ML18082A348
| ML18082A348 | |
| Person / Time | |
|---|---|
| Site: | Salem  |
| Issue date: | 02/15/1980 |
| From: | Curtis N, Weimer R DELMARVA POWER & LIGHT CO. |
| To: | |
| Shared Package | |
| ML18082A342 | List: |
| References | |
| NUDOCS 8005090411 | |
| Download: ML18082A348 (40) | |
Text
1979 Annual Report DELMARVA POWER & LIGHT COMPANY
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Service territory The Delmarva Peninsula is our home. As depicted on the cover, we supply much of the energy for the people 1iving, working, and playing on 5,700 square miles of both urban and rural land stretching from the industrialized Wil-mington area in the Northeast Corridor to the farmland of Delaware, Maryland,
and Virginia and surrounded by the beauty of the Atlantic Ocean and the Chesapeake Bay.
Business Our 2,500 employees supply electricity to 272,000 customers on most of the peninsula and natural gas to 72,000 customers around Wilmington. Corpo-rate goals are to provide safe, reliable electric and gas service to all customers at the lowest possible cost and impact on the environment, to generate attrac-tive earnings to stockholders, and to satisfy the needs of our employees.
Facilities We supply electricity with 2,047 mega-watts of generation capacity, 1,300 miles of transmission lines and 8,400 miles of distribution lines. We supply natural gas to the Wilmington area with 1,000 miles of gas main.
Cover Illustration by C Phillip Wikoff, Corporate Communications Department.
Financial Highlights Revenues Net Income Earnings Per Share Dividends Declared Common Stock Outstanding (Average Shares)
Common Stock Book Value Construction Expenditures Financings Electric Sales Electric Customers (Average)
Average Residential Usage Gas Sales Gas Customers (Average)
Average Residential Usage llEGULJiro11y Do.
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, Copy Percent Increase 1979 1978 (Decrease)
$424.7 million
$378. 7 million 12.1
$ 53.4 million
$ 47.4 million 12.5 1.91 1.85 3.2 1.40V2 1.30V2 7.7 23,214,603 21,581,575 7.6
$ 15.87
$ 15.77 0.6
$112.1 million
$130.3 million (14.0)
$ 98.9 million
$ 75.3 million 31.3 7.49 billion kwh 7.25 billion kwh 3.4 269,497 266,042 1.3 8,188 kwh 8,406 kwh (2.6) 13.96 million mcf 13.17 million mcf 6.0 71,239 71,416 (0.2) 95.3 mcf 102.8 mcf (7.3)
- Quarterly dividends increased to 37 cents per share.
- Annual earnings increased to $1.91 per share.
- The price of oil increased by 89% over the year, causing a major impact on the company and its customers.
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2 Letter to stockholders February 15, 1980 The high price of energy is every-body's problem. Certainly, the price of oil this year had a major impact on your company as well as on all of its customers. Until this company and our nation can reduce this depen-dence on foreign oil, controlling energy costs will be difficult, and our nation's foreign policy options will be limited.
Therefore, we believe it is of overriding importance for us to dis-cuss our plan for reducing the de-pendence on oil and to seek the ac-tive support of our customers and regulators to implement this plan.
Crucial components of this plan in-clude prompt and reasonable rate relief during 1980 and continued confidence of investors to provide capital to pay for the non-oil-using facilities needed to provide reliable electric service while minimizing future costs for the people of the Delmarva Peninsula.
During 1979, approximately 42 cents out of every dollar received went to buy our raw material -
fuel.
Most of that money went to pay for oil which produced 53% of the electric-ity we sold. The price of oil bought by Delmarva Power this year has in-creased 89%. Thus, the price of oil is critical to our price of electricity.
Since 1974, a strategic objec-tive of the company has been to re-duce dependence on oil. We are accomplishing this by balancing our fuel mix, mainly switching to coal.
Our plan is to reduce dependence on oil from 53% in 1979 to 29% by 1981 through the addition of a 400 megawatt coal-fired generator at Indian River in the fall of 1980 and the addition of 83 megawatts of ca-pacity at the Salem 2 Nuclear Power Station. This dependence will be re-duced further to 19% in 1982 through the conversion to coal of two oil-fired units at the Edge Moor Power Station.
As these coal and nuclear plants begin operation, we expect reductions in the rate at which fuel costs rise since we expect, in the near future, the price of coal and uranium to rise at a slower rate than the price of oil. Offsetting this in 1980, we will be asking the regula-tory agencies in Delaware, Mary-land, and Virginia and the Federal Energy Regulatory Commission for rate hikes to begin to pay for this non-oil-fired generation capacity.
In addition to balancing our fuel mix, we plan to reduce this depen-dence on oil by encouraging the wise use of energy. A new rate de-
sign proposed by the company of-fers incentives for business and in-dustry to reduce on-peak energy use and take advantage of lower off-peak nighttime and weekend rates. Delmarva Power's marketing efforts during the 1980's will be di-rected toward providing printed materials, seminars, and energy audits to help customers manage their use of energy. Research projects are directed toward devel-oping the tools for using energy during off-peak hours. These projects will have the effect of utiliz-ing more fully the company's most fficient generating units.
We believe this continuing ommitment toward reducing our ependence on oil will lead to both nore predictable costs to our con-umers and increased financial sta-ility of the company in the coming ecade.
Progress on this path was made 1979. The financial stability of the ompany has improved. By tradi-
- anal standards of financial mea-urement, the year may be called ne of moderate growth. However, onsidering the severe external ressures on your company during 979 -
a year-long inflation rate of 3%, a capital market in disarray, oil N. M. Curtis and R. D. Weimer Photo: Action Photo prices doubling with some question of supply, a nuclear incident casting shadows over all electric utilities whether dependent on nuclear power or not, and the threat of re-cession -
we are pleased to report an increase in earnings to $1.91 per share from $1.85 per share in 1978.
This is on target with expectations.
In December, the Board of Di-rectors increased dividends, indi-cating confidence in the perfor-mance of the company.
Progress was made in the man-agement of the company with the completion of the merger of the Maryland and Virginia subsidiaries into the parent company; the com-pletion of a staff reorganization for greater efficiency; the development and installation of new automated in-house programs; the on-schedule construction progress on the coal-fired unit at Indian River; the opening of a new Northern Division headquarters and system oper-ations facility at Christiana; and in-creased performance of our em-ployees.
These programs are designed to position Delmarva Power for the 1980's with a strong, flexible profes-sional organization dedicated to providing reliable service to cus-tamers at reasonable costs.
Thus, in the year 1979, although earnings increased only modestly and operations were impacted sub-stantially by the high price of oil,
Delmarva Power progressed toward the crucial objectives of reducing the dependence on oil and improv-ing the financial stability of the com-pany. We appreciate the hard work, loyalty, and understanding of our employees, which have enabled us to make this progress.
1980 will be a pivotal year for the company, largely dependent on prompt and reasonable rate relief.
We intend to work as a team utilizing the skills of all employees to meet the new decade of challenges and opportunities.
RN~
Robert D. Weimer Chairman of the Board &
Chief Executive Officer
~~*
Nevius M. Curtis President &
Chief Operating Officer 3
4 Energy to the people of the peninsula Fuel Cost Cents per MBTU 400 320 240 160 ~
80 Nuclear
~
75 76 77 78 79 Delmarva Power & Light Company pro-vides electricity to a diverse service ter-ritory including the industrialized area around Wilmington, Delaware, the tour-ist and recreation areas on the Atlantic Coast, and the commercial and rural areas of the Eastern Shore of Maryland and Virginia and lower Delaware.
Delmarva Power projects a moder-ate -
3% to4% -
growth rate in kilowatt hour sales through the early 1980's. To continue to provide reliable service to the Delmarva Peninsula and to accom-modate this growth, Delmarva Power has strengthened several programs to control prices, improve service, and en-courage the wise use of energy.
Balanced fuel mix Delmarva Power, along with the rest of this nation, must reduce its dependence on foreign oil. The price of oil purchased by the company in 1979 for use at the Edge Moor Power Plant increased 89%
from $14.20 per barrel in January to
$26.90 per barrel in December, causing filings to the Delaware, Maryland, and Virginia regulatory agencies for sub-stantial increases in the fuel charges.
As outlined in the letter to stock-holders, the company is working to bal-ance its fuel mix and reduce its depen-dence on oil from 53% in 1979 to 29% by 1981 through the completion of a 400-megawatt coal-fired plant at Indian River in 1980, the retirement of three oil-fired units at Vienna Power Plant, and the addition of 83 megawatts of genera-tion capacity from the Salem 2 Nuclear Power Station under construction in southern New Jersey.
In addition, Delmarva Power plans to reduce this dependence on oil to 19%
in 1982 by converting to coal two oil-fired units at the Edge Moor Power Sta-tion and to 14% in 1988 by building a large coal-fired plant at Vienna, Mary-land.
