ML19322D755
| ML19322D755 | |
| Person / Time | |
|---|---|
| Site: | Crane  |
| Issue date: | 02/19/1980 |
| From: | Herbein J METROPOLITAN EDISON CO. |
| To: | Saltzman J Office of Nuclear Reactor Regulation |
| References | |
| TLL-059, TLL-59, NUDOCS 8002260509 | |
| Download: ML19322D755 (29) | |
Text
a e
i Metropolitan Edison Company Post Office Box 480
=
Middletown, Pennsylvan,a 17057 i
717 944-4041 Writer's Direct Dial Number February 19, 1980 TLL 059 Director of Nuclear Reactor Regulation Attn:
Mr. Jerome Saltzman, Chief Antitrust & Indemnity Group U. S. Nuclear Regulatory Commission Washington, D.C.
20555
Dear Sir:
Three Mile Island Nuclear Station, Units I and II (TMI-l and TMI-2)
Operating License Nos. DPR-50 and DPR-73 Docket Nos. 50-289 and 50-320 Price Anderson Act (Public Law 94-197)
Pursuant to our letters of December 29, 1978 (CQL 0575) and June 7, 1979, enclosed is our submission employing Alternate 5, and showing adequate cash flow for 1979 and forecast data for 1980 to meet the requirement relating to guaranteeing retrospective premiums.
1.
Quarterly financial statements for the period ending September 30, 1979; such data for the last quarter is not yet available.
2.
A consolidating cash flow forecast for the year 1980 accompanied by underlying assumptions.
3.
A 1979 internal cash flow statement.
l The cash flow forecast accompanying this letter indicates that about $21 l
million is expected to be generated internally by Met-Ed during 1980. This indicates that the company is fully able to meet the maximum retrospective premium requirement of the subject licenses. Such a requirement would be shared with its affiliated co-owners in the proportion of their retrospective owner-i ship interests as follows:
l l
Maximum Requirement Percent (nillion)
.CP&L 25 S
5 Met-Ed 50
$ 10 Penelec 25 5
S 20 As shown by the accompanying cash flow forecast, the company's affiliates expect to be able to generate sufficient internal cash during 1980 to be able to t 800220 09 0
vaccomn ec son ecmms a c or me aene a euc:c uwees s s:em
4 Jerome Saltzman TLL 059 3
meet their respective share of the above maximum requirement.
Since certified 1979 Annual Reports for the Company and its parent will not be available until sometime in April, they will be forwarded as soon as possible at that time.
Please note our proposal in the December 29, 1979 letter to supply all relevent financial information during April of each year.
Sincerely,,
o wl /
.s"---
J. G. Herbein Vice President i
Nuclear Operations JCH:LWH: hah Enclosures cc:
J. T. Collins R. H. Vollmer R. Reid i
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CENERAL PUBLIC UTILITIES CORPORATION & SUBSIDIAPIES SOIIRCE & APPLICATION OF FUNDS - FORECAST 1980
($ Millions)
CPU CPU Jersey Consolidated Eliminations Corporation Central Met-Ed Penelec Sources of Funds Internal Sources De pr eci at ion
$ 149
$ 61 39
$ 49 Deferred Energy Cost s (120)
(53)
(38)
(29)
De ferred Taxes 89 29 30 30 inve stme nt Tax Credit Net (44)
(18)
(33) 7 Amist izat ion of Nuc lear Fuel 15 15 Change in Wrking Capital & Cash Changes
- 19 (45) 51 23 (10)
Tot al Inte rnal Sources
$ 108
$ (45)
$ 85 2R
$ 47 Ext ernal Sources Long Term Debt 35 5
30 Preferred St ock Capital Contributions frtas CPU Common Stock Short-Tern Borrowings Net 176
$ 153 65
$ 101 45 68 39 24 Tot al Sources of Funds
$ 319 Application of Funds Cons t r uc t ion S 290
$ 143 51 96 Re financi ng 17 4
12 1
Sinking Fund 12 6
2 4
Total Applicat ion of Funds
$ 319
$ 153 65
$ 101 Capit ali zat ion long Tens Debt
$2,182 39
$ 890
$ 536
$ 717 Prefe rred Stock 515 204 140 171 Comm>n Equity I,411 (I,502)
I,4II
_ 701
_$1,061
$1,304 385 416 Total
$4,108
$(1,502)
$1,450
$1,795 Short-Term Debts 352 94 133 125 Totat
$4,460
$(1,502)
$1,544
$1.928
$1,186
$1,304
- Includes ret ained earnings 12/26/79
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i GENERAL Pt!BLIC UTILITIES Q)RPORATION 1979 IKrtRNAL CASH FLOW STATtMEKF - CONSOLIATED
($ Millions) 1979 Jan.
Feb.
Mar.
Apr.
May June July Aug.
Sept.
Oct.
Nov.
Dec.
Year Net income Af ter Times & Dividends 11.8 13.2 10.7 10.9 7.0 2.5 6.5 11.3 7.7 5.5 4.4 4.7 95.8 Leos Corssons Dividends (27.5)
(15.3)
(15.3)
(15.3)
(73.4)
Retained Earnings (15.7) 13.2 10.7 10.9 (8.3) 2.1 (8.8) 11.3 7.7 (9.8) 4.4 4.7 22.4 Adjustmenta:
Depreci at ion & Anurtizat ion 14.9 15.8 15.4 13.0 12.1 12.3 1J.1 13.2 13.1 13.3 13.I 13.2 162.5 Deferred Income Taxes
& Inve st me nt Tax Credits 9.4 4.8 8.1 8.0 5.2 4.6 (4.2) 5.9 8.7 4.8 4.2 (3.4) 56.I Allowance for Funds used During Cgtruct ion (2.6)
(1.9)
(1.9)
(2.0)
(l.8)
(2.1)
(2.2)
(2.4)
(2.4)
(2.3)
(2.0)
(1.1)
(24.7)
Deferg Energy (6.8)
.6 (3.8)
(13.0)
(21.2)
(.4)
(2.5)
(5.6) 3.7.
(4.4)
(6.9)
(9.5)
(69.8)
Other 28.7 (31.6) 29.3 (27.8) 2.5 (11.4) 29.0 (9.1)
(40.0) 17.5
(.3) 62.1 48.9 Tot al Adjustment s 43.6 (12.3) 47.1 (21.8)
(3.2) 3.0 33.2 2.0 (16.9) 28.9 8.1 61.3 173.0 Internal Cash Flow 27.9
.9 57.8 (10.9)
(11.5) 5.1 24.4 13.3 (9.2) 19.1 12.5 66.0 195.4 Percent age ownership in Nuc lear Unit s - Oyster Creek 100%
Three Mile Island Unit #1 100%
Three Mile Island Unit #2 100%
(1) Negat ive represent s energy costs in exce ss of energy reve nues (2) Includes changes in working capital 2/12/80
Quarterly Financial Statements September 30,1979*
1 l
General Public Utilities Corporation l
100 Interpace Parkway, Parsippany, N.J. 07054 e (201) 263-6500 Jersey Central Power & Light Company Metropolitan Edison Company l
Pennsylvania Electric Company These statements are not furnished in connection with any offering of securities or for the purpose of promoting or influencing the sale or purchase or securities.
- No provision has been made in these financial statements for any possible loss resulting from the nuclear accident at Three.\\ lite Island Unit 2, inasmuch as the amount thereof, if any, is not deter-minable at present.
CENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES Condensed Consolidated Balance Sheets (In Thousand,)
September 30, September 30, 1979 1978 ASSETS:
Utility Plant (at original cost)(Note 9)-
54.985.764
$4.697.741 In service, under construction and held for future use.
945.110 835 027 Less. accumulated depreciation (Note 1).
4.040.654 3.862.714 Net 224.319 232.921 Nuclear fuel (Note 8) -
43.163 60.214 Less, accumulated amortization (Note 1)
Net Nuclear Fuel 181.156 172.707 4 221.810 4 035.421 Net Utility Plant.
30 805 30 805 E stess of investments in subsidiaries over related net assets.
21.165 21.156 investm+nts.
Current Assels:
13.235 20.797 Cash 129.595 114.512 Accounts receivable, net.
234.992 121.256 Other 377.822 256 565 Totals Deferred Debits:
Deterred energy costs (Notes 1. 7 and 9)...
151.968
%.514 7.902 9.071 Unamortired mine development costs (Note 1) 67.775 Deterred casts nuclear accident (Note 9).
123 248 47,290 Other(Note 9) 350.893 152.875 Totals 55.002.495 54.436.822 Total Assets LIABILITIES AND CAPITAL:
Long-Term Debt, Capital Stock and Consolidated Surplus:
Long Term Debt:
51.827,177 51.768.156 First mortgage bonds 233.700 239.600 Debentures Other long term debt
.i 54.115 60.746 (4.672)
(5 813)
Unamortised net discount on long-term debt.
2.110 320 2 062.689 Totals d
422 868 422 017 Non-redeemable cumulative preferred stock, irvlu ing premium, net of expense.
88 561 93565 Redeemable cumulative pref erred stock, net of u; en: e Common stock and consolidated surplus (Note 4):
153.159 151.127 Common stock. less reacquired common stock -
772.538 760 266 Consohdated capital surplus.
17.978 17.720 Less, capital stock expense 486 376 455 562 Consohda ted retained earmngs (Note 5) 1.394 095 1.349 233 Totals 4 015.844 3 927.526 Totals Current Liabilities:
72.158 22.275 Securities due within one year to be refinanced.
229.700 42.750 Notes payable to banks (Note 31 112.209 78 393 Accounts payable.
113.748 122.055 Other 527.815 265.473 Totals Deferred Credits and Other Liabilities:
278.212 180 328 Deterred income taxes tNotes t and 6)..
