ML19329E326
| ML19329E326 | |
| Person / Time | |
|---|---|
| Site: | Midland |
| Issue date: | 03/17/1975 |
| From: | CONSUMERS ENERGY CO. (FORMERLY CONSUMERS POWER CO.) |
| To: | |
| References | |
| NUDOCS 8006120634 | |
| Download: ML19329E326 (32) | |
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C8Hl8His Page Electric Service Area.
.inside Front Cover The Chairman's Letter.
2-3 Consumers Power Company /1974.
4-17 Statement of income.
18 Statement of Source of Funds for Gross Property Additions.
19 Balance Sheet.
.20-21 Statement of Retained Earnings.
22 Notes to the Financial Statements.
.22 27 Auditors' Report.
27 Summary of Statement of Income, 1974-70.
28 Management's Discussion and Analysis of the Statement of Income.
29 Consumers Power Company Stock Prices and Dividends, and Principal Markets on Which Traded 30 Company Directors, Officers, Divisions and Managers.
31 Annual Meeting, Transfer Agents and Registrars.
32 Natural Gas Service Area.
.inside Back Cover Consumers Power Company Annual Report 1974/ 212 West Michigan Avenue, Jackson, Michigan 49201 (517) 788-0550 the Cimpany Consumers Power Company was incorporated in Michigan in 1968 and is the successor to a corporation of the same name which was organized in Maine in 1910 and which did business in Michigan from 1915 to 1968.
The Company is a public utility engaged in the generation, pur-chase, distribution and sale of electricity, and in the purchase, pro-duction, manufacture, storage, distribution and sale of gas, in the Lower Peninsula of the State of Michigan.The Company also supplies steam service in one community. The population of the territory served by the Company is estimated to exceed 5,200,000. The Com-pany's utility operating revenues in 1974 were derived approximately 56% from electric service and 44% from gas service.
The industries in the territory served by the Company include f
automobile and automobile equipment, primary metals, chemicals, faDricated metal products, pharmaceuticals, machinery, oil refining, paper and paper products, food products and a diversified list of other industries.
The Company has two major wholly-owned subsidiaries. Northern Michigan Exploration Company is engaged in exploration and de-velopment, purchase and sale of oil and natural gas in the northern part of the Lower Peninsula of Michigan, and onshore and offshore Louisiana. Michigan Gas Storage Company is engaged in the pur-chase, transmission, storage and sale to the Company of gas from interstate pipeline suppliers. In addition, the Company owns a small subsidiary, Michigan Utility Collection Services, Inc., which is en-1 gaged in a special collection service from some past customers for utility services rendered by the Company.
1 FRONT COVER: Gantry Crane at the Ludington Pumped Storage Plant
O IearFelosSharehe der:
In any lifetime, there are some years that one would stocks, after Consolidated Edison Company of New rather forget. And 1974 was one of them. In a word, it York, Inc., took action in April 1974 to omit its second was terrible.
quarter dividend.
Just about everything that could possibly go wrong in consequence, Consumers Power Company was did so. Or, so it seemed. The automobile industry, brought to the point where it was unable to sell new which began the year in a mini-recession as a result securities in amounts anywhere near the levels of the Arab oil embargo, concluded 1974 in a state of needed to continue its major construction projects. It near disaster. Layoffs idled hundreds of thousands of became necessary to cancel plans to build a auto workers and shut down a large percentage of the billion twin-unit nuclear plant near Quanicassee industry's assembly lines. The ripple effect of auto to set back the prospective in-service dates of its industry troubles extended to many other rnajor in-Midland nuclear units, its oil-fired Karn Unit No. 4, anc dustries, and these difficulties were compounded by its coal-fired Unit No. 3 at the James H. Campbeh the twin pressures of inflation on the one hand and plant.
recession on the other. Meanwhile, it bec.1me clear These reductions in the Company's construction that the energy crisit, is not c, matter of just a few program, together with similar postponements and months, but of years. It is the new and predominant cancellations by other utilities, may have an adverse -
fact of life in industrialized societies. And few areas effect on the adequacy and reliability of energy sup-are more industrialized, or more dependent on energy, plies in the future. While Company load forecasts now than Michigan.
predict somewhat curtailed growth in energy de-For Consumers Power Company,1974 was a year mands in the years ahead, the amc'Jnt of growth which of extreme difficulty and frustration. Being a supplier actually can be accommodated will depend entirely of electricity and natural gas, and a regulated utility, on the Company's financial ability to construct new y
it was unable because of regulatory lag to adjust its facilities. It is in the national interest that utility con-
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rates quickly enough to offset the ravages of continu-struction be resumed as promptly as posible on such ing inflation. The costs of nearly everything needed to projects. And it is essential that utility earnings be supply adequate and reliable service to its customers restored to the point where they can attract the cap-continued to rise more rapidly than revenues.
ital needed to do the job. Hopefully, this will occur in An important cause of difficulty was the Company's the reasonably near future.
inability to use its largest electric generating facility, Even with rate relief and improved earnings,it will the Palisades nuclear power plant. This facility was take time for many utility companies, including Con-down for repairs almost the whole year. Purchase of sumers Power, to improve their credit ratings to the replacement power to make up for non-generation point where they can obtain the financial resources at Palisades was a grievous financial burden to the necessary to maintain th6 construction programs that Company.
are needed if we are to meet the energy demands of This combination of circumstances-galloping in-tomorrow. The nation cannot afford to wait until then flation, the cost of replacement power for Palisades, for construction of these projects to resume.
i and the time required to obtain rate relief-resulted it is for this reason that I have proposed that le in a precipitous decline in the Company's earnings.
lation be introduced which would allow an agency Moreover, the price of the Company's common stock of the Federal Government to support future energy dropped sharply, as did the price of many other utility needs of the nation by the purchase of a special class 2
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1 IvLw of non-voting stock. This would not be a subsidy. The crease gas revenues by at least $54.2 million annually.
Government would receive appropriate dividends on Two other aspects of the January 23 rate order ca.,
its investment, and full repayment at a later date.
have major effects on the Company's future earnings.
Meanwhile, such an arrangement would provide an First,the Commission stated that future rate pro-equity base that is much needed by many of the na-ceedings are not to be confined simply to a " test year" tion's utilities to enable them to borrow in the free that is wholly in the past. While the Commission will market. it would permit prompt restoration of projects look at past costs, it will consider these in the context that are needed without further lost time.
of known or reasonably predictable costs that are ex-Nevertheless adequate rates, producing improved pected to occur in the succeeding 12 months. This earnings, are absolutely essential if utilities are to be procedure should in part alleviate the problem of reg-able to obtain the money needed for required expan-ulatory lag which up to now has made it impossible sion. Without adequate earnings, without the assur-for utility rates to keep pace with inflation.
ance that interest and dividend obligations can be A second element of the rate order directs the Com-met, and the principal eventually repaid, no utility can mission staff to undertake an in-depth study of the borrow money from anybody; neither from the Gov-rate of return to be allowed on common equity, for use ernment nor from the investing public.
in the Company's next rate proceeding. The presently In recalling the disappointments and difficulties of authorized rate of return on common equity is 12.12 1974, it is important to note that, in a period of grave percent, a figure based on costs of capital prevailing economic turbulence, the Company maintained its in 1968. The Commission's request for the new study common stock dividend, and thus its potential for at-is evidence that it is prepared to give consideration tracting additional capital upon achieving significant to allowing a rate of return on common equity that is improvement in earnings. I believe that the most appropriate in these times of higher capital costs.
trying times are behind us and that the prospect is for Finally, there is reason to believe that the Palisades a brighter future.
plant will be brought back into commercial service in On January 23,1975 the Company received authori-the spring. This, together with power being generated zation from the Michigan Public Service Commission by the Company's newest oil-fired unit at the Dan E.
to raise electric rates sufficiently to produce an addi-Karn plant, should greatly reduce the need for pur-tional $38.6 million annually. This is in addition to in-chased power.
terim relief of $27.6 million which was authorized in For these reasons, I believe we can look forward September 1974, making the total increase S66.2 mil-to substantial improvement in the Company's affairs lion annually, in 1975.
There is pending before the Commission for deci-Sincerely, sion a request by the Company for authorization to pass through to its customers much of the cost of pur-chased and interchanged power similar to the way p that changes in the cost of fuel are reflected in rates.
It is hoped that a favorable decision will be forthcorn-A.H.Aymond ing in the pending case at an early date.
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Chairman of the Board and President Heanngs are proceed,ng,n a major case involv.ing natural gas rates, in which the Company seeks to in-February 11,1975 3
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in what can only be viewed as the most difficult of
$3,200 for each new electric customer added.
times, Consumers Power Company-though be-The problem in 1974, intensified as never bef coming financially depressed at the end of the year was that the Company's costs simply outstrip to the point of being unable to soll any securities-revenues. As a result, its earnings continued to continued in 1974 to provide more than 1.7 million cline to a point at which in the latter part of 1974, Michigan customers with reliable electric and nat-the Company could not meet the requirements for ural gas service.
the sale of new securities. Given the recent electric To have provided that service was a clear dem-rate increase, favorable early action on a request onstration of the professionalism and dedication for a purchased and interchanged power clause in of the Company's 10,800 employees. This was all ite rates, and authorization to increase gas rates by '
the more true in a year when declining earnings and next summer, the Management believes the Com-a substantial downturn in new business required pany can accomplish the financing required for the cutbacks that resulted in the elimination of more curtailed 1975 construction program.
than 750 Company jobs.
Substantial layoffs in the construction trades in Rates, Revenues and Earnings Michigan also resulted as Company construction The Company's total revenues in 1974 were projects were canceled or deferred, particularly
$1,105,383,000, compared to $834,954,000 in 1973.