As these new and converted power plants begin operations, the company expects a decrease in the rate at which fuel costs rise.
While coal is envisioned as the fuel for the new power plants of the 1980's, DP&L believes that the nation's nuclear option should remain open to achieve a balanced program of energy indepen-dence. The company will not construct nuclear generation until more assur-ance is given by the federal government that major problems such as waste dis-posal and fuel reprocessing are solved.
In a related move to reduce further the dependence on oil, Delmarva Power sought and received approval to make available 850 million cubic feet of nat-ural gas and took on new natural gas customers for the first time since 1971.
Energy management Energy costs to customers can also be controlled through the wise use of the energy that is now available. In re-sponse to customers' needs, Delmarva Power is intensifying its efforts to en-courage customers to use energy more efficiently.
New rate designs proposed by the company offer incentives for business and industry to reduce on-peak energy use and to take advantage of lower cost off-peak nighttime and weekend rates.
These rates will help customers control energy costs. They also have the poten-tial of utilizing more fully the company's most efficient generating units and of minimizing the need to build more costly generating capacity in the future.
In order to help commercial and in-dustrial customers with their energy management, the company's marketing department offers various services in-cluding printed materials, seminars, special publications, and specialized energy management courses. Cus-tomer commitment and participation is the key to success in this area.
Residential customers have bene-fited from the company's Energy Effi-ciency Award program which encour-ages thermal efficiency in new home construction. More than 26,000 res-idents of Delmarva Peninsula have re-ceived energy conservation tips through Project Conserve, a com-puterized home energy audit which also promotes energy efficiency. Planning
Generation Output By Fuel Source Percent 100 78 79 80 81 82 D Nuclear Oil
- Coal Proiected Photo: Delaware State Chamber of Commerce The contrast between the busy skyline of Wilmington,
Delaware, and a solitary farmer indicates the diversity of Delmarva Power & Light Company's service territory. Del-marva Power provides much of the energy to the people of the Delmarva Peninsula.
5
6 Total Sales Millions of KWH 10,000 8,000 76 77 78 79 80 D Residential D Commercial ii Industrial ii Other Pro1ected Photo Action Photo Environmental protection and energy manage-ment are important concepts to the people of the peninsula. Workmen for Delmarva Power (top) lay a submarine power cable across the Assawoman Bay to help provide additional reliable electric service to the tourist and recreation area around Ocean City, Maryland, while not interfering with the esthetic beauty of the bay. Above, F. Larry Golt, (left) vice president for building management for the Concord Plaza Associates, shows Delmarva Power en-gineers, Tim Smith (center) and Richard Garvine (right), the additional energy savings he has made at his Wilmington office building through Delmarva Power's energy management action course.
has begun for a more extensive energy audit program to be conducted in cus-tomer homes by company represen-tatives.
Looking to the future, the company is sponsoring research projects which should help give customers the ability to take full advantage of lower cost off-peak energy. Although most of Del-marva Power's research is conducted through the Electric Power Research In-stitute, the company invests in several local research programs including a project with chemists and engineers at the University of Delaware's Institute of Energy Conversion to allow home-owners to store the cold air generated by air conditioners running at night for use during the heat of the next day and a project with researchers at the Univer-sity of Maryland and.the Delmarva Poul-try Institute to encourage poultry farm-ers to use electricity at night for heat instead of propane. Also, with Public Service Commission approval, the Company will offer 1,000 customers in Delaware the opportunity to test new residential rate designs which encour-age efficient energy use.
Delmarva Power realizes that en-ergy costs are of crucial importance to the economic well-being of the penin-sula. The company intends to continue providing customers the assistance and the options to better control these costs.
Customer services Delmarva Power works hard to avoid service disconnections. DP&L recog-nizes both the potential danger of ser-vice cutoffs to people and property of the peninsula during the cold winter season and the cost to the company and its stockholders of the termination and resumption of service. Therefore, the company takes extra precautions to avoid disconnections for nonpayment of bills. Customers having difficulties in paying bills are encouraged to use sev-eral programs the company has devel-oped to help in hardship cases. These include the installment payment of
- overdue bills; notification of a friend or relative of the intention to disconnect service; budget billing; life-support and medical emergency listing; the distri-bution of energy conservation infor-mation; and referrals to social agencies which can help people with these prob-lems.
Environmental considerations Delmarva Power appreciates the beauty of the Delmarva Peninsula and works hard to produce energy with minimal impact on the air and water.
During 1979, the company re-ceived $17. 7 million from the sale of tax exempt pollution control bonds through the Delaware Department of Community Affairs and Economic Development to provide the funds for pollution control equipment at the Indian River and Edge Moor Power Stations needed to meet both national and state water and air quality standards. A key part of that pro-gram is an $8 million project to upgrade precipitators to reduce stack emissions at Indian River.
Another program completed this year was the placing of a three mile cable under the Assawoman Bay. This will improve the reliability of electric ser-vice in the Ocean City, Maryland, area.
Delmarva Power is also participat-ing in the planning of the Merrill Creek Reservoir in Harmony Township, New Jersey, which will provide additional cooling water to utilities throughout the Delaware Valley at times of low water flow on the Delaware River.
Stockholders A key resource to Delmarva Power is its nearly 70,000 stockholders, 14,000 of whom live on the Delmarva Peninsula.
These shareholders are part of the en-ergy solution for both the Delmarva Peninsula and the nation because they help provide the capital needed to sup-port these efforts.
Construction Expenditures Including Enviro1,mental Dollars in Millions 160 140 79 80 81 82 83 L Projected -1 D Environmental Construction (Net of Environmental) 7
8 1979 Financial review Revenue by Operation for 1979 ELECTRIC 86%
NON-UTILITY 3%
Cost of Service for 1979 FUEL 42%
\\
MATERIALS
& OTHER 16%
1979 was a year of moderate financial growth. Earnings applicable to common stock increased 10.9% to $44.3 million from $40.0 million. Earnings per share increased 3.2% to $1.91 from $1.85. The quarterly dividend was increased in De-cember to 37 cents per share from 34 1/2 cents per share. Coverage of fixed charges (SEC) increased to 2.86 times in 1979 from 2. 79 times in 19l8.
The return on average common equity in 1979 increased to 11.9% from 11.8% in 1978. This rate is still well below that found "fair and reasonable" by all of Delmarva Power's regulatory authorities.
Sales and revenues Electricity sales increased 3.4% over the previous year to 7.49 billion kwh.
This growth was slightly less than antici-pated because of cooler summer and warmer winter weather than normal and conservation. Residential sales de-creased 0.6% in 1979 to 1.97 billion kwh. However, this was more than offset by a nearly 9% increase in industrial demand.
Electric operating revenues in-creased 14.3% to $363.7 million in 1979, primarily due to rate increases which became effective in late 1978, greater kwh sales and increases in fuel adjust-ment rates.
Natural gas sales increased 6.0%
over 1978 to 14.0 million met. Delmarva Power began adding new customers for the first time since 1971. Gas operating revenues of $49.3 million were approx-imately the same as those of 1978.
Operating expenses Despite the company's stringent pro-grams to control costs, operating and maintenance expenses increased by
- 15. 7% during 1979 to $275.0 million.
The increases are due mainly to infla-tion, the delays in the nuclear power plants at Salem, New Jersey, and in-creases in fuel prices. However, the re-peal of the Pennsylvania Gross Receipt tax increased reported earnings in 1979 (see Note 3 to financial statements).
Financing and capitalization During 1979, the company continued financing in the public market to provide funds for its construction program. Total construction requirements for the year amounted to $112.1 million and $98.9 million of that was raised from external sources. The company sold two million shares of common stock for $24.2 mil-lion and received $17.7 million from the sale of 6.6% Series tax exempt pollution control bonds through the Delaware Department of Community Affairs and Economic Development. The bonds were sold to finance pollution control equipment at the company's Indian River and Edge Moor Power Stations to meet both national and state water and air quality standards.
Because of the poor financial mar-kets, the company replaced the planned sale of first mortgage bonds and preferr.ed stock by obtaining a $50 million five-year term loan. This loan provides the company with flexibility to refinance any time during the five-year term without prepayment penalty.
In addition to these three issues, the company raised $6.0 million with the sale of 4 76 thousand shares of common stock through the Dividend Reinvest-ment and Common Share Purchase Plan. The company established an In-vestment Tax Credit Employee Stock Ownership Plan (TRASOP) in 1979.
Under this plan, the company raised
$1.0 million in 1979 through the is-suance of 75 thousand shares of com-mon stock.
Photo: Jay Mason.
Photo* Getty Refining & Marketing Co.
