ML19347E405

Annual Financial Rept 1980

ML19347E405
Person / Time
Site:	Oyster Creek
Issue date:	03/05/1981
From:	Dieckamp H, Kuhns W GENERAL PUBLIC UTILITIES CORP.
To:
Shared Package
ML19347E404	List: ML19347E403 ML19347E405 ML19347E406
References
NUDOCS 8104270271
Download: ML19347E405 (43)

Text

- _

O l

i l

GENERAL PUBLIC UTILITIES CORPORATION 19J0 ANNUAL REPORT i

I i

l l

8104270/7ls

- - ===.=

= -

= =--

1 inside GPU's1980 Annual Report S

Financial Summary and Stockholder Profile Page 1 Board Changes 11 Letter to Stockholders 2

GPl! System (Map) 12 The Financial Report 4

Special Report: Progress at Three Mile Island 14 Earnings Down Sharply Unit 1: 51osingToward Restart Credit Agreement Changes Stade Across Spectrum Stringent Economy 51 oves Human Element Stressed CapitalRequirements Reduced Unit 2: Alaving Toward Recovery Water Purified The Regulatory Situation 5

Krypton Gas Vented Safely Reccreery Depends on Regulation Containment Entnes Gather Data State Responses "SDS"To Filter Containment Water Major Regulatory Actions 1930-1981 51uch Remains To Be Accomplished Ruhngs Result in Additional Cuts Core is Unique Research Tool Court Challenges Communications Changes Slow Federal Responses Nuclear Experienca Brought to Bear TMI-2 Funding 8

Statementof Management 17 Shanng of Costs Pursued Consensus Sought Management Analysis of Financial Condition 18 T511 Insurance and Results of Operations GPU Files Tall Lawsuits Reportof Auditors 20 Operations Report 9

Purchased Power Costs Cut Finar.clal Statements 21 Coal. Gas Produce Savings Long Outage At Oyster Creek Notes to Financial Statements 25 Nuclear Project CanceIIed Seeking Alternatives System Statistics 37 Canadian Cable Tie Studied New Energy 51anagement Plan Proposed Effects of Changing Prices 38 Nuclear Organization 11 Directors and Officers 40 New Nuclear Entity Integrates Skills New Subsidiary Has Single Task Notices to Stockholders and 41 Safer Generation a Direct Result Quarterly Stock Price and Dividend Data GPU Nuclearin Approval Process The General Public Utilities Sjotem General Public U+iS ies Corporation is an electnc utility t

holding company. Its operating electnc utility subsidiaries.

Jersey Central Power and Light Company GCP&L) in New Jersey and 51etropolitan Edison Corrmany (51et-Ed) and Pennsylvania Electric Company (Penelec) 5 Pennsyh ania.

forTn the GPU System.

For a fuller description of the System. and a look at its service area, see the map and operating statistics on pages 12 and 13.

Thefnancialconsequences of the Three Mile Island accident continued to make 1980 ayearof" survival."

t safely, efhciently and expeditiously.

and thus conflict with the view that busi-We need additional resources to do Thereis also no doubt that it can be ness should not run to the federal gov-that job and to provide reliable senice to done-no scientific breakthroughs will be err. ment and others when they have our customers. No one will be sened by required-a large part of the job involves financial problems.

a continuing state of near-insolvency.

the application of known technology and We accept and even agree with that Nor will the necessary funds be found in

" elbow grease" The gathering and the attitude when it is applicable. However, it bankruptcy. Bankruptcy would only containment of the dispersed radioactive is not applicable to our situation. The futher complicate and delay the task and isotopes require a great deal of care and accident was an unanticipated step in the increase its costs to customers, inves-protection and this takes time and further development of nuclear power tors and government. It is time for all to money. The pace of the cleanup program and its regulation. The burden of this face the realities of the challenge and to is controlled both by regulatory attitudes teaming process should be more fairly get on with the job.

and available funds. Present estimates of distributed over all participants in and We are an electric utility system that six or seven years and $1 billion to beneficiaries of nuclear power. We are on March 28,1979 was strong and well complete the task could conceivably be not a company that hasn't sold enough of balanced in energy sources and capital reduced to about four years and cost its product or senice. We are not a stnicture. The need for continuing elec-

$300-to$400millionlessif thepre; ram company or a city that has lived beyond tric senice remains critical. The inter-could be expedited. A productive spend-its means. Our stockholders never ests ofour customers and our investors ing rate for the cleanup would be about gained any special benefit from over ten are so mutually inte:tlependent that we

$100-to $150 million per year. With any years of successful nuclear operations cannot permit them to be unfairly sepa-reasonable allocation of this cost among before the accident and should therefore rated by the accident.

the customers of the GPU system, the not be expected to assume sole risk for Finally, we cannot close without ac-federal and state governments and the the accident. Allinvestigations have knowledging the competence, dedication nuclear power industry, this task is cer-clearly identified the institutional infir-and energy of the employees of the GPU tainly manageable.

mities of nuclear power that resulted in System. They continue to work long and itis simply too early to assess the so many contributors to and participants hard under difficult circumstances.

ability to return TMI-2 to senice-that intheaccident. Allof theseparticipants We are heartened and motivated by decision must await the completion of at should contribute to the solution.

the continuing supportive comments least a major part of the cleanup pro-In addition, we assert a responsibility from so many stockholders. This is par-gram. Its return as a productive generat-and even a liability of the federal govern-ticularly meaningful at this time when the ing facility orits writeoff against ment for what happened. It also has the owners of this company have had to bear revenues provided for that purpose deciding role in determuung how fast and a heavy and disproportionate share of the would be the final step in GPU's financial in what manner we may proceed with burdens of the accident-a share which recovery. This is not an effort on our they were never paid to bear. We will recovery.

Full financial health will require a fair part to shed responsibility-rather we devote our efforts to making 1981 i; turn to our investors so that we can seek to identify the responsibilities of all the turning point in this struggle that have normd access to capital markets to participants which led to the accident and willlead to the eventualrecovery provide the facilities needed to serve our to demand accountability and participa-of your company.

customers. This will require decisive and tion inits cost.

innovative action by our rate regulators.

Beyond that, the lessons learned and yj to be teamed from the accident will T2 Sharing the Cleanup Costs continue to have an enormous impact on

/

We continue to believe that the causes the entire nuclear power program for this William G. Kuhns and extent of the TMI accident andits country and, indeed, internationally.

Chainnan and ChiefExecutive Offfcer aftermath-the lessons learned and yet to be learned from the experience-call for Summary

./

and require a sharing of the cost among The TMl accident was unforeseen. Nei-

,d_J more than the customers and investors ther we, our industry, regulators, gov-

~~ [

of the GPU System. Despite anincreas-ernment, nor the American public were IIcnnan Diccka ing acceptance of the equity of this posi-prepared for it. Its cleanup is more than Presidentand C /OperatingOfffccr tion, some express concern that such important, it is essential-for health and help would simply be another " bailout" safety-for the future of nuclear power-March 5,1981 and for the energy posture of ourcountry.

3

cessation of construction credits to in-The come (AFC)in April 1980 for the carry-Nadal RenM ing costs of funds associated with the r

Forked River nuclear project, which was cancelledin November 1980; Forty-one cents as a result ofin-As a result of the Three Mile island creased nudear operations and mainte-accident and the abandonment of the nance expenses of TMIand the Oyster Forked River nuclear project, the GPU Creek nuclear station, including the im-Systemis carrying fixed charges and pact on such expenses of a six-month operatin'g costs associated with about outage at Oyster Creck;

$1.5 billion of assets for which no reve-Twenty cents per share fromin-nues are being received. He adverse creased interest expenses as short-term impact onincome and earnmgs has been rates reached a rew high during the year.

drastic (See" Management'sDiscussion The effect of these factors was offset, and A nalysis,"page 18 and Note l to the to alimited degree, by a $60 million FinancialStatements, beginningon interim, annual rate increase received by page25J Jersey CentralPower & Lightin May 1980.

Eamings Down Sharply Netincomein1980 was $21million, or Credit Agreement 34 cents per share, down sharply from A Revohing Credit Agreement was

$% million, or $1.56 per share, in 1979.

negotiated with a consortium of banks in The reduction results mainly from the June 1979, shortly after the TM1 acci-following factors:

dent, to provide a limited " cushion" be-Thirty-two cents per share were taken tween cash needs and cash available.

by the removal of the capital and operat-Borrowings under the Revolving ing costs of Three Mile Island Unit 1 Credit Agreement were $171 million at from the base rates of the GPU System December 31,1979 and $169 million at companies for more than half of 1980 and December 31,1980. The borrowings for an additional 15 cents per share by TMI each of the GPU companies are com-Unit 2's being excluded from base rates pared with their allowed credit limits in forallof1980; the table on page 7.

Thirty-nine cents as a result of the The creditlimit for Metropolitan Edison Company (Met-Ed)is an amount equal to the Company's " liquid assets

,e.

- defined by the banksin the Revolving

,mm e ng meg _v.m h,$i2M>7 m y Y

,.g ;,

Netincome fl?' 94 ' ~ NW M? whQ@Qg Credit Agreement as uranium and ac-

..N @.p.h p;iQ5'$

dL i

M' counts receivable pledged as collateral to

'jr* c

(=d'==d g&gM$M$qg%j. $,@ 'GMM '

energy payments stillowed to Met.Ed V

the banks, plus the balance of deferred 980,

k20.6his dM l@p r v tQgW:$c.g by its customers. This balance is cur-979 Y:b rently being reduced at the rate of about 978 38.8 W

$5 million per month and, if unchanged in 977 Id.gp future rate orders, will reduce Met-Ed's

__pj,.d -

credit limit to $40 million at December 976 21,2 M.W&.

31,1981.

g Tg;g$CNj{jY - The Revolving Credit Agreement ter-fd . W v .D M [.d3dhN, w@;hy,p gg' M NDM2[ minates October 1,1981. Currently out-ih o nutiM25!5 AmuWm DddWMMDiW. standingnotes under the Revohing 4

Crucialto GPU'spresentandfutwe fnancialposition are theactions of the regulaton bodies. t Credit Agreement mature Aprill,1981. the $515 mi!! ion bud;;eted before the The Regulatory These notes must be renewed and the TMI accident. Agreement re-negotiated and extended he System's 1980 capital require-Situation i!GPU is to remain solvent. (forfurther ments totaled about $279 million, with infonnation see Note 4 to the Financial $246 million of that spent on muumum statements, page32.) construction requirements and $33 mil-lion for retirement of matured securities Recovery Depends on Stringent Economy Moves and sinking funds. The System financed Regulation The GPU System has putinto effect its 1980 construction requirements pri-Crucial to GPU's present and future drastic steps to reduce cash outlays. maxily from internal sources. financial position are the actions of the These steps willnecessarily have an Subject to available cash resources, regulatory bodies which control sirtually effect on customers (see " Rulings Result capital expenditures in 1981 are expected every aspect of our business and our in Additional Cuts,"page 6) and mean, as to total about $335 million, of which $265 progress toward financial stability. well, a slowing-down of TMI-2 cleanup million will be spent for construction and At the federallevelwe are handi-activities. This step, however, brings $70 million for retirement of maturing capped by delays in the authorization that effort closer to the pace of regula-securities and sinking funds. The con-to restart TMI-1. At the state level, tory approvals from the Nuclear Regula-struction budgetis 37 percent of the inadequate rate awards have been the tory Commission (NRC). No reductions $720 million budgeted prior to the principal problem. are planned in cleanup areas affecting accident. public health and safety. The System's capitalization ratios at State Responses The currentlimited cleanup program year-end 1980 stood at 51 percent long-The state regulatory responses to date will require about $60 million in 1981, term debt,12 percent preferred stock, have beenjust sufficient to permit GPU with about $40 million to be covered by 33 percent common equity and 4 percent to sunive. Both states have allowed insurance. At the end of 1980, about short-term bank debt. These capitaliza-replacement energy costs to be re- $100 million ofinsurance coverage tion ratios are not subs'antially different covered from customers through applica-

remained, from those of the last few years.

tion of the energy clauses. This question was of great importance to the banks Capital Requirements Reduced which financed the enormous cost of ne accident at Aree Mile Island has purchased pc wer to replace TMI's gener-had a severe effect on the GPU System's ation immediately following the accident. construction program. The NewJersey and Pennsylvania com-The $246 million spent on con-missions now allow full recovery of cur-struction (mainly upgrading System facil-rent energy costs from customers. ities) in 1980 was 52 percent less than in addition, GPU's subsidiaries are now recovering their past deferred energy balances, though over varying spans - _. -.,,,y - r p q -, -- - ~ of time. I On the other hand, both commissions, Earnings Per Average Share in the second quarter of 1980, reduced h customer rates by amounts equivalent to ( ~ l$.34 the capital and operating costs of TMI-1,

1980 following the similar treatment of such

%6itepA ((]S1.56 1979 I1978 ^ TMI-2 costs a year earlier. No provision

$2.30 has been made for TMI-2 cleanup costs XI by the commissions 1977

[$2.50 A significant aid in this situation has m,m _ __ J$2.20 been animprovementin the rate of '1976 5 Dividends Paid Per Share - the TMI propertyinsurance pohcy. o z,,. L ' L m.4 u:. GPU's totalinsurance proceeds at the L =&_u.u.%.ww axmom -ame - P00R ORGINAL .,o ~. a

E end ofl980 were slightly less than the t mvtWNvwmTNWmm~'FO-v "" cumulative, deferred cleanup costs, in-m-." cluding the TMI-2 core; in addition, the . Major Regulatory Ac4ons -, July 1980... lag between cleanup expenditures and kin 1980 and1981 ' JCP&Lfiles for$18 million energy insurance receipts has been eliminated. 7 - - - charge increase. Request is denied in in effect, the regulatory treatment a .t i October. re.eived by GPU's subsidiaries has t> October 1980o. pliced ai: inordinate share of the financial IN NEY/ JERSEY FERC approves new lower-cost pricing burden of ti'e accident on GPU's stock- [ January 1980... ~ formula for replacement power. holders and has significantly unpaired the T JCP&L 6.las for$142 million annual TMI Unit 1 appealmoved to N.J. financial viability of the System. l increaseinenergycharge. ' Supreme Court. CPU is attempting to redress the un- . NewJersey Board of Public Utilities fairness of the rate situation by aggres-s(NBPU)ordersinvestigationof the _ November 1980... sively pursuing the rate increase re-Missue of" fault"in the cause of the - AnhurYoung&Co. submits 6nahepon quests now before the NewJersey and TMI-2 accident. on first " Strategic Option" forJCP&L. Pennsylvania Commissions and by con. Report finds bankruptcy "no solution" testing, through court appeals, a number . February 1980.- forJCP&L orits customers. of(.ecisions rendered by those commis- [~JCP&L files " fault" briefs with NBPU. sions. (See " Court Challenges,"page 7). ~ March 1980... JCP&L files for $105 million increase in At this writing, there are pending be-K JCP&L energy clauseincreased by$M energy charges. fore the NewJersey and Pennsylvania million annually. Does not include re-NJ. Supreme Court hears arguments Commissions rrte increase requests placement power costs forTM1 units. on appealfrom NBPU April 1980 order. amounting to $318 million, including the JCP&L files with FederalEnergy $60 million granted toJCP&L on an ~ Regulatory Commission (FERC)for 4 - IN PENNSYLVANIN interim basis, subject to possible refund. - change in replacement power pricing ' in May 1980. The amounts pending for ' formulas. February 1980... each of the subsidiaries are as follows: NJBPU award;" Strategic Options" Pa. Public Utility Commission (PaPUC) Jersey Central, $173.5 million: Met-Ed, i studyofJCP&Lto ArthurYoung& grants $55 million interim energy clause $77 million and Penelec, $67 million. . Company, management consu'tants. increase to Met-Ed. InJanuary1980, GPU proposed plans i M M M 1980 m to combine the management ofits tw E TMI UnitIremoved fromJCP&L base Met-Ed and Penelec file with FERC for rates, a reduction of $18 million yearly in replacement power pricing change. eans n e g S tem. I i earnings; cash effect of this loss is off-February 1981, an Administrative Law M W 980 m Judge of the Pennsylvania Commission setbyincreased amortization of deferred PaPUC ph " temporary rates", ~ recommended that this plan not be ap. energy balance;JCP&L energy clause reducing Met-Ed's base rates by $27 f raccident-relatedenergycostsisin-pmved. The Pennsylvania Commission is F milliona yearand Penelec base rates ' creased by $34 million a year. not expected to rule on the proposal until by $12 million a year; Met-Ed's energy K a W s @ on M Q recovery charges increased by $86 mil-late spring 1981. mm base rates to U Supenor The chronological display at right will lion a year, Penelec's by $26 million. help put into perspective the particularly JCP&L files for $173.'5 million base. PaPUC upholds Met-Ed's franchise to mtense activity on the state regulatory serve sta customers. ggg g fror.ts during 1980 and the early months interim, emergency relief. July 1980... of1981. . Met-Ed requests $77 million annually in Rulings Resultin l BPU grNs $60 millioninterim " _ ba g $M rnini i le ts $67 ge Additional Cuts

base rate increase request subject, '

lionwwehw Met-Ed has been forced to lay off145 / topossible refund. ; 1 Met-Ed and Penelec file complaints workers, reducing its ability to connect , "D A. '. rates prescribed in May.. V y with PaPUC against the temporary l new customers to about 5,000 a year, O - ;4. l 800 fewer than m, 1980. The Company's ability to react to a major senice disrup-b',,. '~ u ~ "C"" ' ' ' ' ^" E Ei0 !!009 e -.P00R OR M

The Companyhas moved to challenge regidatorydecisions inNewJerseyandPennsylvania. t tion, such as a storm, has been impaired Met-Ed has two matters underjudicial ywm qcwcy m -f0 ' - 5 through reduced maintenance on trans-review. { August 1980... mission and distributionlines. In September, Met-Ed appealed to the hMet-Ed's emergency rate increase The Company has also cut con-Pennsylvania Commonwealth Court the , request is denied. struction and new equipment expendi-PaPUC's August 28,1980 order denying A ! tures and has delayed improvement Met-Ed's request for an emergency rate bC E 4 projects at a number of its power plants. increase. Met-Ed ordered not to use operating These steps mean losses in productivity. The Company has opened twin ave-4 jaevenues received for services supplied Additionally, cuts of up to 500 jobs nues forjudicialreviewinits moves j to customers for uninsuredTMI-2 were made in the contractors' work against the PUC's September order ban-hieanup costs; the Company seeks fed-forces at Three Mile Island, delaying the ning the use of operating revenues to pay g eral court injunct.on against the order. cleanup of TMI-2. for uninsured cleanup costs at TMI-2. 9 Met-Ed appeals denialof emergency The PUC's order forbidding use of Noting that the order ootentially conflicts - rate relief to Pa. Commonwealth Court. revenues from customers for the unin-with its responsibility under the Federal w 9.PaPUC receives final report from sured costs of the TMI-2 cleanup could Atomic Energy Act and regulations and

