ML19309E665

Annual Financial Rept 1979

ML19309E665
Person / Time
Site:	Wolf Creek
Issue date:	02/13/1980
From:	KANSAS GAS & ELECTRIC CO.
To:
Shared Package
ML19309E638	List: ML19309E637 ML19309E654 ML19309E665
References
NUDOCS 8004220759
Download: ML19309E665 (32)

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i Contents

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Af anagement Letter . Progress was made in several important areas: Last half earnings increased, customer numbers grew and major challenges were resolved. Our goal it to continue providing service - -

that will improve people's lives. '

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Page 2 s _.4 Current Topics . . Rates increased, but judicial review requested. Questions surrounding Wolf Creek base --

mat resolved. Tentative settlement reached in a ___ _ _Q- -; -

Westinghouse uranium default suit. cmem onw Page5 Financial Results . Earnings per share drop for the

year but are up in the last half and common stock dividend increased. Revenues are up and sales are ,g virtually unchanged. About the Cover Page 6 Kansas pioneers fonnJ a land rough and rau. Yet men Financial blanagement and Planning . . $140 million 'uch af th'1' Pidar'd made Ih' Prairie blossom. The bonntiful haricus harr come not because they learned to in permanent 6nancin l

Stockholder reinvestn$g needed ent and employee stockin purchase 1980. "'#'I hd'#"' N""' 'h') h"'"''# '""tJ 'o **lliflJ 'h'i capacity to produce. Rend!: the Kansas farma of a centary plans popular.

hirimlf aird rs. T@ orie farrrier Page 8 feeds M besides himself.

Customer Services and Load Stanagement And the search for improsement goes on. Irrigation Customers benefit from research and efEcient use of ')"'"" Id' 'h' ""' '" the P o'o h hd8 ' /n/ Ped i"U'd" 'l" electricity, but are frustrated by the claims and #*'F #l #d"'d' l#"'"' """E I"'A' d"'**"" "I '""f) '"

Joing so. These systems and others Jependent spon electric counter charges of the energy debate. ,,, ,, ,, , j, .7,j,j j,, ,3, ,,, ,,, , f,,j ,y,,,,g,,,y,,, y,jjg Page 10 Throughout this report are photographs that capture Power Suppiv System demand drops slichtly 'h""f" '" ##" '/"#I") #l I'/' 'h"' '""f) h"' h'II'# ##

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after 89 gair[a year earlier. $177 million invested in a group of associates sat for hours uarching the pale glou-new construction, primarily coal and uranium -

,, ,g, pru successful incandesunt bulb. That light still generating units needed to replace those fueled by gas 7,,g, ,, a m.rjor auornplishine,n in 1/>e ch. sin of energy and oil, achieuements that since 1879 haue changed the face of Page 12 the earth and benered the uay u e lite.

KG&E u as organized in 1909 to proside electric pou er t.

Employee Participation Employees play unique go,,,,,y, ,,,,J the frnits of this relationship are eriJent -

role in company success- from etficient management on farms, in homes, in business and inJastry and in l and operation through representing the company to commar,ity institutions and facilities. Like the prairie, customers and the wider community. Kansas and its people also hate blossomed. A look into thei Page 14 P'" Prosides us trith fresh perspurite for today.

Financials Af anagement's discussion; current financial statements; comparative financial statements, and comparative electric statements.

Pages 16-27 Officers and Directors Page 28 Historical photo credits Stockholder Information Page 29 The Kansas State Hatorical Societv -Coser, pages 2, 4, 6, 10 11 and 12. Pittsburg Pubig Libury - pages 8 9.

System blap . Page 29 Tilliam E. Ellington Jr., Wuhita city historian - back coser

2 Highlights for 1979 to Year Annual

• /o Increase Compound 1979 1978 Over 1978 1969 Growth Rate Operating Revenues $244,970,260 $238,459,676 2.7 $ 67,087,496 13.8 Net Income $ 29,219,986 $ 28,964,461 0.9 $ 11,034,578 10.2 Earnings Per Share of Common Stock $1.84 $2.28 (19.3) $2.17 (1.7)

Annual Common Stock Dividend Rate (Year End) $1.94 $1.90 2.1 $1.40 3.3 Available Capacity (Kilowatts) 1,968,000 2,031,000 (3.1) 1,318,000 4.1 System Peak (Kilowatts) 1,473,400 1,532,600 (3.9) 998,400 4.0 Average Use Per Residential Customer (Kilowatt-Hours) 9,4% 10,136 (6.3) 6,545 3.8 Average Price Per Kilowatt-Hour (Residential) 3.97#. 3.78# 5.0 2.04# 6.9 Number of Customers at End of Year 223,413 217,649 2.6 185,818 1.9 Total Utility Plant (Net) $913,448,977 , $753,786,668 21.2 $207,767,919 16.0 d'

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Management Letter If it's remembered for nothing else,1979 may have But even with progress in public understanding.

been the year when the nation 6nally began to agree utility rate relief generally- and speci6cally for it faces an energy problem. KG&E-was not timely or adequate. Earnings per Presidential pleas and new laws resulted in higher share in 1979 were down from 1978 largely because summer and lower winter thermostat settings. of a 11 month lapse from the time when a new Regulations holding down the cost of oil and gas generating unit came on line and when new rates were relaxed. Oil exporting countries raised prices went into effect.

again, and again. Iran's oil cutoff focused the Declining earnings per share compounded the country's attention on its vulnerable line of supply to problem of 6nancing new facilities needed to provide overseas production. The consensus grew: the United customer service. In the face of government mandates States must become energy independent again. to reduce the use of natural gas and oil as power plant fuel, new coal and uranium fueled plants are being constructed as alternatives. At the same time, rampant inflation anJ record high interest rates also are adding to the con and dif6culty of meeting existing ard pwposed federal regulations.

However, we are dealing with these problems.

Securities have been sold and arrangements made with banks to provide 6nancing. Consultants have been 3,

. employed to help deal with today's complex decisions.

{/f, 3. , We are aggressively seeking rate relief before regu-y .

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3 latory bodies and, when advisable, the courts. The Kansas Corporation Commission has recognized the

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4,t~ problem created by lengthy rate setting procedure >

1. and is establishing a way to reduce the amount of time

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- ,s and when utilities are permitted to earn on it.

. The company will request interim rate relief to be

,r-effective when a new generating unit goes into service

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/) this spring. A request for permanent rate changes will be 6 led later in the year.

Reasonable progress was made in several important 4 ,_,

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• Earnings available for common stock in the last six l

[, months of 1979 were $15.1 million compared with p $11.5 million in the last half of 1978.

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With the upward trend in earnings, the board of .-

directors increased the common stock dividend rate for the 24th time in as many years. The increase was etiective with the 6nal quarter of the year. l gl- L The payout for common stock dividends for the last six months of the year was 769 ,

o Continuing growth in customer numbers and ,

increased area economic output partially otiset the decline in energy sales resulting from 1979 weather 'D A ' D __

being much milder than 1978's. IFilson K. Calinan Ralph P. Fiebach i

• Several major challenges we faced at the beginning chajnyayofthesoa,J presjl,nt of the year were resolved in a way favorable to the company. These include questions about the employees. And, we will act in the best interests strength of concrete used in a uranium fueled plant of the country to promote energy conservation and we are building. And, early in January 1980, fuel conversion to make our nation less dependent tentatise agreement was reached in a large lawsuit on foreign oil.

against Westinghouse over uranium supply. . We have a strong employee and management Our ability to deal effectively with current difficult group. Parts of our service area were struck early situations results from several basic strengths: in 1979 by one of the worst winter storms in

• Our service area has a diserse, vigorous economy. company history. Outdoors in bitter blizzard con-Income in south central and southeast Kansas comes ditions, employees worked around the clock to from farming, manufacturing and minerals, par. restore service and earned the praise of hundreds of ticularly oil and gas. The area's vigor is evident customers for their effectiveness. A major change in the Wichita Metropolitan Area where our busi. strengthened our management group in 1979.

ness is centered. There the number of employed Wilson K. Cadman, 52, was promoted to president persons grew by 12,400 to 220,800 in 1979 and and chief operating officer from executive vice year-end unemployment was 2.W. less than half of president. Ralph P. Fiebach continues to serve as the national average. For the second successive year chairman of the board and chief executive officer.

KGNE added more than 5,000 customers. In one other change, Ralph Foster, a director and

• We made an early start in 1967 toward convertine '

the company's general counsel the past 10 years, our generating system from one fueled with gas was made vice president-general counsel.

and oil to one using coal and uranium. Events of With an excellent group of employees and the the past year have again proven our early planning stronger management structure, we believe we can was wise. But the construction program resulting continue to deal etiectively with rapidly changing con-from this conversion in generating fuels is the most ditions and meet the challenges of providing service ambitious we have ever undertaken. We are, in an era of national uncertainty.

however, committed to serving the present and long. Even nuclear power seems to have emerged from term interests of customers, stockholders and 1979 with its acceptance restored. The March accident at Three Mile Island dealt a blow to public con 6dence.

But the accident caused no deaths or apparent adverse health effects. The industry quickly took strong steps to apply lessons learned to ensure the future safety (Contrinul on Pan ,)

intentite Kansans long hate sorsght to harness Q trind pou er and thn "scinJ uagon" uns one early D efon t. Today. the scarch continnes as engineers O

u ork to unpros e the n ind.Jois en generators that once u en connnon in rural areas.

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again show eJ a man:rity of Amernans reo ynving tin I1 tontmuine need for u3mc uranium as an eneres s.,ur.s

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f f J.,/ .j , This hast year -- lo 9 w as the tentennia! vear

} ,g / *. of Thomas Edison s perf ettion < >f the intanJestent

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< hght bull It also was the 'oth sear of KME s 4 ;- existente Oser its long years of Jeselopment. the

,* d'- elettrit utihtv industn has had a creat and favorable k

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l . impact on the in es of people het ause the thange w a-

. ,.; y ,.y cradual. many < >f us took this impros ement tur gran-

! -: and forgot the stark Jitterentes betw een the Jas s ,

l j.i 1. < ample energy and those before we had it Through-y this report is a senes of photographs that pr< aide a vivid tontrast of how men and w omen hs ed anJ 3 w orked --- then anJ toJas Our aim for the tuture to be able to contmue t< proside the kinJ or sers i.

