ML19345D593
| ML19345D593 | |
| Person / Time | |
|---|---|
| Site: | Peach Bottom, Oyster Creek, Limerick, 05000363, 05000463, 05000464, Crane |
| Issue date: | 11/14/1980 |
| From: | EUTGENP, GENERAL PUBLIC UTILITIES CORP. |
| To: | |
| Shared Package | |
| ML19345D585 | List: |
| References | |
| NUDOCS 8012160154 | |
| Download: ML19345D593 (44) | |
Text
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Quarterly Financial Statements september 30,1980 I
General Public Utilities Corporatioit 100 Interpace Parkway, Parsippany, N.J. 07054 e (2Ul) 263-6555 ~
~
Jersey Central Power & Light Company Metropolitan Edison Company Pennsylvania Electric Company These statements are not furnisned in connection with any offering of securities or for the purpose of promoting or influencing the sale or purchase or securities.
i 80122 code /,
CENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES t
Condensed Consolidated Balance Sheets (Note 1)
(in Thousands)
September 30, September 30, ASSETS:
Utility Plant (at onginal cost)(Note 1)-
In Service:
Investment m Three Mile Island Unit No 2.
5 705 013 5 705 502 Other.
) 874 503 3 706 401 Totalin service....
.4 579 516 4 412 403 Less. accumulated depreciation 1 071 928 945 110 Net 3 507 588 3 467 293 Construction work in progress.
568 905 546 388 Held for future use.
23 665 26 973 Totals.
4 100 158 4 040 654 Nuclear fuel (Note 2).
257 459 224 319 Less, accumulated amortizat on.
50 210 43163 N el 207 249 181 156 Net Utility Plant.
4 307 407 4 221 810 tstess of investments in subsidianes over related net assets.
30 805 30 805 Investments.
21 095 21 165 Current Assets:
Cash.
9 32 13 233 Temporary cash investments.....
55 820 98 800 Accounts receivable, net (Note 2)........
143 475 129 595 Inventories - matenals. supplies and fuel.
115 335 112 877 Other.
21 724 23 315 Totals 345 646 377 822 Deferred Debits:
Deferred energy costs (Note 1).....
206 299 151 968 Deferred costs-nuclear accident. net of msurance recovenes(Note 1).
70 820 84 673 Deferred income tames.
33 307 26 016 Other.
54 061 68 316 Totals 364 487 330 493 Total Assets 55 r%9 440 54 982 595 LIABILITIES AND CAPITAL:
Long-Term Debt, Capital Stock and Consolidated Surplus:
Long-Term Debt-First mortgage bonds.
51 872 494 51 827 177 Debentures......
227 800 233 700 Other long-term debt.
64 023 54 115 Unamortized net discount on long. term debt.
(3 743)
(4 672) l Totals 2 160 574 2 110 320 l
Cumulative Preferred Stock-mandatory redemption, net of enpense.
83 544 88 561
[
Cumulats., Preferred Stock-no mandatory redemption, including premium, net of expense.
423 700 422 868 l
Common stock and consolidated surplus:
t Common stock,less reacquered common stock.
153 159 153 159 Consolidated capital surplus.
772 689 772 538 i
Less. capital stock e= pense -
18 045 17 978 l
. Consolidated retained eammas 504 743 486 376 l
Totals 1412 54r3 1 394 045 Totals 4 CAO 364 4 015 844 Current Liabilities:
Secunties due within one year.
30 224 72 158 l
Notes payable to banks (Note 2).
250 000 229 700 l
Accounts payable.
135 446 112 209 j
Taies accrued...
42 336 31 131 i
interest accrued.
39 660 40 415 Other.
43 397 42 202 Tolais
$41063 527 815 Deferred Credits and Other Liabilities:
Deferred income tames....
342 542 278 212 Ur amortized investment credits 82 537 123 469 Other.
22 934 37 255 i
l Totals 448 013 4389 %
l Commitments and Contingencies (Note 1)
Totalliabilitics and Capital.
55 069 441 5448215 The acccrepanying notes are an mtegral part of the financial statements.
I21
CENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES Consolidated Statement 5 of Income (Note 1)
(In Thousands)
Three Months Nine Months Twelve Months Ended September 30, Ended September 30, Ended Septernber 30, 1980 1979 1980 1979 1980
_ 1979 Operating Revenues 5 490 201 5 383 927 51 363 925 51 104 180 51749 WV) 51 433 480 Operating Espenses:
Fuel.
107 914 88 163 292 494 260 174 179 399 337 589 Power purchased and interchanged, net 91 757 64 449 369 105 176 243 461 072 214 789 Deferral of energy costs, net.
31 988 (4 403)
(33 529)
(49 030)
(54 331)
(58 644)
Payroll.
42 941 34 233 120 158 99 572 153 921 131 849 Other operation and maintenance (escluding payroll).
60 645 41 420 177 889 127 474 227 901 182 629 Depreciation 36 885 35 141 110 800 105 772 146 252 133 959 Tames other than income taues.
43 740 35 532 130 700 110 640 169 455 141 930 To tals.
415 870 294 535 1 167 617 830 895 1 483 669 1 084 101 Opera *. ira income before income Tames.
74 331 89 392 1 % 308 273 285 266 231 349 379 income Taxes.
6 792 16172 10 497 59 795 16 608 70 741 Opera ting income.
67 539 73 220 185 811 213 440 249 623 278 638 Other income and Deductions:
Allowance for other f unds during Construction.
2 200 7 019 9 684
'9 305 15 123 30 881 Other income, net.
1 903 2 337 6667 4 934 12 669 6 174 income taues on other income, net.
(1 109)
(1 451)
(4 866)
(2 736)
(7 276)
(3 436)
Total Other income and Deductions.
2 994 7 905 13 485 21 303 20 516 33 619 income Before Interest Charges and Preferred Dividends.
70 533 81 125 199 2 %
234 993 270 139 312 257 Interest Charges and Preferred Dividends:
Interest on first mortgage bonds.
38 083 37 233 113 925 105 872 152 151 139 877 Interest on debentures ar d other long-term debt.
5 742 5 972 18 347 17 995 24 579 24 036 Otherinterest.
9 771 7 478 32 047 14 545 41 888 14 407 Allowance for borrowed funds used dunng construction -
credit (net of tan).
(2 805)
(4 433)
(11 557)
(12 507)
(17 347)
(17 632) income tanes attributable to the al!owance for borrowed iunds.
(1 501)
(1 615)
(5 030)
(4 915)
(8 092)
(8 315)
Preferred stock dividends of subsidianes.
10 785 10 899 32 392 32 732 43 276 43 694 TotalInterest Charges and Preferred Dividends.
60 075 55 534 18n 124 153 722 236 455 196 067 Net income.
5 10 458 5 25 591 5 19 172 5 81 271 5 33 Ma 5 11 M Earnings Per Average Share.
5 17 5
42 31 5
1 33 5 55 5 1 40 Average number of shares outstanding during each period.
01 264 61 264 61 264 61 203 61 264 61 Ofp Cash Dividends Per Share 5
5 25 5
_5 95 5 25 5 1 40 Consolidated Statements of Retained Earnings (Note 1):
Balance, beg nning of period.
5 494 285 5 476 100 5 485 571 5 463 173 5 486 375 5 455 562 Add. net income.
10 458 25 591 19 172 81 271 33 684 1161ao Totals.
504 743 501 691 504 743 544 444 520 059 571 752 Oeduct. dwidends on Common Stocii 15 315 58 068 15 316 85 376 Balance, end of penod.
5 504 743 5 486 376 5 504 473 g 8 y6 5 504 743 5 486 376 The accompany notes are intergral part of the financial statements.
D1
O l
CENERAL PUBLIC UTillIIES CORPORATION AND SUB5iDIARY COMPANIES Consolidated Statements of Source of Funds Used for Construction (Note 1) l (In Thousands)
Three Months Nine 1Aonths Twelve Months Ended September 30, inded September 30, inded September 30, 1980 1979 1980 1979 1980 1979 Sources of Funds Funds generrtJ from operations.
Ne m ume 5 10 458 5 25 591 5 19 172 5 81 271 5 33 684 5116 190, Add. items not recuring current cash outlay or (receipt)-
Depreciation 36 885 35 141 110 800 105 772 146 252 133 959 3
Amortuation of nuclear fuel.
2 914 4 256 3 077 17 203 7188 21 082 Investment credits, net.
12 125 (1 187)
(32 675)
(3 586)
(40 919) 21 403 Deferred mcome taxes. net.
(7 062) 11 514 43 212 54 001 57 092 88 279 Allowance for other funds used dunng construction.
(2 2001 (7 014)
(9 684)
(19 305)
(15 123) f30 881)
Totals.
33 120 68 2 %
133 902 235 356 188 174 350 032 Less, cash dividends on common stock.
15 315 58 068
'15 316 85 376 Totals.
53120 52 981 133402 177 288 172 855 y 656 Other sources (uses):
Sale of nuclear f uel(Note 2).
6 130 6 130 6 130 Deferred energy costs, net.
31 988 (4 403)
(33 529)
(49 030)
(54 331)
(58 644)
Deferred costs nuclear accident net of insurance recoveries (Note l).
(12 939) (24 936)
(9 649)
(47 875) 13 853 (47 875)
Changes in -cash (2 635) 5235 (1 383) 4 745 3 943 7 562
-temporary cash investments (21 415) (49 300) 4 812 (98 800) 42 981 (98 800)
-accounts receivable.
(5 605) 15 390 (19 127) 21 194 (13 880)
(15 082)
-accounts payable 6 357 8 418 (26 716) 17 756 23 238 33 815
-inventor.es-materials, supplies and fuel.
872 (5 979) 7 425 (25 887)
(2 458)
(22 406)
-interest accrued.
(2 243) 3 066 (3 817) 1 776 (754) 3 362
-taxes accrued 3 318 (16 674) 1 776 10 474 11 205 (10 C51)
Other, net.
7 750 (4 561) 16 191 (12 427) 8 914 1 175 Totals.
11 578 (73 744)
(57 807) (178 074) 38 841 (206 944)
Funds from financmss.
15 744 106 300 63 5,+
106 300-Sale of long-term debt.
4 777 14 046 Sale of comn.on stock. net of expense Bank borrowmss, net (Note 2)
(11 000) 89 650 79 000 145 850 20 300 195 750 l
Retirement or redemption of long-term debt
(
and preferred stock.
(6 309)
(4 163)
(21 839)
(15 404)
(60 498)
(22 815)
Totals.
(17 309) 85 487 72 905 241 023 23 346 293 281 Totals,
5 47 389 5 64 724 5149 000 5 2a0 237 5 235 045 5 350 993
(
Construction Espenditures:
5 37 700 5 47 648 5129 867 5198 141 5213 638 5315 839 I
titary plant 11 889 24 095 28 817 61 a01 36 530 66 035 puclear fuel.
Totals.
49 589 71 743 158 684 259 542 250 168 381 874 Allowance f or other f unds used dunng construction.
(2 2001 (7 019)
(c 6841 fl9 305)
(15123)
(30 881)
Totals.
5 47 389 5 64 724 5149 000 5 240 237 5 235 045 5 350 993 I
The accompanymg notes are an integral part of the fmancial statements.
[4]
s I
I 1
JERSEY CENTRAL POWER & LICHT COMPANY Condensed Balance Sheet 5 (Note 1)
(In Thousands)
September 30, September 30, 1980 _
1979 4$$gg, Utility Plant (at ongmal cost)(Note 1)-
In Servece:
Investment in Three %Ie Island Unit No. 2.
5 166 610 5 166 726 Other.
_1 509 465 1 421 363 Totalin service....
