ML19031A133
| ML19031A133 | |
| Person / Time | |
|---|---|
| Site: | Salem  |
| Issue date: | 03/13/1978 |
| From: | Philadelphia Electric Co |
| To: | Office of Nuclear Reactor Regulation |
| References | |
| Download: ML19031A133 (40) | |
Text
~Philadelohia Electric Company NOTICE -
THE ATTACHED FILES ARE OFFICIAL RECORDS OF THE DIVISION OF DOCUMENT CONTROL.
THEY HAVE BEEN CHARGED TO YOU FOR A LIMITED TIME PERIOD AND MUST BE RETURNED TO THE RECORDS FACILITY BRANCH 016.
PLEASE DO NOT SEND DOCUMENTS CHARGED OUT THROUGH THE MAIL. REMOVAL OF ANY PAGE(S) FROM DOCUMENT FOR REPRODUCTION MUST BE RE FERRED TO FILE PERSONNEL.
- t DEADLINE RETURN DATE RECORDS FACILITY BRANCH
~nual Report 1977
DIRECTORS
- Gustave G. Amsterdam Chairman of the Board and Chief Executive Officer Bankers Securities Corporation (Merchandising and Real Estate)
William T. Coleman, Jr.
Senior Partner of the law firm of O'Melveny & Myers
- James L. Everett President of the Company William S. Fishman Chairman and Chief Executive Officer of ARA Services, Inc.
(Service Management)
- Robert F. Gilkeson Chairman of the Board and Chief Executive Officer of the Company Robert F. Gilkeson Chairman 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.
- William W. Hagerty President, Drexel University Robert D. Harrison President and Chief Operating Officer, John Wanamaker, Philadelphia (Merchandising)
Paul R. Kaiser Chairman of the Board and Chief Executive Officer Tasty Baking Company (Diversified Manufacturing)
Joseph C. Ladd President, Fidelity Mutual Life Insurance Company
- Joseph]. Mclaughlin President, Beneficial Mutual Savings Bank
- Member of Executive Committee OFFICERS William L. Maruchi Vice President Electric Transmission and Distribution William B. Morlok Vice President Commercial Operations Clair V. M yers Vice President Purchasing and General Services Theodore S. Fetter Secretary Vice President and General Counsel Morton W. Rimerman Treasurer Vincent S. Boyer Vice President Engineering and *Research Clifford Brenner Vice President Corporate Communications Charles L. Fritz Vice President Personnel and Industrial Relations Martin F. Gaver Vice President Gas Operations John L. Hankins Vice President Electric Production Lucy S. Binder Assistant Secretary James D. Lynch Assistant Secretary George G. Eppright Assistant Treasurer Alfred M. Newill Assistant Treasurer Joseph W. Ruff Assistant Treasurer Donald P. Scott Assistant Treasurer
CONTENTS 2
Financial Highlights 3
Letter to Shareholders 5
1977 Tax Story 6
Pictures Tell the Story 19 Financial Statements 24 N otes to Financial Statements 29 Report of Auditors 29 Financial Statistics 31 Operating Statistics 32 Fiscal Agents Inside back cover:
PE Promotes Southeastern Pennsylvania ANNUAL MEETING The annual meeting of the shareholders of the Company will be held on April 5, 1978, 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 1 are 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 G. Eppright was elected assistant treasurer on March 28.
William T. Coleman, Jr. was re-elected to the Board of Directors on May 23.
On September 26, Charles L. Fritz was elected vice president of Personnel and Industrial Relations, succeeding Henry T. Bryans who retired October 1.
Lucy S. Binder was elected assistant secretary on September 26.
GENERAL OFFICE 2301 Market Street, P.O. Box 8699 Philadelphia, Pennsylvania 19101
FINANCIAL HIGHLIGHTS Percent Increase 1977 1976 (Decrease)
Operating Revenue
$1,394,762,229
$1,224,141,382 13.9%
Operating Expenses, including Fuel, Maintenance, Depreciation, and Taxes 1,172,599,293 1,012,716,075 15.8%
Operating Income 222,162,936 211,425,307 5.1%
Other Income, primarily Allowance for Other Funds Used during Construction Income before Interest Charges Interest Charged to Operations (Net)
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
$125.6 million in 1976 to $132.7 million in 1977, an increase of 5.7 percent.
Earnings per average share decreased moderately from $1.91 to $1.87 as the average number of shares outstanding in-creased 8.0 percent.
Dividends paid on the common stock were $1.76 a share, of which 27 percent is not taxable in 1977 as ordinary dividend income for Federal income tax purposes.
The quarterly rate was increased from 41 ¢ to 45 ¢ effective with the June, 1977 pay-ment.
WHERE THE DOLLAR CAME FROM...
OPERATING REVENUE 96¢ OTHER INCOME 4¢ 2
65,055,932 56,842,363 14.4%
287,218,868 268,267,670 7.1 %
113,779,779 103,648,960 9.8%
173,439,089 164,618,710 5.4%
40,705,097 39,021,780 4.3 %
132,733,992 125,596,930 5.7%
124,893,048 107,682,682 16.0%
7,840,944 $
17,914,248 (56.2 % )
70,843,634 65,605,660 8.0%
$1.87
$1.91 (2.1 % )
1.76
$1.64 7.3 %
Operating revenue rose to a new high of
$1.4 billion, an increase of 13.9 percent over 1976, as sales to electric customers increased 3.5 percent over 1976 and set a new record.
Financing requirements were met by the sale of the following securities:
Mortgage Bonds (Millions )
8Ys % Series (March)....... $ 75.0 8Ys % Series (July).........
75.0 Operating expenses were up 15.8 per-cent reflecting continued inflation in all areas of doing business.
Construction expenditures amounted to
$393 million, increasing total investment in plant to $4.2 billion.
Pollution Control Bonds 6% Series (February)
Common Stock
- public offering
( 4,000,000 shares ).........
- Dividend Reinvestment and Employee Plans (1,317,952 shares)........
WHERE IT WENT.
FUEL 39¢ WAGES & BENEFITS 12¢ MATERIAL, ETC. 8¢ DEPRECIATION 7¢ TAXES 13¢ INTEREST AND PREFERRED STOCK DIVIDENDS 11 ¢ COMMON STOCK DIVIDENDS 9¢ RETAINED EARNINGS I¢ 23.5 78.3 25.6
$277.4
TO OUR SHAREHOLDERS:
R. F. Gilkeson, Chairman of the Board 1977 was a year of continued progress for Philadelphia Electric Company. Electric kilowatt-hour sales set new records; the first of two units at the Salem Nuclear Power station began commercial operation; our gas supply improved substantially; and we success-fully completed a major step forward in customer service. Reflecting this progress and our confidence in the future, the quarterly dividend was increased from 41 ~~ per share to 45 ¢ per share beginning in June.
However, 1977 was not without problems. The economy of our service territory continued to be sluggish and our sales growth for the year was disap-pointing. Inflation continued to significantly impact our expenses. Regulatory delay in approving needed rate increases for incurred costs continued to penalize earnmgs.
For the year, common stock earnings were $133 million, an increase of 6 percent over last year. Earnings per share were $1.87, on 8 percent more average shares outstanding, compared to $1.91 in 1976. Our 1977 earnings benefited by 11 ¢ per share as a result of a non-recurring revenue increase due to the conversion of residential and small commercial customers from bi-monthly to monthly meter reading and billing, but were penalized by approximately 20¢ per share as a result of the Salem unit being in service, but not in the rate base.
Electric revenue increased $15 3 million, or l 5 percent above last year. The increase was due to the recovery of higher fuel costs, rate increases, and a 3.5 percent increase in electric sales. Recovery of higher fuel costs resulted in an increase in gas revenue of $16 million or 10 percent above last year. Steam revenue increased almost $2 million or 4 percent.
NUCLEAR POWER The first Salem nuclear unit, constructed and operated by Public Service Electric and Gas Company, of New Jersey, was placed in commercial operation on June 30, 1977. The Company owns a 42 percent share in this 1079 megawatt unit and will own a like share of the second unit scheduled for completion in 1979. This addition brings our system nuclear generating capacity to 1346 megawatts, or about 16 % of our total capacity. Nuclear energy is expected to account for over 25 % of our annual output in 1978.
Our Peach Bottom nuclear units continue to perform well although we were disappointed by the length of outages due to some "shakedown" problems. The nuclear units presently in service reduce our system fuel costs by about $1 50 million annually.
Construction continues at the Limerick nuclear plant. The two 105 5 megawatt units are scheduled for service in 1983 and 1985. When Limerick is com-pleted, nuclear generation should account for more than half of our total output.
We carried a new record electric peak load last summer of nearly 5900 megawatts without difficulty.
We have a reserve capacity of about 40 % and our ability to serve our loads is comfortable after a decade of "blackout" worries.
CUSTOMER SERVICE Efficient, reliable, reasonably priced service is our public responsibility and an essential ingredient to insuring the present and future profitability of our shareholders' investment. In 1977, we took another 3
major step forward in fulfilling this responsibility.
Recognizing that energy costs are now a larger part of the family budget, we converted our residential and small commercial customers from bi-monthly to monthly meter reading and billing. Now our customers receive a bill each month for their actual use based on meter readings, enabling them to pay their actual bills monthly just as they do most other household bills.
Our enviable record of reliability for electric service continued through 1977. For the past four years we did not quite achieve 100% reliability, but we did achieve over 99.99 %.
After years of unheeded warnings, severe shortages of natural gas finally occurred. The severe winter of 1977, one of the coldest in the recorded history of eastern Pennsylvania, provided a major test of our Company's ability to provide reliable service. The eastern half of the United States suffered from shortfalls of gas and increased curtailments. The result was the closing of schools and the curtailing of natural gas use by business and industry.
Despite the severe winter, it was not necessary to curtail our residential customers. On ] anuary 17, 197 7, the Company set a new daily sendout record of 441 million cubic feet of natural gas. Our steam system also set a peak load record in ] anuary 1977.
Although we experienced a new all time winter peak and there were heavy demands on our electric system, our Company, through the PJM Interconnection, was still able to assist in supplying electric energy to other utilities.
In anticipation of the recent coal miners strike, our Company accumulated coal reserves which would permit operations through the 1977-78 winter. Nuclear units, free from the limitations of conventional fuel supply and delivery, perform well in the winter cold.
GAS OPERATIONS PLANS AHEAD We entered the winter of 1977-78 well prepared.
