ML19206A230

Annual Rept 1970

ML19206A230
Person / Time
Site:	Crane
Issue date:	03/25/1971
From:	Cox F Metropolitan Edison Co
To:
References
NUDOCS 7904180410
Download: ML19206A230 (12)

Text

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~ T-w : ~- -~-- -~-~ METROPOLITAN EDISON COMPANY A SUBSIDIARY OF GENERAL PUBLIC UTILITIES CORPORATION DIRECTORS TRUSTEE-FIRST MORTGAGE BONDS MORGAN GUARANTY trust COMPANY J. I.EE BAusHER JOHN G. bhLLER Or NEw YORK FREDERIC COx GEORGE J. SCHNEIDEL 23 Tall Street WA1.TER M. CREITz RosERT H. SIMs New York. N. Y. 10015 WILLIAM G. KUHNS FloYD J. SMirH EDWARD S. I OANE TRUSTEE - DEBENTURES MARINE MIDLAND BANK-NEw YORK 140 Brcadway EXECUTIVE COMMITTEE Ne-Ymk. N. Y. 20015 FREDERIC Cox . Chairman WILLIAM G. KUHNs PREFERRED STOCKS FLOYD J. SMmt WALTER M. CREITZ . Alterna!t TRANSFER AGENTS GEORGE J. SGINEIDER ........ Alternals AMERICAN BANK AND TRUST CO. or PA. 35 N. 6th Street Reading. Pa. 19601 CHEMm BANx OFFICERS 20 Pine Street FREDERJC COx........... .... President New York. N. Y. 10015 WALTER M. CREITz ...Vice President JOHN G. bbLLER.. ....Vice President REcl5TRARS ERNEST W. SCHLEICHER....... Vice President GrRARD TRUST BANK GroRGE J. SCHNEmER.........Vict President Broad and chestnut Streets FLoYD J. SurrH ..Vice President philadelphia, Pa. 19101 RAYMOND E. WERT5 ..,,,..,,,,, Cornptrollar MANUFACTURERS HANOVER trust COMPANY . Treasurer RosERT E. GEHMAN..... 40 Wall Street WILBUR D. Hot.uNGER... . Secretary New York, N. Y. 10015 RICHARD 1. RUTH . Asst. Secretary RnatutD E. WHrTE . Asst. Comptroller l PRINCIPAL OFFICE 2800 Pottsville Pike, Muhlenberg Township, ANNUAL MEETING Berks County, Pa. [; SECOND MONDAY IN MAY Mailing Address. P. O. Box 542 Reading. Pa.19605 l 1 J, [ On July 31,1970, John A. Dunlap retired as Vice Secretary. Mr. Gehman had been Assistant Treasurer. President-Finance of Metropolitan Edison Company. Walter M. Creitz, Vice President and Western Divi. t His retirement, after nearly a half-century service to sion Manager and a Director, was named as an alter. the electric utility industry, was accepted by the Board nate on the Executive Committee to fdl the vacancy k of Directors with regret and expressions of apprecia-created when Mr. Dunlap retired. tion for the years of dedicated service. In December, Richard E. White was named As. ( In May, John G. Miller, Met Ed Vice President sistant Comptroller. At the same meeting, Robert H. y and Chief Engineer, was elected to the Board of Di. Sims, who is Vice President of Generation and System Operations for Jersey Central Power & I.ight Com-rectors. pany and New Jersey Power & I.ight Company, was [ In August, Robert E. Gehman was elected Tr:2s. y urer and William D. Hollinger, who had been Secre. elected a Director of Met.Ed. f tary-Treasarer, was given full-time responsibility as on4 f$ uas y t A b 4 .B

