ML19031A130
| ML19031A130 | |
| Person / Time | |
|---|---|
| Site: | Salem  |
| Issue date: | 05/23/1977 |
| From: | Delmarva Power & Light Co |
| To: | Office of Nuclear Reactor Regulation |
| References | |
| Download: ML19031A130 (36) | |
Text
our Service Area - Delmarva Power provides electric service throughout most of the 5,700 square-mile Delmarva Peninsula. This area includes the State of Delaware, portions of nine Eastern Shore Counties of Maryland and the two Eastern Shore Counties of Virginia. In addition, the Company distributes natural gas in a 270 square-mile area in Northern Delaware.
Locations of the Company's generating stations on the peninsula are indicated on the map. In addition, the Company receives generation from two coal-burning stations in Western Pennsylvania and from the Peach Bottom, Pennsylvania, and Salem, New Jersey, nuclear power stations.
I DE.
ON THE COVER (Clockwise from top left) -
Construction is underway on coal-fired unit at Indian River Power Station; Thomas J.
Warren, Sr., Mechanical Welder at Delaware City Power Station; propane mixing station helps offset increased natural gas curtailment by our pipeline supplier; Joseph Huszti, Chemist, Delaware City Power Station; Jean McGrory, Section Supervisor, Customer Services, discusses billing question with Robert Moore, Clerk, Customer Services.
Delaware City Power Station, Delaware City Indian River Power Station, Millsboro
Financial Highlights Revenues Net Income Earnings per share Dividends Declared Common Stock Outstanding (Average Shares)
Common Stock Book Value Construction Requirements Electric Sales Gas Sales Electric Customers Gas Customers
- Restated contents Page President's & Chairman's Message to Stockholders 2
Revenues Up $10.4 Million 4
Operating Expenses Increase
$9.1 Million 4
Earnings Increase to $1.48 Per Share 4
Construction and Financing 4
Rate Increases in Effect and Pending 4
Favorable Decision from SEC 6
Electric Consumption Increases 7
Gas Supply 8
Gas Exploration Successful 8
Marketing Energy Efficiency 8
Generation Planning 9
Fuel Supply and Costs 10 Environmental Matters 10 FEA Conversion Order 10 River Crossing Project 10 Chestertown Utility Acquired 11 Communications Activities 11 Employees 12 Management Changes 12 Officers and Directors 14 Management Review of Operations 15 Quarterly Financial Information 17 Financial Section 18 Consolidated Statistics 28 1976
$286.4 million
$35.1 million
$1.48
$1.20 18,820,521
$15.01
$76.0 million
- 6. 7 billion kwh 13.8 million mcf 260,476 73,352 1975 Percent Increase <Decrease>
$276.0 million*
$31.5 million*
$1.38*
$1.20 17,579,509
$14.79
$80.5 million 6.4 billion kwh 12.9 million mcf 250,593 73,827 ANNUAL MEETING Third Tuesday in April at 12:30 p.m., in the Company's General Offices 800 King Street Wilmington, Delaware 3.8 11.4 7.2 7.1 1.5 (5.6) 4.7 7.0 3.9 (0.6)
FIRST MORTGAGE AND COLLATERAL TRUST BONDS -
Trustee, Chemical Bank, New York, N.Y PREFERRED STOCK -
Transfer Agent, Wilmington Trust Company, Wilmington, Del.,
Registrar -
Delaware Trust Company, Wilmington, Del.
COMMON STOCK -
Stock Symbol, DEW, Listed on the New York and Philadelphia Stock Exchanges. Transfer Agents -
Wilmington Trust Company, Wilmington, Del., and Irving Trust Company, New York, N.Y Registrars -
Delaware Trust Company, Wilmington, Del. and Bankers Trust Company, New York, N.Y
To our Shareholders:
Company earnings of $1.48 for 1976 were 7.2% over restated earnings for 1975 of $1.38. In spite of this increase, earnings were well below expectations mainly because of an adverse rate decision by the Delaware Public Service Commission which allowed only 52% of the amount requested.
In addition, a tentative settlement was reached in February, 1977 of a rate case pending before the Federal Power Commission, which reduced revenue collected during 1976 by 1.4 million dollars.
In mid-January, 1977 the Company filed for an overall increase in Delaware electric revenues of about $26 million or 18%. This increase is required to bring Company revenues up to the rate of return previously authorized as well as offset the continuing erosion of the Company's earnings during 1977. The Company plans to request in a timely manner rate increases in other jurisdictions during the year.
Your Company is working with the Delaware, Maryland and Virginia Commissions to develop electric rate structures that will more closely reflect the on peak and off peak costs of providing service.
Several events took place during the year which are of special importance to the Company:
- The final permit for the 500,000 volt aerial transmission line across the Delaware River was received and construction is underway.
- The Securities & Exchange Commission granted the Company's request for an exemption from the Public Utility Company Holding Act of 1935. The SEC decision essentially reaffirms our position that the Company is a single integrated utility system and puts to rest the uncertainty regarding the separation of the gas and electric properties.
- The natural gas exploration venture in which the Company is participating found gas in the Southwest.
The Company's share of the find will be an extremely small portion of our customers' needs.
- A reorganization of Company management was accomplished to more closely coordinate the parent and subsidiary companies' operations throughout the peninsula.
Mr. Roe was elected Chairman of the Board, succeeding Mr. Gardner and we are working together to improve internal efficiencies.
- With the exception of $34.5 million of pollution control revenue bonds, no external financing was required in 1976. The pollution bonds afford the Company a more favorable interest rate.
2 During the year a plan was developed for meeting the need power in our service area durin the next decade and for financi this plan. The plan is based on very thorough study and project of our peak load growth betwee now and the year 1995. We hav concluded that our peak load w*
grow at a rate of about 5.44% p year during the next 10 years. T compares to an 8.5% average annual rate of growth for the pa decade. Our projections take in account the influence of energy conservation, population growt and the effects of higher energ prices. In accordance with a Delaware PS.C. order, this plan been submitted to the Corilmiss for approval.
In order to have adequate generation to meet our growth projections, we studied many generation alternatives before selecting the one which is most acceptable from the standpoint capital and revenue requiremen One part of our generation pl consists of purchase of capacit from the Philadelphia Electric Company's Limerick nuclear po station from mid-1983 through 1 This arrangement is beneficial because these units are under construction and no capital expenditures are required by Delmarva prior to the startup of units.
Another part of our plan is the tallation of a nuclear generating it to be on line in 1987. In order to hieve economy of size, this ility would be either 900 or 1200 gawatts. Our system would quire about 600 megawatts of this it and we would invite other lities to share ownership. Our alysis of generation options icates that a nuclear plant is sently the most economical ernative for the late 1980's.
wever, the plan provides us with flexibility to make changes in the e of the unit or type of fuel clear or fossil). Our objective is provide the most economical neration for the lowest overall st to the Company and its stomers.
t the present time, oil provides out 53% of our kilowatt-hour neration; coal provides 36%,
d nuclear power 11 %. In 1987, we n for nuclear power to provide
% of our kilowatt-hour neration, while coal will provide
% and oil only 12%.
he Company continues to phasize conservation of all ms of energy due to what we lieve to be a serious, long range rgy problem in this country.
t has been necessary to curtail ural gas supplies to many ustrial and commercial gas tomers because of severe tailments by our pipeline plier. In order to stimulate gas production, we continue to support industry efforts aimed at the deregulation of the price of natural gas.
A national energy policy is sorely needed and is long overdue. We hope that a comprehensive policy regarding use of all fuels and the closing of the nuclear fuel cycle will be formulated during the next year.
Such a policy will assist us in choosing the best course to follow in carrying out our proposed 10-year generation plan. The results of nuclear referendums in seven states this year are encouraging and indicate that a majority of people support development of nuclear power.
Your Company will seek to improve the quality of its earnings by proposing changes in the Robert D. Weimer 3
methods of accounting for construction work in progress and allowance for funds used during construction.
We appreciate the cooperation of all employees during the past year and we will all work together in 1977 to improve the return on shareholders' equity while providing our customers with the best possible service.
Sincerely, ~
Thomas C. Roe Chairman of the Board RN~
Robert D. Weimer President and Chief Executive Officer February 14, 1977 Thomas C. Roe
summit settlement Provides construction Funds Revenues Up $10.4 Million Operating revenues totaled
$286.4 in 1976, a 3.8% increase over 1975. The increase.is due primarily to increased rates and a 4.7% increase in electric sales.
Increases and decreases in revenue over 1975 by customer class were as follows:
Electric Gas Residential Commercial Industrial Resale Interruptible 4.3 %
3.3 %
0.5 %
(3.3)%
Operating Expenses Increase $9.1 Million 22.5%
29.6%
37.8%
(27.4)%
Operating expenses totaled
$233.3 million for 1976, an increase of $9.1 million or 4.1% over 1975.
