ML19263C398
| ML19263C398 | |
| Person / Time | |
|---|---|
| Site: | 05000502, 05000503 |
| Issue date: | 02/15/1979 |
| From: | Remmel J WISCONSIN ELECTRIC POWER CO. |
| To: | Saltzman J Office of Nuclear Reactor Regulation |
| References | |
| NUDOCS 7902220061 | |
| Download: ML19263C398 (12) | |
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Wisconsin Electnc eaara couesur February 15. 1979 231 W. MICHIGAN, P.O. BOX 2046, MILWAUKEE, WI 53201 Mr. Jerome Saltzman, Cnief Antitrus t & Indemnity Group Nuclear Reactor Regulation Nuclear Regulatory Commission Wasni6gton , D. C. 20555
Dear Mr. Saltzman:
We are herewith providing our guarantee under the retrospective premium system which became effective August 1,1977 pursuant to:
- l. Certain provisions of the 1975 Amendments to the Price-Anderson Act,
- 2. Certain requirements relating to guaranteeing retrospective premiums published by the Nuclear Regulatory Commission in the Federal Register on January 31, 19 7 7 (42 F.R. 46) ,
- 3. Your letter of June 15, 1977 addressed to Wis consin Electric Power Company and Wisconsin Michigan Power Company, and
- 4. Our reply to your letter of June 15, 1977 dated June 27, 1977 with a showing of adequate cash flow as detailed in the documents attached and listed below which are required in utilizing this alternative:
- 1. Annual certified financial statements for year 1978.
- 2. Certified Cash Flow Projection for year 1979 with narrative statement.
Sincerely, a /
Lk J . G . Remmel/bj k Treas urer
[O. COL
\ 80- KW 790 222 0 M /
S
4 .
WISCONSI'N FLI Cll'IC POWTR COMI'ANY SYSTEM INCOME STATEMENT - urn rNUrD DECFMPER M 1978 1977 (Thousands of Dollars)
Operating Revenues Elec t ri c . . . . . . . . . . . . . . . . . . . . . ......................... ... . 5583,162 5519,182 Gas .. ............. .. ............. ...... .... ...... .. . 161,177 143,265 Steam . . . .. ... ........... .. .. .......... ......... ... 8,272 7,456 Total Operating Hevenues 752,611 669,903 Operating upuses 155,615 131,108 Fuel (Note A) .. .. . . ..... .. . ..... .. .. .........
Purchased power . . . . .. . ... . . ..... .. . .. . .. .. 48,568 30,819 Cas purchased for resale . .... ... ... .. ... . .. .. 115,943 98,999 Other operation expenses (Note B) . . . ..... ..... ... .. . 112,573 104,666 Maintenance . . . . .. . .. . . . . 55,879 49,334 Taxes other than income taxes . . ... .... . .. . .. .. 35,049 33,429 Depreciation (Note C) ,
Straight line . . . . . . . . .... .. . .... ... .... .. . . . ... 54,160 49,702 Deferred income taxes (Note D) . ... .. ......... ... . ... 3,873 16,463 Federal income tax (Note D) . . . ....... .. . .. .. ... ... 31,904 37,017 Investment tax credit adjustments - net ...... . ... . . . 23,946 10,010 State income tax (Note D) . . . . . . . . . . . . . . . ..... . . . 6,887 7,039 Total Operating Expenses 644,402 568,586 Operating Income , ... .... . . ... .. ..... . .... . 108,209 101,317 Other Ireome and Deductions Interest income . . . .. . . . .. .... 1,659 2,854 Allowance for other funds used during construction (Note E) . . 3,372 238 Miscellaneous - net . . .. . . .. .. . .. .. (322) (ISS)
Income taxes (Note D) .. .... .. ... .. . ....... ... .. (1,184) (1,820)
Total Other income and Deductions 3,525 1,114 Income Uefore Interest Charges . . .... . .. .. .. 111,734 102,431 Interest Charges 20 Long term debt .. . ... . . . .. .. 35,998 32,119 Allowance for borrowed funds used during construction (Note E) . (1,695) (152)
Other .. .. .. .. . .. .. ... ... ... .. 5,026 2,269 Total Interest Charges 40,129 34,236 Net income . . . . . . . . ... . . ... . .. .... ...... .. 71,605 68,195 Preferred Stock Dividend Requirement .. .. ... .,. . . 7,337 7,088 Earnings Available for Common Stockholders . .. .. . ... . . .. $ 64,268 S 61,107 Average Number of Shares of Common Stock Outstanding (Thousands) ... .... .. ... ... 18,354 18,213 Earnings Per Share of Common Stock . . . . . . . . . . . . ..... .. .. $3.50 53.36 l i J The notes on pages 21 through 28 are an integral part of the f.nancial statements.
