ML19331C369

Annual Financial Rept 1979

ML19331C369
Person / Time
Site:	Palisades, Big Rock Point, Midland  File:Consumers Energy icon.png
Issue date:	12/31/1979
From:	CONSUMERS ENERGY CO. (FORMERLY CONSUMERS POWER CO.)
To:
References
NUDOCS 8008150068
Download: ML19331C369 (44)

Text

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Activity Code R36 TACS No. 5405 REVIEW OF ANNUAL FINANCIAL REPORTS (10 CFR 50.71b)

FINANCIAL QUALIFICATIONS SECTION N%,

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Company Name:

Date of Balance Sheet:

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W The annual financial report for the above-named company has been reviewed. The review indicates that special monitoring of the company's financial condition

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3 Contents h

The Executive Office Letter.

1 Al Aymond Begins a New Caree.-

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Consumers Power Shareholders:

interesting and Interested., 5

[s Shareholders invest More Than Money in Consumers Power.

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Customer / Shareholders: Home-grown Investment Lakes Sense.. and Dol!ars. 13 f

Through ESOP and on Their Own, Employees Own Shares of Consumers Power. 17 The Wall Street Connection:

CapitalforOurEnergyFuture. 21 About Our Photos Financial Statements. 24-28 Notes to the Financial Statements. 28-36 Shareholders-who participate in the Auditors

• Opinion. 38 future of Consumers Power through their Management's Discussion and Aralysis investment in the Company-are the of the Statement of income. 37 photographic theme of tt !s annualreport.

Five-yearSummaryof the StatementofIncome. 38 In the Stock Transfer Department, Jean Afatz Dividends and Stock Prices. 39 works with registration books containing Company Description and Service Area Map..40 information about the Company's 205.000 Company Directors Officers, shareholders. Jean is a sharehcider herself Region General Managers, and through the Employee Stock Ownership Plan.

PlantGeneralManagers..inside Back Cover FINANCIAL HIGHLIGHTS 1979 1978 Total Operating Revenue

$2,003,374,000

$1,866,921,000 Net income

$ 203,787,000

$ 185,131,000 Earnings per Common Share

$3.24

$3.21 Average No. of Common Shares Outstanding 48,003,214 43,743,081 Dividends Paid per Common Share

$2.30

$2.18 Return on Average Common Equity 11.4 %

11.5 %

Capital Expenditures S 823,967,000

$ 665,057,000 Net investment in Utility Plant at Year End

$4,670,780,000

$3,986,378,000 Total Capitalization at Year End

$4,136,975,000

$3,919,621,000 Consumers Power Company Annual Report 1979 212 West Michigan Avenue, Jackson, Michigan 49201 (517) 788-0550

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Dear Shareholder:

. L, This year your Company's annual report is about where we've been and where we expect to go, and also about you. We conducted a shareholder survey in 1979 and, as a result, we've started a program to meet more of your informational l

y needs and wishes. There is more on the new program in the report that follows. We hope you're interested.

Our ear-ings per share rose to $3.24 from $3.21 a year ago.

The improvement is inadequate and well below plan. The

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basic causes were: (1) tower-than-budgeted revenues result-ing from a sales decline brought on by a mid-year stump in the auto industry, (2) delayed rate increases, and (3) a rapid j

Increase during the year in the cost of borrowed funds which l

was compounded by delayed approval from the Michigan Public Service Commission (MPSC) for the sale of additional i

i securities.

g There are many things that we might discuss with you in this management letter ';ut, of the f actors that influenced our industry in 1979, thre? stand out: the continuing influence of Jof n D.Selby small but vocal o%ups of anti-utility activists, unrelenting in-flation, and the Three Mile Island accident.

First, intervent:r. continues to be a very significant prob-r.

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lem. Some system which will permit essential regulatory deci-

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i sions to be made in a timely manner must be established so i f 1:

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that small groups of "special interest" intervenors cannot,

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without accountability for the results of their actions, tie up regulatory agencies and cost utility

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tomers millions of dollars. Time and time again, important f

projects of investor-owned utilities are delayed because a

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few objectors twist and distort the facts. We are counting on

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those shareholders, employees, and retirees who are enrolled s..

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in our new information/ Action Program to help combat this by making their opinions heard where they will count.

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- a Second, inflation remained a heavy burden last year. Other.

'd-wise, you would have eamed more on your investment in s

Consumers Power Company. The cost of everything has P'

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surged up and up. To economize, we have put stiff controts T

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our customers reliably. But-since we cannot control inflation that will be required to obtain an operating license. The Bech-

-in the interest of keeping up with increased cost levels, we tel report, which we received in late January, Indicates a must and shall continue to ask the MPSC to authorize addi.

probable schedule delay of three years and a coct increase to $3.1 billion from our previous cost estimate of $1.67 biiiicn.

tional revenues.

Third, no nuclear plant in the U.S.-whether already in op-The inability of the NRC to settle in a timely fashitn all the cration, under construction, or merely in the planning stages licensing issues brought forth by the Three Mile Island acci-

-was left unaffected by the events which occurred in March dent poses a significant threat to the existence of the nuclea-1979 at the Three Mile Island nuclear complex in Pennsyl-option in this country. We are now in the procecs of reviewing van'.:;. The Company's Midland plant is no exception, the Bechtel report and evaluating various altematives regard-Because the Nuclear Regulatory Commission (NRC) is ing the Midland plant's cost and completior: schedule.

directing its resources towards handling TMI issues, consid-Finally, we note two of 1979's major internal changes. We cration of all construction permits and operating licenses, in-witnessed the retirement, as an active employee, of A. H.

cluding the Company's application for an operating license Aymond, chairman of the board from 1960-1979. His tribute for the Midland plant, has been delayed.

follows, but we are p. eased that his advice and insight are Intensive study of the lessons learned at Three Mile Island not lost to this Company since he remains a member of the can, we believe, contribute to safer and more efficient nuclear bosrd of directors.

gen; ration over the long run. For the short run, however, the Subsequently, there was a reorganization in the structure fm that NRC requirernents are in a state of flux causes severe of the Company's top management. The two of us now form problems.~ Regulations have changed constantly since the an " executive office" to which the other officers of the Com-Midland plant was announced in 1967 and, as a result of TMI, pany report. It is our belief that this reorganization will provide are changing still it is difficult, if not impossible, to arrive at the appropriate flexibility and control for managing Company accurate cost estimates and completion schedules under operations.

th:se circumstances.

There is no direct way we can thank the employees of Con-In spite of the regulatory uncertainties, we asked our Mid-sumers Power-except through their paychecks and through land contractor, the Bechtel Power Corporation, to prepare effective, concerned supervision-but they are good and their a cost and schedule projection based on their and our best work shows it. Utility people nationwide have a tradition of

,tstimates of the NRC licensing environment and the changes being above average. Ours-we f9el-are among the very best.

A _.

JOHN D. SELBY Chairman of the Board rr /

JAMESB.FALAHEE Vice Chairman of the Board February 15,1980 2

Om AL AYMOND BEGINS A NEW CAREER His Legacy To Consumers Power: Leadership For more than 32 years, Alphonse H. Aymond seldom, if ever, had Consumers Power Company completely off his mind.

Mg _g And for 19 of those years, as chairman and chief executive 4

, ;- -m C officer, he held the ultimate responsibility for makinr the most FEV p-of the good times and weathering the bad.

There surely were both: the rapid progress on both the cor-

~h porate and operating fronts throughout most of the 1960s, q

the severe financial challenges in 1974 and 1975.

But when Al Aymond stepped down as chief executive offi-cer in 1978, he relinquished the leadership of a company that

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was strong in management, solid in its work force, financially sound, and-above all-proud of its proven ability to provide quality utility service to the state of Michigan and to more than two million Consumers Power customers.

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His mandatory retirement on October 1,1979, in keeping with Company policy, did not mean the time had finally come "At home"in North Palm Beach, Florida, AI Aymond keeps to get Consumers Power completely off his mind. He con-up with board executive and financial committee paperwork.

tinues as a member of the board of directors, on which he He also continues to maintain his residence in Jackson.

has served for 22 years, as a member of the executive com-mittee and several other board committees, as chairman of the finance committee, and as a director of three of the Company's wholly-owned subsidiaries-Northern Michigan Exploration Company, Plateau Resources Limited, and Mich-igan Gas Storage Company.

He will also maintain his close ties with Michigan and with the Company's corporate headquarters city since he has be-come associated with the Jackson law firm in which his son, Charles,is a partner.

Without the responsibility for the leadership of Consuth Power Company, does Al Aymond still have his hand.: tull?

He surely does. There are new horizons on which his eyes are sharply trained, as they were on Consumers Power prob-lems and achievements during his tenure as chief executive.

His business experience and his wealth of community and public service accomplishments have made him an invaluable source of counsel and leadership in the many professional, civic, and cultural activities in which he is, and will become, engaged.

"The requests to serve keep coming in," he said recently, "and in spite of the temptation, golf will just have to wait."

And at Consumers Power, his leadership-by decision and by example-will continue to benefit the Company as he l

serves on the board of directors and several of its committees.

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CONSUMERS POWER COMPANY SHAREHOLDERS-INTERESTING AND INTERESTED

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Shareholder Survey Conducted in 1979 According to the survey, around 60 percent have some col-lege experience. The average number of common shares As part of our continuing dialogue with groups ol people who held is just over 300, and 62 percent of those responding to have a strong influence on the success of Consumers Power the survey report that they acquired their stock pn,or to 1974.

Company, we conducted a shareholder survey in the spring The main purpose of the survey, however, was not to ac-of 1979. Explanatory letters and survey questionnaires were quire statistics but to Iearn what Consumers Power share.

sent to a representative sample of 2,550 CP Co. shareholders.

holders think about the,r Company. Are they generally satu,-

i The results of that survey cannot go unrecognized. This fied with the Company's performance? In making such an year's annual report-in addition to portraying as accurate!y overall judgment, 84 percent of the survey respondents as possible the events which took place at Consumers Power said "yes." More specifically, nearly 50 percent gave the Company during 1979-will also attempt to convey some of Company top marks for efficiency of operation, profitability, the interest, enthusiasm, cupport, loyalty, and critical percep-and effectiveness in planning for future energy needs.

tion of Consumers Power shareholders.

How familiar are shareholders with the Company's actual operations? Fifty-five percent said they knew "a great deal" Survey Results Reveal More Than Statistics to "a fair amount" about them. Do they want to know more?

l Fifty-seven percent indicated that they would be interested in Geographically, "CP people" cover a lot of territory. Although participating in a program that would provide them with infor-54 percent live in Michigan, others are located throughout mation about social, political, econorric, and environmentd l

the remaining 49 states and in 28 foreign countries. Not sur-issues affecting the Company.

l prisingly,48 percent are customers as well as shareholders.

New information/ Action Program initiated in response to this expression of shareholder interest, the Company initiated a new Information/ Action Program for shareholders, employees, and retirees. Sign-up cards (like the one in the back of this annual report) were mailed during (Top) Shareholder James Cahill, assembly line worker at the year to all potential participants. To date, more than 22,000 the Chevrolet plant in Filnt, Michigan, recognizes the fle people have asked to be put on the mailing list. Two issues of between energy from Consumers Power and s hoalthy

" Energy Update," the new program's newsieder, have al-economy. He has an investment in both, ready been released; others will be forthcoming. In addition, program participants who wish to take action on behalf of the (Lower left) Helen and Dorothy M wapil, shareholders of Company-such as writing to legislators or newspapers and Consumers Power, aren't bothered by a rainy day. They speaking to civic groups-will receive suggestions through the take the weatherin Seattle, Washington in stride.

Information/ Action Program when issues affecting Consum-(Lower right) Music adds something to life for Ronald, Chris, and Doug Gallegos who live near Jackson, Michigan. So do the dividend checks they receive from Dividend increased in 1979 Consumers Power Company.

is an increase in dividends. At its July 1979 meeting the board of directors increased the quarterly dividend on the Com-E pany's common stock from 56 to 59 cents per share. It was the third such increase in the past three years. (In April 1977 m$

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the dividend was raised from 50 to 53 cents per share and, in to amend the Articles of Incorporation to increase the autho.

July 1978, to 56 cents per share.) During 1979 the Company rized number of shares of preferred stock from 5 million to 7.5 paid $109.698,000, or $2.30 per share, in dividends to its million. The primary reason for taking this action was to insure 165,000 common shareholders. Dividends for the Company's adequate capital for construction purposes.

