389,877
$5,241,260 The quarterly data shown below, in the opinion of the Company, includes all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of such amounts.
Quarter Operating Net Ended Revenues Income (Thousands of Dollars) 1979 1978 1979 1978 Mar 31 $419,206 $402,012
$57,193
$55,625 Jun 30 340,945 326,100 41,694 29,455 Sep 30 387,564 384,275 55,232 57,581 Dec 31 430,790 344,371 40,352 42,200
- 10. Supplementary Information to Disclose the Estimated Effects of Inflation for the Year Ended December 31, 1979 (Unaudited)
The following supplementary information is supplied to show the estimated effects of inflation because the Company is required to do so according to the Statement of Financial Accounting Standards No. 33 (FAS No. 33). The methods required to develop this information are approximate and complex and may not necessarily reflect the true effects of inflation on the Company. Under existing regulatory law, the Company is permitted to recover actual operating and capital costs incurred to serve customers and a reasonable return on investment, and the Company believes it will be al lowed to recover cost increases caused by inflation as such increases are actually incurred.
Effect of Inflation on Reported Income. In adjusting the Consolidated Statements of Income, as shown below, only depreciation expense is required to be adjusted for the effect of inflation.
Earnings Applicable Average Shares Earnings Per to Common Outstanding Average Share Stock (Thousands)
(Dollars) 1979 1978 1979 1978 1979 1978
$45,953
$45,473 76,558 74,661
$.60
$.61 30,506 18,586 81,263 75,084
.37
.25 44,058 46,336 81,840 75,697
.54
.61 29,181 30,954 82,378 76,102
.35
.41 24 The "constant dollars" and "current costs" depre-ciation expenses were determined by ;:ipplying the Company's depreciation rates to restated deprecia-ble plant in service at December 31, 1979. Fuel inven-tories have not been restated from their original cost because the operation of fuel adjustment clauses permits the automatic recovery of fuel costs.
If the Company had to replace its entire utility plant at this time, the costs to do so would greatly exceed the original costs incurred when the facilities were built because of the cumulative effect of inflation.
These plant replacement costs, net of accumulated depreciation, are estimated at $7,542,000,000 as restated for "constant dollars" and $8,581,000,000 as restated for "current costs." Under the "constant dollars" method, the Company is required to restate the original costs in terms of dollars of equal purchasing power, as measured by the Consumer Price Index for all Urban Consumers. The "current costs" method uses specific indices representing the Company's experienced cost of construction. Results from the two
methods differ because construction costs have increased more rapidly than consumer prices in general. In the Company's opinion, the "current costs" method is more appropriate for estimating the effect of inflation on utility plant. Additional "current costs" data as required by FAS No. 33 is disclosed in the Company's annual report to the Securities and Exchange Commission on Form 10-K.
Consolidated Statements of Income Adjusted for Inflation As Adjusted For for the Year Ended December 31, 1979 (Thousands of Dollars)
Constant Dollars Current Costs (Average (Average Operating Revenues.....................
Depreciation............................
Other Operating Expenses................
As Reported
$1,578,505 120,608 1,212,098 1979 Dollars)
$1,578,505 233,000 1,212,098 1979 Dollars)
$1,578,505 277,000 1,212,098 Operating Income.......................
Other Income...........................
Income Before Interest Charges and Preferred Stock Dividends..........
Interest Charges and Preferred Stock Dividends.......................
Earnings Applicable to Common Stock........................
Earnings Per Average Share...............
Effects of Inflation on Shareholders' Equity. During 1979 the effect of inflation on the Company's actual original cost of net utility plant amounted to
$559,000,000 which was not recovered because rates are based on depreciation of original cost plant. If the Company were required to charge the entire
$559,000,000 against income in 1979, earnings appli-cable to common stock would become a loss of
$409,302,000.
The effect of 1979's inflation (13.3%) on the value of the Company's debt and preferred stock is approxi-mately $384,000,000 which partially offsets the
$559,000,000 effect of inflation on utility plant.