123.469 99.513 L;namortized ins estment credits (Notes 1 and 6).
19.900 insurance recoveries nuclear accident (Note 9).
37 255 23.982 Other 458 836 303.823 Totals Commitments and Contingencies (Notes 8 and 9) 55.002.495
$4.4% 822 Total Liabilities and Capital The accompanving notes are an integral part of the financial statements.
I21
I i
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES Consolidated Statements of income (In Thousands)
Three Months Nine Months Twelve Months Ended September 30, inded September 30, inded September 30, 1979 1978 1979 1978 1979 5978 Operating Revenues.
5383.927 5336.278 51 104.180 5997.344 51 433.463 51.303 854 Operating Espenses:
Fuel 88.163 81.928 260.174 248.670 337,589 311,191 Power purchased and mterchanged, net 64.449 23.482 176.243 95,194 214.789 133.211 Deferral of energy costs, net (Notes 1 and 7) f4.403) 2.852 (49.030)
(8.302)
(58.644)
(4.413)
Payroll.
34.233 32.464 99.572 94.886 131.849 122.638 Other operation and maintenance (excluding payroll) 41.420 42.725 127,474 124.266 182.629 160.4 %
Depreciation (Note 1) -
35.141 27.016 105.772 81.319 133,959 106.188 T axes, other than income taxes.
35.532 32.553 110.690 98.622 141.930 128.608 Totals 194.535 243.020 830.895 734.655 1.084.101 957.919 Operatmg income before income Tames.
89.392 93.258 273.285 262.689 349.379 345.935 income Tases (Notes 1 and 6):
16.172 26.619
$9.795 73.407 70.741 94.857 73.220 66.639 213.490 189.282 278.638 251.078 Operating income.
Other income and Deductions:
Allowance for other f unds used durmg construction (Note 2) 7.019 13.276 19.305 38.311 30.881 51.223 Other mcome, net.
2.337 628 4.934 2.442 6.174 2.788 income taxes on other income, net (Notes 1 and 6).
(1.451)
(495)
(2.736)
(1.760)
(3.436)
(2.160)
Tutal Other income and Deductions.
7.905 13.409 21.503 38.993 33.619 51.851 incorne sefore interest Charges and Preferred Dividends 81.125 80,048 234 993 228.275 312.257 302.929 Interest Charges and Preferred Dividends:
Interest on first mortgage bonds.
37.233 33.193 105.872 97.456 139.877 128,148 Interest on debentures and other long term debt 5.972 5.891 17.995 17.818 24.036 23.849 Other mterest.
7,478 1.830 14.545 4.666 14.407 6.043 Allowance for borrowed funds used durmg construction -
credit (netof tax)(Note 2)
(4.433)
(5.916)
(12.507)
(17.130)
(17.632)
(22.608)
Income taxes attnbutable to the allowance for bonowed funds (Notes 2 and 6).
(1.615)
(2.941)
(4.915)
(11.358)
(8.31 5)
(15.120)
Preferred stock dividends of subsidianes 10.899 10 977 32.732 32.968 43.694 43.728 Total Interest Charges and Preferred Dividends.
55.534 42.034 153 722 124 420 1 % 067 164.040 Net income.
SM SM 5JJ $g 5 5116.190 5 138 889 hraings Per Average Share 5
42 5 63 5
1 33 5 1 73 5 1 90 5 2 32 Average number of shares outstanding during each period 61 264 60 275 61.203 60 030 61 096 59 926 Cash Dividends Per Share 5
25 5 44 5
95 5 1 32 5 1 40 5 1 76 Consolidated Statements of Retained Earnings Balance,beginnmgof penod 5476.100 5444.020 5 463.173 5430.822 5 455.562 5 421.995 Add, net mcome.
25 591 38 014 81.271 103 855 116140 138 889 Totals 501.691 482.034 544.444 534.677 571.752 560.884 Deduct, dividends on Common Stock 15 315 26 472 58 068 79115 85 376 105.322 Balance, end of penod(Note 5).
5486 376 5455.562 5 486.376 5455.562 5 486.376 5 455.562 l
l The accompanvmg notes are an ntegral part of the fmancial statements.
I31
I CENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES Consolidated Statements of Sources of Funds Used for Construction (In Thousands)
Three Months Nine Months Twelve Months Ended September 30, Ended September 30.
Ended September 30, 1979 1978 1979 1978 1979 1978 Sources of Funds:
Funds generated from operations.
525,591 538.014 5 81.271 5103.855 5116.190 5138.889 Net income Add, items not requinns current cash outlay or (receipt):
35,141 27,015 105.772 81,319 133.959
.106.188 Depreciation (Note l) 4 256 5.503 17,203 17,565 21.082 24,487 Amortization of nuclear fuel (Notel) investment credits, net (Notes 1 and 6)
(1.187) 5,904 (3,586) 16,744 21.403 30.932 Deferred mcome taxes, net (Notes 1 and 6) 11,514 2.794 54,001 23.716 88.279 29,170 Allowance for other funds used dunng construction (7,019)
(13.276)
(19.305)
(18.311)
(30.882)
(51.223)
(Note 2).
68.2 %
65.954 235,356 204.888 350.031 278.443 Totals 15.315 26.472 58 068 79.115 85.376 105.322 Less, cash dividends on common stock 52.5 st 39.482 177.288 125.773 264.655 173.121 Totals Other sources (uses):
Def erred energy costs, net (Notes 1 and 7)
(4.403) 2.852 (49.030)
(8,302)
(58.644)
(4.413) 5.235 (2.256) 4,745 3.494 7.562 9.178 Changes in -cash.
-temporary cash investments.
(49,300) 17,001 (98,800) 3.089 (98.800) 4.939
-accounts receivable 15,390 (8.325) 21,194 (7,51 2)
(15.082)
(13.314)
-accounts payable.
8.418 (5,673) 17,756 (3.674) 33.815 13,951
-inventones-matenais, supplies and f uel.
(5.979)
(9.871)
(25.887) 14.802 (22,406) 19.134
- st'terest accrued.
3.066 (514) 1.776 (1,455) 3,362 (99)
-tanes accrued.
(16.674) 11.565 10.474 12.679 (10,051) 16.648 (29 450) 20 066 (60.302)
(7.661)
(46.700)
(18.173)
Other. net (73,697) 24.845 (178.074) 5.460 (206 944) 27.860 Totals.
Funds from fmancings.
50.000 106 300 154.082 106.300 202.752 Sale of long-tehn debt 50.000 Sale of preferred stock.
(47) 5.223 4.777 13.004 14.046 17.998 Sale of common stock, net of expense (Note 4).
89.650 (22.254) 145.850 (25.275) 195.750 (87.105)
Bank borrow mgs. net Retirement or redemption of long-term debt and (4.163)
(8 048)
(15904)
(25.997) (22.815)
(30.197) preferred stock.
85.440 24.921 241.023 115.814 293 281 153.448 Totals.
$64 724 589 248 5240 237 5247 047 5350 992 5354 429 Totals Construction Espenditures:
547.648 589.878 5198.141 5259.115 5315.839
$359.094 Utihty plant 24 095 12.646 61 401 26 243 66 035 46 558 Nuclear fuel 71,743 102.524 259.542 285.358 381.874 405.652 Totals.
Allowance f or other f unds used dunng construction (Note 2)
(7.01 9)
(13.276)
(19.305)
(38.311) (30.882)
(51.223) 564 724 589 248 5240 237 5247 047 5350 992 5354 429 Totals The accompanymg notes are an integral pa. t of the fmancial statements t41
IERSEY CENTRAL POWER & LIGHT COMPANY Condensed Balance Sheets (in Thousands)
ASSETS:
September 30.
September 30.
1979 1978 Utility Plant (at ongmal cost)(Note 9):
in service, under construction and held f or f uture use.
52.066.487 51.886.574 Less. accumulated depreciatson (Note 1).
357.831 315 410 Nel 1,708 656 1 571 164 Nuclear fuel (Note 8).
139,571 128.430 Less, accumulated amortization (Note 1) 32.076 36 091 Net Nuclear Fuel.
107.495 92.339 Net Utility Plant.
1.816151 1 663 501 imestments 366 454 Current Assets:
Cash 7,988
- 846, Accounts receivable, net 64.374 48.039 Other.
65 214 44.042 Totals 137.576 92 927 Deferred Debits:
Deferred energy costs (Notes 1,7 and 9) 81.146 41.012 Deferred costs nuclear accident (Note 9).
16.944 Other(Note 9).
40.633 21.444 Totals 138.723 62.456 Total Assets
$2.092.816 51.819.340 LIABILITIES AND CAPITAL:
Long Term Debt. Capital stock and Surplus:
First mortgage bonds.
5 752.618 5 725.195 Debentures.
81.080 83.160 Other long-term debt 10.465 15.746 Unamortized net discount on long term debt.
(2.429)
(3.4981 Non redeemable cumulative preferred stock. includmg premium, net of expense 161.631 161,196 Redeemable cumulative preferred stock, net of empense 41.065 41 402 Totals 1.044 430 1.025 201 Common stock and surplus.
Common stock.
153.713 153.713 Capital surplus -
436,989 373.489 Retained earnmgs(Note 5) 48.110 28 517 Totals 638 812 555.719 Totals 1.683 242 1.580 920 Cs trent Liabilities:
Secunties due withm one year to be ref manced.
35.846 16.790 Notes payable to banks (Note 3) 90.600 12.900 Accounts payable 54.173 34 608 Other.
