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Submit 1976 Annual Report by Philadelphia Electric Company
	ML19031A129
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Site:	Salem
Issue date:	05/23/1977
From:	; Philadelphia Electric Co
To:	; Office of Nuclear Reactor Regulation
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Philatklphia Electric Company Annual Report 1976

DIRECTORS

Gustave G. Amsterdam Chairman of the Board Bankers Securities Corporation (Merchandising and Real Estate)

James L. Everett President of the Company

Robert F. Gilkeson Chairman of the Board and C hief Executive Officer of the Company

William W. Hagerty President, Drexel University

William G. Hamilton. Jr.

Director, Singer Company (Diversified Manufacturing)

Robert D. Harrison President, John Wanamaker, Philadelphia (Merchandising)

Paul R. Kaiser Chairman of the Board Tasty Baking Company (Manufacturing)

Joseph J. McLaughlin President, Beneficial Mutual Savings Bank John R. Park Chairman of the Board and President A mcrican Stores Compan y (Retailing)

'Member of Executive Committee OFFICERS Robert F. Gilkeson C hairman of the Board James L. Everett President Wayne C. Astley Vice President General Administration John H. Austin, Jr.

Vice President Finance and Accounting Edward G. Bauer, Jr.

Vice President and General Counsel Vincent S. Boyer Vice President Engineering and Research C lifford Brenner Vice President Corporate Communications Henry T. Bryans Vice President Personnel and Industrial Relations Martin F. Gavct Vice President Gas Operations John L. Hankins Vice President Electric Production William L. Maruchi Vice President Electric Transmission and Distribution William B. Morlok Vice President Commercial OpLTations C lair V. Myers Vice President Purchasing and General Services Theodore S. Fetter Secretary Morton W. Rimerman Treasurer James D. Lynch Assistant Secretary Alfred M. Newill Assistant Treasurer Joseph W. Ruff Assistant Treasurer Donald P. Scott Assistant Treasurer

CONTENTS 2 Financial Highlights 3 Letter to Shareholders 5

Reliable Service 8

Help for a Neighbor 9

Scenes Behind Scenes 10 Keeping PE on the Move 12 Meeting the Challenges of Gas Supply 13 Importance of Customer Contact 14 Supporting the Front Lines 15 Qualified Employees 16 Tellin g Our Story 19 The 1976 Tax Story 20 Financial Statements 25 Notes to Financial Statements 29 Report of Auditors 29 Financial Statistics 31 Operating Statistics 32 Fiscal Agents ANNUAL MEETING The annual meeting of the shareholders of the Company will be held on April 13, 1977, at eleven a.m., in the Crystal Ball Room, Benjamin Franklin Hotel, Ninth and Chestnut Streets, Philadelphia, Pennsylvania.

Shareholders of record at the close of business March 4 arc entitled to vote at this meeting.

Notice of the meeting, proxy statement, and proxy will be mailed under separate cover. Prompt return of the proxies will be appreciated.

MANAGEMENT CHANGES George H. Brown, Jr., who served as a director since 1963, withheld his name from nomination for re-election to the Board prior to the annual meeting held April 14, 1976.

On April 14, 1976, Clifford Brenner, general manager of Corporate Commun i-ca tions, was elected Vice President of that department.

William G. Hamilton, Jr., resigned as a director on December 31, 1976.

William S. Fishman, President and C hief Executive Officer of ARA Services, Inc. and Joseph C. Ladd, President of Fidelity Mutual Life Insurance Company.

were elected directors on January 24, 1977.

GENERAL OFFICE 2301 Market Street Philadelphia, Pennsylvania 19101 1

FINANCIAL HIGHLIGHTS 1976 1975 Percent Increase Operating Revenue

$1,224,141,382 Sl,134,810,120 Operating Expenses, including Fuel, Maintenance, Depreciation, and Taxes 1,012,716,075 937,724,740 Operating Income 211,425,307 197,085,380 Other Income, primarily Allowance for Funds Used during Construction Income before Interest Charges Interest Charges Net Income Preferred Stock Dividends Earnings Applicable to Common Stock Dividends on Common Stock Balance to Retained Earnings Shares of Common Stock - Average Earnings Per Average Share Dividends Paid Per Share Common stock earnings improved from $107.9 million in 1975 to $125.6 million in 1976, an increase of 16.4 percent.

Earnings per average share increased moderately from $1.86 to $1.91 as the average number of shares outstanding increased 12. 9 percent.

Dividends paid on the common stock were maintained at $1.64 a share, all of which were taxable in 1976 as ordinary dividend income for Federal income tax purposes.

WHERE THE DOLLAR CAME FROM...

O PERATING REVENUE 92<

2 104,356,626 91,231,605 315,781,933 288,316,985 151,163,223 144,391,513 164,618,710 143,925,472 39,021,780 36,026,349 125,596,930 107,899,123 107,682,682 95,439,435 s

17,914,248 s

12,459,688 65,605,660 58,135,012 Sl.91 Sl.86 Sl.64 Sl.64 Operating revenue rose to a nevv high of$1.2 billion, an increase of 7.9 percent over 1975, as sales to all classes of serv ice-electri c, gas and stea m -

showed gains over 1975.

Mortgage Bonds 9 l/s% Series.

95/s% Series.

Operating expenses were up 8 percent reflecting continued inflation in all areas of doing business.

Prefrrred Stock 9.52% Series (500,000 shares).

Construction expenditures amounted to $380 million, increasing total invest-ment in plant to $3.9 billion.

Financing requirements were met by the sale of the following securities:

Common Stock

- through a public offering (4,000,000 shares).

WHERE IT WENT.

FUEL 36<

WAGES & BENEFITS 12<

DEPRECIATION 8<

TAXES 14<

INTEREST AND PREFER l~ED STOCK DIVIDENDS 14<

COMMO STOCK DIVIDENDS 8<

- through continuing Dividend Reinvestment and Employee Plans

( 1, 110,227 shares).

RETAINED EARN INGS 1e --=-...___.._._......,

7.9%

8.0%

7.3%

14.4%

9.5%

4.7%

14.4%

8.3%

16.4%

12.8%

43.8%

12.9%

2.7%

(Millions)

.. $100.0 100.0 50.0 67.7 18.4 S336.1

TO OUR SHAREHOLDERS:

As our nation emerged from its Bicentennial Year, the factors which shaped its growth are as vital today as they were 200 years ago. Issues such as taxation, governmental regulation of industry, personal freedom and avail-able resources, including energy, money and credit are all current influences on our country's economic health and, of necessity, on our Company's as well. Any emphasis or shift in emphasis on these variables presents constant challenges for your management team - challenges which must be met without the benefit of a comprehensive national energy policy.

At no time in our history has there been a more urgent need to adopt national energy guidelines to foster economic and social growth. To meet these challenges, your Company is secure in the knowledge that we have the proven scientific, engineering, construction and operating capabilities to produce and distribute our services reliably, economically and profi tably.

We look fo rward to a promising future convinced that there is a growing need and market fo r these services.

The past year ended on a note of cautious optimism w ith the traditional economic indicators tentatively showing that the nation was recuperat-ing from the severest recession since the Great D epression. Philadelphia Electric Company's gains in earnings, revenues and sales confirmed these trends.

Common stock earnings amounted to $125.6 million, an increase of approximately 16 percent over 1975, while earnings per share rose fi ve cents a share to $1.91, even though there were 13 percent more average shares outstanding.

Electric revenue was $46 million, or five percent above last year, as a result of higher rates and a fo ur percent increase in total kilowatt-hour sales.

While sales to all classes of electric service increased in 1976, the upturn in the economy of our region was reflected by a four percent increase in sales to commercial and industrial users. Residential sales, aided by the addition of over fo ur thousand electric house heating customers, also showed a gain of $8.5 million over last year.

Higher rates and increased gas ava ilability were primarily responsible for the increase in gas revenue which rose $41 million or 35 percent. Stearn revenue increased $2 million or five percent over 1975.

Although we were successful in obtaining rate increases for all three classes of service during 1976, our realized return on investment continues to be penalized by "regulatory lag."

Of the $95 million electric rate increase filed in November, 1975 the Pennsyl-vania Public Utility Commission permitted $47 million to become effective in 1976. In February 1977 the Commission allowed an additional

$25 million to become effective, bring-ing the total amount of the increase to

$72 million or 76 percent of the amount initially reguested.

In 1976, our Company spent approx-imately $380 million on construction, an increase of about $19 million over 1975. During the year, we pared our 1976-1980 construction estimate by approximately $800 million and even though this cutback relates principally to the cancellation of the Fulton and Summit nuclear generating stations, and the extension of the completion date for Limerick nuclear station by approximately two years, it docs not indicate any change in our commitment to nuclear generation. Clearly, we must continue to invest in nuclear plants as well as explore environmentally acceptable generation from coal to meet 3

the anticipated load growth in the years ahead and to lessen the reliance on imported petroleum fuels for genera ti on.

Last year, nuclear generation from our Peach Bottom Station accounted fo r 17 percent of our output and resulted in substantial fuel savings for our customers. Construction was also completed on the first unit of the Salem Nuclear Station in which the Company has a 42 percent ownership interest.

The first unit is scheduled for commer-cial operation later this year with the second unit scheduled for 1979. Con-struction of Limerick Station also moved forward in 1976 and commercial operation of the two nuclear units is expected in 1983 and 1985. When these units are completed, more than 50 per-cent of our output vvill come from the peace time a torn.

Our curtailed construction program has reduced our need fo r new capital,

but has not eliminated it entirely.

New common stock issues arc kept as small as possible to minimize the dilution penalty to our shareholders, but arc necessary to support construc-tion essential to the long run health of the Company.

4 Moving into a new era of our nation's history, we are ever more cognizant that we are in an energy controlled economy. We are dependent on the availability of reasonably priced fuels more than the other factors of production. Therefore, we need the kind of unified national effort that puts men on the moon and satellites into space if we are to obtain optimum results from our natural resources.

We need responsible leadership too, in order to permit the growth of industry w hich impacts the environ-ment and, especially, we need an informed public capable of differentiat-ing fact from myth and progress from panic. With this kind of understanding power plants can be built and be available when needed, industry ca 11 expand with confidence and investors can receive an adequate return on their investment.

During the past difficult recessionary period we have concentrated on establishing a sound finan cial base, stringently controlling our expenses and filing promptly for required rate relief. We have also sharpened our skills in scientific and professional management and prepared for imple-mentation of advancing technology.

However, our main priority has been directed to the twin objectives of service and reliability in all facets of our business and the remainder of this report illustrates in more detail the manner in which our Company fulfills its day-to-day responsibilities. Our greatest strengths are still the abilities, dedication and spirit of our employee team. We acknowledge with pride their important contributions to the year past and look forward to continued successful dedication in supplying our services to the community.

