ML19031A134

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Submit 1977 Annual Report by Delmarva Power & Light Company
ML19031A134
Person / Time
Site: Salem  PSEG icon.png
Issue date: 03/13/1978
From:
Delmarva Power & Light Co
To:
Office of Nuclear Reactor Regulation
References
Download: ML19031A134 (36)
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Text

- 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 REFERRED TO FILE PERSONNEL.

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Crmtrnl # ?808 f) OOl/J D i~P. ~ l r.:?> ( '1 "t of Document:

REGULATORY DOCKET FIL~

RECORDS FACILITY BRANCH

First Mortgage And Collateral Trust Bonds - '

Trustee, Chemical Bank, New York, N .Y.

Pollution Control Revenue Bonds - Trustees, '

Farmers Bank of the State of Delaware, Wil- 1 mington, DE, and Bank of Delaware, Wil-mington, DE. ,

Preferred Stock - Transfer Agent, Wilming- 1 ton Trust Company, Wilmington, DE, Registrar - Delaware Trust Company, Wil-mington, DE.

Common Stock-Stock symbol, DEW, Listed on the New York and Philadelphia Stock Ex-changes. Transfer Agents - Wilmington Trust Company, Wilmington, DE, and Irving Trust Company, New York, N.Y.

Registrars - Delaware Trust Company, Wil-Delmarva mington, DE, and Irving Trust Company, New York, N.Y.

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Regulatory Commissions Federal Energy Regulatory Commission 825 North Capital Street, N.E.

Washington, D.C. 20426 Delaware Public Service Commission 1560 S. DuPont Highway Dover, DE 19901 Maryland Public Service Commission 301 W. Preston Street Baltimore, MD 21201 Virginia State Corporation Commission P.O. Box 1197 Richmond, VA 23209 To supplement information in this Annual Report,1 a statistical review,1967-1977, is available to shareholders upon request after April 1, from Stockholders Relations, Delmarva Power, 800 Kin~

Street, P. 0. Box 231, Wilmington, DE 19899

Percent Increase Financial Highlights 1977 1976 (Decrease)

Revenues $337.8 million $286.4 million 18.0 Net Income $ 39.3 million $ 36.4

  • million 8.0 Earnings per share $ 1.65 $ 1.55* 6.5 Dividends Declared $ 1.22 $ 1.20 1.7 Common Stock Outstanding (Average Shares) 19,403,032 18,820,521 3.1 Common Stock Book Value $ 15.27 $ 15.07* 1.3 Construction Expenditures $130.4 million $ 66.5 million 96.1 Electric Sales 6.91 billion kwh 6.66 billion kwh 3.7 Gas Sales 12.1 million mcf 13.8 million mcf (12.2)

Electric Customers 264,236 260,476 1.4 Gas Customers 73,332 73,352

  • Restated Contents Pages Stockholders Letter 2 Revenues, Operating Expenses 4 Net Income and Earnings 4 Annual Meeting Financing and Construction 4 Third Tuesday in April at System Rates 5 12:30 p .m., in the Electric Sales Increase 6 Company's General Offices Marketing Activities 7 800 King Street Gas Exploration Venture 7 Wilmington, Delaware Natural Gas Supply 7 River Crossing Completed 8 Fuel Supply 8 Environmental Protection 8 FEA Conversion Order 9 Generation Additions 9 Research and Development 9 Communications, Management Changes 10 Employees 10 Management Review of Operations 11 Financial Section 14 Consolidated Statistics 26 Board of Directors 28 Officers, Service Area 29

million of annual rate relief. At year's end, $36.2 2 million of additional annual revenue had been ap-proved by regulatory commissions. Additional rate relief will be necessary in 1978.

Thomas C. Roe The Company also has begun to realize the bene-fits of previous actions to improve the cash com-ponent of our earnings. Specifically, the adoption of normalized accounting in 1975 for rate-making pur-poses has resulted in increased cash flow and a corresponding reduction in financing require-ments. We will pursue further improvements in the quality of earnings with our applications for rate increases during 1978.

During the year we revised plans for providing additional generating capacity over the next two decades. The plans reflect a decrease from prior Robert D. We imer projections in the rate of growth of electric demand To Our Stockholders: in our service area . To meet future power require-ments, we propose to build a 400,000 kilowatt coal-Company earnings of $1.65 per share for 1977 burning power station in our Maryland service area represent a 6.5% increase over restated earnings for for operation in 1987. If necessary, additiol).al peak-1976. The improvement is due primarily to rate in- ing generation will be added prior to that date . We creases in effect during the year. will receive additional generation from the second The Board of Directors in December approved an nuclear unit at the Salem station in 1979 and from a increase in the dividend on common stock from $.30 major coal-fired addition to our Indian River Power to $.32 per share on a quarterly basis, which in- Station in 1980. These additions will help to reduce creases the projected annual dividend to $1.28. This substantially the use of oil for generation and pro-action was taken in order for shareholders to receive vide our customers with a more economical mixture a more adequate return on their invested capital and of fuels .

to improve the future marketability of our common Our generation planning is flexible and we are not stock. sealed into any long range commitments at this Improving the Company's financial integrity was time. We believe that nuclear energy is still a viable a primary objective during 1977. In this respect, the and economical energy source and in the event that Company's ability to file rate requests in all jurisdic- the present uncertainties surrounding nuclear tions in a timely manner was strengthened. Our energy are resolved, we will be able to take advan-goal is to obtain an adequate rate of return on your tage of this generation alternative at a later date.

investment and offset the effects of regulatory lag Our industry looks to the day when the Federal on earnings. In 1977, the Company sought $41.1 Government will affirmatively resolve the waste

disposal issue and shorten the overall licensing pro- of operation and management effectiveness cess . throughout our service area, the Board of Directors 3 The Company's natural gas supply continues to has approved, in principal, plans to merge the be curtailed by our pipeline supplier. To offset the Maryland and Virginia subsidiaries into the parent curtailment, it is necessary to purchase and store Company. Stockholder ratification of this action substantial volumes of supplemental gas. Such gas will be required after the appropriate regulatory is considerably more costly to our customers. Our approvals have been obtained.

supplier expects the gas supply to improve as new In 1978, we will continue to seek an adequate offshore wells are placed in production. return on the capital you have invested in the Com-During the year, the 500,000 volt transmission pany. It is important for the Company to at least line across the Delaware River was placed in service. maintain its single A bond rating in order to obtain This line was proposed in 1969 at a cost of about $6 external financing in 1978 at the most economical million. Opposition from environmental groups, in- cost to the Company, its stockholders and cus-flation and design changes increased the final cost tomers. In this regard, stockholder support for rate to $22 mllion, which is ultimately reflected in the relief will be greatly appreciated. Regulatory com-cost of service to customers. The facility will carry missions seldom hear from stockholders and their our share of generation from the Salem Nuclear interests in seeing that their Company maintains Station as well as strengthen the reliability of inter- adequate earnings. In the event that you wish to connected companies in the lower Delaware Valley. communicate with the regulatory commissions that In 1977, the Company began operation of a new have jurisdiction over our operations, a listing is computerized customer information system. The included in the inside front cover.

planning of the new system has been under way for Thank you very much for your support and con-about two years. It will coordinate many aspects of fidence in the Company.

providing basic customer services and improve our response to customer requests. Sincerely, The Company's accomplishments this year reflect the hard work and skills of the men and women working throughout our service area. We are often reminded of their dedication by appreciative cus- Thomas C. Roe tomers during storms and other emergencies when Chairman of the Board our employees act to quickly restore service.

The Company welcomes opportunities to explain business decisions and its operations to customers

PAJ~

Robert D. Weimer and various public audiences. Company represen- President and Chief tatives and members of management participated Executive Officer during the year in numerous communication activ-ities to improve the understanding of our business.

In keeping with our desire to improve efficiencies February 14, 1978

1977 Revenue Dollar Source Operating Expenses Total operating expenses were $275.8 million in 4 Electric 1977, an increase of $43.8 million, or 18.9%, over 1976. The increase is due primarily to increased fuel costs, higher costs for purchased gas and expenses Refinery Service for overhaul and repair of electric generation facil-ities.

Other 2¢.

Disposition Net Income and Earnings Net income was $39.3 million in 1977 compared to

$36.4 million in 1976.

Earnings on common stock for 1977 increased Fuel 38¢ $2.9 million, or 9.9%, over 1976. Per share earnings increased to $1.65 from $1.55 in 1976. During the Preferred year, the average number of common shares in-Dividends creased 3.1 % . At year's end, there were 62,667

& Interest shareholders of common stock.

11 ¢ 12¢ The Company has determined that 100% of 1977 Materials, common stock dividends are taxable for federal in-Supplies & Other 7¢ come tax purposes.