The increase primarily reflects the higher cost of purchased natural gas and increased maintenance costs for generation and transmission facilities. Fuel expenses leveled off in 1976 and represented an increase of 1.5%.
Earnings Increase to
$1.48 Per Share Earnings on common stock for 1976 increased to $27.9 million from $24.3 million in 1975. Earnings per share in 1976 were $1.48, compared to $1.38 in 1975. At year's end there were 55,860 shareholders of common stock.
The Company has determined that 100% of 1976 common stock dividends are taxable for federal income tax purposes.
construction and Financing Construction requirements for 1976 were approximately $76.0 million. From 1977 to 1981 construction requirements are estimated at $673 million. Of that amount, approximately $190 million will be required in 1977, $157 million in 1978, $98 million in 1979, $83 million in 1980 and $145 million in 1981.
Funds for 1976 construction requirements were provided by proceeds from the settlement of the nuclear plant contract with General Atomic Company and from internally generated funds. These sources are also expected to provide the cash requirements for
$255 million of the financing requirements for 1977 through 1981. We expect to finance the balance of the construction program through 1981, together with $32 million required for refunding maturing long-term debt, through the issuance of first mortgage bonds, pollution control revenue bonds, preferred and common stock and unsecured short-term notes.
In December the Company received the proceeds from the sale of $32 million of pollution control revenue bonds by the State of Delaware and $2.5 million of pollution control revenue bonds by the Commonwealth of Pennsylvania. The bonds bear an 4
interest rate of 7Y4 % and 7Ys%
respectively and were sold to finance pollution control equipme for the Company's coal-burning Indian River Power Station and f its share of pollution control equipment at the Peach Bottom Atomic Power Station.
During 1977 the Company anticipates financing a portion o its construction program through the sale of approximately $23.2 million of common stock, $20.0 million of preferred stock and $41 million of first mortgage bonds a short-term securities. The type, amounts and timing of future financing will be determined by prevailing market conditions.
Rate Increases In Effect and Pending Gas Rates In April the Public Service Commission of Delaware (PSC) approved the Company's reque for an increase of 11.4%, or $2. 7 million, in revenue from rates charged natural gas customers.
The increas13 had been in effect, subject to refund since June 19 No decision was reached duri the year on the Company's app to the courts, for the second tim of the Delaware Public Service Commission's order concerning 1973 request for a 12% increase gas rates. The Commission granted an increase of about 411:
April 1974. On remand by the urt, the Commission reaffirmed 1975 the 4V2% increase to be fective from June 1, 1973 through rch 8, 1974 and agreed to xamine the subsequent period til June, 1 1975 in connection th an application for increased s rates filed in 1975. The Court held Delmarva's position in the cond appeal, but a Commission g for rehearing was pending at ar end.
ctric Rates In May, at the Company's uest, the Delaware PSC reheard rtions of its decision issued the vious month which allowed the mpany a 6.5% increase in retail ctric revenues. As a result of the earing, the PSC granted a total rease of 7.1 % or $10.6 million in ditional revenues. The Company requested an increase of 5%. The primary reason the full uest was not granted was due he Commission's treatment of favorable settlement of the mit project which occurred e months after the rate rease was filed in 1975.
y order of the Commission, the mpany proposed a new idential electric rate to the aware PSC in June. The posed rate is not a rate increase ause it is intended to provide roximately the same revenues he Company. The proposed rate uces the cost of electricity ing winter months for customers 12 II
- ll Top -
The Company sorts service bills to use 12¢ first-class bulk mail rate for an annual savings of about
$25,000. Bottom left -
The issuance of pollution control revenue bonds afforded the Company more favorable interest rates as compared to conventional financing. Bottom right -
Ken Jones, left, Assistant Manager of Corporate Planning and Earl Krapf, Manager of Corporate Planning, share a lighter moment between rate hearings.
5
S.E.C. Decision Supports company Position who conserve electricity during the peak summer months and increases costs for those who contribute to the summer peak.
Hearings before the PSC on the rate proposal have not been scheduled. The Company is unable to predict when the new rates will become effective or if changes in the rates will be made.
In August the Delaware PSC approved a temporary residential electric heating rate retroactive to April 13, 1976. The temporary heating rate, like the proposed residential rate, offers an incentive to customers who conserve electricity during the peak summer months.
Maryland In January, 1976 the Maryland PSC approved a 5.2% rate increase in retail electric revenues for the Maryland subsidiary. The increase represents 58% of the Company's total request and will increase annual revenue by
$2,379,000.
The Company has appealed an order from the Public Service Commission of Maryland requiring the Maryland subsidiary to refund
$125,000 to Maryland customers.
The appeal results from a 1975 decision by the PSC of Maryland requiring the Maryland subsidiary to revise its formula for billing customers for the changing costs of fuel used to produce electricity.
The Commission concluded that the Company's calculation method resulted in collecting more during 1974 than the method proposed by the Commission. The Company was ordered to refund that amount or show cause why such refunds should not be made. The Company is unable to predict what the final decision will be on this matter.
Virginia In November the Virginia State Corporation Commission approved a 4.5% increase in retail electric revenues for the Virginia subsidiary. The increase represents 44% of the Company's total request and will increase annual revenues by $349,000.
Municipals and Cooperatives In January, 1976 the Company applied to the Federal Power Commission (FPC) for an average increase in electric rates of 12.9%
to all resale customers. The increase was placed in effect in April subject to refund. If approved, the new rate will increase annual revenues by approximately $4.1 million. A tentative settlement in this case was reached on February 2, 1977, and is explained in Note 2 (b) to Financial Statements.
In November a tentative settlement was reached between the Company and intervenors concerning a resale rate increase 6
filed with the FPC in August 1974 The agreement provides the Company with 4 7% or approximately $1.7 million of a $3 million rate increase. The settlement requires final FPC approval. Since the entire increa has been in effect since October 1974, amounts collected in exce of the settlement amount will be refunded to resale customers following FPC approval.
See Note 2 to Financial Statements for additional information concerning "Rate Matters."
Favorable SEC Decision In October the Securities and Exchange Commission (SEC) granted the Company an exemption from most of the provisions of the Public Utility Holding Company Act of 1935 a requested by the Company. The decision does not require the Company to divest its gas prope However, the Commission reserv the right to consider divestiture the gas property at some future date.
The Commission took into consideration testimony of the Public Service Commission of Delaware indicating that separation of the gas company would increase costs to users of both gas and electricity.
The decision by the SEC mmed from action initiated by SEC in 1972 concerning the paration of Delmarva's gas perty. In response to the SEC er, the Company requested an emption from the Public Utility lding Company Act of 1935 on basis that the Company is dominately an operating mpany and is operating a single egrated utility system.
ectric consumption creases ystem electric sales were 6. 7 ion kilowatt hours in 1976, or
% higher than in 1975. The rease reflects an improvement in anomic conditions affecting ctric sales to firm industrial stomers along with increased ge by commercial and idential customers.
ncreases and decreases in es as compared to 1975 by tomer class were as follows:
Residential 6.9 %
Commercial 3.9 %
Industrial 5.5 %
Resale
{1. 8)%
7 Top -
These townhouses in Wilton, a new community near Wilmington, reflect continued residential growth. Center -
Progress continues at Wilmington's Civic Center complex, where Company headquarters building is located (partially visible, center background).
Bottom -
Bill Abernathy, Sr., Electric Meterman, affixes metering device to record customer usage patterns for rate-making analysis.
Generation Planning centers on coal and Nuclear Power Electric heating is a popular choice of new customers.
During 1976 the Company added 8, 799 residential electric customers; of these, 2, 764 heat their homes electrically. Of the 1,000 commercial customers added during the year, 193 have electric heat. Further increases in the electric heating category are anticipated as new home construction on the Delmarva Peninsula increases.
The peak demand was 1,434,000 kilowatts on June 28, 1976 at 5 p.m.
This peak was less than the 1975 peak by 2%, and was 4.9% less than the 1,508,000 kilowatt all time peak set in 1973.
Oas curtailment Increases For the sixth consecutive year, the Company's natural gas supply was curtailed by the Transcontinental Gas Pipe Line Corporation (Transco). The Company experienced a curtailment of 41 % for the 1976 -
1977 winter season and expects a curtailment of 52% for the summer of 1977.
To partially offset these shortages we are storing 3.4 billion cubic feet of natural gas and have obtained propane equivalent to an additional 220 million cubic feet.
The Company is seeking additional underground field storage.
As a result of severe winter weather and additional curtailments by our pipeline supplier, gas volumes were curtailed to industrial and commercial customers during January and February, 1977. Gas service to residential customers was not curtailed. Customers cooperated in reducing natural gas usage as requested by the Company.
No new gas customers have been added to the system since 1972.
The Company continues to support efforts to deregulate the interstate price of new natural gas in order to stimulate exploration and production of this domestic fuel.
