ML18086B375

Forwards Annual Financial Rept 1981

ML18086B375
Person / Time
Site:	Salem
Issue date:	03/18/1982
From:	Uderitz R Public Service Enterprise Group
To:	Wood R NRC OFFICE OF STATE PROGRAMS (OSP)
Shared Package
ML18086B376	List: ML18086B375 ML20042A892
References
NUDOCS 8203240244
Download: ML18086B375 (42)

Text

• .>

Public Service Electric and Gas Company Richard A. Uderitz 80 Park Plaza, Newark, NJ 07101 201-430-7380 Mailing Address: P.O. Box 570, Newark, NJ 07101 Vice President Nuclear Off ice of State Programs Nuclear Reactor Regulation March 18, 1982 U.S. Nuclear Regulatory Commission Washington, D.C.

20555 Attention:

Dear Sir:

RE:

SALEM GENERATING STATION DOCKET NOS. 50-272 AND 50-311; OPERATING LICENSE NOS. DPR-70 AND DPR GUARANTEEING RETROSPECTIVE PREMIUMS FOLLOWING NUCLEAR INCIDENT Our letter of March 15, 1982 provided the filing under Public Law 94-197 for the owners of Salem Generating Station Units No. 1 and No. 2 and stated that the 1981 Stockholders Annual Report of Atlantic City Electric Company would be submitted when available.

Enclosed is a copy of this Report which completes the guarantee requirements as provided under Alternative No. 5 of the 1975 Amendments to the Price-Anderson Act.

Very truly yours, Enclosure (8203240244 820318 PDR.ADOCK 05000272 I -

,, PDR..

NOTICE THE ATTACHED FILES ARE OFFICIAL RECORDS OF THE DIVISION OF DOCUMENT CONTROL. THEY HAVE REEN CHARGED TO YOU FOR A LIMITED TIME PERIOD AND MUST BE RETURNED TO THE RECORDS FACILITY BRANCH 016.

PLEASE DO NOT SEND DOCUMENTS CHARGED OUT THROUGH THE MAIL. REMOVAL OF ANY PAGE(S) FROM DOCUMENT FOR REPRODUCTION MUST BE REFERRED TO FILE PERSONNEL.

DEADLINE RETURN DATE RECORDS FACILITY BRANCH

Results of Operations 1981 - 1980 1981 1980 0/o Change Electric Operating Revenues........ $ 469,683,000

$ 358,391,000 31.1 Operating Expenses............... $ 396,172,000

$ 302,158,000 31.1 Fuel Costs....................... $ 154,652,000

$ 131,894,000 17.3 Net Income...................... $

46,988,000 38,538,000 21.9 Earnings Per Common Share....... $

3.03 2.62 15.6 Dividends Paid Per Common Share.. $

2.04 1.90 7.4 Total Assets..................... $1,013,789,000

$ 879,795,000 15.2 Cash Construction Expenditures..... $ 113,221,000 88,791,000 27.5 Sales of Electricity (KWH)..........

5,675,367,000 5,633,904,000

.7 Total Customer Service Installations (Year-end)...........

386,046 379,242 1.8 Number of Shareholders (Common Stock) (Year-end).......

48,424 47,762 1.4 Number of Employees (Year-end)....

2,035 1,968 3.4 Book Value...................... $

22.40 22.22

.8 The Corporate Name and Trade Name Atlantic City Electric Company, 1600 Pacific Avenue, Atlantic City, New Jersey 08404, is the official name of the Company as it appears in the Articles of Incorporation. The Company also uses the registered trade name Atlantic Electric in various publications to shareholders and customers, and in its day-to-day operations.

Notice of Annual Meeting The 1982 Annual Meeting of Shareholders will be held Tuesday, April 27, 1982, at Quail Hill Inn, Route 9, Smithville, New Jersey. A Notice of Meeting will be mailed in March to those shareholders entitled to vote.

1

~

To Our Shareholders:

1981 was a successful year for your Company. Atlantic Electric had a successful year making substantial progress in the face of major challenges and adversities. These successes oc-curred in a number of areas:

Earnings increased by more than 15010 to $3.03 per share, representing the fourth con-secutive year of growth in earnings for the Company. Dividends paid in 1981 were increased to $2.04 per share, compared to $1.90 in 1980, an increase of over 7010. This represents the 29th consecutive year that the Company has increased its dividend payment-a truly remarkable record. The current annual dividend rate established in July 1981 is $2.12 per share.

Atlantic Electric made further progress in reducing its dependence on overseas oil. Only 20010 of the kilowatt-hours our customers used were produced with oil, compared to 24°/o in 1980 and 32010 in 1979. We are moving away from oil by means of greater use of coal and uranium; and are converting more units back to coal as well as importing coal-produced elec-tricity from the Midwest. With the commercial operation of Salem Nuclear Unit No. 2 in Oc-tober 1981, nuclear's contribution to our electric energy supply is growing.

By the end of 1981, Atlantic Electric was successful in reducing its 5-year forecast of con-struction expenditures by some $362 million. As a result, cash expenditures for 1982-1986 will drop from $970 million to a much-more-manageable $608 million. We have been able to lower our forecast of load growth and to reschedule major capacity additions because of the greater conservation and energy efficiency of our customers. These developments are consistent with our "New Direction" program announced at the Annual Meeting last year.

This New Direction recognizes that growth in electrical demand is extremely costly to serve in these days of high inflation and high interest rates, and that all our efforts should be directed toward reducing our capital expenditures. We made real progress in that direction in 1981, as evidenced by this reduction in projected capital expenditures.

< Unit No. 2 at the Salem Nuclear Generating Station became commercially operable in October 1981.

Atlantic Electric's participation in this Unit entitles it to 82% MW of capacity.

> Alfred C. Linkletter, Chairman of the Board of Directors, and John D. Feehan, President and Chief Executive Officer.

5

In 1981, Atlantic Electric*was successful in attaining one.of its*long term goals. Some years back, we set a five-year goal to achieve a level of excellence that would warrant national recognition in the form of the Electric Light & Power Magazine's annual award. We are pleased that your Company was selected by this prominent trade magazine (through a panel of judges) as the Outstanding Electric Utility of the Year 1981 ! We are doubly pleased that the Com-pany achieved this high level of excellence and that this excellence has been recognized.

But most of all, we are grateful that the management and personnel of Atlantic Electric set

_such a challenging goal for themselves and then made it happen.

Truly, 1981 was a successful year for your Company. However, Atlantic Electric faces ma-jor challenges in 1982 in order to continue its successful performance. Our major challenge is to maintain good earnings and to finance our planned heavy construction program. Both problems are more severe in 1982 because we are in a transition period in which many measures taken in 1981 will bear fruit beyond 1982.

For example, major cuts made in our five-year capital expenditure program will result in sizable reductions in our capital outlays in 1983, '84, '85 and '86. But our capital expenditures will still be at a high level in 1982-some $160 million compared to approximately $98 million in 1983 and $91 million in 1984. These capital expenditures remain high in 1982 because we have major ongoing programs to convert units from oil back to coal and to rebuild major furnace components in our existing coal-burning units. These measures will ultimately lower costs and improve performance and efficiency in our system, but involve sizable outlays in 1982.

Earnings performance in 1982 hinges to a large degree on the timing and adequacy of a rate increase in our base rates. We filed a rate increase request in the amount of $172 million on February 19, 1982 and will be aggressively pursuing speedy rate relief.

< The real recipients of the Outstanding Electric Utility of the Year 1981 Award were Atlantic Electric's 2000 employees.

7

Once we are beyond 1982, the benefits of our New Direction program will be more dramatic in terms of lowered capital expenditures and improved financial parameters. We are con-vinced that the New Direction program will be in the best interest of the shareholder, the customer and the Nation's efforts to contain inflation and lower interest rates.

Your Company faces the challenges of 1982 and beyond with a great deal of confidence.

This confidence comes from our successes over many years and is highlighted by some record successes in 1981. We have a strong Company... a Company which gets its strength from its diversity. We are strong because of the diversity of our service area. We are strong because of the diversity of our fuels. We are strong because of the diversity of our generating capa-city. We are strong because of the diversity of our management team.

We appreciate the confidence the shareholders have placed in this Company and this management. We intend to continue to advance the interest of the shareholders while fulfill-ing our obligations to serve the customer. Our goal is to continue to be successful so that we may continue to warrant the confidence of our shareholders.

> A new Operations Center was opened in the Fall of 1981 to house the Atlantic City Overhead and Underground Departments.

< Overhead lines crews often work under adverse conditions to restore service which is interrupted because of traffic accidents or storm damage.

For the Board of Directors,

().c.~

A. C. Linkletter Chairman of the Board

~~

J. D. Feehan President 9

The New Direction We are pleased that we made substantial progress in 1981 by achieving the Company's basic goal of effecting a reduction in growth of the peak demand for electricity and a reduc-tion of estimated construction expenditures for the next five years. However, we face a major challenge of reducing projected major cash construction requirements beyond that period into the 1990s. For that reason we will be expanding the " New Direction Program" in 1982 and in future years as we aggressively pursue energy efficiency and conservation.

We believe that the letter we received from Mrs. Mary Owen, and the comments of Mr.

Joseph Muldoon (see page 13), describe the recognition we hope the " New Direction Pro-gram" will receive throughout our service area... and that our present customers, and future customers, will adopt the energy efficiency measures which are becoming available.

< Wind and solar energy installations are encouraged under Atlantic Electric's " New Direction." Some applications of both technologies have begun to appear in the Southern New Jersey area.

11

"You and your Company are to be most heartily congrat ated for the wisdom of your ap-proach to energy conservation and growth limitation... Would that other utilities, businesses and corporations would follow your prudent example!

Your customers are indeed fortunate. "

Mrs. Robert I. Owen West Long Branch, New Jersey "On December 11th, Atlantic City Electric Company announced, as part of its New Direction Program, that it was reducing its 1982-1986 construction budget from $970 million to about

$610 million, basically due to lowering of its long term peak demand growth rate from 2. 7%

to 2. 4%. We view this decision... and the New Direction Program... favorably as it will reduce the necessity for debt and equity financing approximately 37% over the next five years.

Atlantic City Electric has followed a prudent expansion program and this decision to reduce future expenditures should eliminate the possibility of excess capacity later in the eighties. "

Joseph B. Muldoon, Certified Financial Analyst Janney Montgomery Scott Inc.

Philadelphia, Pennsylvania

< B. L. England Generating Station at Beesley's Point, the Company's largest generating facility.

Units No. 1 and 2 burn coal and have a total capacity of 289 megawatts; Unit No. 3 has a capacity of 160 megawatts and burns oil. The cooling tower to the right is used for condensing the steam in Unit No. 3.

13

Board of Directors Seated left to right: Richard M. Wilson, Retired. Formerly Senior Vice President of the Company; John D. Feehan, President and Chief Executive Officer of the Company; Alfred C. Linkletter, Consultant. Chairman of the Board of Directors of the Company; Mack C. Jones, Engineer. Retired; Eleanor S. Daniel, Self-employed. Vice President and Director of several real estate corporations.

Standing, left to right: Irving K. Kessler, Executive Vice President, RCA Corporation; Matthew Holden, Jr., Professor of Government and Foreign Affairs, University of Virginia; Richard M. Dicke, Counselor at law. Partner of the law firm of Simpson Thacher and Bartlett; Jos. Michael Galvin, Jr., President and Executive Director of Salem County Memorial Hospital; Frank H. Wheaton, Jr., President of Wheaton Industries. Manufacturer of glass and plastic products; John M. Miner, Senior Vice President of Crocker National Bank.

Committee Listings Mr. Linkletter, Chairman of the Board, serves as an ex officio member of all committees and Mr. Feehan, President, serves as an ex officio member of all committees except the Audit Committee.

Audit Committee Personnel Committee John M. Miner, Chairman Jos. Michael Galvin, Jr., Chairman Eleanor S. Daniel Eleanor S. Daniel Jos. Michael Galvin, Jr.

Richard M. Dicke Mack C. Jones Irving K. Kessler Irving K. Kessler Frank H. Wheaton, Jr.

Corporate Development Committee Frank H. Wheaton, Jr., Chairman Eleanor S. Daniel Shareholder, Community and Government Relations Committee Eleanor S. Daniel, Chairman Matthew Holden, Jr.

Mack C. Jones John M. Miner Energy, Operations and Research Committee Mack C. Jones, Chairman Richard M. Dicke Jos. Michael Galvin, Jr.

Matthew Holden, Jr.

Irving K. Kessler Richard M. Wilson Finance Committee John M. Miner, Chairman Eleanor S. Daniel Richard M. Dicke Mack C. Jones Irving K. Kessler Richard M. Wilson Pension and Insurance Committee Richard M. Dicke, Chairman Matthew Holden, Jr.

John M. Miner Frank H. Wheaton, Jr.

Richard M. Wilson Officers John D. Feehan, President and Chief Executive Officer Frank J. Ficadenti, Senior Vice President Ernest D. Huggard, Senior Vice President Jerrold L. Jacobs, Senior Vice President Michael A. Jarrett, Senior Vice President Jos. Michael Galvin, Jr.

Matthew Holden, Jr.

Frank H. Wheaton, Jr.

Richard M. Wilson David V. Boney, Vice President-Customer and Community Services John F. Born, Vice President-Electric Operations Thomas E. Freeman, Vice President-Human Resources Brian A. Parent, Vice President and Treasurer Joseph G. Salomone, Vice President-Control Henry C. Schwemm, Jr., Vice President-Production Martin R. Meyer, Secretary and Assistant Treasurer Joseph T. Kelly, Jr., Assistant Vice President-Operations, and Assistant Secretary 15

1981 Revenue Dollar Year to Date - December 31, 1981 Commercial $.33 Material and Supplies $.10 Labor $.07 Industrial

$. 18 Preferred and Common

/

Stock D1v1dends

$ 08

/

/

Interest

$ 06 Deprec1at1on

$ 05

/

Reinvested in Business

$.03 Residential

$.46 Fuel and Purchased Power $.46 Where It Came From Where It Went Generation by Fuel Source

% of Utility System CJ)

II COAL

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1977 GAS

• NET INTERCHANGE

• NUCLEAR 5%

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32%

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1981

Dividend Reinvestment and Stock Purchase Plan The Company continues to offer a Dividend Reinvestment and Stock Purchase Plan which enables shareholders and employees to automatically invest their cash dividends in Company stock, and also make optional cash payments without paying brokerage commissions or ser-vice charges. Over 302,000 shares were purchased through the Plan in 1981 with proceeds to the Company in excess of $5 million. There were 12,711 participants in the Plan at year-end. To enroll, please contact our Investor Records Department. See address on page 40.

