ML19031A134
| ML19031A134 | |
| Person / Time | |
|---|---|
| Site: | Salem  |
| Issue date: | 03/13/1978 |
| From: | Delmarva Power & Light Co |
| To: | Office of Nuclear Reactor Regulation |
| References | |
| Download: ML19031A134 (36) | |
Text
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Ooc~et#~ ~~'?.;;2 Crmtrnl # ?808 f) OOl/ J D i~P. ~ l r.:?> ( '1 "t of Document:
REGULATORY DOCKET FIL~
RECORDS FACILITY BRANCH
Delmarva Dn111Ar
~
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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-mington, DE, and Irving Trust Company, New York, N.Y.
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
Financial Highlights Revenues Net Income Earnings per share Dividends Declared Common Stock Outstanding (Average Shares)
Common Stock Book Value Construction Expenditures Electric Sales Gas Sales Electric Customers Gas Customers
- Restated Contents Stockholders Letter Revenues, Operating Expenses Net Income and Earnings Financing and Construction System Rates Electric Sales Increase Marketing Activities Gas Exploration Venture Natural Gas Supply River Crossing Completed Fuel Supply Environmental Protection FEA Conversion Order Generation Additions 1977
$337.8 million
$ 39.3 million
$ 1.65
$ 1.22 19,403,032
$ 15.27
$130.4 million 6.91 billion kwh 12.1 million mcf 264,236 73,332 Pages 2
4 4
4 5
6 7
7 7
8 8
8 9
9 Research and Development Communications, Management Changes Employees 9
10 10 11 14 26 28 29 Management Review of Operations Financial Section Consolidated Statistics Board of Directors Officers, Service Area 1976 Percent Increase (Decrease)
$286.4 million
$ 36.4
- million
$ 1.55*
$ 1.20 18,820,521
$ 15.07*
$ 66.5 million 6.66 billion kwh 13.8 million mcf 260,476 73,352 Annual Meeting Third Tuesday in April at 12:30 p.m., in the Company's General Offices 800 King Street Wilmington, Delaware 18.0 8.0 6.5 1.7 3.1 1.3 96.1 3.7 (12.2) 1.4
2 Thomas C. Roe Robert D. Weimer To Our Stockholders:
Company earnings of $1.65 per share for 1977 represent a 6.5% increase over restated earnings for 1976. The improvement is due primarily to rate in-creases in effect during the year.
The Board of Directors in December approved an increase in the dividend on common stock from $.30 to $.32 per share on a quarterly basis, which in-creases the projected annual dividend to $1.28. This action was taken in order for shareholders to receive a more adequate return on their invested capital and to improve the future marketability of our common stock.
Improving the Company's financial integrity was a primary objective during 1977. In this respect, the Company's ability to file rate requests in all jurisdic-tions in a timely manner was strengthened. Our goal is to obtain an adequate rate of return on your investment and offset the effects of regulatory lag on earnings. In 1977, the Company sought $41.1 million of annual rate relief. At year's end, $36.2 million of additional annual revenue had been ap-proved by regulatory commissions. Additional rate relief will be necessary in 1978.
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 projections in the rate of growth of electric demand in our service area. To meet future power require-ments, we propose to build a 400,000 kilowatt coal-burning power station in our Maryland service area for operation in 1987. If necessary, additiol).al peak-ing generation will be added prior to that date. We will receive additional generation from the second nuclear unit at the Salem station in 1979 and from a major coal-fired addition to our Indian River Power Station in 1980. These additions will help to reduce substantially the use of oil for generation and pro-vide our customers with a more economical mixture of fuels.
Our generation planning is flexible and we are not sealed into any long range commitments at this time. We believe that nuclear energy is still a viable and economical energy source and in the event that the present uncertainties surrounding nuclear energy are resolved, we will be able to take advan-tage of this generation alternative at a later date.
Our industry looks to the day when the Federal Government will affirmatively resolve the waste
disposal issue and shorten the overall licensing pro-cess.
The Company's natural gas supply continues to be curtailed by our pipeline supplier. To offset the curtailment, it is necessary to purchase and store substantial volumes of supplemental gas. Such gas is considerably more costly to our customers. Our supplier expects the gas supply to improve as new offshore wells are placed in production.
During the year, the 500,000 volt transmission line across the Delaware River was placed in service.
This line was proposed in 1969 at a cost of about $6 million. Opposition from environmental groups, in-flation and design changes increased the final cost to $22 mllion, which is ultimately reflected in the cost of service to customers. The facility will carry our share of generation from the Salem Nuclear Station as well as strengthen the reliability of inter-connected companies in the lower Delaware Valley.
In 1977, the Company began operation of a new computerized customer information system. The planning of the new system has been under way for about two years. It will coordinate many aspects of providing basic customer services and improve our response to customer requests.
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-tomers during storms and other emergencies when our employees act to quickly restore service.
The Company welcomes opportunities to explain business decisions and its operations to customers and various public audiences. Company represen-tatives and members of management participated during the year in numerous communication activ-ities to improve the understanding of our business.
In keeping with our desire to improve efficiencies of operation and management effectiveness throughout our service area, the Board of Directors has approved, in principal, plans to merge the Maryland and Virginia subsidiaries into the parent Company. Stockholder ratification of this action will be required after the appropriate regulatory approvals have been obtained.
In 1978, we will continue to seek an adequate return on the capital you have invested in the Com-pany. It is important for the Company to at least maintain its single A bond rating in order to obtain external financing in 1978 at the most economical cost to the Company, its stockholders and cus-tomers. In this regard, stockholder support for rate relief will be greatly appreciated. Regulatory com-missions seldom hear from stockholders and their interests in seeing that their Company maintains adequate earnings. In the event that you wish to communicate with the regulatory commissions that have jurisdiction over our operations, a listing is included in the inside front cover.
Thank you very much for your support and con-fidence in the Company.
Sincerely, Thomas C. Roe Chairman of the Board
- PAJ~
Robert D. Weimer President and Chief Executive Officer February 14, 1978 3
4 1977 Revenue Dollar Source Electric Refinery Service Other 2¢.
Disposition Preferred Dividends
& Interest 11 ¢ Fuel 38¢ 12¢ Materials, Supplies & Other Expenses 10¢ Common Dividends 6¢ 7¢ Revenues Total operating revenues were $337.8 million in 1977, an increase of $51.4 million, or 18.0%, over 1976.
Electric operating revenues rose 20.3% over 1976 due to increases in base rates, fuel clause revenues and kilowatt-hour sales. The increase in gas rev-enues of 12.4% was attributable to higher base rates and production cost adjustment revenues.
