ML20002D132

Annual Financial Rept 1979

ML20002D132
Person / Time
Site:	Calvert Cliffs
Issue date:	12/08/1980
From:	BALTIMORE GAS & ELECTRIC CO.
To:
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ML20002D128	List: ML20002D127 ML20002D132
References
NUDOCS 8101190507
Download: ML20002D132 (40)

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COVER PHOTOGRAPH shows a Greek con-tainer vessel, the Hellenic Innovator, steaming under the Francis Scott Key Bridge en route from Baltimore's Inner Harbor to the high seas. The Port of Baltimore is among the top four inter-national commerce centers of the nation, a prin-cipal U.S. port of entry for foreign automobiles, and second among all East and Gulf Coast ports 1,.

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in total volume of containerized cargo.

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3 ON THE RACK COVER is historic Fort NIcHenry,

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standing watch over the entrance to Baltimore's

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Inner Harbor, with the busy Curtis Bay port area 1

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in the background. The American flag still flies proudly over the fort today, as it did at dawn on September 14, 1814, when Francis Scott Key j

wrote "The Star Spangled Banner" from his obser-vation post aboard a small ship moored in the Chesapeake Bay. British forces, fresh from sacking and burning Washington, had vainly shelled Fort f

SicHenry for 25 hours2.893519e-4 days <br />0.00694 hours <br />4.133598e-5 weeks <br />9.5125e-6 months <br /> before withdrawing in defeat from the Battle of Baltimore.

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1979 1978 1969 l

Earnings Per Share of Common Stock...

$3.40

$3.38

$2.60 Average Shares of Common Stock Outstanding 31,356,000 30.847,000 15,808,000 Dividends Declared Per Share..

$2.40

$2.25

$1.70 Revenues Electric..

$ 714,956,000 $ 697,173.000 $ 208,806,000 Gas..

287,074,000 264,586,000 88,029,000 Balance Available for Common Stock... $ 106,532.000 $ 104,364.000 $

41,048,000 l

Dividends - Common Stock.........

75.373,000 69,467,000 26,869.000 i

Earnings Reinvested in the Business..

31,159,000 $

34,897,000 $

14,179,000 Electric Sales - thousands of kilowatthours 16,823.000 16.170,000 11,165,000 Gas Sales - dekatherms*

93.450,000 84.489,000 78.927,000 Investment in Utility Plant.

$2.974.653,000 $2.831,219.000 $ 1,067.056,000

'One dekatherm (Dth) equals 1.000.000 British thermal units, or 1,000 cu5ic feet o!c0 of gas with a heating value of 1.000 Blu per cubic f00t.

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DMDENDS PAID ON THE COMMON STOCK CONTINUOUSLY SINCE 1910-ALWAYS EARNED-NEVER REDUCED f

$3 50 f

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$2 00 1963

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'72

'73

'74

'75

'76

'77

'78

'79 i Earnings Per Share Civicends Dec!ared Per Share i

Earnings and DMdends Dectored Per Shore of Common Stock i

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Earnings per share were $3.40, up 2e over 1978 i

and 54c above the depressed earnings of two years ago. The quarterly dividend on common stock was increased, effective July 2,1979, from 57e to 61c, which represents an annual dividend rate of $2.44 per < hare.

Sharply rising operating costs, high interest rates, and other increased capital costs continue to impede l'

the Company's financial performancc. At the year l

j progressed, it became increasingly evident that 3

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higher electric, gas, and steam rates were needed to meet these mounting costs and produce the level of

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earnings required to attract, on reasonable terms, the new funds that must be invested in plant and r p.

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equipment to maintain reliable service and keep pace with growth in customer demand. Accordingly, we filed with the Public Service Commission of Stary-land in November an application for increased j

service rates designed to produce $147 million of

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i additional annual revenues.

l This rate relief is required both to otiset earnings l

attrition resulting from double-digit intlatien and to 1

increase the Company's rate of return. particularly B. C. Trueschler l

on common equity. The Commission is currently l

l holding hearings on our application, and the final The 10.6% increase in 1979 gas volume, reflecting decision, as required by law, will be issued early in

. a substantial rise in sales to interruptible service June,1980.

customers, was made pessible by the total removal j

In face of 1979's 13G inflation rate, electric and of delisery curtailments that had been imposed by i

gas service remained available to Central 5f aryland the Company's pipeline supplier since the winter of i

residents at prices that represented a real bargain 1972-1973. In consequence, the 51aryland Com-

}l by any comparative standard. The 1979 average unit mission approved termination, as of Stay 4,1979, i

price for residential electricity was only 0.2%

of the five-year moratorium on new uses and more than in 1978, while household gas cost only customers that had been partially lifted in August, l

3.2"c more per unit. For the period from mid-1974 1978.

i through 1979, the average unit price of residential Our current long-range forecast of annual electric j

clectr city increased only 16%, while the cost-of-demand is below previous projections of peak-load living index for the Baltimore 5ferropolitan Area growth through 1989 and reflects a slower growth i

rose 43"c. Thus, it is quite evident that the increase in electric sales, resulting from the energy-conserva-in the cost of electricity is lagging substantially tion efTorts of our customers. Consequently, the l

behind the general rate of economic inflation. During Company decided not to proceed into a joint venture j

the same period, the average unit price of residential with the Potomac Electric Power Company, which j

gas increased 102%, of which 67G is attributable had involved a proposed 50G participation by the to increases in the cost of gas from the Company's Company in the construction, ownership, and opera-i supplier. The remaining 35% represents the rise in tion of an 800,000-kilowatt coal-fired generstmg i

the Company's base rates.

unit at PEPCO's Dickerson Power Plant.

Unit sales of electricity and gas increased in 1979 Completion of the Company's Brandon Shores

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over the previous year by 4.0G and 10.6%, re-Power Plant, currently under construction,is now spectively. Both increases result in large part from expected to provide electric generating capacity the high level of Central Af aryland manufacturing adequate to meet the projected additionalloads for activity, especially pronounced in the heavy-industry the next 10 years. The schedule for commercial category. For the residential and commercial cus-operation of the two units has been modified in I

tomer classifications, electric sales were adversely accordance with the revised long-range forecast of affected by cooler weather during the air-conditioning annual electric loads. The first 620,000-kilowatt season, while gas sales declined because tempera-electric generating unit is now scheduled for com-i tures during the heating months were above normal.

mercial operation in 1984 and the second unit, i

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'TM Gi f '9 savings of 5800 million realized by the Compeny's

'N h ratepayers since the plant's first unit went into 7

g commercial operation in 1975 exceed the original w,

cost of the plant.

However, the unfortunate accident of Afarch 28, gg tn-1979 at the Three 31ile Island Nuclear Plant of the 7

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51etropolitan Edison Company in Pennsylvania has brought into sharp focus the question of safety of operations at nuclear power plants.

Upon first learnine of the accident, we imme-

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diately began an internal review and subsequent

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uperadine of procedures. Increased training of plant UN

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per'sonneiwas instituted to reduce further the pos-h Jhdb i h1 sibility of a similar mishap at Calvert Clitis. Sub-

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'.v, sequently, the Nuclear Regulatory Commission (NRC) has been actively gathering information from

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1 chances which will be required as a' result of the

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investigations of an NRC task force. The required

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chances must be made on a ticht time schedule in M

a nuinber of areas including incre extensive training

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of plant personnel, plant procedure changes, review G. V. EGow an of plant design, equipment modifications, and up-grading of site and State emergency plans.

identical in capacity, has been rescheduled for We support recommendations which will further completion in 1988. Both units will b t constructed enhance the safety of Calvert Clitis or increase the to burn coal as the primary fuel stock cut will retain safeguards accorded to the public. Until the precise the capability to burn oil.

nature of required changes is known,it is dirlicult The 1979 program of energy initiatives which to estimate reasonably the costs involved in provid-President Carter announced in July included the ing these additional safeguards. However, w e believe proposal that electric utilities reduce their use of oil that forthcoming modifications will require the for electric generation 50% by 1990. The Company expenditure of several tens of millions of dollars.

plans to exceed that goal, by cutting its oil consump-In spite of this, nuclear power remains a viable tion by almost 90G in the coming decade, from a source of energy for the future-economical, safe, present level of S.1 million barrels per year to less reliable. and environmentally benign. We reattirm than one million barrels in 1990. This objective our confidence in nuclear power as an essential can be accomplished by burning coal in the two means of helping our Nation achieve energy inde-generating units now under construction at the new pendence.

Brandon Shores Power Plant, as outlined above, and by reconverting to coal two oil-fired units at the Charles P. Crane Power Plant. In addition to reducing imports of foreign oil, this program will 3

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produce net savings amounting to hundreds of millions of dollars. These net savings, which provide for the increase in operating costs and proper Com.

Chairman of the Board pany compensation on the additional plant invest-ment, will be passed on to our customers, helping to stabilize the future cost of electricity.

Acain in 1979, the Calvert Cliffs Nuclear Power Plant provided dramatic evidence of the benefits to 1~'~

consumers from this energy source. Supplying 54fo President of our customers total electric requirements during the year, Calvert Clitis produced fuel-cost savings that reduced the electric bills of Central >!ary-landers by $260 million in 1979. The aggregate February 8,1980 l

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C. E. UTER 310llLE, JR.

Retires from Active Service l

A1anagement acknowledges with abiding gratitude the invaluable contributions to the Company's continuing j

progress which have been made in the course of the past l

45 years by C. E. Utermohle, Jr., whose retirement from i

active service became et]ective on Januvy 1,1980. The l

forthright leadership provided by 5ir. L*termohle as

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Chairman of the Board and Chief Executive Officer since November 1,1969 has brought the Company successfully l

through the turbulent and troubled 1970's, and has given l

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his successors a solid foundation of corporate strength on j

which to build with confidence. Thankfully, his counsel will remain readily available to us by virtue of his con.

tinuance on the Board of Directors.

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Rate Application for Funds Used During Construction in determining The Company filed with :he Public Sersice Com-revenue requirements.

mission of $1arvland on Sosember 13.1979 an On Starch 2S,1979, the Commission issued a application for'an increase in base service rates follow-up Order which reduced annual electric designed to prcduce 5147.000,000 of addi:icnal revenues by $12.500.000, on a prospective basis, revenue on an annual basis. The request seeks to as of April 10,1979 and required that Allowance raise electric resenues by 5123.000.000, er 16.6c ;

for Funds Used During Construction hencefor:h be e

capitalized on 100c, ra:her than the previous 50c,

gas revenues by 522.500.000, or 6.S rc ; and steam c

c resenues by $1.500.000, or 9.5cc.

of Construe: ion Werk in Progress at the Company's Under the President's price guide!!nes for utilities, Brandon Shores Power Plant.

revenues per unit cf sales (excluding recovery of fuel costs) are permitted, when justified, to be about Electric Fuel Rate 21 c higher in the third year cf the program c

As a result of :he new elec:ric Fuel Rate formula

( October 1,19S0 to September 30.1981) than in adopted by the 51aryland Commission et!ective the 1978 base period. Because rate increases since October 1,197S, the Company has experienced a Oc:ceer 1,197S have been minimal, the Company,s lac in the recos ery of higher ftiel expense. This lac reques:ed increases on an overall basis ecmply with is'being acccun:ed for as a deferred fuel expense,'

the guidel:ne requirements.

recoverable through base-ra:e proceedings. Conse-quen:ly, we have requested in the current rate Allowance For Funds Used During Construction applica:!cn tha: the Commission authorize a sur-Pursuant to a petitlen submitted by the Company charge to the Fuel Rate that will enable us to recover in Sep: ember 1973, the Staryland Commissica deferred fuel cost during the third quarter of 1980-sthorized a 524.000.000 rate increase which took the first full quar:er following issuance of the forth-et!ect on January 2,1979. At the same time, the coming rate Order.