Expenses 10¢ Common Dividends 6¢ Financing and Construction Revenues Construction expenditures for 1977, excluding al-Total operating revenues were $337.8 million in lowance for funds used during construction, were 1977, an increase of $51.4 million, or 18.0%, over approximately $130.4 million, consisting of $78.1 1976. million for electric production facilities, $24.3 mil-Electric operating revenues rose 20.3% over 1976 lion for electric transmission facilities, $17.9 million due to increases in base rates, fuel clause revenues for electric distribution facilities, $1.1 million for gas and kilowatt-hour sales. The increase in gas rev- distribution facilities and $9.0 million for general enues of 12.4% was attributable to higher base rates facilities.

and production cost adjustment revenues. The 1977 construction program was financed by Following are increases and decreases in rev- $33.3 million of internally generated funds, $30. 9 enues over or under 1976 by customer category: million from sale of 2.3 million shares of common Electric Gas stock, $32.1 million from unsecured short-term debt Residential 21.5% 16.0 % and $34.1 million resulting from other sources, Commercial 24.2% 17.7 % primarily changes in working capital.

Industrial 19.2% 16.1 % During 1977 the Company deposited a total of Resale 12.0% $1,950,000 with the Chemical Bank of New York, Interruptible (87.1)% the Trustee for the Company's Mortgage and Deed

of Trust. The money was used to redeem 3% of the Clause that would stabilize customer costs . The 10% and 11 % Series First Mortgage and Collateral proposed clause would be based on a calendar year 5 Trust Bonds at a price of 100.47% and 101 % of par estimate of fuel costs and system output in order to value, respectively, under the sinking fund re- determine the average monthly fuel adjustment for demption provisions for such bonds. the year.

The Company estimates that construction re- No action was taken during 1977 by the Delaware quirements during 1978 will total $143 million, in- PSC on the Company's proposed new residential cluding electric construction requirements of $140.4 electric rate, filed with the Commission in June million and gas construction requirements of $1.5 1976. The proposed rate would not be a rate increase million. Major construction projects now underway because it is intended to provide approximately the include the addition of a fourth generating unit at same revenues to the Company. The rate would the Indian River power station, an electric oper- reduce the cost of electricity in the winter months ations center in New Castle County, Delaware, and for customers who conserve electricity during the improvements to the Company's electric and gas summer months and would increase costs for those transmission systems. It is estimated that 35% of the who contribute to the summer peak. It is expected funds required for construction during 1978 will be that the Commission will make a decision on the internally generated. The remaining construction proposed rate during 1978.

requirements and an anticipated reduction in out-standing short-term debt are expected to be fi-nanced through the sale of $35 million of common stock, $20 million of preferred stock and $50 million of first mortgage bonds and the use of proceeds from previously issued pollution control obligations currently on deposit with a Trustee. The exact type, amounts and timing of the financing will be deter-mined by prevailing market conditions.

System Rates Delaware Electric Rates In January 1977, the Company filed with the Del-aware PSC for an overall increase in retail electric revenues of approximately 18%, or $26 million. The Construction of new Commission awarded the Company the full amount coal-fired unit at of the requested increase in August. The Company Indian River believes that an appeal of this decision, which was Power Station.

made by an intervenor in the proceedings, has no Electric merit and will be dismissed by the Superior Court of Production Delaware. 59.9%

In November, the Company filed with the Del-aware Commission a proposed Fuel Adjustment Gas Distribution

.9%

1977 Construction Expenditures

Wholesale Rates In July 1977, the Federal Power Commission ap-6 proved settlement agreements for two wholesale electric rate increases pending since 1974 and 1976, respectively.

The two settlements awarded the Company a total annual increase of $5.7 million of the $8.3 mil-lion requested. The excess which the Company had been collecting was refunded.

Gas Rates A 12 % gas revenue increase, originally requested in 1973, was approved in February 1977, after two appeals by the Company of the Delaware Public Service Commission's original decision to increase revenue by only 4.7%.

7,423 7,957 7,512 7,645 7,953 8,285 In May 1977, the Company applied to the Del-Average Annual aware Public Service Commission for an increase in Residential Electric Usage (Kwh) natural gas revenues of about 16%, or $5.1 million.

The Company placed a 15% increase in gas revenue into effect on August 1 subject to refund. In January Maryland Electric Rates 1978, the Commission approved an increase in rev-In November, the Maryland Public Service enues of $4.5 million, or 13.8%. In addition, the Commission granted an increase of $5.7 million, or Commission allowed the Company to collect unre-10.1 %, in the retail electric revenues of the Mary- covered gas costs through the gas production cost land subsidiary. The increase represents 70% of the adjustment.

$8 .1 million revenue increase requested. Litigation The Maryland Commission also ordered that all Four Delaware municipal customers have filed fuel costs billed to customers be accounted for antitrust suits against the Company, claiming they through the Fuel Adjustment Clause. A portion of were charged unreasonably high electric rates. The fuel costs were previously included in base electric Company believes that it has not violated any laws rates. This change has no effect on customers' total and has filed counterclaims against the municipal bills. customers involved. See Note 10 to the Financial Virginia Electric Rates Statements.

In December 1977, the Virginia subsidiary filed an application with the State Corporation Commission of Virginia for an increase of $1. 9 million, or 21.5%, Electric Sales Increase in retail electric revenues. System electric sales were 6.91 billion kilowatt-The Virginia subsidiary also filed a proposed Fuel hours in 1977, or 3.7% higher than in 1976. The Adjustment Clause, similar to the clause filed in increase reflects continued improvement of eco-Delaware, to stabilize customer costs. nomic conditions affecting industrial and commer-

cial firms in our service area and an increase in the The Company participated with the State of Del-per household consumption of electricity by res- aware and the University of Delaware's Institute of 7 idential customers. Total residential sales increased Energy Conversion to offer a computerized energy 7.7%, commercial sales 5.9 % and industrial sales analysis to help Delaware homeowners save energy were 0.8%, over 1976. Total kilowatt-hour sales to dollars.

wholesale customers increased 0.7 % over 1976.

The 1977 peak demand of 1,499,000 kilowatts for Gas Exploration Venture the Delmarva system occurred on July 21, 1977, at 5 Delmarva Energy Company, a wholly-owned p.m. This peak was slightly higher than the pre- subsidiary, is involved in a limited partnership for vious record demand of 1,489,000 kilowatts estab- gas exploration with seven other gas distributors lished in 1973. and a subsidiary of Stone & Webster, Inc. This part-During the year, the number of residential cus- nership has resulted in discoveries which could tomers increased by 2,527, with the electric heating provide additional gas supply to the Company.

classification gaining 1,465 of these customers. The Exploration is continuing and Delmarva Energy commercial classification gained 1,303 new cus- Company presently intends to participate for an tomers during the year. New home construction additional three years.

increased over 1976 with a growing number of homes having electric heat pumps installed. Natural Gas Supply The Company's natural gas supply was curtailed about 41 % for the 1976/77 winter season and a cur-tailment of 40% is expected for the winter of 1977/78.

Marketing Activities On January 17, 1977, an all time maximum send-During the year, the Company's marketing pro- out of 102,870 mcf was recorded, which was 2. 9%

gram was reorganized to improve the planning and greater than the previous peak sendout in 1971.

implementation of load management techniques To partially offset the curtailment from our sup-and activities to help customers use energy as ef- plier, Transcontinental Gas Pipe Line Corporation ficiently as possible.

Response from homebuilders on the Delmarva Peninsula to the Company's Energy Efficiency .J:_

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Award program continues to be favorable. Created l .

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in 1976, the award recognizes important energy ef-ficiency features in new home construction. Com- " Delmarva Energy Company

~" -~ explores for natural gas in the pany representatives inspect the houses prior to  :/

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issuing the awards.

During the summer the Company sponsored an ,y energy efficiency equipment exhibit to increase con- t sumer awareness of effective ways to conserve energy. Equipment on display included electric heat '/

pumps, insulation materials and techniques and high efficiency appliances.

I 1975 1976 1977

$0.92/mcf $1.22/mcf $1. 73/mcf Cost of Purchased Gas

(TRANSCO), the Company has obtained adequate Completed at a cost of $22 million, the project was 8 quantities of supplemental gas, which is available at projected to cost $6 million when planned in 1969.

unregulated prices. This gas will enable the Com- Delays, caused primarily by opposition to the pany to meet the normal requirements of its firm project by certain special interest groups, increased customers during the 1977/78 winter season. the cost.

The extremely cold weather over the entire TRANSCO service area forced the Company and Fuel Supply most other TRANSCO customers to curtail indus- The Company was able to obtain adequate fuel for trial and commercial customers for about three electric generation during the year, but the overall weeks during February 1977. The curtailment fol- cost of fuel increased over 1976. A comparison of lowed a plan previously filed and approved by the fuel costs is included in Management Review of Delaware regulatory commission. Operations, page 12.

Both the Federal Energy Regulatory Commission River Crossing Completed and the state regulatory commissions review the In December, the Company placed in service a Company's fuel procurement practices. Recently, a new 500,000 volt transmission line across the Del- Delaware PSC staff consultant reported ... "I firmly aware River. The line enables the Company to re- believe that Delmarva has made every effort to se-ceive its share of power from the Salem Nuclear cure the needed fuel supplies at the best available Generating Station and serves as an important link price and in so doing the customer has benefitted."

in a high voltage transmission system in the lower A supply of coal has been obtained for the period Delaware Valley. 1980-1984 for the new 400,000 kilowatt unit at the Indian River Power Station. The Company will comply with all existing sulfur emission standards through the use of this coal.

