ML19323A024
| ML19323A024 | |
| Person / Time | |
|---|---|
| Site: | Oyster Creek |
| Issue date: | 04/01/1980 |
| From: | GENERAL PUBLIC UTILITIES CORP. |
| To: | |
| Shared Package | |
| ML19323A022 | List: |
| References | |
| NUDOCS 8004100356 | |
| Download: ML19323A024 (44) | |
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CPU in Bri:f General Public Utilities Corporation is an electric utility holding company that provides electricity to about 4 million people livit g in about half the land area of New Jersey and Pennsylvania. It serves over 1.5 million customers. Some 32 billion kilowatt hours of electricity were distributed in 1979. Of this total,34 percent went to residential customers,23 percent to commercial accounts, 37 percent to industry and 6 percent other customers.
The CPU System includes three operating companies: Jersey Central Power & Light Company and, in Pennsylvania, Metropolitan Edison Com-pany and Pennsylvania Electric Company. The System has total assets of $5 billion, making it the nation's 14th largest investor-owned electric utility.
The GPU companies depend primarily on coal and nuclear energy for the generation of electricity.
The generation mix in 1979, exclusive of purchased power, was 25 percent nuclear,67 percent coal and 8 percent oil and gas. The nuclear component was 34 percent in 1978, the last full year before the TMI accident.
Contents 1 1979 Financial Summary 2 Letter to Stockholders 4 1979 Financial and Operating Report 14 The CPU System (Map) 16 Statement of Management 17 Report of Auditors 18 Comments on Earnings 19 FinancialStatements 23 Notes to FinancialStatements 39 System Statistics 40 Directors and Officers
1979 Fin:nci:1 Summ:ry 1979 "
1978
% Change Net Income ($000)
$ 95,783
$ 138,774 (31.0)
Earnings Per Average Share 1.56 2.30 (32.2)
Annual Cash Dividend Paid Per Share 1.20 1.77 (32.2)
Book Value Per Share 22.74 22.41 1.5
)
Common Shares Outstanding (000):
Average 61,218 60,217 1.7 Year-End 61,2M 00,971
.5 Number of Stockholders 169,258 177,056 (4.4)
Generating Capacity (megawatts)*
8,262 8,281
(.2)
Peak Load (megawatts) 6,173 5,898 4.7 Cost of Fuel and Purchased Power (mills per kwh) 17.68 13.81 28.0 hiegawatt-Hour Sales (000) 31,995 31,270 2.3 Operating Revenues ($000)
$1,490,154
$1,326,M4 12.3 Customers Served at Year-End 1,558,094 1,532,00S 1.7 Construction Expenditures ($000)
$ 351,026
$ 407,690 (13.9)
Total Assets ($000)
$4,991,994
$4,612,683 8.2 Number of Employees at Year-End 11.'59 11,597 (3.8)
- Includes both TMI units rated at 1706 AfW.
- See Note I to Consolidated Financial Statements and Report of Auditors.
1980 Annual Meeting The annual meeting of stockholders of General Public Utilities Corporation will be held at 2 P.hi.,
local time, hiay 5,1980, at the William G. hiennen Sports Arena,161 East Hanover Avenue, hforristown, N. J.
Further Information
[
Too Many Annual Reports?
For further information about the company, a copy You may be receiving extra copies of the GPU of the GPU System Statistics and the Corporation's Annual Report because of multiple accounts 1979 annual report to the Securities and Exchange within your household. To stop the extra copies, Commission will be available after hfarch 31,1980.
please write to the Hartford National Bank and Write to Afiss Helen h1. Graydon, Secretary, Trust Company, P.O. Box 210, Hartford, Ct. 06101.
General Public Utilities Corporation,100 Interpace Please enclose the mailing labels from the Parkway, Parsippany, N. J. 07054.
extra copies.
I
To the Stockholders Last year's nuclear accident at Three Mile Island the ultimate repayment of the borrowings. This brought on the most severe crisis in the history of again is primarily directed at continuing reasonable the GPU System. That crisis continues today and regulatory response to cash and earnings needs.
dominates virtually every aspect of the compar./s Our borrowings under the revolving credit agree-ment at the end of February amounted to $220 J
operation.
million, and our cash projections show that we could At the time of the accident, the GPU System was well positioned in terms of both the customer and reach the interim ceiling of $292 million this the investor. We had just received rate-making spring. It was in the context of these difBeult recognition of the $750 million investment in circumstances that we made the decision to omit the TMI.2. The construction of that unit had imposed cash dividend in February. We fully understand a heavy burden on the investors-but it had been the importance of maintaining regular quarterly completed and was delivering lower cost nuclear cash dividends and the fact that a great many GPU power to our customers. The outlook for earnings shareholders, with our heavy concentration of was improved as a result of rate orders approved retirees, are counting on such dividends to supple-in both Pennsylvania and New Jersey shortly before ment their other income. In light of the serious
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the accident. Our capital structure was balanced; uncertainties facing us, your Board of Directors our energy supply sources were a healthy concluded that it was necessary and in the best j
52"c coal,41c'c nuclear and a modest 7% oil and long-term interests of the stockhcIders to conserve gas; and our rates were in the mid-range of those cash and credit resources. First priority had to charged by other utilities in surrounding areas.
be placed on preserving the financial integrity of Then on March 28 your healthy company your corporation.
suffered the accident that the President's Commis-sion characterized as " eventually inevitable" in the nuclear industry. In the highly charged emiron-ment following the accident, we have cooperated to the fullest extent possible with the regulatory agencies involved. Even wiO all these efforts, we The most critical factor in our continuing have had an extremely difBcuh +ime in obtaining financial Viability and uitimate financial ppropriate and timely response. by state and health is the granting of timely and adequate feder I wgulaton to our difBeun arcumstances.
rate relief by the Pennsylvania and The accident forced us to seek r te orders to New Jersey state commissions during th.is recover the immediate and sharp i icrease in the cost of power purchased to replace the lower cost difficult period.
nuclear energy supply interrupted by the accident.
Despite the attention of the utilit/ commissions in both New Jersey and Pennsylvania through extensive hearings, the very nature and format of Other sections of this report outline the details these proceedings invite delays and diversions.
of our situation and our planning. To summarize Our internal response to the cash crisis continues to include deep cutbacks in virtually all of our our present position:
programs. Our only significant external source of
- 1. The cash crisis is severe:
cash today is the revolving credit agreement
- a. The removal of TMI-2 from ra e base with 45 banks which was put m place after the deprives us of the recovery of the capital accident. Although that agreement provides for costs of that investment, thereby reducing an ultimate borrowmg level of $412 million, we earnings to a point which severely restricts, are currently limited to an mterim ceiling of if not eliminates, continuing access to
$292 milhon which we cannot exceed without the long-term security markett favorable vote of the banks providing 85% of the
- b. The cost of power purchased to replace the bank credit. That vote will depend upon the energy made unavailable by the accident outcome of pending regulatory proceedings. In ntinues to increase at a pace in excess i
addition, the availability of credit under this f that currently collected from customers.
agreement depends upon a continuing absence of
- c. We must limit cash expenditures to those
" material adverse developments" which threaten covered by revenues or borrowings under the revolving credit agreement.
- 2. The most critical factor in our continuing financial viability and ultimate financial
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health is the granting of timely and adequate rate relief by the Pennsylvania and New Jersey state commissions during this difficult period.
- 3. We continue to be deeply involved in proceedings in Pennsylv:mia relating to the possible loss of hietropolitan Edison's franchise to serve its customers. We believe that our past record of excellent service to those customers justifies the retention of the franchise. We have the confidence and determination to solve the problems at ThfI and do the job at least as well as any other group.
While dealing with these critical factors we have two important objectives. The first of these is the return to service of the undamaged ThfI-1 unit, which is being unreasonably delayed by the Nuclear Regulatory Commission. The safe return of that unit sooner rather than later is in the interests of the customer because of the immediate relief it will ptovide from rising fuel costs. A second objective that is clearly beneficial to the ThiI plant neighbors is the clean-up of the damaged Unit 2 at a more rapid pace than present NRC decision making has permitted.
We are taking significant steps to strengthen the CPU system organization through the establish-We are taking significant steps to ment f a ser r te nucle r e rp r ti n t design, operate and mainta n all nuclear plants. Addition-strengthen the GPU System organization ally, we are combm, mg the managements of the g
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two Pennsylvania operating companies so as to nUCiear Corporation...
make the fullest use of their resources.
At the same time we recognize that neither we nor anyone else can do these tasks alone. We continue our efforts to justify the support of the regulators and to regain the trust and confidence of our customers, plant neighbors and government leaders.
We believe very strongly that regulatory actions which will permit the recovery of the financial health of the GPU System are in the best interests of both customers and investars. From the time of the accident we have supported and sought to establish a sharing of the burdens of the accident.
To date the stockholders have borne a heavy and disproportionate share of the costs. We are determined that investor rights be protected.
We are determined that'favestors be treated fairly.
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1 William C. Kuhns Herman Dieckamp Chairman and President and Chief Executive OfBeer Chief Operating Officer
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1979 Financial and Operating Report Reviewing GPU's Financial Picture Primarily because of the severe increases in oil costs and the high cost of energy purchased income and Earnings Down GPU's 1979 net to replace Thil's generation, energy associated income and earnings per share were down sub-revenues rose by $94 million, or 22 percent over stantially from the previous year despite an increase 1978, to $523 million in 1979. These energy-related in kilowatt-hour sales and revenues. This was revenues had no impact on 1979 earnings because mainly because, since the accident, the capital, they were used to partially offset energy-related operating and maintenance costs of TNII-2 were expenses, with the remainder of those expenses not recovered even though they were charged being deferred for future recovery from customers.
against income for the full year. Hight after th Accident Creates Cash Flow Crisis The accident, Unit 2 s costs were removed from the rates immediate impact of the TNil accident was to of the GPU operating companies by the New deprive the System of 1.7 mdhon kilowatts of Jersey and Pennsylvania regulatory agencies.
nuclear capacity from our two TN!! nuclear umts.
Net income for 1979 was $95.S million, compared ns mat J dw cash How enm hwause we with $138.8 million for the previous year, a had to replace Thil s output with more expensive decline of 31 percent.
energy-much of it purchased from other utilities-Earnings per average share in 1979 were $1.56.
t a cost of $20 million to over $3a_ mdhon This was a decline of 32 percent from $2.30 per month.
The cash problem was further aggravated when egulators' elimination of TN11-2 costs from the Pennsylvama and New Jersey regulatory our base rates has the effect of reducing our wmmissions rem ved the costs of TNII-2 from net income by $56 million a year, or 92 cents the rates of the CPU operating companies, reducing per share annually. A major portion of this adverse base rate revenues by an estimated $100 milhon impact was reflected in 1979 net income.
""""^U-Y The Board of Directors in April 1979 reduced the Slightly more than $101 million in costs were quarterly dividend trom 45 cents to 25 cents, a incurred in 1979 in containing the accident and m, regrettable, but necessary step. At the same time, heginning clean-up and repairs at TNfI-2. In the dividend reinvestment program was suspended.
addition, we have retired the Unit's $37 million Even more regrettable, but necessary, was the nuclear fuel me Of this total, $138 million, we recent decision to omit the February 19S0 dividend.
have charged $7 million to operations and have To date, these two actions have enabled us to received $70 million in insurance payments.
retain approximately $64 million to offset the The remaining costs, $61 million, have been enormous cash drain imposed by the high cost deferred pending resolution of whether they wiH be of supplying replacement power to our customers.
recovered through insurance payments, under rates, Approximately 59 percent of 1979's dividends r through other sources.
represented return of capital and therefore will not be subject to current income taxes as dividend immediate Remedies App: led The cash flow income.
problem was attacked on several fronts. Very soon (For further details on the 1979 financial after the accident, the company suspended con-results, see Nfanagement's Comments on Earnings, struction projects involving new generating and page 18.)
transmission facilities, cut compensation for directors and corporate officers, reduced the Growth Rate Slows Sales of electricity number of employm, cut preventm maintenanm increased 2.3 percent-from 31.3 billion kilowatt w rk to a minimum compatible with reliable hours in 1978 to 32.0 billion kilowatt hours in 5"'"'""
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1979. This is a lower growth rate than the 5 percent
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registered in the previous year and the 4.5 percent projected for 1979, but it is consistent Credit Agreement Negotiated To place with our conservation objectives.
Interim financing on a firm footing, GPU concluded Operating revenues in 1979 totaled $1.49 billion, a revolving credit agreement with a consortium a gain of 12 percent over revenues of $1.33 billion of 45 banks. This arrangement currently makes the year before.
avaihble a credit level of $292 million. With Bevenues in 1979 not related to energy (fuel approval of the banks representing 85% of the and purchased power) costs were $967 million, an total credit line, this amount may be increased increase of $70 million, or 8 percent, over the to $412 million. ( As of December 31,1979 non-energy related revenues of $897 million GPU had $171 million outstanding under this in 1978.
agreement.)
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OPERATING REVENUES WHERE THE 1979 DOLLAR WENT (mdtkms) 8523.3
$966.9
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.37
$429.2
$S97.4
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$424.4
$827.6
.17
$317.2
$751.6
.14
$305.5
$648.9
.12
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NET INCOME CONSTRUCTION BUDGETS (mdlm as)
{millkms)
$455
($185) 3415
($260)
$455
($230)
$320
($400)
$2',5
($240)
$351'
($104) l EARNINGS PER AVERAGE SHARE COST OF ELECTRICITY TO CUSTOMERS DIVIDENDS PAID PER SHARE (da e per KWII of sales)
$1.20 2.89d 1.70t
$1.77 2.77d 1.41e
$1.70 1.86d 1.48e
$1.88 2.47f 1.20f
$1.68 2.37d 1.llt i
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1979 Financial and Operating Report (continued)
(undamaged by the accident) would be back in Subse<piently, Jersey Central Pmver & Light service by January 1,19S0.
Company and Pennsylvania Electric Company sold We have been able to make substantial savings.
a total of $147 million in 20-year first mortgage The company has negotiated agreements with U.S.
bonds to a group of institutional lenders.
and Canadian utilities that have been saving The revolving credit agreement and these bond GPU customers about 56 million a month, and purchase agreements contain provisions which our efforts continue. But since other energy costs call for the inunediate repayment of the total (principally oil) increased by even greater indebtedness involved if an event occurs which a amounts, net savings could not be achieved.
majority of the lenders or holders of the bond issues T\\ll replacement power costs continue to be high, deem to have a materially adverse effect on the especially until the NRC permits Thll-1 back into As of the end of February, our borrowings totaled operation.This could cut the replacement power borrower.
bill by over $160 million annually, or about
$220 million, up S19 million from the $171 million
$14 million a month.
level at year end 1979. Our cash projecticys show that we could reach our interim $292 mihiou miling Additinnal Energy Cost Offsets Jersey Central on bank borrowings some time m the second in September received an additional $70 million annual incre se in its energy ad ustment charges to quarter of 19SO.
The banks participating in the credit agreement ffset its rising energy costs, especially for o.l. This have indicated to us and to the state regulatory increase is not related to the TNII accident commissions the importance of our receiving a rate On N1 arch 6,19S0, Jersey Central receis ed an regulatorv response that would anticipate the anno 1incre se f SS4 milhon m its energy ultimate repayment of the borrowings before there adjustment charges, effective Alarch 6,1950, for is an attempt to increase the $292 million limit.
energy costs, again distinct from those resulting Regulatory Actions Critical The most critical aspects of GPU's financial 11 is essential that the subs. diary companies i
recoverv and of TN11's technical recoverv have to receive rates which will restore them to do with'the actions of our regulators, especially financial health at the earliest practical date.
those by the utility commissions of New Jersey and Pennsylvania and by the federal Nuclear Regulatory Commission.
