ML19296B752

Annual Financial Rept 1979

ML19296B752
Person / Time
Site:	Bailly
Issue date:	02/18/1980
From:	Petersen A NORTHERN INDIANA PUBLIC SERVICE CO.
To:
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ML19296B750	List: ML19296B749 ML19296B752
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NUDOCS 8002210455
Download: ML19296B752 (39)

Text

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DIRECTORS Edmund A. Schroer

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Chairman Presidentand ni Chief Executive Otticer

Northern Indiana Public Service Company t-i 'k2e' n"1"2"e university.

NORTHERN lNDIANA PUBLIC

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L William J. Johnson SERVICE COMPANY

? Chairman of the Board.

L Goshen Rubber Company, Inc.,

p Goshen, Indiana i

John Allan MacLean (netireo) 7 Former Vice Presic'snt and Director, j Reliance Electric Company, Cleveland, Ohio.

and President of its Dodge Manufacturing Division, 7 Mishawaka. Indiana E

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Dean H. Mitchell(netireo) a m -

Former Chairman and Chief Executive Otticer Northern Indiana Public Service Company NIPSCO Consultant Paul H. Neininger Chairman of the Board.

State and Savings Bank of Monticello, Indiana Operating Revenues-reach $1.196 billion, s James F. Purcell

Senior vice President up $246 m.ll.

i ion over 1978.

y Northern Indiana Public Service Company e WiHiam J. Riley Net income-increases 23 per cent to L Chairman and Chief Executive Otticer. $7g,g mllll99*

First National Bank of East Chicago, Indiana.

and Riley Company, Inc.

0 Ian M. Rolland

{ President and Chief Executive Otticer, $1.61 in 1978.

Lincoln National Corporation, and Lincoln National Life Insurance Company

[ Fort Wayne. Indiana Common Stock Dividends-1979 payments

, continue at $1.50 per share.

Automatic Dividend Reinvestment and 5

e Stock Purchase Plan-5 per cent discount instituted May,1979.

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h Electric Rate Case-a 12.8 per cent t general increase in electric retail rates effective j Availability of Form 10-K A copy of the Company's annual report July 19,1979.

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W_ for 1979 to the Securities and Exchange j Commission, Form 10-K. will be Plant Investment-exceeds $2.3 billion, more provided without charge to any share-holder or beneficial owner of shares of than double the investment in 1972.

the Company's stock upon written request to M. J. Mikulas. Secretary.

Northern indiana Public Service Company. 5265 Hohman Avenue.

Units 15 and 16A and 16B at the Schahfer b_

A Hammond. indiana 4ea20. Generating Station-in service during the year. 7 4 8002n10 4 55

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Our construction program for the first half of the TO O(r decade is $2.6 biiiion, more than doubiing the current utility plant, which itself was approximately doubled in the past seven years.

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e 1979 earnings were materially improved from

$1.61 to $1.86 per share and net income from

$ 62,581,000 to $ 76,859.000, but both will have to be "orthern Inriiana Public Service Company enters the '80s aware and determined; further improved. As of the end of the year our

.- aware of the absolute necessity of energy net utility plant, at original cost,was $1,952,902,000.

sufficiency and determined to meet that need The increases in revenues from $509,790,000 throughout its service territory. to $560,084,000 in electric and from $440,483,000

. .. to $636.160,000 in gas, a total increase of Conservation is vital to energy suff. .iciency;

$245,971,000, were substantially offset by production is vital to energy sufficiency. All avail- increased costs of coal and natural gas,' <hich costs able technologies will need to be pursued t are passed through directly to suppliers without maintain energy sufficiency.There are no simplist.ic rofit to the Company.

answers. Our concern should not be which option to pursue, whether coal, nuclear, oil, gas, Substantial electric rate relief was granted on liquefied natural gas, synthetic natural gas, coal July 18,1979; approximately $61.5 million annually gasification, solar, geothermal or biomass. on the basis of the test year. Additional rate relief Maintaining energy sufficiency is not an and/or will clearly be needed in 1980 as inflation continues proposition, it is an all proposition. in the double digits. Approximately $360 million of electric plant has now been placed in service The adverse economic impacts of insufficiency which was not included ir the last rate case.Whole-are obvious and the political, social and cultural sale electric rates were increased during the adversities are just as real. Our focus during year by about $5.7 million based on the test year.

the '80s will be on continuing to provide reliable utility service, not toward finding an equitable The largest items of new electric plant placed manner of curtailing service. in service since the last electric rate case were $ 212 million for Unit 15, a 472,000 kilowatt coal-We believe the current economic slowdown to fired plant, and $32 million for Units 16A and 168, be temporary and that because of lead times o I-fired combustion turbines, with a combined required for construction decisions there is a capability of approximately 155,000 kilowatts, all continuing need to provide for both growth and at Schahfer station near Wheatfield. Maintenance increased internal generating capability. In 1979, of existing generatir.g units was substantially we purchased about 38 per cent of the electric increased not only for present service capability power sold.There should be fewer purchases in but for future improved availability and reliability.

1980 as large plant additions, approximately Improvements were also made .inthe electnc 627,000 kilowatts, were made late in 1979, and Unit 14, a 431,000 kilowatt fossil-fired unit wNch transmission and distribution system during was out of service for about six months in 1979, the year.

due to unanticipated chemical deposition Gas supply improved materially in 1979.

problems, is back in service. Curtailment from our five

• ipeline suppliers was reduced from approxima'ely 25 per cent in 1978 to The job of producing and distributing electricity approximately 16 per ce ut and the positive and gas in the heavily industrialized and downward trend is conti iuing. ')u storage capa-employment-sensitive area we serve clearly bility, bcth in the Comp v'. an aquifer requires adequate utility plant which is capable of storage fields as well as in antracted storage with sustaining the restoration and maintenance of a other companies, has beei, unproved. Construc-sound economy tion is on schedule for completion in 1981 of The large steel mills and related loads are liquefied natural gas facilities, doubling the secured by strong long-term contracts.The steel maximum output of our current liquefied natural market is relatively strong in our service area. gas facilities from 200,000 Mcf per day to The steel production facilities are regularly being 400,000 Mcf per day. Our exploration program was 2 modernized, expanded and improved. also aggressively pursued.

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$161 million from the sale of new securities in 1979. In addition, approximately $110 million was provided for construction from internal funds.

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Acceptable capitalization ratios and credit ratings

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....- r maintain its credit ratings and improve its capitali-

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$ zation ratios. Continuance of a successful

,? q J [ , .7'4i i financing program is essential. It is unfortunate that there is not a greater awareness that the

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interest of the consumers, shareholders and em-( .. .

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ployes are in synchronization and not hostile

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I is clearly in the interest of all concerned and

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.\ continued adequate rate relief will be necessary

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l and will be sought to maintain and improve our

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Reasonable environmental legislation with

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E[ realistic economic burdens should be enacted in

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_\ the '80s.The extended delays in plant construc-

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tion, particularly in nuclear, should not be tolerated over a protracted period.We continue to closely in 1979, we added twelve thousand new gas monitor the feasibility of Bailly Nuclear One customers and relaxed the limitation on new gas where intervenors have been defeated in loads.The limitation on new loads was raised two different United States Courts of Appeals and from a maximum of 1,000 cubic feet per hour or in the United States Supreme Court, but 10.000 cubic feet per day to 4,000 cubic feet administrative regulatory delays continue. Had per hour or 40,000 cub,c feet per day, effective this plant been on-line anywhere near the original August 27,1979.

1976 schedule, there would have been material Preliminary indications are that a new all-time savings as well as enhanced service capability to gas peak sendout of 1.334 billion cubic feet our customers. Technical and economic con-was set in the 24-hour period ending at noon on siderations continue to be adversely intertwined January 24,1980, exceeding the former all- with non-data based political, media and time peak of 1.297 billion cubic feet distributed social perceptions.

in the 24-hour period ending at noon on January 17, 1977, and the 1979 peak of 1.283 billion cubic We look forward to rational energy po!icies in feet distributed in the 24-hour period endin9 the future and a return to emphasis on 7apital at noon on January 3,1979. attraction and application of capitai .n ; int which it is most unfortunate that " incremental pricing" improves instead of reduces productivity. In any provisions of the new Natura: Gas Policy Act event, Northern Indiana Public Service Company impede the marketing of gas in the industrial will continue to make every effort to insure sector when prices to all customers could be moa. that shareholders, customers and employes of the erated by such marketing and imported oil Company are well served.

dependency reduced.

On behalf of the Board of Directors.

During the year we hired independent consultants to improve our service efficiency and capabilities and anticipate the programs now in place will be cost effective as well as service effective.

We also had independent consultants

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Chairman, President and Chief Executive Officer install highly efficient computer technology to aid in multifaceted corporate planning. January 29,1980 3

d e also reported on the effect that a recently h,v approved gas rate increase (November 27,1978) would have on earnings and discussed our filing on December 27,1978, for a 13.5 per cent 1B VleW increase in electric rates that would meet the profit margin test of voluntary wage and price January,1979, began with heavy snowf alls and guidelines established by the President.

subnormal temperatures. We were able to meet all of the natural gas energy requirements of customers due to an improvement in flow gas Bailly Nuclear One supply and increased storage capacity. On February 7,1979, we requested that the Although many economists predicted that 1979 Nuclear Regulatory Commission (NRC) extend our would be a recession year, production levels construction permit for Bailly Nuclear One, a at Northwest Indiana steel mills remained strong planned 644,000-kilowatt generating unit, from for most of the year in spite of some slackening in September 1,1979,to September 1,1985. In August the fourth quarter.With order books now filling this request was amended to December 1,1987.

up again, Calumet Region steelmakers are Intervenors petitioned the NRC for a hearing on

" moderately bullish" on their outlook for 1980, the extension of the construction permit, and according to a Hammond Times' survey taken in on November 26,1979, the NRC issued a Notice late December. of Opportunity for Hearing and gave interested Tvuo modernized coke furnaces will soon be parties until December 31,1979, to indicate why completed at U.S. Steel's Gary Works and the they thought a hearing should be held. Several corporation's President, William R. Roesch, groups have filed petitions opposing extension of recently told an Indiana audience that the corpora. the permit and requesting hearings.The tion " expects to invest heavily in the Gary area." Company belisves that the requested amendment inland Steel reported they had invested extending the costruction completion date l more than $950 million in new facilities at their will be granted.

Indiana HarborWorks over the past decade, We won another legal challenge to the project in and predicted that in 1980 domestic steelmakers 1979 when the United States Court of Appeals will ship between 9G and 98 million tons, for the District of Columbia upheld a 1978 decision about the same as in 1979. of the NRC denying an earlier request by intervenors to revoke our construction permit.

Presentat,onToi Security Analysts Review of the pile placement issue also inched On January 31,1979, we made a major presentation forward during the year with a favorable report to the NewYork Society of Security Analysts from the NRC's Advisory Committee on Reactor in which we discussed the adverse impact Safeguards and a denial by the Commission of of inflation on our operations and outlined a $1.9 petitions requesting a full hearing on the subject.

billion, five-year construction program (1979- Our proposed method of pile driving is now 1983).The program included plans for the building being reviewed by the Army Corps of Engineers at of another liquefied natural gas (LNG) plant the request of the NRC staff, near LaPorte, Indiana, and the addition of two Although Bailly Nuclear One will use a boiling 344,000-kilowatt generating units (17 in 1983 and water reactor which is different in design and 18 in 1985) at our Schahfer station site in Jasper manufacturer from the pressurized water reactor County.The additional storage facilities and at ~,'hree Mile Island, the events there have generating capacity are needed to meet the precipitated an intensive review of construction increasing demand for gas and electric energy in and operating safety standards and procedures by

^ur highly industrialized service area ard to the NRC.This has delayed the NRC's processing 4 reduce reliance on purchased power. of our request for an extension of the completion

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date for Bailly Nuclear One and the resolution (l w .TheCompany also added two oil-fired  :

of the pile placement issue. combustion turbines Units 16A and 16B at the  :

We also announced that because of inflation and Schahfer plant.These units were placed in  :

delay, the capital cost of building Bailly Nuclear commercial operation December 31,1979, and One will escalate from $850 million for an in-service have a combined initial winter rating of 180,000

date of September,1984, to an estimated $1.1 kilowatts.They will have different ratings at  ;

billion for an in-service date in 1987.The capital various atmospheric temperatures. As the  ;

cost of building fossil-fueled generating units temperature increases, the capability rating on i also continues to rise because of inflation and the turbine decreases. At 100 degrees Fahrenheit, required environmental controls.We believe with water injection, the combined rating of the economic feasibility of Bailly Nuclear One is the turbines is 155,000 kilowatts. As of January 1, still in the intcrest of our customers and share. 1980, the net capability of all of our generating holders. As soon as the NRC's technical questions units is 2,685,850 kilowatts.

regarding pile placement have been satisfied. Coal-fired U nits 17 and 18 also will be constructed we expect to go forward with construction. at our Schahfer station site. Each of these units is to have an approximate net-rated capability of Electric Energy Growth and 344,000 kilowatts. Unit 17 is scheduled for Generating Capacity commercial operation in 1983, andyrpt 18 in 1985.

