ML19327A907
| ML19327A907 | |
| Person / Time | |
|---|---|
| Site: | Palo Verde  |
| Issue date: | 12/31/1988 |
| From: | Caruso R LOS ANGELES DEPT. OF WATER & POWER |
| To: | |
| Shared Package | |
| ML17305A289 | List: |
| References | |
| NUDOCS 8910190240 | |
| Download: ML19327A907 (90) | |
Text
{{#Wiki_filter:-._ 8 .. W' o '. 4 e
* .4, e
s . 9-, W t
.4
-? k l}_,
. +
+ g.
1 ,
.4 .r: ,,
e
# l.
g '
,a, ,
r 4
.A , .
+ , ,
5 g %. 4
., 3..
. .- p q Y
- p. s 'e w g
- , ,. t T' .
, g
'E
~
. e s g 4 9'
.g 0 '. s.
+ ,
, k' y & 1 g- -
s B.
)
1
. e-
.q.
.. e t
.i.
k
- fr 4
W t . W
\ 4 f
g 9 ,' W , l
, , T. .
4 4
- i
'v . A
. g
.g a ';
. g.
- 4 4
i I l
. )
- l. .
l .
?
l ',i , - 1 t i i amen howw pense h fers 11 5 t 1 Other
) 2 Fue hydront lentals l
5 Gmrnmental ! 37 Residental gg 31' 55 (ommettelandindustrial l i. 14lpwr Ispendrwe Seaer b (pts p ,
,t i Peyments to the (Ity l
', ll 9 Retirement Plan tests related to operatons e i
. g' i 11 (epitol mprovements II
{ > . e, le Debt serne tests r-j 17 Puf(tiased wate and ene'gy y
}
,' j 19 Other operotmg expenses i, i 1 2: Oproteg solo es and wopes 57 h 4 .
j 1, I j 3g !
,. Pe w Resean pehr h fars ;
) j 0 t $neet h;t&g
, j t ONr !
j j 16 Indestim! j- ) 53 !? Resdental ' 53 Commerto! l 7 I 8 t 9 1 1 l .\ 4 t 5 Powerlupperve beNer k Cents ; ) l 3 4 Nments to % i 5 Retnement Picn tests relsed to operatens j . .' l 4 ' E88'I3' '*D"*'"'5 ! 10 3 to Debt semte costs ; 13 Oprotmo scio'es and wages '
'i
, 14 Other ope >etmg erpenes '
a l is 15 fuel , i 30 PwMmd energy 14 i J' i l l h n k1 i
- 5
m.a ^m..se n k n.sab-66<= + 4oen m
, , - . 9 l
I l tuer Ituur l
" -im , w im . m, w_ !
J. -. , _ ,
?
- lervice Ma ewn tue u e $w.
l I i
.+ ' *V' l Sales 203 6 210.1 (31%) 21.1 20 $ t.9% !
i 0.9% 1,304 6 1.27f .9 2.3% ; (ustomets-owroge numbet (thavsonds) 637.8 632..!
- t
>.,, e i
';l .
t
' .9 M > aAm bmAwn l g
I. + l' .
' 5 252.9 2.7% 51,588.1 51.423 2 11 6 % j r' hvenue' $ 259 7 , t 1 i
.i
! wonne. - m4 uu n5% . i.i9u uu6 a ss >
, j {
34.4 44.6 (22 9%) 175 6 166 6 (6 0%) t
-fi ket income 1
, i i i
t Paymens to 04 af Los hgh 12.4 11 3 97% 70 2 67.9 34% 3
.o '
1 i
' 58% 334 5 321 2 41%
(opitalexpenditures 104 8 99.1 { i k Net uiAy plant 1.114.7
- I,046.1 66% 3.324 9 3.133 5 6it -
i: I (epitalizchan-eaviy and lang4erm debt 1,172.5 1.054 1 112% 3,444 7 3.180 6 83S i 1 a on orar,,um-,,o g
* *{H&$.9f $9919.'t0?WR 9E59950 I
s -$
.t ,
l 6
<4 . l i
l 6 l
. t l
l ) i !
.t i o
p l I i
}
b
- - - , -n -- -.....-.-.c,_,- _
a - 1 I Approximote v u aan ,aen,s in the not n s smond a lorgest city exeive water and electricity from the los { I j Angeles Department of Water and Power. As the lorgest !
.U l ~ municipolly owred utility in the noten, DWP has more j ?} -
v 'q than 11,000 employees serving the needs of residents, j
,.4 , ;6 businesses and industry in o 465 square mile creo.
The City of los Angeles began municipal distributen [ ]1 {
;. .l of water in 1902 and eixittity in 1916.
The OWP, os o propretory agency of the los Angeles Oty
,.[
,'; government, receives no tax support. Its operotons ore
;i financed entirely by the sole of water and electricity.
. t f
,lQ Revenue bonds are the main source of enternel financing.
1 , The DWr is admimstered by the Board of Woter and i i Power Commisseners', whose five members are oppointed
,, by the Mayor and confirmed by the Oty Council for terms
, of five years. The Boord estchlishes wcter and electrit !
4 rctes, subject to approval by the Gty Council. l l-) .
. ~
u. 4 r f $ I 4
.p
i
)
I,
.)
.I l'
9,-- - , w ** YW ** & #* ? '
- . - - m,...r._._ . _ _ . . , - . - _ , _ _ _ . _ _ _ , . _ . -. _ _ , . _ . _ _ _ . -_ _ _ . _ _ _ . . _ _ _ _ _ _ _ _ _ _ . ~ , _ _
--.r e ,
i i l . l
)
I i Reed of Weer and Poner t% !
. Geowelpenspor and OdelImpinser +
i l , i Assinom temmelitanager Wesse Div6mns of the Watet Setem: s Aqueduct j
,. Water Operating l 4 Watei inge,tenng Design !
Wate Doolity l
.! GeneialSeryges j f i J
l Assistem teneralinenoper.Pemer s
? Divsens of the kw Sprem: l Power Operating and Maintenance ;
}
Powei Design and Construction !
.I System Development
', Power System 5ervkes ; Powe< Distribution l l
! Ieol(stole
?
l ,.
^ ~ ~' $ervices j l AssisesNl temeral W.Estlertel end ( .
Olv60l'$ Of blein0!On$ Olg0nt:0 ton 0lServlies: (Ommercial l j (ustomer $0fvKes i Government Affairs i Human Resources 4( Management $efvkes [ Pubin Affairs l oitelPlaendelN i Oiv60n3 Of fnonce und kt00ntmf: >
, )
Accounting , 3
*: internal Audit f i ,
4 FinancialPlanning i ; j onel Amisism any An,veey see www d remer ; I !
- l. !
1 u ( l, - t , i 4 i , i h ( 9 g 1 I e
- i. ' . , . _ .._-._.__.._.u- _ , . . _ .= _r_.. . :_ _ _ . , _ __;; ; - m; . 3 2 3:3 3_~_~ 3 3 ~' 3 _,_
t I
-)
l I
)
I j -
)
t h is with great pleasure that we present the 87th annual report whi:h renews the oaomphshments of the Deponment of Water and Power during the j
, 1987-68 fiscol year. I
.I i
. l; i
.W -
We are contmuing to meet the challenge of providing water nnd electric ;
., t
** j I
,~h
.. service to o dynamic metropolis while plannmg for expension os the aty grows l
~kl into the next century. This is being accomphshed in conjunction with our pr0- l i
?! grams for watet conservaten and energy effKenty. !
I
.3 *
~
As tie second lorgest aty in the noton with 34 million people, los Angeles
.,j '
is dependent on water and electnaty for its vitekty and growth, it is the }
'4 :
,'; Department's responsibihty to ensure that these vital resources are ovoilable ,
, . j to residents, business and industry. We live up to this responsibility every day i ond are committed to doing so in the future. l
. - Out success os o utility could not have been ochiend without the help of i 1 !
the Moyor and the (ity (ouncil. We olso opprecio4 the efforts of othet elected ; ' i ! aty offKiols and city departments. i 4
;1 I 11 would be impossible to onoin our goals without our greatest tesource-monogemerri and personnel whose continued dedKotion and service have
.. " t made this utikty effiaent and responsive to its customers. ,
i i j
.y r t
Kk . orus0 ! hesident s 1 b
,y
. '.~ -- -~~ :-.. ...- .:.. _.. ". l ' .: ~ . ~ ...?,..'"*~L.. - .
., ~$ ?. ? ~ ~ _ . _ . , . - .
o.
,' d i l
l m.u we. m cms , . 1 , j ..,_
. . m_ ,_ ;j Asuer Ike Avusw I
M A 20NflWI o l l l l t I s I J l
;L .
dtives our e:onomy and water that I sestoins hie.
, )
As the flottort's large51 publl(ly 1 owned utihty, DWP occepts responsh bihty for leoding the way m shopmg (t i
,-,M $nce formation of the Oty's first pub- the future of thisindustry-which l s
"i
, hc utikty nearly 90 years ago, the meons fmdmg innovative yet piocri- I
- j. (,. Department of Water and Power's colways to dealwith changmg primary responsibility has been to economic, socialend regulatory
} serve the pubkct interest. This is conditions. This recuires us to be ,
i
)
; corred out through service to out more businesslike, more adoptoble, j
, :. > \
<d customers, maintainmg the (moncial more sensitice to externo! concerns strength of the Department, protect- ond mere proachve in meeting L
Nl 1 ing current supphes of water and challenges. l j power and secunng future supples to for this we look to our partners in meet the needs of our Oty. pubhc service, the men and women The Board of Water and Power who run the water or.d power sys- l 6 (ommissioners holds lead responsL bility foi seeing that this mandate is tems, Iheir ordicofion will contmue to meet the challengeslocmg us. f i
,j corried out. With my fellow commis- On this 75th anniversary of the l r
sioners, we represent the interests of los Angeles Aqueduct, the Board ! N wer 3,400,000 residents of the Oty thanks everyone associated with the through their elected representatives, DWP. Our specialthanks to Generof l
', i *'i the Oty Council and Mayor. Manager Paul H. lone, who is rein-Our lodgunt must always be ing offer 40 years of dedicated serv-t guided by the fact that DWP provides ice to the Department. '
1
.' I. not a luxury, but vital necessites: ,
'l electricity that serves our homes and je a
I
-s l
}
t pe** - y *p-m espa wa=1s>=ge ee= memame e. ,* =ep --wea -e e g ap-. ,w.e *ge- *==r-- =m 3 --- +=e-..ea_+-e + v , me = e > ,, w e w TSP _
~
t, 4- , [
- h. g.
N' q. h a h b.g. f
.4
< fr . , ' I d
T 6 '8' 4 .
+ ,
g tu
\ . ,I ' ,
4
~
8
. 4 N .g.
s . i+
. . e+
t a' *
.k '
u
*,.)
M- IO ,
- 4. ,.
- 4 6 e. /
w ' 6 4
, , 4 g
M t ,. i a g . '-
, -t. -
3 g g,
- N y .
i.
. , ' . k. . .
., 4 4 .
(elleges are becoming more owore of the rieed Iof people with human
,j. felations skills, and have res?onded
[ 1 by developng new courses. At the 3.'i Department, we have o constant
',' he Drowth of Los AnDeles from o tiny ned for these skills and are prepor-pueblo to the premier oty of the mg our employees to deal with the ,. Pacifc Rim moles o great story. compin people issues that confront "'j Development of the water and power us today. This process includes inter.
systems to supply this growth is even f nel froming classes, university grod-
', i more loscinoimg. ucte progroms, on employee j l
'.j lt allstarted cuite simply during speelers bureou, and more effective !
l the early years, with the challenges interocton with consumer and I being technical, engreering, physi- environmentol0roups, the medio col and financial. When you needed and elected offnials. (
; more water or electrkity you Theimportanceof theproducts [
. i
, designed and constructed the most we serve to our customers puts us
-! rekoble and lowest cost systems. directly ond inevocably into the pea- !
i
; loday 5 pubig utikties are faced pie business m odditon to the utikty j i
',- with new challenges requiring new business, We willcontmue to solve n .
skills in odd; ton to the traditonal the complex technkoland engmeer. r ones of engineering design and con- ing problems involved in maintaining { structon. This new environment odeguate supples of watar and elec-
," involves increased interaction with trxity to our Oty while meetmg the public officiols, legisloffve and regu- mcreasing number of new demands ;
j Ictive bodies and the medio; negoti- in the ateno of human relatons. i i ofmg labor contiocts; and respondmg mort effettively to consumer (oncerns. rd Our
, ,. , --x- .-
-,- , d.
W-1F
\
ee'
% 999 m k.
s.
? .
%- ,b. .
. w,'
8 r I , i-
+
.g-a, .
- b
- 4l y.
3 g 4
! {
.g .
i
, \
#4 sy
-9
@ E ,
+ g a +,
k t W.
. +
.- t k .k
.r g
en k 5
% v
- e i ,
., )
4 g *$'
, . ,* l's t frs a w a
g, .e .
% =
I
?_
".1 Y
q
, 4.. - .
t . . ,- , .
'O . ,, g-
+
a
+
# # 8-9 ,,
+ .
'W
\
\
a
.g 9
y .
p_ . __ y i i.i l L ; I water in o megolopohs like los t
-'( <
Angeles is o tough job. The system- } 1 from underground water moms to j ss , obove-ground reservoirs- requires ; t constant attenton. We must ton-
) l , heirvering high quahry drinking water tmue to pursue new technologes, !
t to o thirsty city hos been a commit- such as those of our new Acueduct ;
*j ment of the Department of Water fittionon Plant, to gNe us on edge in !
4, and Powel over oil 66 years of out the bottle ogomst water degrodotmn
.I {
history. Todoy, even as water quohry The pubkt, our customers, deserve to j t 1, standards become more stringent, know these lotts. l 4 ,
, your DWP remains on top of the situ. They oko need to know thof we ;
I
! chon, consistently providmg a prod- are wmnmg. By measures both j e
uct that meets or exceeds oil objectrve end personal, today's los g i reQuuements. Angeles top water is puret, better Yet public concerns remom, fueled tastmg than ever. And thanks to by reports of proliferating contrmi- ongomg efforts of the Department's , nor,ts in our envuonment. A signifi- employees, it conhnues to improve, i tant percentoge of our customers- Making these facts clear to o dis. l
. reactmg to such rtports-have cernmp pubhc is oho one of our most j
}
'! turned to olternate dunking water important tobs. It 5 out respordsi!-
l l ' p supphes, paying o high price for o sty not only to safeguord but to ouu-U margin of safety that is largely illo- rotely inform the pubhc we serve. ;
- ary How con we, as stewards of the
- ( o I public trust, respond construttwely to i
l such ronrarns? 4 first of all, we must recogmze that
, j momtoining high quality dnnking !
! t
!! N9 t
,W, w f w -ye-wwe- wm e-w v -"*--w- - - -CW' *-**--- "v1 18'*' * * " * ' 9' " * " "C*' '#'""""'~~~""**^^* - " ~ " " "~" T' "' '
\ i A
k 2
- f .,'
..g o *
(
- w -
<^
v k . ..= ,M.s . L k
.. M. .g o
A
'S: 4 4
s g.. . t 5, * + a
'. 0,
+
g *: J
,s. .e. ,
9 ~ A w . g
'N, , s.e
.s s
' , \ .. w ,
' ^
- E s
v
- g. ( m. I
( # 4
.g. a 3 ,.
4 .. -
.i g
.A .' . .
# . . i.. .. -
h g, 9 y g. a 4
-g ,.
e . k *n W 5 r
? Q.
.s s< _','* , l
% , e . . ,i g- '," ..
*e5 y . v.e ,, , 'p .
. 4
e. g Q
i t g o
. 3
- ? %
- G , ..
4
... 2 e
=t e. .<
% s 3
.. , f t
. d g.
b i' .g. s
, y
\ \ .-
i .': g, "x..
' 3 - '
g.
. , * . . . . . . I' .
t were olso molbd to customers clong j
; with their bills os port of o mondo- 1 i tory retroht ordinance opproved by '
the (by Council, f Yhe drought hos also forced the [ (oping with the second consecutive Department to sharply increase water
.' ; dry year in the lastern Sierra Nevado purchases from the Metropoliton
.< i
- ) was o major priority of the Water Wo'er District, of a signif<ent cost !
System during 1987 88. This region, premium over DWP sources. In nor-I i
; 300 miles north of los Angeles,is malpetods, MWD supphes oround j normally the source of 75 percent of 10 percent of the city's water needs,
! the city) water supply, butlost year but this year purchases will be Its shore fellto only 60 percent. cround 30 peicent.
.i As o result, conservaten efforts improvement of water quohty t .
f were intensihed, including octr,9 ton remains o major 0:; wiry of the Water of Phase Iof the city) Water Conser- System. Work contmued on o votion ordmonce, colling for volun- $2.5 millon oerotion tower in North i tory 10 percent cuts in water use by Hollywood for treatment of a porton ; t
. j consumers, in additen, the DWP of San Femondo Vohey groundwater. .
; extended its conservaton advertrsing Completon is schtduled inlate 1988. l 1 !
I and promotionalcompaign, which As o leader in water quality, the t i featured 12 Los Angeles TV weather-DWP isinvah-d in innovatrve costers. Offers of free low flow t I shower heads and watar soving kits 5 j
, t 4 u
, p- N per y-
_ ___ w.. _. ee.--.--*--w- m wm -e-a ~ -o. n 2.-.. ... --,-..,,.. . - . . . . . . . - .- -- ... .. - -. .. - . - - - - .-..-- - . - ~
- e. m a -s e.esF""A-=N4M-M4m.meiEM aN.-w-MM.-s--um us i 4 ag e wF -sea w Eemems%4 uni _45 hweJ.c= re g- m-p %w.mwi, - -
,r-wwwp--.-- - r.
0 Y b ] h h*
> ('
- h. ',A j , ec,' l{p. ;i ,$j cd ' ' , I L , l ,..
4 i
, - h' f , . r r 5
,.y 7
1 L
;t ,i,l
',. s l' > r
,.y ;,
' , , (;. '
9 .,; l', 1 Mb@bd i,'.~,,'9 l ',. .h, . . ' M k M N M*
, ,'I' ) .
Auwas emn W1,A4AmtsW, c+ a i l, Yi Y. h
. ,' w an m m==
pl - s...<. m.m. m.m a
&&NWW ' ' ' ' ' ' '
M4;& Asp Ademi, E S 'k E.' [4
- w. . m.... . . .
l M no ,u.un ..
-, , , ; ; p' . -
- ;, l f ,4 ,
.f ($ r l
.g *
% 1- :
L, i ;
'~
, ,. ), '
- - \ t ,
I p. .. . .
~
+
r ~. t f 4, ; l - l (... . . : - t, w & I
. 1 e
l l- , 1 l t l l- i l 1 l- l l I 1 O j
~ ~
1:!. % . , - , - . :.m: .nn~ ~. ~-- r r ~~ ~:' ~ ~ ' ~ ~- _ ~~ .~. ~-- .. _ _ . _ _ _ .__ ___ , , , _,,
e 1988 e a 2.@ poke le nous younowrpr treartw anonsnow
# bit meUMT Mu 0/DfE4rdf0ppe twmadr *1mokfr sewksw enf4 4' l XU mint N'f The 5i nuRa d
.s - !
(kacn6 (RW edbe but e ken
- .( w._ ,!. . y __
l
- q?
~
- i
)%uent unar conect me o vnen 4
N. M m,eM .. 3 espany he (mew a scneo.
. b m. -
4 m ,*r e n., cow,s cum .,m 4-( I [ --.. , 1 . gg -[ gg, (g.
~
k . ., ' yE . -
'. wapp Spe;e. the $f dstr$ute
. , gll
~~ n' s onowstag mennoicostems her
- g. .
- . # &nP-/bn140mpr4 sod m melas afhsr
. aggw ..
[ ' 6h.h b) # l l l A'
'r;. -
O' .
.s .
M . ..p ,d7N l 1 l l 1
. n.
we , y ) 3 *' g k a
'i[ ,
(flerts were pressed to upgrade
.{ ,
! the water distribution system through
~
tepletement and(ement kning of older moins and(overing of smoU T reserVDirs. 3;4 k'.l. fe56erCh 00 on odvanced oxidation ' Mono Basin htigotion Continued, with preess in partnership with Unk. the Department defending chonenges
'^l toitslong held water rightsin that
. ; One groundwater treatment effort e l' thatlooks promising utilizes ozone oreo. A 16 month extension of the ~1 ,
. t and hydrogen peroxide, los Angeles Inyo Agreement was 1
The los Angeles Aqueduct Filtrotx>n opproved, allowing for completion of
$ Plant completed its first fuH year of a cooperative environmentalimpact operations with o high degree of reli- report and groundwotel monogement plan for the Owens Vouey ground-
! obihty, producing exceptionoHy high water quality. worer basin, IEufer System foefs le anW 1988 9 81 w esed low 30 Use el Weter Amage los Angeles populaton wed 3.388.03o 3.353.000 j
Amage do% use pet topito (gollons) 180.1 1B8 6 Watet ules for fiscal yeot. (bilhon polions) 203 6 710i Monmum daily demand, (million gallons) 841 0 873 o Wowe Supply (m to. It- per mini-c.I s ) 1 localsupply 1669 137 0 s DWP Aqueduct Metropoliten Water District 573 6 661 4 ((chlomic Aqueduct and Colorado Rrm Agineduct) 207.7 177 I
'i
- Gross supply 9487 975 5 Divens Itom (to) local storsge (0 3) (17)
". j Net supply to distribution systems u
i . .' \
.. a
'0 f 4
.e
$ystem has developed a Sirategk j i ,
@. Pion thot oddresses 11 important i
creas of out electik business, rong. j ing from financel respansibihty to [ employee relations.
'ei g 1 j Eike othu segmets of Amerxon lo keep out competitwe edge, we ;
j i 1 industry, the electtk utihty business have chosen two ateos for special 1
] ,
is experencing diostic thonges. The emphosts: price and semce to our prospect of deregulaton, mcteased customers. We plan to momtoin i competiton, changesin the tax laws rates of 1965 leveb, odiusted only ,
; and constantly evoking world eco- for inflation. This means future elet-
~3 ;
nomk conditons provide 95 with fik rate incteoses must not exceed { many new challenges. this regon's Consumer Prke Index-Unkle the monopohstk envuon- on ombitious goal, but one we must ; ment of the post, competition in the meet to stay competitive. lacrecsed f electrk utihty industry today ii very emphasis on customer service will I i teol. Other energy forms now com- oho help us compete in the new ;
. i pete wah electrkity. Some customers environment. !
genetote their own power, selkng oil We build upon a record of success ! what they don't need. Entrepreneurs and innovotion, o noditon we must
] [
} ore mlhng to build power plants and carry on as we mwe into the future.
I i i sell the output to electrk utihtes or The Strategk Pion points the way l
] to groups of former utikty customers. into the 21st Century.
Legaland regulatory unwtointy f l- ,g and the prospect c!changesin tax . i i polkes make planning for the future f i difficult. lo assist us, the Power r I !
- } -
! 5 i
- ! t it w I ..
y-., .we-.e-.-.. _ =*.-.---.-e. ~ +
- .--.,4 . . , . . . - - - . _ _ . _ - - - - . - - - . - - . . _ ~ . . - - - - _ . - ~ . . - - - - - - - - ~ . ~ . - _ _
g e
, ;e. 9 _
A f m
' ~:
?
,P ,,
8 e %
.6. 4,
- 3 4
,-l
. * , .,, i4 g .
~
-4 g
*. 'agr i A
#4e t t
-e g - y N,
. v 4%
)
(, ., 4 - g !g
+ y - p. -
I" 4 p- . f k
.,. 4 a,
i
+ .,
-9
!e
,4
.s \ ,f
. -I '
.j.7
+
4 . i [ 4 9-
\ -
g
'Y. ,. f, w f
/
- ~
ft. , p s . f-4' ., f0 4$ . n s e 4 . f . $,, as gg - .O' $ - h . s e N" b b ag 4l
~
- e e N
I , e r 4.
- e-s*
e 4.b , e . T W.
. i a 4 ,
I'
~
~
d . * * . .
*- .4
"% -W f 4
-:4 4 i
?.' shore of this output (around 368 4 t megnwotts) represents opproxl-motely 7 percent of the city's cunent l.
^
j electlKol needs., f
, ': j 4
.] Orought conditions across the west (
he Power $y5 tem look a mojo! stride have reduced wolm volumes in the f ., .' ,
, forward in 1988 with completion of (olorod0,(olumbio and Owens Rivers j f its first $trotegic Pl0n, designed to by as much as 40 pacent this year, {.
guide management through the curtailing production or allhydro- I t-l- uncertem environment focing t'ectrK i electrK stations sepplying the DWP. f 1 s '] , utilities over the test of the century. As o result, the Power System has j [.,'] The plan, reflectmg the ideos and made greater use of power from the [ t Intermountom Power Project in Utah
?i energies of hundreds of DWP
<7g 6 sj employees and several outside and the filo Verde storianin Antono, .
.i l experts, will be o valuable toolin as well as generating mote electrKity j l
I helping the system remain fmonciolly in its los Angeles Bosin steam gener- ;
,' and operatonelly strong and respon- otmg stations deing 1987 88. :
j ' sive to its approximately 1.300,000 lo help its costomers use electrKity customers. mo'e wisely, the DWP has expanded l q' The third and fmol unit of the Polo its energy effKiency program, which i i verde Nuclear Generotmg Station in includes offenng free energy audits,
,d Arizona,in which the DWP holds o incentives for retrofittmg more effi.
[ 9.7 percent interest, went on line cient equipment, including rebotes to y early in 1968, raising the stcton's : 4
?
output to its design copocity of j
'j
~
3,810 megowatts. Los Angeles' i
!{ -
c . k I [ N W
- 7 . z., -.-
_ ._+..,--_.--_,__4.. _ . _ . . . . . _ - . . ~ _ _ _ _ . _ . - - - _ - , _ _ .
. .- . _ . . . . ~ .. _ _ _ _ _ ~ , . . _ . . _ . _ _ _ _ _ . . . . _ . . ~ _ . . _ _ . _ _ _ _ _ _ _ _ _ _ _ . . _ . . . _ _ _ _ _ _ . _ _ _ _
l 1
, ik Nedk sneemik arete l l 50seiermee amor hem er A*
Abreusg emy w mr. ww not 5 anokedon na S111 maan ausman de Ah Jane tower same m We 9msn a me saw i Alf /4 app /prabk sepe peer s
,. 4 s ,g Y.}
e
, ., i b he-doeur immmune. e K ,... , , ,- -
(akaseswee). me km e
~
~
W.
. : m, - . -
~
der W g}i x A ,. s
~.. .,
I 4.
;w s, .
l h 4k. g .f - g 4
'k .
.[O2
- ..4 ,
}fg,%g, 1 .
l : s t. 3 f 'h ; p 1 1 I f
, 1
. 1
, l h l 1
il 1
. . ,% _., . . _.m___.__ ..
. . . . -_.....,7_..._ _
t - .
,4 sy,..! . , o p ,..
l- , 50k1 mm0030Iqhvalt & Mr Nt enth ha nelwn lod on.N.
# aves by 31wrent anong al onehers e N kst nm es. and k 40 weont snr I980 ornong eng*ws e ha.voom min tvet a M Sysnan utsnumvpos j , ss44 peers e a trasse i
Y ,& MPskmrs/dsndannt sloson, one eraw Wsan la*m e = re of in Aw to armneg noe sto. fDG5 00d Isradtenne Od Onf5, Ihr i b SpWem has angdesad conwo.'det me 4 sanamsg I r 1 . l l l l l l 9 9 o!- e s l ( l l l 1 l l \ l l l l l l > l l n = 3
! l 1
.. . . , . . . _ . . . , . , _ , - . . . _ - . m _.c , .
wp%yy , uq. . wt 9
.p
;u i
Angeles bosin. These focihties, which cre used with the objettive of mini-mizmg oir Quohty impacts, continue to provide on important increment of power for los Angeles.
.d ,:Q
- , customers whoinstolbw energy With gesohne engines enounting
,8 , ligking sr,tems, for most of the besm's oit pollution, c 4., ; ,
Meanwhile, the Powei System con- the DWP has stepped up efforts to tmues to improve plant efficiencies encoutoge development and use of l through its ongoing seliabihtyl electnc vehicles in1B orea. One
.sj ovoilobiltyimprovement program. DWP test vehicle begon opetoimg in
' ~ 'i in 1988 the DWP spent more than the lost 12 months, and controcrs
]: $9 millinn in retubing boilers a.ad have beenlet for six more electric reconditoning generators and tur- vons in the next two years.
j bines of its steam plants in the los - t l Amer $resem Asefs b Mel
- 1967
; We ea:ied Are 30 1988
*) *
. Pe e use 1.116J06 1,097.9 t ?
Domesta rustomers (omme'tmi tustomers 165,779 160.239 Indostrialcustomets 19.740 70 006 l 7,, , All others 7.828 2.76) L. [
- lotal tustomets-oli tlesses Sales to ultimate consumers-Ul: watt hours 1.304.603 20,936.158.000 1,275.970 79.162.531.000 -
Sales to other utilnes-Lilowen houn 169.800.000 371.876.000 l
?; Average onnual kilowatt-hours per domesfx (ustomer 5.029 $.004 Stetes of lystem Utihty plant (less octumulated provison for depreaction) 53.324.924.000 $3133.454 000
.c; Genersting Stet 6 ens
.4 Net dependable topobihty, kilowatts 7.?Bo ooo' 7 s54 000 "
"i. ass,w,iu re,,ou.>,s ,c aum a ". .. ievi e,.mne,em 23 4
% _ _ m p % ge.,w=e. nee a**-=w=*d'a %**SM*
becoming more sensitind to cus- i
. 'i
- l 3.t - temer needs. Involving empbyeesin :
c ., this wat h cutual to our suuess in o i l, ; L .j newly compet:twe environment, so ! c , (] . monogement must cultivate o spirit (, brvke h the new chol!enge for the of partnipoten ond commitment f N .'*. ) Amerkon morletplace, and nowhere throughout the ranks that moies t
, t
~
; ore the demands more evident than servke suond nature.
) l. 4 in the pubig utility feld, whkh has But while the breadth of service ;
s
. j undergone signifgont change in expands, ouessibility must become f'
' , ,1 inent yects. Delivery of a product- more focused. It is nolonger onept- l
'?' l in our cose high quohty water and oble for customats to make several
, rehoble, offordoble electrk power- phone oils, or coide endless delays
_.lt l is only the starting pointin our whi',e the right servke person is .
'i servke responsibilities toward sought. . i 1
our customers. Single contact problem solving i Bothlarge industrialusers and must be o choroctenstg of utility l
! individual homrwners, os well es service. Today 5 cusicmers wont and (
i oli the customer classes in between, deserve more ouess to the Deport-nowlook to us for such support- ment and more controlover their ! y : d- from conservonon tips to large-scale consumpton of water and electtgity. ; of > .. analysis of cost and reliabihty I09 Our job, now and in the future,is to i g.y tors.10 meet these new demands, respond suuessfully. ,
..a. -
l,) thousands of our employees are
.}
., J 1 being made more aware that the
- 3 '
customer owns the company, and i L i 4
- s i i gI i
_,,-__y
. N D"N " **'O'@ DOM'N*'
--__I- _, y.-.,....,,_.w-._ ,. 3._#,.c. _ , e , , . . . . - . . , . ,y,.. ,g,,_ p,--
~
'"W * \
v
.?L: ' D-
. \. .f5' bb[ . . '
,W 4 %
$ l 9 t
y; .'. ',y ,;g 3 y w. - t (' b. . k .
?
.y ,
-%.Q* . , 9A g, -
f Ik gif "- , [p.t: "
* , M g.j, ,. .
[
.2w ,
a Vj '.$ -
, (i a 3
p,v.,_
, < <. ., n : ,- .
r pj~i 4 3 A y g.- e [f i> s W ' , ., s
- e.
b)$.1l - bl
- i - - .
- . v. ,$.
q; . > .g _
.:. e . . s I i !:,,,t@. 't .
LS M : 1 i . y' p.' w-o wa *
) N' '
.,s
. 't, .I.
9 j
. j yw. .-
a
\ t' '! - i s gs. w g ..
p: h;o.4 $' Nf. + t- ' [kff; , : - I 'I r ed
?* ,1 * '
- I $
s .
? -
'j
@it
'l
..; df 9 'I N.D
' T'p- , ,, .
L
.h y
- p a.,3 .
'O [ :, ' 7,g j
(;j? st
* ).0 3 .
E n y, ti,
'. j 4
).v. na.*' . ' . . g., . g W s. >. '
. . i
-l f +% g+ ,.' T
',Y, ? '
- h4 i ! ,\%.'
.g . .
,..cp v 3 l
.y[ 1 ,.
M$ - * - f G', - v a t ,
. . Le a ..
g ,
%y9 -
t< P l' 4
., % g , , ,
.* 4 ss N' e . . I
"' (k
l i
'y $mA ^fy-([s i
. +,
F
.g .
d B, w y ,t p,
^
i
%' d. 4 i., - ' -? - we e *
,tp* . - .,
n .'. - w4, f p f,~ , - e. v h
< ?$ - 4
% gt 'y : k , . .,.
m, 4 ; 9 1 i!r I "
. ,h. , : # g .
r ., .s 9 g .w,-
,L g4 .
.gp -
(*r, Q' , -, g ..,1
,fk, e.tn
,,. g ,
6
)gY .'[ , r ,, .
.** ll.3 Y')h
?'
.h
,t+ -
? x a ,
....a ' ' $
Q' , n:
- e
~; t c
\it;. # ,
( ' h g -
,l',."~ >
( d: M fl~Yh : l;0.l 6
~
.; B,u, J: ,- . .
A g <- c .[Y l}'{ /,i - , r 40;l '- ' '
.< t ' g 4, $g't g <-
, c
+- - .s -
Jg, f.x.g,. - . . . ... . . . . .. .. .. . .. . .. . .. . ..
rw-- g,q
~
+
- p. g .
c l f;n ,
.L< !
t, g-u ;- exceeded 50 percent of the employee [~. population. DWP's professional work
'~.:x, f
+
1 force is also 50 percent minorities W. fj,) .[ ond women. Hispanics in the - L ;u , serVke mCintenance area kh'
' bternal and Orgenizational Serykes achieved repulation parity.
g (IOS)is responsible for DWP's A strategic study ofinformation (pp humon resources, public offoirs, systems waslaunchedlost year, v , Pi.f
?
management systems, customer and aimed at focusing computer technol- e f,; commercialservices and government ogy on theimportant business needs
, /l e': . relations. of the Department, porticularly pro-
$i.' Major improvement was achieved ductivity and efficiency, resource
, L)
;/j in customer servke, with a new mancgement and customer seryke.
phone system that has sharply dh.y Public Affairs played on important L _ l. reduced response times on incoming relein broadening awareness on a ; i
;j calls. The People Difference end number of DWPissues and concerns
.2- .
i! Investmentin [xcellence Progroms
, lost year, including the Power Sys- >
for service employees has helped tem's strategic plan. l second year i 4 1l
,; 4 themin dealing with customer prob. of drought spurred new efforts to
.O lems, and new uniforms and vehkle drive home the conservation message i,.4 'h '
markings haveincreased DWP's for water customers, and several
- g. U . image in the community. Greater innovative media and community Q[ emphasis on risk and account man- outreach efforts signaled a more pro-ogement has resulted in major reduc- active posture for the Department, tionsin write-ofis and s3ryke disconnects.
l The DWP possed on off rmative L>1 omon eilestone when minorities l L 1
? 'v l;,M:
T, l }' 3 u2 .- - _: - :_ .- T-
,. ...- .i. 7- :. - - , .
O a ,y A,= + Ama oa-*a-- -- A ~ "& " d' N -"A*~ M M4 - ' - i M e ade05Mg nWiiffs M notingpoents e #5 todt the QWP has kdthe noy venglos Angoks 04 l cpunes prondng cm /or smM cM6en. Ihr linpornnet ato estab- { ; hsheda hrent1 arsource (ww ,
,', , . ] adspecars ckmes a meus
' aspens denungcM6en.
.',.1
'1 The CW9in I908eneducedbnpktnew ear w<orcheg nkck entkormns l
drsped m he9tur es nsbaty m f the <sawnuary in the photo, a trwer f leadv uses o new handMicewuw that makes cusnmer bang more accu- l ev ade . l l \ l , l \ { I l
-I l
. .a.' - .v. , ,J',,1 4 'l j 'n, ~ ~ ' 9-- : -
l 9,w' l
'm
~; $. ~.!: ^ .
01_ . l T'- l [ .E j;j}#p -
- i .,
l
, ,, i I j
{ : .v . t i
,.l: :;. .g;? m --
I l ,t. .
, Ja~e., . j. .,; s.
. . 3 . g. _. . . .
l l t I 1 l l b 1 . \. e- . .
*__m__f_-.yo-______ _ - . _ _n._,_.__, _ .-
i But there is Dreat uncertainty y ,
.n a s
-; . today over the future status of tax-exempt bonds. Certain federollegis-
't
=1.- lotors hoW colled for on end to the
; exemption, as well os for other
, 'I o doits job mesielfectively, the changes that raise significant issues a
~'^
Department of Water and Power for the DWP. Without the exemption,
^
l must maintain a sound footing that for example, rates on future bonds I L provides the financio! resources for would haya to be increased to make 4 4? current operations and future expan. them competitive on a taxable basis, (I ' sion. To help assure this, the Deport- and that would mean i h'gher costs to e.. ment must plan carefully, remain the DWP and :ts customers. This h effkient and structureits rates and could have for reaching effects on borrowing to supportits financial the future financial health of all pub-objectives. licly owned utilities. { .
. Borrowing through theissuance of There are a numbt of other vncer- j tax 4xempt revenue bondsis one way tointies rippling through the public the DWP provides for future growth. utilityindustry today-from the 4 To date, the Department has borrowed long term effects of deregulation to
.i more than $2 billion. Investors are theimpacts of more strmgent envi-A l willing to purchase these bonds ronmentairegulation-but nothing
.i
' il' because(1) the DWP has a strong is more critical to our future than
. .1 1 credit rating,(2)the bonds pay on maintaining a solid financialposi-1
,. t attractive rate ofinterest and (3) tion. Thisis a top priority for allof thereis currently no federalincome us at the DWP.
r-fox on the interest they earn. L
!I
~
i i 4
; )
w a
- c. f I
N"~ -. .. .i -
~
. ,i1{ j[~((((['[. (( _ ,_ l
G
'.W-
{ 0 ( , n ,
, w 4 .) -
-o
~ y ,,
- v s 4 ~ ?
e . , 4 .- i a g
\ , s
' ' *^
- 4. , . ,.
"4
- q. .
/
- s . .
K b 'e _ 8 O 6, ,
._ -w . .;,
4 5 l r s. c . g 4 :s ,, a
'9a I.(
,.-. y < . "2r;
*. ..:" I g .
g .
* 's s x ['
- g :
% 'k , -, ,. .f 4
{.' ' # '
, ( ry v
- ( t.' s .( ' ' \
- t. . t
*[1 c
M'
' .ahhpsay e .
a A O' s e .
, c- . 1
--e*' _
S %
.4 4
, .@N
. , a
- -- 5 ,.
s .
#'
- r
- , ,, . g,
- s g.
W - i . k 9 M ,, 9 . _ b 54 .
. g+,
r 4
.e k' .
- e
, ,w 9
- 9, f .,.
5 k f -. . , , f.[e 4
- n s . '.7 e . . . .
. <, -c.:,. , . ., c ,,...
1,,7
.+ , .
b . *. L e hl ** 1
' ~
e!pfte g'aser-sesse M -pR.' .
. i t' g<',My'> '
I.h hi 6aa '
* =
4 ' d.% ;1^ : ,l y,.:. r .4 y4 ,
. i fhyo , 8 ,q p[xe' ' j( ^a yv."& 9
-y , (, . e - i
.9 a . ., i: . .
i + .- - / w.J s
>y y:7N. '.9 L i fl s 1 y , . ,, , ,. . :
3..,.g . . . . .
, l y.
y, g a y ,. pa ;, ~4 . . Ia % ,.