At the subsidiaries' present rates, they are not receiving sufficient revenues to meet their overall requireinents.1; is essential that the subsidiary from the Thlt mishap. Jersey Central has pending companies receive rates which will restore them to in this proceeding a request for $37 million a year financial health at the earliest practical date. Because to cover higher replacement energy costs for of our major and immediate cash flow problem, Three 51ile Island, primarily because of the i
delayed decisions place a great burden on our regulatory delay in returning Thil Unit-1 to service.
ability to continue with a successfoi recovery and hearings in this matter are continuing.
effort. This section will review our state rate regulatory situation. The NBC has delayed a Interim Relief for Met-Ed In November 1979, Thil.1 restart decision by nearly a year and has yet hiet.Ed requested a $55 million annual increase in to approve major T.\\11-2 cleanup plans. Its its energy sdjustment clause, effective January 1, actisities will be reviewed in the section following.
19s0, te, permit it to recover part of its increased cost of energy. Because of our declining cash Early Rate Rell' f Granted In June, more than resources, we have repeatedly urged the early e
two months following the accident, the regulatory consideration of the energy cost issue. On commissions in New ?crsey and Pennsylvania 17,1950, the Pennsylvania PUC granted increases in the energy adjustment charges January announced a schedule which provided for the to customers, providing recoverv, over an IS-month issuance of an order on April 4. About a week period, of about 83 percent of the estimated later, we filed a motion again reyiesting prompt replacement power costs. Both commissions action on an increase in energy co ts.
established these charges at levels that assumed we On February 8, the day after G1 Ui Board voted could secure savings in the purchase price of to omit the February dividend, the Pennsylvania replacement power and that ThfI Unit 1 6
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PUC voted to temporarily permit hiet-Ed to put and to explain the many positive actions taken to the $55 million energy clause increase into effect on assure continued safe, reliabk customer service.
h1 arch 1. This order is in effect only until final The Pennsylvania PUC is to announce on hf ay 23, resolution of the full proceedings, which was 19S0 its decisions concerning the three issues before pushed back from April 4 to h1ay 23. The increased it: retention of ThfI-1 in the rate base; continuation revenues collected in the interim are subject to of Afet-Ed's franchise; and a final order concerning review.
Sfet-Ed's rate request.
In New Jersev, the New Jersey Board of Public
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GPU's Rates Below Average Despite the cost Utility Commissioners ( NJ BPU ) stated in its of replacement power and the impact of inflation as
.\\! arch 6.1950 order that it will shortly take up the reflected in the rate increases, the average cost of issue of the retention of TilI-1 in the JCP&L base electricity to GPU customers as of year-end 1979 rates. In February 1950, briefs were filed in response was lower than the average paid by the majority of to a BPU order concerning what action, if any, the utility customers in New Jersey and Pennsylvania-BPU should take in the light of the Kemeny,'
In the case of Jersey Central, the company's rates Rogovin and other reports concerning the causes of to the great bra of its residential customers, those the T.\\fl-2 accident. In its.N! arch 6 order, the BPU without electne space heating or electric water stated that it will establish a hearing date to begin heating, were the second lowest in the state and this complex investigatien.
among the lowest of major utilities in surrounding Audit to Review Financial Viability In late 1979 areas.
The situation is much the same for both Niet-Ed the Pennsylvania PUC ordered a full-scale and Penelee. The rates of both companies are still anagement audit of Afet-Ed, Penelee and GPU.
in the mid-range of those charged by Pennsylvania's The PUC has asked for preliminary findings on the financial viability of 51et-Ed and GPU by Theodore major utihties.
Nor have the GPU System's rates increased significantly over the past several years. In fact, corrected for ger.eral inflation (measured by the Consumer Price Index), CPU's average kilowatt
... the average cost of electr..ty to GPU ici hour charge for 1979 was seven percent lower than Customers as of year-end 1979 was lower in 1977 and two percent lower than in 1975. During than the average paid by the majority of the past five years, the cost to GPU's customers for Utility Customers in New Jersey and a kilowatt hour has decreased with respect to Social pennsylvania.
Security benefits; has decreased with respect to the minimum wage; and has decreased with respect to manufacturing wages..\\finimizing electric costs for our customers remains one of our prime objectives.
Barry & Associates, the firm conducting the audit.
Chow Cause Orders Present Challenges Tw These results are to be presented *o the PUC about "show cause" orders by the Pennsylvania PUC have mid-hf arch 1950.
presented additional challenges for the GPU The audit is also examining decisions related to operating companies.
construction, maintenance and operation of ThfI-2.
In September 1979, the Pennsylvania Public The cost of this nine-month audit, estimated at Utility Commission ordered both 51et-Ed and
$775,000, will be paid by GPU's Pennsylvania Penelce to show cause why ThfI-1 should not be operating companies, hiet-Ed and Penelec. Just a taken out of their rate bases aslong as the unit is idle.
year earlier, GPU provided to the Commission the We believe that the capital, operating and nine-volume report of Booz-Allen-Hamilton's maintenance costs of ThiI Unit 1 should be exhaustive management audit of all components continued in the operating companies' rates because of the System.
of its four and a half years of safe and efficient In September of last year, in response to concerns operation, and becauseit is not permitted to resume about our long-term service capabilities, the NJBPU generation for reasons over which we have no ordered an independent study of various control.
reorganizational alternatives for Jersey Central.
In November, the Pennsylvania PUC also ordered Completion of the study, which JCP&L will pay for, Afet-Ed to show cause why its operating franchise is not expected until at least late 19S0.
to serve its customers should not be rescinded. GPU has used this as an opportunity to review the several pnblems facing Afet Ed in an integrated manner 7
1979 Financial and Operating Report (continued)
TMI Recovery Steps Clean up, Repair, Restart The next steps in the recovery process for Tall-2 will be removal and First Step: TMI-1 Restart The first major step decontamination of the air and water from the toward financial recovery will come when TN11-1 is reactor containment building, the first entry of permitted to resume generation, now not anticipated workers into the building, and its partial decon-before late 1950. At that time, the bit for tamination by remote control techniques. These replacement pmver will drop an estimated $14 steps should be completed within about a year.
million monthly and revenues could become During the following year, we plan to complete available to reduce the deferred energy balances decontamination of the containment building and and short-term debt.
prepare for removal of the fuel from the Three months after the accident, we advised the reactor core.
NRC of the steps we planned to take to improve in the next recovery phase, fuel will be removed operational safety of T511-1 prior to restart.
and the reactor cooling system will be decon-The NRC has not yet established a firm time taminated. Tests will be made to certify the schedule for the completion of the hearings and physical integrity of the major system components.
decision. While we agree there should be no restart These step, will require most of 1952.
until the NHC and the public are assured of the Repair or replaecment of damaged equipment unit's safety, we have urged the Commission to will follow, with startup of T.\\ll.2 possibly expedite its procedures to get TN11-1 back on line.
occurring in late 1953.
Preliminary public hearings on the TN11-1 restart The N1-2 recovery effort, requiring about four began in the llarrisburg-liershey area in mid-years and costing an estimated 5-100 million November,1979 and are expected to continue (up to $300 million of which may be covered by through much of 19S0.
insurance), remains subject to what is found upon For our part, we expect to have the Tall-1 entry into the containment building, as well as on technical modifications and necessarv personnel public and regulatory support for the cleanup training completed and the unit ready for restart and restart of this unit.
well ahead of the conclusion of the hearing procedures.
GPU Organizational Changes Second Step: TMI-2 Recovery The recovery of TN112. now in " cold shutdown," is a complex and Creating a separate nuclear subsidiary ano lengthy techmeal project. Ilowever, progress is combining the managements of Niet-Ed and being made. Dec(mtammation of open areas of the pg
- j g3 g, gg auxiliary and fuel handling buildings is near position to carry out all aspects of the recovery completion. A system designed specifically for the d
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o al will be required for TN11 pmject, known as Epicor II, has filtered both of these programs.
120,000 gallons (about 309 of the total) of the radioactive water in the auxiliary building storage Unifying Nuclear Control Even before the Thil tanks. The clean water is being stored in tanks accident, the campany's planning contemplated a on site.
GPU Nuclear Corporation. A step in this Probes inserted into the ecmtainment building direction was taken last June by formation of have shown that radioactive contamination is lower the 'I.\\ll Generation Group, which brought than anticipated. Television cameras inside the together about 275 Alet.Ed and GPU Service containment building do not indicate any major Corporation nuclear and technical people who had damage to any important components of the Tall as their primary responsibility.
reactor system.
GPU Nuclear will be responsible for the safe in November 1979, we submitted a plan to vent and efficient operation of Oyster Creek nuclear the gases in the reactor building to allow us to station in New Jersey and the restoration and i
begin cleanup of that area. This plan is still safe operation of the two units at TA11. It also will awaiting approval.
have responsibility for the design, construction and A summary technical plan for decontamination operation of any future nuclear plants in the GPU of the facility and removal of fuel from the System. Ownership of the nuJear units will remain reactor was submitted to the NRC in 1979. The with the GPU operating companies.
plans for cleanup will be refined as we gain This move to unify and expand the Sytem's more knowledge of the conditions inside the nuclear capability, reflecting recommendations of containment building.
the President's Commission on T511, will provide for safer and more reliable generation of electricity
l with nuclear energy. The flow of vital technical None of t..: outstanding securities of either and operational information between nuclear company will be affected.
stations, both within and outside the GPU System, Before completing its Pennsylvania reorgani-will be stimulated. Formation of this separate zational plan, GPU will review the proposed nuclear company should help attract the best changes with the Pa insylvania PUC's management personnel from the entire nuclear industry.
audit firm to secure their comments and recom-Robert C. Arnokl, currently head of the Tall mendations. This review is expected to be recovery operation, will be president of CPU accomplished by late spring and implementation of Nuclear Corporation. GPU's president, Hermi, the approved changes to take place later in 19S0.
Dieckamp, will assume the additional respon-sibilities of chairman and chief executive officer ior GPU Nuclear. Philip Clark, senior staff member GPU's Unequivocal Commitment to with the Naval Reactors Program for the past Nuclear Safety twenty-five years, will be named executive vice posident.
The continuation of a commercial nuclear industry Based at GPU headquarters in Parsippany, NJ, in America rests squarely on our industry's ability to GPU Nuclear will be responsible for about $1.8 operate nuclear plants safely. This is as it should billion in nuclear facilities. Initial employment, most be, and GPU is unequivocally committed to the of which will be drawn from within the System, safe operation of its nuclear generating pt nts.
will be about 1.100 people; of these some 300 Both the Kemeny Report and the report ey the have professional degrees, along with 3,500 work Special Inquiry Group, directed by hiitchell years of nuclear experience.
Rogovin, dealt in detail with the overall nuclet r Formation of GPU Nuclear Corporation is expected to be completed by late summer 19SO.
Combining Management Strengths Combining the managements of GPU's two Pennsylvania operating companies will enhance the System's ability to provide reliable service to customers at The continuat. ion of a commercial reasonable cost. It will do this by bringing together nuclear industry in America rests the complementary strengths and resources of squarely on our industry's ability the Pennsylvania companies-to operate nuclear plants safely.
The new organization will have sole respon-sibility for the GPU System's existing coal-fired generating plants, all of which are in Pennsylvania.
This has obvious benefits in light of the growing role of coal in the country's energy future and the demonstrated expertise of GPU's Pennsylvania industry, including equipment suppliers, the companies in the operation of coal-fired utilities and the federal Nuclear Regulatory generating stations.
Commission, which regulates the nuclear The combined management will also focus on industry. Each report offered a large number of the System's expanding conservation and load recommendations to help assure that the operation management programs and on the ongoing f nuclear generating plants will be safe. Afany of improvement of customer and community relations.
their recommendations stemmed from lessons The organization will be headed by William A.
learned at TAfI. GPU is working with the NRC and Verrochi, current president of Penelee, and will be with the entire nuclear industry to implement these headquartered in Reading, where hiet-Ed cur, and other recommendations as they apply to our rently is based. Penelec's headquarters facilities nuclear plants and to bring an added level of in Johnstown will continue as a key management safety to nuclear power generation.
center, particularly for customer and community relations and for the operation and management GPU's safety Programe GPU's own safety of the System,s coal-fired generating plants.
programs are closely tied to preparations for the The new structure will have a smgle set restart of Tall Unit 1 (the undamaged unit), which of directors and a smgle.:et of officers, but will not was down for refueling at the time of the accident.
^
'*E' I'*.ents designed be a formal corporate merger. A formal merger t m H s fer als are bemg implemented, as is not considered necessary to achieve the desired objectives of improved management and efficiency.
8Pplicable, at the company's Oyster Creek nuclear generating station.
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1979 Financial and Operating Report (continued) l The major safety-oriented areas being addressed Plant Safety Modifications A number of include: the retraining and reexamination of physical modifications are being made to the plant.
operators; review and improvement of operating These include system improvements for assuring procedves; preparation of improved plans for reactor cooling and immediate shut down of the handling energencies; plant modifications; the reactor in the event of a wider range of potential isolation of T511 Unit 1 from Unit 2; radioactive malfunctions. Special instrumentation is being waste management; and overall management of the added to plant systems and equipment to monitor Thil operation.
those items critical to safety.
Other measures are being taken to prevent improving Oport tor Training GPU early last significant radioactive releases resulting from an summer began a complete review of its operator accident. These include upgrading instrumentation training programs. All licensed control room for the early isolation of the containment building.
Operators and some supervisory and professional The control room computer is being improved personnel are participating in retraining programs so operators will have faster and more accurate with an expanded curriculum that includes the use information on the plant's status at all times. Visual of computerized simulators to re-enact not only display of this information in the control room is the TAfI-2 event, but also other potential accident being improved to make it more readily apparent situations involving single and multiple and understandable to operators.
malfunctions.
At all times, a graduate engineer will be in GPU's Separating Units 1 and 2 The common facilities nuclear plant control rooms to provide additional shared by TAfI Units 1 and 2, such as the fuel diagnostic capability. This has been in effect at handling building and the radioactive waste the Oyster Creek station in New Jersey since last treatment processes, are now being modified so that fall. Operating and emergency procedures are e ch unit will be totally separate and independent, being completely reviewed and upgraded.
thus removing any likelihood that the cleanup of Unit 2 can interfere with operation of Unit 1.