533o7 56.076 Totals 234 186 120 374 Deferred Credits and Other Liabilities:
Deferred mcome taxes (Notes 1 and 6) 109 721 63.583 Unamortized investment credits l Notes 1 and 6) 50 076 43.460 Insurance recoveries - nuclear accident (Note 9) 4.975 Other,
10 616 11,003 Totals 175 388 118 046 Commitments and Contingencies (Notes 8 and 9)
Total Liabilities and Capital.
52.092,816
$1.819.340 The accompanymg notes are an mtegral part of the finanaal statements
[51
JERSEY CENTRAL POWER & LIGHT COMPANY Statements of income (In Thous ands)
_ Three Months Nine Mo 2hs Twelve Months Ended September 30, Ended September 30, Ended September 30, 1979 1978 1979 1978 1979 1978 5185.594 1161.747 5490.548 5451.352 5630 491 5589.582 Operating Revenues.
Operating Espenses:
31.154 27.186 79.070 82.823 94.028 101.477 Fuel Power purchased and interchanged, net.
20.653 10.018 36.376 16.022 50.7 %
18.287 20.553 18.957 92.909 53.534 127.418 75.388' Aff#liates Others 484 (1,983)
(24,741) 7.426 (43.323) 13.142 Detertal of energv costs. net (Notes l and 7) 13.723 11.842 39.365 35.801 52.182 46.146 Pag roll Other operation and mamtenanceteicludmg payroll) 17.597 17.544 52.560 51.094 79.472 66.622 14.238 11,546 42.922 34.734 54.081 45.701 Depreciation (Notel) 23.992 18 424 69 236 54 803 86 265 71.727 Tases other than encome tanes 142 394 113.534 387.697 336.237 500.919 438.490 Totals.
43.200 48.213 102.851 115.115 129.572 151.092 Operatmg Income betore income Tames 8746 14 264 20 226 29.587 23.116 18.549 Income T aies(Notes 1 and el-34 454 33949 82.625 85 528 106 456 112.543 Operating income.
Other locome and Deductions:
6.326 4.818 16.946 13.806 21.658 17.623 Allowance for other f unds used durmg construction (Note 2) 94 8
301 958 841 931 (1 44)
(77)
(191)
(718)
(418)
(7%)
Other mcome. net Income ta mes on other income, net (Notes 1 and 6) 6 276 4.749 17.056 14046 22.081 17.758 Total Other income and Deductions 40 730 38 698 99 681 99 574 128 537 130.301 Income Before Interest Charges Interest Charges 16.083 14.581 45.327 43.495 59.888
$7.061 Interest on first mortgage bonds 1.750 1.869 5.341 5.71 8 7.197 7,661 Interest on debentures and other long-term debt 3.375 188 7.227 321 7.810 568 Other mterest Allowance for borrowed funds used durmg construction -
(3.701)
(2,978)
(9.852)
(8.601)
(12.553)
(11,308) credit (netof tas)(Note 2) income tases attnbutable to the allowance for (930)
(568)
(2.462)
(1.567)
(3.077)
(2.032) borrowed f u ds(Notes 2 and 6) n 16 577 13092 45 581 39.366 59.265_
51.950 Total interest Charges 24.153 25.606 54 100 60.208 69.272 7' '
Net income 4 666 4 708 13999 14125 18 693 18.'380 Preferred 5tock Dividends 5 19 487 5 20 848 5 40,101 5 46 083 5 50 579 5 59.771 Earnings Asailable for Common Stock.
Statements of Retained Earnings 5 28.637 5 24.633
$ 20.023 5 20.448 5 28.517 5 29.110 Balance. begmnmg of pened 24153 25.606 54100 60.208 69 272 78 351 52 740 50 239 74123 80 656 97.789 107.461 Add. net mcome Totals 17.000 12.000 38.000 31.000 60.000 Deduc t Cash dmdends on common 5tock 4 680 4 722 14013 14.139 18 679_
18.944 Cash dodends on rumulatn e preferred stock 4 680 21 722 26013 52.139 49 679 78 944 5 48110 5 28517 5 48 110 5 28 517 5 48 110
$ 28 517 Totals Balance end of period (Note 5)
The accompanymg notes are an mtegral part of the fmancial statements
[6]
e
JERSEY CENTRAL POWER & LIGHT COMPANY Statements of Sources of Funds Used for Construction (In Thousands)
Three Months Nine Months Twelve Months Ended September 30. Ended September 30, Ended September 30.
1979 1978 1979 1978 1979 1978 Sources of Funds:
Funds generated from operations.
Net income.
$24.153 525.606 5 54.100 5 60.208 5 69.272 5 78.351 Add, stems not requinng current cash outlay or (receipt):
Depreciation (Ncte l).
14,238 11.546 42.922 34.734 54.081 45.701 Amortization of nuclear fuel (Note 1) 4.255 3.370 12.213 12.550 13.760 17.249 investment eredits, net (Notes t and 6)
(551) 4.690 (1.628) 12.189 4.999 15.740 Dcferred mcome taxes, net (Notes 1 and 6).
1.792 2.839 2'1.024 2.737 42.414 2.221 Allowance for other funds used durms construction (Note 2).
f6 326)
(4 818)
(16.946)
(13 806)
(21 658)
(17.622)
Totals -
37.561 43.233 111.685 108.612 162.868 141.640 Less, cash dividends -common stock 17.000 12.000 38.000 31.000 60.000
-preferred stock ~
4 680 4 722 14013 14.139 18 679 18 944 Totals.
32.881 21.511 85.672 56.473 113.189 62.6 %
Other sources (uses)-
Deferred energy costs, net (Notes 1 and 7) 484 (1.983)
(24.741) 7,426 (43.323) 13.142 Changes in -cash.
3.089 (301)
(5.687) 1.219 (7.142) 3.063
-temporary cash investments (7.000) 17.000 (7.000) 2.989 (7.000) 2.989
-accounts receivable.
6.635 (2.230)
(4.665)
(1.178)
(16.335)
(1.821)
-accounts payable (511)
(1.%9) 4.116 (2.398) 19.564 11.343
-inventones-matenals supphes and fuel (598)
(2.166)
(9.040) 2.479 (11.555)
(776)
-interest accrued.
511 (2.090) 452 (3.163) 2.987 (2.365)
-taxes accrued.
(20.571) 554 12.169 14.734 (6.799) 17.044 Other. net (8.941) 1.965 (18.014)
(1.635)
(10.000)
(5.002)
Totals (26 402) 8.780 (52.410) 20 473 (79 603) 37.615 Funds from fmancings-Sale of long-term debt 56.300 50.382 56.300 50.382 50.000 Sale of preferred sLck Bank borrowmss. net 30.600 12,900 36.500 12.900 77.700 (22.200)
Retirement or redemption of long. term debt and preferred stock (2.022)
(1.677)
(11.710)
(11.810)
(18.420)
(14.930)
Cash contnbutions from Ceneral Pubhc Utahties Corporation parent company 10 000 29 500 10.000 63 500 30.000 Totals.
28 578 21.223 110 590 61.472 179.080 93252 Totals.
534 557 551 514 5143 852 5138.418 5212.666 5193.563 Construction Espenditures:
Utihty plant.
527.% 1 551.840 5125.424 5139.275 5196.434 5186,851 Nuclear fuel 12.922 4 492 35 374 12949 17 840 24 334 Totals 40.881 56.332 160.798 152.224 234.324 211.185 Allowance for other f unds used donna construction (Note 2)
(6.326)
(4.818)
(16.946)
(13 som (21.658)
(17.622)
Totals
$ 34 557 551.514 5143.852 5138.418 5212.666
$193.5o3 The accompanymg notes are an mtegral part of the fmancial statements
[7]
METROPOLITAN EDISON COMPANY AIID SUBSIDIARY COMPANY Condensed Consolidated Balance Sheets (in Thousands)
September 30, September 30,
7' "7'
ASSETS:
Utslity Plant (at original costXNote 9r in servec e, under construction and held for f uture use.
51.313.484 51.273.240 Less. accumulated depreciation (Note 1) 234.468 203.892 Nei 1.079 016 1.069.348 Nuclear f uel(Note 8) 55.980 69.308 Less accumulated amortization (Notel) 7.399 16 073 Net Nuclear f uel 48.581 53 235 Net Utility Plant -
1.127.597 1.122.583 Investments.
659 665 Current Assets:
Cash 1.258 2.583 Accounts receivable, net 43.885 23.449 Other 40.953 35.285 Totals 86 0 %
61.317 Deferred Debits:
Deferred energy costs (Notes 1,7 and9) 56.765 26.710 Deferred costs nucfear accident (Note 9) 33.887 Other(Note 9) 49 964 7.454 Totals 140 616 34.164 Total Assets 51 354 % 8 51 218 729 LIABILITIES AND CAPITAL:
Long-Term Debt, Capital Stock and Consolidated Surplus:
First mortgage bonds 5 455.773 5 e62.018 Debentures 82.580 e4.560 Unamortered net dncount on long-term debt (1,598)
(1.649)
Non redeemable cumulative preferred stock, including premium 139.87_4 139 874 Totals 676 629 685 803 Common stock and consolidated surplus Common stock 66.273 66.273 Consolida ted capital surplus 280.524 280.524 Consolidated retained earnings (Note 5) -
31 533 34.782 Totals 378.330 381 579 Totals 1.054 959 1 067.382 Current Liabilities:
Debt due within one year 7,764 362 Notes payable to banks (Note 3) 88.200 24.150 Ac counts payable 32.350 17.107 Other 15.900 24 198 Totals 144 214 66 017 Deferred Credits and Other Liabilities:
Def erred mcome taies (Notes 1 and 6) 99.303 59.899 Unamortized investment credits (Notes l and 6).
32.535 21.073 Insurance recoscries - nuclear accident (Note 9).
