ML19318D167

Annual Financial Rept 1979

ML19318D167
Person / Time
Site:	Seabrook
Issue date:	02/15/1980
From:	CENTRAL VERMONT PUBLIC SERVICE CORP.
To:
Shared Package
ML19318D157	List: ML19318D156 ML19318D158 ML19318D159 ML19318D163 ML19318D165 ML19318D167 ML19318D168 ML19318D169 ML19318D172 ML19318D173 ML19318D175 ML19318D177 ML19318D178 ML19318D180 ML19318D184 ML19318D188
References
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. Annual Meeting .

CENTRAL VERMONT i The annual meeting of Central Vermont PUBLIC SERVICE CORPORATION Public Service Corporation stockholders will 77 Grove Street, Rutland, Vermont C5701 be held on Tuesday, May 6,1980 in Rutland, Telephone: (802) 773-2711 Ve:rrxx Notice of this meeting, together with

- proxy staternent and proxy, will be mailed to common stockholders in early April,1980.

Tran-fer Agent and Registrar The First National Bank of Boston, Boston, Massachusetts 02102 - for Common Stock and til series of Preferred Stock.

Please Note This repor* is prepared for the information of security holders, analysts Company person-nel, customers and other interested persons.

It is not transmitted in connection with the sa!o of any securityi THE COMPANY WILL PROVIDE EACH SHAREHOLDER A COPY OF THE FORM 10-K ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION, WITHOUT Contents CHARGE UPON REQUEST TO THE SECRE- PAG'E TARY OF THE COMPANY, 1 Highlights 2 Letter to Shareholders About Our Cover 5 The Year in Review Development of Vermont's water resources into 11 Load Management Update energy is a commitment of Central Vermont. Sta- 12 Vermont Yankee tion operators Howard Wilder and Francis Petelle 13 People of Central Vermont are observing the replacement of the penstock at Cavendish, one of eighteen present<1ay operating 17 Results of Shareholder Survey stations. 18 Shareholder Analysis

l. 19 Shareholder Questions ,

! 21 Financial Statements

, 26 Notes to Financial Statements I

31. Comparative Statistics 32 Directors and Officers Area Map The Company's common stock (NASDAO symbol: CPUB)is traded on the over-the-counter market.

Statement of Corporate Purpose It is the objective of Central Vermon* Public Service Corporation to continue to be one of the nation's most efficiently managed electric utilities The Company will do allit can to provide:

' (1) Safe, adequete and reliable electric service in a socially and environmentally acceptable manner et the !owest possible cost; and (2) A competitive rate of return on funds invested in the Company which will enable it to retain and attract the necessary capital to carry out its electric service obligations at reasonable costs; and j (3) An employment atmosphere which will attract and retain qualified employees.

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. Highlights  % i 1979 1978 Change Finr.ncial (dollars in thousands) i Revenues S 78,185 $ 75,019 + 4.2

! Nstincome $ 9,767 $ 10,368 - 5.8 Net income for Common Stock $ - 7,995 $ 8,414 - 5.0 Construction (Excluding AFDC) $ 11,539 $ 13,214 - 12.7

' Net Utikty Plant $124,930 $113,573 + 10.0  !

Total Capitalization $152,466 $144,573 + 5.5 '

Average Shares of Common Stock Outstanding 2,921,527 2,881,111 + 1.4 Debt / Percent of TotalCapitalization 44.3 % 43.0 % + 3.0 Return on Common Equity (Average) 12.8 % 14.5 % - 11.7 Per Share of Common Stock I i

- Net income $ 2.74 $ 2.92 - 6.2 )

Dividends Paid $ 1.69 $ 1.44 + 17.4 Book Value (Year-End) $21.84 $20.84 + 4.6 Operating Retail Electric Sales (MWH) 1,677,739 1,654,433 + 1.4 System Peak Demand (KW) 372,500 353,000 + 5.5 System Load Factor 58.8 % 61.2 % - 3.9 Degree Days (Rutland, Vermont) 6,890 7,242 - 4.9 Customers 109,980 107,977 + 1.9 Employees 577 571 + 1.1 i

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EARNINGS AND DIVIDENDS PER COMMON SHARE (Average Shares) 3 50 3M 2 92

.50 1975 1976 19?? 1978- 1979 E Eamsngs Q Anr.ualRate1980 l M Div.oeno.

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Letter it Shareholders Looking Forward customers. We came away from Growth Has Moderated As we enter a new decade, it is each "give and take" experience Over the past five years, kilowatt f evident that energy issues will con- with the strong conviction that our hour sales have increased at an an-tinue to be of overwhelming impor- corporate goals are realistic and nual rate of 2.7%. This is a signifi-t:nco for the foreseeabie future. Ef- attainable. cant change from the period fective management of energy re. 1965-1973 when sales growth was sources will remain esseritial in the Financial Performance 10% annually. During the 1970's, clectric utility industry. Innovation Encouraging our Company pioneered load cnd service have been the tradition The Company's financial perfor- management tect.niques that are of the Company throughout the last mance was encouraging for the now mandated by the National 50 y:ars. We will continue to year 1979. Earnings per common Energy Act which includes the cmphasize those characteristics in share were $2.74, down from $2.92 Public Utility Regulatory Polic%s the future. Looking forward, we find in 1978 but subject to improvement Act of 1978 (PURPA).

that our strengths lie in three basic in 1980 resulting from an 8.2% PURPA requires that each state ar:as: our sound financial posture; Vermont retail rate increase effec- regulatory commission consider the professionalism and dedication tive January 1,1980. Common adopting certain standards. Some of our employees; and the loyalty of stock dividends paid in 1979 in- examples of these standards are:

our stockholders. It is our hope that creased to $1.69 a sha'e from rates based on cost to serve; rates Dy reading through the " People of $1.44 in 1978. The for.rth quarter which reflect differences between Central Vermont" section of this annual dividend rate of $1.84 winter and summer use of electri-report, you will be exposed to the represents an increase of 44% city; time-of-day rates which offer a human dimension of our Company from the $1.28 dividend in 1975. price incentive to use less during as well as the financial and The Company's financial goals peak hours; interruptible rates; the operating data. The excellent and performance are realistic and installation of various devices which r sponse te ur first shareholder encouraging. A $1.84 common divi- control loads; and the elimination of survey prr ,ded us witt, a valuable dend represents a 67% payout of rate structures which serve to pro-profile of our shareholders. The 1979 earnings, as compared with mote greater electric use. Our large number of shareholders who an industry payout average of 77%. Company has been in the forefront made the extra effort to write a The Company's capital ratios of of all these ratemaking techniques.

rute expressing their confidence in 44% debt,14% preferred equity Energy efficiency has been our goal tha Company's management is very and 42% common equity at the for many years and continuing load cncouraging. In addition to respond- end of 1979 will permit financial management efforts by the Com-ing to the questionnaire, mtny of "exibility in the future. In January pany will help to achieve that goal.

them asked questions and offered 1980, the completion of $15.0 comments. Therefore, one section million financing of mortgage bonds Power Planning of this report answers the questions at a 10%% interest rate virtually Our long-term planning includes most frequently expressed. eliminated our bank borrowings a kilowatt hour growth rate of 3%.

temporarily, allowing us even Even with this premise, we require Looking Back greater flexibility. Recently, the additions in generation, transmis-During 1979, the Company cele- Company rece.ed investment sion, distribution and general facili-t' rated its 50th anniversary. The oc. orW Nungs for commercial paper ties in order to provide a secure casion provided many opportunities providing an additional method by energy future for our customers in-throughout the year to meet with which our short-term capital needs to the 1980's and beyond.

shareholders, employees and can be met.

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i Nuclear power is necessary to meet those future power needs. We / ~

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l will continue to move ahead as L

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g' ; p Joint owners in Seabrook #1 and #2 j- ~

in New Hampshire, Millstone #3 in (

Connecticut and Pilgrim #2 in L k.~'y -

- Eg'QAi i Massachusetts. We feel strongly l that industry and government must k.. .;

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' nuclear industry. In this way, broad f ;: ' e- .- ') . s.i' support can be maintained for this }1' .

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essential part of our nation's

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' energy supply. f * .

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Our continuing commitment to {4 ,

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our customers is expressed in the l<" ~

c ,L 'AJ l development of and participation in f,*.9 y .f .

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two new programs: the Residential  : '

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Conservation Corporation, in which

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we have joined with other Vermont y 1

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l utilities, along with the Vermont F!-  ;- ;'~ . ':;*/- .

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' Public Service Board and the State EE - *' " ~

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Energy Office, was organized to L Douglas Meredith James E. Grittin l help homeowners conserve enet/

l by aiding them with conservation

' nieasures, in financing energy im-provement loans and by inspecting completed work; and " Operation i Pe@ Alert," a voluntary consumer l action program geared toward levelling the peak demand growth rate.

! Tha Challenges The energy picture will continue (j

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Qh P pe to unfold in a series of coallenges (d t I that will only be met with sound JAMES E. GRIFFIN. President energy management and the con. nd Chief Executive Officer tinued support of our employees, Og , g j ,

customers and shareholders. These y bya /puWj; challenges must be met for the g future of energy is the future of L. DOUGLAS MEREDITH, Vermont and, indeed, the Nation. chairman l

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The Year in Review Revenues and Sales days were 6.6% less than normal and Operating revenues increased 4.9% less than 1978. l 4.2% in 1979 as a result of kilowatt Federal regulations controlling hour sales growth, the remaining ef- temperature settings for air condition-fect of a retail rate increase im- ing and heating have lessened elec-plemented late in 1978 for Connec- tric usage in commercial, industrial ticut Valley Electric Company, a and public authority buildings.

wholly-owned subsidiary, and an in- Continued energy conservation by crease in miscellaneous revenue. all customers remained an important Kilowatt hour sales to retail cus- factor in maintaining a modest growth pattern as residential and business I tomers increased 1.4%. Sales to our nine wholesale customers and peri- customers attempted to reduce odic sales to other utilities grew by energy consumption and offset a 22.5% Total kilowatt hour sales to decline in real income.

customers increased by 2.8%. A in Vermont, almost two-thirds of all number of factors affected the pattern homes bum some wood for heating i of growth of the various customer purposes and as many as 20%-25% )

classes in 1979, some of which will use wood as a primary source of continue to influence future growth. heat.

These factors include weather pat- An important occurrence during the terns, new federal regulations, conser- year, and one which will affect future l vation, and the changing pattern of usage patterns, was the decline in the relative energy prices in Vermont. relative price of electricity compared  !

The most important factor moder- to other energy sources in Vermont. l ating growth in 1979 was the unusu- Over 70% of total energy in Vermont I ally warm weather experienced during is provided by oil. As consumers at-the heating season. Heating re- tempt to adjust to the change in quirements as measured by degree relative energy prices, the Company expects to see an increase in the use of electric service.

