ML19347E100
| ML19347E100 | |
| Person / Time | |
|---|---|
| Site: | Crystal River  |
| Issue date: | 02/20/1981 |
| From: | FLORIDA POWER CORP. |
| To: | |
| Shared Package | |
| ML19347E099 | List: |
| References | |
| NUDOCS 8104230417 | |
| Download: ML19347E100 (37) | |
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- Charles C. I.uthin "*"'~~"~T fr, l' ice President- Q% ' ' ',F Fw Robert F. I.anzillotti Dean, College of 7
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One of Florida's major industries, < Florida will be one of the most r ! tourism, will continue to expand during growing states during the 1980's, ' the 19S0's. Florida's picturesque becoming the nation's 4th largest by beaches, lakes and ideal weather are 1990, with a population of 12,000,000. complemented by the many attractions The age structure will shift slightly , which have already proven their toward those over 65. Average popularity. A number of new projects household size will continue falling from ' are under way to expand or create more 2.9 in 1970 to 2.1 persons by 1990. For family attractions to entice both new Florida's utilities, this will require a and return visitors. The enlargement of larger number of service connections Central Florida's airports and expansion per 1,000 persons than in the past. ; of international flights should provide a About 2,600,000 housing units will go ! setting for substantial increases in up during the 1980's; 5SW will be single-
, foreign visitors. Orange County's new family residences. Florida's economy will :
Convention Center will also have a still be " driven" by the service sector, I positive impact. but manufacturing will become more l f Increased leisure time, the growing important. I importance of vacationing, and Employment growth will be most - additional international interest combine promising in certain key areas. This new with the recognition of the importance surge in growth will challenge the : of tourism by the people of Florida to state's leaders to develop forward-keep our State in the forefront of looking economic policies. Hopefully, l i tourism throughout the 1980's. As a they will rely increasingly on the market result, this should generate expansion of system to give appropriate signals , i the many industries which serve tourism through the pricing mechanism to help l and impact their energy needs, balance the need for industrial j expansion and the encouragement of ; energy conservation. ' i 1
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e continuing diversification of uring the next ten years, Florida Florida's economy includes industrial will continue to be the country's number growth as a new stabilizing factor in our one supplier of citrus products. outlook for the 1980's. As one of the Although citrus production will expand : nation's fastest growing states, our i during the next decade, it will come ! plans must continue to be comprehensive primarily through the maturing of trees and innovative to attract new industry planted during the 1970's, providing - and encourage expansion of existing higher per-acreage production. Better industries. Our projections reveal that methods of disease control, greater our manufacturing sector will expand market stability and improved employment at five times the national management techniques will result in a rate during the next decade. Our goal is brighter economic outlook in this $2 t to add 200,000 new jobs by 1990. billion a year industry. i
" Target industries" which are compat. Florida's heef cattle production, which !
ible with our non-business objectives ranks 9th in the country, provides the such as environmental protection, yet state's agribusiness industry with one of are appealing and competitive, include its largest areas of growth potential. ~ medical instrumentation, drugs and Enhanced productivity will be the by-pharmaceuticals, aviation, defense, and Product of improved feed through the electronics for data management, and use of natural fertilizers and the telecommunications. Our efforts to at. development of strains of cattle which tract and keep these especially desirable are more compatible with the Florida industries is well under way, with the environment. Our state will also see active assistance of Florida business increases in our dairy industry's output leaders in these specific fields. and expanded production of vegetable crops. i f
i I U 7- Andrew II Ilinen.Jr. V [_.ng n -- -
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s . le preceding comments from four of As a business with over 80 years of , Florida's outstanding leaders point history, Florida Power Corporation plays j toward continued growth in the Florida a vital role in accommodating the needs - economy. In the time when some are and demands of the area we serve. We still debating the wisdom or value of provide an essential service-clean, effi-growth, the direction of Florida's future cient electric energy. The growth of the is becoming increasingly clear. The natu- state in the past several decades has ral assets with which our state is been solidly buttressed by the availabil-blessed and the broad national and inter- ity and adequacy of that energy supply. national trends of population movement, Air conditioning has made possible a flow of commerce and international great deal of Florida's development. If trade indicate that Florida's growth will growth is to be dealt with effectively, be very streng in the 1980's. It is the then an adequate and strong supply of belief of many Floridians that the electric energy is vital. i state's growth can be directed and con-31any things must happen in order for trolled in such a way that the benefits to this supply to be available. One of the all will far exceed the costs which are most important is the development and the price for any growth. implementation of very large scale en-The validity of this position is under- ergy conservation programs. These be-scored by developments in the 1970's. gan in earlier years, but a new impetus During that tumultuous era, Florida's was given in 1980 through the action of population growth was over 41'7<, placing the Florida Legislature and the Florida it seventh in size in the nation. As a Public Service Commission. The electric result, the state acquired four new Con; utilities in the state have submitted gressional seats in the redistricting broad gauge, highly diversified conserva-which is to become effective with the tion programs designed to sharply de-elections of 1982. 8104230417 1
a, During the year, the Company was ; subjected to an intensive management i crease the rate of growth for both elec- audit conducted by Arthur Young & tric capacity and energy. These are am- Company under the auspices of the Flor-bitious goais, but your Company as well ida Public Service Commission. The con-as the rest of the utility industry within clusions, quoting from the Executive Florida is dedicated to meeting them. It Summary are, that ". . . the company is is only through the strong advocacy and generally well managed, however, hand ; implementation of effective conservation in hand with the accomplishments of i programs that we will have an electric FPC's management team are the oppor-supply suflicient to meet the require. tunities to improve." We are heartened ments for the growth discussed by our by the favorable recognition. We found guest writers. the audit to be very helpful as a review Coupled with conservation there must, I * ".aggment practices and are en-nevertheless, be an expansion of coal- gaged in implementmg its recommenda-fired generating capacity and electric tions. Makmg those improvements is a transmission facilities to help reduce the high priority item for Florida Power's requirements for imported oil and to management and employees. l provide an adequate reserve for the un- The year 1980 was marked by continu- I foreseen contingencies of nature and the ing escalation in fuel oil prices. This re-economy. In one of nature's contingen- sults in very high electric bills. It also cies, Florida Power's electric system was places a severe strain on customer rela- l tested severely in early January 1981. tions and regulatory attitudes. There l At that time, unusually cold weather im. was considerable controversy during the ; posed a record peak load of 5,0SS,000 year with the Florida Public Service kilowatts. On January 13, it was neces- Commission. One of the items on the ! sary to resort to rolling blackouts for Commission's agenda dealt with an acci- ! about 30 minutes. Approximately 44,000 dent which occurred at the Crystal River ' ; customers were directly affected. We nuclear unit in 1978 and prolonged a had excellent cooperation from the public repair outage. The Commission recently which reduced its requirements during ordered a refund of approximately $14.7 ; this extremely cold weather. However, million to our customers because of the j the concept of falling short in supply of prolonged outage. The Company dis-electric service is not a good basis for agrees strongly with both the funda-planning the future. Both massive con- mental principle supporting the decision servation and additional coal-fired power and the computations involved. This mat-are needed. ter will probably be decided in the courts. 1 l 2
i Lw Florida's projected growth provides
" our Company with a " Challenge for the 80's." Despite the growing burden of
[ regulation and uncertain economic condi-
, t i _ lIi tions, we must continue to provide good, reliable service at the lowest possible L" * { l !
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e- we must provide a positive work incen-C - '" l* lI~ * I }i }! Ir tive for our employees . . . and maintain the interest and confidence of both our present and potential investors. I have confidence that this can be done. Your . Because of inflation and the .mability support in making it possible is deeply ' to fully recover its fuel costs, the Com' appreciated. pany's earnings declined to $1.66 per share. Two rate cases are being actively For the Board of Directors, pursued to help correct this situation. Nonetheless, your Board of Directors in-creased total common stock dividends for the 28th consecutive year. During 1980, the annua! dividend rate was
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raised from $1.50 to $1.64 per share. , This reflects a strong belief that inves-tors must be compensated for the use of President their capital. In the face of the problems of ram- February 20,1981 pant inflation and stress on consumers and savers alike, investors displayed re-newed confidence in your Company by committing over $280 million in fresh capital during 1980. This permitted the continuation of our construction pro- . grams to strengthen electric service and to reduce the need for oil. Our major effort in this regard is the completion of two 640,000 kilowatt coal-bugaing units acheduled for service in 1982 and 1984. 3
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Highlights of 1980 1980 1979 Revenues increased 16.1% $970,173,000 $835,493.000 Fuel And Purchased Power -Up 24.6% $513,186,000 $411,747,000 Earnings Per Share Were Down $1.66 $2.07 Dividends on Common Stock-Up 11% S1.565 $1.41 Consiuction E[ pad tures Were Up Sharply $316,974,000 $193,099,000 Sales of Energy-Up 7% 18.8 Billion KWH 17.6 Bilhon KWH Average Customers increased 5% 772,265 735,633 Average Residential Usage Was Up Slightly 10,643 KWH 10,496 KWH Peak Deman[Was Up 4.6% 4,419,000 KW 4,224,000 KW Contents 1 President's Report to Shareholders 5 Energy Sales and Usage 5 Energy Conservation 6 System Operations 10 Fuel 12 Constructnn Program 12 Research and Development 12 Environmental Comphance 13 Employees 14 Financial Review-Management's Discussion 17 Financial Statements 29 Selected Financial and Operating Data 30 Quarterly Data 31 Business and System Map 32 Directors and Officers 33 Sharehofder Informat;on 4
1 ENERGY SALES AND USAGE Florida Economy. The 1980 census reflects the economic climate of the 1970's, which resulted in Florida moving Energy sales to our residential customers .in. ahead of Michigan and New Jersey to become creased 6.5% in 1980, following a 1.3% increase the seventh most populous state. During 1980, ln 1979..The increase is a result of higher usage
. despite a nation-wide recession, Florida con- ~
and customer growth. The average energy
' tinued to experience expansion of its major in- usage by our residential customers was 10,643 dustries. Tourism, our fargest industry, was up kilowatt hours in 1980, up 1.4% from 1979, 3% primarily as a result of a significant increase although still below the 10,895 kilowatt-hours in foreign visitors. More than 37 million tourists used in 1978.