' [IT ' ' -
[hr! eMFr b.ttysp5 e s
'y
; '.\ :@ t
,.oq:., &.
4 (+ Y . t' u+ p
*. u :.
'N:N '
, gh ,
.iN y e -
y 46 p ps', / y, , . ,. L i- + 7
, ..' gi ii p.-
d m' [. ? M'fl %' % 4,% , %, 3 s. K.; <a-le ' * ',7 ..l
~ '
1%,, 4 ,-
- n , v.
e -
to: , . i)1; ,. 3+- .- E g g 9 w . 4- j -
. < ; .c 6mn h um - - ...W;!
w\ f.
. ~ s.
k'mt we i ( , . i..* s
<: 9 'g e
,h, y *
, o;y ?
i f a
) I
.4 2!
- O. j~ , R .
. ,i to.
v 'y: ; p {;(. p i y.9 *
- v ,
(* ' a , [ <
' :., s
.l s p N
i 'E* t
.4 9' mi y 4 I, / . ,,.
9
) .
4 k I g 4p 5
. m f *
;y ' .' *
* % ,.. 1 b'
=
x h 9 M ' k J. ., r e
.d d ,,4 Q4 m
.g t t
- 3.
s l:4 ; ' \ e = L,
'kQ ;
- f. .
v g
i'
-O,
,,.,'g,
,4).< .- , .
- 44. . ,{.-
- c
... +
8 e-
, 4 g
4.s=
.. . . i
. - y s , I g 1.
[-y-. Ir s O "** 37 A' f - 9
~ .
. 4
% . +
,q
- W
! 4r i
e b bg S' q imp: - 4e~ g 4' e
- 4 d 4 y , \ %-
i
- e
) 4( .. . . . . . * . * ,
.,p'
[-.
):
0,ohonsio,f,,coitori,87-88 the operoneg reveeve of the Oerstandma bonds. notes o#d rev-Power System increased by 11.9 pei- enu certifKotes of June 30,1988, L resulted in on inoeose of 2.9 pei. Q tent from 1986-87, to o total of totaled $1.70 billion for the Power centin sales of elecnic energy and a [ System and $373 milkn for the
- 3.1 pecent dureose in water soles. $1.57 billion. Het income amounted Opworing rewnns of tte Depart- to $176 mdien, or 6 pecent below Wata System. Both systems met p - l the $186.8 mdlion in the prevous their maturing payments on bonds fL, ; ment) Wota and Power Systems totoled more than $1.83 billen, o fiscal por, da to highs opcotmg and notes.
(( j^,N+t gom of $175 million owr the pre- expenses. j' vious fiscalyear. The Power System The Power System inwsted $335 c eve g3 egees
)~
a occounted for $166 million of the mdlion in copital construction for the in accordance with its basic fiscal pol-inaeose, pnmonly due to higher - yect. Motor ex.nditures were addi- icy, the Department paysalltests of d, : fj.. 'o energy costs bihd to customers and hons and modifronons to the elecni- opconon, debt sennce and port ol ~ col distnbution and hansmrssion the (ost OI(opitolimprovements
]. the incense in sales manhoned E1 abow, the Wota System added facilitss. from cunent revenues. The remomder l
.[ $9 mdlen to the total, mostly hom totalassetsof theDepottmentof of the cost of capitalimprevementsis L higher energy and purchased water June 30,1988, were opproximately met through sales of revenue bonds p
I costs bibd to customers and the $5.21, billion. Of this amount. or notes and from contribuhansin effect of the November 1987 rewnue $3.90 bilhon was recorded in the aid of constrvchon. incense of 5.3 percent. Power System and the remainder in Beudes mechng all costs of op-liigher Water System operahng the Wate* System. erohon from current revenues, the rewnues, offset by moeoses in oper- Department paid more than
- l. j otmg and debt expenses, nrsulted in PhasehrAeWpMee $82 million into the Reserve fund i*'} netincome of $34 mdlion, down 23 percent from 1986-81's total During the year, the Power System of the aty in support of general ;
sold $200 million in revenue bonds aty government. l '1 J of $44.6 million. consishng of two issues of $100 md- Approntmorely 85 percent of that l1; A total of $105 mdlion was spent lion each, or inteest rates overoging omount come from the Power Reve-I ! ? l.j by the Water System on copital con- 7.67 percent. The Water System sold nue fund. Operchons of the Water
. snuction, most of whKh went $85 mdlion in rewnue bonds, con- and Power Systems are enhrely self-
-f l- ; towardstheimprovementof the ushng of two issues for $35 mdlion supportmg and no Imonoci obligo- !
'i l j water distnbunon and supply and $50 milhon, of the some over- hon or tax burden is placed on the' l
i system, as well as water quohty age eterest rate. otuens of Los Angeles.
,,g, programs.
4 1 M .'
.y 3r (M d W & d ***
- e e 2 0 w-- . _ - . _ _, , , y n_~;- ; - ----
- - - . -_.. . . . ._.. . .-.-. - -. - . . . . - . .. .. . . ~.- -
. .. . , . s, . .., ;
s I
)
l isn %ew u r.wa x we w s
.-__. . __. . . _ . ,. . ~ _ . . . .
. Operating Amanes ,
Resident:al
$ 94,525 59243 $ 24,14/
Comnecol ond industnol 142,456 135,163 122.917 i Othet 20.051 20,775 18.955 lotaloperatmg revenues 257,032- 248.374 - 226.019 ; I
~ Operering Espenses Purchased water 31,072 26,765 11,192
< 'h~
Purchased energy 11,613 8.050 _ _8. _806
, Purchased water and energy costs 42,685 35,571 25.242 i Other cperation 92,709 84.843 73.715 Momtenance 34.243 28.691 27,145 - I Depreciation 30,584 26,536 22.963 ,
iones on ptoperty outside the 6ty 2,734 2.191 2,572 [ Iotuloperotmg expensas 202.955 178.132 154.657 Operering lwome - 54.077 69.892 69,362 , Other mcome-net 2,685 4,524 8.176 [ i loss on Abondonment of Chatsworth Reservou - (10.675) -- income befose debt expenses 77,538
, 56.76_2 , - ._63. 74.1.. ..
Debt Espenses interest on debt 23.749 22.039 23.239 . Allowance for borrowed funds used durmg (castrucien _(1,380) !? 1]h .j7.545) l Total debt expenses 22.3d o D% 15.691 Net income 5 34 393 $ :1.641 5 61.5.:4 ; I sletement of , l '; Referned lmeneeme. l g. Remvestep . + l_ .. in the Euunesen~ l 7
- i,
- y :-
l {!rI%w & H' mJh] foy ]O '* '$ l l' Balance at begmnmg ofl ect $442.526 54091M $357,757 Netincome for the vent 34 393 44 mil 61.344 l l' 476.919 453.321 J i'/.601 j' tess-Paymenn to the reserve fund of the 6ty 12.419 11.'01 10 415 Bolon(e at end of year 5364,500 5447 526 5109.:26 lN9 CC(00rl34MV'AI) 0dIt1 Q10 64 PN!!ffY $61,' & thne fenstwCl titr*bhtn%
!! bry dies Angens Orperknent & Waarr sad kner i .. .
1 i
"F *wwwwei-e-ryt e w-w h wege
b- . i ,r
* 'nb., .$
Y' - :l i. q l;
' ic v 30 145 n' , c. (k lMnonds' l . l: ' Assets . , litilety Plost, of oitginalcost Source of water supply 5 236.592 5 230.343 Pumpmg 48.969 48.203 -l' Punhcoten 132,699 129.874
- 1,022,138' ~ 864,205 -
Distribution - 110.029 94,309 General 1,550.427 -1.466.934 less-kcumulored depreootion $10.225 . 480.483 1.040.202 986.4514 Construction work m progress _ 14.526 _ 59 697 Net utihty plant Igl4128 1.04414! ;
~ Current Assets
$4.329 37,13f
' Deposin w(th Gly Ireasuret (vuomer and other onounn iecewable, less $400 and $600 ollowance lot lones -51.772 45 520 -l kcrued unbilled revenue 21.611 25.654-ll Meterials and supplies, of overage cost 15.489 14.490 ,j Prepayments and othef cuirent assets 14,906 14.841 191,167 131.641 Total cutient assets - ,
$1.305 895 $1 153.78e Total ossets 1
I. (r. stelization andliebilities - j (epitelization huity i Retamed income remvested m the busmess S 464.500 5 4 ? $23 l 357.329 325.951 Contributiens in cid of construction 822.329 M .17/ long-term debt 350,13s N5 599 Total capitchiation I,l/2.517 8954g/s Currentliabilities long tetm debt due within one yent 20.270 t9 5e0 Aulued intere9 1,!52 c.165 kcounts payable and curved expenses 69.544 6t447 cum;, met deposits 35112 34.241 133,373 i:9,713 Total current liabihties Commitments and Contmgences forcl capitohtotion and habilities $1.305.805 5!.193??9 1 tre vam.wpeg wes a o en mtnralprt 2 wse hwmt unemws l l i-33 (@ elles Anpes llroammer ei krer and her
.. . . . . . - - - - - - . _ - ~ - -
w.. ,,s,,,,
)
,w . ,o of
. . . , p%.
.Q J '.
i ~, ' ,f 6 t , @ hwe ' H rMin M n!i 'V' w (ash flows from Optrating Attivities: l hat ir:ome $ 34,393 5 44,64 ' 4 o1.844 )
, Adiostments to secono!e net in(cme to net tosh provided by opefoting o(tmties: i
, Depre(iotion 36,188 31,112 26,291 loss on Abandonment of Chotsworth Resenoit -
10.675 -
. A!!owance for bonowed funds used dunng constru< tion (1,380) (2,937) (7.545) l l Changes in tunent assen and liabaties: l (ustomet and other onounts wewable (9,252) (10,511) (2.778)
Auswd unbdled revenue 3.983 (7.764) (2.073) Motench and supphes (1,067) f (999) (119) Prepayments and other current assets 1,026 (65) (10.910) Aurved interest 1.287 (281) 520 Aucunh poychte and ourced expenses 91 2.574 5.592 l- (ustomei deposits _ 1,91 6.J N 3,111 ; !' Net cash provided by operotmg actmnes 65.823 73.080 ' 73.933 6 l Cash flows from financing ktivities: ) So!e of revoue bonds 84.626 - - l l Scie of advance refund 6ng bonds - - - . 65,928 1 ! Amount mewed from escrow enoont - - 13.025 Conrnbutionpn aid of consavoien 31,878 I 23.005 18.362 l Reducion of long-term debt (19,327) (19.248) (19.636) Amount deposited in escow eacunt and afhet ogcinst cdvcnce refun6ng bonds - - 0 423) (- long term debt tedeemed. mclu6ng coil premium - -
? :2D i
!: Payments to the reserve fund of the (gy (12.417) Hi3m a CD - i Net (csh provuted by (used m) fmonong c(tmhes &l 758 < ? 540 'i m ) i Cash flows from Investing krivitns: > l [xpenstures for plont and equipment (j6191) 00521p l (103.385) ) [. Deposits with City treasurer: } l Net meeose (deoeose) 47.193 :2933) (43 352) l l Beginnmg of year 37,136 seM9 111 351 l (nd of year 5 94 329 5 37 !36 5449 l Supplementeldisdesere of tosh flow information: i l Cash paid dunng the year for mierest 5 28 870 5 28 231 5 26 011 l tu wnun wn ve e wara na um 1,wus m.m l i 6 I a i J4 (4 dim Asgnes Oppempset W 19ser W Anser i k
- .. . - ~- - . - - . - . . -- . - - - - _. -
,w ,x..
'4 ,. n ii rsJ
!,' . ,\vff'p 4
i Nose A-$sassary elSigeNicent Accesseing Nicies Centriberiens is sid of cesstructies-Under the prcosa of the
"-lhe Depotment of Watet and Pcwet of the Oty 0ty (hottet, amounn te(ewd from tustamets and olhen for (un.
The4 ^ of Los Angeles cmts under and by vutue of the Oty (hottet enacted 9tuttmg uhhty plant are combined with retamed mtome remvested m i in 1925 os a sepointe propietary agency of the 6ty. The Water the business to restesent equity for purposes of computmg the Water System is esponuble for the quahty and distnbution of watet foi Sntem's borrowmg hmits Anoid ngiv. tontobuhons in aid of con. sole in the Oty- struchon are shown m the ouompanymg belon(e sheet as on eqmty ouount and are not offset agomst unhty plant. Depieoorinn lot the related uhhty plant is expensed. Finserialsesfossit 4 i-The hnencial 90tements el the Watet Sy9em are presented m confamity with geneintly cuented ouountmg pnn(iples, and subuantially m (onformity with ouountmg Assesses Revenues con 9st of bdlmgs to customers for wcter ten-pimoples prescobed by the (okfonho l'ubh( Uhhhes Commiwon sumphen and mdude cmoun's rewinng from o p.mhosed ever eni , enept for the method of oucuntm0 for (ontubuhons in cid of ton- energy tost odiustment formulo designed to peimit the Idi rarwery of s'tuchon desoibed below The Department rs not subl e(f to regulchons pc'Chosed watei and encigy tostt the Ocportmwr prciem tv.e , u , ' (ous to ecobbsh the (ou ientvery (nmponent 01(ustumes bdimgs cod of suchtommnuon. uny difference between bilkd and o<tuohosts, lealtmg m wet of Utigty pisst-The costs of addihons to uhhty plant and replace- under retnvery of purchased werer and energy costt is cdiusted m ments of refued umts of property are topitohted. (osts mdude lobot, wbsequent bdhngs motesiols and allocated induett charges suth as engmeenn0, supervi- The Wofer Sy9em recogmies purthosed wafei and energy (osn m - 9en, tionspottotion and constrv(non equipment, retuement plan con- the pened mturred and ocuues foi estimcted unb&d revenues for ; inbuhons, oad certem admmntronve and general expenset Repoin watei mid but not b&d of the end of a hwO,o I and mmoi replacements are (hatoed to rnomtencn(e expense. The lhe Water Sygem's intes me e9chinhed by rre amens ongmel co9 of property rehied, plus removohost, less scivcge, is capioved by the Oty Counot Ihe Water $ntem si',ever rc ef~i . thoiged to enumulated depreoohon. Depcomenn of the Dry at req k: mies pmuecd n the wnome ANeueste for Isads esed daring constructies (AfuD()- $6ered operating esponses-The WcNr Sywm hes man AIUDC represents the (09 of bonowed funds used for the tenutuchon ndmmistrotnre fun (tmns with the Descrimenn Pow brem far-of new lookhet AIUDC is topdohted as part of the (09 of unhty ally, the cous of these funchuns are allocated on the Dnus o' hwl.ts plant and n cedded to mcome os a reduchon of debt experises, prouded to the 56temt but does not repiesent (osh eormngt the ovetage Af 00( totes we 8 4%,9.4% and 9 4h for hscal yeon 1988,1987 and De6t esponses-Dehr premium. dracont and bsce %ptmses me r
!?86, respechvely deferred and ommuted to m< cme oser the hes of it:e re med nwet 1
Deprecieties-Depreconon expense n computed by the urenjht-Stet st I(e:6II ws-Ovnna the ger ewd kne 30. l kne merhed bo ed on emmated servue Ines Depreachon proviuon as 1988. the Department implemen'ed SNtement et hmmual Auer ng 5tnndanh No 95, " Statement of Cash ihr,' AaciNfy. ku:! j.- c percentage of u.etoge depreoobie plant was 2 4%,2.4% and 2 3% fet hstol vecrs 1988,1987 and 1986, respechvely. yects 1987 and 1986 cmounn how ken retmed !wnNm reah i the imcl year 1988 presen,acn j Deposits with City Tresserer-Deposits wah the 6ty bcowier induded $83 mdhon and 531 milhon at June 30.1988 and 1981 tbkh were mvested in ht-term secunhes undet the 6ty heoween Note 8-less en A6endesment .I Chetswerth Reservoir pooled mvestment program whereby ovminble fumh of the Gry and From 1969 fu 1772, the were Syuem murmm fusmq 510 / its mdesemicct operotmq depm!ments een mvested on n tombmed miihen to celante end ,mpine tho Omhwrb Re.eier islovenm w huus These mn9ments are valued at (cu, whgh appmumcres 1971 emthquake m me lo<, Angee mea. the Sr1'e c'(oldctmo morket
% et le, hyrkn Orcarreent el Warrr eat Mr*
M
- l. m k
1-L enacted more snmgent safety stendords for earth hiled dcms v,hich Nose f-impdeyse 8eseaf:
. would have requued the replacement of the (hanworth Reservon the Depoitment has a funded contnbutary retream, et.Mty on!
Doms of sigmfgant oddnional costs pror to rehlhng. Dunng 1987, the decth beneht msuionce plan coveimg substantially all of in employees. Watei System completed vanous studies and concluded that the od6- Plan benehts are generdy based on wm of servke. oge at re:nement
, tonal costs of upgiadmg the dams and complying woh inceosed and the employees' highest 12 consecutive months of sofory befare water quohty standords predvded refillmg the reservoir. Therefore, the ietuement, the Department funds retuement plan costs 09 a level pre-project was formdy obandoned, resultmg in o unhty plant write off of num actuarici method as deteimmed by the plan s mdependent actuary.
$10.7 nihon as of June 30,1987. For fundmg purposes, pror servxe costs relanno to the plan are amor-
, teed generdy ovet o 30 por period endmg June 30. 2003.
The wore System was docoted opproximately 24% of the plun's gas, (_ gesy.,g,,,,3,g total costs for fsal por 1987, and 26% for fsd yect 1986 omwn!- long4erm debt cuntandmg at June 30,1988, conshted of sevenue 'ng to 533 milhon and $32 m! hon, resocctively As of June 30 DB7 bonds cnd notes due senally in varying ennvol amounts through the octuandy computed present value of ouumulated lefnemont pkin 2028. Intetest rates, which vary among in6vidualinotunnes, over. benehrs attnbutable to the Water System aggregcted 5494 miikn. [ oged opproximately 7.4% and 7.2% oi June 30,1988 and 1937. 1he revenue bonds generdy are collable ten yeon offer issvonce. duounted at 8%, of whrh substonnolly oil are vested. In Isol atW1988, the Deomtment adopted the prusiens of State-Scheduled annual pnnopol moruiines during the five years suaeed. ment of francel Aucuntmg Standonjs ho. 87, "[mployers' Aucunhng ing lune 30,1988 ore $20 nihon, $20 milion, $12 n!! ion, for Pensions" The adopnon of this statement 6d not morendy oHect
; the Department's results of operanons. As requned by the new stondcrd,
$12 milhon and $12 million, respectively.
in fuelpors 1986 and 1985, the Wate System sold advance ietnement cost is deteimmed usmg the prorcted umt vest nimut refunang bonds totalmg 585 nikon. Until the bonds to be refunded cost method forci beneht plan costs for hscal year 1988 ts te Sw k.. ' are colled, interest on the advance refundmg bonds is payab!e from Sraem indude the fdcwmq (cmntmn m.ikns) interest eoined on secunties of the Umted Stores amernment por- 9,,,. chased out of the proceeds of the sales and held in esoow ouounts inie,est mi on proteced beneta dron n wah Onbonk, N A., New York. Al June 30,1988,585 milien of u,uot retum on psn insen a these escow ouounts have been offset ogoinst the advance refundmg Net omastveren end defencl bonds in the cuompnnymg balonce sheet (dunnq Isol year 1988 Ner vernement picn mt P there were no refunded bonds redeemed). After the momes in the Dischety and deeth benehr plan mes and i:cmmm .me esuow ouaunts are opplied to redeem the bonds to be cded, pnno-W Benehr Nn 6n ,U po!!y through 1994, mrerest on the advance refundmg bonds win be payable from Water System revenues. The plon's fundW status of June 30,1988 doccred to the Erer System is as Idows (amounts m nulhens): Acuanal present se cf bant 6pem Nefe 8-3boudMI8 Posses vested benetin M' Operonng expenses shored wah the Power System were 5256 nikon, w,,swenehn . 5235 millon and 5216 allicn for isolWars 1988,1987 and 1986, ucu,som ,6r cogerm m of whKh 589 n0 ion, $82 elhon and $74 million Mre olhXored to the p,oeded future mmpenshn ieveis Water System Piceced henehl 61cron Nn owels of tot vrhe Pneded benehr ocinpon in euen d clm ir,seF. !! Unterngruled net gmn and ebis of saNn m means Uncmointed net spmn or adcctma of FA5 B! th koued pemen Imtery i ."; i l N (if Y $0i $0i}W EnRNr Y WQNF Oid Y
m < . i l i l The protected benel'it ebhgots ni kne 30,1988 we determmed usmo New F-femmiheeses and(estispennes a dmount iote of 8.75% and on ocumed rate of macow in loture p>pmeses n #6e mnw Issd els6e Ger- Undti the pmvnes 9 uompenscron of 6%. The 1988 pension sost was deteemmed uung the Gry (hmter, the Watet System ticosten lun6 o' in date's to the a long term rete of retum on plan onets of 8% lion oswis comst rewrw fund of the Oty Such payments are not in heu of toies and .- pianordy of corporate c,nd government bonds, common stocks, are recaded as dninbunons ol retamed kxome. The Depoiiment espan mortgage backed secunhes and short term investments, to make payments of $13 malm in fuel year 1989 liom the Wofer
' la addmon to the retirement plan, the Deperment promdes certain System to the reserve fund of the Gry.
hechh core benefits to octive and tehied employees. Health core costs are expemad as pad under a wil. insured plan. The cat of providmg UNysNes- A noinber of claims and suits are pendmg agenst the I such benefits to rehred employees, net of emplope contnbutors, Ceportment for alleged demoges to persons and propetty and foi o:her omounted to $3 mdhon, $2 mahon and $2 mdlon for fuel pars alleged hobdees ansing out of in opciotom in the opn'on of nmneae-
- 1988,1981 and 1986, respectiwly. ment, the unmsured habJay umier the e cctions e.w!d not moteWy
- offect the Watet System's Imancel posden as of kne 30,1983.
\ Nepartel Indepersdent ;
nuountents . _ l
-m...,
4 e , . .
.t.- . e. _
August 31,1988 to the Bomd of Water and Powei Commnswers L Department of water and Power l' 6ty of in Angeles In out opmnn, the odompanymq holon(e sheef and the relofed slatements of uttome and refomed mu,.ne remvested m the bovneu and of (t.h licm Ethans fod, m cil morenoi respects, the fmanual peution of the water system of ttie Department of Watet cnd Power of the Gry of in Anqela of June 30.1938 ord 19M cad m.- rnalis of ds operatiom and as co',h flows for each Al the three pan m tN pencd ended June 30.1988, in tonimmey wch genciully cuented acouarmg oncre i Ihese fmanoul storements are the reponsitdify of the Departmenti management, our repenubthty 6 to erpreu on onmion on thaw im,tnout statenen how en v ) oudds We conducted our audih of thew storemenh m caut:fonce with generally nuepred audamn standards whgh requae that we phm and perhrm trw ruto la -j cbtom reconoble nuotuixe shout *bether the Imnool storements are free of morenol miurarement An oudd m(ludes cc:minan). en u t'",? Ann. crocau u.ar-mg the amounts und dntlosure m the Imonoul statements cuenmg the nuounknq pr naule, used and unmhcint e hmata moi tv monom"im omt miuc'mq the overall Imanool statement pinenrahon we beheve that our audih provide o reconot el bmn he the opimon expreued u:wwe AA$CL q j o.& 31
q- , . q ac e .j
.e
}
Q s lis lAvisatJ 10,- .v e. Opsting Revenees : tesdential - 5 430.696 5 38S,?D 5 379.W
~ Commercolandindusnial- 1.085,557 963,151 932.167
- Other ' 53.775 51.560 46.459 lotoloperotmg revenues 1.570.028 1.403.441 1.358.134.
Operetop hpenses het for generoton 228.499 219,944 348,069 Purchased power 3 % 975
)
_.470. _95.7 ._ 2_03._11_6 1
- s. Inergy costs 699.456 575,919 551.185 l Other operaten 326,876 799.403 288.954 Momtenance 153.062 147.s73 142.461 Depreciation 124.004 !!5.09 107.419 Totes on property outside the 6ty 12.343 SM2 8.%0 lotol operotmg expenses 1.315.741 1.!!7 Ici 1,198.67?
Operetingincome 254.287 256.260 259,355 Other income-net 1 A.C37 19354 27.984 i e income before debt expenses 212.324 276,014 287,439 Det hpeens . laterest on debt 102,437 H '123 9? J64 A!!cwance for borrowed funds used donng construction (5,674) (y10) (f 754) Iofol debt expenses 4,761 P HT ^3 E; ,, Net income 5 175 561 ; o J $ W3 91 I h f(I f t' fff P ff f tJi N"fij e rve'd j /f t erff r H, n o s.a r P ' ft t' b +1 \ f fiv' T i 1
- Un ihawdd r y A .: s or J) :if
.. nn - . . . . ~ ~ -. , .-
Balance of beginnmilof year $1630.322 ii.W H6 ;1.n2154 Net mrome fer the year l 5, H 1 % :O W l,d55 F.dj ! l!S:S 25.'11 less-Payments to the resene fund of the (ny /3. M7 > 'i s n, N < Bolunce at end of year $U85 701 1 ~ ': s2 '. u M I,, m m ,y. , pen m ,,, ,,,,g.,,e na ai fru ,,9., ,w,,i m,w ,
# (4 dim Aapsen Apemmwd Asw adhun
_,.i.,, _ _ J._ . . . , , _ , _ . . . _ , -
~ h ;
. _ cf i t
' .i i
- i r )
i
,iaw.; - Gv m* +,-
l i
- l. Assets Utility Plant, at twgmal t%f
' $1.749,111 51,539.610 !
hoducten 561,118 545.621 - l Ironsm6sion 1,845.103 . 1,704.800 : Dntntuhen 784.625 256.124 .
.,- General 4.441,283' >
4.046.355 , 1.3 % .344 1,252.336 leu- Aaumulated depietiation 3,084,939 2.194.019 215.435 311,640 ' (omtincten work in progress 27.795
- a Nuclect fuel. of amortued (at _ 24.550 Net uhlity plant 3.374.924 3. t 3).454 ,
I (wrent Assets 119,170 174,430 Deposits with City lienute . (usternei and othei cuountuecevable, leu $2,500 and 53.900 allcwonte foi lones 143.310 110,287 .< 84,535 - ' 88,182 Aarved unbilled ievenue . 74,663 63.009 Morench and supphes, at overoge cost , 56,123 65.897 Fuel for geneinhon Defeated energy costs
- 8.928 hepoyments and other (unent onets , 37.774 30.267 h 7.353 l Totaltunent onets 519.624 lorci one's 53.901.118 53331N!-
s Capitolization ond tlabilities (epitelization 4 Equity
. Retamed income reinvested in the bouneu $1.785.101 51.680.32: ,
104.825 91.352 (ontnbunons in 0:d of comfructmn 1.890,526 1371.674 4 1.408.913 Long term debt 1.554J10 3.444.696 3.180,538 total (cpitoluchon l (wrentliabilities long term debt due withm one yeo 53.545 67 916 l Revenue terblicates paycble 90.000 90.000 30,648 26.157 Autued mievest 4 Aucunts psyable and autued expensa ?!?,380 217.9/3 57.557 73,196 Ovei recovered energy costs intensmn and cihei depo 9ts 15 97/ It6'? 460.057 510 219 Ictal tunent habilities (cmmitmerits and (ontmgenoes total capitolaanon and habihna 53 901 /48 $3100 807 temamnn,a.; ,,en r,. .i., .m.v. nan a me r ,,a.,v.v nw,w , 4 Mr
h (k 1%hl %s M k x )) '04 '4' % (esh flows from Oportating kiivitiest Net income $ 175.561 5 186.847 5 193 585 Adiustments to ieconde net income to net cash provided by operahng ochvihes. Deprecioton 135,558 125,734 115.599 i Amortization of nuckor fun! 7,516 5,936 925 Allowance for borrewed funds used Junng constructen (5,674) (7,759) (3,610) Changes in current assets and habilites: , Customer and other ouounts receivable (3,023) (244) 8,109 Aurved unbdled revenue ' (4,247) (806) (26,246) Meterials and supplies (11,654) (1,189) (4,671) fuel for generchon 9,774 (4,078) 22,032 Deferred energy costs 8,928 17,856 13,753 Prepayments and other current assets (7,509) 1,301 (18.659) kud interest 4.191 (17) 2,753 Acounts payable and ourued expenses (30,593) (72,546) 105,585 Over recoveied energy costs (15,644) 3.935 56,159 brension and other deposits (3350) 2,228 10.485 het cash provided by operchng actmhes 259,434 237,208 496,3_64 Cash flows from linenting Activities: Sole of revenue bonds 198,108 - 98,566 Soleof advancerefundingbends - 47,312 - Amount:eceived from esciow nuount l 72.920 Contnbuhons in aid of constructen 13,473 6,644 5.063 Iteduchon oflong term debt (67,223) (60.835) 3U0!) l' Amount deposited in escrow ouount and offset agomst advance refundmg bonds - (47,312) - long term debt redeemed, includmg co!! premium l- - - (12.9N) f' Payments to the reserve fund of the Gry (70.182) (67,913) (64,353) Net cash provided by (used in) imoncing actmtes 74,176 (122.104) (46.8)5) Cash ! lows from Investing ktivities: l fxpenditures for plant and equipment (328.870) (313,465) (100.758) I Deposits with City Treasurert Net inoeose (deaeose) 4.140 (198,361) 48.801 i- Begmnmg of ye:;r 174 430 372,791, 323.990 End of year S 179.170 $ 114.430 $ 372391 Sepplementaldis<lesere of tesh flewinformation: I (osh po:d dunng the year for interest $ 100.435 5 98 353 5 103 513 1 = lse s< onnonerg nores are en unrevet avr of rues,. r.,m mtvemean L l 1 l 1 to wato,u em owmea new atsa l l 1
' ;l i, {
t a; 4 i Nuclear fwl- Nuclear fuelis cmortized and charged to fuel foi Nefe A-$ssissory eIsigelArsef Arceestisp Mieles T6e ?g ^-lhe Deportment of Water and Power of the City Generchon in the Statement of trkome on the boss of octual theimal ollos Angele exists under and by virtue of the 6ty Chatter enoced energy produced telative to total thermal energy expeced to be pro- . duced over the hfe of the fuel Under the provnions of the Nuclear in 1925 as a separate propsietory agency of the 6ty. The Power System is responsible for the generoton, trommnuon and darnbuten ofWeste . Polky Art of 1982, the Deportment is chorged one mill per ,
- eleant power for sole in the Oty. kilowat: hour on its shore of eleoriory produced by the Polo veide Nuleor Generchng Stahon. The Department retords this charge os o Finessielspessisest posessasies-The fmoncial stotcments of cunent year expense.
the Power Syuem are presented in Conformity weh generoily cuepted cuountmg pnnciples, and substonhally in conformity with ouountmg Naciser decesssississing-Decommissioning of the rolo Verde prinoples prescnbed by the Federal (nergy Regulatory Commnsion and Nudeor Generating Station, m whnh the Power Syuem he on ownc-the Cohfo nio Pubig Utdities Commission except for the method of ship interest, n proieced to stort somehme ofter 7077 The Power aucuntmg for (onhibutens in aid of consnucon desorbed below the System is providmg for its shore el the eshmated futuie decommn-Department is not sutjeo to regulchens of such commnuons. somng costs over the ble of the nuclear powar plant throcgh annual (horges to expense.
- A Nudeor Decommisuomng fund hos been esrobinhed. the semi-Sety plast- The costs of oddihons to uhhty plant and replace-ments of retired un is of property are capitalized. Costs inoudo loboi, annual depo 9ts to the fund plus the intesest earnings on the fund bol-morenols and ollocated indited charges such as engmeeting, superv!- on(e are expected to be suffioent to pay the Department's core of sion, transportohon and con 9:ucion equipment, relitement plan con- decommnsiomng cous, inbutens, and certam adminstrative and general expenses. Repairs and mmoi replacements are charged to momtenance expene lhe Deposits wit 6 Gry Ireeserer-Depouts wh the Gry treasuie' ongmoi cost of propedy tehred, plus removal cost, les salvage, is mduded $161 malmn and $150 milhon at June 30.1988 and 1931 whnh were mvested in short-leim secuanes undet the 6ty lieasurer's f' tharged to ouumalated deprecionon.
pooled investment program, whereby avodobie funds el the Gry and ANeueste der isods seed durisp cesstructies (AFUSQ - its mdependent operatmg departments oie invested on o combmed bous These mvestments are valued at cost, whnh operoximores i AFUDC represents the cut of bonowed funds used for the consnudon of new lochhet AfuDC is capitakted a part of the cost of unhty modet. plant and is cedited to income os a reducion of debt expenses, l but does not represent cash earnmgt The overage AfUDC rates feel for genersfies - Cool mventones are stated at oveioge cost Fuel od inventones are poted at cost, usm; the last m, were 79%,8.8% and 9.1% for hstol yeon 1988,1987 and 1986, respectively fird out method. I- * (estri6stless la eid elcesstructies-Under the proviucm of the 1 "- ^* -Depreoot:en expeine is computed by the straight-line method for all maior proieds completed offer July 1,1913 and foi Gry Chortet, amounts received from cupomers and others for con-all offKe and shop strudures, related Iurmture and equipment, and 9tuomg uhhty plant are combmed mth retamed income remvested in the busmess 10 represent equity for purpose of computng the Power transportahon and construchon equipment. Depreachen for foolines (ompleted pnot to thn date is provided by the 5% unkmg lund Sy9em's borrowmg hmits Auordmgly, contribuhons m cid of com method based nq ashmoted servue hvet Depieachon provi9cn as a snudior are shown m the cuompanymg balon(e sheet m un equity aucunt and are not othet agomst unhty plant Depieachon tot the percentage of overage deprecoble plant was 3.2%,3 2% and 3 3% for incol years 1988,1981 and 1986, respett vely related unhty plant is expemed N I'
w ye i V assesses- Revenueuens61 of bdiings to customers for consumpion Stefenest of(ese News- hi,na tt e mr edd nr , 2) cf slearic energy and mdude amounts resulhng from on energy cost 1988, the DepartmenHmplemented 5!ctennst et finamJ buia9 odiustment formulo designed to permit the full secovery of energy Standoids No. 95, " Statement of (osh Fluc Ashgly, hvel costs. The Department projecn these costs to estchlish the energy cost yeon 1981 and 1986 omounn hcve been restated to conform vrth recovery component of customes billings and any ddleience between the hscal yeo: 1988 presenrohon, bdled and actual energy costs, resulhng in over or unde < recovery of energy cosn, is odi usted in subse: vent bilkro lhe Pcwer System recognizes energy costs in the periad incuned ' Nefe 8- Asseses (eef#icefes and acoves for eshmated unbilled revenues for energy sold but not At June 30,1988 and 1987, the overage interest rate of revenue bdled of the end of o Incol year. cethf(otes payohle nos 4 9h and 4 6% with various me!uttrm The Power System's rates are estchlished by rate ordincoce of up to 242 and 152 days, respecady ihe Departmem has on opproved by the City (ounal. The Power System sells eleths energy unsecured standby Ime of aedit of $90 millian ethxh mey be u e d to other Departmenn of the City at regular rates provided in the if the certdees ccnnot be sehnenced us they mave 0<dinance. S& seed opersfisp espesses - The Power System shares certain Nese( ' ' , 2imser Plent admines!rotive lunchuns with the Department > Water System. Gener. Ihe Powei System has on undmded mierest in several elecinoi genemt ng ally, the (osts of these fundons are allocated on the basis of benehn statens and transmnson systems wruch are smily-mvned wh other urL provided to the Systems. het [ach p<ost portxipnnt hos praided in romen of the tari nn-struden Imonong The Pmwr System's proport:cncte doe of um'is-De&f espeeses- Debt premium, d6 count and issue expenses are hon onc'impioement (osn runcWd m Mc!cnce t ' a R b defened and amornied to income over the hves of the related 6 sues 1938 as fellvwndcllcr umounn m militens) wwe n mr n ,,, ?< w ;w, cWnM kan ko Os W ITsMll AWW/ ifleJd,tfM/ 6.# [ * / 's Polo Verde Nudeur Geneschng Staron (Note G) 51% 209 54'10 5 19 Novop 5 team Generanng Storen 21 2 % 477 179 66 53 Mohave Cool Generanng Storen 20.0% 316 15 21 3 744 106 il Poch interne DC ironsm6 son 5ntem 40 0 % 800 99 I: 3J Other fronsm6sion systems Vorous - 69 14 I I6I 26 3$
~3i2 5 5if2 lie n 4 # h u gniom====rd ear =W h e
mny n - gn y a u , t L The P;,wei Syven wdl incur (ertoin en mmum cperc'mg ct,ti on the Nede f-Imployee 8seelits iomtly owned faciliteuegmdlen of the 01ount of energy genciated a lhe De;citruent has u lumkd (enhbutt sehenst, d%bici erd the otdify to take delivery of its shore of energy generated. The ptopor- dec!h beneht insurance plan (crenny substantelly c!l of its emfoyees. honate share of these expenses is included in the copropiste categores flos benehrs are genemlly based on yeon of service, ege et ret.re rent j of operchng expenses 2 and the employees' highest 12 tonse(ute renths of solary before rehrement, the Department funds retirement plan (osts on a level pre-I mium actuarial method as dete<mmed by the plon's mdependen! octusy. Nefe 8-tesy-feem es6f For fundmg purposes, pnot servke (osts relotmg to the plan are omoi-long-term debt outstondmg at }Une 30,1988, consisted of revenue wed generally ovei a 30 yes pened endmg June 30,2003 bonds and notes due seticily m varying annual amounts through The Power Syvem was cilixoted oppronmcely 76% of the scis 2028. Intere9 rates, whkh vary among individuct motunnes, aser- tofol costs for fuel pm 1987, and 14% for hscal yeci 1936 cmuun!. oged opprommately 6)% cod 6 5% or jene 30,1988 and l'r81 mg to $102 mdhon and 591 mahon, respettmly. As of Ive 311987. The revenue bonds generally are tellable ten yees offer inucoce. the octuonc!Iy (omoured piesent vclue of cuumulo!ed febrement pho Scheduled annuci pnnopol motetes during the hve years suueed- benehrs ortnburchle to the Power Sntem o,lgregmed $1,233 oJa. 6scounted at 8%, of which substennelly cil were vesei - ing lune 30,1988 ore 554 mdhon, $52 mdlen,553 milton, 555 mithon and 556 mdlon, respe(nvely. In la al por 1988. The Deportrnent odepted the ororsens cf State- j ment of financial Aaountmg Standards No 87, "[mployen' Aucunimg I In fmol year 1987 the Power System sold advome refundmg bonds r totdmg 548 mdien. Unhl the bonds to be refunded are called, interest for Pensens" The odepnen of this uctement did not maic cly cited on the casame refunding bands r, pnychle from intevest ecraed on secu. the Deportment s reurs of operanuns Auvquired by the oew wM , utes of the Umred Stats government punhused out of the poceeds of renrement cast is deteimmed u9ng +e pnevehnnett en.w! the scles and he!d m esoow ouounts with (ihtonk, N A , New Yaik At cost methcd lotcl bereh! plcn ccus fu % d m'r l'33 bi " e 8wt June 30,1988,548 mahon of these emow caounts hcve been efhet $sem indude the tuliovnng (can's m neid against the advame refunding bonds m the cuompanymq botence sheet g ;3 (dunng isol year 1988 there were no refunded bonds iedeemed). Aher gm, ,, , g g, g,, 3 l the momes e the emow ouounts are opphed to redeem the bends to g ,,,, g,,.,, 3y be (alled, pt:nopally through 1994, mterest on the advance refunding g,,, emansion and debral % " bonds wdl be payable imm Power System revenues. g , ,, g y Onoway ce un Mi pwinn cw cannne e. pac
.i Notet-Sharedopereringf penses g g, g g,, g l- ""
Operotmg expenses shared with the victer System were 5256 m lhon, ; 5235 mdhon end 5216 mdhon for Imcl years 1988,1987 and 1986. i of which 5167 milhon,5153 mdhon and 5142 mdhon were dictated to I s the Pcwet System. j b I i l l 1 i n i 1 C_ j
ww w i i y(' the pion's funded status at June 30,1988 ollocated to the Paver leep-twar perdosed poirer med fr===inw c wrecte -N Sy tem is as follows (amounts in muons) hponment hos entered into o number ut eneig ord tonwramers ice contracts whgh involve substonnot commitments. These indude on ktuorel pre ent value of beneht obligotens: Veced tmhn $1,300 ogreement with the Intermountom Powet Agency, o Utah Store Ageccy, ha vested benehts 5 los purchese of energy from the Intermountom Power Pioiect (IPP) foi whgh the Power System hos served as the protect manager and operot. kcumulated benehr obhgoien ( 305 howded futues compensoren levels ny mg agent. The Department's total interest in IPP indudes e 44.6%
"t he or pay" obhgaton and on eness powet contmct for 18.2% los Proieced beehr obhganoa L532 a total of 62.8%. Ihe Depertment cho has two agreemenn with the Plan ouets at loe value w3 Southern (chlorne Pubic Power Authonty (SCPPA), o (ch!cm,o Icint Proieced benehr othgaten a cuess of plan cuen Powers Agency, for 67% of 5(PPA's 5.9% entitlement (repmemoj o 369 Umaognved net gom and effeas of changeun oswmpons net 4% port (:ponon) to the energy generateJ ct Pelo verde Nudea 25 Unumaiwed net obligorna of okpron of fA5 81 Generohng Stonen and for 59.5% m the concorr of rtie Soutr eto
[ Jn) fransmisson System, whKh transmits energy frorn IPP in Utch to kuued pensen koihty $ 12
- Southern (chlornia. Signihcont data related to these ageeements, whgh are schedultd to exp;te hom 2022 to 2021, of June 30, Ihe protected beneht obhgaton of June 30,1988 was determ,ned usmg j9gg o discount rote of 8.25% and on assumed iote of moecse in future >.ww compenschon of 6%. The 1988 pen 90n cost was determined u9ng NY. [
o long term late of return on plan ossets of 8% Pico oswts conw _ pnmonly of corporate and government bonds. common stocks. P;le vede %tleur Genem'ag 5'eran mortgage backed secunties and shoo term mvestments (+ =gh WPPAl . ;t % in addifen to the refuement plan, the Deportment provides certom Intemanrom P=' hvo im wt hecith cme benehts to ochve and retired employees. Health core costs 5mthem Iranmen W n ore expensed as pmd undet a wlf insured pion. The cost of providmg M I E "'""*'8 EIIA) 33 M su(h benehts to rented employees, tiet of employee contnbuton5 All these agreements requne the Pcwet Syuem to mcie Pr'r ma omounted to 59 muon,57 muon and 56 milien far hscal years imum payments, whgh are based upon debt servue serements. WW 1988,1987 cod 1986, respechvely. these payments are bred charges (of approumotety 5330 nden m each of the next hve years), the Desertment is cho required to pov oddironoi omounts (of opproximately 5120 muon in ecch of the nest Nefe 6-fesudfuesses and (esfingoedas Irve yects) for operotmg and momienance costs related ta cc!ual dehv-Poyassses se the reserve fund elf 6e Gry- Under the provisens enes of energy under these agreements ictal pcyments uncer !nese of the Gry (horter, the Power System hanslets funds of its disueton to centrods were oppmmmateh 5320 mAon. 5260 mucn and $20 mil. the reserve fund of the 6ty. Such payments are not m heu cf taxes and hon m hscal years 1988,1987 and 1986, respenvers These avre-are recorded as distnbutons of retamed income the Department expeos gate punhosed power costs are secovered it rouch t se enemy cast to make poyments of 578 muon m hscal year 1989 hem the Pow" recovery component of customer bungs. s System to the reserve fund of the 6tV Ihe Department cho has a controd througn 2017 urh the U 5 Department of inergy for the punhose of ovcilable enenn gnero ec at the Itoover Power Plant. The Department s sbcre of c:pi:orv at movei cppronmates 500 meoowatts. ' e4 astans enews.nsemim. I
, . J I
s . ;
'i 1
l 1 i I Nedser insurasse- As a por+ opont in the Pcle Vento Nudear Geaer- Nefe N-$s6sequestIvest oting Stanon, the Department could be subiets to cuenment of ietro- ' As of lu:y 1,1988, on umui6nent to na en.sem Pw, any spective insurance premium odiustments in the event of a nucleos bond resoluhon piavides for it.e use of sniplus comnocon lu* ft+n incident at Polo Veide or at any othet kensed teoctor in the Unned the Inteimountom Powei Pioiect. As o memtet poetiopoor n! Its States. prole (t, the Department expeth to re< ewe 5110 mil hen donng the next three to leur years representmg its shore of such surplus funds lhe funds will be used to reduce lhe Deportnent's future purchesed
%- A number ol(loims and suits are pending against the Department for alleged domoges to persons and propeity and for other power expense.
clleged liabilihes onsmg out of in operchons. In the opinion of monoge-ment, the unmsured liabihty undef these ochons would not morenully 1 offect the Power System's Imanool pc9non o, of June 30,1988 i e
,,9#.