Residential sales in 1979 increased KILOWATT HOUR SALES by only 1% despite an increase of Percent Change Frorn Previous Yest 2% in the number of customers.

to Residential customers, feeling the ef-fect of a reduction in real income, continue to conserve electricity. The re exceptionally warm weather also reduced expected growth.

" During the latter part of 1979, however, changing patterns of usage e could be discerned which will affect j future growth. Customers increasingly began to shift to electric water 4 heating as a substitute for oil. In addi-tion, an increasing number of customers introduced the use of elec-a tg tricity for heating purposes in new homes and as a supplement in ex-isting residences. Customers in-im terested in electric heat are en-8 isis isii 197a isis couraged by the Company to consider the advantages of off-peak storage

-u heat.

~t Excluding Perledic Sales to Other Utihtees 5

I

?

l The commercial sales area ex-perienced a growth rate of 5% in 1979. This group, consisting of small )

commercial and industrial establish-I ments, benefited from the strong I i

economy in Vermont during most of

the year, offsetting effects of the couuoN EoulTY RETURN spring fuel shortage and a disappoint. BASED oN A ERAGE EOulTY ing ski season during the last quarter i4 s of the year. 14 The industrial sales area had a .8 12 e sales increase of 1.6%. A number of 12 unusual factors contributed to lower I usage levels including a number of " '

so -

work stoppages and the temporary y closing of a whey processing plant 3e_ -

due to environmental and economic  ;  ;

problems. Larger customers are con- j,_ _

tinuing to seek ways to reduce energy consumption including ,_ _

measures required by federal regula-tions such as temperature setbacks ,_

and more efficient lighting.

The Vermont economy is forecast ,

to grow at a reduced rate in 1980, but is7s is7e 1977 197s 1979 retail sales are expected to increase t by about 5% with the return of more normal weather patterns. In 1980, customers undoubtedly will continue their conservation efforts, but at the same time may adjust their usage patterns to reflect the lower relative cost of electricity, in addition, a number of ski areas continue to ex- ANNUALIZED pand their facilities and several new PAYOUT ratio and large industrial expansions will ** 0 so become operational.

l E:rnings and Return to investors 70 e9 9 Eamings per share in 1979 6' 2 64 ,

amounted to $2.74, compared to the

, $2.92 earned in 1978. The recent rate 60 -

increase placed in effect January 1, 55 '

1980 should improve earnings. The ,, 4, 3 Company's historical retum on equity is shown on this page. 3 The Company's dividend rate was E 40 -

l increased by 28% in 1979. The first E quarter dividend payment was in- '

' ~

creased from the 364 per share level l to 41C. Again in the fourth quarter, I the dividend was raised from the 41C 20 -

1 level to 464 per share, or $1.84 on an annual basis.

io -

0 1975 1976 1977 1978 1979

' I 6  !

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CAPITAllZATloN RATIOS The goal of the Company is to g establish dividend levels so that equity investors are fairly compensated The

, so _

Company believes that this will be possible :n a regulatory climate recog-l i40 _ nizing that prompt and adequate rate i rehef is necessary in order to attract l

130 -

adequate amounts of capital.

fhe annual payout ratio in 1979

'2 -

was 67% for the Company, compared l to 49% in 1978. The charts " Earnings l and Dividends Per Common Share" l _ 300 _ _

and " Common Equity Return" shown

y on the Highlights page and on page 6.

l } 90 _ _ indicate the trends over the past five 8 i years with respect to the Company's l 3 so -

financial health. The charts indicate 8 improving trends in these areas.

70 -

Financing l so _ __ Construction in 1979 amounted to

$115 million and is expected to in-l 40 - -

crease to $181 million in 1980.

l largely accounted for by an increase 30 - -

in expenditures for joint ownership generating units Internally generated 2

funds. when related to total con-struction expenditures in 1979.

amounted to 57%. compared with a 34% a year ago 1975 197c 1977 1978 1979 The Company's financial goals in-l clude a capital structure which will E commw euu:ty M nw-eo equ.i, E oeti allow for flexibility in financial plan-ning Such a strategy is necessary in the current environment of uncer-tainty in which utilities operate Long-term capital structure targets are TIMES (X) FUNDED DEBT INTEREST EARNEu approximately 46% debt,14% pre-

.e.ime mera mm.ie 'w- ra" ferred equity and 40% common eq-

• uity The historic capital structure 4 37x trends are showa on this page The

• 23^

1979 structure closely reflects the 4 on 3 , ,,

long-term goal 3 '3*

The sale of $15 millron poncipal 3 amount of First Mortgage 10%%

Bonds to institutional investors pro-vided a major source of funds in 1979 In September. $4 25 million were issued snd the remaining $10 75 2"

million were delivered in early January 1980 An additional $ 724 million in common equity was raised through i cx _ --

tiie Dividend Reinvestment and Com-1975 1976 1977 1978 1979 i l

7

i 4

j l mon Stock Purchase Plan ($.608 COMMON STOCK PRICES AND j million) and the Company's participa- DIVIDENDS j tion in the Tax Reduction Act Stock Dividends j Ownership Plan ($.116 million)- 1978 High Low Per Share j in line with the stated financial 1st Ouarter 15% 14% .36 goals, the Company applied for and 2nd Ouarter 15% 14% .36 received commercial paper ratings 3rd Ouarter .36 154 14%

! from three rating agencies, as follow: 4th Ouarter 14 .36 15%

Fitch Investors Service, Inc., F-1; Moody's investors Service, Inc., P-2; 1979

- and Standard & Poor's Corporation, 1st Ouarter 16% 14% .41

! A ?. These ratings are of investment 2nd Quarter 15% 14% .41

{ grade and will permit the use of com- 3rd Quarter 18 15% .41 Quaner 16% M4 A6

[ mercial paper at competitive rates.

i The Company plans to use commer- , v. m __ -

cial paper for part of its short-term 5 ,, c' - y {; * '

{ financing requirements.

l.

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! Short-term borrowings increased 4 *

3) . - r--- :.

- ,, J during 1979 from $6.6 million on January 1 to $13.5 million on

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l December 31. This amount was re-duced to less than $1 million in  ; ;

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January af ter the final delivery of the .

Series Z Mortgage Bonds. -

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With the Company's continuing 'y: -

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construction program, it is anticipated / -, -

K ., N that both debt and equity financings will ba necessary in 1980. The Com-pany is exploring all possible means

fr - Y] - * ' '

y of financing at the lowest cost. The * *,. $w- y Company's interest coverage levels 3,,3700, con 3,7ye,on

- an important financial ratio ex-l pressing relation of income to interest GENERAT Y pU charges - remained excellent in l

1979. The five year trend is shown on page 7 indicating sustained coverages "

of over 3.0 times for the past five years.

The Company has made application m for tax exempt revenue bond financ-i ing through the Vermont industrial Development Authonty. These bonds ,,

would be at a lower cost to the Com-

. pany than conventional debt, and

$m would be related to qualifying projects in the plann.'ag stage, such as low b

g head hydro developments located ' ,

within Vermont or service facilities.

Rats Case Activity Although the Company had no rate increases which became effectiva in 1979, it submitted a requer,t to the 500 Vermont Public Service Board on l

l 1979 1989 8 .

_ . _ _ _ _ _ _ , ._ ._.- _ __ _ -- - _ -- ~ _- - - - - - - - -

FUTURE POWER SOURCES Cost in ThousandsW Projected Unit Fuel Completion . .

Actual ' 1980 thru Name Source Date Megawatts - thru 1979 Completion Total Seabrook #1 & #2 Nuclhar - 1983,1985 36 $11,733 ' $17,480 ' $29.213

- Pilgt:m #2 ' Nuclear - 1987 20 4,695 - 20,746 25,441 l

. Mdistone #3 . Nuclear 1986' 20 9,403 - 14,304 23.707 -

. Montague #1 & #2 Nuclear Under Review 40 450 N/A N/A

0) Does not include allowance for funds during construction or cost of nuclear fuel.

November 30 for a retail rate in- total energy requirements at a cost of become more competitive offsetting crease of 8.2% After review by'the 2c per Kwh. An accompanying chart the Company's rate design efforts Public Service Board, the rates were on power sources shows present and which specifically discourage on-peak allowed to become effective without - future power supplies. loads.

heirings or suspension commencing On January 11 1980, the continued As part of its future power re-with January 1980 sales.' The rate in- availability of 23 megawatts of low quirements, the Company continued

< cruse amounted to $5.3 million on a cost Niagara Project power from the to invest in several nuclear power list year basis and will be collected Power Authority of the State of New plants. Construction of the Seabrook ts a 3.5 mill surcharge on ejl V' nont York (PASNY) was assured through #1 and #2 units has continued despite rit!il kilowatt hour sales. June 30,1985, when a new contract financial difficulties of its lead owner.

The rate filing included an overall was signed. In 1985, both the Niagara Unit #1, currently 30% complete, has r;t) of return of 10.8% and a return and St. Lawrence contracts with 1983 as the expected in-service date.

on common equity of 14.5% in allow- PASNY will be subject to termination. The Pilgrim #2 unit is awaiting is-

' i ng the rate increase to become ef- The contracts provide for possible ex- suance of a construction permit. The fective, the Board continued its ~ tension beyond 1985. Together, these Montague e.h are currently under gliow:nca of a 14.5% retem on.com- two contracts provide 68 megawatts review with little activity anticipated in mon equity authorized in three prior of power to the Company. A planning the near future. Despite financial rats cases. The Company's cost of target of the Company is to seek and problems, construction delays and the servics fully complied with the maintain a diverse power supply with probable increase in nuclear costs as rat making principles established by hydro generation a continuing im- a result of Three Mile Island, the

. the Board in the previous rate case. portant source. Company believes that nuclear power During 1980, the Ccmpany plans c Future power planning must face continues to be the least expensive file for rate relief in its several the reality that the real cost of elec- source of base load power for New

. jurlsdictions, retail and wholesale, in tricity as a form of energy has de- England utilities.

order 13 maintain the necessary rate , clined and will continue to do so in Oil is prohibitive as a base load of r; turn to attract capital and provide the naar future relative to other source of power and there are no

! adequat) service to customers. availaole sources, such as oil. This is new coal-fired plants beyond the plan-( .

important in Vermont since currently ning stages at the present time. Par-l Currect and FutureSources 70% of the State's total energy is ticipation in a Vermont woodburning l of Power provided by oil. Other alternatives are plant is under study. This is concistent