Ccmmission ordered additional hearmgs to consider

. In the course of the Commission's hearings on the the Ccmpany's accounting treatment with respect electric Fuel Rate in the latter part of 1978, certain to Cons:ruction Work in Progress and Allowance intervenors alleged that the Company was paying How the Revenue Do cr for 1979 Wes Spent n

Pureased Puel and Ener;y 33 2:

C eratiens 17.9

_ Taxes 15.2 Interest and Preferred Dividends 10.7 l

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r Depreciation 7.9

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Ccmmen D.vidends 7.4 A

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Maintenance 6.4 h

Retained in Business 1.3 100.0 t

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an excessive price for coal used in Unit No. 3 at the In July, the Company negotiated the private place-Wagner Power Plant, supplied under the terms of ment with institutionalinvestors of a $50,000,000 a contract negotiated in 1974. The Commission issue of 8.375% Cumulative Preference Stock ($100 terminated its investigation of the matter by con-par value), redeemable at a rate of 100,000 shares cluding that the price of coal under the contract was annually for the five years 1985 through 1989.

just and reasonabic.

In September, Anne Arundel County issued an aggregate of $75,000,000 of Pollution Control Disidend Re.msestment Plan Revenue Bonds-$55,000,000 of 6.90% Bonds A 5% discount feature was incorporated on due September 15,2009 and $20,000,000 of 6.80%

July 1,1979 in the Dividend Reinvestment and Bonds due September 15,2004. Under a loan l-Stock Purchase Plan which the Company has made agreement, the proceeds will be advanced to the 3

available to common stockholders since 1973.

Company to finance construction of air-and water-Under the amended program, stockholders who pollution control facilities at the Brandon Shores i

elect to reinvest their cash dividends in additional Power Plant. Initially, the Company withdrew common stock will acquire the new shares at 95 %

$55,000,000 of the proceeds and issued $55,000,000 of their market value on the date of purchase. As principal amount of First Refunding Stortgage before, each shareow ner also has the option of in.

Bonds,6.90% Series, due September 15,2009.The creasing his or her investment in the Company by remaining $20,000,000 of proceeds is deposited means of cash payments in amounts up to $3,000 with and temporarily invested by the Trustee and per quarter, which will be applied to the purchase is available for withdrawal by the Company when of additional common shares at full current market additional First Refunding Stortgage Bonds are value but without payment of brokerage commis-issued to cover further expenditures. The Company's sions or transaction fees of any kind.

payments of principal and interest on these Stort-The attractiveness of the discount policy is attested by the fact that almost 18% of the Company's com-mon stockholders, owning 14% of the common shares outstanding, now are participating in the reinvestment plan. Cash payments processed through the program also rose sharply over the precedinS

$250 year.

Stockholders may enroll in or withdraw from the

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Dividend Reinvestment and Stock Purchase Plan at any time simply by notifying the Treasurer of the 200 f

Company.

Construction Program Construction expenditures for 1979 totaled iso

$160,917,000.

The Brandon Shores Power Plant, with its asso-ciated transmission requirements, was foremost among the electric projects which accounted for ico

$138,777,000 of the 1979 total. Expended on gas construction during the year was $13,990,000.

j Additionally, the Coaipany spent $57,956,000 in l

1979 to purchase supplies of nuclear fuel.

So The 1980 construction budget is estimated at

$233,000,000. The year's add'itional expenditures for nuclear fuel are expected to approximate

$47,000,000.

o Security Transactions 1975 76 77 78 79

'80(est )

External financuig requirements for the construc-tion program and other corporate purposes were Construction Expenditures

• ' cad can met in 1979 by sale of prefereace stock and an issue of pollution controlbonds.

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gage Bonds will provide the funds needed to meet EI.ECTRIC principal and interest requirements on the County's Following three decades of virtually uninterrupted Pollution Control Revenue Bonds.

annual reductions in the average unit price of resi-The Company issued 652,874 shares of common dential electricity, the impact of inflation on the stock in 1979 to cover conversions of Convertible Company's operating, construction, and capital costs Cumulative Preference Stock and to provide for forced the average unit price to turn upward for new shares purchased under the Dividend Reinvest-the first time in 1971.

ment and Stock Purchase Plan and the Investment The rising trend continued over the next three Tax Credit Employee Stock Ownership Plan.

years, increasing the unit price for 1974 by 64%

During the year, bonds and debentures totaling over the year 1970. For the period from mid-1974

$12,764,000 were retired through sinking funds.

through 1977, the average unit price remained stable, primarily because the fuel savings achieved by operation of the Calvert Cliffs Nuclear Power Plant reduced fuel-cost charges in our customers' monthly

$2.375 electric bills surliciently to otIset the total etYect of 32p 1 periodic necessary increases in electric base rates.

$2 99 [

In 1978, the average unit price of electricity was 5

only 16G above the mid-1974 level, and it remained

$2 213 {45 basically unchanged for 1979. Operation of the 32 Calvert ClitIs Nuclear Power Plant, producing fuel-3'y31 cost savings totaling $260 million in 1979 and 31.790 S800 million since the first unit was placed in com-l for this extraordinary record of electric price stability.

S13e61 mercial service in 1975,is principally responsible

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$1.257 Over the 40 years from 1939 through 1979, the l average residential unit cost of electricity increasedl

• '[,1 by only 25G. During that period, the cost-of-living i index for the Baltimore Metropolitan Area rose 440%.

I The favored position of the Company's customers l

is further attested by the table below, which i

! compares our 4.24p average rate per kilowatthour

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'71

'72

'73 '74

'75 '76 '77

'78

~79 Average Rate Per Kilowatthour Total Utility Plant i

All Customer Categories ucc-s e asam

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Full Year 1979 i i l

l BALTIMORE 4.244 Norfolk, Va.

4.39 Philadelphia, Pa.

4.62

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Wilmington, Del.

4.79 Washington, D.C.

4.83 l

l Atlantic City, N.J.

5.24 i

l Newark, N.J.

5.70 Boston, Mass.

6.11 New York, N.Y.

9.40 8-CITY AVERAGE 5.64 l

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of electricity sold to all categories of consumers for GAS the full year 1979 with the corresponding averages Unrealistic Federal price controls, installed in for eight other major East Coast cities, from Norfolk 1954, artificially held the price of natural gas far to Boston. Elsewhere, the 1979 average rate ex.

below its true market value for more than two ceeded Baltimore's by amounts varying from 3.5 9 decades, creating a serious national gas shortage to 121.79. In overall average, the cost of electricity in the process. As a result, the Company's average was 33.0G higher in these cities than it was in price per residential unit of gas sold was only 12%

Baltimore; even if New York were excluded, the higher in 1973 than it had been in 1954 ditierential would remain 20.3% based on a 7-city The consequent scarcity of interstate supplies led aserage of 5.10c.

to nationwide curtailment of pipeline gas which (per Kwh*)

(per Tnerm*)

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Bread (per leaf) l l

Eggs (per do:en) l l

Cigarettes (per pack) l l

Regu!ar Gasoline (per gal.)

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Butter (per pound) l i

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PERCENT INCREASE IN PRICE-1979 cver 1939 Electric and Gos Residential Unir Prices Compared With Cost-of-Uving Index and Other Goods and Services in the Dolrimere Metropoliton Areo 1

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ultimately forced a series of Government-instituted with oil. The retail price per gallon of oil in the increases in the price of natural gas, culminating in Baltimore area increased some 58"c in 1979 alone adoption of a phased deregulation plan as part of the bringing the year-end cost differential favoring gas National Energy Act of 1978. These belated Federal househeating in our service territory to some 66"c.

actions have caused the average unit price paid by the Central Marylanders, as the following table shows, Company's residential gas customers to rise steadily also pay less for gas than do their counterparts in over the past six years,to a 1979 average 126Fc comparable metropolitan areas along the East Coast.

above that for 1973, with continuing annual increases For the eight comparison cities the 1979 cost of inevitable under the law.

gas for all uses was 23.2"c higher, on the average, Nevertheless, as of today, the consumer cost of than it was in Baltimore. The 7-city averace without gas houscheating is still far below the cost of heating New York was 35.87c,17.9Fe abose Baltimore.

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.berage Rate Per Therm of Gas All Customer Categories Full Year 1979 300 450 BALTIMORE 30.43e

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0 400 Philadelphia, Pa.

33,69 Atlantic City, N.J.

33.86 250 Washington, D.C.

34.22 Wilmington. De!.

35.38 Newark, N.J.

39.16 ggg Boston, Mass.

42.32 New York, N.Y.

48.93 250 8 CITY AVERAGE 37.50 m

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==Ccst-of-Livirg -Gas --Eectric Residential Unit Price Compared With Cost-of-Uving Dolvimore Areo l

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Electric Sales j

Unit sales of c!ectricity rose for the fourth con-

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secutive y ear following the 1974-1975 interruption of the sustained long-term growth pattern. Ilowever, i

1979's increased electric consuoption was concen-16 trated largely in the industri:d customer classification, where high-level business activity produced a 7.2%

gain. Commercial and residential usage remained relatis ely static, each increasing 1. !'i Growth in l

these categories was slowed both by appreciably tr cooler summer weather and by customer conservation ettorts.

i Our current long-range forceast indicates an l

average annual rate of growth of about 3.5Cc in j

clectric peak loads and 47o in total electric sales for 8

the period 1980 through 1989 Electric houscheating continues its sharp rise in 6

popularity. Electric heat, principally in the cost-competitive form of heat pumps, was installed m 77% of all homes newly built in Central Nianland 4

during 1979.

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19 0 70 '71 72 '73 '74 '75 '76 '77 73 '73 I

I I Inductrial i

I Commercial Residential Soles of Electricity Bithor's of Kiloestt%;rs M

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Calvert Cliffs Performance v

l Another year of outstanding operating etliciency and fuel economy was achieved by the Calvert Clitis l

l Nuclear Power Plant in 1979.

The plant's nuclear units, totaling 1,635,000

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kilowatts of generating capacity, produced 54% of our customers' total electric requirements for the year. The fuel-cost savings thus realized-and passed along to ilG&E customers by means of lower fuel I

charges in their monthly electric bills-totaled IIRANDON SIIORI S. the 1.240,000-kilowatt power,

$260 million in 1979 alone.

the The fuel savings which have been applied to the atarsco Riv ne rundet unty ow,

being equi ped to use coal rather than oil as its pri.

direct benetit of Central hlaryland electric consumers F

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mary fuel. tinit No.1. at left, has been rescheduled since the first Calvert Clitis unit went into com-for commercial operation in 1984, tJnit No. 2 in 1988.

mercial operation in 1975 now exceed $800 million.

The extraordinary fact is that in less than five 10 f

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ELECTRIC HEAT now is the choice for over three.four:hs of all new homes built in the Company's servi:e terntory. The two 1979 housing developments pictured here utilize electric heat pumps.

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.. n a w rcx :,e years' service Calvert Cliffs has exceeded its initial to coalis a major part of the Company's plans to construction cost with the savings in fuel costs passed comply with President Carter's 1979 energy proposal on to our electric customers.

requiring electric utilities to reduce their use of oil for electric generation 50% by 1990. An additional Brandon Shores Power Plant

$253 million is the projected cost to install coal-handling and coal-burning equipment at Brandon Due to lower projections of electric load growth Shores, and the total cost of the plant is now for the years 1980-1989, the construction schedule estimated to be about $1.1 billion.

l for the Company's Brandon Shores Power Plant Action taken under the provisions of the Power has been revised. The first of two 620,000-kilowatt Plant and Industrial Fuel Use Act of 197S by the generating units. previously planned for completion Economic Regulatory Administration (ERA) of the in 1982. has been rescheduled for commercial opera-U.S. Department of Energy in October,1979 should tion in 1984, and completion of the second unit is facilitate the economic use of coal by the Company now targeted for 1988 instead of 1984. Both units in Brandon Shores Units No. I and No. 2. This will be constructed to burn coal as the primary fuel Federal action may permit the Company to meet the source but will have the capability to burn oil.

air quality requirements for such facilities by burning Conversion of the Brandon Shores units fror. nil low-sulfur coal. If the purchase of flue-gas desulfuri-11

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i zation equipment, commonly referred to as " scrub-Gas Sales the cost of the plant willincrease by approximatelv Unit sales of gas rose 10.6G in 1979, consider-bers,"is required to meet air quality regulations,

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5300 million.

ably above the previous year's 5.5G gain. The 1979 j

increase resulted almost entirely from improved j

l Recon $ersion to Coal v ilability of pipeline supply which enabled greater sales to large businesses, particularly those sersed As a further means of reducing our depend-under interruptible-service contracts. Overall, indus-ence on imported foreign oil, we petitioned the trial consumption for the year went up 26.99, while 5faryland Department of Health and >! ental Hygiene usage in the residential and commercial customer in >!ay,1979 for permission to burn higher-sulfur categories-tempered by relatively moderate winter fuelin the gener; ting units of the Company's temperatures and by energy-conservation practices-400,000-kilowatt Charles P. Crane Power decreased 3.2% and 1.8%, respectisely.