1
\
k
- August 31,1988 Io the Bacid of Wofer and Power Commissioners ,
Department of Water and Power ; ll Oty of Los Angeles
^
l I In out opinion, the cuompanymg balon(e sheet and the relored statements of m(ome and refamed m(ome remvested m me buunm and of cash f tm , l loirly, in cil matenal fespeth. the fmonool posmon of the Power System of the Depor! ment of Water and Power of me Gry of las Angeles at June 1987, and the results of its operations and its (osh flows for each of the three yeois m the pened ended June 30,1988, m conformity wim generah ouapted 0:(ountmg prmoples. Those fmanool statements are the respon9haty of the Department's monogement, our respenucility 6 to eip:en en opuuon on thes* Imonual statements based on our ou&b. We conducted our custs of these stcremenh in cuordon(e weh generoliv uurpied cudifica sMndmt, wh ch re,uim thof we plan and perform the cust to oli.cin reasonable onurance about whether tile hnanaal statements are hee of meterd mintotement h ouet nides exammmg, on a test bous, evidence supportmg the amounts and $stlosures m the fmanool statemenh onenmg the uuountmq ponoples uud cnd u.p M i e'.hmotes made by management, and evaluotmg the overall Imanoul statement presenrotion We bekeve that our nu6h prsvide o recsmble tosn b 'I'e opimon expreswd above. AAlCl AW><- 45
-fm O .-- _, L_,-u-.__...____....-._.-__.- , . - . _ _ . ~ _ _ _ . . , . _ . . _ . . - . - . _ _ _ . . . . , , , , . , . _ . _ . _ . , . . . ~
_ _ - _ . _ . . . ._ . . _ . . - . . . = . . _ . . . - . ~ ~ - . . . . . ~ .-
, ,.-,m. ,,i i
fis'i 5 is . ' '. 's.fi. , f;:
, r 6
' 6 n\49 ress *ey nu '.h v;
- $letement ofincene Operarmg iennues
- f. ' Re9dential . . $ 94 $ $ 92.4 5 84.2 5 19 0 5 12 & '
I (ommeticaland indusfrel 142 4 1352 122 9 111 I 96 9 l Governmentof andother 14.3 14 6 13 4 13 0 t1.1 1, ,-{ . fire hydrants 41 41 40 40 39 j Mis (ellaneous 1.7 1.9 l5 .._,.12 . . , . - .10
;L Total revenues $ 251.0 5 2484 5 2760 5 2083
'~ 5 18) 7 i 1
. Operonng income 54 1 69.9 69 4 67 a .54 6 " - ' As % of revenues 21 1% 20 1 %^ 301% 32 6% 2' 1%
Lt income 5 34.4 5 44 6 5 61 8 5 63 3 5 . 58 4 Bolence $heet . J ' ' Net uhlity plant 5 9888
$1.114 7 51.046 1 5 40? 2 5 8266 Capital tipenstures 104 8 ' 99 I 112 8 101 5 ' 40 8 (epitoliration 1 . Iquity - 822 3 168 5 112.1 642 6 570 3 long term debt 3502 285 6 305 0 374 6 .3391 !
1.112.5 1.054 1 1.011.1 96? ? 8/94 Debt es % of net utAN plant
- 302% 25 3 % 28 0 % 321h 3140 iterest on debt 23 7 22 0 23 2 23 3 18 3 ,
Payments to (ity of L. A. 12 4 11 3 10 4 94 73 3 Operations
~
Gallons sold (billions) 203 6 210 1 204 3 ?:3 ; 'E ) (ustomers-overage nu'mber (thousands) 631 8 632 J 6301 oJ) 4 W 4' Average revenue per hundred tu. ft, sold (m cents) - Residenhol 92 8 81.2 81 8 li ! !? 0 Commertml and industnal 93 6 81 5 81 1 /$ s ?? : Water supply (in (u. ft. per second -t.l.s.) lo(al supply 166 9 131 0 it15 l64
- O;i !
DWP Aqueduct 513 6 661 4 611 8 ?l)9 3 73' 5 Metropolitan Water Dntrict 207 I 171.1 !?3 9 64 8 39 s Gross supply 948 2 915 5 940 2 939 i Mii Diversion liom (to)localstorage (0 3) (17) (6 6) :6 o ;13 m Net supply te distributen systems 947 9 913 8 933 6 $17 5 m6 natuees ,rmee wn and esvance ,etentma ,omse bns u a .< ,,, w,.,-., i ,,, e i
i ,11 '
.g.g ..
\'. .,
.- ( ,
a 4, r .- , 9 T: s .
+
k - 4 ,, , .
*- 4 y
N
- h. :M g
, W
- 4 .
.y x .
e
; : .t g . -, :
i ge.,
, s ;
4 ", * '
? -
gm e
' . . , . : . g.
'\
-4 8-jf .
; ,g
.e t
e,
'. \ .
.g. -A a
u
;g- -
; - M
*e-
; :. 1 s 4 s
h'- f g+ + 4 i
* 't
. F' k .. .,.
ed , WQ ,
,, %$ s_
4tm . .. .c + v
.i
- as
.s. ,-
$4 " 41 1 g g p 4.g v'y. '
't'
$ Wi v..le. M tm J%5' -8,. . . .
. p sy,
- . - 4=
4 d g - - . :. , 1 T ,. - . ' es
- g gy _
, 4 s,
% .- i; s s ,
s , .. tt
, t*
- s g ( %9 a, ,
8; ; ' j ' ; .
= 4 ,
- r. g -
, s e- '. yn e3 ;- ,
4 - s
.. f' + .
W 7{
- n. *
,l .
y i .. . ,,
" . P .
ce
I m o,k . M > ,
- . i -
, -a l
697r
' ($ sw! ' 'W Pg,' %
- en sy; -
. ~ . . = - __ _ .
. . Statenrent oflateae .
Operotmg revenues I Residentml $ 4301 5 388.7 5 3793 0 3130 ' S 3)!.? ; Commental andindushm! t,085 5 9631 932 2 559.2 m/ Street lighting and othet 39 1 38 2 3; 9 48 5 41.6 hstdoneous 14 i . 7.3 13.4
. _ 85 6 5 .- y
,. . Totallevenues $1,570 0 $1,403.4 $l.358.1' $1.288 0 $1.117.5 '
, Operotmo income 254 3 256 3 2n 5 259.5 24 4 i: As % of revenues ' 16.2 % 16 h 19 A 213% 20.5 %
Net income $ 175 6 5 1868 $ 1916 5 2136 5 1655-Bolence Sheet Net utility clon! $3.324.9 53.133 5 52,943 9 $b% 1 ' 52.5'ri 1 j (cpital expenditures 3345 321.2 434 4 ';; 7
'50 1
. (cpitalitction Iquity 1.890 5 1,111.7 1.646 I 1.511 8 ' 1,341.5 longlerm debt 1,554 2 1,408 9 1.476.1 e1.442
.- 1.416.. 1 '
3.444 1 3.180 6 3.122 7 2.952 0 2.817 6 - '; Debt es % of nei unhty plant' 46 1 % 44 5 % 49 3 % 57. 6 53 % Intercs! on debt 102 4 96.9 91.5 96 1 93 5
- Payments to (ity of L. A . 70 2 61.9 64 4 53 9 ,55 3 -
Operations l Xilowatt hours sold (tillions) 21 1 20 5 21 3 6e i; :
~
Customers-everage number (thousant) 13046 1,215 9 1.262 0 ! 20 : 2 0.; Astrege revenue per kah scid (m cents) Residentml 17 11 61 4I 50 Commeraalondindustrial 7.3 63 66 33 5/ ' Inergy production (bdhon kah) Hydro I8 29 38 49 62 Thermal 20 1 15 9 13 3 23 J1 Total gerierorion 21.9 18 8 17.1 17 2 16 i Pur(hows 26 43 58 ei 7: loral produtnon 24 5 23 1 22.9 23 l 23 6 Net system (cpebility (thcusand megawatts) Hydro I9 I9 !9 1^ i .9 Oiland ges owned 31 13 3.3 12 32 50 52 52 5' Li Jomiy owned ' ti Ii 10 firm purchcses I3 1)
~
12 13 /4 l3 6'
- - m. .mmmmmm. --mm
- fh!E$1M I4 WON PO?t1 $%* 4 s *'t it'fil'll % Wri %t OYA5 n M din wn oroarmee a wee et hue b
,.y.
) .
z k h
" " ~ -
.g %
I . W i
- 4 9 *
- d. i. .
w ., .,
.. 4
'Opersemstimenen * ,- - . Edainten htlipid j l
4 1 1 , i
, '. , j ..
,. ,. 'f g ..
i i I .
'i..
e
'e t
" 4
- A' -
j {A.,
- i
-; , i, 7'
{ j, '?{ ?
,,g
} .j . I .
. s , t 1
1 {, t, l,ili.):.. e; 4 .* , k$.' .
, ,
- EN '
n%mmen . 4- " . o -; -
- g. g .g.. .. .
'[ . . .
l- -i ' 4 4' , .y -
' M .:< _ ,
~; ; h ; 3. -
.l 9
...3. - : '
A -- 0 r.= - E - 4,4 , .
.g ,
; ll ,
. ,. l _
b . s ;
.- :' ,. I c . ., .. ... ,
Y d
^
;' it ,9 ,
R
--$ a .
A y
- .)
, 'y * -
. -t
~.
\
i I
'l H
cc h h
- There are 105 fonks and reservoirs in the 0WP's Water The DWP receives firm power from geerating statirs System. They range from o capacity of 10,000 gallons , located in Cohfornia, Arizona, Nevado, and Utah
]
to 60 billion gallons. ! DWP customers received about 30 percent of their electricity 1 Crowley take, 300 miles north of los Angeles, is the from the intermountain Power Project in utoh during the
' largest reservoir in the DWP system. It holds 60 billion fiscal year.
l galicas of water. The DWP's Paciht Interfie is the longest DC transminien
. The los' Angeles Owens River Ageduct is about 338 miles . line in the world. l long and has been in service for 75 years.
There are more than 289,000 wooden pcrer nies ens
, The Second los Angeles Aqueduct was completed in 1970 owned or icintly oned by the DWP.
andis about 177 miles long. Los Angeles hcs more than 2,200 miles of erderground los Angeles hos more than 7,000 miles of we'a pipehne. distribution cable. The overage per capito cons; mpr.n of water in los Angeles Over the Icst 50 years the cost ci Mrg has goce a is 181 gallons per day. , more than three times es much as % as b ' A . c in los Angeles The anual precipitation in the los Angeles basin is 15.05 inches. A dnp from a water faucet con weste 1,500 gallons of water every month. There are more than 53,000 fire hydrants in los Angeles. so re aia w =,a anea w n
--v- r+.-*-., wv.-we..+. -....e- _. -_ ______--...-.,-_-w_ .- __ _.m.-. , , , ,._.-_-_____-_____ --m___--____- - - . - ____-..-.----_wme-w
' '. ! I I
r, l
.i .]
o; l 1
.1 Generating facilities in s ,
other western states are ploying larper reles in 1he ii a g.g l city's poser supply. Water, ** 98t*
, also imported from hon. !
dreds of miles away,is ,.
;i brought to L A. by eqw. ,
Ongen , x l dat to serw tlw needs el )' eg.
. the 3.4 million popelehen, f
.$ --- Weersemen (
,'- - resar supply 1 l
-'s%~
' hhk Ironumw tme l
Cablernis l, p bemounen ' Power kt J
- l. <
. ~ .
h t.
\ O' .i \
Owm Gage \ Navas : (diorma f ,,
%,1 ,,,n,,,,, Sm- -
(5fom Wo* \ .Mne %, i g.3 e l b,I-\ K-K l \
\
\
%w( toe po e, poni s* $5"0" @/) meed 5.eng 58
. <_ 1,,./.h me.
i I. Pouel Mont 4 ll M-Smle l Artgeng (- mohave Generating
; los Angeies m.o: Sm- n.
- a vahy Generonne 5:enon 4,so a kot* good Generanne Sanon a Hevnes Generanng Smnon pse verae a Natu Generanng Svm Gereofmg Smnon a
B i
$l
- p. .a. r,, ., . .
. m ,. . ... .u. , ..r,
,.. i, 4-
, , ., .[
H, ,
~
'i 1
- p. .,,.
s e T. , 1 y;, ) ': , SOUTHERN CAuf0RNIA EDESON CounsNr ' i
. , -. ,, .t
* ;+ ^
1988 AnnualReport; i 2
.i >
.t 4 b - Vi
,p
,:.r , dU, Ii
' t 3
1
+
. ,5 i
r 9 i t-1- 7
, '4
. .: s t.
p, ' l I' ' 1 I 1- i 1-l l 9 I i l l l Southern California Edison i. 4 P* $ e * +-wee- - =-w- a -__-a.--e--_eew+--m --.._,-,_m --.s--e__ -e- -+s ----ew---*w+
l l 1 ANNUAL REP 0ft? l This is the Annual Report to Preferred Shareholders of Southem Califomia Edloon Company ) (Wie Company) for the year onded Dooomber 31,1988. This report is being provided to holders c4 the i Company's Cumulative Preferred Stock and $100 Cumulethe Preferred Stock in connection with the i Annual Meeting of Shareholders to be held at 10:00 a.m. on Thursday, April 20,1989, at the industry l Huis aM Sheraton Resort, One Industry Hills Parkway City of industry, Califomia. This report i contains the Company's audited financial statements for the 1900 flecal year and other information i of interest to the Company's shareholders. l l ABOUT THE CORAPANY The Company was incorporated in 1909 under Cailfomia low and is a public utility primarily j l,. engaged in the business of supplying electric enargy to a 80,000 aguere< nile area of central and j wouthem Califomia, excluding the City of Los Angeles and certeln other cities, This area indudes i some 800 cities and communities snd a population of muro than ten minion people. As of December j ls. 31,196$ the Corr %g had 16,660 emp;oyeres, j On July 1,1964, ife Co'npany became a subsidisty of a new *attaing compey. SCEcorp. Eech ! sJma or tre ComtAny3 Common Stock and Orighal Pesterred StorA won oorverted into Commer. ! tLeoca of SCEcorp. Tdia Cumeisthe P$ermd Sto% nnd $100 Camuleeve Profc' tad Stock wsre r.:t j l' aftm.ted 6rd conynuo to be to;uritlet of the Company. Somert at of the currently outstandkg .t
!Awam0.t Stoci< o' the Cornpany is owned by SOEcom, thes Anrum flepor*, to Shusholoma is boir<g I provirW.1 only to noiders of tra Corr.pany's prefetted ttcaka. j i
i-
)
i
*l l
l l, k i f r i l ' 1 t f ( t f
gs
. 1 0 !
i i l' 1 SOUTHERN CAUPOANIA EtM90N COMPANY [ 00NSOUDATED STATEMENTS OF INCOME weer sneed neeemmer 31
. 1900 1987 1998 (in thousenes)
Oposseng novenue. Sales _. . . . . . . . . . 08.004.330 86.448.043 86.276.647 Other...._.... .: .c _ .. 78.870 53 638 43,110 l Total opereteng revenue . . . - . . . . . . . . . . . . . . ~ . . . _ 5,938.908 6.502.290 6.318 967 , Opemung Esponses. l Fuel . . . . . . . . . . _ . . . . . . . .. . . . . _ . . . . 971.978 1.091.978 005.376 : f Purchemed peser._ . . .-.~ .m . . . . . . . . . . . _ , . . . . . . . . . 1,3M.831 700.000 776.414 ! i Prevesne for reguistory soluotment oi4uese-net... . . . . . . . . . . - 340.001 til.1M 386.630 i Other operstm0 empensee . .. ...-._. ..,..... ...., - . . . . 870,98& 8%0.447 380.872 J 14 r'tenance _ .. ~ . . . . .. . .... .. ,.. ..=.. . . . . .._, 376.003 M1 tot 862,000 (
. . Cep'vedsetW 8N1 det>tmesserung ... . . _ , . . . . . - . . W4.896 649.810 M .230 1 hbhe tause ... . .z. . .. -.-.....e. .. m ~.......... 4 tufa 6 % 5.433 607.52G r.x5.rty end or
- m a . ... .. ..,... . ..... ..... .... ... ... .. tu.m s e1. sis ua 3_2i ;
few wuwpenue .. .. ... . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . ,f.,tsos j.s7c.ies .1.xsat' I p op.es wome .. . . _ ... . .._. . .._ ..__ ... .. - . . . .. .. _ip.um mi,0 __mm l os.,inseme ens assuequ e ; Nunec piam oca onne (sois 8>... .. .. =........_.....m. - oa.w3) (m.m; " inoeme =es-nurmw neont eiunonenos. ... .. .. . ...... .. .... . . - 76.sie ei.e.u i erove ear ro w pr ea nm . . . .. . .. ... .. .. ... ... ...... .. ... no.us 137.s32 m.sn Amorenr+ #a outy tunee used enng wmewon.... . . .. .. . .__. ta.in 73 40a 50s.n4 i L imweennm . - . . . . .. ...-. . -. . ._ .. .. . . . a.m e7.9x 107.re < E Tues on repwet.no ine . ........ :.. ... , . . . . . . .._.._ ..... m.64n oe.w) (u m l l' . or.w-nc............_..............-.,....._.... _,,,g943- is.us 24a i "htai otw hoor+-not . . . . . . . . . . . . . . , . . . . . . . . . . . . . . 280316 16d.209 IO,291 treeme actora interest Erpense. ._ . . . . . . . . . . . . 1.?A3.1'8 1.096.319 1.0 t 6.780 ( - interest Egunes'. fr tortet on long term detst and amorttraton . . . . . . 430.015 397.099 432.40P , Other interoet expones : . 107.413 80.963 92.592 Allowance for terrowed funce used ounng construction _- (11.088) (42.926) (23.478) Capnointed interest.- _. . . . . . . (1#,414) (19.646) (27.824) Total interoet expense-not . . . . . . . 801.738 416.000 457.898 inseme Gotere Cumule#ve 39eet of e Change in _" : _ ._, Prtnolple...... . ... 731.306 679 239 $$7.842 . i Cumulettvo efloot on pror yeere (to Decomter 31.1996) of socruing l l l untillied revenue-not of income ts of $64.t&2.00Q (Note 2). - 68.044 - Not ineame
. . . .. . . . . . . . . . . . - 731.308 747.283 557.842 ohwenos on cumuienve pretwred and pretor noe stock . . . . . . . . . . da.ees 50.00s 54 as4 senunge Aveeshie ter Commen steek- ...... t e44.000 s 607.18e $ $03.19s The accompanying notes are an integral part of these financial statements.
F 1
u p
)
i a i l SOUTHERN CAUPORNIA EDt90N COSARANY CONSOUDATED BALANCE SHEETS ASSETS o.es== si, l isse $ser i On oiouseasel l 4 Plant: .
]
utuny piant, at original cost (Note 3) ............................................. 816,M7,8M $14,465.691 i Laes-Acoumulated prov6sion for depreciation and i escommissioning (Note 3) ......................... ............................. . 4,829,930 3.993.468 j 11.187,912 10,472,223 l Construction work in progress .................... ................... 878,175 1,232.990 ! Nuclear fuel, at amortised oost ................ ................................. .. 478,764 547.786 J s 12,309,851 12.253.999 f Lan-Propony4eisted accumuwd deferred income inn...... $1932 s4o.u3 ^ Totai utsty pwnt ..... .... ..... .-... ........ .... .. . ... ......... . ..... ............ _L1AM,stt 3,412.c56 l Other Proper'N ensi investmente ! I Non6Wrf property.--lose nowmu',ated provis,ou for ! deproc6st6on of $13144,000 ar.d $121,835.000 at , respec0ve dates .........~ ... ..... .. ......... ..... . ..... ....... ........., . 45,tM 47,482 ! , Nuclear decommissioning trusts, at cost......... .......................... 137,006 - ! Other investments ................... ........... ...... ..... ......... .... ....... ...... ... . 28,978 _ 23,483 {
. Total other propstty and investments......................... . ,... .. 234.902 70.965 :
, e~ Current Assets: Cash and eq uiv ale nts .... .... .... .... ........ . ... .. _ ... . ... .... ... ....... .... 23,7*2 32.452 l Receivables. Includr.g unbilled revenue, less s'lowances : of $13.140,000 and $14.8?9,000 fo< uncotactbo accounts at respective dates ............ .............. ...... .. .... . ...... 690,547 615,397 ; Fuel stock ..... ................. ..... ... ......................................... 125,303 118.540 Materials and supplies, at average cost........................................ 96,767 105,577 Regulatory balancing accounts-not ............................................. 395,026 621,635 Prepayments and other current assets ..................... ................... 81,145 78.242 { Total current as sets.... ................ .......... ......... ........................ 1,412,060 1.571.B43 : Deterred Chargee: Unamortired debt issuance and reacquisition expense............... 296,064 301,741 ; Rate phase-in plan ............................ ..... ...................... 435,941 239.760 Other deferred charges ..................................... 138,593 132.040 l Total deferred charges ......... ......... ..... ........ .......... 870,628 673.541 Total assets : ............ .............................. $13,909,899 $13,729.205 e
===
l . The accompanying notes are an integral part of these financial statements i 6 i i 2
SOUTNERN CAUPORNIA EDISON C004PANY CONGOUDATED BALANCE SHEETS CAPITALIZATION AND LIABILITIES Deeember 31, 1ses iss7 p moveense) CapiteRastion (see seeempanying stesoments): i Common stock, at par value, 217,444,062 and "4 217,126,001 shares outstanding at respectia dates................ 8 006,017 8 904,694 Addit 6onal paid.in capital .............. ......................................... ...... 1,264,872 1,307,758 Retained earnings ............................ .............................................. 2,391,703 2.329.174 i Common shareholder's equity (Note 3) ......................................... 4.584,592 4,541,626 Preferred and preference stock: Not subjec to mandatory redempt6on...................................... 368,7M 361.238
, .g Sub&ct to mendatory redemption .................................. ..... .... 239,037 277,538 <., L ong sow det;t ... . . ....... .. ..... ......... . . . .... ... ., ,......... ..... . . .. ........ ..... ... _5 22J2,667 4,915.329 l Tott ! . Lpitalia ation ........ .......... . ,. ..~....... .......... ...... .. -..s. 10,M7,041 JO 095.730 !
Other luyd. Term Webil? dea .....s.................. ...... 2.m......................... 138,810 _ 113 345-6 Curwnt Gebelities: -
; Current po1607 of bng-toim debt and re%erroie ;
i profe. red and preiercoce stock .......... ......... .. .. ....... ........... 148,917 101,555 o> hW.>rmdet...............................,............................... MS,2M 665.839 ! I' %:Ws pt ya ble . . . ... . ... ..... - ..... . .. ... .. .. ... . .. .... . .. .... .. . . . ... ... 424,314 441,628 l
/mru9d ta .e s .. .... . .. . . . ... ... . . . ... . . .. . . . . . .. .. .. . .. .. ... .. . . ... .. . . . .. .. . . 435,030 .571.006 Accrued intere st ... .....- .. .. .. . ... .. ............ .. ................. . .... .............. 117,142 106.259 )
t Dividends pa ya Lde ...... ......... . ........ .. ... ... .......................... .......... 136,1bF 133.281 1 Accumulated deforttd income taxer -rv I....... .. ...... ...... ............ 164,354 235,921 - Deferred unbilled revenue and other.. .......................... 297,217 347.445 - I Total current liabilities ................................. ............................ 2,394,482 2.542,936 ) Deferred Credits. Accumulated deferred investment tax credits ............................... 507,844 525,750 ! Accumulated deferred income taxes-net..................................... 2H,493 176.835 H Customer advances and other deferred credits ........................... 247,437 274,606 Total deferred credits ........................................................ .... ... 1,011,596 977,191 l l Commitments and Caf_*: :':s l l (Notes 1, 3, 8, 9, and 10) J Total capitellaetten and liabinties....................................... 813,909,899 $13.729.205 i l The accompanying notes are an integral part of these financial statements. I i i l I i I l 3 I
< t i #1 ;
f SOUTHERN CAllPORNLA E04 SON COMPANY ! CONSOLIDATED STATEMENTS OF CASH PLOWS L voor sneed oseemser 31 ! 1sst iss7 issa f pn smeenes) l Cash Plows Prem Operating Activilles: l Notincome....................................................................... 8 731,385 $ 747.283 $ $$7,882 , Adjustments for noncash items: ! Depreciation and decommiwsloning.............. 644,036 5#9.810 506.230 ! Amortiz ation........ . . ..... .. . ................ ... ... .. ... ....... .. .. ...... 147,875 156.900 129,800 } Nuclear plant disallowance-not ................................ - 70,347 208.218 ; Allowance for funds used during construction.......... (38,000) (116.332) (135.222) : Rate phase 4n plan ............... ....................................... (196,181) (149,110) (30,650) ! Regulatory deferreis-onergy exploration prop... - 61,637 21,748 ; Deterred income taxes and investment tax credits.. 104,574 143.978 266.430 ' j Other-net................................................................... (5,434) 22.439 8,391 4 Changes in working ospital components: ,
, R eceivable s . . .. . .. . . .. .... ..... ...... . ..... ... ... .. . ... . ... . .. .. . .. .. .. (75,150) (252.403) (18:343) ,
' Regulatory balancing accounts ... ..,........................... 226,6N 0,120 ;
(31.548) Fuel stock, materiait ed supplies ........................... 2,047 133,510 3.214 l Propovments a.*d other current assets....... . ... ....... Q.943) (3.723) 29,159 , Accrued interest argt toxos ........, . .... .... . .. ... . .. .... (43,242) 8,384 222,2G3 , Accounts payable and other current liab1 ties..... ... (95,638) _ 264,631 4 8.7.33 , 1.387,630 1 GQ,Q 1,774,973 ! Cash Pinwo Prem Finanaing Activities: - Issoances of longetemi debt.............. ............ ..... .... . . 622,6id4 132.548 1,436,675 j Repayments ot pj. term debt... ...... ............... ... ...... (328.612) (275.02() {1395936) . Red 2mption cf preferred and p(efHence stock............ (48,775) (17,712) (200.525) i f4 clear fuel financing .......... .......... ....... ......... ....... ... . (16,549) (56,191; (46.51S) ; Short term debt financings-net ... ........... .... ............... 58,410 175.810 232.240 Capital transfers and dividend payments . .............. ..... (716,460) (63 ,463) (553.389) (4.'1,106) (684.034) (735.453) l Cash Plows Prem investing ActMtles: ; Conetruction expenditures ...................... ........ ......... .... (817,025) (1,021.177) (1,156.387) ! Contnbutions to decommissioning funds......... (157,006) - - l Other-net....................................................................... 8,357 5.635 15.297 (985,754) 3 015.542) (1.141,090) l Doorease in cash and equivalente... .. .... ... ...... ... (9,230) (73,685) (101,570) Cash and equivalents, beginning of year.......... . .. ..... 32,452 106,137 207.707 Cash and equivalents. end of year.. ....... ...... .......... $ 23,222 $ 32.452 $ 106,137 Noncash investing and Financing ActMties: Conversion of 5.20% convertible preference stock...... 82,100 $ 414 $ 845 , Conversion of subordinated debentures = ......... 2,973 3,136 2.849 ' The accompanying notes are an integral part of these financial statements. . 4 I
\
8 j I 4
7 r i i 1 l SOUTHERN CAUPORNIA EDISON C0h0PANY l 00NPOUDATED STATERAENTS OF CAPITALIZATION Deewnmm 31, f' 1900 1987 On eneumendel i' Om em OmpTY (see sesempanyeng sesseniante)... 8 4.M4.600 8 4.541.626 , Pampennmo me merenmeossToom- r Deseneer 31,1900 ! test eetgest to atenseepy Seisse nesonymen ; Sense O!8esonding enes
====r===M.. !
Cumuleeve preserved , i NO Per Wales: 4.00 % 1.000.000 8 26.50 . . . . . . . . . . _ 36,000 25.000 : 4J4 1.300.000 26 30 . . . . . . . . . . . 30.000 30.000 4.32 1.063.420 28.75 41.336 41.336 4.78 1.298.700 25.80 __ 32.410 32.419 , 5.00 2.200.000 25.25 . .- 65.000 55.000
$100 per Wlue: 7.98 750.000 101.00 , 75.000 75.000 .
8.70 900.000 104.00 ..........-.4 80.000 50.000 B.M 148.l.000 104.23 . - . 50.000 50.000 Proserence: PW f*ervetec 3 E verwerutto w..-...............-.....,. _ 2, _ 2 03 , _ Su.7ss __ m1.au Seeks 4 to aug i testemptenthMat' , Cirmene preterret 6180 Per Unlue: 7.39% fA7.301 $103.5 . . . . . _ . . . . M.733 e0 000 ; i 7.00 , 443.493 104.62 . 44.M0 51.000 ,
- 8.64 815.A0 i(3 65 ..=... . ..- . 81.600 63.75C '
87W 433*% 110.00 . 43.312 45,$J7 i 1241 4 W ort 80551 .......- . . . . . . . 43,0M 150.000 036 iter Umene. 7.375 - - . . . . . . . . .. ... . . - 2P.064 - 250.900 39 fs51 [ l Preterred enc preference stock to to redeemed we.tw1 one year.= . _.. (11,633) ( _ 22.013n l Totel _. . . - . . . . . . . . . -_ . . 239 K F 277.538 , LOleG.Tante DEST-Forst and refunding mortgego , bonde dNo)- . I testartly interest notee , 1900 through 1992 4%% to 84% .. 475.000 672.000 1993 through 1997 6%% to 9% 1.125.000 1.000.000 1908 through 2002 84% to 9% 400.000 500.000 i 2003 through 2007 9%% to 9 95%... ... . 270.750 264.000 2000 through 2020 9%% to 13% ... - 1.267.476 1.064.413 3,796.226 3.540.413 l Polluton control bonde(dNf): 1900 through 2015 6%% to 10%% and venntne. 947,730 897.730 i Funde held by trustone . . . . . . - _ (11.119) (10.472) Decentures and notee(cNdk 1992 through 1993 9.6% to 11% 211.500 202.973 Nuoteer fuel indebtednese(dMg) . .. . ... . 424.164 379.029 . l Long term dont due withm one yeartd).... (133.064) (79.542) Unemortered debt <*an=rit- . net . -
.. (22.844) (14.803)
Total . . . . . . . 5.212.857 4.915.328 Teesi Capiteenseen. . . .- $10,367 041 $10.095.730 Notes to Consolidated Statements of Capitalization are on the following page. The accompanying notes are an integral part of these financial statements. 5 1
\
f i 6 SOUTHERN CAUPORN4A EDISON COMPANY ! NOTES TO CONSOLIDATED PINANCIAL STATEMENTS f NOTE 14e/. Restructuring and P'repeeed Merger I On July 1,1988, SCEcorp soquired the outstanding common stock of Southern California - Edison Company (the Company) under a merger agreement approved by shareholders on April 21, 1988. The Company's common shareholders became holders of SCEoorp's common stock on a share for. share basis. Each share of the Company's outstanding original preferred stock was , converted into 2.1 shares of SCEcorp's common stock. The Company's remaining preferred stock ' and debt scourtties were not exchanged or transferred to SCEcorp. The Company's equity invest-ment in nonutility subsidiarios was transferred to SCEcorp at book value on July 1,1984. The !
+ accompanying consolidated financial statomonts hav6 been restated to reflect the financial position ,
and results of operations of the Company as presently structured. The effect on not income of l aMog the earnings of nonutility companies that were formerly the Company's subsidiaries is - reflected in the table below. ; [ Veer snese l December 31 ; its? 190s (en henseense) Not income crew.rsey reponed ... _ 4tht.62f4 $Tes.617 , assia.am-me . - osa m> 1 t.nm. -m.e, m.o ,e s.w.
. .mi.
. . . . m _.... .... .... . ... __
. . . . ........._.__m___ m.xs, n7.sm -
w.on.,e.-_.._.........._._....._._._..____ m gg . i Oh November 30,168, SCEcc@, #s Company, ard San Diego Gas & Electric Coraper<y , L ('lDG&E) executed an sgrooment to tt.orge 5,0GLE 'rvto f.he Company. Under the terms of Jie rnarger agseement, SC'Ecorp will exchar"Je 1.3 st art.s of its newer leeued common stock er each . SDG&E common share. SOGaE preferrec and prsforence stock will be exchanged for ECEcorp preferred and preference stock w!th similar provisions, except that ohndereds on occh series will be increaepd utwean 2.5% and 20.0% The merger is subject to auprerial of the str.arah:iders of ; 1CEcorp, the Company, an? $0G8 E te.'oll as regulatory agenases including it.e Catfornia Pub 2 - Utilities Commission (CPUC) and the Federal Energy Regulatory Commission (CERC). , t l NCRE 2-Summary of Significant Account 6ng Policies conoodidealen PoAlcy-The consolidated financial statements include the accounts of the Company, its wholly owned financing subsidiary, SCE Capital Company, and other utility rotated subsidiaries which are not considered significant for financial reporting purposes. All signtAcant intercompany transactions y have been eliminated, except intercompany profits from energy sales to the Company by unregulat-ed, energy-producing affiliates, which are allowed in rates.
^::: .^ ; Princfples-The Company is regulated by the CPUC and the FERC. The accompanying consolidated i
financial statements reflect the ratemaking policies of these comnuselons, as applied to the Com-I pany, in conformity with generally accepted accounting pnncepton applicable to rate-regulated enterprises. Uenty Mont-The costs of plant additions, including replacements and betterments, are capitalized and included in utility plant. Capitalized costs include direct material and labor, construction overhead, and an allowance for debt and equity funds used to finance construction. The cost of property that is replaced or retired-and related removal costs. less salvage-es charged to the accumulated provision for depreciation. Accumulated deferred income taxes related to utility plant are presented as a deduction from utility plant to conform with ratemaking procochares usad to determine rate base. 8
hs 1 i SOUTNERN CALIPORNIA Edit 0N COMPANY NOTES TO CONSOLIDATED PINANCIAL STATEMENTS (Centlnued) NOTE 9-Sununary of SignMeent t::S.e Polleles--(oontinued) l l Annemonee ter Funnie Used Duning Construcelen (APUCC)- l AFUDC represents the oost of debt and equity funds that finance construction of utility plant. I Capitalized AFUDC is reported in the consolidated statements of income as a reduction of Interest charges for the debt component and as other income for the equity component. AFUDC and plant construction oosts are rooovered when completed projects are placed into commercial operat6on, and the recovery of related depreolation is authorized through customer rates, tefore 1987, the oost of debt included in the AFUDC calculation was redwood by the tax benefit realized from deductmg the related interest expense from taxable income. As a result of changes in j the treatment of interest expense for income tax purposes, protax interest expones was used to j compute the debt component of AFUDC beginning in 1987. The AFUDC rate, which reflects i samlannual compounding, was 10.78% for 1988 and 11.67% for 1987 under the protax method. The i
, rete was 10.53% for 1986 under the prov6ous not-of tax method.