Supplies of natural gas from pipelines have been subject to less curtailments. In addition, we have taken some other important steps to firm up our own supply.
These steps are increased underground storage capacity, purchases of synthetic natural gas and local refinery gas, and participation in ventures for exploration. We established a wholly-owned subsidiary called Eastern Pennsylvania Exploration Company. The subsidiary is a partner in ventures for exploring and drilling for gas in the Gulf Coast area. Some of the ventures have already proven successful.
In the near future, gas supplies look more plentiful.
Hopefully, regulatory restrictions concerning the addition of new customers could be lifted.
4 FINANCING/RATE INCREASES During 1977, we sold $173.5 million of mortgage bonds and over 5 million shares of common stock.
The sale of these securities provided a financing mix which preserved our strong equity capital position.
Construction expenditures totaled $393 million, of which 45 percent was financed by internally generated funds. Conservative financing and good cash flow continue to be fundamental strengths of the Company.
In August 1977, we filed with the Pennsylvania Public Utility Commission for a two-step change in electric rates in order to recover the higher costs of new plants now in service and inflation. The first step proposed to eliminate the fuel adjustment clause for our residential and small commercial customers in return for an improved fuel clause for large commercial and industrial customers which would not pass through the fuel savings of a new nuclear plant until it is fully reflected in our base rates. The second step proposed to increase electric revenue by $119 million.
The Commission has suspended both parts of the request until April, 1978. Hearings on the full increase are underway and are expected to continue over the next several months. Pending completion of the hearings, we have asked for interim rate relief because our earnings have been decreasing as a result of the Salem unit being in service but not in rate base.
IN CLOSING 1977 was indeed a year of progress for our company-progress which was the direct result of the combined efforts of a capable and dedicated employee team. This progress was accomplished with about 1,000 fewer employees than we had five years ago.
Our report this year includes some views of our employees at work serving our customers, our com-munity and you, our shareholders. We are justifiably proud of these individuals and acknowledge their contributions to the progress which has been achieved in the past year.
March 1, 1978 Chairman of the Board
THE 1977 TAX STORY From time to time, questions are raised by variotts groups and public officials about Federal tax payments by tttilities. These inquiries receive substantial publicity in the news media and frequently restdt in the dissemination of erroneous and grossly misleading information.
For that reason, your Company, is continuing the practice begun last year of discussing, in some detail, the Company's tax obligations and payments.
The Company's total income tax obligation (Federal and state) for 1977 was $ 72 million. Of the total obligation,
$5 7 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 1977 was $1,395 million. From this, we are permitted to deduct the expenses of running the business such as fuel, labor, depreciation, etc. We can consider this our first allowable deduction, which for 1977 amounted to $1,075 million.
In addition, we are also permitted to deduct interest expenses, that is the interest we pay on both long-and shore-term debt, which totaled $164 million in 1977. Other allowable deductions of $32 million reduced our taxable income for 1977 to $124 million. This is the income on which the tax rate is applied. Our calculated tax at the Federal statutory rate ( 48 % )
amounted to $59 million in 1977.
In order to encourage companies to maintain modern and efficient facilities and to expand these facilities as required, the tax laws grant an income Calculation of Federal Income Tax Obligation Operating Revenue Less:
$1,075 164 (Millions)
$1,395 Operating Expenses Interest Expense Other Deductions Taxable Income 32 1,271 124 Income Taxes on above at 48% statutory rate Amortization of Invest-ment Tax Credit Federal Income Tax 59
(_2) 57 tax investment credit for certain new plant and equipment. For 1977 this reduction amounted to $2 million and brought our total Federal income tax obligation to $ 5 7 million.
However, 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 1977, primarily because of tax depreciation and investment tax credits, we were able to defer all but about $1 million of our tax obligation. This is not a tax "loophole."
Deferral 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 funds which would otherwise be paid to the government help us reduce our external financing requirements and hold down the cost of supplying energy.
These funds are used to finance our construction program, including our biggest project-the nuclear Limerick Generating 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 1977 these taxes amounted to $92 million and included gross receipts taxes (which are only applicable to utilities), capital stock taxes, real estate taxes, and social security taxes.
The Company's total tax expense for 1977 is indicated below :
Total Taxes-1977 (Millions )
Income Gross Receipts Capital Stock Realty Social Security Other Total
$ 72 60 13 9
6 4
$164 5
WINTER OF '77 FOUND PHILADELPHIA ELECTRIC COMPANY EQUAL TO THE CRISES The coldest January since 1790 tested the resources of the Company all over the system. All power generation equipment was used to maximum capacity. Operating personnel worked around the clock to keep equipment moving and ready.
Records were broken in all three Company services: a new all-time electric winter peak of 4,510,000 kilowatts was established on January 18; gas distribution reached 441,000,000 cubic feet on January 1 7; steam output reached 2, 796,000 pounds per hour on January 18.
The freeze caused a national gas shortage which resulted in re-allocation of supplies by the federal government. This necessitated curtailment by Philadelphia Electric Company of supplies to large industrial and commercial customers. The Company also rendered assistance to others. ln response to an appeal from the Philadelphia Gas Works, PE service crews and utilization personnel helped restore heat to homes and repair leaks on the PGW system.
Despite heavy electric demands on its system, the Company, through the P JM Interconnection, assisted in supplying electric energy to utilities to the South and West. Philadelphia Electric and its employees are proud that their record of safety and reliability was maintained during the big freeze.
Authoritative sources reported that had the approximately 28 billion kilowatt-hours of electricity estimated to have been produced by nuclear plants in January not been available to the nation, these consequences would have resulted:
- l. more than 25 7,000 jobs lost in the month; I JPinLIAPiY I 6
- 2. nearly $230 million lost in monthly wages;
- 3. a reduction of some $3.8 billion in the month for the various goods, products, and services that make up gross national product.
In addition, ten million homes, 1 million stores, office buildings, and schools, and 60,000 factories, industries, and manufacturing plants that may have been served by this nuclear generation would have needed their energy requirements met by other means.
Filling these demands for electricity by other sources would have required either 32 million barrels of oil, nearly 13 percent of current monthly domestic production, or 182 billion cubic feet of natural gas, more than 10 percent of current monthly production, or 9.6 million tons of coal, about 17 percent of current monthly production.
Because of its foresight in constructing 500,000-volt transmission Jines such as this in 1967, Philadelphia Electric was able to send large blocks of power to distressed utilities to the South and West during the big freeze.
Daniel Fetterman, Gas Operations, instructs Donna Ranzer, RN, Bryn Mawr Hospital, in proper setting of controls for space heaters lent by Philadelphia Electric when the hospital lost its oil-fired heating system.
As Gas Operations experienced a new sendout record of 441 million cubic feet of gas on January 17, one quarter of the supply came from the liquefied natural gas holder at West Conshohocken, which stores the equivalent of 1.2 billion cubic feet of natural gas.
While Philadelphia Electric experienced a larger number of gas emergencies than usual during the cold weather. it was still able to help restore service to Philadelphia Gas Works customers. Gas Operations put in a total of 371 crew days during PGW's emergency.
John Hagner, Gas Operations, monitors gas supply and pressures during the cold period. A number of major weather factors affect the amount of gas needed.
As these factors change, new information is fed into a computerized data bank to maintain close control over gas operations.
An air quality control system such as the "scrubbing" equipment shown here at Eddystone Station, as well as water pollution control facilities at Peach Bottom Atomic Power Station, were funded by $23.5 million of pollution control revenue bonds.
I JPinLIPiAY I 7
"It is our fervent hope that the achievements recorded in the collection will, indeed, inspire the young, gratify the old, and encourage all who witness these accomplishments... "With these words, Robert F. Gilkeson, chairman of the board, formally presented a permanent collection on outstanding Black scientists and inventors to the Afro-American Historical and Cultural Museum, in downtown Philadelphia.
FEBAUAAY 8
2 Electric T & D crew helped to save lives in apartment fire. When Clarence C.
Allen, Wilmer C. Kulp, Jr., and George T. Sivel, an Electric T & D crew, saw a need, they responded quickly. Employee Allen noticed a police car, then saw smoke while the crew was replacing wooden crossarms at a site in Willow Grove. The crew ran to an intersection where a fire was in progress in an apartment building. They used their bucket truck to assist firemen in rescuing residents. One person died in the fire and four others were injured, but Willow Grove Fire Company officials said that the prompt action by the Philadelphia Electric crew had helped to prevent further tragedy.
The display shown here was part of a kickoff campaign held at the Main Office Building to promote an energy conservation program directed to residential consumers. The program provided specific advice on how to put conservation practices to work in their households. To offer reminders and tips, Joan Specter, Mary Walker, and John Facenda appeared as spokespeople for the campaign. Facenda appeared on all local television stations to introduce the campaign and provide viewers with tips emphasizing energy conservation.
He also deli vered similar messages on area radio stations, as did Ms. Walker, a former WHAT radio personality.
In addition, her messages appeared in area newspapers in an advertisement entitled "Conservation Corner." Ms. Specter, Evening Bulletin food columnist and a recognized cooking authority, was also featured in "Conservation Corner" newspaper advertisements.
The more you save...
ENERGY the more y:ou save.
An important part of the campaign was PE's offer of free guidebooks for using energy wisely. These offers were made through coupons in the newspaper ads, and through special bill enclosures. The booklets were filled with practical, easy-to-follow hints on saving energy in the kitchen and throughout the house.
While conservation is a "holding action" in the energy crisis, PE believes its program played a vital role in educating the public to its importance.
The energy conservation program generated customer requests for more than 300,000 pieces of literature during the year.
Personnel at the Lineman Training School completed five weeks of intensive training where they learned basic fundamentals of electricity, resuscitation practices, and instructions in climbing and pole-line construction techniques.
I mAACH I 9
Among the milestones reached at Limerick Generating Station during 1977 was the setting in April of the 83-ton spent fuel pool liner.
APFUL 10 Dismantling of Tilghman Street Gas Plant got underway in April. The plant had been reactivated during the January cold spell on a temporary basis, following approvals from regulatory agencies concerned with the environment. It was capable of producing eight million cubic feet of oil-gas a day during the winter emergency.
When gas manufacturing ceased at the Tilghman Street Plant, the gas holder was no longer needed, and it was dismantled in 1977. However, any vessel (holder) or pipeline containing combustible gas must be made safe before being opened to the atmosphere. First, the combustible gas must be displaced by inert gas. This process is called "purging." Photograph, right, shows the crew at work during the dismantling of the holder. The work of purging and disconnecting all piping is a delicate and difficult task and the crew did an excellent job in completing this phase of the dismantling safely and without mishap.