4 Plant in eastern Baltimore County. The granting of this request, and subsequent approval Pipeline Curtailments Removed by the Environmental Protection Agency, will enable us to reconvert this plant from oil to coal of the The Company's pipeline supplier, Columbia Gas composition required for successful use in Crane's Transmission Corporation, totally removed as of cyclone furnaces, and to do so without exceeding any of the requirements-including sulfur-emission l

4 standards-imposed by the Federal Clean Air Act.

When the necessary authorization is received, w

the Company is prepared to enter into long-term coal contracts and to place orders for the new par-90 ticulate controls and other equipment needed to accomplish the proposed conversion. Several years will be required for manufacture and installation

~ m of this equipment, involving an estimated cost of l

555 million. Prompt regulatory approval will make l

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it possible, how ever, for Crane Units No. I and No. 2 to resume burning coalin 1983.

Another petition from the Company to conduct a 60 i

series of tests in 1980 at Crane Station has been approved by the Sta'e Department of Health and go Atental Hygiene and is under review by the Environ-

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l mental Protection Acency. The tests involve the burning of coal and inixtures of coal with processed 40 trash. If these tests establish that proper combustion l

l can be achiesed without damaging the furnace or bo fuel handling equipment, we have indicated a willing-ness to burn processed trash on a continuing basis, g

thus enabling Baltimore County to avoid construc-tion of a multi-million-dollar plant intended to convert its refuse into electricity.

10 0

1969 70 '71 '72 '73 74 75 '76 '77 78 '79 I

I Industrial 1-1 Ccmmercial I

Residential l

Sales of Gas Ecm af Ce=amees)

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April,1979 the delivery curtailments which had Higher gas prices inevitably accompany the new I

been imposed since the winter of 1972-1973, rang-adequacy of supply. To offset the increase in its own j

ing as high as 21 % in recent heating seasons.

costs, Columbia raised the price to the Company This action produced an immediate increase of 6 Se per therm, effective September 1,1979. This 13% in pipeline supplies available to our service 45G increase in the Company's unit cost of pipeline territory during the last three quarters of 1979. It deliveries is being passed on to gas customers was accompanied, moreover, by assurances that through the Purchased Gas Adjustment clause of 1

Columbia anticipates no difficulty in meeting all of the Company's service tariff. However, the cost of i

its contract commitments to the Company for at gas remains substantially below that of oil-the least the next decade.

most common alternative heating fuelin existing The vastly improved outlook results from new homes.

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domestic gas supplies developed in response to the ir.centives provided by the Natural Gas Policy Act End of New Customer Moratorium of 1978, coupled with the continued availability of I

imported and synthetic gases introduced in recent The long-term expansion of pipeline supplies

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enabled the Company to request Public Service years.

i Commission approval to terminate the moratorium on acceptance of new gas customers which had been imposed in the summer of 1974 and had been relaxed somewhat in August,1978. The Commission

'20 granted this request as of May 4,1979.

l Under the Order, new customers are required to 4

ito pay the full cost of installing new gas mains where j

such facilities are needed to complete the gas con-nections. Service-line extensions of up to 50 feet

'00

, are installed by the Company at its expense.

Nonessential gas uses. such as for decorative outdoor lighting or fueling swimming-pool heaters, continue to be prohibited. The lighting prohibition 80 is made all-inclusive by a Federal energy conserva-tion law which requires that nonexempt outdoor i

lights using natural gas be disconnected at business 70 establishments by November 5,1979 and at residences no later than January 1,1982.

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BG&E's basic responsibidty is to keep adequate supplies of electricity and gas flowing to customers without interruption, day and night, year in and year out. Under all but the most exceptional of circum-stances, the talented and dedicated team of BG1E employees carry out that assignment so well tha.

b Cf.v their efforts go almost unnoticed by Central Mary-landers, who hase come to take it for granted that d-

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the energy they need will be instantly available Y;

s whenever they push a button or turn a switch, f

A " routine" job? Perhaps--until a major storm

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lashes our ser ice territory. When other businesses s

suspend operations, gas and electricity become still more vital to local residents, so our work must go on. It is then that employees face the ultimate test of determination in getting to the job and tireless devotion to duty once there. The men and women of

,9 BG&E always have responded to the challenga L

magnificently.

Twc weather-generated 1979 service crises illus-

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trate the point.

jeu Over the three-day Washington's Birthday "holi-

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day weekend" of February 17-19, Central Maryland s

was struck by a 24-inch snowstorm. Drifts fis e and t

1. t i.iii, six feet high rendered streets and highways impass-able in many places,3 hut down area airports, and WIIEN CENTRAL 51ARYLAND is immobilized, immobilized tr:. ins as u ell as buses. Well into the whether by blizzard or hurricane, comrany employ-following week, local schools and businesses were ces do whatever it takes to get to work, and stay on closed.

the i b for as long as they are needed to restore service to escry disrupted home or business.

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l But BG&E remained adequately staffed through-wires,228 electric poles were sheared off or washed l

out the epic " Blizzard of '79." Our operating out,132 transformers were rendered inoperative, j

employees, line and stat! alike, managed somehow and 118 main distribution feeders were knocked out.

to get to work, many of them trudging miles over At the storm's height, some 175,000 electric empty roads coated with snow and ice. And once on customers--one in every five-were without electric j

the job, they took again to the streets, answering service.

i thousands of calls for emergency assistance. As a As always, employees turned out in force to meet

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result, BG&E customers experienced virtually no this new challenge. For live days, emergency crews i

disruption of service.

labored around the clock, in individual shifts of 12 l

l On September 5 and 6, Tropical Storm David to 18 hours2.083333e-4 days <br />0.005 hours <br />2.97619e-5 weeks <br />6.849e-6 months <br /> and even !cnger, until electricity had roared through our service area. Torrer.*ial rains been restored to the last home on Sunday morning, i

j and gale 'orce winds intlicted 52 million worth of September 9.

I damage or 1:te Company's electric system. In all, Characteristically, the people of Central Siary-(

4,516 wires were felled,3.985 line fuses were short-land responded generously to this massive employee l

l circuited,2,485 trees or limbs crashed or.to our effort. Stany letters of praise were received not on!v i

by the Company, but also by area newspapers.

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Typical was the tribute contained in one " letter-to-l l

the editor" "Regarding Trepical Storm David and l

unsung heroes. I would like to commend employees i

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of the Gas and Electric Company for their etTorts on j

[ 1 d,l ' ',, h the public's behalf. All too often we take for

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power at all times and in all conditions. When once

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restored, few question or think about what sacrifices

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and women who today sustain the proud BG1E

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,. s ONicers On January 1,1980, C. Edward Utermohle, Jr.

JOHN W. GORE, JR., Vice President, Electric retired as Chairman of the Board and Chief Execu-Interconnection and Operations. Afr. Gore's prior tive 0$cer of the Company. Sir. Utermohle will position was Vice President. Engineering and remain on the Board of Directors and serve as Construction.

Chairman of the Executive Committee.

CHRIS H. POINDEXTER, Vice President, Directors of the Company elected the following Engineering and Construction. Mr. Poindexter had Otficers to new positions, erTective as of January 1, been serving as Treasurer and Assistant Secretary.

1980:

D. PIERRE G. CAAfERON, JR., Treasurer and BERNARD C. TRUESCHLER, Chairman of the Assistant Secretary. Sir. Cameron formerly was Board and Chief Executive 0$cer. Str. Trueschler Associate General Counsel for corporate matters.

had formerly served as President and Chief i

Operating 0$cer.

GEORGE V. SicGOWAN, President and Chief Directors 1

Operating O$cer. Sfr. NicGowan's former position George V. SicGowan also was elected to the was Vice President, N!anagement and Staff Services.

Board of Directors, erTective January 1,1980.

NORA!AN J. BOWh! AKER. Vice President, After more than 9 years of dedicated service, Sianagement and Staff Services. Afr. Bowmaker Af artin D. 51unger resigned from the Board, as of previously served as Vice President, Electric Inter-October 1,1979, as a means of reducing his connection.

participation in business.

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Common Stock institutions representing the savings and financial At year-end 1979, there were 89,698 holders of interests of many additional thousands of people,in the Company's common stock.

Sfaryland and elsewhere: banks, insurance com-31aryland citizens account for 48% of the total.

Panies, pension funds, investment trusts, labor The great majority of these 43,542 investors are umons, corporations, hospitals, orphanages, schools customers as well as shareowners,29% living in the and colleges, libraries, charitable foundations, City of Baltimore and 65fc elsewhere in Central religious organizations, security dealers, and hfaryland. All 23 of the State's counties are repre, fratemal societies.

f sented, however.

The wide distribution of Company ownership is i

The remaining 52fc of our common stockholders further attested by the fact that 54% of our common include residents of each of the 49 other states and stockholders own 100 shares or less. Only 7% own i

the District of Columbia, plus Puerto Rico and the more than 500 shares, and no stockholder of record l'

Virgin Islands. Shareowners also live in 18 foreign owns as much as 3% of all shares outstanding.

nations and dependencies.

Preferred and Preference Stock Individuals const tute 87% of the total. Of these, 30,683 are women and 20,092 are men, with another There were 4,845 holders of the Company's 27,709 accounts held jointly by men and women.

preferred stock at the close of 1979. Owners of The other 13% of our common stockholders are preference stock numbered 13,180.

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a Dolonce, Krowth & ?.conomic Stability U

1j Baltimore Gas and E!eetric Company supplies Balance likewise is a dominant characteristic of electric, gas, and steam utdity service to a major the Company's electric generating capability, pres-metropolitan region that is noted for an economic ently compnsing 5,010,000 kilowatts of insta: led stability founded on diversification of industry, capacity and tirm purchases. Of this total,33G i

growth in population, privatel>-tinanced urban (supplying 54cc of 1979 customer requirements) is renewal. and cisic and cultural advancement.

nuclear; 33 % is residual fuel oil; 17G is coal; 1I G is li2ht disti!! ate oil; 3rc is gas-fueled; and Central Staryland contains one cf the largest steel 3 G s hydroelectrie. The Company owns nine oper- ~

mdis m the % estern Hemisphere, one of America s ating Central 5taryland power plants, with additional busiest seaports, and the national headquarters of generating capacity prosided by shared ownership 3

the Social Security Administration. But, as illustrated of two mine-mou'h plants and a small hydroelectrie here, it also includes an extraordinary number and station, allin Pennsylvania, plus membership in the 3/

s ariety of diversified manufactunng concerns. These Pennsylvania-New Jersey-5f aryland Interconnection, P,

companies-many of them acknowledged world which atfords access to pooled capacity on advan-teaders m their fields-represent all but one of the taceous economic terms.

84 principal U.S. Standard Industrial Classificauen

' categories.

