ML20003H681

Annual Financial Rept 1980

ML20003H681
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Site:	Crane
Issue date:	03/05/1981
From:	Dieckamp H, Kuhns W GENERAL PUBLIC UTILITIES CORP.
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ML20003H680	List: ML20003H679 ML20003H681 ML20003H682
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Download: ML20003H681 (43)

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_._

O GENERAL PUBLIC UTILITIES CORPORATION 1980 ANNUAL l

REPORT l

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Inside GPU's1980 Annual Report Financial Summary and Stockholder Profile Page1 Board Changes 11 Letter to Stockholders 2

GPU System (Map) 12 The Financial Report 4

Special Report: Progress at Three Mlle Island 14 Earnings Down Sharply Unit 1: Moving Toward Restart Credit Agreement Changes Made Across Spectrum Stringent Economy Moves iluman Element Stressed Capital Requirements Reduced Unit 2: Moving Toward Recovery Water Purified The Regulatory Situation 5

Krypton Gas Vented Safely Recovery Depends on Regulation Containment Entries Gather Data State Responses "SDS"To Filter Containment Water Major Regulatory Actions 1980-1981 Much Remains To Be Accomplished Rulings Result in Additional Cuts Coreis Unique Research Tool Court Challenges Communications Changes Slow Federal Responses Nuclear Experience Brought to Bear TMI-2 Funding 8

Statementof Management 17 Sharim of Costs Pursued Consensus Sought Management Analysis of Financial Condition a

TMlInsurance and Results of Operations GPU Files TM! Lawsuits Reportof Auditors 20 Operations Report 9

Purchased Power Costs Cut Financial Statements 21 Coal, Gas Produce Savings Long Outage At Oyster Creek Notes to Financial Statements 25 Nuclear Project Cancelled Seeking Alternatives System Statistics 37 Canadian Cable Tie Studied New Energy Management Plan Proposed Effects of Changing Prices 38

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Nuclear Organization 11 Directors and Officers 40 New Nuclear Entity Integrates Skills New Subsidiary lias Single Task Notices to Stockholders and 41 Safer Generation a Direct Result Quarterly Stock Price and Dividend Data GPU Nuclearin Approval Process The General Public Utilities System Genem! Public Utilities Corporation is an electric utility l

ho! ding company. Its operating electric utility subsidiaries, Jersey Central Power and Light Company (JCP&L) in NewJersey and Metropolitan Edison Company (Met-Ed) and Pennsylvania Electric Company (Penelec) in Pennsylvania, form the GPU System.

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

1980 Financial Summary 1980' 1979*

% Change Net income (000) s 20,591 S

95,783 (79)

Earnings Per Average Share s

.34 S

1.56 (7s)

Annual Cash Dividend Paid Per Share S

1.20 Common Shares Outstanding, Year-End (000):

61,264 61,264 Number of Stockholders 150,965 169,258 (11)

Megawatt-Ilour Sales (000) 31,838 31,995 Operating Revenues (000) s1,831,741

$1,490,154 23 Construction Expenditures (000) s 245,740 S 351,026 (30)

Total Assets (000)

$5,042,972

$4,991,994 1

Generating Capacity (megawatts)*

• 8,254 8,262 Peak Load (megawatts) 6,161 6,173 Cost of Fuel and Purchased Power (mills per kwh) 23.78 17.68 35 Customers Served at Year-end 1,577,966 1,558,094 1

Number of Employees at Year-End 11,490 11,159 3

'See Note I to Consohdated Fmanaal Statements and Repx t of Auditors.

"Inchales both T511 urut s rated at a total of 1.M 51egawatts.

GPU's Stockholders: A Profile A 1980 Shareholder Survey confirmed an earlier (1978) profile of the typical GPU shareholder. Returns from 74,000 indhidual shareholder participants in the survey showed that the typical holder owns approximately 180 shares of stock and has been a shareholder for 6 to 7 years. Two-thirds of the holders are retired or within five years of retirement.The median family income of shareholders is $22,800, with 28% of shareholders caming less than $15,000 Ninety-one per cent of survey respondents owned Gl'U stock prior to the TMI-2 accident.

I

its fundamental nature and the extensive other than the limited ($292 million)

To the lessons learned. At the same time, there amount available under our credit agree-Stockholders.

has been less focus on the regulatory and ment with a consortium of banks.

financiallessons from TM1. A summary 1.astly, the stockholders have through of those lessons is useful in helping to 1980 lost $147 million in dividend pay-understand where the company is today ments while the market value of their Two years have passed since the acci-and what must be done before financial investment declined by over $800 mil-dent at Three Mile Island Unit 2. The healthis regained.

lion. The cost impact of the accident on passage of time has allowed the initial First, the response to the accident customers has been significantly reduced emotional reactions to be dissipated, re-demanded immediate cash for accident by rates that deny to GPU the fixed and vealed the inability of the institutions control and early cleanup actions. Such operating costs of both TMI ur.its.

involved to respond properly to so un-expenditures during 1979 and 1980 of All of this has come about because of precedented a challenge and identified about $200 million were largely covered the limited regulatory response to the more clearly the tasks that lie ahead on by our property damage insurance, after needs of the company and the inability-the road to recovery.

an initial collection lag of about $70 mil-to date-of our governmentalinstitutions The financial consequences of the TMI lion. The $300 million total of available to deal with an event like the TMI acci-accident continued to make 1980 a year insurance, however, will prc-ide but a dent. Uncertain public support for nu-of "sunival" for G PU-requiring actions small fraction of the currently estimated clear power and political pressure has designed to bring the compmy through

$1.4 billion required for cleanup and the undoubtedly complicated the situation.

the most difficult period ever faced by cost of restoration.

Improvements in GPU's situation will any electric utility, while continuing to Next, the cost of purchasing power to require major revisions in existing regula-provide senice to our customers despite serve our customers as a result of the tory attitudes and the elimination of a these extreme problems. We recognize unavailability of our two large TMI number of uncertainties facing GPU.

that this situation has been brought home nuclear units imposed an immediate cash to you painfully by the necessity of con-drain on the GPU System of about $2:

Financial Recovery tinuing to omit dividend payments.

million per month. The regulatory author-Before GPU can recoverits financial At the time of this report the company ities ultimately recognized the cost of health there are a number of key require-remains in a critical condition. Its pri-replacement power but only after about ments that must be met. Some of these mary problem is maintaining solvency.

$150 million of costs had been deferred are relatively short-term items that could Severe spending constraints and drastic for future recovery, see resolution within a matter of months.

reductions in construction have brought A very significant financial factor was Other needs are of a longer-term nature.

spending in line with available cash.

the action of the Pennsylvania and New ily far the most significant action liowever, without early rate relief, our Jersey rate regulatory agencies in estab-needed at this moment is the return to mandatory expenditures will soon ex-lishing rates that, effective immediately senice of TMI-I The economic impact ceed our cash resources-a result that after the accident, made no provision for ofits operation would do much to bolster would be harmful to allinterests.

the operating and capital costs of TMI-2 the financial health of the GPU com-In the longer term, financing the and, since the spring of 1980, make no panies and provide lower cost energy to cleanup of the TMI accident remains to provision for the same costs of TMI-1, our customers. We continue to press the be resolved, despite continuing efforts the undamaged unit. The combined net federal regulators on the unfairness of by management to bring about a satisfac-effect of (1) stockholder absorption of treating this unit differently from the tory solution. We remain confident that these fixed charges and operating costs other Babcock & Wilcox units of similar the problems are solvable, though ex-(2) interruption of the rate-making pro-design now operating around the coun-tremely difficult and unprecedented.

cess on unaffected property and (3) the try. At this time, however, it still appears loss of construction credits (AFC) to that it will be late 1981 before TMI-l is

" Lessons Learned" earnings on the abandoned Forked River operating again.

Numerous investigations have pointed nuclear project, reduced 1980 net income The second and longer-term require-out the " lessons learned" from the TMl from a more nomiallevel of $150-to $175 ment for the recovery of GPU is the accident. There continue to be important million to $20.6 million.

provision of financial resources for the responses to these lessons around the As a result of the cash and earnings cleanup of TMI-2. There is no disagree-world in all parts of the nuclear power impact, we have seen GPU denied ac-ment that this job must be done and done program. These actions speak loudly and cess to the external capital markets, clearly about the causes of the accident, 2

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

safely, efficiently and expeditiously.

and thus conflict with the view that buti-We need additionalresources to do There is also no doubt that it can be ness should not run to the federal gov-that job and to proside reliable senice to done-no scientific breakthroughs will be ernment and others when they have our customers. No one will be sened by required-a large part of the job involves financial problems.

a continuing state of near-insolvency.

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

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

and available funds. Present estimates of distributed over all participants in and We are an electric utili$ system that six or seven years and $1b31 ion to beneficiaries of nuclear power. We are on Starch 28,1979 was strong and well complete the task could conceivabiy be not a company that hasn't sold enough of balanced in energy sources and capital reduced to about four years and cost its product or senice. We are not a structure. The need for continuing elec-

$300-tc $100 mi!! ion less if the program company or a city that has lived beyond tric senice remains critical. The inter-could be expedited. A productive spend-its means. Our stockholders never ests of our customers and our investors ing rate for the cleanup would be about gained any special benefit from over ten are so mutually intenfependent that we

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

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

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

abihty to return T3112 to senice-that intheaccident. Allof theseparticipants We are heartened and motivated by decision must await the completion of at shoted contribute to the so!ution.

the continuing supportive comments least a major part of the cleanup pro-In addition, we assert a responsibility from so many stockholders. This is par-gram. Its return as a productive generat-and even a liability of the federal govern-ticularly meaningful at tha time when the ing facility orits writeoff against ment for what happened. It a'so has the owners of this company have had to bear revenues provided for that purpose deciding role in detemunmg how fast and a heavy and disproportionate share of the would be the final step in G PU's financial in what manner we may proceed with burdens of the accident-a share which recovery.

recovery. This is not an effort on our they were never paid to bear. We will Full financial health will require a fair part to shed responsibility-rather we devote our efforts to makmg 1981 retum to our investors so that we can seek to identify the responsibilities of all the turning point in this struggle that have normal access to capital markets to participants which led to the accident and willlead to the eventual recovery provide the facihties needed to serve our to demand accountability and participa-of your company.

customers. This will require decisive and tion in its cost.

innovative action by our rate regulators.

Beyond that, the lessons teamed and I

to be teamed from the accident will T

Sharing the Cleanup Costs continue to have an enormous impact on

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We continue to believe that the causes the entire nuclear power program for this li'illiam G. Kuhns and extent of the T311 accident and its country and, indeed. internationally.

Chairman andChic/Executirc Oficer aftermath-the lessons learned and yet to

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be learned fmm the experience-call for Summary and require a sharing of the cost among The T311 accident was unforeseen. Nei-

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more than the customers and investors ther we, our industry, regulators, gov-of the GPU System. Despite an increas-ernment. nor the American public were Ilmnan Dicckan ing acceptance of the equity of this posi-prepareu for it. Its cleanup is more than President and Ch cf 0perating Officer tion, some express concern that such important; it is essential-for health and help would simply be another " bailout" safety-for the future of nuclear power-March 5,1981 and for the energy posture of ourcountry.

3

cessation of construction credits to in-The come (AFC) in April 1980 for the carry-Namial RenM ing c sts f funds associated with the r

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

$1.5 billion of assets for which no reve-Twenty cents per share from in-nues are being received. The adverse creased interest expenses as short-term impact on inwme and earnings has been rates reached a new high during the year.

drastic. (Sec" Managements' Discussion The effect of these factors was offset, and Analysis,"page 18 andNote 1 to the to a limited degree, by a $60 million FinancialStatements, beginningon interim, annual rate increase received by page25.)

Jersey Cen ral Power & Lightin May 1980.

Eamings Down Sharply Net income in 1980 was $21 million, or Credit Agreemcot 34 cents per share, down sharply from A Revohing Credit Agreement was

$96 million, or $1.56 per share, in 1979.

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

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

by the removal of the capital and operat-Borrowings under the Revolving ing costs of Three Mile Island Unit 1 Credit Agreement were $171 million at from the base rates of the GPU System December 31,1979 and $169 million at companies for more than half of 1980 and December 31,1980. The borrowings for an additional 15 cents per share by TMl each of the GPU companies are com-Unit 2's being excluded from base rates pared with their allowed credit linsts in for allof1980; the table on page 7.