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in electric construction where massive capital in-As costs soared and rates lagged far behind, earn-vestment is necessary. Total expenditures for the ings per share declined from $2.41 to S1.34, before year were $342.8 million, down S77.1 million from the cumulative effect of an accounting method the original construction budget planned. The pres-change on years prior to 1974 described below.
ent budget for expansion and improvement for 1975 Retroactive to January 1,1974, the Company is set at $251 million. That budget would be $484 changed its method of accounting to accrue reve-million, were the Company able to finance the con-nues for service rendered but not billed at month struction program it believes necessary to meet fu-end in order to achieve a better matching of reve-ture customer needs, nues and expenses. Prior to January 1,1974, oper-ating revenue was recognized at the time of Costs Continued To Rise monthly billings on a cycle basis for electric and One example of how the Company's costs have gas service. The difference in method was not ma-risen is the dramatic increase in the investment re-terial in earlier years. With the accelerating quired to serve its customers. The historical auer-crease in costs and rate levels that took plac age investment by the Company per electric cus-1974 the disparity between costs and revenues un-tomer is approximately $1,400. In 1974, it averaged der the earlier method of accounting has increased.
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Thus, it became necessary to change the method trict Court for the Western District of Michigan of accounting to more closely match costs and rev-seeking not less than $300 million in past and future enues. This change had the effect of increasing net damages, together with equitable relief, from sup-income and earnings per share of common stock in pliers of components and design work for the plant.
1974 by $9,016,000 and $.34, respectively. Had the The Company also is involved in antitrust pro-change in accounting b een applied retroactively to ceedings which,in effect, demand that as a condi-1973, earnings per share in that year would have tion of licensing the Midland nuclear plant, the U.S.
been $2.50. The cumulative effect of the change Nuclear Regulatory Commission require the Com-on years prior to 1974 of $51,860,000 less income pany to enter into certain arrangements with certain taxes of $26,996,000 (a net effect of $.95 per share) municipal power systems and rural cooperatives.
has been reflected in the financial statements for These arrangements would cover the sale and ex-1974.
change of electricity and the planning and opera-in a final order on the Company's electric rate tion of their respective systems, rather than have case, which had been filed in April 1974, ;he Michi-them continue to purchase power at wholesale rates gan Public Service Commission in January 1975 fixed by the Federal Power Commission. The Com-authorized additional revenues amounting to $38.6 pany has denied any antitrust violations, and the million annually. This was in addition to an interim matter is pending.
increase granted in September 1974 in the amount of $27.6 million, making the total increase $66.2 QuanicaSSee Costs Deferred million.
In 1974, the Company canceled plans to construct In addition to the rate increase, the Commission a $1.4 billion nuclear power plant near Quanicas-also revised the fuel adjustment clause in two re-see, Michigan. Total costs (excluding land costs spects. One change provides for an adjustment and expenditures which may have value in connec-factor to modify the effect of the time-lag in recov-tion with the future use of the site for a generating ering fuel costs which, in the past, had resulied in plant) amount to approximately $13.7 million. These significant revenue deficiencies. A similar provision consist of engineering, licensing expenses, other previously had been authorized by the Commission preliminary work having no salvageable value, and for the cost of gas adjustment clause. The other cancellation charges on major equipment items.
change allows the recovery of nuclear fuel costs The Company has been authorized by the Michigan through the fuel adjustment clause and also will PubHc Service Commission to amortize the non-partially offset the adverse impact of a continued salvageable costo net of related income taxes to outage of the Palisades nuclear generating plant.
operations over a period of ten years.
In November 1974, the Company filed with the Financing Commission for authorization to increase its gas rates by at least $54.2 million annually. Partial and To finance new construction, and to repay short-immediate relief in the amount of $39.6 million an-term borrowings made for that purpose, the Com-nually is being asked. Determination of the Com-pany in 1974 sold $140 million of Preference Stock pany's request for interini relief is expected in the and First Mortgage Bonds, as follows:
second quarter of 1975, witn a final decision in the f
proceeding by summer.
First Mortgage Bonds The Company also has pending a request to re-August flect changes in the cost of purchased and inter-
$60 million,11 % % Effective interest changed power in its electric rates, and hopes for Series due 1994 cost to the Company: 11.569%
a favorable ruling early in 1975.
September Palisades and Midland Litigation
$50 million,11 % % Effective interest deri s due 1982 cost to the Company: 11.373%
Except for a brief period during October, the Pali-sades plant was out of service for the entire year.
Preference Stock While the plant has been shut down for repairs, the August Company has been forced to purchase power at
$30 million gross proceeds Cost after under-higher costs from other sources and to generate from sale of 600,000 shares, writing commissions:
replacement power using less efficient facilities. As cumulative, convertible, 12.739 %
O a result, the Palisades outage has contributed sub-
$1.00 par value, annual stantially to the erosion of the Company's earnings.
dividend rate, $6.00, at in August, the Company filed suit in the U.S. Dis-
$50 per share 7
TheCorporateStory Icentinuedl The Company also completed negotiations in Jan-New Labor Agreement uary 1974 for the sale of two series of pollution con-A new three-year working agreement affecting trol revenue bonds, in the amounts of $27.5 million approximately 5,000 operating, maintenance and and $7.2 million, issued by the Charter Township of construction employees of the Company who are Hampton, Michigan and the City of Marysville, Mich-represented by the UtilityWorkers Union of America igan, respectively. These bonds were issued to (AFL-CIO) was negotiated in 1974. The new con-finance the acquisition and installation of air and tract, effective September 1,1974, provides for im-water pollution control facilities at the Company's mediate wage increases averaging 22 cents an hour Karn and Weadock electric generating plants and and an immediate cost-of-living adjustment of 15 the Marysville gas reforming plant. Interest costs cents an hour. In each of the second and third years, to the Company ranged from 4.45% to 6.05% de-wage increases will average 23 cents an hour plus pending on the maturity dates of the bonds. In addi-cost-of-living adjustments. Additional holiday, va-tion, in November 1974, the Company arranged for cation and insurance allowances also were in-the sale and leaseback of a portion of its nuclear ciuded.
fuel in the amount of $32.1 million.
Environmental Activities and Investments New Directors Named, Management in 1974, the Company invested approximately $34 Restructured million in capital expenses for environmental pro-Don T. McKone, executive sice president and direc-tection, including pre-construction environmental tor of Libbey-Owens-Ford Company of Toledo, studies for new electric plants. Of the total invest.
Ohio, was named to the Company's board at the ment, significant portions went for air pollution con.
1974 annual meeting of shareholders. Mr. McKone trol (over $9 million), water pollution control also is president of Aeroquip Corporation of Jack-(over $12 million) and nuclear waste control (more son, Michigan, and was elected to the L-O-F b than $10 million). Other expenses involved solid of directors following the acquisition of Aero waste disposal, noise abatement, aesthetics and by the Toledo-based firm in 1968. He became exec-land use.
utive vice president of Libbey-Owens-Ford in 1970.
In addition, the Company incurred more than $16 In October 1974, Edward N. Cole, retired presi-million annually in added operating costs and low-dent and chief operating officer of General Motors sulfur fuel costs to meet environmental require.
Corporation, was elected a director. He had been ments.
president of General Motors and chairman of the -
It is estimated that in the five-year period 1975-corporation's administration committee since 1967, 79, to comply with environmental requirements, the and served the firm 44 years. Mr. Cole is now chair-Company will invest in excess of $290 million for man of the board of International Husky, Inc., an environmental facilities, and spend an additional air freight company which he organized.
$112 million to maintain and operate this equip-Martha W. Griffiths. a former member of the ment, including incremental costs for icw-sulfur United States Congress, was elected to the board in k
- fuel, January 1975. She is the first woman to be elected While providing environmental safeguards, the a Company director. Mrs. Griffiths became the U.S.
equipment and systems are non-revenue producing Representative from the 17th Michigan Congres-and thus inevitably add to the costs of providing sional District beginning with the 84th Congress in electric and gas service.
1955, and was reelected in all subsequent elections through the 93rd Congress. She did not seek re-Research and Development oiection in 1974.
The Company is committed, along with many other As of the 1975 annual meeting, to be held April 8, electric and natural gas utilities, to the develop-directors Robert P. Briggs and Lee D. Ferden will ment of new ways to provide energy and to improve leave the board in accordance with the board's the efficiency of existing energy systems.
retirement policy. Mr. Briggs, formerly executive These research and development activities in-vice president of the Company, retired from that clude the fast-breeder reactor development-the position in 1968 after 17 years of senior manage-so-called Clinch River Project in Tennessee.
ment service and subsequently served as Mic The Corrpany's contributions to these and other gan's Commissioner of Financial Institutions.
research efforts amounted to more than $3 million has been a member of the Company's board si j
in 1974.
1951. Mr. Ferden, a farmer and long-time com-8
munity leader of Chesaning, Michigan, has served the Company faithfully as a member of its board of directors since 1945.
In December 1974, a restructuring of the Com-pany's management was effected to further con-centrate executive atternion in key areas. Company executives John B. Simpson, Russell C. Youngdahl and James A. McDivitt, formerly senior vice presi-dents, were named executive vice presidents and elected to the Company's board of directors.
At the same time, the board also elected Lowell L. Shepard as vice president for division operations and Raynard C. Lincoln, Jr., as vice president for general services. S;nce 1968, Mr. Shepard had been manager of the Company's Northeast Division headquartered in Bay City. He has been with the Company since 1949. Mr. Lincoln had been man-Birum G. Campbell, 1917-1974 ager of general services since 1972. He joined Consumers Power in 1959.