Growth in electricity sales from the industrial and commercial sectors of the peninsula was an impor-tant part of Delmarva Power's progress during 1979 and will continue to be a priority of the 1980's. A major user of Delmarva Power's electricity is the peninsula's prestigious broiler industry. Franklin P.
Perdue (left), Chairman of Perdue Incorporated headquartered in Salisbury, Maryland, is one of Delmarva Power's largest customers. Another major user of Delmarva's electricity and steam is the Getty Refining & Marketing Co. refinery at Delaware City, Delaware.
9
10 Construction Expenditures &
Internal Financing Dollars in Millions 140 120 78 79 80 81 82 Projected D Construction Internal Financing Photo Carl H. Sturner The key to minimizing costs tor electric service is to reduce, as quickly as possible, Delmarva Power's depen-dence on oil tor the generation of electricity. A major coal-tired unit (above and behind the circular cooling tower) is nearing completion at the company's Indian River plant near Millsboro, Delaware. Delmarva Power's use of the railroads, including crossing the Chesapeake Bay to bring the coal to the plant, will have a substantial impact on the long-term preservation of rail service tor the peninsula.
Construction and capital needs Capital needs peaked in 1978-1979 with the coal-fired Indian River 4 and the nu-clear Salem 2 nearing completion.
Projected construction expendi-tures will decrease through 1982 be{ore beginning to rise in the mid 1980's. The planned decline in construction expen-ditures coupled with requested rate re-lief will provide increased cash flow. In-ternally generated cash as a percent of construction expenditures, which pro-vided about 35% of the funds needed for construction in the 1977-1979 period, will provide about 72% of the cash for construction in the 1980 to 1982 period.
Organization Effective October 1, 1979, Thomas C.
Roe retired as Chairman of the Board of Directors. Mr. Roe served the company with distinction since 1936. For more than 40 years, he held several key posi-tions in Delmarva Power's southern 1
subsidiaries. For the last three years, Mr.
Roe served as Delmarva Power's Chairman during the time when the southern subsidiaries were merged into the parent company. He will continue as a director.
Robert D. Weimer was elected Chairman of the Board of Directors. Mr.
Weimer, formerly president of the com-pany, will continue as Chief Executive Officer. Nevius M. Curtis was elected President and Chief Operating Officer.
Howard E. Cosgrove was elected Vice President of Finance and Accounting,
and Chief Financial Officer, replacing Mr. Curtis. Charles Marchyshyn, for-merly of West Penn Power Co., was named Comptroller.
Merger The stockholders approved the merger of the Maryland and Virginia sub-sidiaries into the parent Delmarva Power
& Light Company. The merger will lead to more efficient service to customers through improved cash management, better utilization of facilities, streamlined record keeping, and greater orga-nizational consistency.
Rate matters New rate design proposals were filed in Delaware which will reflect more ac-curately the cost of service to each class of customers. These new rates, if ap-proved, will cause some shifts in costs both between and within customer classes. The rates also will be higher in summer than in winter and will include incentives for off-peak usage.
This proceeding in Delaware has drawn 12 active participants including the State of Delaware and the Federal Department of Energy. A decision is ex-pected in mid 1980.
Also in Delaware, the Public Ser-vice Commission approved an increase in the fuel adjustment charge which went into effect in June and another in-crease in January, 1980, subject to re-fund after formal proceedings in early 1980. The Commission also approved effective January 1, 1980, an increase, subject to refund, in the gas production charge.
In Maryland, rate redesign pro-posals were filed similar to those in Del-aware. Also, the company filed for a $7.6 million increase in revenues to recover higher operating and capitai costs caused by inflation and to make system improvements. The company also re-quested recovery of deferred fuel costs.
In Virginia, the State Corporation Commission has approved the re-quested increase in fuel adjustment charges, effective January 1, 1980.
The Federal Energy Regulatory Commission (FERC) approved set-tlements of a 1978 rate case between the company and three electric cooperatives and five municipalities and has yet to act on a settlement pro-posal with another municipality. The settlements were for about 64% of what was originally sought by the company.
The case is stil l pending for six municipalities.
Revenue by Jurisdiction DELAWARE 64%
/
\\
OTHER 4%
VIRGINIA 2%
11
Financial Contents Trustees Transfer Agents Registrars Stock Symbol Regulatory Commissions Corporate Address Annual Meeting Management Review of Operations Consolidated Statements of Income Consolidated Balance Sheets Consolidated Statements of Sources of Funds for Construction Expenditures Consolidated Statements of Capitalization Consolidated Statements of Changes in Common Stockholders' Equity Notes to Consolidated Financial Statements Report of Independent Certified Public Accountants Consolidated Statistics 13 15 16 18 19 20 21 29 30 First Mortgage and Collateral Trust Bonds, Chemical Bank, New York, NY.
Pollution Control Revenue Bonds, Farmers Bank of the State of Delaware, Wilmington,
DE, and Bank of Delaware, Wilmington, DE.
Preferred Stock -
Wilmington Trust Company, Wilmington, DE.
Common Stock -
Wilmington Trust Company, Wilmington, DE, and Irving Trust Company, New York, NY.
Preferred Stock -
Delaware Trust Company, Wilmington, DE.
Common Stock -
Delaware Trust Company, Wilmington, DE, and Irving Trust Company, New York, NY.
Common Stock, DEW-listed on the New York and Philadelphia Stock Exchanges.
Federal Energy Regulatory Commission, 825 North Capital Street, N.E.,
Washington, D.C. 20426 Delaware Public Service Commission, 1560 S. du Pont Highway, Dover, DE 19901 Maryland Public Service Commission, American Building, 231 E. Baltimore St.,
Baltimore, MD 21202 Virginia State Corporation Commission, P.O. Box 1197, Richmond, VA 23209 Delmarva Power, 800 King Street, P.O. Box 231, Wilmington, DE 19899.
Telephone (302) 429-3011 Will be held on April 15, 1980, at 12:30 p.m., in the Grand Opera House, 818 Market Street Mall, Wilmington, DE To supplement information in this Annual Report, a Financial and Statistical Review ( 1969-1979) and the Form 10-K are available upon request. Please write to Stockholder Relations, Delmarva Power, 800 King Street, P.O. Box 231,
Wilmington, DE 19899 Quarterly Common Stock Dividends and Price Ranges The company's common stock is listed on the New York and Philadelphia Stock Exchanges and has unlisted trading privileges on the Cincinnati, Midwest, and Pacific Stock Exchanges.
1979 1978 Dividend Price Dividend Price Declared
.l::!i9._b__
Low Declared Jj_j_g__b_
Low First Quarter
$.34V2 14Va 12Y'a First Quarter
$.32 143/a 135/a Second Quarter
.34V2 135/a 12Va Second Quarter
.32 14Va 133/a Third Quarter
.34V2 14 125/a Third Quarter
.32 14V2 13%
Fourth Quarter
.37 133/.i 11 5/a Fourth Quarter
.34V2 14Va 123/a 12
Delmarva Power & Light Company and Subsidiary Companies Management Review of Operations Consolidated Summary of Earnings For the years ended December 31 (Dollars in Thousands) 1979 1978 1977 1976 1975 Operating Revenues Electric
$363,666
$318, 106
$291,568
$242,279
$239,355 Gas 49,322 49,640 36,233 32,248 25,673 Steam 11, 711 10,956 10,017 11,861 10,998 424,699 378,702 337,818 286,388 276,026 Operating Expenses Operation 246,547 212,498 198,020 167,215 165,165 Maintenance 28,475 25,214 24,989 21,596 17,769 Depreciation 33,866 31,383 28,046 25,367 24,579 Taxes 40,952 38,044 24,736 17,857 16,689 349,840 307, 139 275,791 232,035 224,202 Operating Income Electric 69,503 66,257 57,438 49,281 48,516 Gas 4,425 4,381 3,666 4,152 2,394 Steam 931 925 923 920 914 74,859 71,563 62,027 54,353 51,824 Other Income 12,670 8,044 8,069 8,519 6,203 Income Before Interest Charges 87,529 79,607 70,096 62,872 58,027 Interest Charges 34, 153 32, 159 30,768 26,437 26,488 Net Income 53,376 47,448 39,328 36,435 31,539 Dividends on Preferred Stock 9,050 7,474 7,250 7,250 7,250 Earnings Applicable to Common Stock 44,326 39,974 32,078 29,185 24,289 Dividends on Common Stock 33, 124 28, 189 24, 127 22,618 21, 107 Addition to Retained Earnings
$ 11,202
$ 11,785 7,951 6,567 3,182 Common Stock Average shares outstanding (thousands) 23,215 21,582 19,403 18,821 17,580 Earnings per share
$1.91
$1.85
$1.65
$1.55
$1.38 Dividends declared per share
$1.40V2
$1.30V2
$1.22
$1.20
$1.20 13
Management's Review of Operations, Continued Operating Revenues 14 Operating revenues were up 12.1 % in 1979 and 1978 primarily because of the following:
Cause Electric Changes in Gas Base rates due to rate increases Sales Recovery of fuel costs Other electric revenues Changes in Base rates due to rate increase Sales Recovery of purchased gas costs Revenue Increase (decrease) from the Prior Year (in millions) 1979 1978
$11.8
$17.6 5.9 8.6 28.5
( 1.4)
(0.6) 1.8
$45.6
$26.6
$ 3.0 (0.1) 1.9 (0.2) 8.5
$(0.3)
$13.4 Electric sales increased 3.4% in 1979, reflecting increased usage by the industrial class of customers, and 5.0% in 1978 as usage increased by all classes of customers. Although total gas sales increased 6.0% in 1979 due to an increase in the availability of gas which was sold to the industrial-interruptible and seasonal off-peak customers, gas revenues decreased
$0.1 million due largely to a decrease in sales to residential and commercial customers as a result of fewer heating degree days. The increase in 1978 sales is primarily due to increased usage by commercial and industrial classes of customers.