A teacher in the Philadelphia School District works with "Our World of Energy," a teacher's guide to energy awareness for elementary school students. The program was created by Philadelphia Electric's Energy Information and Education division under the auspices of the Energy Education Advisory Council. The program was developed because surveys indicated that Americans know very little about energy, the energy crisis, natural resources and conservation.
The Company's three natural gas exploration programs in the Gulf Coast area have proved successful. A fourth exploration program in West Virginia is being undertaken and drilling will begin in the Spring of 1978. Of 109 wells drilled, 29 are productive, which finding rate is better than the industry average. Martin F. Gavet (third from left), vice president, Gas Operations, early in May joined with public officials and community residents to mark symbolically the first delivery of gas from the new wells by opening a valve at West Conshohocken.
To keep Philadelphia Electric's older poles in service longer, concrete is used to replace decayed bottom section of wood pole. A steel collar is then used to join new and old sections. "Mod-pole" eliminates need to rewire top section, saves time and money.
During May the Company began hiring and training additional meter readers to convert meter reading and billing from a bi-monthly to a monthly schedule. A total of 162 new meter readers was hired, since nearly twice as many readings had to be taken daily.
Besides providing improved service to our customers, monthly meter reading and billing reduces delinquencies and chargeoffs, more promptly identifies tampering with service facilities and brings about more frequent personal contact with customers.
Meter reader Peter R. Supplee, who is assigned to the Coatesville area, has read more than 200,000 meters over a 3\\/2 year period without an error. His achievements illustrate the standards of excellence which employees set for themselves to render customers reliable and accurate service.
11
Traffic in the southbound lane of U.S. Route I atop Conowingo Dam resumed on June 22. It had been closed since March 1976, for construction work on the dam.
Drills such as the one shown here bored 537 holes through the structure and cables were installed to anchor the dam and powerhouse to bedrock to assure safety and stability exceeding the original flood design standards. Project is sheduled for completion in the Spring of 1978 at a total cost of about $7 million.
12 Salem Generating Station of Public Service Electric and Gas Company on the Delaware River in Lower Alloways Creek Township, New Jersey. No. I unit (right) began commercial operation in June, 1977, and construction on No. 2 unit is 78 percent completed. Each unit has a capacity of more than a million kilowatts.
Philadelphia Electric has a 42 percent share in the Salem installation.
The last major concrete placement at Limerick Generating Station was made in connection with the pour to the top of Unit 2 containment.
Note men at rim of structure.
Tn Harford County, Maryland, W. Howard Jarman, superintendent, Conowingo Hydroelectric Station, presents checks totalling $966,800 in payment of real estate and capital stock taxes assessed against the station, and Susquehanna Power Company.
Philadelphia Electric subsidiaries paid taxes in Maryland totalling about
$1.5 million in 1977.
Jn Pennsylvania, Philadelphia Electric paid nearly $100 million in state taxes for the year.
Since today's children are tomorrow's citizens, an education in electric power and its uses will equip them to make decisions with respect to energy needs in the future. Energy Education programs were presented at summer day camps and shopping malls throughout the Company's service area. They combined fun with learning when youngsters pedaled a bicycle equipped with a generator to create their own electricity. Depending upon the amount of energy the cyclists pedaled, they could turn on a small portable TV, a radio, and up to a I 00 watt light bulb.
Tips on safety during an electrical storm were illustrated by use of props to dramatize outdoor dangers.
13
E. S. Halfmann, Director, Research Division, is pictured with the Volkswagen "beetle" which he has converted to electric operation. Car consumes about three-quarters of a kilowatt-hour per mile. The Research Di vision keeps abreast of battery developments in the hope that electric energy for autos can one day help to alleviate our growing energy shortage. Looking on is a reporter for a local newspaper.
On August 5, the Company filed with the Pennsylvania Public Utility Commission for an 11.5 percent rate increase ($119 million) in electric rates to be applied to all customers.
Lydia Brennan, Rate Division. stands with the thousands of pages of statistics, exhibits and other supporting data generated by the Finance and Accounting Department for its presentation of Philadelphia Electric's case for rate relief.
The volume of paper involved is even greater than that shown here, since fifty copies of many of these documents had to be produced.
Last summer, Philadelphia Electric's Muddy Run Recreation Park, adjacent to the Company's pumped-storage hydroelectric facility, celebrated the arrival of its two-millionth visitor.
I PiLiuLIST I 14 The Park's camping, picniC'king, fishing and boating facilities have provided recreational enjoyment for the entire family since its opening, Memorial Day, 1969.
Late in September, a major milestone was reached at Limerick Generating Station when the plant's second reactor vessel was placed into the No. 2 Unit Containment vessel.
The vessel, constructed of six-inch thick carbon steel, weighs 650 tons, is 63 feet high and has an inside diameter of 21 feet. Note how it dwarfs men at lower left.
In the fall of the year the Company began increasing its inventory of coal in anticipation of a miners' strike in December. This view of Eddystone Station shows a stockpile of about 374,000 tons. By the end of 1977, the Company had on hand a supply of coal sufficient for I 00 days of generation at its coal burning units at Eddystone and Cromby Stations.
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- 1111111 Beginning September 26 display lights on the top of Philadelphia Electric Company's headquarters building at 2301 Market Street accented the United Way's theme for 1977, Lucky, Lucky You.
The lights were on each night from dusk until 1 a.m., until the end of the campaign.
I SEPTEmBEPi I 15
Problems and alternatives were explored at the Energy Scholars Conference by 140 Philadelphia area students who participated in the day-long conference which was sponsored by The Electrical Association of Philadelphia, the Company's Energy Education Advisory Council and the Franklin Institute.
Under Philadelphia Electric Company's program known as PREP (Program Resulting in Employment Possibilities), conducted in cooperation with the School District of Philadelphia, area high school seniors receive on-the-job training by attending school four hours a day and working four hours in the afternoon.
Training sessions supplement the classroom subjects with practical applications to business situations. Students also receive counseling and guidance in career opportunities so that they will be better prepared to enter the mainstreams of business and industry upon graduation.
D£::TDBEA 16 The Pennsylvania-New Jersey-Maryland Interconnection (PJM),
America's pioneer power pool completed 50 years of operation in 1977. Governor Milton Shapp of Pennsylvania joined with government officials, civic leaders and utility executives from five states and the District of Columbia to celebrate the anniversary at ceremonies held in PJM headquarters. At the podium with Mr. Shapp is Robert F. Gilkeson, chairman of Philadelphia Electric. The Interconnection coordinates the bulk electricity supply of eleven investor-owned electric companies in the Mid-Atlantic Region serving 21 million people in a 50,000-square-mile territory. Philadelphia Electric is represented in PJM through its General Administration Department.
James J. Dougherty, Jr., supervisor, and Michael C. Smith both work in Data Processing's dispatch group which is responsible for inserting and mailing of more than one million bills per month to customers.
Philadelphia Electric was one of the first companies to take advantage of a one-cent discount offered by the U.S. Postal Service for large volume mailers who pre-sort mail by zip codes. During 1977, total savings in postage amounted to about $140,000.
ItS good business to be in Southeastern Pennsylvania
... midway between New York, a world financial center, and Washington, the nation's capital... without the headaches of either.
Why Southeastern Pennsylvania?
Here's what five outstanding business leaders say...
"... reasonably priced land... and lower overall building and construction costs."
G. G. Probst President, Sperry Uniuac, Blue Bell, PA The decision to move Sperry Univac division headquarters to Montgomery County was made based on such considerations as reasonably-priced land -
to effectively insure planned company expansion -
and lower overall building and construc-tion costs. Of course, being a world-wide company, it was imperative that we be located as close as possible to shipping and transportation centers.
Because Sperry Univac is highly technology-oriented, we need to be able to draw from a large number of talented, well-educated personnel. The many fine colleges and universities in the Philadelphia area provide a wealth of such competent, degreed people to choose from.
We chose a suburban setting, too, because of the ease of travel and quiet surroundings for our employees. The beauty of the Pennsylvania countryside is appreciated by all of us.
"... highway, air and rail transit is exceptional."
Donald L. Felley Group Vice President-North America, Rohm and Haas, Bristol, PA The first plant designed and built by the Rohm and Haas Company was our Bristol Plant in Bucks County. It has many advantages for Rohm and Haas, including an excellent riverfront location, ample land, a superb labor force and, most important, a great transportation net-work at our doorstep. The plant is also close to our corporate headquarters in Philadelphia.
About one-third of the population of the U.S. lives within 200 miles of our Bucks County facility and high-way, air and rail transit is exceptional.
Particularly important to us is the convenience of the Philadelphia Port, since we're its largest shipper of contain-erized goods. We find that our trucks can move materials down 1-95 to a pier in a matter of minutes_ The Port also serves as an important link to our European markets.
"... Delaware County provides an ideal environment for business."
Charles L. Andes Chairman of the Board, Franklin Mint Corporation, Franklin Center, PA We believe that Delaware County provides an ideal environment for business. The area has a long tradition of craftsmanship and is rich in highly skilled and motivated workers. The range and quality of the area's cultural, educational and recreational facilities are im-pressive. Being adjacent to Philadelphia and relatively close to New York, Washington and the seashore are additional advantages.
When we outgrew our facilities in Yeadon, we had no trouble finding suitable and sufficient acreage in Franklin Center to accommodate our office, manufacturing, museum and parking facilities. Then, as now, it made good business sense to stay in Delaware County.
"Chester County is a superb place to live."
Bud Carlson Vice Chairman, Lukens Steel Company, Coatesville, PA When Lukens started at its present site in Southeastern Pennsylvania in 1810, water power was available, raw materials were plentiful and products could be moved to nearby customers over the Pennsylvania Toil Road.
Even though times have changed, Lukens stayed and today operates profitably as a specialist in plate steels. We adequately serve our customers from this location and are convenient for suppliers. Chester County is a superb place to live. Excellent schools, cultural and recreational facilities are at hand, and we're close to Philadelphia, New York City and the Nation's Capital.
".. without a doubt, the best location for us."
Paul R. Kaiser Chairman of the Board, Tasty Baking Co., Philadelphia, PA Ten years ago, we made a hard-nosed economic decision to keep our company, and its 2,000 jobs, in Philadelphia. We had a big investment here, and we were very satisfied with the city services and the availability of labor. It was, without a doubt, the best location for us.
