ML19206A277

Annual Financial Rept 1970

ML19206A277
Person / Time
Site:	Crane
Issue date:	03/18/1971
From:	Dodson N GENERAL PUBLIC UTILITIES CORP.
To:
References
NUDOCS 7904190017
Download: ML19206A277 (16)

Text

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PENNSYLVANIA ELECTRIC COMPANY neu Ek (v,)

A Subsidiary of General Public Utilities Corporation System Headquarters 1001 Bread Street Johnstown, Pa. 15907 s

Board of Directors

[

N. Gwynne Dodson M. M;tchell Devorris Wil!!am G. Kuhas Paul L Lumnitzer j

George J. Schneider J. Frankl:n Smith f

Cf+,cers i

Executive Committee l

I N. G.WYNNE DODSON P esident Mr. Dodson, Cha: men:

Mr. Kuhns: Mr. Devorris: Mr. Sm;th, Aternate M. MITCHELL DEVORRIS V;ce, President. CreraHens PAUL L LUMNITZER V;ce Pres: dent. Techn: cal MCRTGAGE TRUSTEE 5 EARL J. MILLER Vice President 3

Pe-pan;a Electr:c Company Bonds 6ECRGE J. SCHNEIDER Vice Pres: dent, F;nascial I

Bankers Trust Company J. FRANKLIN SMITH V ce Pres;dert, Sales 16 Wall Street, New York, New York 10015 i

Er:e County Efec+r,c Company Bonds WILLIAM R. THOMAS Secretary and Treasurer G;rard Trust Bank "P""*'

Brood and Chestnut 5ts., Phifadelphia, Pa. 19101 I

Nortbern Pennsy van:a Power Company Bends MARGARET A. GRADY Assistent Secretary l

Morgan Guaranty Trust Copany of New York 140 Broadway, New York, New York 10015 INDENTURE TRUSTEE Penniytve.

E!.ctric Company Debentures Chem; cal Bank 20 Pine Street, New York, New York 10015 TRANSFER AGENT Preterred Stock COVER: FOCUS ON THE ENYlRONMENT. Penelee's commitmen* to the quality of the on,,roen,ene in symbolically demonstrated at k Homer City E1mtric Generating Mellan Nationel Bank and Trust Company stat;o, ase,, o;r and,ot,r,ompi,, are roarinely monitor,d. The toll ste<u, and s7per.

Mellon Square, Pittsburgh, Pa. 15230 botic natural dron coo!,ng towers of the station pror,J a fitting boddrop.

R EGMTRAR THE ANNUAL MEETING of stockhotders was hefd in the c*n of ths Compeay Pittsburgh Na*;onal Seak in Johnstown. Pa, on Merch t8. 4971 at wh;ch time directors for the ensuing year Fourth Ave. and Wood St., Pittsburgh, Pa. 15222

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0 ANNUAL REPORT FOR 1970 resseer The Year in Review Pe-e'ec's resdts fer 1970. as ref'ected both in the financial statements in this Report and in the exce ierces of +he r en ard women of the organization. portrays one of the mest difficult and challeng-irg perieds in cur histcry, it was a year cevoted to maliing cor creratiens harmonize with changing conditions in the scheres of isance, envircnmentai standards rega'aticn. fuel supoly, production performance. Custo-rrer relaticns and a hest cf other matters.

The f;nancial results the-seives te:I a large part ef the story. WhUe cperating revenues grew by $12.2 mii!'on over 1970 HIGHUGHL 1969, increases in cperating and interest expenso and de-creases in ether inccme acccLats resdted in a 11% decline in ret i"Ceme.

SUMMARY

CF EARNINGS

'70 vs. '69 In M;!Iio..

1970 1969 Rising Costs, Interest Rates and State Taxes Operating Revenues:

During the year we faced the continued impact of infia-Rece;ved tro, K.h sates _

si31.6 s120.5

+ 9.2 tion en the prices we esid for materia:s and equipment' Other Revenue 8.2 7.1

+ 18.0 significant ;ncreases in payroll and benefit cests, a less-tran-expected sa'e of interchenged power and higher-than.

Tetsi 139.s 127.6

+ 9.5 encected production costs. Short. term bank berrewir g, in-Dedact C:nt ef Deing Business:

c!uding considerstien of corapen<ating balances, ccst ap-Payro l. Fuel. Taxes &

proximately 10*'. curing mest cf +he year and, in April Caer Cperat;ng Espenses.

7to 62.4 4-18.4 1970. Pe e'ec seid first mortgage bends at an annual net Deprec:at;cn 20.2 1s.s r 7.6 interest ccst of 9.35*.. an ad-time high for the Company.

Net C:st for

'"9' At the end ef 1969 and early in 1970 the Pennsylvania le';isioture imposed new and increased taxes en utilities.

Tctal OperaMng Emnies 93.8 873

+ A6 Ssbsequently the State PubSc Utility Cornmissicn (PUC)

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' nd authorized affected utilities to inclJde a surcharge on cus-De c

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W temer bms. Pene'ec's surcharge of abcut 5.2*. became ef-Dedact Interest Espers.

21.5 18.1

+19.1 iective on March _3.

The increase in Penelec.s taxes re-w income s2m usa

- 3a sulting from the new legis!ation was about $5.9 million for 1970 of which about $4 5 mi; ion was coUected via the sur-charge and about $1.4 miincn was not recovered because k

OTHER ITEMS the surcharge was not made retreactive to the beginning

-1970 cf the year. This had the effect of reducing net income by Eiecmc Se:es W.M 7,735,406

+ to about $700.000 fer 1970.

Total Castomers 450,s54

+ i.2 Annual Avg. Use Per First General Rate increase in 18 Years Residentai Cast. (K S ) _

5,808

+ 5.4 i

D eQ'gs" Y In April 1970 Peneiec filed its first general rate increase No

"' ed r d since 1952, providing for increases of about 20% for sub-Full Time Employees 3,553

+ 1.5 stant. miany ad retail customers and which would have pro-duced about $24 mi: lion in additional annual revenue based Wagn & amus

$43,171,7H

+ a.0 on ner-a!ized kilowatt hcur (Kwh) sales in 1969. The new Aneuel Peak bad W.)