Operation and Maintenance Operation (which includes fuel, energy interchange, gas purchased and other operation costs) and maintenance expenses increased $37.3 million and $14.7 million during the year 1979 and 1978, respectively. The increase in 1979 reflects higher fuel costs, primarily oil. The larger expenses in 1978 resulted from increased costs of gas purchased and greater generation of electricity which was partially offset by an increase in interchange sales to the PJM pool as a result of the coal strike in early 1978.
Taxes Taxes on income in 1979 increased due to higher pre-tax operating income which was partially offset by a reduction in the statutory tax rate from 48% to 46%. The increase in 1978 is primarily due to higher pre-tax operating income which was generated by the rate increases placed into effect. Taxes other than income decreased in 1979 due to the reversal of the Pennsylvania gross receipts tax (see Note 3 to the financial statements).
Other Income Other income increased in 1979 due mainly to an increase in the AFUDC rate, semi-annual compounding of AFUDC and increased construction expenditures at Indian River power plant.
Interest Charges Interest charges increased in each of the comparable years due to an increase in long-term debt through the sale of first mortgage bonds in 1979 and 1978. Short-term debt interest expense also increased as a result of higher interest rates incurred by the company in providing interim financing for its operations.
Earnings Applicable to Common Stock Earnings applicable to common stock and earnings per share increased 10.9% and 3.2%,
respectively, in 1979. The increase in earnings applicable to common stock was greater than the increase in earnings per share due to the dilutive effect of the increased average number of shares outstanding resulting from the sale of 2,000,000 shares of common stock in June 1979.
Delmarva Power & Light Company and Subsidiary Companies Consolidated Statements of Income For the years ended December 31 (Dollars in Thousands)
Operating Revenues Electric Gas Steam Operating Expenses Operation:
Fuel and energy interchange, net Gas purchased Other operation Maintenance Depreciation Taxes on income Taxes other than income Operating Income Other Income Allowance for other funds used during construction Other, net Income Before Interest Charges Interest Charges Long-term debt Short-term debt and other Allowance for borrowed funds used during construction Net Income Dividends on Pref erred Stock Earnings Applicable to Common Stock Common Stock Average shares outstanding (thousands)
Earnings per share Dividends declared per share See accompanying Notes to Consolidated Financial Statements.
1979
$363,666 49,322 11,711 424,699 148,922 29,801 67,824 28,475 33,866 23,304 17,648 349,840 74,859 12,576 94 12,670 87,529 36,399 2,166 (4,412) 34, 153 53,376 9,050
$ 44,326 23,215
$1.91
$1.40V2 1978
$318, 106 49,640 10,956 378,702 122,760 31, 135 58,603 25,214 31,383 18,858 19, 186 307, 139 71,563 7,91 6 128 8,044 79,607 33,506 1,585 (2,932) 32, 159 47,448 7,474 39,974 21,582
$1.85
$1.30V2 15
Delmarva Power & Light Company and Subsidiary Companies Consolidated Balance Sheets As of December 31 (Dollars in Thousands) 16 Assets Utility Plant -
at original cost Electric Gas Steam Common Less: accumulated depreciation Net utility plant in service Construction work in progress Nuclear fuel, at amortized cost Nonutility Property and Other Investments Current Assets Cash Pollution control funds held by trustee Accounts receivable Deferred fuel costs, net Materials and supplies, at average cost:
Fuel (coal, oil and gas)
Construction and operation Prepayments Deferred Charges Deferred income taxes relating to the credit arising from sale of contracts (note 6)
Other TOTAL See accompanying Notes to Consolidated Financial Statements.
1979
$ 962, 116 60,960 22,447 30,399 1,075,922 300,250 775,672 309,755 11,057 1,096,484 3,712 11,775 3,226 39,322 10,976 45,422 16,594 3,109 130,424 13,269 5,717 18,986
$1,249,606 1978 912,366 58,884 22,322 18, 176 1,011,748 270,756 740,992 252,266 8,910 1,002, 168 4,620 16,845 1,432 33,637 (2,290) 28,061 14,599 3,013 95,297 9,888 8,332 18,220
$1,120,305
Five years of growth for the Company's Dividend Reinvestment and Common Share Purchase Plan.
The Plan was initiated in November 1974: In the first year, 4,521 sharehold-ers (which was 8%) had joined, invest-ing $1.8 million in 160,000 additional shares.
Today more than 18%, or 13,000 common shareholders are taking ad-vantage of this opportunity to increase their holdings in the Company. They are investing approximately $6.5 million an-nually to purchase approximately 490,000 additional shares.
If you are not participating, you may want to consider the benefits of joining.
The Plan affords the opportunity for owners of our Common Stock to reinvest cash dividends and/or invest additional cash monthly in amounts from $25 to
$3,000 per quarter to purchase addi-tional shares of Common Stock without paying any brokerage or service charge.
To receive a Prospectus containing details of the Plan, please complete and mail the attached form to the Company.
Yes, please send me additional information about the dividend reinvestment plan.
Name Address City State Zip Code
Delmarva Power Attention: Stockholders Relations P.O. Box 231 Wilminqton, DE 19899 Please Affix 10¢ Postage
Liabilities Capitalization (see accompanying statements)
Common stock Additional paid-in capital Retained earnings Total common stockholders' equity Preferred stock Long-term debt Current Liabilities Short-term debt Current maturity of long-term debt Accounts payable Taxes:
Accrued, net Deferred (fuel costs)
Interest accrued Dividends declared Other Deferred Credits Credit arising from sale of contracts (note 6)
Accumulated deferred income taxes Accumulated deferred investment tax credits Other Commitments (note 7) and Contingencies (note 9)
TOTAL See accompanying Notes to Consolidated Financial Statements.
1979 1978 82,015 73,407 172,897 150,283 130,594 119,392 385,506 343,082 125,110 125, 175 524,779 468,955 1,035,395 937,21 2 16,950 12,000 10,000 15,985 13,261 426 18,284 5,299 (1,270) 11'166 11,303 8,996 7,504 3,299 3,477 74, 121 62,559 76,749 77,383 23,525 15,490 34,927 24,772 4,889 2,889 140,090 120,534
$1,249,606
$1, 120,305 17
Delmarva Power & Light Company and Subsidiary Companies Consolidated Statement of Sources of Funds For Construction Expenditures For the years ended December 31 (Dollars in Thousands)
Sources of Funds Internally generated:
Net income Items not requiring (providing) funds:
Depreciation Amortization of nuclear fuel Allowance for funds used during construction Investment tax credit adjustments, net Deferred income taxes, net Funds from operations Less: Dividends on common and preferred stock Internally generated funds External financing :
Net proceeds from :
Long-term debt:
First Mortgage bonds Term loan Common stock Preferred stock Change in short-term debt Redemption of long-term debt Externally financed funds Other sources (uses):
Decrease (increase) in working capital(2)
Other, net Other sources (uses)
Construction Expenditures (excluding allowance for funds during construction) 11llssued to collateralize 6.6% Series Pollution Control Revenue Bonds.
1979
$ 53,376 33,866 596 (16,988) 10, 155 14 604 95,609 42 174 53 435 17,678 (1 )
50,000 31,222 16,950 (10,000}
105,850 (49,084) 1 860 (47,224)
$112,061 12>0ther than short-term debt, current maturity of long-term debt and current deferred income taxes. Changes primarily relate to fuel and tax accounts.
See accompanying Notes to Consolidated Financial Statements.