Theodore Barry & Associates, manage-add even more delay and cost to that license issued thereunder, Met-Ed

. ment consultants, on a study begun m ""'I'

• Y a temporaryrestrammgorder

' December 1979 of the financial status During the latter part of January 1981 and mj. unction m Federal Distnct Court m -u and outlook of GPU, Met-Ed and Penelec. the Company presented testimony to the Harnsburg, Pa. later that month. The O Report states that problems facing PaPUC urging an accelerated decision on temporary restrammg order was dern. d e < GPU can be solved through rates and Met-Ed's $77 million base rate filing. by the court. The request for an injunc-financial assistance from the state or tion is being held in abeyance. In . federal government or the utility indus-Court Challenges October, Met-Ed also appealed the )'try. It identified the early restart of GPU moved quicidy to test some of same order to the Pennsylvania gIMI-lasa necessarystep. these decisions in the courts. Commonwealth Court. ( October 1980... Just days after the N.J. Board of Public l (Met-Ed appeals PUC order forbidding Utilities, in April 1980, removed the capi-Slow Federal Responses l ' use of operating revenues for cleanup tal and operating costs of TMI-1 from its At the federallevel, GPU has been / o Pa. Commonwealth Court. base rates, JCP&L appealed that deci-hampered by the inordinately slow pace t - PaPUC opens investigation and hear-sion to the state's Superior Court. In of NRC action on both the recovery of . jngs into proposed combination of Met. October, in an effort to save time, the TMI Unit 2 and the restart of Unit 1. The { Ed and Penelecand fonnationof GPU u.:e was moved to the N.J. State NRC's Programmatic Emironmental Im-t Nuclear Corporation. FERC approves Supreme Court, which heard oral pact Statement on Unit 2, a document l ? pricing formula. arguments on the matter in January 1981. evaluating the major steps to full clean-December 1980... JPaPUC approves Met-Ed and Penelec ~ ' FN " C' " ~ ! energy clause charges for 1981 which, t Agreement 2 R J essentially, aeflect no increase over, ,1980 yet provide for current recovery of , _. c 12/31/79 4 12/31/80 - i energy costsin198L

y Outstandm[, j Outstandmg;(,

_ Credit Limit

January 1981...

, - JCP&LT g 'S ,$,,45 g n u. 611 , A, '5123 s 68 W - ':63 " t W ~F116 ' 86*

Hearings before PaPUC Administrative

, Met-Ed W ' J 7 ' : WWPl5 fLM9 f ' OCN

pef,;, N U N k E'

- Lawjudgein base rateincreases and c - D'b c75 b i complaint against temporary rate pro ; '5 'GPU' l eH.;.S~ M5 .$1_69p;gWlg.j' -($292* ? TbtalGPU. System y $17,1k @, Jceedmgs closedlate in the month.. r ,gg 3. 7 - 1 + bruary 1981... ,y n y ;. 7 7.7 7, n g en - Fe j' Briefs filed in the rate proceedings with , " me GPU Synem, h total, is kated to ens ammse withat a itsther axe dthe banh partweme the a,eem a. mi e.ch a un sysem ancmes is inted io the emnt stated fu that agony. Fw.

PaPUC Adm..nustrative LawJudge.

- _ y. me, mmt,t, on u,ta.oed a,,,e 4.. y ; ' t a a m m-- = ~ w sl ' ' N - t s NM C - y,,

p m,

w Y .e ,L . R L?:. a ' ' ' " m u fj) g 7

i i up-and without which NRC will not mid-February 1981 that direct federal aid move in the absence of an emergency TMI-2 Fund.mg pay for part of the TM1-2 cleanup and -has been open for public comment, but that federalloans or loan guarantees will not be decided upon until after you cover the remainder of the costs. have received this report in late March Sharing of Costs Pursued 1981. Meanwhile, costs escalate and time The cost of completing the cleanup por-Consensus Sought schedules lengthen. tion of the recovery program has been In early February 1981, GPU commis-The extended shutdown of TMI-1, estimated at $1 billion. (" Management's sioned the Hon. Thomas L. Ashley, for-despite the fact that it was not damaged Discussion and A nalysis,"page ls and mer Congressman from Toledo, Ohio, to by the TMI-2 accident, is the direct con-Notel to the FinancialStatements, attempt to obtain a consensus and agree-sequence of a decision by the NRC in page21) ment among government, the GPU com-mid-1979 to adopt procedures that se-GPU has discussed with nuclear indus-panies, the industry and its regulators on verely disenmmate against that unit. The try leaders, state and federallegislators an equitable sharing of the financial re-procedures ordered by the NRC have and regulators, several possible ap-sponsibility to clean up TMI-2. The frag-involved many months of preparations proaches for TMI-2 cleanup funding mented and sometimes conflicting goals, for hearings by other parties, lengthy mechanisms. Progress is being made in interests, responsibilities and authority hearings that beganin October 1980 this important effort, of the governmentalinstitutions, in rela-(about 15 months after the NRC orders) A Congressional task force of Pennsyl-tion to the TMI accident, have thus far and will probably continue for several vania legislators, headed by Congress-prevented the reaching of such an more months, a recommended decision man Allen E. Ertel, has drafted a bill that agreement. by a Licensing Board and a decision by would form a national nuclear accident Mr. Ashley is well qualified to accom-the NRC itself before restart of TMI-lis pool to furnish about one-fourth of TMI's plish this goal by his demonstrated ability authorized. This succession of events cleanup cost. In its draft form, the bill and experience in finding solutions to puts TMI-l's probable startup into would create a quasi-governmental cor-difficult financing and energy problems in late 1981. poration that would insure all utilities his 26 years in the U.S. House of Repre-On December 1,1980, GPU formally against nuclear power plant accident ex-sentatives. Mr. Ashley enjoys high es-requested that the NRC permit TMl-1 to pense not covered by private insurance teem and respect in both government return to senice after the hearings are carriers. Retroactive provisions in the bill and private sectors; his senice as chair-concluded on issues unique to TMI-1. would allow coverage for GPU aMits man of the House Ad Hoc Energy Com-This action would precede completion of subsidiaries. At this writing, the bill has mittee is particularly notable. He not the hearings on issues applicable not just not yet been submitted to Congress. only negotiated the terms of complex to TMI-1 but to other nuclear plants In a related development, the Nuclear energy legislation in the House, but was around the country. So far, there has Safety Oversight Committee, an ad-instrumentalin securing the compro-been no response by the Commissioners visory group established by former Pres-mises between the U.S. Senate and the to that request. ident Carterin1980, recommended in House that resulted in a law that started this nation on a course toward energy sufficiency. l m,-, e - m-y m m - ..-w--c--- Operating Revenues' GPU is providing Mr. Ashley with the (mimom; freedom of action necessary to work w mm z _ with all of the parties involved and has E1980 h w 383E gs4 q o ;_ mcse mm"-~)$1831.7 placed no pre-conditions or limitations on $994.8 his authority to develop a solution. The amermum m-we-r--[$1490.2 company has engaged a Washington, $966.9 ,1979 E'n 5523.3s a r .ammansmmmp="p"fS1326.6 $897.4 D.C. consulting firm to work with Mr. r1978 Ecj429,2M Ashley, and has created a task force p r $827.6 1252.0 1977 R M Q within the Company to assure that its 1976 Q311 $751.6 068.8. own resources are fully available to him v.a g e w ge F as well. ', ~, E Energy Related ; Mse c.A . y n- .se e y.; [ l dh fiLMM !iM.h[th_b1', sN,$ 1._ t [j t-

The Companyseeks a consensus on TMI-2 cleanupfunding among regulators, legislators and the nuclear industry t his is an extraordinary approach, but financing charges, from GPU and its management believes it offers an oppor-subsidiaries for senices rendered and Operations Report tunity to reach a mutual agreement on equipment provided under contract with an equitable solution that no single party TMI-2. Document discovery and deposi-could achieve through its own efforts. tions related to this action are Taking this additional step can bring all proceeding. Purchased Power Costs Cut parties to take the final steps necessary OnDecember8 GPUanditsthree GPU has continued to trim outlays for to reach an agreement that is so essential operating subsidiaries filed a $4 billion purchased replacement power. While to completing the crucial cleanup effort. claim stemming from the TMI-2 accident these savings go directly to customers, against the NRC. He filing charges the they do reduce the borrowings that the TMIInsurance NRC with negligence in its performance System would otherwise have had to Through the end of 1980, GPU had and review functions. Among other make. The System's aggressive efforts incurred $181 million in cleanup and re-things, it cites the NRC 's failure to warn to buy lower cost replacement power covery costs associated with the acci-GPU and Met-Ed of a similar incident at have reduced theimpact of the TMI dent. The damaged nuclear fuel core the Davis-Besse plant in Ohio in 1977, accident on customers through 1980 by amounts to $37 million. These costs 18 months earlier. GPU believes that had about $220 million, compared with the hate been partially offset by $203 million the details of the Davis-Besse incident largely oil-fired generation available ofinsurance proceeds. been made known, the TMI-2 accident through the Pennsylvania-NewJersey-(Forfurthcr information about cicanup would not have happened. Maryland (PJM) power pool. costs andinsurance recorcrics, see in addition to sceking recovery from A favorable development was the Slanagcment' Discussion andAnalysis," the NRC of the cleanup costs, GPU's adoption of a revised pricing method s page18 andNotelto theFinancial claim also seeks to cover replacement covering power purchases from the Statements, page25J power costs for both TMI units of ap-other utilities in the PJM pool. The proximately $1.6 billion, the cost of fu-Federal Energy Regulatory Commission GPU Files TMI Lawsuits ture restoration of Unit 2, estimated at authorized the new tariff on October 1, in March 1980, GPU and its operating $430 million, lost revenues of approx. 1980. It will remain in effect until the companies filed suit against Babcock & imately $950 million and an increased earlier of December 31.1981 or the Wilcox and its parent company, J. Ray cost of borrowing of about $40 million. return of TMI-1 to senice. While GPU McDermott, Inc., for damages resulting at present buys more ofits power from from the accident. GPU alleges in the utility systems to the west and south action that these damages exceed $500 than from the PjM pool, the new pricing million and that very substantial future formula provides a backup source of damages are to be expected. Babcock lower-cost purchased power if those and Wdcox countersued in July, denying sources should not be available. l liability and seeking $4.1 million, plus Coal, Gas Produce Savings The large coal-fired generating stations r-- - m w --, c - Where the1980 Dollar Went in which the GPU companies participate I with other utilities have turned in a supe-rior performance, adding some S5 million Reinvestedin Business 1e N of fuel-cost savings (compared to oil) 47s l Energy during 1980. l i Taxes 10e Additionally, the System during 1980 continued its program of converting a h number of generating units from oil to Intemst & Preferred Dividends 13e ~ cheaper natural gas. By the spring of l Depreciation Sc 1981, some 800 megawatts of capacity \\ will have been converted to dual fuel Other Operation & Maintenance, 21e including Payroll r-V .... ra.:su ..w w w - a u:a..- , :l ' "4 s .... ~. < - -.~ 9

capability, replacing 4 million barrels of was permanently cancelled because of sources of coal. The start of constmction oil a year. The move will reduce custom-financial and regulatory uncertainties. of this unit has been deferred for two ers' bills by about $30 million annually, JCP&L received a construction permit years, resulting in a forecast completion assuming sufficient gas supplies. for the 1,168 megawatt project in 1973. In date of1989. 1978, the plant was forecast to be in Long Outage at Oyster Creek senice in the mid-1980s at a cost of Canadian CableTie Studied The Oyster Creek nuclear station was about $1.2 billion. JCP&Lis seeking GPUis also exploring, with Ontario shut down onJanuary 5,1980 for a approvalfrom the NJ Board of Public Hydro of Canada, another means of sup-scheduled 10-week refueling outage. Utilities to amortize and recover the $412 plying a portion ofJCP&L's future needs. This was prolonged to nearly seven million already invested in the plant The studies involve the possible delivery months for the repair of cracks in piping through its rates to customers over a of 1,000 megawatts of electricity pro-associated with the emergency core reasonable period of time. duced by Ontario Hydro in coal-fired cooling system. stations and delivered through a sub-Beginningin the springof1981and Seeking Alternatives marine cable interconnection between lasting for about five weeks, equipment Studies are underway to determine how the two countries under Lake Erie. The required by the NRC as a result of that to restore the future generating capacity cable would hook into GPU's transmis-agency's

• Lessons Learned from Three lost by the cancellation of Forked River.

sion network near Erie, Pennsyh ania. Mile Island" directives will be installed. The unit had been planned to meet Modifications to the station's emer-JCP&L's growing needs in the second New Energy Management gency core cooling system and other half of the 1980s and thereafter. One Plan Proposed safety-related changes will be made dur-option is to use the site for a coal-fired GPU has presented to the NewJersey ing a six-month shatdown scheduled to unit. Such a plan, however, presents and Pennsylvania PUCs a new con-begin on December 1,198L some problems, not least of which are servation and energy management plan, Despite the long 1980 outage, Oyster NewJersey's clean air regulations that one of the first ofits kind in the nation, Creek recorded significant fuel savings make compliance of a coal-fired generat-that it believes will reduce future con-for customers in 1980 and early 1981. In ing unit very difficult. The transportation struction costs and produce sasings for operation, the station cuts fuel costs by logistics of moving sufficient coal to the customers. The plan would move capital $10-to $14 million a month. plant site present another challenge. investment from constmetion of new Another option is construction of one generating facilities into conservation Nuclear Project Cancelled or more standardized coal-fired plants in and load-shifting hardware and senices. A major casualty of GPU's reduced finan-western Pennsylvania's coal fields, part The company proposed such desices as cial capabilities was JCP&L's Forked of Penelec's senice area. For several heat storage equipment and special River, NewJersey, nuclear project. The years, the System has been planning a meters. The cost of the desices would project was in the early stages of con-650-megawatt coal-fired unit at Penelec's be treated as a capitalinvestment. The struction when, in November 1980, it Seward, Pa. station, near abundant cost impact would be less than that of constructing new generating equipment and would be included in the operating . y n,y 3y nygqy yy. ~ - ~ i perA as new generating plants. GPU's current ' e ;1We M ' < WrN ' 4 cash position limits the ability to pursue -~- 1980 F M h it.69g W M 2.99e $.68e this program. Equitable rate treatment, -.,.1 therefore, will be fundamental to the '1979 k lL CC. $ 50c g g h; a 2.89e success of the plan. ~'"m A S-p.s'm( 1978 ML,4Jgg 2.77e 18C .. ng; j - .14e::s c. v. y. 1977 RFL4gs e, 2.66e

4 M e 5 67g b h. M b i 1976 E A L air b 2.47e

.g,c m sa m n-a. . w m www.m;y;

-u

~g

y t

1-A h, a " kr .a ' bD 3C .y, ~ ' ' ' P00R DIGINE 10

GeneralPublic Utilities has established aseparate nuclearorganization dedicated tosafepowergeneration. t the two TM1 Units. It would also be Nuclear responsible for the design, construction Board Changes Oraanization and operation of any future nuclear plants on the GPU System. While the nuclear a corporation would operate the nuclear How Nuclear Entity plants, ownership of those units would David L. Grove, president of David L Integrates Skills remain withJCP&L, Met-Ed and Grove, Ltd., an economic consulting Out of the various investigations into the Penelec. firm, was elected a member of the GPU causes and consequences of the TMI-2 Board of Directors at the Board's March accident emerged a strong consensus Safer Generation 1981 meeting. that nuclear power plants can best be a Direct Result Dr. Grove, who founded his firm upon operated and managed by a separate Bringing this single-focus emphasis to retiring in 1978 fmm the International organization dedicated solely to prmiding bear on nuclear operations reflects rec-Business Machines Corporation (IBM) the safe generation of nuclear power. ommendations of the President's Com-as vice president and chief economist, is Wellbefore the accident the Company mission on TMI. It would result in safer president of the United States Council of recognized the benefit of expanding its and more reliable nuclear generation of the International Chamber of Commerce in-house technical capabilities and ofinte-electricity and places the System in a and serves as senior economic adsisor of grating the operating responsibilities of stronger position to carry out all aspects the Marine Midland Bank of New York. its nuclear facilities into one organization. of nuclear operations. He is a member of the board of directors Serious consideration had been given to Pulling together the existing technical of Inter-North, Inc. and serves in the the forming of a separate corporate en-support and expanding the number of same capacity with a number of institu-tity to manage GPU's nuclear facilities. professional personnel has resulted in a tions, among them the National Bureau The early accident recovery program notable strengthening of the company's of Economic Research and the Commit-provided theimoetus to form such an nuclear power program. tee for Economic Development. organization-one which gathered to-Prior tojoining IBM, Dr. Grove was gether the wealth of nuclear experience GPU Nuclear vice president and chief economist for i l of the management and technical staff of in Approval Process the Federal Reserve Bank of San Fran-the GPU companies and directed that GPU Nuclear's formation has been ap-cisco and the Bank of America. He has l experience toward the cleanup program proved by the U.S. Securities and Ex. served as an adsisor on central banking l and preparations for returning Unit 1 to change Commission. Implementation of and economic policy to governments in l senice. its operations is now awaiting approval Latin America, Asia and the Middle East l From the early experience gained from the NRC and the NewJersey and as well as an adsisor on general eco-l from the formation of the TMI Genera-Pennsylvania commissions. Management nomic matters to several offices of the tion Group, and the recommendations of GPU Nuclear is well along in organiz-U.S. Government. i and insight provided by the studies of the ing the composite work force of some WarrenJ. Hayford, a member of I accident, evolved the expanded GPU 2,000 trained and motivated personnel GPU's Board of Directors, resigned in Nuc! car Corporation. from within and outside the GPU January 1981 after six years of senice System. because of the press of other business New Subsidiary Has activities and interests. Mr. Hayford had SingleTask taken a position as president and chief GPU Nuclear would be a separate sub-operating officer of International Han es-sidiary of General Public Utilities. Its ter Company in Chicago in 1979 and felt sole task would be the operation of the that his growing commitments there GPU System's $1.3 billion investment in made it increasingly difficult to meet the nuclear plants. Thus, it would be respon-requirements of being a director of GPU. sible for the safe and efficient operation GPU's Board accepted his resignation of the Oyster Creek nuclear unit as well with regret in view of the valuable per-as the restoration and safe operation of spective he brought to its deliberations. jmro-(@.., n

d

- i,; ' J I,\\ 1 11 3 mu m)