WISCONSIM FI FCIRIC l'OWER COMI'ANY MSirM RETAINED EAllNINGS STATEMENT si AR rNtilD firCI:MitrR 31 1978 1977 (Thousands of Dollars) 11 a la n c e, J a n u a ry 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $201,424 $178,736 Additions Net income . . . . . .. ...... . .. . . .... . .... 71,605 68,195 Transfer of amortization reserve - hydroelectric proiccts ..... .... 305 -
273,334 246,931 Deductions Dividends - Cash Preferred stock . .. . ... ..... ..... . ....... ..... 7,088 7,088 Common stock .. . ... . . . . .... . ..... 40,537 38,055 47,625 45,143 Cost of issuing capital stock , . . . . ............... 687 164 Call premium on retirement of preferred stock . . .. ............. - 200 48,312 45,507 llalance, December 31 . ... . .... . . ...... . ..... . $225,022 S201,424 STATEMENT GF CII ANGES IN FIN ANCI AL POSITION -- WAR rNDED DECEMBER 31 1978 1977 (Thousands of Dollars)
Financial Resources Provided Operations Net income .. . . .. ...... ... .. .... $ 71,605 S 68,195 Depreciation - straight ime . . . . . .. . .... .. .. 54,160 49,702
- deferred income taxes .. . ... .. . 3,873 16,463 Accumubted deferred investment tax credi's .. ... .......... 19,942 8,360 Nuclear fuel expense . . .. . .. ... .. .......... 8,782 6,679 Allowance for funds used during construction ...... ....... ... (5,267) (390)
Total from operations . ... . .. ..... ..... ... . 153,095 149,009 Common stock .. .. .... .. . .. .............. ....... ... 5,516 3,038 Preferred stock . . . . ... . .. . ....... .. . ... .. 59,455 -
Long term debt . . . . . ..... ... ....... . ..... .. .. .......... 104,882 - 21 Sale of nuclear fuel . . . .. ... . . .. . . ... ... ....... 5,192 -
Reicase of deposit with trustee under mortgage . . , .. ... . .. - 11,851 Short term borrowings . .. . . .. . . .. ... .. .... 3,675 968 Deferred accrued utility revenues . . ..... ... ........ ..... - 52,054 Contributions in aid of r;onstruction .... ........ . ... ....... 3,338 4,120 Miscellaneous , .. .. .... . ... .. .......... . ..... .. . (2,528) (3,387)
$332,625 $217,653 Financial Resources Used Construction expenditures . ... .. ............ . . ............ $220,563 $136,915 Nucicar fuel. ... ... . . .............. . ........... ....... 33,436 12,605 Dividends . . .. . . .... . .. .. . .. ...... ............... 47,625 45,143 Retirement of preferred stock of former subsidiary .... ... ..... . - 4,200 Retirement of long term debt , .. ..... .... ................. 12,165 12,348 Construction funds held by trustees .. . . . .. . .. ......... .. 12,153 -
Increase in working capital (other than short term borrowings and long term debt due currently) .. . ...... ... 6,683 6,442
$332,625 5217,653 I I The notes on pages 24 through 28 are an integral part of the financial statements.
WISCON5iN Ft.ECTRIC POWER COMPANY SYS'IEM UALANCE SIIEET - otCruntR 3 n , a 1978 1977
(' thousands of Dollars)
ASSETS Utility Plant Electric . . ................................................... . $1,511,172 $1,417,129 Gas ..................................................... ...... 173,918 167,797 Steam......................................................... 17,161 17,095 1,702,251 1,602,021 Accumulated provisior. for depreciation . . . . . . . . . . . . . . . . . . . . . . . . (653,291) (588,886) 1,048,960 1,013,135 Construction work in p rogress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217,108 103,652
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N u cl e a r i u c t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,420 27,175 Accumulated provision for amortization . . . . . . . . . . . . . . . . . . . . . . . . (2,617) -
52.803 27,175 Net Utility Plant 1,318,8" t 1,143,962 Nonutility Property . . . . . . . ................ ............ ..... 6,539 6,448 Accumulated provision for depreciation . . . . . . . . . . . . . . . . . . . . (383) (315)
Net Nonutility Property 6,156 6,133 Construction Funds IIeld by Trustees (Note F) ..... .............. 12,153 -
Current Assets Cash .......... .................. ........................ ... 5,947 4,073 Temporary cash inve9ments . . . . . . . . . . . . . . . . . . . . . . . . . ..... 2,900 5,450 Accounts receivable (Note G) . . . . ..... . . ........... . ... 50,013 40,279 Accru ed u tility reven ues . . . . . . . . . . . . . . . . . . . . . . . . . .. .... 59,787 52,039 Fossil fuel (at average cost) . . . . . . .. ........... . .. . . 46,665 33,613 22 Materials and supplies (at average cost) .. ........... . .. 25,193 20,016 Prepayments and other assets . . . . . . . . . ....... .......... .. 6,588 6,028 Total Current Assets 197,093 :67,328 Deferred Charges and Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,898 29,688
$1,565,171 $1,342,111 I I The notes on pages 21 through 28 are an integral part of the financial statements.