! w hich has maJe it possible for peupit s hs es t.,

( improve J

On behalf of the board i,i direttors l

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Ralph P Fieba !

Chairman if the BoarJ Wilson K Cadman g President j

. Februan 14 1%

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Current Topics Rates Increased: Judicial Review Sought Retail and wholesale rate increases approved in 1979 will amount to about S19 million on an annual basis.

The Kansas Corporation Commission (KCC) authorized a 99 increase effective in September which, , - . , ..

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based on the test year ending in August,1978, is '

expected to provide S17.3 milhon in new revenues 3;  :.

' annually. The Federal Energy Regulatory Commission ;M - -

approved an annual increase of $1.9 million starting

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October 19 for rural electric cooperatives we serve. '*I - .

The KCC is presently acting to reduce the time -

between when new facihties go into use and the invest-ment in them is included in our rates, a welcome and ,._U -

~M needed step. As an example of the problem, a new coal-fueled generating unit at JetTrey Energy Center ' " I: -

was in use 14 months before our $67 million invest- [4. -p.% A - WM "

ment in it was allowed in our rate base.

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t But even with the increase approved in 1979, retail rates remain inadequate and the company has re-

$g, quested a judicial review by the Kansas Court of

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op,,,,,,, u.,, ,,,,,, ,,,,,,,,s, ,,,,,,,5 ,;73;,g Appeals of the KCC rate order. roof at trolf Creek Generating Station. By building Accounting Treatment Change Follows Rate Order #h' ##'ne on the fro *nd and lifting it into Pldre in two 200-ton sections, the builders reduced After the KCCs rate order, the company changed construction time by three months.

from the normalized to flow through method of accounting for income taxes associated with construc-tion interest. This accounting treatment reduces income tax expenses and therefore related Tentative Uranium Agreement Reached revenue requirements.

A memorandum of understanding was signed Wolf Creek Base Mat Question Resolved January 14, 1980, with Westinghouse Electric Corpo-Concrete used in the base mat of Wolf Creek ration to settle its default on delivering 3 million Generatine Station, a uranium-fueled plant being built

' Pounds of uranium for the Wolf Creek Station.

in eastern Kansas with two other utilities, has been ap- Under the tent. tive agreement, Westinghouse will proved by the Nuclear Regulatory Commission (NRC). Pay $38 million in cash to KG&E and its partner in Questions were raised in 1978 about concrete the plant shortly after 6nal contracts are executed strength wben one test produced lower values than and the litigation is dismissed about March 1.

I expected. However, several independent retests indi- Westinghouse also will provide 1.7 million pounds i cated the concrete strength exceeded specifications. f uranium, equipment, fuel fabrication and engineer-In Julv,1979, the NRC after an investigation wrote: ing and other services at discounts having a present "T'he Safety Evaluation Report . concluded value of $48.6 million. And, the utilities will receive the base mat concrete will withstand the specified at a present value of up to $7.5 million part of any design loads and loading combinations without im- net proceeds Westinghouse receives in litigation with pairment of its structural integrity or safety function / an alleged uranium cartel.

During retesting, the company suspended safety- The agreement is subject to de6nitive documenta-l related concrete placement. With the NRC ruling, tion and approval by the boards of the companies.

work was resumed and steps taken to regain lost time. Kansas Electric Power Cooperative, Inc. has agreed ,

to buy 177c of the Wolf Creek unit. Upon closing I the sale, KEPCo will acquire a 177c interest in the l Westinghouse settlement.

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l Oper anne res enues m< reascJ So s nulhon to of 51 ol w as lugher than the 518 4 a<tualk earneJ  !

52 0 nu h n .n in 19'9 es en though the1e w as a ;', In the preteJmg lo s cars Jn idenJ pao >uts haJ Jet rease m kih .w att hours used by general as eraged about W of canuncs 'l he bi,arJ appri n et busmess < ustomers the m< rease bascJ on unprmed carmngs in the last In< reases m t uel adiustment <harges, a general rate halt of 19'> anJ the expettanon of lugher un rease enc < t n e 'septembei 29 and a w holesale rate cauungs m 1980 The vear-enJ quarterk JnidenJ ,

u n reast m Ot t. ,ber au ounted f or the res enue grow th w as 48!ce per share. up le f rom the presious vear j Net mo 'me n a rcaseJ only 5 's s s ". or less than Both u mter and summer m 19'> w ere more nuld  !

l' in m o totalmg 529 2 million for the year than lo~s w ith toolmg Jegree Javs dow n 18'<

l anluics per as erage i'utstanding share i,f comm.in ('onsers atit n bv t ust< >mers als., JerresscJ the use < +

sti) > i: l o'o det lincJ ri> 51 s i t rom 52 28 in t o s cle< t ocity As a result. use of ele < traits 5s tustome:

.\ l t s s 'l this Je< icase w a3 <aused bs lat k of timelv w as s irtualls un< hanged t rt >in lo's rate ichet o o m er the expense of a new plant plated Customers w e sene Jire<tlv used ~ bilhon kilow .

m sets u m 1"3 .\lilJ w eather that reduteJ sales of hours m 19 o. a det rease or . ;' < t rom 10 8 w hen c!c< n u e abn. ma! mamtenante tosts and an an s'. gain m er the pretcJing tear haJ been un r east 1 .t l o' m the aserage number of outstandmg ret orJeJ Residential use Je< reased i', and ton.

o ,n u n. i sh.u c s also o,ntobuteJ to the Jedme  !

I ~l he .Aw an, c t < - t unJs u sed ' rm,e t onst ruction.

ni as!i item. u as 52 per sl.are

1. :ht 2 ch tune m as mans s ears the tommon s:, .s & iJenJ i.ac was m< rt .iscJ But lo~o w as U.'lr r, < t; e i L' ', t..t , h..; r a ,:. t s e

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{It s h o s scars in !tlat Ille (asil dis hienJ , , , ,, 73 .,

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Vulcan Afaterials Co. Chemical Disision in trichita sers es custorners trorlJuide. Its productisity is tied directly to the energy it uses. .

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I mercial use was down 19. Industrial consumption was up 49. Total sales of electricity, including that i provided other utilities, decreased 59 from 1978.

l Revenues from industrial and commercial customers increased 49 and 109 respectively in 1979 over 1978. However, revenues from residential customers incrc .;ed only 19. During the year,

industrial revenues totaled $80.3 million, commercial

$56 million and residential $74.2 million. '

Electricity sold to other utilities produced revenues of $10.7 million compared with $15.8 million a year . . .

KG&E's I'iversified Industrial Revenues ei Increase earlier. Revenue from power sold to municipal systems (Thousands ,f dollars) i979 1978 over 19 8 and cooperatives was up 59 in 1979 over 1978 i to $20.2 million. ENERGY PRODUCTION (30% of total)

Petroleun Refining $14,264 S13,257 7.6

. O Peratin.g expenses were uP 39 to $205 Petroleu n and Gas 4,288 4,154 3.-

million. Fuel and purchased power expense was a maj.or 5,015 4,169 Pipeline Pumping 20.3 factor in the increase and accounted for 559 of our Coal Afining 698 600 16.3 ,

total operating expenses. Cost of fuel and purchased Subtotal e4,265 22,180 9.4 power was $111.8 million, up 59 from a year ago.

However, total kilowatt hours provided to the system NATURAL RESOURCE (29% of total)

Chemical 14,476 13,579 6.6 decreased 59 from 1978. Sand, Stone, Clay and Cement 6,376 5,901 8.0 Taxes amounted to $18.s million, a decrease of plastics 2,204 2,02o 9.1

$12 million from a year aj;o, and represent Subtotal 23,056 21,500 7.2 99 of total expenses.

Maintenance costs in 1979 were $23 milh.on,an MANUFACTURING (25% of total)

Ai rah 9,028 7,529 19.9 increase of 509 over 1978. Extra mamtenance at a Aiachinery 6,117 9.5 5.588 l large coal. fueled generating unit was the primary Afetal Fabricating 2,926 2,687 8.9 reason for the increase. Company facilities are other Manufacturing 1,612 1,642 ( 1.9) well maintained. Subrotal 19,683 17,4a6 12.8 Wages and benefits charged to operations in' AGRICULTURAL, FOOD AND creased 89 and amounted to $20.1 million. KINDRED PRODUCTS (11% of total)

Grain Afill Products 3,366 3,111 8.2 Prepared Foods 2,231 2,035 9.6 hicat Products 2,657 2,552 4.1 l Dairy Products 386 377 2.4 Subtotal 8,640 8,075 7.0 SERVICE RELATED INDUSTRIES (5% of total)

Subtotal 3,999 3,647 9.7 l TOTAL (Note) 579,643 $72,848 9.3 )

( Note: 1979 excludes $685 thousand fuel ad;ustment d uw menues 7

l l

7m q r Financial Management and Planning h e ud w,a> <hanymy omes momenm forem ,omy ,mJ . s o ,mhnm w amm,ca througn s.ae, a c finanual management beu,me more Jitla ult. but : heir shares of tommon stock through the disidend relhvestolent and eniphiyees st.u k punhase p!aris impt)f tarke In(Iea$e5 l b>th bud,tetirig aini fi4rnastine are inore u>mplex 14ank li>aris and u>mmertial paper are used as short-term hnanung Outstandmg short-term loans