9.950 Other 14 007 4.358 Totals 155 795 85.330 Commitments and Contingencies (Note 8 and 9)
Total Liabilities and Capital 51.354 968 51,218.729 The accompansmg notes are an integral part of the fmancial statements 18)
_m
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANY Consolidated Statements of income (in Th
")
Three Months Nine Months Twelve Months Ended September 30, Ended September 30, Ended September 30, 1979 1978 1979 J 71 1979 19tg Operating itetenues.
585.846 576 237 5250.525 5231 525 5329.580
$303.566 Operating Espenses:
Fuel 15.730 21,109 56.253 64.825 75.302 84.803 Power purchased and mterchanged, net.
Affelsates 21 6 (2.614)
(1.013)
(4.024)
(4.721)
(7.547)
Others 31.334 2.956 62.047 20.853 66.421 23.913 Deferral of energy costs, net (Notes 1 and 7)
(12.849) 1.074 (33.544)
(13.478)
(30.055)
(13.045)
Payroll 8.783 8.553 25.481 25.352 33.899 32.792 Other operation and maintenance (encludms payroll).
9.734
?.150 31.415 29.479 43.266 38.369 Depreciation (Note 1).
9.370 6,095 28.263 18.178 35.570 24.014 Tames, other than income taxes 4 484 6 263 16.711 19.278 22.723 25.034 Totals.
66.802
$2.586 185 613 160 463 242.405 208.333 Operatmg income before income Tases.
19.044 23.651 64.912 71.062 87,175 95.233 income Tames (Notes 1 and 6) 1 087 7.768 10 192 22.951 14.703 30.353 Operating income 17,957 15.883 54 720 48.111 72 472 64 880 Other income and Deductions:
Allowance for other f unds used durmg construction (Note 2) 235 5.701 908 16.350 5.440 21.481 Other mcome. net.
238 9
673 4
746 (111) income taxes on other mcome, net (Notes 1 and 6)
(87)
(7)
(291)
(15)
(304) 44 Total Other income and Deductions.
386 5.703 1 290 16 339 5.882 21.414 income Before Interest Charges.
18.343 21.586 56.010 64.450 78.354 86.294 Interest Charges:
Interest ort first mortgage bonds.
8.816 7.745 26.447 23.144 35.263 30.699 Interest on debentures 1.655 1.670 4.976 5.068 6.638 6.770 Other mterest 2.377 1.481 4.644 3.102 5.361 3.749 Allowance for borrowed funds used durmg construction -
credit (net of tax)(Note 2)
(456)
(1.812)
(1.775)
(5.195)
(3.245)
(6.539)
Income taxes attnbutable to the allowance for borrowed tunds (Notes 2 and 6)
(389)
(2.080)
(1.512)
(5 467)
(3,202)
(7.602)
Total anterest Charges 12.003 7.004 32.780 20.152 40.815 27.077 Net income 6.340 14.582 23.230 44 298 37.539 59.21 7 Preferred Stock Dividends 2.573 2.573 7,717 7.717 10.289 10.289 Earnings Available for Common Stock 53767 512.009 5 15 513 5 36.581 527.250 5 48.928 Consolidated Statements of Retained Earnings Balance, begmnmgof penod 527.766 530.773 5 23.020 5 22.701 534.783 5 23.854 Add. net mcome 6 340 14 582 23 230 44.298 37 539 59.21 7 Totals 34.106 45.355 46.250 66.999 72.322 83.071 Deduct.
Cash divulends on common stock.
8.000 7.000 24.500 30.500 38.000 Cash dmdends on cumulative preferred stock 2 573 2 573 7717 7.71 7 10 289 10 289 Totals 2.573 10 573 14 717 32.217 40.789 48.289 Balance, end of penod(Note 5) 531 533 534 782 5 31 533 5 34 782 531 533 5 34 782 The accompansmg notes are an mtegral part of the tmancial statements (91
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANY Consolidated Statements of Sources of Funds Used for Construction (In Thousands)
Three Months Nine Months Twelve Months Ended September 30 Ended September 30, Ended September 30, 1979 1978 1979 1978 1979 1978 Sources of Funds:
Funds generated from operations.
5 6.340 514.582 523.230 544.298 537.539 559.217 Net mcome.
Add. stems not requiring current cash outlay or (receipt)-
Depreciation (Note l) 9.370 6.095 28.263 18.178 35.570 24.014 Amortuation oi nuclear fuel (Note l) 1.422 3.340 3.345 4.897 4.827 investment credits. net (Notes 1 and 6)
(271) 235 (897) 1,306 11.128 3.376 Deterred mcome taxes, net (Notes 1 and 6) 11.650 1.398 28.527 13.448 35.546 15.397 Allowance for other funds used durmg construction (Note 2)
(235)
(5.701)
(%8)
(16.350)
(5.440)
(21.481)
Totals 27,054 18.031 81.555 64.225 119.240 85.350 Less, cash dividends-common stock.
8.000 7.000 24.500 30.500 38.000
-preferred stock 2.573 2,573 7.717 7 717 10.289 10 289 Totals 24.481 7.458 66 838 32.008 78.451 37.061 Other sources (uses).
Deferred energy costs, net (Notes 1 and 7)
(12.849) 1.074 (33.544)
(13.478)
(30.055)
(13.045)
Changes m -cash (225) 754 5,145 2.071 1.325 7.318
-temporary cash investments (2.100)
(4.600)
(4.600)
-accounts receivable (7.029)
(4.700)
(8.21 0)
(4.076)
(20.437)
(2.432)
-accounts payable 4.808 (2.790) 14.165 2.818 15.243 3.607
-mventories-materials. supphes and fuel (4.215)
(4.448)
(4.630) 1.283 (4.714) 6.023
.mterest accrued.
(4.408)
(3,309)
(4.637)
(2.524)
(426) 1.2 31
- tanes accrued.
(465) 6.374 (2.732)
(7.211)
(4.088)
(1.167)
Other. net (25 322) 7.864 (35 847)
(5104)
(34 991)
(6.553)
Totals (51.805) 819 (74 890)
(26 221)
(82.743)
(5018)
Funds from financings-50.000 58.700 93.700 Sale of long-term debt Bank borrowmss. net.
42.750 (34.700) 52.700 (7,100) 64.050 (44.650)
Retirement or redemption of long-term debt (1.520)
(5 420)
(1.641)
(5 540)
(1.822)
(6 000)
Totals 41.230 9 880 51.059 46 060 62.228 43050 Totals.
513 906 518157 543 007 551 847 557 936 575 093 Construction Espenditures:
5 6.717 518.487 526 625 559.433 544.648 581.977 Utility plant Nuc! car fuel 7 424 5 371 17 290 8 764 18.728 14 597 Totals.
14.141 23.858 43.915 68.197 63.376
%.574 Allowance for other funds used durmg construction (Note 2)
(235)
(5.701)
(908)
(16.350)
(5.440)
(21.481)
Totals
$13906 518.157 543.007 551.847 557.936 575.093
==r-The accompangmg notes are an mtegral part of the fmancial statemerus.
[10J
PENNSYLVANIA ELECTRIC COMPAN) AND SUBSIDIARY COMPANIFS Condensed Consolidated Balance Slieets (In Thousande September 30, September 30, 1979 1978 ASSETS:
Utility Plant (at origmal cost)(Note 9)-
In service, under construction and held for future use.
51,579,264
$1,522.404 350.664 314.152 Less, accumulated depreciation (Note 1).
1.228.600 1.208 252 Nel Nuclear fuel 28,768 35,183 3 687 8.050 Less, accumulated amortization (Note 1).
Net Nuclear Fuel 25.081 27133 Net Utility Plant.
1.253.681 1.235.385 20140 20 037 investments.
Current Assets:
2.963 11.687 Cash.
Accounts receivable, net 47.117 44.323 129 169 41.764 l
Other.
1 Totals.
179.249 97 774 Deferred Debits:
14.057 28.792 Deferred energy costs (Notes 1,7 and 9)
Unamortized mme development costs (Note 1) 7,902 9.071 Def erred costs - nuclear accident (Note 9) 16.944 10 067 14 862 Other(Note 9).
Totals 68.970 52.725 Total Assets
$1.522.040
$1.405 921 LIABILITIES AND CAPITAL:
Long Term Debt, Capital Stock and Consolidated Surples:
5 618.786 5 579.944 First mortgage bonds.
Debentures 70,040 71,880 (644)
(666)
Unamortized net discount on long-term debt.
121,363 120 % 8 Nor> redeemable cumulative preferred stock, including premium, net of expense.
47.4 %
50163 Redeemable cumulative preferred stock, net of expcnse 857.041 822.289 Totals Common stock and consohdated surplus.
105.812 105.812 Common stock.
266.530 266.530 Consohda red capital surplus.
54 652 33.758 Consolidated retained earnmgs(Note 5).
426 994 406.100 Totals 1.284 035 1.228.389 Totals Current Liabilities:
Securities due withm one year to be retmanced.
15.648 2.373 5.500 Notes payable to banks (Note 3) 34.339 29.725 Accounts payable 61 212 40 025 Other 111.199 77 623 Totals Deferred Credits and Other Liabilities:
68 8 %
56.846 Def erred mcome taxes (Notes 1 and 6).
40.858 34.980 Unamortized mvestment credits (Notes 1 and 6) 4.975 Insurance recoveries - nuclear accident (Note 9) 12077 8 083 Other 126 806 99 n09 Totals Commitments and Contingencies (Notes 8 and 9)
Total Liabilities and Capital.
51 522 040 51.405 921 The accompanymg notes are an mtegral part of the fmancial statements (11]
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES Consolidated Statements of income (In Thousands)
Three Months Nine Months Twelve Months Ended September 30.
Ended September 30, Ended September 10, 1979 1978 1979 1978 1979 1978 Operating Revenues.