Emphasis on Emergency Planning The area of Safety is the prime concern of each step involved emergency planning has received special emphasis.
in the ckanup of Unit 2. Every major function The emergency plan has been revised in accord-along the way not only is being closely examined for ance with new guidelines laid down by the Nuclear its possible impact on public safety, but also will Regulatory Commission.
be the subject of searching NRC investigations, included in this emergency planning are specific evaluations and public hearings.
detailed activities to be undertaken by the utility industry Safety Efforts Even while improving its and public officials in the event of radiation own facilities, GPU is participating in the releases beyond the plant site, and an emergency substantial industry-wide efforts to upgrade the communications program to keep the pubhc and its safety of nuclear operations.
official representatives promptly and accurately These industry actions have led to the formation informed in the event of a future accident.
of an industry group, the Nuclear Safety Analysis These plans, developed m cooperation with local Center (NSAC), that will investigate and apply the and state officials, provide for emergency opera-technical lessons learned at Thil. The electric tions centers to give government leaders direct utility industry also has formed (and the GPU communications with the plant. Additional companies have already joined) the Institute of emergency equipment is being provided, such as Nuclear Power Operation (INPO), with an annual respirators and radiation detectors. The company is budget of $11 million, to establish benchmarks for also lending support and assistance to local com-excellence in nuclear power operation. It will munities to develop their own related emergency conduct audits to verify compliance with its plans.
standards and will analyze and share reactor operating experience with utilities owning nuclear plants.
GPU has also been involved in the industry's establishment of a mutualinsurance organization to help cover the costs of replacement power resulting from any future nuclear accidents. This coverage will be available only to those utilities that meet the safety standards established by the NRC, NSAC and INPO.
10
- - --. _ - - L - -
t*
The Accident investigsted
" Defense-in-Depth" Protected Public The Hogovin study found that one of nuclear's major Several major investigations at the federal, state and safety concepts, defense-in-depth,"tcorked to local levels have iocused on the Th11 accident.
protect the public health and safety. In spite of The most important were those of the President's multiple equipment malfunctions, human failures, (Kemeny} Commission on ThtI and oi the NRC's and the creation of conditions in the reactor Special Inquiry Group, headed by Afitchell and auxiliary buildings that tecre never contem-Rogovin, a prominent Washington attorney. The plated in the design of the plant's safety systems, conclusions of the two are similar in many major the utility and its engineering support staf tcere areas. And their conclusions support GPU's original able to bring the system to a stable condition position that the accident involved the entire trithout releases of radioactice materials to the industrial, technological and regulatory structure of atmosphere that could hace resulted in signipcant nuclear power in the United States.
health efects to those living near the plant."
Speaking to the possibility of a " meltdown"of the Training, Public Information Examined Despit any criticism of the company's response to the reactor's fuel core, the Regovin Report notes that accident, the efficiency and adequacy of the Th!I had operators not closed a valve (the PORY block operators were recogmzed as being well up on the valve) when they did, calculations project that, scale of nuclear industry norms. The kemeny thin 30 to 63 minutes, a substantial portion of fuel in the core would have melted.
Report states that the ThfI control room operator training program met all applicable NRC standards.
h ever, Rogovin concludes that even with a We now recognize that there have been deficnenen,es core meltdown, "the most likely probability is that in these standards for all operator trammg and we the reactor building scould have surviced in this have mstituted wide ranging improvements.
accident scenario, and the cast maiority of the But, as the Hogovin Report points out: "These radioactice material released from the fuel trould problems tccre not unique to 3fetropolitan Edison.
hace been retained trithin the building, not released Although it is true that Slet-Ed's training program to the surrounding environment."
tras in some respects defcient, it appears that investigations Reject Moratorium Both the Met-Ed aforded its operators training that, taken as Kemeny and the Rogovin investigations specifically a tchole, iras typical of the industry and, in certain rejected proposing or recommending a moratorium respects, tras above accrage. The shift crctc on duty on operating nuclear reactors or on granting new ichen the accident began tccre all products of the operating licenses for eactors now under consi tuc-nucIcar Nary training program, and cach had at tion. Both groups did, hewever, recommend a least 5 years of Nary experience. Prior to the number of changes in the manner in which licenses accident, all of them had completed training courses are granted and evaluated.
tchich met NRC requirements, had passed NRC The Rogovin report looked at changes since the exams, and had rccciced simulator training totalling accident and determined that "an accident identical 5 to 9 teceks each. Three had received 1 tecek's to that at Three Mile Island is not going to happen training at Penn State University's rescarch reactor.
again. Not only have changes been made to amelio-Their combined average NRC licensing exam test rate the particular problems recealed there, but the scores tcere above the national average. The accident has spatened a mafor re-examination by inadequate training that played a role in this the industry and the NRC of many aspects of design accident must be attributed to not one utility but and operations that contributed to the accident "
rather to the industry as a tchole and to the NRC."
Two other major investigations being conducted While many problems arose in reporting the by two committees of the U.S. Congress have been accident to the public, the Kemeny Report found essentially completed, and, as this report goes to "there tras no systematic attempt at a cocer-up bV press, recommendations for follow-up legislation the sources of information."The Bogovin study are being developed.
Iound that "the ecsdente failed to establish that Met-Ed management or other personnel teillfully crithheld information.."The GPU companies have developed improved emergency communications plins for their nuclear units based on the recommendations from these reports and on the lessons learned at Th!I-2.
w
___._.1 1979 Financial and 0 3erating Report (continued)
GPU's Construction Program Conservation Efforts Intensified As an important part of its program to minimize new Construction Program Cut Suspension of major construction, GPU has underway an intensified construction activity following the accident conservation and load management program to involved two major generating plants-a 1.1 further slash increases in the System's peak demand million kilowatt nuclear unit at Forked River, NJ, for electricity over the next decade.
and a 625,000 kilowatt coal-fired facility at the CPU's existing and planned programs had been Seward Station near Johnstown, PA.
expected to cut the growth in peak demand to There are no current plans for near-term about 2 million kilowatts in 1990. The newly resumption of the Forked River nuclear project.
intensified effort will further reduce this growth flowever, studies on capacity addition alternatives, by half to about one millioi kilowatts.
including Forked River's conversion to a coal Another move that reduced the peak power unit, are being evaluated. Subject to cash avail-demand was the transfer. on Alarch 1,19S0, of ability, construction may be resumed at Seward Alet-Ed's wholesale service to Hershey ( PA) late in 1950, with a projected 19S7 completion date.
Electric Company to another utility. The action CPU has cut actual and projected construction trims CPU's peak power requirement by about expenditures by more than $1.4 billion in the six-1 percent. As part of the changeover, hiet-Ed sold year 1979-84 period. This is a reduction of 3S two substations and otl>er transmission equipment percent, dropping construction activity from nearly for $737,000.
$3.7 billion to about $2.3 billion during these Coal's Contributions Significant The company's years. This reduced construction program will be I rgee bfired generating stations in Pennsylvania ijacked up with an intensified conservation and re contributing significantly to minimizing the load management effort through which we plan to minimize future increases in customer requirements.
Financing 1979 Construction The System's 1979 capital requirements totaled about $406 million, of which $351 million was for construction and
$55 million for retirement of matured securities GPU haS Cut actual and projected and sinking funds.
Construction expenditures by more than The s351 million spent in 1979 on construction
$1.4 billion in the Six year 1979-84 period.
was 23 percent less thar the $400 mdlion con-struction budget planned before the accident.
The GPU System raised a total of $246 million from external sources. Of this, $154 million came from sales of first mortgage bonds; $S7 million came from bank loans (mainly from the revolving credit agreement); and $5 million came from purchase of outside power These stations have a common stock sales through GPU's dividend combined generating capacity of about 6.9 million reinvestment and employee stock purchase plans kilowatts, about half owned by the CPU companies.
(before they were suspended as a result of Two-thirds of GPU's generation was produced the accident).
from coal during 1979.
The System's capitalization ratios at year-end The clean and efficient use of coal is being 1979 stood at 61 percent long-term debt,12 percent enhanced by the coal cleaning unit installed several preferred stock,33 percent common equity and years ago at the Homer City, PA station. In 1979, 4 percent short term bank debt.These capitaliza-the Ilomer City site was selected by the Electric tion ratios are not gubstantially different from Power Research Institute for construction of a those at the end of 1978.
$12.4 million experimental facility to test the applicability of alternate cleaning processes for 1980 Capital Needs Subject to available cash various types of coal to meet environmental resources, capital expenditures in 19S0 are expected requirements' to total about $305 million, of which $275 million will be for construction and $30 million for Oyster Creek Savings The Oyster Creek nuclear retirement of matured securities and sinking funds.
station, owned by Jersey Central Power & Light, The 1980 construction budget is 47 percent less marked its tenth birthday on December 23,1979.
than the $515 million budgeted prior to the accident.
x-
=
- N
- a n,_
,., - ~
With one exception, Oyster Creek has produced Cost reduction programs initiated following the more electricity than any other nuclear plant in the ThfI accident resulted in work force reductions U.S. In its ten years of operation, it has produced or layoffs at Jersey Central, hiet-Ed, Penelee and 37.5 billion kilowatt hours of electricity. Fuel the GPU Service Corporation. System. wide savings of $600 million have exceeded the interest employment at the end of 1979 was 11,159, down costs, taxes and operation and maintenance about four percent from the 11,597 employed at the expenses of the station as we'l as its capital cost of beginning of the year.
$110 million. These fuel savings have been passed The CPU System's labor relations climate remains on to customers through a lower energy adjustment favorable. Recent agreements with labor unions cost than would have been necessary if the power include:
had been generated with oil.
Jersey Central concluded negotiations with the Oyster Creek is now undergoing its annual International Brotherhood of Electrical Workers refueling, a process which has been extended (IBEW) for a two-year closed contract with a wage beyond its scheduled length for maintenance and settlement of 6.9 percent effective November 1, possible repairs. At this date, the schedule for its 1979, and an increase of 6.7 percent effective resumption of operations is uncertain. Replacement November 1,1980.
power for the station's output costs about Penelec negotiated a one-year contract with
$3.5 million a week.
IBEW and the Utility Workers Union of America, Fuel Sources Assured Some 60 percent of the Providing for a wage increase of 6.8 percent.
System's coal requirements in 1979 were met "E** #" W##8 through long-term contracts. Future requirements April 30,19S0.
will be filled by a combination of spot, short-term, All three operating companies completed intermediate-term and long-term contracts, as well negodations amending their retirement annuities l
P ans.
as through control of some coal reserves.
In the fall of 1979, CPU converted five oil-burning units in New Jersey and Pennsylvania t natural gas. This fuel, purchased on a contract Board Changes basis, will be used as long as supplies remain plentiful at a lower cost than oil. It is estimated that John F. O' Leary, former deputy secretary of the the conversion will save about two milhon barrels U. S. Department of Energy, n as elected a member of the GPU Board of Directors at the Board's of oil by June 1,19SO and reduce energy costs October meeting.
by $18 million.
Afr. O' Leary has devoted most of his career to the Uranium for the nuclear plants is provided under long-term contracts. 'I here are, however, unresolved energy field, having served in a number of state legal questions concerning supplies for the Oyster and federal energy posts both as administrator Creek Station. (See Note, page 28.)
and regulator. He joined the Department of Energy when it was formei n 1977. In the early 1970's he was director of licensing for the Atomic Energy Commission.
CPU's Employee Relations John W. Oswald, president of Pennsylvania State University, was elected a member of the GPU This year has been a very trying and stressful Board of Directors at the Board's hiarch 19S0 period for our employees and, until all major meeting.
aspects of our recovery efforts have been resolved, Dr. Oswald has been president of Penn State they will continue to bear a significant burden.
since 1970. Prior to that he had served as president All of us, as stockhbiders, customers or manage-of the University of Kentucky and in several senior ment, are deeply indebted to the System's executive and teaching positions at the University employees, many of whom have worked long days of California.
and nights and given up weekends and holidays, George H. Lanier, Jr. and Ferdinand K. Thun month after month, to help see us through this retired in late 1979 in accordance with company difficult period, policy for retirement because of age. Both were GPU continues to emphasize its Equal Employ-elected directors emeritus, effective January 1,1980.
ment commitment. While the number of employees Barbara Barnes Hauptful.rer, GPU director since in the System was reduced by over 400 people, the 1976, resigned in December, citing personal reasons.
proportion of both minority and female employees actually increased slightly during 1979.
Tha Genercl Public Utilities Sy2t:m FRONT ST.
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Operating Companies' Statistics Revenues Total Assets Sales Mix Customers-Company *
($000)
($000)
Residential Commercial Industrial Year-End Jersey Central Power & Ught
$ 664,947
$2,114,054 40%
27%
30%
690,SS9 Metropolitan Edison
$ 338,136
$1,327,149 31%
19%
41%
358,265 Pennsylvania Electric
$ 493,061
$1,496,576 28%
21%
44%
508,940 General Public Utilities System
$1,490,154
$4,991,994 34%
23%
37%
1,558,094 14
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OYSTER CREEK NEW JERSEY i
Electric Sales Peak Load' Number of Fuel Afix (htWH)
(51W)
Employees Coal Oil a G as Nuclear 12,770,9S9 2,548 3,599 19%
22%
59%
8,0S4,033 1,533 2,659 76%
55 19%
11,140,457 2,092 4,067 95%
15 4%
31,995,479 6,173 11,159 67%
8%
25%
- At time of CPU System peal 15
General Public Utilitles Corporation and Subsidiary Companies Statement of Management t
The management of General Public Utilities Corporation is responsible for the information and representations contained in the financial state-ments and other sections of this annual report.
The financial statements have been prepared in conformity with generally accepted accounting principles consistently applied. In preparing the financial statements, management makes informed judgments and estimates of the expected effects of events and transactions that are currently being reported.
The accompanying financial statements and notes thereto disclose the effect of the nuclear accident on hiarch 28,1979 at Unit No. 2 of the Three hiile Island Nuclear Generating Station (" Tall-2").
The accident has had a significant adverse impact on the earnings and financial position of the Corporation in 1979.
In the aftermath of the accident the subsidiaries' respective state utility commissions reduced allowable annual revenues by the capital and operating costs associated with T5fI-2, resulting in a substantial decline in earnings. In addition, several significant contingencies and uncertainties, the outcome of which cannot be determined at the present time, resulted.
Reference should be made to Note 1 to the accompanying financial statements and to hianagement Comments on Earnings on page IS for further discussion of the effects and impact of the nuclear accident at Three 5 file Island.
Coopers & Lybrand, independent public accountants, are engaged to examine and express an opinion on our financial statements. Their opinion, which appears on the following page, sets forth the contingencies and uncertainties resulting from the accident.
O
1 Report of Auditors To the Board of Directors and Stockholders GENERAL PUBLIC UTILITIES CORPORATION Pzrsippany, New Jersey We have examined the consolidated balance sheets The accompanying cons !idated Snancial state-of General Public Utilities Corporation and Sub-ments have been prepared :n conformity with gen-sidiary Companies as of December 31,1979 and erally accepted accounting principles applicable to 1978, and the related consolidated statements of a going concern which coatemplates, among other income, retained earnings and sources of funds used things, the sealization of r.ssets and the liquidation for construction for each of the five years in the of liabilities in the nornul course of business. The period ended December 31,1979. Our examinations Corporation's subsidiarie s are currently not re-were made in accordance with generally accepted ceiving a level of revenuas sufficient to assure their auditing standards and, accordingly, included such ability to continue as a going concern. The con-tests of the accounting records and such other au-tinuation of the Corporation as a going concern is diting procedures as we considered necessary in dependent upon obtaining adequate and timely rate the circumstances.
relief and maintaining and increasing the availabil-As more fully discussed in Note I to Consolidated ity of credit under the revolving credit agreement.
Financial Statements, the Corporation is unable to (See Note 4 to Consolidated Financial Statements.)
determine the consequences of the accident at Unit The eventual outcome and effect of the foregoing No. 2 of the Three Atile Island Nuclear Generating on the consolidated financial statements cannot Station (Tall-2) and of the response of rate-making presently be determined.
and other regulatory agencies to that accident.
