ML19031A128
| ML19031A128 | |
| Person / Time | |
|---|---|
| Site: | Salem  |
| Issue date: | 05/23/1977 |
| From: | Public Service Electric & Gas Co |
| To: | Office of Nuclear Reactor Regulation |
| References | |
| Download: ML19031A128 (40) | |
Text
1976 Annual Report 0
PS~G
Earnings per average share of Common Stock
$2.79
$2.25 24 Shares of Common Stock Average 58,308,000 54,513,000 7
Year end 58,976,000 56,523,000 4
Dividends paid per sha re of Common Stock
$1.78
$1.72 3
Tota l Operating Revenues
$1,869,535,000
$1,630,525,000 15 Total Operating Expenses
$1,581,097,000
$1,380,293,000 15 Balance Avai lable for Common Stock
$ 162,767,000
$ 122,598,000 33 Gross Additions to Utility Plant
$ 350,576,000
$ 297,418,000 18 Total Util ity Plant
$5,255,286,000
$4,920,768,000 7
Electric Operati ng Revenues
$1,316,077,000
$1,213,488,000 8
Kilowatthour Sales to Customers 27,957,732,000 26,995,491,000 4
Peak Load-Kilowatts 6,190,000 6,270,000
- 1 Cooling Degree Hours 6,513 6,543 Gas Operating Revenues
$ 553,458,000
$ 417,037,000 33 Therm Sales to Customers 1,822,726,000 1,761,478,000 3
Maximum Day's Sendout-Therms 12,803,000 11,077,000 16 Heati ng Degree Days 5,349 4,653 15
0 PS~G The Energy People Public Service Electric and Gas Company 80 Park Place Newark, New Jersey 07101 Annual Meeting Please note that the Ann ual Meeting of Stockholders of the Company w ill be held in the Company aud itorium, 70 Park Place, Newark, New Jersey (rather than the Robert Treat Hotel) on Tuesday (rather than Monday), Apri I 19, 1977, at 2 :00 p.m. A sum-mary of the meeting wil l be sent to stockholders at a later date.
Financial and Statistical Review A comprehensive statistical supplement to this report, containing financial and operating data for the years 1966-1976, will be avai lable this spring. If you wish to receive a copy, please write to the Vice President and Treasurer, Public Service Electric and Gas Company, P. 0. Box 570, Newark, N.J. 07101 Transfer Agents All Stocks Morgan Guaranty Trust Company of New York 30 West Broadway, New York, N.Y. 10015 Stock Transfer Department Public Service Electric and Gas Company 80 Park Place, Newark, N.J. 07101 Registrars
$1.40 Dividend Preference Common Stock and Common Stock Bankers Trust Company 485 Lexington Avenue, New York, N.Y. 10017 Fidelity Union Trust Company 765 Broad Street, Newark, N.J. 07101 Preferred Stocks The Chase Manhattan Bank (National Association) 1 New York Plaza, New York, N.Y. 10015 Fidelity Union Trust Company 765 Broad Street, Newark, N.J. 07101 Contents Highlights (Inside Front Cover)
President's Message to Stockholders and Employees 2
Revenues and Operating Expenses 4
Earnings and Dividends 5
Construction Expenditures 6
Financial Policies and Objectives 7
Electric and Gas Production 7
Gas Supply 10 Research and Development 13 Commercial and Marketing 15 Area Development 16 Employees 18 Transport of New Jersey 19 Accounting Policies 20 Financial Statements 21 Independent Accountant's Opinion 29 Operating Statistics 30 Financial Statistics 32 Management's Discussion and Analysis of the Statement of Income 34 Changes in Organization 36 Officers and Board of Directors (Inside Back Cover)
Cover Illustration, Aerial view of Salem Generating Station on the Delaware River in Salem County, New Jersey
President's Message to Shareholders The Bicentennial Year was a period of continuing improvement in the financial condition of the Company.
A revenue increase of $239 million resulted from rate increases, more severe weather conditions and a hesitant emergence from the industrial recession. Demand for both electricity and gas increased by 3 to 4% compared to 1975.
Earnings increased $40.2 million, and earnings per share of common stock rose from $2.25 to $2.79.
At mid-year, quarterly dividend payments on common stock were increased from 43 cents to 45 cents a share, rai sing the an nual rate from $1.72 to $1.80. Management recognizes that periodi c dividend increases are necessary to maintain existi ng shareholder support and encourage additional investor interest in providi ng the funds necessary to complete our multi-billion dollar construction program.
Future dividend increases w ill, of cou rse, depend on the maintenance of the Company's favorable fi nancial condition.
Sa lem, the first nuclear generati ng station for which the Company has design and operating responsibility, produced electricity from nuclear fission for the fi rst time on December 25th. The fi rst unit at Sa lem is one of a series of eight 1100-megawatt nuclear units planned for service between now and the earl y 1990's. Ownership of most of these generating plants w ill be shared w ith neighboring utilities, but the Company w ill be the principal owner and will have complete responsibility for operation.
We are relying on these nuclear units to meet the future electric demands, which are forecast to grow at an average annual rate of 4% over the next 15 years.
Obviously, predicti ng electric energy demands in today's chaotic energy atmosphere is fraught with uncertainty. Prior to the Arab oil embargo in 1973, the Company's annual growth rate in electric demand averaged 6 to 7%. However, after two years of negative growth in 1974 and 1975 and recognizing the effects of conservation, higher energy costs 2
and reduced growth patterns in New Jersey since 1973, a 4% growth rate appears to be reasonable.
The demand for gas, on the other hand, is virtua lly impossible to predict because gas is supply-limited. Our current pipeline suppliers of natural gas continue to curtail our contracted amounts of gas, and no additional gas is available. We presently have a moratorium on new gas cus-tomers and a lifting of that moratorium will depend on the ava ilability of new gas or a decrease in present demands. As we have ind icated in prior years, we are attempting to secure additional supplies through the importation of lique-fied natural gas from Algeria and by drilling for domestic gas through ou r exploration and development subsidiary, Energy Development Corporation.
If the Algerian importation project is successfully con-cluded, major additional supplies of gas will be avai lable in the earl y 1980's. The contribution of Energy Development Corporation activities to our gas supp ly picture is somewhat unpredictable. However, unless we increase our annual in-vestment significantly from the current level of $20 million a year, our exploration and dri lling activities wi ll not make a major contribution to gas supply. If add itiona l gas sup-plies do not materialize in sufficient quantity to meet national and loca l needs, consumers wi ll be forced to switch to alternate energy sou rces. Oi I is an obvious sub-stitute, but with paralleling domestic oil shortages and the desire to reduce oil imports, electricity may well be the most reasonable replacement energy source.
There is another energy source which is receivi ng considerable attention these days - the sun. Solar power is being proclaimed by some as the solution to our energy problems. We initiated a research program in 1976 to re-solve cost and feasibility questions assoc iated with the use of the sun as a controlled energy source.
One of the reasons for intense interest in alternate
forms of energy is the high cost, as wel l as the dwindling supply, of conventional energy sources. We can see little prospect of price relief in sight for our customers and, as in-flation continues, we perceive an undeniable need for additiona l rate increases. Our last rate case was filed in January 1976, and a final Order was received in October 1976. Although the amount of relief received was consider-ably less than that requested, the case was processed in record time, and we see this as a recognition on the part of the Public Utility Comm ission of the importance of prompt decisions.
The Company is working with the Public Utility Commission in the development of innovative rate struc-tures for residenti al customers. O ne of these experimental rates is designed to reduce the consumption of electricity during peak periods w hil e providing an opportu nity for the customer to reduce his overa ll energy cost by scheduling his major use of electricity during off-peak periods. Late in 1976, the Compa ny submitted an interruptible rate for large industrial customers w hich requ ires them to reduce electri c use during peak periods. Thi s lower rate, subsequently approved by the Commission, provides an incentive for industry to locate in New Jersey. It will also help delay the expenditure involved in constru cting new generating facilities. Postponing the construction of new facili ti es will, of cou rse, benefit al I customers.
As we review the overall energy situation, it is still obvious that the nation sorely needs a consistent, constru c-tive energy policy. Conservation must be a keystone of that policy. The price of oil and natural gas shou ld be deregu-lated to encou rage domestic exploration. Dependence on foreign imports and on the diminishing domestic supplies of oil and gas for the generation of electricity should be re-duced. The generation of electricity from coa l and uranium should be endorsed and supported. Research to develop Salem Generating Station, Lower Alloways Creek, New Jersey alternate energy sources shou Id be encouraged. As far as the Company is concerned, the most important feature of the required energy policy is the support of nuclear power.
Our studies consistentl y show that, for our particular situa-tion in New Jersey, nuclear power offers the best economic and envi ronmental solution to the problem of supplying electri city to our customers. We are convinced that nuclear plants will provide electri ci ty at the lowest possible cost and, for that reason, the management of your Company urges that you acti vely support development of nuclear power.
In reviewing the Bicentennial Year, the contributions of our talented and highly-motivated employees to the im-proved position of the Company must be recognized. Out-standing results were obtained throughout the organization in reduci ng costs. Innovations in many areas of our opera-tions improved service to ou r customers while bringing benefits to the Company. Our employees, many of whom are shareholders, should also be commended for their dedicated involvement in commu nity service acti vities outside of their norm al work ass ignments.
The Board of Directors and the management of the Company appreciate the level of understanding exhibited by our shareholders during the critica l days of the past few years. As we look to the future, we know that there wi 11 be cha llenging times ahead, but with the cooperation of ou r employees and the support of our shareholders we are con-fident that the Company w i 11 continue to prosper.
Febru ary 10, 1977 3
Control room at Sa/em Revenues Increase $239 Million Revenues increased $239 million, or 14.7%, to $1.9 billion in 1976. About $120 million of the rise resulted from rate increases which took effect in June and November 1975 and in October 1976.
Electric revenues increased 8.5 % to $1.3 bil lion, representing 70% of total revenues. Gas revenues rose 32.7% to $553 million, or 30% of the total. Revenues for the year by customer classification were :
Electric Gas Combined Residential 34%
62%
42%
Commerc ial 36 26 33 Industrial 28 12 23 Street Lighting and other 2
2 Total 100%
100%
100%
Operating Expenses Rise $201 Million Operating expenses were $1.6 billion, an increase of $201 million, or 14.5% over the 1975 total. Power production expenses increased 4.6% for the year over 1975, principally as the result of a 3.8% increase in electric output. Similarly, fuel expenditures continued to rise, increasing 6.7% in 1976. There was a modest decrease of 4.6% in the amount of power we purchased from our power pool, the Pennsylvania-New Jersey-Maryland Interconnection. The total cost of that power fell 12.3% or $17 million in 1976 because more of it was produced at nuclear stations.
Costs of natural gas and materials to manufacture gas in-creased 31.5%. Because of larger curtailments by our three principal pipeline suppliers, we had to make emergency purchases of natural gas in December from other sources and manufacture more gas.
4 The 1976 Income Dollar Where It Came From:
Electric Revenues Gas Revenues Allowance For Funds Used During Construction Where It Went:
Fuel, Purchased Power and Gas Maintenance Other Operation Taxes Interest Dividends Reinvested in Business
Nuclear fuel delivery and loading Maintenance of property and equipment was up $16 mil-lion, or 19.3% over 1975 levels.
The effect of rate relief resulted in a significant increase in revenue-related taxes. Gross receipts taxes rose $32 million, or 14.9% and Federal income taxes, both current and de-ferred, increased $46 million, or 84.6% over 1975 totals.
Deferred income taxes, wh ich represent the tax effect of the difference between book and taxable income to the extent permitted for rate-making purposes by the Public Utility Commission of New Jersey, consist mainly of investment tax credits. The substantially greater taxab le income, resulting primarily from rate increases, allowed the Company to utilize investment tax credits available under Federal in-come tax law. These credits are deferred on the books and amortized over the average I ife of the related plant.
Earnings and Dividends Up Earnings available for Common Stock rose to $2.79 a share from $2.25 a share in 1975 when there were 3.8 mil lion fewer average shares outstand ing.
Dividends totaling $1.78 a share were paid on the Com-mon Stock, up from $1.72 in 1975. The increase reflects a rise in the quarterly dividend rate from 43 cents to 45 cents beginning w ith the June 30 payment, the first increase since 1972. All 1976 dividends are considered fully taxable for income tax purposes.
The Company's Common Stock and the $1.40 Dividend Preference Common Stock are traded on the New York Stock Exchange and use the stock symbo l PEG. The Com-mon Stock is also li sted on the Philadelphia Stock Ex-change. Shown in the following table are the range of trad-ing prices and dividends paid for the last two years.
Quarterly Dividends Paid Per Share First Common Stock 1976 1975
$.45*
$.43
$1.40 Dividend Preference Common Stock 1976 1975
$.35
$.35 Quarter 20%-175/a 16%-12 16-14 1/i 15%-12%
Second Quarter 19%-1 8 17%-14 3/a 15%-1 45/a 14%-13 1/i Third Quarter 23%-19%
1634-15 16%-15 14% -13 5/a Fourth Quarter 23%-21 34 1 9-1 5 34 1634-15 5/a 15-13 5/a
- $.43 First Quarter only.