~

than m the past 14ur the companv s huantial group has been enlarged anJ h nger-range foreusts are at the end of the year totaled 5118 milhon routmeh prepareJ Iinanual modehng umtmues to In U>so permanent finanung is expatcJ to raise ,

be used nuire extensis elv slao m din >n Tw o bond issues. the first in late Mart h In part prompting these thanges is the growing and two u>mmon stock sales of I s mdhon shares fleeJ ti> hii.iiwe new pow er pri>Jta tion fatilitic3 that each are planned This tinanunc is subi ett to tan use u>al and uramum as fuel. In 19'>. 572 6 many vanables l mdhon was received trom bonds and stock sales. In January U>so 52s nulhon w as raised f rom a (

e sia s nulhon m 6 8; pollution res enue bonds u>nsornum of foreign and domesta banks brmpny w ere issued in January by the (aty i>t St Marys total barri>w ed n > s's milliim i>f a 5100 milli ,n commitment from this group Interest rates are b c e $2s mdhon m 81 g <; and s; preferred stotk w as sold in Martb.

i e prime and teJeral f unds rates f

' '"nnnued to meet wioi hnanual anale j e $29 9 nulhon was reah/ed from the sale of 2 and suunnes dealm in rnaior ones duou out &

mdhon shares of tommon stot k in O<tober at n we umtmue h b, M)

<( n y n

$]c s() per share m the 1980s Financing fi>r 1980 u msiders tw i> 7et ial f at t, >r-One w as an a,creement by Kansas IA tra Pow t r

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l approval and w hen KEPCo secures permanent .' p

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tentatne agreement m pnnuple reathed in January 'y .- -

- -; l l One erlet t of the lack of rate rehef and reduced  :+

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earnings w as lowering the raung of company bonds f rom A to A reduong mmmerual paper ranngs

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f rom A ? to A s and changing preferred stock rating A\ "

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f rom A to Bbb hv one of the major ranng agenues - 9 . . .y n -- g, _k ~

l Parnopanon of stockholders in the Dividend . , j _. / -] g % gen ;

Remvestment Pl.;n wntinued to grow m 19'9.

Dividends on stotk iw ned bv partiupants are auto-it Kfg > g f4 h .

mantally rennested each quarter in newly issued common stotk at 9sr; of market prae Partiupants , +3 . ,. ,

may also invest up to an additional $s.ooo each .T l quarter at market prae. but with no broker's fee  ;.

Details of the plan tan be obramed bv w ntmg -an { #

Se retarv. K(W1. P. O Box 208. Wahita. KS 6'201. A f " le "' r2 - /^e k / P* < > t>! m! ^u P'<**' -

Sinte the reinsestment plan was estabbshed m d"/ ^ A > '""o'< /" 7'da"' I' ' ": ' "> /,

197' almost 56 mdhon m stot ks bas e been sold R" ' "'" A "- '"d'" l ^ "" i ? " ' ' ^ " " ' '

The amount of reinsestment bv stutkholders has ^ "' ' # 'il " ' " "" ' h d' ep;;nen: .a leio >

intreased eat h year In Julv a plan w as estabbshed whah enables

' 9. ..

employees through pavroll JeJuttion and tash l pa ymen t to but stot k at 95'; of market value

~

The number of wmmon stotkholders grew bs #

s,07 s to r 745 m 19~9. There were s.;82 preferred l stot kholders. about the same as in 19 '8 Stoc kholders

%e Ine in escry state and some foreign wuntries No stoc kholder ow ns as muth as 1 G of the stoc k 1 .

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eme . . R4m Customer Services and Load Management The company continues to provide customers with Under the law, states must submit conservation ample, reliable electricity at reasonable prices. Still, plans to the federal Department of Energy for the times pose important questions: approval. Until that has been done by the State of How can customers who are increasingly frustrated Kansas, our exact role, and its cost, will not be known.

by rising energy costs, and often are confused by the Meanwhile, several other steps have been taken claims and counter charges of the energy debate, be which should help strengthen our own " wise use" aided in securing the greatest benefit and satisfaction promotions. In September, when new rates were for their electrical dollar? How can we keep costs approved, we increased the long-standing difference in down while preparing to meet future needs of price between electricity used during peak demand customers? seasons and that used at other times. This helps One answer to some energy problems is, of course, recover the higher costs of peak period service and conservation-cutting out wasteful use. Although also is an efTective load management tool.

KG&E, like many utilities, has for years promoted Through load management we seek to level the eEcient use of electricity, new federal laws enlarge our high and low demand periods, producing e$ciency in responsibilities. In 1980 many requirements of the equipment and manpower use. Load management is 1978 National Energy Act will become effective. needed because demand for electricity changes ac-Our company already is preparing for its expanded cording to time of year as well as time of day. This role and the former Marketing Services Department uneven demand means equipment needed to serve was reorganized into a Customer Services Department. high demand periods is not fully used at other times.

Since it is not now practical to store large amounts of electricity, generating plants and other facilities must be constructed to meet high peak electricity needs. If peak growth is reduced, less new generating capacity will be required and construction and s

/ maintenance costs can be reduced.

We create consumer awareness of the importance of load management to level out seasonal use as well

% as reduce high time of-day peaks. In peak-use periods, advertising encourages customers to perform

( high energy tasks at other than the peak use time of day. Conservation also reduces peak demand and customers are encouraged to conserve through a number of programs.

A 19th century Kansas farmcr had only his own labor, his family's and that of animals to pit against nature in producing food. The major eueption was a wind. operated water pump.

tr'indmills still are used by many farm operators.

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l I h- s s ah r  ; mg ocu unp >rtan< t n a n o n.c p r s iJe pri,c rams at s<hools and tolleces o an % o s . >n n : scisi es that i,t D,urs ot < , .m p.u n t a< ihnc - espe < ulk ceneranng nun'a' s ' n !c:h t an,! < rcatin c stato'ns. arc entituraccJ os s ln ( )u r < ustomers hasc Jemi,nsn.neJ a w ilhneness n Kt,Al e t ..e it s pr,crarn it ( usn >rnci ii)t tsers e encrcs thli'u ch pri n en tet hniques Their I.,u, we; .cs s he:c! , a!l r esiJennal < usti,mers arc i on u nent s a l s. - inJn ate a hich interest m resea r< h I:Is 1: '1 I ' I '. t t ' u 1:!i l !: ,'J : n itil.cis af h} InanageIN !n ICI w e aJJcJ s 'n i < usti>mers We expe< t u ch < n h r:s a: su c : n.; < oso nu quest o ,n s the nu'ober < >f < asn >mers w ill tontmue to grow A Nptakt's ha (. cruh!cs iludlif}cJ crnphn ees ti, l his ah >ng w ith the reali/at nin that elet trititt is presc: c: a - ,

1 i n sc n a n. ,n pn .g rams to <lubs tontinualk replating other enercs torms. means the l and c.e .m s I im' speakers made mort JemanJ w e mast meet w ill also crow \\ e are  !

tiun i m. ns t.c ,s un i h ing in ooo persons t omonttcJ to meet this neeJ w ah rehable sen ne

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) Hetause of mt reased tonsers ation and 19N in IvN the o>mpam unested 51 milhon m ne; l

u eather hemp mut h milder than m 19V i>ur general u >nstrut n, >n. mosth f or generatmp stanons The I busmess < ustomers used ;'; f ewer kilow att hours m 1980 u >nst rut tion budget amounts ti, il " milhon F, 19N than m 19's And system Jemand of 1 A'3aoo the th e years 1980-1984. o>nstruc tion spending is kdow atts w at l', less than in 19~8 w hen both ex pet ted to total $~;3 milhon JemanJ and electra energy usage increased more By the end of 19'9 the company had 861 meca t h.m 8' , os er 19' w atts of toal-f ueled capauty and 1.022 megaw atts ut i Ateenng long-term grow th in elettric energy needs gas-oil capabihtv An additional unit at Jetirev I ncre j is i,ne reason f or builJing new generating plants Center is to be o,mpleted in 1980. aJJmg another l but there is an esen more pressing purpose Natural 1 ;n megaw atts ot toal tapautv With the retiremen cas anJ u w hnh K(; Al used extensivelv f or years of two old toal-tueleJ units and betause hs Jropou t -

t, f ue! ns plants bas e beu >me expensn e and supphes previously secured f rom the Southw estern Power are sh6 )Tt bs f ederal !aw. we will not be permitted Admmistration w as ni>t .n ailable. the wmpam s tap.

ti . use n.c ural gas af ter 1990 There also is proposed uty Jet hned ;' < to 1.968.000 kilow atts in 19' >

teJeia: lecislans .n to rcJute the use or oil bs sor; Studies tonnnue ab, >ut the wmpam s generanng As a iesult. the <ompam must tonstruct new plants neeJs includmg its parnupation m other planneJ w hert o,a! and uramum tan be used as fuel units at Jeffrev All coalf ueled capabihtv is ow nedJ ointiv with i other uniities Other ow ners of Jettrey are The K.u ra Pow er anJ Light Company. Western Pow er Dn n of ( entral Telephone and Unhties Corp . and Alissouri Pubht Sen ne Compant Kansas ( in P u c A Light Company ow ns so'; of La Cygne Station At the end of 19Y work on the uranium-fuelc J c

Wolf Creek Stanon w as so i complete. It is scheduled to be wmpleted in 198; in 19'9 the tompany and its partner in the plan-Kansas Cin Power A Light Company. signed a leue of agreement to sell l; interest to Kansas Electra Power Cooperatne. made up of 26 rural elettra cooperatives This long-planned transatrion is W .x a a-j " -

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fnel her fava!;b sini a

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l expected to be culminated in 1980 with the cooperative assuming ownership after receiving its permanent fmancing and regulatory approval.

High inHation, design adjustments following the Three Afile Island accident and the KCC method of accounting for construction in progress have all pushed w dq g up the cost of construction projects. Late in 1979 the N ft' y" ' c

~O %d .

KCC authorized a study of Wolf Creek costs. A proper " '"

investigation should show the plant is well planned, is being built well and is resisting the etiect of inflation t.

as well as could reasonably be expected.

Uranium fuel purchased through a contract with Westinghouse and a subsidiary company formed by KG&E and its Wolf Creek Generating Station partners to secure uranium in New Alexico will be supple-mented by other purchases.

Fuel for our coal generating units is available under long-term contracts.