Oas Exploration successful Natural gas was discovered in 1976 by the exploration consortium which the Company joined in 1975 through a wholly-owned subsidiary, "Delmarva Energy Company". The Company's share of the discoveries, which are located in the Southwest, is equivalent to 0.3% of our daily contractual supply and will help to offset the pipeline curtailment. The gas is expected to arrive by mid 1977.
Delmarva Energy Company has a 7.5% share in the exploration partnership and has invested
$338,000 through 1976.
Exploration is continuing and Delmarva Energy Company will participate in a second year of exploration at a cost of $280,000.
8 Marketing Energy Efficiency The Company is committed to encouraging its customers to ma the most efficient use of electrici especially during peak load periods on the system.
An Energy Efficiency Award Program was initiated to encourage home builders to incorporate energy efficient features in new home constructi on the peninsula. To qualify for t award, the builder must meet requirements for adequate insulation in order to reduce ener requirements. Response from builders and potential home buy has been very favorable.
Company representatives are pointing out the benefits of the electric heat pump, which offers the homeowner improved heatin efficiency at a cost that is very competitive with other systems.
Considerable interest has been developed and a substantial number of new electric heating installations are heat pumps.
Through on-going meetings wi commercial and industrial customers, the Company provid assistance in energy manageme especially the use of techniques help control energy demand duri peak periods. Studies are underway to measure customer usage patterns in order to impro load management aspects of marketing energy efficiency.
eneration Planning The Company has developed a w generating plan following ncellation of the Summit Power ation in 1975 when the reactor pplier was unable to fulfill its ntract. In agreeing to terminate e contract, the Company tained a settlement of $125 ii lion.
The plan is based on a year-long udy of generation alternatives d energy demand on our system m 1976 through 1995.
The following table shows major nerating facilities of the mpany which are under nstruction and those which are anned as part of the long range neration plan.
The generation plan includes O megawatts of peaking neration in 1986 and an ditional 100 megawatts in 1988.
e addition of these units can be justed to reflect changes in mand and gives flexibility to the erall plan.
An integral and necessary part our overall plan is to undertake e selection activities on the ninsula for a coal-burning plant ncurrently with our plans for veloping a nuclear site. Early site lection for a coal plant must oceed to provide an alternate ould future events, for whatever ason, make a nuclear facility desirable or impossible.
PLANNED CAPACITY ADDITIONS Under Construction:
Nuclear:
Total Megawatts Salem #1 1,090 Salem #2 1, 115 Coal Fired:
Indian River #4 400 Planned:
Nuclear:
Limerick #1 Limerick #2 Summit 1,055 1,055 900/1200
- short term purchase 9
Scheduled Company Commercial Portion Operation 81 1977 82 1979 400 1979 200*
1983 - 86 200*
1985 - 87 600 1987 Top -
Meeting customer demand requires near-term and long-range generation planning.
Left -
Bob Bradway, Builder Services Representative, holds the Company's "Energy Efficiency Award" sign for placement in front of qualifying home. The award was created in 1976 to encourage energy-efficient construction from the ground up.
construction Underway on River crossing Transmission Line Fuel supply and cost The fuel supply situation was stable in 1976 and the overall cost of fuel (per million BTU) declined for the second consecutive year.
During 1976 the Company received 11 % of its generation from the Peach Bottom nuclear units, representing a savings in fossil fuels equivalent to 1.5 million barrels of fuel oil.
Oil provided 53% of the Company's generation in 1976, and 36% was provided by coal.
The Company expects oil costs to increase in 1977 as the result of a worldwide increase in oil prices.
The increase will be partially offset by greater nuclear generation from Unit #1 at Salem Nuclear Generating Station, which began pre-commercial operation in December 1976.
Environmental Matters Wastewater discharge permits issued for the Company's four generating stations on the peninsula require compliance with chemical and thermal discharge limitations. Construction of wastewater treatment facilities to meet chemical discharge limits by a July 1, 1977, statutory deadline is now underway at all four plants and total costs are estimated at about
$6.5 million.
Studies at Pea Patch Island, Delaware, continued in 1976 in order to adequately document the status of the colony of wading birds which nest there in the spring and summer months. This site is a breeding area and is one of the largest mixed-species heronries on the east coast. Construction of the Company's 500,000 volt Delaware River transmission line crossing began about one mile north of the heronry in the fall of 1976 after most of the birds had departed for their winter nesting areas to the south. Since construction will continue into the 1977 breeding season, an additional year of study is planned. No significant adverse impacts on the heronry are anticipated as a result of line construction.
FEA conversion Order No decision was reached in 1976 regarding the Federal Energy Administration's (FEA) order in 1975 prohibiting the burning of oil in Units 1 through 4 at the Edge Moor Power Station. Environmental studies are being conducted by both the FEA and the Environmental Protection Agency (EPA) on the effects of burning coal.
The Company questions the advisability of converting all 4 units at Edge Moor because three of the 10 units have remaining useful lives only 6 to 9 years and the availabili of an adequate supply of low sulf coal is questionable. The Campa has filed a plan with the EPA to convert two of the units to burn 1 sulfur coal with an upgrading of particulate control equipment. Th two oldest units would remain oil-fired. The cost of the Compan plan would be approximately $31 million, including interest during construction but excluding expenditures to obtain an adequate supply of coal.
A ruling on this matter is expected from the FEA in 1977.
River crossing Project Started In August the Company received the final permit required construct a 500,000 volt transmission line across the Delaware River. Construction of t line is expected to take 15 month to complete at a cost of $22 millio When proposed in 1969 the projected cost was approximate!
$6 million.
The line represents an importa link in an interstate high voltage transmission system and will enable the Company to receive it share of power from the Salem Nuclear Generating Station.
estertown Utility cquired In November the Company quired The Chestertown Electric ght and Power Company, which rved approximately 4,500 ectric customers in Kent and ueen Anne's counties, Maryland.
e acquisition occurred through a ock-for-stock transfer. The estertown system previously s one of the Company's olesale-for-resale customers.
mmunications Activities To inform our customers about e many energy issues and ncerns facing us, the Company nducts an on-going mmunications program using a riety of media. Energy nservation information is a key ment in the program. The mpany instituted a mmunications campaign to orm southern system customers the economies and energy ficiency of the electric heat mp.
Experience has proven that e-to-face communications ough school programs, eaking engagements and daily stomer contact is extremely ective in building understanding Company decisions and erations. Such communications Top Left -
Environmental studies during the year indi-cate that wading birds, such as this snowy egret, will not be adversely affected by a high voltage transmis-sion line across the Delaware River. Top Right -
The energy conservation attributes of the electric heat pump are featured in Company advertising. Bottom -
Unit #1 at Salem Nuclear Generating Station, right, began pre-commercial testing in late December, with commercial operation scheduled for spring.
11
r
... "I consider it very good service indeedl" also provide feedback of customer attitudes toward the Company. This aspect of the program receives greater emphasis than in the past.
Delmarva Power is interested in the well-being of all communities in its service area and continues to encourage employees to participate in business and social organizations of the communities where they live. As members of these groups, employees are company spokesmen and benefit the company greatly by being able to discuss questions about company activities at the time they arise.
Employees Approximately 1,671 of the Company's 2.416 employees are represented by the International Brotherhood of Electrical Workers (A.FL.-C.1.0.). During 1976 a labor contract was satisfactorily concluded for the parent company.
The labor contract for the subsidiary companies is effective until June, 1977. Wages and salaries of all employees during 1976 totaled $39.6 million.
Providing dependable utility service is the very basis of our business. Our success at living up to this responsibility requires the individual efforts and skills of men and women throughout our system.
The following letter from a customer speaks for the way that our employees strive to provide service.
"Last night at about 10:00 my house was plunged into darkness because of the failure of the transformer in my yard.
"Your Resident Serviceman in Trappe responded promptly to my call and quickly organized a replacement. This was accomplished by a crew from Cambridge in a little over two hours from the time of the outage. Since this involved mobilizing a number of men and two pieces of heavy equipment in the middle of the night, I consider it very good service indeed!
"Many thanks to everyone concerned." -
Robert W. Chapin, Trappe, Maryland.
Management Changes In September the Board of Directors elected Thomas C. Roe Chairman of the Board. He succeeds Austin T. Gardner who retired November 1. Mr. Gardner remains on the Board, is a member of the Executive Committee and is retained in a consulting capacity.
William G. Price was elected to the Board to replace Charles G.
Minich, Vice President, Gas 12 Operations, who retired October Mr. Minich served the Company with distinction for 42 years and expertise contributed greatly to well-run gas system.
James A. Clark, Jr., added the duties of Vice President of Gas Operations and President of Delmarva Energy Company to hi duties as Vice President of Electric Operations.
