ML18101A638
| ML18101A638 | |
| Person / Time | |
|---|---|
| Site: | Salem, Hope Creek  |
| Issue date: | 12/31/1994 |
| From: | Paquette J PECO ENERGY CO., (FORMERLY PHILADELPHIA ELECTRIC |
| To: | |
| Shared Package | |
| ML18101A636 | List: |
| References | |
| NUDOCS 9504180349 | |
| Download: ML18101A638 (48) | |
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Company Profile PECO Energy Company is an operating utility which provides electric and gas service in southeastern Pennsylvania. Two subsidiaries own, and a third subsidiary operates, the Conowingo Hydroelectric Project, and one distribution subsidiary provides electric service in two counties in northeastern Maryland.
The total area served by the Company and subsidiaries covers 2,475 square miles. Electric service is supplied in an area of 2,340 square miles with a population of about 3,700,000, including 1,600,000 in the City of Philadelphia. Approximately 95 percent of the electric service area and 63 percent of kilowatthour sales are in the Philadelphia suburbs and in northeastern Maryland, and 5 percent of the service area and 3 7 percent of such sales are in the City of Philadelphia. Natural gas service is supplied to a population of about 1,900,000 in a 1,475-square-mile area of southeastern Pennsylvania adjacent to Philadelphia.
COMPANY SERVICE TERRITORY COUNTIES SERVED PECO Energy Co m pany
To Our Shareholders:
The year 1994, our first under the name of PECO Energy, will be remembered as one of mixed results for our Company.
Operationally, it was a very positive year as new records were set for both electric and gas sales, as our nuclear operations achieved milestones in safety and perfor-mance and as our energy supply organization responded to the worst ice storm to ever hit our service territory in a manner that achieved wide-spread customer compliments.
Financially, the Company continued to recover from the adverse 1990 Pennsylvania Public Utility Commission (PUC) rate order, allowing the dividend to be increased for the fourth consecutive year. However, earnings per share of $2.42, excluding a one-time charge, were 1 % below the prior year. In addition, the market price of the Company's stock, as well as other utilities, decreased significantly as a result of higher interest rates and concerns about the potential for increased competition in the utility industry.
Including the effect of the one-time charge, 1994 earnings were $1.76 per share. On the positive side, sales to other utilities and in the residential and small commercial market increased over 1993. These gains were offset by reduced sales and lower prices in the large commercial and industrial market.
Strategically, the Company accelerated its plans and activities to prepare for a more competitive future. Major events included a voluntary retirement and separation program which was accepted by 27% of the employees, an industry-first decision to outsource a major part of our Information Systems activities, and a concentrated focus on developing new sales and marketing tools and techniques.
Watershed Year On the national scene, this was a watershed year for the electric utility industry. The possibility of open competition in our industry took a significant step forward as a result of a proposal by the California Public Utilities Commission to permit utility customers in that state to have access to alternative electricity suppliers by the year 2002. This proposal, although still under study, has set off a series of reactions throughout the country. Utility companies have begun many initiatives to prepare for competition, state regulators are focusing on the issue and the stock market reacted negatively to the prospects of higher risks for the industry.
In April, the Pennsylvania PUC opened its own investigation to review the potential advantages and disadvantages of competition in the retail electricity market.
The Company has taken the position that retail competition should not be enacted because it clearly would not produce net benefits for the overall public and could, in fact, reduce the reliability of electric supply and cause the market value of utility investments to erode. Most of the other parties to the PUC investigation support the position taken by the Company.
For PECO Energy, these regulatory events validate the numerous actions we have taken in recent years to build a stronger Company to meet the challenges of a competitive market which were discussed in last year's Annual Report. To reinforce our commitments, we adopted a new vision for the Company which has the goal of transforming PECO Energy into a competitive energy supplier with high customer loyalty by the year 2000 and to seek out emerging opportunities for growth which capitalize on our skills and assets.
PECO Energy Company
Corbin A. McNeil!, Jr.
President and Chief Operating Officer Joseph F. Paquette, Jr.
Chairman of the Board and Chief Executive Officer Becoming A Competitive Supplier With High Customer Loyalty During 1994, a munber of new steps were taken to improve the Company's cost effectiveness.
- The voluntary retirement and separation program will produce estimated savings in wages and benefits of approximately $66 million in 1995 and $100 million per year thereafter, but it required a one-time charge of $254 million ($145 million after taxes or about $0.66 per share) in 1994.
- The decision to outsource a significant part of our Information Systems Department, the first such major arrangement in our industry, will enable the Company to improve the level of IS technology throughout the Company while saving approximately
$150 million over the life of the 10-year contract.
- Both the Limerick and Peach Bottom nuclear power plants achieved industry-best refueling outages of less than 36 days in 1994, a reduction of about 65% in just 2 years.
Because of these and other improvements, the Company produced a record amount of nuclear energy, saving our customers over $500 million in fuel costs and resulting in a bonus of $14 million for our shareholders.
- A comprehensive review of administrative and general overhead costs identified over
$50 million of potential savings which are expected to be realized by 1996.
- In order to build the high-performance work culture required to succeed in the competitive marketplace, standards are being raised for hiring and promotion and performance is becoming the driver for merit increases and incentive pay in more jobs.
- The Company has agreed not to request a base electric rate increase before April 1999 except for unusual circumstances.
The transition to a competitive environment will require new skills and techniques for satisfying customers' needs and increasing customer loyalty. During 1994 major progress was achieved on the reengineering of customer-related activities, and we began a complete reorganization of the way we service our major industrial and commercial customer accounts. Through the cooperation of the Pennsylvania PUC, the Company now has the flexibility to offer pricing alternatives for the large customer accounts which have competitive alternatives. We also initiated a study to reengineer the delivery of energy to our customers. This effort is expected to improve the efficiency of a major component of our cost structure.
We were fortunate to have been able to elect Robert Subin to the Board of Directors. Bob is Senior Vice President, Campbell Soup Company and President, Campbell Soup Company-Bakery and Confectionery Division. His extensive experience in consumer sales and marketing will provide valuable insights as we expand our marketing activities.
Emerging Opportunities During the year we were also successful in exploring and implementing various emerging opportunities for growth by capitalizing on our existing strengths and assets.
For example, we successfully completed, safely and ahead of schedule, the transfer of slightly irradiated nuclear fuel from the Shoreham, N ew York, nuclear power plant PECO E nergy Compa n y
to Limerick. This "win-win" transaction benefitted our shareholders to the extent of over $50 million (half in 1994) and will save $70 million in fuel costs for our customers over the next 15 years.
Our new strategic business units are building capabilities to profit from a variety of new activities such as becoming a major participant in the expanding national wholesale power business, developing customized energy solutions for larger retail customers, becoming a participant in the natural gas brokering business and contracting out our technical expertise.
Another area which contains interesting possibilities is in the telecommu-nications field. We are studying various alternatives for profitably utilizing the Company's infrastructure and customer base in this evolving and changing industry.
Top Management Succession As a significant step in assuring an orderly management succession, the Board of Directors has announced its intention to elect Corbin McNeill to the additional position of Chief Executive Officer at the Company's Organization Meeting on April 12. I will continue as Chairman of the Board and Chairman of the Executive Committee and will focus on strategic issues as well as regulatory, legislative and financial activities until my retirement in 1997.
PECO Energy is extremely fortunate to have Corbin McNeill, an executive with unique leadership skills and high personal standards, available to lead the Company during the challenging years ahead. He has played an instrumental role in raising the level of performance of PECO Energy operations, especially its nuclear department, and has exhibited a focus on quality, an ability to manage change and a bias for customer satisfaction, all of which are essential for successful leadership in today's business environment.
Future Prospects As I predicted in last year's report, the future is certainly turning out to be interesting and somewhat chaotic. Based on 1994 events, more of the same is in store. The cover on this year's Annual Report is intended to depict the challenging environment that exists today in the utility industry. Despite the obstacles and challenges that lie before us, I am convinced that PECO Energy has the resources and the determination to "harness the winds of change" as we move from today's choppy waters to a more stable future.
Our employees are committed to the Company's success; our facilities are ample and efficient; and our strategic plan is credible and achievable. These strengths give us confidence that the years ahead will be successful.
We appreciate the support of our investors and are dedicated to enhancing the value of your investment in PECO Energy.
j)?lft~?
J. F. Paquette, Jr.
Chairman of the Board and Chief Execut ive Officer January 30, 1995 PECO Energy Comp a ny
EARNINGS AND DIVIDENDS (DOLLARS PER SHARE) 2.50---------
2.00-----------111----
1.50------
tll---I-1.00--.-
--e------11 _
o.50 -
t1-1-
90 91 92 93 94
- Earnings per share
- Dividends paid per share Report of 1994 Operations Financial and Operating Review Earnings for the twelve months ended December 31, 1994 were $1.76 per share, which is $0.69 per share below last year. This decrease was primarily due to the one-time charge of $0.66 per share for the Company's special retirement and separation programs.
Also contributing to the decrease in earnings were strategic and non-recurring operating and maintenance expenses. The decrease in earnings was partially offset by the benefits of the Company's ongoing debt and preferred stock refinancing and redemption program.
In October, the Board of Directors increased the annual common stock dividend by 7% from $1.52 to $1.62 per share, beginning with the December 1994 payment. This is the fourth increase since the 1990 dividend reduction and reflects the Company's continuing financial improvement.
Total electric sales increased 5% in 1994, setting a new record. This sales increase was primarily due to increased sales to other utilities and over 9,400 new customers. Natural gas sold and transported also set a record, increasing 7% primarily due to an increase in gas transported for others which was partially offset by lower interruptible sales.
PECO Energy to Sell Conowingo Power Company In May, the Company announced that it had agreed to sell its Maryland retail electric subsidiary, Conowingo Power Company (COPCO), to Delmarva Power & Light Company (Delmarva) for $150 million. The sale of COPCO, which is subject to state and federal regulatory approvals, will bring value to Company shareholders while providing lower rates to COPCO customers. COPCO, with 1994 revenue of $78 million, supplies electric service to about 3 5,000 customers in portions of Cecil and Harford counties. Customer service functions now provided by COPCO to York County, PA customers will be provided by PECO Energy. The transaction includes a ten-year contract for PECO Energy to sell wholesale power to Delmarva. The COPCO sale does not involve the Conowingo Hydroelectric Station which is owned by Susquehanna Power Company, another PECO Energy subsidiary.
Rate Matters In December, the Pennsylvania Public Utility Commission (PUC) approved a settlement which resolved the litigation concerning the Company's September 1992 request for a 1.5%, $50 million electric rate increase which the PUC had denied and the Company had appealed to the Commonwealth Court of Pennsylvania. Under the settlement, the Company was allowed to increase rates by $25 million (less than one percent) effective January 1, 1995 to cover postretirement benefits. As part of the PECO Energy Company
I settlement, the Company agreed not to file for an electric base rate increase before April 1, 1999. This will extend to almost ten years the period from PECO Energy's last electric base rate filing to its next possible filing. During this period, the Company is permitted to file for recovery of certain cost increases beyond its control, such as fuel and taxes.
Also, in another December action, the PUC approved a petjtion concerning gas operations which recognizes the environmental costs for former manufactured gas plant sites ($1.5 million) and postretirement benefits ($2.8 million). These increased costs are being offset by a reduction in annual gas plant depreciation so that the net result is no increase in rates to gas customers.
Retirement and Separation Programs The Company's commitment to cost reduction and continued cost control was evident again in 1994. In April, the Board of Directors approved a package of financial incentives that permitted eligible employees to participate in either a Voluntary Retirement Incentive Program (VRIP) or a Voluntary Separation Incentive Program (VSIP). In September, 2,482 employees, or 27% of the work force, accepted either VRIP or VSIP. To ensure an orderly transition, the retirements and separations are taking place in stages through December 31, 1995. The Company recorded a one-time, after-tax charge against earnings of approximately $145 million, or $0.66 per share, in the third quarter of 1994 to reflect the costs of these programs. The Company estimates that the savings of salaries and benefits will amount to approximately $100 million per year by 1996.
Power Sales Agreement Signed During the second quarter, the Company finalized an agreement, subject to regula-tory approval, to sell 140 megawatts of capacity and energy to Baltimore Gas and Electric Company for 2 5 years beginning in 1997. PECO Energy's successful bid was one of 28 bids submitted. The Company expects sales under this agreement to generate annual revenues of approximately $45 million, or at least $1.2 billion over the life of the contract.
Extreme Weather Conditions Affect Customers PECO Energy customers set records on January 18, 1994 for winter electric peak demand of 5,957 megawatts, up 7%, and on J anuary 19, 1994 for daily gas sendout of 618 billion cubic feet, up 10%. In addition to meeting record demand, the Company successfully responded to a number of operating challenges caused by the extreme cold and ice. During the four-day period beginning J anuary 7, 1994, a severe ice storm caused service interruptions to nearly 600,000 customers, the most in the Company's history. Most service was restored within two days. This storm was followed on January 17 by another ice storm that caused service interruptions to 120,000 customers.
PECO Energy Company ELECTRIC SALES (BILLION KILOWATTHOURS) 30 --llf---9-~---~--
20 --10--__ e--__ ~---~--
10 --llf---9-~---~--
90 91 92 93 94
- Sales ro orher uriliries
- Rerai 1 sales GAS SALES AND TRANSPORTED GAS
!BI LLION CUBIC FEET) 60 -111-----~----~---~---
40 -111-----~----~---~---
90 91 92 93 94
_I
The Company has a dual approach to increasing share-holder value through improved financial performance. On the one hand, the Company continues to focus on the cost-cutting required to be competitive in the utility marketplace of the future. On the other hand, the Company is seeking innovative ways to increase revenue, such as entering into long-term contracts with key customers and increasing off-system sales.
PECO Energy Company
Unprecedented winter electric demand throughout the service territories of the member companies of the Pennsylvania-New Jersey-Maryland Interconnection (PJM),
the regional power pool, created severe demands on the companies' power systems.
This demand, compounded by the unavailability of some of the companies' generating plants due to scheduled maintenance and difficulty in supplying fuel to fossil-fuel stations due to impassable rivers and roads, caused the PJM companies, including PECO Energy, to initiate 45-minute rolling blackouts on January 19. Nevertheless, throughout the cold spell, the Company's nuclear, hydroelectric and fossil-fuel plants performed in an outstanding manner and supported the energy requirements of the other utilities in the power pool.
On July 8, a new hourly record for electric energy use of 7,227 megawatts was established by the Company's customers, surpassing the record of7,100 megawatts established on the same day in 1993.
Nuclear Operations The 1994 combined capacity factor for the Company-operated Limerick and Peach Bottom nuclear units was 89%. This capacity factor is not only well above the nuclear industry average but also exceeds the nuclear performance standard established by the PUC, enabling the Company to earn a performance bonus of $14 million, which is reflected in 1994 income.
Since it began operation, Limerick has been one of the top-rated U.S. plants, and Peach Bottom's performance continues to improve. Peach Bottom attained a Systematic Assessment of Licensee Performance (SALP) rating of " 1" for Operations from the Nuclear Regulatory Commission for the first time in its 20 years of operation.
This is a significant achievement, reflecting improved training, procedures and teamwork at the station.
In the first quarter of 1994, Limerick Unit No. 1 completed a refueling outage in slightly less than 36 days, the shortest ever for a U.S. boiling water reactor (BWR).
In the fourth quarter, Peach Bottom Unit No. 2 completed a refueling outage in 35 1/2 days, surpassing the Limerick record and giving PECO Energy the two shortest refueling outages for comparable BWRs in the U.S. Only one similar European BWR has had a shorter refueling outage. The Company's shorter outages are a result of improved planning and coordination, innovative equipment and work practices, and streamlined management processes. A one-day reduction in nuclear outage time saves approximately $500,000 in fuel costs for Company customers.
PECO Energy Company CONSTRUCTION EXPENDITURES &
INTERNAL CASH FLOW (MILLION DOLLARS) 1,000---------
800 --<IO--t't------11~----
600 ---ill-----fl-----ll-
-D--
400 __.._ ___,____._..,._--11m ~
91 92 93 94 95*
- Construction expendirures
- Internal cash
- Budget for 1995
The Company is com-mitted to improving customer satisfaction and creating high customer loyalty. As our industry becomes more competitive, we will guide our customers to innova-tive solutions for all their energy needs.