!~

~ During 1979, the Company con- not available at this time with the with the Company's objective of hav-i tinued 13 rely heavily on nuclear. possible exception of wood for home ing a diversified power supply.

power (41%) and hydro (31%) as heating. As noted previously, the im- To meet the Company's future primary sources of energy, with coal- mediate impact on the Company as a power requirements, a number of (11%), oil (8%) and other NEPOOL ~ result of the change in the relative hydro developments are being pur-sources (mostly oil) providing the . price of energy is an increase in the sued. These are in two general cate-balancs cf the Company's require- uso of electricity for off-peak water gories: existing sites and new sites.

ments. Vermont Yankee Nuclear i heating. This, fortunately, is a con- The Company has 18 active hydro Power Corporation, the Company's - trollable load. If the price of oil con- generation stations. In addition to largest single source of power, had tinues to escalate; other electric these facilities, there are a number of

, cn cxcellent year providing 30% of . energy demands such as heating may abandoned sites for which the Com-9

i l

pany holds operating licenses. With was affected by the continuing the changing price of alternate fuels, escalation in purchased power costs j e number of these sites now appear which increased by 8% These are i to be economican feasible. In addi- costs over which the Company has THE 1979 INCOME DOLLAR tion, the Company is exp!oring a relatively little control in the ,

number of new hydro development short run.

sites. One of the most promising is Other operating expenses in-loccted in East Georgia on the creased by only 45 This is a result Where the income Dollar Came From:

Lamoille River in northem Vermont. of the Company's continuing efforts to )

The Company is working with Ver- scrutinize all expenses and to in-mont Hydroelectric Associates in the crease productivity. s development of this 14,000 kilowatt facility. The planned East Georgia Employee Wages and Benefits J, project will provide up to 35 million There were 577 employees at the ",

kilowitt hours annually. end of the year compared with 571 in e

+

Additionally, several smaller proj- the previous year. Wages and , y ects tre in the design planning stage benefits during 1979 amounted to $12 h including Frog Hollow (1500 kilowatts) loc;ted on the Otter Creek, Middle.

million, an increase of 5%

The Company and Local 300, y

bury; Bradford (930 kilowatts) on the International Brotherhood of Electrical Writs River; and Bamet (2200 kilo. Workers, which represents 240 em-witts) on the Passumpsic River. The ployees, reached a two-year agree-Sugar River in the City of Claremont, ment which expires on December 31, as New Hampshire, offers another 1981. The agreement provides for 11 % 0'"*'

potential hydro project for develop- annual increases of 8% in base rates 02n'c ment (2000 kilowatts). The City and in 1980 and 1981. A cost-of-living ha the Company have applied for a adjustment based on the change in permit to study the feasibility of the the Consumer Price Index was also project on a joint and cooperative included.

basis which should lead to a mutual sharing of benefits. Innovative project Springfield Where it Went:

financing and revenue bond financing During 1979, the Town of Spring-tra being studied for these projects. field continued its efforts to take over 45 in 1979, the State of Vermont the Company's distribution facilities in p,,Q,, Demoauoa 4%

"*'"'"'*d cErne cigned a contract with Hydro-Ouebec order to operate a municipal distribu- o.vanos n oiv.oend '

ior purchases r.4 52 megawatts of tion system. Extensive hearings are Bu=$s in, 5),,, j power from Canada over the next five being held before the Vermont Public /

years. Although this power may not Service Board. Expenditures by the i be tvailable during the peak winter Town of Springfield total almost $2 I months, it will augment current million to date including design and .

capacity in time of need for replace- engineering studies related to the g ment energy. Further discussions are takeover of the distribution system as . g i continuing with various Canadian well as development e the Black l l sources and possible future agree- River hydro project. . ne Company i I '

?.

ments may make additional amounts believes that when tN actual costs of of power available to Vermont on a setting up a municipal system are '

mora permanent basis through Hydro- recognized, rates which the municipal '

Ouebec or Ontario Hydro. would have to charge in the town will more than double. Hearings are Operations and Expenses expected to continue during 1980.

A 1979 income dollar shown on The ruling is likely to be appealed to this page indicates the major the courts by one of the parties, categories of expenses. The Company thereby extending the final decision.

10

l l

l

. Nr'^5Inaq. nffi:t J M a l(;

f The goal of the Company s Icad Central Vermont is continuing its LOAD MANAGEMENT PROGRAMS l management program is to provide participation in load management Customers l incentives for customers to use power stud <es. including an expenment with at off-peak penods This will reduce dual fuel heating systems Such Program 12/31/78 12/31/79 Growth

! capital expenditures and allow less systems. if proved feasible, will allow Off-Peak Water l expensive energy sources to be used customers to utilize either electocity Heating 27.447 28 901 1.454 This section highlights our progress in or an alternative energy source. such Time-of-Day 1979 as oil The system would then use Rate 664 909 245 9* Heat 171 251 80 l Rapidly changing energy pnce electncity dunng off-peak penods and ne&

t structures in the late 1970's caused the alte rnate fuel dunng the peak Pricing All cu.:,lomers

, Vermonters to reevaluate their energy penods Both the customer and tFa sources Almost 1.800 Vermonters Company would benefit - the became load management customers customer through the reduction in the in 1979 as shown in the accompany- use of fuel oil. and the Company by ing table interrupting electnc service when The increase in the pnce of oil, needed Central Vermont now hL .

' ~

- ~ .g.f , ,

which accounts for 70% of Vermont's controllable loads equivalen'. to 10% .' . n .s total energy requirements. provides of its current system peak in L .., ,

an incentive for customers to convert summary. Central Vermont and its W . ~3,  ; e -

to the use of controlled electnc water customers are continuing to respond 9 .. .;4 gn.

.b

.j 'd ,- $} j heating to the nation s energy probiems by A%~ - i-Many Vermonters have begun to seeking a vanety of innovative '[ j k' ' , 7 I

, take advantage of wood as a pnmary methods providing energy at the [.),, "/L47 ( /, .

l heating source Approximately lowest cost 4 '

a - 3.

20-25% 0 the homes in Vermont are  :;%; N . ' '. ;g' 5

heated this way Many homes heated ^ ~ '"

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with electric heat or oil are now '

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utilizing Central Vermont's time-of-day EC rate which allows customers to # - E ,' ' _ _

control their heating needs, as well as . 4 4

their appliances (freezers, dryers. N e ,.;. --

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~

water heaters). with deferrable rates in a manner that helps Central -

Vermont reduce ite peak demand in . .

Inis manner expensive oil generation *#

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costs are avoided while providing cus- k- , , r s -..."'

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'y a$ '6 tomers who are wdling to defer some

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' saving benefit to themselves and the r -

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An increasing number of new 5 >1 i ' R4 i

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homes and businesses are finding it . ' 4 , ,

beneficial to install storage heat equipment instead of oil or resistance -

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',e electnc baseboard heat These

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systems store electoc heat dunng off- .. 8

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peak hours while providing an even ',g

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flow of heat dunng the remainder of ,^ - J ' i r# , -

the day

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For the nuclear industry.1979 was the Company s pnncipal source of The nuclear industry undertook an ef-a year of turbulence. marked by a power dunng the Iranian oil cutback fort to understand the probiems and numbor of highly-publicized events and at the time of the highest peak issues involved in the incident Vermont Yankee performed well in use ever recorded at Central Ver- Vermont Yankee is taking specific 1 1979 The plant had a 76 6% capac- mont steps to improve operating standards l Ity factor for the year This means in March. When electncity use which include reviewing control room I that the plant operated more than dropped back frGm high winter levels. procedures, stepping up operator three-quarters of the time This perfor- the plant was shut down for several training and installing equipment for l mance maintains Vermont Yankee's weeks to replace some faulty fuel In better monitonng and control of plant record as une of the nation's most December, Vermont Yankee s fuel operating areas ,

reliable boshng water reactors Follow- suppher announced the results of a Vermont Yankee also joined with ing is a bnef chronology of the most year-long investigation into this prob- the nuclear industry in establishing important events of 1979 lem Improved testing of new fuel two new institutions The Nuclear l January and February were ex- should avoid future fuel difficulties Safety Analysis Center (NSAC) to in- l Cellent months, with Vermont Yankee During March and Apol. exhaustive terpret the lessons of Three Mile l at higher-than-rated capacity It was reports of the accident at Three Mile Island. and the institute for Nuclear  !

Island were pubbshed in the media Power Operations (INPO) to set stan- I dards of excellence and dev;se methods for evaluating a nuclear utility's performance

.7 .

Several new NRC requirements N resulted from the Three Mile Island in-

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cident Vermont Yankee installed y,/ g'.3.N J.:'.i.[M..

4

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equipment and adopted new proce-

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dures as quickly as possible Re-quests for tours of Vermont Yankee I. * '

4 have increased People are asking i g

.(.- , k f[ more sophisticated questions This

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trend is encouraging since we beheve

., 3 - * - that an enkghtened pubhc makes

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a reasonable decisions

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• Even through a union stnke in the

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'J g M . * - late spong. the plant operated satis-

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• . - '. factonly until late September when it C j; y ( ~ [It i. ', o was shut down for annual refuehng

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. ' . y 1.; p.. j -p p" '4 .- and maintenance Despite vanous technical problems and a demonstra-

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.giWTf tion by anti-nuclear activists dunng l g...e refuehng, the plant was back on-hne 1

.- on schedule in early November On l the seventh anniversary of com-

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ro ,$ mercial generation. November 30.

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'~; 1979. the plant was running at full

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et The year ended as well as it began.

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with a December capacity factor of

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A 35 over 100% Over the year, the

' ' ~. .- %

~

. .E W- iw average cost of a kilowatt hour produced was a low 2 0 cents in

>- w ,j ~% addition. five and a half million barrels

-+'

. . . . .c .,.~ -',- ,

g of oil were saved dunng 1979

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If you should find yourself in the s cinity of Vernon. Vermont, you are l .

. , 7 1 -

invited to visit the newly renovated l.j

' '.; Energy Information Center at the plant

37. , [- -- ' . ;

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12

l I like to let the costomer know that "

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someone is interested in their prob- .'N. h lC

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h ' *~ Y lem and that together we can reach a

,l~ hh.l .R.' N solution that is beneficial to both the

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There is a saying ' Industry moves

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everything from oaper cl'os to con- y struction equry . rent in a fleet that's

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f' geared to the needs and safety cf our peopic In (Gday S world it is im-

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perative that our Company minimile a']- *

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the cost to the customers Transporta-

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tion is an ntegral part of that effort '

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i timely with tha customer It's my job 7 to see that customers are satisfied

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. .'?'t joy working with the people

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I l{, Lf 3 f q)E printing se do in-house is definitely y suving the Company money - that s i Y. .% W' i

important

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I ve been working for the Company tor 42 years and I hke my job very

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much We generate the product the

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Company sells Hydro is a natural for J  ?. . ,~< Vermont and we'rc using 11 to provide ll ';:..Nbd y ..