Following are increases and decreases in rev-enues over or under 1976 by customer category:
Residential Commercial Industrial Resale Interruptible Electric Gas 21.5%
16.0 %
24.2%
17.7 %
19.2%
16.1 %
12.0%
(87.1)%
Operating Expenses Total operating expenses were $275.8 million in 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 for overhaul and repair of electric generation facil-ities.
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
$2.9 million, or 9.9%, over 1976. Per share earnings increased to $1.65 from $1.55 in 1976. During the year, the average number of common shares in-creased 3.1 %. At year's end, there were 62,667 shareholders of common stock.
The Company has determined that 100% of 1977 common stock dividends are taxable for federal in-come tax purposes.
Financing and Construction Construction expenditures for 1977, excluding al-lowance for funds used during construction, were approximately $130.4 million, consisting of $78.1 million for electric production facilities, $24.3 mil-lion for electric transmission facilities, $17.9 million for electric distribution facilities, $1.1 million for gas distribution facilities and $9.0 million for general facilities.
The 1977 construction program was financed by
$33.3 million of internally generated funds, $30. 9 million from sale of 2.3 million shares of common stock, $32.1 million from unsecured short-term debt and $34.1 million resulting from other sources, primarily changes in working capital.
During 1977 the Company deposited a total of
$1,950,000 with the Chemical Bank of New York, the Trustee for the Company's Mortgage and Deed
of Trust. The money was used to redeem 3% of the 10% and 11 % Series First Mortgage and Collateral Trust Bonds at a price of 100.47% and 101 % of par value, respectively, under the sinking fund re-demption provisions for such bonds.
The Company estimates that construction re-quirements during 1978 will total $143 million, in-cluding electric construction requirements of $140.4 million and gas construction requirements of $1.5 million. Major construction projects now underway include the addition of a fourth generating unit at the Indian River power station, an electric oper-ations center in New Castle County, Delaware, and improvements to the Company's electric and gas transmission systems. It is estimated that 35% of the funds required for construction during 1978 will be internally generated. The remaining construction 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 Commission awarded the Company the full amount of the requested increase in August. The Company believes that an appeal of this decision, which was made by an intervenor in the proceedings, has no merit and will be dismissed by the Superior Court of Delaware.
In November, the Company filed with the Del-aware Commission a proposed Fuel Adjustment Clause that would stabilize customer costs. The proposed clause would be based on a calendar year estimate of fuel costs and system output in order to determine the average monthly fuel adjustment for the year.
No action was taken during 1977 by the Delaware PSC on the Company's proposed new residential electric rate, filed with the Commission in June 1976. The proposed rate would not be a rate increase because it is intended to provide approximately the same revenues to the Company. The rate would reduce the cost of electricity in the winter months for customers who conserve electricity during the summer months and would increase costs for those who contribute to the summer peak. It is expected that the Commission will make a decision on the proposed rate during 1978.
Electric Production 59.9%
Construction of new coal-fired unit at Indian River Power Station.
Gas Distribution
.9%
1977 Construction Expenditures 5
6 7,423 7,957 7,512 7,645 7,953 8,285 Average Annual Residential Electric Usage (Kwh)
Maryland Electric Rates In November, the Maryland Public Service Commission granted an increase of $5.7 million, or 10.1 %, in the retail electric revenues of the Mary-land subsidiary. The increase represents 70% of the
$8.1 million revenue increase requested.
The Maryland Commission also ordered that all fuel costs billed to customers be accounted for through the Fuel Adjustment Clause. A portion of fuel costs were previously included in base electric rates. This change has no effect on customers' total bills.
Virginia Electric Rates 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%,
in retail electric revenues.
The Virginia subsidiary also filed a proposed Fuel Adjustment Clause, similar to the clause filed in Delaware, to stabilize customer costs.
Wholesale Rates In July 1977, the Federal Power Commission ap-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%.
In May 1977, the Company applied to the Del-aware Public Service Commission for an increase in 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 1978, the Commission approved an increase in rev-enues of $4.5 million, or 13.8%. In addition, the Commission allowed the Company to collect unre-covered gas costs through the gas production cost adjustment.
Litigation Four Delaware municipal customers have filed antitrust suits against the Company, claiming they were charged unreasonably high electric rates. The Company believes that it has not violated any laws and has filed counterclaims against the municipal customers involved. See Note 10 to the Financial Statements.
Electric Sales Increase System electric sales were 6.91 billion kilowatt-hours in 1977, or 3.7% higher than in 1976. The increase reflects continued improvement of eco-nomic conditions affecting industrial and commer-
cial firms in our service area and an increase in the per household consumption of electricity by res-idential customers. Total residential sales increased 7.7%, commercial sales 5.9% and industrial sales were 0.8%, over 1976. Total kilowatt-hour sales to wholesale customers increased 0.7% over 1976.
The 1977 peak demand of 1,499,000 kilowatts for the Delmarva system occurred on July 21, 1977, at 5 p.m. This peak was slightly higher than the pre-vious record demand of 1,489,000 kilowatts estab-lished in 1973.
During the year, the number of residential cus-tomers increased by 2,527, with the electric heating classification gaining 1,465 of these customers. The commercial classification gained 1,303 new cus-tomers during the year. New home construction increased over 1976 with a growing number of homes having electric heat pumps installed.
Marketing Activities During the year, the Company's marketing pro-gram was reorganized to improve the planning and implementation of load management techniques and activities to help customers use energy as ef-ficiently as possible.
Response from homebuilders on the Delmarva Peninsula to the Company's Energy Efficiency Award program continues to be favorable. Created in 1976, the award recognizes important energy ef-ficiency features in new home construction. Com-pany representatives inspect the houses prior to issuing the awards.
During the summer the Company sponsored an energy efficiency equipment exhibit to increase con-sumer awareness of effective ways to conserve energy. Equipment on display included electric heat pumps, insulation materials and techniques and high efficiency appliances.
The Company participated with the State of Del-aware and the University of Delaware's Institute of Energy Conversion to offer a computerized energy analysis to help Delaware homeowners save energy dollars.
Gas Exploration Venture Delmarva Energy Company, a wholly-owned subsidiary, is involved in a limited partnership for gas exploration with seven other gas distributors and a subsidiary of Stone & Webster, Inc. This part-nership has resulted in discoveries which could provide additional gas supply to the Company.
Exploration is continuing and Delmarva Energy Company presently intends to participate for an additional three years.
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.
On January 17, 1977, an all time maximum send-out of 102,870 mcf was recorded, which was 2. 9%
greater than the previous peak sendout in 1971.