Excellence will be the hallmark of all our operatiopts.
PECO En e rgy Comp a ny
In June, the last of 33 shipments of slightly irradiated nuclear fuel from Shoreham Nuclear Power Station on Long Island, New York to Limerick was completed. The fuel transport was completed several months ahead of schedule and without incident. The Company's customers will realize an estimated $70 million in fuel savings over the next 15 years as the Shoreham fuel replaces, at no cost, fuel that otherwise would have been purchased. In addition to these savings, the Company was paid $50 million to accept the fuel.
Customer Satisfaction and Cost Control As the Company moves toward achieving its vision of becoming a competitive energy supplier with high customer loyalty, it continues to focus on improving customer satisfaction by launching a comprehensive reengineering effort of routine services. In one program, teams of employees designed an entirely new business system that resulted in the planned consolidation of seven customer call-taking locations into two, the reorganization of all customer service work into a single department with fewer and broader job classifications, and significant information system improvements to increase the speed and precision of the new process. Many of the process changes were implemented through a pilot program involving 50,000 customers. Although some organizational changes were implemented in 1994, most of the new business system will be implemented in 1995.
PECO Energy has also begun a major initiative to improve the cost competitiveness of its support functions. Teams of employees have been examining support-function activities and work processes to reduce costs and improve operating efficiencies. The goal of this effort is to achieve annual savings of $75 million. To date, these efforts have identified over $50 million of annual savings, the bulk of which will be realized in 1995.
During 1994, the Information Systems group underwent a major reorgani-zation. The Company contracted with an outside vendor to provide selected Information Systems functions formerly performed by Company employees. The outsourcing of these functions will save the Company approximately $150 million over the next ten years.
To compete effectively in the future wholesale power marketplace, the Company has determined that it must reduce the cost of its fossil-fuel and hydroelectric gener-ation. To accomplish this goal, the Company developed and implemented a program called Vision Quest which redesigned all work processes at its fossil-fuel and hydro-electric stations to achieve annual cost savings of approximately $100 million by 1997.
PECO Energy Comp*ny TOTAL DEBT OUTSTANDING
!BILLION DOLLARS) 4 --110----~----~--~--
o _..___.._~---~---~---
90 91 92 93 94
PECO Energy is seeking new oppor-tunities for growth which capitalize on our skills and assets.
We will replace the ordinary with a variety of innovative products and services.
We are ready to take the prudent risks necessary to reach our higher goals.
PECO Energy Company
During 1994, capital expenditures for expansion of the electric transmission and distribution system were reduced by implementing new substation planning criteria. Use of two newly acquired mobile transformers for emergency purposes has reduced capital investment requirements in new and existing substations, while providing optimal reliability of the electric distribution delivery system. During the next ten years, the Company will avoid approximately $60 million in expansion costs, as well as associated operating and maintenance costs, at 15 substations. Future electric load growth will be serviced by existing facilities, while using the mobile transformers to meet emergency needs.
The Company is moving to a more aggressive, growth-oriented strategy in the natural gas business, particularly in the industrial markets and the non-traditional areas such as natural gas vehicles and cooling. PECO Energy will increase promotional activities and strengthen relationships with builders, architects, dealers and contractors in order to expand the use of gas appliances and equipment. The Company is also exploring opportunities in non-regulated gas businesses which would complement existing activities.
Financing Activities The Company is continuing its program to reduce long-term debt and refinance high-cost debt and preferred stock. The total annualized savings from 1994 reductions in debt and preferred stock and refinancings amount to approximately $34 million or
$0.11 per share.
In June, two series of floating-rate debt totaling $96 million were issued through the Montgomery County (Pennsylvania) Industrial Development Authority to replace a similar amount of bonds carrying an interest rate of 101/2%. Floating rates for these new issues averaged 5% in 1994. In July, the Company issued $49 million of Medium-Term Notes with maturities ranging from one to four years and interest rates ranging from 6.05% to 7.41 % to refund 10.05% debentures. OnJuly 27, the Company, through its wholly owned subsidiary PECO Energy Capital, LP., issued
$221 million of 9% Cumulative Monthly Income Preferred Securities. The proceeds of this issuance were used to redeem six series of the Company's preferred stock.
Odd-Lot Shares Buy-Back Program In September, the Company initiated a voluntary buy-back program that entitled shareholders of odd lots -
that is, holdings of fewer than 100 shares -
to sell their holdings of PECO Energy common stock without paying brokers' commissions or fees.
Through the program, which expired in October, more than 380,000 shares were tendered, resulting in annual savings of approximately $120,000.
PECO En er g y Comp a ny 1994 REVENUE DOLLAR RECEIVED
- Electrical sales-service territory (8 3 ¢)
- Electrical sales-wholesale (7¢)
- Gas sales (10¢)
1994 REVENUE DOLLAR SPENT
- Operating expenses, excluding taxes (66¢)
- Taxes charged to operations ( 13 ¢)
- Interest charges (10¢)
- Preferred stock dividends (1¢)
- Earnings per common shate (10¢)
\\..
M~nagement' s Discussion and Analysis of Financial Condition and Results of Operations EARNINGS AND DIVIDENDS 1994Comparedto 1993 Earnings per common share in 1994 were $1.76 compared to
$2.45 in 1993. The decrease in earnings was primarily due to the one-rime charge of $0.66 per share associated with the Company's Voluntary Retirement Incentive Program (VRIP) and Voluntary Separation Incentive Program (VSIP). Of the estimated 2,135 employees eligible for VRIP, 1,474 employees elected to accept early retirement. An additional 1,008 employ-ees elected to separate under VSIP These programs were accepted by 27% of the Company's work force. Also contribut-ing to the decrease in earnings were other strategic and non-recurring operating and maintenance charges which decreased 1994 earnings by $0.13 per share. These decreases were partially offset by savings from the Company's ongoing debt and preferred stock refinancing and redemption pro-gram, which increased earnings by $0.14 per share.
The Company increased its annual common stock divi-dend by 7% to $1.62 per share, effective with the dividend paid in December 1994.
Operating Revenues Increases/(decreases) in electric sales and operating revenues for 1994 vs 1993 by classes of customers are set forth below:
Electric Sales Eleccric Revenues (millions of kWh)
(millions of$)
Residential 160 15 Small Commercial and Industrial 335 28 Large Commercial and Industrial (88)
(21)
Other 20
{25)
Service Territory 427 (3)
Interchange Sales 311 9
Sales to Other Utilities 1369 13 Total 2,107 19 Electric revenues increased $19 million in 1994 compared to 1993 primarily due to increased sales to other utilities and increased interchange sales. These increases were partially offset by lower revenue margins obtained on these sales.
Effective April 7, 1994, the Energy Cost Adjustment (ECA) was changed from a credit value of 7.600 mills per kilowatt-hour (kWh) to a credit value of 5.627 mills per kWh, which resulted in an increase in annual revenue of 63 million.
Gas revenues increased $33 million in 1994 compared to 1993 primarily due to higher fuel-clause revenues.
Fuel and Energy Interchange Expense Fuel and energy interchange expenses increased $44 million in 1994 compared to 1993 primarily due to increased elec-tric output associated with interchange sales and increased sales to other utilities. A portion of this increase is being deferred pending regulatory action. The increase was also attributable to an increase in gas fuel costs.
Other Operating and Maintenance Expenses Other operating and maintenance expenses increased $304 million in 1994 compared to 1993 primarily due to a one-time, pre-tax charge of $254 million in the third quarter of 1994 for VRIP and VSIP In addition, other operating and maintenance expenses increased due to higher environmen-tal, customer and employee-related charges, and other stra-tegic and non-recurring operating and maintenance charges.
These increases were partially offset by lower generating sta-tion charges resulting from fewer and shorter refueling and maintenance outages.
Depreciation Expense Depreciation expense increased in 1994 compared to 1993 due to additions to plant in service.
Allowance for Funds Used During Construction Allowance for Funds Used During Construction (AFUDC) decreased in 1994 compared to 1993 primarily due to a decrease in the 1994 AFUDC rare, partially offset by an increase in Construction Work in Progress.
Income Taxes Income taxes charged to operations decreased in 1994 com-pared to 1993 primarily due to the charge for VRIP and VSIP and lower operating income. These decreases were par-tially offset by lower interest expense allocated to operations.
Other Taxes Other taxes increased in 1994 compared to 1993 primarily due to an increase in the real estate tax base and increased Pennsylvania gross receipts tax resulting from higher operat-ing revenues.
Total Interest Charges Total interest charges decreased in 1994 com pared to 199 3 primarily due to the Company's ongoing program to refi-nance and redeem higher-cost, long-term de_bt.
Preferred Stock Dividends Preferred stock dividends decreased in 1994 compared to 1993 primarily due to the reduced number of preferred shares outstanding and the refinancing of higher-cost pre-ferred stock.
1993 Compared to 1992 Earnings per common share in 1993 were $2.45 compared to $1.90 in 1992. The increase in earnings was primarily due to the settlement of the litigation in connection with the 1987 shutdown of the Peach Bottom Atomic Power Station (Peach Bottom), which reduced 1992 earnings by $0.27 per share; more favorable weather in 1993, which increased earnings by $0.26 per share; and the Company's ongoing debt and preferred stock refinancing and redemption pro-gram, which increased earnings by $0.18 per share. These PECO En e r g y Comp a ny a nd Sub si d i ary Comp a n i e s j
Management's Discussion and Analysis of Financial Condition and Results of Operations (CONTINUED) improvements were partially offset by non-recurring federal income tax settlements, which increased 199 2 earnings by
$0.10 per.share, and the higher 1993 federal income tax rate, which decreased earnings by $0.04 per share.
Operating Revenues Increases/(decreases) in electric sales and operating revenues for 1993 vs 1992 by classes of customers are set forth below:
Elecrric Sales Electric Revenues (millions of kWh)
(millions of$)
Residential 763 50 Small Commercial and Industrial 406 9
Large Commercial and Industrial 165 (59)
Other (191)
(7)
Service Territory 1,143 (7)
Interchange Sales (774)
(18)
Sales to Other Utilities 1,971 33 Total 2,340 8
Electric revenues increased $8 million in 1993 compared to 1992 primarily as a result of higher residential sales due to favorable weather conditions and higher sales to other utili-ties, partially offset by the pass-through of lower fuel costs to customers and lower revenues from large commercial and industrial customers.
Gas revenues increased $17 million in 1993 compared to 1992 primarily as a result of higher interruptible sales resulting from favorable market conditions and an increase in the use of gas at the Company's electric generating sta-tions.
Fuel and Energy Interchange Expense Fuel and energy interchange costs decreased $50 million in 1993 compared to 1992 primarily due to reduced higher-cost interchange purchases resulting from increased nuclear gen-eration and lower fuel costs. Nuclear generation utilizes the Company's lowest-cost fuel. These decreases were partially offset by increased output.
Other Operating and Maintenance Expenses Other operating and maintenance expenses decreased 44 million in 1993 compared to 1992 primarily due to lower charges for uncollectible accounts, lower administrative and general expenses primarily as a result of a reduction in the number of employees and the 199 2 charge for the Nuclear Group Voluntary Early Retirement Program and Voluntary Separation Package. These decreases were partially offset by increases in other operating and maintenance charges related to the Company's generating units.
Depreciation Expense Depreciation expense increased in 199 3 com pared to 199 2 due to additions to plant in service.
Allowance for Funds Used During Construction AFUDC increased in 1993 compared to 1992 primarily due to an increase in Construction Work in Progress, partially offset by a decrease in the 1993 AFUDC rate.
Income Taxes Income taxes charged to operations and to other income increased in 1993 compared to 1992 due to the cost associat-ed with the 199 2 settlement of the Peach Bottom co-owners' litigation, higher pre-tax income, lower interest expense, the reduction in 1992 income taxes as a result of the settlement of the Company's 1984-1986 federal income tax returns and the change in the federal income tax rate from 34% to 35%
in 1993. These increases were partially offset by the first quarter 1993 change in estimate to ratably decrease deferred federal income taxes in accordance with the tax-rate decrease mandated by the Tax Reform Act of 1986.
Other Taxes Other taxes increased in 1993 compared to 1992 primarily due to a settlement of the 1990 Pennsylvania Capital Stock Tax, an adjustment of the 1991 Pennsylvania Capital Stock Tax in 1992, and an increase in the real estate tax base.
Total Interest Charges Total interest charges decreased in 1993 compared to 1992 primarily due to the Company's ongoing program to refi-nance and redeem higher-cost, long-term debt.
Preferred Stock Dividends Preferred stock dividends decreased in 1993 compared to 1992 primarily due to the reduced number qf preferred shares outstanding and the refinancing of higher-cost pre-ferred stock.
LIQUIDITY AND CAPITAL RESOURCES The Company's capital requirements are primarily for capi-tal expenditures for its construction program and for debt service. Capital resources available to meet these require-me.nts and dividend payments are funded from cash provid-ed by utility operations and, to the extent necessary, external financing.
The Company meets its short-term liquidity require-ments primarily through a $150 million commercial paper program and bank lines of credit, which were $351.2 million at December 31, 1994. The Company did not have any com-mercial paper outstanding at December 31, 1994, and had
$11.5 million outstanding under existing bank lines of cred-it. The Company believes these sources of short-term liquidi-ty are adequate.
PECO Energy Company and Subaidiary Comp*nie*
Management's Discussion and Analysis of Financial Condition and Results of Operations !CONTINUED)
Construction program expenditures for 1994 were $5 5 7 million and are estimated to be $495 million in 1995 and
$1.4 billion for 1996 te 1998. Certain facilities under con-struction and te be constructed may require permits and licenses which the Company has no assurance will be granted.
The Company expects its level of capital investment in utility plant te remain relatively stable since it has sufficient electric generating capacity te meet the anticipated needs of its service territery well into the next decade.
Since 1990, the Company's internal sources of cash have exceeded its capital requirements, which has improved the Company's financial condition. Contributing te this improve-ment in internal sources of cash were revenues from sales of capacity and energy te other utilities and the Company's ongoing program to refinance and redeem higher-cost, long-term debt and preferred stock. Net cash provided by operat-ing activities for 1994 was $1.3 billion. For 199 5 through 1998, the Company expects that internally generated cash will exceed its capital requirements, allowing further reduc-tions in the Company's debt.
During 1994, $366 million of long-term debt and monthly income preferred securities were sold to replace debt and preferred stock carrying higher rates of interest and divi-dends. Also during 1994, the Company utilized internally generated cash to repay $25 3 million of debt and to redeem
$18 million of preferred steck. These transactions resulted in a reduction of approximately $26 million in annualized interest and $8 million in annualized preferred stock divi-dends. At December 31, 1994, the Company's embedded cost of debt was 7.2% and 16.7% of the Company's long-term debt had a floating rate. The ratios under the Company's mortgage indenture and Articles of Incorporation at December 31, 1994 were 3.48 and 2.05 times, respectively, compared with minimum issuance requirements of 2.00 and 1.50 times. The ratios, although significantly above mini-mum requirements, are adversely affected through the third quarter of 1995 by the one-time charge incurred in the third quarter of 1994 for VRIP and VSIP.
During 1994, the Company purchased more than 380,000 shares of the Company's common steck through a voluntary odd-lot buy-back program which entitled share-holders with fewer than 100 shares, or odd lots, te sell their entire holdings of PECO Energy common stock without pay-ing any brokerage commission or fees. Dividend Reinvest-ment and Stock Purchase Plan requirements were satisfied by the reissuance of the odd-lot shares and purchase of shares of common stock on the open market. Depending on the Company's specific requirements, the Company will decide whether to issue shares or purchase shares on the open mar-ket in the future.
The Company's capital structure as of December 31, 1994 was common equity, 43.5%; preferred stock and monthly income preferred securities of a subsidi<try (which comprises 2.2% of the Company's total capitalization struc-ture), 6.0%; and long-term debt, 50.5%; compared te its capi-tal structure as of December 31, 1993 of common equity, 42.6%; preferred stock, 6.1 %; and long-term debt, 51.3%. The Company anticipates that it will further reduce its debt.