Rate Case Decision The New Jersey Board of Public Utility Commissioners granted the Company a rate increase of $136.5 mi llion annually for electric and gas service, effective October 21, 1976. The increase allowed $103.3 mi ll ion additional elec-tric revenues and $33.2 million gas revenues.
Our origina l petition filed in January 1976 requested rate increases totaling $447 million. This amou nt was later re-duced to $318 million as a result of stipulations and by the updating of the test year with 12 months of actual results.
The final order came about nine months after the original fil ing in contrast to the 18 months required for a decision in our previous rate relief req uest.
The order granted the Company a 13% return on common equity, the same retu rn approved in the prior case, and an overall return of 8.83% on rate base. We had requested a 14% return on equity and a 9.34% return on rate base.
The decision also approved higher depreciation rates which wi ll raise the composi te rate from 3.32% to 3.46%.
5
Exterior scenes at Sa lem Construction Expenditures Up After declining for five years, cash expenditures for new fa-cilities increased in 1976 to $333 million from $267 million in 1975. Construction expenditures, including nuclear fuel and advances to subsidiari es, in 1977 are expected to rise to
$42 7 million and w ill continue to increase for at least the next four years. Nuclear generating facilities and nuclear fuel w ill represent the largest porti on of these expenditures.
Current es ti mates for the years 1977 through 1981, excl ud-ing allowance for funds used during construction, are:
Year 1977 1978 1979 1980 1981 Total Millions of$
427 605 665 800 926 3,423 We expect to generate internally about 55% of our con-struction expenditure needs for the five years, 1977-81, provided that adequate rate relief is obtai ned during th is period.
Financing Two million shares of Common Stock were sold for
$35,090,000 in March. In April we sold $60 mill ion of 834 % First and Refunding Mortgage Bonds. Proceeds from both issues helped to prepay $150 million of Five-Year Term Notes issued in 1974.
In September, PSE&G completed two offerings: two mil-lion shares of 8.70% Cum ulative Preferred Stock - $25 Par for $50 million and $60 mill ion principa l amount of 8.45% First and Refunding Mortgage Bonds. In October, the Company issued $14.3 mill ion of tax-exempt 6.30% First and Refunding Mortgage Bonds to provide fu nds for its share of ai r and water poll ution control fac ilities at Peach Bottom nuclear station in York Cou nty, Pennsylvania.
6 The Company raised an add itional $9.4 million in 1976 by the sa le to stockholders of 452,587 shares of Common Stock through the Dividend Reinvestment Pl an.
Commercia l paper was utilized modestly during the year to meet interim capita l requ irements. The average daily amount of comryiercial paper outstanding in 1976 was only
$6.4 million. At December 31, the Company had $4.7 million outstanding in short-term obligations.
We plan to raise about $100 million of capital in 1977 from sales of securities. If PSE&G is to raise this capital at reasonable costs, it is essential that we earn a fa ir return on our invested capital and that we continue to maintain high credit ratings on all of our securities.
Stockholders The number of stockholders continued to grow in 1976.
At year end there were 216,191 holders of Common Stock; 14,414 holders of $1.40 Dividend Preference Common Stock; and 34,040 holders of Preferred Stock. At Decem-ber 31, there were 25,507 holders of Common Stock participating in the Company's Automatic Dividend Reinvestment Plan, an increase of 4,678 from a year earlier.
Investor Relations PSE&G pursued an active investor relations program in 1976.
To insu re effective commu nications w ith the financia l com-munity, management met with groups of security analysts, portfolio managers, and other members of the investment community in several major cities during the yea r. In addi-tion to a formal presentation before the New York Society of Secu rity Analysts, the Company held two seminars in Cherry H ill, New Jersey, for senior security analysts. These sem inars focused on industry developments and on ou r
Company's cu rrent and projected operations. We intend to continue ou r comprehensive information program for investors during 1977.
Financial Policies and Objectives Your management at PSE&G continues to assign the highest priority to the task of maintaining the Company in a sou nd fi nancia l condition. This is of very specia l importance as we face the task of financi ng our construction program in the years ahead.
We were successful this past year in reach ing certain minimum goals we had set several years ago. Among these financial objectives were: a sound capital structure com-prising 50% debt, 13% preferred stock and 37% common equity; a minimum earnings coverage of fixed charges of 3.0 times; stronger cash flow, higher quality ea rnings, and the maintenance of high cred it rati ngs for all of our secu r-ities. While we feel there is still room for improvement in the areas of cash fl ow and higher quality earnings, par-ticularly as we view the future, we were pleased that at year end we had exceeded our minimum goals for capital structure and coverage ratios.
It is also of prime concern to us that we ea rn a fair return on invested capital to support the market price of the Com-pany's common shares at a reasonable premium above book va lue.
Corporate Modeling System O ur near-term financing plans are extremely important in placing the Company in the best possible position to finance the extremely heavy construction program that we face in the next 3 to 10 years. To aid in this effort and to assure proper steps are taken to maintain high credit Nuclear energy to serve the State ratings fo r ou r securities, PSE&G in 1976 installed the most advanced corporate modeling and financial plan-ning system avai lable w ith assistance from O n-Line Deci-sions, Inc. Thi s system allows us to adjust ou r plans for changing cu rrent condi tions as well as for changing esti-mates of future activity quickly. Answers to most "what if" type questions can now be provided in terms of minutes and hours rather than in terms of days and weeks.
Electric and Gas Production Electric output registered an increase in 1976, the first since 1973. Total kilowatthours produced, purchased and inter-changed rose 4% to 30.4 billion.
This year's hou rl y peak demand of 6, 190 megawatts re-corded on August 26, 1976 was below the 1975 peak of 6,270 megawatts and considerably lower than the all time peak of 6,816 reached in 1973. The year's highest daily output, also on August 26, was 117,091,000 net kilowatt-hours, 3% below the 1975 figure. However, we did experi-ence a new w inter peak demand of 4,806 megawatts on December 13, 1976.
Gas sendout for the year totaled 1. 9 bi 11 ion therms, 4%
more than in 1975 and the first annual increase experienced si nce 1972. The highest sendout in 1976 for a si ngle day was 12,803,000 therms on February 2, when the tempera-ture averaged 12°F. The highest sendout in 1975 for a single day was 11,077,000 therms on January 20, w hen the tem-perature averaged 18° F.
A new record for a si ngle day was set on January 17, 1977 with a sendout of 14,006,000 therm s when the day's aver-age temperature was 3° F. The previous record 24-hour sendout was 12,872,000 therms on February 1, 1971 when the average temperature was 10° F.
7
L Electric Peak Load and Installed Capacity at Time of Peak 9.0 Millions of Kw ___________________
8.72 8.5 ______ ____________ __
7.5 ____________
Installed Capacity 7.0 __________
6.5 6.0 5.5 5.0
- 4. 5 4.0 3.5 1967 68 69 70 71 72 73 74 75 Generating Capacity The installed generating capac ity at year end was 8,741 megawatts, a decrease of 88 megawatts from December 1975. The decline resulted primari ly from decreased ratings of several generating units during the year.
The generating capacity forecast for the peak loads ex-pected during the next eleven years, when the Company's projected sixth nuclear faci lity is scheduled to enter com-mercial operation, indicates a reserve of about 20% at all times. The anticipated peaks, insta lled capaci ty and reserve during this period are:
Peak Instal led Year Load Capacity Reserve (Megawatts) 1977 7, 100 9,245 30 1978 7,380 9,265 26 1979 7,670 9,740 27 1980 7,970 9,740 22 198 1 8,290 9,928 20 1982 8,630 10,328 20 1983 8,990 10,728 19 1984 9,370 11,242 20 1985 9,750 11,762 21 1986 10, 130 12,037 19 1987 10,530 12,557 19 Nuclear Generating Facilities 76 Salem Generating Station Unit 1, the first nuclear unit to be designed and operated by PSE&G, received a fu ll-power operating license from the Nuclear Regu latory Commiss ion (N RC) on December 1, 1976. Th is unit, which first produced power on December 25, is expected to reach full output of 1,090 megawatts by May 1977.
8 Gas Peak Sendout and Daily Capacity at Time of Peak 19 Millionsof Therms __________________
17 __________________
16 _______________
15 ___________
~
12 _____
11 __
10 _
9 __
8------t' 6 __
4 _
1966 1967 67 68 Heating Season 68 69 69 70 70 71 71 72 72 73 73 74 74 75 The Company holds a 42.59% interest in the station and is entitled to 464 megawatts as its share of th is unit. Also sharing in the ownership and output are: Phi ladelphi a Elec-tric Company (42.59%); Atlantic City Electric Company and Delmarva Power & Light Company (7.41 % each).
Total annual PSE&G electri c output generated by nuclear energy was 16% in 1976 compared with 15% in 1975. With the addition of Salem 1, this output is expected to rise to 24% in 1977.
Construction and installation of equ ipment at Salem 2 is expected to be completed in time for commercial servi ce in M ay 1979. When this unit achieves fu ll power output, the additional 475 megawatts allocated to PSE&G as its share will increase the Company's nuclear generation to 31 % of total power output.
Construction work on the Hope Creek Generating Station commenced in March 1976 after a number of delays. Hope Creek 1 is now scheduled to enter com mercial service in May 1984 and Hope Creek 2 in May 1986.
Early in 1976, Atlantic City Electric Company reduced its ownership interest in the Hope Creek units from 10% to 5%, thus increasi ng PSE&G's share to 95%. Each unit is schedu led to produce 1,067 megawatts w hen ful I operation is attained.
The necessary steps are being taken to obtai n appropriate permits for the Atlantic Generating Station to be located almost three miles off the New Jersey shore and 12 miles northeast of Atlanti c City. Licensi ng for the floating nuclear power units, Atlantic 1 and 2, is a two-pronged procedu re.
A license to construct the plants in Jacksonvi ll e, Florida is being sought by Offshore Power Systems and NRC hearings are expected to be completed by the end of 1977. Our Company has applied fo r a I icense to construct a break-
Uranium mine, Wyoming. Agreements were made to provide fuel for Sa lem and Hope Creek Generating Stations into the '90's.
water at the Atl anti c site and we expect public hearings to begin in the su mmer.
An environmental review by NRC in October 1976 stated that the plants would have "no significant adverse impact" on the environment.
Although the licensing process is moving slowly, the Company remains fi rml y con-vi nced that the offshore concept for construc-tion and operation of nuclear plants offers substan-tial advantages over other alternatives in meeting the future energy needs of our customers.
At the end of 1976, PSE&G had expended $394 million on its Salem units, $204 million on its Hope Creek project, and $1 56 milliop on the Atlantic project.
The Company also has a contract wi th Offshore Power Systems for two additional barge-mounted units identica l to Atlantic 1 and 2 wh ich are schedu led for commercia l operation in 1990 and 1992. An estimate of the total cost of these units is not yet ava ilable. However, it can be anticipated that such costs w ill at least equal the current estimate for the Atlanti c units. The size and sophistication of today's electric uti I ity plants and the complexity and delays encountered in obtaining licenses and other regu latory approva ls have compelled the Company, as well as other electric utilities, to make substantial expenditures and commitments for fac ilities prior to the completion of licensing and regu latory proceed ings. A lthough no positive assurances can be given that such perm its and licenses wi ll be forthcoming, the licensing activities are movi ng forward and the Company anti cipates that the necessary licenses and authori zations w ill be received. We w ill continue to comply with all requirements necessary to receive such licenses.
Coal cleaning plant, Virginia. Contract signed in '76, added to existing agreements, assures Company of 60% of its low-sulfur coal needs for the next decade.
Fossil Fuel The Company was able to obtain adequate supplies of fossil fuels for its production needs throughout 1976. Prices remained rela-tively stable during the year. The delivered cost of low sulfur coa l increased 1 % and light oil increased 8% w hile heavy oil declined 3%.
Long-term contracts for low sulfur heavy fuel oil and kerosene were successfully negotiated.
We also entered into a new long-term contract for a sizeable quantity of low sulfur coa l which will sub-stantiall y strengthen our coal supply position.
Nuclear Fuel The Company successfully completed negotiations during 1976 for uranium w hich should meet the anticipated fuel needs for Sa lem and Hope Creek nuclear generating pl ants through the early 1990's.
A contract w ith Kerr-McGee Nuclear Corporation pro-vides for the purchase by PSE&G of all uranium, up to 20 million pounds, produced from reserves on the supplier's properties at South Powder River Basin in Wyoming be-tween 1980 and 1995. Deliveries are scheduled at the ap-proximate rate of 1.6 million pounds annually. The Com-pany wi ll also have the right of first refusa l on other uranium deposits w hich may be developed on the basi n properties. The price of the uranium w ill be the same as the generally prevailing domestic level at the time of delivery.
In addition, the Company has agreed to make interest-bearing advances of up to $11 5 million over an eight-year peri od to help finan ce the mining and milling facilities.
In another contract signed with Homestake Mining Com-pany, we agreed to finance 90% of a $10 million explora-9
!~
L Energy Centers: 7) Linden Synthetic Natural Gas Plant, with Linden Generating Station to the rear; 2) PSE&G subsidiary, Energy Terminal Serv-ices Corporation, will receive imported liquefied natural gas. At top left is Company's Sewaren Generating Station; 3) Burlington Liquefied Natural Gas Plant in foreground, followed by a combined cycle unit which utilizes waste heat from the cluster of gas turbine generator units, and our Burlington Generating Station.
tion and development program on the Homestake proper-ties in Wyoming. Under the contract, PSE&G has options to purchase uranium concentrates, the quantity depending upon the results of the program.