Share Listings Common Stock of the Company is liste.d on the New York Stock Exchange and the Philadelphia Stock Exchange. The 5 7/80/o Qumulative Convertible Preferred Stock of the Company is listed on the New York Stock Exchange.

10-K Report Available The annual report to the Securities and Exchange Commission on Form10-K is available to shareholders and may be obtained by writing to the Company, Attention: Mr. M. R. Meyer, Secretary. See address on page 1.

Transfer Agents For Common and Preferred Stock Morgan Guaranty Trust Company of New York 30 West Broadway, New York, New York 10015 For Common Stock First National State Bank of South Jersey Atlantic City, New Jersey 08404

> The Company's Deepwater Generating Station, located on the Delaware River. A major conversion is underway at this Station to convert several units from oil-tiring to coal-firing.

< At the Company's Deepwater Generating Station in Salem County, steam is produced and then provided to a neighboring large industrial customer.

A by-product of this steam production is electricity 17

Average Cost of Fuel/Cents Per Gallon

• OIL

• COAL

• NUCLEAR GAS 80 (f) 1--z w

(.)

70 60 50 40 30 20 10

~

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0 1977 1978 1979 MONTH OF DECEMBER 1980 Year-End Capitalization a LONG-TERM DEBT a PREFERRED STOCK COMMON EQUITY 100%

90 80 33%

37%

41%

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$3.00 1981

$3.50 19

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• ,, \\

I',~;', ~

• ~.

• , i'

'~,

)* __.

s*uppleri'lehtar*y Information* Concerning

• The EJfects Of.C_hanging *Prices. (Unaudited)-Continuect*_

. : --Stat~-~en~ Ofl~ccim-e Fr~m: c*ontinui~g: : _*,

• . Operations-Adjusted Fo"r Changing Prices*.. -,

-Year Ended December 31; 1981 -*:..

(In Av_erag~ 1_981 _ Dollars).,,

I In Constari*t.

.At Curreht *

• Histori~al.. :

. Dollars Cost *.

(In Thousands)

Operating.Revenu-es..... >..... *.*. : :..... ;. >.*. :::.. :. :.*... -.* ~. :.. :... *.. *... -$469,683.

'$469;683

$469,:683

• Operation and Mainte_nc!nCe Expens_es :: :. :... :. :. "... -.... *.. *.-. :.. : :-'....... *-.

. _346,017 346,017

• . 346',017 Depreciatiori,.and.Amo'rti:Zation Expense.:.-.. _..,.... *.... *..... *:.. _..... '.*-'.-.-...

25,161..

64;352.. * *

, *64,500 Federal, lncom(;) Tax Expense*:... :-'*....,.-.*.... _*:.*.;... *.*...,:.:.*:<:..* ::.:. *-* 24,'9.94

• - *24,994

-';" 24,994

.Ottier.'... -.. '.....,:. *.. :.-...'.... '.-.. -.-.-,.'.... -..-::.......,...... -_:.:.......'.'....... *.* _

26,523.

26,523-. -. :.

• .26,523

• $422,695

-$461 ;88EL"

• . $462,034

-- In com~ from* Continuing *operations :. *. *.*....'.':... -.... '.. -.,.. :.::*... :*........... - $:* 46,988 7.;791 *

, _-* $*

• 7,649 _:

~

' ~ *

\\

~-.

J

• • >' -~

• i.

+*

- t

~

• . *. _

• Depreciation and amortization expense expressed in constant dOllar and current:cost amoun*ts were defeqTiined using the rates and

.. me!hods used f9r computing. qook depreciation.arid a111orti:iatio,n applied to utility plant balances reexpressed in terms:of cbhstant _

dollarS'*ctnd curre_nt costs.

~' '

• , Only depreciation. and_ amortization of ~nuclear Juel have beer) "specifically adjus'ted for 'inflatio*n in ~the *c1.b6ve schedule., Operating -*,

revenues_ and* other operating exp_enses were generally inc:;urred rateab,ly over the"year, ac;:cordingly; the stated amoun_ts already

reflec;:t; in effect, a1,1erage 1981 c;lollars. *. * -.-. *

, ~ '_ *

-;. ".:, Sig-riiflcant -to this. data is thi/impact at' a* fixed- _income tax --~~te. fnco-me't~xes.weie*not adj\\,Jsted because the present tax laws.

~ q0.11of-'8.llqW -a**ae*ductiori*.for d9preGiatiOn a*nd anio.~fiz8ticin.*adjuste-cj *for th9 im~8ct *of,Inflation. Theref0re, the-Cornp_any:s eftE3ctiVe * *,

• tax rate rises from 36:8°/o under the hi~torical ~ost qasis to 77.8%,arid 78;10/o under the respective constarit dollar anp cucrent cost l;lasis:- *

* :'This supp-le*ment~ry inform~tion *should *not be u~ed to. assess -the probability'*ot future cash flbws when *existing utility plant~is

• replaced._ The estimate~ ao not reflect the* effects of the regulatory" process no(the specific plans*ot the,Co,rripariy for the:replacement <.

• or modernizati0n at utility plant. A _m*eaningfu1)3stimate of-the e~tiniated leveJ*offuJ_ure capital :e_i:<:penditures is set forth on'*page 17 of the a_nnual.!"ep~rt.

' Cur.rent Yea;, Effect o\\'lricreas~d 'Pric~- lev~ls:*' ', '

' - (In 'rhousarids)

, lnc~eases in Specific 'Prices,on Utilhy Plant Fie Id... :..'.*. '...-. *. *.. :.. '.. :...... /:. *..... :,_ *:.... *.. :. :... _. :,... *,. -.. $1°53,000

_ lncr:.S:ases iri ~en(;)ral.Price Levels* on Utility°.PfanfHeld., :. *. _,... *:-.*.. *:.-----*. _

_.-.':,....... *. *.. *.... * -: :~.': *.,. '.._.'. _. : >*;.. *.,:. __ -. 1'27,796_

• __

• Excess *of-,lncreas~ _in,Specifi~_ -Prices :over lnc:rea~~S; irij:3eneral -Price,~~vels '.. :'*. *.. *-: ~.. _:_.,; :--.*-... <* ~<,\\*,. : *... :. '.*-; ',$,25,204', -I

. _-. __ -'-At D~~~inbe/ 31, 19'81

• th~- cost of; ~till;y plant, 0net -~f ~*CGUlll-~l~tE/d depre~i~tiOIJ'. ~as'$1,537,3()5:ooo 6n.a: 'constant d*olla; basis*_:_: '

-* and "$1°,600,527,000 ori _a' current c9st oasis, -while historical cost was $831,864,00,0; The aCGUmulated proYiSiohs for*depreciati,oh -.

and am,arti,zation under both constant dollar and c;:,urrent cost niethods'were estimatecf tor E!ach major:cl.ass* of utility pia'nt (produc-*

• tio~; transmission; distribution' and general _plant) by m_ultiplying th(;) respec;tive cost data by'a percentage representing the expired

• life-of existing facilities of eqch class at December' 3.:1, 1981.

_-*Fuel*in-~entories, the *cc;>st of fossil fuels-,u~ed in.- g~nerati~n; -have.not been--rest_~ted fro~ th~i-~ historic?i CQst/New Je,~sey 0

'. regulation* controls fi.iel *costs; *through the operation of a*Jevelized 'energy clause;* such that recoyer5' is'ultimately limited to:actual*

0 :*c::ost. For this.r~ason fuel-iny~ntori_es*a,re ~ffect,v~ly rrio,r:1etary.gs~~ts_:*_*.'~

• .-* '*./.', >*.. :... _-* : '*,: <:,. *',

• _*. '._. :* Nitu_tili~y "Plant :do~;~--~e6~~~r~~le: : ___ *. :_

• *- *"/ _:'...

• - Umd~r r~_t_~ ma~fng -pr.~s~-~itied~ bit he regulatbry cqmm(ssions t9 ;_whic::~ thei'*Co.mpany*is iubje_ct,. pnly the -h1_storical c9st *at utiiity _

plant is r!=)poverable in 'revenues as. depreciation. Therefore, the exc*ess of. t~e. cost of._utility plant stated i_n terms of c9nstant do,lla.'rs.

• *_*or current cost :over ttie h,istorical -cost-of.pl_an't is no~ presently recove'rable: Due" tp*this. feature,* the value _of utility pla*nt* and its *.

. -. effect on iricor:ne _fro'm conti'nuin~f operation:adfusted for. changing_ *pri'ces musfbe corisiclered *in terms ot'its net*recoverable cost whic,h' ii? historical, cost. -W_hile, the' rate m,aking process* g!ves ho rec;:ognition to t,he *current cost of r~placing utility _plant, based *.,,'

on past.practices the,Company b~ljev'es*itwill pe allq~e~ to.eafri,on*thE3*Jn~r~ased cos~ of jts r:,et !rives~ment'wh~r;i replacem~n_t

• of faciliti!3*s. actt,Jally, oce:~rs. : :'. *, :*. * -:*

'.:-*cu~rent.'/ear.Oec,lin~.in RU/CQasi,:ig_ P~W!3J 0 0f Net.A:riiounts.:*o~e,/

• 1,, '. The 'current' ye_:ar qec;:line in pLlrchas'in_g pow~r 9f net aryioQl")ts *owed was,$3I(573;;oo_d.:qi.fri_n'g *a period q_f i-nfl~tio*n; holder~ qf mbneta:~y'....-.

-,_- * *

• a~~ets su*ch.a~_cash :and *receivabl_~s ~utter-aJoss of g~ner~J-_puq:::hasing_ power;wliile :~alders of monet!3,ry -Jiabi_liti~s. generally

• _ * :* l9r:,g t~rm debt,.e?(pe'rience a:gainhec.ai.i~e debt.will-be repai9 in dollars ~?ving less p!-,lrchasing_power. Th~:Ctjmpany's,gajn from _

... -the: dE;J_dl_ine in purchasirig.'power of its net al'ncH:mts_owed is primarily attrib1,1table *-10 the'substa'n_tial *amount of debt arid -cumulative*_*

. *: preferred.sto'ck subject t.o. mimdatdry '.redem,ption.which tias been: used t6 'finar:,ce Utility plan(:_T°hfs gain;,however, should not b'e' consid~red as*p_roviding *funds to the Company, si'rice thei'Company is'ljmited-under rate making procepu're to the recove*r-y

~ on!y bf its 13n:,bedd13d

• cost of 'de!;£. *,.

• OA;l~rid< El~~tric

,I

.** Ni)TE_*Q. LONG: TERM DEBT:

I',,*

e

.. * 'December.31

-. 1981

. _ *1980 *

(In Tr,10usands)* - *

. First Mor'tg.ag~ Boricis: :..

• *.*, -3~1/4%'SE1ries*due (March 1) 1982.-.. *.,.. <.. *. _;:.. :*:.. :... _

.... *.. :.. :.-.. :,.-......... --:-.. *: :;_. _- $. 4,620.. $

4,620 *

• * : 3-_1/4?/o. S.eries due (January 1 )* 1983... -,. : :. :*. _:.. -.. -.. '.... :,.............-... _... *:... '.: :*: *.* :*.... :..

• 4,050.

.:. 4,050..

'.-: ~;1/40/o.Series*due:(May 1.) 1983.:.:.... *..... *.......... :... -. *. :*..-.... :.:.'".... *.:...... :.. *:... _ *. 35,000 35,000

. **.;'3% * - B~ries,due'*(M_arc.h 1-) 1984'.,-. *.*...... :.:-.. *:... ;.. _.*... :.*.... :..... -:.. >:.. :...... : *,*.*... *: * ~.~o.o -*-~

."5,_000 9.0/o:.. Pollution Cqntrol ~eries due (May 1) 1984*.:.*.... *..... -......., ~.... **....... '.. **._... '*. -~-.....

~1*,000.

• 3-1 /4% Serres due (fvlatc~ 1) 1985... *... :... :. -: -.,.. *.... -,., *-'...... * -.,.. *..... _, *... ':* :_,.. *. :... : 1-0,000- *. 1 Q,do(J. 1/2°/o* Series.due (Ja,nuary.1.) 191F..,._::.:.,.*..,;..... ::.....,.., *_,.... -.. **.--. **'°.. :_...... *.. *.. : :*,.. :,,;. to,ooo_* -* -_10,000 3-7/8°/o Series du8 (April 1)" 19-88... _.-... *.~.. :.*.. 1~: *

.~ *** :._ ***** :-~:.:.'

• . \\

10,000 ~-. * * ~O,dOO * *.

4-1./2% Serie's due (April 1) 1'9~9._-.. :::*.. :-:.... :./... *.... *._.*... >.*... *.*:. :*.. ;.._.,-.....,..... *.... *.*>... 5,000 <.5;990.

_ 4-1/20/ci Series *due_(March.1) 1991_.*._:. *.*... _:_.:... _*...... :....,.;.. *.. _..'...,*.... : _.:.:,:. _:_.: *.,*. '..':..... : J0,000 10,000

. 4~1/2% Series due.(Ju)y 1) 1992........ *.. ;_-... *.*:.. :,., : -. -. : *.*... :.,...... *... -. *.*. '... ::*.. -.'.. *:... _.-...

.12,350

_ 15~000.*. *

• .. 4~.~/8%.-Series _due (Ma_rch.'1) 199:L... <.:... *.. :.... -..<:.. _<...... *.......'. ~.,.....,'..".. *_-.. *:'..

13,500

• 15-,000 _

5-1 /8%. Serie~ due. (Feqrua~y 1) 1996.... _:.....,. *.........,'... *..... *..... :. :._... *.,.'....,..":.. *.'.. :.

. : 9,980.