18.000 preferred shareholders amounted to $32,009.000 in Shareholders also voted at the 1979 meeting to reelect 14 1979, and those for its 24,000 preference shareholders totaled incumbent members of the board of directors. A fifteenth

$16.410,000.

board member, C. S. Harding Mott of Flint, Michigan, retired from the board on that date in accordance with the board's Board Elects New Officers retirement policy. The many valuable contributions he made The headline item at the board's October 1979 meeting was during his almost 14 years as a director are greatly appreci-ated.

the selection of a new chairman. John D. Selby, president and chief executive officer of the Company, was elected to the in add"on to the 1979 annual meeting of shareholders, addit;onal position of chairman of the board, and James B.

regional meetings were held in five Michigan cities. Com-Falahee, senior vice president for legal, regulation, and ac-bined attendance for the meetings was more than 3,000. At counting and computer services, was elected to the board each meeting Mr. Aymond or Mr. Selby reported to the share.

and to the newly created post of vice chairman.

holders on the events of the past year and the business trans-Under the reorganized management structure, the chair.

acted at the 1979 annual meeting in Jackson.

man and vice chairman began operating as an " executive The 1980 annual meeting of shareholders will take place on office" to provide overall direction for the Company's activi-April 8 at 2:00 PM in the Pamall Office Building,1945 West ties. Senior officers reporting directly to the Executive Office Parnall Road, Jackson, Michigan. Regional shareholder meet-are John B. Simpson, executive vice president; Russell C.

ings will be held, as well, on April 9 in Jackson, April 10-Youngdahl, executive vice president; Walter R. Boris, execu-Pontiac, Apnl 15-Grand Rapids, April 16-Lansing, and April 17-Saginaw. Shareholders are cordially invited to a%nd tive vice president; Stephen H Howell, senior vice president; and Jack W. Reynolds, senior vice president.

either the annual meeting or one of the regional meetings, At the same meeting, Paul S. Mirabito, chairman of the board and chief executive officer of Burroughs Corporation, CP Co.1978 Annual Report Wins was elected to the board of Consumers Power Company. His Financial World Awards election brought the number of CP Co. directors to 16.

A. H. Aymond, former chairman of the board, retired as an The Company's 1978 annual report was awarded silver and active employee on October 1. He cont 5ues as a member bronze medals in Financial World magazine's 35th annual re-of the board, the executive ccmmittee and several other port contest. To win, the Consumers Power report had to committees, and as chairman of the finant e committee.

survive competition that began with the selection of 1,500 merit award winners which v,ere then grouped into 82 indus try categories. The first place winners in each of these cate-Dividend Reinvestment Plan Reflects gories were awarded bronze trophies. Bronze trophy winners Shareholder Savvy were then grouped into 11 broad industrial categories from At the end of 1979, 23,000 shareholders were taking advan-tage of the Company's Dividend Reinvestment and Common annual report took first place in the utility category, Stock Purchase Plan in order to purchase additional shares of common stock-by reinvesting their dividende or by making cash payments-without incurring any brokerage fees or service charges.

(Top lef t) In Sparta, Michigan, it's "like grandfather-like During 19.9 plan participants purchased nearly 629,000 grandson." Floyd Schut, a retired businessman, and his shares of common stock for approximately $13.239,000. Of grandson Andrew both own shares in Consumers Power.

that amount, about 59,794,000 came from reinvested divi-dends and about $3,445,000 came from cash payments. The (Top right) An investmentin Consumers Poweris number of participants enrolled in the plars increased 5.1 part of the financial" game plan"of stockholder Lucille percent over that for 1978.

Doss, who teaches schoolin Detroit.

Shareholders who are interested in obtaining more infor-mation concerning the plan may write to: Stock Transfer (Lowerleft) Gordon Howard,long time Battle Creek Department, Consumers Power Company, 212 West Michi-division manager (now retired) and consultant for the new gan Avenue, Jackson, Michigan 49201.

Intc mation/ Action Program, discusses issues presented in " Energy Update" with Marion Chatfin, one of the first shareholders who enrolled in the program.

1975 Annual and Regional Shareholder Meetings H:Id;1980 Meetings Planned (Lower right) On the west coast, share,i older Andrew At the Company's April 10,1979 annual meeting of share-

,ng s a t, p se @ w.

holders, which was held in Jackson, Michigan, nearly 36,269,000 shares of Company stock, or 70.3 percent of all shares entitled to vote, we.e represented. Shareholders votd l

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SHAREHOLDERS INVEST MORE THAN MONEY IN CONSUMERS POWER Investors Show Interest in issues Affecting Company Campbell unit 3. This step may be considered in the commis-Although Consumers Power shareholders are-of course-sion's mid-1980 order or it may be the subject of a separate interested in the financial aspects of their investment, many hearing. (The commission staff has proposed that such a of them have expressed a much broader interest in the heanng be held and that it should begin four months before Company and its affairs. Eighty percent of those responding the facility goes into commercial operation. Present plans call to the shareholder survey indicated they felt that the Company for Campbell 3 to go on line in September 1980.)

should ask their help in resisting the passage of unreasonable Reasons for the rate increase include the need to cover the legislation or regulation, and 83 percent said they should be investment and expenses for Campbell unit 3; to counter the asked to support the Company's position (if they agreed with effects of inflation on the cost of materials., labor, and sup-it) on pending legislation, plies; to recover the higher cost of obtaining investment capi.

Because utility shareholders know that the state and federal tal; and to make adequate provision for the retirement of the agencies which regulate Consumers Power can have a strong Company's presently operating nuclear plants at the end of influence on whether the Company has an outstanding year their operating lives.

or a mediocre one, news about regulatory and legislative activities affecting the Company is of major interest to them.

Consumer Price Index Adjustment Approved Through the new Information/ Action Program, participating in January 1980 the Michigan Public Service Commission shareholders w,ll receive additional information about such i

issuer as well as suggestions for action to be taken on them.

approved an operating and maintenance expense indexing adjustment for the Company that increased its electric rates by an estimated $20.3 million annually. The increase became Unusual, Three-Step Electric Rate Case Filed in 1979 effective in February. The operating and maintenance ex-An event of particular significance for the Company and its pense indexing system was approved by the MPSC in a investors occurred in January of 1979 when the Company filed July 1978 electric rate order as a further incentive to man-an unusual, three-step electric rate care with the Michigan agement efficiency.

Public Service Commission (MPSC). The Company has pro.

Under the provisions of the indexing system, the Company posed that the $320 million request be implemented in three may reflect in its electric ratas an increase or decrease in stages.

recoverable operating and maintenance expense equal to in November the MPSC, acknowledging that the Company the percentage increase or decrease in the Consumer Price needed additional revenue to arrange debt financing at rea.

Index during the preceding 12 months ending in August.

sonable rates, granted an interim increase of approximately Fuel, purchased power, and production maintenance expense

$29.3 million annually. A decision on the second step of the are not included. A previous operating and maintenance rate increase request ($165.7 million, is expected in mid-1980.

expense indexing adjustment, which became effective in The third portion of the request, $125 million,is based upon February 1979, raised the Company's rates by $12.3 miUlon the adFinnat plant investment and expenses of the new annually.

Gas Rate Case Reopened (Top left) B. N. Sharp and son Michael are "the management"of Sha,p's hardware store m Milford' A gas rate case filed by the Company in March 1978 and a arently closed in June 1979 when the Michigan Public indiana. Shares of CP Co. stock are held by the business.

Service Commission issued a final order allowing a total (Top right) ll's a long, way from headquarters in Jackson, gas rate increase of $29.2 million annually was reopened Michigan to Green Valley, Arizona but shareholder Roy by the commission in September 1979 after the Company an-Oliver, wife Donna, at:d daughter LaDonna keep track of n unced that it was mothballing its Marysville Gas Reforming theliinvestmentin the Company.

Constructed to produce synthetic natural gas from liquid

'"dstocks, the Marysville plant began operating (Lowerleft) As a v.ed judge, Ronald M.Ryan of BMtle Creek, Michigan knows the law. As an investorin the in 1973 and continued until March of 1979. It produced over Company, he also knows about Consumers Power.

ne-quarter trillion cubic feet of pipeline-quality natural gas and enabled Consumers Power to meet the needs of its 99'

' * ' " *" '" # '9**'h*U 9

(Lower right) Consumers Power Company serves more than 68,000 farm customers. Among them are shareholders Taken out of service in March for scheduled maintenance,'

Wayne and Georgia Gardner of Concord, Michigan, the plant did not resume operation > mse an adequate sup-ply of Icwer cost pipeline gas hao oecome available. This, plus uncertainty conceming the feedstock supply for the plant, 9

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lid to the Company's decision-announcid on S:pt:mber 5-Availabihty Incentive Will Affect R:te cf R: turn 13 mothball the plant until the mid-1980s when it is expected if the Michigan Public Service Commission approws the to be needed again.

change, Consumers Power expects to receive an ucward in October 1979, the MPSC ordered it e Company to de-adjustment, for a 12-month penod, of.25 percentage pomis crease its gas rates by $23.9 million to reflect the reduced in the authorized rate of return on common equity for d5 elec-plant operating costs resulting from the Marysville shutdown.

tric business as a result of having achieved an overal avail-The commission also rem

'he previous case to review, ability of 81.8 percent for the Company's electric generating along with other Marysville relomd issues, the actual savings plants in 1979. The "availabihty incentive" for system genera-from the shutdown This reopened proceeding is continuing.

tion was established in an electric rate order issued by the in January 1980 the Company presented to the commis-MPSC in July 1978. If the Company's plants are avanade.not sion a request, based on a more recent test period than that shut down for repair, maintenance, or nuclear refuelrg more used in the previous filing, for an annual increase of $77 mil-than 80 percent of the time, the Company's 13.5 percent lion in the Company's gas rates. The Company asked that the authorized return on common equity will be increased to commission hear the request either as a separate case or 2.s 13.75 percent. If. however, plant availabihty is 70 percent or a part of the reopened gas ra' 7roceeding.

less, a penalty equivalent to.25 percentage pointe ; le fac:ed from the authorized return on common equ;;y fu. me Com-Company Negotiates Rate agreement with pany's electric business.

Wholesale Customers in November 1979 the MPSC found the overall 3. H3bity in October 1979 the Company reached an agreement with 17 of the Company's electric plants ln 197d to be in !Pe neutral wholesale electric customers-who together purchase about range (between 70.1 and 80 0 percent) so there v.u ro ad-830.000 megawatthours annually, or approximately 3 percent justment to the 13.5 percent authorized rate of reim of the Company's total electric sales-on a $5.9 million anr,ual rate increase The increase, which was approved by the Fed-tral Energy Regulatory Commission in December, is being Company Confers with Regulatory Agencies implemented in two stages. The first, an annual increase of on New Plant Sites

$3 5 million, became effective in February 1980. A sccond Although present plans for future generating prcK: do rct increase of $2 4 million annually will go into effect when require the start of construction for several years ~e Car-Campbeit unit 3 comes on line.

pany presented a 12-step process for environme~ ! evaba-tion of future power plant sites plus environmer/u data 09 Cptional Purchase Agreement Completed for eight sites now being considered, to the staff cf te Schly Midland and Campbell Public Service Commission and the Michigan Cerment cf Natural Resources in January 1979 The presen 3D:n 7,33 Issues that arose in an antitrust case connected with the licensing of the Company's Midland nuclear plant were settled m de in an effort to estabbsh a satisfactory pr:c7'cf earb review and comment from the state agenc:e? c9 :re t*'e in an agreement announced in September. Twenty-nine Mich-Company makes a final decision on the next ccr.:

^*nre igan cooperatives and municipakties were given options to discussions will also be held with federal agerc e3 rd 2:i' purchase up to a total of 341,000 kilowatts of Midland units 1 and 2 and 100.000 kilowatts of Campbell unit 3. Also outlined governing bodies.

il the agreement are the electric transmission services the Company will provide to the utilities, general conditions for 5

'he sale and exchange of electric power, and the creation of an administrative and planning committee to coordinate la-(Top left)In the far Northwest, Margaret and Fr d George tura joint activities.

The antitrust case began in 1971 when the U.S. Atomic stay current on their company-Consumers po r:r-Energy Commission, predecessor of the Nuclear Regulatory through annualand interim reports to shareho!srs.

Commission (NRC), appointed a hearing board to decide whether the Company's activities under the Midland plant (Top right) The William F. Kapankas, who i:ve l" 9e great Southwest, maintain a proprietaryinterestin A'.mgan's licenses would create or maintain a situation inconsistent with antitrust laws. Pubhc hearings began in late 1973, and economy via part ownership of Consumers Po ur.

in July 1975 the heanng board ruled that activities under the Midland plant licenses v.ould r.ot te incompatible with anti.

(Lower felf) Over 50 percent of the Compar:y's t ust laws. The decision was app 3aled by a number of the shareholderslivein Michigan,includinginsuu :e agent o operatives and municipalities, i.nd in December 1977 the Harry Conway. In his /ree time, he enjoys exer : A9 his horses, IWC's Atomic Safety and Licensing Appeal Board reversed the. decision. After the appeal board returned the case to the hearing board for further consideration. the participants asked (Lower right) Many Michigan shareholders, f.-

"Jr.Jnd that hearings be deferred until settlement discussions could Mrs. Harry Davidson, are also customers of the CcPfanf be completed. Those discussions eventually led to the forma.

Harry makes custom fishing tackle as a hobby.

tion of an agreement in pnnciple in July 1978 and to the agreement concluded last September. The NRC must still ap-prove proposed hcense conditions in the agreement.

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e CUSTOMER / SHAREHOLDERS-HOME-GROWN INVESTMENT MAKES SENSE... AND DOLLARS

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Customer investment Pays Dividends for kilowatthour sales rose 1.7 percent from 26,359,130,000 kilo-Company and Vice Verse watthours to 26,797,331,000 kilowatthours.