1977 Electric Generation Mix Environmental Protection The Company is completing construction of waste water treatment facilities at all four of its gen-erating stations at a cost of $7.5 million. Old air pollution control equipment was replaced with modern, more efficient equipment at Indian River Oil Units 1and2 at a cost of $7 million. The Company's 60% four generating stations on the Delmarva Peninsula now comply with all air and water quality regula-tions and consent orders.

During 1977, environmental expenditures were

$22.7 million. An additional $38.7 million of similar Construction of expenditures is anticipated between 1978 and 1980.

500,000 volt transmission line During the year, the Getty Refining and Market-across the Delaware River.

ing Company announced plans to construct a flue gas desulfurization ("scrubber") system for use at 9 the Delaware City Power Station, which provides steam and electricity to the adjacent refinery . Getty will finance, own and operate the control equip-ment with no financial participation by the Com-pany. The equipment will enable the power station to use high sulfur fuel and still meet Delaware emis-sion requirements by May 1980.

FEA Conversion Order No decision was made in 1977 regarding conver-sion to coal at the Edge Moor Power Station pur-suant to the Federal Energy Administration's order in 1975.

The Federal Energy Administration has recently Governor Pierre S. du Pont IV, center with glasses , and been incorporated into the Department of Energy. Richard S. Cordrey, far right, President Pro Tem of the The Company is currently awaiting the publication Delaware Senate, tour the Indian River Power Station dur-by the Department of Energy of an Environmental ing statewide " Energy Day" activities .

Impact Statement concerning the conversion of the Edge Moor units.

Research and Development During the year, we continued to support re-Generation Additions search and development efforts aimed at solving the In June, the first unit at the Salem Nuclear Gen- energy problems facing our industry and nation. A erating Station, located in New Jersey, began com- total of $943,000 was authorized during 1977 to sup-mercial operation. The Company's share of gen- port a wide range of electric and gas research proj-eration from the 1.1 million kilowatt unit is 81,000 ects. Our electric research is primarily administered kilowatts. Salem Unit #2 is scheduled for operation by the Electric Power Research Institute through the in 1979. The Company will receive 82,000 kilowatts Edison Electric Institute. Gas research is primarily from the second unit. conducted through the American Gas Association Construction continued during the year on a and the Institute of Gas Technology.

fourth coal-fired generating unit at the Indian River Locally, we provided a total of $75,000 in three Power Station in southern Delaware. The sched- grants to the University of Delaware's Institute of uled completion date was moved from 1979to1980. Energy Conversion for the following work:

During the year, the Company continued to re- * $10,000 grant to analyze solar hot water heat-view load growth projections and generation alter- ing.

natives. Plans for providing additional generating * $50,000 grant to perform an engineering evalu-capacity were announced in 1978 and are explained ation of a full-scale "coolness" storage system using in the shareholder message on page 2. salt hydrate mixtures .

  • $15,000 grant to support the ongoing research are represented by the International Brotherhood of 10 programs at the Institute and for occasional studies Electrical Workers (A.F.L.-C.I.O.). During 1977 a of specific Electric Power Research Institute proj- labor contract was satisfactorily negotiated for the ects. subsidiaries. Wages and salaries of all employees Since 1972, we have contributed $125,000 to- during 1977 totaled $43.8 million.

wards solar research at the University. Company management is committed to an on-going Affirmative Action Program for the employ-Communications ment and promotion of minorities and females.

Our on-going communications program keeps customers informed about Company plans and var-(Left) Employee United Way ious aspects of the energy situation. commitment is exemplified During the year, Company representatives were by Carol Calloway, standing invited to speak about various subjects including and Linda Cross, kneeling, who share a moment energy conservation practices, reasons for in- with one of the children creasing electric rates, and future electric generation at a day camp for the methods. Such meetings help increase under- physically handicapped.

standing of Company operations and concerns and (Below) Janet Samluk, provide a means of evaluating customer attitudes. Customer Service Representative, uses new customer in-Management Changes formation retrieval In December, the Board of Directors elected H. system to answer billing inquiry .

Ray Landon Senior Vice President. Earl D. Krapf was elected Vice President.

Mr. Landon, 42, previously served as Vice Pres-ident, Personnel and Industrial Relations. As a Senior Vice President of the entire Delmarva Sys-tem, he will be responsible for personnel and indus-trial relations, corporate communications and cus-tomer services and administrative services.

Mr. Krapf, 62, was promoted to the position of Vice President from that of Manager, Corporate Planning and Regulatory Practice and will continue the same responsibilities.

Employees The success of the Company's operations de-pends upon the skills, performance and dedication of its employees. Delmarva employees throughout the system work hard to provide customers with dependable, courteous service.

About 1,690 of the Company's 2,427 employees

MANAGEMENT REVIEW OF OPERATIONS 11 Consolidated Summary of Earnings (Thousands of Dollars) 1977 1976* 1975 1974 1973 1972 Operating Revenue . ............. $337,818 $286,388 $276,026 $261,494 $188,359 $158,844 Operating Expenses Operation . . .. .... . . . .. .. .. .. 198,020 167,215 165,165 153,494 99,323 80,517 Maintenance ........... ...... 24,989 21,596 17,769 16,289 13,715 12,960 Depreciation .. . . .. ...... . .. . . 28,046 25,367 24,579 21,656 18,278 16,329 Taxes . .. . . ... . ... . .. . ....... 24,736 17,857 16,689 18,684 15,545 14,609 Total operating expenses .. 275,791 232,035 224,202 210,123 146,861 124,415 Operating Income . .. .. .. ... . . .... 62,027 54,353 51,824 51,371 41,498 34,429 Other Income . .. .. . .. ....... . ... . 8,069 8,519 6,203 6,585 7,947 7,875 Income Before Interest Charges . .. 70,096 62,872 58,027 57,956 49,445 42,304 Interest Charges ................ . 30,768 26,437 26,488 25,223 18,783 14,797 Net Income . .. . .. .. . ..... . . . .. ... 39,328 36,435 31,539 32,733 30,662 27,507 Dividends on Preferred Stock .. .. . 7,250 7,250 7,250 7,250 6,360 6,050 Earnings Applicable to Common Stock .. . ...... . . . .. .. 32,078 29,185 24,289 25,483 24,302 21,457 Dividends on Common Stock ....... ......... 24,127 22,618 21,107 17,995 15,851 13,940 Addition to Retained Earnings . . . . $ 7,951 $ 6,567 $ 3,182 $ 7,488 $ 8,451 $ 7,517 Common Stock Average shares outstanding (thousands) . .... .. . . . . ..... 19,403 18,821 17,580 14,862 13,547 12,128 Earnings per share . . . . . ... . .. $1.65 $1.55 $1.38 $1.72 $1 .79 $1.77 Dividends declared per share $1.22 $1.20 $1.20 $1.20 $1.17 $1.13

  • Restated

12 Management Review of Operations, continued Operating Revenue Total operating revenue for the year ended De- result of higher generation, partially offset by a de-cember 31, 1977 increased $51.4 million, or 18.0%, crease in fuel cost per million BTU . Fuel expense per over 1976. Electric operating revenue increases of million BTU at the Company's generating stations is

$49.3 million, included $21.8 million in rate in- shown in the following table:

creases, $18.7 million in fuel clause revenues and

$6.5 million resulting from increased electric sales.

1977 1976 1975 Kilowatt hour sales increased 3.7% primarily due to increased residential and commercial usage. Gas Oil $2.20 $1.91 $2.12 operating revenue increased $4.0 million, reflecting Coal 1.08 1.07 1.09

$2. 9 million in base rate increases and a $2. 9 million Refinery By-Product 2.15 1.83 2.03 increase in the gas production cost adjustment rev- Nuclear .32 .26 .26 enues. Partially offsetting this increase is a 12.2% Overall Cost $1.67 $1.46 $1.53 decrease in mcf sales. Refinery service revenues decreased $1.8 million for the comparable period.