OUTLOOK The Company's financial condition and its future operating results are dependent on a number of factors affecting the Company and the utility industry in general. These factors include increased competition, the regulation and operation of nuclear generating facilities, off-system sales, compliance with environmental regulations, and regulatery and account-ing changes.
Competition The National Energy Policy Act of 1992 (Energy Act) encourages competition among utilities and nonuti!ity gen-erators for sales of energy and capacity to wholesale cus-tomers by allowing access to utility transmission facilities.
The Energy Act directs the Federal Energy Regulatory Commission (FERC) to set prices for wheeling to allow utili-ties to recover all legitimate, verifiable and economic costs of providing wheeling services, including the cost of expanding their transmission facilities to accommodate required trans-mission access. The Energy Act prohibits FERC from order-ing wheeling for sales to retail customers. This does not, however, prohibit state regulatory commissions from order-ing wheeling to retail customers within their jurisdiction.
Currently a number of states, including Pennsylvania, are assessing the issue of retail competition.
In May 1994, the Pennsylvania Public Utility Commission (PUC) instituted an investigation' into electric power competition issues. The PUC invited utilities, inde-pendent power producers and other interested parties to respond to a number of issues related to competition, includ-ing the impact of retail wheeling. In November 19.94, the Company filed its comments with the PUC. The Company responded that access by retail customers to alternate elec-tricity suppliers (retail access) is not in the public interest and should not be implemented unless there is a reasonable expectation that the total benefits created will exceed the total cost of the changes.
The Company believes that retail access should not be adopted if it represents a mere shifting of costs from one class of customers to another. The Company believes that retail access does not currently provide a net benefit.
Regulatory changes permitting retail access may also create "stranded investment," investment by a regulated utility in assets currently included in rates that are not recoverable if its customers are served by another energy supplier.
Investments by the Company in assets which are not recov-erable from customers* may have to be written off, which write-off could have a material adverse effect on the Company's financial condition and results of operations. The Company bt!lieves other alternatives are available for enhancing the current regulatory system. The Company expressed its willingness to work with others to explore potential enhancements, such as performance-based PECO Energy Company and Subsidiary Coll'\\panlea J
Management's Discussion and Analysis of Financial Condition and Results of Operations (CONTINUED!
ratemaking, flexible pricing and the continued development of efficient bulk-power markets. The PUC is currently expected to release the findings from its investigation in the spring of 1.995. The Company is not able to predict whether retail access will be implemented and, if implemented, what impact it would have on the Company's financial condition or results of operations.
The Company believes that through interruptible rates and long-term contracts with cost-based rates that are avail-able to most of its larger-volume industrial customers, retail access would not adversely affect that portion of its retail business. Because the Company is a high-cost producer due to its capital investment in nuclear facilities, retail access could adversely affect other segments of its retail business, particularly other large commercial and industrial customers.
The wholesale electric utility industry, in particular power generation tO serve the needs of large users such as municipal customers and tO provide for off-system sales, has become increasingly competitive. Such competition has per-mitted the Company to increase off-system sales but has reduced the Company's margin for off-system sales.
Companies th~t are abk to provide energy at a lower cost are likely to benefit from this competition. These factors will continue to challenge the Company to maintain current rev-enue levels.
As part of the Company's commitment to cost reduction and stringent cost control, in April 1994, the Company's Board of Directors approved a package of financial incen-tives permitting eligible employees to participate in either VRIP or VSIP Of the estimated 2,135 employees eligible for VRIP, 1,474 employees elected to accept early retirement. An additional 1,008 employees elected to separate under VSIP The retirements and separations of the 2,482 employees accepting VRIP or VSIP are taking place in stages through December 31, 1995. The Company expects VRIP and VSIP to provide savings in wages and benefits to the Company of approximately 100 million annually.
In May 1994, the Company entered into an agreement to sell Conowingo Power Company (COPCO), its wholly owned Maryland retail electric subsidiary, tO Delmarva Power and Light Company (Delmarva) for approximately
$150.million. The transaction also includes a ten-year con-tract for the Company to sell capacity and energy to Delmarva. The sale is subject to state and federal regulatory approvals. Recognition of the ~ain on the sale, which the Company expects ro be approximately $40 million after taxes, is contingent upon the completion of the sale.
The Company has implemented its plan to reorganize the Company's operations into five strategic business units to better enable it to meet the challenges of a competitive envi-ronment. The Consumer Energy Services Group distributes energy products and services to the Company's retail cus-tomers and consists primarily of the operating divisions, marketing, sales, engineering and support services. Bulk Power Enterprises is responsible for marketing and selling energy products to wholesale customers inside and outside the Company's service territory. The Power Generatiori Group is responsible for operating the Company's fossil-fuel and hydroelectric generating units. The Nuclear Generation Group is responsible for operating the Company's nuclear generating stations. The Gas Services Group is responsible for managing the Company's gas operations. The Company is currently planning to have each business unit eventually operate as an individual profit center, separate from the other business units.
Regulation and Operation of Nuclear Generating Facilities The Company's financial condition and future operating results are in part dependent on the continued successful operation of its nuclear generating facilities. The Company's nuclear generating facilities represent approximately 44% of its installed generating capacity. Because of the Company's substantial investment in and reliance on its nuclear gener-ating units, any changes in regulations by the Nuclear Regulatory Commission (NRC) requiring additional invest-ments or resulting in increased operating costs of nuclear generating units could adversely affect the Company.
During 1994, the Company-operated nuclear plants operated at an 89% weighted average capacity factor and the Company-owned nuclear plants operated at an 82% weight-ed average capacity factor and produced 60% of the Company's output. Nuclear generation is th.e most cost-effec-tive way for the Company to meet customer needs and com-mitments for off-system sales. Continued operation of the nuclear plants above 60% of capacity is necessary to avoid penalties under the ECA. In addition, the terms of the 1991 settlement of the Limerick Generating Station (Limerick)
Unit No. 2 rate case afford the Company the opportunity, through sales to other utilities and the efficient operation of Limerick, to increase future earnings. See note 2 of Notes to Consolidated Financial Statements for a description of the ECA and the terms of the Limerick Unit No. 2 rate case set-tlement.
The Company would ultimately seek to recover through the ratemaking process all capital costs and any increased operating costs, including those associated with NRC regula-tion of the Company's nuclear generating stations and envi-ronmental compliance and remediation, although such recovery is not assured.
The staff of the Securities and Exchange Commission has questioned the electric utility industry accounting prac-tices regarding the recognition, measurement and classifica-tion of decommissioning costs for nuclear generating stations in financial statements. The Financial Accounting Standards Board (FASB) has agreed to review the accounting for removal costs, including decommissioning (see note 3 of otes to Consolidated Financial Statements). The Company does not expect this review to have a material effect on the Company's financial condition or results of operations.
PECO Energy Company and Subsidiary Companies
Management's Discussion and Analysis of Financial Condition and Results of Operations (CONTI NU EDI Off-System Sales The Company has agreements with other utilities to sell its excess installed generating capacity and/or associated energy.
These agreements are primarily for weekly purchases of energy. The Company expects to sell over $100 million of capacity and/or energy through such agreements in 1995.
Due to rerates, the Company currently has 989 megawatts (MW) *of excess installed generating capacity and expects to have 1,201 MW of excess installed generating capacity by 1997. The Company's future results of operations are depen-dent in part on its ability to successfully market its excess generating capacity and/or associated energy.
In May 1994, the Company entered into a ten-year con-tract to sell capacity and energy to Delmarva as part of the Company's agreement to sell COPCO to Delmarva. Revenue received under this contract is expected to offset the revenue lost as a result of the sale of COPCO. This contract is subject to state and federal regulatory approvals and the sale of COPCO to Delmarva. The Company also finalized an agree-ment to sell 140 MW of capacity and energy to Baltimore Gas and Electric Company for a 25-year term beginning in 1997, subject to state and federal regulatory approval. The Company's bid was one of 28 bids submitted, and the sale is expected to generate approximately $45 million in revenue annually.
Compliance With Environmental Regulations Under federal and state environmental laws, the Company is generally liable for the costs of remediating environmental contamination of property now or formerly owned by the Company or of property contaminated by hazardous sub-stances generated by the Company. The Company owns or leases a substantial number of real estate parcels, including parcels on which its operations or the operations of others may have resulted in contamination by substances which are considered hazardous under environmental laws. The Company is currently involved in a number of proceedings relating to sites where hazardous "-1.bstances have been deposited and may be subject to additional proceedings in the future.
An evaluation of Company sites for potential environ-mental clean-up liability is ongoing, including approximate-ly 20 sites where manufactured gas plant activities may have resulted in site contamination. Past activities at several sites have resulted in actual site contamination. The Company is presently engaged in performing detailed evaluations at cer-tain of these sites to define the nature and extent of the con-tamination, to determine the necessity of remediation and to identify possible remediation alternatives.
As of December 31, 1994 and 1993, the Company had accrued $24 and $17 million, respectively, for environmen-tal investigation and remediation costs that currently can be reasonably estimated. The Company cannot currently pre-dict whether it will incur other significant liabilities for any additional remediation costs at these or additional sites iden-tified by rhe Company, environmental agencies or others.
Regulatory Assets At December 31, 1994, the Company had deferred on its balance sheet certain regulatory assets for which current recovery has not yet been approved by the PUC. These regu-latory assets include $91 million of operating and mainte-nance expenses, depreciation and accrued carrying charges on its investment in Limerick Unit No. 2 and 50% of Limerick common facilities, deferred pursuant to a Declaratory Order of the PUC, and $107 million for the effect on deferred taxes of the change in the statutory federal income tax rate from 34% to 35% in 1993. See notes 2 and 13, respectively, of Notes to Consolidated Financial Statements.
These and other regulatory assets are deferred pursuant to PUC action. Any deferred costs that are nor recovered through base rates would be charged against income imme-diately. The Company has agreed not to seek a retail electric base rate increase before April 1, 1999, except under speci-fied circumstances (see note 2 of Notes to Consolidated Financial Statements).
Other Factors Affecting the Company's Outlook Although 1994 was essentially a weather-neutral year, annual and quarterly operating results can be significantly affected by weather. An extremely hot or cool summer can increase or decrease earnings for a year by as much as $0.20 per share compared to a year which has normal weather.
Inflation affects the Company through increased operat-ing costs and increased capital costs for utility plant. During periods of high inflation, the Company could be adversely affected if it is unable to offset increasing costs with improved productivity. In addition, the replacement costs of the Company's utility plant are significantly higher than the historical costs reflected in the financial statements.
The Company's budgeted capital expenditures through 1997 include all costs of compliance with Phase I of the Clean Air Act of 1990 (Clean Air Act), including its share of the costs of scrubbers being installed at Conemaugh Generating Station. As a result of its prior investments in scrubbers for Eddystone and Cromby Generating Stations and its investment in nuclear generating capacity, the Company believes that compliance with the Clean Air Act will have significantly less impact on the Company than on other Pennsylvania utilities which are more dependent on coal-fired generation.
In 1994, Standard & Poor's (S&P) rating agency revised its rating outlook on the Company from "negative" to "sta-ble." S&P revised the rating as a result of the Company's material cost-cutting initiatives, plans for a more rapid debt reduction, well-controlled construction spending, and prospects for additional sales to other utilities.
For a discussion of other contingencies, see notes 2 and 3 of Notes to Consolidated Financial Statements.
P E CO En er g y C omp a ny a nd Sub al d la ry Comp a ni ea
Report of Independent Accountants To the Shareholders and Board of Directors
- PECO Energy Company:
We have audited the accompanying consolidated balance sheets of PECO Energy Company and Subsidiary 'Companies as of December 31, 1994 and 1993, and the related consoli-dated statements of income, cash flows, and changes in com-mon shareholders' equity and preferred stock for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Companies' management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
, reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of PECO Energy Company and Subsidiary Companies as of December 31, 1994 and 1993, and the con-solidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles.
As discussed in Note 4 of the consolidated financial statements, the Company changed its methods of accounting for non-pension postretireinent employee benefits and income taxes in 1993.
2400 Eleven Penn Center Philadelphia, Pennsylvania January 30, 1995 PECO Energy Company and Subeidiary Companie*
Consolidated Statements of Income (THOUSANDS OF DOLLARS)
FOR THE YEARS ENDED DECEMBER 31,
1994 1993 1992 OPERATING REVENUES Electric
$ 3,624,797
$ 3,605,425
$ 3,597,14 1 Gas 415,835 382,704 365,328 TOTAL OPERATING REVENUES 4,040,632 3,988,129 3,962,469 OPERATING EXPENSES Fuel and Energy Interchange 703,590 659,580 709,115 Other Operating 937,849 851,254 906,346 Early Retirement and Separation Programs 254,106 Maintenance 327,714 364,409 35 3,502 Depreciation 442, 101 4 24,952 4 13,779 Income Taxes 234,033 354,391 264,483 Other Taxes 311,689 298,1 32 281,868 TOTAL OPERATING EXPENSES 3,211,082 2,952,718 2,929,093 OPERATING INCOME 829,550 1,035,411 1,033,3 76 OTHER INCOME AND DEDUCTIONS Allowance for Other Funds Used During Construction 10, 180 11,885 10,461 Settlement of Peach Bottom Litigation (103,078)
Income Taxes (15,291]
(11,808) 40,160 Other, Net 23, 121 11980 3,392 TOTAL OTHER INCOME AND DEDUCTIONS 18,010 12,057 (49,065)
INCOME BEFORE INTEREST CHARGES 847,560 1,047,468 984,311 INTEREST CHARGES Long-Term Debt 387,279 432,707 484,15 3 Dividends on Preferred Securities of Subsidiary 8,570 Shorr-Term Debt 36,987 36,002 31,419 TOTAL INTEREST CHARGES 432,836 468,709 515,572 Allowance for Borrowed Funds Used During Construction (11,989]
(11,889)
(10,202)
NET INTEREST CHARGES 420,847 456,820 505,3 70 Net Income 426,713 590,648 478,941 Preferred Stock Dividends 37,298 49,058 60 73 1 EARNINGS APPLICABLE TO COMMON STOCK 389,415 54 1,590 4 18,210 Average Shares of Common* Stock Outstanding (THOUSANDS!
221,554 221,072 220,245 EARNINGS PER AVERAGE COMMON SHARE (DOLLARS) 1.76 2.45 1.90 DIVIDENDS PER COMMON SHARE (DOLLARS) 1.545 1.43 1.325 See Notes to Consolidated Financial Statements.
PECO Energy Company and Subsidiary Companie*
Consolidated Balance Sheets (THOUSANDS OF DOLLARS)
Assets UTILITY PLANT, AT ORIGINAL COST Electric Gas Common Less Accumulated Provision for Depreciation Nuclear Fuel, Net Construction Work in Progress Leased Property, Net NET UTILITY PLANT CURRENT ASSETS Cash and Temporary Cash Investments Accounts Receivable, Net Customers Other Inventories, at Average Cost Fossil Fuel Materials and Supplies Deferred Income Taxes Other TOTAL CURRENT ASSETS DEFERRED DEBITS AND OTHER ASSETS Recoverable Deferred Income Taxes Deferred Limerick Costs Deferred Non-Pension Poscretirement Benefit Costs Investments Loss on Reacquired Debt Other TOTAL DEFERRED DEBITS AND OTHER ASSETS TOTAL See Notes to Consolidated Financial Statements.
DECEMBER 31, ----'--19_9_4
$13,283,888 895,946 234,769 14,414,603 4,242,576 10, 172,027 184, 161 472,512 174,565 11,003,265 46,970 96,987 49,854 72,732 118,230 12,002 58,069 454,844 2,138,079 413,885 261,912 236,587 320,879 263,308 3,634,650
$15,092,759 PECO Energy Company and Sub*idiary Companie*
1993
$ 13,102,088 843,205 203,747 14,149,040 3,946,805 10,202,235 179,529 381,247 194,702 10,957,713 46,923 122,581 47,768 67,040 142,132 30,185 58,205 514,834 2,297,368 433,605 44,691 218,636 343,004 222,476 3,559,780
$ 15,032,327
Conj olidated Balance Sheets !CONTINUED!