5113 991 599.928 5367.599 5319 957 5479.3 %
$418.102 Operating Empenses:
Fuel 41,279 33.633 124.851 101.021 168,259
.24.912 Power purchased and interchanged, net-Atfshates (20.869)
(7.404)
(35,363)
(11.998)
(46.075)
(10.740)
Others.
12.562 1.569 21.287 20.807 20.950 33.909 Deferral of energv costs. net (Notes 1 and 7) 7.961 3.763 9.255 (2.249) 14.734 (4.510)
Pay roll 11.726 12.069 34,726 33.733 45.768 43.700 Other operation and mamtenance(excluding payroll) 14.790 16.962 45.730 47,192 t:3.010 60.281 Depreciation (Note 1) 11.535 9.377 34.587 28.408 44.307 36.474 Taies. other than mcome tames 6 990 7 759 24 518 24 220 32 612 31.376 Totals 85.974 77 728 259 591 241.134 343.565 315.402 Opera tmg income before income Taxes 28.017 22.200 108.008 78,823 135.831 102.700 Income Taxes (Notes 1 and 6).
6 337 4.587 29.376 20.869 32,923 25.956 Operating income.
21 6A0 17 613 78 632 57954 102.908 76.744 Other income and Deductions:
Allowance for other f unds used durms construction (Note 2) 456 2.755 1,450 8.154 3.784 12.120 Other mcome, net.
2,008 611 3.961 1,480 4.587 1,971 income taxes on other mcome, net (Notes 1 and 6)
(1 219)
(411)
(2 253)
(1.027) f 2.714)
(1.409)
Total O ther income and Deductions 1 245 2 955 3158 8 607 I657 12.682 income Before interest Charges 22.925 20.568 81 790 66 561 108.565 89.426 Interest Charges:
Interest on first mortgage bonds 12.334 10.865 34.098 30.816 44.726 40,387 Interest on debentures 1,285 1.318 3.883 3.978 5.186 5.31 4 Other mterest 529 350 1.009 1.791 (84) 2.447 Allowance for borrowed funds used durmg construction -
credit (net of tas)(Note 2)
(277)
(1.126)
(880)
(3.333)
(1,834)
(4.761) income tases attributable to the allowance for borrowed f unds(Notes 2 and 61 f2%)
(1.292)
(941)
(3 6741 (2.036)
(5.486)
Total interest Charges 13575 10115 37.169 29 428 45 958 37 901 Net income 9.350 10.453 44.621 37,133 62.607 51.525 Preferred Stock Dividends 3 660 3.6%
11.016 11.126 14.713 14 859 Earnings Available for Common Stoca.
5 5690
$ 6 757 5 33 605 $ 26.007 5 47 894 5 36 666 Consolidated Statements of Retained Earnings Balance. begmnmg of pened 5 48.962
$38.001 5 37.047
$ 33.751 5 33.758 5 37.092 Add. net mcome 9.350 10.453 44 621 37133 62 66?
51 525 Totals 58 312 48.454 81.668 70 884
% 365 88.617 DeducI:
Cash dividends on common stock.
11.000 16 000 26,000 27.000 40 000 Cash dedends on cumulative preterred stock 1660 36%
11 016 11126 14 713 14 859 Totals 3 660 14 6 %
27 016 37126 41.713 54 859 Balance. end of penod(Note 51 5 54 652
$33 758
$ 54 652 5 33 758 5 54 652 5 33 758 The accompas.vmg notes are an mtegral part of the tmancial statements (121
i s'
[
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES Consolidated Statements of Sources of Funds Used for Construction (In Thousands)
Three Months Nine Months Twelve Months Ended September 30.
Ended September 30, 2.ided Septeneher 30, 1979 1978 1979 1978 1979 1978 Sources of Funds:
Funds generated from operations.
Net mcome.
5 9.350 510.453 544.621 537.133 562.607 551,525 Add. stems not requirms current cash outlav or(receipt)
Depreciation (Notel).
11.535 9.377 34.587 28.408 44.307 36.474 Amortuation of nuclear fuel (Note 11 708 1.649 1.669 2.425 2.411 Investment credits. net (Notes t and 6)
(365) 978 (1.061) 3.249 5.277 11.814 Def erred income tases. net (Notes 1 and 6)
(2.129)
(1.444) 4 450 7.531 10.319 11.551 Allowance for other funds used durmg construction (Note 2)
(456)
(2.755)
(1.450) f8154)
(3.784)
(12.120)
Totals.
17.935 17.317 82.7 %
69.836 121.151 101.655 Less, cash dividends-common stock 11.000 16.000 26.000 27,000 40.000
- preferred stock.
3.660 36%
11.016 11,126 14.713 14 859 Totals 14.275 2.621 55.780 32.710 79.438 46.7 %
Other sources (uses)-
Deferred energy costs, net (Notes 1 and 7).
7.961 3.763 9.255 (2.249) 14.734 (4.510)
Changes in -cash.
438 (2.243) 1.149 (491) 8.723 71
-temporary cash mvestments (40.2001 (87.200)
(87.2001
-accounts receivable 7.164 (1,116) 13,700 2.567 (2.793)
(9.979)
-accounts payable 6.244 (1.247) 1.964 (2.0 39) 4.614 398
-mventories-matenais, supplies and fuel (1.166)
(3.257)
(12.217) 11.040 (6,137) 13.889
-mterest accrued.
6.109 4.889 5.877 4.498 170 1.305
-tanes accrued.
10.033 4.525 19.761 (827) 19.851 562 Other, net.
4.41 6 10.717 (8.553) 101 (3.944)
(4 857)
Totals.
999 16.031 (56 264) 12.600 (51.982)
(3.121)
Funds from financmss.
Sale of long-term debt 50.000 45.000 50.000 61.420 Bank borrow ass, net.
(500)
(33.325)
(5.500)
(23.905)
Retirement or redemption of long-term debt and preferred stock.
(621)
(951)
(2.552)
(3.147)
(2.573)
(3.767)
Cash contnbuion f rom General Public Utilities Corporation.
5.000 parent company.
Totals (621) f855) 46 948 8 528 41 927 38.748 Totals
$14 653 517.797 546.464 553.838 569.383 582.423
_a Construction Espenditures:
Uu;ity plant.
511.360
$17.770 539.177 557.462 563.750 586.916 Nuclear fuel 3 749 2.782 8.737 4 530 9.417 7.627 Totals.
15.109 20.552 47.914 61.992 73.167 94.543 Allowante for other f unds used durms construction (Note 2)
(456)
(2.755)
(1.450)
(8.154)
(3.784)
(12.120)
Totals
$14 653 517.797 546.464 553.838 569.383 582.423 r---r
==
The accompanymg notes are an mtegral part of the fmancial statements (13) 4
y Notes to Financial Statements
- 1. Summary of Significant Accounting Policies:
General:
Reference is made to the Notes to Financial Statements included in the 1978 Annual Report to Stockholders Operating Revenues:
Revenues are generally recorded on the basis of billings rendered. During 1978, the Corporation's Penn-sylvania subsidiaries commenced billing their retail customers on a monthly basis rather than on a bi-monthly basis to conform to requirements of the Pennsylvania Public Utilities Commission ("PaPUC") while remaining on a bi-monthly meter reading cycle.
Depreciation:
The Corporation's subsidiaries provide for depreciation at annual rates determined and revised periodically, on the basis of studies, to be sufficient to amortize the original cost of depreciable property over estimated remaining service lives, which are generally longer than those employed for tax purposes.
The subsidiary companies use depreciation rates which, on an aggregate composite basis, resulted in an ap-proximate annual rate of 3 07% (Jersey Central Power & Light Company ("JCP&L")-3.40%, Metropolitan Edison Company (" Met-Ed")-2.84%, and Pennsylvania Electric Company ("Penelec")-2.89%) for the year 1978.
Nuclear Plant Decommissioning Costs; in accordance with ratemaking determinations (a) JCP&L is charging to expense and crediting to a non-funded reserve amounts intended to provide over their service lives for the decommissioning of Oyster Creek and its share of TMI #1 nuclear unit, and (b) Met-Ed and Penelec are charging to expense and paying over to a separate trust amounts intended to provide over their service lives for the decommissioning of their shares of the radioactive components of TMI #1. Such ratemaking orders limit such provisions to amounts based on cost estimates in current dollars without provision for possible future cost escalation. None of the subsidiaries is making any similar provision for decommissioning costs for TMI #2; none of the capital or operating costs of TMl #2 are currently reflected in the rates of the subsidiaries (see Note 9).
Amortization of Nuclear Fuel:
The amortization of nuclear fuel is provided on a unit of production basis. Rates are determined and periodically revised to amortize the cost over the useful life. Prior to December 1,1976, amortization of nuclear fuel costs included estimated costs of reprocessing such fuel and estimated residual uranium and plutonium. Due to the uncertain future of government approvals for reprocessing and plutonium recycling, the Corporation's subsidiaries, effective December 1,1976, began using amortization rates for nuclear fuel at the Three Mile Island station which estimate zero values for reprocessing costs and for residual credits. Ef-fective September 1,1977 similar treatment was adopted pursuant to authorization by the Board of Public Utilities of the State of New Jersey ("NJBPU") for the Oyster Creek station nuclear fuel. Also effective September 1,1977 JCP&L is providing for estimated future off-site storage costs for the spent Ovster Creek nuclear fuel and similar treatment will be provided for of f-site storage costs for the spent Three Mile Island station ("TMl") nuclear fuel when required. Previously accumulated estimated residual credits, net of previously accumulated estimated costs of reprocessing for the Oyster Creek station nuclear fuel are being amortized to fuel expense on a unit of production basis. Should reprocessing eventually be undertaken, the Corporation expects that any difference between such costs and credits will be recognized prospectivelv in the rate-making process.