18 1978
$ 47,448 31,383 1,307 (10,848) 9,701
__Jj_,428) 77,563 35,663 41 900 49,620 5,084 19,949 (32, 100) 42,553 36,962 8 857 45 819
$130,272
Delmarva Power & Light Company and Subsidiary Companies Consolidated Statements of Capitalization As of December 31 (Dollars in Thousands) 1979 1978 Common Stockholders' Equity Common stock, par value $3.375 per share authorized 35,000,000 shares, outstanding 24,300,758 and 21,750,139, shares 82,01 5
$ 73,407 Additional paid-in capital 172,897 150,283 Retained earnings 130_,594 119,392 Total Common Stockholders' Equity 385_,_50§ 37%
343,082 36%
Cumulative Preferred Stock Par value $25 per share, 3,000,000 shares authorized, none outstanding Par value $100 per share, 1,800,000 shares authorized Without mandatory redemption :
4.00% Series -
outstanding 40,000 shares 4,000 4,000
- 3. 70% Series -
outstanding 50,000 shares 5.000 5,000 4.28% Series -
outstanding 50,000 shares 5.000 5,000 4.56% Series -
outstanding 50,000 shares 5,000 5,000 4.20% Series -
outstanding 50,000 shares 5.000 5,000 5.00% Series -
outstanding 80,000 shares 8,000 8,000 7.84% Series -
outstanding 100,000 shares 10,000 10,000 8.96% Series -
outstanding 130,000 shares 13,000 13,000 7.52% Series -
outstanding 150,000 shares 15,000 15,000 7.88% Series -
outstanding 200,000 shares 20,000 20,000 8 00% Series -
outstanding 150,000 shares 15.000 15,000 With mandatory redemption :
105 000 105,000 I
9.00% Series -
outstanding 200,000 shares 20,000 20,000 125,000 125,000 Premium 110 175 Total Preferred Stock 125 110 12%
125,175 13%
Long-Term Debt First Mortgage and Collateral Trust Bonds:
2'l'a% Series -
issued 71 7149, due 7/1/79 10,000 2314% Series -
issued 10/ 6/50, due 9/1/80 12,000 12,000 93/a% Series -
issued 1/14/75, due 1/1/83 30,000 30,000 3Ya% Series -
issued 5/11 /54, due 5/1/84 10,000 10,000 3Y2% Series -
issued 12/20/55, due 12/1 /85 10,000 10,000 3'l'a% Series -
issued 6/17/58, due 6/1/88 25,000 25,000 4%% Series -
issued 9122164, due 10/1 /94 25,000 25,000 63/a% Series -
issued 9/13/67, due 9/1 /97 25,000 25,000 7 % Series -
issued 10/28/68, due 11 /1 /98 25,000 25,000 83,4% Series -
issued 1/12/70, due 1 /1 /00 30,000 30,000 83/a% Series -
issued 11 /30/70, due 12/1 /00 30.000 30,000 7%% Series -
issued 11 /30/71, due 12/1/01 35,000 35,000 7WYo Series -
issued 81 3172, due 8/1 /02 30.000 30,000 8 % Series -
issued 6127173, due 7/1/03 25,000 25,000 10 % Series -
issued 6/13/74, due 6/1 /04 33,950 33,950 11
% Series -
issued 71 2175, due 7/1 /05 29,100 29, 100 95/a% Series -
issued 6/22/78, due 7/1 /08 50,000 50,000 6.6% Series -
issued 71 1/79, due 7/1/04 18_200 443 250 435,050 Pollution Control Notes:
Series 1973, 5.9% effective rate, due 1983-1998 8,000 8,000 Series 1976, 7.3% effective rate, due 1992-2006 34,500 34,500 42,500 42,500 Term Loan, due 1984, interest at prime rate 50_,_000 Unamortized premium and discount on debt, net 1_,Q29 1,405 536.779 51%
478,955 51%
Current maturity of long-term debt
(_12,000)
(10,000)
Total Long-Term Debt 524,779 468,955 Total Capitalization
$1,035,395 100%
$937,21 2 100%
See accompanying Notes to Consolidated Financial Statements.
19
Delmarva Power & Light Company and Subsidiary Companies Consolidated Statement of Changes in Common Stockholders' Equity For the two years ended December 31, 1979 (Dollars in Thousands}
Additional Par Paid-In Retained Shares Value Capital Earnings Total Balance -
January 1, 1 978 21,358,543
$72,085
$146,521
$107,607
$326,213 Net income 47,448 47,448 Cash dividends declared:
Common stock (28, 189)
(28,189)
Pref erred stock (7,474)
(7,4 7 4)
Issuance of common stock:
Dividend Reinvestment Plan 391,596 1,322 3,762 5,084 Balance -
December 31, 1978 21,750,139 73,407 150,283 119,392 343,082 Net income 53,376 53,376 Cash dividends declared:
Common stock (33, 124)
(33,124)
Preferred stock (9,050)
(9,050)
Issuance of common stock:
Public offering -
June 2,000,000 6,750 17,460 24,210 Tax Reduction Act Stock Ownership Plan (TRASOP) 74,557 252 757 1,009 Dividend Reinvestment Plan 476 062 1,606 4 397 6 003 Balance -
December 31, 1979 24,300,758
$82,015
$172,897
$130,594
$385,506 See accompanying Notes to Consolidated Financial Statements.
20
Delmarva Power & Light Company and Subsidiary Company Notes to Consolidated Financial Statements Note 1. Significant Accounting Policies Financial Statements The consolidated financial statements include the accounts of the company and its subsidiary companies, all of which are totally-held. Accounting policies are in accordance with those prescribed by the regulatory commissions having juris-diction with respect to accounting matters.
Revenues Revenues are billed to customers on a monthly cycle basis and include rate increases permitted to be billed subject to refund pending final approval. At the end of each month, there is an amount of unbilled electric and gas service which has been rendered from the last meter reading to the month-end.
Fuel Costs Fuel costs (electric and gas) are deferred and charged to operations on the basis of fuel costs included in customer billings under the company's tariffs, which are subject to periodic regulatory review and approval.
The company's share of nuclear fuel costs relating to jointly-owned nuclear generating stations (including estimated costs of storing spent fuel) is charged to fuel expense on a unit of production basis.
Depreciation and Maintenance The annual provision for depreciation is computed on the straight-line basis using composite rates by classes of depreciable property. For the years 1979 and 1978, the annual provisions expressed as a percent of average depreciable utility plant in service were 3.3% and 3.4%, respectively. Provision for decom-missioning costs relating to jointly-owned nuclear generating units is made to the extent of the net cost of removal allowed for rate purposes (approximately 20% of the plant cost).
The cost of maintenance and repairs is charged to operating expenses. A replacement of a unit of property is accounted for as an addition to and a retirement from utility plant. The original cost of the property retired is charged to accumulated depreciation together with the net cost of removal. For income tax purposes, the cost of removing retired property is deducted as an expense.
Pension Plan The company has a trusteed noncontributory pension plan covering all regular employees. Pension contributions were $6,839,000 in 1979 and $6,619,000 in 1978, including $1,236,000 and $1,221,000 charged to construction, respec-tively. The contributions provide for normal cost and amortization of prior service costs over periods of twenty to twenty-five years. At December 31, 1979, the prior service costs exceeded the market value of the assets in the retirement fund by approximately $14,800,000. As of the same date, the market value of the fund assets exceeded the actuarially computed value of vested benefits.
Income Taxes Consolidated federal income tax returns have been settled through 1973; the returns for 1974 through 1976 are being examined by the Internal Revenue Service.
Deferred income taxes result from timing differences in the recognition of certain expenses for tax and financial accounting purposes. The principal items accounting for deferred income taxes are: (1) use of accelerated depreciation methods for income tax purposes, (2) unbilled fuel and gas purchased costs deducted currently for income tax purposes, and (3) other timing differences involving spent nuclear fuel storage costs and the capitalization of certain taxes and construction costs.
21
Note 2. Taxes on Income 22 Investment tax credits utilized to reduce federal income taxes are deferred and generally amortized over the useful lives of the related utility plant, excluding the additional 1 % TRASOP credit, which does not affect income.
Allowance for Funds Used During Construction Allowance for funds used during construction (AFUDC) is a noncash item and is defined in the regulatory system of accounts as "the net cost for the period of construction of borrowed funds used for construction purposes and a reason-able rate on other funds so used." AFUDC is segregated into two components:
(1) the interest on debt component ("allowance for borrowed funds used during construction"), which is net of taxes and classified as a credit to interest charges, and (2) the common stock equity and preferred dividend component ("al-lowance for other funds used during construction"), which is classified as an item of other income. AFUDC is considered a cost of utility plant with a concurrent credit to income. It is excluded from taxable income for income tax purposes.
The rate used in determining AFUDC was 7.7% in 1979 and 7.4% in 1978.
Also, effective January 1, 1979, the company adopted semiannual compound-ing of AFUDC. The effect of these changes increased earnings applicable to common stock for 1979 by $1,736,000 (7¢ per share).