Deprooineien and T:::.--- '_ :' .L; Depreciation of atility plant, except nucieur fuel, is computed on a straight lir,c, remairung4fe tesis. The estimated cost of deco pra:stionh;i the Compart/s nuclear gtnerstmg facutt4s is $713 1 trille eno it, recovemd in rato, throusn anneal tilowance's coarpoo to deprov. coon expenne. Rotall ) rates for 1908, and connin pdo? yetts, included ansal decommissbritng favenue requirements, j which lerve been deposited in trust funde unt!! decommission'fg begins. Tmst fund co1tribut ons are invo.ted in high. grade recunt6ea. Approxima'ely 80% of the truv. fund contribut6or,s quellfy as tax
. deductions.
Nucletifuel~ l i , Tbe cost of nuclear fuel, inclutsng its dis,posat,la etnortized on the bas'.s or cercaton ar>d is chargfr/ to fuel expense.',n wordance with ratomAing proceduras adopted by the CPliC, n'Jcl6ar , l Met financing costs aid cap.talized unt!I the fuel!s placed No production. Research, De;:!:;=t, and Demonstreeien (ROAD)- RD&D costs not related to a specific project ara expensed in the year incurred. RD&D costs i related to specific construction projects are capitalized until it is determined whether they will result l in construction of plant. If construction does not result, the costs are charged to expense, j RD&D costs are reflected in the following table: veer sneed December 31, 1000 1907 1900 l l (in theueende)
$42,893 $47,122 l RD&D costs charged to expense,_ s43,414 I RD&D costs cotorte:Pcapitaltred.. .
17,4ss 14.855 3.888 . Total RD&D costs: . sa0.000 s57.748 $51.010 ) Commencing in 1988, a balancing account has been established for RD&D costs charged to . expense. Under this mechanism, the Company is required to refund to ratepayers any authorized but unspent RD&D funds at the end of the three-year rate-case cycle ending December 31,1990. Unemertisad Debt Isevance and Reecquisition Expense-Debt premium, discount, and issuance expenses are amortized over the lives of the related issuances. The expense of reacquiring bonds that are redeemed without refunding are amortized over the period the debt would have remained outstanding. The reacquisition expenses are amor-tized over the lives of the new debt issues when debt is reacquired with refunding. 9 i
I i i SOUTNERN CAUPORNIA Edit 0N COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE : r n , nn ;eentinued) ! In addmon, revenue accrued to rooover prior years' ownership costs, which is associated with > the construction costs disallowed by the CPUC, has been written off from the MAAC balancing account. The Company recorded after tax charges against earnings of approximately $15 million for i 1986 and $70 million for 1987. Enonw Cent ,";::::T^,;;^ l The CPUC's Division of Ratepeyer Advocates (DRA) recommended that the CPUC disallow j
$124 million of energy costs incurred between late 1984 and late 1987. Approximately $120 mill 6on ,
of the proposed disallowanos represents alleged overpayments to nonutility power producers, including e6sctnotty purchased by the Company from a 300-MW oogeneration facliity owned by Kern ! M6ver Cogenerat6on Company (KRCC). Mission Energy Company, which is one of SCEcorp's ! nonuttitty subcidiaries, is a partner in the KRCC facility. The DRA's proposed disallowanoe in relation ! to power purchases from KRCC is approximately $37 million. In upcoming CPUC hearings, the l Company will demonstrate that the power purchases from KRCC actually saved its customers more i than $24 million dur6ng the three years under consideration, compared with the " Standard offer" contract approved by the CPUC, The DRA also alleges overpayments by the Company undai 17 other contracts negotktted with nonutility power produoors the.t are not SCEcorp affiliates. The > Company sigr,od those contracts dunng the early 6tages of Callfernia'r4 offerts to rapidly develop , afternata and renewattle energy resources. At that time the pneted paces unds thast 17 ! contracts woro at or below avoided cost standard contracts over the!r I!vss. ; in M4 tion to its remommended ansrgy Onstn e sailowarece, the DRA has tromnwde that 5a l CPUC mod!?) its 6arly 1988 decis9n that siutnort?od forr.ation of a holding compsny. j Although the probable effect that the cytcomo cf this matter mil have on not income cannot be d4terrnined at this time, the Company boileves that adoction of tt:e DRA's rcuomnencate,;,n to - * , mwidy the holding company decision is not nocensary to prottTt Ine 9uhhc interer,t ?.nd w;ll work : clqmnt>y to deraor* strate that it has reasonably act,inisternd $s ovvacts undet v#rm, 0000 ! prm46rgt Ste schedueet; tu tskt place later this year, ,
\
Assade Asses-in accordance with FERC procedures, resale revenue is subject to refund with interest if I l subsequently disallowed. The Company believes that any refunds resulting from pending rate procGedings, should not have a material effect on not incorne. NOTE 4--Short Term Debt f The Company maintains unrestricted deposits of approximately $7 million at commercial banks and pays annual commitment fees of up to .1% to maintain lines of credit which may be utilized at negot6ated or bank index rates and which totaled $1.9 billion on December 31,1988. Approximate'y
$1.3 billion of these lines of credit support commercial paper and other borrowings to finance general cash requirements; fuel inventories; and undercollections in regulatory balancing accounts.
The remaining $600 million of these lines of credit are available for the long term refinancing of
. Certain variable-rate pollution-control indebtedness. -
12 i l , V - .. - - - _ - -- - . - __ _ _ _ _ _ _ __ _ _ __ _ _ _ _ _ __ ___ - _
g. g , . - .
~
Ms .j !I It g! i ~.l ,
}i lj,1 fi ll ll! l!! lj i a' l
; Is e lj l111gil4 liimanlin! 41 3!g, i' :
iilt i
.i ;
g@ i 2[gc fiP'jj!jlIdgj hu l _4 , _ y;; t$ 1 ,,13 14 ;3 gn. :
!ali n; d!l Ill 4- !
a ; ga a a a a e : e eeee . u s . s ! i
? . .
j Li ' l i
. 5 0 ,
i ~
~ ~ ~ ~ ~
,l s i Ab sg h,gs 'Ik ,k '
r . _ _ _ 3 __. g gp y . j --- "1 N .f t n 1 !
.;, g,4 gaygs. g, g ., , . .
L YdNN }#! g ,,Ipml'[fl _ _._ll l ipu a ; l }, sill W= idi!!liI i- _n ' iq!lijl t=: if]jjM i l l !illll r i= t jiiIN!j l " l
~
m!!!d il lilif
>is l!lIlill!!
Ll n ,s.r, e l
~ 1 ilij
=
1..... _ .. 3 1 I
! ill:
sin 9t! fr i 3 ![! h If!- ! 7
...._...__m . - , ...- __ _. _ _ . . . . - . _ _ . . . ___... _ _ _ ._... - _ ..._...._ _ _._ ...____. --- - .
f f t' Af[j[35 g I- I .{ Ni A. ; - qj
- f. I i "
; j ri
! n:ps i 3
ig I 3
)
ii 4 ,e: . . "i.i iiiii i i wi > li ,n:gii 1
* ' \ U i-f 85 ! \ ,['$f
~
ll}[glFUj! , I Ij!rpl;[rll 1 wL' : ly i nj yeq u a; j!I r L "
!3109,i l f ! I l l d l,I !
i e u ). : l'['e.djlijjilt. g ll! !!iljf .
;ip t
3 g r -
. i jl!j i ura r rr - o g
e g. j =uplli
, iqi. . in
l SOUTNERN CAUPORNIA EDISON COMPANY , NOTES TO CONSOUQATED FINANCIAL STATEMENTS (Continued) I i' NOTE 4-Short Term Debt-(eentinued) The Company's short *orm debt is comprised of: ; oseember 31 ; 1900 1987 i (in mellene) Generol purpose. . . . . _ . . . _ . . . . . . . . . t 87.1 s 3s.8 t metanome asoounce . . . . _ _ .... .... 400.0 400.0
. Fuel .. ... .. _ . .. _ .... . .. 835.3 518.3 Total borromnge supponed ty 16nes of credit. .. .. _ .~ . . . ... .. 1.003.4 964.1 .i Lees: Amount reonesothed as long. term.. _ ..... . . . .. _ .. 338.8 2M.3 :
unemorn.do.s.ouni. ._...... .- _ ......... s.3 - woishonisr. dooi _... . _._ ._ ... - . . . _ . . . _ e me.3 me.8 I NOTE 5-ineeme Taxes The Company and its subsidiaries are included in SCEcorp's consolidated federal income tax and combined state franchise tax returns. Under income tax allocat6on agreements each affiliate
- calculates its tax liability separately.
CurrerW anaf Denorred Taxee-l Income tax expense includes the current tax liabliity from operations, and deferred income i 1 taxes provided on onrtain items of income and expense whiren are reported in differont periods for
- l. tax and financial reporting purposes.
The curtent e and deferred components of incom3 tax expense are: f veer f ated ossember 11, IM9 1987 i t'2 . t (in thousande) ; Queet , 1 Coveral .. ._..~.. . s. . m....._.. ..~.......c . . . _ . . . . . . , . . . . . . . . $278TA $'J9tl ,06/. $34P,034
- Stete . .. ..- . . . . . . . . . . . . . . . . . . . . , tel/.4 _1 P1075, 117.177 .
l 344.1?t $15.133 4tS.211 ! Dodembe-bWated e N! state- l l} ; i invoat'nor.t and f:narty 1st credto-not. .. . . . .. _ . . . . . . . ... (* 4.076) (15.C74) WJ37 i Depreciatic a. ... . ~ . .. .. ~... .... . ....-.s... . . . . . 144.240 172.713 170.5M Regulosory bv!arcvg accounts ... . . . . . . . . . . . . . . (79.400) (33.<,63) (21.400) Debt reecquisttson 6xpenses. .... (2,007) (1.390) 81.968 Fuel contract settlemer'te.. - (1.900) 16.002 9.528 Nucteer plant detallowance.. ... . -
- (70.616) (61.066) '
Cumunettve o#ect of sooounting change . ..
$8.752 -
Capiteaired exploration and deve60pment expensee . . . - (31.330) , UntWited revenue . . . - ...~..- . (94.430) (27.467) - Rate phase.en plan - 78.743 68.797 46.398 Flmed charpos. ... ... . 7.994 (14.178) (45.538) . Contnbuttone in a+d of construction - (28,836) (14.000) - i Other 23.076 _ (33.587) (14.986) 1N.574 97,736 196.298 Total income tax exoense.- . 4484,762 $613.875 $661.509 Classencaden of income tesee:
*ncluded in operating expenses- 6412.106 $555,433 $687.520 t included en other income -
74.647 78.306 35.654 Nuclear plant detallowance- . (78.616) (61.665) Related tu cumulattve e#ect of accounting change - 58.752 - Total income tas empense -
$488.752 $613.875 5661.509 13
i ! I i l ! I SOUTHERN CAUPORNIA EDISON COMPANY NOTES TO CON 00uGATED PINANCIAL STATEMENTS (Continued) l [ . NOTE S-Inseme Taxee-(oontinued) Accumulated deferred investment tax credits are amortized over the lives of the related i proporties. i r t l Cash payments for income taxes were $500.8 million in 1988, $497.1 million in 1987, and $311.8 mimon in 1988. The following table reconciles the dieerences between recorded state and federal income taxes i and amounts determmed on income before taxes by applying the federal statutory tax rate. The
', federal and composite federal and state statutory income tax rates are 34% and 40.138%, respec.
#vely, for 1988; 40% and 48,138%, respectively, for 1987; and 48% and 51.184%, respectively, for 1888. ,
Veer Ended osoember 31, i 1000 1987 1 _. 980 l
.' On theuesnes) ;
Empacted fecerol 6nooms tax expones et sistutory rete. . 0 414.447 8 544.4s3 $ $00.920 i increams (aeoreese) in income tax expones resulting from: 1 Anowance for equay and borrowed tunos used cunne i construcean . .. .. _ . . . ,.. .... .. ... ......_ . . is.1st) (29.362) (s2.202) Peoeral osauceon for stets taxes on income _. . .. .. .. (36.400) (47.046) (63.200) Deproceton tmng OWierence not colerred .. . . 70.294 96.042 102.536 Sesee tax provieson . . m .. ... . ._. . .... 106.647 117.614 115.060 Pnor voors' escommesesoneng. . ... (18,714) - - i.ue.ar ,== n een enos ._ _._.__ . _ . _ - (4 n 0> ss.o42 m oinor mio,enome. _ .._ _ __._... _ _. . . . . in.m) _ <n.m> (s u 4ai ; row inoo,no m t,x,.n . .. _ .. . . _ . . . . _ . . . _ . 0 7m i eis. tis esi. sos e,en me.. _ .... .__ . . .. . . .. . . . St.zam p m ie. g i Ellecove tax re's potel income tax expanee + oretax income)...- 40.1% _ 45.1 % 54.2 % . Deterred income taxes for tkx depreciation prior to 1981 and certain construction overbteds i have not t.ven prov60ed t:ftause the tex effects of such timing didforences are not Allowed for reta0 ) ratemering purposes until the taxes become payable. The cumulative not arrount of thess tinting disiarences was St.d 'o6llion on Docombet '31.1988, md 1987. l Rotemaking s.x::".;t . j 1 in 1988, the CPUC began an invest 6gation to evaluate the effects of the Tax Reform Act of 1986 on retomaking procedures. Revenue for recovery of income tax expense for 1987 and subseqi ant periods was collected subject to refund pending a CPUC decision. In October 1988, the Company refunded approximately $51 million through the ERAM balancing account, in compilance with an August 1988 CPUC interim resolut6on. Final CPUC approval of the amounts refunded is pending. Because the Company had previously provided a reserve for this ) llem, refunds to customers have not and are not expected to have any significant effect on not income. > l Now Accounting Standard-Under accounting rules currently in effect, deferred income tax balances are not adjusted to reflect changes in tax law or rates. However, a new accounting standard will require such adjust- l monts beginning in 19EO. The new standard requires significant balance sheet adjustments. The Company will record addit 6onal deferred income taxes related to the equity component of AFUDC, which is currently l recorded on an after tax basis; the debt component of AFUDC, which was recorded on a not of tax 14 1
- - - . . - - . - - .-s ,, ,._v ,,,_,,,_,,,,,-.,my w, _ , _ , ,, y,..,, . .. , , , , , , < w -- rm- wc- e--w-e-*-*'--m7avf+v -m v
--mw- vew -w- w-
l 4 i i SOUTNERN CAUPORNIA EDISON COIAPANY , 1 NOTES TO CONSOUO4TED PINANCIAL STATEMENTS (Continued) I NOTE S-Inseme Tamee-(eentinued) i basis prior to 1987; and other temporary differonoss for which deferred income taxes have not been ! provided, i Additional balance sheet adjustments will be recorded for the not reduction in deferred income ; toit liatWities resulting from income tax rate changeel the recognition of deferred income tax assets attributable to the reduction of the book basis of property by unamortized investment tax credits; j and to clasalty property-related accumulated deferred taxes as a liability instead of a reduction of [ udMy plant. l The mekrity of additional detstred-tax assets and liabilities will be offset by record 6ng regulatory , assets and 16atWities representing the anticipated effects of these adjustments on customer rates. ; Such regulatory assets and liabilities will be adjusted as they are recovered or refunded through the ! ratomaking process and for changes in tax rates or laws. j NOTE" "- 7,x Beneet Plans i Annaion Pilse-The Cow.any has a trustood noncontributory defined-bonefit pension plan, oovering substan. , tialbf til full-time employees wno fulfill minimum serviot requirements. Benefits are based on years of accredited service and average compensaton. The Company's policy is to fund the plan on s , level prom 6um actuarial me' hod, provided that t.nnual contrilArtions meet the mir.imum fursding
- requiroir. ants of the Empbyee Retirement incomo Securify Act and co not exceed ihe maximum deductible amount under income tax regulations. Prior service costs frr.,m pension plan amendments - ,
we ferded ever 30 ysar penocs. tn 1957, a new recounting standard for d666pd b8093t plans was implen*ntoJ that Changed j the basis fo* notonnining per;sion expent.o. Setors 19#7, pontion ocet we.t based on the actuatici nthod used to detetriline annual contributter.: to ins p',an. For 1966, oension expense amounted to f48.6 million, i Pension expense under the new standard includes the following components: ; veer Enses Dooomber 31, i tass iss7 (in thousenes) Not ponten expones: Service cost for benente samed. . . - - 8 48.340 $ as.s2s
- Interest ooet on protected benent ot*getion . 101.24s 91.026 i Actual return on plan assets... .. (133.887) (130.723) ;
Not amorttaation and oeferral.. 40.610 46 s99 i Pension hatetty pursuant to scoount6ng stawards. St.612 $3.s30 Regulatory adjustment- - . . - . . . . (e,41s) (3.481) Not pension oost recognised_ $ es.Oss 8 50.144 in conformity with the accounting principles for rate-regulated enterprisos, regulatory adjust. ments have been recorded to reflect,in not income, the pension costs calculated under the actuarial method used for ratemaking tarposes. The difference between pension costs calculated for ac. < counting and ratemaking pwposes has been recorded as a deferred charge on the consolidated balance sheets. 15 s I w'y -v e-~----
I~ i r l l t SOUTNERN CAUPORNIA EDISON COMPANY i NOTES TO CONSOUDATED PINANCIAL STATEMENTS (Continued) NOTE 6--4mployee toneet C.- (eenlinued) l The plan's funded status is presented below: l i Desenhor 31, t 1000 iter [ (in eeusense) i Amunnel present venue of tieront ot*petions: ! weed tenen. . . .... . . . . .. . . _ . . s tw. ins son.est ! weavened isnon. . ... .. .._. - . . . . . . . es. set sr.3os ; Acoumuisted tenett otegaten . ..., .... . . ..m.. . _. . ..... ....... 9Fs.Ft1 est.2s0 i Value of protected future componesten leveie .. .. .. aas.308 372.00s l Propected tenont oI*08#en . .. . _.. ....- .. . . ... .. _.. 81.40s.8se 1.1.230.3s3 j Pian eensie et iest wesue . - .. - . . . . . . . . . . . . . _ . . . _ et,3es.sas $1.201.sso : i tenont ot*penon in emosos of pien essete.............. .. . . . . . . 9 tes.44el 8 (ts.303) Unroeognized not goon . ... . . . . . . . . . . . . . . . (40.081) (101.st2) ! Unrecognised not ot*getion teing emortised over 17 yeare., ...... _ 88.440 ss.1s3 i Acorued pension hetsny. . - . .... . . . . . . . . . . . . 8 (41.sas) 8 (36.202) ! t Aneumphone for oefmed tenoht poneson plan, r Discount rate ... ... . ..... ......: _ . . . . . . . . . . . 8.0% 8.6% Rate of increses in future componostion.- . . . ......... s.0% s.0% ILxpected long. term rets of return on soneto _.o...._....,. 8.8% 8.6% Assets of the plan consist primarily of common stocks, corporets and govemment bonds, short- t term investments, and guaranteed investment contracts, i smpwree sneek Pnm- i
- s. .
The Company maintains an Employee Stock Owne. ship Man (ESOP) and a Stock Savings Plus ! Plan (SSPP). designed to supplement employees' retirement income. Contributions to the ESOP , i worn funded primarily by fecieral incorae tax benef.9s and contntn ooons by employees. Cornpany , contributions to the SGPP were $16.9 million in 1988, $16.6 rnillion in 1987, and $15.4 million in 1986. i 00rer Poet.Empkyment BenetNe~ ; Herdth care and We insurance are provided for retired employees a':o their oopendents. Grouo i Hfe inswanoe is provideo through an insurance company. fleerb caro is provided by a cortbinetion of Compant acilities f sind insurance programs. The costs of those twnefits for retirees were $22.8 : million in 1988, $18.0 maiori in 1987, and $15.4 md!6on in f 086. ; NOTE 7-ti.O; Owned Utl#ty Projects f The Company owns undivided interests in several generating stations and transmission sys- l tems, for which each participant provides its own financing. The ,,vyviG0iiste share of expenses ! pertaining to such projects is included in the appropriate operating expense category in the i 16
, . . . _ - . . , , _.# ...e., -,, - . _ - _ . , , , _ _ _ y-
; SOUTNERN CALIPORNIA EDISON COMPANY l
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) i l' I NOTE 7--Joiney owned Utility Projecto -(continued) !
' j consolidated statements of income. The table boiow presents the investments in each project as ;
includeft in the consolidated balance sheet as of December 31,1968: ! On thouseneel ; Plant in Acousmaisted unser ownership i serv 6ee Depseelston Ceneerustan enesseet ; i El parado honeminato.1 Syeesm, . . . .. . $ 21.649 8 8.9e0 $ 100 to.00%(e) l Pour Comore Cool Genereeng Stemors-Unne 4 and 6 ....... 401,142 122.013 11.306 48.00 I Mohove Cool Generenne Staten- .. . . .- - : 233.70s 96.919 877 to 00 i Peone imeros oc wanemineian Sremm ............ 115.047 34.07s os.660 60.00 i Pelo Veros Nucteer Genereeng Stetson.... - . 1.4a3.307 80.010 8.348 15.80 San onotre Nucesor Genereeng Stemon; l unn 1 .... .... . . .. ... . . . - 637.022 153.see 23.2e1 e0.00 . Urute 2 and 3 ..- - - - 2.769.741 477.623 18.004 76.06 i Common teostees-Orvte 2 and 3 819.030 114.846 1.0s3 76 06 : Common teamties-Urute 1,2. and 3. - 176.130 28.864 3.599 75.87 l Yume Ame Genersang Station . _. 12.300 10.516 69 33.30 ! rotel....... . . . . . . . . . . . _ . . - 96.539.146 $1.127.746 8137.154 I (e) Repreeome e compoono rate. i i NOTE 4-Leases ; The Company leases automotive, computer, ofhoe, and miscellaneous equipment through ; operating rental agreements with varying terms, prr' visions, and 6xpiration dates. At December 31, l 1988, estimated remaining rental commitments fut noncancelable operating leases were as follows: i veer ansed Decemaer g on thweenas) , i 1989.... ..... . . . ... . . . . , = .. . $ 28.264 r
- t 993. .. .. .. . ... . . . ... . .. . . . . . . . .. . . . - . . .. 25.227 !
1991 .....
. . . . . . . . . . _ _ . .. . . . . . . . . . . . . . . . . . . . 22.354 l 1392- .......... .... .~ . . . . . . . .. . . . ... .. . . . . . . . . . . - . . . . . . . - . . . ... 18.926 ,
196 - . . . .. . . , . . - . . . . . . . . . . . . . . . . . . . . . . 14,637 For penoos veroefter. ... ... . .. ... ...:- . . . 26.2*6 j ru ,uu. r.mai oomm.mme .. . .. .. .. _.. .._ . . - .. - . _ m , On . tune 10,19W. a wholly owned subsidiary purchased the leasing company from which the l Company leas 9d its nuclear fuel, by assuming the masing company's commercial paper obligations. , On March 1,1988, the Company assumed the commercial paper obligations of the affiliated nuclear i fuel lessor and terminated the nuclear fuel lease agreement. Lease liabilities supported by commer- L cial paper borrowings, which had been classified as long. term obligations, have been reclassifed as ; long. term debt to conform with the financial statement presentation of nuclear fuel financing on ! December 31,1988. The long. term debt amount represents the estimated repayment of commercial > paper based upon expected nuclear fuel consumption subsequent to one year after the balance sheet date and is supported by refinancing agreements with commercial banks. NOTE 9-Commitments ! r Construcelon Program and fuel Supply- l As of December 31,1988, the Company's construction expenditures are estimated to be $802 ; million for 1989,$704 million for 1990, and $713 million for 1991, in addition, minimum long. term , commitments of approximately $1,607 million existed as of December 31,1988, under fuel supply ! contracts. 17
-...--,-,._.-,,n,
-- - -w, ,, ----,------m---n- . . - .,---m.-a -+-, -,n,.--, , - ~ - - - - - - , , < - - - - , -- - --,,.,w,---
i I SOUTHERN CALIPORNIA EDISON COMPihNY ; NOTES TO CONSOLIOhTED FINANCIAL STATEMENTS (Continued) l 000TE O
-r C ' continued)
Leap.16nn Purchened Power and honom6eason Conennete- t The Company has contracted to purchase port 6ons of the generating output of certain facilities [ and to purchase firm transmission service when appropriate. Although there is no investment in ! such facilities, these contracts provide for minimum payments based, in part, on the debt service ! requwements of the provider, whether or not the facility or transmission line is operable. None of ( times power contracts prov6de, or are expected to provide, more than 5% of ourrent or estimated i future operating capacity, j The oost of power and firm trammission service obtained under these contracts, including payments made when a facility or transmission line is not operating, is included in purchased power and other operating expenses, respectively, in the consolidated statements of income. Purchased power oosts are generally recoverable through the ECAC balancing account procedure. Selected , 4 infortnat6on pertaining to these contracts on Dooember 31,1988, is summartzed as follows: l Pwehenes wonemmenen 1 Power servese - vmers oorwoois empwo .... .... ....... ..m ..........._........._.... - _ 1990 2017 1900-201s I share of eeectw operstmo capocrty-megewens, . . . . . . 473.6.s27.5 < share or energy output.... .. ._. .. . . . . . . . . . . 6.6451000% ; i Meeuwed mamum armuni payments on thousenes) tese. . .~. . . . . . . . . - . ...... $ 4c.4es s 9.033 i 1 ae0 .. . _ . . ... . . ...... . . . - . . . . _ . . 13.es4 6.030 - 1sei - . _ . . . . . . . . . . . . . . . . . . . . . . . . . . _ . . 2.600 4.629 1 set,. .. . . . . . - . . . . . . . . . . . . . . . . . 2.500 4.422 1ses . .. -. . - - . . . . 2.600 4.267 Thereener. __ -.. ..... ..m .... . . . so.375 es.11s Toimi . . .C. . ... ... ... . . g s.11,4 199 Purchased power costs were $121.5 million in 1988, $118.0 million in 1987, and $115.3 million in . l 1998. Transmission costs were $11.4 million in 1988, $11.2 million in 1987, and $12.0 million in 1986. NOTE 10-C&.E;mies , Nuteene insurance- j j On August 22,1988 Cor9tess amended the Price Andcroon Act, extending it until August 1 j 2002. vt increased-rn $7.6 billion from $720 m,thon--thr limit on public liability claims that could arise from a nuclear incider1. Participants in San Or,ofte and Palo Verde have purchased the max; mum private primary insurance available, which currently is $200 million. The balance is to be 1 covered by the industry's retrospective rating plan, using deferred premium charges. This secon- l dary level of financial protection is required by the Nuclear Regulatory Commission (NRC). The maximum amount of the deferred premium that may be charged for each nuclear incident is $63 million per reactor, but not more than $10 million por reactor may be charged in any one year for each incident. The Company could be required to pay a maximum of $183.6 mill 6on per nuclear inc6 dent, on the basis of its ownership interests in San Or.ofre and Palo Verde, but it would have to pay no more than $29.1 million per incident in any one year. Such amounts include a 5% surcharge that would be applicable in the event that additional funds are needed to satisfy public liability claims, and are subject to adjustment for inflation. Property damage insurance cc', ors losses up to $500 million at San Onofre and Palo Verde. Decontamination liability and proporty damage coverage in excess of the primary $500 million layer i has also been purchased, exceeding NRC requirements. insurance covering part of the additional expense of replacement pawer, which could result from an accident related nuclear unit outage, is I also provided. After the first 21 weeks of such an outage, a maximum weekly indemnity of $2.7 million for a single unit for 52 weeks begins. An additional $1.4 million por week is provided for the 18 i
. ~ _ . . _ _ . _ . . _ , . - _ . _ . _ . , . _ . . _ _ _ _ _ _ . _ . _ _ _ _ _ . . . _ _ _ _ _ _ _ _ _ _ . _ _ . _ _ _ _ _ _ . _ ,
l l SOUTHERN CALIPORN6A EDISON CORAPANY I 1 J NOTES TO CONSOLIDATED PINANCIAL STATEt0ENTS (Continued) NOTE e t._ ;: .:'::-Hoentinued) next $2 weeks. These policies are issued primar!!y by mutual insurance companies owned by , utibelos with nuclear facilities, if losses at any nuclear facility cover 6d by the arrangement were to I exceed the accumulated funds available for these insurance programs, the Company could be i aseeeeed retrospective premium adjustments of up to $54.0 million por year. Insuranos premiums : are charged to operating expenses. l NN in 1978, Ave rese6e oustomers filed a suit in federal district court, alleging violation of antitrust , laws. The complaint seeks monetary damages, a trebling of such damages, and certain injunctive ' rollet. The complaint alleges that the Company engaged in anticompetitive behavior by charging more for electriolly it sori to rossie customers than it charged osttain classes of retail customers. The complaint also alleges that the Company acted alone and in conoort with other utilities to prevent or limit such resale customers from obtaining bulk power supplies from other sources to j reduce or replace the resale customers' purchases from the Company. The plaintiffs estimate that their actual damages, before trebling, were approximately $99.5 million from February 1,1978, through December 31,1986. The trial began on July 8,1986, and concluded on September 26,1986. l The Company flied findings of fact and conclusions of law with the court on November 21,1986. A l decision is pending. I
- in 1983, another resale oustomer also flied a suit in federal district court, alleging violation of certain antitrust laws. The customer alleges that it has been denied access to lower cost power and ;
was overcharged for power purchases as well as other operational and financial damages. On July , 17,1988, the Company recolved the customer's antitrust damage study alleging total damages of I approximate 75135 million before trebling. A trial date of November 14,1989, has boon set. l The foregoing proceedings involve complex issuee of law and fact. Although the Company is -f unable to predict the final outcome, it has categorically den 6ed the rossie customers' allegations. l f i D 9 1 19
. _ _ , - __-._m,,y,, , ~,. _ . - . .,_
. -~ . - . . . . - - - . . . -
- t i
i i i I SOUTHERN CAUPORNIA EDISON cot 4PANY l teenagement's Dioeussion and Analysis of Roeults of Operstlene and Financial Conseillen . RESULTS JP OPERATIONS i innt ge Sumnery Et n6ngs available for common stock in 1988 decreased $12.5 million or 1.8% compared to the , prior iear. The decrease is primarily attributable to the reduction in the California Public Utilities ! Com nission's (CPUC) authorized rate of return on common equity from 13.9% in 1987 to 12.75% in , 190L,15everal items offset the negative impact of the CPUC's reduction in authorized retum on ; cormion equity, including the CPUC's approval of non-fuel expense levels that more accurately t reflect current operating costs, management's continued emphasis on oost containment and a CPUC eward for favorable coal-plant operating performanos. Operating Revenue and Se600 Approximately 98% of operating revenue represents retail sales that are subject to rate ' regulation by the CPUC. The remaining revenue is from sales to wholesale customers, which are regulated by the Federal Energy Regulatory Commission (FERC). Operating revenue increased by $430.6 million, or 7.8%, over last year, reflecting a 3.6% incrosse in kilowatt-hour sales. *he increase in revenue is attributable to a 3.9% increase in retail sales volume that resulted from the addition of more than 114,000 new customers and the effect of , rate changes. Rosale sales volume declined 5.4% due to the availability of alternative energy sources to resale customers, increases in operating revenue of 3.4% in 1987 and 2.6% in 1986 i reflect, in addition to rate changes, a 5.1% retail sales volume increase in 1987 nd a 1.2% sales volume decline in 1986. The table below presents the changes in major components of operating revenue which > contributed to the overall variation from prior years. I g) - , Deeember 31, . i 1900 1987 1996 (in salmlene) operstmg Revenue- Sn6es Sees rete changes.. . 00 4.8 $ (6.5) $ 61.8 Balanciag account rete changes : -
.. (484.9) 30.2 97.9 Seios volume changeo-Reta61 m . 208.2 255 6 91.3 Saios vo6ume chenges-Rosane. .. z :- - . . . . (6.s) (106.3) (1' 7.2) other .. . . ~ . . . . . _ . 23.0 10 6 30 , . Tow .. ..... .... .. .. _ . .
meim Rate changes that became effective January 1,1989, are profocted to increase revenue by $77.7 million, or 1.3%. The CPUC approved an attrition increase of $116.4 million to recognize increases in nonfuel expenses and to increase the Company's authorized rate of retum on common equity to 13.0% . from 12.75%. In separate proceedings, the CPUC authortzed a $77.1-million rate decrease after the ! Company completed full recovery of uranium contract settlement payments and granted a $38.4 million rate increase for additional plant investment in the San Onofre Nuclear Generating Station. Operating Drpenses ; Operating expenses for 1988 increased by $343.9 million, or 7.5%, over 1987, compared with l increases of $191.0 million, or 4.4% in 1987, and $173.8 million, or 4.1% in 1986. Fuel expense declined $119.0 million, or 10.9% in 1988, compared with an increase of $226.6 million in 1987, and a decrease of $812.4 million in 1986. The reduction in fuel expense for 1988 is the result of increased . nuclear generation which displaced higher cost natural gas generation. The Company operated higher cost non-nuclear fuel-burning power plants less because of an increase in mandatory 20 ( .
.--.-e.-.m-.w-..---..u.----- . . . - . - . . , , - - . - - . - . . - - - . . . - - - . . . - , - - , . _ . - - . - - . - , - . . . . . - . ~ . . - - - - - - - . - -
i l i purchases of power from nonutility produoors at CPUC-mandated rates that exooeded rates for economy purchases. Purchae9d power expense increased by $464.2 million, or $8.2%, over 1987, f The efloat on camings of fuel and purchased power oost fluctuations is minimized by regulatory j adjuotment mechanisms established by the CPUC and the FERC. j Provisions for regulatory adjustment clauses for 1988 reflect not overcollections of $240.7 ! million. The overoollections are attributable to growth in kilowatt hour sales: CPUC authorized i recovery of previously deferred energy costs through the Energy Cost Adjustment Clause; and i rN- %i.on of deferrect costs under an adjustmo,it clause that was established to recover costs of ! n.,a system additions. l System growth, including the addition of the Balsam Meadow Hydro Project, which commenced !
; oommercial operetion in December 1987, and Palo Verde Nuclear Generating Stat 6on (Palo Verde) ;
Unit 3, which was placed into commercial operat6on in January 1988, contributed significantly to the i increase of $20.5 million in other operating expenses. , Depreciation and decommissioning expones increased during 1988 by $94.2 million of which $44.8 l million is attributed to higher levels of decommissioning expense Luthorized by the CPUC The remain- j der of the increase results from increased depreciat6on due to system growth, as described above. l Taxes on operating inoome for 1988 decreased $143.3 million, compared to 1987 resulting ! primarily from lower corporate tax rates instituted by the Tax Reform Act of 1986. However, the ! lower tax rates were offset by reduced electricity rates for customers and, therefore, had little or no effect on not income. l Oaker inoeme and inoeme Deelueelone l Utilities capitallre an allowanos for funds used during construction (AFUDC) which represents ! the cost of debt and equity capital used to finance construction of plant additions. Completion of the ! Balsam Meadow Hydro Project and Palo Verde Unit 3 contributed significantly to a $86.3 million decline in AFUDC compared to 1987. AFUDC has declined ste2.dlly over the past three years, as the r construct 60n of major projects has been completed and the facilities placed into service. t The $20.7 million increase in 1988 interest income over 1987, resulted from higher interest rates on - invested cash and increases in the average amounts of cash investments and regulatory asset balances. Signficant A-:::L.:.; Changes in accordance with changes in accour. ting standatde for rate-regulated enterprises, in the first quarter of 1988 the Company rocorded a noncash write off against income of approximately $193 ; million, not of related income tax effects, for disallowed costs on its investment in nuclear facilities. ' As permitted by the nevf Accoun'J ng standard, the Company adopted these changes by restating the financial results for 1988, the period in which the write-offs would have been recorded had the " present accounting rules boon in effect.
- As discussed further in Note 5 of the Notes to Consolidated Financial Statements, major balance sheet adjustments will be recorded in accordance with new income tax accounting requirements that become effective in 1990. These changes are not expected to significantly affect future camings.
FINANCIAL CONDITION Lhpukery and Capitel Resources The Company's liquidity is affected primarily by construction expenditures and by capital , requirements relating to debt and capital stock maturities. The capital resources available to meet these requirements include internal cash generation and extemal financings. ? The majority of the Company's capital requirements continue to be met by cash generated through operations. For 1988, nearly 75% of cash requirements were internally generated, compared with approximately 89% in 1987 and 97% in 1986. The decline in 1988 is attributed to a 24.1% reduction in cash from operations not of a 9.4% decrease in cash requirements. Cash flow and liquidity for 1988 21
._..-,..--,,..,,.____._,m,w-.-- . _y-,,.,,,-_.-,,..._y _..__,..- . . , _m. , . - - . , ,m,,.--..m,_-,...._-m,- _ . , . .,.y... ,m .
i i were unfevorably affected by revenue deferred to future years under the Palo Verde Rate Phaeo-in ! Plan, wnich will increase through 1990, and decline in subsequent years. Additional items impact 6ng i cash flow untevorably are inoroaeed income tax payments result 6ng from the Tax Reform Act of 1988, and contnbutions of more than $187 million to nuclear decommissioning trusts related to 1988 and , cortsin prior years. A dooline in construct 6on expenditures and the recovery of balancing sooount undercollections partially offset these adverse factors. ( The Company reited $822.7 million through long.torm debt issuanoes during 1988, primarily to , finance the redempt6on of more oostly debt. repay bond maturttles, and to meet sinking fund require. Heents. Market conditions and other factors, includlng limitat6ons imposed by the Company's Articles of ' l Incorporat6on and Truet indenture, influence extemal Anancings. As of Dooomber 31,1988, the Com-pony could issue approximately $3.8 billion of additional first and refunding mortgage bonds or approxi-mately $1.7 billion of preferred stock at ourrent interest and dividend rates under its Trust indenture and Attloles of incorporation. i in conformity with CPUC-retomaking procedures, short term borrowings are utilized primarily to Anance fuel-oil inventory, regulatory balancing account underoollections, and nuclear fuel. The prtnoipal and interest related to these special purpose short term borrowings are recovered through : regulatory balancing account mechanisms. Note 4 of " Notes to Consolidated Financial Statements" dieousses available lines of credit and related short-term borrowings. l Capmet 4*guiremense ( The Company's primary capital requirements consist of expenditures under its construction i- program and debt and capital stock maturttles. It is anticipated that the ma}ority of these capital v requirements will be Ananood through intomally generated cash with supplemental Anancing through t the issuance of long term debt, The following table presents the Company's projected capital requirements for calendar years j 1989 through 1993: l
" ites itse 1991 itet 190s (in RAttilene)
Constructen expendetures Se02.5 $703.5 $712.9 $760.1 8694.2 -
- f
! Metunties of long. term coat - - = 133.0 1s2.9 174.7 192.1 212.5 hoosmpeons of preferred stock - 11.9 , 11.7 11.7 11 7 12.3, Capetal roguerements ... . . g teleJ g g $f#19 0 Capmel Structure , The Corr.pany's capital structure as of December 31,1988 is reflected in the tab;e below: C om mon eq u ity. .. . .. . ... . .. ... ..... . .. . . ... . .... ... . . .. . .. . . .. . .. ....... . ..... ........ . .. ... ... 43.9 % > P r o f erred s tock ................. ... ... . . . . .. .. . .. . ..... .. . . ... ..... . . .. .... . .. ... ............. .. . ... .... 5.8 Long term debt..... .............................................................. 50.3 Tot al .. . . ...... .. .. .. ..... . . . . .. . .. ............................................... g/. I Meposesi Aforger As discussed in Note 1 of Notes to Consolidated Financial Statements, on November 30,1988, SCEcorp, the Company, and San Diego Gas & Electric Company (SDG&E) executed an agreement to merge SDG&E into the Company. Under the terms of the merger agreement, SCEcorp will exchange 1.3 shares of its newly issued common stock for each SDG&E common share. SDG&E preferred and preference stock will be exchanged for SCEcorp preferred and preference stock with similar provisions, except that dividends on each series will be increased between 2.5% and 20.0%. The merger is subject to the approval of shareholders and various regulatory agencies, including the CPUC and the FERC. The Company is working to complete the approval process in early 1990. 22
+ - - - , y eo + , ,,n,~-- , - . . , . - - - - . . < . ,-- -- .w- - - ,,- , , - .~-
j .- SOUTHERN CALIPORNM EDISON C0tepANY , Quartesy P6neno6el Date 1 (in millions) i isse- : Pirst lesene _There _ pew 9 Tetel ' operating Revenue ............................... ...... ................. $1,305 $1.315 $1,876 $1,437 $5.933 ' opereting income ........................................................ 166 210 433 164 1,013 i Not income.......... ....................................... 120 141 363 107 731 l Eamings Ava6lable for Common Stock ...................... 106 130 351 96 645 t Common Div6dends Declared ................... ................ 130 136 135 221 622 ! 5es7 ! rws: a no Thee sewm Team operat6ng Revenue ................................. ..................... $1.266 $1,333 $1.491 $1,392 $5.502 operating income ...................................................... .. 209 245 246 224 926 ! Not income........... .......... .............. 165" 194 215 173 747 i Esmings Available for Common Stock ...................... 153 161 202 161 697 Common Dividends Declared...... ... 124 129 130 130 513 ;
~
- Queriony museuseone compared to 1987 ero prunerWy the resuM ol e December 1987 CPUC rete decesson wtWon oroered the Company to the way n tWie large customere, concentrating e sorger percentage of these customers' annuel charges ,
ento the summer
** h $$$ mill 6on resulting im en accounting change. (See Note 2 of Notes to Consoleosted Finercel StatementeJ ;
t i e. P i l l l ( l l I 23 l
l R19PONSIBILITY POR FINANCIAL REPORTING The management of Southom Califomia Edison Company (the Company) is responsible for ( preparing the accompanying consolidated financial statements. The statements were prepared in : accordance witi panorally accepted accounting principles and include amounts based on manage- , mont's estimates and judgments. Management also is responsible for the accuracy of all other l Information in the annual report, inciuding its consistency with the financial statements. ! The Company's consolidated financial statements have been audited in accordance with gener. f ally accepted auditing standards by Arthur Anderson & Co., a firm of independent public ac. ! countants, which has expressed its opinion regarding the falmess of these consolidated financial j statements in the sooompany6ng report. The raanagement of the Company maintains systems of intomal control that prov6de reasonable l assurance that assets are safeguarded, transactions are property executed in accordance with menagement's authoritation, and sooount6ng records may b3 relied upon for the preparation of flnancial statements and other financial information. The design of intomal control systems involves i management's judgment concerning the relative cost and expected benefits of specific control measures. These systems are augmented by internal audit programs through which the adequacy . and effectiveness of internal controls, policios and procedures are evaluated and reported to i i management. In addition, Arthur Andersen & Co., as part of its audit of the Company's consolidated financial statements, evaluate the internal control structure to determine the nature, timing and extent of its audit tests. Management believes the Company's systems of intomal control are , adequate to accomplish the objectives discussed herein. l The Audit Committee of the Board of Directors, composed entirely of nonomployee directors, meets periodically with the independent public accountants, intomal auditors and management. This committee, which recommends to the Board of Directors the annual appointment of the independent public accot ntants, also considers the audit scope and nature of other services provided, discusses ! the adequacy of internal controls, reviews financial reporting issues and is advisert of management's actions regarding these matters. Both the independent public accountants and intemt.I auditors , , have unrestricted access to the Audit Committee. Mahagement also is responsible for fostering a climate in which the Company's effairs are conducted in accordance with the highett standards of personal and corporate conduct. This high I ethical standard is reflected in the Company's Standards of Conduct, which are distributed periodi-cally to all employees of the Cornpany. The Standards of Conduct addrese, among other things, i complying with all laws and regJtations applicable to the Company's business, avoiding potential , conflicts of interests, and maintair,ing the confidentiality of proprietary information. The management of the Conipany maintains programs to assess compliance with these standards, j l s ~. 4m _ _ . . _ ~ 9{ JOHN E. BRYSoN HoWARD P. Au.EN Executive Vice President and Chairman of the Board, Chief Financial Omcer President and Chief Executive OMcer February 6,1989
.e 24
I <:
!' l l ?