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customers - electncity *

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s. jr,.-l . bihty after hou S to see that the

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on Basically. se have to give the customer a satisfactory answer to his y.,

. ll 3roblem I've been doing 11 now for 27

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years and I enjoy it lust as much now y '

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as when I first came here possibly

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even more so y -

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k. . -: Our company draftspeople can help l "g ,

._. i someone better explain or understand l

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. ~ ~ :- energy sublects through the use of ,

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1 providing a needed service to our y'fs-^ , l.f,' "!.

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employees and to our customers by turning complex energy questions into

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'We're a service department for Storm duty is an extremely important employees and other departments thing These are our custumers call-They're our custome's and we have ing in and these customers are pay-g to treat them the same way the Com- ing us I always try to say I under-i puny treats its customers stand I realize you're in trouble. and we'll do the best we can to help you i

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and see the problems from their point

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The goal of power supply planning is T f to select a combination of sources of

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%{ supply of electricity at the lowest y }'

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is everything s cnanging every day .- g

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changing prices in oil or coal proba-a ..

bil ties of units being on-line being i

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able to supply the energy you want _&. . f 3, Thern are so many things you have to

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take into aCCoun! We USed to look at '{  %, ,.

Our DurChaSe poher Sources at sit- N .

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month intervals Nos Ae IOok at them .

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cost to serve each group helps to pro-9

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vide us with a basis for designing fair and equitable rates to our customers lW R ' .

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and a fair rate of return to our

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stockholders

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"PrGbably the most important (, art of

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., _ my lob is the personal safety of the

,1 workers in our Compant It's not like

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just an ordinary job M.any people are

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depending on yta. It's a good feeling y . for our linemer to know that their s . < gloves were tested at 20.000 volts I

when they re using them at only 7 200

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.'." ' guidance in matters pertaining to the

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energy field and how it affects them.

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communications wrthin the Company kh ^%'A .. h..* ?,.s

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16

RESULTS OF SHAREHOLDER SURVEY Profile

1. Number of Shareholders Up 16% since 1970

2. Investment Objectives Current income is primary objective

3. Income Median

• family income is less than $20,000

4. Employment Majority of CVPS shareholders are retired. Actively employed shareholders have a wide range of occupa-tions 5 Age Average age of shareholders is about 65 years

o. Shareholdings Median size of holdings is less than 175 shares

7. Location 57% of holders reside in New England states

8. Customers shareholders Approximately 11% of shareholders are also customers

9. Years as shareholder Over 35% of shareholders have owned stock for more than 10 years

10. Dividend Reinvestment Plan About 10% of shareholders participate

11. Shareholder Information Over 90% feel they are adequately informed on cor-porate matters

• Median is the point at which the total group is evenly dividedin half with half the members above the median point and half below.

l Analysis j During the third quarter of 1979,-the first survey of Central Vermont shareholders was conducted. Almost 40% of the shareholders participated.

i Shareholders answered thirteen questions providing a wide range of information con-cerning their investment objectives, size of holdings, demographic backgrounds, opinions and

~

informational needs. Twenty percent of the respondents took the time and effort to make specific comments regarding issues affecting the Company ranging from general comments to specific questions regarding Company policies.

The following pages outline the characteristics of our shareholders based on the survey rcsults as well as other sources and respond to the most frequently asked questions.

b.

4- .

.- .a

1, Number and Type of shareholders own less than 100 SHARES HELD BY MAJOR Groups Shareholders shares, while about 3% of the holders

The total number of Central Ver- own over 1,000 shares which includes mont shareholders is 17,500, an in- the large institutional and nominee as insi,tutions as corporai ons as

"Y crease of 16% since 1970. This num- holdings. The mid-range holders of ""'l'*"llg p, ' +'**'S' ber includes 800 institutional holders between 100 to 999 shares own on such cs foundations, pension funds, the average 208 shares each and

' tc., c s well as nominees - such as

. hold 61% of the total shares out-

^

brok:rs and bank names - who standing. The median holding is 166 cften hold stock for their individual shares while the average holding is t customers. To the extent possible, in- 191 shares. somen.

dividu Is who have stock held in their brok;rs and bank names have been y

7. Location NoWnees contacted and are included in the The majority of registered share- 3 sury;y results. holders are located in the six New muoint Aee uni.

Ov:r 70% of Company stock is England states and they own 45% of held directly by individuals or in joint the shares outstanding - thus, the accounts and less than two percent average size holding is small. Share-by institutions and pension funds. holders residing in Vermont represent 14.6% of the shareholders and hold

2. Investment Objectives 9.5% of the total shares.

The primary objective for owning Shareholders reside in every state 1.ntral Vermont stock was " current of the union in addition to such income." The second largest invest- foreign countries as Cuba, Italy, ment goal was " total return" (current Panama, and Trinidad-Tobago.

income plus long-term gain). The balance indicated "long-term growth" 8. Customers-Shareholders and a variety of other objectives as Approximately 11% of our share-th:ir primary investment motive. holders are also direct customers of NUr4OCT: oF YEARS As SHAREHOLDER Central Vermont. This represents (s of Totaisnar.noio rs)

3. Family income about 2% of total customers. Of A majority (54%) of Central Ver- course, thousands of others indirectly fy'd t ,, ,n.n , y.., o,,,i to 2 v ,

mont Public Service shareholders in- own shares through pension plans, it;-

dicated family incomes of below surance, and c ther investment

$20.000 with the median income be- mediums.

~

a.

ing $18,900. Over 46% of share-holders indicated incomes of $20,000 9. Years as Shareholder "%'

or gt:ater. Shareholders have shown strong loyalty over the years. 65% have a

4. Employment Status Of the shareholders actively em-owned stock for over 5 years with the median being 8 years of ownership. In

, Q ses -

pioyed, the occupational analysis in- addition,36% of shareholders have dicated that 32% are professionals, been owners for more than 10 years 23% cre homemakers,20% hold and 14% for more than 20 years.

managerial positions,8% are in trade or cr:ft fields, and 7% hold sales or 10. Dividend Reinvestment o= S to cleric 11 jobs. About 10% of Central Vermont ov.,

shareholders are active in the Divi- 2 io s v..r.

5. Age dend Reinvestment Plan. , g y,,,,

Although Central Vermont Public Service shareholders are represented 11. Shareholder Information in all cge brackets, a majority are age Generally, shareholders expressed 65 or over. The next age group is be- satisfaction with reports received tween 55 and 64 years of age. about various aspects of the business.

Many took time to comment about

6. Central Vermont Public Service Company affairs.

Holding Size Shareholder holdings vary greatly in size but are characterized by small holdings. Slightly over 41% of the 18

i DIVIDEND REINVESTMENT PROGRAM PARTICIPATloN LARGEST REGISTERED INDIVIDUAL HOLDINGS BY STATE BV VARiouS SHAREHOLDER ORoUPS taased on Individual and Joint Accounts!

Long Term Growth Goal :I ' % -($.qEf@ 36% Connecticut ] 18%

C^ue Cotf ar Workers 24 % Vermont , ,

~

i1 11 %

Under Age SS M 23% Massachusetts L r" '

' ' 1 10 %

Managenall Profess 6onal 22 % New York , I9%

CentralVermont Customers M w,2 15% Fionda b ]8%

Annuallncome Over $20,000 ERNWa 14%

All Shareholders

• 10 %

%atimo m000. tess m ,%

n.t.,ed e n.

Current income Goal

] 4%

Homemakers b 4%

Cuestions Frequently Asked by Shareholders in Survey and the Company's Response

1. Do y:u have any plans in the About 10% of the stockholders cur- flation on the purchasing powt.r of the futura for listing on either the rently participate through dividend stockholders.

Am:rican or New York Stock Ex- reinvestment or cash purchases.

change?

5. The steady increase in dividends The Company periodically reviews 3. I purchased stock originally is greatly appreciated, but how thm costs and the benefits of listing because dividends were partially can you pay 46c when you earn v:rsus continuation of over-the- tax exempt. Why are they no 43c?

count:r trading. Although the Com- longer exempt? The question refers to the summer pany nas no immediate plans for in the early 1970's as a result of listing, as the Company grows it quarter when usage of electricity and lower earnings levels and IRS income is traditionally lowest.

would seem logical that at some point methods of calculating the taxability Dividends are paid out of retained in tim 3 listing on a major exchange of dividends, part of the Company's will be desirable. earnings and may reflect earnings dividends were considered to be a over past periods as well as current.

return on investment and therefore The Company's payout ratio (annual

2. Y ur dividend reinvestment pro- were partially tax exempt. Since that gram is of great interest. Where time, the Company's earnings have do I obtain information on the improved markedly and the tax laws program and how do I enroll? have been changed. In recent years, occuPATloNS OF An information booklet on the Com- therefore, the Company's dividends ACTIVELY EMPLOYED SHAREHOLDERS pany's dividend reinvestment plan have been taxable.

may be obtained upon request by us- While the nontaxability of dividends ing the postage-paid reply card may have been pleasing from a short enclosed with this copy of the annual range viewpoint, increased profits and d j report. Stockholders interested in par- increased dividends are certainly ness ticipating simply fill out an application more desirable in the lcng run, ' ass i -

form specifying whether only divi- *d"*"d w ameeemene==.

dends cnd/or optional cash payments 4. Will dividends be increased to .-

ar] t) be made. Contributions through match or exceed the rate of in- "%

either of these two methods are flation?  %.

r: invested in new stock issued by the As discussed on Page 6 the Com-Company without cost to the par- pany's aim in its dividend policy is to ticipating stockholders. Specifically recognize the effect of in-19

I }

_~

dividends as a percent of annual 10. Is there some way to consoll- SHAREHOLDER ORoUPs BY earnings) is 67% and is low when date the records of stockhold. NUMBER OF HOLDERS compared to the electric utility ers to avoid costly duplication uo,ne ,omoio.re average of 77% The Corapany's divi- in mailings? * *"o'*4 dend based on this trtditional mea- The Company's stockholder agent Mn7,N sura is well protected. is continually checking on duplicate ma. lings. A major problem exists

6. Why have stockholders not been wherever there is any difference in given pre-emptive rights on new joint accounts requiring separate stock issues? handling although they may be dupli- -a Pre-emptive rights are sometimes cative. Stockholders who become Len ha -

off; red to existing stockholders and, if aware of duplications which can be ses .

cx;rcised,~ allow existing stockholders eliminated are encouraged to contact  %'*,",,,,*,,"

to maintain their ownership share. the transfer agent or the Corporate The use of pre-emptive rights is Secretary.

