ML19312C240

Annual Financial Rept 1976

ML19312C240
Person / Time
Site:	Oconee, Mcguire, Catawba, McGuire, Perkins, Cherokee
Issue date:	03/22/1977
From:	DUKE POWER CO.
To:
References
NUDOCS 7912110787
Download: ML19312C240 (39)

Text

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l Making Sense of the Financial Statements The pnmary purpose of the Annual Report to Shareholders is to give the Company s owners a detaned accounting of how their investments have been managed The financial statements. which compare results of the reporting year with those of the pre-ced.ng year. are an important part of this accounting  :

This year we ve made a special effort to he!D our shareholders interpret these in-j

• 4 creasingly complex statements Bound into the financial section are partial pages. kke this one on which the individual statements

• are explained We have attempted to define those items which have the greatest impact on the Company s operations and the o vestments of its sharenolders We hope this effort will assist you in mea-Sunng the performance of your Company Highlights un 1976 _

These imt. Tnt operating and financial statistics are pr esented near the front of the Annual Report to give shareholders a quick

• look at how the Company performed during

the recorting year.

I Of particularinteresttoshareholdersarethe '

two items under Common Stock Data.

Eamings Per Share is the amount of money the Company earned for each share of a common stock: Dividends Per Share is the amount actually paid to the shareholders for each share. The difference is reinvested

in the business.

Return on Average Book Common Equity is one of thecommonly used methods of measunng an electnc utility's financial per-formance. itcompares what the shareholders made (their earnings) with what they've in-vested (their equity). The return can be determined bydividing Earnings for f Common Stock bythe average of Total common stock equity for the current and preceding years. shown on the STATEMENT' OF CAPITALIZATION (Page 20). Total common stock eculty is the total amount of investr~ents that has been made in the Compary through the sale of common stock. plus the total of shareholders' earn-ings that has been reinvestedin the business.

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I Highlights 1976 1975*  :=

Electric Revenues $ 1 108.358.000 5 930.384 000 19 1 Earnings for Common Stock $ 138.711.000 3 82.799 000 67.5 Common Stock Data Average Shares Outstanding 57 767 000 51.020.000 13 2 Earn;ngs Per Share $2 40 $162 48.1 D:vidends Per Share $1525 31 40 89 Return on Average Bcak Cc .imon Equity 12 7% 85% 49 4 Plant Conctruction Costs S 475.248 000 3 438 952.000 83 Electric Plant. Net 33.720.408 000 53.366 419 000 10 5 Kilowatthour Sales (thousands) 45 633.000 42 138.000 8.3 .

Peak Load tKw) 8.600.630 8.421.960 2.1 l

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1976 Year of marked improvement To Our Shareholders:

N:neteen seventy-ox was a year of marked :mprove- Earnings for 1975 have been restated to ref:ect tne ment for your Company potent:al refunding to North Carohna retad customers Earnings per snare of common stock tota:ed $2 40 a of approomately $18 3 mdhon under a January.1977 481 per cent increase over the restated $ 162 of 1975 N C. Supreme Court rukng and a related S5 7 milhon amm e rem b N hpany s The annual dividend rate on cornmon stock was in- _

creased from $140 per share to 5160 per share the

' rst >ncrease in the ccmmon 0:vidend s:nce 1968 Whne we are encouraged by the results of 1976 we ea e many chne ems we omndusky The market once of Duke Power common stock re- ced dag Mst had oms decade sM emst turnea to a tevet above book value after reacnino a low of accut 50 per cent of cock value iust two years ago One such probfem is the continuing escalation in the wst cWdmg new gmanng faces As new plants Tnese 3ch:evemente are grat:fying :n view of the severe economic pressures under anicn your Company and m g m as per MowaM capaw rates m N a@M meNee @er the e' ectr c ut.h!y ndustry have operated dunng the cosh Some emsion of eamings nomlady occurs first na.f of inis decade oetween the time these costs are incurred and rates are Beginn ng in 1969 and continuing through the first half increased to recover them of 1975 Duke Power was engaged in an uph!!! struqg!e aga'nst the effects of :nf!ation unprecedented capital We are attempting to reduce the size and frequency of requ:rements for piant construction. and inadequate rate increases by restraining the growth in peak demand rate lave!s The economic recession wh:ch resu!ted in for electncity. This would reduce tne amount of new a shght dechne in kilowatthour sales in botn 1974 and generating capability that wt!I be required to serve 1975 furtner contnbuted to the erosion of earn:ngs futuregrowth Variousaspectsof thisprogramare ciscussed in de!ad later in this Report.

during much of this penod The turning point came :n mid- 1975 At that time. rates We a:so are working through industry organZations.

weread,usted to more nearly reflect current costs Sa:es and through our Congressional delegations. to impress ir prosed as the :ndustr:es of our service area ceaan upon Congre" ihe vital necessity of deve!Cptng a recovenng trCm the recession The rate cf inflat:cn nationai energy pohcy. To make the U S less dependent w h!ch had plunged the nation into its wcrst economic upon foreign energy sources Such a pohCy must in-recession since the 1930 s. slowed to a more manage. c!ude full use of our nation s most abundant energy ab!e :esel resources - coal and uranium.

These improved economic cond.itons. coup'ed with in this regard. it also is vital to the nation's future energy more adequate rates and the absence of new generat. supply that U S uranium ennchment capacity be en-

<ng fac:ht:es comtrg into service. resu;ted in a greatly larged and that the nuclear fuel cyc!e be completed.

morcved retum on commen shareholders investments Despite tre more than 380 successful p! ant years of in 1976 without a furtner increase in e!ectnc rates to nuclear fuel reprocessing worldwide there is not a custcmers The earned fevel of retum however. was single reprocessing plant currently licensed for opera-stdi below that allowed by regulatory agencies tion in this Country The finu! missing fink in the nuclear fuel cycle is the ^

u!timate storage of high-level rad:oactive wastes Al-though the technology for safe and reliaole disposal I

of theselow-vo!ume wastes s now avadable the

• To cc ntinue prcvic:ng rehab:e eiectnc serv:ce to cur necessary cr tena standards and regu!ations have yet custom ars at the lowest possce cost to be established by the federal government

• To rega.n couc;e A rat:ngs on cur sen:or secunt.es With voters in seven states having sound;y re;ected tnus morovrng the Company s nnanc:rg flesubihty and prcoesals that wou,d have cnopled nuclear power softening t:'e :mpact of f:nanc:ng costs on rates to deveicoment in this country we should now move customers forward in fully ut!htng this important energy resource , io ma,ntain an annua: G u -

Another maior area of concern is that of env'rcnmental amcenas per share ci common stock at a eve!inat M ver-protectron Under current regu!ations tne U S ennance the orcspect et a market pnce sucstant aly Environrnental Protection Agency rn many cases !s not above occk vaiue recu: red to weigh costs agarnst benet:ts :n pursuing . To attract the necessary cap.ta and to octa.n ail

ts goa! of cleaning up the environment As a result recutrec utenses and permits to ma nta'n a construc-

ndustry is ceng recuirea to spend mnbons of collars non screcu:e inat .w. ensure a renac,e source of on environmental activit.es wh:cn offer att:e or no efectncat enercy 'or our serwce area compensatang benefits

• To protect the env.ronrrentai cuanty of the P:eomont Hawng established its first f ull-time environmental Caronnas and to prov:de the e:ectnca! energy recu: red department in 1923, your Company has a long-stand:ng for the area s economic ceseiopment comm:tment to the quahty of the environment in its servicearea However westrongly coposeenviron- The management and more than 13 000 emp;oyees of mental regulations which place unnecessary financial our Company are dec;cated to tne fu:f.i! ment of these burdens on e!ectnc consumers At a time when both goals government and pnvate enteronse should be worhng We a e gra*eful for the centinued support and conf; to reduce unnecessary costs potent:al benefits c!early dance of our shareho:cers our emo'oyees. cur must te considered in the development of regulations customers and the commun: ties we serve des:gnea to protect our environment FOR THE BOAPD OF DIRECTORS Deso;te tne challenges wnich he anead. we are opti-m:stic about the future of our Company and the e'ectnc utsty industry In add t:on to the improved economic cord;tions discussed earlier that optim:sm is based on ,

a growing. national awareness of e!ectncity s essential  !

rote in meettng the nation s future energy needs CariHorn Jr l To he!c cnart our own course through the years ahead. Chairman et the Board and Chief Executive Officer l l

the management of your Company has adopted these I corporate colectives-

• io earn a fair and reasonable return on the invest- - --

ments of our shareholders B E Parker Pres: dent and Ch:ef Operat ng Cfficer Fecruary 17.1977 1

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l 1976 Year in review Electric Sales As a percentage of the tota! output of ine oconee Nuc! ear Stat;on cechned from 'ts 1975 level due to i E ecinc sa:es in 1976 ct 45 6 bdhon kdonatthours recuaea ma,ntenance scneduled refuenng of au tnree

. reo esent an 8 3 per cent :ncrease cver those of the

previous year it was tne first increase in knowattnour as am uma d mal sams saw m W reacters by tre manufacturer j sa es s;nce 1973 Sa;es had rema.ned essenttaay unchanged in 1974 Efficiency l

I and 1975 cue to the economic recession wh;ch was Duke s steam-fossJ generat4ng system set a new Com-( part.cuiarly damaging to ndustr1es in the Duke Power pany record for therma! efficiency in i976 Tne year s l serv ce area anc to energy conservat;on efforts by neat rate of 9 315 BTUs at energy per net Mowatthour

) customers generated was tre lowest ever reported to the Fecerai The <ncrease :n saies for 1976 resuaec pnmanly frcm Power Comm:ssion for a mu!tepiant generat;ng system

! an ucswing :n sa'es to :ncustnal customers who used Accord:ng to a prehm: nary survey by tne Edtson E,ecinc 10 0 per cent more e ecinc:ty :n 1976 than in tre Institute the Company s steam-fossd system a:so was preuous year the nat:on s most effic:ent :n 1975. the latest year fcr Modest ga.ns a'so were recorded in sates to commer. wnich industry operat:ng statist:cs have been Compded l

c:a! customers who :ncreased the r electr:C usage 5 6 Duke s steam-fossd system has been the nat:on s most i

i per cent and to residential customers who used 4 8 effic;ent for four of the past six years for whlCh industry i

cer cent more e:ecinc:ty in 1976 tnan in 1975 Sa'es statist:cs are avadab:e and second most effic:ent for to res.dential customers rema:ned sucstant,ady below the other two years ine n,stanc growin eve! due to abnorma!!y mdd weather in add tion to reduc:rg operat:ng costs. imoroved l l curina tne f:rst three quarters and continued energy thermal efficiency has a s:gn:ficant impact on conser-corservat:on efforts vat.on of energy resources i Nc! :nc:udea in these sa'es stat:st.cs are sales to other elecinc utities which more inan doubled in 1976 These sales are part:Cu!arly important since they are l cenved from generat;ng reserves which otherwise would be id:e Generation GENERATION

% By type fuel Cf the total kdonatincurs generated :n 1976 70 6 per cent came from coahfired un:ts 25 5 cer cent from an Hydro & Omer nuc! ear units ano 3 9 per Cent from hydroe:ecinc and er anc ciner sources e coal 100%

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SALES Bdhons of Kriowattheurs 60 1976 m 45 6 50 42 1 40 1975 1974 42 3 20 1973 43 2 10 1972 39 7 0

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Rates surcnarge to North Carohna retail custcmers That dec:s;on was upne!d by the N C Court of Acceals Aitnougn no recuests for general rate increases were fded in 1976 severalimportant events assoc:ated Howeser nJanuary 1977 the N C SuoremeCourt reversed theCourtcf Aopeals ruhno dec!anng thattre mth the Comoany s system of rates and charges Commission had exceeded ats autnonty in a!!owing occurred dunng the year the temporary surcridrge The reversal wou!d recuire On December 31, the North Caronna Suoreme Court a refund of approomate!y 518 3 mohon to retad cus- -

aff,rmed a t973 crder of the N C Utihties Commission tomers in Nortn Carchna and a revenue adjustment of l whicn granted the Company an automatic fuel cost about $5 7 mecn with respect to the Comcany's i ad;ustment c!ause The Company had recorded ap- wholesa!e business A;though Duke plans to petit:on

, prox:mately $151 mAon under that clause beforeit was fcr a reneanng cn the Suoreme Court s cec:s:on reofaced by an Accroved Fuel Charge in September. earnings for 1975 have teen restated to reflect tne 1975 Under the ne'n procedure a utikty must obta:n ootent a! refund and revenue adiustment

Comm;ssion accroval before ad;usting rates to ref

ect cnanges in fuel costs The Cornpany sti!! has autcmatic On October 4 1976 tre Company ided orcocsed t me-of-day rates for retad customers in Nortn Carchna

tuei cost adjustment c:auses in both its South Carohna in response to a cirect:ve from the N C. Utikties Com-retad rates and :n ts rates to wholesale customers in mission The Company asked to place such rates into both sues effect on a voluntary excenmental basis invo!ving a Certain fuel expenses had been incurred under pro- hmited number of customers :n that state Time-of-day l vis:cns of the automatic fuel cost adjustment c!ause in rates have been proposed as a poss:ble means of re-l North Carohna but were unbd!ed at the time the clause auc:ng the growth in peak demand for e'ectnc:ty and was repiaced by the approved fue! charge The Com- the amount of new generating capabikty recuired to m:ss cn had akowea Duke to colfect these unbu!ed serve future e!ectnc demands.

revenues over a 13-month penod througn a temporary Construction Deferrals Completion dates of eight major generating un:ts were cusned back in 1976 as a result of reduced load fore-casts. design changes and delays in receiving NET INTERCHANGE components from manufacturers AND PURCHASED POWER Thetwo un:ts of the Wakam B McGuire Nuc' ear Station Net Sales previously scheduled for completion in 1978 and 1979.