? visited the Sunshine State, spending about
$16 billion.
Our commercial customers used 1.8% less energy in 1980 than 1979, primarily due to the As a result of the increase in population, new . reclassification of customers to Other Sales. home building activity was strong, although slightly below the level of 1979. For the first time Our industrial energy sales increased 8.2% in l since 1974, multi-family construction exceeded 1980. Although this is slightly below the 9.3% increase in 1979, it is well above the average single-family construction, although this trend is not expected to continue. Reflecting the impact during the 1970's and is primarily due to expan-of construction activity, the unemployment rate sion of the. phosphate industry's operations.
, for the state was well below the national rate The remainder of our 1980 energy sales in-l throughout the year. creased 15.5% primarily as a result of the re-l classification of commercial customers to this i Energy Sales category. However, sales to other utilities for resale have increased 10.9%, well above the Energy sales during 1980 increased 7% due primarily to the increase in customers. Our aver. 1.6% in 1979.
} age customer growth rate during 1980 was 5%, compared to 5.1% in 1979 and 4.5% in 1978. ENERGY CONSERVATION Although heating and cooling requirements During the 1980's, energy conservation will take on a critical importance in the determination were slightly above the previous year, weather conditions during 1980 were not a significant of our Company's ability to provide reliable elec. l factor in our energy sales. As a winter peaking tric service to our customers. As the cost of utility, our 1930 peak increased 4.6% over 1979. building new generation and distribution facilities continues to skyrocket, the Company's ability to 4 maintain a reasonable balance between earn-ings growth and consumer rates is adversely affected. l'
- As a result of the des'rability of Floritia as a place to visit and to live, we believe that our
- % annual customer growtl. rate will be about 3%
[p. during the 1980's. In order to meet this increas-ing load, it is critical that our Company achieve [f! a high level of operating efficiency, and that our
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Th;t Company initiated the Home Energy internal Programs Checkup Program for existing homeowners in l 1979. The program provides residential custom-The Company will develop more extensive in. ers with trained energy surveyors to locate , ternal controls for the improved efficiency of our areas of energy waste in their homes. During g system operations. We use a highly refined pro, 1980, over 3,500 customers received the bene!t gram to schedule maintenance of our generating of this program. During the next five years, over Units. It selects the exact maintenance time 100,000 customers should receive the benefits of period to minimize any adverse impact on fuel this program. The Company anticipates that this usage and system reliability We are improving program will be expanded in the near future to the efficiency of each generating unit and de. include both commercial and industrial custom-veloping additional interconnections with other ers which should provide greater opportunities utilities in order to purchase lower cost power for energy conservation. when it is available. During 1980, in an effort to emphasize the Energy Saver New Home Award Program importance of energy conservation, our Com- This program continues to benefit both build-pany established the Energy Conservation De- ing contractors and homebuyers. It offers guide-partment to coordinate the development of knes for selecting energy saving options which effective conservation programs to meet future are beneficial for individual needs. The program ' energy requirements. This new department will has been expanded to provide specialized anal-focus our efforts on achieving long-range energy ysis of single family, multi-famiN and manufac-conservation goals through the use of a wide tured homes. This allows recognition of specific range of residential and commercial conserva. building codes and requirements for each type tion programs. In addition, the Florida Public of residential construction. To evaluate the effec-Service Commission established strict conserva. liveness of this program, the Company intends tion goals for all Florida electric utilities in order to monitor the results by placing specialized to reduce the growth of peak demand and en. meters on both participating and non-participat-ergy sales, as well as reduce the use of oil for ing customers' homes. the generation of electricity. SYSTEM OPERATIONS Customer Programs Achieving high system reliability is our con-The Company is developing or expanding pro. tinuing objective. To insure this reliabihty, our i grams to encourage our customers to reduce Company combines the use of large base load j energy usage. To reduce the growth of peak generating units, smaller gas turbine peaking demand, we are actively involved in several load units and purchased power from neighboring management programs. Our first priority is to communicate the necessity of conservation to our customers. Effective energy conservation can be achieved only through their participation in our programs. This education program will Residential Over 39% of our energy sales are to i consist of new and innovative ideas to be com- residential customers. we are addrng rnunicated through group presentations, mall aimost 100 new customers to our system displays, workshops, and timely messages in our monthly billings. At the same time, we will contnues toism . theYm$orta$c energy conservation measures for both continually evaluate the effectiveness of each program in order to maintain only those pro- significantYur hom$a$y offerEtotv grams which result ,ni altering the pattern of and existing homeowners many programs to help reduce their power bilis energy usage. 6
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r Commercial Florida's economic growth is accentuated . by the development of new shopping utilities. The efficient coordination of these re- mans and industnat parks. Many nationai sources provides optimum, cost effective system firms find that Florida is an attractwc operation. The Company's Energy Control Cen- p;,nii,7,'raNo"r'tNoI[n! IeYa't7veYyNi$
- ter, which went on-line at year-end 1979, im- weather minimize ene.gy costs for many proves our system rehability by controlling the service-related businesses. Our Company P
use of our resources to minimize fuel and oper- $n*iE[ha*d c*Ne#[atYN' ea"su#!s r ating expenses. The new Energy Control Center to reduce operating expenses for born has already improved our operating control per. eusting and potentia! customers formance significantly. Interconnections with neighboring utilities im-
- prove the reliability of our system operations, it provides backup power for emergencies as well
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as the opportunity to purchase or sell energy at were urder restricted operation from time to economically attractive rates. To improve the time due to environmental compliance use of this resource, all of the Florida utilities requirements. participate in the " Energy Broker" system. The in January 1981, as a result of record low Energy Broker matches hourly quotations of the temperatures, a riew system peak of 5,088,000 amount of available energy with prices for both kilowatts was reached, an increase of 15.1% i buying and selling among the participating sys- above the winter peak set a year ago. In the i tems. During 1980, the Energy Broker system early moming hours during the peak period, the resulted in $10 million in reduced power bills for Company curtailed 250,000 kilowatts of certain our customers. industrial customers. Due to the unavailability of The Company has increased its capability to some generating units at the time of peak, we exchange power by adding a 230,000 volt inter. were also forced into a program of planned connection with The Southern Company. This residential and commercial outages for short pe-facility strengthens our ability to continue to pur. riods of time on a rotating basis throughout our chase 200,000 kilowatts of coal-fired power. This service area. This reduced the requirements by lessens our dependence on oil and saved over an additional 150,000 kilowatts. 530 million in fuel expenses in 1980. New Peaking Units Go On Line System Capability In October 1930, the Company's three new During 1980, the Company's ability to meet gas turbine peaking units went into commercial customer demand was adverse!y affected by the service at our Suwannee River Plant. These new loss of our Crystal River nuclear unit from late units, totalling 198,000 kilowatts of capacity, rep-February through mid-August. However, normal resent an investment of about $27 million. These
- summer weather allowed the Company to meet units, plus the restored capacity of our Crystal this demand with our existing generating capac. River Unit No. 2, added 233,000 kilowatts of net
? ity and purchased power. During the summer, capability during 1980. At year-end, our winter the twin 517,000 kilowati oil-fired Anclote units capability, including 300,000 kilowatts of firm pur-chased power, was 5.417,000 kilowatts. This re-presents a doubling of our system capability since 1972. 8~
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I 4 FUEL As a result of the political developments in - Iran and Iraq during 1980, the cost of oil in-Nuclear Energy creased about 50% This impact on fuel costs On February 26,1980, our Crystal River nu- resulted in unfavorable increases in fuel ex-clear unit experienced a short circuit in a control penses which were aggravated by the Crystal panel which affected certain monitoring equip. River nuclear unit outage. Although the cost'of ment. Safety systems and prompt operator re- oil increased dramatically during the year, the sponses resulted in the shutdown of the unit Company was able to obtain an adequate sup-with no damage to the equipment or the envi- ply. Our continuing policy of maintaining firm fuel ronment. During the outage, the reactor was supply contracts reduced the risk of a shortage. i- refueled and certain modifications required by Our long-range fuel mix objective is to obtain the Nuclear Regulatory Commission were com- fuel at the lowest economic cost and to diversify pleted. Following extended maintenance, the unit fuel supplies by type, source, timing and trans-returned to service in August, with significant portation method. By 1985, coal will become our - improvements achieved as a result of the Com- primary fuel as our new coal-fired generating pany's Nuclear Safety Task Force which was units come on-line at the' Crystal River Plant site created after the February 1980 incident. Follow- in 1982 and 1984. Our subsidiary, Electric Fuels ing its retum to service, the nuclear unit oper- Corporation, supplies our coal requirements. ated at a 87.6% capacity factor through the About one-half of our coal supply is delivered by balance of 1980. water transportation to our Crystal River Plant site. During 1980, the Company completed deep-Coal-Oil Mixture to be Used ening of the barge canal into the Plant. The coal The Company is in the process of converting barges are now able to increase their delivery its 109,000 kilowatt oil-fired Bartow Unit No.1 to capability by 40% The other half of our coal burn a mixture of finely pulverized coal and oil. supply is delivered by rail in unit traias owned This $10 million project not only reduces the by Electric Fuels Corporation. amount of oil consumed, but is also a pilot Our nuclear fue: supply is under long-term program for future conversion possibilities. The contracts through 1989. We continue to use nat-converted unit is scheduled to resume operation ural gas in certain generating units when it is buming the coat-oil mixture in January 1982. available. We are seeking opportunities to in-crease our natural gas supplies; however, its Power Delivery use is restricted by pipeline capability in Florida,
- i. As our new construction program at the Crys-tal River Plant site progresses, the Company is building the necessary transmission facilities to carry the capacity to our load centers for distrib-ution to our customers. About 50 miles of Industrial 500,000 voit transmission lines and associated "
facilities will be constructed to serve Crystal customerIa the phIs ate Nni River Unit No. 5, scheduled for operation in and processing business. Energy related costs are one of ineir major expense late 1984. items. Some industrial customers provide a portion of their own energy requirements, and may have excess r power to sell to our Company. This co-generation provides cost effective energy for our customers and additional sources of energy for our Company. t i 10 _ _ . ~ - = , - - c _ ~ . _ _ . <.-e-..-.,.