(THOUSANDS OF DOLLARS)
Capitalization and Liabilities CAPITALIZATION Common Shareholders' Equity Common Srock Other Paid-In Capital Retained Earnings Preferred and Preference Stock Without Mandatory Redemption With Mandatory Redemption Minority Interest in Preferred Securities of Subsidiary Long-Term Debt TOTAL CAPITALIZATION CURRENT LIABILITIES Notes Payable, Bank Long-Term Debt Due Within One Year Capital Lease Obligations Due Within One Year Accounts Payable Taxes Accrued Deferred Energy Costs Interest Accrued Dividends PayabJe Other TOTAL CURRENT LIABILITIES DEFERRED CREDITS AND OTHER LIABILITIES Capital Lease Obligations Deferred Income Taxes U namorrized Investment Tax Credits Pension Obligation for Early Retirement Plans Non-Pension Postretirement Benefits Obligation Other TOTAL DEFERRED CREDITS AND OTHER LIABILITIES COMMITMENTS AND CONTINGENCIES [ NOTES 2 AND 3 )
TOTAL See Notes to Consolidated Financial Statements.
DECEMBER 31, ____
1'-'9:..:9...:.4 3,490,728 1,271 810,507 4,302,506 277,472 92,700 221,250 4,785,631 9,679,559 11,499 201,213 60,476 308,832 87,185 15,486 93,159 15,096 85,649 878,595 114,089 3,225,915 374,100 238,250 354,458 227,793 4,534,605
$ 15,092,759 PECO Energ y Company a nd Subsidiary Compan i e
- 1993 3,488,477 1,214 773 727 4,263,418 422,472 186,500 4,884,343 9,756,733 119,350 252,263 60,500 242,239 24,939 48,691 97,540 18,345 90,710 954 577 134,202 3,386,136 386,162 135,286 51,781 2271450 4,321,017
$ 15,032,327
Consolidated Statements of Cash Flows (THOUSANDS OF DOLLARS)
FOR THE YEARS ENDED DECEMBER 31, 1994 1993 1992 CASH FLOWS FROM OPERATING ACTIVITIES Net Income 426,713 590,648
.478,941 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation and Amortization 517,681 507,069 491,186 Deferred Income Taxes
[23,306]
139,846 81,943 Early Retirement and Separation Programs 254,106 Unrecovered Phase-In Plan Revenue 142,267 Deferred Energy Costs
[33,205]
(24,308) 52,959 Amortization of Leased Property 61,900 58,400 54,600 Changes in Working Capital:
Accounts Receivable 23,508 31,102 82,151 Inventories 18,210 11,222 1,395 Accounts Payable 5,342 777 (47,403)
Other Current Assets and Liabilities 52,940 (34,694)
(136,627)
Other Items Affecting Operations
[9,175]
(18,287)
(28,569)
Net Cash Flows Provided by Operating Activities 1,294,714 1,261,775 1,172,843 CASH FLOWS FROM INVESTING ACTIVITIES
- Investment in Plant
[570,903]
(568,076)
(571,829)
Increase in Other Investments
[17,951]
{16,214)
{32,769)
Net Cash Flows Used by Investing Activities
[588,854]
(584,290)
(604,598)
CASH FLOWS FROM FINANCING ACTIVITIES Change in Short-Term Debt
[107,851]
8,850 110,500 Issuance of Common Stock 2,308 29,346 12,465 Issuance of Preferred Stock 142,700 140,000 Retirement of Preferred Stock
[238,800]
(187,330)
(224,462)
Minority Interest in Preferred Securities of Subsidiary 221,250 Issuance of Long-Term Debt 245,100 1,994,765 1,369,540 Retirement of Long-Term Debt
[397,763]
(2,148,963)
(1,504,877)
Loss on Reacquired Debt 22, 125 (69,884) '
(85,380)
Dividends on Preferred and Common Stock
[377,883]
(366,081)
(349,856)
Change in Dividends Payable
[3,249]
(1,114)
(16,607)
Expenses of Issuing Long-Term Debt and Preferred Stock
[9,150]
(24,820)
(11,660)
Capital Lease Payments
[61,900]
(58 400)
{54,600)
Net Cash Flows from Financing Activities
[705,813) 680 931)
{614,93 7)
Increase/(Decrease) in Cash and Cash Equivalents 47 (3,446)
(46,692)
Cash and Cash Equivalents at beginning of.period 46,923 50 369 97 061 Cash and Cash Equivalents at end of period 46,970 46,923 50,369 See Notes to Consolidated Financial Statements.
PECO Energy Company and Subsidiary Companies
C~msolidated Statements of Changes in Common Shareholders' Equity and Preferred Stock Ocher Common Srock Paid-In Retained Preferred Srock (ALL AMOUNTS IN THOUSANDS)
Shares Amount Caeical Earn i n~
Shares Amounc Balance,January 1, 1992 220,030 $ 3,446,666 1,214 $
444,399 7,381 $
738,064 Net Income 478,941 Cash Dividends Declared Preferred Stock (at specified annual rates)
(58,021)
Common St<:>ck ($1.325 per share)
(291,835)
Expenses of Capital Stock Activity (11,660)
Issuance of Stock Long-Term Incentive Plan 504 12,465 Issuances 1,400 140,000 Redemptions (2 245)
(224,462)
Balance, December 31, 1992 220,534 3,459,131 1,214 561,824 6,536 65 3,602 Net Income 590,648 Cash Dividends Declared Preferred Stock (at specified annual rates)
(49,919)
Common Stock ($1.43 per share)
(316,162)
Expenses of Capital Stock Activity (5,625)
Issuance of Stock Long-Term Incentive Plan 983 29,346 (7,039)
Issuances 1,427 142,700 Redemptions
{1,873)
(187,330)
Balance, December 31, 1993 221,517 3,488,477 1,214 773,727 6,090 608,972 Net Income 426,713 Cash Dividends Declared
~ Preferred Stock (at specified annual rates)
[35,706)
Common Stock ($1.545 per share)
[342,177)
Expenses of Capital Stock Activity
[11,662)
Issuance of Stock Long-Term Incentive Plan 92 2,251
[388)
Issuances 57 Redemptions
[2,388)
[238,800)
Balance, December 31, 1994 221,609 $ 3,490,728 1,271 $
810,507 3,702 $
370,172 See Notes to Consolidated Financial Statements.
PECO Energy Company and Subsidiary Companie*
j
Notes to Consolidated Financial Statements
~
- 1. Significant Accounting Policies General The consolidated financial statements of PECO Energy Company (Company) include the accounts of its utility sub-sidiary companies, all of which are wholly owned. Non-utility subsidiaries are not material and are accounted for on the equity method. Accounting policies are in accordance with those prescribed by the regulatory authorities having jurisdiction, principally the Pennsylvania Public Utility Commission (PUC) and the Federal Energy Regulatory Commission (FERC).
Revenues Customers' meters are read and bills are prepared o~ a cycle basis. At the end of each month, the Company accrues an estimate for the unbilled amount of energy delivered to cus-tomers.
Pursuant to a phase-in plan approved by the PUC in its electric base rate order dated April 19, 1990, the Company recorded revenue equal to the full amount of the rate increase approved, based on kilowatthours rendered to cus-tomers. On April 5, 1991, that plan was amended by the PUC as part of the settlement of all appeals arising from the Limerick Generating Station (Limerick) Unit No. 2 rate pro-ceeding to permit recovery of the remaining unrecovered revenue by December 31, 1992 (see note 2). As of December 31, 1994, 1993 and 1992, the Company had no unrecovered phase-in plan revenue.
Fuel and Energy Cost Adjustment Clauses The Company's classes of service are subject to fuel adjust-ment clauses designed to recover or refund the differences between actual costs of fuel, energy interchange, and pur-chased power and gas, and the amounts of such costs includ-ed in base rates. Differences between the amounts billed to customers and the actual costs recoverable are deferred and recovered or refunded in future periods by means of prospec-tive adjustments to rates. Generally, such rates are adjusted every twelve months. In addition to reconciling fuel costs and revenues, the Company's Energy Cost Adjustment (ECA), established by the PUC, incorporates a nuclear per-formance standard which allows for financial bonuses or penalties depending upon whether the Company's system nuclear capacity factor exceeds or falls below a specified range (see note 2).
Nuclear Fuel Nuclear fuel is capitalized and charged to fuel expense on the unit of production method. Estimated costs of nuclear fuel disposal are charged to fuel expense as the related fuel is consumed. The Company's share of nuclear fuel at Peach Bottom Atomic Power Station (Peach Bottom) and Salem Generating Station (Salem) is accounted for as a capital lease. Nuclear fuel at Limerick is owned.
Depreciation and Decommissioning The annual provision for depreciation is provided over the estimated service lives of plant on the straight-line method.
Annual depreciation provisions for financial reporting pur-poses, expressed as a percent of average depreciable utility plant in service, were approximately 2. 77% in 1994 and 2.75% in 1993 and 1992.
The Company's share of the 1990 estimated costs for decommissioning nuclear generating stations currently included in electric base rates is J:>eing charged to operations over the expected service life of the related plant. The amounts recovered from customers are deposited in trust accounts and invested for funding of future costs and credited to accumulated depreciation (see note 3).
Income Taxes In 1993", the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," which requires an asset and liability approach for financial accounting and reporting of income taxes. The effects of the Alternative Minimum Tax (AMT) are normalized. Investment Tax Credit (ITC) is deferred and amortized to income over the estimated useful lives of the related utility plant. ITC related to plant in service, not included in Tate base, is accounted for on the flow-through method (see note 13 ).
Allowance for Funds Used During Construction [AFUDC]
AFUDC is the cost, during the period of construction, of debt and equity funds used to finance construction projects.
AFUDC is recorded as a charge to Construction Work in Progress, and the credits are to Interest Charges for the cost of borrowed funds and to Oth~r Income and Deductions for the remainder as the allowance for other funds. The rates used for capitalizing AFUDC, which averaged 7.74% in 1994, 9.39% in 1993 and 10.61% in 1992, are computed under a method prescribed by the regulatory authorities.
AFUDC is not included in regular taxable income and the depreciation of capitalized AFUDC is not tax deductible.
Nuclear Outage Costs Incremental nuclear maintenance and refueling outage costs are accrued over the unit operating cycle. For each unit, an accrual for incremental nuclear maintenance and refueling outage expense is estimated based upon the latest planned outage schedule and estimated costs for the outage.
Differences between the accrued and actual expense for the outage are recorded when such differences are known.
Capitalized Software Costs Software projects which exceed $5 million are capitalized. At December 31, *1994 and 1993, capitalized software costs totaled $51 million and $5 6 million (net of $1 0 million and
$3 million accumulated amortization), respectively. Such capitalized amounts are amortized ratably over the expected lives of the projects when they become operational, not to exceed ten years.
PECO Energy Company and Subaidiary Companie*
Notes to Consolidated Financial Statements (CONTINUED)
- 1. Significant Accounting Policies (CONTINUED)
Gains and Losses on Reacquired Debt Gains and losses on reacquired debt are deferred and amor-tized t0 interest expense over the stated life of the reacquired debt.
Reclassifications Certain prior-year amounts have been reclassified for com-parative purposes.
- 2. Rate Matters Limerick Unit No. 2 Electric Rate Order As part of the April 19, 1990 PUC order, the PUC approved recovery of $285 million of deferred Limerick costs repre-senting carrying charges and depreciation associated with 50% of Limerick common facilities. These costs are included in base rates and are being recovered over the life of Limerick. The PUC also approved recovery of$137 million of Limerick Unit No. 1 costs which had previously been deferred pursuant tO a Declaratary Order dated September 28, 1984. These costs are being recovered over a ten-year period without a return on investment.
On April 5, 1991, the PUC approved the settlement of all appeals arising from the Limerick Unit No. 2 rate order.
Under the terms of the settlement, the Company is allowed t0 retain for shareholders any proceeds above the average energy cost for sales of up tO 399 megawatts (MW) of capaci-ty and/or associated energy, since the PUC had ruled that the Company had 399 MW of near-term excess capacity in the Limerick Unit No. 2 rate order. Under the settlement, the Company began on April 1, 1994 tO share in the bene-fits which result from the operation of both Limerick Unit No. 1 and Unit
- o. 2 through the retention of 16.5% of the energy savings. Through 1994, the Company's potential benefit from the sale of up t0 399 MW of capacity and/or associated energy and the retained Limerick energy savings was limited tO $106 million per year, with any excess accru-ing t0 cusromers. Beginning in 1995, in addition tO retaining the first $106 million, the Company will share in any excess above $106 million with the Company's share of the excess being 10% in 1995, 20% in 1996 and 30% in 1997. and thereafter. During 1994, 1993 and 1992, the Company recorded as revenue net of fuel costs $68, $38 and $34 mil-lion, respectively, as a result of the sale of the 399 MW of capacity and/or associated energy and the Company's share of Limerick Unit No. 1 and Unit No. 2 energy savings.
Single-Issue Electric Base Rate Increase Under a Joint Petition dated Ocrober 3, 1994, the Company has been permitted t0 increase electric base rates by $25 mil-lion per year, effective January 1, 1995, t0 recover the increased costs associated with the implementation of SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." See notes 4 and 6. The Joint Petition also provides that the Company will not file for an increase in retail electric service rates before April 1, 1999, except under specified circumstances for items such as energy cost adjustments, changes in state taxes, changes in federal taxes, demand side management surcharges, and increases in nuclear plant decommissioning expense or funding require-ments and spent nuclear fuel disposal expenses. The retail electric SFAS No. 106 operating expense, including the annual amortization of the transition obligation (over 18 years) deferred in 1993 and 1994, will be included in the new rates. Subsequent tO January 1, 1995, and prior tO the Company's next* base rate case, no portion of retail electric SFAS No. 106 operating expense in excess of the amount allowed t0 be recovered under the Joint Petition will be deferred for future rate recovery. Also, beginning January 1, 1995, the Company will be required tO deposit in trust accounts funds equivalent t0 all of its retail electric SFAS No.
106 costs. These costs include amounts charged t0 operating expense and capitalized on and after January 1, 1995.
In accordance with the Joint Petition, any of the parties tO the Joint Petition may elect tO void the settlement in the event current rate recovery of SFAS No. 106 expense is ultimately disallowed through the Office of Consumer Advocate's appeal t0 the Supreme Court of Pennsylvania of cases involving other Pennsylvania utilities. In such event, the Company would refund t0 cusromers, with interest, any increased base rate amounts collected.
Gas Accounting Settlement On December 15, 1994, the PUC approved the Company's petition for an accounting order associated with gas utility operations permitting recognition of 2.8 million of SFAS No. 106 costs annually and recognition of $1.5 million of environmental costs annually for the remediation of sites of former manufactured gas plant facilities using a cost of removal methodology, in exchange for a reduction in depre-ciation rates to reflect the results of a current life study. The Company will deposit in trust accounts funds equivalent tO its retaii gas SFAS No. 106 costs beginning January 1, 1995.
This settlement will not result in any increase in rates tO cus-romers. See notes 3 and 6.
Limerick Unit No. 2 Declaratory Order Pursuant t0 a Declararory Order of the PUC, the Company deferred the operating and maintenance expenses, deprecia-tion and accrued carrying charges on its capital investment in Limerick Unit No. 2 and 50% of Limerick common facil-ities during the period from January 8, 1990, the commer-cial operation date of Limerick Unit No. 2, until April 20, 1990, the effective date of the Limerick Unit No. 2 rate order. At December 31, 1994 and 1993, such costs included in Deferred Limerick Costs tataled $91 million. Recovery of such costs deferred pursuant tO the Declaratary Order will be addressed by the PUC in a subsequent electric base rate case, although such recovery is not assured. Any amounts not recovered would be charged against income.
PECO Energy Company and Subsidiary Companies
Notes to Consolidated Financial Statements !CONTINUED!
- 2. Rate Matters !CONTINUED)
Energy Cost Adjustment The Company is subject to a PUC-established electric ECA which, in addition to reconciling fuel costs and revenues, incorporates a nuclear performance standard which allows for financial bonuses or penalties depending on whether the Company's system nuclear capacity factor exceeds or falls below a specified range. The bonuses or penalties are based upon average system replacement energy costs. If the capaci-ty factor is within the range of 60-70%, there is no bonus or penalty. If the capacity factor exceeds the specified range, progressive incremental bonuses are earned and, if the capacity factor falls below.the specified range, progressive incremental penalties are incurred.