With that decided, we felt we needed to do something to help stabilize the neighborhoods adjacent to our headquarters.
We began with a $40,000 annual investment. Today, our Allegheny West Community Development program has been joined by other business, government and private foundations. We're so pleased with the results that we recently bought a 260,000 square-foot neighboring building for expansion.
The five-county Southeastern Pennsylvania area, midway between New You'll find too, that the cost of living is lower than in comparable metropolitan areas. You'll also find that workers are more skilled, better York and Washington, offers an exceptionally convenient location combined with a unique quality of life you can't really find anywhere else.
educated and less inclined to strike Valley Forge Park than in other areas.
This is an area with so many attractive places to live that making a choice will be difficult. Whether you prefer rolling countryside or the sophisticated atmo-sphere of colonial Society Hill in Phila-delphia, you'll find a delightful mix of cosmopolitan city neighborhoods, beautiful suburbs or country acres to choose from.
And, you'll join a wonderfully diversified business and industrial community. We have about 90% of all U.S. manufacturing-industrial classifications repre-sented here -
a cross-section of the economic base of the country. And they're not all corporate giants, Brandywine Museum and Battlefield either. Many are small businesses, so vital to the economic health of any area.
Of course, there are many practical reasons why busi-nessmen prefer South-eastern Pennsylvania.
For example, our convenient air, sea, And, you can count on a diver-sified pool of engineering and pro-fessional people who graduate from the 50 universities and col-leges in the area. Most of them prefer to live here.
We also have an abundance of water for industrial use, plus ample and reliable energy supplies.
Best of all, this is not an overcrowded area.
Choice plant sites are available in all five counties. That in-cludes over 7500 acres in suburban industrial parks. Within the city of Philadelphia, we have 1300 acres of fully-Longwood Gardens improved land available for relocation, and selling for 10% of the market value. Further-rail, highway and mass transit systems. They Philadelphia more, you can get long-term, low-inter-est loans for 100% of your development costs. You won't find a more gen-erous urban land offer in any other major city!
make for easy access of goods, raw materials and people in this market area of over five Before you make a move, look at Southeastern Penn-sylvania. Write or call today.
million.
To/ind out more about locating your business in one of the five counties in Southeastern Pennsylvania, simply fill in this coupon, attach it to your letterhead and mail to:
Mr. James O'Brien Manager of Area Development Philadelphia Electric Company 2301 Market Street Philadelphia, PA 19101 Telephone (215) 841-5657 Title _ ________ _____ ___ ______
Company _ _________ _________ ___
Address - ----------- ----------
City ___________
~tat~-----~iP*----
Commercial Operations is working closely with Drexel University, builders, and equipment manufacturers to obtain data and operating experience on solar energy. In a test program, solar panels atop a student dormitory at the University provide the building with domestic hot water. The solar hot water system utilizes a 300-gallon preheat tank in conjunction with an existing 150-gallon oil-fired hot water system.
A construction program at the North Philadelphia Substation converted the supply from 132,000 volts to a 220,000 volt transmission system, thereby increasing reliable service to the central and northern city areas which it serves.
Here, one of two massive new transformers is being rolled into place.
Through the years, Philadelphia Electric has been honored with numerous awards for the landscaping of its facilities. Last year, it received the 1977 Landscape Horticultural Award of the Greater Philadelphia Chamber of Commerce in cooperation with the Pennsylvania Horticultural Society. At the I 50th annual meeting of the Society the award was given for Knowlton Substation which was cited as conforming to the "usual high standards of many of the Company's facilities."
nauEmBEA 17
Aerial view of Limerick Generating Station construction. By the end of 1977, Unit 1 was 38 percent complete and Unit 2 was 26 percent finished. Overall construction was 34 percent complete.
During 1977, the total Peach Bottom plant generated 8.8 billion kilowatt-hours of electricity, bringing its total generation since beginning operation to 34.5 billion kilowatt-hours. In that time Peach Bottom generation will have saved 22 million barrels of expensive oil.
[]ECEmBEA 18
FINANCIAL SECTION MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED STATEMENTS OF INCOME Electric operating revenue increases of $46.4 million in 1976 over 1975 and $152.9 million in 1977 over 1976 principally reflect higher fuel adjustment revenues and increased base rates which added an aggregate of $23.5 million in 1976 and
$123.2 million in 1977. Kwh sales of electricity in 1976 in-creased 3.7 percent over 1975, principally reflecting economic recovery. For 1977, sales of electricity, excluding the effect of a change from bi-monthly to monthly meter reading and billing (see below ), increased 2.2 percent over 1976.
Gas operating revenue increases of $40.9 million in 1976 over 1975 and $16.0 million in 1977 over 1976 reflect higher fuel adjustment revenues and increased base rates. Higher fuel cost adjustment revenues and base rares added an aggregate of
$27.0 million in 1976 and $16.9 million in 1977. Mcf sales of gas for 1976 increased 13.4 percent over 1975 as a result of the availability of gas under emergency contracts and increased sendout due to colder weather in October, November and December 1976. For 1977, Mcf sales of gas, excluding the effect of a change from bi-monthly ro monthly meter reading and billing (see below), decreased 2.7 percent below 1976 due ro curtailments by the Company's pipeline suppliers which were necessitated by the nation's severe winter.
In June 1977, the Company began converting its residential and small commercial electric and gas cusromers from bi-monthly ro monthly meter reading and billing. This conversion, which was completed in November 1977, increased billed sales, and decreased unbilled sales, of electricity and gas by approxi-mately 340 million kwh and 2,140 million cubic feet, respec-tively, for 1977. As a result, there was a non-recurring revenue increase of approximately $24 million, ( $1 7 million electric and $ 7 million gas).
Fuel and energy interchange expense increased by $94.6 million in 1977 over 1976. This increase was due primarily to higher fuel costs and decreased coal generation primarily at Eddystone station (Unit 2 was out of service over 6 months due to planned inspections and the need for additional work revealed by such inspections) which was replaced by higher cost interchange purchases.
Other operation and maintenance expenses have increased in each period due to growth in utility plant and inflationary pressures. The first refueling outage at Peach Bottom Unit 2 contributed to higher maintenance expenses in 1976 over 1975.
The outages associated with the refueling of both Peach Bottom units contributed to higher maintenance expenses in 1977 over 1976. In addition, operation and maintenance expenses were increased in 1977 over 1976 due to Salem Unit 1 going into commercial operation on June 30, 1977.
Increases in depreciation in 1976 reflect major additions ro new plant in service. Beginning July 1, 1977, depreciation charges increased by approximately $950,000 per month as a result of Salem Unit 1 being placed in commercial operation.
Salem Unit 1 nuclear generating unit, in which the Company has an ownership interest of approximately 42 percent, qualified as in service for income tax purposes in Decmber 1976. Federal and state income taxes for 1976 and for 1977 reflect reductions of $9.1 million and $17.1 million, respectively, associated with Salem Unit 1 tax depreciation. For 1976, $5.5 million was de-ferred and $3.6 million flowed through to income. For 1977,
$9.8 million was deferred. The remainder ( $7.3 million) flowed through to income but was substantially offset by book depreciation ( $5.7 million) on the unit. The related invest-ment tax credit of $29 million for 1976 reduced Federal income taxes payable and was deferred by charging investment tax credits, net of amortization.
Taxes, other than income taxes, have escalated primarily due to increases in revenue, which is subject to a gross receipts tax.
The increase in the AFUDC in 1976 over 1975 resulted from an increase in construction work in progress and a higher cost of capital for construction. The increase in 1977 over 1976 was primarily due to the higher cost of capital.
Beginning August 1, 1977, AFUDC has been reduced in th.e aggregate by approximately $2.0 million per month as a result of Salem Unit 1 being placed in commercial operation.
Interest charges on debt and dividends on preferred stock have increased substantially in recent years because of the higher cost of money and increases in the amounts of debt and pre-ferred stock outstanding.
Earnings available for common stock increased from $108 million in 1975 to $126 million in 1976 and to $133 million in 1977. The sales of approximately 5.1 million shares of common stock in 1976, and approximately 5.3 million in 1977 increased the average number of shares outstanding by 13 percent in 1976 and 8 percent in 1977. Earnings per average share increased from $1.86 in 1975 to $1.91 in 1976, but decreased slightly ro
$1.87 in 1977. The 1977 earnings were penalized by approxi-mately 20¢ per share as a result of Salem Unit 1 being in service, with the resultant discontinuance of AFUDC and the accrual of related depreciation charges, while the unit is not reflected in base rates. The non-recurring revenue increase for the conversion of residential and small commercial customers from bi-monthly ro monthly meter reading and billing added 11¢ ro earnings per share.
Dividends on common stock were paid at the rat~ of $1.64 per share in each of the years 1975 and 1976. A dividend of $.41 per share for the first quarter of 1977 was paid on March 30, and dividends of $.45 per share for the remaining quarters of 1977 were paid on June 29, September 29 and December 21 respectively.
19
CONSOLIDATED STATEMENTS OF INCOME Philadelphia Electric Company and Subsidiary Companies Operating Revenue Electric.............................................
Gas................................................
Steam Total Operating Revenue Operating Expenses Fuel and Energy Interchange............................
Other Operation Expense..............................
Maintenance.........................................
Depreciation........................................
Taxes on Income.....................................
Taxes, Other than Income..............................
Total Operating Expenses Operating Income Other Income Allowance for Other Funds Used During Construction.......
Income Tax Credits, net................................
Other, net...........................................
Total Other Income Income Before Interest Charges Interest Charges Interest on Long-Term Debt............................
Interest on Short-Term Debt............................
Allowance for Borrowed Funds Used During Construction....
Net Interest Charges Net Income...............................................................
Preferred Stock Dividends..................................................
Earnings Applicable to Common Stock.......................................
Shares of Common Stock-Average (Thousands)................................
Earnings Per Average Share (Dollars).......................................
Dividends Per Share (Dollars)...............................................
See notes and schedules to financial statements.