Thirty-nine cents as a result of the The credit limit for Metropolitan Edison Company (Met-Ed)is an amount equal to the Company's " liquid assets" defined by the banksin the Revohing p

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W counts receivable pledged as collateral to 5

Credit Agreement as uranium and ac-h munkmW ' & j

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r the banks, plus the balance of deferred (1980{aq$ 20.6L i

gg" energy payments still owed to Met-Ed mr.curcas

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by its customers. This balance is cur-H um, 1

rently being reduced at the rate of about l1978Y - -

A n a -r a r = m m e m z w e - - - a. m w. - a! $1 R $

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

[I19761 mmmm.,wmm.l18121.2 % ~

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. credit limit to $40 million at December 3

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The Revohing Credit Agreement ter-

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minates October 1,1981. Currently out-V..

standing notes under the Revolving

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Cmcialto GPUspresentandfuture financialposition are the actions of the regidatory bodies.

Credit Agreement mature April 1.1981.

the $515 million budgeted before the The Regulatory These notes must be renewed and the TMI accident.

Agreement re-negotiated and extended The System's 1980 capital require-Situation if GPU is to ramain solvent. (Forfurther ments totaled about $279 million, with information scc Note l to the Financial

$216 milliou of that spent on minimum Statements, page 32.)

constmetion requirements and $33 mil-tion for retirement of matured securities Recovery Depends on Stringent Economy Moves and sinking funds. "lle System financed Regulation The GPU System has put into effect its 1980 construction requirements pri-Crucial to GPU's present and future drastic steps to reduce cash outlays.

marily from internal sources.

financial position are the actions of the Theae steps will necessarily have an Subject to available cash resources, regulatory bodies which control virtually effect on customers (sce " Rulings Rcsult capital expenditures in 1981 are expected every aspect of our business and our in Additional Cuts,"page 6) and mean, as to total about $335 milhon, of which $265 progress toward financial stability.

weu, a skwing-down of TMl-2 cleanup million will be spent for construction and At the federallevel we are handi-activities. This step, however, bring;

$70 million for retirement of maturing capped by delays in the authorization that effort closer to the pace of regula-securities and sinkUg funds. The con-to restart TM1-1. At the state level, tory approvals from the Nuclear Regula-struction budget is 37 percent of the inadequate rate awards have been the tory Commission (NRC). No reductions

$720 million budgeted pnor to the principal problem.

are planned in cleanup areas affecting accident.

public health and safety.

The System's capitalization ratios at State Responses The current limited cleanup program year-end 1980 stood at 51 percent long-The state regulatory responses to date wt!! require about $60 mi!501 in 1981, term debt,12 percent preferred stock, have beenjust sufficient to permit GPU with about $10 million to be covered by 33 percent common equity and 4 percent to sursive. Both states have aDowed insurance. At the end of 1980, about short-term bank debt. These capitaliza-replacement energy costs to be re-

$1@ million ofinsurance coverage tion ratios are not substan*.ially different covered from customers through applica-remained.

from those of the last few years.

tion of the energy clauses. This question was of great importance to the banks Capital Requirements Reduced which fmanced the enormous cost of The accident at Three Mile Island has purchased power to replace TMI's gener-had a severe effect on the GPU System's ation immediately fouowing the accident.

cor.struction program.

The NewJersey and Pennsylvania com-The $216 miUion spent on con-missions now allow full recovery of cur-stmetion (mainly upgradmg System facil-rent energy costs from customers.

ities) in 1980 was 52 percent less than In addition, GPU's subsidiaries are now recovering their past deferred energy balances, though over varying spans oitime.

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- wm I (' Eamings Per AuerageShese On the other hand, both commissions,

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..,f in the second quarter of 1980, reduced customer rates by amounts equivalent to

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the capital and operating costs of TMI-1, y-j fouowing the similar treatment of such c19'<9 %L A...

i,f, '.. _ $L96 3.

TMI-2 costs a year earlier. No provision 4

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! 1978 M 7 4.j l.L i $ s - i t

, _.;J M ae -- !$3,4 has been made for TMI-2 cleanup costs

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by the commissions.

[1977 R $ g. -

] S2.50 A significant aid in this situation has

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j been an improvement in the rate of 3 recovery ofinsurance proceeds under m.mm 4'

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s the TMI property insurance policy.

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GPU's totalinsurance pmceeds at the uw wa wa u -

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end of 1980 were slightly less than the

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cumulative, deferred cleanup costs, in-ciudmg the TMI-2 cc e: in addition, the Major Regulatory Actions July 1980...

1 lag between cleanup expenditures and in1980 and1981 -

JCP&L files for$18 nulbon energy insurance receipts has been ehminated.

charge increase. Request is denied id i in effect, the regulatory treatment

. October.

receised by GPU's subsidiaries has a

placed an inordinate share of the financial IN NEW JERSEY Octotm1900.~

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. burden of the accident on GPU's stock-FERC approves new lower-cost pnang January 1900...

formula for replacement power.

holders and has significantly impaired the

- JCP&L files f~ $142milhon annual TMI Unit l appealmoved to N.J.

tmancial viability of the System.

tnerease in energy charge.

Supreme Court.'

GPU is attempting ta redress the un-NewJersey Board of Public Utilities -

,1 fairness of the rate situation by aggres-(NJBPU)ordersinvestigation of the Nomnhor1900m, sively pursuing the rate increase re-issue of" fault"in the cause of the Arthur Young & Co. submits final report quests now before the NewJersey and TMI-2 accident.

on first " Strategic Opt on" forJCP&L. E Pennsylvania Commissions and by con-Report finds bankruptcy "no solubon" JCP&L files " fault"M, Ys with NJBPU.

ry1900".

' forJCP&L orits customers.

testing. through court appeals, a number l;

of decisions rendered by those commis-sions. (Su Court Chalknas," pag 7).

March 1900...

JCP&L files for $105 nulbon incwase in At this wnting, there are pendmg be-JCP&L energy clauseincreased byW energy charger.

fore the NewJersey and Pennsylvania million annually. Does not include re-N.J. Supreme Count hears arguments commissions rate increase requests placement power costs for TMI units.

. on appeal from NJBPU April 1980 order. '

amounting to $318 million, including the JCP&L files with Federal Energy

$60 million granted toJCP&L on an Regulatory Commission (FERC)for b

interim basis, subject to possible refund.

changein replacement power pricing in May 1980. The amounts pending for formulas.

Fetwuar'f 1980....

/

each of the subsidiaries are as follows:

NJBPU awards' Strategic Options" Pa. Public Utility Commission (PaPUC) :

Jersey Central. $173.5 million: Met-Ed.

study ofJCP&L to Arthur Young &

grants $55 million interim' energy clause

$77 million and Penelec. M7 million.

Company, management consultants.

increase to Met-Ed.

In January 1980. GPL poposed plans T I Uru Ymoved fromJCP&Lbase dand1blecfile WithFERC fo 5

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e means of strengthening the System. In rat es, a reduction of $18 million yearly m replacement power pricing change.

I Februarv 1981, an Administrative Law earnings; cash effect of this loss is off-Judge of'the Pennsylvania Commission set byincr,ased amortization of deferred 90 L PaPUC prescribes " temporary rates",

recommended that this plan not be ap-

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'""NE *"'N @.se reducing Met-Ed's baae rates by $27 proved. The Pennsylvania Commission is f raccident-relatedenergycostsisin-g.

gp not expected to rule on the proposal until cre sedby$34 millionayear.

late spring 1981.

JCP&L appeals ruling on TMI.1 re-by$12 mdhon a year; Met-Ed's energy l recovery charges increased by $86 mil-The chronological display at right will m val from base rates to N.J. Supen.or lion a year, Penelec's by $26 nulhon.

l help put into perspective the particularly Pa'PUC upholds Met-Ed's francluse to yCP&L files for$173.5million base intense activity on the state regulatory serve its customers.

fronts during 1980 and the early months l

interun, emergency relief.

July 1900...

g igg;'

900 Met.Ed requests $77 milbon annually in <

Rulings Resul in NJBPU grNds $60millioninterim base rates including $34 million in emer--

Additional Cuts base rateincrease request subject gency relief: Penelec requests $67 mil.

Met-Ed has been forced to lay off 115 to possible refund.

. Met-Ed and Penelecfile complaints workers, reducing its ability to connect new customers to about 5.000 a year, 7

w th PaPUC against the temporary 800 fewer than in 1980. The Comp;my's rates presenbed in May.

abihty to react to a major service disrup-

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The Companyhas moved to challenge regidatorydecisions inNewJeneyandPennghania.

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tion, such as a storm, has been impaired Alet-Ed has two matters underjudicial 4

7 through reduced maintenance on trans-resiew.

August 1900...

mission and distnbution lines.

In September, hiet-Ed appealed to the l Met-Ed'semergencyrateincrease:

The Company has also cut con-Pennsylvania Commonwealth Court the request is demed.'

] struction and new equipment expendi-PaPUC's August 28,1980 order denying tures and has delated improvement Atet-Ed's request for an emergency rate September 1900...

i, projects at a number of its power plants.

increase.

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. Met-Ed ordered not to use.operatag j

These steps meaa loses in productivity.

The Company has opened twin ave-l L mvenues rceived for services suppbed h

Additionally, cuts of up to 500 jobs nues forjudicial review in its moves y to customers for unmsured TMI-2 j

against the PUC's September order ban-l cleanup costs; the Company seeks fed' L l were made in the contractors' work forces at Three A!le Island, delaying the ning the use of operating revenues to pay

= eral court mjunction against the order.:

i cleanup of Ull-2.

for uninsured cleanup costs at T511-2.

- Met Edappealsdenialofemergency

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The PUC's order forbidding use of Noting that the order potentially conflicts rate relief to Pa. Commonwealth Court.

j' revenues fro n customers for the tain-with its responsibility under the Fec.,eral

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.PaPUC receives fmalreport fmm sured costs of the Ull-2 cleanup could Atomic Energy Act and regulations and

Theodore Barry & Associates, manage'

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add even more delay and cost to that license issued thereunder, Met-Ed

[ ment consu'tants, on a study begun m unit's recovery.

s ught a temporary restraining order,

1t December 1979 of the financial status

-- and outlook of GPU, Met-Ed and Penelec.

Dgring the latter part ofJanuary 1981 and injunction in Fede al District Court m the Lompany presented testimony to the Harrisburg, I a. later that month. The Report states that problems facmg 1-y:

I,al,UL. urging an accelerated decision on temporary restraining order was deru. d e

. GPU can be solved through rates and a' ~

Met-I;d's $77 million base ate filing.

bs. the court. The request for an injunc-

. financial assistance fmm the state or :

tion is being held m. abeyance. In 4

4 federal government or the utihty indus-4 CourtChallenges October, Met-Ed also appeaied the try, it identified the early restart of '~

a GPU moved quickly to test some of same order to the Pennsylvania c

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-TMI-1 as a "necessory step,,~

] these decisions in the courts.

Commonwealth Court.

Osteher1900, '

Lj Just days after the N.J. Board of Public 6

i - Met-Ed appeals PUC order forbeddmg Utilities, in April 1980, removed the capi-Slow Federal Responses tal and operating costs of TMI-1 from its At the federallevel GPU has been

use of operating revenues for cleanup 3

to Pa. Commonwealth Court.1. _.

1 base rates, JCP&L appealed that deci-hampered by the inordinately slow pace

, PaPUC opensinvestigatxm and hear f d sion to the state's Superior Court. In of NRC action on both the recovery of Kings into pmposed combmation of Met-'

4 October, in an effort to save time, the TMl Unit 2 and the restart of Unit 1. The

' TEd and fenelec and formation of GPU

] case was moved to the N.J. StateNRC's Programmatic Emironmental Im-

^ Nuclear Corporation. FERCapproves -

g Supreme Court, which heard oral pact Statement on Unit 2, a document 1

pricmg formula.

A arguments on the matter in Januarv 1981. evaluating the major steps to full clean-1 December 1900...

PaPUC approves Met-Ed and Penelec J

' energy clause charges for 1981 which,,

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,1980 yet prmide for current recovery of : j L'

12/31/79 112/31/80.