In 1979, we generated 62 per cent and purchased During a regular maintenance shutdown of our 38 per cent of our electric energy requirements. 431,000-kilowatt coal-fired Unit 14 at the Internal capacity came from our four fossil-fueled Schahfer station, which began on April 15,1979, plants-Michigan City station Dean Mitchell heavy chemical deposits were discovered station in Gary, Bailly station near Burns Harbor and on the turbine blades and in the boiler and water

.. Schahfer station nearWheatfield.We also have piping system. Extensive cleaning was required  ;

two small hydroelectric plants near Monticello. which lasted throughout the summer and i During the next five years, electric demand in into the early fall.The unit was returned to service  !

Northern Indiana is estimated to grow at an annual on October 28,1979. During the prolonced rate of about 5.5 per cent.The former forecast outage of this unit, replacement power was pur-  ;

was at a 6 per cent rate.The new estimate reflects chased from neighboring utilities.

the conservation programs of industrial, commercial and residential customers and allows High Voltage Interconnections for a prospective reduction from the rate On April 30,1979, a new 345,000-volt transmission of growth actually experienced prior to 1979. line was placed in service between our Dune  ;

To reflect actuc. operating conditions, the Acres and Sheffield Substations.This 30-mile line effects of enviror. mental controls and the completes another extra-high voltage tie with substitution of low-sulfurWestern coal for Midwest Commonwealth Edison Company (Illinois).

coal, we recently revised the power output During the year, two additional 345,000-volt ratings of some of our generating units. As a interconnections were established with result, the net capability rating of generating units Commonwealth Edison at our new St. John Sub-now operating at our Michigan City, Mitchell station and Green Acres Substation near and Bailly stations has been lowered by Merrillville.These interconnections were made to 156,000 kilowatts. increase the power available to our growing A new coal-fired electric generating Unit 15 Northwest Indiana service area and to strengthen was placed in commercial operation at the the reliability of our electric transmission system.

Schahfer station on October 31,1979.The unit On September 28,1979, a 26-mile,345,000-volt has an initial net capability of approximately line connecting our Schahfer station to our G reen 472.000 kilowatts. Acres Substation was placed in service, providing 5

3 D D J b o Ju oJu S..' }\ m another circuit for the power from the Schahfer United States Environmental Protection Agency station into ou 345,000-volt transmission system. (EPA).The EPA notices of violation date back to Our first intecconnection with Consumers 1973. In light of the Indiana Court of Appeals Power Company (Michigan) also was established, action, EPA stipulated before the United States via our Barton .ake Substation near Angola, in Court of Appeals for the Seventh Circuit that it 1979.This 138,000-volt interconnection would withdraw all notices of violation pending strengthens the electric system in the northeast against the Company and issued pursuant to corner of Indiana. this regulation.

At our Dean Mitchell Generating Station in Gary, Electric Rate increases we are continuing to operate the jointly funded On July 18,1979, the Public Service Commission (EPA-NIPSCO) demonstration sulf ur dioxide of Indiana granted us an electric rate increase removal system. It is anticipated that this system which, based on the test year, would produce addi- will continue to provide data during 1980.

tional annual electric revenues of $61,500,000. During the year, additional precipitator The increased rates became effective Juiy 19- sections were added to each of the small boilers 1979, and represented an across-the-board at our Michigan City station and to two of the average increase to retail electric customers of boilers at ou r Mitchell station to increase particulate about 12.8 per cent.The Commission determined collection efficiency and reduce the amount of that the increase was in compliance with the fly ash released to the aimosphere.

profit margin limitation standard of the federal At our Bailly Generating Station construction is Council on Wage and Price Stability.

in progress to install completely new electro-On July 27,1978, we filed a petition with the static precipitators on both boilers.These Federal Energy Regulatory Commission (FERC) precipitators are expected to go into service requesting increased rates for wholesale electric n 1980 and should considerably reduce service to 12 Rural Electric Membership Corporations (REMCs) and eight municipalities. articulate emissions.

The new rates were designed to increase annual On February 24,1978, we signed an agreement revenues by $8,300,000 and were put into effect, with the United States Department of Interior, subject to refund, on January 23,1979. Under providing for the sealing of our ash settling basins settlement agreements between the Company and at our Bailly Generating S:ation site in Porter its wholesale customers, rates were established County, near the Indiana Dunes National which, based on the test year, would produce Lakeshore Park. During 1979, this project approximately $5.700,000 of additional revenue in loved forward.

the first year. Additionalincreases to the REMCs We believe that achieving the objectives of this are provided for over a three-year period. agreement is in the best interest of the Company The agreements were approved by the FERC on as well as the Indiana Dunes National Lakeshore.

k October 11,1979. Refunds to wholesale customers Electric Contract Changes were completed by October 26,1979, to reflect On June 30,1979, an electric service agreement the agreements.

between ourselves and the Commonwealth Edison Company of Illinois terminated. It pro-Environmental Matters vided for the purchase of 90,000 kilowatts of The Indiana Court of Appeals aff.irmed a lower capacity, and under certain conditions, up to an court decision invalidating the indiana Air additional 175,000 kilowatts of supplemental Pollution Control Board standard for sulfur dioxide capacity.

emissions.The ruling invalidated the standard and its subsequent revisions, which had been the A contract for 100,000 kilowatts of power from basis for notices of violation of the sulfur dioxide Indianapolis Power and Light Company ef fective in U emission limitations issued to the Company by the December,1977, expired on August 31,1979.

O Service to Hensselaer Company's operations the systems and procedures An agreement was signed by the Company and that prove to be successful.

the City of Rensselaer on December 27,1978, which provided for initial partial service to Gas Supply the city's electric system once we completed the Our gas supply showed steady improvement necessary olectric line construction. Partial during 1979 with annual curtailments decreasing service to Rensselaer began on July 9,1979, from approximately 25 per cent in 1978 to 16 following FERC approval of the agreement. Fuli per cent in 1979.This increase in supply is primarily service is expected to be available to the city the result of higher prices allowed for gas in the spring of 1981. exploration and development and the availability of intrastate gas in the interstate market.

Electric System Peak We believe the gas supply situation will continue The Company's half-hour system peak of approxi- to improve.

mately 2,283,200 kilowatts, established on During 1979, gas available to us from the September 9,1978, was not exceeded in 1979. A interest-free loan we made to the Shell Oil new hourly system peak load of 2.243,650 Company in 1971 (which has been entirely repaid) kilowatts was established on August 7,1979.The increased to more than 28 million cubic feet previous hourly system peak load was 2,239,150 per day for 120 days during the winter, rather than kilowatts, which occurred September 9,1978. 27 million cubic feet per day for 100 days.

Through our exploration subsidiary-NEXCO-Fuel Supplies we have invested almost $16 million in two Additional Western low-sulfur coal deliveries separate drilling prcjects in the Gulf of Mexico.

began in 1979 under two new long-term contracts. We have joined with the Natural Gas Pipeline One contract is for Unit 14 at the Schahfer Company of America and other customers station which will reach 1.5 million tens per year. of Natural to make these investments.

The other contract is for the Mitchell station One of these investments is with Aminoil at one-half million tons per year. Corporation for the acquisition of lease interests Two oil storage tanks were completed in 1979 at in 12 tracts in the Gulf of Mexico, offshore the Schahfer station with a total capacity of Texas and Louisiana. Six of these 12 tracts are 350,000 barrels to provide fuel for the new oil-fired now producing and production platforms for two turbines. Delivery of oil to the tanks is made additional tracts will be installed in 1980.

through a new eight-mile oil pipeline connected to The second investment is with Natural, other a cross-country oil transportation system. customers of Natural, and Chevron USA, Inc. and Dur;ng the year, the Company added 110 leased provides for participation in another venture railroad coal cars to its fleet, bringing the total offshore Texas and Louisiana. Of the 31 original owned or leased to almost 700 cars. exploration tracts in this program, one is now i

Irnproved Service producing and three others are scheduled to begin in 1979, we continued to work with an independent production in 1980.

consulting firm on the development and The Anschutz gas exploration project also implementation of systems and procedures continued in 1979. We joined the project in 1970 designed to improve productivity and efficiency by providing an interest-free loan in the amount of in our operations and enhance our customer $1.3 million for the development of new gas service response. supplies in the Overthrust Belt area of Utah and This work, carried out in our divisions, districts, Wyoming.The loan is for a maximum term of engineering departments and generating stations, five years and the Company is entitled to purchase will continue during the coming year. A per- approximately 13 per cent of the gas volumes manent department will be established to monitor, produced from the exploration. Several" shut-in" _,

perpetuate and expand into other areas of the gas wells await the construction of pipelines /

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to bring the gas to market. Further exploration Center storage field. By 1984,3 biiion cu ic and development is planned by the Anschutz feet of useable natural gas should be in storage in Corporation in 1980 and 1981, with additional loans that formation supplementing the 4.5 billion of up to $1.3 million to be made under the cubic feet of useable storage in theTrenton forma-1976 agreement. tion which has served the Company so well for The Natural Gas Pipeline Company of America almost 20 years.

and others pla, to build a pipeline to be known as the Trailblazer System, to transport large New Gas Sales volumes of gas (up to 350 million cubic feet per During the year, the Public Service Commission of day) to the Midwest from Utah and Wyoming.

Indiana approved our request to raise the limit The project is awaiting federal appreval. Hopefully,

, on new residential, commercial and industrial gas construction will begin in 1980.

sales to 40,000 cubic feet per day, up from the Coal Gasification previous limit of 10,000 cubic feet rer day. Existing Not only is NIPSCO joining in projects to explore customers have also been authorized an addi-for liatural gas, but we are also involved in a project tional 40,000 cubic feet of gas per day.

to help develop unconventional gas sources. The saturation of gas heating customers on During the year we submitted a proposal to the our lines climbed over the 90 per cent mark during Department of Energy to study the feasibility 1979. During the year we added 12,293 new of a medium Btu coal gasification plant using gas customers.

Indiana coal. A grant of $565,724 was authorized by the Department of Energy in January,1980. Gas Sendout Joining us in the one-year study are some of Preliminary figures indicate that a new peak-day

our largest industrial customers who would be the sendout was established during the 24-hour

primary users of the gas. We will act as the period ending at noon, January 24,1980, when

prime contractor and manage the program.The 1.334 billion cubic feet of gas was distributed.

l actual study will be performed by Bechtel l National, Inc., a well-known international consulting firm. Corporate Planning On July 1,1979, a new Corporate Planning

Gas Storage department was established.This department,

Construction of a second LNG storage facility near supported in its initial development by an i LaPorte, Indiana, which will increase our gas independent consulting firm, will provide opera-storage capacity there from 2 billion to 4 billion tional and financial forecasts using the latest

cubic feet, continued in 1979.The steel tank com pute r tech nology. A corporate mod eling system, is nearing completion and the liquefaction and consisting of an integrated set of models of j vaporization equipment is being installed.The plant major areas such as Electric Operations and

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should be producing LNG for storage early in Economics, Gas Operations and Economics, Plant 1981 with the stored gas available for use in the Accounting, Manpower and Financial Planning, 1981-82 winter heating season. has been established.Through a consolidation The FERC has approved our gas storage model, monthly financial forecasts over the contracts with the Michigan Consolidated Gas planning horizon will be produced.

Company that have been operative under temporary certificates for the past several winters. The National Energy Act (NEA)

FERC has also certificated a ne.v storage On November 9,1978, the President signed contract for 2 billion cubic feet with the ANR the National Energy Act. During 1979, much time

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Storage Company, due to begin in 1980, has been devoted to compliance with this act.

We are continuing to develop the Mount Simon The total impact of the act will not be realized until O underground gas storage formation at our Royal much later in this decade.

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The NEA is' comprised of five separate acts: the of approximately$2.6 billion.Thismarksanincrease o I Natural Gas Policy Act of 1978 ((NGPA), the of 3644 million or about 33 per cent cver Public Utility Regulatory Policies Act of 1978 estimated construction expenditures for the (PURPA), the Powerplant and industrial Fuel Use previous five-year budget period (1979-1983).

Act of 1978 (FUA), the National Energy Con- Included in the $2.6 billion figure are outlays servation Policy Act (NECPA) and the Energy Tax of $383.3 million in 1980 and $461.9 million Act of 1978 (ETA). in 1981.

The NGPA provides for ircremental pricing of The largest expenditures, in excess of $2 natural gas to certain industrial users. Incremental billion, are for additional electric generation.

pricing is particularly vexing because it requires, For example, increased estimated costs of through rules adopted by the FERC, certain approximately $217 million in the budget period industrial gas usage to be billed at the price of oil are for generating Units 17 and 18 with a total beginning January 1,1980.The Public Service capacity of 688,000 kilowatts, increased costs of Commission of Indiana has issued an order approximately $96.5 million are included for providing an Indiana alternative to some incre- the 644,0GO-kilowatt nuclear unit at Bailly, and mental pricing regulations. $350 million is included for additional generation We have been very active with the American to come on line later in the 1980s.