The Board also approved management and organizational structure changes to improve th efficiency and coordination of th Company's system-wide operations. The changes include the election of William G. Price t Senior Vice President, Operation and Generation; J. Kenneth Wile to Senior Vice President, Engineering and Accounting; H.
Ray Landon to Vice President, Personnel and Industrial Relatio J. Edwin Hobbs to a Vice Presid and Ralph H. Smith to an Assist Comptroller. In addition, Mr. Hob was named President and Mr.
Smith a Vice President of the subsidiary companies.
Mr. Roe joined the subsidiary companies in 1936 and has serv as President and Director of the subsidiaries and a Vice Preside and Director of the parent Company since 1971.
Mr. Price joined the parent mpany in 1970 as Manager of wer Plant Design Engineering d was promoted to Vice esident, Generation, in 1972.
Mr. Wiley joined the parent mpany in 1974 as Vice esident, Engineering. He was eviously associated with electric ilities in Florida.
Mr. Landon joined the subsidiary mpanies in 1963 as Manager of ustrial Relations and was med their Vice President, rsonnel and Public Relations in
- 73.
Mr. Hobbs joined the subsidiary mpanies in 1933 and has served Vice President of Operations ce 1968 and Director since 1974.
Mr. Clark joined the parent mpany in 1949 and was named e President of Electric erations in 1975.
Mr. Smith joined the bsidiary companies in 1961 a Staff Accountant and has rved as an Assistant Secretary d Assistant Treasurer of the rent Company since 1971. He is rrently Treasurer and Vice sident for finance of the bsidiary companies.
Top -
The Company participated in Bicentennial celebrations, such as this one in historic New Castle, Delaware. Center -
Billie Tennant, Control Room Operator, Delaware City Power Station; George Biddle, Jr., Cable Splicer; Mary Charlotte Campbell, Coal Handler, Indian River Power Station. Bottom -
Doris DeStafney, Clerk, Customer Account-ing; Eileen Klosowski, Clerk, Accounts Receivable.
13
Board of Directors THOMAS C. ROE*
Chairman of the Board ROBERT D. WEIMER*
President and Chief Executive Officer of the Company WERNER C. BROWN**
President and Director of Hercules, Inc.
{chemical manufacturer) Wilmington, Delaware OSCAR L. CAREY President and Director of Larmar Corporation (general real estate and home builders) Salisbury, Maryland
!RENEE duPONT, JR.*
Senior Vice President and Director of E. I.
duPont de Nemours & Company (chemical manufacturer) Wilmington, Delaware AUSTIN T. GARDNER*
Retired, former Chairman of the Board,
President and Chief Executive Officer
- Member of Executive Committee
- Chairman of Executive Committee Officers THOMAS C. ROE Chairman of the Board 41 Years' Service ROBERT D. WEIMER President and Chief Executive Officer of the Company 29 Years' Service WILLIAM G. PRICE Senior Vice President, Operations and Generation 6 Years' Service J. KENNETH WILEY Senior Vice President, Engineering and Accounting 2 Years' Service JAMES A. CLARK, JR.
Vice President, (Electric and Gas Operations) of the Company and President of Delmarva Energy Company 27 Years' Service JAMES L. HAMMOND Vice President, Finance & Accounting 18 Years' Service J. EDWIN HOBBS Vice President of the Company and President of Delmarva Power & Light Company of Maryland and Delmarva Power
& Light Company of Virginia 43 Years' Service 14 FRANK R. GRIER Director of Dentsply International, Inc.
(manufacturer and distributor of dental and optical supplies) and retired Vice President, the L. D. Caulk Division of Dentsply, Milford,
Delaware DR. EARL C. JACKSON, SR.
Retired, former Superintendent of the Wilmington Public Schools Wilmington, Delaware WILLIAM G. PRICE Senior Vice President of the Company DR. E. ARTHUR TRABANT President of the University of Delaware Newark, Delaware JAMES M. TUNNELL, JR.*
Partner of Morris, Nichols, Arsht & Tunnell, attorneys Wilmington, Delaware H. RAY LANDON Vice President, Personnel and Industrial Relations 13 Years' Service GEORGE J. PINTO Vice President, Administrative Services 28 Years' Service EDWARD F. SPEAR Vice President, Corporate Communications and Customer Services 30 Years' Service ALFRED C. THAWLEY, JR.
Secretary and Treasurer 21 Years' Service WILLIAM E. ROSSELL, SR.
Comptroller 28 Years' Service JAMES W. PORTER Assistant Comptroller 20 Years' Service RALPH H. SMITH Assistant Comptroller 16 Years' Service RUTH V. LOKEY Assistant Secretary and Assistant Treasurer 39 Years' Service PAUL A. MODESTO Assistant Secretary and Assistant Treasurer 6 Years' Service
Dividend Reinvestment and Common Share Purchase Plan For more than 2 years, the Company has offered the owners of Common Stock the opportunity to reinvest cash dividends and/or invest additional cash monthly in amounts from $25 up to $3,000 per quarter to purchase additional shares of Common Stock without paying any brokerage or service charges. More than 8,000 (or 14%)
of the common shareholders are participating in the Plan. They have
invested their dividends and/or optional cash payments amounting to more than $5.6 million to purchase 455,252 new shares of the Company's Common Stock.
If you are not participating, you may want to consider the benefits of joining the Plan. To receive a Summary Prospectus containing details of the Plan, please complete and mail the attached form to the Company. In the event that you are participating in the Plan on an optional cash payment basis only, remember that you can instruct the Company to invest your dividends also.
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Delmarva Power 800 King Street Wilmington, DE.19899 ATTN: Stockholders Relations Please Affix9¢ Postage*
MANAGEMENT REVIEW OF OPERATIONS Consolidated Summary of Earnings (Thousands of Dollars) 1976 1975*
1974*
1973 1972 1971 Operating Revenue...................
$286,388
$276,026
$261,494
$188,359
$158,844
$129,505 Operating Expenses Operation.... '..................
169,924 165, 165 153,494 99,323 80,517 66,982 Maintenance.....................
21,596 17,769 16,289 13, 715 12,960 10,536 Depreciation.....................
25,367 24,579 21,656 18,278 16,329 13,961 Taxes.................... '......
16,455 16,689 18,684 15,545 14,609 9,479 Total operating expenses......
233,342 224,202 210,123 146,861 124,415 100,958 Operating Income....................
53,046 51,824 51,371 41,498 34,429 28,547 Other Income Allowance for funds used during construction.............
9,439 8,354 8,527 10,251 9,770 8,037 Other, net of taxes............... '
2,289 605 190 54 156 92 Income Before Interest Charges........
64,774 60,783 60,088 51,803 44,355 36,676 Interest Charges.....................
29,646 29,244 27,355 21, 141 16,848 13,368 Net Income..........................
35,128 31,539 32,733 30,662 27,507 23,308 Dividends on Preferred Stock..........
7,250 7,250 7,250 6,360 6,050 4,637 Earnings Applicable to Common Stock..
27,878 24,289 25,483 24,302 21,457 18,671 Dividends on Common Stock..........
22,618 21, 107 17,995 15,851 13,940 12,233 Addition to Retained Earnings..........
5,260 3, 182 7,488 8,451 7,517 6,438 Common Stock Average shares outstanding (thousands)....................
18,821 17,580 14,862 13,547 12, 128 10,921 Earnings per average share.......
$1.48
$1.38
$1.72
$1.79
$1.77
$1.71 Dividends per share
$1.20
$1.20
$1.20
$1.17
$1.13
$1.12
- Restated Operating Revenue Total operating revenue for the year ended December 31, 1976 increased $10.4 million, or 3.8%, over 1975. The increase reflects higher gas base rate and gas production revenues ($6.6 million) as well as increased electric base rate revenues ($25.8 million) and higher electric and gas sales. This increase was partially offset by lower electric fuel adjustment charges ($19.2 million) and, in 1975, repeal of the Delaware 5% utility tax to residential customers and the termination of a facilities agreement between the Company and a neighboring utility.
Increased sales reflect improved economic conditions and greater heating demands as a result of unusually cold weather. Total heating degree days in the Company's area for 1976 were higher than the norm for the past thirty years.
Industrial sales were 119,000,000 KWH, or 6%, higher than last year.
Total operating revenues for.1975 increased $14.5 million, or 5.6%, over 1974 due mainly to rate increases placed into effect and higher fuel adjustments partially offset by the repeal of the Delaware 5% utility tax and a slight decrease (3.0%)
in electrical energy sales.