Although domestic uranium continues to be in short supply, prior contracts made by the Company wi 11 provide enough fuel to operate Salem 1 and 2 into 1980. The price of uranium continued to rise in 1976 but at a slower rate than in 1974 and 1975. While the course of future prices cannot be estimated with certainty, it is likely that the price of uranium, like that of all fuels, will continue to increase.
In October, uranium mining operations began at two properties in Utah where the Company has a 50% interest through our exploration and development subsidiary, Energy Development Corporation. Approximately 1,000 tons of ore have been extracted by Uranium Production Company, the mine operator. This ore will be milled at the Cotter Corporation mi 11 under a one-year contract. Long Island Lighting Company also holds a 50% interest in this joint venture which is managed by Nuclear Assurance Corporation.
Gas Supply The daily gas capacity, excluding the effect of pipeline cur-tailments, declined to 19,449,000 therms during the year 10 from 19,575,000 therms in 1975. The decrease resu lts from the termination of 126,000 therms of delivery capac ity from temporary fi~ld storage service provided in 1975 by Trans-continental Gas Pipe Line Corporation. The compos ition of the daily capacity on December 31, 1976 was:
Type of Gas Natural Gas Liquefied Petroleum Gas Oil Gas Refinery Gas Synthetic Natural Gas Holder Stock Available Natural Gas Therms Per Day 14,257,000 2,068,000 1,510,000 255,000 1,325,000 34,000 The daily supply of natu ral gas included in the total capa-city declined to 14,25 7,000 therms from 14,383,000 therms at the end of 1975. About 47% of the daily natural gas capacity constitutes high-load-factor gas, ava ilable every day of the year. The balance comes from field storage, liquefied storage, and contract peaking supply.
During 1976, the Company purchased and used 1,734 million therms of natura l gas including storage gas. The rise of 80 million therms or 5% over 1975, even with cu rtail-ments in pipeline deliveries, resulted primarily because of deliveries from Energy Development Corporation, emergency purchases and withdrawals from storage. Cur-tailments of natu ral gas shipments covered by contracts were aga in imposed by each of the Company's three major pipeline suppliers. These curtailments, which started in 1971 with the national shortage of natural gas, averaged
31 % or 2 mill ion therms per day in 1976 compared with an average cut-off of 27%, or 1.8 million therms a day in 1975.
Supplementary Gas Supply The Company supplements its supplies of purchased natural gas and refinery gas with synthetic natural gas (SNG) man-ufactured from naphtha, oil gas made from kerosene, and liquefied petroleum gas produced from butane and pro-pane. Although all of these feedstocks are refined petroleum products, supplies were adequate in 1976. The daily capac-ity for producing these gases is 4.9 million therms, un-changed from 1975. In 1976, total output dropped to 42.9 million therms, or 15.2 million less than in the prior yea r.
The volume of refinery gas purchased from Exxon Com-pany's refinery in New Jersey was 118 million therms in 1976, an increase of 6% over 1975. Thi s source accounted for 6% of PSE&G's total supply of gas in 1976. The average cost of refinery gas bought in 1976 rose 24% from the 1975 level to $2.82 per million Btu. Deliveri es of refinery gas are under contract with Exxon through 1978.
Imported LNG As part of a long-range program to supplement its supplies of natural gas, the Company has been attempting since 1972 to obtain liquefied natural gas (LNG) from Al geria. In November 1975 an agreement was reached w ith Sonatrach, Algeri a's state-owned gas and oil company, to import LNG and to market this gas through a jointly-owned subsidiary, Eascogas LNG, Inc. Our partner in thi s joint venture is Algonquin Gas Transmi ssion Company, which operates in New England. About 72 % of the projected LNG shipments w ill be unloaded at termin al facilities at Staten Island, N.Y.,
acquired in August 1976 from the Cabot Corporation. After sales to other companies, PSE&G's share of the tota l imports from Sonatrach will be about 20-25% of the approximately 49 bil lion therms of LNG to be shipped over some 22 years.
In October, the Cabot terminal and pipeline corporations, which had become wholly-owned subsidiaries of PSE&G, were renamed Energy Terminal Services Corporation and Energy Pipeline Corporation. In November, a transportation agreement was signed with Burmah Oil Tankers Ltd. It cov-ers 60% of the shipping required under the Sonatrach sup-ply contract. The remaining 40% of the transportation, to be provided by the Algerians, is presently under negotiation with Sonatrach.
If deliveries are to commence during the winter of 1977-78, a number of approvals must be secured from gov-ernmental authorities in both Al geri a and the United States.
First, Eascogas must be authorized by the Federal Power Commi ssion to import and to sell LNG in the Un ited States.
Permits to operate the terminal and to build and operate a proposed pipeline to transport the LNG from the terminal to PSE&G's system are also needed.
Exploration and Development Energy Development Corporation (EDC), the Company's exploration and development subsidi ary, expanded its domestic acti vities during 1976 in both onshore and off-shore areas in its continuing search for new energy sources.
Natural gas joint exp loration programs were conducted in the Texas and Loui siana Gulf Coast regions.
By the end of 1976, EDC had drilled a total of 50 explora-tion well s and 32 development wells, of w hich 38 had been classified as commercial producers. Gas produced from two of the discovery fields, Colorado Delta and Pare Perdue, was transported during the year to PSE&G's system at the rate 11
Princeton Large Torus, the largest Tokamak in the world, is an important step in the development of fusion power plants by the 7 990's. PSE&C has been actively supporting the Princeton fusion project since 1957.
of 58,000 therms a day. Two discovery fi elds in East Texas may increase substantially the volume of gas transported to the Company when development work is completed and necessary authorizations are secured.
EDC extended its gas exploration program into federal offshore waters in 1976. Gas was di scovered in one area off the shore of Louisiana, w here additional drilling will deter-mine if the amount will reach commercial proportions. Par-ticipating as a member of the Transco Exploration Company group, EDC also acquired interests in five tracts in the Gulf of M exico. In the first Atlanti c O uter Continental Shelf lease sale, off the Mid-Atlantic coast, the PSE&G subsidiary ac-quired lease ri ghts as a member of the Shell Oi l Company group. The group, in w hich EDC's partici pation ranges from 1.4% to 3.5% of individual leases, made w inning bids total-ing $1 83 mill ion on 12 tracts. In addition, EDC purchased a 2% interest in four other tracts. Exploratory drilling is ex-pected to start by the spring of 1977.
Transmi ssion and Distribution In August, six years after initial application, final state and federal permits were received to build a 500,000 volt over-head transmission line to link New Jersey and Delaware.
Thi s line, scheduled to be completed late in 1977, w ill not only remove a transmission bottleneck in the lower Dela-ware Valley, but w ill also allow the full output of Salem Generating Station to reach the customers of PSE&G and the other utiliti es participating in Sa lem.
12 PSE&C is prime contractor to design and build a national test*facility to de-velop large batteries for energy storage. Th is w ill allow the most efficient generating units to supply lower-cost energy for use during peak hours.
Construction continued during the year on two other 500,000 volt overhead lines to strengthen the Company's bulk power capability in north ern and central New Jersey.
Both lines, one scheduled for completion in 1977 and the other in 1979, w ill serve as important links for transmitting power generated at Sa lem.
The Company's electric transmiss ion system was ex-panded by completion of an underground 230,000 volt line and by extension of a 230,000 volt overhead circuit to supply a new substation.
M ajor improvements included install ation of five new expandable substations, discontinuance of four unit sub-stations of limited capacity, and install ation of eight new 13,000 volt distribution circuits. Field operations were con-solidated by the di scontinuance of three subheadquarters.
In November, the Company received permi ssion to build a 23 0,000 volt overhead line in Union County after encoun-tering four years of delays. Scheduled for completion in 1979, the five-mile section w ill complete the transmission line between Deans Switching Station in Middlesex County and Aldene Switching Station in Union County.
In furthering efforts to conserve gas energy, the Company is parti cipating in an industry-w ide program to improve the efficiency of gas space heating systems. With the coopera-tion of 200 of our customers, experimental changes are being made in such areas as ignition, fuel input, venting, duct-work, adjustment of circul ating air or w ater, and flue heat recovery in tests that w ill extend over two wi nter seasons.
Shown is installation at one of 74 customer homes the Company's Solar Energy Task Force recommended be equipped with solar energy systems for testing and evaluation purposes.
Energy Pooling:
New Interconnection Agreements The Company signed an agreement in Apri I with six of the 10 other member companies of the Pennsylvania-New Jersey-Maryland Interconnection to build additional 500,000 volt lines in Pennsylvania. The agreement, which adds new east-west transmission facilities, augments the existing Keystone-Conemaugh 500,000 volt network which supplies power to PSE&G and other pool members from mine-mouth generating stations in the Pennsylvania coal regions. The new transmission facilities, scheduled for service in 1978, are expected to provide additional energy from lower cost sources.
Research and Development We accelerated our emphasis in 1976 on research and de-velopment programs seeking practical solutions for current and long-term energy problems. Research activities in-cluded continuation of existing projects and initiation of additional energy conservation programs.
In expandi ng its role in research, PSE&G has continued to seek outside financing from major national research organi-zations whose projects can best be coordinated with the needs and objectives of our Company. In 1976, PSE&G was awarded 11 research contracts totaling $9 million in outside funding. The Company also allocated $12 million for its own research programs and for PSE&G's share of jointly sponsored projects. This is in addition to the more than $16 million previously authorized for expenditure through 1980.
Four new weather monitoring stations will provide a centralized weather data bank to help determine solar energy availability under varying condi-tions and to provide weather information for general Company use.
13
Research is being carried out to determine feasibility of adding hydrogen to natural gas distribution systems to help stretch supply. H ydrogen from off-peak nuclear power could conceivably be used for this purpose.
Battery Energy Storage Test Facility The Company was selected by the Federal Energy Research and Development Administration (ERDA) as the prime con-tractor for a Battery Energy Storage Test (BEST) facility. This facility, expected to play a vital national role in developing new types of batteries for storing energy on electric power systems, wi ll be used to eval uate and to test several types of advanced batteries and associated auxiliary equipment operati ng in parallel with our electric system.
The BEST project, jointly funded by ERDA and by the Electric Power Research Institute (EPRI), will evaluate advanced batteries and serve as the focal point for develop-ment of efficient and econom ic batteries for energy storage.
This wi ll allow large nuclear and fossil base-load genera-tors to operate at maximum efficiency in off-pea k periods and this lower cost energy could then be stored for use during peak load periods.
Construction of the BEST fac ility is scheduled to start in mid-1 977 and to be operational by 1980. It w ill cost an esti-mated $8.6 million to build and equip the facility and an additional $3 to $5 mi llion for supplementary eq uipment.
The Company will contribute about $1.5 million for costs associated with the Somerset County site, the bu ilding, and substation equ ipment. Th is contribution is expected to be offset by Federal funding during operation of the fac ility w hich has a life expectancy of 10 years.
Gas Blending Studies The Company is conducting a 15-month study to determine the feasibility of blending hydrogen into nature.I gas di stri-bution systems. The project is funded by a $188,000 re-search contract with ERDA. Results to date indicate that up 14 PSE&C employees at United Technologies Corporation, Connecticut, where Company-supported research is being carried out to develop 26-megawatt fuel cell power plants to more efficiently meet energy needs in urban areas.
to 10% hydrogen could be used in existing appliances, and concentrations of up to 20% could be used by adjusting certai n appli ances. W ith fossil fuels and petroleum feed-stocks becom ing more expensive and some supplies more uncertain, hydrogen technology has been attracting greater interest among utilities. The concept of blending hydrogen, if proved commercia lly feasib le, holds the potential of extending our limited reserves of natural gas.
Aquaculture Project Expanded The Company's aquaculture project at Mercer Generating Station was extended for an additional three years to dem-onstrate the econom ic feas ibility of utilizi ng warm water discharged from power plants to raise commercia l-size freshwater sh rimp, trout, striped bass and eels. The initial phase of the program, started as an experiment in 1974 and concl uded in November 1976, proved that heated water cou ld produce high yields of protein from fish caged in raceways of special design and controlled environments.
Expansion of the raceways at M ercer is being funded by
$271,000 as the fi rst step of an $895,000 research grant from the National Science Foundation, sponsor of the first phase of the project.
Fuel Cel I Demonstrator Program As a result of advances made in a 26,000-ki lowatt fue l cell development program, which PSE&G has been supporting with eight other utilities, a $42 million demonstration program has been launched by EPRI and ERDA. A 4,800-kilowatt fuel cell power plant will be installed on a utility system to determine operational and performance charac-teristics. PSE&G will propose to ERDA that it serve as
"The Meadowlands," the nation's fin est sports and entertainment center. The 78,000-seat stadium is home of the Giants football team while the adjacent racetrack can accommodate 35,000 fans.
the host utility system. If successful, the program could lead to commercial fuel cell power plants w ithin ten years.