For the years ended December 31, 1994, 1993 and 1992, the Company's system nuclear capacity factors were 82%, 78% and 71 %, respectively. This entitled the Company to bonuses reflected in 1994, 1993 and 1992 income of 14,
$10 and $1 million, respectively.
3. Commitments and Contingencies Construction Expenditures Construction expenditures are estimated to be $495 million for 1995 and $1.4 billion for 1996-1998. For 1995-1998, the Company expects that all of its capital needs will be provided through internally generated funds. Construction expenditure estimates are reviewed and revised periodically to reflect changes in economic conditions, revised load foi:ecasts and other appropriate factors. Certain facilities under construction and to be constructed may require permits and licenses which the Company has no assurance will be granted.
The Company's operations have in the past and may in the future require substantial capital expenditures in order to comply with environmental laws.
Nuclear Insurance The Price-Anderson Act, as amended (Price-Anderson Act),
sets the limit of liability of approximately $8.9 billion for.
claims that could arise from an incident involving any licensed nuclear facility in the nation. The limit is subject to increase to reflect the effects of inflation and changes in the number of licensed reactors. All utilities with nuclear gener-ating units, including the Company, have obtained coverage for these potential claims through a combination of private insurances of $200 million and mandatory participation in a financial protection pool. Under the Price-Anderson Act, all nuclear reactor licensees can be assessed up to $76 million per reactor per incident, payable at $10 million per reactor per incident per year. This assessment is subject to inflation, state premium taxes and an additional surcharge of 5% if the total amount of claims and legal costs exceeds the basic assessment.
If the damages from an incident at a licensed nuclear facility exceed $8.9 billion, the President of the United States is to submit to Congress a plan for providing additional compensation to the injured parties. Congress could impose further revenue-raising measures on the nuclear industry to pay claims. The Price-Anderson Act and the extensive regu-lation of nuclear safety by the Nuclear Regulatory Commission (NRC) do not preempt claims under state law for personal, property or punitive damages related to radia-tion hazards.
Although the NRC requires the maintenance of proper-ty insurance on nuclear power plants in the amount of $1.06 billion or the amount available from private sources, whichever is less, the Company maintains coverage in the amount of its $2.75 billion proportionate share for each sta-tion. The Company's insurance policies provide coverage for decontamination liability expense, premature decommis-sioning and loss or damage to its nuclear facilities. These policies require that, following an accident, insurance pro-ceeds first be applied to assure that the facility is in a safe and stable condition and can be maintained in such condi-tion. Within 30 days of stabilizing the reactor, the licensee
.must submit a report to the NRC which provides a clean-up plan, including the identification of all clean-up operations necessary to decontaminate the reactor to either permit the resumption of operations or decommissioning of the facility.
Under the Company's insurance policies, insurance proceeds not already expended to place the reactor in a stable condi-tion must be used to decontaminate the facility. If the deci-sion is made to decommission the facility, a portion of the insurance proceeds will be allocated to a fund* which the Company is required by the NRC to maintain to provide for decommissioning the facility. These proceeds would be paid to the fund to make up any difference between the amount of money in the fund at the time of the early decommission-ing and the amount that would be in the fund if contribu-tions had been made over the normal life of the facility. The Company is unable to predict what effect these requirements may have on the amount and the availability of insurance proceeds for the benefit of the Company's bondholders under the Company's mortgage. Under the terms of the vari-ous property insurance agreements, the Company could be assessed up to $44 million for losses incurred at any plant insured by the insurance companies. The Company is self-insured to the extent that any losses may exceed the amount of insurance maintained. Any such losses, if not recovered through the ratemaking process, could have a material adverse effect on the Company's financial condition or results of operations.
The Company is a member of an industry mutual insurance company which provides replacement power cost insurance in the event of a major accidental outage at a nuclear station. The premium for this coverage is subject to assessment for adverse loss experience. The Company's max-imum share of any assessment is $14 million per year.
PECO Energy Company and Subaidiary Companie*
Nolf* to Consolidated Financial Statements (CONTINUED)
- 3. Commitments and Contingencies (CONTINUED!
Nuclear Decommissioning and Spent Fuel Storage In conjunction with the PUCs April 19, 1990 electric base rate order, the PUC recognized a revised decommissioning cost estimate based upon total cost. The Company's share of this revised cost is $643 million expressed in 1990 dollars.
Under current rates, the Company collects approximately
$20 million annually from customers for decommissioning the Company's nuclear units. The Company had recovered
$174 million as of December 31, 1994, from customers which has been deposited in trust accounts for funding future decommissioning costs. The most recent estimate of the Company's share of the cost to decommission its _nuclear units is approximately $900 million in 1994 dollars. Any increase in the 1990 decommissioning cost estimate being recovered in base rates is to be recoverable in the Company's next base rate case. As a result, the Company expects to receive recovery of a higher level of decommissioning expense in its next base rate proceeding.
The staff of the Securities and Exchange Commission has questioned the electric utility industry accounting prac-tices regarding the recognition, measurement and classifica-tion of decommissioning costs for nuclear generating stations in financial statements. The Financial Accounting Standards Board has agreed to review the accounting for removal costs including decommissioning. If current electric utility industry accounting practices for decommissioning are changed, annual provisions for decommissioning could increase, the estimated cost for decommissioning could be recorded as a liability rather than as accumulated deprecia-tion, and trust fund income from external decommissioning trusts could be reported as investment income rather than as a reduction to decommissioning expense. The Company does not expect this review to have a material effect on the Company's financial condition or results of operations.
Effective January 1, 1994, the Company began recogniz-ing in the financial statements unrealized gains using the average cost method as part of the value of the decommis-sioning trust accounts and as a deferred liability (see note 4).
Under the Nuclear Waste Policy Act. of 1982 (NWPA),
the U.S. Department of Energy (DOE) is required to take possession of all spent nuclear fuel generated by the Company's nuclear units for long-term storage by no later than 1998. Under the NWPA, the DOE is authorized to assess utilities for the cost of nuclear fuel disposal. The cur-rent cost of such disposal is one mill ($.001) per kilo-watthour of net nuclear generation. The fee may be adjusted prospectively in order to ensure full cost recovery.
The DOE has stated that it is under no legal obligation to begin accepting spent fuel absent an operational reposito-ry or other facility constructed under the NWPA. The DOE acknowledges, however, that it may have created the expec-tation of such a commitment on the part of utilities by issu-ing certain regulations and projected waste acceptance schedules. The DOE has stated that it will not be able to open a permanent, high-level nuclear waste storage facility until 2010, at the earliest. The DOE stated that the delay was a result of its seeking new data about the suitability of the proposed repository site at Yucca Mountain, Nevada, opposition to this location for the repository and the DOE's revision of its civilian nuclear waste program. The DOE stat-ed that it would seek legislation from Congress for the con-struction of a temporary storage facility which would accept spent nuclear fuel from utilities in 1998 or soon thereafter.
Although progress is being made at Yucca Mountain and several communities have expressed interest in providing a temporary storage site, the Company cannot predict when the temporary storage facilities or permanent repository will become available. The DOE is exploring options to address delays in the currently projected waste acceptance schedules.
The op~ions under consideration by the DOE include offset-ting a portion of the financial burden associated with the costs of continued on-site storage of spent fuel after 1998 and the issuance by the DOE to utilities of multi-purpose canisters for on-sit'e storage.
Peach Bottom and Limerick have on-site storage facili-ties with the capacity to store spent fuel discharged from the units through the late 1990's and, by further modifying spent fuel storage facilities, capacity could be provided until approximately 2010. Salem has spent fuel storage capacity through 1998 for Unit No. 1 and 2002 for Unit No. 2.
Public Service Electric and Gas (PSE&G) is implementing a plan to extend the fuel storage capacity of Salem Unit No. 1 to 2008 and Unit No. 2 to 2012.
The National Energy Policy Act of 1992 (Energy Act) provides, among other things, that utilities with nuclear reactors must pay for the decommissioning and decontami-nation of the DOE nuclear fuel enrichment facilities. The total costs are estimated to be $15 0 million per year for 15 years, of which t.he Company's share is estimated at $5 mil-lion per year. The Energy Act provides that these cost.s are to be recoverable in the same manner as other fuel costs. The Company has recorded the liability and a related regulatory asset, which at December 31, 1994 and 1993 was $59 and
$69 million, respectively.
The Company is currently recovering in rates costs for nuclear decommissioning and decontamination and spent fuel storage. The Company believes that the ultimate costs of decommissioning and decontamination, spent fuel disposal and any assessment under the Energy Act will contiriue to be recoverable through rates, although such recovery is not assured.
Environmental Issues Under federal and state environmental laws, the Company is generally liable for the costs of remediating environmental contamination of property now or formerly owned by the Company or of property contaminated by hazardous sub-stances generated by the Company. The Company owns or PECO E n e rg y Comp a ny a nd Sub si d ia r y Comp a n ies
Notes to Consolidated Financial Statements (CONTINUED)
- 3. Commitments and Contingencies (CONTINUED) leases a substantial number of real estate parcels, including parcels on which its operations or the operations of others may have resulted in contamination by substances which are considered hazardous under environmental laws. The Company is currently involved in a number of proceedings relating to sites where hazardous substances have been deposited and may be subject to additional proceedings in the future. An evaluation of Company sites for potential environmental clean-up liability is in progress, including approximately 20 sites where manufactured gas plant activi-ties may have resulted in site contamination. Past activities at several sites have resulted in actual site contamination.
The Company is presently engaged in performing detailed evaluations of these sites to define the nature and extent of the contamination, to determine the necessity of remediation and to identify possible remediation alternatives. As of December 31, 1994 and 1993, the Company had accrued
$24 and $17 million, respectively, for environmental investi-gation and remediation costs that currently can be reason-ably estimated. On December 15, 1994, the PUC approved the recognition of $1.5 million of environmental costs annu-ally for the remediation of sites of former manufactured gas plant facilities (see note 2). The Company cannot currently predict whether it will incur other significant liabilities for additional investigation and remediation costs at these or additional sites identified by the Company, environmental agencies or others, or whether all such costs will be recover-able through rates or from third parties.
Other Litigation
. On April 11, 1991, 33 former employees of the Company filed an amended class action suit against the Company in the United States District Court for the Eastern District of Pennsylvania (Eastern District Court) on behalf of approxi-mately 141 persons who retired from the Company between January and April 1990. The lawsuit, filed under the Employee Retirement Income Security Act (ERISA), alleges that the Company fraudulently and/or negligently misrepre-sented or concealed facts concerning the Company's 1990 Early Retirement Plan and thus induced the plaintiffs to" retire or not to defer retirement immediately before the initia-tion of the 1990 Early Retirement Plan, thereby depriving the plaintiffs of substantial pension and salary benefits. In June 1991, the plaintiffs filed amended complaints adding additional plaintiffs. The lawsuit names the Company, the Company's Service Annuity Plan (SAP) and two Company officers as defendants. The plaintiffs seek approximately $20 million in damages representing, among other things, increased pension benefits and nine months salary pursuant to the terms of the 1990 Early Retirement Plan, as well as punitive damages. On March 24 and 25, 1994, the case was tried in Eastern District Court on the issue of liability. On May 13, 1994, the Eastern District Court issued a decision, finding the Company liable to all plaintiffs who made inquiries about any early retirement plan after March 12, 1990 and retired prior to April 1990. The Eastern District Court will try the case on the issue of damages. The ultimate outcome of this matter is not expected to have a material adverse effect on the Company's financial condition.
On May 2, 1991, 3 7 former employees of the Company filed an amended class action suit against the Company, the SAP and three former Company officers in the Eastern District Court, on behalf of 147 former employees who retired from the Company between January and June 1987.
The lawsuit was filed under ERISA and concerns the August 1, 1987 amendment to the SAP The plaintiffs claim that the Company concealed or misrepresented the fact that the amendment to the SAP was planned to increase retirement benefits and, as a consequence, they retired prior to the amendment to the SAP and were deprived of significant retirement benefits. The complaint does not specify any dol-lar amount of damages. On March 24 and 25, 1994, the case was tried in Eastern District Court on the issue of liability.
On May 13, 1994, the Eastern District Court issued a deci-sion, finding the Company liable to all plaintiffs who made inquiries about any pension improvement after March 1,
- 1987 and retired prior to June 1987. The Eastern District Court will try the case on the issue of damages. The ultimate outcome of this matter is not expected to have a material adverse effect on the Company's financial condition.
On May 25, 1993, the Company received a letter from attorneys on behalf of a shareholder demanding that the Company's Board of Directors commence legal action against certain Company officers and directors with respect to the Company's credit and collections practices. The basis of the demand is the findings and conclusions contained in the Credit and Collection section of the May 1991 PUC Management Audit Report prepared by Ernst & Young. At its June 28, 1993 meeting, the Board of Directors appointed a special committee of directors to consider whether such legal action is in the best interests of the Company and its share-holders. On March 14, 1994, upon the recommendation of the Special Committee, the Board of Directors approved a res-olution refusing the shareholder demand set forth in the May 25, 1993 demand letter, and authorizing and directing offi-cers of the Company to take all steps necessary to terminate the derivative suit discussed below.
On July 26, 1993, attorneys on behalf of two sharehold-ers filed a shareholder derivative action in the Court of Common Pleas of Philadelphia County against several of the Company's present and former officers alleging mismanage-ment, waste of corporate assets and breach of fiduciary duty in connection with the Company's credit and collections practices. A similar suit by the same plaintiffs previously had been withdrawn while on appeal after dismissal *by the court for failure to first serve a demand on the Company's Board of Directors. This action is also based on the findings and con-clusions contained in the Credit and Collections section of rhe May 1991 PUC Management Audit Report_ prepared by PECO Energy Company and Subeldiary Companlea
Notes to Consolidated Financial Statements (CONTINUED)
~
- 3. Commitments and Contingencies (CONTINUED)
Ernst & Young. The plaintiffs seek, among other things, an unspecified amount of damages and the awarding ro the plaintiffs of the costs and cjisbursements of the action, includ-ing attorneys' fees. On April 12, 1994, the Company filed a motion for summary judgment seeking termination of the action pursuant to the Board of Directors' resolution of March 14, 1994. Any monetary damages which may be recovered, net of expense~, would be paid to the Company because the lawsuit is brought derivatively by shareholders on behalf of the Company.
The Company is involved in various other litigation matters, the ultimate outcomes of which, while uncertain, are not expected to have a material adverse effect on the Company's financial condition or results of operations.
- 4. Changes in Accounting Effective January 1, 1994, the Company adopted SFAS No.
112, "Employers' Accounting for Postemployment Benefits,"
which requires current recognition of the expected costs of the obligation to provide benefits to former or inactive employees during the period after active employment but before ret-irement. For 1993 and prior, the Company recog-nized these costs on a pay-as-you-go basis. The Company is currently recovering in base rates the pay-as-you-go costs.
The Company's transition obligation under SFAS No. 112 was $10.9 million, which represents the previously unrecog-nized accumulated postemployment benefits obligation. The Company's increased SFAS No. 112 costs for 1994 were $1.4 million. The Company expects to recover all increased expenses resulting from the adoption of SFAS No. 112, and accordingly, has deferred all such expenses.
- 5. Retirement Benefits Effective January 1, 1994, the Company adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which requires the fair value of invest-ments in certain debt and equity securities be recorded in the financial statements. The amounts which the Company recovers from customers for the Company's share of the esti-mated costs for decommissioning its nuclear generating sta-tions are deposited in trust accounts and invested for fund-ing of future costs. As of December 31, 1994, the Company recognized $1 million of unrealized gains using the average cost method, which are recorded as a deferred liability (see note 3). The Company had no other such investments as of December 31, 1994.
Effective January 1, 1993, the Company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," which requires the recognition of the expected costs of the benefits during the years employees
- render service", but not later than the date eligible for retir.e-ment using the prescribed accrual method. For 1992 and prior, the Company recognized these costs on a pay-as-you-go basis. For 1994 and prior, the Company recovered in base rates the pay-as-you-go costs. Adoption of SFAS No. 106 resulted in a transition obligation of $505 million, which is being amortized on a straight-line basis over 20 years.