Income tax expense for 1979 and 1978 is as follows:
1979 Operations:
Current:
Federal State Deferred, net:
Federal State Investment tax credit adjustments, net Other income
$(4,457) 1,859 12,,674 1,930 11,298 23,304 346
$23,650
($000) 1978
$ 6,849 3,736 (1,105)
(323) 9 701 18,858 452
$19,310 The following is a reconciliation of the difference between income tax expense and the amount computed by multiplying income before tax by the federal statutory rate:
1979
($000) 1978 Amount Rate Amount Rate Statutory income tax expense
$35,432 46%
$32,044 48%
Reduction in taxes resulting from:
Exclusion of AFUDC for income tax purposes (7,815) (10)
(5,207)
(8)
Investment tax credits amortized to income (2,646)
(3)
(4,196)
(6)
Excess of tax depreciation over book depreciation not normalized (2,511)
(3)
(3,329)
(5)
Other, net 1 190 1
(2)
Income tax expense
$23,650 31%
$19,310 29%
Note 3. Taxes Other Than Income Note 4. Capitalization The components of deferred income taxes relate to the following tax effects of timing differences between book and tax income:
Depreciation Deferred fuel costs Capitalized overhead costs Nuclear fuel storage costs Pennsylvania gross receipts tax Other, net 1979
($000)
$ 6,907 6,081 1, 103 (1,007) 1,284 236
$14,604 1978
$ 5,657 (5,254) 162 (1,155)
(735)
(103)
$(1,428)
Investment tax credits utilized amounted to $14,000,000 in 1979 (including TRASOP credit of $1,060,000) and $13,900,000 in 1978.
Delaware utility Pennsylvania gross receipts tax Property Other gross receipts Social Secu rity Franchise and other 1979
($000)
$ 8,090 (2,445)*
5,860 2,560 2,332 1,251
$17,648 1978
$ 7,088 1,400 5, 113 1,843 1,942 1,800
$19, 186
- The company had accrued, but not paid, the Pennsylvania gross receipts tax on energy generated within the state but sold outside for the years 1977-1979.
In December 1979, the tax was repealed beginning in 1980, and the company does not now believe that the prior years' taxes will be payable. Accordingly, the accruals were reversed in the fourth quarter of 1979, the effect of which was to increase earnings applicable to common stock for the three and twelve months ended December 31, 1979 by $1,687,000 (7¢ per share) and
$1, 161,000 (5¢ per share), respectively.
Common Stock At December 31, 1979 there were 1,686,701 shares of common stock reserved for issuance under the Dividend Reinvestment Plan and the TRASOP.
Retained Earnings The current supplemental indenture restricts the amount of consolidated re-tained earnings available for cash dividend payments on common stock to
$35,000,000 plus accumulations after June 30, 1978, which available amount at December 31, 1979 was approximately $51,000,000.
Preferred Stock (1 ) The 9% series of preferred stock has a sinking fund requirement, com-mencing in December, 1984, to redeem 8,000 shares annually at $100 per share. At the option of the company, an additional 8,000 shares may be re-deemed on any sinking fund date, without premium. (2) The series of preferred 23
Note 5. Short-term Debt and Lines of Credit Note 6. Sale of Contracts for Nuclear Plant 24 stock without mandatory redemption may be redeemed at the option of the company at any time, in whole or in part, at the various redemption prices fixed for each series (ranging from $103 to $108 at December 31, 1979). (3) The annual preferred dividend requirements on the outstanding preferred stock at December 31, 1979 are $9,050,000.
Capital Stock Expenses The additional paid-in capital on common stock and the premiums on preferred stock are stated net of the expenses related to the issuance of such stock.
Long-Term Debt (1) On July 12, 1979, the company issued $18,200,000 of 6.6% First Mortgage and Collateral Trust Bonds to collateralize pollution control revenue bonds issued by the Department of Community Affairs and Economic Development of the State of Delaware. The net proceeds of the issue ($17,678,000) were depos-ited in a construction fund held by a trustee and are intermittently disbursed to reimburse the company for the cost of constructing certain pollution control facilities. (2) In December, 1979, the company entered into term loan agree-ments with several banks in borrowing $50,000,000 for a five-year period. The loan may be prepaid at any time without penalty and the interest on the loan will range from the prime rate in 1979 to 105% of the prime rate in 1984. (3) Substan-tially all utility plant of the company now or hereafter owned is subject to the lien of the related Mortgage and Deed of Trust. ( 4) The annual interest requirements on the outstanding indebtedness at December 31, 1979 are $44,517,000.
Information regarding short-term borrowings (all commercial paper) is as follows:
Short-term debt outstanding at year-end Average rate of interest on debt outstanding at end of period Average short-term debt out-standing during period Average rate of interest on short-term debt outstanding during period Maximum short-term borrowing during period 1979
$16,950,000 13.6%
$15, 100,000 11.5%
$53,200,000 1978
$17,700,000 7.2%
$36,000,000 As of January 1, 1980, the company had unused bank lines of credit of
$75, 750,000. The company is required to pay commitment fees or maintain 10%
compensating balances for these lines.
The proceeds received by the company for the sale, in 1975, of the contracts for a nuclear steam supply system and related fuel, net of plant expenditures which are considered of no future value to the company, are classified as a deferred credit in the balance sheet. It is the intention of the company to reduce the cost of subsequent replacement plant capacity by the amount of the net proceeds.
The company, under advice of counsel, did not treat the sale of these contracts as taxable for federal and state income tax purposes. Accordingly, the tax basis of the company's depreciable property was reduced by approximately
$77 million in 1976, and the annual tax effect (approximately $4 million per year) of the resulting decrease in tax depreciation is being recorded in a deferred
Note 7. Commitments Note 8. Jointly-Owned Utility Plant income tax account with a corresponding direct credit to current taxes accrued.
If this transaction is ultimately considered taxable, additional taxes payable at December 31, 1979 would approximate between $13 million and $24 million (excluding related net interest of $2.8 million to $5.3 million) and would be charged to the deferred tax account.
The company estimates that approximately $98,800,000, excluding AFUDC, will be expended for construction purposes in 1980, in connection with which substantial commitments have been incurred. The company also has commit-ments under long-term fuel supply contracts.
Minimum commitments as of December 31, 1979 under all noncancelable lease agreements are as follows:
1980.............................
1981..............................
1982.............................
1983.............................
1984.............................
Remainder........................
Total.......................
$ 6,743,000 6,411,000 5,977,000 5,308,000 2, 190,000 18,678,000
$45,307,000 The total minimum rental commitments are applicable to the following types of property: company's share of Peach Bottom nuclear fuel, $12,049,000; fuel storage and pipeline facilities, $26, 792,000; railroad coal cars, $3, 175,000; other, principally computer equipment, $3,291,000. Rentals charged to operat-ing expenses aggregated $11,516,000 in 1979 and $10,385,000 in 1978, in-cluding $5,646,000 and $5,460,000 for nuclear fuel, respectively.
The aforementioned leases are principally operating leases. Those leases that meet the criteria of capital leases are not accounted for as such in the rate-making process, and, if capitalized, would not have a significant effect on assets, liabilities or expenses.
In addition to nuclear fuel, utility plant in the accompanying balance sheet as of December 31, 1979 includes the company's interest in jointly-owned plant as follows:
$000 Propor-Accumu-Construction tionate Plant in lated Work in Share Service DeQreciation Progress Nuclear:
Peach Bottom 2 and 3 7.51%
$ 60,518
$11,806
$ 1,996 Salem 1 and 2 7.41 72,804 6,940 49,969 Coal-Fired:
Keystone 3.70 8,029 2,691 90 Conemaugh 3.72 12,202 3 113 134 Total
$153,553
$24,550
$52,189 25
Note 9. Contingencies 26 L....
The company finances its share of construction of jointly-owned projects. In addition, the company is a joint guarantor of loans ($1,382,000proportionate share) advanced for operation of the coal mines that supply the Keystone plant.
The company's share of operating expenses of the jointly-owned plant is in-cluded in the corresponding operating expenses in the accompanying state-ments of income.
See Note 6 for possible payment of income taxes relating to the sale of contracts.
Revenues collected since December 1, 1978 of approximately $2.8 million are subject to refund pending FERC approval of an electric resale rate increase for certain wholesale customers.
The company is a defendant in two anti-trust suits filed in 1977 in the U.S.
District Court for Delaware by four Delaware municipal electric wholesale cus-tomers who seek declaratory, injunctive and treble damage relief under the Sherman and Clayton Acts. These actions are in their earliest stages and, until plaintiffs have articulated a theory of damages for their allegations, it is not possible to quantify the company's exposure to liability, if any, or to comment on the validity, as a matter of law, of the damage claims. The company believes the suits to be without merit and legal counsel believes the company has material substantive defenses available to it.
