ML19305E183

Requests to Institute Proceeding & to Suspend or Revoke Cp. Urges Admittance of Porter County Chapter of Izaak Walton League of America,Concerned Citizens Against Bailly Nuclear Site,Et Al,As Parties.W/Certificate of Svc & Documentation

ML19305E183
Person / Time
Site:	Bailly
Issue date:	11/24/1976
From:	Graham R, Osann E, Vollen R GRAHAM, R. L., OSANN, E. W., VOLLEN, R.J. & WHICHER, J.M.
To:
Shared Package
ML19305E186	List: ML19305E183 ML19305E188 ML19305E192 ML19305E195
References
NUDOCS 8004230091
Download: ML19305E183 (107)

Text

{{#Wiki_filter:- _ _ _ - _ _ _ _ - _ _ _ _ _ _. _ _ _ - _ _ _ _ _ _ _ _ ~ d y ga s 4 + UNITED STATES OF AMERICA Docysrso s" ~ NUCLEAR REGULATORY COMMISSION Sf ??"Mc -3 2 MAR 2 41980> ~- % Cffice of the Secretary ) ) Cccket!rg & Servi:a IN THE MATTER OF ) '?3,- , Mb, ) / NORTHERN INDIANA PUBLIC Si.'RVICE COMPANY ) DOCKET NO. (Bailly Generating S tation, Nuclear-1 ) 50-367 ) REQUEST TO INSTITUTE A PROCEEDING, AND MOTION,, TO SUSPEND AND REVOKE CONSTRUCTION PERMIT NO. CPPR-104 Porter County Chapter of the Izaak Walton League of America, Inc.; Concerned Citizens Against Bailly Nuclear-Site; Businessmen for the Public Interest, Inc.; James E. Newman; Mildred Warner, and George Hanks' (hereinafter " Joint Intervenors"), by their attorneys, Robert J. Vollon, Edward W. Osann, Jr., and Robert L. Graham,' request that the United States Nuclear Regulatory Commission (hereinafter the "Com-mission") or such office or official of the Commission, in-cluding, but not limited to, the Director of Nuclear Reactor Regulation, or the Director, O'fice of Inspection and Enforce-f ment, as appropriate, institute a proceeding to suspend and revoke Construction Permit No. CPPR-104 (hereinaf ter the " con-struction permit") issued by the Atomic Energy Commission (hereinafter the "AEC") on May 1, 1974 to Northern Indiana Public Service conipany (hereinafter "NIPSCO") to construct the proposed Bailly Generating Station, Nuclear 1 (hereinafter "Bailly"). Joint Intervonors also move the Commission to sus-pend and revoke the construction permit. Joint Intervenors 8004230 0 9 l l k. n j

/ further request that the Commission grant a hearing and that Joint Intervenors be admitted as parties to such proceeding. i Joint Intervenors further request that the effective-i ness of the construction permit be suspended immediately. These requests are made pursuan.t to 42 U.S.C.

52239, 10 C.F.R.

i SS2.206, 2.202 and 2.730, and such other regula-tory or statutory provisions as may be applicable. The ) facts that constitute the basis for the requests are as follows: 1. The construction permit was issued by the AEC to NIPSCO on May.1, 1974, following authorization by an initial l decision of an Atomic Safety and Licensing Board on April 5, 1974. RAI-74-4, 557. Since issuance of the construction per-mit there have come into existence new facts, new evidence and legal developments, such that the construction permit could not have been~ validly authorized or issued had they been available to.the AEC prior to the issuance of the construction permit. Moreover, these new facts, new evidence and legal developments are of such significance that, wholly apart from what their impact would have been prior to and at the time of the issuance of the construction permit, they require that the Commission now suspend and revoke the permit. A proceeding for that purpose should be instituted. The Commission's obli-gations under the National Environmental Policy Act ("NEPA").. -. - -

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m / and under the Atomic Energy Act of 1954, as amended, re-quire that it consider these new facts, evidence and legal developments, and suspend and revoke the construction permit as a result thereof. It would be a violation of the commis-sion's statutory duties for it to refuse to consider these matters or to refuse to suspend and revoke the construction permit. 2. Since issuance of the construction permit, up to and including the present time, there has been virtually no ~construction activity on the Bailly plant by'NIPSCO.

Indeed, as reflected in various letters from NIPSCO to the Commission

~ which are a matter of public record, even engineering work on the Ba' illy plant has beer halted. The only construction ac-tivity undertaken by NIPSCO has been some preliminary site ex-cavation work. On October 16, 1974, the effectiveness of the AEC's decision permitting NIPSCO to engage in site dewatering by tha pumping out of ground water, and the effectiveness of action by the AEC permitting NIPSCO to construct a slurry wall, were stayed by an order of the United States Court of Appeals for the Seventh Circuit in case No. 74-1751. However, since at least June 9, 1976, there has been no legal restriction upon con-struction activity by NIPSCO. 3. Joint Intervenors were. parties to the AEC proceed-ings held-in connection with the issuance of the construction per-mit. The subject matter of each of the new factual, evidentiary, and legal matters was either raised by them, or sought to be '**?

l J i l t raised by them and barred by the Commission, or otherwise l considered in the course of those proceedings. Joint In-H tervenors were and are all parties whose interests are af-fected by the proceeding requested hereby. 4. The cost of construction of the Bailly plant was a significant factor in the AEC's cost-benefit analysis of the proposed action of_ issuing a construction permit for Bailly. The AEC's Final Environmental Statement under NEPA, dated February 1973 (hereinafter "FES"), contains the figure of $180 million as the capital cost of the Bailly plant (FES, p.XI-10). A subsequent document prepared by the AEC Regula-tory Staff (Reg. Staff. Ex.*8), upon which the AEC apparently relied and which thus became a modification of the FES (RAI-74-4, at p.169, 1169), contaiaed the higher figure for capital cost of construction of $243 million. In the AEC decision i authorizing issuance of a construction permit for the Bailly plant, the economic costs of building Bailly were explicitly compared to the costs of alternative courses of action. (See, e.g., RAI-74-4 at p.621, 1187; p.624, 1196). As of October 19, 1976, NIPSCO stated that the current estimate of the cost of constructing the Bailly plant was ap-proximately $675 million, exclusive of fuel costs and fuel en-richment costs. (See Exhibit I, p.13) The current estimates Attached hereto.is the Affidavit of Robert J. Vollen, one of the attorney.'s for Joint Intervenors, to which attached are 7 exhibits, marked " Exhibits" I through VII. Refer-ences to " Exhibit " are to the exhibits to that affidavit., k

J 4 s 4 raised by them and barred by the Commission, or otherwise considered in the course of those proceedings. Joint In-tervenors were and are all parties whose interests are af-fected by the proceeding requested hereby. 4. The cost of construction of the Bailly plant was a significant factor in the AEC's cost-benefit analysis of the proposed action of issuing a construction permit for Bailly. The AEC's Final Environmental Statement under NEPA, dated February 1973 (hereinafter "FES"), contains the figure of $18d million as the capital cost of the Bailly plant (FES, p.XI-10). A subsequent document prepared by the AEC Regula-tory Staff (Reg. Staff. Ex. 8), upon which the AEC apparently relied and which thus became a modification of the FES (RAI-74-4, at p.169, 1169), contained the higher figure for capital cost of construction of $243 million. In the AEC decision authorizing issuance of a construction permit for the Bailly plant, the economic costs of building Bailly were explicitly compared to the costs of alternative courses of action. (S ee, e.g., RAI-74-4 at p.621, 1187; p.624, 1196). As of October 19, 1976, NIPSCO stated that the current estimate of the cost of constructing the Bailly plant was ap-proximately $675 million, exclusive of fuel costs and fuel en-richment costs. (See Exhibit I, p.13 ) The current estimates Attached hereto is the Affidavit of Robert J. Vollen, one of the attorneys for Joint Intervenors, to which attached are 7 exhibits, marked " Exhibits" I through VII. Refer-ences to " Exhibit " are to the exhibits to that affidavit. l l M J

of the cost of constructing the Bailly plant thus are al-most triple the estimated costs upon which the AEC made its decision to authorize issuance of the construction permit. A chango in circumscances of this magnitude with re-spect t6 a factor as significant in the cost-benefit,analy-sis as the cost of construction requires that the Commission re-analyze its prior cost-benefit balance of_the action of l issuing a construction permit for the Bailly plant, and_that the Commission re-analyze its comparison of that action to the costs and benefits of alternative courses of action. A proceeding to suspend and revoke the construction permit should be instituted; the construction permit should be sus-pended and revoked. 5. The AEC decision authorizing issuance of the con-struction permit found and concluded that NIPSCO was finan-cially qualified to design and construct the Bailly plant (RAI-74-4, p.567). By reason of the cur' rent estimate of $675 million 'as the cost of construction and other recent data from NIPSCO, seri-ous doubt now exists about the financial ability of NIPSCO to fund construction of the Bailly plant, without seriously im-pairing the financial position of the company. Indeed,.NIPSCO has said.that new cost estimates for the plant are required. (Exhibit II.) As of October 19, 1976, NIPSCO stated that its .l j 1976-1980 construction program will require capital expendi- ~ i -.w,.n_--_=_-_-~=-_-__,__._

tures of $1.2 billion, an amount approximately equal to ~ NIPSCO's total capitalization as of July 31, 1976. There-fore, NIPSCO in effect is planning to double its capitali-zation within the next five years. (Exhibit I, pp.3,7). NIPSCO's experience of the last five years, as set o' t u in the source and use of funds statement of the October 19, 1976 prospectus (Exhibit I, p. 41), is instructive as to .NIPSCO's lack of ability to raise the funds to construct Bail-ly. In,the period from January 1, 1971 to December 31, 1976, NIPSCO raised some $380 million from the sale of bonds, $90 million from the sale of preferred stock and about $60 mil-i e lion from the sale of common stock, or a total of some $530 million of permanent capital from normal outside sources. Another $57 millioni was raised by the sale of notes. During that same period some $210 million was available from earnings after payments to bondholders and preferred stockholders, but before payments of dividends to common stockholders. Thus, dur-ing this period some S800 mil'if on potentially was available to fund construction projects. NIPSCO did, however, pay dividends to. stockholders through-out the period. If it were to discontinue payments of equity dividends in the future, this development certainly would have a subs'tantial~ adverse impact on NIPSCO's ability to procure needed capital funds at rates it could affor'd. Even assuming arguendo that NIPSCO would be.able to suu- [ .pendpaymentsofdividendsonitscommons$ockwithoutaffecting t a

++ its ability to go to the market to raise capital, by its own figures, it would have to acquire at least $400 million more capital in the next five years, than the amount of capital it was able to accumulato from all sources including earnings in the last five years. Moreover, unless NIPSCO suspended dividend payments on common stock, which dividends amounted to something over $130 million over the last five years, it appears that NIPSCO will have capital requirements in the next five years some $530 million above those for the last five years. To provide these-funds from earnings would require an ap-proximate tripling of the average earnings before common stock dividends over that level attained during the last five years. NIPSCO will have-to go to the market place for most of the ad-ditional permanent financing and there is no evidence that the market is prepared to absorb such a substantial increase in NIPSCO debt and equity securities. The increase in the projected cost of Bailly from less than $250 million to more than $675 million, raises serious questions about NIPSCO's financial ability to design and con-struct the plant. Indeed, it is not clear whether the $1.2 billion capital requirement figure used by NIPSCO is based on a projected cost for Bailly of $450 million ot $695 million or whether it includes or exc'ludes moneys already spent on Bailly. As NIPSCO said, as of October 19, 1976 (Exhibit I, pp.3-4) : a

3 ~ "The company estimates that ita conctruc-J7d;Q tion program will reqdire expenditures of approximately $1.2 billion in 1976 through 1980... "Of the amount estimated to be expended in 1976, S86.1 million had been spent as or July 31, 1976 h "The 1976-77 estimates include $87.1 million b'TPar and the 1976-80 es'timate includes $389 mil-lion of expenditures for construction of a nuclear generating unit at Bailly Generating Station and were based on an estimated total cost of $450 million for 1979-80 in-service De-l date for that unit which cannot be met. lays...have increased the current estimated total cost to $675 million. This.new esti-mate assumes that a new in-service date in It is not the Spring of 1982 can be met. presently known what part of the $675 million will be scheduled for expenditure in 1976-80 except for amounts expended to date." w 80DI The changed circumstances and new evidence regarding the cost.of Bailly and NIPSCO's financial condition and' history indicate that NIPSCO is not financially quali fied to design and construct the Bailly plant and therefore that the require-1 ments of the Atomic Energy Act of 1954, as amended, and the i Commission's regulations are not satisfied. A proceeding to suspend or revoke the construction permit should be instituted; the construction permit should be suspended and revoked. lIIE MS In its initial decision authorizing issuance of the y[ 6. construction permit the AEC's Atomic Safety and Licensing Board said that the need for power is: \\ lh "one of the most crucial issues...In balanc-E[ the ing alternatives, as required by NEPA, (( chief benefit of a power plant is the elec-tricity it produces. If that electricity is j

not needed, then tha benefit side of the balance would have little weight." ) (RAI-74-4, at p. 616, 1171. ) The Licensing Board approached the need for power issue in terms of the date that the power to be generated by Bailly would be needed on NIPSCO's system. Having concluded that the power from Bailly would be needed in 1979 (RAI-74-4, p.625, 1197.), the Licensing Board also concluded that: "the one factor that tips the scale over-whelmingly in favor of the Bailly site las compared to the alternative Schahfer site) is'the delay that would be associated with moving to a new site." (RAI-74-4, at p. 62 4, 119 6. ) Joint Intervenors, as parties to the AEC proceedings, had contended that the power would not be needed by NIPSCO un'til This is borne out by the following colloquy between the Board Chairman and NIPSCO counsel at the oral argument before the Licensing Board on February 19, 1974: " CHAIRMAN GARFINKEL: ....Isn't one of the threshold issues in this proceeding a ques-tion of the need for power, and would you agree that if there were no need for power from this plant in the years '79, '80, or '81 when this plant is supposed to come on the line, that the Board ehould be in the ' position of saying that the cost-benefit analysis tilts in. favor of the environmental harm and dismiss the application? MR. EICHHORN: Mr. Chairman, I certainly agree that if there is no need for addition-al capacity on the Applicant's system that ~ they should not entertain any thoughts of building a nuclear facility, and I believe that the Board should not grant them permis-sion to do so, if there is a demonstration that the power is not needed. (Argument, Tr.

11),

6. I i

v 3 sometime in the period from 1981 to well beyond 1983, the actual date depending upon the assumed rate of growth of NIPSCO's load. (H. Road, pp.8,9, chart XVI, following Tr. 7131). The criterion used here to determine when the power to be generated by Bailly will be needed is whether a mini-mum of 15 percent reserve ca'pacity could be maintained, the same criterion used by the Licensing Board. (RAI-74-4, pp.616,618.) New evidence shows clearly that power from the Bailly nuclear plant will not be needed, if at all, until a date well beyond the Licensing Board's conclusion of 1979. As of August 31, 1976, NIPSCO said that, by it's own estimates, the power to be supplied by the Bailly plant " won't be needed until some time between 1983 and 1985." (Exhibit II). In ad-dition, data vihich NIPSCO, as.in ECAR Bulk Power Member, -sub-mitted to the Federal Power Commission in April 1976 (Exhibit VII) and data contained in a prospectus dated October 19, 1976 (Exhibit I), demonstrates conclusively that Bailly or equiva-lent power capacity will not be needed on NIPSCO's system until at least 1985. More specifically, NIPSCO's April 1976 report to the Federal Power Commission (Exhibit VII) contained its demand or peak load projections from 1976 through 1985 showing essen-tially a 6% growth curve, and also its internal generating capacity. The October'19, 1976 prospectus (Exhibit I) shows the following additions to internal generating capacity, ex-clusive of Bailly N-1: t ! l

Schsduled Total Nat Capacity In-Scrvica (Kilo ~wntta) Dutn R.M. Schahfer Unit 14 477,000 Nov. 1976 R.M. Schahfer Unit 15 527,000 1979 Marble 11111 Unit 1 226,000 1983 Marble Hill Unit 2 226,000 1984 It also shows a 1976 summer peak load of 1997 megawatts, and a 1976 total internal capacity of 185'5 megawatts not. counting Unit 14. In the table below, tha percent reserve for the years 1977 through 1985 is shown ir. the right hand column. It has been calculated using the Demand projections from Exhibit VII; Inter-nal Capacity (Seasonal) without N-1 from Exhibits I and VII; maximum allowable Purchased Power under NIPSCO's contracts (Joint Int. Ex. 13,14); and the correct method of calculating percent reserve by excluding reserve margins from firm purchased power as explained by Mr. Beyer, a Federal Power Commission engineer, who testified before the Licensing Board that the utility which sells firm purchased power to NIPSCO has already included that block of power in its own reserve calculations; hence it is un-necessary for NIPSCO to impose a reserve margin on its firm pur-chased power. (Bcyer, Tr. 5769.) E.s to n 't Maues 3g G..ar s be > J o Yc.ae De-> '4 $'ee h'[,'l,. c y <,^ty c,g.,.ey N'f,'," ';"[ Y'i'""} r.N."r$.; Allevve') I'Mk ' 1977 2/20 232C ' $$$r.an) 32tG /0 ?& l00 W \\ ms v 10 znc c.in.,) 3=a 9" ' n 1977 2]$0 2SSJ ($'. tm) 2653 12 72 19S0 6'*:3 1 950 $30 2573 4co 3:53

• 123 2/30 D.l 1961 2630 r.55) 4*oc 3263 573 2250 2Cl 19S2 2WO 155]

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• ]2H 4/3 zu,evo 16.1 19S3 3010 3c77 400 3Hf 4(a 2c,tc

/7.1 /f84 3e10' 3305~ //00 370f F/I 2')90

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/ 96 5 3350 J2c5 t/co 1 70 .725 2*lSc 10.'I l _11_ l

The above tabulation shows that the percent reserve re-mains well above 15% until 1985 when it drops to 10.9%. Thus added capacity equivalent to Bailly N-1 would not be needed on NIPSCO's system until 1985. This change in circumstances and newly available evidence, demonstrating a very significant change in "one of the most crucial issues" in the AEC proceedings, requires that the Commission re-analyze its cost-benefit balance of the action of issuing a construction permit for the Bailly plant, and tliat the Commission re-analyze its comparison of that action to the costs and benefits of alternative courses of action. A proceeding to suspend or revoke the construction permit should be instituted; the construction permit should be suspend-ed and revoked. 7. The AEC decision authorizing issuance of the con-struction permit concluded that "the nuclear power contemplated for Bailly N-1 is preferable to the other fuels from an economic and environmental consideration." (RAI-74-4, at p.622, 1188.) The FES utilized a figure of 2.75 mils /kWh as operating costs (p.XI-3). Joint Intervenors, as parties to the AEC proceedings, had contended that the Bailly plant "will be a major consumer of uranium fuel, and in conjunction with the other nuclear plants scheduled to begin operation on Lake Michigan in the near future, will consume a major part of the entire domestic uran-Q} ;' ium fuel output of the United States." (Furthar Specification

e 1972.) Thic con-ggg.4 7 33, filed August 28, bkkh f of Contentions, No. ding tention was excluded from consideration in the procee (Tr. 197-99. ) l by the Licensing Board on September 6, 1972. Joint Intervenors had also cottended that the "Bailly nu-clear plant is, in reality,s. short term solution to meet 'j' l future power demand due to tae fact that known fuel reserves . 4...... a f the of uranium.will be exhausted within the 40 year life o (Joint Intervenors' Supplementary Specification of f plant." 1973.) This con-66, filed February 12, Contentions - A, No. ding tention also was barred from consideration in the procee l (Prehearing Conference Order, r i by the Licensing Board. March 21, 1973.) / )( As of October 19, 1976, NIPSCO had said that (Exhibit I, p.17): { "The Company has acquired approximately one-half of the initial core require-(hexaflu-j ments of uranium hexafluoride oride) for Bailly Unit N1. If the Comp-any continues to prevail in pending liti-gation and goes forward with the con-struction of Bailly Unit N to negotiate a contract for fuel fabrica-for which a commitment has been made, and seek bids for reprocessing of

tion, spent fuel and for the remaining require-w ments of hexafluoride for the initial core

[ It will also have to seek bids for lN ~i load. uranium concentrate, conversion to hexa-fuel fabrication, reprocessing

fluoride, of spent fuel and for enriching services.

There is no assurance that any of the nec-f The essary contracts will be available. i Company estimates the fuel cycle costs for fr the first ten years of operation will be - g $395 million based on a 1982 in-service date and that costs would be higher for any Even if the nuclear i later in-service date. l l ' I \\, g

1. .4 zT-i',-.

unit is constructrd, ths Comprny could not operate it nor would the company's investment therein be usable until such time as the described contracts can be secured." Moreover, because of significant changes in the supply-and price of uranium since the issuance of the construction permit, there is a high probability that nuclear fuel will not be available for the entire operating life of the Bailly l Plant. All of the low cost uranium reserves in the United States have been contracted for, and the medium cost reserve s that are known to exist in the United States will not be su'l-ficient to supply the demands of the nuclear plants currently planned for construction in the 1980's. (Mitchell, Hutchins, Inc., THE URAN 70M STOCKS: NUCLEAR INDUSTRY KALEIDOSCOPE COMING TOGETHER (New York, January 1976.\\. ) According to the U.S. Energy Research and Development A'1 ministration, in order to provide for our domestic uranium requirements to the year 2000, the United States will have to discover new uranium supplies equal in extent to nine (9)' new Colorado Plateaus or twenty $20) new Wyoming Basins. (Hans Adler, U.S. Energy Research and Development Administration, Division 'd.Piclear Fuel Cycle and P.roduction, GEOLOGICAL ASPECTS OF FOREAGN AND DOMESTIC URANIUM DEPOSITS, October 1975.) An ERDA geologist recently stated that most of the predicted reserves on which nuclear industry projections have been based are premised largely on statistical treatments that hava accorded the eastern half of the United States the same degree of favorability for uranium discovery as the western half. Such, ( _ _ - - _ - ~ - ~. - ~. ~ - - _7. 1

1 o treatment appears tc be contrary to avail-able geologic evidence. (Ibi'd. ) Uranium enrichment capacity in the United States is al-so insufficient to satisfy the projected needs of the Bailly plant. According to the U.S. Energy Research and Development Administration, the projected demand for enrichment exceeds 4 i capacity shortly after 1981, despite expansion of the three existing uranium enrichment plants. (U.S. Energy Research and Development Administration, A NATIONAL PLAN FOR ENERGY RE-SEARCH, DEVELOPMENT AND DEMONSTRATION: CREATING ENERGY EHOICE { FOR THE FUTURE (ERDA 76-1), (Washington, DC April 1976), i Figure III-2, p.'48.) NIPSCO does not now have a contract with l U.S. ERDA for enrichment of nuclear fuel for the Bailly plant and ERDA's contracts for enrichment were closed in July 1975. Extremely poor fuel burn-up in General Electric reactors and other operating nuclear plants have recently led to revi-sions'of uranium demands. General Electric reactors have a design burn-up rate of 27,500 thermal megawatt-days per metric tonne of uranium, but experience to date shows that the average burn-up for General Electric nuclear fuel has been only 11,000 megawatt days per metric tonne. (D.T. Weiss, General Electric Company, GENERAL ELECTRIC FUEL PERFORMANCE UP-DATE (American Power Conference, 1975).) There is no evidence.that GE reac-tors will achieve design burn-up rates. Thus the Bailly plant will need two and a half times 's much uranium over its life-a time as predicted in the FES. . [g

g Even assuming that design burn-up rotss cre cchicvad o in the.Bailly plant, the nucicar-fuel cost in 1982 will be 17.4 mils per kilowatt-hour, a figure far in excess of the 2.75 mils per kilowatt-hour used in calculating the cost-5 benefit ratios in the FES. (James Harding, NUCLEAR FUEL BURN-UP AND FUEL CYCLE COSTS (California Energy Commission, Sacramento, California, June 15, 1976); FES, p.XI-3.) If future burn-up rates in GE reactors rise from 11,000 to 15,000 mege. watt days per metric tonne, the 1982 nuclear fuel cost will be 23.2 mils per kilowatt-hour, many times the nuc' lear fuel cost assumed in the FES. (Ibid.) Since these figures assume a 1982 cost for uranium of $55 a pound, they are conservative, inasmuch as current predictions of $100 a pound to $300 a pound for 1982 are widely used. (Mitchell, NU' LEAR INDUSTRY KALEI-C Hutchins, Inc., THE URANIUM STOCKS: DOSCOPE COMING TOGETHER (New York, January 1976).) These changes in circumstances, new facts and newly available evidence, demonstrate dramatic changes with respect to very significant factors in the cost-benefit analysis. They require that the Commission re-analyze its prior cost-benefit balance of the action of issuing a construction permit for the Bailly plant, and that the Commission re-ana' lyze its comparison of that action to the costs and benefits of alternative courses of action. A proceeding to suspend and revoke the construction f permit should be instituted; the construction permit should be-1 suspended and :: evoked.. s s

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MW. Ed 3 The AEC decision authorizing iccuanca of th9 con-ho$g.g$?l 8.

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struction permit rejected energy conservation as an alterna-tiva to that course of action. It said that: "To deny a license as a result of specu-lative possibilitics as to future demands kgzg$pi g, qp.. is not reasonable. Our position is sup--

1. $'$UM ported by a quotation from the AEC Mem-

~' 9 orandum and Order of January 24, 1974, in the Consumers Power Co. case, Docket No. 50-329, 50-330: 1 '...Furthermore, the impact of proposed ' energy conservation alternatives on demand must be susceptible to a reasonable degree of proof. Largely speculative and remote possibilities need not be weighed against a convincing projection of demand.

Here, as with many other issues under the Nation-al environmental Policy Act of 1969, a rule of reason applies...(RAI-74-1, p.24)"

h (RAI-74-4, pp.619-20, 1182.) LI Joint Intervenors, as parties to the proceeding, had ade-quately stimulated the Commission's consideration of energy conservation alternatives. Joint Intervenors' Contentions 39 a bh.h,h through 42 raised numerous contentions concerning the need for EL-. the power from the Dailly plant (Petition for Leave to Inter-vene, dated January 28, 1972.) Joint Intervenors also speci-fically focused upon the following energy conservation alterna-tives in Contention 39: conserving electrical power'through N changes in the rate structure; elimination of wasteful uses of power; upgrading the efficiency of the NIPSCO's existing fossil fuel plants; construction of a nuclear plant as a joint venture and research and development of p;7 outside NIPSCO's service area; myv psy alternative methods of generating power other than nuclear or Joint Intervenors presented testimeny in support fossil fuel. . 7 t. li8 .a ne

s r of Contentions 39 through 42 by Herbsrt Rond, en trchit:ct, -{ 4srd + who testified that power can be purchased for short-term needs and the reduction of consumption can be achieved on a voluntary basis. Mr. Read also testified that architec-l. tural desigr.ers will be incorporating energy conservation irq.

f. J T

into the buildings of the future and added that the O'ffice ik,$, of Emergency Preparedness had already published two studies on the potential for energy conservation -- the first conclud-ing that multi-family dwellings will use less power than single-1 family dwellings, and, the second concluding that higher power cost will reduce the demand for power. (Read, following Tr. f ~ 7116.) During the pendency of the proceeding before the Licens-ing Board, the AEC declared a major change in policy regarding p ? energy conservation on November 6,1973 in Niagara Mohawk r Joint Intervenors sought clarifi Power Corp., RAI-73-ll, 995. ImW "'sif cation of the impact of Niagara on the energy conservation con-imm

==

In a hearing before the Licensing Board on November tentions. L 1973, Joint Intervenors sought to reopen and supplement l 13, h / the record on energy conservation in light of the Niagara deci-sion which had been decided the week before. In particular,

• t As their attorney

,s Joint Intervonors sought to introduce evidence. stated to the Board (Tr. 10423): r i i Mr. Chairman, the material that "MR. OSANN: I have in mind on this subject [of energy falls into two categories. The > qgy i v6fi conservation] first category is. material in the nature of ' E$N l advertising; there are releases or actual ad-l i -la-E ! ;Qi;$. p ---

w., - -.-

_ s,st_ _ ___

vertising by tha company, which reflecte whatever thsy have dono in thic crsa, whatever they have done or not done. The second category would be the -- some brief evidence on the rate structure of the company which tends to put a premium on heavy use as distinguished from con-servation. Now, in the -- closely associated with the rate question would be whatever activities the utility has engaged in with regard to the facilitating more efficient design of various electrical units." i The Board refused to reopen the record. (Tr. 10 4 31). 1 Based upon a " threshold test", the Licensing Board con-cluded that Joint Intervenors failed tolmeet the burden of coming forward with an affirmative showing justifying further exploration of these energy conservation issues. On this basis and pursuant to this " threshold test", the Licensing Board held the record before it adequate to establish a power need for the Bailly plant. (RAI-74-4, pp.619-20.) on July 21, 1976, the United States Court of Appeals for the District of Columbia Circuit decided Aeschliman v. NRC, F.2d

9 ERC 1289.

The Court held that by using the " threshold test" to test energy conservation alternatives put forth by intervenors there, the Commission had violated its NEPA mandate. The " threshold test" there was precisely the same one used by the AEC in the Bailly proceedings. In invalida-ting this " threshold test", the Court said (9 ERC at 1292-93): - l

I ~ "[Intervenors] contend that ths 'thrc2-g hold test' applied in this case is in-consistent with NEPA's basic mandate' to the Commission to 'take the initiative' in considering environmental issues. We agree." i The Court recognized that energy conservati,on is clear-ly an alternative to the construction and operation of a i, i nuclear power plant which should be considered by the NRC in i order to comply with the mandates of NEPA. It held that re-jection of energy conservation alternatives on the basis of a " threshold test," requiring intervonors to prove that an alternative satisfies a " rule of reason" before the Commission investigates the alternative, was arbitrary and capricious. The Court thus ordered a remand and reopening of the issues of energy conservation. The scope of the Commission's obligations under NEPA, as determined by the Aeschliman decision, which obligations were not fulfilled in connection with issuance of the con-struction permit for the Bailly plant, on a significant issue involving the cost-benefit analysis, requires that the Commis-sion re-analyze its prior cost-benefit balance of the action of issuing the construction permit, and that the Commission re-analyze its comparison of that action to the costs and benefits of alternative courses of action. A proceeding to suspend and revoke the construction permit should be instituted; the con-struction permit should be suspended and revoked. l l 1

9. The AEC decicion authorizing iacutnc2 of tha con-struction permit stated that NIPSCO's application and the proceeding therein complied with the requirements of the Atomic Energy Act of 1954, as amended. (RAI-74-4, p.630.) One of those requirements is the ceceipt of a report from the Advisory Committee on Reacto Safeguards ("ACRS") of its independent review of the licensing application and its public statement of its findings and conclusions oncerning the safety of the proposed Bailly plant. (42 U.S.C.