1,513

+ 3.5 rates. which were to go into effect in June, were suspended I"5'*'I*d Capacity ( M*)

1.7'3

+8' by the PUC whiie it conducted an investigation and pubiic Net Generation (M.h) 9,496,794

+ 21.1 hearings.

Cost of Plant Add tiens and improvements

$69,008,000 Unfertunately, the aggravating conditiens of high in-terest ccsts. rising prices and a sharp increase in fuel costs Mant Innstments:

centinued whhe the rate proceedings were pursued. In Per Employee

$ 239,966 December. in response to a Penelec petition, the PUC Per Revenue Dc'lar 6.10 ahowed Peneiec interim rate relief of $12 millien en an annual basis. whiie it extended the suspension for an addi-52-202

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d 1970 - 1971 Construction Program

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Pene'ec's 1970 construction program toiated over $69 g /

1 mill;on. The largest sing e expenditure went toward con-l f

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1 tinuing construction of Three Mile Island Nuclear Generat-l) ing Station at M;ddletown. Pa. The staticn will be owned 50% by Metrocolitan Edison Co. and 25% by Jersey Cen-

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k %g tral Power & Light Co., also GPU subsidiaries, and 25*'.

by Peneiec. subject to approval by regulatory bodies. The g,_

f station will have a capability of 1.800.000 Kw. The first J

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>d unit will be in service in 1773 with the second unit on line k(' M ps 4

Q'[E Z $ b,h

,,,.g,h WT about a year later. Our share of the output w"I substan-

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1. iM aN.h**3.a tD!i tia]iy help the Company meet its generating capacity re-E quirements.

Other maior investrnents were made during the year to f.ional three months to aflow complet. ion of its considerat. ion increase the output or upgrade the ava labi,lity of ex. t.is ing i

of Peneiec s total rate proposal. Of the new revenues to be g enera t.ing plants and to provide equipment modificat.

ions realized. over half will go directly for state and federal or additions to minimize their effect on the environment.

taxes on inco*ne and gross receipts.

Ma or investments were also made to achieve satisfactory cperaH n i the Seneca Pumped Sterage 5+ation near Steam Rate Increase Warren, Pa.. in which Peneiec is operator and 20*'. owner in December 1969. Pere:ec fued increased rates fer as a partner wi+h The Cleveland E!ectric illuminating Co.

stcam heat service in Erie, where eperating costs were en-This station went into comn ercial operation at 150.000 Kw ceeding revenues from the 330 customers being served.

in January 1970 and experienced a series of prob! ems with The PUC suspended the rate change on Feeruary 16. the the upper reservoir. In December, Seneca's capability was day before it was to become effective. In the interest of ucrated to 380.000 Kw. The reservoir has oeen operated avoiding prolonged litigation, the Company reduced its satisfactorily since December and, following further tests, original request and a smail grosp of customers withdrew the station's capacity may be increased again before sum-its formal compiaint. The PUC aHowed the charge to be-mer 1971. Other investments were devoted to expansion come effective May 15, 1970. It was the fir:t steam rate and strengthening of the system transmission and distribu-increase in Erie in 22 years.

tien networks to serve growing loads and to assure high leve!s of reiiability.

Fuel Supplies and Cost Our 1971 censtruction program is forecast at an ali. time Whi'e many utilities had serious problems in m.d. year.

i in high of about $94 miU;on. Almost half the total will go for getting fuel suppI;es at any price, Penelec had oniy minor centinued construction at Three Mile Island Station. The difficulties on the supply side but suffered maior effects program a so calis for compietion of a 20.000 Kw combus-l on the cost side. The severe competition among buyers for tion turbine installation at Blossburg in the north central por-available coal, higher rnine operation costs, and other fac-tion of the state and for work on two, 58,000 Kw combus-tors drove coal prices up in a startling manner. The aver-tion turbine units in the northwestern area to be on the age cost per ton Pene ec paid for coal increased from I;ne in 1972. These units, which can be fue!ed by either t

$5.624 in December 1969 to $7.231 in December 1970, or gas or oil, will be operated to he!p meet peak demands about 29%. Coal represents our largest sing'e operF,,g and provide additional back.up power sources to growing cost item in power production and such escalation cannot loads in these regions.

now be automatically absorbed.

The balance cf the budget will be spent in continuing To compensate for these <a lical changes, nany efectric programs of upgracing existing power stations to.mprove, utilities across the nation anc in this state have adooted pert rmance and to minimize their impact on the environ-a Fuel Cost Adiustment c!ause. In November (970, Pen-ment and in extending transmission and distribut,ien faci-elec fiied with the PUC a fuel clause which would reflect monthly changes in +he ccst of coal burned, taking into acccunt both fuel price and power production efficiency.

The charge may change, up or down, each menth and Financing the Company must supply a calculation of the change and supporting data to the PUC. The fuel c!ause became ef-Peneac's 1970 construction program was financed pri-fective for service rendered retail customers on and after marily from $21 miilion in cash contributions from GPU, January 20,1971.

the seie of $25 million of 30-year 9%% First Mortgage 2

Bonds in April, interna!!y generated funds and short-term Marketing. A Changing Concept bank benewings. The 1971 financing program included the During '970 and 1971 many normal and desirable acti-sa'e in Ja,uary of $30 million of 25-year 8%i. debentures vities have been curteiied or reduced to he p Pene'ec cut l

at a net onnual interest cost of 8.03%. We antic:pate the operating costs. Among those programs, we discontinued ba!ance e f the, program w;11 include further antributions virtuauy all soies promotion advertising in broadcast and from GF U. short terr, berrowing, interaa!ly generated newspaper media, reduced other sales promotion activities funds or d the sale of additional deben'ures and possibly and are redirecting our future programs. The combination additio al preferred stock later this yerr.

of reduced promotion and the national slow down in busi-Power Supplies 1970 and 1971 ness activity and in home construction had its effect in re-cucing the year-to-year growth rate in Kwh sa'es to resi-Peneiec's power stations and maior transmission lines and dential. commerciai and incustrial customers below that of those of the other GPU subsidiar es are operated as part recent years. Total Kwh sales graw by 6.6. over 1969.

cf the 12-company PJM Interco,nection. This is an inte-gested system in which the tota bWk power resources of Despite the adversities, the new load that was added al companies are pooied to meet the total demands by represented desi,able growth. We added 2,2:i1 new eiec-customers of a!! companies in the most economical and re-tric home hesOng instadations bnnging our system total to liabie manner. The PJM power poel experiences its highest 15 950 at year end and substantial portions of the new com-demand during the summer end its generating reserves of mercial and industrial load added was in space heating.

capacity over maximum demand i-rproved for the summer The redirecting of our marketing program wdl stress two 1970 period over the previous year, eithough not yet up to the level the cool plans to attain.