245,799 81,602 327,401 177,703
$149,698
$1.86 133,407 81,602 215,009 177,703
$37,306
$0.46 89,407 81,602 171,009 177,703
($6,694)
($0.08)
If the Company had earned at the rate of inflation (13.3%) on its shareholders' equity in 1979, earnings would have been approximately $200,000,000 compared with reported earnings of $149,698,000.
Thus, reported earnings applicable to common stock in 1979 were about $50,000,000 below the level necessary to offset the impact of inflation on share-holders' equity.
Adjustment of Selected Five Year Financial Information.
In order to reflect the impact of general inflation on selected financial information for each of the years 1975 through 1979, the following table shows actual data com-pared with data adjusted to "average 1979 dollars."
Five Year Summary of Selected Financial Information Showing Adjustments to Reflect Inflation Development of Adjustment Factors 1975 1976 1977 1978 1979 Consumer Price Index Average During Year...................
161.2 170.5 181.5 195.4 217.4 Year End.............................
166.3 174.3 186.1 202.9 229.9 Consumer Price Index Multiplier (217.4 -:- year's index)
A = Average..........................
1.35 1.28 1.20 1.11 1.00 B = Year End.........................
1.31 1.25 1.17 1.07
.95 Actual and Adjusted Financial Information Dividends Per Share Actual Paid...........................
$ 1.64
$ 1.64
$ 1.76
$ 1.80
$ 1.80 Adjusted (Actual x A)..................
2.21 2.10 2.11 2.00 1.80 Market Price Per Share Actual Year End.......................
$15.00
$17.88
$19.63
$15.50
$13.75 Adjusted (Actual x B)..................
19.65 22.35 22.97 16.59 13.06 Operating Revenues (thousands of dollars)
Actual................................
$1,134,810
$1,224,141
$1,394,762
$1,456,758
$1,578,505 Adjusted (Actual x A)..................
1,531,994 1,566,900 1,673,714 1,617,001 1,578,505 Common Shareholders' Equity (thousands of dollars)
Actual Year End.......................
$1,222,815
$1,325,670
$1,437,202
$1,475,276
$1,580,004 Adjusted (Actual x B)..................
1,601,888 1,657,088 1,681,526 1,578,545 1,501,004 25
Schedule of Long-Term Debt-December 31, 1979 and 1978 Philadelphia Electric Company First and Refunding Mortgage Bonds (A):
Series 11%
2%%
31/4%
31/a%
31/a%
43/a%
4%%
3%%
5%
9%
81/4%
61/a%
71/2%
7112%
73,~%
11%
11%%
73/a%
9%%
8%%
8W%
12112%
91/a%
6%
8%%
91/a%
Due 1980.........................................
1981.........................................
1982.........................................
1983.........................................
1985.........................................
1986.........................................
1987.........................................
1988.........................................
1989.........................................
1993.........................................
1994.........................................
1995.........................................
1996.........................................
1997.........................................
1998.........................................
1999.........................................
2000.........................................
2000.........................................
2000.........................................
2001.........................................
2002.........................................
2003.........................................
2004.........................................
2005 (Sold 1979)..............................
2006.........................................
2007.........................................
2007.........................................
2008 (Sold 1978)..............................
Total First and Refunding Mortgage Bonds..............................
Notes Payable-Banks..... (B) 1979-87 (C)......................
Pollution Control Note...... 5.5%
1979-97.........................
Debentures............... 12%%
1981 Debentures............... 4.85%
1986 Unamortized Debt Discount and Premium, Net............................
Total Philadelphia Electric Company....................................
Philadelphia Electric Power Company-a subsidiary:
Sinking Fund Debentures 41/2%
1995 Unamortized Debt Discount.............................................
Total Long-Term Debt (Annual interest requirements $207,185,000).............,............................
Current Maturities included in Current Liabilities (D)......................
Long-Term Debt included in Capitalization..............................
(A) Utility plant is subject to the lien of the Company's mortgage.
(B) At interest rates ranging from prime rate to 112% of prime rate.
(C) $50,000,000 sold in 1979 and 1978; $50,000,000 refinanced in 1979.