As more fully discussed in Note I to Consolidated Among the contingencies and uncertainties which Financial Statements, the Corporation's New Jersey hwe resulted as a direct or indirect consequence of subsidiary is engaged in litigation with a nuclear this accident are questions concerning:
fuel supplier involving the pricing of nuclear fuel.
At this time, the outcome of the litigation and the
- a. The recovery of the approximately $6S2 mil-rate-making treatment of amy increased fuel costs lion investment m, TAfI-2.
which might result from an adverse legal determi-
- b. The recovery of $61 million of costs incurred nation are uncertain.
net of insurance proceeds received, and the As more fully discussed in Note 1 to Consolidated indeterminable amount of uninsured costs Financial Statements, the Corporation's Pennsyl-yet to be incurred, in connection with the vania subsidiaries may be required to make refunds anticipated restoration of Th!!-2 to service.
to customers for certain payments made for coal. At
- c. The recovery of the approximately $3S4 mil.
this time, it is uncertain whether or to what extent lion investment by the Corporation's New such reftmds will have to be made.
Jersey subsidiary in the Forked River Nu.
In our opinion, subject to the effect, if any, on the clear Generating' Station, construction of which consolidated financial statements (the 1979 consoli-has been suspended.
dated financial statements only with regard to the
- d. The recovery of the excess, if any, of amounts uncertainties discussed in the second through fourth which might be paid m connection with paragraphs above) of such adjustments as might MM&
d&e claims for damages resultmg from the acci-dent over available insurance proceeds.
tainties discussed in the preceding paragraphs been hm & &MM me Wu 19
- c. The financial effects should the capital and through SS) present fairly the consolidated financial operating costs associated with Three hiile position of General Public Utilities Corporation and Island Unit No.1 Nuclear Generating Station Subsidiary Companies at December 31,1979 and be removed from base rates and the effects of 1978 and the consolidated results of their operations various investigations and inquiries upon the and the consolidated sources of funds used for con-ultimate recovery of the approximately $387 struction for each of the five years in the period million investment in the unit if action is ended December 31,1979, in conformity with gen-taken to prevent'its return to operation.
erally accepted accounting principles applied on a
- f. The financial effects should the Pennsylvania consistent basis.
Public Utility Commission order the revoca-COOPERS & LYBRAND tion or modification of Afetropolitan Edison hfarch 6,1980 Company's franchise to operate in its service 1251 Avenue of the Americas area.
t Management's Comments on Earnings 1979 vs.1978 their interest, in Thfl.2. However, in their June 1979 rate orders the two subsidiaries were ordered Earnings available for common stock for 1979 declined against those for the year 1978 The major by their respective commissions to remcve Thil.2 c ds from their base rates. A rate increase for the factor causing such decline was the ratemaking treatment accorded to the capital and operating third subsidiary, owning tla other 50Tc of the unit, and maintenance costs associated with Three Afile was authorized in late Afarch 1979, but was re-Island Unit No. 2 (~rhil.2").
scinded before implementation so that the sub-In 1978, allowance for funds used during con.
sidiary was never permitted to place rates in effect struction was accrued on the subsidiaries' invest, to cover its share of the Thfl.2 related costs. Since December 30, 1978, the subsidiaries have been rr.cnt in ThiI.2 and thereby offset the interest charges, preferred stock dividends and common charging to income fixed capital and normal oper-stock carnings requirements associated with such ating and maintenance costs associated with T.\\ll-2.
investment. Such accrual ceased when Thfl.2 was 1978 vs.1977 plaud in commercial operabon on December 30.
1978. Aforeover, until Th!I.2 was placed in com.
Earnings available for common stock for 1978 mercial service, the investment and operation and declined against those for the year 1977.The major maintenance costs associated with that unit were factors involved in such decline were a result of capitalized and depreciation was not accrued.
increased operating. maintenance and financing Effective about February 1, two of the subsidi.
costs due to inflation, generating plant outages and new plant in service. Partially offsetting such aries owning an aggregate 507c of TXfl.2, received rate increases covering the bulk of the capital and decline were revenue increases from sales growth operation and maintenance costs associated with and increased rates.
A summary of the principal factors affecting the changes in earnings available for common stock are as follows:
1979 0ver 1978 over (under) 1978 (under) 1977 (millions)
(millions) 725
- _27, 1.500 5%
DVII sales increased Revenues other than energy related:
(a) Increawd revenues resulting from DVII sales growth.
321 840 (b) Increased revenues resulting from higher rates,
49 30 Energy related res enues..
94*
5 Total Revenue Increase...
164 12 75 6
Energy costs:
(a) Resulting from higher unit fuel costs 46 29 (b) Resulting from increased (decreased) system generation...
(25) 26 (c) Power purchased and interchanged......
135 (52)
(d) Deferred energy costs increased.....
(52) _
3
_1_
Total Energy Cost increase..
104' _23 Payroll and other operation and maintenance expenses increased as a result of an increase in employees and higher wage rates in 1978. generating plant outages, increased costs associated with new facilities and inflationary factors.
Such increases in 1979 were substantially offset by cost reduction programs and a reduced number of employees.........................
4 1
54 21 Depreciation expense increased as a result of additional plant in service (includ-ing TMI.2 in 12/78 and Ilomer City 3 in 12/77).................
32 29 13 14 Taxes:
Income taxes declined primarily as a result of lower income subject to taxes and in addition, in 1978 a excess of tax over book de[n increase in the flow through portion of the reciation principally resulting from the plac-ing in service of the TMI. nuclear unit in December 1978 (85 million)
(9) (12)
(12) (15)
Taxes other than income increased due primarily to higher state revenue taxes..........
20 15 15 13 Total 11 5
3 2
Interest and preferred dividends increased primarily from additional security issuances at higher raterand increased levels of short-term debt...
33* 16 11
_6_
Allowance for funds used during construction, net, declined in 1979 pnmarily as a result of TMI.2 in service in 12/78....
(29) (40_)
2
,,3, Other income net increased mainly as a result of interest income from securities 6
3 Earnings available for common stock..................................
8(43) (3 )
8 (4) Q)
]
8(.74) (gt)7,
$(.20) g)%
Earnings per Average Share.
l
- These changes are mainly as a. result of the nuclear accident at TMI.2. see Note I to consolidated Snancial statements.
I j
18
Consolid ted Statements of income (Nota 1)
General Public Utilities Corporation and Subsidiary Companies (In Thousands)
For ihe Years Ended December 31, 1979 1978 1977 1976 55 Operating Hever.ues
$1,490,154 $1,326,N4 $1,252,013 $1,068.753 $954,420 Operating Expenses:
Fuel 347,079 326,0S3 270,612 245,63S 256,972 Power purchased and interchanged, net 26S,210 133,741 166,235 120,7S4 52,277 Deferral of energy costs, net (Note 2)......
(69,832)
(17,916)
(17,937)
(21,726)
(9,999) 133,336 127,163 109,500 100,575 91,949 Payroll Other operation and maintenance (excluding payroll) (Note 12)...
177,4S5 179,423 143,245 131,281 113,773 Depreciation (Note 2)..
141,224 109,505 96,508 87,839 82,834 Taxes, other than income taxes (Note 12)
__149,445 129,862 114.682 94,927 89,879 Totals 1,146,947 9S7.861 902,845 759,318 677,6S5 Operating income liefore income Taxes..
343,207 338,783 349,168 309,435 276,735 Income Taxes (Notes 2 and 10)..........
65,905 84,354 95,805 79,832 66,123 Operating Income 277,302 254,429 253,363 229,603 210.612 Other income and Deductions:
Allowance for other funds used during construction (Note 3).
24,744 49,8SS 47,787 42,269 32,054 Other income, net 8,937 3,6S2 274 1,165 1,206 Income taxes on other income, net (5,146)
(2,461)
(996)
(1,157)
(1,004)
(Notes 2 and 10)
Total Other Income and Deductions 28,535 51,109 47,065 42,277 32,2]
Income Before Interest Charges and Preferred Dividends 305,837 305,538 300,428 271,880 242,868 Interest Charges and Preferred Dividends:
Interest on first mortgage bonds............
144,097 131,461 118,734 108,802 87,M8 Interest on debentures and other long-term debt 24,22S 23,859 23,898 26,202 25,384 24,387 4,527 9,117 3,994 15,360 Other interest Allowance for borrowed funds used during construction-credit (net of tax) (Note 3)
(18,296)
(22,255)
(22,269)
(17,080) (15,858)
Income taxes attributable to the allowance for borrowed funds (Notes 3 and 10)........
(7,977)
(14,75S)
(12,514)
(10,8S7)
(8,755)
Preferred stock dividends of subsidiaries....
43,615 43,930 40,683 39,652 32,307 Total Interest Charges and Preferred Dividends..
210,054 166,764 157,649 150,683 135,486 Net Income
$ 95,783 $ 138,774 $ 142,779 $ 121,197 $107.382 Earnings per average share..............
$1.56
$2.30
$2.50
$2.20
$2.13 Book value per share (Note 1)
$22.74
$22.41
$21.96
$21.43
$20.M Common Shares Outstanding-Average for year...
61,218 60,217 57,208 54,968 50,406 Yea r-End..............................
61,264 60,971 59,721 55,263 54,757 e
The accompanying notes are an integral part of the consolidated financialstatements.
19 w
1
Consolidated Balance Sheets (Not31)
General Public Util':les Corporation and Subsidiary Companies (In Thousands)
December 31, 1979 1978 l
ASSETS Utility Plant (at original cost):
In service (Note 1):
Investment in Three hfile Island Unit No. 2...............
$ 704,992
$ 701,267 Other 3,773,897 3.59S.815
)
Total in service.......................................
4,478,S59 4,300,032 j
Less,' accumulated depreciation ( Note 2)....................
973.490 850.422 Net.
3,505.399 3,449.660 Construction work in progress (Note 1)............
553,6S4 471,46S IIeld for future use 24,56S 26.577 Totals 4,083,651 3,947,705 Nuclear fuel (Note 4).
232.032 224,429 Less, accumulated amortization (Note 2)..
47.241 50,809 Net nuclear fuel 184,791 173.620 Net utility plant 4,26S,442 4,121,325 Excess of investments in subsidiaries over related net assets.....
30,505 30,805 Investments:
Other physical property, net 968 1.116 Loans to non-affiliated coal companies (Note 11)............
19,375 19,375 Other, at cost......
783 836 Totals 21,126 21,327 Current Assets:
Cash (Note 4).
7,909 17,981 Special deposits 21,808 11,839 Temporary cash investments.....
60,711 Accounts receivable:
Customers, net 113,870 91,352 Others (Note 10)...
10,478 59,437 Inventories, at average cost or less:
Af aterials and supplies for construction and operation........
53.254 39,267 Fuel 69,507 47,722 Prepayments 12.439 6,152 Totals 349,976 273,750 Deferred Debits:
Deferred energy costs ( Notes I and 2)...................
172,770 10',938 2
Unamo'rtized mine development costs (Note 2)...............
7,631 8,765 Deferred mosts-nuclear accident, net of insurance recoverie,s ( Note 1 ).....................................
61,171 Deferred income taxes ( Notes 2 and 10).....................
28,646 15,726 Other...................................................
51,427 3S.047 i
Totals 321.645 165,476 Tot a l Assets..........................................
$4,991,994
$4,612,683 The accompanying notes are an integral part of the consolidated {mancialstatements 20
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U n & mends) 1979 1978 LIABILITIES AND CAPITAL Ismg. Term Debt, Capital Stock and Consolidated Surplus:
Long-Term Debt (Notes 4 and 5):
First mortgage bonds (3%Q to 12%, due 19S1 through 2009)
$1,868,733
$1,732,074 Debentures (4%% to 9%Fe, due 1986 through 1998)........
230,580 236,4SO Other long-term debt (varying rates, duc 1931 through 1984)..
54,065 54,046 Unamortized net discount on long-term debt...............
(4,406)
(5,477)
Totals....
2,14S.972 2.017,123 Cumulative preferred stock-mandatory redemption (Note 6)..
90,400 95,750 Iess, capital st ock pense..................................
3,004 3,347 Totals....
87,396 92,403 Cumulative preferred stock-no mandatory redemption (Note 7) 423,391 423,391 Premium on cumulative preferred stock.....................
1,34S 1,348 Less, capital stock expense.
1,663 2,495 Totals...
423,076 422.244 Common stock and consolidated surplus (Note 1):
Common stock (Note 8)..
153,229 152,498 Consolidated capital surplus (Note 8)...........
772,538 763,350 Less, cr.pital stock expense.......
17,933 17,836 Consolidated retained earnings (Note 9)....
4S5,571 403,173 Totals....
1,393,355 1,366,185 Less, reacquired common stock (Note 8) 70 70 Totals............................................
1,393,285 1,366,115 Totals............................................
4,052,729 3,897.885 Current Liabilities:
Securities due within one year (Notes 5 and 6)..............
44,164 85,065 Notes payable to banks ( Note 4 )............................
171,000 90,100 Accounts payable 162,162 94,453 Customer deposits 6,387 6,775 Taxes accrued (Note 10) 40,560 20,657 I nterest a ccrued..........................................
43,477 38,639 Other 36,322 34,204 Totals.............................................
504,072 349,893 Deferred Credits and Other Liabilities:
Deferred income taxes ( Notes 2 and 10).....................
294,510 213,757 Unamortized investment credits (Notes 2 and 10).............
115,212 127,055 Other...................................................
25,471 24,093 To t als...... :.......................................
435,193 364,905 l
1 Commitments and Contingencies (Note 1)
Total Liabilities and Capital..........................
$4,991,994
$4,612,683 21 l
Consolidated Statements of Sources of Funds Used For Construction (Note 1)
Ceneral Public Utilities Corporation and Si ddiary Companies (in Thousands)
For the Years Ended December 31, 1979 1978 1977 1976 1975 Sources of Funds:
Funds generated from operations:
Net income..
$ 95,783 $138,774 $142,779 $121,197 $107,382 Add. Items not requiring current cash outlay or (receipt):
Depreciation ( Note 2)..................
141,224 109,505 96,50S 87,839 82,834 Amortization of nuc! car fuel (Note 2) 21,314 21,443 17,764 16,374 20,M3 Investment credits, net (Notes 2 and 10).....
(11,830) 41,733 42,496 7,783 15,834 Deferred income taxes, net (Notes 2 and 10)..
67,882 58,285 35,296 33,732 27,359 Allowance for other funds used during construc-tior (Note 3)
(24,744) (49,888) (47,787) (42,269) (32,054)
Totals....
289,629 319,852 2S7,056 224,656 222,19S Less, cash dividends on common stock............
73,3S5 106,424 97,609 92,261 M,574 Totals 216,244 213,428 189,447 132,39-137,624 Other sources (uses):
Deferred energy costs, net (Note 2)..........
(69,832) (17,916) (17,937) (21,726)
(8,473)
Deferred costs-nuclear accident, net of insurance recoveries (Note 1)
(24.373)
Loans to non-affiliated coal companies (Note 11).
(625)
(2,350)
(650)
(1,500)
Unamortized mine development costs (Note 2)...
1,134 89S 513 526 471 Changes in-cash (Note 4).
10,072 6,310 13,378 (2,302) 20,250
-temporary cash investments....
(60,711) 2,938 (2,9SS)
-accounts receivable..............