The pool went through the summer months without any major problems affecting service to custo ers. But in the

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p third week of September a !arge partion of the eastern j

U.S. emperienced unusuauy hot and humid weather with re-

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sultant high jemands for power. PJM entered the week J,

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ed at substantiai ! eve!s a4 summer were taiea out of ser.

vice for schedded maintenaace to prepare fcr winter oe-

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mands. Then an unusua:ly high prepo rion of unschedJed l

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loss of generating capacity threatered to wipe out remain-j T

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ing reserves.

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~ (g aj Over a four-day period, a 112 companies acting together g pg executed portions of the PJM emergency plan to reduce 4

load by reducing voltage uo to 5%, by esiing setec+ed J,p.b,g

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large users. with whom standing arrangements exist, to cur-j%fQpjf g

tail non essential consumption and by a public appeal to g

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all custorriers in the five-state region to cut back on the;r e,

use of electricity. On one of the days it was necessary to d,

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actually curtail service to a limited number of customers

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for short periods on a rotating basi-. The use of this pre-

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planned procedure avoided any wicespread or extended k

interruption to service, y'

y Power plant and transmission construction projects cn I - ~ 9[*+l '* # %, M, 1.J 1

take up to seven years to comp ete and PJM companies i

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y' nave been working at an acce!erated pace to bring their reserves up to new level> whi'e improving the performance

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and availabii;ty of existing u.a;ts, installing combustion tur-

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eg, 4 bane units and arranging for power purchases from other

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suRIAL The 1,000 root se,,on near somerser. re. is bet eved ra be tse rurst M

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d,r.o 6.<,as, operor on and ma,n<enone. or ne.<sroons s,an eonas. i.n.s "T#.

o acoroor.cr. rerra. wwe reneiea is pro.s ra se o as,ane oNs s,ns or se 1.o-g, K

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me,r. ueaergro.nd tran m.ssion oppi, car,ans -,il for some sme be I,m, red for

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s r.chn,tal and economna reosons.

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INTER $7 ATE 80, THE ~KU$ TONE SHORTWAY", was dedkated in September M-M QJ 2:'K* ' m 1970. Th.s maior east-west h,ghway crosses through the north-<entral part of 12,.

i renews ser.,ee area. it prom,ses to spark sommercial and,rmdvstrial expansson 073 R.v..&_+'Q p-;?isj12.QQh27.l U.%

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en this regnen ord to prov.ae better accessary and growsn appertun nas to serv,<e area tommun,tces.

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main areas. One w.,l focus on se'ective promotion of these p g, o

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.j Our other area of emphasis wiu be a c:ntinuation cf ef-h M@4',$5h:@

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d en oy accessic?e industria; paris: tf'e vanous i rban revitaliza-

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-mn Ay tion programs: and the develcoment of attractive and i'g [ /+

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,, $' M varied recreatienal cppertun; ties by private, local, state

. 9tJ y e. % M*.?ed M

and federal spcnsors.

Perefec syste n anc local staffs have and will centinue to assist in both the attraction of incustrial prespects and in community and regicnal oeve'coment pregrams. In 1970, s bstantial experience as a pioneer in the deve!cpment of although the number of new D;ents announced. under way underorOund d'stributien as having prepared us to ccmply or comp!eted in the service area was less than previous with the order and to help further decrease the difference yea rs, the number cf encans;ons comp eted at existing in cest.

l plants were higher, Scme of the better known and sizab'e firms in our 1970 Mcvement cf Incustry Report include:

Our Facilities And The Environment Owens.lllinois, Boise Cascace Mcbile Ho nes PPG Incus-Os responsrej cperaHon of facm, qty to the environmeat in the design end tries. Zippo Manufacturing, DuPont. U. 5. 5+ eel. Borc ties and our interest,n enhancing the at-Warner and P;ttsburgh-Des Mo;nes. For the yearu a net of i

3,367 new icbs were created in the service area.

tractiveress of the reg:cn we serve has long had the formal policy, action and financial cerrmitment of the Peneiec and PUC Orders on Promeh.on and Underground GPU crganizations w; thin the scope of our prime responsi.

bility for providing adequate and reliab'e electric service.

In October the PUC issued an orcer spening out ground rules for sa,es promoh.on practices among ccmpeting reg-Over these years, we have picneered rr ny develcpments ulated utilit.es and restnctirg certain act.. vibes. The order.

now or socn to be in incustry-w'de use and we ave invest-ed substantial sums.in fac...h.m es and in operat.ng and P. & D wide,y m.. terpreted.in the press, does not curo or d;.s.

isin r

unds toward those ends, courage so!es activities. In fact it says:,,If a given promo-tional activity induces custome s to take service during cff-Developing ways t: minimize the impact of utility faci-peak hours or on off. peak season, ii.e fixed charge asso-Uties on the environment, as in air quaGty centrol equip-ciated with plant decreciation. return and teres - can be ment, cr cesigning them in ways that they anhance the screed over a larger number of kilowatt hours, with a cor-quauty cf hfe, as in providing new recreation and conser-responding benefit to all custerrers."

vation opportunities is a cor,tinuing commitment. It is com-Another order issued by the PUC iinst year required un-piicated, however, by the impossibility of making " instant derground. ta,,ation of efectr.c cistn, uh.on Unes in new change and. instant progress..

ins a

.e residertial deve!cpments of five or more lots with the tract A Comm.tment Backed by Ach.

developer or apartment house owner paying all or most of i

on tf a difference between the cost of overhead and uncer.