15
Operation, Fuel and Maintenance Expenses Total electric fuel expense for 1976 increased slightly over 1975 reflecting write-offs of fuel costs previously deferred, partially offset by a decrease in fuel cost per million Btu. The increase in 1975over1974 reflects higher previously deferred fuel costs offset by a decrease in cost per million Btu combined with lower generation during the year (See Note 1 -
Fuel Costs). Fuel expense per million Btu at the Company's generating stations is shown in the following table:
1976 1975 1974 Oil
$1.91
$2.12
$2.18 Coal 1.07 1.09
.90 Refinery By-Product 1.83 2.03
- 1. 71 Nuclear
.26
.26
.26 Overall Cost
$1.46
$1.53
$1.70 Generation was 494,000,000 KWH, or 6. 7%, higher in 1976 and 781,000,000 KWH lower in 1975 when com-pared to the corresponding previous years. The increase in 1976 reflects greater sales of energy to the Pennsylvania-New Jersey-Maryland interconnection. Nuclear energy was 11 % of system generation in 1976 and 1975 compared with 4% in 1974.
Other operation expenses increased $10.6 million, or 18.9%, over 1975 and 1975 increased $6.5, or 13%, over 1974. These increases are due primarily to an increase in the cost of gas purchased, escalated labor costs and general inflationary pressures. The increase in the cost of gas purchased was particularly higher in 1976 as the Company acted in response to greater curtailments from its supplier by purchasing supplemental gas supplies in the unregulated intrastate market at higher rates. The average cost of gas was $1.22 per MCF in 1976 compared to $0.92 per MCF in 1975.
Maintenance expenses increased $3.8 million, or 21.5%, over 1975 due mainly to increased maintenance performed at the Peach Bottom Nuclear Generating Station as well as increased maintenance on the Com-pany's transmission and distribution systems.
Taxes Taxes on income increased $1.2 million over the year 1975, reflecting the normalization of tax benefits with respect to additions to plant for 1975 and 1976. Taxes other than income decreased $1.4 million compared to 1975 and such taxes for 1975 decreased $1.1 million compared to 1974 primarily due to the repeal of the Delaware Public Utility Tax to residential customers in July, 1975.
Other Income Allowance for funds used during construction increased $1.1 million, or 13.0%, over 1975 primarily as a result of on-going construction at the Salem Nuclear and Indian River Power Stations as well as an increase in the rate used to 8% in January 1976 from 7Y2% in 1975.
Other income increased $1. 7 million over 1975 largely due to interest income received from short-term investment of the proceeds of the Summit Nuclear Settlement.
Interest Charges Total interest charges for 1976 increased slightly over 1975. Interest on long-term debt increased $2.2 million and represented the annualization of interest paid on $30 million of bonds issued in July, 1975. This increase was largely offset by a decrease in short-term interest charges of $1.9 million. As a result of a favorable cash position gained through the Summit settlement, the Company did not incur any short-term debt in 1976. Total interest charges for 1975 increased 6.9% over 1974 reflecting the sale of two $30 million bond issues.
Earnings Per Share Earnings applicable to Common Stock increased 14.8% in 1976. An increase in the average number of common shares outstanding as a result of the Company's Dividend Reinvestment Plan and the Chestertown acquisition acted to hold the increase in earnings per share to 7.2%. Earnings per share decreased in 1975 from 1974 due to the factors discussed above and the sale of 2 million shares of Common Stock in July, 1975.
16
Dividends and Price Range of Common Stock The initial public distribution of the Common Stock of the Company was made in May 1944, and quarterly dividends have been paid continuously since July, 1944. A quarterly dividend of 30~ per share has been declared for the fourth quarter of 1976 payable January 31, 1977 to shareholders of record January 9, 1977.
Dividends on Common Stock increased $1.5 million over 1975 and 1975 dividends increased $3.1 million over 1974. These increases were due to an increased number of shares outstanding. Dividends paid during 1976 averaged 81.1 % of earnings applicable to Common Stock compared to 86.9% in 1975 and 70.6% in 1974. Future dividends will be dependent upon future earnings, the financial condition of the Company and other factors (See Note 9 to Financial Statements).
The following tabulation shows the price range and dividends per share of the Common Stock of the Company on the New York Stock Exchange during the periods indicated:
1976 1975 High Low Div.
High Low Div.
1st quarter 135/a 12%
$0.30 113/a 9
$0.30 2nd quarter 13Va 123/a 0.30 133/a 10%
0.30 3rd quarter 143/a 12V2 0.30 125/a 1 OV2 0.30 4th quarter 143/a 13Va 0.30 13 103/<i 0.30 Quarterly Finanoial Information Presented below are quarterly results of operations for 1976 and 1975. Previously reported quarterly financial statements have been restated to reflect the adjustments described in Note 2 to Financial Statements pertaining to "Rate Matters".
Three Months Ended (000)
March 31 June 30 1976 Operating Revenue.................... $75,909 Operating Income..................... $14,774 Net Income........................... $10,120 Earnings Applicable to Common Stock... $ 8,308 Average Shares of Common Stock Outstanding
........................ 18, 701 Earnings Per Average Share of Common Stock......................
$.44 1975
$75,462
$13,625
$ 8,345
$ 6,532 16,516
$.40 1976
$69,330
$11,857
$ 7,321
$ 5,508 18,760
$.30 Three Months Ended (000) 1975
$61,611
$11,390
$ 6,334
$ 4,522 16,558
$.27 September 30 December 31 1976 1975 Operating Revenue.................... $71,959
$72,37 4 Operating Income..................... $15,159
$15,416 Net Income........................... $10,712
$10,232 Earnings Applicable to Common Stock... $ 8, 900
$ 8,420 Average Shares of Common Stock Outstanding
........................ 18,820 18,601 Earnings Per Average Share of Common Stock......................
$.47
$.46 17 1976
$69, 190
$11,256
$ 6,975
$ 5, 162 19,001
$.27 1975
$66,579
$11,393
$ 6,628
$ 4,815 18,643
$.25
CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31 (Thousands of Dollars)
OPERATING REVENUES Electric.....................................................
Gas........................................................
Steam and electric (refinery service)...........................
OPERATING EXPENSES Operation:
Fuel for electric generation Energy interchange, net....................................
Gas purchased............................................
Other operation...........................................
Maintenance................................................
Depreciation................................................
Taxes on income............................................
Taxes other than income......................................
OPERATING INCOME.........................................
OTHER INCOME Allowance for funds used during construction...................
Other, principally interest income in 1976, net of taxes............
INCOME BEFORE INTEREST CHARGES INTEREST CHARGES Long-term debt..............................................
Short-term debt and other....................................
NET INCOME DIVIDENDS ON PREFERRED STOCK EARNINGS APPLICABLE TO COMMON STOCK COMMON STOCK Average shares outstanding (thousands).......................
Earnings per average share...................................
Dividends per share 1976
$242,279 32,248 11,861 286,388 123,792 (20,852) 17,495 49,489 21,596 25,367 2,614 13,841 233,342 53,046 9,439 2,289 11,728 64,774 29,379 267 29,646 35, 128 7,250
$ 27,878 18,821
$1.48
$1.20 The Notes to Financial Statements are an integ ral part of the above statements.
DELMARVA POWER & LIGHT COMPANY and Subsidiary Companies 18 1975 (Note 2)
$239,355 25,673 10,998 276,026 122,020 (13,190) 12, 179 44, 156 17,769 24,579 1,415 15,274 224,202 51,824 8,354 605 8,959 60,783 27,217 2,027 29,244 31,539 7,250
$ 24,289 17,580
$1.38
$1.20
CONSOLIDATED STATEMENTS OF CHANCES IN FINANCIAL POSITION FOR THE YEARS ENDED DECEMBER 31 (Thousands of Dollars)
SOURCE OF FUNDS Net Income................................................
Items not requiring (providing) funds:
Depreciation.............................................
Allowance for funds used during construction................
Investment tax credit adjustments, net.......................
Deferred income taxes, net................................
Funds provided from operations..........................
Net proceeds from sale of:
Long-term debt...........................................
Common stock roceeds from sale of contracts for nuclear plant................
Other......................................................
USE OF FUNDS Construction expenditures (excluding allowance for funds used during construction)............................
Dividends on common and preferred stock........
Current maturity of long-term debt............................
Decrease in short-term debt..................................
Increase in preliminary survey and investigation charges........
Deferred fuel expense not billable within one year.........
Adjustments to net credit arising from sale of contracts for nuclear plant Increase (decrease) in working capital*......,_.................
- CHANGES IN COMPONENTS OF WORKING CAPITAL Cash and temporary cash investments......................
Special deposit for pollution control equipment..............
Receivables from sale of contracts for nuclear plant...........
Accounts payable........................................
Other, net................................................
1976
$35, 128 25,367 (9,439) 4,187 1,175 56,418 33,524 5,221 (3,520)
$91,643
$66,541 29,868 10,000 3,755 2,268 (9,343)
(11,446)
$91,643
$34,552 23,617 (90,000) 22,830 (2,445)
$(11,446)
The Notes to Financial Statements are an integral part of the above statements.