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RESEARCH AND DEVELOPMENT Our Company's efforts in the area of new by the avail >lity of gas in the field and by technology are aimed at those projects and government polecy. During 1980, our fuel mix studies which exhibit strong potential benefits for was 53% oil. 25% coal,17% nuclear and 5% the Company and its customers. A significant gas. By 1985. we estimate that our fuel mix will part os our efforts in this mea is for development be 54% coal,24% nuclear,18% oil and 4% gas. of alternative sources of fuel. The results of earlier research in the coat-oil composite fuel process resulted in the decision to convert our Fuel ta Bartow Unit No.1 to this fuel. m 0- = =$ lwm The Company is also researching two other
, ,q o g m y promising sources of energy:
M -m I e- I**N BIOMASS. During 1980, an analysis of re-source potential of forestry wastes was made near the Company's Suwannee River Plant. In 1981, a 2,000 kilowatt wood gasification dem-CONSTRUCTION PROGRAM onstration facility will be instal!ed next to the Customer requirements for energy are ex- 33,000 kilowatt Suwannee River Unit No. 2. pected to grow at a 3.3% annual rate dJring the The synthetic gas produced will be burned as 1980's. In order to respond to this demand, the a supplemental boiler fuel in Unit No. 2. Also Company must develop effective conservation during 1981, a final evaluation will be made as programs as well as build new generating facili- to the possible conversion of the 34,000 kilo-ties. Our objective is to maintain adequate re- watt Suwannee River Unit No.1 to the burning serve margins, although somewhat below the of wood waste. industry average. This policy requires highly effective planning and maintenance but can re- SOLAR. In cooperation with General sult in a stronger financial base. Our ability to Electric Company and Sea World, Inc., the meet our load growin will be based primarily on Company is developing a demonstration pro-our ability to maintain financial stability. ject for a 100 kilowatt photovoltaic power sys-Construct cn co-tinues on schedule at our tem at the Sea World theme park in Central Crystal River Plant site for Unit Nos. 4 and 5. Florida. This photovoltaic cNI system converts These two 640.000 kilowatt coal-fired units are sunlight directly into electricity. This facility will schedu!ed for operation in late 1982 and 1984. interconnect with the Company's system to The Company's first natural draft cooling towers demonstrate the potential for the integration of will be bui:t for these new units. dispersed power generating sources. Following completion of the Crystal River coal-1 ENVIRONMENTAL COMPLIANCE fired units,Ine Company has no plans for addi-tional base loac or peaking capacity for the Our Company, like most businesses, con-balance of the 1930's. We will be making use of tinues to face increasing envirenmental regula-purchased power from neighboring utilities dur. tions at national, state and local levels. These ing the first half of the 1980's. The results of our energy conservation programs should postpone tne need for add >tional generating facdities until the 1990's. 12 I ._-
improved job skills. In addition, a comprehensive regulations decrease productivity and add to the Corporate Management Development Plan pro-cost of energy which is ultimately passed on to V' des supervisors with individualized programs our customers. We believe that the costs should to expand their competencies. The Company be balanced by the long-term effect on the also offers assistance to employees who wish environment. to attend schools and colleges to study job related subjects. The Company completed a modification of the electrostatic precipitator for Crystal River Unit Management Changes No. 2 during 1980. This unit is now in full compli-ance with the air quality standards. During 1980, the Company made changes which will provide a stronger organization for EMPLOYEES the years ahead. Mr. James H. Blanchard was; elected Vice President, System Operations; Jay A significant reason for our system's reliability G. Loader was elected Vice President, Secretary is the dedication and productivity of the Com-and Treasurer, and George C. Moore was pany's employees. The Company is committed elected Vice President, Power Production. Also, to the full utilization of the abilities of all em. Joseph F. Cronin was elected Assistant Vice playees. The kind of working atmosphere which President, Corporate Communications, George encourages job satisfaction and improves per. E. Greene, Ill, was elected Assistant Vice Presi- { formance is our cor tinuing goal. dent, Internal Audits; John A. Hancock was elected Assistant Vice President, Nuclear Opera-Equal Employment Opportunity tions and Philip C. Henry was elected Assistant i Our Company is dedicated to its established . Vice President, Transmission and Substation i corporate objective of taking affirmative action in Projects. Mr. Allen J. Keesler, Jr. was employment of allindividuals and ensuring equal selected Director of our new Energy employment opportunities for all employees. The Conservation Department. recent management audit roted "a high level of awareness of the cor;nration's affirmative action Employee Communication and equal opportunity commitments among Good communications with employees is a managers." During 1980, this awareness was vita: part of service reliability. Throughout our enhanced by the implementation of a formalized widespread system, we provide our employees
- corporate affirmative action training program for with up-to-the-minute information on the com-all supervisors.
plex, vital issues that affect their jobs. Our com-munications efforts with our employees include a , Employee Development bi-monthly newspaper, special information meet- . We continue to emphasize training and devel- ings, news updates and ACCESS, a monthly l opment in all o_f our operations to upgrade the video tape report. These communication tools ' quality of our service by improving employee help each employee become better informed effectiveness and efficiency. The Company pro- about the Company and, in tum, better informed vides a wide range of training programs to represcatatives in the communities we serve. stress personal growth and technical training for i != I 13 - c .. . - - - . , . . - - . . - . . . . -. - -.
FINANCIAL REVIEW-MANAGEMENTS DISCUSSION D Liquidity and Capital Rn.ources The Company is in a hignly capital intensive l the increase in accounts receivable and in mate-industry in one of the fastest grow:ng states in the rials and supplies, which includes fuel. The actions nation. In general. the Company is not able to fund of the Organization c' r etrateum Exporting Coun-its construction program with funds derived from tries and inflation have Seen the principal causes I operations. In 1980 and 1979, funds derived from of these increases, and to the extent they persist, operations provided 41*6 and 68%, respectively, of this trend is likely to continue. Additional funds wi!! mi. 'eds used for construction expenditures. The L be required to finance the increased investment in balance of the 1980 and 1979 construction pro- net current assets, impacting the Company's liquidity. grams were funded through short-term borrowings - The Company experienced a decrease in pre-tax and long-term financings. earnings during 1980 as a result of rapidly increas-ing operating expenses. This decrease, coupled.
- with investment tax credits generated in connection -
- m. ,,
with the Company's increased construction activity, " l I will result in the Company filing for an income tax t
- refund in early 1981.
l ~ {L in general, the Company borrows short-term funds from banks or through the sale of commer- ; a cial paper. During 1978, the amount available was 580 million. This amount was increased to its pres-ent level of $100 million in August 1979. Source Of Funds As the level of short-term debt outstanding in-En$true' tion ^ creases, the Company issues long-term securities. g;; ,,,,,,,,, Sources of capital include bonds, preferred stock, _ preference stock, unsecured debt and common m 7, , , , , stock. The proceeds from the sales of long-term securities are used to repay short-term debt. A record volume of external financings occurred in 1980, totating over $280 million. This included two $100 million first mortgage bond issues which were sold n Apn! at:d November at interest rates of 130s% ar seven years and 13.30% for ten ir years, respectively. In December, the Company is-sued $38 million of pollution control revenue bonds. The issue had an interest rate of 10% on r r ! S25 million for twenty years and 10%% on S13 _ l -1 , million for thirty years. Three million shares of com- * , mon stock were sold during September in a public j offering to provide approximately $44.6 million. An .v , additional S6.6 million was received from selling j common stock to the dividend reinvestment plan r_ = , i and employee benefit plans during the year. These sales of common stock were made at prices below ' F ' > book value, There has been a significant increase in net
$[
current assets since 1978. This is primarily due to i
- .14 L
have not been increasing as rapidly as expenses. Significant rate relief will be neces-
.The Company has a long-range plan to deter- sary to reverse this trend and cope with the mine needed facilities. From this plan, the con- present high rate of inflation; Inadequate rates struction program is developed. The Compan) could require the Company to curtail its plans to spend $374 million, S396 million and construction program.