20 For the Year Ended December 31 1977 1976 (Thousands of Dollars)
$1,177,689 174,818 42,255 1,394,762 575,272 201,231 99,398 107,761 97,267 91,670 1,172,599 222,163 36,230 25,282 3,544 65,056 287,219 161,055 2,573
( 49,848) 113,780 173,439 40,705
$ 132,734 70,844
$1.87
$1.76
$1,024,814 158,865 40,462 1,224,141 480,663 175,801 75,030 97,980 100,598 82,644 1,012,716 211,425 30,127 24,167 2,548 56,842 268,267 147,596 3,567 (47,5 14) 103,649 164,618 39,022
$ 125,596 65,606
$1.91
$1.64
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION Philadelphia Electric Company and Subsidiary Companies For the Year Ended December 31 1977 1976 (Thousands of Dollars)
Source of Funds Net Income.........................................
$173,439
$164,618 Charges (Credits) Not Affecting Funds Depreciation....................................
107,761 97,980 Deferred Income Taxes, net.........................
37,237 28,882 Investment Tax Credits, net........................
26,488 52,668 Allowance for Ocher Funds Used During Construction....
(36,230)
(30,127 )
Total from Operations 308,695 314,021 Sale of Long-Term Debt...................................
173,500 200,000 Preferred Stock....................................
50,000 Common Stock.....................................
103,917 86,128 Increase (Decrease ) in Shorr-Term Debt.................
7,649 (100,728 )
Proceeds from Contract Terminations-Nuclear Projects 64,000 Total
$593,761
$613,421 Use of Funds Additions to Utility Plant..............................
$393,134
$380,007 Allowance for Other Funds Used During Construction (Deduction )....................................
( 36,230)
(30,127)
Dividends on Preferred and Common Stock................
165,605 147,097 Retirement of Long-Term Debt.........................
38,945 63,271 Increase in Other Items of Working Capital..............
23,433 40,222 Ocher, nee...........................................
8,874 12,951 Total
$593,761
$613,421 See notes and schedules co financial srartments.
21
CONSOLIDATED 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...................
Net Utility Plant in Service...........................
Construction Work in Progress..........................
Nuclear Fuel, at amortized cost..........................
Nonutility Property and Other Investments......................................
Current Assets Cash and Temporary Cash Investments....................
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 See notes and schedules to financial statements.
22 December 31 1977 1976 (Thousands of Dollars )
$3,485,102
$3,034,654 282,123 278,181 52,177 50,877 118,570 118,085 3,937,972 3,481,797 955,301 860,349 2,982,671 2,621,448 1,094,157 1,189,315 89,019 76,128 4,165,847 3,886,891 27,431 13,203 30,771 23,847 163,254 137,920 14,671 20,761 15,428 23,008 19,854 69,811 58,722 32,424 29,614 3,796 2,597 343,825 302,653 10,894 14,669
$4,547,997
$4,217,416
LIABILITIES December 31 1977 1976 (Thousands of Dollars)
Capitalization Stockholders' Equity Preferred Stock-See Schedule, page 28..................
$ 534,268
$ 535,072 Common Stock-See Schedule, Page 28..................
1,106,684 1,002,767 Other Paid-In Capital...............................
1,819 1,713 Retained Earnings..................................
328,699 321,190 1,971,470 1,860,742 Long-Term Debt-See Schedule, page 28..................
2,078,273 1,936,417 4,049,743 3,797,159 Current Liabilities Shorr-Term Debt Bank Loans.......................................
2,200 800 Commercial Paper..................................
12,675 6,426 Current Maturities of Long-Term Debt...................
28,653 36,898 Accounts Payable.....................................
82,193 72,278 Taxes Accrued..........................................
24,480 20,170 Deferred (fuel expense ).............................
12,217 10,531 Interest Accrued......................................
48,597 43,183 Dividends Declared...................................
10,174 11,570 Other..............................................
4,150 4,654 225,339 206,510 Deferred Credits Accumulated Deferred Income Taxes.....................
146,378 110,829 Accumulated Deferred Investment Tax Credits..............
110,709 87,957 Other..............................................
15,828 14,961 272,915 213,747 Total
$4,547,997
$4,217,416 See notes and schedules co financia l statements.
23
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS Philadelphia Electric Company and Subsidiary Companies For the Year Ended December 31 1977 1976 (Thousands of Dollars)
Balance, January 1....................................
$32 1,190
$304,678 Net Income (from page 20)............................
173,439 164,618 494,629 469,296 Cash Dividends Declared Preferred Stock....................................
40,712 39,414 Common Stock....................................
124,893 107,683 Expenses of Capital Stock Issues Balance, December 31 See notes and schedules co financial statements.
NOTES TO FINANCIAL STATEMENTS
- 1. Significant Accounting Policies:
General: All utility subsidiary companies of Philadelphia Electric Company are wholly-owned and are included in the consolidated financial statements. The accounts are maintained in accordance with the uniform system of accounts prescribed by the regulatory authorities having jurisdiction.
Revenues: Revenues are recorded in the accounts upon billing to the customer. Rate increases are billed from dates authorized or permitted to become effective by regulatory authorities.
Due to the use of cycle billing there is an amount of unbilled revenue at the end of any period. See "Management's Discus-sion and Analysis of the Consolidated Statements of Income" for effect of meter reading and billing change in 1977.
Fuel Expenses: For financial reporting purposes the Company defers that porrion of fuel expense which is recoverable under fuel adjustment clauses until it is subsequently billed as fuel adjustment revenue in order to effect a better matching of fuel expense with related revenues. Amounts of fuel expense re-covered under the fuel adjustment clauses are charged to opera-tions with equivalent credits to deferred fuel expense.
Nuclear energy costs are calculated at a zero net salvage value (assuming reprocessing facilities will be available for spent fuel as needed) and charged to fuel expense on the basis of the 24 325 1,009 165,930 148,106
$328,699
$321,190 number of units of thermal energy produced as they relate to the estimated total thermal units to be produced over the ap-proximate four-year life of the fuel. If such reprocessing facil-ities are not available, the Company would incur additional costs to dispose of spent fuel.
Depreciation: For financial reporting purposes, depreciation is provided over the estimated service lives of the plant on a straight-line basis. No provision is presently provided for the estimated decommissioning costs of the nuclear plants. The annual depreciation provisions, expressed as a percent of average depreciable utility plant in service, were approximately 2.99%
for 1977 and 2.97 % for 1976.
Income Taxes: Deferred income taxes are provided for dif-ferences between book and taxable income to the extent per-mitted by the regulatory authorities for rate-making purposes.
Investment tax credits, other than credits resulting from contributions to the Tax Reduction Act Stock Ownership Plan for employees which do not affect income, are deferred and amortized by credits to income over the estimated useful life of the related utility plant.
Allowance for Funds Used During Construction
( AFUDC) : AFUDC is defined in the applicable regulatory system of accounts as "the net cost for the period of construction
of borrowed funds used for construction purposes and a reason-able rate upon other funds when so used." The net after-tax rates used in determining the allowance averaged 8.65 % in 1977 and 8.30% in 1976. The allowance is recorded as a noncash charge to construction in the plant accounts and the corresponding credits, in conformity with a change in the regularory system of accounts effective January 1, 1977, are ro "Interest Charges" for cost of borrowed funds, excluding the related income tax benefits, and ro "Other Income" for cost of other funds. AFUDC in 1976 has been reclassified in the con-solidated statements for comparative purposes. For income tax purposes, the allowance is not included in taxable income, nor is the depreciation of the capitalized allowance a tax deduct-ible expense. Income tax benefits of $26,237,000 in 1977 and
$24,701,000 in 1976, arising from interest charges associated with borrowed funds used to finance construction, were allo-cated from operating expenses ro other income.
- 2. Taxes on Income:
1977 1976 (Thousands of Dollars)
Included in operating expenses:
Current income taxes Federal........... $ 21,413 12,129 33,542
$ 6,147 12,901 19,048 State.............
Total........
Deferred income taxes, net Federal............
State..............
Total.........
Investment tax credits, net Federal............
Total Federal State..............
29,778 7,459 37,237 26,488 Total......... $
77,679 19,588 97,267 Included in other income:
Current income taxes Federal............ $ ( 20,225)
State..............
( 5,057)
Total......... $ ( 25,282)
Total income tax provisions:
Federal............ $ 57,454 State..............
14,531 Total......... $ 71,985 23,447 5,435 28,882 52,668 82,262 18,336
$100,598
$ ( 19,684)
( 4,483)
$(24,167)
$ 62,578 13,853
$ 76,431 Investment tax credits consist of (a) the basic credits allow-able at the Federal statutory rate ( 10 % ) plus ( b ) an additional (11;2 % ) $3,708,000 in 1977 and (1%) $4,935,000 in 1976 allowed the Company to offset Federal income taxes pro-viding such amounts are passed on to the employees of the Company in the form of Philadelphia Electric Company com-mon stock. Such additional credits have no effect on net income.
For Federal income tax purposes the 1976 investment tax credits eliminated current Federal income taxes payable, $39,-
635,000 in 1976, and resulted in a claim for refund of prior years' Federal income taxes of $14,671,000 which was received in 1977.
The aforementioned income tax provisions differ from amounts computed by applying the Federal staturory tax rate to adjusted income before income taxes for the following reasons:
Net Income................
Total income tax provisions....
Income before income taxes....
Deduct-Allowances for Funds Used During Construction (non-taxable)............
Adjusted income before income taxes.............
Income taxes on above at Federal staturory rate ( 48% )......
Increase (Decrease) due to:
Excess of tax depreciation over book depreciation not normalized...............
State income tax, net of Federal income tax benefits........
Amortization of investment tax credits previously deferred...
Other, net.................
Total income tax provisions Provision for income taxes as a percent of:
Income before income taxes Adjusted income before income taxes....................
1977 1976 (Thousands of Dollars)
$173,439
$164,618 71,985 76,431 245,424 241,049 (86,078)
( 77,641)
$159,346
$163,408
$ 76,486
$ 78,436
( 4,702)
( 5,285) 10,467 9,812 (2,183)
(1,638)
( 8,083)
( 4,894)
$ 71,985
$ 76,431 29.3 %
31.7%
45.2%
46.8%
Provisions for deferred income taxes consist of the following tax effects of timing differences between tax and book income:
1977 1976 (Thousands of Dollars)
Depreciation...............
$3 7,492
$29,770 Deferred fuel expense........
1,687 1,054 Other.....................
( 1,942)
( 1,942)
$3 7,23 7
$28,882 25
- 3. Taxes, Other than Income:
1977 1976 (Thousands of Dollars )
Gross Receipts.............
$59,545
$52,103 Capital Srock...............
13,002 10,817 Realty.....................