SS2039, 2232b.)

i i The ACRS report on the Bailly plant, dated October 1, 1971, in pertinent part, states (AEC Regulatory Staff Safety Evaluation, pp.145-46) : "Other problems.related to large water-cooled and moderated reactors have been identified by the Regulatory Staff and the ACRS and cited in previous ACRS re-ports. The Committee believes.that re-solution of these items should apply equally to the Bailly Station. "The Committee believes that the items mentioned above can be resolved during construction and that, if due considera-tion is given to these items, the Bailly Generating Station Nuclear 1 can be con-structed with reasonable assurance that it can be operated without undue risk to the health and safety of the public." The decision of United States Court of Appeals for the D'istrict of Columbia in Aeschliman v. MRC, F.2d i 9 ERC 1289 (D.C. Cir. 1976), held that portions of the ACRS i report involved there, identical to the portions of the ACRS e.r q-1!I c 1 9(,. " '4 %-[~, k

n. aamuw n ~.

wr._.

report on Bailly quoted abova exc:pt for tho namn of tha plant, were in violation of the Atomic Energy Act of 1954, as amended. The Court recognized that ACRS reports should ~ not only be sufficient to give the Commission the benefit of the ACRS Members' technidal expertise, but should also perforn "the other equally important task which Congress gave the ACRS: informing the public of the hazards." The Court said (9 ERC at 1296; footnote omitted): "At a minimum, the ACRS report should have provided a short explanation, un-derstandable to a layman, of the addi'- tional matters of concern to the com-mittee, and a cross-reference to the previous reports in which those problems, and the measures proposed to solve them, were developed in more detail. Other-wise, a concerned citizen would be unable to determine, as Congress intended, what other difficulties might be lurking in the proposed reactor design. Since the ACRS report on its face did not comply with the requirements of the statute, we believe the Licensing Board should have returned it sua sponte to ACRS for further elaboration of the cryptic re-forence to 'other problems'." The ACRS report concerning Midland Plant Units 1 & 2 and held inadequate in Aeschliman provided as follows: "Other problems related to large water reactors have been identified by the Re-gulatory Staff and the ACRS and cited in previous ACRS reports. The Committee be-lieves that resolution of these items should apply equally to Midland Plant Units 1 and 2. The Committee believes that the above items can be resolved during construction and that, if due consideration is given to these items, the nuclear units proposed for the Midland Plant can be constructed with reasonable as-surance that they can be operated without un-due risk to the health and safety of the public."._

on its faco, omite Tho ACRS report on thm Bailly plant, I-- mat'erial information. It suffers from procicoly tha cama as the ACRS report in deficiencies, in violation of law, Aoschliman. The requirements of the Atomic Energy Act of 1954, as [ v.v.3,; g amended, as determined by the recent Aeschliman decision, were not complied with by the AEC in issuing the construction The ACRS has yet to complete permit for the Bailly plant. its statutorily required scrutiny with regard "to the hazards of the proposed (Bailly] facility." (42 U.S.C. 52039.) The public has not been fully " apprised of the safety or possible hazards of the facility." (S. Rep. No. 29 6, 8 5th Cong., 1st Sess., 1957 U.S. Code Cong. & Admin. News 1803, 1825-26.) A

• o proceeding to suspend and revoke the construction permit should I

'be instituted; the construction permit should be suspended and revoked. $$fd5Pil The AEC Atomic Safety and Licensing Appeal Board de-10. cision, affirming the Licensing Board decision authorizing said ( RAI -, 4-8, t issuance of the Bailly construction permit, ] pp. 27 0-71) : I

1. g.}+]

gg j "6. Uranium fuel cycle. Subscquent to the the Commission completed a pgg, '; decision below,

---

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rulemaking proceeding which investigated the environmental consequences of mining, manu-f acturing, using and dumping of uranium fuel of the type to be utilized in the proposed i Based on information gather-I Bailly facility. ed at that proceeding, the Commission quanti-I e fled the adverse environmental effects of such d a fuel cycle and assigned numerical values, q representing a proportionate share of those 1. i l 4, t e 'M r- ---e- _.g ._7 _ _ y l

cdverca consequancas, to be fcctercd into cach psnding lic:nsing procscding. Sac 39 F.R. 14199 (April 22, 1974.)S7

Where, as here, an initial decision has already been rendered by the Licensing Board, it becomes our obligation under the new regu-lation to insure that those factors are properly considered in the cost / benefit balance.

See Potomac Electric Power Comp-(Louglas Point Nuclear Generating Sta-7m tion. Units 1 and 2). ALAB-218, RAI-74-7, Pd any 79 (July 15, 1974). See also Philadelphia fN sd Electric Company (Peach Bottom Atomic Power Station, Units 2 and 3) CLI-74-32, RAI-74-8, 217 (August 8, 1974). In this as we have just mentioned, the basic

case, issue is not whether there should be a nuclear facility but where it should go.

Obviously, whichever site is chosen, the environmental consequences of the uranium fuel cycle would remain relatively unchanged because the same type of facility is being considered for all locations. The effects of that cycle, therefore, cannot tilt the cost / benefit balance between the sites un-der consideration in this case, for the same approximate values would go onto both sides of the scale. We may therefore limit our consideration of that issue to noting that fact. Sce Peach Bottom, supra, RAI-74-8 at 7 220. n 57 The regulation is now published as 10 C.F.R. S 51. 20 (e), 39 F.R. at 26282 (July 18, 1974).. [ Footnote in original.] Joint Intervenors, as parties to the Bailly proceeding, had asserted the following contentions in their Petition for n Leave to Intervene (dated January 28, 1972): "25. Considering the state of the art and i the inherent dangers resulting from any ra-dioactive emissions, petitioners contend that applicant is required, under the Atomic Energy Act, to design a plant which contains a radio-active waste system which releases essentially I zero amounts of radioactivity into the environ-ment. 1, i p W..

26. Applicant has nsithrr c ncidsrcd ncr analyz:d the effecte on tho public of radiation waste products which will be transported from the proposed plant site to various parts of the United States in the event that such occurrences as acci-dents or labor strikes prevent the normal operation of such transportation as con-templated in the proposed transportation procedure." These contentions were disallowed by the Licensing Board. (Order of May 15, 1972.) Joint Intervr nors also presented the following conten-tion. (Intervenors' Further Stipulation of Contentions, No. 34, filed August 28, 1972): "34. Reprocessing plants release, in normal operations, radioactivity in gase-ous and liquid forms. Applicant has pro-vided no information concerning the amounts, character, and effects of such radioactive effluents. Since the Commission does not apply the as low as practicable formula to reprocessing plants, it is conceivable that the total amount of radioactivity that will reach the environment as a result of the operation of Applicant's plant will exceed safe and tolerable limits. Intervenors con-tend that the National Environmental Policy act of 1969 requires consideration of this matter in the environmental license hearing." This contention also was excluded by the Licensing Board. (Prehearing conference, September 6,1972, Tr.197-99.) In the recent decision in NRDC v. NRC, F.2d 9 ERC 1149, (D.C. Cir. 1976), the Court of Appeals held "the Commission's action in cutting off consideration of waste dis-posal and reprocessing issues in licensing proceedings...was. M ENM M M

capricious cnd'crbitrary." 9 ERC et 1167. It rulcd that tha portions of 10 C.F.R. SSI.20 (el dealing with reprocessing and waste disposal, the same provisions utilized by the Commission in connection with authorizing the Bailly construction permit, were invalid, because they hcd been promulgated by procedures insufficient to ventilate the issues. Accordingly, the AEC decision authorizing the construction permit for Bailly is in violation of MEPA since in the cost-benefit analysis it util-ized an invalid generic regulation and since it excluded the matters covered by that invalid regulation from consideration in the individual Bailly proceeding. The changed circumstances and new developments with re-spect to the invalidity of the Commission's NEPA regulations, used to justify the cost-benefit analysis of the action of issuing a construction permit for Bailly, require that the Commission re-analyze the cost-benefit balance of that action, and also require that the Commission re-analyze its comparison of that action to the costs and benefits of alternative courses of action. A proceeding to suspend and revoke the Bailly con-struction permit should be instituted; the construction permit should be suspended a'nd revoked. 11. One of the conditions of the construction permit is that (Para. F. (2)) " Prior to discharging to the site's ash settling ponds any liquid effluents at-tributable to site preparation, con-struction.or operation of the Bailly. G

G3nercting Station, Nuclocr 1, if tha ro-quired monitoring program indicates any evidence that ash pond seepage is causing a change in the chemical composition of the interdunal ponds, the applicant will take remedial action as needed to assure that the Nuclear 1 effluents do not con-tribute significantly to any such changes." Joint Intervenors, as parties to the AEC proceedings, had contended that the Indiana Dunes National Lakeshore and the Cowles Bog National Landmark would be polluted by seepage from the existing ash ponds, exacerbated by construction of the Bailly plant. (RAI-74-4, pp.604-06.) In June, 1976, studies on the impact of the possible con-struction and operation of the Bailly plant on the National Lakeshore were conducted by scientists of the National Park Service, headed by Dr. Theodore W. Sudia, Chief Scientist o the National Park Service ("NPS"). At a series of meetings in connection with the studies, representatives of the U.S. Fish and Wildlife Service, U.S. Environmental Protection Agency, Nuclear Regulatory Commission, NIPSCO, and NPS consultants ex-changed information and participated in discussions with respect to the National Lakeshore and environmental impacts and effects from construction and operation of the Bailly plant. (Exhibit i IV.) t Dr. Sudia concluded that the Bailly plant addition to the site will exacerbate the harm currently being caused to the Indiana Dunes National Lakeshore from the operation of the fos-sil fuel plants on the site, (pd. at p.3). In addition, these 1 1 m

Idiccucsiono reculted in rcc:mmandationc concarning review.of and possible improvements in the monitoring program, and mitigating measures with respect to damage to the Indiana Dunes National Lakeshore (Exhibits V and VI). These significant new facts and evidentiary developments with respect to an issue of vital environmental importance, none of which existed prior to the summer of 1976, require that the Commission update its Final Environmental Statement and re-analyze the cost-benefit balance of the action of is-suing a construction permit for Bailly, and that the Commis-sion re-analyze its comparison of that action to the costs and benefits of alternative courses of action. A proceeding to suspend and revoke the Dailly construction permit should be instituted; the construction permit should be suspended and revoked. 12. Among the issues presented and decided by the AEC in its decision authorizing issuance of the construction per-mit was the effect of the legislation authorizing creation of the Indiana Dunes National Lakeshore (" National Lakeshore"). (RAI-74-4, at pp.626-27.) On October 18, 1976, the President of the United States l signed into law Public Law 94-549, an act amending the Indiana t Dunes National Lakeshore enabling legislation. (80 Stat. 1309, 16 U.S.C., 5460 et seq.) This new law, in addition to authoriz-ing the federal government to acquire additional acreage for the National Lakeshore, specifically requires the Secretary. ."T

of tho Interior to prcp ro end trcnsmit to tha Scncto and House Committees on Interior and Insular Affairs a study of what is described in the Act as area II-A, commonly re-ferred to as the NIPSCO " greenbelt," a strip of land adja-cent to the existing boundaries of the National Lakeshore. This strip of land includes interdunal ponds and much of the headwaters of Cowles Bog as well as some of NIPSCO's ash. settling ponds and sludge fill areas. The act commands the Secretary to study and issue a re-port by July 1, 1977, on the NIPSCO greenbelt with respect to certain specific objectives. These objectives are: (a) preservation of the remaining dunes, wetlands, native vegeta-tion, and animal life within the area; (b) preservation and restoration of the watersheds of Cowles Bog and its associated wetlands; (c) appropriate public access to and use of lands within the area; (d) protection of the area and the adjacent lakeshore from degradation caused by all forms of construction, pollution, or other adverse impacts including, but not limited to the discharge of wastes and any excessive subsurface irriga-tion of water; and (e) the economic conse'quences to the utility and its customers of acquisition of such area." (Public Law 94-549, S19, 1976.) This new legislation and its impact and effect on the validity of the construction permit must be considered by the commission. A proceeding to suspend and revoke the construction j permit should be instituted.. m A-

13. In its decision. authorizing iccuancs of tho Bail-ly construction permit, the Licensing Board concluded "that total energy sources have been appropriately taken into account in calculating the peak pressure following a LOCA and that containment design pressure contains an adequate mar-gin of safety" (RAI-74-4, p.579, 170). Joint Intervenors, as parties to the AEC proceedings, had contended that the maximum pressure peak in the dry well and pressure suppression chamber during a LOCA will exceed the design limit of the containment in that NIPSCO failed to include the total energy sources available in its analysis of a design basis accident (Contention No. 52). NIPSCO's witness admitted that there has been no full-scale prototype blowdown test of the Bailly containment and suppression chamb-or (Rockwell, Tr. 10668). As reflected in letters dated September 10 and 21, 1976, from the Commission to NIPSCO, which are a matter of public record, subsequent to issuance of the Bailly construction per-mit, it has been discovered that the Mark II containment, the type of containment to be used in the Bailly plant, is subject to serious dynamic loads in the pressure suppression pool fol-lowing rupture of a main coolant line, and also following opera-ti cn of safety reilaf valves. These transient loads raise sub-stantial questions about the safety of the Mark II containment, the reactor support system, and the reactor internals..

6 9 There is a virtually complete lack of information as to whether or not the Bailly Mark II containment and reactor support systems would be capable of withstanding the above events without failure. In view of the foregoing changed circumstances, and the critical importance and position of these structures in the Bailly ' plant, there is now serious doubt as to whether the public health and safety is adequately protected. A proceed-ing to suspend and revoke the construction permit should be instituted; the construction permit should be suspended and revoked.

r .s All of the facts and the equitable factors demon-14, strate that construction activity by NIPSCO under the con-struction permit should be suspended immediately, even while a determination is pending as to the matters presented by this request and motion. Only five days ago, on November 19, 1976, NIPSCO ex-pressed its intention to resume construction activity (Exhi-bit III), af ter a period of over two years without any con-struction activity, much of which resulted from the voluntary decision of NIPSCO. Accordingly, no significant amount of such construction activity will have taken p' lace if the Com-mission suspends the construction permit immediately. There will be no significant adverse effect upon NIPSCO or upon anyone else if the construction permit is suspended immediately. In view of the length of time during which there has been ao construction activity, a substantial portion of which is due to NIPSCO's voluntary decision, any alleged financial detriment to NIPSCO during the presumably short ad-ditional time through which the construction activity would be suspended while a decision on the relief requested here is considered and made, cannot be treated as signiM c7nt. In view of NIPSCO's own admissions that the pow r ta oc generated by the Bailly plant will not be needed until souatime between 1983 and 1985, it cannot be asserted that the public interest in an adequate supply of power bars the immediate suspension of the construction permit. On the contrary, the public inter-.

m w*e e i@dNE!I est in a fair and full Commission exploration and a decision O...y.] based upon.and in compliance with current facts and law re- ~ quires immediate suspension of the construction permit.' The possibility that increased expenditures by NIPSCO in 9 dO P[ further construction activity might be argued to affect the-3:,u.G k554 .S.539 cost-benefit balance should not be permitted. Although the Comminsion has authorized NIPSCO to install a slurry wall so as to reduce the potential for well-point

4

,g,gg,; dowatering of the site, M.'wid the Commission has not prohibited NIPSCO from engaging in such well-point dewatering and the possibility that it will be engaged in remains. The immediatc and irreparable harm that would be caused to the adjacent fd$h= Indiana Dunes National Lakeshore by well-point dewatering is N...' ;a t well documented in the record. Indeed, it was the threat of just that injury that led the United States Court of Appeals for the Seventh Circuit to impose the stay of the offectivenes of the construction permit insofar as it authorized such de- 's. .i %1 / bd Ol (Jl$b wataring. Moreover, the possibility of construction activity resulting in a discharge to the ash settling ponds on the Dail-ly site with a resultant change in the chemical composition of the interdunal ponds, also requires an immediate suspension of the construction permit. The additional immediate adverse im-pacts of site preparation and plant construction are documented in the FES (pp.IV-1 to IV-7; VII-l to VII-2), i*g, 73 The violations of NEPA a.c. of the Atomic Energy Act of 1954, as amended, are substantial. The subject matter of each wg nist - as

. _ mm - 4 of the new factual, evidentiary and legal matters was raised in, or was sought to be raised or was considered in the AEC licensing proceedings. The public interest and public policy in protecting the environment and in agency decisions made in compliance with current legal requirements and based on cur-rent facts require that the construction permit be suspended immediately. 15. For all of the foregoing reasons, the construction permit should be suspended immediately, a proceeding to sus-pend and revoke the construction permit should be instituted, a hearing should be held and the Joint Intervenors admitted as parties, and the construction permit should be suspended and revoked. DATED: November 24, 1976 Respectfully submitted, Robert J. Vollen i Edward W. Osann, Jr. Robert L. Graham By: Robert J. VolIen' Attorneys for Joint Intervenors Robert J. Vollen, Esq. 13th Floor 109 North Dearborn Street Chicago, Illinois 60602 (312) 641-5570 Edward W. Osann, Jr., Esq. Suite 4600 One IBM Plaza Chicago, Illinois 60611 (312) 822-9666 Robert L. Graham, Esq. Room 4300 One IBM Plaza Chicago, Illinois 60611 (312) 222-9350 . L

6!?i Q&$ b -*1 AFFIDAVIT OF ROBERT J. VOLLEN Robert J. Vollen, being duly sworn on oath, deposes jpni and says, that: eleH jpj 1. The document attached hereto and marked " Exhibit I" is a true and correct copy of a Prospectus dated October 19, 1976, obtained from the office of Dean Witter & Co., Inc., at 33 North

Dearborn Street,

Chicago, Illinois. 2. The document attached hereto and marked " Exhibit II',' .m is a true and correct copy of an article appearing on page 1 of a newspaper named the Vidette-Messenger, Valparaiso, Indiana, on August 31, 1976. ~ fr; 3. The document attached hereto and marked " Exhibit III" ..un

20 is a true and correct copy of an article appearing on page 14 of a newspaper named the Chicago Sun-Times, Chicago, Illinois, on Friday, November 19,.1976.

4. The document attached hereto and marked " Exhibit IV" is a true and correct copy of a memorandum dated June 18, 1976 from Theodore W. Sudia, Chief Scientist, National Park Service to the Director, National Park Service. 5. The document attached hereto and ma':4ed " Exhibit V" i is a true and correct copy of a memorandum dated June 29, 1976 prepared by Robert P. Geckler of the NRC. E ??.. -a e

== sA. g % t..:.

^ l 6. The document attached hereto and marked " Exhibit VI" is a true and correct copy of a memorandum dated June 30, 1976 prepared by Robert P. Geckler of the NRC. 7. The document attached hereto and marked " Exhibit VII" is a true and correct copy of pages 1, 7, and 8 of a portion of NIPSCO's April, 1976, ECAR Bulk Power Member report to the Federal Power Commission. Robert J. follen Subscribed and sworn to before me,tliis 24th dayp1 Nov.'b'er 1976. t !v f L.<..s ', j l0 - 4 ' Notary Public My ommission expires ce.0 /G !f d y s y

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\\ CERTIFICATE OF SERVICE I hereby certify that I have served' copies of the fore-going Request to Institute A Proceeding, And Motion, To Sus-pond And Revoke Construction Permit No. CPPR-104 upon each of the following persons by deposit in the United States mail, first class, special delivery postage prepaid, this 24th day of November, 1976: Marcus Rowden Chairman U.S. Nuclear Regulatory Commission Washington, D.C. 20555 Richarc Kennedy Commissioner U.S. Nuclear Regulatory Commission Washington, D.C. 20555 Edward Mason Commissioner U.S. Nuclear Regulatory Commission Washington, D.C. 20555 Victor Gilinsky Commissioner U.S. Nuclear Regulatory Commission Washington, D.C. 20555 Samuel J. Chilk Secret.ary of the Commission U.S. Nuclear Regulatory Commission Washington, D.C. 20555 Director of Nuclear Reactor Regulation U.S. Nuclear Regulatory Commission Washington, D.C. 20555 Director, Office of Inspection and Enforcement U.S. Nuclear Regulatory Commission Washing ton, D.C. 20555 Chief, Public Proceedings Branch Office of Secretary of the Commission U.S. Nuclear Regulatory Commission Washington, D.C. 20555 Em g w

~ V ...s ..u.y i.r, 0) 1 .<"jp'{rEl 8 William II. Eichhorn, Esq. tI Schroer, Eichhorn and florrow 5243 IIohman Avenue llammond, Indiana Jack R. Newman, Esq. Newman, Reis & Axelrad j .o.;r.er.: k i w S @ j 1025 Connecticut Avenue, N.U. .::tyly;&y.f i Bi 4 Washington, D.C. 20036 Ib.i r$5!$/Sli k Stuart A. Treby, Esq. Counsel for the AEC Regulatory St U.S. Atomic Energy Commission Washington, D.C. 20545 .. e M N 4i'..r.'iyihk Meredith Hemphill, Jr., Esq. Hs*#IM MiM1Y Assistant General Counsel ..gidiW' ~- Bethlehem Steel Corporation 701 East Third Street t Room 2060 Bethlehrn, Pe n n sy ] v.m.i.1 1.9, t i, Peter L.' Strauss General Counsel U.S. . '+ Nuclear Regulatory Commission .e .;, r : 9.,,. Washington, D.C. 20555 jd.6pa' dgykd:i> i.or4..f % 29PS / ? YiMO$ Attorney ~ ( et ..ie. j!j[!.DI@ l 1 ..;*2..c.L:!f.%I .-;pi!l.w:p3'ti43[!

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~ PR O S P E CT U S %ii!Li$ s,. cmp "d $60,000,000 A} NORTHERN INDIANA Punuc SERVICE COMPAN yg .h F;.,',3.p First Mortgage Bonds, Series Y,8% %, due October 15,2006 SidiY Intesest Payabic on April 15 and October 15 s The finnd< nec rnbruimt.ir. In ork..h.r in p.trt, at the ov?nm ;I 11.. < ;m. vain.o up..n.u at priram sul); rth here on prorphd ths:f. prtar la 0 t<h r I;. r h.r~t :Lo rt.:.ia ui re.to. I!rNI. no wh rui, *r.p:iam not*t l< rnad.- through rcfarulints at not efectur voto rest cer! to Ih. ( *vurpanut.:(b.a th.un S.;riri.* r annru 4 s t' ~... TIIESE SECUltlTIES IIAVE NOT BEEN APPROVED 01t DISAPPRO ' ~ ', SECURITIES AND EXCIIANGE COMMISSION NOR IIAS TIIE COMM 5 -- C-2 ,1 I PASSED UPON TIIE ACCURACY OR ADEQUACY OF Tills PROSPEL M ANY REF RESENTATION TO TIIE CONTRAl1Y IS A CitIMINAL OFFEN Underw ritine .i Price to Disenunts and Praccerts to Public (1) Comminians t*) Company (l)(3) PerUtdt. 99.5(r, .8 77 ",. @$ li Total.............. tN.62ri ;, $50,7th).0tx) $r.25.000 $59.175,(n M1 &b 3 (1} Plus accrued interest from October 15.1976, to the date of delivery. aa f (2) The Company has agreed to indemnify the several Underwriters d including liabilities under ihe Securities Act of 1933. against erriain liabilities, (3) liefore expenses, payable by the Cornpany, estimateil at $l71.S70. 1 f. and if received and accepted by them and subject to certain oth i ' delivery of the lionds in dehnitive form will be inade in ('hicago. Illinois on or al >u li is esg.ceted fl.at Dean Witter & Co. Merrill Lynch, Piercr. 'enner & Smith ino.,tm.ma i......,..,..... i The date of this Prosp$ctn> i< Och ber it'.19N EXHIBIT I

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3 , {\\ .d1 .^ e =' 4'; r..* E h i g o N

EFFECT TRANSACTIONS Wit!CII STABILIZE O i SERIES Y BONDS OFFEttED IIEREBY AT A LEVEL A PREVAIL IN TIIE OPEN SIARKET. SUCII STABILIZING, IF C05151ENCED, AIAY BI DISCONTINU1'D AT ANYTI51El 1 6 &h ty. -g ~~'~j f ' AVAILABLE INFOR51ATION Northern Indiana Public Service Company ithe " Company") other information with the Securities and Exchange 3* concerning directors and officers, their remuneration, their stock purchases Purchase Plan, the principal holders of securities of the Company and an (,q2 persons in transactions with the Company is disclosed in pro.xy statements dis 3s the Company and filed with the Commission. Such reports, proxy statements and o h'""j' "r. ' .be inspected at the Commission at 1100 L Street, N. W., Washington, D. rmation can f material can be obtained from the Commission at prescribed rates. statements and other information concerning the Company can he inspected York Stock Exchange and the Slidwest Stock Exchange. t those contained in this Prospectus la connection with or made, any such information or representation must not be relied upon a e us and,if given the Company or any Underwriter. This Psospectus does not constitute an offer to se unlawful to make such offer in such jurisdiction.an offer to buy any o a solicitation of ty A,p'); Iw :fe s un m Ahm 2 4 $ir.4 I f ~ - \\. e y i c ,I s 1 1 pl gan _O -)LI ~ I

mA' -- + MW W . ) Tile COMPANY The Company, an Indiana corporatma organized on August 2.1912 is a public g nernpany engaged in supplymg ch etneal energ, and muural gas in the norther y operatm g terntory with an es'unated population of 2,12h000 ami serves appn part of hrhana. a electricity and 17:LOoo with nat ural gas roximately 313mo cu>tomer with its executive olhres are located at llmanond, lulutna 16320 pelepin nc number 219 S53-5200) f>265 lb hman A t enue. .Q l'tility Industry Problems a,, p,u, heensmg and construction periods for the larger and more l om!ays and longer l ' M;3. v. meet current and future service requirements of their customers e eratme units needed to se with envirotunental reqmrements and (e) regulatory tag in ohi ~f

y. (d) compliance

( distnbution utihnes 3 hare the problems of merca3ine costs and in addition a n ne neMed rate mer"ases Gas and prospective hnutanuns of gas supply. are encounterme current dnTerent comparues and areas. The seventy of each of these prohh ms s anes 2 See "llusiness"-subcaptions bet ween i Fuel Supply and Rates, and " Regulation" >ubcaption Environmental Mat tersElectric ope The Company expenenced. substantial hucation problems +" of Nuclear Construenon Program at Ikully.'l' tut N1 which re3nin d in { See " Current Status l / USE OF PROCEEDS j The net proceeds froin t he sale of $60.000,000 a.hhtions to the utdity properties of the Company, meluding { on is, senes g o t he cosi of cross } o a pornon of hank loans made to provide funds for the con 3truction procrarn. It 1 l prepayment of ad or tune of complenon of the sale by the Company of the Sen W ' air ut $30,000,000 es Y llond< such bank loans w til aggregate 1 4 CONSTRUCTION PROGRAM + The ('ompany estunate3 that it s const ruct ton prograin w dl require esp $12 bdhun m 1976 through 1950, mehidmg expetulitures of f1211 ruillion in UJ76 77 as follows: { 1976 1977 Total Electne productWn plant (Thousands) Electne transuussion and ihstnnutjon facihties. $ 92,900 $1n3.100 5236.000 facillt tes td Serve elect ric alul gas ettsf omers 13,200 37.000 so.2no Gas storage, gas transuusson and distribution knes. 21.700 21.100 1%, N IO Str'ictures and general equiptinent. 9.200 10.700 19.900