Fae:lities for the production and storage of liquetied natural gas, synthetic natural gas, and At year-end 1979, the Company served 823,690 propane gas are maintained at three Company l

electric customers and 507,456 gas customers.

plants in Central 5f aryland, w hich supplement pipe-j Total revenue amounted to $1,014,408,000, exceed-line supplies of natural gas as the need arises.

ine the billion-dollar level for the first time. Our 10 largest electric customers accounted for only-Currently under construction is 1,240.000 kilo-11"c of total 1979 electric resenues, and the 10 watts of additional:! : ric generating capacity, l

largest gas customers provided no more than 17%

required to meet the future needs of a se:Tice terri-of total 1979 cas revenues. The 20 larcest customers tory whose prime geographic asset is its location overall were the source of 15Fe of cor' orate reve-within one day's freight-delivery range of 44rc of p

nues for the year.

the U.S. industrial market and 37% of the Nation's total population. Superior transportation facilities-The diversity inherent in this broad revenue base rail, air, highway, and water-fuel the sustained is reinforced, moreover, by the area's exceptional crowth of the Central Staryland business community.

' steadily increasing population, attracted by de-o' economic balance of industry.. commerce...

A educational, medical, and other service f acilities..

sirable living conditions coupled with exceptional

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and governmental installations. This balance is cultural and recreational advantaces, a;sures an reflected in the customer distribution of 1979 unit abundant manpower supply, espe'cially noteworthy sales: on the electric side,33G residential,18%

in the professional and skilled categor'ies, availability commercial,49Cc industrial; for gas,42Fc resi-of which is a crucial factor in indus' trial expansion.

dential,6Fc commercial,52G industrial.

t The economic stability of Central Staryland's continued growth is apparent also from the fact that 69Fc of 1979 electric revenues and 60Fc of 1979 gas revenues were derived from sales outside the g

City of Baltimore, in a service territory that extends t

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into nine counties.

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A The total area served approximates, for electricity, 2,300 square miles, with some 2,367,000 residents; for gas,600 square miles, with a population esti-mated at 1,857,000. Steam is produced for sale to I

700 customers located in downtown Baltimore.

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BALTIMORE GAS AND ELECTRIC COMPANY 1979 1978 1977 1976 1975 1969 ELECTRIC OPERATING STATISTICS (Dollar Amounts in Thousands)

Revenues R esidential....................

$ 274.079

$ 270.536 $ 220.904 $ 205.188 $

198, % $

79.259 Comm ercial...................

174.157 171.363 140.323 132.600 127.840 59.527 Industrial....................

263.319 251.966 194.811 191.920 187,550 67.789 O th e r.........................

3.401 3.308 2.520 2.348 2.313 2.231 Total....................

$ 714.956

$ 697.173 5 558.558 $ 532.056 s 516.006 $ 208.806 Sales - SlWH Residential.....

5.496.737 5.434,958 5.231.317 4.887.793 4,663.902 3,284.961 Commercial..................

3,052.081 3.019.633 2.910.532 2.$06.247 2.717.730 2.201.191 Industrial R.274.422 7.715.633 7.319.862 7.064.166 6.475.795 5.679.027 Tota l....................

16,823.240 16.170.224 15.461.711 14.758.206 13.857.427 11.165.179 l Customers Residential..

747,699 734.l S6 722,080 708.135 696,827 605.560 Commercial..

74.575 74.626 73.345 72.030 71,197 67.025 Industrial.........

1.416 1.355 1.306 1.297 1.250 945 Total.................

823.690 810.167 796.731 781.512 769.274 673.530 Average use per Residential Customer - KWH.............

7,413 7,465 7,320 6,965 6,744 5,488 GAS OPERATING STATISTICS Revenues l

Residential.....................

$ 146.598

$ 146.675 $ 124.357 $ 105.900 $

87.676 $

54.563 Commercial....................

21.097 20.115 17,184 14.750 12.307 7.796 I ndus trial......................

54,767 54,315 44,497 38,405 31.702 15,743 l

Interrupt 2ble Services-industrial and Other..........

61.816 40,569 31.502 25,817 22.189 8,350 O th e r........................

2.796 2.712 4.119 (588) 1.548 1.577 I To tal....................

$ 287.074 S

264.586 S 221.659 5 184.314 $ 155.422 5 88.029 j

Sales - DTH Residential.....................

39.282,741 40.576.498 39.777.652 41.197.620 38.886.991 38.049,851 Commercial...................

5.320.010 5.417,140 5.335,081 5,514.194 5,202.085 5.070,168 I nd ust rial......................

17,671,851 18,055,404 17,406,677 18,692,073 17,737,079 15,854,665 laterruptible Services -

i Industrial and Other...........

31.175.052 20.439.595 17.543.597 21.392.706 21.963.199 19.952.814 i

Total....................

93.449.654 84.488.637 80.063.007 86.796.593 83.789.354 78.927.498 i Customers Resid ntial.....................

473,761 472.414 474.361 476.867 477.413 433,501 Commercial....................

28.569 28.790 29,049 29,468 29,604 28,125 I nd ust rial......................

4,941 4,969 5.012 5.026 5.058 3,587 Interruptible Services-Industrial and Other 185 184 188 189 190 94 i

To tal...................

507.456 506.357 508.610 511.550 512.265 465.307.

Average use per Residential 4

Customer - DTH..............

82.9 85.9 83.8 86.5 81.6 88.7 :

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~ FINANCIAL AND OTIIER STATISTICS i Long.'lerm Debt.

$ 1.250,132

$ 1.207,896 $ 1,145,656 $ 1,069.527 $ 1,015,314 $ 411,104 {

I Preferred. Preference, and Convertible Preference Stocks...............

292,753 245,484 247,518 252,573 260,958 89,209 j Common Stock, Premium. Install.

l ments and Retained Earnings......

953.161 906.421 861,463 790.716 719.499 340.248 j l Total Capitalization...............

$ 2.496.046

$ 2.359.801 S 2.254.637

$ 2.112.816 $ 1.995.771

$ 840.561 !

Sharet of Common Stock at end of year (Thousands)...........

31.692 31,039 30,658 28,839 27,041 16,561 Book Value Per Share of Common f

Stock at end of year.............

$30.08

$29.20

$28.10

$27.42

$26.61

$20.49 4

Common Stockholders at end of year..

89.698 89.249 38.795 37.106 87,232 51,470 Expenditures for Additions to Plant..

$ 160,917

$ 172.402 $ 182.205 $

165.9.'6

$ 143.226 $ 140.398 Total Utility Plant.................

$ 2.974,653

$ 2,831,219 $ 2,669,927 $ 2.499,035 $ 2,345,246 $ 1,067,056 Accumulated Provision for Depreciation

$ 608.293

$ 541.618 $ 470.969 $ 410,836 $ 361.505 $ 215.275 Employees at December 31 8,485 8,459 8,306 8,087 7,822 7,395 20

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BALTIh! ORE GAS AND ELECTRIC COhfPANY

~

1979 1978

' l977 1976 1975 1969 (In Thousands of Dollars)

Operating Revenues:

Electric.....................

$ 714,956

$697,173

$558.55 S

$532.056

$516.006

$208,806 Gas..........................

287,074 264,586 221,659 184,314 155,422 88,029 S te am........................

12.378 12.727 12.305 9,447 8.614 2,981 Total Operating Revenues...

$1.014,408

$974,486

$792.522

$725,8!7

$680.042

$299.816 Operating Expenses:

Purchased Fuel and Energy........

$ 338.464

$ 321.266

$245,469

$257,645

$270,670

$ 67,479 Operations....................

182,055 161,981 140.774 124,896 107.542 59,108

.\\taintenance......

64.913 55,083 49,892 35,587 33,386 17.951 Depreciation...................

80,338 78,063 68,449

$9,448 51,028 26,136 Income Taxes:

Curre nt.................

8.987 43,619 19,649 (1,603) 14,381 34,569 De fe rred....................

44,149 15,818 10,024 Investment Tax Credit Adjustments................

16,593 17,882 13,613 27,120 3,812 1,938 Other Taxes....................

85,455 83.330 72.427 62.831 57.225 34,902 Total Operating Expenses

$ 820,954

$777,042

$620.297

$565.924

$538,644

$242,083 Operating Income.................

$ 193,454

$197,444

$172,225

$159,893

$141,398

$ 57,733 Allowance for Other Funds Used During Construction............

9,545 4,006 2.553 9,174 10,471 2,972 Net Other Income and Deductions....

1,698 739 2.228 624 732 587 Income before Interest Charges.......

$ 204,697

$201189

$177,006

$169,691

$152,601 3 61,292 Interest Charges...................

86,159 83,228 76,230 70,645 67,895 17,425 Allowance for Borrowed Funds Used During Construction - Credit.....

7,778 3,580 2.318 7.771 8.657 2.032 Net income......................

$ 126,316

$122,541

$103,094

$106,817

$ 93,363

$ 45,899 l

i Dividends - Preferred and l

Preference Stock................

19,784 18,177 18.381 18,771 19,148 4.851 Balance Available for Common Stock.........................

$ 106,532

$104,364

$ 84,713

$ 88,046

$ 74,215

$ 4',048 Dividends - Common Stock........

75.373 69,467 63,743 58.985 52,985 26,869 l

Earnings Reinvested in the Business...

$ 31.159

$ 34,897

$ 20.970

$ 29.061

$ 21.230

$ 14,179 l

Average Shares of Common Stock Outstanding (Thousands).........

31,356 30,847 29.666 28,231 27,033 15,808 Earnings Per Average Share of

$2.75

$2.60 i

Common Stock.................

$3.40

$3.38

$2.86

$3.12 Dividends Declared Per Share of Common Stock.................

$2.40

$2.25

$2.14

$2.08

$1.96

$1.70 i

t l

21 l

1

i l

l l

LV AGIAN'S D]5CU551CH AND MDff315 OF THI SUWM/ 07 OMMTCSS i

4 j

The Letter to Stockholders in this report provides actual accun ulated fuel costs are not recovered an appraisal of the major factors currently affecting through the Fuel Rate charge, they are deferred the Company's business. Year-to-year variations in as an operating expense and recovered,if the individual categories of the Summary of Operations Commission finds the ecsts were justified, in a base are discussed below. References are made to the rate proceeding. This method differs from that j

Notes to the Financial S:atements.

adopted in December,1976. w hich provided for the recovery of the full cost of electric fuel based on i

a Earnings estimates for the month in which such costs were i

l The balance available for common stock charged to operations.

increased $2,168,000 in 1979 and $19.651.000 In 1978, the Company modified its accounting to in 1978 treat the Ataryland Electric Environmental Surcharge Earnmgs per share of common stock, on the as a tax on the Company instead of a tax passed mereasmg average number of shares outstanding m.

directly on to customers'. As a result, electric each period. meressed 26 in 1979 and 5:e in 1978.

operating revenues include revenues collected liigher service rates combmed with increases in for this tax.

sales and. in 1979, the higher Allowance for Funds I' sed During Construction were the primary reasons Gas Sales (Dth) and Operating Revenees for the increases in earnings.

Gas sales increased 10.6G in 1979 and 5.5 G in i

Electric Sales Olah) and Operating Resenues 1978. Primarily due to higher usage by large c mmercial and industrial customers, principally Electric sales increased 4.0G in 1979 and 4.6G interruptible customers. The rise m such usage was in 197S. Growth in the residential category was precipitated, part by an increased availability of m

1.1 G.m 1979 and 3.9G.m 1978 - principally due natural gas (see sections entit!cd " Pipeline Curtail-to the m, stallation of electrically heated dwelb ~1 ments Removed" and "End of Customer Afora-i umts partial!)l offset by cooler weather during the torium" on pages 12 and 13). The 1979 increase was air-conditionmg season, and also m 1979, by warmer partially offset by decreased usage on the part of j

weather during the heating season. Sales to ecm-residential and small commercial customers, resulting mercial customers increased 1.1G m 1979 and 3.7G from conservation and warmer weather during the m 1978. Industrial sales increased 7.2G m 1979 heating season 1

4 j

and 5.4g in 1978 as a result of higher production Gas operating revenues increased each year i

levels by todustria1 customers.

as follows:

Increase or ectne operating revenues increased each year p

Pnor Year Increase or 4

(Decrease) From 1979 1978 Prior Year (In hiillions i

of Dollars) i 1979 1978 Attributable to:

(In hiillions Base Rate Adjustments..... $ (1.0)

$15.0 of Dollars)

Gas Cost Adjustments...... 19.8 26.0 Attributable to:

Sales Volumes............