Also as part of the management restructuring, IN MEMORIAM Vice President W. Anson Hedgecock, formerly in charge of divisions, customer service and energy On March 26,1974, the Company was deeply sad-consulting services, was assigned to concentrate dened by the loss of Birum G. Campbell, vice resi-solely on the two latter areas, reflecting the in-dent-personnel, who died of a heart attack at his creased importance being placed on consumer af-home in Jackson. He was 56 years old.
j fairs and energy conservation both by the Company During his many years with Consumers Power, and the Michigan Public Service Commission.
"Barney" Campbell contributed substantially to the i
Three division manager changes have been made Company's growth and progress, particularly in the involving two new appointments. Ralph Hahn, for-development of its marketing ooerations in the merly manager of the Central Division, moved to expanding years of the 1950's and 1960's.
Bay City to replace Mr. Shepard in the Northeast Mr. Campbell began his career with Consumers Division.To replace Mr.Hahn, Eugene A.Waggener, Power Company in 1939, in the sales department formerly manager of gas production and transmis-of the then Southeast Division. In 1941 he left for sion engineering and construction, was named to military service and spent nearly five years with head the Central Divistor. C. Thomas Baylis, the U.S. Army Signal Corps, serving overseas in manager of the Muskegon Division, retired early on Europe. He returned to the Company in 1946, to an February 1,1975 and was replaced by W. Joseph assignment in the personnel department.
McCormick, formerly assistant division manager-Mr. Campbell was promoted to Kalamazoo assist-T operations in Flint.
ant division manager in 1951, and became division manager there in 1952. In 1957, he was elected vice president of the Company in charge of marketing and returned to Jackson. In 1972 he was named vice president for personnel.
Mr. Campbell was born in Pontiac on Septembsr 12,1917. He attended Pontiac High School and the University of Michigan. He is survived by his wife, Joan C. (Brace) and two sons, William B. and B. G.
Campbed, Ill.
His brother, James H. Campbell, was president of Consumers Power Company from May 1,1960 until his death on January 24,1972. The Campbell brothers' father, Birum G. campbell, Sr., was man-ager of the Company's Pontiac Division during their youth.
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tomers throughout 1974 despite the fact that doing nation's electric utility industry is raising capital so required the purchase of large amounts of power new construction. This difficulty threatens serio j
from other electric utilities.The cost of this replace-shortages of electric energy later in the.1970's.
1 ment power was substantial, but the Company's Construci. ton Program Slowed commitment to reliable utility service to Michigan l
dictated its purchase.
The Company made significant construction defer-Even la a year of slowing economic activity and rals in 1974. Some, early in the year, were based on somewhat reduced electric sales, substantial new revised and substantially lower forei:asts of future loads were added to the Company's electric sys-customer needs due to the effects of energy con-1 tem. These included 18,500 new residental cus-servation and revised economic projections. But tomers.
major cancellations and delays announced later in the year resulted from the Company's inability to Growth Continues raise the necessary capital to continue scheduled U.S. economic growth is continuing, despite prob-building of electric generating capacity.
lems, and that growth will require substantial addi-The Company canceled its plans to build a 2,300-tional supplies of energy. Electricity must play a megawatt twin-unit nuclear plant nearQuanicassee, j
steadily larger role in view of the costs, shortages east of Bay City. The two units of the 1,300-mega-and, in some cases, environmental problem? with watt Midland nuclear plant, meanwhile, were de-other sources of energy, plus the time ne'Wed to layed by two years, with new scheduled in-service develop newer and yet unproven sourcN dates of 1981 and 1982. Completion of a 660-mega-The Ludington pumped storage hyJroelectric watt fourth unit at the Dan E. Karn plant was de-plant-completed in 1973 and the largis'. plant of ferred for nearly one year, until the fall of 1976. And its kind operating in the world-continued to supply an 800-megawatt addition to the James H. Campbell large and essential amounts of power to enable the plant was deferred three years, until 1981.
Michigan Electric Coordinated Systems to meet These cancellations and delays may impair the peak demands throughout 1974. In addition, strong future reliability and availability of electric energy interties with other electric systems, the comple-in Michigan, and make it much more expensive.
tion of a new 644-megawatt generating unit at the When it is in operation, the Palisades plant p Karn plant near Bay City, and the knowledge gained duces electricity at a cost substantially lower t at the Palisades nuclear plant as repairs continued, any other generating station in the Company's sy -
contributed to a brightened outlook at year-end, at tem. Since August of 1973, when equipment prob-10
1:ms requirrd th2 plant to be shut down, much low-sulfur oil received under contract from pro-new data and experience have been acquired. Re-ducers in Canada. Thus, its operating costs are pairs to the main steam condenser and the turbine adversely affected by increasing costs of Canadian
[V the plant can be returned to service in the spring
} now have been completed and it is expected that oil and proposed import taxes. Nonetheless, the new Karn unit represents a much-needed addition of 1975, following completion of a testing program to the electric system.
required by the U.S. Nuclear Regulatory Commis-Canadian crude oil also is burned in six units of sion (NRC). This testing program was ordered by the John C. Weadock plant, located adjacent to the the NRC in January 1975 after repairs had been Karn plant. The average cost of oil burned during completed and the plant was being readied to re-1974 was $10.76 per barrel, compared to $4.15 in turn to service.
1973. On an annual basis Karn No. 3 and Weadock together will use approximately 7,200,000 barrels of Nuclear Power Needed oil. The Company also burned 6,335,000 tons of Despite the difficulties at Palisades, the Manage-coal to generate electricity during the year. This ment remains convinced that nuclear power is the coal cost the Company an average of $16.92 per ton most dasirable energy alternative for the remainder in 1974, compared to $11.33 in 1973. The cost of all of this century. Overall experience throughout the fuel used in e!ectric generation, and the cost of electric utility industry demonstrates that nuclear purchased and interchanged power, amounted to power plants are operating nfely, reliably and at
$315,444,000, up 80% from 1973.
substantially lower costs than plants using coal or The Company ended 1974 with 1,203,214 electric oil. They also generate electricity without consum-customers. These included 7,779 industrial,119,581 ing limited supplies of fossil fuels. They are en-commercial and 1,075,036 residential customers, vironmentally less intrusive. Together with coal-located in 61 Lower Michigan counties.They used a fired plants, they offer the only proven way to obtain total of 23.3 billion kilowatthours duririg the year, the immense new amounts of generating capacity down 3% from 1973. The decline in use is attributed that will be needed over the next 20 years.
to the economic downturn, particularly in the auto-In 1974 and into 1975, the Big Rock Point nuclear mobile industry, and to customers' efforts to con-plant operated for 173 consecutive days during serve energy.
which it produced more than 239 million kilowatt-hours of power for the Company's system. Prior to 1974, the plant had completed an all-time record C~
in January 1975, shortly before a scheduled main-run of 198 days. Big Rock was taken out of service tenance shutdown, when continuing operating sur-veillance determined that the adequacy of the reactor core spray system components needed to be assured. That work and scheduled maintenance are being done concurrently while the plant is out The 1,950-megawatt Ludington pumped storage of service, together with a pioing inspection re-plant,0wned jointly by Consumers Power Company cently ordered by the U.S. Nuctsur Regulatory Com-and The Detroit Edison Company, attained mission for all boiling water reactorc.
full operation in October 1973.
The Lucington pumped storage hydroelectric plant, with a maximum demons.trated capability of 1,950 megawatts, generated rr. ore than 2.8 billion c--
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i Karn No. 3 Completed At the Dan E. Karn plant, Unit No. 3 was completed and began testing late in 1974. The plant is ex-p pected to be put into commercial operation early v
Q in 1975, adding 644 megawatts to the electric system and bringing total system generating capa-bility to 5,993 megawatts. Karn No. 3 is fired with i
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The. Company's aggressive development of new supplies resulted in its customers being less affected by the natural gas
' shortage than those of.many other U.S.
' distribution companies.
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Severe curtailments to industrial customers would has applied to the Federal Power Commission for have been required during 1974, but for the Com-approval of contracts to begin selling and trans-pany's determined and successful efforts to develop porting gas from these new platfer") to Michi new sources of gas supply. Instead, the Company in 1975. Northern Mich!ger owns a one-eig was able to meet the requirements of existing cus-interest in this gas. One of the Company's major tomers and to continue adding new residential cus-suppliers, Trunkline Gas Company, also owns a tomers. Moreover, beginning in May 1974, it again substantial share of this gas and has a call on 90 was able to accept a limited number of new small percent of the remaining gas found by this offshore commercial and industrial customers.
group. This added supply will offset, in part, the Nationally, the natural gas shortage worsened, anticipated increase in curtailments from normal due to declining deliveries from the nation's pro-pipeline sources.
ducing fields. The Company's major pipeline sup-The offshore gas would be transported via the pliers curtailed deliveries below contracted vol-new offshore Stingray pipeline network which was umes to an aggregate of approximately 270 million completed during 1974. Trunkline is a partner in cubic feet per day, or 28 percent. However, that the Stingray venture. Under the proposed contract deficiency was made up partly by deliveries of gas with Northern Michigan, the Company would re-from the Marysville reforming plant and partly by ceive up to 40 million cubic feet of gas daily. How-
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new Michigan production stimulated and partici-ever, if the Federal Power Commission does not pated in by Consumers Power Company.
grant a certificate allowing the proposed sale and New Michigan production added approximately transportation of this gas, the Company anticipates 60 million cubic feet per day to the Company's gas it will have to stop accepting new gas customers supply.Through its wholly-owned subsidiary, North-to protect its commitments to existing customers.
ern Michigan Exploration Company, the Company In all, Consumers Power and Northern Michigan in 1974 participated in 24 drilling ventures in the have invested more than $225 million since 1970 in northern Lower Peninsula, of which 16 proved suc-developing new sources of gas. Of that, $30 million cessful in the discover / of either oil or gas.
has been spent in the search for Gulf Coast gas where Northern Michigan owns a one-eighth inter-Offshore Exploration Successful est in 12 partially explored leases, each approxi-Northern Michigan Exploration Company also is mately 5,000 acres in area. in addition to the areas participating in a group which is drilling in the off-under development in 1974.
shore Louisiana area. In 1974, this activity resulted Northern Michigan's successful operations c in the development of 23 gas wells on four offshore tributed significantly to the Company's earnings platforms in the Gulf of Mexico. Northern Michigan 1974.