REPORT OF INDEPENDENT PUSUC ACCOUNTANTS ! I To the Sharehoiders and the Board of Directors, ! Southom Califomia Edison Company: I We have a'udited the accompany 6ng consolidated balanos sheets and statements of capitaliza. [ tion of Southem Cal #fomia Edison Company (a Califomia corporation hereinafter referred to as the !
" Company") and its subsidiaries as of December 31,1988 and 1987, and the related consolidated i statements of inooms, common shareholder's equity and cash flows for each of the three years in the period ended December 31, 1988. These Anancial statements are the responsibility of the Company's management. Our responsib6lity is to express an op6nion on those Anancial statements bseed on our audits. i
?
We conducted out audits in tooordance with generally acoopted auditing standards. Those i standards require that we plan and perform the audit to obtain reasonable assurance about whether i the financial statements are free of material misstatement. An audit includes examining, on a tout basis, evidonos supporting the amounts and disclosures in the Anancial statements. An audit also f 3 includes assessing the sooounting pnnc6 pies used and signifloant estimates made by management, j as well as evaluatmg the overall financial statement presentation. We believe that our audits provide ;
, a reasonable basis for our opinion. ;
in our opinion, the Anancial statements referred to above present fairty, in all material respects, I the Anancial position of the Company and its subsidiaries as of December 31,1988 and 1987, and { the results of the6r operations and their cash flows for each of the three years in the period ended Dooember 31,1988, in conformity with generally socepted accounting principios. As discussed in Notes 1 and 2 to the accompanying financial statements, the Company has j given retroactive of8ect to the July 1,1988 corporate restructuring. which established it as a subsidiary of SCEcorp and to its change in the method of accounting for its majority-owned subsidiaries.Also, as discussed in Hotes 2 and 3 to the financial statements, the Company changed t its method of accounting for unbilled revenues as of January 1,1937 and, effective January 1,1988, has retroactively changed its method of accounting for disallowances of plant costs.
- l l AE .
ARTHUR ANDERSEN & Co,
- Los Ange6es, California Nbruary 6,1989 .
l 25
F i SOUTHERN CAUPORNIA E0000N C0htPANY ! l SELECTED PINANCIAL AND OPERATf0NAL DATA 1984 1988 llmer Ended Desondier St. f
. 1000 9987 1900* 100s 1staa ; ' (In themsense) !
tunumery of Operemons t Total operating revenus .. 8 6.938.000 $ 6.602.200 8 6.318.667 8 6.181.830 $ 4.006f.162 i Toisi opereeng empensee .... .... - 4.006.108 4.676.100 4.306.168 4.211.340 3.932.627 t Fust erg purchemed power empenses 1.397.004 1.872.672 1.H1.190 2.383.497 2.0N.M1 incomo lames ... . .. . . .. 418.108 666,438 007.620 714.726 438.876 i Abowenee ter eeusty and horrowed tunes ' M.000 116.332 136.222 167,004 1M.787 used cunng construceen . m.... ... . Toesi interest sapense - not...... 818.411 400.000 487.376 498.007 630 922 731.305 747.208 667.002 706.011 732.428 i Not income . ! Eamenge oveltages for common stos . .. 404.000 907.100 603.100 GM.113 660.306 Fmencel reis of resum on common oowely'. 14.40 % 16.32 % 11.07 % 16.93 % 16.60 % l
, i Reesmetung rees of retum on common 11.97 % 12.42 % 13.22 % 14.24 % !
sously - earned - .... . . . . 13.39 % Ratemak6ng reis of retum on common l eeusty - authonaed... . .. ........ . 18.78 % 13.90 % 14 60% 16.00% 16.00 % i Rato of samngs to flued charges...... ... 3.21 3.34 3.30 3.76 3.38 telense Shoot Does 813.000.000 613.729.206 $13.430.611 813.002.936 511.906.508 ; Total enests' ... . . ... ... . ... .. Grote utsty plant * .. . . --.. .... 16.088.788 16.246,467 16.370.139 14.641.307 13.382.009 . Accumulated proveson for coprocahon and 3.903,448 3 % 5.071 3.152.141 2,763.661 Oscommeneneng' ... . . ..... . ... 4.830.930 i 36.9 % 24.4% 23.1 % 21.'1% 20.7 % Percent of prtes ut6 tit / plant.... m. . .. Common eherchedest's souny* ,.. ....... .. S 4 ama nas 8 4.H1.826 8 4.438.004 8 4.446,000 $ 4.246.788 Preterred and preterence stook: .
-not suppoot to manoetory woompton ..- . 384.708 38' 230 361.664 432.630 433.253 730.037 27/.538 293.049 395F;4 422.286
-sutvect to manoetory rocomption . ..
L> p-term oobt ... . .m ... ... .. -.. 6.t13.651 4.916.3?8 6.078.478 6.116.617 4.722.079 i Captal structure:
?.,omm en sha~ehond6r's equety' . . ... . 43.9% 46.0 % 43.6 % 42.4 % 43.19e - l Preferred and utterence et.x*
3.5 1.6 3.6 4.4 4.7
-not suhtect to mandetory recompton.
2.3 2.7 2.9 3.3 4.3
-sutvect to mandatory reoemptien...- ..
Long.ierm osot' . . . . . . . . . . . 90.3 % 48.7% 49.9 % 49.4% 47ci% Opereeng and Seite Date 14.699 14,$67 16.189 r Aree peak Gemand (WW).. . 18.987 14.776 10.093 18.2V6 18.3:0 17.770 1Y,354 ; Aree genersteng capauty at peak (MW).. . ; Total energy requirement (KWH)(000) 76.823.000 74.142.513 73.208.697 73.756.963 72.431.625 Percent energy requirement: 61.9 % 70.8% 66.6% 68.7 % $4.1% Thermal . .. .. MerwweD4Wellemethe (includeng hyoro). 4.0 4.7 7.9 6.0 7.5 Purchased power ente other sources . 34.1 % 24.6% 36.6 % 36.3 % 38.4 % 47.806.791 66.539.481 64,197.406 64.964.666 63.310.047 Knowett. hour estes (000) ~ . .. Averego annual KWH eates por resocont6al 8.364 6.117 6.999 6.099 6.147 customer- . . . . . . . . 3.831,668 3.717.262 3.589.414 3.490.325 3.400.182 . Customere . . 18.000 17.006 17.653 17.182 16.844 Emp6oyoos. .. . .., .. {
' Restated for nuc6 ear plant construction cost oisellowances ossenbod 6n Notes to Consoledeted Financial Statomonte,
" Amounts for 1964 represent the unoonsoi+ dated finance! cete of the Company pnor to restructunng.
26
i l
)
I i C00ARW6Y DWIECTORS I Howard P. Anon Chakman of the Board, Pweident and Chet Executin OMcer, SCEcorp and the Company Roy A. Anderson Chairman Ementus, Lockheed Corporation, Burbank, Caklomis l l Norman Barker, Jr. Chakman of the Board, PactRC Amencan income Shares, Inc., Los Angeles, Caktomin Whrten Chnstopher Chakman, O'Mohony A Myers, Los Angedes, Ca#fomos , Camina C. Frost Chakman of the Executive Committee, Los Angeles County l Mueoum of Art, Los Angeles, Cantorrun >
%laner 9. Gerken ChaWmen of the Executhe Committee, Pacinc Mutual Life l
Insurance Company, Newport Beach, Catitomin W6liiam R. Gould Chakman Emerrtus and Cansultant to the Company (Retored l Chakman of the Board and Chief Executive OMcer of the Company), Long Beach, Califomte Josn C Hanley General Parmer and Manager, Miramonte Mneyards, Temecuin, Cahnorr%n j Jack K, Horton' l Chakman of ths Executive Commitw, SCEccm snd troe Company, and Consultant to the Company (Retired Choir- l nun of the Board and Chief Exersth s Of3cer of ths Com-e pany), Los Atopeles, Cahtom.a , Ca;\ Y. Huntsinger Ger,e,11 Partw, O!.E L.imneu Partnership, Ltd. (Agri:u'tursll Mansgcur:t,\ (I}al Cshfomis , i Clar1As O. Mdier Chawmar, 0: the Boa.u and hool Executhe CMcer, Avery ImornatkYsal Corpyttkva (Manufacturer of Se!f. Adhesive , Products), Pasadens, Calitomia i J. J. Pir.ola Chrirmer: of the Board and Chief Executive OMcer First i Intnestate Bancorp, Los Angeles, Calitomis ! James M. Rosser President, Califomia State University, Los Angeles, Los Angeles, Cahibmin Henry T. Segerstrom Managing Partner, C. J. Segerstrom & Sons (Real Estate Deniopment), Costa Mesa, Califomia E. L Shannon, Jr. President, Chio! Executin OMcer and Director, Santa Fe Intemational Corporation (Oil Service, Engineering, Petro- . Jeum Exploration and Production), Alhambra, Calitomia Robert H. Smtth President and Chief Executive OMcer, Security Pacihc National Bank, and Mce Chairman of the Board, Security Pacisc Corporation, Los Angeles, Catblomia Edward Zapanta Physician and Neurosurgeon, Monterey Park and East Los Angeles, Califomia
- Will not stand for re-election in 1989 27
i l l i. l j COMPANY EXECUTIVE OPPICERS i Howard P. Alien Chnirman of the Board, President and Chief Executhe Omcor , 1 Dev6d J. Fogarty Executive Moe President l John E. Bryson Executive Mce President and Chief Financial Omcer M6chael R. Peevey Execus,re Mce President , 1 P. L Martin Senior Hoe President L T.Papey Senior Hce President Kenneth P. Baekhn Mce President. Nuclear Engineering, Safety and Licensing Glenn J. Bjorklund Mce President, Poner Supply f R. H. Bridenbecker Mce Presi0ent, Custorner Service Jchn R. Bury
- Hoe President and General Counsel Richard K. Bushey Mce President and Controller Robert D%tch Vce President, Engineering, Planning and Research John R. Fisldy Mce Presidst, Information Services ,
l, Chst%e 5. VCCtfJ<t: Jr. Var President and Site Mansger, San Onofre Nedear , l Genert:ing Stauon
.s - ,
l r Mkches) L Hoel Vits Presi$0nt alvt Treasurer , ~ Harrud d. Rt) Mce President, Yvel and Material Managernent Jennifer Voran Secret.ory of the Cciporation t
- Effective ME'r~cn 1,1989, Mr. Buty has elet,ted to reti,e P.nd Dand N. Barry til will become Vice President and General Counsel.
e l l l 28
[ . r l i l 944MHOLDER INPORIAAfl0N i k 88Dok W* l The Cumutettve Preferred Stock,4.08% Series,4.24% Ser6es,4.32% Ser6es,4.78% Senos and ! 5.80% Series, and the $100 Cumulative Preferred Stock,7.58% Series 8.54% Series,8.70% Series l and 8.58% Series are 16sted for trading on the Amencen and Pacific Stock Exchanges. The issued ! and E -4.iii common stock of the Company is wholly owned by SCEcorp and as a result is not j listed for trad6ng on any stock exchange. ' Stock Wansfer Agent: Registrar of Stock: l Southom Cailfomia Edison Company Through December 31,1988- , s . Soorstery's Department
' 2244 W Grove Avenue Security Pacific National Bank i P. O. Box 400 Los Angeles, Califomia ,
Rosemead, Califomia 91770 Effective January 1,1989- , (800) 347 8625 Southem Califomia Edison Company ; Secretary's Departmer t ! 2244 Walnut Grove Avenue ' P. O. Box 400 Rosomesd. Calitomis t1770
, (SCO) 347 8625 a
.e- ;
t i 1 I
- F s
9
-. ,.._i _,.,,-_,,,..._,,,.,,-,.,-,.,,,,,.n._m. , - . , , - - , - , , . , . ., . , . , - . _. ,
j,Q_^ . . . . Pi e. ,s M[ , A W'N .N bME -.n\ d I
;~ w . s-i NG
,hlh
'x -
h
, j
- k. f;'O; -
It # '
# . . .' . ' . .[ ' }. 4 ., q
- m. .
# ...a , - - .,
% ," f.N2l . ?,
m . ' +J. p 4. ,. .
., ll*. +
. ..- - - r e
s"' i . A s
' . m, . e
.s. 4 h i 3,
. g- I a . ., , . .
..,,.., n.~. . ',b'
' ; . -d**M'
,,,.- WE '
'h
- i
+M pe'j- '
.% 1 w r
.p,
.m . , r.
8 ' v ,1
~
*) .) ,
4 '? ( ,; , . k / k O'-
+ '
P . ,p' ' . .
.p -
- e. , ,
2 .
. smi, ' s .. -
,g '
w>,,r. 3
, .i . -
L $ g * , *, J
,ogfi' '- ,
8 't . y , *
- t $
- c. ' w.
%,f; O a
- s
.y d 5 'f =F h * -
.s e r . ,,w, e
- e: 4 z is 1 8 ,,%9
g , y .N $ * ,
,_ f _'h *'*M' '
'i **f.,g"M.e,e' fis.,8 b '
*W*
/'
. -g , -4
, t. *6 '
- u. .
4
+ > +
,g* . m.wt m * .,
A .
,p .p * * * -- j ' 4
- 4d
, ,Y *- '
- M (
" 4 -
o . g .. g ' g g 46- , 4
.,, . w. . .. ., . , , . , , . ,
. . - : + > .
- w. .
3 y
,, ,.: . . .. :x ..
- - ~
.~.
y,* ,'N .,-! "
- t. . g , , ?$ %
, . , - , , [. e,
.. $e .*: '4 , V. r-..- .
. - . .s . ,
' ...;. ?
\_' '
g 44 et 3 Y l
'.' \ =g * * "N w* *
.J, . '.
'/ *- .f 4 ..
sc - * - q g. o 4 .,
,- j., ," *,
,j'
- 4 - s- e.
, ' -;..,, ;4
. - N. * , .g **'
[. 1h; 4 g; ' .. . 4
- y '
- 1 -, , % **
, *. .,- - w. . 3..
a
, a v
t - 4 ,'
- q-
- i. h} .- ; ,
[, N 'N * ,. [* ' s s
,', ., 4 I -
5 '
,.,s , ,
I p, '+ 4 I" . M 1
, s - . $ g .
i , t ,. . .
+. .s .
- g. '+ ,
5 ; e ;
, < - i ,
x
..i g .
1 ..
; s
. g, 9 g .g y
A I v 3 < h 3
,6
- W
$ h. ,
5 e
+
v I,- .
- . .......4 .
,_ g 4 D -[p .-e.,. p' .g pr .
V , -
.- .~
~
q ;
- i. . 6-NM t9 4
.; - ,. +
v ; a 1, v r .i
,t'
; 1: ,.A New Corporate Structure i 2:. SCEcorp Highlights .
3: %c Year at a Clance
- , -- 4: ~ letter to Shareholders (o* . 7:' Operations Review: Southern California Edison Company
. t
-4 22: A Review of Nonutility Sulmidiance: The Mission Group ;
<1 24: Financial Review ,
Ji 26: Responsibility for Finaucial Reporting and Report of W-i=-%t Public Accountants 27: Consolidated Financial Staraments 3> 33: ' Notes to Consolidated Financial Statements , s.
. 41: ~ Quarterly Financial Data i
~ 42: Selected Financial Data:1934-1988 43: Management's Discussion and Analysis of Results of Operations and Financial Condition i
" 46: Board of Directors l 48: ' Executive Offlcers -
l i ( i i l
\
l %. \ covsa: Colorful beams of light illuminate an urban indacape in ( ' the San Gabriel Valley, near the corporate headquarters of SCEcorp and its l -
- electnc utility subsidiary, southern California Edison Company.
,1 t (.(
~ , .
- - , ,-. . _ - , , _ . . , , . , , , - _ __ , ___I
P
' ~
n L - A New Corporcte Structure s. j;- , yffc.aga A historic change for the corporation took place in 1988 with the formation of SCEcorp, the parent holding company of Southern California Edison Company. This new corporate structure, which went into effect on July :t following shareholder approval, more clearly separates the regulated utility operations of Edison from the operations of SCEcorp's nonutility subsidiaries. With its headquarters in Rosemead, Califorrds, SCEcorp is primarily an energy services company whose cubsidiaries have p; a ' combined assets of $14.9 billion. I' SCEcorp's principal subsidiary is Edison, a 102 year old electric utility that serves t 3.8 million customers in Central and Southern California More than 10 million n [, people live within its 50,000-square mile service tcrritory-one of the nation's most dynamic and prosperous regional economies. The nonutility subsidiaries of SCEcorp that operate as The Mission Group are
- engaged primarily in businesses related to the corporation's expertise in the energy mdustry. The Mission Group subsidiaries have projects in eight states, including
~i electric power generation, engineering and construction of electric facilities, real estate development, and financial investments.
. Under the new corporate structure, SCEcorp will continue a long tradition of providing good service to customers and a competitive return to shareholders.
l i \ i e
bs , n !2~ , Fi 'e-year e,L : SCEcorp Highlights con spound et.nual Increase gro vth f 1988 1987- Idecreanc) re ) j; . Per the year (000): l Revenue $6,252,719 $5,601,926 11.6 % 7.0% l l Net income ' $761,831 $738,531 3.2 4.3 i
$530,409 $507,808 4.5 8.4 i - Common stock dividends paid )
Weighted average shares of common stock 218,332 218,014 0.1 1.9 i r ,, , l I L' At year end: Assets (000) 514,866,276 $14,350,664
- 3.6 S.2 L 3 1.latalities (000) $8,010,685 $7,798,136 2.7 5.I r- Common shareholders' equity (000) 55,064,848 $4,833,734' 4.8 o.0 Common shareholders 148,427 156,154 (4.9) (1.3) 4 F.mployees 16,995 17,255 (1.5) 0.8 i
l Per shese: I Earnings $3.49 $3.39 2.9 2.3 ls, E Dividends $2.48 $2.38 4.2 5.5 , Book value $23.18 $22.16' 4.6 4.3 Market price $32% $30% 6.1 10.3 is . / [ Pinancial ratios: Rate of return on comrgoa equity 15.3 % 15.5%
- Dividend payout 69.6 % 68.7 %
Dividend yield 7.7 % 7.8% Price earnings - 9.3 9.0 I i. Tbtal shareholder return (price appreciation and dividends) 14.1 % (3.ll%
- Reflects restatement for nuclear plant dnsallowance.
l Baraines Per Share lSCEcorp) Annual Dividend Rate Per Share (SCEcorp) l- - s ~ la dollars In dollars
- 3 49 2.48 3 39 3 Nonutshey
[ 3,g g g is g ]
.it m l '
2.39'
" *
- Consumer r
e price e * ,
- e, andex Utihty e
[ , 1 .?, t h 1 l s3 B4 - 85 86 R7 88 76 77 77 78 ',9 30 8182 83 R4 M5 46 37 MH
,f, .
- Andeces restatement tar avslaat plana dasellowence l
I- a y 5 I? I' w- - - n , -., , _ .
3 c. t The Year at a Glance I I' . SCEcorp's carnings per share of common stack . Southern California Edison, the utility subsidiary,
- increased 2.9% to a record high of $3.49 in 1988. internally generated 100% of the funds needed to meet capital requirements, up from 77% in 1987, and the
. The boards of directors of SCEcorp and San Diego highest level in more than 30 years.
Gas & Electric Company (SDG&E) approved an agree-ment to merge SDC&E into Edison. The company is . The utdity's sales to retail customers increased 3.9%
. working to complete the approval process for the pro- to 66 bilhon kilowatt. hours (kwh), total electric sales,
; posed merger in early 1990, subject to the approval which include sales to municipal and utility custom-of shareholders of the companies, the Califomia Public crs, rose 3.6% to 68 billion kwh.
Utilities Commission (CPUC), the Federal Energy Reg-t { ulatory Commission and other regulatory agencies. . The utility recorded a net gain of 114,394 new custom-ers, the third largest annual increase in Edison's
; e The board of directors of SCEcorp raised the common- history, stock annual dividend 4.2% in June to $2.48, the 13th increase in the past 12 years. . Edison customers set a record peak demand for electri-k city of 15,987 megawatts {MW) on September 6,1988,
. The return to SCEcorp's common shareholders from breaking the prevmus mark of 15,189 MW set in 1984.
stock price appreciation and dividends was 14.1% in 1988.The annual return to shareholders has averaged . The CPUC authonzed the recovery of $465 million in more than 19% for the past 5 year and 10 year periods, futi and purchased power expenses, $116 million for exceeding the Dow Jones industrial and utility aver- inflation and capital costs in an attntion allowance and [ ages, as well as the S&P 500 index, an increase in Edison's authorized return on common
, , equity from 12.75% to 13.0% for 1989. The CPUC also
. SCEcorp's net income rose to a record $761.8 million found that $295 million of Edison's added investment .
and revenue to a rTcord $6.3 billion. in San Onofre Nuclear Generatmg Station Units 2 and 3, since they began operatmg commercially, was
. The Mission Group of nonutility subsidiaries earned reasonable. ~i net income of $77.8 million, or 35 cents per share, from revenue of $333.1 million, nonutility earnings were . Edison achieved its cost containment goals of reducing 10.0% of SCEcorp's total carnmgs. capital expenditures and limiting growth in operation and maintenance expenses to below the annual rate of inflation.
Sources and Distribution of Revenue (SCEcorpl l Sources Distribution In percent f* In percent 34 Commercial \ 36 Fuel and purchased power 30 Reedenual
/g} 24 Operatum and maintenance
- i 18 Industrial 7 j IN Dividends and intcrest (Y
M Pubhc authoriucs , 7 Tancs and other i I ' y 5 Other electric / I I Depreuation and decommmionins 5 Investment and other y' 4 Remvested earnings a 6
[. 4 !. Letter t2 Sharch:lders t <, i Aeoeber Outstanding Year Cost Containment Few years in the 102 year history of our company have - Although the San Diego merger was a inaior focus in matched 1988 for maior changes, maior challenges, and 1988, we also made internal changes necessary to maior achievements. It was a year of notable succest.cs, ensure that this enterpnse wdl continue to be finan-
, 19M8 saw us achieve record carnings, $3 49 per com- cially strong, tervice oriented and competitive in its
. mon share compared with $3.39 in 1987, and our 13th operations. We restructured the organir.ation to increase dividend increase in the last 12 years. The return to our producuvity and climinate duplication and unneces-common shareholders in 1988 from dividends and sary expense. We reduced the number of officers, ;
l stock price appreciation was 14.1%, and has averaged managers, and administrative and fleid personnel more than 19% annually for the last 10 years. We added throughout the company, streamlining every depart-114,000 new customers to our electric system, the third- ment. This reflects much attention, care, and effecuve largest increase ever in our service territory. hard work by Edison people and keeps us on track to meet our five year corporate goal to reduce Edison's 1992 revenue requirements by $900 million from a
, Merger Agreement with SDGhE business as usuallevel.Cmwth of Edison's operating !
and maintenance expenses for 1988 were under the rate in late November, our tuard of directors and that of San of inflatmn. Edison reduced employment by 426 posi-Diego Gas & Electric Company (SDC&E) approved a tions, or 2.5%, through attrition and retirements, with definitive agreement to merge SDC&E into our electric few layoffs. utility subsidiary, Southern California Edison Com- Health care costs have been increasing nationally for
! pany. Under terms of the agreement, each SDC&E maior corporatmns and for our company at about 20% .
common share will be exchanged for 1.3 newly issued a year. To have a benefits program that would be more SCEcorp common sharEI. Existing SDC&E preferred responsive to employee needs, and yet help control issues will be exchanged for newly issued SCEcorp pre- . escalating health-care costs, we implemented a com. ' ferred shares.The merger requires approval of share- prehensive new program that enables our employees to holders of both companies, as well as regulatory . match benefits with personal and tamdy needs. approvals by the California public Utiliues Commis-sion (CPUC), Federal Energy Regulatory Commissmn (FERC), and other regulatory agencies. We are working Quality Service to complete the approval process in early 1990. Our merger proposal has received opposition in the Our Edison companywide quahty service programs San Diego erca, largely based on the issue of loss of a found hter.~iy hundreds of ways to give better and hometown headquarters company. Our position is that more responsive service to our customers. For example, lower electric rates, better service, and mcreased com- we expanded surveys to determine customer needs, munity support are more important to consumers than reduced resp (mse times on telephone calls from cus-having a locally headquartered utility with higher tomers, created a more understandable customer bill, electnc rates. We plan to demonstrate the substantial changed electnc circu t switchmg procedures to reduce , customer and community beneflts for San Diegans in outages dunng mamtenance work, and trained employ-our regalatory proceedmgs, and are confident that ecs in better service, work techmques and practices, when the facts are known, our merger will be accepted. Nuclear Operations Holding Company By every measure, our S.m Onotre Nuclear Generatmg As desenhed on page 1, SCEcorp came mto existence Station had an excellent year. The stanon achieved ree-on July I as the parent holding company of Southern ord energy output, tight cost control, recognitmn from Cahforma Edison, our electric utility subsidiary, and federal regulators for safe and professional nuclear The Mission Group of nonutihty busmesses. operations, and a record 3.8 mdhon work hours with-out a lost time miury accident.
- _~ - ~ - . - . . - -- .. - . - .- .-
s ; i I Operations. Edison Vice President Glenn J. Bjorklund, i Generating Resources, Purchaced Power and Fuel moved from System Planning and Research to Power l Supply, and Edison Vice President Robert Die:ch took ; Our nine different energy production resources help on Mr. Biorklund's former responsibilities in addition protect our customers from unforeseen changes in to his position as vice president of Engineering and world energy markets. Our coal, nuclear and oil and Construction, gas fired plants remain our primary generating in December the board of directors elected two new resources. Our coal and nuclear plants achieved another officers. Effective January 1,1989, John R. Fielder year of record production increases in the cost of nat- became Vice President-Information Services of South-
. ural gas and reduction in the reliability of its supply crn California Edison. Effective March 1,1989, David I are causing us to change our gas supply practices. We N. Barry 111 becomes Vice President and General are engaged in efforts to obtain more gas from different Counsel of SCEcorp and Southern California Edison, sources. Our hydro production was down because of succeeding John R. Bury, who retires af ter 35 years of the second year of drought conditions. Purchased dedicated service. i power in balanced amounts remains an important At our annual meeting in April we will mark the and cost effective resource. Alternative a'nd ren:wable retirement from our board of directors of lack K. Hor-generation resources also remain important, but in ton, who provided our company with wise leadership many cases are not cost competitive today. and counsel as President begmning in 1959, as Chair-man beginning in 1968, and as Chairman of the Execu- l I
tive Committee since 1980. He has been a friend and Customer Self Generation an inspiration to all of us, and we will miss him. . 1988 war a good year for our company. Much still has Through CPUC actions and our own efforts, we are to b: done. With the wise counsel and policy direction reducing the threat of large commercial and industrial of our board of directors, the Icadership of an extra- i customers bypassing the Edison system. This has been ordinarily able team of officers and managers, and the i a maior company effort, because if these lar,;c custom- outstanding efforts of all our employees, we will meet _l' ers leave the system, the remaining customers will be 1989's challenges. On behalf of shareholders,I thank required to pay higher rates to cover fixed costs. our people for their dedication and hard work in 1988. l l hiok forward to leading them again this year. 1 Mission Group i l Earnings of The Mission Group, our nonutility busi-nesses, contributed 35 cents per share, or 10% of . 1 SCEcorp's total earnings, up from 5.6% in 1987, and an .
'W8 increase of 84%. The Mission Group subsidiaries-T[
Mission Energy, Mission Land, Mission Power Engs- p,[ necting, and Mission First Financial-are an important . w l part of our financial strength. They have exceeded our ,h ' , expectatmns and are expected to grow m the future. i L l Management j i I We have fewer officers than any other maior electric l utility enterprise. Your company's top management c 1 j l team consists of Execuuve Vice Presidents David J. Fogarty, John E. Bryson, Michael R. Peevey and myself, Howard P. Allen
*] i I with ages rangmg from 45 to 63, and disciphnes of Chairman, President and l engineering, law and economics. Cross.trainmg is an Chic / Execuuve Officer i , important part of our management strategy. Edison Senior Vice President Larry T. Papay moved froin February 21,1989
, Power Supply to a new position overseeing Nuclear l
1,
s to Paciac Northwest E San CALIF 0RNIA NEVADA UTAH Francsuo i B4& Cree 1 Las Vegas Four Corners koall Hoover Dam 9
& Mohave tcoall l
l ARIZONA Los Angeles Phoensx 9 Palo Verde at San Dueso MEIICO e Southern California Edison Company service territory
- Extra high voltage transmission lines 9 Hydroelectnc A Fossil 4 Nuclear
= Geothermal Y Wind
# Solar O thomass
7 Operations Revi:,w: Southern California Edison Company , i-l
! s Southern California Edison Company, the utility sub- During an extended heat wave, customers' demand ci sidiary of SCEcorp, provided more electricity to more for electricity rose to a record peak of 15,987 mega-customers during 1988 than ever before in its 102 year watts (MW) on September 6, breaking the previous history. The company also strengthened its commit- mark of 15,189 MW set in 1984. The primary reason ment to quality service while rigorously controlling for this record was the heavy use of air condition- , costs. Its success in serving customers and providing ing, as residential customers sought relief from the shareholders with a competitive return reflected the fourth consecutive day of 100 degree plus temperatures.
effective hard work and dedication of its 16,660
- 1 employees.
f .; Focus on Large Custo ners
',i Growth la Service Territory For several years, the company has faced the possibility n that some large commercial and industrial customers l Edison serves more char 3.8 million customers in a would leave its system and generate their own electric- - 50,000-square mile service territory that covers much ity. This problem essentially results from earlier state of Central and Southern California. With headquarters and federal regulatory and legislative decisions that had 't ,
in Rosemead, California, Edison is a regulated, investor- distorted electricity pricing since the late 1970s. But owned utility providing electric service to one of with support from the California public Utilities Com-the nation's most robust and prosperous regional mission (CpVC), Edison has made substantial strides economics. in 1988 toward stemming the potentialloss of these The company had a net gain of 114,394 new custom- large customers. ers in 1988, the third highest increase in its history. The electricity price struc+ure, which the current Residential customers represented,about 87% of the CpVC is reforming, has subsidi:cd residential custom-total growth In the next five years, Edison projects ers at the expense of many commercial and industrial growth of approxtmately 450,000 customers. customers. Consequently, many large customers have The increase in customers was the primary reason paid sigmficantly more than what it costs Edison to for a 3.9% nse in retail electric sales-to 66 0 billion serve them, and in some cases more than it would cost l kilowatt hours (kwh) fr'om 63.5 billion kwh in 1987. them to generate their own electricity. If these large Edistm's total electnc sales in 1988, including sales to customers leave the Edison system, the result would bc l l other utilities and municipalities, rose 3.6%-to 67.9 flxed costs spread over a smaller customer bs.e, l billion kwh from 65.5 billion kwh in 1987. l l' l
; Peak Demand and New Cassemers (Utility) Reserve Margin (Utilityl In thousands in thousands of megawatts l
N8 ' l 18.3
- 1,8.2
, gy 4 17 8 l
" 114 1 .(6 4 22 % IS% .u% ] ins margin Reserve 99 i 22 % u a l -
Peak demand 75 50 i i 83 84 H5 86 87 88 N.l N4 RS N6 87 NN
. ._ . - __ _ _.- w -.__ _ -_
a i 9 Focus: - 3gg g' This maior industrial customer deferred
,,___,_.,_ , - ' 'i 4 . installation of a 31. -megawatt generating unit m -
- g at its plastics manufacturing facility in Tor-s_ ,
1- rance, California. The customer qualified for a j g .E
\
-*- I wer electri rate, neg tiated by Edison and ,
Custommers ir q e'
# ~
a approved by the California Public Utilities s ,a_ m -j '
- Commission (CPUC). As a result, the utility
- -% s
- -- -- a will continue ser ving this large industrial customer that otherwise would have left the utility's electric system. i in addition, Edison has sought lower electric bills for industrial and commercial f r customers by changing an overall rate structure that has subsidized residential cus-l.
tomers since the 1970s. A new rate structure for all customers, approved by the CPUC,
. . went into effect on January 1,1988, following Edison's request to bring rctes more in
-- line with its actual costs of service to different classes of customers.
L Furthermore, the company pro'vides a variety of energy related services to its 200 - l largest customers. Highly trained account representatives serve as a single point of contact in promptly meeting all of their energy needs and advising them on ways to l l cut costs. e l l l A rnaior industnal customer Inxht) took advantage of Ednun's lower rates and specialized services at its plastics operations in Torrance. Two Ednon employees tubewcs advne a representative of the coinpany,
*+-w'-- Wp-**
* ' sm u
~
~ ,
p g p? v ..w. .:
' a
,g 1
- n. i :
.e; h
~ .. '
yh CI
' Qj?, ' /
l
. [n
..g' g;y. W.h.
a ., f te d ,l. I, 3 i
/
f g e ryf. ,
- 1) ~
~
,?. :1, A .
e '
/ / ~ p:-%:
l h9 g %)d' s - >,y ' 2 :' .. s{.{- y i'I' .
+ ;)
0N .(- .
'. Y a l
( 10 i f ' fg b b increasing electric.ity prices to remaining customers- maior corporations nationwide, have been rising at t particularly residential customers. - more than 20% annually since 1980, in response, A eamber of actions taken by Edison and the CpUC Edison developed an innovative and comprehensive have b:iped correct this problem. In response to Edi- flexible benefits program, calkd SCEflex, which gives son's requeet in its 1988 general rate case, the CpUC employees the ability to choose the benefits that best has begun to establish cost based rates that more suit their permnal and family needs. At the same time, closely reflect the actual costs of serving each cus- it allows Edison and employees to better control bene-tomer class: On Januaiy 1,1988, the commission fits and health care costs. In general, the savings result increased re ndential rates an average of 4.9% and from more favorable rates negotiated with doctors .nd decreased rates for large commercial and industrial hospitals, a new system of managed care that reduces i ! customers an average of 4.7%, The CPUC also has the number of unnecessary medical procedures and a given Edison more flexibility in negotiating special totally new benefits and health case plan. In all, SCE-1 rates and services for large customers who are planning flex will continue to provide Edison employees with to generate their own electricity. one of the best benefit and health care programs in the
.' Edison's 200 largest customers represent 20% of its nation, while also achieving substantial savings and revenues. Because of their importance, the company cost controlin this high cost area.
has established a huhly trained group of professionals in another maior effort to streamline operations and who serve as single points of contact for each of these contml costs during the year, Edison began consolidat-large customers. ing its telephone and customer accounting centers As a result of these efforts, large commercial and from four locations to awo. This was possible because industrial customers in 1988 deferred or cancelled more of the interconnect;on of the telephone centers, which ! than 200 proposed generating protects, representing handle more than 6 million calls annually. As a result, i l 325 MW. If these self generation proiccts had been all Edison representatives can now answer calls from built, Edison's sales would have fallen about 2.4 billion customers residing anywhere in the 50,000-square mile l kwh, the eqmvalent of7pproximately $185 million in service territory. The consolidation will result in more annual revenue, and rates for the remaining customers efficient use of personnel, as well as save about 57
~
would have increased. million in capital expenditures and 51.3 million an-This is an example of how past public policy deci. . nually in operating costs. To achieve this consolidation, sions, which were made with good intentions, can be Edison made a special effort to mmimize hardship on harmful to the public interest if not reviewed and employees by offering them similar positmns at the revised on a timely basis. two remaining centers and by providmg other job opportunities. mu- =-.: : = = re--. as In 1988, the company contmued to restructure and Emphasis on Cost Controland Productivity sticamline a number of departments, and to increase , the efficiency of its work force. Total employment for l In 1988, the company continued its maior effort to Edimn at year-end dropped 426 to 16,660 According to reduce costs and increase productivity without sacnfic- the most recently available data on the ratm of custom-ing high quahty service to customers. These strong ers to employees Edison ranks first among the nation's cost containment efforts are necessary to ensure that IS largest electric utilities in productivity. . Edison remains financially strong and competitive in l tmlay's busmess environment. v "-- Under its five year cost contamment plan begun m Commitment to Quality Service 1987, the company is committed to reduce by 5900 mil-lion its proiccted revenue requirements from customers Quality service has been the foundation of Edison's by 1992. Edison achieved its cost contamment goals in management phikmophy throughout its history-but 1988 by reducmg planned.constructmn expenses, low- never more m than today. Since its early days, the com-cring inventory requirements, and tightly controlling pany's motto has been. "Gmxl Service, Square Dealing, increases in operations and maintenance expenditures Courteous Treatment? During 1988, Edimn employees below the annual rate of inflation. agam demonstrated this commitment-both at field A good example of Edisont efforts to reduce and locations and in of6ces throughout the service control costs was the complete revision of its territory. health care program. These costs, like those of other i
- y. -
p-11 V s When severe wind and rainstorms struck in January,
- Expansion of service to a rapidly growing number of February, and December, Edison emergency crews dnd non English speaking customers through community other personnel mobilized quickly and worked around programs, as well as toll free telephone service by Edi-the chick to restore service to more than 1% million son representatives who are flucnt in Spanish, Chinese, cffected customers. During the extmded heat wave in Vietnamese and Camtodian.
carly September, when temperatures soared to 110 degrees and demand for electricity reached new rec- ' m_- 2 ords, more than 1,300 employees worked an additional Diversity in Generating Resources
; S2000 hours to replace damaged transformers and y l' make other repairs, and restore electric service. The company historically has sought diverse generat-1 Employees in departments throughout Edison also ing resources to provide customers with reliable elec-developed innovative programs to improve customer tric service at reasonable cost Usins nine different service. As an example, quality service teams in many resources, more than any other utility in the world, +' departments helped coordinate procedures to ensure Edison has great flexibility in adjusting to unforeseen L
more rapid and efficient responses to customers. Tb changes in world energy markets. 1
- measure the level of customer satisfaction, and respond better to their *iceds, Edison actively sought more feed- Nuclear Plants Edison's nuclear power plants in
, back from customers thmugh surveys and interviews. Southern California and Arizona had another excellent The company also expanded programs that recognize yea:, generstmg more than 21% of customers' electric-
. and reward managers and employees whose suggestions ity needs, up from 20% in 1987. The output reflects increase productivity, lower costs, or provide better the strong operating performance of the San Onofre service. Nuclear Generating Station and the first full year of Among other important steps taken to enhance qual- operation for all three units at the Palo Verde Nuclear ity service in 1988 were: - Generating Station in Art:ona.