To partially offset the curtailment from our sup-plier, Transcontinental Gas Pipe Line Corporation
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I 1975 1976 1977
$0.92/mcf
$1.22/mcf
$1. 73/mcf Cost of Purchased Gas 7
8 (TRANSCO), the Company has obtained adequate quantities of supplemental gas, which is available at unregulated prices. This gas will enable the Com-pany to meet the normal requirements of its firm customers during the 1977/78 winter season.
The extremely cold weather over the entire TRANSCO service area forced the Company and most other TRANSCO customers to curtail indus-trial and commercial customers for about three weeks during February 1977. The curtailment fol-lowed a plan previously filed and approved by the Delaware regulatory commission.
River Crossing Completed In December, the Company placed in service a new 500,000 volt transmission line across the Del-aware River. The line enables the Company to re-ceive its share of power from the Salem Nuclear Generating Station and serves as an important link in a high voltage transmission system in the lower Delaware Valley.
Oil 60%
Construction of 500,000 volt transmission line across the Delaware River.
1977 Electric Generation Mix Completed at a cost of $22 million, the project was projected to cost $6 million when planned in 1969.
Delays, caused primarily by opposition to the project by certain special interest groups, increased the cost.
Fuel Supply The Company was able to obtain adequate fuel for electric generation during the year, but the overall cost of fuel increased over 1976. A comparison of fuel costs is included in Management Review of Operations, page 12.
Both the Federal Energy Regulatory Commission and the state regulatory commissions review the Company's fuel procurement practices. Recently, a Delaware PSC staff consultant reported... "I firmly believe that Delmarva has made every effort to se-cure the needed fuel supplies at the best available price and in so doing the customer has benefitted."
A supply of coal has been obtained for the period 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.
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 Units 1and2 at a cost of $7 million. The Company's 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 expenditures is anticipated between 1978 and 1980.
During the year, the Getty Refining and Market-
ing Company announced plans to construct a flue gas desulfurization ("scrubber") system for use at 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 been incorporated into the Department of Energy.
The Company is currently awaiting the publication by the Department of Energy of an Environmental Impact Statement concerning the conversion of the Edge Moor units.
Generation Additions In June, the first unit at the Salem Nuclear Gen-erating Station, located in New Jersey, began com-mercial operation. The Company's share of gen-eration from the 1.1 million kilowatt unit is 81,000 kilowatts. Salem Unit #2 is scheduled for operation in 1979. The Company will receive 82,000 kilowatts from the second unit.
Construction continued during the year on a fourth coal-fired generating unit at the Indian River Power Station in southern Delaware. The sched-uled completion date was moved from 1979to1980.
During the year, the Company continued to re-view load growth projections and generation alter-natives. Plans for providing additional generating capacity were announced in 1978 and are explained in the shareholder message on page 2.
Governor Pierre S. du Pont IV, center with glasses, and Richard S. Cordrey, far right, President Pro Tem of the Delaware Senate, tour the Indian River Power Station dur-ing statewide "Energy Day" activities.
Research and Development During the year, we continued to support re-search and development efforts aimed at solving the energy problems facing our industry and nation. A total of $943,000 was authorized during 1977 to sup-port a wide range of electric and gas research proj-ects. Our electric research is primarily administered by the Electric Power Research Institute through the Edison Electric Institute. Gas research is primarily conducted through the American Gas Association and the Institute of Gas Technology.
Locally, we provided a total of $75,000 in three grants to the University of Delaware's Institute of Energy Conversion for the following work:
- $10,000 grant to analyze solar hot water heat-ing.
- $50,000 grant to perform an engineering evalu-ation of a full-scale "coolness" storage system using salt hydrate mixtures.
9
10
- $15,000 grant to support the ongoing research programs at the Institute and for occasional studies of specific Electric Power Research Institute proj-ects.
Since 1972, we have contributed $125,000 to-wards solar research at the University.
Communications Our on-going communications program keeps customers informed about Company plans and var-ious aspects of the energy situation.
During the year, Company representatives were invited to speak about various subjects including energy conservation practices, reasons for in-creasing electric rates, and future electric generation methods. Such meetings help increase under-standing of Company operations and concerns and provide a means of evaluating customer attitudes.
Management Changes In December, the Board of Directors elected H.
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 are represented by the International Brotherhood of Electrical Workers (A.F.L.-C.I.O.). During 1977 a labor contract was satisfactorily negotiated for the subsidiaries. Wages and salaries of all employees during 1977 totaled $43.8 million.
Company management is committed to an on-going Affirmative Action Program for the employ-ment and promotion of minorities and females.
(Left) Employee United Way commitment is exemplified by Carol Calloway, standing and Linda Cross, kneeling, who share a moment with one of the children at a day camp for the physically handicapped.
(Below) Janet Samluk, Customer Service Representative, uses new customer in-formation retrieval system to answer billing inquiry.
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-cember 31, 1977 increased $51.4 million, or 18.0%,
over 1976. Electric operating revenue increases of
$49.3 million, included $21.8 million in rate in-creases, $18.7 million in fuel clause revenues and
$6.5 million resulting from increased electric sales.
Kilowatt hour sales increased 3.7% primarily due to increased residential and commercial usage. Gas operating revenue increased $4.0 million, reflecting
$2. 9 million in base rate increases and a $2. 9 million increase in the gas production cost adjustment rev-enues. Partially offsetting this increase is a 12.2%
decrease in mcf sales. Refinery service revenues decreased $1.8 million for the comparable period.
Total operating revenue for 1976 increased $10.4 million, or 3.8%, over 1975. Electric operating rev-enue increased $2.9 million, reflecting base rate in-creases and a 4.2% kilowatt hour sales increase ag-gregating approximately $25.8 million. However, offsetting these increases was a $19.3 million reduc-tion of fuel clause revenues as well as the repeal of the 5% Delaware Utility Tax applicable to residen-tial customers. Gas operating revenue increased
$6.6 million, reflecting $5.1 million of higher base rate revenues, primarily attributable to a 7% in-crease in mcf sales, and a $1.8 million increase in gas production cost adjustment revenues.
Operating Expenses Electric fuel expense for 1977 increased $13.3 mil-lion, or 10.7%, over 1976, due mainly to increased fuel costs per million BTU. Electric fuel expense for 1976 increased $1.8 million, or 1.5%, over 1975 as a result of higher generation, partially offset by a de-crease in fuel cost per million BTU. Fuel expense per million BTU at the Company's generating stations is shown in the following table:
1977 1976 1975 Oil
$2.20
$1.91
$2.12 Coal 1.08 1.07 1.09 Refinery By-Product 2.15 1.83 2.03 Nuclear
.32
.26
.26 Overall Cost
$1.67
$1.46
$1.53 Generation was 344,000,000 kwh, or 4.4%, lower in 1977 and 494,000,000 kwh higher in 1976 when compared to the corresponding previous years. The decrease in 1977 reflects large quantities of pur-chased power acquired in partial substitution for operation of the Company's own generating facil-ities which were under repair.