W Net Purchases are now sCnedu:ed for service in 1979 and 1980 3

Construct en of the two 1.180 000 k4owatt units was delayed by des;gn changes and late dehvenes of p: ping supports and components 2

Following new estimates of load growth in the P:ed-mont Carchnas the Company also de!ayed by one year the complet:on of Unit 2 of the Catawba Nuc! ear j j_ 3 Station (1.150.000 kw) Unit 3 of the Cherokee

, j Nuc: ear Stat:on (1280 000 kw). and Unit 3 of the j j g Perkins Nuc! ear Stat:on (1280.000 kw) These units 5 are now scheduied for completion in 1983,1989 and I

1990. respective!y De!ayed for six months were Un:t 1 j- i of the Catawba station (1.150.000 kw). now scheduled for operation in 1981: Unit 2 of the Cherokee station (1280.000 kw). now plannec for 1986 and Unit 2 of 2 the Perk:ns station (1280.000 kw). now schecuted for serwce :n 1987 i 3 -

l 1972 1973 1974 1975 1976 5

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l Year in review continued

, Unit 1 of the Cherokee station and Unit 1 cf the Perkins ut.hty industry the company conducts :ts affairs in a stat on botn rated at 1.280 000 kilowatts were un- genera!iy outstand.ng manner. ~ the firm reported in affected by the construct.on deterrais. The units are ;ts summary ccmrnents White the aud;t identif,ed l

schedu'ed for serv.ce in 1984 and 1985 respective!y certarn areas AhlCh nave potent:al for improvement.

l Site preparation and other work have commenced at it found part:cu!ar strengths :n certain areas. inC!ud:ng l

( the Cherokee station following receipt of a kmited work

• Duke has deve!cped a strong, expenenced manage- -

l authonzat:on from the Nuclear Regu!atory Commission ment team Catawba Negotiations Managers at an ievets are both technically competent l

Negot:ations with certa:n wholesa!e Customers over tre proposed safe of the Catawba Nuc! ear Stat;cn

• Management exhib.ts ondein past acComphshments nere cont nuing at tre date of this Report Duke offered but also a cositive att.tude toward constructive to seu the two 1 150 000 Mowatt units to a grouo of cnanges Duke is c! ear ly a technolog:ca! leader in nnoiesa e customers in late 1975 as a financing the electnc ut;hty industry alernative . The company consistently ranks at er near the top Management Performance Audit f comparab e utdit:es 4n tne relative efficiency of its generat:ng O! ant design. construction and operating an eight monin study by Booz Alien & Hamdton Inc . practices.

a nationa:!y recognized management consuit:ng brm

• Duke makes extensive use of state-of-the-art applica-a nas founa Duke Power to De a weil managed com-t:ons of data process;ng and te!ecommunications

! pany operating generany ;n a cost effective manner technology in several funct;onal areas i in au major functional areas ' The management per-

'ormance aud.t was orcered by the North Carchna

• Major expense items - fue! construction costs.

Utst.es Comrnssion :n Apnl 1976 to provice an and interest expense - are tightly controlled ~

.mpart:a1 crofessiona! assessment of Duke s manage- The audit report said opportunities for improvement ment and cperating efficiency in managenal and operat;ng effic:ency in most cases Duke nas clearly demonstrated dunng tne course of thrs aud.t why !! is Considered a leader :n the efectric LONG-TERM DEBT As 'a of Caoitalization

} 55 9 55 3 55 4 54 9 1 53 9 i THE REVENUE DOLLAR - 1976 i

- 52%

WHERE IT CAME FROM HOW IT WAS USED  %

50

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1 3 c.

1 Residential Customers Fuel Costs ;5 S

2 i

i 20% 10%

Depreciation

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Commercial Customers 21%  ;

5 Taxes 18% j

industrial Textile .

.

Customers 6% Wages Benefits g 1

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r LOAD MANAGEMENT:

Reshaping future electric demand Tne cear Oe"3nd for efectr.c;ty.5 ore of tre mCSI cuot tnereby soften;ng the imoac! that tne h:gne costs

gemcant 'autcrs a!!ect;ng the cceration of an electr.c a rave on cur Company and ;ts customers

.t,' 't de!ervres the amount of generat:ng canecti:li jo e.ectnc %cci,er must have n service vn cn m turn Why is it now costing more to build new power otWaec construct'cn screau.es !nanc:a piann ng plants?

rates and to a gmmng extent earn n9s inere are two main reasons One. cf course is int:at:on in n:s aterv,ew Seculme Vce Wes: cent D W Scctn inere has a! ways been a certa:n amount at ,ntfation cut l.nes a ne.y maru et,ng concept 3:W at recucing :n our bus: ness but we were able to offset ;t by gener-

'ne gre. vin of peak cemana tcr e'ectnc tv 'n the Duke at ng e'ectnc:ty more eff:c:ently We re std! making Pc wr servcce area He mso d:scusses ncw that con- 'mprevements but there is s:mply no way to offset the wat wil a'fect corn rates to Duxe s customers and intat.cn our industry has been expenenc:ng since 1969 earn ngs for ts snareno/cers Anctner raason for the higher cost of new plants is The conceDt is can e a Load Management its goalis

1. • # *"U ' " '** 0 " *S ' ~

• recu: red t r e v;r nment ! c nsiderations Cbvious:y.

to recace the growth in De3< cemand bv i 300 0G0 Ucw3tts by lhD0

e. ectr,c:ty . n,s means customers have to pay hioner rates without rece:ving any :ncreased benetts insofar as therr er ectnc serv,ce is concerned l Mr. Booth, why would an electric utility want to restrain the growth in the demand for its Are the costs of building new plants beginning service? to level off?

As you <now tre peak cemanc for eiectric:ty ceter- No. they re actually chmo:ng higher The Oconee m res the amount of generating capabd ty an e! ectr'c Nucl ear Stat:on was completed in 1974 at a cost of utaty must have in service As the peak grows a utity $179 per kdowatt The McGuire Nuclear Station. which must ;ncrease its generat:ng capabdity by budding is to be completed in 1980 is excected to cost S398 new power o' ants The cost cf these new plants has a per knowatt P! ants beyond that wdl cost even mcre direct imcact on tne cost of provcng elecirc service Obviously. rates wdl have to be increased each time l ll the cost of a new p! ant :s lower on a per kdowatt one of these units is p! aced in service.

bas:s than the average cost of the plants a: ready in serv:ce this tenas to recuce the overal cost of provid. Are other utilities experiencing the same infla-ing s' ectr;c;ty Be:ng ab e to budd pl ants at a 'ower per tionary pressures?

l Mov.att cost was the major factor :n our be,ng able to Yes any electnC Utlhty that is 'n a growth situat:on is recuce rates s;x nmes dur:ng the 1960 s Prght now having the same type of problems In fact Duke is l

- m m a situat on v.nere tne cost of new olants !s better off in this regard than most of the other ut:ht;es

- cer Wowatt than the aserage cost of c: ants since we ces;gn and budd our own piants at a lower eacy rn seroce Th;s means we now hate to increase cost than most cther uttht:es. The costs we ve been a:es every Sme a new p ant is burt By restrain.ng the C:scuss:ng procably wdl be low compared to what growtn in tne peak demand we can reduce the otner comoanies wdl have to pay for new generating amou^t of new generat.ng capacaty that has to be cacac:ty e

If customers will benefit from a reduction in "In theory, shifting non time-sensitive new generating capability coming into service, USGS Of electricity from peak to Off-wouldn't they benefit even more if Duke were peak is an ideal marketing Concept."

to simply stop building new power plants?

Nct at an A cer*a n amount of new cenerating cao- can get peooie to ao these th.ngs at otner than peak aDNy :s absciute:y essent.a! to the Ieq be og ct tne penocs tne peak can be reduced In theory sh:ft ng peco,e /,e ser se t cecoie are to vprose the:r staMarc non ::rne-sens I.ve uses of e'ec*nc:ty from Deak to off-s' ' ..ng more ard Detter-cajing jCos nave to De pro. 's id9a: ""arke0 g Cc CeDI it nct or'y reduces oded Al ino% ;cbs yd recu;re scree fo"". of erergy the amourt o generating Capab:! ty reQu red but a'so And ,iin other energy fnrms a! ready in sncrt suco"j 'ncreases the ou! Cut Of generattng otants at I:mes A u e CaCady MeNe Aou!d be rd e

!c #e / i30% Inat etctr C$/ a have to c:ay an egen O.g(er ' De in the 'Uture .n provid;ng joCs 'cr peCo;e ancM d and .n croduC:ng Ine goocs and serv >Ces that oecote eCCCCm'C coeraDcns as creat ng new off-Oeak uses

.:i recare Cf course a certain amount cf neh gener. Cf e ectnc ty wthout reau:r ng any addit: ora! :nvest-a!.ng caDaDihty also nas to oe acCed pencd:CaLV to ments 'n generaLng CapaC;ty Cf Course inese eCO-eol ace v,orn-out faccmes The ourocse o! Load norries of coerat:cos "ct crl/ he p ho:c down the cost Management is not to restr:CI the avaaaCm!y ci sc'Aer c e ectnC ty 10 custCreers out a!so enrance the to cur :erace area but ratner to he o cecn.e use e;ec. Umoary s orcscects f actua ;y earn ng tre return

'r c:ts trey neea :n sucn a way as to m'rme Pe on n snarenccers nswts mat regu;atcry agen-amcunt cf more excensrve nea ge erat og cacac tv ^""""""""*~M""N mat . m reau: red to crocce that oci.or Do you think customers will voluntarily make How do you plan to accomplish that goal? these changes in their living habits?

Rght now ae have 2i seoarate ac0 vies uncer say Some of mem ;M f they can ccme to uncerstand to ne:p reduce the growth in Dean demarc There 7g how these changes w:! a"ect the future cost cf tre:r ce otrers as we move further into the Lcad f,ianage- e ecinc serv:ce Cf ccurse tnng;ng about this under-ment program Or'e category inc'uces tncse acnvmes stard:ng va recu1re a creat ceai of ecucat:ena' work shrcn encourace customers to sn ft certa:n uses ct on our part We rea ze newever mat some sort of electr,c ty from on-peak penocs to off-oeak pencds C ""U "* * * '"*' "3 # I' N ""# *C Somethinq like time-of day rates?

y:7 7 gg

^ 4.} Pernaps Scme peop:e refer to this as peak toad h.[g, h oncing The meory cenind m:s pncing system is trat yv

• S by charg!ng tower rates dunng me off-ceak cenocs than Cur,ng the on-peak cenods consumers wd shrt

.)

uses of e:ecir c:ty to the off-Deak nours to take ac-

,fj#

- i vantage of tne 'cwer rates Duke is very :nterested

in th!S concept and nas r ecent!y asked the North Caro-4 4f

• kna Utaties Ccmm:ssion for permission to put time-

!* cf-day rates into effect on a voluntary expenmental 2

bas:s :nvolvinn a hmced nur"ber of rustomars 9

% If time-of-day rates will help reduce the growth in peak demand, why not put them into effect u%w on a systemwide basis?

Anctner :s he!p:ng Customers improve the etitc:ency At this poln! I:me-Of-day rates are an essenta1y un-of the!r on-ceak uses of elecinc:ty wh:Ch cannot be proven Concept A thougn they appear to have ine sn:tted A tntro category involves the possib:e voiuntary Octenttar of reduc.ng the growth in Oeak demand contro! cf certa:n customer eiectr.c dewces dunng the tnere are some duest;cns that need to be t esolved l oea< demand cened befcre such rates are O! aced into effect on a system-wde basis One quest:cn is that of pubnc acceptance Let's take one category at a time. What type of We naed to find cut f ceop e ad make the necessary electric uses can be shifted from on-peak to  !

ad;ustments in tre:r hfesty:es to take advantage of tre  !

off peak periods?

off-peak rates There a!so are some signif cant costs i Us:ng a washing machtne an,er cr d:shwasher are assoc:ated ath this concept Tirre-cf-day rates wd l examo'es of the types of eiecmc uses wnicn in most recu:re soec:al meters cacao e of separately record:ng j cases can ce done virtuauy any t.me cf me day if we e ectnc usage canng the on-ceak and off-peak cenccs i 9

Load Management continued l

, un eost:ng home to the EES stancards :s tne s:gn:f-

+

"To have any influence on the amount , cant sa enas me nomeowner w reahze .n energy of generating capability required, costs We re orcmet:ng th:s concept tnrougn an i energy conservation must occur at the extenswe consumer ecucation program aimec not time of peak." onn at the nomeoe.ner but a so at Dunders arcndects.

rea: tors mortgage aankers and others engaged in the 4

These meters are relatively expensue Coviously to be norne-budcing anc homeamorovement f:etas So far.

a viabie pr'cing concept the benef;is must outwe:gh the resconse from ad these grcups has been extreme!y

tne costs it wiH take a reasonao'e amount of tirre to favoraofe

$nc the answers -

You mentioned improving the efficiency of Are there other energy conservation programs j

involved in Load Management? l on-peak usages as an element of the Load _

, Management Program. Aren't people already Yes there are several One !s our Energy Eff:cient i conserving energy? Apenances or EEA program This program is armed at mproving tne energy ettic:ency of maior appliances

! Yes arc those erforts aiready have had some impact

.n the peak But there s stcl a !ot more to ce done such as water heaters retngerators and air-conci- 1 t:cners These apphances are relatively large users of I

One et tre procems ath energy ccnservat:on as it s )

eecircty. and they are norma:ly in Operation at the

! genera !y thougnt of is tnat people wdl conserve t m of W a4 We re attacking this particular probtem l energy a1 year lona and then run their a.r-conc;tioners

> tu!' ciast on the hotiest day of the year or the!r heat on three d;tferent fronts. First we re encouraging the manufacturers of tnese apphances to budd more energy I on the cc:cest day renen the peaks ncrr"any occur effcent moceis Secondly we re encourag;ng appk-To nave any inffuence on the amount of generat;ng ance dea'ers to stock and promcte those energy cacaba ty recu' red energy conservation must occur at the t me of peak Instead of expecting people to turn eff*c:ent aophances current!y avadable Thirdly. we i

' have launched a consumer education program to ott the;r air-cona:t;oners on the hottest day of the year make our customers aware of the advantages these

! ese have ceve! opec a program tnat wci adow them to run their air-cona:t:eners but use less energy in the aphances offer over !ess energy-effic ent mode!s.

l j prccess You mentioned that Duke might control certain How is that possible?

customer electric devices during peak demand l periods. How would this figure into the goals j

Some of the e!ecinc:ty inat is recu; red for air-cond" of Load Management?