Gas Association (AGA)in presenting gas industry More and more construction dollars are being views to the FERC during its rule-making pro- consumed by nonproductive environmental cedures. We are also active in efforts to obtain facilities-$490.7 million in this new five-year Congressional repeal of incremental pricing, budget. Evea though they do not produce s because we believe that incremental pricing will one kilowatt of electric energy and add substantial result in higher rates for all our customers. maintenance expense, they must be included PURPA requires, among other things, a review in the cost of providing service to customers.

of certain rate standards by state regulatory Substantial investments in gas and electric commissions. Such a procedure has been initiated transmission and distribution lines, plus additional by the Public Service Commission of Indiana gas storage facilities are also in the estimate.

and will be continued during 1980. Employe Relat%ns The FUA and Public Service Commission of During the year, college recruitment, employe Indiana orders issued pursuant to it, prohibit the training, safety practices and fringe-benefit sale of natural gas for outdoor lighting use to programs received new emphasis as part of our industrial and commercial users after November 5, manpower planning and development activities.

1979, and to residential and municipal users By the end of the year, we had almost 6,000 af ter January 1,1982.The prohibitions are subject employes. More than 53 per cent have 10 years or to exemption under specified criteria. more of service and 18 per cent have been NECPA requires a utility program of residential witi, the Company 25 years or more.

energy audits. Fullimplementation of that Production, maintenance, construction, program awaits adoption of a State Energy Plan operating and laboratory personnel are represented expected during 1980. by Local 12775, United Steelworkers of

. - The ETA provides a federal income tax credit America, AFL-CIO-CLC. Clerical employes are for qualified residential energy conservation represented by Local 13796 of the same union.

expenditures and contains other provisions Labor contracts with both of these locals relating to motor fuels and the taxes thereon. expire May 31,1980, and new contracts will have "9

New Fivo-Year Construction Program in October, we announced our five-year con- Outstanding Service struction program for the years 1980 through 1984, David C. Manning, a serviceman in our Warsaw which will result in an additional investment district, was awarded the American Gas 9

1 Association's fAGA) Meritorious Service Award at the Company and its policies and to provide more the organiz tion's annual convention in October useful consumer safety and conservation data.

for saving the life of a young boy. During the year, we continued to urge our It marked the f' ',t time in AGA's history that customers to "Use NIPSCO Energy Wisely."The an employe from the same company won Marketing Communications department produced the award in two consecutive years. Lawrence E. and made available, free of charge, a new Clark, a heavy equipment operator in our booklet titled "99 Ways to Conserve Energy."The Construction department, received the honor availability of the booklet was actively advertised in 1978, also for a life-saving act. and it was widely distributed.

Our " Energy Conservation Award Program" Management Development for contractors and builders in our service area also in September, our Annual Management Conference was continued, with more than 350 organizations was held at the University of Notre Dame's qualifying for the award since its inception in 1976.

Continuing Education Center.The two-day meeting included speakers from both within and outside Community Relations the Company. Among those making presentations As part of our continuing program to strengthen were Llewellyn King, publisher of The Energy communications with the communities we serve, Daily, and Colyer Crum, chairman of the investment we held a regular directors' meeting at South management section of the Harvard Graduate Bend in May and at Fort Wayne in September. On School of Business Administration. both occasions, we invited local business and civic leaders to join our officers and directors for Consumer Communication dinner.They heard presentations on the future During the year, we initiated an advertising of energy and our Company's plans for serving the campaign to inform customers about rising energy areas in which they live.

costs, conservation, budget payment plans and Company policies and programs which could Shareholder Relations be helpful. Beginning January 1,1980, the Company assumed Newspaper and radio advertising, along with the stockholder record-keeping function and our monthly bill insert, formed the nucleus of payment of dividends on its common, preferred the campaign. A question and answer manual about and preference stock. Holders of these classes of Company policies and practices was produced stock are asked to direct any correspondence and made available to all customer-contact regarding the payment of dividends, stock regis-employes to help them answer inquiries as quickly tration, address changes or any other inquiries and completely as possible. pertaining to the Company's stock to Shareholder The program was intensified in the fall, Relations, care of the address listed on the back in anticipation of the coming heating season. cover of this report.

Customers were alerted to additional Company. Organization Change state and federal programs which had become Following our Annual Meeting of Shareholders available in tha interim, especially those concerned in April, Eugene M. Shorb was elected First Vice with weatheiizathn, bill payment assistance and President.

third party notification.

In addition, our service bill was redesigned to Mr. Shorb is a 1949 engineering graduate of simplify and provide additional billing information, Purdue University and has been with the Company making it easier for customers to determine in many operating positions since that time.

the components of the bill.The new bill was first He has responsibility for all electric, gas and used in January,1980. division operations, including engineering, The format of our monthly billinsert also was and is the Company's executive next in authority

/0 redesigned to present pertinent information about to the president.

I' '

Y ',

{^ '

• The per cent of revenue and utility operating A F}* hk{ income, before federal and state income taxes, derived from the sale of electricity and gas for the years 1975 through 1979 follows:

t> Year Ended December 31 1975 1976 1977 1978 1979 Total operating revenues in 1979 exceeded Revenue:

$1.196 billion, or 26 per cent over 1978. Electric. 48.1 % 49.9% 51.4 % 53.6% 46.8 %

Net income increased to $76.9 million, some Gas. . 51.9% 50.1% 48.6% 46.4% 53.2%

23 per cent above the previous year. Utility Operating Af ter deducting preferred and preference income Before stock dividends, including the full requirements of Federal and State th31978 issues, there remained a balance IncomeTaxes:

of $59.5 million equal to $1.86 per share on the Electric. 56.8% 64.6% 64.7% 63.2% 52.8%

31,972,567 average common shares outstanding Gas. . 43.2% 35.4% 35.3% 36.8% 47.2%

during the year.

Electric revenues advanced 10 per cent to

$560 million, an all-time high, reflecting a general Expenses retail rate increase that became effective Utilities are extremely vulnerabie to the adverse July 19,1979, and the wholesale rate increase effects of inflation.This was again evident effective January 23,1979, which was adjusted during 1979. Prices for almost everything we in October.1979.The tracking of fueland purchased bought to provi1e service to our customers power costs, the addition of 3,801 new electric advanced substantially during the year.These customers and greater sales to existing customers include maintenance costs, as well as coal to also contributed to these higher revenues. generate electricity, gas from suppliers, borrowed Gas revenues were also higher in 1979, rising money, vehicles, wages, fringe benefits, to $636 million, some 44 per cent over 1978. insurance and postage.

This improvement was due to a full year of revenue Total operating expenses, including maintenance from the general gas rate increase that became and depreciation, increased $215 million, or effective November 27,1978, the addition 28 per cent over 1978.

~

of new customers, increased sales to existing Although more power was purchased, mainly customers primarily as a result of a reduction to replace capacity lost because of the unavailability in curtailments by our pipeline suppliers and the of Unit 14 at our Schahfer station, the increase in the cost of kilowatt hours purchased was more

=

recovery of gas supply and storage costs through rate adjustment procedures. than offset by the decrease resulting from the WHERE EACH NIPSCO DOLLAR CAME FROM WHERE EACH NIPSCO DOLLAR WENT Taxes 8.4C

=

Dividends 5.6C Residential 27.5C Operations and Maintenance 8.3C Cornmercial 8.5C Interest and Other Deductions 2.7C Other 3.4C Depreciation 4.9C Industrial 60.6C - Payroil 8.2C Retained in the Business 0.8C

- Fuel and Purchased Energy 61.1C EM llllM l 7 77

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' ' # e operation of the fuel cost adjustment clause and taxable earnings base and an increased tax rate the deferral of the variance between actual effective January 1,1979.

fuel costs and the estimated amounts recovered. Although the statutory rate decreased from 48 to Significant portions of these additional costs, 46 per cent, federal income taxes increased $12 however, were not recoverable under the million or 29 per cent due to higher pretax income.

purchased power adjustment clause.

Fuel for electric generation increased $28 million due primarily to an increase in the Financing average cost per ton of coal, which was $29.35 in During 1979, we raised $161 million in external 1978 and increased to $33.65 in 1979. funds for application to our construction program.

Gas purchased costs increased $148 million.This in February,1979,we issued commercial paper was the result of an increase in the average for the first time, allowing us additional flexibility cost of gas purchased from $1.33 per Mcf in 1978 in short-term financing. Our commercial paper, to $1.73 per Mcf in 1979 and the purchase of as issued from time to time, is f ully supported by our additional gas volumes from our pipeline suppliers. bank lines of credit which at the end of 1979 Depreciation and amortization expenses were stood at $191.5 million.

up $8 million, reflecting additions to property On June 21,1979, the Company issued and including Unit 15 at the Schahfer station and sold to underwriters 2,000,000 shares of common increased rates of depreciation for gas property. stock with net proceeds to the Company of Allowance for Funds Used During Construction $29,345,711. A public offering was made by (AFUDC) increased $7 million primarily due the underwriters.

to construction activity on Unit 15 and the amount The Company issued and sold $45,000,000 expended for Bailly Nuclear One. principal amount of 25-year, double-A rated, Interest expense increased $7 million, First Mortgage Bonds, Series BB,9%%, through reflecting continuing high levels of construction private placement to institutional purchasers.

expenditures which required additional financing. The sale and delivery of $34,000,000 principal amount of the Series BB Bonds was consum-mated cn June 27,1979, with the remaining Taxes $11,000,000 principal amount consummated on Tax provisions charged to operations September 18,1979. Net proceeds to the amounted to $100 million in 1979, some 8 per Company were $44,747,522.

cent of operating revenues. On December 20,1979, the Company issued Gross income taxes increased $3 million, or 22 and sold to underwriters 2,000,000 shares of per cent, due to increased revenues.The Company's common stock with net proceeds to the Company portion of Social Security tax increased $1 of $27,612,385. A public offering was made million, or 26 per cent, as a result of a higher by the underwriters.

UTILITY PLANT INVESTMENT OPERATING REVENUES Millions of Millions of Dollars Dollars CC~ $ 1,200 CC -

CC .

$ 1,200

$2l400 2 200 Er z3CC 3 $ 2,400 1,100 CC3CCgn 2,000 C=CC 2CC' -2,200 1,000 CC=CC=C' ~1,100 CC=CC CC C '1,000 1,800 -C '

o\ -2,000 900 -

C;'

1,600 C6CCC 'l P1,800 800 $C=Cc3 900 1,400 $C b -- 1,600 700 600 c3=$C '-

' 800700 1,200

~

-1,400

'1,200 500 Cn==

C ~ ~'

' 600 1,000 -

800 ~ 1,000 400 .

- '-500 600 ' 800 300 '~400 200-400 ' 600 ' 300 200

'-400 100: -200

' 200 7o '-100 72 73 7h 76 74 75 76 7f78 12 76 f 78 79 79

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]D em,M Wo S a On December 20,1979, the Company issued and a five per cent discount on the price of the common sold to underwriters $60,000,000 principal stock purchased with reinvested dividends.

amount of 30-year, double-A rated. First Mortgage As a result of the sale of common stock during Bonds Series CC,11%%, with net proceeds 1979, our total number of shareholders passed the to the Company of $59.301,227. A public offering 76,000 mark by the end of the year.

was made by the underwriters. We have 71,536 common stockholders,4.136 The Compar.y exercised its option to redeem holders of preferred stock and 1,204 holders 16,000 shares of 11.64% cumulative preference of preference stock.

stock, $50 par value, in addition to the 16,000 While this ownership extends into every state shares required to be redeemed through the sinking of the union and many foreign countries, as fund on September 1,1979. an Indiana corporation, we have long encouraged local ownership of our stock.The largest con-Plant investment centration of our shareholders lives in Indiana.

Our total plant investment on December 31,1979, was $2.3 billion, which is more than double the plant investment in 1972. Additions and replacements in 1979 amounted to $227 million. EARNINGS AND DIVIDENDS O EARNINGS PER COMMON SHARE Shareholders E DIVIDENDS PER COMMON SHARE Our common stock is listed and traded on both ,_

the New York and Midwest stock exchanges. '

$3.00 The table below indicates the high and low sales - ~

' 53.00 price of our common stock, on the composite $2.50 p --

tape, during the periods indicated. Dividends per - ;/@ / '

- ~

share are also shown.