9,467 11,127 Other, principally social security 9,656 8,597
$91,670
$82,644
- 4. Short-Term Debt:
The average short-term borrowings during 1977 aggregated
$33,595,000 at an average rate of 7.66% and during 1976 aggre-gated $51,131,000 at an average rate of 6.74%. The maximum short-term borrowings outstanding were $94,326,000 in 1977 and $132,200,000 in 1976. The average rate of interest on short-term borrowings at December 31, 1977 was 7.75 % for bank loans and 6.85 % for commercial paper. As of December 31, 1977 the Company had informal lines of credit with banks aggregating $212,875,000. The Company generally does not have formal compensating balance arrangements with these banks. The Company maintains deposits with banks for work-ing funds for normal operations.
- 5. Retirement Plan:
The Companies have a noncontriburory, trusteed plan appli-cable t0 all regular employees. Pension costs which are funded as accrued, consisting of current and prior service costs, if any, over a twenty-year period, aggregated $18,708,000 in 1977 and
$15,225,000 in 1976. Approximately 76% of such amounts was charged t0 operating expense and 24%, 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, 1977.
- 6. Commitments and Contingent Liabilities:
The Companies have incurred substantial commitments in connection with their construction program. Construction ex-penditures are estimated t0 be $434,000,000 for 1978 and
$1,510,000,000 for l 979-1981.
The Price-Anderson Act places a "Limit of Liability" of
$560,000,000 on each nuclear generating facility for public liability claims that could arise from a nuclear incident. The Company and its co-owners of the Peach Bottom and Salem Stations have insured for this exposure by purchasing private insurance in the maximum available amount of $140,000,000 and the remainder is provided by indemnity agreements with the Nuclear Regularory Commission (NRC); however, since August 1977, the indemnity by the NRC has decreased and in the event of a nuclear incident, the Company tO the extent of its ownership participation, could be assessed $5,000,000 for each reacror owned (maximum $10,000,000 per reacror in a year ). On March 31, 1977, the United States District Court for the Western District of North Carolina rendered a declara-rory judgment, in a case brought by an environmental group and other plaintiffs against the NRC and an electric utility 26 company, t0 the effect that the $560,000,000 "Limit of Liability" under the Price-Anderson Act contravenes the due process and equal protection provisions of the Fifth Amendment to the United States Constitution and is, therefore, unenforceable.
Both defendants appealed the decision directly tO the United States Supreme Court and on November 7, 1977 the Court announced it would review the lower court's decision.
For damage 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 $220,000,000; for the Salem Station, the Company through the operaror of the Station is a member of Nuclear Mutual Limited (NML) which provides for coverage up to $175,000,000. In the event of a loss at any plant insured by NML, the Company may be subject tO a maximum 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 interests, 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, 1977, was $51,907,000. An independent fuel company has been authorized to acquire and own up tO a maximum of
$150,000,000 of such fuel at any one time and has agreed to sell the energy therefrom to the Company, as the operator of the Station.
The minimum rental commitments under all noncancelable agreements aggregated $162,008,000 at December 31, 1977.
Annual rental commitments are estimated to be $21,533,000 for 1978; $20,484,000 for 1979; $18,892,000 for 1980; $18,-
712,000 for 1981 and $6,067,000 for 1982. Rentals charged tO operating expenses were $25,470,000 in 1977 and $25,293,000 in 1976.
Certain leases, including the nuclear fuel contract, meet the criteria of a capital lease as defined by Statement No. 13 of the Financial Accounting Standards Board, but are not accounted for as such in the rate making process. If such leases were capitalized, the amounts thereof would not have a material effect on assets, liabilities, or related expenses.
Complaints have been filed before the Pennsylvania Public Utility Commission against the Electric Fuel Adjustment 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 with respect t0 alleged discrimination in its employ-ment or promotion practices. Counsel for the Company is of the opinion that the Company has meritorious defenses to these suits.
- 7. Replacement Cost Information (Unaudited) :
Inflation has resulted in replacement costs of utility plant in service rhar are significantly greater than the recorded original cost. The current replacement cost of the gross utility plant in service ar December 31, 1977, is estimated at $8,800,000,000 which compares to recorded cosr of $3,937,972,000.
The esrimared replacement cost of utility plant, determined by applying indices to recorded cost, does not necessarily reflect the current value of these assets, nor does rhe excess of replace-ment cost over recorded cost represent additional equity for rhe
- 8. Segment Information:
Company's common shareholders. Replacement cost of utility plant is the Company's estimate of rhe current cosr to replace existing plant with similar plant of mosr recent design.
This replacement cost information should not be used ro evaluate rhe effect of inflation upon rhe Company's financial position and results of operations, as reported.
In compliance wirh reporting requirements additional re-placement cost information is disclosed in rhe Company's annual report to the Securities and Exchange Commission on Form 10-K.
Segment informarion for the year ended December 31, 1977 is as follows:
Electric Gas Sream Tora!
(Thousands of Dollars)
Operating revenue..............................................
Operating expenses, excluding depreciation..........................
Depreciation..................................................
Tora! operating expenses.......................................
Operating income..............................................
Construction expendimres Assets, December 31, 1977:
Net uriliry plant ( * )..........................................
Materials and supplies.........................................
Nonallocable assers...........................................
Total assets................................................
( *) Includes Construction W ork in Progress and allocated Common Utiliry Plant.
- 9. Quarterly Data (Unaudited ) :
Earnings Applicable Quarter Operating Net to Common Ended Revenue Income Stock (Thousands of Dollars) 1977 1976 1977 1976 1977 1976
$1,177,689
$174,818
$42,255 881,168 145,71 3 37,957 97,916 8,243 1,602 979,084 153,956 39,559
$ 198,605
$ 20,862
$ 2,696
$ 382,992 8,941
$ 1,201
$3,883,906 90,056
$3,973,962
$248,054 11,990
$260,044 Average Shares Omstanding (Thousands)
$33,887 189
$34,076 1977 1976
$1,394,762 1,064,838 107,761 1,172,599
$ 222,163
$ 393,134
$4,165,847 102,235
$4,268,082 279,915
$4,547,997 Earnings Per Average Share (Dollars )
1977 1976 Mar 31
$365,822
$324,740
$49,559
$42,986
$39,379
$33,983 69,336 64,22 1
$.57
$.53 Jun 30 318,772 282,408 39,683 32,715 29,503 23,057 69,676 64,498
.42
.36 Sep 30 380,356 316,011 50,168 44,875 39,990 34,693 70,112 64,818
.57
.54 Dec 31 329,812 300,982 34,029 44,042 23,862 33,863 74,206 68,859
.32
.48 27
SCHEDULE OF CAPITAL STOCK-DECEMBER 31, 1977 Philadelphia Electric Company Number of Shares Amount Preferred Stock ( $100 par) cumulative:
Current Redemption (Thousands Series Price (A)
Authorized Outstanding of Dollars) 9.52 % (Sold 1976 at $100 per share)
$109.52 500,000 500,000(B) $
50,000 9.50%.........................
109.50 750,000 750,000 75,000 8.75%........................
110.00 650,000 650,000 65,000 7.85%.........................
108.00 500,000 500,000 50,000 7.80 %.........................
105.50 750,000 750,000 75,000 7.75%.........................
105.50 200,000 200,000 20,000 7.325%........................
7%...........................
106.15 750,000 750,000(C) 75,000 107.00 400,000 367,960(D) 36,796 4.68%.........................
104.00 150,000 150,000 15,000 4.4 %..........................
112.50 274,720 274,720 27,472 4.3%..........................
102.00 150,000 150,000 15,000 3.8 %..........................
106.00 300,000 300,000 30,000 Unclassified......................
4,625,280 Total Preferred Srock..........
10,000,000 5,342,680
$ 534,268 Common Stock-no par (E) 100,000,000 74,624,517
$1,106,684 (A) Redeemable at the option of the Company, at the indicated dollar amounts per share, plus accrued dividends.
(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.
(D) 8,000 shares are being redeemed annually at $100 per share. The Company purchased 8,040 shares in 1977 and 7,915 shares in 1976 for this purpose and at December 31, 1977 had applied 40 shares to future redemption requirements. The excess of the aggregate par value of such shares over the aggregate purchase price is reflected in Other Paid-In Capital ($ 106,000 in 1977 and $215,000 in 1976 ).
(E) At December 31, 1977 there were 2,040,560 shares reserved for issuance under stock purchase plans. Common Srock issued in 1977 and 1976 was as follows :
Dividend Employee Tax Reduction Act Public Reinvestment Purchase Stock Ownership Sales Plan Plan Plan Total 19 77 -Shares 4,000,000 882,793 179,618 255,541 5,317,952 Proceeds
$78,340,000
$17,159,000
$3,483,000
$4,935,000
$103,917,000 19 7 6-Shares 4,000,000 899,660 165,878 44,689 5,110,227 Proceeds
$67,680,000
$ 14,98 1,000
$2,760,000
$ 707,000
$ 86,128,000 SCHEDULE OF LONG-TERM DEBT-DECEMBER 31, 1977 Philadelphia Electric Company First and Refunding Mortgage Bonds (A) :
Amount Amount Amount (Thousands (Thousands (Thousands Series Due of Dollars)
Series Due of Dollars)
Series Due of Dollars) 2Ys%
1978
$ 25,000 5%
1989
$ 50,000 11 %
2000......... $
80,000 11 %
1980 125,000 6V2 %
1993 60,000 11 Ys %
2000.........
65,000 2%%
1981 30,000 4V2 %
1994 50,000 7%%
2001.........
80,000 3Y<i%
1982 35,000 9 %
1995 75,200 9Ys %
2002 (Sold 1976) 100,000 3Ys%
1983 20,000 8Y<i%
1996 80,000 8Ys %
2003 (Sold 1977) 75,000 3Ys%
1985 50,000 6Ys%
1997 75,000 8Yi %
2004.........
125,000 4%%
1986 50,000 7Y2 %
1998 100,000 9Ys %
2006 (Sold 1976) 100,000 4Ys%
1987 40,000 7Y2 %
1999 100,000 6%
2007 (Sold 1977) 23,500 3%%
1988 40,000 7% %
2000 74,625 8Ys%
2007(Sold1977) 75,000 Total First and Refunding Mortgage Bonds........................................................
1,803,325 Note Payable-Bank................ 8.835 %
1979-84...........................................
125,000 Pollution Control Note............. 5.5 %
1978-97...........................................