- Introduction of7new customer bill that presents Edison's three nuclear units at the San Onofre plant more information in a simpler, clearer way; generated more than 16% of the electricity needed to .
- Installation of a new telecommunications cir uit- serve Edison customers in 1988. Their output saved switching system between voice and data networks, customers the cost of about 21 million barrels of oil or which has increased employee productivity, reduced the equivalent in natural gas, resulting in fuel savings costs and improved customer service, of about $275 million. Edison manages and operates ,
- Support for the sixth consecutive year in paying the the three San Onofre umts, owning 80% of the 450- )
winter electric bills of 8,800 low income, elderly and MW Unit I and 75% of Units 2 and 3, which have a j disabled customers through Edison's Winter Energy combined capacity of 1,200 MW. I i-Assistance Fund and generous voluntary contributions on average, the three units at San Onofre produced l from customers, 74% of their capacity for the year, exceeding the
- Notifying customers of a 24 hour telephone service national average for nuclear plants. Unit 1, which com- !
l to respond to their requests, such as startmg or stop- menced commercial operation in 1968, was out of l
> ping service, answermg questions on billing and report- service for more than six months in 1988 foe refueling j ; mg electric outages; and completion of electrical modifications required by
- Assistance to nearly 46,000 low income and needy the federal Nuclear Regulatory Commission (NRC).
l l customers by providing vanous energy management Unit 2 operated at 95% of its capacity for the year and i services, mcluding bdingual help and free installation was the third highest producer of electricity among the of energy efficient equipment; nation's 109 nuclear units. Urut 3 operated at 66% of l , e implementation of a good neighbor program under capacity, and completed its third refueling durmg 1988. which customer contact personnel refer elderly cus- In 1988, the hfetime generation of San Onofre plant tomers who need assistance-such as medical care, exceeded 100 billion kwh of electric generation, savmg l meals and transportation-to various commuruty customers the cost of more than 160 million barrels of agencies, oil or the equivalent m natural gas.
- Intrmluction of a toll free telephone number for Edison has been given high marks for the safe and shareholders, which has provided faster and more con- professional operation of the San Onofre units by the 1,2; venient service, and NRC and the Institute of Nuclear power Operatmns.
I S
_ ___ __ _ w _ __.. .
.i i
- l l
e icate dh Ed ison dd t e Ba sam l Mea dow hydro-IFOCUS: R "
, "'5 l clectric facility in June, making it the newest i and largest addition to the Big Creek system .
Hydroelectric 4 f ' . . . in the Sierra Nevada. The company designed Resource. - I and managed the $277 million project, which ) i i was built by blasting four miles of tunnels s, ',.1 through solid granite to connect Huntington
} and Shaver Lakes. The 207 megawatt power j station is 1,000 feet below ground in a huge excavated cavern and was named in ,
4 honor of John S. Eastwood, the visionary engineer who originally conceived the Big Creek hydroelectric system in the late 1800s. Edison commemorated Big Creck's 75 years of continuous operation in October. This immense hydroelectric complex now wnsists of six maior lakes,16 tunnels extendir$g a total of 48 miles, and nine powerhouses with 24 generating units. Big Creek is an important source of rel'iable, low cost power for Edison, representing 1,000 megawatts of capacity, or eno' ugh power to serve 500,000 people. By using computers and flber optics communications, Edison was able to reduce costs and increase efficiency in operating all of Big Creek's generating units from a single control center. a I i f Mamtenance workers Irrght) mspect generatur at the lohn S Eastwml powerhouse of the Ralsam Meadow hydro facihty, built 1,000 Icet underground m the Sierra Nevada. Two employees (abewel measure the depth of the forchay abtwc the hydro facshty.
.a; ,
t' #r'* - -
- Sd '
e it o p t e C f [ 'i'- 3,' d y ,. 1
. . . g-
. y: f -
. +
4 v 1 4
.a ., 3
- 1
#' a .
.= a
- g. , .h ,
6 O
., t-'
t
# ,4
.I k -
p \ v f
* , W r .. ,
'y+ . a .
k
', ,'jf.
e 2 * $ ' ,. a,g 4, h
'~
9 .,
~
. / , .
7
. . . a
+., ,
, 6
f s e -
,t gg, a
.- g ,, -
)
* ' q
=
. i 4: ,
, g ,
- %^ .-
}
.g- we.
g'*' S*m .
^) . N f .
g
. +g-
, ...s w = ~
~
4- . W g s, j_ " a f, e 4 -. g- .. m s. ' J, ,( ', ,
,f* ..
,. / ' 4 .- . ..
's ..#, d
,g i ' j ' ,
k
'a I. ,
- , , ' 4. e ,,- ' , , g, s, ,
' /* [*
1
, f
- g..f
. -. %e.
- l. ! $ ., l .* ,
'5 jf y yl y
** f 3[ ,
3 *
.,p
,.$ ~ ,
s
*,1 q..',.'? : c
=
,/
,q ,.-
.j r
f I' . g , c ..
.. gn, . - m e -?, .n - .
e,
.,M., , 2
-g.[,=..~4 ,
d64ab gd. .,3,, ,.; ',
r-l h 14 f i i :i The company also owns a 15.8% interest in the Palo , Hydroelectric Plants 1,0w precipitation in 1987 and
. Verde Nuclear Generating Station near Phoenix, Ari- 1988 limited the company's hydmelectric generation to zona, whose three 1,221 MW units comprise the largest 4% of customers' electricity needs in 1988. The Big nuclear plant in the country. These units, manage d by Creek hydro system in California's Sierra Nevada is the Arizona Public Service Compan7, went into commer- primary r.ource of this low cost power, representing ,
cial operation on February 1,1986, September 19,1986, 1,000 MW of capacity, Begun in 1911, this extensive and January 20,1988, respectively, hydro system now consists of six lakes,12 maior dams, Tbtal generation from the three Palo Verde units was nine maior tunnels and nine powerhouws. In June, 3 the highest among all nuclear plants in the United the company dedicated the 207-MW Balsam Meadow i States, in addition, Unit 3 had the highest pmduction hydro proicct, the largest and most recent addition to
' nationwide for an individual nuclear unit. Palo Verde the Big Creek system.
In addition, Edison has an allotment of 277 MW of i Units 1,2 and 3 operated at capacity factors of 62%, 63% and 95%, respectively. Both Units I and 2 com. hydroelectric capacity from the Hoover Dam on the
. pleted their first refueling outages in 1988, Unit 3 will Colorado River.
have its first refueling in 1989. Purchased Power The purchase of powet irom a Fossil-FuelPower Plants The company's 54 oil and diversity of outside sources gives Edison added flexibil-natural gas units, with 10,000 MW of capacity, provided ity in meeting its customers' electric needs. Edison's 26% of customers' electric needs in 1988. The two total electricity purchases met 34% of customers' coal fired plants located outside Califomia produced an needs durmg the year, compared with 24% in 1987. additional 15%. Edison operates and owns 56% of the This growth resulted primarily from a large increase in
' Mohave Generating Station in Nevada and owns 48% purchases from nonutility power producers in of the Four Corners Generating Station's Units 4 and S Califomia, in New Mexico. The Mahave planc operated at 73% of its maximum capacity and Four Corners at 80%-new Ecoriomy Energy Purchases: The company made production records for both plants. Edison was awarded 'short term " spot market" purchases of low cost elec- .
$7.9 million in 1988 under the CPUC's coal plant tricity from the Pacific Northwest and Southwest, '
incentive program. Though the CPUC suspended this which saved customers nearly $100 million in 1988, program in luly, it requested Edison to develop and compared with the cost of generation using natural gas. recommend an alternative incentive plan in 1989. Economy energy purchases supplied about 9% of i Generation Mix IUtahty) Construction Espenditures (Utility) la persent In bolituns ni dollarn 5.1 26 25 Oil and gas 39 % 3.7 "d ' 20% Generation 21 12 %
> . 15% Transtnission 15 5 HYd'"
'I IR Purchaws.
4 10 uther utilitics l 16 57% Distribution i 9 27 Purchaws: other power 17 IN producers N 1978 19M8 199M 19M4-19NN 1989 1993 l l Protected) (Recordedl (Proiccted) l l
i~ 15 i i L customers' total electric needs in 1988 and had an in 1988, electricity purchased from qualifying facili-average cost of 1.8 cents per kwh, compared with , ties cost an average of 6.3 cents per kwh, higher than 1.6 cents in 1987. Edison's average costs for both economy and firm-During 1988, Edison purchased and exchanged power power purchases from other uti'.ities. The higher costs as an active member of the Western Systems Power for power supplied by qualifying facilities cost Edison's Pool (WSPP), the largest power poolin the nation. The customers an estimated $200 million in 1988 and will company played a maior role in establishing WSPP in cost an estimated $260 million in 1989. This is another example of well meaning public policy that tumed out 1987 as a two year experiment by 24 public and inves-C .l tor owned utilities in 10 Western states. Pool members to be wrong because it was not reviewed and modified
? use a centralized computer to efficiently buy and sell .on a timely basis, i '
tow cost surplus power, and make better use of existing At the end of 1988, there were 344 nonutility power
, generation and transmission facilities. Market forces, projects, with a combined generating capacity of rather than regulatory agencies, determine power 2,446 MW, providing powc-r to Edison under these l pnces under this program. To date, results of the experi- contracts. Edison also has signed contracts, under ment have been favorable, and efforts are under way to CPUC orders, for an additional 133 projects repre-have the Federal Energy Regulatory Commission senting another potential 1,884 MW of capacity. Edison (FERC) extend it another two years. estimates that ! css than half of the electric capacity of these remaining proiccts will go into service, primarily Firrn Energy Purchases: Purchases under long term because of changes in federal tax laws, air quality con- , contracts with other utilities supplied 7% of custom- siderations, and siting and permit requirements.
ers' electricity needs at an average cost of 4.1 cent.,
, per kwh. Maior Power Sale: In August, Edison also reached In June, after several years of negotiating, Edison agreement on a 10 year contract to sell between 300
, reached agreement on a 20-year sales and exchange MW and 700 MW of its excess generstmg capacity to contract with theSonneville Power Administration the Sacramento Municipal Utility District, beginning (BPA). The contract provides the company with 250 in January 1990. The company estimates that the pro-MW of capacity and 1.2 billion kwh annually begmning cceds from this sale will earn Edison customers July 1,1989. The agreement also will provide Edison between $35 million and $70 million annually, depend-with an additional 250 MW during times of unexpect- ing on the amount of electricity needed by the Sacra-edly high electric demand. The contract, approved by mento utility.
the FERC and CPUC, will save Edison customers an estimated $30 million or more annually, compared *' mw with the least cost attemauve of refurbishing some of Higher Fuel and Purchased Power Costs Edison's existing oil and gas generating units now on standby status. Fuel and purchased power costs represent Edison's
'; largest expense in supplymg electricity to customers.
. Purchases from Nonutility Power Producers: Alter- Under Califomia regulation Edison is allowed to native and renewable energy protects, developed by recover these costs from ratepayers on a dollar for-nonutility power producers, supplied about 18% of dollar basis so long as they are reasonably incurred.
customers' needs durmg 1988-nearly a 90% increase The costs are subiect to periodic reasonableness over 1987. reviews by the CPUC. In 1978, the federal Public Utillty Regulatory Policies These combmed costs rose from $1.87 billion in 1987 Act (PURPA) was erncted to encourage the develop- to $2.21 billion m 1988. The increase resulted pnmarily ment of alternative and renewable energy sources by from substantial increases irt. purchases from nonutility requitmg electric utilities to purchase power from quali- power producers. fymg nonutility producers. Each state was required Natural gas was the pnmary fuel used m Edison's gas to establish its own implementation rules. In Cali- and oil generating units, except for periods of partial fornia, CPUC policy at that time required Edison and natural gas curtailment m january and August, and other utilities to buy power from qualifymg f acihties later in the year when Edison switched to oil because under long term contracts. Generally, this power was oil pnces declined below gas pnces. For the first time not needed to meet customer demand, and was much more costly than power Edison can now pnxluce or purchase from other utilities.
. 16 -
]
1 , j l l Edison will obtain greater access to low cost
' FOCUS *. .
]
a
- 1. n .4 (
l' u %a,-y power from the Paciflc Northwest af ter com-g ,,,g , i plet on of a joint pr iect in March 1989 to Capacity ii .1 l expand the 850-mile direct current lDC)line l g,,,, , of the PacificIntertie transmission system. ; g The installation of new equipment converting i DC into alternating current ( AC) will result in ' i 1,100 megawatts of additional capacity to serve Southern California consumers.The DC line is jointly owned by Edison, the Los Angeles Department of Water and Power, and the municipal utilities of Glendale, . Pasadena and Burbank. Completion of the $171 million expansion proicct will boost Edison's transmission capacity over this line from 421 MW to 643 MW. The Paciflc Intertie is the maior link for exchanging power between California and
- the Pacific Northwest. Built in the 19'60s, it includes two AC lines and one DC line, all capable of transmitting large amounts of electricity in either direction at extra- .-
high voltages. A proposal to build a third ACline, known as the California Oregon
'nansmission Project, would add 1,600 MW of transmission capacity by 1992, includine Edison's 281 MW share. If this third AC line is approved, Edison's total share of trans-mission capacity from these lines to the Pacifh. Northwest will rise to 1,900 MW. m i
t More cfficient equipment (abovchnstalled at a facihty m Sylmat Cahhama, converts DC power used m transmission to AC that customers use The DC hne fright)ni the IWfic intertie trJnsmission system supphes customers with low. cost power from the pacille Ninthwest. 4
*^^~ ~ ~ ~ - * *
* - "~ - ~ ~ - -
- . . . . . - .m . - - . <
w,-
y _;;; y_.g - + :;, , ~ . , 9 X-n.> , , ,,
. ', ;; i .. . n ' ., ~,. .q c, d_
...y' .
s
.g
.N g . -
- 1.vv ,
7- '.-A '. ; p,*n. * .+. .o;. . a.
, + - g. .
,. y
,. . . , , n ,x. w,,,y. . .; .. v. . , . ~.: g
. y,n : . . ..,Ar_ .
~ . , ,a 1.
,q.,:. , , .%
+. .,. . . ,
.a. .
..'.,: ; ','y !T ,7,M.3' .Ar . . . .
'. ..
- Q i i e 3 t
, ' l. .h,. . L ,. - '* - ; ,
+ -; .' .. .
m
. a. m v . <
- v , *:_: u
' i
- 4. f .E
, , ,,,.;,.,g -
.., - . -m , u', ,ic 9 .p>h s
., :. .c,. ;.,.
e. f f Q. %;k.+.e w'i idy r..sg$$f-(yd$h:3 .w
- ' W - - f.I '. .
Mg
- 7. . g.g ugg.q.4 . jpg.t. " .. . ,i., s. .x
. , . .Apw . , P.4&.v~; ' s. 3 .< ~.. . - s . .
e.- , .. . . . . ... . . . s , k,h a, } ,$} y y +3 ,., i 1 .p j - . th: '.? w.. s :
%,\gh w . *rp y,g . Q, .
- :. p . .
g - . . %;, ,, , . , 3,; ; 3}%s3. i@. n .:.,. .s , 4 .
# Q..,-7,4[%;y;,7:
..4
%&,g;.,
,% . ., . .; . , .: . .a 3 q.
..:. p. + .
G . u jJ '- S. < . iJ , . 3.
.o .
.'. .4 . . , , . .-
. y ,,, .,
, p. . . r..
. ;? ., , %_ ,"w 4 ,
,t.. -
~^
- 4 i -
y . i g.- 3-S . 5 g, c' l - , ,
.m -
k ,, J
. . e.
j.. *
) .%
u.. .
'[. , i s.
5 t
- . ,3 ,
4-
- F
- s. ,
,i . .
N
. k'
.e t k
.', ~-
, n.
8 ,.
'h . ,g' 4s
' 8 .i y' .',.; e' 4 ,
- fr .' .,
f m .' 3
.i' s ..
- g E .,
- g. :.
g e 'i S. f,
- 4 j ;:
g > w: .
\
e W g , p. t ' 4 ). , i (. j . 44 e al- . NE % N
'G..4 ,
4
.g-
- f. g . . . -
- . m.,,
. % y $
s >,
- J .
s %
+- . ,-
5
'#
- L
, t e- :
1
~ !
**+
( ..
'i es' p . ,
g h' 'h. .
.. - . - = . . - - _ . _._
n, - O ,
's since the gas shortages of the 1970s, the company's tra- In July, the company began a two year test program ditional supplier of natural gas restricted its normal gas - of energy storage technology at a 10 MW proicct in supplies during the summer, forcing Edison to use Chino, California. The $13.5 million facility is the more expensive fuels. world's largest battery energy storage system and in 1988, coal and nuclear fuel prices remained steady, charges batteries at night when electricity demand is while Edison paid sli;;htly more for oil. However, the low and power is less expensive. The facility then sup-average cost of natural gas increased significantly- plies electricity during the day when costs and electric-from an average price of $2.55 per million Btu in 1987 ity use are much higher. After the completion of this H
to $3.25 in 1988-primarily because fixed charges from research and development program, Edison will deter-the company's primary supplier remained unchanged mine the commercial feasibility of this technology. despite a lower volume of purchases. 'Ib protect its cus. After successfully completing a six-year test pro-l tomers, Edison is seeking to develop alternate sources gram, Edison in September discontmued operations at
' Solar One, the world's largest central receiver power of natural gas from other than its traditional supplier to increase reliability of its gas supply and reduce costs. plant using 1,818 sun tracking mirrors on 130 acres near Daggett, California. A pioneering project in the nation's alternate and renewable energy efforts, the 10-Better Service Thsough Resource Planning and Research MW Solar One demonstrated the technical r.apabilities of electrical power production from reflected sunlight.
The company's resource-planning strategy gives it However, the plant is not cost competitive because maximum flexibility to respond to rapid changes in lower cos: alternative generation is available. supply and demand. In the next decade, Edison will add The 100-MW Cool Water Coal Gasification plant is new transmission capacity to gain access to low cost on a standby status af ter completion of its five year power, and serve customer needs without construction demonstration program. l.ocated near Daggett, Califor-of maior new power plants. To minimize costs, the nia, the plant converts coalinto a clean synthetic gas emphasis will be on grTater purchases of electricity, used in turbines to generate electricity. Cool Water is better energy management, and refurbishing and the world's cleanest coal plant and has received numer- ' bringing back into service oil and gas plants now on ous awards for its environmental and technological standby status. , successes. It operated at 70% of capacity in 1988, but in addition, Edison's research programs focus on is not commercially competitive because more cost-giving customers more choice, lower cost and better effective alternatives are available. service. For example, Ediron is testing a two-way Although many of these renewable and alternative electronic metering and communications network that resources are not cost competitive today, they will links the utility with residential customers. This net- remain important components of Edison's diverse work provides customers with informational services energy resource mix, especially if oil and gas become and new options for reducing electricity costs by allow- scarce or costly in the future. ing them to shif t their usage to low-cost times. These all-electronic devices also are expected to reduce costs by allowing remote meter reading-as well as connect- Emphasis em Employee Development ing and disconnecting electric service from Edison offices-rather than sending an employee to the cus- New and revised employee training programs con-tomer's location. tinued to help employees improve their performance, in cooperation with other utilines and governmental while enhancmg existing skills and the dedication to agencies, Edison also is promotmg the development of customer service Edison employees have always pollution free electric vehicles and new advances m exhibited. This increase in professional work skills battery technology. Increased use of electric vehicles in helped make 1988 a successful year. In 1988, about Southern California would reduce air pollution, traffic 4,400 employees participated in sarious trainmg noise and gasoline consumption. In addition, rughttime programs. battery chargmg would increase off. peak electnc load, providmg a safe and healthful work environment resulting in more efficient use of Edison's generatmg contmues to be a high priority at Edison. During 1988, capacity. industnal accidents declined 7% from 1987 while lost i workdays decreased 15%. The Edison Electric Institute presented 13 safety achievement awards to Edison
-l
q s 19 organizations whose employees worked I million or Employees showed their spirit of generosity during more hours without a lost time accident. the 1988 United Way campaign by giving nearly $2.3 million to help people in need. On a per capita basis, Af#rmative Action The minority representation Edison employees were among the leading contributors in the work force rose from 27.4% in 1983 to 31.7% to the more than 900 charitable organizations sup-in 1988, while the proportion of female employees ported by United Way. increased from 22.9% to 25.2% Even with this prog- The Edison Electric Institute honored Edison with its ress, the company seeks to improve its record of insur- Common Goals Award in 1988, citing excellent con-ing greater upward mobility for there employees in tributions made by the company's educational advisory l 5 management positions. council. This council oversees the company's informa-
> In 1979, the company established a Women and tional and educational programs to schools.
Minority Business Development Program. From then During 1988, Edison developed educational materials
,~
until the end of 1988, the number of women and through various school programs in cooperation with j minority owned enterprises qualihed to do business teachers, administrators and community leaders. Stu-with Edison grew from 207 to 1,548. Annual payments dents learn about energy conservation, electric safety, [ to these firms rose from $18.7 million in 1983 to $92 disaster preparedness, environmental issues and other million in 1988. The company and CpUC have agreed energy related topics. to a new goal of awarding 20% of Edison's annual Edison also provides scholarships and grants to stu-purchases under competitive conditions to women- dents throur,hout its service territory. For example, the and minority owned businesses within five years. company provides four $12,000 scholarships,20 career-In addition, Edison reached agreement with four development awards of $3,000, and 50 educational minority-owned businesses in 1988 to manage $35 grants of $500, in addition to two $12,000 scholarship million of the employee pension fund. With earlier awards for children of employees. Another important agreements, this increased Edison's total pension educational program, known as the Science Gonnec-investments managed by women and minority-owned tion, uses a 40-foot mobile classroom to stimulate firms to $135 million, or 10% of the fund. greater interest in science and technology among elementary school children. Throughout Edison's scr-vice territory, this program provided scier ttfic demon-A Commitment to Community Service strations to more than 10,000 youngsters during the year. In recognition of this valuable program, the Cali-Both the company and its employees have a long tradi- fornia Department of Education gave the company a tion of participating in community and civic organiza- special award for its support of science education. tions in areas served by Edison in Central and Southern Califomia. For years, employees have voluntarily par-l ticipated in such activities as the Special Olympics, the Junior Chamber of Commerce, Junior Achievement, YMCA, YWCA and scouting. l l l Percemage of American Total Asian male, female, and Male Female Black Amencan Indian Mmonties l His'nanic i minority employees % % % % % 4, % at year end Year end Year end icar end Year.end Year end Year end Year end 1983 and 1988 1983 1988 1983 19H8 1983 l988 1983 1988 1983 1988 1983 1988 1983 1988 l Management
- 83.5 79.3 16.5 20.7 3.7 4.2 5.9 76 0.5 04 7.5 9.8 17.6 22.0 Administrative
& operative
- 73.7 72.2 26.3 27.8 9.5 9.6 3.3 4.3 1.1 1.4 18.7 21.9 32.6 37.2 Total Edison
- 77.1 74.8 22.9 25.2 7.5 7.6 4.2 5.5 0.9 1.0 14.8 17.6 27.4 31.7 (Il includes the "officsals" and "professsonals" athernatsve.actsun caterornes.
(2) Includes the "sechnscsans." " office and ciencal." "craf tsinen." " operators." " laborers" and "servste workers" caterotses (3) includes all classes of ernployees.
my - -- g , , _ y, I f in addition to its recommended energy cost disallow. Bagmissary Review . ance, the DRA has recommended that the CPUC mod-
- ify its early 1988 decision that authorized Edison to -
'- ' SWP Attrition Allowance The CPUC authorized a form a holding company, Edison believes that adoption SIM.4-million annual attrition increase in Edison's of the DRA's recommendations to modify the holding bene-rate revenues effective January 1,1989. Attrition company decision is not necessary to protect the public allowances cover annual changes in costs caused by interest and will work diligently to demonstrate that it undanon, capital additions and financings between gen- has reasonably administered the contracts under esalisee case proceedings, which are held at three year review CPUC proceedings are scheduled to take place
. kneervals. As part of the attrition allowance, the CPUC later in 1989, smahanzed an increased rate of return on common egusty from 12.75% in 1988 to 13.0% in 1989. Balsam Meadow Hydroelectric Project In October 1988, the CPUC's Division of Ratepayer Advocates i Sam Omedre Unita 2 and 3 Costs since Commercial completed a review of the costs for the 207 MW Balsam Operseien The CPUC authorized an annual revenue Meadow hydroelectric project. The DRA found that screase of $39 million, effective January 1,1989, as - Edison had prudently constructed the project and rec-
=
_ part ed its decision allowing Edison to begin recovering ommended that the entire amount of its investment be
$295 million, or 97% of its investment costs incurred covered in customer rates. A decision by the CPUC is at San Onofre Units 2 and 3 after the unit, began com- expected in May 1989.
unercial operation. The decision affirmed an agreement l between Edison and the CPUC's Division of Ratepayer Fuel and Purchased Power Rate Ad/ustments The j Advocates (DRA), which was negotiated to avoid a CPUC periodically reviews the reasonableness of fuel lengthy, expensive review of these costs. and purchased-power costs and adjusts rates to reflect i , changes in Edison's costs. Based on the utility's fore-A5 sessions of Purchegd-Power Overpayments The casc of higher energy costs from June 1988 through May j j DRA has recommended that the CPUC disallow $124 1989, the CPUC adjusted rates twice in 1988, granting a j maillion of energy costs incurred between late 1984 and $200 million revenue increase effective June 1, and an '; l late 1987. Approximately $120 million of the proposed additional $265-million increase effective October 1. l ahaallawance represents alleged overpayments to non-l utility power producers, including electricity pur- Suspension of incentive for fuel and Purchased Power L chased by Edison from a 300 MW cogeneration facility Expenses On June 1,1988, the CPUC suspended the I owned by Kern River Cogeneration Company (KRCC). annual energy rate ( AER) that was established in 1981 Mission Energy Company, which is one of SCEcorp's to provide utilities a regulatory incentive to minimize manutility subsidiaries, is a partner in the KRCC fuel knd purchased power expenses. Under the AER, facility. The DRA's proposed disallowance m relation utilities are rewarded for keeping fuel and purchased-to power purchases from KRCC is approximately power expenses below the levels authorized by the
$37 millio i. CPUC, and are at risk for such costs that exceed those in upcommg CPUC hearings, Edison will demon- levels. This temporary suspension was ordered because .
strate that the power purchases from KRCC actually uncertain natural gas supplies and prices beyond saved its customers more than $24 million dunng the Edison's control rest:lted in wide cost fluctuations. The three years under consideration, compared with the AER is expected to be reinstaied on January 1,1990.
" standard offer" contract approved by the CPUC.
The DRA also alleges overpayments by Edison under Devers-Valley Serrano Transmission Line in 17 other contracts Edison negotiated with nonutility November 1988, the CPUC s Division of Ratepayer power producers that are not SCEcorp affiliates. Edison Advocates completed a review of the costs of the 500-signed these contracts during the early stages of Cali. KV Devers-Valley.5errano Proiect, which became fornia% efforts to rapidly develop alternate and renew- operationalin mid 1987. The DRA found that Edison ahic energy resources. The pnces Edison protected to had prudently constructed the proicct, and that the full pay under these 17 contracts were at or below avoided amount should be collected in customer rates. A deci-cost over the life of the contracts. Hearings on the 17 sion by the commission is expected in May 1989. contracts have not been scheduled as of this date but will he heard in later proceedmgs.
,L.. 21 ?
J Devers Polo Verde No. 2 71ansmission Line The year 2007. The plan would impose unreasonably high CPUC has conditionally approved Edison's request to costs on Edison customers by requiring that Edison build the Devers Palo Verde No. 2 transmission line, install uneconomic and unproven new technology on Scheduled for operation in June 1993, this transmission its oil. and gas fired generating plants. Edison has line would increase access to Southwest power markets joined with other businesses in the Los Angeles Basin for Edison and 11 other California utilities. The proicct in presenting an alternative plan that would achieve must be re evaluated in the context of the proposed the compliance goals in 10 years instead of 20, and at Edison San Diego Cas and Electric (SDG&E) merger one third the cost to consumers and the economy com-before construction can begm. pared with the district's plan. Edison will continue to participate in the district's public review process in the Federal Energy Regulatory Commission Pmposal in hope of saving Edison customers unnecessary costs, mid 1987, the chairman of the Federal Energy Regula- preventing an adverse economic impact on the area and
. tory Commission (FERC) announced that the commis- working to comply with federal air-quality standards. !
sion would consider changes to its rules implementing l the Federal Power Act and the Public Utility Regula. Aferger Filing in mid December, Edison and SDC&E I tory Policies Act. These changes weuld essentially filed joint applications with the CPUC and the FERC, I deregulate new sources of nonutility electrical genera- seeking approval of the merger of SDG&E into Edison. , b Hearings are expected to begin in mid 1989. Edison and tion by creating a new special class of generation called
" independent power producers." SDC&E will be seeking regulatory approval for the Edison opposes many of these proposed changes that merger from other agencies in 1989. As is typically the are inconsistent with the Federal Power Act, because case in these matters, there have been a number of they discriminate against utility customers. In addi. intervenors in both the state and federal proceedings. I tion, they would, reduce the long term reliability of the nation's electricity supply. The issue is still pending before the FERC artd at year end, the U.S. House of Legislative Review Representatives and U.S. Senate cere reviewing the ~
matter. Price Anderson Nuclear Liability Act in August, the ; I President signed a bitrextending the Price Anderson Seasonal Rate E//ects Edison petitioned the CPUC to Act for 15 years. Although the act increases insurance modify an entlier decision relating to a new seasonal costs for nuclear utilities, it provides a tenfold increase rate structure. The rate structure was intended to en. in financial pre ection to the public in the unlikely , courage conservation and load management by creating event of a maior accident at a nuclear power plant in higher rates during summer and lower rates the rest the United States. At the same time, the act's $7.6-bil-of the year for many commercial, industrial and lion level of potential compensation that is available to l agricultural customers. the public serves to limit financial liability for opera-l However, the new seasonal rate structure had the tors of nuclear power plants. I l cffect of distorting the company's quarterly earnings Under the extension, owners of the 109 operating , l- patterns, although it did not affect Edison's overall nuclear reactors in the United States must continue to 1988 earnings. SCEcorp's 1988 third-quarter summer. carry the maximum available private insurance cover-l time earnmgs, for example, were 85% higher than age for an accident at one of their own reactors. This earnings in the third quarter of 1987, while earnings in maximum coverage was mcreased to $200 million per the flrst, second and fourth quarters were significantly reactor at the end of 1988. If damages were to exceed l lower. Without the seasonal charge, third quarter earn- the private insurance coverage, Pnce Anderson would ings would have increased only 3%. The CPUC will provide additmnal funds by levymg assessments of up review Edison's request to modify the rate structure m to $63 million per reactor agamst all nuclear plant 1989. owners. Under the new law, the per reactor assess-ments would be limited to $10 million annually until Clean Air Plan The South Coast Air Quality Man- the $63 million limit is met. agement Distnct, which meludes the counties of Los Angeles, Orange, Riverside and San Bernardmo, has presented a plan to bring the Los Angeles Basm mto compliance with federal air quality standards by the
_ A Review of Nonutility Subsidiaries: The Mission Group The Mission Group was formed in 1987 to manage the corporation's four principal nonutility subsidiaries, Mission Energy Cosapany which are primarily engaged in energy-related busi-nesses. Since then, these subsidiaries have continued Mission Energy is a national leader in the ownership, to pursue business opportunities and now operate in development and operation of maior cogeneration proi-eight states. ects, it provides management of engineering and con-At year end, SCEcorp's equity investment in The struction, operation and maintenance, and assistance Mission Group totaled $505.4 million. Revenues for in obtaining permitting and financing for power facili-1988 were $333.1 million, producing a net income of ties. Mission Energy concentrates on joint venture
$77.8 million, or 35 cents per share. This compares projects with low technological risk, sound economics, with 1987 revenues of $107.6 million, which produced a and well-established partners.
net income of $41.3 million, or 19 cents per share. At the end of 1988, Mission Energy jointly owned Mission Group earnings represent 10.0% of SCEcorp's and operated nine projects with 1,300 megawatts (MW) 1988 earnings, compared with 5.6% the previous year. of capacity in three states. Five of those projects, with a total of 830 MW of capacity, began operation during 1988. The three largest are the 385-MW Watson cogener-ation plant in Carson, California, the 300-MW Syca-
~i more cogeneration plant and the 300-MW Kern River
, g cogeneration plant, both near Bakersfleid, California.
Another four projects with 330 MW of capacity are Cents per share under construction. 3s Mission Energy is the largest of The Mission Group
. @ $'"!gy,*" subsidiaries. Revenues for 1988 were $88.2 million, Mmaion First prdesg a net income of W mMon, of 18 cents Fin 3ncial per share. This compares with 1987 revenues of $38.2 million, producing a net income of $16.4 million, or 7.5
~
[',8y a cents per share. At year end, equity investment in the Em company totaled $265.7 million. N Mission
. Energy 1987 19s8 l
l l l l l l l
w , 4 c During 1988, Mission Land completed several maior
, .Hl Mission First Financial Company . transactions involving the sale of industrial and resi-
, dential properties. It became a partner with the Lusk Mission First Financial provides energyselated venture Company in the California Commerce Center, the capital and invests in leveraged leasing transactions, second largest master planned industrial park in project financing, and high quality securities. This sub- Southern California. Mission Land maintained an nyer-sidiary holds financial interests in Beaver Valley age vacancy rate of only 3% in its industrial parks Nuclear Unit 2 near Pittsburgh, Pennsylvania, and a throughout the year, a major accomplishment in a
}
'l paper mill and cogeneration facility developed through highly competitive market.
' j a joint venture with Minnesota Power Company and Revenues for 1988 were $48.7 million, producing a J Pentair, Inc., a Midwestern paper company, net income of $20.2 million, or 9 cents per share. This i compares with 1987 revenues of $33.2 million, produc-This subsidiary also has developed a customized cash management program to provide attractive yields ing a net income of $17.4 million, or 8 cents per share.
t on funds held pending longer term investments, in At year end, the equity investment in this company addition, the company has an equity investment in totaled $131.5 million.
. Metricom, a California based electronics firm that is developing and marketing a solid state electric meter and customer communications system. Mission Power Engineering Company No new business was consummated in 1988 because of low lease volume and aggressive pricing by com- Mission Power Engineering performs consulting, engi-petitors, but the company is well positioned to take necting and construction in the energy fleid, including advantage of investment opportunities in 1989. electric generating units, transmission lines, and sub-In 1988, Mission First Financial produced substan- stations. Since its formation in 1984, the company has tially higher financial contributions than 1987, because been awarded contracts with a total value of about it was the first fulhear of operation. Revenues for 1988 $400 million. In 1988, Mission Power Engm:ering con-were $21.7 million, producing a net income of $13.7 tinued to grow as it performed work on 11 new power million, or 6 cents per share. This compares with 1987 plants. For its achievements in 1987, the company was revenues of $10.8 million, producing a net income of ,
ranked 36th out of the top 400 national design and con-
$6.8 million, or 3 cents per share. At year-end, equity struction firms, according to a 1988 trade publication, investment in the company totaled $90.5 million. Revenues for 1988 were $174.4 million, producing a net income of $7.6 million, or 3 cents per share. This compares with 1987 revenues of $25.8 million that pro-Mission Land Company duced a net income of $1.7 million, or about 1,;ent per share. At year end, equity investment in this subsidiary Mission Land develops industrial parks with medium- totaled $14.1 million.
sized warehouses and distribution buildings. The firm owns and manages six industrial parks in Southern California and Arcona, which contain more than 2 million square feet of leasable space. in addition, Mis-sion Land has entered into iomt ventures m California, Illinois and Indiana.
.i
p 7'
, . ' 34 Pmancial Review .
;. F
'It.c corporation reported a record financial perfor- The Mission Group earnings per share for 1988 were mance in 1988 and provided shareholders with a com- . 35 cents, or 10.0% of SCEcorp's total carnings, com-
/
petitive return on their investment. pared with 19 cents per share, or 5.6%, for 1987. Non-utility earnings increased 84% above those in 1987, with earnings growing in each nonutility business. SCEcesp mgher carnings resulted from Mission Energy bringing 830 megawatts of new cogeneration and geothermal Ascard Net Jaceae and Revenues SCEcorp's earn- projects into operation, the sale of industnal and resi-ings rose 3.2% to a record $761.8 million in 1988, dential property by Mi,sion I.and, increased construc-W ' cesapared with $738.5 million in 1987, and revenue tion activity by Mission Power Engineering, and a full
') grew to another record of $6.3 billion, compared with year of operation for Mission First Financial.
, 85.6 billion in 1987.