1 676 075 1 588 089 Less. accumulated depreciation 410 161 357 831 Nel 1 265 914 1 230 258 Constructe work in progress.
501 413 472 531 Held for future use.
5 872 5 867 Totals 1 773 199 1 708 656 Nuclear fuel (Note 2).
152 690 139 571 Less, accumulated amortaation.
39 123 32 076 Net 113 567 107 495 Net Utility Plant.
1 686 766 1 816 151 Investments,
362 366 Current Assets:
6 076 7 988 Cash.
9 986 7000 Temporary cash investrrents.
75 586 64 374 Accounts receivable. net............
38 157 43 509 inventories - niatenals, supplies and fuel.
Other.
9 765 14 705 Totals 139 570 137 576 Deferred Debits:
Deferred energy costs (Note l)......
128 633 81 146 Def erred costs-nuclear accident, net of insurance recoveries (Note 1).
17 725 21 188 Def erred income tanes.
23 668 10 793 Other.
20 379 20 621 Totals 100 405 133 748 Total Assets 52 217 103 52 087 841 LIABILITIES AND CAPITAL:
Long. Term Debt, Capital Stock and Surplus:
First mortgage bonds.
5 7 % 016 5 752 618 Debentures........
79 000 81 080 5 233 10 465 Other long-term debt.
(1 573)
(2 429)
Unamortued net discount on long term debt Totals 878 676 841 734 Cumulative Preferred Stock-mandatory redemption, net of empense.
38 721 41 065 Cumulatae PreferrM Stock-no mandatory redemption, including premium, net of expense.
162 06 161 631 Common stock and surplus:
Capital surplus.
153 713 153 713 Common stock.
437 140 436 989 Retamed earnmgs.
77 429 48 110 Totals 668 282 638812 Totals.
1 747 747 1 68) 242 Current Liabilities:
Secunties due within one year..
13 623 35 846 Notes payable to bank 5(Note 2).
124 000 90 600 Accounts payable.
70 433 54 173 Taies accrued...
33 208 17 008 InteIest accrued 16 989 17 771 Other.
22 189 18 788 Tc.tals 280 442 234 186 Deferred Credits and Other Liabilities:
Deferred mcorre tanes....
150 728 109 721 Unamortued msestment credits.
27 085 50 076 Other.
11 101 10 616 Totals 188 914 170 43 Commitments and Contingencies (Note 1)
Totalliabilities and Capital.
52 217 10) 52 087 841 The accompanying notes are an integral part of the financial statements.
[51
JERSEY CENTRAL POWER & LICHT COMPANY Statement 5 of income (Note 1)
(In Thousands)
Three Months Nine Months Twelve Months Inded September 30, inded Setember 30, Ended September 30, 1980 1979 1980 1979 1980 1979 Operating Re.enues.
5256 989 5185 594 5660 942 5490 548 5835 341 5630 491 Operating Espenses:
Fuel 42 093 31 154 107 734 79 070 138 774 94 028 Power purchased and interchanged. net Atfiliates.
10 050 20 653 24 113 36 376
.12 670 50 7 %
Others 62 282 20 553 240 903 92 909 272 849 127 418 I
Deferral of energy costs, net 7 175 484 (51 347)
(24 741)
(47 487)
(43323)
Payroll.
15 744 13 723 46 307 39 365 59 656 52 182 Other operation and mamtenance(excludmg payroll).
24 774 17 597 78 570
$2 560 97 628 79 472 Depreciation 15 068 14 238 45 209 42 922 59 503 54 081 Ta mes, other than income taxes
. 27 442 23 092 74 067 64 236 103 all
_8126}
i Totals.
204 628 142 394 570 556 387 697 717 424 500 919 Operating income before mcome tanes.
52 361 43 200 90 386 102 851 117 917 129 572 Income Taxes.
11 280 8 746 7 109 20 226 8 229 23 116 Operating income -
41 081 34 454 83 277 82 625 109 688 106 456 Other income and Deductions:
Allow ance for other f unds used durmg construction.
1 486 6 326 8 382 16 946 14 584 21 658 Other mcome, net.
284 94 745 301 1 067 841 Income tames on other income, net.
(211)
(144)
(555)
(191)
(733)
(418)
Total O ther income and Deduct;ons.
1 559 6 276 8572 17 056 14 918 22 081 f acome 8efore Interest Charges 42 640 40 730 91 849 99 681 124 606 128 517 Interest Charges:
'onds 16 663 16 083 49 500 45 327 66 627 59 F88 Interest on first mortga.
fnterest on debentures and other long-term debt.
1 654 1 750 5054 5 341 6 790 7 197 Other mterest.
5 273 3 375 14 593 7 227 17 829 7 810 Allowance for borrowed funds use) durmg constructson.
l credit (net of tas).
(1 489)
(3 701)
(8 087)
(9 852)
(11 6931 (12 553) focome tames attributable to the a!!owance for borrowed f unds.
(247)
(930)
(1 751)
(2 462)
(2 659)
(s 077)
Totallnterest Charges.
21 854 16 577 59 309 45 581 76 894 j Q5 Net income.
20 786 24 153 32 540 54 100 47112 69 ;72 Preferred Stod Dividends.
4 590 4 666 13 769 13 999 18 421 18 693 f arnings Available for Common Stock.
5 16 196 5 19 487 5 18 771 5 40 101 5 29 291 5 50 579
~
Statements of Retained f arnings (Note 1):
Balance, beginnmg of period -
5 61 233 5 28 637 5 58 658 5 20 023 5 48 110 5 28 517 Add. net mcome.
20 786 24153 32 540 54 100 47 712 69 272 Totals.
82019 52 790 91 146 74 123 95 822 97 789 Deduct:
Cash dmdends on common stock 12 000 31 000
- Cash dmdends on cumulative pref erred stock.
4 590 4 680 13 769 14 013 18 393 18 679 4 590 4 680 13 769 26 013 18393 49 679 Totals Bal'ance. end of period 5 77 429 5 48 110 5 77 429 5 48 110 5 77 429 5 48 110 The accompanymg notes are an integral part of the financial statements,
[6]
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JERSEY CENTRAL POWE'l & LICHT COMPANY Statements of Sources of Funds Used 1u4 (.ons(tuClion (NO(c 1)
(In Thousands)
Three Months Nine Months Twelve Months Ended Septernber 30, Inded Septernber 30, Ended September 30, 1980 1979 1980 1979 1980 1979 Sources of Funds:
Funds generated from operations Net income.
5 20 786 5 24 153 5 32 540 5 54 100 5 47712 5 69 272 Add. stems not requiring current cash outlay or (receipth Depreciation 15 068 14 238 45 209 42 922 59 503 54 081 Amortaation of nuclear fuel.
2 914 4 255 3 077 12 213 7 188 13 760 investment credits, net.
12 329 (551)
(23 436)
(1 628)
(22 984) 4 999 Deferred income tases, net (3 760) 1 792 29 267 21 024 28 039 42 414 Allowance for other funds used during construction.
(1 486) f6 326)
(8 382)
(16 946)
(14 584)
(21 658)
Totals.
45 851 37 561 78275 111 685 104 874 162 868 Less, cash dividends - common stock.
12 000 31 000
- preferred stock.
4 540 J _680 13 769 14 013 18 393 18 679 Totals.
41 261 32 e'81 64 506 85 672 86 481 113189 Other sources (usesk Sale of nuclear fuel (Note 2).
6 130 6 130 6 130 Deferred energy costs. net.
7 175 484 (51 347)
(24 741)
(47 487)
(43 323)
Deferred costs nuclear accident. net ol insurance recoveries (Note ll.
(3 129)
(6 234)
(2 410)
(11 %9) 3 463 (11 %9)
Changes in -cash (2 723) 3 089 (3 125)
(5 687) 1 912 (7'142)
-temporary cash investments (5 986)
(7 000)
(5 982)
(7 000)
(2 986)
(7 000)
-accounts receivable.
(3 273) 6 635 (16 848)
(4 665)
(11 212)
(16 335)
-accounts payable.
(6 096)
(511)
(18 193) 4 116 16 260 19 564
-inventones-materials. supplies and fuel.
2 294 (598) 9 972 (9 040) 5 352 (11 555)
-interest accrued.
(2 973) 511 (3 182) 452 (781) 2 987
-tanes accrued.
1 492 (20 571) 16 486 12 169 16 201 (6 799) 379 f 2 707) 7 975 (6 045) 9 288 1 %9 Other, net.
Totals (6 710) (26 902)
(60 524)
(57 110)
() 860)
(79 603)
Funds from financings-56 300 47 500 56 300 Sale of long.:erm debt.
Bank borrowings. net (Note 2)
(9 000) 30 600 79 000 36 500 33 400 77 700
)
Retirement or redemption of long-term debt and preferred stock.
(2 456)
(2 022)
(8 678)
(11 710)
(35 131)
(18 420)
Cash contributions from General Public 29 500 63500 Utihties Corporation, parent company.
Totals (11 456) 28 578 70 322 110 5 %
45 769 179 080 S
SM M h oo S E 666 yM Totals.
' Conuruction fipendifures:
518 145 5 27 % 1 5 70 760 $125 424 5126 465 51 % 434 Utility plant Nuclear fuel.
6 416 12 922 11 926 35 374 16 509 37 840 Totals.
24 581 40 883 82 686 160 798 142 974 234 324 Allowance for other f unds used during construction.
(1 4861 (6 326)
(8 382)
(16 946)
(14 584)
(21 658)
Totals.
$_2M S 34,557, 5 74 304,
{4384
$1.2$_ Jag
$11Zf&fg The accompanying notes are an integral part of the financial statements.
(7)
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METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANY Condensed Consolidated Balance Sheets (Note 1) fin Thousands)
September 30 September 30.
ASSETS:
Utility Plant (at original cost)(Note 1)
In Service in= ester tnt m Three %Ie Island Unit No 2 5 359 660 5 359 912 Other 947 342 921 187 Totalin service...
1 307 042 D81 Oy9 Less, accumulated depreciatun 269 955 234 468 Nel 1 037 087 1 046 631 Construction work in progress.
17713 19 80 Held for future use.
11 576 12 576 Totals 1 066 376 1 079 016 h
Nuclear fuel (Note 2).
69 356 55 980 Less. accumulated amortization.
7 399
? 399 Net 61 957 48 581 Net Utility Plant.
1 128 333 1 127 597 insestments.
630 659 Current Assets:
Cash.
1 500 4 600 911 1 258 Temporary cash investments.....
Accounts receivable net l Note 2).........
32 321 43 885 Inventories - matenals..spolies and fuel.
30 165 30 797 Other.
5609 5 556 Totals 70 506 86 096 Deferred Debits:
Deferred energy costs (Notel).
..=,....
67 522 56 765 Ceferred costs-nuclear accident, net of insurance recoveries (Note 1).
35 497 42 423 Deferred income tames.
2 461 7 256 Other.
10 470 24 222 Totals 115 950 j30 t46 Total Assets 51 315 419 51 345 018 1
LIABILITIES AND CAPITAL:
Long Term Debt. Capital Stock and Consolidated Surplus:
First mortgage bonds.
5 463 276 5 455 773 Debentures...,..
80 600 82 580 Unamc i:. zed net diunt on long-term debt.
(1 547)
(1 598)
Totals 542 329 536 755 Cumulative Preferred Stock-no mandatory redemption. including premium. net of eipense.
139 874 139 874 Common stock and consolidated surplus:
I 66 273 66 273 Common stock.......
Consolidated capital surplus.
280 524 280 524 Consoledated retained earnmes 25 062 31 533 To'ais 371 859 378 330 Totals 1 054 062 1 054 959 Current Liabilities:
Debt due withm one year......
6 017 7 764
. fJotes payable to bank s (Note 2).