1 TO THE SECURITY HOLDERS OF MET ED: Our edorts to produce the increased earnings needed to permit the Enancing of our vital construction pro-grams began to show some results in 1970. Gross revenue s!. owed a $19.2 million--or 21.4 per cent increase over 1960 Of that, $9.7 millior was due to rate relief granted during the year, $5.9 million was due to increased sales to our customers, and $3.6 million represented the Pennsylvania State Tax Surcharge which we collected for the State from our customers. However, the increase in gross revenue was substantially odset by new and higher taxes, by interest rates, rising fuel prices, and other indationary costs. In September 1969, we filed a request with the Pennsylvania Public Utility Commission for a rate increase of $18.5 million, 2nd also requested interim relief until all testimony and examinations could be completed. The Pennsylvania Public Utility Commission granted an interim rate incre2se of $9 million edective February 12,1970. After all the hearings we're completed, the Pennsylvania Public Utility Commission granted a total increase of $16.5 million edective September 1,1970. The Pennsylvania Public Utility Commission also allowed Afet Ed (and all other Pennsylvania utilities) to include on their bills a State Tax Adjustment Surcharge to compensate for additional taxes imposed by legislation; Since fuel costs were and are continuing to increase rapidly, Afer-Ed 61ed a request with the Pennsylvanis Public Utility Commission for a fuel cost adjustment clause. This was 61ed in November and became edective January 8, 1971. In another Eling in November, Afet-Ed requested and subsequently was granted an increase in the rates and a fuel cost adjustment clause for steam heating service in the City of York. The number of customers served by Afet Ed increared 1.9 per cent, or 5,688 over 1969, for a total of 302,437. The average residential use of electricity increased by a record 450 kilowatthours, to 6692 KWH per residential customer. At the end of 1970, Afet-Ed served 13,503 all electric homes, a 22 per cent increase of 2,475 homes dur-ing the year. Both the commercial and industrial loads continue to grow. As a result, despite a cool summer, we experienced a summer peak of 1134 megawatts, which was then exceeded by a peak in December of 1188 megawatts. Construction delays and operating problems resulted in keeping much needed generating equipment out of service, so that our costs for power purchased and interchanged increased. On the positive side, our construction program has continued at a rapid pace. The 6rst 820,000 KW unit of the mine-mouth Conemaugh Station came en the line Afay 21,1970. Afet Ed's share of this unit amounts to 135,000 KW. This unit has operated very well and has had few problems. The second unit is scheduled to go in service be-fore the 1971 summer peak and will add another 135,000 KW to Afet-Ed's capacity. In addition, we installed a combustion turbine at our Titus Station to add 17,000 KW of peaking capacity. Construction was started for the installation of six additional combustion turbmes of 24,000 KW each, that are expected to become operational in 1971. Construction of our Three Afile Island Nuclear Station continued. Unit #1 is scheduled to be in service in 1973 and Unit #2 in 1974. The station will have a capacity of 1,660,000 KW when completed. At present, Afetropolitan Edison Company owns a 50% interest: Jersey Central Powei & Light Company and Pennsylvania Electric Company each own a 25Q interest in this plant. However, studies are in progress to determine whether it would be preferable to organize a separate generating company to own and operate the eion and sell the output to the other System companies. Pollution and the environment continued to be a matter of great concern both to us and to our customers. The low pressure boilers at Crawford Station, Afiddletown, were converted to burn oil and improvements were made to the pollution control equipment on the coal burning high pressure boiiers. These improvements cost approximately $900,000, and in addition, increased the fuel costs at this station. Work has also been started on the ccnversion of Eyler Station in West Reading from coal to oil. This will be completed in 1971. We have continued our work to improve appearances by using modern transmission tower designs along with right-of-way screening, selective clearing and seedling planting. In the past years, we have been encouraging un-derground distribution in new developments, but during the year the Pennsylvania Public Utility Commission made underground construction mandatory for such developments. We have also improved the appearance of our existing substations and emphasized landscaping and new designs for our newer substations. However, our primary objective is to continue to provide adequate, reluble electric service at the lowest cost attainahie. This will be possible only if we have earnings adequate to support the issuance of the large amounts of securities necessary to 6 nance our construction program. Reading, Pennsylvama Atarch 25,19H Preiller:t j I o rm vAj