,. SCEcorp's earnings per share for 1988 increased 10 DMdaad increase The board of directors in June .
cents to a record $3.49 from $3.39 in 1987. This increased the common stock dividend for the 13th time increase is particularly noteworthy because it was in 12 years. The new annual dividend rate of $2.48 per achieved despite a reduction by the California Public share is 4.2% higher than the previous year's $2.38. Utilities Commission (CPUC)in Edison's authorized The current dividend provided a 7.7% yield, based on a rate of return on common equity from 13.9% to year.end market price of $32% per share. 12.75%. The reduction, by itself, would have lowered !M earnings 33 cents per share, but the company overcame 7btalShareholder Return The return to SCEcorp this through tight controls on operating expenses, common shareholders from stock price appreciation approval by the CPUC of expense levels that more and dividends was 14.1% in 1988. The annual return accurately reflect Edison's costs, a CPUC award for has averaged more than 19% for the past S-year and l ' l favorable coal. plant operating performance, and higher 10 year periods, exceeding the Dow Jones industrial earnings from The Misemn Group of nonutility sub- and utility averages, as well as the 58tp 500 index. l. sidiaries. In December, the CPUC increased the autho-l rized regulatory return on common equity for 1989 to
!3.0% from 12.75% because of higher interest rates
- j. facing the utility.
l Stock Price Range ($CEcorp) Net Inconne (SCEcorp) In dollars in mslisons of dollars 38% 762 g
' 3 702 34 % g7 ,
ei i a Year.end g, i f closing
- prict 28 %
. 21,%
e 27% 24 % g 2iw ,,, e 17ha 17 % B3 84 85 86 87 88 n3 84 85 86 87 88
- Reflects restete,nent for nucleet plant alsselle>wonse i
_ _ __ . _. _ - _ . _ _ _ . _ _ .~ _ ,
y years, The utility raised $663 million in U.S. capital Southern California Edison Comipeny . markets during the v'. c primarily to finance the redemption of more costly debt, repay rnaturing bonds Maascialand Regulatory Returns The CPUC autho- and meet sinking fund requirements. rizes Edison to carn a retum on its regulatory rate base, which is the value of assets used to serve customers. Credit Line Restructuring Edison lowered the cost This authori:cd regulatory retum is designed to allow of its credit lines in July by arranging for a $300 mib the utility to recover its cost of capital, which is lion line of credit through a syndicate of foreign banks, compoecd of long term debt, preferred stock and the This was the lowest cost European credit line negoti-a
; authorized regulatory return on common equity, ated by any U.S. utility in 1988. Edison also renegoti-e in 1988, Edison's authorized regulatory return on rate sted the cost and structure of its existing $1.6 billion
- base was 10.75%, and its authorized regulatory return in credit lines.
on common equity was 12.75% The company's By negotiating thesc credit arrangements, Edison recorded regulatory return on rate base was 10.6%, will save its customers $600,000 annually while main-and its recorded regulatory return on common equity taining $1.9 billion in credit lines with 40 domestic and was 12.2% foreign banks to meet a variety of financial obligations. However, SCEcorp's recorded flnancial retum on common equity, as shown in financial reports, is based Credit Watch Edison's early warning credit watch on the holding company's total operations. Several system, the first of its kind in the utility industry, con-items can cause it to differ from Edison's authorized tinued to reduce the number of bad debt wnte offs by regulatory return on common equity. In 1988, these early identification of high risk commercial and factors included camings from nonutility subsidiaries, industrial customers in danger of business failure. The federal investment tax credits, and CPUC established system saves money for customers by ensunng that ! awards for high output from the utility's two coal fired Edison's revenues are protected through deposits of ! power plants, in 1968, the corporation's recorded finan- cash, posting of surety bonds or more frequent pay-cial return on common equity was 15.3%, compared ments by these customers. ; with 15.5% in 1987. In 1988, the early waming system reduced potential -j had debt by $860,000. It has avoided potential losses of ; Corporate financing in 1988, Edison internally gen. $8 million since it began seven years ago. l crated 100% of the funds it needed to meet capital { requirements,its highest percentage in more than 30 i i 1 5-Year Annual Return Comparison laternal Generation of Funde (Utility) (Stock price appreciation and dividends) ; la percent in percent 100 19.5 17.0 f I 77 15.1 67 65 34 S& P 500 DflA DlUA SCEcorp index sinck I eam. mum F' e3 s4 85 56 87 A8 e
e - - u Responsibility for Financial Reporting . Report of Independent Public Accountants i The management of SCEcorp {the " corporation")is responsible Tu the Shareholders and the Board of Directors, SCEcorp: for preparing the accompanying consolidated flnancial state- , ments. The statements were prepared in accordance with gen. We have audited the accompanying consohdated balance sheets etally accepted accounting prmciples and include amounts and statements of capitalization of SCEcorp la Cahforma corpo-based on management's estimates and judgments. Management . ratmn hereinaf ter referred to as the " corporation") and sta sub- ! also is responsible for the accuracy of all other information m sidiaries as of December 31,1988, and 1987, and the related con-the annual report, including its consistency with the financial sohdated statements of mcome, retamed earnings and cash statements. . flows for each of the three years in the perimi ended December . The corporation's consolidated financial statements have 31,1988. These financial statements are the responsibihty of been audited in accordance with generally accepted auditmg the corporatmn's management. Our responsibihty is to express standards by Arthur Andersen & Co., a firm of independent an opmion on these financial statements based on our audits, public accountants, which has expressed its opinion regardmg We conducted our audits in accordance with generally ac-the fairness of these consolidated financial statements in the ecpted audiung standards. Those standards require that we plan accompanying report, and perform the audit to obtain reasonable assurance almut The management of the corporation and its subsidianes whether the financial statements are irce of material misstate-maintains systems of internal control that provide reasonable ment. An audit includes examining, on a test basis, evidence [' - assurance that assets are safeguarded, transactions are properly supporting the amounts and disclosures in the financial state-executed in accordance with management's authorization, and ments. An audit also includes assessmg the accountmg princa-accounting records may be relied upon for the preparation of fl. pies used and significant estimates made by management, as nancial statements and other financial information. The design well as evaluatmg the overall financial statement preses.tation.
!' of internal control systems involves management's judgment We believe that our audits provide a reasonable basis ior our C i concerning the relauve cost and expected benefits of specific opimon.
control measures. These systems are augmented by internal In our opmion, the financial statements referred to above audit programs through which the adequacy and effectiveness present fairly, in all matenal respects, the financial position of of internal controls, policies and procedures are evaluated and the corporation and its subsidiaries as of December 31,1988, reported to management. In addition, Arthur Andersen & Co, and 1987, and the results of their operations and their cash
as part of its audit of the corporation's consolidated financial flows for each of the three years in the penod ended December i statements, evaluates the internal control structure to deter- 31,1988, in conformity with generally accepted accounting mine the nature, timing and extent of its audit tests. Manage- pnnciples. t ment believes the corporation's and its subsidianes' systems of As discussed in Notes I and 2 to the accompanymg financial internal control are adequate to accomplish the obiectives dis- statements, the corporation has given retroactive effect to its cussed herein. - restructunn'- ; took place on July I,1988, and to the The Audit Cummittee of the Board of Directors, composed change in the utbod of accountmg for its maionty owned sub-entirely of nonemployee directors, meets periodically with the .sidiaries. Also, as discussed in Notes 2 and 3 to the financial '
independent public accountants, internal auditors and manage- statements, the corporation changed its method of accountmg ment. This committee, which recommends to the Board of for unbilled revenues as of January 1,1987, and, cliective Janu-Directors the annual appointment of the mdependent public 'ary 1,1988, retroactively changed its method of accountmg for ( accountants, also considers the audit scope and nature of other disallowances of plant costs. services provided, discusses the adequacy of mternal controls, reviews financial reporting issues and is advised of manage-ment's actions regarding these matters. Both the independent public accountants and internal auditors have unrestricted gg gg 4 g access to the Audit Committee. ARTHUll ANDtR$LN et CO. Management also is responsible for fosterms a climate in Los Angeles,Cahfonna . I which the corporation's and its subsidianes' affairs are con- February 6,1989
<lucted in accordance with the highest standards of personal and corporate conduct. This high ethical standard is reflected in the corporation's Standards of Conduct, which are distnbuted peri-odically to all employees of the corporation and its subside aries, The Standards of Conduct address, among other thmns, complying with all laws and regulations apphcable to the cor-paration's and its subsidianes' business, avoidmg potential e conflicts of interests, and mamtammg the confidentiahty of propnetary information. The management of the corporation and its subsidianes mamtams programs to assess comphance with these standards, b I.
~ ~ ~
i lohn E. Bryson Howard p. Allen \' Execuuve %ce Pressdent Chauman of the Board, and Chsef Fmancial Olticer President and Chief Execuuve Officer February 6,1989 i
y r 17 Canaalidated Statement 4 of Income setcorp and Subsidianca Jn thousands, escept per share amounts Year ended December 31, 1908 1987 1986 Electric revenue , 68,931,682 55,501,057 55,316,325 investment and other 321,017 100,869 51,762 htal operating revenue 6,251,719 5,601,926 5,368,087 Fuel 972,973 1,091,973 865,376 Purchased power 1,235,110 780,599 775,814 Provisions for regulatory adjustment clauses-net 240,681 225,108 225,539 Other operating crpenses 1,068,8M 885,849 S46,652 ,
,; Maintenance 375,454 361,484 353,170 t
,Ji Depreciation and decommissioning 646,h9 551,348 507,503 *
; income taxes 446,395 578,228 702,442 Property and other taxes 170,293 162,546 144,435 heal operating expenses 5,1 M ,351 4,637,135 4,420,931 ;
Operating incosme 1,096,364 964,791 947,156 Nuclear plant disallowance (Note 3) - (148,963) (269,883) Income taxes-nuclear plant disallowance - 78,616 61,665 , Provision for phase in plan 170,8 % 137,832 88,672 Allowance for equity funds used during construction 18,125 73,406 105,744 i Interest income 128,708 93,213 110,971
, Taxes on nonoperating income (79,547) (80,490) (35,654I l Other-net (162) 20.144 25,320 f htal other incesne-net 230,980 173,758 86,835 !
lacosse before intasest and other expenses 1,327,348 1,138,549 1,033,991 Interest on long-term debt and amortization . 439,842 404,767 433,103 , Other interest expense 108,498 82,059 M,274 Mjowance for borrowed funds used during construction , (11,443) (42,926) {29,478) Capitalized interest ' (17,6%) (25,933) 128,319) Preferred and preference stock dividend requirements of sebsidiary 46,696 50.095 54,684 heallaterest and other expenses-net % 5,517 468,062 513,264 i 761,831 670,487 520,727 ! income before cumulative effect of a change in accounting principle
') Cumulative effect on prior years (to December 31,1986) of accruing unbilled revenue-net of income taxes of $58,752,000 (Note 2) - 6R,044 -
Not lacesse 8 761,831 5 738.531 $ 520,727 Weighted average shares of common stock outstanding (000) 218,332 218,014 217,780 ? Earnings per share (Note 21: i Before cumulative effect of a change in accountmg pnnciple $3.49 $3.0H $2.39 ; Cumulative effect of a change in accountma principle - .31 - , heal earnings per share $3,49 53.39 12.39 The acwinpannns notes are on entegralpart of thsse hnencual staternenes. f ( l 1
r w 38 COEt00lidated.BalanCC ShetRD SCEcorp aru Subsidiaries in thosiaands December 31, 1988 1987 ASSETE Utility plant, at unginal cost (Note 3) $15,687,850 $ 14,46'i,691 Less- Accumuisted provision for depter:iathm aud decommissioning (Notc 3) 4,529,938 3,993.468 11,157,912 10,472,223 i Construction work in propess 676,175 1,232,990 Nuclear fuel, at amortized cost 475,764 547,786 12,309,851 12,252,999
.[, - Lean-Property related accumulated de' erred income taxes 914,532 840,143 htal maility plant 11,395,319 11,412,856 Nonutility property-less accumulated provision for depreciation of $22,570,000 and $130,681,000 at respective dates 107,851 105,850 Nuclear decommissionmg trusts, at cost 157,046 -
Investments in partnerships 480,458 286.006 8 Investments in leveraged leases 148,027 128,858 Other investments 31,978 26.483 htal other property and investments 925,400 547,197 Cas.h and equivalents 228,367 163,426 Receivables, including unbilled revenue, less allowances of $13,187,000 and
$15,355,000 for unco!!cctible accounts at respective dates 700,343 625,789 Fuel stock 125,303 118,540 Matenals and suppliesat average cost 96,767 105,577 Regulatory balancing accounts-net 395,026 621,6 %
Prepayments and other current assets 113,556 80.474 . htal current assets 1,659,362 1,715.441 Unamortized debt issuance and reacquisition expense 296,094 301,741 Rate phase in plan 435,941 239,760 Other de' erred charges 154,160 133.669 hial delerred charges 886,195 675,170 heal assets $14,866,276 114,350.664
- m The enornponynns notes are on ongestalpart of shese finonnel staternents.
ta , A &
29 SCEcorp and Subsidiaries in thousands December 31, 1988 1987 CAPITALIZATION AND LIARILITIES Common shareholders' equity (Note 3) & 5,064,848 $ 4,8 R 734 l' referred and preference stock of subudiary: Not sulycet to mandatory redemption 358,755 361,23H Subicet to mandatory redemption 239,037 277,53H Long-term debt of subudiaries 5.421,747 5,150,883 hal capitalisation (see accompanymg statements) 11,084,387 10,623,393 Osber long-term liabilities 136,810 113,348 3
.i l Current portion of subsidiaries'long term debt and redeemable subsidiary preferred and prelcrence stock 165,975 101,555 Short term debt 658,418 672,501 Aerounts payable 464,817 458,04H Acerued taxes 435,030 471,(K)8 Accrued interest i17,477 106,666 Dividends payable 139,187 133,281 Accumulated deferred income taxes-net 166,754 236,662 Delerred unbtlled revenue and other 304,470 354,184 Tbtal current liabilities 2,452,128 2,533,905 e
Accumulated deferred investment tax credits $45,728 555,676
~
Accumulated deferred income taxes-r'et 39H,827 248,690 - Customer advances and other deferred credits 24N,396 275,652 Tbtal delerted credits 1,192,951 1,080,018 Commitments and contmgencies (Notes I,3,8, 9, and 10) Tbtal capitslitation and liabilities $14,866,276 514,350,664 The ocentnpanynns notes our un snerstalport vi these hnunual staternents. o
30 Consolid8ted Statements of Cuh Flow 8 sCtcorp and subsidianes I In thousands Year ended December 31, 1968 1987 1986 Cash flows imm specating activitiest . Net incorne $ 761,831 $ 738,531 $ 520,727 Adms tments for noncash items: Depreciation and decommissioning 646,569 551,348 507,503 Amorti:stion 156,732 157,304 129,800 s Nuclear plant disallowance-net - 70,347 208,218 Allowance for funds used during construction (30,008) ll16,332) (135,222) Rate phase in plan (196,181) (149,110) (90,650) Regulatory deferrais-energy exploration proicets - 61,637 21,748 Deferred income taxes and investment tax credits 176,614 198,417 281,863 Equa in income from partnerships (87,070) 151,739) (21,319) Income from leveraged leases (17,056) (10,289) - Othct-net (20,420) 22,443 8,390 Changes in working capital compcments: Receivables (74,554) (241,227) (41,44S) Regulatory balancing accounts 226,609 131,548) 17,120 Fuel stock, materials and supplies 2,047 133,518 5,584 prepayments and other current assets (12,689) (3,713) 31,860 Accruedinterest and taxes (63,314) 8,607 222,418 Accounts payable and other current liabilities (43,292) 267,883 38,784 Net cash provided by operating activities 1,425,818 1,606,077 1,705.379 Cash flows from financing activities:
!ssuances of long term gbt 631,343 374,787 1,472,532 Repayment of long term debt (350,383) 1325,967) (I,595,936)
Redemption of subsidiary preferred and preference stock (48,775) (17,712) (200,525) , Nuclear fuel financmg (18,569) (56,191) (46,5181 Short term debt financings-net . 51,917 182,461 231,750 Dividends paid (530,409) (507,808) (484,320) Net cash used by financing activities (264,876) l350,430) (623.017) Ca[h flows from investing activities: Construction expenditures (834,630) (1,034,348) (I,158,243) Co:itributions to decommissiomng funds (157,086) - - Investenents in leveraged leases-net (200) (102,865) - Investments in partnerships (168,332) {164,037) (19,884) Distributions from partnerships 55,998 37,838 - pre,cceds from Sale of assets 27,637 23,900 - Other-net (19,38s) (18,217) 11.289 Net cash used by investing activities (1,096,001) I1,257,729) II,166,838) Increase (decrease) in cash and equivalents 64,941 (2,082) (84,476) Cash and equivalents, beginning of year 163,426 165,508 249,9R4, Cash and equivalessa, end of year $ 228,367 $ 1M 426 $ 165,508 Noncash investing and financing activities: Conversion of subsidiary 5.20% converuble preference stock $2,10s $ 414 $ 845 Conversion of subordmated debentures 2,973 3,136 2,849 Conversion cJ partnership notes to equity - 18,670 - The accornreanns noses are un s~negralpart of these hauncsolstaternennt
y' . i t . 31
;- COO 90lidated Statements Of Capitalization $CEcorp and $utsidiaries Notas to consohdated statements of capitahtatum are on l' age 32.
[. r in thousands (Member 31, 19es 1987 Caesman ebasebeldees' egoley: , L Common stak-no pat value-400,(KU,0LIO shares authorned, 21H,461,932 and 218,134,481 outstandmg at respective dates (b) $ 2,463,762 5 2,457,819 p Retained carnmas (Arr accompanrms statementd 2,681,086 2,375.915 1stal 5,064,848 4.M 3,734
! Peelorved ased pelesence etwk of subendiary:
December 31. Ivh8
^.
Not embloet to snandatary ' Shares Redempunn c' sedesmpion (c)(dh Srnes Outstanding Prue
)
. Cumulative preferred.
( $25 par value: 4.08 % 1,(Klo,(KD 8 25.50 25,000 25,000 [' ,;{ 4.24 4.32 1,200,0t10 1,653,429 2580 28 75 30,000 41,336 30,(KO 41,336 [ 4.78 1,296,769 25.80 32,419 32,419 I 5.80 2,200,000 25 25 55,000 55,(K0 f' 5100 par value: 7.58 750,0(K) 101.00 75,000 75,(KKI 8.70 500,(KX) 104 (K) 50,000 50,(KO l 8.96 500,(KO 104.(K) 50,000 50,(K0 Preference:
, , 525 par value: 5.20 convertible - - - 2.4k3 1
L 4 heal 364,755 361,238
. Subject to emendatory redesartion (c)(eh Cumulative preferred:
L $100 par valse 7.325 % 547,3RI i103.54 54,738 60,(KO i 7.80 4K3,495 104.62 48,350 Si,(n) l 8.54 615 (KU 105 65 61,500 M.750 870A 433,124 110(0 43,312 45.937 12.31 430,(KK) 105R3 - 43,000 50,(KO Preferencc: 525 pat value: 7.375 - - - 2H,864 Preferred and preference stock to be redeemed withm one year (11,863) 122.013) Total 239,037 277,534 Imes-tertu debe el subsidiaries: Maturity interrat raten First and refundmg enortgage bonds (citi): 19R9 through 19V2 4%% to H%% 475,0(e0 672,(x0 f.- 1993 through 1997 6%% to 9% 1,125,000 . ,(KK),tKO 1998 through 2(02 8%% to9% 650,000 Mo,(KO 2003 through 2007 V4% to 9 95% 278,750 2k4,(KO
, , 200M througn 2020 N%% to 13% 1,267,476 1,0M4,413 Polluuon coutrol londs icilgt: 1999 through 2015 6%% to 10%% and variable 947,730 M97,730 l'unds held by trusices (11,1191 (10.472)
Dchentures and notes id)lc)(hl- 1990 through 1999 R 25% to 11% and variable 441,696 44,52 k i Nuclear fuel indebtedness ici til 424,168 179,029 Long term debt due withm one year (c) (154,112) 179,5421 Unamortned debt discount-net (22,A441 114$031 heal 5,421,747 (150.N0 heel capitalisation 511,084,387 510.623.393 The otsvinranytng notes are en sntegralport ut shrse linonnelsnaturnents
31 Neeen se Ceaseudseed h-aa el Cap 6tausee6es $CEcorp and hbudinnes la) Lifecuve luly 1,1988, SCleorp became the parent holding (g) Edann has n>ued first and refunding mortgage lumda and company of Southern Cahfornia Edison Company lLdium) other mdebtedness to governmental agencies m exchange for and The Missmn Group. Holders of Edison common stock be- proceeds from pollution ccmtrol lumJs. These pmt ceds have came holders of SCicorp common samk on a share for share been depsted wath trustees and are used to finance construc-baus. The Cahfortus Pubhc Utihues Commisuons (CPUC) tmn of pollutmn control facihties Cettem p<dluuon mntrol decaion authontmg the estabhshment of a holdmg company lumda may be redeemed at the dncretion of the txmdholders. requires Edaon to mamtam a capital structure conustent Edium has made arrangements with secunty dealcts for the with the CPUC's most recently authonted capitsi structure. remarketmg or purchase of the podlution controllumds m such cases. Ednan arranged hnes of c.redit for $MU milhon at (b) At December 31,198g,1,490/KO shares of common stock December 31, IV88, to refinance these lumds, should remar-were reserved for issuance under the 1987 tong Term lncequve keung be unsuccessful. Compensanon Plan. (h) One of SCLeorp's unregulated subudianes has debt out-ic) In connectmn with the formauon of SCLcorp, each out- standmg m the amount of $990 milhon at December 31,1968, standing share of Edium's ongmal preferred samk was con- and $107D milhon at December 31,1987, surgmrted by hnes verted mto 2.1 shares of SCLcorp's common stock. Edium's of credit aggregatmg $280.0 milhon at December 31,19kR, and authorized shares of $25 cumulauve preferred, $100 eumula- 5235 0 milhon at Decemher 31,1987. uve preferred, $25 preference and $HO preference stock are 24JKO,000,12%KX1/00,10%K0f00, and 2,000/KO shares, re- (il Nucicar fuel financmg is compnsed of; specuvely. All senes of cumulauve preferred and preference December 31. stock are redermable. The 430fE0 shares of $100 cumulauve preferred stock,12.31% Senes, are not subiect to redemption in 4housands 19kn 19k? unut May 1,1992. The var'ous ienes of $HO cumulauve prc' ioreign.cunenct denommated notes'" 5 62.950 $ 66200 ferred stock are subsect to certam restncuons on redemptmn Commc rcial paper *H 33n.m 2k8.296 for refundmg purposes. Spent nucicar fuel obhgauun'" 12.441 24333 a 24.168 379229 (d) On May 31,1988. EdnEn either redeemed or converted its Loma Cuttene matuntics 65494 2 292 outstandmg shares of 5.20% convertible preterence stock at Total 145h 674 t it6.m
$25 per share and converted all of the outstandmg 12%% con- m idnan usurd forrisn-currency denommated noin totahng vertible debentures at the converuon pnce of $161875. se,0.t millmn an sterrrnber 1987 in hnunc e nustrar fuel The notes mature 24 rnunths from the date of muan<r Under a h "'"""'"'""'#"""""""**'"""N
{cl The table below presents the mandatory redernpuun re- '""'""curren'c"y"translotwn gems und inuet wrushted ovrauxe foreuxn qutrements for preferred stock, long term debt maturities and enterest rests on ahe notes are based on the sterare dash smkmg fund requirements for the five years subsequent to commeresel paper rear and were 7 46% for 1988 und 7 0v% for 1981 fortsgn.< urrency trennlouon gauns or lours have been U'"'"hOI'I'EN deterred and ett stuluded en the translated relue 09 the habshty yest ended Detember 31. (21 A portwn el the rummerttulpaper used to heronse nustrer fuel In shousands 1989 1990 1991 1992 1993
' "b"N"" " " "#"#8 ""
menu wsth corntnerruelbanks. The lont. term portwn knan<rs Pre lctred stut k nuclear tuel ant u heduled for sunsumpmm wohrn 12 months redemptwa of the balanse sheet dates regunements $ ll. sal $ 11,73R $ li.73k $ 11,738 5 12.338 t3l pursuant en the Nuclear neste puhtv Act ut 194. IJuan has gang.,,,,n 4,y, ugned a umuott wath the U 5 Department ut intres tur dn. matuntnes end swung f und
'""I "# #Y'"' ""'I'"' '*'I Iun the 3an Onurre Nus leer rectu rements 154.112 212.905 204.737 222.157 242,535 Total ll6L975 1224.643 $216.475 $133 795 1254 #73 (f) Substanually all utihty properties are subiect to the hens of trust mdentures, esctpt for nuclear fuel ar.d fuel oil mven-tones, which are financed with short term debt m conformity with CpVC ratemakmg procedures.
p
e ~ ~- - - . A3 CemNdated Statemen]Of Retained Earnings SCEcorp and Subsidiaries is alwanands rucpf prr share amoamis Yeat ended Decembes 41, lett lyk? 19M Besance at lieginning of yest $2,375,915 $2,150,751 $2,128,646 Net income 761,831 73k,531 520,727(al I Dividends declared on common stoc k (536,660) (513,367) (4NV,909) L4w.s on reacquired capital stm k and other - -- 18,713) ( Butumse at end of year $2,601,08Mb) 12,375.915 12,150,751 Dtvidsuds declased per conianos $lisse 11.45 % $2.35 % 52 ] 4 lol arsensed$ nun $rl&9318w 80 5520121.Wno ta rrtlett the aturr ses wrne.oM of nuclear plant duulkment rs totahng flV120Mw (See Nott 3 of
- Note.s to Consohdoted Isaanual$sonernanis"I
- tbl losludes oppropriated retained rannungs reloned av serioon fehrolls hs ensed hydruelutrue prnres ts of $4 at.Uw or Dn emt.s r St. Inn The ecuanpermns noses err en instgralport ut these knenuel stonernents Notes to Consolidated Financial Statements SCtcorp and Subsidianes I
Mene 1. Casperate Iteatruciaring and Proposed Merger all subsidiaries not subiect to tate regulation. SCEcorp uses the equity method of accountmg to report invest-On July 1,1988, SCEcorp acqmted the outstandmg ments of 50% or less in partnerships primanly engaged l common stock of Southern Cahforma Edison Company in cogeneration, grothermal and other energy related (Edmml under a merger agreement approved by share- facilitics which are exempt from utihty regulauon. All holders on Apnl 21,1988. Edison sharcholders became e significant intercompany transactmns have becli climi-holders of SCEcorp,'s common stock on a sharc.for. nated, except mtercompany profits from energy sales to share basis. Each v, hare of Edison's outstanding ongmal Edison by unregulated, energy producing affihates, preferred stock was converted into 2.1 shares of which are allowed m rates. - SCEcorp' common stock. Edison's remaining preferred stock and debt securitics were not exchanged or trans- - Accounting Principles Edison is regulated by ths ferred to SCEcorp. Edison's eqmty investment m non. CpUC and the TERC. The accompanymg consohdated utility subsidiaries was transferred to SCEcorp at book financial statements reflect the ratemaking pohcies of
. value on July 1,1988. these commissmns, as applied to Edison, in conformity On November 30,198R, SCEcorp, Edison, aral San with generally accepte;l accountmg prmciples apphcable Diego Cas & Electric Company (SDC&El executed an to rate regulated enterpnses.
agreement to merge SDG&E into Edison. Under the terms of the merger agreement, SCEcorp will exchange Utility Plant The costs of plant additiota, includmg 1.3 shares of its newly issued common stock for cach replacements and betterments, are capitali:cd and in-SDC&E common share. SDC&E preferred and prefer- cluded m unlity plant. Capitalized costs mclude direct ence stock will be exchanged for SCEcorp preferred and material and labor, construction overhead, and an preference stock with similar provisic.ns, except that allowance for debt and equity iunds used to finance dividends on cach series will be lacreased between constructmn. The cost of property that is replaced or 2.5% and 20% The merger is subiect to approval by reured-and related removal costs, less salvage-a the shareholders of SCEcorp, Edison, and SDC&E, as charged to the accumulated provmon for depreciation. well as regulatory agencies, includmg the Cahfornia Accumulated deferred mcome taxes related to ut hty pubhc Utihties Commirsion (CpVC) and the Federal plant are presented as a deductmn from unhty plant to Energy Regulatory Commnsion (FERC). conform with ratemakmg pmcedures used to determme rate ba*c. Nose 2. Summary of Significant Accounting policies Construction financing Costs Allowance for f unds r'a-34derion Polley The consohdated financial used dunng constructmn I AI UDCl represents the cost statements mclude the accounts of SCEcorp and its of dcbt and equity funds that finance construction of % subsidiancs. The pnncipal subsidianes are Ednan and utihty plant. Capitalized AfUDC is reported m the The Missmn Group, which is the parent company for consohdated statements of meome as a reductmn of m-
C s u I' ! terest charges for the debt comsment and as other in- RDAD costs are reflected in the followmg table: ; come for the equity compment. AFUDC anti plant . yn, ended twember 31. construction costs are recovered wh n completed prof ccts are placed mto commercial operation, and the re- - -- - - - - - - -r RDAD tosts charged to czpense $41,414 142,Ntt 547,122 covery of related depreciatmn is authortred throegh RDAD umis ddem@tatutalired 17.a u 14.H% 3 kkN i customer stra. liefore 1987, the cost of debt included in the Al'UDC Ibial RDAD cimes 5 m $R un s'itS10 l calculatina was reduced by the tax twncfit scalized from deducting the related interest expense from tax- Commencmg in 1988, a balancing account has been able income. As a result of changes in the treatment of established for RD&D costs charged to expense. Under interest expense for income tax purposes, pretax inter- thu mechanism, Ednon is required to refund to i est expense was used to compute the debt component ratepayers any authonted but unspent RD&D funds at of AFUDC leginning m 1987.%e AlUDC rate, which the end of the three year rate case cycle endmg reflects semiannual compoundmn, was 10.76% for 198H December 31,1990.
- and 11.57% for 1967 under the pectax methtd. The rate 3 was 10.53% for 1986 under the previous net of tax Uneanortised Debt laamance and Reacgwisition method. Espanat Debt premium, dncount, and issuance Interrat on loans that finance partnership construc- expenses are amortized over the hves of the related tion pmiccts is capitahred until the proiccts arc issuances. The expense of reacquitmg bonds that operational. Such capitahred interest is included m are redeemed without refunding are amortized over investments in partnerships m the consolidated bal- the peruxi the debt would have remained outstand-ance sheets. ing. The reacquisition expenses are amorti
- cd over
, the lives of the new debt issues when debt is reac-Depcocleados and Decommoissioning Depreciatmn of qmted with refundmg. :
utility plant, except nuticar iurt, is computed on a straight line, remaining hfe basis. Depreciation of non- Changeim AccountingPrinciple poor to 1987, elec- ; utility properties is computed on a straight hne basis tnc operating revenue was recorded based on cus'omer over their estimated useful hus. ,Inthngs. On January 1,1987, Edison began accrumg esti-The estimated cost of decommissioning Edison's mated revenue for electncity that had been dehvered to nuclear generstmg facihties is $713 million and is re- customers through the end of each month but had not covered in rancs through annual allowances charged to yet been billed. This accountmg change conforms to : depreciation expense. Retail rates for 1988, and certain the TLx Reform Act of 1986, which requires utthnes to i pnor years, mcluded annual decommissiomng revenue include unbilled revenue in taxable income commenc-requirements, which have been deposited in trust funds ing in 1987 and results in a better matching of revenue untti decommissioning begma. Trust Iund contribu- and expense.
- tions are invested in high grade securit'en. Approxi- Had the new accountmg method Iren in effect for mately 80% of the trust fund contnbutions qualify 1986, net income would have been $2.7 milhon less as tax deductions. than the amount reported, resultmg m a one cent decline in earnmgs per share.
Nuclear Fast The cost of nuclear fuel, mcluding its disposal, is amortized on the basis of generatmn and is Reguleracy Aalencing Accounts charged to fuel expense, in accordance with rate-makmg procedures adopted by the CPUC, nuclear fuel operating Revenue: The CPUC has authonred an financ6 costs are capitahted un'ai the fuel is placed electnc revenue adiustment mechamsm (LRAM) 7 into productmn. balancing account to mimim:c the elfect on earnmg> of retad sales iluctuat ons. Differences between autho. Reseecch, Development, and Demonstration (RD AD) nzed and recorded base rate revenue are accumulated RD&D costs not related to a specifle proiect are ex- m the account until they are refunded to or recovered pensed in the year meurred. RD&D costs related to from utihty customert, through CPUC authonzed rate specific construction proiccts are capitahzed until it adiustments. is determmed whether they will result in constructmo of plant. If constructmn does not result, the costs are , charged to expense.
li n Baerry Costa: An energy cut adintment clause I Palo Verde Aste Phase In Plan: Palo Verde Units [~ (ECAC) holancing account adtats results of operstmne 1,2, and 3 have been in commercial operation, for ! (( ' for variations hetwwn the recorded cost of fuel and ratemaking purposes, since February 1,1986, Septem-purchr. sed power and revenue de6ignated for recovery her 19,1986, and lanuary 20,1988, respectively. The ! of such costs. Undercollected energy costs are accumu- CPUC has adopted a 10. year rate phase in plan, which ,
,s lated in the balancing account untd they are recovered . defers $200 million of required revenue durmg the first ,
- i. ,
from utility entomers through CPUC authorized rate four years of operation for each unit Deferrals for each l adintments. Previonly,90% of fuel and purchased unit, for years one through four, are $80 million, 560 !
' power costs were recovered through ECAC, and the re- milhon, 540 million, and $20 million, respectively. The i j maming 10% of such coats were recovered through the deferrals and related interest will be recovered on a !
- t. annual energy rate (AER). On June 1,1988, the CPUC level basis during the final six years of each unit's l
[-i sapended the AER rate component. As a result, all phase in plan.
)- fuel and purchased power costs are currently recovered i !- i. through ECAC. Steesmosas e/ Coah News Beginning in 1988, !
i in 1987, the CPUC authorized a one time write down SCEcorp presented statements of cash flows in confor- l
< of the cost of fuel oil inventory to market prices. It mity with a new accounting standard. Pnot perimis ,
l'. J ' also authorized the last in, first out inventory methat have been restated to be consistent with the current ! for measurmg the cost of fuel od comumptmn. The presentation. For purposes of the comolidated state- l
$108.7 million wnte down, includmg interest, has been ments of cash flows, SCEcorp considers short term }
recorded in the ECAC balancing account. On Decem- temporary cash investments to be cash equivalents. - ber 31,1988, the balance remaining to be recovered was Cash payments for interest were $485.5 million in j
$$9.0 million, including interest. 1988,$455.1 million in 1987, and $466.3 million in ;
. The CPUC has established performance incentives 1986. ;
based on target generstion levels for Edison's nuclear i generating stationrFuel savmgs or costs attnbutable Restetsments and Recleasi4 cations All prior penod i to levels above or below the targeted ranges are divided financial statements and related notes have been re- l equally between SCEcorp and Edison's customers stated to reflect consohdation of all maiority owned *! L through adjustments to the ECAC balancmg account. , subsidiaries and the corporate restructurmg. The con- .;
! solidated finanhal statements also have been restated !
Major Plant Additions: Before 1988, Edison used to reflect the write off of utility plant and related ad-
', maior additions 3dintment clause (MAACI balancing lustments to the accumulated provision for deprecia-accounts to accumulate the differences between reve- tion, accumulated deferred income taxes, and retairied f;
; nue required to provide recovery of ownership costs of earnings resultmg from the CPUC's disallowance of
- , San Onofre Nuclear Cencratmg Station (San Onofre) nuclear plant construction costs. See Note 3 for a fur- !
I Units 2 and 3 and Palo Verde Nuclear Cencratmg Sta- ther discussion of the disallowance. tion lPalo Verdel Umts I and 2 and related authonzed Certam other items in prior permds have also been j revenue, reclassifled to conform them to the financial statement Commencing in 1988, ownership costs of San Onofre presentauons for December 31,1988. 'I Units 2 and 3 are recovered in base rates. The own. ! crship costs of Palo Verde Units 1,2, and 3 are also re- Note 3. Regulatory Matters i
, covered m base rates to the extent they are not deferred in accordance with the Palo Verde race phase in plan. CPUC Disallowances In October 1986, the CPUC !
Recovery of remaimng undercollections in the MAAC disallowed $258 6 milhon of Edison's $3.4 billion in. -l balancing accounts as of December 31,1988, has been vestment in San Oncfre Umts 2 and 3. Edison filed for authorized over a three year periet beginmng m 1989. rehearma on $213.4 million of the disallowed costs in t December 1986. In March 1987, the CPUC granted a > interest and Taxes: Interest on regulatory balancmg rehearmg on mdirect construction cost inues and, in accounts is accrued at the three month pnme cornmer- July 1987, issued a decision that reduced the October cial paper rate. The weighted average interest rates 1986 disallowance to $198.9 million. i ' i were 7.60% for 1988 and 6.57% for 1987. Income tax effects on the changes m the regulatory balancmg accounts are deferred. L .F' __ _ , ._, _ __ --
36 Recovery of Edison's $1.5 bilhon mvestment in Palo Although the probable effect that the outcome of this Verde was reduced by 19.33% of the amount disallowed - matter will have on net income cannot be determmed for San Onofre Umts 2 and 3, under a ratemaking at this time, Edison beheves that adoptmn of the DRA's agreement adopted by the CPUC. The CPUC's mvest- recommendatmn to moddy the holdmg company deci-ment anallowances for San Onof re and Palo Verde total smn is not necenary to protett the pubhc mterest and
$237 million. Edison wdl woik dihgently to demonstrate that it has ,
in December 1986, the Fmancial Accountmg Stan- reasonably admmistered the contract, under review. dards Ikiard began requiring regulated enter).rnes to CPUC proceeding are scheduled to take place later wnte oli construction costa not allowed in rate base. this year.
%c new standard provides for the restatement of prior-period financial statements for disallowances occurrmg Resale Rates in accordance with FERC procedures, before the standard's effective date of lanuary 1,1988. resale rates are subiect to refund with interest if subsc-Accordi igly, the 1986 consolidated statement of in- quently dnallowed. Edison behetes that any refunds come includes a one time, after tax charge agamst resulting from pendmg rate proceeding,6hould not earninp of approumately $193 milhon, reflectmg the have a matenal ofIcet on net inwme.
CPUC's final constructmn cost dnallowances arismg from its October 1986 decnion. Note 4. Shott Term Debt in addition, revenue accrued to recover prior years' ownership costs, which is anociated with the con- SCEcorp mamtains unrestricted deposas of appron-structmn costs dnallowed by the CPUC, has beca mately $7 milhon at commercial bants and pays an-wntten off from the MAAC balancmg account Ednon nual commitmem fees of up to .1% to mamtam hnes of recorded after tax charges against earnings of appmxi. credit which may be utili:cd at negotiated or bank in-mately $15 m.llion for 1986 and $70 mdlion for 1987. dex rates and which totaled $2.2 bdhon on December 31, 1988. Appmumately $1.6 bdlion of these hnes of credit Aasrgy Cost Proceedids The CPUC's Divnion of support commercial paper and other borrowmgs to Ratepayer Advocates (DRA) recommended that the finance general cash requirements, leteraged leasesi , CPUC disallow $124 mdlion of energy costs incurred fuel mventonc% and undercollectmns in regulatory between late 1984 and late 1987. Approumately $120 , balancing accounts. The remammg $600 mdhon of million of the proposed disallowance represents alleged these lines of credd are avadable for the long term overpayments to nonutihty power pmducers, meludmg refinancmg of certain vanable rate p(dlutmn control electricity purchased by Edmm from a 300 MW cogen- mdebtedntss nsued by Ednon. t cration facihty owned by Kern River Cogeneration Short term debt of subsidianes a comprised of: Company (KRCC). Minion Energy Company, which is Detember 31. one of SCEcorp's nonutdity subsidiaries, is a partner in
'"""E"" I" l#
the KRCC facility. The DRA's pmposed dnallowance m relation to power purchases from KRCC is approxi. General purpow $ 671 $ MK LeveraxedIcnes Wo loto mately $37 million, in upcommg CPUC hearmgs, Edi. hdtd"'ing anounts aco o aco o son will demonstrate that the power purchases from I"'I "A *3 KRCC actually saved its customers more than $24 mi'- Total hormwing supported by lion during the three years under consideratmn, com. I'"'5 "3 "'d l 103 d IMIl pared with the " standard offer" contract approved by
^ '""""' id "' h'd "' 1""" 4 '"" "" " M 31 the CPUC. The DRA also alleges overpayments by Ed -
"""*"""""* ~
son under 17 other contracts Ednon negotiated with nonutthty power producers that are not SCEcorp offih-stes. Ednon signed these contracts during the early pishonacnnabt 5 Wa 1H stages of Cahforma's efforts to rapidly devtlop alter-nate and renewable energy resources. The pnces Ednon Note L Income Thies proiceted to pay under these 17 contracts were at or below avoided cost standard contracts over their hves. SCEcorp's subsidianes are meluded m its consohdated in additmn to its recommended energy cost dnallow. federal mcome tax and combmed state franchne tax re-ance, the DRA has recommended that the CPUC turns. Under mcome tax allocatmn agreements, each modify its early 19M8 decnion that authori:cd Ednon subsidiary calculates its tax habdity separately. to form a holding company.
mmpw~~~
; 37 l
l I Carrant and De/ erred Taaes Income tax expente 34% and 40.13N%, respectively, for 1968,40% and includes the current tax hability from operations, and 46.138% respectively, for 19k7, and 46% and 51.184% deferred income taxes provided on certain items of respectively, for 1986. j meome arid expense which are reported m ddlerent War ended Ikcemtwr 31. penmin for tax and financial reportmg purposes, g,_g ,,, ,,,, , , , The current and deferred components of mco;ne tax expense are: Expected federal mcome tax expense at statuto6 r este 5 437,k43 5 550,954 & 550,693 Year ended December 31. Increase (decrease)in In thousands 1988 1987 19h6 income tax expense resultmg from: Federal $241,917 1319,429 $342,253
' State 107,411 124.055 119.972 durms constructmn 16,lM) (29,362) 162,202) 349,32N 443 4k4 462.225 lederal deductmn for state Delected-lederal and state: taxes on meome 140,(KKI (49.4t;0) (54,493)
Investment and energy las Depreciation timmg credits-net {ll,2101 40,351 69,931 ditleren(c not defereed 70,224 96,042 102,536 Depreciation 173,3H0 18R,186 176,280 5 tate tax provmon 117,662 123,7(o llR464 Regulatory balancmg accounts (79,4601 (33,4M) 128,4001 pnot years' Debt scacqumtmn expenses (2,507) {1,390) 81,96R decommnsiomng (15,714) - - Leveraged leases 38,950 23,764 - Nuclear plant Fuel contraet nettlements (1,9H0) 16,002 9,528 disallowance - 14,730) 55042 Nuclear plant dnallowance - (78,616) (61,665) Subudiary preferred and Cumulative cifret of preference dmdends e 15,h76 20,ntR 25,155 acemmtmg change - 58,752 - All other dif ferences 103M11 (6 0 0x1 1 4 7641 Capitaltred explora:IEn and hial m<ome ias expense 5 52's 942 & rd8 k%4 5 676 411 development expenses - - (31,338) , Unbilled revenue (24,420) (27,467) - I'C'8" '"C"*C Il 2"7J" il W" S L I" phase m plan 78,743 6R.797 46.398 , Iifcetive tax rate (total mcome Fixed charges 7,994 (14,178) 145,538) _spx expense- pre:ax mcomel da k% 46 4%, 46 %, Conrnbutions in and of
" ""**#""' #* ' # " "" E " "' "
Ot 29 19,9; 1981 and certam constructmn overheads have not been 176.614 195.370 214,206
.irovided because the tax cffects of such timmg diffcr-healinconne tan expense $525.942 56u.64 $676 431 ences are not allowed for retail ratemaking purposen until the taxes become payable, The cumulative net Classillestion olincome cases amount of these timing ddferences was $1.H billion on included m operatmg expenses $446,395 557il 22N 1702,442 December 31,19NH, and 1987.