As part of this commitment, Peneiec in 1970 retained ground lines. Although there is relativeIy htt!e " tract de-Environmental Sciences Inc. (ES!) to conduct detailed stu-veicpment" in the Pene!ec service area, we lock to our dies at each of Pene!ec's whoHy-owned fossil fue;ed power ib

plants to define existing and potential environmental pro-Tetal payroil and benefit costs for 1970 were $43,171,711, biems as they relate both to current standards and to up 8*/. over 1969. with fringe benefits averaging $2,606 trends in ;ocial priorities and future regulations. ESI cper-per employee.

ates an analytical laboratory and is staffed by scientists and technologists experienced in a wioe range of environmental Recog nition must be extended to Pene'ec employees sciences and engineenng and producticn. suppiemented by

+hreughout the system who, in response to the financial consultants from the prefessions and universit.es.

pressures en the Company in 1970, made significant contri-bution in helping ;dentify and esecute programs and pro-Among many other activities. Pene'ec init;ated or cen.

cedures to reduce costs white maintaining high levels of tinued programs reioted to: use ci its faci'ities for pubIic service to customers, recreation: landscaping and eahancing wildiife food and cover values of r;ghts-of way: adoption of new cesigns for Format,on of a Service Company transmission structures and substations: and investigation i

of new equipment and technoicgy re!ated to air and water GPU is in the process of forming a subsidiary service quality, solid wastes ord aesthet.cs that can be designed ccmceny to render certain services and coordinate certain into new facil; ties now being p!anned.

functions otherwise performed by the operating subsidi-aries and GPU's own staff. It is a matter of prido to us that many Pene'ec employees have been se!ected to fill key Employee Relat.ions assignments in that service organization.

Of Pene'ec's over 3,500 regulat pern anynt empicyees.

about 50*,. ar.s recresented by seven loca:s of the Inter-The Company leased and occupied a new ccmrr'ercial national Brotherhood of E ectrical Worrers (IBEW) and office and service center in Mansfield in 1970 and in Clear-about 10*'. by a local of the UtH;ty Workers Union of field in January 1971. These moves continue a program of America (UWUA). The Company and the UWUA reached consolidating local operations in a sing'e, modern facility an aareement ratified by the Unicn on June 6.1970 on a designed and sited to provice optimum efficiency, im-roved comfort and convenience for emolcyees and custo-new two-year contract th

. espire May 28. 1972. A two-year contract with the iBEW. eec.n_. g on May 2c,1972, mers and the opportunity to demonstrate the total electric N

was ratified by that Union on June 19.1970 afte a 23-day strike c,uring which superviscry employees meintained ser.

• PF' P'i * ** #i" 9 '

vice and production. The increase in wege and benefits.

The 1970's present to electric utilities chal!enges that are exclucing changes in life insurance and rensien benefits.

in many ways markedly different from those of the previous negotiated in 1970 are estimated te invu ve an overail an-decade. We are confident that the competence and dedi-nual increase of about 8.12*'. in payroll costs.

cation of the men and women of our organization can meet those chel'enges to the benefit of investers, consumers, em-picyees and the communities we serve.

For the Board of Directors N

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g N. Gwynne Dodson Q

Q-President n r % 2 PAE Vi} &{

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CO.OP STUDENT VIEWS LO N PROFILE SU85TATION DEstCN. A fin-year

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• • • , Kl$ 4 & %

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work. study program, soonsored by Penelee woth Pennsvivama state Une'versity,

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$ K h h* W h $ p

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9 g'ves engnneenne students an opportumty to learn whole trouanng wuth nteren Pen engsneers. Here m nudent u WeM on low p&e substatson designs

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adopted by Penelee to acken a more attractin oppearatte.

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Electric Generation and Sales Statistics 1970 1969 1968 1967 1966 Generating Capacities and Peaks-KW:

~

J, installed Capacity 1792,500 1J24,500 1,190,900 1,190,900 1,190,900 Firm Power Purchases.

161,100 168,000 Tota s 1,792,500 1,885,600 1,190,900 1,190,900 1,358,900 l

Annual Peak Lead 1,513,000 1,462,000 1,294,000 1,179,000 1,111,000 Net System Load (rega-stt hours):

Net Generat;on... _..

9,496,794 7,842,241 7,590/97 7,245,689 7,150,616 Purchased 99,532 133,113 8,665 153,614 1,576,093 i

Net Interchange _

(880,495) 120,787 (280,311) (710,575) (2,264,932)

+

l Net System Load.

8715,831 8,096,141 7,319,151 6,688728 6,461,777 I

Steam Production Data:

Average 8tu (per net KWH).

10,863 10,921 10,630 10,506 10,519 Fuel Cost (c per mulion btu) 28.1 24.0 21.9 21.5 20.6 Cost of Fuel (mills per KWH) -

3.05 2.62 2.33 2.26 2.16 s

Total Production Costs (mit!s pe-V.WH).

4.18 3.70 3.34 3.24 3.11 i

Energy Sales ( eg3*ett hours):

Residential 2,291,491 2,147,359 2,00o,305 1.824,050 1,680,866 Commercial 1,452,396 1,327,487 1,211,165 1,082,200 975,345 indus+ rial All Other.

..._ 3,497,299 3,365,000 3,030,986 2,771,880 2,602,807 494,220 416,562 345,266 284.535 487,589 Totals.

7,735,406 7,256,408 6,593722 5,962,665 5746,607 Gain Over Prior Year.

6.6%

10.1 %

10.6 %

3.8%

5.8%

Operating Revenues (> t ous3na $):

Residential.

$ 52,276 1 48,173 $ 45,823 $ 42,703 $ 40,265 Commercial 31,302 28,164 26,395 24.400 22,607 Industrial 41,890 38,898 35,957 33,914 32,142 Other.

6,094 5,241 4,534 3,878 5,528 Total. from KWH Sates.........