Gas purchased expenses increased $4.5 million, or 28%, over 1976, and $3.8 million, or 31.0%, in 1976 over 1975. These increases are due mainly to the increase in the commodity cost of natural gas which has escalated from $0.92 per mcf in 1975 to
$1.73 per mcf in 1977. These costs are recoverable through the recently amended gas production cost adjustment clause. See Note 1-Gas Purchased Costs.
Other operation expenses have increased steadily since 1973 reflecting escalated labor costs, higher cost of services and increased cost of operating supplies.
Maintenance expenses increased $3.4 million, or 15.7%, over 1976 resulting from overhaul repair work at Edge Moor and Indian River Generating Stations along with other increased scheduled maintenance. Increased maintenance performed at the Peach Bottom Nuclear Generating Station and the Company's transmission and distribution sys-tems accounted for most of the increase in 1976 as compared with 1975.
Taxes on income increased $3. 7 million over the year 1976 and $2.6 million in 1976over1975, largely due to the effect of normalization of tax benefits with respect to plant additions subsequent to De-cember 31, 1974. Taxes other than income increased
$3. 2 million over 1976, largely because of an increase in operating revenue and the recent enactment of a Pennsylvania gross receipts tax. Taxes other than income decreased $1.4 million when compared to 1975, primarily due to the repeal of the Public Utility Tax to residential customers in July 1975.
Other Income Other income decreased $0.5 million under 1976 due largely to a decrease in interest income received from short-term investment of the proceeds of the Summit Nuclear Settlement in 1976. Partially off-setting this decrease was an increase in allowance for other funds used during construction. Other income increased in 1976 over 1975, largely due to interest income received from the Summit Settle-ment.
Interest Charges Interest expense, net of allowance for borrowed funds used during construction, increased $4.3 mil-lion over 1976 primarily due to interest on the Pol-lution Control Notes issued in December 1976, along with the incurrence of interest on short-term debt during 1977. Total interest charges for 1976 increased slightly over 1975. Interest on long-term debt increased $2.2 million because of interest pay-ments on $30 million of bonds issued in July 1975.
This increase was largely offset by a decrease in short-term interest charges as a result of a favorable cash position gained through the Summit settle-ment.
Earnings Per Share Earnings applicable to common stock increased
$2.9 million, or 9.9%, over 1976. However, as a result of an increase in the average number of com-mon shares outstanding, earnings per share in-creased only $.10 per share, or 6.5%. Earnings ap-plicable to common stock and earnings per share increased $4. 9 million and $.17 per share, respec-tively, when 1976 is compared to 1975.
13
14 I
CONSOLIDATED STATEMENTS OF INCOME For the years ended December 31 (Thousands of Dollars)
OPERATING REVENUES:
Electric................................................
Gas.............................................. *****
Stearn.................................................
OPERA TING EXPENSES:
Operation:
Fuel for electric generation............................
Energy interchange, net..............................
Gas purchased.......................................
Other opera ti on......................................
Maintenance...........................................
Depreciation...........................................
Taxes on income.......................................
Taxes other than income................................
OPERA TING INCOME..................................
OTHER INCOME:
Allowance for other funds used during construction.......
Other, principally interest income in 1976, net of taxes....
INCOME BEFORE INTEREST CHARGES.................
INTEREST CHARGES:
Long-term debt........................................
Short-term debt and other..............................
Allowance for borrowed funds used during construction...
NET INCOME...........................................
DIVIDENDS ON PREFERRED STOCK....................
EARNINGS APPLICABLE TO COMMON STOCK.........
COMMON STOCK:
Average shares outstanding (thousands).................
Earnings per share.....................................
Dividends declared per share...........................
1977
$291,568 36,233 10,017 337,818 137,066 (12,902) 20,429 53,427 24,989 28,046 7,662 17,074 275,791 62,027 7,139 930 8,069 70,096 31,601 1,814 (2,647) 30,768 39,328 7,250
$ 32,078 19,403
$1.65
$1.22 The Notes to Financial Statements are an integral part of the above statements.
DELMARVA POWER & LIGHT COMPANY and Subsidiary Companies 1976 (Note 2)
$242,279 32,248 11,861 286,388 123,792 (20,852) 15,957 48,318 21,596 25,367 4,016 13,841 232,035 54,353 6,230 2,289 8,519 62,872 29,379 267 (3,209) 26,437 36,435 7,250
$ 29,185 18,821
$1.55
$1.20
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
A TIN: Stockholders Relations Delmarva Power 800 King Street P.O. Box 231 Wilmington, DE. 19899 Please Affix 9¢ Postage
CONSOLIDATED STATEMENTS OF SOURCES OF FUNDS FOR CONSTRUCTION EXPENDITURES For the years ended December 31 (Thousands of Dollars)
SOURCES OF FUNDS:
Internally generated:
Net income..........................................
Items not. r~quiring (providing) funds:
Depreciation.......................................
Allowance for funds used during construction........
Investment tax credit adjustments, net...............
Deferred income taxes, net..........................
Funds from operations...........................
Less: Dividends on common and preferred stock........
Internally generated funds........................
External financing:
Net proceeds from sale of:
Long-term debt....................................
Common stock.....................................
Increase in short-term debt...........................
Redemption of long-term debt........................
Externally financed funds.........................
Other sources (uses):
Decrease (increase) in other components of working capital (principally temporary cash investments in 1977)......
Other, net.........................................
Other funds.....................................
CONSTRUCTION EXPENDITURES (excluding allowance for funds used during construction)........................
1977
$39,328 28,046 (9,786) 164 6,953 64,705 (31,377) 33,328 30,870 32,100 (11,950) 51,020 44,708 1,315 46,023
$130,371 The Notes to Financial Statements are an integral part of the above statements.
DELMARVA POWER & LIGHT COMPANY and Subsidiary Companies 1976 (Note 2)
$36,435 25,367 (9,439) 4,187 2,577 59,127 (29,868) 29,259 33,524 5,221 38,745 (2,255) 792 (1,463)
$66,541 15
CONSOLIDATED BALANCE SHEETS As of December 31 16 (Thousands of Dollars)
ASSETS UTILITY PLANT, AT ORIGINAL COST:
Electric................................................
Gas......................................... *** **** ***
Steam.................................................
Common..............................................
Less: accumulated depreciation..........................
Construction work in progress..........................
NONUTILITY PROPERTY AND OTHER INVESTMENTS..
CURRENT ASSETS:
Cash (and temporary cash investments in 1976)...........
Special deposit for pollution equipment..................
Accounts receivable....................................
Deferred fuel expense..................................