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d Outstanding _

H77 Credit Limit i

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$ 45 1 P " 7 18 61

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up-and without which NRC will not mid-February 1981 that dis ect federal aid move in the absence of an emergency TMI-2 Fund,mg pay for part of the T51i-2 cicanup and

-has ueen open for public comment, but that federalloans or loan guarantees will not be decided upon until after you cover the remainder of the costs.

have received this report in late 51 arch Sharing of Costs Pursued 1981. Aleanwhile, costs escalate and time The cost of completing the cleanup por-Consensils Sought schedules lengthen.

tion of the recovery program has been In early Febreary 1981, GPU commis-The exten/ '. shutdown of TMI-1, estimated at $1 billion. (,Vanarcncnt's sioned the lion. Thomas L Ashley, for-despite the fact that it was not damaged Discussion and Analysis,"page ls and mer Congressman from Toledo, Ohio, to by the T511-2 accident, is the direct con-Notel to the FinancialStatcments, attempt to obtain a consensus and agree-sequence of a decision by the NRC in parc25.)

ment among government, the GPU com-mid-1979 to adopt procedures that se-GPU has discussed with nuclear indus-panies, the industry and its regulators on verely discriminate against that unit. The try leaders, state and federal legislators an equitable sharing of the financial re-procedures ordered by the NRC have and regulators, several possible ap-sponsibility to clean up TMI-2. The frag-involved many months of preparations proaches for TMI-2 cleanup funding mented and sometimes conflicting goals, for hearings by other parties, lengthy mechansms. Progress is being made in interests, responsibilities and authority hearings that began in October 1980 this imp >rtant effort.

of the govemmentalinstitutions, in rela-(about 15 months after the NRC orders)

A Congressional task force of Pennsyl-tion to the T511 accident, have thus far and will probably continue for several vania legislators, headed by Congress-prevented the reaching of such an more months, a recommended decision man Allen E. Ertel, has drafted a bill that agreement.

by a Licensing Iloard and a decision by would form a national nuclear accident Mr. Ashley is well qualified to accom-the NRC itself before restart of TMI.1 is pool to furnish about one-fourth of TMI's plish this goal by his demonstrated ability authorized. This succession of events cleanup cost. In its draft form, the bill and experience in finding solutions to puts T.\\ll-l's probable startup into would create a quasi-governmental cor-difficult financing and energy problems in late 1981.

poration that would insure all utilities his 26 years in the U.S.11ouse of Repre-On I ecember 1.1980, GPU fonnally against nuclear power plant accident ex-sentatives. Mr. Ashley enjoys high es-requested that the NRC permit TMI-l to pense not covered by private insurance teem and respect in both government return to senice after the hearings are carriers. Retroactive provisions in the bill and private sectors; his senice as chair-concluded on issues unique to TMI-1.

would allow coverage for GPU and its man of the llouse Ad floc Energy Com-This action would precede completion of subs; diaries. At this writing, the bill has mittee is particularly notable. lie not the hearings on issues applicable not just not yet been submitted to Congress.

only negotiated the teas of complex to TMI-l but to other nuclear plants In a related development, the Nuclear energy legislation in the flouse, but was around the country. So far, there has Safety Oversight Committee, an ad-instrumentalin securing the compro-been no response by the Commissioners visory group established by former Pres. mises between the U.S. Senate and the to that request.

ident Carterin 1980, recommended in llouse that resulted in a law that started this nation on a course toward energy sufficiency.

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The Companyseeks a consensus on TMI-2 cleanupfunding among regulators, legislators and the nuclear industry This is an extraordinary approach, but financing charges, fmm GPU and its Operations Report management believes it offers an oppor-subsidiaries for senices rendered and tunity to reach a mutual agreement on eq iipment provided t.nder contract with an equitable solution that no single party T511-2. Document discovery and deposi-could achieve through its own efforts.

tions related to this action are Taking this additional step can bring all proceeding.

Purchased Power Costs Cut parties to take the final steps necessary On December 8, GPU and its three GPU has continued to trim outlays for to reach an agreement that is so essential operating subsidiaries filed a $1 billion purchased ieplacement power. While to completing the crucial cleanup effort.

claim stemming from the T511-2 accident these savings go directly to customers, against the NRC. The filing charges the they do reduce the borrowings that the TMIInsurance NRC with negligence in its perfomiance System would otherwise have had to Through the end of 1980 GPU had and review functions. Among other make. The System's aggressive efforts incurred $181 million in cleanup and re-things, it cites the NRC 's failure to warn to buy lower cost replacement power covery costs associated with the acci-GPU and h!et-Ed of a similar incident at have mduced the impact of the T511 dent. The damaged nuclear fuel core the Davis-llesse plant in Ohio in 1977, accident on customers through 1980 by amounts to $37 million. These costs 18 months earlier. GPU believes that had about $220 million, compared with the have been partially offset by $203 million the details of the Davis-llesse incideat largely oil-fired generation available ofinsurance proceeds.

been made known, the T511-2 accident through the Pennsylvania-NewJersey-(Srfurtherinformation about ricam

power costs for both Tall units of ap-other utilities in the PJh1 pool. The proximately $1.6 billion, the cost of fu-Federal Energy Regulatory Commission GPU Fiies TMI Lawsuits ture restoration of Unit 2. estimated at authorized the new tariff on October 1, In 51 arch 1980, GPU and its operating $130 million, lost revenues of approx-1980. It will remain in effect until the companies filed suit against liabcock & imately $950 million and an increased earlier of December 31,1981 or the Wilcox and its parent company, J. Ray cost of borrowing of about $10 million. return of Tall-1 to senice. While GPU 51cDermott, Inc., for damages resulting at present buys more ofits power from from the accident. GPU alleges in the utility systems to the west and south action that these damages exceed $500 than from the PJ51 pool, the new pricing million and that very substantial future formula provides a backup source of damages are to be expected. Isabcock lower-cost purchased power ii. hose and Wilcox countersued in July, denying sources should not be available. liability and seeking $ 1.1 million, plus Coal, Gas Produce Savings The large coal-fired generating stations g._, g 7y-k Where#io190DogerM n in which the GPU companies participate I. ..tei N ~ 47s y _ ~ l m with other utilities have turned in a supe- ~ - Reinvestedin Puumeesk of.Jel-cost sasings (compared to oiD rior performance, adding some $5 million [ . Energy s 7N g f during 1980. [- w Additionally, the System during 1980 t 'Ihmes 10 l-he continued its program of converting a 7 i i U ? ~ b~ number of generating units from oil to (( [ Intereet & PseieriodDtvidends 13e :.' ^[ cheaper natural gas. Ily the spring of ~ q 1981, some 800 megawatts of capacity f Depreastion %,,,.,/gf p. ' 8e g will have been converted to dual fuel M N [J Other Operation & Mantenance,J + 21e '3 l~ ^includmg Payrou ^ + Lx aw-w w L w a ,.kl 9 capability, replacing 4 million barrels of was permanently cancelled because of sources of coal. The start of construction oil a year. The move will reduce custom-financial and regulatory uncertainties. of this unit has been deferred for two ers' bills by about $10 million annually, JCP&; eceived a construction permit years, resulting in a forecast completion assuming sufficient gas supplies. for the 1,168 megawatt pmject in 1973. In date of1989. 1978, the plant was forecast to be in Long Outage at Oyster Creek senice in the mid-1980s at a cost of Canadian CableTie Studied The Oyster Creek nuclear station was about $1.2 billion. JCP&Lis seeking GPU is also exploring, with Ontario shut down onJanuary 5,1980 for a appn> val from the NJ Board of Public ilydro of Canada, another means of sup-scheduled 10-week refueling outage. Utilities to amortize and recover the $412 plying a portion ofJCP&L*s future needs. This was prolonged to nearly seven million already invested in the plant The studies involve the possible delivery months for the repair of cracks in piping through its rates to customers over a of 1,000 megawatts of electricity pro-associated with the emergency core reasonable period of time. duced by Ontario liydro in coal-fired cooling system. stations and delivered thmugh a sub-Beginning in the spring of 1981 and Seeking Alternatives marine cable interconnection between lasting for about five weeks. equipment Studies are undenvay to determine how the two countries under Lake Erie. The required by the NRC as a result of that to restore the future generating capacity cable would hook into GPU's transmis-agency's " Lessons Learned from Three lost by the cancellation of Forked River. sion network near Erie, Pennsylvania. Mile Island" directives will be installed. The unit had been planned to meet Modifications to the station's emer-JCP&lls g owing needsin the second New Energy Management gency core cooling system and other half of the 1980s and thereafter. One Plan Proposed safety-related changes will be made dur-option is to use the site for a coal-fired GPU has presented to the NewJersey ing a six-month snutdown scheduled to unit. Such a plan, however, presents and Pennsylvania PUCs a new con-begin on December 1,1981. some problems, not least of which are servation and energy management plan, Despite the long 1980 outage, Oyster NewJersey's clean air regulations that one of the first ofits kind in the nation, Creek recorded significant fuel savings make compliance of a coal-fired generat-that it believes will reduce future con-for customers in 1980 and early 1981. In ing unit very difficult. The transportation stmetion costs and produce savings for operation, the station cuts fuel costs by logistics of moving sufficient coal to the customers. The plan would move capital $10-to S14 million a month. plant site present another chr.!!enge. investment from construction of new Another option is construction of one generating facihties into conservation Nuclear Project Cancelled or more standardized coal-fired plants in and load-shifting hardware and senices. A major casualty of GPU's reduced finan. western Pennsylvania's coal fields, part The company proposed such devices as cial capabilities wasJCP&L's Forked of Penelec's senice area. For several heat storage equipment and special River, NawJersey, nuclear project. The years, the System has been planning a meters. The cost of the devices would l project was in the early stages of con-650-megawatt coal-fired unit at Penelec's be treated as a capital investment. The struction when, in November 1980, it Seward, Pa. station, near abundant cost impcet would be less than that of constructing new generating equipment % and would be included in the operating m.--w.% fy g n .mm 1Costaf' SDCIIStBIRer#U .I ' c mp nies' rate base in the same manner f.- gp !a' as new generating plants. GPU,s current c m y* g, . g,g >r - k, ~ nawabLd.d.. O cash position limits the ability to pursue + ,f1980 2.89e RW 2.99e MV this program. Equitable rate treatment, .n _st maxrm ;yc " 7 ' N, therefore, will be fundamental to the 61379 p., mW-A success of the plan. ! 1978 M m m m e - w I1977 M_. raze::mmmmmmed.18p " ^ < ; - d 2.77c i4 L -arme[4,148 ) 2.66c H,M

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i[1976. ^ 2.47c K3.67c - +< m m -m m e h ! E MCOsts hbCOM3 5 - e [ ^ ,m i. um.2_mmumeaAam ua 10 GeneralPublic Utilities has established asepamte nuclearorganization dedicatedto safepowergeneration. the two TMI Units. It would also be Nuclear responsible for the design, construction Board Changes ""d 9""tio" o' ^"v 'ut"* ""de"r P "t$ Oroanization on the GPU System. While the nuclear e corporation would operate the nuclear New Nuclear Entity plants, ownership of those units would David L. Grove, president of Dasid L. Integrates Skills remain withJCP&L, Met.Ed and Grove, Ltd., an economic consulting Out of the various investigations into the Penelec. firm, was elected a member of the GPU causes and consequences of the TMI-2 Board of Directors at the Board's March accident emerged a stmng consensus Safer Generation 1931 meeting. that nuclear pcwer plants can best be a Direct Result Dr. Grove, who founded his firm upon operated and managed by a separate Bringing this single-focus emphasis to retiring in 1978 from the International organization dedicated solely to providing bear on nuclear operations reflects rec-Business Machines Corporation (IBM) the safe generation of nuclear power. ommendations of the President's Com-as vice president and chief economist, is Well before the accident the Company mission on TML lt would result in safer president of the United States Council of recognized the benefit of expanding its and more reliable nuclear generation of the International Chamber of Commerce in-house technical capabilities and of inte-electricity and places the System in a and serves as senior economic advisor of grating the operating responsibilities of stronger position to carry out all aspects the Marine Midland Bank of New York. its nuclear facilities into one organization. of nuclear operations. lie is a member of the board of directors Serious consideration had been given :o Pulling together the existing technical of Inter-North, Inc. and serves in the the forming of a separate corporate en-support and expanding the number of same capacity with a number of institu-tity to manr~ GPU's nuclear facilities. professional persannel has resulted in a tions, among them the National Bureau The early accident recovery pmgram notabk strengthening of the company's of Economic Research and the Comnut-provided the impetus to fonn such an nuclear power program. tee for Economic Development. organization-one which gathered to-Prior tojoiningIBM Dr. Gmve was gether the wealth of nuclear experience GPU Nuclear vice president and chief economist for of the management and technical staff of in Approval Procas the Federal Reserve Bank of San Fran-the GPU companies and directed that GPU Nuclear's formation has been ap-cisco and the Bank of America. lie has experience iow d the cleanup program proved by the U.S. Securities and Ex. served as an advisor on central banking and preparat ons for returning Unit I to change Commission. Implementation of and economic policy to governments in senice. its operations is now awaiting approval Latin America, Asia and the Middle East From the early experience gained from the NRC and the NewJersey and as well as an advisor on general eco-fmm the formation of the TMI Genera-Pennsylvania commissions. Management nomic matters to several offices of the tion Group, and tne recommendations of G PU Nuclear is well along in organiz-U.S. Government. and insight provided by the studies of the ing the composite work force of some WarrenJ. Ilayford, a member of accident, evolved the expanded GPU 2,000 trained and motivated personnel GPU's Board of Directors, resigned in Nuclear Corporation. from within and outside the GPU january 1981 after six years of senice System. because of the press of other business New Subsidiary Has activities and interests. Mr. Ilayford had SingleTask taken a position as president and chief GPU Nuclear would be a separate sub-operating officer of International llan es-sidiary of General Public Utilities. Its ter Company in Chicago in 1979 and felt sole task would be the operation of the that his growing commitments there GPU System's $1.3 billion investment in made it increasingly difficult to meet the nuclear plants. Thus, it would be respon-requirements of being a director of GPU. sible for the safe and efficient operation GPU's Board accepted his resignation of the Oyster Creek neclear unit as well with regret in view of the valuable per-as the restoration and safe operation of spective he brought to its deliberations. 11 N f "P. COAL PLANT E OIL PLANT f