Coal from Wyoming is used in the Jetirey Energy Center units. Contracts for that coal extend well into the next century. A unit completed at La Cygne Coal rapidly is buoming KG&E's number one scarce Station in 1977 also is fueled with coal from Wyoming of<"ut)- Af ruentl) ai 1972, sirtually an under a contract extending until 1996. The first unit elutriot1 Produced by KC&E u as generated in gas-at La Cygne was completed in 1973. It uses coal /"eled P .lants. Bat buaun of uauity. Me company from local mines in eastern Kansas and western as joined otbu at#itin in ba#4ng nen plants

1. "" ### ## "#"" "'""'" * - ## I' #

Alissouri being purchased under a 30 year contract. '

! Gas, which as recently as 1972 accounted for I

virtually all the fuel we used, Provided 53G of our 1979 fuel requirements. Gas used comes from two ~ $,

,WNDEUB"T,,mc,7M-

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'rs y.

sources. Alost of it is intrastate pas from Kansas '

wells dedicated to company use. The rest is available ,' >

j from an interstate pipeline company, but that supply is frequently interrupted, particularly during winter f't _ _

^

months when there is a heavy demand for gas to be t used in heating homes.

Residual oil is used to replace gas during times of . '

curtailment. But oil costs more and requires more (

I ...

plant maintenance, handling and storage facilities.

Alost oil used by the company was purchased on the spor market at an average price of $12.52 per barrel in 1979. To date we have experienced no difficulty in .

buying needed oil, but anticipate a price increase of -

509 when we replace that currently being used. -

Storage capacity is approximately 1 million barrels.

I Expansion of the distribution sprem is nuessary to sers e neu customers and assure reliability of sersice for old ones.

D *

• 1) 7 T["^ 5 oo o f6 J1 k a

T 979

/'

i Employee Participation Employees-highly skilled and dedicated-continue to play an essential role in the success of the company.

Capital required in equipment and tools for each job averages $700,000. This investment contributes to greater productivity so the number of customers per

,b' employee has continued to improve over 10 years 4 ago. Most of the recently added employees have been at the new Wolf Creek Station.

More than two-thirds of our people have more than five years experience with the company.

More than 300 have served for 25 years or longer.

KG&E continues to enjoy a low turnover rate in a job

, y market where year-end unemployment was only i

2.59, well below the national average.

Continued training and education are designed to aid employees in self improvement and better job performance. A tuition reimbursement plan Y '

encourages employees to take advantage of formal g educational opportunities while they work on the job.

1 Y Success of this program is seen in that 1 of every 5

. employees was promoted during the year.

• 4 7 The safety record of KG&E employees, another measure of professionalism, remained good in 1979.

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~

At our Ripley Generating Station there has not been a lost-time accident since the plant became operational in 1938. During the past 10 years, KG&E people consistently have been among the safest work groups

" among utilities of our size.

4,

'q Recognizing that employees also are affected by

.+ the economic, social and political challenges facing the electric utility industry, steps were taken during the year to maintain communications with employees

. in all areas.

~-f An " Annual Report to Employees," a monthly employee magazine and a weekly newsletter are

_ g provided all employees. Bulletin boards are used for

~

• - faster. breaking news. It's also possible to reach

'f virtually all employees at one time with a e ,

--- 2 1 ~ system-wide telephone network.

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. In addition to meeting with supervisors, company officers in 1979 met with employees in a series of J ."'

work-location meetings. Emphasis was on listening to

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employee comments and ans ering questions.

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• In 1900 linemen attending the International Brotherhood of Electrical trorkers contention in A .

Irichita posed for this unique photo.

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KANSAS f2 ELECTRIC COMPANY Management's Discussion and Analysis of the Income Statement During the three years ended December 31,1979, the 1979. Effective in August 1978, in accordance with an order following changes in operating revenues had a significant of the State Corporation Commission of Kansas, the Company effect upon the Company's results of operations: climinated deferred fuel accounting and commenced billing fuel costs on an estimated basis currently. Effective in May Revenue Increase (Decrease) Over Millions of Dollars 1979 the Company started recording variances resulting from Corresponding Prior Period 3977 3978 1979 the fuel adjustment clause. These variances are cleared twc months after they are recorded as an adjustment through the Increase in General Business $6 $10 $(1) fuel adjustment clause.

Fuel Recovery 25 - 13 9 Rate Increases 13 5 4 Depreciation has increased due to increases in electric Sales to Other Utilities 9 14 (5) plant in service creating increases of approximately $3 million and $2.3 million annual depreciation as a result of placing in "l'I 853 I42

$7 service I.a Cygne Unit No. 2 and Jeffrey Energy Center Uni:

Growth in kilowatt hour sales during the period has been No.1, respectively.

affected by energy conservation by customers and weather. Allowance for funds used during construction has varied Growth in kilowatt-hour sales, particularly to residential and significantly because of fluctuation in ths. amount of construc-commercial aistomers, was enhanced in 1978 by a cold winter tion work in progress and changes in the rates utilized. AFC and a hot summer and was diminished in 1979 by a warm rates were 7.27c for 1977,7.37c for 1978 and 7.696 for the winter and a cool summer. first seven months of 1979, all net of income taxes. Effectiu Operating expenses, other than fuel expense, for 1978 and August 1,1979 the Company adopted a gross AFC rate of 1979 increased primarily because of commercial operation of 10.09F. Under the gross basis the income tax effect on thc La Cygne Unit No. 2 in May 1977 and Jeffrey Energy Center borrowed funds portion of the AFC is capitalized for finan.

Unit No. I in July 1978. aal reporting purposes.

Maintenance expenses, as well as purchased power, in- Interest charges and preferred dividends increased sub-creased due to extensive repairs made on major units. stantially during the period because securities were issued to The Company has a fuel adjustment rider applicable to finance the record construction program and because of thc all of its rate schedules. Fuel costs per million Bru were increase in interest and preferred dividend rates.

67.2( in 1976,99.3( in 1977,109.3g in 1978 and 122.7p in See Page 24 for a summary of operations in 1969-79.

Auditors' Opinion To the Stockholders and the -,

Board of Directors of - ",' '

Kansas Gas and Electric Company: '

We have examined the balance sheets of Kansas Gas and Electric Company as of December 31,1979 and 1978 and the related statements of income, retained earnings, and of source of funds for construction for the years then ended. Our examinations were made in accordance with generally accepted auditing standards e.nd, accordingly, in-cluded such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our report dated January 25,1979, our opinion on the 1978 financial statements was qualified as being subject to the effect on the 1978 financial statements of such adjustments, if any, as might have been required had the outcome of litigation on certain revenues collected subject to refund been kncwn. As a result of favorable court rulings de-scribed in Note 2, we no longer qualify our opinion on the 1978 financial statements. Accordingly, our present opinion on the 1978 financial statements, as presented herein, is different from that expressed in our previous report. r In our opinion, such financial statements present fairly the financial position'of the<ompany at December 31, 1979 and 1978 and the results of its operations and the source of its funds for construction for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis.

l l

Deloitte Haskins & Sells l

January 25,1980 Wichita, Kansas 16

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" Statements Of Income 1979 1978 For the Years Ended December 31 (musands of dollars) h p.

[ Operating Revenues (Note 2) .. . .. . ... ... ... . .. $244,970 $238,460

[ Operating Expenses:

Fuel .... . . .. . . . . . ... ...... 101,927 96,017 f"

Deferred fuel .. .. . . . .. . .. . .. . . . .. 1,347 6,127 Purchased power . . . . . . . . .... . .. 8,535 4,162 Other operation . . . . . . . . . 27,675 25,062

(- Maintenance . . . . .. . . . . . . . 22,999 15,292

. Depreciation . . .... . . . . . .. ...... 23,625 21,924

Taxes-other than income taxes .. ... . . .. ... ...... .. . 11,910 12,207 j Income taxes (Note 7) . . .. . .. . 7,022 18,697 Total operating expenses . . 205,040 199,488 Operating Income .. . .. . . . . .. .. .... .. .. 39,930 38,972 g- Other Income and Deductions

l_ Allowance for funds used during construction-other . . ... .. . ... 13,358 8,716 ,

E Income taxes-net (Note 7) . . ... .. .

(259) (38) h Miscellaneous - net . . . . 479 73 Total other income and deductions . . .... 13,578 8,751 i, Income Before Interest Charges 53,508 47,723 5' Interest Charges:

[; Interest on long-term debt . . . . . . . .. . 31,726 23,746 Other interest .... . . . .. ...... . 4,752 1,815 g{ . Amortization of debt premium, discount and expense-net . .. ... .. 209 197 il Allowance for funds used during construction-borrowed (Note 2) . (12,399) (6,999)

Total interest charges . . . 24,288 18,759 I

t.

Net Income .. ... 29,220 28,964 F

Y, Preferred Stock Dividends . . .. . .. . ... .. ... .... . 8,217 7,084 t7 ..

Earnings Applicable to Common Stock . . .. ... . . . .. $ 21,003 $ 21,880 c;i -- Average Shares of Common Stock Outstamhng

. ..... ...... ..... . .. 11,400,916 9,615,051 w(( Earnings Per Average Share of Common Stock . . . . . . . . . . . . . . . . . . . . . $1.84 $2.28 i

Statements of Retained Earnings 1979 1978 or the Years Ended Decernber 31 (husands of dollars) r

[ Balance at Beginning of the Year . $ 91,015 $ 87,224

( Net Income . . . . . . . . . . .

~

. 29,220 28,964 E~ Total ..... .... ... . . . 120,235 116,188 E Deduct: '

'ET Cash Dividends: - -

f'  : Psefeired " stock . . . . . . . . .. . . ... 8,217 . 7,084

! h ,. Common stock-$1.91 in 1979; $1.825 in 1978 . .. .. . . ...... 22,272 17,944 4 ' ~ Capital Stock Expense '. . .. . . .. . . .. .. . ... 339 145 gi Total . . . . . . . . . . .. ...... . ... . . 30,828 25,173 4 Balance at End of the Year . . . .. $ 89,407 $ 91,015 ,

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V 4-Balance Sheets December 31,1979 and 1978 i979 iv78 b( e Aasses (Thousands of dollars) m .