Energy from Refuse The Company signed an agreement w ith Combustion Equipment Associates to parti cipate in a one-year program to test the use of a powdered fuel to be burned as a supple-ment w ith oil at Bergen Generating Station. The fuel, known as Eco-Fuel II, is derived from solid w aste. If tests are suc-cessful, the agreement prov ides for a 19-year purchase arrangement. The Company has agreed to work w ith the Hackensack M eadow lands Commi ssion in testing the use of another refuse-deri ved fuel as a supplement to coal at its Hudson Generating Station. We are also embarking on a project to recover methane gas from a sanitary landfill in Cinnaminson, New Jersey. The project is expected to recover one million cubic feet of gas per day generated by decomposi ng garbage. Thi s gas wi ll be supplied to an adjacent industrial customer.
Solar Research Launched PSE&G has started a $447,000 demonstration project to in-stall and operate solar energy faci lities in 14 customers' homes to determine the practicality of solar energy as a substitute or supplement to conventional heating systems.
The project, which w ill ta ke three years to complete, is part of the Company's solar energy research program. The pro-gram includes the installation of a weather station monitor-ing network w ithin PSE&G's service area. Collected data w ill document weather conditions in the vicinity of each of the homes w here solar energy facilities w ill be in use. The information w ill provide a more accurate indication of per-formance of the equipment under varying conditions.
Commercial and Marketing The Company has continued to emphasize effective communications with customers and the importance of responding promptl y to their areas of concern.
Employees in customer contact activities have received special training to improve communication techniques employed in face-to-face contact or by telephone. The training has proved espec ially timely because of the large increase in the number of customer inquiries concerning billing or service.
The Company has also expanded its customer communi-cations program by converting its post card billing system to envelope billing allowing fo r enclosu res of messages on conservation or other subjects of special interest to users of electric or gas service. Thi s system also provides the customer w ith a return envelope fo r payment convenience.
PSE&G has continued to emphasize the importance of conservation measures in its marketing program. The Com-pany is also evaluating the effecti veness of heat pumps, solar heating, cogeneration of electricity and time-of-day prici ng for thei r potential contributions to more economical and more efficient uses of energy.
Kilowatthour sa les to customers increased by 4% in 1976 in contrast to a decl ine of 3% in 1975 from the prior yea r.
The increase reflected a modest improvement in the genera l hea lth of the economy w ithin the Company's servi ce terri-tory and w as the first increase in electric sales since 1973.
Installations of electric space heating systems showed an improvement over 1975. In the residential market, 1,948 in-stallations were made. The total number of residential in-stallations on the Company's lines w as 26,865 at yea r-end.
15
The New York Ttmes modem sate/lite printing plant in Carlstadt, estab-lished at a capital investment of $35 million, is designed to improve both production and distribution o f the newspaper.
In the industrial and commercial market 491 installations were made totaling 61,295 kilowatts. The total electric space heating added during the year will produce estimated additional revenues of $3,845,000 at current rates in 1977.
Therm sales of gas rose 3% from 1975 levels, the first in-crease in gas sales since 1972. Record cold weather in the last three months of the year was principally responsible for the gain.
At year end, the Company was supplying electricity to 1,654,505 customers and gas to 1,304,762 customers. A new municipal customer, the Borough of Park Ridge, was signed during the year. Transfer of its electric load will pro-duce an estimated $800,000 in annual electric revenues, starting in 1977.
Interruptible Service The number of gas customers served under interruptible contracts was 76 at the end of 1976 compared to 83 a year earlier. Interruptions during 1976 totaled 175 calendar days compared with 108 days in 1975. Revenues from inter-ruptible customers declined as therm sales for the year decreased 34% from 1975 levels.
The Company has received permission to establish an interruptible electric rate as an additional means of load management. It is anticipated that significant load relief w ill be realized at times of system peak through this medium.
Area Development Industria l and commercial development in the Company's service territory increased substantially over 1975's recession-depressed levels.
A total of 474 major companies with about 20,700 employees initiated or expanded operations within PSE&G 16 Harmon Cove, a condominium housing development along the Hacken-sack River in Secaucus will eventually provide 4,000 luxury dwelling units and associated amenities. The developer is Hartz Mountain Industries, Inc.
territory while 106 companies with about 9,700 employ-ees departed, leaving a net gain of 11,000 jobs.
Demand for office facilities was active. American Telephone and Telegraph Company's new headquarters building in Basking Ridge, with 2.7 million square feet, will be occupied by 2,900 employees. Other companies w ith new or planned major fac ilities in PSE&G territory include Prudential, Thomas and Betts, Becton-Dickinson, General Electric, IBM, and American Broadcasting Company.
Open ing of the Meadowlands Sports Complex, a $300 million project featuring a year-round racetrack and a 78,000-seat football stadium, has stimu lated plans for other facilities on the 588-acre site. These include an aquarium, an indoor arena, and a theme park of major proportions.
Commercial development of the meadowlands area, where nearly $200 mil lion of industrial, commercial and residential development has already taken place, continues to accelerate. A total of 1.6 million square feet of space was occupied or put under contract last year by industrial companies new to the area. Major projects planned include a 14-story Hi I ton hotel and convention center and a 560,000 square foot office and distribution building for Abraham & Straus.
Industrial development in PSE&G territory during the year involved construction or leasing of more than one million square feet of space for manufacturing or service opera-tions. Companies included were Eastman Kodak, Mattell, Inc., Essex Chemical Corporation, Colgate-Palmolive,
Restoration of the abandoned Keuffel & Esser factory building in Hoboken into 173 dwelling units is a unique accomplishment and has been re-corded on film by PSE&C to help give direction to other urban areas.
Baxter Laboratories, Coca Cola Bottling Company of New York, Inc., and Emerson Radio.
One of the largest industrial projects is the plan by Co-Steel International Ltd. to build a $95 mill ion steel plant in Perth Amboy. The plant, with a capacity of 500,000 tons a year, is expected to employ over 1,000 workers when it becomes fully operational in 1979. Its 74-megawatt elec-tric furnaces and rolling mill are expected to generate about
$10 million in annual revenues for PSE&G.
The New Jersey Economic Development Authority helped create new jobs by lending $15 6 million in 1976 to private industry for131 new business projects w ith total investments of $226 million. An estimated 7,900 perma-nent new jobs and 2,600 construction jobs have been or w ill be created as a direct result of this financi ng.
Community Involvement The Company cooperates in many ways w ith numerous civic, educational and cultural organizations within its service territory.
Personnel from the Consumer Affairs, Urban Affairs and Community Relations Departments are serving all spec-trums of the community, with special programs designed for minoriti es and economically-di sadvantaged persons. O ver-all assistance ranges from extending fin ancial support to advisory rol es to planned programs. For instance, Urban Affairs personnel are acti vely engaged in programs designed to create jobs. Last year this included close working rela-tionships with local, state and regional governmental units to help develop industrial park projects in Newark, Jersey City and Elizabeth. W hen complete, these projects w ill offer greater employment opportunities to di sadvantaged and minority groups.
Consumer Advisers held meetings throughout Company territory w ith numerous groups explaining the details and advantages to customers of the Company's "new look" billing.
Other programs have been designed to stimulate career motivation and development, provide summer film pro-grams for center city children, conduct solar energy compe-tition for 11th grade students and make presentations on conservation and w ise use of energy. Our Consumer Advis-ers alone in 1976 made 1400 presentations and answered 15,000 telephone call s from customers seeking information on nutrition, safety, and energy costs.
Environmental Affairs The Company has increased its efforts to communicate w ith government environmental agencies and w ith private organizations as part of its continuing program to achieve a more satisfactory envi ronment.
The Environmental Affairs Department, w hich represents PSE&G at public hearings on matters related to the envi-ronment, has also been instrumental in establishing greater contact w ith the pub I ic. An expanded speakers bureau has stressed such subjects as the energy outlook, nuclear energy, solar energy, the proposed offshore power stations, and other publicly significant issues.
PSE&G expenditures to preserve and improve the quality of environmental influences due to its operations were $121 million in 1976, incl uding the $66 million incremental cost of low sulfur fuels.
Communications Communications acti vi ti es have pl ayed key roles in imple-menting the Company's pub I ic information program s directed at employees, customers, students, social and civic groups, and other members of the general public.
In 1976, the Community Relations Department reached over 22 5,000 persons in our servi ce area. Films, slides, lee-17
There were over 400 entries in the Bicentennial Employee Art Contest held in April. It was enjoyed by all who visited and all who entered w ith trophies and awards being made at a special closing ceremony.
tures, and printed materials were used to provide informa-tion on nuclear energy and subjects of broad interest.
The Company also communicated with the general pub-lic by providing continuous information to the press and electronic news media and by an all-encompassing adver-tising program which produced more than a third of a million requests for energy information.
Also of great importance in 1976 was the appearance of Company personnel on radio and television stations either as guest speakers, panelists or as spokesmen answering media or audience questions.
The Company's floating energy information center, which features exhibits about nuclear energy, attracted 51,000 visitors in 1976.
Employees There were 13,342 Company employees at the end of 1976, or 6 fewer than at the end of 1975. A substantial number of employees who had been laid off in 1975 in departments where the work load. had decreased because of economic conditions were rehired during 1976, a year when the hiring level was the highest since 1973.
Wages and salaries totaled $237,521,252 in 1976, includ-ing $8,837,719 for disability benefits and workmen's compensation. Union-represented employees received a 7.98% wage increase on May 1 as part of a two-year in-crease negotiated in 1975. The Company's contributions to the trusteed pension fund for employees was $33,973,008 18 Executive Vice Presidents William E. Scott and John F. Betz discuss Company's Affirmative Action Program with M ichael R. Tuosto (left)
Manager-Equal Opportunit y Activities.
in 1976. At year-end the number of retired employees and beneficiaries under the pension plan had increased to 4,508.
The Company's continuing program to help employees improve their supervisory and managerial practices through personnel development classroom courses again elicited much interest at all organizational levels. A new corporate performance evaluation system was adopted on a Company-wide basis during the year. Job related courses at nearby colleges were attended by 536 employees under the Com-pany's tuition aid program.
PSE&G has continued to emphasize its Affirmative Action program in respect to the hiring of women and members of minority groups. In 1976, 29% of all persons hired were women and 23% were from minorities. At year end, 1,731 employees were female and 1,497 were members of minor-ity groups. As part of Company personnel policy, there was an appreciable increase in the number of professional and managerial positions filled by women and by minority persons.
A report analyzing the results of an employee attitude survey was submitted to the Company during 1976. The survey report, made by Opinion Research Corporation of Princeton, New Jersey, was based on answers to an opinion research questionnaire by 2,920 representative employees.
In response, many actions have been taken to make PSE&G a better place to work.
TN} is the State's largest mass transit carrier and last year provided service for 118 million passengers. In 7 976, TN} received 416 new buses under a program sponsored by the State Department of Transportation.
Transport of New Jersey In 1976 Transport of New Jersey (TNJ) and its subsidiaries recorded a net loss of $504,000 after receiving State subsidies of $20,976,000. This compa res to a net loss of $1,755,000 in 1975 when the State subsidies were
$17,143,000.
Fare Increase The Interstate Commerce Commission (ICC) in March 1976 authorized TNJ to increase the rates of all interstate fares by 10%, from all points on its routes in New Jersey to points in New York and Pennsylvania.
Bus-Buy-Out Program Under the Bus-Buy-Out Program of 1975, the Department of Transportation acquired 514 used buses from TNJ. The buses were then leased back to TNJ at a nominal cost. As part of the transaction, $5,339,000 or 40% of the approx-imately $13 million price was returned to the Department of Transportation for use, together with Federal financial assistance, to purchase in 1976, 195 new transit-type buses and 221 new commuter-type buses which are now leased at no cost to TNJ.
These new buses are air conditioned and equipped with the latest ecological device to limit ai r pollution. With the addition of these new buses, the average age of TNJ's oper-ating fleet was reduced from 11.64 years to 7.84 years.
Subsidies Necessary TNJ, along with its subsidiary Maplewood Equipment Company, provides transportation for nearly one-half million passengers every working day. This is substantially more than the total number of passengers carried by all New Jersey commuter railroads and underscores the im-portance of TNJ's operations to the citizens - and to the economy - of the State. Unfortunately, despite strenuous cost-cutting measures, the future operation of TNJ is dependent upon the continuation of State or Federal subsidies.
Officers John J. Gilhooley Chairman of the Board and President S. A. Caria Executive Vii::e President Madison L. Edgerton Senior Vice President for Traffic and Community Affairs Richard Fryling Vice President for Law and Secretary George K. Klein Treasurer and Assistant Secretary Jesse J. Cooper Comptrol ler and Assistant Treasurer 19
Summary of Significant Accounting Policies System of Accounts The Company is under the jurisdiction of the Federal Power Commission (FPC) and the Board of Public Uti lity Commission-ers of the State of New Jersey (PUC) and maintains its accounts in accordance w ith their prescribed Uniform Systems of Ac-cou nts, wh ich are substantial ly the same. As a result of the rate-making process the accounting princi ples applied by the Company differ in certai n respects from those applied by non-regulated businesses.
Investments in Subsidiaries The Company's investments in its subsidiaries, w hich in the aggregate are not significant as defined by the Securities and Ex-change Commission, are reported in the accompanyi ng financia l statements on the equ ity method of accounting.