( 08 )
Notes to Financial Statements -(Continued)
Income Taxes:
The Corporation and its subsidiaries file consolidated Federal income tax returns. All participants in a consolidated Federal income tax return are severally liable for the full amount of any tax, including penalties and interest, which may be assessed against the group. The Corporation and its subsidiaries have filed with the Securities and Exchange Commission ("SEC") a proposal to change the method of allocation of Federal income taxes beginning with the year 1979. The effect of this change will be to allocate the tax reductions attributable to CPU expenses among its subsidiaries in proportion to the dollars of average com-mon stock equity investment of GPU in such subsidiaries during the year. In addition, each subsidiary will receive in current cash payments the benefit of its own net operating loss carrybacks to the extent that the other subsidiaries can utilize such net operating loss carrybacks to offset the tax liability they would other-wise have on a separate return basis (af ter taking into account any investment tax credits they could utilize on a separate return basis). The proposed method of allocation will not allow any subsidiary to pay more than its separate return liability as if it had always filed separate returns.
The revenues of the Corporation's subsidiaries in any period are dependent to a significant extent upon the costs which are recognized and allowed in that period for rate-making purposes. In accordance therewith, the Corporation % subsidiaries have employed the following policies:
Tax Depreciation: The subsidiaries of the Corporation generally utilize liberalized depreciation methods and the shortest depreciation lives permitted by the Internal Revenue Code in computing depreciation deductions and provide for deferred income taxes where permitted m the rate-making process.
Investment Credits: The 3% investment credits are being amortized over a 10-year period while the 4% and 10% investment credits are being amortized over the estimated service lives of the related facilities.
Investment credits applicable to the Tax Reduction Act Employee Stock Ownership Plan
("TRAESOP") are remitted to the Plan Trustee and have no effect on income (see Note 4).
Pension Plans:
The Corporation's subsidiaries have several pension plans including plans applicable to all employees, the accrued costs of which are being funded. The costs of supplemental pension plans applicable only to supervisory employees were not funded prior to 1976. The previously unfunded supplemental pension plan costs are being funded during the five year period beginning January 1,1977. Prior service costs applicable to all plans are being amortized and funded over 25-year periods.
Deferred Energy Costs:
The subsidiaries follow a policy of recognizing energy costs in the period in which the related energy clause revenues are billed.
Deferred energy costs at September 30,1979 include (a) amounts accumulated prior to the TMl #2 acci-dent, which are being amortized in accordance with ratemaking orders (see Note 7), and (b) amounts ac-cumulated subsequent to the TMI #2 accident reflecting the operation of levelized energy adjustment clauses placed in effect pursuant to ratemaking orders entered in June 1979 (see Note 9).
Mine Development Costs:
These costs are being amortized to income over the estimated life (20 years) of the mines.
- 2. Allowance fu Funds Used During Construction:
The applicable regulatory Uniform System of Accounts provides for allowance for funds used during lis]
Notes to Financial Statements -(Continued) construction ("AFC") which is defined as including the net cost during the period of construction of bor-rowed funds (allowance for borrowed funds used during construction) used for construction purposes and a reasonable rate on other funds (allowance for other funds used during construction) when so used. While AFC results in a current increase in utility plant to be recognized for rate-making purposes and represents, in this fashion, current compensation for the use of capital devoted to construction, AFC is not an item of cur-rent cash income; instead, AFC is realized in cash af ter the related plant is placed in service by means of the allowance for depreciation charges based on the total cost of the plant, including AFC.
To the extent permitted in the rate-making proceedings of the subsidiaries, the income tax reductions associated with the interest component of AFC have been allocated to reduce interest charges and, cor-respondingly, have not reduced income taxes charged to operating expenses. Pursuant to such rate orders, the Pennsylvania subsidiaries employ a net of tax accrual rate for AFC and JCP&L employs a net of tax ac-crual rate for AFC on cert.ain construction projects while using a gross AFC rate on others.
The Corporation's subsidiaries have accrued AFC using rates which, on an aggregate composite basis, would have resulted in an annual rate of 8.42% (JCP&L-8.85%, Met-Ed-6.38%, and Penelec-7.09%) for the mne months ended September 30,1979.
- 3. Short Term Borrowing Arrangements:
The Corporation and its subsidiaries have entered into a revolving credit agreement with a group of banks, under which they expect to ultimately have available up to $412 million of credit at interest rates ranging from 105% to 111% of the prime rate. The agreement provides for a commitment fee of one-half of one percent per annum of each bank's total commitment (whether used or unused). At September 30,1979, the lines of credit under the agreement totaled $289 million, of which $220 million have been utilized for outstanding borrowings.
In addition, the Corporation and its subsidiaries have informal lines of credit with various lenders. These arrangements generally provide for the maintenance of compensating balances ranging from a minimum of 10% of the available line of credit to a maximum of 10% of the line plus 10% of the loans outstanding, as determined on a daily average basis. At September 30,1979, the lines of credit available under these ar-rangements totaled approximately $35 million (JCP&L - $17 million. Met-Ed - $2 million and Penelec -$16 million).
- 4. Common Stock and Capital Surplus:
Of the 75 million authorized shares of $2.50 par value common stock of the Corporation, 61,264,000 shares were issued and outstanding at September 30,1979.
During the quarter ended March 31,1979, the Corporation sold 293,000 shares of common stock. The par value of sucn shares ($731.000)was credited to common stock and the excess of proceeds over the par value of such shares ($4,188.000) was credited to capital surplus.
As a result of the accident at TMI #2, the Corporation suspended boQ the Dividend Reinvestment Plan and the TRAE50P. Because of such suspensions, no shares of common stock have been sold subsequent to March 31,1979.
- 5. Consolidated Retained Earnings:
Under the revolving credit agreement, $300,000,000 of the balance of consolidated retained earnings is restricted as to the payment of cash dividends on common stock.
Retained earnings of Met Ed and Penelec include $3,360,000 and $37,048,000, respectively, which Ini
Notes to Financial Statements -(Continued) amounts are restricted as to the declaration of cash dividends on common stock in accordance with the most restnctive of the provisions contained in their mortgages, debenture indentures, charters and the revolving credit agreement, in accordance with recently supplemented provisions of its mortgage, JCP&L must limit cash dividends on common stock, to the extent they are not matched by cash capital contributions f rom the Corporation, to an amount not exceeding 25% of earnings for 1979 and 1980 and 100% of earnings thereafter. In the NIBPU's rate order of June 18,1979, JCP&L was directed not to pay any cash dividends on common stock for the remainder of 1979.
- 6. Income Taxes:
Examination of Federal income tax returns through 1976 has been completed and the years 1977 and 1978 are currently under review. The Corporation and its subsidiaries have provided for any anticipated liabihties that may result from such examination.
- 7. Deferred Energy Costs:
The balance of deferred energy costs at September 30,1979 includes (a) 552.6 million deferred by JCP&L prior to September 1,1977 which is being amortized to income at a rate of $2.3 million per year, before in-come taxes, for accounting and rate-making purposes, and, (b) 525.2 million (Met-Ed $14.4 million, and Penelec $10.8 million) deferred by the Pennsylvania subsidiaries prior to July 1,1978 which is being amor-tized to mcome at a rate of $11.3 million (Me-Ed. 55 8 million and Penelec,55.5 million) per year, before in-come taxes, for accounting and rate-making purposes. Substantially all of the remaining balance of deferred energy costs represents costs experienced since the accident at TMI #2 (see Note 9).
- 8. Commitments and Contingenices:
General:
The subsidiaries' construction programs, which extend over several years, contemplate expenditures of approximately $330 million (JCP&L,5205 mil! ion; Met Ed,550 million; and Penelec,570 million) during 1979.
In connection with these construction programs the subsidiaries have incurred substantial commitments.
The subsidiaries are engaged in negotiations and, in one instance, litigation with various suppliers relating to the latters claims for delay or termination charges or inueased fees which such suppliers assert result from the subsidiaries' revisions of their construction plans and schedules and/or from the increased scope of supply. The subsidiaries' managements do not expec* at this time that such negotiations and litiga-tion will result in any material increase in costs that would not be valid costs prcperly recognizable through the rate-making process.
Claims for damages arising out of the operation of the Oyster Creek station have been asserted. JCP&L's management believes that such liability, if any, as it may have for such damages in the pending suits and for all asserted and potential similar claims would not be material.
JCP&L was a participant in the Atlantic generating station project. In December 1978, the non-affiliated co-owner and principal sponsor of the station announced the abandonment of the project. At September 30, 1979, JCF&L's investment in the project was 54 2 million. ICP&L plans to seek regulatory approval to amor-tize this investment, net of related income tax reductions of $1.4 million, over a period of years for rate-making purposes. The NIBPU has accorded such treatment for similar items in the past.
The corporation has guaranteed all borrowings outstanding under the revolving credit agreement (see Note 3) in order to secure such guarantee, plus 539 million of the Corporation's term loan and the guarantee 1171
Notes to Financial Statements -(Contirned) by the Corporation of $16.8 million of loans to GPU Service Corporation,("CPUSC"), the Corporation has pledged the common stock of JCP&L, Met Ed Penelec and CPUSC.
JCP&L and Met-Ed have secured their r otes under the revolving credit agreement by pledging a secunty interest in certain nuclear fuel in process of refinement, conversion, enrichment and fabrication. Such nuclear fuel was recorded, on the September 30,1979 balance sheet, at a cost of $16.4 million UCP&L -58.5 million and Met-Ed - 57.9 million) In addition, Met-Ed has pledged $40 million of first mortgage bonds as security for its indebtedness under the revolving credit agreement.