FRONT ST. ] COALPLANT 5 OILPLANT w / b The GPU System's !I Service Area S .,, '!c i a : f I The General Publ. Utilities System is a vital source of i , '. i, ~ g q energy for more than four million people in the nation's !u northeast quadrant. The GPU System companies. Jg i Jersey Central Power & Light, Metropolitan Edison and [OW.,3 'KEYSTOS 9 7 Pennsylvania Electric, have nearly 1.6 million customers y $^ ![ l l 4 j j: across half the land areas of NewJersey and Pennsylvania. g in 1980, the System provide I almost 32 bdlion kilowatt-hours s was used by residential customers, 24 percent by commercial h PITISBUR 11*h of electricity to those custr.sers. Of that total,34 percent p. 4 g accounts, 36 percent by industry and 6 percent by other L y types of customers. 1 g j'~ kJ 'q" The GPU System's service area forms a link (see map g g y inset) between the Northeastern and Middle Atlantic States. I h its pivotal position provides strong ties to economical power N / E 3; j sources to the North. South and West. p j { g Operating Companies' Statistics Sales Mix Customers-Revenues Total Assets Company ($000) ($000) Residential Commercial Industrial Year-End Jersey CentralPower & Light $ 882,975 $2,214,276 40% 28 % 28 % 703,462 Metropolitan Edison $ 432,652 $1,291,248 32 % 21 % 41% 361,662 Pennsylvania Electric $ 522,129 $1,488,011 28 % 22 % 42% 512,842 Genera! Public Utilities System $1,831,741 $5,042,972 34 % 24 % 36 % 1,577,966 P00RORIGE

Jersey Central Power & Light Company N Metropolitan Edison Company

• M b NUCLEARPLANT A PUMPEDSTORAGEPLANT

. Pennsylvania Electric Company m t. ,,/g SCRANTON M l ~m _- / r ? ? w_ . PENNSYLVANIA [ % T m g', ~~ TATE COLLEG / 'j ' PORT k 'Qg . -. G 3 j j , J' yG y "g. ig b ( { @ __d,..'~ g g !kidienid5r7 f g NEWARK r N'j p j ( 4 ,g vs H % a

i:hM

^n s tl p'l kJ N . + ~I N ~ m. l M 13 HARRISBURbf M S <Y - X# ~~ ~ E C .~h k SUI US .4 ) 19 REE MILE ISLA 4 s r, I Hkhh --PHILADELPHIA O ~ p# [ d h{$h h fg/j- .wagg8? MI ,' }. OYSTER C} REEK

q

,; ' #NMm NEW JERSEY FuelMix ElectricSales Peak Load' Numberof l (MWH) (MW) Employees Coal Oil & Gas Nuclear 12,ED7,007 2,997 3,564 30% 37% 33 % 7,813,405 1,429 2,827 96 % 4% i 11,117,631 1,735 4,072 99 % 1% 31,838,043 6,161 11,490 81% 11 % 8%

• At time ofGPUSystempeak.

13

S ial Re ort. c mpli nce with the order, and the agency is continuingits evaluation of the modifications as they are made. Progress at Three Mile Island The changes reach across both the technical and human aspects of Unit l's operations. Major progress is being made in the huge task confronting Changes Made Across Spectrum GPU at Three Mile Island despite the slow pace of federal Ore of the major safety modifications involved prosiding approvals and a reduction in available funds. Our efforts there physicalindependence of Unit 1 from Unit 2 to insure that are two-pronged: first, to bring Unit 1 back safely on line as decontammation and restoration work on Unit 2 would not soon as possible, and, second to accomplish the safe cleanup affect safe operation of Unit L These modifications involved, and recovery of Unit 2 expeditiously. Some of the major among others, piping changes and wall construction as well as achievemer.ts in this work are described in this section. some new facilities for waste treatment, radiation protection and sampling to duplicate previously shared operations. UNIT 1:MovingToward Restart in addition to the complete separation of Unit 1 from TMI Unit I was scheduled to go back into service after Unit 2, major changes have been made or are in progress to refueling on the day of the accident, March 28,1979. It has improve Unit 1's programs, procedures and performance. since remained shut down in response to NRC orders which Human engineering studies were conducted of the Unit 1 established a series of prolonged public restart hearings and control room and modifications are under way which will mandated numerous modifications that must be made to the greatly enhance the operator's ability to safely operate the unit before it can go back on line. Most of these changes stem plant. For example, re-labeling of controls gives instant from the " Lessons Learned at Three Mile Island" report of recognition of equipment function and status. New, eye-the NRC. Some changes must be completed before return to directing lines integrate panel displays for each of the Unit's ser, ice; others, of a longer-range nature, can be made after major operating systems, giving quicker appreciation of the plant is operating again. entire systems at a glance. Non-glare lighting now brings Much progress has been made in the " Lessons Learned" more clarity to panel displays and Unit l's computer has been work. The NRC has stated that Unit lis now in significant given far faster printout capability. ,y.;sm,1m y m m. g. ..-urm He was graduatedimm mexelUniwr-Nuclear Exnerience Assurance Radia6m & Ennmnmental - sity and completed stud Controls, Maintenance and Construc-r- ! Broughtto Bear tie, TechnicalFunctims, Administra6m nationalSchmlof NuclearScience and and Communications. Rese positions Engmeenng as well as graduate courses i have been filled by highly quahfied indi- . at the Pennsylvania State University. The Bree MileIslandmanagement viduals with impressive professional I structure today differs significantly from credentials. LTMI-1 vice president Henry Hukilljoined 4 ! the pre-accident period, when the Island The professionaland technical ' ' ' GPUinJune 1980, after serving as a was regarded, organized and staffed as a strengths of the Nuclear Corporation semor cisilian special assistant to the j single station with two units and shared maregement are typifiedby thesice commander, Naval Sea Systems facilities. preside 6ts of GPU's nuclear units. Command. He was graduated from the U.S. Nava! Admmistratively, activities at TMI are ' now directed by Robert C. Arnold, who Ivan Fintrock, vice president of Oyster Academy and served on active duty for I will serve as president of GPU Nuclear Creek, joined Met-Ed in 1952 and ad-more than 22 years. His Navy assign- ! when it is permitted to begin operating,. vanced through various engineering posi-. ments were primarily involved with the ~ and by his deputy executive,' Philip R. tions there. He served at the Saxton j, constmction, maintenance and opera-Clark. Additionally, a vice president has Experimental project and was assigned tions of nuclear submarines. been named for each of the TMIunits to Oyster Creekin1961as a nuclear ". From1976to1977 he also served as and the Oyster Creek nuclear plant. project engineer. He served in various. pmiect operations manager at the Clinch New vice presidential posts also have positions before beingnamedJCP&Ls ' River Breeder Reactor project for Burns L been created for the areas of Nuclear. vice president of Generation in 1972.' , and Roe Inc.. ,.- y,o .;y, ~t,, ~ - wY 3 2. td: .wg w.sf = s2 L m'- NE kJ SsS?- 15 1 {'. ,.. : 91. 7, r,s hIf f .' ( %,I([ })

e

• "6?i2010

{

The challenging task ofcleanup and recovery is essential to public health and safety and thefuture ofnuclearpower in this countr.y t An expanded plant maintenance program has been put into UNIT 2: Moving Toward Recovery place, providing increased emphasis and management atten-The task of cleaning up and recovering TMI Unit 2 is one of tion toward maintaining the Unit s equipment in a high state of the most challenging ever assumed by industry, not only in readiness and reliability. the sheer physical scope of the work involved, but in the fact Attesting to the benefits of the expanded maintenance that the people at TMI are working in an emironment that is program was the successful completion of a test conducted unique. early this year (1981) of all major plant components permitted But, through detailed planning, careful engineering and to be operated under the NRC's current shutdown order. The painstaking performance, the portions of the overalljob that equipment check prosided a high degree of assurance against have been permitted to date by the NRC are being accom-major equipment problems during restart. plished in a quiet, workmanhke, almost routine way. Some examples follow. Human Element Stressed The changes on the human side have been equally extensive. Water Purified Enhanced operator training programs-with particular empha-A sophisticated water filtration system. EPICOR II, has sis on reactor simulator training-provide plant operators with cleaned some 430,000 gallons of mid-level radioactive water greater recognition of the human element in plant malfunc-that had spilled into Unit 2's auxiliary building during the tions that might evolve into a major accident. accident. Although this water is distinct from the more highly Shift technical advisors with bachelor of science degrees radioactive water in the reactor building, it still contains, after are now providing around-the-clock technical assistance to the filtration process, higher than permissible levels of plant operators at each of our nuclear facilities. tritium, which cannot be filtered out because of its molecular The radiological controls staff for Unit I was increased four-similarity to normal hydrogen. Further dilution of this filtered fold during 1980 to allow for continuous radiological coverage water with uncontammated water readily reduces the tntium of all plant activities. content to dnnkable levels. We expect to complete the remaining required modifica-EPICOR 11 has allowed us to decontammate the auxihary i tions for restart by the fall of 1981 followed by an extensive building and the Unit's fuel handling area, both large work testing period before placing the plant in operatio 1. spaces needed for the overall program. EPICOR Il finished ... a-m-.- ww -.-nm -- - w.m m -, -~ , e Gale Hovey, vice president of TMI-2, Complementing the professional back-Robert C. Amold, Nuclear Corporation joined GPUinJanuary1980aftermore grounds of the Nuclear Corporation's president and chief operating executive, than 21 years in the nuclear industry. vice presidents are those of the deputy was elected senior vice president of 4 Before his TMI post, he served seven executive and chief operating executive. Met-Ed in August 1979 and alsois vice years as plant manager for Allied Gen-president-Generation for the GPU Gral Nuclear Senices' nuclear fuel plant Philip R. Clark, vice president and dep-Senice Corporation. in Barnwell, S.C. uty executive, prior to joining GPU late Hejoined Met-Edin 1969 on the staff l He was formerly associated with Gen-in 1979 was associate director, reactors, of the superintendent of Production and l : eral Electric Company's Vallecitos Nu-of the U.S. Department of Energy's was heavily involved during the startup _ clear Center in Pleasanton, CA, where Naval Reactors Division, and chief of the andinitialoperation of TMIL He was he held a variety of management posi-Reactor Engineering division of the elected to the Senice Corporation posi-tions dealing with test reactor operations Navy's Sea Systems Command. tionin1977. l k and radioactive materiallaboratory He earned the U.S. Energy Research Following graduation from the Univer-l operations. and Development Administration Special sity of Michigan, he served for ten years I n He served nine years with the U.S. Achievement Award in 1976. as an officerin the U. S. Navy. Six of l i Navy and completed the Navy's Nuclear Mr. Clarkholds a Bachelor of Civil ' those years were devoted to assign-Power Program before assignment to the Engineering Degree and did graduate - ments invohing nuclear power and in-l p ' first Polaris submarine. study in civil engineering at the Poly ' . cluded responsibilities for operator p~ He earned a B.S. in business admin-technic Institute of Brooklyn. He also ' trammg, radiological controls programs f - istration from the Illinois Institute of attended the Oak Ridge School of Reac-and reactor operations and maintenance. f. Technology.' tor Technology. ,y u s '.i 2A 2O 'dI. E.1% ! -C % i b h -' M!d dA. i^f. 5L,.._ b MM A' ' _i 15

its primary task in the spring of 1980; it will now clean water Much Remains to be Accomplished being used to flush holding tanks and for other purposes. The Although the cleanup of Unit 2 is slowly progressing, much filtered water from the auxiliary building is being held at TMI remains to be done. The 700,000 gallons of contaminated for use in the decontamination of the containment building. water in the containment building and the reactor coolant system must be processed and the containment building Krypton Gas Vented Safely decontaminated. Contaminated equipment and material must Carefully mcnitored by hosts of specialists, about 43,000 be removed, then the next major objective is removal and curies of radioactive krypton gas from within Unit 2's con-transfer of the fuel core to the spent fuel pool. tainment building were released harmlessly to the atmo-sphere from June 28th toJuly 11. All monitoring agencies, Coreis Unique Research Tool federal, state and local, reported radiation readings that were The TMI-2 accident offers an opportunity to obtain pre-consistently far below the limits set by the NRC, posing no viously unavailable information relating to the impact of threat to public health and safety. serious reactor mishaps. Examination of the reactor and core can be of unique value in gaining understanding of the effects Containment Entries Gather Data of serious nuclear accidents on a nuclear plant. Clearing the containment building of Krypton allowed Mike Safety analyses for accidents such as the one that occurred Bensoa and Bill Behrte, both Met-Ed employees, to open the at TMI-2 make use of detailed calculational models in esti-half-ton door of the containment building on July 22 and mating fuel damage and the potential, nature and extent of becorr.e the first to mter the structure since the accident possible releases to the emironment. Large-scale confirma-16 months before. tory tests of these models to determine their accuracy are That initial entry has been followed by several more, each virtually non-existent. In this regard, the damaged fuel vith larger groups of men. During these entries, teams assemblies at TMI-2 constitute a research and learning performed such varying tasks as taking still photographs and opportunity that must be explored. videotape footage, testing electrical circuits long unused. Exammation of the fuel can have far-reaching effects on the installing a TV monitoring system, checking equipment and nuclear industry and regulatory agencies. taking cloth " swipe samples" from walls, floors and equipment Many experts believe that the research work on the failed t I for radioactivity tests to assist in preparing for later steps in fuel will show that calculational models are very conservative the decontamination and cleanup program. and that the actual damage and impact of accidents may be far less severe than previously estimated. "SDS"To Filter Containment Water Nearing completion and awaiting licensing by the NRC is Communications Changes TMI's Submerged Demineralizer System (SDS). An ex-Regaining the understanding and trust of the public, elected panded, more sophisticated version of EPICOR 11, SDS will and appointed officials and the media is the task of an be used to filter the 700,000 gallons of highly radioactive expanded communications organization at TMI. weer contained in the Unit 2 reactor building and in the To remedy one of the most critical flaws made apparent in reactor itself. the early hours of the accident, a comprehensive emergency Like EPICOR ll, the new system will filter out radioactive communications plan has been developed to alert responsible particles from the water by trapping them in special chemical officials at alllevels of govemment in the event of an accident beds. The filtering process, however, because of the radioac-in the future. The new TM1 commumcations staff will play an tivity involved, will be carried out underwater in Unit 2's important role in implementing the emergency plan. spent-fuel pool, a 40-foot-deep, concrete-lined pit which Refurbished and updated, the TMI Visitors Center, across normally holds spent malear fuel rods. the river from TMI, is playing a larger role today in informing SDS will be available for operation in April 1981, but its the public, the media and government officials. starting date depends on NRC approvals and the granting of a license. The water cleaned by SDS will be used in decon-taminating the walls and equipment surfaces within the reactor building. After start-up, SDS is expected to complete itsjob in three to four months. 16

Statement of Management t The management of General Public Utilities Corporation is responsible for the information and representations contained in the financial statements and other sections of this armual report. The financial statements have been prepared m conformity with generally accepted accounting principles consistently applied. In preparing the financial statements, management makes infonnedjudgments and estimates of the expected effects of events and transactions that are currently being reported. To fulfillits responsibilities for the reliability of the financial statements, management has developed and maintains a system ofinternal accounting contro!. This system is in-tended to provide reasonable assurance that assets are safe-guarded and transactions are executed in accordance with management's authorizatica and recorded pn>perly to pennit the preparation of financial statements in accordance with generally accepted accounting principles. The accompanying financial statements and notes thereto disclose the effect of the nuclear accident on March 28,1979 at Unit No. 2 of the Three Mile Island Nuclear Generatit g Station (TMI-2). The accident has had a significant adverse impact on the earnings and financial position of the Corpora-tion in 1980 and 1979. In addition, several significant con-tingencies and uncertainties, the outcome of which cannot be determined at the present time, resulted. Reference is made to Note 1 to the accompanying financial statements and to Management's Discussion and Analysis of Financial Condition and Results of Operations on page 18 for further discussion of the effects and impact of the nuclear accident at Three Mile Island. Coopers & Lybrand, independent public accountants, are engaged to examme and express an opinion on the financial statements. Their opinion, which appears on page 20, sets forth the contingencies and uncertainties resulting from the accident. 17