Of the total 1,303,535 electric customers being served by In these days of increased energy costs, the Company-the Company at the end of 1979,1,169,917 were residential, through public service advertising and material enclosed with an increase of 18,031 over those served in 1978; 130,627 were customers' bills-suggests ways for customers to conserve commercial, an ',1 crease of 4,992 over 1978; and 8,126 were energy and keep their bills lower. In addition, when the industrial, an tracrease of 103. Within these customer cate-Company anticipates that special conditions such as colder gories, sales ta residential customers were up 1.9 percent, weather or a nuclear plant outage may.cauce higher bills, those to commercial customers rose 3.7 percent, and those customers are informed in advance so that they may take to industrial customers increased 0.3 pe cent during 1979.

extra precautions for conserving energy.

Gas sales for the 1979 year decreased 6.3 percent, from While no one-including Consumers Power shareholders-353,092,000 mcf in 1978 to 330,849,000 mcf in 1973. The likes paying higher gas and electric bills, customers of the decrease was partially due to significantly higher average Company who are also shareholders often are more aware temperatures during March and December of 1979 and par-than others how increased fuel costs, regulatory delays, and overall inflation affect the Company's cost of providing ser.

tially due to the Company's 1978 sale of nearly 15 billion vice. Their knowledge and understanding provide a base of cubic feet of gas to an Ohio gas supplier faced with an emergency shortage.

public support which helps offset the sometimes destructive At the end of 1979, the Company was servino 1,098,581 gas actions of anti-utility intervenor groups.

customers, an increase of 46,690 o*wdog the year. The num-But customer / shareholders also derive important benefits ber of residential gas customers increased by 36,787 to a from Consumers Power Company. As shareholders they re.

total of 1.019,929. Of these, 963,472 use natural gas for ceive cash dividends, and as customers they receive reliable home heating. Additions to the commercial category num-gas and electric service, an energy source to support jobs bered 9,561-for a total of 71,547 commercial customers at and growth in their local economies, and concemed planning year end. Industrial customers, who were 6,763 strong in for their future energy needs.

1978, increased to 7,105 by the end of 1979. Gas sales to residential customers increased L6 percent; commercial sales remained about the same; and industrial sales de-Customer Usage More Modest in 1979 creased 9.7 percent.

Because of our customers' awareness of higher energy costs and the need for conservation, plus milder t '5er as com-pared to that of 1978 and the decline in auto production in Generating Electricity Cost More in 1979 our service area,1979 atas a year of modest gains in electric Inflation r,ontinued to be felt in coal, oil, combustion tur-sales. The number of electric customers increased 1.8 per-bine, and nuclear electric generating operations. Company cent, or 23,117, over the number served in 1978, and total plants bumed 6.1 million tons of coal in 1979 at an average cost of $32.95 per ton, as compared to 5.8 million tons at an average cost of $29.10 per ton in 1978. Gil-fired plants used (Top) Mary and Arthur Kroon, customers of the Company' 8.2 million barrels at an average cost of $18.55 per barrel, go shopping in Grand Rapids. They've afready shopped versus 11 million barrels at an average cost of $15.65 per for an investment-and purchased CP Co. shares.

barrel in 1978. (Oil consumption was lower in 1979 because he abnormally high use of oil during the coal strike in early Dental technician Dennise Hoffman of Horton, Michigan pays her utility bill. it's often a little easier to understand The Company's two operating nuclear plants, Palisades energy costs when you to both a customer and a and Big Rock Point, generated 3,525,645.000 kilowatthours shareholder Barbara Lubahn accepts the payment.

of electricity, or 12.1 percent of total Company requirements, at a fuel cost of.43 cents per kilowatthour, as compared to 13

375 cents per kilowatthour in 1978 Fuel costs for fossil-fueled piants amounted to 198 cents per kilowatthour in 1979 and the system average for all plants was 176 cents.

Whtre the Energy Dollar Went in 1979 Out of every dollar received by Consumers Power Company in 1979. 55 cents was spent for natural gas sold, for fuel used k

to genc 3 electricity, and for electricity purchased from other g

uti.ities to meet energy requirements In addition 7 cents j

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was spent for mate,?l? and supphes, 7 cents for interest on

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debt reQuned ts fino4. Company iacihties, and 11 cents for g

employee wages. sa:arin. and benehts. To cover wear and j

tear and necessary repkaments of plants and equipment. 5 l

cents was provided in depreciatifn allowances. Local, state, I

and federal taxes acucunted for 5 cents. 8 cents went to i

shareholders in the form of dMdends. and approximately 2 cents was set aside for the b[i ding of new plants and the

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':c.ns of a slowing real economic growth

-l rate for the nation elrxtric sales tn the Company's service

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than those experien[ed poor to 1973 Company analysts ex-g

^~ - C pect an average mnual increase in electric sales and peak

-a demand of 2 75 rercent from 1979 to 1994 After tne gaf shortages of the eaty 1970s, the federal government tfegan to allow the pnce of newly discovered natural gas to increase As a result of several governr'ent

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increas{ $n the arrount of p'pehne gas avatlable from our 1; 7 % f '

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conversions took place on the Consumers Power systern L. / ' '~,

.j means of heating their homes Approximately 20.000 such i

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oil and gas for approximately 7 percent, and on hydro for 2 Company Studies Alternative Energy Sources percent. Thus the electric system-including the large hydro-Two small, wind-powered generators and related monitoring electric peaking capacity of Ludington-will be flexible and equipment have been installed at Michigan State University strong enough to meet the needs of customers throughout on land south of the campus in East Lansing, Michigan.

most of the remainder of the decade.

The windmills, which will have a combined cutput of between l

Current estimates of a lower economic growth rate and 1,000 and 5,000 watts, are part of a joint research project related moderate increases in demands for electricity have involving Consumers Power and MSU's College of Engi-resulted in additional latitude regarding future construction neering.

plans. Tre Company expects that the next generating unit The MSU windmill project is being undertaken to determine I

will be fossil-fired.

the effects of adding energy from small, wind powered elec-tric generators to a utility grid and also to determine the amount of energy produced by AC and DC generators of the Energy Assistance Programs Made Available same size.

W Custaners The first-year cost of the project is estimated at $45,000.

Because the Company switched from postcard to statement Consumers Power will pay about two-thirds of that amount billing this year, it was possible to send important informa-while MSU will provide the remainder.

tion to customers in a timely manner without incurring the cost of special mailings. (The potential saving from eliminat-Coal Gasification Project ing even one mailing amounts to $200.000 in postage alone.)

Consumers Power Company, a group of other utilities, the In late 1979, for example, all customers began receiving state of Illinois, and Allis-Chalmers Manufacturing Company notices about the federal and state home heat,ing assistance intend to build a coal gasification plant in East Alton, Illinois programs which are now available.

f funding can be arranged and the necessarv governmental in addition to informing customers of these programs, ermits secured. The $100 million p,oject vJI produce a low Consumers Power applied to the Michigan Public Service stu gas to be burned in a 50-megawatt corventional boiler Commission for authorization to adopt In expanded resi-owned by lilinois Power Company.

dential gas energy conservation program. (in July the MPSC A portion of Consumers Power Company's 1980 research adopted rules allowing regulated utilities to make interest-and development budget is directed to the project because free loans to customers if the cost of the insulation purchased the Company believes that its customers will eventually bene-with the loan can be repaid in energy say:ngs within seven g

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-the nation's most abundant fuel-in yet another way, Un er the Company's proposal, interest-free financing for ceil;ng insulation would be provided to eligible customers Consumers Dower, Wo;verine Agree on who would then have up to 60 months to pay for the insula.

Wood-Fueled Plant Project tion in equal monthly payments added to their gas bills. Funds After completing an eight-month feasibili'y study on the of up to $1,000 per building would be available, when the work is done by an approved contractor, and up to $300 for project, Consumers Power Company and Wolverine Electric a "do-it-yourself" project. The cost of financing the interest-Cooperative of Big Rapids piari to combine forces to construct free loan program, together with other overhead costs of the and operate a demonstrational 25,000-kilowatt wood fueled insulation program, would be charged to all the Company's electric generating plant near Hersey, Michigan.

Wolverine Electric and Consumers Power intend to share gas customers. The Company estimates that there are 234,000 the costs of the undertaking as well as the eventual electric gas-heated, single-family homes, duplexes, apartments, or output of the plant on a 51/49 percent basis, respectively.

other multi-family dwellings in its service area which have no more than 2% inches of ceiling insulation and could meet the Consumers Power is responsible for managing the design and cost-effective standard set up by the MPSC for interest-free construction of the faclity, for obtaining necessary govern-mental permits for construction, and for arranging project loans.

financing. Wolverine E'ectric will have responsibility for oper-ating and maintaining he completed facility, obtaining sup-plies of wood for fue, and esta' lishing an environmental o

monitoring program for wood harvesting.

(Top) CP Co. customers are Eugene Tolbert's business.

The Mi higan Natural Resources Commission has ap-He supervises the handling of customer records.

proved a timber harvest agreement allowing the purchase of Eugene is a shareholder as well.

wood from state lands for a major portion of the plant's fuel requirements. A project manager has been appointed by Gene Yehlof Energy Management Services shows CP Co. to supervise the undertaking and an architect-engi-Marilyn and Eugene Wanger, CP Co. customer /

neer will be selected early in 1980. The cost of the project is shareholders, the experimental windmill generating currently estimated at $56 million.

project in East Lansing, Michigan.

If the necessary govemmental approvals and permits are granted in a timely manner, plant construction could begin by mid-1982 with commercial operatior, by late 1984.

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THROUGH ESOP AND ON THEIR OWN-EMPLOYEES OWN SHARES OF CONSUMERS POWER COMPANY 3

Stock Ownership Gives Employees a Stake in Management Changes Reflect increased Company's Financial Success Emphasis on Safety and Efficiency The Consumers Power Company Employee Stock Ownership Since the Three Mile Island accident, the nuclear industry as f Plan (ESOP), which covers almost all employees of Con-a whole has acted to toughen standards by creating an Insti-sumers Power and three of its subsidiaries-Michigan Gas tute of Nuclear Power Operations to upgrade the training and Storage Company, Northem Michigan Exploration Company.

performance of nuclear reactor operators and a Nuclear and Plateau Resources Limited-was established to give em-Safety Analysis Center to investigate ways to improve plant ployees the benefit of certain provisions of the Tax Reduction safety. At Consumers Power Company, programs e.re being Act of 1975. Under existing laws, companies may receive an instituted to assure the maintenance of a higher level of safety investment tax credit against their federal income tax for a consciousness.

part of their investment in new plants or equipment. The 1975 in connection with increased management empnasis on act provides an additional 1 percent credit for those compa-safety and efficiency and with preparations for adding Camp-nies that contribute an amount equal to the additional tax bell unit 3 and Midland units 1 and 2 to the Company's sys-credit to an employee stock ownership plan.

tem, Russell 8. DeWitt was elected vice president for Nuclear Although most employees are shareholders through the Operations, Charles R. Bilby, formerly vice president for Pro-Company's Employee Stock Ownership Plan, nearly 85 per-duction and Transmission, was made vice presidant for Fossil cent of those employees who qualify also own stock through Operations, and Gordon L Heins was elected vice president enrollment in the Employees' Savings Plan, and some have for System Operations.

chosen to purchase shares on their own as well. Since they As additional safety concerns and increased environmental are familiar with the Company and its operations, many em-requirements add to the intricacies of electric system opera-ployees feel that stock ownership is a good investment in tions, a new operating structure-designed to meet these their own and the Company's future. It seems to increase the changing conditions-has become necessary. Under a re-feeling of involvement with the Company's goals and the real-alignment of responsibilities in the energy supply area, each ization that individual effort on the job is important. As one of the Company's major generating complexes is now headed employee shareholder put it, "Since I own part of this Com-by a general manager who reports to an officer of the pany, I'm going to keep an eye on what goes on around here."

Company.

Company Requests Hearing on NRC Action at Pelisades (Top leff) Jim Hausbeck, lead lineman in Saginaw, sports in January 1980, the Nuclear Regulatory Commission (NRC) a regulation hard hat with the Company symbol. Jim is a notified Consumers Power that a public hearing will be held shareholder through the Employee Stock Ownership Plan.

later in the year on the $450,000 in civil penalties assessed against the Company for an alleged safety violation at the (Top right)"See what you get? Jim Hagadorn and Sandy Palisades plant. The Company requested the hearing, in Deckerof the PersonnelDepartmentin Jackson, Michigan accordance with NRC regulations, after the commission re-look over a booklet describing the Company's Employee jected the Company's formal protest against the civil penalties Stock Ownership Plan.

in December.

(Lower left) Customer represenfaffve Linda Bohnsack was The NRC imposed the penalties after the Company discov-ered and reported that two containment isolation valves were born with a smile in her voice. As an employee and a found open during an inspection performed after the Pali-shareholder of the Company, Linda is adept at answering sades plant was shut down for scheduled refueling and main-the questions of customers who call with problems.

tenance in September 1979. License requirements stipulate that the valves must be closed while the plant is in operation.