Deferred gas purchased costs...........................
Materials and supplies, at average cost:
Fuel (coal and oil)....................................
Operation and construction...........................
Prepayments..........................................
DEFERRED DEBITS:
Preliminary survey and investigation charges.............
Other.................................................
TOTAL.................................................
1977
$883,032 56,462 22,273 18,179 979,946 245,216 734,730 158,685 893,415 4,008 15,317 11,857 30,470 3,766 4,318 21,770 19,841 3,118 110,457 11,481 8,059 19,540
$1,027,420 The Notes to Financial Statements are an integral part of the above statements.
DELMARVA POWER & LIGHT COMPANY and Subsidiary Companies 1976 (Note 2)
$754,139 54,917 22,223 17,993 849,272 220,979 628,293 155,028 783,321 3,106 62,610 23,617 35,607 4,785 2,709 21,113 17,862 3,067 171,370 9,496 7,013 16,509
$974,306
LIABILITIES 1977 CAPITALIZATION:
Sti~~fe~~~~~tiX~~ ~~~-t~ -~).:............................
$105,226 Common stock.......................................
218,606 Retained earnings....................................
107,607 431,439 Long-term debt........................................
428,905 860,344 CURRENT LIABILITIES:
Short-term debt........................................
32,100 Current maturity of long-term debt......................
Accounts payable......................................
8,180 Taxes:
Accrued.............................................
4,280 Deferred............................................
4,077 Interest accrued........................................
8,910 Dividends declared.....................................
6,835 Other.................................................
3,184 67,566 DEFERRED CREDITS AND OTHER:
Net credit arising from sale of contracts for nuclear plant.....................................
69,415 Accumulated deferred income taxes......................
12,079 Accumulated deferred investment tax credits.............
17,170 Other.................................................
846 99,510 CONTINGENCIES (Note 10) AND COMMITMENTS (Note 11)
TOTAL.................................................
$1,027,420 The Notes to Financial Statements are an integral part of the above statements.
DELMARVA POWER & LIGHT COMPANY and Subsidiary Companies 1976 (Note 2)
$105,226 187,736 99,656 392,618 430,920 823,538 10,000 15,811 4,067 3,812 8,938 5,723 3,055 51,406 74,221 5,391 13,406 6,344 99,362
$974,306 17
18 CONSOLIDATED STATEMENTS OF RETAINED EARNINGS For the years ended December 31
{Thousands of Dollars) 1977 1976 (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 24,127 7,250 22,618 Common stock.........................................
BALANCE, DECEMBER 31...............................
31,377
$107,607 29,868
$ 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:
Financial Statements:
The consolidated financial statements include the ac-counts of the Company and its subsidiary companies, all of which are wholly-owned. The accounts are maintained in accordance with the uniform systems of accounts pre-scribed by the regulatory commissions having jurisdiction with respect to accounting matters.
Revenue:
Revenues are billed to customers on a monthly cycle basis and include rate increases permitted to be.billed subject to refund, pending final approval. At the end of each month, there is an amount of unbilled electric and gas service which has been rendered from the last meter read-ing to the month-end.
Fuel Costs:
Fuel costs are deferred and charged to operations on the basis of the fuel cost per kilowatt hour included in cus-tomer billings. For tax purposes fuel costs are expensed as incurred. Approval was received during 1976 to modify the Company's resale and certain retail fuel adjustment clauses to permit more timely recovery of fuel expense under these clauses. Also in 1976, approval was received from the Delaware Public Service Commission to recover the deferred fuel balance relating to Delaware retail cus-tomers at March 31, 1976, aggregating approximately
$4,830,000, over a three-year period from June 1, 1976.
The Company's share of nuclear fuel costs relating to jointly-owned nuclear generating stations (including es-timated costs of storing spent fuel) is charged to fuel ex-pense on a unit of production basis.
Notes, continued Gas Purchased Costs:
Prior to 1977, the Company charged gas purchased costs to operations as incurred, as there was no assurance that all such costs would be recovered under the application of the Company's gas production cost adjustment clause. On January 24, 1978, the Delaware Public Service Commission approved an amendment to the clause, retroactive to July 1, 1976, that provides an annual billing adjustment for any difference between gas purchased costs incurred and billed. Accordingly, such costs are deferred and charged to operations on the basis of gas purchased costs included in customer billings. See Note 2 for additional information concerning deferred gas purchased costs.
Depreciation and Maintenance:
The annual provisions for depreciation are computed by the use of composite rates applied on the straight-line method for financial accounting purposes and principally on accelerated methods for income tax purposes. The ef-fect of this difference in recording depreciation is a reduc-tion in income taxes, the benefit of which, effective with respect to additions to utility plant after 1974, is deferred (normalized) for credit to subsequent years when financial accounting expense exceeds tax expense.
The cost of maintenance and repairs, including renewals of minor items of property, is charged to operating ex-penses. A replacement of a unit of property is accounted for as an addition to and a retirement from the utility plant account. The original cost of the property retired is charged to accumulated depreciation together with the net cost of removal. For income tax purposes the cost of re-moving retired property is deducted as an expense. Provi-sions for decommissioning costs relating to jointly-owned nuclear generating units is not currently made.
Investment Tax Credit:
Investment tax credits utilized to reduce federal income taxes are deferred for financial accounting purposes and credited to income over subsequent five-year periods.
Allowance for Funds Used During Construction:
Allowance for funds used during construction (AFUDC) is a noncash item and is defined in regulatory systems of accounts as the net cost, during the period of construction, of borrowed funds used for construction purposes and a reasonable rate for other funds so used. The allowance is considered a cost of utility plant and a credit to income; for income tax purposes, the allowance is excluded from tax-able income.
The rate used in determining the allowance for funds used during construction was 8% in 1976 and 7.4% in 1977. The latter rate was determined in accordance with a formula prescribed by the Federal Energy Regulatory Commission (formerly the Federal Power Commission).
The Commission also required, effective January 1, 1977, the segregation of allowance for funds used during con-struction into two components: the interest on debt com-ponent ("allowance for borrowed funds used during con-struction") is classified as a credit to interest charges, and the common stock equity and preferred dividend com-ponent ("allowance for other funds used during con-struction") continues to be classified as an item of other income. The consolidated financial statements of prior years have been reclassified for comparative purposes.
Pension Plan:
The Company and subsidiaries have a trusteed noncon-tributory pension plan covering all of their regular em-ployees. Pension contributions (aggregating $5,807,000 for 1977 and $4,950,000 for 1976), are charged principally to operating expenses and provide for normal cost and amor-tization of prior service costs over a period of approx-imately twenty years. At December 31, 1977, the prior service costs exceeded the market value of the assets in the retirement fund by approximately $16,600,000. As of the same date, the market value of the fund assets exceeded the actuarially computed value of vested benefits.