$ 131,562 $ 120,476 $ 112,709 $ 104,895 $ 100,542 Other Revenues 7,667 6,554 6,191 4,156 1,592 Totals

$ 139,229 $ 127,030 $ 118,900 $ 109,051 $ 102,134 Gain Over Prior Year 9.6%

6.8%

9.0%

6.8%

4.4%

Customers - Year End:

Residential.

397,411 392,483 387,576 382,879 379,362 Commercial.

47,679 47,363 47,126 46,663 46,520 Industrial.

5,136 5,160 5,155 5,225 5,247 All Other 628 626 620 624 626 Totals 450,854 445,632 440,477 435,391 431,755 Average Use, N1 and Price:

R Wdentia! Customers:

KWH Use Per Customer Annual Bill.

5,808 5,510 5,213 4.791 4,463

$ 132.50 $ 123.61 $ 119.05 $ 112.17 $ 106.90 Price Per KWH 2.28#

2.24 g 2.28 t 2.34W 2.40 g

( ) Indicates red figure.

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PENNSYLVANIA ELECTRIC COMPANY and Subsidiary Companies Consolidated Stetements of Income For the Years Ended December 31,1970 and 1969 1970 1969 Operating Revenues

$139,774,612 $127,616,321 Operating Expenses:

Operation

$ 54,003,008 $ 43,919,089 Power purchased and interchanged:

Affiliates (4,891,179)

(4,096,064)

Others 4,454,650 10,797,533 Maintenance _

13,464,051 11,758,351 Depreciation of utility plant (Note 2) 20,175,803 18,755,841 Federal income tax (Note 6)

(2,445,900)

(960,770)

State income tax (Note 6) 453,315 1,220,066 Deferred income taxes (Note 6)

(451,949)

(460,429)

Amount equivalent to current investment tax credit (Note 6) 3,227,384 Amorti:stion of accumulated investment tax credit (Note 6)

(910,900)

(823,900)

Other taxes 9,877,182 4,605,289 Totals

$ 93,728,081

$ 87,942,390 Operating income

$ 46,046,531

$ 39,673,931 Other income and Deductions:

Interest charge i to construction--credit (Note 7)

$ 1,848,513 $ 6,070,112 Other miscellaneous income, net 1,283,821 706,135 Income taxes associated with other income, net (536.700)

(394,600)

Totals

$ 2,595,634 $ 6,381,648 Gross Income

$ 48,642,165 $ 44,055,579 Interest Charges:

Interest on first mortgage bonds and debertures

$ 19,696,363 $ 17,142,374 Amortization of premium and expense on debt (101,995)

(102,305)

Other interest expense 1,916,149 t,028,042 Totals

$ 21,510,517 $ 18,068,111 Net income

$ 27,131,648 $ 27,987,468

( ) Indicates red figure.

f The accompanying notes are an integral part of the financial statements.

1 b

32-208 7

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PENNSYLVANIA ELECTRIC COMPANY and Subsidiary Companies Consolidated Balance Sheets December 31,1970 and 1969 1970 1969 ASSETS:

Property, Plant and Equipment (at original cest):

Utility plant in service and under construction

$852,597,655 $789,908,064 Less, accumulated depreciation (Note 2) 164,417,619 149,817,232 Net utility plant

$688,180,036 $640,090,832 i!ucleer fuel 11,570 Net property, plant and equipment

$688,191,606 $640,090,832 Investments:

Other physical property, at original cost 359,623 $

365,113 Loans to non-affiliated coal companies (Note 10) 10,722,266 9,539,985 Other, at cost 437,552 441,306 Totals

$ 11,519,441

$ 10,346,404 Current Assets:

Cash (Ncte 3)

$ 13,821,459 $ 4,789,578 Accounts receivable (Note 6).

17,835,925 16,243,774 Materials and supplies (inc!uding construction materials),

j at average cost or less 7,473,019 6,542,472 l

Prepayments 590,477 595,892 i

Other 1,530,374 1,266,583 Totals

$ 41,251,254 $ 29,438,299 Deferred Debits:

Unamortized mine deve'opment costs (Note 10)

$ 4,468,651

$ 1,615,036 Charges related to proposed construction projects and other work....

790,398 639,301 Other 1,556,730 1,045,820 Totals

$ 6,815,787 $ 3,300,157 Total Assets

$747,778,088 $683,175,692 The accomcanying notes are an integral part of the financial statements.

D 8

PENNSYLVANIA ELECTRIC COMPANY and Subsidiary Companies Consolidated Balance Sheets December 31,1970 and 1969 1970 1969 LIABILITIES AND CAPITAL:

Long-Term Debt, Capital Stock and Surplus:

(see pages 10 and lI):

First mertgage bonds and debentures S392,074,000 $367,914,000 Notes payable to banks due within one year to bn refinanced 29,930,000 18,500,000 Totals.

$422,004,000 $386,414,000 Cumulative preferred stock

$ 36,500,000 $ 36,500,000 Premium on cumulative preferred stock.

277,157 277,157 Totals

$ 36,777,157 ~$ 36,777,157 Commen stock and surplus:

Common stock

$105,811,920 $105,811,920 Capital surplus (Note 4)......

118,673,095 97,673,095 Unappropriated earned surplus (see statements on page 10) (Note 5) 24,790,251 22,402,437 Totals

$249,275,266 $225,887,452 Totals

$708,056,423 $649,078,609 Current Liabilities:

Debentures due within one year...._

840,000 $

600,000 Accounts payable 8,826,109 5,272,288 Customer deposits 268,112 263,280 Taxes accrued _.

4,470,385 5,052,032 Interest accrued 5,278,428 4,398,742 Other 5,958,317 3,400,231 Totals

$ 25,641,351

$ 18,986,573 Deferred Credits:

Unamortired premiurn on debt

$ 1.485,417 $ 1,593,879 Other 214,164 172,843 Totals

$ 1,699,587

$ 1,766,722 Reserves (Note 8):

Future income taxes (Note 6)

$ 5,197,118 $ 5,649,067 Unamc,rtized investment tax credit (Note 6) 5,947,359 6,858,259 Pensions (Note 12) 335,317 7

Tota's

$ 11,479,794 $ 12,507,0 26-Contributions in Aid of Construction 5

900,939 5 836,462 Total Liabilities and Capital

$747,778,088 _$683,175,692 The accompanying notes are an integral part of the financial statements.

a2-210 9

.~

PENNSYLVANIA ELECTRIC COMPANY and Subsidiary Companies Consolidated Statements of Unappropriated Earned Surplus for the Years Ended December 31,1970 and 1969 1970 1969 Balance, Beginning af yesc

$ 22,402,437 $ 21,358,803 Add, Net incer*e (see statements on page 7).