(lower tight) Charles Ramsey of Bulldings and Machine Repair keeps an eye on Company equipment-and on his Consumers Power has requested the public hearing in investment as a shareholderin the Corr'pany.

order to explain fully its contentions that the agency's actions in this matter are both excessive and unreasonable. While it has not been proven that the valves were open during the operation of the plant, the Company has determined-through

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valve incident have been adopted before the plant may re-after they have automatically closed. The changes are part of sume commercial operation. While this requirement is not an overall program evaluating older operating reactors in expected to delay the plant's retum to service, the additional the U.S. with regard to current government licensing require-testing (also required by the NRC) of installed anchor bolts, ments. The Big Rock Point plant began commercial operation which hold down numerous safety-related pipes throughout in 1962.

the plant, may prevent Palisades from coming back on line until this spring.

Miss Dig's At it Again in December 1979 when the program was expanded into the Company Reviews Waste-Handling Procedures upper peninsula, Michigan became the first state to have a After being cited by the Department of Transportation (DOT) statewide safety program aimed at avoiding damage to both for improperly packaging and labeling low-level radioactive overhead electric lines and underground cable and pipeline waste materials shipped from the Palisades plant to Beatty, systems. Known as "Miss Dig" to utility people nnd contrac-Nevada in June and July 1979, the Company has reviewed tors, the communication system was developet to protect a'l procedures associated with radioactive waste disposition, builders and individuals from contact with utility lines, cables, made all necessary corrections, and set up a new trainin9 and pipes when they are digging or working near those facili-course for employees who handle radioactive waste.

ties. Initiated by Consumers Power in 1970, the program now The DOT could have imposed a civil penalty of up to includes other utilities throughout the siate. Miss Dig urges

$40,000 for the alleged violations but, in view of the Com-all who will listen to call "her" 48 hours5.555556e-4 days <br />0.0133 hours <br />7.936508e-5 weeks <br />1.8264e-5 months <br /> before beginning a pany's past history and the nature of the violations, the DOT project near utility lines so that utility representatives can assessed a penalty, which the Company paid, of $8,000.

come to the site and advise on the location of electric or gas lines as well as on safe procedures for completing the work planned.

Elg Rock Re,> aired; New Equipment Installed The program's success-it has been credited with reduc-Repairs required to correct a cracked weld attaching a control ing damage to underground lines by some 50 percent-rod drive mechanism to the reactor vessel of the Big Rock spurred the extension of Miss Dig to overhead electric facili-Point nuclear plant extended the plant's scheduled return to ties in mid-1977.

service from an outage for refueling and maintenance from Miss Dig has a 30-member call-center staff which gets April to November of 1979. Start-up testing begun in April almost 300,000 calls a year and sends out 1.5 million utility was halted when employees noticed that about two quarts of line marking requests to 317 participating utilities and public water had seeped from the bottom of the reactor. (All of the agencies.

water, which contained low-level radioactivity, evaporated within the containment vessel and at no time did it constitute a safety hazard to employees or to the public.) The leak was MEPCC Marks 10th Anniversary repaired and the plant returned to service in early November.

The facility was shut down again-for about two weeks-at The Michigan Electric Power Coordination Center (MEPCC) the end of Decernber while work required by the Nuclear near Ann Arbor completed its first decade of operations in Regulatory Commission as a result of lessons learned at August of 1979. The facility serves as the nerve center for the Three Mile Island was completed. Indicators were installed interconnected Consumers Power and Detroit Edison electric to show whether relief valves are open or closed, and elec.

systems. These, in turn, are interconnected with utilities in trical modifications were made to insure that positive opera.

Ohio, Indiana, and Canada for economic operations, as well tor action is required to reopen containment isolation valves as for mutual assistance in emergencies. Through computer monitoring MEPCC provides for the use of the least expen-sive, reliable sources of power that are available at any given time. The center's computers analyze the relative costs of buying power for Michigan from out-of-state utilities and gen-erating it with available units and if, for example, it is cheaper to buy power from Canada than to generate it from plants (Top) Scheduled and emergency maintenance work at M performed by CP Co. linemen Carl Burk and Rich MEPCC s s affed and operated jointly by Consumers Power Neuwirth, shareholders through ESOP, keeps the power and Detroit Edison. Records maintained at the center indicate flowing to the Company s 7.3 milhon electric customers.

ts operation saved the two companies' customers $70 million

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Helicopter pilot Carl Boylan andlineman Arthur McManus since the facility began operation.

consult a map before taking off to check the Company's transmission lines from the air. Both are shareholders.

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'9'o N O'." C ' v tio pato m the dnnma of 75 wem.anivan 1 ou un n 30 wens loc stod in the U S for a succem r ae + 40 perr or' Exp', radon exponditures for the NOMECO Contributes to Company's Earnings in i the funds ta cover them were year tota le 1 $~',100 000 mrces er Northern Mirma r ! iptoraten Co pan, ;NOMECOL

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Power's operations and prospects.

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CONSUMERS POWER COMPANY Statement of inconw YEAR ENDED DFCEMBER 31 1979 1978 Thousands of Dollars OPERATING SEVENUE (Notes 1 and 6):

Electric

$1,129,N5

$1,057,240 Gas 870,298 806,479 Steam.

3,513 3,202, Total operating revenue.

$2,003,374

$1.866.921 OPERATING EXPENSES AND TAXES:

Operation-Fuel consumed in eletric generation.

$ 385,944

$ 371,444 Purchased and interchange power 159,944 151,249 Cost cf gas sold (Note 1).

502,315 533,779 Other 268,808 238.892 Total operation expenses.

$1,407,000

$1,295,364 l

Maintenance (Note 12) 114,575 101,446 Depreciation and amortization (Note 12).

113,302 106,688 General taxes.

83,437 80,503 income taxes (Note 8).

23,740 52,747 Total operating expenses and taxes.

$1,742,063

$1.636.7< 3 1

NET OPERATING INCOME:

Electric

$ 200,851

$ 163,627 Gas.

60,331 66,419 Steam.

129 127 l

Total net operating income

. $ 261,311

$ 230.173 l

OTHER INCOME:

........ $ 08,188

$ 43,710 Allowance for other funds used during construction (Note 1) 9,098 10,887 income of subsidiaries (Note 1)

Gain on reacquisition of long-term debt.

2,817 2,558 6.698 15.443 Other, net Total other income.

5 84,581

$ 72,598 l

l INTEREST CHARGES:

$ 176,858

$ 149,525 Interest on long-tenu aebt.

Other 14,555 1,701 l

Allowance for borrowed funds used during construction (Note 1).

(49,308)

(33,586)

Net interest charges

$ 142,105

$ 117,640

$ 203,787

$ 185,131 Net income.

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i DIVIDENDS ON PREFERRED AND PREFERENCE STOCK.

48,419 44,881 Net income after dividends on preferred and preference stock.

$ 155,368

$ 140.250 AVERAGE NUMBER OF COMMON SHARES OUTSTAf. DING,

48,003,214 43,743,081

$3.24

$3.21 EARNINGS PER COMMON SHARE.

The accompanying notes ars an integral part of thh statement.

24

CONSUMERS POWER COMPANY Statement of Source of Funds YEAR ENDED DECEMBER 31 for Gross Property Additions igyg 1978 Thousaris of Dollars FUNDS GENERATED Net income

$ 203,787

$ 185,131 FROM OPERATIONS: Principal noncash items-Depreciaten and amortization Per Statement of Income.

113,302 106,688 Charged to c2er accounts.

3,054 4,248 Deferred inecae taxes, net.

19,437 18,386 Investment tax credit, not.

(5,805) 46,238 Allowance for funds used during construction.

(115,478)

(77,2%)

Undistributed earnings of subsidiaries.

79 (7,471)

$ 218,378

$ 275,924 Less-Dividends on preferred and preference stock.

41.,.e19 44,881 109,898 95,050 Dividends on common stock.

Retirement of preferred stock and long-term debt.

18,198 23,140

$ 42,063

.TTIU53 FUNDS 06TAINED issuance of common stock.

$ 94,830

$106,031 FROM NEW lssuance of preference stock 58,000 48,000 50,000 FINANCING:

Issuance of preferred stock.

Sale of first mortgage bonds 138,500 100,000 337 7,825 Not proceeds from installment sales contracts.

o 100,000 increase.in bank term loan......

Increase (decrease)in other long term debt.

187 (110) 289,139_

increase in notes payable due within one year.

$ 588,993

$ '21,746 OTHER S0dRCES Changes in net current assets and liabilities, (USES)0F FUNDS:

excluding obligations expected to be refinanced -

Temporary cash investments.

$ 154,180

$ (14,436)

Accounts receivable.

Q3,100)

(38,444)

Accrued revenues.

(19,580)

(9,949)

Gas in underground storage.

(41,020) 20,674 Ger.erating plant fuel stock.

(13,005)

(6,420; l

Accounts payable.

44,574 25,216 10,195 (7,424) l Accrued taxes.

18,817 2,054 Deferred income taxes (37,554) 21,263 Other, net.

$ 85,447

$ (7,466) i Property sold under leaseback arrangements (Note 5).

18,985 66,323 Other, net.

(4,W7)

(5,695)

$ 97,435

$ 53,162 Total funds from above sources.

$ 708,491

$ 587,761 Allowance for funds used during construction.

115,478 77,2 %

GROSS PROPERTY ADDITIONS.

$ 823,987

$ 665,057 GROSS PROPERTY ADDITIONS BY REPORTABl.E SEGMENTS:

Electric.

$ 750,552

$ 617,125 Gas..

87,083 44,558 Other 5,752 3,374

$ 823,987

$ 665,057 1

The 97 n'.4 notes are an integral part of this statement.

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CONSUMERS POWER COMPANY a

o DECEM80t 31

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1979 1978 Assets Thousands of Dollars UTILITY PtANT Plant in service and held for future use-(AT ORIGINAL Electric.

32,717,517

$2,582,077 1,132,802 1,073,199 COST)

Gas.

other 55,1se 53,483

$3,905,488

$3,708,759 Lass provision for accumulated depreciation.

1,177,030 1,051,773

$2,728,450

$2,656,986 Construction work in progress (Notes 2 and 3) 1.942,330 1,329,392

$4,870,780

$3,986.378 INVESTMENTS: Wholly 4wned subsidiaries (Note 1)-

$ 08,218 5 60,895 Marthern Michigan Exploration Company.

Plateau Resources Limited.

38,424 30.058 R5chigan Gas Storage Company 20,280 22,048 Other, at cost or less, net 4,757 4.425 5 129,879

$ 117,426

$ 20,672

$ 20,452 CURRENT Cash ASSETSc Temporary cash investments, at cost, which approx'unates narket....

154,160 Accounts receivable,less reserves of $2,670,000 in 1979 and 62,602,000 in 1978.

186,181 163.021 Accrued revenues (Note 1)....

128,194 108,634 Gas in underground storage, at average cost 163,159 122.139 81,388 68,381 Generating plant fuel stock, at average cost.......

Materials and supplies, at average cost 72,380 68,244 97,175 83,528 Prepayments and other.

$ 749,147 5 788.559

$ 29,481

$ 43,148 DEFERRED DEBITS..

$5.579,087

$4.935,511 Stockholders' investment and Liabilities CAPITAll2AT10N: (See Statement of Capitalization)

Common stockholders' equity

$1,441,268

$1,314,111 28,924 35,698 Redeemable preference stock.

140,000 140,000 Nonredeemable preference stock 138,355 92,755 Redeemable preferred stock..

334,779 334,779 Nonredeemable preferred stock.......

inng-term debt 2,033.651 2.002.278 l

$4,138,975

$3,919,621 i

CURRENT Current obligations expected to be refinanced -

l LIABILITIES:

Noto payable due within one year (Note 3).

$ 289,139 F'wst Mortgage Bonds,9h% Series due 1980 75,000 5,400 Note payable to subsidiary (Note 3) l

$ 369,539 31,475 17,799 l

Current maturities and sinking fund on long-term debt (Note 4).

196,901 158.1;'J Accounts payable.

21,417 15.556 t

l Accounts payable to subsidiaries

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Accrued taxes (Note 8)...

92,914 82,719 Deferred income taxes (Note 8) 99,966 89.149 Accrued interest.

57,040 43,301 43,201 95.567 Other

$ 912,453

$ 502,279

$ 330.303

$ 314.363 DEFERRED Deferred income taxes (Note 8).

l CREDITS AND Investment tax credit (Note 8).

163,089 168,791 36.267 30.457 RESERVES: Other

$ 529,659 3 513,611 l

Construction commitments and contingent liabilities (Notes 3 and 9) l

$5,579,087

$4.935,511 l

26 The accompanying notes are an integral part of this statement.

CONSUMERS POWER COMPANY DECEMBER 31 Statement of Capitalization (Note 4) 1970 1978 1970 1978 Shares Outstanding Thousandsof Dollars COMMON STOCKHOLDERS' EQUITY:

52,456,515 47,176,203 $ 524,555 $ 471,762 Common stock, $10 par value, authorized 60,000,000 shares.

516,572 467,607 Cuitalin excess of par value 440,000 394,338 Retained earnings 19,069 19,596 Les capitalstock expense.

$1,401,200 $1,314,111 Total common stockholders' equity.

PREFERENCE STOCK-Cumulative, $1 par value, authorized 15,000,000 shares:

Redeemable-S 6.00 Convertible, $50 stated value, conversion price $12.50.

21,096 104,484 $

1,055 $

5,224 5.50 Convertible, $50 stated value, conversion price $15.50.