March 7, 1977 CHAIRMAN OF THE BOARD d/.~

PRESIDENT

REUABIUTY: OUR BOTTOMUNE Ask utility planners about their prob-lems and they'll recite a litany of how things can go wrong, how equipment to generate electricity breaks down and how the best laid plans can become unglued. But ask them whether cus-tomers are affected by these problems and they say, "Not at all. Equipment failures, scheduled maintenance and rearrangements are 011r problems. The customer-more likely than not -

kno ws nothing about them. The power is there at the switch and, to the customer, that's what counts."

So it takes a special breed of person to work devotedly behind the scenes to provide service at the "flick of a switch. "

o pat on the back is expected for making this event happen millions and millions of times a day. This special breed aims to make the utility business a career, a way of life based on rendering a vital service, rather than manufacturing a product.

Every one of PE's 9,450 employees-no matter how remote from customer contact - has an important team role to play in bringing this about. They take genuine pride in creating the daily marvels that keep our modern world alive. There is a dedication rarely found elsewhere that brings satisfacti on to these employees in their collective effort to achieve perfection - 100 per-cent reliability-or power at the switch e11ery time it is flicked on.

Storms, cars hitting poles, trees fall-ing on wires and equipment failure prevent the achievement of 100 percent reliability. but for the last three years, PE has produced an enviable record of reliability for electric service:

1974-99.993%

1975-99.990%

1976-99.991%

This record is eloquent testimon y of the Company's efforts.

Attaining such a high degree of reliability year after year is no accident.

For Philadelphia Electric, Reliability tops the list of Corporate Objectives:

"Our Number One objective is to supply our customers with reliable service at reasonable rates. We will be 5

responsive to the customer on all ser-vice-related matters and correct defi-ciences promptly.

"Reliability of service depends on ( 1) prevention of interruptions of service, and (2) minimization of the length of those interruptions which do occur... "

Although it has been made official in this statement of Company policy, reliability is not the responsibility of any one person, nor of one Company department. Ir is the contribution of every PE man and woman at work.

Because the rendering of service is a 24-hour job, every day of the year, and year after year, it, like a ring, has neither beginning nor end.

Break into rhar ring as a new day dawns. In Electric Production's system operations division headquarters, dis-patchers are holding quiet telephone conversations, checking information and calling forth up-to-the-second data from computers, using one of the most sophisticated tools of the industry, SAMAC, a computerized system de-signed by Philadelphia Electric engi-neers-the largest and most advanced utility control system in the United States. T he men are updating the schedule of generators w hich w ill be operated to meet customer electric needs for the day, feeding in a variety of info rmation w hich w ill enable the system to operate most reliably and at the lowest cost. Consideration is given to weather, to maintenance work on lines and at substations, to loading of transmission lines, the startup of cer-tain heavy industry after a holiday or other shutdown, and to many other factors. A similar system is doing the same job for gas and steam requirements.

With the generating requirement fo recast completed as accurately as possible, additional generating capacity is added as a reserve-in the event of equipment fa ilure-and the resultant conclusions are communicated to the Pennsylvania-New Jersey-Maryland Interconnection (PJM) control center.

PJM's staff coordinates the power supply of eleven investor-owned utilities in a 50,000 square mile area of the mid-Atlantic states with a popula-tion of more than 21 million. Such planning for bulk power requirements assures that a sufficient margin of reserve power is available at lower cost than could be achieved by each com-pany acting independently. Daily gen-eration requirements are scheduled to achieve the lowest possible costs, while power transmission is monitored and controlled to assure that electricity is available for the needs of the 7.5 mil-lion customers served by the partic-ipating companies. The General Administration D epartment represents PE on PJM's eleven-utility management committee.

In 1977 PJM - America's pioneer power pool-will celebrate 50 years of operations, during which time it has played an important role in enhancing PE's system reliability.

Transmission lines also connect PJM to neighboring power pools for the exchange of electricity to reduce costs and for mutual assistance in times of emergency. For example, PJM sold emergency power to several neighbors in January, 1977, when severe weather conditions strained rhe capacity of utility systems in the Midwest and South.

The high-voltage transmission systems of utilities in all the contiguous states and part of Canada are interconnected fo r one common 6

Th<' Cc1111/lilll).< S;JJf,.j C w11trc>I "'""' is do111i11ated by 1wtc>11wted scrC'e11s 1uhich display its S<'11m1ti11s and tm11s111issic>11 facilities. Disp11tchers co11sta11tly 1111tilyz1* a11d co11trol rlic jlo1J1 oj clearicity. They cc111 tirder i11aeascs tlr dC'aeascs in the outpllts 11}.~l'11eratit1g 1111its affordi11~~ to rhe demands for p<>1Per and numitor the rra11smissio11 system which dcli11crs p11111cr il'hcre it is 11ccded.

lf'ater and air '/mility comrol; improved recrcmio11al

/aciliti<'s; 1111d rnr<'f11/ w11sider11rio11 to /1111dsrnpi11g 1111d tlt'stltetics in plm111i11g rrc111smissio11 lines.. ~c11t*rc1ti11g pla11ts, mid s11bs1ario11s are major co11Cl'ms tlf the Company i11 order to protl'Ct the e1111iro11111e1lf of rhc area it scr11es.

purpose-reliable electric service across America, at the lowest cost.

Electric Production - 1 ikc other de-partments-believes it is the keystone in the Company's arch of reliability.

There is nothing wrong w ith that kind of thinking-it creates a consciousness that leads to good performance. With a logical credo, "Electric service begins with the production of electricity,"

the D epartment mans generating stations 24 hours2.777778e-4 days 0.00667 hours 3.968254e-5 weeks 9.132e-6 months a day, every day, w ith well-trained personnel.

Electric Production's maintenance people periodically inspect generating facilities for preventive maintenance work and perform emergency repair work at any location when needed.

C hemists and technicians monitor the quality of water, lubricating oils and fuels, among other duties. Training programs fo r generating plant oper-ators and nuclear technicians arc con-tinually improved and expanded and changes arc made constantly through-out the D epartment to improve pro-cedure and operations.

Responsibilites of the D epartment extend from the delivery of coal and oil to the delivery of electricity through the high-voltage transmission systems.

U sually, the work performed by this group is not obvious to customers or the public in general, but there arc exceptions.

On Sunday, October 3, 1976, mon-itors at Peach Bottom Atomic Power Sta ti on recorded higher than normal radioactivity at the site and in the sur-rounding area. While the level of radioactivity presented no health haz-ard, personnel at the station took immediate precautionary measures, including the washing down of cars and walkways and notification of the U.S. Nuclear Regulatory Commission and the Pennsylvania Bureau of Radio-logical Health. The Company also issued a news release.

Su bseq uen ti y, governmcn ta 1 reg-ulatory agencies announced that the abnormal radioactivity outside the Peach Bottom plant resulted from the fa llout of a Chinese nuclear bomb test in late September. Philadelphia Electric received national recognition for being the first to detect such fa llout in the continental United States.

To Electric Transmission and Distribution (T & D ) people, reliability Sched11/ed inspections, w11ti1111ous mo11itori11.~, reg11lar 11wi111e11anCl' a11d prompt repair of l'c/11ipmc11t are basic demems of d<'pt11dabl<' serl'ice.

of service depends on ( 1) prevention of interruptions of service and (2) min-imization of the length of those interruptions w hich do occur. Another way of saying this is that reliable service depends on a well constructed system which is properly maintained and which is rapidl y restored when storms or other troubles affect it.

PE has a well designed system,

constructed with high quality com-ponents assembled according to good standards, with quality workmanship, and is keeping it that way. The other important factor in reliable service is the restoration of service w hen it is interrupted. The most important aspect here is the availability of a source of highly motivated, skilled

.'"111 S)ISf<'lllS arc.~o in the (c1111ml roo111 at rhc EddystcH/£' Ce11crati11.~ Sr,11in11. Staffed 'nm11d the dcick, conrrol roo111 111u*ra1<1rs /l1llflit1ir 11la11r pcrj11n11crnu* tn i11s11rc c1111ti111w11s electric scn 1frc J11r PEC11 c11sr11111crs.

7

F11wre /i111'11H'll gai11 <"<>11}id,*11ff by pl11yi11g,-,1((/1while11/ tire rop of poles d11ri11g dl'xterity drills m tire Co111p1111y's Li111*1111111 '/'r11i11i11.~,<;,)11>0/.

manpower, pro perl y trained in restora-tion w ork.

With the beginning of the new day, the T & D D epartment concentrates on a report detailing service interrup-tions during the past 24 hours2.777778e-4 days 0.00667 hours 3.968254e-5 weeks 9.132e-6 months .

The report is studied to answer two basic questions: 1) What happened' and 2) How can we prevent this from happening again? And these questions:

How long was service intcrrupte~ ?

Was service interrupted because of weather, trees down, equipment failure? Can we identify a recurring problem or benefit in any way from the experience? The info rmation is thoroughl y analyzed and, where appli-cable, action is taken fo r future im-provement. Once an interruption occurs, restoration is T & D's first con-cern. As they say, "Our job is to get electricity from the power plant to our customers wherever and when-ever they need it.

"The customer is concerned only about electric service at his house, his store, his plant. It's what happens when the customer £lips the switch that deter-mines reliability-as he sees it. We all have one job to do. Give the best pos-sible service at reasonable cost."

Electric T & D people-and their Gas Operations counterparts-don't 8

I l (~h 11c1/ragc tower li11e 111<lrk rt'cp1ires spl'Cial l'1/11ipmnu and people. Elcari( 011crhcad rra11s111issio11 S('(tiofl li11emc11 11s1* 11 wlf-pn>pelled <"art that is 11/l<l<"ill'd to 11 de-e11,*~~i::ed <"t1ble. Tirey **rid" tire wire""-' they perj1>r111 their lr(~lr-li11e """k S<'l'eral lr1111dreds ofjeet i11 tire air.

.i. special tool (a/led a p11e11111a<~ophcr Stll'l'S tJme and 1110tH')' in w1dc~~n,1111d ser11icc work. This roof dri11es Jon/lard, pushii1.~ 1hro11 rhc earth ro create' a hole into whid1 clcarical n1wl11it ccm he i11s1all speak of an eight-to-five fair weather j ob. Service reliability and restoration procedures are put to the severest test during the foulest weather and any hour of any night or day.

It is under these conditions that our field forces, supported by other per-sonnel in offices and service buildings, present the best image of our Com-pany's dedication to reliability.

What we have glimpsed as the begin-ning of a new day is really a part of a continuing process. None of the sched-uling, none of the analyses, not even quick restoration would be possible without the monumental planning, design and construction that went beforehand.

HELP FOR A NEIGHBOR Storms of various kinds are respon-sible for 111ost interruptions of service to customers. Relatively mild storms, or accidents involving PE lines and poles, are generally handled by T & D operating personnel with routine efficiency. When storms of major proportion approach our service area, however, special preparations arc undertaken, and when those of extreme severity strike, a special Storm Control Center is activated.

In August, 1976, Hurricane Belle swept up the coast. Preparing fo r the worst, Philadelphia Electric assigned approximately 1,000 off-duty em-ployees to emergency restoration w ork.