- we .m. ... ~.,. _.. _.. ~. - - ELECTRIC GENERATION AND SALES STATISTICS 1970 1969 1968 196Y 1966 CENERATlHQ CAPACITIES & PEAKS: Installed Capacity-KW.... 1,045,000 898,000 894,300 894,300 859,300 161,100 Firm Power Purchases........ 1,206,100 898,000 894.300 894,300 859.300 Totals 1,183.000 1,139,000 1,021,000 912,000 864,000 Annual Peak Load..... NET SYSTEM LOAD (megawatt hours): Net Generation 4,866,081 5,173,156 5,223,030 5,122,761 5,117,216 Purchased......... 952,743 70,180 99,333 70,159 63,326 1,182,553 1,185,042 605,266 196,317 (168,480) Net Interchange 7,001,377 6,428,378 5,927,629 5,389,237 5,012,062 Net System Load. STEAM PRODUCTION DATA: Average Btu (per net KWH)... 10,685 10,623 10,377 10,116 10,192 Fuel Cost (e per million bru) 42.7 35.3 32.2 31.1 30.0 Cost of Fuel (mills per KWH) 4.56 3.75 3.34 3,15 3.05 Total Production Ccsts (mills per KWH) 6.39 4.96 4.47 4.13 3.94 ENERGY SALES (megawatt hours): Residential.. 1,757,528 1,606,275 1,471,444 1,338,981 1,231,031 1,019,475 932,427 836,976 757,344 710,415 Commercial......... Industrial 3,129,021 2,885,383 2,647,637 2,449,033 2,344,263 All Other.. 503.849 445,441 397,953 335,121 218,111 6,409,873 5,869.526 5,354,010 4,880,479 4,503,820 Totals.............. ~ Gain Over Prior Year..... 9.29 9.69 9.79 8.49 10.5 9 OPERATING REVENUES (in thousand $): Fesidential........ $ 40,462 $ 32,805 $ 30,519 $ 28,185 $ 26,328 22,036 17,630 16,274 14,990 14,169 bmmercial 'dustrial... 37,157 30,646 28,773 27,199 26,135 6,804 5,634 5,023 4,374 3,435 sther..... Tot 21, frem KWH Sales..... S 100,459 $ 86,715 $ 80,589 $ 74,74d $ 70,067 2,049 2,668 2,719 1,335 642 Other Revenues.......... $ 108.508 $ 89,383 $ 83,308 $ 76,083 $ 70,709 Totals Gain Over Prior Year................ 21.4 5 7.39 9.59 7.6% 6.3% C1,STOMERS--YEAR END: Residential 265,379 260,075 254,996 250,551 246,646 32,324 31,963 31,588 31,119 30,773 Commercial........ 2,457 2,480 2,474 2,515 2,565 Industrial... All Other... 2,277 2,231 2,'75 2,124 2,062_ 302,437 296,749 291,233 286,309 282.046 Totals AVERAGE USE, BILL AND PRICE: Residential Customers: - 5,386 5,033 KWH Use Per Customer 6,692 6,242 5,823 $154.06 $127.49 $120.77 $113.38 $107.64 Annual Bill 2.30p 2.04( 2.07 2.10( 2.14( Price Per KWH.. ( ) Indicates red 6gure, e[ ' fj

METROPOLITAN EDISON COMPANY STATE 31ENTS OF INCOh!E For the Years Ended December 31,1970 and 1969 1970 1969 OPERATING REVENUES.. $108,834,519 $89,664,890 OPERATING EXPENSES: Operation..... $ 39,515,555 $35,709,294 ~ Power purchased and interchanged: AfEliates 3,944,546 410,225 Others 19,589,619 12,323,092 hiaintenance... 10,912,760 7,651,898 Depreciation of utility plant (Note 2) 11,581,000 10,617,000 Federal incorne tax (Note 6).. (3,761,720) (337,203) State income tax (Note 6)... (40,500) 13,800 Amount equivalent to current investment tax credit (Note 6) 450,300 Amortization of accumulated investrnent tax credit (Note 6) (462,900) (377,600) Other taxes...... 7,899,284 3,199,555 Totals $ 89,177,644 $69,660,361 OPERATING INCOME $ 19,656,875 $ 20,004,529 OTHER INCOME AND DEDUCTIONS: Interest charged to construction--credit (Note 7) $ 9,303,673 $ 3,628,138 Other miscellaneous income, net (1,835) 37,023 Income taxes associated with other income, net... 41,500 (1,000) Totals $ 9,343,338 $ 3,664,iS1 GROSS INCOME........................................ $ 29,000,213 $23,668,6 0 INTEREST CHARGES: Interest on Erst mortgage bonds and debentures....... $ 11,176,074 $ 9,954,910 Amortization of premium and expense on debt...... (12,527) (11,093) Other interest expense 3,159,570 1,055,048 To tals......................... $ 14,323,117 $I O,999,865 N ET INCOM E.... $ 14,677,096 $12,669,825 ( ) Icdicates red 6gure. The accornpanying notes are an integral part of the financial st2tements. 3 f o".O/xl ,J..