Cl ;rly important to stockholders of firms whose owners are in'arested in 11. Is it possible to arrange direct maintaining their relative control posi- deposit of dividends to per-tions. This is genei.JIy not a concem sonal bank accounts similar to for the average utility investor whL social security direct deposits?

simply uses the open market to in- Yes. You can arrange deposits to -

c.sase or decrease holdings. Occa- your bank account by writing to the sicnally there are special situations Corporate Secretary or to our bank where rights offerings may be con- directing them to make such deposits.

sidered The latter request should be directed to: SHAREHOLDER GROUPS SY

7. Hive you considered including a NUMBER OF SHARES The First National Bank of Boston 5% discount on the dividend Transfer Department wornt,.r ov snern r; investment program similar to P.O. Box 1891 * " ' ' "

what many other utilities are of- Boston, Massachusetts 02102 t,,,1,,

7 f; ring? a snern Yes. A discount has been con- 12. Is it possible to purchase stock sidered and studied. Our present in the names of my grand-thinking is that the discount is costly children and if so, how do I go and unnecessary to the success of about it? s the plan. There are statutes in all 50 states - a related to Uniform Gifts to Minors umar .

8. Is it possible to receive dividend "***'"

whereby grandparents, for example, checks by the payable date? can purchase stock as custodians. ..,4 Although the dividend checks are When the child reaches a majority 100 - Lees mailed from Boston, the Company will age, the stock so purchased will ~ "s"eie ee att::mpt to expedite delivery by mail- transfer to the specified recipient.

ing s;veral days prior to the payable Your stockbroker will be glad to help date. in the purchase of stock whereby you would become custodian for the

9. Is it possible to sell small beneficiaries named.

quantitles of shares (either preferred or common) back to

. the Compt.ny and avoid paying a broker's fee? The Company appreciates inquiries from stockholders at any No. Except under special condi- time as it does from employees, customers and others, and we tions, the Company is not authorized particularly appreciate the stockholder survey response which to Cct as a broker in the buying and has provided this opportunity to address specific questions. We selling of its outstanding securities. appreciate the comments supporting and approving Company Your local stockbroker will be glad to operations and suggestions on ways to improve. We are par-

. offer advice and carry out any se- ticularly gratified that our stockholders overwhelmingly supported curity transactions. the Company's participation in the nuclear industry.

20

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-7

- Management's Discussion and Analysis of Operations l

The Company's operating results for the years 1975 Due to the commencement of commercial operation of through 1979 reflect continuing inflationary pressure on the jointly-owned W. F. Wyman Unit #4 oil-fired generating costs, a fluctuating pattem of modest growth and the effect plant, during the fouith quarter of 1978, depreciation in-of several rate increases. Retail rate increases effective dur- creased by $87,000 and production costs by $241,000 in

ing 1974,1975 and as of June 20,1977 have significantly 1979.

contributed to an improved eamings performance during this Maintenance expenses rose in 1978 and 1979 related to <

. period. An additional retail rate increase of 8.2%, effective the Company's line clearing and tree trimming program and . ,

January 1,1980, will increase future revenues, a continued emphasis on maintenance of our electric pro -

duction, transmission and distribution systems.

Operating Hevenuest In each of the last five years operating revenues have increased over the preceding year. Taxes: Income taxes in recent years reflect the substantial j These increases are attributable to the following factors improvement in before>.ax income for financial reporting pur- ,

(dollars in thousands): poses; the utilization in 1975 of operating loss carryforwards .

which resulted in an extraordinary credit to income; and in 1979 1978 1977 1976 1975 1976 the utilization of investment tax credit carryforwards of Change in retad KWH sales $1,012 $3.930 $ 667 $3.600 $ (333) approximately $970,000. For further information conceming increased retaL rates 1,325 1.886 4,701 3.441 6.084 income taxes see Note 6 to Consolidated Financial increased e*sa4 and Statements.

other revenues 829 82 199 -652 64 Net increase over prior year $3,106 $5.898 $5.567 $7.693 $5.815 Allowance for Funds During Construction: The allowances for equity funds and borrowed funds used during Sinco 1975 the Company has exper:enced a modest growth construction in recent years reflect the continuing increase in in KWH sales. Although our customers continue to conserve construction svork in progress for future nuclear generating

- energy, retail KWH sales have grown by 6.5%,1.0%,5.9% plants, part:cular'y the Seabrook, Millstone and Pilgrim units.

md 1.4% for the years 1976 throLQh 1979, respectively. See Note 8 to Consolidated Financial Statements.

Operat/ng Expenses: Costs for purchased power, which Cost of Money: The increase in interest on long-term debt represent more than 50% of our total operating expenses, in 1979 reflects the sale of $10,000,000 of First Mortgage 9%% Bonds, Series Y ($8,000,000 in October 1978 and cin be categorized into two types: costs for capacity

$2,000,000 in January 1979) and the issuance in September avillable to the Correnv and costs for energy delivered.

These two components of oursurchased power costs for the 1979 of $4,250,000 of First Mortgage 10%% Bonds, Series Z.

last five years were as follows (dollars in thousands): Interest expense on short-term borrowings reflects higher average short-term interest rates (12.97% for 1979 com-1979 1978 1977 1976 1975 pared with 8.88% for 1978) and a higher level of average short-term borrowings during 1979 ($6,603,000 for 1979 Capacity $18,882 $17,563 $18,404 $19,372 $17.665 compared with $4,213,000 for 1978). See Note 5 to Con-Energy 15.988 14.743 10.979 10,624 **"83 solidated Financial Statements.

Totaipurchasedpower $34.870 $32.306 $29.383 $29.996 S25.648 ln 1979 funds generated from operations (net income ad-Justed for non-cash charges and credits to income)

Although we have been able to hold our capacity costs to a amounted to $16,857,000. After deducting dividends declared relatively constant level, our energy costs have increased of $6,705,000, intemally generated funds amounted to dramatically over this period of time. Energy costs are $10,152,000, which represents 78% of the construction and

. directly related to the price of oil, nuclear fuel and coal and plant expenditures made during the year, compared with the growth in units of energy purchased. The units of energy 57% for 1978. In order to provide funda for the Company's purchased grew by 5.8%,2.8%,6.9% and 1.5% for the continuing construction program and other business pur-

. years 1976 through 1979, respectively; poses, additional funds must be obtained by issuing long-

- Trmsmission cost increases of about M29,000 in 1979 term debt and equity securities, as necessary. Short-term

. wera principally related to transmission of electricity over borrowings, used to provide funds for the interim period, are lines owned by others, which for the most part reflected genera!!y paid when long-term debt or equity securities are higher costs of operating the Velco system. issued.

22

am Consolidated Stat:: ment of Income and Rstained Eamings

1. 1. vs b1 thousaruts except amosatts per share)

Year Ended December 31 1979 1978 1977 1976 1975 OPERATING REVENUES $78,185 $75,019 $69,121 $63,554 $55,861 OPERATING EXPENSES Operation -

. Purchased power 34,870 32,306 29,383 29,996 25.648 Production and transmission 5,797 5.235 4,940 4,793 4,758 Other operation 10,965 10,891 10,163 8,849 7,219 Maintenance 4,200 3,654 3,281 2,988 2,218 Depreciation - 3,466 3,148 3,048 3,015 2,678 Other taxes, principally property taxes 4,288 ~ 3,994 3,899 3,765 3,457 Taxes on income (Note 6) 4,250 4,861 4,457 1.236 1,517 Total operating expenses 67,836 64,089 59.171 54.642 47,495 OPERATING INCOME 10,349 10,930 9,950 8,912 8,366 OTHER INCOME AND DEDUCTIONS Equity in earnings of companies not couotidated 2,327 2,314 2.268 2,370 2,362 Allowance for equity funds during construction 1,684 1,173 742 276 107 Other income, nel 184 189 331 233 161 Taxes on income (Note 6) (310) (299) (282) (123) - (120)

TOTAL OPERATING AND OTHER INCOME 14,234 14,307 13,009 11,668 10,876

-INTEREST EXPENSE Interest on long-term debt 5,066 4,284 4,150 4,103 3,890 Other interest .

879 402 60 275 1,126 Allowance for borrowed funds during construction (1,478) (747) (371) (188) (93)

Net interest expense 4,467 3,939 3,839 4,190 4,923 INCOME GEFORE EXTRAORDINARY CREDIT 9,767 10,368 9,170 7,478 5,953 Extraordinary credit (Note 6) - - - - 1,010 NET INCOME 9,767 10,368 9,170 7,478 6,963 RETAINED EARNINGS, JANUARY 1 19,418 15.149 11,985 9,867 7,577 29,185 25,517 21,155 17,345 14,540

' CASH DIVIDENDS DECt.AP5D '

Preferred stock L 1,772 1,954 2,136 1,744 1,712

. Common stock 4,933 4,145 3,870 3,616 2,961 Total dividends . 6,705 6.099 6,006 5,360 4,673 RETAINED EARNINGS, DECEMBER 31 $22,480 - $19,418 $15.149 $11,985 $ 9,867 Average shares of common stock outstanding .'2,921,527 2,881,111 2,848,759 2,734,642 2,312,914 PER SHARE OF COMMON STOCK Income before extraordinary credit $2.74 $2.92 $2.47 $2.10 $1.83

Extraordinary credit - - - - -

$ .44

- Net income .

$2,74 . $2.92 $2.47 $2.10 $2.27 Cash' dividends paid . $1.69 $1.44 $1.36 $1.34 $1.28 See .cwi+4r.g notes to consoMated hnancial statements. -

23

Consolidated BalanceSheet

tabnersht thousards)

December 31 1979 1978-ASSETS l UTillTY PLANT,at originalcost $119,440 $113,880 -

Lessaccumulateddepreciation 31,269 28,890 88,171 84,990 Constructionworkin progress 36,759 28,583 Net Ltility plant - 124,930 113,573 INVESTMENTS IN AFFILIATES, at equity (Note 2) 24,643 24,521 NONUTILITY PROPERTY, less accumulated depreciation 3,286 2,705 CURRENTAESETS Cash 1,482 1,343 Accounts receivable, less allowance for uncollectibia accounts 7,810 6,834 Unbilled retroactive revenue 1,749 1,477 Unbilled revenue-estimated 4,664 4,646 Materials and supplies, at average cost 1,943 1,436 Prepayments 1,052 992 Other currentassets 733 785 Totalcurrent assets 19,433 17,513 DEFERRED CHARGES 8,222 8.245

$180,514 $166,557 CAPITALIZATION AND LIABILITIES CAPITALIZATION-Common stock, $6 par value, authorized 5,t.n ,.,000 shares outstanding 2,946,324 shares and 2,898,983 shares, respectively(Note 3) $ 17,678 $ 17,394 Other paid-incapital(Note 3) 24,192 23,613 Retained earnings 22,480 19,418 Totalcommon stock equity 64,350 - 60,425 Preferred and preference stock (Note 3) . 15,258 15,285 Preferred stock with sinking fund requirements (Note 3) 5,310 6,650 Long-term debt (Note 4) 67,548 62,213 Totalcapitalization 152,466 144,573 CURRENT LIABILITIES Notes payable-banks 13,500 6,600 Accounts payable 1,581 1,253 -

Accounts payable-affiliates 4,048 3,575

' Accruedinterest 1,108 900 Accruedincome taxes 210 4,928 Other currentliabilities 1,447 1,667 Totalcurrentliabilities 21,894 18,923 DEFERREDINCOMETAXES 3,102 1,651 ,

DEFERREDINVESTMENTTAXCREDITS 2,528 -842 DEFERRED CREDITS AND MISCELLANEOUS RESERVES 524- 568

' COMMITMENTS AND CONTINGENCIES (Note 8)

$180,514 $166,557

-I See accompanymnotes to consoldated knancialstatements.