9. LIM) 9, N Hi 10 2t H i

$179 100 5211.700 151he arHimal estunated til be exl'c!Hlet! In l970 h50 I nub ~ 5121 100 = _ _ 4, r b n ICUkIdl ' pll ' a ' "f l u!'. II I ' [I, r , y q " ] p ;p i

y.1 k

3 3 u a p (' [ x ._ g n ;.,. L - ( < y +m. ~. a,.n,.x w:.w~n n Y;".l p$.~.,.a : ? ".* w. f 31 .I I

• Y

,'] f[ 4 [gn. 4 ' %. Q.s L... . g j.f( m,~ '4 v g s

T. f.

E G _Qey" A.. . g,,cgo? - 9 % p ;h s #, & g_w, Qq._, y.py A. ur \\

Jg W

R y b h fk h 3m e www. hl: [ .wws,

I ( I ~ The 1976-77 estimates include $871 million and the 197ti-so estirnate includes $:tx9 million of l N expenditures for construction of a nuclear generatmg unit at liailly Generatme Station and were' h based on an estimated total cost of $450 mi!! ion dollars for a 1979-so in-service date for that unit l which cannot be met. Delays due primarily to litigation (see " Current Status of Nuclear ('onstruction k 3 Program at Bailly") have increased the current estunated toi.d cost to $675 nuinon Tlus new ' B__ estimate assumes that a new in-service date in the sprme of 1%2 can he ne t. h is noi preu uly E_ i known what part of the $675 milhon will he scheduled for expemh' ire m 1976 40.v. pr for :unnun t s i expended to date. E b During the period January 1,1971, to July 31,1976. the company made cross a,hia mn, to aul g? j retirements from property amounting to $S05,810,255 and $62. SIN 259. respectively. At hdy 31.1976, the Company ourned and operated generatmg plants, mainly coal-hred, wnh an accrecate capabihty . ? a of 1,S51,S50 kilowatts. The Company's construction program for 1976-50 incluiles estimated expendi-E tures m connection with the followmg major generating projects. g i Estimated Estimated Estimated ? ( Cost Per Expendi. Total dG j Total Net Scheduled Kilow a tt tures in Company if Capability In-Sersice of Net 1976 Cost E. Statn n ) Fuel (Kilowatts) Date Capability (Millions) (Millions) 5 r-A R 51. Schahfer " nit 14 Coal 177.000 l97f-SH5 SM $198 r } R. 51 Schahfer-Grut 15(a) Coal 527,000 1979 353 32 202 l B,ully-l'ntt NI Nuclear 645,000 1942(10 1,017( M 12 675(b) j I Starble Hd!-l' nit (c) Nuclear 206,000 1983 751 (d) 170 b 512rble Hill-1l rut 2(c) N uclear 226,000 19st 001 (d) 130 k (a) Although no agreements have been made, the Company is currently negotiatmg with Wabash Z f Valley Power Association for approximately 20"e of the capab lity of this unit to he linanced and "g" owned by Wabash. g ) E-(b) The above stated costs are based on new 1976 estimates which assume an in-service date in 3 the sprmg of 1982. Costs for any later in-service date would be sub3tantially increased See " Current E ,j Status of Nuclear Construction Program at Bailly" regarding htigatmn which had halted construction E g l and a statement of the current status of this project. a f" (c) On August 8,1971, the Company and Public Service Company of Indiana, Inc. (PSI) executed a Letter of Intent. If a defmitive contract is executed pursuant thereto the Company k d would own and be entitled to the output of 20", of each of the two umts. PSI has informed the 1 Company that others have signed letters of intent to take up to 15"c of the remaimng 80", of each l unit. Each unit is to have a net capability of 1,130,000 kilowatts, and each is to be constructed by PSI m southeastern Indiana on the Ohio River in Jefferson County.15! mdicates that it is considering an in-service date m the first quarter of 1982 for Unit 1. The Company has not agreed to such change i and does not anticipate participation prior to 1993. The ( ~oinpany is also consulering either (i) g { negotiating a, purchase from PSI of 20", of the output of each of the two units m>tead of ownerslup _F l 3 (ii) negotiating a purchase from PSI of 20'", of the output of Unit I and ownership and enntlement to [ l { the output of 20"e of Unit 2 or (iii) taking no participatt n m these Niarble lhil facihuc-No E j agreement has been reached with PSI with reference to these fanktms. L 3 (d) The parties have not yet executed a definitive contract in ihe e.ent a trce n.en t e. re td.ed " g participate on an ownership basis. 1976 expendit ure3 for bot h umt s are wt icipated to he i l approxunately $9 7 million. me a = ' l! i-[ h, h ' q n' pu a pu j g,

i 4

= q y y&wn ~ = n I,,\\,

( ----- '( -w ,mw-- 2s U The' Company's total ca.utal espemhiurcs frorn.lanuar f .he Series A Noten-Stichi:an City and.lasper Countypollution con i. ? 'bl red pnnnpath by 1 i nproumately $15S mdhon for polluhon cont rol apupinentThe ( 'omp iny a rd nap ac-espemhi ori - ol 1 178 nalhon expended m the period January through luly m th" 197mo penod winch u.cheln ~ [ 196 nulhon for the period Autosi 1976.o.d :omnp o ed o pen.ht ures /noi.rus are included in the tiemes m the 'able on pace 3throuch 1)ccember 1976 atel 336 M of ear 1977 Thee h4 for ;%ible increa ed expenditures reeaohne environmenial protcetion f See "Pegulai on4ns irmonenr t a! Xia n e r, The construenon program of the Company a subject to contmu u anhnes 1.M ntent necessary to meet chaneme comhtionx renew and revnion in the o s q ^ FINANCING REQUIRE 51ENTS h,I It n espected that fund 3 finance construenon expetulitures,m mhhnon to those obtained from the senes reyinred to Y liond< which w dl be including pollut:on .( short term borrowings wdl be uulized as interim financingprovnled f . It a anunpated that to he sold will depend upon market conditions and other factor. The tinang atuount and type of seconties ' nates that they wdl be rnet as unhcated below-The Company anticipaies t s. e m 1976 ami 1977 and flegmrements for Funds: is;s i377 4 Construction. IThouuncio } llond and debenture maturities and sinkmg fund.. 3I79.100 5213.700 Additions to net assets (principally for reductio:. of bank loan 4)

7. If>9 2.737

17. I IT.

Sources of Fumb $231.001 5217,13i Sah of 8econnes- ~ ~ " .lasper CO Nene = A note.% (drau dou n5). -gjl Conunon 5tock sold Apnl 22.1976 b II 'O y Preferred Stock sold October 7.1976 'l "o Sale of pen"s Y llond3. C 8 ale of o:hcr new 'e roir innmg ined).. ecurmes (cont emplainl -neu l er l m., u.. .Q lletatned earnmes deprena r ion, deferred.. 315. nuo e incorne rase, and

h defe rn! mvesonent tax ernht.

100.311 9.'.137 l;i p 4231.001 v217.137 ne com pa ny ts cho,cc of lone term knancme atternanves J-Ir.denoire of.\\lorteace or Dred of Tinst dated as of August r aifeen.a by prou mus u o, S'I (the " Indenture") relating to us First 11ortgage Ilonds and thI,1939 as amended ami snpplernented 2 Ir.corporanon approved and filed Aprd r stock arai cunulat ve preference stock 10.1975 (the " Charter") relat me ie provismn-of us Am j o its cunodante preferred l h Erst Alorttage llonds are set forth at pages 33 and 31 of this ProspeenoIlmtriction g ' of npendu ures for bondable property at lladly I'mt S t. the Company conhl Ai.luly 31.1976 exclusive { pnneipal anmunt of First.\\Iortgage llonds m addition to the $munum senes Y li 7 l. onds. [ L'nder the Charter, cumulauve preferred stock m addition to that inued w a hou t p the consent of the holders of at least a majority of th now outstandine cannoi he ,etunulante preferred 3tock of all 3cncs then outstanding (1) unlee for any 12 co [ total number of hares of e E i S b i s sukX \\ u = t t i t 1 - E. 1 i - n_ [ l ~ ** .l 3 g

i ,m-e thonths within the 15 calen4 months preenling the month in which the shares arr tu 1.r i ned (i) t 'j net carnings applicaW o the payment of dividends on the cumulative preferred stock and an e ril of stock ro-N. on a parity therewith as to assets or dividemis shall have been at lea t iwo times O L annual div. '.nd reluirements upon all shares of cumulative preferred stock ami any clas e,f stock I ranking on a parity therewith as to assets or dividends to be outstanding immediately thereafter. ( (ii) the net earnings ap:dicable to the payment of interest charges on the interest hearing imb lardne )J of the Company shall have been at least one and one-half times the aegregate for a 12.m..nt of such dividend revluirements.and the annual interest charecs on the entire am ( hearing indebteduc3s likewise to be outstanding and (2) unle.w the aggregan of the capital a e to stocks subordinate as to as< cts or dividends to the cumulative pn ferred stock plus the surplus lj 3} eipial or exceed 2r/b of the sum of all obligations evidenced by houd.s, antes, debentures or othe t q securities plus the total capital and surphis. At July 31, itR6. the nel carnings were tu5 times the j annual dividend requircinents on the cumulative preferred stock, the net earnings were '? 51 im.es ~ g the aggregate of such dividend requirements and the annual interent charee< on the e ntire amount o interest bearing indebtedness and the aggregate of such capital and >urplus was 3fn of the total capitalization including surplus. Under the above re3trictions, all of the amborized I,ut uni %ued cumulative preferred stock, $100 par value, couhl have been issued at July 31, limi. The Comp sold 250,000 shares of its emnulative preferred stock through a private placement or. October 7. If66. if. See " Capitalization." i) If, in the future, the coverages are less than the various minimums specified above, the Com would be prevented from issuing additional securitics of the kind subject to such restrictions until such minimums are met, and if additional external financing cannot be secured the Company wou he required to consider alternative sources of financing or defer certain of its future construction espenditures. In addition, see " Current Status of Nuclear Construction Program at 11ailly." 9 knW !ig N. h-1 1 ry i y 1 a# D Y 'D 0 Y o_m e t 1 m u (} y CM' 1i o gamed - ~ - ~ ~ ~ ~~')

CAPITALIZATION The following table shows the capitalization of the Comp;my as of Ju '. p. sithin one year, and as adjttsted to relh ct the sale of the .1976. excimling the (2) and (3) of " Notes to Financial Statements" for add c a ance Sheet and to Notes a M wmed

• y*

Outstanding G of Capital. l.ong. Term Debt July 31. !SM Amount inoon Z* ;3.d. First Stortgage Bonds (a)........ 'D*"'"' Convertible Debentures $ 593.67S $ 653,t178 18.S % 8eries A Notes (c)......( b)............................. 4t a 20.i59 20.ir>9 1.5 Unamortized premium and discount on long-term debt (net). 57,Tdx1 57.5(Ni 1.3 1 Tota l Long-Term Debt............................. El MI Preferred and Preference Stock 672,191 732.191

51. 6".

Cumulative Preferred, $100 par value, authorized 2.t00.000 t shares; 1,111,3S0 shares outstandin'g and 1,361,3S0 3 hares t o be ou ts tanding............................ Cumulative Preference, $50 par value, authorized @. M, 111,135 136,138 10.1 shares; 552.000 shares outstandin 2,000.000 94 Premium on Preferred Stock......g (d)(c).............. 27,6m 27.600 2.t a-Total Preferred and Preference Stock............... 251 251 Common Stock Equity (b)(d)(f) 13N.m2 ina.mu 12.r Common Stock, no par valoc, authorized 32.000aul hares 21,172.5S7 shares outstanding.. Hetained Earninen

27.

MO

.t27.3Cu Capital stock expense............... 1 Is. -179 IIs.174 I:v. s Total Common Stock Equity (l.103) (l.103) a,,, Q Total Capitalization.................... _ iiI.136 I I 1,.136 33.2% 3 *$g .Un ( $1.2 >5.919 $1.310.919 100.tn

== h) The amotmt of bonds issuable under the First 31ortgage Indenture is u = the terms thereof and of the indentu es suppletnental theretnl. and,.,ubject to may be issued. Indenture restrictions regarding issuance of additional bond pages 33 and 31. s are set forth at (1,) The Company has reserved 818.37a IM convertible debentures due 1992 and will reserve such respaired in the event of an adjustment in the current conver> ion prices .onal shares as may be (c) The 8eries A Notes have been issued in connection with i 'T at the Company's Stichigan City Generating Station and Rollin St 8 h hf 8tation. a r and water pollunon control facilities a' (3) The Company has reserved 666,666 shares of common stock f er Generating .ca shares of 6%% Cumidative Preference Stock. or issuance on nmversion of 200.000 I h) On September 1,1976. the Company redeemed 16J) j mnulative Preference u IG.tu) shares on such date. The sinking fund redemptions are reflected i j M The Company has reserwd 197.S99 shares of common stock for e eem an additional l n the table. w Employe Su>ek Purchase Plan and A with the Automatic flividend Reinvestment and Stock Purchase Plan 500,000 on with the a ce in nennection ke'T>e of Proceeds" with respect to repayment of bank loans. 0"#]D F D' N TYbSYA 1 LA e 'e /

v . - - - = = Q.M STATEMENTS DF INCOME The following statements of income for the five years eniini Decernher 31,197fs ~ d: 7 exarnined by Arthur Andersen & Co., independent public accountants, as set fo .M included elsewhere in this l'rospectus. Said report is qualified with fmancial statements of the tdtituate resobation of the matter discussed in Note 7 statements. The statement of income for the twelve months et.ded.luly 31,19m mit exam reschition of the matter discussed in Note 7 to ilo linanci:d stmei e y included only normal recurring accruals) nece s ry t all adju.<tment.s (which 'g Ileference is made to " Notes to Financial 8tatements" apirarine elsewhere in th .t o present Na M. nre an integra' tiart of Ihewe statements. , which .....K .r T[(.} t Tu cite LM Months Ended Year Ended December 3t 'I"y'[ 1971 t972 1973 1971 1975 t t:naudited! Ori u smo lti vrsi na (a): Eh:ctric. (Dollars in thousand*l $132. t:Wi $ 1 ',7. ti2*, $lst.Ill i3r'.726 $27% 05s $2'% 636 Gas 103.581 211.97% 2 m.3N2 2a" 9'9 27%.rnt TN 5tl Ore a grno I., sri w 5 sw 'l. 325.677 .172. f RI 39t NG m3: - y - lt%.715 f4pi.751 597.5e;u Operatihn-it Power purchased. Furi for ciretric generation 17.80t 21.s97 37.l*,7 4A.N77

12. tm S t,f,37 q /,4 Ga* purchased for rrsale 21.086

26. slo 2%.712 IIMw 69.7 5 sw,tna

' ry Other operation.... 90.551 113,51'l life.308 133.b9 8 'If0.726 177,195 La 30,863 4M.763 52.T85 55.983 63.597 fi7.914 Maintenance (Note l) M It,712 17,180 17,73*, 21.540 26,tr27 27,7t3 Depreciation and amortization (Note 1)... 21,035 T2,676 23.hl2 31.710 31,tuit 38,001 y Tates (etcept income) (Note il........ i, Federat income tases-current (Note l).. 2G.573 29.178 25.915 27.%62 20,53"> 31.120 {4 18,417 20.mo 19.086 7.221 12 E 2 13,083 8 tate income tates-current Dcierred federal income taxes net (Note 1).. 1.128 712 I.333 t.612 4,105 5.707 5.11I a.226 12.937 21,003 Deferred state mcome taxes, net (Note 1).... Deferred investment tax credits, net (Note 1). 728 !aN l. 3 10 ' l.31c S60 1.Mr2 I.2%5 6.3%4 5.20 9,920 M Ore.u mc htmer 207.435 310:50'2 32%.f00 3%2. "% I?.7.?si TM.3i2

• • j 5M,2 r!

61.NH trt.27r, s:*,.s27

79. te:

39,ris ?! O Orm u bonn:(Nnte it Allowance for fund.4 usni during construction e "- M (b).... '---**3 Income tas credits applical.le to nannierat.nc 3,091 ti,$W 13.132 II.mt 3 7.rg, 72,333 activities, net. 570 1.710 3.02's 1.275 3.rJ,2 97s Otlcr net..... 732 675

1. Ltr2 1.12*,

2.t:5 2,271 4.39ti 9.275 l%.262 3 p.m7 23.7872 2*, Mr2 bemn: th o,ue. hra uter CH wa.* 62.63M 71.076 hl.r4N %5.%3i urt.223 lig,s90 hitRiol Cusmin. Intercqt on lonipterta debt.. 20.113 21,302 27.515 37.057 15,6ts 13,2:0 sustus?. Of her mterest.... 550 1.514 ' 2,261 2.929 3,34 2.907 Amoruzation of premiutu, discount and et-

1. h9.

• rd pense on debt. net (100)

( V P.O (!in) (f,2) 3'_s to( 20.59S 25.71t 29.669 39511 49 5n, .,i.251 No r hnais. 42,010 45,;pi5 Si,Ni9 15.91 0 ist,65ej 63.639 thvidend requirements on preferred and pref. rrence stnru 2,2*,7 2 372 6, 0.0 7 :c,5 9, g.,d 9 ei27 N6T honn At snanu som Oniuos Sun h. Couy,,s 8ren k: $ 39,7%3 $ 12.7 8.t $ 85.7tre I W.5 tf, 4 : l, y,,; 3 53,ol2 Averace aban

• ontstandmc

~ 1s.903,M5 Is,37s.377 19'm s.* 3. .,s it.; .e f, 4 9. e,s Earnines per charc-on aver. age shares out-MInndHut $2,lli f 2.*J., Earnings per share auumm,e emn.....pide conver- =

• 2' 62,
• p n ni t'.inveruble Debenturrs and the 6%**,I'mnulante l'rrirrrnec 8vork (c).

$2.(C, $2.19 ? ':I ei.o u in i 2. a *. l bs idend.< per >harr.............. $t.32 ft.33

• 1.. ).

41.:pi 5 ;m it.3% ltatio of Farnings to Fitol Charges (d). 4.15 3.75

l.57 2.63 2.6s 3.II JB

'r 'D ' }j ]DN K $ D s.e l Jg A{n J -A. - ki? k f

• h.N ?,# k k ? ' ;M' 1:t t

4* f*" 51 .yw " - ph gyg. h,?';s.l 'q..

ej g 8g wgw_ rj

,j7 } f J. g ge as M M M N GE M w

-= - ~ _ _ __2-fotes to Statements of Income: (s) Reference is made herein to " Business-Rates" concerning rate increases. (t) The allowance for funds used during construction, an item of nonoperatin not represent current cash income, is defined in the applicable regulatory system cf g income, which does the net cost for the period of construction of borrowed funds used for construction as the estimated cost of such fimd.s used for constructionreasonable ra purposes and a p determine the allowance for funds used during construction was s% duri ,,u,.;.3 7%% January through August,1971, and S% during September through Decemb r

gl allowance for funds rate of S"'. was used during the. entire year 1975 and Jan e,1974. An-g, 1976 for gas and common construction. The S% rate was applied to electric const rough July January through September,1975.

c on from computing the interest component of the allowance for (*mds fro 5% to a pretax rate of 10% for its electric construction. The income effect of increa change had no effect on net income. allowance for funds rate has been af ? E ng the e t,d to construction as this requires arbitrary cost allocations ,Si %A used to fmance construction during the five years ended December e at funds .d { months ended July 31,1976, 31, 1975 and the twelve capitalir.ation ratios, which averaged over that entire period, 55% for lo ll preferred and preference stock, and 34% for common stock equity; and also ass ,11% for 'L reflecting the federal income tax effect except as app 'f' p October,1975), the common stock' equity component of the allowance for funds 5.0%,10.5%,19.0%,17.2%, 21.6%, and 19.1% for the ye uring months ended July 31,1970, respectively. welve For the twelve months ended July 31,1976, the allowance for funds used durin t relauve to construction expenditures for Bailly Unit N1 at the Bailly Generating on a $5,811.000. had halted construction.See " Current Status of Nuc! car Construction Program at B c I For the twelve months ended July 31,1976, the allowance for funds used durir constituted approximately 41% of' net income available for common stock, a on u approximately 57% of net income available for common stock was paid out in dividend n_ ..d

• it) The 4% and 44% Convertible Debentures outstandin

~~ July 31,1976 ($21,013,100), g at December 31,1975 ($24,022,900) and were convertible on December 31,1975 into 1032 018 and on July 31 $ 1976 into 1.031,533 shares of common stock upon the payment of cash totaling $8,862,418 an I $7,737,659, respectively. Earnings debentures and the 6%% Cumulative Preference Stocl< have been

• debentures outstanding at the end of the respective periods had been converted as e (i) their issuance and as though the cash that would have been received w uld h of the date of

' been converted as of the date of its issuance. purchase sharca of the Com ave been used to o

- Q

@ft Y = ^ ' /- g i (

^ ~ _. _ _... e -a k:WI (d) For the purpose of calculating the ratio of carnings to limi charges: (i) earnings have been calculated by adding to income before interest charges, federal income taxe TQ 4.. i deferred investment tax credits (net), deferred income taxes (net) and federal inco _-Q included in other income (credit);(ii) lixed charges consist of interest charecs ami a net premium on debt. a on of charges. llents are not significant in the aggregate arel are not included in fixed i .y The pro-forma ratio of earnings to fixed charges for the 12 months er:ded.luly 31.1 M after giving elTect to (i) annual interest requirements on the long-term debt of t 7 q* k ; f ' 31,1976 and the Series Y Bonds;(ii) the elimination of interest on the 4"e Convertible lie October IS,1976; (iii) the elimination of interest on bank loans that were outstanding s N, I months ended July 3L; 1970; and (iv) the addition of estimated interest at an assun.ed rate ^M I - (the prime rate in effect at July 31, 1976) on average short.tcrm Lorrowings expected to be out. l standing for the 12 months ended July 31,1977 based on the short term borrowings <>ut the 12 months ended July 31,1976. The annual interest requirements on the outstanding long. term debt at July 31,1976 (e $754,000 principal amount of long-term debt due within one year and $3,553,700 princ 4% Convertible Debentures due October 18,1976) are $47,751,-132. The annual inte on the Series Y Bonds will be $5,025,000. 7 July 31,1970 was $2,557,7Gl. The interest on short. term loans for the 12 months ended 4 ,J The followimt unaudited figures summarize the latest available infortnation: 13 Months 8 Months 8 Stanths I Ended Ended Ended j ( Auctest 31. August 31 A ugust.11 Operating Revenues (000).. 1%,ty ,,IM3 IM4 l p,ol.. u:.

J,0.501 v i t s, s..i Net income 000).............

Net income (Available for Common Stock 000).... ?'f 5 61.EM $ :17.361 $ is.612 "i!$ f Itatio of Iper Common Share.......... (. Earnines 5 55,31s $ 31,117 $ 12,239 i M, $2.15 $1.54 $1.81 .arnin Actuat......gs to Fixed Charges: A Pro fo rm a................................... 3.21 2.92 These amounts, not examined by independent public acnumtanta refleet in the opinio 7 management of the Company, subject to the resolution of the matter discussed in Note 7 to the 7 financial statements, all adjustments (which include only normal recurring accrua j present fairly the carnings for such periods. ii Management's Discussion and Analysis of the Statements of Income, l The Statements of Income reflect the results of past operations and are not' inten representation as to results of operations for any future period. The outcome and the effect of th litigation regarding Bailly Unit N1 cannot be currently predicted. Future operations w be atiected by various and diverse factors and developments, including possible change and gas rates, general business activity, taxes, labor contracts. fuel costs, environment the cliccts of various conservation programs, and other matters, the nature and clicet of which now be determirwd. 10 P D T 0 _r s ~ 'M 5.?ib ( f r ""8' g. .P ' 90 I

l .\\l'aterial fluctuatioas in revenue and expense items for the most recent years presented on the oing Statements of Income are as follows: E!cetric revenues increased approximately $2S *l, 5IS.3 and $11U1 inillion in the years 1971 and 5 and for the 12 months ended July 31,1970, over the prior periods. The principal factors causing hise increases were as follows: Variations from Prior Perio I t (31illions of DnHaro 1231onths 4 Ended b,.; July 31, p y 1971 1973 1976 llate increases.... ........ $l2.0 $11.3 $29.fi Fue.1 adj ustment clause............................. 12.I 31.9 3.1 j 5 Changes in total KWil sales !cvels and changes in sales levels to the respective customer classifications..... 3.9 2.I 7.6 [ $2S.3 $1S.3 $ 10.ti ( l Gas revenues increased approximately $2S.G. $39.7 and $20.2 million in the s car-1971 : ant 1975 I ci for the 12 months ended July 31. 1976 The Company's rare che.hles D c..: m -i.. i.. o-l tatoners contain a rate adjustinent clause for changed cost of pi.rtha>e i.:., -loi h ...ir p twLing factor. These variations from the prior periods were a3 follows. ( Variations from l'rior Period f (31illions nf Dullare 123Innths Ended g July 31, i 1971 197.1 197ft i Tracking (purchased gas adjustment clause)........ $12.7 $19.1 $ 3.6 I l R ate in c rease................................. 20.5 Changes in sales levels to the respective customer clas-l safications and increased sales.................... 15.9 .I 1 1. 11 $2S.fi $39.7 $20.2 The decrease in purchased power costs for the year 1975 reflects prirnarily the production of Unit 2at.\\lichigan City Generating Station (Unit 12). The 1971 increase was the result of increased irements due to sales increases and the rapidly escalating fuel costs which are relheted in fuel @.struent clauses in the Company's purchase contracts, and also reflects additional purchases due to y hefull capacity of Unit 12 in service May 31,1971, not being available during its shake-down peri wl. increase for the 12 months ended July 31, 1976 was the result of increased respdrements due to increases. ) k I'uel for electric generation expense has increased due to the higher costs of Western low-sulfur 'as well as generally escalating costs of mining, transportation and other related co is which are ed under the provisions of the Company's coal contracts and due to the recluircinents of !! nit 12 [ 3rars 1971 and 1975. The ih crease for the twelve months ended July 31,1976 was the result of a l - sverage cost of coal consumed and a decrease in generation at the Company's stations. i Cas purchased costs increased due to higher pipeline rates even though the arnount of gas pur. decreased due to milder than normal weather and a declin. in industrial activity as well as cur-i 1' ts by the Company's pipeline suppliers which resulted in a decrease in gas availableg. de. Nn n R DM l E 6 n s L i ? --c .-=v e ~ ' " " * * ~ " =

j Operation and maintenance have increased due to the clicet of intiationary pressures on ) y and materials. u aers f increases in depreciation expense are the result of addition 3 g depreciation resulting from Unit 12 heing placed in service Slayto pniserty inchnling the :ulditional 'l 31, 1971 and the increased rates of 3,1975 and the electric rate onier of October 6,1975. depreciation approve ary 4g in October,1975, the Company changed its inethod of comt utin allowance for funds from the u e of an after-tax rate of G in a pretax ra!" of 107 for ite the y S construction. The incomo elTect of increasing the alhovance for funds s ebvtr:e Q 9 provision for deferrnl income taxes, so that the change had no cilirt on nei inc ra m has been 4ei M.. ou.e. Income taxes during the years 1971 and 1975 and the ? 12 momh4 en : d.lal:: 31.ic compared to each respective prior period primarily due tu lin. iumiom m i tr u. m on,c d ,rs for funds used during construction and investment tax crolin ami dicaiv a . c l... 4 c,- }i, use of full inter-period tax allocation for electric property. u.ii 197', re:In t d M Accelerated levels of construction expenditures (partietdarly construction in connection ) electrie generating Unit 12 at Stichigan City 8tation liailly Unit N1 at liailly 8tation a~nd d and 15 at Schahfer Station) rotuiring substantial additional financing ami the refinanci 1 y interest rates, of hond inues coming due, resulted in increased interest charges and )] in increases in allowance for funds used during construction. T preferred and i ) expenditures during the past live years has resulted in a substantially greater proportion of uction i income resulting from the capitalization of allowance for funds used during constructi n o. i CURIIENT STATUS OF NUCLEAR CONSTRUCTION PROGRAM AT BAILL ( In August, 1970, the Company applied to the Atomic Energy Cenunission (AEC, now the [ Nuclear Regulatory Connaission-NRC) for a construction permit r-d operating license for in Porter County, Indiana. The Company presently has fossil fired units I c gan j 620,900 kilowatts at its liailly Generating Station. a net capability of i Against llailly Nuclear 8ite, llusinessmen for the Public Inter >g the construction of Bailly Unit ~ proceedings before the AEC. Ni (the Joint Intervenors) were liermitted to intervene in the e o O K authorizing the issuance of a omstruction permit; and on Sla 1 ) I irectorate of 1.icensine issued a construction permit. On Stay 6.1971, the.b, int Intervennrs appealed to the Atomic Safety and I.icensing Appeal floard (the Apleal lloard). On August the Appeal Board allirmed the order of the Licensing Boani authorizing the con tru ti 29 1971 Unit N1. c on of Ilailly s Appeals for the Seventh Circuit (the Court of Appeals) on SepteinherT 13,1971. The 8 tate of Illinois l and the City of Gary. Indiana, were permitted to join the.loint Intervenors in this appeal in opposition to the construction permit. On October 16,1971, the Court of Appeals granted the Jo Intervenors' Petition to 8tay certain construction activities thereby clicctively halting constru pending a deci3 ion of the apical to the Court, of Appeals. i 12 DTD "D ~ 9$ MoS . 5 $lnb o m' - - w t A 4 s Q p ~ p 3 L =v. .x 4

~ n.snrme.u.