Electric Plant at Ori8nal Cost:

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Plant in service .. .. . .. .. . .. ... . . . . . . $735,201 $719,458 y . 1 . .

160,673

IAss accurnulated provision for depreciation . 178,113

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, Net plant in service . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... . 557,088 558,785

Construction work in progress . . . . . . 343,016 188,869 Nuclear fuel . . . . . . . . .. . ... .. . . . . 13,345 6,133 Total electric plant- net . . ... . 913,449 753,787 Other Property and lovestments-at cost ...... . . .. . 180 180 Current Assets

. , . . ,Casia (Note 4 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 2,342 2,303 e

Special deposits . .. . . .. . ......... ..... ... . .. .. . . . 5,152 3,910

. Temporary cash investments . . . . . . ... .. . . . .

- 7,200 u

Accounts receivable- net . ... . . . . . . . 16,530 16,745 Fuel-at average cost 28,681 20,650

([ Matenals and supplies-at average cost . .. ... . ....... . . . . 9,563 9,046 g, . Prepayments and other current assets . .. .. . .. . .... . . ... . . 708 422 Total current assets ... . . . . . . . . . .. .. 62,976 60,276 Deferred Debits:

,, Unamortized debt expense ..... .. . . . 4,208 4,152 1

Deferred fuel . - 1,347

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' ~ Other . . . . . . . . . . . ...... . . . ..... . . .. . . . .. 2,824 2,635

j. ' Total deferred debits . .. . . . . 7,032 8,134 y +

, cm Teest '.; . ; . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......... ..... $983,637 $822,377 C. ,

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," Capitalization:

[ Common stock, without par value, authorized 20,000,000 and 14,000,000 sharea.

, respectively; outstanding, 13,240,277 shares and 11,054,503 shares respectively (Note 5 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 184,39 7 $151,336 Retained earnings . .... .. . ........................................ 89,407 91,015 Common stock equity . . . . . . . .... .... ........... .... . 273,804 242,351 Preferred stock, including premium-non-redermable (Note 5) .. . . . . . . 63,993 63,993 Preferred stock - redeemable (Note 5) . . . . . . . . . . . ........... .... . 54,000 30,000 I.ong-term debt (Note 6) . . ... .. ..... ........ .... .. .... .. .. 386,519 374,071 Total capitalization '. .. ... ... ... .. .. . . . . . 778,316 710,415 Current I.iabilities:

Short-term borrowings (Note 4) .. . . . .... ........ . .. ......... 41,800 -

f Securities due within one year . . . . . . . .. .............................. 1,000 3,000 Accounts payable . . . ... ... .. . .. 24,220 20,061 Customer deposits .. . . . . . .. . . . .. . . 1,384 1,200

, Tares accrued . . . .. . .. .. . .. .. .. 4,009 9,684 Interest accrued . . . . . . . . 8,754 7,862 Dividends declared . . .. . 2,327 1,821 Other current liabilities .. .. .. .. ... ............... 138 92 Total current liabilities . .. ....... .. . . .................. 83,632 43,720 Deferred Credits:

\E Accumulated deferred income taxes (Note 1) . . . .. . ..... ...... .. 46,318 38,775 s Accumulated deferred investment tax credit .... . ...... ... . . . 26,797 27,558 Customer advances for construction . . . . . 1,252 1,026 Advance-Kansas Electric Power Cooperatives, Inc. (Note 8) .. . . .. 46,893 -

y Other . . . . . . . . . . . . . . . . . . .. . .. . . . ... .. 171 619 i Total deferred credits . .. . . . .. 121,431 67,978

f. Reserve for Injuries and Damages . . . . . 258 264 t c

[ Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99s3,63 7 $822,377 6, s

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! -Statements of Source of Funds for Construction 1979 1978

. For the' Years Ended Decernber 31 (Thousands of dollars)

Source of Funds From Operations:

Net income . . .. . .. . ..... . . $ 29,220 $ 28,964 Non.casra charges (credits) to net income:

Depreciation . .. . 23,625 21,924 Deferred income tax and investment tax credit . 9,639 18,711 Allowance for funds used during construction (AFC) (25,757) (15,715)

Funds from operations .. . .. . . . . . . . . 36,727 53,884 Dividends . . .. . . 30,489 25,028 Funds retained in business 6,238 28,856 From Financing:

Iong-term debt proceeds . . . 12,391 81,458 Long-term debt redemption (3,000) (5,000)

Preferred stock . . 25,000 10,000 Common stock .

33,061 29,680 Increase (decrease) in short. term borrowings 41,800 (21,700)

Funds from fmancing 109,252 94,438 Advance-Kansas Electric Power Cooperatives, Inc. 45,000 -

(Increase) decrease in working capital (other than short-term borrowings) . (2,588) (5,730)

Other -net . . .. .. . . . . . ... 3,189 7,470

$161,091 $125,034 Total Funds Used for Construction (excludes AFC) . .

Scc notes to fmancial statements.

NOTES TO FINANCIAL STATEMENTS

1. Summary of Significant Aceounting Policies This allowance has been added to all major Construction System of Accounts-The Company is subject to the projects at an annual compound rate of 9.8% (7.6% net of jurisdiction of the State Corporation Commission of Kansas income taxes) for January through July 1979 and at a groe (Kansas Commission) and th- Federal Energy Regulatory rate of 10% since August 1,1979. In 1978, an annual com-Commission (FERC) and maintains its accounts in accordance pound rate of 9.5% (7.3% net of income taxes) was used.

with the uniform system of accounts prescribed by these regu. Depreciation - For accounting purposes, the Company is latory commissions. As a regulated utility, the accounting depreciating the original cost of property by the straight.hnt principles applied by the Company differ in certain respects method over its estimated remaining service life, as deter-p from those applied by non. regulated business. mined by independent engineers. Depreciation provisior Electric Plant-%e Company performs a portion of its stated as a percent of original cost of depreciable property construction work and capitalizes general overhead and engi- was 3.4% for 1979 and 1978.

neering expenses related to construction projects. Maintenance Income Taxes-In the calculation of income taxes, the and repairs of property and replacements and renewals of Company (i) uses liberalized depreciation for additions sina items determined to be less than units of property are charged 1954 and the ADR system for additions since 1972, and (ii) to operating expenses. He cost of units of property replaced utilizes other tax benefits as permitted by the Internal Revenue

- or renewed, plus removal costs, less salvage, is charged to the Code, consisting principally of diferences in straight.line de

,'am==l*J provision for depreciation, and the cost of related preciation ind the, deduction currently for interest and taxe-replacements and renewals is added to electric plant. Better- capitalized for book purposeg. Deferred taxes are providec h rnents are charged to eintric plant. for those items included in (i) above as approved by the Allowance for Funds Used During Construction- Kansas Commission, and for the amortization of expenses ir

_ Allowance for funds used during construction (AFC), a non. connection with bond issue refundings. For 1978 and Janu cash item, is defmed in the applicable regulatory system of ary through July 1979 AFC is recorded in Electric Plant or accounts as the net cost during the period of construction of a net basis. However, an amount e<}uivalent to the income ta>

borrowed funds used for construction purposes and a reason- effect on the borrowed funds portion of the AFC was charget able rate on ather funds when so used, to deferred taxes under operating expenses and credited t, y y .e v

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AFC. Effective August 1979 in connection with an Order The Company draws upon the bank lines-of-credit and from the Kansas Commission, AFC is recorded in Electric sells commercial paper to obtain short. term construction funds.

Plant on a gross basis. Under the gross basis the income tax At December 31,1979 the short-term borrowings outstanding effect on the borrowed funds portion of the AFC is capitalized amounted to $41,800,000. He maximum amount outstand-for fmancial reporting purposes. ing during the year was $50,200,000 on June 29,1979. The The Company defers and amortizes the investment tax weighted average interest rate, including fee, for the year was (redit mer the hfe of the applicable property, in accordance approximately 13.5% based on a daily average outstanding with an order of the Kansas Commission. Ioan balance of $21,135,001 ,

Revenues- Operating resenues and accounts receivable 5. Capital Stock-Changes in Common Stock during 1979 include amounts actually billed for services rendered. The and 1978 follows: shares Company Joes not accrue an cstimate for unbilled revenue. Outstanding Arnoum Fuel Adjustment Clause Revenue -The Company's (Thousands rate schedules include a fuel adjustment dause which permits of dollars) recoveries of fuel costs on an estimated basis currently. Ef. lialance January 1,1978 9,357,310 $121,656 fective May 1979 the Company started recording variances Additional shares sold 1,600,000 27,824 resulting from the fuel adjustment clause. Dese variances Dividend Reinvestment Plan 97,193 1,856 are cleared two months after they are recorded as an adjust' flalance December 31, 1978 11,054,593 151,336 ment through the fuel adjustment clause. Additional shares sold 2,000,000 29,880

2. Rate Matters-In July 1977, the Kansas Commission is- Employee Stcxk Purchase Plan and sued an order granting the Company an interim annual rate Dividend Reinvestment Plan 185.774 3,181 increase of $14.1 million which was collected by the addition 1121ance December 31, 1979 13,240,277 $184,397 of a uniform percentage surcharge to each mstomer's bill.