78 000 88 200 Accounts payable.
35 045 32 350 Tases accrued. -.
5 139 3 461 Interest accrued.
6 400 6 391 Other 8 311 6 048 Totals 133 912 144 214 Deferred Credits and Other liabilities:
112 753 99 303 1
Delerred mcome tames.
l Unamortued mvestment credits.,
5 436 32 535 Other 4 256 14 007 Totals 122 445 145 845 Commitments and Contingencies (Note 1)
Totalliabilities and Capital.
51 315 419 51 345 018 The accompanying notes are an integral part of the financial statements.
Ia1
METROPOf.ITAN EDISON COMPANY AND SUBSIOIARY COMPANY Consolidated Statement 5 of Income (Note 1)
(In Thousands)
Three Months Nine Months Ti.elve Months Ended September 30.
Ended September 30, inded Septernber 30, ;
1980 19?9 1980 1979 1980 1979 Operating me enues
_ $111047 5 85 846 5118 010 5250 525 90562) 5329 560 Operating tapenses:
Fuel -
22 571 15 730 63 095 56 253 77 517 75 302 '
Power purchased and mterchanged not Af f ehates.
(1 445) 216 (7 098)
(1 013)
(5 920)
(4721 Others 24 298 31 334 88 377 62 047 133 988 66 421 Deferral of energy costs, net -
18 118 (12 849) 14 977 (33 544)
(10 757)
(30 055 Payroll.
10 475 8783 29 540 25 481 38 427 33 899 Other operation and maintenance (escludme payroll) -
15 777 9 734 42 986 31 415 56 683 43 266 Depreciation '
9 809 9 370 29 481 28 263 38 927 35 570 Ta mes. other than incorne tanes 7 825 4 484 24 020 16 711 29 991 22 723 i
Totals.
107 428 66 802 285,78 185 613 358 856 242 405 Opera tmg income before income Tames.
5 t>69 19 044 32 632 64 912 46 765 87 175 Income Tames.
(4 073) 1 087 (7 448) 10 192
. (7 425) 14 703 Operatmg lacome.
9 742 17 957 40 130
}47;0 54 190 72 472 Other lacome and Deductions Alfowance f or other f unds used durms construction.
3 235 (789) 908 (1 692) 5 440 Other income. net 231 238 867 673 1 262 746 income tanes on other mcome. net.
(114) f87)
(422)
(291)
(777)
(304)
Total Other income and Deductions.
120 386 (344) 1 240 (1 207) 5 882 Income Sefore interest Charges.
9862 18343 39 786 56 010
$2 98}
78 354 I
Interest Charges:
Irterest on first mortsage bonds 9 163 8 816 27 653 26 447 36 468 35 263 Interest on debentures 1 617 1 655 4 863 4 976 6 490 6 638 Other interest.
2 897 2 377 11 159 4 644 15 432 5 361 Allowance for borrowed funds usmg during construction -
credit (net of tan)
(1 039)
(456)
(2 655)
(1 775)
(4754)
(3 245)
Income taxes attributable to the allowance for borrowed funds.
(959) 0 89)
(2 408)
(1 512)
(4 471)
(3 202)
Total Interest Charges.
11 679 M 38 612 32 780 49 165 40 815 Net income (toss)
(1 817) 6 340 1 174 23 230 3 818 37 539 Preferred Stock Dividends.
2 573 2 573 7 717 7 717 10 259 to 289 lacome(toss) Af ter Preferred Stock Dividends 5 (4 390) 5 3 767 5 (6 543) 515513 5 (6 471) 5 27 250 Consolidated Statements of Retained tarnings(Note 1):
i Balance, beginnmg of period.
5 29 452 5 27 766 5 31 605 5 23 020 5 31 533 5 34 783 l
Add. net mcome(loss).
(1 817) 6 340 1 174 23 230 3 818 37 539 Totals.
27 635
}4 10%
E 46 250 35}51 72 322
' Deduct:
CaJh dmdends on common stock.
7 000 30 500 Ca sh dividends on cumulatne pref erred stock.
2 573 2 573 7 717 7 717 10 289 10 299 Totals.
2 573 2 57}
7 717 14 717 10 289 40 789 Bahnce, end of period 5 25 062 5 31 533 5 25 062 5 31 513 5 25 062 5 31 533 The accompanpr's notes are an iniegral part of the fmancial statements.
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METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANY
^
Conlolidated Statements of Soutce5 of Fund 5 U5ed for Construction (Note 1)
(In Thousands)
Three Months Nine Months Twelve Months Ended September 30, inded Septeml>er 30, inded September 30, 1980 1979 1980 1979 1940 1979,
Sources of Funds:
Funds generated frorn operations.
I Net.nc orne(loss 1 5 (1 817) 5 6340 5 1174 5 23 230 5 3818 5 37 539 Add. stems not requiring current cash outlay or (receipt)-
j Depreciation 9 809 9 370 29 481 28 263 38 927 35 570 Amortuation of nuclear fuel 3 340 4 897 f ewestment c redits. net (1 252)
(271)
(12 764)
(897)
(27 093) 11 12S Def erred income ta nes, net (4 1131 11 850 4 632 28 527 18 182 35 546 l
Allowance f or other f unds used durms construct:on.
(3)
(235) 789 (408) 1 692 (5 440)
Totals 2 624 27 054 23 312 81 555 35 526 119 240 Less. cash dedends -common stock 7 000 30 500 l
-preferred stock.
2573 2 573 7717 7 717 10 289 10 299 Totals 51 24 481 15 595 66 R18 25 237 78 451 Other sources (usest Def erred energy costs, net 18 118 (12 849) 14 977 (33 544)
(10 757)
(30 055)
Deferred costs - nuclear accident, net of insurance recoveries (Note 1)
(6 266) (12 468)
(4 826)
(23 937) 6 927 (23 937)
Changes in -cash (519)
(225) 1 226 5145 347 1 325 !
-temporary casa mv estments (1 500)
(2 100)
(1 500)
(4 600) 3 100 (4 6001
- accounts receivable 5 307 (7 029)
(4 387)
(8 210) 11 5t:4 (20 437)
-accounts pay able (117) 4 808 (882) 14 165 2 695 15 243
-mventorres-materials. Supphes and fuel (79)
(4 215) 4 483 (4 630) 632 (4 714)
-mterest accrued (5 013)
(4 408)
(5 457)
(4 637) 9 (426)
-tanes accrued.
2 159 (465)
(2 832)
(2 732) 1 678 (4 0S8' i
Other, net.
2 472 (12 854) 16%
(11 910) 7 828 (11 ost Totals.
15 062 (51 805) 2 458 (74 eno) 24 023 IS; 741 Funds f rom fmancmgs Sale of loneterm debt 13000 13 000 Bank borrow mgs, net (Note 2) -
(3 000) 42 750 10 000 52 700 (10 200) 64 050 Retirement or redemption of long-term debt (1 522)
(1 520)
(8 764)
(1 641)
(9 224)
(1 822' Totals (4 522) 41 230 14 236 51 059 (6 424) 62 228 l
Totals 510 591 5 i l WM S 12 289 5 43 n07 5428%
557 936 i
Construction tapenditures:
56%7 5 6717 5 20 264 5 26 625 5 27 767 5 44 648 ptility plant Nuclear fuel.
3 627 7 424 11 236 17 240 13 377 15 728 Totals.
10 594 14 141 31 500 43 915 41 144 63 376 Allow ance f or other f unds used durmg construction (3)
(235) 789 (408) 1 692 (5 440 Totals 510 591 513406 5 32 289 5 43 007 5 42 836 5 57 936 The accompanying notes are an mtegral part of t! e fenancial statements.
[10]
l l
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES Condensed Consolidated Balance Sheets (Note 1) fin Thousands)
September 30, September 30, 1980 1979 ASSETS:
Utility Plant (at original cost)(Note 11 in Service:
5 178 743 5 178 864 Investmentin Three MileIsland UnitNo 2.
1 389 469 1 352 150 Other.
1 568 212 Tih 414 Totalin service..-
388 976 350 664 Less, accumulated depreciation.
1 179 236 1 180 750 Net 49 522 39 320 Construction work in progress.
6 217 8 530 Held f or future use.
1 234 975 1 228 600 Totals.
35 413 28 768 Nuclear fuel.....
3 688 3 647 Less. accumulated amortiz ation.
31 725 25 081 Net 1 266 700 1 253 681 i
Net Utility Plant 20 103 20 140 investments.
Current Assets:
1 261 2 %3 Cash.
40 534 87 200 Temporary cash investments.
41 218 47 117 Accounts receivable. net......-.....
47 013 38 571 Inventories - matenals, supplies and f uel 6 307 3 396 Other.
136 333 179 249 Totals Deferred Debits:
10 144 14 057 Deferred energy costs (Note 11 17 598 21 062 Def erred costs-nuclear accident, net of insurance recoveries (Note 1).
7 178 7 %7 Def erred income taxes.
21 336 20 009 Other.
56 256 63 995 Totals 51 479 192 51 517 065 Total Assets LIABILITIES AND CAPITAL:
tong. Term Debt, Capital Stock and Consolidated Surplus:
Long. Term Debt:
5 613 202 5 618 786 First mortgase bone 68 200 70 040 Debentures......,.
f623)
(644)
Unamortized net disco nt on long-term debt.
680 779 688 182 Totals.
44 823 47 4 %
Cumulative Preferred Stock-mandatory redemption, net of expense.
171 758 121 363 Cumulative Preferred Stock no mandatory redemption, including premium, net of expense.
Common stock and consolidated surplus:
105 812 105 812 Common stock,less teacquired common stock.
266 530 266 530 Consolidated capital surplus.
43 268 54 652 Consolidated retained earnings 415 610 426 044 Totals 1 262 970 1 284 035 Totals Current Liabilities:
10 075 15 648 tecurities due within one year to be refinanced.
38 351 34 339 Accounts payable.
4 161 29 610 Tames accrued...
15 077 14 812 Interest accrued.
12 281 16 790 Other.
79 945 111 199 Totals Deferred Credits and Other Liabilities:
79 061 68 8 %
Deierred income taues.....
50 016 40 858 Unamortised investment credits.
7 400 12 077 Other.
136 477 121 All Totals Commitments and Contingencies (Note 1)
$_1479 39]
51 517 065 Totalliabilities and Capital.
The accompanying notes are an integral part of the financial statements.
[ 11 ]
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES Consolidated Statement 5 of Income (Note 1)
(In Thousands)
Three Months Nine Months Twelve Months Ended September 30, f aded September 30.
Ended September 30, 1980 1979 1980 1979
_1980
_1979 Operating Revenues 5121 614 5113 991 5389 469 5367 599 5514 930 54791%
Operatms Espenses:
Fuet 43 250 41 279 121 665 124 851 163 108 168 259 Power purchased and interchanged. net.
Af filiates.
(8 605) (20 869)
(17 015)
(35 363)
(26 750)
(46 075)
Others.
5177 12 562 39 825 21 287 54 235 20 950 Deferralof energy costs. net.
6 695 7 %1 2 841 9 255 3 913 14 734 Payroll 16 722 11 726 44 311 34 726 55 837 45 768 Other operation and maintenance (escluding payroll).
20 7 %
14 790 58 414 45 730 75 975 63 010 Depreciation 12 008 11 535 36 110 34 587 47 823 44 307 Taies, other than income taxes.
. 8 443 6 940 27 447 24 518 35 419 32 612 Totals.
104 486 85 974 313 598 259 591 409 560 343 565 Operating income bef ore income 7aies.