• Unit N1 and ordered the excavation therefor filled, On April 1,1975, the "h

On No.rmh. deebion of issues not decidnl by the Court of AppealmSupreme

11. M r. the t w ed. states

]- On April 13. 1976, C

• Petition for Review of Final Orders of the Atomic Energy Co I

April 13.1976 decision, which were all denied by the Court e construction [ ' On August 27,1970, fi!ed with the United States Supreme Court. a Petition for a Writ of

• f '

.n ana.

l9 Company in opposition to the petition was filed September 21,1976.

. The brict of the l f the United States and the NRC will file a brief in opposition to the petition.The Company anticip [' Company a construction permit and relies on the Suprem the Court of Appeals decisions of April 13,197G and June 1,1976 ,1975 and predict the action of the Supreme Court of the United States on the August. Ilowever, th Writ of Certiorari. The Company will be unable to construct Bailly Unit N1 unless the C 27.1976 Petition for a continues to prevail in the pending litigation and cannot predict the amount of delay mpany .l even in the event the Company finally prevails. ~ By letter dated June 23,1976, the Secretary of the Interior requested the Chairm 3 to review and reconsider on NRC's own motion the approval of the construction By letter dated July would be inappropriate to take the course suggested by the b the request. o grant spring of 19S2, are approximately $675 million exclus ) j i i ~, ' luel costs at page 17). If construction of Bailly Unit N1 is,lelayed beyond the sp ee anticipated that costs would be substantialty increased for any later in.scrvice date Approximately $78.5 million, including allowance for funds used during construction h espended by the Company on this project as of July een 31, 1976. A summary of these expenditures follows: h (Millions of Dollar 9

• g Nuclear steam supply equipment.......

Turbine generator equipment............................$29.6 + Engineering services...................... j .l. 3 Umidings and constr 10.1 Fuel.............. uction facilities........ 5.1 AEC licensing expenses 7.1 Const ruction managemen................................ l.S t........ Miscellaneous overheads................... 1.0 Allowa7ce for fu 4.4 Other..........nds used during construction............13.1 2.0 Total............................................. 4 $78.5 ? In the event the Company does not continue to prevailin the lititmtion and t;uild s.certain, at this time, just what part of the Company's total expemlitures woohi he r I3 0 3 t h I

'[I t what the extent and timing of the resulting adverse economic impact on the Company would be. The

• 1 Company is continuing to capitalize allowance for funds used during construction on this unit.

O b b 'h 7 BUSINESS The Company is a public utility operating company engaged in.*upplying electrical energy M natural gas to the public, it operates in 30 coimties in t he northern part of Indiana, serving an area o 9 about 12.000 square miles with an estimated population of 2.121,000. h served approximately 313,000 customers with electricity and approximately 173,000 with gas. The The Company at July 31.1970, f+ principal communities served with electricity and gas, the principal power plants and the prin j electric ar.d gas lines are shown on the Map included herein. e f The percentages of the Company's revenue and utility operating incoine. hefore federal:ind > tate M income taxes, derived from the sale of electricity and gas for the years 1971 through 1975 and fo j j f twelve months ended July 31,197G were as follows: ,',1 12 jt Months Year Emlest December 31 I'micd I ( July 31, 1971 1972 1973 1971 1973 197G llevenue: l Elect ric......................

10. Gc 12.3'i 16.3'<

t'. i' N.I i ?>o. W; Gas......................... 59.I 57.7 53.7 '3.3 51.9 50.0 $o Utility Operating income Before Federal and State income Taxes: 1 Elect ric....................... h Gas.............................. 15.1 51.l 60.1 50.0 56.S 63.3 i 51.9 IS.G 39.0 19.1 13.2 36.7 The utility operating income shown above does not give effect to interest expense or to the related allowance for funds used during construction. The investment. '.a e etric plant is substantially a' than the investment in gas plant. ' I I ~ Electric Operations. The Company owns and operates three ci ctrie generating stations t.> l fossil fuels with net capability of 1,75S.750 kilowatts, two hydro-elceirie generating plants with rat net capability of 10,000 kilowatts. and four gas turbine generating units with net capability of 86,1 kilowatts, an aggregate of 1,S51,S50 kilowatts. An additional 690,190 kilowatts of capacity are being purchased under contracts. providing a total of 2,545,010 kilowatts. e @h The peak !nad of 1,996,0S7 kilowatts occurred on July 27, 1976. The reserve margin at time of j system peak was 27.5%. The Company has maintained and currently intends to maintain a minimum i of a 15% reserve margin and has a supplemental purchase contract to assist in assuring this f This contract provides for up to 175,000 kilowatts of supplemental capacity if the system reserv i e margin drops to less than 15"i The maximum kilowatts available mnler this contract, including supplemental capacity, would ultimately provide a total of F35,100 kiiowatts available from purch 4 DQQD QD i y p p.c immersegr m l Ngp i H ll gw m. 1 A yt M; a,4 m [ g [ g. ". e- 'V 1 n 4. m ya j ~ w. l p 6 e @~ y m.- _ 'q. f

• Qg Q.)l g - m -Yg I

-~ 3 e. g,g _ _gl gy, g 3 E_M =$- I( k 4%.

k. 3@.M M E

hi gifEM d_f W,] Q@TP; i l

cont.racts, providing a total sycrem capability of 2,720.010 kilowatts. This supplemental capacity 3 contract expirec on June 30. 1979, and the Company is considering an increase to 18 to 20% in i minimum reserve margin at that time. l The Company's electric system is connected with that of Commonwealth Edison Company of hidiana, Inc., Public Service Company of Indiana, Inc., and Indiana & Stichigan Electric Company. l E!cetric energy is purchased from, sold to, or exchanged with these utilities.1)nring the twelve months ended July 31, 1970, the Company generated tv, and purchased 32rc of its electrie energy 3, requirements. w The Company is informeil by the utilities from which it purcha.-es electric energy that such util-ities are able to deliver the chetric energy to which the Company is entitled und-r i'< purchase 1 I contracts. The Company is a meniber of the East Central Area !!cliability G,mli:.at o.n.werment i (ECAll). ECAR is one of nine regional reliability conneils estabh3hed to coordinaie plans l and operations of member companies regionally and nationally. A new electric generating unit, Unit i1, is presently under const'rnetion at the Company's new a generating station site on the Kankakee fliver in Jasper County (the !(ollin M. Schahfer Station). Unit 14 will use coal, will have an approximate net capability of 177,000 kilowatts and is scheduled for completion and commercial operation in November,1976. In 1975, the Company commenced construction of another electric generating unit, Unit 15, using coal, at the Ib.llin M. Schahfer Station, with an approximate net capability of 527,000 kilowatts, for operation in 1979. Construction of a new nuclear fueled electric generating unit, liailly Unit N1, with an approxirnate net capability of 615,000 kilowatts has been delayed primarily due to litigation. (See " Current Status of Nuclear Construction Program at Bailly.") In 1973, the Company antered into a contract with the federal Environmental Protection Agency y to construct a sulfur dioxide removal system at the Dean !!. Mitchell Station in Gary, Indiana, at an estimated cost of $11,100,000 The cost of this project, designed to demonstrate the satisfactory con-trol of sulfur dioxide emissic ns from the burning of high-sulfur content coal, will be substantially divided equally between the Company and the Environmental Pro:cetion Agency. The Company does not believe that a successful method of controlling sulfur dioxide emissions has yet been demon-a y I l strated that courd be adapted to the Company's recluirements on a conuncreial hasis and there is no 2 assurance of success for the subject project. Construction has been completed and testing procedures i are in progress. See "flegulation-Environmental Matters" for [mib!c increased expenditures ~ regarding environmental protection facilities. 4 f The Company is presently supplying muler contract chctricity at wholesale to twelve local Itural E!cetric Membership Corporations operating in rural areas and eight municipal electric utdities. Electricity conservation measures which may he imposed by Conerc<s or regulatory authonties s and voluntary measures to reduce the consumptiorr of electricity conhl result in reduced sales by the I Company, although any such reduction may be offset to some extent by increased use of electricity restiting from substitution of electricity for other energy sources. Y D" D

• D

~ %~ { h \\ 15 S i r wo oJ - u-3 I E u ; c q g,j anac a_, E s ^ j Ei N ewww aws--ioe.v--weya-rem.p.e,,wwm-y.y ,, pyg sygeguno'i w w - g g 3gg*-wgpyy-tr--

J Fuel Supply. Generatine units of the Conqiany. located at the liaiHy..Thichell amt Alichman ('it Generatmg Stations. with a net capahi: sty of 1.f;S7.7T4 kdowatis. are fuelnl by coal The Company is maintainmg its coal stock at a normal level of 70 days and is planmne to merease its mventory to a level of So days by June,1977. A unit at Alichman City with a net capaluhty of 7tJW kdonaus is tired by nat ural ga.s ( ;a s turbine units with a net capahihty of Ni. loo kilow an< are fired by od For . y the twche inont hs ended 1)ecember 31. 197T>.the fuel rnpurement. for the ( 'om pa n y 's e"ner:o me w ere supphed by coal (s7 OW. natural gas (11 W:) a:ct fuel od (I r,) ami f..r t he Iwelve no m bs ut.n s ended.hd3 31.19N ti.e f uel rninirements w cre supphed hs. <,ai (u.r, t nat urn! /a< ( 10 l': i.no t fuel

y b i-d ( 75 )

h n a n t in pa t ed t ha t for t he ca le m L y-a r 19N.

• he -o p; h a El L... d pc t n.r i...d sn (2'-).aullu<l od (2.)

v In 1975 and for t he twelve months ended July 31.19N. the (impany useil apinos.:n.acly 3 s ^ nuS.o n un of coal a t us generanne stations The t urrait e-t unaint aroma: usa er ot coal for u s i, generat uig -f anons is about 1 S millmn ton, per year, with " ce in.a ted ageregate ro pm. ment of aiqiri Nuiiatelv lld 0 noiholl finns over the eslMnated refnaining usc[ul lis e< a>I t he generatine -t at u in A bout 21 s mdhon nun of the 102.ti milhon ton requirement are coninn ini for under an cu une -upply com ract wluch espires December 31.1958 and abotn 19 mdhon ron< are contracted for umier two contract s which espire Slay 31,1977 and Alay 31.19M The balan. of the reiluirement w di h s ae to be obtained t hrouch negotiation of extension of exi.-t mg cont ract, des ch pment of new coniract s .uvl spot pu rchase.s in addition, the Company wdl have to secure a supplv of low sulfur coal for Umt 1., now under construenon at the llollin AI. Schahfer Statn.n A h houch the price of coal is-iueh and aculabihty of addnional cou questionable, the Company behew, n u dl succeed in procurn.g coal i for all of to fut ure requirements. g l i The coal supphed under the contracts described above inay have a luther 3nifur coment than rns tromnental reculanons would permit in the future in the event that t he Company i., prohihned from usme coal now furnished under contract. it is not able to estunate t he av:ulabihty of low sulfur coal or t he.unnunt of mhlitional co3ts if conversion wouhi he ma le t heret o See "Itceulat nin-i l{ns iromucatal Alaners-Air ____.4__m_.____ c\\eced N r) U yoining coal to he dehvered at a r3te o[ j 3 mjll ion to [ i ngl hon [ong per year hetWeen f, .luly 1.1971 and. lune 30.1951 *it is estimated that the new coaldited eenecarmg unit, l'nn i 1. at t he m h m ~.,, _ m e. ta _ m. ~ _ ds -. o m _,_. aca 0 operanon m 19N. an annual usaec of about 1.3 million tons and ah m 13 5 nulhon o,n-wdl he 7 rnpured over as nual estunated useful hfe 1 i ay T!.c t i mpant al-o has a contract for dehvery of 9 n i 2 nulh..n 'on- ~f b,w nam u..none co d t o he dehvered bet w een Slay 1.19N and.\\ lay 1. I'.C7 h pu,cm h ma mi, hmn 6i 1 at n.\\i n chell.m anon. I i The Dunpatiy has u lo.Hy owned subsidiary. Nil'N'() Fuci (~. Inc ( N;foi) w hrh w a, a oi u a tu /.n i tor the purpose of acqu rmg additional sources of fuel Nifco has no piesent dehnnive i '.f ninil f ra'n t s f herrii'r ffM w) Ci @ % I Q ] ] [Q la l pf%& ~ o Q:g

g J QW.4 %.n

, pfy % 7,.. N ~ k-N '. .?).(( % &!!Y f W 'lf{ f va ,. m ? - + '., y ( ' d,' ', 3, " * -" '

• U j.. '

~ ^ a u *v :. c' - ri

• O t

-+ r3 <%

• 7.

. % A

y. - **

...,5 w 3 + ,, M(.# ?. e .,, ;.f ,; h I 3.-9 AM ? ? '. L 2 ,x T 3' #.f o. y , s ..- N r .'., h & *j.

• h..%

I' .? V

• '\\)),

w.a py(4c4 m. y %, J..$ . y.y :e.... a

4..n.,g g,

- se s u. s m.- :- [e.%s w g.. .j d-54. s "-{e g b. tj, 3 I. 3 :p -M= p).g / $ y-( '[ .T. ld.g-- ~ m.Ag g.y, #,;

49..

. J e v...

k . _stan,w. ;a, L v m ' s a.,. n 3 2 ?_9 y y, s.,,,,,g c a.t % g %., ; .. nm W.. A ggy . (. l O

1 million Btu or $14.30 to $25.13 per ton. The averaec costs W MS to $1.2ti per Ot Per Milhon Per 1970 titu Ton 1971

8. 2%0 5 6.cs 1972

. :d 10

7. II 197:5

. :t%7

7. w

"".4"i 1971 .t7m v ::t x 1%a .5107 !!.[2 4 12 months ended July 31,1976. ... r_m

15. :5G

.7572 15.19 substantially recovered through the fuct adjustment clau-rCosts of en aws ha ve 1,een electric customers on the basis of the cost of fossil fuel us m ilm Compain N ch cine rates Iim e raies of u-fuel cost adjustment h policy of the Public Service Coimmrion ranons The current adjustment be based on a projected three month average cost thereby climimoing of huliana provvies that -uch I

osts to the Company are increasing due to escalator clauws in the ( hmp I

ecovery lag ( bal which increases cannot be presently estimated p The l'otupany cannot anyi coal upply cont racis, l actions taken by federal or State authorities to allenate a simr <pra niif y the effei which a I 1 1 o rogram or ollwr g operations or operating results. e may have upon us funne l The Federal Power Commicior. (FPC) has a program to pronnoie con crvanon requested most of the nation's electric utilities to report of fuel :noi has The Company has fded such reports but cannot predict the etreet of such proeramf planned memures ,,, 1 . 1 upon as opera nons to the following matters regarding nuclear fuel supply at HadlyT { d fladly" s appiicahic l hexalluoride (hexafluoride) for Badly (JnitThe Company ha.s ac<pured app i j St. If the Company continues ents of uranimn e h j htigation and goes forward with the construction of Hadly linu N1. o u dt hav to prevail m pending contract for fuel fabrication. for which a commitment has been made of spent fuel and for the remainmg reepiirements of besalinoride for the inin l. and wek h a a i '. -b have to. seek bids for uranium concentrate. conversmn to hesaduarnle a core load it wdl a spent fuel and for ennchmg services. There is no assurance ihat ans of the n, fuel h I of available. The Company estimates the fuel eyele costs for the tira ten years of ece sary cont racs w ill he 7"1 I million based on a iM2 m-service date and that cost, w onhl be luzher for any l t operanon u di hr 5:m., Even if the nuelcar unit is constructed, the Company could noi a er m en :n dan-investment therein he u3ahle until u h t operate o nor wouhliho ('o m pany x A sc une as the de.senhed cont racis ra n he n ured g The Company cannot prediet at ths time what ditlicuh ms Of riuclear wastes. ey The ('oinpany does tiot currently have. n,r is eu di he encountern! icua nina.h-n wl therefor but it will have to deve! ip such a plan, wluch w di rmpu m e:o ly : n pored r.. i. i t. i.!, along with other federal agennes, a m t he procer of det eh uoat n cul u mi re t he appm.d of NT t Ti.c NIM areas. r.aui coolchne m t he-( Wl Y l 5, %O) ' j.i'f g*&'+l.*A 1 [,[ l ~ ~. ljL, s '.'e y, - g, ,4 si ~ r ', WY ? I ' ' } ',i $ f l g n.,,,. n a. Ag*g 4, V g,%=w.( k;h a[, d <y v i.v. wt. p 7 v .,. ~ s' s. c v +* ' N [? '. u he,' .b . % p#.4.:.. d c 8-a g.' '4,i tb'.M ,*., s y,. JD4 .,. > g , I.

4. A f ' Mtf,;. Q h-g.sf.NM. ':

. 4 ~ 5.*p.A.w w & .M c. 5' - v. w E'i -, ^ ~ 9, *,.4 qsi <- ~ _ 1 '. }z - r - c '.$gA,, '. & yh wQk q.g,..m g' }*,Tr. p-'., "p, Y*N [' g. U _ V.:e n -+ '. b k.f .,1 $. *D W "- O '. -. a. \\ g$, 1 0 ' ab N MNM k* ' c ' ;* ,A G

j.s The Company and Public 8ervice Cornpany of imliana, Inc. (P81) executed a Letter of Intent on August 8,1971. If a definitive contract is executed pursuant thereto the Company would own and be entitled to 2tn of the output of each o' two nuclear units to be constructed P81 at Marble Ilill in Southeastern Indiana on the Ohio Itiver in.leiferson County amt in. uch event the Company would also be responsible for 2fn of the fuel cycle co3 h-The company is also considering either (i) negotiating a purchase from PSI of 20% of the output of each of the two units instead of ownership j (ii) negotiating a purchase from PSI of 20% of the output of Unit I and ownership and entit'ement to

b the ou

put of 207 of l~mt 2 or (m) takine no pa:nnpation in t he-c Marble lh!1 facdines. No i

I 'P agreement has been reache'l w ith P81 w ith reference i, t hne fanht.es mee note 3 (cj and (d) at page 1.) l l I Gas Operations. The Company supphe.s nnt ural cas of about IJNio Utu per cubic foot The g maximum day's delivery of gas was approxunaiely 1.271000 Mef on.lanuary 16, 1972. During the at 1975-70 winter heatmg season, the maxunum day's delivery of gas was approximately 1,273,000 Mcf ( on December 17,1975

e.,.

{ The gas is purchased from Natural Gas Pipeline Company of America (Natural) Midwestern Gas Transmis3 ton Company (Midwestern), Panhandle Easterr. Pipe Line Company (Panhandle), p Trunkhne Gas Company (Trunkline) and Michigan Wisconsin Pipe Line Company (Michigan-J' Wisconsin), under sep.. ate service agreements with these suppliers. There respective service agreements provnic for dady purcha.ses of natural gas as follows: Daily Purchases Date Current 3fcf Agreement Expires ib) Natural. 16s,795 12/1/90 Midwcst ern 255,000 12/2/88 Panhandle 116,000(a) 10/31/88 Trunkhne 30,000 1/15/S1 Michigan-Wisconsin. 12,200 S/31/02 (a) 114,000 Mcf during five winter months and lesser volumes for each of other seven months. ,I (b) Current term 3 are until date stated and thereafter untd terminated as provided in the respective agreements. 1 On November 1.1971, the Company entered mto a Winter service.\\greement (100 days during the Winter Period) with Natural. Pursuant to the aercement the service was for 7.116 Mef per day during the 1971-75 winter period and e'rective !)ecember 1.1975, the amount of such service was increased to 27.010 Mef per day during the 1975-76 w mrer period The Forepany has been informed by Natural these deliveries will continue at 27,010 Mef l "r day for ihe 197b77 wir.ter permd. The FP(' has entered orders and is considering procedur"s concerned with the estabh.-hment of mea;,ures to be taken for the protection of gas supplies All of t he ( ompany's suppliers are presently curtaihng delivertes based on their respective nuhvninal curtaihnent plans as filed with and approved y by the FPC h I 18 uca mu 'l = t l'

' $4tf % g.w r w m n yy.a; w.c;r 5 a m,. a p. e. - m n ..k m..s >. ~- a. n m w -9: a y..- %, } v ~-o

m,,

e, '" ' f t.e-'7 * ; el i,,

m.. -:

,p. .,? n [ sa, s ' - % '* p ,1..- s .- eL += L. e > p n. s ; ; ;. ;... - g,,

• }1,,

f, 1f n ~ y k.e I

j. '

S.

s. =

7 e ...,,. y.. g g 1 ; gw a s.v. eye : .,. 4-e. r g., < W s y p.<. 4 f. a w.n f ,3';%h _ pg. gh fkk

• y :

w l l .I 4 .\\ wr:u r i.uly mirt aihn"n'- ( n: Mcf) for t he tive inanth winter -r: -on co:nnene:ne N"v"nd.cr 1 4! d t he sev, n noi.t h 'unn,cr ca -on. .na:r ncine.\\ prd I are a follow s eq Estimated 1973-76 Winter 197G S u nt m e r 197G-77 % inter Oloft ISIffl (MCII N at ural 1 1..iod 110.""" 33 I"" M:.. e tern ' rih M M.*"' O

• h" Panhand!r 12.000 22.!"'O I1 Trunkline.

13. ni M i 13. ( H ' I 1. U "' M wlutan-M -con-m io 'ne nonc n"n" .\\il of 'he supphers chaneo t he ir cur'ailn. st-on wea ten as t heir part a olar ea supply si* uation chane n but all chane", are in.ule o. cornphance with t heir resp. et n e ITC appros ed curtaihnent pbn-are af luo ; lo.nl factor of the ea avai!ahic to it under the s arious The (in.pany*, puri b..-es cintract-an.1 cur t adn.cnt order- 'I h e drinand charers for ea, purchawd frotn Trunkhne el Natural ar no' reduced durine all curtaihnent periods w hich r" ult < in an increa r m utor cost w hich is :ot recoverable by the (irnpany un ier the.uljustturnt clau-" in its rates to it s c'i to:ncrs curtati any of its rc<ulential service or contracted firm e r vir. to The f irnpany dai rea cernmercial or nolustrial customers m the a mter of 197.1-76 nor does tt contemplate curt.ohnent of f r.vdennal servwe or prewntly contracted nrm -ervice to commercial atol imiu-trial custone " any The e.unpans does haw a tr-nico.in on :tc a-es 1.cyoral present crvice comnot tncnt, of coinn.rrc:a! cr ' in t r:al u-au" m em - of 30 Mcf per dav i c.n 'q hir es.tlhl cauw.itii"r c';rt ai} ment a d lir"wn! aml [' -- t f i + ' I t a l 'alst.i. !r

e" dl -.nM c: riathn"nt or of her treniatorv procr!ures Y

r.. o.- I' i i i ha-i. p'ra! Din J!I 'irulerch'utul ca -n.Tage Nrl.5 at p a:.a J. " . a:- t- .ade m the w u,ter of 1975-76 of up to l l '>.13'i M e i pe r o. c.n - orata -er' we at:"' :m ni s w hwh mahe p. 3th!c t he t he (

.; a;.

ha-

q in M, raw ai of qu 3: annal. pun'me ri ca-f:om.ther storaer faciht w-

.\\ torae" -erv:ce acrectneta aun.Na'urai p:"voir-thr ( in.p:o.y w o h a maunnun d.ulv wn!sirawal of lau3s Mef of ea- .\\ tether t/rcen. cat w it h N at'n al ros ers ot hs. r t orage 3ervice with a maumum. lady withdrawal i f UJ,3'!l Mei.\\n aerr"!nent w if! Alb!Wr*t"lP J'rI'v;de% [UT a !nasi!ntini ilady wit!ultaWal ed Ull.M7 bIc[ 4 The aztec: with Natural contmar to Ib mher 1. lovo arol March 1. lieri re-peen.ely and 'he n.:rcement with Moine tcrn untd November 1. Im7. and thereafter until ternunated as provided in th re prente acrectnent s Thr Cornpar.y, as of.lanuary 23.1976, enterr 1 into 15 year contrac's wi'h Mo lacat. W : won m at.d Michican Fon-olulate i for a total of 6 indhon Mcf of annual -naraer ser'.r e ta ? ore cas piircha3rd [T '!n Olbers N 'll etinf rat't4 'tre Hlbject to ITI ap}'roVal. The Co!npany ba.4 a one year actrement with Panhandir. winch provule3 for a Orm masunum dady witlo!rawal of 13311 Mcf arai a po.9hle dany wulairawal of 20.000 Mcf durme the 1976-77 Leaune -cason. The ap" ment n subject to anprosal of the IT(' hefore it can hrcoine effective.\\il of t he t oraer aercement< have h:mtation, ori 'he total annual w a hdraw al ami the t: ming therref. The (in.pany has a inpmned naniral ca plant in I.aPor te Cou:a

• w hich n de tened for peak has me atsi ha-ihr follow me capacu a - masuniun -toraec of 2.non,ono Mrf. masunum hquefaction 7n 19

'l J

1. , rate (gas a li<inid),10,000 Mcf pee day; and maximum vaporization . #f;i) system),2t0,000 Mcf per day. o distribution ,: ' MM - In 1973, the Company organized NIPSCO thploration Company I 1a subsidiary The Company has been authorized by the Pubhc Service Commissio up to $16,760.000 in Nexco. As of July 31,1976 of Indiana to invesi ments relate to participatwn by Nexco with othersthe Company had invested $7 598 000 . The invest. Department of Interior in the Pleistoetne and L cene Basins itin the acqu sition of inte and Louisiana. to predict the outcome of t his wntur"The Company hopes to impr~ve o, inture evo but is not alde no present dehmtive c<anmitments Other u uures by N xen are bena < onsdered but there are ~, f ,q ,.]* f( 69.21e per Mef and for the 12 month.s ended.luly 31The av s .a. ..' m fo m fron, a. opph - wa, I . 1976 w a ~~ 3 ; - %i The wholesale rates of Natural. Midwe-tern. Pant M the Company are i i. Lo" cdWi 4: subject to change enher m m ard..w trackmg procedures estabbshed by the FPC or m rate pr - m i mh m <.eed e.s aam u. t.- ami ram ^ i not possiole to predict the rates that will be estabhshed therebyine hHt uth the FIM ', or b oc. Rates. approved an increase which, haded on the test year 1971On Oc ..W ana Commission) m October S.1975. As a part cf the October 6 rate order the Ind i revenues of approximately 550,000.000. { xr 7 and became etTecove the deprecbtion rate applicable to the electric utility property a Commission approved a change in 1 test year, would have increased depreciation expense ap of the Company to 3.0% which, for the change, based on the test year, would increase the pr proximately $2,100,000 in addition, the i or the electric utility. This $3.100.000. The Company commenced its electric rate case on Novemb rred taxes by approx on the t e st ~ $61,000,000

year, er 22,1971. Its request, based would have produced additional amaual e 'etric reven j

concluiled ;n August 1975. The new rates are final unless rev W ues of approximately l ,a n May 1975 and e imhana law the increased rates are subject to refund if an a sed in judicial proceedines. Under j sustained upon appeal. not During the appeal, however, the increased rates rema Intervenors opposed the Company's petition before the Indiana Co l . elTect. decision of the Indiana Commission to the Court of Appeals of I dimmission and h Court of Appeals of Indiana denied an injimetion soneht by one of such iana. O n of the increased rates pending the appeal. On mrch 30 ntervenors against collection trander the injunction proceeding to the Supreme C.1976 that intervenor filed a petition to Supreme Ceurt denied the peutmn. ourt of Indiana. On September 11,1976, the i i All metered electric rates contain a provision for adjustment reflect increases and decreases in the coat of fuel On July m charges for electric energy i of indiana requested the Indiana Commission to mvesticat to i 12 1971 the P bli Counselor of the State l u c adjustment clauses over which the Indiana Comnussion entered its order holding fuel adjustmen j On m rch 21,1976, the Company has made its lihngs under such new fuel adjustm ~ es withm 90 days The approved by the Conuniemn. e order, which filings have been !O I i . f. s. Md E huh qct .y + 97

