ML19305D275
| ML19305D275 | |
| Person / Time | |
|---|---|
| Site: | Limerick  |
| Issue date: | 02/25/1980 |
| From: | PECO ENERGY CO., (FORMERLY PHILADELPHIA ELECTRIC |
| To: | |
| Shared Package | |
| ML19305D274 | List: |
| References | |
| NUDOCS 8004140319 | |
| Download: ML19305D275 (36) | |
Text
Our Shareholders; D"*D "gT YQ' be a n k N iin .o 1979 was another year with both e The completion of a PUC- the cornerstone of the Company's
" Good News" and " Bad News" for mandated management audit by system of " Management by Objec-the Company. Common stock earn- Cresap, McCormick & Paget, an tives," which is a key element in a ings were $1.86 per share, primar- independent firm of management management tool we use to ana-ily because most of the " Bad experts, that gave the Company lyze our problems, plan for News" adversely affected our abil- high marks in all key areas and improvement, and measure our ity to earn a reasonable return. made valuable suggestions for results each year. Our five "Corpo.
Specifically, the " Bad News" improving some of our operations. rate Objectives" serve to focus all we've been wrestling with this year We're diligently following up their of our activities in the right has been: recommendations. direction.
O Double-digit inflation, that e A continuation of our construc- We have also included informa-increased most of our costs. tion activities to replace old oil tion, beginning on page 24, which o Record high interest rates, which burning plants and to prepare estimates what inflation is doing to had a significant impact on for increases in future energy use. the Company's financial state-earnings.
- A vigorous pursuit of much. ments, it highlights in a quantita-needed rate increases before the tive way what we already knew, o Nearly doubled prices for oil that PUC, to offset the impact of infla. that we must receive more timely substantially raised electric and tion on operating costs and to earn rate incresses if we are to offset steam rates to our customers and inflation, improve our earnings, added costs to the Company. a fair return for our sharehciders.
We were granted a $2.9 million and attract the new capital we o Low sales growth, because of the need to continue to serve our annual increase in steam rates weakness in both our national and October 1,1979, and a $10.7 customers' needs.
regional economies and appro- million annual increase in gas While 1979 won't go down in our priate reductions in energy use rates January 5,1980; and we are " memory banks" as a good year, it by our customers. pursuing an electric rate increase was a year of progress. We are in a o The Three Mile Island accident that should be decided bythe PUC stronger position today to improve that was a severe setback for the this spring. future results than we were at the riation's nuclear power program. While we are not satisfied with beginning of the year.
We've covered this subject in our earnings performance, we feel We are grateful for the loyalty some detail in a special section and support of our shareholders, we made the best of a difficult on page 14. year, primarily because of the and pledge to you our continued But, there was " Good News" too, excellent response of our fine dedication.
highlighted by: organization to the adverse circum-0 The resumption of gas sales at a stances we had to contend with in February 25,1980 record-breaking rate. This was 1979. Your Company has a strong brought about by greatly in. capital base, it has a group of creased supplies of natural gas dedicated employees, and it is to the Company because of the looking forward to the new decade e deregulation of naturalgas prices, with confidence.
Chairman of the Board which are still substantially below This year's report is organized the equivalent price of heating oil around the Company's " Corporate to home heating customers. Objectives." These objectives form [
o The continued excellent perfor-mance of our Peach Bottom President and Chief Executive Officer nuclear units, that saved our cus- _
tomers $210 million in fuel charges. The total plant saved ths nation 27 million barrels of oil. Executive Vice President and Chief Operating Officer 800411 O l
Financial Highlights 1979 1978 Percent Change Operating Reve nues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,578,505,000 $1,456,758,000 8%
Operating Expenses . . ..... ...... .. .. .. .. .. $ 1,332,706.000 $1,215,110,000 10%
Taxes Charged to Operations . . . .... . . ..... .. $ 185,731,000 $ 194,728,000 (5%)
Operating income . . . . . . . . . . . .. . .. ... . . . $ 245,799,000 $ 241,648,000 2%
Earnings Applicable to Common Stock . . . . . . . . . . $ 149,698,000 $ 141,349,000 6%
Earnings per Average Common Share . . . . . ...... .. $1.86 $1.87 (1%)
Cash Dividends Paid per Common Share . . . . .. .. $1.80 $1.80 -
Average Shares of Common Stock Outstanding . . . . .. 80,529,000 75,391,000 7%
Construction Expenditures . ... . . . .. . . $ 429,336,000 $ 411,716,000 4%
Total Assets . . . . . ... ..... . .. .... $5,241,260,000 $4,850,625,000 8%
Where the income Dollar Came From 4
.. V ' %
Other income St 2 -. Steam 3C m,.y y _
.h . . ,_ ., ,
,; sp Where the income Dollar Went
. y# M Compensation to investors A ' -C- ~
for Use of Their Funds 20C Interest 84 fhu Preferred Stock Dividends 34 A -- ~ % - $% Common Dividends 94
- 9
, g.i[ t ;f ]W* Depreciation 7$
~lhy Taxes lit
] {. ' Materials, etc.104 Wages i Benefits 124 The Company The Company's predecessors provided electric service starting in 1881. The current Company, incorporated in Pennsylvania in 1929, is an operating utility providing electric, gas and steam service in southeastern Pennsylvania and providing, through its subsidiaries, electric service in two counties in northeastern Maryland. General Office: 2301 Market Street, P.O. Box 8699, Philadelphia, Pennsylvania 19101.
The total area served by the Company and subsidiaries covers 2,475 square miles, with a population of 3,700,000. The City of Philadelphia represents only 5 percent of this total area.
Annual Meeting The annual meeting of the shareholders of the Company will be held on April 9,1980, at eleven a.m. in the Crystal Ballroom, Benjamin Franklin Hotel, Ninth and Chestnut Streets, Philadelphia, Pennsylvania.
Shareholders of record at the close of business February 22,1980 are entitled to vote at this meeting.
Notice of the meeting, proxy statement and proxy will be mailed u 1 der separate cover. Prompt return of the proxies will be appreciated.
2
Providing Reliable Service "To provide customers with reliable service at reasonable rates."
gg Meeting Customers' Needs quickly if it is interrupted. Philadel- ' ~
In 1979, Philadelphia Electric phia Electric is ready to respond to Company met all of its customers' problems with a well. trained work fi energy needs. Electric sales were force and the most modern f the highest in the Company's 98 equipment. -
-1 P year history. And, gas sales were The Company realizes it cannot
- again on the upswing as additional rest on its long record of reliability. It supplies of gas enabled us to is determined to keep up with the resume adding new customers. changes of customers, technology, Electric sales were 28 billion and working methods. And,it must s kilowatt hours,1 percent higher always fight higher costs.
than 1978. One of the factors A contributing to this low growth is Keeping Costs Down With customerconservation. Nuclear Power During the summer, the Company Philadelphia Electric Company's :
experiences the greatest demand goalis to provide this reliable .
for electricity because of air condi. service at the lowest possible cost to i f ~ -D tioning usage. The biggest challenge customers. One reason for using Ronald Pugh of Stores Division receives for 1979 came on August 1, when nuclear power is the relative low materiai requirements from service build.
~
cost of fuel, which is less than one h ' ' "
the peak hourly demand was 'r>gbm 3 pr d t g tr er, s and suppIes to 5.641,000 kilowatts. tenth the cost of heavy oil. operat,ng forces is done at a lower cost and Nuclear plants continue to pro- "'U' 8' '#'C"CY Gas sales increased 5 percent over 1978. For the first time since vide a substantial economic benefit 1972, the Company was able to for customers. During 1979, connect new customers desiring 24 percent of PE's electric powerwas 3m gas. This marks an upswing in PE's generated by nuclear units which 53 34 gas business which has been accel. saved PE's customers $240 million erated by high oil costs, encourag. in fuel charges. . , ,
ing customers to make an economic The Peach Bottom nuclear units selection of gas. continued to perform we.l. These two units operated at 80 percent of 2w Mrint:ining High Reliability maximum possible output, surpass-Providing high quality electric ing the excellent 75 percent achieved in 1978. 2" od service to 1.3 million customers is a formidable job. In 1979, PE's envi- The Salem No.1 nuclear unit, able record of reliability continued. which is operated by Public Service 3 ,o st 48 On the average, uninterrupted ser- Electric and Gas Company of New vice was maintained 99.99% of the Jersey, was out of service for 9 year. Storms, cars hitting poles, months in 1979 due to an extended im coni trees falling on wires and equipment maintenance outage in conjunction failure prevented the achievement with its first refueling. Major work of 100 percent reliability. included repairs to the turbine w-To provide reliable service, the blades, replacement of main con-
/ Nuclear M32 Company must work constantly to denser tubing, repair of concrete N prevent service interruptions. PE anchor bolts and modification of g g ,g ,g has a well constructed system piping hanger supports to meet new Comparison of FuelCosts which is properly maintained. It is NRC requirements. Average s Per Million BTU equally important to restore service 1
3 l
i Although it is normal for large C,"l7;O !
new plants to need work af ter their initial " shakedown" run, the length 30
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of this outage was a disappointment. Annual consumer PE owns 43% of 1he unit. Pee inden (CPI) .
Construction of the Salem No. 2 2 / .
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i unit is complete and it is scheduled j
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3 for cornmercial operation in 1980. ',,',,,, -
Licensing of Ihis unit has been delayed due to the Nuclear Regula-
/ n.,,no, p., gwn -
tory Commission's moratorium on
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issuing new hcenses.
Construction progress continues iors im isn PE Electric Rates Have increased isza is79
] Wsf
, Allen Yahemsky, Electnc Production.
I at the Limerick nuclear generating Less Than the Consumer Price Index instructs Kirby Jones, a Pre-Engineenng station. When completed in the Esposure Program student, on the use of latest computer equipment accessable to a mid 1980,s, this 2,110,000 ki'owatt bod'og water 'eactor core s,mulation profit, but with a lag of 4 to 5 station will save the equivalent of pr grarn.
months. Second, it was necessary to more than 20 million barrels of oil borrow funds to finance the higher each year.
fuelcosts pending collection from "
"""'a mers. n st on Oil Costs Rise Significantly ,,
( During 1979, the price of oil these borrowings, coming at a time when interest rates were at record , ,
increased about 70%. Because of high levels, decreased our earnings * '
this price rise and its ef fect on the approximately 5 cents per share.
cost of energy purchased from i neighboring utikties, the Company's The need to recover higher costs, total electric f uel and energy bill in p rticularly higher fossil fuel costs, .
1979 rose to about $570 million, an hd significant impact on the ,
Company's rates in 1979. However, increase of $150 million over the ,
previous year. This significant rise in as iUustrated on the chart above, the Company s average electric rate has g
the largest element in PE's cost of ,
increased less than the Consumer doing business had two other etfects. First, customer bills rose Price Index (CPI)during the past ;
because of increases in the energy four years. And during the same four to a customer. PE ss ava#Iable to help l
charge which enables the Company year period, the increase in the pnce customers and respond to thest needs.
l to recover actual fuel costs, without of oil was almost double the cpl.
This record demonstrates nuclear ,
power's role in holding down custom-er costs.
, Gas Service Expanding $:
,.,,, h As new gas supplies became
- 7 1 ; available, the 'k mpany reopened '
Q..q 3, M} gas sales to an classes of custom- ( . g
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,' ers in 1979. New gas connec-y tions had been stopped by the PUC 4
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v,.f/ia.J i m M-M".} --- .
in 1972 because of dwindling hi P reserves in the gas producing (,fo N,*n*s " '" ^
k (3 R ' regions of the nation. Limited new Construction at PE's timersch nuclear gen. residentiai saies were permitted in eratmg station continues. The plant is now 1978 to replace customers lost 50% complete.
through attrition.