> ccnina and heanng in homes tnat are inadecuate!y In acc:t;on to havmg suff;clent generat1ng capabihty nsuiated - in fact as much as a th:rd in some cases -

to meet the peak demand for electnc:ty a power com-I :s actuady wasted T.nese inadecuate ievels of insu at,on pany must have a certain amount of generating reserves

! cause ecu:pment to work harder and use more e!ec-I incity That can e ecu.oment would use much :ess to Insure the renaomty of the system Without those

' reserves the breakdown of a ma;or generating unit enercy - and piace far iess demand on our generat.

at the t me of peak wouic' resu:t in a power shortage 1 ng 'acet;es - f homes were cetter insulated anc This essential margin between generat:ng capabihty l tetter ces:gned for the efficient use of energy and Deak demand can be provided in either one of How does the program work? two ways The conventional way is to have actual We have devetoped a set of standards for what we call generating capabihty ranging from 15 to 25 per cent an Energy Eff:c:ent Structure ' - or EES These abcve the expected peak demand The other way is standards recu:re far greater tevels cf :nsulaticn tnan to be able to automatically recuce the demand if

! reco: rec e Iner ov our own e'ectnc heatng rates or by necessary dunng the peak demand penod The advan-

ine state ounc:ng ccde A hcme cuanfy:rg as an Energy taae of the second method wh:ch may be incorporated E'f c ent Structure a so must have doub'e-parea glass in the Load Management program is that you could or surm windows nsu:ated cr storm doors. ano :n provice the recu; red reserve margin with less actua:

the case ci rea hcmes a omtt on g' ass of 12 per cent generatng capacAty and at fess cost of tre outs ce read area Our goa! :s to nave about How would you automatically reduce the de-15 000 romes ;n our serv:ce area meet!ng these mand for electricity during the peak demand gancarcs ov i960 anc abcut 220 000 by 1990 periods?

Are you offering a special rate to homes meet - Cne way wou4d te to nave :nterrupt.ble " ate agree-ing the EES standards? ments un scme of our targe !ncustnal cusicmers No Tne 4ncentve to ouEd an EES nome. or to uograce Uncer sucn an agreernent the Cor"cany would be

pemNiea to irierruar se< c,ce to cer'a n 'oads dur;ng of the DeaK and ine arnount ct ceneratng cacabaty tN pea demarc per.cas Trese Aou d oe rather size- reau rea to serse inat peak Th s _,9 resu:t in a grad-at:e icads out iney ncu:0 ce cf tne t/pe inat wou;d ualy :morov:ng .oad factor arten in the long run /d not mater,aMy af'ect the customers Cperat:cns Cunng benefit bctn customers and snareno;ders Ancther tre per,ca of .nterruot(on wa/ that snareno ders wrii benef t from Load Manage-Anctrer examo e of now the demand cou!d be reduced ment +s that .I wW recuce the eros;on of earnings nhlch nou'd be =nterruotron of service to certa:n nome normauy occurs between the t:me costs are incurred acosances The ;.ater heater :s an espec:aHy good and they are reccvered througn n:gher rates We re 22000 20000 yo*

16000 /

• • • • ,s*

e 16000 5 #

f *

{

2 14000 / e * * #p * **

• a e' 12000

• • • , /

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• a9 10000 '""

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. ., /

S W S W S W S W S W S WSW S W S W S WS WS WS WS 1977 78 79 80 81 82 83 84 85 86 87 88 89 1990 minummme Load forecast without Load Management uut - - Load forecast with Load Management cand date for th:S e:ement of Load Maiiagement since also hocefui that smauer and less frequent recuests for interruohon of service IO this aochance would imoose rate increases wd shorten ne I:me reQUWed in oro-htt'e or no inconven:ence on our customers in most cessina rate aconcabons cases the water inside the tank wou!d remain heated Mr. Booth, how long do you feel Load Manage-for the :ength of t:me that service wou!d be interrupted ment will be a viable marketing concept?

Of course th:s caoacity wou!d recu:re instamng elec-tron:c devices on the neaters or in the service panet When you ta'k about marketing strategy you have to ma! wou!d anow the Comoaay to control service to eeo m md mat any mamg p:an must te @sanec ne acciance The feas.tsty of octh trese actvt:es to re o the Corroany fu!fd its respons:bittes as a

.s cero stad:ed at ints t:me @ a'ec <' Downed busiress Those responsi-t it es ar+ Wde a renab:e source of electr'c:ty at it seems that in addition to reducing the growth in peak demand, certain elements of Load the lost c as o'e cost to custorrers and to earn a 5 :r and reascnatie return en its shareho cers invest-Management - especially EES and EEA - will r ,ents R grt now Ae can 'af:!! those respons, bit,es reduce the growth in kilowatthour sales. Won't cest cy restrain:rg the growin n "'e ceak cemand for this adversely affect earnings? gg;nc.ty And ;n v ew of what we know about the ccst No ve ccn t te: eve so A!!nough trere wm be sorre o+ 0: arts scredufed for service through the 1980 s recuct.on :n the grovah cf knowatthcur sa'es there wol Load Maragement s, A te a via0'e marke9ng concept ce a crccert.cnateiy greater recuct:cn in the growth for at ' east that 'ong anc orcoao!/ even teyond

ENERGY:

Confronting the issues Pernaos no issue

n recent years has s!:rrea cuch Because of tne tremencous amounts of investment puDiic and 'egrs,ative emotions as those assoc!ated cap tai reauired oy an e ecinc ut:hty tne cost or fs tain our nation s hfeblood -energy nanC:ng ts a major , tem reflected n Consumers efectric Ms That cost is detswea in part by a company s

! Energ/ nas teen thrust into tne soothgnt for the same financ:a! condton at the t:me secunt es are issued reasons that any commod ty or service occuo:es a _

h.gh c: ace on the value sca:emt has become scarce Cap:ta! costs are a virtuaHy permanent fixture in efec-1n reiahve terms 't has become expensive inc rates once they are incurred if a Company is It is nct surpnsing that electnC;ty. the crost versatue s at 4 com Wade d and es3ent;at of aM energy fcfms is at the Center of in:s "ceee3" s " ** costs"be**

Y "

crow:ng and multifaceteO issue its Cost and avadabity usuaJy a0 years !n the case of first mortgage conds nave cecome emcroded in controversy Issues acound are otten aggravating and comoouncing ancther We n We case d cme se There are two bas;c ways Inat the rmpact of 'inancing i l Chiet among its offenses against a captive customer /

pubhc :s a recent h: story of increasing rates Yet :n costs on e ecinc rates can be reduced One is to re-1 auce me ammnt of :nvestment capital recuired This I

some instances ccnsumer efforts to resut nigher rates tend to dove the cost of e!ecinc:tv even h:gher Can be done by reducing the growth in peak demand for e!ecincity and the required increase :n generat;ng At a t:rre when more raw energy is needed to meet capaouity to serve that peak A comprehensive olan me nat cn s growing demand for esctncdv f and to to accomphsh that oclective is outhned elsewhere reduce .ts decencence on 'creign energy sources in this Report an ava ancne of iegis:ative proposals wcuid restnct The second way to reduce the impact of f;nanC:ng me avalabWy and inf: ate the cost of our own energy resources costs on rates is fcr e! ectr c utst:es to rema n finan-c:aily hea: thy so that wnateser investment Cap:tal is

$tn wor'dwice reserves of oil and n atural gas ce:ng recu: red can be raised at the lowest poss:D/e cost cecteted faster inan new sources have been d:scoverea i some environmentai groups s;muttaneous!y oppose In the Duke Power serv:ce area state laws recu:re i ine oni/ two cract>cai a;ternatives for meet.ng future that recuests for rate increases be based on histonCal energy cemanas --ccai and uranrum coerat+ng data and oecisions on such requests are rendereo only af ter fengthi heanngs Van nseg Manc ccsts al ready imposing a very rea!

curcen on many Amencan farrhes environmental Wth ,nt:abcn cont =nu;ng betaeen the time higher restr c cns recu;re inat the consuming puchc te costs are incurred and rates can be adjusted to recover curdened stn toons of douars of add.tional costs them a utaty s financia! cond: tion eroces. forc:ng the nn:cn .n scme cases offer htt'e or no corroensat:ng cost of f.nanc:ng h;gner l environmenta: benef:ts to t"em The rate-making process mus! De d:rected toward i Whether you re a shareholder of an e!ectnc utthty or matching rates 'Mth current expenses Such matching cre of ,ts customers you have a stake <n the outcome wou:d nct only help electnc utlht:es attract the necessary l

of mese 'ssues Here is a summary of the major issues capita! for plant construction but wou!d reduce tre arc cur vews of 'vhat needs to be acne to rese

ve them cost of financ:ng anc the impact of financ:ng costs on afectnc rates

2. Electric Supply THE ISSUES utnouan ine ns,ng cost at erectocity nas 01 aced an  !

addea tnanc:af burden on aa consumers a greater i

1. Rates danger to the r econom;c we:1-te:ng :s the possibory A mougn an e ectnc utity shou!d ce reau rec to prove cf power shortages wh:ch cou 0 disruct the economy trat rate nc eases are necessary dec:s:ons en rate The future of tre nat:on s e ectnc suppiy aecends re uests on:cn ceny a utity tre reecea reseques to arge!y cn the ati ty of e!ectnc utiimes to f nance cen-i rse! .ts nstro ccsts may nave the etfect of caus:ng struct cn of new gererat:ng tacht:es ana on tre rates to go eve, n:grer avalaen.ty of raa teis for use ;n mese facit:es c

l

Even cons;dering energy conservation measures and sure protect;on cf tre environment much cf the the effects of our own Load Management program 'eg: station now .n effect or cenc:ng could ehmtnate the peak demand for electncity in the Duke Power mucn of the nabon s coa! reserves as avadac!e fue!

service area is exoected to grow at an annual rate of Of part:cu!ar concern ts the mynad of existing and about s:x per cent from 1977 through t990 That prcoosed regu!at ons and !eg:siation concerning _

gro Ath win recu:re s:gnificant amounts of new gen- sino-min:ng By recu:nng that mined land be eranno cacabikty y essent.aly restorea to its onginai contour and

.6 At ieast ha!f of the bvhons of dodars recu:reo to pro- ., by prohibit ng sing-min:ng on sicpes of more vide this ne.v capacW wd: nave to be raised thr0ugn W..h than 20 degrees such regufations wcu:d the sa:e of Duke Power secunt:es Both the cost and S k' Q m <e th:s veryimoortant method of minin f-avadacmty cf :nvestment capital are influenced to a ;frcm wn:cn Duke gets over 50 per cent of <ts great extent by a corrpany s financ:ai strength at the coai; mucn more costly Deep-m:ning aione tirre a cart;cular issue is offered for saie If a company cou d not orocuce the necessary coal for meet ng s nct earning a fair and reasonab;e return on the future electnc recuirements envestments cf ts current sharehoiders. the abihty to attract nemnvestments may be senous'y impaired Duke Fower has invested many mdhons of doHars in

3. Availability of Fuels air pollution control ecu:pment necessary to comply with the National Amoient Air Standards which. by in piann;ng for future e:ectnc recutrements an elec-definition. protect aca:nst any known or anticipated inc suppher must re!y on known and rehable fue!

adverse effects to soc ety in add: tion to these invest-sources ments. we have made large f:nancial commitments in Od arc natural gas ahicn comoined reoresent eniy mining propertiesin V:rginia. West Virginia and Kentucky abcut hve per cent of tne world s known energy re- to he!p assure a continuing supply of low-sulfur coal sources are already in short suopiy as a result of our for our boders heavy dependence upon these fueis Some experts We are Concerned. however. over Orcposed amend-predict that the world s <nown reserves of these two ments to the Federal C!ean A!r Act that wou!d prontbit fuels wd be exhausted by the end of this century Even any detencration in arr cuakty even if sucn cetenoration

,f research and exp;crat.on make add.tiona! suppDes resulted in no adverse effects to society Since the avauabie increas;ng amounts of od and natura! gas necessary technology for comphance is not avadab!e.

must be devoted to uses-sucn as petrochemica!s-these amencments would in effect. prevent the future for whtch there is no known substtute Since much construct:on of economica4y-sized coa l-burning piants.

of me country s cd is ;mocrted Octn the supp!y and They also wou!d p' ace an additional financial burden cost of !n s fuel are sub;ect to the whims cf foreign on our customers and cou!d pronibit the industnal and govemr-ents commerc:ai deve:coment which wou!d create neeced Certa.nly from the standpoint of energy a!!ocat:cn tt jobs for the most underdeveloped areas of cur country would not seem prudent to increase the amounts of these fueis used for e:ecinc generation since other b. Uranium mcre abundant domestc fue:s are avadab!e for such Since uran:um has virtuaily no commerC;a! apphcation ourocses and have kmited cther cract: cal uses other than eiectnc generaton this energy resource

a. h al can be devcted aimost entere!y to meet ng the grow:ng need for electnc;ty It is est! mated that uran:um deposits A;tncugn agenc'es vary :n the'r est: mates of coa! re- a! ready d:sccvered in this country alone - .at:sfy sert es t is teneved trat reserses cf this fue! are su!! c:er t tne naten s recuirements for nuc! ear fuel for at ' east sn this ccuntry a:cne to meet ertnc recu rements for 30 years at ' east a century at tre cro;ected ' eve! Of usage There The hfe span of nuctear fue! however cannot be are hcwever a numberof soc:a and econom:c factor 3 measured by the avadabihty of raw fue! a'cre The fast-