17 128 28 017 75 871 108 008 105 370 135 831 income Taies f 415) 6 337 10 886 29 376 16 320 32 923 Operating income 17 543 21 680 64 085 78 632 89 050 102 908 Other income and Deductions:
Allowance for other funds used dunng construction.
711 456 2 091 1 450 2 231 3 784 Other income, net.
1 389 2 008 7 056 3 %1 10 834 4 587 income taves on other mcome, net (785)
(1 219) f 3 889)
(2 253)
(6 On61 (2 714)
TotalOther income and Deduction.
1 315 1 245 5 258 3 158 7 059 5657 income Before Interest Charges.
to 858 22 925 70 243 81 790 06109 108 565 Interest Charges:
Interest on first mortgage bonds 12 257
.12 334.
36 772 34 098
~ 056 44 726 Interest on debentures.
1 249 1 285 3 787 3 883
- 061 5186 Other interest.
360 529 1 287 1 009
- 672 (84)
Allowance for borrowed funds used dunns construction.
credit (netof tan)
(277)
(277)
(815)
(380)
(900)
(1 834)
Income tames attnbutable to the allowance for
- (295)
(296)
(871)
(941)
(%2)
(2 036) borrowed funds.
Totalinterest Charges -
13 294 13 575 a0160 37 169 53 927 di 958 Net income 5 564 9 350 30 083 44 621 42 182 62 607 Preferred Stock Dividends.
3 623 3 660 to 006 11 016 14 566 14 713 (arnings Available for Common Stocli 5 1 941 5 5 600 5 19 177 5 11 hos 5 27 616 5 47 894 Consolidated Statements af Retained farnings(Note 1):
Balance, beginning of penod 5 44 327 5 48 % 2 5 49 091 - 5 37 047 5 54 652 5 33 758 Add. net income.
5 564 9 350 30 083 44 621 42 182 62 607 Totals 49 891 58312 79 174 81 668 46 834 06 365 Deduct:
C3sh dividends on comrnon stock 3 000 25 000 16 000 39 000 27 000 Ca sh dividends on cumulative pref erred stock.
3 623 3 660 to 906 11 016 14 566 14 713 Totals -
6 623 3 660 35 906 27 016 53 566 41 713 4
Balance.end of per*od.
5 43 268 5 54 652 5 43 268 5 54 652 5 43 268 5 54 652 The accompanying notes are an mtegral part of the financial statements.
11 21
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARIES Consolidated Staternents of Sources of Funds U5ed for Construction (Note 1)
(in Thousands)
Three Months Nine Months Twelve Months Ended September 30, Ended September 30, Ended September 30, 1980 1979 1980 1979 1980 1979 Soveces of Funds:
Funds generated from cperations-Net mcome.
5 5564 5 9350 5 30 083 5 44 621 5 42 182 5 62 607 Add, stems not requinns current cash outlay or (receept):
Depreciation.
12 008 11 535 36 110 34 587 47 823 44 307 Amortization of nuclear fuel.
1 649 2 425 Investment credits, net.
1 048 (365) 3 525 (1 061) 9 158 5 277 Def erred income ta kes. net 811 (2 129) 9 313 4 450 10 871 10 319 Allowance for other funds used dunng construction.
(711]
(456)
(2 091)
(1 450)
(2 231)
(3 784 Totals.
18 720 17 935 76 940 82 7 %
107 803 121 151 Less. cash dividends -common stock.
3 000 25 000 16 000 39 000 27 000
-preferred stock.
3 623 3 660 10 406 11 016 14 M$
14 713 1
Totals.
12 097 14 275 41 034 55 780 54 237 79 4}8 Other sources (uses).
Def erred energy costs. net.
6 695 7 %1 2 841 9 255 3 913 14 734 Deferred costs - nuclear acciden', net t
of insurance recoverses(Note l).
(3 544)
(6 234)
(2 413)
(11 969) 3 463 (11 %9)
Changes in -cash 145 438 1 005 1 149 1 702 8 723 l
-temporary ca sh investments (13 129) (40 200) 15 274 (87 200) 46 667 (87 2001
-accounts receivable.
4 245 7 164 1 885 13 700 5899 (2 793)
-accounts payable.
2 214 6 244 (1 987) 1 964 4 012 4 614
-inventones-matenais, supplies and fuel.
(1 343)
(1 166)
(7 030)
(12 217)
< 442)
(6 137)
-interest at: rued.
5614 6 109 5 354 5 877 265 170
-ta xes accrued.
(1 406) 10 033 (16 154) 19 761 (25 449) 19 851 Other, net -
4 087 10 650 5 689 3 416 r8 5141 8OM Totals.
3 578 999 4 464 (56 264) 23 516 (51 482)
Funds from financings.
Sale of long term debt.
50 000 50 000 Bank borrowings. net.
(500)
[5 500)
Retirement or redemption of long-term debt and preferred stock.
(2 221) f 621)
(4 153) f2 552)
(15 848)
(2 573)
Totals.
(2 221)
(621)
(4 153) 46 948 (15 848) 41 927 Totals.
513 454 514 653 5 41 345 5 46 464 5 61 405 5 69 3E Construction Espenditures:
Utility pf ant.
512 339 5 11 360 5 37 781 5 39 177 5 57 492 5 63 750 Nuclear fuel 1 826 3 749 5 655 8 737 6 644 9 417 Totals.
14 165 15 109 43 436 47 914 64 116 73 167 Allowance for other funds used dunng construction (711)
(456)
(2 091)
(1 450) f2 ?31)
(3 784)
Totals,
513 454 514 653 5 41 345 5 46 464 561 005 5 69 383 The accompanying notes are an integral part of the financial statements.
[13]
NOTES TO FINANCIAL STATEMENTS 1.
COMMITMENTS AND CONTINGENCIES Three Mile Island Nuclear Accident On March 28, 1979, an accident occurred at Unit No. 2 of the Three Mile Island nuclear generating station ("TMI-2")
resulting in significant damage to TMI-2 and a release of some low level radiation which published reports of govern-mental agencies indicate did not constitute a significant public health or safety hazard. TMI-2 is jointly owned by the Corporation's subsidiaries, Jersey Central Power & Light Company ("JCP&L"), 25%; Metropolitan Edison Company (" Met-Ed"),
50%; and Pennsylvania Electric Company ("Penelec"), 25%.
At September 30, 1980, total net investment by the subsidiaries in TMI-2 was approximately S663 million (S705 million investment less $42 million accumulated depreciation),
excluding the unamortized investment of approximately S37 million in the nuclear fuel core.
Three Mile Island nuclear generating station Unit No. 1
("TMI-1"), which adjoins TMI-2, was out of service for a scheduled refueling and was not in*';1ved in the accident.
TMI-l is jointly owned by the Corporation's subsidiaries in the same percentages as TMI-2.
At September 30, 1980, total net investment by the subsidiaries in TMI-1 was approximately S379 million, including the unamortized investment in the nuclear fuel core of S30 million.
By orders dated July 2, 1979 and August 9, 1979, the Nuclear Regulatory Commission
("NRC") directed that TMI-l remain in a shut-down condition until resumption of operation is authorized by the NRC, after public hearings and the satisfaction of various requirements set forth in such orders.
Hearings commenced on October 15, 1980 before an NRC Atomic Safety and Licensing Board.
The normal hearing and decision making process would preclude the TMI-l return to operation before the fourth quarter of 1981.
Cost of Clean-up and Restoration:
The Corporation and its subsidiaries have entered into agreements with a consulting engineering firm under which the firm has agreed to provide various planning, engineering, procurement, construction and related services for the decontamination, defueling, rehabilitation and recommissioning of TMI-2.
The firm's initial report, released in 1979, indicated that, while the decontanination of the buildings and removal and disposal of large quantities of radicactive i
material is a major undertaking, the technology and techniques are well known and have been previously demonstrated.
That report estimated that the complete process would take about four years and cost approximately S400 million.
I 14 -
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In August 1980 as a result of a reassessment of plant con-ditions and the development of a definitive work plan and schedule, the preliminary estimate was revised.
The revised plan provides for decontamination, including fuel removal to be completed in 1983, at a cost of S500 million (exclusive of 595 million spent in 1979).
Restoration of the unit (in-cluding replacement of the nuclear fuel core) is expected to take an additional two years, at a cost of $260 million.
The estimated amounts are in 1980 dollars and do not include the cost of modifications to meet post-accident regulatory require-ments or the cost of ordinary operation and maintenance of TMI-2 expected to be incurred during this period, estimated at S90-S100 million.
The revised estimate emphasizes that major uncertainties remain, including (a) the regulatory environment, (b) the full scope of the challenges in decontaminating the reactor remain in question, (c) the ef fect of govern 'ent regulations on the issue of waste disposal and (d) the r2 usability of major components.
In September 1980 as a result of regulatory and financial constraints, the subsidiaries were forced to reduce substan-tially the level of effort for the clean-up of TMI-2.
In light of these constraints, in November 1980, the subsid-iaries advised the NRC that they expect the scheduled clean-up and restoration period to be extended two to three years.
The two to three year scheduled extension is expected to increase clean-up costs by about $150 million, for an aggregate cost of approximately S750 million (including 1979 expenditures) without any adjustment for inflation.
The subsidiaries as of September 30, 1980, in responding to the accident at TMI-2, have deferred S164.2 million of costs associated with the clean-up and recovery process.
In addition to the deferred clean-up and recovery costs, the TMI-2 nuclear fuel core was retired and its unamortized book cost of $36.8 million transferred to deferred debits (deferred costs - nuclear accident).
These deferred debits which aggre-gate S201.0 million have been partially of fset by the insurance proceeds of $130.1 million received through September 30, 1980.
All net deferred costs will be charged to operations or plant i
in service (for those which constitute permanent improvements) if it should be determined that such costs are not recoverable through additional insurance proceeds, rates or by financial assistance from the Federal government or from other public or private sources and/or the utility industry.
l The subsidiaries carried the maximum insurance coverage avail-able at the time (S300 million) for damage to the unit and core and for decontamination expenses.
The insurance does not cover replacement power costs, depreciation or return on in-vestment while the unit is not providing electricity for cus-tomers, but it otherwise covers most types of costr.
It is,
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the Corporation's belief that the recoveries from the insur-ance companies will approximate the amount of the insurance carried.
The subsidiaries do not know the extent, if any, to which the expenditures for repair and restoration of the unit to operation will represent plant improvements or other items that are capitalizable and which may be recoverable in the future through rates charged to customers by emortization or depreciation charges.
Moreover, the subsidiaries are seeking financial assistance from the Federal government and the utility industry.
Management believes that any loss suf fered by the subsidiaries for which they do not re-ceive financial assistance, or reimbursement from suppliers, is recoverable in ra te s.
Under these circumstances, the amount of loss, if any, suffered by the Corporation and its subsidiaries resulting from the TMI accident is not presently determinable and no provision therefore has been made in their accounts.
In its rate order issued on June 19, 1979 referred to below, the PaPUC recognized that no claim for such costs had been made in the proceedings in which such order was entered.
Nevertheless, the PaPUC stated in that order: "the Commission is of the view that none of the costs of responding to the incident, including repair, disposal of wastes and decontami-nation are recoverable f rom ratepayers.
These costs are and should be insurab' a. "
In its rate order of May 23, 1980, the PaPUC again addressed this issue, without any request having been made by Met-Ed or Penelec with respect thereto, by stating:
"With respect to the recovery of clean-up costs through rates, nothing in this order negates the statements of the Commission in the June 19, 1979 order."
On September 18, 1980 the PaPUC issued an order requiring, among other things, that Met-Ed " cease and desist from using any operating revenues for uninsured clean-up and restoration l
costs" of TMI-2.