3.7 1.9 Base Rate Adjustments...... $ 11.6

$ 55.2 Fuel Rate Adjustments.....

(8.4) 64.6 Net Increases......... $ 22.5

$42.9 Slaryland Electric Environ-mental Surcharge........

(0.9) 3.0 Operations and Alaistenance j

Sales Volumes............ 15.5 15.8 Total purchased fuel and energy expen>e increased Net Increases......... $ 17.8

$138.6

$17,198.000 in 1979 and $75.797,000 in 1978, as a result of higher fuel and natural gas prices, coupled with increased sal:s. The 1979 increase was Based on new regulations established by the mitigated by the deferral of fuel costs incurred Public Service Commission of hfaryland, the but unrecovered through the electric fuel clause Company implemented in October,1978 a new Fuel during the period (see Note 5).

Rate clause to recover the cost of fuel used in Increases in operations and maintenance expenses generating electricity, nis system is predicated upon reflect the higher cost of payroll, employee benefits the latest twelve month generation mix and the and materials. In 1979, such expenses also include latest three-month average cost for each fuel type.

increases due to higher costs at the Calvert Cliffs De Fuel Rate will not change unless the calculated Nuclear Power Plant, repair work related to major Fuel Rate is more than SG above or below storms and higher uncollectible accounts. In 1978, the Fuel Rate then in effect. To the extent that the increases also reflected greater scheduled mainte-

+

22-

nance at various fossil-fuel generating plants and increase. This was offset in part by deferrals asso-additional costs resulting from the initial refueling cisted with a Pennsylvania Gross Receipts Tax on and maintenance overhaul of Calvert Cliffs Unit the sale of electricity to out-of-state customers, which No. 2.

has been repealed on a prospective basis etYective Deferred Debits in the Balance Sheet as of January 1,1980 (see Note 3).

December 31,1979, include $28,793,000 for Investment tax credits vary from year to year as 1

deferred fuel rate costs, $9,934,000 for spent construction expenditures become eligible for the i

nuclear fuel storage costs, and $7,275,000 for credit.

maintenance expenditures at the Calvert Cliffs Taxes other than income taxes increased Nuc! car Power Plant (see Notes 3,5 and 6). In 52,125,000 in 1979 and $10,903,000 in 1978.

its pending rate case, the Company is requesting The 1979 increase was primarily attributable to a additional revenue to recover these deferred higher taxable wage base for social security taxes.

expenses.

The increase in 1978 retlects the first full year of Depreciation Property and capital stock taxes on Calvert Cliffs Unit No. 2 and increased gross receipts taxes as a i

The increase in depreciation charges results from result of higher revenues. Also, in 1978, the additional facilities that have been placed in service Company commenced recording the Afaryland and, et'ective December 1,1977, an increase from Environmental Surcharge as a tax on the Company 3Cc to 3.26G in the annual accrual rate for electric instead of a tax passed on directly to customers property other than nuclear, etiset in part by a (see Note 7),

decrease from 3.6Fc to 3.45 cc in the annual accrual OtherIncome and Income Deductions rate for electric nuclear property.

l The 59,737,000 increase in the Allower.ce for Tates Funds Used During Construction (AFC) in 1979 l

Federal Income Taxes - Current decreased in is attributable to continued construction at the 1979 due to a lower level cf taxable income and the

.Brandon Shores Power Plant and to the modification reduction in tax rate from 484 to 464, which in accounting treatment, effective mid-April,1979, became effective January 1,1979, partially otiset by resulting from computing AFC on the total Iower investment tax credits. The increase in 1978 amount of the Company's investment at that plant l

was attributable to the higher level of taxable income, instead of on one-half of such plantinvestment.

partially offset by the adoption in 1978 of the The $2,715,000 increase in the allowance for 1978 percentage repair allowance provisions and an is attributable to continued construction at the increase in the investment tax credit (see Note 3).

Brandon Shores Plant and to an increase in the Federal Income Taxes - Deferred are the result AFC rate from 7.67Fe to 8.13fc effective January 1, of changing in 1977 from flow-through to normaliza-1978 (see Note 4).

tion accounting for the tax benefits arising from Interest charges increased due to sales of liberalized depreciation on property additions in additional securities. In July, 1979,500,000 shares j

1976 and subsequent years and for certain other of Redeemable Preference Stock were issued, i

timing differences betw een tax and book income. The resulting in an increase in preferred and preference 1979 amount also reflects tax deferrals applicable to dividends in 1979. No additional shares of preference maintenance expenditures at the Calvert Cliffs stock were sold in 1978, and the number of Nuclear Power Plant and fuel expenses under the preference shares outstanding decreased due to con-Company's fuel rate clause. In 1978, the election of versions, producing a decline in preference i

the percentage repair allowance contributed to the dividends in that year.

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I 1979 1978 i

Dividend Pric*

Dividend Price The Company's common stock is Faid High Low Paid High Low listed on the New York, h!idwest, l

and Pacific stock exchanges and has First Quarter

$.57

$26

$24%

$.54

$26%

$24%

l l

unlisted trading privileges en the Second Quarter J7 25 %

21 %

.54 26 24 %

Boston, Cincinnati, and Philadelphia Tlurd Quarter

.61 25 %

22 %

.57 27 %

25 %

exchanges.

Fourth Quarter

.61 24 %

21 %

.57 26 %

23 %

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BALTDIORE GAS AND ELECTRIC COMPANY Per Cent 1979 1978 herer.:e (In Thousands of Dollars)

(Decrease)

OPERATING REVENUES E!ectric.......

$ 714.956

$697.173 2.6 Gas.

287.074 264.586 8.5 12.378 11727 (2.7)

Steam...

Total Operating Revenues.....................

$1.014.40s

$974.486 4.1 OPERATING EXPENSES Purchased Fuel and Energy.

$ 338.464

$321.266 5.4 182.055 161.981 12.4 Operations..........

64.913 55.083 17.8 M aintenance.......................

80.338 78.063 2.9 Depreciation..........

69.729 77.319 (9.8 )

Income Taxes - Note 3...............

Other Taxes...................

85.455 83.330 16 5 820.954 5777.042 5.7 Total Operating Expenses OPERATING INCOME

$ 193.454

$197.444 (10)

ALLOWANCE FOR OTHER FUNDS USED DURING CONSTRUCTION-Note 4 9.545 4.006 138.3 1.69s 739 129.8 NET OTHER INCOME AND DEDUCTIONS INCOME BEFORE INTEREST CHARGES..

$ 204.697

$202.189 1.2 86.159 83.228 3.5 INTEREST CHARGES.

ALLOWANCE FOR BORROWED FUNDS USED DURING 7.77s 3.580 117.3 CONSTRUCTION-CREDIT-Note 4..

N ET INC O M E................................................

$ 126J16

$122.541 3.1 DIVIDENDS-PREFERRED AND PREFERENCE STOCK........

19.784 18.177 8.8 BALANCE AVAILABLE FOR COMNION STOCK

$ 106.532

$104.364 2.1 EARNINGS PER SHARE OF COMMON STOCK,

$3.40

$3.38

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BALTBf0RE GAS AND ELECTRIC COMPANY l'7' 1978 (In Thousands of Dollars)

$304,261

$269.414 RETAINED EARNINGS BEGINNING OF YEAR NET INCOME FOR TIIE YEAR FROM STATF'.f ENT OF INCOME.................

126.316 122.541 5430.577

$391.955 CASH DIVIDENDS DECLARED Preferred Stock (Cumulative)

Series B 4% %......

$ 1.003

$ 1.003 Series C 4%

276 276 Series D 5.4"o 1.620 1.620 Preference S'ock (Cumulative)

Convertibl e 6 % " Series..................................................

635 784 8.75 4.1970 Series.......

2.625 2.625 7.88 %.1971 Series 3.940 3.940 7.75 %.1972 Series.....

3.100 3.100 1.556 1.556 7.78%.1973 Series 3.273 3.273 9.35%.1974 Series 1.756 8.375 %. 1979 Series Common Stock (at the annual rate of $2.16 per share through April 1.1978.

$128 per share through April 1,1979 and $2.44 per share thereafter) 75.373 69.467 OTHER CHARGES - Expenses in connection with issuance of stock.....................

284 50 Total Charges..................

$ 95.441 5 87.694 RETAINED EARNINGS END OF YEAR...........................

$335.136

$304.261 See accompanying notes and sehedules-pages 27 through 35.

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BALTLNIORE GAS AND ELECTRIC COhfPANY December 31, December 31, 1979 1978 (In Thousands of Dollars)

ASSETS UTILITY PLANT Plant in Service Electric - at original cost.

52,165,107

$2,112,368 Gas - at original cost.

310,127 300,379 Steam - at cost 18,753 17,104 Common - at original cost.

92.042 90.706

$2,586,029

$2.520.557 Total Plant in Service.

Construction Work in Progress - at cost 384.885 306.923 3.739 3.739 Plant Held for Future Use - at cost.

Total Utility Plant...

$2,974,653

$2.831,219 Less Accumulated Provision for Depreciation.

608,293 541.618 Net Utility Plant.....

52.366,360

$2,289,601 Nuclear Fuel-at amortized cost..

148.626 114.462

$2.514.986

$2.404.063 OTHER INVEST 5fENTS..

7.775 7.582 CURREST ASSETS Cash.....

9,431 6,102 Special Deposits and Working Funds..

996 439 Accounts Receivable,less provision for uncollectibles 97,74; 105,143

>!aterials and Supplies - generally at average cost.

122,938 103.476 Prepayments and Other...

37.868 35.659

$ 268.973

$ 250.819 DEFERRED DEBITS...

$ 64.250 11.290 TOTAL ASSETS..

$2.855.984

$2.673.754 CAPITAL AND LIABILITIES COhth!ON STOCK AND RETAINED EARNINGS Common Stock-Schedule. page 27

$ 617,868

$ 602,003 Premium on Preferred Stock 157 157 Retained Earnings 335.136 304.261 5 953.161 5 906.421 PREFERRED AND PREFERENCE STOCK NOT SUBJECT TO SIANDATORY REDEh!PTION Preferred Stock - Schedule, page 27.

$ 59,185

$ 59,135 Prefere. ice Stock - Schedule, page 27..

175,000 175.000 Convertible Preference Stock-Schedule, page 27....

8.568 I1.299

$ 242.753

$ 245.484 REDEEhiABLE PREFERENCE STOCK-Schedule, page 27 5 50.000 LONG.TER51 DEBT Afortgage Bonds-Schedule, page 28

$1.215,732

$1,172.496 34.400 35.400 Debentures-Schedule page 28 Unamortized Discount and' Premium................

(3.864)

(3.053) l Long. Term Debt estimated to be :: tired within one year................

(33.214)

(12.842) 51.213.054

$1.192.001 CURRENT LIABILITIES Accounts Payable S 76,802

$ 66,477 Taxes Accrued..............................................

21,951 45,186 Interest Accrued and Dividends Declared.......

56.951 53,232 Long-Term Debt estimated to be retired within one year..............

33,214 12.842 29.053 25.895 Oter

$ 217.971

$ 203.632 OTHER CREDITS Accumulated Deferred Investment Tax Credits....................

$ 103,941

$ 89.951 Deferred Income Taxes........................................

69,991 25,842 5.113 10.423 Other.......................................................

$ 179.045

$ 126.216 TOTAL CAPITAL AND LIABILITIES

$2.855.984

$2.673.754 See accompanying notes and schedules - pages 27 through 35.

i 25

STATDAD TS OF OdNGIS ;N FEW CDd POSIT!CH 5

BALTIMORE GAS AND ELECTRIC COMPANY 1979 1978*

(In Thousands of Dollars)

SOURCE OF FUNDS Funds from Operations:

Net Income......

$126.316

$1 2.541 Depreciation and Amortization............

96.252 87.144 Investment Tax Credit Adjustments...

13.989 15.396 Deferred Income Taxes..............

44.149 15.818 Allowance for Other Funds Used During Construction.