i i i 1978 1977 (Thousands of Dc,llars)
LIABILITIES Capitalization Common Stock Equity (Note 11)
Common stock (authorized 41,000,000 shares, $10 par value; issued 18,473,747 and 18,276,068 sh a res) . . . . . . . . . . . . . $ 184,737 $ 182,760 Premium on capital stock .. .. .....I................... 135,296 131,757 Retained camings . . . ............ ... .................. 225,022 201,424 Total Common Stock Equity 545,055 515,941 160,451 100,451 Preferred Stock (Note J) . . ...... .......... .. .........
1.ong Term Debt (Note 1) . . . ... .. .. ... . . ............ 589,576 491,257 Total Capitalization 1,295,082 1,110,M9 Current Liabilities Long term debt due currently (Note 1) . . .. .. ..... .......... 7,662 10,310 Notes payable to banks (Note K) .. ....... . ... . ....... . 21,441 20,794 Commercial paper (Note K) . . .. . .. .............. ... ..... 4,022 994 Accounts payable . . ... . ... . .... .. ... ...... 54,711 38,426 Payroll and vacation accrual . . . ... ... . ... ..... .......... 11,171 10,148 Taxes accrued -income and other . ..... . ............... . 26,732 20,627 Interest accrued . . . . . . . . ..... ..... ........... . ........ 10,600 8,300 Customer deposits . . . . . . . . ........ .... .......... .... .. 1,863 1,679 Other .. .. .... .. .. . . . .... ... . . . ......... 6,771 4,586 Total Current Liabilities 144,973 115,864 Deferred Credits and Other Liabilities Accumulated deferred investment tax credits . ............. 49,956 30,014 Nuclear fuel costs accrued (Note D) , . . . . ....... ... ... .... 17,372 27,332 Unamortized accrued u tility revenues . . . . . . . . . . . . . . . . . . . . . . . . 33,778 38,000 Other..................................... . .. ... .. . 6,027 5,302 Total Deferred Credits and Other Liabilities 107,133 100,648 23 Amortization Reserve - Ilydroelectric Projects . . . . . . . . . . . . . . . . . . . - 305 Contributions in Aid of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 17,983 14,645 Comrnitments (Note L) and Contingencies (Note M)
_S,1,565,1H $1,342,111 i I The notes on pages 24 through 28 are an integral part of the financial statements.
WISCONSIN Fl.ECIIIIC POWElt COMPANY SYSTEM NOTES TO FINANCIAL STATEMENTS Summary of Significant Accounting Policies General Debi Premium, Discount and Expense
'Ihe a,ccounting records of the Company and its Long term debt premium or discount and expense utility subsidiary are kept as prescribed by the of issuance are amortized by the straight line method Federal Energy Regulatory Commission, modified over the lives of the debt issue:,. Unamortized for requirements of the Public Service Commission amounts pertaining to debt reacquired for sinking of Wisconsin (PSCW). The consolidated financial fund purposes are written off currently.
statements include the accounts of the Company and A - Rental Expense its subsidiaries, Wisconsin Natural Gas Company and Total rental expense was $20,989,000 in 1978 and Ibiyr Service Company.
$18,053,000 in 1977. This includes lease payments for Revenues nuclear fuel of $19,835,000 in 1978 and $17,083,000 in Meters are read and accounts are billed monthly. 1977. The nuc! car fuellease can be terminated by the Since Janut.ry 1,1977 utility revenues have been Company or the lessor on two years notice. The lease recognized on the accrual basis and include estimated of any batch of fuel automatically terminates at the amounts for service rendered but not billed. Accrued end of 78 months, or 18 months after removal from utility revenue of $52 million at December 31,1976 is the reactor, unless the parties extend the term.