Fuel Adiustment Clauses:
In 1974, in the af termath of the Arab oil e.mbargo and OPEC actions doubling the price of oil and in the presence of the threat of a prolonged coal strike, competition for coal was intense. In some cases Met-Ed and Penelec agreed in 1974 to modification of existing contracts and/or paid prices in excess of such con-tracts, believing that they would not have been able to obtain delivery of coal from their contract suppliers without taking such actions and that the other alternatives would have resulted in even higher costs or unreliable service to their customers. In 1976, the PaPUC directed that independent studies be made of the f uel procurement policies, practices and the procedures of Pennsylvania electric utilities and their applica-tion of the fuel adjustment clauses in 1974 and that reports of such studies be filed with the PaPUC.
The indeper Jent auditors of the Corporation and its subsidiaries made such studies with respect to Met-Ed and Penelec and submitted reports to the PaPUC on March 1,1976. These reports found that m 1974 cer-tain payments to coal suppliers were in excess of original contract arrangements. The Met-Ed report states that $2.8 million in payments were in excess of base contract prices but in accordance with contract terms for escalation; whereas $5.8 million of price increases in excess of base contract prices had inadequate documentation to support such escalation. The report also stated additional quantities of coal (an estimated 70,000 tons) had to be purchased due to receipt of coal that had not met the BTU specifications of the con-tracts. The Penelec report identifies 54.5 million of payments in excess of escalated contract prices due to renegotiations of existing contracts and that certam suppliers did not deliver 400,000 tons required under the contractual arrangements. These reports also stated that "[a] part of these additional costs was unavoidable since they were caused by external conditions beyond the control" of the subsidiaries and "to some degree,"
because of their coal procurement practices which the report found to be " informal and not well documented". The subsidiaries' alternatives were limited and they were not in a strong bargaining position to contend with 1974 conditions, the reports stated, but added that, in retrospect, the subsidiaries might have done more to contain fuel costs, despite such conditions and procurement problems. Although the reports said that the subsidiaries' primary commitment is to maintain reliable electric service, it added that the subsidiaries "could have been more responsive to the developing procurement problems and taken more effective action to cope with them" In March,1976, by complaints filed against several Pennsylvania electric utilities, including Met-Ed and Penelec, the PaPUC ordered an investigation of their charges made and rates received through fuel adjust-ment clauses.
In January and Apnl 1977, the PaPUC issued amended complaints asserting that Met-Ed and Penelec made payments in 1974 for coal that were 59.8 million and 54 9 million, respectively, in excess of those re-quired by their contracts, and that such excess payments were without justification and directing Met-Ed and Penelec to show cause why they should not be required to refund 59.8 million and 54.9 million, respec-tively, to their customers. Met Ed and Penelec believe that the p2yments which they made were justified and that there is no basis for requiring such refunds and they have so responded to the complaints. Hearings on the complaint against Met Ed were completed in November 1978 and the matter is awaitmg the initial deci-sion by the administrative law judge who heard the evidence.
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Notes to Financial Statements -(Continued)
In November and December 1978, the SPUC issued further complaints asserting that Met Ed and Penelec incurred excess costs of 54.6 million and 5.8 million, respectively, for coal during 1975 and 1976, and that such excess payments were without justification and directing Met-Ed and Penelec to show cause why they should not be required to refund 54 6 million and 5 8 million, respectively, to their customers. Such complaints were based on audit reports prepared by the PaPUC staff. Met-Ed and Penelec believe that the payments which they made were justified and that there is no basis for requiring such refunds, and they have so responded to the complaints.
In May,1976, the PaPUC required all Pennsylvania electric utilities to file supplements, effective August 1,1976, to their fuel adjustment clauses providing that the application of such clause shall be sub-ject to continuous review and audit and that, if it shall be determined by a final order that such clause has been erroneously or improperly utilized, the utility will rectify such error and apply credits against future fuel cost adjustments.
Met-Ed and Penelec believe that the amounts paid by them for fuelin 1974-1976 were fully justified and that there is no valid basis for requinng any refund of any amounts collected by them under their fuel adjust-ment clauses. However, the Corporation is unable 4 this time to predict the outcome of these matters.
Compliance Audits:
The staff of the FERC has conducted compliance audits of Met Ed's and Penelec's accounting records covering the periods ending December 31,1976 and December 31,1977, respectively. The findings of such audits which, among other things, raised pestions concerning the base to which AFC accruals should be ap-plied, were furnished to Met-Ed and Penelec by the FERC in letters dated October 2,1978 and November 17, 1978, respectively. The letters recommended certain adjustments to the books of account. If such recom-mendations were to be sustained, the resulting reduction in consolidated earnings would approximate $4.5 million (Met-Ed,52.2 million and Penelec $2.3 million) through 1978. Met-Ed and Penelec believe that such recommended adjustments are not justified and they are contesting them.
Nuclear Fuel Litigation:
In 1971, JCP&L entered into a contract for the purchase of three nuclear fuel reloads for the Oyster Creek Station, with an option for five additional annual reloads beginning in 1976. In 1974 the supplier offered an extension of that contract to cover five additional annual reloads beginning in 1981. JCP&L believes that it effectively exercised the option in the initial contract and accepted the offer to extend the contract to cover the annual reloads through 1985. The supplier disputes this position and, in November 1978, submitted bills for material and services in the aggregate amount of approximately $33 milhon, covering reloads supplied in 1977 and 1978 and to be supplied in 1979. The supplier has stated that its objective is to establish revised prices and other terms and conditions rather than to diminish supplies and, without prejudice to its legal position, has released uranium concentrates for enrichment and f abrication for the 1979 annual fuel reload.
Of the 533 million claimed by the supplier to be due JCP&L has paid approximately 5.8 million, agreed to pay an additional 53 million but has asserted that such amount will not be due until later in 1979 and is of the opinion that the balance of approximately $29 million is not payable by it and has so informed the sup-Wer. On January 26,1979, the suppl,er filed suit against ICP&L, the Corporation and CPU Service Corpora-tion. ICP&L has filed a counterclaim for a ;ieclaratory judgement confirming its view of the contractual status and for damages and has also filed another suit against the supplier and its parent seeking damages.
ICP&L believes that any additional amount that it might be required to pay if the supplier is successful in its suit would be valid costs and should be recognized for rate-making purposes. However, there can be no assurance that this will be the case.
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Notes to Financial Statements -(Continued)
- 9. Nuclear Accident:
On March 28,1979, an accident occurred at Unit No. 2 of the Three Mile Island nuclear generating sta-tion ("TMI-2") resultirig in significant damage to TMI-2, and a release of some low level radiation which published reports of governmental agencies indicate did not constitute a significant public health or safety hazard. TMI-2 is jointly owned by the subsidiaries, JCP&L,25% Met-Ed. 50%; and Penelec 25% Total in-vestment by the subsidiaries in TMr2 is approximately $750 mi!No, including the unamortized investment of approximately 535 million in the nuclear fuel core.
The subsidiaries have engaged a consulting engineering firm to prepa:e a cost estimate and schedule for restoring TMI-2 to service. The firm's initial report notes that, while the decontamination of the buildings and removal and disposal of large quantities of radioactive material is a major undertaking, the technology and techniques are well-known and have been previously demonstrated. This initial report emphasizes the inherent uncertainties in cost and schedule estimates until(a) entry into the containment vessel has been gained and the difficulties of decontamination have been evaluated. (b) the reactor vessel has been opened and the difficulties of core removal have been evaluated, and (c) the physical integrity of major components has been assessed.
Subject to these qualifications, the initial report estimates that decontamination and restoration of TMI-2 to service, exclusive of replacement of the core, will cost approximately $240 million and take about four years. The report also recommends that, because of the unknowns and variables, an allowance of $80 million for contingencies be included in the estimate of cost, bringing the total to S320 million. The estimate does not include provision for the replacement of the reactor core (estimated by the subsidiaries to cost 560 million to $85 million) nor for the subsidiaries' replacement power, financing and other costs during the period of rahabilitation of TMI 2. The subsidiaries have increased, by $25 million, the engineering firm's estimate of costs to provide for other items possibly omitted from that estimate.
The subsidiaries carried the maximum insurance coverage available(5300 million) for damage to the unit and core and for decontamination expenses. The insurance does not cover replacement power costs or return on investment while the unit is not providing electricity for customers, but it otherwise covers most types of costs. It is the subsidiaries ~ belief that, if the estimates of the consultmg engineering firm are borne out, the recoveries fror, the insurance companies will approximase the amount of the insurance carried.
The subsidiaries do not know the extent, if any, to which the expenditures for repair and restoration of t
the unit to service will represent plant improvements or other items that are properly capitalizable and recoverable in the future through rates charged to customers by amortization or depreciation charges.
Moreover, the subsidiaries expect to seek financial assistance from the Federal government and/or the utility industry in areas where the technical information should be of wide value and significance. Under these cir-cumstances, the amount of loss, if any, suffered by the Corporation and its subsidiaries resultmg from the TMI accident is not presently determinable and no provision therefore has been made in their accounts.
The property damage insurance, and the limit of coverage, is applicable to both TMI-1 and TMI-2. This property insurance is reduced by claims paid and the insurance carriers have refused to reinstate the original coverage limits at this time. Separate property damage insurance for TMI-1 of up to $300 million was ob-tained from another carrier which provides such insurance only on a retrospective premium basis whereby the insureds are subject to annual assessments of up to 14 times the annual premium. As a result, the subsid-iaries have a contingent liability for an aggregate annual assessment of up to 514 million. With regard to property insurance for TMI-2,550 million of coverage has been obtained for possible damages which might result from a non-nuclear accident during the unit's restoration period.