$370 million in 1981,1982 and 1983, respectively, in connection with its construction program. Operating Results These estimates are subject to periodic review REVENUES. The trend of increasing reve-and revision. The actual construction expend.i- nues is due primarily to two factors. The major tures incurred may vary from the estimates for contributor is the increase in fuel prices due to many reasons. These include changing eco- OPEC control of petroleum supplies and prices.: nomic conditions, rates of inflation, the adequacy The higher prices are translated into higher rev-and timeliness of rate relief, environmental re- enues through our fuel adjustment clauses. Sec-quirements and the Company's ability to attract ondly, the continuing customer growth rate re capital at reasonable costs to finance the ex- suits in increased energy sales. The impact of penditures. The 1981-83 construction program these factors is shown in the following table: will require additional permanent financings. The nature and amount will depend on, among other M80 MM M78 things, market conditions prevailing at each time * *"O the financings are to be undertaken. Increased fuel costs S 63.0 560.7 S13.6 Ircreased kilowatt-hours In determining the type and amount of future sold 58.0 22.7 45.0 financings, the Company's choice may be lim- Increased base rates 25.9 - 35.9 ited by the requirements of its Mortgage and its Other (12.2) .9 .6 Charter. At December 31,1980, $237 millicn of
$134.7 $84.3 ' $95.1 first mortgage bonds and $54 million of preferred stock could be issued at an assumed rate of 13%
Other revenues for 1980 decreased due to the The Company's abi'ity to obtain adequate capital at reasonable :osts required to finance pompany deferring approximately $13.6 million in retail fuel revenues as a result of the revised the 1981-83 construction program and to re-fuel adjustment clause. This deferral occurred finance maturing debt will depend on the results during the last quarter of 1980 because the of operations. As discussed below, revenues Company billed fuel revenues which exceeded the actual fuel expenses. In our last rate case in 1977, the Company received rate relief on an interim basis which was made permanent in 1978. In 1980, the Com-pany was granted an interim rate increase of
* $40.4 million annually, subject to refund, as part of a petition for $99 million of retail rate relief.
- a t: The Company anticipates a final decision on this g L g- petition about February 23,1981. The Company's
!+tt ! S19.6 million interim wholesale rate increase was CAPITAUZATION
! hjit plaCed into effect in April 1980, subject to re-RATIOS v j fund. The Company expects the Federal
-o ' f l[ j' ' Energy Regulatory Commission to hold public E;- >
hearings in mid-1981. r~ _ k [1 J; l [! 77 /> N C 15
In March 1980, the Florida Public Service , Commission approved a revision to the previous fuel adjustment clause. This revision in the clause introduced a change in the accounting Purchased power expenses have also steadily for fuel adjustment revenues which resulted in a increased over the 1978-80 period. These in-new item on the Balance Sheet," Deferred Fuel creases have primarily been the result of the Expense." This item ref'ects the difference be' need to purchase replacement power due to the tween actual fuel costs incurred and fuel reve" extended nuclear unit outages The trend of ; nues billed under " new fuel adjustment these expenses is likely to continue during 1981 clause. As part c e new clause, the Commis~ due to a planned outage for refueling. However, sion authonzed fra Company a transition adjust- the trend should be favorably influenced by the ment of about $23 million to permit recovery of nuclear unit changing from a twelve-month fuel fuel costs which would otherwise have been lost cycle to an eighteen-month fuel cycle, and the in changing to the new clause. However, th? two coal-fired units coming on-line. Florida Public Counsel appealed the Commis- Other operation expenses increased at an an-sion's action to the Flonda Supreme Court and nual rate of approximately 20% during the three the recovery of those revenues has been sus- : years. These increases are due mostly to the pended pending the Court's decision. effects of inflation in all areas of our operations, The prospect of higher revenues as a result of combined with the expenses of the nuclear unit the favorable resolution of the pending actions increasing as a result of additional Nuclear Reg-discussed above may improve the Company's ulatory Commission requirements. 8 The increase in maintenance expense relates earnings in 1981, reversing the downward trend experienced during the past three years. OPERATING EXPENSES. , Fuelexpenses ([ch increase a a esu o bo addi o at have continued to increase significantly dunng NRC requirements at the nut! ear unit and the the 1978-80 period. For example, tne price of a effects of inflation. Steam production mainte-barrel of residual oil has increased from S11.80 nance has also shown steady increases, espe-in January 1978, to S31.75 at year-end 1980. The cially in 1980. effect of the higher fuel prices has accounted for OTHER EXPENSES. Interest on long-term about 83% and 77% of the increase in fuel debt increased substantially in 1980 due to a expense for 1980 and 1979, respectively. The record level of financing and the interest rates remaining increases were essentially due to in- which the Company had to pay for these funds, creased generation requirements. This trend is as discussed earlier. expected to continue as long as OPEC con, In 1980, construction work in progress more tinues its pattem of increasing prices. Our de- than doubled, resulting in a significant increase pendence on oil will be reduced significantly in the allowance for equity and borrowed funds when our two coat fired generating units go on- used during construction. It is expected that the [ line in 1982 and 1984. ! allowance for funds used during construction will
- continue to increase substantially due to the
- Company's planned construction program. How-ever, this could be partially offset if the Commis-sion acts favorably on the Company's request to
{ include an additional amount of construction work in progress in the retail rate base for rate-
- L, making purposes.
r'I M g e. I L j. L +
# r s Fuel Costs W
{Isi E co,&neo po , , L rw { ; 7e 77 16 79 80 16 i ,-
FLORIDA POWER CORPORATION Statements of Income FOR THE YEARS ENDED DECEMBER 31,1980,1979 AND 1978 1980 1979 1978 (Thousands) OPERATING REVENUES (Notes 1b and 7b): $327,146
$410,018 $356,597 Residential 208,209 193,886 187,574 Commercial 145,470 121,336 101,479 Industrial 206,476 163,674 135,021 Other 970,173 835,493 751,220 OPERATING EXPENSES:
Operation- 282,876 420,552 359,579 Fuel (Note 1b) 52,168 48,063 Purchased power 92,634 93,964 74,329 64,416 Other 395,355 607,150 486,076 62,484 44,885 36,572 Maintenance (Note 1c) 65,010 59,361 Depreciation (Note 1c) 69,797 53,374 48,665 44,627 Taxes other than income taxes income taxes (Notes 1g and 2) 45,333 56,370 74,931 Federat 6,140 7,147 8,804 State 844,278 708,153 619,650 125,895 127.340 131,570 OPERATING INCOME OTHER INCOME AND DEDUCTIONS: Allowance for equity funds used during 575 2,687 769 construction (Note 1d) 1,188 1,263 Gain on reacquired bonds 1,631 (1,767) 3,112 (2,058) Miscellaneous other income and (deductions) 2,551 5,069 (220) INTEREST CHARGES: 59,087 47,994 46,624 Interest on long-term debt 7,096 11.398 3.610 Other interest expense 66,183 59,392 50.234 l Allowance for borrowed funds used during (5,816) (502) (375) construction (Note 1d) 60,367 58,890 49,859 68,079 73,519 81,491 NET INCOME 18,197 13,649 13,340 DMDENDS ON PREFERRED STOCK _
$ 49,882 5 59.870 $ 68,151 NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK 28,951,212 28,777,366 AVERAGE SHARES OF COMMON STOCK OUTSTANDING (Note 3) 30,137,689
$1.66 $2.07 $2.37 EARNINGS PER AVERAGE COMMON SHARE (Note 3)
The accompanying notes are an integral part of these financial statements. 17
~
FLORGA POWER CORPORATION Balance Sheets DECEMBER 31,1930 AND 1979 1980 1979 Assets (Thousands) ELECTRIC PLANT (Notes 1,7a and 8):- S1.927,662
$2,080,326 In service and held for future use 475,940 414.192 Less-Accumulated depreciation 1.513,470 1,604,386 245,516 116.275 Construction work in progress _47,02_7 61,3_62
_. Nucleal fuel, at amo tized cost 1,911,264 1.676.772 OTHER PROPERN AND INVESTMENTS: i 4,466 4.276 Nonut.I.!y propedy and other investments 13,562 8.472 investment in and advances to subsid a y (Note 1e) 18,028 12.748 CURRENT ASSETS: 2,888 9.149 Cash 22,716 7.538 Special depos:ts - 6.000 Temporary cash investments Accounts receivable, less reserve of $1,id6.000 in 1930 and 75,770 49.229
$1.327.000 in 1979 16,442 -
income ta.ies ece".able Matenats and supphes at average cost- 85.103 99,169 Fuel 34.521 32.283 Plant matenals and operating supphes 1.693 4,003 _ Prepayments _ _ _ _ 253,271 193.433 DEFERRED CHARGES: 6,730 4,432 Ui.amortzzed debt expense, being amortized over term of debt 28,190 - Deferred fuel expense (Notes 1b and 7b) 26.840 _ 26,108 .