Revenues Revenues are recorded based on estimated service rendered, but are generally bil led to customers through monthly cycle billings on the basis of actual usage.
Fuel Costs - Electric The Company's electri c rates incl ude energy adjustment clauses which permit recovery of increases in electri c fuel and inter-changed power costs over base period costs approximately two months subsequent to their incurrence. In accordance w ith regu-latory approva l, the Company is charging operations for in-creases in electric fuel costs in the period of recovery.
Effective June 16, 1975, in accordance w ith a rate order re-ceived from the PUC, an amount equal to the balance of unbil-led fuel costs at December 31, 1974 is being amortized over a peri od of eight years.
Fuel Costs - Gas Effective January 2, 1976, in accordance w ith a PUC order re-ceived in late 1975, the Company is allowed to recover the proj-ected cost of purchased gas and materi als used to manufacture gas over a twelve month period. The adjustment clause for gas costs is set at a fixed rate for such period. Recoveries that vary from actual costs are being deferred and included in the follow-ing period's cost for determining the adjustment factor for gas rates. The Company is charging operations pri ncipa lly on the basis of the average twelve month period cost of gas delivered to its customers.
Prior to January 2, 1976 increases in purchased gas and materials used to produce gas were recovered in months sub-sequent to their incurrence and were charged to operations prin-cipally as they were incurred.
Gross Receipts Tax As a result of rate orders received from the PUC, the Company, effective January 1, 1973, began accruing gross receipts tax on current revenues rather than on the previous basis of taxes paid.
The provision for gross receipts tax on 1972 revenues is being charged to operations by an amount equivalent to.5% of reve-nues subject to the gross receipts tax.
Depreciation and Utility Plant Depreciation, for financia l reporting purposes, is computed under the straight-line method and is based on estimated average remaining lives of the several classes of depreciable property.
These estimates are reviewed continuously and adjustments, as approved by the PUC, are made as required. Depreciati on pro-visions for the years 1976 and 1975 stated in percentages of ori g-inal cost of depreciable property are 3.39% and 3.20%, respec-tively.
20 The cost of mai ntenance, repairs and replacements of minor items of property is charged to appropriate expense ac-counts. The cost of replacements of units of property is charged to Uti lity Plant. At the time depreciable properties are retired or otherwise disposed of, the original cost less net salvage va lue is charged to the appropriate accumu lated provision for deprecia-tion.
Income Taxes The Company and its subsidiaries fi le a conso lidated Federal in-come tax return, and income taxes are al located, for reporti ng purposes, to the Company and its subsidiaries based on the taxa-ble income or loss of each.
Deferred income taxes are provided for differences be-tween book and taxable income to the extent permitted by the PUC or other regulatory agencies for rate-making purposes.
Investment tax credits are deferred and amortized over the average life of the related plant.
Allowance for Funds Used During Construction Allowance for funds used duri ng construction (AFDC) is a cost accounting procedure w hereby the approximate net composite interest and equ ity costs of capital funds used to fi nance con-struction are transferred from the income statement to construc-tion work in progress (CWIP) in the balance sheet. Thi s proce-dure is intended to remove the effect of the cost of fi nancing construction activity from the income statement, and resu lts in treating such cost in the same manner as construction labor and material costs. The rate used for ca lculating AFDC was 8% in 1976 and 1975.
The PUC issued rate orders in 1975 allowi ng the Company to recover the financing cost on $2 50,000,000 of CWIP through current operating revenues. As a result of these orders no AF DC has been accrued on $1 25,000,000 of CWIP since June 1975, and none has been accrued on an additional $125,000,000 of CWIP since November 1975.
O n February 2, 1977 the FPC issued an order revising the Uni form Systems of Accounts, effective January 1, 1977, w hich provides a formula for determining the maximum allowable AFDC rate, and for segregating AFDC into two component parts, borrowed funds and other funds. The borrowed funds compon-ent wi ll be included in the Interest Charges section of the State-ment of Income and the other funds component w ill remai n as part of Other Income. The Company does not expect any mate-rial change in its AFDC rate or adverse effects on the results of operations as a result of thi s statement. However, there may be an effect on earnings available for coverage tests under the pro-visions in the Company's Mortgage and Restated Certificate of lncorporatio[l which in turn may affect the amount of mortgage bonds and preferred stock that can be issued, but this wi ll not af-fect the Company's fi nancing in the immediate future.
Pension Plan Pension costs are accounted for on the basis of an acceptable ac-tuarial method and are charged to operating expenses, util ity pl ant and other accounts. The Company's policy is to fund pen-sion costs accrued. In January 1977 the Company increased its annual payment to the fund for prior service costs, thereby re-ducing the funding period, w hich began January 1, 1967, from 40 to 35 years.
Extraordinary Property Losses Extraordinary Property Losses are deferred and amortized over periods prescribed by the PUC, the longest of which ends De-cember 1, 1993.
Statement of Income For the Years Ended December 31,
Operating Revenues Electric Gas Total Operating Revenues Operating Expenses Operation Fuel for Electric Generation Interchanged Power-net Gas Purchased and Materials for Gas Produced Other Operation Expenses Maintenance Depreciation Taxes Other than Federal Income Taxes Federal Income Taxes (note 1):
Current Deferred Total Operating Expenses Operating Income Other Income Allowance for Funds Used During Construction Miscellaneous Other Income-net Earnings (Losses) of Subsidiaries-net (note 2)
Total Other Income Income Before Interest Charges Interest Charges Long-Term Debt Short-Te rm Debt Other Total Interest Charges Net Income Dividends on Cumulative Preferred Stock and
$1.40 Dividend Preference Common Stock Balance Available for Common Stock Shares of Common Stock Outstanding End of Year Ave rage for Year Earnings per average share of Common Stock Dividends paid per share of Common Stock 1976 1975 (Thousands of Dollars)
$1,316,077
$1,213,488 553,458 417,037 1,869,535 1,630,525 362,257 339,296 121,917 139,016 261,190 198,653 227,395 201,865 99,617 83,494 133,087 122,634 275,254 240,967 6,033 1,202 94,347 53,166 1,581,097 1,380,293 288,438 250,232 43,547 43,325 1,928 2,913 726 (1,155) 46,201 45,083 334,639 295,315 127,643 134,411 359 1,551 2,613 747 130,615 136,709 204,024 158,606 41,257 36,008
$ 162,767
$ 122,598 58,975,747 56,523,160 58,307,947 54,512,838
$2.79
$2.25
$1.78
$1.72 See Summary of Significant Accounting Policies and Notes to Financial Statements.
21
Balance Sheet December 31,
Assets Utility Plant-original cost Electric Plant Gas Plant Common Plant Utility Plant in Service Less Accumulated Depreciation Net Utility Plant in Service Construction Work in Progress, including nuclear fuel, 1976, $72,352; 1975, $47,044 Plant Held fo r Future Use, net of accumulated depreciation Net Utility Pl ant Other Property and Investments Nonutility Property, net of accumulated depreciation, 1976, $380; 1975, $465 Investments in and Advances to Subsidiaries (note 2)
Other Security Investments, at cost or less (note 2)
Total Other Property and Investments Current Assets Cash (note 3)
Accounts Receivable, net of accumulated provision for doubtful accounts, 1976, $4,039; 1975, $2,860 Refundable Federal Income Taxes Fuel, at average cost Unbilled Electric Fuel Costs Materials and Supplies, principally at average cost Prepayments Total Current Assets Deferred Debits Gross Receipts Tax Extraordinary Property Losses Other, principally debt expense Total Deferred Debits Total See Summary of Significant Accounting Policies and Notes to Financial Statements.
22 1976 1975 (Thousands of Dollars)
$3,219,349 843,315 41,948 4,104,612 1,194,444 2,910,168 1,129,504 21,147 4,060,819 6,511 117,354 24 123,889 26,728 266,702 1,015 102,570 43,492 15,801 2,367 458,675 96,397 6,761 2,241 105,399
$4,748,782
$3,175,218 820,171 35,463 4,030,852 1,078,121 2,952,731 869,261 20,652 3,842,644 6,874 23,349 64,728 94,951 24,528 224,582 1,015 106,197 45,422 16,084 2,133 419,961 105,580 7,708 2,629 115,917
$4,473,473
Lia bi I ities Capitalization Common Equity Common Stock (see statement, page 25)
Premium on Capital Stock Paid-In Capital Retained Earnings Reinvested in Business (note 4)
Total Common Equity Preferred Stock (see statement, page 25)
Total Stockholders' Equity Long-Term Debt (see statement, page 26)
Total Capitalization Current Liabilities Long-Term Debt due within one year (see statement, page 26)
Commercial Paper Accounts Payable Taxes Accrued, including gross receipts tax, 1976, $257,498; 1975, $226,090 Deferred Income Taxes (note 1)
Interest Accrued Gas Purchased Other Total Current Liabilities Deferred Credits Accumulated Deferred Income Taxes (note 1)
Accumulated Deferred Investment Tax Credits (note 1)
Other Total Deferred Credits Commitments and Contingent Liabilities (note 6)
Total 1976 1975 (Thousands of Dollars)
$ 900,384 550 26,065 596,745 1,523,744 559,994 2,083,738 1,894,210 3,977,948 37,136 4,700 66,457 276,410 70,666 33,183 27,202 47,230 562,984 116,455 83,735 7,660 207,850
$4,748,782
$ 855,874 550 26,065 540,041 1,422,530 509,994 1,932,524 1,953,073 3,885,597 5,133 10,000 56,613 241,375 69,859 31,383 24,752 34,832 473.947 72,881 34,379 6,669 113,929
$4,473,473 23
Statement of Retained Earnings Reinvested in Business For the Years Ended December 31, Balance January 1, Add Net Income Total Deduct Cash Dividends Preferred Stock at required annual rates
$1.40 Dividend Preference Common Stock Common Stock Total Cash Dividends Capital stock expenses Total Deductions Balance December 31 (note 4)
Statement of Changes in Financial Position For the Years Ended December 31,
Source of Funds:
Net Income Non-cash Items:
Depreciation Amortization of Gross Receipts Tax Provision for Deferred Income Taxes-net Investment Tax Credit Adjustments-net Allowance for Funds Used During Construction Equity in Net (Earnings) Losses of Subsidiaries Other Total from operations Proceeds from sales of:
Long-Term Debt Preferred Stock Common Stock Total Security Sales Proceeds from the sale of nonutility equipment Miscellaneous Total Funds Provided Application of Funds:
Additions to Utility Plant, excluding allowance for funds used during construction Investments in and Advances to Subsidiaries Reductions of Long-Term Debt Dividends Miscellaneous Total Funds Applied Changes in Working Capital:
Short-Term Debt-(lncrease) Decrease Other (net)-lncrease (Decrease)
Net Increase (Decrease) in Working Capital Total Funds Applied and Changes in Working Capital See Summary of Significant Accounting Policies and Notes to Financial Statements.
24 1976 1975 (Thousands of Dollars)
$540,041
$515,267 204,024 158,606 744,065 673,873 39,462 1,881 103,609 144,952 2,368 147,320
$596,745 1976 34,041 1,881 93,692 129,614 4,218 133,832
$540,041 1975 (Thousands of Dollars)
$204,024
$158,606 135,833 125,427 9,182 8,016 43,574 21,669 49,966 7,829 (43,547)
(43,325)
(434) 1,262 801 (1,442) 399,399 278,042 132,526 48,163 72,415 44,086 56,855 224,775 129,270 40,027 1,001 3,592
$625,175
$450,931
$307,029
$254,093 28,877 7,289 190,504 10,548 144,952 129,614 4,136 2,635 675,498 404,179 5,300 89,422 (55,623)
(42,670)
(50,323) 46,752
$625,175
$450,931
Statement of Capital Stock December 31, Cumulative Preferred Stock
$100 par value-authorized 7,500,000 shares Series issued:
4.08%
4.18%
4.30%
5.05 %
5.28%
6.80%
9.62%
7.40%
7.52%
8.08%
7.80%
7.70%
12.25% issued in 1975 (note B)
Unissued-2,800,058 shares
$25 par value-authorized 10,000,000 shares 9.75% Series issued in 1975 8.70% Series issued in 1976 Unissued-6,400,000 shares Outstanding Shares 250,000 249,942 250,000 250,000 250,000 250,000 350,000 500,000 500,000 150,000 750,000 600,000 350,000 1,600,000 2,000,000 Current Redemption Price 1976 1975 Per Share (Thousands of Dollars) 25,000 24,994 25,000 25,000 25,000 25,000 35,000 50,000 50,000 15,000 75,000 60,000 35,000 40,000 50,000
$ 25,000 24,994 25,000 25,000 25,000 25,000 35,000 50,000 50,000 15,000 75,000 60,000 35,000 40,000
$103.00 103.00 102.75 103.00 103.00 106.00 109.50 106.00 108.00 108.00 108.00 108.49 112.00 27.50 27.00 Refunding Restricted Prior to (note A)
July 1, 1980 April 1, 1977 May 1, 1977 November 1, 1977 April 1, 1978 February 1, 1985 January 1, 1981 October 1, 1981 Total Cumulative Preferred Stock (note C)
$559,994
$509,994 Dividend Preference Common Stock and Common Stock
$1.40 Dividend Preference Common Stock (no par)-1,343,999 shares authorized, issued and outstanding ;
current redemption price $35.00 per share (note D)
$900,384
$855,874 Common Stock (no par)-authorized 100,000,000 shares (note E); issued and outstanding as of December 31,
1976, 58,975,747 shares (2,452,587 shares issued for $44,510 in 1976 and 3,992,157 shares issued for
$58,488in1975)
Notes:
A-Prior to the date specified, none of the shares of each such series may be redeemed, other than through the operation of a sinking fund, through refunding of such shares by the incurring of debt or the issuance of Preferred Stock where the cost of such debt or such Preferred Stock is less than the cost to the Company of each such series.