In this order, the PaPUC stated that "these cleanup costs and expenditures not covered by insurance ulti-mately are the responsibility of the company's stockholders and/or the Federal government; however, they are not the responsibility of the ratepayers" and that the cease and desist order is designed "to insure that ratepayer monies l
are not being used, currently or in the future either directly l
or indirectly to pay clean-up expenses. "
On September 26, 1980 Met-Ed filed a complaint in the United l
States District Court for the Middle District of Pennsylvania seeking a temporary restraining order and an injunction against enforcement of the PaPUC's cease and desist order as well as declaratory relief.
In its complaint, Met-Ed alleged, among other things, that the PaPUC's cease and desist order was in conflict with Met-Ed's (i) obligations under the Atomic Energy Act, rules, regulations and orders thereunder, i
l l l
l
(ii) the operating license issued by the NRC for TMI-2 and (iii) Met-Ed's duties under the Pennsylvania Public Utllity Law to furnish and maintain adequate, efficient, safe and reasonable facilities.
Met-Ed believes that compliance with the PaPUC's cease and desist order could cause Met-Ed to violate State and Federal laws.
On September 26, 1980, the District Court denied Met-Ed's request for a temporary restraining order.
This matter is now pending before the District Court.
On October 16, 1980 Met-Ed filed an appeal of the PaPUC order in the Commonwealth Court of Pennsylvania.
Met-Ed and Penelec do not know what ef fect these actions of the PaPUC may have on their ultimate ability to recovery uninsured TMI-2 clean-up costs from ratepayers.
In the event of a final unfavorable determination in the administrative or judicial proceedings described above, Met-Ed and Penelec would be required to make provision, at that time, in their financial statements for the estimated losses that would result because of the TMI-2 accident.
These losses would have a material adverse ef fect on the earnings and financial position of Met-Ed and Penelec.
Similar actions by the NJBPU with respect to JCP&L would have a material adverse effect on its earnings and financial position.
In order to make provision for the substantial expenditures required for clean up and repair, replacement energy and other added costs resulting from this accident, the Corporation and its subsidiaries entered into a revolving credit agreement with a group of banks in June 1979 (see Note 2).
In addition, i
l JCP&L and Penelec each issued $50 million of first mortgage l
bonds in June 1979 and JCP&L issued S47.5 million cf first i
mortgage bonds in October 1979, $25 million of which was applied to the payment of maturing bonds.
As indicated by the subsequent paragraphs, the operating ex-penses, depreciation and return requirements associated with the investment in TMI-l and TMI-2 are not being recovered from customers.
Such depreciation and return requirements are currently being reflected in the financial statements in that (a) depreciation charges (TMI-1, $13 million annually and TMI-2, S23 million annually) in respect of the units are being provided and charged to expense, (b) the interest and preferred stock dividend components of these investments are being accrued, and (c) the earnings per share of common stock are determined on a basis which reflects all outstanding shares including the shares issued to finance the common stock com-ponents of these investments.
On September 18, 1980, the PaPUC directed its staf f and Met-Ed to address the issue of the continued booking of annual de-preciation expense for TMI-l and TMI-2, and its effect on t
L_
total operating income.
The PaPUC " referred to the possible classification of TMI-l and TMI-? as plant held for future use, or another classification wh. h might not require depreciation expense to be booked currently."
In response thereto Met-Ed and Penelec have indicated to the PaPUC that if this course is to be adopted, it would be approp-riate to focus initially on TMI-1.
They f urther indicated that consistent with the cessation of depreciation, the PaPUC would have to assure Met-Ed and Penelec, that upon TMI-l's return to operation, the depreciation reserve requirement attricutable to the unit would be no greater than the reserve requirement at the date of suspension of depreciation accruals.
Rate Proceedings - New Jersey:
On January 31, 1979, JCP&L was granted a S33.8 million annual rate increase by the New Jersey Board of Public Utilities ("NJBPU"), which, among other things, reflected n base rates its investment in TMI-2 and the operating and maintenance costs associated with the unit.
On June 18, 1979, the NJSPU issued a rate order reducing annual base revenues by S29 million which represented the amount allowed by the NJBPU in fts January 31, 1979 order for JCP&L's annual capital and operating costs associated with its interest in TMI-2.
The order also provided for a reduction in energy revenues of S7.3 million over a prospective eighteen month period as an offset to base rate revenues attributable to TMI-2, collected during April, May and June 1979.
Accord-ingly, such amount was recorded as a charge to deferred energy costs by JCP&L in June 1979.
In addition, the order authorized JCP&L to increase its levelized energy adjustment charges to its customers over the period July 1, 1979 -
December 31, 1980, by an amount which the NJBPU then believed would be sufficient to recover the replacement power costs associated with the non-availability of TMI since March 31, 1979, assuming that TMI-l would resume the generation of electricity by January 1, 1980.
On September 5, 1979, the NJBPU authorized JCP&L to increase its levelized energy adjustment clause ("LEAC") charges to recover increases in energy costs, not associated with replacement of TMI generation, anticipated for the period September 1, 1979 - August 31', 1980; such increase was expected to provide approximately S70 million of revenues during that period.
In light of the NRC's action requiring that TMI-1 remain in a shut-down condition until resumption of operation is author-ized by it, while allowing similar units to operate, and as a result of increased fuel costs, JCP&L on January 21, 1980 _
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filed with the NJBPU for an increase in its LEAC charges of
$142 million annually, ef fective March 1, 1980.
On March 6, 1980, the NJBPU authorized JCP&L to increase its LEAC charges, ef fective March 6, 1980, for non-TMI energy costs by a f actor estimated to produce approximately S84 million of additional annual revenues.
Moreover, on April 1, 1980, the NJBPU authorized JCP&L to increase its levelized energy adjustment clausa charges for TMI replace ent energy costs by S34.2 million annually, ef fective immediately.
By a separate order ef fective April 1,1980, the NJBPU removed from JCP&L's base rates the capital and operating costs assoc-iated with TMI-l of $17.9 million annually.
That order did not reduce JCP&L's charges to customers; instead, it directed that an equivalent amount (after adiustment for revenue taxes) be applied to accelerate the amorcization of its deferred energy costs incurred prior to thu TMI-2 accident.
In removing TMI-l from JCP&L's base rates, the NJBPU determined that "given the extended period of unavailability and the impossibility of ascertaining when the unit may return to service, TMI-l is not used and useful in supplying energy...." JCP&L has appealed to the Supreme Court of New Jersey, the portion of the order which removed TM1-1 costs from base rates.
Other parties have filed cross appeals, contesting the provision of that order directing the acceleration of the amortization of prior deferred energy costs.
On April 29, 1980, JCP&L, filed a petition with the NJBPU requesting an increase in base rates of $173 million annually.
The petition requested an interim increase of $60 million annually subject to review and possible refund at the conclusion of the rate case.
On May 13, 1980, the NJBPU granted such interim increase subject to possible refund.
Through September 30, 1980, JCP&L has collected approximately l
S23 million pursuant to such interim increase.
The order granting such increase prohibited the payment of dividends by JCP&L to the Corporation for the balance of 1980.
(No such dividends have been paid since the TMI-2 accident.)
Hearings on the petition for the increase are continuing.
JCP&L, on July 21, 1980, petitioned the NJBPU for an increase in its LEAC charges of S77.8 million annually, ef fective September 1, 1980.
The requested increase was attributable to the continuing high cost of oil, an anticipated future outage l
at the Oyster Creek nuclear generating station and the delay in the return to operation of TMI-1.
On October 2, 1980 the NJBPU issued an order denying the requested LEAC increase.
The NJBPU's decision to deny the request was predicated on the acceptance of assumptions that
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differed'from those utilized by JCP&L to forecast future energy costs.
Dif ferences related to such variables as future sales of electricity, replacement power costs, the timing of an anticipated future outage at the Oyster Creek Nuclear Generating Plant, coal costs, oil costs and others.
However, the order of October 2,1980 stated, "The Board wishes to make it perfectly clear to all parties that in the event of any material change in the circumstances of the Company, it will, on an expedited basis, entertain a petition to reexamine the Company's LEAC."
During the pendency of the proceedings which resulted in the June 18, 1979 order of the NJBPU, certain intervenors requested that the NJBPU consider the issue of fault regarding the causation of the TMI-2 accident.
At that time, the NJBPU ruled that this issue would be considered in a later phase of such proceedings.
On January 23, 1980, the NJBPU directed the filing of legal memoranda attempting to identify
~
the legal standards which should govern the NJBPU's evaluation of fault, the legal and factual contentions regarding fault, the regulatory consequences of a f ault finding, the NJBPU's legal authority to impose such consequences and the implica-tions thereof.
Such memoranda have been filed.
On March 6, 1980, the NJBPU stated that it will establish a hearing date to begin consideration of the above issues.
Rate Proceedings - Pennsylvania:
During the first quarter of 1979, Met-Ed and Penelec were granted retail rate increases by the PaPUC which, among other things, reflected in base rates their investment in TMI-2 and operating and maintenance costs associated with the unit.
On April 19, 1979 and April 25, 1979, following the TMI-2 accident, the PaPUC established temporary rates for Met-Ed and Penelec, respectively, reducing annual base revenues by amounts approximating the operating and capital
~
costs that had been allowed in their rate increase orders associated with their interests in TMI-2.
These actions ef fectively revoked, prior to becoming ef fective, the S46.6 million increase in base rates granted Met-Ed on March 22, 1979, returning the rates to levels in ef fect prior to that rate order.
In Penelec's case, the PaPUC prospectively l
reduced by S25 million the S56.2 million rate increase which Penelec had been billing since January 27, 1979 pursuant to the prior PaPUC order.
On June 19, 1979, the PaPUC issued a rate order which directed that Met-Ed's and Penelec's temporary rates prescribed by its April 19, 1979 and April 25, 1979 orders, respectively, be made permanent.
In addition, the order _
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established levelized energy cost rates for Met-Ed and Penelec for the period July 1, 1979 - December 31, 1980 at a level which the PaPUC then believed would be sufficient to recover the increases in the companies' energy costs during that period, assuming that TMI-l would resume the generation of electricity on January, 1, 1980.
The order also made provision for the amortization through base rates by Met-Ed of S5.8 million annually of previously deferred energy costs of $14 million, and by Penelec of $5.5 million annually of previously deferred energy costs.of $19.4 million.
In its rate order issued in June 1979, the PaPUC determined that the capital and operating costs associated with TMI-l should continue to be reflected in base rates, but stated tha t this matter would be reexamined if TMI-l was not oper-ating by January 1, 1980.
On September 20, 1979, the PaPUC issued an order instituting an investigation to determine whether the costs of Met-Ed and Penelec associated with TMI-l should be removed from their base rates.
In view of the delay in the restart of TMI-l and increased fuel costs, Met-Ed on November 1, 1979 filed with the PaPUC a petition for an increase in its levelized energy cost rates of S55 million annually, ef fective January 1, 1980.
On February 8, 1980, the PaPUC issued an order granting, ef fec-tive March 1, 1980, on an interim basis and subject to inves-tigation, Met-Ed's requested increase.
On November 1, 1979, the PaPUC ordered Met-Ed to show cause why its governmental authorization to conduct public utility operations should not be revoked.
On November 8,
- 1979, the PaPUC combined into one proceeding (i) its investigation to determine whether Met-Ed's and Penelec's costs associated with TMI-l should continue to be reflected in base rates,
(ii) Met-Ed's request for additional energy cost rates and l
(iii) its show cause order why Met-Ed's authorization to conduct public utility operations should not be revoked.
j With respect to this combined proceeding the PaPUC rendered a decision on May 23, 1980. The decision dismissed the show cause order regarding the revocation of Met-Ed's franchise to conduct public utility operations.