~

52.00

'~'

$ 1.50 1979 H_igh Lo.w Dividend

' ' O W T ,' i 751.50 First Quarter. 16% 15% 37%c $ 1.00

/ $ 00 Second Quarter. 16% 14% 37Mc -

Third Quarter. , $0.50

,. 16% 15% 37%c r30.50 Fourth Quarter. ,

15M 13 37%c ,-

'/ 0 Commencing with the May 21,1979 dividand, our Automatic Dividend Reinvestment and Stock 70 71 72 73'/74 79 75 76 7 Purchase Plan was amended to give stockholders CAPITAllZATION RATIOS ELECTRIC AND GAS SALES ~ LONG-TERM DEBT E COMMON STOCK EQUITY U ELECTRIC SALES Billions of 5 GAS SALES Millions of E PREFERRED AND PREFERENCE STOCK Cubic Feet KWH Per Cent 0 " 1, 0 b .

' 2,000 350 - -~ ~~ [ '

'-10,500 40 '

'- - ' -- -- /~40 300 -

- 'C ~

u 9,00G '

250 ' 'N 30 /~30 200 '

' q /~ 7,500 p

/- 6,000 20 150 ' /'20

/~ 4,500 ' '

100 10 '

50 / /~ 3,000 /'10

/ /' 1,500 / /

7 727 [74 75 76 7j 74 7 76 7'7 7hg' g

Northern Indiana Public Service Company StatementofIncome Year Ended December 31, 1979 1978 (Dollars in thoutands)

Operating Revenues:

Electric . S 560,084 $509,790 Gas. 636,160 440,483 1,196,244 950,273 Operating Expenses and Taxes:

Operation-Power purchased. 109,229 125,181 Fuelfor electric generation . 172,900 145,026 Gas purchased for resale. 448,511 300,016 Other operation . 122,337 97,593 Maintenance . 74,673 53,388 Depreciation and amortization . 58,393 50,023 Taxes (exceptincome). 45,430 41,242 Income taxes-Federal-current. 3,895 3,296 State-current. 2,1 75 2,064 Deferred federal, net . 31,260 21,897 Deferred state, net . 1,736 1,022 Deferred investment tax credits, net . 15,897 14,197 1,086,436 854,945 Operating Income. 109,808 95.328 OtherIncome:

Allowance for funds, other than borrowed funds, used during construction . 19,577 15,546 Other, net . 1,835 1,815 21,412 17,361 Income Before Interest Charges . 131,220 112,689 Interest Charges:

Interest on long-term debt . 61,290 58,308 Other interest. 5,686 1,630 Allowance for borrowed funds used during construction . (13,052) (10,256]

Amortization of premium, discount and expense on debt, net. 197 186 Amortization of reacquisition premium on debt. 240 240 54,361 50,108 Net income . S 76,859 $ 62,581 Earnings per average common share outstanding . 51.86 $1.61 Earnings per average common share assuming conversion of the Convertible Debentures and the 6. 70% Cumulative Preference Stock. $ 1.82 $ 1.58 The accompanying notes to financial statements are an integral part of this statement.

IA ( ) Denotes deduction

Northern Irdiana Public Service Company Statement of Sources ofFunds Use for CapitalExpenditures Year Endat Dew:omber 3 t. 1979 1978 (Dollars in thousands)

Funds ProvidedInternally:

Retained earnings-Net income . S 76,859 $ 62,581 Less: Cash dividends on preferred and preference stocks . 17,179 15,908 Net income available for common stock . 59,680 46,673 Less: Cash dividends on common stock . 49,406 44.346 Total. 10,274 2,327 Principal non-cash items-Depreciation and amortization . 58,393 50,023 Deferred federal and state income taxes, J. 32,996 22,9 l9 Deferred investment tax credits (excludina ESOP), net . 15,793 12,691 Allowance for funds used during construction . (32,629) (25,802)

Total. 74,553 59,831 Totalprovidedinternally. 84,827 62,158 Less: Sinking fund retirements . 6,741 5,482 Total. 78,086 56.676 Funds Obtained From Outside Sources:

Sale of bonds . 105,000 -

Sale of preferred and preference stocks . -

45.000 Sale of common stock . 59,250 34,500 Sale of note. - t 8,000 Other icsues of common stock . 7,312 4,3 72 Net changes in construction and other special funds . (712) 2.188 Net changes in commercialpaper. 22,000 -

Net changes in bank loans . (45,000) 45,000 Net changes in U.S. Government securities . 10,008 34,918 Other, including changes in other net current assets . (41,277) (23,378]

Total. 116,581 160,600 Less: Retirement of debentures and preference stock . 14 10,013 Total. 116,567 150,587 Total Above Funds . 194,653 207,263 Allowance for Funds Used During Construction . 32,629 25,802 Total Available for Capital Expenditures . 5227,282 $233,065 CapitalExpenditures:

Gas supply exploration . 5 -

S 8,400 Construction expenditures . 227,282 224,665 Total CapitalExpenditures. $227,282 $233,065 The accompanying notes to financialstatements are an integralpart of this statement.

[ ] Denotes deduction 15

Northern Indiana Public Service Company

, , 1 ,'/P

^

Balance Sheet D*wentwr 31 1979 1978 (Dolldt s in (trousan< f:;)

Assets Utility Plant, at original cost (including construction work in progress of $295,171 and $432.062, respectively):

Electnc $ 1,732,997 $ 1,564,810 Gas. 542,453 503,793 Common . 6_5,106 56,759 2,340,556 2,125.362 Less - Accumulated provision for depreciation and amortization . 387,654 338,526 1 952 9_02_t 1,786.836 Investments:

Investments - Subsidiary companies not consolidated, at equity . 16,265 16,146 Other at cost. _

1,546 1.549 17,811 17,695 Construction and Other Special Funds . 9,482 8,770 Current Assets:

Cash 19,357 15,832 U S Governtnent secunties. at cost . -

10,008 Accounts receivable, less reserve of $1,516 and $1,094, respectively . 122,259 96,073 Fuel ad,iustment clause balance . 1,742 -

Materials and supplies, at average cost. 36,672 31,885 Electric production fuel, at average cost . 110,346 68,089 Natural gas in storage, at last-in, first-out cost . 34,405 31,039 Prepayments and other 41 048 6,382 328,829 259,32 Deterred Charges:

I . amortized reacquisition premium on debt and debt expenses . 9,294 9,261 Other. 883 4,330 10_,177 13,5_91_

16 *21'E 2m. $2986,200 The BCComNnytny nOfes 10 findnCGI Statements are an IntegraiMr! Of thtS Statement

.m "t'*, 7, r* ,

1979 1978 (Dollars in thousands)

Common Stockholders' Equity, Preferred and Preference Stocks and Liabihties Capitalization (see page 18):

Common stock-no par value-authorized 40,000,000 shares-issued and outstanding 35,161,492 and 30.656,083 shares, respectively. 5 510,095 S 443,533 Retained earnings . 137,916 130,140 Total common stockholders' equity. 648,011 573,673 Preferred and,oreference stocks:

Series without mandatory redemption provisions . 141,392 141,392 Series with mandatory redemption provisions . 92,215 93,631 Long-term debt. 900,302 818.361 Current Liabihties:

Obligations Due Within One Year Expected to be Refinanced-Rank loans, at prime rates . -

45,000 Commercialpaper. 22,000 -

Geries E Bonds,2'8s , due March 1,1980. 9,055 -

Geries F Bonds, 2 %, due May 1,1980. 8,360 -

Other Current Liabihties-Accounts paysble . 129,564 100,669 Sinking funds due within ono year. 1,010 1,010 Dividends declared. 17,451 15,763 Customer deposits . 5,188 5,034 Taxes accrued . 35,047 32,846 Interest accrued. 18,350 18,881 Fueladjustment clause balance . -

4.870 Other - 13,968 6.167 220,578 185,240 Totalcurrentliabihties . 259,993 230,240 Deferredincome taxes . 183,376 153,044 Deferred investment tax credits, being amortized over hie of related property. 85,567 69,774 Delerred credits . 6,774 4,553 Other reserves . 1,571 1,532 277,288 228,903 Commitments (see note]

$2,319,201 S2,086,200 ff

o 9"% Qn say yonnurn ingana. Pu,bl1,c. , Serv {gg , Company

.)9 9 g

fQ

~ ,c. e.. y7;:p_ + yn ,

. .: .. 3. a'.

Statement of Capitalization December 31 1979 1978 (Dollars in thousands)

Common Stockholders' Equity:

Common stock- no par value- authorized 40,000,000 shares (1,949.875 shares reserved)-issued and outstanding 35,161,492 and 30,656,083 shares, respectively. S 510,095 S 443,533 Retained earnings . 137,916 130,140 Total Common Stockholders

• Equity. 648,011 36.4 % 5?3,6 73 35.3%

Preferred and Preference Stocks, which are redeemable solely at option of the issuer-Cumulative preferred stock- $100 par value-4% series- 211,380 shares outstanding . 21,138 21,138 4!?? , series- 80,000 shares outstanding. 8,000 8,000 4.22% series- 120,000 shares outstanding . 12,000 12,000 4.887, series- 100,000 shares outstanding . 10,000 10,000 7.44% series-300,000 shares outstanding . 30,000 30,000 7.50 % series- 300,000 shares outstanding . 30,000 30,000 Premium on preferred stock. 254 254 Cumulative preference stock- $50 par value-8.36% series- 600,000 shares outstanding . 30,000_ 30,000 141,392 7.9% __141,392 8. 7%

Redeemable Preferred and Preference Stocks, subisct to mandatory redemption requirements or whose redemption is outside the controlof the issuer-Cumulative preferred stock- 5100 par value-8.85% series-250,000 shares outstanding . 25,000 25.000 74 % series- 100,000 shares outstanding . 10,000 10,000 8.35% series- 100,000 shares outstanding . 10,000 10,000 7t?% series- 200,000 shares outstanding . 20,000 20,000 Cumulative preference stock- $50 par value-11.64% series-240,000 and 272,000 shares outstanding, respectively. 12,000 13,600

6. 70% series-300,000 shares outstanding (convertible into not more than 821,917 shares of common stock). 15,215 15,031 92,215 5.2% 93.631 5. 7%

Cumulative Preferred Stock-no par value-authorized 3,000,000 shares-none issued. - - - -

Cumulative Preference Stock-no par value-authorizcd 3,000,000 shares- none issued . - - - -

Long-Term Debt (see page 19). 900,302 50.5% 818,361 50.3%

TotalCapitalization. $ 1,781,92_0 100.0% S t 627,057 100.0%

1E5 The accompanying notes to isnancial statements are an integralpart of this statement.

Northern Indiana Public Service Company V (P 7 C k n}9 9rq L Y: -

Statement of Long-Term Debt December 31 1979 1978 (Dollars on thousands]

First Mortgage Bonds-Series E, 2:8%-due March 1,1980, to be rehnanced. $ -

$ 9,170 Series F 2 M' -due May 1,1980, to be refinanced. -

8,4 70 Series G, 3%-due March 1,1982. 7,600 7,700 Series H, 3'kY-due July 1,1984. 7,800 7,900 Series I, 5% -due August 15,1987. 17,400 17,600 Series J. 4h M -due January 15,1989. 20,976 21,237 Series K. 4 M-due February 15,1990. 12,738 12,900 Series L. 4%%-due March 15,1992. 17,200 17,600 Series M, 42 %-due April 15,1993. 26,380 26,667 Series N, 4%--due May 15,1995. 26,992 27,282 Series 0, 6W-due September 1,1997. 32,533 32,900 Series P, 6%-due October 1,1998. 18,799 18,999 Scries S, Bw%-due May 1, 2001. 47,976 48,475 Series T, 7D%-due April 1,2002. 48,500 49,000 Series U, 8%-due July 15,2003. 73,500 74,250 Series V 8.90 b-due April 1, 2004. 74,200 75,000 Series W 10.40 lb-due September 1,2004. 13,145 13,145 Series X, 8%-due July 15,1983. 80,000 80,000 Series Y. 8%-due October 15, 2006. 60,000 60,000 Series 7, 8'8%-due August 15,2007. 50,000 50,000 Series AA, 8h%-due November 1, f 207. 65,000 65,000 Series BB, 9%-due June 15,2004. 45,000 -

Series CC,114%-due December 15. 2009. 60,000 -

805,739 723.295 Series A Notes (Pollution Control)-

City of Michigan City-5. 70% due October 1, 2003. 23,500 23,500 County of Jasper-

$10,000 @ 6 40% due February 1,1985,

$24,000 @ Tib% due February 1,2005. 34,000 34,000 57,500 57,500 Series 1978 Note (Pollution Control)-

County of Jasper- 6. 70% due November i, 2008. 18,000 18,000 Convertible Debentures-4 %-due February 8,1992 (each $100 Debenture presently convertible into four shares of common stock upon payment of $10.84 cash, subject to adjustment in certain events) . 20,388 20,402 Unamortized Premium and Discount on Long-Term Debt, net. (1,325) (836)

Total Long-Term Debt, excluding amounts due within one year. $900,302 $818,361 The accompanying notes to Inancial statements are an integralpart of this statement.