14
Marysville Needed by Michigan The Company ended 1974 serving 957,907 gas The performance of the Marysville reforming plan.,
customers, in 40 Lower Michigan counties. Of which went into full operation during the year, was these,6,446 were industrial,65,833 were commer-highly gratifying. The plant, which represents about cial and 885,628 were residential customers,819,199 20 percent of the Company's total supply, converts of the latter using gas to heat their homes. Custom-light hydrocarbon liquids received from Alberta, ers used 333.6 billion cubic feet of gas in 1974, up Canada into pipeline-quality gas. The first unit at slightly from 1973 but, reflecting the gas shortage,
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Marysville began operating in the early fall of 1973, energy conservation and milder weather, down and the second unit started up in the spring of 1974.
about five percent from 1972.
In full operation, the plant has achieved a demon.
The average cost of gas sold by the Company strated daily output of up to 250 million cubic feet per thousand cubic feet rose from 51.93 cents in of synthetic gas, which is 25 percent greater than 1973 to 86.34 cents in 1974. This included the im-its design rating. In 1974, Marysville alone offset pact of Marysville gas as affected by the sharply nearly two-thirds of the curtailments in pipeline gas increased Canadian taxes on Marysville feedstocks.
deliveries and was the single most instrumental factor in the Company's ability to continue to serve j
existmg firm requirements and to add new cus-tomers.
The Marysville reforming plant cost $155 million to build, and is the largest synthetic gas plant of Through its subsidiary, Northern Michigan i
its kind operating in the world. The dramatic in-Exploration Company, the Company has developed crease in worldwide prices of petroleum products ubstantial new sources of gas supply in the has led to a sharp increase in the cost of synthetic northern Lower Peninsula of Michigan.
gas produced at Marysville. When natural gas liquid feedstocks for Marysville began arriving in 1973, the price was $3.55 per barrel. At the end of 1974, f
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/ without Marysville, declining energy availability in y
Michigan would have meant even less industrial production and even higher unemployment in 1974,
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a year of severe economic slowdown, t
During the year, the Marysville plant was the sub-4
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gan Public Service Commission and conducted by b
d the Stanford Research Institute (SRI). A preliminary 4 /.
conclusion of SRI as a result of the study (the final report has not been submitted yet) was that, al-I s
though the cost of Marysville gas is relatively high,
"[.p largely due to Canadian taxes on the plant's feed-
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stock, Marysville allowed new customers to receive gas service and prevented drastic curtailments to I
existing industrial customers. Thus, the study has confirmed that Marysville is of vital importance to I;s the Michigan energy supply.
Energy Conservation Encouraged The Company in cooperation with the Michigan Public Service Commission continued its active
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17 l
l
Statement c
, c Of REDIRB O
YEAR ENDED DECEMBER 31 1974 1973 Thousands of Dollars OPERATING REVENUE (Notes 1 and 2):
Electric
$ 619,958
$495,723 Gas 483,832 337,906 Steam.
1,593 1.325 Total Operating Revenue
$1,105.383
$834,954 OPERATING EXPENSES AND TAXES:
Operation-Purchased and interchanged power
$ 143,394
$ 70,006 fuel consumed in electric generation 172,050 105,391 Cost of gas sold 293,190 175,185 Other 153,619 143,173 Total operation
$ 762,253
$493,75$
Maintenance 55,140 44,263 Depreciation and amortization 82,944 73,42 General taxes.
63,058 54,16 Income taxes (Note 12) 20,781 44,63 Total operating expenses and taxes.
$ 984,176
$710,239 Net operating income 5 121,207
$124,715 OTHER INCOME:
Allowance for funds used during construction (Notes 1 and 13)
$ 21,875
$ 23,223 income of subsidiaries (Notes 1 and 14).
7,371 3,341 Gain on reacquisition of long-term debt.
2,833 1,609 Other, net.
862 1,990 Net other income
$ 32,941
$ 30.163 INTEREST CHARGES:
Interest on long-term debt 84,948
$ 71,322 5
Other interest charges 8,367 2,663 Total interest charges...
5 93,315
$ 73.985 income before cumulative effect of change in method of recording revenue (Note 2).
$ 60,833
$ 80,893 Cumulative effect on years prior to 1974 of accruing estimated unbilled revenue after deduction for related income taxes (Note 2).
24,864 Net income.
$ 85,697
$ 80,893 DIVIDENDS ON PREFERRED AND PREFERENCE STOCK:
25,540 17.746 Net income after dividends on preferred and preference stock.
5 60,157
$ 63,147 EARNINGS PER SHARE OF COMMON STOCK BASED ON AVERAGE SHARES OUTSTANDING (26,233,838 shares in 1974 and 1973):
Before cumulative effect of change in method of recording revenue (Note 2).
$1.34
$2.41 Cumulative effect on years prior to 1974 of accruing estimated unbilled revenue.
.95 Total 52.29
$2.41 The accompanying notes are an integral part of this statement.
18
Statementof Sourceof Fun 2 c -
,c O fir EressProperty Additiins YEAR ENDED DECEMBER 31 1974 1973 SOURCE OF FUNDS FOR GROSS PROPERTY ADDITIONS:
Thousands of Dollars Funds generated from operations:
Net income after dividend. on preferred and preference stock.
$ 60,157'
$ 63,147 Principal noncash items-Depreciation and amortization Per statement of income.
82,944 73,428 Charged to other accounts 4,420 13,616 Deferred income taxes, net.
26,191 25,072 Investment tax credit, net (5,118) 14,057 Allowance for funds used during construction.
(21,875)
(23,223) i Undistributed earnings of subsidiaries (Note 1)
.688)
)
Less-i Dividends declared on common st
't 52,467 52,467 Retirement of long term debt and prefened stoch.
13,688 12,938
$ 74,876
$ 99.151 Funds obtained from new financing: Issuance of preferred stock
$130,000 Issuance of preference stock 30,000 Issuance of first mortgage bonds 110,000 75,000 Issuance of long term note.
50,000 I
Net proceeds from i%tallment sales contracts payable 36,385 31,744 (Decrease)in other long-term debt (174)
(3,915)
Increase in notes payable 73,700 19,300
$299,911
$252,129 Other sources (uk ;,J iunds:
Changes in net current assets and current liabilities (excluding obligations expected to be refinanced)-
Accounts receivables.
$ (29,509)
(490)
Accrued revenues (Note 2)
(70,666)
Refundable income taxes (Note 12).
(17,651)
Materials and supplies-fuel stock (38,685)
(6,083)
Gas in undarground storage (26,601)
(6,227) q Accounts payable.
26,866 7,800
~
1 Accrued taxes.
46,317 (247)
)
Other.
11,936 3,551 5(97,993)
$ (1,696)
Sale of nuclear fuel (Note 9) 32,094 Increase in investment in Northern Michigan Exploration Company (8,600)
Other, net 11,997 (3,277)
$ (53,902)
$ (13,573)
Total funds Sr construction from above sources.
$320,885
$337,707 Allowance for funds used during construction 21,875 23,223 Gross property additions.
... $342,760
$360,930
- Includes cumulative effect on years prior to 1974 of change in method of recording revenue amounting to $24,864,000, net of related income taxes.
( ) Denotes deduction.
The accompanying notes are an integral part of this statement.
19
ialance Sheet G
Assels DECEMBER 31 1974 1973 Thousands of Dollars UTILITY PLANT: At original cost-Plant in service and held for future use-Electric
$1,986,889
$1,895,705 Gas 974,169 889,128 Steam 3,304 3,280 Common to all departments.
72,422 71.481
$3,036,784
$2,859,594 Less-Provision for accrued depreciation.
700,347 649,498
$2,336,437
$2,210,096 Construction work in progress (Notes 4 and 5).
439,954 359,548
$2.776.391 OTHER PHYSICAL At cost or less-less provision for accrued depreciation of PROPERTY:
$166,000 in 1974 and $37,000 in 1973 2,507 2.727 INVESTMENTS: Whollyawned subsidiaries-Michigan Gas Storage Company (Note 1).
$ 20,530
$ 20,111 Northern Michigan Exploration Company (Notes 1 and 14).
21,899 16,631 Other, at cost or less 1,044 922
$ 43,473
$ 37,664 CURRENT Cash (Note 5).
$ 15,970
$ 12,243 ASSETS: Accounts receivable, less reserves of $712,000 in 1974 and $674,000 in 1973.
96,804 67,295 T
AccrueJ revenues (Note 2) 70,666 Refundable income taxes (Note 12).
17,651 Materials and supplies, at average cost-Fuel stock 63,464 24,779 Other 31,945 27,704 Gas in underground storage, at average cost 58,532 31,931 Prcperty taxes-future period, net.
29,102 27,903 Prepayments and other 1,455 1,076 5 385,589
$ 192.931 OTHER: Preliminary construction costs of canceled project being amortized (Note 4).
5,585 l
Other deferred debits 13,939 6,9 l
$ 19.524 6,92F l
$3.227,484
$2,809,892 20 The accompanying notes are an integral part of this statement.
l
CassumersPower Company G
V Stockholders'innestment end I.iebilities DECEMBER 31 1974 1973 Thousands of Dollars CAPITALIZATION: Common stockholders' equity-Common stock, $10 par value, authorized 32,500,000 shares, outstanding 26.233,838 shares (Notes 5 and 7)
$ 262,338
$ 262,338 Capitalin excess of par value (Note 7).