Although high winds and heavy rains interrupted electric power to onl y about two percent of PE's customers, the brunt of the storm passed us by.

Even so, our crews worked overtime to put every customer back in service.

Meanwhile, Belle slammed into Long Island Lighting Company (LILCO) territory, where it knocked out about half of LILCO's 860,000 customers.

Under a mutual assistance plan, LILC O asked PE and other companies for assis-tance at 4 a.m. on August 10. Within hours, PE system crews were on their way. In all, 121 linemen and supervisory personnel and fi ve trans-portation mechanics w ith 55 vehicles made the 130-mile journey to LILCO's headg uarters. (All of PE's costs were paid by LILC O. )

O ur crews went right to w ork, help-ing to rebuild power lines that had been downed th roughout the area by fa llen trees. The w reckage w as cleared and power restored to the LILCO cus-tomers. many of w hom had been wi th-out service fo r three days. O ne PE em ployee said LILCO customers every-

\\\\*here expressed their appreciation fo r Philadel phia Elccrric's help. "They even set off fireworks," he said.

Certainly Philadelphia Electric was glad to hel p a neighbor utility, bur it is reassuring to know that had PE exper-ienced trouble of similar magnitude, it could coum also on assistance fro m orhn u ri 1 i tics. Ir d id. in fac t. get such assistance afrn the big snowstorm of 1958. when crews came in from New York, Detroit. Sr. Louis. and as fa r south as Alabam:i.

SCENES BEHIND SCENES If a brge proportion of :icrivirics carried on by PE opnating peopk :ire not readil y :ipparent to cusromns. :in even larger sh:ire of the Enginening

.! 11J1l/1l/ /ll//t'.*/tl//t U/ tft1t"1l//.*fl/1tf/1llf1l/r/1t* ( tlJllJlilll(* l/lltft'1H

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and Research D epartment's work is unknown to the general public. This group has the responsibility of plan-ning, designing and constructing facil-ities that arc going to be required far in the future. Projects such as the huge nuclear installations at Peach Bottom and Limerick arc perhaps the most spectacular, because they will supply most of the power requirements in the years ahead-reliably and at lower cost. They also point to the day when we can free ourselves from the strangle-hold of high-cost imported oil.

Peach Bottom is an excellent example of what nuclear power can do. During 1976, the plant supplied 11.6 billion kilowatt-hours of electricity which saved the equivalent of 20 million barrels of imported oil. With the first unit of Salem Generating Station coming into commercial operation in 1977, further savings are anticipated with this increased nuclear generated electricity.

The Engineering and Research D epartment's work involves planning and construction of all Company energy services: electricity, gas and steam. In addition to nuclear facilities, there are coal gas desulfurization pro-jects (to permit the use of coal in com-pliance with environmental regula-tions), protective relay systems, design and construction of transmission lines, and the development of many other new techniques and equipment. Engi-neers are working with the City of Philadelphia to develop a steam supply from the burning of trash and other waste materials. Research programs are continuously evaluating other new sources of energy and Department per-sonnel are actively working on such exotic fo rms as fuel cells and solar power. Other key investigations cover improved systems for more efficient and reliable control of present and futu re generating equipment. Literally millions of man hours of engineering work must be performed before most projects see the light of day-and all are directed to the goal of reliable ser-vice, at the lowest possible cost.

10 KEEPING PE ON THE MOVE Purchasing and General Services Department spans the gamut from real estate and insurance to automotive equipment and telecommunications.

Does this strike the chord of reliability?

Members of the D epartment admit that by the nature of their work they are in the background. But they are quite proud to be able to say, "It is our responsibility to see that all other PE employees have the right tools, vehicles, equipment, and anything else they need to do their jobs."

Building Management division is responsible for operating 70 buildings or pieces of property containing more than two million square fee t of floor space and 65 acres of land used for storage. The division has been respon-sible for energy conservation measures within our buildings that have brought many awards from the Federal Energy Administration.

Transportation division maintains nearly 3,000 vehicles, including line trucks, pole diggers, bucket trucks, cranes and just plain automobiles. Vehi-cles relate directly to reliability, since their condition and availability some-times make the difference between a short power interruption or a long one.

Telecommunications division coor-dinates all telephone and radio com-munications required by the Company.

It operates switchboards, consoles and 42 base stations for radio frequencies, and constantly evaluates the efficiency of its installations.

In addition to keeping the Company on the move, the Department must see that materials needed by other depart-ments are in the right quantities at the right place at the right time. The logis-tics problem this poses is controlled by the Stores division which uses a com-puter-oriented inventory management system to track the more than 50,000 items in stock.

To obtain all the materials and sup-plies PE people use, and to negotiate all construction contracts, requires

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diligence and accuracy by the Purchas-ing division. Purchasing must acquire all our fuel and items ranging from Aluminum cable to Zirconium components for nuclear plants. They demand adherence to exacting specifi-cations and strive for fair prices-no small job in this era of shortages.

Fuels are purchased from a diversity of suppliers to enhance reliability of deliveries. Coal, for example is pur-chased from deep mines, as well as from strip mines, so long as our required quality specifications can be met. About two million tons were purchased in 1976.

About 13 million barrels of heavy oil were supplied by four major suppliers who had both domestic and offshore refineries. Approximately 1.5 million barrels of light oil were purchased from eight suppliers. The Company has leased storage space for 1.5 million barrels at a terminal in New Jersey to provide continuity of supply.

During the year, Purchasing negotiated contracts for uranium ore that, with other existing contracts, will assure supplies of nuclear fuel for Peach Bottom and Limerick generating station through 1985.

111 111 I,

While we believe nuclear power is the best alremative for Philadelphia Electric, we continue to develop techniques that will enable us to continue to bum high-sulfur coal that is available to eastern wilities. And to do so without emitting large amounts of sulfur dioxide and ash into the enviro11111ent.

11

'/ (1prn11tclc/nr111~1rc c111ailabiliry 1~/.~c1s d11n11.~ rht 111111tc*r lt(

111/111g S{'11S011 11 1'1{'11U1Sto111cr11s1tge' is rhc.~rccucst. rhc C11111pc111y S{<1rt'S,<,!els 11! lfS '11//1(1/icd lltltllrcll.~'IS (L.\\'C),i1,11111111d in 1111dc~~ftllllld Sfllft~~(' /ttt"iliti('S.

12 MEETING THE CHALLENGES OF GAS SUPPLY The past winter's natural gas short-age came as no surprise to PE's Gas Operations Department. With de-liveries of natural gas being curtailed by pipeline suppliers over the last half dozen years, Gas Operations has faced many challenges during that period.

Handling this past w inter's task was made more demanding and projected into public visibility by the severity of the weather, but the problem had been there all the time. Building of a liquefied natural gas storage facility in 1972 at West Conshohocken was a major step toward greater reliability.

Additional underground storage was contracted for in western Pennsylvania and in Texas and Louisiana. In months of low gas demand, excess gas was stored there for use in months of grea ter need. Still later, gas was pur-chased from intrastate pipelines in the Gulf area under Federal regulations labeled "Emergency Purchase."

While Gas Operations looks hope-fully to construction of a synthetic natural gas plant in the Company's service area, and to research on com-mercial gasification of domestic coal reserves, perhaps the most exciting project to obtain additional gas - and a first in the history of Philadelphia Electric-is a j oint venture of explora-tion and development drilling in the onshore coastal areas of the Gulf of Mexico. Some gas fields already drilled show promise and the first gas from this project is expected to reach Phila-delphia earl y in 1977.

Gas demand va ries each heating season, of course, as temperatures change. In late 1976 the thermometer dropped to unusual lows for long periods. October. November and December, 1976, was the coldest q uar-ter in the history of the Weather Bureau and great quantities of gas were distri-buted. No curtailment of industrial customers was necessary at that time, but reserves were lowered considerabl y.

Continued severe cold throughout the eastern half of the N atio n converted a serious natural gas shortage into a

crisis and, in January and February, the Company was forced to initiate orderly steps of gas curtailment to industrial and large commercial cus-tomers. Knowledge of our customers' needs and our gas system capability helped our people to minimize the potentially devastating impact on the area economy.

Gas Operations conducts training sessions for appliance service men w ho travel with fully equipped vehicles. so that one call is usually sufficirnt to restore heat or hot water to a res-idential customer with an emergency.

Trouble 111en arc on shift duty 24 hours2.777778e-4 days 0.00667 hours 3.968254e-5 weeks 9.132e-6 months a day.

A community service that affects both reliability and safety is the fire school opera red by Gas Oper-ations for volunteer firemen th rough-out the Compan y's service territory.

Originally, it dealt with gas fires onl y, but proper procedures for handling electric fires were recently added. It 1s considered one of the fin est fire schools in the country and instruction has been given to hundreds of volun-teer firemen from local com111unities.

Both lives and property have been saved as a result of training received at the school.

Gels ( >11crclfit111s has lllcllfr t'_\\*tc11si11c i111proue111c11r..: /tl t/1('

(,',11111Jc111y'..:,v,as clistri/111rio11 sysrc111 r11 i11act1st' it.'..:,1f<'1y 1111d rdi,,/1iliry.

.-tr rhe Co111pa11J.1's Fire School. 1'11/u111ecr /irc11w11 arc.~il'Cll aduiCl' i11.fi.v,llfi11,v, 111a11holcjires as pan of a trc1i11i11g pro,v,ram tl// h1H1 1 r11 hand c cl1Ytricc1/ 1'111c~v,e11cics.

IMPORTANCE OF PERSONAL CUSTOMER CONTACT Perhaps the *'special breed" that characterizes the utility employee is epitomized in the philosophy that guides Commercial Operations em-ployees in their daily conversations with residential and commercial cus-tomers. Commercial Operations people arc trained to.. think as o ur customers rhink"- to sec the customer's side of a problem and help to solve that problem in a sympathetic and courteous manner.

Every custo111er contact is regarded as an opportunity to render prompt and efficient service and, if possible, to make a friend. As an important element in this service, telephone centers are operated around the clock throughout the year and arc prepared to respond immediately to emergency conditions.

Computerized equipment enables them to retrieve customer records in seconds, to speed their anal yses of problems and reduce the time customers need to wait for their answers.

Special groups in the Commercial Operations D epartment fill i111portant roles in maintaining contacts with large industrial and commercial customers.

Many of these accounts, in turn. serve the general public, through the oper-tion of hospitals, water pumping sta-tions, sewage treatment plants, or air and train terminals, stadiums, theaters and other places where large groups assemble. Power interruptions at such installations are often due to customer equipment problems, and many times Philadelphia Electric lends its equip-ment until the customer's faulty apparatus can be repaired or replaced.

Working from their special knowl-edge of custo111ers and the territory, a group of analysts in Commercial Operations projects our future energy needs. Information from many fields is fed into computers-data gleaned from our own voluminous records as

';J,1'£°i,tlly trt1i11cd (.'11sr1ll111'1s,\\'('n 1frl' rcprcsctllclfi11cs,111itkly rcs111111d,,, s1*1-,.i1 t' n*,1111*s1s 1111cl i11,111iries 1/1n111.v./1 rl1t' (l111111wni:td dlSf11111a i11/11n11c11i1111 systt'lll.