.OJpef _
61,028 31.272
$2.243,591 $1.914.225 The accompanym;; nctes are an integral pa of these financial statements 18
Capitalization and Liabilities 1980 1979 (Thousands) CAPITAUZATION (see accompanying statements): Common s:ock equ4 5 590,576 5 533,181 Cumu!atwe preferred stock wcout sinking funds 133,500 133.5CO Cumulative preferred stock witn s:r, king funds 85,540 87.125 Long-term debt 912,895 662 635 1,722,511 L44MH CURRENT UAB'LITIES: Accounts payable 34,145 27.311 Customers' deposits 27,767 25,155 Accrued income taxes "3.233 Accrued other taxes 29,282 33.827 Accrue-' interest 16,356 17,776 Other 9,759 6.704 117,309 1R056 Long-term debt due with:n one year 7,745 11.277 Notes payable 20,755 9.609 145,809 174.972 l DEFERRED CREDITS: Accumulated deferred income taxes (t,ote 1g) 270,227 221.051 Accumu!ated deferred investment tax cred4s (Note 1g) 102,759 74.595 l Other 2.285 2.193 375,271 297.547 COMM;TP.'ENTS AND CONTINGENCIES (Note 7) . l 52.243.591 S1.914 225 l l l I l 19 l t
FLORIDA POWER CORPORATION Statements of Capitalization
~
DECEMBER 31,1980 AND 1979
@ "**"#'I common stock Listed COMMON STOCK EQUITY (Note 3):
Common stock without par value, authorized New York 60,000.000 shares (914,259 shares reserved for con- Stock Exchange version of convertible debentures), outstanding 32,622,650 shares in 1980 and 29,159,752 in 1970 $ 298,339 S 247,062 Transfer Agent for Retained earnings, including 577,090,000 not available common stock for duidends on common stock 292,237 291,119 Manufacturers Hanover 590,576 34 % - 538,181 37 % - Trust company New York, N.Y. CUMULATIVE PREFERRED STOCK (Notes 4 and 5):
$100 par value, authorized 4,000,000 shares-Shares Outstanding Without Sinking Funds December 31,1980 335,000 33,500 33,500 4% to 4.75%
300,000 30,000 30,000 7.40 % 500,000 50,000 50,000 Transfer Agent for 7.76 % 200,000 20,000 20,000 Preferred stock 8.80 % 133,500 133.500 Chemical Bank New York, N.Y. , With Sinking Funds 355,395 35,540 37,125 10 % 500,000 50,000 50,000 10.50 % 85,540 87,125
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219,040 13 % 220,625 15 % LONG-TERM DEBT (Note 6): First mortgage bonds-3%% due July 1,1981 8,005 8,250 j Trustees for 3%% due November 1,1982 8,611 8,874 l First Mortgage Bonds 3%% due November 1,1983 5,661 5,836 l 6,879 7,089 uorgan cuaranty Trust 3%% due July 1,1984 299,792 102,417 Company of New York l Maturing 1986 through 1995-3%% to 13%% 398,008 398,971 Florida National Matunng 1996 through 2005-6%% to 9% 80,000 80,000 Bank of Jacksonville Maturing 2006 - 8 4 % Premium, being amortized over term of bonds 5,693 6,027 Par value of bonds racquired to meet cash sinking fund requirements (4,809) (4,913) Convert:ble debentures,4%% due August 1,1936 Trustee for I l (convert;ble into shares of common stock at the rate Convert >ble Debentures of one share for each $21.25 of pnncipal amount) 19,428 19,479 l Irving Trust company 9.10% electric consumer capital notes due New York, N.Y. October 1,1980 - 11,277 ( I 11% electnc consumer capital notes due October 1,1985 4,797 - Guarantee of pollution con'rol revenue bonds-88,575 50,575 Maturyng_2_00 0_ through 2010-6%% 1o 10%% 920,640 693,882 (7,745) (11,277) Logg telm debt due within one year 682,605 48 % 912,895 53 %
$1,722,511 S1,441,411 l
i l The accompanying notes are an integral part of these financial statements. l 20
l Statements of Source of Funds Used for Construction l FOR THE YEARS ENDED DECEMBER 31,1980,1979 AND 1978 1980 1979 1978 (Thousands) SOURCE OF FUNDS: Funds Denved from Operations-S 68,079 $ 73,519 $ 81,491 Net income Less-Dividends on common and preferred stock 65,351 54,486 50.045 2,728 19,033 31,446 Earnings retained in the business Items included in net income not requiring (providing) funds-69,797 65,010 59,361 Depreciation 9,562 8,748 5.218 Amortization of nuclear fu' 77,009 38,402 29,290 Deferred income taxes and investment tax credit Deferred fuel expense (28,190) - - Allowance for all funds used during construction (8,503) (1,271) (950) 122,403 129.922 124,365 (locrease) Decrease in Net Current Assets (exclusive of tempo-(102,615) (21,842) 9,977 _ r ryyasqyngsggnts and current debt)(a) Funds from Financing and Other Sources (Uses)- Common stock 44,625 - - Common stock- employee benefit and dividend reinvestment plans 6,600 4,541 2,342
- 49,407 -
Preferred stock First mortgage bonds 200,000 - - Pollution control revenue bonds 38,000 40,000 - Electric consumer capital notes 4,797 - - Electnc consumer capital notes redeemed (11,277) - - Retirement of 4.10% pollution control revenue bond anticipation note - (10,000) - Long-term debt and preferred stock matured or reacquired for sinking funds (5,%2) (6,022) (11,547) (Increase) decrease in temporary cash investments 6,000 (2,000) - 11,146 9,609 - Increase in short-term debt (Increase) decrease in investment and advances to subsid:ary (5,090) 3,853 (4.954) Other sources - net (156) (5f40) 3.058 288,683 83,748 (11,101) f 308,471 191,828 123,241 Allowance for /d! Funds Used During Construction 8,503 1.271 950 FUNDS USED FOR CONSTRUCTION $316,974 S193.009 $124.191 (a) Analysis of (Increase) Decrease in Net Current Assets-($ 15,178) ($ 5.806) S 2,686 Special deposits Accounts receivable (26,541) (12,238) (5,675) income taxes receivable (16,442) - - Matenals and supplies (11,828) (35,515) (7,641) 6,834 8,113 1,935 Accounts payable (43,283) (3,779) 17,311 Accrued income taxes (4,545) 19,389 2,077 Accrued other taxes (1,420) 6,822 1,551 Accrued interest l 9,788 1,172 (2,267) l Other - net ($102,615) (S 21,842) S 9.977 i The accompanying notes are an integral part of these financial statements. 21 i l
-a h, %+6 em g
FLORIDA PO"4R CORPORATION Statements of Retained Earnings FOR THE YEARS ENDED DECEMBER 31,1980,1979 AND 1978 1980 1979 1978 (Thousands)
$291,119 $272.695 $241,264 Balance at Beginning of Year Add - Net income after dividends on preferred stock 49,882 59,870 68.151 341,001 332,565 309,415 Deduct:
Cash dividends on common stock; quarterly dividends equiva-lent to the follouing annual rates-
- - 26,759
$1.24 29.912 9.946
$1.38 10,947 10,925 -
$1.50 22,854 - -
51.56 13,353 - -
$1.64 1,610 609 15
__Eypense of issuing commorLand preferred stock 48,764 41,446 36,720
$292,237 5291.119 $272,695 E5alance a't5d of Year The above amounts include undistributed earnings (loss) of subsidiary as of December 31,1980,1979 and 1978 of
$1.936,000,51,004,000 and ($83,000), respectively.