247,231 247,070 Retained earnings (Note 6) 240,126 232,436
$ 749,695
$ 741,844 Less-Capital stock expense 8,841 6,975 Total common stockholders' equity
$ 740,854
$ 734,869 Preferred and preference stock-O Preferred stock, cumulative, $100 par value, authorized 5,000,000 shares, outstanding 3,471,338 shares (Notes 5 and 7)
$ 347,134
$ 347,534 Preference stock, cumulative, convertible $1 par value, authorized 5,000,000 shares, outstanding 600,000 shares (Note 7).
600 Capital in excess of par value of preference stock.
29,400 Total preferred and preference stock
. $ 377,134
$ 347,534 Total stockholders' investment
$1,117,988
$1,082,403 Long term debt (Notes 5 and 8).
1,316,343 1,222,340 Total capitalization.
$2,434,331
$2,304,743 CURRENT OBLIGATIONS First Mortgage Bonds,2%% Series due 1975.
$ 86,324 EXPECTED TO BE REFINANCED Notes payable to banks (average interest rate of (Note 5):
10.32% and 9.80%, respectively) 118,500 43,000 Commercial paper (average interest rate of 9.62%).
1,800 2
$ 204,824
$ 44,800 CURRENT LIABILITIES Current maturities and sinking fund on long term debt (Note 8).
14,624
$ 17,309 (excluding current Accounts payable 127,177 100,311 obligations expected Accrued taxes 104,148 57,831 to be refinanced): Accrued interest.
29,224 20,787 Other.
38,623 22,893
$ 313,796
$ 219,131 DEFERRED Deferred income taxes (Note 12)
$ 199,807
$ 173,616 CREDITS AND Investment tax credit (Note 12) 42,820 47,938 RESERVES: Other (Note 10) 31,906 19,664 l
$ 274,533
$ 241,218 53,227,484
$2,809,692 The accompanying notes are an integral part of this statement.
g i
Statenient iI l etained Earnings *=""""7 YEAR ENDED DECEMBER 31 l
1974 1973 Thousands of Dollars
$213,358 RETAINED EARNINGS-December 31,1972, as previously reported ADD-F ?atement for income tax effect of gain on reacquisition of long term debt prior to 1973 (Note 3) 4.039 j
RETAINED EARNINGS-Beginning of year, as restated
$232,436
$217,397 i
ADD-Net income after dividends on preferred and preference stock 60,157 63,147 i
Equity in undistributed earnings of subsidiaries at December 31,1972 4,359
$292,593
$284,903 i
DEDUCT-Cash dividends on common stock of $2.00 per share 52,467 52,467 RETAINED EARNINGS-End of year (Note 6).
$240,126 The accompanying notes are an integral part of this statement.
Blitesle th <
FinaicialStatements 5
1 SIGNIFICANT ACCOUNTING POLICIES Effective January 1,1973, the Company adopted the equity method of accounting for the investment in its whollyowned subsidi-aries, Michigan Gas Storage Company and Northern Michigan Exploration Company, pursuant to Federal Power Commission Order No.
469. Under this method of accounting the Company's interest in the earnings of the subsidiaries is reflected currently in earnings and in the carrying value of the investments.
The Company provides depreciation on the basis of straight-line rates approved by the Michigan Public Service Commission (MPSC).
Composite depreciation rates were approximately 2.80% in 1974 and 2.92% in 1973 for electric property and 3.56% in 1974 and 3.01% in 1973 for gas property. The decrease in the composite rate for electric property in 1974 reflects the effect of the placing in service of the Ludington Pumped Storage Project.
Effective January 1,1974, the Company changed its method of accounting to accrue revenues for service rendered but not billed at month end. Prior to January 1,1974, operating revenue was recognized at the time of monthly billings on a cycle basis. (See Note 2)
The Company makes annual contributions to the pension plan sufficient to cover current service u.sts, interest on unfunded prior service costs and amortization of prior service costs. (See Note 11)
Allowance for funds used during construction, included in other income, represents the estimated cost of funds applicable utility plant in process of construction capitalized as a component of the cost of utility plant. Under established regulatory practice.
the Company is permitted to earn a return on the capitalized cost of such funds and to recover the same in the rates charged for utility services. (See Note 13)
Referencc is made to Note 12 for information regarding income taxes.
22
Censumers Power Campany
- m x-2 CHANGEIN ACCOUNTING METHOD Prior to 1974, the Company followed the policy of not recording revenues relating to service rendered but not billed at the end of the accounting period since the changes in such unrecorded amounts from year to year were generally not significant. Due to the accelerating increase in costs and rate levels, the disparity between costs and revenues as a result of this method of accounting has increased. Accordingly, effective January 1,1974, the Company changed to a preferable method of account;ng to accrue the amount of unbilled revenues for services provided to the month end to more closely match costs and revenues. This change had the effect of increasing net income and earnings per share of common stock in 1974 by $9,016,000 and $.34, respectively, before the cumulative effect for periods prior to 1974.
The cumulative effect of the change on years prior to 1974 of $51,860,000 less income taxes of $26,996.000 (a net effect of $.95 per share) has been reflected in the financial statements for 1974. Had this change in accounting been applied to the statements for the year ended December 31,1973, net income and earnings per share would have been increased by $2,477,000 and $.09, respectively.
3 RESTATEMENTS Retained earnings at December 31, 1972 has been restated to eliminate $4,039,000 in deferred income taxes provided in the years 1970,1971 and 1972 applicable to the gain on reacquisition of long-term debt since such deferred taxes were not recognized by the Michigan Public Service Commission (MPSC)in setting the Company's rates for utility service and such deferred tax accounting has not been authorized by the MPSC as required by Federal Power Commission Order No. 504. dated February 11,1974.
(
)
Effective January 1,1974 the Company, pursuant to Federal Power Commission Order No. 490, reclassified contributions in aid of construction as an offset to Utility Plant at original cost. The financial statements for 1973 have been restated to a comparable basis.
4 NUCLEAR GENERATING PLANTS The Palisades Nuclear Plant was shut down in August 1973 for repairs. In October 1974, the Plant resumed limited operation pursuant to a 90<!ay authorization to carry out a program to remove chemical imparities from the Plant's steam generators. While such program was being conducted, other operating problems required further shut down to permit repairs. It is expected that the Plant will remain out of service until Sprirg 1975. In August 1974, the Company filed suit in the U.S. District Court for the Western District of Michigan seeking not less than $300 million in past and future damages, together with equitable relief from suppliers of components and design work for the Flant. The suit is still pending.
Construction work in progress includes $205,299,000 at December 31,1974 related to the Midland Nuclear Plant. The issuance of construction permits by the Atomic Energy Commission (AEC), now Nuclear Regulatory Commission, in December 1972 was upheld by an Appeal Board of the AEC in May 1973 but has been appealed to the U.S. Court of Appeals for the District of Columbia Circuit.
Construction, delayed since 1970, was resumed in June 1973. In December 1973 the AEC issued an order for the Company to show cause why all construction activity should not be suspended pending a showing that the Company is in compliance with the AEC's r
quality 1ssurance regulations and that there is reasonable assurance that such compliance will continue throughout the construction process. Following hearings, an Atomic Safety and Licensing Board of the AEC on September 25,1974 determined the issues favorably to the Company's position. Certain intervenors have petitioned to reopen the record and reconsider the decision. The matter is pending.
The Company has canceled plans to construct a two-unit,2,300 megawatt nuclear power plant near Quanicassee, Michigan which was scheduled for commercial operation in 1983 and 1985. The decision to cancel the $1.4 billion project was based upon the currently j
prevailing market conditions for utility securities, the Company's inadequate earnings, and the need for raising capital for other i
construction projects during the lengthy construction period required to build the Quanicassee Plant (see Note 5). Total costs (exclud-ing land costs and expenditures which ;nay have value in connection with the future use of the site for a generating plant) consisting of engineering, licensing expenses and other preliminary work having no salvageable value and cancellation charges are expected to amount to approximately $13,700,000. The Company has been authorized by the Michigan Public Service Commission to amortize such costs net of related income taxes to operations over a period of ten years.
5 CONSTRUCTION PROGRAM AND FINANCING RESTRICTIONS g'
Difficulty in financing the Company's planned construction program, new estimates of increased costs, and a reduction in projected load growth have forced the Company to substantially reduce its five-year construction program. After giving effect to reductions in the construction program, capital expenditures in 1975 are currently estimated to total $251 million and total construction expendi-tures through 1979 are presently estimated to approximate $2.4 billion. The reduction in the Company's planned construction program has resulted in the cancellation of the Quanicassee Nuclear Plant as discussed in Note 4 and the curtailment of construction activity at other electric generating plants which will postpone their planne completion dates from one to three years. The Company expects j
23
10 tes Icontinuedl O
these reductions may have an adverse effect on the adequacy and reliability of energy supplies in the future. Substantial commit-ments have been made with respect to the construction program in future years.
In order to finance the 1975 construction program and other current obligations expected to be refinanced of $204,824,000, it will be necessary for the Company to sell substantial additional securities, including the issuance of notes payable to banks, the amounts, timing and nature of which have not yet been determined. The earnings coverage provisions of the Indenture covering the Company's First Mortgage Bonds require for the issuance of additional mortgage bonds, except for certain refunding purposes, mini-mum earnings coverage, before income taxes, of at least two times pro forma annual interest charges on bonds. The Company's Articles of incorporation require, for the issuance of additional shares of Preferred Stock, specified earnings coverages, including minimum earnings coverage after income taxes of at least one and one-half times the pro forma annual interest charges on all indebtedness and Preferred dividend requirements. On the basis of these formulae, the coverages for the year ended December 31,1974 do not meet the minimum earnings coverage requirements for the issuance of additional First Mortgage Bonds or Preferred Stock. Common Stock of the Company may not be issued at less than par value pursuant to the Michigan Business Corporation Act.