27,131,648 27,987,468 Totals

$ 49,534,085 $ 49,346,271 Deduct, Dividends en capi'sl st:ck:

Cumulative preferred stock:

4.40*'. Series B 249,964 $

249,964 3.70*'. Series C 359,100 359,100 4.05'/. Series D 257,969 257,969 4.70*'. Series E 135,073 135,073

{

4.50*'. Series F 193,361 193,361 4.60*/ Series G 348,367 348,367 Common stock.

23,200,000 25,400,000 Totals

$ 24,743,834 $ 26,943,834 8alance, End of yese (Note 5)

$ 24,790,251 $ 22,402,437 Conso!idated Statements of Source and Application of Funds For +he Yeers Ended December 31.1970 and 1969 1970 1969 SOURCE OF FUNDS:

Consolidated net income (see statements on page 7).

$ 27,131,648 $ 27,987,468 Depreciation (Note 2) 20,175,803 18,755,841 Investment tax credit, less amortization (Note 6)

(910,900) 2,403,484 Totals

$ 46,396,551 5 49,146,793 Sale of bonds 25.000,000 28,000,000 Bank borrowings.

I1,430,000 16,500,000 Cash contributions from General Pubi;c Utilities Corporation, parent company (Note 4) 21,000,000 20,000,000 Total Funds Received

$103,826,551 $113,646,793 APPLICATION OF FUND 5:

Additions to:

Utility plant

$ 69,007,790 $ 73,505,436 Nuc! ear fuel 11,570 Cash dividends on preferred stock 1,543,834 1,543,834 Cash dividends on common stock 23,200,000 25,400,000 Retirement of debentures 600,000 755,000 Loans to non affiliated coal con panies (Note 10) 1,182,281 4,900,230 Unamortized mine development costs (Note 10) 2,853,615 1,615,036 Other, net.._

5,427,461 5,927,257 Total Funds Applied

$103,826,551 $113,646,793

( ) Indicates red figure.

The accompanying notes are an integral part of the financia: statements.

52'211 10

PENNSYLVANIA ELECTRIC COMPANY and Subsidiary Ccmpanies Long-Term Debt and Capital Stock December 31,1970 Long Term Debt (excluding sinking fund requirements due within one year):

First Mertgage Bonds:

3%*'. Series, due 1972

$ 32,520,000 3W'/. Series, due 1973 4,000,000 2%*/. Series, due 1976 23,500,000 2%*'. Series, due 1979 11,000,000 3%*'. Series due 198I 5,000,000 3%*'. Series, due 1982 9,500,000 4 . Series, due 1983 12,500,000 3 . Series, due 1984 12,000,000 3%*'. Series. due 1986 12,500,000 4 */. Series, due 1988 29,000,000 5 . Series. due 1989 15,000,000 5 */. Series, due 1990 12,000,000 4%% Series, due 1991 10,000,000 4%% Series, due 1994 20,000,000 6%% Series, cue 1996 25,000,000 6%*/. Series, due 1997 26,000,000 6%% Series, due 1998 38,000,000 8 % Series, due 1999 28,000,000 9%% Series, due 2000 25,000,000 Decentures (a) (b):

5%*'. Series, due 1986 9,600,000 5 . Series, due 1990 17,600,000 7 % Series, due 1992 9,200,000 Divisienal Liens:

Erie Cour,ty %ctric Company (assumed by the Company, non-callable).

6*'. fund:ng mortgage gold bonds due 1980 74,000 Northern Pennsylvania Power Company (assumed by the Company) F;rst Mortgage Bonds:

2%% Series, due 1975 4,600,000 2%*'. Series, due 1980 500,000

$392,074,0C0 Netes payab:e to canis. 7*. to Th*., d e. thM ene year to be refinanced 5 29,930,000 Capital Stock Cumu ative prefer ed stock, par va ue $100 per share. 415.000 shares autherizeo:

t Issued and outstanding:

56.810 shares, 4.40*'. Series B (cailable at $108.25 per share)

$ 5,681,000 97.054 share, 3.70*/. Series C (callable at $105.00 per share) 9,705,400 63.696 shares 4.05. Series D lealfabfe at $104.53 per share) 6,369,600 28,739 shares, 4.70% Series E callab!c at $105.25 per share) 2,873,900 42.969 shares. 4.50*'. Series F 'esilable at $104.27 per share) 4,296,900 75.732 shares 4.60*'. Series G (ca:lable at $104.25 per share) 7,573.200

$ 36,500,000 Co-men steck, par vaive $20 cer share. 5.400.C00 sne es autherizea:

Issued and outstanding 5.290.596 shares.

$105,811,920 (a) At December 31.1970 the an*usi sinUng fund reau;remees amoun+ed to $840 000.

(b) During January 1971. $30.000 000 of cebentures (o'/s% due 1996) were issoed.

t

& 212 11

PENNSYLVANIA ELECTRIC COMPANY and Subsidiary Companies Notes to Financial Statements I. General:

ef $2.013 900 ($2.445 900 cred ted to operating e penses less

$432 000 charged to ether incerael. The re!ated pctent:al claim fur The consolidated f.inancial sta'emea+s ieclude the accoun's cf the refund is reflec*ed in the 1970 barance sheet as an account Corepony's subs;d:ar:es. Niaeveh Water Company and The Waverly receinb o Electric Ught and Power Company. each cf wh;ch is =boity cwned.