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On December 21,1975, the Indiana Commission adopted new rules aml regulations for cicetric s service for utilities subject to its jurisdiction. Certain of the rules will mlversely collections and result in other increased costs. In addition, approximately $3 lion of customer deposits hehl by the Company are being refumini. l reached an agreement for new rates which would pro revenue to the Company annually based on a projected test year endine December 31 d Company and its eight namicipal electric utility wholesale cu3tomers reached a ,1975 The based on a projected test year ending Decemberrates which would prod -=. 31, 1975. FPC on November 21, 1975 These agreements were approved by th respectively. and were made eficetive on October 1,1975 and January 1 e ~ , 1976, The Company purchases electric power at wholesale frenn Indiana & Michi.m Company. On June 25, 1976 Electric Company for fding and suspended the same for one m l t subject to refund, pending the outcome of a decision and hearing thereon. T the increased rates, in FPC proceedings, which would amount to an increa<c to the C $11,300,125 based on the test year ended December 31,197ti. Current ra ompany of fded with and approved by the Indiana Commission, do not provide for trac il Proceedings regarding such tracking'are pending before ilm Imliana Commi% costs. 1 9 Company is requesting authority for such tracking in those proceedings. l predict the outcome thereof. The Company cmmot On January 3,1975, the Indiana Commission approved an increase in gas rate test year ending June 30, 1971, increased rates became effective January 7,1975.would pro <hice additional annual gas . 0.im The utilities to fde rate schedules which would track chang j which have been approved by the Indiana Commission. storage transp i ( All metered gas rates contain an adjustment clause which rapiires the Compan 4 changing costs from the Company's suppliers regulated by the FPC ugu relh et d,f Company and upon approval of the Indiana Commission. On September 13,1976, the Indiana Commission adopted new r~ les and. regulations for se gas utilities subject to its jurisdiction. These new rules must be approved by th u o and the Governor of the State of Indiana before they can become eticetive aw made effective, could adversely affect customer collections and result in othe + addition, approximately $2.2 million of the customer deinuits hehl by the Comp refunded. e On September 27,1976, with the Indiana Commission and requested effectiveness Nov 5 e subject to the approval of the Indiana Commission. If such approval is granted. es are creased rates would produce additional revenue in the first 12 months after e mately $8,200,000. The Company cannot predict the outcome of the proceeding. described above are not necessarily indicative of future earnings E- . g;- 7 E.J 'n i W- _ _ _ - r ~'- g wase i T' . s O,,, _ _, ww--e_m _.__fm __Th n m -1 - w -.-,,--esw,wwws--,--ww.-g-+ ,-e*--gy,%-e.i.wrm,==qwe.y.y wvy-3--.,,i-w--==---v g-,--g-,g-w .ww,+y wy

• g

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g _ _. l l g Competition. In municipalities where the Company renders eleeirie service to the genera. public s m Angola, l as a pubhe utdity no other utihty renders electrie or gas service to the puhhe, except 5 DeMotte, Ibeme ('ity, Wanatah and Waterloo. Ilowever, c"riain mmi palito s ami prtvate concerns in Ancobi and Waterloo the gas 1 located in the terruory served eencrate electricity for their own use I utihty of another utihiy n.mpany competes wah the electrte -ervice supplied by the Company. In f localities where the t 'ompany renders gas service only, it compete, w u h electrie utilines, municipal or Subject to the approval of ) g priva:c, for the hu-mess for w hich they remier alternative electric <ervice a compeime utility voteis, any ammeipaht y m w hich the Company n op ra:n.c can cornoowe afin a hearing, t hat puhhc os h wrs ite t herem if t he ominetpal couned of <nch muninpahiy driminuos t he e-tabbshment of such a unhty therem an I, if an appeal to the i convemence and necenity rapn w (; courts he taken by the Company, such determination is tinally uphehl Under the Public Service Connuissmn Act of Indiana any mumcipahty is empowered to own and f b operate a unlity in such municipahty or witlun six milc< heyond the hmits thereo, or at any p ce withm the county m which such mumcipahty is situaied. The ('ompany is not informed of any proceedmgs pending or conteinplated by any municipahiy for municipal operation or owners competition with the Company, or the acipiisition of any mility property now operated by the i pany. It makes no representation as to the possible e!Te-t upon its hu. mess of present or fu 1 instrumentahties or authorittes ( petition by private or mimicipal utdities or governmental agencies, j [- withm the tert;itory now served. 31,1975 About 73% of its Employe Relations. The Company had 1127 emph>yes at December employes are represented by two locals of the Umted Steelworkers of America, AFL-CIO-CL ) 31,1977 and ; Collectise bargainine agreements for the physical ami clerical employes expire May p June 15,1977, respectively. On,lanuary 30, 1976, the Indianapolis District Otlice of the tupial Employment Opportunity Commission determmed that there was reasonable cause to beheve that the Company engaged in d unlawful employment practices with reference to feinales in manacement and supervisory positions The deiernunation was made with reference to a complaint brought by a female employe and the 4 Conunis3mn has invited all parties to join with it in the concihation process. At this time, the 0 f Company cannot predict the outcome or impact of th"se proceedings. i e f REGULATION In General. The Company is subject to regulation by the Public Service Commission of Indiana 9 it is also subject to limited as to rates, wrs ice, accounts, issuance of securities, and in ot her respect., regulanon by local pubhc authorities. On October 13.1976, the Pubhe Service ('omnussion of Indiana[ [ authorized the issuance ami sale of the Series Y Honds a turmshes at l h 1.31 of the Company's cleet ne revenues are denved from elect ne -ervice A bout whole< ale m inter-tate conunerce to mmucipalities an i Rural 1:lectne Men Aership Corporations. I I These w holesale rates aial operations are subject to t he junshenon of t h" Fe, "ral Power ( 'omuussion The junsdictmn of t he Federal Power Conmu-mn doc not rxtemi to under the Federal Power Act th iruance of <cuntie< hy the Company since it & a pubhe unhiy organie.ed and operating in the ; Nate of imliana. under the laws of which its wcuruy r<ues are reculate l by the Public Service The Federal Power Comnacion on October 21, lu5l, declared the Company Conuni. won of Indiana esen.pt from the provisions of the Natural Gas Act. Approval of the N uclear Regulatory Comnuaion ( N W '), formerly the Atomic Ene gy r 3 Comnurmn. ami other reculatory tolics having Junwhenon th"reof wdl have to be obt:uned before liailly Generaung Station (see l at construenon and operation of the new nuclear eencranne umts @ fl@ 22 '? 1 ,u_y l 1 t i 5 1- " ~ ' - - - a

CompItitlin. In inunicipalities where the Company renders electric ervice to the general public as a public utility no other utility renders electric or gas service to the puhhe, except m Angola. De>Iotte, llome City, Wanaiah and Waterloo llowever. certain municipalities anc pnvate concerns ~ located in the terraory servol generate electricity for their own use. In Angola and Waterloo the gas unhty of another utday company competes with the electric service supplied by the Company. In locahties w here the Company renders gas servie" only, it competes wit h ciertric utilities, rnunicipal or l Subject to the approval of ) pnvate, for the hu-uwe for which they render abernante electric service [ any nouncipality in w hich the ('orapany is operaum; can commenee a competme utihty as voters, i ' hat puhhc y service therein d the mimicipal coimed of -urh inunicipalo y decrinnas, afur a hear ng, t i@ convemence and nece.way require the estabh3hment of -uch utihty thi rem and, if an appeal to the i T t ( courts he taken by the ('ompany, such deternunanon is finally uphchl Uinter the Pubbe Service Coinua sion Act of huhana any nonocipahty is empowered in own and M j i operate a utility in such municipahty or wi ian <is nole-heyond the hnots thereof or at any phice t atthm the county in which such municipahty is snuaird The ('ompany is not infonned of any proceedmgs pending or contemplated by any municipalit y for munmip.d operanon or ow nersh:p m 2 ! compeution with the Company, or the acipusition of any unhty proper t y now operated by the Com-g y pany. It inakes no representation as to the possible effect upon its hu-mew of pre 3ent or future com-f j mstrumentalities or authorities j petinon by pnvate or inumcipal utihties or governmental agencies, l N willan the territory now served I-Employe Relations. The Company had 5,127 employes at December 31,1975. About 73% of its United 8teelworkers of America, AFl.-CIO-CLC. ) employes are represented by two h>cals of the 31,1977 and [ l Collective bargaining agreements for the physical and clerical employes expire Atay g J une 15,1977, respectively. } the Indianapolis District Ollice of the Equal Employment Opportunity J On January 30. 1976. i Cmamission determined that there was reasonable cause to believe that the Compa s 1 i nulawful employment practices with reference to females in management and supervisory positions. d The determination was made with reference to a complaint brought by a female employe and the I j At this time, the Commission has mvited all parties to join with it in the conciliation process. i Company cannot predict the outcome or impact of these proceedings. ] 4 REGULATION l In General. The Company is subject to regulation by the Public Service Commission of Indiana j as to rates, service, accounts, issuance of securities, and in other respects. It is also subject to limited ,3 regulation by k>eal public authorities. On October 13,1976, the Public Service Commission of Indiana authorized the issuance and sale of the Series Y f3onds. IM of the Company's electric revenues are derived from electric service it furnishes at About wholesale in mterstate conauerce to municipalitics and llural Electric Membership Corporations. I These w holesale rates aiul operations are subject to the jurisdiction of the Federal Power Commission I The junsdiction of the Federal Power Conunission does not extend to under the Federal Power Act the i-suance of securines by the Company since it n a public milit y organized and operating in the 'l State of Imhana, uniler the laws of which its security issues are reenlate l by the Pubbe service $j n.h"r 21 IC I. declared t he 4 Wapany Conunicion of Indiana. The Federal Power Conuni>+n on () esempt from the provismns of the Natural uas Act Approval of the N ucicar Itegulatory Comnu-n ( N IU 'u h o-t. j I su L n. l.4 ola.ned o ('onunnsmn, and ot her regulatory bodies having jun A i v.o i hm const ruction and operanon of die new nuclear generannt unn .o Ild, t icorranne 8tanon Dee il r n." f% h 'd; uudad,d-b' ! .M ji { I @ _@Bi"E w av u u i d ____ w,

Current Status of Nuclear Construction Program at Hailly") and at Marbie Ilill Areas of NRC lation include nuclear safety, control of radioactive materials, quahr v assurance durmg truction and operation, environmental impact of 3tation construenon and operatn.n. and certain stitrust matters 'IN NRC Regulatory Stati licenses certain station operating personnel and gyroves certain station operating procedures and practices A decision of the United State- ('ourt of gpeals for the District of Columbia ('ircuit regardmg been mg of the \\ cimont Yankee Nuclear hier Station located near Vernon, Vermont and an NIU' rulemakine reear Im en virom aent al '.4 cts of all staces of the uranimo fuel cycle has been stayed untd October 31. turn s pa ru ~ t o t hai b dmg have petitioned the Suprener ('our' of the Unned 8tates for a h i ,.f i,i: oart The ') I epany is not a party to those proemhnes and cannot predict the outcome thered or the effect of g ytt htigation, if any, on the Company. g Environmental Matters. The Company is subject to regulation unh regard to air and water %!ity, and may be subject to regulation wHh regard to ot her environinestd considerations, by ) I )ticus federal, State and local authonnes The Company cannot fm ecast t he effect of all such ) i $lation upon its generating, tran< mission and other facihties, or a s operat tons. The Company ( uendt to endeavor to comply with all appheable vahd Governmental retporements but also intemls

I p contest any it deems to be unreasonable or impossible of comphance or ot herwise ms ahd 3 l or tatrary tt the pubhc interest.

3 0. The application of federal and State restrictions to protect the environment, meloding bv not l { Aited to those hereinafter described. mvolves or may involve review, certificanon or issuaner of per- ) da by various federal, State and local authorities, includmg the Adunnistrator of the Environmental %2ection Agency (EPA). Such restrictions, particularly in regard to enu<> ions into the air and j i

k near, thermal mixmg zones acd water temperature variations may limit or prevent operations, or Mistantially merense the cost of construction and operation of the Company's generating installa-f kas and may require substantial mvestments in new equipment at existing in3tallations. They may fo require substantial investments above the figures stated under " construction Program" for 1

l pd new projects and may delay or prevent authorization and completion of the projcets The Company's total capital expenditures from January 1,1972 through December j

3 31,1975 for

/ation control facilities were approsunately $55 milhon, which have been linanced principally by i ) Series A Notes-Michigan City arnt Jasper County. l !s9tmmately $15S nulhon for pollution control equipment in theThe rompany anneipates expenditures 197640 period which includes $7A '50n expeniied in the period January through July 1976 and anticipated mpenditures of $9 6 j @n for the period August through December 1976 and $36 unllion for the 3 car 1977 l . Air. The State of Indiana through ihe Indiana Air Pollutmo Control lioard (Imhana Air lloard) a ndopted ambient air quality standards for particulates, sulfur dioxide and mt rogen owbw w it h hted emissmn standards. The EPA has approved that part of a state plan of unplementanon Ohe wa Air Plan) which sets forth emission standards, fixes time schedules for e unphance wah such I andards and designates air quahty regions for the State The EPA ha, disapproved -on e I rnents to the plan proposed by the Indiana Air Board as hereinaf ter

• fort u m t he fourt h o

raph of this sectmn. In additmn, the City of Gary, I.ake County, Imhana. m w hich ihe ('otn-y 's Mitchell Generating Stauon (Muchell Stanon) is located, throuch t he ('it y of (;ary I)cpart-n of Health. Division of Air Pollunon (Gary Air Board) and the C:ty of Mielugan City, l.a Porte of ty, Indiana, in which the Company's Michigan City Generating Station (Michican City Sea-is located, through the Michigan City Air Pollution Control Department (Michigan City Air a )have adopted regulations which have been approved by the Indiana Air lloaid. n 10n June 23,1972, the Company and other utilities filed suit in the I nued States Court of n 15 tor the Seventh Circuit challenging the order of the EPA Adnunistrator approving the state e 23 pa

b., ad d b u d N [U @h h q f MfM L6

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Air 1%n. On.lamtary 23. 1975, the Court of Appeal. issued an opimon alrirrmng EPA's approval of the state Air 1%n and behl that the valnhty of the regulanon cornpnsing the 8 tate Air Plan could be contested m *iale court actions or in enforcernent actions On.Inne 27. 1973, the Company and I certam oiber unhon kleil a cornplami for ihrlaraior y juih nn ni arul uguncuon in the Marnm (:ircuit t 'ourt at imhanapoh-huhana. agamst the hnhana Ernirotonental Managetnent floard and the h..hana Air Board Tin. complamt generally challenged ihe s ahiht y of t he sulf ur ihoxide. nitrogen osnic. ini permo regulain.n, arul the omnner m wiech they were adoe cd on November 10,1975, the Marion Orrmt ( bur ' ustamed the Monon of the ('ompany :unt the o'lo r uohties for summary .I niement hol.hne t hat the bsh;mp Air brulanon< A14 1.t (a ulf ur.houde regulationt melusimg 4 < ld A p( ' id A t (' 1 i t. mhirni air spiah:3 ) All' 19 b on Ir uction and operaimg pernats) aml AP( 22 ( reep u. d e'la--Illra D ui) u ri s' Ins all.1 alstk elijt u rH11 fui t bPr mil' ire'enaent til t juw rege.ations. Ne (nal i .b emon u. beme appealed by t he stat e The parne h o,e agrmi to a ta3 of the inpmcuon court prinhoe an appeal 1 y t he deiendants 4 The Company cannot predict the outcome of the appeal. The r to,.an3 does not hea' n e n presently necerary to enher ble a hke emnplamt agamst the Gary tir o l!naul or.Thelogan Co3 Air Board or mitiate additional litiganon agamst the EPA. I ne t une scheduln ami plan of implementation estabbshed by the ongmal Indiana Air Board -ulf ur rhoude s eculat n.n-which are part of the 6tt <e Air I'lan, required the Company to submit by 'ulv 1.1973. plans and <peciheatmns for back fittir., a ting generating units at Mitchell Stati Hadh (;eneratmg stanon liladly 8tation) in Porter County and Michigan City Station with control on, e n piaent or if the (impany elected to rneet. sulfur ihoxale standards by shifting fuels, by subnutone a leuer of neh mient by January 1,1973. for \\litchell Statmn and Hailly Station and by Aprd 1.1973. for.\\helugan City Station. Substantmi costs, not yet deterrninable, could be incurred in con nect ion wah enher compliance met hod. The Company believes that reliable and effective e,pupment n not conumercially available and that there is no feasible ahernative for meeting the -ulfur dnanir regulations The Company applied for and received sariances from the original reenlarmas relatme to back-httmg units at Bad!v station and Michigan Oty Station to December 31, 1971 and had a vanance application pendmg for Mitchell Station. Prior to December 31,1974, the t oneinal Imhana Air Board regulations were *uperseded by amended and new regulations of th imhana Air Hoard ihsens ed below. e (The original sulfur dioxide regulations, as part of the State Air p 1%n apprmed by EPA. may be a b:ais for federal er.forcernent although said plan is in litigation as i a bove <le-enhed ) The unghted average sulfur content of all coal burnen by the Company at its t i em.crat me stat n.ns m 1975 was 2 29T. the weighted averaec heat vahic was 10.203 Btu per pound. l The otiemal Im hana br Board ulfur ihoxnle regulati,ns re pure utiheainm J a ec ' of not nee t ( ' ha n o r,o', -u l f u r con n n t at a h ai value of in o00 Hin per p. und (o r.F, at a L"at value of inju3 Uni per p.nonH m u der to comply wah the rmpured enowton hnolahons if 'm nssions are not -~ '{ cont rolled by.ther mean-The Adnam nator of the MPA has approved amemled ami new reenbhons of t he Indiana Air lloard relanne to carbon noon.ude, mtrogen oude, vi.chie enamons and breakdowns (in part) and msn uenon and. peraone pernuts (m part ) The Adnuni trator has disapproved a regdation setting huan, for xlaurnmu \\ llow a ble llydrocarbon Ermssion4 in is entirety and portions of the regional c e,incan-n ree danon irlanne to particulate arnt h) frocarbon emiasions-Responsive to amen !cd aul nca regulanons of ihe hohana Air Board regardmg 3nifur thoude liinitations the Company 4 uhnan ed a iener of mieni as to a plan and tunetable for compliance for each of its generating l.a n.ns t o t he huhana Air Board The Company is m comphance with the arnended and new sulfur ih"uile regulanons of t he hahana Air Board at the Hadly statmn en! Michiga, City Station and beheses usclf to be m comphance at the Mitchell Stahon provided a revned formula is utilized to s R y' }gDR[ \\ .nq 3 vDm '] C-h f" . u s 8 3 l e 6 \\ t ~. w.. x 3 h -- Cr. '.. N l

pote emiasion level ( The Company believes that comphance wit h the anwnded and new. ult m loule regulations at Mitchell Stanon would not be lu>ssible if they are interpreted under a fm.aula dich would require use of coal of not more than 0 279"i sulfur content at a heat value of InMoo Ht u prr pound (0.2%5"c at a heat value of 10.203 litu per potmd) (in February is,1977. thr Company thised the Indiana Air Board that the Mitchell Station comphed witb the amended and new ulf ur toside regulatn.n* if a revned fortmda was unhzed but has ut received appo n al or 4hsappria al dereof. The Company has been unhung low sulfur fuel at M uehell sian..n smec.lamtarv t. l977. g sad mpphes of low sulfur coal ha c been obtained for the other tanons in the event of an :or c::ereency The amewh d and new sul dioude regulations reipure monn. ing e sienr at t he H:u'ly I Ation and Michican Un v 8:atton The Company has m-talled these. systems The sulfur donide. g reponal classilication and pernut regulations of the amended and new regulation < are hemg contesu d 3 m the abnve de.senbed acnon tiled June 27, 1973, against the Imb:ma Environmental Management j Board and the Indiana Air 10 ard m the Manon Circuit Court and enforcement thereof has U enjoined by the Court m its order of November 10, 1975; however, the parnes have agreed to a stay of been I the injunction pendmg appeah it is not anacipated that the other amended amt new regulations 4 sould have a signuicant adverse effect on the Company. The amended and new regulations of the f Indiana Air Board relatmg to sulfur dioxide emissions and regional classification are not part of the 5 tate Air Plan unless approved by the Administrator of the y EPA On Augu.<t 21. 1976, the Administrator of the EPA disapproved portions of amended and new regulations APC 13 (a sulfur ) i koside regulation) and APC 22 (a regional classification regulation) and stated tha< ohl A PC 13 is j spphcable m Porter County and I.aPorte County. The CompanyN lladly gener.tme station is m l-Porter Cosmty and its Michigan City generating stanon is in I.aPorte Count 3ok! A P(: 13 woubi d have required comphance by January 1,1975. The Company does not agree wnh the Adnumstrator sad will take such steps as necessary to maintain its pmition On September 22.1976 t he ('ompa n s j pennoned the United States Court of Appeals for the Seventh (iremt to n s ww t he W munaram s tj scuon of August 21,1976 If t he ongmal State Air Plan is ( oforcra hb t h. t L mp..n. j fw sulfur dioude controls m ode w onhl I.e substanually increard. c The State Air Plan al o includes regulations requinne permn F flo 'o X

3..

I Inodtheation or operation of facihtles, equipment, or device-whwh.uc - u re. - I or p h c, n Applications of the company f or oper:. ting permits for all of the t 'otupan, s genenon.e tan %- v. ynene, but none have yet been granted or denied Reference is made t o i he af. redeu nhed a4 tue Enon Circuit Court filed. lune 27, 1973 The Company had receised b ucr appoival of nic non m construenon of Unit 1 i at 8chahfer Station from the Indiana Air Board prior to t he efh etive dan ot y the pernut regulanon< The Company has an operating permit for Umt I i ami a const ruct oin pernut i for l' nit 15 from the Indiana Air Board j The Company has the followmg additional matters pending with the EPA. I j Hy letter dated March 9.1973, the regional admimstrator of the EPA at Ubicago, llhnon. adtned t the Company that it may he m vndanon of appheable regulations reganling particulare emiwnins ( under the Ulcan Air Act m the t 'ompany's operations at H,ully 8tanon and requested the ( mopany to ? furm h contoonng mfonnanon regardmg it, operations as requested in t hat letter The t 'ompany conunues to supply such mformation and believes that it comphes with the e reipurenmnts except m event of eipupment malfunenoa. Un August 10, 1976, the Regional Administrator issued a notice of siolanon regardmg particulate enussions at Bailly Station An informal conference wit h EPA wa.s held 8cpternher 1,1976 i A further informal conference will tw held but the date therefor ha.s not been I set The Company is harme ditliculty with some of such equiprnent. Repmr< were made m lj September and the Company anticipates that the remaining repairs will be done assoon ns powbic. 4 Additmnal expemhtores, not known at this time, could be necessitated by these problems 25 {- r c, -3 pN:o, \\ b y ] il i ? ?

Y '3, Ily letter dated.f une 25. 1975, the Coinpany advi cd the El'T. Itego.n V. at ( 'locago, of us . y, 'y prograni to correct particulate etno oin problerns relatme to the chance to usage of h,w sulfur coal at .~ i Mitchell Station. The Company beheses that its program will correct such pinblems . ? . l ,. ~ l (in Septernher 13. 1973, the Corupany was issued a citation h3 t he EPA charcine a violation of 1., j the Clean Air Act am! Irohana Air lloard sulfur diosnie regulat o un at u < ll.nlly 8t anon IIcarmgs on . p.; g %.q this matter ami hke enations acain t other electric ut ahnes were held m T rhngton. Virgmia. October 9 I IN 1973 throuch Nos end.cr 2.1973 ()n January 22 1971. t h-llearine Pane l iuned u s report u.

• S-di !

~MN w ha h it re otornende.1 t hat 110 elect ne utiht v indu-n s hoo!.I n.ike u n m e. ! nn, coinme ment s to ne -r.dl t'ue gas ilesulph uru.at u,n t ems givmg poordt to t ho-e -mm ee w hen cont tol are needed to meet prnuary ambient air <piaht v tandard atui aggre -n elv pur ne flue ea-developmental progranu .,g. to unprove rehabihty and lower operaimn costs The llearn.g P:u.el al-o recon.tnercled t hat the EP A - l ar.d the States shoulu estabhsh expedinous but reasonalde comphance schedules aml vigorously en-force the schedules givmg pnontv to in talianons w here systen.s are neede.1 to meet prunary ambient .or quahty standarel., 1:mler date of.luly 21,1978. the Conquna recened a maice of violanon of the Imhana Air lloard regulation as to ulfur ihoude emissions (ohl A P( ' 13) at its t hree cust mg generat-ing stations Mitchell Stanon. Ilatily Station and Stichigan City Manon. from flegmn V of the EPA A conference was held March 10.1975 to discuss the notices of uolanon but no orders or comphane . schedules have resulted therefroin On Dece mber 5.1971 the EP A adopted new regula r mns ' An Quality implementation Plans. Prevennon of Significant Air Quality Deterioranon.' w hich may bas e an adwrse nopact on future development m the Company's service territory. The Company naend< to file a petinon for a writ of ecrtiorari to the l'ntled States supreme Court for a review of an adverse deensid en of the United State, Court of Appeals for the [htnet of Columbia Circuit athrmmg the regulations. On June IS.1976, the Company petitioned to meervene in the case of Smrra Club v. Ilussell Train. Adnumstrator of the EPA (Civil No. 76-06.% L: 8. I bt net Court for the District of Columtua) Plainuffs in thn case are seekmg to respiire the Adamnstrator to hst sn* pended sulfunc acids and sulfates as pollutants and adopt aminent air standards with reference t hereto The (hmpany opposes the rehef soneht Water. The Coinpany n rnpurril to obtam Natmnal Pollunon Ibeharge Elunmanon system (N PDE8) Pernots for all uninstnalihscharges into waters of the I'mted 8tates under the terms of the Federal Water Pollunon Control Act Pennus applied for pnor to January 2.197.3 are nsued by the EP A. suh3cipwnt appheanons are under the jurisdiction of the truhana Stream Pollution Control Iloard in 1971. the EPA rsued operarme pernuts to t he Company for its exotmg generaung tatuns The penmta for Machell 8tanon and Michigan City Sianon were reused in 1975. A I tipulated rension to the lladly Stanon Permit is pemhne wo h the EPA. The Company has completed a study regardmg thermal eficets at Mitchell Station and subnutted it to the Indiana 8 ream P.,llunon control floard and the EPA. A hke study for such demonstraimn at llailly Station w as - hnut ted on ( >ctober 6.1976 If th. results of such stmhes are not acceptable to regulatory author- .nc ther closed cycle or other means d meeting water standards would have to be met at Mitchell 8tanon and llailly station by July 1.1977. In the Company's opunon the studies demonstrate l hat closed cycle co< ding is not necewary at Mitchell or llaillv Manons The Indiana Stream Pohunon Control !!oard ami the EPA have not reacted to the conclu-ion < of either study. The revi.-ed i ernar i,r Michigan Cay Aanon rc<porc< that the Company.spon-or a plan of unty to evaluate the cl[cets t f the thermal dischare" arul iniaise on t h> sairiniin,ul inhery The stinly wdl rtin for tw .>1,,i,', kf g-i m ( s, i ',i u0 ) ?,\\ \\ . u-Nl f M@R~VJ j..$. Q;wk&, + D. %N,.&ggh*' c ery y.g p* ' L,-- w ,g. .- e. Q:nf y w.. s 3,%.l.L-3 x 3.,, ~.,y. y A J % y~, ft a 4,.f.w.7, 4 $.y S pe . n N M -y e 3;. -.x x. m m 3.. ww;. a 7; n, o ..~ n a l 3. ;p* p ? . r... e, s e.. 4 s + =..,;. j-cy.:.Q>.* g g e.