The amounts of additional First Mortgage Bonds and Preferred Stock which can be issued in the future will be contingent upon increasts in earnings through rate increases or otherwise. If it is not possible to issue additional amounts of First Mortgage Bonds, Preferrei Stock, Preference Stock or Common Stock, due to market conditions, the inability to satisfy earnings coverage requirements or any otiier reason, additional bank or other credit (including leasing arrangements) to provide such amounts would be necessary. The receipt of such additional amounts is not assured and additional reductions to the Company's 1975 construction program may be necessary.
The Company presently has arrangements with banks providing for short-term borrowings of up to $161,200,000, which are subject to periodic review. In connection with these arrangements the Company is generally required to maintain average com-pensating balances with the banks, over an unspecified period of time, equal to 10% of the total line of credit plus 10% of the average borrowings outstanding, as determined from the bank's records after adjustment for uncollected funds. There are no legal restrictions on the withdrawal of these funds. In addition, the Company has issued commercial paper from time to time on a short term basis, generally for periods of less than one month.
During 1974 and 1973, average short-term borrowings outstanding amounted to $72,000,000 and $32,000,000, respectively, and the weighted average interest rate was 10.98% and 7.85%, respectively, excluding the effect of compensating balances. The maximum amount outstanding at any one time was $118,500,000 during 1974 and $82,000,000 during 1973.
6 UMITATION ON DIVIDENDS At December 31,1974, retained earnings in the amount of $99,213,000 are not available for the payment of cash dividends on Common-Stock under provisions of the Articles of Incorporation of the Company which, except under certain circumstances, prohibit the payment of Common Stock dividends in cash which would reduce the percentage of Common Stock equity to total capitalization below 25%. There are also other restrictions as to payment of dividends on Common Stock which, however, are presently less restrictive than the limitation mentioned above.
7 PREFERRED STOCK AND PREFERENCE STOCK Preferred Stock is represented by:
DECEMBER 31 REDEMPTION 1974 1973 PRICE PER SHARE Thousands of Dollars p
$4.50-547,788 Shares Outstanding 4.52-123,550 Shares Outstanding.
$110.00
$ 54,779
$ 54,779 104.725 12,355 12,755 4.16-100,000 Shares Outstanding 103.25 10,000 10,000 7.45--700,000 Shares Outstanding 108.00 70,000 70,000 7.72-700,000 Shares Outstanding 108.00 70,000 70,000 7.76-750,000 Shares Outstanding.
109.19 75,000 75,000 7.68-550,000 Shares Outstanding.
108.00 55,000 55,000 Total Preferred Stock
$347,134
$347,534 The Preferred Stock of the Company is redeemable as a whole or in part, at the option of the Company, at the above redemption prices plus accrued dividends to the date of redemption, except that prior to April 1,1978, July 1,1977, June 1,1978 and November 1,1978, the $7.45,57.72, $7.76 and $7.63 Preferred Stock, respectively, may not be redeemed through certain refunding operations.
The Company is required to endeavor to purchase and retire annually 4,000 shares of the $4.52 Preferred Stock at a price per share not to exceed $102.725 plus accrued dividends. Such purchases of Preferred Stock resulted in a net gain of $161,000 in 197 and $127,000 in 1973 which was credited to capital in excess of par value.
In August 1974, the Company sold 600,000 shares of $6.00 Preference Stock, convertible into Common Stock on and after Novembe 1,1974 at four shares of Common Stock for each share of Preference Stock. At December 31,1974,2,400,000 shares of Common Stock are reserved for conversion of Preference Stock.
24 i
Consumers Power Company l
)
Lj 8 LONG-TERM DEBT DECEMBER 31 Longterm debt is represented by:
1974 1973 Thousands of Dollars First Mortgage Bonds, secured by a mortgage and lien on substantially all property-27/a% Series due 1975.
$ 86,324
$ 86,324 8%% Series due 1976 60,000 60,000 2Fa% Series due 1977 24,010 24,010 3%% Series due 1981.
39,000 39,000 11%% Series due 1982...
3%4%% Series due 1984 1991 50,000 224,269 236,957 11%% Series due 1994....
57/s%-67/a% Series due 1996-1998 60,000 247,550 247,550 7h%8%% Series due 1999 2003 470,000 470,000 Total First Mortgage Bonds..........
$1,261,153
$1,163,841 Installment Sales Contracts Payable (Net of $5,571.000 held by Trustee pending completion of construction)....
68,129 31,744 Sinking Fund Debentures,4%%, due 1994.
37,000 37,600 Term Bank Loan, due 1981 at 115% of Bank's prime rate 50,000 Other 351 4,310 Unamortized Net Debt Premium 658 2,154
$1,417,291
$1,239,649 Deduct-Current maturities and sinking fund-i (3
First Mortgage Bonds.
$ 13,788
$ 12,688 Sinking Fund Debentures......
600 600 First Mortgage Bonds,2rs%, Series due 1975 86,324 Other 236 4,021
$ 100,948
$ 17,309 Total long term debt
$1,316,343
$1,222,340 9 NUCLEAR FUEL LEASE OBLIGATION The Company has executed a Nuclear fuel Lease, dated as of November 19, 1974, whereby the Lessor has acquired a 100%
undivided interest in nuclear fuel (having a cost of approximately $32,094,000) which will be utilized at the Palisades Nuclear Plant.
The fuel lease provides for a term ending on November 18,1979, with provision for one year extensions from time to time to a date not later than November 19,2029, subject to earlier termination in certain events. The quarterly lease charges consist of a fuel factor computed on the basis of huat production plus interest costs and administrative fees and expenses incurred by the Lessor, and, in the event of termination of the fuel lease, an amount equal to the Lessor's remaining investment. The Company is also responsible for payment of taxes, maintenance, operating costs, risks of loss and insurance.
r 10 RATE MATTERS On January 23,1975, the MPSC authorized an increase in the Company's electric rates of $66,231,000 on an annual basis which included an interim increase of $27,624,000 authorized September 16,1974.
In November 1974, the Company submitted an application to the MPSC to increase its gas rates by not less than $54,157,000 annually and at the same time requested partial and interim relief in the amount of $39,559,000 annually. Hearings are currently proceeding on the application.
Litigation is pending with respect to electric and gas rate increases which became effective in 1969 and which are subject to refund relating to the reduction and elimination of the Federal inccme tax surcharge. In March and April 1974, the Court ruled in favor of the MPSC with respect to the income tax surcharge issue and ordered the Company to refund $24,543,000, together with interest thereon, to its electric and gas customers. The Company has established a reserve stated net of related income taxes in the amount of $11.868,000, and believes that the amount of such reserve is adequate to cover the refund obligation, exclusive of interest charges which wculd accrue for the period from early 1970 to date of payment and which are presently not capable of gm determination. The Company is appealing the Court Orders of March and April 1974. The litigation also involves a claim with respect
(
to the legality of the electric rate increase, which became effective in 1969, on the grounds that the increased rates became J
effective by Court Order in October 1969, that the MFSC did not issue an order approving said rates until April 1970 and that as a result, the electric rates charged during the period are subject to refund in an amount of approximately $7,763,000, plus interest charges which are presently not capable of determination, for which no reserve has been provided.
25
ElesIcontinuedl O
11 PENSION PLAN The Company has a trusteed noncontributory pension plan under which full-time regular employees within specified age limits and periods of service are qualified to participate. The contributions to the plan were $15,387,000 in 1974 and $14,607,000 in 1973.
Of these amounts $11,817,000 in 1974 and $10,968,000 in 1973 were charged directly to expense accounts with the remainder being charged to various construction, clearing and other accounts.
As of January 1,1974, the date of the most recent actuary's report, the actuarially computed value of vested benefits was
$168,200,000. The market value of the assets of the plan was $157,500,000 at January 1,1974 and was $132,900,000 at December 31,1974. If the market value of the assets of the plan remain below the vested benefits, the actuarial method used in determining
.the annual contribution will fund this amount over a period of years.
The enactment of the Employee Retirement income Security Act of 1974 will not significantly increase the Company's future annual contribution since the Company's present plan generally conforms to minimum requirements.
12 INCOME TAX EXPENSE income tax expense is made up of the following components:
YEAR ENDED DECEMBER 31 1974 1973 Thousands of Dollars Charged to utility operations-Federal income taxes
$ 437
$ 2,718 State income taxes (729) 2,786 Deferred Federal income taxes, net 22,091 21,133 Deferred State income taxes, net.
4,100 3,939 Charge equivalent to investment tax credit, net (5,118) 14,057 Total (See Statement of Income) 520,781
$44,633 Charged to nonutility operations 1,781 1,091 Total
$22,562
$45,7 Current Federal and State income taxes for 1974, as shown above, reflect a credit of $17,651,000 attributable to the carrybackY 1974's net operating foss to prior years, offset by provisions for income taxes of $9,790,000 related to the 1974 increment in unbilled revenues: $5,904,000 related to the cancellation of the Quanicassee Nuclear Plant; and $1,665,000 related to other timing differences.
The Company utilizes liberalized depreciation and the " class life asset depreciauon range system" for income tax purposes.
Income tax deferred due to the use of these methods is charged to income currently and credited to a reserve for deferred income taxes. As income taxes previously deferred become payable, the related deferrals are credited to income.
Certain costs, principally interest, capitalized in accordance with the provisions of the lJniform System of Accounts, are expensed -
for income tax purposes and the tax reduction resulting therefrom is reflected in the income statement currently as ordered by the Michigan Public Service Commision.