Capital Stock Expenses:
The premiums on preferred and common stock are stated net of the expenses related to the issuance of such stock.
19
20 Notes, continued
- 2. Rate Matters:
(a) Deferred gas purchased costs -
On January 24, 1978, the Delaware Public Service Commission approved a gas rate increase that would provide approximately $4,500,000 of additional base revenues on an annual basis. The Commission's order also provided for the recovery, over the twelve month period beginning February 1978, of un-billed gas production costs for the period July 1, 1976 to December 31, 1977, and annual billing adjustments there-after for differences between gas production costs incurred and billed.
Pursuant to this order, the Company has deferred
$4,318,000 of gas production costs at December 31, 1977, of which $2,709,000 relates to 1976. Accordingly, the appli-cable purchased gas and related tax accounts and retained earnings for the year 1976 have been restated. The effect of the restatement upon previously reported 1976 earnings applicable to common stock was as follows:
As originally reported Adjustment As restated Earnings Applicable to Common Stock
($000)
$27,878 1,307
$29,185 Earnings Per Average Share
$1.48
.07
$1.55 The effect of the deferral for the year 1977 was to increase earnings applicable to common stock and earnings per average share by $764,000 and $.04, respectively.
(b) Resale rate orders -OnJuly 1, 1977 the Federal Power Commission issued orders that (i) approved the settlement reached on February 2, 1977 between the Company and intervenors in connection with electric resale rates that became effective as of April 1, 1976, subject to refund, (ii) upheld the disallowance by an Administrative Law Judge of a surcharge that became effective on April 1, 1976, subject to refund, to recover the deferred fuel balance relating to resale customers and (iii) approved the settle-ment reached on November 3, 1976 between the Company and intervenors in connection with electric resale rates that became effective in October 1974, subject to refund. These orders were anticipated and the appropriate adjustments to the revenue and related accounts were previously re-corded in the applicable accounting periods.
- 3. Taxes on Income:
Operations:
Federal income State income.................
Deferred income, net.........
Investment tax credit 1977
$ (493) 1,038 6,953 adjustments, net...........
164 7,662 Other income..................
1,050
$8,712
($000) 1976
$(3,068) 320 2,577 4,187 4,016 2,418
$6,434 The Company's effective income tax rates for financial reporting purposes were substantially less than the federal s ta tu tory rate of 48 %. The reasons for these differences are as follows:
1977
($000) 1976 Amount Rate Amount Rate Statutory income tax expense $23,059 48% $20,577 48%
Reduction in taxes resulting from:
Excess of tax depreciation over book depreciation not normalized.......
(5,141)
(11)
(5,951)
(14)
Exclusion of AFUDC for income tax purposes..
(4,697)
(10)
(4,531)
(10)
Investment tax credits amortized to income...
(3,560)
(7)
(2,364)
(6)
Other, net..............
(949).fil_ (1,297) _Q2_
Income tax expense.......
$8,712 18%
$6,434 15%
Notes, continued Investment tax credits utilized to reduce federal income taxes payable amounted to approximately $7,300,000 for 1977 and $6,500,000 in 1976. The amount for 1977 includes approximately $3,600,000 of credits utilized to offset the increase in taxes relating to the sale of contracts (see Note 8). At December 31, 1977, the company had approximately
$5,000,000 of unused investment tax credits available to reduce future federal income taxes payable.
The components of deferred income taxes relate to the following tax effects of timing differences between book and tax income:
1977 Depreciation.................... $ 4,835 Deferred fuel expense............
(1,359)
Rate refunds....................
2,632 Deferred gas purchased costs..... __
84_ 5
$ 6,953
- 4. Taxes Other Than Income:
Delaware utility................
Property.......................
Franchise and gross receipts.....
Social Security..................
Other..........................
- 5. Capital Stock:
1977
$ 6,238 4,896 3,685 1,681 574
$17,074
($000) 1976
$ 2,795 (420)
(1,200) 1,402
$ 2,577
($000) 1976
$ 5,214 4,525 2,093 1,521 488
$13,841 A new class of preferred stock ($25 par, cumulative, 3,000,000 shares) was authorized during 1977. No shares are outstanding at December 31, 1977.
Preferred stock $100 par, cumulative (authorized 1,800,000 shares) outstanding at December 31, 1977, re-deemable at the option of the Company, was as follows:
Series 3.70%-5%
7.52%-7.88 %
8%-8.96%
Shares 320,000 450,000 280,000 1,050,000 Redemption Prices per Share at 12/31/77
$103-$105 107-108 108-109 Premium on preferred stock Par Value
($000)
$ 32,000 45,000 28,000 105,000 226
$105,226 Changes in common stock (par value $3.375, authorized 25,000,000 shares) and related premium for the period January 1, 1976 to December 31, 1977 were as follows:
Aggregate Par Value Premium Shares
($000)
($000)
Balance, January 1, 1976.... 18,652,779
$62,953
$119,562 Issuance of common stock for Dividend Reinvestment and Common Share Purchase Plan...........
236, 171 798 2, 179 Issuance of common stock for acquisition of certain utility plant..............
187,069 Balance, December 31, 1976. 19,076,019 Sale of common stock...... 2,000,000 Issuance of common stock for Dividend Reinvestment and Common Share 631 64,382 6,750 Purchase Plan...........
282,524 953 Balance, December 31, 1977. 21,358,543
$72,085 1,613 123,354 20,330 2,837
$146,521 At December 31, 1977 there were 321,181 shares of common stock reserved for issuance under the Dividend Reinvestment and Common Share Purchase Plan.
The current Supplemental Indenture restricts the amount of consolidated retained earnings available for cash dividend 21
22 Notes, continued payments on common stock to $29,600,000 plus ac-cumulations after June 30, 1975, which available amount at December 31, 1977 was approximately $46,000,000.
- 6. Long-Term Debt:
Long-term debt outstanding at December 31, 1977 was as follows:
First mortgage and collateral trust bonds:
Principal Amount
($000) 2% % Series, due 1979........................ $ 10,000 12,000 30,000 45,000 75,000 23/4 % Series, due 1980........................
9%% Series, due 1983........................
31/s%-3%% Series, due 1984-1988..............
4%%-7% Series, due 1994-1998................
71/2%-8 3/4 % Series, due 2000-2002..............
8%-11 % Series, due 2003-2005.................
Pollution control notes:
Series 1973, 5.9% effective rate, due 1983-1998..............................
Series 1976, 7.3% effective rate, due 1992-2006..............................
Unamortized premium and discount 125,000 88,050 385,050 8,000 34,500 42,500 on debt, net...............................