Total operating revenue for 1976 increased $10.4 Generation was 344,000,000 kwh, or 4.4%, lower million, or 3.8%, over 1975. Electric operating rev- in 1977 and 494,000,000 kwh higher in 1976 when enue increased $2.9 million, reflecting base rate in- compared to the corresponding previous years . The creases and a 4.2% kilowatt hour sales increase ag- decrease in 1977 reflects large quantities of pur-gregating approximately $25.8 million . However, chased power acquired in partial substitution for offsetting these increases was a $19.3 million reduc- operation of the Company's own generating facil-tion of fuel clause revenues as well as the repeal of ities which were under repair.

the 5% Delaware Utility Tax applicable to residen- Gas purchased expenses increased $4.5 million, tial customers. Gas operating revenue increased or 28 %, over 1976, and $3.8 million, or 31.0%, in

$6.6 million, reflecting $5.1 million of higher base 1976 over 1975. These increases are due mainly to rate revenues, primarily attributable to a 7% in- the increase in the commodity cost of natural gas crease in mcf sales, and a $1.8 million increase in gas which has escalated from $0.92 per mcf in 1975 to production cost adjustment revenues. $1.73 per mcf in 1977. These costs are recoverable through the recently amended gas production cost Operating Expenses adjustment clause. See Note 1-Gas Purchased Electric fuel expense for 1977 increased $13.3 mil- Costs.

lion, or 10.7%, over 1976, due mainly to increased Other operation expenses have increased steadily fuel costs per million BTU. Electric fuel expense for since 1973 reflecting escalated labor costs, higher cost 1976 increased $1.8 million, or 1.5%, over 1975 as a of services and increased cost of operating supplies.

13 Maintenance expenses increased $3.4 million, or for other funds used during construction. Other 15.7%, over 1976 resulting from overhaul repair income increased in 1976 over 1975, largely due to work at Edge Moor and Indian River Generating interest income received from the Summit Settle-Stations along with other increased scheduled ment.

maintenance. Increased maintenance performed at Interest Charges the Peach Bottom Nuclear Generating Station and Interest expense, net of allowance for borrowed the Company's transmission and distribution sys- funds used during construction, increased $4.3 mil-tems accounted for most of the increase in 1976 as lion over 1976 primarily due to interest on the Pol-compared with 1975.

lution Control Notes issued in December 1976, Taxes on income increased $3. 7 million over the along with the incurrence of interest on short-term year 1976 and $2.6 million in 1976over1975, largely debt during 1977. Total interest charges for 1976 due to the effect of normalization of tax benefits increased slightly over 1975. Interest on long-term with respect to plant additions subsequent to De- debt increased $2.2 million because of interest pay-cember 31, 1974. Taxes other than income increased ments on $30 million of bonds issued in July 1975.

$3. 2 million over 1976, largely because of an increase This increase was largely offset by a decrease in in operating revenue and the recent enactment of a short-term interest charges as a result of a favorable Pennsylvania gross receipts tax. Taxes other than cash position gained through the Summit settle-income decreased $1.4 million when compared to ment.

1975, primarily due to the repeal of the Public Utility Earnings Per Share Tax to residential customers in July 1975. Earnings applicable to common stock increased

$2.9 million, or 9.9%, over 1976. However, as a Other Income result of an increase in the average number of com-Other income decreased $0.5 million under 1976 mon shares outstanding, earnings per share in-due largely to a decrease in interest income received creased only $.10 per share, or 6.5%. Earnings ap-from short-term investment of the proceeds of the plicable to common stock and earnings per share Summit Nuclear Settlement in 1976. Partially off- increased $4.9 million and $.17 per share, respec-setting this decrease was an increase in allowance tively, when 1976 is compared to 1975.

CONSOLIDATED STATEMENTS OF INCOME For the years ended December 31 (Thousands of Dollars) 1976 1977 (Note 2) 14 OPERATING REVENUES:

Electric ..................................... . .... .... . . $291,568 $242,279 Gas .......... .. .... . ................... . .... . . ... ***** 36,233 32,248 Stearn . . ... ... . ........... ...... . .... . .... .......... .. . 10,017 11,861 337,818 286,388 OPERATING EXPENSES:

Operation:

Fuel for electric generation ....... . ................. . . . 137,066 123,792 Energy interchange, net ... ... .......... . ..... . . ..... . (12,902) (20,852)

Gas purchased ...................................... . 20,429 15,957 Other opera ti on ..... ................................ . 53,427 48,318 Maintenance ......................... .. ............ .. . . 24,989 21,596 Depreciation .... . ........................ ... .......... . 28,046 25,367 Taxes on income .. . ........ ... ... ..... ....... . ........ . 7,662 4,016 Taxes other than income .. . . .... .. . .. . ... .. .......... .. . 17,074 13,841 275,791 232,035 OPERA TING INCOME ....... . ......................... . 62,027 54,353 OTHER INCOME:

Allowance for other funds used during construction ...... . 7,139 6,230 Other, principally interest income in 1976, net of taxes ... . 930 2,289 8,069 8,519 INCOME BEFORE INTEREST CHARGES .. .. . . .......... . 70,096 62,872 INTEREST CHARGES:

Long-term debt . .. ......... .. ......... . ...... . ........ . 31,601 29,379 Short-term debt and other ............................. . 1,814 267 Allowance for borrowed funds used during construction .. . (2,647) (3,209) 30,768 26,437 NET INCOME .......................................... . 39,328 36,435 DIVIDENDS ON PREFERRED STOCK ...... . ..... .. ..... . 7,250 7,250 EARNINGS APPLICABLE TO COMMON STOCK .... .. .. . $ 32,078 $ 29,185 COMMON STOCK:

Average shares outstanding (thousands) ........... . .... . 19,403 18,821 Earnings per share .................................... . $1.65 $1.55 Dividends declared per share ... . ... . . . .... . ....... .. .. . $1.22 $1.20 The Notes to Financial Statements are an integral part of the above statements.

DELMARVA POWER & LIGHT COMPANY and Subsidiary Companies I_

For more than 3 years, the Company has offered the owners of Common Stock the opportunity to reinvest cash dividends and/or invest additional cash monthly in amounts from $25 up to $3 ,000 per quarter to purchase additional shares of Common Stock without paying any brokerage or service charges. More than 9,500 of the common shareholders are participating in the Plan. They have invested their dividends and/or optional cash payments amounting to more than $9.8 million to purchase 755,663 new shares of the Company's Common Stock.

If you are not participating, you may want to consider the benefits of joining the Plan. To receive a Summary Prospectus containing details of the Plan, please complete and mail the attached form to the Company.

Yes, please send me additional information about the dividend reinvestment plan.

Name Address City State Zip Code

Please Affix 9¢ Postage Delmarva Power 800 King Street P.O. Box 231 Wilmington, DE . 19899 A TIN: Stockholders Relations

CONSOLIDATED STATEMENTS OF SOURCES OF FUNDS FOR CONSTRUCTION EXPENDITURES For the years ended December 31 (Th ousands of Dollars) 1976 1977 (Note 2) 15 SOURCES OF FUNDS:

Internally generated:

Net income ................... .. ... ..... .... . .. .. ... . $39,328 $36,435 Items not. r~quiring (providing) funds:

Depreciation .... ...... ... . .. .. . .. .. . .. .... .... . ... . 28,046 25,367 Allowance for funds used during construction ....... . (9,786) (9,439)

Investment tax credit adjustments, net .. . .. .. .... . . . . 164 4,187 Deferred income taxes, net ...... ............ .. . .... . 6,953 2,577 Funds from operations .. . .. ........ .. . .......... . 64,705 59,127 Less: Dividends on common and preferred stock . ...... . (31,377) (29,868)

Internally generated funds . . . .. . .. . ... .. . ..... ... . 33,328 29,259 External financing:

Net proceeds from sale of:

Long-term debt ... . . ...... .. . ....... . ............. . 33,524 Common stock . ............. . ................ . .... . 30,870 5,221 Increase in short-term debt .. ... .. ... . ............... . 32,100 Redemption of long-term debt ....... .. .. . .... . ...... . (11,950)

Externally financed funds .. .... .................. . 51,020 38,745 Other sources (uses):

Decrease (increase) in other components of working capital (principally temporary cash investments in 1977) .. .. . . 44,708 (2,255)

Other, net ......... .. ...... ......... .............. . 1,315 792 Other funds ........... . ........................ . 46,023 (1,463)

CONSTRUCTION EXPENDITURES (excluding allowance for funds used during construction) ... . ........ ........ . . . . $130,371 $66,541 The Notes to Financial Statements are an integ ral part of the above statements.