[ ] Denotes deduction 19

Northern.InQppa Pw1cSolvicq'Cdinpany ,

N :,;

~

Statement ofRetainedEamings Ymr EndM Decemtmr 31. 1979 19I8 (Dollars in thousands)

Balance at beginning of year. $ 130,140 $130.512 Not income . 76,859 62.581 206,999 193,093 Deduct:

Dividends on preferred and preference stocks . 17,179 15,908 Dividends on common stock . 49,406 44,346 Amortization of discount and expense on preference stock . 206 34 Wnto-off capitalstock expense . 2,292 2,665 69,083 __6?,953 Balance at end of year. $137

_ , 916_

$ 130,140 Notes to FinancialStatements summary of significant Accounting Policies Depreciation and Maintenance The provisions for depreciat;on. which were approximately 3 6 , and 3 3 ', of the cost of depreciable utility plant for the years ended 1979 and 1978. respectively are made on the straight-line method over average service lives of the property The electric rate order of September 27,1977, increased the depreciation rate for electnc and common property to 3 3G and 2 93 ' respectively and the gas rate order of November 22,1978, increased the depreciation rate for gas property to 3 67 The Company follows the practice of charging maintenance and repairs, including the cost of renewals of minoritems of properly. to maintenance expense accounts. except that repairs of transportation and service equipment are charged to clearing accounts and redistnbuted to operating expense and other accounts When property which represents a retirement unit is replaced or removed the cost of such property is credited to utility plant and such cost, together with the cost of removalless salvage. is charged to the accumulated provision for depreciation.

Operating Revenues In accordance with industry practice, the Company records, in its accounts, revenues as billed to its customers and Joes not recognize any unbilled portion which exists at the end of an accounting perioG ^ fueland purchased gas costs are expensed as incurred, except as discussed below.

Fuel Adjustment Clause AII metered elecinc rates contain a provision for adjustment in charges for elecinc energy to reflect increases and decreases in the cost of fueland!!;e fuelcost of purchased power through operation of a fueladjustment clause. As prescnbed by the Public Service Commission of Indiana (Indiana Commission), the adlustment factor is calculated based on the estimated cost of fuel and the fuel cost of purchased power in a future three month penod Any over or underrecovery caused by variances between estimated and actual cost in a given three month period is included in a future filing The Company records any under or overrecovery as a current asset or liability until such time as it is billed or refunded to its customers.

The fuel adlustment charge is subject to a hearing by the Indiana Commission every three months and adlustments remain in effect for a three month penod Gas in Storage Erfective January 1,1979, the Company changed from the average cost method to the last-in. first-out (LIFO) cost method of accounting for its inventory of gas in storage This change was made concurrently with the adoption by the Indiana Commission of the LIFO cost methoc; for rate making purposes. As a result, this change did not have a material effect on the financial statements for the current period and is not expected to have a material effect on the financial statements in any future penod Based on the average cost of gas purchased in December.1979, the estimated cost of gas in storage at December 31,1979 exceeded the stated LIFO cost by approximately $20,000,000.

Income Taxes Provisions for deferred income taxes are recorded primarily as a result of the use ofincome tax law provisions which allow  ;

deduction of items as expense in the tax return prior to their being recorded as expense on the books of the Company  !

These deferred tax provisions set forth below are recognized as costs in the rate-making process by the Commissions having lunsdiction over the rates charged by the Company The deferred income taxes resulting from the above are currently being charged to income, and such taxes which have been deferred in prior years are now being credited to income as the timing differences reverse. A summary of the timing differences which give rise to deferred federal 20 and state income taxes and the reiated amounts are as foitows:

= _ _ _ _ _

Northern Indiana Pubhc Syytco Company

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Notes to Financial Statements (Continued) 1979 1978 iDottars on thousands)

Liberalized depreciation and class hie asset depreciation range system . $ 16,905 $14.073 Dsmanthng costs . 2,215 2.489 Debt component of allowance for funds used dunng construchon* 6,216 5.020 Overheads capitahzed* 9,246 6.601 Deferred fuel tracking costs . 3,242 (3.466)

Gus storage and storage transportanon costs (1,645) (450)

Other (331) 939 Income taxes deferred in pnor years, credit . _(2,852) _(2287)

$ 32,996_ $22,919

• Commencing in December.1978, in accordance with an order of the Indiana Commission approving an increase in gas rates the Company began providing deferred income taxes for all timing ddlerences (full normahzation) Prior to that hme. no deferred income taxes were provided on timing ddlerences apphcable to the allowance for funds used dunng construction. Overheads capitahzed and certain other items relating to gas operations A reconcthation of an amount computed by applying the statutory federalincome tax rate to prelax income. to total tax expense is as follows:

1979 1978 (Dollars in thousands)

Not income . $ 76x 859 $ 62 581 Add Current income taxes Federal 3,895 3.296 State 2,175 2,064 Federalincome tax apphcable to non-operahng activities. net . 358 426 Delcited income tax es, net

, 8 5786 Federal 31,260 21,897 State 1,736 1.022 Colerrei nestment tat credits, net _ 15,897 14,197 Tote __55221 _ 42 902 Net income before income taxes . $ 132,180 $105 483 A m c unt denved by multiplying prelax income by statutory rate (46 % and 48 : , respectively) $ 60,803 $ 50.632 Reconcihng items multiched by the statutory rate:

Equity component of allowance for funds used during construction . (9,006) (7.669)

Taxes and payroll-related construction costs capilahzed in the accounts, but deducted currcntly-gas (see

• above). -

(1,886)

Book depreciation over related tax depreciation . 3,229 2.923 Other net (1,817) (2,702' State income taxes not of Federalincome tax benefit . _ 2,112 1.6f%

Totalincome taxes . $_55,321 $ %9_02_

( ) Denotes deduction The investment tax credits have been deferred and are being amortized to income over the hie of the related prop-erty At December 31, 1979. unused investment tax credits (excluding ESOP) carned forward to future years were approximately $3,600.000 Pension Plan Ihe actuanally determined cost of the Company's non-contnbutorypension plan, which covers substantially allemployes, was $13.467'000 in 1979 and $11,575.000 in 1978, including amortization of unfunded past service cost incurredprior to January 1.1977' for a penod of 40 years and unfunded past service cost incurred after January 1,1977, for a penod of 30 years The Company follows a policy of funding all pension costs accrued The unfunded past service cost at December 31,1979. was estimated to be $42.736.000. As of the date of the latest actuarial valuation. January 1, 1979. the total market value of the fund was less than the actuarially compu'ed value of vested benefits by $25,620.000.

Allowance for Funds Used During Construction The allowance for funds used during construction (AFUDC)is a non-cash item and does not contnbute current cash flow to the Company AFUDC is charged to constn *ction work in progress during the period of construction and represents the net cost of borrowed funds used for construction purposes and a reasonable rate upon other funds when so used. Under established regulatory rate practices, after the construction project is placed in service the Company is permitted to include in the rates charged for unhty services (1) a fair return on and(2) depreciation of such AFUDC includedin plant in service. 9

-l

MO % G Northerr1 Indiana Public Service Company . Df*Dd M uh} %

Notes to Financial Statements [ Continued)

The Federal Energy Regulatory Commissiun (FERC) has prescnbed a formula to be used for computing separately the maximum amount of AFUDC apphcable to borrowed funds and to other funds. On the income statement, the AFUDC applicable to borrowed funds is reported as a reduction of totalInterest Charges and the AFUDC applicable to other (equity) funds is reported as Other locome.

Dunng the period from January 1978 through December,1978, an alter tax rate of 8 % was used for gas construction and a prelax rate of 10:a was used for electric construction. Effective January 1,1979, a pretax rate of 10 m was used for allconstruction.

Subsidiary Companies The Company believes that its hnancial position and results of operations are clearly exhibited without consolidating its insignificant subsidiaries NIPSCO Exploration Company Inc., NIPSCO Fuel Company Inc., and Shore Line Shops, Incorporated No income has been realized on these companies in 1978 and 1979. In 1973, the Company organized NIPSCO Exploration Company Inc. (NEXCO), a wholly-owned subsidiary The Company has been authorized by the Indiana Commission to invest up to $31,760,000 in NEXCO As of December 31,1979, the Company had invested

$15,998,000 relating to two separate projects. The hrst protect is participation by NEXCO with others in the acquisition of interests in leases sold by the Department of Interior in the Gulf of Mexico, off-shore Texas and Louisiana. Of the monies invested by the Company in NEXCO, it has invested $7598.000 in this project. The second project is participation by NEXCO with others in exploring and developing oil and gas leases in the Gulf of Mexico, off-shore Texas and Louisiana.

NEXCO is authonzed to invest $15,000,000 in this project and has invcsted $8,400,000. The balance authorized for investment in this project mast be denved from NEXCO's share of any prohts from the exploration and development venture. The Company hopes to improve its future gas supply through NEXCO, but is not able to predict the outcome of these ventures.

Preferred and Preference stocks The authonzed classes of par value cumulative preferred and preference stocks are as follows:

2,400,000 shares- Cumulative Preferred- $ 100 par value 2,000,000 shares - Cumulative Preference - $50 par value The redemphon prices at December 31,1979 for the cumulative preferred stock, which are redeemable solely at the option of the issuer, are' 4% series, $101.20, 4n% series, $100.00: 4 22% series, $101.60; 4.88 % series, $102.00; 744 % senes, $105 00; and 750% series, $105.00.

The redemption price at December 31,1979 for the 8.36% Cumulative Preference Stock, which is redeemable solely at the option of the issuer, is $54.18 (not redeemable prior to June 1,1982 through refunding at an effective interest cost of less than 8 36% per annum).

Dunng the pened January 1,1978 to December 31,1979, there were no changes in the above preferred and oreferer,ce stocks.

The preferred and preference stocks without mandatory redemption requirements are redeemable in whole or in part at any time upon 30 days' riotice at the option of the Company at the redemption prices stated above, except that the redemption pnces for the 744 %, 750% and the 8.36% series wi!I be reduced periodically in the future.

Preferred and preference stocks, subject to mandatory redemption requirements or whose redemption is outside the control of the issuer issued during the period January 1,1978 to December 31,1979 were $10,000,000, 8.33%

Preferred in June 1978; $20,000.000, Th% Preferred in July 1978; and $15,000,000, 6.70% Preference issued in con-nection with the retirement of $10,000,000, 60% Preference in November 1978.

The 11.64% Cumulative Preference Stock is entitled to a sinking fund sufficient to redeem a minimum of 16,000 shares on or before September 1 in each year, at the par value plus accrued dividends. At its option, the Company may redeem through the sinking fund on or before September 1 in each such year not more than 16,000 additional shares.

On June 12, 1979, by Resolution of the Board of Directors, the Company exercised its option to redeem 16,000 shares in addition to the 16,000 shares required to be redeemed on September 1,1979. The right to redeem such additional shares shall not be cumulative and shall not reduce the sinking fund requirement in any subsequent year The redemption price at December 31,1979 is $5750.

The 6.70 % Cumulative Preference Stock is convertible, on and after October 1,1981, to and including October 31, 1983, into not more than 821,917 shares of Common Stock. The 6 70% Cumulative Preference Stock is redeemable at the option of the Company or at the option of the holder, commencing November 1,1983, at the price of $53.065 per share, plus all unpaid cumulative dividends accrued thereon to the date of redemption.

n The 8.85% Cumulative Preferred Stock is entitled to a sinking fund sufficient to redeem 12,500 shares on or before 2/ April 1 in each year beginning in 1984 (not redeemable prior to October 1,1986 from the proceeds of anyindebtedness

D"O "O Uh

~

northeMjpdiana Public' Service Comphrry a e, ) o n b

Notes to FinancialStatements (Continued) having an effective cost of less than 8 85n per annum or having a shorter average hfe than the remaining hfe of the 8 85 h senes) The redemption pnce at December 31,1979 is $107 75 The 8 35 h Cumulative Preferred Stock is entitled to a sinking fund sufhcient to redeen, '.000 shara on or before July 1 in each year beginning in 1984, 3,000 shares in each year beginning in 1994, and 6,000 shares in each year bcginning in 2004, which amounts may be doubled at the option of the Company in any such year (not redeemable prior to July 1,1988 from the proceeds of any indebtedness having an effective cost ofless than 8.35% per annum or having a shorter average hie than the remaining hfe of the 8 35% senes) The redemption price at December 31,1979 is $108.11.

The 7% , Cumulative Preferred Stock is entitled to a sinking fund sufficient to redeem 40,000 shares on or before October 14 in each year beginning in 1984 (not redeemable pnor to October 15,1983).

The 74 :, Cumulative Preferred Stock is entitled to a sinking fund sufficient to redeem 2,777 shares on or before December 1 in each year beginning in 987 with 2,805 shares set aside for redemption on the final sinking fund date.

At its option, the Company may redeem through the sinking fund on or before December 1 in each year not more than 2,777 additional shares, which nght to redeem such additional shares shall not be cumulative and shall not reduce the sinking fund requirements in any subsequent year (not redeemable prior to December 1,1987 from the proceeds of any indebtedness having an effective cost of less than Th% per annum or having a shorter average hfe than the remaining hfe of the 7% series). The redemption price at December 31,1979 is $10740.