The PaPUC stated in this decision that " based upon this record no modification or revocation of Met-Ed's certificate is required at this time because we find no imminent and foreseeable threat to i
continued provision of adequate and reliable service at l
reasonable rates."
In addition, the PaPUC found in this i
decision tha t TMI-1 is not "useu and useful in the public l
service" and prescribed temporary base rates for Met-Ed and Penelec, ef fective June 1, 1980, which removed the capital
(
and crerating costs (Met-Ed - $27 million annually and l
Pene.ec - $12 million annually) associated with the unit from the companies' base rates. !
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U The PaPUC's decision of May 23, 1980 allows for "a full and current energy cost recovery,"
ef fective June 1, 1980.
More specifically the order: (i) affirmed Met-Ed's interim increase in its energy cost rates granted on February 8, 1980, and (ii) increased Met-Ed's and Penelec's energy cost rates, ef fective June 1,1980, by additional annual amounts of S27 million and S21 million, respectively.
These increases, together with the energy costs already provided for in the tarif f, are anticipated to provide suf ficient revenues for the full recovery of energy costs for the period June 1, 1980 through December 31, 1980. Moreover, the decision provided for the recovery of the then outstanding deferred energy costs over an 18 month period, in the form of a surcharge, ef fective June 1,1980, to Met-Ed's and Penelec's customers which is anticipated to increase annual revenues by $59 million and $5 million, respectively.
The PaPUC, in its decision, stated in respect of these recoveries of energy costs: "Those amounts are subject to audit and review by the Commission and to a later determina-tion that specific amounts of energy costs were imprudently or unreasonably incurred.
If the courts and/or the NRC should ultimately conclude that Met-Ed was imprudent or negligent in its operation or management of Three Mile Island, then this Commission will take notice of such determinations and their relevance to any portion of the replacement power costs for which current recovery is permitted today."
That decision further provided that Met-Ed and Penelec may include in costs recoverable through their energy cost rates the costs of demand charges associated with purchased power incurred from January 1, 1980 until TMI-1 returns to service or until further order of the PaPUC.
It also directed the reduction of Met-Ed's deferred energy cost balance in the amount of any refunds directed in the proceeding referred to below growing out of Met-Ed's 1974 coal purchases.
On July 29, 1980 Met-Ed and Penelec filed new tariffs with the PaPUC requesting annual increases in retail base rates of S76.5 million and S67.4 million, respectively.
Of these amounts $34.2 million and S15.2 million, respectively, pertain to operating and capital costs associated with TMI-1.
Met-Ed's petition requested an emergency interim increase of $34.1 million annually, ef fective no later than September 1, 1980, subject to a final determination at the conclusion of the rate case.
On August 28, 1980 the PaPUC 22 -
denied Met-Ed's request for emergency rate relief.
On September 29, 1980, Met-Ed filed a petition with the Common-wealth Court seeking to review and set aside the order.
On July 29, 1980, Met-Ed and Penelec also filed complaints with respect to the temporary rates established by the PaPUC by its order of May 23, 1980.
The complaints allege that the PaPUC's orders of May 23, 1980 deprive Met-Ed and Penelec of the opportunity to receive suf ficient revenue to provide for their operating and capital costs, to assure confidence in their financial integrity, so as to maintain their credit and ability to attract capital, and to provide a return commensurate with returns on investments in other enterprises having corresponding risks, and is, therefore confiscatory and inconsistent with statutory and constitu-tional requirements.
By an order dated October 16, 1?80 the administrative law judge consolidated for hearing carposes Met-Ed's and oenelec's complaints against the temporary base rates fixed by the PaPUC's orders of May 23, 1980 with their July 29, 1980 requests for increased retail base rates.
In such order the judge suggested that in the early consolidated hearings all parties focus on evidence which would enable an early dis-position of the controversy with respect to the complaints against the temporary rates.
Met-Ed and Penelec on October 27, 1980 and October 28, 1980, respectively, petitioned the PaPUC for purposes of implementing an early determination of their complaints against the temporary rates prescribed in its May 23, 1980 order and certain other related matters.
Such petitions request an increase in annual revenues of $25 million for Met-Ed and S10 million for Penelec.
The companies proposed to account for such increase for the period June 1, 1980 and the ef fective date of the modified base rates prescribed in response to the complaints by restating the deferred energy balances.
Furthermore, the companies propose to reduce their rate increase requests of July 29, 1980 by any amounts awarded with respect to these petitions.
Investigations:
On January 23, 1980, the NRC ordered Met-Ed to pay a fine of
$155,000 for safety, maintenance, procedural and training violations at TMI.
Such One was paid on February 13, 1980.
The NRC has also stated that, depending upon the findings of continuing investigations into the TMI-2 accident, it may -
take additional enforcement action such as assessing addi-tional civil penalties or ordering the suspension, modifi-cation or revocation of Met-Ed's license to operate TMI-2.
Met-Ed does not know what the ultimate outcome of this matter will be.
On October 30, 1979, the Presidential (Kemeny) Commission on the Accident at Three-Mile Island issued its report.
The Report states, in part, that its " investigation has revealed problems with the systen' that manuf actures, operates and regulates nuclear power plants" and the shortcomings which turned the incident into a serious accident "are attributable to the utility, to suppliers of equipment and to the federal commission that regulates nuclear power."
The NRC's Special Inquiry Group (Roracin) and the U.S. Senate Subcommittee on Nuclear Regulation (" Hart Committee") issued the results of.
their investigatlons of the accident at TMI-2 on January 23, 1980 and July 2, 1980, respectively.
Their conclusions with respect to these matters were similar to those of the Kemer Commission.
The U.S. General Accounting Of fice, in response to a request of the Hart Committee, issued a report, "Three Mile Island:
The Financial Fallout."
The report concludes in part:
"The financial stability of the GPU System has been seriously af fected by the results of the accident but recent State regulatory decisions have temporarily alleviated the System's cash flow problems and maintained the System's solvency."
" Removal of the TMI units from the companies' rate base considerations has an adverse impact on earnings needed to assere the System's future financial viability and the continuation of reliable power supplies."
"The TMI-2 accident has severely limited the System companies' ability to obtain funds from the capital market."
"The loss of earnings capability raises questions as i
l to the System's ability to fund TMI-2 clean-up costs i
and needed generating capacity."
" Federal regulatory agencies have done little to expedite the System's recovery from the accident."
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In addition, the report recommends that a detailed study be made by the Secretary of Energy regarding the future role of the GPU System as a provider of electric power in Pennsylvania and New Jersey.
The study should result in a report to the Jongress recommending any specific actions to be taken includ ing, if necessary, external assistance.
In addition, the report also urged the NP.C to act as quickly as possible, consistent with health and safety considerations on the ques-tion of restarting TMI-1.
In its order dated June 19, 1979, the PaPUC ordered a compre-hensive management audit of Met-Ed, Penelec and the Corporation, including an examination of the financial viability of Met-Ed and the Corporation and decisions relating to the canstruction, maintenance and operation of TMI-2.
On October 3, 1s00 the report of the management audit was filed with the PaPUC.
The re po rt stressed the subsidiaries' critical financial position, but indicated that the problems facing GPU can be solved.
The report cites the need to solve GPU's major financial problems through rates and financial assistance from the federal / state governments or the utility industry.
In March 1980, the NJBPU ordered a study of future options for JCP&L.
The firm conducting the study has been directed to determine whether the ultimate costs to JCP&L's customers of the accident at TMI-2 could be lessened if JCP&L's corpor-ate structure was changed or reorganized.
2he Corporation does not know what ef fect, if any, these eports will have upon it or its subsidicries.
Other investigations and inquiries into the nature, causes and consequences of the TMI-2 accident commenced by various federal and state bodies are continuing.
The Corporation and its subsidiaries are unable to estimate the full scope and nature of these continuing investigations or the potential consequences thereof to the investors in the securities of the Corporation and its subsidiaries.
The Corporation is also unable to determine the impact, if any, the results of such investigations may have on the proceedings to return TMI-l to operation and the efforts to rehabilitate TMI-2.
Law Suits:
As a result of the accider2, the Corporation, and/or its sub-sidiaries, have been named as defendants in various law suits.
The suits include (i) individual suits and purported and actual class actions for personal and property damages (including claims for punitive damages) resulting from the accident and (ii) suits to enjoin the future operations of TMI-2.
The suits described in (i) above involve questions as to whether certain of such claims, material in amount and arising out of both the accident itself and the cleanup and decontamination efforts are (a) subject to limitation of liabilty set by the Price-Anderson Act, and (b) outside the insurance coverage provided pursuant to the Price-Anderson Act.
These questions have not yet been resolved.
Class suits for damages on behalf of purchasers of GPU common stock during the period August 25, 1975 through April 1, 1979 have also been instituted against the Corporation and certain of its directors as a result of the accident.
These suits have raised questions, which have not yet been resolved, as to whether certain claims are beyond the insurance coverage for directors' and officers' liability carried by the System companies.
The directors have filed a cross-complaint against the insurance companies providing such insurance coverage.
The Corporation and its subsidiaries are presently unable to estimate the likelihood of an unfavorable outcome on any of the matters set forth in the preceding paragraphs or their financial exposure with respect thereto.
On March 25, 1980, the Corporation and its subsidiaries filed a complaint against the supplier (and its parent) of the nuc-lear steam system and associated services, training and procede;es for TMI-2, for damages suf fered by the Corpcration and its sabsidiaries as a result of the accident. The complaint alleges that the Samages incurred to date are in excess of S500 million and that very substantial future damages are expec ted.
On July 18, 1980, the defendants answered the complaint denying liability and seeking S4.1 million, plus finance charges, from the Corporation and its subsidiaries for services rendered and equipment allegedly provided under the contract for the TMI-2 nuclear steam supply system.
Insurance:
The property damage insurance, and the $300 million limit of coverage, was applicable to both TMI-l and TMI-2.
This property insurance has been reduced by claims paid.
The insurance carriers have reinstated the original coverage limits for TMI-1 but have not yet done so for TMI-2. Nego-tiations are continuing for such reinstatement but the outcome is uncertain at this time.
With regard to property insurance for TMI-2, S100 million of coverage has been obtained for possible damage which might result from a non-nuclear accident during the unit's restoration period..
The Price-Anderson Act limits liability to third parties to S560 million for each nuclear incident.
Coverage of the first
$140 million (raised to $160 million following the accident) of such liability is provided by private insurance.
The next S355 million is provided by assessments of up to the limit of S5 million per nuclear reactor per incident, but not more than
$10 million per reactor in any calendar year.
The remainder is provided by a government indemnity.
Based on the ownership of three nuclear reactors, the subsidiaries' maximum potential assessment under these provisions would be $15 million per incident but not more than $30 million per calendar year for claims covered by this insurance.
The Corporation's private insurance under Price-Anderson pro-vides that coverage is reduced by claims paid but is subject to reinstatement to original coverage limits upon approval by the insurance carriers.
The subsidiaries have applied for such reinstatement but are unable at this time to ascertain whether or when such reinstatement will be approved.
The NRC has informed Met-Ed that the failure by it to obtain such reinstatement could result in the suspension or revocation of its license to operate TMI-2.
Ef fective September 15, 1980, JCP&L with respect to its Oyster Creek nuclear generating station only, is a member of Nuclear Electric Institute Limited ("NEIL").
NEIL, a mutual insurance company, provides coverage for the incremental cost of replace-ment power during prolonged accidental outages of nuclear power generating units.
As a member of NEIL, JCP&L is subject to a retrospective premium adjustment limited to $7.55 million which is five times its annual premium, in the event that losses exceed the accumulated funds available to NEIL.
JCP&L's insurance coverage under NEIL provides for a maximum weekly indemnity of $2.0 million for the incremental cost of l
replacement power.