.1

=- 24'

Consolidated Statement of Changes in Financial Position (donnes b thousands) ^

Year Ended December 31 1979 1978 1977 1976 1975 SOURCE OF FUNDS Funds from operatione

~

income before extraordinary credit - S 9,767 . $10,368 $ 9,170 $ 7,478 $ 5,953 Principal norx: ash charges (credits) to income Depreciation .

3,466 3,148 3,048 3,015 2,678 Deferred income taxes and investment tax credits 3,137 (1,439) 2,080- 1,111 1,660 Allowance for equity funds during construction (1,684) (1,173) (742) (276) (107)

Dividends received more (less) than equity inct 50 369 401 291 (236)

Retroactive revenue' 272 1,477 (3,796) - -

Other 1,849 1,279 979 914 1,066 Total funds from operations 16,857 14,029 11,140 12,533 11.014 Funds f om outside sources Long-term debt 6,250 8,000 300 - 7,500 Preferred stock - - -

7,000 1,200 Common stock ' 724 535 429 6,475 -

Change in short-term debt 6,900 1.300 5,300 (9.300) (2,200)

' Total funds from outside sources 13,874 9,835 6,029 4,175 6,500 Total funds provided $30,731 $23,864 $17,169 $16,708 $17,514 I

USE OF FUNDS Construction and plant expenditures $13,065 $13,961 $10,766 $ 9,107 $ 5,970

' Dividends declared 6,705 6,099 6,006 5,360 4,673 Investments in affiliates 172 (240) (oG) (314) 755

' Retirement of long-term debt . 915 2,531 2,146 066 6,448 Retirement of preferred stock 1,340 . 1,340 1,340 670 -

Net increase (decrease) in other working capital items 5,849 (622) (4,441) 73 459

' Other, net 2,685 795 1,402 946 (791)

. Total furv', used . f,30,731 $23,864 $17,169 $16,708 $17,514 CHANGES IN OTHER WORKING CAPITAL ITEMS Accounts ' receivable $ 994 $ 857 $ (507) $ (959) $ 557 Unbilled retroactive revenue 272 1,477 - - -

Cash and other current assets 654 (1,004) (43) 1,481 134 Accounts payable (801) 343 (R'T ' (211) (121)

~ Accrued income taxes' 4,718 (2,424) . (2,24., (207) . (54)

Other cunent liabilities . 12 129 (843) - (31) (57)

. Net increase (decrease) ,

in other working capitst items S 5,849 $ (622) $(4,441)1 $ - 73 '$ 459

?

. See accompanyng noses so consoAdated Anancial statements.

Notes to Consolidated Financial Statements Note 1 "cc.;. f of significant accounting policies: Note 2-investments in affiliates: The Company accounts Consolldation: The consolidated financial statements for investments in the following companies by the equity include the accounts of the Company and its wholly-owned method (dollars in thousands);

subsidiary, Connecticut Valley Electric Company Inc.

The Company follows the equity method of accounting for December 31

~ lts investments in affiliates. See Note 2. Ownership 1979

_ _1978

- Begulaflon: The Company is subject to regulation by the Nuclear generating cornpanies*

Vermont Public Service Board (PSB), the Federal Energy Vermont Yankee Nuclear Power Corp. 31.3 % $18,332 $18.389 Regulatory Commission (FERC) and, to a lesser extent, the Maine Yankee Atorne Power Co. 2.0% 1,337 1.336 Connectcut Yankee Atornic Power Co. 2.0% 1,029 949 public utilities ccmmissions in other New England states Yankee Atornic Electric Co. 3.5% 716 725 whera the ComprJiy does business, with respect to rates charged for service, accounting and other matters. The 21,414 21.399 Company's accounting policies generally reflect the rate. Oth*r affiliated companies-vermont Electric Power Company, Inc. 58.4 % 3,110 2.910 making and regulatory policies of these authorities.

C.V. Realty, Inc. 100.0 % 119 208

. Revenues: Estimated unbilled revenues are recorded at the 524,643 $24'SN end of accounting periods. Through 1978 the Company's '

tariffs included fuel adjustment clauses under which fuel and the energy portion of purchased power costs were billed to customers. As of January 1,1970 the fuel adjust. Each sponsor of the nuclear generating companies is ment clause applicable to the majority of retail c.:stomers obligated to pay an amount equal to its entitlement percent i was terminated. age of fuel, operating expenses, and cost of capital and is Maintenance: Maintenance and repairs are chaqsd to entitled to a similar share of the power output of the plants.

maintenance expense and include repiacements of less than See Note 8 for the perrmntages of total power output retirement units. Replacements of retirement units and received from these companies.

Summarized f,nanc,al i i information for Vermont Yankee bett:rments are charged to utility plan: and the book cost of

' units retired plus the cost of removal ths.mof, less salvage, Nuclear Power Corporation is as follows (dollars in ara charged to accumetated provision for preciation. thousands):

Depreclation: The Company uses the straight-In.3 method of depreciation. Total depreciation expense was between December 31 3.03% and 3.45% of the cost of depreciable utility plant for 1979 1978 the years 1975 through 1979.

income Taxes: The tax effect of timing differences between pre-tax income in the financial statements and income sub-r 982 E 638 Net income applicable to common stock 5 5,811 $ 5.874 Ject to tax are accounted for in accordance with the rate- Company's equity in net income $ 1,819 $ 1,838 making policies of the PSB. See Note 6. Beginning in 1978, investment tax credits realized are deferred and amortizedto investment income over the lives of the related properties. Prior to 1978, Total assets, pnnccally utility piant s217,664 s211,231 the CompaPy followed the flow-through method of account- Less:

Ing for investment tax credits when realized. Preferred stock 18,325 19.425

' Allowance for Funds During Construction: Allowance for Lo'9tm oebt 81.279 85 800' N H Mes and defened credds 59,300 47,220 fu ds used during cor,:*truction (AFDC) is the cost, during th period of construction, o' funds used to finance con. Net assets S $8,600 s 58.782' st uction projects. The Company capitalizes AFDC as a part Company's equity in net assets S 18,332 $ 18,389 of he cost of major utility plant projects except to the extent tha costs applicable to such construction work in progress e havt been included in rate base in connection with rate- Vermont Electric Power Company, Inc. (Velco) owns and making proceedings.-The /iFDC rates used by the Company operates a transmission system in Vermont over which bulk wera 8.15%,8.41%,9.32%,10.27% and 11.13% for the power is delivered to all electric utilities in the state. Velco years 1975 through 1979. entered into a Power Transmission Contract with the State @

~ Deterred Charges: Costs associated with Vermont Yankee Vermont and under its terms bills all costs, including amorti-shutdowns required to replace original fuel rods and install - zation of its debt and a fixed return on equity, to the State off<3as holding equipment during 1973 were deferred. These and others using the system. This contract has enabled '

costs, which totalled $3,374,000, are being amortized to _Velco to finance its facilities primarily through the saie of

- expense over_ a ten-year period commencing January 1, first mortgage bonds. Velco operates pursuant to the terms '

1974 as approved by the FERC and PSB. ' of the State contract and an Operating Agreement with the

- During regular Vermorit Yankee refueling shutdowns the Company and two other major distribution companies in Ver-l Increased costs attributable to replacement energy pur- mont. Although the Company owns 58.4% (61.7% at

- chased from NEPOOL are deferred and amortized to Decernber 31,1978) of Velco's outstanding common stock.

. expense over the estimated period until the next regularly the Operating Agreemet t effectively restricts the Company's

- scheduled refueling shutdown, control and therefore V6 co's financial statements have not 2 26

4 been cor,solidated. Summarized financial information for par through a mandatory sinking fund in the amount of (elco O as follows (dollars in thousands): $670,000 per annum and, at its option, the Co npany may Decernber 31 redeem at par an additional non-cumulative $670,000 per 1979 1978 annum.

gn,, In 1979 other paid-in capital increased $448,000 for the excess of the proceeds over the par value on the Tranerrusion rewnues $10,425 59.8?6 6,016 sales of 45,893 shares of common stock, increased

%ratng exoenses 5231

$133,000 due to the amortization of capital stock 0"*'ating ocorne 4,400 4.615 1 expense related to the 13.50% series preferred stock O' hCO** .