13

well as from planning commissions, universities, economists, trade associa-tions, government agencies and many media sources. Housing starts, popula-tion studies, appliance sales, industrial production and commercial construc-tion figures, all related to our area, are sifted.

Their aim is to provide detailed growth estimates so that the energy needs for jobs or homes of future cus-tomers, many of whom are now in our grade schools, can be satisfied in distant tomorrows as reliably as today.

Ten years is a tight planning horizon in our business.

Commercial Operations engineers work closely with architects, builders and major commercial and industrial customers to help them achieve max-imum efficiency in the use of our energy services. Nationally recognized high-efficiency air conditioning pro-grams and heat pump application seminars, both co-sponsored by The Electrical Association of Philadelphia, are but two examples of how this Department is dedicated to serving the customer.

Predicting 1uluu "fies ahead" is an important factor i11 11wi11wi11i11g reliable ser11iC£'. A 11alysrs w11ti111wlly ~*wdy rhe eco1w111i~

state of the Company's sen,ice area i11cl11di11g the s11 1i11g to electricity from Mher e11e~~y so11rCl's bew11se oj rhe ii11111i11e11Cl' oj slwrta,~l'S i11.~as and oil.

14 SUPPORTING THE FRONTUNES Except in times of trouble, or when there is a question to be answered, the PE employee most familiar to cus-tomers is the meter reader who works in the Finance and Accounting Depart-ment (F & A).

There is much more activity in F & A than meter reading, however.

As anyone in the Department will tell you, they consider themselves as sup-porting troops, behind the front lines, passing the ammunition to get the rest of the Company's work done. Here rests the responsibility to provide funds for day-to-day operations, as well as to raise enough capital for necessary expansion and construction to meet the future needs of customers.

Without proper money management, Philadelphia Electric could not main-tain a good credit rating, and without a good credit rating could not obtain, through the sale of securities, the vast amounts of money required to build, operate and service the facilities that guarantee reliable service.

F & A also is responsible for prep-aration and mailing of PE's bills to its customers. 1976 marked the first full year of PE's new, improved billing system w hich has been widely ac-cepted by our customers.

The Department also operates the Company's computer center, with its many remote terminals, which provide accounting and service personnel instant access to the computerized customer information system for handling customer calls and trouble analysis.

Utility rates, although not the most popular subject with consumers, arc of paramount importance to the Com-pany. Unless fa ir and adequate rates are established, new construction of our facilities either slows down or halts, and the possibility is always on the horizon that if new construction stops, the day may come when a power

Company's extensive training programs, administers benefits and records, con-tributes to their health and well-being, assures a safe working environment, and affords all employees an oppor-tunity to participate in educational improvement and recreational pro-grams. The Personnel Department shares with General Administration the key responsibility for our progressive management training and development programs.

Flir a majority of 011r cmtomcrs rite merer reader is their 011/y pcrso11e1/ co11rao ll'ith rite Company.

The Department has a direct employee-management working rela-tionship, maintains good labor relations, and interprets and communi-cates to employees the Company's personnel policies, practices and procedures. In comparison with other investor-owned utilities, PE has long been considered a pace setter for the industry.

shortage prohibits the supplying of service to newly forming households and new and expanded industries.

When F & A determines that an increase in rates is absolutely essential,

the Company's Legal Department ful-fills its obligation to reliability by presenting the Company's position in rate cases, working through seemingly interminable hearings in an effort to obtain the needed rate of return to keep the Company financially sound.

The Legal D epartment also handles the regulatory aspects of all operations, especially the licensing of nuclear or other plants. Here, again, delays, drawn-out hearings and months of hard work are more the general rule than the exception. It is Legal's task to work through the regulatory maze to get approval for generating facilities as quickly as possible. The sooner a new plant goes on the line, the sooner customers can benefit from lower operating costs and reliability is enhanced.

The Department also keeps a close watch on proposed state and Federal legislation and analyzes, among other things, its impact on service reliability.

HIGHLY QUAUFIED PEOPLE MAINTAIN REUABIUTY Employ the best qualified, provide good working conditions, good tools, fair salaries and incentives to remain and grow with the Company. This is the goal of Personnel and Industrial Relations. In addition to hiring and introducing employees to the Com-pany, this Department coordinates the The success of enlightened employee policies is reflected in the remarkably small turnover of employees. Of the 9,450 persons working for the Com-pany, 2, 196 have twenty-five or more years of service.

Pn>11idi11g reliable sa11iff fl'1Jllircs cxpcric11(t'd a11d dedicated paso1111el.. -1 11 011goi1.1g co11ccr11 ~>f 011r Pas<m11e.l Dt'/Wrt111£'1lf is rhe rcrmitllH'llf <~/ 11e111 e111ployces mid the dc*11elop111c111 <1} presc11r employees ro 111s11rc 11u1x111111111 opporr11111ry.

15

A number of divisions within the D epartment work directly for the benefit of employees. The Medical division offers a variety of services designed to maintain standards of employees' physical capabilities as well as to improve their health and prevent problems which may affect their work performance. In addition, th rough its six dispensaries throughout the service area, it is equipped to administer emergency treatment for illness or accident occurring on the job.

PE's Safety division has won many industry-w ide awards for its first-aid and resuscitation programs. During 1976 about 1,700 employees were given training in cardiovascular pulmonary resuscitation (CPR). Such training has saved many lives, both among employees and in the communities throughout our service area. It con-stantly checks all facilities for safe working conditions and reviews new construction to be sure safety is incor-porated in the basic design. Safety talks and safe practices programs are presented continuously to employee groups. As examples of these programs' effectiveness, we have exceeded two million operating man-hours at Peach Bottom Atomic Power Station, and two million more in substations with-out lost-time accidents.

Employee Services administers the Company's pension plans, group life insurance, a dental care plan, Blue Cross, Blue Shield and Major Medical programs. Trained personnel offer pre-retirement counseling and help employees with personal problems, operating on the premise that "a satis-fied employee is a good employee who produces better work."

Employee Activities recognizes the efforts and achievements of employees through a rewarding suggestion system.

It also helps maintain high morale by providing cultural, social, vacation and athletic acti vities for employee groups.

/)11n11.~ /9~6 thl' (;,1111111111y miti,unl 1l /'fl~~r11111 /1ir iwrrrr ((111111111t1ifcl!io11s ll'ith its "l'Jlrclsimcuc 10.000.\\11,rnis'1 s1wt1ki11.~

d1sr11111a:.:. Fl1t* St'n*i((' i11, ludcs 11 sp1*t"i1il rdeJ'ht111c 1111111/ia t"11s1n1111'rs t"tlll t"cdl 111 dsk,111csrio11s 1111d rt'ffi11<' 1111.-:wns. h1lfli i11

'f'11111sli. In 11dditil111,.'J'l'tT1rl ;1ictcs ti/ (.11111p1111r lirn11t11rc lri11 1c* ht'tll rn111.d11!<'d i11ro Spimis/11111d 11 1erc distrihwt'd to 1*/.,11<'1.<,I( 1/1< /tr6 \\/l,1/11.'/r f,111 irt'fc/ II/ J>/r,/,1,/t'/j,/lld.

16 TELUNGTHE PHILADELPIIIA ELECTRIC STORY As the name implies, Corporate Communications Department is con-cerned with the maintenance of open lines of communication, both w ithin the Company and with the various publics it serves.

During 1976, the D epartment con-centrated on creating a climate fo r a freer exchange of ideas, not only with newspaper, television and radio reporters, but w ith civic, business and "grass roots" groups in the Company's service area. Not a week wen t by with-out at least one PE representati ve being interviewed by the press. Topics covered a wide range, embracing vir-tually every phase of Company operations. In addition, employees at all levels participated frequentl y in panel or talk shows.

A Speakers Bureau, composed of volunteer employees from all depart-ments, and the Peach Bottom and Limerick informatio n centers brought the PE story to thousands through men's and women's clubs. church groups, schools and civic organizations.

Retired employee volunteers assisted in special programs fo r senior citizens.

In all communities, meetings were held with opinion leaders, to w hom informati ve literature was given as background material fo r their use.

Similar material was distributed to ed itors and feature writcrs.

Direct con tact w ith customers was accomplished through a series of bill enclosures which offered tips on safety and energy conservation. Till' enclo-sures offered helpful booklets and.

judging from the response, were greatl y app reciated.

Because the economy of the area in which it operates is important to its own economic well-being, the Com-pany recognizes its social responsibili-ties for assisting in the development of the region's yo ung people.

(,'11sttllll('r n*s11011si"s u111si.,rc*11tly f1<1i111 tlllf r/i,u J>/,//,1clclplii11 1-'lctrri( c11111/l1)'<<'t'.' i1rc 1'1,1111,!llf ti/,is "fnn1dly" 1111d "scn 1it-c l1rin1tecl." I /ere one 11/ 1111r e1111i/11y1*cs dn111111_,*trc1tes the "flJ11/_, t1/ /1is uwlc" ft' 1l _i,!n11111 ti/ s1/i,111f-i1.l.!cd tl11/ch<<'11,1_,

f'drl 11/ 1l J'rt'_l.!r,1111,,, c.\\p/11111 dcont"itr i111d :.:afcry /ti st"ht111/ t!n111J'S.

For several years, PE Company has made available to guidance counselors in area schools a library of 40 films, describing the various careers in the world of work. In 1976, arrangements were made to have these film s shown on the local public television outlet, which has stimulated considerably the requests for films by schools.

An advisory council of outstanding area educators was formed to develop and implement a comprehensive energy information and education program to broaden the base of public under-standing among our younger citizens.

Internally, the Department expanded communications with employees and developed special programs to keep employees up to date on matters affecting their Company and the electric industry in general.

WHAT IS REUABIUTY?

Ar Philadelphia Electric Company it is the top line of Corporate Objec-tives. And when all is done as planned it is the bottom line of our "account-ing" sheet to our customers.

In short, reliability transcends mere statistics and is in the final analysis an assessment of the Company's respon-siveness to customers' needs.

Serving our customers efficiently, economically, promptly and courte-ously is the essence of our business and the jusrifica rion for a fair return to our investors. The ultimate value and security of our shareholders' investment rests on the foundation of superior service.

17

18 "Reliability of ser11ice depends i11 pan 011 th£* pre11e11rio11 of iwerr11ptio11s of ser11ice... " This objcai11e 111as cJ1ide11ced by 011r 011crhead Trn11s111issio11 sario11 's relocnri11.~ a

£ra11s111issio11 tower from the path of a 11e111l'.\\press1uay111hilc w11d11aors supported br the,,_Hflt'r rt*111t1i11ed l'fll'~~i:::cd. Ext£'11si1w tmi11i11,~ in 1/1<1rki11.~ 111ith e11e~~ized lines has i111pro11ed <'Hr reliabiliry record and helps prci11itle oJJr rnsro111ers JJ'irh l""i'r ar rhe "}lick oj 11 s111irdr."