The redeemable preferred and preference stocks are redeemable in whole or in part at any time upon 30 days' notice at the option of the Company at the redemption prices shown, except that the redemption prices for the 8.85%,

the 7w > the 8 35? the 76 ($103 333 commencing October 15, 1983) and the 11.64% series will be reduced peiiodically in the future The sinking fund requirements with respect to redeemable preferred and preference stocks, outstanding at Decem-ber 31,1979. for each of the twelve month periods subsequent to December 31,1980, are as follows:

Year Ended December 31 1981 1982 1983 1984

$800 000 $800.000 $800 000 $6150.005 Long-Term Debt The sinking fund requirements of long-term debt (including the matunty of First Mortgage Bonds, Series G,3n, March 1,1982, 3eries X, BW , July 15 1983 and Series H, 3M, July 1,1984), outstanding at December 31,1979, for each of the four years ubsequent to December 31,1980, are as follows:

Year Ended December 31 1981 1982 1983 1984

$4 325.450 $12.281.450 $84 681.450 $ 12.081.450 Unamortized debt expense, premium and discount on long-term debt, applicable to outstanding bonds is being amortized over itse hfe of such bonds.

The Company's Deed of Trust, dated August 1,1939, as amended and supplemented, securing the First Mortgage Bonds issued by the Company constitutes a direct first mortgage lien upon substantially all property and franchises, other than expressly excepted property owned by the Company By Purchase Agreements dated as of June 15. 1979, the Company sold $45,000,000 principal amount of its First Mortgage Bonds, Series BB, 9T: , due June 15, 2004 (the Series BB Bonds) through pnvate placement to institutional purchasers. The sale and dehvery of $34,000,000 principalamount of the Senes BB Bonds was consummated on June 27, 1979 and the sale and delivery of the remaining $11,000,000 principalamount was consummated on September 18,1979.

On December 20,1979. the Company sold $60,000,000 pnncipalamount ofits First Mortgage Bonds, Series CC, Ilk" , due December 15, 2009 to underwnters A public offering was made by the underwriters.

Short-Term Borrowings The Company has several hnes of credit totahng $141,500,000 which run to May 31,1980 whereby the Company can borrow at the pnme rate then in effect for a period not to exceed one year The Company has an additionelline for

$50,000,000 with the same rate terms but with a period not to exceed 9 months. Although there are no commitment fees or formal compensat ng balance requirements, the Company has agreed to maintain balances which are mutually satisfactory to the banks and the Company The hnes of credit are also used to support commercial paper which the Company began to issue in February,1979. Commercialpaper outstanding at December 31,1979, was issued at rates between 13.10% and 13.57h The maximum amount of aggre0 ate short-term borrowings outstanding during the year nn ended December 31,1979, amounted to $100,000,000, the monthly average amount of aggregate short-term borrowings 4J

!f ,.: -

Nortl]6fy (rldlana Public Service' Company M

&YiQ (i @n(SnMid Notes to Financial Statements [ Continued]

amounted to $4G.123.932, and the weighted average interest rate dunny the year was 1170 . The maximum amount of aggnyato short term borrowings outstanding dunng the year ended December 31.1978. amounted to $45.000,000, the monthly average amount of aggregate short term borrowings amounted to $12.260.274 and the weighted average interest rate during the year was 10 47 >

Rate Increases Electric Rates On July la 1979. the Indiana Commission approved an increase in electnc rates which. based on the test year ended September 30. 1978. would produce additional annual electric revenues of $61.500.000 The Company's request based on the test penod would have produced additional annual electric revenues of $65.000,000. The increased rates became effective July 19,1979 and are final On July 27.1978. the Company filed with the FERC requesting the approval of new wholesale electric rates which ll approved would have incicased the Company's revenues from electuc wholesale service by apprcrimately $8.381.000 annually. based on the projected 1978 test year. The wholesale customers intervened in opposition to the increase The rules were put into vilect on January 23, 1979, subject to refund. The Company and its wholesale customers reached agreements on increased rates, which would produce in the firsi year approxi lately $5. 700.000 of additional revenue based on the protected 1978 test year The agreements provide for additionat increases to the Rural Elecinc Membership Corpotations (REMC] over a three year period The agreements were approved by the FERC on October 11, 1979 and refunds were made in late October.1979.

Gas Rates On November 22,1978. the Indiana Commission approved an increase in gas rates, which, based on the test year 1977, wc ild produce adornonal annual gas revenues of $37.320.764 after adjustments for purchased gas, gas storage and storage transportation costs The increased rates became effective November 27.1978 and are final. Included in the Commission's order was approval of the use of full normalized tax accounting, an increase in the rate of depreciation of the Company's gas property from 2 70 to 3.67 per cent. which based on the test year 1977 would haveincreased depreciation expense $4.231,414 and an adjustment to reflect the Bru content of the gas being sold The Company commenced its gas rate case Apnl 28, 1978. Its request, based on the test year would havo oroduced additional annual gas revenues of $39.455.249 All metered gas rates contain an adjustment clause which requires the Company to reflect changing costs of purchased gas and contractual gas storage and storage transportation charg3s from the Company's suppliers regulated by the FERC upon thirty days' notice by the Company and. except for one industrial rate. upon approval of the Indiana Commission Because of the effect of other changes in revenues and changes in expenses, the rate increases descnbod ebove are not necessanly indicative of future carnings.

Nuclear Generating Unit History of Proceedings in August,1970. the Company applied to the Atomic Energy Commission (AEC. now the Nuclear Regulatory Commission

-NRC) for a construction permit and operating license for a nuclear generating unit (Bailly Unit N1) at its Bailly Generating Station on the south shore of Lake Michigan in Porter County. Indiana The Company presently has fossil-fired units with a not capability of 523.900 kilowatts at its Bailly Generating Station.

The Porter County Chapter of the Izaak Walloo League of America, Inc.. Concemed Citizens Against Bailly Nuclear Site. Businessmen for the Public Interest, Inc. and others who are opposed to the construchon of Bailly Unit N1 (the Joint Intervenors) were permitted to intervene in the proceedings before the AEC.

On May 3.1974. The AEC issued a construction permit. The issuance of the permit was challenged before the Atomic Safety and Licensing Appeal Board, in the United States Court of Appeals for the Seventh Circuit and in the United States Supreme Court by the Joint Intervenors The State of Illinois and the City of Gary Indiana joined the Joint Intervenors in the court proceedings. On Apnl 1.1975. the Court of Appeals set aside the AEC order. enjoined construction of Bailly Unit N1 and ordered the excavation therefor hiled. On November 11, 1975. the United States Supreme Court reversed the April 1,1975 decision of the Court of Appeals and remanded the case for decision of issues not decided by the Court of Appeals. On Apnt 13. 1976, the Court of Appeals decided such issues and denied the Joint Intervenors' " Petition for Review of Final Orders of the Atomic Energy Commission" opposing the construction permit held by the Company The Joint Intervenors and others filed petitions for reheanng of the Apnl 13. 19 76 decision, which were all denied by the Court of Appeals on June 1,1976. On August 27,1976, the Joint Intervenors.

S, the State of II!inois and the City of Gary Indiana, filed with the United States Supreme Court a Petition for a Wnt of

Nortt;ern Indiana Pubhc Service Company h Notes to Financial Statements [ Continued]

Certiorari The issuance of the construction permit was ultimately sustained by a ruling of the United States Supreme Court on November 8,1976.

Current Legal Status The Company is of the opinion that the November 8,1976 ruhng allows it to go forward with construction of a nuclear generating unit at its Badly Generating Station, and it intends to resume construction as soon as the pile driving suspension hereinafter descnbed is resolved.

Subsequent to the ruling, Joint intervenors, the State of Ilknois, the Cdy of Gary and others filed with the NRC, a request to institute a proceeding and suspend and revoke the Company's construction permit. On April 15, 1977, the Director of the Office of Nuclear Reactor Regulation of the NRC denied the request in its entirety On April 20,1978, the Commissioners of the NRC also denied the request in its entirety Under date of June 14,1978, the Joint Intervenors ided in the Unded States Court of Appeals for the Distnct of Columbia Circuit a petition to review the April 20,1978 order of the NRC Subsequently the State ofIlhnois, the City of Gary and others ided similar petitions. On September 6, 1979, the Court of Appeals afbrmed the April 20,1978 decision of the Commissioners. The Company cannot predict what further action, if any these petitioners may take.

On September 28. 1977, pile driving activities were suspended at the request of the NRC until additional ground water monitonng wells were installed and an NRC staff review completed On October 3.1977' the NRC staff advised that resumption of pile placement was also contingent upon a favorable safety review of the proposed pile placement method. The Company has submitted comprehensive data supporting mechanicalpile placement. On August 4,1978, the NRC staff authorized the Company to proceed with an indicator pile driving program to conbrm the acceptabihty of the Company's proposed method of pile driving. The Company completed the indicator pile driving program and ided its report with the NRC staff on December 4,1978 The report, in the Company's opinion. sustains the adequacy of the proposed ode driving method. The Company is awaiting the completion of the NRC staff's review of the report.

The NRC staff has requested the Army Corps of Engineers to review the proposed pile driving method. As hereinafter stated the Company cannot predict the duration of such review or the costs associated therewith.

In November 1978, Joint Intervenors, the State of I!!inois, the City of Gary, the Lake Michigan Federation and Local 1010 Unded Steelworkers of America, ided petitions which requested the NRC to institute hearings and stay construction pending the outcome of the hearings relating to the Company's pile driving method Local 1010 represents the employes of inland Steel Company at its Indiana Harbor Works. On December 12, 1979, the NRC denied all of these petitions.

On February 71979, the Company requested the NRC to extend the latest completion date in the construction permit for Badly Unit N1 from September 1,1979 to September 1,1985. On August 31,1979, the Company amended its request to ask that the latest completion date be extended to December 1,1987. In 1974 when the Company received its construction permit for Bailly Und N1, it was anticipated that construction would be completed no later than September 1,1979 However, because of the various delays due to legal proceedings and regulatory review, delays in pile placement, the continuing effects of the events at Three Mde Island (see below), and the NRC's recent report that longer periods of time are now needed to construct facihties, it is necessary to extend the completion date estabhshed by the construction permit. Joint Intervenors, State of Ilhnois, and Local 1010 have each petitioned the NRC for a hearing on the extension of the construction permit. On November 26,1979, the NRC issued its Notice of Opportundy for Heanng relative to the conuruction permit extension, allowing any person whose interest may be affected by the proceeding to Ide a request for a hearing by December 31,1979. Several groups have ided petitions opposing extension of the construction permit. The Company has ided responses to those petitions. The NRC sta!! has also filed responses to those petdions. The Company believes that the requested amendment extending the construction com-pletion date wdlbe granted Three Mile Island Beginning March 28,1979, a nuclear generating unit at the Three Mde Island Station near Harrisburg. Pennsylvania experienced severe operating problems resulting in damage to and shutdown of the station. Although the Company's Bailly Unit N1 wdl be a boiling water reactor, different in design and manufacturer from the pressurized water reactor at Three Mile Island, these events have precipitated a review of safety standards and procedures by the NRC and may cause further legislation concerning, or delay in, the construction and operation of nuclear generating units, and may lead to or influence other regulatory action by the NRC and other agencies. In addition, these events have delayed the NRC's processing of the Company's pending request for an extension of the completion date for Bailly Unit N1 and the resolution of pile placement as descnbed above. The Company cannot predict whether new statutes or regulations, including a moratorium on construction of nuclear generating facilities, will be adopted; whether design changes applicable to nuclear facihties now under construction will be required; or the ultimate impact these events may have upon the construction schedule, licensing, in-service date or cost of Bailly Unit N1. D-

am e y

Northern Indiana Public Service Cornpany wo a b. n d

t Notes to Financial Statements [ Continued]

Current Cost Status The Company expects to go forward with construchon once all of the NRC's questions regarding pile dnving have been sabstied The Company is hopeful the pile driving delay will not continue but cannot predict either the duration of the suspension of complete pile dnving activities or eshmate the additional costs associated therewith Dunng the delay limited expenditures conhnue to be made on the project The Company anticipates thct the cost of Bailly Unit N1 will be recovered over the service life of the unit The Company's most recent cost estimate, based on a 1987 in service date, amounts to $1.1 billion, exclusive of fuel and fuel ennchment costs The increase in estimated costs is generally due to inflation. If the in-service date of Bailly Unit N1 is delayed beyond 1987, it is anticipated further increased costs would be experienced The Company cannot predict what other events may occur which could continue to delay or halt the protect nor the economic impact of such events Approximately $179 million has been expended by the Company on this project as of December 31,1979 Sulfur Dioxide Removal System in 1973. the Company entered into a contract with the federal Environmental Protection Agency (EPA) w construct a sulfur dioxide removat system, designed to demonstrate the satisfactory control of sulfur dioxide emissior, from the hurning of high sulfur content coal on a 110.000 kilowatt generating unit at the Dean H MitchellStation in Ga:y. Indiana The capital cost of the proicct was approximately $t8,000.000 of which approximately $5.500,000 was paid by EPA.