1979 1978 (Thousands of Dollars) 125,000
$ 125,000 30,000 30,000 35,000 35,000 20,000 20,000 50,000 50,000 50,000 50,000 40,000 40,000 40,000 40,000 50,000 50,000 60,000 60,000 50,000 50,000 70,272 72,000 80,000 80,000 75,000 75,000 100,000 100,000 100,000 100,000 71,428 73,240 80,000 80,000 65,000 65,000 80,000 80,000 100,000 100,000 75,000 75,000 125,000 125,000 100,000 100,000 100,000 23,500 23,500 75,000 75,000 100,000 100,000 1,970,200 1,873,740 225,000 175,000 34,000 35,000 100,000 100,000 25,562 26,294
( 5,892)
(5,571) 2,348,870 2,204,463 20,894 21,791 (84)
(94) 2,369,680 2,226,160 (127,790)
(52,934)
$2,241,890
$2,173,226 (D) Long-term debt maturities in the period 1980-1984 are as follows: 1980-$127,790,000; 1981-$140,172,000; 1982-$45,300,000; 1983-$30,300,000; and 1984-$85,300,000.
26
Schedule of Capital Stock-December 31, 1979 and 1978 Number of Shares Amount Authorized Outstanding (Thousands of Dollars) 1979 1978 1979 1978 Common Stock-no par (A)................ 100,000,000 82,883,216 76,512,685
$1,239,647
$1,139,659 Preferred Stock ($100 par) cumulative:
Current Redemption Series (without mandatory Price (B) redemption requirements):
9.50%...................... $106.50 750,000 750,000 750,000
$ 75,000
$ 75,000 8.75%......................
107.00 650,000 650,000 650,000 65,000 65,000 7.85%......................
107.00 500,000 500,000 500,000 50,000 50,000 7.80%......................
105.50 750,000 750,000 750,000 75,000 75,000 7.75%......................
105.50 200,000 200,000 200,000 20,000 20,000 4.68%......................
104.00 150,000 150,000 150,000 15,000 15,000 4.4%.......................
112.50 274,720 274,720 274,720 27,472 27,472 4.3%.......................
102.00 150,000 150,000 150,000 15,000 15,000 3.8%.......................
106.00 300,000 300,000 300,000 30,000 30,000 3,724,720 3,724,720 3,724,720 372,472 372,472 Series (with mandatory redemption requirements):
9.52%......................
109.52 500,000 500,000(C) 500,000(C) 50,000 50,000 8.75% (Sold 1978)...........
108.75 500,000 500,000(0) 500,000(D) 50,000 50,000 7.325%.....................
105.57 750,000 720,000(E) 750,000(E) 72,000 75,000 7%.........................
104.00 400,000 348,510(F) 359,000(F) 34,851 35,900 2,150,000 2,068,510 2,109,000 206,851 210,900 Unclassified.................
4,125,280 Total Preferred Stock.....
10,000,000 5,793,230 5,833,720
$579,323
$583,372 (A) At December 31, 1979 there were 1,281,861 shares reserved for issuance under stock purchase plans. Common Stock issued in 1979 and 1978 was as follows:
Dividend Employee Tax Reduction Act Public Reinvestment Purchase Stock Ownership Sales Plan Plan Plan Total 1979-Shares 4,000,000 1,740,991 279,315 350,225 6,370,531 Proceeds
$63,460,000
$26,389,242
$4,416,561
$5,722,677
$99,988,480 1978--Shares 1,433,489 215, 198 239,481 1,888,168 Proceeds
$24,852,000
$3,871,000
$4,252,000
$32,975,000 (B) Redeemable at the option of the Company at the indicated dollar amounts per share, plus accrued dividends.
(C) 20,000 shares to be redeemed annually at $100 per share commencing May 1, 1981.
(D) 33,300 shares to be redeemed annually at $100 per share commencing May 1, 1984.
(E) 30,000 shares are being redeemed annually at $100 per share commencing May 1, 1979.
(F) 8,000 shares are being redeemed annually at $100 per share. The Company purchased 10,490 shares in 1979 and 8,960 shares in 1978 for this purpose and at December 31, 1979 had applied 3,490 shares to future redemption requirements.