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- Pil!LADELPillA p p wa ~ q. w: w a h% OYSTER CREEK NEW JERSEY Elect.ic Sales l'eak Load' Number of FuelStix 01Wil) (51W) Emple,ees Coal ' Oil & Gas Nuclear 12,!4)7,007 2,9th 3,561 309 379 339 7,813,105 1,429 2,827 96 9 49 -9 11,117,631 1,735 4,072 99 9 19 -9 31,838,013 6,161 11,490 819 119 89

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13 l S dal Re Ort: c mpli nc with the order, and the agency is continuingits evaluation of the modifications as they are made. Progress at Three Mile Island The changes reach across bota the technicai and human aspects of Unit l's operations. Major pmgress is being made in the huge task confmnting Changes Made Across Spectrum GPU at Three Mile Island despite the slow pace of federal One of the major safety modifications involved pmviding approvals and a reduction in available funds. Our efforts there physicalindependence of Unit 1 from Unit 2 to insure that are two-pronged: first, to bring Unit 1 back safely on line as decontamination and restoration work on Unit 2 would not soon as possible, and. second, to accomplish the safe cleanup affect safe operation of Unit 1. These modifications involved, and recovery of Unit 2 expeditiously. Some of the major among others, piping changes and wall construction as well as achievements m this work are described in this section. some new facilities for waste treatment, radiation protection and sampling to duplicate previously shared operations. UNIT 1: Moving Toward Restart In addition to the complete separation of Unit 1 from TMI Unit I was scheduled to go back into senice after Unit 2, major changes have been made or are in progress to refueling on the day of the accident, March 28,1979. It has improve Unit l's programs, pmcedures and performance, since remained shut down in response to NRC orders which lluman engineering studies were conducted of the Unit 1 established a series of prolonged public restart hearings and contml room and modifications are under way which will mandated numerous modifications that must be made to the greatly enhance the operator's ability to safely operate the unit benre it can go back on line. Most of these changes stem plant. For example, re-labeling of controls gives instant from th " Lessons Learned at Three Mile Island" report of recognition of equipm3 nt function and status. New, eye-the NRt. Some changcs must be completed before return to directing lines integrate panel displays for each of the Un t's i senice: others, of a longer-range nature, can be made after major operating systems, giving quicker appreciation of the plant is operating again. entire systems at a glance. Non-glare lighting now brings Mwh pmgress has been made in the " Lessons Learned" more clarity to panel displays and Unit l's computer has been work. The NRC has stated that Unit 1is now in significant given far faster printout capability. ~ -n -,,.,n,_ c.,-- 3 Nuclear Exnarience Anuran, Radiadon & Envimnnwntal He wu suduated fmm Wexd Unie r Contmis, Maintenance and Construc - sity and completed studies at the Inter-l Broughtto Bear. tion,TechnicalFun:t: ens, Admuustration national School of Nuclear Science and and Communications. These positions Engmeering as we!! as graduate courses . have been illed by highly quahfied indi-l at the Pennsylvania State University-The Three MileIsland management viduals with impressive professional 4 structure today differs significantly fromy. credentials. LTMI-1 vice president >%nry HukNIjoined ( the pre-accident period, when the Island ' The professionaland techrucal GPU inJune 1980, after serving as a - was regarded, organized and staffed as a strengths of the Nuclear Corporation sener civihan special assistant to the

single station with two units and shared ' management are typified by the vice commander, NavalSea Systerns %

9 ' facilities. presidents of GPU's nuclear units. Command. Administratively, activities at TMI are. He was graduated from the U.S. Naval - cow directed by Robert C. Arnold, who 'Ivan Finfrock, vice president of Oyster Academy and served on active' duty for ; t will serve as president of GPU Nuclear Creek, joined Met-Ed in 1952 and ad- ' more than 22 years. His Navy assign-when it is permitted to begin operating, ' vanced through various engmeering posi- ' ments were primarily involved with the - ' and by his deputy executive; Philip R. ~ tions there. He served at the Saxton ~ ' construction, maintenanie and opera-- clerk. Additionally, a vice president has Experimental pmject and was assigned ~tions of nuclear submarines, been named for each of the TMI tmits - - to Oyster Creekin1964 as a nuclear From1976 to1977 he also served as c and the Oyster Creek nuclear plant. pmject engineer. He served in various project operations manager at the Clinch - ~

New vice presidential posts also have positions before being namedJCP&L's River Breeder Reactor protect for Burns been created for the areas of Nuclear vice president of Generation in 1972.

and Roe Inc. W-t .. w n i s. ~n n.n i. w o m +-=GA .W.- nan i - s d. ~.m n a u ^ l1 The challenging task ofcleanup and recovery is essential to public health and safety and thefuture ofnuclearpowerin this country An expanded plant maintenance program has been put into UNIT 2: Moving Toward Recovery place, providing increased emphasis and management atten-The task of cleaning up and recovering T511 Umt 2 is one of tion toward maintaining the Unit's equipment in a high state of the most challenging ever assumed by industry, not only in readiness and reliability. the sheer physical scop of the work involved, but in the fact Attesting to the benefits of the expanded maintenance that the people at TMI are working in an emironment that is program was the successful completion of a test conducted unique. early this year (1981) of all major plant components permitted But, through detailed planning, careful engineering and to be operated under the NRC's current shutdown order. The painstaking performance, the portions of the overalljob that equipment check provided a high degree of assurance against have been permitted to date by the NRC are being accom-major equipment problems during restart. plished in a quiet, workmanlike, almost routine way. Some examples follow. Human Element Stressed The changes on the human side have been equally extensive. Water Purified Enhanced operator training programs-with particular empha-A sophisticated water filtration system, EPICOR 11, has sis on reactor simulator training-provide plant operators with cleaned some 430,000 gMlons of mid-level radioactive water greater recognition of the human element in plant malfunc-that had spilled into Unit 2's auxiliary building during the tions that might evolve into a major accident. accident. Although this water is distinct from the more highly Shift technical advisors with bachelor of science degrees radioactive water in the reactor building, it still contains, after are ncw providing aro md-the-chick technical assistance to the filtration process, higher than permissible levels of plant operators at each of our nuclear facilities. tritium, which cannot be filtered out because ofits molecular The radiological controls staff for Unit I was increased four-similarity to normal hydrogen. Further dilution of this filtered fold during 1980 to allow for continuous radiological coverage water with uncontaminated water readily reduces the tritium of all plant activities. content to drinkable levels. We expect to complete the remaining required modifica-EPICOR !! has allowed us to decontaminate the auxiliary tions for restart by the fall of 1981 followed by an extensive building and the Unit's fuel handling area, both large work testing period before placir.g the plant in operation. spaces needed for the overall program. EPICOR !! finished - -- -- __,.m.n m-g ' Complementing the pmfessional back-Robert C. Arnold, Nuclear CorporatidnM Gale Hovey, vice president of TM1-2, joined GPU inJanuary 1980 after more ? grounds of the Nuclear Corporation's ' president and chief'operahng execuuve, - l than 21 years in the nuclear industry. vice presidents are those of the deputy was eh:cted senior vice president of ' . Before his TM1 post, he served seven - executive and chief operating executive? ; Met-Ed in August 1979 and also is vice a i l' eral Nuclear Services' nuclear fuel plant president _Ge ieration forthe GPU; p years as plant manager for Allied Gen- ~ Philip R. Clerk, vice president and dep-1 Service Corporation.1 j

Hejomed Met-Edin 1969on the staf U

~ L in Barnwell, S.C.. uty executive', prior tojoining GPU late _ of the superintendent of [ . He was formerly associated with Gen- ' in 1979 was associate director, reactors, - . _. _ ' eral Electric Companyt Vallecitos Nu. - of the U.S. Department of Energy's. . as heavdy involved dunne the startup j w '. * ' clear Center in Pleasanton, CA, where Naval Reactors Division, and chief of the ; and initial operation of TMI 1l He was' 9 he held a variety of management posi- - Reactor Engmeering division of thel elected to the Service Corporahon poei-tions dealing with test reactor operations ~ Navy's Sea Systems Command. _ tion in 1977. - 3 and radioactive aiaterial laboratory He earned the U.S. Energy Research ' Followmg graduation from the Univer- ] ? - ' and Development Admuustration Special' sity of Michigan,' he served for tMyears? 9 operations. = He served nine years with the U.S.; - Achievement Awardin1976.~. is an 08icerin the U;SJ Navy. Sinf : M

Navy and completed the Navy's Nuclear _ Mr. Clark holds a Bachelor of Civil '

. those years'were devoted to assign-9 . Power Program before assignment to the ~ Engineering Degree and did graduate - -ments involving nuclear power and in. d first Polaris submarine. study in civil engmeering at the Poly ; cluded responsibihties for operator j C) earned a B.S. in business admin-technic Instiete of Brooklyn. He also' trammg, radmiogical controls programs d istration from the lilinois Institute of i attended the Oak Ridge School of Reac- - and reactor operabons and mamtenance.j j ~ Technology. tor Technology i N ?. = - - ~ ~ ~-. ~ ~. j 15 its primary task in Se spring of 1980; it will now clean water Much Romains to be Accomplished being used to flush holding tanks and for other purposes. The Although the cleanup of Unit 2 is slowly progressing, much filtered water from the auxiliary building is being held at Tall remains to be done. The 700,000 gallons of contaminated for use in the decontamination of the containment building. water in the containment building and the reactor coolant system must be pmcessed and the containment building Krypton Gas Vented Safely decontaminated. Contaminated equipment and material must Carefully monitored by hosts of specialists, atxr't 13,000 be removed, then the next major objective is removal and curies of radioactive krypton gas from within Unit 2's con-transfer of the fuel core to the spent fuel pool. tainment building were released hmnlessly to the atmo-sphere from June 28th tojuly 11. All monitoring agencies, Coreis Unique Research Tool federal, state and local, reported radiation readings that were The Tall-2 accident offers an opportunity to obtain pre-consistently far below the limits set by the NRC, posing no viously unavailable information relating to the impact of threat to public health and safety. serious reactor mishaps. Examination of the reactor and core can be of unique value in gaining understanding of the effects Containment Entries Gather Data of serious nuclear accidents on a nuclear plant. Clearing the containment building of Krypton allowed Alike Safety analyses for accidents such as the one that occurred lienson and Ilill liehrle, both Alet-Ed employees, to open the at Tall-2 make use of detailed calculational models in esti-half-ton door of the containment building onJuly 22 and mating fuel damage and the potential, nature and extent of become the first to enter the structure since the accident possible releases to the environment.1.arge-scale confirma-16 months before. tory tests of these mc,dels to cetermine their accuracy are That initial entry has been followed by several more, each virtually non-existent. In this regard, the damaged fuel with larger groups of men. During these entries, teams assemblies at T511-2 constitute a research and learning performed such varying tasks as taking still photographs and opportunity that must be explored. videotape foot age, testing electrical circuits lon;; unused. Examination of the fuel can have far-reaching effects on the insta""g a TV monitoring system, checking equipment and nuclear industry and regulatory agencies. taking cloth " swipe samples" from walls, floors and equipment Alany experts believe t!.at the research work on the failed for radioactivity tests to assist in preparing for later steps in fuel will show that calculational models are very conservative the decontamination and cleanup program. and that the actual damage and impact of accidents may be far less severe than previously estimated. "SDS" To Filter Containment Water Nearing completion and awaiting licensing by the NRC is Communications Changes Tall's Submerged Demineralizer System tSDS). An ex-Regaining the understanding and trust of the public, elected panded, more sophisticated version of EPICOR II, SDS will and appointed officials and the media is the task of an be used to tilter the 700,000 gallons of highly radioactive expanded communications organization at T511. water contained in the Unit 2 reactor building and in the To remedy one of the most critical flaws made apparent in reactor itself. the early hours of the accident, a comprehensive emergency Like EPICOR II, the new system will filter out radioactive communications plan has been developed to alert responsible particles from the water by trapping them in special chemical officials at all levels of government in the event of an accident beds. The tiltering process, however, because of the radioac. in the future. The new Thll commumcations staff will play aa tivity involved, will be carried out underwater in Unit 2's important role in implementing the emergency plan. spent-fuel pool, a 40-foot-deep, concrete-lined pit which Refurbished and updated, the Tall Visitors Center, across normally holds spent nuclear fuel nxis. the river from Tall, is playing a larger role today in informing SDS will be available for operation in April 1981, but its the public, the media and government officials. starting date depends on NRC approvals and the granting of a license. The water cleaned by SDS will be used in decon-taminating the walls and equipment surfaces within the reactor building. After start-up, SDS is expected to complete its job in three to four months. 16 Statement of Management The management of General Public Utilities Corporation is responsible for the information and representations contai.:ed in the financial statements and other sections of this annual report. The financial statements have been prepared in conformity with generally accepted accounting principles consistently applied. In preparing the financial statements, management makes informedjudgments and estimates of the expected effects of events and transactions that are currently being reported. To fulfillits responsibilities for the reliability of the financial statements, management has developed and maintains a system of internal accounting control. This system is in-tended to provide reasonable ass'irance that assets are safe-guarded and transactions are executed in accordance with management's authorization and recorded properly to permit Ihe preparation of financial statements in acordance with generally accepted accounting principles. The accompanying financial statements and notes thereto disclose the effect of the nuclear accident on Alarch 28,1979 at Unit No. 2 of the Three h!ile Island Nuclear Generating Station (T511-2). The accident has had a significant adverse impact on the earnings and financial position of the Corpora-tion in 19SO and 1979. In addition, several significant con-tingencies and uncertainties, the outcome of which cannot '.c c determined at theiwsent time resulted. Reference is made to Note 1 to the accompanying !!nancial statements and to Slanagement's Discussion and Analysis of Financial Condition and Results of Operations on page 18 for further discussion of the effects and impact of the nuclear accident at Three 51ile Island. Coopers & Lybrand, independent public accountants, are engaged to examine and express an opinion on the financial statements. Their opinion, which appears on page 20, sets forth the contingencies and uncertainties resulting from the accident. 17 .I Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resource: Results of Operations: ne nuclear accident at Three Ahle Island has had a The results of operations discussed below compare 1980 significant adverse impact on the earnings and financial with 1978. The year 1978 is used to provide the reader with a position of the GPU System. As a direct result of this basis for comparison with 1980 results, as 1978 represents accident, the Corporation's subsMaries are carning no retum the last year of normal operations for the Corporation and its on invested capital aggregating about $1.5 billion. subsidiaries. In the aftermath of the accident the subsidiaries