With oil prices soaring, the re-opening of gas sales was more than welcome to customers. During 4
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1979, gas heat was installed in the new customers in these classifica-homes of 6,500 residential custom-p i tions have been added to the ,
ers, and it is expected that in system. Increased gas supplies x -
1980,8,000 additional residential have also permitted PE to make I gas heating customers will be interruptible gas available to some '
.- , f'y added to the system. In addition, large industrial and commerical p there has been significant load customers. i growth by existing commerical and Gas forecasts for the future are industrial customers, and many oright. Philadelphia Electric Com- _
pany expects about a 7 percent
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p p p increase in the amount of gas from
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existing suppliers in 1980. Also, -
, a
,W -p1 O C"* the Company's exploration subsid- - *l
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M 3 ' --p , .d iary's joint drilling ventures con- - \
aO :p g :: foo i 3340( ~
p tinue with success. Through 1979, ~
' ~ neooi8 % S
, 88 8' .
g the Company has participated in s0700 YM
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- "~.: 33"**Y $ Ig the drilling of 218 natural gas welIs. To date, there have been 69 nodert tenderman of Gas Operations taAes monthly reading on a rect,fier to c'etermine 141800 AICO that the cathodic protectron system Is a
8
,,gggg g g ; sUCCessM we%, an a&[aMaM functioning The system prevents gas prpe-groor;.nooi record for the gas production i,ne corros,on.
g industry.
%#g> pany and gives the Company par-
'j f PUC Audit Gives PE High Marks ticularly high marks for technical
- a .
for Reliable Service competence; service reliability; V
GVhay A management audit of Philadel- financial, construction and fuels
./ / PO phia Electric Company, ordered by management; employee capability y J$ the Pennsylvania Public Utility and dedication.
_ jf Sdd Commission and completed in gW /4y , c G :a_y
,T 1979, reveals PE is doing a good The audit also lists 58 opportuni-ties for improvement. Among the job, especially where it counts r M, major opportunities identified by
_ . most ,in delivery of reliable and L%is .# the consultant are: improving the economical service to customers' performance of the Eddystone b tr buton a s statIt c n he St rm The audit conducted by the New coal fired generating station, accel-York management consulting firm Control Center dunng Hurncane David. erating completion of the Limerick When snterruptions do occur. PE employees of Cresap, McCormick & Paget, k to restore service in a minimum of nuclear plant, pursuing cost reduc-was ordered by the PUC as a part tion npportunities, particularly in of its new program to audit the personnel-related expenditures, state's major utilities to find ways greater unification of responsibili-of improving operating efficiency ties in the area of customer service and cutting costs, thus insuring and improving the Company's rela-h adequate service at the most rea- tionship with the PUC.
-C Q '~i sonable rates possible.
The management audit verified The remaining recommenda-tions are primarily in the areas of G that PE's rates compare very favor-
=
organizational changes, modifica-
, ,e ..
, ably with other major metropolitan tion of various controls and proce-CTC~,g.Mgti i areas. The audit reported that PE's dures, and acceleration of the K . Mg revenues per kilowatt hour have development of various work man-
- ') Y, f , consistently been substantially agement systems.
Q j lower than the average of five in summary, the report shows Q
T comparable east coast utilities. In PE is a well managed Company h ., sa N*.f L '.4 1978, PE's customer bills were doing a good job where it counts -
N- . about $145 million lower than the n providing reliable service, the Ed Al vood. a Peach Bottom operator, at the average of the comparison group.
plant s control panel. Company's number one objective.
The audit identified 74 strengths and accomplishments of the Com-5
Building Financial Strength f'@LU)d Etd "b be financially strong and pay investors a fair return on their invest.nent."
~ 1979 Financial Results Hearings were completed on E M Common stock earnings were December 21,1979, and a final liiif < $1.86 per share in 1979,1 cent order is expected prior to the end
'q below the previous year. Average of April.
'Eiig & iA 4 shares for 1979 were 80.5 million, This rate increase request was f b' q pyj m k M
$ an increase of 7 percent over the previous year. Cominon stock earn-necessary mainly because inflation continues to push up operating i mo p:
- y 4
p CfY $M J 3 ings were $150 million, an and maintenance expenses.
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increase of $8 million over 1978. Between the last :equest for a rate
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/,45 The Company continued to pay dividends at $1.80 per share, the increase in 197/ and this filing, the cost of living rose over 15 per-cent and is stih rising. About $90 4 -y p F
fr r same level paid since mid 1977 when the annual rate was million of the rate increase covers f -
. + r ?,-
- ^'
the higher costs of labor, deprecia-o increased from $1.64.
'n 'n "" 'n 'n tion, equipment, taxes, and sup-Regular common stock divi-
- plies. The remaining portion of the dends are an uninterrupted tradi-increase is required to achieve a tion for the Company since 1902.
= level of earnings that will continue 1979 operating revenues were to attract investors so the Company
$1.6 billion, or 8 percent over the can replace and improve facilities previous year. Electric revenues and continue its record of reliable increased $87 million as a result of service.
si om higher electric rates and a 1 per-centincreaseinsales. Gas in March 1979* the Company Was #
requested a $15.4 million gas rate
[f s 9 II"I revenues increased $32 million increase. In December, The Penn-Y' kl due to higher fuel revenues and a sylvania Public Utility Commis-h- % 5 percent increasein sales, and t$ "
steam revenues increased $3 mil-si n (PUC) approved a $10.7 million hk 5
lion as a result of the higher fuel increase which became effective on revenues.
January 5,1980 and affects all gas iiic in an in in customers. This increase is only the E E "b b bd seCond residential gas rate increase operaung Espenses 10 percent as a result of higher in the last twenty six years.
fuel costs, m, creased wages and higher depreciation. In April 1979, a $4.3 million n= un ..., o ., e
. steam rate increase request was l5c ,. -
Earnings per share in 1979 were filed with the PUC. The PUC adversely affected by these rising approved $?.9 million which costs not offse' by growth m sales, became effective on October 1, and by higher mterest rates. 1979.
Rate increases in December 1979, Conowingo On July 27,1979, the Company Power Company filed a request for filed with the Pennsylvania Public a $4.2 million rate increase. The Utility Commission (PUC) a request request has been suspended by the Maryland Public Service Com-
"" " "" " " for an additional $123 million mission pending an investigation.
""""'" " ~"" (10%) in electric revenues. This rate request has been suspended The Salem No. 2 nuclear gener-EanWngs N Stwe ating unit, constructed and oper-by the PUC until April 25,1980.
l ated by Public Service Electric and Gas Company of New Jersey, is expected to be placed in commer-
- D 3'3IS' D*A*D .s LA 6
i cial operation after the Nuclear in October, $100 million of first been severely limited because the Regulatory Commission lifts its and refunding mortgage bonds due Company's income has not kept moratorium on new licenses. The 2005 were sold at a coupon rate of pace with the higher interest rates Company owns a 43 percent share 12% percent. which now prevail. This situation
' of the unit (about 474,000 kilo- During 1979, over 2 million increases the need for timely and watts). Since demand is growing at shares of common stock were substantial rate relief now pending a lower rate than expected, PE's . issued through our Dividend Rein. before the PUC.
present system generating capacity vestment and Employee Stock Pur-is adequate to meet customers' chase Plans. The continued suc-needs. Therefore, in April 1979, cess of these plans demonstrates the Company reached an agree- the shareholders' and employees' ment with Jersey Central Power confidence in the Company. ".".'*,",
4 and Light Company, a subsidiary of -
General Public Utilities Corpora- For 1980, construction expendi- , m i tion, to sell the output of Salem No. tures including acquisition of ,
2 to Jersey Central at least through nuclear fuel are expected to be F f. 7 w i s
$610 million, $180 million above '
s ;$ ;M 1984. During the term of the the 1979 level. Approximately am -
agreement, PE's customers will not ,
$190 million will be provided by ;
be charged for any costs related to ,
3alem No. 2. Revenues from Jersey internal sources. ,
Centrai are expected to cover the To finance the remainder of the u '. <
unit's operating and capital costs 1980 construction program and to d; and provide a return for investors refund $128 million of maturing q until the plant is needed on the PE long term debt, approximately
$550 million of new financings will
- system.
be required. Bonds, Preferred Financing Program Stock and Common Stock, includ- -
1979 construction expenditures ing sales through the Dividend 4
were $429 million. Internal sources Reinvestment and Employee Stock n - im ,a e of funds, which are pnmorily Purchase Plans will be issued, Q l"j,*,,,'"Q ,,,, m,,,
depreciation, deferred taxes and subject to market conditions. ConstrucHon Spending and investment tax credits, provided However, the Company's ability sowces omnancing
$169 million. Internal sources help to issue additional mortgage bonds the Company to hold down financ- and preferred stock in 1980 has ing costs for construction and pro-vide energy at a lower cost to customers.
The 1979 financing program m - ~~- -
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began in April when the Company .i- .
- /
~l sold 4 million shares of common {6 miBiRih i Jgj S.7
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~
W stock through a public offering. I~^ ^
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Also in April, $50 million of bank ,
notes we'e issued. This was the remaining portion of a $100 million -
T 7-year term bank loan arranged in ~g 1978. In May, the Company arranged a $50 million 8 year term loan, using the proceeds to refund a portion of an existing loan.
The Company owns 43 percent of Salem nuclear generating station's two units.
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Employee Relations "To be fair to employees and offer opportunities for personal growth and increased productivity."
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Our Efficient Work Force Turnover among PE people is j Philadelphia Electric employees low and more than 88 percent of are dedicated to searching for and employees have been with the
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finding better ways to do their jobs. Company five years or longer. More i
d*. 9" They have succeeded so well that than 2,200 of the 9,400 employees the Company work force today is have more than 25 years of com-
, , . about the same as it v;as 20 years pany experience. Low turnover
'.i4 +, ago, while serving some 237,000 reflects good morale and is an
.A more electric and 48,000 more gas asset to the Company. The Com-customers. In the same period, pany is proud of this high degree
- d"h; energy sales have doubled. Sim. of motivation and loyalty. PE peo-Tijd ilarly,20 years ago it took 9 pie have met the challenges facing
!"H21h employees to serve each 1,000 the Company.
Affirmative Action ls A X- on 7 ,
m '
Continu,mg Objective Better productivity results from in 1979, the Company made two elements: improved technology significant progress in increasing and the efforts of men and women the number of minorities and to use the tools furnished to them
, women throughout the labor force.
Beth Kelly. Financial Division, operates the to do a good job m an efflCient PE is in compliance with the Equal Opportunity consent decree signed s docuYefts r)t in ng to rIe increase filings and secunties registrations Most important is that PE people in 1973 and has met the targets are stored in the computer memory. realize the need to help control for 1979. The goal of the affirma-costs. They are willing to put forth tive action program is to have the N N g efforts and ideas to help the Com- proportion of minorities in PE's
, I pany operate more efficiently. work force equal to that in the
\ ^^ Through the Employee Suggestion labor market throughout the Com-3~
System, PE people share in the pany's 2,475-square-mile service q savings that result from improved territory. The Company continues
- working conditions. Savings of to recruit females and minorities,
$230,000 resulted from employee as well as the handicapped. In fact,
~
. - ~4 suggestions in 1979. Suggestions PE has become an industry leader have included equipment modifica- in the employment and training of
- tions, inventions and ideas for the handicapped.
Joellen Coyle. Customer Accounts, operat. modifying working methods. PE's sng the remittance sort.ng system. Lise of Employee Suggestion System, this system enables the Company to expe- -
Training To Keep Up With dite and reduce handling of checks sent in which was founded -m 1909, is the Technology And New Challenges by the customers. second oldest suggestion systern in The Company's training efforts the country.
- . 3 ,
are aimed primarily at keeping g m ;'Y
' employees abreast of their chang-i ing job requirements and preparing 7.Mb them for advancement to new responsibilities when the opportu-nity occurs.
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D Managerial personnel attending manage- @@ W D ment development program class.
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l Both on the job training tech- '...
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niques and Company-sponsored classes are used. Training is aimed
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at meeting the specific needs of employees. Employee training
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needs are undergoing rapid change as the Company strives to use the V """-
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3jiI pl h f f g
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%.s latest technology. To meet this ? N '
5 training challenge, the Company f ,.; - N has been innovative in establishing training programs. These include A'
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John Roberts and Larry Murray of Commer-programs for nuclear plant opera- g; T . cial Operations use the Company's new tors, linemen, meter readers, cus. m deo training equipment.
tomer service personnel, and many
%'" cs*' "M
. ,. -, .g otlier occupations. * '" "" 73 During 1979, an in depth devel- '
$g opment program for rnanagement/
g %
supervisory employees continued.