• 10;000

• 8-7/80/o'Series'd.Lie (September 1) 2000.. :.,:*.'.. :...-:... *:*... *... _,.... :. :.. :. :... **.....-. :*... _.*..., -20,000 20,000*

• *.8%.

Series.due. (ry1_ay, 1) 2001.. _.... ;. : _

27,000.. : 27,000

• • __ *."?01_/2% Series clue (April 1) 2Q02

.:.:.. ~:,... _,<.. :..... :... :... *... :... _:-. *...-.*.. *.*.. ::.. :. __ :.....

20,00Q

• _20,0pO:.*

• * :*. 3/4% Series 'due tJune *1) 2903.. :.*.... _-..'... *.. :... *. :..'.... *...... *.... _...... * :.... -.....-. : :.. *. * * -'30,000.

• 30,000: *

-* 7-5i'8% Pollution co:ntrol Series que (Januari.1) 2005 *..... :*.. *......... *.. :*... -...... -. "'.........,,.* _ ~,500 * -.

• 6,500 * *.

• : 6-3/8% Pollutic;>n Control-Series_ due (Decei:nbe:ir *1) 2006..... :*... -.,....., *.-.. :. -. >. :... *i. :.. *..

. 2,500

• 2,500' *.

... -,: *12-5/ffO/o'Seri_es* due-(J9-riuary 1)" 20*10... : *.. ~... :. :--:.. : *.*. ::.. *.. :. *,.. :.*. __ _. <-,,.:*: /._..-:. :*._..,.-'.*. */.;*. "...., _1s*;oQQ. *75_,000.: :*

... 11-5/8% Pollqtion Co.ntrol*Series dµe (May 1). 2011 *. -.,..,-.. :.,... :... :*.. -.*... :*......... :.:.... :... : 39,000

'370;500.,. 314,670_.

I

~

Debentures:**

• . 5~1/4% Sin_ki~g Fund -Debentures due *(February 1\\ _1_996.*..... "'-..... --.... :: :.. ~.. : :*-... -.'....", :_:'. /;

_ 2,267

• 2,.8,4C(

. 7-*1/40/o. Sinking Fund Debentures dl:le.. (May.1) 1998._:........ *... -.. :. '... *..... :.. *:..-..... -....... *.,.. **

2,786

• 3,-725-5;053, 6,'565

• '; I\\Jotes~7.90°/~--Notes 'd_UEt(December' )5).1982 -.. : *.. : *.. *. :**.-.:..... *.. _'... ~.. _-.-._.*... -::* *:.. :... *.,. \\:... *.:.. :.**.. <. /'15,000* :. '15,000 "t'.Jn-~morti~ed.P~~mii.i'm:i:l.nd:Disc:~unt~-- Net*.::... :.*.\\.;*.:;.::.::._-:.. _,,.:._.,*.*...,<*.*:*../.. *.\\.... :*.... -:/:*:.<'*.., ',.. :._ *a3*6 *-.. ** 1.253:._:;*-: *.

-*. '. 391 389 -

337 488 '

I r

\\

• I

._,,~

~

~:

. I

~*~ *,

.. Deduct First Mortgage Bonds and.Notes *due within one year_..... -.**.. '-.... *..... :*,. *.... *. ::.. *.. *... *.-..

(19,620)

. :-\\ '* *.

. -~ -.. '

• * *,. _*; *:$371';76S -$337,488'

• .. Deposits i~ siriking _f.unds for-.r~tiremen*t* ~f d~b,e~tu.~es.are. r'~q~;~ed ~n Feb~uar/1 of ~ach year throug~ 19;5 ~or the 5~ 1 /40/o :deb*en-',

tu'r,es, and 'on May_'1ofeach yeanhr9.u.gh 1997 for*the 7-1/4% debentures* in-.amouMts in each case si;iJficieritt¢ 'redeem*$*100,d~:iQ.

• prin.cipal amOU!']t plus*; at the election. of the-Company, up to ai:1.ad.ditional $100,000. princ;jpa.1 *a,mo~nt. in each y~ar. AtD'ece!T1ber *.*

31; 1981 *the.Company had. reacquired and.cancelled$1 ;533,00.o *principal amount ofthe 5-1/4% debentUrE3s and $1,314,ooo prin_- *

...__cipal ampunt' of tl)E;i. 7-1/4% debe_ntures towar.d it1>Jequirer:rients for 1*982 and sµbsequerit periods:.*. :- :.

. -~

• Current sinking furi~ req*uiremenfs of $986: 700 in' c_9nnectio*n with ~ertain* first mor-tgage-bpnds.outsfa.nding/ are being satisfie_d

. by certifi<:::~tiori of prop_erty additions *as :Provided fpr Jr:i ~he r~l~te~ :mqrtgage:,in.denture~.... *., *... *_c...

.. Annual sinking* fund *deposits are-'~lso required *each year from 1986 tffrough 201 d su*fficien*t to reaeem $3,000,000 *principal

. ~mo~nt *of t.he* 12~5/80/idirst *mortgag!3 bonds plu.s, at :th.e election of'th~ Con:,pany,

• an add,iti9nal..$.3,000,9QO in:* eacli y~ar:.. _

In-addition,* annual ~inkiqg. fu.n~- dep*osit~ of $3;soo;ooo in *2007 and 20.08 'and $10_.000,000 in. 2009 and 2010 ar.ef,requir*ed_. *.,,.. ~

in ord_er to re.deem principal--aniourits of the 11-5/8% Pollution Control Series:-

)

I T

• *NbTEJo; sHoRi-"tERM DEBT AND COMFiENs*A_TING BALANCES:

The. Company had* arrangem'ent!3 for. short terrr(debt as follows:.*..

~

• 1*901*.-.. -. *.. J9.80 -...

1979*

"*.. ~(Dollars i~ Thouiaric;ls)... -,.*

As-of. ~nd of year...:...*

-* -'Weigl;ited.'average interesfrafe-f_or short term,debto'utstan.dinif.

\\.-.....

-* -~

--~ :'

• Conimer~!al* Paper*;,.. : :*:.. :...... *. *.. ;... _. :*.. :. ~,.";..-. :*.<.... :*,.. *.*........ <*'.

_.... :. 12:200Vo.*:

1_s_300va.. - -13*.2010 NotesPayablE1to.Banks*........-..... :-'.. :.....,..... :.-.. :.*...... :c...... *.... :.*:.*..

• 12.BYo 19.3Vo,

• 1"4.7%

• .. Fc:fr tli_e year}nde*d~:. * -. *.-.-..

,_._ : 1,

• . Monthly amount of short term debt at *any month-e'nd:

Gommercial Paper._-....-...... -:.:.. *...,.. :.... :,.*.... *,*..... *.. _..... *.... *.. *-*.. $62:475.

"$1°6,725.'

$31,975.

Notes Payable to Banks.. -.:*.. :-........... ::.*.:,;.*::... *........ *..... ~-.... :-,.:*.. :.*.*.. ::-.$ 17;500.*. $,3,500. * *'$ 7,500:

.

• Average-amount.of short te~rri debt (bas:ed ori daily outstandi~g bki'ance~):

• .. Cqmmer~ia,I paper.. :._..... -~*/**:..... **.:**...-.;:........ _...... _:... :...-.. ::.:.,:.... _.. _$.43,284.:

$ 8,879

.' $,9,352*,._- *

. Notes Payable to.Bank_s...........,.... ].... *....,..-*:;. *,. :...., *...... *.. *.. :...... -. :-. $ ~;661

$ 1,810'. * $: 2,260.-

• Weighted.daily average interest rates*on.sho~t-ierm debt:

• .., ~~~;~~~~bietfoe-~~~k;*:': :-: : :--;' :*:*:~i :)*:.-:,: :*:_.:*: :. :*: :.'-: :.. :.:**'.*:: :--:*:: :. :,:.:.>;--:-;: :_:-:.:_:_::.:*":-:: *: -~f;:*.. * -,~1:*~:~-- * :~~:6:~::'..

• 31

_--. -.. -~------

,, ~*

'*NOIE 1t).,Continued:,,,~ *,_

. In f.pril of ~ 98.1, the Compaoy

• negoJiate(;f.new.agreements:* pro\\tidi[lg *tor,* $_1.15;000,.0.0Q of bank JJne~ of credit/ $1 os;ooo,ooo of*

• . which:were i.mu_sed atDecerriber 3,1,* 19~1: The Company is. rE;iquire*d,',with' respect-ti:f$17,ooo,ooo*ot these credit lines*to ma:intafn :.

> ~ avera:g*e compensati,rig bal_ah_ces of $1,079;000 plu's an, 'equivalent_ additfortal"~njo'unt ifthe_se' lines *are fully utilized: 'rhese come

.,..,.. pehsating balances porn rl)ain,tained. indelT).an*d depo~i!f:i Which.ar~ riot legally res.tri,ct~d. The*Conip~ny is iri conipliar:,ce. with' such:*:; *

*\\.* '... compe_bsati,ng balance arrangem.ents

With respect.to th~ rerfiaining av~ilable cr_edit lines of $98,00.Q,909 tl']e*Compariy pays com-.

• • . : rnitmentfeel3 rahgir19 from -3/.80/ofto 1/2%.' In 198l commitment fees aggregated $400,897,.. ; :,:

• ~ *

.,.. NoTi 11.:C:;b_MMITMENTS A~~ CONTINGEN°CIE*~*:.,. -~ ',

.' ;fr~~the o'Utp~fof DPL:~.~o~l~tiredJndia,fRbi~r ktation'.' indi~n,,Ri)err>'

• _*consfructibn expenditures includ1ng*nuclea,/tuel b.ut excluc;ling pro-.. c' : StatioQ commenced commercial dperatioh qn October 1, 1980. Also,

".dudion_plant a"re: estimated at appfoxiri:Jl;l.tely $60,000,000 for. *1982.. > DPL is planning to. construct a 500 MW coal~fired generating sta~' *.-"

. Commitments for.. ttie co~?tfuction of m~.jor production an.d transmis- - * :tion (Vienna No.. 9) w~ich... ~as. been *sized: t,a accommodate a 25°10 <

• .* sion facillti~s*amount,Jo approximately, $274,00Q,OOO of wh[9h 'it is, * *ownership' (125 MW),by~ AUa.'n_tjc Electric. Such* L!nit is. ~cheduled

.. *. * *estimated that approximately. $2~,ooo,oop.wi.11 t;,e expended in 1982,. _to.be placed in commercia~ operation. in 19.90:, The C!Jmpa,ny* and**:..

,.. -

• Thes.e amounts ~xclude all,owance for funds ul,ep during con'str\\jctjqr,. *., -,Pennsylvania Povver &*U,ght Company (PP~)," have enterEl~:into.an*..

. *. ;. ~_. *. The" Price-Ander.son -Act'. 'pl~c.es** a: :1iaqility: fo,:iit ;.'of: '

• agre~m*erjf ~hereby the Cqmpany'\\~1ill pur9hase-5:94%'.{:Sqhe rn~t :.

, :* * '$56Q,QO,O,OOO on each* nuclear:generating*unitfor p'ublic liability

• capacity and eflergy outpur of ea'1h 6f :two PPL 1.050 MW nuclear * *

• ... c.la,ims.that could arise. from a nuclear incid~nt. In -the *ev~rit of

• *gerierati.ng* units scheduled to be p!a,ced. in,seryic(\\) in thEl secon.<;I' '*

...,any_such-inci_den( a!' own)3rs of nLicl.e.ar *generatin,g-LJnits licens"*.: ' ~. qu~rter of 1983.. ~ncHhe fourth 'quarter *of 1984,, r~speetlvely. The' *'

'.' ed t0 operate would,be reciuired, to* c_ontribute toward satistac*-

, purchase of power from.PPL wm comm_ence' with commercial opera-*:

r

• 'tion of such.claim~. Jhe Company, as a co'-o~ner,of.the 'Pea_ch.

tion of tne *stations and continue thr9ugh Septem_ber 30, 1991: * *

• 1;3otfom arid Salem. Stat[ons-1:ias partially i_hs~re.d fprthi.s.exposure:.

• ,. .In* 1981; the C.o~P.9'r:iy ent~red into a new agreement with

.. by purchasing; thro.ugt:'l'the. principalowners, private insurance**,Allegheny Power Syst~m*s (APS):whictrwill entitle the Conipany

• *._in the maxin:n.im availabie, amount of $160,*000,099,* Th~, fe-' * : t,o so-MW.of 9oal-fir~d capacityJr~m tbe A.PS 0p1easants §tatior(

.. maind~r ($40Q;OOO,OO.O) is providEld by a.combination of a J1]an°.,,. in St. M_ary's,, West Virgini~* for, the :y_ears.1,982 \\hm'ugh t985.Jn *

• . 'datory'program of retrospedive'premiun:,s to*~e assessed against '

adpition,.Jtie Q.om*pany tias* a comi'nit,:rHint with' Pu,oli(Sefyice

. *.9wners *of. nu.cle_ar. re~ctc:irs 'after.a n*uclea:r inci,d~fnt "(up. to.

• Electric :an<;i Gas**coliipany (PSE&G) wherEl they will provide up. :

,.'. * '$9,00p,bOO.'.p*e.r,ihcJd,en\\.but,rio,t,cnor,e tha,n-$19;009*1090,ir, any.'::;, to. 125* MW,9(pciw~r fOr,Jh~. year,s 1°98ffthro~g~ l,~95..,*..

• ~ ~.

• . :, :~* *.* c;:aler\\dar: year* for *ea,ch* license9 riucle'ar re.actor :in1 th_e Uniteq * *.* _ As a result of the~e changes, the pl?'.nned $550 'rhillior-1, ;290 *. '.*

.,.*; '*. States)

• ar,d*.by. indemnity. '.agreements with the Nuctear * * *._MW cbahfired Qumbetla~d \\Uni! No.. 1", which was to.go :in:*ser-i.

• .:.:, *. 'Regulatory. Cg~mjssi~n, Ac(?ordingly,: in t~e eyent of: a-,nu,clear: * **vice' in.th*e spring of 1988. h_al3 be~n:resphepuled for,.qompletio[) *,: * *

• _:,/ tn¢ident invdly,ing aJ'.IY* licenSe!'.L nuclew reactor in th.e United.. in.the fall.of:1*991'., *

. **.- * : $tates,which was not covered by t~e $1'60;000,000 priyc:i,t~ in~... ' * *. The, Copipany had planned to ~farticipate as *a:5% owner in *.