Adoption of SFAS No. 106 had no impact on the Company's results of operations as the Company deferred these increased costs pending rate treatment (see notes 2 and 6).
Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes," which requires an asset and liability approach for financial accounting and reporting for income taxes utilizing the cumulative method of adoption. As a result, the Company recognized a charge of
$3 million during 1993. The Company has also recorded an additional accumulated deferred income tax liability along with a corresponding recoverable deferred income tax asset of 2.1 and $2.3 billion at December 31, 1994 and 1993, respectively (see note 13 ).
The Company and its subsidiaries have a non-contributory trusteed retirement plan applicable to all regular employees. The benefits are based primarily upon employees' years of service and average earnings prior to retirement. The Company's fund-ing policy is to contribute, at a minimum, amounts sufficient to meet ERISA requirements. Approximately 85 %, 71 % and 78% of pension costs were charged to operations in 1994, 1993 and 1992, respectively, and the remainder, associated with construction labor, to the cost of new utility plant.
(THOUSANDS OF DOLLARS)
Pension costs for 1994, 1993 and 1992 included the following components:
Service cost -
benefits earned during the period Interest cost on projected benefit obligations Actual return on plan assets Amortization of transition asset Amortization and deferral Net pension cost 1994 33,403 136,690 12,946 (4,538)
[161,955) 16,546 PECO Energy Company and Subaidlary Companie*
1993 1992 33,673 30,191 134,658 129,000 (226,240)
(122,869)
(4,538)
(4,539) 87 73 3 (5,741) 25,286 2_.
6,_04_2
Notes to Consolidated Financial Statements !CONTINUED)
- 5. Retir~ment Benefits (CONTINUED)
The changes in net periodic pension costs in 1994, 199 3 and 199 2 were as follows:
(THOUSANDS OF DOLLARS) 1994 1993 1992 Change in number, characteristics and salary levels of participants and net actuarial gain
[6,004]
(756) $
(840)
Change in plan provisions
[1,777]
Change in actuarial assumptions
[959]
4 542 Net change
[8,740]
(756) $
3,702 Plan assets consist principally of common stock, U.S. government obligations and other fixed income instruments. In determining pension costs, the assumed long-term rate of return on assets was 9.50% for 1994, 1993 and 1992.
The weighted-average discount rate used in determining the actuarial present value of the projected benefit obligation was 8.25% at December 31, 1994, 7% at December 31, 1993, and 7.75% at December 31, 1992. The average rate of increase in future compensation levels ranged from 4.25% to 6.25% at December 31, 1994, from 4% to 6% at December 31, 1993, and from 4.5% to 6.5% at December 31, 1992.
Prior service cost is amortized on a straight-line basis over the average remaining service period of employees expected to receive benefits under the plan. The funded status of the plan at December 31, 1994 and 1993 is summarized as follows:
(THOUSANDS OF DOLLARS)
Actuarial present value of accumulated plan benefit obligations:
Vested benefit obligations Accumulated benefit obligation Projected benefit obligation for services rendered to date Plan assets at fair value Funded status Unrecognized transition asset Unrecognized prior service costs Unrecognized net gain Pension liability
- 6. Non-Pension Retirement Benefits The Company provides certain health care and life insur-ance benefits for retired employees. Company employees will become eligible for these benefits if they retire from the Company with ten years of service. These benefits and simi-lar benefits for active employees are provided by an insur-ance company whose premiums are based upon the benefits paid during the year. Prior to 1993, the Company recognized the cost of providing these benefits by charging the annual insurance premiums to expense.
The transition obligation resulting from the adoption of SFAS No. 106 was $505 million atJanuary 1, 1993, which represents the previously unrecognized accumulated non-pension postretirement benefit obligation. The transition obligation is being amortized on a straight-line basis over an allowed 20-year period. As a result of the Voluntary Retirement Incentive Program (VRIP) and the Voluntary Separation Incentive Program (VSIP), the Company acceler-ated recognition of $180 million of non-pension postretire-ment benefits obligation (see note 22). The annual non-pen-sion postretirement benefits costs (including amortization of 1994 1993
$ [1,505,552]
$ (1,482,868)
[1,632,666]
(1,600, 7 68)
[1,814,209]
(1,972,332) 1,741,271 1,844,281
[72,938]
(128,051)
[49,327]
(53,865) 73,338 95,728
[230,105]
(77 245)
[279,032) $
(163,433) the transition obligation) is $81 million. The Company's comparable pay-as-you-go costs for these benefits, which were recovered in base rates, were $32 million in 1994.
Effective January 1, 1995, the Company will be permitted by the PUC co recover SFAS No. 106 costs associated with the Company's retail electric and gas operations (see note 2).
The transition obligation was determined by application of the terms of medical, dental and life insurance plans, including the effects of established maximums on covered costs, together with relevant actuarial assumptions and health care cost trend rates, which are projected to range from 10% in 1995 to 5% in 2002. The effect of a 1% annual increase in these assumed cost trend rates would increase the accumulated postretirement benefit obligation by $56 mil-lion and the annual service and interest costs by $7 million.
Total costs for all plans amounted to $81, $8 3 and $1 7 mil-lion in 1994, 1993 and 1992, respectively, for 6,000 retirees during 1994, 1993 and 1992 and for 3,539 aaive employees during 1994. The cost was higher in 1994 and 1993 than in 1992 primarily due to the adoption ofSFAS No. 106.
PECO Energy Company and Subaidiary Companie*
l -
Notes to Consolidated Financial Statements (CONTINUED)
- 6. Non-Pension Retirement Benefits (CONTINUED)
The net periodic benefits costs for 1994 and 1993 included the following components:
(THOUSANDS OF DOLLARS) 1994 1993 Service cost - benefits earned during the period 17,056 15,615 Interest cost on projected benefit obligations 41, 196 41,708 Amortization of the transition obligation 22,659 25,251 Actual return on plan assets Amortization and deferral Net periodic postretirement benefits costs 80,911 82,574 The funded status of the plan at December 31, 1994 and 1993 is summarized as follows:
!THOUSANDS OF DOLLARS) 1994 1993 Accumulated postretirement benefit obligation:
Retirees 566,128 476,059 Fully eligible active plan participants 7,895 39,367 Other active plan participants
'16,006 79808 Total 590,029 595,234 Plan assets at fair value
[1,200)
Accumulated postretirement benefit obligation in excess of plan assets 588,829 595,234 Unrecognized transition obligation
[267,871)
(479,778)
Unrecognized net gain 33,500
{63,675)
Accrued postretirement benefits cost recognized on the balance sheet 354,458 511781 Measurement of the accumulated postretirement benefits obligation was based on an 8.5 % and 7.25% assumed discount rate as of December 31, 1994 and 1993, respectively.
- 7. Accounts Receivable Accounts receivable at December 31, 1994 and 1993 included unbilled operating revenues of $100 and $115 mil-lion, respectively. Accounts receivable at December 31, 1994 and 1993 were net of an allowance for uncollectible accounts of$17 and $15 million, respectively.
The Company is party to an agreement with a financial institution whereby it can sell on a daily basis and with lim-ited recourse an undivided interest in up to $325 million of designated accounts receivable until January 24, 1996. At
- 8. Common Stock At December 31, 1994 and 1993, common stock without par value consisted of 500,000,000 shares authorized and 221,608,984 and 221,517,099 shares outstanding, respec-tively. At December 31, 1994, there were 4,800,000 shares reserved for issuance* under stock purchase plans.
The Company maintains a Long-Term Incentive Plan (LTIP) for certain full-time salaried employees of the December 31, 1994 and 1993, the Company had sold a
$325 million interest in accounts receivable under this agreement. The Company retains the servicing responsibility for these receivables.
By terms of this agreement, under certain circumstances, a portion of deferred Limerick costs may be included in the pool of eligible receivables. At December 31, 1994, $3 7 mil-lion of d,eferred Limerick costs were included in the pool of eligible receivables.
Company. The types of long-term incentive awards which may be granted under the LTIP are non-qualified options to purchase shares of the Company's common stock, dividend equivalents and shares of restricted common stock. Pursuant to the LTIP, 2,651,397 shares of stock were authorized for issuance upon exercise of options at December 31, 1994.
PECO En er gy Comp a n y a nd Sub si d i a ry Compani es
Notes to Consolidated Financial Statements (CONTINUED)
- 8. Common Stock (CONTINUED)
The following table summarizes option activity during 1994, 1993 and 1992:
1994 1993 1992 Balance atJanuary 1 1,961,882 2,445,833 1,656,244 Options granted 909,000 533,800 1,380,000 Options exercised
[90,885]
(981,551)
(504,411)
Options cancelled
[128,600]
{36,200)
{86,000)
Balance at December 31 2,651,397 1!961!882 2!445!833 Exercisable at December 31 1,865,397 12447z282 lzl62z833 Options were exercised at average option prices of$22.91 per share, $22.66 per share and $24.73 per share in 1994, 1993 and 1992, respectively. The average exercise prices of shares under option were $26.73 per share, $25.12 per share and $23.18 per share at December 31, 1994, 1993 and 1992, respectively.
- 9. Preferred and Preference Stock At December 31, 1994 and 1993, Series Preference Stock consisted of 100,000,000 shares authorized, of which no shares were outstanding. At December 31, 1994 and 1993, cumulative Preferred Stock, no par value, consisted of 15,000,000 shares authorized.
Series (without mandatory redemption)
$7.85
$7.80
$7.75
$4.68 4.40
$4.30
$3.80
$7.96(b)
$7.48 Series (with mandatory redemption) (e)
$9.875
$7.325
$7.00
$6.12 Total Preferred Stock Current Redemption Price (a) 104.00 112.50 102.00 106.00 (c)
(cl)
(f)
(a) Redeemable, at the option of the Company, at the indi-cated dollar amounts per share, plus accrued dividends.
(b) Ownership of this series of preferred stock is evidenced by depositary receipts, each representing one-fourth of a share of preferred stock.
(c) None of the shares of this series are subject to redemp-tion prior to October 1, 199 7.
Shares Amount Outstanding (Thousands of Dollars) 1994 1993 1994 1993 500,000 50,000 750,000 75,000 200,000 20,000 150,000 150,000 15,000 15,000 274,720 274,720 27,472 27,472 150,000 150,000 15,000 15,000 300,000 300,000 30,000 30,000 1,400,000 1,400,000 140,000 140,000 500,000 500 000 50,000 50,000 2,774,720 4 224 720 277,472 422,472 390,000 39,000 300,000 30,000 248,000 24,800 927,000 927,000 92,700 92,700 927,000 1,865,000 92,700 186,500 3,701,720 6p89z720
$ 370,, 72 608!972 (cl) None of the shares of this series are subject to redemp-tion prior to April 1, 2003.
(e) There are no annual sinking fund requirements in the period 1995-1998. Annual sinking fund requirements in 1999 are $18,540,000.
(f) None of the shares of this series are subject to redemp-tion prior to August 1, 1999.
PECO Energy Company ftnd Subaldiary Compan ie*
Notes to Consolidated Financial Statements (CONTINUED)
~
1 0. Monthly Income Preferred Securities of Subsidiary On July 27, 1994, PECO Energy Capital, LP, a Delaware limit-ed partnership of which a wholly owned subsidiary of the Company is the sole general partner, issued 8.85 million of9%
Cumulative Monthly Income Preferred Securities, Series A, rep-
- 11. Long-Term Debt (THOUSANDS OF DOLLARS)
First and Refunding Mortgage Bonds (a) resenting limited partnership interests with a stated liquidation value of$25, totaling $221 million, all of which were outstand-ing as of December 31, 1994.
AT DECEMBER 31, Series Due 1994 1993 4 1/2% - 13.05%
1994 170,000 6 1/8%
1997 $
75,000 75,000 5 3/8%
1998 225,000 225,000 7 1/2% - 9 1/4%
1999 325,000 325,000 5 518% - 10%
2000-2004 1,310,069 1,310,069 6 3/8% - 10 1/4%
2005-2009 127,813 131,875 (b) 2010-2014 154,200 167,540 8 718% - 11%
2015-2019 145,281 227,841 6 518% - 10 112%
2020-2024 1,665,280 1665 280 Total First and Refunding Mortgage Bonds Notes Payable -
Banks Revolving Credit and Term Loan Agreements Pollution Control Notes Debentures Medium-Term Notes Sinking Fund Debentures -
PECO Energy Power Company, a Subsidiary Unamortized Debt Discount and Premium, Net Total Long-Term Debt Due Within One Year (g)
Long-Term Debt included in Capitalization (h)
(a) Utility Plant is subject to the lien of the Company's mortgage.
(b) Floating rates, which were an average annual interest rate of 3. 7% at December 31, 1994.
(c) The Company has entered into interest rate swap agree-ments to fix the effective interest rates on these notes. At December 31, 1994 and 1993, the Company had two interest rate swap agreements outstanding with commer-cial banks, for a total notional principal amount of$167 million, respectively. These agreements are subject to performance by the commercial banks, which are coun-terparties to the interest rate swaps. The Company does not anticipate nonperformance by the counterparties.
The annual interest rate for these notes, giving effect to the interest rate swaps, was 10.5 1 % at December 31, 1994.
(d) On October 3, 1994, borrowings by the Company under its $5 25 million revolving credit and term loan agree-ment with a group of banks converted to a term loan.
The term loan is due in six semi-annual installments commencing April 3, 1995. Interest on outstanding bor-rowings is based on specific formulas selected by the Company involving yields on several types of debt 4,027,643 4,297,605 (c) 1994-1996 167,000 167,000 (d) 1995-1998 525,000 425,000 (e) 1997-2025 161,465 65,565 10.05%
1994-2011 62,000 (f) 1994-2005 134,200 150,000 4 1/2%
1995 9,750 10,550 (38,214)
{41,114) 4,986,844 5,136,606 201,213 252,263
$ 4,785,631
$ 4,884,343 instruments. The average annual interest rate for this revolving credit agreement was 6.5% at December 31, 1994. The Company also has a $150 million revolving credit and term loan agreement with a group of banks.
The revolving credit agreement converts into a term loan in July 1996 and the commitment terminates in 1998. There is an annual commitment fee of 0.2% on the unused amount. At December 31, 1994 and 1993, no amounts were outstanding under this agreement.
(e) Floating rates, which were an average annual interest rate of 4.9% at December 31, 1994.
(f) Medium-term notes collateralized by mortgage bonds.
The average annual interest rate was 8.2% at December 31, 1994.
(g) Long-term debt maturities, including mandatory sink-ing fund requirements, in the period 1996-1999 are as follows: 1996 - $393,463,000; 1997 - $266,063,000; 1998 - $241,463,000; 1999 - $359,063,000.
(h) The annualized interest on long-term debt at December 31, 1994, was $362 million, of which $303 million was associated with mortgage bonds and $59 million was associated with other long-term debt.
PECO Energy Company and Subsidiary Companies
Notes to Consolidated Financial Statements !CONTINUED) 1 2. Short-Term Debt (THOUSANDS OF DOLLARS) 1994 1993 1992 Average Borrowings 130,539 $
113,193 $
50,161 Average. Interest Rates, computed on daily basis 4.03%
3.35%
3.72%
Maximum Borrowings Outstanding 418,600 $
368,400 $
255,500 Average Interest Rates at December 31 6.73%
3.45%
3.72%
The Company has a $150 million commercial paper program and at December 31, 1994, there was no commercial paper outstanding. At December 31, 1994, the Company had formal and informal lines of credit with banks aggregating $351 million against which $11 million of short-term debt was outstanding. The Company has compensating balance arrange-ments for $158 million of these formal and informal lines of credit. During 1994, the Company was required to maintain a 5% average compensating balance for these credit lines.