B-On February 1, 1980 and annually thereafter not less than 17,500 shares or more than 35,000 shares must be redeemed th rough the operation of a sinking fund at a redemption price of $100 per share plus accumulated and unpaid dividends to the date of such redemption.
The sinking fund requirement to redeem not less than 17,500 shares is cumulative.
C-As of December 31, 1976 the annual dividend require-ment on Preferred Stock was $42,469,000. The em-bedded dividend cost was 7.67%.
D-Each share of $1.40 Dividend Preference Common Stock is entitled to cumulative dividends, to two votes, and, on liquidation or dissolution, to twice as much as each share of Common Stock.
E-1ncludes1,892,311 shares of Common Stock reserved for possible issuance under the Automatic Dividend Reinvestment Plan.
See Summary of Significant Accounting Policies and Notes to Financial Statements.
25
Statement of Long-Term Debt December 31, First and Refunding Mortgage Bonds Series (note A) n 's% June 1, 1979 23/4% May1, 1980 31/4 % October 1, 1983 31/4 % May 1, 1984 43/a% November 1, 1986 4% % September 1, 1987 45/a % August 1, 1988 51/a % June 1, 1989 43/4 % September 1, 1990 43/a % August 1, 1992 43/a% June 1, 1993 45/a % September 1, 1994 43/4 % September 1, 1995 61/4% June1, 1997 7
% June 1, 1998 75/a % April 1, 1999 91/a % March 1, 2000 83/a% A May 15, 2001 75/a % B November 15, 2001 71/2 % C April 1, 2002 81/2% D March 1, 2004 12
% E0ctober1,2004 83/4 % F April 1, 2006 8.45% G September 1, 2006 6.30% Pollution Control A October 1, 2006 8
% June 1, 2037 5
% July 1, 2037 Total First and Refunding Mortgage Bonds Notes :
1976 1975 (Thousands of Dollars) 54,740 54,990 19,060 19,160 22,833 22,976 50,000 50,000 50,000 50,000 60,000 60,000 60,000 60,000 50,000 50,000 50,000 50,000 40,000 40,000 40,000 40,000 60,000 60,000 60,000 60,000 75,000 75,000 75,000 75,000 75,000 75,000 98,000 98,000 69,300 69,300 80,000 80,000 125,000 125,000 90,000 90,000 98,000 99,000 60,000 60,000 14,300 7,463 7,463 7,538 7,538 1,551,234 1,418,427 A-The Company's Mortgage, securing the First and Refunding Mortgage Bonds, constitutes a direct first mortgage lien on substantially all property and fran-chises.
B-The Five-Year Term Notes were prepaid with pro-ceeds from Common Stock issued March 11, 1976, First and Refunding Mortgage Bonds, 83/4 % Series F due 2006 issued on April 7, 1976 and cash from internal sources.
C-As of December 31, 1976 the annual interest require-ment on Long-Term Debt was $130,320,000 of which
$103,897,000 was the requirement for First and Refunding Mortgage Bonds. The embedded interest cost on Long-Term Debt was 6.78%.
26 See Summary of Significant Accounting Policies and Notes to Financial Statements.
1976 1975 (Thousands of Dollars)
Debenture Bonds unsecured 4%% March 1, 1977 43/4 % October 1, 1981 45/a % October 1, 1983 53/4 % June 1, 1991 71/4 % December 1, 1993 9
% November 1, 1995 73/4%August15,1996 83/4 % November 1, 1996 6
% July 1, 1998 Total Debenture Bonds Other Long-Term Debt Five-Year Term Notes due November 26, 1979 (note B) 61/2 % Note due serially from May 15, 1977 to 31,000 34,080 28,818 46,752 32,931 65,935 67,078 51,461 18,195 376,250 November 15, 1983 3,600 Total Other Long-Term Debt 3,600 Total Long-Term Debt principal amount outstanding (note C) 1,931,084 Less amount due within one year (note D) 37,136 Long-Term Debt excluding amount due within one year (note D) 1,893,948 Add Net Unamortized Premium 262 Long-Term Debt and Net Unamortized Premium
$1,894,210 31,000 35,761 29,645 48,306 34,298 66,784 67,876 52,523 18,195 384,388
- 150,000 3,600 153,600 1,956,415 5,133 1,951,282 1,791
$1,953,073 D-The aggregate principal amount of requirements for sinking funds and maturities for each of the five years following December 31, 1976 is as follows:
Sinking Year Funds Maturities Total (Thousands of Dollars) 1977
$ 5,656
$ 31,480
$ 37,136 1978 10,262 480 10,742 1979 9,560 53,730 63,290 1980 9,300 18,940 28,240 1981 8,300 31,480 39,780
$43,078
$136,110
$179,188 For sinking fund purposes, certain First and Refunding Mortgage Bond issues require annually the retirement of $14,300,000 principal amount of bonds or the utilization of bondable property additions at 60% of cost and the portion expected to be met by property additions has been excluded from the table above.
Also, the Company may, at its option, retire addi-tional amounts up to $6,200,000 annually through sinking funds of certain debenture bonds.
Notes to Financial Statements
- 1. Federal Income Taxes A reconciliation of reported Net Income with pre-tax in-come and of Federal income tax expense with the amount computed by multiplying pre-tax income by the statutory Federal income tax rate of 48% is as fol lows:
Net Income Federal income taxes included in:
Operating income:
Current provision
- Provision for deferred income taxes - net Investment tax credit adjustments - net Total deferred Total included in operating income Miscellaneous other income - net Total Federal income tax provisions Total (Earnings) Losses of subsidiaries - net Pre-tax income Tax expense at 48% of pre-tax income Adjustments to pre-tax income, computed at 48%, for which deferred taxes are not provided under current rate-making policies:
Tax depreciation in excess of book depreciation Allowance for funds used during construction Overhead costs capitalized Other Total Amortization of deferred tax items Total Total Federal income tax provisions
- Represents the tax effects of the following items:
Additional tax depreciation Unbilled revenues U nbi I led fuel costs Gross receipts taxes Repair allowance property Other 1976 1975 (Thousands of Dollars)
$204,024 $158,606 6,033 1,202 44,381 45,337 49,966 7,829 94,347 53, 166 100,380 54,368 232 154 100,612 54,522 304,636 213,128 (726) 1, 155
$303,910 $214,283
$145,877 $102,856 (6, 126)
(13,956)
(20,902)
(20,796)
(4,652)
(4,408)
(600)
(1,484)
(32,280)
(40,644)
(12,985)
(7,690)
(45,265)
(48,334)
$100,612 $ 54,522
$ 28,002 $ 20,685 7,662 7,514 (8,508) 1,818 1,653 14,336 18,239 3,836 (2,667)
(2,852)
Total
$ 44,381
~ 45,337 The balance of investment tax credits not utilized in 1976 in the amount of $21,000,000 is available as a carry-over to future years. The Tax Reduction Act of 1975 pro-vides that, for years 1975 and 1976, investment tax credits can be utilized to offset 100% of tax liability before investment cred it.
- 2. Investments in and Advances to Subsidiaries Investments in and advances to subsidiaries (including the Company's equ ity in undistributed earnings or losses) are summarized as follows:
December 31,
Transport of New Jersey Investment Energy Terminal Services Corporation (formerly DONY)
Investment Advances (A)
Energy Pipeline Corporation (formerly Distrigas Pipeline Corporation)
Investment Advances Energy Development Corporation Investment Advances Eascogas LNG, Inc.
Investment Total 1976 1975 (Thousands of Dollars)
$ 10,019 $ 10,523 3,097 69,598 1,000 400 2,879 30,356 5
$117,354 64,695 1, 941 10,880 5
$88,044(A)
(A) In 1975 the advances to DONY were included in "Other Security Investments".
The Company, to assist in the construction of a liquefied natural gas terminal on Staten Island, from 1972 through 1975 purchased $60,000,000 principal amount of interest bearing first mortgage notes of Distrigas of New York Corporation (DONY), a wholly-owned subsidiary of Cabot Corporation, a non-affi I iated company. These notes were in addition to $35,000,000 of equity funds provided by Cabot. The terminal facilities are intended to be the primary port of entry for the Company's share of LNG supplies being negotiated from foreign sources.
In recognition of the serious problems being encoun-tered by DONY in obtaining sufficient quantities of LNG with related regulatory approvals and authorizations and permits for the economical operation of the terminal facilities, the Company has not recognized interest income on these notes.
Early in 1975 Cabot announced that it would not in-vest any additional funds in this project. In order to protect its interest and investment in the terminal facilities, the Company, on August 13, 1976, purchased the capital stock of DONY and its affiliate, Distrigas Pipeline Corporation, and certain real estate interests for a consideration of
$6,000,000.
27
The conditions necessary to permit the successful operation of the terminal have not been met at this time.
Any loss the Company may incur, if these conditions are not resolved, is not presently determinable; however, in the opi nion of the management of the Company such loss, if any, would not have a materi al effect on the fi nancia l position of the Company or the resu Its of its operations.
Until such time as these conditions are met, the Company w ill continue its poli cy of not recognizi ng any income on th is investment. The ultimate realization of the carrying value of this investment may depend, among other th ings, upon the Company's ability to find alternate uses for the fac i I ities and the treatment granted by the PUC for rate-making purposes. Reference is made to Imported LNG on page 11 for additional information.
- 3. Compensating Balances Cash at December 31, 1976 and December 31, 1975 con-sisted pri maril y of compensating balances under informal arrangements w ith various banks to compensate them for services and to support lines of credit of $189,250,000 and
$1 87,200,000, respectively.
- 4. Retained Earnings and Dividend Restrictions Certain indentures suppl emental to the First and Refunding M ortgage, certain of the Debenture Bond indentures and the Restated Certifi cate of Incorporation, as amended, con-tain, among other things, provisions relating to the pay-ment of dividends on both Common Stock and $1.40 Dividend Preference Common Stock and provisions relating to the use of retained earnings. The amount of retained earnings available for the payment of dividends as of December 31, 1976 was $586,745,000.
- 5. Pension Plan The Company has a non-contributory, trusteed plan cover-ing all permanent employees. Pension costs for the past two years were charged as follows:
O perating Expenses Utility Plant and O ther Accounts Total Pension Costs 1976 1975 (Thousands of Dol lars)
$27,398 8,606
$36,004
$24,456 7,978
$32,434 As of December 31, 1976, the unfunded prior serv-ice cost was approximately $2 71,500,000 and vested ben-efits exceeded the cost of fund assets by approximately
$1 70,600,000.
Amendments to conform the Company's Pension Plan w ith the requirements of the Employee Retirement 28 Income Security Act of 197 4 were adopted effective January 1, 1976. Additional pension costs resulti ng from the amendments are not materi al.
- 6. Commitments and Contingent Liabilities The Company has su bstantial commitments as part of its constru ction program as well as com mitments to obtai n suf-ficient sources of fuel for electric generation and adequate gas supplies. Construction expenditures, excluding AFDC, of $3.4 billion are expected to be incurred during the years 1977 through 1981. For detai led information, see Construc-tion Expenditures - page 6, Nuclear Generati ng Facilities -
page 8, Nuclear Fuel - page 9, and Imported LNG-page 11.
The Company is a member of Nuclear Mutual Limited (NML) w hich provides insurance coverages, up to $150 mil-lion, for property damage to nuclear generating facilities of member companies. In the event of losses at any plant cov-ered by NML, the Company would be subject to a maxi mum assessment of fourteen times its annual premium, w hich currently wou ld not be material for a si ngle assessment.
The Company, under an agreement entered into in M ay 1972, agreed to provide a limited guaranty of not more than $76,000,000 of the legal obligations of the Company's unconsolidated subsidiary, Transport of New Jersey (Trans-port) under its pension plan in the event Transport failed to meet such obligations, limited to pension benefits accrued to the date of the agreement. As of December 31, 1975, the latest date for which information is ava ilable, the actuari ally computed value of the Company's obligation under the guaranty w as approximately $50,000,000. Under an in-terpretation of the Employee Retirement Income Security Act of 1974, the Company could be liable to the Pension Benefit Guaranty Corporation, a corporation established w ithin the United States Department of Labor, for deficien-cies in plan assets if the subsidiaries' pension plans were terminated. As of December 31, 1975, vested benefits of the Company's subsidiaries' pension plans exceeded the cost of the fund assets by approximately $70,000,000. Any pay-ments made under the guaranty would have the effect of reducing the Company's potential liabil ity to the Pension Benefit Guaranty Corporation Ph iladelphia Electric Company has consummated arrangements for the supply of all nuclear fuel for Peach Bottom 2 and 3 which are jointly owned w ith the Company and other utilities. The Company's proportionate share (42.49%) of the commitment as of December 31, 1976 was
$45,373,000. Nuclear energy costs, ca lculated at a zero net salvage value, are charged to fuel expense on the basis of the number of units of thermal energy produced as they re-late to total thermal units to be produced over the life of the fuel.