(9.545)

(4.006)

Subtotal

$271.161

$236,893 Funds from Outside Sources:

Long. Term Debt 53.789 74.193

~

Common Stock..

15.796 10.062 Preference Stock.......

47.053 (2.035)

Short. Term Debt (Net).....

(18.750) 296 414 Other (Net).

Total

$384.095

$ 300.777 APPLICATION OF FUNDS Construction Exrenditures................

$160,917

$172.402 Allowance for Other Funds Used During Construction..

19.545)

(4.005)

Purchase of Nuclear Fue! Staterials......

57.956 57.253 Deferred Nuclear 5f aintenance.

7.275 Common Stock Dividends.

75,373 69.467 Preferred Stock Dividends.

2,899 2.899 Preference Stock Dividends....

16.885 15.278 Retirement of Long. Term Debt.............

12.764 12.760 19.462 (2.154) hf aterials and Supp!ies-Principally Fuel Stock 37.197 (4.578)

Deferred Fuel Rate Costs...

Other-Principaily Net Change in Other Working Capital items..

6.912 (18,544)

Total.............................................................

$388.095

$300.777

• Restated to conform with 1979 presentation.

l See accompanying notes and schedules - pages 27 through 35.

i m - m..s m zy3 g y m s

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; viJ s G f w ; LI Coopers & Lybread I

l To the Stockholders of

{

Baltimore Gas and Electric Company l

We have examined the balance sheets of Baltimore In our opinion, the financial statements referred Gas and Electric Company at December 31,1979 to above (pages 24 through the footnotes to l

and 1978, and the related statements of income, financial statements on page 35), present fairly the retained earnings and changes in financial position financial position of Baltimore Gas and Electric for the years then ended. Our examinations were Company at December 31,1979 and 1978, and the made in accordance with generally accepted auditing results of its operations and changes in its financial standards and, accordingly, included such tests of position for the years then ended, in conformity with i

the accounting records and such other auditing generally accepted accounting principles applied on j

procedures as we considered necessary in the a consistent basis.

circumstances.

j 4

Baltimore, Maryland 26 January 22 1980

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a BALTIh! ORE GAS AND ELECTRIC COhfPANY December 31, December 31, 1979 1978 (In Thousands of Dollars)

CO51510N STOCK - without par value - 45.000.000 shares authorized:

31.692.176 and 31,039,302 shares, respectively, outstanding......

$617.868

$602.003

( At the end of 1979,296,073 shares were reserved for conversion of Convertible Preference Stock. 1.003.662 shares for the Investment Tax Credit Employee Stock Ownership Plan, and 198.163 shares for the Dividend Reinvestment and Stock Purchase Plan.)

PREFERRED AND PREFERENCE STOCK NOT SUBJECT TO SIANDATORY REDESIPTION Preferred Stock (Cumulative) - $100 par value - 1,000,000 shares authorized:

Series B 4M G - 222.921 shares outstanding

$ 22.292

$ 22,292 (Callable at $110 per share.)

Series C 4G -68.928 shares outstanding 6.893 6,893 (Callable at $105 per share.)

Series D 5.4G - 300.000 shares outstanding..

30,000 30,000 (Callable at $102.50 per share prior to April 1,1982 and at lesser amounts thereafter.)

Total Preferred Stock.

$ 59.185

$ 59.185 Preference Stock (Cumulative)- $100 par value -3,000.000 shares authorized:

Convertible. 6% G Series - 85.677 and 112.989 shares, i

$ 8.568

$ 11,299 respectively, outstanding (Callable at $100 per share; convertible into Common Stock of the Company at $28.98 per share.)

8.75G,1970 Series - 300,000 shares outstanding..................

30,000 30,000 (Callable at $110 per share prior to October 1,1980 and 4

at lesser amcunts thertafter.)

l 7.SSG.1971 Series - 500.000 shares outstanding 50,000 50,000 i

(Callable at $107 per share prior to October 1,1981 and at lesser amounts thereafter.)

7.75 9, 1972 Series 400,000 shares outstanding 40,000 40,000 (Callable at $105.50 per share prior to October 1,1:#82 and at lesser amounts thereafter.)

7.78 %, 1973 Series - 200.000 shares outstanding..

20,000 20,000 (Callable at $105.50 per share prior to December 1,1983 and at lesser amounts thereafter.)

9.35G.1974 Series - 350.000 shares outstanding................

35,000 35,000 (Callable at $110 per share prior to April 1,1984 and at lesser amounts thereafter.)

Total Preference Stock.........................................

$183.568 5186.299 3

REDEE5 FABLE PREFERENCE STOCK (Cumulative)-

$100 par value-500,000 shares authorized:

3 8.375 %, 1979 Series - 500,000 shares outstanding.................

$ 50.000 (100.000 shares to be retired at par in each year 1985-1989.

l This series is junior to Preferred Stock, ranks on a parity

{

with Preference Stock and prior to Common Stock, as to payment of dividends or assets available in the event of liquidation.)

i See pages 6 and 7 for information regarding securities issued and retired in 1979.

s 27 1

5GIDEE3 CF OUT3TMD} G DOND5 MD DIDEFURIS BALTIMORE GAS AND ELECTRIC COMPANY December 31 December 31, 1979 1978 (In Thousands of Dollars)

FIRST REFUNDING hlORTGAGE BONDS 4% % Series, due June 1, 19 80............................ $

9,361 9,386 Series W 2M %, due June 15,1980.........

10.695 10.695 Series U 2% %, due April 1,1981.

39,063 39,063 10% Series, due July 1,1982...

90,202 90.227 10% % Series, due September 15.1983........

41.932 41.932 Series V 2% %, due December 21,1984 19,123 19,123 Series X 2M G. due January l5,1986...

24.317 24.317 Series Z 3%, due July 15,1989...

36,754 36,754 3% % Series, due December 1,1990..

29.682 29,682 4% % Series, due Jul" 15.1992...

25.000 25,000 i

4% Series, due Starch 1,1993........................

24,095 24.095 4% % Series, due July 15,1994.....

29.989 29.989 j

5% % Series, due April 15,1996 26,680 26.680 6% % Series, due August 1,1997..

24.967 24,967 5% G Installment Series, due August 15,1998....

67.000 67.000 79 Series, due December 15,1998...

28,795 28.705 8% % Series, due September 15.1999..

22,198 22,198 8% G Senes, due September 15,2000....

11.433 11,433 7% G Series, due April 15.2001 60,000 60,000 756 % Series, due September 1,2001.

60.000 60,000 7% % Series, due January 1,2002..

50,000 50,000 7% % Series, due July 1,2002.

50.000 50,000 50 % Installment Series, due July 15.2002 12.500 12,500 7H % Series, due September !$. 2002.

50,000 50.000 8% % Series. due February 1, 2004..

75.000 75,000 l

9% G Series, due August 1,2005.

17.036 28,750 8% % Series, due Septernber 15,2006....

75.000 75,000 8% % Series, due September 15,2007...........~..........

75,000 75,000 I

94 % Series, due July 1, 2008...

75,000 75.000 6.90% Installment Series, due September 15,2009.....

55.000 l

t Total First Refunding Stortgage Bonds.

$1.215,732

$1.172.496 (All of the Company's properties and the stock of Safe Harbor Water Power Corpcration are subject to the lien of the mortgage r

under which these bonds were issued. Sinking Fund payment of

(

$ 12.157,320 is estimated to be paid in 1980.)

i DEBENTURES 4% % Sinking Fund Debentures. due June 15,1986................

$ 12.800

$ 13,200 4% % Sinking Fund Debentures, due August 1,1990...................

21.600 22,200 To tal Debe n tures.........................................

$ 34.400

$ 35.400 (Sinking Fund payments of $400,000 on 4% % Debentures and

$600,000 on 4% % Debentures are required each year.)

See pages 6 and.7 for information regarding securities issued and retired in 1979.

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Accounting Policies:

tion guarantee feature, employing the aggregate cost l

The accounting records of the Company are main-method. In 1979 and 1978, the Company's cost for tained in accordance with the Uniform Systems of pensions totaled $13,563,000 and $13,412,000, Accounts prescribed by the Federal Energy Regula.

rc5Pectively, of which $11,081,000 and $10,720,000, tory Commission and the Public Service Commission TCSPectively, were included in expenses, and the of Maryland.The Company's principal accounting remainders were charged to construction. The in-policies are described in Notes 1 through 6.

crease in 1979 is the net result of changes in benefits effective July 1,1979 and higher payrolls, sub-Note 1 - Pension Plan:

stantially offset by a decrease resulting from changes The Company maintains a noncontributory pension in actuarial assumptions effective January 1,1979.

plan covering its regular employees. The funding of Based on the latest available actuarial report, as of the Company's pension plan is through a deposit January 1,1979 there were no unfunded vested administration medium with an immediate participa-liabilities.

28 i

I Note 2 - Depreciation and 31aintenance:

The amounts set aside on the Company's books for

$777,949. 000, all other electric 51,353,555,000, depreciation are generally based on composite gas $306,832.000, steam $ 18,547,000, and common straight-line rates determined and revised period-

$84.605.000.

ically by means of independent engineering studies, Expenditures for maintenance and repairs. in-applied to the average investment in depreciable ciuding renewals of minor items of property (as utility plant in service. The composite depreciation distinguished from units of property), are charged to rate for nuclear electric properties includes a pro-operating expenses and/or clearing accounts, un'ess vision for the decommissioniiig of the properties at the replacement of a minor item of property effects the end of their usefullife. Such provision (presently a substantial betterment, in which event the excess estimated at $36,000,000)is subject to periodic cost of the replacement over the estimated current resiew for future changes in economic conditions and cost of replacement without betterment is charged to advances in technology.

the appropriate property account. Replacements of The amounts of depreciation for 1979 and 1973 items designated as units of property are accounted

~

were computed at 3.45 c'c for nuclear electric prop-for as Plant Additions and Retirements. When de-erties. 3.269 for all other electric properties,2.6G preciable property is retired or otherwise disposed of, I

for gas properties. 2.75 G for steam properties and the Accumulated Provision for Depreciatien is 3c'c for common utility plant (except for transporta-charged with the " original cost" of such property, tion vehicles, which are generally depreciated on a together with the cost of removal, and is credited usage basis). The investment in depreciable utility with the salvage value or sale price and any other plant as of December 31,1979 was nuclear electric amounts recovered, such as insurance.

Note 3 -Income Taxes:

1979 1978 (In Thousands of Dollars)

Income Tax expense is composed of the following:

Included in Operating Expenses:

Income Taxes -Current.

$ 8.987

$43,619 44,149 15.818 Income Taxes-Deferred 16.593 17.882 j

Investment Tax Credit Adjustments Total Charged to Operating Income...

$69,729 577,319 l

Included in Net Other Income and Deductions (Current) 1.047 453 l

Total Income Tax Expense

$70.776

$77.772 Total income taxes currently payable consist of the following components-Federal Income Tax:

l Included in Operating Expenses......

$ 8,959

$43,540 i

Included in Net Other Income and Deductions.

934 380 State Income Tax:

28 79 Included in Operating Expenses......

Included in Net Other Income and Deductions..

113 73 i

TotalIncome Taxes Currently Payable.

$10.034

$44.072 The provision for deferred Federal income taxes consists of the following tax etTects of timing differences between tax and book income:

Liberalized Depreciatio'n.......

$20.717

$18.770 i

17,281 (2,197) l Deferred Fuel Rate Costs (credit)...

(2.850)

Spent Nuclear Fuel Storage Costs (credit)-Note 6 (1,638)

Pennsylvania Gross Receipts Tax (credit)-Note 7 Percentage Repair Allowance....

2.804 3,733 i

3.347 l

Staintenance Expenditures - Calvert Cliffs...

$44.149

$ 15.818 i

Total................................

The Investment Tax Credit Adjustments, which substantially offset the reduction in Federal income taxes resulting from the Investment Tax Credits. are derived as follows:

Reduction in Federal Income Taxes due to credits arising from:

$17,776 -

$18.554 Eligible property..

2,604 2.486 Employee Stock Ownership Plan Total..