The excess of the aggregate par value of such shares over the aggregate purchase price is reflected in Other Paid-In Capital
($235,000 in 1979 and $149,000 in 1978).
27
Financial Statistics Summary of Earnings (Millions of dollars)
Operating Revenues (for details see pages 30 and 31)....................
Operating Expenses Fuel and Energy Interchange..........
Labor..............................
Other Materials, Supplies and Services..........................
Total Operation and Maintenance..
Depreciation........................
Taxes Total Operating Expenses.........
Operating Income......................
Other Income Allowance for Other Funds Used During Construction................
Income Tax Credits, net..............
Other, net..........................
Total Other Income..............
Income Before Interest Charges.......
Interest Charges Long-Term Debt.....................
Short-Term Debt.....................
Allowance for Borrowed Funds Used During Construction...........
Net Interest Charges.............
Net Income...........................
Preferred Stock Dividends..............
Earnings Applicable to Common Stock...
Dividends on Common Stock............
Earnings Retained.....................
Earnings per Average Share (dollars).....
Dividends per Common Share (dollars)...
Common Stock Equity (Per Share).......
Average Shares of Common Stock Outstanding (Millions)................
1979 1978 1977 1976 1975 1974
$1,578.5 $1,456.8 $1,394.8 $1,224.l $1,134.8 $1,011.7 661.7 209.3 155.4 1,026.4 120.6 185.7 1,332.7 245.8 46.0 33.9 1.7 81.6 573.9 195.0 135.0 903.9 116.5 194.7 1,215.1 241.7 37.6 26.3 4.6 68.5 575.3 179.2 121.4 875.9 107.8 188.9 1, 172.6 222.2 36.2 25.3 3.5 65.0 480.7 161.9 88.9 731.5 98.0 183.2 1,012.7 211.4 30.1 24.2 2.6 56.9 327.4 310.2 287.2 268.3 193.0 176.3 161.0 147.6 7.3 2.5 2.6 3.6 (67.4)
(53.4)
(49.8)
(47.5) 132.9 125.4 113.8 103. 7 194.5 44.8 149.7 145.0 184.8 43.5 141.3 135.7 173.4 40.7 132.7 124.9 164.6 39.0 125.6 107.7 4.7 $
5.6 $
7.8 $
17.9 $
1.86 $
1.87 $
1.87 $
1.91 1.80 $
1.80 $
1.76 $
1.64
$ 19.06 $ 19.28 $ 19.26 $ 19.13 80.5 75.4 70.8 65.6 457.8 152.2 72.6 682.6 91.2 163.9 937.7 197.l 23.3 22.3 2.0 47.6 439.2 134.0 73.4 646.6 77.8 134.3 858.7 153.0 25.3 25.5 0.3 51.1 244.7 204.l 136.5 106.3 7.9 14.2 (43.6)
(45.5) 100.8 75.0 143.9 129.1 36.0 33.7 107.9 95.4 95.4 86.4 12.5 $
9.0 1.86 $
1.81 1.64 $
1.64 19.05 $ 20.21 58.1 52.7 See page 16 for Discussion and Analysis of the Consolidated Statements of Income.
NYSE-Composite Common Stock Prices, Earnings and Dividends by Quarters (Per Share) 1979 1978 Fourth Quarter High Price
......... $151/2 Low Price.......... $13112 Earnings...........
35¢ Dividends..........
45 ¢ Third Quarter
$17
$143/4 54 ¢ 45 ¢ Second Quarter
$165/a
$151/s 37 ¢ 45¢ 28 First Quarter
$175/a
$155/a 60¢ 45¢ Fourth Quarter
$17%
$15 41 ¢ 45 ¢ Third Quarter
$187/a
$17 61 ¢ 45 ¢ Second Quarter
$19
$167/a 25¢ 45 ¢ 1969
$440.5 110.0 93.9 32.2 236.1 49.3 53.8 339.2 101.3 0.1 0.1 101.4 38.2 6.8 (7.9) 37.l 64.3 5.9 58.4 48.8 9.6
$ 1.97
$ 1.64
$18.84 29.6 First Quarter
$19%
$183/a 61¢ 45¢
Financial Statistics Summary of Financial Condition-December 31 (Millions of dollars) 1979 1978 1977 1976 1975 1974 1969 Assets Utility Plant, at Original Cost.....................