• respec-Although operating revenues of the System increased by tive state utility commissions reduced allowable annual reve-5505 million (38%) in 1980 over those of 1978, earnings per nues to exclude the capital and operating costs associated share for the same periods declined from $2.30 to S.34. This mth TMI-2 and Thll-1. Furthermore, in view of regulatory reflects a decrease in net income and in the return on average and cost uncertainties arising from the accident, Jersey common equity from $138.8 million and 10.4%, respectively Central Power & Light Company (JCP&L) abandoned the in 1978 to $20.6 million and 1.5%, respectively in 1980.

construction of its Forked River nuclear generating project. The substantial increase in operating revenue

• from 1978 These actions resulted in a significant decline in earnings to 1980 is primarily attributable to the recovery of higher fuel because the operating expenses, depredation and capital and purchased power costs in energy clauses. Such additional costs associated with the aforementioned assets am being revenues ($408 million) reflect the recovery of the higher absorbed by the common shareholder.

energy costs incurred by the System, and have no impact With respect to the abandoned Forked River nuclear on camings. generating project, JCP&L is seeking recovery of its invest-The decline in net mcome between 1978 and 1980 of $118.2 ment in the project in a pending rate proceeding. million is primarily the result of the regulatory response to The adverse financial results and continuing uncertainties the accident at T511-2. As previously indicated, the subsidi-arising from the accident preclude the Corporation and its aties are not recovering in their base rates the costs subsidiaries from issuing any securities. Consequently, the associated with TMI-1 and TMI-2. The capital and operating only available source of outside funding is short-term borrow-costs associated with TMI-1 were removed from base rates ings (see Note 4 to consolidated financial statements). Short-in the second quarter of 1980 while similar costs for TMI-2 term borrowings have increased approximately two-fold from were removed from base rates during 1979. Other factors $99 million prior to the accident to an average of $200 million contributing to the decline in earnings include (i) the suspen-in periods subsequent to the accident. At December 31, sion. in April 1980, of the accruing of credits to income for the 1980, short-term borrowings were $156 million against avail-carrying cost of funds associated with the constmetion of the able credit of $279 million (excluding $13 million issued as Forked River pmject (which was subsequently abandoned), bonds). (ii) the increase in operation and maintenance expenses Expenditures for the cleanup and restoration of TMI-2 are primarily resulting from intiation and additional expenditures anticipated to aggregate $1.4 billion and continue through at the nuclear stations and (iii) increased interest expense. December 31,1987. The subsidiaries, through Following is a comparative statement of operations and December 31,1980, have incurred clean-up and recovery return on average common equity for the years 1978 and costs of $181 milhon. The damaged nuclear fuel core 1980. The statement shows the cost components of TMI 1, amounts to $37 million. These costs have been partially TMI-2 and Forked River that are being excluded from base offset by insurance proceeds of $203 million. rates and therefore incurred by the common shareholders The subsidiaries anticipate recovering $300 million of and those costs associated with the operations of the System insurance proceeds, the maximum amount available under which are included in rates. The statenient shows that, net of their policy for property damage at TMI-2. The Corporation income taxes TMI.1 accounted for $22 million of costs in and its subsidiaries am uncertain as to the source of funding excess of revenues, TMI-2 accounted for $28 million, and for cleanup and restoration costs in excess of such insurance Forked River accounted for $6 million. Furthermore, the coverage. statement shows that, if non-earning operations were ex-The Corporation's subsMiaries have rate increase requests cluded, the electric system would have produced net income pending before their respective commissions. Failure by the of $77 million in 1980 and a return on common equity of 8.6%. comrnissions to act in a positive and timely manner on these For a further discussion of events subsequent to the requests could result in the inability of the subsidiaries to accident at Three Mile Island see Note 1 to Consolidated refinance their short-term borrowings and impair their ability Financial Statements. With regard to the effect of changing to meet their obligations. prices, see page 38. 18 Statements of Operations and Retum on Common Equity (Unaudited) Generall'ubise Chishes System tDollars in S1d!;ons) 1978(a) 1980(b) Excluding TMIand Total Total Forked Forked System System River TMI-1 TMI.2 River Plant Values (Net of Depreciation)...... $4,121 St.379 $2.882 $ 387 $ 698 $ 412 Revenues......................... $1.327 $1.832 $1.809 $ 21 2 E nergy Cost s................................ 460 832 832 Deferred Energy...... (18) 25 25 Other Operation and Maintenance.................. 307 392 370 28 (6)(c) Depreciation......... 110 147 111 13 23 Taxes Other Than Income Taxes.................... 130 172 172 Interest E xpense............................. 160 219 158 15 27 19 Other income and Deductions..................... (4) (7) (7) Total.. 1.145 1.780 1.661 56 44 19 Pre. Tax Income.............................. 182 52 148 (35) (44) (17) Income Tax Expense............................. 71 16 62 (16) (22) (8) Income after Taxes 111 36 86 (19) (22) (9) Allowance for Funds Used during Const.... 72 28 21 7 lieferred Stock Dividends. 44 43 30 3 6 4 Nat income Per Income Statement. $ 139 $ 21 $ 77 $ (22) $ (28) $ (6) Return on Average Common Equity................. 10.4 % 1.5% 8.6% (16 9)% (11.9)% (4,2)% (a) Ofwrahons and return en common eriustyfor 193 npresent the lastpre-accsdentyear (b) TSil l casts urre escludedfrom the base rate rrtruurs of]CI'&L and theltnnsylvanna subsidsarws effechswApnll,1980andjune l,1980, restschssly. TSil-2 costs arre remotedfrom base resrnues in early 193. Wsth resput to the For ked Riswr nucleargenerahngproject. the credst to incomeforAFC uns sustwnded efectus April I, J.Wro. (c) includes $12 mullwn of 4crabon and maintenance extvndstures more than offset by the resen e capacsty credits. 19 Reportof Auditors To the Board of Directors and Stockholders GENERAL PUBLIC UTILITIES CORPORATION Parsippany, NewJersey We have examined the consolidated be.!ance sheets of and the liquidation ofliabilities in the normal course of General Public Utilities Corporation and Subsidiary Com-business. The Corporation's subsidiaries are currently not panies as of December 31,1980 and 1979, and the related receiving a level of revenues sufficient to assure their ability consolidated statements ofincome, retained earnings and to continue as a going concern. The continuation of the changes in financial position for each of the five years in the Corporation as a going concern is dependent upon obtaining period ended December 31,1980. Our examinations were adequate and timely rate relief, receising financial assistance made in accordance with generally accepted auditing stan-for the cleanup and restoration costs required for TMI-2, and dards and, accordingly, included such tests of the accounting maintaining and increasing the avislability of ciedit under the records and such other auditing procedures as we considered revohing credit agreement (see Note 4 to Consolidated necessaryin the circumstances. Financial Statements). The eventual outcome and effect of As more fully discussed in Note 1 to Consolidated Financial the foregoing on the consolidated financial statements cannot Statements, the Corporation is unable to determine the presently be determined. ultimate consequences of the accident at Unit No. 2 of the As more fully discussed in Note 1 to Consolidated Financial Three Mile Island Nuclear Generating Station (TMI-2) and of Statements, the Corporation's NewJersey subsidiary is the response of rate-making and other regulatory agencies to engaged in litigation with a nuclear fuel slipplier invohing the that accident. Among the contingencies and uncertainties pricing of nuclear fuel. At this time, the outcome of the which have resulted as a direct or indirect consequence of litigation and the rate-making treatment of any increased fuel this accident are questions conceming-costs which might result from an adverse legal determination a. Tne recovery of the approximately $661 million invest-A ore y discussed in Note 1 to Consolidated Financial ment in TMI-2: Statements, the Corporation's Pennsylvania subsidiaries may b. The recovery of $15 million of costs incurred net of be required to make refunds to customers for certain insurance proceeds received, and the indeterminable payments made for coal. At this time, it is uncertain whether amount of uninsured costs yet to be incurred, m or to what extent such refunds will have to be made. connection with the anticipated cleanup and restoration In our opinion, subject to the effect, if any, on the consoli-of TMl-2 to service; dated financial statements (the 1980 and 1979 consolidated c. The recovery of the approximately $387 million invest-financial statements only with regard to the uncertainties ment in Three Mile Island Unit No.1 Nuclear Generat-discussed in the second through fourth paragraphs above) of ing Station; such adjustments as might have been required had the d. The recovery of the approximately $412 million invest-outcome of the uncertainties discussed in the preceding ment by the Corporation's NewJersey subsidiary in the paragraphs been known, the aforementioned statements Forked River Nuclear project, construction of which (pages 21 through 36) present fairly the consolidated financial has been abandoned; position of General Public Utilities Corporation and Subsidi-e. The recovery of the excess, if any, of amounts which ary Companies at December 31,1980 and 1979 and the. might be paid in connection with claims for damages consolidated results of their operations and the consolidated resulting from the mident over available insurance changes in their financial position for each of the five years in proceeds;and the period ended December 31,1980, in conformity with f. Any action of rate-making agencies with respect to any generally accepted accounting principles applied on a portion of the replacement powercosts for which .onsistent basis. current recovery is now permitted. The accompanying consolidated financial statements have COOPERS & LYBRAND been prepared in conformity with generally accepted ac-March 5,1981 counting principles applicable to a going concern w hich 1251 Avenueof the Americas contemplates, among other things, the realization of assets New York, New York 10020 20 y 12 .stnem ha!> lannanifdetadhosnor eht ru fraplargetnu na na se:on gnsynapmoaa ehT 356 583 $ 328 034 $ 371364 S 175 584 S 261,605 S. .)9 dna 1 seton ( raey fo dne,ecnalalI 1 162 29 906 79 124 601 583 37 .kcots nommoc no sdnediNd,tcudeD 419,774 231,825 795,965 659,855 261,605 slatbI' 791,121 977,211 477 831 387 59 195,02 . emocni ten,ddA .raey fo gninn'geb.ecnalalI 717,653 $ 356,583 $ 328,034 $ 371,364 S 175,581 S. 6791 7791 S791 9791 0891 ,13 rebmeceD dednE sraeY eht roF ><dnasuon1 nif nerom sgninraE deniateR fo stnemetatS detadilosnoC 869,45 802 75 712,06 ~ 812 16 162,16 .gnidnatstuO serahS nommoC egarevA 02 2$ 05 2$ 03 2S 65.tS 13.S . erahS egarevA rep sgninraE 791,121 $ 977,241 S 477 831 S 387,59 S 195,02 S. .emocnI ten 386 051 946,751 167 661 450 012 _ 769,832 .sdnedivid derreferp dna segrahc tseretnilatoT 256,93 386 04 039 34 516 34 750,34 . seiraidisbus fo sdnedivid kcots derreferP )788,01( )415 21( )857,41( )779,7( )104,7( .)01 dna 3 seton ( sdnuf deworrob rof ecnawolla eht ot elbatubirtta sexat emocnI )080,71( )962,22( )552,22( )692,81( )622,51( . )3 etoN()xat fo ten ( tiderc -noitcurtsnoc gnirud desu sdnuf dewmrob rof ecnawollA 499,3 711 9 725 4 783,42 687,11 .tsmetni rehtO 202,62 898 32 958,32 822,42 975,12 .tbed mret-gnol rehto dna serutnebed no tseretnI 208,801 437,811 164,131 790 441 571,251 .sdnob egagtrom tsrif no tseretnI