107,300 249,470 0,000 12,474 10,000 18,009 10,000 18,000 85.00 Nonconvertible, $1,000 stated value.

$ 20,024 $ 35,698 Total redeemable preference stock.

Nonredeemable-

. 2,000,000 2,000,000 $ 5(,000 $ 50,000

$2.43 Nonconvertible, $25 staRd vafue 2,000,000 2,000 000 50,000 50,000 2.23 Nonconvertible, $25 stated value...

1,600,000 1,600,000 40,000 40,000 2.50 Nonconvertible, $25 stated value

$ 140,000 $ 140,000 Total nonredeemable preference stock.............

PREFERRED STOCK-Cumulative, $100 par value, authorized 7,500.000 shares:

Redeemable-103,550 107,550 $ 10,355 $ 10,755

$4.52 320,000 320,000 32,000 32,000 9.25 500,000 500,000 50,000 50,000 9.00 190,000 10,000 9.70 360,000 36,000 8.625

$ 130,355 $ 92,755 Total redeemable preferred stock.

Nonredeemable-547,700 547,788 5 54,779 $ 54,779

$4.50 100,000 100,000 10,000 10,000 4.16 700,000 700,000 70,000 70,000 7.45 700,000 700,000 70,000 70,000 7.72..

750,000 750,000 75,000 75,000 7.76

~

550,000 550,000 55,000 55,000 7.68

$ 334,779 $ r,34,779 Total nonredeemable preferred stock.

LONG-TERM DEBT:

First mortgage bonds, secured by a mortgage and tien on substantially all property-

$ 75,50 $ 75,000 9%%, Series due 1980 30,479 38,654 3%%, Series due 1981.

50,00C 50,000 11%%, Series due 1982.

21,t42 21,707 3%, Series due 1984.....

140,050 158,588 3%%4%%, Series ciue 1986-1991.

57,000 60,000 11%%, Series due 1994....

512,00C 519,155 5%%9%%, Series d'.:e 1996 2000.

30,500 10%%, Series due 1999.

75,000 75,000 11%%, Series due 2000.......................

095,000 695 000 7%%nd, Series due 20012008.

100,000 10%%, Series due 2009.

Total first mortgage bonds.............

$1,012,560 $1,693,104 Installment sales contracts, average interest rate 6.5% (net of $1,309,000 in 1979 and 124,141

?25,354

$1,646,000 in 1978 held in trust pend:ng certification of construction expend +turas).

34,000 34,600 4%% Sinking Fund Debentures due 1994....

75,000 75,000 Bank term loan, at 109% of bank's prime rate due 1900 through 1985.

100,000 100,000 Bank term loan, at 106% of bank's prime rate due 1985.

207 00 Other

$2,145,960 $2,028,138 Deduct-75,000 9%% First Mortgage Bonds Series due 1900.

2,550 1,550 Current maturities of instahment sales contracts.

7,5M Current maturit/ of bank term loan.

20,025 19,045 First mortgage bonds reacquired for sinking fund.

800 600 Sinking fund for debentures.

5,042 4.665 Unamortized net debt discount,

$2,033,051 $2,002,278 Totallongterm debt.

$4,138,975 "919,621 Total capitalization N

The accompanying notes are an integral part of this statement.

CONSUMERS POWER COMPANY Statement of Capital in Excess of Par Value of Common Stock YEAR ENDED DECEM8ER 31

'j 1979 1978 1W9 1978 d.

s.

Number of Shares Thousandsof Dollars

}a Balance at January 1.

47,178,283 42,199,870

$487,8B7

$NMi,502 fl issuance of commen stock through:

S 4,000,000 4,000,000 38,440 52,780 h

Sales through underwriters..........

Dividend Reinvestment and Common Stock Purchase Plan.

828,900 415,957 4,900 5,265 3

j; Employee Stock Ownership Plan.

103,225 161,085 1,215 2,216 Employees' Savings Plan.

48,0N 444 Conversions of $6.00 Preference Stock.

333,252 173,040 833 433 j

Conversions of $5.50 Ptsference Stock.

187,848 226,251 SIS 1,244 i

Net gain on reacquisition of preferred stock.

III 167 Balance at Decembei 31.

52,455,515 47.176,203

$518,572

$467,607

.a Statement of Retained Earnings 3

YEAR ENDED DECalBER 31 l

1979 1978 j

Thousands of Dollars Balance at January 1.

$394,338

$349,138 Net income.

203,787 185.131

$6

$534,269 i.ess cash dividends:

Preferred stock.

32,000 31,007 Preference stock 18,410 13,874 Common stock (Note 4).

100,000 95,050 Balance at December 31.

$440,W8

$394,338 The accompanying notes are an integral part of these statements.

E h

Notes to the Financial Statements I siaticAur AccouvriNs PouciEs The Company follows the equity method of accounting for the investment in its whollyewned subsidiaries. Under this method the Company's interest in the subsidiaries' earnings is reflect.d ctrTently in earnings and in the carrying value of the investments. At December 31,1979, undistributed su isidiary earnings were $48,!17,000. The Company receives a portion of its gas supply from two subsidiaries. Opv7 tion expense includes approximately $162,63d,000 in 1979, and $124,263,000 in 1978 relating to gas purchased from these subsidia6r Transactions with subsidiaries have no significant effect on the Company's finr.cial position or results cf operations and are not in,r nated.

The Compan) accrues revenues for service rendered to customers but not billed at month's end.

3e ':ompany capitalizes as a component of utility plant cost, and includes in other income and deducts from interest charges, an allowanee for funds used during construction (AFUDC), a noncash item. AFUDC is the cost of funds applicable to utility plant in process of crenstruction. During 1979 and 1978, the Company capitalized AFUDC at a rate of 8.5%. Substantially all AFUDC was related to electric plant construction. Under established regulatory practices, the Company is permitted to earn a rett,rn on the capitalized cost of :Jch funds and to recover the same in the rates charged for utility services.

Reference is made to Notes 7,8 and 12 for information regarding the pendn fan, income taxes aad depreciation, respectively.

28 1, h [ h:~:$:MjOQi4f '" < jd ~ ' - e M( } '

f Q $;i [Y'

'..? i 'N

y CONSUMERS POWER COMPANY Notes (continued) n 2 NUCLEAR GENERATING PLANTS j

Investment in the Midland Nuclear Plant, a twin-unit facility designed to generate 1,357 megawatts for the Company's electric system and to furnish process steam service to The Dow Chemical Company (Dow), was $1.26 billion at December 31,1979. Because H

~

of the Three Mile Island (TMI) accident, the Nuclear Regulatory Commission (NRC) is directing its resources towards handling TMI issues; therefore, consideration of construction permits and operating licenses, including the Company's application for Midland Plant operating licenses, has been delayed. Additionally, not all NRC requirements resulting from reviews of the TMI accident have been defined. Based on estimates of the effects of licensing delays and expected design revisions as a result of licensing require-ments, many of which resulted from the TMI accident, Bechtel Power Corporation (Bechtel), prime contractor for the Midland Plant, reported a revised estimate of costs and schedulesin January 1980. A preliminary review of the Bechtel report indicates that the plant

[

could cost approximately $3.1 billion and be in commercial operstion in 19841985. (See Note 3.)The Company had previously estimated L

the cost to be $1.67 billion and commercial operation in 19611982. There can be no assurance that further delays and further ccst increases will not occur.The Company has undertaken a detailed study of the revised costs and schedules in order to examine alternatives, prepare a definitive project plan, and determine the resulting schedule and cost forecast. Design and construction of the plant is con-tinuing. If commencement of commercial operation of the plant for process steam service to Dow were delayed beyond December 31, 1984, Dow would have the right to terminate its agreement with the Company for such service; however, Dow would be obligated to pay an amount estimated to range from $175 million at present to $430 million if the plant were completed at a cost of $3.1 billion. In the event Dow were to terminate the agreement for such cause, the remaining portion of the investment in equipment allocable to the process steam service, estimated to range from $130 million at present to $300 millioc if the plant were completed at a cost of $3.1 billion, may not be sa!vageable.

In August 1978, the Company discovered and reported to the NRC certain foundation soil problems at the Midland Plant. in December 1979, the NRC issued an order which,if made effective, would modify the Company's construction permits relating to the plant to prohibit remedial construction work undertaken to correct the problems, pending NRC approval.The matteris pending.The Company is p'esently unable to determine whether this matter will result in further delay in initial operation of the plant or further increases m plant costs.

Other pending issues relating to the Midland Plant construction permits which could influence the cost and schedule relate to an antitrust proceeding in which the parties involved have reached a settlement, subject to NRC approval, and to nuclear fuel cycle rules.

However, the Company does not expect that further review of these issues will mvalidate the plant construction permits.

In November 1979, the NRC cited the Company for license violations for allegeoly operating the Palisades Nuclear Plant with two con-tainment isolation VMves open and related matters.The Company discovered the open valves in September 1979 during testing at the plant during the current refueling and maintenance outage. The Company filed a response to the November notice which denied the alleged violations in part and sought remission or mitigation of proposed civil penalties. In December 1979, after consideration of the Company's response, the NRC issued an order which required the Company to pay the proposed civil penalties. The Company has requested a hearing with respect to the December order, thereby delaying its effectiveness. Concurrently with the November notice, the NRC issued an immediately effective order which requires monthly inspections and, before the plant may be returned to service, a review of checklists and procedures and a demonstration by the Company that appropriate controls have been adopted to prevent recurrence of the alleged violations. The Company is unable to predict whether the current outage will be extended on account of these requirements. The date when the plant will retum to service from this outage is uncertain due to maintenance work necessary to meet seismic requirements. An extension of the outage would increase the Company's cost of replacement power in an amount which cannot presently be determined, and the recoverability of the incremental portion of such costs is not assured.

The Company filed suit in a U.S. District Court seeking damages, together with equitable relief, from five suppliers of components l

and design work for the Palisades Plant. The Company has reached settlements with the five suppliers totaling approximately $68 l

million in cash and future services, the majority of which has been or will be used to reduce the investment in the plant. The value to the Company of the settlement could reach $88 million depending on the future value of certain uranium fuel assemblies.

The Company's applications for full term,40 year operating licenses for the Palisades and Midland Plants are pending before the NRC.

3 CONSTRUCTION PROGRAM ANO SNORTTERM SORROWING ARRANGEMENTS After giving effect to the preliminary estimate of the Midland Nuclear Plant's cost increases and schedule delays (see Note 2), con-struction expenditures are currently estimated to total approximately $650 million in 1980 and $3.4 billion through 1984.These amounts are net of anticipated participation by other parties in the Campbell unit 3 coal-fired plant, estimated at $46 million in 1980, and not of leased nuclear fuel. The amounts and timing of similar participation in the Midland Plant are presently uncertain, and are not consid-ered in the preceding construction expenditures estimates. While substantial commitments have been made with respect to the con-struction program in future years, the Company is unable to determine at this time how it will finance its construction program beyond 1980. No determination has been made regarding the amounts, timing and nature of the securities to be issued.

The Company will need significant and timely rate increases if revenues and income are to reach and be maintained at levels which will result in sufficient internally generated funds to meet its operational requirements and permit extemal financing of its constru-tion program at reasonable cost. If adequate funds cannot be obtained from outside financmg and internal sources, the Company will, as it has in the past, curtail its construction program to the extent feasible, although this may affect adversely the reliability

(

of service for future customer requirements. Deferrals of planned construction may result in near term expenditure reductions, but cost escalations and general inflationary price trends would, in the Company's judgment, cause the long term effect of such deferrals to be an overall increase in the Company's required investment.

The Company has arrangements with banks for short term borrowings of up to $291 million and for acceptance draft commitments 29

M

m

g yu.

.J; na Notes (continued)

W{

g met W

up to $145 million which are subject to eriodic review. In connection with the short term borrowings, to Campany is generally j

s required to maintain average compensating balances with the banks, over an unspecified period of time, aquel to 10% of the totalline 1

of credit plus 10% of the average borrowings outstanding as determined from the banks' records after adjustment for uncollected T

funds. There are no legal restrictions on the withdrawal of the compensating balances. When issued, the acceptance drafts are secured d

by a lien on certain of the Company's fuel inventories.

d During 1979, the Company incurred short term borrowings to a maximum amount of $332,773,000, which were the first such trans-9 actions since 1976. The average daily arno;nt outstanding was $80,671,000, and the weighted average interest rate (calculeted dailyk

?

excluding the effect of compensating balanns, was 13.8% per annum.

j 1

4 CAPITALIZAT10ll s

.g Common Stock At December 31,1979, retained earnings in !be amount of $48,371,000, out of total retained earnings of $440,008,000, cannot be distributed as cash dividends on common stock under provisions of the Company's Articles of incorporation. There are also other restrictions as to payment of dividends on common stock which are presently less restrictive. At December 31,1979, common stock is j

reserved as follows: 505,331 shares for the Employee Stock Ownership Plan,354,000 shares for the Employees' Savings Plan,l'2,032 7.

shares for the Dividend Reinvestment and Common Stock Purchase Plan, and 84,384 and 636,710 shares for conversions of $6.00 and 1

of $5.50 Preference Stock, respectively. The Company's quarterly dividend on common stock was increased from 5.53 to $.56 per share j

in July 1978 and to $.59 per share in July 1979.