The subsidiaries, in responding to the accident at TMi-2, have incurred $74 million of costs associated with the clean-up and recovery process, as of September 30,.979. Of this amount $67.8 milhon has been
! 20 1
Notes to Financial Statements -(Continued) deferred and 56.2 million charged to operations. All deferred costs will be charged to operations upon a determination that such costs are not recoverable through insurance proceeds, rates or by financial assistance from the Federal government or from other public or private sources and/or utility industry, in its rate order approved June 15,1979 referred to below, the PaPUC recognized that no claim for such costs had been made in the proceedings in which such order was entered. Nevertheless, the PaPUC stated in that order:
"the Commission is of the view that none of the costs of responding to the incident, including repair, disposal of wastes and decontamination are recoverable from ratepayers."
The subsidiaries, while presently unable to assess the specific damage to the fuel core at TMI-2, are of the opinion that the core is no longer useful in TMI-2 or any other nuclear generating station. At the time of the accident at TMI-2, the nuclear fuel core had a remaining unamortized book cost of approximately 535 million. In June 1979 this nuclear fuel core was retired and the unamortized cost was transferred to Deferred Debits Other, pending insurance settlement.
TMI-1 which adjoins TMI-2 was out of service for a scheduled refueling and was not involved in the acci-dent. By orders dated July 2,1979 and August 9,1979, the Nuclear Regulatory Commission ("NRC") directed that TMI-1 remain in a shut down condition until resumption of operation is authorized by the NRC, after public hearings and the satisfaction of various requirements set forth in such orders. The NRC's time schedule for the completion of the hearings and decision would require at least one year and a longer period could be required.
In their rate orders issued in June 1979, the PaPUC and NIBPU determined that the capital and operating costs associated with TMI-1 should continue to be reflected in base rates. However, on September 20,1979, the PaPUC issued an order instituting an investigation to determine whether the costs of Met-Ed and Penelec associated with TMl-1 should be removed from their base rates. The NJ BPU may institute a similar investiga-tion.
In order to make provisions for the substantial expenditures required for clean up and repair, replace-ment energy and other added costs resulting from this accident, the Corporation and its subsidiaries entered into a revolving credit agreement with a group of banks in June 1979,(see Note 3). In addition, JCP&L and Penelec each issued 550 million of first mortgage bonds in June 1979 and JCP&L sold $47.5 million of first mortgage bonds in October 1979,525 million of which was applied to the payment of maturing bonds.
On October 26, 1979, the NRC proposed a fine of $155,000 against Met-Ed for alleged safety, maintenance procedural and training violations at TMt. The NRC also stated that depending upon the findings of continuing investigations into the TMI-2 accident, it may take additional enforcement action such as assessing additional civil penalties or ordering the suspension, modification or revocation of Met Ed's operating license. Met-Ed proposes to contest the major elements of the proposed fine but does not I
know what the outcome of this matter will be.
On October 30,1979, the PresidentW Commission on the Accident at Three-M:le Island issued its report.
The Commission's Report is lengthy.nd it was accompanied by a series of Staff Reports compnsing several thousand pages. The Commission's Report states, in part, that its " investigation has revealed problems with j
the ' system' that manuf actures, operates and regulates nuclear power plants" and the shortcomings which l
turned the incident into a serious accident "are attributable to the utility, to suppliers of equipment and to l
the federal commission that regulates nuclear power " The Corporation does not know what effect, if any, the Report will have upon it and its subsidiaries.
Other investigations and inquiries into the nature, causes and consequences of the TMI 2 accident com-l menced by various federal and state bodies are continuing CPU is unable to estimate the full scope and nature of these continuing investigations or the potential consequences thereof to the investors in the secunties of the Corporation and its subsidiaries. The Corporation is also unable to determine the impact, if l 21 1 s -
f Notes to Financial Statements -(Continued) any, the results of such investigations may have on the proceedings to return TMI-1 to service and the ef forts to rehabilitate TMI-2.
On November 1,1979, the PaPUC ordered Met Ed to show cause why its governmental authorization to sell elec:ric power should not be revoked. Met-Ed intends to respond to the order contending that there is no basis for such revocation.
On January 31,1979, JCP&L was granted a $33.8 million rate increase by the NjBPU, which, among other things, reflected in base rates its investment in TMI-2 and the operating and maintenance costs associated with the unit. On June 18,1979, the NJ BPU issued a rate order reducing annual base revenues by $29 million which represents JCP&L's capital and operating cost associated with its interest in TMI 2. The order also pro-vided for a reduction in energy revenues of $7.3 million over a prospective eighteen month period as an of f-set to revenues attributable to TMI 2, collected during April, May and June 1979. Accordingly, such amount was recorded as a charge to energy costs by JCP&L in June 1979. In addition, the order authorized JCP&L to increase its levelized energy adjustment charges to its customers over the period July 1,1979-December 31, 1980, by an amount which the NIBPU believed would be sufficient to recover the replacement power costs associated with the non-availability of TMl since March 31,1979 (see Notes 1 and 7). On September 5,1979, the Nj BPU authorized JCP&L to increase its levelized energy adjustment clause charges to recover increases in energy costs, not associated with TMI, anticipated for the period September 1,1979 - August 31, 1980; such increase is expected to provide approximately $70 million of revenues durmg that penod (see Note 1).
During the first quarter of 1979, Met Ed and Penelec were granted retail rate increases by the PaPUC which, among other things, reflected in base rates their investment in TMI-2 and the operating and maintenance costs associated with the umt. On April 19,1979 and April 25,1979, the PaPUC, as a result of the accident, established temporary rates for Met-Ed and Penelec, respectively, reducing annual base revenues by the operating and capital costs associated with their interest in TMI 2. These actions effectively revoked the 546 6 million increase in rates granted Met-Ed on March 22,1979, restorin7, the rates to levels in effect pnor to that rate order. In Penelec's case, the PaPUC prospectively reduced the 556.2 million rate in-crease which the company had been billing since January 27,1979 by 525.0 million.
OnJune 15,1979, the PaPUC issued a rate order which directed that Met Ed's and Penelec's temporary rates prescribed by its April 19,1979 and Aptd 25,1979 orders be made permanent. In addition, the order established levelized energy adjustment clauses for Met Ed and Penelec for the period July 1,1979
-December 31,1980 at a level which the PaPUC believed would be suf ficient to recover the increases in the companies' energy costs during that period. This levelized energy adjustment clause did not make provision for the increased energy costs expenenced by Met Ed and Penelec during the March 28 lune 30,1979 period, but the discussion at the public meeting at which such order was entered indicated that such costs will ultimately be recoverable. The order also made provision for the amortization through base rates by Met Ed of 55 8 million annually of previously deferred energy costs of $14 million and by Penelec of 55.5 million an-nually of previously deferred energy costs of 519.4 million.
The increases in the subsidiaries' levelized energy adjustment charges granted by the Nj BPU and PaPUC m June 1979 assumed that TMI-1 would resume the generation of electricity on January 1,1980. The sub-sidiaries expect to seek increased energy adjustment charges in the light of the NRC's action requiring that TMI-1 remain in a shut down condition untd resumption of operations is authorized by it.
On November 1,1979, Met Ed filed with the PaPUC for an increase of approximately 555 million in its levelized energy clause charges Such request is a result of increased fuel costs since the June 15,1979 rate order, as well as the continued delay in returning TMI1 to service.
As indicated by the preceding paragraphs the depreciation and return requirements associated with the 5750 million investment m TMI-2 (amounting to approximately 595 million per year) are not being recovered
[221
Notes to Financial Statements -(Continued) from customers. Such der eciation and return requirements are currently being reflected in the financial statements in that (a) depreciation charges in respect of the unit are being provided. (b) the interest and preferred stock dividend charges associated with the debt and preferred stock components of that invest-ment are being accrued, and (c) the earnings per share of common stock are determined on a basis which reflects all outstanding shares including the shares issued to finance the common stock component of that investment.
Under the Price-Anderson Act there is a limit of $560 million on each nuclear generating unit for public liability claims that could result from a single nuclear incident. The subsidiares have insured for this ex-posure by purchasing pnvate insurance of $140 million (the maximum amount available at the time of the accident) and the remainder by participating in an arrangement for assessments af ter an accident against owners of nuclear reactors of up to 55 milhon per incident, but not more than $10 million in any calendar year, for each licensed nuclear reactor and indemnity by the Federal government. Based on the three nuclear reactors and the insurance coverage in effect at the time of the accident, the subsidiaries' maximum potential assessment under this vangement is 515 million per incident.
Such pnvate insurance is reduced by claims paid but is subject to reinstatement to original coverage limits upon approval by the insurance carriers. The subsidiaries have applied for such reinstatement but are unable at this time to ascertain whether or when such reinstatement will be approved.
As a result of the accident, the Corporation, and/or its subsidiaries have been named as defendants in various law suits. Among other matters such suits include (i) class actions and individual suits for personal and property damages directly resulting from the accident,(ii) suits to enjoin the decontamination of TMI-2 and (iii) suits for damages on behalf of purchasers of CPU Common Stock.The corporation and its sub-sidianes are not able to evaluate the merits of these complaints.
The subsidiaries' construction program, which extends over several years, contemplated expenditures of approximately 5455 million during 1979. However, due to the accident at TMI-2, in an effort to conserve tneir cash resources the subsidiaries' have reduced their 1979 construction program expenditures to approx-imately $330 million.
JCP&L in view of the accident, has temporarily suspended construction on its Forked River nuclear generating station. Total costs applicable to this project at September 30,1979 were approximately $357 million. Prior to the accident, JCP&L was negotiating for the sale of undivided interests in the station to two unaffiliated utilities, one of which has since indicated it is no longer interested in such a purchase. JCP&L does not know whether it will be able to sell any undivided interests in the station.
(M1