METROPOLITAN EDISON COMPANY BALANCE SHEE'13 1 December 31,1970 and 1969 ASSETS: PROPERTY, PLANT AND EQUIPMENT (at original cost): Utility plant in se.vice and under construction $616,040,610 $ 521,569,708 Less, accumulated depreciation (Note 2) 113,670,094 106,835,159 Net utility plant..... $502,370,516 $414,734,549 Nuclear fuel..... 83,260 Net property, plant and equipment $502,453,776 $414,734,549 INVESTMENTS: Other physical property, at original cost.... 27,567 16,032 Other, at cost......... 531,204 531,307 To tals................................. 558,771 547,339 CURRENT ASSETS: Cash (Note 3) $ 8,708,001 $ 7,876,405 Accounts receivable (Note 6)......... 13,730,471 8,169,328 Materials and supplies (including construction materials), at average cost f orless......................................... 11,577,409 5,075,755 i Prepayments 269,589 316.220 g Other 866,121 824,007 To ta ls.................................. $ 35,151,591 $ 22,261,715 DEFERRED DEBITS: Charges related to proposed construction projects and other work. 828,444 569,341 977,924 485,890 Other $ 1,806,368 $ 1,055,231 To tals.................................... TOTAL ASSETS.............. $539,970,506 $438,598,834 The accornpanying notes are an integral past of the financial statements. r .e nm. 4

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9 O METROPOLITAN EDISON COMPANY BALANCE SHEETS December 31,1970 and 1969 t 1 1970 19s9 LIABILITIES AND CAPITAL: LONO. TERM DEBT, CAPITAL STOCK AND SURPLUS (see pages 6 and 7): First mortgage bonds and debentures $218,230,000 $218,750,000 Notes payable to banks due within one year to be re6nanced 44,000,000 34,000,000 Totals......... $262,230,000 $ 252,750,000 $ 23,391,200 $ 23,391,200 Cumulative preferred stock Premium on cumulative preferred stock...... 206,209 206,209 $ 23,597,409 $ 23,597,409 Totals. Common stock and surplus: Common stock.......... $ 66,273,400 $ 66,273,400 Capital surplus (Note 4).. 146,823,611 61,823,611 Un2ppropriated earned surplus (Note 5) 13,451,393 12,517,845 Totals. $226,548,404 $140.614,856 Tct21s. $512,375,813 $416,962,265 CURRENT LIABILITIES: Debentures due within one year...... 520,000 520,000 Accounts payable 15,288,408 10,905,165 Customer d eposits............................. 292,2'7 265,324 s Taxes accrued 2,363,787 1,238,533 Interest accrued 2,998,736 2,867,726 Other 1,364,638 1,170,919 Totals........ $ 22,827,826 $ 16,967,667 k DEFERRED CREDITS: Unamortized premium on debt 266,182 278,829 Other 187,139 207,135 Totals. 453,321 485,964 RESERVES: Unamortized investment tax credit (Note 6). $ 2,574,600 $ 3,037,500 Pensions (Note 11) 273,028 Other (Note 8) 99,575 106,275 Totals..................... $ 2,947,203 $ 3,143,775 CONTRIBUTION 3 IN AfD OF CONSTRUCTION $ 1,366,343 $ 1,039,163 TOTAL LIABILlYlES AND CAPITA',.. $539,970,506 $438,598,834 The accompanying notes are an integral part of the financial statements. y - 5 eJ. CD