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s Jzunee pars, with an option for a third year upon mutual agreement of the particx F w submit semi-annual reports thereof. If the study denum<trates that the t , nm! the ('ornpany will < n;h4 2 snd 3 to the existing cooling tower and/or modify the in .scharge or intake is i xs ng Units 1. pisns for Unit 14 at the Schahfer Station was granted prior to the elT i requiring construction permits and the Comp:niy behem n.o :ebh i e re-required for Unit 15. On August 27,197ti, ,y ,3 ndts are SPDES permit which covers Umt 11 at 8chahfer staththe loihana Strean. Pollmi-n i ? -

• ir facilities constructed m nasicable waters

' Lh'mr t p rem, n.carr l f or acw l mar he suye< t o curs!cd review melm reg ula t u.n3 'a ie, promulgated by the U.S. Army Corps of Enginars on Apni 3. ItCI ' u..f The EPA has adoptal recornmendations as to standanls for heated J.. - afichigan. The Indiana Stream Pollution Control llaani adopted i .es into 1.ahe standards. The Cornpany uses Lake Niiciigan water for conhng purlwes in c t operation of Slitchell Station, Ilailly 8tation and Michigan City 8tation onnection with the constructed natural draft cooling facilities at Michigan City Station in c . The Company has became operational May 31,1971 and has plans to construct similar i n w hich connection with the construction of the nuclear generating unit, if perinitted i . e a y Station in the Michigan City Station cooling facilities wag $8 500 tm Assmning

e. The cost of construction in 1981-82, Additional delays in construction of Ilailly Unit N1 woubt

"'D Q t j t .M- ). Status of Nuclear Construction Program at 13ailly.") s costs. (see " Current Steam electric generation which may require substantia ) a mlards for the Company's generating stations. The Company is seeking exures, not heretofo require closed cycle cooling. units at its three generating stations from S --e imum co.st of such facihties is $11,wo.000 at Mitchell 8tation an might otherwise c [;[j g tion and an additional $1,331.000 at Michigan City Station onal $9,m).000 at liailly Sta-Ily letter to the Company dated July 2,197ti Department of Interior, has made imptiry regarding aileged serpage 5 the !)irector of the 4,,k National Park service. related matters at liailly Uenerating Station. Conferences aml *tu lies f' currently in progress. e e matters are Nuclear. For inatters relating to ennstruction of a nue!"ar mat q l

• Current Status of Nuclear Construction Prograrn at Ibdh oH: 1. t -

a ar "9 5 l %j It is not pos.ihle to predict the scope or enforceahdity of other air u ater i standards which may be established in the future. y., or nuclear t.unlation, or l g c C \\ ,g '.Y. a' .c b e.8.m i l p 4 \\ e w-- -,-,--,-,m-s.w.,---,e-- -we.pa.ame-w---w=

r 1 I ( OPERATING STATISTICS Year Ended December 31 12 " } E e 1971 1972 1973 1978 1975 Jul3 31.1976 ) ( Ori.mimo Rmat u (000 ornitted)- i 'tr6 Electric-i M-Itesidential $ 10,6:16 8 17,7M $ 52 *, Pi 1 '.1 127

• 7 '.ia;

> ". At [, Cornmercial. 16.335 1% %12

13. n* 7 mu

• t.w 4

Industrial 67,*21s %2 2't2 i s.@' l'7'.' t" i.. ;4 'h Street lighting.

2. 2i6

2. :572 4's

.~-

• 7!

{ ;! 7',a Sales for resale.. l. :t.I's I. C* CfG .* ics i[ Other.......... l.J70 1.I.12 3.7"' L is "t; . 1. I.. Total.......... 132.836 l L. Gw = 157.e.25 151.61 m 7.'c . _2 w.ulo.._ 2's i.y, 1 { 1 1 Hwidential(including home heating) 70,823 5403t2 71.7% M. 'J3 IDl url Im.as6 l Cernmercial......... 26,560 30,60% 2'8. 115 32(h5 3fa,25

A,714 Industrial.

81,990 97, 4 0 105.296 121.579 I:17.0 9.5 151.2 8r) Industrial (interruptible!.... 13,361 5.222 { j Other...... 802 6f4 S45 1.lt2 1.49:1 8.6'a0 3 Total........... 193.541 214.973 210.3M2 233 % 9 278. tit 83 293,938 l 5 ) .h* Total operating revenues.... 1 325.677 8 372.603 $ 391.r26 s lis.715 1 536.75: $ 597 StA) I .'i ( .q 1 3,, FM .c ,I h-. hdu AaA1 u r I 9 p i b IOriin.rr IL. us m Ein nu Ewucs Ge.sa.asm), Pt MmM H ANU 8+m (000 omitted): v ff Generated (net).. 6,883,642 7,073,919 7,141,036

7. %1.927 1,558.098 M.Sii.147 T

Purchased.. 2,385.483 3.191.193 1.165.606 4.137.900 3,018,782 3.932.853 Total.... 9,269,085 10.265.412 11,653,682 12.021,827 11.572.534 12,480.000 Losses 497.350 $19.992 5%3.278 567,751

• s5.097 5i1,6%7 A

[ Sales..... 8.771.735 9.745.150 11.070.368 11.858.n74 10. M7. 73.1 11 M.4.313 e I f' 8 u.i3: i Ilesidential 1.664,500 1.775,420 1,sM,342 1.915.029 2.073.116 2.06 8.t sio l h Cominercial 577,127 5%2.456 592.267 5f4.273 563,i19 53's.3rd Industrial 5,a19,882 6,710,861 7,888,571 8.230.360 7.528,537 8.405,.% 5 Street hghting 09,918 71,266 75,079 76.506 76.973 78.Ni3 4 i Sales for renale. 495,553 556,413 580,160 618.905 C71,678 m.575 i Other... 18,755 49.001 19,906 62.403 71.0:6 x2.141 Ti.tal.. 8.771.735 9.745.450 11.070.:561 y 11,851 076 10.9%7.739 II.%*.x 31.s 28 4 / z .F i 1 f .o - - =, --- 4

\\ s = mm w...m J "** *"'* mac OPERATING STATISTICS-Concluded 4 12 Months Year Ended December 31 Ended July gg73 3972 1973 IMI IG

31. lM6 1

o. Tnisus' os Go Panmun. Poicnusin un k n (Ontl omitted): 122 r.al 78 %I Purchased....... 2.h71.907 2.933,792 2.792. WJ 2.782.174 2.511.074 2.528.672 < a Pr<rtuced... 2.h72.0?) 2.938,126 2,792,313 2.782.178 2.515.074 2.528.672 4 lesses. Company Use, Etc.... 1%3.223 142.157 119.702 110.531 17%.2s5 123,799 Total Sales.................. 2.tm.No6 2.792.269 2.683.681 2.t,31.647 2.365.793 2.800.573 t F-Ilesidential(including home heating)... 592,717 643,303 571,755 618.566 C57.192 613,619 Sa!cs: Com mercial........................ 271,862 299.32S 276.826 290,989 2 89.'J19 238,691 Industrial............... 1,515,615 1,740.519 1,793,211 1.721,327 1,454.886 1.512.970 Industrial (interruptible)....... 307.190 107.143 l.792 1.976 1.889 4.505 4.506 5,563 Othe r....................... 2.6ss, son 2.792.269 2.613.641 2.831.647 2.365.793 2.too.M73 Total............... i Ntwsta or CenTomas er Esn or Ps.mion. Residential................ 283,179 239.333 298.952 299,925 302.384 305.881 Electrie: )l r Commercial.............. 28.616 23,768 23.716 28,910 2%.M9 23.150 I nd us t rial............. 6,776 6,999 7,270 7.439 7,DH3 N,554 270 272 276 277 271 279 21 20 20 20 20 20 St reet lighting............ 293 310 326 3 11 364 332 Sales for renale..... Other......... 319.155 325.652 331.560 335.912 .Lb M.5 383.23i1 Total Ilesidential (including home heatmg). 393,082 102.321 410.805 il9.:Im i M.1:t5 817 i t.*. Car g 11,873 42,661 l'. 1 M 11 in,% 'I w

':n 21o 2,110 2,2*l 2.117

i. 3 2 166

.: tie Commercial......

Ind sist rial............... 20 12 as .n 7 Industriallinterruptible) 6 8 8 x Other... g 437.081 417. N 156. lini 4%ws 1:2.79. 17.1.163 4,. Total......... I Ais naci ANNt: AL UM, Ahis itiVL% tis' I 4 Electric-1 Itesidential custa. (incl. rural residential) Average annual use (ku hl...... 5,933 6,200 6.162 6,458 fl.897 6.wl j Average annual resenue per kwh 2.4tc 2.69: 2.78c 3.lue 3.17e 3.67e r Commercial-Average annual revenue 2.834 3.23c 3.37t 3.79e 1.22c 4.43c +1 per kwh.... Industrial-Average annual resenue per 1.144 1.23c 1.2 48 1.12c 1.9 14 2.14e 1 kwh............... se i Gas-1 Ilesidential custs (incl. home heating)

1. tl3 1.621

1. 112

1. 13 6 1.525 1.678 Average annual use (thernu)..

Average annual revenue per therm 11.954 12.474 13.08c 13.60c 15.92t 16.9se ] i Commercial-Average annual revenue 9.78c 10.29e 10.63e 11.21e 11.25e 15.38c per therm.......... Industrial (firml-Average annual 5.11e 5.62e 5.57c 7.06e 9.12c 10.00c revenue per therm........ Industrial (interruptil,le)-Average an-1.35e 4.87e nual revenue per therm. I, a h I i p

• A therm is m1ual to 100,000 litu p

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s MANAGEMENT The names of the directors and executive otricers of the Company are as follows: omcc Name h Dean !!. Mitchell Chairman and Director '[J Carl D. Rees President and Director James F. Purcell Senior Vice Prr-ident -11 M. ' o - .1 : e. et..r h}yjM^ Dale W. Anderson Viec Pwsident I b i- - ') 58 N llorace P. Lyle Vise Presideni - F.b i ri. l'o .!w. ei m-i. Forrest G. Iliple Vice President-i.lectrv Uper.a en. am! n as racei.n ?gs, Vice President-8 ales f ra J. Roberts g A Eugene M. Shorb Vice President-Gas Operations and Fuel Procurement Allen !!. Petersen Vice President and Controller h John E. Reil Secretary and Treasurer fl$ Carl H. Elliott Director h. William J. Johnson Director ? John Allan MacLean Director Paul 11. Neininger Director ,g, Director William J. Riley Walter W. Walb, a director since 1940, died April 2,1970. The vacancy residting from his death s has not pt been filled. Throughout the past five years, each of the executive o!Ticers has been continuously active c in the business of the Company. h DESCRIPTION OF SERIES Y BONDS 'f General. The Series Y Uonds will be issued under the Company's Indenture of Mortgage or Deed '.~ of Trust dated August 1,1939, as heretofore amended and supplemented, under which Ilarris Trust and Sa' ings Bank is the Trustee and R. II. l.ong is the Co-trustee, and a Supplemental Indenture to 'p v be dated October 15,1976, creating the series of which the $60,ooo,(no principal amount of Series Y t Bonds will constitute the initial issue. M The Company's Indenture of Mortgage or Deed of Trust dated Aucust I,1939 (the " Original Indenture"), the Supplemental Indentures heretofore executed and the Supplemental indenture to be ~ + dated October 15, 1976, are herein collectively called the " Indenture." Copics of the Original )_ indenture and such Supplemental Indentures are tiled as exhibits to the Itenistration Statement and {. reference is made thereto for a complete statement of the provisions thereof. 'The Series Y Bonds will mature October 15, 2006, and will hear interest at the rete per annum ',y specified in their title, payable semiannually Iloth principal and interest will be payable in Chicago / at !!arris Trust and Savings llank, til West Monroe 8treet, Chicano. Illinois Geo, or in New York Nj at Morgan Guaranty Trust Company of New York,23 Wall Street, New York, New York 10005. Ih The Series Y Bonds will be delivered only in the form of registered bonds without coupor.s issuable in denominations of $1,000 and any multiple of $1000. Ilonds in the several denominations ,? may be exchanged for bonds of other denominations without service charge therefor by the Company. A s .R 4 7q I l i wrgig.,; y A

^ ---- I The f..lb.wmg stateinents are brief summaries of certain provisions of the Indenture. 8uch tatement, mahe n-e of terms defim,1 in ihe Indenture, do not purport to be colnplete, and are in each ca-e ohjees to t he in..re delaileil provi.sions of the Indenture. Itedemption l'rovisions. Ifga n not less than :to days' published notice, the Series Y llonds may bc ) o. l..aned pri..t to Inalurity, a3 a whole at any titne or in part Irotn tilne to time at the option of the by payn cnt e.f the principal atonunt of the hotuls called for ri,lemption, acerti.d inteNst I~ a r. .4, .., rho d .t....I n..letoption and a pretuitun c<plal to the applicable percentage of principal 1. 'h e ci.u. t.n.eided. l.owever, that no Series Y liond* may be redeemed prior to Octobt.r f ... o. h. i.. i n.n a for the purpose e.r in anticipation of refunding such innds throuch the . u:. o n e ! -. h ..f fund

• 1.orrowed by the Company at an clicctive interest rmt to the

? s t....e. ; u n. i c. a ccerda ner with generally accepted financial practice) of less than the .19. ia.. mico.,i co r ni Ihe Serie.< Y lionds as set forth on the cover page hereof. Itedemption Premiums If itedccmed During 12 Months Period Ending Octnher 14 1977

7. w%

1987 5.16 % IW7 2.15". 19;s 7.6 t *; itm 1.9% IW4 2.1 %"*. 197!# 7.3 8". IDW I.62". 1999 1.91". tino 7.n7"; IWu 8. 35". 2000 1.63". I'nl G. 7'/4 1991

1. 08".

2001

1. 36".

tim 2 6.57& 1992

3. h t ".

2utr.! l.oTL 19s3

6. 25a; twa

3. 5 *-,

2003 . M2'". I!N 5.!Wh 1991

3. 2W".

2001 .55% tuu

5. 7 t %

1995 2.9./b 3nl5 .2M4

• l ItW6

5. 8 8".

1996 2.72"; 2006 0". Sinking Fund. There are no so.. ing fund provisions for the Series Y llonds. Security. The 8erw Y lionds will be sceure i by the hulenture and will rank equally and ratahly (cwept a to mking fund establisheil for the exclusive benefit of particular series of bonds) with all h..n.i. trre-pecute of senr3. now outstanding or hereafter issued under the Indenture. Th" holenture con. titutes a direct fir 3t mortgage lien upon substantially all permanent physical pn.perty ami fram hises now owned by the Company, except certain real estate having an aggregate ho..k co t m.: m ewcw of $1.Um heht for sale and not useful in the conduct of the Company's utility bu-mee. suby et only to " permitted liens" as defined in the Indenture. The Indenture contains ph.vi ion.<.<ubjerone after acquired property and franchises to the lien thereof, subject, however, to pern.itmd liens an 1 to liens existing or placed on such property at the time of acquisition by the ( '..m pa ny. Dividend flestrictions. While any homls are outstanding the Company may not pay cash i dividends on ils stock, ewept preferred stock (which includes the Company's cumulative preferred I so.ek and run utante preference stock), or purchase or retire shares of its common stock, except out of cat. ! o n p his er t.et profits neainst which have first been charged the amoun s required to be ey.cmled or depo-imd with the Trustee under the provisions of the maintenance and renewal fund. J (IN of.\\rt. VI of the.\\memh,t.irticles of lucorporation of the Company (the provisions of g

ce aid -ecin.n beine rifectiv" so lone as any shares of cumulativn preferred stock are outstanding)

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~ lviles in sybstance that no cash dividendo may be paid on the common stock in exc f l

net income available therefor for the preceding calendar year un ess li ferred stock plus the plicable to stocks subordinato as to as., cts and dividends to the cumu at ve pred 25% of the su e

rphis, after giving effect to such dividends, would equal or exceeidenced L l d surplus. At July i h 1,1976, the sum of the enpital applicab!c to stocks subordinate to t e cu d giving effect to the f 'n the surplus was equal to 36". of the total capitalir.ation including surplus, anl tive preferred s f mance of the Series Y llonds and the 250,000 shares o cumu a t 976, this percentage was 3h d h ll be Maintenance and Renewal Fund. INring each calemlar year, so long as any bon s s g h i rovided, expend sums Q outstanding, the Company covenants that it will, except as ot erw se prating revenues" of the Com , y" amounting in the aggregate to not le>s than 17%% of the " gross opefo d repair of i i i the mortgagml property;(b) the construction or acqu s t on or the purchase and cance!!ation of bonds inued under the Indenture.

n. ti no,any merce-to d.3,r it annu:dly with the Trustee cash to the extent th h purposes in prior years.

-o mpcoded. h~

.n.,, ;.~ht, for och expenditures for suc h Trustee as provided in M.y ca>h -o depouted may 1.c

.o..A c.n by th" Company or applied by t ethern expenditures in f any 3uw.me: v.: t subsequent year or years. " Gross expenditures" for bondable proper y the Indentm e. sith the provisions of the foregoing clause (b). d bject to the Issuance of Additional Bonds. Additional bonds of any series may be issue, suf " net . 3; provisions of the Indenture,(a) in principal amount equal to 00% ther series theretofore g f 4 i l authenticated under any provision of the Indenture in a princ pa amou i i al amount equal to the pincipal amount of the bonds of such other series retired, and (c) in pr nc ph bonds. Su f smount of cash deposited with the Tru.stre as the basis for the issuance o sucf bonds to the au cash may be withdrawn in an amount equal to the principal amount oExcept as to refunding b<mds b shich the Company may be entitled under (a) or (b) a ove.t a rate not greater than that borne by, the % times the annual i uithin live years of maturity of, and bearing interest alands to be refunded interest charges as provided in the Indenture. Net earnings, as define - times the annual interest requirements at July 31,1976. d thilndenture At July 31,1976 the amount of net property additions not previously utilized un era = t exclusive of $78,500,000 of net proper y nditures for f o net expe cas approximately $213,300.000,linit N1. The Series Y Bonds will be issued on the ba ' bondable property additions. l d in the State of 5 5 ' Indiana, or located in any state contiguous thereto and, in P f then owned by the Company) constructed or d used or to be used as a part of its ti . capable of economic interconnection with proper es 2 Bondable property does not include, acquired by the Company on or after August 1,191, an prmanent and fixed investment in its electric or gas business.(a) property o been charged or is among other things: 0 f -m n ~' N :g Y g n'f;Q:RYfgr. G yr fa 3 u A 3 7 .g:.,7 i Esg pfy.y,yK.pW ; 4 f f. W.y 4- [ . ;.0. R R : y. -: m 1

Y7 g,' ]z,(c{. % m.y p, x : ;

T. -y**7,' hi ['lg'k.'f._Qj.&,' p. y-flT?. l ~ O

i i chargeable by the Company to maintenance or other operating expense,(b) natural gas wells or lea es. natural gas gathering lines, or natural gas transmission lines not interconnecting gas distrihati:.. systems, or other property used in the production or gathering of natural gas, (d leaset.dds or permanent improvements constructed on prola rty held under l< o by the Company flondabic property incitides rights-of-way and casements and electric or gas iransmiss:on or di.e.ribution lines and equipment and appurtenances thereto, except as stated in clause (b), located t',ereon or located - upon any street, alley or public place of any municipality or upon any pub;ie hiehr,ay. " Net earnings" of the Company for any perinal no ans an amount, computed in accordance with l accepted princip!cs of accountme, determined by deducting from the total eross earnings and incon.e l of the Company derived from all sources for such period, all operating expenses for auch period, y including current maintenance and repairs, rentals, taxes (excluding income taxes ami accruals therefor), insurance, and all amounts applicable to such period charged to income and credited to o reserves for depreciation, retirements, renewals, replacements or amortization of property, as reconh d j 4 on the books of the Company in accordance with accepted principles of accounting the remainder i being adjusted, if necessary, so that not more than 10. thereof shall consist of the aggregate of (1) net j i non-operating income,(2) net operating revenues from properties other than electric or gas properties, j and (3) net earnings from properties not owned by the Company. Default. " Events of default" are defined in the Indenture as: (a) default in the payment of principal, (b) default for 30 days in the payment of interest,(c) default in the payment of principal or interest on prior tien bonds or default in any other respect under prior lien bonds, continued beyond ( grace periods, (d) failure 60 days after notice to perform any other covenant contained.n the Indenture or in the bonds, and (e) certain events in bankruptcy, receivership or =imilar proceedings. If any event of default shall occur, the Trustee or the holders of not less than a.aajority in principal amount of the outstanding bonds may declare the principal of all outstam>? lxinds immediately due and payable. The holders of not less than a majority in principal amount of the i outstanding bonds may, upon the occurrence of any event of default, dinet the Trustee to act to protect and enforce the rights of the bondholders, provided that before so acting, the Trustcc may require the bondholders to provide reasonable indemnity against expenses and liabilities. The Company has agreed to fde with the Trustee all doemnents required to be filed under Section 13 or 15(d) of the Securities Exchange Act of 1931, and to furnish certain other information to the Trustee, but no periodic evidence is required to be furnished by the Company as to the absence of default or compliance with the terms of the Indenture. Concerning the Trustees. Ilarris Trust and Savings flank is paying agent 'and withholdine agent for the bonds of the Company under the Indenture. The Company has no other relationship with the Trustee or the Co-trustee. Modification. There are no provisions in the Indenture relating to the modification or amendment of the terms of the bonds or the Indenture by the holders of part of the bonds issued thereunder. d m p I . l L. 4 0 m., s.- -w-,----

l EGAL C?!O'S AND EXPpTS 4 ~11.. trea:n,,4 ' h.- . r: Y lt,nds wd! 1,e pas.<ed tuon by Schroer, Eichhorn & Morrow,5213 ll.Jun.,n.b nur, llan.n..ici. holiana 16:120. cencral counsel for the Company, and by Schili liardin i Waite. 72t:0 deais Tower, ::aa south Wacker Drive, Chicago, Illinois tu)C06, counsel for the Under-anters. The incorporation of the Co:npany, the right of the Company to operate as a public ittility wier the laws of Indiana, the franchi<cs of the Company, the titles to its properties, the lien of the j ladenture upon such properties and franchises and all matters governed by Indiana laws will be p cd upon only by Schroer, Eichhorn & alorrow. Schiff flantin & Waite have advised the Cornpany that a partner of such firm, who has participated in the prepacation of the Prospectus and sho will participate in rendering such firm's opinicus has the following interests in securities of the Cornpany: 2.020 shares of cornmon stock owned direedy by him or his wife; 1,100 shares of common stock owned by a trust in which he has the beneficial n.'erest; 2,980 shares of common stock,120 shares of 11.111% Cumulative Preference Stock and $1,100 of senvertible debentures due 1992 owned by trusts of which he is a trustee but has no beneficial interest amt C0 hares of common stock and $500 of convertible debentures due 1992 owned by a foundation of which he is a director but has no Inneficial interest. The statements as to matters of law and legal conclu.sior s made in this Prospectus under captions ' Current Status of Nuclear Construc- ; Program at llailly," "llusiness," subcaptions "Itates" and ' Competition," "llegulation" and "Ibeription of Series Y llonds", subcaption " Security" have been tapared under the supervision of, and reviewed by, Schroer, Eichhorn & Slorrow, general counsel for the Company, who have given their opinion that such statements are correct, and all such statements are inade on the basis of such opinion. The financial statements as of December 31, 1975, and for the five years ended December 31, IM5,includad in this Prosnectus havr been examined by Arthur Andersen & Co., independent public i accountants, as indicated in their report with respect thereto, and are included herein in reliance upon l the authority of said firm as esperts in giving said relmrt. Iteference is made to said report in which the opinion is qualified with respect to the elTect, if any, of the ultimate resolution of the matter dbeussed in Note 7 to said financial statements. l 35 i 4 \\ t i g h, a 4

marit33 l

+ l } I l ' ' * ' ~ * ^ ~ ~

--.-..-.a.- F =h-G me e unusamme TFri ' k=Ik, i t i e i S ITills PAGE INTENTIONALLY LEFT BLANK l N s f f s l en t I 36 e ] 4 '. '.7 eJ e f e -*-a= - ~,. _ _, I

• w

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l l REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS l We have examined the balance sheet of Northern Indiana Public Service Coinpany (an Imliana cur: oration) as of December 31.1975, and the related statements of income (inchaled on pages x-10), <etained earnings and sources of funds used for capital expenditures for the live years then emled. Our examination was made in accor, dance with generally accepted auditing standards, ami accorilinely included such tests of the accounting records and such other auditing procedures as we con-ilcrrel necessary in the circumstances ,1 b eh. n -. I o. '8 eo*.:.t-r o ..f No le.ir Cotstruction l'rograrn at liailly" at pages 12-11 aml

n. '..:e 7 t., fl.. l'.n..io u' ni.iti no :.t s. con.struction of the Conipany's nuclear generating unit at the II.uh.5 t;rnerating diation.-ite had been halted by litigation and at this time it is uncertain u hat part of the Company'6 expenditures of $71,721,u)0 at December 31,1975 would be recoverable in Ihe event that the Company is not successful in its defense of this litigation.

i In our opinion, subject to the effect, if any, on the financial statements of the ultimate resobition of the matter discussed in the preceding paragraph, the financial statements referred to aboce present 1 fairly the financial position of Northern Indiana Public Service Company as of December 31,1975, and the results of its operations and sources of funds used for capital expenditures for the five years then ended, in conformity with generally accepted accounting principles consistently applied durim: the periods. l Antut:n Asin:nsts & Co. Chicago, Illinois, , February 1,1976. k M t I- ,g 37 \\ e l l l l r J 4 - -, - - -, ~ - - -

BA1.ANCE. SilEETS-DECEMllElt 31,1975 ana.sou.... 7 July 3t. !$;4 .,,..~7'T December 31. (Unsudited_i P N. isu _ 3 IDollars in thsusandst IjkDkff M** ASSET _S work in progress of ' i truction llen. y I's.nr. at original cost (including cons (Notes 3 and 7) $1,076,320 $1,112,267 1: 437,392 $291,136,000 a'nd $370.109,000. respectively): Ele c t ric. 126,75S 51.507 11,771 1,631.166 213.795 1,518,352 261,788 Gas. Common.. 1.369.378 1.301,557

4. sT..

I,ess-Iteserve for depreciation and atuortization........ i $ V.l',. h'I 103 193 i f $13.000... Nonutility property at cost,less reserve for depreciat on olidated, at 7,739 4.169 1 7,784 Isvr>tm:sts: Investments Subsidiary companies not conso 1.821 1)............................................ 12.151 12.758 t Other investments, at cost.........................

f

/ l 8,751 g 10.229 12,40S

x 17.11S

[ p....

51,514 9-Cruntsr A v rr3: 0 spec-51.022 30,811 Const ruction fund * (Not e 8)................. Cash....... of $ SIS,000 and '31,2H 00. re 23,810 26,639 .irnmnt receival.le, les* resca.es........................... 23,559 ( 13,731 10,571 2.119 M* ri:d-and sippli <. at averaen n.stKiret ric pn.durii>4, fuel 1 r. r

vely.

1.392 i 115.731 1 1-10,393 verage cost L Natural gas in storage, ata........... Prepayments and other. i ' l 5,481 .. m 2,853 '/ l(.