being recorded as revenue in equal amounts over a The Company has agreed to pay the lessor for the ten year period as prescribed by PSCW. unamortized cost of the nuclear fuelin the event the gg lease is terminated. The Company has an option The cost of fossil and nucl .ar fuel is expensed in t Purchase the nuclear fuel at the higher of such the period consumed.
unam rtize c st r fair mar t value Rental Payments are made monthly based on the arr. cunt Nuclear fuel expense indudes an estimate fn f nuclear fu 1 leased and the amount of leased offsite storage of spent nuc! car fuel for ten years nucl ac fuel burned.
after removal from the reactor. No salvage value is recognized for spent nuclear fuel. The accounting for The nuclear fuellease is treated as an operating nuclear fuel follows the ratemaking treatment for lease by PSCW in determining revenue requirements, such costs. and the value of the leased fuel is not included in the Property Company's rate base. Ilad the lease been accounted Electric and gas utility property is recorded at f r as capital lease, expenses before income original cost, and steam utility and nonutility taxes and indetermmate effects of corresponding property is recorded at cost. Additions to utility r t making treatment would have been decreased
$891,000 in 1978 and $78,000 in 1977 and an asset and property and significant replacements are charged to utility plant at cost. Cost includes material, labor and c rresp nding liability would have been recorded at December 31 in the amounts of $27,855,000 in 1978
,g allowance for funds used during construction (see and $39,214,000 in 1977.
Note E). Replacements of minor items of property are charged to maintenance expense. The cost of B - Pension Plans depreciable propertv, together with removal cost less Several noncantributory pension plans cover all salvage, is charged to accumulated provision for eligible employes. Normal emplaye pension cost is depreciation when property is retired. accrued and funded currently and unfunded prior Income Taxes service li bility is amo.tized qver periods from ten to Deferred income tax accounting is practiced in thirty years. The unfunded pnor service liability of respect to significant timing differences. The federal the pension plans is not significant. Substantially all investment tax credit is accounted for ca the deferred vested and accrued benefits under the plans have basis and is reflected in income ratably ever the life been funded. Pension expense was $5,715,000 in 1978 and $4,640,000 in 1977.
of the related property.
C - Depreciation Depreciation expense is accrued at straight line rates certified by PSCW. Depreciation rates include estimates of salvage and plant removal costs. Nuclear plant depreciation rates provide for an amount to cover estimated plant decommissioning costs.
Additional depreciation is accrued in accordance E- Allowance for runds Used During with PSCW requirements which is equal to the tax Construction ( Al DC) effects of timing differences related to property and AFDC is included in utility plant accounts and nuclear fuel including principally the use for tax represents the cost of borrowed funds used during purposes of accelerated depreciation methods (see plant construction and a rate of return on Note D). stockholders' capital used for construction purposes.
On the income statement the cost of borrowed funds D -Income Tax Expense Delow is a summary of income tax expense and a More inc me taxes) is a reduction of interest expense and the return on stockholders' capital is an reconciliation of toul income tax expense with the tax Item f n ncash other income.
expected at the federal statutory rate.
The Company is limited by PSCW to capitah,/mg 1978 1977 AFDC only on construction work in progress m.ouuna, ot noua'4 exceeding 10% of its net investment rate base.
Concat tas cipen* 5 39,975 5 45.876 Revenues granted by PSCW in rate orders include the Ingestment tas credit ad;ustments - net 23,946 10,010 .
equivaIent of a return on investment in construction DcIerred lancs charp,cd to depreciation cupense 3.873 16.463 work in progress below this limit. AFDC was Total ta= cmpece . 5 67,79: 5 72.349 capitalized in 1978 and 1977 at a rate of 7% approved Income before income taxes . 5139.399 5140,544 by PSCW.
Eirected tax at federal statutory rate . 5 66.912 5 67.461 F - Construction Funds IIcid by Trustees State income tai net of The construction funds were established in hiay federal tas reduction . 5,028 4,389 Other (no item over 5% of 1978 to finance pollut. ion control and environmental empccred tas) . (4.146) 499 improvement facilities at the Company's new Pleasant Total tas eurense . .