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~.- x.n _n METROPOLITAN EDISON COMPANY STATEMENTS OF UNAPPROhuAT= r*~C SURPI.US For the Yetts Ended December 31,1970 and 1969 1970 1969 $ 12,517,845 $ 13,591,568 BALANCE, Beginning of year ADD, Net income (see statements oa page 3) 14,677,096 12,669,825 Totals................................... $ 27,194,941 $ 26,261,393 DEDUCT, Dividends on capital stxk: Cumulative preferreo stcac: 3.90 9 Se ries.......................................... 459,144 459,144 4.3 5 % Series........ 144,632 144,632 3.85% Series. 112,324 112,324 68,864 68,864 3.8 0 % Series..................................... 158,584 158.584 4.4 5 % Series.................................... Common stock....... 12,800,000 12,800,000 Totals....................................... $ 13,743,548 $ 13 743.548 $ 13,451.393 $ 12.517,845 BALANCE, End of year (Note 5) STATEMENTS OF SOURCE AND APPLICATION OF FUNDS For the Years Ended December 31,1970 and 1969 1970 1969 SOURCE OF FUNDS: $ 14,677,096 $ 12,569,825 Net income (see statements on page 3) Depreciation (Note 2)......... 11,581,000 10,617,000 !nvestment tax credit, less amortization (Note 6) (462,900) 72,700 Totals...... $ 25,795,196 $ 23,359,525 Sale of bonds 25,000,000 Cash centribution from General Public Utilities Corporation, parent company (Note 4)...... 85,000,000 23,000,000 Bank borrowings................ 10,000,000 31,000,000 Total Fu nds Received.......................... $120,795,196 $102,359,525 APPLICATION OF FUNDS: Additions to: Utility plant. $ 99,653,337 $ 85,33',482 Nudear fuel 83,260 Cash dividends on preferred sttdc.... 943,548 943,548 Cash dividends on common stock............. 12,800,000 12,800,000 Retirement of debentures................................. 520,000 816,000 Other, net 6,795,051 2,465,495 Total Funds Applied................................... $120,795,196 $102,359,525 ( ) Indicates red Egure. The accompanying notes are an integrst part of the financial statements. 6 ,ff -p~O'a, 11

n... .v.. m _2 r a : -e+er -*-c-~ m - - ~ - - O METROPOLITAN EDISON COMPANY LONG-TERM DEBT AND CAPITAL STOCK December 31, 1970 LONG-TERM DEBT (excluding sinking fund requireme.'.* due within one year): First mortg2ge bonds: 2%7c Seri 3, due 1974........... $ 24,500,000 37o Series, du e 1977.............................. 4,500,000 3,500,000 37o Series, due 1978............................. 2% 7o Series, due 1980................... 12,250,000 7,800,000 3% 7o Series, due 1982...................... 15,000,000 3 % 7c Series, due 1984.......................... 4% 7o Series, due 19 87............................... 19,000,000 57o Series, due 1990........... 15,000,000 15,000,000 4 % 7o Series, due 1992.................................... 4%7o Series, due 1995 12,000,000 5%Co Series, due 1996 15.000,000 77o Series, due 1998. 26,000,000 25,000,000 8%7o Series, due 1999 Debentures (2): 5,280,000 4%7o Series, due 1990 18,400,000 6%7o Series, due 1992............. $218.230,000 Total. Notes payable to banks due within one year to be refinanced: 6%9 $ 1,000,000 77c 8,000,000 7%Cc 2,240,000 7%7c 16,210,000 89 16,550,000 $ 44,000,000 CAPITAL STOCK: Cumulative preferred stock, par value $100 a share, 400,000 shares authorized: 3.907o Series, 117,729 shares outstanding, callable at $105.625 a share. $ 11,772.900 4.357o Series, 33,249 shares cutstanding, callable at $104.25 a share. 3,324,900 3.857o Series, 29,175 shares outstmding, callable at $104.00 a share. 2,917,500 1,812,200 3.807c Series. 18,122 shares outstanding, callable at $104.70 a share. 4.457c Series, 35,637 shares outstanding, callable at $104.25 a share. 3.563,700 $ 23,391,200 Total........................................... Common stock, no pr value, 900,000 shares authorized, 859,500 shares outstanding $ 66,273,400 (a) At December 31,1970 the annual sinking fund requirements amounted to $520,000. 7 t)..

d$ni--YW-WJSOUA HEM ~ L - =' W M Jn t ' ~ ' **n~~m MN NOTES TO FINA CIAL STATEMENT in connection with the financial statements con.