The EPA and the Company have concluded. after acceptance tests were completed on Septembe- 14,1977, that the demonstration plant met the standards for sulfur dioxide and particulate emissions during the test The Company is presently operahng the project with EPA contnbuting a portion of the operating expenses The Company and the EPA are continuing to stu@ the technical feasibihty and economics of this type of flue gas scrubbing system: however, there is no assurance of success of the subject project in commercial operation The Indiana Air Pollution Control Board State Implementation Plan for sulfur dioxide. currently being reviewed by the federal EPA, may require the Company to continue operation of the removal system The unit capability of the generating unit to which the removal system is attached has been decreased by approximately one-third when the system is operating Common Stock The following table shows the changes in common stock outstanding for the years 1979 and 1978:

1979 1978 Shares Amount Shares Amount (Dollars in (Dol:ars in thousands) thousands)

Balance beginning of year. 30,656,083 $443,533 28,400,628 $404,661 Sale of common stock . 4,000,000 59,250 2,000,000 34,500 Employe stock purchase plan . 64,016 904 51,116 859 Automatic dividend reinvestment and stock purchase plan . 319,878 4,540 101,767 1,741 Employe stock ownership plan . 120,931 1,851 102,052 1.756 Conversion of debentures . 584 17 520 16 Balanco end of year. 3_516L492_ $510A95 3_01 56,0_83_ $443133_

The following shares of common stock were reserved at the dates indicated December 31 1979_ 1978 For the conversion of 4!^ convertible debentures. 815,500 816.084 For the conversion of the G 70 % cumulative preference stock . 821,917 821,917 For the employe stock purchase plan. 37,502 101,518 For the automatic dividend reinvestment and stock purchase plan . 229,325 299,203 For the employo stock ownership plan . 45 & 31_ 166 562_

no 1349S75 2205284

1 1.1 ,

.j i, r .

Northeri2 fndiana'Poblic Seitice Company ' m 9 e ,

u ]

Notes to Financial Statements (Continued)

Quarterly Financial Data The following data summarize certain operating results for each of the quarters of 1979 and 1978:

1979 Quarters Ended March 31 June 30 Sept. 30 Dec. 31 (Dol'ars in thousands)

Operating revenues . 5343,101 $274,785 $255,708 $322,650 Operating expenses and taxes . 303,356_ 246,771 _237,058 299,251 Operating income . 39,745 28,014 18,650 23,399 Other income . 5,535 5,693 5,732 4,452 Interest chargcs . 12,886 12,484 12,985 16,006 Not income . S 32,394 5 2h223 5 11,397 5 11,845 Earnings on common stock . $ 28,031 5 16,860 $ 7,048 $ G551 Earnings per average common share outstanding

• 5.91 S.54 S.21 S.23 Earnings per share assuming complete conversion of Convertible Debentures and 6.70%

Cumulative Preference Stock

• 5.89_ S.53 S.21 S.23 1978 Quarters Ended March 31 June 30 Sept 30 Dec.31 (Dollars in thousands)

Operating revenues . $265.348 $216.625 $207,334 $260,966 Operating expenses and tsxes . 231,892 194,301 187,613 241,139 Operating income . 33,456 22,324 19,721 19,827 Other income . 4,045 4,205 4,206 4,905 Interest charges . 12.491 12,273 12.427 12,917 Net income . $ 25,010 $ 14,256 $ 11,500 $ 11,815 Earnings on common stock . $ 21,324 $ 10,568 $ 7,357 $ 7,500 Earnings per average common share outstanding

• 5.75 S.37 $.26 _

$ 25 _

Earnings per share assuming complete conversion of Convertible Debentures and 6.70% Cumulative Preference Stock * $. 74 S 37 S.25 $ 25

• Because of the combined mathemarcal effect of new common stock issues er,d the cyclical nature of net income dunng the year, the sum of earnings per share for any four quarterly peroods may vary slightly from the eamings per share for the equivalent twelve n, month penod 4/

~

Northern In'dlana'P0blic seivico Conipany peo D e

g p- p Notes to FinancialStatements (Continued)

Segments Of Business The Company is a public utility operating company engaged in distnbuting electrical energy and natural gas.

The reportable items for electric and gas departments for the years 1979,1978 and 1977 are as follows:

1979 1978 1977 (Dollars in thousands)

Operating information-Electnc operations:

Operating revenues . S 560,084 $ 509.790 $ 414,701 Operating expenses, excluding provision forincome taxes . 473,111 422,636 319,135 Pretax operating income . 86,973 87,154 95.566 Allowance for funds used dunng construction (AFUDC). 31,930 25,333 20.050 Prelax operating income including AFUDC . 5 118,903 $ 112,48_7 $ 115,616 Gas operations:

Operating revenues . S 636,160 $ 440,483 $ 392,030 Operating expenses. excluding provision forincome taxes . 558,362 389,833 339,802 Pretax operating income . 77,798 50,650 52,228 Allowance for funds used during construction (AFUDC). 699 469 420 Pretax operating income including AFUDC . S 78,497 $ 51,119 $ 52,648 Total. $ 197,400 $ 163,606 $ 168,264 Other income, net . 1,835 1,815 1,057 Less interest charges . 67,4*.3 60,364 55.484 Less provision forincome taxes . 54,963 42,476 46,673 Net income per statement ofincome . S 76,85_9 _$ 62 L581_ $ 6716_4 Other information-Depreciation and amortization expense:

Electric . S 40,181 $ 37,166 $ 31,816 Gas. 18,212 12,857 12,133 Total. S~-~58,39_3_ $ 50,02_3_

~

$ 431 949 Capitalexpenditures:

Electric . $ 180,704 $ 187.435 $ 191,416 Gas. 46,578 45.630 28.078 Total 5 227,282 $ 233,065 $ 219 494 investment information-Ident1hable assets (a):

Electric . 51,626,310 $ 1,444,642 $ 1,271.862 Gas. 525,380 490,571 448,920 Total. 2,151,690 1,935,213 1,720,782 Assets utilized for overall Compary operations . 166 932 150,987 170,053 Total assets . 52,318,622 $2,086,200 $L890,835 Major Customer United states steel Corporation Year ended December 31, Electric Gas Total 1979-Revenue from customer. $61.655 $61,803 $ 123,458

-Per cent of Company revenue. 11% 10% 10h 1978-Revenue from customer. $59,927 $45,096 $105,023

-Per cent of Company revenue . 12% 10 % 11%

1977-Revenue irom customer. $47,890 $36,945 $ 84,835

-Per cent of Company revenue. 12 % 9% 11%

na (a) Utihty plant less accumula.*od provision for depreciation and amortization, matonal and supplies. c!ectnc production fuel. natural gas dU in storago. and gas supply exploration investments

Northern Indiana Public service Company D (" '" (D ~D  %

NS '

LM o AAL Notes to Financial Statements (Continued)

Construction Funds Construction Funds from the proceeds of the Series "A"and Senes 1978 Notes (Pollution Control) have been deposited with tho Trustee, the designated disbursing agent. Monics in the Construction Funds are applied to pay among other costs. the cost of constructing and equipping the applicable pollution controlprojects at the Company's Michigan City and Rollin M Schabler electnc generating stations.

Commitments The Company estimates that approximately $2.601.000.000 will be expended for construction purposes for the period frcv January 1,1980 to December 31,1984 Substantial commitments have been made by the Company in connection with this program Current Cost Data (Unaudited]

It;e impact of inflation on the Company's operating costs and its investment in property, plant and equipment has been significant. Replacing items of property plant and equipment at current costs would require a substantially greater capitalinvestment than was required to acquire such assets onginally Data showing the estimated current cost pursuant to Statement No 33 of the Financial Accounting Standards Board of the Company's productive capacity together with the related effect on depreciation expense is contained in the Company's 1979 form 10-K filed nith the Secunties and Exchange Commission.

The Company is subject to regulation by the Public Service Commission ofIndiana a" to rates, serv lx, accounts, issuance of secunties, and in other respects. The accompanying hnancial statements are .oresented un m original cost basis in conformity with the Indiana Commission's accounting policies Constant Dollar Cost Data (Unaudited)

STATEMENT OF INCOME FROM CONTINUING OPERATIONS ADJUSTED FOR CHANGING PRICES (UNAUDITED) d YearE gpggm Ye (In thousands of average 1979 Dollars) 31.1979 Income from continuing operations, as reported in the statement ofincome . $ 76,859 Adlustments to restate costs for the oflect of generalinflation-Depicciation and amortization expense. 43 460 Income from continuing operations adjusted for generalinflation excluding reduction to recoverable cost. $ 33 399 (a)

Reduction to racoverable cost. $(179.686)

Reduction of purchasing power loss through debt hnancing . 147.984 Net . $ (31.702)

FIVE-YEAR COMPARISON OF SELECTED SUPPLEMENTARY FINANCIAL DATA ADJUSTED FOR EFFECTS OF CHANGING PRICES (UNAUDITED)

(In thousands of average 1979 Dollars) Yw & DeMM

,9 75 ,g7 977 19 78 1979 Operating revenues- historical. $536,751 $647,994 $806. 731 $ 950,273 51,196,244

- adlusted . 723,881 826.240 9G6,299 1.057,264 1,196,244 Historical cost information adjusted for generalinflation:

Income from continuing operations excluding reduction to recoverable cost . S 33,399 Income from continuing operations per common share excluding reduction to recoverable cost. 50.50 Not assets at year end at recoverable cost S 613,847 Reduction of purchasing power loss through debt hnancing . $ 147,984 Cash dividends declared per common share-histoncal. $1.36 $1.40 $ 1. 44 $1.50 $ 1.50

-adlusted. $1.83 $1. 79 $ 1. 72 $1.67 $ 1.50 Matket price per common share at year end-histoncal. $17.875 $19.875 $ 19.125 $15. 75 513.75

-adlusted. $24.11 $25.34 $22.91 $17.52 $ 13.75 Average consumer price index . 161.2 170.5 181.5 195 4 217.4 $

1 f NortherriIrilhabu$;itc inwice Company fM@ foYiM(&q n na Notes to Financial Statements [ Concluded]

The supplementary presentation above, made pursuant to Statement No 33 of the Financial Accounting Standards Board. Is intended to set forth the effect of generalinflation It should be viewed as an estimate of the approximate etfect of inflation, rather than as a precise measure Constant dollar amounts above represent histoncal cost stated in terms of dollars of equal purcitasing power, as measured by the Consumers Price Index for all Urban Consumers (CPI-U).

Depreciation is determined by applying the Company's depreciation rates to the indexed plant amounts.

Under the rate making proxnbed by the regulatory commissions to which the Company is subsect. only the historic cost of plant is recoverable in revenues as depreciation Therefor, the excess of the cost of plant stated in terms of constant dallors that exceeds th0 histonc cost of plant is not presently recoverable in rates as depreciation, and is included in the cost of maintaining common stockholdern' equity Under the Companys fuel and gas adjustment ciruses, increases in the cost of electric generating fuel and gas purchased for resale are recoverable in future revenues dunng subsequent penods, cnd such increases are effectively receivables from future customers Therefor, such increases are not included in income from continuing operations but instead are treated as monetary assets The purchasing power loss in thcse monetary assets has been offset through debt financing Since only histoncal costs are deductible for income tax purposes, the income tax expense in the historical cost fina 1cial statements is not adjusted.

The cost to maintain the purchasing power of the common stockholders' equity is summarized as follows' Average 1979 Dollars Constant Dollars (Dollars in thousands)

Additional provision for depmciation . $43,460 Net of other inflation adlustments above . 31.702_

_S 75 IG2 (a) If the reduction to recoverable cost of $179.636 in average 1979 constant dollars had been deducted in determo,. 's income from continuing operations, such income would have been a $146,287 loss in average 1979 constant dollars.

Auditors' Report TO THE BOARD OF DIRECTORS OF NORTHERN INDIANA PUBLIC SERVICE COMPANY:

We have examined the balance sheet and statements of capitalization and long term debt of NORTHERN INDIANA PUBLIC SERVICE COMPANY (an Indiana corporation) as of December 31,1979 and 1978, and the related statements ofincome, retained earnings and sources of funds used for capital expenditures for the years then ended. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, inctuN such tests of the accounting records and such other auditing proceduroa we considered necessary in the circumstances.

In our opinion, the financial statements referred to above present fairly the financialposition of Northern Indiana Public Service Company as of December 31,1979 and 1978, and the results of its operations and sources ofits funds used for capital expenditures for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis.

Chicago, Illinois, Arthur Andersen & Co.

30 January 29,1980.

mm 0** '

Northern Indiana Public Service Company ,

Management's Discussion and Analysis of the Statement ofIncome (Millions of Dollars)

Variations from Prior Year 1979 1978 Amount  % Amount  % Explanation Electric Operating Revenues . $ 50.3 99 $95.1 22.9 Increases due to rate increascs. $31.2 and

$391; fueladjustment clause. $5.6 and

$40 0; purchased power tracking. $3.9 and $4.1; and changes in total KWH sales levels to the respective customer ulassifications. $9 6 and $11.3.