Management's Discussion and AnalysiJ of Financial Condition and Results of Operations Liquidity and Capital Resource: Results of Operations: The nuclear accident at Three Mile Island has had a The results of operations discussed below compare 1980 significant adverse impact on the earnings and financial with 1978. The year 1975 is used to proside the reader with a position of the GPU System. As a direct result of this basis for comparison with 1980 results, as 1978 represents accident, the Corporation's subsidiaries are earning no return the last year of normal uperations for the Corporation and its on invented capital aggregating about $1.5 billion. subsidiaries. In the aftermath of the accident the subsidiaries' respec-Although operating revenues of the System increased by tive state utility commissions reduced allowable annual reve- $505 million (38%) in 1980 over those of 1978, earnings per nues to exclude the capital and operating costs associated share for the same periods declined from $2.30 to $.34. This with TMI-2 and TMI-1. Furthermore, in view of regulatory reflects a decrease in net income and in the retum on average and cost uncertainties arising from the accident, Jersey common equity from $138.8 million and 10.4%, respectively Central Power & Light Company UCP&L) abandoned the in 1978 to $20.6 million and 1.5%, respectively in 1980. construction of its Forked River nuclear generating project. The substantialincrease in operating revenues from 1978 These actions resulted in a significant decline in earnings to 1980 is primarily attributable to the recovery of higher fuel because the operating expenses, depreciation and capital and purchased power costs in energy clauses. Such additional costs associated with the aforementioned assets are being revenues ($408 million) reflect the recovery of the higher absorbed by the common shareholder. energy costs incurred by the System, and have no impact With respect to the abandoned Forked River nuc! car on earnings. generating project, JCP&L is seeking recovery of its invest-The decline in net income between 1978 and 1980 of $118.2 ment in the project in a pending rate proceeding. mi!! ion is primarily the result of the regulatory response to The adverse financial results and continuing uncertainties the accident at TMI-2. As previously indicated, the subsidi-arising from the accident preclude the Corporation and its aries are not recovering in their base rates the costs subsidiaries from issuing any securities. Consequently, the associated with TMI-1 and TMI-2. The capital and operating only available source of outside funding is short-term borrow-costs associated with TMI-1 were removed from base rates ings (see Note 4 to consolidated financial statements). Short-in the second quarter of 1980 while similar costs for TMI-2 term borrowings have increased approximately two-fold from were removed from base rates during 1979. Other factors $99 million prior to the accident to an average of $200 million contributing to the decline in earnings include (i) the suspen-in periods subsequent to the accident. At December 31, sion, in April 1980, of the accruing of credits to income for the 1980, short-term borrowings were $156 million against avail-carrying cost of funds associated with the construction of the able credit of $279 million (excluding $13 million issued as Forked River project (which was subsequently abandoned), bonds). (ii) the increase in operation and maintenance expenses Expenditures for the cleanup and restoration of TM1-2 are primarily resulting from inflation and additional expenditures anticipated to aggregate $1.4 billion and continue through at the nuclear stations and (iii) increased interest expense. December 31,1987. The subsidiaries, through Following is a comparative statement of operations and December 31,1980, have incurred clean-up and recovery return on average common equity for the years 1978 and costs of $181 million. The damaged nuclear fuel core 1980. The statement shows the cost components of TMI-1, amounts to $37 million. These costs have been partially TMI-2 and Forked River that are being excluded from base offset by insurance proceeds of $203 million. rates and therefore incurred by the common shareholders The subsidiaries anticipate recovering $300 million of and those costs associated with the operations of the System - l insurance proceeds, the maximum amount available under which are included in rates. The statement shows that, net of their policy for property damage at TM1-?. The Corporation income taxes, TMI-1 accounted for $22 million of costs in and its subsidiaries are uncertain as to the source of funding excess of revenues, TM1-2 accounted for $28 million, and for cleanup and restoration costs in excess of such insurance Forked River accounted for $6 million. Furthermore, the coverage. statement shows that, if non-earning operations were ex-The Corporation's subsidiaries have rate increase requests cluded, the electric system would have produced net income pending before their respective commissions. Failure by the of $77 million in 1980 and a return on common equity of 8.6%. commissions to act in a positive and timely manner on these For a further discussion of events subsequent to the requests could result in the inability of the subsidiaries to accident at Three Mile Island see Note 1 to Consolidated refinance their short-term borrowings and impair their ability Financial Statements. With regard to the effect of changing to meet their obligations. prices, see page 38. 18 L

Statements of Operations and Retum on Common Equity (Unaudited) Generas Public Utilstses System 1 (Dollars in Millions) 1978(a) 1980(b) Excluding TMland Total Total Forked Forked System System River TMI-1 TMI-2 River Plant Values (Net of Depreciation).................. $4.121 $1.379 $2,882 $ 387 $ 698 $ 412 Revenues.................. $1.327 $1,832 $1.809 $ 21 2 Energy Costs................................ 460 832 832 Deferred Energy........ (18) 25 25 Other Operation and Maintenance................. 307 392 370 28 (6)(c) Depreciation..................... 110 147 111 13 23 Taxes Other Than Income Taxes.................... 130 172 172 Interest Expense............................... 160 219 158 15 27 19 Other Income and Deductions...................... (4) (7) (7) Total........................................ 1,145 1.780 1.661 56 44 19 Pre-Tax Income................................. 182 52 148 (35) (44) (17) Income Tax Expense............................ 71 16 6? (16) (22) (8) Income after Taxes.............................. 111 36 86 (19) (22) (9) Allowance for Funds Used during Const............. 72 28 21 7 Preferred Stock Dividends....................... 44 43 30 3 6 4 N;t income Per Income Statement................... $ 139 $ 21 $ 77 $ (22) $ (28) $ (6) l Return on Average Common Equity.................. 10.4 % 1.5% 8.6% (16.9)% (11.9)% (4.2)% (a) Operation : return on common equityfor19a8 represent the lastpre-accidentyear (b) TML 1 costs utre excludedfrom the base rate retwnues of]CP&L and thelknnsyltania subsidiaries effectitsApril1.1980and]une l.1980. respectitsly. TMI-2 costs arre remottdfrom base retwnues in early 19o^'9. Wsth respect to the ForkedRiter nucleargeneratsngproject, the credit to incomeforAFC uns suspended effectus April 1. 1980. (c) includes $12 million ofoperation and maintenance espendstures more than offset by the resent capacs.) credits. l l l l 19

Reportof Auditors To the Board of Directors and Stockholders GENERAL PUBLIC UTILITIES CORPORATION Parsippany, NewJersey We have exammed the consolidated balance sheets of and the liquidation ofliabilities in the normal course of General Public Utilities Corporation and Subsidiary Com-business. De Corporation's subsidiaries are currently not panies as of December 31,1980 and 1979, and the related receiving a level of revenues sufficient to assure their ability consolidated statements ofincome, retained earnings and to continue as a going concern. He continuation of the changes in financial position for each of the five years in the Corporation as a going concern is dependent upon obtaining period ended December 31,1980. Our exammations were adequate and timely rate relief, receiving financial assistance made in accordance with generally accepted auditing stan-for the cleanup and restoration costs required for TMI-2, and dards and, accordingly, included such tests of the accounting maintaining and increasing the availability of credit under the records and such other auditing procedures as we considered revohing credit agreement (see Note 4 to Consolidated necessaryin the circumstances. Financial Statements). The eventual outcome and effect of As more fully discussed in Note 1 to Consolidated Financial the foregoing on th: consolidated fmancial statements cannot Statements, the Corporation is unable to detemiine the presently be determined. ultimate consequences of the accident at Unit No. 2 of the As more fully discussed in Note I to Consolidated Financial Three Mile Island Nuclear Generating Station (TM1-2) and of Statements, the Corporation's NewJersey subsidiary is the response of rate-making and other regulatory agencies to engaged in litigation with a nuclear fuel supplier invohing the that accident. Among the contingencies and uncertainties pricing of nuclear fuel At this time, the outcome of the which have resulted as a direct or indirect consequence of litigation and the rate-makmg treatment of any increased fuel this accident are questions concerning-costs which might result from an adverse legal determination are " The recovery of the approximately $661 million invest-A Q dimN'ot@ CelidatM Finad a. ment in TMI-2; Statements, the Corporation's Pennsylvania subsidiaries may b. The recovery of $15 million of costs incurred net of be required to make refunds to customers for certain insurance proceeds received, and the mdeterminable payments made for coal. At this time, it is uncertain whether amount of uninsured costs yet to be incurred, m or to what extent such refunds will have to be made. connection with the anticipated cleanup and restoration in our opinion, subject to the effect, if any, on the consoli-of TMI-2 to sersice; dated financial statements (the 1980 and 1979 consolidated c. The recovery of the approximately $387 million invest-financial statements only with regard to the uncertainties ment in Three Mile Island Unit No.1 Nuclear Generat-discussed in the second through fourth paragraphs above) of ing Station; such adjustments as might have been required had the d. The recovery of the approximately $412 million invest-outcome of the uncertainties discussed in the preceding ment by the Corporation's NewJersey subsidiary in the paragraphs been known, the aforementioned statements Forked River Nuclear project, construction of which (pages 21 through 36) present fairly the consolidated financial has been abandoned; position of General Public Utilities Corporation and Subsidi-e. The recovery of the excess, if any, of amounts which sry Companies at December 31,1980 and 1979 and the might be paid in connection with claims for damages consolidated results of their operations and the consolidated resulting from the accident over available insurance changes in their financial position for each of the five years in proceeds; and the period ended December 31,1980, in conformity with f. Any action of rate-making agencies with respect to any generally accepted accounting principles applied on a portion of the replacement power costs for which consistent basis. current recovery is now permitted. COOPERS & LYBRAND He accompanying consolidated financial statements have been prepared in conformity with generally accepted ac-March 5,1981 counting principles applicable to a going concern which 1251 Avenue of the Americas contemplates, among other things, the realization of assets New York, New York 10020 20

Consolidated Statements of Income ruoten GeneralPubhc Utshties Corporation andSubsidsary Companies ^ t (in ThousandsI For the Years Ended December 31, 1980 1979 1978 1977 1976 . $1,831,741 S1,490.154 S1.326,M4 $1,252.013 $1.068,753 Operating Revenues...... Operating Expenses: Fuel...... 401,922 347,079 326.083 270,612 245,638 Power purchased and interchanged, net........... 429,993 268,210 133,741 186,235 120,784 Deferral of energy costs, net (Note 2)............... 25,058 (69,832) (17,916) (17,937) (21,726) Other operation and maintenance (Note 12)... 392,062 310,821 306,586 252,745 231,856 Depreciation (Note 2)... 147,086 141.224 109,505 96,508 87,839 Taxes, other than income taxes (Note 12).... 172,565 149.445 129,862 114,682 94,927 Totals.... 1,568,686 1,146.947 987.861 902,845 759.318 Operating income before income taxes.... 263,055 343,207 338,783 349,168 309,435 Income taxes (Notes 2 and 10). 18,460 65,905 84.354 95.805 79,832 Operating Int ome..... 244,595 277.302 _ 254.429 253.363 229,603 OtherIncome and Deductions: Allowance for other funds used during construction (Note 3).. 12,014 24,744 49,888 47,787 42,269 Otherincome, net. 7,462 8,937 3,682 274 1,165 income taxes on other income, net (Notes 2 and 10).... (4,513) (5,146) (2,461) (996) (1,157) Totalotherincome and deductions 14,963 28.535 51,109 47,065 42,277 Income Before Interest Charges and Preferred Dividends. 259,558 305.837 305.538 300.428 271,880 Interest Charges and Preferred Dividends: Interest on first mortgage bonds................ 152,175 144,097 131,461 118,734 108,802 Interest on debentures and other long-term debt... 24,579 24,228 23,859 23,898 7.6.202 Other interest..... 41,786 24,387 4,527 9,117 3,994 Allowance for borrowed funds used during construction-credit (net of tax)(Note 3). (15,226) (18,296) (22,255) (22,269) (17,080) Income taxes attributable to the allowance for borrowed funds (Notes 3 and 10).. (7,404) (7,977) (14,758) (12,514) (10,887) Preferred stock dividends of subsidiaries. 43,057 43,615 43.930 40.683 39,652 Total interest charges and preferred dividends..... 238,967 210,0M 166,7M 157,649 150,683 l N:t Income............. ....S 20,591 5 95.783 $ 138.774 S 142,779 $ 121,197 Ecrnings per Average Share... S.34 $1.56 $2.30 $2.50 $2.20 l Average Common Shares Outstanding. 61,264 61,218 60,217 57,208 54,968 l l l l Consolidated Statements of Retained Earnings (Noten (in Thousands > For the Years Ended December 31, 1980 1979 1978 1977 1976 Balance, beginning of year.... .... S 485,571 5 463,173 $ 430,823 $ 385,653 $ 356,717 i Add, net income................ 20,591 95,783 138.774 142,779 121,197 Totals...... 506,162 558,956 569,597 528,432 477,914 Deduct, dividends on common stock...... 73,385 106,424 97.609 92,261 Balance, end of year (Notes 1 and 9).. ............ S 506,162 $ 485,571 $ 463.173 $ 430.823 $ 385,653 The accompanying notes are an integralpart of the consohdatedJfnancialstatements. 21 t

1 Consolidated Balance Sheets moren GeneralPublic Utshtws Corporatwn andSubsidsary Companses tin Thousands) December 31, 1980 1979 Assets Utility Plant (at original cost): In senice (Note 1): S 705,740 $ 704,992 Investment in Three Mile Island Unit No. 2... Other....... 3,931.554 3.773.897 Totalin service............. 4,637,294 4,478,889 Less, accumulated depreciation (Note 2)..... 1,098,651 973.490 Net...... 3,538,643 3.505,399 Construction work in progress (Note 1)............. 156,191 553,6M 33,674 24.568 Held for future use............. 3,728,511 4.083.651 Totals.. 255,765 232,032 Nuclear fuel (Note 4). 54,360 47.241 Less, accumulated amortization (Note 2)...... Net nuclear fuel......... 201,405 184.791 Net utility plant..... 3,929,916 4.268.442 Excess ofinvestments in subsidiaries over related net assets... 30,805 30.805 Investments: 941 968 Other physical property, net........ Loans to non-affiliated coal companies (Note 11). 18,275 19.375 759 783 Other, at cost..... _21.126 19,975 Totals..... Current Assets.: Cash.............. 6,815 7,909 37,407 21,808 Special deposits, (Note l).. 48,300 60,711 Temporary cas' investments. n Accounts receivable: Customers, net (Note 4). 135,196 113,870 37,886 10,478 Others (Note 10)... inventories at average cost or less: Materials and supplies for constmetion and operation............. 66,229 53,254 Fuel............ 42,572 69,507 13,967 12.439 Prepayments..... 388,402 349.976 Totals.... Deferred Debits: Deferred energy costs (Notes 1, 2 and 4). 147,712 172.770 Unamortized property losses (Note l)...... 420,216 9,602 15,063 61,171 Deferred costs-nuclear accident, net of insurance recoveries (Note 1). Deferred income taxes (Notes 2 and 10). 43,614 28,M6 Other....................................... 47,269 49.456 Totals........... 673,874 321.645 Total Assets........ $5,042,972 $4.991.994 The acco,npanving notes are an sattgralpart of the consolsdatedfsnancial statements. 22

i Gn Thousands) 1980 1979 Liabilities and Capital Long. Term Debt, Capital Stock and Consolidated Surplus: Long-Term Debt (Notes 4 and 5): First mortgage bonds (3%% to 13%%, due 1982 through 2009).. $1,874,284 $1,868,733 Debentures (4%% to 9%%, due 1986 through 1998)........................... 224,680 230,580 Other long-term debt (varying rates, due 1982 through 1985)..................... 10,035 54,065 Unamortized net discount on long-term debt.................................... (3,560) (4.406) Totals........................................................... 2,105,439 2,148,972 Cumulative preferred stock-mandatory redemption (Note 6)................... 85,050 90,400 Less, capital stock expense................. 2,674 3.004 Totals....................................... 82,376 87,396 Cumulative preferred stock-no mandatory redemption (Note 8)... 423,391 423,391 Premium on cumulative preferred stock..................................... 1,348 1,348 Less, capital stock expense............................................... 831 1.663 Total s............................ 423,908 423.076 Common stock and consolidated surplus (Notes 1 and 4): Common stock (Note 7)... 153,229 153,229 Consolidated capital surplus (Note 7)........................................ 772,958 772,538 Less, capital stock expense.................. 18,056 17,983 Consolidated retained earnings (Note 9)........ 506,162 485.571 Totals........................................... 1,414,293 1,393,355 Less, reacquired common stock (Note 7)...................................... 70 70 Totals............................................................ 1,414,223 1,393.285 l Total s................................... 4,025,946 4.052.729 Current Liabilities: Securities due within one year (Notes 5 and 6).......... 76,067 44,164 Notes payable to banks (Note 4)....... 156,000 171,000 l Accounts payable...................... 146,242 162,162 Customer deposit s.................................................... 7,190 6,387 Taxes accrued (Note 10)................................... 55,910 40,560 Intere st accrued............................................................. 42,343 43,477 Other................................................................. 57,057 36.322 l Totals............. 540,809 504,072 l Deferred Credits and Other Liabilities: Deferred income taxes (Notes 2 and 10)... 385,011 294,510 Unamortized investment credits (Notes 2 and 10). 66,377 115,212 Other..................................................................... 24,829 25,471 l Totals............................................................ 476,217 435.193 Commitments and Contingencies (Note l) Total Liabilities and Capital....... $5,042,972 $4,991,994 l I 23

Consolidated Statements of Changes in Financial Position moren GeneralPublic Utihties Corporatum andSubsidiary Cornpanies V lin Thousands) For the Years Ended December 31, 1980 1979 1978 1977 1976 Source of Funds: Operations: Net Income................................... . $ 20,591 $ 95,783 $138.774 $142,779 $121,197 Principal non-cash charges (credits) to income: Depreciation (Note 2)....... 147,086 141,224 109,505 96,508 87,839 Amortization of nuclear fuel (Note 2)... 7,260 21,314 21,443 17,764 16,374 Investment tax credits, net (Note; 2 and 10). (53,155) (11,830) 41,733 42,496 7,783 77,406 67,882 58,285 35,296 33,732 Deferred income taxes, net (Notes 2 and 10)... Allowance for other funds used during construction (Note 3).. (12,014) (24,744) (49.888) (47,787) (42.269) Total from operations........................ 187,174 289,629 319,852 287,056 224,656 1.ong-term debt... 15,783 153,800 154,082 155,920 217,000 Common stock, net of expense (Note 7)................ 4,771 22.273 82,166 8,466 Preferred stock (Notes 6 and 8)........ 50,000 35,000 Bank borrowings, net (Note 4).... (15,000) 87,400 24,625 19.125 13,300 Sale of nuclear fuel.............. 15,798 Decrease in working capital (excluding debt)(a) 17,954 5,193 8,899 3.143 6.979 Other, net....... Total source of funds. $212,654 $553.554 $523.975 $594.267 $510,594 Application of Funds: Construction expenditures-Utility plant. .... $191,980 $281,912 $376,812 $343,909 $321,150 Nuclear fuel.............. 53,760 69,114 30,878 67,268 45,086 Allowance for other funds used during construction (Note 3). (12,014) (24.744) (49,888) (47,787) (42,269) Retirement or redemption oflong-term debt and preferred stock.. 32,602 54,463 32,908 73,389 71,990 Dividends on common stock.......... 73,385 106,424 97,609 92,261 Deferred energy costs, net (Note 2)........ (25,058) 69,832 17,916 17,937 21,726 Deferred costs-nuclear accident, net of insurance recoveries (Note 1). (46,108) 24,373 (1,100) 625 2,350 650 Loaa to non-affiliated coal companies (Note 11)........... Increae in working capital (excluding debt)(a)...... 18,592 8,300 21,239 Other, ret....... 5.219 18,353 ....... $212,654 $553.554 $523.975 $594,267 $510.594 Total application of funds.. (a) Changes in components of working capital (excluding debt): Cash and temporary investments....... . $(13,475) $ 50,639 $ (9,298) $(10,390) $ 2,302 15,599 9,969 (3,307) 4,531 3,949 Special deposits........ 48,734 (26.441) 43,788 2,433 14,070 Accounts receivable. inventories...... (13,960) 35,772 (18,284) 30,620 7,196 Accounts payable.... 15,920 (67,709) (12,386) (20,129) 3,168 Taxes accrued.... (15,350) (19,903) 7,845 24,698 (22,470) 1,134 (4,838) (131) (3.218) (5,791) Interest accrued.......... Other, net............ (20,010) 4.557 73 (7,306) (7,617) Total....... ........ $ 18,592 $(17,954) $ 8,300 $ 21,239 $ (5.193) The accompanytng notes are an integralpart of the consohdatedjfnancialstatements. 24