Preference and Preferred Stock All preference and preferred issues may be repurchased as a whole or in part at the Company's option, either at a fixed price or at progressively decreasing prices. Certain issues are subject to restrichons which prohibit repurchase with funds raised from the issuance of securities which would rank prior to or on parity with the repurchased stock and have a lower interest or dividend cost. The Company's $6.00, $5.50 and $85.00 Preference Stock and $4.52, $9.25, $9.00, $9.70 and $8.625 Preferred Stock are redeemable at mandatory dates and prices.

f The following table summarizes the repurchase and redemption features for stock outstanding at December 31,1979.

j Repurchases at Company's Option Mandatory Redemptions Price Price (Excluding Restrictions Annual (Excluding Accrued Effective in Effect Number Accrued First Dividends)

Through Through of Shares

- Dividends)

Redemption Redeemable preference:

$ 6.00

$ 52.50 July 1984 None

?7 500W

$ 50.00 Aug.1979 5.50 52.50N June 19851)

None 50,000(c) 50.00 July 1980 85.00fd) 1,085.00 Sept.1983 Sept.1983 3,600 1,000.00 Oct.1984 j

Redeemable preferred:

I

$ 4.52

$ 104.725 None None 4,000

$ 102.725 April 1952 j

9.25 110.00 March 1982 March 1987 16,000 100.00 April 1982 9.00 110.00 March 1983 March 1988 25.000 100.00 April 1983 j

9.70fe) 110.00 Dec.1984 Dec.1989 5,000 100.00 Jan.1986 8.625(e) 109.00 Dec.1984 Dec.1984 72,000 130.00 Jan.1986 Nonredeemable preference:

$ 2.43

$ 27.43 Aug.1981 Aug.1981 2.23 27.25 Oct.1982 Oct.1982 2.50(0 27.50 July 1983 July 1983 Nonredeemable preferred:

$ 4.50

$ 110.00 None None 4.16 103.25 None None 7.45 106.00 March 1981 None 7.72 106.00 June 1982 None 7.76 107.25 May 1983 None 7.68 106.00 Oct.1983 None W Mandatory redemption in 1980 will be limited to the number of shares outstanding (21,096 at December 31,1979). This limit is reflected in the mandatory redemption amounts.

M Tha Company's repurchase option begins in July 1980.

(c) The Company has the option to receive credit for any shares converted.

(d)lssued in October 1978.

i 1

(e) Issued in November 1979.

l (0 issued in July 1978.

30

M II II m

CONSUMERS POWER COMPANY Five-year aggregate amount of mandatory redemption requirements of redeemable preference and preferred stock:

Preference Preferred Thousands of Do!!ars

$3,555

$ 411 1980.

2,500 411 1931.

1982.

2,500 2,011 2.369 4,511 1983.

3,600 4,511 1984.

Should the Company default in the performance of its obligations under the sinking fund provisions, no cash dividends or distribution i

of assets may be made on common stock or, for preferred stockholders, on preference stock, over whidt the preferred and preference stock have preference as to the payment of dividends.

First Mortgage Bonds The Company has executed $31,000,000 principal amount of installment sales contracts, for which the Company has pledged a like amount of first mortgage bonds as security for its obligations under such contracts.

Under the terms of the Indenture securing the first mortgage bonds, the Company is required, on or before October 1 of each year, to deposit with the trustee, cash and/or bonds in an amount equal to 1% of the aggregate principal amount of bonds of all series, other thm refunding series, authenticated prior to January 1 of the year of deposit. In addition, a $600,000 sinking fund deposit is due on the 4%% Sinking Fured Debentures on or before September 1 of each year.

Fiveyear maturities md annual sinking fund requirements of long term debt, including mandatory redemption features on certain issues:

Annual Debt SMking Fund Maturities Requirements

~

Thousands of Dollars

$85,050

$21,425 1980.

56.029 23,125 1981 1982.

67,950 23,125 17,950 23,125 1983.

39,592 23,125 1984.

The Company sold $100,000,GD0 of m.% Series First Mortgage Bonds due 2010, and $70,000,000 of 12.10% Series First Mortgage Bonds due 1987, in January 1980; and has contracted to sell $39,500,000 of 10%% Series First Mortgage Bonds due 1999 in February 1980.

5 MASE OBUGAD0NS AND ISITALS The Company has two leasing arrangements for its nuclear fuel. The lessors' investment in the fuel at December 31,1979 was $110 million. The current term of one lease runs to November 1983, with provision for one-year extensions from time to time to November 2029, sub.ect to earlier termination in certain events. The initial term of a second leasing agreement expires in August 1983, with provision or one-year extensions from time to time to August 2013, subject to earlier termination in certain events.

The quarterly lease charges for both leases consist of a fuel factor computed on the basis of heat production plus interest costs and administrative fees and expenses incurred by the lessors. In the event of termination of either lease, the lessor would be entitled to an amount equal to the lessor's remaining investment.The Company is also responsible for payment cf taxes, maintenance, operating costs, risks ofloss andinsurance.

In 1975, two of the Company's general office buildings were sold for $26 million and leased back. The initial term of the leases empires in 2003, with two five-year renewal options subject to escalation clauses and a third five-year renewal option at the then Is;r market rental value with the option to purchase at the expiration of the basic term or any renewal term at the then fair market asles value. Annual rentals under the losses are subject to quadrennial escalation and currently approximate $2.9 million. Taxes, lasurance and other operstmg costs relating to the buildings are required to be paid by the Company.

Rentais, including amounts charged to clearing and other accounts, amounted to $42,204,000 in 1979 and $27,738,000 in 1978.

Of these amounts $11,700,000 in 1979 and $8,014,000 in 1978 were contingent upon usage.

The minimum rental commitments for leases presently in effect will approximate $28,800,000 in 1980, $24,878,000 in 1981,

$24,709,000 in 1982, $21,967,000 in 1983, $13,38b,000 in 1984, $25,200,000 for the period 1985-1989, $16,209,000 for the period 19901994, $14,599,000 for the period 19951999 and $10,219,000 for remaining years.

The Company's lease obligations are accounted for as operating leases in the rateinaking process. Accordingly, obligations related to financing leases have been charged to expense as incurred. Had these leases been capitalized the aggregate amounts of asse and liabih'tles that would have been recorded at December 31,1979 are $171,635,000 related to utility plant, net of accamulated depreciaban and amertizabon, and $173,041,000 related to obligations under capital leases. If all f' ancing leases were capitalized, m

Sie effect on espouse would not be material.

I 31

Notes (continued) 6 RATE MAMS In September 1979 the Company announced plans to " mothball" the Marysville Gas Reforming Plant until such p>

projected to be the m,id.1980s, as its output is again needed to meet the requirements of the Company's custo announcement the Michigan Public Service Commission (MPSC) reopened hearings in the Company's most recent gas rate which a final order for an annual amount of $29.2 million had been issued in June 1979) and in OctobJ established in June be reduced $23.9 million annually to reflect the reduced plant operstlag costs, including depreciation. In i

1979, the Michigan Attorney General petitioned the MPSC for rehearing of tne October order. The petition seeks retroac 1

June 1979 of the reduction ordcod in October 1979, a refund of the revenue collected under an interim order in the proceed l

iq a refund of the 1978 and 197s purchased gas adjustment clause revenue attributable to Marysville Plant feedstock costs.

i Appeals and motions for rehearing are pendmg with respect to several electric and other gas rate orders, including liti c

involving alleged over collections under the fuel cost adjustment clause, and alleged illegality of the purchased and interchange po q

l adjustment clause (PPAC) applicable to the Company's electric rates, the December 1977 PPAC revenue collected und) court order, revenues collected in 1979 and 1980 under an indexing system whereby the recovery in rates of other operation an tenance expense is annually adjusted for changes in the Consumer Price Index and a courterdered electric rate mcrease collected from October 1%9 to April 1970.The Company is vigorously pursuing these matters before reguletory bodies and the courts and, in the opinion of management, their ultimate resolution should not materially affect the financial position of the Company or the results

}

of operations for the periods involved.

b l

i 7 PENSION PLAN C

The Company has a trusteed noncontributory penslor

.a under which employees within specified age limits and periods of service are qualified to participate.

The Company makes annual contributions to the pension plan sufficient to cover current service costs, interest on unfunded prior 2

service costs, and amortization of prior service costs. Contributions to the plan were $24,785,000 in 1979 and $22,489,000 in 1978.

Of these amounts, $19,357,000 in 1979 and $18,466,000 in 1978 were charged to expense accounts and the remainder charged to construction, clearing and other accounts.

As of the most recent actuary's report dated January 1,1979, the actuarially computed value of vested benefits was $207,234,000.

The market value of the assets of the plan was $240,464,000 at January 1,1979, and $284,077,000 at December 31,1979. Should the market value of the assets of the plan fall below the value of vested benefits, the actuarial method used in determining the annual contribution funds this difference over a period of years. The unfunded prior service cost at January 1,1979 amounted to approximately $59 million. Unf unded prior service costs are bemg amortized over a 25 year period.

$ INCOME TAX EXPENSE

~ The components of income tax expense are as follows:

YEAR ENDED DECEMBER 31 l

1979 1978 Thousands of Dollars Federalincome taxes (credit)

$ (3,850)

$ (1,065)

Deferred income taxes:

Current, net-Accrued revenues

$15,283

$ (1,613)

Revenue reserved for possible refund.

533 (3,954)

Real and personal property taxes.

1,276 1,344

$17,002

$ (4,223)

Noncurrent-Accelersted depreciation-Deferredin current year.

$28,504

$26,475 Reversal of prior years' deferrals.

(7,218)

(7,147)

Other, net (1,849)

(942)

$19,437

$18,386

$ (5,805)

$46,238 Deferred investment tax credit, net.

$27,085

$59,336 Charged to utility operations

$23,740

$52,747 Charged to nonutilit) operations 3,325 6,589

$27,065

$59,336 The 1979 and 1978 federal income tax credits reflect adjustments of prior years' provisions and investment tax credits.

32

l l

CONSUMERS POWER COMPANY l

l l

The fo!!c^ing schedule reconciles the statutory federal income tax rates to the effactive income tax rates.

YEAR ENDED DECEMBER 31 1979 1978 48.0%

48.0 %

Feda income tax statutory rates.

increase (reduction) in taxes resulting from:

ey e,ed portion of AFUDC and other capitalized construction costs.

(18.8)

(10.0)

(13.8)

(8.6)

Other portion of AFUDC IJ 2.5 C. mer connection fees.

(5.2)

(7.6)

Other, net.

11.7 %

NE Petive income tax rates.

Certain costs, principally interest, wnich are capitalized for financial reporting purposes in accordance with the provisions of th Uniform System of Accounts, are expensed for income tax purposes and the resultmg tax reduction is reficcted currently in t Stateme-t of income as ordered by the MPSC.

The j:o development investment tax credit utilized as a reduction of the current year's income tax is deferred and amor operatmg expense over the life of the related property. As of December 31,1979. the Company's unutilized job developme tax cred t generated during 1979 and 1978 was approximately $86 million and $9 million, respectively.

The Company utilizes hberalized depreciation and the " class life asset depreciation 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 thesa timing differences reverse, the related deferrals are credited to income.

)

$ CONTINGENT LIABILITIES The Company is involved in certain legal and administrative proceedings before various courts and govemmantal agencies an in contractual matters with others concerning rates, environmenta! issues, property and income taxes, licensing, fuel supplies and costs, ar.d other matters, the outcome of which might result in a decrease in the Company's revenues and/or increases in construction expenditJres and/0r operatt.1g expenses.

10 SEGEENTS OF BU$lNESS Income taxes and corporate expenses are allocated to sepnents in accordance with the regulatory accounting requirements of both the MPSC and the Federal Energy Regulatory Commission.

Expenses by segment for the years ended and total assets at December 31 are shown below:

1979 1978 I

Bepresistles Depreciation and Inesse and income P

Amortlastles Tases Assets Amortization Taxes Assets Thousands of Dollars Electric

$ 75,783

$ 1,144 $3,904,924

$ 71,032

$20,719

$3,317,245 Gn 37,43s 22,5es ess,sse 35,553 31,990 901,371 Steam 183 as 1,943 103 38 2,044 714,851

$18,531 Urexated

$113,302

$23,740 $5,579,087

$166,688

$52,747

$4,935,511 Allocated assets include construction work in progress.

Revenue derived from sales to General Motors Corporation amounted to 10.6% and 11.1% of tie total revenue for 1979 and 1978, respectively.

SS L

t Notes (continued) 11 QUARTERLY FINANCIAL INFORMATION Quarterly financial information for 1979 and 1978 is as follows:

o utfDt DEED March June Sept.

Sec.

March Juri Sept.

Dec.

1879 1879 1573 1979 1978 1970 1978 1978

(

Thanands of ooners Total operating revenue.

.$825,885 $428,554 $383,841

$888,114 $607,528 $397,285 $358,894 $503,214 Net operating income..

. 87.747 57,212 53,983 62.389 69,074 54,331 48,760 58,008 l

Net income 74,018 45,418 43,4N 40,883 53,948 41,316 39,305 50,562 Net income after dividends on preferred and preference stock.