IncluJed m other mcome 79,547 ko.490 35,644 Nuclear plant dnallowance - (7K6161 16 L6651 Ratemaking incesrigation in 1986, ihe CpUC began Related to cumulauve effect of an mvestigation to evaluate the effects of the Tax accountme change - u 752 - Reform Act of 1986 on ratemakmg procedures. Reve-healincome est espense 1525.942 $rdNM4 1676 43) nue Ior recove Y of mcome tax expense for 19N7 and subsequent penods was collected subicet to refund Accumulated deferred investment tax credits (lTC) pending a CpUC decision. are amortized over the lives of the related propernes. In October 1988, Ednon retunded approximately $51 Cash payments for income taxes were $421.9 milhon milhor. through the LRAM balancing account, m com-in 19M8,5466.7 million in 1987, and $316.3 million in phance with an August 198N CpUC intenm resolutmn. 1986. Imal CpVC approval of the amounts rerunded n The followmg table reconciles the differences be- pendmg. Itecause Ednon had prevmusly pmvided a tween recorded state and federal mcome taxes and reserve for this item, refunds to customers have not
, amounts deternimed on mcome before taxes by apply- and are not expected to have any sigmficant effect on
, ing the federal statutory tax rate The federal and com- net mcome. ,
. posite federal and state statutory mcome tax rates are
v kj.: New Aseemoedas $seederd Under accounting ules pension expense under the new standard includes the currently in eficct, deferred income tax balances are not ' followmg compcments: adpusted to reflect thanges m tax law of rates. Ilow-Year onded !hmkt 31. evet, a new accounting standard will require such ad-
'" 0"""" I'"I sustment6 begmning in 1990.
The new standard requires sigmficant balance sheet Net pension espennes admstments. The corporation wdl record additional de- h"*' "*: he kneHtuanwd $ 4 U40 $ 46,629 letted income taxes related to the equity component of I"'" "*' "" P"'m ted kncfit iddisatum 102,249 91,025 ATUDC, which is cunently recorded on an af ter tax Anual rourn on plan aswis 0.n6871 030,72m basisa the debt component of AlUDC, which was re- 40 610 46.699 Net amortizatum and delertal corded on a net of tan basis prior to 19t(7 and other 4 temporary dif ferences for which delened income taxes I'"""'" I'*I"I" Y P"'*"*"' "' ' """"" 8
*"dd: 52,512 uMo :
have not been provided. Additional balance sheet adjustments wdl be re-
"""" '"" * '"""**' #U
$ 46 096 $ s i n,149 corded for the net reduction in delerted income tax S'f"'"'" ""' rn3 mise liabihties resulting from income tax rate thonges, the
, recogmtion of delcried income tax assets attributable in confortmty with the accounting pnnciples for late-to the reduction of the book basis of property by un- tegulated enterpnses, regulatory adiustments have amortized investment tax credits; and to clasuly prop- been recorded to tellect, in net income, the pennon crty rclated accumulated deferred taxes as a liabihty costs calculated under the actuarial method used for instead of a reduction of utthty plant, ratemakmg purposes. The dillerence between penuon The maionry of addiuonal defened tax assets and costs calculated for accounting and ratemakmg pur-habdities will be otiset by accordmg regulatory assets poses has beenpcorded as a deferred charge on the .
and liabihties irpresent ng the antiapated effect of consohdated balance sheets. these adjustments on customer rates. Such regulatory The phn's funded Statur is presented below; assets and liabihues will be admsted as they are re- , , g , covered or refunded through the ratemakmg process and for changes in tax rates or laws. Actuarial geesent salue el benefit obl4ations* Note 6. Employee itemelit Plans Wsted benefits 1 90s.190 $ x00.9s2 Nonvested benents 6KMI 57.306 Assados Man SCLcorp has a trusteed noncontribut. Accumulated benefit obbsatum v73,721 Nsa.2s8 ory defined-bcuefit penuon plan, covering substan- V*l"'"I P "*ceted future annpensatmn tia!!y all full time employees who fulfill mmimum levels 4 R 363 372 M service requirements.11cnefits are based on years of Pnnected benefit ediht.atum 11.4tvog4_s i 230.3ra accredited service and average compensation. SCID orp's plan aucts at tait value $1.326 ta; 51.201.sso policy in to fund the plan on a level premium hcHe ohlmatmn m m ns actuarial method, ptovided that annual contribu' of plan asnets 5 (82.4491 5 128.N01) uons meet the mmimum fundmg requirements of Unrecogmred net gam ' 149.02 H (101.5621 the I'mr.loyee Retirement income secunty Act and do unrecognmd nct obhr.atwn bemn [' w't exceed the maximum deductible amount under m- amoro ca own 17 vears uv.640 v4 ira come tax regulations. pnor seryne uw f rom penuon Acerned pennese lisholme 5 641 M01~~1 114202) plan amendments are funded over 30-year penods. In 1987, a new accounting standard for defined- ^ " " " * ' " ' " ' " """" ' U""""" E' # " Discount rate N0% As% benefit plans was implemented that changed the haus g,,, o, mu ,,,, ,, used for deterrmrung penuou ext.Jnse. licture 19M7, future uimpenutam 60% 60% penuun cost was based on the actuanal method used to 1.xpected hms-term raic . determanc annual coninbutmns to the plan For 1986 of rnurn on nwis ks% 8sN ! penuon expense amounted to 54M.6 mdlion. . Assets of the pl an cosesist pnmanly of common stocks, corporate aami guvernment bonds, shordtenn
' mvestments, and gu.ananteed investment contracts.
39 l ,L I anydeper Saecir Mass SCEcorp maintains an OtJacr Post 4mpleyanset sene#ts Health care bene- , Employee stock Ownership plan (ESOp) and a Stock fits and life insurance are provided for retired employ-i Savings plus plan (55pp), which are designed to sup- ces and their dependents. Group hic insurance is i plement employces' retirement mcome. Contnbutions provided through an insurance company. Health care is - to the ESOp were funded pnmanly by federalincome pmvided by a combinatmn of SCEcorp facihties and tax benefits and contnbutions by employees. SCEcorp insurance programs. The costs of these benefits for re-contnbutions to the SSpp were $16.9 million in 1988, tirees were $22.8 milhon in 1988, $1H.0 milhon in 1987,
$16.6 mdlion in 1987, and $15.4 million in 1986, and $15.4 million in 1986.
4 None 7, )eistly Owned Utility Protects cluded in the appropriate operstmg expense category m the consolidated statements of income. He table Edison owns undmded interests in several generstmg below pre ents the investments in each proicct as statmns and transmission systems, for which each par- included m the consolidated balance sheet as of tecipant provides its own financing. The proportionate December 31,1988: l share of expenses pertaining to such proiccts is in. Plant in At t umulated Under Ownership la thouunds servit c Depict isuon Conmir ut tmn luterent E.l Dorado Transmissum System $ 21,649 5 8,$90 $ ION 60 00% (al Funar Cors.crs Coal Cencratmg Statmn-Umts 4 and 5 401.142 122,613 11,395 4M10
, Muhave Coal Generatmg Statmn 233,708 95,919 877 56 00 PactAc intertic DC Transmission System 115,047 34.075 69.550 50 00 palo Verde Nuclear tene aung Statmn 1,4M,307 k0.810 N,34 M i 5 k0 San Onofre Nuclear Generstmg Statmn: -
Unit 1 537,022 153,999 23.261 N0 00 Units 2 and 3 ,2.759,741 - 477,523 I n.0A4 7 5 (15 Common facihtscs-Umt: 2 and 3 kiv.mo 114,k46 1,kM 75 05 Common facilities-Units I,2 end 3 176,130 2N,ks4 3,599 75.k ? Yuma Axis Generatint Statmn l't.369 10 %I6 69 33 30 Tutal $6.539.145 $ 1,127,745 $ 137.154 lab Represents a stunpume rete. Nuee 8. leases ests s their only remedy m the event of default by the lessee. The components of the net investment in assumesmesta is Leveraged Leesca Durmg 1987, a leveraged leases are provided m the following table: wholly owned, nonutility subsidiary became the lessor in several leveraged. lease agreements, under which its undivided interests in a nuc! car power plant and a in th usands , ivsn iyxy paper mill facility, havmg economic hves of 40 and 34 Rentals recesvable (net of prmcipal years, respectively, were leased for terms of 29 and 25 and interest on nonrecourse debtl $243,999 $243.960 years, respectively. All operatmg, mamtenance, and l'$5' Uncarned mcome viv72 115.102 decommissioning costs are the responsibihty of the investment m leveraged leases 148,027 128 8;n lessees. The facilities' total cast was 5609 millmn at Current portmn ut rentals receivable - 4,642 December 31,1988, and 1947. Less: Deferred income taxes 74,4 0 40 76R he equity mvestment in these facilities represented Net mvestment m leverai:cd leases 5 73,574 $ v2.731 24*. of the purchase price. The remaming 76% was numeccourse debt, which is secured by first hens on the leaned property. The lenders accept their security mier-
y- , 40 i' Opersedag heae Ca mnemeseta SCEcorp leases auto- vider, whether or not the fecihty or transmission line is motive, computer, office, and miscellaneous equipment - operabic. None of the,e power contracts provide, or are through operating rental agreements with varymg expected to provide, more than 5% of cunent or esti-terms, provisions, and expiration dates. At December mated future operstmg capacity. , 31,1988, estimated remaining rental commitments for The cost of power and firm transmisuon service ob- , tained under these contracts, includmg payments made noncancelable operating leases were as follows:
' " * * ' Y " "*"' "" "' "# "P "K Year ended Dnemt er 31. In thousands- mcluded in purchased power and other operstmg ex' I# $IWI penses, respectively, in the consohdated statements of IM 26 m income. Purchased power costs are generally recover-alle through the ECAC balancing account procedure.
p Se cetd inimmatWn pensining m these conuacts on 1993 14.637
' December 31,1988, is summanzed as f ollows:
For penosis theraf ter 16.266 l l
+
$ 129.081 pur(hased Transmisuun Total future rental commitments Power Service Years contruts capue 19904 017 1990-2016 On June 10,1987, one of Edison's wholly owned sub.
share of cifccuve operaung sidiaries purchased the leasing company imm which
**P" " *'E8**"s 473 5 627.5
- Edison leased its nuclear fuel by assuming the com- 5 * ""
"*"I'"""'P"'
pany's commercial paper obligations. On March 1,1988, Required mmimum annual paymtnts in thousands Edison assumed the commercial paper obligations of Im & 46.468 s m3 6 the affiliated nuclear fuel lessor and terminated the IM 13,8'.4 Wo nuclear fuel lease agreement. Lease liabilities supported W 2MD 4329 by commercial paper borrowings, which had been classified as long term Ubligations, have been reclassi- 2 fled as long term debt to conform with the financial Theredict m't r, e - statement presentation of nuclear fuel financing on otal 512 w snaw December 31,1988. The longl ierm debt amount represents the estimated repayment of commercial purchased power costs were $121.5 milhon m 1988, paper based up(m expected nuclear fuel consumption
$118.0 million in 1987, and $115.3 million in 1986.
subsequent to one year after the balance sheet date Transmission costs were $11.4 milhon in 1988, $11.2 and is supported by refinancing agreements with million in 1987, and $12.0 million m 1986. l commercial banks. : Note 10 Contingencies Note 9. Comaniemiests Nuclear laamrance On August 22,1988. Congress j Casatracties progrear and fuel Supply As of Dc. amended the pnce Anderson Act, ex?cndmg it until , tember 31,1988, SCEcorp's construction expenditures August 1,2002, it increased-to $7.6 billion from are estimated to be $905 million for 1989, $712 milhon
$720 mdlion-the limit on public liability claims that for 1990, and $713 million for 1991. In addition, mini.
could arise from a nuclear incident. participants m San , mum long term commitments of approximately $1,607 ! Onofre and palo Verde have purchased the maximum million existed as of December 31,1988, under fuel ' puvate pnmary msurance avadable, which currently supply contracts. is $200 mdlion. The balance is to be covered by the . industry's retrospective rating plan, usmg deferred ! Long Term Purchased Power and Dansmission premium charges. This secondary level of financial Contracts Edison has contracted to purchase por. pnnection is regmred by the Nuclear Regulatory Com-tions of the generatmg output of certam facdities and mission (NRC). The maximum amount of the deterred to purchase firm transmission service when appropri-prem um that may be charged for each nuclear mcident etc. Although there is no investment in such facilities, these contracts provide for mmimum payments based, in part, on the debt service requirements of the pro-
- y. -
is $63 milhon per reactor, but not more than $10 mil. Amedensat LJedgeedon in 1978, five resale customers lion per reactor may be charged in any one year for. filed a suit against Edison,in federal district court, al-each incident. Edium could be required to pay a max. leging violnion of antitrust laws. The complaint seeks imum of $110 6 million per nuclear inendent, on the monetary damages, a trebhng of such damages, and basis of its ownership intercats in San Onofre and palo certam injunctive relici. The complamt alleges that : Verde, but it would have to pay no more than $29.1 Edaon engaged in anticompetitive behavior by charsms milhon per incident in any one yeat. Such amounts in- more for electricity it sold to resale customers than it clude a 5% surcharge that would be appl 6 cable in the s.harged certam clases of retail customers. The com-event tha* additional funds are needed to natisiy public plaint also alleges that Edaon acted alone and in con.
' liability clums, and are subicci to adiustment for cert with other utdities to prevent or limit such resale inflation. customers from obtaining bulk power supplies from
., Edison's property damage insurance covers losses other sources to reduce or replace the resale customer 6' up to $500 million at San Onofre and palo Verde. De- purchues from Edison. The plaintiffa enumate that
. contamination liability and property damage coverage their actual damages, before trebimg, were approxi-in exccu of the primary $500 million layer hn aluo mately $99.5 milhon from h bruary 1,1978, through been purchased, exceeding NRC requirements. Decc mber 31,1985. The trial began on July 8,1986, and insurance covering part of the additmnal expense of concluded on September 26,1986. Edison Illed findmgs replacement power, which could result from an acci- of fact and concluris of law with the court on dent related nuclear unit outage,is also provided. After November 21,1986. A & cision is pendmg.
the first 21 weeks of such an outage, a maximum In 1983, another resale customer also filed suit, in weekly indemmty of $2.7 milhon for a single unit for federal district court, allegmg violation of certain ant - 52 weeks begms. An additional $1.4 million per week is trust laws. The customer alleges that it has been de-provided for the next 52 weeks. These policies are is- nied access to lower cost power and was overcharged sued primarily by mutual in'surance companies owned for power purchases as well as other operational and by utilitics with nuclear facilities. Illosses at any . financial damages. On July 17,1988, Edison received nuclear facility covered by the arrangement were to the customer's antitrust damage study allegmg total exceed the accumulated funds available for these damages e,f approximately $135 milhon before trebling. insurance programs, Edison could be assessed retro- A trial date of November 14,1989, has been set, spective premium adiustments of up to $54.0 million The foregoing proceedings involve complex inues of per year. Insurance premiums are charged to operating law and fact. Although Edison is unable to predict the expenses. final outcome, it has categoncally denied the resale customers' allegations. QuartCTly finanCl.Il Data sctcorp and subsidianes Unoudstet in rmlhons. I9NN'* 39N7 cxcept per share data Total fourth Tlord Second brat Tbial Fourth Third $ccond hrst Operatmg revenue $6,253 $ 1,539 $2,029 $1,3'd $ 1,332 15.602 51.414 51,518 51,354 $ 1,316 Operstmx mcome 1,096 196 476 228 196 965 233 28 k 249 225 Net income 762 107 3V2 146 117 739 171 212 th7 169' per share: Larnmgs 3 49 .49 1.79 .67 54 3.39 .78 97 $6 .78 ' Dmdends declared 2.4 51 .62 .62 62 .59% 2.35% ..'i9 % .59% .59% .57 Common stock pnces lingh 134 % $34% 133 % $34 % 534 $37 133 % $33% $32% $37 Low $29% $31 % $30% 130 129 % $27% $27% $29% $2k% $31 % y
- Includes SM mdhon. or ll1 cents per share, resulung frum an accountmg shange (See Nute 2 of "Nuten to Connnhdated fsnoncsal Statements "I
' Quart:dv fluctuatsuns sompared to IVN1 ere promendy the result ut a DeLember IVN! CpUC rett drasson whosh vedered idnun to shange the .' war se bdis ione cunturners. cnntentratsna e large r pers entage of these customere annual sharges ento the summer months ,
e w \: L 42 Selected Financial Data 1984-1988 sctcorp and subsidianes in thousands. except percerst, per al,are and ratso data 1968 19k1 19k6 (al Ivkh 19nt sbl
- cam .
Conudidated operstmg sevenur 66,252,719 Si601,926 1'i,36k,0x 7 $(217,16? $3,k99.1;2 Conmbdated operatmg cspenses 5,156,35l 4.647,13% 4.420.9.41 4.240,l'5 3v42.427 Consohdated net income 761,831 73H,531 520,727 702,409 M9, M Weighted everage shares of common samk outstandmg l(RKI) 218,332 218,014 217,780 21 ri .ov6 207,576 pre there data: Larnings $3.49 $3.39 12.39 5126 13 Ik Davidends declared 2.45 % 2.35 % 2.25 2 13 2.01 Book value (a) 23.18 22<l6 21.13 21.04 19.89
' Market value at year end 32 % 30% 33 % 26 % 22 n Davidend payout satio l paid basist 69.6 % 68.7 % 92.9 % 64 4 % 61.9 %
Rate id return on common equity tal 15.33 % 15.51 % 11.09 % 15.75 % 16.;k% Prne/carnings term 9,3 9.0 14.2 A.2 7.2 Ratio of carnings to flued charges 2.86 2.91 2.71 2 97 2 70 Total assets (al $14,666,276 $14,350.664 $ 13,683,00 $13,2;6,044 $ 11,906 408 Common stmk-paid m capital 2,463,762 2,457,kl9 2,454,3 t k 2,4so,754 1.3R9k4 1,601,086 2,315,915 2,150,751 2,12 h,646 1,hk6,N04 Retained carnmas Common shareholders' equity {al 5,064,848 4A4734 4,6M,069 4,579,400 4.246.7 h 8 preferred and prcierence stock of subsidiary
-not subicct to mandatory redemptmn 358,7$$ 361,238 361,M4 462.500 4M,25R
-subiect to mandatory redemption 239,037 277,5hi 2V9,04V 395,074 422,2k6 5,421,747 5,150,8h3 5,122.243 5,175.624 4,722,079 Lams term debt of subsidiaries Southore Califorms EdiaoLCompany financial data: ,
Earrungs available for common stock $684,689 5697,18k Sm1,198 $694.113 56% vl' Larnmgs per share tc) , 3.14 3.20 2.31 3.22 3 16 Financial rate of return on common equity lal 14.88 % 15.32 % 11.07 % 15 93 % 16.50 % Ratemalmg rate of return on common equity-carned 11.20 % 11.97% 12.42 % 13.22 % 14 24 % Ratemakmg rate of return on common equity-authori:cd 12.75 % 13.90 % 14 60 % 16m% 16 00N , Internal generation of funds 100 % 77% 74 % M% 67 % t Operating and sales dets: 15,98L7 14,775 14,W9 14.587 15,169 Arca peak demand (MW) Area generatmg capacity at peak (MW) 18,893 I M.206 i n,320 17,776 17, E4 67,8s5,761 65,539.481 64.197.405 64.984,566 M.3 t o,0,47 Kilowatt hour sales 10001 Customers 3,831,656 3,717,262 3,5M9,414 3,490.325 3.400.182
, Employees 16,660 17,086 17,%3 17,162 16A44 The Mienien Group Comrnon shareholder's equity $505,371 1292,10k $ 166,381 S l34.310 Sk 4,h61 Net mcome 77,?63 41,343 17.529 M,296 3.4M
, Larnings per share tc) 35e ivt hc 44 2c percent of t CLcorp's carnmy,s per share i 10.0% ;6% 3.3% l .2". 06" tab ltestated int nusIrar plant surntructenn sust dnullossuns es den ral,rd un "Nunn en Cunudsdated f ununoal Matensents" on paw M-h f H ltepresents Ednnn% vns unsnlodated tonanaal data. whosh wouhl br subusantoutly unnias un bCls urph s unsnhdated nanancsal data ici llosed un wrnghted.overute shurr.s nl SCL s nry s urnnoun atm L nut standsnt
7 < p Management's Discussion and Analysis of Results of Operations and Financial Condition l SCEcorp became the parent holding company of South- Elcetric operstmg revenue increased by $430 6 mil-ern Cahfornia Edison Company (Edison) through a- hon, or 7.k%, over last year, reflectmg a 3.6% mcrea6e f{ corporate reorgani:stmn approved by tdison 6harehold- in blowatt hour sales. The mcrease m revenue is at-era durmg 1988. Unless stated otherwise, this discus- inbutable to a 3 9% mcrease m retail sales volume that Sion addrer.scs the consohdated results of operatmns and resulicJ from the addition of more than ll4XXKi new financial conditmn of SCEcorp. SCEcorp is comprised customer 6 and the ofIcet of rate changes. Resale sales of Edison and The Mission Group, the parent company volume declined 5.4% due to the availabdity of alter-for all Subsidiaries not subject to rate regulation. native energy sources to resale customers. Increases m electric operating revenue of 3.5% m 1987 and 2.6% m
! l Baseles el Operedens 1986 reflect, m additam to rate changes, a 5.1% retsil sales volume increase in 1987 and a 1.2% sales volume Aarnings h=-ry Earnings per share for 1988 m- dechne in 1986.
creased 10 cents to $3 49 from $3.39 in 1987 despite a Rate changes that became etfective January 1,1989,
, reduction by the Cahfornia Pubhc Utthties Commis- are protected to increabe revenue by $77.7 milhon, or sion (CPUC)in Edikon's authorized rate of return on 1.3% The CPUC approved on attritmn increase of common equity from 13 9% to 12.75% Net income $116.4 million to recogm:c mercases in nonfuel ce rose 3.2% to a record $761.8 mdlion and revenue to penses and to increase Edison's authon:cd rate of another record of $6.3 bilhon, compared to $5.6 billmn return on common egmty to 13.0% from 12.75% in in 1987. Factors contnbutmg to the increa$cd carnmes separate pmecedmgs, the CPUC authonted a $77.1 mil-include CPUC approval of 1988 expense levels that hon rate decrease aher Edison completed full recovery more accurately reflect Edison's costs, continued em- of uramum contract settlement payments and granted phasis on cost contamment, a CPUC award for favor- a $38 4 million rate mcrease for additional plant mvest-able coal plant operating performance, and higher ment in the San Onofre Nuclear Cencratmg Station.
carnmgs from The Mission Group. Investment and other operatmg revenue mcreased by The Mission Gmup's contnbution to carnmgs per $220.2 mdhon, or 218.3%, reflecimg growth in nonutil-share for 1988 was 35 cents, or 10.0%, of total SCEcorp ity busmesses. Contmued mcreases m revenue from , carnings, compared with 19 cents per share, or 5.6% nonutihiv businesses are expected durma 1989. for 1987. The Mission Group's net income rose to $77.8 . million from $41.3 milhon in 1987, Nonutthty earnings Operating E.rpenses Operatmg expenses for 1988 per share increased by approximately 84% above those mcreased by $519.2 milhon, or 11.2%, over 19R7, in 1987, with carmngs growth in each nonunhty busi- compared with mcreases of $216.2 mdhon, or 4 9% in ness. Higher carnings resulted from the additmn of 19H7, and $1MO.8 mdhon, or 4.3% in 1986. 830 MW of new cogeneration and geothermal proicets The net increase in operating expenses resulted pri-by Mission Energy Company, the sale of industrial prop- manly from utihty operations. Fuel expense declined erty by Mission Land Company, increased construction $119.0 mdhon or 10 9% m 1988, compared with an
, contractmg actmty by Mnsmn Power Engmeermg Com- increase of $226.6 milhon m 19M7, and a decrease of pany, and the first full year of operation for Mnsmn $812.4 mdhon in 19M6. The reductmn in f uel expense First Financial. for 198N is the result of mereased nuclear generation which dnplaced higher cost natural gas generatmn.
Flectric Operating Revenue and Sales Approxi- Additionally, the utihty operated higher cost non. nuclear mately 98% of cleetnc operating revenue represents fuel burning power plants less because of an mcrease retad sales that are subiect to rate regulatmn by m mandatory purchases of power from nonutihty pro-the CPUC. The remaining revenue is from sales to ducers at CpUC mandated rates that exceeded ra:es wholesale customers, which are regulated by the for economy purchases. purchased power expense in-Federal Energy Regulatory Commnuon ifERC). creased by $454.5 mdhon, or 5M.2% over 19M7. The eficci on earmngs of f uel and purchased power cost fluctuations is minirm:cd by regulatory adiustment me;hamsms estabbshed by the CpUC and the FERC. i- _
= ,
e I Provisions for regulatory adiu6tment clauses for 1988 $4snWeast Aenes edag Changes in accordance with
, teilect net overcollectionnd $240.7 million. The - changes in accounting standards for rate regulated en-overcollections are attnbutable to growth in kilowatt- terprnes, m the first quarter of 19k8 Edium recorded a hout unes CPUC authonted recovery of previously noncash wnte off against mcome of approximately !
g deferred energy coats through the Energy Cost Adiust- $193 milhon, net of related income tax citetts, for dis-l' ment Clau6ci and amorntation of deferred costs under allowed costs on its inveniment in nuclear fanht es. A6 an adtuntment clau6e that was estabhshed ta recovet permitted by the new ascounting standard, Ednon cuan of maior system additions. adopted these changes by restatmg the financial results [f Depreciation and decomminioning expense in- for 1986, the period in which the wnte offs would have l creased during 1988 by $95.2 million, of which 584.8 been accorded had the present accounting rules been in j mulhon is attnbuted to higher levels of decommission- efs ct. [' i ing empenac authonted by the CPUC The remainder of As discussed further in Note 5 of the " Notes to Con-the increase results from increased deprecianon due to antidated Financial Statements," mamr balance sheet l 2 adjustments will be recorded in accordance with new
- - system growth, Taxes on operating mcome for 1988 decreased $131.8 mcome tax accounting requirements that become ;
million, compared to 1987 resulting primarily f rom cffcctive in 1990. Theme changes are not expected to l sigmficantly affect future carmngs. i lower corporate tax rates insututed by the Tax Reform Act of 1986. However, the lower tax rates were offset by i
, reduced electncity rates for customers and, therefore, Financial Condition [
i had httle or no effect on net income, An increase in contracted nonutihty engmeeting and Ligaddity and Capital Atesources $CEcorp's liqu dity [' construcuon servico contnbuted approximately $138 is affected pnmarily by construction expenditures and million to the $1830 million increase in other operat. by capital requirements relatmg to debt and capital ing expem cs for 1988. The remainder of the increase is stock matunties The capital resources available to l principally due to Edis6 fps system growth. meet these requirements include internal cash genna- ,
. non and external financmgs.
- Other incasse and locome Dedverions Utihties capi. The maionty of SCEcorp's capital requnements con-talize an allowance for fieds used durmg construction , tmue to be met by ca6h generated through operations.
(AFUDC) whch represents the cost of debt and equity For 1988, nearly 80% of cash requirements were mter-capital used to finance construction of plant additions. nally generated, compared with approximately 87% m , i Completion of the Balsam Meadow Hydro Prosect and 1987 and 96% in 1986. The decime in Iv8N n attnbuted Palo Verde Nuclear Generating Station IPalo Verde) to an 18.4% reduction in cash from operatmns net of a Unit 3 contributed significantly to an $86.3 million 10.9% decrease in cash requirements. Cash flow and 11- i decline in AFUDC compared to 19fi7. AFUDC has quidity for 1988 were unfsvorably afIccted by revenue
. declined steadily over the past three years, as the deferred to future years under the Palo Verde Phue m construction of maior proiccts has been completed and Plan, which will increase through 1990, and dechne in the facihties placed into service, subsequent years. Additional items impacting cash l The $28.5 million mercase in 1988 interest mcome flow unfavorably are mcreased income tax payments l over 1987, resulted from higher interest rates on m- resulting from the Tax Reform Act of 1986, and con- i vested cash, and increases in the average amounts of inbutions of more than $157 milhon to nuclear decom- l masioning trusts related to 1988 and certam poor ;
cash investments and regulatory ance balances. years. A decime m construction expenditures and the recovery of balancmg account undercollectmnn par-tially offset these advene factors. > Through the issuance of long term debt dunng tysk, SCEcorp raised $631.3 milhon of which Ednon raned !
$622.7 milhon, pnmarily to finance the redemption at [
more costly debt, repay lxmd matunties, and to meet ! 6mkmg fund requirements. Market conditions and , WQ
/*W~~"
/
1 7 l' other factors, t nluding limitations imposed by Capital $tructure The capital structure of SCEcorp Edison's Artnics of Incorporatmn and Trust indenture, as of December 31,1988, is reflected in the table below: influence external financings. As of December 31,1988, Edis<m could issue approximately S18 billion of addi- "*'*'"'9 Y
- tional first and ref unding mortgage lumda or appsoxi-Long term debt 4K9 mately $1.7 bilhon of prtferred stock at current l
interest and dividend rates under its *llrust Indenture Tmal 100 0 % and Articles of Incorporation.
, in conformity with CpVC ratemaking procedures, Pr9 posed Merger short term borrowings sie utilized primarily to finance f fuel oil inventory, regulatory balancing account under- An discussed in Note i of " Notes to Consohdatd Eman-4 j collections, and nuclear fuel. The prmcipal and interest cial Statements," on November 30,19f;H, SCEcorp, Edi-related to these special purpose short term horrowmgs son, and San Diego Gas & Electric Company (SDG AEl ! are recovered through regulatory balancing account executed an agreement to merge SDC AE into Edison.
mechanisms. Note 4 of Notes to C(msohdated Finan- Under the terms of the merger agreement, SCEcorp cial Statements" discusses available lines of credit and will exchange 1.3 shares of its newly issued common related short term borrowings. stock for eachSDGAL common share. SDGAL pre-ferred and preference stock will be exchanged for CapitalRequirements SCEcorp, on an unconsolidated SCEcorp preferred and preference stock with similar basis, requires capital for common stock dmdend provisions, cxcept that dividends on each senes will be payments, investment in nonutility subudianes and increased between 2.5% and 20.0E general and admimstrative expenses. These require- The merger is subiect to the approval of shareholders ments are provided by dividend payments from Edison. and various regulatory agencies, includmg the CpUC l SCEcorp's primary capital requirements consist of and the EERC. SCEcorp in working to complete the expenditures undffits subsidiatics' construction pro- approval prc. cess in early 1990. grams and debt and capital stock matunties. Such com- , mitments are proiccted to total 54.9 bilhon from 1989 to 1993. It is anticipated that the maionty of these capi- . tal requirements will be financed through internally generated cash with supplemental financing through the issuance of long term debt. Balancing Acteunts and Prokened Capital Rate Pinese-ia Plan (Utthey) Requiressents ($Ctcorp) in onntloons of dallers la rnstitons of doliers a62 g ? D71 994 El N' 937 979 234 12% 216 255 Debt and 4 3 g,,, capital sim k
,,g ITlatufflita plan 739 905 622 760 712 713 694 Construction capendst urce 395 Regulatory balanung accounte .o 19h6 19s7 i9ss s9 90 Vi 92 93
7___
. 46 '
Ii 4 J. 4
^' '~? w' '
j ' l,6 ,-_ _ .
^
- D
~
gp c .*.
. l fDiil .?
[. i, 4 .
; ? *ps '. I 1-l
, 4-
+-
p V ) g k' % *M, = ! s V - l .
,s gn yh ; -! ,
=.., .
W%
.:' ~ # : ;
4 ' " }L a ., a hrst row (from left): Joan C Hardey, lack K. Horton, Howard P. Allen, Wdham R. Gould, Canadle C Prost. Second tow: Carl F. Huntsanget Henry T. 5cgerstrom Wenen Chnstopher, Walter B Cerken, Normen Barker,it., f.dward Zapanta. I Third row: Charles D. Mdlet Roy A. Anderson, Robert H. Smith, lames M. Rconer, E L h, it. l.1. Pmola. i i
y-a1 , Board of DimCtors SCleorp l Howasd P. Aben Carl E Huntainger
" l Chairman of the Board General Partner !
Pnadent and Chief Enecutive Officer DAE hmited Partnership, Ltd. ! [. (Agneultural Management) ; Roy A. Anderson Olai,Califomia ' i Chainnan Emeritus i hickheed Corporathm Charles D. Miller Burbank, Cahiornia Chairman of the incard and Chic! Executive Officer Avery Internathmal Corporation t Nesman Berket,)s (Mamilacturerof Self Adhesive Pnalucts) Chairmanof thekiard Pasadena, Cahlomia d PactSc Amencan income Shares, lac. (A Chimed End Iked Fund) 1.I.Pinola he Angeles, Cahlomia Chairman of the Board and Chief Executive Officer l'irst Interstate Bancorp Warsen Christophst hu Angeles, California l Chairman O'Melveny & Myers James M.Renner ; he Angeles, Cahfornia President ! Cahfomia State University, hm Angeles e-ma C Feast hm Angeles,Cahfomia
- Chairman of the Executive Committee '
he Angeles County Mur.eum of Art Henry T.Segerstnwn Les Angeles,Califomia Managing P rtner l C. I. Segerstrom & S(ms (Real Estate Development) .i Waher B.Gerken Costa Mesa, Cahfornia Chainnan of the Executive Committee Pactfic Mutual Life insurance Company , E.L Shannon,ls. ! Newport Beach, Cahfomia . President. Chief Executive Offlcer and Director Santa Fe Intemational Corporation Wiulam R.Gould (Oil Service, Engmeenng, Petroleum Exploratum ; Chairman Ementus and Consultant and Pnxtuction) (Retired Chatrman of the ikurd and Chief Executive Officer Alhambra,Cahfomia
, Southern California Edaon Company) hmg Beach, Cahfornia Robert H. Smith j President and Chief Executive Officer Jean C Hanley Secunty Pacific National Bank '
General Partner and Manager and Vice Chairman of the Ikiard ! Miramonte Vineyards Secunty Pacific Corporanon
' l' Temecula, Cahlornia he Angeles, Cahforma Jack K.Harton' Edward Zaponta Chainnan of the Executive Committee and Consultant Phyr.acian and Neuunurgeon (Retired Chairman of the BoarJ and Chief Executive Officer Monterey Park and East hm Angeles, California Southem Cahfornia Edison Company l '
hm Angeles, California
'Wsilnot standfor re electum m IVW '
9
r. L EEecutive Of6cers , I. ~ 4 - Neweed P. Allen Michael R.Peevey MichaelL Noel [' Vice President and'nessurer Cheerinan of the Board Executive Vice President President and Chiel Esecutive Of ficer Richard K.Bushey Jennifer Moran l David I.Fogarty Vice President and Controller Secretaryof the Cwporation i_ ' f E.necutive Vice Picsident l lohn R.Ruryl " ' D "' 8"4' """ d '#" '" ' M"" A 8 8 ' f lebeLReysom Vice Preudent and General Counsel $,,#',,*"",',,""[ ', ,',,$',',,#{"$'"#
,,, l h ,
l- , Esecutive Vice Pres 6 dent i Devid N. Barry lil'" p' andCh6ef FinancialOfficer Vi:e President and General Counsel , Smetheca Cal 44ernia Edison Cesapeny , Glena l.56erklundLH Charles R.McCarthy,it. ! Howard P. Allen Vice President (Power Supply) Vice President and Site Manager, Chairman of the ikiard President and Chici Executive Officer San Onof te Nuclear Robert H.Bridenbecket Generstmg Station
- Devid l.Fagnety Vice President (Customer Service) f.necutive Vice President MichaelL Noel John R.Rury'81 Vice President and Treasurer John Ltrymen Vice President and Cencral Counsel
- Harold R. Ray Executive Vice President andChief FmancialOfflect David N.Barry till" Vice President (i uel and
~
Vice Preudent and General Counsel Material Management) Michael R.Peerey
- Executive Vice President Richard K.Bushey lennifer Moran l Vice Preudent and Controller Secretary of the Corporation .
P.L Martin '"'#"""'""""""""' Senior Vice President Robert Dictchl*' 12) Mt Buty rtterrd rHrs urt M stsb l. IVNV o p L3D Mt hurts was sin ard Vist perudsnt und L T.Papay (Engineering, Planmng r;,n,,,I coun ,1rny,n, Mon 31. svav. Serllor Vice President and Research) #dt Mr vernh naurnedudannin i i orsponuinhts lut \s nsern I'lannung and l Kenneth P. Raskin John R. Fielder'" Vice President - Vice Preudent (Informanon Services) '" ,",,[,#, ,
",#Y,$,',",","",','
, ,,y ,
#'[,'"# $'l, (Nuclear Engineering, Safety 1939 7 and 1.icensmg) b Nonutility Subsidiaries r Thomas R.McDaniel lames S. Pignatelli58' H. Frederick Christie Preudent and Chief Execuuve Officer, President, Minuon First Financial Preudent. Missmn Energy Company ;
The Mission Group Edward A.Myers,Jt.HI Robert E.Umbaugh Prendent, Mission Energy Company President, Misuon Land Company J. lock Adrian ,
.=
President, Mission Power "
'O"'"""""'"#'""""^P"*""
Engmeermg Company (26 tilrvuvr Apenll. IVNN > P P _ _}}