• h:cn must be reschea before the fud pctent,a! of .s breeder reactor wn:cn actuady produces mcre nuclear rescurce can ce reahzed fuel than it consumes coula extenc tne hfe scan of the A:inaugn reasonao:e rego atons are recuired to as- nuc' ear :ncustry oy 6teraMy hundreds of years 13

Energy continued T%re ye rc / e.,- r ccr"e m ss:ng orvs 'n tre nuc ear Wh' e:t ,s recessary to 00stu ate tre ns*s of ccmrnerc:a!

tue cec + Uncer puent requ!atcns nuc. ear ue: nuc: ear povcer raactcrs 'n over 300 reactor years of err crmert s rv ".ctec ic 'acm; es e/,ned anc oceratec aceratons inere nas not oeen a s,ng e nuc ear-re:ated by me 'edera gc ser vert Trose facmt es are not coury on v,n.cn to case actuai nsxs. the benef:ts of acecuate to arcuce tra vear tuei tra! M ce re- nuc: ear povier are coin tangne and creasurabe Cor .

au: rec n tne furs aneac Un ess tre government :ne in rg %c. ear Ocwer o acts re!o recuce cur sqre cantL /en:. <ces .ts o/.n enr crment caca- depencence on +creign energy scurces in 1976 't c'ty i m uta to tre nWon s future energy /<cu:c nase recu: red the use of over 23 000 000 barrels suco!y inat ne cnvate Ccr cecome:n- cf o to gererate the e ecir c output cf our oven Oconee so,-ec n tre er cnment process Sucn Nuc ear Staten That outcut a:so resudec .n a savings n sc! cert . au.c recu.re Cengrec 'o Duh e customers cf rn o' cns of donars ciacc?onai ora 3corcia: ccsts mat zou'd ba se teen >ncurred had Cconee been ces gned ta use cca nstead Ct nuc' ear 'Le-A,so m rc na "om tre nuc: ear fue cyc e are

'Ie necesSary 'dCh t es tor reproCesing scent C ear!/ IIese Cenet is Idr CLr/.e cn Ine VirIu3'!y non-

've' SvCn taCl ! es are recu red to 'ecover reus- eostent nsks at tts vta: enerQy ref ource 30 e tue' anc for solc 'ytng n:ch' eve! /Jastes ter amate storage Adrougn Congress has mace recroc- CONCLUSIONS estra a resocns Citi et tre pnvate sec or anc deso;te Mg punt jears et wcricMce reDrocess:no exDen. The erergy Orco em m1 not C:Saopear nor ?cd ;t so!ve ece nct a s ng e reprocesang 0 ant s current:y :tse f There are no easy ca:n'ess solutons cmed 'or operahon n this country The crespect o' aga n enjoying cneap. aoundant Once trese wastes ha$e been consertec .nto :nso:ucie energy s c:m The orcscect of atarneg even ade-Otasshke bioCks tney must ce permanentif :so,atea cuate energy at any once cepenas on our n:hngness from tre b:csonere This can ce accompusned through to ' ace the Das,c crootems and to solve them i storace in deep underground formations such as satt l What can De done?

comes shtch have been stab:e fcr mdhons of years )

anc are remote from ioca! /sater tabies For one thing ne must tace the reanty that th>s naton ,

wdl never ga!n energy independence whde restncting i A4 hough !ne techno,ogy 'or safe c:sposa! of high-teve! I rad.oactae wastes s prosen standards and regula, the avadatify ofits own energy resources There must ce an aggressae nat;onal energy pohCy to deveico f t.ons as wel as specic storage ocatons have yet to '

those dorreste resources which cualfy as pracsca!

te ces gnated by the federa government energy forms To be practCal an energy must be

4. Nuclear Power- 1 avauatie for targe-sca'e use Z cependab e its Risks and Benefits 13i compart:e uth the environment N) safe and J5 econornca! Right now there are only two energy There are nsks assoc:ated wah nuc! ear power pl ants.

sources that can cuahfy-coa! and uranium just as inere are r,sks assoc:ated witn any incustnal cevfcoment Those nsks however are extremely We must acce'erate our search fcr new energy sources

cw arc must be we gned aga:nst the atom s current But that searcn shou!d not be based en the f antasy anc potent.a' teneMs to mank:nd tnat some technolog: cal mirac'e wcl bal us out of cur energy prob: errs overnight The ceve coment of such A trreegear 'eceracy aunced stud < cy a team !ed by potental energy scurces as so!ar and gecthermal Or Norman Pasmussen of the Massacnusetts insttute M 'ake ' n'e Whde Duke and cther utibt:es are soon-of Techno: cay snows that an indsdual s chances cf sonng researcn :nto inese pctential energy sources te ng tataly njurec by a nuC! ear acc' dent is about one current cec:s:Ons r"ust be based on known and reBao!e

,n f se N.cn years i hat nsk :s Duncrecs at times .ess erergy sources inan the r:sk from esen the most remote naturF event sucn as a !crnado or nurncane anc trusarcs cf We must acceCI tre econcrn:c facts of life So ! cog as tres .ess than the nsks a ready accected from sucn :nfrat:On Contnues in the nationa! economy tre cost of man-causec esents as a:r and auto travel dam fab al forms cf erergy J contnue to go up Although vres arc ext:cs ors h:gner eiecinc rates place acced burden on ccnsumers

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the best interest of consumers is not served by puni-tive leg'c'ation and regulation which deny suppliers FinancialRepOff the opportunity to recover legitimate operating costs The financial statements should be the most and to achieve a level of earnings that will enable the reveakng part of the Annual Report to Companies to assure Continu:ty of electnc supply Shareholders Theyshowtheresuitsof lust We should not expect to have energy production with. about everything that affected the Com- -

out some environmentalimpact And we should not pany s financial coerations dunng the year

expect to create jobs for people unless we produce The prob!em with financ

al statements is i more energy State and national energy pohc:es must that not everyone can understand them.

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be directed toward sinking a balance between the need Unless you re an accountant. or have some l for environmental protection and our society's need understanding of account:ng. you may view j for more energy the statements as an agon: zing exerc:se in C:early we must manage our energy use better Adop. corporate anthmetic l

I:cn of significant conservation practices such as more Actually. the financ:a! statements appear effic:ent equipment and better thermalinsulation cou!d more comphcated than they really are. The produce significant energy savings without degrading tnck is knowing wnat the statements are our hfe style Among the naticn s electnc utthries. Duke supposed to show. and being able to get Power has been a feader in promoting energy conser- from one kne to the next without tnpoing Vdflon We were Ine first major uhlity to establish over a " deferred this ' or a " depreciated insutation standards as part of our rates design We that."

have now embarked upon a dynamic new Load To help our shareholders better interpret Management program to conserve the nation s energy their Company s performancein 1976.

1 resources and the energy dollars of our customers we ve done something specialin the Today our nation wants desperate!y to take the next financ:al section of this year s Report.

, step toward ennching its future It is a step which rests Alongside each statement is a bnef discus-squarely on the cont:nued availabikty of energy to pro- sion of what the statement does and what vide jobs for our growing population. and to improve some of the more significant items represent.

the standard of hving of todays Amencans.

The purpose of this exercise is not to give i technical definitions of the statements and their ma;or items. but rather to exclain. in poneral terms. what the stater ents show.

'Ne hope this effort will help take some of -

the mystery out of this important part of l

your 1976 Annual Report.

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i Statement of income Duke Power Company rear Enced Decemoer 31

wars ,e reusands; 1976 1975' l ELECTRIC REVENUES (Notes 2 and 3) 51.108.358 5930.384 i ELECTRIC EXPENSES Operation Fuel used in electnc generation $399.770 $338.024 Net interchange and purchased power (cred:t) (28 815) (11.588)

Wages. benefits and matenals 118.834 105.890 ,

Ma

ntenance of plant fac:lities 45.369 40.968 Depreciation (Note 1) 110.644 100.995 ,

Taxes (Notes 1 and 7)

General 85.215 75.757 Federalincome 25.927 36.361 State income 10.978 5.379

' Deferred income. net 55.624 51.208 investment tax credits '

Deferred 53.372 -

] Amortization of deferments (creoit) r 19771 r406) j Total electnc expenses 874 941 742.588 Electnc operating income 233.417 187.796 j OTHER INCOME (Note 1) j Allowance for funds used dunng construction 61.725 54.794

Earnings of subsidianes from operations. net 4.582 197

Other. net (deduction) 265 (1.666) 22 963 21 789 income tax - credit (Note 7)

Total otherincome 89 535 75 114 Income before interest deduct:ons 322.952 262.910

INTEREST DEDUCTIONS Interest on long term debt 143.899 134.431 Other interest 4.502 10.478 Amortization of debt discount, premium and expense 850 858 i Totalinterest deductions 149 251 145.767 NET INCOME 173.701 117.143

< Dividends on preference and preferred stocks 34 990 34 344 EARNINGS FOR COMMON STOCK S 138 711 5 82 799 i COMMON STOCK DATA Average shares outstanoing (thousands) 57.767 51.020 Earnings per share $2.40 $1.62 i

Dividends per share $1.525 51.40

• Restarm-See Note 2 e

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eS F%',.(d3T7dt S.'JteTeTS.

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Statement of Source of Funds for Plant Construction Costs Generally. money used for plant construction comes from two sources-the Company s own operat:ons. and f:nancing One way that cash can be generated from operations is by retaining a port:on of the common shareholders' earn:ngs. I n addition.

certain items. such as creareciation and de- -

terredincome taxes are shown as expenses on the STATEMENT OFINCOME. but do not currently require cash payment Reve-nues collected to offset these non-cash expenses also can be used for plant construction .

The rest of the money required for plant construction is raised through the sale of vanous secunties scan as common. pre-ferred and preference stocks, and first mortgage bonds e

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i Statement oflocome 1

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l This statement summanzes the Company's

! financial operations dunng the year. Simply stated, it shows the Company's ravenues, its expenses and the amount lef t for the Company's owners-its sharebalders.

About half the cost of doing btsiness in 1976 was represented by Fuelusedin electnc generation and Totalinterest de- -

ductions. The latter is interest costs on money the Company has borrowed, pri-manly through the sale of long-term debt secunties, to help finance power plants and other facilities. These interest costs are part:cularly large for an electnc utility be-l l causeof thetremendousamountsof money recuired for plant construction.

An electnc utihty also must seH significant amounts of preference and preferred stocks. ,

While Dividends on preference andpre-

/erredstocks is not considered an operating expense, this item represents the cost of essential finar'cing and must be dedur before a utihty's earnings for common shareholders are known.

EARNINGS FOR COMMON STCCKis the amount left for the common shareholder after all expenses. including costs assoc -

ated with all other types of financing, have been paid. This amount is divided by the l

i average number of snares outstanding dur-l ing the year to determine Eamings pershare l of common stock. The portion of Earnings per share that is actua!Iy paid to the com-i mon shareholder is called the Otvidend l pershare. The unpaid portion is reinvested I in the business.

6

Statement cf Sourca of Funds For Plant Construction Costs Duke Power Company vear Enced Decem0er 31 (conars in inousancs) 1976 1975*

FUNDS FROM OPERATIONS Net income $ 173.701 5117.143 Non-fund items Depreciation and amortization 118 646 110.327 Deferred income taxes, net 55 624 51.208 Investment tax credits. net 51.395 (406)

Less common equity component of the allowance for funds used during construction (29.702) (25.331)

Other, net r1259) 4 073 Funds from operations $368.405 $257.014 Dividends paid on common stock (87.833) (70.949)

Dividends paid on preference and preferred stocks (34 990) (34 075)

Funds retained in the business 245.582 151.990 FUNDS FROM FINANCING - NET PROCEEDS First mortgage bonds 118.329 203.632 Pollution control obligations 2.364 -

Common stock 97.429 75.188 Preferred stock -

57.450 Sale and safe / lease-back transactions 17.443 61.429 Decrease in current notes payable (59.043) (57.049)

Retirement of long-term debt (30 9_.28) (87 225)

Funds from financing 145 584 253 425 Total available funds 391.166 405.415 DECREASE (INCREASE) IN WORKING CAPITAL. ETC.

Matenals and supplies 11.943 (44.670)

Investment in and advances to subsidianes 13.414 (5.183)

Other current assets (10.136) 26.248 Other current fiabilities 23.874 19.134 Other, net 15 285 12.677 Decrease (increase) in working capital etc. 54 380 8 206 Plant construction expenditures 445.546 413.621 Common equity component of the a!!owance for funds used dunng construction 29 702 25 331 PLANT CONSTRUCTION COSTS $475 248 5438 952

• Restated- Sw Note 2 l

Sea notes :o nnanc:a! statements 17

- Balance Sheet l

Assets owe = 32 1975*

co.:ars <n tnousancs) 1976 I

ELECTRIC PLANT (At onginal cost-Notes 1 and 5)

]' Electnc plantin service 53.576.654 S3.427.933 Less accumulated depreciation j and amortization 939 962 826 627 Electric plant in service. net 2.636,692 2,601.306

, Constructon work in progress 1 083.716 765.113 Total electnc plant. net $3.720.408 53,366.419 ,

OTHER PROPERTY ANDINVESTMENTS 4 Other property-at Cost (less accumulated l

deprec:ation: 1976 - 54.109.1975 - $3.748) 22.643 22.024 ,

1 investments in and advances to subsidianes (Note 1) 36.354 45.071 Otherinvestments-at cost or less 8 814 8 840 Total other property and investments 67.811 75.935 l

CURRENT ASSETS Cash (Note 8) 21.176 21.288 Receivabtes (less allowance for !csses:

1976 - S2.369.1975 - $2.394) 83.017 79.897 j Fuel c!ause revenues accrued (Notes 2 and 3) 10.832 3.704 Matenals and supplies - at average cost Coal 89.752 101.078 '

i Other 49 201 49 818 Total current assets 253.978 255.785 CEFERRED DEBITS ,

Debt expense. being amort:2'd over terms of related debt 11.931 11.651 Other 4 516 13.069 Total deferred deoits 16 447 24 720 TOTAL ASSETS S4 058.644 S3.722 859

• Re:tated-See Note ?