DELMARVA POWER & LIGHT COMPANY and Subsidiary Companies

CONSOLIDATED BALANCE SHEETS As of December 31 16 (Thousa nds of Dollars)

ASSETS 1976 1977 (Note 2)

UTILITY PLANT, AT ORIGINAL COST:

Electric ... . ......... . .. . .. . .. . .. . . . ... ... . .. .. ... . . . .. . $883,032 $754,139 Gas . .. . . ..... ... .... . ...... . .... . ....... . .. . *** **** *** 56,462 54,917 Steam . .... . .. . ... . . . . . ..... . ... . . . ........ . ..... . .... . 22,273 22,223 Common . . ...... .. . . .... . . . ... .. . ... .. .. . .... ... .. .. . . 18,179 17,993 979,946 849,272 Less: accumulated depreciation ..... . ...... . . . ... . ...... . 245,216 220,979 734,730 628,293 Construction work in progress . ... . .. .. .. . ... .. . . . .. . . . . 158,685 155,028 893,415 783,321 NONUTILITY PROPERTY AND OTHER INVESTMENTS . . 4,008 3,106 CURRENT ASSETS:

Cash (and temporary cash investments in 1976) . ... . .. . .. . 15,317 62,610 Special dep osit for pollution equipmen t . . . ... . . .. . .. .. . . . 11,857 23,617 Accounts receivable ... . ......... . . .. . . .. . . . .. .. . . . . . . . . 30,470 35,607 Deferred fuel expense .... . .............. .. ..... . . . .... . 3,766 4,785 Deferred gas purchased costs . . . . ... . . ......... . . . . . . .. . 4,318 2,709 Materials and supplies, at average cost:

Fuel (coal and oil) . . .. .. . . ... .. . .. .. . .... . ... . .. ... . . . 21,770 21,113 Operation and construction . ..... . . .. . . . . . . . . . . .. . .. . . 19,841 17,862 Prepaym ents . . .. . .......... . .... .. ....... . .. . . . .... . . . 3,118 3,067 110,457 171,370 DEFERRED DEBITS :

Preliminary survey and investigation charges . . . .... ... . . . 11,481 9,496 Other .. . ...... ... . . . . . .. ... . .... ... . ..... .. .. . ... .. .. . 8,059 7,013 19,540 16,509 TOTAL ... . ..... . . . . . .. . . . . . . . . .. .. .. . .. ... . . . . . . .... . . . $1,027,420 $974,306 The Notes to Financial Statements are an integral part of the above statements.

DELMARVA POWER & LIGHT COMPAN Y and Subsidiary Companies

17 LIABILITIES 1976 1977 (Note 2)

CAPITALIZATION:

Sti~~fe~~~~~tiX~~ ~~~-t~-~).: .. . .. ....... . .. ... . .... . . .. . $105,226 $105,226 Common stock ....... ... . . ... . . . . . . . ..... . .... . .. .. . . 218,606 187,736 Retained earnings .. . .. . .. . .. . ... .. ... .... .. . . . . . . . .. . 107,607 99,656 431,439 392,618 Long-term debt . . . ... .. . . ... .... .. .. . . ........... . .. . . . 428,905 430,920 860,344 823,538 CURRENT LIABILITIES:

Short-term debt .. . ... .. . .. . ........ ... ... . . . . . . .. .. ... . 32,100 Current maturity of long-term debt . ... . ..... .... . . . .. . . . 10,000 Accounts payable . . ....... . . ..... .. .... . ............ . . . 8,180 15,811 Taxes:

Accrued ... . . . .. .. . .... . . ...... . .. . .. .. . . . ... .. . ... . . 4,280 4,067 Deferred . ...... . . . .. ............ .. . .. ... . . . ... . . .. . . 4,077 3,812 Interest accrued . . .... . .. . .. .. .. . .. . ..... . ...... . ... . .. . 8,910 8,938 Dividends declared . .. ... ... ... . ... . .... . . . . .... . . . .... . 6,835 5,723 Other ... . .. ... . .. .. ...... .. . .. . ... .. ... . . .. . ... . ... . . . 3,184 3,055 67,566 51,406 DEFERRED CREDITS AND OTHER:

Net credit arising from sale of contracts for nuclear plant ... .... . . . . .. . ...... . .. . ........... . . 69,415 74,221 Accumulated deferred income taxes ... . ..... .. . ... . . .. . . . 12,079 5,391 Accumulated deferred investment tax credits ... ....... .. . 17,170 13,406 Other ...... . .. . . . . .. ........... . . . .. .... .. .. ........ . . 846 6,344 99,510 99,362 CONTINGENCIES (Note 10) AND COMMITMENTS (Note 11)

TOTAL . . ....... . ..... . .... . .. . ......... . ... . ..... . .. . . . $1,027,420 $974,306 The Notes to Financial Statements are an integral part of the above statements.

DELMARVA POWER & LIGHT COMPANY and Subsidiary Companies

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS For the years ended December 31

{Thousands of Dollars) 18 1976 1977 (Note 2)

BALANCE, JANUARY 1 ................................ . $ 99,656 $ 93,089 NET INCOME . . ...... ... . . ............................. . 39,328 36,435 138,984 129,524 CASH DIVIDENDS DECLARED:

Preferred stock .. . ............. ... ..................... . 7,250 7,250 Common stock ........................................ . 24,127 22,618 31,377 29,868 BALANCE, DECEMBER 31 ............. ..... ............ . $107,607 $ 99,656 The Notes to Financial Statements are an integral part of the above statements .

DELMARVA POWER & LIGHT COMPANY and Subsidiary Companies NOTES TO FINANCIAL STATEMENTS

1. Significant Accounting Policies: Fuel Costs:

Fuel costs are deferred and charged to operations on the Financial Statements: basis of the fuel cost per kilowatt hour included in cus-The consolidated financial statements include the ac- tomer billings . For tax purposes fuel costs are expensed as counts of the Company and its subsidiary companies, all of incurred. Approval was received during 1976 to modify which are wholly-owned. The accounts are maintained in the Company's resale and certain retail fuel adjustment accordance with the uniform systems of accounts pre- clauses to permit more timely recovery of fuel expense scribed by the regulatory commissions having jurisdiction under these clauses . Also in 1976, approval was received with respect to accounting matters. from the Delaware Public Service Commission to recover Revenue: the deferred fuel balance relating to Delaware retail cus-Revenues are billed to customers on a monthly cycle tomers at March 31, 1976, aggregating approximately

$4,830,000, over a three-year period from June 1, 1976.

basis and include rate increases permitted to be .billed subject to refund, pending final approval. At the end of The Company's share of nuclear fuel costs relating to each month, there is an amount of unbilled electric and gas jointly-owned nuclear generating stations (including es-service which has been rendered from the last meter read- timated costs of storing spent fuel) is charged to fuel ex-ing to the month-end. pense on a unit of production basis.

Notes, continued Gas Purchased Costs: accounts as the net cost, during the period of construction, Prior to 1977, the Company charged gas purchased costs of borrowed funds used for construction purposes and a 19 to operations as incurred, as there was no assurance that reasonable rate for other funds so used. The allowance is all such costs would be recovered under the application of considered a cost of utility plant and a credit to income; for the Company's gas production cost adjustment clause. On income tax purposes, the allowance is excluded from tax-January 24, 1978, the Delaware Public Service Commission able income.

approved an amendment to the clause, retroactive to July The rate used in determining the allowance for funds 1, 1976, that provides an annual billing adjustment for any used during construction was 8% in 1976 and 7.4 % in difference between gas purchased costs incurred and 1977. The latter rate was determined in accordance with a billed. Accordingly, such costs are deferred and charged to formula prescribed by the Federal Energy Regulatory operations on the basis of gas purchased costs included in Commission (formerly the Federal Power Commission) .

customer billings. See Note 2 for additional information The Commission also required, effective January 1, 1977, concerning deferred gas purchased costs . the segregation of allowance for funds used during con-struction into two components: the interest on debt com-Depreciation and Maintenance:

ponent ("allowance for borrowed funds used during con-The annual provisions for depreciation are computed by struction") is classified as a credit to interest charges, and the use of composite rates applied on the straight-line the common stock equity and preferred dividend com-method for financial accounting purposes and principally ponent ("allowance for other funds used during con-on accelerated methods for income tax purposes . The ef-struction" ) continues to be classified as an item of other fect of this difference in recording depreciation is a reduc-income . The consolidated financial statements of prior tion in income taxes, the benefit of which, effective with years have been reclassified for comparative purposes.

respect to additions to utility plant after 1974, is deferred (normalized) for credit to subsequent years when financial accounting expense exceeds tax expense.

Pension Plan:

The cost of maintenance and repairs, including renewals The Company and subsidiaries have a trusteed noncon-of minor items of property, is charged to operating ex- tributory pension plan covering all of their regular em-penses. A replacement of a unit of property is accounted ployees. Pension contributions (aggregating $5 ,807 ,000 for for as an addition to and a retirement from the utility plant 1977 and $4,950,000 for 1976), are charged principally to account. The original cost of the property retired is operating expenses and provide for normal cost and amor-charged to accumulated depreciation together with the net tization of prior service costs over a period of approx-cost of removal. For income tax purposes the cost of re- imately twenty years. At December 31, 1977, the prior moving retired property is deducted as an expense. Provi- service costs exceeded the market value of the assets in the sions for decommissioning costs relating to jointly-owned retirement fund by approximately $16,600,000. As of the nuclear generating units is not currently made. same date, the market value of the fund assets exceeded Investment Tax Credit: the actuarially computed value of vested benefits.

Investment tax credits utilized to reduce federal income taxes are deferred for financial accounting purposes and credited to income over subsequent five-year periods.

Capital Stock Expenses:

Allowance for Funds Used During Construction: The premiums on preferred and common stock are Allowance for funds used during construction (AFUDC) stated net of the expenses related to the issuance of such is a noncash item and is defined in regulatory systems of stock.