Notes to Consolidated Financial Statements

1. Commitments and Contingencies nuclear fuel core was retired in 1979 and its unamortized book c st of $36.8 million transferred to deferred debits (deferred Three Mile Island Nuclear Accident e sts-nuclear accident). These deferred debits which aggre-On March 28,1979, an accident occurred at Unit No. 2 of the gate $217.9 million have been partially offset by the insurance Three Mile Island nuclear generating station (TMI-2) result, pmceeds of $202.8 million received through December 31, ing in significant damage to TMI-2 and a release of some low D8E level radiation which published reports of governmental The subsidiaries first mortgage bond indentures proside rgencies indicate did not constitute a significant public health f r insurance proceeds to be held by their respective trust-or safety hazard. TMI-2 is jointly owned by the Corporation's ees for reimbursement to the company for either expendi-subsidiaries, Jersey Central Power & Light Company tures on repair of damaged property or construction of other (JCP&L),25%; Metropolitan Edison Company (Met-Ed),

b ndable property. Insurance proceeds of $33.5 million and 50%; and Pennsylvania Electric Company (Penelec),25%. At $12.6 mEon remained on deposit with the subsidianes December 31,1980, total net investment by the subsidiaries tmstees at December 31,1980 and 1979, respectively. Such in TMI-2 was approximately $661 million ($706 million invest-amounts are recorded on the balance sheet as special ment less $45 million accumulated depreciation), excludmg deposits and included in the aforementioned insurance the unamortized investment of approximately $37 millionin proceeds. the nuclear fuel core. The subsidiaries carried the maximum insurance coverage Three Mile Island nuclear generating station Unit No.1 v il ble at the time ($300 million) for damage to the unit and (TMI 1), which adjoins TMI-2, was out of service for a c re and for decontamination expenses. lt is the Corpora scheduled refueling and was not involved in the accident. n ns W that hcmeries fmm the m, swance comparues TMI-l is jointly owned by the Corporation's subsidiaries in will approximate the amount of the insurance carried as the same percentages as TMI-2. At December 31,1980, total

• stimated cleanup expenditures are expected to exceed net investment by the subsidiaries in TMI 1 was approx-nW avadahswame cwerage s

imately $387 million, includmg the unamortized investment in The subsidiaries do not know the extent, if any, to which the nuclear fuel core of $30 million. By orders dated July 2, the expenditures for repair and restoration of the unit to 1979 and August 9,1979, the Nuclear Regulatory Commis-p&ation will represent plant improvements or other items sion (NRC) directed that TMI-I remain in a shut-down that are capitalizable and which may be recoverable m the condition until resumption or operation is authorized by the future through rates charged to customers, by amortization NRC, after public hearings and the satisfaction of various r depreciation charges. Moreover, the subsidiaries are requirements set forth in such orders. Hearings commenced seeking financial assistance from the Federal government and on October 15,1980 before an NRC Atomic Safety and the utility industry. Although, as set forth below, the Penn-Licensing Board. TMI-1 is not expected to return to operaton sylvania Public Utility Commission (PaPUC) has expressed a before the fourth quarter of1981. contrary view, with respect to the costs of responding to the l CostofCleanup andRestoration: TMI-2 accident management believes that any loss suffered Current projections provide for decontamination, including by the subsidiaries for which they do not receive financial fuel removal, to be completed in 1985, at a cost of $750 assistance, or reimbursement from suppliers or others, million in current dollars ($1 billion when adjusted for inflation should be recoverable in rates. Moreover, it is management's of10% per annum). Restoration of the unit (including replace-intent to seek to recover such costs in future rate and/or ment of the nuclear fuel core)is ext acted to take an judicial proceedings. Under these circumstances, the amount additional two years, at a cost of $260 million in current ofloss, if any, suffered by the Corporation and its subsidiaries dollars ($430 million when adjusted for inflation of 10% per resulting from the TMI-2 accident is not presently deter-annum). The estimated amounts do not include the cost of minable and, therefore, no provision has been made in their modifications to meet post accident regulatory requirements accounts. (estimated at $80 million) or the cost of ordinary operation In its rate order ofJune 19,1979, the PaPUC recognized and maintenance of TMI-2 (estimated at $170 million) ex-that no claim for such costs had been made. Nevertheless, pected to be incurred during this period. the PaPUC stated: "The Commission is of the view that none The above e.stimates are subject to major uncertainties, of the costs of responding to the incident, including repair, including (a) the regulatory emironment. (b) the full scope of disposal of wastes and decontamination are recoverable from the challenges in decontammating the reactor, (c) the effect ratepayers. These costs are and should be insurable" In its of government regulations on the issue of waste disposal and rate order of May 23,1980, the PaPUC again addressed this (d) the reusability of major components. issue, without any request having been made by Met-Ed or The subsidiaries as of December 31,1980, in responding to Penelec with respect thereto, by stating "With respect to the accident at TMI-2, have deferred $181.1 million of costs the recovery of cleanup costs through rates, nothing in this associated with the cleanup and recovery process. In addition order negates the statements of the Commission in the June to the deferred cleanup and recovery coe, the TMI-2 19,1979 order" 25

9 ~ On September 18,1980 the PaPUC issued an order ~ precation and capital costs are currently being reflected F requiring, among other things, that Met-Ed " cease and desist in the financial statements in that (a) depreciation charges t i from using any operating revenues for uninsured cleanup and (TMI-1, $13 mdhon annually and TMI-2, $23 million annually). restoration costs" of TMI-2. In this order, the PaPUC stated are being charged to expense, (b) the interest and preferred l that "these cleanup costs and expenditures not covered by stock dividend components of these investments are being insurance ultimately are the responsibility of the_ company's accrued and (c) the earnings per share of common' stock are j stockholders and/or the Federal government: however, they determined on a basis which reflects all outstandmg shares are not the responsibility of the ratepayers" and that the including the shares issued to finance the common stock i cease and desist order is designed "to insure that ratepayer componentsof theseinvestments. momes are not being used, currently or in the future either. The GPU System is a member of the Pennsylvania-New j drectly or indirectly to pay clean-up expenses" Jersey-Maryland Interconnection (PJM). The generating On September 26,1980 Met-Ed filed a complaint in the facilities of the member companies cumulatively satisiy their I United States District Courtfor the Middle District of capacity requirements. As a result of the unavailability of both Pennsylvania seeking a temporary restranung order and an TMI units, the GPU System is unable to meet its obligations i iriunction against enforcement of the PaPUC's cease and forits allocated share of the PJM capacity requirements. desist order as well as declaratory relief. Met-Ed alleged, Consequently, the subsidianes will be required to make l among other things, that the PaPUC's cease and desist order payments to other PJM members in the future. Furthermore, confhcts with Met-Ed's (i) obligations under the Atomic until such time as TMI or other replacement capacity l f Energy Act, and rules, regulations and orders thereunder, (ii) becomes available, the GPU System will continue to be - the operating license issued by the NRC for TMI-2 and (iii) unable to meet its PJM obligation. In view of the association } Met-Ed's duties under the Penrisylvania Public Utility Law to of such costs with the accident at TMI-2, their ultimate furnish and maintain adequate, efficient, safe and reasonable ratemalung treatment is uncertain. Should such future costs facilities. On September 26,1980, the District Court denied not be recoverable in rates, this could have a material adverse l Met-Ed's request for a temporary restranung order; the effect on the future earrungs of the Corporations

• subsidianes.

groceedings relating to Met-Ed's request for an injunction are being held in abeyance at Met-Ed's request. RateProceedings-Newfersey: l On October 16,1980 Met-Ed filed an appeal of the On January 31,1979, JCP&L was granted a $33.8 million aforementioned PaPUC order of September 18,1980 to the annual rate increase by the NJBPU, which, among other Commonwealth Court of Pennsylvania, and the matter is now things, reflected in base rates its investment in TMI-2 and ' pendingin that court. the operating and maintenance costs associated with the unit. j Met-Ed and Penelec do not know what effect these actions On June 18,1979, the NJBPU issued a rate order reducing l of the PaPUC may have on their ultimate ability to recover annual base revenues by $29 million which represented the uninsured TMI-2 cleanup costs from ratepayers. In the event amount allowed by the NJBPU in its January 31,1979 order 8' of a final unfavorable determination in administrative or forJCP&L's annual capital and operating costs associated i judicial proceedings, Met-Ed and Penelec, at that time, would with its interest in TMI-2. The order also prmided for a be required to make provision in their financial statements for reduction in energy revenues of $7.3 million over a prospec-j the estimated losses that would result because of the TMI-2 tive eighteen month period as an offset to base rate revenues i accident. These losses would have a material adverse effect attributable to TMI-2, collected during April, May andJune on the earnings and financial position of Met-Ed and Penelec. 1979. Accordingly, such amount was recorded as a charge to if the NewJersey Board of Public Utilities (NJBPU) were to energy costs byJCP&LinJune1979. take smular action with respect to JCP&L and such action By order dated Aprill,1980, the NJBPU removed from were not reversed by appeal, this would have a material JCP&L's base rates the capital and operating costs associated 1= adverse effect on JCP&L's earnings and financial position. with TMI-1 of $17.9 million annually. That order did not in order to finance the substantial expenditures required reduce JCP&L's charges to customers; instead, it directed for replacement energy, cleanup and repair and other costs that an equivalent amount (after rdjustment for revenue resulting from this accident, the Corporation and its subsidi-taxes) be apphed to accelerate the amortization ofits de-aries entered into a revohing credit agreement with a group ferred energy costs incurred prior to the TMI-2 accident. In of banks inJune 1979 (see Note 4). In addition, JCP&L and removing TMI-1 from JCP&L's base rates, the NJBPU deter-f Penelec each issued $50 million of first mortgage bonds in mmed that "given the extended period of unavailability and j June 1979 and JCP&L issued $47.5 million of first mortgage the impossibility of ascertauung when the unit may return to j bonds in October 1979, $25 million of which was applied to service,TMI-lis not used and usefulin supplying energy..." i the paynwnt of maturing bonds. JCP&L has appealed to the Supreme Court of NewJersey, As indicated below, the operating expenses, depreciation that portion of the order which removed TMI-1 costs from 1 - and capital costs associated with the investment in TMI-1 and base rates. Other parties have filed cross appeals, contesting TMI-2 are not being recovered from customers. Such de-the provision of that order directmg the acceleration of the amortization of prior deferred energy costs. Oral argument 26 has been held and a decision is pending. F 1. -__.-_.__-.._._____.._-.,_,_.11._i..i._._,______....~._

~ On April 29,1980 JCP&L filed a petition with the NJBPU On May 23,1980, the PaPUC dismissed a show cause requestina an increase in base rates of $173 miHion annually. order it had issued regarding the revocation of Met-Ed's - 0 The petition requested an interim increase of $60 million franchise to conduct public utility operations. The PaPUC annually subject to resiew and possible refund at the con-stated that it had found "no immment and foreseeable threat clusion of the rate case. On May 13,1980, the NJBPU to continued pro ision of adequate and reliable senice at granted such interim increase. Through December 31,1980, reasonable rates" In addition, the PaPUC found in this l JCP&L has collected approximately $38 million pursuant to decision that TMI-1 is not "used and useful in the public - such interim increase. In the opinion ofJCP&L's counselin senice" and prescribed temporary base rates for Met-Ed i this proceeding, there is little likelihood that such increase and Penelec, effectiveJune 1,1980, which removed the wiu be refunded. capital and operating costs (Met-Ed-$27 miuion annually and With respect to additional energy costs, including those Penelec-$12 million annually) associated with the unit from l. resulting from the outage at TMI-1 and TMl-2, the NjBPU the companies' base rates. As discussed below, Met-Ed and has aHowed JCP&L to recover these costs from ratepayers Penelec have filed complaints against these temporary rates. over current and future periods. Pending before the NjBPU The PaPUC's decision of May 23,1980 further allowed for is a petition for an increase in JCP&L's levelized energy levelized energy cost rates that provided for the full recovery l adjustment clause (LEAC) of $104.6 million annuaHy re-of energy costs for the period June 1,1980 through Decem-quested to become effective March 9,1981. ber 31,1980. Moreover, the decision prosided for the l During the pendency of the proceedings which resulted in recovery of the then outstanding post-accident deferred theJune 18,1979 order of the NJBPU, certain intervenors energy costs over an 18 month period, in the form of a requested that the NjBPU consider the issue of fault regard-surcharge, effectiveJune 1,1980, to Met-Ed's and Penelec's -j ing the causation of the TMI-2 accident. In accordance with customers. In this regard the PaPUC stated: "Those the NJBPU's direction, legal memoranda have been filed amounts are subject to audit and resiew by the Commission attempting to identify the legal standards which should and to a later determination that specific amounts of energy govern the NJBPU's evaluation of fault, the legal and factual costs were imprudently or unreasonably incurred. If the contentions regarding fault, the regulatory consequences of a courts and/or the NRC should ultimately conclude that Met-fault finding, the NjBPU's legal authority to impose such Ed was imprudent or negligent in its operation or manage-j consequences and the implications thereof. The NJBPU has ment of Three Mile Island, then this Commission will take not established a hearing date to begin consideration of the notice of such determinations and their relevance to any L above issues. portie, of the replacement power costs for which current In connection with the current base rate and LEAC recov ryispermittedtoday" proceedings, intervenors have filed motions requesting, OnJuly 29,1980, Met-Ed and Penelec filed new tariffs with among other items, a moratorium on any additional base rate the PaPUC requesting annual increases in retail base rates of relief and the suspension of the flow-through to ratepayers of $76.5 million and $67.4 million, respectively. Of these TMI accident related replacement power costs pending the amounts, $34.2 million and $15.2 miHion, respectively, per-final outcome of fault proceedings. tain to operating and capital costs associated with TMI-1. Met-Ed's petition requested an emergency interim increase RatePmceedings-Pennsyhunia: f $34.1 million annually, effective no later than September 1, During the first quarter of 1979, Met-Ed and Penelec were 1980, subject to a final determination at the conclusion of the granted retail rate increases by the PaPUC which, among rate case. On August 28,1980, the PaPUC derned Met-Eds other things, reflected in base rates their investment in request for emergency rate relief. On September 29,1980, TMI-2 and operation and maintenance costs associated with Met-Ed filed a petition with the Commonwealth Court the unit. On April 19,1979 and April 25,1979, following the seeking to review and set aside the order. TMI-2 accident, the PaPUC established temporary rates for On July 29,1980, Met-Ed and Penelec filed complaints Met Ed and Penelec, respectively, reducing annual base with the PaPUC with respect to the temporary rates estab-revenues by amounts approximating the operating and capital lished by the PaPUC by its order of May 23,1980. The costs associated with their mterests m TMI-2 that had been complaints allege that the PaPUC's order of May 23,1980 aHowed in their pre-accident rate increase orders. These deprives Met-Ed and Penelee of the oppcrtunity to receive actions effectively revoked, prior to becoming effective, the sufficient revenue to pmvide for their operating and capital $46.6 milhon mcrease m base rates granted Met-Ed on costs, to assure confidence in their financial integrity, so as to March 22,1979, returning the rates to levels m effect prior t maintain their credit and ability to attract capital, and to that rate order. In Penelec's case, the PaPUC prospectively provide a return commensurate with returns on investments reduced by $25 million the $56.2 miDion rate increase which in other enterprises having corresponding risks, and is, Penelee had been biuing sinceJanuary 27,1979 pursuant t therefore confiscatory and inconsistent with statutory and the prior PaPUC order. On June 19,1979, the PaPUC issued c nstithrequirements. a rate order directing that such temporary rates be made permanent. ,--m- .-,i..,,..--,.w,-_-,, ~%-.. ,., -~, ,.w_.-,.--,--.~..,.m-,.7m,.,.,.. ,4--,.-__.y. -m,, -,-v

r-+--.m+

4

By an order dated October 16,1980 the administrative law cense to operate TMI-2. Met-Ed does not know what the judge consolidated for hearing purposes Met-Ed's and ultimate outcome of this matter will be. Penelec's complaints against tie temporary base rates fixed On October 30,1979, the Presidential (Kemeny) Commis-by the PaPUC's orders of May 23,1980 with theirJuly 29, sion on the Accident at Three Mile Island issued its report. 1980 requests for increased retail base rates. The staff of the The report states, in part, that its " investigation has revealed PaPUC and witnesses for the consumer advocate have problems with the ' system' that manufactures, operates and testified in these proceedings. He Corporation believes that regulates nuclear power plants" and the short-comings which the level of rate relief recommended by the staff and the turned the incident into a serious accident "are attributable to consumer advocate for Met Ed could result in the inability of the utility, to suppliers of equipment and to the federal Met-Ed to refinance its short-term borrowings under the commission that regulates nuclear power" The NRC's Special revohing credit agreement and impair its ability to meet its Inquiry Group (Rogovin) and the U.S. Senate Subcommittee obhgations. on Nuclear Regulation (Hart Committee) issued the results of On April 15,1981 it will be necessary for Met-Ed to effect their investigatior.s of the accident at TMI-2 on January 23, substantial additional borrowings under the revolving credit 1980 and July 2,1980, respectively. Their conclusions with agreement in order to meet its obligations with respect to the respect to these matters were similar to those of the payment of Pennsylvania state taxes. In the course of current Kemeny Commission. rate proceedings the representatives of the agent banks of In its order dated June 19,1979, the PaPUC ordered a the' revolving credit agreement (see Note 4) testified that it comprehensive management audit of Met-Ed Penelec and would be their recommendation that the bank group not the Corporation, including an exammation of the financial substantially increase its exposure by additional loans to viability of Met-Ed and the Corporation and decisions relating Met-Ed so long as there is uncertainty concerning the to the construction, maintenance and operation of TMI-2. On resolution of these proceedings. Accordingly, the agent October 3,1980 the report of the management audit was filed banks have petitioned the PaPUC to modify its decision with the PaPUC. The report stressed the GPU System's timetable for such proceeding so as to provide a determina-critical financial position, but indicated that the problems tion by the Comrrission prior to April 10,198L On March 5, facing GPU can be solved. The report cites the need to solve 1981, the PaPUC denied that motion but stated that it would GPU's major financial problems through rates and financial schedule pollings of the PaPUC commissioners on allissues assistance from the federal / state governments or the utility for public meetings on Apel 3 and 10,1981. iri.:stry. In addition the report states: "The uncertainties Met-Ed and Penelec on October 27,1980 and October 28, ,sociated with bankruptcy are sufficiently great and pose 1980, respectively, petitioned the PaPUC for purposes of risks-risks that cannot be completely quantified-to implementing an early determination of their complaints ratepayers, regulators and investors that they should be against the temporary rates prescribed in its May 23,1980 avoided" order and certain other related matters. Such petitions In March 1980, the NJBPU ordered a study of future request an increase in annual revenues of $25 million for options forJCP&L The firm conducting the study has been Met-Ed and $10 million for Penelec. He companies proposen directed to determine whether the ultimate costs toJCP&L's to account for such increase for the period June 1,1980 to the istomers of the accident at TMI-2 could be lessened if effective date of the modified base rates prescribed in P&L's corporate structure were changed or reorganized. response to the complaints by restating the deferred energy ..a study, a portion of which has now been completed and balances and thereby retroactively increasing the subsidiaries submitted to the NJBPU, concludes that "the process of base revenues. Furthermore, the companies propose to bankruptcy introduces risks of higher costs to rate-payers reduce their rate increase requests ofJuly 29,1980 by any and would probably reduce the flexibility of the NJBPU and amounts awarded with respect to these petitions. JCP&L to make important decisions during a critical time ne PaPUC, on December 18,1980, approved energy cost period. Therefore, we believe that the NJBPU should con-rates for Met-Ed and Penelec which prmide for the current tinue to preside rate relief necessary to preserve the sol-recovery of energy costs expected to be incurred during the vency ofJCP&L until the strategic options study initiated by period January 1,1981 through December 31,198L the NJBPU has been completed