DELMARVA POWER & LIGHT COMPANY and Subsidiary Companies 19 1975 (Note 2)
$ 31,539 24,579 (8,354) 2,962 (3,038) 47,688 59,339 25,823 106,250 9,403
$248,503
$ 72, 100 28,357 53,050 5,296 13,600 76, 100
$248,503
$ 16,654 90,000 (23,062)
(7,492)
$ 76,100
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31 (Thousands of Dollars)
ASSETS UTILITY PLANT, at original cost Electric.....................................................
Gas........................................................
Steam and electric (refinery service)............................
Common....................................................
Less: Accumulated depreciation Construction work in progress............................
NONUTILITY PROPERTY AND OTHER INVESTMENTS CURRENT ASSETS Cash and temporary cash investments.......................
Special deposit for pollution control equipment...................
Receivable from sale of contracts for nuclear plant................
Accounts receivable..........................................
Deferred fuel expense........................................
Materials and supplies, at average cost:
Fuel......................................................
Operation and construction..................................
Prepayments................................................
DEFERRED DEBITS...........................................
TOTAL........................................................
20 1976
$754,139 54,917 22,223 17,993 849,272 220,979 628,293 155,028 783,321 3,106 62,610 23,617 35,607 4,785 21, 113 17,862 3,067 168,661 16,509
$971,597 1975
$702,393 54,268 22,216 17,766 796,643 198,965 597,678 131,228 728,906 2,200 28,058 90,000 25,813 7,980 22,556 17,263 2,691 194,361 9,257
$934,724 The Notes to Financial State DELMARVA POWER & LI
LIABILITIES CAPITALIZATION Stockholders' equity:
Preferred stock, cumulative, par value
$100, authorized 1,800,000 shares:
Outstanding 1,050,000 shares...........................
Premium on preferred stock.................................
Common stock, par value $3.375, authorized 25,000,000 shares:
Outstanding 19,076,019, and 18,652,779 shares...........
Premium on common stock.................................
Retained earnings.........................................
Long-term debt..............................................
CURRENT LIABILITIES Current maturity of long-term debt.............................
Accounts payable...........................................
Taxes:
Accrued..................................................
Deferred..................................................
Interest accrued.............................................
Dividends declared..........................................
Other......................................................
DEFERRED CREDITS AND OTHER Net credit arising from sale of contracts for nuclear plant.......................................
Accumulated deferred income taxes...........................
Accumulated deferred investment tax credits...................
Other................................................
CONTINGENCIES AND COMMITMENTS (Note 10)
TOTAL........................................................
n integral part of the above statements.
PANY and Subsidiary Companies 21 1976
$105,000 226 64,382 123,354 98,349 391,311 430,920 822,231 10,000 15,811 5,059 2,410 8,938 5,723 3,055 50,996 74,221 5,391 12,414 6,344 98,370
$971,597 1975 (Note 2)
$105,000 226 62,953 119,562 93,089 380,830 407,348 788, 178 38,641 3,411 4,003 8.717 7,501 4,570 66,843 64,878 2,623 8,171 4,031 79,703
$934,724
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31 (Thousands of Dollars)
BALANCE, JANUARY 1 NET INCOME.................................................
CASH DIVIDENDS DECLARED Preferred stock Common stock.......................................
BALANCE, DECEMBER 31.....................................
1976
$ 93,089 35, 128 128,217 7,250 22,618 29,868
$ 98,349 The Notes to Financial Statements are an integral part of the above statements.
DELMARVA POWER & LIGHT COMPANY and Subsidiary Companies NOTES TO FINANCIAL STATEMENTS
- 1. Significant Accounting Policies:
Financial Statements:
1975 (Note 2)
$ 89,907 31,539 121,446 7,250 21, 107 28,357
$ 93,089 The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary companies. The accounts are maintained in accordance with the uniform systems of accounts prescribed by the regulatory commissions having jurisdiction with respect to accounting matters.
Revenue:
Revenues are billed to customers on a monthly cycle basis and include rate increases permitted to be billed subject to refund, pending final approval. At the end of each month, there is an amount of unbilled electric and gas service which has been rendered from the last meter reading to the month-end.
Fuel Costs:
Fuel costs are deferred and charged to operations on the basis of the fuel cost per kilowatt hour included in customer billings. For tax purposes fuel costs are expensed as incurred. See Note 2 for additional information concerning deferred fuel costs.
The Company's share of nuclear fuel costs relating to the Peach Bottom nuclear generating station has been charged to fuel expense on a unit of production basis.
Depreciation and Maintenance:
The annual provisions for depreciation are computed by the use of composite rates applied on the straight-line method for financial accounting purposes and principally on accelerated methods for income tax purposes. The effect of this difference in recording depreciation is a reduction in income taxes, the benefit of which, effective with respect to additions to utility plant in 1975 and thereafter, is deferred (normalized) for credit to subsequent years when financial accounting expense exceeds tax expense.
The previous deferral of such reductions in income taxes was discontinued in 1962, and the deferrals accumulated to that date were restored to income over a 10-year period ended in 1976.
Accumulated tax deferrals relating to amortization of completed construction costs under necessity certificates are being restored to income as straight-line depreciation charges exceed the amounts deductible for income tax purposes.
22
The relationship of the annual provision for depreciation for financial accounting purposes to average depreciable property was 3.2% and 3.3% for 1976 and 1975, respectively.
The cost of maintenance and repairs, including renewals of minor items of property, is charged to operating expenses. A replacement of a unit of property is accounted for as an addition to and a retirement from the utility plant account. The original cost of the property retired is charged to accumu-lated depreciation together with the net cost of removal. For income tax purposes the cost of removing retired property is deducted as an expense.
Investment Tax Credit:
Investment tax credits utilized ($6,551,000 in 1976 and $4,605,000 in 1975) to reduce federal income taxes are deferred for financial accounting purposes by equivalent charges to income and are credited to income over subsequent five-year periods.
Allowance for Funds Used During Construction:
Allowance for funds used during construction (AFUDC) is a noncash item and is defined in regulatory systems of accounts as the net cost, during the period of construction, of borrowed funds used for construction purposes and a reasonable rate for other funds so used. The allowance is considered a cost of utility plant and an item of other income in the consolidated statements of income; for income tax purposes, the allowance is excluded from taxable income. The rate used in determining the amount of the allowance was 8% in 1976 and 7112'Yo in 1975.
The estimated portion of AFUDC attributable to the common equity component of total capitaliza-tion was 11.9% and 10.6% of earnings applicable to common stock for the years 1976 and 1975, respectively.
Pension Plan:
The Company and Subsidiaries have a trusteed noncontributory pension plan covering all of their regular employees. Pension contributions, charged principally to operating expenses (aggregating
$4,950,000 for 1976 and $4,454,000 for 1975), provide for normal cost and amortization of prior service costs over a period of approximately twenty years. At December 31, 1976, the prior service costs exceeded the market value of the assets in the retirement fund by approximately $5,800,000. As of the same date, the market value of the fund assets exceeded the actuarially computed value of vested benefits.
Capital Stock Expenses:
The premiums on preferred and common stock are stated net of the expenses related to the issuance of such stock.
- 2. Rate Matters:
(a) Revenue subject to refund -
Operating revenues for the years 1976 and 1975 include $4,375,000 and $2,916,000, respectively, of amounts billed but subject to refund, pending final determination of requested rate increases. If these amounts had to be currently refunded, the years 1976 and 1975 would be restated, the effect of which would be to reduce earnings applicable to common stock by $2,111,000 ($.11 per share) and $1,407,000 ($.08 per share), respectively. The aforemen-tioned amounts of revenue subject to refund largely represent the tentatively approved portions of resale rate increases and exclude $2,371,000 and $2,522,000, respectively, which the Company anticipates refunding as described below.
(b) Tentative settlement of 1976 resale rate request -
On February 2, 1977, a tentative settlement was reached between the Company and intervenors in connection with the electric resale rates that became effective as of April 1, 1976, subject to refund. The tentative agreement would require the Company to refund, with interest, approximately 27% of the amount collected ($5,313,000 as of December 31, 1976). The staff of the Federal Power Commission (FPC) were present when the tentative settlement was reached and the Company believes that the settlement will be finalized and ultimately approved by the FPC. Accordingly, the applicable revenue and related tax accounts for the year 1976 have been adjusted to reflect the terms of the tentative settlement. The effect of the adjustment was to reduce 1976 operating revenues, earnings applicable to common stock, and earnings per average share by $1,415,000, $696,000 and $.04, respectively.
(c) Modifications of fuel adjustment clauses -
Approval was received during 1976 to modify the Company's resale and certain retail fuel adjustment clauses to permit more timely recovery of fuel 23
expense under these clauses. In addition, approval was received from the Delaware Public Ser-vice Commission to recover the deferred fuel balance relating to Delaware retail customers at March 31, 1976, aggregating approximately $4,830,000, over a three-year period beginning June 1, 1976. Similar recovery of the deferred fuel balance relating to resale customers was put into effect April 1, 1976, subject to refund pending FPC approval. On January 12, 1977, an Administrative Law Judge disallowed such recovery. The Company anticipates refunding the amount collected
($419,000 at December 31, 1976) and has excluded such amount from operating revenues. An additional $832,000 of deferred fuel costs not expected to be recovered was charged to 1976 operating expenses, the effect of which was to reduce earnings applicable to common stock and earnings per average share by $410,000 and $.02, respectively.