The investment tax credit aw job development investment credit utilized as a reduction of the current year's income tax is deferred and amortized to operating expense over the life of the related property. As of December 31, 1974, the Company has unutilized investment tax credits of approximstely $14,900,000.
The total income tax expense as set idi above produces an effective income tax rate of 27.1% in 1974 and 36.1% in 1973.
The following schedule reconches the statutory Federalincome tax rate of 48% to such effective income tax rates.
p YEAR ENDED DECEMBER 31 1974 1973 AMOUNT RATE AMOUNT RATE Thousands Thousands of DcIlars of Dollars Computed " expected" tax expense.
$40,030 48.0 %
$60,776 48.0 %
increase (reduction) in taxes resulting from:
Certain capitalized construction costs, principally interest, deducted cur-rently for income tax purposes for which no deferred taxes are pro-vided in accordance with the requirements of the MPSC (14,691)
(17.6)
(15,637)
(12.3)
State income taxes, net of Federal incor.1e tax benefit 1,867 2.2 3,588 2.8 Amortization of deferred investment tax credit (1,485)
(1.8)
(1,317)
(1.
Equity in earnings of subsidiaries..
(3,538)
(4.2)
(1,604)
(1 Other miscellaneous items.
379
.5 (82)
(.1 Actual tax expense
. $22.562 27.1 %
$45,724 36.1 %
26
mPowerm t
13 Au0WANCE FOR FUNOS USED DURING CONSTRUCTION The allowance for funds used during construction was capitalized at a rate of 7%% in 1974 and 7%% in 1973. Based on the Company's source of funds for gross property additions, and assuming that the cost of financing other than common equity financing was equivalent to the current cost of debt, preferred stock and other sources, available in each year, the estimated common equity component of the allowance for funds used during construction amounted to 10.6% and 9.6% of net income available for common stock for 1974 and 1973, respectively.
14 NORTHERN MICHIGM U(PLORATION COMPANY Northern Michigan Exploration Company (Northern), a whollyewned sttsidiary of the Company, is engaged in gas exploration programs in northern Michigan and the southern United States. The Company's Board of Directors has authorized loans to Northern up to a maximum of $20,000,000 and has authorized a total common stock investment of $20,000,000.
Northern has applied to the Federal Power Commission for authority to sell gas from offshore Louisiana to Consumers Power Company. Hearings on the matter are pending.
Northern follows full cost accounting for financial reporting purposes including a policy of capitalizing iriterest costs related to properties in process of development. Interest capitalized amounted to $2,300,000 in 1974 and $1,500,000 in 1973. Had these interest costs not been capitalized, the Company's net income would have been reduced approximately $1,200,000 in 1974 and
$800,000 in 1973. Summadzed financial information of Northern is shown below.
1974 1973 Operating revenues
$12,286,000
$ 3,791,000 Net income 5,268,000 1,522,000 Gas and oil properties 54,708,000 39,670,000 Total assets 61,471,000 43,597,000 Stockholder's investment 21,899,000 16,631,000 Production payment.
27,500,000 25,000,000 j
\\j l
ARTHUR ANDERSEN & CO.
To the Board of Directors, Consumers Power Company:
We nave examined the balance sheet of CONSUMERS POWER COMPANY (a Michigan corporation) as of December 31,1974 and December 31,1973, and the related statements of income, retained earnings and source of funds for gross property additions for the years then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the accompanying financial statements referred to above present fairly the financial position of Consumers Power Company as of December 31,1974 and December 31, 1973, and the results of its operations and the source of funds for gross property additions for the years then ended, in conformity with generally accepted accounting principles which, other than for the change in 1974 with which we concur in the method of recording revenue as discussed in Note 2 to the financial statements, were consistently applied during the periods.
Detroit, Michigan, February 11,1975.
O I
27
Suzary i f Statement iIIncome 19784875 1974 1973 1972 1971 Thousands of Dollars Operating Revenue (3)
$619,958 $495,723 $416,994 $364,230 $334,904 Electric...
Gas....
483,832 337,906 332,085 286,091 273,874 Steam.
1,593 1,325 1,374 1,296 1,212 Operating Revenue Deductions, Except income Taxes Fuel Consumed in Electric Generation 172,050 105,391 91,969 84,206 70,939 143,394 70,006 56,662 41,860 19,331 Purchased and Interchanged Power.
Cost of Gas Sold..
293,190 175,185 156,238 130,411 117,875 208,759 187,436 180,807 154,022 149,462 Other Operation and Maintenance Depreciation and Amortization 82,944 73,428 62,937 58.210 55,608 63,058 54,160 48,204 43,073 39,062 General Taxes j
Net Operating income Before income Taxes 78,614 121,196 84,627 75,249 92,747 Electric Gas...
63,192 48,083 68,954 64,107 65,377 182 69 55 (321)
(411)
Steam.
Income Taxes 437 2,718 11,371 14,469 38,824 Federal Income Tax (729) 2,786 3,216 3,065 4,787 State income Tax 26,191 25,072 18,972 14,300 10,222 Deferred income Tax (Net)
Investment Tax Credit (Net).
(5,118) 14,057 5,960 5,751 448 Net Operating income 75,476 87,463 69,405 59,844 62,779 Electric...
45,585 37,167 44,621 41,683 40,780 Gas Steam.
146 85 91 (77)
(12 Allowance for Funds Used During Construction 21,875 23,223 25,455 21,862 14,108 Other income (1) 11,066 6,940 5,416 5,373 4,414 Interest Charges 93,315 73,985 65,258 55,578 47,962 Income Before Cumulative Effect of Change in Method of 60,833 80,893 79,730 73,107 73,992 Recording Revenue Cumulative Effect on Years Prior to 1974 of Accruing Estimated Unbilled Revenue After Deduction for Related Income Taxes (3) 24,864 85,697 80,893 79,730 73,107 73,992 Net income (1).
Cash Dividends on Preferred and Preference Stock.
25,540 17,746 11,252 7,108 3,517 p
Net income After Dividends on Preferred and Preference Stock 60,157 63,147 68,478 65,999 70,475 Cash Dividends on Common Stock.
52,467 52,467 49,168 48,068 46,803 Common Stock-Average Shares Outstanding (Thousands of Shares).
26,234 26,234 24,584 24,034 23,507 1
Earnings per Share of Common Stock Based on Average Shares Outstanding (2)
Before Cumulative Effect of Change in Method of Recording Revenue
$1.34
$2.41
$2.78
$2.75
$3.00 Cumulative Effect on Years Prior to 1974 of Accruing Estimated Unbilled Revenue After Deduction for Related Income Taxes.
.95 2.29 2.41 2.78 2.75 3.00 Total (1)
Pro Forma Amounts Assuming Change in Method of Recording Revenue is Applied Retroactively
$60,833
$83,370
$83,967
$73,151
$73,1 Net income Earnings per Share of Common Stock
$1.34
$2.50
$2.95
$2.75
$2.96 l
Cash Dividends Paid per Share.
2.00 2.00 2.00 2.00 2.00 28 l
Management's Discussion and Analysis O
of theStatementof ncome Electric revenue increased $78,729,000 in 1973 maintenance at various electric generating plants, and $124,235,000 in 1974. The increased electric particularly the Palisades Nuclear Plant in 1974, revenues resulted primarily from rate increases and employee benefits charged to operations.
and fuel cost adjustments, partially offset by the Depreciation and amortization expenses in-conservation of energy and the downturn in the creased $10,491,000 in 1973 and $9,516,000 in 1974, economy.
resulting from additions to depreciable property.
Gas revenue increased $5,821,000 in 1973 and Major additions were the Palisades and Ludington
$145,926,000 in 1974. The increased gas revenues electric generating plants and the Marysville Gas resulted primarily from rate increases and cost of Reforming Plant.
gas adjustments, partially offset by the conserva-General taxes increased $5,956,000 in 1973 and tion of energy and the downturn in the economy.
$8,898,000 in 1974, primarily the result of increased Effective January 1,1974, the Company changed property subject to real and personal property its method of accounting to accrue revenues for taxes.
services rendered but not billed at month end to in 1973 the net result of the increased revenue more closely match costs and revenues. Prior to partially offset by higher operating expenses was 1974, operating revenue was recognized at the time a $15,712,000 growth in net operating income be-of monthly billings on a cycle basis.
fore income taxes. Income taxes increased Fuel for generation costs increased $13,422,000
$5,114,000, leaving an increase in net operating in-in 1973 and $66,659,000 in 1974. These increases come of $10,598,000. In 1974, increased revenues reflect the increased cost of coal and oil and in-did not fully offset higher costs resulting in a creased use of oil at the steam generating plants.
$27,360,000 decline in net operating income before Purchased and interchanged power costs in-income taxes. Income taxes decreased $23,852,000, creased $13,344,000 in 1973 and $73,388,000 in leaving a decrease in net operating income of v
1974. The 1974 increase reflects a substantial in-
$3,508,000.
crease in the unit cost of purchased and inter-Allowance for funds used during construction de-changed power in the last half of 1974.The increase creased $2,232,000 in 1973 and $1,348,000 in 1974, in both years reflects the Palisades Nuclear Plant reflecting a reduced construction program.
outage.
Net other income increased $1,524,000 in 1973 Cost of gas sold increased $18,947,000 in 1973 and $4,126,000 in 1974, primarily reflecting an in-and $118,005,000 in 1974. These increases reflect crease in the earnings of subsidiary companies.
the higher prices put into effect by pipeline suppli-The sale of First Mortgage Bonds and the issu-ers, the addition of the Marysville Gas Reforming ance of short-term notes increased interest charges Plant and the increased costs of liquid hydrocarbon by $8,727,000 in 1973. The sale of First Mortgage feedstock for the production of synthetic natural Bonds, the issuance of installment sales contracts j
gas at the Marysville Plant. The latter is due largely in connection with pollution control equipment and d
to the significant increases in C;.nadian taxes on the issuance cf a seven-year promissory note, to-the feedstock. The increases in cost are almost gether with an increase in short-term notes, resulted totally offset by the cost of gas adjustment clause in increased interest charges of $19,330,000 in 1974.
which permits pass-through to the customers.