Notes to Financial Statements (1)
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (a) Electric Plant-Electnc plant is stated at the orig:nal cost of construction which includes payroll and related costs such as taxes, pensions and other fringe benefits, general and administrative costs and an allowance for funds used during construction Substantia!!y all of the Company's electnc plant is pledged as collateral for the first mortgage bonds. (b) Operating Revenues and Fuel Expense-The Company recognizes revenues concurrent with billing to customers on a cycle billing basis. The cost of fuel for electric generation is charged to expense as burned The cost of nuclear fuel is amortized to fuet expense based on the quantity of heat produced for generation of electnc energy in relation to the quantity of heat expected to be produced over the life of the nuclear fuel core. Effective Apnl 1,1980, the Florida Public Service Commission (FPSC) approved a revision to the fuel adjustment clause which eliminated the existing lag and provided for a projected six-month fuel clause. The projections are monitored by the FPSC and adjustments may be made if substantial dif'erences occur; otherwise actual and projected fuel cost d:fierences will be added to or deducted from billings to retail customers during the following projected penod. As part of a rate petition in Apnt 1980, the Company also changed its wholesale fuel adjustment clause to a current fuel cost recovery clause. As a result of these changes, the G *npany began recording deferred fuel revenues and/or deferred fuel expenses which at December 31,1960, total 513,611.000 and 541,801.000, respectively, for a net amount of 528,190,000. See Note 7b below for a further explanation. 22
Notes to Financial Statements The Company has been authonzed by the Federal Energy Regulatory Commission to provide for the recovery of estimated future permanent storage and disposal costs of spent nuclear fuel. However, the Company is not providing on the books or in the bilhng rates for the recovery of these Costs from retail customers pending approval from the FPSC. (c) Depreciation and Maintenance-The Company provides for the depreciation of the original cost of properties over their estimated useful hves on a straight-line basis. The annual provision for depreciation, expressed as a percentage of the average balances of depreciable plant was 3.62% for 1980 and 1979 and 3.63% for 1978. The depreciation rate applied to nuclear facilities includes a factor for dismantling or removal costs to the extent allowed by the FPSC. The Company charges maintenance with the cost of repairs and minor renewals of property, the plant accounts with the cost of renewals and replacements of property units and accumulated depreciation with cost, less nel salvage, ci property units retired. (d) Allowance for Funds Used During Construction (AFDC)-This item represents the estimated cost of funds applicable to utihty plant under construction. Recogn:fron of this item as a cost of utility plant is appropriate because it constitutes an actual cost of construction and, under established regulatory rate practices, the Corr.pany is permitted to earn a return on these costs and to recover them in the rates charged for utility services. The rate used in computing AFDC for 1930,1979 end 1978 was 8 66%, which after considerattor, of deferred income taxes on the debt component of AFDC produces an a'ter tax rate of 699% for 1980 and 1979 and 6.93% for 1978. The rate of 8 66% is applied to the construction work in progress base which excludes $106,250,000, the amount allowed in the rate base for rate-making purposes. (e) Investment in Subsidiary-The Company has a wholly-owned subsidiary Electnc Fuels Corporation, formed to secure long-term fuel suppbes The Company accounts for the investment in the subsidiary on the equity method. (f) Pension Costs-The Company has a rt:tirement plan covenng substantially all of its employees. The total pension costs for 1980,1979 and 1978 were $8.483,000, $7,423,000 and $7,140,000, respectively, which includes amortization of pnor service cost over 10 years. The Company makes annual contnbutions to the plan equal to the amounts accrued for pension expense. A compar' son of the actuarial present value of accumulated plan benefits based on an assumed rate of investment return of 8% a year and plan net assets is presented below. January 1,1980
~
(Thousands) Actuanal present vaiue of accumu!ated plan benefits-Vested $43,226 Nonvested 5.920 Total $49.146 Net assets available for benefits $84.541 The actuanal present va!ue of accumulated plan benefits does not recognize any improvements in benefcs and ignores the ef'ects of future compensation increases on the benefits participants will receive for their past service. If this value is adjusted for projected compensation increases consistent with the assumed rate of investment return, the adjusted actuarial present value of accumulated plan benefits would be approximately $72.163.000. (g) income Taxes-Deferred incomt taxes result pnmanly from the use of liberchzed depreciation, accelerated amortization, the repair allowance and from the defe.rel of taxes on the debt component of the allowance for funds used dunr g construction and substantially all other current book-tax timing differences as recognized in rates by the FPSC. The investment tax credits. including job development investment tax credits, have been deferred and are being amortized through credits to income over the lives of the related property. 23
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; i l
1
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FLORIDA POWER CORPORATION Notes to Financial Statements (2) INCOME TAX EXPENSE The amounts composing income tax expense are detaded as follows: 1980 1978 _ 1979 (Thousands) Fedcrat $24.138 $44.143 ($25.995) Payable currently (refund) 32,052 26.588 61,140 Deferred to subsequent years (a) (21.302) (11.959) (6.534) Deferred income taxes-credits 15.661 6.751 32.178 Investment tax credit, net of amortization 70.94S 46,021 59,892 income tax expense I (688) (3,522) 3.983 Taxes mcluded in miscellaneous other income and deductions $45,333 $56.370 $74.931 income tax expense e operating expenses State: 5 5.880
$ 1,236 $ 4.886 Payable currently 2.919 7.028 3.654 Deferred to subsequent years (a)
(2,035) (1.006) (4 __34) Deferred income taxes-credits 7,534 8.365 L 6.229 income tax expense (89) (387) 439 Taxes included in m!seellaneous other income and deductions $ 7,147 $ 8.804
$ 6,;40 locome tax exnense in operating expenses (a) The components of income tax deferred to subsequent years wcre as _
to..ows: Federal. $20,308 $15,983
$28.705 Excess tax over book deprecation Normalizat:on of construction costs and other property related items 4,430 3.631 6.576 deducted for tau purposes 4.711 765 3.138 Repair aHowance -
18.267 Underrecovery of fuei expenses 2.263 6.827 4.176 Other $61,140 $32.052 $26.588 State: $ 1.756 5 3,317 $ 2.318 Excess tax over book depreciation Normabzation o' construction costs and other property related items 505 397 74? deducted for tax purposes 519 100 35B Repair allowance - 2.091 Underrecovery of fuel expenses 247 779 473 Other $ 2.919
$ 7.028 $ 3.654 The provision for federal income tax, including amounts allocated to miscellaneous other income and deductions, produ ef'ective income tax rate of 40% in 1980. 45% in 1979 and 47% in 1978 The statutory rate was 46% in 1980 and 1979 and 48
' in 1978 The primary differences between the statutory federal income tax rate and the effective income tax rate in 1980 of ab 6% are due to the amortization of in.estment tax credits (2 8%). income tax ad,ustments recorded in 1980 resultrog frorn revenue agents' examinations of the Company's 1972-1977 income tax returns (14%) and the exclusion from taxab!e the allowance for equity funds used dunng construction (2.2%). 24
Notes to Financial Statements (3) EQUITY SECURITIES _ Cumulative Preferred Stock The changes in equay secunties for 1930 Without With Corr: mon senking Sinking and 1979 are as follows: Stock Funds Funds (Thousands) Ba!ance December 31,1978 $242,505 $133.500 $38,700 307,50a common shares sold 4,557 - - 10% senes,15,750 shares reacquired - - (1,575) 10.50% senes,500,000 shares sold - - 50.000 Balance December 31,1979 247,062 133.500 87,125 3.462.893 common shares sold 51,277 - - 10% series,15F5 shares reacquired - - (1,585) Ba!ance Decerrber 31.1980 $298.339 $133.500 SES 540 The Company has 1.000,000 shares of authonzed but unissued preference stock, $100 par va ue, and 5,000,000 shares of authortzed but un:ssued cumulative preferred stock, without par value. A two-for-one common stock spht was effective April 2,1980. Accordingly, the financial statements have been restated to refiect the stock spht. In add, tion, the number of authonzed shares was increased from 30,000,000 shares with a par value of $2.50 to 60,000.000 shares w:thout par value. (4) CUMULATIVE PREFERRED STOCK WITHOUT SINKING FUNDS This preferred stock at December 31,1980, may be redeemed at the following prices: Current Redemption Scheduled Decreases in Senes Pnce Redemption Pnce 4% S104.25 4 40 % 102 00 4.58 % 101.00 460% 103.25 4.75 % 102.00 7.40 % 106.92 $105.07 after August 15.1982,5103.22 after August 15.1987, and $1024B a+ter August 15, 1992. 7.70 % 100S6 5104 92 a"er Febary 15,1934, $102.95 after February 15, 29, and $102.21 after February 15,1994. 8;80 % ___ 104 00 $101.00 after November 15, 1985. (5) CUMULATIVE PREFERRED STOCK WITH SINKING FUNDS The Company is r2queed to ret:re 15,750 shares of the cumulative preferred stock,10% senes, before August 15 of each year, Th9 Company, starting November 15,1984, is required to retire 15,000 shares of the cumulative preferred stock,10.50% series, w:th the opt.on to ret.re a manmum of 30,000 shares before November 15 of each year. The combined agg egate amount of minimum redemption requirements for these series amounts to $1,575,000 per year through 1933 and $3,075,000 per year through 1985. This preferred stock at December 31,1980, may be redeemed at the following pnces: Current Redemption Scheduied Decreases in Senes Pnce Redemption Pnct 10 % $107.50 $105 00 a+ter August 15,1984, $102.50 after August 15,1989, and $10100 after August 15,1994. 10.50 % 110 50 $108 00 a*ter November 15,1984. $105 00 a+ter November IEt, 1989, $102.00 after November 15, 1994, and $10100 after November 15,1999. 25
FLOR!DA POWER CORPORATION Notes to Financial Statements (6) FIRST MORTGAGE BOND SINKING FUND REQUIREMENTS The annual sinking fund requirement relating to the first mortgage bonds at December 31,1980, is $12.050,000 of which
$4,937,500 must be satished in cash or an equal principal amount of bonds and the balance may be satisfied with bondable add,tions. At December 31,1980, the Company had reacquired $8,977,000 principal amount of bonds. This amount will be used to satisfy the 1981 cash sinking fund rcquirement and the remainder will be used for future cash sinking fund require I balance of the 1981 sinking fund requirement will be met with bondable additions.