THE 1976 TAX STORY D espite the common misconception that utilities pay little or no income taxes, PE actually incurs many millions of dollars of Federal and state income taxes every year. The Company's total income tax obliga-tion (Federal and state) for 1976 was

$76 million. Of the total obligation,

$62 million represents Federal income taxes and the remainder represents state income taxes. See Note 2 of Notes to Financial Statements on page 25.

The Company's Federal income tax bill is calculated the same way as the individual taxpayer calculates his own income tax return - the income tax rate is applied to the Company's income after deducting certain allowable expenses.

To illustrate, the Company's revenue from sales during 1976 was $1.2 billion.

From this, we are permitted to deduct Calculation of Federal Income Tax Obligation Operating Revenue Less:

Operating E:x.rpenses

$912 Interest Expense 151 (Millions)

$1,224 Other Deductions Taxable Income 27 1,090 Income Taxes on above at 48% Federal statutory rate Amortization of Invest-ment Tax Credit Federal Income Tax

$ 134 64 (2) the expenses of running the business such as foe!, labor, depreciation, etc.

We can consider this our first allow-able deduction, which for 1976 amounted to $912 million.

In addition, we are also permitted to deduct interest expenses, that is the interest we pay on both long-and short-term debt, which totaled $151 million in 1976. Other allowable deduc-tions of $27 million reduced our taxable income for 1976 to $134 million. This is the income on which the tax rate is applied. Our calculated income tax at the Federal statutory rate (48%)

amounted to $64 million in 1976.

In order to encourage companies to maintain modern and efficient facilities and to expand these facilities as re-quired, the tax laws grant an income tax investment credit for certain new plant and equipment. For 1976 this reduction amounted to $2 million and brought our total Federal income tax obligation to $62 million.

H owever, not all of our income tax obligations have to be paid currently.

Tax laws permit a company to defer payment of its tax obligation to the future if the company invests in new plant and equipment for expansion or modernization. In 1976, primarily because of tax depreciation and invest-ment tax credits, we were able to defer our $62 million tax obligation.

This is not a tax "loophole". D eferral of taxes by industry was expressly provided for by Congress to stimulate the economy and increase employment.

When these tax payments are deferred, both our customers and our shareholders benefit, because these interest-free fonds which would other-wise be paid to the government help us to reduce our external financing requirements and hold down the cost of supplying energy. These fonds are used to finance our construction program, including our biggest project

- the nuclear Limerick Genera ting Station which employs 2,000 workers at the site. If the Company did not invest in new facilities, it would be required to pay the entire amount of income taxes in cash currently. By investing, the deferred taxes are put to work for both our shareholders and our customers.

In addition to income taxes, we also pay many millions of dollars of taxes regardless of our income. For 1976, these taxes amounted to $83 million and included gross receipts taxes (which are only applicable to utilities), real estate taxes, capital stock taxes and social security taxes.

The Company's total tax expense for 1976 is indicated below:

Total Taxes-1976 (Millions)

Income

$ 76 Gross Receipts 52 Realty 11 Capital Stock 11 Social Security 6

Other 3

Total

$159 19

FINANCIAL SECTION MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOUDATED STATEMENTS OF INCOME.

Operating revenue increased $123 million in 1975 and $89 million in 1976 principally reflecting higher fuel adjustment revenues and base rates w hich added an aggregate of $111 million to operating revenues in 1975 and $53 million in 1976. K wh sales of electricity in 1975 were slightly below 1974, as a result of lower sales to large commercial and industrial cus-tomers which were only partially offset by increased sales to residential customers. Mcf sales of gas decreased 14 percent in 1975 from 1974 prin-cipally because of curtailments by the Company's major pipeline suppliers.

For 1976, kwh sales increased fo ur per-cent over 1975, principally reflecting the economic recovery, and mcf sales increased 13 percent as a result of the availability of gas under emergency contracts and colder weather in O ct-ober, N ovember and December 1976.

Fuel and energy interchange expense in 1974 increased by $179 million over the previous year, and further increases of $19 million and $23 million, respec-tively, were experienced in 1975 and 1976. In 1974 the increase in this 20 expense was primaril y due to substan-tial increases in fossil fuel prices.

Other operation and maintenance expenses have increased in each period due to grow th in utility plant and inflationary pressures.

Increases in depreciation in 1975 and 1976 reflect major additions to new plant in service.

Salem N o. 1 nuclear generating unit, in which the Company has an owner-ship interest of approximately 42 per-cent, qualified as in service fo r tax purposes in D ecember 1976. Federal and state income taxes fo r 1976 reflect reductions of $9. 1 million associated w ith Salem Unit 1 tax depreciation (of which $5.5 million was deferred and $3.6 million fl owed through to income). The related investment tax credit of $29 mill ion reduced Federal income taxes payable and was deferred by charging investment tax credits, net by the same amount.

Taxes, other than income taxes, have escalated primaril y due to increases in revenue, w hich is subject to a gross receipts tax.

The decrease in the allowance fo r funds used during construction fo r 1975, as compared with 1974, resulted from the full year effect in 1975 of new plant placed in service during late 1974.

The increase in 1976 over 1975 resulted from an increase in construction work in progress and a higher cost of capital fo r construction.

Interest charges on debt and div-idends on preferred stock have in-creased substantially in recent years because of the higher cost of money and increases in the amounts of debt and preferred stock outstanding.

Earnings ava ilable for common stock increased from $95 million in 1974 to $108 million in 1975 and $126 million in 1976. The sales of almost 11 million shares of common stock in 1975, and approximately 5.1 million in 1976 increased the average number of shares outstanding by 10 percent in 1975 and by 13 percent in 1976.

Earnings per average share increased from $1.81in1974 to $1.86 in 1975 and to $1.91 in 1976. Dividends on common stock were paid at the ra te of $1.64 per share.

CONSOUDATED STATEMENTS OF INCOME Philadelphia Electric Company and Subsidiary Companies For the Year Ended December 31 1976 1975 (Thousands of Dollars )

Operating Revenue Electric........................................

$1,024,814

$ 978,368 Gas........................

158,865 117,989 Steam.

40,462 38,453 Total Operating Revenue 1,224,141 1,134,810 Operating Expenses Fuel and Energy Interchange........

480,663 457,783 Other Operation Expense..........................

175,801 162,504 Maintenance..................

75,030 62,313 Depreciation.

97,980 91,221 Taxes on Income.

100,598 86,337 Taxes, O ther than Income.

82,644 77,567 Total Operating Expenses 1,012,716 937,725 Operating Income 211,425 197,085 Other Income Allowance for Funds Used During Construction.

77,641 66,874 Income Tax Credits, net.

24,167 22,271 Other, net.

2,548 2,087 Total Other Income 104,356 91,232 Income Before Interest Charges 315,781 288,317 Interest Charges Long-Term Debt.

147,596 136,507 Short-Term Debt..............

3,567 7,885 Total Interest Charges 151,163 144,392 Net Income.......................................

164,618 143,925 Preferred Stock Dividends..............

39,022 36,026 Earnings Applicable to Common Stock.

$ 125,596

$ 107,899 Shares of Common Stock-Average (Thousands)........

65,606 58,135 Earnings Per Average Share (Dollars).

$1.91

$1.86 Dividends Per Share (Dollars)........

$1.64

$1.64 The notes and sc hedules to fin:incial sr:HL'llll.'IH S arc an in1egral pan of this st:llcmcnt.

21

CONSOUDATED BALANCE SHEETS Philadelphia Electric Company and Subsidiary Companies ASSETS Utility Plant, at original cost In Service:

Electric.

Gas......

Steam..

Common, used in all services..........

Less: Accumulated Depreciation..

Construction Work in Progress (including nuclear fuel of

$76,128 in 1976 and $47,511 in 1975)..................

Nonutility Property and Otherlnvestments.................................

Current Assets Cash.

Accounts Receivable Customers..........

Refundable Federal Income Taxes.

Other............

Deferred Fuel Expense.

Materials and Supplies, at average cost Fuel (Coal, Oil and Gas).........

Operating and Construction..............

Prepayments....

Deferred Debits..........................................

Total The noccs and schedules to finJncial statements arc an imcgral pare of this statement.

22 December 31 1976 1975 (Thousands of Dollars)

$3,034,654 278,181 50,877 118,085 3,481,797 860,349 2,621,448 1,265,443 3,886,891 13,203 23,847 137,920 14,671 15,428 19,854 58,722 29,614 2,597 302,653 14,669

$4,217,416

$2,889,428 272,944 48,919 115,855 3,327,146 775,856 2,551,290 1,118,471 3,669,761 12,273 17,429 113,647 26,157 17,933 61,522 26,497 2,439 265,624 13,805

$3,961,463

UABIUTIES Capitalization Stockholders' Equity Preferred Stock - See Schedule, page 28.

Common Stock - See Schedule, page 28..............

O ther Paid-In Capital............

Retained Earnings................

Long-Term Debt - See Schedule, page 28.........

Current Liabilities Short-Term Debt Bank Loans....................................

Commercial Paper..............

Current Maturities of Long-Term Debt.

Accounts Payable...

Taxes Accrued.

Deferred (fuel expense)..........................

Interest Accrued.

Dividends Declared.

Other.

Deferred Credits Accumulated Deferred Income Taxes.............

Accumulated Deferred Investment Tax Credits..........

Other.

Total The notes and schedules to financial stacemcnts arc an integral pan of chis sra! cment.

December 31 1976 1975 (Thousands of Dolla rs )

$ 535,072 1,002,767 1,713 321,190 1,860,742 1,936,417 3,797,159 800 6,426 36,898 72,278 20,170 10,531 43,183 11,570 4,654 206,510 110,829 87,957 14,961 213,747

$4,217,416

$ 485,864 916,639 1,498 304,678 1,708,679 1,776,936 3,485,615 50,200 57,754 60,894 67,618 34,650 9,476 37,829 12,457 3,549 334,427 83,001 40,203 18,217 141,421

$3,961,463 23

CONSOUDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION Philadelphia Electric Company and Subsidiary Companies Source of Funds Use of Funds Net Income...

Charges (Credits) Not Affecting Funds Depreciation........

Deferred Income Taxes, net........

Investment Tax Credits, net..

Allowance for Funds Used During Construction..

Total from Operations Sale of Long-Term Debt....................

Preferred Stock...........

Common Stock.

Decrease in Short-Term Debt.

Proceeds from contract terminations-nuclear projects.

Total Additions to Utility Plant.

Allowance for Funds Used During Construction (Deduction)

Dividends on Preferred and Common Stock.

Retirement of Long-Term Debt.

Increase (Decrease) in Other Items of Working Capital.

Other, net......................

Total Tht* not1..*s and schedules to fin :rncial s1atemen ts are an integral p:irt of th is SlJ tt'!lll'nt.

CONSOUDATED STATEMENTS OF RETAINED EARMNGS Philadelphia Electric Company and Subsidiary Companies Balance, January 1..............................

Net Income (from page 21).