$5,885.5 $5,502.5 $5, 121.1 $4,747.2 $4,445.6 $4,123.9 $2,188.6 Less: Accumulated Depreciation..............
1,144.1 1,053.3 955.3 860.3 775.8 717.8 514.2 Total Utility Plant........
$4,741.4 $4,449.2 $4,165.8 $3,886.9 $3,669.8 $3,406. l $1,674.4 Nonutility Property and Other Investments.........
47.4 30.0 27.4 13.2 12.3 12.7 5.0 Current Assets Cash and Temporary Investments.............
10.6 38.6 30.8 23.8 17.4 16.0 17.0 Accounts Receivable.......
230.9 223.5 184.0 168.0 139.8 111.9 44.1 Deferred Fuel Expense.....
83.5 4.2 23.0 19.9 17.9 21.7 Materials and Supplies.....
110.0 93.3 102.3 88.3 88.0 72.5 29.l Other.... ~...............
4.6 4.3 3.8 2.6 2.5 21.1 1.6 Deferred Debits.............
12.9 7.5 10.9 14.7 13.8 6.0 4.9 Total Assets............
$5,241.3 $4,850.6 $4,548.0 $4,217.4 $3,961.5 $3,668.0 $1,776.1 Liabilities Common Stock..............
$1,239.6 $1,139.7 $1,106.7 $1,002.8 $ 916.6 $ 782.9 $ 365.0 Other Paid-In Capital.........
2.2 2.0 1.8 1.7 1.5 1.3 1.2 Retained Earnings...........
338.2 333.6 328.7 321.2 304.7 293.7 235.4 Common Shareholders' Equity................
1,580.0 1,475.3 1,437.2 1,325.7 1,222.8 1,077.9 601.6 Preferred Stock.............
579.3 583.4 534.2 535.l 485.9 486.4 127.5 Long-Term Debt.............
2,241.9 2,173.2 2,078.3 1,936.4 1,776.9 1,597.7 848.8 Total Capitalization......
4,401.2 4,231.9 4,049.7 3,797.2 3,485.6 3, 162.0 1,577.9 Current Liabilities Short-Term Debt..........
85.2 16.2 14.9 7.2 108.0 177.9 98.8 Current Maturities Of Long-Term Debt.........
127.8 52.9 28.7 36.9 60.9 91.9 8.5 Accounts Payable and Dividends Declared......
133.5 120.3 92.4 83.9 80.1 78.8 34.0 Taxes Accrued and Deferred................
65.1 44.5 36.7 30.7 44.2 28.0 8.3 Interest Accrued..........
58.1 51.0 48.6 43.2 37.8 30.5 10.9 Other....................
13.9 7.9 4.1 4.6 3.5 3.8 1.9 Deferred Credits.............
356.5 325.9 272.9 213.7 141.4 95.1 35.8 Total Liabilities........
$5,241.3 $4,850.6 $4,548.0 $4,217.4 $3,961.5 $3,668.0 $1,776.1 29
Operating Statistics 1979 1978 1977 1976 1975 1974 1969 ELECTRIC OPERATIONS Output (millions of kilowatt-hours)
Steam.........................
11,279 13,160 11,468 13,385 12,814 16,649 20,020 Nuclear........................
7,104 7,769 4,596 4,937 4,387 1,745 130 Hydraulic.......................
2,155 1,700 1,997 2,065 2,275 1,938 1,342 Pumped Storage Output.........
1,270 1,109 1,223 1,062 1,275 1,075 1,733 Pumped Storage Input...........
(1,847)
(1,606)
(1,761)
(1,506)
(1,785)
(1,515)
(2,395)
Purchase and Net Interchange....
9,180 6,651 9,759 7,666 7,363 5,300 2,293 Internal Combustion.............
454 704 847 792 914 1,200 341 Other..........................
716 36 1,016 5
T ota'I Electric Output...........
29,595 29,487 28,845 28,437 27,243 27,408 23,469 Sales (millions of kilowatt-hours)
Residential.....................