• :. :.: )u~ance., the:Cd1T1paoy co~.lq, b~ ass*~ssed, bas.ed 'on,,th§l* foLJr:

• ,:the constructiqn oMwo 1))67,My,r n~clear.uQit$; khciwn*a.s 1-jope. ~.

. * ** :*: *. nuclear reac.tots now in ser~ice, a maximurh*amouri\\in r.elation, /Greek*.Unit,No. tar:itf2_to be located in $alem county, N~w*Jersey..

• *..: _to its ownership, participation (approximately $1,492,000'for any.

• 6n De.camber ?3, 1981, P;$E&Gwho 'owns 95o/oot the. 'proje'ct,'Can- _*::.

. *such::incide~(but* not_ m~re.than $2,98~,oob in,,any year)... /

nbunceo.th~ ca~c~llatiqn'. of-HopeC~~ek LJnitJ.Jo.,i* *Hope Creek.....

• , The' Co111pany',is.a, member of.Nuclear' Mutual *ltd::Wh)ch...

.'Wr:i.it No. 1 is,c~rrently*plarined to~ complEltipn in ;1_986'..Acco_rdiJ"\\g-.:*

pr,ovides \\irisu*rance *coverage_~up*to $450,0.00,'000*f9r pr,bpe*rty.. *: ly*,on De.cember ~~. 19~1,.the _C6mpan'y'c;ahcellE;id its*5,0%share:

. damages. to. n:uclear' generating facilities* of the member corn~,..' o(H0pe.creek*. Unit N.9. 2. The, Compafiy'$' inve~tment'in Hope 1' *

'< 'panies.: lr:i 'the ~veri(of,m,ajor lo's~(ar any, plant-covefre'9 by ;the<,'.* ¢reek LJriit,,No. 2-has been)*vritteh off fpr 'federal *inc;ori,E?ta,(p'ur~.-

'.i_ - 'group, the Compa_ny coul6be assessed.Up to'$4,007;.64,4; four~:' ' poses:'., For qopk !;)U:rposes,' ;as of *oecen:,oer 23',' f9.8;t, the Come~

• .*. teen tji'nes-its'..annual premiuhJ.

,, C. :** * *.,.. *:. *

• pl;l.ny'$ inyestry,eritof,$151956A76; ir:icl,uding $2,:390,676 bfAFDq :

• * :.. * * < The Company is*also a o;iembetofNuclearElectric:lrisurance * :: has.been.. transferred frorrl' Cohstruction'Wor.k irl'Progress.to. Pro".

. *-: * -Ltd... which. provide,s 'in'sudmce: cciv~rage for th'e,*extra expense* qt. :: perty Abaridon*ment Costs arid° an approprjate am.ollnt '?f deferred *,.

"Jepli3,cer:nen\\power during prolonged*acci9ental outages qfn_uclear. :* ~eqera\\ inimnie*Jaxes have been~pro.vi_9_ed:

, -, plantstAfter a ~dedµctiblepetiod, of 26 v.veeks; wee.kly'_p~ymehts bf,,,. Ot},;De~embef 15, ~ 9'81', :thEH;lPU;.hel9 p~bliQ hearing~.. ori* ;..

... '. *up to. $2,300,000 *are'.provided f9r b!le ;ye~.r: and -~p to $1,.1.50,000

• the, Hop~* Cre~k Ynit. No. 2 abando*nmE:lnt issue*.: Duriog those. '

.~:.* for *an:,ad.ditiorial year,*-tor ea.ch :insu,t~d.1Jnit' If IQSSE:l~. exce~d ;~c~, *.. -.~e~rings;.' fSE&G

• an_d*>the.,:,~~V'f.J.~rs_ey. f ublic :~ A,~_v6cat~ ;

'. "cumulated* funds ava.ilable' to :the gro.up, :the Oomp;:i.ny.c.ou,ld oe *

• pre$e.ntE:ld,the~~PU.a. Joint pos1t1on,pap13r,.wh1ch *suppprt~ the

• . assessed. up: to $2:421 ;252, Jivf timeis its.c'urrent ~rinu~I premium:,., abandonment of'. Hope {~.reek.Unit' No*. 2' and -'recorhmen~s t~e; *'

. In,ad~ttion, ~U_CIE:la(Electric ins.uranceLtd: al~o_'pmvide~ *insurarjc~. :* 'recovery*ofthe atiandonmerit cqsts,;o_ver E:lit'~er,a f2 o.r: 15 year'.

. for property damages to ~:(~cl~~r g~:ner,atirig facUities in' thE:l ~rnoun.r,.. 'P;efiqd: Su'ch -j~int positi~h'. P,ap,er-, al50:~~c?rifm'~nds a.similar,_:

of $247,090,00Q,for:any damages.in.exqes~_of $500,0QO;OO,O.Jn the *. * ;re.covary for tJ:,e.Compar,y.. }he Company; 1,:i; its _next rat~ request,_.

,, event of a *mi:l.jOJ loss, the Company,could be assessed $1,23,0164~,. *: **plans to ~sk tor*a shorter* 9mortization perio~,:and-for carrying*.

seven *and.one0half"times.its,,.annual pr.eimium.:, > ~..,' ;:.

cm;ts,associated.'With the unamortized pala,nce,'The C9rnpany.

,.*, *... The Gpni'pany has'an.agreeinenfexpirir.i'g May,31;' 1~85/ with *,

cannpt-preseqtlypredic,t fhe qutcome' or.thediming ofthfde,ci~.. :

..* Delmarva Power & Ligh.t (DPL).for the purchase of 50 MW of power, sion _Which wrll bE:l.ren(lered by the. BRO.',

• :,:,-N~~(1.~::CE_e,~~s:':'::**

._.. <*** :**::*---... :.:*... *.,\\,.;x..:*.~**~\\**.*.*:' -~'::,.... *_*:**.:'. :**>:,.<:.. *: -: -::*~.. *,.. <*.,*::::.'_..*.,._

. *.. The* Qompany *has certain l~ases for.property :an.d equipment~hich meetthe crite(ia tqr capitalization, but'io _accordance. with rah{,

'making treatmei:,t are.,~cc6Ui)ted*fOr*~s'coperafir:'lg, leases. T~~ capitali:iaUon of S(!Gh leas~s. wouldriot,have a sigriificant*e,Jfect' on ~assets, -.,,:

,', li~Qilifeso,roperating,,expen~es.*  : '

,:: '--*: ;~;-'

'*s:

,-.1/

• ,', "s*"

" ' ' ~.

. \\ OAda~Jca~ltri~

.,*\\'

t_* ::/ '

l...;

~ '

'I:

.r t*

• • ,{

.. ' (' -, ~. ~.

~.--, *

~ _'

-,...~_,I.. ',

-~

--"-'~.

• KlOTE,5>JOINJLY;OWNED-GENERATING STATIONS: -..-/-.., *

. ' _The Compa_ny-partidpates with other utilifies in the *ce>nstructiori and operation of several,jqintly-c,wneq -elE1,Ctric production fadiiti~s.-', " '_,, '

- l1he,amounts s~own repre~ent the'Comp~iny's 'share oteach,jointly-ow~ed plant' arDec_ember 31, 'and includes ari.allb_wance for', *,. *.

. :foric;ls us~d-during cbn~truc~icin, '

'. r

),*

'-_ ;,.'Electric pj~~i'.,:,*::,

~ Construction:. ".

,: ---Ge~erati~'n*<' >-::* '.,. '..

. Energy.-.,.'. Co.mpanfs

• in Service*:.~.

• . *, Work' in Progress.,

-.. (KWHs) _ ::. _.

. Station\\*.-*

• .Source::* - *-.:Share-_,'*

,*. 19*81* '.-1980..

1981 ;.. *:1980'.

198L

,,, 1!3'80.: - **

~, _

• • ~*

,_*.. -{Dollais: i~ :crhou~c;1ndsf

• -. -! *~ -~

• Keystone~.*::**

Coal.,

• 2.47% -**

$'-5",752* :-$~5,607-,,-

$**-173

'13s-'.;.-_2-18',104 252)68:**

Conetn_augh,

• . - C,<;>1=11 *_ *.. _ *. :- ;3'.83, '_.. '.

• i,-

• 1-1,18*9~-

)0,786. * *

• *. :16}:i *.. -,.:_433:.

290;20,~ * - ; 403,660. *__

Peach Bottom *> *',,Nuclear,_

7.51. *_,-. -

' 63,778

.. ' 61;485

• . 7,;438 * *,.

• 6,142 *. 73Q;0;34

.. 865,946: *,

• Salem.:(1)'.<,

' :,,Nuclear.*

'. ' :7.41'"-. :.-,'

,, 40;849.. *_

77,495:-.

• 3,64i<." 57,458, - ' 577,113

'420,1_48'.

<H.'opff Creek(?).,:'_ f Nucl_ea};': '.*

, 5.0o_-;_ ;, *. '.,

. >. :*~- _ -* *,..'

... _.??,207 > \\. *q4/43',, :

' ~

• -m:salem Lfoit_.No. rwas,,placed i[l,comm~rci~I Op_eration,on_-.Qctobe'r 13,.-1,98'J., i_ _ *. _, :

• * -_. *,,,s

'(2) As.of Dece'mber.23, 198'1-,* t-1ope{ C~e~k.Unit No'. 2 has been can,cell_edi See Note '1 {of Notes to'Finan_dai Statements:' : '. ': :'::

Tne:i1Cofnp-~ny p'rovldes its>own fina~cfrig during. the construction period f9r *its.share of the *joihtliowried plan.ts* and includes its*,-*.

• ,siiare* ot direct_operati6ns)md*mairitenanc~:expenses in its statement of'lncorrye. * :'

l

~' --*

_, ** '*\\', ~.~

. NOTE 6. :INVESTMENT' IN SUBSIDIARY COMPANIES:*_,

• _. ::Ttie Company's-investment inJ)eepwater Operating:'Company_ (Oee'pwater}',,a*wholly~owhed.. sabsidiary which qperates gene'rating.. '

,.and*process ste~m units own'eq by the,Company; was $2;~41,00p at: December 31, \\981 'anci-19-80.'..ihe assets:of'Deepwater'..* :_

-princ_ipaBY9onsist "o(workin,g capi_tpf._ in whiqh the: equity of the Company_ is:fai,tly 'r'epreisehte_d :by,)ts.irwestmiarit in peepwat~r.,

1.' T_be net production 'cfo~ts ot Deepwater_(after' deducting *contract ct,arges) _are charged to fhe'Company: T_h~se costs areHn'tluded ',

• in: th.e Com"pany's9,QCOuntsclassif1ed as. to.ope/ation, ;rriaintenanoe*and.ta~es.. : -:..

., '.',. Ttie* Company' i:ils'o has an_ investme'nt. io Atl~ntic"Hbusing,. l~c.* (H.ousihg);. a*wh'olly-owned subsidiary; which.. amc:,unted to,* *,

... $820,538 and $916',455-:at beQ~mbeY _3:1,:1981' -.~hd 19~o:,*respective,ly. *Housing's priQdpal inVesfrneot i~. a: 20%. un9i'.'.ic:led i,:it_erest_,.,---,,

• _as tena~t in c'oriimbn in *a *future ge_ner~ting station Jmd'i_ndli'strial;site. ::c -.,*.. * *..

~

. ~.

~.. -.

,\\ ~* -:.

,.. :1 'r

, -'/

~,

/

,,~' '

• l;*

• NOTE *7. COfv1Mo'N STQC.K:

,,As of -Deoenibet,-31; ~1981° ',ai,9 H~80',:_the Co'mpariy,'s C_cimmdn_rstock.'inclqd!3d 18,0bo;900.,aut_h'oi:ized.shar.es o(Co~'mon.Stock':,. ~' -

. ($3 par value), respectively.

• . - -~ -

.*s'tiare~'issu!3d,andoutstandihg:'

• ,_:,,./ '

--.c

.* '.,,/fast:._.:,,,,

/1980-'.::'.*.',.\\979<,,,

'"~eginni_ng.of~Y~~t-.. -.._.°'.'-.,;,/.- ;>*_:,_;i**. *: ::*,.<*-.:. ;_.'. -./*:-,,,.:.-.: :,/. :*<.. \\:... -12,538,880*.. <-:,12,t~6:1-~~.:<~ s.\\0;91;6,~08.. _

'_ Sale,of Common 'Stock-.. \\ *,. *.. ; :*,";.:. -:.'... *.:.*.'.. -.i::....-..':'.. *.. *,.*-.. *:,: : 1,500,000.,

.

• 1,0b0,000- _ < '" **

./ 6ividend :Reinvestment,and* Stock P,u*rchase>... '.. :. :*. '..-.-., ::*.-.-.\\ -. :. : '. *.-,..302;726 :. * **:,' '.. 257,095 *

• 18_4;889. '-,

E'rnploy:.ee SJ6cl< Q~nership~Pla:n.',.'**,;;<*:.. )... :. :":.'*.::.. '... :.': \\>.... :.. '.:. _1_6,641 :. *.

~~._: 54_,616**

> 48,710~ __

• Con'v~rsJon of Preferred St~ck.~,. :*,':,'.. :_. *':...-:_...,.,::... >:. ',_:. :**:**.-.:.':. * * *.. 69,743.- *-.'*

30,683, _... *.

• 46,579* '.: ;

._:!;:~~t::,*~~~u:~\\*~~~~'.::::>:: :)}\\~;'.. : ;/,:~:.. : i *::i '.-: (:-.:\\::j: :-:: :.:::\\:,: >:-~~*::/-:;:(.:: *-$::*:::;::~~- :- *, ;, -$:.~~:~:*:::~>:,:*:* -~ *:$}!*:;::::::. *

.. **Pr~riiiu'm --~n C~pita/ Sto'~k was 6r~diteq,*l~ 19a'1*;,\\gso-~nd:_j~79 With '.$26, 7~5,552, $!{42f(82 12,*an~' $21 ;1 H, 1-41, re,Spectfvely,' :( :_',*

I -repr~senting the' excess(of prbeeei::ls, overfoe.par~value'of $hare~f 'of Common*,Sfock.issued,' ~old :and C.QllVEirted. At :o:ecember* \\ ~'-: *, '*:. '

. 31, '.1981 tl;lere w~re j40,769' shares :of.Common,Stocl(authodzed~for issu'ance pu-rsua_nt fo: its' bivicie:nd Reinvestme,nt_and Sta.ck,;* *., *. :.,'.'