Gas Operating Revenues . 195.7 44 4 48. 12.4 increases due to purchased gas tracking.

$56.5 and $20.3; gas storage tracking. ($ 1.8) and (50 9); rate increase. $46.8 and $3.6:

and changes in sales levels to the respective Operanng Expenses and Taxes: ' " ' ' # "'# " #0 0^

Power purchased * (16 0) (12. 7) 34.6 38.3 Vanations the result ofincreased costs for power to replace capacitylost due to generating units down for repairs and the operation of fuel cost adjustment clacse and the Company's practice of defer;;ng the variance between actual fuel costs anJ the estimated amounts recovered.

Fuel for electric generation

• 27.9 19.2 37.9 35.4 Increases due largely to an increase in the average cost per ton of coalfrom $2216 in 1977 $29.35 in 1978 to $33.65 in 1979.

Gas purchased for resale

• 148.5 49.5 45 6 17.9 Chiefly the result of an increase in <he average cost of gas purchased per MCF from $1.17 in 1977 $1.33 in 1978 to $1.73 in 1979.

Other operation and maintenance

• 46.0 30.5 25.4 20.3 Majorincreases were experiencedin maintenance at the various generating stations. employes* wages and fringe benefits and onces paid to vendors for materials.

Depreciation and amortization . 8. 4 16 7 6.1 13.8 Increases reflect additions to property including Unit 15 at the Schah!er station in 1979 andincreased rates for gas property effective November 22.1978 and electric and common property effective October.1977 Taxes (except income). 4. 2 10 2 3.9 10.5 Increases due to increased revenue taxes as a result ofincreased revenue and an increase in the Company's portion of social security taxes, and for 1978 an increese in proper'y taxes.

Income taxes . 12.5 29.4 (4.2) (9.0) 197P increase the result of higher prelax inc ame partially oftset by a change in statutory rate from 48 to 46% effective 1979; 1978 Other locome and Interest Charges: decrease due to lower pretax income.

Allowance for funds used dunng construction (borrowed and other). 6. 8 26.5 5.3 26.0 High level of construction activity including Schahler station Unit 15 and the amount expended on Bailly station Unit N1, interest expense A " # "'

(excluding AFUDC). 7.0 11.7 49 8.8 Increases due to additionalinterest require-ments on debt fit:ancing on account of continuing high level of construction expenditures.

Net income . 14 3 22.8 (4.6) (6.8) Variation due to the above-mentioned Preferred and preference stock #

• dividend requirements . 1.5 97 2. 7 20.9 Increases reflect the fullrequirements of Net income available for newi ue in 1 78 and 19U common stock . 12.7 27.3 (7.3] [13.5) Variation due to the above-mentioned factors

• AII metered rates contain provisions for adjustment to reflect changes in the cost of powerpurchased, fuel. gas purchased and gas storage and gas storage transportation.

( ] Denotes decrease 94 aI

Northern Indiana Public Service Company 10-Year Comparison ofIncome (Dollars in thousands]

1979 1978 1977 1976 Operating Revenues:

Electric . S 560,084 $509,790 $414,701 $323,382 Gas . 636,160 440,4_83 392,030 324,612 1,196,244 95G,273 806,731 647,994 Operating Expenses and Taxes:

Operation-Power purchased. 109,229 125,181 90,540 65.833 FucIfor electric generation . 172,900 145,026 107,122 71,927 Gas purchased for resale . 448,511 300,016 254,443 201.591 Other operation . 122,337 97,593 86,766 70.964 Maintenance . 74,673 53,388 38,788 28,444 Depreciation and amortization . 58,393 50,023 43,949 35,219 T:aas (exceptincome). 45,430 41,242 37,329 32,761 locome taxes-Federal-current . 3,895 3,296 777 3.276 State-current. 2,175 2,064 1,852 1,735 Deterred federal, net . 31,260 21,897 25,868 23,490 Deferred state, net . 1,736 1,022 1,517 1,513 Defened investment tax credits, net. 15,897 14,197 _ 16,659 17,13!>

1,086,436 854,945 705,610 553,888 Operating income . 109,808 95,328 101,121 94,106 Otherincome:

Allowance for funds, other than borrowed funds, used during construction . 19,577 15,546 12,427 13,681 Other, net . 1,835 1,815 1,057 1,183 21,412 17,361 13,484 14,844 Income Before Interest Charges . 131,220 112,689 114,605 108,950 Interest Charges:

Interest on long-term debt. 61,290 58.308 54,109 48,797 Other interest . 5,686 1,630 1,176 2,74 3 Allowance for borrowed funds used during construction . (13,052) (10,256] [8,043) (11,671)

Amortization of premium, discount and expense on debt, net . 197 186 160 108 Amortization of reacquisition oremium on debt . 240 240 39 -

54,361 50,108 47,441 39,977 Net income . 76,859 62.581 67,164 68.973 Dividend requirements on preferred and preference stocks . 17,369 15,832 13,100 10,074 Balance for Common Stock. $ 59,490 S 46,749 S 54,064 5 58,899 Common Stock-Average shares outstanding . 31,972,567 28,951,104 26,200,337 23,549,525 Earnings per average share . $ 1.86 $ 1.61 5 2.06 $ 2.50 Dividends per share . $ 1.50 $ 1.50 $ 1.44 5 1.40 32 ( ) Denotes deduction

1975 19 74 19 73 19 72 19 71 1970 1969

$258,058 $209. 726 $181,444 $157,625 $132,136 $124,513 $ l 19,699

_278,693 238,989 210.382 214,978 193,541 175,272 147,659 536,751 448,715 391,826 372,603 325,677 299,785 267.358 42,460 48,877 37,457 24,897 17,891 13,659 13.047 69,745 44,688 28,712 26,840 24,086 21,542 18,750 160,726 133,694 115.304 113,943 99,854 84,286 75,723 63,597 55,943 52,295 48,763 39,863 36,113 30,658 26,027 21,540 17,735 17,410 14,712 13,030 11,641 31,964 26,740 23,812 22,676 21,035 19,919 18,626 29,535 27,862 25,945 29,174 26,573 24,353 20,420 12,562 7,224 19,046 20,000 18,447 27,175 24,148 1,333 742 1,124 -- - - -

12,937 8.226 5.111 5,70 7 4,105 3,285 3,864 1,200 968 724 - - - -

5x 2_04 6,384 1,285 1,392 869 640 4 76 457,290 382,888 328,550 310,802 267,435 244,002 217,353 79.461 65,827 63,276 61,801 58,242 55,783 50,005 11,595 9,104 10,143 5,061 2,213 1,954 1,321 6D97 5,403 4,130 2,385 1,502 850 (87) 17,692 14,507 14,273 7,446 3,515 _ _ 2 8_04 1,234 97,153 80,334 77,549 69,247 61,757 58,587 51,239 45,648 37,057 27,515 24,302 20,148 15,722 13,697 3,880 2.929 2,264 1,518 550 1,566 1,513

[6,070) [5.500) (3,989) (1,829) (881) (840) (5 73) 39 (52) (110) (109) (100) (78) (404) 43.497 34,434 25,680 23,882 19,717_ 16,370 14,233 53,656 45,900 51,869 45.365 42,040 42,217 37,006 9,450 7,355 6,160 2,622 2,257 2,257 2,257

$ 44 206 $ 38,545 $ 45,709 $ 42,743 $ 39,783 $ 39,960 $ 34,749 20,457,390 20,062,385 19,959,685 18,978,377 18,903,565 18,814,658 18,747,162

$ 2.16 $ 1.92 $ 2.29 $ 2.25 $ 2.10 $ 2.12 $ 1.85

$ 1.36 $ 1.36 $ 1.36 $ 1.33 $ 1.32 $ 1.215 $ 1.14 33

Northern Indiana Pubhc Service Company Statistics increase or(Decrease]

Year Ended December 31. 1979 1978 Amount Percent Electric:

Operating Revenues (thousands):

Residential. $ 120,700 $ 114,809 $ 5,891 5 Commercial. 31,861 29,769 2.092 7 Industrial. 370,614 336,923 33.691 10 Street lighting . 4,286 3,839 447 12 Sales for resale. 27,684 20,583 7,101 35 Other 4,939 3,867 1,0 72 28 Total 5 560,084 $ 509 790 $ 50 294 _10 Sales in kilowatt-hours (thousands):

Residential. 2,214,660 2,248,012 (33,352) (1)

Commercial. 485,524 481,090 4,434 1 Industrial. 10,303,535 10,121,217 182,318 2 Street hghting . 84,838 84.178 660 1 Sales for resale . 835,857 799,149 36,708 5 Other . _8_2,697 63,278 19,419 31 Total. _j 4,0_07,111 13,796,924 2101 187 _2 Customers Served:

End of Year:

Residential . 322,293 318.756 3,527 1 Commercial. 29,2Y3 29.222 51 -

Industrial. 9,210 9,006 210 2 Other. 820 807 13 2 Total. _ _36L592 357,791 3.801 _1 Gas:

Ooerating Revenues (thousands):

Residential (including home heating]. $ 208,451 $ 163,787 $ 44,664 27 Commercial . 70,173 54,318 15,355 28 Industrial. 354,053 219,048 135,005 62 Other . 3,483 2,830 653 23 Total. S 636,160 $_ 440,483 $195x 677 _'i Sales in therms (thousands):

Residential (including home heating). 753,895 i53,308 587 -

Commercial. 266,455 '206,844 (389) -

Industrial. 1,602,204 1,315,106 287,098 22 Other. 7,337 ' 769 (432) [6]

Total. 2,629,891 2,345 027 286,864 12 Customers Served.

End of Year:

Residential (including home heating) . 474,721 463,169 11,552 2 Commercial. 36,106 35,350 748 2 Industrial. 2,730 2,724 6 -

Other. 24 37 (13) [3D

,]gi Total. 513,581 501,288 12,293 2

GLOSSARY OF TERMS BRITISH THERMAL UNIT (Blu)

The standard unit for measuring quantity of heat cnergy One 8tu is the amount of heat energy required to raise the temperature of one pound cf water I Fahrenheit.

THERM f p A quantity of heat equivalent to 100.000 (( l"lf'N h ;rg {d,h,UL'dtUd;u,b:

i g / g g-9,>t.

3 i,- i;;

gg p q Btus or 100 cubic feet (CF) of 1,000 -

Btu natural g33.

CCF One hundred cubic feet. A cubic foot is the most common unit measurement of gas volume HEATING DEGREE DAY A measure of the coldness of the weather based on the extent to which the mean daily terv.perature falls below 6S'> Fahrenheit.

For example, on a day when the mean outdoor temperature is 35 Fahrenheit, the degree days would be 30.

WATT -

Unit of meanurement for elecir . pu,,u..

Most appliances are iated in watts which indicte the amount of electnc energy they use.1,000 watts = 1 kilowatt; I milhon watts = 1 megawatt.

KILOWATT-HOU R (kwh)

The basic unit of electric energy equal to one kilowatt of power supplied to or

[

f -

taken from an electric circuit steadily for one hour.

LOAD MICHIGAN Demand on a gar or electric cystem. Load p( '

is the amount of electric power or natural gas energy required at any specific point or points on a system.

PEAK LOAD

-OHIO The maximum load or demand in a stated period of time. lLUNOIS. !ND!ANA S EN DOUT, G AS ,

The total amount of gas distributed within a specified time interval. Maximum day ser'dout is the greatest actual gas sendout .

occurring in a 24-hour period.

s.

N /

1979 ANNUAL REPORT BULK RATE NORTHERN INDIANA PUBLIC SERVICE COMPANY 5265 Hohman Avenue U.S. POSTAGE Hammond, Indiana 46320 PAID Permit No. 377 Hammond, indiana i i\ -

c/QO.Sh, es.

Gd\.\

M Ni" y\-

Transfer Agents Continental I!!inois National Bank an(1 Trust Company of Chicago 30 North LaSaHe Street Chicago. Ilhnois 60003 The Chaso Manhattan Bank, N A.

I New York Plaza New York. New York 10081 Registrars The First National Bank of Chicago Ono First National Plaza Chicago. Ilhnois 60670 Morgan Guaranty Trust Company of New York 30 West Broadway ii New York. New York 10015 il Stockholder Records and Dividend Disbursing Offico Shareholder Relations Northern Indiana Public Service Company gpggg C  %

5265 Hohman Avenuo Hammond, Indiana 46320 7"~'"7/

( . .;

Qg,Y Thes report is assued solely 10: the purpose of providing statist,calinformation. It os not a representatron. (

\

piospectus or circular in recpect to the stock or j securities of this corporation. and is not transmitted on connection with any sale or offer to sell or buy any stock or security now of hereafter to be ossued.

or y sit' any prelomenary negotiation for sucto sale.

sa > s ,s- or av