36,000 Debentures...................... 12 % %
1981 100,000 Debentures...................... 4.85 %
1986 26,294 Unamortized Debt Discount and Premium, Net.......................................................
(6,218)
Total Philadelphia Electric Company.............................................................
2,084,401 Philadelphia Electric Power Company-a subsidiary :
Sinking Fund Debentures........... 4 Yi%
1995 22,628 Unamortized Debt Discount.......... :...........................................................
(103)
Total Long-Term Debt (Annual interest requirements $165,564,000) (B)................................ 2,106,926 Current Maturities included in Current Liabilities....................................................
(28,653)
Long-Term Debt included in Capitalization....................................................... $ 2,078,273 (A) Utility plant is subject to the lien of the Company's mortgage.
1978-$28,653,ooo; 1979-$55,694.ooo; 1980-$130,800.000; (B) Long-term debt maturities in the period 1978-1982 are as follows:
1981-$140,300,000; and 1982-$70,300,000.
28
- J
REPORT OF AUDITORS To Shareholders and the Board of D irectors Philadelphia Electric Company Philadelphia, Pennsylvania We have examined the consolidated balance sheets of Philadelphia Electric Company and Subsidiary Companies as of December 31, 197 7 and 197 6, and the related consolidated statements of income, retained earnings, and changes in financial position for the years then ended. Our examinations were made in accordance 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.
In our opinion, the consolidated financial statements referred to above present fairly the financial position of Philadelphia Electric Company and Subsidiary Companies as of December 31, 1977 and 1976, 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 February 8, 1978 FINANCIAL STATISTICS Summary of Earnings (Millions of dollars)
Operating Revenue (for details see pages 1977 1976 1975 COOPERS & LYBRAND 1974 1973 1972 1967 31 and 32)..............................
$1,394.8 $1,224.1
$1,134.8 1,011.7
$766.6
$685.0
$376.5 Operating Expenses Fuel and Energy Interchange.................
Labor....................................
Other Materials, Supplies and Services..........
Total Operation and Maintenance...........
Depreciation..............................
Taxes....................................
Total Operating Expenses..................
Operating Income............................
Ocher Income Allowance for Ocher Funds Used During Construction*.....................
Income Tax Credits, net.....................
Other, net................................
Total Ocher Income......................
Income Before Interest Charges...............
Interest Charges Interest on Long-Term Debt.................
lncerest on Short-Term Debt.................
Allowance for Borrowed Funds Used During Construction*.....................
Nee Interest Charges......................
Nee Income.................................
Preferred Srock Dividends.....................
Earnings Applicable ro Common Stock...........
Dividends on Common Srock...................
Earnings Retained...........................
Earnings per Average Share (dollars )............
Dividends Paid per Share (dollars )..............
Common Srock Equity (Per Share)..............
Shares of Common Srock-Average (Millions ).....
575.3 179.2 121.4 875.9 107.8 188.9 1,172.6 222.2 36.2 25.3 3.5 65.0 287.2 161.0 2.6
( 49.8) 113.8 173.4 40.7 132.7 124.9 7.8
=
$1.87 1.76
$19.26 70.8
- 1976 and prior years reclassified for comparative purposes.
480.7 161.9 88.9 731.5 98.0 183.2 1,012.7 211.4 30.1 24.2 2.6 56.9 268.3 147.6 3.6
( 47.5) 103.7 164.6 39.0 125.6 107.7 17.9
$1.91
$1.64
$19.13 65.6 457.8 152.2 72.6 682.6 91.2 163.9 937.7 197.1 23.3 22.3 2.0 47.6 244.7 136.5 7.9
( 43.6) 100.8 143.9 36.0 107.9 95.4 12.5
$1.86
$1.64
$19.05 58.1 See page 19 for Discussion and Analysis of the Consolidated Statements of Income.
439.2 134.0 73.4 646.6 77.8 134.3 858.7 153.0 25.3 25.5 0.3 51.1 204.1 106.3 14.2 260.3 125.6 65.5 451.4 64.3 102.5 618.2 148.4 28.1 3.4 2.7 34.2 182.6 84.8 5.5 212.0 120.4 55.0 387.4 60.5 93.6 541.5 143.5 21.4 (0.4) 0.2 21.2 164.7 73.4 4.4
( 45.5)
( 30.6) _G_!J )
75.0 59.7 56.7 129.1 33.7 95.4 86.4 9.0
$1.81
$1.64
$20.21 52.7 122.9 27.6 95.3 78.4
$ 16.9
$1.99
$1.64
$20.22 47.8 108.0 21.6 86.4 67.7
$ 18.7
$2.08
$1.64
$20.00 41.5 86.7 81.4 27.6 195.7 41.8 51.5 289.0 87.5 2.2 (0.3) 0.6 2.5 90.0 26.8 2.6
( 2.6) 26.8 63.2 3.7 59.5 44.8
$ 14.7
$2.13
$1.60
$17.66 27.9 29
FINANCIAL STATISTICS Summary of Financial Condition-December 31 (Millions of dollars) 1977 1976 1975 Assets Utility Plant, at Original Cost.........
$5,121.1
$4,747.2
$4,445.6 Less: Accumulated Depreciation........
955.3 860.3 775.8 Total Utility Plant..............
4,165.8 3,886.9 3.669.8 Non utility Property and Other Investments 27.4 13.2 12.3 Current Assets Cash...........................
30.8 23.8 17.4 Pollution Control Funds............
Accounts Receivable..............
184.0 168.0 139.8 Deferred Fuel Expense............
23.0 19.9 17.9 Materials and Supplies.............
102.3 88.3 88.0 Other..........................
3.8 2.6 2.5 Deferred Debits....................
10.9 14.7 13.8 T oral Assets...................
$4,548.0
$4,2 17.4
$3,961.5 Liabilities Preferred Srock.....................
$ 534.2
$ 535.1
$ 485.9 Common Srock.....................
l,l06.7 1,002.8 916.6 Other Paid-In Capital................
1.8 1.7 1.5 Retained Earnings..................
328.7 321.2 304.7 Total Srockholders' Equity........
1,971.4 1,860.8 1,708.7 Long-Term Debt...................
2,078.3 1,936.4 1,776.9 Total Capitalization.............
4,049.7 3,797.2 3,485.6 Current Liabilities Bank Loans......................
2.2 0.8 50.2 Commercial Paper................
12.7 6.4 57.8 Current Maturities of Long-Term Debt 28.7 36.9 60.9 Accounts Payable and Dividends Declared......................
92.4 83.9 80.1 Taxes Accrued...................
24.S 20.2 34.7 Taxes Deferred (fuel expense)......
12.2 10.5 9.5 Other..........................
52.7 47.8 41.3 Deferred Credits....................
272.9 213.7 141.4 Contributions in Aid of Construction*..
Total Liabilities................
$4,548.0
$4,217.4
$3,961.5
- 'Transferred ro Utility Accounts in 1973.
Common Stock Prices, Earnings and Dividends by Quarters (Per Share) 1977 Fourth Third Second Quarter Quarter Quarter High Price...............
$20~
$2 1 ~
$20%
Low Price...............
$19Ys
$18Ys
$18Yi Earnings................
32¢ 57¢ 42¢ Dividends..............
45¢ 45¢ 45¢ 30 First Quarter
$18Ys
$17Ys 57¢ 41¢ 1974 1973 1972 1967
$4,123.9
$3,672.1
$3,222.6
$1,791.5 717.8 665.4 624.2 459.8 3,406.1 3,006.7 2,598.4 1,33 1.7 12.7 11.5 9.5 6.3 16.0 16.2 17.8 15.2 12.2 38.0 111.9 75.6 72.1 47.0 21.7 72.5 40.2 38.8 23.8 21.1 3.8 2.8 3.0 6.0 9.9 7.5 4.1
$3,668.0
$3,176.1 $2.784.9
$1,431.1
$ 486.4
$ 412.0
$ 337.5 87.5 782.9 771.8 622.5 298.3 1.3 1.3 1.2 1.2 293.7 286.2 271.0 213.l 1,564.3 1,471.3 1,232.2 600.1 l,597.7 1,3 19.1 1,287.2 691.9 3,162.0 2,790.4 2,519.4 1,292.0 115.1 83.5 41.1 47.7 62.8 64.2 62.7 91.9 67.3 13.5 9.6 78.8 67.4 49.5 23.9 16.S 18.l 18.4 6.8 11.5 34.3 27.4 23.7 9.4 95.1 57.8 44.0 31.1 12.6 10.9
$3,668.0
$3,176.1 $2,784.9
$1,431.1 1976 Fourth Third Second First Quarter Quarter Quarter Quarter
$18
$17%
$16Ys
$17Ys
$15 Ys
$1 5Ys
$15
$14Ys 48¢ 54¢ 36¢ 53¢ 41¢ 41¢ 41¢ 41¢
OPERATING STATISTICS 1977 1976 1975 1974 1973 1972 1967 ELECTRIC OPERATIONS Output (millions of kilowatt-hours)
Steam....................................
11,468 13,385 12,814 16,649 18,536 20,181 17,087 Nuclear..................................
4,596 4,937 4,387 1,745 176 97 144 Hydraulic.................................
1,997 2,065 2,275 1,938 2,132 2,242 1,895 Pumped Storage Output.....................
1,223 1,062 1,275 1,075 1,318 1,430 400 Pumped Storage Input.......................
( 1,761)
(1,506)
( 1,785)
(1,515)
( 1,876)
(2,018)
(555)
Purchase and Net Interchange.................
9,759 7,666 7,363 5,300 7,094 3,472 1,090 Internal Combustion........................
847 792 914 1,200 688 946 53 Other....................................
716 36 1,016 27 1
56 Total Electric Output......................
28,845 28,43 7 27,243 27,408 28,095 26,351 20,170 Sales (millions of kilowatt-hours)
Residential................................
8,110 7,585 7,424 7,159 7,493 6,856 4,763 Small Commercial and Industrial..............
2,825 2,755 2,624 2,558 2,663 2,503 2,125 Large Commercial and Industrial..............
14,912 14,662 14,060 14,622 14,953 14,011 10,724 All Other.................................
1,350 1,271 1,227 1,217 1,192 1,136 1,091 Total Electric Sales.......................
27,197 26,273 25,335 25,556 26,301 24,506 18,703 Number of Customers, December 31 Residential................................ 1,148,171 1,137,544 1,120,981 1,113,036 1,103,163 1,090,921 1,021,216 Small Commercial and Industrial..............