Notes, continued

2. Rate Matters: ment reached on November 3, 1976 between the Company 20 (a) Deferred gas purchased costs - On January 24, 1978, and intervenors in connection with electric resale rates that the Delaware Public Service Commission approved a gas became effective in October 1974, subject to refund. These rate increase that would provide approximately $4,500,000 orders were anticipated and the appropriate adjustments of additional base revenues on an annual basis . The to the revenue and related accounts were previously re-Commission's order also provided for the recovery, over corded in the applicable accounting periods.

the twelve month period beginning February 1978, of un-billed gas production costs for the period July 1, 1976 to 3. Taxes on Income:

December 31, 1977, and annual billing adjustments there-after for differences between gas production costs incurred 1977 ($000) 1976 and billed. Operations:

Pursuant to this order, the Company has deferred Federal income $ (493) $(3,068)

$4,318,000 of gas production costs at December 31, 1977, of State income .. . . .. . ... . ..... . 1,038 320 which $2,709,000 relates to 1976. Accordingly, the appli- Deferred income, net .. .. . .. . . 6,953 2,577 Inves tment tax credit cable purchased gas and related tax accounts and retained adjustments, net . . . . . . . . . . . 164 4,187 earnings for the year 1976 have been restated. The effect of 7,662 4,016 the restatement upon previously reported 1976 earnings Other income . . . . . . . . . . . . . . . . . . 1,050 2,418 applicable to common stock was as follows:

$8,712 $6,434 Earnings Applicable Earnings to Common Per The Company's effective income tax rates for financial Stock Average reporting purposes were substantially less than the federal

($000) Share s ta tu tory rate of 48 % . The reasons for these differences are As originally reported $27,878 $1.48 as follows:

Adjustment 1,307 .07 As restated $29,185 $1.55 1977 ($000) 1976 The effect of the deferral for the year 1977 was to increase Amount Rate Amount Rate - -

earnings applicable to common stock and earnings per Statutory income tax expense $23,059 48% $20,577 48%

average share by $764,000 and $.04, respectively . Reduction in taxes resulting from:

(b) Resale rate orders -OnJuly 1, 1977 the Federal Power Excess of tax depreciation Commission issued orders that (i) approved the settlement over book depreciation reached on February 2, 1977 between the Company and not normalized .. . .... (5,141) (11) (5,951) (14) intervenors in connection with electric resale rates that Exclusion of AFUDC for became effective as of April 1, 1976, subject to refund, (ii) income tax purposes .. (4,697) (10) (4,531) (10) upheld the disallowance by an Administrative Law Judge Investme nt tax credits amortized to income . .. (3,560) (7) (2,364) (6) of a surcharge that became effective on April 1, 1976, Other, net . ............. (949) .fil_ (1,297) _Q2_

subject to refund, to recover the deferred fuel balance relating to resale customers and (iii) approved the settle- Income tax expense .... ... $8,712 18 % $6,434 15%

Notes, continued Investment tax credits utilized to reduce federal income deemable at the option of the Company, was as follows:

taxes payable amounted to approximately $7,300,000 for Redemption 21 1977 and $6,500,000 in 1976. The amount for 1977 includes Prices per approximately $3,600,000 of credits utilized to offset the Share at Par Value increase in taxes relating to the sale of contracts (see Note Series Shares 12/31/77 ($000) 8). At December 31, 1977, the company had approximately 3.70 %-5 % 320,000 $103-$105 $ 32,000

$5,000,000 of unused inves tment tax credits available to 7.52 %-7 .88 % 450,000 107- 108 45,000 reduce future federal income taxes payable. 8%-8 .96 % 280,000 108- 109 28 ,000 1,050,000 105,000 The components of deferred income taxes relate to the following tax effects of timing differences between book Premium on preferred stock 226 and tax income: $105 ,226 1977 ($000) 1976 Changes in common stock (par value $3 .375, authorized 25,000,000 shares) and related premium for the period Depreciation . . . . . . . . . . . . . . . . . . . . $ 4,835 $ 2,795 (420)

January 1, 1976 to December 31, 1977 were as follows:

Deferred fuel expense. . . . . . . . . . . . (1,359)

Rate refunds . . . . . . . . . . . . . . . . . . . . 2,632 (1,200) Aggregate Deferred gas purchased costs .... . _ _84 _5 1,402 Par Value Premium

$ 6,953 $ 2,577 Shares ($000) ($000)

Balance, January 1, 1976 .. .. 18,652,779 $62,953 $119 ,562 Issuance of common stock for Dividend Reinvestment and Common Share

4. Taxes Other Than Income: Purchase Plan . . . . . . . . . . . 236, 171 798 2, 179 1977 ($000) 1976 Issuance of common stock Delaware utility .. . . .. . . . . .. ... . $ 6,238 $ 5,214 for acqu isition of certain Property . ................... . . . 4,896 4,525 utility plant. . . . . . . . . . . . . . 187,069 631 1,613 Franchise and gross receipts .... . 3,685 2,093 Balance, December 31, 1976 . 19,076,019 64,382 123,354 Social Security . ............ .. .. . 1,681 1,521 Sale of common stock . . . . . . 2,000,000 6,750 20,330 Other ... . .. . . . . . . ... . . . . ... . .. . 574 488 Issuance of common stock

$17,074 $13 ,841 for Dividend Reinvestment and Common Share Purchase Plan . . . . . . . . . . . 282,524 953 2,837 Balance, December 31, 1977 . 21,358,543 $72,085 $146,521

5. Capital Stock:

A new class of preferred stock ($25 par, cumulative, At December 31, 1977 there were 321,181 shares of 3,000,000 shares) was authorized during 1977. No shares common stock reserved for issuance under the Dividend are outstanding at December 31, 1977. Reinvestment and Common Share Purchase Plan.

Preferred s tock $100 par, cumulative (authorized The current Supplemental Indenture restricts the amount 1,800,000 shares) outstanding at December 31, 1977, re- of consolidated retained earnings available for cash dividend

Notes, continued payments on common stock to $29,600,000 plus ac- 7. Short-Term Debt:

22 cumulations after June 30, 1975, which available amount at Established bank lines of credit as of December 31, 1977 December 31, 1977 was approximately $46,000,000. amounted to $75,000,000 all of which, when in use, bear interest at the prime rate. The Company is required to

6. Long-Term Debt: maintain a 10% compensating balance on these lines when Long-term debt outstanding at December 31, 1977 was not in use and an additional 10% balance when in use.

as follows:

Principal There was no short-term debt outstanding during 1976 Amount or the first six months of 1977. Average short-term debt

($000) outstanding during the last six months of 1977 was First mortgage and collateral trust bonds: $25,100,000 (consisting of commercial paper), with an av-2% % Series, due 1979 . . . . . . . . . . . . . . . . . . . . . . . . $ 10,000 erage interest rate of 6.4%. The maximum short-term bor-23/4 % Series, due 1980 .. . . . ....... . .... . ... .. . 12,000 rowing during this period was $45,000,000 . The average 9%% Series, due 1983 .... .... . . .. .. .... . .... . 30,000 rate of interest on short-term debt outstanding at Decem-31/s %-3 %% Series, due 1984-1988 ... . .. . .. . . . . . 45,000 ber 31, 1977 (consisting of commercial paper) was 6.7%.

4% % -7 % Series, due 1994-1998 . ..... ... . .... . . 75,000 71/2%-8 3/4 % Series, due 2000-2002 ... . .. .. .. ... . 125,000 8 %-11 % Series, due 2003-2005 .. ..... .. . . . ... . . 88,050 8 . Sale of Contracts for Nuclear Plant:

385,050 The proceeds received by the Company for the sale, in 1975, of the contracts for a nuclear steam supply system Pollution control notes:

and related fuel, net of plant expenditures which were Series 1973, 5.9 % effective rate, considered of no future value to the Company are clas-due 1983-1998 .... ... .. ....... . .. ... . .. .... . 8,000 sified as a deferred credit in the balance sheet. It is the Series 1976, 7.3 % effective rate, intention of the Company to reduce the cost of sub-due 1992-2006 . . .. . . ... . . . . .. . . ... ........ . . 34,500 sequent, alternative plant expenditures by the amount of 42,500 the net proceeds .

Unamortized premium and discount The Company, under advice of Counsel, is not treating on debt, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - 1,355

- the sale of these contracts as taxable for federal and state

$428, 905 income tax purposes. Accordingly, the tax basis of the Company's depreciable property was reduced by the amount of the net proceeds. The annual tax effect of the resulting decrease in tax depreciation is currently being The annual interest requirements on the qbove classified as a reduction of the deferred credit balance. If indebtedness at December 31, 1977 are $31,166,000. this transaction is ultimately considered taxable, ad-Substantially all utility plant of the Company now or ditional taxes payable at December31, 1977would approx-hereafter owned and all securities issued by its sub- imate between $16 million and $27 million (including utili-sidiaries are subject to the lien of the related Mortgage and zation of available investment tax credits) and would be Deed of Trust. charged to the aforementioned credit balance.

Notes, continued

9. Segment Information: 10. Contingencies:

See Note 8 for possible payment of income taxes relating 23 Segment information for the year ended December 31, to the sale of contracts.