1 3. Income Taxes (THOUSANDS OF DOLLARS)
Included in Operating Income:
Federal Current Deferred Investment Tax Credit, Net State Current Deferred Included in Other Income and Deductions:
Federal Current Deferred State Current Deferred Total 1994 164,472 (2,691) 28,006 77,754 (33,508) 234,033 1,989 9,722 409 3, 171 15,291 249,324 PECO Energy Company and Subaldlary Comp*nl**
1993 1992 117,535 131,054 113,054 66,281 43,344 (3,495) 70,740 78,546 9,718 (7,903) 354,391 264,483 (3,650)
(45,295) 15,926 20,23 7 (1,615)
(18,430) 1147 3 328 11808
{40,160) 366,199 $
224,323
Notes to Consolidated Financial Statement:. (CONTINUED) 1 3. Income Taxes (CONTINUEOl In accordance with SFAS No. 109, the Company has record-ed an additional accumulated net deferred income tax liabil-ity and pursuant to SFAS No. 71, "Accounting for the Effects of Certain Types of Regulation," a corresponding recoverable deferred income tax asset of $2.1 and 2.3 billion at December 31, 1994 and 1993, respectively, representing pri-marily the cumulative amount of federal and state income taxes associated with the elimination of the net-of-tax AFUDC accounting methodology.
The accumulated net deferred income tax liability reflects the tax effect of anticipated revenues and reverses as the related temporary differences reverse over the life of the related depreciable assets concurrent with the recovery of their cost in rates. Also included in the accumulated deferred income tax liability are other accumulated deferred income taxes, principally associated with liberalized tax deprecia-tion, established in accordance with the ratemaking policies of the PUC based on flow-through accounting.
ITC and other general business credits reduced federal income taxes currently payable by $43, $60 and $41 million in 1994, 1993 and 1992, respectively. Under the Tax Reform Act of 1986, ITC was repealed effective January 1, (MILLIONS OF DOLLARS)
Nature of Temporary Difference:
Utility Plant Accelerated Depreciation Deferred Investment Tax Credits AMT Credits Other Plant Related Temporary Differences Taxes Recoverable Through Future Rates, Net Deferred Debt Refinancing Costs Other, Net Deferred Income Taxes per the Balance Sheet The net deferred tax liability shown above as of December 31, 1994 and 1993 is comprised of$4.127 and
$4.182 billion of deferred tax liabilities, partly offset by $5 39 and $440 million of deferred tax assets, respectively.
The 1994 amendment to Pennsylvania tax law changed the corporate income tax rate from 12.25% to 11.99% for 1994, 10.99% for 1995, 10.75% for 1996, and 9.99% for 1997 and thereafter. This change resulted in a $2 million decrease in Income Taxes in the Consolidated Statement of Income for the year ended December 31, 1994. This change also resulted in a $174 million decrease in the Deferred Income Taxes liability on the December 31, 1994 Consolidated Balance Sheet. The decrease in the Deferred Income Taxes liability is returned to customers through the State Tax Adjustment Clause in the year realized.
1986 with the exception of transition property. The Company believes that Limerick Unit No. 2 qualifies as transition property eligible for ITC.
All remaining general business credits were used by the Company during 1994.
The Internal Revenue Service (IRS) has completed its examinations of the Company's federal income tax returns through 1986. The 198 7 through 1990 federal income tax returns are under examination. The IRS completed its field examination in February 1994 and subsequently issued an assessment that the Company has appealed. The Company expects resolution of the appeal by mid-1995.
For the years 1987 through 1990, the Company's cur-rent tax liability was determined under the AMT method resulting in a cumulative tax credit of $176 million which can be utilized in future years when regular tax liability exceeds AMT liability.
The tax effect of temporary differences which give rise to the Company's net deferred tax liability as of December 31, 1994 and 1993 are as follows:
Liabi lity or (Assec) 1994 1993 1,377 1,270 374 346
[176]
(176) 1,305 1,335 882 980 132 142
[306]
{155) 3,588 3,742 The Omnibus Budget Reconciliation Act of 1993 changed the federal income tax rate for corporations to 35%
from 34%, effective January 1, 1993. This change resulted in an $8 million increase in Income Taxes in the Consolidated Statement of Income for the year ended December 31, 1993.
This change also resulted in a $10 7 million increase in the Deferred Income Taxes liability in 1993, included in the December 31, 1994 and 1993 Consolidated Balance Sheets, because the Company expects ro receive recovery of all taxes when paid.
PECO Energy Company and Subsidiary Companie
- Notes to Consolidated Financial Statements (CONTINUED!
- 13. Income Taxes (CONTINUED!
Provisions for deferred income taxes consist of the tax effects of rhe following riming differences:
(THOUSANDS OF DOLLARS) 1994 1993 1992 Depreciation and Amortization 85,772 78,324 93,469 Deferred Energy Costs 13,777 19,013 (18,033)
Early Retirement and Se'pararion Programs (82,008]
1,865 Incremental Nuclear Maintenance and Refueling Outage Costs
[2,751)
(827)
(1,627)
Uncollecrible Accounts (23,096) 625 (2,629)
Reacquired Debt (12,954) 28,959 39,123 Unrecovered Revenue
[2,239)
(806)
(56,050)
Environmental Clean-up Cost (3,949)
(2,479)
Obsolete Inventory (6,192)
(6,887)
Limerick Plant Disallowances and Phase-In Plan 12,894 17,073 15,118 Other (2,560) 6,850 10 707 Total (23,306]
139,845 81,943 The total income tax provisions differed from amounts com pured by applying the federal statutory tax rate to income and adjusted income before income taxes as shown below:
(THOUSANDS OF DOLLARS) 1994 1993 1992 Net Income 426,713
$ 590,648 478,941 Total Income Tax Provisions 249,324 366,199 224 323 Income Before Income Taxes 676,037 956,847 703,264 Deduce Allowance for Funds Used During Construction 22,169 23,774 20,663 Adjusted Income Before Income Taxes 653,868
$ 933,073 682,601 Income Taxes on Above at Federal Statutory Rate of35 % in 1994 and 1993 and 34% in 1992 228,854
$ 326,576 232,084 Increase (Decrease) due to:
Depreciation Timing Differences Not Normalized 12,767 9,721 10,427 Limerick Plant Disallowances and Phase-In Plan
[530]
5,094 2,159 Unbilled Revenues Not Normalized (5,766)
State Income Taxes, Net of Federal Income Tax Benefits 31,086 51,994 36,657 Amortization of Investment Tax Credits
[14,570]
(13,470)
(24,624)
Prior Period Income Taxes
[14,524]
(3,942)
(20,655)
Other, Net 6,241 (9,774)
(5,959)
Total Income Tax Provisions 249,324 366,199 224,323 Provisions for Income Taxes as a Percent of:
Income Before Income Taxes 36.9%
38.3%
31.9~
Adjusted Income Before Income Taxes 38.1%
39.2%
32.9%
- 14. Taxes, Other Than Income - Operating (THOUSANDS OF DOLLARS) 1994 1993 1992 Gross Receipts 160,704 155,407 158,314 Capital Srock 39,957 38,990 28,013 Real Estate 77,571 71,445 63,593 Payroll 31,556 31,490 29,410 Other 1,901 800 2,538 Total 311,689 298,132 281,868 PECO Energy Company end Subaidiary Companie*
Notes to Consolidated Financial Statements (CONTINUED)
_)
15.Leases Leased property included in Utility Plant at December 31, was as follows:
(THOUSANDS OF DOLLARS) 1994 1993 Nuclear Fuel 445,338 448,203 Electric Plant 2,110 2169 Gross Leased Property 447,448 450,3 72 Accumulated Amortization
[272,883)
{255,670)
Net Leased Property 174,565 1942702 The nuclear fuel obligation is amortized as the fuel is consumed. Amortization of leased property totaled $62, $58 and $55 million for the years ended Decem~er 31, 1994, 1993 and 1992, respectively. Other operating expenses included interest on capital lease obligations of 7, $8 and $7 million in 1994, 1993 and 1992, respectively. Minimum future lease payments as of December 31, 1994 were:
(THOUSANDS OF DOLLARS)
YEAR ENDING DECEMBER 31, Caeiral Leases O~racing Leases Toca I 1995 69,777 97,608 167,385 1996 60,752 61,349 122,101 1997 50,21 3 60,208 110,421 1998 9,675 56,347 66,022 1999 92 53,900 53,992 Remaining Years 1089 578 419 579,508 Total Minimum Future Lease Payments 191,598 907,831
$ 1,099,429 Imputed Interest (rates ranging from 6.5% to 17.0%)
{17,033)
Present Value of Net Minimum Future Lease Payments 1742565 Rental expense under operating leases totaled $101, $99 and $94 million in 1994, 1993 and 1992, respectively.
1 6. Jointly Owned Electric Utility Plant The Company's ownership interests in jointly owned electric utility plant at December 31, 1994 were as follows:
Peach Boccom PECO Energy OPERATOR Comeanr Participating Interest 42.49%
(THOUSANDS OF DOLLARS)
Company's share of Utility Plant 732,291 Accumulated Depreciation 274,452 Construction Work in Progress 22,283 The Company's participating interests are financed with Company funds and, when placed in service, all operations are accounted for as if such participating interests were wholly owned facilities.
On April 2, 1992, the United States District Court for the District of New Jersey approved a settlement of the lawsuits filed against the Company by the other co-d'wners of Peach Bottom concerning the 1987 shutdown of Peach Bottom ordered by the NRC. As part of the settlement, the Company paid $131 million to the other co-owners on October 1, 1992 and the Company recognized a charge against income ($76 Transmission and Production Planes Other Plane Salem Kez:scone Conemaugh Public Service Electric Pennsylvania Pennsylvania Various and Gas Comeanl'.
Electric Comeanz:
Electric Comeanz:
Comeanies 42.59%
20.99%
20.72%
21% to 43%
1,184,271 86,845 147,479 88,276 3 74,354 47,840 48,719 28,060 47,280 21,484 27,658 1,101 million, net of taxes) in the first quarter of 1992.
In 1990, the Company received net proceeds of $28 mil-lion ($16 million, net of taxes) in settlement of a shareholders' derivative suit in connection with the 1987 Peach Bottom shutdown. Recognition of the $28 million had been deferred pending the resolution of the co-owners' litigation. As a result of the settlement of the co-owners' litigation, the $28 million was recognized as other income in the first quarter of 1992 and reported as an offset against the amount of the above-mentioned charge relating to the settlement of the co-owners' litigation.
PECO Energy Company and Subsidiary Companies
Notes to Consolidated Financial Statements (CONTINUED) 1 7. Segment Information (THOUSANDS OF DOLLARS) 1994 1993 1992 ELECTRIC OPERATIONS Operating Revenues 3,624,797 3,605,425 3,597,141 Operating Expenses, excluding Depreciation 2.429,452 2,228,507 2,236,907 Depreciation 415,854 400,851 390 846 Operating Income 779,491 976,067 969,388 Utility Plant Additions 457,728 458,125 461,407 GAS OPERATIONS Operating Revenues 415,835 382 704 365,328 Operating Expenses, excluding Depreciation 339,529 299,259 278,407 Depreciation 26,247 24 101 22 933 Operating Income 50,059 59,344 63,988 Utility Plant Additions 67,090 721481 741858 Identifiable Assets*
Electric
$ 10,410,461
$ 10,395,488
$ 10,393,449 Gas 768,279 727,690 658,825 Nonallocable Assets 3,914,019 3 909149 1,525,95 3 Total Assets
$ 15,092, 7 59
$ 15z032J27
$ 1215 78,227 "Includes Utility Plant Im acmm11/ated depreciation, inventories and alkicated common utility property.
1 8. Cash and Cash Equivalents For purposes of the Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The following disclosures supplement the accompanying Statements of Cash Flows:
(THOUSANDS OF DOLLARS) 1994 1993 1992 Cash Paid During the Year:
Interest (net of amount capitalized) 437,096 474,735 515,696 Income Taxes (net of refunds) 205,316 182,751 224,352 Noncash Investing and Financing:
Capital Lease Obligations Incurred 41,710 42,484 40,757 PECO Energy Company and Subaidlary Companie*
Notes to Consolidated Financial Statements (CONTINUED)
)
1 9. Investments (THOUSANDS OF DOLLARS)
Trust Accounts for Decommissioning Nuclear Plants Real Estate Developments and Other Ventures Nonutility Property Gas Exploration and Development Joint Ventures Other Deposits Total
- 20. Financial Instruments DECEMBER 31, 1994 1993 175,326 149,932 42,298 46,741 19,609 21,262
[722]
625 76 76 236,587 218,636 Fair values of financial instruments, including liabilities, are estimated based on quoted market prices for the same or simi-lar issues. The carrying amounts and fair values of the Company's financial instruments as of December 31, 1994 and 1993 were as follows:
(THOUSANDS OF DOLLARS) 1994 1993 Carrying Fair Carrying Fair Amount Value Amount Value Cash and Temporary Cash Investments 46,970 46,970 46,923 46,923 Long-Term Debt (including amounts due within one year) 4,986,844 4,730,005 5,136,606 5,3 75,427 Trust Accounts for Decommissioning Nuclear Plants 175,326 175,326 149,932 160,141 Financial instruments which potentially subject the Company to concentrations of credit risk consist principally 0£ tem-porary cash investments and customer accounts receivable. The Company places its temporary cash investments with high-credit, quality financial institutions. At times, such investments may be in excess of the Federal Deposit Insurance Corporation limit. Concentrations of credit risk with respect to customer accounts receivable are limited due to the Company's large number of customers and their dispersion across many industries.
- 21. Nuclear Fuel Agreement with Long Island Power Authority [LIPA)
In March 1993, the Company entered into an agreement with LIPA and other parties, subsequently revised in September 1993, to receive 46 million as compensation for accepting slightly irradiated nuclear fuel from Shoreham Nuclear Power Station. The Company has received the pay-ments in installments as the shipments of nuclear fuel were accepted. As of June 30, 1994, the Company had accepted all of the nuclear fuel shipments, and pursuant to the agree-ment, earned a $4 million bonus as a result of receiving all shipments prior to the September 5, 1994 target date.
The payments from LIPA, in excess of related costs, were recognized in income. The Company recognized 26 and 20 million as other income in the Consolidated Statements of Income for the year ended December 31, 1994 and 1993, respectively. The Company incurred $4 million of costs related to accepting the shipments pursuant to this agree-ment. The acquisition of the fuel will result in estimated benefits to the Company's customers of $70 million over the next 15 years due to reduced fuel-purchase requirements.
PECO En e rgy Comp a ny a nd Sub e id ia ry Compan i e
- Notes to Consolidated Financial Statements (CONTINUED) 2 2. Voluntary Retirement and Separation Incentive Programs In April 1994, the Company's Board of Directors approved a package of financial incentives permitting eligible employ-ees to participate in either VRIP or VSIP.
All regular, part-time and intermittent employees who would be 50 years of age and have at least five years of cred-ited service as of December 31, 1995 were eligible for VRIP.
All regular and part-time employees of the Company, regardless of age or seniority, were eligible for VSIP.
Employees who voluntarily separate from the Company under VSIP receive a lump-sum payment based on years of service. Of the estimated 2,135 employees eligible for VRIP, 1,474 employees elected to accept early retirement. An addi-tional 1,008 employees elected to separate under VSIP. The retirements and separations are taking place in stages through December 31, 1995.
- 23. Quarterly Data [Unaudited)
As a result of VRIP and VSIP, the Company incurred a one-time pre-tax charge of $254 million ($145 million net of taxes) in the third quarter of 1994. This charge consisted of the following $190 million for the actuarially deter-mined pension and other postretirement benefits costs; $51.5 million in cash payments for severance and accrued vaca-tion/sick pay to be paid upon separation; and $12.5 million for outplacement services costs and, for those electing VSIP, the continuation of benefits for one year.
In addition, as a result of VRIP and VSIP, the Company accelerated recognition of $1 0 million of its non-pension postretirement benefits obligation. The Company recorded a corresponding regulatory asset as it expects to receive recov-ery of all non-pension postretirement benefits cost through the ratemaking process. This recognition of $180 million of non-pension postretirement benefits obligation and the recordation of the corresponding regulatory asset did not impact earnings.