61,950 33,397 31,578 28,443 43,590 30,509 27,644 38,507 Earnings per common share.

$1.31

$.79

$.88

$.80

$1.03

$.72

$.64

$.82 12 MAINTENANCE ANO DEPRECIATION AND NUCLEAR FUEL AMORTiml0N The Company charges to maintenance expense the cost of repairs of property and replacements and renewals of items determined to be less than units of property. Property additions and replacements and renewals of units of property are charged to the utility I

plant accounts. Units of property retired or otherwise disposed in the normal course of business are charged to the provision for accumulated depreciation in the amount of such retirements, less net salvage credits.

The Company provides depreciation on the basis of straight-line rates approved by the MPSC. Composite depreciation rates were approximately 2.93% for electric plant and 3.76% for gas plant in 1979, and 2.87% for electric plant and 3.60% for gas plant in 1978. The Company's composite electric depreciation rate includes an estimate for the decommissioning costs of the Company's nuclear plants. In January 1979, the Company sought approval of revised electric depreciation schedules which would incorporate higher decommissioning costs. The matter is pending before the MPSC.

In the opinion of management, the balance in the provision for accumulated depreciation is reasonably adequate to cover the l

requirements for depreciation on the original cost of utility plant.

The Company's cost of nuclear fuel is amortized to fuel expense based on the quantity of heat produced for the generation of electric energy. In an electric rate order effective in August 1978, cost of service was determined giving consideration, on a prospective basis, to the assumptions of zero residual value for spent nuclear fuel and the need for perpetual storage. Previously, the nuclear fuel amortization rate utilized for accounting and rate purposes was based upon the assumptions that spent nuclear fuel l

had a residual salvage value ar.d would be chemically reprocessed. With regard to these costs, the MPSC indicated in an earlier order that the Company was not precluded from recovering such costs when actually incurred.

i 13 JOINTLY 0WNED UTluTY PLANT The Company and The Detroit Edison Company tre co-owners of the Ludington Pumped Storzge Plant which was placed into commercial operation in 1973. The Company has a 51% undivided ownership interest and Detroit Edison the remaining 49%. The l

Company's investment at December 31,1979 and 1978 in utility plant in service was $122,165,000 and $1:J,893.000, respectively, net of accumulated depreciation of $17,778,000 and $15,036,000, respectively. Operation, maintenance and other expenses of the plant are shared by the Company and Detroit Edison,51% and 49%, respectively. The Company's share of these expenses is included m operation and maintenance expense on the Statement of Income.

14 EFFECTS OF CHANGING PRICES (UNAUDITED)

The following information is supplied in accordance with the requirements of Financial Accounting Standards Board (FASB) Statement No. 33, " Financial Reporting and Changing Prices," for the purpose of providing estimates of certain information about the effects of changing prices. The schedules below are intended to indicate the effect on the Company of both general inflation (represented by the coristant dollar amounts) and changes in specific prices (represented by the current cost amounts). The estimated information should be viewed as an approximation of the effects of inflation rather than a precise measure. A number of judgments and estimating techniques were used in the current cost calculations so that the cost of accumulating the data would be proportionate to its benefit.

As provided by FAS8 Statement No. 33, the information does not reflect a comprehensive application of either type of inflation accounting, 34

a

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a CONSUMERS POWER COMPANY 0

.5

ra 94 th but instead represents approximations of the price changes that have affected the Company's business.

s Constant dollar amounts represent historical costs stated in dollars of equal purchasing power, as measured by the Co Index for All Urban Consumers. Current cost amounts reflect the changes in specific pnces of plant from the date the pla acquired to the present, and differ from constant dollar amounts to the extent that specific prices have increased m than the general rate of inflation. The current cost of plant represents an estimated cost of replacing existing plant assets and determined by indexing the original cost of existing plant by the Handywhitman Index of Public Utility Construction Costs a appropriate indexes. The provisions for depreciation stated m constant dollar and current cost amounts were dete the Company's functional class depreciation rates to the average indexed plant amounts.

Inventories, the cost of fuel consumed in electric generation and the cost of gas sold have not been restated from their hist cost amounts. The inventory turnover period is relatively short, and fuel and gas costs are recovered on a reasonably cur through the operation of adjustment clauses or through adjustments in basic rate schedules. In accordance with other items on the Condensed Statement of income Adjusted for Changing Prices have not been restated.

p S

Under the ratemaking prescribed by the regulatory commissions to which the Company's accounting is subject, o the historical cost of plant is recoverable in rates, and any excess of the cost of plant stated in constant dollars or current historical cost is not presently recoverable.Tharefore, the amount of this excess which accumulated in 1979 is reflected below as a reduction of plant, as adjusted, to net recoverable cost. To property reflect the economics of rate regulation h,

Statement of Income Adjusted for Changing Prices, the reduction of net plant, should be offset by the gain f power of net amounts owed.

Holders of monetary assets suffer a loss of general purchasing power during inflationary periods w' nile holders experience a " gain." The theoretical " gain" from the decline in purchasing power of net amounts owed disc attributable to the substantial amount of debt and other fixed-return securities which were used to finance plant.

There is presently no consensus on which aspect of inflation, if any, should be repoded on a continuing basis. Exp these techniques of communicating the effects of inflation and price changes may eventually lead to changes in the statements. But until a final decision is reached, the FASB has decided that primary financial statements will be stated cost basis.

1979 Constant Current Historical Dollar Cost Dollars Average 1979 Dollars Millions of Dollars CONDENSED STATEMENT OF INCOME ADJUSTED FOR CHANGING PRICES Operating revenue

$2,003.4

$2,003.4

$2,003.4 Deduct (add):

Depreciation and amortization 113.3 222.5 266.7 Remaining operating expenses, and taxes.

1,628.8 1,628.8 1,628.8 Other income, net.

(84.6)

(84.6)

(84.6)

Net interest charges.

142.1 142.1 142.1 Dividends on preferred and preference stock.

48.4 48.4 48.4 Net income after dividends on preferred and preference stockW.

$ 155.4

$ 46.2 2.0 OTHER ADJUSTMENTS FOR CHANGING PRICES Increase in specific price of plant held during the yeart).

Reduction of plant to net recoverable cost.

$ 685.6

$ (420.4)

(42.0)

Less effect of increase in general price level of plant.

$ 643.6 Excess of increase in general price level over increase in

$1,019.8 specific prices after reduction of plant to net recoverable cost.

" Gain" from decline in purchasing power of not amounts owed.

$ (376.2) 357.5 357.5 Net

$ (62.9)

$ (183)

W Excludes the reduction of plant to net recoverable cost. Had this reduction been included, net income after and preference stock in constant dollars would have been reduced to a $374.2 million loss.

4) At December 31,1979, plant, net of accumulated depreciation, was $8.9 billion on a current cost basis and $4.7 bi cost basis.

35

s CONSUMERS POWER COMPANY Notes (continued)

FIVEYEAR COMPARISON OF SELECTED SUPPLEMENTARY FINANCIAL DATA ADJUSTED FOR EFFECTS OF CHANGING PRICES in Average 1979 Dollars (Millions, except per share amounts) 1979 1978 1977 1976 1975 AVERAGE CONSUMER PRICE INDEX.

217.4 195.4 181.5 170.5 161.2 HISTOR! CAL INFORMATION ADJUSTED FOR GENERAL INFLATION Operating revenue.

$2,003.4

$2,077.1

$1,960.3 $2,016.3 $1,808.6 Cash dividends per common share.

$2.30

$2.43

$2.50

$? b5

$2.70 Year end market price per com.non share.

$17.89

$23.97

$28.18

$28.22

$24.84 Net incorne after dividends on preferred and preference stock (excluding reduction of plant to not recoverable cost).

$46.2 Earnings per common share.

$.96 Net assets at year-end at net recoverable amount.

$1,395.2

" Gain" from decline in purchasing power of net amounts owed.

$357.5 CURRENT COST INFCRMATION Net income after dividends on preferred and preference stock (excluding reduction of plant to net recoverable cost).

12.0

$.04 Earnings per common share..............

Excess of increase in general price level over increase in specific prices after reduction of plant to net recoverable cost.

$376.2 Net assets at year end at net recoverable cost.

$1,393.2 ARTHUR ANDERSEN & CO.

D ETaorr, MICHIGAN To the Board of Directors, Consumers Power Company:

We have examined the balance sheet and statement of capitalization of CONSUMERS POWER COMPANY (a Michigan corport. tion)as of December 31,1979, and 1978, and the related statements of income, retained earnings, capital in excess of par value of common stock and source of funds for gross property additions for the years then ended. 0ur exarninations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the financial statements referred to above present fairly the financial position of Consumers Power Company as of December 31,1979, and 1978, 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 applied on a consistent basis.

g 38

]

jZP CONSUMERS POWER COMPANY Management's Discussion and Analysis of the Statement of income OPERATING ftEVENUE Electric revenue increased $72,325,000 in 1979 and 1979 due to supplier price increases was partially offset by lower sales volume. The 1978 increase reflects a 13.3% !n-

$148,277,000 in 1978. The 1979 increase was primarily the crease in the gas sendout associated with the increase in result of rate increases. A 1.7% sales volume increase ac-sales, partially offset by a decrease in the average unit cost.

counted for $17,463,000. The 1978 increase was primarily Other operation and maintenance expense increased the result of fuel cost and purchased and interchange power

$43,043,000 in 1979 and $44,655,000 in 1978. Generating cost adjustment clause revenue. A 2.6% sales volume in-plant maintenance and employee wage increases accounted crease accounted for an increase of $23,790,000.

Gas revenue increased $63,817,000 in 1979 and for the major portion in these amounts.

$81,658,000 in 1978. An increase in purchased gas adjust-ment clause revenue was partially offset by a $50,594,000, or 6.3%, decrease in sales volume that was due to a 1978 sale to an Ohio uti.'ty that faccd an emergency shortage. Colder weatoer in 1970 and the emergency sais caused a sales vo"-

INCOME TAXES ume increase of 13.3%, or $96,094,000. Lower purchased gas adjustment clause revenue, net of increased rate revenue, in 1979, the declase in income taxes of $29,007,000 was the accounted for the offsetting decrease, result of increased interest charges and the decrease in gas not operating income before income taxes. In 1978, income taxea decreased $10,098,000 despite the growth in income before taxes, largely due to an increased interest deduction OPERATING EXPENSES Fuel for generation increased $14,500,000 in 1979 and

$108,721,000 in 1978. The 1979 increase was the reeutt of a 4.1% increase in the average fuel cost per kilowatthour gen-ALLOWANCE FOR FUNDS USED DURING erated, from 1.69 cents to 1,76 cents. The higher 1979 CONSTRUCTION (AFUDC) average cost resulted from increased oil prices and increased increases in the AFUDC debt and other components in 1979 price and use of coal. The increase in 1978 :sflects a 39.7%

and 1978 resulted primarily from construction at the Midland increase, from 1.21 cents to 1.69 cents, in the average fuel cost per kilowatthour generated. The increase reflects the ar.d at the Campbell unit 3 plants. In 1979, total AFUDC in-higher cost of oil generation in lieu of coal during the 1978 creased $38,180,000 and in 1978 it increased $23,085,000, coal strike and the scheduled refueling cutage of the Pali-sades Nuclear Plant in the first quarter of 1978.

Purchased and interchange power increased $8,695,000 in 1979 and $21,244,000 in 1978. The 1979 increase was the result of a 7.1% increase in purchased and not interchange INTEREST CHARGES power use. The 1978 increase reflects an 11.3% increase in the average cost per kilowatthour purchased and a 4.5%

Interest expense, exclusive of the AFUDC credit, increased increase in purchased powei requirements. Much of the

$40,187,000 in 1979 and S1F.,733,000 in 1971 Both increases increase in requirements occurred during the coal strike.

resulted from first mortgage ':ond sales and, in 1979, short-Cost of gas sold increased $58,536,000 in 1979 and

$37,212,000 in 1978. An 18.5% increase in the unit cost in term borrowings.

37 l

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wwx OUMERS POWER COMP /N(

' U y CON summary of statement oW:ome 1s7s.1s7s ISN 1978 1977 1976 1975 Thousands of Dollars Operating revenue:

Doctric

$1,15,35 $1,057,240 $908,963 $878,468 $757,741 Gas 878,298 806,479 724,821 700,236 581,294 Steam.

3,513 3,202 2,826 2,548 2,065 Operating expenses, except income taxes:

Fuel consumed in electric generation.

385,944 371,444 262,723 266,447 249,556 Purchased and interchange power.

150,944 151,249 130,005 127,464 90,811 Cost of gas sold.

502,315 533,779 496,567 460,458 375,435 Other operation and maintenance.

383,301 340,33B 295,683 263,279 236,636 Depreciation and amortization.

113,302 106,688 102.448

%,954 93,635 General taxes 83,437 80,505 74,397 77,365 67,678 Net operating income before income taxes:

Electric 291,905 184,346 209,988 202,926 161,468 Gas 82,W7 98,405 64,666 86,159 65,461 150 165 133 200 280 Steam.

Income taxes:

Federal 10,100 (11,877)

(9,211) 38,970 (1,602)

(2.901) 3,417 State.

Deferred, net.