., Purchase' F.>lan which b 0ecamer'effective lh 1976:and.77,638 shares of'Com'mon Stock 'authorized for'.issu*ance-,pursuar\\t to it§ Employee-,, * * *.. '01

.. Stoc_k,Own~rs~ip 'Plan:' At o'ecemti~r *31, 1981, 1,2,3,603,-stiares 6t Commo'n 'St6c'k were resem,eclJor. the,conv~r-~ion* of'5-7/8% *.

_9onvertible Series _of Preferred Stqe~..

• ~

.,.,1

• .,-~::.,;,/

/*-.

',,*,-"]

• ',c'*\\,

,',1/,~*::,.t,'*

~*...,./

• • NOTE 8. 'c~-MULATIVE.*P.REFERRED *sTocK:

'- The Compiiny has-authciized'799,979 share~*ot,dum~lative Pret~'rred Stoe;;k/.$100. par' Vafue~-2;000;600 ~h~res:c:,f cum.ulati,ve.'.,* -~\\:,*

, ; _preferred stock, N_6 Par.Valye,;and 3,000,000 s_hares,of Preference.'Stock; No Pa(\\/_i:ilue.'Unissuedshares:may,* or_'IJ1a:y-noJ, :poss~ss

• m_and§ltory redemption characteri$fics L,Jpon issuanc*e. _ln,ce~tain,-circumsta:nces,.i_f c;livide_ndiron* issued GLJinulative,Prefe.rr.ec:lJ,tock.-

• ,are-in arrears voting rights foi the election 'of'a majority of-the Bciard~of* Directors become,s operative: :

,"-'s

,, ~

'I f'

I

'(

)

't

~

sf

(

I

• ' ~

\\

_.,')

~. ',.

~'

'I

,.- 'l* ',, ',.,*'

'. ~-

~---

I

~

---

*~

• .-,,,...}.

\\:.;,*

,,:.-',I

• -\\*

~ ',.

(. ~.

/. ':

I ' '

~

', '~

I

• ~*!, 'i'

,, l

~ I (

'.,) ;

I

,.J-"

~

_,. i_;

1*,',,

i__

I~"'

• , ~_9TE B(A).. c.u~ulative Preferred_ Stoc_k NC?t *sut:ij~ct To Mandatory-Reder:np~ion:

)

. : Decefrnber-31: *., *,

• 'Premium on.

1981-.. ***_.

• 1980

.*,. Capital Stock*

$1.00 Par Valu~-:-'Cumulative* ~nq N~n-par~i~ipating *.,

,.share,s.-is'su_ed** aQd outstanding:-.; -. :.

-..,------*. (In Thousa~ds}'_---~-"

,I'

\\

~

Series:_

• 4%. *

• 77;000 Shares *........... :.... *.... *:..... * $ i,.700 *.

• *.*4.10%

072,000 Shares......... _. -..,. :...... :...... ~'

• 1,200 *

.. 4.35% *

• 15,000 Shares,.... *.. -. '.-,:. *.-...... *..... *._.:-.

• 1 ;500 :

• . A.35%'

36,000 *shares :... '.... : :... *.. *. :........

• 3,600

• ,*4_750;~

• 5b,,ooo_Shares*....... :..,. :..-: :*.. *........

-.~.ooo*.

5.0°/o so,oon $hares, :.......... _. :.. :.. *... : :*..,....

5,ooo--.

5-7/8% Convertible. Series*:

35',310 Shares '(1981)'..,,. ':*... '..:....... *:.. :. *3,531 1

-*,,$. 7,_700

• .7,_200 1,500 3,60Q

'5,000

. *_5,00~

~$93 '..

• I

_. Current

,.*- RedemptiQn"'

• Price Per Share 11

';: $105)50

.101.00

. 101.00

• 101.00

'161.00

$ ~-

.,100:00 *.

.:103.00, :* *..

.5-5,240 Sha'res-(1980). _

• .. *5,524

.... ~.52% 100;000.s~ares *... :.. _:... :,.,:.,*._.. *._..:..,._: :' *10,000.**., -1~.ooo:

-' 106.77_.**

'* * *Total...... *.*:,.. :*.:.... -.*..... *..... *..... >.:.... : $43,531

• , $45,524

~-u~u;at,iv~ Pr~f~rred St~ck'Not. Sub)ict ~~ Mandat~ry Redemption i~ ~~de~-~*able so*l~ly at th.~. option :of the *9ompany Gpon pay:

' ment of,the redemption' price "plus ~ccumulat~d: a_nd 'u~pa_id qivide~ds to the date fixed for redernptior.

J.

,... _::. The 5:][8°/o Cbn~ertible S~rie.s, o_f ":'hich 1 ~.927,' 8, 76! and 13,309 s~are's were. ~onverted in 19.81, :1980 and 1979.'respectivel_y,' * /I

. * * - :. 1s 'convertible (subJecno ~dJu.stme.nt in certain ~ven.ts) into Commc:m Stock at the orate -c:>f 3.5_,shares of,C9_mmon _StockJor each*

_**-: ~hare,~,f,_Pr~ferre1.. <_.**::.~>'.***.. :.*-*.-

,:.. <-.*: ____ *,::-*.**~---<:-,:_ "_..--.~---<_.*.:-_:_"*

NOTE.= c8(B). Cumulative. Preferred St9ck Subject,:-o.Ma.rida.tory; Redemption:*

• I

~

• I

,' *..J i:ie.functing -'

,,.\\**.

_'"\\""

~ -- \\.' *-

Par -.

.Dece~mber* 3-1.-:

• Valu'e

• 1981*.

.,* **1980_ *.*

.(lr:i *p1ou_sar.ds) * :... *

. Shares Issued _.and' Outstan~ir:ig:_.

Series:.

• .1*.

..

• c;;urrerit :

_, *Ae9emption*.,., _

Price'. Per* Share..,

'* /.

• Restricted

• Prior to'.

,._ i".. -,

-8.40% 1*00;000,sha~es '... *.:. ::.-:*.--:.. :.....,.,*::*.$*100,$10,000* *. $'10,000 *... *-

'$11'*5':oo _.:.

'9.96% rno',ooo.Shar'es*(1981}.. :..-:*...-.:.-....-... *.. 1,00' *16,000

• , 10{50_

• -.-."*..,-August1,'19,84'

.16a,dbo.sha:res*(1980).:... \\.."..... ~,-,,.:1:00

• f6;8oo.. :

-:.$8.25*,1P_O,Op0$hares.... :**.. *.,.:... ~.. *... _.,;None *.--10;0,qo 1*0,000*. *-..

107.41. *

• -'-.*. No~e~ber(1987 -*.*.

• $9.45 *. 200,000 Shares.-...,...,;....... *....... *... None-* 20;000--

20,bo'o

• .**,.. November 1,-1989.

~

~,

• 0

• • ** 56,ooo

_*.56,8:oo *.

Less "Portion _due within *one.year.*.:... :. :. *.". :. *... '. :...,*

800,. : :_

• 800 * * *

.!~ta:1..,.*,.-:_.:_":**;*:_:*;-:.*:*.. *.*:**.. -..-'~:-:-'*_:_._*:;**:t.-*_::**~.-$55,2?0~i_. *!56;000_.**.. _ :,:**,*,_*.,' __

. On O~t6ber 24! 1980,:the Company sold ~Q0,000.share*s :of $9,45 No Pa.r Preferred Stcick ($100.stated value) in a private pla9ement.,.

,' :,_ on* August *1, a:nnuaJ.1~/ 8,000.shar,es of.the 9:9s:%,Series mllst~be redee~~d 'through th~' ope~ation.bt'a ;*inking f~~d at ~..

• . redemption _price.of $100 per share. At the option of-the C6mpar:iy, an.-a~dition_al 8;000 !,>h.ares may _be *redeem~d on.any sir,king

,. fl.ind date;. without premium, up_.to 40,0QO~ shares in. the aggregate. The Gonipariy -redeemed *8,000 and.16,000 shares at paf.in

'.. -*1981' and 1980, respectively.*

• f.-_ *otr-Novem.ber, 1 **,

• 1983, knd ann~?liy thereaft~r'; 2:500.s*h~res 'ot t-h~ ~;8.25 N_cj.'p~/. Pr~f-~rr~c{Stoc{ Seri~~ ~ust:*b~ ~~dee~i;ld: ~ '_-

through the op~ratiori of,a. si~king** fur:19

• at a* rec;lempt,iori.pri~e* i?f- $1 qo. p~r.shi;re. A,f the option *of.th~ C,omp~ny, '13,n ad'diti9nal. *

• *n*.umber'of-~tfares*.no~ to exc.eed 2,500 may.qe redeemed*,on any sinkirig*f.unq date with.out premium.. _... * ** *.*.

r

• *"\\*

• \\

\\'

.I

..,_.,.,;'On__Februar/1 1.1~~~. ar:)d ~nrjually*t~e,re.aft_er, 4,000 shares ~f_the 8..40D/o:$im~s:must be_redeemed-~h,rough the* operatio_n -

• *.

• ot a sin.k)ng fund ~ta,rede.mptron price ot $1 qo p~r share. At, th~ optjon of the'.Compa~y. an additional. 4,000 sh1ues m'a.y'be_rE;Jdeemea -;

.-on a~y--~i~kiri~: fund d.a~e w!t.hout premiu~; up to_.~?,.ooo* sha~es :-ir:i the. ~g*gregat~.. *. *,..

• • . O_n.Noy~mber 1,,1986, and annucl,lly the.re;:i.fter, 40,ooo* shar.es of the' $9.45 No Par Pr$ferred Stock_ Series niust t;>e redeemed

• *through th~-- bpera~ion of -a sinkJng.furid.at a.re9en,p,tion. 'price of $.100.per *share. At-.the,option o'f the.Comp~ny, an; additiorial:

- :'.1-0,QOO,-*s~ar_es may_ Q,e. redeem.~d on any* siri.~ing f\\.m~.ct.ate, without.PrelT!ium; }-i_P to, 50,090_- shares -in the ag_gregafe... *.,. :

,:-h~_minil'T)qf'll ~in.king *tu rid p*ro,\\lisions of. ttie aoove* ssries *aggrega1e_ $8oq,090-in ~ 982*,'.$1\\0so,ooo in 1903 ~nd 1984_,-$1,4s~.ooo in1985,.and*.$5A.50,000*in.1986.. **.. *.*

f',,

l

• ,. ': t :*

(

.. :. -~ *..,.

• ~..... * '...

.l.*

i..., ~*

'I*,

• r..._

~.

.J h

I*,

i 0,A\\ientl~El~ctric I',

I

~

,I......

. /*

1 I

., *~

\\

NOTE 2. F:EDERAL INCOME TAXES:..

~ _

Federal_income tax expense applicable fo current operations is less thari.t11e* amount computed by applying the statutory rate on book i~come -subject to tax for _the following reasons:

• Yea:rs Ended December 31

• 1981 *

• 1980' 1979 Net Income... -.................................................. -........,

$46,988 Federal Income Tax Expense (as.below)...............,.'....... :....... *........ *:

• 27,332 Book lncorile,Subject to Tax*-'*................... :..,... *... *..... -............. *$74,320 Income Tc!x.-at Statutory Rate (46%)._.:... '. ~.,*.. _.:.............. :... <...........

$34*,187 Less: ; -*

• Allowance for, Funds,Used During Construction....-...... : :....... :...... *......

Capitalized Overheads.... -:..........-.. :....., :........... :... *...-...... :.

Investment T_ax Credits-Used....... :.... *....... _.................. -........

• other.............. *. _-._.. *.... *.......

Total Federa_l lncc;;ine Ta*x* Expense...........,.. :...... _.-,... :*... *.*..... :*..

Federal Income Tax Expe~se is comprised of the following:

,. Federal'lncome Tax.Currently Payable.. *.*........ *..... _..-........,....... *..... :.

Deferred Federal lr:icome Taxes (as below)......-......... :..... --... *.............

• ,ln1Jestment Tax Credit-,-Earned.... *.. :.............. *.*..... :... -..'............. *.:

Investment Tax Credit.:.,....used.... :... ':. * *....... -._...... *:*......-.... *... *.... :**....

4,645 1,242 1;075,'

(107)

• _

'$27;'332

$13,124 Federal Income Tax Expense...... :.. :.... *_-.. *.......... -... :.... *....... '....... -.. **

Fede*ral Income-Tax-Other lnc*ome:

4,'438.

8,507 *

(1,075) 24,994 Curre.ntly Payable................. *.. :.-.. :.. *. -.............. :...........,...

~2.!5

• Deferred (as below). :........ _.............. *.. -:. : *.. :...,....... *.... *........

1,512

• Total-..... :................. *... -.:.*......... >... :... *...... ~-... *._.*... **.

2,338 Total Federal Income Tax Expense...... :......,..... *.................... - $27,332 o"eferred Federal Income Ta?(es rns~i from the foJoV:,ing timing* differen~es:..

• Liberalized,Dep-reciation*..... :.. :. :.... :........... :......... *.. *............. *..

$.6;~95

Repair Allowance. -. *.... -......... *.-........,. *...... -..-......,... *.. :...,*... '*. :.

Amortization-Acceleratea*Depreciation, Repair Allowance. and

_ Property Aband_onment Costs. ;-... :.*:..... i.. :. ;... _........,*.... *...... :....... *.

1

• Properw Abandonment Costs.................... :....... :.,. *.... *.............

Gains.on Reacquiced Debt and Purchased-Tax Benefits*...... -:...... ;:....... *..'.*

(708) 6,700.

-'1,512 949

• :* Other.'.. *... :*.. :... *..... *.....-*. :...... :.. *.. *. _,......'. *. :.. : *. :..... i. -.. :. *.. :.'..

' Total....... *.. :................ :...'-. "..... :'........ :.................