The Company's application for permanent rate relief was filed Cumulative Preferred Stock - non redeemable except at in September 1977. In June 1978, the Kansas Commission the company's option at December 31,1979 and 1978 con-issued an order permitting the Company to increase its per. sisted of the following: 1979 197a manent rates an additional $2.2 million representing a total 4 $, $100 par value; authorized (Thousands of dollars) increase of $16 3 million. An industrial mstomer appealed and outstanding, 82,011 shares $ 8,201 $ 8,201 the interim rate case order from the District Court, where the Serial, $100 par value; authorized, Company presailed, to the Kansas Court of Appeals, which 255,000 shares:

upheld the District Court ruling. Petition for review by the 4.28% series, outstanding Kansas Supreme Court was denied on December 6,1979, ef- 45,000 shares , 4,500 4,500 (c(tively disposing of any question of the Company having to 4.329 series, outstanding refund said revenues. 60,000 shares 6,000 6,000 1 in September 1979, the Kansas Commission issued an 7.449 series, outstanding order grantmg the Company an annual rate increase of $17.3 150,000 shares 15,000 15,000 million. In this order the Commission set rates on the basis Serial, without par value (see Note):

of flow through accounting treatment for the income tax effect $8.66 series, outstanding on the borrowed funds portion of the AFC. %is accountinE 300,000 shares 30,000 30,000 treatment reduces income tax expense and therefore related Premium on Preferred Stock- . 292 292 revenue requirements. The income tax effect on the borrowed Total . .. . . . . . $ 63,993 $ 63,993 funds is being capitalized and is expected to be recovered in future periods under the regulatory practices of the Kansas Cumulative Preferred Stock -redeemable at December Commission. 31,1979 and 1978 consisted of the following:

3. Retirement Plan -He Company has a non. contributory 1979 3978 retirement plan for all employees. He total cost for 1979 Serial, without par value (see Note): (Thousands of dollars) and 1978 was $2,129,438 and $1,958,928, respectively, which $2.42 series, outstanding includes amortization of prior service msts over a ten year 800,000 shares $ 20,000 $ 20,000 period. Of these amounts, $642,516 and $470,998 were in- $8.125 series, outstanding cluded in plant construction costs. The Company's policy is 100,000 shares . 10,000 10,000 to fund pension costs accrued currently. Unfunded past ser- $8.00 series, outstanding vice (ost at December 31,1979 was approximately $3,750,000. 150,000 shares 15,000 --

The actuarially computed value of vested benefits at Novem-

~

$8.25 series, outstanding ber 30,1979 exceeded the market value of the plan assets on 100,000 shares ... 10,000 -

that date by approximately $2,000,000. . Subtotal . . . . . . ...... $5,000 30,000

4. Short. Term Borrowings- At December 31,1979, the Less: sinking fund requirements. 1,000 -

Company had established lines-of-credit with various banks Total .. $ 54,000 $ 30,000 totaling $64 million for which the banks are compensated with either a fee or compensating balance. Compensating Note: Serial Preferred Stock without par value, 6,000,000 shares balances are not legally restricted. authmized. (Condssed on Pqe 22) 21

b KANSAS 2n ELECTRIC COMPANY N

i The 6% Series and the 5%9 Series, due 2007 and 6.8(,

[ ne mandatory sinking fund obligation for the $2.42 Series is designed to retire that series by April 1,1999, and Series due 2004, are pledged as collateral for Pollution Con.

. trol Revenue Bonds issued by Kansas Municipalities.

F provides for the redemption of a minimum of 40,000 shares Proceeds, in excess of certified mnstruaion msts, are held y per year and a maximum of 80,000 shares per year, com-mencing April 1,1980. by the Trustee and invested in interest-bearing securities pend-He mandatory sinking fund obligation for the $8.125 ing application to the cost of a pollution control project being Series is designed to retire that series by April 1, 2018, and constructed at the Jeffrey Energy Center.

nrovides for the redemption of a minimum of 3,333 shares ne term bank loan is provided through an agreement

^

'per year and a maximum of 6,666 shares per year, com. with fourteen domestic and foreign fmancial institutions pro-mencing April 1,1989. viding for up to $100 million. The loan agreement is com-Prised of a two-year revolving credit and a three-year term ne Company is obligated to redeem all 150,000 shares ,

of the $8.00 Series on March 28,1985. Ioan with right of prepayment at any time without penalty.

The effective interest rate on this borrowmg was 13.29 for The mandatory sinkmg fund obligation for the $835 1979 and 12.5% for 1978.

Series is designed to retire that series by July 1,1989, and provides for redemption of 20.000 shares on July 1,1986, 7. Income Taxes-%c effective Federal inmme tax rates e 50,000 shares on July 1,1987,15,000 shares on July 1,1988, differ from the amounts computed by applying the Federal and 15,000 shares on July 1,1989. statutory rates to income before income taxes. The reasons with the related percentage etTects are:

6. Long-Term Debt - 1.ong-term debt at December 31, 1979 19'8 b 1979 and December 31, 1978 consisted of the following: " Statutory Federal income tax rate 46 % 489

< Add (Deduct) income tax effects of timing 1979 1973 differences:

AH wances f r mnstmdion .(26) M 1 First Mortgage Bonds:

Taxes and pensions capitalized (4) (3) 2%% series, due 1979 -

3 3,000 Other items - net (norr one item makes 3%% series, due 1982 $ 12.000 12,000 up more than 3c/c) 1 -

~

3%% series, due 1983 10,000 10,000 Effective Federal income tax rate 17% 3M. ;

3%% series, due 1985 10,000 10,000 g 3%% series, due 1986 7,000 7,000 Income taxes as recorded in the Statements of Income are:

4%% series, due 1991 7,000 7,000 1979 3973 4 5%% series, due 1996 16,000 16,000 rnuim a of Ain m 8%% series, due 2000 35,000 35,000 Operating expenses:

8%W series, due 2001 35,000 35,000 Currently payable - Federal 3(2,296) $ ( t,0s s )

' 7%% series, due 2002 25,000 25,000 - State (321) 1,071 E 6.8% series, due 2004 14,500 - Deferred - Federal 6,495 6,772

• ' 978% series, due 2005 40,000 40,000 - State 1,048 1,022 i 8%g series, due 2006 25,000 25,000 Deferred-tax effect of AFC-8%% series, due 2007 25,000 25,000 borrowed . 2,857 3,605 6% series, due 2007 10,000 10,000 Investment tax credit-net (761) 7,312 h 21,940 21,940 I SYa% series, due 2007 . Total . 7,022 18,697 873% series, due 2008 30,000 30,000 Other income and deductions:

Irss: certain securities held by Currently payable-Federal 224 33

- S'*t' 35 5 h(l?

p Trustee .. . . (1,964) -

Total . . 259 38 Total 321,476 371,940 Income tax expense - net . $ 7,281 $18,73s Guarantee of pollution control revenue At December 31, 1979, the Company has unused invest-bonds- 5%% series, due 2003 15,000 15,000 ment tax credits of approximately $30 million available for Term bank loan 50,000 50,000 carryf tward to future years.

[

V s. Advance - Kansas Electric Power Cooperatives, Inc.

l M . . Unamortized premium and 4.(KEPCo) 2-%e Company and Kansas City Power & Light

_ discount - net . . . .. . 43 131-Company each presently'own A0% of Wolf Creek Generating E Total . . . . . 386,519 377,071 3 Station However, they have agreed to sell to KEPCo a 179 h- interest in the unit. During 1979, KEPCo advanced $45 mil-

1. Irss: current maturities of _ lion to the Company to be applied along with credits for in-long term debt - 3,000 terest to the purchase price on consummation of the sale. The

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sale, which is subject to regulatory approval and KEPCo

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. Total . .... ... . $386,519 $374,071 permanent fmancing, is expected to take place in 1980.

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39. Construction Budget-De construction budget for 1980, As prescribed in Statement 33, income taxes were not Ias approved by the Board of Directors, is $136,940,847. The adjusted.

Kompany has wbstantial purchase commitments in connection Under the rate making prescribed by the regulatory com-r missions to which the Company is subject, only the historical blwith

10. Financial itsStanstics contruction (U'nsudited) program.-

mst of plant is recoverable in revenues as depreciation. Here-fore, the excess of the cost of plant stated in terms of constant

{f i . (n usands except per sham) dollars over the historical cost of plant is not presen:ly re.

1979 coverable in rates as depreciation, and is reflected as a reduc.

4th 3rd 2nd 1st tion to net recoverable cost. While the rate. making process f ,,,;, ,

9"' 9"' 9"' 9"'

gives no recognition to the current cast of replacing property, even ' . . . . . . .^ $60,982' $67,351 $51,685 $64,952 Pl ant, and equipment, based on past practices, the Company FOperating beheves it will be allowed to earn on the increased cost of its b Income ........ 11,570 13,942 5,351 9;067 net investment when replacement of facilities actually occurs. .

ENet Income . . . . . . . 8,447 11,502 2,636 6,635 To properly reflect the economics of rate regulation in the

[ Earnings Applicable Supplemental Statement of Income, the reduction of net prop-ertT. Pl ant, and equipment should be offset by the gain from F to Common . . . . 6,120 9,254 814 4,815 5 Average hares the dechne m, purchasmg power of net amounts owed. During

[ Outstanding . . . . . 12,236 11,162 11,122 11,084

• Period of inflation, holders of monetary assets suffer a loss I E '"*I. Purchasing power while holders of monetary liabil.

f Eamings Per Share.. $0.50 J0.83 $0.07 $0.43 k stics expenence a gaan. Preferred Stock and Deferred Invest.

[. 1978 ment Tax Credits are classi6ed as monetary items. The gain A 4th 3rd 2nd 1st from the decline in purchasing power of net amounts owed is Qtr. Qtr. Qtr. Qtr. primarily attributable to the substantial amount of debt which

[bPeratin8Revenues .. . $53,609 $70,235 $52,150 $62,466 has been used to finance property, plant, and equipment. Since the depreciation on this plant is limited to the recovery of his.