~5 67,79: 5 72,349 Prairie Power Plant. Proceeds of $25,772.500 from the sale of municipal revenue bonds issued by the Town The aggregate amount of deferred income taxes of Measant Prairie were deposited in the funds under included in the accumulated provision for a loan agreement with the Company. As a revenue depreciation at December 31 was $122,404,000 in 1978 source and collateral for the loan, the Company and $104,850,000 in 1977. issued to the Town its First Mortgage Bonds in the in 1978 the Company filed claims for refunds with principal amount of $26 million. Funds are released to the Internal Revenue Service (IRS) for the years the Company as qualifying property is constructed at 1970-72. The claims seek a refund of federal income the plant.
taxes for the deduction of storage and other costs fer spent nuclear fuel. Such costs were disallowed as a G - Accounts Receivable Accounts receivable are shown on the balance sheet current deduction by IRS on audit and the resulting after deducting an accumulated provision for doubtful assessment was withheld from a previous refund.
accounts in the amount of $826,000 for 1978 and 9-Management is contestmg the disallowance, but 923,000 for 1977. Uncollectible account write-offs net pending resolution the Company recorded m 1978 of veries were $1,552,000 in 1978 and $1,807,000 the tax effect of these costs for the years 1970-78 by in 1977' increasing the current federal income tax pmvision and normalizing that amount by reducing deferred II-- Common Stock and Premium on Capital Stock income taxes by $14.733,000, resulting in no effect on Under the Automatic Dividend Reinvestment and net income. Deferred nuclear fuel costs accrued have Stock Purchase Plan, sales of 114,506 shares of bcui reduced by the amount of taxes prvdded. This common stock were made in 1978 and 80,378 shares accoundag for income taxes is in accordance with in 1977. Proceeds from the sales were $3,148,083 in PSCW practice. Related interest of $1,682,000 was 1978 and $2,409,441 in 1977. Sales of common stock accrued in 1978. under the Tax Reduction Act Stock Ownership Plan (TRASOP) were 83,173 shares in 1978 and 21,147 shares in 1977. Proceeds from the TRASOP sales were
$2,367,709 in 1978 and $628,408 in 1977. The increase in premium on capital stock is the excess of the proceeds from sales over the $10 par value of the common stock sold.
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WISCONSIN ELEC11dC POWER COMPANY SYSTEM NOTES - CONTINULD I- Long Term Debt Future sinking fund requirements have been Dearnbn 31 anticipated by advance purchases of bonds to the 3978 1977 extent of $3,110,000 and certification of property in Ghousands of Douars) the amount cf $2,750,000.
First Mortgage Bonds Wisconsin Electric Power Company Substantially all utility plant and nonutility 2%% Series due 1979 , . . $ 7,574 5 7,574 2% % Series due 1980 ,
propetty b subject to i;ie lien of the applicable
.. 11,122 11,286 mortgage.
3%% Series due 1982 , .. 9,502 9,628 3%% Senes due 1934 . 15,647 15,832 3%% Senes due 1986 , .
22,332 22,552 J - Preferred Stock 4 %% Senes due 1988 , . 23,457 23,612 Decemoer 31 5 % Series due 1990 . . . . . .. 26,913 26,951 5%% Series due 1996 , 3973 3977
.. 28,122 28,101 6%% Series due 1997 . . .. . . 38,115 33,247 (Thousands of Doum) 6%% Series due 1998 , . .. 33,834 33,910 Preferrcd Stock (cumulative) 7%% Senes due 1999 . . . 33,995 39,053 Wisc nsin Electnc Power Company -
8 %% Series due 1999 . . . 39,591 39,591 Per Cent. Prewrred Stuk -
8% % Series due 2006 , . 60,000 60,000 authonred 45,000 shares; 8?s% Series due 2008 , . . 8C,000 - $10J par value; issued 44,508 6.10% Serial Series due 1999-2008 . 25,000 -
shares; not callable . . . $ 4,451 $ 4,451 6.25% Serial Series oue 1999-2008 . . 1,000 - Serial Preferred Stock -
Former Wisconsin Michigan Power authorized 1,560,000 shares; Company (merged with Company in 1977) , $100 par value 3 % Series due 1978 . .