26,441 (43,78S)
(2,433) (14,070) 3,643
-accounts payable..................
67,709 12,3S6 20,129 (3,168) 25,894
-inventories-materials, supplies and fuel (35,772) 18,284 (30,620)
(7,196) 6,876 j
-interest accrued..............
4,83S 131 3,218 5,791 565
-taxes accrued....................
19,903 (7,845) (24,693) 22,470 10,352 Other, net (20,879) 5,479 (16,091) 10,121 (3,349)
Totals (81,470) (23,698) (59,879) (10,2N) 54,729 Funds from financings:
Sale of long term debt..
153,800 154,082 155,920 217,000 228,953 Sale of common stock, net of expense (Note 8)....
4,771 22,273 82,166 8,466 97,014 Sale of preferred stock (Notes 6 and 7)...........
50,000 35,000 87,450 Bank borrowings, net ( Note 4 )..................
87,400 24,625 19,125 13,300 (270,690)
Retirement or redemption of long-term debt and preferred stock..............................
(54,463) (32,908) (73,389) (71,990) (19,687)
Total s..................................
191,508 168,072 233,822 201,776 123,040 Totals.................................. $326,282 $357,802 $363,390 $323,967 $315,393 Construction Expenditures:
Ut ility plant................................... $281,912 $376,812 $343,909 $321,150 $315,350 Nuclear fuel...................................
69,114 30,878 67,268 45,086 _32,09.
To tals.................................
351,026 407,690 411.177 366,236 347,447 Allowance for other funds used during construction
( Not e 3 )....... '..............................
(24,744) (49,888) (47,787) (42,269) (32,054)
To tal s.................................. $326,282 $357.802 $363,390 $323,967 $315,393 1
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Consolid ted St:tements of Retained Earnings (Nita1)
Un Wusands)
For the Years Ended Decemhcr 31, 1979 1978 1977 1976 1975 Balance, beginning of year.
$463,173
$430,623
$3S5,653
$356,717
$333,909 Add. net income..
95.783 138,774 142,779 121,197 107,3S2 Totals 359,956 569,597 528,432 477,914 441,291 Deduct, dividends on common stock.........
73,3S5 106.424 97,609 92,261 84.574 Balance, end of year (Notes I and 9)
$4S5,571
$463,173
$430.823 US5,653
$356,717 Cash dividends on common stock, per share....
81.20
$1.77
$1.70
$1.68
,$1.6S Notes to Consolidated Financial Statements
- 1. Commitments and Contingencies:
an allowance of $50 million for contingencies be H" ~
to $320 milh.' The estimate does not include Three Mile Island Nuclear Accident: On hfarch 28, on.
1979, an accident occurred at Unit No. 2 of the pmvision for the replacement of the reactor core Three Afile Island nuclear generating station (estimated by the subskliaries to cost $60 million
("ThfI.2") resulting m significant damage to TN!I-2, to $S5 million) nor for the subsidiaries
- renlace-and a release of some low level radiation which ment power, financing and other costs during the published reports of governmental agencies indicate riod of rehabilitation of Thi1-2. The subsidiaries did not constitute a sigmficant public health or safety hazard. ThfI-2 is jointly oivned by the increased, by $2a_ milh.on, the engineering firm,s Corporation's subsidiaries, Jersey Central Power &
estim te of c sts to provide for other items,
Light ("JCP&L"),257c; Afetropolitan Edison p ssibly omitted from that estimate. The estimates Company ("h!et-Ed"),507c; and Pennsylvania do not take into account potential legal, political Electric Company ("Penelec"),257c. At December r regulat ry del ys, which would further increase 31,1979, total net investment by the subsidiaries the cost of restoring ThiI-2 to service. The delays in TNII-2 was approximately $6S2 million experienced t date in obtaining regulatory
($705 million investment less $23 million accu-authorizations to proceed with the decontamination mulated depreciation), excluding the unamortized m y have exhausted the allowance for contingencies investment of approximately $37 million in the in the engmeer s estimate.
nuclear fuel core.
The subsidianes carned the maximum insurance The subsidiaries engaged a consulting engineer-
"*"E".available ($300 million) for damage t the umt and core and for decontammation ing firm to prepare a cost estimate and schedule for restoring ThfI-2 to service. The firm's initial expenses. The insurance does not cover replace-report indicates that, while the decortamination of ment p wer e sts r return n investment while the the buildings and removal and disposal of unit is not providing electricity for customers, large quantities of radioactive materialis a major but it otherwise covers most types of costs. It is the undertaking Corporation's belief that,if the estimates of the well-knod a, the technology and techniques aree nsultit,g engineering firm are borne out, the nd have been previously demon, venes fr m the msurance compames will re strated. This initial report emphasizes the inherent uncertainties in cost and schedule estimates until appmximate the amount of the msurance carn,ed.
(a) entry into the containment vessel has been subsidiaries do not know the extent,if any, t which the expenditures for repair and restoration grined and the difBeulties of decontamination have been evaluated, (b.) the reactor vessel has been f the unit to operation will represent plant opened and the difficulties of core removal have improvements or other items that are properly been evaluated, and (c) the physical integrity of capitalizable and recoverable in the future through majer components has been assessed.
rates charged to customers by amortization or Subject to these qualifications, the initial report deprMation charges. Aforeover, the subsidianes estimates that decontamination and restoration expect to seek Snancial assistance from the Federal of ThfI-2 to service, exclusive of replacement of the reactor core, would cost approximately $240 million cnd take about four years. The report also recom.
mends that, because of the unknowns and variables, 23 my
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General Public Utilities Corporation and Subsidiary Companies government and/or the utility industry in areas is of the view that none of the costs of responding where the technicalinformation should be of wide to the incident, including repair, disposal of wastes value and significance. Under these circumstances, and decontrnination are recoverable from rate-the amount of loss, if any, suffered by the payers. These costs are and should be insurable "
Corporation and its subsidiaries resulting from TAII-1, which adjoins TA112, was out of service the Thil accident is not presently determinable for a scheduled refueling and was not involved and no provision therefor has been made in in the accident. At December 31,1979 total net their accounts.
investment by the subsidiaries in TAfi-1 was The property damage insurance, and the approximately $357 million, including the nuclear
$300 million limit of coverage, was applicable to fuel core of $30 million. By orders dated July 2, both Three Afile Island Unit No.1 (" Tall 1")
1979 and August 9,1979, the Nuclear Regulatory and TAfI-2. This property insurance has been Commission ("NHC") directed that T5fI 1 remain in a shut down condition until resumption of reduced by claims paid. The insurance carriers have reinstated the original coverage limits for operation is authorized by the NBC, after public Tall.1 but have refused to do so at this time for hearings and the satisfaction of various require-TAfI-2. Additional property damage insurance ments set forth in such orders. The NHC has not yet established a firm time schedule for the completion for TAfI-1 of up to $300 million was obtained by the subsidiaries through membership in Nuclear of the hearings and decision.
Afutual Limited (" NAIL"). As members of N AIL, In their rate orders issued in June 1979, the the subsidiaries are subject to annual assessments PaPUC and Board of Public Utilities of the State of up to 14 times their annual premium, or of New Jersey ("NJHPU") determined that the
$13 million, in the event of an incident at a nuclear capital and operating costs associated with TAff 1 should continue to be reflected in base rates.
plant of any member company. With regard to pmperty insurance for Tall-2, $50 million of Ilowever, on September 20,1979, the PaPUC coverage has been obtained for possible damages issued an order instituting an investigation to which might result from a non-nuclear accident determine whether the costs of Afet-Ed and Penelec associated with TAff-1 should be removed from during the unit's restoration period, The subsidiaries, in responding to the accident their base rates. Similar issues have been raised by at Tall-2, have incurred $101.2 million of costs some of the parties in the proceedings initiated associated with the clean-up and recovery process.
before the NJBPU in January 19S0 by JCP&L which Of this amount, $94.5 ; 11 ion have been deferred are referred to below. Operating and capital costs and $0." million charged to operations. In addition for TAfI 1 in base revenues aggregate approximately to the deferred clean.up and recovery costs, the
$54 mi!! ion annually.
TAII-2 nuclear fuel core was retired and its In order to make provisions for the substantial unamortized book cost of $36.8 million transferred expenditures required for clean up and repair, to deferred debits, which aggregate $131.3 million replacement energy and other added costs resulting and have been offset by the insurance proceeds of from this accident, the Corporation and its sub-
$70.1 million received through December 31,1979.
sidiaries entered into a revolving credit agreement All net deferred costs will be charged to operations with a group of banks in June 1979 (see Note 4).
or plant in service (for those which constitute In addition, JCP&L and Penelee each issued permanent improvements) upon a determination
$50 million of first mortgage bonds in June 1979 that such costs are not recoverable through and JCP&L sold $47.5 million of first mortgage additional insurance proceeds, rates or by financial bonds in October 1979, $25 million of which was assistance from the Federal government or from applied to the payrnent of maturing bonds.
other public or private sources and/or the utility On January 23,1950, the NRC ordered Met-Ed industry. In its rate orde, issued on June 19,1979 to pay a fine of $155,000 fcr safety, maintenance, referred to below, the Pennsylvania Public Utility procedural and training violations at TAfI. Such fine Commission ("PaPUC") recognized that no claim was paid on February 13,1930. The NRC has also for such costs had been made in the proceedmgs stated that, depending upon the findings of in which such order,was entered. Nevertheless, continuing investigations into the TAfI-2 accident, the PaPUC stated in that order: "the Commission it may take additional enforcement action such as assessing additional civil penalties or erdering the suspension, modification or revocation of Afet-Ed's license to operate TA!I-2. Afet Ed does not know what the ultimate outcome of this matter will bc.
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On October 30,1979, the Presidential (Kemeny) anticipated for the period September 1,1979-Commission on the Accident at Three-Mile Island August 31,1950; such increase is expected to issued its report.The Report states,in part, that provide approximately $70 mi!! ion of revenues its " investigation has revealed problems with the during that period.
During the first quarter of 1979, Afet-Ed and
' system
- that manufactures, operates and regulates Penelec were granted,etail rate increases by the nuclear power plants" and the shortcomings PaPUC which, among other things, reflected which turned the incident into a serious accident "are attributable to the utility, to suppliers of in base rates their investment in Thf f-2 and the equipment and to the federal commission that or..at'.g and maintenance costs associated with regulates nuclear power." On January 23,19S0, tre unit. On April 19,1979 and April 25,1979, the NRC's Special Inquiry Group (Rogovin) the PaPUC, as a result of the accident, established reported the results of its investigation of the temporary rates for Afet-Ed and Penelec, respec-accident at TMI-2. Its conclusions with respect tively, reducing annual base revenues by the to the assignment of responsibility for the accident operating and capital costs associated with their were similar to those of the Kemeny Commission.
interest in TMI-2. These actions effectively The Corporation does not know what effect, if revoked, prior to becoming effective, the $46.6 mil-lion increase in base rates granted hiet-Ed on any, these reports will have upon it or its March 22,1979, returning the rates to levels in subsidiaries.
Other investigations and inquiries into the effect prior to that rate order. In Penelec's case, nature, causes and consequences of the TMI-2 the PaPUC prospectively reduced the $56.2 million accident commenced by various federal and state rate increase which the company had been billing bodies are continuing. The Corporation is unable since January 27,1979 by $25.0 million.
to c>timate the full scope and nature of these On June 19,1979, the PaPUC issued a rate order continuing investigations or the potential conse-which directed that Met-Ed's and Penelec's quences thereof to the investors in the securities temporary rates prescribed by its April 19,1979 of the Corporation and its subsidiaries. The and April 25,1979 orders be made permanent.
Corporation is also unable to determine the impact, In addition, the order established levelized energy if any, the results of such investigations may adjustment clauses for Met-Ed and Penelec for have on the proceeding to return TMI-1 to the period July 1,1979-December 31,1980 at a operation and the efforts to rehabilitate TMI-2.
level which the PaPUC believed would be On January 31,1979, JCP&L was granted a sufficient to recover the increases in the companies *
$33.8 million annual rate increase by ' he NJBPU, energy costs during that period. This levelized which, among other things, reflected in base rates energy adjustment clause did not make provision its investment in TMI-2 and the operating and for the increased energy costs experienced by maintenance costs associated with the unit. On Met-Ed and Penelec during the March 28-June 30, 1979 period, but the discussion at the public June 18,1979, the NJBPU issued a rate order meeting at which such order was entered indicated reducing annual base revenues by $29 million that such costs will ultimately be recoverable. The which represents JCP&L's annual capital and operating cost associated with its interest in TMI-2.
order also made provision for the amortization The order also provided for a reduction in energy through base rates by Met-Ed of $5.8 million revenues of $7.3 million over a prospective annually of previously deferred energy costs of eighteen month period as an offset to base rate
$14 million, and by Penelee of $5.5 million annually revenues attributable to TMI-2, collected during of previously deferred energy costs of $19.4 million.
The increases in the subsidiaries'levelized April, May and June 1979. Accordingly, such energy adjustment charges granted by the NJBPU amount was recorded as a charge to energy costs by JCP&L in June 1979. In addition, the order and PaPUC in June 1979 assumed that TMI 1 authorized JCP&L to increase its levelized energy would resume the generation of electricity on adustment charges to its customers over the January 1,1980. In light of the NRC's action period July 1,1979-Dt cember 31,19S0, by an requiring that TMI-1 remain in a shut-down condi-amount which the NJBPU believed would be tion until resumption of operation is authorized sufficient to recover the replacement power costs associated with the non-availability of TMI since March 31,1979. On September 5,1979, the NJBPU authorized JCP&L to increase its levelized energy adjustment clause charges to recover increases in energy costs, not associated with TMI, 25
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General Public Utilitics Corporation and Subsidiary Companies During the pendency of the proceedings which by it, while allowing similar type units to operate, resulted in the June IS,1979 order of the NJBPU, and as a result of increased fuel costs, Afet-Ed certain intervenors requested that the NJBPU on November 1,1979 and JCP&L on January 21, consider the issue of fault regarding the causation 1980 filed with their respective state commissions of theTh!I-2 accident. At that time, the NJBPU for increases in their levelized energy clause ruled that this issue would be considered in a later charges. hiet Ed requested an increase of $55 mil.
phase of such proceedings. On January 23,1950, lion annually effective January 1,1950 and JCP&L the NJBPU directed the filing of legal memoranda an increase of $142 million annually effective attempting to identify the legal standards which Siarch 1,19S0. JCP&L and Afet Ed,in filings with their respective state commissions, indicated that should govern the NJBPU's evaluation of fault, the failure by the Commission to act in a positive and legal and factual contentions regarding fault, timely manner on their requests could result in the regulatory consequences of a fault finding, the NJBPU's legal authority to impose such conse-the inalnlity of JCP&L and Afet-Ed to obtain quences and the implications thereof. Such additional short term financing and thus impair memoranda have been filed. On Af arch 6,19S0, the their ability to meet their obligations in the future.
NJBPU stated that it will establish a hearing date to With respect to JCP&L's proceeding,on February 27,19$0, the administrative law judge begin consideration of the above issues.