sdnediviD derreferP dna segrahC tseretnI 088,172 824 003 _ 835 503 738 503 855,952

. sdnediviD derreferP dna segrahC tseretnI erofelI emocnI 772,21-560,74 901,15 535,82 369,41 snoitcuded dna emocnirehto latoT )751,1( )699( )164 2( )641,5( )315,4( . )01 dna 2 seton ( ten,emocni rehto no sexat emocnI 561,1 472 286,3 739,8 264,7 . te.r,emocni rehtO 962,24 787,74 888,94 447 42 110,21 .)3 etoN( noitcurtsnoc gnirud desu sdnuf rehto rof ecnawollA

snoitcudeD dna emocnI rehtO

.. emocnI gnitarepO 306,922 363,352 924 152 203 772 595,112 238 97 508 59 453,48 509,56 064,81 )01 dna 2 seton ( sexat emocni 534,903 861,943 387,813 702 343 550,362 . sexat en,ocni erof eb emocni gnitarepO 813 957 548,209 168,789 749,641 1 686,865,1 slatoT 729,49 286,411 268,921 544 941 565,271 .)21 etoN( sexat emocni naht rehto,sexaT 938,78 805,69 505,901 422,141 680,741 ....)2 etoN( noitaicerpeD 658,132 547 252 685,603 128 013 260,293 .. )21 etoN( ecnaneiriam dna noivrepo rehtO )627,12( )739,71( )619,71( )238,96( 850,52 . )2 etoN( ten,stsoc ygrene fo larref eD . ten.degnahcretni dna desahcru), rewoP 487,021 532,681 147,331 012,862 399,921 836,542 216,072 380,623 970,713 229,101 .leuF

ses.nepxE gnitarepO 357,860,1$ 310 2521S 446 6231$ 451094,1$ 11;7,13M,1$.

.. seuneveR gnitarepO 6791 7791 8791 9791 0891 ,13 rebmeceD dednE sraeY eht rif isdnasuwiT nI( scinapmoC yraidisbuSdna nwtaruproC swthhU chba'llareneG >:erow emocni fo stnemetatS detadilosnoC Consolidated Balance Sheets fuore1> Generall'ubhc litslitics Corturatum andSubsidiary Companics (in Thousands) December 31. 1980 1979 Assets Utility I'lant (at original cost): In service (Note 1): Investment in Three Mile Island Unit No. 2......... S 705,740 $ 7G1,992 Other. 3,931,554 3.773,897 Totalin service.. 4,637,291 4,478,889 Less, accumulated depreciation (Note 2).... 1.098,651 973.490 Net. 3,538,613 3,505,399 Construction work in progress (Note 1)........ 156,191 553,684 Ileid for future use..... 33,674 24,568 Totals.......... 3.728,511 4.083.651 Nuclear fuel (Note 4).... 255,765 232,032 1.ess, accumulated amortization (Note 2).. 5-1,360 47,241 Net nuclear fuel.... 201.405 184.791 Net utility plant. 3,929,916 4.268.442 Excess ofinvestments in subsidiaries over related net assets.............. 30,805 30.805 Investments: Other physical property, net.... 911 968 Loans to 'on-affiliated coal companies (Note 11)................ 18,275 19,375 Other, at cost........ 759 783 Totals........ 19,975 21,126 Current Assets: Cash.. 6,8 15 7,909 1 37,407 21,808 Special deposits (Note 1). Temporary cash investments.. 48,300 60,711-Accounts receivable: Customers, net (Note 4). 135,196 113.870 Others (Note 10).. 37,886 10,478 inventories. at average cost or less: Materials and supplies for construction and operation... 66,229 53,254 Fuel...... 42,572 69,507 13,967 12,439 Prepayments. Totals... 388,402 319.976 Deferred Debits: Deferred energy costs (Notes 1. 2 and 4). 147,712 172.770 Unamortized property losses (Note 1).... 420,216 9,602 Deferred costs-nuclear accident, net o' insurance recoveries (Note 1). 15,0G3 61,171 Deferred ircome taxes (Notes 2 and 10). 43,614 28,616 Otiier............ 47,269 49.456 Totals. 673,874 321.645 Total Assets. $5,012,972 $4,991,994 The accompanysng notes are en intexw:part of the sonsolidatedpnancialstatemcnts. l .J Un Thusandst 1980 1979 Liabilities and Capital Long. Term Debt, Capital Stock and Consolidated Surplus: Long.Tenn Debt (Notes 4 and 5): First mortgage bonds (3%% to 13%%, due 1982 through 2009)................... $1,874,28 i S1,868,733 Debentures (4%% to 9%%, due 1986 thmugh 1998)............. 221,680 230,580 Other long-term debt (varying rates. due 1982 through 1985)... 10,035 54,065 Unamortized net discount on long-term debt. (3,560) (1,406) Totals........................ 2,105,439 2.148.972 Cumulative preferred stock-mandatory redemption (Note 6)..... 85,050 90.400 Less, capital stock expense................ 2,674 3,004 Totals....... 82,376 87.396 Cumulative Preferred stock-no mandatory redemption (Note 8)..... 423,391 423,391 Premium on cumulative preferred stock. 1,348 1,348 Less, capital stock expense.. 831 1,663 Totals...... 423.908 423.076 Common stock and consoliomted surplus (Notes 1 and 4): Common stock (Note 7). 153,229 153,229 Consolidated capital surplus (Note 7)......... 772.958 772,538 Less, capital stock expense..... 18,056 17,983 Consolidated retained earnings (Note 9)..... 506,162 435.571 1,414,293 1,393. 5 Totals.. Less. reacquired common stock (Note 7)... 70 70 Totals........ 1,114.223 1,393.285 Totals.. 4,025,946 4,052,7j29 Current Liabilities: Securities due within one year (Notes 5 and 6). 76,067 44,164 Notes payable to banks (Note 4). 156,000 171,000 Accounts payable.. I16,242 162,162 Customer deposits.. 7,190 6,387 Taxes accrued (Note 10)... 55,910 40,560 Interest accrued. 42,313 43,477 Other.. 57,057 36.322 Totals...... 510.809 504,072 Def::rred Credits and Other Liabilities: Deferred income taxes (Notes 2 and 10). 385,011 294,510 Unamortized investment credits (Notes 2 and 10) 66,377 115,212 Other. 21,829 25.471 Totals............ 476.217 435.193 Commitments and Contingencies (Note 1) Tccal Liabilities and Capital...... S5.012,972 $4,991.994 'Z3 Consolidated Statements of Changes in Financial Position woien Generall'ubiw !!!shtws Co'twratwn andSubsulwry Companies fin 1kusanda For the Years Ended December 31, 1980 1979 1978 1977 1976 Source of Funds: Operations: Net income... . S 20,591 $ 95.783 $138,774 $142,779 $121,197 Principal non-cash charges (credits) to income: Depreciation (Note 2).. 117,086 141.224 109,505 96,508 87,839 Amortization of nuclear fuel (Note 2).... 7,260 21,314 21,443 17,764 16.374 Investment tax credits, net (Notes 2 an<110). (53,155) (11,830) 41,733 42,496 7,783 Deferred income taxes, net (Notes 2 and 10). 77,106 67,882 53,285 35,296 33.732 Allowance for other funds used during construction (Note 3).... (12,011) (24,741) (49,888) (47.787) (42.269) Total from operations.. 187,171 289,629 319,852 287,066 224,656 Long tenu debt. 15,783 153,800 151.082 155,920 217,000 Common stock, net of expense (Note 7). 4,771 22,273 82,166 8,466 Preferred stock (Notes 6 and 8)... 50,000 35,000 Bank borrowings, net (Note 4). (15,000) 87,400 21,G25 19.125 13,300 15,798 Sale of nuclear fuel. Decrease in working capital (excluding debt)(a) 17,951 5,193 Other, net.. 8,899 3.143 6,979 Total source of funds. .. $212,651 $553,554 $523,975 $591.267 $510,59 i Application of Funds: Construction expenditures-Utihty plant. $191,980 $281,912 $376,812 $313,909 $321,150 Nudear fuel. 53,760 69,114 30.878 67,268 45,086 Allowance for other funds used dunng construction (Note 3). (12,0111 (21,744) (49,888) (47,787) (42,269) Retircrr.ent or redemption of long-term debt and preferred stock. 32,602 51,463 32,908 73,389 71,990 Dividends on common stock. 73.385 106,421 97,609 92,261 Deferred energy costs, net (Note 2). (25,058) 69,832 17,916 17.937 21,726 Deferred costs-nuclear accident, net of insurance recoveries (Note 1). (16,108) 24,373 Loans to non-affiliated coal companies (Note 11). (1,100) 625 2,350 650 Incease in working capital (excluding debt)(a). 18,592 8,300 21,239 Other, net. 5.219 18.353 Ltal application of funds. $212,651 $553,551 $523,973 $591.267 $51').594 (a) Changes in components of working capital (excluding debt): Cash and temporary investments.. S(13,175) $ 50,639 $ (9,298) $(10,390) $ 2.302 Special deposits.. 15,599 9,969 (3,307) 4.531 3,9 19 18,731 (26,441) 43,788 2,433 14,070 Accounts receivable. inventories (13,960) 35,772 (18.28 0 30,620 7,196 Accounts payable. 15,920 (67,709) (12,386) (20.129) 3,168 Taxes accrued. (15,350) (19,903) 7,815 21,698 (22,470) Interest accrued. 1,131 (4,838) (131) (3,218) (5,791) Other, net. (20,010) 4.557 73 (7,306) (7,617) Total.... S 18,592 $(17,951) $ 8.300 $ 21,239 $ (5.193) The accompanying notes are an int,xralpart of the consolidatedfinancial state nu nts. 2I Notes tD Consolidated Financial Statements

1. Commitments and Contingencies nuclear fuel core was retired in 1979 and its unamortized book co m

n kan ermh &mWh mew Three Mile Island Nuclear Accident e sts-nuclear accident). These deferred debits which aggre-On hlarch 28,1979, an accident occurred at Unit No. 2 of the g te $217.9 million have been partially offset by the insurance Three Ahle Island nuclear generating station (T.Til-2) result-I"Cceds of $202.8 million received through Decemtier 31, ing in significant damage to Thll-2 and a release of some low o' level radiation which published rrports of governmental The subsidiaries first mortgage bond indentures provide agencies indicate did not constitute a significant public health f rinsurance proceeds to be held by their ret.pective trum or safety hazard. T511-2 is jointly owned by the Corporation's ees for reimbursement to the company for either expendi-subsidiaries, jersey Central Power & Light Compar y tures on repair of damaged property or construction of other (JCP&L), 25"r; 5!ctropolitan Edison Company diet-Ed), bondable property, insurance proceeds of $33.5 nullion and 509; and Pennsylvania Electric Company (Penelec). 259. At $12.6 million remained on deposit with the subsidianes December 31,1980, total net investment by the subsidiaries ~ trustees at December 31,1980 and 1979, respectively. Such in Tall-2 was approximately $661 million (S706 million invest-m unts are recorded on the balance sheet as special ment less $ 15 million accumulated depreciation), excluding deposits ad included in the aforementioned insurance the unamortized investment of approximately S37 million in proceeds. the nuclear fuel core. The subsidiaries carried the maximum insurance coverage Three h!ile Island nuclear generating station Umt No.1 v il ble at the time (S300 million) for damage to the unit and (Tall-1), w hich adjoins Tall-2, was out of senice for a C re nd for decontamination expenses. It is the torpora-schedu!cd refueling and was not involved in the accident. tion s belief that the recoveries from the insurance companies Thll-1 is jointly owned by the Cemoration's subsidiaries in will approximate the amount of the insurance carried as the same percentages as Thll.L At December 31,1980, total