Cash Dividends Declared Preferred Stock...

Common Stock...

Expenses of Capital Stock Issues.

Balance, December 31.......................

The narcs and scl1l*dulcs to fin:inci:i\\ st:Heml'll lS are :in inrcgra l pa rt of this statcnwnt.

24 For the Year Ended December 31 1976 1975 (T housonds of Dolio rs)

$164,618

$143,925 97,980 91,221 28,882 24,472 52,668 8,353 (77,641)

(66,874) 266,507 201,097 200,000 245,000 50,000 86,128 133,723 (100,728)

(69,970) 64,000 18,750

$565,907

$528,600

$380,007

$361,368 (77,641 )

(66,874) 147,097 131,465 63,271 95,193 40,222 (2,032) 12,951 9,480

$565, 907

$528,600 For the Year Ended December 31 1976 1975 (Thousonds of Dollo rs )

$304,678 S293,747 164,618 143,925 469,296 437,672 39,414 36,026 107,683 95,439 1,009 1,529 148,106 132,994

$321,190

$304,678

NOTES TO FINANCIAL STATEMENTS-Thousands of Dollars

1. Significant Accounting Policies:

General: All utility subsidiary com-p a ni es o f Phil a d e lphia El ectric C ompany are w holly-owned and are included in the consolidated financial statements. The acco unts arc main-tained in accordance w ith the uniform system of accounts prescribed by the r eg ul a t o r y auth o riti es h a vin g jurisdiction.

Revenues: Revenues are recorded in the accounts upon billing to the cus-tomer. Rate increases arc billed from dates authorized or permitted to be-come effective by regulatory author-ities.

Fuel Expenses: For financial report-ing purposes the Company defers that portion of fuel expense w hich is rc-cove ra b lc under fu el adju stment clauses until it is subsequentl y billed as fuel adjustment revenue in order to effect a better matching of fuel expen se w ith related re vc n ucs.

Amounts of fuel expense recovered under the fuel adj ustment clauses arc charged to o perations wi th eq ui valent credits to deferred fuel expense.

The Company's share (42.49%) of nuclear energy costs, relating to the Peach Bottom Station (owned by the Compan y and three contiguous uti-1 i ties ), refl ec ts a zero ne t sa lvage value and is charged to fuel ex penses on the basis of the number of units of thermal energy produced as they relate to the total thermal units to be pro-duced over the estimated fo ur-year life of the fuel.

Depreciation: For fin ancial reporting purp oses, d eprec iati o n is prov id ed over the estimated service lives of the plant on a straight-line basis. The annual depreciatio n prov isions ex-pressed as a percent of average depre-ciable utility plant in serv ice, were approx imately 2.97% fo r 1976 and 2.88% for 1975.

I11co1ne Taxes: D eferred income taxes arc prov i<lcd fo r diffe rences between book and taxable income to the extent permitted by the regulatory author-ities for rate-making purposes.

Investment tax credits w hich reduce Federal income tax expense, arc de-f e r re d by equiv alent ch a rges to income and subsequently amortized by credits to income over the estimated useful life of the related utility plant.

Allowance for Funds Used During Construction: Allowance fo r funds used during construction is defined in the applicable regulatory system of accounts as "the net cost fo r the period of construction of borrowed funds used fo r construction purposes and a reasonable ra te upon other funds when so used." For financial rep o rting purp oses, the all o w a nce determined in accordance w ith the foregoing definition is recorded as a non-cash charge to construction in the plant accounts with a corresponding non-cash credit to "Other Income,"

thereby deferrin g the estimated cost of the capital employed in construction work in progress. For income tax purposes, the allowance accrued is not included in taxable income, nor is the depreciation of the capitalized allow-ance a tax deductible expense. Income tax reductions of $24,701 in 1976 and

$22,520 in 1975 arising from interest charges associated w ith debt used to fin ance construction arc allocated to other income. The net after-tax rates were 8% on January 1, 1975, 8\\,11%

on July 1, 1975, 8.20% on January 1, 1976 and 8.40% on Jul y 1, 1976.

The estimated portions of the allow-ance attributable to funds provided by common stock equity, w ithout regard to the tax effect of interest on debt, were equivalent to 15 percent in 1976 and 13 percent in 1975 of earnings applicable to common stock.

Retirement Plan: T h e Co m pa ni es have a no nco ntributo ry serv ice annuity plan applicable to all regular employees. The annuities arc dctcr-mi n cd under a fo rmul a w hi c h is applied unifo rml y to all employees rega rdl ess o f p os iti o n, and the amount depends on length of service and compensation earned to normal retirement age. The annuities arc paid out of an irrevocable trust fund, to w hich the Com panies make con-tributions to fund current and pnor se rvice cos ts o v e r a twent y year period. (Sec N ote 5)

2. Taxes 011 Income:

Included in oper-ating expenses:

Current income taxes Federal State Total D eferred income taxes, net Federal State Total Investment tax credits, net Federal Total included in operating expense Federal State Total Included in other income:

Current income taxes Federal State Total Total income tax prov1s1ons:

Federal State Total 5 6,147 12,901 19,048 23,447 5,435 28,882 52,668 82,262 18,336 100,598 (19,684)

( 4,483)

(24,167) 62,578 13,853 s 76,431

$42,161 11,351 53,512 19,955 4,517 24,472 8,353 70,469 15,868 86,337 (18,096)

( 4,175)

(22,271) 52,373 11,693

$64,066 The afo re m enti o ned inco m e tax provisions differ from amounts com-puted by applying the Federal statutory 25

tax rate to adjusted income before 111com e taxes for the fo ll ow ing reasons:

Net Income.

Total income 1976

$164,618 1975

$143,925 taxprovisions..

76,431 64,066 Income before income taxes... $241,049

$207,991 Deduct-Allow-ance for Funds Used During Consu-uction (non-taxable).

Adjusted income before income taxes.....

Income taxes on above at Federal statutOt)' rate (77,641 )

(66,864)

$163,408

$141,127 (48%).

$ 78,436

$ 67,741 Increase (Decrease) due to:

Excess of tax depreciation over book de-preciation not nom1aliz.ed.

State income tax, net of Federal income tax benefits.

Amortization of investment tax a*edits previously deferred...

Other, net.

Total income tax proV!S!OllS.

Provisions for income taxes as a percent of:

Income before income taxes.

Adjusted income before mcome taxes..

26 (5,285) 9,812 (1,638)

( 4,894)

( 4,229) 8,249 (2,490)

(5,205)

$ 76,431

$ 64,066 31.7%

30.8%

46.8%

45.4%

Provisions for deferred income taxes consist of the following tax effects of timing differences between tax and book income:

Depreciation.

Deferred fuel expense..

Other.

1976

$29,770 1,054

( 1,942)

$28,882 1975

$26,030

( 1,995) 437

$24,472 Investment tax credits of $54,306 and $10,843 applicable to new plant and equipment placed in service in 1976 and 1975, respectively, have been reflected as reductions of Federal in-come tax expense with equivalent amounts reflected in investment tax credits, net. For Federal income tax purposes the 1976 inv es tment tax credits will eliminate current Federal income taxes payable, $39,635, and result in a claim for refund of prior years' Federal income taxes of $14,671.

3. Taxes, Other than Income:

Gross Receipts.

Capital Stock.

Realty.

Other, prin-cipally social security.

1976

$52,103 10,817 11,127 8,597

$82,644

4. Short-Term Debt:

1975

$48,263 10,667 10,687 7,950

$77,567 The average short-term borrowings during 1976 aggregated $51,131 at an average rate of 6.74% and during 1975 aggregated $97,044 at an average rate of 7.85%. The maximum short-term borrowin gs o ut standin g were

$132,200 111 February, 1976 and

$183,900 inJanuary, 1975. The average rate of interest on short-term borrow-ings at D ecember 31, 1976 was 6.25%

for bank loans and 4.73% for com-mercial paper. As of December 31, 1976 the Company had informal lines of credit with banks aggregating

$212,575. The Company generally does not have formal compensating balance arrangements with these banks. The Company maintains de-posits w ith banks for working funds for normal operations.

5. Retirement Plan:

Annuities under the Companies' Retirement Plan are funded through a Trust Fund. Contributions by the Companies aggregated $15,225 in 1976 and $14,315 in 1975. Of such amounts, approximately 77 percent was charged to operating expense and 23 percent, associated with con-struction labor, was included in the cost of new utility plant. Based upon actuarial assumptions, the estimated prior service liability of the Plan was substantially fully funded at December 31, 1976.

6. Commitments and Contingent Liabilities:

The Companies have incurred sub-stantial commitments in connection with their construction program. Con-struction expenditures are estimated to be $414,000 for 1977 and $1,338,000 for 1978-1980.

The Price-Anderson Act places a "Limit of Liability" of $560,000 on each nuclear generating facility for public liability claims that could arise from a nuclear incident. The owners insure this exposure by purchasing the maximum private insuranc e of

$125,000 and the remainder is pro-vided by indemnity agreements with the Nuclear Regulatory Commission (NRC ); however, beginning in Au-gust, 1977, the indemnity by the NRC will decrease, and, in the event of a nuclear incident, the Company, to the extent of its ownership participa-tion, could be assessed $5,000 for each reactor owned (maximum $10,000 per reactor in a year). For property dam-age to the nuclear plant facilities which could arise from an incident at the Peach Bottom Station, the Company and its co-owners have private insurance up to $175,000; for

the Salem Station, the Company, through the operator of the Station, is a member of Nucl ear Mutual Limited (NML) which provides for coverage up to $150,000. In the event of a loss at a plant insured by NML, the Company may be subject to a maximum amount of fourteen times its annual premium (currently not material for any one incident). The Company is a self-insurer, to the extent of its ownership interest, for any property loss in excess of the aforementioned amounts.

The Company's proportionate share of a commitment for nuclear fuel at the Peach Bottom Station as of December 31, 1976, was $45,373. An independent fuel company has been authorized to acquire and own up to a maximum of $150,000 of such fuel at any one time and sell the energy therefrom to the Company, as the operator of this Station.

Minimum rental commitments as of December 31, 1976, under all non-cancelable agreements are $18,500 for 1977, $17,800 for 1978, $17,000 for 1979, $15,700 for 1980, $4,900 for 1981, $27,600 for 1982-86, $26,900 for 1987-91, $23,500 for 1992-96 and a remainder of $3,800. The minimum rental commitments aggregating

$155,700 at December 31, 1976 are applicable to the following types of leased property: nuclear fuel $51,000 (estimated to be charged to operations over a four year period); combustion turbine generators $80,400; computer equipment $3,600; other, principally rights - of - way $20,700. Rentals charged to operating expenses were

$25,293 in 1976 and $25,854 in 1975, which include nuclear fuel contract payments of $13,790 in 1976 and

$12,455 in 1975.

Complaints have been filed before the Pennsylvania Public Utility Com-mission against the Electric Fuel Ad-justment Clause. Counsel for the Company is of the opinion that no refunds will be required of revenues collected under the fuel adjustment clause.