- 10,310 3.60% Series - issued 260,000 2%% Series due 1930 . . . 640 640 shares; redemption price $101. . 26,000 26,000 3%% Series due 1981. . 2,147 2,149 8.90% Senes -issued 400,000 3%% Series due 1988 , . . 2,164 2,164 snares; redemption price $107 4%% Series due 1991, . . 3,623 3,624 to December 1,1930 and 4%% Sones due 1993 , 5,077 5,112 declining amounts thereafter to 5%% Series due 1996 . . 9,271 9,271 $101 after December 1,1985. . 40,000 40,000 6%% Senes due 1997 , 11,539 11,549 7.75% Series - issued 300,000 6','s% Series due 1993 . 9,899 9,905 shares; redemption price $107 8%% Series due 1999 < . 11,829 11,875 to November 1,1981 and Wisconsin Natural Cas Company decimmg amounts thereafter to 3%% Senes duc 1980 . . . 1,861 1,861 $101 af ter November 1,1986 30 ? 00 30,000 4 % % Series due 1986 , 3,633 3,646 8 80% Series - issued 6t,0,000 4%% Series due 1987. . . 4,531 4,501 shares; redemption price $103.80 4?s% Senes due 1990 . . 6,513 6,603 to January 1,1981 and 6?s% Series due 1992 , 9,462 9,477 declining amounts thereafter to 8%% Series due 1994 4 9,796 9,834 $101 after December 31,1993. 60.000 -
8%% Series due 1996 . 9,981 9,971 Serial Preferred Stock -
563,103 468,927 authorized 5,000,000 shares; Debentures (unsecured) $25 par value, unissued . . . - -
Wisconsin E!cttric Power Company Total Preferred Stock $160,451 $100,451 3 7 % Senes due 1993 . . 38,429 35,163 -
597,532 m ,090 Unamortiicd Premium or (Discount)- net (291) 477 K - Notes Payable and Commercial Paper Long Term Debt Due Currently .. .. (7,662) (10,310) The average interest rate for debt outstanding at Total Long Term Debt. . $589,576 $494,257 December 31,1978 was 10.25% for notes payable and 10.42% for commercial paper. Average short term The maturities and sm. king fund requirements borrowings outstanding during 1978 amounted to through 19S3 for the aggregate amount of long term $31,877,000 with a weighted average interest rate of debt outstanding at December 31,1978 are shown 8.01%. Maximum short term borrowing during 1978 was $66,538,000.
below. Of the annual sm. king fun'd requirements,
$3,190,000 for the years 1979-80 and $3,990,000 for the years 1981-83 may be satisfied by certifying additional mortgaged property. '
Maturities Sinking Fund 1979 .. . . ... $ 7,574,000 $5,735,000 1980 4 . . . . . 13,514,000 5,725,000 1981 . . . . .. .. . . .. 2,147,000 6,350,000 1082 , . . . . ..... . .. 9,137,000 6,315,000 1933 .. ............A... .. - 6,190,000
AU bank loans outstanding at December 31,1978 to transfer capitalized expenditures on the were demand notes held by binks in fiduciary Koshkonong project (approximately $20.5 million for capacities. Commercial paper outstanding matured the Company) less the cost of site acquisition in January 1979. ($600,000 for the Company) to the llaven nuc! car Unused Imes of credit for short terra borrowing project. In an October 1974 order PSCW had stated amounted to $125,355,000 at December 31,1978. In that any expende. ires on the Koshkonong project support of various informallines of credit from found to be impradent or unreasonable will not te banks, the companies have agreed to maintain allowed as an operatin' g upense or included in the unrestricted compensating balances. With the rate base.
exception of funds required for daily operations, the Although the actions of regulatory bodies cannot cash balance shown on the balance sheet at December be predicted with assurance, the Company continues 31, 1978 as well as $1,000,000 of non-interest bearing to believe that its decisions with respect to the certificates of deposit included in temporary cash Koshkonong project and its expenditures in investments represent compensating balances. connection therewith were and continue to be L - Commitments prudent and reasonable and that any portion of Construction expenditures through 1983 are such expenditures that cannot be transferred to the estimated to be $1.4 billion, of which $255 million is llavcn pr et should be, therefore, recognized for planned for 1979. Plans for expansion of generation '# k" "U pq ses in some way. heent press reports muicate, however, that the PSCW has decided facilitic3 include a 62.5% ownership in a nuclear plant, and investment in coal fired generating units. t direct an immediate write-off of some of these Commitments for generation facilities at December exp nditures, which, for the Company, would 31,1978 amounted to $271 million, part of which are am unt t appr ximat ly $4.4 milhon bef' ore income cancelable. tax effect. A formal decision, which would be subject to court review, is expected in the near future.
M - Contingencies In July 1977 the Company d other participants in N - Replacement Cost of Productive Capacity the proposed construction of two nuclear power plant (Unaudited) units at Lake Koshkonong withdrew their application Because of inflation, the cost of replacing existing for regulatory approval becausc the Wisconsin utility plant today would exceed the original cost of Department of Natural Resources considered t!.is site these facilities. In compliance with the Securities and to be environmentally unsuitable. The participants Exchange Commission requirement, the Company's then announced they proposed instead to build the annual report to the Commission (Form 10-K) will project at the Haven site near Sheboye,an, Wisconsin. include the unaudited.cstimated cost of replacing PSCW held hearings in May and June 1978 on the present productive capacity and the corresponding proposal of the Company and the other participants depreciation expense based on replacement cost.