282 133 and was reduced by $20,000 for expenses in connection l Total operating and other income 4,891 4,748 with the sales of common stock, 4,2e9 - 4. m f interest expense Note 4 - Long term debt: A summary of long-term Net mcorne $ 402 $ m debt follows (dollars in thousands):

Company's eqtaty in net inco ne $ 234 5 213 Decernber 31 Investment Net utshty plant $46,917 $47,521 age M Current assets - 13,324 9.265 5%% Series M,due 1995 4,605 4.633 y assets 2a91 32 9 6%% Senes N,due 1996 4,700 4.675 Total assets 59,732 60.049 7%% Series O,due 1992 1,880 1,890 Less. 8X% Series P,due1999 3,000 3,000 FirO rnortgage bonds 44,641 37,293 10 % Series O,due 1999 - 2,000 2,000 Current habihties 9,76c 18.033 3,000 8%% Series R.due2001 3.000 Net assets S 5.323 $ 4.723 8X%Senes S,due2003 5,000 5.000 11%% Series T,due1990 6,000 6.375 Company's equity in net assets S 3,110 $ 2.915 3%% Series U, due 1980 1,517 1,527 Note 3 - Capital stock and other paid-in capital:

Cumulative preferred and preference stock outstanding was g

Y" w'g $

3%% Series X,due1984 3,163

's 3J83 3 follows (dollars in thousands): 9%% Series Y,due2003 10,000 8.000 Current 10%% Series Z,due 2004 4,250 -

December 31 Debentures Share 1979 1978 4%%, p 1987 3,2 3,420 l

7 %, due 1993 8,600 8,800 Preferred stock, $100 par value, 10%%, due 1995 3,150 3.220 authortred 500.000 shares

' outstanding: Other, due 1985 258 ?22

- 415% Series; 37.856 shares $10550 $ 3,788 $ 3,786 Total long-term debt $67,548 362213-4 65% Series: 10.000 shares 105.00 1,00) 1,000 4 75% Series: 17.682 shares 101.00 1,768 1,768 Based on issues outstanding at December 31,1979, the 5375% Series; 15.000 shares 105 00 1,500 1.500 13 50% Senes; 53,100 shares accregate amount of long-term debt maturities and sinking furid requirements (e*,clusive of the amount that may be Prefert s $2 pa satisf 3d t y property additions) are approximately $2,424,000 authorizad 1,000.000 shares $2.330,0;0, $1,652,0CO, $828,000 and $4,391,000 for the outstanding years 1"d0 through 1084, respectively._

' 900% Series: 280.000 shares 27.25 7,000 7,000 Go January 10,1980 the Company issued an additional second preferred stock, $50 par value, $10,750,000 of Series Z First Mortgage Bonds. The proceeds authorized 7,993 shares received were used to reduce outstanding short-term bank outstanding- . _

loans, 544% Conwnee Sees A W Note 5 - Short-term borrowings: The ^vnpany had p,g,[,[*g$8 3 shares) - 521 5 231 unused lines of credit of $1,600,000 at [^.,; ember 31,1979, authorked 1,000.000 st' ares . The lines expire approximately one year frorr the dates of outstarong --- none - - the agreements and are normally renewed. The Company Total curnM prWerred normally maintains average compensating balances equal to and preference stock - $20,568 $21,935 10% of credit lines available plus 10% of outstar. ding bor-rowings.

-- The recond p.eferred stock is' currently ccm ertible Notes payable to banks at December 31,1979 were at an nto common stock at $18.44 per share. As of Detamber 31, average interest rate of 15.22 % (11.18 % at December 31, 079,11,084 shares of common stock were reserved for 1978). During 1979 the maximum amount of notes payable

onversion, in 1979,535 shares of second p"eferred - outstanding at any month end was $13,500,000 ($7,700,000 itock_ were converted into 1,448 shares of co nmon . for 1978) and the daily average amount of notes payable

tock, which increased other paid-in capital $18,000. outstanding was $6.603,000 ($4,213,000 for 1978) with a cor-The 13,50% series preferred stock is redeemable at responding average interest rate of 12.97%'(8.88% for 1978).

27

Note 6 - Income taxes: The components of income t x Note 7 - Pension plan; The Company has e non-expense before extraordinary items are as follows (dollars in contributory trust 6ed pension plan covering alt regular thousands): employees and follows the consistent practice of currently funding all costs accrued. The market value of the assets of Year Ended December 31 the trust fund was apDroximately ecual to the actuarially 1979 1978 1977 1976 1975 computed value of vested benefits as of January 1,1979.

Taxes on operatir a incorne Total pension costs amounted to $711,000, $895,000, Federal - curr snt $ 435 $5,345 $1.904 $ 13 $ (31) $985,000, $1,046,000 and $908,000 for the years 1975 Federal - debrred 1,231 (1,967) 1,882 867 1.319 through 1979, including amortization of the unfunded investment cfr di adj 1,895 820 - - -

actuarial liability over a thirty-year period beginning State - curr snt 491 971 442 171 4 January 1,1976.

State - rverred 190 (308) 229 185 225 4.250 4.8c1 4.457 1 236 1.517 Note 8 - Commitments and contingencies: The Com-Taxes on other income pany purchases 67,525 KW of hydroelectric power generated Federal - current 203 242 269 41 4 by the Power Authority of the State of New York (Pasny),

Federal - deferred 1 (21) (27) 50 100 under long-term contracts which expire June 30,1985 and investrrent creet adj. 71 40 - - -

also purchases power f rom a coal-fired generating plant located in Merrimack, New Hampshire under a life of the unit t e (3) (4) 6 contract. The percentages of the Company's total power out-310 299 282 123 120 put from allsourceswere as follows:

Total income taxes $4,560 $5.160 $4.739 $1.359 $1.637 Year Ended December 31 Source of Energy 1979 1978 1977 1976 1975 M:jor items which resulted in deferred income tax ex- Nuclear generating companies 41 % 38 % 42 % 41 % 452 pense were allowance for borrowed funds during construc- Pasny - hydro 22 22 25 27 29 tion ($1,236,000 in 1979), the Company's portion of Vermont Merrnnack-coai 11 8 11 2 3 Yankes deferred shutdown costs ($1,318,000 in 1975 and compa yownedhydro 9 8 9 12 11

$877,000 in 1976), municipal property taxes ($367,000 in uscerianeous 17 24 13 18 12 1975 and $219,000 in 1976), equity in unremitted eamings of 100 % 100 % 100 % 100 % 100 %

companies act consolidated ($217,000 in 1976), unbilled fuel cost @255,000 in 1977) and retroactive revenue ($1,915,000 a 1977 which reversed in 1978). The Company's ownership interest and its share of in the consolidated statement of income for 1975 a provi- amounts invested at year-end in the jointly-owned generating sion for income taxes equivalent to the provisinn for such facilities in which it is participating are as follows (dollars in taxes that would have been required in the absence of tax thousands):

operr; ting loss carryforwards was charged to income before cxtraordinary credit and the benefit, in the amount of December 31

$1,010,000, arising from utilization of such operating loss Ownership 1979 1978 carryforwards was reflected as extraordinary income. Piantin service:

The principal reasons for the differences between the total Wyman #4 1.77690 % $ 3,139 $ 2.86E income tax expense and the amount calculated by applying the Federa! income tax rate to income before tax are as s eroo # a 1.59096 % $14,947 $10.522 follows (dollars in thousands): Millstone #3 1.73030 % 12,425 9.50' Pilgrim #2 1.78000 % 5,946 4.665 Year Ended December 31 1979 1978 19Fi 1976 1975 Income before income tax $14.327 $15.528 $13.909 $8.837 $7,590 '

Federd statutory rate 46 % 48 % 48 % 48 % 48 %

$ 6,590 $ 7,453 $ 6.676 $4.242 $3,643 ' 9" mercial operation in December 1978. The Company's share increases Wonsm

. taxes resulting front of operating expenses are included in the corresponding Drvujend received creet (934) (954) (925) (967) (980) operating accounts on the Statement of income.

wtional depreciation The construction schedule for the Montague #1 and #2 for tax purposes (530) (514) (401) (425) (598) units is Currently under review and little activity is anticipated Mowance for equity funds in the near future. For the other four nuclear units to be con-daring construction (774) (563) (356) . (132) (51) structed, the Company is obligated to provide funds in future 0,her capr.alized costs . (41) (387) (213) (122) (63) years estimated to total $91,000,000 (including AFDC and Change in unbilled revenue (8) . (103) 6 (81) (383) present commitments for nuclear fuel) to be required approx-state income taxes net imately as follows: 1980, $13,000,000; 1981, $16,000,000; t tax e ts ) ( 8) (1, 7) 1982, $16,000M 1983, $16,000,000; 19% $14,000,000;

55) ( 5) otner and 1985-1987, $16,000,000.

(79) (107) 1 (1) (43)

- 3 4,560 $ 5.160 $ 4.739 $1.359 $1.637 '

Totaiincome taxes .

evolving standards administered by Federal, state and local 28

authorities relating to the quality of the environment. These sisting only of normal recurring accruals) necessary to a fair standards affect the siting of generating facilities, air and statement of results of operations for such periods. Variations water quality, nuclear plant licensing and safety and other between quarters reflect the seasonal nature of the Com-environmental factors. While these standards have had some pany's business (dollars in thousands except amounts per

, impact upon the Company's past operations as a distribution share):

company, the Company anticipates that they will have a Quarter Ended more significant impact upc3 the capital costs and construc- March June . septe,mber December tion schedules of the new generating facilities in which the 3979 a esrenues $2 4 42 mu I mitmentsof theCompanyundernon- 8;444 2 cancellable leases as of December 31,1979 are not $ 2,913 Net ncome $ 2.954 $ 2.192 $ 1.708

, material. Total rental expense entering into the determination Net neomeper share of of net income, cons %g principally of vehicle and equip- common stock $ 85 $ 61 $ 43 $ 85 ment rentals, was appoximately $828,000, $1,031,000, 1978 C1,119,000, $1,229,00') and $1,370,000, respectively, for the years 1975 through 1979, operatog revenues $19.778 $16.845 $18.642 $19.754 Operating ocome $ 2.844 $ 2.571 $ 2.257 $ 3.258 Note 9 - Unaudited quarterfy financial information: The Netincome $ 2,708 $ 2A24 $ 2.164 $ 3.072 following quarterly financial information is unaudited and in Net ocome per share of

'the opinion of management includes all adjustments (con. common stock $ 76 $ 68 $ 58 5.90 Note 10-Unaudited information cuncoming the effects of inflation: The following information is supplied for the purpose of providing c;rtain information about the effects of changing prices. It should be *,iewed as an estimate of the approximate effect of changing prices, rather than as a precise measure. A statement of income adjusted for changing prices follows(dollars in thousands):

Year Ended December 31,1979 Conventional Adjusted for Adjusted Historical General forChangesin Cost inflation Specific Prices Oper; ting revenues $78,185 $ 78,185 $ 78,185 Operating cxpenses Operation and maintenance 55,832 55,8 0 55,832 Depreciation 3,466 7,077 8,576 Other taxes, principally property taxes 4,288 4,288 4,288

- Taxes onincome 4,250 4,250 4,250 Totaloperating expenses 67,836 71,447 72,946 Operatingincome ~ 10,349 6,738 5,239 Otherincome and deductions, net 3,885 3,885 3,885 Interestcxpense, net (4,467) (4,467) (4,467)

Net income (excluding reduction to net recoverabie cost) $ 9,767 $ 6,156* $ 4,657*

, Gain f rom decline in purchasing power of net amounts owed $ 9,593 $ 9,593 Reduction tonet recoverable cost (11,298) (9,799) 5 (1,705) $ (206)

Increase in specific prices (current cost) of property,

( . plant and equipment held during the year * * $ 18,329

Effect of increase in general price level (28,239)

Excess of increase in general price level over increase in specific prices .. $ 9,910

• Includog the reduction trNet recoverable cost, net neome would have been a loss of $5,142.