The policy limits covered. outages to i
fif ty-two weeks at 100% of the weekly indemnity and fif ty-l two additional weeks at 50% of the weekly indemnity.
More-I over, the policy provides for a deductible, in that the first twenty-six weeks of any outage is not covered.
I Forked River Project
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On November 6, 1980, as a result of regulatory and cost uncer-l tainties, JCP&L terminated its ef fort to proceed with the construction of the Forked River Nuclear project.
JCP&L's investment in the project at the time of its abandonment was
$394 million.
Of this investment, S82 million reflects the accrual of the allowance for funds used during construction.
During the second quarter of 1979, in view of the impact of the accident at TMI-2 on its financing capability JCP&L suspended construction on the project. _
In its April 29, 1980 rate increase application, JCP&L had requested approximately $52 million, in annual base revenues, associated with its investment in Forked River or for the amortization of such investment if the project should be abandoned.
In conjunction with the proceedings, JCP&L was reviewing possible alternatives for the supply of additional capacity, including the possible conversion of the Forked River project to a coal-fired facility.
Pending resolution of these matters, JCP&L, ef fective April 1,1980, ceased the accrual of credits to income for the carrying costs of funds associated with construction of the project (allowance for funds used during construction).
JCP&L is continuing with the investigation of the possibility of developing a coal fired generating station at Forked River in addition to other sites.
These financial statements do not reflect the ef fects of aban-donment of the Forked River project.
In the fourth quarter of 1980 the investment in such project will be reclassified from construction work in progress to deferred debits-extra-ordinary property losses, pending the ultimate resolution of its recovery in rates.
It is anticipated that abandonment of the project will result in a consolidated net operating tax loss carry-forward.
Coal Purchase Costs In January and April 1977, the PaPUC issued amended complaints asserting that Met-Ed and Penelec made payments in 1974 for coal that were S9.8 million and $4.9 million, respectively, in excess of those required by their contracts, and that such excess payments were without justification and directing Met-Ed and Penelec to show cause why they should not be required to refund S9.8 million and S4.9 million, respectively, to their customers. Met-Ed and Penelec believe that the payments which they made were justified and that there is no basis for requiring such refunds and they so responded to the complaints.
During the spring of 1980, the PaPUC upheld such complaints against Met-Ed in part and ordered Met-Ed to refund to its customers S3.7 million plus interest at 6% per annum, or an aggregate of S4.7 million. As noted above, in its order of May 23, 1980 with respect to the consolidated rate and other proceedings, the PaPUC directed Met-Ed to reduce its deferred energy costs balance in satisfaction of such refunds.
Effec-tive May 1980, Met-Ed recorded such adjustment, net of related tax benefits of S2.1 million.
Met-Ed has appealed the PaPUC's decision in the Pennsylvania Commonwealth Court.
i In November and December 1978, the PaPUC issued further complaints asserting that Met-Ed and Penelec incurred excess costs of S4.6 million and S.8 million, respectively, for coal purchased during 1975 and 1976, and that such excess payments were without justification and directing Met-Ed and Penelec to show cause why they should not be required to refund S4.6 millien and S.8 million, respectively, to their customers.
Such complaints were based on audit reports prepared by the PaPUC staff.
Met-Ed and Penelec believe that the payments d
which they made were justified and that there is no basis for requiring such refunds. and they have so responded to the complaints.
The Corporation is unable at this time to predict the 1
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outcome of these matters.
Compliance Audits During 1977 and 1978, the staff of the Federal Energy Regulatory Commission ("FERC") conducted compliance audits l
of Met-Ed's and Penelec's accounting records covering the periods ending December 31, 1976 and December 31, 1977, i
respectively.
With one exception, matters raised by such audits have been resolved and the accounting acjustments made.
The remaining unresolved issue concerns AFC accruals of Sl.2 million in the case of Met-Ed and S.6 million in Penelec's case for the 1974-1978 period.
On April 15, 1980, FERC ordered Met-Ed to make an entry with respect to that issue which would require the reversal of that accrual.
Met-Ed filed sa application for reconsideration by the FERC and suggested, alternatively, that the subject amount be i
transferred to deferred debits.
On November 12, 1980, the FERC authorized such transfer and directed that such amounts shall be amortized coincidental with their rate ;ucognition l
by the PaPUC.
Nuclear Fuel Litigation l
In 1971, JCP&L entered into a contract for the purchase of three nuclear fuel reloads for the Oyster Creek Station, I
with an option for five additional annual reloads beginning in 1976.
In 1974 the supplier offered an extension of that contract to cover five additional annual reloads beginning in 1981.
JCP&L believes that it effectively exercised the option in the initial contract and accepted the of fer to extend the contract to cover the annual reloads through
~ e supplier disputes this position and, in November 1985.
- 1978,
..itted bills for material and services in the aggregat. amount of approximately S2 3 million, covering reloads supplied in 1977, 1978 and 1979.
The supplier stated that its objec ive vas to establish revised prices and other terms and cond2: ions rather than to diminish supplies and, without prejudice to its legal position, provided the 1979 annual fuel reload.
Of the S33 million _
i claimed by the supplier to be due, JCP&L has paid approxi-mately S3.8 million and is of the opinion that the balance of approximately $29 million is not payable by it and has so informed the supplier.
On January 26, 1979, the supp'ier filed suit against JCP&L, the Corporation and GPU Service Corpo ra tion.
JCP&L has filed a counterclaim for a declara-tory judgment confirming its view of the contractual status and for damages and has also filed another suit against the supplier and its parent seeking damages.
JCP&L believes that any additional amount that it might be required to pay if the supplier is successful in its suit would be valid costs and should be recognized for rate-making purposes.
However, there can be no assurance that this will be the case.
If the suits were to be resolved in the supplier's favor, JCP&L would incur S8.1 million in addi*:ional fuel expense, based on the amount of fuel consumed through September 30, 1980.
Other The subsidiaries' construction programs, which extend over several years, contemplate expenditures of approximately S235 million during 1980.
In connection with these construc-tion programs the subsidiaries have incurred substantial commitments.
The subsidiaries are engaged in negotiations and, in certain instances, litigation with various suppliers relating to the latters' claims for delay or termination charges or increased fees which such suppliers assert result from the subsidiaries' revisions of their construction plans and schedules and/or from the increased scope of supply.
The subsidiaries' manage-ments do not expect at this time that such negotiations and litigation will result in any material increase in costs that would not be valid costs properly recognizable through the rate-making process.
Claims for damages arising out of the operation of the Oyster Creek station have been asserted.
JCP&L's management believes that such liability, if any, as it may have for such damages in the pending suits and for all asserted and potential similar claims would not be material.
JCP&L was a participant in the Atlantic generating station project.
In December 1978, the non-affiliated co-owner and principal sponsor of the station announced the abandonment of the project.
At September 30, 1980, JCP&L's investment in the project was S4.2 million. In its pending rate increase application to the NJBPU, JCP&L is seeking allowance for amor-ti:stion of its investment in the project for rate-making purposes.
In the testimony submitted by NJBPU staf f members in connection with JCP&L's motion for an interim rate increase, they recommended allowance for rate-making purposes of amor-tization of this investment over a 20-year period.
Effective April 1, 1980, in accordance with the FERC's authorization,.
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JCP&L is amortizing its investment in the Atlantic station (net of related income tax benefits of 51.4 million) over a period of 20 years.
Met-Ed has cancelled plans for its Berne generating station.
At September 30, 1980, Met-Ed's investment in the project was approximately $6.4 million, of which amount S3.8 million rep-resented investment in land and S2.6 m'llion preliminary licensing, environmental and engineering studies. In its July 29, 1980 rate increase application, Met-Ed asked the PaPUC for authorization to amortize its investment in the project, subject to disposition of the land, over a period of five years, and for the inclusion of the unamortized portion in rate base.
There can be no assurance that such treatment will be granted.
The Stony Creek pumped storage project has been cancelled by its principal sponsor.
At September 30, 1980, Met-Ed's in-vestment in the project was approximately S2.6 million.
In its current rate proceeding, Met-Ed has asked for authoriza-tion to amortize such investment over a period of five years and for the inclusion of the unamortized portion in rate base.
There can be no assurance that such treatment will be granted.
2.
SHORT-TERM BORROWING ARRANGEMENTS In June 1979, the Corporation and its subsidiaries entered into a revolving credit agreement with a group of banks, under which they had available, at September 30, 1980, S292 million of credit, of which S263 million (S250 million of short-term borrowings, S13 million of first mortgage bonds due October 1, 1981) has been utilized for outstanding borrowings.
Such available credit can be increased to S412 million upon the approval of banks holding 85% of the notes outstanding.
i Subject to the overall system limit, which is less than the total of the individual limits of the Corporation and its subsidiaries, the individual limits are:
the Corporation -
S75 million (which can be increased to S150 million upon the I
approval of the banks holding 85% of the notes outstanding),
JCP&L - $139 million, Met-Ed - $125 million (including S13 j
million of bonds sold to the banks in January 1980) and Penelec Sil6 million.
The agreement provides for a commitment fee of i
one-half of one percent per annum of each bank's total commit-ment (whether used or unused).
Interest rates on such borrow-j ings range from 105% to 111% of the prime rate.
In light of the actions taken by the PaPUC on May 23, 1980, l
and August 28, 1960 the banks, by letter dated September 5, 1980, advised that they do not expect Met-Ed to borrow in l,
excess of an amount equal to its " Liquid Assets," defined as S20,000,000 (the value ascribed by the banks to the uranium Met-Ed has pledged to them as collateral) plus the amount-i l
l l
of Met-Ed's deferred energy account which amount is anticipated i
to decrease f rom time to time (S68 million at September 30, i
1980).
The banks stated, however, that they would permit Met-Ed to borrow in excess of its " Liquid Assets" to the extent that Met-Ed pledged acceptable short-term liquid assets to the banks, such as accounts receivable.
On November 14, 1980 Met-Ed pledged $25 million of its customer accounts receivable as security for loans under the revolving credit agreement.
The Corporation has guaranteed all borrowings outstanding under the revolving credit agreement.
As security for such guarantee, the Corporation's S39 million term loan, and the guarantee by the Corporation of S4.7 million of loans to GPU Service Corporation ("GPUSC"), the Corporation has pledged the common stock of JCP&L, Met-Ed, Penelec and GPUSC.
JCP&L and Met-Ed have secured their notes under the revolving credit agreement by granting a security interest in certain nuclear fuel in the process of refinement, conversion, enrich-ment and fabrication.
Such nuclear fuel was recorded, on the September 30, 1980 balance sheet, at a cost of $36.0 million (JCP&L - $17.7 million and Met-Ed
- $18.3 million).
In addition, Met-Ed has pledged S40 million of first mortgage bonds as securir;y for its indebtedness under the revolving credit agreement.
JCP&L has entered into agreements for the sale of' approx-imately 550,000 pounds of uranium for an aggregate sale price of approximately S17 million.
In order to obtain the approval of the banks for the sale of 250,000 pounds of this uranium, which was pledged to the banks as security, JCP&L agreed to apply the entire proceeds of the sales to prepay notes under the agreement. The banks, however, advised JCP&L that its loan limit under the agreement would be automatically reduced by the amount of such prepayment.
To date, JCP&L has sold 200,000 pounds 6f uranium for S6 million and has used the proceeds to retire notes.
The gain from such sales (S2 million) was used to reduce JCP&L's investment in the Forked River Proiect (See Note 1).
The revolving credit agreement and the purchase agreements for the bonds sold by JCP&L and Penelec subsequent to the accident at TMI-2 ($147.5 million) contain provisions for the immediate payment of the indebtedness involved upon the occurrence of an event deemed by specified majorities of the lenders or of holders of such bonds to have a materially adverse effect on the borrower.