As indicated by the preceding paragraphs, the granted a motion of intervenors in that proceeding depreciation and return requirements associated to deal initiaUy with energy costs other than those relating to the replacement of ThfI generation and with the investment in TA11-2 (amounting to to continue the proceedings for Thll replacement approximately $94 million per year) are not being recovered from customers. Such depreciation and energy costs. On Af arch 6,1950, the NJBPU return requirements are currently being reflected authorized JCP&L to increase its levelized energy in the financial statements in that (a ) depreciation adjustment clause charges, effective Alarch 0, charges in respect of the unit are being provided 1950, for non-TN!I energy costs by a factor estimated to produce apprmimately $54 million of and charged to expense, (b) the interest and additional annual revenues. The NJBPU also stated preferred stock dividend components of that in this order ' hat it will shortly take up the issue of investment are being accrued, and (c) the earnings per share of common stock are determined the retention.,f ThfI-I in JCP&L's base rates.
On February 8,1950, the PaPUC issued an order on a basis which reflects all outstanding shares permitting hiet-Ed to increase its leveli7ed energy including the shares issued to finance the common clause charges, subject to investigation, by an stock components of that imestment, additional $55 million annually, effective hf arch 1, TI.e Price-Anderson Amendments to the Nuclear 19S0. This order is effective pending final resolution Energy Act limit liability to third parties to of the issues in the proceedings referred to in the
$560 million for each nucIcar incident. Coverage of the first $140 million (raised to $160 million next paragraph and does not determine that any following the accident) of such liability is provided specific costs are recoverable.
by private insurance. The next $335 million On November 1,1979, the PaPUC ordered hfet-Ed to show cause why its governmental (reduced to $315 million following the accident) is provided by assessments of up to the limit of authorization to conduct public utility operations
$5 million per nuclear reactor per incident, but not should not be revoked. Afet-Ed has responded to more than $10 million in any calendar year. The such order contending that there is no basis for remainder is provided by a government indemnity.
such revocation and that such revocation would be Based on the ownership of three nuclear reactors, contrary to the public interest, On November 8, the subsidiaries
- maximum potential assessment 1979 the PaPUC combined into one proceeding (i) its investigation to determine whether hiet Ed's under these provisions would be $15 million per and Penek c's costs associated with ThfI-1 should incident but not more than $30 million per continue to be reflected in base rates, (ii) hfet-Ed's calendar year for claims covered by this insurance.
The Corporation's private insurance under Price-request for additional energy cisuse adjustment Anderson provides that coverage is reduced by revenues and (iii) its show cause order why hiet-Ed's authorization to conduct public utility claims paid but is subject to reinstatement to operations should be revoked. By orders dated original coverage limits upon approval by the insurance carriers. The subsidiaries have applied for February 8,19so, the PaPUC stated that it expected to complete these combined proceedings on hf ay 23,1980.
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such reinstatement but are unable at this time to Prior to the accident, JCP&L was negc.iating for a
ascertain whether or when such reinstatement will the sale of undivided interests in the station to two be approved. The NRC has informed hiet.Ed that unaffiliated utilities, one of which has since the failure by it to obtain such reinstatement could indicated it is no longer interested in such a result in the suspension or revocation of its license purchase. JCP&L does not know whether it will be to operate Thil-2.
able to sell any undivided interest in the station.
As a result of the accident, the Corporation, in addition, JCP&L is unable to estimate what and/or its subsidiaries, have been named as effect any delay in, or moratorium on, the issuance defendants in various law suits. The suits include by the NRC of construction permits or operating (i) individual suits and purported and actual class licenses for nuclear generation stations may have actions for personal and property damages on the resumption of construction or the eventual (including claims for punitive damages) resulting issuance of an operating license for the Forked from the accident and (ii) suits to enjoin the future River station.
operations of Th!I-2.
JCP&L is currently reviewing possible alternatives The suits described in (i) above involve questions for the supply of additional capacity, including es to whether certain of such claims, material in the possible conversica of the Forked River project amount and arising out of both the accident to a coal-fired facility. Pending resolution of these itself and the cleanup and decontamination efforts, matters, JCP&L has continued to accrue AFC on are (a) subject to the limitation of liability set by its investment in Forked River.
the Price-Anderson Amendments; and (b) outside the insurance coverage provided pursuant to the Oyster Creek Outage: The Oyster Creek nuclear Price-Anderson Amendments. These questions have generating station, owned by JCP&L is currently not yet been resolved.
being refueled, a process which has been extended Class suits for damages on behalf of purchasers beyond its scheduled length for maintenance and of CPU common stock during the period August 25, possible repairs. At this date, the schedule for its 1975 through April 1,1979 have also been resumption of operations is uncertain. Replacement instituted against the Corporation and certain of its power for the station's output costs approximately directors as a result of the accident. These suits
$3.5 million per week.
have raised questions, which have not yet been resolved, as to whether certain claims are beyond Coal Purchase Costs: In January and April 1977, the insurance coverage for directors' and officers' the PaPUC issued amended complaints asserting liability carried by the System companies.
that hiet-Ed and Penelee made payments in The Corporation and its subsidiaries are presently 1974 fcr coal that were 89.8 million and $4.9 mil-unable to estimate the likelihood of an unf avorable lion, respectively,in excess of those required outcome on any of the matters set forth in the by their contracts, and that such excess payments preceding paragraphs or their financial exposure were without justification and directing hiet-Ed with respect thereto.
and Penelee to show cause why they should not be required to refund $9.8 million and $4.9 million, Forked Ricer Profect: In view of the impact of the respectively, to their customers. hiet-Ed and accident at ThiI.2 on its financing capability, Penelec believe that the payrnents which they JCP&L suspended construction on its Forked River made were justified and that there is no basis for nuclear generating station during the second requiring such refunds and they so responded quarter of 1979. JCP&L's investment in the project to the complaints. In November 1979, the et December 31,1979 was approximately $384 administrative law judge who heard the evidence million, approximately $30 million of which has in the complaint against hfet-Ed for 1974 recom-been included in JCP&L's rate base. Of this mended that hiet-Ed refund $2.7 million, plus investment, $75 million reflects the accrual of interest, to its customers. Met-Ed filed exceptions ellowance for funds uspd during construction to such recommendation, asserting that the
("AFC"). JCP&L does not know when it will be evidence does not support any refund. Other parties cble to resume construefion of the station, whether filed exceptions asserting that the refunds should it will be able to finance completion of the station be increased. Oral argument before the PaPUC without substantial rate relief and participation by was held in February 1980 and the matter is other entities, and what additional modifications, if awaiting decision.
rny, will be required upon resumption of In November and December 1978, the PaPUC construction. There are no current plans for issued further complaints asserting that Met-Ed near term resumption of construction of the station.
and Penelee incurred excess costs of $4.6 million 27
Cencral Public Utilitics Corporation and Subsidiarj Companies and $.8 million, respectively, for coal during for damages and has also filed another suit against 1975 and 1976, and that such excess payments the supplier and its parent seeking damages.
were without justification and directing Slet-Ed JCP&L believes that any additional amount that and Penelee to show cause why they should not it might be required to pay if the supplier is be required to refund $4.6 million and 6.8 million, successful in its suit would be valid costs and respectively, to their customers. Such complaints should be recognized for rate-making purposes.
were based on audit reports prepared by the Ilowever, there can be no assurance that this will PaPUC staff. 51et-Ed and Penelec believe that the be the case. If the suits were to be resolved payments which they made were justified and in the supplier's favor, JCP&L would incur $6.7 mil-that there is no basis for requiring such refunds, lion in additional fuel expense, based on the amount and they have so responded to the complaints.
of fuel consumed through December 31,1979.
The Corporation is unable at this time to predict the outcome of these matters.
Other: The subsidiaries
- construction programs, which extend over several years, contemplate Compliance Audits: During 1977 and 1978, the expenditures of approximately $275 million during stall of the Federal Energy Hegulatory Commission 19S0. In connection with these construction
("FERC") conducted compliance audits of programs the subsidiaries have incurred substan-Stet-Ed's and Penelec's accounting records tial commitments.
covering the periods ending December 31,1976 The subsidiaries are engaged in negotiations and December 31,1977, respectively. The remain-and, in one instance, litigation with various sup-ing unresolved issues concern the base to which pliers relating to the latters' claims for delay or AFC accruals were applied. If such issues were termination charges or increased fees which such to be unfavorably resolved, the resulting reduction suppliers assert result from the subsidiaries
- revi-in consolidated earnings would approximate sions of their construction plans and schedules
$2.5 mihion. Slet-Ed and Penelec believe that the and/or from the increased scope of supply. The FERC's position is not justified and they are subsidiaries
- managements do not expect at this contesting it.
time that such negotiations and litigation will result in any material increase in costs that would Nuclear Fuct Litigation: In 1971, JCP&L entered not be valid costs properly recognizable through into a contract for the purchase of three nuclear the rate-making process.
fuel reloads for the Oyster Creek Station, with an Claims for damages arising out of the operation of option for five additional annual reloads beginning the Oyster Creek station have been asserted.
in 1976. In 1974 the supplier offered an extension JCP&L's management believes that such liability, of that contract to cover five additional annual if any, as it may have for such damages in the reloads beginning in 1981. JCP&L believes that it pending suits and for all asserted and potential effectively exercised the option in the initial similar claims would not be material.
contract and accepted the offer to extend the JCP&L was a participant in the Atlantic generat-contract to cover the annual reloads through 19S5.
ing station project. In December 1978, the non.
The supplier disputes this position and,in affiliated co-owner and principal sponsor of the November 1978, submitted bills for material and station announced the abandonment of the project.
services m the aggregate amount of approximately At December 31,1979, J CP&L*s investment in
$33 million, covering reloads supplied in 1977, the project was $4.2 million. JCP&L plans to seek 1978 and 1979. The supplier stated that its regulatory approval to amortize this investment, objective was to establish revised prices and other net of related income tax reductions of $1.4 million, 4
terms and conditions rather than to diminish over a period of years for rate-making purposes.
supplies and, without prejudice to its legal position, The NJBPU has accorded such treatment for provided the 1979 annual fuel reload. Of the similar items in the past.
$33 million claiined by the supplier to be due, JCP&L has paid approximately $3.8 million and
- 2. Summary of Significant Accounting Policies:
is of the opinion that the balance of approximately General: The consolidated financial statements
$29 million is not pavaole by it and has so include the accounts of all subsidiaries.
informed the supplier. On January 26,1979,the It is the general policy of the Corporation s supplier filed suit against JCP&L, the Corporation subsidiaries to record additions to utility plant at and CPU Service Corporation. JCP&L has filed a counterclaim for a declaratory judgment confirming its view of the contractual status and i
28 y
i m
~..
cost, which includes material, labor, overhead and nations to range between $27 and $36 million per 1
AFC. The cost of current repairs (except those unit in then current dollars assuming in-place related to the nuclear accident described in Note 1) entombment), and (b) Afet.Ed and Penelee are and minor replacements is charged to appropriate charging to expense amounts intended to provide operating expense and clearing accounts and the over their service lives for the decommissioning of cost of renewals and betterments is capitalized. The their shares of the radioactive components of their original cost of utihty plant retired, or otherwise nuclear units (approximately $24 million per unit disposed of, is charged to accumulated depreciation.
in then current dollars for rate-making purposes).
In accordance with rate-making requirements, these Operating Hewnues: Revenues are generally re.
charges make no provision for possible inflation in corded on the basis of billings rendered.
decommissioning costs during the period prior to decommissioning but are expected to be subject Deferred Energr/ Costs: The subsidiaries follow a to modification to take cognizance of that factor.
policy of recognizing energy costs in the period in which the related energy clause revenues are billed.
Amortization of Nuclear Fuel: The amortization of Deferred energy costs at December 31,1979 nuclear fuelis pmvided on a unit of production include (a) amounts accumulated prior to the basis. Rates are determined and periodically TA112 accident which are being amortized to revised to amortize the cost over the usefullife.
income in accordance with ratemaking orders Prior to December 1,1976, amortization of nuclear (JCP&L--$52 million at a rate of $2.3'million per fuel costs included estimated costs of reprocessing year, and Pennsylvania subsidiaries-$22.5 million veh fuel and estimated residual value of uranium at a rate of $11.3 million per year), and and plutonium. Due to the uncertain future of (b) amounts accumulated subsequent to the government approvals for reprocessing and TAf12 accident reflecting the operation of levelized plutonium recycling. the Corporation's subsidiaries, energy adjustment clauses placed in effect effective December 1,1976, began using amortiza-pursuant to ratemaking orders entered in June and tion rates for nuclear fuel at ThfI which makes no September 1979 (see Note 1).
current provision for reprocessing costs and gives no credit for residual values. Effective September 1, Depreciation: Thc Corporation's subsidiaries pro-1977, similar treatment was adopted pursuant to vide for depreciation at annual rates determined authorization by the NJBPU for the Oyster Creek and revised periodically, on the basis of studies, to station nuclear fuel. Also effective September 1, be sufficient to amortize the original cost of 1977, JCP&L is providing for estimated future depreciable property over estimated remaining handling costs for the spent Oyster Creek nuclear service lives, which are generally longer than those fuel, and similar treatment will be provided for employed for tax purposes. The subsidiaries use future handling costs for the spent TAfI nuclear depreciation rates which, on an aggregate com-fuel when required. Previously accumulated posite basis, resulted in an approximate annual rate estimated resideal credits, net of previously of 3.17%,3.07%,3.02c'c,2.95%, and 2.88% for accumu ated estimated costs of reprocessing, for the years 1979,1978,1977,1976 and 1975, tb Oyster Creek station nuclear fuel are being amortized to fuel expense on a unit of production E
tiv anuary 1,1977, to conform with rate-basis. Should reprocessing eventually be under-making treatment,'Afet-Ed and Penelee are taken, the Corporation expects that any difference charging depreciation expense with the cost of between such costs and accumulated resenes removal (less salvage) as incurred rather than wdl be recognized prospectively in the rate-makm, g including it in the provision for depreciation.
Process.
Nuclear Plant Decommissioning Costs: In accord-Income Taxes: The Corporation and its subsidiaries ance with ratemaking determinations (a) JCP&L file consolidated Federalincome tax returns. All is charging to expense and creditmg to a non-participants in a consolidated Federal income tax funded reserve amounts intended to provide over return are severally liable for the full amount of their service lives for the cost of decommissioning any tax, including penalties and interest, which may
~
nuclear plants at the end of their useful lives be assessed against the group.
(estimated for purposes of the ratemaking determi-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 accord-29
.,1.ww : u. -- -
1
.. ~_
=
General Public Utilities Corporation and Subsidiarj Companics ance therewith, the Corporation's subsidiaries have in service by means of the allowance for deprecia-employed the following policies:
tion charges based on the total cost of the plant, including AFC.
Tar Depreciation: The subsidiaries of the Corpo.
To the extent permitted in the rate-making ration generally utilize liberalized depreciation proceedings of the subsidiaries, the income tax methods and the shortest depreciation lives reductions associated with the interest component permitted by the Internal llevenue Code in com-of AFC have been allocated to reduce interest puting depreciation deductions and provide charges and, correspondingly, have not reduced for deferred income taxes where permitted in income taxes charged to operating expenses.
the rate-making process.
Pursuant to such rate orders, the Pennsylvania subsidiaries employ a net of tax accrual rate for Intestment Credits: The 3% investment credits AFC. JCP&L employed a partial net of tax AFC are being amortized over a 10-year period while accrual rate from June 1975 through July 1976, and, the 4% and 10Te investment credits are being effective September 1977, began employing a net amortized over the estimated service lives of the of tax accrual rate for AFC on certain construction related facilities.
projects while using a gross AFC rate on others.