$20.380

$21,040 Credits allocated to inecme f3.787)

(3.158)

Net Total...

$16.593

$ 17.882 29

Note 3 (continued) t Investment tax credits accruing to the benefit of respect to the credits provided under the Revenue employees result from the additional 1 % G credit Act of 1971 and subsequent years, and over thirty-allowed by the Internal Revenue Code to provide year periods with respect to the credits provided stock for employees under the Investment Tax Credit under prior Revenue Acts.

Employee Stock Ownership Plan (ESOP).

Total income tax expense was less than the All investment tax credits, except those related to amount computed by applying the Federal income ESOP, are being deferred and allocated to income tax statutory rate to book income before tax. The ratably over the lives of the subject property with reasons for this difference are as follows:

1979 1978 (In Thousands of Dollars)

Tax computed at statutory rate on book income before tax (46% in 1979 and 48% in 1978)

$90,662

$96,150 Increases (Decreases) in tax from:

Excess of tax over book depreciation - not normalized........

(7,478)

(10,990)

Allowance for Funds Used During Construction - Borrowed Funds and Other Funds (7,969)

(3,641)

Investment Tax Credit allocated to income.

(3,787)

(3,158)

Net other items (652)

(589)

Total Income Tax Expense.

570,776

$77.772 The tax reductions resulting from the difference liberalized depreciation m property additions in between depreciation recorded on the Company's 1976 and subsequent years totalling $20,717,000 in books and the depreciation taken for Federalincome 1979 and $ 18,770,000 in 1978 have been tax purposes amounted to $28,195,000 in 1979 and normalized.

$29,760,000 in 1978. Tax benefits arising from Note 4 - Allowance for Funds Used During Such allowances are not taxable income.

Construction:

In 1978, the allowance was computed at an 8.13%

i The Allowance for Funds Used During Construction, rate applied to one-half of the construction expendi-a non-cash item, is an accounting procedure by which tures for the Company's Brandon Shores Power there are accrued allowances for the costs of bor-Plant. In its Order dated March 28,1979, the Public rowed funds and other funds used to finance con-Service Commission of Maryland directed the struction, segregated between other income and Company to commence applying the 8.13% rate to l

interest charges in conformance with an Order of the the total construction expenditures for the Brandon Federal Energy Regulatory Commission. Such Shores Plant and to reduce electric base revenues by j

allowances are transferred from the Statement of

$12,500,000 to offset the increase in the allowance.

Income to Construction Work in Progress in the The changes became effective in April 1979 and, i

Balance Sheet and are capitalized in the same based upon test-year results, Net Income was not manner as construction labor and material costs.

significantly affected.

Sote 5 - Deferred Fuel Costs:

Under the new electric Fuel Rate formula adopted income taxes) as of December 31,1979. This lag is by the Public Service Commission of Maryland being accounted for as a deferred f aei expense. In effective October 1,1978, the Company has experi-Management's opinion such fuel t.osts are justifiable enced a lag in the recovery of higher fuel expense and are recoverable under the Commission's Order amounting to $28,793,000 ($15,610,000 net after through base-rate proceedings.

Note 6 - Nuclear Fuel:

I

'The Company has a lease agreement for a portion of

$28.020,000, respecti"ely. The Company is respon-the nuclear fuel presently installed in Units No. I sible for taxes, insura *ce and other operating costs i

and 2 at the Calvert Cliffs Plant. Under the lease relating to the fuel.

agreement, lease payments for nuclear fuel com-At December 31,1979, the estimated lease pay-menced upon consumption of the fuelin the operation ments were as follows:

of the Calvert Cliffs Plant and are designed to return (In Thousands of Dollars) to the lessor the accumulated investment in the Lessor 3

nuclear fuel prior to commencenmnt of burn-ur Accumulated Financing Total Lease

{

(including original purchase price, all subsequent Year Investment Charge Payment processing payn. cats made and a financing charge) 1980

$10,659

$1,388

$12,047 and a monthly carrying or financm, g charge on the 1981 4.242 255 4,497 unamortized accumulated mvestment. Lease pay-i Total

$14,901

$ 1,643

$16.544 ments for 1979 and 1978 totaled $20,369,000 and 30 s

Note 6 (continued)

If the Company had accounted for the nuclear fuel Effective October 1,1978, post-reactor shipping lease as a capital lease, both net assets and liabilities and disposalcosts were deferred pursuant to an Order would have been increased by $14,901,000 and by the Public Service Commission of 51aryland

$31,791.000 at December 31.1979 and 1978, which excluded these costs from the fuel rate com-respectively. However, no additional expenses would putation. However, the Commission did not dispute have been incurred.

the principle that such costs should be paid by the Prior to Niay 1977, the cost of nuclear fuel same customers who benefit from the nuclear energy reflected an assumed value for residual uranium less and committed itself to consider these costs for estimated shipping and reprocessing costs. However, inclusion in base rates. Consequently, tSe Company starting with the monthly fuel rate in hiay 1977, in its rate application filed on Novembu 13,1979, the Company began billing as a cost of nuclear fuel is requesting approval to include such charges in its the cost to provide for transportation and long-term electric base rates. Future fuel costs will be adjusted oti-site spent fuel storage, with no credit for either as actual spent fuel storage costs and reprocessing residual uranium or plutonium.

costs (if any) become known.

Note 7 - Other Taxes:

(a) In December 1977, the Pennsylvania Gross Taxes, other than taxes on income, were as follows:

Receipts Tat law was amended, etiective 1979 1978 retroactively to January 1,1977, to apply to (In Thousands of Dollars) electricity produced in Pennsylvania and sold outside of that State. Counsel for the Company Property...

$22.015

$21,504 s of the opinien that this legislation is invalid 27,057 26,896 and unconstitutional, and the matter is being Capital Stock...

Alaryland Gross Receipts 19,915 19,170 contested in the courts. Legislation has been PennssIvama Gross enacted m. the Commonwealth of Pennsylvan.ia Rec'eipts (a) 3,728 3,413 Af aryland Electric which repeals the tax on a prospective basis, Environmental etTective January 1,1980.

Surcharge 2,199 3,442 In 1978, the amount of the tax is equivalent Social Secur,ty 11,473 9,882 after Federal income taxes to 6c per common i

hiiscellaneous 1.479 1.281

. share, based on the averacc number of shares

$87,866

$85,588 outstanding. Pursuant to an Order from the Amount included above Afaryland Public Service Commission, the charged principally t Company began,in 1979, to defer the tax until such time as its ultima'e disposition has been tates (cre t (2,411)

(2.258) determined. As a result, there is no cilect on TotalOtherTaxes. $85,455 583.330 1979 earnings.

Note 8 - Short-Term Borrowings:

to withdrawal). Borrowings under the lines are at The Company maintains bank lines -

-lit to the bank's prime interest rate or at mu'.tiples thereof.

provide backup financing capacity fc tiercial Certain of the lines require that compensating balances be increased in relation to usage except paper notes issued to satisfy interim t requirements and to permit short-term ing where borrowings are at a multiple of the bank's flexibility. In support of such lines, the C ty prime interest rate. Information concerning short-either pays commitment fees generally rel.

.1 to the term borrowings outstanding at December 31,1979 respective bank's prime interest rate or maintains and December 31,1978 and during each of the l

compensating balances (which are not restricted as years then ended is set forth below:

1979 1978 At December 31 (In Thousands of Dollars)

Short-Term Borrowings Outstanding:

Commercial Paper Ltes (maturing in 90 days or less)........ $

S -

Weighted Average Interest Rate..

Unused Lines of Credit

.................... $ 13 8.000

$138,000

$ 3,355

$ 4,125 l

Compensating Balances During the Year Ended December 31 Afaximum Aggregate Short-Term Borrowings

$ 20,250

$ 58,050 Average Daily Short-Term Borrowings (a).

........ S 3,109

$ 17,246 Weighted Average Interest Rate (b) 10.19 %

7.46 %

(a) The sum of dollar days of outstanding borrowings divided by actual days in the period.

(b) Actual accrued interest during the period divided by average daily borrowings.

31

I Note 9 - Commitments and Contingent Liabilities:

I The Price-Anderson Act (Act) currently limits the maximum contingent liability (retrospective assess-liability of an owner of a nuclear power plant to ment) would be $10,000,000. Under regulations

$560,000,000 for a single nuclear incident. De issued pursuant to the Act, the Company's maximum Company is protected against this potentialliability contingent liability in any one calendar year for by a combination of private insurance carried by the payment arising from more than one nuclear incident Company (currently limited to S160,000.000 is limited to twice the retrospective assessment per through the nuclear insurance pools) and Federal reactor, or $20,000,000.

governmental indemnity agreements. In the event of Rental expense under leases currently in effect, a nuclear incident, as defined by the Act, causing excluding the nuclear fuel lease (see Note 6), is not damage to the public in excess of the limits of material.

l primary financial protection, the Company could be The Company has made substantial commitments assessed up to the limit of $5,000.000 per reactor at in connection with its construction programs for the Company's Calvert Cliffs Nuclear Power Plant.

1980 and subsequent years.

l.

For one nuclear incident, therefore, the Company's Note 10 - Segment Information:

See Schedules of Segment Information for 1978 and 1979 on page 35.

Note 11 -Jointly Owned Electric Utility Plant:

The Company's ownership as a tenant in common of represent the Company's proportionate share:

undivided interests in the Keystone and Conemaugh (in Thousands of Dollars) i mine-mouth electric generating plants, located in Trans-western Pennsylvania, entitles the Company to 536 Key-Cone-mission i

stone maugh Line j

megawatts of rated capacity.

Financing and accounting for these properties Ownership Interest 20.99 %

10.56 %

7.00 %

are the same as those for any other fully-owned

. Utility Plant in Service

$43,267 528,769 $ 1,486 property. The Company's share of the direct expenses Accumulated of the joint property is included ir 'he corresponding operating expenses in the Statement of Income.

h, pre ation V

11,471 6,176 290 The following data as of December 31,1979 Construction Work l

in Progress 341 415 l

Note 12 - Quarterly Financial Data (Unaudited):

i The following data are unaudited but,in the opinion De business of the Company is seasonalin nature, of the Company, include all adjustments (comprising and it is hlanagement's opinion that comparisons only normal recurring accruals) necessary for a fair between quarters of a year do not give a true indica-l statement of the results for the periods presented.

tion of overall trends and changes in operations.

(In Thousands of Dollars) j Operating Net Income Earnings i

Total Income Applicable Per Share l

Operating plus Net to Common of Common Quarter Ended Revenues AFUDC(a)

Income Stock Stock l

i Nfarch 31,1979

$ 292,919

$ 59,929

$ 39,085

$ 34,558 S1.11 June 30,1979.....

232,443 50,796 29.897 25,378 0.81 September 30,1979.....

245,377 60,445 39,284 34,082 1.08 l

December 31,1979.......

243,669 39,607 18,050 12.514 0.40

$1,014,408

$210,777

$126,316

$106,532

$3.40 Total Year 1979 l

5farch 31,1978.

$ 268,836

$ 59,832 S 40,020

$ 35,467

$ 1.15 June 30,1978.....

219,241 47,879 27,890 23,341 0.76 September 30,1978 249,776 55,651 34,587 30,044 0.97 December 31.1978 236,633 41,668 20,044 15,512 0.50 Total Year 1978 S 974,486

$205,030

$122,541

$104,364

$3.38 (a) Allowance for Funds Used During Construction (for Borrowed Funds and Other Funds) is added to Operating Income in determining operating income for ratemaking purposes in the State of Staryland.

i 32 1

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i Note 13 - Supplementary Information to Disclose the Effects of Changing Prices (Unaudited):

The following supplementary information is supplied changes in specific prices of plant from the date the in accordance with the requirements of Financial plant was acquired to the present, and ditier from Accounting Standards Board Statement No. 33, constant dollar amounts to the extent that specific Financial Reporting and Changing Prices, for the prices have increased more or less rapidly than prices purpose of providing certain information about the in general.

effects of changing prices. It should be viewed as an The current cost of utility plant, comprising all estimate of the approximate effect of inflation, rather plant in :enice, construction work in progress, and than as a precise measure.

plant heli for future use, represents the estimated Constant dollar amounts represent historical costs cost of replacing existing plant assets and was deter-stated in terms of dollars of equal purchasing power, mined by indexing the suniving plant by the Handy-as measured by the Consumer Price Index for All Whitman Index of Public Utility Construction Costs.