• fj

~ f-D or ran w Cu r uc t2........................... 2.152 3.823 -f' $1.535,555 $1.469,727 U s wonrizu Dust Exrtsses...................... e an integral part of these statements. The accompanying notes to financial statements ar e i T' wa-~ 8 ' s* 4* a;4**h5 ,.a p&Y gg, O ~ e, ---r - _.~,

BALANCE SIIEETS-DECEMBER 31,1975 and JULY 31,1976 i -E December 31. July 31.1976 S T O C K il O L D E R S

• I N V E S T M E N T A N D LI A BILITIES 1973 (Unauditedi 37>

IDollars in thousands) } Common stock-no par value-authorized 32,000,000 shares-out- { Cinnuntios: standing 22,121,929 and 21,172,5S7 shares, respectively-stated at Y" $ 290,312 $ 327.300 (Note 2)..................................................... 103.139 lIS 170 d 1(etained earnings-see accompanying statements................. (l.103) 3 Ca pital stock e x pe nses......................................... __ 393.7S1 -111.136 h 139,53s 13s.738 g Cumulative preferred and preference stocks (Note 2)................ 251 251 g Premium on preferred stock...................................... 533.573 SS3,12S Total stockholders' equity.............................. Long term debt, excluding amount due within one year to be refmanced (Note 3): 595.757 593.678 First mortgage bonds........................................ .57,509 57,500 Se ries A no tes.............................................. 20.16S 20,159 Convertible debent urcs...................................... 2.167 s51 Unamortized premium and discount on long-term debt (net).... 676,192 672,191-1.2trJ 765 1.255.919 Total capitalizat ion..................................... Cnuo:sr 1.nmutux Obligations Due Within One Year Expected to be Itefinancede-37.000 31.000 Bank loans, at prime rates (Note 5).............................. Other Current Liabilities-50,G50 15,ti29 A ccou n ts pa y able.............................................. 3,555 3,551 -17e convertible debentures due within one year.................. 1,010 2.35-1 Sinking funds due within one year................................ 2.105 S,100 Dividends declared on preferred stock and preference stock.......... 11.316 .,521 Customer delmsi'ts....................................... I 30,251 32,119 In.57i u,si9 J Taxes accrued........................................... I n te rest acc ru ed............................................ 3.771 3,131 _3 O the r acc ruals................................................. 119.532 111.920 J 156.532 118.920 1 Total current liabilitics.................................. Onu n: 75,321 SS,089 Deferred income taxes (Note 1)................................... J investment tax credits being amortized over life of related property 21.889 32.099 (Note 1)..................................................... 9ti2 1,801 O the r rese rves.................................................. 2.255 7.827 Def e rred credits............................................... 103,130 130.716 Comunn.sts (Note 6) $1,169.727 $1.535.555 ( ) Denotes deduction. The accompanying notes to financial statements are an integral part of these statements. D D D ~ D ' V S i gJ $d\\ o J - } - -Q = p [ g $ f g g. p g g g g g g.g L. *.. g g gj gp n- .w n m. ,-w, y.' %,#'. . +.e. w, ina.C g y,4.y.g %,u,,. :.,m.. y 3 g ~ g. w a - ~' s, f k ; M 1 '.

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1 l NORTIIERN INDIANA PUllLIC SERVICE COMPANY E. STATEMENTS OF RETAINED EARNINGS l l I Twche Months I "[,hp, Year Ended Ocrember 31 1971 1972 1973 l!!71 1975 f t'nauditeil) 2 O' (Onllars in thous.:ndo I L i ',, !;. g. , m t.. r l ', r ;.< l v o s.: Jul $1lx,727 $136,i17 $103.03o $ Ss,Ss2 $ 95,523 .\\, i. l .'N 1re'olne } er sl.tlerte hi s inf in-corne 12,010 15,365 51,069 15,900 53,656 63,639 115,!)l1 161,092 ISS,016 1ls,930 112,53S 159,102 1)cduri I h videnils-Cash - Cmnol,itive pieferre<l. stock-1 % "r < cries S98 NN S9s S9S SOS 671 li,t") scries 360 360 360 360 360 270 1 22"o series. 506 506 506 506 506 379 1 S8~r series. .lS8 iss t ISS '88 3Gb 7 1 l'"o series. I17 2.232 2.232 2,232 1,671 1 7 TE'c series. 1,75S 2.250 2,250 1,6S9 ('urnulatn e preference stock-1 10"~o 5 3 l 11 G l"~o 706 2, 21)l 1,685 G i t *~o. 111 lS7

i

('onirnon t ock-$ 1 32. $ 1 33, $ 1 36, il 36, $ 1 36. and l $13% per share in the respec-i tn e periods. 21,957 25,213 27.229 27,2s7 2S,035 32,187 Write-oli capital stc,ck expen.c, 1.51,1 ,12 1 1,592 1,592 Transfer to cornmon stock (Note 2) 0.000 25,000 = l 27,211 27,915 51, t Ni 60.01S 39,009 10.983 llalance at 1:nd of l'ern al. 51IS,727 $ 13fi, i 17 $103,030 $ 5s.NN2 $ 103.139 _$ 1 IS,179 I The ace',inpanying riotes to finaricial stateinents are an integral pari f these siateriierits. 37n s t g E, 1 y w-~ ? l k 1

==-- 10 .7 ' f' g N" w,tKt \\ m n l~ = - - @tgg,bE%e -a E! "i 4m 3% m .~ 9 ] w n ma g [gi e W ijssagig. 4 g 1

STATEMENTS OF SOUltCES OF FUNDS USED FOR CAPITAL EXPENDITURES Twelve Months Ended Year Ended December 31 July 31.1976 1971 1972 1973 1974 1975 lunaudited) i IDollars in thousands) I Fe sni. I'nos un n Isis muum itetained earnings-Net inn.rne........... $12.010 $ 15.365 $ 51.569 $ 45,9sul $ 53.656 $ 63,639 less. Cah dividends on pericrre.1 at l perferent e st icks. 2,27,7 2,;tu 6,2 62 7, l io 9.172

,006 Nct inonne as ailable for ronunon *Inrk...

39,753 82,663 45.627

33. nede 11.181 56.835 im Canh divulends on c..innion stuck.

21.957 25.263 27.229 27,287 23.035 J2.697 Total.. 18.826 17.420 18,393 11.173 16.189 28.243 I l'rtncipalnon.cashitcins-l Drpreciation an.1 annortization....... 21.035 22.676 23.812 26.750 31,968 38,091 1)eferred federal and state inn.nic lases, net. 4,10 "> 5,707 5,83*s 9.194 14.137 22,389 7 b69 1,392 1.285 6.388 5.004 0.920 Deferred intestrnent tas errehta, nct... Allowance for funds u*cel durmg omstniction.. (3.034) (6,890) (18.132) (14,601) (17.665) (22,363) Total.. 22.915 22.M5 16,800 27.711 33.680 41,017 Tntal provided iriternally. 37,711 40,305 35,tus 38.837 49.789 68.265 less. Hinking fund retireinents.. 2,313 2.218 2.165 2.410 3,286 3.261 35.l23 33.037 33.033 36.477 46,583 65,(W)1 Total i Fe see. Oni use n fuim Oi n.u.e.%.s ou i ' ) 8aler.flionds....... 50.520 50.305 75,801 125.000 80.000 Nic of preferred and preferenne piork.. 30.000 30.010 2n.Gio 10.000 33,500 69,750 " Fate of corarnon stock.. 26.250 Male of notes. 23,501 38,u10 (2.AIS) 218 (18,516) 11.519 Net changes in construction funds. Net chances in hank lo.inir. 6,f,00 25,f,00 (3,000) (5.000) 8.uin (6,2',0) Not changes in !!.% Governracnt on urttirs. (3,tnit) 3, Hit ( i.'GI) 4,831 5,001 1

167, If,N 20 2

5 Proceeds froin convernou of detentures.... 713 721 6MI 687 67M 758 i Prorereh frnrn sale of coinn.on tn. k to en+1m r*. Other. niclu.in.g th.mec un other net current aurts (2,2S5) (3.582) 3,906 (13,759) (1G.281) (12.713) 1.s n itet urinent of.... 52.962 10*>,803 153,008 122,3 6 140,219 71,066 Toral I styi curnulative preference stick. 107 A Ilon.h. 35.623 Oll.mi .'L5.nlu l.814 Total 52.912 to5.6N 115.2s"> 102,:uis 105,219 72.510 s3.380 ll3.7s3 151.318 134.7 % 151.762 137.516 Toi n A hnu Fi sim..... Auum su a inn Fi w 16e n Ih una. C..s inie isos. 3.091 6,890 16.132 14.tmi 17.665 22.363 Tor a Fi siis Av us.m e ina Ciriru. ihinentrue.4 $91.431 $t50.673 $165.450 $l51,389 $169.127 $159.557 Frum. thin son C sen a thre sean mix - 5 6.700 $ 799 $ 33 5 Conuruction b rnehturc=.

91. 13 l 150,673 158.690 152.590 169.398 159,852 j

Ge Supply thploration. i Tor u. Fi sis. U>e n son Csrti u Ewin n as a. $98.131 $150.673 $165.850 $153.389 $169.427 $159.857 ( ) Denotes deduction The accompanying notes to financial statements are an integral part of these statements. dl.%h D 9 ~ I I N.28 1 11 D 9%D hd i ~h e&i.R ~ %g - _ _ _ _Aj'n.. .ghr.wm l jk j l - m - w sm ., g,. i I ,m...

NOftTilERN INDIANA PUBLIC SEIW1CE COMPANY NOTES TO FINANCIAL STATEMENTS l (including Notes Applicable to Unaudited Period) i (1) Summary of Significant Accounting Policies: Subsidiary Companies. The Company believes that its fmancial position and results o clearly exhibited without consolidating its insignificant subsidiaries, Shore Line Shops Incorporated, NIPSCO Exploration Company, Inc. and NIPSCO Fuel Company, Inc. are fi li d in of the Company with Shore I.irm Shops, incorporated are not significant and no pro ts are rea ze l i

Company, connection therewith. On May 22, 1973, the Company organized NIPSCO thp orat on l

Inc., an Indiana corporation (Nexco). Nexeo is a wholly owned subsidiary of the Comp 0 000 in pany has been authorized by the Public Service Commission of Indiana to invest up ~ Nexco. As of July 31, 1976, the Company had invested $7,593,000. Service Commission of Indiana this investment is considered utility property for rate m f interests purposes. The investments relate to participation by Nexco with others in the acquisi in leases sohl by the Department of Interior in the Gulf of Mexico, o!T shore Texas a The Company hopes to improve its future gas supply through Nexco, but is not abl i but has no present i outcome of this venture. The Company is considering other ven Fuel Co., Inc.,(Nifco) for the purpose of acquiring additional sources of fuel but Nifco ha dermitive commitments therefor. Depreciation and Maintenance. The provisions for depreciation, which were ap l 31, 1975, are ma e on the d of the cost of depreciable utility plant for the five years ended Dec Commission of Indiana gas rate order of January 3,1975, increased the depreciation d the property to approximately 2 tr'*. and the electric rate order of October 6,1975, incr f depreciation rate for electric property to 3% If the 3", electric rate had been in j year 1975, the composite rate for 1975 would have been approximately 2.9% The Company follows the practice of charging maintenance and repairs, includ i f renewals of minor items of property, to maintenance expense accounts, except that repa d to operating transportation and service equipment are charged to clearing accou h the cost of g expense and other accounts. removed, the cost of such property is credited to utility plan removal less salvage,is charged to the reserve for depreciation. Operating Revenues. In accordance with industry practice, the Cor.pany reco i h d revenues as biited to its customers and does not recognize any unbilled portion which ex of an accounting period, and fuel and purchased gas costs are expensed as incurred. i locome Taxes. Provisions for deferred income taxes are recorded primarily as a l Range System for 5 use of liberalized depreciation methods and the Class Life Asset Depreciation in October 1975. 3 income tax purposes, (ii) current deduction of dismantling costs, (iii) effective h Public Service concurrent with the allowance of these costs for electric rate i t for construction of electric property and (iv) normalization of the efTect of using a pre tax ra A e p. % m-

• b G

ggg.py 1 e,w ,m f .] h ywg $; 4 2 .,\\l,yw [; Ryy ;; };% ( Ak hj, ).' l n (- y : L,y q,

NOTES TO FINANCIAL STATEMENTS-Continued (Including Nttes Applictble to Unudited Period) cornputing the Allowance for Funds Used During Construction for electric construction. The deferred 1 inenme taxes rmulting from the almve are currently being charged to income and such taxes which (' have been deferred in prior years are now being credited to income nn the timing differences reverse. 1 A nummary of the timing ditTerences which give rise to deferred taxes and the related arnounts are as i i Twelve follows: Months Ended July 31.1976 f~; P 1973 1971 1975 IUnauditedi (Dollars in thuusands) Fj 7 $l.067 $7.903 $11.11 l $12.916 .,I 1.d* rab.rd depreci.ition sail (1a l.ife A. ct Depreciation llange systern... l.12 8 1.1.~.0 1,7tA 2,151 I'.S 3.f>2 8 l bsinanihng emim 801 3.121 1' All..wance for fund 4 used elunne const ructi..u--electne... IS2 N9 902 2.079 Ovcihcad capitalimi-clectnc.. (73%) (1.04S) (1.2G7) (1.515) Other income tases deferred in prior years. credit. $5.S35 $9.191 $18.137 $22.389 l A reconciliation of an amount computed by applying the statutory federal income tax rate to Twelve Months i , pretax income, to total tax expense is as follows: Ended July 31.197G 1973 _ 1974 1975 (Unaudited) i = (Dullars in thousands) j $51.4fi9 $1*>,900 $53,rG $63.639 = Nrt lucorne 1 Add. Current inenn.c tases 19,0 91 7.22l 12,5r.2 13.0 4 1.128 712 1.333 1.611 ?j Federal.. 1 8t at e.... Fnteral income tax cre.he. app icable tn nonoperatmg activities. l (3.028) ( t,27 I) (3.652) (978) net.. 17.182 3.083 10.213 13,716 __1-Deferred inenme taxes. net 5.111 S.226 12.937 21.003 Federal. 728 DM l.200 1.3 4ti i 1.285 6.381 5.201 9.920 State.. investment tas crnhts deferred, net. 2 1.2112 19.2titi 29.588 1f. 94 Tntal. $76 '.31 $4. tr.6 $%3.210 $109.621 Net income before income taxes. 636.512 $31.280 $39,955 5 52,620 i= Arnaunt iierised by multiplying pretas income by statutory rate (47.).... (6,783) (7.010) (7.739) (7,303) Itec, scihng stems n.ultiphed by t ha statutory rate- , I-Allowance for funilm uwd.hmne constructii.n. Tam..u.d p. yri 11 rd..ird o.u tructo.n costs capitalimi in the ac. s, I.ut l. dua. i rurre ntiv (1,010) (4,53) (1,600) (2,911) (II) .W 363 913 roun (. i ic. nt y 1 ine. L.o ei-1 a., mi.n.c but nut di: ducted currently. ( (2.138) (1,385) 373 1.158 l 901 M9 1.217 1.533 ot h. r. ni t. st.iir me.mc tam nei < f fr. rM in...mc t..s 1.rnent. $21.':11 2 $19.000 $'b.5SI $ 45,085 Total mo.ne tawa. 3 6 bfh ? f} f

n..

4 r ] ,.F i 1 y

• ~

_W-M4 ymg-r ' 'I ff . l' 4

NORTilEltN INI)l AN A Pt'HLIC 5t.tu tt es uims m. I I NOTES TO FINANCIAL STATEMENTS-Continued (Including Notes Applicable to Unaudited Period) b~ by capo almi ha:. been othet d The proviston for deferred meome taxes for electric overheads 1975. order of the Pubhe Servn e = wo h the October 6 mereased electric revenues in accordance Coinnu% ion of Indiana, so that t he change had no effect on net mcorne 2 resuhme from mterest charges appheable to rmnoperann a ( le t obe r, reduchon of meonie i ne< principally construenon is e dol [ied e Other Income, execpl that comme nemt mappheable t o i f The .iet D llie%. 1975 the reduetton of mcome ines resultmg from interest charges 75, electric rate order of the are charged to deferred meome taxes m accordance with the October 6,19 Pubbe Service Commission of Indiana The investment tax credits ha e been deferred and are bemg amortized to meome over j Pension Plan.The actuarially deternaned cost of the Company's noncontribu l the related property substantially all employes, for the years 1971 through 1975, respectivel<, and is estimated to be $6NR000 in 197 was i which covers The Cornpany follows including amortization over a penod of to years of unlunded past service cost.The unfunded p $5.7(4000 6 31,1975 j f I a pohey of fundmg all pensmn costs accruedAs of January 1,1975, date of the latest actuarial valuation, the ted value of vested benents by was estunated to be $22,610,000 ll total book value of the fund was less than the actuarta y e unpuvalue of equity securities hehl b 1975. was ines Smee that date, the $ 11,019.000 The market below the total book value of the equity secur976. the rnarktt value of the approumately $12.088,000 market value of equity securities has itiereased and, as of June 3 l l nputy securities a ns approximately $1,023.000 Refer to note (b) of Notes to Statements of below t l Allowance for Funds Used During Construction. ~ at December 31. 1975, and July 31. lheome preferred and preference stocks J uly Current (2) Capital Stock: ( 'uinulat a t i 1976. were a3 f ollow s December 31.1976 fledemption 31.1973 (l'naudited] Price (Dollars in thousandW Cumulauve pn ferred o n - Sitsi par s ame - authonred 2 600 nio larcs- $ 21.las i 21.138 Sint.20 4 4"e senes-211.3mi ca es ootc arnhng h.U M s. OlD lib.tU 4 8%e series-74d itiRI hars.3 imtMatuhhg 12. f N o 12.t a n 101.G) lu.ut o 103.00 4 22". sence-120AMC shares outstandu.g lo.no 107.50 l W'. sence-lm.Om shares outstamhng. 30.t n e 30.a 0 7 44*. senes-300 9 H = hares outstandu:g7 50". nenes-300.0lo shares outstandmg (not redeemable pnor to M 'to. mo 30.m0 1978)... Cumulanve preference stock-l',0 par value -authon:cd 2,uon.000 shares-1164. senes-3M 000 and 352.0W sha.es nuts'.tndmit. respecoveiv. ca. clusive of unkir:g f und pa>rnents due within onc year (not redeemable pnor to Seprember 1,1979)

14. nm 17 tMIO 6%*'. senes-200 t00 shares outcar.dmg. convernble mtn not more than 10 Gio t o.Ut s]

U6.666 shares nf common stock (not redeemable pnur to June 1.1930). f1.n 538 Total curnulanve preferred and preference stocks. The cumubnve preferred and preference stock u redeemaMe m whole or m part at any t t hown above, except that i upon 30 days' notice at the opnon of t he Company at t he redempt on prices s il 11 D m T 3 EMhMhM@ hk um.

4. a., nwa..:x.n; ;c. 9.,m

..y;~. ~w

.; y. y .:.s L. / < s,.s . 4.3 wr. g.;.. ;.,g'f; /' s.1, i .., [4I. 3 y.' g44pf,.., iJ. f;- y; 7 ~p y, lw. ;,...y e. e.. C. y % x e. g n -; %-:* ; &.. q,<. j r. P . A, ~.. . y. +..

l NOltTllEllN INDIANA PUl!LIC SEIWICE COMPANY d a l d d j, NOTES TO FINANCIAL STATEMENTS-C' ntinued o >{e" d (Including Notes Applicable to Uncudited Period) the is dernpipin piire fier t he I W < senes will he reduce,l af ter lh cetuber 31,1976 to $102 (M per share. .ne! Ihr re.leinpinin pnces n.r i hr 711' <, t he 7 Tu, (vio > 00 ominentme Slay 1.1978) ami the l' 6 Fe ]A no m l., r i UCo) o, o w di he reduced penoiheally m the future F in. ai,m.% : m,, a , ' 6t.' k r.I.iii.,i ni a snkmg fund 3uthetent ti, redecin a n,un-Q lic 11 '.I 6 .n.il, l' e acia y ear lHClittiltZ in 1975. at t!6e }iar value phis fi i.ti, e.li .i !4 11 Si j.;. iiil er [ iii h j H 18 6 .il:, >,1 i t i

cdcem thr.. ugh t he -mkme fund on or before Ilian inp ui ad.ht innal shari ( No shares were redeemed dur-

{ k' h a..i.ic,l.h.olem!- A' o s op e n 6 i ompoo ni. Se pt ember 1 m < :o h so. h s c.o noi me 1975 iluonuh the opteinal iedempnon piovrion. On.Inne 23,1976 by !(esolution of the lloard of , "A)~ n e.i e Un ector s t he ('ornp.my cwiered a s option to rodeem 1690 shares in addition to the 16.000 shares i (g re< pored to be redeemed on Septemi.cr 1,1976 The nuht to redeem such additional shares shall not he eiunulauve and shall not reduce the 4nkme fund re<purement in..ay subsequent year in.\\ lay.1973, t he Company sold 2io nio shares of tiW',. Cuinulat ve Preference Stock, $50 par gi* The 6b % Cumulative i t han 666.666 3 hares of conunon stock. r value. con vertible mto not more opium of the Company, or at the option of the hohler. Preference Stock is redreinable at the couaneneme.Iune 1.19so at the pnee of $53 per share, plus all unpaid cumulative dividends accrued thereon to the daic of redemphon. h-- The Company ol12Somo shares of 8 CA Unmulauve Preferred stock, $100 par value, through a priv ate placernent, on October 7.1976 On ()ctober IS,1976, the ('ompany redeemed the outstandmg Pc Convertible Debentures due on that date l)uring t he years 1971 thlough 1975 awl for the seven months ended.luly 31, 1976, shares of [ = '. Seven W nths cononon stock, no par value, w ere rsued for the followmc purposes: Year Ended December 31 "g If,$ 3 g 1971 1972 _ 1973 1974_ 1975 (Unaudited) -g un 791 ans i

30. 7 a 47.7 u 57.670 47,238 4

}_""

temp.p so L run hw. gn j Conversion of 15 cons erable.M.cnoire-67.51% 'J2, Nf,0 1,926 18 30 84 ('or.wraton of t i - con vri t :ia ich. ni urc, til 121 628 196 336 g ble, of comnmn w>ck. t.uiin oun

2.non.ono 2.0n0,000 91.601 M. ora 1.0.Q EM 47.7ho 2.067.%96 2.lH7.658 i,

-1 9 Un Aprd 9,197.5, the shaicholders atul the ihrectors of the Company authori7.ed an increase in the { j authorued number of share-m t he employe <tock purchase plan from 321,570 shares to 574,570 j < hares Amernied Arneles of Incorporation adopted Apnl 9,1975 filed and ell'ective April 10, 1975:(i) 4 mcreased the authoru.ed numi.cr of shares of conunon stod from 27,000.000 shares to 32,000.000 I? y ~ f 000.000 'Q' 3 hairs, (a) mereased the aut horued number of shares of cumulative preference stock rom 1. i - shares to 2Wo 000 < hares (no :uncmled t he provisions relanve to the authonzed but unissued shares 1 3 ( W d of cumulative preferred sto. k to (a) delete rest netions on the maximum allowable dividend rate and E n.asunum allowahic redempin.n pnee aml (b) allow smkmg fund and conversion provisions and such 3 i - l-other relative nuhts. prefer ences hmitat nin< or restnetions as rnay be deternuned by the floard of nu , y Directors m such usues and stS.376 shares of common stock reserved for the g At J uly 31.1976 there w ere 213.222 t >s converuon of F e aiul it.'< t 'onvernt le Uebent ure.t resi cet ively, 666.666 shares of common stock y% m J > sg n U.*.} p,

y, l

l 'r [ Y NnE

NoltTilEltN INDIANA l'L'IlLIC SEltVICE COMi'ANY NOTES TO I'INANCIAL STATEMENTS-Continued lincluding Notes Applicable to l'naudited Period) l r escrs ed for t he ". nver-o n of 68 2"; (innuhihre l' reference Sinck, 197399 -h: ire of coininon t< 4 L re-crved for t he en pi..v. so,ck puich.i-e phin and 501U:00 hares of e iinna n stock ic-ers ed for t he A n t oin.it ic lhvnlerol 1(enn e-inmni an.1 stock I'urchase I'la n At Deccinber 3!.1975. t here were" and 18 4'< ( 'on t ert ible 213 30ii aiol X1Ul2 4are, of e innion sn.ek ie-crved for the cons er n n of I" l ' e,l 's l 'el 'el's b;tl q s e d cinthhpi!g d o it k re-t T% ef t [s it the ei sh \\ ef-p ih ilf 6 A lr ~ 1 )cbe 'n t l]l e*( req 6ec t ['. I'l\\, w o ,3 ('urnulative l'teference hiin k atal 215.137 -hares of cornnein lork rewi s eri fier t he etuploy e stock { purcha n plan The Cornpany transferred $ro.luuiou arul $25.ooo.qu'o froin Ibt:uned I:arnini:s to the Cen.nion St ock account in 1973 aint 1971, respect n ely The t ran3fers w ere in ace.irdance wit h itevolutions of t he lloard of Directors Ai !i-en;ber

1. l'A a. atu1.luly 31.1976 t he lon'rierin debt excluduu announts 3

(3) Long-Term Debt: due willan one year, is ned ano aut retiled or canceled was as foll"" Amount outstandin g July December 31.197G 31.1975 (l'na u dited t (Dollars in thousando First mor' rute lon'l-g <> r,37, $ 9,135 l g Series F. N, ' lac NI.i t ' h I. I'"'d' Scrics I.. l' C s qui 4.Q4) due M.i v i l'N ' - s,3,3 st. p s) Nrics il 3'O 'Itic \\l.io h I l'l4 g .,,q u i g, pse Scrira 11.P a ' lar luls i i t '% 3, it3nt 1%.0 4) 5cncs ! T d'ie Ano nt lft 19 % gl,9ee3

21. 7741

%erics.l, l l'3"r d hic.l.a f t a ir) lb, I g 3 ypj l3,jf t) 6.' dne Felo uary l i l'J'JU. 7 &ncs K yg 999 p,n s) genc-1. l + in \\l i e, b 1 ", 1742 .g,, q .;;, rgo +1; ' i 11 i 't \\t- ,g g77 js n73 \\1 I 33,9y, 33.uel wim I i p.g,ggy) l ') lt 4 ) A e. 8' . ro I r,n u m)

49. ' n al 74, },,,

ty j e u, 3 -3 o.

i \\t - i _' d ' i

,.. i n la \\;a.i i 1m/ 7,,a ul 7*, a n el sci w I' O. .tiv lois I P, J' M 7, gig 77,3 n si \\.ol 1. 2"'l - r,o mui 50 (u ni

scries V. k tC. da" l

sencg W pl tir, d uc Sept ember L. '.'4ll. q)},p q, in si Scncs.\\. O. ~e duc July 15.19sJ. 595. 7">7 593 C\\ Total. Senes A Noie.

i.rgjo 23,",00 City of Michican Gtv. 5 Tir'c. duc October 1. 2003.

County of Juper- $10fvo un0 @ f, Un duc February 1.1Wi 3i no 3 i.tu si $24.0001410 @ 7's". duc fchruary 1. 2005. g,, Convertible del entures-44*c due Februars i Urn (rach S ono debenture 1.o enits c..uvernt,1c into f..or -hares of

29. IM 20 I?e cniumon stock ur=,n payment of $3121 ca h, autyect to adju3nnent u, certam evento.

2 Hi7 Cl Unamortized l'renuum and lince unt on 1.one Term ()ebi. net. % M.192 %72. I'>l Total long-Terne livlit. escimhne amounta due wu hin one year. U ti i s l

i

,I i i 1 ,,]j()@ ,,a%' 4 f - u = ,l g v + m w-- 7 _1 l - i.Wv y ~ s p sy ~ 7 4 y$ b .4

_ _ _ ~ _. -. _. - _. - ___, _ _ __ l NORTilERN INDIANA PUllLIC SERVICE COMPANY 'H 1 t 6 NOTES TO FINANCIAL STATEMENTS-Continued 9 r t ,y (including Notes Applicable to Unaudited Period) The sinking fumi reepiirements of long-term debt Uncluding the maturity of First Mortgage 31,1976, llomis. & ries E,2W',, March 1, !!no and & ries F,2%%, Stay 1,19S0), outstanding at.luly l i for caeh of the four years subseipient to July 31,1977. are as follows: 4 l 19xl 4 1979 tum I 1978 $2.12S/M $3.380,000 $21,610,000 $5.150,000 j ,E i 1l Unamortized debt expense, discount and premium on heng term debt. applicah!c to outstanding 7 honds is being sunortized over the life of such londs. T; The Coinpany's Deed of Trust, dated August I,1939, n.< arnetulcel and supplemented, secu first mortga::e lien unim !e j Mortgage Ilonds issued by the Company, constitutes a direct d by the First substantially all property aint franchises, other than expressly cwepted property, owne Company. (1) Supplementary Information: The amounts of maintenance k accounts, are not considered to le significant. Hents, advertising and research and development cos [f l j f are not considered to be significant, and the Company pays no royaNcs. j federal taxes, other than income taxes, are t f Provisions for state, local and miscellaneous summarized as follows: Months Endeel 3"gg;[* f IY Year Ended Decemhcr 31 1971 1972 1373 1971 1973 tilnaudfled) i (Dullars in Llmusatuis) Real estate and personal property. $18,368 $19,882 $15,599 $16,S07 $17,051 $18,117 'l Indiana gross inconm... 6,610 7,161 7,571 S,068 9,229 9,81S 1,2SG 1,557 2,129 2,599 2,717 2,S92 266 250 2G1 2 17 3 17 39G Pay roll....................... s3 15 S5 111 ISS 167 l Public utility fee................ i J Other........................ 1.:9.573 $29,171 $25.915 $27.862 $29,535 $31.120 l' 31, 1977 with several The Company has lines of credit which run to May 1 (5) Lines of Credit: at the prime rate participating banks whereby the Company can borrow a maximum l compensating balance rettuirements, the Company has agreed to maintain balances whic The maximum amount of such loans mutually satisfactory to the banks and the Company. amounted to $77.250.000, the monthly average 31,1975, outstanding during the year ended December amount of loans amounted to il5,2S9,t/N). and the weighted average interest rate during the year w l The maximum amount i.f such loans c,tstanding odring the twelve months ended July 31, l 7 89, A 1 a I JI + r y ~ 2 '" -v M.d F y f ~ \\

NOllTIIEltN INDIANA PUBLIC SERVICE COMPANY l NOTES TO FINANCIAL STATEMENTS-Concluded (Including Notes Applicable to Unaudited Period) l l lu7c amounted to $60.2WM t he mont hly average amount of loan < amounted to $31,903.552, and = the w eighted average mn rest rate durme t he pern,d was 7 33% The prime rate at December 31,1975 are!.luly 31.1976 was 7 % S 5 Oh Commitments: The ( 'om pa n s cu m.* t hat appr"xuoately ti._'?:I m 000 will be espemled for construction purposes for the peroid f rom.lai.uan

1. 1976 to I)ccemi cr 31. 19N0 Substantial cormmtments base been inade by the t'ompany in connection with tha prw am Iteference is rnade to t he caption Construction l'rogram" herem (7) Nuclear Generating Unit: Itefer to Turrent Statm, of Noch ar ('onstruction Program at liailly" at page 12 for a discussion of htigation w hich had halted const ruction of Urut N 1.