Since 1976,1,800 have undergone p , , ;
westerman, who was named "1978 Suggest- J training to improve and upgrade er of the Year." f managerial skills. It is the aim of Philadelphia Electric to provide ,.
^
managerial personnel with the - ~~
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tools to develop to the fullest extent y of their capabilities, ,id ;O g[
The Company encourages #
1 I employees to enroll in classes at ,
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i local educational institutions by '
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paying tuition expenses for job-S"f
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related courses.
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Safety is A Way Of Life Safety is more than a program at 3 *-1a" Edwsn Breeser of Electnc Production gives instructions on worktng on containment f '
']-
Phi!adelphia Electric. It is a way of areas at nuclear power plants. , .
l life. Observance of safety rules .C both on the job and at home is 3 emphasized at every level of the f 3r r
7, f, pd . .
f organization. Consequently, PE toen and women are able to keep
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V en f PE ineter readers visit all of the 1.3 mollian accidents on the job to a min- ' '
customers each month. Here. Linda Camp-imum, and bring good safety habits ,
the coldest
... [en r ad, n Fe [rfr into their family and community y / - -
lives. 9 Employees receiving training at the Com-pany's Fire School.
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4
i Communications "To communicate so others can better understand the role of the Company and the challenges it faces."
Responding To Customers' communications approach was Concerns expanded by holding regional Utilities these days are in the shareholders' meetings. Two
-~' public eye more than ever before. regional shareholders' meetings I
f -
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Criticism of rates continues at a high level. Rate increases, which were held in the Fall of 1979. The Company looks forward to continu-are a direct result of the overall ing this contact in 1980.
problem of inflation, are the main Daily contact with investors concern of customers. And envi- occurs at the shareholder informa-ronment and nuclear issues have tion office located at the Com-created significant communication pany's general offices. A staff is challenges for the Company, available to assist investors and A logical consequence of this pr vide information, both in person
' high visibility has been to step up and by telephone. Thq Company is the corporate communications pro- always pleased to answer questions gram. PE did just that. The Company and provide information.
uses the envelopes holding custom. In addition to direct contact with ers' bills to insert leaflets to explain investors, PE keeps the financial rate increases, safety and energy community updated on the Com-conservation tips. pany's progress through meetings, publications and detailed informa-The Speakers Bureau was given tion mailed to security analysts, ;
increased attention because of its stockbrokers, and institutional l I importance as a way to talk face to face with the community. Investors.
In 1979, the Speakers Bureau Around The Clock Communications
" '"ce g ve 930 presentations before With The Media and $ n't7ng aim" n"$sh"d to shareholder questions. more than 100,000 persons. Nearly Philadelphia Electric Company 37,000 visited the Limerick Atomic operates 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br /> a day. And so
"~ N Information Center. And about do the media. PE keeps the 37,000 v,! sited the Peach Bottom Atomic Information Center. The _~
Company sponsored educational aa i programs for 60,000 students. L A
~.
More than 240,000 visited the -
Muddy Run Recreation Park.
a Communicating With Investors . -
PE communicates with investors every day - by face to face -
Joe Paquette. PE's Chief financial Officer, contact, through telephone or writ- '
M descusses our electnc rate increase request .+
M,,:W wuth Dock Sheeran, of Channel 3's Eyewit. ten correspondence.
"* 5 5 "'
- S- The annual meeting provides an Larry EcAman of Corporate communications opportunity for management to dis- #' "' ' "
$# neck e at Statfon$n l9$9 cuss its achievements with share- 37.000 vrsited the Limerock Atomic Informa.
holders. In.1978, this face to face t'on Center-
'g o
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l media up to date and responds to ; l
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their needs day and night The Q '. , , ' [. ' -
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[., l media are espeaally important ' '
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PE's tommunications efforts are N 'su m W ' -
- vi - ' ' t entt nsive In 19 /9. the Company $ (.g .- f j'( .k i ,o issued 440 news releases. had 330 --
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radio interviews. and 185 television :
+
'.i spots Philadelphia Electric Com .. .~- J
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pany tuntinues to work diligently .[ [. fh,f e" f i4 f, M (. . s
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i througt) the media - newspapers, N i
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radio and TV stations - in -
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attempting to rea( h those who w ** !.-
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3
.long been recognized as one of the Chaars Martin of Corporate Communica Company's greatest assets Public
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tions ass,sts sharrholder in asking a ques understandmg of the Conipany and f'on at teKW"al sheeholder meeting at .g _ J ,h .
its Challenges is enhanced when #" # ""P """'#" #
shareholder meetings give management an , ;
employees have the ability to ( om opportun,ty to descuss the challenges facing
^
munn ate effet tively Management the Company has given a high poority to inform .
ing employees Employees recel.e .D /' y M daily. be weexly and rnonthly tom munications t onterning the Com .-
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Octavia Jones Spencer of Pf's Speakers Bureau discusses uses of electocity with pany and its operations And. h 4 students throughout the year. informational hon meetings give employees an oppor tunity to exchange ideas and ask g
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Thmugh P[ 's Hisparm Councol. PE t an p L .,
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st eak a,g c ustomers k (e* W - : _. ' > ~ ~
Joe McKenna lett of Business Servrces talk s with customer The new Fairmont Hotel opened in 1979 1 s . '
I I
11
D Corporate Citizenship "To contribute to the common good of the community and utility industry."
l gyp --
a Employees Active in Community Employees Are Blood Donors C' 7% e - Philadelphia Electric Company in 1979, PE employees donated f' 4*;f f,<1 strives, both through individuals 1,600 pints of blood to the Ameri-p
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and as a Company, to be a good can Red Cross. Twice each year, l k -
citizen of local communities. Some the Red Cross sets up a blood
[m 112 employees held positions of donor center at Company head-p y responsibility during 1979 in local quarters while the Bloodmobile y Q"eff --
government, while thousands of reaches employees throughout the k~cja% others actively participated in the system. Pre-arranged appointments
& affairs of local civic, school and permit an orderly operation of the
! J church organizations. Employees event - an event PE employees
. played leadership roles in a variety view as an opportunity to help l of charitable fund drives. The Com- others in need.
! pany encourages employees to be active in functions that help the PE Gets Andy Award For Area e n$loyeeNh t r s communities in which they live. Development Publication nded to he ed Crc 3s emergency appeal for blood after a train The Company recently received l coinsson. Employees Give $572,000 an Andy award presented by the To United Way Advertising Club of New York for p y " Philadelphia Electric employees contributed $572,000 to the 1980 the area development insert which was a part of our 1977 annual
/ f %^ " United Way Campaign - a new report. The award is symbolic of
--1 record high for the Company cam- tr e effort put forth by the Company paign. Employees have participated in developing the service territory.
in ti e United Way and other chari- The exceptional construction j table campaigns for over 50 years. activity in Center City Philadelphia A Not only do PE employees contrib- indicates tl.e confidence exhibited ute to this worthwhile effort, they in the City's future. Company
- assist in running it. This year PE representatives work closely with l president Lee Everett headed the City and community leaders in the Southeastern Pennsylvania cam- effort to attract new business to the
paign and PE was a leader in City. Similar efforts are made starting its employee campaign throughout the service territory.
"1 '
early. United Way is one of the l .
l many ways PE people help people Developing Technology
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within the community. Philadelphia Electric Company is
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+ a leader in the utility industry. As a major electric, gas and steam util-Edward Pearl of Electnc Transmission and Ij ity, the Company supports the Distnbution Department vastts a local hospi- A elforts of trade associations. PE b
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these associations and contribute to research and development proj-
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j( ects undertaken to improve the mdustry.
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The 1979 Vanety Club Telethon was consid-ered one of the most successful telethons held by the club. The Independent Group Association wuth full cooperation by the Company recruoted about 200 PE employees to volunteer for the event.
12
Customers' use of Energy g.- ' '-
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Recognizing the importance of 9; . . . , ~ I .j '
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l economic health of our area. the ,
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Company began advocating the "r. #,
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1973 created a national awareness "1 -: . 1+ - .,
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of this need
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Penny Saver das at the begin- .. .
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use and reducing oil imports has ".. C been intensifying for ten years
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Market.ag and Purchase (CEMAP) -
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of a windmill generator on the PE
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system at Creamery. Pennsylvania i 4.M ,~ .
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Year round testing continued on 13 residential solar water heating
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installations and several commer c . h,e(,} -- .,
7 oal solar heat storage systems -
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p Efforts to help the nation reduce its dependency on oil paid off in 3j(
the success of the heat pump pro- [7QJZ
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gram Electric heat pumps, which M6 are more efficient than conten h
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tional heating systems, are being he i '~ '
installed in half of new residential b '"1 .' ' [' i+d '
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success and coupled with the fact that ten percent of new homes are (k.j [ g g heated with electnc resistance heat g.
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PE helped olluminare Pope U al II's vnsor to Philadelphia with the centunes old greeting. "long Live the Pop.
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F 70 *0 TY@
Special Report: The Accident at Three Mile Island fa , .1 %
On March 28,1979 a serious accident tions and PE's internal recommendations has occurred at the Three Mile Island (TMI) required, and will continue to require, a large nuclear power plant in Middletown, Pennsylva- commitment of manpower. The ultimate cost nia, owned by General Public Utilities Corpora- of implementing the short term recommenda-tion. Many investigations into the design, tions, and the full scope and cost of the long operation, and regulation of nuclear power term recommendations from the NRC are still plants followed. In addition to the governmen- unknown; however, it is estimated $30 million tal investigations such as the Kemeny Com- may be required to cover plant modifications mission and the Nuclear Regulatory at the Peach Bottom and Salem stations in the Commission's (NRC) Special Inquiry Group, next few years.
the electric utility industry, through its Electric PE has always insisted on providing the best Power Research Institute, has established the training possible for its nuclear reactor opera-Nuclear Safety Analysis Center (NSAC) to tors. Peach Bottom No.1, PE's first nuclear analyze in depth the TMI accident. plant, had its own simulator which was used to NRC " Lessons Leamed- train and retrain operating personnel through-The Nuclear Regulatory Commission's out the operating lifetime of the unit. PE uses review of the design and operation of all simulator facilities extensively in training oper-nuclear power plants, and the emergency ators for Peach Bottom No. 2 and No. 3, and response capabilities for coping with acci. well over a year ago, the Company decided to dents, developed thirty-one recommendations build its own simulator and training center at for implementation in the immediate or near Limerick, which is now underway.
term. These short term recommendations deal As a further step in strengthening the with plant design, operations and emergency Company's nuclear program, Vincent S. Boyer preparedness. has been elected Senior Vice President, The Nuclear Regu!atory Commission's Nuclear Power. Mr. Boyer will be responsible review is continuing and more recommenda- for coordinating all of the Company's nuclear-tions will be made. These long term recom- related activities. Mr. Boyer was the Superin-mendations will deal with operator training tendent of the Company's first nuclear power '
and qualification and the licensing process. plant. He is a past President of the American The utility industry has established the Nuclear Society and was Philadelphia's "1979 Institute for Nuclear Power Operations (INPO), Engineer of the Year." John S. Kemper,52, will which will set and maintain uniformly high succeed Mr. Boyer as Vice President of standards for operator training and qualifica. Engineering and Research. Mr. Kemper also tion throughout the industry and act as an has considerable experience in the Company's accrediting agency for these programs. nuclear program.
PE Review Future of Nuclear Power PE set up its own task force to review The TMI accident was the most serious to independently the TMl experience and to date in the nuclear industry in economic make recommendations for improving the terms, but resulted in no injuries or fatalities.
safety of the Peach Bottom and Limerick in the words of the Kemeny Commission, "We plants. While concluding that operations are conclude that the most serious health effect of extremely safe, the task force made twenty two the accident was severe mental stress, which recommendations for improving operations. was short lived."