7,968 7,875 8,110 7,585 7,424 7,159 5,812 Small Commercial and Industrial..
2,928 2,888 2,825 2,755 2,624 2,558 2,292 Large Commercial and Industrial..
15,428 15,302 14,912 14,662 14,060 14,622 12,663 All Other.......................
1,277 1,329 1,350 1,271 1,227 1,217 1,106 Total Electric Sales 27,601 27,394 27,197 26,273 25,335 25,556 21,873 Number of Customers, December 31 Residential..................... 1,173,514* 1,158,853 1,148,171 1,137,544 1,120,981 1,113,036 1,060,376 Small Commercial and Industrial..
115,724*
115,945 115,883 115,422 114,896 117,237 120,997 Large Commercial and Industrial..
5,798 5,780 5,772 5,747 5,719 5,724 5,359 All Other.......................
1,919*
2,413 2,381 2,345 2,305 2,248 2,045 Total Electric Customers....... 1,296,955 1,282,991 1,272,207 1,261,058 1,243,901 1,238,245 1,188,777
- Reflects reclassification of certain customers.
Operating Revenues (millions of dollars)
Residential.....................
$ 461.0
$ 430.8
$ 427.6
$ 373.2
$ 364.7
$ 314.4 135.0 Small Commercial and Industrial..
189.0 176.5 168.4 149.3 138.9 122.0 58.9 Large Commercial and Industrial..
587.4 544.0 513.4 442.9 418.3 388.l 138.2 All Other.......................
74.5 73.1 68.3 59.4 56.5 49.0 23.2 Total Electric Revenues........
$1,311.9
$1,224.4
$1,177.7
$1,024.8
$ 978.4
$ 873.5
$ 355.3 Operating Expenses (millions of dollars)
Operating expenses excluding depreciation.........
$ 975.4
$ 896.3
$ 881.2
$ 750.2
$ 717.6
$ 669.6 224.0 Depreciation....................
110.0 106.3 97.9 88.0 81.6 68.4 44.0 Total Operating Expenses......
$1,085.4
$1,002.6
$ 979.1
$ 838.2
$ 799.2
$ 738.0
$ 268.0 Operating Income (millions of dollars)
$ 226.5
$ 221.8 198.6 186.6 179.2 135.5 $
87.3 Net Utility Plant (millions of dollars)..............
$4,449.5
$4, 167. l
$3,883.9
$3,604.5
$3,388.0
$3,128.0
$1,468.9 Average Use per Residential Customer (kilowatt-hours)..................
6,829 6,833 7,097 6,710 6,645 6,460 5,557 Electric Peak Load, Net Hourly Demand (thous. kw).............
5,641 5,667 5,888 5,346 5,530 5,431 4,592 Net Electric Generating Capacity-Summer Rating (thous. kw).......
7,727 7,727 8,198 7,742 7,186 7,808 5,115 Cost of Fuel per Million Btu
$1.55
$1.29
$1.40
$1.24
$1.23
$1.42
$0.32 Btu per Net Kilowatt-hour Generated......................
10,810 10,773 10,882 10,529 10,523 10,676 11,009 30
Operating Statistics 1979 1978 1977 1976 1975 1974 1969 GAS OPERATIONS Sales (millions of cubic feet)
Residential..........................
2,327 2,316 2,394 2,342 2,334 2,281 2,376 House Heating......................
23,593 24,974 26,335 24,540 20,817 23,793 23,403 Commercial and Industrial............
37,452 32,784 31,017 33,390 30,012 35,913 41,750 All other............................
93 94 86 89 74 79 102 Total Gas Sales..................
63,465 60,168 59,832 60,361 53,237 62,066 67,631 Number of Customers, December 31 Residential..........................
85,315 87,715 88,775 89,459 90,117 90,870 98,598 House Heating......................
168,905 163,469 162,978 162,993 162,914 163,093 145,879 Commercial and Industrial............
19,065 19,207 19,422 19,669 19,874 20,276 18,491 Total Gas Customers.............
273,285 270,391 271,175 272,121 272,905 274,239 262,968 Operating Revenues (millions of dollars)
Residential..........................