Operatmg torical costs, the Company does not have the opportunity to Income 7,412 13,652 7,578 10,330 j , Net Income .. ..... realize a holding gain on debt and is limited to recovery only y 4,374 10,808 5,747 8,035 of the embedded cost of debt capital.

yearnings Applicable p to Common .... 2,554 8,987 3,926 6,413 SUPPLEMENTAL STATEMENT OF INCOME

[ Average Shares ADJUSTED FOR CHANGING PRICES Outstanding . . 10,255 9,427 9,402 9,37 7 FOR THE YEAR ENDED DECEMBER 31, 1979

{p Earnings Per Share.. $0.25 $0.95 $0.42 $0.68 Conventional Constant Dollar L

11. Replacement Cost (Unaudited)-The impact of the Historical Average cost 1979 Dollars brate of inflation experienced in recent years has resulted in k seplacement ccsts of productive capacity that are significantly (Thousands of dollars)

Operating revenues $244,970 $244,970

[ greater than the historical costs of such assets reported in the .

kCompany's fmancial statements. In compliance with reporting Fuel used in generation expense. 103,274 103,274 )

{ requirements, estimated replacement cost information will be Purchased power . . 8,535 8,535 l

r disclosed in the Company's annual report to the Securities and Depreciation expense .... 23,625 40,179 j

[ Exchange Commission on Form 10-K. Other operating and maintenance ,

E 12 . Supplementary Information to Disclose the EHects of expense . . . 62,584 62,584 l banging Prices (Unaudited)-ne following supplemen. Inc me tax expense-net . 7,281 7,281 hary information'is supplied in accordance with the require. I"te M 5! expense " et . . ... 24,288 24,288 h of Financial Accounting Standards Board Statement. anmar and deductions -

net ...... .. . .. .. . (13,837) (13,837)

ENo. 33, Financial Reporting and Changing Prices, for the

[ purpose of providing certain information about the eHects of Subtotal . 215,750 232,304 tdianging prices. It should be viewed as an estimate of the Income from continuing approxim, ate effect of inflation, rather than as a precise operations (excluding reduction measure. $ 29,220 $ 12,666 to net recoverable cost) .

h Constant dollar amounts represent historical costs stated in h of dollars of equal purchasing power, as measured by . Reduction to net recoverable cost . $ (77,866) h Consumer Price Inder for All Urban Consumers. Gain from decline in purchasing Ej Fuel inventories and the cost of fuel used in generation Power of net amounts owed . 64,995

%sve not been restated from their historical cost in nominal Net . . . . . ....... ... $(12,871) dollars. Regulation limits the recovery of fuel through the operation of adjustment clauses or adjustments in basic rate Five year supplemental selected fmance data is enclosed in l g ediedules to actual costs. For this reason fuel inventories are the Company': annual report to the Securities and Exchange i

j f Sedively monetary assets. - Commission on Form 10-K. j W

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KANSAS fe ELECTRIC COMPANY Comparative Financial Statistics (Thousands) 1979 1978 1977 1976 Electric Operating Revenues:

Residential ............................. $ 74,215 $ 73,683 $ 60,849 $ 47,120 Commercial ............ ................. 55,990 53,588 45,890 35,930 Industrial ............................. 80,328 72,848 59,978 44,828 Public street and highway lighting . . . . . . . . . . . . 2,161 12,034 1,688 1,399 Sales for resale-municipals and cooperatives . . . . . . . . . . . . . . . . 20,184 19,177 16,197 10,889 General business . . . . . . . . . . . . . . . . . . . . . . . . . 232,878 221,330 184,602 140,166 Sales for resale- other electrie utilities .. . . . . . . 10,737 13,794 10,580 1,728 Total sales of electricity . . . . . . . . . . . . . . . . . . . 243,615 237,124 195,182 141.894 Other . ... .... ... ......... ..... 1,355 1,336 1,054 879 Total electric operating revenues . . . . . . . . . . . . 244,970 238,460 196,236 142,773 Operating Expenses:

Fuel . .. . . ...................... 101,927 96,017 73,826 42,658 Deferred fuel . .... ..................... 1,347 6,127 (2,461) (2,182)

Purchased power . .. .. ..... .. ...... 8,535 4,162 14,523 9,459 Other operation ........................... 27,675 25,062 22,267 18,954 Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,999 . 15,292 11,041 8,208 Depreciation . . ..... ....... ........ 23,625 21,924 17,729 13,765 Taxes other than income taxes ......... . . . 11,910 12,207 11,036 9,134 Income taxes . .. ....... .......... . 7,022 18,697 15,473 13,783 Total operating expenses . . . . . . . . . . . .. 205,040 199,488 163,434 113.779 Operating Income .. . . . . . . 39,930 38,972 32,802 28,994 Other Income and Deductions:

AFUDC-other (a) .. . .. ......... ... 13,358 8,71C 7,644 -

AFUDC (7V2% in 19761970, 6V2% in 1969,6% in 1969) . . . . . . ... - - - 9,992 Income taxes-net . . .. ...... . ... (259) (38) (47) 3,171 Miscellaneous - net ........ ........ ..... 479 73 91 158 Income Before Interest Charges . . 53,508 47,723 40,490 42,315 Interest Charges:

Interest on bonds . . . . ........ ... ... . 31,726 23,746 20,660 17,102 Other interest . ..... ................. 4,752 1,815 %1 1,859 Amortization of debt premium, discount and expense-net ............... 209 197 126 81 AFUDC - borrowed (a) . . . . . . . . . . . . . . . . . . (12,399) (6,999) (5,907) -

Net Income ........ . .................. 29,220 -28,964 24,650 23,273 Preferred Stock Dividends '. . . . . . . . . . . . . . . . . . . . 8,217 7,084 6,471 4,537 Earnings Applicable to r~=-a Stock . . . . . . . . . $ 21,003 $ 21,880 $ 18,179 $ 18,736 Shares of Common Stock Outstanding (End of Year) . . . . . . . . . . . . . . . . 13,240 11,055 9,357 6,717 Earnings per Average Share of e- Seack .. $1.84 $2.28 $2.28 $2.88 I

Cash Dividends Paid per Share l On Commen Stock (b) . . . . . . . . . . . . . . . . . . . $1.91 $1.825 $1.77 $1.70 1 Capitalization: (Amount and Percent) l Long-term debt (less current maturities) . . . . . . . $386,519 49.7 $374,071 52.7 $295,392 50.2 $262,854 52 Preferred stock including premium . . . . . .. . . . . . 117,993 15.1 93,993 13 83,993 14.3 83,993 16 Common equity: .

Comrnon stock . . . . . . . . . . . . . . . . . . . . . . . . . . -184,397 151,336 ,, 121,656 66,906 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 39,407 -91,015 w 87,224 C3,642 Total common eqmty . . . . . . . . . . . . . .'.7. . . 273,804 35.2 242,351 34.1 208,880 35.5 150,548 30 Total capitalization . . . . . . . . . . . . . . . . . . . $778,316 100.0 $710,415 100.0 $588,265 100.0 $497,395 100 Short. term Borrowings (End of Year) . . . . .. . . . $ 41,000 $ - $ 21,700 $ 29,250 l

Embedded Interest Cost of Long.Tersa Debt , . . . 7.398/e 7.36 % 7.12 % 7.13 %

(a) See Note 1 to Notes to Finanoel hasa= ase (b) 1979 year.end annual rate $1.94 per share.

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f KANSAS f4 ELECTRIC COMPANY Comparative Electric Statements 1979 1978 1977 1976 Sales in Kilowatt. Hours (Tb===A):

Residential ............................... 1,870,597 1,947,538 1,771,645 1,671,47 Commercial .............................. 1,398,942 1,402,986 1,330,807 1,257,61 Industrial . .........T.................... 2,777,807 2,679,630 2,465,928 2,351,63 Public street and highway lighting . . . . . . . . . . . . 63,385 62,808 62,085 60,74' Sales for resale-municipals and cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . 927,395 965,187 883,553 726,54' General business . . . . . . . . . . . . . . . . . . . . . . . . . 7,038,126 7,058,149 6,519,018 6,068,00-Sales for resale - other electric utilities '. . . . . . . . 534,925 921,338 695,285 97,95 Total kilowatt-hours sold . . . . . . . . . . . . . . . . . . 7,573,051 7,979,487 7,214,303 6,165,95 Customers at End of Year:

Residential . .. . ....................... 200,024 194,773 190,174 187,01 Commercial ........ ...... .............. 19,141 18,970 18,510 18,24 Industrial . ....... ..... ........... 3,696 3,392 3,311 3,1 b Public street and highway lighting . . . . . . . . . . . 450 413 396 37 Sales for resale-municipals and cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 91 90 8:

General business . . . . . . . . . . . . . . . . . . . . . . 223,403 217,639 212,481 208.90 Sales for resale - other electric utilities . . . . . . . . 10 10 10 l' Total electric custorners . . . . . . . . . . . . . . . . . . . 223,413 217,649 212,491 208.91 Residential:

Average kwh per customer .. ..... ....... 9,496 10,136 9,413 9,09i Average revenue per customer . . . . . . . . . . . . . . . . $376.76 $383.49 $323.29 $256.2i Average revenue per kwh (cents) . . . . . . . . . . . . . 8.97 3.78 3.43 2.8 Kilowatt. Hours Generated and Purchased (Thousands):

Generated (net after station use) . . . . . . . . . . . . 7,554,258 8,130,424 6,732,339 5,878.67 Purchased . . .. .... . ............ 475,866 334,683 947,973 802.41 Total . . ......................... 8,030,124 8,465,107 7,680,312 6,681.08 Less: Sales for resale-other electric utilities . ...... .............. 534,925 921,338 695,285 97,95 Net . .. . . . . . . . . . . . . . . . . . . . . . 7,495,199 7,543,769 6,985,027 6,583,13-Company use, line loss, etc. . .. .. ....... 457,073 485,620 466,009 515,13' Energy sold - general business . . . . . . . . . . . . . 7,038,126 7,058,149 6,519,018 6,068,00 Average BTU per Nec Kilowatt. Hour Generated .......... . ........... 10,998 10,802 11,048 10.80 Average Fuel Cost per Million BTU (cents) . ............................. 122.684 109.324 99.256 67.15 Available Capacity (Kilowatts) . . . . . . . . . . . . . . . 1,968,000 2,031,000 2,026,000 1,718,00-Maximum Demand (Kilowat's)

(Exclusive of sale to other utilities) . . . . . . . . . . . 1,473,400 1,532,600 1,423,400 1,387,004 Utility Plant at Original Cost (Thousands):

Beginning of year ......................... $ 914,460 $780,181 $676,554 $563,98:

Capital expenditures . . . . . . . . . . . . . . . . . . . . . . 183,991 137,144 106,565 115,12-Retirements ........................... 6,889 2,865' ,, 2,938 2,55:

End of year . ....... .................... 1,091,562 914,460 780,181 676,55 Accumulated provision ,for depreciation . . . . . . . . 178,113 160,673 140,775 124,96 Net utility plant .. ........................ $ 913,449 $753,787 $639,406 $351,59 Employees at Year End . . . . . . . . . . . . . . . . . . . . . . 1,432 1,385 1,340 1,31 26

%~

y ...<- - s 1975 1974 1973 1972 1971 1970 1969 1,635,381 -1,455,571 1,420,678 -1,306,894 1,218,515 1,210,616 1,074,492 1,204,998 1,086,213 1,088,392 1,027,931 950,848 911, % 7 821,203

~ 2,268,200 2,233,936 2,045,851 1,887,252 1,797,720 1,782,629 1,779,093 58,602 57,123 55,472 52,443 49,657 47,049 44,943 687,541 636,368 547,324 503,616 461,229 468,477 391,893 5,854,722 5,469,211 5,157,717 4,778,136 4,477,969 4,420,738 4,111,624 247,717 380,239 347,549 505,515 737,016 1,109,211 1,423,658 6,102,439 5,849,450 5,505,266 5,283,651 5,214,985 5,529,949 5,535,282 180,772 177,162 172,896 169,761 166,697 165,668 165,424 18,913 18,698 18,573 18,411 18,048 17,923 17,849 2,546 2,462 2,381 2,345 2,327 2,302 2,303 320 248 181 177 167 165 160 87 84 82 81 78 77 74 202,638 198,654 194,113 190,775 187,317 186,135 185,810 10 10 8 8 8 8 8 -

202,648 198,664 194,121 190,783 187,325 186,143 185,818 9,150 8,338 8,317 7,792 7,343 7,325 6,545

$236.86 $181.02 $162.02 $152.73 $145.88 $146.15 $133.40 2.59 2.17 1.95 1.% 1.99 2.00 2.04 6,194,369 5,945,844 5,544,119 5,428,111 5,469,259 5,785,520 5,692,076 372,332 354,699 386,562 359,501 124,350 155,299 189,245 6,566,701 6,300,543 5,930,681 5,787,612 5,593,609 5,940,819 5,881,321 247,717 380,239 347,549 505,515 737,016 1,109,211 1,423,658 e 6,318,984 5,920,304 5,583,132 -5,282,097 4,856,593 4,831,608 4,457,663 464,262 451,093 425,415 503,961 378,624 410,870 346,039 5,854,722 5,469,211 5,157,717 4,778,136 4,477,969 4,420,738 4,111,624 r- 12,843 11,284 11,058 10,710 10,480 10,374 10,345

{ 58.473 > 33.284 27.116 24.423 24.341 22.303 22.118 I ,718,000 I ?1 ,728,000 1,728,000 ~ 1,318,000 1,318,000 1,318,000 1,318,000 1,337,400 1,324,600 1,201,900 1,137,300 1,079,400 1,076,600 998,400 7 4478,011 _ . $432,059 $397,790 $347,961 $306,801 $273,137 $255,068 t 88,287 ^ , PJf,. , 48,094 . 34506 51,799 43,196 . 35,662 20,578 fJ - 2,310 s ' "? ' ' J 2,142 2,237 1,970 2,036 '

1,998 2,509 g 563,988 ,

478,011 432,059 397,790 347,961 306,801 " 273,137

( 113,130 101,817 91,839 83,644 77,317 71,226 65,369

$450,858 $376,194 $340,220 $314,146 $270,644 $235,575 $207,768

- 1,289 1,290 1,269 1,238 1,240 1,263 1,237 27

Directors (and the year they trere elected)

Robert A. Brown (1953) Martin K. Eby (1957) Glen L. Montague (1974)

Arkansas City, Chairman of the BoarJ, W'ichita, Retired Chairman of the V'ichita, Vice President .

The Home National Bank of BoarJ, Atartin K. Eby Construction Administratis e Sersices of Arkansas City Co., Inc. the Company A. Dwight Button (1976) G. W. Evans (1947) Clifton C. Otto (1953)

W'ichita, Chairman of the Board, n 'ichita, Consultant and Retired Fort Scott, Retired Chairman of The Fourth National Bank and Chairman of the Board of the Board, The W'estern insurance Trust Company, W'ichita the Company Companies Wilson K. Cadman (1978) Ralph P. Fiebach (1967) Dwane L. Wallace (1953)

W'ichita, President of the Company W'ichita, Chairman of the Board W'ichita. Senior Consultant, C. T. Carter (1%8) of the Company Cessna Aircraft Company Independence, Retired Vice President,

, Ralph Foster (1970) Robert L. Williams (1968)

Pipeline Transportation > W'ichita, Vice President . General W'ichits, Ouner of Imperial Atl.sntic Richfeld Company

(,,,,,,,,,y,(,,p,,, o;j (,,p,,,

'it ita, Cha rman o the Board George K. Mackie, Jr. (1965) Lyle E. Yost (1969) and President, First National Bank Pittsburg, Chairman of the Board, Hessten, Chairman of the Board.

in W'ichita The Clemens Coal Company Hesston Corporation Officers (including their ages and titles)

Ralph P. Fiebach, 62 Glenn L. Koester, 54 R. E. Tate, 63 Chairman of the Board Vice President . Operations Treasurer Wilson K. Cadman, 52 Glen L. Montague,60 E. D. Prothro, 47 President Vice President. Administratise Contruller, Assistant Secretary Dennis L. Evans, 45 Sersices and Assistant Treasurer Vice President . Customer and Robert L. Rives,46 Jack Skelton,49 Community Sersices Vice President . System Sersices Assistant Secretary Ralph Foster, 51 Bernard Ruddick, 56 J. F. Klassen, 50 Vice President GeneralCounsel Vice President . Engineering Assistant Treasurer Howard J. Hansen, 58 W. B. Walker, 59 Verna L. Ridgeway,52 Vice President . Finance Vice President Aucunting Assistant Vice President and Secretary l

l l

28

Stockholder Information 51arkct Prices and Disidend Rates of Stocks ,

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19?9 1978 1979 1978 1

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p , , j First Quarter 19 % '1812 21 /19% $ .475 $ .45 3 .

19 /1 'I 4 201.'s /181,-i .475 .45 - -

second Quarter 21 /18% .475 .45 Third Quarter IQ < int )

.485 .475

~ } ~~ 1 i Fourth Quarter l'% / I s 19 % /17 % l

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1979 1978 1979 1978 .' 2. e

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First Quarter 4' % /421 50%/m $1.125 $1.125

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,c Second Qaarter 4514/41 51 % /46 1.125 1.125 ,

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Third Quarter 44 % /40 % 51 % /46 1.125 1.125 ';- -

3 Fourth Quarter 40Q/41 48 /44 1.125 1.125  !

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A. nnual Meeting J.

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The annual stockholders' meeting will be held at the , ,

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General Otlice of the Company, Wichita, Kansas, h l May 21,1980. Proxies for this meeting will be solicited by '

- I ~ ~' Oklahoma I

the management. A proxy sta:ement will be mailed to Slap Legend stockhciders about April 25,1980.

This report is prepared primarily for the information of Uni 5i a He'dquarters Cities k

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stockholders of the company and is not transmitted in connection with the sale of any securities or offer to Electric Lines,69 kv mummmmms buy any securities. Electric Lines Authorized eeeeee Electric Interconnections i a e m a(

Generating Stations and Capability o D Gordon Evans Steam Electric Station,507.8 mw O Ripley Steam Electric Station,88 3 mw Preferred Stock: Transfer Agent, First National Bank in am El ' ' '

Wichita; Registrar, The Fourth National Bank and Trust h [',',$'ay $ i ,m El ric "Ei i, 3 3 3 mm N Company, Wichita- D Neosho Steam Electnc Station,68.7 mw Common Stock: Transfer Agents, First National Bank in Q La Cygne Steam Electric Station.* 725 mw Wichita and Irsing Trust Company, New York ; Registrars, B Wolf Creek Generating Station.* 477 mw Q The Fourth National Bank and Trust Company, Wichita, Dj"Hry 'Or' y"'$n e'r

• 136 mw Q and Registrar and Transfer Company, New York. . Jointly owned with other utilities.

Listed N.Y.S.E., ticker symbol, KGE. Capability stated is KG&E allocation.

Bonds: Trustee, Registrar and Paying Agent, Morgan Interconnected Utilities Guaranty Trust Company of New York. . Associated Electnc Cooperative, Inc.- AEC

. The Empire District Electric Company- EDE

. Kansas City Power & Light Company KCPL Form 10-Kr . The Kansas Powe, ana t,,ht Company _ xet

. Oklahoma Gas and Electric Company -OGE The ComIan . Public Service Company of Oklahoma - P50 and Exchange C f'sandForm ommission is available10.K isthat from filed agency with the. Western Securities Power Division of Central Telephone & Utihties or from the Secretary of the Company, Box 208, Corporation - WPD Wichita, Kansas 67201.

Service Area KG&E provides electric service to approximately 223,400 l retail customers in southeastern Kansas including the Wichita l Metropolitan Area.

Wholesale service is provided to 31 communities and to 8 rural electric cooperatives. The company owns no gas properties and has no gas operations.

The company has all appropriate franchises and certificates which are needed to permit it to provide service throughout the area.

29 l

ansas Gas and Electric Compan}-

Bulk Rate P. O. Box 208 Wichita, Kansas 67201 t L ' P"S' PAID Addren Correaion Requeste / Permit 165 Return Post.sge Gnaranta Ke) Number to

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Wichita, Ks.

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I Gasoline lines aren't neu. It' hen Phillips 66 opened its first eficiently, u e hau e taken steps to anure a continucJ tJequate gas station anyu here in lY'ichit. in 1927 customers lined supply of pou er to s.uisfy neu uses at ucIl as netc customer:

up for sertice. Energy uas important then as nasc. In the future as in the past. electricity can be a re!..ble and KG&E has for 70 years met the grotting needs of snorasing economical energy source expanding the potential of men numbers of customers. Although all energy must be used ,, and tromen to u-ork as u eli as to enjoy life.