Seventeen of these recommendations Nuclear power has had an enviable record proved to be similar to the Nuclear Regulatory of safety and reliability. PE is convinced the l Commission's recommendation for which changes produced in the TMI aftermath will implementation was required. The five internal improve upon the nuclear power industry's recommendations not addressed by the performance in providing a much needed Nuclear Regulatory Commission have been or source of energy for the country. PE has taken are in the process of being implemented. the " lessons learned" at TMI seriousiv. anl its implementing Changes confidence in the future of nuclear technology implementing both the NRC's recommenda- is as strong as ever.
14
' Financial Section Contents 15 Report of Auditors 16 Management Discussion and Analysis of the Consolidated Statements of Income 17 Consolidated Statements of Income 18 Consolidated Balance Sheets 20 Consolidated Statements of Retained Earnings .,
20 Consolidated Statements of ,
a M D^ N Changes in Financial Position 21 Notes to Financial Statements O}b g ~h AW6 26 Schedule of Long Term Debt 27 Schedule of Capital Stock 28 Financial Statistics 30 Operating Statistics Report of Auditors To Shareholders and the Board of Directors
! Philadelphia Electric Company Phdadelphia, Pennsylvania We have examined the consolidated balance sheets of Philadelphia Electric Company and Subsidiary Compa-nies as of December 31,1979 and 1978, and the related consolidated statements of income, retained earnings, and changes in financial position for the years then ended. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the consolidated financial statements referred to above (pages 17 to 27) present fairly the financial position of Philadephia Electric Company and Subsidiary Companies as of December 31,1979 and 1978, and the results of their operations and the changes in their financial position for the years then ended,in conformity with generally accepted accounting principles applied on a consistent basis.
1900 Three Girard Plaza Philadelphia, Pennsylvania !
February 8,1980 COOPERS & LYBRAND l
1 15
Management Discussion and Analysis of the Consolidated Statements of Income in General - The revenue growth o_f recent years has Other Operation and Maintenance Expenses been accompanied by substantial increases in operating Other operation and maintenance expenses have costs and carrying charges on increased investment in increased in 1978 and 1979 due to inflation and growth in plant and equipment. Any future increases in such costs utility plant.
and charges may be expected to affect future net incorne Depreciation and earnings per average share adversely unless periodic increases in depreciation in 1978 and 1979 reflect rate relief is obtained to offset them. In addition, sluggish additions to new plant in service.
economic conditions in the Company's service area are continuing to have an adverse effect on operating results. Taxes on income 1978 income taxes were slightly above 1977 income The Company estimates that 99% of the $1.80 per taxes. In 1979, income taxes were $19.8 million less than share dividend paid to common shareholders in 1979 in 1978 due to the lower faderal tax rate, the flow-through represents a return of capital which is not taxable as dividend income for Federal income Tax purposes. This of state deferred taxes and lower taxable income which was caused by higher deductions for operating and main-percentage is substantially higher than the prior year tenance expenses, interest charges and depreciation.
because of the significant increase in fuel and inter-change expenses which were incurred in 1979 but As a result of lower taxable income in 1979, the Com-deferred because they are not expected to be billed to pany was able to use only $0.6 million of Investment Tax customers until 1980. Credits compared to $35.1 million in 1978. About $39.0 million of Investment Tax Credits available in 1979 will be Operating Revenue carried forward for use through 1986.
Electric - An electric operating revenue increase of
$46.7 milUon in 1978 over 1977 principally reflects income Tax Credits, net, have increased in 1978 and higher rates. The $87.5 million increase in 1979 over 1979 as a result of higher Allowance for Borrowed Funds 1978 reflects both higher rates and recovery of higher fuel Used During Construction.
costs. Sales of electricity increased 1 percent in 1979 Taxes, Other than income over 1978. .
Taxes, Other than income, have increased due to Gas - Gas operating revenue increases of $14.7 mil- increases in revenue, which is subject to a gross receipts lion in 1978 over 1977 and $31.6 million in 1979 over tax, higher capital stock, realty and social security taxes.
1978 principally reflect the recovery of higher fuel costs. Allowance for Funds Used During Construction (AFUDC)
Sales of gas increased 5 percent in 1979 over 1978 due t the sale of interruptible gas which was not available in The increase in AFUDC for 1978 over 1977 and 1979 ver 1978 resulted from a higher cost of capital for con-1978' struction and higher construction work in progress.
Fuel and Energy Interchange Expense Interest Charges In 1978 fuel and energy interchange expense was $1.4 million below 1977 due to the 69 percent increase in Interest charges on long-term debt increased in 1978 nuclear generation replacing high-cost interchange pur. over 1977 and 1979 over 1978 because of higher costs of chases and higher Company sales to the interchange as a money and the sale of additional issues of debt. Interest result of the nationwide coal strike. In 1979, fuel and charges on short term debt were essentially the same in energy interchange expense was $87.8 million above 1978 as 1977, but increased by $4.9 million in 1979 over 1978 due pnmarily to higher fuel costs and higher inter. 1978 due to higher interest rates and higher short term change purchases. Deferred fuel expenses increased debt.
$98.1 million in 1979 over 1978.
l 16
Consolidated Statements ofincome IUON $
Philadelphia Electric Company and Subsidiary Companies
~
For the Year E$ded December 31 1979 1978 (Thousands of Dollars)
Operating Revenues Electric .. .. ... . . . ... . . ... ... . .. ... ..... ... $1,311,891 $1,224,404 Gas .... .. . . .. . . .. .. .. .. ..... ...... .. . 221,135 189,522 Steam . . . . .. . . . .. .. . . .. . 45,479 42,832 Total Oparating Revenues 1,578,505 1,456,758 Operating Expenses Fuel and Energy Interchange .. . . ... . .. ... . 661,724 573,905 Other Operation Expense . ... . . .. . . .... ... . .. . 247,152 220,543 Maintenance . . . . ... . .... .. . 117,491 109,407 Depreciation . . . .. . ... .... . . . 120,608 116,527 Taxes on income . . . . .. . .. .. ... .. . . 79,055 98,8 %
Taxes, Other than income .... ... . .. .. . .. . 106,676 95,832 Total Operating Expenses 1,332,706 1,215,110 Operating income . . . .. . ... . . . ... . 245,799 241,648 Other income Allowance for Other Funds Used During Construction . .... . . .. . 46,008 37,617 income Tax Credits, net . . .. . . . . 33,884 26,355 Other, net . .. . . . ... . ... .
1,710 4,605 Total Other income 81,602 68,577 income Before Interest Charges . . . .. ..... 327,401 310,225 Interest Charges Long Term Debt .. . . ... . ... . .. ... . 192,990 176,290 Short Term Debt . . . . . . . .. . . .. . 7,315 2,454 Allowance for Borrowed Funds Used During Construction . . . .. (67,375) (53,380)
Net Interest Charges 132,930 125,364 Net income ... ... . . .. . . . . ..... . .. ... . .. 194,471 184,861 Preferred Stock Dividends . . . . . . . . . ... ... .
44,773 43,512 Earnings Applicable to Common Stock . ..... . . . . .. .. .. .. $ 149,698 $ 141,349 Average Shares of Common Stock Outstanding (Thousands) ... .. .... 80,529 75,391 Earnings Per Average Common Share (Dollars) ... .... . .. ... $1.86 $1.87 Dividends Per Common Share (Dollars) .. . .. .. ..... .... .... $1.80 $1.80 See notes and schedules to financial statements.
17
Consolidated Balance Sheets Philadelphia Electric Company and Subsidiary Companies
[ObN December 31 ASSETS 1979 1978 IIhousands of Doils.s)
Utility Plant, at original cost in Service Elect ric . . . . . . . . . . . . . . . . .. . .... .......... . ... . $3,655,729 $3,580,178 Gas . .................... .. ...... .. .. ... ....... . ... 296,658 289,954 Steam .... ... . ....... . ....... ..... ......... ...... .. 53,477 52.434 Common, used in all services .... ..... ......... . ...... . ..... 118,176 117,639 4,124,040 4,040,205 Less: Accumulated Depreciation . . . . . . . . . . . . . . . ... . ..... 1,144,119 1.053.284 Net Utility Plant in Service . . . . . . . . . . . . . . . . . . . .... . ..... .. 2,979,921 2,986,921 Construction Work in Progress .. ... . ... ..... ........... ...... 1,619,806 1,345,931 Nuclear Fuel, at amortized cost 141,655
... .. ... .......... ......... .. 116.320 4,741,382 4,449,172 Nonutility Property and Other investments . . . .......... . . . .. . . 47,431 29,% 3 Current Assets Cash and Temporary Cash Investments ... ....... .. ...... ....... 10,592 38,644 Accounts Receivable Customers ... ... .. .. ... . .. . .. ...... .... .... . 210,732 151,718 Other .. ... ..... .. .. .. ... .. . ... .... . .. .... .. . 20,165 71,812 Deferred Fuel Expense . . . . . . . . . ...... ..... .. .. ... 83,512 4,227 Materials and Supplies, at average cost Fuel (coal, oil and gas) .... .... . .... .. . ... ... . . .... . 74,432 60,535 Operating and Construction ....... ........ .... ............ .. 35,569 32,769 Prepayments . . . . . . . . . . . 4,567
.... .... ... ....... . . .. .. 4.270 439,569 363,975 De ferred Deb it s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,878 7,515 Total $5,241,260 $4,850,625 See notes and schedules to financial statements.
18
1 I
l I
D""D *D T Ti oo- o . S . k _a December 31 LIABILITIES 1979 1978 (Thouhinds of Dollau Capitalization Common Shareholders' Equity Common Stock-See Schedule, Page 27 .. . . $1,239,647 $ 1,139,659 Other Paid-in Capital .
2,203 1,968 Retained Earnings .. 338,154 333,649 1,580,004 1,475,276 Preferred Stock-See Schedule, Page 27 Series Without Mandatory Redemption Requirements . 372,472 372,472 Series With Mandatory Redemption Requirements .
206,851 210,900 Long-Term Debt-See Schedule, Page 26 2,241,890 2,173,226 4,401,217 4,231,874 Current Liabilities Short-Term Debt Bank Loans .
35,350 4,650 Commercial Paper . . 49,837 11,569 Current Maturities of Long Term Debt 127,790 52,934 Accounts Payable .
111,176 106,864 Taxes Accrued .
22,046 23,881 Deferred .
43,086 20,650 Interest Accrued 58,143 50,958 Dividends Declared . .
22,248 13,409 Other . . .
13,899 7,977 483,575 292,892 Deferred Credits Accumulated Deferred Income Taxes .
202,815 177,286 Accumulated Deferred Investment Tax Credits 135,294 138,421 Other . .. . . 18,359 10,152 356,468 325,859 Total $5,241,260 $4,850,625 See notes and schedules to financial statements.
l 13
de 11 e tr c Co y d S b d 1r C mp es For the Year Ended December 31 1979 1978 (Thousands of Duitars)
Balance, January 1 . . . ... ..... . . .. $333,649 $328,699 Net income . . . . 194,471 184,861
, 528,120 513,560 Cash Dividends Declar~i Preferred Stock .. . . . . ... 44,760 43,877 Common Stock . . . . 144,984 135,687 Expenses of Capital Stock issues .. . .. 222 347 189,966 179,911 Balance. December 31 . . . . ... $338,154 $333,649 Consolidated Statements of Changes in Financial Position Source of Funds Net income ... .. . .. $194,471 $184,861 Charges (Credits) Not Affecting Funds Depreciation and Amortization . 123,066 122,116 Deferred Income Taxes, net . . . . . 44,854 39,340 investment Tax Credits, net of Amortization . .. . . (3,019) 31,717 Allowance for Other Funds Used During Construction . .. (46,008) (37,617)
Total from Operations 313,364 340.417 Sale of Long-Term Debt 200,000
. . . . .. . 150,000 Preferred Stock . . .
. - 50,000 Common Stock .