The issuance of Preferred Stock during 1972 and Other operation and maintenance expenses in-1973, together with the issuance of Preference creased $6,629,000 in 1973 and S21,323,000 in 1974.
Stock in 1974, increased dividends on such stock Major increases reflected in these amounts were
$6,494,000 in 1973 and $7,794,000 in 1974.
(1) Net income and Earnings per Share have been restated from amounts previously reported in amount of $1,552,000 ($.06 per share),
$1,327,000 (5.06 per share) and $1,160,000 (5.05 per share) for 1972,1971 and 1970, respectively, to reflect the elimination of h
Deferred income Taxes provided in prior years applicable to the gain on reacquisition of Long-Term Debt. (See Note 3 to Financial V
Statements.)
i (2) After reduction for Cash Dividends on Preferred and Preference Stock.
(3)See Note 2 to the Financial Statements for change in method of account ng.
l 29
Cinsumers Piuusr Company Dividends and Stocit Prices O
1 Dividends Paid Per Share 4
Calendar Quarter-1973 Calendar Quarter-1974 l,
Security 1
2 3
4 1
2 3
4 Common Stock
$0.50 50.50 50.50 50.50
$0.50
$0.50
$0.50
$0.50 Preferred Stock:
$4.16 1.04 1.04 1.04 1.04 1.04 1.04 1.04 1.04 4.50 1.125 1.125 1.125 1.125 1.125 1.125 1.125 1.125 4.52 1.13 1.13 1.13 1.13 1.13 1.13 1.13 1.13 7.45 1.8625 1.8625 1.8625 1.8625 1.8625 1.8625
'l.8625 1.8625 I
7.68 1.024 1.92 1.92 1.92 7.72 1.93 1.93 1.93 1.93 1.93 1.93 1.93 1.93 1
7.76 1.94 1.94 1.94 1.94 1.94
$6.00 Preference Stock 0.917 _
I High and Low Sales Prices on New York Stock Exchange Calendar Quarter-1973 Calendar Quarter-1974 Security 1
2 3
4 1
2 3
4 High Low High Low High Low High Low High Low High Low High Low High Low Common Stock 30 % 28 28 % 26 % 28 % 25 27 % 21 24 % 22 % 23 11 14 10 % 13 % 9 Preferred Stock:
$4.16 58 55 % 56 % 53 % 53 % 51 55 51 52 % 50 48 % 43 % 40 35 35 30 4.50 65 % 60 61 59 61 55 % 60 52 % 58 52 % 54 % 41 % 42 % 34 39 % 29 %
4.52 67 % 64 % 66 % 64 66 63 % 66 % 61 % 62 60 59 % 49 % 50 41 41 31 7.45 102 98 % 101 96 97 92 % 98 % 88 94 % 84 85 68 70 52M 59% 47%
7.68
- 93 87 87 70 71 60 60 57 7.72 104 % 101 % 104 % 98 101 95 102 95 95 % 91 91 % 71 % 74 58 60 50 7.76
- 98 96 102 % 94 % 95 91 91 76 % 72 72 61 53
$6.00 Preference Stock
- 52 % 52 53 46 %
Exchanges on which the Company's Equity Securities Are Listed For Trading:
Common stock is listed on the New York, Midwest and Detroit stock exchanges.
Preferred stock is listed on the New York and Detroit stock exchanges.
$6.00 Preference stock is listed on the New York Stock Exchange.
30
d CompanyDirectorS Company Officers A.H. AYMOND A. H. AYM0ND l
l Chairman of the Board and President of the Company Chairman of the Board and President, Jackson, Michigan Chief Executive Officer ROBERT P. BRIGGS JOHN B. SIMPSON former Michigan Commissioner of FinancialInstitutions Executive Vice President, Divisions, Customer Service, Elk Rapids, Michigan Energy Consulting Services, Gas Groups and General Services EDWARD N. COLE RUSSELL C. YOUNGDAHL Chairman of the Board of International Husky, Inc.,
Executive Vice President, Electric Groups an air freight company JAMES A. McDIVITT Bloomfield Hills, Michigan Executive Vice President, Corporate Affairs-E. NEWTON CUTLER, JR.
Accounting and Rates, Finance, Legal, Public Relations Chairman of the Board, Horizon Bancorp, and Personnel a bank holding company JOHN W. KLUBERG Morristown, New Jersey Vice President and Controller L D. FERDEN W. ANSON HEDGEC0CK Farmer Vice President, Customer Service and Chesaning, Michigan Energy Consulting Services DANIEL M. FITZ-GERALD WALTER R. BORIS Chairman of the Board and Chairman of the Executive Vice President, Finance corporat,ee of The Wickes Corporation, a diversified Committ W. JACK MOSLEY ion Vice President, Electric Planning San Diego, Caliform.a HAROLD P. GRAVES RICHARD M. GILLETT Vice President and General Counsel Chairman of the Board and Chief Executive Off.icer of Old Kent Financial Corporation, a bank holding company "
fc si ent, Public Relations Grand Rapids, Michigan MARTHA W. GRIFFITHS ROLAND A. LAMLEY Attorney, Griffiths and Griffiths Vice President, Bulk Power Operations Farmington Hills, Michigan EUGENE B. HEDGES JOHN W. HANNON, JR.
Vice Pre:ident, Gas Operations I
President of Bankers Trust Company and Bankers Trust STEPHEN H. HOWELL New York Corporation Vice President Electric Plant Projects New York, New York LOWELL L SHEPARD JAMES A. McDIVITT Vice President, Division Operations Executive Vice President of the Company RAYNARD C. LINCOLN, JR.
Jackson, Michigan Vice President, General Services DON T. McKONE PAUL A. PERRY Executive Vice President of Libbey-0 wens Ford Company, Secretary a diversified corporation RICHARD M. GRISWOLD Toledo, Ohio Treasurer President of Aeroquip Corporation, Jack 0n',1'A'a? "
lIRISIt RS and Mana!erS C. S. HARDING MOTT (Headquarters cities in parentheses) c
~
Foundat on, a phi anthropic f un a ior Battle Creek Division (Battle Creek) G0RDON W. HOWARD Flint, Michigan Central Division (Alma) RALPH HAHN (to 12-31-74)
L C. ROLL EUGENE A. WAGGENER (from 1-1-75)
Vice Chairman of the Board of Kellogg Company, Flint Division (Fiint) J. LAURENCE GILLIE cereal manufacturer Grand Rapids Division (Grand Rapids) JOHN G. G0ENSE Battle Creek, Michigan Jackson Division (Jackson) A. FRANK BREWER Kalamazoo Division (Kalamazoo) WILLIAM A. HOLTGREIVE Executive e P esident of the Company Jackson, Michigan Lansing Division (Lansing) CHARLES F. BROWN JOHN C. SUERTH Macomb Division (East Detroit) GEORGE L MAYHEW Chairman of the Board and Chief Executive Officer Muskegon Division (Muskegon) C. THOMAS BAYLIS (to 131-75) of Gerber Products Company, producer of baby needs W. JOSEPH McCORMICK (from 2-1-75)
Fremont, Michigan Northeast Division (Bay City) LOWELL L SHEPARC (to 12 3174)
{
g DR. E. GIFFORD UPJOHN RALPH HAHN (from 1175)
Director of The Upjohn Company, Northwest Division (Traverse City) B0B D. HILTY Ka arnaIco, ichig n Pontiac Division (Pontiac) K. EUGENE McGRAW RUSSELL C.YOUNGDAHL Saginaw Division (Saginaw) STANLEY M. JURRENS Executive Vice President of the Company South Oakland Division (Royal Oak) WILFRED L WHITFIELD Jackson, Michigan West Wayne Division (Livonia) JAMES P. THOMAS 31 l
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5 The Marysville gas reforming plant has helped significantly to shield gas customers from the severe impact of increasing curtailments of interstate pipeline deliveries.
Transfer Agents NDliceof AnnualMeetinll Commen. Preference The annuai meeting of sharehoiders of Consumers Power Com-and Preferred Stock pany will take place Tuesday, April 8,1975, at 2:00 PM in the Company's Parnall Office Building,1945 West Parnall Road, Consumers Power Company Jackson, Michigan. A notice of meeting, proxy statement and Jackson, Michigan 49201 P.fUXy will be mailed to shareholders early in March 1975. Prompt signing and return of proxies will be appreciated by the man-Bankers Trust Company agement.
New York, New York 10017 Registrars Common Stock AnnualRellirI in Form 1M The National Bank of Jackson Jackson, Michigan 49201 A copy of Consumers Power Company's annual report, without Bankers Trust Company exhibits, for the fiscal year ended December 31,1974 on Form New York, New York 10017 12-K, required to be filed with the Securities and Exchange Com-mission pursuant to Rule 13a-1 under the Securities Exchange Act of 1934, will be furnished by the Company without charge to any shareholder who so requests upon applicstion made to Registrars Preference Mr. P. A. Perry, Secretary, Consumers Power Company,212 West Michigan Avenue, Jackson, Michigan 49201. Such report will be and Preferred Stock available to shareholders after May 1,1975.
Each shareholder request must indicate that, as of Febru City Bank and Trust Company, N.A.
21,1975, the record date for the annual meeting of sharehold Jackson, Michigan 49201 the person making such request was a beneficial owner of curities entitled to vote at such meeting.
Bankers Trust Company New York, New York 10017 32 BACK COVER: Offshore drilling platform in the Gulf of Mexico
- - _