1,355
$428,905 The annual interest requirements on the qbove indebtedness at December 31, 1977 are $31,166,000.
Substantially all utility plant of the Company now or hereafter owned and all securities issued by its sub-sidiaries are subject to the lien of the related Mortgage and Deed of Trust.
- 7. Short-Term Debt:
Established bank lines of credit as of December 31, 1977 amounted to $75,000,000 all of which, when in use, bear interest at the prime rate. The Company is required to maintain a 10% compensating balance on these lines when not in use and an additional 10% balance when in use.
There was no short-term debt outstanding during 1976 or the first six months of 1977. Average short-term debt outstanding during the last six months of 1977 was
$25,100,000 (consisting of commercial paper), with an av-erage interest rate of 6.4%. The maximum short-term bor-rowing during this period was $45,000,000. The average rate of interest on short-term debt outstanding at Decem-ber 31, 1977 (consisting of commercial paper) was 6.7%.
- 8. Sale of Contracts for Nuclear Plant:
The proceeds received by the Company for the sale, in 1975, of the contracts for a nuclear steam supply system and related fuel, net of plant expenditures which were considered of no future value to the Company are clas-sified as a deferred credit in the balance sheet. It is the intention of the Company to reduce the cost of sub-sequent, alternative plant expenditures by the amount of the net proceeds.
The Company, under advice of Counsel, is not treating the sale of these contracts as taxable for federal and state income tax purposes. Accordingly, the tax basis of the Company's depreciable property was reduced by the amount of the net proceeds. The annual tax effect of the resulting decrease in tax depreciation is currently being classified as a reduction of the deferred credit balance. If this transaction is ultimately considered taxable, ad-ditional taxes payable at December31, 1977would approx-imate between $16 million and $27 million (including utili-zation of available investment tax credits) and would be charged to the aforementioned credit balance.
Notes, continued
- 9. Segment Information:
Segment information for the year ended December 31, 1977, is as follows:
($000)
Electric Gas Steam Total Operating revenues.... $291,568 $36,233 $10,017 $ 337,818 Operating expenses:
Depreciation.......
Other.............
25,611 208,519 234,130 1,683 752 28,046 30,884 8,342 247,745 32,567 9,094 275,791 Operating income...... $ 57,438 $ 3,666 $
923 $
62,027 Assets at December 31, 1977:
Net utility plant......... $686,271 $41,800 $ 6,659 $ 734,730 Construction work in progress.......... 157,888 200 597 158,685 Total utility plant.......... 844,159 42,000 7,256 893,415 Other identifiable assets...............
Unallocated assets......
Total assets......
51,591 9,652 309
$895,750 $51,652 $ 7,565 61,552 954,967 72,453
$1,027,420 Operating income by segment is reported in accordance with generally accepted accounting and rate-making prac-tices within the utility industry and, accordingly, includes each segment's proportionate share of taxes on income and general corporate expenses. Construction ex-penditures in 1977 for other than electric facilities were not significant.
- 10. Contingencies:
See Note 8 for possible payment of income taxes relating to the sale of contracts.
The Company has been named defendant in two anti-trust suits filed in July and August 1977 by four Delaware municipal electric wholesale customers of the Company, seeking declaratory, injunctive, and treble damage relief under the Sherman and Clayton Acts. Plaintiffs allege that the Company has prevented them from competing for customers in their respective service areas by charging discriminatory and unreasonably high wholesale electric rates, monopolizing production, transmission and sale of bulk power, and engaging in other such restraints of trade.
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 earliest stages and, until plaintiffs have articulated a theory of damages, it is not possible to quantify the Company's exposure to liability, if any, or to comment on the validity, as a matter of law, of the damage claims. The Company believes the suits to be without merit and legal counsel believes the Company has material substantive defenses available to it.
The electric retail order issued by the Delaware Public Service Commission in August, 1977, approving a
$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.
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.
Public liability insurance on the nuclear generating units in which the Company has an ownership participation is 23
24 I_
Notes, continued currently provided by a combination of private insurance and indemnity agreements with the Nuclear Regulatory Commission (NRC). Since August 1977, however, the in-demnity by the NRC has decreased and, in the event of a nuclear incident involving any facility covered by govern-ment indemnification, the Company could be assessed up to $375,000 for each reactor owned (maximum of $750,000 per reactor in a year). The United States Supreme Court is reviewing the constitutionality of the limit of liability under the Price-Anderson Act. For property damage to the nuclear plant facilities, the Company and its co-owners have private insurance up to $175 million for the Salem Station and $220 million for the Peach Bottom Station.
Because the possibility of a nuclear incident is considered to be highly unlikely, the Company is a self-insurer, to the extent of its ownership interests, for any property loss in excess of the aforementioned amounts.
- 11. Commitments:
The Company is constructing a fossil fuel unit estimated to cost approximately $229,000,000. At December 31, 1977 construction commitments for the aforementioned plant and other facilities aggregated approximately
$209' 000' 000.
- 12. Quarterly Financial Information (Unaudited):
Minimum rental commitments as of December 31, 1977 under all noncancelable agreements are as follows:
1978........................................ $ 6,021,000 1979.........................................
5,833,000 1980.........................................
5,580,000 1981.........................................
5,280,000 1982.........................................
2,688,000 Remainder...................................
22,558,000 Total
$ 47,960,000 The total minimum rental commitments are applicable to the following types of property: Company's share of Peach Bottom nuclear fuel, $10,446,000 (estimated to be charged to operations over a four-year period); fuel stor-age and pipeline facilities, $31,563,000; railroad coal cars,
$3,753,000; other, principally computer equipment,
$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.
The aforementioned leases are generally operating leases as defined by Statement of Financial Accounting Standards No. 13. Those leases that meet the criteria of capital leases are not accounted for as such in the rate-making process, and, if capitalized, would not have a significant effect on assets, liabilities or expenses.
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
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.
1900 Three Girard Plaza Philadelphia, Pennsylvania February 3, 1978 COOPERS & LYBRAND
~"~~::...,,..dW'V'"W 19&7/19.,...
CONSOLIDATED STATISTICS 26 10 Years of Progress... 1967 - 1977 1977 1976 1975 1974 19j ELECTRIC REVENUES (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 cubic 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-hours)
Stearn delivered.........