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See nctes to t:ranc:a statements i

!8 I. - - , .-. - - . .. - -._ . _ . . , ._. . , , . . . . - . . . - - , _ , _ . . . . , . , . . . _ - . _ _

Balance Sheet This statement is an inventory of what the common. preferred and preference stocks).

Company owned. and wnat it owed. on the and by purcnasers of vanous long-term last day of the year. debt secunties such as first mortgage bonds. L/AB/L/T/ES are other *ypes of debt There are two sides to a balance sheet One ,

owed by the Company sica hsts the Company s ASSETS. the other This financ:al statement is called a BAL-side ksts its CAP /TAL/ZATlON and ANCE SHEET because the totals of the two LIAB/L/T/ES sides always equal. or balance One side -

Genera:ly ASSETS are anything of value shows the total cost of the Company s the Company owns CAP /TAL/ZAT/ONis -

• assets: the other s;de shows the total invest-the amount of money inat has been invested ments and debts required to obta:n those in the Comoany by its owners (hotders of assets.

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Capitalization and Liabilities Assets The largest item on this side of the BAL- The largest asset of an electnc utility is its ANCE SHEET is Tota / capitalization. This is ,

electrs piant-the generating stations, pow-the total amount of money invested in the er lines. substations and other facilities Company by its common, preferred and involved in providing electnc service. The preference shareholders, as well as money . net cost of these facilities is their total ori-raised through the sale of long-term debt ginal cost. less the amount the facilities have secunties such as first mortgage bonds. been depreciated since they were placed in service. Although the cost of building a Current Liabdeties are debts which must be paid within one year. In addition to Accounts facility is incurred dunrg the construction period, this cost is recovered through reve-payable (bills from creditors which have not been paid) theseliabilitiesinclude both nues dunng the number of years the facility is in service. This means of spreading the taxes and interest costs which have been incurred but not yet paid. cost of a facility over its expected lifetime is called deoreciation.

Also shown are Accumulated Deferredin-come Taxes and deferred Investment tax Also shown as an asset is Construction credits. Essentially, deferred income taxes work in progress. This consists of gen-are taxes which have been incurred but for erating plants and other facilities that are which payment has been postponed until under construction but not yet in service.

future years. Deferred investment tax credits Other assets include vanous properties are deductions from federal income taxes owned by the Company but not actually based on the amount of qualifying new in- e e used in providing electnc service, invest-vestments in facilities. These credits are ments in subsidianes and other companies, recognized asincomeoverthelifeof the cash, money that is owed the Company by related facilities. Both these incentives are . .

its customers and debtors, and materials authorized by Congress to encourage ex- and supplies (mainly fuel) that are in pansion byindustry. inventory.

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Duke Power Company Capitalization and Liabilities cecemoer 31 coonarsin enousanas) 1976 1975' CAPITALIZATION (See Statement of Capitalization)

Common stock equity $1.163.942 . $1.015.637 Preference and preferred stocks 455.000 455.000 Long-term debt 1 892 505 1 827.562 Total capitalization $3,511.447 53.298.199

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CURRENT LIABILITIES Accounts payable 87.C65 70.731 Interest accrued 44.399 41.600 Taxes accrued 21.784 14.275 Other 8 276 10 735 Total 161.524 137.341 Notes payable for construction-pending permanent financing (Note 8) 26.000 85.043 Current matunties of long-term debt 76 990 30 649 Total current liabilities 264.514 253.033

- ACCUMULATED DEFERRED INCOME TAXES 7

(Note 1) 208.317 150.880 I

DEFERRED CREDITS Investment tax credits (Note 1) 52.705 2.390 Other 21 661 18 357 Total deferred credits 74 366 20,747 COMMirMENTS(Notes 6 and 9)

TOTAL CAPITALIZATION AND LIABILITIES $4 058 644 53 722.859

• Restated- See Note 2 i  !

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e See nctes to bnancial statements i 19 I

Statement of Capitalization Duke Power Company oecemcer 31 Jayars in moeanos; 1976 1975*

COMMON STOCK EOUlTY(Note 4)

Common stock. no par. authonzed 70.000.000 shares.

59.179.502 and 53.521.268 shares outstanding for 1976 and 1975. respectively $1.002.332 $ 901.116 Retained eamings 161 610 114 521 Total common stock equity 1 163 942 1,015 637 Percent of capitalization 33.1% 30 8% -

PREFERENCE AND PREFERRED STOCKS (Note 4) .

Shares Rate /Senes Outstandino Preference stock. 5100 par.

authonzea 1.500.000 shares Convertible 6M% AA 500 000 50.000 50.C00 Preferred stock. 5100 par.

authonzed 5.000 000 shares 4.50% C 350.000 35.000 35.000 5.72% D 350.000 35.000 35.000 6.72% E 350.000 35.000 35.000 8.70% F 600.000 60.000 60.000 8 20% G 600.000 60.000 60.000 7.80% H 600.000 60.000 60.000 7.35% 1 600.000 60.000 60.000 Preferred stock A. S25 par.

autnonzed 10.000 000 shares 10.76%.1975 2.400.000 60 000 60.000 .

Total preference and preferred stocks 455 000 455 000 Percent of capitahzation 13 0% 13 8%

LONG-TERM DEBT (Note 5)

Rate Due First and refunding mortgage bonds 2.65%-11% 1977-2006 1.700.000 1.580.750 Sinking fund debentures 44% 1982 30.000 30.000 Term notes 6M%-7% 1976-1978 87.950 98.000 13% 1979 100.000 100.000 Floating Prime 1976 -

18.500 Poilution control obligations Floating Pnme 1983 2.420 -

Turbine generator leases (Note 6) 19.081 15.853 Caoitahzed leases 29.132 13.610 Unamortized debt discount and premium. net 912 1.498 Current matunt;es of long-term debt (76 990) (30 649)

Totallong term debt 1 892 505 1 827 562 Percent of capitalization 53.9% 55.4%

TOTAL CAPITALIZATION S3 511 447 $3 298199 ,

l ' Pes:atec-See No:e 2 I

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Swc:es to tmanc:ai statemen:s 20

t Statement of Capitalization '

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l I Over the years. more than S3.5 bilhon has I been invested in Duke Power to finance j

generating plants and cther facil: ties. This statement summarizes the sources of those investments.

1 COMMONSTOCK EQUITYis theinvest-ments that have been made in the Company' ~

i by its owners-the common shareholders.

4 Totalcommon stock eGulty includes not i

only the amount of money that has been raised through the sale of common stock.

but also the earnings of common share-

. holders that have been reinvested in the Company over the years..

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, Holders of PREFERENCEAND PREFER.

! RED S TOCKS also are considered owners

' of the Company. They have preferential rights to the payment of dividends, but ordinanly do not have voting rights in

' matters affecting the Company. Unlike the dividend rate on common stock. which may

! fluctuate with the Comoany's financial per-3 formance, dividend rates on preference and l

preferred stocks are fixed at the time partic-

! ularissues are sold.

LONG-TERM DEBTts a form of borrowing.

I The primary source of debt financing is First and refunding mangage bonds. As the nameimplies these bonds are secured by a t

mortgage on substantially all of the Com-pany's electnc properties. Both the interest rate and the date these " loans" must be i repaid are determined at the time the seOu-

+ rities are sold. Interest on debt secunties i must be paid before any dividends can be 4 paid on preference, preferred cr common l stock.

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Statement of RetainedEarnings As discussed under STATEMENT OFIN-COME. not a!! of the common shareholders' earnings is actually paid in dividends. A portion usually is retained for reinvestment in the business This statement shows the amount oi earnings that has been reinvested in the Company over the years of its opera-tions. and how that amount was affected _

by the Company's operations during the reporting year. .

Auditors' Opinion The financial statements are examined by an independent auditing firm. The purposes of this examination are to assure share-holders and other interested parties that, in -

the auditors' opinion, the statements fairly reflect tne Company's operations for the year and its financial position at year-end. that the statements were prepared in accordance l

I with generally accepted accounting princi-ples, and that the accounting pririciples used for the reporting year were the same as those used for preceding years.

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Statement of Retained Earnings Duke Power Company

<er Eccea cecemce u e:.ws .n moucs! 1976 1975 BALANCE-Beginning of year (as previously reported) 5125.6:3 $109 037 Pnor penod adjustment of fuel clause revenues recorded in 1975. net of taxes (Note 2) i11 092) -

BALANCE-Beginning of year (as restated) 114 521 109.037 ADD-Net income 173 701 117 143 -

Tctal S288 222 S226.180 DEDUCT Cash dividends Common stock 87 833 70.949 Preference and preferred stocks 34 990 34.344 Cap:tal stock expense 3 789 6 366 Total deductions 126 612 111.659 BALANCE-End of year S161 610 S114 521 Tw=es ic tww strements Auditors' Opinion HASKINS & SELLS Certified Pubhc Accountants Duke Power Company.

We have examined the balance sheet and the statement of capitahzation of Duke Power Company as of December 31.1976 and 1975 and the related statements of income retained earnings, and source of funds for plant construction costs for the years then ended Our examination was made in accordance with gen-erally accepted aud: ting standards and. accordingly. included such tests of the accounting records and such other audit;ng procedures as we considered necessary in the circumstances.

In our opinion the above mentioned financ:al statements present fairly the financial position of the Company at December 31.1976 and 1975 and the results of its operations and the source of its funds for plant con-struction Costs for the years then ended. in conformity with generally accepted accounting pnnciples applied on a consistent basis.

Charlotte. North Carolina j

February 17.1977 y I- c'

• 21

Notes to Financial Statements Duke Power Company

1. Summary of Significant Accounting Policies A Acr2t'ons to Electoc Flant The Company caottanzes a!! Income The income tax-creo>t c! ass.f;ed under Other eerstructon reiated c. rect laccr anc matenals as weil as Income resu!!s pnnc' pay from tax deductions fer interest re atea ind rect construction costs inc:ud.ng general engi- costs relat,ng to investments in non-utikty properties. mainly neonng taxes and the cost of money (anonance for funds construct:en work:n progress used dunng construct:on) The cost of repairs and replace- The Company has provided deferred income taxes under ments representing :ess than a unit of property is charged to normahzation account:ng for differences ;n book and tax e ectnc excenses the cost of renewa:s and betterments of depreciation ansing ' rom the use of acce;erated tax deprecia-un ts of crocerty is cap.tahzed The ongrnal cost of property tron on substant:a!? all e'ectric plant in 1975 the Company retired togetner with removal costs less salvage. is charged expanded its nor nakzation to include capitahzed taxes.

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to accumulated deprec:at:cn employee oenehti etc currently deducted for income tax Mowance for Funds Usea Dunng Construct en tADC)is an purpcses as aHowed cy regu!atory authonties The effect of account;ng procedure whereby the net compostte :nterest the change on the financ:al statements was not matenal.

anc ecu'ty costs of cap;tal funds used to hnance construc- Investment tax cred:ts are be!ng deferred and amortized over t cn are transferred from the statement of income to tre decreciable hves of the refa!ed properties The investment construct:on wc2 n progress in tne balance sheet and. tax cred.t deferral of $53 372 000 in 1976 represents the accord'ngN are capitanzed in the same manner as construc- utMatron of investment tax cred:ts generated Onor to Son lacor and matenal costs Th:s item is reccgnized as a January 1.1976 acphed in contcrm:ty with the Tax Reform cost of E ectnc P! ant witn an offsetting cred.t to C er Act of 1976 At Decemoer 31.1976. unused investment tax f ncor e because. under estachshed regulatory rate grac- credtts amountng to accroximately $30.000.000 were t.ces a utihty is permitted to include a fair retum on and the avadable for use througn 1983.

rocovery of these cao:tal costs through the4r inclusion in the rate base and in the provision for deprectanon ADC has E Retirement Plan Costs The Company has a non-contnb-Seen calculated us:ng an 8% rate net of aophcab!e income utory retirement plan for the benefit of its employees. The taxes for t976 and 1975 Company s pohcy is to fund cension costs accrued. which amounted to $11.788.000 rn 1976 and $6.493.000 m 1975.

B Deorec: anon and Amornzation Provis;cns for deprecia- -

t:cn are recorded using the straight-kne method Theyear-end The plan was amended effective September 1.1975. to comoosite average rate was 3 26% for 1976 and 1975 provide for increased survivor benefits. early retirement Provis:ons for amortizat.on of nuclear fuel wh:ch are in. benefits without penalty at age 62 with 10 years service. and ciuded in Fuel used in e!ectnc generationJ are recorded to comply with the Employee Petrement income Secunty using the unit of produchon method Act of 19741 pnncipally by perm.tting employee participa-tion at an earher age and vest:ng rights with less service C Socscanes TheCompanyaccountsforinvestmentsin in addition the assumed earnings rate was increased from its suosid: anes by the ecuity method See Subs:ctanes ' on 4M% to 51 and the penod of funding was increased from 10 page 32 to 20 years. These changes increased the approximate total D fncome Taxes TheCompanyanditssubsidianeshiea unfunded prior service costs of the plan from S3 600.000 to censohdated federal income tax return income taxes are S19.600.000.

adocated to each company based on its taxab!e income or The actuanally computed va!ue of vested benefits under the ess plan exceeded the assets of the plan by $11.049.000 as of The Comcany's income taxes are aUocated to e!ectnc operat- the date of the latest avadable actuarial report.

ing expense and to non-eleCtnC operations under "Other

2. Restatement of Financial Statements - Fuel Clause Revenues The Supreme Court of North Carohna on January 31.1977. agreement with tne Comoany s wholesale customers. a rendered a judgement dec!anng that an order of the North similar refund wdl be recuired to be made to such customers.