$ 10.7 9.9 9.6 8.7 8.1 7.1 5.7 House Heating......................
91.2 86.6 84.1 73.3 54.8 55.4 39.6 Commercial and Industrial............
118.4 92.2 80.4 76.l 54.5 45.7 29.4 All other............................
0.2 0.2 0.2 0.2 0.1 0.1 0.1 Subtotal........................
$220.5
$188.9
$174.3
$158.3
$117.5
$108.3
$ 74.8 Other Revenues.....................
0.6 0.6 0.5 0.6 0.5 0.6 0.3 Total Gas Revenues..............
$221.1
$189.5
$174.8
$158.9
$118.0
$108.9
$ 75.l Operating Expenses (millions of dollars)
Operating expenses excluding depreciation..............
$194.4
$163.0
$145. 7
$128. l
$ 93.7
$ 82.2
$ 57.9 Depreciation........................
8.9 8.6 8.2 8.4 8.3 8.1 4.3 Total Operating Expenses...........
$203.3
$171.6
$153.9
$136.5
$102.0
$ 90.3
$ 62.2 Operating Income (millions of dollars)
$ 17.8
$ 17.9
$ 20.9
$ 22.4
$ 16.0
$ 18.6
$ 12.9 Net Utility Plant (millions of dollars)
$261.7
$250.5
$248.l
$247.5
$246.8
$246.4
$180.2 STEAM OPERATIONS Sales (millions of pounds).............
6,581 7,336 7,165 7,735 7,117 7,600 7,905 Number of Customers, December 31...
638 660 670 679 689 710 1,179 Operating Revenues (millions of dollars)
$ 45.5
$ 42.8
$ 42.3
$ 40.5
$ 38.5
$ 29.3
$ 10. l Operating Expenses (millions of dollars)
Operating expenses excluding depreciation..............
$ 42.3
$ 39.3
$ 38.0
$ 36.5
$ 35.3
$ 29.l 8.0 Depreciation........................
1.7 1.6 1.6 1.5 1.4 1.3 0.9 Total Operating Expenses...........
$ 44.0
$ 40.9
$ 39.6
$ 38.0
$ 36.7
$ 30.4 8.9 Operating Income (millions of dollars) 1.5 1.9 2.7 2.5 1.8
$ (1.1) 1.2 Net Utility Plant (millions of dollars)
$ 30.1
$ 31.6
$ 33.9
$ 34.9
$ 34.9
$ 31.7
$ 25.3 31
Officers Robert F. Gilkeson Chairman of the Board James L. Everett President and Chief Executive Officer John H. Austin, Jr.
Executive Vice President and Chief Operating Officer*
Vincent S. Boyer Senior Vice President Nuclear Power**
Wayne C. Astley Vice President General Administration Edward G. Bauer, Jr.
Vice President and General Counsel Clifford Brenner Vice President Corporate Communications Shields L. Daltroff Charles L. Fritz Vice President Personnel and Industrial Relations Martin F. Gavet Vice President Gas Operations John S. Kemper Vice President Engineering and Research**
William L. Maruchi Vice President Electric Transmission and Distribution William B. Morlok Vice President Commercial Operations Clair V. Myers Vice President Purchasing and General Services Joseph F. Paquette, Jr.
Vice President Finance and Accounting Lucy S. Binder Secretary Morton W. Rimerman Treasurer James D. Lynch Assistant Secretary J. Robert Causton Assistant Treasurer George G. Eppright Assistant Treasurer William M. Lennox Assistant Treasurer Joseph W. Ruff Assistant Treasurer Vice President Electric Production
- Designated Chief Operating Officer on January 28, 1980.
- Elected on January 28, 1980.
Form 10-K A copy of the Company's report for 1979 filed with the Securities and Exchange Commission on Form 10-K will be provided to shareholders upon written request to Philadelphia Electric Company, 2301 Market Street, P.O. Box 8699, Philadelphia, PA 19101, Attn: Financial Division.
Additional Information Additional information aboutthe Company may be obtained by writing to: L. S. Binder, Secretary, Philadelphia Electric Company, 2301 Market Street, P.O. Box 8699, Philadelphia, PA 19101.