. . . 99,988 32,975 increase in Short-Term Debt . .. . . 68,968 1,344 Total from Financings 368,956 234,319 Total $682,320 $574,736 Use of Funds Expenditures for Utility Plant . . . $421,615 $405,606 Allowance for Other Funds Used During Construction (Deduction) . .. .. . .. . .. . . . .. (46,008) (37,617)
Dividends on Preferred and Common Stock .. ... .. . 189,744 179,564 increase (Decrease)in Deferred Fuel Expense . ... . . . 79,285 (18,781)
Retirement of Long-Term Debt . . .. . ... .... . . . 56,169 31,422 Increase (Decrease) in Other items of Working Capital . .. .. (28,114) 5,436 Other, net 9,629
..... . . .. . ... ... ........ . . .. .. 9,106 Total $682,320 $574,736 Sie notes and schedules to financial statements.
20
~
D**D
~
'D T IS Notes to Financial Statements ,, , , J1 R L
- 1. Significant Accounting Policies Investment tax credits, other than credits resulting General. All utility subsidiary companies of Philadelphia from contributions to the Tax Reduction Act Stock Owner-Electric Company are wholly-owned and are included in ship Plan for employees which do not affect income, are the consolidated financial statements. Non-utility subsid- deferred and amortized by credits to income over the janes, which are not significant, are included in invest- estimated useful life of the related utility plant.
ments and accounted for by the equity method. The Allowance for Funds Used During Construction (AFUDC).
accounts are maintained in accordance with the uniform AFUDC is a non-cash item which is defined in the applica-system of accounts prescribed by the regulatory authori- ble regulatory system of accounts as "the net cost for the ties having jurisdiction. period of construction of borrowed funds used for con-Revenues. Revenues are recorded in the accounts upon struction purposes and a reasonable rate on other funds billing to the customer. Rate increases are billed from when so used." AFUDC is recorded as a charge to con-dates authorized or permitted to become effective by struction work in progress (CWIP), and the equivalent regulatory authorities. Due to the cycle billing there is an credits are to " Interest Charges" for the gross cost of amount of unbilled revenue at the end of any period. borrowed funds and to "Other income" for the cost of The 1978 financial statements reflect recoupment equity funds, less income tax credits arising from interest revenue of $34,571,000 which was authorized by the charges capitalized, which are also included in "Other Pennsylvania Public Utility Commission in December income." For income tax purposes, AFUDC is not 1978 and billed to customers in 1979. included in taxable income nor is the depreciation of Fuel Expense. For financial reporting purposes the Com. capitalized AFUDC a tax-deductible expense. The rate pany defers that portion of fuel expense which is re. used for capitalizing AFUDC, which averaged 7.45% in coverable under energy adjustment clauses until it is 1979 and 7.20% in 1978, is computed under a method subsequently billed. For income tax purposes, fuel prescribed by the regulatory authorities which provides enpense is considered an expense when incurred. for its application to a CWIP base which includes prior The Company both leases and owns nuclear fuel for use AFUDC and which provides for semi annual compound-in its nuclear generating stations. Such fuel costs are ing. The rate is a " net after tax rate" whereby the current charged to fuel expense on the basis of the number of income tax reductions arising from interest charges asso-unit,s of thermal energy produced as they relate to the ciated with debt used to finance construction, estimated total thermal units to be produced over the life $34,754,000 in 1979 and $28,346,000 in 1978, are of the fuel. Such charges are computed on the basis of a recorded in "Other Income."
zero net salvage value (assuming reprocessing facilities Retirement Plan. The Company has a non-contributory will be available for spent fuel as needed). If such repro- trusteed retirement plan applicable to all regular cessing facilities are not available, the Company would employees. Pension costs include normal cost for the incur additional costs to dispose of spent fuel. The Com- year and amortization of unfunded prior service costs, pany believes that any such additional costs would be over ten to twenty-year periods (see Note 5). Approxi-recoverable thruugh adjustments of rates charged to its mately 80% of such costs were charged to operating customers. expense and 20%, associated with construction labor, to Depreciation. For financial reporting purposes, deprecia. the cost of new utility plant.
tion is provided over the estimated service lives of the plant on a straight-line basis. No provision is presently Gas Exploration and Development Costs. The Company provided for the potential decommissioning cost of the has invested in several joint ventures for exploring and nuclear plants. The Company believes that any such ad. drilling for gas. In accordance with the accounting prac-ditional costs, which may be significant, would be re. tice prescribed by the Federal Energy Regulatory Com-coverable through adjustments of rates charged to its mission these costs are capitalized under the full cost customers. The annual depreciation provisions, ex. method. Such costs are charged to operations commen-pressed as a percent of average depreciable utility surate with the use of gas arising from these ventures. ;
plant in service, were approximately 3.11% for 1979 and Non utility property and other investments at December !
2.99 6 for 1978. 31,1979 and 1978, include capitalized costs of '
incerie Taxes. Deferred income taxes are provided for $25,488,000 and $14,496,000, respectively.
diffe ences between book and taxable income to the extent permitted by the regulatory authorities for rate-making purposes.
21
i
- 2. Taxes on income D ' I gl g j 1979 1978 l b 6i (Thousards of Dostars) 1979 1978 Net income . . . . . . . . . . . . . . . $194,471 $ 184.861 UhousaMs of Douars) Total income tax provisions . . . . . 45,171 72,541 included in operating expenses: Income before income taxes . . . 239,642 257,402 Current income taxes Fede ral . . . . . . . . . . . . . . . $29,844 $15,710 Deduct - allowances for funds 7,376 used during construction State . 12,129 (non-taxable) . . . . ... . . . . . (113,383) (90,997)
Total .. ...... ... 37,220 27,839 Adjusted income before Deferred income taxes, net ncome taes m ... . . . . . . M.m W E Federal . . . . . . . . 41,058 34,484 State . . . . 3,796 4,856 income taxes on above at Federal statutory rate Total . . . . . . . . . . . . 44,854 39,340 (46% in 1979, 48% in 1978) . . . . . . . . . . . . $58,079 $79,874 Investment tax credits, net of amortization increase (decrease) due to:
Federal . . . . ... .. (3,019) 31.717 Excess of tax depreciation ,
over book depreciation Total not normalized . . ... . (2,987) (2,210)
Federal . . ... 67,883 81,911 State .. .... .. . 11,172 16,985 State income tax, net of Total . . . . . .... $79,055 $98,896 Federal income tax benefits. . 2,327 6,146 Taxes and pension costs included in other income: capitalized but expensed Current income taxes for tax purposes . .... .. (6,382) (5,407)
Federal . . (27,021) (21,189)
State . . .. . (6,863) (5,166) Amortization of investment Total . . . . $(33,884) $(26,355) heferreddits previously Total income tax provisions: Ot her, net . . . . . . . . . . . . . . . . . . (2,242) (2,461)
Federal .. . . . 40,862 60,722 State . . . . .. 4,309 11,819 Totalincome tax provisions $45,171 $72.541 Total . .. . . . . $45,171 $72,541 Provision for income taxes as a percent of:
Investment tax credits of $605,000 have been realized as income before income taxes . . . 18.8% 28.2%
a reduction of federal income taxes currently payable in Adjusted income before 1979. Approximately $39,000,000 of investment tax income taxes . . . ... ... 35.8% 43.6%
credits available in 1979 have not been realized due to the limitations based on taxable income. These credits may Provisions for deferred income taxes consist of the follow-be used to reduce federal income taxes in future years ing tax effects of timing differences betweeen tax and through 1986. Investment tax credits in the amount of book income:
$35,118,000 were realized in 1978. 1979 1978 Investment tax credits consist of (a) the basic credits GhwsaMs of Douars) allowable of 10% plus (b) an additional credit of 1%% Depreciation and amortization . . . $26,981 $32,849
($4,005,000 in 1978, none realized in 1979) allowed the Recoupment revenue . . . . . . . . . . . (18,462) 18,462 Company to offset federal income tax. Since such addi- Deferred fuel expense . . . . ... 40,899 (10,029) tional amount was passed on to the eri,ployees of the Other. . . . . ... ..... ..... (4,564) (1,942)
Company in the Srm of Philadelpha Electric Company common stock, sect additional credit had no effect on $44,854 $39,340 ffec i e July 1,1978, the Pennsylvania Public Utility 3. Taxes. Other than income Commission disallowed the normalization of state 1979 1978 income tax deferrals associated with the use of acceler. Ghmsards of DoHars) ated depreciation for tax purposes. ' Gross receipts . . . . . . . . . . . . . . . . . $67,385 $62,115 The aforementioned income tax provisions differ from Capital Stock . . . . . . . . . . . . . . . . . . . 17,030 15,102 amounts computed by applying the Federal statutory tax Realty . ....... ............ 8,819 6,873 rate to adjusted income before income taxes for the fol- Other, principally social security . . 13,442 11,742
' "E # "
$106,676 $95,832 22
- 4. Short Term Debt (NRC) declared a moratorium on the issuance of operat-The average short term borrowings during 1979 aggre- ing licenses for nuclear plants pending further study.
gated $54,466,725 at an. average rate of 12.72% and The Price-Anderson Act places a " Limit of Liability" of during 1978 aggregated $20,356,000 at an average rate $560,000,000 on each licensed nuclear facility for public of 10.55E The average rates are computed on a daily liability claims that could arise from a nuclear incident basis. The maximum short term borrowmgs outstanding involving any licensed facility in the nation. The Company were $135,525,000 in 1979 and $60,484,000 in 1978. and its co-owners of the Peach Bottom and Salem Sta-The average rate of interest on short term borrowings was tions have insured for this exposure by purchasing private 15.11% for bank loans and 14.00% for commercial paper insurance in the maximum available amount of at December 31,1979, and 11.31% for bank loans and $160,000,000, and the remainder is currently provided 10.20% for commercial paper at December 31,1978. As by indemnity agreements with the NRC. However, since of December 31,1979 the Company had informallinesof August 1977, the indemnity by the NRC has decreased credit with banks aggregating $214,875,000. The Com- and in the event of a nuclearincident, the Company,tothe pany generally does not have formal compensating bal- extent of its ownership participation (42.5%), could be ance arrangements with these banks. The Company assessed $5,000,000 per incident for each licensed reac-maintains deposits with banks for working funds for nor- tor, subject to a maximum of $10,000,000 per licensed mal operations. reactor in any one year in the event of more than one
- 5. Retirement Plan Costs incident. The Company is currently a participant in three Retirement plan costs, which are funded as accrued, licensed reactors; therefore, its maximum assessment aggregated $25,713,000 in 1979 and $21,396,000 in would be $6,375,000 per incident with a maximum 1978. Based on the most recent available actuarial report amount of $12,750,000 in any one year.
as of January 1,1979, the unfunded liability of the plan For damage to the nuclear plant facilities which could amounted to approximately $24,000,000 and the actuar. arise from an incident at the Peach Bottom Station, the ially computed vested benefits exceeded the actuarial Company and its co-owners have private insurance up to value of the plan assets by approximately $9,000,000. $300,000,000; for the Salem Station, the Company included in the aforementioned unfunded liability is through the operator of the Station is a member of approximately $17,000,000, relating to the cost of an Nuclear Mutual Limited (NML) which provides for cover-early retirement amendment to the plan effective in 1978, age up to $300,000,000. In the event of losses at any which amount is being amortized over a ten-year period plants insured by NML, the Company may be subject to beginning in 1979. an additional premium assessment of approximately
$13,000,000 The Company is a self-insurer, to the extent
- 6. Jointly-Owned Electric Utility Plant f ts ownership interests, for any property loss in excess The Company's ownership interests in jointly-owned util-f the aforementioned amounts of insurance coverage.
ity plant, excluding nuclear fuel, at December 31,1979 The Company's proportionate share of a commitment wem as foHows: to purchase nuclear fuel for the Peach Bottom Station as of December 31,1979was$59,383,000. Anindependent Production Participating Company's Share of fuel company has been authorized to acquire and own up Plant Interest Utility Plant, Ne,'
to a maximum of $200,000,000 of nuclear fuel at any one Peach Bottom 42.49% $302,317,000 time and has contracted to sell the energy therefrom to Salem 42.59% $676,716,000 the Company, as the operator of the Station.