Caronna Uttht'es Commiss:on of August 27.1975, autho- The Company, however. intends to petition the North Caro-nrng the Company to impose a temporary fuel adjustment kna Supreme Court for a reheanng and reconsideration of surcnarge to its North Carchna retail rates was in excess of this matter the Commission s authonty The Court remanded the case The f:nanc:at statements for the year 1975 have been re-for entry of an order by the Commiss;on c; rect:ng refund of stated to reflect the Court Order by a reduction in Electnc amounts codected from the Company s customers pursuant Revenues of $24 030.000. " Net income" of S11.092.000.

to such surcharge Under the terms of a rate settiement and Earnings per common share'of 50.22 2:

3. Rate Matters Rate .ncreases granted s.nce January 1 1975 un.ch are :nc!uded in E ectnc Resenues in the accompanying Statement cf !ncorre are summarized below Accrca mate Pe.enue increnes Per Ce t W ars nt % s v as Re<e%e E"ect .e R re Mea ; e mcm re Cra $U6 1975 NCRetar 236 Cr.tc,cer 3 1375 5 18 000 !47 620 5t Aet 3,* 22 3 Jdr udry 13 '976 40 000 21200

, rc, eu e. 22 0 Aucast 17 0 76 21 000 'n ac0

$ 1a1 MO E9 400 ,

'vaes rte ra reserue rcra tes Of 3ccrow a'e , 20% ared rto e"e:r ,n ma '975 The Company has procedures in a i tnree of its regulatory v.ho:esaie and North Caronna retad rate schedu!es While the jur<sd.citons to adjust rates for fluctuations :n fuel expense Corrpany has in the past accrued revenues under such The procedures entad 60 to CO-day Iags from the date fuel procedures in antictoation of recovenng fuel excense in excense changes occur untd they are ret'ected in Odis to excess cf that in base rates in alll unsd:ctions. such ac-custerrers Tctal revenues under sucn procedures amounted crua!s were d:scontinued for Ncrth Carchna reta+1 revenues o 357 800 000 for 1976 and $132.500 000 fcr 1975 The effective September 1.1975 upon a change in app.icabie eecrease :n fuel ciause revenues in 1976 ref!ects an adjust- North Carcana regulat:cn and for who'esate revenues in n ent ncreas.ng the level of fuel expense <n base rates for Conjunction with an August 1976 sett'errent agreement (See Note 2)

4. Capital Stock in 1976 5 658 234 shares of common stock wereissued for The outstanding Preference Stock. 6h?6 Convert b!e Senes a consideration of $101218.000 In 1975 5 685 209 shares AA is convertible into shares of common stock at the of ccmmon stock were issued for a consideration of adjusted conversion once of $25 56 per share each share

$79 003 000 and 2 400 000 shares of 10 76?6 Preferred of such preference stock bctng taken at $ 100 for such Stock A 1975 Senes wereissued for 360 000 000 purpose The conversion once is subject to certain adjust-In 1976 the Company s shamiolders authonzed the imple. ments des.gned to prctect the conversion privilege against mentatton of an Emoioyees Stock Ownersn'p P!an and ddution autncnzed the reservation of 300 000 snares of the Com- The can provis;ons for the outstand.ng preference and pany s common stock for issuance under such plan The preferred capita! stocks specify vancus redemption onces plan is being funded by an adaitional 1"6 investment tax not exceeding 111% of par va!Les plus accumulated cred t effectiveJanuary 1 1975 as provided under the Tax dividends to the redemption date Peduct;cn Actcf 1975 None of the Cor pany s reta:ned earnings at December 31.

At Decemter 31 19~6 certain shares of common stock 1976 or 1975 w2s restncted with respect to the declaration were reserved for ssuance as foHows: or payment of dividends.

Shves ir.ers on cf P'ete'ence Stoca 1 356 ?82 Dr. Pucmse $*ngs Praram for Emo!cyees 480 723 0 . cer1 Re .estment ed Stock Purchase P'an 4C6 372 Empe ees r Stoca Carerse c P4n 240 '36

• .; ty 3 093 413 23

5. Long-Term Debt rst ard ro+una.ng rrortgage bonas outstand:ng at Decemoer 31 1976 and 1975 e.ere as foliows (doi!ars .n thousancs1

.m aw v .. 3, . an

., w of 4 m 'c5 Cm ' '

• a 7' I40 000 540 :en ae

000 100 ao '

co cc0

.- j' # 3 0. u

. 40 000 -

01

• Cn J D0 '00 000

., '8t 35 X0 35 u01 7VB 2C0 40 00] 43 000

'fa .2 319c0 ME% b ZM2 ' 00 C O ') t 00 000

. y: v rf,0 s ja 418 210 75 000 75 000 4 8 .K 3 ) OW %00 ', 193 1PC OGn 'OC000 '

. .. 40 ;0 .; , d. B C JJ 20 r,00 'CO GC0

..' 75 X) ,

. W E4 'C0C00 '00 000

.g 5,3, - a .cs 00 cc0 00Oc0

~5 m ';5 CO 05 750

.. 533 'jf4

.. ';cy -: ,co :o var ^' _

. 75 0 c - to . ' n a nN.=

t m '50 Sucstant.a411 e'ecinc p: art zas mcrtgaged at Decernter onnc pai Dayr"ents;inrough 1981 are $76 990 000 :n 1977 21 1976 The annuai arrounts cf 'crg-term dect maturit.es 570 309 000:n 1978 5150 330 000in 1979 310 353 0C0

ncud:ng s;neng 'urd recu:rements and capitaazed ! ease in 1980 and 345 379 J00 :n 1981

6. Leases Pentats incurred in 1976 and 1975 and renta! commitments at December 31 1976 under all non-cancelabie ! eases suostant.aly a1 non-cacitahzed f.nancing eases as defined by the Secur t es and Exchange Commission) were as fol!ows ccuars in tnousancs -

c m tercn CeW %cer T - w. E a w. rw c + nr im y

< a ; r f rea 503 5:'

'5 i da- 2 475 53 ada 533 063

'c

" 533

. 2 525 2 ^ 3 ?O 3 732 37 543

< ', c :~ 'v t

.-- 5 5 ..  ; r3 Mr5 34 " 3?$64

'- 9 53' 307' 3 Od' 2 73. :3075

+- + 8 5 4t 3 '75  : t38 '3 104 3 5 }' 3 >;2 ' 925 t 3 7'8

53' 3 47' i 476 13 537 M; ~ a ' ' A' f2J 2 633 63'34 a- 'a c. -

!25 '4205 y .. _

sy-  ; 5 59 1arv 33 943 .

33 343 Amounts :n 1976 and 1975 include 534 629 000 and sat:sfy the obhgations of tne leases. net of sa!vage. at the 534 593 000 respective!y crarged to operat:ng expenses end of theestimated usefulhfeof thegenerators Suchleases Sotstart:any ad ' eases reau re the Company to pay taxes contain cpt.cns to purchase ceginning in 1981 at the !essors and coerat.cn and maintenance exoenses Penta's incurred unrecovered cost Pentais under nuclear fuelleases are anc renim comm.tments urcer ccmcust:en turbine gerera- based on usage Cther feases generaHy contain octions to ter ' eases inc!ude accrua:s in excess of current payments purchase at the lessors unrecovered cost or fatr market n amounts reau,rea to ecuahze annua! rent expense and va;ue

7. Income Tax Expense In Grre tax erDer$e :s comorised of !ne folowng corTDGnents CC drs n Tov 5anCs, 1976 1975 T u expense accccat'e to e ectr c opera! ons Odera' 525 927 536 261 S'a:e 10 075 5379 5 36 905 Sai 74U Ta( cred t acc icac.e to ciner 'ncome Federa! 20 268; '19 232.

$? ate [2695' 2 557' -

~22 ?6? 21 789' InCCrre taxes Cur rer't'y cayat'e 13 942* 19 951*

DeterrGd tases net t,r";ng d "erences' Excess tax over cces cepreC:at on 41443 42 756 PeCa r alo Aance and Cost Of remova! 4 699 4 091 Ca0 tanzed faxes emo:ciee Ceref:ts etc 9 482 4 361 55 624 51 208 In sesiment tax crec.t Ce* erred 53 372 -

Ar"ortizat.Cn Gf Ce'erments Cred,t.: 1 377 - 4C6' 51 395 ~ 4C61 TGial recorded income tax expense 15120 061 570 753

• Fcr Ccnschaateo incorre tax return curposes only a minimum amourt of nccme ! axes is payaDt6 Cue to ut>itzat:Cn of tax l css i

and investrrent tax Cred:t Carryovers of tne parent and Certa:n sues dianes Deterred taxes net arctode state income taxes of 56 4C6 COO for 1976 and 55 Si 1000 fcr 1975 Income taxes C;ffer frCm amounts CCmputed by appjying the statutory tax rate to prelax :nCCme as follcws iCOHars in Incusandsi 1976 1975 Income ta xes Cn pretax inCCme at !ne statutory federal ra!e of 48% S141 438 5 90 190 AC,ustments to above at 46%

A"owance for funds used dJnng Construction (29 622) (26 3011 Pens;ons and taxes cacita:: zed on tocks -

(2 797)

Amortizat.cn of investment tax crea:t deferra!s (1 977) (406)

Amortizat.on of nuc' ear fuel book tax casts differences (pnncioa!!y ADC) 1568 1 845 O!neritems net 1.922 3 889 Stateincome taxes netof feceral:ncometax benefit 7 638 4333 Fecorded income tax ex pense (see ados e ! S120 961 5 70 753

s

8. Short-Term Borrowing Tre Compan/ nas ces of cred t /,tr 7e comrrerc:a! tarts At Decemcer J ' '976 ara Cecemocr 31 1975 cc uses trese nres ca.s tre sa:e of commerc a pacer ic 5"J5177 TO md i

• n

• M 000 c' ne Ccmcang s tank

+ nance as currert casn reca rerrents Barr ' cans are tcr res cf crec rea; red ccmcensat rg ca'acces of accrow M da/s or ess masy :t9 5 8 000 anc 5?8 920 GC0 respeche;y Tre remang Dres ct cred t :cr:nc pany ncn-cady deposacry At Decemcer 31 1976 Nctes payat e for construct.on t

accourts are on a %e cas:s ca cu*ated .n genera, to ecuate i conuted cf 5^6 000 000 cf canx l cans at 6% At ic tre cost of ca'acces Borroungs are pnnc:pa !y at the Cecemter 31 1975 Nctes cafacle tcr construcron con-

rec a li2 000 OCO cf oark oans at ;rterest rates rang ng ec ng caos ccmmecai prime nterest rate verta.n cf

' rom ' 250n to 8 225" E21600 000 cf commerc;a' caper tre Comoan/ s cans ire arrangements may recuire addr 1

at r ces o' 5 E to 6V arc i! ' 243 000 ct peltut:en con. tera. ca ances ec a t

• O ct tne borroungs on an annual -

tec, rend antecat'on ccies at 6', , matunrg on TJarcn 10 away v,;

i A .umma9 cf .n+crma!.cn re at.nq to snort-term corro/..nq :s as fc"o/.s :dolars .n trcusarcs 1976 1975 A mou-t c uranc;ng 3 26 000 3 85 043 hmum amcunt outstand:rg dunng the year 3102 043 5214 813 A erage amount cutstana:ng dunng the year 3 44 984 3 87.791 a res of crea i at /ea end 3252 677 $246 698

/,arsa am age r interest ra':u-year-enc 4

Barx nctes pa/at'e 6 25% 7 79%

Commerc:a' caper -

5.90%

'/,e antec amrage rterest raw for the year -computed on a dady basis 6 20% 7 60%

9. Commitments Tre Ccmoany is engaged cn a long range construction estmated at 319 tnhon for the construct:cn program and crogram tcr / nich sucstanna! commitments have teen $305 muncn 'cr nuc: ear fue mace Ccs:s for the years 1977 through 1979 are current!y

10. Quarterly Financial Data (Unaudited)

A summary 1 cuarter;y 'inancial data for 1976 is as huows couars in incusands except per share data '

F rst Second Third Fourth Quarter Quar ter Cuarter Quarter E'ectnc Resenues 5277 379 5258 414 $289114 5283 451 E ectnc Ocerating income 5 62 918 5 50 522 $ 64 748 $ 55 229 Net incorre 5 44 937 3 34 274 3 50.965 5 43 525 Earnings per Common Share 50 67 30 42 SO 72 50 59 D cence cer Common Share 50 375 30 375 50 375 50 40

11. Current Replacement Cost (Unaudited)

Because Cf in?:at:C-n and environmenta: and regulatory re- ref!ect under present regulatory procedures. the higner cu:rements tre cost of res:ac:rg the Ccmoany s plant in ceprec:ation expense assoc:ated with such investments.

Service tcday //obiC s gn;f: cart!y exCOEf the amoun!S actuaFy ReO:aceTent Cost cata recurred by the Secunt:es and Ex-scent for suCn facut es ard reoCrted in the Company s fb change Commission is -nCluCed in the Comoany s annual nanc:a' statements it s ant:c:catec that as the rectacement repo~ 'Cerm 10-K' fded with the Commissicn costs of facit es are srcurrec n tre future e!ecinc rates wnl 3

Financial Review and Management's Analysis j for the Years Ended December 31,1976 and 1975 Duke Power Company Electric Revenues Fuel Used in Electric Generation i i

Pe.eroe .nc'eus 'cr 1976 and 1975 resu ted cr.mardy Fue. excense tn ' 376,ncreased 18". Over 1975 due to an l 1 trom rate increases rrc,emented in mid-1975 and tre con- increase in tcta> generat.on Ccuo ed adh 10 /ser nuc: ear l t nuat:cn of re enue cci ect.cns under fuet cost ad,ustment generat on Unart:c cated ma:ntenance recu:remerts at the l procedures !n add.t.cn e' ectr:c revenues increased .n 1976 Ccr oany s Occree Nuc' ear Stat;on dur ng 1976 orevented

] due to an 3 3a :ncrease in Wonatthour sa:es increased .t frem coerat:ng at the 1975.evel of generat on The n gner ew'nc revenues ,n !975 ref'ected a sign f, cant change in ocerate: e.e: atta ned by tne nuc! ear on,ts :n 1975 ccm-l . :cnatthour ca es mu u th .ncreased residertiai consump- pared to 1974 /.as cue to the add: tion of Uconee Un,ts 2 t

t on and dec' eased industnal ccnsumct:cn Fcr furtrer and 3 :n the latter na!f of 1974 Th:s was a ma,cr contnbut,rg

ricrmat.cn see Notes to Financ:al Statements factor to the mcre favoracle mir .n fue!s used for generat on .