1. GENERAL:

pany, tained in registration statements pursuant to yhich secur-The accompanying financial statements have been classified in accordance with the Uniform System of ities are tiered and in reports of fmancial condition and of the results of operatrns to the holders of such Accounts cf the Federal Power Commission which be.

securities, to fNlow the basic accoun, ting principle of came ef fective January 1.1970. matching costs and revenues. thing into consideration

2. DEPRECIATION:

th., aspect of the rate-makmg process. In accordance for rate-making and financial accounting purposes, the therewith, the Company has employed the following Com pany proudes for deprecatien at annual rates de-policies: termined and revised periodically on the basis of studies Lebmli:e.1 Der wi. n vid C*idelines and R4.les. by indepenJent engmeers to be sufficient ta amortize the The provisioru f ar income taxes in the accompanving income statements were directly reduced by amounts origmal cost of depreci2ble property over estimated serv. equal to the reduction in income taxes attributable to ice lises, which are generally longer than those employed for tax purposes The Cornpmv uses Jerrecution rates the employment of hberabzed depreciation and th based on functional account groups w hich, on an ag. "Guidehnes and Rules / I,rr rrrwr T.iv Credit. Charges to income equal to the gregate composite basis, resulted in an approximate an. nual rate of : W, 2 69"c, 2.707, 2 719, and 2.?2"e M insestment tax credit (when available) are made for the years 1970,1969,19M.19(a and 19% respee and the accumulatcd M nces (classified in the ac-companving balance sheets as a reserve but as de-ti"ely. fened aeQs in remns to regulatory agenae4 are

3. COMPENS ATING B ALANCES:

bemg amortued over ten years. Except for daily werking funds and like.tems, sub-

7. INTEREST CHARGED TO stantially all the funds included in cash represent com-CONSTRUCTION:

pensatmg balances maintained in re< rect of short-term bank borrowmgs or imes of credit for potential bor-The applicable regulatory uniform systems of accounts deime interest charged to construction as including the row mgs. ret cost brips & period of ccastruction of borrowed

4. CAPITAL SURPLUS:

funds used for constructic purposes and a reasonable During 1970, capital surplus increased by rate on other funJs when so used. In accordance there- $ M,000.000 as a result of cash capital contributmns by with and in recognition of the increasing cost of capital, General Public l'tihnes Corpration, parent company. the Company increased the rate employed for the ac-mn-aedit effective

5. UN APPROPRI ATED EARNED SURPLUS:

crual of interest charged to con-January 1, Ir0 from M to e This, change in-Cer'ain limitations on the declaration of cash dividenJs creased the amount of interest capita ized in 1970 by on com:non stock are con'amed in the Company's mort- $1 000. gage, debenture mdenture and charter, the most re-

8. OTHER RESERVES:

strictive present!y bemg et at centamed in the mortgage, under which $ MM,052 of the balance of earned sur-The Company s licensed hydroelectric project is with-plus at December 31,19'O are so restric'ed in the periods requirmg the estabbshment of an amurti-z2' ion reserve under Section 10(d) of the Federal

6. INCOME TAXES:

Pow er Act. The Company has provided such reserse. The Company ioms with its parent and ar.. liates in

9. COMMITMENTS:

ti filing consc>hdated Federal income tax returns. Examina. The Company expects to make expenditures of ap-tion of returns through 19G5 has tren completed and all deficiennes base been paid. The years 1966 through prnumatelv $ 112,000.000 for plant additions durmg 1969 are currently unJer audit. It is anticipated that the 1971 and in that connection has incurred substantal complenon cf such audits will not result in any material cornmitments. The Company plans to issue securities to deficencies for w hich provision has not been made. partially finance such construction. All participants in a consohdred Federal income tax

10. RATE INCREASE:

return are severally liable for the full amount of any tax, Reference is made to the President's Letter, included includmg penalties and interest, which may be assessed in this repor', for information relatmg to a recently acamst the group. The consohdated Federal income tax granted rate increase and fuel cost adiustment clause. liabihty is allocated among the partic: pants in the con-sohdated returns pursuant to agreements generauv de.