4,888,366 5,301,421 5,517,000 5,921,000 5,926 (1,000 pounds)
- Restated
r1972 1971 1970 1969 143,878
$ 36,198
$30,992
$27,857 31,810 25,468 21,430 19,333 35,962 28,903 24,069 22,483 16,833 12,964 10,175 8,936 2,857 1,209 530 513 31,340
$104,742
$87,196
$79,122 l63,821 1,380,763 1,280,420 1,151,108
~27,230 1,099,897 1,009,488 923,064 U2,239 2,252,219 2,264,084 2,217,655 37,272 1,014,972 885,720 792,151
~ 40,562 5,747,851 5,439,712 5,083,978
~ 00,595 193,282 187,683 183,458 25,856 25,139 24,383 24,058 869 810 834 815 496 460 375 283 27,816 219,691 213,275 208,614
,12,944
$11,948
$11,283
$10,708
. 3,532 3,126 2,861 2,555 3,265 2,998 2,618 2,641 1,035 1,153 1,340 1,222 25 16 10 7
18 39 225 251 S20,819
$19,280
$18,337
$17,384 7,737 7,583 7,406 6,942 2,696 2,534 2,384 2,097 3,875 3,797 3,549 3,700 2,134 2,708 3,423 3,263 20 13 8
6 16,462 16,635 16,770 16,008 69,891 69,604 68,614 68,074
' 4,407 4,426 4,444 4,423 195 204 206 103 21 21 21 19 1
1 1
1 74,515 74,256 73,286 72,620 95,236 272,649 244,614 281,120 61,000 7,564,000 7,779,000 7,536,000 1968 1967
$25,487
$22,900 17,754 16,377 20,120 16,471 7,962 7,099 504 497
$71,827
$63,344 1,037,223 910,548 856,258 774,382 2,048,776 1,633,827 708,899 629,643 4,651,156 3,948,400 178,948 174,039 23,474 22,966 806 760 281 281 203,509 198,046
$10,290
$10,041 2,207 1,980 2,536 2,032 1,155 1,293 8
8 215 204
$16,411
$15,558 6,601 6,432 1,770 1,564 3,455 2,659 3,089 3,447 6
7 14,921 14,109 67,270 66,079 4,341 4,225 93 95 19 16 1
1 71,724 70,416 265,824 276,598 7,296,000 7,390,000 Average Annual Compound%
Rate of Growth ELECTRIC REVENUES 15.61 Residential 16.38 16.64 18.57 21.42 16.49 7.77 6.81 3.38 6.76 5.75 2.97 2.59 1.94 7.16 2.93 8.08 13.67 13.09 (18.41) 19.87 (6.61) 8.82 0.49 4.54 0.56 (31.28) 9.28 (1.53) 0.43 (0.19) 7.51 2.76 0.41 0.44 (4.05)
Commercial Industrial Other utilities, etc.
Miscellaneous revenues Total electric revenues ELECTRIC SALES Residential Commercial Industrial Other utilities, etc.
Total electric sales ELECTRIC CUSTOMERS Residential Commercial Industrial Other utilities, etc.
Total electric customers GAS REVENUES Residential Commercial Industrial Interruptible Other utilities, etc.
Miscellaneous revenues Total gas revenues GAS SALES Residential Commercial Industrial Interruptible Other utilities, etc.
Total gas sales GAS CUSTOMERS Residential Commercial Industrial Interruptible Other utilities, etc.
Total gas customers REFINERY SERVICE Electricity delivered (1,000 kilowatt-hours)
Steam delivered (1,000 pounds) 27
28 Board of Directors Werner C. Brown Chairman of the Board of Hercules, Inc.
(chemical manufacturer) Wilmington, Delaware Mrs. Hen!Y P. Cannon, II Director of H. P Cannon & Son, Inc. (food processing firm) Bridgeville, Delaware Oscar L. Carey President and Director of Larmar Corporation (general real estate and home builders) Salisbury, Maryland Irenee du Pont, Jr.
Senior Vice President and Director of E. I.
duPont de Nemours & Company (chemical manufacturer) Wilmington, Delaware CANNON Austin T. Gardner Retired, former Chairman of the Board, President and Chief Executive Officer of the Company Dr. Earl C. Jackson, Sr.
Retired, former S'uperintendent of the Wilmington Public Schools Wilmington, Delaware William G. Price Senior Vice President of the Company Thomas C. Roe Chairman of the Board of the Company JACKSON Dr. E. Arthur Trabant President of the University of Delaware Newark, Delaware Tames M. Tunnell, Jr.
'Partner of Morris, Nichols, Arsht &
Tunnell, attorneys Wilmington, Delaware Robert D. Weimer President and Chief Executive Officer of the Company Executive Committee -
Werner C.
Brown, Chairman ; lrenee du Pont, Jr.;
Austin T. Gardner; Thomas C. Roe; James M. Tunnell, Jr.; Robert D. Weimer Audit Committee -
James M.
Tunnell, Jr., Chairman; Werner C. Brown; Oscar L. Carey TUNNELL
Officers Thomas C. Roe Chairman of the Board 42 Years Service Robert D. Weimer President and Chief Executive Officer 30 Years Service H. Rav Landon Senior Vice President 14 Years Service William G. Price Senior Vice President 7 Years Service J. Kenneth Wiley Senior Vice President 3 Years Service Tames A. Clark, Jr.
Vice President, Electric and Gas Operations, and President of Delmarva Energy Company 28 Years Service Tames L. Hammond Vice President, Finance & Accounting 19 Years Service T. Edwin Hobbs Vice President of the Company and President of Delmarva Power & Light Company of Maryland and Delmarva Power & Light Company of Virginia 44 Years Service Earl D. Krapf Vice President, Corporate Planning and Regulatory Practice 20 Years Service George T. Pinto Vice President, Administrative Services 29 Years Service Edward F. Spear Vice President, Corporate Communications and Customer Services 31 Years Service Alfred C. Thawley, Jr.
Secretary and Treasurer 22 Years Service William E. Rossell, Sr.
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 Our Service Area The Company was incorporated in Delaware in 1909. In 1943 the Company acquired its subsidiaries, Delmarva Power & Light Company of Maryland and Delmarva Power & Light Company of Virginia. A third subsidiary, Delmarva Energy Company, was formed in 1975 to explore for gas in a limited partnership with several other firms.
Delmarva Power provides electric service throughout most of the 5,700 square-mile Delmarva Peninsula. This area includes the State of Delaware, portions of nine Eastern Shore Counties of Maryland and the two Eastern Shore Counties of Virginia. In addition, the Company distributes natural gas in a 270 square-mile area in Northern Delaware.
Locations of the Company's major generating stations on the peninsula are indicated on the map. In addition, the Company receives generation from two coal-burning stations in Western Pennsylvania and from the Peach Bottom, Pennsylvania, and Salem, New Jersey, nuclear power stations.
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- Cities 29
- Power Stations
Delmarva Power & Light Company 800 King Street P.O.Box 231 Wilmington, Delaware 19899 U.S. POSTAGE PAID Wilmington, De.
Permit No. 68 Zip Code 19899