The data shown below include all adjustments which the Company considers necessary for a fair presentation of su.ch amounts:
Operating Revenues O~ratina; Income Net Income (THOUSANDS OF DOLLARS) 1994 1993 1994 1993 1994 1993 Quarter ended March 31
$ 1, 128,409
$ 1,071,492 260,313 281,734 159,384 162,356 June 30 951,541 901,703 202,784 223,196 116,050 107,691 September 30 1,041'.162 1,073,134 128,477 290,93 7 22, 195 181,683 December 31 919,520 941,800 237,976 239,544 129,084 138,918 Earnings Applicable Average Shares Earnings co Common Stock Outstanding Per Averas:e Share (THOUSANDS OF DOLLARS) 1994 1993 1994 1993 1994 1993 Quarter ended March 31 148,553 149,305 221,517 220,609 0.67 0.68 June 30 105,264 94,540 221,531 220,856 0.48 0.43 September 30 12,577 169,727 221,570 221,318 0.06 0.77 December 31 123,021 128,018 221,596 221,493 0.55 0.58 1994 third quarter results include a net.charge of $254 million ($145 million, net of taxes), or $0.66 per share, as a result of VRIP and VSIP (see note 22).
PECO Energy Company and Subaldiary Companie*
Financial Statistics (MILLIONS OF DOLLARS)
FOR THE YEAR ENDED 1994 1993 1992 1991 1990 1989 Summary of Earnings and Financial Condition Operating Revenues 4,040.6 3,988.1 3,962.5 4,018.6 3,786.7 3,473.8 Operating Income 829.6 1,035.4 1,033.4 1,081.2 767.7 809.3 Income from Continuing Operations 426.7 590.6 478.9 534.7 105.8 590.5 Net Income 426.7 590.6 478.9 534.7 214.2 590.5 Earnings Applicable to Common Stock 389.4 541.6 418.2 468.6 123.9 493.9 Earnings Per Average Common Share From Continuing Operations !DOLLARS!
1.76 2.45 1.90 2.15 0.07 2.36 Earnings Per Average Common Share !DOLLARS!
1.76 2.45 1.90 2.15 0.58 2.36 Dividends Per Common Share !DOLLARS!
1.545 1.43 1.325 1.225 1.45 2.20 Common Stock Equity !PER SHARE!
19.41 19.25 18.24 17.69 16.71 17.67 Average Shares of Common Stock Outstanding !MILLIONS!
221.6 221.1 220.2 218.2 214.4 208.9 AT DECEMBER 31, Net Utility Plant, at Original Cost
$ 10,828.7 10,763.0 10,691.2
$ 10,598.4 10,591.3
$ 10,720.8 Leased Property, Net 174.6 194.7 210.0 223.8 241.3 273.5 Total Current Assets 454.8 514.8 550.0 783.2 745.0 655.0 Total Deferred Debits and Other Assets 3,634.7 3 559.8 1,127.0 918.1 938.6 972.8 Total Assets
$ 15,092.8 15,03 2.3
$ 12,578.2
$ 12,523.5
$ 12,516.2
$ 12,622.l Common Shareholders' Equity 4,302.5 4,263.4 4,022.2 3,892.3 3,624.5 3,744.8 Preferred and Preference Stock Without Mandatory Redemption 277.5 422.5 422.5 422.5 422.5 622.4 With Mandatory Redemption 92.7 186.5 231.1 315.6 330.9 351.1 Minority Interest in Preferred Securities of Subsidiary 221.3 Long-Term Debt 4,785.6 4,884.3 5,203.9 5 415.6 5,830.8 5 762.7 Total Capitalization 9,679.6 9 756.7 9 879.7 10,046.0 10,208.7 10 481.0 Total Current Liabilities 878.6 954.6 830.6 823.4 783.8 790.5 Total Deferred Credits and Other Liabilities 4,534.6 4,3 21.0 1867.9 1,654.l 1523.7 1,350.6 Total Capitalization and Liabilities
. $ 15,092.8
$ 15p 32.3
$ 121578.2
$ 1215 23.5
$ 121516.2
$ 121622.l P E CO E n ergy Co mpan y a n d Sub si d iary C om pa n ies
Operating Statistics FOR THE YEAR ENDED 1994 1993 1992 1991 1990 1989 Electric Operations 0 U T PU T (MILLIONS OF KILOWATIHOURS)
Fossil 11,239 10,352 8,082 7,376 7,913 10,470 Nuclear 28, 195 27,026 24,428 25,735 23,715 12,890 Hydro 1,970 1,699 1,803 1,388 2,266 1,743 Pumped Storage Output 1,596 1,478 1,597 1,653 1,43 7 1,354 Pumped Storage Input
[2,256)
(2,192)
(2,21 7)
(2,355)
(2,059)
(1,937)
Purchase and Interchange 6,164 6,447 8,675 8,603 5,787 11,192 Internal Combustion 106 56 29 79 152 348 Other 180 1063 TOTAL ELECTRIC OUTPUT 47,014 44,866 42 397 42,479 39 391 3 7z123 SAL E S (MILLIONS OF KILDWATIHOURS)
Residential 10,817 10,657 9,894 10,311 9,815 9,974 Small Commercial and Industrial 6,108 5,773 5,367 5,284 5,066 4,921 Large Commercial and Industrial 15,847 15,935 15,770 16,177 16,554 16,749 Other 791 771 962 1,029 1010 1031 Service Territory 33,563 33,136 31,993 32,801 32,445 32,675 Interchange Sales 768 457 1,231 1,612 2,751 2,027 Sales to Other Utilities 10,039 8 670 6 699 5 445 1865 TOTAL ELECTRIC SALES 44,370 42,263 39z923 39z858 37 061 34 702 NUMBER OF CUSTOMERS, DECEMBER 31, Residential 1,350,210 1,341,873 1,333,926 1,324,795 1,320,126 1,309,717 Small Commercial and Industrial 143,605 142,363 141,253 140,901 140,305 138,244 Large Commercial and Industrial 3,603 3,742 3,972 4,162 4,344 4,449 Other 944 888 857 840 817 775 TOTAL ELECTRIC CUSTOMERS 1,498,362 1,488z866 lz480p 08 lz470z698 lz465z592 lz453z185 0 PER AT I NG R EVEN U ES (MILLIONS OF DOLLARS)
Residential
$ 1,369.6 1,354.l 1,304.5 1,342.3 1,229.8 1,15 7.0 Small Commercial and Industrial 706.8 678.9 669.8 641.0 595.2 5 3 7.1 Large Commercial and Industrial 1,142.9 1,164.0 1,223.2 1,278.9 1,247.l 1,182.0 Other 136.0 161.2 168.0 170.4
.166.9 143.9 Service Territory 3,355.3 3,358.2 3,365.5 3,432.6 3,239.0 3,020.0 Interchange Sales 23.0 14.3 32.1 42.8 81.5 68.2 Sales to Other Utilities 246.5 232.9 199.5 187.2 81.1 TOTAL ELECTRIC REVENUES
$ 3,624.8 3 605.4 3 597.l 3 662.6 3 401.6 3,088.2 0 PE R AT ING E X PENSE S (MILLIONS OF DOLLARS)
Operating Expenses, excluding Depreciation
$ 2,429.4 2,228.5 2,236.9 2,253.2 2,325.2 2,077.4 Depreciation 415.9 400.8 390.8 379.6 337.7 257.4 TOTAL OPERATING EXPENSES
$ 2,845.3 2,629.3 2,627.7 2,632.8
~
2,662.9 2,334.8 ELECTRIC OPERATING INCOME 779.5 976.1 969.4 lz029.8 738.7 753.4 AVERAGE USE PER RESIDENTIAL CU ST 0 MER (KILOWATIHDURS)
Without Electric Heating 6,736 6,727 6,259 6,707 6,376 6,488 With Electric Heating 17,527 17,096 16,298 16,201 16,038 17,250 Total 8,041 7,970 7,443 7,801 7,464 7,655 Electrical Peak Load, Demand (THOUSANDS OF KILOWATIS) 7,227 7,100 6,617 7,096 6,755 6,467 Net Electric Generating Capacity -
Year-End Summer Rating (THOUSANDS OF KILOWATIS) 8,956 8,877 8,836 8,766 8,766 7,759 Cost of Fuel per Million Btu 0.89 0.90 0.82 0.92 1.13 1.37 Btu per Net Kilowatthour Generated 11,617 10,675 10,657 10,849 10,844 10,894
~
PECO Energy Company and Subsidiary Companie*
I f !
t Op~r.j!ting Statistics !CONTINUED) 1994 1993 l992 l99 1 l990 1989 Gas Operations SALES (MILLIONS OF CUBIC FEET)
Residential 1,636 1,637 1,819 1,746 1,778 1,951 House Heating 31,974 30,687 29,750 26,423 25,303 28,301 Commercial and Industrial 21,520 22,943 21,497 20,492 23,228 30,0 38 Other 5,079 5 656 21 46 534 1567 2 344
. TOTAL GAS SALES 60,209 60,923 55,212 49,195 51,876 62,634 Gas Transported for Customers 29,801 22,946 22,060 21 414 24,413 18,03 3 TOTAL GAS SALES & TRANSPORTED 90,010 83,869 77 272 70609 76,289 80 667 NUMBER OF custOMERS, DECEMBER 31, Residential 57, 122 59,5 73 59,859 62,444 63,267 65,544 House Heating 287,481 277,500 269,5 77 260,473 254,564 246,273 Commercial and Industrial 32,292 315 73 30,956 30 204 29,456 28 369 TOTAL GAS CUSTOMERS 376,895 368,646 360,392 353,121 347 28 7 340,186 0 PER AT I NG REV EN U ES (MILLIONS OF DOLLARS)
Residential 16.0 15.0 16.4 17.0 18.1 18.0 House Heating 235.4 205.5 201.9 192.4 200.8 195.8 Commercial and Industrial 133.1 124.2 121.1 123.6 144.7 152.5 Other 14.0 15.2 2.8 2.2 5.6 7.3 S u b~ota l 398.5 359.9 342.2 335.2 369.2 373.6 Other Revenues (including Transported for Customers) 17.3 22.8 23.l 20.8 15.8 12.l TOTAL GAS REVENUES 415.8 382.7 365.3 356.0 385.0 385.7 0 PER AT ING E X PE NS ES (MILLIONS OF DOLLARS)
Operating Expenses, excluding Depreciation 339.5 299.3 278.4 283.7 336.2 310.2 Depreciation 26.2 24.1 22.9 21.0 19.8 19.6 TOTAL OPERATING EXPENSES 365.7 323.4 301.3 304.7 356.0 329.8 GAS OPERATING INCOME 50.1 59.3 64.0
- 51.3 29.0 55.9 SECURITIES STATISTICS Ratings on PECO Energy CompanY'.s Secu\\ities Mortgage Bonds Debentures Preferred Scock Date Date Date AGENCY Rating Established Raring Established Raring Established Duff and Phelps, Inc.
BBB+
4/92 BBB 4/92 BBB-8/91 Fitch Investors Service, Inc.
A-9192 BBB+
9192 BBB+
9192 Moody's Investors Service Baal 4/92 Baa2 4/92 baa2 4/92 Standard & Poor's Corporation BBB+
4/92 BBB 4/92 BBB 4/92 NYSE-Composite Common Srock Prices, Earnings and Dividends By Quarter !PER SHARE!
1994 1993 Fourth Third Second First Fourth Thicd Second First Quarter Quarter Quarter uarter Quarter Quarter Quarter Quarter High Price
$25-7/8
$28-1 /4
$29-3/8 30
$32-7 /8
$33-1 /2
$3 1-1/8
$30-3/8 Low Price
$23-5/8
$23-5/8
$25-3/8
$25-3/8
$27-3/8
$30-3/8
$27-3/4
$25-1 /2 Close
$24-1 /2
$25-3/8
$26-1/4
$27-3/4
$30-114
$32-3/4
$30-5/8 30 Earnings 55¢ 6¢ 48¢ 67¢ 58¢.
77¢.
43¢.
68¢.
Dividends 40.5¢ 38¢ 38¢ 38¢ 38¢.
35¢.
35¢.
35¢.
PECO Energy Com pa n y a nd Sub s idia r y Comp a n ie s
~
Board of Directors and Officers Board of Directors Susan W. Catherwood [51]
Chairman, Trustee Board, The University of Pennsylvania Health System M. Walter D' Alessio [ 61 ]
President and Chief Executive Officer, Legg Mason Real Estate Services (Commercial mortgage banking and pension fund advisors)
Richard G. Gilmore * [ 6 7]
Former Senior Vice President, Finance and Chief Financial Officer of the Company Richard H. Glanton, Esquire
[48]
Partner of the law firm Reed Smith Shaw & McClay Officers Joseph F. Paquette, Jr. [ 60]
Chairman and Chief Executive Officer Corbin A. McNeill, Jr. [55)
President and Chief Operating Officer William L. Bardeen [56]
Senior Vice President and Group Executive, Consumer Energy Services Group <1>
James W. Durham [5 7]
Senior Vice President and General Counsel William J. Kaschub [52]
Senior Vice President, Human Resources Gwendolyn S. King [54]
Senior Vice President, Corporate and Public Affairs Kenneth G. Lawrence [4 7]
Senior Vice President, Finance and Chief Financial Officer <1>
John M. Madara, Jr. [51 )
Senior Vice President and Group Executive, Power Generation Group <1>
James A. Hagen * [62]
Chairman, President and Chief Executive Officer, Conrail, Inc.
Nelson G. Harris * [ 68]
Chairman of the Executive Committee, Tasty Baking Company Joseph C. Ladd [ 68)
Former Chairman, The Fidelity Mutual Life Insurance Company Edithe J. Levit, M.D. [ 68)
President Emeritus and Life Member of the Board, National Board of Medical Examiners Admiral Kinnaird R. McKee [65)
Director Emeritus, U.S. Navy Nuclear Propulsion Robert J. Patrylo [ 48)
Senior Vice President and Group Executive, Gas Services Group <4>
Dickinson M. Smith [ 61)
Senior Vice President, Nuclear Generation Group and Chief Nuclear Officer 0 >
Alvin J. Weigand [ 5 6)
Senior Vice President and Group Executive, Bulk Power Enterprises <1>
JoAnn M. Bauer [48)
Vice President, Customer Services m Gregory A. Cucchi [45)
Vice President, Planning and Performance In David R. Helwig [43)
Vice President, Limerick Generating Station Thomas P. Hill, Jr. [46]
Vice President and Controller Joseph J. Mclaughlin * [ 6 6)
Former President and Chief Executive Officer, Beneficial Mutual Savings Bank CorbinA.McNeill,Jr. [55)
President and Chief Operating Officer of the Company John M. Palms, PhD. [ 59]
President, University of South Carolina Joseph F. Paquette, Jr. * [60]
Chairman and Chief Executive Officer of the Company Ronald Rubin * [63]
Chief Executive Officer, The Rubin Organization, Inc.
(Real estate development and management)
Katherine C. Holland [42]
Vice President, Information Systems and Chief Information Officer <2>
Garret C. Miller [ 5 0]
Vice President, Philadelphia Region J. Barry Mitchell [ 4 7]
Vice President, Finance and Treasurer <7>
William E. Powell, Jr. [58]
Vice President, Support Services <8>
Gerald R. Rainey [45]
Vice President, Peach Bottom Atomic Power Station William H. Smith, Ill [ 46]
Vice President,. Station Support 0 >
Thomas C. Stapleford [ 5 7]
Vice President, Bucks/Mont Region Damian A. Thomas [48]
Vice President, Marketing and Sales<8>
PECO Energy Company and Subaidiary Companie*
RobertSubin [56]
Senior Vice President, Campbell Soup Company and President, Campbell Soup Company, Bakery and Confectionery Division Director Changes:
Robert D. Harrison's term expired on March 31, 1994.
Robert Subin was elected a member of the Board, effec-tive Septem ber 26, 1994.
- Member of the F.xecutive Committee WilliamJ. Williams[53]
Vice President, Transmission and Distribution Services Nancy J. Zausner [ 41 ]
Vice President, Power Transactions <l>
Katherine K. Dodd [44]
Corporate Secretary <6>
Edward J. Cullen, Jr. [4 7]
Assistant Corporate Secretary <8>
Todd D. Cutler [34]
Assistant Corporate Secretary James F. Hohenstein [ 51 ]
Assistant Treasurer 0 > Effective March 1, 1994
'" Effective March 21, 1994
"' Effective April 13, 1994
'" Effective August 1, 1994
'" Effective October 11, 1994
<*>Effective November 1, 1994 m Effective December 1, 1994
<*>Effective January 30, 1995
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