Keystone 20.99% $ 31,900,000 The minimum rental commitments under all noncan.
Conemaugh 20.72% $ 43,220,000 celable agreements aggregated $188,296,000 at Transmission Plant 21% to 43% $ 62,254,000 December 31,1979. Annual rental commitments are The Company's participating interests are financed with estimated to be $30,036,000 for 1980; $30,514,000 for Company funds and when placed in service all operations 1981; $27,184,000 for 1982; $24,323,000 for 1983; and are accounted for as if such participating interests were $7,772,000 for 1984. Rentals charged to operating wholly-owned facilities. expenses were $41,659,000 in 1979 and $36,232,000 in
- 7. Commitments and Contingencies 1978.
The Company has incurred substantial commitments in Certa,n i leases, m, chtding the nuclear fuel contract, connection with its constructioq program. Construction meet the criteria of a capital lease as defined by State-expenditures are estimated to be $610,000,000 for 1980 ment of Financial Accounting Standards No 13, but are and $1,886,000,000 for 1981-1983. These estimates, not accounted for as such in accordance with the rate-which are based on current circumstancer, are reviewed m king process. If such leases were capitelized, the and revised periodically to reflect changes in economic amounts thereof would not have a matenal effect en conditions, revised load forecasts and other appropriate assets, liabilities, er related expenses.
factors. Actions have been filed in the U.S. District Court against The nuclear plant facilities under ccnstruction require the Company with respect to alleged discrimination in its numerous permits and licenses culminating in an operat- employment or promotion practices. Counsel is of the ing license for a facility. The Company cannct be assured opinion that the ultimate cutcome of these actions would that such operating licenses will be issued at completion not have a materiat adverse effect on the financial posi-of the facilities. Subsequent to the nuclear ircident at tion of the Company.
Three Mile 1:, land, the Nuclear Regulatory Commission 3
- 8. S:gm:nt information: 1979 1978 Electric Gas Steam Total Electric Gas Steam Total tThouwnds of Dossars) titioowmh of Doilars, Operating revenues . . . $1,311,891 $221,135 $45,479 $1,578,505 $1,224,404 $189,522 $42,832 $1,456,758 Operating expenses, excluding depreciation 975,414 194,416 42,268 1,212,098 896,339 162,983 39,261 1,098,583 Depreciation . . 109,990 8,944 1,674 120,608 106,253 8,618 1,656 116,527 Total operating expenses .... .. 1,085,404 203,360 _ 3,942 4 1,332,706 1,002,592 171,601 40,917 1,215,110 Operating income . . $ 226,487 $ 17,775 $ 1,537 $ 245,799 $ 221,812 $ 17,921 $ 1,915 $ 241,648 Utility plant additions .. 5 401,674 $ 19,490 $ 451 $ 421,615 $ 395,271 $ 10.010 $ 325 $ 405,606 December 31:
Aliocable assets:
Net utility plant (*) . $4,449,522 $261,719 $30,141 $4,741,382 $4,167,122 $250,466 $31,584 $4,449,172 Materials and supplies 91,685 18,017 299 110,001 78,452 14,456 396 93,304
$4,541,207 $279,736 $30,440 $4,851,383 $4,245,574 $264,922 $31,980 4,542,476
~ - ~
- - ~
Nonallocable assets . 389,877 308,149 Total assets . . $5,241,260 $4,850,625
(*)lHLludeS CO,Mirutt:On work !n progfen and Allocated Common utMy property.
- 9. Quarterly Data (Unaudited):
The quarterly data shown below, in the opinion of the Company, includes all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of such amounts.
Earnings Applicable Average Shares Earnings Per Quarter Operating Net to Common Outstanding Average Share Ended Revenues locome Stock (Thousands) (Dollars)
(Thousands of Dollars) 1979 1978 1979 1978 1979 1978 1979 1978 1979 1978 Mar 31 $419,206 $402,012 $57,193 $55,625 $45,953 $45,473 76,558 74,661 $.60 $.61 Jun 30 340,945 326,100 41,694 29,455 30,506 18,586 81,263 75,084 .37 .25 Sep 30 387,564 384,275 55,232 57,581 44,058 46,336 81,840 75,697 .54 .61 Dec 31 430,790 344,371 40,352 42,200 29,181 30,954 82,378 76,102 .35 .41 l
- 10. Supplementary Information to Disclose the The " constant dollars" and " current costs" depre-Estimated Effects of inflation for the Year Ended ciation expenses were determined by applying the
! December 31,1979 (Unaudited) Company's depreciation rates to restated deprecia-The following supplementary information is supplied ble plant in service at December 31,1979. Fuelinven-to show the estimated effecis of inflation because ton,es have not been restated from their original cost the Company is require j to do so according to the because the operation of fuel adjustrnent clauses Statement of Financial ;ccaunting Standards No. 33 permits the automatic recovery of fuel costs.
(FAS No. 33) The methods required to deveiop this if the Company had to rcplace its entire utility plant information are approximate and comp'ex and may not at this time, the costs to do so would greatly exceed necessanly reflect the true effects of inflation on the the original costs incurred when the facilities were Company. Under existing regulatory law, the Company built because of the cumulative effect of inflation.
is permitted to recover actual operating and capital These plant replacement costs, net of accumulated costs incurred to serve customers and a reasonable depreciation, are estimated at $7,542,000,000 as return on investment, and the Compar.y believes it will restated for " constant dollars" and $8,581,000,000 as be allowed to recover cost increases caused by inflation restated for " current costs." Under the " constant as such increases are actually incurred. dollars" method, the Company is required to restate the original costs in terms of dollars of equa! purchasing Effect of Inflation on Reported Income. In adjusting power, as measured by the Consumer Price index for the Consolidated Statements of income, as shown all Urban Consumers. The " current costs" method below, only depreciation expense is required to be uses specific indices representing the Company's adjusted for the effect of inflation. experienced cost of construction. Results from the two a iM0 a .. a -
methods differ because construction costs have inflation on utility plant. Additional" current costs" data mcreased more rapidly than consumer prices in as required by FAS No. 33 is disclosed in the Company's general. In the Company's opinion, the " current costs" annual report to the Securities and Exchange method is more appropriate for estimating the effect of Commission on Form 10.K.
Consolidated Statements of Income Adjusted for inflation for the Year Ended December 31,1979 (Thousands of Dollars) As Adjusted For Constant Dollars Current Costs (Average (Average As Reported 1979 Dollars) 1979 Dollars)
Oprating Revenues . .... . . .... .
$1,578,505 $1,578,505 $1,578,505 Depreciation . . . . . . . . ..... .......... 120,608 233,000 277,000 Other Operating Expenses . . . . . . . . . . ... 1,212,098 1,212,098 1,212,098 Operating income . .. ..... . ...... 245,799 133,407 89,407 Other Income . ........ . . ...... . 81,602 81,602 81,602 Income Before Interest Charges and Preferred Stock Dividends . . . . . . . . 327,401 215,009 171,009 Interest Charges and Preferred Stock Dividends . . . . . .. . . 177,703 177,703 177,703 Earnings Applicable to Common Stock . . .. .. ... $149,698 $37,306 ($6,694)
Earnings Per Average Share . . . . . . ... $1.86 $0.46 ($0.08)
Effects of inflation on Shareholders' Equity. During If the Company had earned at the rate of inflation 1979 the effect of inflation on the Company's actual (13.3%) on its shareholders' equity in 1979, earnings original cost of net utility plant amounted to would have been approximately $200,000.000
$559.000.000 which was not recovered because rates compared with reported earnings of $149,698,000.
are based on depreciation of original cost plant. If the Thus, reported earnings applicable to common stock Company were required to charge the entire in 1979 were about $50,000,000 below the level
$559.000.000 against income in 1979, earnings appli- necessary to offset the impact of inflation on share-cable to common stock would become a loss of holders' equity.
$409.302.000. Adjustment of Selected Five Year Financial Information.
The effect of 1979's inflation (13.3%) on the value of In order to reflect the impact of general inflation on the Company's debt and preferred stock is approxi- selected financial information for each of the years 1975 mately $384.000,000 which partially offsets the through 1979, the following table shows actual data com.
5559.000.000 effect of inflation on utility plant. nared with data adjusted to " average 1979 dollars."
Five Year Summary of Selected Financial Information Showing Adjustments to Reflect inflation Development of Adjustment Factors 1975 1976 1977 1978 1979 Consumer Price Index Average During Year . . . .. . 161.2 170.5 181.5 195.4 217.4 Year End . . . .. . .... . . . . 166.3 174.3 186.1 202.9 229.9 Consumer Price Index Multiplier (217.4 = year's index)
A = Average .. . .. .. ... . 1.35 1.28 1.20 1.11 1.00 B = Year End . . . . .. ...... .. 1.31 1.25 1.17 1.07 .95 Actual and Adjusted Financial Information ,,
Dividends Per Share Actual Paid . . . . . . . . . . . . . . . .. .. . 5 1.64 $ 1.64 $ 1.76 $ 1.80 $ 1.80 Adjusted (Actual x A) . . . . . . . . . . . . . 2.21 2.10 2.11 2.00 1.80 Market Price Per Share Actual Year End . . . . . . . ....... . $15.00 $17.88 $19.63 $15.50 $13.75 Adjusted (Actual x B) . . ............ 19.65 22.35 22.97 16.59 13.06 Oprating Revenues (thousands of dollars)
Act ua l . . . . . . . . . . . . . . . . . . . . . . . . ... $1,134,810 $1,224,141 $1,394,762 $1,456,758 $1,578,505 Adjusted (Actual x A) ..... ..... ... . 1,531,994 1,566,900 1,673,714 1,617,001 1,578,505 Common Shareholders' Equity (thousands of dollars)
Actual Year End . . . . . . . . . . . . . . . ... . $1,222,815 $1,325,670 $1,437,202 $1,475,276 $1,580,004 Adjusted (Actual x B) . . . . . . . .... .. 1,601,888 1,657,088 1,681,526 1,578,545 1,501,004 D**D
- D n
w a f&]L[1 o
D Schedule of Long-Term Debt - December 31,1979 and 1978 Philadelphia Electric Company First and Refunding Mortgage Bonds (A):
1979 1978 Series Due (Thousands of Dollars) 11 % 1980 ..... .. . ... . .. . . ... ...... $ 125,000 $ 125,000 2%% 1981 .. . .. .. . .. ... . ...... .. . 30,000 30,000 3%% 1982 . . . . .. . . . . . . . .... . . 35,000 35,000 3%% 1983 .. . ... . ..... .. . ... .. ... . 20,000 20,000 3%% 1985 . .. .. .... .. .. .......... .. . 50,000 50,000 4%% 1986 .. .. . ......... .... . ....... . .. .. 50,000 50,000 4%% 1987 ..... . .. .. .. 40,000 40,000 3%% 1988 ... . .. . . ... .. .. 40,000 40,000 5% 1989 . . . .. .... . .. . ..... 50,000 50,000 6%% 1993 .... .. . . ... ..... .... . . 60,000 60,000 4%% 1994 . . ... .. . ... . .. . 50,000 50,000 9% 1995 . .. .......... .. .. ... . ... 70,272 72,000 8%% 19 % ... . .. ... ... . . ..... . 80,000 80,000 6%% 1997 . . . .... ..... .. 75,000 75,000 7b% 1998 ....... .. .... . ... ... . . .. 100,000 100,000 7W% 1999 .. .. . .. .. .. 100,000 100,000 7%% 2000 ... .. .. .. ... . .. 71,428 73,240 11 % 2000 . .. .. . .... .... 80,000 80,000 11%% 2000 .. . . .. .. . ... 65,000 65,000 7%% 2001 . ... .. . ... .. . .. 80,000 80,000 9%% 2002 . . . . . . .. ... ... .... 100,000 100,000 8%% 2003 . .. . . . . .. 75,000 75,000 8h% 2004 ... ... ..... . . . . . 125,000 125.000 12h% 2005 (Sold 1979) . .. . . ... . .. .. 100,000 -
9%% 2006 . . . . . .. . . . . ... .. ... 100,000 100,000 6% 2007 . . . .. .. . ....... ......... 23,500 23,500 8%% 2007 . ..... .. .... . . .. .. . 75,000 75,000 9%% 2008 (Sold 1978) . ... . . . . . 100,000 100,000 Total First and Refunding Mortgage Bonds . .. . .. . . . .. . 1,970,200 1,873,740 Notes Payable-Banks . .(B) 1979-87 (C) .. .. . .... . ... 225,000 175,000 Pollution Control Note .. . 5.5% 1979-97 . ... . .. ... .. 34,000 35,000 Debentures . . . . .. .. 12%% 1981 .. . . .. . ... .. 100,000 100,000 Debentures . . . . . . . . . 4.8 5% 1986 .. ... . . 25,562 26,294 Unamortized Debt Discount and Premium, Net ........ . . .. .. ( 5,892) (5,571)
Total Philadelphia Electric Company . . . . . . 2,348,870 2,204,463 Philadelphia Electric Power Company--a subsidiary:
Sinking Fund Debentures 4h% 1995 . . . . . . .. 20,894 21,791 Unamortized Debt D;scount ... ... . . .. . .... . . . .. . (84) (94)
Total Long-Term Debt (Annual interest requirements $207,185.000) . . . . ... . .. . . .... ..... .. .. ... 2,369,680 2,226,160 Current Maturities included in Current Liabilities (D) . . . . . . . . ........ (127,790) (52,934) l Long-Term Debt included in Capitalization . . . . . . . ........ .......... . $2,241,890 $2,173,226 (A) Utility plant is subject to the lien of the Company's mortgage.