• The Corporation does not know what effect, if any, these hWah reports will have upon it or its subsidiaries.

On January 23,1980, the NRC imposed civil penalties against Other investigations and inquiries into the nature, causes Met-Ed of $155,000 for safety, mam.enance, procedural and and consequences of the TMI-2 accident commenced by trauung violations at TMI. The NRC has also stated that, various federal and state bodies are continuing. The Corpora-depending upon the findings of continuing investigations int tion and its subsidiaries are wiable to estimate the full scope the TMI-2 accident, it may take additional enforcement and nature of these continuing investigations or the potential action such as assessing additional civil penalties or orden.ng consequences thereof to the investors in the securities of the the suspension, modification or revocation of Met-Ed's li-Corporation and its subsidiaries. The Corporation is also 28

I unable to determine the impact, if any, the results of such subsidianes for senices rendex ed and equipment allegedly I investigations may have on (i) the proceedings to return prmided under the contract for the TMI-2 nuclear steam TMI-1 to operation (ii) the efforts to clean up and whabilitate supply system. . TMI-2 and (iii) the rate regulatory agency decisions with The Corporation and its subsidiaries are presently unable respect to the ultimate recoverability from ratepayers of the to estimate the likelihood of an unfavorable outcome on any of replacement power costs necessitated by the unavailability of the matters set forth in the preceding paragraphs or their l TMI.l and TMI-2. financial exposure with respect thereto. i On December 8,1980, the Corporation and its subsidianes filed a claim with the NRC for damages, estimated at about A s t of the accident, the Corporation, and/orits $ HH n, msu ing fmm 6e accident. W claim aueges sat - subsidiaries, have been named as defendants in various law the NRC violated its statutory and regulatory duties to warn suits. The suits include (i) individual suits as well as pur-nuc arp an ensees of defectsin eq@ent, dyses, ported and actual class actions for personal and property pmcedures and trammg at nuclear facilities. The claim also damages (including claims for punitive damages) resulting charges Gat, foHowing a sh mcident at a nuclear power from the accident and (H) suits to enjoin the future operation P ant operated by a non-affiliated utility which the NRC had l i of TMI 2 investigated, the NRC failed to take and recommend appro-l The suits described in (i) above involve questions as to Priate action and to warn Met-Ed and other licensees of l whether certain of such claims, materialin amount and mactors of anNefects. N & seeks to mcmer arising out of both the accident itself and the cleanup and the cost of cleanup and restoration, replacement power decontamination efforts are (a) subject to limitation ofliability c sts, lost mvenus and incmased Mg costsA E set by the Price-Anderson Act; and (b) outside the insurance .l has not yet responded to the claim. coverage prmided pursuant to the Price-Anderson Act. These questions have not yet been resolved. Insumnce: i In February 1981, the insurance companies and representa-The property damage insurance, and the $300 million limit of tives in the class actions reached an agreement for the coverage, was applicable to both TMI-1 and TMI-2. This proposed settlement of the class action claims for economic property insurance had been reduced by claims paid. The losses resulting from the TMI-2 accident. If the settlement insurance carriers have reinstated the original coverage limits agreement is approved by the court in which the class action for T.'.11-1. With regard to property insurance for TMI-2, j - claims are pending, the insurance companies would establish coverage has been reinstatea only for possible damage which a fund of $20 million for economic loss claims and a separate might result from a non-nuclear accident during the unit's fund of $5 million for public health purposes. Earlier, the restoration period. Additional property damage insurance for court had held that personalinjury claims (other than for TMI-l of up to $375 million was obtained by the subsidiaries medical detection senices) could not be pursued in class through membership in Nuclear Mutual Limited ("NML"). As y action proceedmgs and the February 1981 agreement does members of NML, the subsidiaries are subject to annual l not dealwith such claims. assessments of up to 14 times their annual premium, or $19.3 Class suits for damages on behalf of purchasers of GPU million, in the event of an incident at a nuclear plant of any common stock during the period August 25,1975 through member company. l April l,1979 have also been instituted against the Corpora-The Price-Anderson Amendments to the Atomic Energy i i tion and certain ofits directors as a result of the acVident. Act limit liability to third parties to $560 million for each l These suits have raised questions, which have not yet been nuclear incident. Coverage of the first $140 million (raised to resolved, as to whether certain claims are beyond the $160 million following the accident) of such liability is provided ( insurance coverage for directors' and officers' liability carned by private insurance. The next $355 million is provided by ( by the System companies. The directors have filed a third-assessments of up to the limit of $5 million per nuclear party complaint against the insurance company provxhng reactor per incident, but not more than $10 million per such primaryinsurance coverage. reactor in any calendar year. The remamder is provided by a - On March 25,1980, the Corporation and its subsidianes government indemnity. Based on the ownership of three filed a complaint against the supplier (and its parent) of the mlear reactors, the subsidianes' maximum potential assess-nuclear steam supply system and associated services, train-ment under these provisions would be $15 million per incident ing and procedures for TMI-2, for damages suffered by the but not more than $30 million per calendar year for claims Corporation and its subsidianes as a result of the accident. covered by this insurance. The complaint alleged that the damages incurred were in The Corporation's private insurance under Price-Anderson excess of $500 mdhon and that very substantial future with respect to TMI-2 prmides that coverage is reduced by damages are expected. OnJuly 18,1980, the defendants claims paid but is subject to reinstatement to original answered the complaint denying liability and seeking $4.1 coverage limits upon approval by the insurance carriers. The milhon, plus finance charges, from the Corporation and its subsidianes have apphed for such reinstatement but are 29

unable at this time to ascertain whether or when such its customers $3.7 million plus interest at 6% per annum, or reinstatement will be approved. The NRC has informed Met-an aggregate of $4.7 million. On May 23,1980, the PaPUC Ed that the failure by it to obtain such re'nstatement could directed Met-Ed to reduce its deferred energy costs balance result in the suspension or revocation of its license to operate in satisfaction of such refunds. Effective May 1980, Met-Ed TMI-2. recorded such adjustment, net of related tax benefits of $2.1 Effective September 15,1980, JCP&L, with respect to its million. Met-Ed has appealed the PaPUC's decision to the Oyster Creek nuclear generating station only, is a member of Pennsylvania Commonwealth Court. Nuclear Electric Insurance Limited (NEIL). NEIL, a mutual In November and December 1978, the PaPUC issued insurance company, provides coverage for the incremental further cornplaints asserting that Met-Ed and Penelec in-cost of replacement power during prolonged accidental out-curred excess costs of $4.6 million and S.8 million, respec-ages of nuclear power generating units. As a member of tively, for el purchased during 1975 and 1976, and that such NEIL, JCP&L is subject to a retrospective premium adjust-excess payments were withcut justification and directing ment limited to $7.55 million, which is five times its annual Met-Ed and Penelec to show cause why they should not be premium, in the event that losses exceed the accumulated required to refund these amounts to their customers. Such funds available to NEIL complaints were based on audit reports prepared by the JCP&L's insurance coverage under NEIL provides for a PaPUC staff. Met-Ed and Penelec believe that the payments maximum weekly indemnity of $2 million, beginning 26 which they made were justified and that there is no basis for weeks after an outage, for the incremental cost of replace-requiring such refunds, and they have so responded to the ment power. The policy limits covered outages to fifty-two complaints. weeks at 100% of the weekly indemnity and fifty-two addi. The Corporation is unable at this tin e to predict the

3 tional weeks at 50% of the weekly indemnity.

outcome of these matters. Forked River Project Nuclear Fuel Utigation On November 6,1980, as a result of regulatory, cost and in 1971, JCP&L entered into a contract for the purchase of other uncertainties, JCP&L abandoned its effort to proceed three nuclear fuel reloads for the Oyster Creek station, with with the construction of the Forked River nuclear project. an option for five additional annual reloads beginning in 1976. JCP&L's investment in the project of $412 million (including In 1974, the supnlier offered an extension of that contract to $20 million of estimated cancellation costs) at December 31, cover five additional annual reloads beginning in 1981. JCP&L 1980 has been reclassified to deferred debits (unamortized believes that it effectively exercised the option in the initial property losses). Of this investment, $82 million reflects contract and accepted the offer to extend the contract to construction financing costs and $23 million represents cover the annual reloads through 1955. The supplier disputes expenditures on contracts for nuclear fuel this position and, in November 1978, submitted bills for During the second quarter of 1979, in view of the impact of material and services in the aggregate amount of approx-the accident at TMI-2 on its financing capability, JCP&L imatesy $33 million, covenng reloads supplied in 1977,1978 suspended construction on the project. Furthermore, effec. and 1979. The supplier stated that its objective was to tive April l,1980, JCP&L ceased the accrual of credits to establish revised prices and other terms and conditions income for the carrying costs of funds associated with rather than to diminish supplies and, without prejudice to its construction of the project (allowance for funds used during legal position, provided the 1979 annual fuel reload. Of the construction), pending a decision as to its continuation. $33 million claimed by the supplier to be due, JCP&L has paid in its April 29,1980 rate increase application, JCP&L is approximately $3.8 million and is of the opinion that the seeking allowance for araortization of its investment in the balance of approximately $29 million is not payable by it and project for rate-makmg purposes. has so informed the supplier. OnJanuary 26,1979, the supplier filed suit against JCP&L, the Corporation and GPU Coal Purchase Costs Se ce rporationEhs &d a meterclaim for a . InJanuary and April 1977, the PaPUC issued amended gmenmMds dew Me mnmud complaints asserting that Met-Ed and Penelec made pay, ses an& damages an&s also M amh suit agamst ments in 1974 for coal that were $9.8 million and $4.9 million, the supplier and its parent seeking damages. JCP&L believes respectively. in excess of those required by ti eir contracts, a any a n am un 1 nu Rg payd and that such excess payments were without justification and the sup% ens successfuMs suit nuh vaM msts and directing Met-Ed and Penelec to show cause why they should should be recognized for ratemaking purposes. However, not be required to refund these amounts to their customers. assuranw Ms wy - case. Me e can Met-Ed and Penelec believe that the payments which they suits were to be resolved in the supplier s favor, JCP&L made were justified and that there is no basis for requiring n in ahnabel expense, Msehn n n such refunds, and they so responded to the complaints. am m elmnsumeh@ecemM, M During the spring of 1980, the PaPUC upheld in part the complaint against Met-Ed and ordered Met-Ed to refund to 30

Other

2. Summary of Significant Accounting Policies The subsidiaries

• construction programs, which extend over

%g several years, contemplate expenditures of approximately The consolidated financial statements include the accounts of $265 million during 1981. In connection with these construc-all subsidiaries. tion programs, the subsidiaries have incurred commitments. It is the general policy of the Corporation's subsidiaries to The subsidiaries are engaged in negotiations and, in certain record additions to utility plant at cost, which includes instances, litigation with various suppliers relating to the material, labor, overhead and an allowance for funds used latters' claims for delay or termination charges or increased during construction (AFC). The cost of current repairs fees which such suppliers assert result from the subsidiaries' (except those related to the nuclear accident described in ( revisions of their construction plans and schedules and/or Note 1) and minor replacements is charged to appropriate from the increased scope of supply. The subsidiaries' mar - operating expense and clearing accounts and the cost of agements do not expect at this time that such negotiations renewals and betterments is capitalized. The original cost of and litigation will result in any material increase in costs that utility plant retired, or otherwise disposed of, is charged to would not be valid costs properly recognizable through the accumulated depreciation. ratemaking process. Claims for damages arising out of the operation of the Operating Revenues: Oyster Creek station have been asserted. JCP&L's manage-Revenues are generally recorded on the basis of billings ment believes that such liability, if any, as it may have for such rendered. damages in the pending suits and for all asserted and Deferred Energy Coste: potential similar claims would not be material. The subsidiaries follow a policy of recognizing energy costs in JCP&L was a participant in the Atlantic generating station the period in which the related energy clause revenues are project. In December 1978, the non-affiliated co-owner ar.d billed (see Note 1). principal sponsor of the station announced the abandonment of the project. At December 31,1980,JCP&L's unamortized Depreciation: im estment in the project was $4.1 million. In its pending rate The Corporation's subsidiaries provide for depreciation at increase application to the NjBPU, JCP&L is seeking allow. annual rates determined and revised periodically, on the basis ance for amortization of its investment in the project for of studies, to be sufficient to amortize the original cost of ratemaking purposes. In testimony submitted in connection depreciable property over estimated remanung senice lives, withJCP&L's motion for an interim rate increase, NJBPU which are generally longer than those employed for tax staff members recommended allowance for ratemakmg pur-purposes. The subsidiaries use depreciation rates which, on poses of amortization of this investment over a 20-year an aggregate composite basis, resulted in an approximate period. Effective Aprill,1980, in accordance with the annual ~ ate of 3.18%, 3.17%, 3.07%, 3.02% and 2.95% for Federal Energy Regulatory Commission's (FERC) authoriza. the years 1980,1979,1978,1977 and 1976, respectively. tion, JCP&L is amortizing its investment in the Atlantic Nuclear Plant Decommissioning Costs: station (net of related income tax benefits of $1.4 million) In accordance with ratemaking determinations (a)JCP&L is l over a period of 20 years. charging to expense and crediting to a non-funded resene Met-Ed has cancelled plans for its Beme generating amounts intended to provide over their senice lives for the station. At December 31,1980, Met-Ed's investment in the cost of decommissioning nuclear plants at the end of their project was approximately $6.4 million, of which amount $3.8 usefullives (estimated for purposes of the ratemaking deter-million represented investment in land and $2.6 million minations to range between $27 and $36 million per unit in prelinunary licensing, environmental and engineering studies. then current dollars assuming in-place entombment), and (b) In its July 29,1980 rate increase application, Met-Ed asked Met-Ed and Penelee are charging to expense amounts the PaPUC for authorization to amortize its investment in the ntended to provide over their senice lives for the decom-project, subject to disposition of the land, over a period of five missioning of their shares of the radioactive components of years, and for the inclusion of the unamortized portion in rate their nuclear units (approximately $24 million per unit in then base. There can be no assurance that such treatment will be current dollars). In accordance with ratemaking require-granted. ments, these charges make no provision for possible inflation The Stony Creek pumped storage project has been can-in decommissioning costs during the period prior to decom-celled by its non-affiliated principal sponsor. At December 31, missioning but are expected to be subject to modification to 1980, Met-Ed's investment in the project was approximately take cognizance of that factor. $2. 3 million. In its current rate proceeding, Met-Ed has asked for authorization to amortize such investment over a Amortization of Nuclear Fuel: period of five years and for the inclusion of the unamortized 'Ihe amortization of nuclear fuelis prmided on a unit of portion in rate base. There can be no assurance that such production basis. Rates are determined and periodically treatment willbe granted. 31 l

revised to amortize the cost over the usefullife. JCP&L is effective September 1977, begar employing a net of tax providing for estimated future handling costs for the spent accrual rate for AFC on certain construction projects while Oyster Creek nuclear fuel, and similar treatment will be using a gross AFC rate on others. provided for future handling costs for the spent TMl nuclear The subsidiaries have accrued AFC using rates which, on fuel when required. Previously accumulated estima'ed re-an aggregate composite basis, resulted in annual rates of sidualcredite net of previously accumulated estimated costs 8.91%,8.60%, 7.99%, 9.03% and 8.71% for the years 1980, of reprocessing, for the Oyster Creek station nuclear fuel are 1979,1978,1977 and 1976, respectively. Sing amortized to fuel expense on a unit of production basis.