11. PENSION PLAN:

signed to allocate such liabihty in proportion to the The Company has established pension plans for its participants' respective contribmons to such habdity. The empicvees and pursuant thereto, made aegrecate pro-agreeraents also provide that a part2arant (other thaa vistens for pension expense of approximately $1,000,000 the parentI will not pay a tax in e xcess of its separate re-in each of the years 1970 and 1969. turn tax liability. The Company and its unions have agreed upon new For the year 19'0, the Company had an operating loss contracts involving increases in wa.ce rates and various for tax r woses u hich, under the terms of the agreement, fringe benefits mciud ng a comprehensive revision of may be carned back and applied ag2mst the tax paid in the employee hfe insurance and pension plans. The new a prior year. Therefore, the sts'.cment of income for pension p:ans involve both a plan applicable to all em-1970 includes a Federal income tax credit of $3,803,223 pIovees, th- -t of which is being funded with a trustee. ( $ 3,'61,723 credited to operating expenses and $41,500 and a tupplemental plan applicable only to supervisory credited to other income). The related potential claim empic yees which is not funded but for which a reserve for refund is rtflected in the 1970 balance sheet as an has '>een created by regular monthly charges to pension account receivable. exp'nse. In addition, the Company had a current investment T. - Company has heretofore followed the policy cf tax credit of approximately $ 350.000 which, due to treatmg and funding as " current service costs" all changes limitations resulting from the consolidated net operating in the costs of its pension plans including increases in 'm is currently unavailable to be carried back and ap. costs resultmg from plan changes that increased bene. plied aninst taxes paid in a prior year but may be car. fits based upon periods of service pnor to such plan ried forward and appiied agamst taxes to be raid in changes. How ever, for the year begmning January 1, future years. 1970, the Company is treatmg benefit changes related For the year 1969, the Company had an investment to prict periods of service as a "past service cost" to tax credit of $450.300 which was m excess of the 1969 be amortized and funded over a period of approximately j i Federal income tax. The excess was carned back and 25 rears. Moreover, for the east several years the costs apphed agamst taxes paid in prior years resulting in a of the plans have been determined on the basis of an Federal income tax credit in the statement of income for assumption that the pension funds will e rn 4% per an-1969. num. In 1970, the Company increased that earnings As a public utility, the revences of the Company in assumption to Stge per annurn. The net edect of the any period are dependent to a significant extent upon the changes in plan benents and in earnings assumptions costs which are recognized and allowed in that period did not have a sigrnficant efect on the net income of the for rate-making purposes. It is the policy of the Com. Company. 8 s 0%,J vi i.

g AUDITORS' REPORT LYBRAND, ROSS BROS. & MONTGOMERY CERTIFIED FUBUC ACCOUNTANTS To the Eoard ef Directors, hf ETROPOLITAN EDISON COMPANY, READINc, PENNSYLVANLA We have ex2 mined the balance sheet of Aferropolitan Euson Ccepany as of December 31,1970 and the related statements of income and unappropriated earned sur-plus and the statement of source and application of funds for the year then ended. Our exammation was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing pro-cedures as we considered necessary in the circumstances. We previously examined and reported upon the financial statements for the year 1969. In our opinion, the aforementioned statements present fairly the fmancial position of Afetropclitan Edison Company at December 31,1970 and 1969 and the results of its operations and the source and application of funds for the years then ended, in con-formity with generally accepted accounting principles applied on a consistent basis. LYBRAND, ROss BROS. dc hiONTCOMERY Philadelphia, Pennsylvania. February 1,1971. i I .p -t('(} _r): ns

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