In add t;en. the Comcary had a current investment tas cred:t The accompanying f;cencial s+a+emeats have been class:Ced in ac-cf appresma+ety $900.000 wh:cm, due to I;m tations resumag from cerdance w;th the Un: form System cf Accounts cf the Feder0 Powe' the conschdated net cperat;ng less, is curredy unavaUab'e to be Comm;ssien wh;ch became effective Jan ary 1.1970.

carried back and apolied age:nst taxes paid in a prior year but may u

be carried forward and appGed age:nst taxes to be paid in future

2. Depreciation:

Y " '5-For rate-meheng and f;naac:al accoua+ ng purposes. the Company For +he yese 1969, the Co-cany bad an investment tan cred:t prow; des for decreciat;on at annual re'es de+erm: red and rev; sed cf $3.22738 wh!ch was in escess of the 1969 Federal income tu.

periods:sfy on the bes:s of stud.es by inoependent engineers to be The ence.s was carried back and a Di:ed against tanes paid in pricr suRcient to amort'ze the orig'eal cest of deprec se!e prcperty ever years resAag ;p a Federal secome tan cred;t in the consolidated estima*ed service Oves. =nich are geeeraHy longer than those om.

statement ef income for 1969 ployed for tas purposes. The Company uses deprec;at:cn rates based As a pub,.oc u G y, d e revenues c,. the Company in any pened on functior al accourt g rou p s wk;ch, en an agg ega+e co-ces;+e resu ted in an a c presim a te annuet r s +e of 2.69$'. 2.57T..

are dependent to a syn;Ccant e + eat upen the costs which are ; s.

basis.

t 2.82*/. 2.84$. and 2.86$'. for the years 1970.1969.1968.1967 and coy. zed and ai owed in eat period fer rate maung purgeses. It is 1966. respectivel,

the poi;cy of the Com7any. m cearectico eth the financial state-y meets cents:ned in registration statements pursuant +o which securi-t;es are offered and in terr's cf f;eaccial cenditien and cf the

3. Compensating 8. lances:

results of eperet; ens to the hoide t ef such securities. to fo;1e- +e

'C'.eu t;ng princi te f matching c sts and revenues..enng E cept for da:ly work:ng funds and he i* ems, substantia'ly a'l tk.

5 C r

funds ine'uded in cash represear compeasatieg bi aaces rna: eta >ed

'". c ns,d era +;en this aspect of the rate-mak;ng process,. In ac,-

l P'"Y

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""9 in respect of shortaerm back borrow egs or lires of cred.t fer co-C*"

tential borrowiegs.

Gberalised Depreciation and Cuodelines and Rules: The previsions for

4. Capital Surplus:

nceme tases in the acce-panying inceme state,ments we e direct.

!y red ced by amcunts equal *o the re duction M inceme taxes at-Dur:rg 19/0. cap;tal surcius ;ecreased $2I 000 000 as a resJt of te;butabte to 'the empfoyment ei l bers. zed depreciation ard the cash capdal contr cutiens by Geeers: Pubdc Utilities Ccrporation.

su: dei:nes aed Rees."

parent ccmpany.

Accelerofed Amortisofiom P ovisices fer future income tones equal to the reducticns in income taxes attributab:e to accelerated

5. Unappropriated Earned Surplus:

a m ert;z a+;on Mi_h enced in 1959) were made through 1959 and Certain lima ticas on the dec!arat en cf cash dividends en com.

+*e accumulated ba'an. e ic! ass:f;ed ;n the accarepany;ng baience a

mon stoch ere conta;ned in the Company's mortgage. debertu e shee's as a reserve but as a ceferred credit in recerts to requis-r indenture and charter. the most restrictive presentiy being that tory agencies) is being amortized over tre lives ci the related coMained m +be mortgage and deberture iedenture under which facint:es.

$10.C64106 of the baiance of eareed su pus at December 31.1970 r

are so rest icted, invemnent Tom Credd: Charges to incorae enal to the 3% invest.

ment tan cred:t (when avadabte) are made and the accumuIsted ba'eaces 0: lass:fied in the accompanvieg ba'ance sheets as a r+

6. lacome Taxes:

serve but as deterres credits in reports to regu'atory agencies)

The Company joins w th its pareat aed afbliotes ;n fding cens:n-are being amortized. ver ten years.

dated Feceral income tan returns. bamination cf returns through

7. Interest Charged to Construction:

1965 has been comcieted and all dei;c. enc:es have been paid. The years 1966 through 1969 are currentfy under awo;t. It is eatic: pated The appUcable regulatory uniform systems of accounts define in-that the co-o:et.on of such audits wW not resuit in any reatorial 4 rest charged to construction as includ:nq the cet cost during the deficiencies for wh:ch provision has not been made. All partic: pants period of construct:on of borrowed funds used for construction pur-in a consorda ed Federal income tam re+ urn are severaiiv liab:e for poses and a reasonab:e ra+e on oteer furds when so used. In ac-tee fuil amount of any ta s, induding pena:t;es and interes+ which cerdance therewith and in recognitien cf the increasing cost of may be assessed age:es+ the group. The consoGdsted Federa! ;nceme capital. the Ccmpany increased the ra+e e-cloyed for the accrual tan liab:lity is aHecated among the pert:cicants in the consondated of interest charged to construct'en-credit e'fective January 1,1970 retures pursuant to agreereents generely cesigned to allocare such frem 7% to 8W7.. This change increased the amou t of interest n

liab?;ty in precortion to the part:cIpants' respective contributions to capitahzed in 1970 by $290.000.

such liab3;ty. The agreements also prev:de that a participant (etber than the parent) wid net pay a tan in encess ci separa+e return

8. Other Reserves:

tan liab:! sty.

Of the Cemeany : licensed hydroe'ectric projects enly one is For 6e year 1970. the consoUda+ed greuo had a nat eseratieg w: thin the per.ed requ; ring the establishment of arnort:zation re-Ioss aad the Company's tan reduct;ce has been reabzed through the serves under Sect:en 10(d) ci the Federal Power Act. Such a re-car y-back to prior years of such not operating loss. Therefore, the serve has not been provided. The license was issued pr;cr +o 1935 ststement of inecme for 1970 includes a Federal income ts: cred;t and the basis fer the determination of the amount, if any, of such M 213 12

O Notes to Financial Statements a,eser,e has not see, es+abcshea. bu, the issues reia,:ng to tte such e.,end;tu,es i.et cf associatea income ta,, educt:oesi shouia.