(d) Tentative settlement of 1974 resale rate request -
On November 3, 1976, a settlement was reached between the Company and intervenors in connection with electric resale rates that became effec-tive in October 1974, subject to refund. The tentative agreement would require the Company to refund, with interest, approximately 53% of the $6,568,000 collected as of March 31, 1976. The staff of the FPC were present when the settlement was reached and the Company believes that the settlement will be ultimately approved. Accordingly, the applicable revenue and related tax ac-counts for the year 1975 and retained earnings as of January 1, 1975 have been restated to reflect the terms of the settement.
The effect of the restatement upon previously reported 1975 financial statements was as follows:
Retaine.d Earnings January 1, Operating 1975 Revenues
($000)
($000)
As originally reported
$90,115
$278,548 Adjustment (208)
(2,522)
As restated
$89,907
$276,026
- 3. Taxes on Income:
1976 Operations:
Federal income................................ $(3,068)
State income..................................
320 Deferred income, net...........................
1, 175 Investment tax credit adjustments, net...........
4, 187 2,614 Other income.....................................
2,418
$5,032 Earnings Applicable to Common Stock
($000)
$25,537 (1,248)
$24,289
($000) 1975
$ 789 702 (3,038) 2,962 1,415 545
$1,960 Earnings Per Average Share
$1.45
(.07)
$1.38 The Company's effective income tax rates for financiaJ reporting purposes were substantially less than the federal statutory rate of 48%. The reasons for these differences are as follows:
1975 1976
($000)
~~~~~~-
~~~~~~~
Amount Statutory income tax expense........................ $19,277 Reduction in taxes resulting from:
Excess of tax depreciation over book depreciation not normalized..................
(5,951)
Exclusion of AFUDC for income tax purposes......
(4,531)
Investment tax credits amortized to income........
(2,364)
Other, net......................................
(1,399)
Income tax expense................................. $ 5,032 24 Rate 48%
(15)
( 11)
(6)
(3) 13%
Amount
$16,Q79 (7,111)
(4,010)
(1,643)
(1,355)
$ 1,960 Rate 48%
(21)
(12)
(5)
(4) 6%
The components of deferred income taxes relate to the following:
1976 Normalization of difference between book and tax depreciation........................... $3,550 Deferred fuel costs................................
(420)
Restoration of prior deferrals........................
(755)
Anticipated rate refunds...........................
(1,200)
$1, 175
- 4. Taxes Other Than Income:
($000) 1976
($000)
Delaware utility............ *....................... $ 5,214 Property..........................................
4,525 Franchise and gross receipts.......................
2,093 Social security....................................
1,521 Other............................................
488
$13,841
- 5. Capital Stock:
1975 544 (1,553)
(755)
(1,274)
$(3,038) 1975
$ 7,164 4,309 1,981 1,359 461
$15,274 Preferred stock outstanding at December 31, 1976, redeemable at the option of the Company, was as follows:
Redemption Prices per Share at Par Value Series Shares 12/31/76
($000) 3.70%-5%
320,000
$103-$105
$ 32,000 7.52%-7.88%
450,000 107-108 45,000 8%-8.96%
280,000 108-109 28,000 1,050,000
$105,000 Changes in capital stock and related accounts for the period January 1, 1975 to December 31, 1976 were as follows:
Aggregate Par Shares Value ($000)
Premium ($000)
Common Preferred Common Preferred Common Preferred Balance, January 1, 1975 16,487,340 1,050,000
$55,645
$105,000 $101,047
$226 Sale of common stock 2,000,000 6,750 17,277 Issuance of common stock for Dividend Reinvestment and Common Share Purchase Plan 165,439 558 1,238 Balance, December 31, 1975 18,652,779 1,050,000 62,953 105,000 119,562 226 Issuance of common stock for Dividend Reinvestment and Common Share Purchase Plan 236, 171 798 2, 179 Issuance of common stock for acquisition of certain utility plant 187,069 631 1,613 Balance, December 31, 1976 19,076,019 1,050,000
$64,382
$105,000 $123,354
$226 At December 31, 1976 there were 327,277 shares of common stock reserved for issuance under the Dividend Reinvestment and Common Share Purchase Plan.
25
- 6. Long-Term Debt:
Long-term debt outstanding at December 31, 1976 was as follows:
Principal Amount
($000)
First Mortgage and Collateral Trust Bonds:
31/s% Series, due 1977................................... $ 10,000 10,000 12,000 30,000 45,000 75,000 2'l's% Series, due 1979...................................
23/4% Series, due 1980...................................
93/s% Series, due 1983...................................
31/s%-3'l's% Series, due 1984-1988........................
4%%-7% Series, due 1994-1998..........................
71/2%-83/4% Series, due 2000-2002........................
8%-11 % Series, due 2003-2005...........................
Pollution Control Notes:
Series 1973, 5.9% effective rate, due 1983-1998 Series 1976, 7.3% effective rate, due 1992-2006 Unamortized premium and discount on debt, net Current maturity of long-term debt...........................
125,000 90,000 397,000 8,000 34,500 42,500 1,420 440,920 (10,000)
$430,920 The annual interest requirements on the above indebtedness at December 31, 1976 are
$31,370,000.
Substantially all utility plant of the Company now or hereafter owned and all securities issued by its subsidiaries are subject to the lien of the related Mortgage and Deed of Trust.
- 7. Short-Term Debt:
Established bank lines of credit as of December 31, 1976 amounted to $75,000,000, all of which bear interest at the prime rate. The Company is required to maintain a 10% compensating balance on these lines when not in use and an additional 10% balance when in use. There was no short-term debt outstanding during 1976. Average short-term debt outstanding during 1975 was $21,221,000 (princi-pally commercial paper), with an average interest rate of 8.8%.
- 8. Sale of Contracts For Nuclear Plant:
The proceeds received by the Company for the sale, in October 1975, of the contracts for a nuclear steam supply system and related fuel, net of plant expenditures which were considered of no future value to the Company are classified as a deferred credit in the balance sheet. It is the intention of the Company to reduce the cost of subsequent, alternative plant expenditures by the amount of these net proceeds.
The Company, under advice of Counsel, is not treating the sale of these contracts as taxable for federal and state income tax purposes. Accordingly, the tax basis of the Company's depreciable property has been reduced by approximately $77,000,000. The annual tax effect of the resulting decrease in tax depreciation is currently being classified as a reduction of the deferred credit balance.
If this transaction is ultimately considered taxable, additional taxes payable at December 31, 1976 would approximate between $26 million and $37 million and would be applied to the aforementioned credit balance.
- 9. Dividend Restriction on Common Stock:
The Fiftieth Supplemental Indenture restricts the amount of retained earnings available for cash dividend payments on common stock to $29,600,000 plus accumulations after June 30, 1975. The unrestricted consolidated retained earnings amounted to approximately $37,000,000 at December 31,
1976.
- 10. Contingencies and Commitments:
See Note 2 for information relating to possible refunds of amounts billed to customers and Note 8 for possible payment of income taxes relating to the sale of contracts.
The Company is constructing a fossil fuel unit estimated to cost approximately $216,000,000. At December 31, 1976, construction commitments for the aforementioned plant and other facilities aggregated approximately $196,000,000.
26
Minimum rental commitments as of December 31, 1976 under all noncancelable agreements are as follows:
1977 1978 1979 1980 1981
$ 5,721,000 5,519,000 5,323,000 5, 130,000 2,888,000 1982-1986 1987-1991 1992-1996 Remainder Total 10,623,000 6,288,000 5,440,000 2,901,000
$49,833,000 The total minimum rental commitments are applicable to the following types of property: Com-pany's share of Peach Bottom nuclear fuel, $9,206,000 (estimated to be charged to operations over a four-year period); fuel storage and pipeline facilities, $33,989,000; railroad coal cars, $4,041,000; other, principally computer equipment, $2,597,000. Rentals charged to operating expenses aggre-gated $6,461,000 in 1976 and $5,901,000 in 1975, including $2,477,000 and $2,204,000 for nuclear fuel, respectively.