Investment credits applicable to the Tax The subsidiaries have accrued AFC using rates lleduction Act Employee Stock Ownership Plan which, on an aggregate composite basis, resulted in
("TRAESOP') are remitted to the Plan Trustee annual rates of 8.60Tc,7.997c,9.03rc,8.71To and and have no effect on income. As a result of the 8.12% for the years 1979,1978,1977,1976 and nuclear accident referred to in Note 1, the 1975, respectively.
Corporation has suspended the TRAESOP.
- 4. Short Term Borrowing Arrangements:
Pension Flam: The Corporation's subsidiaries have In June 1979, the Corporation and its subsidiaries several pension plans meludmg plans applicable entered into a revolving credit agreement with a to all employees, the accrued costs of which ar group of banks, under which they had available, being funded. The costs of supplemental pension at December 31,1979, $292 million of credit, of plans applicable only to supervisory employees which $171 million were utilized for outstanding were not funded prior to 1976. The previously borrmvings. Such available credit can be increased unfunded supplemental pension plan costs are to $412 million upon the approval of banks being funded during the five year period begin-holding 85To of the notes outstanding. The ning January 1,1977. Prior service costs e pplicable agreement provides for a commitment fee of to all plans are being amortized and funded over one-half of one percent per annum of each bank's a-year penods.
total commitment (whether used or unused).
Interest rates on such borrowings range from l
Mine Dcrclopment Costs: These costs are being 105Tc to 111To of the prime rate.
amortized to income over the estimated life The Corporation has guaranteed all borrowings (20 years) of the mines.
outstanding under the revolving credit agreement.
In order to secure such guarantee, plus the
- 3. Allowance for Funds Used Corporation's $39 million term loan and the During Construction:
guarantee by the Corporation of $17.8 million fI ns to CPU Service Corporation ("GPUSC"),
The applicable regulatory Uniform System of the Corporation has pledged the common stock of Accounts provides for AFC which is deBned as including the net cost during the period of JCP&L, hiet-Ed, Penelee and GPUSC.
construction of borrowed funds (allowance for JCP&L and hfet-Ed have secured their notes under the revolving credit agreement by granting borrowed funds used during construction) used for a security interest in certain nuclear fuel in the 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 recog-nized 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 current cash income; instead, AFC is realized in cash after the related plant is placed
E
- _..;-.- - u
~ -
-.:a - - -.. -
$f process of reBnement, conversion, enrichment and 5.
I;mg. Term Debt Maturities:
fabrication. Such nuclear fuel was recorded, on the lamg-term debt due during the years 1960 through December 31,1979 balance sheet, at a cost of l
$30.5 million. In addition, Met-Ed Ls pledged U" Th#"*""d'I
$40 million of first mortgage bonds as security for its indebtedness under the revolving credit First Mortgage agreement.
Year sonas oebentures other Totals The revolving credit agreement and the purchase 1980 s 15,334
$5,000
$18,450
$ 38,814 agreements of the bonds sold by JCP&L and 1981 9,321 5,900 44,433 50.654 Penelee subsequent to the accident at TMI-2 1982 21,625 5,900 5,433 32,958
($147.5 million) contair. provisions for the 1983 101,830 5,900 200 107,930 immediate payment of the indebtedness involved 1984 90,856 5,900 4,000 100,756 uimn the occurrence of an event deemed by the majority of the lenders or holders of an issue to have Substantially all of the subsidiaries' property is a materially adverse effect on the borrower.
subject to the lien of their respective mortgages.
In addition, the Corporation and its subsidiaries have informal lines of credit with various lenders.
- 6. Cumulative Preferred Stock-Mandatory These arrangements generally provide for the Hedemption maintenance of compensating balances ranging from a minimum of 107c of the available line of At December 31,1979 and 1978 the subsidiaries credit to a maximum of 107o of the line plus 107c had outstanding the following issues of cumulative of the loans outstanding, as determined on a daily prefmni st ek which are subject to mandatory average basis. At December 31,1979 and 1978, the ralemption requirements:
lines of credit available under these arrangements
- share, Stated value outstanding Un Thousands) totaled approximately $27 million and $255 million, respectively. At December 31,1979, $1.2 million 19 9 1978 1979 1978 was maintained as compensating balances.
JCP&L:
Substantially all of the cash at December 31,1978 13.5% Series F 187,500 200,000 $18,750 $20,000 was maintained as compensating balances.
11% Series C(1) 250,000 250,000 25,000 25,000 Under the revolving credit agreement, the amount Due within one year (25,000) (12,500) (2.500) (1,250) of debt outstanding under these externallines Penelec:
cannot exceed $15,000,000.
11.72% Series J(1) 200,000 212,500 20,000 21,250 10.88% Series K(1) 320,000 320,000 32,000 32,000 The m*ximum aggregate amount of bank bor-Due within on-year (28.500) (12.500) (2,850) (l.250) rowings (. it tanding at any month-end during 1979 Totals 904,000 957,500 $90,400 $95,750 was $230 miLion. For the year 1979, the average daily amount outstanding was approximately (1) sold in 1975
$157.2 million, having a weighted average interest rate of 14.2%. Bank borrowings outstanding at JCP&L has had an annual rdemption require-Decemlur 31,1979 aggregated $171 million having ment of 12,500 shares of the Series F preferred a weighted average interest rate of 17.2%.
stock since 1975. It also has an annual redemption The maximum aggregate amount of bank bor-requirement of 12,500 shares of the Series C rowings outstanding at any month-end during preferred stock beginning in 1980.
1978 was $102 million. For the year 1978, the Penelee has had an annual redemption require-average daily amount outstanding was approxi.
ment of 12,500 shares of the Series J preferred mately $67 million, having a weighted average stock since 1976. It also has an annual redemption interest rate of 8.67c. Bank borrowings outstanding requirement of 16,000 shares of the Series K at December 31,1978 aggregated $90,100,000 preferred stock beginning in 1980.
having a weighted average interest rate of 11.1%.
All redemptions are at the stated values of the shares, plus accrued dividends. No redemptions of preferred stock may be made unless dividends on all preferred stock for all past quarterly divi- -
dend periods have been paid or declared and set aside for payment.
l i
81 i
_m General Public Utilitics Corporation and Subsidiart Companies j
The subsidiaries aggregate mandatory redemption
- 8. Common Stock and Capital Surplus:
requirement for allissues of cumulative preferred Of the 75 million authorized shares of $2.50 par stock outstandmg at December 31,1979 is value common stock of the Corporation,61,264,000
$26,750,000 through 10S4.
shms were issued and outstanding at December 31, 1979 and 25,000 shares were recorded as re-
- 7. Cumulative Preferred Stock-No Mandatory acquired at $2.50 per share.
Hedempt!on:
During the period January 1,1975 through At December 31,1979 and 1978, the subsidiaries December 31,1979, the Corporation issued addi-tional shares of common stock as follows:
had outstandir.g the following issues of cumulative preferred stock, which are redeemable solely at (in Thousands) the option of the issuers:
Par Value Excess over Credited to Par Value Shares Stated Value Number Common Credated to Outstanding (in Thousands)
- l. ear of Shares Stock Capital Surplus JCP&L:
1975 7,399,000
$18,497
$S4,296 4% Series 125,000
$ 12,500 1976 507,000 1,266 7,431 9.36% Series 250,000 25,000 1977 4,458,000 11,146 72,767 812% Series 250,000 25,000 1978 1,250,000 3,124 19,467 8% Series 250,000 25,000 1979 293,000 731 4,lSS 7.%% Series 250,000 25,000 8.75% Series I1(1) 2,000,000 50,000 Met.Ed:
- 9. Consolidated Retained Earnings:
3.90% Series 117,729 11,773 4.35% Series 33,249 3,325 Under the revolving credit agreement, $300,000,000 3.85% Series 29,175 2,917 of the balance of consolidated retained earnings is 3$ [*'
3h I'h restricted as to the payment of cash dividends 38' 8.12% Series 160,000 16,000 on common stock.
7A8% Series G 350,000 35,000 8.32% Series 11 250,000 25,000 8.12% Series I 256,000 25,000
- 10. Income Taxes:
8.32% Series J 150,000 15,000 p
Examination of Federal income tax returns through 4.40% Series B 56,810 5.681 1976 has been completed and the years 1977 and 3.70% Series C 97,054 9,705 197S are currently under review. The Corporation 4.05% Series D 63,696 6,370 and its subsidiaries have provided for any antici-4.70% Series E 28,739 2,874 pated liabilities that may result from such 4.50% Series F 42,969 4,297 exanunation.
4.60% Series G 75,732 7,573 8.36% Series !!
250,000 25,000 8.12% Series I 250,000 25,000 9.00% Series L(2) 1,400,000 35,000 Total 6,783.912
$423,391 (1) sold in 1977 (2) sold in 1976 At December 31,1979 and 1978, the subsidiaries were authorized to issue 37,035,000 shares (JCP&L
-15,600,000 shares, Met-Ed-10,000,000 shares, and Penelec-11,435,000 shares) of cumulative preferred stock, no ' par value.
Incorae tax expense for the years 1975 through Income tax expense is comprised of the following:
1979 was less than the amount computed by U" "Nu "*)
applying the statutory rate to book income subject 1979 1978 1977 1976 1975 to tax a* follows:
(in Millions) yede7,g inc me tax $ 3
$(20)(b) $ 9(c) $33 $15(d) 1979 1978 1977 1976 1975 State income tax 7
5 9
5 8
Operatmg income telore income taxes
$3*J
$139 $349 $310 $277 on oli r Other income, net _9 4
1 1
income, net 5
2 1
1 1
Totals 32 313 G49 311 278 Income taxes Interest expense (193) (160) (152) (139) Q28)
(tl e Beck income allowance for subject to income tax
$159
$183 $197 $172 4150 borrowed funds
"[utory (N te 3)
(8)
(15)
(13)
(11)
(9) rite ( a )
$ 73
$ 88 $ 95 $ 82 $ 72 Provision I 't**e5 Excess of tax currently over book payabie depreciation
[of)' "N h) 7 (28)(b) 6(c) 28 15(d)
( Note 2)
(2)
(10)
(7)
(9)
(12)
Deferred
' net 6S 58 35 34 27
^*M((a e c
in.
vestment credits Current
( Note 2)
(5)
(4)
(4)
(4)
(4) im estment credits (7)(a) 46(b) 47(c) 12 20(d)
Other adjustments (3)
(2) 1 2
Am rtization Income tax IC expense
$ 63
$ 72 $ 84 $ 70 $ 58
,,"jy E6ective income investment ta rate 40 %
39 %
43 %
41 % 39 %
credits (5)
(4)
(4)
(4)
(4)
Income (a ) Effective January 1,1979, the statutory rate tax was changed fro'm 4STc to 467c.
expense $ 63
$ 72
$84 s70 $58 (a) Redetermination of prior years' investment credits resulting from 1979 net operating loss.This amount is reflected in the 1973 unused investment credit.
(b) Includes 1978 investment tax credits of $27 million carried back to prior years, which is includedin Accounts receivable-Otherin the accompanying December 31,1978 con-solidated balance sheet.
(c) Reflects 1976 investment tax credits of $7 million, resulting from adoption of TRAESOP and the election to claim investment tax credits under the progress payment method.
(d) Reflects an investment credit carry-over of $12 million from 1974.
(e) Unused 1978 and 1979 investment credits of approximately $17 million and $29 million, respectively (including $5 million and
$4 million, respectively, of TRAESOP credits) are available for carry-forward to future years.
O
.. _,. _ =.
- _n_
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.. 7 7_
'. ?' ? y
General Public Utilities Corporation and Subsidiary Companies The provisions for deferred income taxes, net, The hability for New Jersey State franchise and result from the following timing differences:
gross receipt taxes and surtax is established in each year of exercise of such franchise based on the (l" Mill'0"8) preceding year's gross receipts and no liability l
1979 1978 1977 1976 1975 exists in a current year to pay a tax based on that Liberalized depre, year's gross receipts. JCP&L has consistently made clation (Note 2h provision in its accounts for such taxes on this Federal 8 50
$ 37 $ 24 3 21
$ 20 basis. For rate-making purposes (including the State 5
4 3
3 opernion of the energy adjustment clause) the Deferral of energy NJT,PU computes allowable expenses as including costs (Note 2):
,0 vision for such taxes based on the current year's Federal 33 7
8 9
5 gross receipts rather than those of the preceding I
I vear. Effective January 1,1979, pursuant to a
- 2' n"er **"[lause recommendation by the FERC, JCP&L began recording the state revenue taxes related to energy revenues
~
clause revenues in the period the evenues are Other (9) 8 (1)
(1)
(1) collected.
Totals 8 68 3 58 8 35 $ 34 8 27
- 13. Pension Plans:
- 11. Loans to Non Affiliated Coal Companies:
Total pension costs for the years 1979,1978,1977, Penelee is providing financing to non-affiliated 1976 and 1975 amounted to approximately $22.S
~
mining companies supplying coal to the Homer million, S19.6 million, $16.8 million, $14.9 million, City generating station under long-term contracts, and $12.4 million, respectively. Based on the latest These loans bear interest at a rate which is 1%%
available actuarial reports as of January 1,1979, per annum above the prime interest rate.
the actuarially computed vested benefits under certain of the plans exceeded the actuarial value of
- 12. Supplementary Income Statement trust assets or reserves created in respect of such Information:
plans by $13.6 million and the unfunded past service liabilities for the plans amounted to approxi-hlaintenance and other taxes uarged to operating matelv $125.7 million, or 39Ce of the total reserve expenses consisted of the following:
requirement.
(in MGlions) 1979 1978 1977 1976 1975 Maintenance (including applicable payroll charges)
$ 91 $108 8 87 $79 $70 Other taxes:
State and local gross receipts 8 87 $ 75 8 67 $55 $51 Cross revenue and franchise 20 17 14 12 11 State surtas 9
7 6
5 5
Capital stock 11 11 10 6
7 Real estate and personal property 12 11 11 10 10 Other 10 9
7 7
6 Totals
$149 $130 $115 $95 $90 0
34
- 14. General Public Utilities Corporation The statements of sources of funds used for invest-(Parent Company):
ment in operating subsidiaries of the Corporation f r the years 1975-1979 are summarized as follows:
The balance sheets of the Corporation at December 31,1979 and 1978 are summarized (in Millions) as follows:
1979 1978 1977 1976 1975 (in Millions) 1979 1978 Equity in earnings of ASSETS subsidiaries not datributed Investment in subsidiaries, at equity
-(59)
(3)
(4)
(3)
(7)
(Notes I and 4) 81,491
$1,401 Totals 37 136 139 118 100 Cosh 5
Dividends paid g ) (106) (98) (92) (85)
Otlier Assets I
2 Totals (36) 30 41 26 15 Total Assets
$1,492
$1.40s Other sources (uses), net _4 10 (1) 25 LIABILITIES AND CAPITAL Totals (32) 30 51 M
S*I' 0f cohmon stock Long. term debt 8 39 8 39 ghow Notes payable (Note 4) 58 Sale of long-term debt 45 Other liabilities 2
3 Bank borrowings, net Totals 99 42 (Note 4) 58 (2) (35) 37 (120)
Common stock (Note 8) 153 153 Retirement of Capital surplus, less capital stock I ng-term debt (6) (58) expense 758 750 Totals
_830 $ 44 $ 85 $ 70 $ 17 Retained earnings (Notes I and 9) 4S+
4 63 Cash capital contri-Comm tments and Contingencies j Ng[ operating
' s Totals 1,393 1,366 Total Liabilities and Capital
$1,492
$1,408
- 15. Jointly Owned Generating Stations:
The income statements of the Corporation for the The Corporation's subsidiaries participated, with years 1975-1979 are summarized as follows:
nonaffiliated utilities, in the following jointly owned generating stations at December 31,1979:
y 1979 1978 1977 1976 1975 Balance (in Thousands)
Equity in earnings In Accumulated of subsidiaries
$108
$145 $153 $130 $121 Station
% Oicnership Serrice Depreciation Interest expense (9)
(3)
(7)
(6)
(11) liomer City 50
$284,178
$37,013 Other espenses (3)
(3)
(3)
(3)
(3)
Keystone 16.67 37,059 9,851 Net Income $ 96
$139 $143 $121 $107 Conemaugh 16.45 43,911 8,737 Yards Creek 50 16,549 2,433 Seneca 20 13,100 1,647 Each participant in a jointly owned generating unit finances its own portion and charges the appro-priate operating expenses with its share of direct expenses. The dollar amounts shown above repre-sent only those portions of the units owned by subsidiaries of the Corporation.