19,437 18,386 25,328 26,603 31,318 (5,805) 46,238 46,728 14,643 24,431 investment tax credit, net.

e Net operatingincome:

208,851 163,627 162,873 1 3.952 120,276 i

Electric 80,331 66,419 48,952 59,6M 49,166 Gas 129 127 117 154 203 Steam.

Allowance for fur.ds used durir:g construction (1).

88,188 43,710 30,444 33,848 24,825 18,413 28,888 21,347 14,787 15,828 Other income Interest charges (1) 142,105 117,640 108,726 116,060 110,362 285,787 185,131 155,007 144,545 99,936 Net income.

Cash dividends on preferred stock 32,000 31,007 25,437 24,071 24,093 Cash dividends on nonconvertible preference stock.

14,858 11,545 5,764 1,701 Cash dividends on convertible preference stock.

1,500 2,329 3,386 5,177 5,993 Net income after dividends on preferred and preference stock.

155,388 140,250 120,420 113,596 69,850 Cash d'vidends on common stock.

109,898 95,050 77,866 61,038 53,271 Averag s common shares outstanr%g assuming no dilution (000).

48,083 43,743 37,866 31,300 26,677 Earninn per share of common stock assuming no dilution (2).

$3.24

$3.21

$3.18

$3.63

$2.62 Averag i common shares outstanding assuming full dilution (000).

48,952 45,174 39,942 34,387 30,437

~

Earnings per share of common stock assuming full dilution (3).

53.21

$3.16

$3.10

$3.44

$2.49

$2.30

$2.18

$2.09

$2.00

$2.00 Cash dividends paid per share.

(1) Prior to 1977, allowance for funds used during construction (AFUDC) when so used. Beginning in 1977, AFUDC reflects allowance for other funds used during construction.

and 1979 have been credited with allowance for borrowed funds used during construction.

(2) After reduction for cash dividends on preferred an) preference stock.

(3) After reduction for cash dividends on preferred and nonconvertible preference stock.

38 L

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Consumers Power Company Dividends and Stock Prices Dividends Paid Por Shars

~

Calendar Quarter-1979 Calendar Quarter-1978

~

security 1

2 3

4 1

2 3

4

~

Common Stock

$0.56

$0.56

$0.59

$0.59

$0.53

$0.53

$0.56

$0.56

$ 4.15 1.04 1.04 1.04 1.04 1.04 1.04 1.04 1.04 Preferred Stock:

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 1.8625 1.8625 7.6?

1.92 1.92 1.92 1.92 1.92 1.92 1.92 1.92 7.72 1.93 1.93 1.93 1.93 1.93 1.93 1.93 1.93 7.76 1.94 1.94 1.94 1.94 1.94 1.94 1.94 1.94 9.25 23125 23125 23125 23125 23125 23125 23125 23125 9.00 2.25 2.25 2.25 2.25 1.275 2.25 2.25 9.70 8.625 Preference Stock:

$ 6.00 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50 5.50 1375 1375 1375 1375 1375 1375 1375 1375 2.43 0.6075 0.6075 0.6075 0.6075 0.6075 0.6075 0.6075 0.6075 2.23 0.5575 0.5575 0.5575 0.5575 0.4522 0.5575 05575 0.5575

~

0.5555 2.50 0.6250 0.6250 0.6250 0.6250 85 00 18.6528 21.25 2125 21.25 H!gh and Low Sales Prices Based on NYSE-Composite Transactions Calender Quarter-1979 Calender Quarter-1978 Security 1

2 3

4 1

2 3

4 Met W Mgh W Mgh W Mgh W udgh W Mgh W Mgh W Mgb W Common Stock 23 % 22 % 23 % 19 23 % 21 % 22 % 18 % 24 22 % 23 % 21 % 25 22 % 25 % 20 %

Preferred Stock:

$ 4.16 42 39 41 % 37 40 % 38 % 41 32 45 42 % 45 % 42 46 % 41 % 45 % 39 %

4 50 45 41 % 44 40 44 % 38 % 41 % 34 % 49 % 47 48 43 % 48 % 44 47 42 %

4 52 58 % 53 % 57 % 52 % 53 % 52 % 56 52 % 57 % 52 % 54 51 % 53 51 % 53 % 51 %

7.45 78 % 69 % 77 % 70 76 % 71 % 72 57 % 82 % 78 % 79 % 72 84 % 72 % 81 % 71 7.68 80 % 73 % 78 % 72 77 % 73 % 72 % 61 84 % 81 % 83 % 75 % 86 % 76 86 77 7.72 80 % 75 80 % 73 % 80 % 71 74 % 61 % 85 % 81 82 % 75 88 76 85 % 76 7.76 80 % 75 % 79 % 73 80 % 73 % 73 % 62 % 85 % 81 82 % 76 % 86 % 77 85 % 75 9.25*

9.00*

9.70*

8.625*

Preference Stock:

$ 6.00 93 % 88 % 90 80 % 92 % 86 % 79 77 % 95 89 94 87 % 97 91 % 97 86 %

5.50 75 71 % 72 64 % 73 68 % 69 % 59 % 75 71 % 76 70 % 77 % 73 % 76 % 70 %

2.43 24 % 22 24 21 % 24 21 % 21 % 18 26 % 25 25 % 23 % 26 % 23 % 25 % 21 %

2.23 22 % 19 % 21 % 19 % 21 % 19 % 19 % 16 % 24 % 23 23 % 21 % 24 % 21 % 23 % 19 %

2.50 24 % 22 % 24 % 21 % 24 % 21 % 22 % 18 % -

26 % 25 % 25 % 23 85.00*

'Not traded-Private placement.

Exchanges on which the Coenpany's Equity Securities Are usted for Trading:

Common stock is listed on the New York and Midwest stock exchanges.

Preferred (except $9.25,39.00, $9.70, and $8.625) and Preference (except $85.00) stock are listed on the New York Stock Exchange.

38 l

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I The Company 1

Consumers Power Company was incorporated in Michigan in 1908 and le the successor to a corporation 1

of the same name which was organized in Maine in 1910 and did business in Michigan from 1915 to 1968.

J As a combination utility, Consumers Power supplies electricity or gee, or both, to a service area with

'4 more than 5 million residents, including those in metropolitan centers such as Grand Rapids, Rir:t, l

suburban Detroit, Pontsec, l.aneing, Kalamazoo, Muskegon, Saginaw, Bay City, Jackson, Traverse City, and Battle Creest Industries in the territory served by the Company include automobiles and automobile equipment, primary 1

metals, chemicals, metal fabricating, pharmaceuticals, machinery, oil refining, paper and paper products, j

food processing, and others. Consumers Power also serves a large rural service area with more than f

68,000 farms.

In all, the Company serves 1.3 million electric customers and more than 1 million gas customers.

About 417,000 of these are both gas and electric customers.

Approximately 57 percent of the Company's operating revenue comes from its electric business, and approximately 43 percent comes from its gas business.

The Company has four wholly-owned subsidiaries. Northem Michigan Exploration Company 4 engaged in the exploration, development, purchase, and sale of oil and natural gas; it operates primarily h: the I

contiguous 48 states. Plateau Hoeources Limited is engaged in the acquisition, exploration, and development of properties forthe mining and milling of uranium and the purchase and sale of uranlutA Michigan Gas Storage Company is engaged in the purchase, transmission, and storage of gas and in ta sale to the Company of gas from interstate pipeline suppliers. Michigan Utility Collection Service Co. Inc.

is engaged 5 a special collection service for past-due utility service bills.

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40

Company Directors Company Officers JOHN D. SELBY Chairman of the Board, President, and Chief Executive Officer C a rman of the Boardof the Company

['

Cou,sel, Aymond Sullivan & Schwartz

{ME B.

g Jac6sz, Michigan and Computer Services, and Energy Planning P

WALTER R. BORIS JOHN B. SIMPSON l

ExecAe Vice President of the Company Executive Vice President. Energy Distribution, Customer Services, Jac6. Michigan General Services, and Oil and Gas Exploration I

,ON CUTLER, JR.

RUSSELL C. YOUNGDAHL Executive Vice President, Energy Supply Nea vernon, New Jersey WALTER R. BORIS Executive Vice President, Finance and Corporate Affairs JAVES B. FALAHEE STEPHEN H. HOWELL Vice Chairman of the Board of the Company Jack son, Michigan Senior Vice President, Projects Engineering and Construction RICHARD M. GILLETT JACK W. REYNOLDS Chaeman of the Boardand Chief Executive Officer Senior Vice President, Personnel and Public Affairs Old k ent Financial Corporation, Grand Rapids, Michigan LOWELL L SHEPARD (a bank holding company)

Vice President, Region Operations RAYNARD C. LINCOLN, JR.

tt rney, r'if i s Griffiths Vice President, General Services Romeo, Michigan CHARLES R. 8 LBY Vice President, Fossil Operations JOHN W. HANNON, JR.

ROBERT J. FITZPATRICK C'

an s Trust Company and Bankers Trust LAWRENCE B.'LINDEMER New York Corporation Nea York, New York Vice President and General Counsel JAMES W. COOK W. N. HUBBARD, JR., M.D.

Vice President, Energy Planning President MACLAY D. GWINN p arm ceut caYanIch icalmanufact er)

Vice President, Energy Distribution e

ROBERT J. ODLEVAK DON T. McKONE Vice President, Fuel Supply President and Chief Executive Officer SAMUEL N. SPRING i

Lcbeyonens-Ford Company, Toledo,0h.io (a diversified corporation)

V ce President and Controller i

RUSSELL B. DeWITT PAUL S. MIRABITO Vice President, Nuclear Operations Chairman of the Board and Chief Exec,utive Officer GORDON L HEINS Burroughs Corporation, Detroit, Michigan Vice President, System Operations (producer of business equipment)

PAUL A. PERRY L C. ROLL Secretary Chairman Emeritus, Director. Amberof the RICHARD M. GRISWOLD Executive Committee Treasurer Kellogg Company, Battle Creek, Michigan (cereal manufacturer)

Region General Managers JOHN D. SELBY (Headquarters cities in parentheses)

F Chairman of the Board, President, and Chief Executive CHARLES F. BROWN,CentralRegion(Saginaw)

Officer of the Company Jackson, Michigan J. LAURENCE GILLIE, Western Region (Grand Rapids)

JOHN & G0mSE Nh R@ km CM JOHN B. SIMPSON RALPH HAHN, Southeastern Region (Pontiac)

'g 8,

President of the ianp*7 C

WILLIAM A. HOLTGREIVE, South Central Region (Lansing)

STANLEY M. JURRENS, Eastern Region (Flint)

JOHN C. SUERTH K. EUGENE McGRAW, Southwestern Region (Kalamazoo) e rP ts C ny, F n M g M A. WAGGES, Metro Region (Royal Oak)

(manufacturer of infant food and infant care products)

Plant General Managers ec e ac Pr sident of Citibank,N.A.

New York, New York ROBERT C. HOFFMAN,'D.E.Karn & J.C.Weadock plants JAMES G. LEWIS, Palisades Plant h

ROBERT W. MONTROSS, Midland Plant C OU p

f ompany Jackson, Michigan JEROME M. SIMPSON,J.H.CampbellPlant

Consumers Power Company, 212 West Michigan Avenue, Jackson, Michigan 49201 l

1 Shareholder le amation Trans'er Agents Annual Report that, as of February 22,1980, the record Ccmman, Preference on Form 10-K*

date of the Annual Meeting of Share-holders, the person making the request and Preferred Stock A copy of Consumers Power Company's was a beneficial owner of securities en-Consumers Power Company Annual Report, without exhibits, for the titled to vote at the annual meeting.

Jackson, Michigan 49201 fiscal year ended December 31,1979, on Fonn M, mquimd to be Hied with the Financial and Bradford Trust Company New York, New York 10017

' ' ', 'a t to Rje 13a under the ec rl-Statistical Summary Available ties Exchange Act of 1934, will be fur-nished by the Company without charge, A Financial and Statistical Supplement to Rsgistrars Common Stock after April 1,1980, to any shareholder the 1979 Annual Report covering the Nationc! Bank of Jackson who se requests. Requests from bens-years 1969-1979 is available to all in-Jackson, Michigan 49201 ficial owners of securities must Indicate terested shareholders at no charge.

Bradford Trust Company New York, New York 10017 Rsgistrars Preference and Preferred Stock City Bank and Tn.st Cor.!pany, N.A.

Jackson, Michigan 49201 Bradford trust Company New York, New York 10017 y E u j Mfgf ~ f..p ' "' f.

Trustee for e

s First Mortgage Bonds

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Citibank, N.A.

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a Box 3297 I -.

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111 Wall Street t

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New York, New York 10043

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• Please address Notice of ence to Mr. Paul A.

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all correspond-s Annual Meeting Perry, Secretary,

'e The Annual Meeting of Sharetolders of mpany 2

~

Consumers Power Company w 9 he held West Michigan Ni C '

on Tuesday, April 8,1980, at 2:t,0 PM Avenue, Jackson,

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Jackson time at the Company's Parnall Michigan 4920f i-

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Office Building,1945 West Parnall Road,

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Jackson, Michigan. A notice c! meeting, D

x proxy statement, and proxy will be y.,

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mailed to shareholders in March 1980.

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• Prompt signing and return of proxies will j ".:

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.c be appreciated.

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