- 7. Replacement Cost (Unaudited)
The impact of the rate of inflation experienced in recent years has resulted in replacement cost of productive capacity which is greater than the historical cost of such assets as reported in the Company's financial statements. It is anticipated that the actual cost of replaci ng productive capacity, when incurred, will be recovered through depreciation recognized, together with a return on the unrecovered investment therein, in future rates allowed by regulatory bodies in the same manner that hi storic costs and returns on investments are being recovered in current rates. In compliance with reporting requirements of the Securities and Exchange Commission, estimated Quarter Operating Ended Revenues Net Income (Thousands)
March31, 1976
$515,138
$52, 147 June 30, 1976 426,634 42, 158 September 30, 1976 427,676 49,392 December 31, 1976 500,087 60,327 Independent Accountants' Opinion HASKINS & SELLS Certified Public Accountants 550 Broad Street, Newark, N.J. 07102 To the Stockholders and Board of Directors of Public Service Electric and Gas Company :
replacement cost information is disclosed in the Com-pany's annual report to the SEC on Form 10-K.
- 8. Other Matters Information regarding rate relief appea rs on page 5 and information describing financing during the year 1976 and subsequent to December 31, 1976 appears on page 6.
- 9. Selected Quarterly Data A summary of quarterly results of operations is shown in the table below. Due to the seasonal nature of the utility busi-ness, quarterly amounts vary significantly during the year.
Average Shares Earnings Balance of Common Per Average Available for Stock Share of Common Stock Outstanding Common Stock
$42, l 47 56,986
$.74 32, l 58 58,626
.55 39,222 58,743
.66 49,240 58,866
.84 We have examined the balance sheet and statements of capital stock and long-term debt of Publi c Service Electri c and Gas Company as of December 31, 1976 and 1975 and the related statements of income, retained earnings reinvested in busi-ness, and changes in fi nancia l position for the years then ended. Our examination was made in accordance with generall y accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing proce-dures as we considered necessary in the circumstances.
In our opinion, such financial statements present fairly the fi nancial position of Public Service Electric and Gas Company as of December 31, 1976 and 1975 and the results of its operations and the changes in its financial position for the years then ended, in conformity with generall y accepted accounting principles applied on a consistent basis.
February 10, 1977 29
Operating Statistics
% Annual lncrease-1976 compared with (000 omitted w here applicable) 1976 1975 1975 1966 Electric Revenues from Sales of Electricity (a)
Residential
$ 443,531
$ 413,005 7.39 13.18 Commercial 474,791 429,428 10.56 14.93 Industrial 367,470 341,749 7.53 12.93 Public Street Lighting 25,863 23,375 10.64 9.33 Total Revenues from Sales to Customers 1,311,655 1,207,557
. 8.62 13.61 Interdepartmental 1.. 585 1,573
.76 13.24 Total Revenues from Sales of Electricity 1,313,240 1,209,130 8.61 13.61 Other Electric Revenues 2,837 4,358 (34.90) 23.45 Tota l Operating Revenues
$1,316,077
$1,213,488 8.45 13.62 Energy Adjustment Revenues (included above)
$ 307,530
$ 419,154 (26.63) 33.94 Sales of Electricity-kilowatthou rs (a)
Residential 7,711,953 7,598,964 1.49 4.88 Commercial 9,514,574 8,994,855 5.78 6.78 Industrial 10,472,054 10,144,917 3.22 1.11 Public Street Lighting 259,151 256,755
.93 1.80 Tota l Sales to Customers 27,957,732 26,995,491 3.56 3.76 Interd epartmental 34,996 39,910 (12.31) 2.75 Total Sales of Electricity 27,992,728 27,035,401 3.54 3.76 Kilowatthours Produced, Purchased, and Interchanged-net 30,376,187 29,255,628 3.83 3.80 Load Factor 55.9%
53.3%
Heat Rate-Btu of fuel per net kwh generated 10,593 10,582
.10 Net Installed Generating Capacity at December 31-ki lowatts 8,741 8,829 (1.00) 6.61 Net Peak Load-kilowatts (60-minute integrated) 6,190 6,270 (1.28) 4.21 Cooling Degree Hours 6,513 6,543
(.46)
(3.99)
Average Annual Use per Residential Customer-kwh 5,395 5,348
.88 4.09 Meters in Service at December 31 1,697 1,689
.47
.60 Gas Revenues from Sales of Gas (a)
Residential
$ 342,524
$ 259,095 32.20 9.85 Commercial 140,809 102,656 37.17 13.89 Industrial 68,341 54,369 25.70 12.06 Street Lighting 159 11 6 37.07 7.80 Total Revenues from Sales to Customers 551,833 41 6,236 32.58 11.01 Interdepartmental 476 647 (26.43) 9.06 Total Revenues from Sales of Gas 552,309 416,883 32.49 11.01 Other Gas Reven ues 1,149 154 646.10 21.64 Total Operating Revenues
$ 553,458
$ 41 7,037 32.71 11.02 Raw Materials Adjustment Revenues (included above)
$ 154,526
$ 106,795 44.69 28.82 Sales of Gas-therms (a)
Residential 1,045,627 968,487 7.97 2.37 Commercial 468,761 447,600 4.73 5.89 Industrial 307,949 344,987 (10.74) 1.1 7 Street Lighting 389 404 (3.71)
(1.51)
Total Sales to Customers 1,822,726 1,761,478 3.48 2.92 Interdepartmental 1,764 3,204 (44.94)
(.58)
Total Sales of Gas 1,824,490 1,764,682 3.39 2.92 Gas Produced and Purchased-therms 1,895,041 1,823,191 3.94 2.68 Effective Daily Capacity at December 31-therms 19,449 19,575
(.64) 5.49 Maximum 24-hour Gas Sendout-therms 12,803 11,077 15.58 3.31 Heating Degree Days (a) 5,349 4,653 14.96
.57 Average Annual Use per Residential Customer-therms 924 862 7.19 1.97 Meters in Servi ce at December 31 1,354 1,355
(.07)
.46 (a) Starting in 1973, revenues and sales by customer classification include accrued and unbilled dollar amou nts and sa les volumes from meter reading date to the end of the calendar year. To better match temperature effects on these recorded sales, heating degree days are also reported on a calendar-year basis effective with 1973. For years prior to 1973, heating degree days rema in on a sales-year basis.
30
1974 1973 1972 1971 1966
$ 364,674
$274,974
$238,025
$219,614
$128,550 377,184 264,450 230,176 205,318 118,1 12 336,250 216,543 188,667 172,902 108,892 20,473 17,086 15,773 14,947 10,600 1,098,581 773,053 672,641 612,781 366,154 1,183 750 646 605 457 1,099,764 773,803 673,287 613,386 366,611 1,201 1,305 1,546 1,251 345
$1,100,965
$775,108
$674,833
$614,637
$366,956
$ 414,798
$141,081
$107,582
$111,506
$ 16,550 7,514,365 8,008,127 7,399,963 7,183,821 4,789,093 8,687,964 8,916,829 8,289,066 7,633,053 4,938,065 11,244, 117 11,830,307 11,375,579 11,091,985 9,381,885 253,395 249,837 246,496 241,449 216,814 27,699,841 29,005,100 27,311,104 26,150,308 19,325,857 31,072 29,160 25,807 25,500 26,671 27,730,913 29,034,260 27,336,911 26,175,808 19,352,528 29,730,774 31,164,926 29,509,136 28,055,190 20,919,448 53.7%
52.2%
54.2%
54.0%
58.2 %
10,779 10,695 10,685 10,642 10,363 8,892 8,306 7,836 7,483 4,610 6,316 6,816 6,201 5,925 4,100 7,501 10,911 7,287 8,717 9,788 5,312 5,703 5,307 5,184 3,614 1,683 1,672 1,656 1,643 1,598
$ 220,364
$186,325
$183,953
$170,380
$133,824 86,463 71,533 70,953 63,164 38,346 46,971 42,624 40,381 36,831 21,883 94 89 88 85 75 353,892 300,571 295,375 270,460 194,128 481 464 552 333 200 354,373 301,D35 295,927 270,793 194,328 535 117 143 76 162
$ 354,908
$301,152
$296,070
$270,869
$194,490 62,448
$ 39,124
$ 34,913
$ 27,636
$ 12,283 977,994 977,468 1,042,793 1,014,887 827,642 459,074 457,955 485,358 454,237 264,435 407,840 494,320 494,454 486,685 274,237 428 444 449 444 453 1,845,336 1,930,187 2,023,054 1,956,253 1,366,767 3,088 3,472 4,463 2,999 1,870 1,848,424 1,933,659 2,027,517 1,959,252 1,368,637 1,913,826 2,002,206 2,112,844 2,004,791 1,454,256 19,324 17,668 16,999 16,372 11,389 11,763 12,341 12,125 12,872 9,242 4,629 4,245 4,879 4,833 5,051 872 873 932 908 760 1,352 1,347 1,338 1,330 1,293 31
Financial Statistics (000 omitted where applicable) 1976 1975 Statement of Income (a)
Amount Amount Operating Revenues Electri c
$1,316,077 70
$1,213,488 74 Gas 553,458 30 417,037 26 Total Operating Revenues 1,869,535 100 1,630,525 100 Operating Expenses Fuel for Electric Generation 362,257 20 339,296 21 Interchanged Power-net 121,917 7
139,01 6 9
Gas Purchased and Materials for Gas Produced 261,190 14 198,653 12 Other Operation Expenses 227,395 12 201,865 12 M ai ntenance 99,617 5
83,494 5
Depreciation 133,087 7
122,634 8
Taxes Other than Federal Income Taxes 275,254 15 240,967 15 Federal Income Taxes :
Current 6,033 1,202 Deferred 94,347 5
53,166 3
Total Operating Expenses 1,581,097 85 1,380,293 85 Operating Income Electric 236,359 12 217,429 13 Gas 52,079 3
32,803 2
Total Operating Income 288,438 15 250,232 15 Other Income Allowance for Funds Used During Construction 43,547 3
43,325 3
Miscellaneous Other Income-net 1,928 2,913 Earnings (Losses) of Subsidiaries-net 726 (1,155)
Total Other Income 46,201 3
45,083 3
Income Before Interest Charges 334,639 18 295,315 18 Interest Charges Long-Term Debt 127,643 7
134,411 8
Short-Term Debt 359 1,551 Other 2,613 747 Total Interest Charges 130,615 7
136,709 8
Income before cumulative effect of a change in accounting method 204,024 11 158,606 10 Cumulative effect to January 1, 1973 of accruing estimated unbilled revenu es of $41,488, net of related taxes Net Income 204,024 11 158,606 10 Preferred Stock Dividends 39,376 2
34,127 2
Balance 164,648 9
124,479 8
$1.40 Dividend Preference Common Stock Dividends 1,881 1,881 Balance Available for Common Stock
$ 162,767 9
$ 122,598 8
Shares of Common Stock Outstanding End of Year 58,976 56,523 Average for Year 58,308 54,513 Earnings per average share of Common Stock
$2.79
$2.25 Dividends Paid per Share
$1.78
$1.72 Payout Ratio 64%
76%
Ratio of Earnings to Fixed Charges Before Income Taxes (c) 3.34 2.56 Book Value per Common Share (d)
$24.71
$24.02 Utility Plant
$5,255,286
$4,920,768 Accumulated Depreciation and Amortization
$1,194,467
$1,078,124 Capitalization Mortgage Bonds
$1,549,579 39
$1,418,854 36 Debenture Bonds 341,511 9
380,619 10 Other Long-Term Debt 3,120 153,600 4
Total Long-Term Debt 1,894,210 48 1,953,073 50 Preferred Stock 559,994 14 509,994 13
$1.40 Dividend Preference Common Stock and Common Stock 900,384 22 855,874 22 Premium on Capital Stock 550 550 Paid-In Capital 26,065 1
26,065 1
Retained Earnings 596,745 15 540,041 14 Total Common Equity 1,523,744 38 1,422,530 37 Total Cap italization
$3,977,948 100
$3,885,597 100 (a) See Summary of Significant Accounting Policies, page 20, and Charges divided by Fixed Charges. Fixed Charges incl ude Interest Notes to Financial Statements, page 27.
on Long-Term and Short-Term Debt and Other Interest Expense.
(b) Exclud es non-recurring special credit equal to $.41 per share.
(d) Total Common Equ ity divided by yea r-end Common Stock shares (c) Net Income plus Income Taxes, Investment Tax Credits and Fixed plus doubled the $1.40 Dividend Preference Common Stock shares.