• stimated cleanup expenditures tre expected to exceed net investment by the subsidiaries in Tall-1 was approx-significantly the available insurance coverage.

imately $187 million, including the unamor'ized im estment in the nuclear fuel core of S10 million. By orders dated July 2. The subsidiaries de not know the extent, if any, to which 1979 and August 9,1979, the Nuckat Regulatory Commis-the expenditures for repair and restoration of the unit to sion (NRC) directed that T511-1 remain in a shut-down peration will represent plant improvements or other items emdition until resumption of operation is authorized by the that are capitalizable and which may be recoverable m the NRC, after public hearings and the satisfaction of various future through rates charged to customers, by amortization requirements set forth in such orders. Hearings commenced r depreciation charges. Aloreover, the subsidiaries are on October 15,1980 before an NRC Atomic Safety and seeking financial assistance from the Federal government and Licensing Board. Tall-1is not expected to return '.o operaton the utility industry. Although, as set forth below, the Penn-before the four'h quarter of 1981. sylvania Public Utility Lommission (PaPUC) has expressed a contrary view, with respect to the costs of responding to the Cost ofCicmmp andRestomtion: Tall-2 accident management believes that any loss suffered Current projections pmvide for decontamination, including by the subsidiaries for which they do not receive fmancial fuel removal, to be completed in 1985, at a cost of $750 assistance, or reimbursement from suppliers or others, million in cunent dollars ($1 billion when adjusted forinflation should be recoverable in rates. Aloreover, it is management's of 109 per.mnum). Restoration of the unit (including replace-intent to seek to recover such costs in future rate and/or ment of the nuclear fuel tore)is expected to take an judicis proceedings. Under these circumstances, the amount additional two years, at a cost of $260 million in current of loss, if any, suffered by the Corporation and its subsidiaries dollars ($430 million when adjusted for inflation of 10% per resulting from the Tall-2 accident is not presently deter-annum). The estimated amounts do not include the cost of minable and, therefore, no provision has been made in their modifications to meet post-accident regulatory requirements accounts. (estimated at $80 million) or the cost of ordinary operation in its rate order ofJune 19,1979, the PaPUC recognized and maintenance of TA!I-2 (estimated at $170 million) ex-tnat no claim for such costs had been enade. Nevertheless, pected to be incurn d during this period. the PaPUC stated: "The Commission is of the view that none The above estimates are subject to major uncertainties, of the costs of responding to the incident, including repair, including (a) the regulatory emironment, (b) the full scope of disposal of wastes and decontamination are recoverable fmn, the challenges in decontaminating the reactor, (c) the effect ratepayers. These costs are and should be insurable In its of govenment regulations on the issue of waste disposal and rate order of Alay 23,1980, the PaPUC again addressed this (d) the reusability of major components. issue, without any request having been made by Alet-Ed or The subsidnries as of December 31,1980, in responding to Penelec with respect thereto, by stating: "With respect to the accident at Tall-2, have deferred $181.1 million of costs the recovery of clean"n costs through rates, nothing in this associated with the cleanup and recovery process. In addition order negates the statements of the Commission in theJune to the deferred cleanup and recovery costs, the TA!I-2 19,1979 order 25 On September 18,1980 the PaPUC issued an order preciation and capital costs are currently being retlected requiring, among other things, that Met Ed " cease and desist in the financial statements in that (a) depreciation charges from using any aperating revenues for uninsured cleanup and (TMI-1, $13 million annually and TMI-2, $23 million annually) restoration costs" of TMI-2. In this order, the PaPUC stated are being charged to expense, (b) the interest and preferred that "then cleanup costs and expenditures not covered by stock dividend components of these investments are being insurance ultimately are the responsibility of the company's accrued and (c) the earnings per share of common stock are stockholders and/or the Federal government; hmvever, they determined on a basis which reflects all outstanding shares are not the responsibility of the ratepayers"and that the in-luding the shares issued to finance the common stock cease and desist order is designed "to insure that ratepayer components of these investments. monies are not being used, currently or in the future either The GPU System is a member of the Pennsylvania-New directly or indirectly to pay mean-up expenses" Jersey-Maryland Interconnection (PJM). The generating On September 26,1980 Met-Ed filed a complaint in the facilities of the member companies cumulatively satisfy their United Sta'.es District Court for the Middle District of capacity requirements. As a result of the unavailability of both Pennsylvania seeking a :cmporary restraining order and an TMI units, the GPU System is unable to meet its obligations injunction against enforcement of the PaPUC's cease and forits allocated share of the PJM capacity requirements. desist order as well as declaratory miief. M.t-Ed alleged, Consequently, the subsidiaries will be required to make among other things, that the PaPUC's cease and desist order payments to other PJM members in the future. Furthermore, conflicts with Met-Ed's (i) obligations uncer the Atomic until such time as TMI or other replacement capacity Energy Act, and rules, regulations and orders thereunder, (ii) becomes available, the GPU System will continue to be the operating license issued by the NRC for TMI-2 and (iii) unable to meet its PJM obligation. In view of the association Met-Ed's duties under the Pennsylvania Public Utility Law to of such costs with the accident at TMI-2, their ultimate fumish and maintain adequate, efficient, safe and reasonable ratemaking treatment is uncertain. Should such future costs facilities. On September 26,1980, the District Court denied not be recoverable in rates, this could have a material adverse Met-Ed's request for a temporary restraining order; the effect on the future earnings of the Corporations

• subsidhries.