1_4,648 (l_n Thousands)

$38,538

. $34,307 19,700

'18,868

$58,238

-$53, 175,,.

$26,789

$24,461 3,842 2,888 1,179

• 1,041 _

914,.

735.

1,154.

929

$19,700

$18,868 (667)

$ (1,550) 12-,657 14,383 6,765_

5-,788 (914)...

(735) 17',841 17,'886 1,859 982 1,859_

$19,700' 982

. $18,868

• • • ====

$ *4,189' 2,551_

... (625)

A3.

_6,.158

$' 3,830'

?,967

• . (516}_

• 6 (6) 6;281 I

Current Liabilities:

Deferred Energy Costs........... _............ *............. :...... *....'.... _.. *..

(6,488) 8,620 8,528

• Deferred Revenue. *... :............... _........ ~;-... :.. *..-..... _, : :....... :.

. (2,210)

. (2,*121) *

• _ *

(426).

Total Deferred Federal' Taxes -. :.

• i......... :.*......... *.................... $. 5,950

$12,657*

. * $14,3a3

. ',~~~~t~erit tax* ~~edit' earr:i~d,i~-_ 1981; 1980 a~d 1979 include~ $291-,00~*-. $806,00.0 and $699,o'oo respectively,' ;epresenting

• the Cqmpany'.s use cif the-additional investment tax _credit -availab.Le under* tlie Tax' Reducti_on_ Act of 1975.

On.December 3,0, 1981, the. Company entered into an.agreement with a corpo_ration to purchase the tax b(?nefits OT) equipment *'

• having c!- tax basis-of $2,636,371. Such tax beriefits*include 6%.Investment Tax Credit and an ACAS lffe of 3 years.*

l r

,I 27 *

• _.*:**-NOTE3.RAtE'tNCREAsEs:*

~

During the thre~ year period ended December 31, 1981 rate 'increases have b'een approved by theBPU: as f.ollows, based in each*

case on th_e applicabJe test" ye?r indicate*d: ' '

o*ate

.- *

• Amount Date Amourit Petition ' *. *

. Requested

• Effective.

. Approved Increase*.

. * *In Revenue Test Year-(millions)

(miJ.lions)

• '*M.arch19,?'8.

• $35.7(1f

'July1,1979

$10.d

-4.0%

1978

• November 1979

85.*7 September _26, *1980 50.6

• . 16.0%

• June 30, 1980 A_ugust 1981 (2) 14.4 -

• January 29, 1982

• . 11.3 Jun~ 30, 198f (1 )* $14,800,000 of the requested amount had, previ~usly been g~anted' on apreliminary ba~rs in July 19.78.

(2) The Company's requesfwas to recognize the cost of owning and operating its 7.41 % share of the Salem Unit No. 2 Nuclear.

• Generating Station (not considered in the $50,600,000 increase appr,oved effectiv~ September.26, 1980).'The unit went-into

• full commercial *operation in October 1981. _The *$11,3.00,000 increase granted.was based on the Company's investment in

.. the unif as pf June 30, 1980.

\\-

. On* September 9, 1981,-' the -BPU issued a decision.wlth respect to the d~sign of the Company's residential, com.mercial _and

• industrial rates. in this decision; the BPU recognized* a separate customer QI ass *consisting of casino hotels in Atlantic City; -and ordered the Col'T]pany to provide*a separate _base 'rate an*d a separate energy adjustment clause for.such custom_ers. The effect of this change is' to inc.r~ase the rates of such customers with-a corresponding reductJoh in the r~venues received from all_ other

customers.' The revised rates became* effective on October 1; 1981. The_ casino 'hotels are seeking* further proceedings before th_e*BPU and in the courts on this issue. The Company cannotpre.seritly. predic;:t the final o.utcome of these proceedings 'or.th*e

• effect, if any, on _the Company.

• Effectiv~ January 1,' 1981, the BPU authorized ari annual incre~se' of ap.proximafely $41,6_00,000 in the.Company's,LEC from.

1.1.019_ cents per kwt) to 1. 7914 cents *per kwh and. at the same time transferred 1.0 *cent per kwh from the LEC to base rates..

• . fa March 1981; a;s *a: result of *a significant projected under-recoyery, of energy cost,s,. th.e *company filed a petition with the Board..

• requestin*g an emergency *increase.in the LEC: Effective. August 21, 1981, the BP.U *granted c;1n emergency lEC of 2.4582 cents

. per kwh,to be effective through the remainder of *1981 and ordered an additional 1.6,cent -per kwh transferr~d from the LEG to base rates, effective October 1-, 1981,. resulting in an LEC of 1.4582 cents per kwh. The BPU. set the *LEC at this *level *to allow.

the.Company. to collect $25,600,000 by *December 31; 1981, In December 19S:1, the *company proposed a :reduction-in the LEC.;

. based'on projected unrecovered**energy co'sts'ot'$33;:100,ooo, ahd-a slight decrease in the projected 1982 total cost of en~~gy.'

. On January 6., 1982, the BPU.ordered an interim reducfion jri the Company's LEC to 0. 760i cent per-kwh~ This'represents an..

approximate $39,300,000 rec;luction in the Company'~-LEC revenues on an annual basis.*concurr'ehtly, *the'BPU reduced, on an interim basis,' t_he energy adjustmentclause rate applied to casino hotels (marginal energy,adjustment clause-MEAC) from 2.4596

. cents.per.kwh to 1.7616 cents perkwh.This represer:its,an ~pp,roximate $1,900,000 redu.ction in MEAC revenues.on.an.annual

. basis: The B~U order that t.he LEC and MEAC reductipris, which.are effective J.anuary,1, 1982,. would *go into effect $iinultaneous-

• ly with. the Corjlpany's _$M,300,0.00. base rate increase. for Salem Unit No. *2-on January 29;' 1982.The net effect of -these* rate

• chan,ges is a decrease of approximately $30,000*,ooo.*on an 'annual ba.sis. In addition, the BP.U has referrep the.Company's -LEc*

and MEAC filings to *.the Office of Administrative Law for evidentiary* hearings: The Company *cannot presently predict the.timing

.qr the final 'decision of the BPU On.the ultimate level of ttie LE*c and MEAC.

In. February 1982, the Coinpany:wili file a petition with the BPU *req.uestlng a bas.e rate in'cr_ease of $J72AOO;OOO; base'd on

. a. projected September 30, 1982* test year. The reqwested amount represents.an increase of approximately 33.1% of total estimated 1982 revenues: The Company cannot pres~ritly predict either the amount, *if any, of the increas*e which. might be granted or the

-timing oUhe decision by the BPU..

~ * *.

NOTE 4:,~ETIREMENT PLAN::.

Jhe cost to :the *company in providing,a-retirement plan for its employees wa.s _$5,476,000; $4,652,QOO and $4,238;000.in 1~81, 1980 and :1,979, respectively. Approximately 80% of these cQsts wer~ charg'ed to op_erating *expense*and the remaining 20%, which was. associated. with ccinstructi.on labor, was charged to the,-ccist of riew utility:plant.'

• **. A qomparis6n -~f ac¢u,mulated plan ben!=)fits, and pl~n net'assets (indluding pu.rch_ased.annuity contract *~mo.u~ts)' for ui*e Com-....

• .. pany's Plan is as follows:.. * *.

• * ". 1

• J~nuary. 1 ___ _

1981

• *

• 1980

• 1979

~ \\

(In T~ous~nds)

• ... Actuarial present vall,le of ?l,CCumulated pla*n* benefits:.

---

~~:i:~1~(::: :: : ::_::< :: : :: : >: :::<>: ::: ::': :: : :::::::: :: : <::,_::r:m _ ::rnr. ::rnr N~rassets available to~ benefits... : *.... *... **.. :.:.. *. *:.**....... :-.. :*,. :. *,.*.....'...':........ $83,989

• $70,303

• $61 ;316 Th'e ~~ig't1ted ~v~rageras's~-med ~ate ~(return -u~~d in determiningJhe ~ctu~~ial p.rese~t ~alue of acclini~'lat~d,pian 'benefi'ts w'aE/.

• 7%,for 19~1 and *6% 'tor 1980 and 1979. The,Company'§; Plan.is in compli.ance with.the, Ernployee Retireme~t Income Security....,

..... Act of 1974.

/

., Lia_pil[tie$ 'and Capitalization

.. -c;APIT ALIZATION:.

.. *C9mmon Shareholders'.Equity:

Common Stock (Note 7)........ -. :. _. :.'.............. *... *.. *... *.. -.......... * :.. *.....

,.. * :. Premi_um on Gapital Stock..... *....,,........ -........., *.,..... *. :........ *. :.. :.........

Capital Stock Purchase Plan.. :. *...,....... :......................... :-.... *.........

• Capital Stock Expe*n~e. :. : -: :.- :.. '*.,. :. :-.. :. ;.. ~-.,. *......... *.......,.. :. :-.........,

, -te;~~:~t!~;:~~.-~*a*r~.ti~id~r~{E~~i;~*,:):::: :<: ':,:.:-: '.::*: :*;->: :-*:-*'. '. :.~*:.:,'. '. '. :.:<*: >>: /*: :*..

'cumul?tive Preferred Stock !;,Jot Subject :to Mandatory R~demptioh *(Note *8). -.:.'. *.......-.'.. *. *

. Cum*u1a:tive Preferre9 Sto~k*.~ubjecfto M_andatory Red~mption (Note_ 8)... :... *.. *....-,. *.. i *:*.,

. Long Term Debt (Note, 9)...... '... :..........,.. *....... *. :.......,.,,...., :. :........... :*

• • Total. Capitalization* {less long term '.debt ciue an*d cumulative preferred stock subject to mandatory redemption within: cine year). :,.. *..... '*:'......,...-. :........ ' ' ;.'

/

r CURRENT.LIABILITIES:'

I

~,

Current Portion:

Cumulative 1Preferred ~to~k SulJjecf t'9 Marid.atory Redemption (Note.'8). :**.. : *: *:.:. :. : < : '....,

. Long Ter.m*-Debt (Note, 9).-,......... *........ '... ':.. :*..... ',.*.*......'...,. :,...-..... *... :.. *..

.' Notes Payable.to Banks (Note { 0) *....'............. <-. :.,., :.....-... : *...,... <...... '.... /

. Commercial Paper (Note 10): *.. :....' :_... _'.. :... *.... *... *... :,.. :..,.. : :.. *......... *,....

.. ~::!{~~J!!~~; / *.* ; > *..*., << ****..*.**.*.*.. / **<*..*** >** *. *.* : : : ** :.

1

• • *,~i~~~s~d~c~~6~Zr~c{. :.**:*::: <.>: ':: *:>::::: ~::,: :*.:*,:*:: '. ::'..:: :.'. ::-/:::::: :,:*: :* :<:;: -: : : '../: \\'. ::'

Aqcumulated*Deferred Taxes (N.otes 1 and 2r..... -..',.. *.*... :.. ;.. :.*...' ::.. :. :. :...... >..*.

• -: 0t.e;6t~i--C*u:r~;~t 0 Lia*b*il;t;'~~*:;<i :~: :<:-:**./ :*: /:~ :::<;_*:::,;/:.. >::.: :*::*:'.: :,::: :',': :,:-,:': :i::: ::_::: :* ',

(..

• pEF_E-RREo_-cFleo1Tsi

• J

.~

• 11

,. f_

Accumulatecf beferreilJr\\yestmenj,Jax:Credits.(Notes 1 and"2)... :,. :.*.... '... -:... :.:.. '........ *,

• Ace.umulated Deferred ~Income. Taxes (Notes: 1 *.and.2)....,.. : :.. *:.**..,;, :: :.. ',........... :

Other.,..... \\.. '.. *...... '..,.*... _....,... :*......... *.. *.*.. :..,... *.. :....,........ *.*.*..,

. Tota( D~ferrec:i'Cre.dits... '...,:..'.. :. >.. :....... *>**..':...'.. :... :.. :.. '_;,_.,:*:. :.... -.. :,..

,. COIIIIIIJ!ITMENTS.ANo*'coNTING.ENTl,.IABILITIES (Note *11) j '~

~

.' 1981 19'80 ::

43,284

.$ 37,617

.,so,4.99..

133,714 78,

• (1,730)_

f21,078.

. 323,209:

43,53.1

55,200>

371,769

'793,709

_,.. 8qo*:.

• 19,620,

..-.7,sotl' 18,325

' *.. q9

.(1,744)

'1.08,977,

278,603 45,524*

• , * '56,000

. *-337,488 7.17,6.15 800 *

. _,.3,500

'.. 11 ;800:*.

.2s;ss9

• 2*,810 i2;980

,,. : -,.*28,8~8.. ; *'

3 613'

', 5,757.

• 9,509

'16,245'

'7,505

• 126,920..

.. :-36,725.< :,.

5~,509 *..

._ 2,926

' 93,'160 :* ',

7,695 3,720 8,090.

. 20,139

• 2,409.

..

• 90,594.,

• .. 29)584

~-.

' 3!3,861',

3 141* *

~ ~ ' '

71,586

~.*,

OTA.LLIABILITIES

~~o cAPITAL.izAr10N '..:... :.... \\.*;... : ;*-: '. ';... :.. \\ *:.~.. >:... s.1,0-13,789-'

_ $879,795,

. *.,:_ 'i'.

I,*..,_*

l*" -*

h.,*"

~..

)

1

. i' *..,

1

~-. )

\\

~...

,. J

- \\':

' *t, 25,,

-.-.: 1

' Notes to Financi~I Statements.'

' -.'.FEDERAL iNCOMI;: TAXES-Deferree F-~d~ral l~come Taxes

• NOT.E.1. SIGNIFICANT.ACCbUNTINCf POLI.CIES:*

- ar~*provided ori depreciable property.adde.d after -f973!'~i:i:t before.

• REGlJLAT_ION---:.The 'accounting and rat~s* of the Companiare' _ Janua_rx 1,* 1 ~81, for th~ c;l_iffe_~ence *betwe~n* tax: accelerate_d and..