The company is involved in certain other legal and administrative proceed-ings before various courts and governmental agencies concerning rates, envi-ronmental issues, taxes, nuclear and other licensing, fuel contracts and other matters. In the opinion of management, the ultimate disposition of these pro-ceedings will not have a material effect on the financial position or results of operations of the company.
The Price-Anderson Act places a limit of liability of $560 million on each nuclear generating facility for public liability claims that arise from a nuclear incident. Public liability insurance on the nuclear generating units in which the company has an ownership participation is currently provided by a combination of private insurance and indemnity agreements with an agency of the federal government, under which the company could be assessed up to a maximum of
$3 million in any one year. For property damage to the Salem and Peach Bottom nuclear plant facilities, the company and its co-owners have private insurance up to $300 million for each station. The company is a self-insurer, to the extent of its ownership interest, for any property loss in excess of the aforementioned amounts.
1979
($000)
Electric Gas Steam Total Operating revenues
$ 363,666
$49,322
$11,711
$ 424,699 Operating expenses:
Depreciation 30,672 2,441 753 33,866 Other 263,491 42,456 10,027 315,974 Operating Income 69,503
$ 4,425 931 74,859 Assets at December 31, 1979:
Net utility plant
$ 737,721
$43,392
$ 5,616
$ 786,729 Construction work in progress 307,412 695 1,648 309,755 Total utility plant 1,045, 133 44,087 7,264 1,096,484 Other identifiable assets 71,958 3,927 332 76 217
$1,117,091
$48,014
$ 7,596
$1, 172,701 Unallocated assets 76,905 Total assets
$1,249,606
Note 11. Quarterly Financial Information (Unaudited)
Note 12. Supplementary Information to Disclose the Effects of Changing Prices (Unaudited) 1978
($000)
Electric Gas Steam Total Operating revenues
$318, 106
$49,640
$10,956
$ 378,702 Operating expenses:
Depreciation 28,513 2, 118 752 31,383 Other 223,336 43 141 9,279 275 756 Operating Income
$ 66,257
$ 4,381 925 71,563 Assets at December 31, 1978:
Net utility plant
$701,024
$42,886
$ 5,992
$ 749,902 Construction work in progress 250,616 352 1,298 252,266 Total utility plant 951,640 43,238 7,290 1,002,168 Other identifiable assets 36,304 5,206 292 41 802
$987,944
$48.444
$ 7,582
$1,043,97Q Unallocated assets 76,335 Total assets
$1,120,305 Operating income by segments is reported in accordance with generally accepted accounting and rate-making practices within the utility industry and,
accordingly, includes each segment's proportionate share of taxes on income and general corporate expenses. Construction expenditures in 1979 and 1978 were principally for electric facilities.
The quarterly data presented below reflect all adjustments necessary in the opinion of the company for a fair presentation of the interim results. Quarterly data normally vary seasonably with temperature variations, the timing of rate increases and the scheduled downtime and maintenance of electric generating units. See Notes 1 and 3 for additional information.
Earnings Earnings Applicable Average per Operating Operating Net to Common Shares Average Revenue Income Income Stock Outstanding Share Quarter Ended (000)
(000)
(000)
(000)
(000)
(Dollars) -
1978:
March 31
$105,172
$20,494
$14,663
$12,851 21,433
$.60 June 30 84,617 14,929 9,441 7,628 21,530
.35 September 30 96,716 19,773 13,881 12,069 21,627
.56 December 31 92, 197 16,367 9,463 7,426 21,736
.34
$378,702
$71,563
$47,448
$39,974 21,582
$1.85 1979:
March 31
$109,237
$21,091
$15,965
$13,703 21,846
$.63 June 30 94,054 16,052 10,870 8,607 22,632
.37 September 30 113,916 19,371 14,277 12,015 24,086
.50 December 31 107,492 18,345 12,264 10,001 24,295
.41
$424,699
$74,859
$53,376
$44,326 23,215
$1.91 The following supplementary financial information, as prescribed by the Finan-cial Accounting Standards Board in Statement No. 33, is supplied for the pur-pose of providing information about the effects of general inflation on the com-pany's operations. The supplemental information presented herein is on a con-stant dollar basis. Constant dollar amounts represent historical costs stated in terms of dollars of equal purchasing power, as measured by the Consumer Price Index for All Urban Consumers. The company advises readers that the infor-mation should be viewed as an estimate of the approximate effect of inflation, rather than as a precise measure.
27
28 Supplementary Financial Data Adjusted for the Effects of General Inflation For the Year Ended December 31, 1979 (Thousands of Dollars)
Operating revenues Operating expenses:
Operation and maintenance Depreciation Taxes Other income -
net Interest charges Net income Purchasing power gain on net amounts owed during the year Reduction of utility plant to net recoverable amount Net Conventional Historical Cost
$424,699 275,022 33,866 40,952
{12,670) 34, 153 371 323
$ 53,376 Constant Dollars (Average 1979 Dollars)
$424,699 275,022 58, 137 40,952
{12,670) 34 153 395,594
$ 29,105*
$ 63,356 (107,380)
($ 44,024)
- Including the reduction of utility plant to net recoverable amount, net income (loss) on a constant dollar basis would have been ($78,275).
As required by Statement No. 33, the current year's provision for deprecia-tion on the constant dollar amounts of utility plant was determined by applying the company's depreciation rates to the indexed plant amounts, even though depreciation is limited to recovery of historical costs as further discussed below.
Other operating expenses were either not required to be adjusted or were not adjusted due to ratemaking considerations.
The company, by holding monetary assets such as cash and receivables, loses purchasing power during periods of inflation because these items can purchase less at a future date. Conversely, by holding monetary liabilities, primarily long-term debt, payments in the future will be made with dollars having less purchasing power. For 1979 the company's monetary liabilities exceeded monetary assets which resulted in a purchasing power gain on net amounts owed during the year.
The rate regulatory process limits the company to the recovery of the historical cost of plant. Therefore, the excess of the cost of plant stated in terms of constant dollars over the historical cost of plant is not presently recoverable in rates as depreciation and is reflected as a reduction to net recoverable cost.
Based on past practices however, the company believes it will be allowed to earn on the increased cost of its facilities when replacement actually occurs.
Since the gain from the decline in purchasing power is primarily attributable to long-term debt which has been used to finance utility plant, the reduction of utility plant to net recoverable amount is netted against the purchasing power gain on net amounts owed during the year.
Current cost information will be available in the company's annual report to the Securities and Exchange Commission on Form 10-K.
Supplementary Five-Year Comparison of Selected Financial Data Adjusted for the Effects of General Inflation (Average 1979 Dollars, in Thousands Except Per Share Amounts)
Operating revenues Historical cost dollars Constant dollars Earnings per average common share (after dividends on preferred stock and excluding reduction to net recoverable amount)
Historical cost dollars Constant dollars Net assets at year end Historical cost dollars Constant dollars Cash dividends declared per common share Historical cost dollars Constant dollars Market price per common share at year-end Historical cost dollars Constant dollars Average consumer price Index (1967 = 100)
Year Ended December 31 1979 1978 1977 1976 1975
$424,699
$378,702
$337,818
$286,388
$276,026 424,699 421,340 404,637 365, 166 372,258 1.91
.86
$490,616 463,941 1.40V2 1.30V2 $
1.22 1.20 1.20 1.40V2 1.45 1.46 1.53 1.62 12.63 13.25 14.38 14.13 13.00 11.94 14.20 16.79 17.62 16.99 217.4 195.4 181.5 170.5 161.2 Report of Independent To the Board of Directors and Stockholders Certified Public Accountants Delmarva Power & Light Company Wilmington, Delaware We have examined the consolidated balance sheets and statements of capitali-zation of Delmarva Power & Light Company and subsidiary companies as of December 31, 1979 and 1978, and the related consolidated statements of income, changes in common stockholders' equity and sources of funds for construction expenditures for the years then ended. Our examinations were made in accordance with generally accepted auditing standards and, accord-ingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the financial statements referred to above present fairly the consolidated financial position of Delmarva Power & Light Company and sub-sidiary companies at December 31, 1979 and 1978, and the consolidated results of their operations and sources of funds for construction expenditures for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis.
1900 Three Girard Plaza Philadelphia, Pennsylvania February 8, 1980 COOPERS & LYBRAND 29
Delmarva Power & Light Company and Subsidiary Companies Consolidated Statistics 10 Years of Review... 1969 - 1979 1979 1978 1977 1976 1975 Electric Revenues (thousands): Residential........ '
$ 115,381
$105,237
$ 97,691
$ 80,416
$ 77,0E Commercial........
91,798 82,796 74,641 60, 111 58,1E Industrial...........