(B) At interest rates rarging from prime , ate to 112% of prime rate.
(C) $50,000,000 sold in 1979 and 1978; $50,000,000 refinanced in 1979.
(D) Long-term debt maturities in the period 1980-1984 are as follows: 1980-$127,790,000; 1981-$140,172,000; 1982-$45,300,000; 1983-$30,300,000; and 1984-$85,300,000.
26
f' @ LU) n @ n U @luu n Schedule of Capital Stock - December 31,1979 and 1978 Number of Shares Amount Authorized Outstanding (Thousands of Dollars) 1979 1978 1979 1978 Common Stock--no par (A) . .. .... .100,000,000 82,883,216 76,512,685 $1,239,647 $1,139.659 Preferred Stock ($100 par) cumulative:
Current Redemption Series (without mandatory Price (B) redemption requirements):
9.50 % .. .. .. .. .. $106.50 750,000 750,000 750,000 $ 75,000 $ 75,000 8.75% . . . . . . . . .. . . 107.00 650,000 650,000 650,000 65,000 65,000 7.85% . . . . . . ..... . 107.00 500,000 500,000 500,000 50,000 50,000 7.80% . . . . . . . . 105.50 750,000 750,000 750,000 75,000 75,000 7.75% . . .. .. 105.50 200,000 200,000 200,000 20,000 20,000 4.68 % . .. . .. 104.00 150,000 150,000 150,000 15,000 15,000 4.4% . . . . .. 112.50 274,720 274,720 274,720 27,472 27,472 4.3% . 102.00 150,000 150,000 150,000 15,000 15,000 3.8% .. . . . ..... 106.00 300,000 300,000 300,000 30,000 30,000 Series (with mandatory redemption requirements):
9.52 % . . 109.52 500,000 500,000(C) 500,000(C) 50,000 50,000 8.75% (Sold 1978) . .. . 108.75 500,000 500,000(D) 500,000(D) 50,000 50,000 7.325% . . 105.57 750,000 720,000(E) 750,000(E) 72,000 75,000 7% . .. . 104.00 400,000 348,510(F) _359,000(F) 34,851 35,900 2,150,000 2,068,510 2,109,000 206,851 210,900 Unclassified . . . . 4,125,280 - - - -
Total Preferred Stock . 10,000,000 5,793,230 5,833,720 $579,323 $583,372 (A) At December 31,1979 there were 1,281,861 shares reserved for issuance under stock purchase plans. Common Stock issued in 1979 and 1978 was as follows:
Dividend Employee Tax Reduction Act Public Reinvestment Purchase Stock Ownership Sales Plan Plan Plan Total 1979-Shares 4,000,000 1,740,991 279,315 350,225 5,370,531 Proceeds $63,460,000 $26,389,242 $4,416,561 $5,722,677 $99,988,480 1978--Shares - 1,433,489 215,198 239,481 1,888,168 Proceeds - $24,852,000 $3,871,000 $4,252,000 $32,975,000 (B) Redeemable at the option of the Company at the indicated dollar amounts per share, plus accrued dividends.
(C) 20,000 shares to be redeemed annually at $100 per share commencing May 1,1981.
(D) 33,300 shares to be redeemed annually at $100 per share commencing May 1,1984.
(E) 30,000 shares are being redeemed annually at $100 per share commencing May 1,1979.
(F) 8,000 shares are being redeemed annually at $100 per share. The Company purchased 10,490 shares in 1979 and 8,960 shares in 1978 for this purpose and at December 31,1979 had applied 3,490 shares to future redemption requirements.
The excess of the aggregate par value of such shares over the aggregate purchase price is reflected in Other Paid-In Capital
($235,000 in 1979 and $149,000 in 1978).
D *]D *)D S 1 A owM oN a 27
Financial Statistics a r;VMih [flh3 q1,y1$
Summary of Eamings (Millions of dollars) 1979 @1978@)M 1977 1976WNtW"""1975 1974 1%9 Operating Revenues (for details see pages 30 and 31) . . . . . . . . . . . . . . . . . . $1,578.5 $1,456.8 $1,394.8 $1,224.1 $1,134.8 $1,011.7 $440.5 Operating Expenses Fuel and Energy Interchange . . . . . . .. 661.7 573.9 575.3 480.7 457.8 439.2 110.0 Labor .......... ......... .. ... .. 209.3 195.0 179.2 161.9 152.2 134.0 93.9 Other Materials, Supplies and Services . . . . . . . . . . . . .. .. . .. 155.4 135.0 121.4 88.9 72.6 73.4 32.2 Total Operation and Maintenance .. 1,026.4 903.9 875.9 731.5 682.6 646.6 236.1 Depreciation .... .. ... . . . ... 120.6 116.5 107.8 98.0 91.2 77.8 49.3 Taxes .... ....... . .. .. ... 185.7 194.7 188.9 183.2 163.9 134.3 53.8 Total Operating Expenses . . . . . . 1,332.7 1,215.1 1,172.6 1.012.7 937.7 858.7 339.2 Oprating income . . . . .. . .. . 245.8 241.7 222.2 211.4 197.1 153.0 101.3 Other income Allowance for Other Funds Used During Construction . . . . . .. . 46.0 37.6 36.2 30.1 23.3 25.3 -
Income Tax Credits, net .. .. .. 33.9 26.3 25.3 24.2 22.3 25.5 -
Other, net .. . .. .. .. 1.7 4.6 3.5 2.6 2.0 0.3 0.1 Total Other income . . .. . 81.6 68.5 65.0 56.9 47.6 51.1 0.1 Income Before Interest Charges . 327.4 310.2 287.2 268.3 244.7 204.1 101.4 Interest Charges Long-Term Debt . .. .. . . ... 193.0 176.3 161.0 147.6 136.5 106.3 38.2 Short-Term Debt . .... . 7.3 2.5 2.6 3.6 7.9 14.2 6.8 Allowance for Borrowed Funds Used During Construction . . .. (67.4) (53.4) (49.8) (47.5) (43.6) (45.5) (7.9)
Net Interest Charges ... . 132.9 125.4 113.8 103.7 100.8 75.0 37.1 Net income .. . . ..... . . .. . 194.5 184.8 173.4 164.6 143.9 129.1 64.3 Preferred Stock Dividends . . .. .. 44.8 43.5 40.7 39.0 36.0 33.7 5.9 Eamings Applicable to Common Stock . 149.7 141.3 132.7 125.6 107.9 95.4 58.4 Dividends on Common Stock . .. .. 145.0 135.7 124.9 107.7 95.4 86.4 48.8 Eamings Retained . ... 4.7 $
.. . .. $ 5.6 $ 7.8 $ 17.9 $ 12.5 $ 9.0 $ 9.6 Eamings per Average Share (dollars) ... . $ 1.86 $ 1.87 $ 1.87 $ 1.91 $ 1.86 $ 1.81 $ 157 Dividends per Common Share (dollars) .
$ 1.80 $ 1.80 $ 1.76 $ 1.64 $ 1.64 $ 1.64 $ 1.64 Common Stock Equity (Per Share) . ...
$ 19.06 $ 19.28 $ 19.26 $ 19.13 $ 19.05 $ 20.21 $18.84 Average Shares of Common Stock Outstanding (Millions) .. . ... .. 80.5 75 4 70.8 65.6 58.1 52.7 29.6 See page 16 for Discussion and Analysis of the Consolidated Statements of income.
NYSE-Composite Common Stock Prices, Eamings and Dividends by Quarters (Per Share) 1979 1978 Fourth Third Second First Fourth Third Second First Quader Quader Quader Quader Quader Quader Quader Quader High Price . . . . . . . $15% $17 $16% $17% $17% $18% $19 $19%
Low Price . ....... $13% $14% $15% $15% $15 $17 $167/s $18Fs Earnings . . . . . . . . 35' 54' 37' 60' 41' 615 25' 615 Dividends . . . . . . . . 45' 45' 45' 45' 45' 45' 45' 45' 28
Financial Statistics h 3 Summary of Financial ConditNm- December 31 (Millions of dollars) 1979 1978 1977 1976 1975 1974 1969 Assets Utility Plant, at Original Cost .. ........ . .. ... $5,885.5 $5,502.5 $5,121.1 $4,747.2 $4,445.6 $4,123.9 $2,188.6 Less: Accumulated Depreciation . . . . . . 1,144.1 1,053.3 955.3 860.3 775.8 717.8 514.2 Total Utility Plant . . . . $4,741.4 $4.449.2 $4,165.8 $3,886.9 $3,669.8 $3,406.1 $1,674.4 Nonutility Property and Other Investments ..... . 47.4 30.0 27.4 13.2 12.3 12.7 5.0 Current Assets Cash and Temporary Investments . . . . . . . 10.6 38.6 30.8 23.8 17.4 16.0 17.0 Accounts Receivable . . .. 230.9 223.5 184.0 168.0 139.8 111.9 44.1 Deferred Fuel Expense . 83.5 4.2 .23.0 19.9 17.9 21.7 -
Materials and Supplies . 110.0 93.3 102.3 88.3 88.0 72.5 29.1 Other . ... .. . . .. 4.6 4.3 3.8 2.6 2.5 21.1 1.6 Deferred Debits .. . 12.9 7.5 10.9 14.7 13.8 6.0 4.9 Total Assets . . .. $5,241.3 $4,850.6 $4.548.0 $4,217.4 $3,%1.5 $3,668.0 $1,776.1 Liabilities Common Stock . . . . . . $1,239.6 $1,139.7 $1,106.7 $1,002.8 $ 916.6 $ 782.9 $ 365.0 Other Paid-In Capital . 2.2 2.0 1.8 1.7 1.5 1.3 1.2 Retained Earrongs .. . 338.2 333.6 328.7 321.2 304.7 293.7 235.4 Common Shareholders' Equity . . 1,580.0 1,475.3 1,437.2 1,325.7 1,222.8 1,077.9 601.6 Preferred Stock .... . . .. 579.3 583.4 534.2 535.1 485.9 486.4 127.5 Long-Term Debt . . . 2,241.9 2,173.2 2,078.3 1,936.4 1,776.9 1,597.7 848.8 Total Capitalization . 4,401.2 4,231.9 4,049.7 3,797.2 3,485.6 3,162.0 1,577.9 Current Liabilities Short. Term Debt .. . 85.2 16.2 14.9 7.2 108.0 177.9 98.8 Current Maturities Of Long. Term Debt . ... 127.8 52.9 28.7 36.9 60.9 91.9 8.5 Accounts Payable and Dividends Declared . .. 133.5 120.3 92.4 83.9 80.1 78.8 34.0 Taxes Accrued and Deferred . .. .... . 65.1 44.5 36.7 30.7 44.2 28.0 8.3 I Interest Accrued ... .... 58.1 51.0 48.6 43.2 37.8 30.5 10.9 l Other .... . . ... ... 13.9 7.9 4.1 4.6 3.5 3.8 1.9 i Deferred Credits ..... . .. 356.5 325.9 272.9 213.7 141.4 95.1 35.8 I Total Liabilities ... $5,241.3 $4,850.6 $4,548.0 $4,217.4 $3,961.5 $3,668.0 $1,776.1 l l
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Operating Statistics 1979 1978 1977 1976 1975 1974 1%9 ELECTRIC OPERATIONS Output (millions of kilowatt-hours)
Steam . .. ............ . . 11,279 13,160 11,468 13,385 12,814 16,649 20.020 Nuclear ..... ... . .. . .. ... 7,104 7,769 4,5 % 4,937 4,387 1,745 130 Hydraulic .. .. . . 2,155 1,700 1,997 2,065 2,275 1,938 1,342 Pumped Storage Output . ...... 1,270 1,109 1,223 1,062 1,275 1,075 1,733 Pumped Storage input . . . ... (1,847) (1,606) (1,761) (1,506) (1,785) (1,515) (2,395)
Purchase and Net Interchange . . . 9,180 6,651 9,759 7,666 7,363 5,300 2,293 Internal Combustion .... . . . 454 704 847 792 914 1,200 341 Other . . . ... . ..... .. - --.