Sl:Jbject to the regulations*of the *state of New Jersey,. Depart-_ *.. -t~x stra1g~t~line depr~c1at1on LJnder the, ~PR s~~tefJ?,. Tax redu_c-_

ment of* 1;*nergy, Board of Public Utilities (BPU) a.rJd in *certain : t1ons re_lat_ing to_ the d1ffer:ence between tax stra1ght-lin~-and-book.,

respects to the Federal Energy Regulatory Commission (FERC), _ - deprec1_at1on-are. reflected curre!')tly (flqwed-through) in Feder_al

-,.. ~---

lncomeTax:Expensea*sallowedby,theBPU.

ELEqTRIC UTILITY_ ~~A~T -Prop~rty !S stated _at_orig1nal co7t.-. *.. 'For: alrprqpei:ty *P.lc:l,bed in.' servi~e'after December 31, 1980;

• , ~enerally the p_l~nt* 1s :subJe?t, to a first mortgage ~1en. ~he c9st. the Company provides deferred Federal Income Taxes' for the'dif0

• qt p,roperty add1t1o_ns, 1.r?lu?ing r,eplacem~nt Qf un_1ts of ~r?per~y :- ference*betweeri tax depreciation computed us,ing tne Acc;elerated 8:nd be.ttermen_ts, 1s cap1ta!1zed. l~cluded m _c~rtain add1t1on~ 1s__

cos,t Recovery Syst~m (ACRS) un,der-the Economi.c RecbveryTc;ix.

. ~n All?wan_ce for Fun~s Uses During q9ristruct1cm (AFDC) which.

Act_of 1981, *and tax depreciatiorr computed* using bqok.line_s,

• ___ 1s 9efined in th~ applicabl~ reglllatory sy~te~s. of accounts as In addition, the Company provides de,ferred Federal Income the ne! cqst during_ the per1od.of_c~nstruct_1on of. borrovyed funds.

Taxes _relating to_ the deferral of.energy costs arid, up to December

• -. *. u_sed for construction purposes _and a reasonable r~teqn _o,ther*. _* -31, 1980, the use ofthe r~pair allpwance prc:ivisi,ons.0 f.ADR. In-* *

. -.-funds ~hen so.used. AFDC has been calculate9 ~sing a, rate.or_. _. vestmerit Tax Credits are deferred on -the:balar1ce sheet' and* are *

~ 8% for.all yea.rs reported: :Such-rate is l~ss_ t~~n the-maxirn_~~

restored to income. over the life of the relate~* property.',_.

_ - allowed un~er a-. FERC orqe,r..

,Gains on reacquired debt are recognized currently for b(?Ok

-* DEFERRED ENERGY COSTS_:_ The Company has _a_ Levelized

• purposes and as* a reduction of prop.arty accounts for tax pur-..

'. Energy Cl_ause (~Eq which utilizes projected e*nergy costs and

. pos~s. Tax gains, therefor_e, are being -returned Jo irycom~ by -

includes *a provision for prior period under or over recoveries. -. reduced tax _depreciation expense over the_ lives of the property.. *..

• .. The r~cc:ivery-of energy* costs i~ made' through lev.e.lized man-Ac'cordingly, the CompRny_ prq~ide_s deferred Federal *income* -.

_.-.* thly *c;harge_s over the-period -of projec;:tion. Any '._under of ov,er.

Taxes_ on its books.

-recoveries**are deferred iri balan'ce sheet accounts as a current RETIREMENT.PLAN-The -Company has in :effect a -non- :

. *. asset i;>r current *!jability. as *appropriate.. _Su'cli deferrais are*' _ ccmfobutory definec;tbenefit retirement plan covering. all re-gular

, -'recognized'ir:i the_Statetrieritof lricorii_e i.n.the period in.wh_ich. -._employees.*Cc:incurrent vtith a 1n*9 amendment, the Board of... *

• .,-_- '. *. the'y.are subsequently: recovered through the claui;e. * * *

... Dir.actors esfablished_ a funding policy providing *fqr direct pay-.

' 'o'EPRE;CIATION ANt>: MAIN:rE_NANCE-Th(:l Gompimy provides:_ 'c" me_nt_, from __ pl~n assets, *of *r~ti~ement ?enefits _relati.ng to s:e::1ices ;., '

.. for straigtjt-line depreciation* based on the e.stimated remain-

. 0 r::i. 0 ~ subsequ~nt to Jan_uar~ 1 _, _1 ~79.- (Ber,~f~ts.~e~e _prev1o~sly _,

ing: l,ife _bf transmission ;l'nd distr.ibuti'ciri property~and; based Ori'**. pr9y1d~d by th~ P~~chase,of ind1v1du~~ annu1t1es_up?n. th~ ret1rE3~_:.

thei' estirnated *service, life,: for a IL other :depreciable pr9perty...

men\\ of P!ar:i. par_t1c1pa:nts.).Su~h fund_ing arrarJgement was also -..

. -'.. Depreciation applicable to nuclear* plant includes certain* amounts -

e~t~nde_d to service pn9r to Jan,.uary 1., 197,9_ for those ~mployel?S.

• _.-:. *for dism.!3,ntli'ng'or'detommissioning. Ttie overall composite rate : C?ns_e_nting_to the ch~nge. Costs_of-the pJan._are determined under.

• . of depreciation *was approximately.3.30/o_.for 1981-,, 1.980 and., Hie aggre~ate cost m~thod:**

. '-., 1979. Acc.uni-ulated depreciation. is* charged with the cost* of

'PROPERTY-ABANDONMENT COSTS~ These costs consist pf.

. * : ;. depreciable pr_opertyunJts retired together w_ith remova1:costs*1ess, * :the Coinpany'_s uriamortize*d in\\iestin.enfiri Hope C/eek u*nit No..

.* ~c;ilvage ~nd: other :recoverfes.... *

• ..,, 2-,: a, nudear gen.eratin_g ur;iit'wh!ch was-canc~lled.in De,cember

• NUC~EAR' fUEL~Tlie Company's amortlzc;l.tion**~:it'Sal~m-Units_, 19~1., '.3-n~: four oJf-shore nu_clear. ~nits _whi?h we~e can9~!1ed in:,:.

• No.-'1-& 2-nucl,ear.fuei is based.on a rate using the number of.;' DeceT;T1ber 1978. *

• _ _-

~.

units of. thermal energy produced over the.Elstimated tote;! -ttier-

..The off-shore nyc;:lear units are,bein_g ~mort1zed, w1tti. the,:

. rnal' units to be_ produced during,tlie lif~ of the fuei, plus a factqr.-.. "'.concurr.~n?e of ~he BPU,.?~er ~ 20 ye_a_r-penod: ~e,e. Not~ 11 o_f _

represen'ting.the e~tim*ated future.costs (storage_ and disposa_l _ Notes to Financ1_?,I State!Jl~nt,~ for _a,dd1t1onal details on.t.he 1.981 for the disposition ofsp*ent*nu9lear fuel). - :*.

Mope Creek, ~-ni~ No., 2.. ca~c~llat1on..

. * ~ _ Nuclear fuel requiremerits.*for Peach !;36ttbm Units No. 2 and-

, OTHER.':.....:.Capital Stock expense is being ?mortiied on a ratable 3 a~e -being provided by the,c:iper_at_ing company for P~ac~ :sot-ba_sis over _20 years:.._

. tom-through a fuel pLir.ch!3,se* contract Presently, *such costs.

Debt'premium, discount and_expense~*are amortiz~d over.

. *: * ; ar*e-calculated usin*g a ierp-net.salvage value. Th~ Cqmpany is., :the l_ite* of !he related_ debt. In conformity w_i~h-allowe*d BPl:J ~ate-

~

- ',

• i"e~ponsib_le for payment of its proportionate int.ere~t. (7.51 %) of,

• making accounting, ~II gain~ or los*~es relating to r.eacquired d~bt*

• th*e cost of.the fuetl cpn~umed and qt certain operating costs_ar:id

. are. recognized currently..-.-. -* -. **. * * *.. _ '. -

• * :interest e'.>cpens:e

• quring _the *term of the* ¢ontract.-The cos\\. at:: * * *- * *,

.-:...., : -~-

• :~

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.-=.

.. as.a:cha.'rge.. to fu,el:'exp~.ri~e. -.. ',,

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,(

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. ELE.QTRIClJTIL;l'TY.PLANT(Notes 1., and~s)),

• In Servfce:::,

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• rrah!:,_iTlissic;,_n*'... /::

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Distribution.....

. ~ -~ :. '.

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• • • ,*.,. '. *.** $, 422;162 *..

• • $339;722

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> 13T 076

, 280 '842

.* '2q2,074"

...... ~,_.

• • ,.,. ::/~

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.. *20:214

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• i : ~.

• Less Accu.mulated Depreciatior:,.'. *,

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• 1\\

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-877.,696..

.75~6~~54...

'.,* 225,3:72 1

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.<

• 158-,995'. :* *

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2c>',545:

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.,......,. a *."-':,-.:_-:......,

• 831 ;Ei'f54'

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• DEF.ERRED. DEBIT'S:~.

. ~,....

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• • Property 'At:fa"r1donment Costs :(Notes*.*1 and 11).. ;*...... **.. -.. *:.

.*. ','-'/....**. *.,.... '.*. *.

.-_.. :19*;934::

. "4~236.

._,**Unamortized-Debt -Expe.nse"(Note~A).*:.- :.. *. :. '

• ,.:... :/.*:--,' :,.

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$1',,013;789 -~ '$8'79;795_*:.:i

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. Report of Management..

. Th_e fi~ancial ~tatements.pr~$~rlt~d herein have be~n prepared hy manag~ment in, c~nfor.mi~y,with Gener~lly A~cepted A~-:..

• countin*g Principles applicable to rate-regul.ated public utilities. Such Accounting Principles'are consistent in all fllaterial resp_ects

. with th.e accoun.ting prescribed by the *Federal Energy Regulatory Commission and the New.Jersey Department of Energy, Board of Public Utilities. lh preparing the financ1al statements, management makes informed ju_dgments and*esffrr)'ate.s relating to events and transactions that ~-re currently belng reported. The* Company has e.stablishe*d a system of iri.ternal accountin'g and finangial

• . controls and procedures designed to insure that the books and records refl~ct the transactions of the Company and that established policies*

• and procedures are followed. This syste,m is examined by mana.gement on a c~mtinuing basis for effectiveness. and efficiency

• an'd is revi'!3wed on a regular* basis by an internal audit staff that reports.-directly to the Audit Committee of the Board of Directors. -

.. The fi_nanciai' ~'tcitements hav~ b!3en examined* by Deloitte Haskins & S~lls,- Certified Publi.c Accouhtants, who~e* report thereon.

• appears below. The auditors provide an objective, indepe11dent revie,;,ras to manageme*n.t's discharge ofits responsibilitiesdn:

• sofar as they.relate to the fairness of reported operating results and finan.cial condition: Their examination includes pr_ocedures..

' 'believecfby them to:provide reasonable assurar:,ce tnat the financial statements are not misleading and:inclLldes a review of the :*'. *

... Company's system of. internal, accounting *and financi,~f controls and.a tl:lst of transactions..

. * -

• _.Th~ Boarp *of Directors 'has oversight'respo~sibility.t6r.<;leterrilining tti~t manage~~~t has' f~lfi[i"eci its obligati~'n iri the.prepar~-.. _..

tion of financial statements and the ongoing ex(lminatiori of the Company's system of internal accounting control. The Audit Com- *

• . mittee, '#hich is composed solely of outside directors_.and rep9rts to the Board of Directors, meets regularly with management, *

• . Deloitte Hask[m5 & Sells _and the internal* audit staff to discuss accounting; auditing and financial reporting matte.rs. The Audit *

• Committee reyiews the program Qf auqit work performed by-the internal audit staff, To insure auditor independence, both Deloitte-Has~ins. & Sell$ and the inte_rnal_al!dit.. staffha)ie co_mplete and _free-access to. t,he A~_dit Co!iihliJtee.. _ :.

Auditors' Opini~/ * **-~ _

. DeloiUe*:Haski~s: & S~lls..,..

.. Orie World Trade Center Certified Public'Accountarfts

'. Ne~ York; N~w Y~:>rk-.10048. -

. To the *sliar~h'olders. and. the Bo.ard of Di/ectors:;of Ati~ntic City Elettri~. Co~pany:.

.,.. We.-hav~ examined*tbe'b9-i~nc~ 'sheets-9f Atlanti,c 'city_ Electric C~rn-pan/ as of' D~_de-~ber 3J) :.1 ~81.c1;nd

• 191?0. and, the r~lated statements of,income and retained earnings and of-'changes in financial position for each.of the thre~ years in the period ended*

December 3l,.1981. Our examinations were made-in accordance with.generall'y° accepted auditing* standards and, accordingly,*

ihclu.ded:su_ch tests of the,accounting.records and such either auditing procedures as we-considered necessary jn the circumstances..

In: o_ur opinion." the *accompa~yin.g fi~,~n~i~I ~tatements present fairly,,the.fin.ancial po~ition of the_ C.omp~ny ~t December 31:

.. 1981* and 1*~ao anq the results of its' operations and-the chang,es i_n' its financial position* for.each.of the three years in _the period ended* December.31, J9.81, in _conform.ity with generally: accepted aqcountiri'g principles _applied pn :a* consistent basis.

January 29,,198_2 r

I

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< The Co~pany's. ne~, custom~r-*service* *

• an_n~x. completed in 1981-; effectively.,

handles about *10,000 inquiries per week.

.

• The new electronic call distribution

'and walk-in areas have improved the

' /

quality of service to our customer_s,

. (

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. - Common Stock, Ptic;:e Range and Dividends...

~

, I r

• 'The Cornman.Stock of the Company is traded on*the Ne'w York Stock Exchange (Principal.Market) and: the Philadelphia Stock, Exchange.'The high,and.low*sales prices of the c'ommonJ;tock as reported in the*wa11 *street Journal a~ New York Stock Exchange-'-

CompositeTra:n~actions for':tbe periods* indicated were ~s follo'ws:.' * :: * *.

.*. * * *.. ~ *

.(

First Q~arter*

• Second Quarter.

• Third Quarter*

'Fourth Quarter High*,

• 1.7-1/4

.'18-1/4.

17-3/4 18-1 /4 1981

< low.

, 15-.1/4 15-1 /4

. 16-1 /8

. 16.