.s,a s s h,,o r, g to bacs are peno.eg wo,e ese rede,ai Powe, the,ef>,.. b. emort.zw fer rat.-aug and account;ng purpos..

Commiss.on in proceo ;ngs relahng to another 1.ceasee.

over that peried and t*e Pennsylvan;a Public Ut;lity Comm;rsion and u

e ederal Power Commiss;on have authorized such amortization in any case if it is finally determ;eed that a reserve must be over a peri d cf 20 years.

prov;ded in respect of this project. it is est; mated tnat the maxi-mum amount cf any such reserve will not onceed $1.000.000.

II. Rate Increase:

1

9. Commitments:

Reference is made to the caption "First General Rate Increas. In 18 Years" in the accompany;ng President's letter for inferreation The Cempany e s pects to make em penditu res cf appron;mately

$',4 000.000 f or pl ant addit;ons during 1971. and in that correction

' elating to the status of the Cornpany's request for a general rate T

l bas incurred substant;al comm,tments. The Corepany plans to issue increase.

securities to part aHy finance soch ceestruction.

Re8erence.is made to the caption " Fuel Suppl:es and Cost" in the accompaay;ng President's letter for information relat;ng to a

10. Coal M.ine Development Costs:

fuel cest ediustment c'aun The Compa*y a9d the non-aiflated co owner of the Hcmer C;ty generet;eg staten have ag eed w;th non-affiiktes mining corapanies

12. Pens, ion Plaas; to ass;st tneu ;th the f;noncing required for the deve:opme9t and T

td M

s for ih e.i@w d equ;pmect cf the m nes which are to supply coal for that station.

No arrangements have yet been made for tne permanent ficaric:ng of a ros;mately $1.400 WO pad $1.350 000 in e., s ent' M 6' re-of these mines. In the meantime. the Ccmpany and such oOer non-aff.l;ated co-owner have agreed to mese inter;m loans to the min.

SP'C' * *lY-ig companies. The man; mum amount cf sucn inter;m loans thus far The CompaN W s v local unices have recently agreed upa new author; zed to be maos by the Company is $13.000 000 and. at De-con,,,ets ;nyo.,;n ; ;n.,,es,s ;n wage rates and various friar bene-cember 31. 1970. $10.722.266 had been so loaned to the mining f,ts includ;ng a ' comprehensive revision cf the emp!cyee I;fe in-companies. However. ore of the m;ning compan;es has reauested surance end pension plans. The new pension plans invohre both a that such auther; zed Icaes be increesed by an add:ti:nal $4.500 000 plan apaiicable to all employees. the cost of which is teing funded and such request is under s'udy. / ;l such loans bear interest at a with 6 ; *u stern and a supp;eme-tal p'an applicable only to super-rate which is l'/2 /, per annum above the prime interest rate for visory enp oyees which is o* Laded but for which a eserve has l

commerciai bcrrowing and maNre ;n 1972.

been cre sted by regda +.+ly charges to pension nt & t '

Ur ser ne areement w;th tne min (nq compan;es, the ite-s capi-WCr taLzed by tne mjning companies as oeve'epment costs prior tu the f..

dtb p'n dtr6W ed date when coal is f;rst produced for 1,.e stockpoe are to be tmor-od efans inc.Jr a increases in costs resulting from pian changes p,

t red. and charged to the Co-ceny ard ron-affna'ed co-oweer, over tt t ;ncressed benef ts based upen periods of service prior to such the tonnag. to be preduced frem tre mines

• Ian changes. However. for the year beginning January I 1970. the After the f;rst production of cca! by the rmning ccmpanies the Company is treating benefit changes related to prior periods of ser.

Ccmpany and non eifisted co-owner ci the stat on are to pay. eac'

,;ce as a "past service cost" to be amortized and funded over a year, the mimng compan;es' acNal costs of product.on (inc wd;.ig period of appres;rcately 25 years. Moreover. for the past several deveiopment costs) for the year plus an agreed profit. Of such years the costs cf tb plant have been determ;ned on the basis cf payments to the rmn;ng ccmpames, $4.466 651 represent payments an assumpt on that the pension funds will earn 47. per annum. In for oeve'op ere n t costs wh;ch e o ;nc'uded in deferred debits in 1970. the Compaay increased that earnings assumpt;on t. ' 5'/27.

recogn; tion of the fact that such expenditures are associated w;th per annum. The net effect of the changes in plan benefits and in d e nv eries from the mines over substantially the entire period cf earnings assumptions did not have a sign;f: cant effect on not in-productive operations cf the m;nes. In the v;ew of the Company.

come of the Company.

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AUDITOR $' REPORT To the Board cf Directors.

Penesylvan:a E;ectric Company.

Jchnstown. Penns,1vania.

We have esamined the conselidated balance sheet of Pennsylvan;a Elect ic Correany and Subsidiary Compan;es as of December 31.1970 and the re;ated censolidated statements of income and unapprepnated earned surplus and the consofidated statement cf source and application of funds fer the year then ended. Our enac ination was maos in accordance with genera 3y accepted aud: ting standards, and according!y in-ciuded such tests of the accounting records. nd such other aud. ting procedures as we considered necessary in itio circumstances. We previously examined and reported upon the censolHats I financial statements for the year 1969.

In our cpinion, the aforementioned Naments present fairly the consol; dated fMancial poshion cf Pennsylvania Efectric Company and Subiio;ary Compan:es at December 31.1970 and 1969 and the consor;da+.d results of the;r one ations and the consel; dated source and appli-cation of fu ds for the years then ended in conformity with generally accepted accounting principles applied on a consistent basis.

r LYBRAND. ROSS BROS. & MONTGOMERY Philadelphia, Pennsylvania.

February 1. Itil.

Md'214

0l$ 000,{ f;}

1970 ANNUAL REPORT PENNSYLVANIA ELECTRIC COMPANY BULK RATE 1001 BROAD STREET, JOHNSTOWN, PA.15907 U.S. POSTAGE

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