32
1974 1973 1972 1971 1966 Amount Amount Amount Amount Amou nt
$1,100,96S 76
$ 77S,108 72
$ 674,833 70
$ 614,637 69
$ 366,9S6 6S 3S4,908 24 301,1S2 28 296,070 30 270,869 31 194,490 35 1,4SS,873 100 1,076,260 100 970,903 100 88S,S06 100 S61,446 100 374,S19 26 221,724 21 171,638 18 170,849 19 67,374 12 81,920 6
19,376 2
31,737 3
831 (S,619)
(1 144,020 10 119,828 11 11 7,910 12 100,296 11 63,S83 11 192,168 13 174,108 16 168,138 17 1S3,009 17 98,6S4 18 91,467 6
88,2S7 8
80,21 s 8
66,789 8
4S,378 8
106,683 7
98,239 9
91,037 10 84,474 10 S6,409 10 213,S76 1S 167,S4S 16 132,827 14 112,S76 13 77,919 14 (10,263)
(1)
(7,983)
(1)
(1S,433)
(2) 16,682 2
39,320 7
31,324 2
11,23S 1
14,442 2
1,484 760 1,22S,414 84 892,329 83 792,S11 82 706,990 80 443,778 79 187,S93 13 1S2,492 14 141,181 14 142,S8S 16 88,092 16 42,866 3
31,439 3
37,211 4
3S,931 4
29,576 5
230,4S9 16 183,931 17 178,392 18 178,S16 20 11 7,668 21 S6,027 4
S6,S29 s
4S,011 s
33,46S 4
2,7SS 1
(180) 2,S66 913 1,226 1,474 (1,8S7)
(1,863)
(6,079)
(1)
(2,S04) 771 S3,990 4
S7,232 s
39,84S 4
32,187 4
S,000 1
284,449 20 241,163 22 218,237 22 210,703 24 122,668 22 114,267 8
104,322 10 101,413 10 84,199 10 39,388 7
16,0S9 1
S,092 sos 2,768 389 283 266 116 237 1S3 130,609 9
109,680 10 102,034 10 87,204 10 39,930 7
1S3,840 11 131,483 12 116,203 12 123,499 14 82,738 1S 18,S40 2
1S3,840 11 1S0,023 14 116,203 12 123,499 14 82,738 15 29,932 3
28,880 3
19,236 2
13,S64 2
S,722 1
123,908 8
121, 143 11 96,967 10 109,93S 12 77,016 14 1,881 1,881 1,881 1,881 1,881 1
$ 122,027 8
$ 11 9,262 11 9S,086 10
$ 108,0S4 12 7S,13S 13 S2,S31 47,861 43,861 39,47S 31,004 S1,918 4S,680 41,S41 36,876 31,004
$2.3S
$2.20 (b)
$2.29
$2.93
$2.42
$1.72
$1.72
$1.70
$1.64
$1.48 73%
78%
74%
S6%
61 %
2.33 2.22 2.08 2.60 4.08
$24.2S
$24.14
$23.48
$23.14
$18.23
$4,636,344
$4,369,141
$3,999,474
$3,S77,248
$2,18S,246
$ 96S,160
$ 916,346
$ 831,673
$ 76S,642
$ 494,S29
$1,422,S2S 38
$1,236,364 36
$1,239,602 39
$1,116,127 40
$ 687,786 41 389,640 10 420,387 12 430,8S7 14 440,028 16 2S2,904 1S 1S3,600 4
103,600 3
1,96S,76S S2 1,760,3S1 51 1,670,4S9 S3 1,SS6,1SS 56 940,690 S6 434,994 12 434,994 13 374,994 12 234,994 9
124,994 7
797,386 21 710,078 21 622,878 20 S28,S77 19 333,398 20 sso sso S39 2S2 138 26,06S 1
26,06S 1
26,06S 1
26,06S 1
26,06S 2
S1S,267 14 483,S43 14 443,443 14 420,919 1S 2S4,S01 15 1,339,268 36 1,220,236 36 1,092,92S 3S 97S,813 3S 614,102 37
$3,740,027 100
$3,41S,S81 100
$3,138,378 100
$2,766,962 100
$1,679,786 100 33
Management's Discussion and Analysis of the Statement of Income The following factors had a significant effect on the Company's results of operations for the periods indicated.
Electric Operating Revenues The increase in electric operating revenues in 1974 was primarily attributable to rate increases and the recovery of increased energy costs through the adjustment clauses conta ined in the Company's rates. The increases in 1975 and 1976 are primari ly due to increases in the basic rates. Kilowatthour sales decreased 4% in 1974 and 3%
in 1975 due to cooler summers, customer conservation efforts and the economic slowdown. However, kilowatt-hour sales increased 4% in 1976 due to improved eco-nomic conditions.
Gas Operating Revenues Increases in gas operating revenues in the years 1974 through 1976 are primarily attributable to rate increases and greater recovery of increased raw material costs through the adjustment clauses contained in the Com-pany's rates. Therm sales, however, decreased 4% in 1974 and 5% in 1975, as a result of warmer than usual heating seasons, curtailments to interruptible customers, customer conservation efforts and the economic slow-down. In 1976 therm sales showed a 3% increase due to the extremely cold weather during the last three months of the year.
Fuel for Electric Generation In 1974 total fuel cost increased significantly due to in-creases in the unit cost of coal and oil. In spite of con-tinuing increases in the unit cost of coal and oil, total fuel cost decreased in 1975 due to the greater use of lower-cost nuclear generating facilities and the increased purchase of interchanged power. In 1976 total fuel cost again increased, mainly due to lesser availability of in-terchanged power.
Interchanged Power-net Interchanged power purchased from the Pennsylvania-New Jersey-Maryland Interconnection increased in 1974 and 1975, because it was more economical to purchase than produce the electricity with low sulphur fuels. In 1976 net kilowatthours interchanged declined 5%, while costs fel l 12% reflecting greater use of nuclear power.
Gas Purchased and Materials for Gas Produced Although gas therm sales to the Company's customers de-creased by 4% in 1974 and 5% in 1975, the cost of gas purchased and materials for gas produced increased dur-34 ing these years due to hi gher prices and, in addition, in 1975 due to the increased use of naphtha for the manufac-ture of synthetic natural gas. The cost of gas purchased and materials for gas produced increased in 1976 due to higher prices and the greater sales volume.
Other Operation Expenses Increases since 1973 are due to higher costs of labor, serv-ices, and materials and supplies.
Maintenance The decrease in 1975 is primarily attributable to reduced maintenance of gas turbine un its due to a decl ine in their usage caused by the availability of less expensive nu-clear energy and purchased power. The increase in 1976 was principally due to maintenance at certain of the Com-pany's conventional steam generating stations and at Peach Bottom nuclear generating station.
Depreciation The increase in 1975 is due to the increase in deprec iable utility plant principally as the result of Peach Bottom nuclear generating station and related transmission facili-ties and the Linden SNG plant being placed in service during 1974. In accordance with rate orders effective November 1975 and October 1976, the Company rai sed its depreciation rates, resulting in an increase of
$7,600,000 in 1976.
Taxes Other than Federal Income Taxes The increases are due to the higher levels of gross receipts tax resulting from greater revenu es.
Federal Income Taxes Current The provision for Federal Income Taxes - Current in-creased $11,465,000 in 1975 primarily due to the increase in pre-tax income and the decrease in the current deduc-tion of fuel costs, substantially offset by the increased utilization of gross receipts tax previously deferred for tax purposes and increased allowable investment tax cred its.
The provision increased $4,831,000 in 1976 primarily due to the increase in pre-tax income and decreases in the cur-rent deduction of fuel costs and utilization of the gross re-ceipts tax deduction, substantial ly offset by increases in the repai r allowance deduction and al lowable investment tax cred its.
Deferred The greater Federal Income Taxes - Deferred subsequent to 1973 are due to increases in differences between book and taxable income and in add ition, starting in 1975, due to increases in allowable investment tax credits.
Allowance for Funds Used During Construction (AFDC)
The increases in AFDC through 1973 are attributable to increased construction work in progress upon which AFDC is computed. The decreases in 1974 and 1975 are primarily due to Peach Bottom and related transmission facilities and the Linden SNG plant being placed in service during 1974 and the discontinuance in the last half of 1975 of the accrual of AFDC on a portion of Construction Work in Progress in accordance with regulatory approval.
Total Interest Charges The increases in 1974 and 1975 are principally due to is-suance of additional debt and to higher interest rates on Form 10-K Available The Company is required by Securities and Exchange Commission (SEC) regulations to file with that agency a Form 10-K annual report containing certain detailed financial and other data. There are no accounting differ-ences between the financial statements presented in this Annual Repo rt to Stockholders and those in the Form 10-K report, but the Form 10-K report does provide other information as required by SEC regulation s. Stockholders such debt. The decrease in 1976 is due to lower rates and the prepayment of long-term debt.
Net Income The increase in "Income before cumulative effect of a change in accounting method" for 1974 was principally the result of rate relief and the deferral of increased fuel costs which were partially offset by increased interest charges. In addition, regu latory accounting requirements followed by the Company during the test operation of Peach Bottom 2 and 3 resulted in a nonrecurring benefit to earnings of l 7t per share in 1974. Under these require-ments, the Company received the benefit of revenues at the prescribed rates for the test generation and continued to record AFDC, while not charging depreciation expense.
or other interested persons who wish to have a copy of the Company's Form 10-K report may obtain one without charge after March 31, 1977 by writing to the Vice Presi-dent and Treasurer, Public Service Electric and Gas Com-pany, 80 Park Pl ace, Newark, New Jersey 07101. The copy so obtained will be without exhibits, which will be avail-able for a specified fee.
35
The Management Council of Public Service Electric and Gas Company meets weekly - or more often if need dictates - to decide on important policy matters and make major decisions concerning every phase of Changes In Organization Donald B. Kipp and Edwin H. Snyder retired from the Board of Directors in 1976. Mr. Kipp, an attorney, was elected to the Board on May 21, 1957 and served until April 19, 1976.
Mr. Snyder, former Chairman of the Board, was elected a director January 19, 1965 and retired from the Board on Apri 118, 1976.
John F. Betz, Executive Vice President, was elected a member of the Board of Directors on April 19, 1976.
Stewart G. Pollock, an attorney, was elected to the Board on November 16. He is a partner in the Morristown, New Jersey firm of Schenck, Price, Smith & King, Counsellors-at-law.
John F. McDonald, Vice President - Governmental Affairs, was elected Senior Vice President - Governmental Affairs, effective August 1, 1976.
36 Company operations. Members of the Council shown above are Messrs.
Smith, Betz, Scott and, standing, from left to right, Messrs. Sann, Randel, Morris, Out/aw and McDonald.
PSE&G Service Territory
Executive Vice President of the Company Member of Executive and Finance Committees Private Practice of Medicine in the specialty of gynecology, East Orange, New Jersey. Clinical Associate Professor of Obstetrics and Gynecology, New Jersey M edica l School; and former Trustee of the College of Medicine and Dentistry of New Jersey, Newark, New Jersey M ember of Audit Committee Chairman of the Board and director, Fidelity Union Bancorporation, and Chairman of the Board and director, Fidelity Union Trust Company, both Newark, New Jersey Member of Executive and Finance Committees and Chairman of Nominating Committee I
Chai rman of the Board and director, Bancshares of New Jersey, Moorestown, New Jersey, Chai rman of the Board and director, The Bank of New Jersey, Camden, New Jersey, and Cha irman of the Board and director, The Bank of New Jersey, N.A., Moorestown, New Jersey Chairman of Audit Committee Former Chairman of the Board of the Company Member of Finance and Nom inating Committees University Professor of Economics, former Dean of Douglass College, Rutgers, The State University of New Jersey, New Brunswick, New Jersey Member of Audit Committee Director and former President, Ingersoll-Rand Company, Woodcliff Lake, New Jersey (d iversified manufacturer of machinery, equ ipment and tools)
Member of Compensati on and Finance Committees Partner of the firm Schenck, Price, Smith & King, Counsellors-at-Law, Morristown, New Jersey M ember of Aud it Committee President, Stevens i nstitute of Technology, Hoboken, New Jersey Member of Compensatio n and Nominating Committees Executive Vice President of the Company M ember of Executive Committee and Chairman of Finance Committee Chai rman of Finance Committee, director and former Chairman of the Board, Ameri can Cyanamid Company, Wayne, New Jersey (pharmaceuti-ca l, consumer and build ing,.agri cultural and chemical products)
M ember of Audit and Nominating Committees and Chairman of Com-pensati on Committee President and Chief Executive Officer of the Company Chairman of Executive Committee and member of Finance Committee President, Chief Executive Officer and director, The Mutual Benefit Life Insurance Company, Newark, New Jersey M ember of Executive and Finance Committees Chairman of Executive Comm ittee, director and former Chai rman of the Board, The Continental Corporation (property and casualty, life and accident and hea lth, and other types of insurance, and other financial services) and The Continental Insurance Compa nies, both New York, New York M ember of Compensation and Finance Committees Executive Vice President Executive Vice President Senior Vice President - Governmental Affairs Senior Vice President - O perations Senior Vice President - Consultant Senior Vice President - Administration Vice President - Law Vice President and Secretary Vice President - Planning and Research Vice President - Fuel Supply Vice President - Engineering and Construction Vice President - Commercial and M arketing Vice President - Energy Pooling I
Vice President and Assistant to Senior Vice President -
Operations Vice President - Public and Employee Relations Vice President and Assistant to the President Vice President and Treasurer Vice President and Comptroller Vice President - Production Vice President - Transmission and Distribution
0 PS~G Public Service Electric and Gas Company Newark, New Jersey 07101 U.S. Postage PAID Bulk Rate Public Service Electric and Gas Company