(7) COMIAITMENTS AND CONTINGENCIES (a) Construction Program-Substantial commitments have been made in connection with the Company's 1981 constructi program which is presently estimated to be $374,300,000. (b) Legal Proceedings-The 1978 forced shutdown of the Crystal River nuclear unit led to an investigation by the Fio Pubhc Service Commission (FPSC) to determine whether the Company's actions relating to the shutdown or repair of the unit were in any way responsible for the length of time it was out of service. The unit was shut down on March 3,1978, to rep damages caused by loose parts within the unit and was retumed to full service in early October 1978. While the uni service, replacement and purchased power from fossd-fueled generaticn caused sharp increases in the fuel adjustment portion of the customer's bill. About $49,000,003 was subject to possible refund pending the outcome of these proceedings. i On January 5,1981, the FPSC took action and ordered the Company to refund approximately $14,700,000 of those revenue inc;uding interest, related to the proceedings discussed above. Company management disagrees with the findings and is in the process of appealing the order. Provision has been made in the 1980 financial statements for the Company's estimate of the amount of revenues which will ultimately be refunded to customers. In the opinion of Company managem legal counsel, the resolution of this rate matter will not result in any matenal adjustment to the estimated refund. The FPSC, in revising the retail f' ei ajustment clause, as discussed in more detail in Note 1b above, authonzed the Company a transition adjustment of approximatety $23,000,000. This adjustment was allowed to permit recovery of fuel costs wh otherwise be lost in changing to the new clause. However, on April 2,1980, the Florida Pubhc Counsel appealed the FPSC order to the Flonda Supreme Court. As a result, on April 4,1980, the FPSC ordered that billings of the transition fuel adjustmen revenues be suspended pending the Court's decision. As a result of the new retail fuel adjustment clause, the Company has recorded deferred fuel expenses for the period Apnl 1 through September 30,1980, of $46.300,000, which will be billed to customers in future penods. This underrecov openses is pnmardy due to the fuel Cost efteC1 of the nuclear unit being shut down for a longer period than anticipated the ongenal projections were madt On November 6,1980, the FPSC authonzed the Company to collect $22,800,000 of the deferred fuel expenses. It postponed ruhng on the remaining $23,500,000 of deferred fuel costs pending further hearings. At th time the Company cannot predict when it will be allowed to collect tha remainder of the deferred fuel costs. (8) SUPPLEMENTARY INFORMATION TO DISCLOSE THE EFFECTS OF CHANGING PRICES (Unaudited) The following supplementary presentation is made consistent with Statement No. 33 of the Financial Accounting Standards Board and is intended to set forth the effect of both general inflation and changes in specific prices on the Company. It sho be viewed as an estimate of the approximate effect of inflation, rather than as a precise measure. Constant dollar amounts represent histoncat cost stated in terms of dollars of equal purchasing power, as measured by the Consumers Pnce index for all Urban Consumers. Current cost amounts reflect the changes in specific pnces of plant from the date the plant was acquired to the present, and differ from constant dollar amounts to the extent that specific prices have increased more or less rapidly than the general rate of infiation. The current cost of plant is determined by indexing survivir>g plant by the Handy. Whitman index of Pubhc Utikty Construction Costs. Since the utihty plant is not expected to be repl precisely in kind, current cost does not necessarily represent the replacement cost of the Company's productive capacity. Amort,zation of nuclear fuel, an item included in operating and maintenance expense, and depreciation are determined by applying the Company's amortization and depreciation rates to the average indexed plant amounts. 26
FLORIDA POWER CORPORATION Notes to Financial Statements . STATEMENT OF INCOME FROM CONTINUING OPERATIONS ADJUSTED FOR CHANGING PRICES For the Year Ended December 31,1980 _ (Thousands) Conventional Constant Dollar- Current Cost-Historical Average Average j Cost 1980 Dollars 1980 Doi 4ars
$970,173 5970.173 5970.173 Operat:ng revenues 723,008 728,473 728.473 Operating and ma ntenance expense 69,797 131 529 139.519 Depreciation expense 51,474 51,474 51,473 income tax expense 60,367 60,367 60.367 Interest expense-net (2..,61) (2,551) (2.551)
Other income and ceduct'ons-ret 977.282 902.094 969.292 income (ioss) from cont;nuing operat.ons (exc'udmg reduction to net $ 68,079 5 881 (S 7,109) recoverabfe costi increase in specMc pnces (current cost) of p ant held danng the year 5 - S250 097 (138.228) (42,293) Reduct.on to net recoverable cost - (333.037) Effect of increase in generai pnce level (138.228) (130 238) 136.408 136 408 Ga;n from decine in purchasing power of net amounts owed ($ 1.820) S 6.170 Net Report of Independent Certified Public Accountants To the Shareholders of Florida Power Corporation: We have examined the balance sheets and statements of capitalization of Flonda Power Corporation (a Florida corporation) as of December 31,1980 and 1979, and the related statements of income, retained earnings and source of funds used for construction for each o' the three years in the period ended December 31,1980. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of tne account;ng records anc'such other auditing procedures as we considered necessary in the circumstances. At the time of the issuance of our report on the financial statements included in the 1979 Annual Report, approximately $49,000,000 of retail revenues recorded in 1978 was subject to possible refund to customers. As discussed more fully in Note 70 of Notes to Financial Statements, the Florida Public Service Commission has directed the Company to refund a portion of such revenues, and all significant uncertainty regarding this matter has been eliminated. Accordingly, our opinion quahfication on this matter is therefore removed. In our opinion, the financial statements referred to above present fairly the financial position of Florirta Power l i Corporation as of December 31,1980 and 1979, and the results of its operations and the source of funds used for t construction for each of the three years in the period ended December 31,1980, in conformity with generally I ac cepted accounting principles applied on a consistent basis. l ARTHUR ANDERSEN & CO. i T ampa, Florida. i February 2,1951 l 1 28
Notes to Financial Statements Since only hstorical costs are deductible for income tax purposes, the income tax expense in the histoncal cost financial statements is not adjusted. Under the rate-making presenbed by the regulatory commissions to which the Company is subject, on!y the historical cost of plant is recoverable in revenues as amortizat on and deprecia!on. Therefore, tne excess of the cost of ptant stated in terms of constant dollars or current cost that exceeds the histoncal cost of plant is not present!y recoverab;e in rates as amortization or depreciation, and is ref:ected as a reduction to net recoverable cost. To property reflect the economics of rate regutation in the Statement of income from Cont:nuing Operations, the reduction of net plant should be of' set by the gain from the decline in purchasing power of net amounts owed. Dunng a penod of intat:cn, holders of monetary assets suf'er a loss of general purchasing power while holders of monetary liabilities expenence a ga.n. The gain from the dechne in purchasing power of net amounts owed is pomanly attnbutable to the substantia! amount of debt wh:ch has been used to f; nance plant. Since the amortizatron and depreciation on this ptant is limited to the recovery of histoncal costs, the Company does not have the opportunity to realize a hold:ng ga:n on debt and is t:m ted to recovery cnly of the embedded cost of debt capital FIVE YEAR COMPARISON OF SELECTED SUPPLEMENTARY FINANCIAL DATA ADJUSTED FOR EFFECTS OF CHANGING PRICES . (Thousands, Except Per share Amounts, of Average 1940 Donars) Years Ended December 31, 1940 1979 1974 1977 1976 Operating revenues: Histoncal $970,173 $835,493 $751220 5656.138 5551,439 Adjusted 970,173 948.481 MB,829 892.203 798.212 Historical Cost Information Adjusted for General inflation income from continuing operations (excluding reduction to net recoverable cost) 881 23.S89 income Coss) per common share (aner dtvrdend reaerements on pre'e red stock) (.57) .35 Net assets at year-end at net recoverable cost 564.501 580.013 Current Cost information income Coss) from contnvng operations (excluding reduct,on to net recoverabie cost) (7.109) 11.441 Loss per common share (after dmdend require-ments on preferred stock) (.84) ( 08) Excess of increase in general pnce level over in-crease in specific pnces after reduction to net recoverable cost 130.238 148.693 Net assets at year-end at net recoverable cost 564.501 580.013 General Information Gain from dechne in purchasing power of net amounts owed 136.408 146.413 Cash dedends declared per common share: Histoncal $ 1.565 5 1.41 5 1.275 5 1.165 5 1 0725 Adjusted $ 1.565 S 1.60 $ 1.61 $ 1 58 $ IM Market pnce per common share at year-end. 5 13 625 $ 14125 5 15 375 $ 16 5 5 16 Histoncat Ad iusted S 13 625 5 16.04 S 19 42 $ 22 44 5 23 16 Average consumer pnce index 246 8 217 4 195 4 181.5 170 5 27