115,883 115,422 114,896 117,237 118,009 118,522 138,898 Large Commercial and Industrial..............
5,772 5,747 5,719 5,724 5,663 5,645 4,993 All Other.................................
2,381 2,345 2,305 2,248 2,207 2,163 2,021 Total Electric Customers................... 1,272,207 1,261,058 1,243,901 1,238,245 1,229,042 1,217,251 1,167,128 Operating Revenue (millions of dollars)
Residential................................ $ 427.6
$ 373.2
$ 364.7
$ 314.4
$ 254.4
$ 222.7
$ 110.7 Small Commercial and Industrial..............
168.4 149.3 138.9 122.0 97.5 88.1 54.0 Large Commercial and Industrial..............
513.4 442.9 418.3 388.1 257.5 228.6 115.5 All Other.................................
68.3 59.4 56.5 49.0 37.4 35.0 20.7 Total Eleetric Revenue.................... $1,177.7
$1,024.8
$ 978.4
$ 873.5
$ 646.8 $ 574.4
$ 300.9 Operating Income Before Income Taxes (millions of dollars)..........................
$ 284.1
$ 273.8
$ 261.5
$ 196.5
$ 170.1
$ 166.1
$ 105.2 Average Use per Residential Customer (kilowatt-hours)...................................
Electric Peak Load, Net Hourly Demand (thous. kw)
Net Electric Generating Capacity-Summer Rating
( thous. kw)................................
Cost of Fuel per Million Btu....................
Btu per Net Kilowatt-hour Generated............
7,097 5,888 8,198
$1.40 10,882 6,710 6,645 5,346 5,530 7,742 7,186
$1.24
$1.23 10,529 10,523 6,460 6,829 6,317 4,699 5,431 5,760 5,313 3,727 7,808 6,650 6,348 4,678
$1.42
$0.71
$0.62
$0.32 10,676 10,523 10,666 10,689 31
OPERATING STATISTICS 1977 1976 1975 1974 GAS OPERATIONS Sales (millions of cubic feet)
Residential...............................
2,394 2,342 2,334 2,281 House Heating............................
26,335 24,540 20,817 23,793 Commercial and Industrial...................
31,017 33,390 30,012 35,913 All Other.................................
86 89 74 79 Total Gas Sales..........................
59,832 60,361 53,237 62,066 Number of Customers, December 31 Residential...............................
88,775 89,459 90,117 90,870 House Heating............................
162,978 162,993 162,914 163,093 Commercial and Industrial...................
19,422 19,669 19,874 20,276 Total Gas Customers.....................
271,175 272,121 272,905 274,239 Operating Revenue (millions of dollars)
Residential...............................
9.6 $
8.7 8.1 $
7.1 House Heating............................
84.l 73.3 54.8 55.4 Commercial and Industrial...................
80.4 76.1 54.5 45.7 All Other.................................
0.2 0.2 0.1 0.1 Subtotal................................
174.3 158.3 117.5 108.3 Other Revenue............................
0.5 0.6 0.5 0.6 Total Gas Revenue.......................
$ 174.8
$ 158.9 $ 118.0 $ 108.9 Operating Income Before Income Taxes (millions of dollars)..........................
$ 30.9 $ 34.4 $
19.6 $ 26.9 STEAM OPERATIONS Sales (millions of pounds)...................
7,165 7,735 7,117 7,600 Number of Customers, December 31...........
670 679 689 710 Total Steam Revenue (millions of dollars)......
$ 42.3
$ 40.5
$ 38.5
$ 29.3 Operating Income Before Income Taxes (millions of dollars).......................
4.5 3.8 2.3
$ ( 3.2)
FISCAL AGENTS FOR STOCKS AND BONDS PHILADELPHIA ELECTRIC COMPANY-Preferred and Common Stocks Registrars Transfer Agents GIRARD BANK PHILADELPHIA ELECTRIC COMPANY One Girard Plaza, Philadelphia, Pa. 19101 2301 Market Street, Philadelphia, Pa. 19101 CHEMICAL BANK MORGAN GUARANTY TRUST CO. of N.Y.
20 Pine Street, New York, N.Y. 10015 30 West Broadway, New York, N.Y. 10015 PHILADELPHIA ELECTRIC COMPANY-First and Refunding Mortgage Bonds Trustee New York Agent THE FIDELITY BANK MORGAN GUARANTY TRUST CO. of N.Y.
Broad & Walnut Streets, Philadelphia, Pa. 19109 2 3 Wall Street, New York, N.Y. 10015 PHILADELPHIA ELECTRIC COMPANY-Sinking Fund Debentures PHILADELPHIA ELECTRIC POWER COMP ANY (A Subsidiary) - Debentures Trustee THE PHILADELPHIA NATIONAL BANK Broad & Chestnut Streets, Philadelphia, Pa. 19101 New York Agent IRVING TRUST COMP ANY One Wall Street, New York, N.Y. 10015 1973 1972 1967 2,317 2,418 2,309 24,125 26,026 22,197 37,868 41,490 33,054 90 104 69 64,400 70,038 57,629 91,682 94,035 98,991 163,096 159,780 136,371 20,518 20,312 20,566 275,296 274,127 255,928 6.7 6.2 5.6 51.3 48.4 37.6 42.0 38.2 23.4 0.1 0.1 0.1 100.1 92.9 66.7 0.4 0.4 0.3
$ 100.5
$ 93.3
$ 67.0
$ 22.8
$ 16.9 $ 19.0 7,762 8,328 7,252 723 737 1,157 19.4
$ 17.3 $
8.6 0.7 1.2 0.8 All Philadelphia Electric Company securities, except the Sinking Fund Debentures and those series of First a;id Refunding Mortgage Bonds and Preferred Stock which were sold privately to institutional investors, are listed on the Philadelphia Stock Exchange and the New York Stock Exchange. Philadelphia Electric Power Company Debentures are listed on the Philadelphia Stock Exchange.
32
PHILADELPHIA ELECTRIC PROMOTES SOUTHEASTERN PENNSYLVANIA The center spread in this report is illus-trative of the efforts your Company is making toward the revitalization of the area we serve. The pull-out is being made avaitabte in mbstantial quantities to area development agencies and area banks and businesses which cire mailing it to their own shareholders.
Ever since PE's first predecessor com-panies were organized, the health of the Philadelphia regional economy has been of concern to Company manage-ment, employees, and shareholders alike. Our corporate philosophy-and I'm certain our employees and share-holders agree-has always been that a healthy utility company, providing high quaiity service to customers and adequate returns to investors, is much more likely to exist in a vigorous, ex-panding region than in a sick or de-clining region.
A review of PECo annual reports in the 1960's and early 1970's reveals a very active area development effort on the part of your Company. National advertising campaigns described the advantages of Philadelphia as a place in which to live and do business. Com-pany employees, who are experts in area development matters, assisted hundreds of businesses each year in their efforts to move into, or expand within, our service territory. This assis-tance included a multitude of activities from finding building sites, and helping to cut regional red tape, to preparing to provide reliable electric, gas, and steam services.
In the last few years, our regional development efforts have been signifi-cantly curtailed in order that we might act as responsible corporate citizens in an era of energy restrictions, and in re-sponse to demands from regulatory agencies to refrain from actively "sell-ing" our services.
However, regional trends which be-gan 10 or 15 years earlier, have become increasingly dominant. The Philadel-phia city economy has been moving from a period of virtual stagnation to one of slow decline when measured in terms of population and jobs. Similarly, the economic activity in the surround-ing four-county region in Southeastern Pennsylvania has been moving from reasonably healthy economic growth toward stagnation.
These trends toward outmigration and economic stagnation are not unique to Philadelphia but are charac-teristic of many of the large urban areas of the Middle Atlantic states, the Northeast and the Midwest. But not all parts of these regions have suffered equally. Some, such as New York City, have experienced more severe prob-lems over larger periods than Phila-delphia. Others, such as Boston, have managed to regain a measure of vigor, while yet others such as the cities in Wisconsin and Minnesota have man-aged to sustain reasonably healthy growth rates throughout the post-W orld War II period.
These differences, along with our natural optimism about Philadelphia and the qualities of its citizens, en-courage us to believe that Philadelphia and its suburbs can rejuvenate them-selves and become, once again, a more vigorous, more vital, more rewarding place in which to live, work, and pros-per.
We believe that several distinct steps are necessary to achieve the major turnaround which is called for. First is a frank and uncompromising evaluation of the advantages and disadvantages of the region as a place in which to do business. We know it is a good place in which to live, and so do the business-men who go elsewhere when they move or expand their business. What we must do is make the region a good place in which to do business.
The second step in the turnaround process is to forge a strong tri-partite coalition of government, business, and labor committed fully to doing what-ever is necessary to improve the re-gion's business climate. We can and must do much better. All three parts of the coalition will have to be willing to change, adapt, and compromise in order to improve this climate. State govern-ment will have to help. National gov-ernment assistance will be welcomed.
But there is much that we, as citizens of the Philadelphia area can do with-out outside help.
Achieving the degree of change needed will require the assistance and forebearance of each citizen as well as of our political, labor, and business leaders. They will have to be convinced that the reward is worth the effort.
James L. Everett, President Therefore, education is a crucial part of the turnaround process.
Of course, initial steps have already been taken or have been underway for years, and various area development agencies in the five-county area have done splendid work.
However, Philadelphia Electric Company is convinced the best efforts of every private and corporate citizen will be needed. We are convinced we can and must play our part. Company man-agement and employees are intimately familiar with all pares of the region, both as a result of their corporate re-sponsibilities, and through the indi-vidual responsibilities which many have assumed over the years in civic and community activities.
We have a statistical data base de-scriptive of the region, that, in many ways, is second to none in the quality and diversity of its data. Our area de-velopment activity, though somewhat less active in the last few years, has retained its basic expertise and is in a position to expand its efforts quickly and efficiently. The center spread is one example of our resurgent posture in this regard.
We are convinced a job must be done. We are convinced, as a major corporate citizen, we can and must help. We are convinced that you, as shareholders, will agree. We are going to make a major effort in this direction in 1978.
d/~
President
PHILADELPHIA ELECTRIC COMPANY 2301 MARKET STREET P.O. BOX 8699 PHILADEI;.PBIA, PA 19101 Address Correction Requested BULK RATE U.S. POSTAGE PAID PECO