27 O - Quarterly Financial Data (Unaudited)
Three Months Ended Marc [ June September December Uhousands of Douars) 1978 1977 1978 1977 1978 1977 1978 1977 Total operating revenues . . $208,802 $183,068 $164,910 $144,68S $184,798 $159,766 $198,101 $182,381 Operating income. . . . . . . 25,590 27.432 23,188 20,218 34,223 29,771 25,208 23,396 Net income. . ... .. 17,697 19,606 14,583 12,133 25,287 21,712 14,038 14,744 Eamings per share of common stock. ....... $0.87 $0.98 $0.70 $0.57 $1.28 $1.09 $0.65 $0.71 Because of seasonal factors which affect the utility business and differences between summer and winter electric rates, the quarterly results of operations are not directly comparable.
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WISCONSIN Lt.EC1RIC POWTR COMPANY SYSTEM NOTES - COvrlNUf D I
P -Information by Segments of 13usiness Year Ended Decernber 31 1978 1977 Ohousands of Dollars)
E!cctric Operations Revenue from unaffiliated customers . ... . .. .. .. . .. . . .. . .. ........ . $ 583,162 $ 519,182 Intersegment sales . . . . . . .. . . . .. . .. . .... . 198 155 Operating reven ues . . . . . . . . . . . . . . . . . . . . . . . .. . . ..... .. . .... . 583,360 519,337 Operating income before income taxes . . . .. . ... . .... . . .... . 153,948 151,492 Depreciation - straight line . . . . . . . . . . . .. . . . .. . . .. .. ... .. .... 47,432 43,219 Construction expenditures . . . . . . . . . . . . . . . . . . . . . . . . ... ....... . 212,063 127,598 Cas Operations Revenue from unaffiliated customers .. . . .. .. . .. . . . ........ .... .. 161,177 143,265 Intersegment sales . . ... . .. ..... .... .. .. . . . . . . ..... 3,224 1,918 Operating revenues. ... ... . . . .. . ... . .. ... .. .... . . . 164,401 145,183 Operating income before income taxes . . . .. . . ... ... ... .... ....... 18,908 18, % 3 Depreciation - straight line . . . . ........ . . . .. .. .. . ... .. 6,217 5,991 Construction expenditures .. . ..... ...... . .. . . . .... . . .. . . 8,153 7,991 Steam Operations -
Operating revenues (unaffiliated) .. . . ... . . . . ........ .. .. .. .. . 8,272 7,456 Operating income before income taxes , . ... . .. . . . . . . . .... 1.%3 1,391 Depreciation - straight line . . . .. .. . . . ... . . .. ........... .. 511 462 Construction expenditures .. .... ....... .. . . ...... ..... ....... 273 704 Consolidated .
Operating revenues (excluding intersegment sales cluainated in consolidation) . .. .. ... . ... .. .. ... . .... 752,611 669,903 Operating income before income taxes . . . . ... .... .. .. . 174,819 171,846 Depreciation - straight line . . . . .. . .. . . ... . .. .. . .. 54,160 49,702 Construction expenditures (including nonutility) . . . . .. 220,563 136,915 At December 31 Net Identifiable Assets Electric .. . .. . ... . . .. . . .. . $1,387,513 $1,167,792 Cas . . . . . .. . .. . . . . . . 159,369 155,668 Steam and nonutility . . .. .. . . . . . . . .. . . . . . 18,289 18,651 Total Consolidated Assets . . . . .. . .... . $1,5t/.,171 $1,342,111 Itatersegment sales consist principally of gas sold by Wisconsin Natural to the Company at rates approved by PSCW.
28 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and the Stockholders of -
Wisconsin Electric Power Company In our opinion, the accompanying consolidated balance she'et and the related consolidated statements of income, retained earnings, and changes in financial position present fairly the financial position of Wisconsin Electric Power Company and its subsidiaries at December 31,1973 and 1977,and the results of their operations and the changes in their financial position for the years the ended, in conformity with generally accepted accounting pnnciples consistently applied. Our examinationc of these statements were made in accordance with generally accepted auditing standards and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
p January 25,1979 h.h g, .(,.t b wuet I%
M
WPlOY,1N FII CTRIC POWER COMPANY SYSTEM STNIISTICAL INFORM ATION l 1978 1977 1976 1975 1974 Financial Net income ($MI) . .. .... . 71,605 68,195 60,130 49,011 46,921 Preferred stod dividend requirement (5000) . . . (7,337) (7,0M) (7,0M) (7,088) (7,088)
Net income available for common stock (5000) . 64,268 61,107 53,042 41,923 39,833
% of operatmg revenues 8.54 9.12 8.95 8.28 9.23
% of retum on average cummon equity . . ... . . 12.18 12.19 12.09 10.02 10.23 Ratio of market to book value of common ,
stock - December 31 .