Actions have been filed in the U.S.

District Court against the Company w ith respect to alleged discrimination in its emp loyment or promotion practices. Counsel for the Company is of the opinion that the Company has meritorious defenses to these suits.

7. Quarterly Data (Unaudited):

The quarterly data shown below is unaudited but in the opinion of the Company includes all adjustm ents (consisting of normal recurring accruals) necessary for a fair presenta-tion of such amounts.

Operating Quarter Ended Mar. 31, Jun. 30, 1976 1976 revenue.

... $324,740 $282,408 Net income.... $ 42,986 $ 32,715 Earnings applicable to common stock$ 33,983 $ 23,057 Average shares outstanding (thousands).

Earnings per average share (dollars).

64,221 64,498

.53

.36 Operating Quarter Ended Sep. 30, Dec. 31, 1976 1976 revenue..

... $316,011 $300,982 Net income.... $ 44,875 $ 44,042 Earnings applicable to common stock $ 34,693 $ 33,863 Average shares outstanding (thousands)...

64,818 68,859 Earnings per average share (dollars)...

.54

.48

8. Replacement Cost Information (Unaudited):

Inflation has resulted in replacement costs of utility plant in service that are significantly greater than the recorded original cost. The current replace-ment cost of the gross utility plant in service at December 31, 1976 is esti-mated at $7,780,000 which compares to recorded cost of $3,481,797.

The estimated replacement cost of utility plant, determined by applying indices to recorded cost, does not necessarily reflect the current value of these assets, nor does the excess of replacement cost over recorded cost represent additional equity for the Company's common shareholders. Re-placement cost of utility plant is the Company's estimate of the current cost to replace existing plant with similar plant of most recent design.

This replacement cost informa -

ti on should not be used to evaluate the effect of inflation upon the Com-pany's financial position and results of operations, as reported.

In comp liance with reporting requirements additional replacement cost information is disclosed in the Company's annual report to the Securities and Exchange Commission.

27

~

SCHEDULE OF CAPITAL STOCK-DECEMBER 31, 1976 Philadelphia Electric Company Preferred Stock (Sl OO par) cumulative:

Current Number of Shares Amount Common Stock - no par (E).

Series 9.52% (Sold 1976 at $100 per share).

9.50%.

8.75%.

7.85%.

7.80%.......................

7.75%.........

7.325%.

7%.

4.68%...............

4.4%.

4.3%.......................

3.8%.

Unclassified...................

Total Preferred Srock.

Redemption Price (A)

Authorized 109.52 500,000 109.50 750,000 110.00 650,000 108.00 500,000 10800 750,000 105.50 200,000 106.45 750,000 107.00 400.000 104.00 150,000 112.50 274,720 102.00 150,000 106.00 300,000 4,625,280 10,000,000 100,000,000 (A) Redeemable at the option of the Company. at the indicated dollar amounts per share, plus accrued di vidends.

( B) 20,000 shares to be redeemed annually at $100 per share commencing May 1, 1981.

( C) 30,000 shares to be redeemed annually at $100 per share commencing May 1, 1979.

(T housands)

O utstanding of Dollars) 500,000 (B) s 50,000 750,000 75,000 650,000 65,000 500,000 50,000 750,000 75,000 200,000 20,000 750,000 (C) 75,000 376,000 (D )

37.600 150.000 15,000 274,720 27,472 150,000 15,000 300,000 30,000 5,350,720 s 535,072 69,306,565 Sl,002,767 (D) 8,000 shares arc being redeemed annually at $100 per share. The Company purchased 7,915 shares in 1976 and 5,200 shares in 1975 for this purpose and at December 31, 1976 had applied 8,000 shares to future redemption requirements. The excess of the aggregate par value of such shares over the aggregate purchase price is reflected in Other Paid-In Capital (S21 5 in 1976and, 192 in 1975).

(E) The Company issued 5.110,227 shares of Common Stock (4,000,000 shares through a public offering and 1, 1 10,~27 shares through continuing D1v1drnd Re111vestmrnt and Employee Plans) for $86,128 111 1976 and 10,866,340 shares for S133.723 111 197:i. Ar December 31, 1976 there wen: 199,697 shares reserved for issuance under the Employee Srock Purchase Plan and 1,658,815 shares under the Dividend Rein vestment and Srock Purchase Plan.

SCHEDULE OF LONG-TERM DEBT-DECEMBER 31, 1976 Philadelphia Electric Company First a*nd Refundin g Mortgage Bonds (A):

Amount (Thousands)

Series Due of Dollars)

Series Due 53/,i %

1977.

s 34,000 45/s%

1987.

27/s%

1978.

25,000 33/,i %

1988.

11 %

1980.

125,000 5%

1989.

23,4%

1981.

30,000 61/2%

1993.

3 1/,i %

1982.

35,000 4 1/2%

1994.

31/s%

1983.

20,000 9%

1995.........

31/s%

1985.

50,000 8 14%

1996.

43s %

1986.

50,000 61/s%

1997.

Amount (Thousands) of Dollars) s 40,000 40,000 50,000 60,000 50,000 75,200 80,000 75,000 Total First and Refunding Mortgage Bonds Note Payable-Bank.

.. (B) 1979 Pollution Control ore..................... 5.5%

1977-97 Debentures.

...... 12% %

1981 (Sold 1975)

Debentures.

.......................... 4.85%

1986 Unamortized Debt Discount and Premium, Net.

Total Philadelphia Electric Compan y........................

Philadelphia Electric Power Company -a subsidiary:

Sinking Fund Debentures.

41/ 2 %

1995 Unamortized Debt Discount.

Total Long-Te_rm Debt (Annual interest rcq.uirements S151.404)

Current Matunnes 111cluded 111 C urrent L1abilmes.............

Long-Term Debt included in Capitalization.

Series 7 1/2 %

71/2%

73;'4%

11 %

11 5/s%

73/s%

95/8%

81/2%

91/s%

Due 1998.

1999..

2000.

2000(Sold 1975) 2000 (Sold 1975) 2001.

2002 (Sold 1976) 2004.

2006 (Sold 1976)

Amount (Thousands of Dollars)

$100,000 100,000 76.800 80,000 65,000 80,000 100,000 125.000 100,000 1,666,000 125,000 37,000 100.000 26,994 (5.263) 1.949,731 23,698 (114) 1,973,315 (36,898)

Sl.936,41 7 (A) Utility plant is subject to the lien of the Company's mortgage.

(B) Interest at a rate of 115% of the base rare of the bank on 90-day loans to responsible and commercial borrowers in effect from rim e ro rime through May 27, 1977 (effective rate 7.19%, December 31, 1976) and at accelerating rates up to 118% of such base rare through maturity.

28

REPORT OF AUDITORS To Shareholders and the Board of Directors Philadelphia Electric Company Philadelphia, Pennsylvania We have examined the consolidated balance sheets of Philadelphia Electric Compan y and Subsidiary Companies as of December 31, 1976 and 1975, and the related consol idated statements of income, retained earn ings, and changes in financial position for the years then ended. Our exam-inations were made in accordance w ith generall y accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the consolidated fi nancial statements referred to above present fai rl y the fi nancial position of Philadelphia Electric Compan y and Subsidiary Companies at December 31, 1976 and 1975, and the results of their operations and the changes in their financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis.

1900 Three Girard Plaza Philadelphia, Pennsylvania COOPERS & LYBRAND February 8. 1977 FINANCIAL STATISTICS Summary of Earnings (Millions of dollars}

1976 1975 Operating Revenue (for details sec pages 31 and 32).

$1,224.1

$1,134.8 Operating Expenses Fuel and Energy Interchange...

480.7 457.8 Labor.

161.9 152.2 Other Materials, Supplies and Services.

88.9 72.6 Total O peration and Maintenance.

731.5 682.6 Depreciation.......................

98.0 91.2 Taxes.

183.2 163.9 Total Operating Expenses.

1,012.7 937.7 Operating Income...............

211.4 197.1 Other Income Allowance for Funds Used During Construction..................

77.6 66.9 Income Tax Credits, net.........

24.2 22.3 Other, net..

2.6

__bQ Total Other Income.

104.4 91.2 Income Before Interest C harges............

315.8 288.3 Interest Charges Long-Term Debt.

147.6 136.5 Shorr-Term Debt.

---1§ -----22.

Total Interest Charges.

151.2 144.4 Net Income...................

164.6 143.9 Preferred Stock Dividends..

39.0 36.0 Earnings Applicable to Common Stock.

125.6 107.9 Dividends on Common Stock...............

107.7 95.4 Earnings Retained...........

17.9 12.5 Earnings per A vcrage Share (dollars).

Sl.91

$1.86 Dividends Paid per Share (dollars)............

$1.64

$1.64 Common Stock Equity (Per Share)..

$19.13

$19.05 Shares of Common Stock - Average (Millions).

65.6 58.1 See page 20 for Discussion and Analysis of the Consolidated Statements of Income.

Common Stock Prices, Earnings and Dividends by Quarters (Per Share}

1976 Fourth Third Second First 1974

$1,011.7 439.2 134.0 73.4 646.6 77.8 134.3 858.7 153.0 70.8 25.5

___QJ

~

249.6 106.3

~

120.5 129.1 33.7 95.4 86.4 s

9.0 Sl.81

$1.64

$20.21 52.7 Quarter Quarter Quarter Quarter High Price..........

518

$173/<i

$167/s

$17 1/s Low Price..........

$155/s

$15 S14 Vs Earnings.................

4811 54<!

3611 53<!

Dividends.........

41<1 41<1 41<1 41<1 1973 1972 1971 1966

$766.6

$685.0

$608.1 S357.9 260.3 212.0 189.8 86.3 125.6 120.4 108.8

76. 1 65.5

___fil 45.2 25.0 451.4 387.4 343.8 187.4 64.3 60.5 55.9 39.0 102.5 93.6 80.8 50.0 618.2 541.5 480.5 276.4 148.4 143.5 127.6 81.5 58.7 42.5 31.7 3.9 3.4 (0.4)

(1.7)

(0.2 )

2.7

_ill

--11 0.2 64.8

__R2

___)).2

12 213.2 185.8 160.8 85.4 84.8 73.4 60.9 23.0 5.5

~ ___Q]

-12 90.3 77.8 67.2 24.5 122.9 108.0 93.6 60.9 27.6 21.6 15.3 3.7 95.3 86.4 78.3 57.2 78.4 67.7 60.7 40.7 s 16.9 s 18.7

$ 17.6 s 16.5

$1.99

$2.08 52.10

$2.08

$1.64

$1.48

$20.22

$20.00

$19.54 516.66 47.8 41.5 37.3 27.5 1975 Fourth Third Second First Quarter Quarter Quarter Quarter

$151/2

$15

$15 1/ 2

$143/<i

$127/s

$123/<i

$121/s

$11 1/s 41Q:

5oa:

4n 4811 41<1 41<1 41<1 41Q:

29

FINANCIAL STATISTICS Summary of Financial Condition-December 31 (Millions of dollars) 1976 1975 1974 1973 1972 1971 1966 Assets Utility Plant, at Original Cost.