1977, is as follows :

The Company has been named defendant in two anti-trust suits filed in July and August 1977 by four Delaware

($000) municipal electric wholesale customers of the Company, Electric Gas Steam Total seeking declaratory, injunctive, and treble damage relief under the Sherman and Clayton Acts. Plaintiffs allege that Operating revenues .. . . $291 ,568 $36,233 $10,017 $ 337,818 the Company has prevented them from competing for Opera ting expenses: customers in their respective service areas by charging Depreciation ... .. . . 25,611 1,683 752 28 ,046 discriminatory and unreasonably high wholesale electric Other ....... .. . . . . 208,519 - 30,884 8,342 247,745

rates, monopolizing production, transmission and sale of 32,567 234,130 - -- - - -

9,094 275,791 bulk power, and engaging in other such restraints of trade.

Operating income . .. .. . $ 57,438 $ 3,666 $ 923 $ 62,027 The Company has filed answers denying the material al-legations of the complaints, asserting affirmative defenses and setting forth counterclaims. These actions are in their Assets at earliest stages and, until plaintiffs have articulated a December 31, 1977:

Net utility plant ...... . .. $686,271 $41,800 $ 6,659 $ 734,730 theory of damages, it is not possible to quantify the Construction work Company's exposure to liability, if any, or to comment on in progress . . . . . . . . . . 157,888 200 597 158,685 the validity, as a matter of law, of the damage claims . The Total utility Company believes the suits to be without merit and legal plant ......... . 844,159 42,000 7,256 893,415 counsel believes the Company has material substantive defenses available to it.

Other identifiable assets .. .... . . .. . . .. . 51,591 9,652 309 61 ,552

$895,750 $51,652 $ 7,565 954,967 The electric retail order issued by the Delaware Public Unallocated assets .... . . 72,453 Service Commission in August, 1977, approving a Total assets . .... . $1 ,027,420 $26,000,000 rate increase, has been appealed by an inter-venor-customer. In the opinion of rate counsel, the likeli-hood of any material refund as a result of this proceeding is remote.

Operating income by segment is reported in accordance with generally accepted accounting and rate-making prac-tices within the utility industry and, accordingly, includes The Price-Anderson Act places a limit of liability of each segment's proportionate share of taxes on income $560,000,000 on each nuclear generating facility for public and general corporate expenses . Construction ex- liability claims that could arise from a nuclear incident.

penditures in 1977 for other than electric facilities were not Public liability insurance on the nuclear generating units in significant. which the Company has an ownership participation is

Notes, continued currently provided by a combination of private insurance Minimum rental commitments as of December 31, 1977 24 and indemnity agreements with the Nuclear Regulatory under all noncancelable agreements are as follows:

Commission (NRC) . Since August 1977, however, the in-1978 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,021,000 demnity by the NRC has decreased and, in the event of a 1979. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,833,000 nuclear incident involving any facility covered by govern- 1980. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,580,000 ment indemnification, the Company could be assessed up 1981 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,280,000 to $375,000 for each reactor owned (maximum of $750,000 1982 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,688,000 per reactor in a year). The United States Supreme Court is Remainder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,558,000 reviewing the constitutionality of the limit of liability Total $ 47,960,000 under the Price-Anderson Act. For property damage to the nuclear plant facilities, the Company and its co-owners The total minimum rental commitments are applicable have private insurance up to $175 million for the Salem to the following types of property: Company's share of Station and $220 million for the Peach Bottom Station. Peach Bottom nuclear fuel, $10,446,000 (estimated to be Because the possibility of a nuclear incident is considered charged to operations over a four-year period); fuel stor-to be highly unlikely, the Company is a self-insurer, to the age and pipeline facilities, $31,563,000; railroad coal cars, extent of its ownership interests, for any property loss in $3,753,000; other, principally computer equipment, excess of the aforementioned amounts. $2,198,000. Rentals charged to operating expenses aggre-gated $6,977,000 in 1977 and $6,461,000 in 1976, including

$2,277,000 and $2,477,000 for nuclear fuel, respectively.

11. Commitments: The aforementioned leases are generally operating The Company is constructing a fossil fuel unit estimated leases as defined by Statement of Financial Accounting to cost approximately $229,000,000. At December 31, Standards No. 13. Those leases that meet the criteria of 1977 construction commitments for the aforementioned capital leases are not accounted for as such in the rate-plant and other facilities aggregated approximately making process, and, if capitalized, would not have a

$209' 000' 000. significant effect on assets, liabilities or expenses.

12. Quarterly Financial Information (Unaudited):

The quarterly data presented below (restated where applicable - see Note 2) reflect all adjustments (consisting of normal recurring accruals) necessary in the opinion of the Company for a fair presentation of the results of operations.

Earnings Earnings Applicable Average per Operating Operating Net to Common Shares Average Revenue Income Income Stock Outstanding Share Quarter Ended (000) (000) (000) (000) (000) (Dollars) 1976:

March 31 $75,909 $14,774 $10,120 $ 8,308 18,701 $ .44 June 30 69,330 11,857 7,321 5,508 18,760 .30 September 30 71,959 15,159 10,712 8,900 18,820 .47 December 31 69,190 12,563 8,282 6,469 19,001 .34 1977:

March 31 87,118 14,896 9,546 7,734 19,130 .40 June 30 78,412 13,889 7,918 6,105 19,203 .32 September 30 92,633 17,996 12,198 10,386 19,269 .54 December 31 79,655 15,246 9,666 7,853 20,009 .39 I_

Notes, continued

13. Replacement Cost Data (Unaudited):

Current replacement cost information for certain assets and expenses will be disclosed in the Company's Form 10-K filed 25 with the Securities and Exchange Commission. The current replacement cost of the Company's affected plant and equipment and the amount of the associated depreciation expense calculated using replacement costs are generally higher than the comparable historical costs shown in the financial statements.

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors Delmarva Power & Light Company Wilmington, Delaware We have examined the consolidated balance sheets of Delmarva Power & Light Company and subsidiary companies as of December 31, 1977 and 1976, and the related consolidated statements of income, retained earnings and sources of funds for construction expenditures 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 report dated February 8, 1977, our opinion was qualified as being subject to the effects, if any, on the financial statements for the years 1976 and 1975 of the final determination of certain rate matters. As explained in Note 2 to the financial statements, these rate matters have been resolved with no effect on the aforementioned financial statements; accordingly, our present opinion on the 1976 financial statements, as presented herein, is different from that expressed in our previous report in that the qualification is removed. As further explained in Note 2, the 1976 financial statements have been restated, with our concurrence, to reflect adjustments retroactive to July 1, 1976 arising from regulatory approval to recover certain unbilled gas purchased costs.

In our opinion, the financial statements referred to in the first paragraph present fairly the consolidated financial position of Delmarva Power & Light Company and subsidiary companies at December 31, 1977 and 1976, and the consolidated results of their operations and sources of funds for construction expenditures for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis.

COOPERS & LYBRAND 1900 Three Girard Plaza Philadelphia, Pennsylvania February 3, 1978

-~"~~::...,,..dW'V'"W 19&7/19.,...

CONSOLIDATED STATISTICS 10 Years of Progress ... 1967 - 1977 26 ELECTRIC REVENUES 1977 1976 1975 1974 19j (thousands): Residential ......... .. . .. $ 97,691 $ 80,416 $ 77,069 $ 68,730 $ 51/

Commercial ........ . . . .. 74,641 60,111 58,169 51,192 37, Industrial . .. .. .. .. ..... . 76,801 64,458 64,141 66,381 41, Other utilities, etc . .... .. 38,974 34,896 35,606 32,976 21, Miscellaneous revenues .. 3,461 2,398 4,370 9,194 5, Total electric revenues . $291,568 $242,279 $239,355 $228,473 $157, ELECTRIC SALES (1,000 kilowatt-hours): Residential .............. 1,924,723 1,787,663 1,672,180 1,597,472 1,629, Commercial .. . .......... 1,495,796 1,412,259 1,359,673 1,303,053 1,360, Industrial .. .. .. . ..... .. . 2,277,630 2,260,661 2,142,151 2,461,303 2,512, Other utilities, etc. . . . . .. 1,210,941 1,199,155 1,218,785 1,230,528 1,252, Total electric sales ..... 6,906,090 6,659,738 6,392,789 6,592,356 6,755, ELECTRIC CUSTOMERS (end of period): Residential ........... ... 233,106 230,579 221,780 215,516 208, Commercial . ... . ........ 29,648 28,345 27,345 27,132 26, Industrial ...... . . ... .... 921 1,002 923 891 Other utilities, etc. .... . . 561 550 545 501 Total electric customers 264,236 260,476 250,593 244,040 236, GAS REVENUES (thousands): Residential . .. . .. . . .... . . $21,829 $18,826 $15,365 $14,298 $13, Commercial ... .. ........ 7,133 6,062 4,676 4,201 3, Industrial . .. .. .. . . .. . .. . 6,950 5,984 4,343 3,726 3, Interruptible ... .... . .... 169 1,301 1,211 1,532 1, Other utilities, etc. .... . . 49 44 33 26 Miscellaneous revenues .. 103 31 45 96 Total gas revenues .. .. . $36,233 $32,248 $25,673 $23,879 $21 GAS SALES (million cubi c feet): Residential ...... . ....... 6,751 6,956 6,540 6,863 7 Commercial . . . . . . . .. . ... 2,439 2,586 2,429 2,526 2 Industrial ..... . .... . .... 2,811 3,264 2,849 3,215 3 Interruptible .. . ..... . ... 81 953 1,073 2,257 2 Other utilities, etc. . ..... 17 20 18 16 Total gas sales . .. . . ... 12,099 13,779 12,909 14,877 15 GAS CUSTOMERS (end of period) : Residential ... . . . ... .. . . . 68,967 68,978 69,418 69,525 69 Commercial . ...... .. .... 4,147 4,154 4,189 4,356 4 Industrial ... .. . . ... . ... . 196 198 198 195 Interruptible . . ..... . .... 21 21 21 21 Other utilities, etc. .. . .. . 1 1 1 1 Total gas customers . .. . 73,332 73,352 73,827 74,098 74 REFINERY SERVICE Electricity delivered ...... 289,049 318,389* 297,282 350,021 341 (1 ,000 kilowatt-hou rs)