FISCAL AGENTS FOR STOCKS AND BONDS PHILADELPHIA ELECTRIC COMPANY-Preferred and Common Stocks Registrars Transfer Agents GIRARD BANK PHILADELPHIA ELECTRIC COMPANY One Girard Plaza, Philadelphia, Pa. 19101 2301 Market Street, Philadelphia, Pa. 19101 CHEMICAL BANK MORGAN GUARANTY TRUST CO. of N.Y.
20 Pine Street, New York, N.Y. 10015 30 West Broadway, New York, N.Y. 10015 PHILADELPHIA ELECTRIC COMPANY-First and Refunding Mortgage Bonds Trustee, THE FIDELITY BANK Broad & Walnut Streets, Philadelphia, Pa. 19109 New York Agent, MORGAN GUARANTY TRUST CO. of N.Y. 23 Wall Street, New York, N.Y. 10015 PHILADELPHIA ELECTRIC COMPANY-Sinking Fund DebentCJres PHILADELPHIA ELECTRIC POWER COMPANY (A Subsidiary)-Debentures Trustee, THE PHILADELPHIA NATIONAL BANK Broad & Chestnut Streets, Philadelphia, Pa. 19101 New York Agent, IRVING TRUST COMPANY One Wall Street, New York, N.Y. 10015 All Philadelphia Electric Company securities, except the Sinking Fund Debentures and those series of First and Refunding Mortgage Bonds and Preferred Stock which were sold privately to Institutional investors, are listed on the Philadelphia Stock Exchange and the New York Stock Exchange. Philadelphia Electric Power Company Debentures are listed on the Philadelphia Stock Exchange.
32
Directors Robert D. Harrison Richard G. Gilmore
- John H. Austin, Jr.
Executive Vice President and Chief Operating Officer of the Company William T. Coleman, Jr., Esq.
Senior Partner of the law firm of O'Melveny & Myers
- James L. Everett President and Chief Executive Officer of the Company William S. Fishman Chairman and Chief Executive Officer ARA Services, Inc.
(Service Management)
Joseph C. Ladd John H. Austin, Jr.
James L. Everett Robert F. Gilkeson William W. Hagerty Paul R. Kaiser William T. Coleman, Jr., Esq.
- Robert F. Gilkeson Chairman of the Board of the Company Richard G. Gilmore Executive Vice President Girard Bank
- William W. Hagerty President, Drexel University Robert D. Harrison Vice Chairman John Wanamaker, Philadelphia, Inc.
(Merchandising)
- Paul R. Kaiser Chairman of the Board and Chief Executive Officer Tasty Baking Company (Diversified Manufacturing)
Joseph C. Ladd President, Fidelity Mutual Life Insurance Company
- Joseph J. Mclaughlin President, Beneficial Mutual Savings Bank
- Member of Executive Committee
PE and PJM The Pennsylvania-New Jersey-Maryland Interconnection (PJM), the world's first integrated power pool, was created in 1927 by PE and two other companies.
Now, eleven electric utility companies operate together through P JM for the development of power generation and transmission facilities. PJM Computers coordinate and schedule the operation of generating units each hour using the most economic units.
These operations reduce energy costs and increase reliability of service.
Philadelphia Electric Company Ill Electric and Gas Service Ill Electric Service only Ill Gas Service only Steam Service Philadelphia Electric Company 2301 Market Street P.O. Box 8699 Philadelphia, PA 19101
~.J ~
- .t\\
,t -*,
I
/~j-?" ~-I;_.
- ,,. \\'
. ~.\\ \\
); '
I Other PJM Members and Associates Public Service Electric and Gas Company Pennsylvania Power
& Light Company Baltimore Gas and Electric Company Ill Jersey Central Power
& Light Company II Metropolitan Edison Company II Pennsylvania Electric Company II Potomac Electric Power Company II Atlantic Electric Company II Delmarva Power &
Light Company Ill Luzerne Electric Division -
UGI Corporation BULK RATE U.S. POSTAGE PAID Philadelphia, PA Permit No. 378