Approximately $71.721.000 arni $7s.52%tn) had been expendr.I hv the ('otnpany on this project as I' of December 31, 1975 aml.luly 31, 1976, respectively, and it wdl cont mue to meur substantial additional costs prior to a final decision on the pending litigation in the esent the Company is not successful in the outcome of future proceedings, if any, it is uncertam, at this tune, just what part of the Company's total expemhtures would be recoverable ami what the extent and timing of the resulting adverse econonue impact on the Company woubt be. The Company is continuing to l capitalize allowance for funds used during construction on this unit. (S) Construction Funds: construction Funds from the proceeds of t he Series ' A" Notes (l'ollution Control) have been deposited with the Trustec, the designated dist"irsme agent. Monics m the Construction Funds are applied to pay, arnong other costs, the co,t of const ructing and equipping the applicable pollution control projects at the CompanyN Michigan City atul Itollin M. Schahfer electric generatmg stations. (9) Summary of Quarterly Financial Data: The following data unnmarv.c certam operating results for the first and second quarters of 1970 llecause of <easonal and ot her factors. the earnings for these quarters should not be taken as an nuhcatmn of carnmes for all or any part of the balance of the j current year' Threc %Innths Ended Starch 31, June 33, 1976 1976 I (In Thousands) Operat mg llevenues.. 9IS2.S21 $111. IS3 I Opr-' sting Expenses and Taxes 152.213 122,123 ), Operating income... 30.578 22,360 ? l Other income and (Deductions)-net. 5.919 6.302 .t l Interest Chatges. 12.Sli 12.I19 Net income $ 23.713 $ 16.213 Earmnes on Common Stock. $ 21.308 $ 13.838 = Earnings per share on Common Stock-on average shares outstanding. .96 $ M ~ ' {,,?0 l\\ 'b

m i

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G UNDEltWittTING k & Co. Incorporated and The wveral Underwruern nained below, acting through Dean Witter rally agreed to Merrdi Lynch, l'icree,14nner & Snath incorporated, ao Itcpresentatives, have se f purchase the principal arnmant of Series Y Bonds in icatent, a copy of which is filed as an exh d k h d l terna and con <httons of the Underwritmg Agrectneif any of the Series Y Ilonds are purcha f Principal l regntratmn staternent Amount of I, Principal Series Y h Amount of Bands _ Series Y Underwriter k I Bonds 5 3 u),t n o l'nderwriter The lihne Company inmrp> rated. 31st a o !) an Witter & Co incorpraird. Janney S!'tagomery Scott inc. 90.0o { L 5 9,015,i m Kidder, Peabmly & Co. Incorporated. 450.0 o Merrdi Lynch. l'aerce. l'enner & dmnh 9.015.000 Klein ort, Un ,n incorporated. 90).0io ,. L incorp. rated 150.01 o g; Kuhn, lah & <. 450,000 Ait!) Secunties Corporation 3tt),rno mann & Co Inc oro,soo h Ladenburg, Tho A>f unt Co. 100,000 f.arard Freres & Co. 900,000 Arthurs. Lestrant,e & Short. 900 000 (. lehman llrothers incorporated. 9to,0lo llache lialsey Stuart inc 3n).000 'lk lab, Ithoaden & Co 310,000 llacon, W hipple & Co s o,0io llaird & Co inenrpor ved Imi&Co Inmrporated. 3 10.0' o f. Robert W 450 Aiu 300.000 Mcdonald & Company. Moore, Leonard & Lynch, incorporated. r, flasle Secunties Craporanon. 450,000 f Baternan Lebler. Udl Richards 300.000 Mowley, llallgarten & Estabrook inc 150,0I0 New Japan Secunties International Inc 310,000 b incorporated. rco.oro i L llear. 5tearns & Co 150 son Newhard, Cook & Co. Incorporated. 310,000 A Ihrt. Wdson & Co. Inc 300.010 The Nikko Secunties Co Internatmnal. Inc 300,000 Wilham Blair & Conipany 3 o,0to Nomura Secunties International, Inc 300,0n0 Blunt Elbs & Simmons incorporated 900,0to The Ohio Company. g Hlyth Eastman Ddion & Co Incorporated i 300,0tX) Paine, Webber. Jackson & Curtis 900,000 f i Ilocttcher & Company. 300,000 Incorporated. 300.000 l [ h** Bosworth, Suthvan & Company, Inc 300.000 Parker /Ilunter incorporated. 300,000 J C Bradford & Co. Incorporated. 450,000 Piper, Jaffray & llopwood incorporated b' 150.000 I Alex Brown & Sons. 310,000 Wm E Pollock & Co, Inc. 300,000 l h flutcher & Smger 300,000 Prescott Ball & Turben 450,000 The Chicago Corporauon. 150,0to R. W Presspnch & Co incorporated. 150,000 p 1 h Coy Secunties Corporannn. 150,000 Raffensperger,Ilughes & Co. Inc. 300.000 8-Juhen Colhns & Company 150,000 Rauscher Pierce Secunties Corporauon. 300.000 y Craigie Incorporated. 300,000 Reinholdt & Gardner. 900.000 / Dam, Kalman & Quad. incorporated. 300,000 Reynolds Secunties Inc 300,000 g Daim a Secuntics Amenca Inc 900,000 The Robinson.liumphrey Company,Inc 150,000 Ddlon. Read & Co inc 900,000 i Rodman & Renshaw. Inc 150,000 Drexel Durnham & Co incorporated. 450.000 Wm. C. Honey & Co 300,000 A G Edwards & Sons. Inc. 450,000 Rotan Mosle inc 670,000 EuroPartners Secunuen Corporsoon. 150,000 L F Rothschdd & Co. 300,000 Evans & Co. Incorporated, 900.000 Scherck, Stem & Franc, Inc 150,000 The First Boston Corporanon. 3n0,000 Schneider, I ernet & lisekman, Inc., 670,000 First of Michigan Corporaton 3 0,000 Shearson llayden Stone Inc f Firu Southwest Company 300,000 Shiclas Model floland Secunties MO,000 I Fulion. Reid & Stapics Inc 9W,mb Incorporated. 300,000 k Goldman,Sachs & Co 150.0uo shuman Agnew & Co,Inc flertfeld & Stern. 300,000 smith Barney,liarris Upham & Co 900,000 I n,' J J H lidhard. W L 1. yon-hill. L e. incorporated. 450,000 3 a ilornbh.*er & WecA= Hemi 9m.uo % Gen.8wiss internauonal Corporauon. 300,000 J In mr porated 15o Ono t H... H anc. t !*. r h. Stone & Youngberg. ..c. l' F liniten X (1mt m bd (.,.i WUVu b M 000 l l 8 I, i J 19 1 ~__ r.*

l ~~ Principal Arni.. Amount of Series Y Series Y Bonds l' iderw riter Unrferwriter Bonds i 5 Jtv),04 Wathng, Lerrlien & Co incorporated. 5 4.d),0lX) 6?0,0t4 Stuart Hrothers 150.000 Wecden & Co incorporated. 5ummers & Company. Inc % crtheim & Co. Inc. 9 0.000 300,0 0 3f e.rs o Sutro & Co incorporateil Wheat. First Securities. Inc. 150 H s) 9(r) oto Thnnian & Company. Inc White. Weld & Cn incorp.r.sied. l home,n & McKinnon Auchinct<,n Wildman. Neal & D. Ibit. Inc IM).t d o GN aili 450. nt o Kohlmcu r inc h=1. 5truthers & Wmthrop ine her.r. r Trwk A (' I m or p,r'u. d ca don) T.o i n d i Y in.:uchi li, tern ation d ( Arneric.i) liic.

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1-T< t J. fr.o,ono isui f. I \\ 'I ), v. o ~,, Y lionds are offered <ubjet t to pnor < ale, when, as and if t%urd by the Cornpany and h on the 3 The,* r'e s a(copted by the Underwriter =, in part directly to the pubhc at the nuttal oUerine price set fort cover page of this prospectu.4 and in part to selected dealer 3 at such price less a concession not Underwriters and dealers niay reallow to other exceeding 50"'o of the pruicipal anmunt thereof. f dealers a discount not exceeding 257e of the principal amount thereof. Af ter the imtial public otTering, the public offering price and concessions and discounts to dealers may be changed by the I llepresentatives. i. g r-1 I l- ,\\ 50 'bl s t J [ 1 g A st 1 i L.y3 l l, s

-c p.. .-m-f bN 1 l f TAllit OF CONTENTS NORTHERN INDIANA UE l PUBLIC SERVICE COMPANY l 3 's hi n.mpm,:. a l l r >c of proce..d.. a I f l g NS nin.truction Pr..grmn... 5 Financing Itcipiirements...... 7 r l C a pitalit.ation......................... 8 NIPSCO Statements of income.................. Current Status of Nuclear Construction 12 l'rogram at Bailly.................... l Ilusiness............................... 22 l llegulation............................. 23 $60,000,000 Operating Statistics..................... j 30 Map................................,.. First Mortgage Bonds 31 i M anageme nt.............'.............. 31 Scrics Y,8%% Description 'of Series Y llonds............ 3C 37 Due October 15,2006 1.egal Opinions and Experts.............. l Iteport of Independent Public Accountants. 33 W Financial Statements.................... 49 d;g U nderw riting...................,,...... PROSPECTUS ) I The Company has filed with the Securities and f Exchange Commission. hhington. D.C. 20'119. f i Act a!!cgistrationStatement underIheSecurit esh Series Y Dean Witter & Co. of 1933 as arnetulcil, with respect to t e Ilonds otTered by thi.- Pro <pect us. For further in-formation incorporated /. Series Y llond4. reference is made to the llegistra. tion Statement and to the Exhibits liste Merrill Lynch, Pierce, Fenner & S mith d in and Incorporated made a part of the llegistration Statement. October 19.197(i

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~. ~. W:'.: C~ hsW y.n a / Y F Y Phone 4GZ-5151 Valparaiso, Indiana 46383, Tuesday, August 31,1976 Bailly Cost Up, Need qy gg% I Down,Says Spokesman f f- !' % e (

1. b."h"4 Energy Commission's Atomic Safety l " '

IIAMMOND - The estimated cost and Licensing Board and its appeal l ,of building Northern Indiana Public board and later by the Court of Ap-Service Co.'s Bailly Nuclear Plant peals for the 7th Circuit." has ballooned from $243 million toThe statement went on to say that $675 million, but the power it would the estimated cost of constructing the provide won t been needed for at least plant has escs :ed to $675 million,and delays in its co seven more years. so deferred 50C to 1.000 construction That was the word today from a i; y* jobs, worth $120 million in 1976-basedwages, a spokesman for the utility company, t.g;.ct, j responding to a petition filed Friday $10 million to $11 milhon m annual, by opponents of Bailly asking the U.S. property taxes. Five years ago the f Supreme Court to review earlier low.company faid Bailly would cost $243million. The n er court rulings which would allow construction of the controversial nu. clear planton Lake Michigan. n a 1982in-service date. The spokesman said today that. UO**ver, a NIPSCO spokesman 645,000 kilowatts that NiPSCO would file arguments against also satd the supplied by the nuclear ---.3, holding a review.The company has 30 would be,t be needed untilsometime {-] N.. b, plant wonbetween 1983 and 1985, by his com-days to fileits arguments. g In an announcement by NIPSCO re-pany's own estimates.in earlier hearings, NIPSCO had

• leased this morning,the company cri-ticized the request for a high court said quick clearance to build Bailly w as vital since the power it would pro,

review,

" Joint Intervenors tenvitonmental-vide would be needed by 1979. Now NIPSCO can legally build Bail-ists opposing the proposed planti al. lege that jurisdiction for the location ly, but it has still not resumed work, and licensing of the nuclear plant whichit startedin 1974. And NIPSCO claims that it won't should be the responsibility of the De-partment of the Interior and not the resume that work untilit completes Nuclear llegulatnry Commission, the new cost estimates and until court F agency established by Congress for cases againstit are finished. these functions," the statement said. In the meantime, power from two "The Intervenors' petition does not new coal fired plants being construct-offer any new arguments or evidence. ed should serve northwest Indiana's needs until the mid 1980, the spokes-11 is simp!y a rephy of information thathasheen submitted and adjudged man admitted. in extensive hearings by the Atomic EXHIBI'i' II sewgltlR.4g,qg

/ JUN 18 1976 1 i et T C* y-j 22-DS U 4cmorandum Director,1:ational Park Service To: Chief Scientist NaillyNuclearPowerPlant From: Indiana Dunes' National Lakeshoic and ofrice of the ~ tatives of the

Subject:

Natural Resources W.SO, met at During the ucek of June 1 h,1976, represen ) uith representatives frem thed Wildlif Chief Scientist WASO, and the Division of Indiana Danes Hational Lakeshore (INDU ission, U.S. GeoloB cal Survey i 141ducst Resional Office (UIS), Fish anProtection Ar.cncy, H After 3 days (list of attendees attached).i its, related to the and IUDU contract consultants Flant upon DIDU, we met with(HIFSCo of intensive discussiens and site v s mental impacts of Bailly lluelcar FowerNorthern Indiana Tu NM d 1-assemble and evaluate existingof B ddh.N Texas Instruis.cnts. The purposes of these rectings were to:infomation rcrardi t l study efforts at Il!DU; and 3-f monito t on INDU; 2-assess ongoin;; environmen adetemine the s t uction and 1 environmental chances Plant. operation of Bailly nuclear Foner discussed in detail prior to the The discussions..are note- 'g.~q,f ithout e:.:ception, were candid, made 6{M,

• Topics listed on the attached outline wereJune 4 riccting t

ents. lterna-eedings, and offered positive aThe meeting with worthy in that the participants, w enlichtened contributions to the procidentified.d on a note of uncerstandin;; and tive solutions to the various probh-:sstrained en the part of MIESCo, trials NIPSCo cas cenducted nnd ulcimately close t mutual cooperatien, but uns scmewhat represumably i ,ww ' f3ntoy. C. 4 .: 2,'h h %.. ' !? hs 'c. -3,$ 'Oc.e10 EXHIBIT IV .-n-e. ~. -.,..,,,-.,,,--..,,.-,-n.-=- ..--c............,.....-,,.,,-

2 Early direwienn identified existing resource information, the character and history of H:bU, the kinds of additional studies needed, and the resource mnacc~ nt mandates of DIDU's enablin;; act. Section 7(a & b) of the act stat.c that the lakeshore shallbe perntnently preserved in its present state, and that no develofment chill be undertaken which is incom-pstible with the prererration of the unique flora and fauna or the physio-rraphic condit. ions now prevailing. We vere briefed en t he t eruit:. of the USGS hydrologic studies and the contrnet " colon c.'l si mi!r s c f Dr. F.eshkin, et al. It beca:ee painfully obvious that P.7U i: f aced by a rm]tiplicity of environmental and resource manaCement Trch]erm. of thich Dailly I;uelcar Fower F1cnt is but one addi-tional threat. In t hat recard, it was rocn recc.Inized that operation of the tuo exist.9G coal fired units at the Bailly site are causing as much, if not more harm, to the lakeshore than da:. ages anticipated from the pro-posed nuclear unit. For example, scepace from fly ash ponds, south and cast of the plant. enters. formerly natural bogs and ground water of the lakeshore at an estimted rate of 1 million callons per day. The former bogs have been eenverted to ponds in which the water quality is essentially identical to that in the fly ash ponds. Water levels in the adjacent pond vary as little as 6 inches per year and have become so much deeper that trees alonc the former shores have been drowned. Fonds in the adjacent w:stershed have widely fluctuating water levels depending on seasonal rain-fall and have different vater quality from that of the fly ash ponds. This may chance, however, as NIISCo has opened another fly ash pond, across this watershed divide separating it from the existing fly ash ponds. The scep-cGe frcm the neu fly ach pend vill 1 ost likelv be touard the northeast into previously unaffected lakeshore pon W and the Cowles Bog drainage. FJJ ash residues were being removed from the fly ash ponds and were being deposited as land fill near the Dune Acres substation, and at or near the transmissicn line richt-of-uay, adjacent to the substation. Although a sand dike has been constructed between the disposal area and the Ccwles Sog drainate, there remains a good possibility that leachate from fly ash land fill will enter drain 2Ge into lakeshore property and perhaps Cowles Bo6 It renains to be confirmed, however, whether fly ash spoil is being dumped on lands proposed for donation to the lakeshore by NIFSCo as greenbelt or buffer area. To further complicat.c the hydrological picture in the vicinity of the Bailly Tower Plant site, the hole excavated for construction of the nuclear unit has apparently caused a ground water table gradient shift. The gradient shift, accordin", t.o USGS experts, disrupted nonnal water movement frem a northwesterly r10w to L&c Michican, for water s arising in lakeshore lands immedi ttely cast of t.he dlly rito, to a circuit from the lahechore west-ward toward ano throuch the ho1.c in the Ground and thence north to Lake Michl an. Thus, it appears that some decree of devatering of the lakeshore C e&Am m - wg,wm m s -.. ~~- --

~.- -

3 e is occurring, but in all probability, is offset by the recharge from fly ash pond sccpage. Acid misting was a concern anticipated when coal fired stack gasses mixed with water vapor from the proposed cooling tower, once the nuclear unit became. opera ti ona l. There is evidence, however, 'that acid rains and air pollution are affecting the lakeshore from operations of the existing coal fired units. The day we arrived there was a heavy, low-lying cloud coi'er that obscured the top of the smoke stack. Acid misting is highly probabic .dur.ing these and similar meteorological conditions. Acid rain can be expected whenever precipitation intermixes with' stack gasses. Air pollution problems arising frem the Bail 1~y Power Plant site are compounded by nearby steel mills (Bethlehem and Indiand) plus the smoko and smog drift from the industriali:ed 'compicxes -further west, e.g., Gary, Hammond and Chicago. A couple of items came to' light that are unrelated to the Bailly Power Plant site. One involves the high concentration of metals found in 'the j sediments at certain sample sites studied by USGS. Metals found in high .concentra tion included cadmium, chromium, cobalt, copper, Icad, mercury and zine. Cyanide too, was found in high concentrations at 4 of the sites sampled. The source (s) of these metals is speculative at this time, but may warrant further investigatiun. The other resource management problem identifi. d was Pbrkewitz Ditch and the nearby residential development. The ditch at;s to drain Cowles Bog, and is heavily polluted by septic tank overflows from' the residential development. These homes are barely above water Icycis, in an area where septic tanks and drain fields cannot function properly, lience, sewage quickly finds its way into Markowitz Ditch. Unfortunately, Markowitz Ditch flows through Indiana Dunes State Park. Since the ditch water is warmer than Lake Michigan, children play in the polluted ditch water where'it flows past the bath. house, the most icisurely visited part of the State Park. i This problem would be resolved by proposed Icgislation to acquire the land and phasing out of the residential development. In retrospect, and by way of a summary, we concluded that operation of the coal fired units at Bailly are causing more harm to the lakeshore than has been anticipated from construction and operat. ion of the nuclear power plant. In reality, the nucicar unit addition will exacerbate those impacts present-ly affecting the lakeshore. Quantification of anticipated impacts due to the nocicar unit alone is impossibic at this time. Reliable reports docu-menting the impacts of acid-misting, salt drift from cooling towers and an accurate appraisal of the ecological impacts of each of these factors are, to the best of utr knowledge, nonexistant. For each of the contentions raised during proceedings in issuance of a construction permit (including the court cases), there has been compiled an exhaustive amount of expert testimony and supporting documentation in defense of the nucicar unit y, JU'to*o N ]h J J A e . = =.-.. - ~. _ ...--m

.4 (i.e., Final.rnvir n tental Statement and !! caring Record, etc., IIITSCo, Failly Generating Statien, liuelc tr-1, Decket tio. 50-367). To challence a buhtark of this nature, at this point in time, would comand a supreme effort. 4:antification of impacts arising from opciation of the coal fir.ed units ' rn the ot%r h:*nd, can be rendily documented. The effects of the fly ash Unds uron t he bl.twhore begs are revealed by existing water level and .:ater qual.it.y infor m" lien, aerial photography available from the years 1938, 1953 r.nd 1973 n.nd ecmparisons with the water level behavior and water quality characteristics of adjacent, unaffected ponds. As a result of briefinc sessions following our trip to UIDU, relating our findings to A/S Tsced's ::taff, key NPS staff and Congressman Sidney Yates, there has been developed a proposed strateEy which we have incorporated in the following recommendations: 1. .Tht: !h t inn il Park Service thould immediately correspond with !!IfGCo confirming the concerns discussed at the June 1 h meetings.

Then, suggest a meeting at or near the Bailly site to consider resolving the fly ash pond scepage, and the possible flow of 1 cached materials from the fly ash residue disposa3 sites. At this meeting the I!stional Park Service should negotiate uith lillSCo to halt infiltration from the fly ash ponds, and succc::t some possible remedial alternatives. The fly ash spoil dis-posal problem vill require seme more ground work before we can ask for termination of activitics and suG5 cst mitigating measures.

Frovide supplemental funding for ongoing USGS vater level and 2-water quelity monitoring, in order to refine the hydrolo5ic model and water quality conditiens of the lakeshore in the vicinity of the Bailly site and Cowles Bog. and $35,000 for FY 77. :e icvel of funding vill be $33,000 during the TQ. 3-As quickly as possible assi n a Ibil time biologist at INDU to G coordinate the research progran and to conduct some in-house data cather-ing activities. Dr. '4111 inn Hendrickson is currently under considera' len for this ust. i h-Further review and analyse the park resource infomation base and expedite the prep *. ration of the resources manaccment/rcscarch plan. Co-t ordinate the plans of the Fark with the research and monitoring plans being develcped by NIPSCo, their consultants and IIRC in the process of acquiring an operating license. Study plans must be designed to detect the possible j effects of air pollution impacts on vegetation (whether from acid misting ) or cooling tower e tit deposition), and be of a quality that will identi^/ air pollution sourecs, unether they be i!IISCo, 3cthelchem St.cel, or 2, :.hers. 'W.'*~,'..,.. ~ ..g ..c .,~...=r.-.~ ?wt..

. h.,**,t-This is necoccar/ in order to require mitisatin_g. action ~ on the part of pol.lution cources. 5-Fecruit frem outside the Service a professional geologist / hydroloCist to coordinste CeoloCic arid hydrologic studies at INDU, and to conduct in-house data ' acquisition. Eaced on 'this sincic experience, it appears that !!ITGCo is villing to cooperate in being r.' cood neighbor by undertaking measures to protect the recources of I!ZU. liowever, should flIFSco fail to cooperate with the !!acion21 Farh Service to mitigate the adverse Jr. pacts on the park due to their activitics, the Service must then be prepared to seek relief throuch leCal tr.can'. s Theodore W. Sudia e O e d e 9 2 6 O* e D e e . s.. g --=~ ~ m.._ -, s

a en1CAGO SUN. TIMES, Fr!., Nov. 19, 1976 ' ' ' f,'

• u

]4,, Bhilly A-planFlicensing5y 3-n. t , r.w.n mm iCallOCl,CO,OSSal error TTF c l c, l

.By!Bruceingersoll :,

I .. Appeals here in the fall of 1974 to halt the r project until several legal issues could be set-; Asst. Interior Sec. Nathaniel P. Reed de-founced as a " colossal error" Thursday the tied. The U.S. Supreme Court cleared away 1 the last obstacle to construction on Nov 8 d, licensing of the Ball." v

k,,, ~

when it let stand the lower court's decision .,., 1 y nuclearl power that the Nuclear Regulatory Commission. .[ plant ,. IndLa,so close to the

(successor to the AEC) has the authority to na Dunes Na-

,phjkg 'linnallikeshore and e" permit a nuclear reactor on land abutting a - y [ national park. ( ' ' ~ %{' the steel mills of,,e t' la explaining' his o p p o s it io n to Bailly, ., northwest Indiana. 7, Reed emphasized that he is not a." knee 3erk"

y1 D*

Reed revealed that ' foe of nuclear power. w J, Q' 'r.W,' :.*. b d"gif- !. : N . he had threatened to "I'm convinced that Bailly is in the wrong resign in 1973 unless :.. place," he said. "I can't believe there is not a. v A the White House and better site than next to 20 per cent of'the ' ~ t h e n-interior Sec. nation's steel-making capacity. , e,- Rogers C. B. Morton "I served in military intelligence for three-- '? ) ( [ allowed him to testi-years and I can't believe that another. country fy against the $675-would take that kind of risk with a priniary million project on Industry when it doesn't have to. NATHAMIL P. Rito 1.ake Michigan. A compromise was threshed out, he said in,. "If you have a malfunctioning of that (Bail-ly) plant," Reed said,'"It would cause the ( [pQ an interview here, permitting him to appear - evacuation and temporary abandonment of .,before'the Atomic Energy Commission's.ll-those steel mi!!s and it would put thousands of s censing lpard on Sept. 20,1973, as the repre. people out of work and have a severs impact - nemmesi==im sentative of the National Park Service and '. on steel production."

.e not the. interior Department.4' '

From a " national strategic standpoint," he Reed's testimony, however, did not dis *, said,it makes no sense for the commission to ~ sunde the AEC from granting a construction . be " satisfied with the ' suicide squad

• ap.

s @,(,. license for the 615 megawatt nuclear reactor, proach that the (steel) companies are going "This decision on Ballly stands out in my to take to turn down their furnaces and evac. mind as one of the two or three worst," Reed unte their men." observed in harking back over six years in Reed said that the Carter adr. Inistration @$.y, Washington as assistant secretary for fish,, abould review not only the ind.astrial reper, wildlife and national parks, cussions of a nuclear acciden'. but also Bail-h.4 A l While he was expressing hope that the Ball ? ly's impact on the. fragile culogyiof the na. ly." mistake" might yet be rectified, Northern - tional park. s ~ Indiana Puulic Service Co. announced Thurs-Dean II. Mitchell, chairman of the power. day that work nn the 135. acre Bailly site will company, said the contrat. tor for building an resume next week.. underground " slurry wa!" around the plant' Environmental foes of the Bailly project site would be on the job Friday. Actual con-had persuaded the 7th U.S. Circuit Court of struction is scheduled to begin next week. - ~ ' g-i'

.P M..

• 4 EXHIBIT III a

m - *a +- - 'T'-

l' 2 A common thread in the discu:;sion was the. need and desire for all groups to work in a coordinated fashion with free exchange of information among all. h-The first step agreed to was for there to be an interchange of existing information, review of it and to meet again for technical discussion. I i M Robert P. Geckler, Project Manager N Environmental Projects Branch No.1 N Division of Site Safety and Environmental Analysis i f l L., 'e 5 ? i WD L.. - 'dI(! n QD s-0 I h i b 1

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