" At December 31.1970, the current cost of ut*ty plant net of accumulated depreciation was estimated to be agoroxirrately $238.371.000 as compared with the net utihty plant recoverable through depreciation of $124.930.000.

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i Note O- Continued: A frve-year compenson of selected supplementary financial data adjusted for the etfects of changing prices follows (in thousands of average 1979 dollars where applicable):

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Year Ended December 31 i 1979 1978 1977 1976 1975 ,

l Oper: ting revenues $78,185 $83,465 $82,793 $81,036 $75,336 j 1

- Historical cost information ad}usted for general inflation

- Net income (excluding reduction to net recoverable cost) 6,156 Net income per share of common stock (tecluding reduction

- to net recoverable cost) . _

1.50 Net assets at year-end at net recoverable cost 75,280 l

l Current cost information -

Net income (excluding reduction to net recoverable est) 4,657 Net income per share of common stock (excluding reduction to net recoverablecost) .99 Excess of increase in general price level over increase

. Inspecificprices 9,910 Net cssets at year-end at net recoverable cost 75,280

' Generat information Gain f rom decline in purchasing power of net amounts owed 9,593

. Cash dividends dMad per common share $ 1.69 $ 1.60 $ 1.63 $ 1.71 $ 1.73 M:rkit price per common share at year-end $15.75 $15.99 $17.97 $19.60 $15.00 Average consumer priceindex 217.4 195d 181.5 170.5 161.2 Dollar amounts adjusted for general inflation (constant ciation rate to the restated depreciable plant base at the dollar) represent historical costs of utility plant stated in beginningof theyear.

1 rms of dollars of equal purchasing power, as measured by The effects of inflation are not recognized for income tax the Consumer Price Index for All Urban Consumers (CPI-U).

Current cost amounts reflect the changes in specific prices or rate-making purposes. Under the rate-making prescribed

of utility plant f rom the date the p! ant was acquired to the by the regulatory commissions to which the Company is sub-

. present, and differ from constant dollar amounts to the extent Ject, only the historical cost of property, plant and equipment that specific prices have increased more or less rapidly than is recoverable ,ni revenues as depreciation. Therefore, the ex-pricesin general. cess of the cost of plant stated in terms of constant dollars

. or current cost over the historical cost of plant is not pres-The current cost of property, plant and equipment, com- ently recoverable in rates as depreciation and is reflected as priling plant in service, experimental electric plant, plant held a reduction to net recoverable cost. While the rate-making

for future use and construction work in progress represents process gives no recognition to fhe current cost of replacing the estimated cost of replacing existing plant assets and was property, plant and equipment, based on past practices, the determined by indexing the surviving plant by the Handy- Company believes it will be allowed to eam on the increased Whitman Index of Public Utility Construction Costs. The - cost of its net investment when replacement of facilities ac-resulting adjusted data for property, plant and equipment are tually occurs.

not indicative of the current value of existing property, plant and equipment nor of the Company,s future capital re- During a period of inflation, holders of monetary assets quirements.The actual replacement of existing property, suffer a loss of general purchasing power while holders of plant and equipment will take place over many years and not monetary liabilities experience a gain. The gain from the decline in purchasing power of net amounts owed is pri-necessarily in the same manner as the pres 3ntly existing asse " emMsteheMN has been used to finance property, plant and equipment. ,

Accumulated provisions for depreciation under both Since the depreciation on the utility plant is limited to the '

- methods described above were determined by calculating recovery of historical costs, the Company does not have the .

the r;tio of historical accumulated depreciation to historical opportunity to realize gain on debt and is limited to recovery ,

2 depreciable property by year of acquistion and applying the only of the embedded cost of debt capital. Therefore to have -l resultant ratio to estimated constant dollar and current cost ' the Statement of income adjusted for Changing Prices prop-of property, plant and equipment. The current year's provi- erly reflect the economics of rate regulation, the gain from the

sion for depreciation on the constant dollar and current cost decline in ourchasing power of net amounts owed should be

amounts was determined by applying the Company's depre- - . offset by tne reduction of net property, plant and equipment.

30

Report of Independent Certified Public Accountants The Stockholders and Bond of Directors

. Central Vermont Public Service Corporation:

, We have examined the consolidated balance sheets of Central Vermont Public Service l

Corporation and subsidiary as of December 31,1979 and 1978 and the related consolidated statements of income and retained oamings and changes in financial position for each of the five years in the period ended December 31,1979. Our examinations were made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the aforementioned financial statements present fairly the censolidated financial position of Central Vermont Public Service Corporation and subsidiary at Decemoer 31,1979 and 1978, and the results of their operations and the changes in their financial position for each of the five years in the period ended December 31,1979, in conformity with generally accepted accounting principles applied on a consistent basis.

Boston, Massachusetts PEAT, MARWICK, MITCHELL & CO.

February 15,1980 Comparative Statistics

'1979 1978 1977 1976 1975 1974 1973 1972 1971 1970 Electric revenues (000)

Residentel $36,462 $35.648 $33.189 $30.760 $27,113 $23,524 $19,546 $17.643 $14,914 $12.356 Commercial and industrial 30,850 29.427 26,498 23,848 21.041 19,470 16286 14,509 12.118 10,466 Other electric utshtes 3,629 2,952 2,879 2,764 2.383 2,535 2.061 1 678 1,777 1.513 Other 7235 6.992 C.555 6.182 5.324 4.617 3.815 3.445 2.761 2242 Total $78,185 $75.019 $69.121 $63.554 $55.861 $50.046 $41,708 $37275 $31.570 $26.577 Electric sales, kwh (000)

Residental 724,041 716,915 698.901 701 244 672.909 670.845 675,658 661.874 606.015 545,928  :

Commercial and industrial 848,646 830,225 759222 742.549 685224 697,989 719,068 684,729 608.100 568.372 Other electre utiktes 148,380 121,127 118.052 133,589 112.006 197,749 178,977 126.331 137,457 117252 Other 105,062. 107293 104.041 102271 94.060 92.613  %.118 94.638 84,116 72.676 Total 1,826,128 1.775.560 1,680.216 1.679.653 1.564.199 1,659,1 % 1,669.821 1.567.572 1.435.696 1.304228 Kwh output (000)

Hydro gener: ton 173.728 156.463 168.620 216.124 179,441 187,449 202.986 187,617 157,695 160.080 Other generaton 6,522 2.543 1.356 , 2,161 4.473 8.157 16,150 21.371 43.079 66,784 Purchased and received 1,765,212 1.739.067 1.626.899 1.582.724 1.496281 1.575.098 1.552.453 1.489.375 1,357,611 1,199.183 Total output 1.945,462 1.898,073 1,796.875 1,801.009 1.680,195 1,770,704 1,771.589 1,698,363 1,558.3BS 1,426.047 Less corrpany use and losses 119,334 122.513 116.659 121.356 115.996 111,500 101,768 130,791 122.689 121,819

! Electre sales 1,826,128 1,775.560 1.680216 1.679.653 1.564,199 1.659,1 % 1.669.821 1.567.572 1,435.696 1.304228 l Cuetomers (end of year) l Residental 96,986 95.016 93,190 91,687 90,288 89,711 88,196 85.450 82.843 79.622

' Commercial and industrial 10,562 10.485 10285 10,094 10.042 10.435 10.12' 9.950 9,716 9.353 Other electric utihtes 10 - 10 12 13 14 18 17 13 14 15 Other 2,442 2,466 2.474 2.435 2.397 2,387 2.339 2.275 2.149 1,924

> Total . 100,980 107.977 105.961 104229 102,741 102,551 97.688 94.721 90.914 100.6_73 Realcortlei use Kilowettfeurs per customer 7,541 7,624 7,577 7,712 7,456 7.502 7,747 7,847 7.465 6,930 Revenue per kilowatthour $.0604 $0497 S.0475 $ 0439 $0403 $0351 $.0289 $ 0267 $.0246 $.0226 Numberof stockholders Prektred ' 2,842 2,932 2.995 2.931 2.045 - 1,821 1.860 1,901 1.949 2,010 Common 14,886 14.921 15.308 15.533 14.362 14.391 14,600 14.589 13224 13.000

- Total 17,508 17.853 18.303 18.464 16.407 16212 16.460 16.490 15.173 15.090 i

~ 31

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Robert P. Bliss, Jr./1973/Presdent The Bob Bhss Agency L td L Douglas Meredith Chaaman St Albans. Vermont (Insurance industry Consultants)(4) James E Gnffin Presdent and Chief E xecutive Of hcer Harold L. Durgin/1951/ Retired Former Presdent of the Com-Robert E. Schill Vice President - Finance and pany Vice Presdent and Assistant Secretary Rut 4nd Savings Corporate Planning Bank Rutland Vermont (1)(4)

Allen O Eaton/1960/ Partner n opes & Gray Boston Massachu-setts il awyeo (1)(3) Thomas J Hurcomb Vice Presdent - Externai Affaas James E Griffin /19/?!Presdent and Chief f xecutive Officer of Theodore W. Millspaugh Treasurer j the Company (1) Alice L. Del Bianco Sec retary Luther F Hackettit979/Presdent Hackett Valine & Mac- Warren L. Stevens Assistant Treasurer l Donak1 inc Burhngton Vermoi;I (Insurance) R) Doris E. Rogers l Assistant Treasurer Robert T Holden /1959/ President and Treasurer F airdal" Virginia S Papineau Assistant Secretary F arms Inc Bennington Verr, nt (Daay Products)(2) l John A. Ritsher Assistant Secretary

' Richard E Ide/1973/ Chairman of the Board and Treasurer LT

&HK Ide inc St Johnsbury Vermont (Farm Supphes) C) Clifford E Giffin General Manager - Division i R DeWitt Mallary/1959/t awyer F aalee Vermont (1) (3) (4> Administration l L. Douglas Meredith/1953/Chaaman f ormer Presdent of the Darrow R. McLeod Genera! Manager Engineenng l Company South Burlington. Vermont (1) and Power Operations l

Preston Leete Smith /197 //Presdent and Chief E xecutive Patrick J Garahan General Manager - Administrative l Of fic er Sherburne Corporation Killington. Vermont (Ski SP'V'C PS Business) (3) i Holmes H. Whitmore/1963/ Retired. Past President Jones &

Lamson. Division of Waterbury Farre! ta Textion Company)

Sonngfield Vermont (Machine Tools)(2)

Fred W. Yeadon, JrJ1974/Presdent and Chief Executive Officer First Vermont Bank and Trust Comptiny Brattleboro Vermont (1) (4) o i Mrmter u I =ecuiwe i omm.ttee (2) MerTTief or Asd;t C(wntmtteri

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