716 36 - 1,016 5 Total Electric Output . .. 29,595 29,487 28.845 28,437 27,243 27,408 23,469 Sales (millions of kilowatt-hours)
Residential . . .... ..... 7,968 7,875 8,110 7,585 7,424 7,159 5,812 Small Commercial and Industrial . 2,928 2,888 2,825 2,755 2,624 2,558 2,292 Large Commercial and Industrial . 15,428 15,302 14,912 14,662 14,060 14,622 12,663 All Other .. . . 1,277 1,329 1,350 1,271 1,227 1,217 1,106 Total Electric Sales 27,601 27,394 27,197 26,273 25,335 25,556 21,873 Number of Customers, December 31 Residential .. . ... . 1,173,514* 1,158,853 1,148,171 1,137,544 1,120,% 1 1,113,036 1,060,376 Small Commercial and Industrial 115,724* 115,945 115,883 115,422 114,8 % 117,237 120,997 Large Commercial and Industrial 5,798 5,780 5,772 5,747 5,719 5,724 5,359 All Other . . .. . .. 1,919* 2,413 2,381 2,345 2,305 2,248 2,045 Total Electric Customers . 1,296,955 1,282,991 1,272,207 1,261,058 1,243,901 1,238,245 1,188,777
- Reflects reclassification of certain customers. ,
Operating Revenues (millions of dollars)
Residential . . $ 461.0 $ 430.8 $ 427.6 $ 373.2 $ 364.7 $ 314.4 $ 135.0 Small Commercial and Industrial 189.0 176.5 168.4 149.3 138.9 122.0 58.9 Large Commercial and industrial 587.4 544.0 513.4 442.9 418.3 388.1 138.2 All Other . . . . 74.5 73.1 68.3 59.4 56.5 49,0 23.2 Total Electric Revenues . . . $1,311.9 $1,224.4 $1,177.7 $1,024.8 $ 978.4 $ 873.5 $ 355.3 Operating Expenses (millions of dollars)
Operating expenses excluding depreciation $ 975.4 $ 896.3 $ 881.2 $ 750.2 $ 717.6 $ 669.6 $ 224.0 Depreciation . . . . 110.0 106.3 97.9 88.0 81.6 68.4 44.0 Total Operating Expenses . $1,085.4 $ 1,002.6 $ 979.1 $ 838.2 $ 799.2 $ 738.0 $ 268.0 Operating Ir,come (millions of dollars) $ 226.5 $ 221.8 $ 198.6 $ 186.6 $ 179.2 $ 135.5 $ 87.3 Net Utility Plant (millions c' trs) . .. .. . ... $4,449.5 $4,167.1 $3,883.9 $3,604.5 $3,388.0 $3,128.0 $1,468.9 Average Use per Res;dential Customer (ki!owatt-hours) . . ... . ... .. 6,829 6,833 7,097 6,710 6,645 6,460 5,557 Electric Peak Load, Net Hourly Demand (thous. kw) ........ .... 5,641 5,667 5,888 5,346 5,530 5,431 4,592 Net Electric Generating Capacity-Summer Rating (thou3. kw) . . 7,727 7,727 8,198 7,742 7,186 7,808 5,115 Cost of Fuel per Million Btu .. ..... $1.55 $1.29 $1.40 $1.24 $1.23 $1.42 $0.32 l Btu per Net Kilowatt-hour Generated .... ............. 10,810 10,773 10,882 10,529 10,523 10,676 11,009 ao 0 " O0 ]D O 0)]
o J uniu UA- .=
Operating Statistics 1979 1978 1977 1976 1975 1974 1%9 GAS OPERATIONS Sales (millions of cubic feet)
Residential . . . . . . . . . . . . . . . . . . . . . . . 2,327 2,316 2,394 2,342 2,334 2,281 2,376 House Heating . ...... ..... ..... . 23,593 24,974 26,335 24,540 20,817 23,793 23,403 CommerciM and industrial . . . . . . . . . . . 37,452 32,784 31,017 33,390 30,012 35,913 41,750 All other . . . . . . . . . . . . . . . . . .. 93 94 86 89 74 79 102 Total Gas Sales . . ... ........ 63,465 60,168 59,832 60,361 53,237 62,066 67,631 Number of Customers, December 31 Residential . . . ...... .. .. 85,315 87,715 88,775 89,459 90,117 90,870 98,598 House Heating .. . .. .. .. . 168,905 163,469 162,978 162,993 162,914 163,093 145.879 Commercial and Industrial . ... . 19,065 19,207 19,422 19,669 19,874 20.276 18,491 Total Gas Customers . .. .. 273,285 270,391 271,175 272,121 272,905 274,239 262,968 Operating Revenues (millions of dollars)
Residential .. . .. ... . . . .. $ 10.7 $ 9.9 $ 9.6 $ 8.7 $ 8.1 $ 7.1 $ 5.7 House Heating ... . .. .. 91.2 86.6 84.1 73.3 54.8 55.4 39.6 Commercial and Industrial . ... ... 118.4 92.2 80.4 76.1 54.5 45.7 29.4 All other . . . .. .. 0.2 0.2 0.2 0.2 0.1 0.1 0.1 Subtotal . . . . . .. $220.5 $188.9 $174.3 $158.3 $117.5 $108.3 $ 74.8 Other Revenues .. 0.6 0.6 0.5 0.6 0.5 0.6 0.3 Total Gas Revenues .. $221.1 $189.5 $174.8 $158.9 $118.0 $108.9 $ 75.1 Operating Expenses (millions of dollars)
Operating expenses excluding depreciation . $194.4 $163.0 $145.7 $128.1 $ 93.7 $ 82.2 $ 57.9 Depreciation ..... .... .. 8.9 8.6 8.2 8.4 8.3 8.1 4.3 Total Operating Expenses . $203.3 $171.6 $153.9 $136.5 $102.0 $ 90.3 $ 62.2 Operating Income (millions of dollars) $ 17.8 $ 17.9 $ 20.9 $ 22.4 $ 16.0 $ 18.6 $ 12.9 Net Utility Plant (millions of dollars) $261.7 $250.5 $248.1 $247.5 $246.8 $246.4 $180.2 STEAM OPERATIONS Sales (millions of pounds) . 6,581 7,336 7,165 7,735 7,117 7,600 7,905 i Number of Customers, December 31 638 660 670 679 689 710 1,179 Operating Revenues (millions of dollars) $ 45.5 $ 42.8 $ 42.3 $ 40.5 $ 38.5 $ 29.3 $ 1G.1 Opersting Expenses (millions of dollars)
Operating expenses excluding depreciation .. .. .. $ 42.3 $ 39.3 $ 38.0 $ 36.5 $ 35.3 $ 29.1 $ 8.0 Depreciation ... .. . .. . .. 1.7 1.6 1.6 1.5 1.4 1.3 0.9 Total Operating Expenses . ... .. $ 44.0 $ 40.9 $ 39.6 $ 38.0 $ 36.7 $ 30.4 $ 8.9 Operating income (millions of dollars) $ 1.5 $ 1.9 $ 2.7 $ 2.5 $ 1.8 $ '1.1) $ 1.2 Net Utility Plant (millions of dollars) $ 30.1 $ 31.6 $ 33.9 $ 34.9 $ 34.9 $ 31.7 $ 25.3 31
D* lD "lD 093 LS Officers oo M o MUJ)UT Robert F.Gilkeson Charles L Fritz Joseph F. Paquette, Jr.
Citirman of the Board Vice President Vice President J mes L. Everett Personnel and Industrial Finance and Accounting Pr:sident and Chief Relations Lucy S. Binder Executive Officer ' Martin F. Gavet Secretary John H. Austin, Jr. Vice President Morton W. Rimerman Executive Vice President Gas Operations Treasurer and Chief Operating John S. Kemper James D. Lynch Officer
- Vice President Assistant Secretary Vincent S. Boyer Engineering and Research**
. uston Senior Vice President William L. Maruchi " "'
Nuclear Power ** Vice President Electric Transmission George G. Eppright Wayne C. Astley and Distnbution Assistant Treasurer -
Vice President General Administration William B. Morlok William M. Lennox Vice President Assistant Treasurer Edward G. Bauer, Jr.
Vice President and Commercial Operations Joseph W. Ruff General Counsel Clair V. Myers Assistant Treasurer Clifford Brenner Vice President Vice President Purchasing and General Corporate Communications Services Shields L Daltroff Vice President
- Designated Chief Operating Officer on January 28.1980.
Electric Production " Elected on January 28,1980.
Form 10-K A copy of the Company's report for 1979 filed with the Securities and Exchange Commission on Form 10-K will be provided to shareholders upon written request to Philadelphia Electric Company,2301 Market Street, P.O. Box 8699, Philadelphia, PA 19101, Attn: Financial Division.
Additionalinformation Additional information a bout the Company may be obtained by writing to: L. S. Binder, Secretary, Philadelphia Electric Company,2301 Market Street, P.O. Box 8699, Philadelphia, PA 19101.
i FISCAL AGENTS FOR STOCKS AND BONDS PHILADELPHIA ELECTRIC COMPANY-Preferred and Common Stocks Registrars Transfer Agents GIRARD BANK PHILADELPHIA ELECTRIC COMPANY Oru Girard Plaza, Philadelphia, Pa.19101 2301 Market Street, Philadelphia, Pa.19101 CHEMICAL BANK MORGAN GUARANTY TRUST CO. of N.Y.
20 Pine Street, New York, N.Y.10015 30 West Broadway, New York, N.Y.10015 PHILADELPHIA ELECTRIC COMPANY-First and Refunding Mortgage Bonds Trustee. THE FIDELITY BANK Broad & Walnut Streets, Philadelphia, Pa.19109 New York Agent, MORGAN GUARANTY TRUST CO. of N.Y. 23 Wall Street, New York, N.Y.10015 PHILADELPHIA ELECTRIC COMPANY-Sinking Fund Debentores PHILADELPHIA ELECTRIC POWER COMPANY (A Subsidiary)-Debentures
~ Trustee. THE PHILADELPHIA NATIONAL BANK Broad & Chestnut Streets, Philadelphia, Pa.19101 New York Agent, IRVING TRUST COMPANY One Wall Street, New York, N.Y.10015 All Philadelphia Electric Company securities, except the Sinking Fund Debentures and those senes of First and Refunding Mortgage Bonds and Preferred Stock which were sold privately to Institutional investors, are listed on the Philadelphia Stock Exchange and the New York Stock Exchange. Philadelphia Electric Power Company Debentures are listed on the Philadelphia Stock Exchange.
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