, 'r

/t:iigh

.18-3/8

• 19-3/4

.- 19-5/8 1_7-3/4

• *1980'

. *.: Low. *.

'.'°14~7/8 15-1/8 1/8

.: ', *15-1 /8 Divi_dends. Paid Per Share

1981

'$A9.

• $.49_'

• • $.53

$'.53

,1980.

. $.46 -

$.46

$~49

$.49

• : '*... For you!" conv~nience: listed: bel~w *are the proposed 198Z record dates ahd pci.y?bl~*-dates; for divid-~nci's o~ Common Stock:

R~cord [)'ate; :

-Payable Dates.

• March 18, i 982.. ~

'sep,temb~ri 16, 1'982 April. 15, 1982

.Octobe~ 15,.1982

.June 17,.1982 Decem_!J~r 1_6,-1982.

July 15, 1982 January 15,1~83

. lnv~*:;;tor '.Recoid~: Co~m.~*nicitio~s reg~rding stock,transf~r.require~ents or ldst certific~tei*shoulci be ~;;~cted *to.the ~'ppropriate *

. Transfer Agent. Changes* of.address, inquiri~s on dividends or matters '.concerning.the Dividend Reinvestment and Stock. f?ur-chas.e Plan should be addrei~sed to:*

'Atlantic;; City Electric Company "...,

,.

• Investor Record's Depar.tment

• 1600 Pacific Avenue* ** *.

, ', '

• Atlantic.City,* New Jersey'08404 * : *

• • or. telephone Area Code. 609/645-4506 or 4507. *

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Projected Construction Expenditures (Millions of Dollars)

$200

$160

$150

$100

$ 50 0

1982 1983 1984 1985 1986 Assuming adequate rate relief, our estimates indicate that over the five year period from 1982 to 1986 an average of 45%

of our total cash construction requirements will be generated internally.

The additional requirement will be raised through the capital markets with the objective of maintaining a capital structure of less than 48% long-term debt, approximately 41 % common equity with the balance composed of preferred stock. Our current capitalization ratios are 48% long-term debt, 40% common and 12% preferred stock. We use short-term financing on an interim basis and maintain total lines of credit of $115,000,000. Refer to Note 10 for additional details on short-term financing.

We are currently investigating alternative methods of financing our program for converting oil-fired units to coal and natural gas. Our proposal, included in our December 4, 1981 LEC filing, would allow us to recoup our investment by retaining a portion (two-thirds) of the fuel cost savings generated by the conversions until the investment is recovered. One-third of the savings is passed on to the customer, immediately. If approved, this would enable us to reduce our financing requirements and would pro-vide substantial savings to our customers through reduced rates and financing costs.

1981 1980 1979 Sources:

c/kwh c/kwh c/kwh Coal 45 2.177 37 1.504 34 1.334 Oil 20 5.771 24 4.783 32 3.161 Nuclear 22

.384 21

.379 21

.367 Natural Gas 4

5.249 8

4.191 5

3.399 Interchange 9

7.529 10 5.987 8

4.115 Total 100 3.083 100 2.731 100 2.032 Our embedded cost of capital, as of December 31, 1981, is 8.54% for long-term debt and 7.50% for preferred stock. With our sinking fund requirements, refinancing of maturing low cost debt and financing our operations, we anticipate our embedded cost to rise.

The tabulation on page 35 includes key indicators which we believe are helpful in evaluating the performance of the Company over the past five years. The tabulation also includes certain unaudited supplementary information showing estimates of the ef-fects of changing prices. This data, which should be viewed as estimates of the approximate effects of inflation rather than as precise measures, is expressed in the dollars of the earliest comparative year (1977). The trends demonstrated reflect the need to control costs and point out the responsibility of regulatory agencies to provide timely and adequate rate relief. Additional sup-plementary information concerning the effects of changing prices is included on page 33 of the annual report.

37

Statistical Review 1981-1971 Facilities for Service Total Utility Plant (Thousands).....................................

Gross Additions to Utility Plant (Thousands)..........................

Pole Miles of Transmission and Distribution Lines.....................

Generating Capacity (Kilowatts) (a) (b)...............................

Maximum Utility System Demand-Kw.................................

Margin of Reserve at Times of Peak (% of Avail. Gen.)..................

Energy Supply (Thousands of Kwh)

Net Generation.................................................

Purchased and Interchanged -

Net................................

Total System Load...........................................

Electric Sales (Thousands of Kwh)

Residential.....................................................

Commercial....................................................

Industrial......................................................

All Others......................................................

Total..................................................*....

Residential Electric Service (Average per Customer)

Amount of Electricity used during the year (Kwh)......................

Amount paid for a year's service...................................

Price paid per Kilowatt-hour.......................................

Customer Data (Average)

Residential With Electric Heating...................................

Residential Without Electric Heating.............. :.................

Total residential.............................................

Commercial....................................................

Industrial......................................................

Other......................................................... >

Total Customers.............................................

Total Service Locations.........................................

Population Served...............................................

Financial Data (Thousands of Dollars)

Energy Sales Residential...................................................

Commercial..................................................

Industrial.....................................................

All Others....................................................

Total......................................................

Other Electric Revenue.........................................

Total......................................................

Investor Information Earnings per Average Common Share..............................

Average Number of Shares Outstanding (In Thousands).................................................

Dividends Paid on Common Stock (Cash)............................

Dividend Payout Ratio.................. *..........................

Book Value Per Share (Year End)............... ~............. ***...

Price Earnings Ratio (Year End)...................................

Times Fixed Charges Earned (before income taxes)...................

Shareholders and Employees (Year End)

Common shareholders...........................................

Employees.................................................. *..

1981

$1,064,928

$ 123,318 6,910 1,524,600 1,263,800 17.1%

5,302,023 946,241 6,248,264 2,480,225 1,849,863 1,279,724 65,555 5,675,367 7,751 670.66 8.65¢ 56,100 263,904 320,004 43,219 1,032 634 364,889 386,046 1,056,000

$ 214,614 156,624 82,908 9,700 463,846 5,837

$ 469,683 3.03 13,034 2.04 67%

22.40 6

2.84 48,424 2,035 1980

$ 962,052 97,330 6,879 1,434,700 1,261,700 12.1%

5,533,178 643,106 6,176,284 2,514,738 1,769,208 1,286,205 63,753 5,633,904 8,003 536.99 6.71¢ 52,225 261,988 314,213 43,267 1,041 654 359,175 379,242 1,037,000

$ 168,733 115,973 60,512 7,836 353,054 5,337

$ 358,391 2.62 12,372 1.90 73%

22.22 6

3.03 47,762 1,968 (a) Excludes capacity allocated to a large industrial customer.

(b) Includes unit purchase of capacity 50,000 kilowatts under contract with Delmarva Power and Light Company.

0 Atlantic Electric 1979

$ 870,075 72,773 6,831 1,384,700 1,192,600 13.9%

5,397,338 464,1 43 5,861,481 2,411,732 1,580,384 1,255,304 60,799 5,308,219 7,849 439.92 5.61¢ 48,339 258,941 307,280 43,219 1,048 667 352,214 371,362 1,015,000

$ 135,178 88,819 47,590 6,624 278,211 4,895

$ 283,106 2.36 11,980 1.765 75%

21.63 7

3.62 48,1 94 1,903

Five-Year Comparison Of Selected Financial Data Including Unaudited Supplementary Data Adjusted For Changing Prices (In Thousands of Dollars Except Per Share Amounts-Constant Dollar and Current Cost Amounts Ex~ressed in 1977 Dollars)

Years Ended December 31 1981 1980 1979 1978 1977 Operating Revenue

-historical

$ 469,683

$358,391

$283,106

$255,058

$234,995

- in constant dollars (a) 312,950 263,566 236,356 236,914 234,995 Income from Continuing Operations

-historical 46,988

$ 38,538

$ 34,307

$ 30,064

$ 27,358

-in constant dollars (a) 5,195 6,339 10,108

-at current cost (a) 5,096 4,078 5,806 Income from Continuing Operations per Share of Common Stock

-historical 3.03 2.62 2.36 2.21 2.06

-in constant dollars

.01

.15

.43

-at current c'ost

.01

(.03)

.06 Effective Income Tax Rate

-historical 36.8%

33.8%

35.5%

38.8%

34.1%

-constant dollar basis 77.8 73.8 63.9

-current cost basis 78.1 81.4 75.5 Excess of Increases in General Price Levels Over Increases in Specific Prices (a)

(16,793)

$ 32,032

$ 37,783 Decline in Purchasing Power of Net Amount Owed (a) 26,367

$ 33,106

$ 39,500 Net Assets at Year End

-historical

$ 338,846

$324,127

$310,231

$279,897

$271,135

-in constant dollars (average) 218,474 227,667 243,753 286,941 281,493 Net Income as a Percent of Operating Revenue

-historical 10.00%

10.75%

12.12%

11.79%

11.64%

-trended in 1977 dollars 6.66 7.91 10.12 10.95 11.64 Earned Rate of Return on Shareholders' Equity

-historical 12.21%

11.62%

10.70%

<10.26%

9.87%

-trended in 1977 dollars 8.14 8.55 8.93 9.53 9.87 Total Assets at Year-End-historical

$1,013,789

$879,795

$779,026

$699,861

$662,614 Long Term Debt and Cumulative Preferred Stock Subject to Mandatory Redemption

-historical

$ 442,769

$394,288

$324,848

$329,781

$330,120 Dividends Declared per Share of Common Stock

-historical 2.08 1.93 1.79 1.70 1.62

-in constant dollars 1.39 1.42 1.49 1.58 1.62 Market Price per Common Share at Year End

-historical 17.25 15.75

$ 17.125 18.00 23.00

-in constant dollars 11.49 11.58 14.30 16.72 23.00 Average Consumer Price Index 272.4 246.8 217.4 195.4 181.5 Certain comparative per share data trended in average 1981 dollars (without adjustment of earnings for the pro forma effects of inflation on depreciation amounts) are as follows:

Earnings Dividends Declared Market Price (Year End) 3.03 2.08 17.25 2.89 2.13 17.38 2.96 2.24 21.46 3.08 2.37 25.09 3.09 2.43 34.51 (a) These amounts will differ from those shown for constant dollar and current costs in Statement of Income From Continuing Operations Adjusted for Changing Prices because a different base year has been used (1977 in the data presented above and 1981 in the Changing Price information) in order to illustrate the impact of changing prices in alternative forms.

35

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Atlantic Electric is an investor-owned public utility which provides electric energy to our customers in the southern one-third of New Jersey. Our rates are subject to the approval of the New Jersey Board of Public Utilities (BPU). The Company's goals continue to be the assurance of continued financial stability, providing for the necessary return on investment needed to attract capital at a reasonable cost and offsetting the effects of inflation on our operating costs. A detailed analysis of our Results of Operations, Liquidity and Capital Resources follows:

RESULTS OF OPERATIONS:

REVENUES Operating revenues have increased during the three-year period ending December 31, 1981, primarily as a result of base rate increases, increases in the Levelized Energy Clause (LEC) and increased kilowatt hour sales. The relative impact of these increases are shown below (dollars in thousands):

Base Rate Increase LEC Increase*

Kilowatt-hour Sales Increase

$ 37,977 70,677 2,638

$111,292 Increase (Decrease) Over Previous Year 1981 1980 10.6%

19.8 0.7 31.1%

$ 4,160 53,755 17,370

$75,285 6.0%

19.0 1.6 26.6%

• Includes transfers to General Rates. See Note 3 of Notes to Financial Statements.

Future operating revenues will be effected by general economic conditions, timeliness and adequacy of rate relief and the effectiveness of our efforts to promote customer conservation and improve our load management techniques.

OPERATION AND MAINTENANCE EXPENSES Net Energy Costs, including purchased power, have increased approximately 110% over the three year period primarily as a result of the increased cost of imported oil and increased generation due to higher sales. We anticipate reducing the impact of increasing energy costs due to a number of factors: 1) Salem Unit #2 became commercially operable on October 13, 1981, and provides us with 82 MW of low cost nuclear generation; 2) on June 1, 1981, we became a full member of the Pennsylvania-New Jersey-Maryland Inter-connection, and we anticipate a reduction of approximately 15% in the cost of interchange power as a result of additional benefits provided to full members and 3) conversion of two peaking power jet units at our Caril's Corner Station to natural gas.

Net Deferred Energy Costs of $14,043,000 in 1981 represents the recognition of $36,233,000 of prior period unrecovered energy costs coincident with recovery of such costs through increased revenue and the deferral of $22,190,000 of unrecovered 1981 costs. On January 6, 1982, the BPU, in an interim order, reduced the Company's LEC (See Note 3). However, we project that the reduced LEC will be sufficient to result in the recovery of all unrecovered energy costs in 1982.

The increased cost of purchased power is due to an agreement reached in April 1981 with Allegheny Power Systems, whereby we purchase capacity to the extent it is available on a week-by-week basis. The impact of these purchases in 1981 resulted in a savings to our customers over what it would have cost the Company to acquire this capacity from alternative sources.

Increases in other operation and maintenance expenses are primarily the result of increases in labor costs and the cost of materials and supplies.

OTHER Interest expense has increased substantially in 1981 over the 1980 and 1979 levels, as a result of: 1) significant short-term borrowings necessary to finance unrecovered fuel costs and to continue our expanded construction program until more favorable long-term financing could be arranged, 2) the issuance of additional pollution control series first mortgage bonds and 3) interest related to Federal Income Tax settlements.

LIQUIDITY AND CAPITAL RESOURCES Of our gross capital requirements for the period 1979 to 1981, approximately 27%, after deducting dividends declared on common and preferred stock, was generated internally. The remainder was raised through the issuance of common and preferred stock, long-term debt, pollution control bonds and short-term debt on an interim basis.

Although we are making a concerted effort to reduce our capital expenditures by encouraging conservation, use of alternate energy sources and by effective load management, the need to replace existing plant, upgrade our transmission and distribution system, and provide for growth, indicate the need to provide approximately $608 million over the next five years for cash construc-tion expenditures. Due to inflation and changes in technology, depreciation accruals are not adequate to fund the replacement of existing utility plant when necessary (see supplementary information concerning the effects of inflation, page 33).

0 Atlantic Electric