Kilowatthour Sales '" 1975 ^"$h'*S"I*d # "'Y ' # 'ncrease :n fuel ex-perse cmer 1974 The 8 3~. increase in 1976 Monatthcor sa:es over 1975 The system averace tue! cost for 19,o_ was 85 08c'tABTU o cue or,mardy to the et,ects of tre economic recovery corrcared to ,.-_ _

e 0_ 0_-, , BTU .n i 9,< 0 and 8179+,ABTU :n on ndustnat usage p:us cusicmer growth of .h. Cepressed ..!

- 19,f 4 re"ect ng bctn a cnange ;n generation mix and the

aa!!nour sa'es

n 19t : and 1974 resu:ted enmady from m e :ccncm1c recess.on and energy concer/at on efforts cont:nued 1ncrease n 'uei costs Ecanom:c cond tions nad tre most prcncunced e'tect on wo to tre ee e industr/ onicn :ncreased 9~ n 1976 FUEL EXPENSES cwr '975 comparec to an 31 decrease from 1974 to 1975  : MBA 1974 1975 1976 ELECTRIC REVENUES Coa! 91 69 115 45 110 80

Mdnens of oonars Nuc! ear 17 76 19 67 21 29 F

m e cows System Average

7. F. . s'i: r'9m3~ ..ges med 3 cce Fuel Cost

• 81 79 79 55 85 08

ncmdes IFe Cost of 00 and gas JSec 'or eteCtrC Qeneration

• T . r re 'W e' .mcn Ms rom:nal .n 1975 and 1976 e a cy'a : Me 00 W5

$ 1.108 i

5930*

KILOWATTHOUR SALES GENERATION

~ Bdhons of KWH, 'Bdhons of KWHi I0l9 Residential 'JMER Hydro & Other muu commercial m Coal 50 8 Wholesale & Cther Nuclear g. ,

M Industrial 45 6 45 1 46.3 42 3 473 11 3

! 10 3 10 8 i 65A

, , ~

H 2*t 1H 4

, e r r, r4 1974 1975 1976 1974 1975 1976 1974 1975 1976 j +_

.i g

I 1

n l

Net Interchange and Purchased Power Tax Expense I

< . .< Ge e's ng p' arts nruugrt .nto serv.ce :n ! ate 1974 and Genera' taxas :ncreased 12o n 1976 anc * - n 1975 on-

' 975 + m nred tre Corroany s need tcr ourcrased power mara as a resu t of :ncreasea gross rece ots taxes unicn

n '976 and 1975 .ntercnange transact ons aan ciner rcse crcoort.orateQ 4:th .ncreased revenues Prcoerty

• i es resu ter1 n ret :rtercnange anc purcnased ocv.er taxes .ncreased pr nc ca'!y due to an ,ncreased property f

/ea is Trese crod ts amounted to 328 815 000 :n 1976 and tax Dase : rom nen orant acc<t: ens li' 568 000 n 1375 contrasted Adn purchased power Income tares :ncreased 563 :n 1976 and 675 in 1975.

r c' ie 495 000 in 1974 mmanty ref:ec* ng r gher pretax income The major contnb-ut;ng ' actor to this increase was add. trona! revenues from  ;

Other Operation, Ma.intenance and rate :ncreases o< aced mto effect in m:d-1973

- r Depreciation Expenses (

In ? 976 tre Company utmzed most of ;ts investment tax Otrer ecerancn and ma ntenance expenses increased 12% crec.t carryovers generated pncr to January 1 1976

! anc 16' . for 1976 anc 19, o rescectively Tne 1976 in- l i cr eases Ae e the resu:t of compaance with the Empioyee See Notes to F:nanc at Statements l

! Re' rement income Securdy Act of 1974 increasesin Other income sa ar es vages and beret.ts ret ecting an increase in em.

ow nce q ih knds m c:c f ees a^c tne e"ecis of inflation unantic:cated ma'ntenance ncreased 1n ue19 ged &mg o retectng consum the higner J. ~invest-average en tre Carrpany s nuc ear un;ts and ada:tiona! ma nierance m tre Company s overhead power Snes and rigris cf .ay y m c w m p e m m e ss M, W %,o was In 1975 tre increases were due onmarily to tre add.t<ena, sw me wel e to a me :n tne acage mswent m cons %cton wm in mopss reseg W coerat oc and ma<ntenance costs assectated win the add:-

cena n generat;ng unas being placed in service i:cn of Oconee Un:ts 2 and 3 anc Be'ews Creek Unit 1 coup:ed 4,tn the imoact of :nfiat;cn on wages benef;ts. Earnings of subs;dianes :ncreased $4 385 000 :n 1976 This <

l mater +ats and supphes increase is largely attributable to lake lot sa!es by Crescent Land & Timber Corp Deorec:at:cn expense showed ,ncreases of 10?s and 20%

for 1976 and 1975 respect <ve!y as a resuit of add:t;ons to INVESTMENT IN CONSTRUCTION o' ant 4n service WORK IN PROGRESS rMilhons of Dollarsi construction work in progress TAX EXPENSE at year end.

Mdhons of Dollars Ottier Taxes M Average Construction work TJE!IB Gross Receipts Taxes in progress.

Property Taxes $229 si m I Income Taxes 333 ELECTRIC PLANT IN SERVICE 7 Bdhons of Dollarsj 5948 Distribunon. 7347 Transrmssion and  ? - sons General Plant $3 6 7.

J'

$3 4 516r M Produchon Plant p4S , ,,,_5 786 g WGA i

4;

$*D s&!

LS40 r

$2 5

• 5637 5120 to$ us sto l $2 0 7 Sir

@ .h sr s%

1972 1973 1974 1975 1976 1974 1975 1976 1974 1975 1976 m-:.1:-c 23 l

! interest Deductions and Preference Stock Market Information and Preferred Dividends At December 31 1976 anc 1975 tre Comcany had Tota! ,nterest deductrons and pre'erence and pre' erred dm- a0pronTiate'y 33 300 and 82 300 noicers of commen donds ;ncreased 54130 OGO and 524 395 000 for 1976 stock rescectweiy Dur:ng 1976 aoproumateiy and 1975 respect:veif These increases nere pnmanly due 9 563 000 shares of common stock were traded as to the ssuance of add,tional securit:es to f; nance the Com- compared to 10 075 000 dunng the prev:ous year pan / 3 construction program and to the h:gner costs of l cac tal Cther nterest deChned in both 1976 and 1975 .vith Di.,dend Stock Pr ce Rance j me reduct.cn in the average fevel of shortaerm cect out- Common Stock stand.ng and lower short-term interest rates Greater internal Per Share H on LE casn generation contnbuted s;gnif' cant:y to the reduced 1976 by Quarter -

snort-term debt borrowings F:rst 30 375 5205 51724 Second 0375 193 s t6%

s Quarterly Results Th'rd 0375 22t2 19 Ouarterly revenues and earnings per share of common Fourth 0400 233s 19h stock for 1976 and the last ha:f of 1975 renected the :mpact

,.Icta: M. E-of rate <ncreases imo'emented in mid-1975 Quarterly earn-

)

ngs tend to f:uctuate with seasonal Aeather Condtons This 1975 Dy Cuarter

' actor coup:ed w:th h:gher than normal fossil fuel e>ioenses Arst 50 35 515 510; l ecess:tated by the reduced avat:abery of nuc! ear Second 0 35 17 12h i vrzts cunng tre second and fourth quarters of 1976 re. Third 0 35 16% 15 suited in lower than normal earn:ngs per share cf common Fourth 0 35 19M 15's stock for these penods compared to otner quarters s;nce Total $140 ine rate :ncreases were implemented See Notes to Financ;al Statements l

l 4

REVENUES AND EARNINGS l

' PER COMMON SHARE BY OUARTERS SHORT-TERM BORROWING  : Revenues in Milhons of Dollars) i Average Debt Outstanaang in Milhons of Dollarsi Revenues M - Earnings Per Common l Average - Average "

Interest Interest Rate Aa'e N Average Short Term 5284 10 5277 Deet Outstanding 275

$254 5258 51 00 37 I

8 $221 220 5208 80 e 165 60 4

110 40 2

55 .20 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 1st 3rd

• 4th 2nd 3rd 4th 1975 1976 1975 1976 Janaa 29

Financing IO freet <ts cap.ta! reau,rert'ents tne Cortpany nas 1:nanced ex%ns.'seiy /<,tn deci and eau.tv secur.t.es and nas raised acd4t cnai cap;tal through the sa:e and sa e/! ease-back of certain assets (dcHars in thousands) 1976 19,, o, Gross Net Gross Net Common stock Pubhc sa'es (5 000 000 snares March 16 517 625 per share; 5 88 125 5 84 336 -

(5 000 000 shares June 5 513 75 per snare) $ 68 750 3 64 935 Stock Purchase Savings Program for Emp!cyees

'418 563 shares 519 69 average once per sharei 8 241 8 241

~ 504 241 snares 514 69 average once per sharei 7 407 7 407 Ers.dend Pe4nvestment and Stock Purcnasc P!an

' 179 207 snares 120 08 average once per share) 3 611 3 611

~ ' 50 965 snares 515 73 average price oer snare' 2 846 2 846 Erro'o ees r Stock C Aneran p P'ac.

59 864 snares 120 73 average once Der sharei 1241 1 241 Totai common stock 101 218 97 429 79 003 75 188 Pre' erred stock Pre' erred stock A 10 76r $25 par 2 400 000 shares February 6) 60 000 57 450 Lcng term cett First mortgace bcnds 111, Senes Due 1994 lVancus datesi 19 250 19.160 105 750 105.213 8% , Ser es Due 2006 tOctober 21) 100 000 99 169 92 ? Set es Due 2005 iFebruary 20) 100 000 98 419 Pouut cn control concat ons iJune 8: 2 420 2 364 Tota! l cog-term dett 121 670 120 693 205 750 203 632 SNe ano sa edease-back transact >ons Cacatanzed real estate teases (Vancus dates) 17 700 17.443 12 000 12 000 Cap tanzed constructen eau:pment : ease ( Apn! 23) 14 694 14 694 Nuc' ear tuei tease Way 13) 24 894 24 894 Ciner 9 841 9 841 Tota' sa:e and sa e/l ease-back transactions t 7 700 17 443 61 429 61 429 Tcta: 5240 588 5235 565 5406 182 3397 699 30

Summary of Operations Duke Pow r Company

• '6 t o75, a : 1974 ?973 1972 'G66 CONCENSED STATET.'ENT CF iNCCME 4 trcuunc: I E ectre revenues '

fusvcert.ai 372 343 5 324437 5 264 :05 5 2t2 Zu 5 M4 561 95 902 C o m m erc a 12' M 200 292 156 562 42788 '04 479 47 547 ncastrai T : ' 3*5 286 254 99) 169 57s t57 407 66 536 utrer erergy '44tn '2403 93 492 66 274 57 253 25 932 Ctrer reverues 2> N 323- 33644 3 '72 45' 2 ?? 7 Toti e ectnc reseNes */#3 430 364 818 603 594 326 243 232 258 694 E ectr.c emenses Fue' 19 "3 338 024 333 3'e 191 661 '72 072 62494 Net 1ntercNn9e anc cur cn3 sed ocwer crec t; 28 d:5 535' 3 495 28575 3247S '705 Carate snc ma n!enance 64 33 '46 e53 46259 107 466 94 229 47197 Cecrecat on t0 6:4 :CO 395 63 914 70453 53 923 31 524 Tases ncorre '43 E4 92 542 55 380 34 293 '8 075 33665 7aesseneral M 2'5 75 757 64 7to 40 776 44 42? 23 237

! Tcti vectr c eicenses 4 .' 742 M8 67215' 482 430 4'? ? 78 204 322

, Estr( #cerat rg income 233 4' ~ :97 M ?26 646 ' 896 du u54 53 672

, O tner n;ome A; o t.ance for fund; msea aur ng constrw.on d' '25 54 794 62 159 5)459 51 185 ?638 Orer nccme net cecuct.o" 4 647 ' t 469. 5 086 ?093 t 51 i t 921 come taocrec t 22 963 2? 759 '6 094 15 406 13 035 '40 r terest cecuct.ons _ '4325' ~ 145 7671 '127 '82 91 535' ' 74 4 ' E ~15 837:

Mc:ne r,e+o e evtraorc.narv der"s '~17' t i 7143 tC2 203 36 313 60367 D 734

E cmf a nary .tems - - -

4 '03 b)

Net rome ~2~' '43 iCZ 903 96 3:9 SO367 45 337 E.,cem cn pre'erence and pre' erred stocq ?4

d4 344 28 534 27 456 21 30 t 2 141 E rn.rgs 'cr cc-on stoc* 'E" SZ'99 74 269 63e63 58 466 43 696 haeac3 on common stoca C- . TO 94) 59 263 54 036 47 753 25 309 Errgs reta.nea 'or use n tre tus recs 9j  ;

? i d50 i 15 006 5 '4827 5 10 70a 5 t8 397 2"JC N 5TOCK DATA S"res o+ ccremon stocn year eac thousands 50 *e0 53 521 47 336 38 751 35 493 23 033

- herage t"ousancs 5T 5t020 42 616 33 465 34 592 23 005 Per srare of common s!ccx E mngs cefore extr warary fe'rs RK 51 62 51 74 5 t 79 51 63 51 72 tatraorc.rarf tems et at ewec ocorre taves -

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tarr.ngs for common stec" 12 40 $162 51 74 51 79 51 69 51 90 Osoenci U 525 51 40 51 40 $t 40 Jarwt wate .ngnaow 51 40 $1 to 23 4 m .. 19410S 20% 'O 2 h-16 25421 43-355 EALANCE SHEET bAYA t casancs, 2h &

E'ec:r c ofant iortg na! ccst; 3466033 34 i93 046 53 783 777 53 355 392 52 903 710 51 124 220

, ycumurated deprec:at cn 130 M2 826 627 727 878 652 922 584 748 354 512

% wtanaten and snort term notes ammon stock equ<ty 64N2 ' Ot5 637 931 150 793 487 706899 Pre'erence stock 335 016 5 i Au 50 000 50 000 50 000 50 000 -

Preferred stock ^

+ d WO 405 000 345 000 345 000 285 000 Long term debt 64 700 I t 2 K %5 1 627562 1 638 752 1505 t 74 1 270 224 367 500

! Shcrt term notes oayacie 26 GQ d5 043 142 092 63 296 96 000 41.000 ELECTRC AND OTHER STATISTICS CO Aa!!nOur sa es {meons; Res cert a: tt327 10806 10 325 t 0186 Commerc:ai 9 237 5 320 7 387 7 567 7 053 7 287 6 515 348 mcusinal iS 4' 7 16 736 17881 18 348 Otner 17 778 11 442

' M? 7 029 7 085 6 838 6 158 3 532 Total Monattnour sa.es 45 633 42 138 42 344 43 159 39689 23442

%meer cf customers iyear enc)

Aes,centa! 98950? 969 d63 951 459 931 020 895 488 743 504 Otner '6? 464 156 396 154 221 152 132 144 939 110 174 Tctar customers ' '50 ?65 1 126 259 1 105 680 1 083 152 1 040 427 853 678 Res cent:al customer data .