.88 1.10 1.16 1.13 .90 Times fined changes carned before income taxes . 4.32 5.09 4.56 4.13 3.86 Earnings per share of common stock (5) 3.50 3.36 3.19 2.54 2.57 Dividends paid per share of comtaon stock (5) , 2.21 2.09 1.98 1.90 1.81 Averay,e number of shares of common stock 18,354,149 18.212,721 16,642,249
. .. . 16,480,868 15,514,837 Plsnt and Pmduction Cross utihty plant (!000) 1,974,779 1,732,843 1,616,405
. . .. .. . 1,548,505 1,460,161 Investment in gross plant per:
Resenue do!!ar (5) ...
2.62 2.59 2.73 3.06 3.38 Cu stomer:
Electric (5) . 2,278 2,019 1,906
. .. 1,851 1,769 Cas (5) . .
. . .. 881 875 866 874 861 Generating capabihty (kilowatts) . 3,686,000 3,577,000 3,594,000 3,603.000 3,618,000 System peak (kilowatts) , 3,339,000 3,452,300
. . . 3,215,(00 3,109,000 3,000,800 Sales, Resenue and Customers Electric Kdowait. hours (thousands)
Net generated . 16,945,796
.. . . . 17,085,864 16,790,986 16,281,565 16,439,518 Purchased . 1,720,012
. . . 1,077,832 614,392 469,123 355,157 Total output . 18,665,838 18,163,696 17,405,378 16,750,688 16,794,675 Company use, transmission losses and unaccounted for . .
(1,196,165) (1,203,322) (1,248,770) (1,187,402) (1,129,709)
Total sales 17,469,673 16,960,374 16,156,608 15,563,286 15,t>64,966 Accrued (154,%3)
. .. . 4,837 - - -
Ibited . .
17,314,710
.16,%5,211 16,156,608 15,563,286 15,664,966 Operating revenues (5000) . 583,162
~
519,182 462,5a7 405,232 347,392 Operating income before income taxes (5000) 153,948 151,492 136,817 112,211 106,574 Custemers (End of year). 782,851 766,730 754,703 742,900 731,834 ca, 29 1herms (thousands)
Purcha sed . .. . .. 681,169 646,916 728,390 707,685 712,616 Company use, distribution losses and unaccoenSed for . . . . .. (410) 827 (24,567) (410) (1,365)
Total sales .
. .. 680,759
... . .. 647,743 703,823. 507,275 711,251 Accrued .
. . ... (2.108) 11.373 - - -
Dilled . 678,651
. .. .. . . 659,116 703,823 707,275 711,251 Operating revenues (5000) . 161,177 143,265 122,525 94,956 78,580 Operating income before income tases (5000) 18,901 18,963 13,853 12,343 14,369 Customers (End of year) . .
.. 197,603 191,807 186,329 180,251 175,104 Steam Sersice Sales (Milhons of pounds) . 2,352 2,193 2,319 2,218 2,327 Operating revenues (5000) . . 8,272
. . . 7,456 7,319 6,380 5,608 Customers (Fnd of year). 610 615 625 627 642
. WISCONSIN ELECTRIC POWER COMPANY 1979 Internal Cash Flow Projection for Point Beach Nuclear Power Station (Dollars in Millions)
Actual Proj e cted 1978 1979 Net Income Af ter Taxes 72 82 Less Dividends Paid (48) (54)
Retained Earnings 24 28 Adj us tmen ts :
Depreciation and Amortization 54 60 Deferred Income Taxes and Investment Tax Credits 43(1) 50 Allowance for Funds Used During Construction (5) (15)
Total Adjustments 92 95 Internal Cash Flow 116 123 Average Quarterly Cash Flow (2) 29 30.75 Percentage Ownership in all Operating Unit No. 1 100%
Nuclear Units Unit No. 2 100%
Maximum Total Contingent Liability $20,000,000 (1) Before debit of $15 million to Deferred Income Tax expense resulting from IRS disallowing certain portions of nuclear fuel expense relating to future storage and bonus / warranty. The Company is contes ting the dis-allow an ce .
(2) If it becomes necessary to curtail capital expenditures to ensure meeting a retrospective premium call, we would anticipate reducing construction activities to the extent necessary.
CERTIFICATION:
The Casn Flow Projections detailed above are based on the most current information available to us and represent our best estimates as of this date.
Dated Feb ruary 15, 1979 By # q[
Q ~ Treasurer