98,023 83,972 76,801 64,458 64, 1L Other utilities, etc....
53,782 40,840 38,974 34,896 35,6(
Miscellaneous revenues.......
4,682 5,261 3,A61 2,398 4,31 Total electric revenues....... $ 363,666
$318,106
$291,568
$242,279
$239,3E Electric Sales (1,000 kilowatt-hours): Residential.........
1,968,452 1,979,624 1,924,723 1,787,663 1,672,11 Commercial........
1,598,299 1,568,600 1,495,796 1,412,259 1,359,6 Industrial...........
2,624,438 2,418,527 2,277,630 2,260,661 2,142,1!
Other uti Ii ties, etc....
1,300,611 1,281,498 1,207,941 1, 199, 155 1,218,71 Total electric sales 7,491,800 7,248,249 6,906,090 6,659,738 6,392,71 Electric Customers (end of period): Residential.........
242,745 237,925 233,106 230,579 221,7
- Commercial........
27,998 28,421 29,648 28,345 27,3 Industrial...........
874 858 921 1,002 9
Other utilities, etc....
478 480 561 550 5
Total electric customers......
272,095 267,684 264,236 260,476 250,5 Gas Revenues (thousands) Residential 25,719
$28,370
$21,829
$18,826
$15,3, Commercial........
8,954 10, 154 7, 133 6,062 4,6 Industrial...........
9,884 10, 191 6,950 5,984 4,3 Interruptible 3,044 716 169 1,301 1,2 Other uti Ii ties, etc....
1,451 93 49 44 Miscellaneous revenues.......
270 116 103 31 Total gas revenues 49,322
$49,640
$36,233
$32,248
$25,E Gas Sales (million cubic feet): Residential.........
6,423 6,941 6,751 6,956 6,t Commercial........
2,415 2,593 2,439 2,586 2,L Industrial...........
3,388 3,290 2,811 3,264 2,t Interruptible........
1, 190 319 81 953 1,(
Other utilities, etc....
546 29 17 20 Total gas sales....
13,962 13, 172 12,099 13,779 12,!
Gas Customers (end of period) : Residential.........
67,823 67,550 67,400 68,978 69,'
Commercial........
3,712 3,773 3,738 4,154 4,
Industrial...........
131 163 163 198 Interruptible........
16 21 21 21 Other utilities, etc....
1 1
1 1
Total gas customers 71,683 71,508 71,323 73,352 73,1 Refinery Service Electricity delivered..
262, 159 270,006 289,049 318,389 297,.
(1,000 kilowatt-hours)
Steam delivered.....
6,378,705 6,016,095 4,888,366 5,301,421 5,517,1 (1,000 pounds) 30
Average Annual Compound%
1974 1973 1972 1971 1970 1969 Rate of Growth Electric Revenues 68,730
$ 51,799
$ 43,878
$ 36,198
$30,992
$27,857 15.27 Residential 51, 192 37,888 31,810 25,468 21,430 19,333 16.86 Commercial 66,381 41,284 35,962 28,903 24,069 22,483 15.86 Industrial 32,976 21,518 16,833 12,964 10, 175 8,936 19.66 Other utilities, etc.
' 9, 194 5,287 2,857 1,209 530 513 24.75 Miscellaneous revenues 128,473
$157,776
$131,340
$104,742
$87, 196
$79, 122 16.48 Total electric revenues Electric Sales
~7,472 1,629,641 1,463,821 1,380,763 1,280,420 1, 151, 108 5.51 Residential 03,053 1,360,216 1,227,230 1,099,897 1,009,488 923,064 5.64 Commercial 61,303 2,512,877 2,412,239 2,252,219 2,264,084 2,217,655 1.70 Industrial 80,528 1,252,977 1,137,272 1,014,972 885,720 792, 151 5.08 Other utilities, etc.
92,356 6,755,711 6,240,562 5,747,851 5,439,712 5,083,978 3.95 Total electric sales Electric Customers H5.516 208,073 200,595 193,282 187,683 183,458 2.84 Residential
~ 7. 132 26,708 25,856 25, 139 24,383 24,058 1.53 Commercial 891 867 869 810 834 815
.70 Industrial 501 506 496 460 375 283 5.38 Other utilities, etc.
4,040 236, 154 227,816 219,691 213,275 208,614 2.69 Total electric customer s Gas Revenues 4,298
$13,018
$12,944
$11,948
$11,283
$10,708 9.16 Residential 4,201 3,715 3,532 3,126 2,861 2,555 13.36 Commercial 3,726 3,505 3,265 2,998 2,618 2,641 14.11 Industrial 1,532 1,363 1,035 1, 153 1,340 1,222 9.56 Interruptible 26 30 25 16 10 7
70.47 Other utilities, etc.
96 22 18 39 225 251 (13.93)
Miscellaneous revenues D3,879
$21,653
$20,819
$19,280
$18,337
$17,384 10.94 Total gas revenues Gas Sales 6,863 7,134 7,737 7,583 7,406 6,942 (0.77)
Residential 2,526 2,614 2,696 2,534 2,384 2,097 1.42 Commercial 3,215 3,653 3,875 3,797 3,549 3,700 (0.88)
Industrial 2,257 2,346 2,134 2,708 3,423 3,263 (9.59)
Interruptible 16 23 20 13 8
6 57.00 Other utilities, etc.
4,877 15,770 16,462 16,635 16,770 16,008 (1.36)
Total gas sales Gas Customers 9,525 69,833 69,891 69,604 68,614 68,074 (0.04)
Residential 4,356 4,418 4,407 4,426 4,444 4,423 (1.74)
Commercial 195 197 195 204 206 103 2.43 Industrial 21 21 21 21 21 19
( 1. 70)
Interruptible 1
1 1
1 1
1 Other utilities, etc.
4,098 74,470 74,515 74,256 73,286 72,620 (0.13)
Total gas customers Refinery Service I0,021 341,700 295,236 272,649 244,614 281,120 (0. 70)
Electricity delivered (1,000 kilowatt-hours) 1,000 5,926,000 7,261,000 7,564,000 7,779,000 7,536,000 (1.65)
Steam delivered (1,000 pounds) 31
Officers Board of Directors 32 Robert D. Weimer Chairman of the Board and Chief Executive Officer Nevius M. Curtis President and Chief Operating Officer H. Ray Landon Senior Vice President William G. Price Senior Vice President J. Kenneth Wiley Senior Vice President Howard E. Cosgrove Vice President, Finance and Accounting and Chief Financial Officer Earl D. Krapf Vice President, Regulatory Practices Werner C. Brown Chairman of the Board of Hercules Incorporated (chemical manufacturer) Wilmington, Delaware Mrs. Henry P. Cannon, II Director of H. P. Cannon & Son, Inc. (food processing firm) Bridgeville, Delaware Oscar L. Carey President and Director of Larmar Corporation (general real estate and home builders)
Salisbury, Maryland Nevius M. Curtis President and Chief Operating Officer of the Company lrenee du Pont, Jr.
Director and member of Finance Committee of E.I. du Pont de Nemours & Company (chemical manufacturer) Wilmington, Delaware Sally V. Hawkins Director and President of Delaware Broadcasting Company and General Manager of Station WILM (radio broadcasting), Wilmington, Delaware Dr. Earl C. Jackson, Sr.
Retired Superintendent of the Wilmington Public Schools, Wilmington, Delaware (Superintendent Emeritus)
William G. Price Senior Vice President of the Company James A. Clark, Jr.
Vice President, System Operations and Energy Supply Frank A. Cook Vice President, Production J. Edwin Hobbs Division Vice President, Southern Division Harland M. Wakefield, Jr.
Division Vice President, Northern Division Alfred C. Thawley, Jr.
Secretary and Treasurer Charles Marchyshyn Comptroller Thomas C. Roe Retired, former Chairman of the Board of the Company Dr. E. Arthur Trabant President of the University of Delaware Newark, Delaware James M. Tunnell, Jr.
Partner of Morris, Nichols, Arsht & Tunnell, attorneys, Wilmington, Delaware Robert D. Weimer Chairman of the Board and Chief Executive Officer of the Company Executive Committee Werner C. Brown, Chairman; Nevius M. Curtis; lrenee du Pont, Jr.; Thomas C. Roe; James M.
Tunnell, Jr.; Robert D. Weimer Audit Committee James M. Tunnell, Jr., Chairman; Werner C.
Brown; Oscar L. Carey Nominating Committee lrenee du Pont, Jr., Chairman; Dr. E. Arthur Trabant; Robert D. Weimer
Delmarva Power & Light Company 800 King Street P.O. Box 231 Wilmington, DE 19899 US POSTAGE PAID W1lm1ngton. DE Permit No. 68 Zip Code 19899 THIRD CLASS