Selected Financial Data 1976-1980 1980 1979 1978 1977 1976 (Thousands, Except Per Share Amounts) Operating Revenues 5 970,173 $ 835,493 $ 751,220 $ 656,138 5 551,439 Net income after Dividends on Preferred Stock 5 49,882 $ 59,870 $ 68,151 5 68,854 $ 45.607 Earnings per Average Common Share $1.66 $2.07 $2.37 $2.41 $1.61 Dividends per Common Share $1.565 $1.41 $1.275 $1.165 $1.0725
$2,243,591 $1.914,225 $1,739,081 $1,6o5,159 $1.672,747 Total Assets Capitahzation Long. Term Debt S 912,895 $ 682,605 $ 658,676 $ 673,867 5 724,333 Preferred Stock with Sinking Funds 85,540 87,125 38,700 40,275 41,850 998,435 769,730 697,376 714.142 766.233 Preferred Stock without Sinking Funds 133,500 133,500 133,500 133,500 133,500 Common Stock Equity 590,576 538,181 515.200 481,412 442.165 Total $1,722,511 $1,441,411 $1,346,076 $1,329,054 $1,341,898 Other Financial and Operating Data 1976-1980 1980 1979 1978 1977 1976 Electric Sales (Thousands of KWH)
Residential 7,379,740 6,927,339 6,838,906 6,373,899 5,750,889 Commercial 3,581,112 3,646,279 3,766,194 3,526,562 3,298,036 industnal 3,480,993 3,215,932 2.942,065 2,813,000 2,690,525 Other 4,3_65,810 3.779,639 3,499,576 3,221,536 3,077,572 Total 18,807,655 17,569,189 17,046,741 15.934,997 14,817,022 Residential Service (Average Annual) KWH Sales per Customer 10,643 10,496 10,895 10,604 9,932 Revenue per Customer $591.32 $540 29 $521.19 $478.12 $416.15 Revenue per KWH 5.56c 5.15c 4.78; 4.51c 4.19: Operating Data
$2,419,416 52,113,614 $1,940,917 $1.831,680 $1,749,429 investment in Electnc Plant (000) 5,117,000 4,884.000 4,929,000 4,452,000 3,895,000 Net Generating Capabihty (KW) 4,419,000 4,224,000 4,135,000 3,899,000 3,530,000 Net System Peak Load (KW) 10,443 10,5C3 10,481 10,423 10,136 BTU per KWH of Net Output Fuel Cost per Milhon BTU $252 $2 01 $1.68 $1.51 $1.67 772,2ti5 735.633 699,677 669.615 644,846 Ave' age Number of Customers 4,195 3,891 3,738 3,546 3,443 Number of Employees 29
FLORIDA POWER CORPORATION Ouarterly Financial Data (unaudited) Three Months Ended March 31 June 30 September 30 December 31 (Thousands, Except Per Share Amounts) 1980 Operating revenues $203,448 $222,787 $306,934 $237,004 Net income 6.397 11.428 27,991 22.263 Earnings on common stock 1,833 6,884 23,447 17,718 Earnings per average common share $.06 $.24 $.79 $.54 1979 Operating revenues $176,435 $178,355 $279,299 $201,404 Net income (loss) 14,663 (1,453) 31,629 28.680 Earnings (loss) on common stock 11,353 (4,764) 28,339 24.942 Earnings (loss) per average common share $ 39 ($.16) $.98 S.86 Earnings per average common share for 1980 as presented above do not equal $1.66 as reported in the Statements of Income as a resutt of issuing 3.000.000 shares of common stock on September 24,1980. The business of the Corrpany is seasonal in nature and it is management's opinion that compansons of earnings for the quarters do not gae a true indication of overall trends and changes in the Company's operations. j Common Stock Data Price of Common Stock on New York stock Exchange Dividends Paid 1900 1979 Per share High Low High Low 1900 1979 First Quarter $15 $1H's $16% $15% $ 375 5.345 Second Quarter 15 % 11 % 15 % 13 % .39 .345 Third QA. - 15 % 13 4 15?s 14 .39 .345 For.n C s 15's 12 15 % 13 41 .375 Common stock pnces and d;vidends per share have been restated to reflect the two-for-one stock split effective April 2,1980. At December 31,1980, the number of common shareholders of record was 39.031. 30
MONTICELLO 9 O.ACKSONVILLE 9 APALAONICOLA (t\. UNIVE RSITY OF FLORCA O OCALA G L 6. E g,. CRYSTAL RNER G WINTER PAk< - The Cornpany serves over 772,000 customers en more than 375 cities, towns w ALT DySNEY Dg and rural comrnun> ties The terntory p-Compnses approximate!y 20,600 square TARPON SPR;NGS , r a miles with a Population of over 3.100,000 CLEARWATER 9 m O TAVPA
- 9 LAKE WALES located in 32 of 67 Flonda counties. In ST. PETERSSUR3 9 m add:tton to the generating plants a h indicated on the map, electnc power can be suppled by interconnected electnc
{" utility systems throughout FlorKfa and h the southeast. i [ N ELECTRIC GENERATING PLANTS M.AMI O h
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s Florida Power Corporation 813-866-St St . Generat Offices. 320134th Street South, P. O. Box 14042, St. Petersburg, Flonda 33733
- Telephone DIRECTOR 3 OFFICERS OTHER THAN DIRECTORS M.F.Hebb S. A. Brandimore Robert C. Allen Vce President. Wa!t Disney World Senior Vece President Vee Presider.t. Staff '
and Chairman. Disney World Corporato Services and J. G. Loader General Counsel Vee President, Secretary Operating Committee and Treasurer Lake Buena Vista. Flonda B. L Grimn Senior Wce President *
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Wilmer W. Bassett, Jr. Engineenng and Construction Vce Presiden,. President. Bassett Brothers, Inc. Power Production Lee H. Scott (Dairy Business) Senior Vice President R. W. Nelser Monticello Fionda Operations Vice Presdent and Assistant General Counsel Sam T. Dell J. H. Blanchard
%ce President Partner. Deli. Graham. Willcox. Barber, Henderson, Monaco & Cates, P.A. Systern Operations y gP fen" Engineering and Construction (Attorneys at Law) C. R. Collins, Jr.
Gainesvilie. F6onda p ; M. H. Phillips uncoast Division Vce President, Central Byron E. Herlong and Northern Divisions President, A. S. Herlong & Co., Inc. J. E. Gleason Vee President, Eastern N. B. Spske (Citrus Business) and Ridge Divisions Vice Pres. dent Leesburg. Flonda Environment and New R. R. Hayes Technology Andrew H. Hines, Jr. Vce President and President Controller Frank M. Hubbard Chairman of the Executive Committee Hubbard Construction Company (Highway Construction) Orlando Flonda Board of Directors (1 to r). Richard C. Johnson G. Ruppel, S. T. Dell. R. C. Johnson, W. W. Bassett, Jr. C. W. McKee, Chairman of the Board Community Banks of Flonda. Inc. Seminole, Flor:da Clarence W. McKee, Jr. Senior %ce President Financial Services Corneal B. Myers Partner. Peterson, Myers, Craig. Crews. Brandon & Mann, P.A. (Attorneys at Law) Lake Wales. Flonda j F George Ruppel Vice President and Secretary Modern Tool & Die Company of Flonda
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Pinellas Park, Flonda .f (' "r] N -T ~ (. % e" ' Jean Giles Wittner
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SHAREHOLDER INFORMATION T. F. Thompson Shareholder Services Department Transfer Agents and Registrars Vca President All dividend checks, shareholder reports, Common Stock Admirustrative Servces prory matenal and tax forms are Manufacturers Hanover Trust Co. J. F. Cronin handled from our St Petersburg 4 New York Plaza General Offices. All correspondence conceming New York, New York 10015 Assistant Vce President Corporate Communications address changes dividend checks and related Pre /ened S!OcA matters should be directed to: Chemical Bank G. E. Greene,111 Asssstant Vce President @atw,. 55 Water Street Fim P New York, New York 1%41 Intemal Audits Shareho/ der Serwces Department ] P. O. Box 14012 J.A.Hancock Enchange Listing for Common Stock Assistant Vice President St Petersburg, Flonda 33733 Nuclear Operations New York Stock Exchange Inquines concerning the transfer of stock Ticker Symbol"FDD" P, C. Henry certifcates should be directed to our New York Assistant Vice President transfer agents. Tr;nsmission and Annual Report Form 10.K and the Substation Projects Statistical Supplement Dividend Reinvestment Plan J.H. Joyce Upon request, the Company will fumish its Assistant Secretary and The Company continues to offer a shareholders without charge a copy of its 1980 Assistant Treasurer Dividend Reinvestment Plan for shareholders Form 10-K, without exhibits, as filed with the
""*"'"*""'#"****'* Secunties and Exchange Commission. A Betty M. Clayton 8 #'" ** detailed Ten-Year Statistical Report on the Assistant Secretary to the Shareholder Services Department Company's business is also available, at the address shown above. Requests should be addressed to J. G. Loader, Secretary.
. Hines, Jr., J G. Wittner, R. C. Allen, C. B. Myers. F. M. Hubbard and B. E. Herlong
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; .-r Post Office Box 490 e Gainesville, Florida 32602 'w une March 26, 1981 Mr. J.H. Blanchard Vice President - System Operations Florida Power Corporation P.O. Box 14042 St. Petersburg, FL 33733 RE: Gainesville Regional Utilities 1980 Annual Report
Dear Jim:
In response to the Administrative Committee meeting minutes of March 10, 1981, please find enclosed eight copies of the subject 1980 Annual Report of Gainesville Regional Utilities. Please note this annual report is for our fiscal year ending September 30, 1980. Should you find you need more current year to-date financial and balance sheet information, please notify - i me at your earliest convenience. If I can be of any '~T further assistance, please feel free to call on me at any time. Sincerely, j Michael L. Kurtz, P.E. Administrator of Utility Engineering and Planning MLK:jh - , cc: G-1.1
- Glenn Kelley
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