Public liability insurance on the nuclear generating units in which the Company has an ownership participation is currently provided by a combination of private insurance and indemnity agreements with the Nuclear Regulatory Commission (NRC). Beginning in August 1977, however, the indemnity by the NRC will decrease and, in the event of a nuclear incident involving any facility covered by government indemnification, the Company could be assessed up to $375,000 for each reactor owned (maximum of $750,000 per unit in a year). For property damage to the nuclear plant facilities, the Company and its co-owners have private insurance up to $150 million for the Salem Station and $175 million for the Peach Bottom Station. Because the possibility of a nuclear incident is considered to be highly unlikely, the Company is a self-insurer, to the extent of its ownership interests, for any property loss in excess of the aforementioned amounts.
- 11. Quarterly Financial Information (Unaudited):
See "Quarterly Financial Information" in the accompanying text for quarterly results of operations for 1976.
- 12. Replacement Cost Data (Unaudited):
Under new rules of the Securities and Exchange Commission, current replacement cost informa-tion for certain assets and expenses is to be disclosed in the Company's Form 10-K filed with the Commission. The current replacement cost of the Company's affected plant and equipment and the amount of the associated depreciation expense calculated using replacement costs are generally higher than the comparable historical costs shown in the financial statements.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors Delmarva Power & Light Company Wilmington, Delaware We have examined the consolidated balance sheets of Delmarva Power & Light Company and subsidiary companies as of December 31, 1976 and 1975, and the related consolidated statements of income, retained earnings and changes in financial position for the years then ended. Our examinations were made in accor-dance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
As explained in Note 2 to the financial statements, the 1975 financial statements have been restated, with our concurrence, to reflect adjustments retroactive to October 1974 arising from the tentative settlement of an electric resale rate request. As further explained in Note 2, operating revenues continue to include amounts subject to refund pending final determination of requested rate increases.
In our opinion, subject to the effects, if any, of the final determination of the rate matters referred to in the preceding paragraph, the aforementioned financial statements present fairly the consolidated financial position of Delmarva Power & Light Company and subsidiary companies at December 31, 1976 and 1975, and the consolidated 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 Phildelphia, Pennsylvania February 8, 1977 27 COOPERS & LYBRAND
CONSOLIDATED STATISTICS 10 YEARS OF PROGRESS... 1966 -1976 ELECTRIC REVENUES (thousands): Residential.............
Commercial.............
Industrial...............
Other utilities, etc.........
Miscellaneous revenues..
Total electric revenues..
ELECTRIC SALES (1,000 kilowatt-hours): Residential.............
Commercial.............
Industrial...............
Other utilities, etc.........
Total electric sales.....
ELECTRIC CUSTOMERS (end of period): Residential Commercial.............
Industrial...............
Other utilities, etc.........
Total electric customers GAS REVENUES (thousands): Residential.............
Commercial.............
Industrial...............
Interruptible.............
Other utilities, etc.........
Miscellaneous revenues Total gas revenues...
GAS SALES (million cubic feet): Residential.............
Commercial.............
Industrial...............
Interruptible.............
Other utilities, etc.........
Total gas sales.........
GAS CUSTOMERS (end of period): Residential Commercial.............
Industrial...............
Interruptible.............
Other utilities, etc.........
Total gas customers....
1976
$ 80,416 60, 111 64,458 34,896 2,398
$242,279 1,787,663 1,412,259 2,260,661 1,199,155 6,659,738 230,579 28,345 1,002 550 260,476
$18,826 6,062 5,984 1,301 44 31
$32,248 6,956 2,586 3,264 953 20 13,779 68,978 4,154 198 21 1
73,352 1975
$ 77,069 58,169 64, 141 35,606*
4,370
$239,355*
1,672, 180 1,359,673 2,142,151 1,218,785 6,392,789 221,780 27,345 923 545 250,593
$15,365 4,676 4,343 1,211 33 45
$25,673 6,540 2,429 2,849 1,073 18 12,909 69,418 4,189 198 21 1
73,827 1974
$ 68,730 51, 192 66,381 32,976*
9,194
$228,473*
1,597,472 1,303,053 2,461,303 1,230,528 6,592,356 215,516 27,132 891 501 244,040
$14,298 4,201 3,726 1,532 26 96
$23,879 6,863 2,526 3,215 2,257 16 14,877 69,525 4,356 195 21 1
74,098 1973
$ 51,799 37,888 41,284 21,518 5,287
$157,776 1,629,641 1,360,216 2,512,877 1,252,977 6,755,711 208,073 26,708 867 506 236,154
$13,018 3,715 3,505 1.363 30 22
$21,653 7,134 2,614 3,653 2,346 23 15,770 69,833 4,418 197 21 1
74,470 1972
$ 43,8 31,8 35,9 16,8 2,8
$131,3 1,463,8 1,227,2 2,412,2 1, 137,2 6,240,5 200,5 25,8 8
L'j 227,8'
$12,9 3,5 3,2 1,0
$20,8 7,7 2,6 3,8 2, 1 16,4 69,8 4,4 1
74,5 REFINERY SERVICE ---------------------------------.
Electricity delivered......
(1,000 kilowatt-hours)
Steam delivered.........
(1,000 pounds)
- Restated 28 343,531 5,301,421 297,282 350,021 5,517,000 5,921,000 341,700 295,2 5,926,000 7,261,0
Average Annual Compound %
1971 1970 1969 1968 1967 1966 Rate of Growth ELECTRIC REVENUES
$ 36,198
$30,992
$27,857
$25.487
$22,900
$21.406 14.1 5 Residential 25.468 21.430 19,333 17.754 16,377 15,256 14.70 Commercial 28,903 24,069 22.483 20, 120 16.4 71 15, 187 15.55 Industrial 12,964 10, 175 8,936 7,962 7,099 6,594 18.13 Other utilities, etc.
1,209 530 513 504 497 490 17.21 Miscellaneous revenues
$104.742
$87, 196
$79, 122
$71,827
$63,344
$58,933 15.18 Total electric revenues ELECTRIC SALES 1,380.763 1,280.420 1, 151, 108 1,037,223 910,548 838,548 7.86 Residential 1,099,897 1,009,488 923,064 856,258 774,382 719,001 6.98 Commercial 2,252,219 2,264,084 2,217,655 2,048,776 1,633,827 1,509,966 4,12 Industrial 1,014,972 885,720 792, 151 708,899 629,643 570,961 7.70 Other utilities, etc.
5.747,851 5,439, 712 5,083,978 4,651, 156 3,948.400 3,638.476 6.23 Total electric sales ELECTRIC CUSTOMERS I
193,282 187,683 183.458 178,948 174,039 169,906 3.10 Residential 25, 139 24,383 24,058 23.474 22,966 22,644 2.27 Commercial 810 834 815 806 760 769 2.68 Industrial l
460 375 283 281 281 274 7.22 Other utilities, etc.
219,691 213,275 208,614 203,509 198,046 193,593 3.01 Total electric customers GAS REVENUES
$11,948
$11,283
$10.708
$10,290
$10,041
$ 9,333 7.27 Residential 3,126 2,861 2,555 2,207 1,980 1,693 13.60 Commercial 2,998 2,618 2,641 2,536 2,032 1,668 13.63 Industrial 1, 153 1,340 1,222 1, 155 1,293 1, 197 0.84 Interruptible 16 10 7
8 8
8 18.59 Other utilities, etc.
39 225 251 215 204 186 (16.40) Miscellaneous revenues
$19,280
. $18,337
$17,384
$16.411
$15,558
$14,085 8.64 Total gas revenues GAS SALES 7,583 7.406 6,942 6,601 6.432 5,851 1.74 Residential 2,534 2,384 2,097 1,770 1,564 1,305 7.08 Commercial 3,797 3,549 3.700 3.455 2,659 2, 125 4.39 Industrial 2.708 3.423 3,263 3,089 3.447 3, 152 (11.27) Interruptible 13 8
6 6
7 6
12.79 Other utilities, etc.
16,635 16,770 16,008 14,921 14, 109 12.439 1.03 Total gas sales GAS CUSTOMERS 69,604 68,614 68,074 67,270 66,079 65,097 0.58 Residential 4.426 4.444 4,423 4,341 4,225 4, 117 0.09 Commercial 204 206 103 93 95 91 8.08 Industrial 21 21 19 19 16 15 3.42 Interruptible 1
1 1
1 1
1 Other utilities, etc.
74,256 73,286 72,620 71,724 70.416 69,321 0.57 Total gas customers REFINERY SERVICE 272,649 244,614 281, 120 265,824 276,598 288.431 1.76 Electricity delivered (1,000 kilowatt-hours)
,564,000 7,779,000 7,536,000 7,296,000 7,390,000 7,300,000 (3. 15) Steam delivered (1,000 pounds)
J
Delmarva Power & Light Company 800 King Street Wilmington, Delaware 19899 Where The 1976 Delmarva Power Dollar went.
8¢ Depreciation 12 ¢ Preferred Dividends
& Interest 9¢ Materials,
Supplies &
Other Expenses
?¢Common Dividends 5¢ Purchased Gas U.S. POSTAGE PAID Wilmington, De.
Permit No. 68 Zip Code 19899