Urban Consumers. Current cost amounts reflect the The current year's provision for depreciation on the Statement of Income From Continuing Operations Adjusted for Changing Prices For the Year Ended December 31,1979 (In Thousands of Dollars)

Conventional Constant Dollar Current Cost Historical Averace Averace Cost 1979 Dollars 1979 Dollars

$1.014.408

$1.014.408

$1.014.408 Operating Revenues..

S 338.464 S 341,638 5 344,719 Purchased Fuel and Energy.

Operations and Maintenance 246,968 246,968 246,968 80.338 153.564 179,580 Depreciation 155.184 155.184 155.184 Taxes S 820.954 S 897.354

$ 926.451 Total Operating Expenses.

$ 193,454

$ 117.054 S

87,957 Operating Income......

I1.243 11.243 11.243 Other Income (incl. AFC).

Income Before Interest.......

S 204,697 S 128.297 S 99.200 Interest Expense (net of AFC) 78.381 78.381 78.381 Income From Continuing Operations (excluding j

S 126.316 5 49.916(a)

$ 20.819 reduction to net recoverable cost).

Increase in Specific Prices (Current Cost) of Utility P' ant and Nuclear Fuel Held During S 461,958 the Year (b)

Reduction to Net Recoverable Cost...

S (229,305)

(106.447)

Effect of Increase in General Price Level.

(555.795)

Excess of Increase in General Price Level Over Increase in Specific Prices After Reduction

$ (200,284) to Net Recoverable Cost.

Gain from Decline in Purchasing Power of Net Amounts Owed...!..

160.930 160.930 l

S (68.375)

$_ (39.354)

Net............................

(a) Including the reduction to net recoverable cost, the loss from continuing operations on a constant dollar basis would have been $179,389,000.

l (b) At December 31,1979. current cost of utility plant and nuclear fuel. net of accumulated depreciation and amortization, was $4,713,987.000, while historical cost or net cost recoverable through depreciation and amortization was $2,514,986,000.

T 33 e

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Note 13 (continued) constant dollar and current cost amounts of utility cost. For these reasons, fuel inventories (other than plant was determined by applying the Company's nuclear fuel) have beca classified as monetary assets.

depreciation rates to the indexed plant amounts.

As prescribed in Statement No. 33, income taxes Nuclear fuel material and its related effect on were not adjusted.

purchased fuel and energy expense has been ad-Under the ratemaking prescribed by the Public justed in a manner similar to utility plant for constant Service Commission of 5faryland. the Company is dollar amounts and at current market prices for generally limited to the recovery of historical cost current cost.

of plant in service and nuclear fuelin revenues as Fuel inventories (other than nuclear fuel), the cost depreciation and amortization. During periods of of fuel used in generation, and gas purchased for inflation, such amounts will be recovered in dollars resale, generally represent recent acquisitions and having less purchasing power than the historical have not been restated from their historical cost in dollars invested. Therefore, the excess of the cost of nominal dollars. The ratemaking process limits the plant stated in terms of constant dollars or current recovery of fuel and purchased gas costs to historical cost over the historical cost of plant is not presently Hve-Year Compar!;on of Selected Supplementary Financial Data Adjusted for ErTects of Changing Prices (In Thousands of Average 1979 Dollars)

Years Ended December 31, 1979 1978 1977 1976 1975 Operating Revenues.

$ 1,014,408

$ 1,084,203 $ 949,280 $ 925,470 $ 917,129 Ilistorical cost information adjusted for general inHation Income from Continuing Operations (excluding reduction to net recoverable cost)....

49,916 Income Per Common Share (after dividend requirements on preferred and preference stock and excluding reduction to net recoverable cost)..

$.96 Net Assets at Year-End at Net Recoverable Cost...

$ 1,131,875 Current cost information income from Continuing Operations (excluding reduction to net 20,819 recoverable cost)......

Income Per Common Share (after dividend requirements on preferred and preference stock)

$.03 Excess of Increase in General Price Level Over increase in Specific Prices After Reduction to Net Recoverable Cost

$ 200,284 Net Assets at Year-End at Net Recoverable Cost........

$ 1,131,875 GeneralInformation Gain from Decline in Purchasing Power of Net Amounts Owed........... $ 160,930 Cash Dividends Declared Per Common Share

$ 2.40

$ 2.50

$ 2.56

$ 2.65

$ 2.64 Afarket Price Per Common Share at Year-End

$20.94

$26.12

$31.10

$33.37

$29.09 Average Consumer Price Index.

217.4 (Est.)

195.4 181.5 170.5 161.2 i

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Note 13 (continued) recoverable in rates, and is reflected as a reduction to nuclear fuel should be offset by the gain from the net recoverable cost. While the ratemaking process decline in purchasing power of net amounts owed.

gives no recognition to the current cost of replacing During a period of inflation, holders of monetary utility plant and nuclear fuel, based on past practices, assets suffer a loss of general purchasing power while the Company believes it will be allowed to earn on holders of monetary liabilities experience a gain. The the increased cost of its net investment when replace-gain from the decline in purchasing power of net ment of facilities actually occurs.

amounts owed is primarily attributable to the sub-To properly reflect the economics of rate regula-stantial amount of long-term debt outstanding which tion in the Statement of Income from Continuing will be repaid with dollars that are worth less than Operations, the reduction of net utility plant and the dollars received when such securities were issued.

y 1979 1978 1977 1976 1975 (In Thousands of Dollars)

Electric Operating Revenues...

$ 714,956 $ 697,173 $ 558,558 $ 532,056 $ 516,006 Operating Income before Income Taxes 236,024 240,661 198,420 157,401 146,802 Operating Income 173,160 173,639 157,544 138.298 129,427 Depreciation.....

71.355 69,415 59.710 51,569 44,515 Constru: tion Expenditures (a) 143,780 155,781 168,563 141,880 122,101 Identifiable Assets at December 31 (a)(b)..

2,350,211 2,229,415 2,102.008 1,936,160 1,830,077 Gas Operating Revenues.....

$ 287,074 $ 264,586 $ 221,659 $ 184,314 S 155,422 Operating Income before Income Taxes 27,091.

34,321 16,382 28,085 13,304 Operating Income 19.973 23,570 13,960 21,250 11,883 Depreciation......

8,463 8,156 8.269 7,425 6,672 Construction Expenditures (a) 15,858 14,875 12,904 23,564 20,769 Identifiable Assets at December 31 (a) (b) 269,634 261,500 255,476 246,245 226,050 Steam Operating Revenues.....

12,378 $

12,727 5 12,305 $

9,447 $

8,614 Operating Income before Income Taxes 68 (219) 709 (76)

(515)

Operating Income 321 235 721 345 88 520 492 470 454 441 Depreciation.....

Construction Expenditures (a)..

1,279 1,746 738 492 356 Identifiable Assets at December 31 (a) (b)........

14,808 14,042 12,689 11,965 12,170 Total Operating Revenues....

$1,014,408 $ 974,486 $ 792,522 $ 725,817 $ 680,042 Operating Income before Income Taxes 263.183 274,763 215,511 185,410 159,591 Operating Income 193,454 197,444 172,225 159,893 141,398 Depreciation...............

80,338 78,063 68,449 59,448 51,628 Construction Expenditures 160,917 172,402.

182,205 165,936 143,226 Identifiable Assets at December 31 (b) 2,634,653 2,504,957 2,370,173 2,194,370 2,068,297 Other Assets 221.331 168,797 158,799 130,254 11b,841 Total Assets.

2,855,984 2,673,754 2,528,972 2,324,624 2,187,138 (a) Includes allocation of Common Utility Property.

(b) Represents Utility Plant and Materials and Supplies, excluding merchandise inventory of $3,272,000,

$2.582.000, $2,670.000, $2,122,000 and $2.633,000 at December 31,1979,1978,1977,1976 and 1975, respectively; merchandising activities are reported in Other Income.

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DIRECTORS OFFICERS J. OWEN COLE BERNARD C. TRUESCHLER Chairman of the Board. First 5f aryland Dancorp.

Chairman of the Board and Chief Executive Officer Battunore (Bank Italdmg Company)

GEORGE V. SicGOWAN ALONZO G. DECKER, JR.

President and Chief Operating Officer Chairman of the Executive Committee, The Black and Decker N!anufacturing Company, Towson NORhlAN J. BOWhiAKER (Power Tools)

Vice President, Stanagement and Staff Services LESLIE B. DISHAROON RAYNIOND C. BRYANT Chairman of the Board and President, Stonumental Vice President. Consumer Services Corporation. Baiimore < insurance >

EDWARD A.CROOKE SISTER KATHLEEN FEELEY, S.S.N.D.

Vice President, Finance and Accounting, and Secretary President. Coi.'ege of Notre Dame of Af aryland' Baltimore (Education)

\\,ERNON R. EVANS RALPH G. HOFF5 TAN Attorney-at law. Westmmster JOHN W. GORE, JR.

JOHN A. LUETKEhlEYER Director afermer Chairman of the Board), Equitable ARTHUR E. LUNDVALL, JR.

Bancorporation, Saltimore (Bank Iloiding Company)

Vice President. Supply GEORGE V. NicGOWAN HENRY H. NIILLER President of the Campany, Baltimore Vice President, Distribution JULIAN S. NEAL CHRIS H. POINDEXTER Rettred (former Chairman of the Board). Tidelity and Vice President, Engineering and Construction Deposit Company of staryland, Baltimore (Bondmg)

D. PIERRE G. CAh!ERON, JR.

CHARLES S. SANFORD, JR.

Treasurer and Assistant Secretary E,tecu V ' P njmt. Bankers Trust Company, ALFRED H. INNERS k an Assistant Secretary and Assistant Treasurer JOHN P. SIPPEL HENRY E. LENTZ Vice Chairman of the Board, The Citizens National Bank, Laurel (Banking)

Assistant Secretary and Assistant Treasurer HENRY F. SNYDER, JR.

b" General Nfanager. Product Line Planning and Stanagement, Western Electric Company, Sforristown, NJ. (Communications Gas and Electric Building, Charles Center, Equipment)

P.O. Box 1475, Baltimore. Staryland 21203 WALTER SONDHEINf, JR.

Annual Meeting Chanman of the Board, Charles Cemer Inner Harbor The annual meeting of stockholders will be held Stanagement. Inc., Baltirnere (Downtown Renewal Projects) at 2:00 P.Nf. on April 25,1980, at the Company's BERNARD C. TRUESCHLER Executin O&n Bahon, Maryland.

Chairman of the Board of the Company, Baltimore Conversion Agents C. EDWARD UTERNIOHLE, JR.

Convertible Preference Stock Chairman of the Executive Committee of the Board, Baltimore aryl Nation Bank, Baltimore GEORGE W, VELENOVSKY Registrars Chairman of the Board. The Annapolis Banking and Trust Company, Annapolis (Banking)

Preferred and Preference Stock The Chase Stanhattan Bank, N.A., New York HARRY K. WELLS Union Trust Company of staryland. Baltimore I

Chairman of the Board. NfcCormick & Company, Inc.,

Common and Convertible Preference Stock Baltimore (Food Processing. Spices. etc.)

hforgan Guaranty Trust Company of New York Union Trust Company of Maryland. Baltimore Transfer Agents l

Preferred, Preference. Convertible Preference and Common Stock j

Chemical Bank, New York Maryland National Bank, Baltimore l

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Upon written request to i

j D. Pierre G. Cameron, Jr., Treasurer, i

j P.O. Box 1475 Baltimore, Std. 21203, i

the Company will furnish without charse a copy of its Form 10.K annual i

4 report after it is Sled with the Securities and Exchange Commission in Starch,1980.

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