Stearn delivered .. . ... . .. 4,888,366 5,301,421 5,517,000 5,921,000 5,926 (1,000 pounds)

  • Restated

Average Annual Compound% 27 r1972 1971 1970 1969 1968 1967 Rate of Growth ELECTRIC REVENUES 143,878 $ 36,198 $30,992 $27,857 $25,487 $22,900 15.61 Residential 31,810 25,468 21,430 19,333 17,754 16,377 16.38 Commercial 35,962 28,903 24,069 22,483 20,120 16,471 16.64 Industrial 16,833 12,964 10,175 8,936 7,962 7,099 18.57 Other utilities, etc.

2,857 1,209 530 513 504 497 21.42 Miscellaneous revenues 31,340 $104,742 $87,196 $79,122 $71,827 $63,344 16.49 Total electric revenues ELECTRIC SALES l63,821 1,380,763 1,280,420 1,151,108 1,037,223 910,548 7.77 Residential

~27,230 1,099,897 1,009,488 923,064 856,258 774,382 6.81 Commercial U2,239 2,252,219 2,264,084 2,217,655 2,048,776 1,633,827 3.38 Industrial 37,272 1,014,972 885,720 792,151 708,899 629,643 6.76 Other utilities, etc.

~ 40,562 5,747,851 5,439,712 5,083,978 4,651,156 3,948,400 5.75 Total electric sales ELECTRIC CUSTOMERS

~ 00,595 193,282 187,683 183,458 178,948 174,039 2.97 Residential 25,856 25,139 24,383 24,058 23,474 22,966 2.59 Commercial 869 810 834 815 806 760 1.94 Industrial 496 460 375 283 281 281 7.16 Other utilities, etc.

27,816 219,691 213,275 208,614 203,509 198,046 2.93 Total electric customers GAS REVENUES

,12,944 $11,948 $11,283 $10,708 $10,290 $10,041 8.08 Residential

. 3,532 3,126 2,861 2,555 2,207 1,980 13.67 Commercial 3,265 2,998 2,618 2,641 2,536 2,032 13.09 Industrial 1,035 1,153 1,340 1,222 1,155 1,293 (18.41) Interruptible 25 16 10 7 8 8 19.87 Other utilities, etc.

18 39 225 251 215 204 (6.61) Miscellaneous revenues S20,819 $19,280 $18,337 $17,384 $16,411 $15,558 8.82 Total gas revenues GAS SALES 7,737 7,583 7,406 6,942 6,601 6,432 0.49 Residential 2,696 2,534 2,384 2,097 1,770 1,564 4.54 Commercial 3,875 3,797 3,549 3,700 3,455 2,659 0.56 Industrial 2,134 2,708 3,423 3,263 3,089 3,447 (31.28) Interruptible 20 13 8 6 6 7 9.28 Other utilities, etc.

16,462 16,635 16,770 16,008 14,921 14,109 (1.53) Total gas sales GAS CUSTOMERS 69,891 69,604 68,614 68,074 67,270 66,079 0.43 Residential

' 4,407 4,426 4,444 4,423 4,341 4,225 (0.19) Commercial 195 204 206 103 93 95 7.51 Industrial 21 21 21 19 19 16 2.76 Interruptible 1 1 1 1 1 1 - Other utilities, etc.

74,515 74,256 73,286 72,620 71,724 70,416 0.41 Total gas customers REFINERY SERVICE 95,236 272,649 244,614 281,120 265,824 276,598 0.44 Electricity delivered (1,000 kilowatt-hours) 61,000 7,564,000 7,779,000 7,536,000 7,296,000 7,390,000 (4.05) Steam delivered (1,000 pounds)

Board of Directors Werner C. Brown Austin T. Gardner Dr. E. Arthur Trabant 28 Chairman of the Board of Hercules, Inc .

(chemical manufacturer) Wilmington ,

Retired , former Chairman of the Board, President and Chief Executive Officer of President of the University of Delaware Newark, Delaware Delaware the Company Tames M. Tunnell, Jr.

Mrs. Hen!Y P. Cannon, II Dr. Earl C. Jackson, Sr. 'Partner of Morris, Nichols , Arsht &

Director of H. P Cannon &Son, Inc . (food Retired, former S'uperintendent of the Tunnell , attorneys processing firm) Bridgeville, Delaware Wilmington Public Schools Wilmington , Delaware Wilmington , Delaware Oscar L. Carey Robert D. Weimer President and Director of Larmar William G. Price President and Chief Executive Officer of Corporation (general real estate and Senior Vice President of the Company the Company home builders) Salisbury, Maryland Thomas C. Roe Executive Committee - Werner C.

Brown , Chairman ; lrenee du Pont , Jr.;

Irenee du Pont, Jr. Chairman of the Board of the Company Austin T. Gardner; Thomas C. Roe ;

Senior Vice President and Director of E. I.

James M. Tunnell , Jr.; Robert D. We imer duPont de Nemours & Company (chemical manufacturer) Wilmington ,

Delaware Audit Committee - James M.

Tunnell, Jr., Chairman ; Werner C. Brown ;

Oscar L. Carey CANNON JACKSON TUNNELL

Officers Our Service Area Thomas C. Roe The Company was incorporated '

Chairman of the Board 42 Years Service in Delaware in 1909. In 1943 the Delaw~re

C1~

29 Company acquired its subsidiaries, Robert D. Weimer President and Chief Executive Officer Delmarva Power & Light I 30 Years Service Company of Maryland and H. Rav Landon Delmarva Power & Light I Senior Vice President 14 Years Service Company of Virginia. A third subsidiary, Delmarva I\ Do\re William G. Price Senior Vice President Energy Company, was '

7 Years Service J. Kenneth Wiley Senior Vice President formed in 1975 to explore for gas in a limited \DE 3 Years Service partnership with several I' Tames A. Clark, Jr.

Vice President, Electric and Gas other firms.

Delmarva Power I' Operations , and President of Delmarva Energy Company provides electric service 28 Years Service \ Indian River throughout most of the L ________ _

Tames L. Hammond 5,700 square-mile Vice President, Finance & Accounting 19 Years Service Delmarva Peninsula. This T. Edwin Hobbs area includes the State of Vice President of the Company and Delaware, portions of nine Eastern President of Delmarva Power & Light Company of Maryland and Delmarva Shore Counties of Maryland and Power & Light Company of Virginia the two Eastern Shore Counties of 44 Years Service Virginia. In addition, the Company Earl D. Krapf distributes natural gas in a 270 square-Vice President, Corporate Planning and Regulatory Practice mile area in Northern Delaware.

20 Years Service Locations of the Company's major George T. Pinto generating stations on the peninsula Vice President, Administrative Services

  • Cities 29 Years Service are indicated on the map. In Edward F. Spear addition, the Company receives
  • Power Stations Vice President, Corporate generation from two coal-burning Communications and Customer Services 31 Years Service stations in Western Pennsylvania Alfred C. Thawley, Jr. and from the Peach Bottom, Secretary and Treasurer Pennsylvania, and Salem, 22 Years Service New Jersey, nuclear William E. Rossell, Sr. power stations.

Comptroller 29 Years Service James W. Porter Assistant Comptroller 21 Years Service Ralph H. Smith Assislant Comptroller 17 Years Service Ruth V. Lokey Assistant Secretary and Assistant Treasurer 40 Years Service Paul A. Modesto Assistant Secretary and Assistant Treasurer 7 Years Service

Delmarva Power & Light Company U.S . POSTAGE 800 King Street PAID P.O.Box 231 Wilmington, De.

Wilmington, Delaware 19899 Permit No. 68 Zip Code 19899

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