Average annual KWH use  ? ? $20 11 237 10 927 Average revenue per KWH 11 072 to 447 7 306 329c 3 00C 2 61C 2 08c 2 000 t Soc

'bmDer Cf Gr"D Cyees (year enc')

Operat ng anc ma'ntenance a 367 3 077 8 103 7 928 7 721 5 870 General c: art construct.on and sng:reer ng 4 916 3 729 -4240 5 125 4 780 611 i Source of enercy Mons of KWH; Gerera:ec-Coa! 35 875 29 202 34 810 37 036 35.870 24 067

- Nvc ear i2 978 15 290 6 761 2 402 - -

- Hycro 36? 2336 2 320 2 377

- 01 anc G as 1961 140t i :3 57 1 236 2 218 2.735 -

Net ntercrange anc cu rcnasec cower a 656' (7761 503 2469 sess arc ccmcany use 2 607 223 i 3.533 3 371 3 256 3143 3 485 2 259

% icss anc company use 7Zs 74% 72%

i System avera:;e neat rate ~ 2% 81% 38%

System icac factor 96'6 937'  ? 783 9 713 9 702 9 619 64 n 61 6" 64 1 % 64 2% 65 7% 66 1%

a cestated-See Nete 2. .

i 3 '966- $a 013 000 net garn ' rom sa,e of cao.ta! stocx cf a non-a'fmated ccmoany: $3 910 000 piant accusition ac;ustment a

31

Subsidiaries 1

Crescent Land & Tirnber Corp. Eastover owned or had contrclhng interest in approx-imately 30 600 acres cf coa! reserves w.th an est; mated l Timber harvestng and reforestat.on cont;nue to be the 245 000 000 tons of recoveraole coal Those reserves l pnmary activ:t.es of th:s land-managerrent subsidiary are located in eastern Kentucky and Virgin:a.

j in 1976. Crescent har.ested 27 mi!l:on board 'eet of Both the ar'ount and auahty of coal shipped from timoer and 42.770 cords of pulpwood from tne Com.

4 pany's non ut:hty fands More than 47 mi! hen seedangs owaq ms m M shod maM gm

! ment over the previous year Product:on was up 18 I

have been planted on Company f anc since the re_

per cent to 2 250 000 tonrc total energy (BTUs) shipped -

forestation program began in 1939 Crescent is increased 24 per cent The improved quakty of coal j currently planting new trees at the rate of t 3 rr:ihon frem these m nes resu!ted from improvements in coal per year I preparation plants wh:ch remove non-ccmbustibfe Also in 1976. Crescent continued se!hng recreat:enal procacts from the m:ned coal f lots on Duke reservoirs to cuahfied leaseholders An Eastover mines prov'ded approximately 17 per cent estimated 5.200 iets are expected to ce offered 'cr of Duke s coal recuirements in 1976 and 15 per cent sate througn th:s program t

in 1975 l

j Eastover Mining Company I Eastover Land Company ,.gj .-

i The Eastover compan:es were organced in 1970 to *

! help assure an adeCuate supply of coal for Duke s -

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1 i coal-fired generating ptants On December 31 1976. 7S.O _ C # , < -w Someday this seecling will De a Chnstmas tree for a P;edmont Carolinas family Planting Chnstmas trees i

1, on transmission lines nghts-ot+ay and other lands is ~.

Dart at Crescent Land a Timber Coro s reforestation L l

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D 4 Ccmpanys HighsDlint Mine. Harlan County Ky Coal from the Eastover mines is shipped by unit trains to o,

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In add tion to those m.ning prCDert.es owned Cr con- purcnas;ng agent fCr virtua!!y a 'supphes OCulpment traced oy Eastover capita: investments also have ceen and fue! reCu red by Duke made in two acc.t:cna: Properties being deve:oped by gir. Power s sa'es continued to be cepressed in 1976 otner coat comaan:es due to a s:owdcan in e:ectncai construct:en and Mill-Power Supply Company in e sed competron m me e:ectncal empment market The c! dest of Duke s operat ng substdranes is a wno!e-safe d sinoutcr of electncal equrpment and serves as -

Subsidiary investments c-o v (dchars in thousands) 1976 975 Property and investments-at cost Rea! estate recreational and land develcoment 5 31 702 5 32 865 Coal mining 103 293 86 000 Net current assets pnnc: pally receivables and inventones 9 350 20 605 Total assets 5 144 345 5139.470 Long-term notes (31.309) (16 600)

Coal product:on commitments (51.520) (50 000)

Deferred 'ncome taxes (25 162) r27 799)

Total liabilmes f107 991) r94 399)

Parent company investments and advances 36.354 45 071 Advances from parent f 4 245) (16 936)

Net assets of suosicianes 5 32.109 5 28 135 o

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• CAPL HORN JR Cra,rman of the Board anc Chret Executive Cft:cer g p;GEEE p1es,deC pgBKER'

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. C, R SArM G ALBANESE *REECE A CVEACA3H ue3r f ooi a H<fre P<es a nt

'l  ::cnom cs A noc ares Corocraton j un c- s t < o f t . rm Caronna of Nor'n A mer ca

., at Greew,cro ' nance consumer era ng i

comme cs end.ng and rsurarte CA ACBERT C ECWARCS P'ss Ut ri * + MARSH ALL I PCKENS C.emson Un-vers.t< 'ary Cha rn an et i

. PAUL H HENSON 7'"

iru s tees Q +met Tre Quee Endown ent Cr a.rman of tre Bwra ~ '

Un.ted Te:ecommunicatons Inc *ACDiSON b REESE e.ecomunicat ons services Cha trean of tre F' nance Corrm;ttee y ,

4ca pr%c.c North Carohna Nat.cna; Bana y

• HCWARD HCLDERNESS and NCNB Corporat>on *

}ha r~an of tre Board * 'CHN S STEWART #'O#NESE vetterson S'andard L te p' ,

m rance ccoarv e,c

.e"er:ca P 'or Carocraton g-

• HE R'J AI. W LAY on leave at absence - -

Chs rman it t"e E vect,t",e jh 7'* + MLLIAfA L WATK:NS I '

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+BUCKMICKEL N '

j 3a rmn of tre Board 1 C ans :nrernat cnv Ccrocrat,on .

.ndestnai arc cor-me c.ai construct'on:

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>CKENS REESE STEWART WATKINS

• '.'nwr ' Aus Ca'"rrea Werw at ena"ce Cam'rcee 35

i Other Officers E

KEITH ARLEDGE A MELL TOLITTLE WARREN H OWEN SAMUEL T LATTIMORE 4

Vice Prescent Vice Prt rit Uce Prescent Assistant V ce Prescent Western Dmsion Distributon Engineenng Design Engineenng Computer Services i "S *"8" 0" *"S RICHARD R PIERCE THOMAS C BE lRY Vce Prescent WILLIAM 0 PARKER JR Assistant Vice President f PCRTER A HAUSER Soumero Deson yce prescent V'ce Prescent Corporate Communicat:ons i Steam Production Finance Administraton i

FRANZ W BEVER P E i

V.ce Pres: cent THOMAS M PATRICK. JR _

FRANK A JENKINS System PfanninG Vce Prescent p Vce Prescent Eastern Omson Transesson and E:ectre CARL J BLADES LEWIS F CAMP insta4atons STEVE C GRIFFITH JR VcE Pres. dent As ant

• Y Real Estate General Counsel f LLOYD P JULIAN e e a Counset vice P es dent GEORGE W FERGUSON JR j WILLtAM J BURTON JOHN C GOODMAN JR O Secretary and g

Vce Pres 4ent Deputy Generai Counsei

! Corocrate Commu..catons J WESLEY LEWIS Vice Prescen.t HENRY L CRANFORD RICHARD C RANSON #SS#d" " '

Deson Oceatens Treasurer Vce Prescent Central Dmson JOE S MAJOR JR W BRUCE SHANNON wlLLIAM A ST! MART

]' Vce Pres 4ent

^SS' star;t Treasurer DONALD H DENTON JR. Controller 85 "" KENNETH C STONEBRAKER Vce Prescent ROBERT J ASHMORE MarkettnQ JOSEPH G MANN Asmstant ControHer Assistant to the Senor Vce Prescent Vice Prescent DOROTHEA B STROUPE ROBERT L DICK Nortnern Desion Legai and F nance Assistant Secretary Vice Prescent l Construction s

4 Management Changes Three new members were elected to the Board of President-Finance Administration: Lloyd P Julian.

Directors at the annual Shareholders' Meeting on from Assistant Vice President to Vice President-

' Apni 27.1976 The new directors are Paul H, Henson. - Operations: George W. Ferguson. Jr.. from Secretary Chairman. United Telecommunications Inc., West- and Associate General Counsel to Secretary and wood. Kan.: Buck Mickel. Chairman. Daniel Inter- Deputy General Counsel: Richard C. Ranson, from 3.

national Corporation. Greenville. S. C.: and Reece A. Manager. Financial Administration. to Treasurer: William Overcash. Jr.. President and Chief Operating Officer. R. Stimart, from Treasurer to Controller; Lewis F Camp.

Associates Corporation of North Amenca. Dallas. .from Assistant Secretary and Assistant General Coun-Texas. Chas. B. Wade. Jr. formerly Senior Vice Presi- . sei to Assistant Secretary and Associate General dent. R. J. Reynolds Industnes. Inc., resig,ed. Counset and Richard W. Holmes. from Manager.

Treasuryand Financia! Accounting to Assistant The Board of Directors made the following manage-Controller.

ment changes dunng the year:

The Company was saddened by the death on July Thomas C. Derry, from Manager. Greenville District, K 1976 of Patrick D. Huff. Vice President and Special to Vice President-Southem Division. A. Mell Doohttle.

Assistant to the Executive Vice President. Mr. Huff had

' from Vice President-Southem Division to Vice Presi- ably served the Company since 1936.

dent-Distnbution Eng:neering. Construction and Operations: Porter A Hauser. from Control!er to Vice i

. 36

Transfer Agents for Common Stock Morgan Guaranty Trust Company of New York New York, N. Y.

North Carolina National Bank Charlotte. N. C.

Registrars for Common Stock -

C:tibans

' New York, N Y Wachovia Bank and Trust Company

, Charlotte. N C.

Stock Exchange Listing Duke Power Company Common Stockis listeo and traded on the New York Stock Exchange.

Thetrading symbol of Duke Power Company Ccmmon Stock is DUK.

Generai Offices

• 422 South Church Street P O. Box 2178 Charlotte. N C. 28242

' (704/373-4011)

SEC Form 10-K Upon wntten request. the Company will provide. without charge, a copy of its 1976 annual report on Form 10-K as filed with the Secunties and Exchange Commission.

Please direct requests to Richard R. Bat >-

cock. Duke Power Company, Investor Relations Dept.. P O Box 2178. Charlotte.

N.C.28242.

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4 About Our Company Duke Power is an investor-cwned electnc utety serving approximately 1.150.000 customers in North Carohna and South Carchna its servce area encompasses approximately 20.000 square miles through the Piedment sections of the two states. Re-tail customers are served locally through 96 distnct and branch offces.

In addition to se!hng efectncity directly to it: _

own retail customers, the Company selis ,

bulk electricity to 55 major wholesa'e cus-tomers. pr: manly municipal elecinc systems and rurai coccerative electnc systems In ,

1976. sales to wnolesale customers repre-sented approximately 15 per cent of the Company's sales.

Dunng the 12 months ended DecemDer 31.1976. the Company s electnc revenues amounted to approximately 51.1 bil! ion of which approximate!y 70 per cent was derived from sales in North Carolina and 30 per cent from salesin South Carolina.

Generating capability on December 31.

1976. of 12.317.000 kilowatts was com-pnsed of 7.622.000 kilowatts from coal-fired steam stations. 2.580.000 kilowatts from nuclear stations. 1.452.000 kilowatts from hydroelectnc stations, and 663.000 kilowatts from comoustion turbines and combined-cycle units Duke Power has four active subsidianes-Crescent Land & Timber Corp . land man-agement: Mill-Power Supply Company wholesaledistnbutionof electnCal equipment (a.so serves as purchasing agent for Duke):

Eastover Land Company. coal property management: and Eastover Mining Com-pany, coal mining.

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