4. Short Term Borrowing Arrangements The Corporation and its subsidiaries file consolidated I ederal inJune 1979, the Corporation and its subsidiaries entered income tax returns. All participants in a consolidated Federal into a revohing credit agreement with a group of banks, income tax return are severally liable for the full amount of scheduled to expire on October 1,1981, under which they had any tax, including penalties and interest, which may be available, at December 31,1980, $292 million of credit, of assessed against the group.

which $169 million ($156 million of short term borrowings, ine revenues of the Corporation's subsidiaries in any $13 million of first mortgage bonds due October 1,1981) has period are dependent to a significant extent upon the costs been utilized for outstanding borrowings. Borrowings under which are recognized and allowed in that period for rate-the agreement are renewable at six month intervals, the next makirig purposes. In accordance therewith, the Corporation's such date being April l,1981. Such available credit may be subsidiaries have employed the following policies: increased to $412 millien upon t ie approval of banks holding S TarDepreciation The subsidiaries of the Corporation 85% of the notes outstanding. Subject to the overall system generally utilize liberalized depreciation methods and the limit, which is less than the total of the individual limits of the shortest depreciation lives permitted by the Internal Corporation and its subsidiaries, the effective individuallimits Revenue Code in computing depreciation deductions and are: the Corporation- $75 million (which may be increased to provide for deferred income taxes where permitted in $150 million upon the approval of the banks holding 85% of the ratemaking process. Ilowever, a 1980, with respect the notes outstanding),JCP&L-$123 million, Met Ed-$86 to TMI-2, the subsidiaries elected to utilize straight-line million (including $13 million of bonds sold to the banks in tax depreciation. january 1980) and Penelec-$116 million. The agreement Investment Credits The 3% investment credits are being provides for a commitment fee of one-half of one percent per amortized over a 10-year period while the 4% and 10% annum of each bank's total commitment (whether used or investment credits are being amortized over the esti-unused). Interest rates on such borrowings range from 105% mated service lives of the related facilities. to 111% of the prime rate. In light of the actions taken by the PaPUC on May 23,

3. Allowance for Funds Used During Construction 1980, and August 2b,1980 the banks advised that they do not expect Met Ed to kmw in excess of an aggregate amount The applicable regulatory Uniform System of Accounts equal to (i) $20,000,000 (the value ascribed by the banks to provides for AFC which is defined as including the net cost the uranium Met-Ed has pledged to them as collateral) (ii) the during the period of constmetion of borrowed funds (allow-am unt of Met-Ed's deferred energy account which amount ance for borrowed funds used during construction) used for is anticipated to decrease from time to time ($42.4 million at construction purposes and a reasonable rate on other funds December 31,1980), and (iii) 80% of pledged acceptable (allowance for other funda used during constmetion) when so short-term liquid assets to the banks, such as accounts used. While AFC results in a current increase in utility plant receivable. They also advised in any event that borrowings to be recognized for ratemaking purposes and represents, in under the aforementioned fornmia should not exceed $10a this fashion, current compensation, AFC is not an item of milli n. On November 14,1980 Met-Ed pledged its customer current cash income; instead, AFC is realized in cash after accounts receivable as collateral for loans under the revolving the related plant is placed in service by means of the credit agreement.

allowance for depreciation charges based on the total cost of The Corporation has guaranteed all borrowings outstand-the plant, including AFC. ing under the revolving credit agreement. As collateral for To the extent permitted in the ratemaking proceedings of such guarantee, the Corporations $39 milhon term loan, and the subsidiaries, the income tax reductions associated with the guarantee by the Corporation of $4.6 million of loans to the interest component of AFC have been allocated to reduce GPU Service Corporation (GPUSC), the Corporation has interest charges and, correspondingly, have not reduced d ed the common stockofJCP&L Met-Ed. Penelecand income taxes charged to operating expenses. Pursuant to f* PUS - such rate orders, the Pennsylvania subsidiaries employ a net JCP&L and Met-Ed have secured their notes under the of tax accrual rate for AFC. JCP&L employed a partial net of rev Iving cred,t agreement by pledging certain nuclear fuel,n i tax AFC accrual rate fromJune 1975 through July 1976, and, 32

i the process of refinement, conversion, enrichment and fab-

6. Cumulative Preferred Stock-Mandatory Redemption ric tion as collateral. Such nuclear fuel was recorded, on the At December 31,1980 and 1979 the subsidiaries had out-December 31,1980 balance sheet, at a cost of $39.2 million.

In addition, Met-Ed has pledged $40 million of first mortgage standing the following issues of cumulative preferred stock bonds as collateral for its indebtedness under the revolving which are subject to mandatory redemption requireme s credit agreement and has also pledged its customer accounts outstandms (f. Thousand3; receivable ($28.9 million at December 31,1980), as noted tw im tw le

above, JCP&L:

The revohing credit agreement and the purchase agree. 13.59 Series F 175.000 187.s o $17,500 $18.750 ments for the bonds sold byJCP&L and Penelee subsequent {se{s y[ {so 2 2 t) the accident at TMI-2 ($147.5 million) contain provisions p,,g,c., for the immediate payment of the indebtedness involved upon 11.724 senesJ 187.sn 200.uo 18.750 20,0to the occurrence of an event deemed by specified majorities of 10.884 senes K 304.u o 320.0 0 30.400 32.uo the lenders or of holders of such bonds to have a materially Due withm one year (2& 9 o> (28.9 n) (2.8%) (2 A o) adverse effect on the borrower. Moreover, should the bor. Totils 89 9 o 9aine $40w swo rowings under the revohing credit agreement not be renewed JCP& L has had an annual redemption requirement of 12,500 on Aprill,1981, or the agreement not extended subsequent shares of the Series F preferred stock since 1975. It also has to October 1,1981, a specified majority of the bond holders an annual redemption requirement of 12,500 shares of the could require the immediate payment of the indebtedness. series G preferred stock beginning in 1980. There can be no assurance that the notes under the Penelec has had an annual redemption requirement of revolving credit agreement will be renewed or that the 12,500 shares of the Series I preferred stock since 1976. It agreement will be extended beyond October 1,1981. also has an annual redemption requirement of 16,000 shares The maximum aggregate amount of bank borrowings of the Series K preferred stock beginning in 1980. outstanding at any month-end during 1980 was $269 million. All redemptions are at the stated values of the shares, plus For the year 1980, the average daily amount outstanding was accrued dividends. No redemptions of preferred stock may approximately $222 million, having a weighted average inter-be made unless dividends on all preferred stock for all past est rate of 17.0%. Bank borrowings outstanding at December quarterly dividend periods have been paid or declared and set 31,1980 aggregated $156 mil! ion having a weighted average aside for payment.lf dividends upon any shares of preferred interest rate of 24.3'E stock of any subsidiary are in arrears to an amount equal to The maximum aggregate amount of bank borrowings the annual dividend, the holders of preferred s' ock, voting as t outstanding at any month-end during 1979 was $230 million. a class, are entitled to elect a majority of the board of For the year 1979, the average daily amount outstanding was directors of that subsidairy until all disidends in arrears have appmximately $157.2 million, having a weighted average been paid. interest rate of 14,2%. Bank bonowings outstanding at The subsidiaries

• aggregate mandatory redemption require-December 31,1979 aggregated $171 million having a ment for allissues of cumulative preferred stock outstanding weighted aver:ge interest rate of 17.2%.

at December 31,1980 is $5,350,000 per year, through 1985.

5. Long Term Debt Maturities

7. Common Stock and Capital Surplus Long-term debt due during the years 1981 through 1985 Of the 75 million authorized shares of $2.50 par value com-bas follows:

mon stock of the Corporation, 61,264,000 shares were issued g,,, and outstanding at December 31,1980 and 1979 and 28,000 mrtsacr shares were recorded as reacquired at $2.50 per share. nar sonde Drkatures other 7htor' During the period January 1,1976 through December 31, 1981 $ 22,409 $4.880 $44.678 $ 71,967fa) 1980, the Corporation issued additional shares of common

• 1982 21,724 5,900 5,718 33.342 stock as follows:

1983 101,943 5.900 308 108,151 19M 90.984 5.900 4.006 100.890 (In Thousands) 1985 102.052 5.900 4 107.956 Ihr Mrlue Excess our (a) Includes a $39 nuthon term loan of the Corporation and $t3 nu! hon of Numkr Co Cred rdto Met.Ed bonds, both of which mature on October 1,1981, the date of nar o(Sharts Stark CapitalSurplus I expiration of the revaNing credit agreement. Excludes $147.5 nulhon of first 1976 507,000 $ 1.266 8 7,431 mortgage bonds due after W85, which could be presented for immediate 1977 4.458.000 11,146 72,767 payment under certain conditxms. (see Note 4). 1978 1.250.000 3,124 19.467 Substantially all of the subsidiaries' properties are subject 1979 293.000 731 4,188 ta the lien of their respective mortgages. 1980 33 e

8. Cumulative Preferred Stock-

$18,348,000 of retained earnings was available for declaration No Mandatory Redemption or payment of dividends on JCP&L's common stock. Further. m re, the NJBPU's May 13,1980 rate order requiresJCP&L At December 31,1980 and 1979, the subsidiaries had out-to give 30 days notice of its intention to declare a disidend on standing the following issues of cumulative preferred stock, its common stock, so that the NJBPU can evaluateJCP&L's which are redeemable solely at the option of the issuers: financial condition. Sha es 5 fated relue In accordance with Met.Ed's suppementa! indenture dated outstanding (In thousand March 1,1952, $3,360,000 of the balance of Met-Ed's JCP&t.: retained eamings is restricted as to the payment of dividends on its common stock. At December 31,1980, $18,265,000 of 9.36 Senes retained earnings was available for declaration or payment of, A125 Sene. 250,0 0 25,uo as Series 250,0 o 25,0u0 dividends on Met-Ed's common stock. 7.885 Senes 250,000 25,0m In accordance with Penelec's supplemental indenture, 8.751 Series 11(1) 2,ux),o o 50,000 datedJune 1,1979, the aggregate amount of any declaration or payment of dividends on common stock after December 39 Series 117,729 11,773 31,1978 cannot exceed Penelec's earnings available for 4.35% Senes 33,249 3,325 '3.851 Senes 29,175 2.917 common stock for the period commencingJanuary 1,1979 3.805 Sene. 18.122 1.812 and terminating at the end of the last fiscal quarter preceding 4.45% Senes 35,637 3,564 the date of such restricted payment. As of December 31, 3 (" 1980, $8,113,000 of retained earnings was available for decla- % ne G 1 ration or payment of dividends on Penelec's common stock. 8.324 Senes 11 250,000 25.0c 8.121 Senes I 250,000 25,0 0 8.32s SenesJ 150,uo 15,000

10. Income Taxes Ivnelec:

4.40s Senes B 56,810 5,681 Examinations of Federalincome tax returns through 1978 3.70% Series C 97,054 9,705 have been completed. 4.051 Series D 63,6 % 6,370 Income tax expense for the years 1976 through 1980 was f504 less than the amount computed by applying the statutory rate F 7 4.604 Series G 75.732 7,573 to book income subject to tax as follows: 8.36% Senes 11 250,000 25.000 (In Elimns# 8124 Senes! 250,000 25.000 l9so l979 19m 1977 l9r6 9.001 Senes L(2) 1,400A o 35AO Operatingincome Total 6,783,912 $423,391 beforc income taxes $263 $343 $339 5349 $310 Other income, net j 9 4 1 (1) soldin 1977 Totals 270 352 M3 3M 311 (2)soldin 1976 Interest expense (218) (193) (160) (152) (139) At December 31,1980 and 1979, the subsidiaries were M income authorized to issue 37,035,000 shares subject toincome tax s 52 s159 $183 $197 $172 , g g {33 ,93 g GCP&L-15,600,000 shares, Met-Ed-10,000,000 ,,,,,,,,,y,, g,, shares, and Penelec-11,435,000 shares) of cumulative Excessof taxovertxxA preferred stock, no par value. depreciation (acw through portion)(Note 2) (1) (2) (10) (7) (9) Amortization of accumulated

9. Consolidated Retained Earnings investment eredits(Note 2)

(4) (5) (4) (4) (4) Under the revohing credit agreement, the balance of consoli. Other adjustments (4) (3) (2) 1 dated retained earnings must be at least $300,000,000. Income tax expense $ 15 s 63 s 72 s 84 s 70 In accordance withjCP&L's supplementalindenture dated Effecove income tax rate 299 409 39% 439 414 June 1,1979, the amount of common dividends payable by JCP&L is limited, to the extent they are not matched by cash (a) Effecuvejanuary t,1979, the statutory rate was changed from 484 to 464, capital contributions fn>m the Corporation, to an amount equal to 25% of earnings for the years 1979 and 1980 and 100% of earnings thereafter. As of December 31,1980,

Income tax expense is comptised of the following-

12. Supplementary income Statement Information Maintenance and other taxes charged to operating expenses two 19a i 977 1976 Federalincome tax

$ (8) $3 $(20) $9 $ 33 consisd Me foh% 5 ateincome tax 2 7 5 9 5 II" 3hll*"" g,come taxes on other 19H0 1979 19 3 1977 1976 income, net 6 5 2 1 1 Maintenance $120 $ 91 $108 Income taxes attnbutable gQ Othn taes-rum funds ( ote3) J) (8) (15) (13) (11) Gross revenue and franchise 26 20 17 14 12 Provisions for taxes currently State surtax 11 9 7 6 5 payable (refundable) (7)(a) 7 (28) 6 28 Capitalstock 6 11 11 10 6 Deferred incarne taxes, net 75 68 58 35 34 Realestate and Currentinvestment crests (c) (49Xb) (7Xb) 46 47 12 Amortizauon of accurnulated personalproperty 16 12 11 20 Other 11 10 9 7 7 invest. wnt creets (4) (5) (4) (4) (4) Totals $173 $149 $130 $115 $ 95 Income tax expense $ 15 $ 63 $ 72 $ 84 $ 70 (a) As a result of the abandonn.ent of the Forked Rner nuclear generaung The liability for NewJersey State franchise and gross receipt P*'ect t)w Corporation andits subsi6 anes incurred a consohdated net taxes and surtax is established in each year of exercise of operating k)ss for tax purposes of $31e million m 1980. Of this amount, such franchise based on the preceding year's gross receipts $144 m&on was carned back to pnor years resulung in a Federalircome and no liability exists in a current year to pay a tax based on tax refund of $9 milhon, which is reflected in Accounts receivable-Others. that year's gross receipts. JCP&L has c)nsistently made The unused balance of the net operatmg tax loss of $174 mnon is provision in its accounts for such taxes on this basis. For rate-available as a carryforward. which can be used to reduce future current malang purposes (inchding the operation of the energy (b) Redeternunation p r ears' investment tax cre6ts resulung from net adjustment clause) the NJBPU computes allowable expenses operaung losses. These amounts are reflected in unused investment as including provision for such taxes based on the current crests. year's gross receipts rather than those of the preceding year. (c) Unused investment tax cre6ts available for carryforward to future years Effective January 1,1979, pursuant to a recommendation by aggregate $101 milhon of which $10 mnon. $48 m6on, $23 mEon and $20 muon expire in 1964,1985,1986 and 1987, respectively. the FERC, JCP&L began recording state revenue taxes related to energy clause revenues in the period the revenues The provisions for deferred income taxes, net, result from are collected. 1he following timingdifferences: (f.3talmno

13. Pension Plans iMO 1979 19 3 1977 1976 1.6naba depwion The Corporation's subsidiaries have several pension plans mote 2);

applicable to all employees, the accrued costs of which are Federal $ 36 $ 50 $ 37 3 24 $ 21 being funded. The costs of supplemental pension plans State 5 4 3 Defnralof enngy cost

• applicable only to supenisory employees were not funded prior to 1976. The previously unfunded supplemental pension fg**ral plan costs are being funded during the five year period (11) 33 7

8 9 State (1) (2) 1 2 beginningJanuary 1,1977. Prior senice costs applicable to all Forked River abandonment plans are being amortized and funded over 25-year periods, loss mote 1) 70 Roenue taxes-energy Total pension cost for the years 1980,1979,1978,1977 and c te 12) (1 1976 amounted to approximately $24.2 rnillion, $22.8 million, ot)se rnenues $19.6 million, $16.8 million and $14.9 million respectively. g ,33 g3, Based on the latest available actuarial reports, as of Totals S 75 $ 68 Ue $ 35 $ 34

== - January 1,1980, the subsidiaries' plans had accumulated benefits and net assets as follows:

11. Loans to Non Affiliated Coal Companies Penelec is providing financing to non-affiliated mining com-panies supplying coal to the Homer City generating station under long-term contracts. 'Ihese loans bear interest at a rate shich is 1%% per annum above the prime interest rate.

35

tin %Ilums) January I,1%0 Januars I,1979 Actuanal present value of accumulated benents:' Vested $227,1 $203.7 Nonvested $ 33.9 $ 27.6 $261.0 $231.3 Net assets available for beneSts $234.4 $197.4 ' Represents benehts esmed only to the date of the evaluauon by current partripants in the plans. Based upon assumptum of continuaton of employment by aD partripants untd normal retirement age, future levels of salary increases and fund earnings, the unfunded past scruce habdites for the plans amounted to $133.0 mdbon and $125.7 nuibon at January 1,1980 and 1979. respectnely. The assumed rate of return used in determuung the actuarial present value of accumulated plan benefits was 8 percent for both 1980 and 1979.

14. Jointly Owned Generating Stations The Corporation's subsidiaries participated, with non-affili-ated utilities, in the following jointly owned generating stations at December 31,1980:

Balancelin Thousands) In Anumulated Statum % Ouwrskap Sernce Deperciahon Homer City 50 296.013 43,732 Keystree 16.67 36,841 10,617 Conemaugh 16.45 44,312 10,167 Yards Creek 50 16,003 2,524 Seneca 20 13.101 1,837 Each participant in a jointly owned generating unit finances its own portion and charges the appropriate operating expenses with its share of direct expenses. The dollar amounts shown above represent only those portions of the units owmed by subsidiaries of the Corporation.