$4,747.2

$4,445.6

$4,123.9

$3,672.1

$3,222.6

$2,851.0

$1,657.7 Less: Accumulated Depreciation.............

860.3 775.8 717.8 665.4 624.2 585.7 429.0 Total Utility Plant............

3,886.9 3,669.8 3,406.1 3,006.7 2,598.4 2,265.3 1,228.7 Nonutility Property and Other Investments...

13.2 12.3 12.7 11.5 9.5 6.0 8.1 Current Assets Cash.

23.8 17.4 16.0 16.2 17.8 25.2 12.3 Pollution Control Funds.

12.2 38.0 Accounts Receivable....................

168.0 139.8 111.9 75.6 72.1 63.0 34.2 Deferred Fuel Expense.

19.9 17.9 21.7 Materials and Supplies.

88.3 88.0 72.5 40.2 38.8 34.2 22.4 Other.

2.6 2.5 21.1 3.8 2.8 2.0 2.6 Deferred Debits.

14.7

1.1]

6.0

12_

7.5 6.6 5.3 Total Assets.

$4,21 7.4

$3,961.5

$3,668.0

$3,176.1

$2,784.9

$2,402.3

$1,313.6 Liabilities Preferred Stock..............

$ 535.1 $ 485.9

$ 486.4

$ 412.0

$ 337.5

$ 262.5 87.5 Common Stock.

1,002.8 916.6 782.9 771.8 622.5 528.2 260.3 Other Paid-In Capital.

1.7 1.5 1.3 1.3 1.2 1.2 1.2 Retained Earnings..

321.2 304.7 293.7 286.2 27 1.0 254.7 199.0 Total Stockholders' Equity.

1,860.8 1,708.7 1,564.3 1,471.3 1,232.2 1,046.6 548.0 Long-Term Debt.

1,936.4 1,776.9 1,597.7 1,319.1 1,287.2 1,161.8 651.3 Total Capitalization............

3,797.2 3,485.6 3,162.0 2,790.4 2,519.4 2,208.4 1,199.3 Current Liabilities Bank Loans..................

0.8 50.2 115.1 83.5 41.1 1.8 32.3 Commercial Paper.

6.4 57.8 62.8 64.2 62.7 47.5 Current Maturities of Long-Term Debt.

36.9 60.9 91.9 67.3 13.5 17.1 1.5 Accounts Payable and Dividends D eclared.

83.9 80.1 78.8 67.4 49.5 40.7 20.8 Taxes Accrued.

20.2 34.7 16.5 18.1 18.4 22.3 13.7 Taxes Deferred (fuel expense)...........

10.5 9.5 11.5 O ther.

47.8 41.3 34.3 27.4 23.7 20.7 8.7 Deferred Credits.

213.7 141.4 95.1 57.8 44.0 31.8 26.8 Contributions in Aid of Construction*

12.6 12.0 10.5 Total Liabilities.

$4,217.4

$3,961.5

$3,668.0

$3,176.1

$2,784.9

$2,402.3

$1,313.6

Transferred to U tility Accounts in 1973.

30

OPERATING STATISTICS 1976 1975 1974 1973 1972 1971 1966 ELECTRIC OPERATIONS Output (millions of kilowatt-hours)

Steam.

13,385 12,814 16,649 18,536 20,181 19,849 16,007 Nuclear.

4,937 4,387 1,745 176 97 206 H ydraulic..................

2,065 2,275 1,938 2,132 2,242 1,738 1,304 Pumped Storage Output..

1,062 1,275 1,075 1,318 1,430 1,639 Pumped Storage Input.

(1,506)

(1,785)

(1,515)

(1,876)

(2,018)

(2,302)

Purchase and Net Interchange.

7,666 7,363 5,300 7,094 3,472 2,889 2,000 In ternal Combustion.

792 914 1,200 688 946 940 19 Other.

36 1,016 27 1

86 Total Electric Output.

28,437 27,243 27,408 28,095 26,351 25,045 19,330 Sales (millions of kilowatt-hours)

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

7,585 7,424 7,159 7,493 6,856 6,649 4,457 Small Commercial and Industrial.

2,755 2,624 2,558 2,663 2,503 2,428 2,087 Large Commercial and Industrial....................

14,662 14,060 14,622 14,953 14,011 13,296 10,267 All Other.

1,271 1,227 1,217

~ 1,136 1,085

-1.J.11 Tota l Electric Sales.............................

26,273 25,335 25,556 26,301 24,506 23,458 17, 9"24 Number of Customers, December 31 Residential.

1,137,544 1,120,981 1,113,036 1,103,163 1,090,921 1,079,585 1,006,613 Small Commercial and Industrial.

115,422 114,896 117,237 118,009 118,522 119,203 141,752 Large Commercial and Industrial.............

5,747 5,719 5,724 5,663 5,645 5,517 4,827 All Other..

2,345 2,305 2,248 2,207 2,1 63 2 130 1,926 Total Electric C ustomers...................

1,261,058 1,243,901 1,238,245 1,229,042 1,217,251 1,206,435 1,155,118 Operating Revenue (millions of dollars)

Residential.

$ 373.2

$ 364.7

$ 314.4

$ 254.4

$ 222.7

$ 198.3

$ 104.6 Small Commercial and Industrial........

149.3 138.9 122.0 97.5 88.1 78.6 53.0 Large Commercial and Industrial....................

442.9 418.3 388.1 257.5 228.6 198.2 110.0 All Other.

59.4 56.5 49.0 37.4 35.0 31.6 ~

Total Electric Revenue.

$1,024.8

$ 978.4

$ 873.5

$ 646.8

$ 574.4

$ 506.7

$ 287.9 Operating Income Before Income Taxes (millions of dollars).

$ 273.8

$ 261.5

$ 196.5

$ 170.1

$ 166.1

$ 141.8

$ 102.3 Average Use per Residential Customer (kilowatt-hours).

6,710 6,645 6,460 6,829 6,317 6,187 4,477 Electric Peak Load, Net Hourly D emand (thous. kw).

5,346 5,530 5,431 5,760 5,313 4,922 3,673 Net Electric Generating Capacity-Summer Rating (thous. kw).

7,742 7,186 7,808 6,650 6,348 6,366 3,663 Cost of Fuel per Million Btu.

$1.24 Sl.23

$1.42

$0.71

$0.62

$0.59

$0.30 Btu per Net Kilowatt-hour Generated.

10,529 10,523 10,676 10,523 10,666 10,782 10,648 31

OPERA TING STATISTICS 1976 1975 1974 GAS OPERATIONS Sales (millions of cubic feet)

Residential.

2,342 2,334 2,281 House Heating.

24,540 20,817 23,793 Commerical and Industrial.

33,390 30,012 35,913 All Other..

89 74 79 Total Gas Sales.

60,361 53,237 62,066 Number of Customers, December 31 Residential..

89,459 90, 117 90,870 House Heating.

162,993 162,914 163,093 Commercial and Industrial...............

19,669 19,874 20,276 Total Gas C ustomers.................

272,121 272,905 274,239 Operating Revenue (millions of dollars)

Residential..

8.7 8.1 7.1 House Heating.

73.3 54.8 55.4 Commercial and Industrial............

76.1 54.5 45.7 All Other.

0.2 0.1 0.1 Subtotal.

158.3 117.5 108.3 Other Revenue..................

0.6 0.5 0.6 Total Gas Revenue.

$ 158.9

$ 118.0

$ 108.9 Operating Income Before Income Taxes (millions of dollars).

34.4 19.6 26.9 STEAM OPERATIONS Sales (millions of pounds)...............

7,735 7,117 7,600 Number of Customers, December 31.

679 689 710 Total Steam Revenue (millions of dollars).

40.5 38.5 29.3 Operating Income Before Income Taxes (millions of dollars).

3.8 2.3 (3.2)

FISCAL AGENTS FOR STOCKS AND BONDS PHIL AD ELPH IA ELECTR IC COMPAN Y-Preferred and Comm on Stocks Transfer Agents l~cg i s trars G IR ARD BANK One Girard Pla za, Philadelph ia, Pa. 19101 PH ILADELPH IA EL ECTR IC COMPANY 2301 Market Street, Phi ladelphia, Pa. 19101 C HEM ICA L BANK 20 Pinc Street, New York, N.Y. 10015 MORGAN GUA RANTY TRUST CO ofN.Y.

30 West Broadway, New York, N.Y. 10015 PH ILADELPH IA ELECTR IC COMPANY - First and Refunding Mortgage Bonds Trustee THE FIDELITY BANK Broad & Walnut Streets, Philadelphia. Pa. 19109 New York Agcm MORGAN GUARANTY TRUST CO. of N.Y.

23 Wall Street, New Yo rk, N.Y. 10015 PHILADELPH IA ELECTRIC COMPA N Y-Sinkin g Fund Debentures PH ILADELPH IA ELECTR IC POWER COM PA Y (A Subsidiary)- Debcmures Trustee THE PH ILADELPI-11 /\\

ATIO AL 13A K

Broad & Chestn ut Streets, Philadelphia, Pa. 19101 New York A gem IRV ING TRUST COMPA N Y One Wall Street, New York, N. Y. 10015 1973 1972 1971 1966 2,317 2,418 2,441 2,231 24,125 26,026 25,165 20,343 37,868 41,490 40,624 32,060 90 104 102 62 64,400 70,038 68,332 54,696 91,682 94,035 95,478 100,264 163,096 159,780 154,902 131,858 20,518 20,312 19,778 20,056 275,296 274,127 270, 158 252,178 6.7 6.2 s 6.2 5.5 51.3 48.4 45.8 34.6 42.0 38.2 34.8 21.4 0.1 0.1 0.1 0.1 100.1 92.9 86.9 61.6 0.4 0.4 0.4 0.3

$ 100.5 93.3 87.3 s 61.9 22.8 16.9 21.7 16.6 7,762 8,328 8,223 6,674 723 737 733 1,154 19.4 s 17.3 14.2 8.1 0.7 1.2 s (2.2) $

0.8 All Philadelphia Electric Compan y securities, excep t the Sinking Fund D ebentures and those series of First and Refundin g Mortgage Bonds and Preferred Stock w hich were sold privately to institutional investors, are listed on the Philadelphia Stock Exchange and the New York Stock Exchange. Philadelp hia Electric Power Compan y Debentures are listed on the Philadelphia Stock Exchange.

32 Oppositl':,~ *11111" '"")'to spread tire ll'<>rd tlrat PE propides dependable elccrrir sen,ice 11*11s 111ade tlrn>1(~lr tire distrib111ion oj in>1HJI/ decals to e111ployees and tlreir friends and nc'(~lrbors.

PHILADELPHIA ELECTRIC COMPANY 2301 MARKET STREET P.O. BOX 8699 PHILADELPHIA, PA 19101 Address Correction Requested Return Postage Guaranteed BULK RATE U.S. POSTAGE PAID PECO

ML19031A129

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