0 0
-.-n..
i General Public Utilitles Corporation and Subsidiary Companies
- 16. Quarterly Financial Data (Unaudited):
Constant dollar amounts represent historical (In Thousands Except Per Share Data) costs stated in terms of dollars of equal purchasing power, as measured by the Consumer Price Index First Quarter Second Quarter for All Urban Consumers (CPI-U). Current cost 1979 1978 1979 1978 amounts refleet the changes in specific prices of Operating plant, and differ flom constant dollar amounts to Bevenues
$384.8-89 $345,812 $335,364 $315,254 the extent that specific prices have increased more Operating Income $ 76,492 $ 66,591 $ 63,778 $ 56,052 or less rapidly than prices in general.
Net Income
$ 35,74i $ 38,596 $ 19.936 $ 27,245 Earnings per Share $
.59 $
.65 $
.33 $
.45 The current cost of property, plant, and equip-Average Shares 61,082 59,799 61,264 60,016 ment, which includes land, land rights, intangible plant, property held for future usc, construction Third Quarter Fourth Quarter work in progress, and other physical property, was 1979 1978 1979 1978 determined by indexing the surviving plant by Operating individual company equipment cost indices or by Revenues
$383,927 $336,278 $385,974 $329,300 the Handy Whitman Index of Public Utility Operating Income $ 73,220 $ 66,639 8 63,812 $ 65,147 Construction Costs. These current cost amounts 8
d n t necessarily represent the replacement cost or arning r Share $
28 Average Shares 61,264 60,275 61,264 60,776 current value of existing plant productive capacity.
The actual replacement of the capacity of present Net income for the fourth quarter of 1978 reflects facilities will occur over many years as future a 55 million decrease in income tax expense due to facilities, different in kind from present facilities, the flow-through of a portion of the excess of are constructed and placed in service.
tax over book depreciation, resulting from Three The current year's provision for depreciation on hfile Island Unit 2's being placed in service in the constant dollar and current cost amounts of December 1978, and a $2.7 million reduction in property, plant, and equipment was determined by income tax expense, plus related interest of $1 applying the depreciation rates of the Corporation's million (net of tax), because of the final resolution subsidiaries to their respective indexed average of certain Federalincome tax matters.
1979 depreciable plant amounts.
Net income for the second, third and fourth Fuel inventories, nuclear fuel, the cost of fuel quarters of 1979 have been affected by the actions used in generation, and purchased power and of the PaPUC and the NJBPU in removing Th!I-2 interchange have not been restated from their from rate base subsequent to the accident described historical cost in nominal dollars. Regulation limits in Note 1.
the recovery of fuel and purchased power and interchange through the operation of energy
""'"'"I
""" '
- I"' **"ts b base rate
- 17. Supplementary Information To Disclose The Effects Of Changing Prices (Unaudited):
schedules to actual costs. For this reason fuel inventories and nuclear fuel, are effectively The following supplementary information is sup-monetary assets.
plied in accordance with the requirements of As prescribed in Statement 33, income taxes were FASH Statement No. 33, Financial Reporting and not adjusted.
Changing Prices, for the purpose of providing Under the rate making prescribed by the regula-certain information about the effects of changing tory commissions to which the Corporation's sub-prices. It should be viewed as an estimate of the sidiaries are subject, only the historical cost of approximate effect of inflation, rather than as plant is recoverable in revenues as depreciation.
a precise measure, since a number of subjective Therefore, the excess of the cost of plant stated in judgements and estimating techniques were terms of constant dollars or current cost over employed in developing the information.
the historical cost of plant is not presently recover-O
2 w a. u w a.:.n,, w -.... ~
n+
- x. ~~;...s cble in rates as depreciation, and is reflected as of net amounts owed. During a period of inflation, o reduction to net recoverable cost. While the b,lders of monetary assets suffer a loss of general rate-making process gives no recognition to the p.echasing power while holders of monetary current cost of replacing property, plant, and liabilities experience a gain. Tlie gain from the equipment, based on past practices, the subsidiaries decline in purchasing power of net amounts owed believe they will be allowed to earn on the in-is primarily attributable to the substantial amount creased cost of their net investment when replace-of debt which has been used to finance property, ment of facilities actually occurs.
plant, and equipment. Since the depreciation on To properly reflect the economics of rate regula.
this plant is limited to the recovery of historical tion in the Consolidated Statement of Income costs, the Company does not have the opportunity Adjusted for Changing Prices, the reduction of net to realize a holding gain on debt and is limited property, plant, and equipment should be offset by to recovery only of the embedded cost of debt the gain from the decline in purchasing power capital.
Consolidated Statement of income Adjusted for Changing Prices in Thousands Conventional Constant Dollar Current Cost Historical Average Average For the Year Ended December 3I,1979 Cost 1979 Dollars 1979 Dollart Operating Revenues (a)
$1,400,154 31.490.154
$1,490,154 Energy Costs (b) 545,457 545,457 545,457 Depreciation 141,224 248,903 280,147 Other Operating Expenses 460,266 460,266 460,266 Income Taxes 85.905 65.905 65,905 Total Operating Expenses 1,212.852 1,320,531 1,351,775 Operating Income 277,302 169,623 138,379 Other Income and Deductions 28,535 28,535 28,535 Interest Charges and Preferred Dividends 210,054 210.054 210,054 Income from continuing operations (a) ble cost)
(excluding reduction to net recovera
$ 95,783 3 (IJ.896)(c) 3 (43.140)
Income (loss) per common share (after preferred dividend requirements)(a) 1.56 3
(.19) 3
(.70)
Change in net plant assets during 1979 due to increases in specific prices 3 594,9I8(d)
Iess: Change in net plant assets during 1979 due to increase in general price level (inHation) 8 864,144 Change in specific prices net of genew'. price level (inaation) 3 (269,226)
Reduction to net recoverable cost of plant assets
- (363,695)
$ (95,002)
Cain from decline in purchasing power of net amounts owed 3 281,599 3 281,599 (a) Revenues do not include amounts for the operating and return requirements associated with the subsidiaries
- investment ir TMI-2 and, correspondingly, the amounts of income from continuing operations have been adversely affected by this loss of revenues (see Note 1).
(b) Energy costs include fuel, power purchased and interchanged, and deferral of energy costs.
(c) Including the reduction to net recoverable cost, the (loss) from continuing operations on a constant do!!ar basis would'have been ($375,591,000) for 1979.
1 (d) At December 31,1979, current cost of property, plant, equipment, and other physical property net of accumulated depreciation, was $7,199,735,000 while historical cost or net cost recoverable through l
depreciation was $4,084,619,000.
37
General hlic Utilities Corporation and Subsidiary Companies Five-Year Comparison of Selected Supplementary Financial Data Adiusted for Ellects of Changing E' rices (in Average 19~9 Dollars)
Year Ended December 31, 1979 1978 1977 1976 1975 Operating revenues (in thousands)
As reported
$1,490,154
$1,326,644
$1,252,013
$1,068,~53
$ 954,420 In 1979 purchasing power 1,490,154 1,476,010 1,499,656 1,362,738 1,287,164 Cash dividends per common share As reported 3 1.20
$ 1.77
$ 1.70
$ 1.68
$ 1.68 In 1979 purchasing power 1.22 1.97 2.04 2 14 2.26 Af arket price per common share at year-end As reported 3 8.625
$17.500
$20.875
$19.500
$17.000 In 1979 purchasing power 8.156 18.751 24.386 24.322 22.224 Average consumer price index 217.4 195.4 181.5 170.5 161.2 December consumer price indes 229.9 202.9 186.1 174.3 166.3 Quarterly Stock Price and Dividend Data 1978-1979 Price 9;7;g,,g, 1978 lilah Low (Cents)
First Quarter
$21%
$18%
44 Second Quarter 20%
18 44 Third Quarter 19%
17%
44 Fourth Quarter 19%
16%
45 1979 First Quarter ISi 16%
45 Second Quarter 15%
8%
25 Third Quarter 10%
9 25 Fourth Quarter 9%
7 25 l
38
._.___m..-
4 System St:tistics Central Pubik Utilities Corporation and Subsidiary Companies 1979 1978 1977 1976 1975 Generating Capacities and Peaks (MW):
Installed capacity (at year end)(a) 8,262 8,281 7,190 7,03S 7,115 Annual hourly peak load.................
6,173(b) 5,898(b) 5,760(b) 5,705(b) 5,244(b) 33.8 40.4 24.8 23.4 35.7 Reserve (%)..
Net System Requirements (in thousands of Mwit):
13,891 29,747 26,576 26,213 27,169 Net generation Power purchased and interchanged, net.....
7,982 4,275 5,926 5,489 2,558 Total Net System Requirements........
34,873 34,022 32.502 31,702 29.727 Imad Factor ( %)....
64.5 65.8 64.4 63.4 M.7 Production Data:
Cost of fuel (in mills per rwu of generation):
Coal 12.95 13.17 11.15 10.50 10.42 Oil..
39.01 28.62 29.74 26.13 27.00 Nuclear 3.18 2.31 2.06 2.01 2.43 Other 35.77 27.58 22.82 16.44 16.45 12.48 11.17 10.17 9.32 9.43 Average Generation by fuel type (To):
Coal 67 57 56 59 58 Oil.
6 9
10 9
9 Nuclear 25 34 33 31 32 Ot her ( gas & hydro )...................
2 1
1 1
Totals.
100 100 100 100 100 Electric Energy Sales (in thousands of Mwn):
Residential..
10,754 10,715 10,257 9,932 9,418 Commercial 7,359 7,208 6,832 6,483 6,063 Industrial 11,974 11,447 10,849 10,477 9,847 Other 1,908 1,900 1,832 1,745 1,576 Totals.
31,995 31,270 29,770 28,637 28,9N Electric Operating Revenues (in thousands):
Resid ential.............................. $ 597,757 4 544,571 $ 515,522 4 444,244 $395,329 Com m e rcial...........................
360,859 328,081 308,904 263,423 237,676 Industrial 431,1N 365,456 342,487 285,056 258,355 Other 77,512 67,421 64,541 57,180 45,709 Totals from zwir Sales................ 1,467,232 1,305,529 1,231,454 1,049,903 937,069 Other revenues 20,479 18,721 18,222 16,273 15,259 Totals............................ $ 1,487,71 1 $1,324.250 $1,249,676 $1,066,176 $952,328 i
Customers-Year End (in thousands):
Residential.......
1.386 1,364 1,339 1,320 1,299 Commercial.
1M 154 151 149 146 Industrial 10 9
9 10 10 O th e r..................................
5 5
5 4
5 To ta ls...............................
1,558 1,532 1,504 1,483 1,460 Price per rwn-all customers (cents).......
4.59 4.18 4.14 3.67 3.48 (a) Includes the installed capacity of the Three Mile Island nuclear generating station Unit No. I of 800 MW and Unit No. 2 of 906 MW. The reserve capacity, excluding these units for 1979, would be 6.2%
(b) Winter peak.
39
Directors Louis J. Appell Jr.1.2.8 President Susquehanna Broadcasting Co.
York, Pennsylvania 17405 (Communications and Consumer Products)
John F. Burditti.
Chairman and Chief Executive O@cer ACF Industries, Inc.
New York, New York 10017 (Equipment Manufacturing)
Herman Dieckamp President and Chief Operating O@cer General Public Utilities Corporation Parsippany, New Jersey 07054 Val B. Diehlt.2 President and Chief Operating O@cer Nabisco inc.
East flanover, New Jersey 07936 (Consumer Packaged Products)
Warren J. Hayford1.8 President and Chief Operating O@cer internationalliarecster Company Chicago, Illinois 60611 (Equipment Manufacturing)
William G. Kuhns Chairman and Chief Executive O@cer General Public Utilities Corporation Parsippany, New Jersey 07054 John F. O' Leary.8 Energy Consnitant Washington, D.C. 20006 Dr. John W. Oswald1 President Pennsylvania State University University Park, Pennsylvania 16802 Paul R. Roedel1.
- President and Chief Operating O@cer Carpenter Technology Corporation Reading, Pennsylvania 19603 (Specialty Metals) 1 Member of Audit Committee 1 Member of Persormel Committee
- Member of Nominating Commitsee 40
_-_-.~.-.-----.--:-.-------
i Officers Ceneral Public Utilities Corporation GPU Service Corporation Cllliam G. Kuhns William G. Kuhns Chairman and Chief Executive Oficer Chairman and Chief Executive Oficer Herman Dieckamp Herman Dieckamp President and Chief Operating Oficer Frendent and Chief Operating Oficer V rner H. Condon Verner H. Condon Vice President and Chief Financial Oficer Executive Vice President Edward J. fiolcombe Robert C. Arnold Comptroller Vice President, Generation John G. Graham Bernard H. Cherry Treasurer Vice President, Corporate Planning Helen M. Graydon Philip Clark Secretary Vice President, Nuclear Activities Crace Wade Frederick Glickman Assistant Secretary Vice President, blaterials hianagement John G. Graham Vice President and Treasurer Fred D. Hafer Vice President, Rate Case bIanagement Edward J. Holcombe Vice President and Comptroller William B. Murray Vice President, Communications Edmund Newton Jr.
Vice President, System Operations Subsidiary Operating Componies Robert H. Sims Vice President, Power Supply Shepard Bartnoff, President Jersey Central Power dr Light Company Floyd J. Smith bladison Ave. at Punch Bowl Road Yi Iid'"'= Admi"I"'I*"
Aforristown, N.J. 07960 Helen M. Graydon Herman Dieckamp, Acting President 8'"'#8'V hietropolitan Edison Company Patrick F. Daley 2800 Pottsville Pike Assistant Comptroller Reading. Pa.19603 Mildred Misure William A. Verrochi, President Assistant Treasurer Pennsylvania Electric Company 2001 Broad Street Grace Wade Johnstown, Pa.15907 Assistant Secretary James B. Liberman General Counsel Transfer Agent and Registrar--Common Stock Hartford National Bank and Trust Company 777 Main Street, Hartford, Ct. 06115 Agent-Dividend Reinvestment and Stock Purchase Plan--
Common Stock l
Hartford National Bank and Trust Campany P.O. Box 210, Hartford, Ct. 06101
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