15. Quarterly Financial Data (Unaudited) tin Thousands EsceptIkrShere Datab Fsrst Quarter Second Quarter 1%0 19 3 1980 19 3 Operating Revenues

$448,714 $384,889 $425.010 $335,364 Operating Income $ 68.862 $ 76,492 5 51,410 $ 63,778 Net income (loss) $ 17,068 8 35,744 8 (8.354) $ 19,936 Earnings (loss)per share .28 $ .59 $ (.14) $ .33 Average Shares 61,264 61,082 61,264 61,264 Thsrd Quarter Fourth Quarter 1980 19 3 1920 19 5 Operatmg Revenues $490,201 $383.927 $467,815 $385,974 Operategincome $ 67,539 $ 73,220 $ 58,m 8 63,812 Net income $ 10.458 3 25,591 $ 1,419 $ 14,512 Earfungs per share ,17 $ .42 5 .03 $ .23 Average Shares 6*.,264 61,264 61,264 61,264 See Note 1 which contams informauon with respect to rate orders and their effect on quarterly earmngs. 36

System Statistics GeneralPubite Unhtws Corporatum andSubsidiary Companies 1980 1979 1978 1977 1976 Generating Capacities and Peaks (MW): Installed capacity (at year end) (a)....................... 8,254 8,262 8,281 7,190 7,038 Annual hourly peak load.............................. 6,161(b) 6,173(c) 5,893(c) 5,760(c) 5,705(c) Reserve (% )(r.)...................................... 34.0 33.8 40.4 24.8 23.4 Net System Requirements (in thousands of Mwli):. Net generation...................................... 22,659 26,891 29,747 26,576 26,213 Iher purchased and interchanged., net.................. 12,346 7,982 4,275 5,926 5,489 Total Net System Requirements................ 35,005 34,873 34,022 32,502 31,702 Load Fact or ('k).................................... 64.9 64.5 65.8 M.4 63.4 Production Data: Ccct of fuel (in mills per xwn of generation): Coal............................................. 13.76 12.95 13.17 11.15 10.50 0i1.............................................. 62.49 39.01 28.62 29.74 26.13 Nu clear.......................................... 3.82 3.18 2.31 2.06 2.01 Other........................................... 42.29 35.77 27.58 22.82 16.44 Ave ra ge........................................ 17.24 12.48 11.17 10.17 9.32 Generation by fueltype(%): Coal........................................... 81 67 57 56 59 Oil.............................................. 5 6 9 10 9 Nuclear.......................................... 8 25 34 33 31 Other (gas & hydro).............................. 6 2 1 1 Total s..................................... 100 100 100 100 100 Elec'tric Energy Sales (in thousands of Mwn): Residential......................................... 10,810 10,754 10,715 10,257 9,932 Commercial........................................ 7,687 7,359 7,208 6,832 6,483 Industrial.......................................... 11,520 11,974 11,447 10,849 10,477 Other............................................. 1,821 1,908 1,900 1,832 1.745 Totals..................................... 31,838 31,995 31,270 29,770 28,637 Electric Operating Revenues (in thousands): Residential......................................... $ 719,166 $ 597,757 $ 544,571 $ 515,522 $ 444,244 Commercial........................................ 470,123 360,859 328,081 308,904 263,423 Industrial........................................... 531,369 431,1N 365,456 342,487 285,056 Other............................................. 87,535 77,512 67.421 M,541 57,180 Totals from xwii Sales........................ 1,808,193 1,467,232 1,305,529 1,231,454 1,049,903 Other revenues.................................. 21,102 20.479 18,721 18,222 16,273 Totals..................................... $1,829,295 $1.487.711 $1,324,250 $1,249,676 $1,066.176 Customers-Year End (in thousands): Residential......................................... 1,405 1,386 1,3M 1,339 1,320 Commercial........................................ 161 157 154 151 149 Industrial........................................... 9 10 9 9 10 Other............................................. 3 5 5 5 4 Totals..................................... 1,578 1.558 1,532 1,504 1,483 Price per Kwu-all customers (cents).................... 5.68 4.59 4.18 4.14 3.67 (a) Includes the installed capaaty of the Three Mile Island nuclear generatzng station Unit No. I of 800 MW for all periods and Unit No. 2 of 906 MW for 1978 through 1980 The reserve (%) excluding these units for 1980 and 1979, would be 6.3% and 6.2%. respectively. (b) Summer peak. (c) Cinter peak. 37

Supplementary Information To Disclose The Effects Of Changing Prices (Unaudited): The following supplementary information is supplied in accord-prices, it should be viewed as an estimate of the approximate ance with the requirements of FASB Statement No 33, effect of inflation, rather than as a precise measurement, "Financtal Reporting and Changing Prices," for the purpose since a number of subjective judgments and estimating of providing certain information about the effects of changing techniques were employed in developing the information. Consolidated Statement of income Adjusted for Changing Prices In huds (Note A) Conventional constant Dottar current cost Hnstancal Aurage Anrage Cost 1980 Dottars 1980 Dollars For tJw nar EndedDerember31.1980 $1.831.741 $1.831.741 $1.831.741 Operating Revenues

• 856.973 856.973 856.913 Energy Costs (Note D) 147.086 288.334 312.5m Deprec1ation(Note C) 564.627 564.627 564.627 Other Operatmg Expenses 18.460 18.460 18.460 income Taxes (Note El 1.587.146 1.728.394 1.752.d?9 TotalOperatmg Expenses 244.595 103.347 79,102 Operatmg income
• 14.963 14.9 0 14.9 9 Other Incune and Deductions 195.910 195.910 195.910 Interest Charges 42.057 43.057 43.057 Preferred Dmdends

$ 20.591 S (120.G 7) $ (144.902/ Income available for common (exclu6ng reduction to net reemerable cost)* $ 748.403 Change in net plant assets dunng 1980 due to increases in specific pnces 856.112 less: Change in net plant assets dunng 1980 due to increase in general pnce level (inflation) (107,709) Change in specific pnces net of general pnce level (inflation) $ (J25.4321 (193.543) Reduction to net recoverable cost of plant assets (Note F) Excess of increase in general pnce level over increase in specific pnces, (301.252; after reduction to net recoverable value 255.292 255.292 Gam from dechne in purchasing power of net amounts owed (Note B) $ 170,140) $ (45.960) Net (Note F)

• Revenues, operating income, and income available for common have been adversely affected by regulatory 6sallowances of operatmg expenses and requirements associated with TMI.1 and TMI-2 (see Note 1).

Notes to SupplementaryInformation Note A-Adjusting for changing priaes: gam of general purchasing power because the amount of money required to Constant doDar amounts represent historical costs stated in terms of dollars settle the liaMties represents dollars of diminished purchasing power. of equal purchasing power, as measured by the Consumer Price Index for All AB assets and liaMties that are not monetary are nonmonetary. Nonmone-Urban Consumers (CPI-U). Current cost amounts reflect the changes in tary items, such as property. plant and equipment, do not gam or lose specific pnces of plant, and differ from constant dollar amounts to the extent general purchasing power solely as a result of general pnce level changes, that specific pnces have increased more or less rapidly than pnces in general. but rather are affected by the relationships between specific pnces for the "Ihe current cost of property, plant, and equipment, whichincludes land. item and changes in the generallevel of prices. land rights, intangible plant, property held for future use, construction work in progress, and other physical property, was determined by applying Note B-Purchasing Power Gain: indnidual company equipment cost indices or the Handy-Whitman Index of Since the Company owed net monetary liaMties during a period in which Public Utsty Construction Costs to surviving plant investments. These the purchasing power of the doLar dechned (i.e. during a period ofinflation), current cost amounts are restatements of the purchasing power which was the Company experienced a gain in purchasing pourr. This net gain in invested in surviving plant, but do not necessanly represent replacement purchasing power, shown separately in the accompanying supplementary cost or current value of existing plant production capacity. The actual schedule, was calculated as the difference betsven beginning and endmg year net monetary liabilities, each converted to average 1980 dollars per the replacement of the capacity of present fac& ties will occur over many years as CPI-U index. AB assets and habihties other than property, plant and future facaties, different in kind from present facaties, are constructed and equipment, as weH as amounts applicable to redeemable preferred stock, placedin service. were treated as monetary items and thus included in the purchasing power A key concept in understandmg the data adjusted for inflation is the distmetion between monetary and nonmonetary assets and habihties. gain computation. Although certain assets and liabilities might be considered Monetary items are those assets and liaMties which are or wiB be nonmonetary from a strict theoretical point of view, such amounts do not converted into a fixed number of dollars regardless of changes m pnces. materiaHy affect the purchasing power gain reported. This gam is strictly an Examples of monetary items mclude cash, accounts receivable and debt. econonuc concept and wiH never be reahzed in cash. As such, the amount Dunng periods of inflation, the holdmg of monetary assets results in a loss of does not represent funds avadable for distnbution to shareholders. general purchasing power. Smularly, monetary habihties are associated with a 38

Note C-Doprocletion edluoted for changing pricos: Note F-Effect of Rete Regulation: In accordance with procedures speafied in FASB Statement No. 33 Under the ratemalung prescnbed by the regulatory commissions to stuch I revenues and all expenses other than depreciation are considered to reflect the Corporation's subsidiaries are subject, only the historical cost of plant is the average pnce level for the year and.ccor6ngly remam unchanged frorn recoverable in revenues as depreciation. Therefore, the excess of the cost of those amounts shown in the Company's pnmar) finanaal statements. plant stated in terms of constant doDars or current cost over the historical The current yeara constant douar and current cost depreciation praisions cost of plant is not presently recoverab!e in rates as depreciation, and is were determmed by applying the depreciation rates of the Corporauon's reflected as a reduction to net reewerable cost. While the ratemaking subsidsanes to their respective indexed average dep eaable plant annmts. process presently gives no recognition to the current cost concept of Note D-Energy Coote and inventories: property, plant, and equipment, the subsidiaries believe, based on past Energy costs include fuel, power purchased end interchanged, and changes practices, they will be aBowed to earn on the increased cost of their net invest. b deferred energy cost balances. ment when construction of both new and replacement capaaty actuaDyoccurs. Ibelinventories, nuclear fuel, the cost of fuel used in generation, and To property reflect the economics of rate regulation in the Conschdated purchased power and interchange have not been restated from their actual Statement of income Adjusted for Changing Prices, the reduction of net histoncal cost. Regulation hrnits the recovery of fuel and purchased power property, plant, and equipment should be offset by the gam from the dechne and interchange through the operation of energy a4ustment clauses or in purchasing power of net amounts owed. Dunng a period ofinflation, adjustments in base rate schedules to actual historical costs. For this reason, holders of rnonetary assets suffer a loss of general purchasmg power stule fuelinventones and nuclear fuel are effectmly monetary assets. holders of monetary habihties expenence a gam. The gain from the dechne in Note E-income Teaee: purchasing power of net amounts owed is pnmanly attnbutable to the Since present tax laws do not aDow increased deductions for depreciation substantial amount of debt which has been used to finance property, plant, adjusted for the effects of inflation, mcome taxes included in the data and equipment. Since the depreciation on this plant is brnated to the recovery a4usted for generalinflation remam unchanged from those amounts pre. of historical costs, the Company does not have the opportunity to realize a sented m the Company's pnmary finanaal statements. h Idmg gain on debt and is hmited to recovery only of the embedded amounts of debt capital Five Year Comparison of Selected Financial Data in Musands ExceptPer%reData harEndedDurmber31. 1980 19a') 19m 19 77 1976 Operatmg revenues As reported $1,831,741 $1,490,154 $1,326,644 $1,252,013 $1,068,753 In 1980 average purchasing power 1,631,741 1,691,674 1,675.618 1,702,462 1,547,028 Income (loss)available for common In histoncalcost doDars S 20,591 $ 95,783 $ 138,774 5 142,779 $ 121,197 In constant doDars (120.657) (11,896) In current cost donars (144,902) (43,140) Income (Loss)per common share In histoncalcost donars 3 0.34 8 1.56 $ 2.30 $ 2.50 $ 2.20 in constant doDars (1.97) (.19) In current cost doDars (2.37) (.70) Cash dividends per common share As reported 3 0.00 $ 1.20 $ 1.77 $ 1.70 $ 1.68 In 1980 average purchasing power 0.00 1.39 2.24 2.31 2.43 Market pnce per common share at year end As reported S 5.000 $ 8.625 $ 17.500 $ 20.875 $ 19.500 In 1980 average purchasing power 4.776 9.259 21.286 27.684 27.611 Net plant assets (in year-end doDars) In historicalcost douars $3,729,452 $4,084,619 $3,948,821 $3,687,615 $3,447,057 In constant doDars 6,959,293 6,831,119 in current cost douars 7,254,476 7.199,735 Net assets at year-end at net recoverable cost (In years' average doDars) In constant doDars $1,726,226 $1,689,007 In current cost doDars 1,726.226 1,689,007 Excess of increase in general price level over increase in specific prices after reduction to net reemerable cost 3 (301,252) $ (364,228) Gain from dechne in purchasing power of net amounts owed $ 255,292 8 281,599 Selected balance sheet data at year end (histoncal costs) Totalassets $5,042,972 $4,991,994 $4,612,683 $4.305,443 $3,954,649 Ims term debt 2,105,439 2.148,972 2,017,123 1,924,650 1,844,607 Cumulatm preferred stock-mandatory Ae 82,376 87,396 92,403 94,556 95,436 Average consumer price index 246.8 217.4 195.4 181.5 170.5 December consumer priceindex 258.4 229.9 202.9 186.1 174.3 39

Directsrs Officers l Directors General Public Utilities Corporation GPU Service Corporation t.ouis J. Appell Jr."

• William G. Kuhns William G.Kuhns Chairman and President Chairman andChiefExecutus Offcer Chie; L'zecutitt Offcer 770 Herman Diecksmp Herman Dieckamp Presidentand an President and Chief Operating 0))icer ChiefOperatingOffcer (Communications and ConsumerProducts)

Verner H. Condon Verner H. condon Executitt VicePresident John F BurdItt u Vice President and ChiefFir.ancial Offcer Robert C. Arnoid VicePresident. Generation Chairman andChiefExecutitt Offcer yg,,7g 3, gngen,y, ACFIndustries. Inc. Comptroller Bernard H. Cherry VicePresident New lbrk. New lbrk10017 CorporatePlanning (Equipment 3ianufacturing) John G. Graham Treasurer Philip Clark Vice President. NuclearActivities Herman Dieckamp William L Gittord VicePresident President and Chief 0perating Offcer Helen M.Graydon Communications. NuckarActitities GeneralPublic Utslities Corparation Secretary ArsWy, Neu fusey Om Fred Glickman VicePresident Grace Wade Val B. Diehl' AssistantSecretary John G. Graham Vice President and Treasurer President and ChiefOperating Offcer Nabiscoinc. Fred D.Hafer VicePresident Eastflanoiv; NewJersey02936 Rate Case 3ianagement (ConsumerIbckagedProducts) Edward J. Holcombe Vice President and Dr. David L Grove" Comptrolkr President Subsidiary Operating Companies DanidL. Grott Ltd. WlIilam B. Murray VicePresident Armonk. New lbrk Shepard Bartnott Communications (Economic Consultants) President Edmund Newton Jr.VicePresident Jersey CentralPoute& LightCompany William G. Kuhns Systern Operations Chairman andChiefExecutin offcer Herman Dieckamp Robert H. Sims Vice President. PowerSupply GerwralPublic Uttlities Corporation ActingPresident Ikrsippany. NewJerseyOMI 3fetropolitan Edtson Company pg,,g 3_ g,ggy y;,, p,,,gg,,,,,g,g,;,,,,,gg, John F. O' Leary " William A.Verrochi Helen M.GrsydonSecretary Energy Consultant President IVashington, D.C. 20006 Etnnsyisania Ekctric Company Patrick F. Daley Assistant Comptroikr Dr. John W. Oswald " E. F. Muchoney Assistant Comptrolkr President Mildred Misura Assistant Treasurer iknnsyltaniaState Unistrsity Universitylkrk. Pennsyltania1680 Grace Wade AssistantSecretary Paul R. Roedel" President and ChiefExecutive Offcer Carpenter Technology Corporation Readig. lknnsylsania196W James B.Liberman GeneralCounsel (Specialty 3ietals) 'MemberofAudstCommstree "Mrmber of Compensatum Commnttet " Member ofNominatsng Commstter 40

Notices to Stockholders 1981 AnnualMeeting Quarterly Stock Price The Annual meeting of Stockholders of General Public and Dividend Data 1979-1980 Utilities Corpontion will be held at 10 A.M. local time, May 7,1981 at the Strand-Capitol Perfonning Arts Center, 50 North George Street York, PA. Price Diridends 1979 High Low (Cents) General Public Utilities Corporation First Quarter $16% 16 % 45 100Interpace Parkway Second Quarter 15 % 8% 25 Parsippany, Nj 07054 Third Quarter 10% 9 25 (201)263-6500 Fourth Quarter 9% 7 25 GPU Sanice Corporation ( Address and telephone same as GPU Corp.) 1980 Jersey Central Power & Light Company First Quarter 9% 3% Madison Avenue at PunchbowlRoad Second Quarter 7% 4% Morristown, NJ 07960 Third Quarter 7 5 (201)455-8200 Fourth Quarter 5% 4% Metropolitan Edison Company 2800 Pottsville Pike Reading, PA 19640 GPU is listed on the New York Stock Exchange. At December 31,1980 there were 150,965 registered holders (215 N 3601 of GPU Common Stock. With respect to restrictons on the Pennsylvania Electric Company payrnent of common stock dividends by GPU, see Note 9 1001 Broad Street to the Financial Statements, page 34. Johnstown, PA 15907 (814) 533-8111 Transfer Agent and Registrar-Common Stock Too many reports? Ilartford National Bank and Trust Company You may be receiving extra copies of the GPU Annual Report 777 Main Street, Hartford, CN 06115 because of multiple accounts within your household. To stop the extra copies, please write to the Hartford National Bank i l Agent-Dividend Reinvestment and Stock and Trust Company, P.O. Box 210, Hartford, CN 06101. Purchase Plan-Common Stock Please enclose the mailing labels from the extra copies. Hartford National Bank and Trust Company P.O. Box 210, Hartford, CN 06101 For furtherinformation Copies of GPU's " System Statistics"and of the Corporation's 1980 annual report to the Securities and Exchange Commission will be available after March 31,1981. W6te to Miss Helen M. Graydon, Secretary, General Public Utilities Corporation, 100 Interpace Parkw2y, Parsippany, NJ 07054. 41

GENER AL PUBLIC UTILITIES CORPORATION 100 Interpace ikkway Iksippany, NJ 07051 (201)263-6500 O m Zm 23>r-TC 03CO C-r- b m (/) OO 23 TC 1 m N_ Oz 1 _ _, -}}