The Corporation and its subst !iaries have informal lines of credit with various lenders, which are terminable at any.
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time.
The arrangements associated with such lines generally provide for the maintenance of compensating balances ranging from a minimum of 10% of the available line of credit to a maximum of 10% of the line plus 10% of the loans outstanding, as determined on a daily average basis.
At September 30, 1980, the lines of credit available under these arrangements totaled approximately S22 million.
However, the revolving credit agreement provides that the amount of debt outstanding under these lines cannot exceed $15 million.
3.
Reference is made to the Notes to Financial Statements in-cluded in the 1979 Annual Reports to Stockholders issued by the Corporation, JCP&L, Me t-Ed and Penelec.
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. EXHIBIT 2.,..
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARIES MANAGEMENT'S COMMENTS ON QUARTERLY INCOME STATEMENTS As a result of the Three Mile Island Nuclear Accident (TMI Accident) in March 1979, the GPU System has about $1.5 billion of assets which are not earning a return for stockholders.
The New Jersey and Pennsylvania Commissions removed Three Mile Island Unit 2 (TMI-2) from the operating subsidiaries' rate base in the second quarter of 1979 and removed Three Mile Island Unit 1 (TMI-1), the undamaged unit, from rate base in the second quarter of 1980.
The operating subsidiaries are continuing to reflect in their financial statements the impact of capital and operating costs associated with TMI-l and TMI-2.
The Forked River nuclear project was also affected by the TMI Accident.
Construction on the project was halted in the second quarter of 1979.
Effective April 1, 1980, GPU suspended credits to income (AFUDC) for the carrying costs of funds associated with the project.
On November 6, 1980, as a result of regulatory and cost uncertainties, the project was cancelled and JCP&L, the GPU subsidiary owning Forked River, is seeking recovery of this investment in current rate proceedings.
l Following is an analysis of the effects of operations on our quarterly results.
l l
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GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARIES Management's Comments on Quarterly Income Statements Third Ouarter 1980 vs. Third Ouarter 1979 The principal factors resulting in the $15 million decline in net income follows:
Revenues other than those related to energy costs increased S22 million or 9% as follows:
(In Millions) 2% increase in kilowatt-hour sales S
5 JCP&L interim rate increase (see Note 1 to Financial Statements) 18 Increased recovery of revenue taxes 11 Removal of TMI-l from base rates (see Note 1 to Financial Statements)
(14)
Other changes 2
S 22 Revenues relating to the cost of energy increased S84 million or 58%.
Related energy costs increased S 84 million as a result of:
Increased fuel costs which resulted from increased unit costs S 20 million Increased power purchased and interch nged resulting primarily from the lowe. gen-eration from the Oyster Creek nuclear unit and the outage at the Shawville generating station 27 million Reduction of the deferred energy balance resulting from changes in the subsi-diaries energy clauses resulting in accelerated recoveries of energy costs (see Note 1 to Financial Statements) 37 million Total S 84 million
. Payroll and other operation and maintenance expenses increased S28 million or 37% which primarily resulted from increased expenditures at TMI-l (the undamaged ' unit), a recently-settled strike at Pennsylvania Electric Company (Penelec), other increased operating costs and inflationary factors Taxes other than income increased $8 million or 23%
resulting mainly from higher revenue related taxes and increased property taxes, partially offset by decreased capital stock taxes.
Interest expense increased $3 million or 6% primarily as a result of higher levels of short-term debt outstanding at higher interest rates (see Note 2 to Financial Statements).
Income taxes decreased $9 million or 58% primarily as a result of the variations mentioned above.
Allowance for funds used during construction decreased
$7 million or 50% primarily as a result of the suspension of construction credits charged to income for the Forked River nuclear unit (see Note 1 to Financial Statements).
Third Ouarter 1980 vs. Second Ouarter 1980 The principal factors resulting in the S19 million increase in net income follows:
i Revenues other than those related to energy costs increased
$30 million or 13% as follows:
(In Millions) 5% increast in kilowatt-hour sales S 13 JCP&L interim rate increase (see Note 1 to Financial Statements) 13 Increased recovery of revenue taxes 2
Removal of TMI-l from base rates (see Note 1 to Financial Statements)
(6)
Other changes 8
$ 30 l
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. Revenues related to the cost of energy increased S35 million or 18%.
Related energy costs increased S33 million as a result of:
Reduction of the deferred energy balance resulting from changes in the subsidiaries energy clauses resulting in accelerated recoveries of energy costs, partially offset by the write-of f of alleged 1974 coal overpayments (see Note 1 to Financial Statements)
S 9 million Increased fuel costs of which S35 million resulted from increased generation partially offset by S4 million from lower unit costs 31 million Decreased power purchased and inter-changed resulting primarily from the return to serivce of the Oyster Creek nuclear station
- 17) million To tal S33 million Payroll and other operation and maintenance expenses increased $2 million or 2% primarily as a result of increased operating costs and inflationary f actors.
Interest expense decreased $4 million or 6% mainly as a result of lower levels of short-term debt outstanding (see Note 2 to Financial Statements).
Income taxes increased S15 million primarily as a result of the variations mentioned above.
. Nine Months September 1980 vs. Nine Months September 1979 The principal factors resulting in the S62 million or 76% decrease in net income follows:
Revenues other than those related to energy costs increased S16 million or 2% as follows:
(In Millions)
JCP&L interim rate increase (see Note 1 to Financial Statements)
S 23 Increased recovery of revenue taxes 27 2% decrease in kilowatt-hour sales (6)
Removal of TMI-l from base rates (see Note 1 to Financial Statements)
(19)
Removal of TMI-2 from base rates (see Note 1 to Financial Statements)
(21)
Other changes 12 S 16 Revenues relating to the cost of energy increased S244 million or 66%.
Related energy costs increased $241 million as a result of:
Increased fuel costs of which S89 million respited from increased unit costs partially offset by $57 million from decreased generation S 32 million Increased power purchased and interchanged resulting mainly from the loss of generation from the TMI units, the Oyster Creek nuclear unit, Homer City Unit 2 and the Shawville station 193 million Reduction of the deferred energy balance resulting from changes in the subsidiaries energy clauses resulting in accelerated recoveries of energy costs and the write-off of alleged 1974 coal overpayments partially offset by June 1979 adjustment by JCP&L for TMI-2 revenues (see Note 1 to Financial Statements) 16 million Total
$241 million
. Payroll and other operation and maintenance expenses increased S71 million or 31% which primarily resulted from the extended outage of the Oyster Creek nuclear ~ unit, a recently-settled strike at Penelec, increased expenditures at TMI-l (the undamaged unit) and inflationary factors.
Taxes other than income increased $20 million or 18%
resulting from higher revenue related taxes and increased property taxes, partially offset by decreased capital stock taxes.
Interest expense increased S26 million or 19% as a result of higher levels of debt and interest ra tes (see Note 2 to Financial Statements).
Income taxes declined $49 million or 82% primarily as a result of the variations mentioned above.
Allowance for funds used during construction declined about $10 million or 28% primarily as a result of the suspension of construction credits charged to income for the Forked River nuclear unit (see Note 1 to Financial Statements).
PARP II Item 1 - LEGAL ParYTFnIES Reference is made to Note 1 to Consolidated Financial Statements and to the Current Reports on Form 8-K for August, September and October 1980, jointly filed by the Corporation and its subsid-iaries, regarding the current status of certain legal proceedings instituted against the Corporation and its affiliates as a result of the March 28, 1979 nuclear accident at Unit No. 2 of the '1hree Mile Island nuclear generating station ("IMI-2"). Copies of these reports are filed herewith as exhibits and incorporated herein by reference.
In August 1980, an additional complaint was filed by an employee of Jersey Central Power & Light Company ("JCP&L") with the Equal Enployment Opportunity Comission ("EEXE") alleging age dis-crimination by JCP&L. 'Ibe matter is pending before the EEOC.
Its June 1980, a former employee of Metropolitan Edison Company
(" Met-Ed") filed a complaint with the Pennsylvania Human Relations Comission ("PHBC") alleging she was improperly discharged from enployment on the basis of sex and other causes. Met-B1 has denied the charges, and the matter is now pending before the PHBC.
In September 1980, a complaint previously filed by a female em-Ployee against Pennsylvania Electric Company ("Penelec") alleging discrimination on the basis of sex was settled and closed by the PHBC.
In July 1980, Penelec was served with a citation by the Pennsyl-vania Department of Environmental Resources ("PaDER") for violation of certain visible emission regulations applicable to penelec's Seward generating station. Penelec has paid the fine and costs involved which amounted to $110.
In August 1980, Penelec was served with a citation by the PaDER for violation of visible emission regulations applicable to Unit No. 1 of the Homer City generating station. Penelec has paid the fine and costs involved, amounting to $316.
Reference is made to Penelec's 1979 Annual Report on Form 10-K for a description of the proceeding involving the petition filed by Penelec with the Pennsylvania Comonwealth Court on February 26, 1979 to review and set aside the January 26, 1979 final rate order of the Pennsylvania Puolic Utility Comission ("PaPLE") as arbi-trary, unreasonable and unlawful in certain respects. Ch July 23, 1980, the Comonwealth Court affirmed the PaPLE's rate order.
l
Item 8 - OINER MATERIALLY IMPORIMr EVENTS Reference is made to tete 1 to Consolidated Financial Statements and to the Current Reports on Form 8-K for August, September and October 1980, jointly filed by the Corporation and its subsid-iaries, for information concerning the 'IMI-2 nuclear accident and its aftermath, including, among cther matters, the status of various proceedings pending before the PaPLC, the New Jersey Board of Public Utilities and the toclear Regulatory Consnission. Copies of these reports are filed herewith as exhibits and incorporated herein by reference.
Reference is made to the Current Report on Ebrm 8-K for August 1980 and to Note 2 to the Consolidated Financial Statements for informa-tion concerning additional restrictions imposed by the banks on Met-Ed's borrowing capacity under the GPU System Bevolving Credit Agreement. Met-93 has now received the necessary regulatory approvals to pledge its customers' accounts receivables to the banks as additional collateral under the Agreement and, on November 14, 1980, such accounts receivable w e so pledged.
Effective as of October 10, 1980, Citibank, N.A., the Trustee under JCP&L's first mortgage bond indenture, dated as of March 1, 1946, resigned and was replaced by the J. Henry Schroder Bank & Trust Conpany.
Item 9 - EXHIBITS AND REPORTS ON EGM 8-K (a)
Exhibits:
(1) Current Report on Form 8-K, dated September 9, 1980, jointly filed by the Company and its affiliates.
(The exhibits to such report are incorporated herein by reference.)
(2) Current Report on Ebrm 8-K, dated October 9, 1980, jointly filed by the Company and its affiliates.
(The exhibits to such report are incorporated herein by reference.)
(3) Current Report on Form 8-K, dated Novemoer 7, 1980, jointly filed by the Company and its affiliates.
(The exhibits to such report are incorporated herein by reference.)
~.
(b)
Reports on Form 8-K:
(1) Ebr the month of August 1980, dated September 9, 1980, under Item 5 (Other Materially Important Events).
(2) For the month of September 1980, dated October 9, 1980, under Item 5 (Other Materially Important Events).
(3) For the month of October 1980, dated November 7, 1980, under Item 5 (Other Materially Important Events).
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SIGNATURE
~ Pursuant to the requirements of the Securities E.xchange Act of 1934, the registrant has duly caused this quarterly report to be signed on its behalf by the undersigned thereunto duly authorized.
GENERAL PUBLIC UTILITIES CORPORATION l
1 November 14, 1980 By 4# n V.
H. Condon, Vice President and Principal Financial Officer e
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