proceedings relating to Met-Ed's request for an injunction are being held in abeyance at Met-Ed's request. Rate Proceedings-Nacfcrscy: On October 16,1980 Met-Ed filed a, appeal of the OnJanuary 31,1979, JCP&L was granted a $33.8 million aforementioned PaPUC order of September 18,1980 to the annual rate increase by the NJ BPU, which, among other Commonwealth Court of Pennsylvania, and the matteris now things, reflected in base rates its im estment in TMI-2 and pnding in that court. the operating and maintenance costs associated with the unit. Met-Ed and Penelec do not know what effect these actions On June 18,1979, the NJilPU issued a rate order reducing of the PaPUC may have on their ultimate ability to recover annual base revenues by $29 million which represented the uninsured TMI-2 cleanup costs from ratepayers. In the event amount allowed by the NJBPU in itsJanuary 31,1979 order of a fmal unfavorable determination in administrative or forJC P&L's annual capital and operating costs associated judicial pmceedinga Met-Ed and Penelec, at that time, would with its intcrest in TMI-2. The order also provided for a be required to make provision in their financial statements for reduction in energy revenues of $7.3 million over a prospec-the estimated losses that would result because of the TMI-2 tive eighteen month period as an offset to base rate revenues accident. These losses would have a material adverse effect attributable to TMI-2, collected during April, May and June on the earnings and financial position of Met-Ed and Penclec. 1979. Accordingly, such amount was recorded as a charge to If the NewJersey Board of Public Utilities (NJBPU) were to energy costs byJCP&L inJune 1979. t take similar action with respect to JCP&L and such action By order dated April 1,1980, the NJBPU removed from were not reversed by appeal, this would have a material JCP&L's base rates the capital and operating costs associated adverse effect on JCP& L's earnings and financial position. with TMI 1 of $17.9 million snnually. That order did not in order to finance the substantial expenditures required reduce JCP& L*s charges to customers; instead, it directed for replacement energy, cleanup and repair and other costs that an equivalent amount (after adjustment for revenue resulting from this accident, the Corporation and its subsidi-taxes) be applied to accelernte the amortization of its de-aries entered into a revolving credit agreement with a group ferred energy costs incuried prior to the TMI-2 accident. In of banks in June 1979 (see Note D. In addition, JCP&L and removing TMI-l from JCP&L's base rates, the NJIWU deter-Penelec each issued $50 million of first mortgage bonds in mined that "given the extended period of unavailability and June 1979 and JCP& L issued $17.5 million of first mortgage the impossibility of cscertaining when the unit may return to bonds in October 1979, $25 million of which was applied to service,TMI-l is not used and usefulin supplying energy.." the payment of maturing bonds. JCP&L has appealed to the Supreme Court of New Jersey, As indicated below, the operating expenses. depreciation that portion of the order which removed TMI-l costs from and capital costs associated with the investment in TMI-1 and base rates. Other parties have filed cross appeals, contesting TMI-2 are not being recovered from customers. Such de-the provision of that order directing the acceleration of the amortization of prior deferred energy costs. Oral argument 26 has been held and a decision is pending. On April 29,1980, JCP&L filed a petition with the NJBPU On May 23,1980, the PaPUC dismissed a show cause requesting an increase in base rates of $173 million annually. order it had issued regarding the revocation of Met-Ed's The petition requested an interim increase of $60 million franchise to conduct public utility operatiens. The PaPUC annually subject to review and possible refund at the con-stated that it had found "no imminent and forest eable threat clusion of the rate case. On May 13,1980, the NJBPU to continued provision of adequate and reliable service at granted such interim increase. Through L)ecember 31,1980, reasonable rates" In addition, the PaPUC found in this JCP&L has collected approximately $38 million pursuant to decision that TMl-1 is not "used and useful in the public such intenm increase. In the opinion ofJCP&L*s counsel in service" and prescribed temporary base rates for Met-Ed this proceeding, there is little likehhood that such increase and Penelec, effectiveJune 1,1980, which removed the will be refunded. capital and operating costs (Met-Ed-$27 million annually and With respect to additional energy costs, including those Penelec-$12 million annually) associated with the unit from resulting from the outage at TMI-1 and TMI-2, the NJBPU the companies' base rates. As discussed below, Met-Ed and has allowed JCP&L to recover these costs from ratepayers Penelec have filed complaints against these temporary rates. over current and future periods. Pending before the NJBPU The PaPUC's decision of May 23,1980 further allowed for is a petition for an increase in JCP&L's levelized energy levelized energy cost rates that provided for the full recovery adjustment clause (LEAC) of $101.6 million annually re-of energy costs for the period June 1,1980 through Decem-quested to become effective March 9,1981. ber 31,1980 Moreover, the decision provided for the During the pendency of the proceedings which resulted in recovery of the then outstanding post-accident deferred theJune 18,1979 order of the NJBPU, certain intervenors energy costs over an 18 month period, in the form of a requested that the NJ BPU consider the issue of fault regard-surcharge, effectiveJune 1,1930, to Met-Ed's and Penelec's ing the causation of the TMI-2 accident. In accordance with customers. In this regard the PaPUC stated: "Those the NJBPU's dimetion, legal memoranda have been filed amounts are subject to audit and review by the Commission attempting to identify the legal standards which should and to a later determination that specific amounts of energy govern the NJ BPU's evaluation of fault, the legal and factual costs were imprudently or uareasonably incurred. If the contentions regarding fault, the regulatory consequences of a courts and/or the NRC should ultimately conclude that Met-fault finding, the NJBPU's legal authority to impose such Ed was imprudent or negligent in its operation or manage-consequences and the implications thereof. The NJBPU has ment of Three Mile Island, then this Commission will take not established a hearing date to begin consideration of the notice of such determinations and their relevance to any above issues. portion of the replacement power costs for which current In connection with the current base rate and LEAC recovery is permitted today" proceedings, intervenors have filed motions requesting. OnJuly 29,1980, Met-Ed and Penelec filed new tariffs witn among other items, a moratorium on any additional base rate the PaPUC requesting annualincreases in 1etail base rates of relief and the suspension of the flow-through to ratepayers of $76.5 million and $67.4 million, respectively. Of these TMI accident related replacement power costs pending the amounts, $31.2 million and $15.2 million, respectively, per-final outcome of fault proceechngs. tain to operating and capital costs associated with TMI-1. Met-Ed's petition requested an emergency interim increase Rate Procudings-Ibmsy/rania: f $34.1 million annually, effective no later than September 1, During the first quarter of1979 Met-Ed and Penelee were 1980, subject to a final determination at the conclusion of the granted retail rate increases by the PaPUC which, among other things, reflected in base rates their investment in r te case. On August 28,1980, the PaPUC denied Met-Ed s ~ TMI-2 and operation and maintenance costs associated with request for emergency rate relief. On September 29,1980, M t-Ed filed a petition with the Commonwealth Lourt the unit. On April 19.1979 and April 25,1979, following the seeking to review and set aside the order. TMI-2 accident, the PaPUC established temporary rates for On July 29,1980, Met-Ed and Penelec filed complaints Met-Ed and Penelee, respectively, mducing annual base with the PaPUC with respect to the temporary rates estab-revenues by amounts appmximating the operating and capital lished by the PaPUC by its order of May 23,1980. The costs associated with their interests in TMI-2 that had been c mpt ints allege that the PaPUC s order of May 23,1980 alh>wed in their pre-accident rate increase orders. These actions effectively revoked, prior to becoming effective, the deprives Met-Ed and Penelec of the opportunity to receive sufficient revenue to provide for their operating and capital S16.6 million increase in base rates granted Met-Ed on mts, to assure confidence in their financial integrity, so as to March 22,1979, returning the rates to levels in effect prior to m inta n their credit and ability to attract capital, and to that rate order. In Penelec's case, the PaPUC prospectively reduced by $25 million the $56.2 million rate increase which pmvide a retum commensurate with returns on investments Penelec had been billing since January 27,1979 pursuant to in otbnWses hadng mmsponysks, and is, the prior PaPUC order. On June 19, l'979, the PaPUC issued therefore confiscatory and tnconsistent with statutory and c Pstitutional requirements. a rate order dimeting that such temporary rates be made pe.manent. 27 Ily an order dated October 16,1980 the adm'nistratise law cense to operate TMI-2. Met-Ed does not know what the judge consolidated for hearing purposes Met-Ed's and ultimate outcome of this matter will be. Penelec's complaints against the temporary base rates fixed On October 30,1979, the Presidential (Kemeny) Commis-by the PaPCC's orders of May 23,1980 with theirJuly 29, sion on the Accident at Three Mile Island issued its report. 1980 requests for increased retail base rates. The staff of the The report states, in part, that its " investigation has revealed PaPUC and witnesses for the consumer advocate have problems with the ' system' that manufactures, operates and testified in these proceedings. The Corporation believes that regulates nuclear power plants" and the short-comings which the !cvel of rate ielief recommended by the staff and the turned the incident into a serious accident "are attributable to consumer advocate for Met Ed could result in the inability of the utility, to suppliers of equipment and to the f~leral Met-Ed to refinance its short term borrowings under the commission that regulates nuclear power"The NRC's Special revohing credit agreement and impair its ability to meet its Inquiry Group (Rogovin) and the U.S. Senate Subcommittee obligations. on Nuclear Regulation (Hart Committee) issued the results of On April 15,1981 it will be necessary for Met-Ed to effect their investigations of the accident at TMI-2 on January 23, substant.al additioral borrowings under the revohing credit 1980 andJuly 2,1980, respectively. Their conclusions with agreement in order to meet its obligations with respect to the respect to these matters were similar to those of the payment of Penns@mia state taxes. In the course of current Kemeny Commission. rate proceedings the representatives of the agent banks of in its order dated June 19,1979, the PaPUC ordered a the revolving credit agreement (see Note 0 testified that it comprehensive management audit of Met-Ed, Penelec and would be their recommendation that the bank group not the Corporation, including an examination of the financial substantially increase its exposure by additional loans to viability of Met-Ed and the Corporation and decisions relating Met-Ed so long as there is uncertainty concerning the to the construction, maintenance and operation of TMI-2. On resolution of these proceedings. Accordingly, the agent October 3,1980 the report of the management adit was filed banks have petitioned the PaPUC to modify its decision with the PaPUC. The report stressed the GPU System's timetable for such proceeding so as to provide a determina-critical financial position, but indicated that the problems tion by the Commission prior to April 10,1981. On March 5, facing GPU can be solved. The report cites the need to solve 1981, the PaPUC denied that motion but stated that it would GPU's major financial problems through rates and financial schedule pollings of the PaPUC commissioners on all issues assistance from the federal / state governments or the utility for public meetings on April 3 and 10,1981. industry. In addition the report states: "The uncertainties Met Ed and Penelec on October 27,1980 and October 28, associated with bankruptcy are sufficiently great and pose 1980, respectively, petitioned the PaPUC for purposes of risks-risks that cannot be completely quantified--to implementing an early determination of their complaints ratepayers, regulators and investors that they should be against the temporary rates prescribed in its May 23,1980 avoided 7 order and certain other related matters. Such petitions - In March 1980, the NJBPU ordered a study of future request an increase in annual revenues of $25 million for options forJCP&L The firm conducting the study has been Met-Ed and $10 million for Penelec. The companies proposed directed to determine whether the ultimate costs to JCP&L's to account for such increase for the periodJune 1,1980 to the customers of the accident at TMI-2 could be lessened if effective date of the modified base rates prescribed in JCP&l 's corporate structure were changed or reorganized. resptmse to the complaints by restating the deferred energy The study, a portion of whien has now been completed and balances and thereby retroactively increasing the subsidiaries submitted to the NJBPU, concludes that "the process of base revenues. Furthermore, the companies propose to bankruptcy introduces risks of higher costs to rate-payers reduce their rate increase requests of July 29,1980 by any and would probably reduce the flexibility of the NJBPU and amounts awarded with respect to these petitions. JCP&L to make important decisions during a critical time The PaPUC, on December 18,1980, approved energy cost peiiod. Therefore, we believe that the NJBPU should con-rates for Met-Ed and Penelec which provide for the current tinue to provide rate relief necessary to preserve the sol-recovery of energy costs expected to be incurred during the vency ofJCP&L until the strategiwtions study initiated by period January 1,1981 through December 31,1981. the NJBPU has been completed? The Corporation does not know what effect, if any, these hrrestigati<ms: reports will have upon it or its subsidiaries. OnJanuary 23,1980, the NRL, imposed cm..l penalties against Other investigations and inquiries into the nature, causes Met-Ed of $155,000 for safety, maintenance, procedural and and consequences of the TMI-2 accident commenced by training violations at TMI. The NRC has also stated that, various federal and state bodies are continuing. The Corpora-depending upon the findings of continuing investigations into tion and its su5sidiaries are unable to estimate the full scope the TMI-2 accident, it may take additional enforcement and nature of these continuing investigations or the potential action such as assessmg a dditional civil penalties or orden.ng consequences thereof to the investors in the securities of the the suspension, ruodification or revocation of Met-Ed's h-Corporation and its subsidiaries. The Corporation is also 28 unable to determine the impact, if any, the results of such subsidiaries for senicts rendered and equipment allegedly investigations may have on (i) the proceedings to return provided under the contract for the TMI-2 nuclear steam TMI-1 to operation (ii) the efforts to clean up and rehabilitate supply system. TMI-2 and (iii) the rate regulatory agency decisions with The Corporation and its subsidiaries are presently unable respect to the ultimate recoverability from ratepayers of the to estimate the likelihood of an unfavorable outcome on any of replacement power costs necessi.ited by the unavailability of the matters set forth in the preceding paragraphs or their TMI-1 and TMI-2. financial exposure with respect thereto. On December 8,1980, the Corporation and its subsidiaries N #N""# filed a claim with the NRC for damages, estimated at about As a result of the accident, the Corporation, and/or its $4 billion, resulting from the accident. The claim alleges that subsidiaries, have been named as defendants in various law the NRC violated its statutory and regulatory duties to warn suits. The suits include (i) individual suits as well as pur-nuclear plant licensees of defects in equipment, analyses, ported and actual class actions for personal and property procedures and training at nuclear facilities. The claim also damages (including claims for punitive damages) resulting charges that, following a similarincident at a nuclear power fmn ti c accMent and (ii) suits to enjoin the future operation plant operated by a non-affiliated utility which the NRC had investigated, the NRC failed to take and recommend appro-The suits described in (i) above involve questions as to priate achon and to warn Met-Ed and other licensees of whether certain of such claims, materialin amount and simuar mactors of any dekcts. Maim seeks to me arising out cf both the accident itself and the cleanup and the cost of cleanup a.nd restoration, replacement power decontamination efforts are (a) subject to limitation of liability c sts, W menues an& mas &an@on h NE set by the Price-Anderson Act: and (b) outside the insurance has not yet responded to the claim. coverage provided pursuant to the Price-Anderson Act. These questions have not yet been resolved. hrsurance: In February 1981, the insurance companies and representa-The property damage insurance, and the $300 million limit of tives in the class actions reached an agreement for the coverage, was applicable to both TMI-l and TM1-2. This proposed settlement of the class action claims for economic property insurance had been reduced by claims paid. The losses resulting from the TMI-2 accident. If the settlement insurance carriers have reinstated the original coverage limits agreement is approved by the court in which the class action for TM1-1. With regard to property insurance for TMI-2, claims are pending, the insurance companies would establish coverage has been reinstated only for possible damage which a fund of $20 million for economic loss claims and a separate might result from a non-nuclear accident during the unit's fund of $5 million for public health purposes. Earlier, the restoration period. Additional property damage insurance for court had he!d that personal injury claims (other than for TMI-l of up to $375 million was obtained by the subsidiaries medical detection services) could not be pursued in class through membership in Nuclear Mutual Limited ("NML"). As action proceedings and the February 1981 agreement does members of NML, the subsidiaries are subject to annual not deal with such claims. assessments of up to 14 times their annual premium, or $19.3 Class suits for damages on behalf of purchasers of GPU million, in the event of an incident at a nuclear plant of any common stock during the period August 25,1975 through member company. April 1,1979 have also been instituted against the Corpora-The Price-Anderson Amendments to the Atomic Energy tion and certain ofits directors as a result of the accident. Act limit liability to third parties to $560 million for each These suits have raised questions, which have not yet been nuclear incident. Coverage of the first $140 million (raised to resolved, as to whether certain claims are beyond the $160 million following the accident) of such liability is provided msurance coverage for directors' and officers' liability carried by private insurance. The next $355 million is provided by by the Syste m companies. The directors have filed a third-assessments of up to the limit of $5 million per nuclear party complaint against the insurance company pmviding reactor per incident, but not more than $10 million per such primary insurance coverage. reactor in any calendar year. The remainder is provided by a . On March 25,1980, the Corporation and its subsidiaries government indemnity. Based on the ownership of three filed a complaint against the supplier (and its parent) of the nuclear reactors, the subsidiaries' maximum potential assess-nuclear steam supply system and associated services, train-ment under these provisions would be $15 million per incident ing and procedures for TMl-2, for damages suffered by the but not more than $30 million per calendar year for claims Corporation and its subsidiaries as a result of the accident. covered by this insurance. The complaint alleged that the damages incurred were in The Corporation's private insurance under Price-Anderson excess of $500 million and that very substantial future with respect to TMI-2 provides that coverage is reduced by damages are expected. On July 18,1980, the defendants claims paid but is subget to reinstatement to original answered the complaint denying liability and seeking $4.1 coverage limits upon approval by the insurance carriers. The million, plus finance charges, from the Corporation and its subsidiaries ha.ve applied for such reinstatement but are 29 unable at this time to ascertain whether or when such its customers $3.7 million plus interest at 6% per annum, or reinstatement will be approved. The NRC has informed Met-an aggregate of $4.7 million. On May 23,1980, the PaPUC Ed that the failure by it to obtain such reinstatement could directed Met-Ed to reduce its deferred energy costs balance result in the suspension or revocation of its license to operate in satisfaction of such refunds. Effective May 1980, Met-Ed TMI-2. recorded such adjustment, net of related tax benefits of $2.1 Effective September 15,1980, JCP&L, with respect to its million. Met-Ed has appealed the PaPUC's decision to the Oyster Creek nuclear generating station only, is a member of Pennsylvania Commonwealth Court. Nuclear Electric Insurance Limited (NEIL). NEIL, a mutual in November and December 1978, the PaPUC issued - insurance compariy, pmvides coverage for the incremental further complaints asserting that Met-Ed and Penelec in-cost of replacement power during prolonged accidental out-curred excess costs of $4.6 million and $.8 million, respec-ages of nuclear power generating units. As a member of tively, for coal purchased during 1975 and 1976,' and that such NEIL, JCP&L is subject te a retmspective premium adjust-excess payments were without justification and directing ' ment limited to $7.55 million, which is five times its annud Met-Ed and Penelec to show cause why they should not be premium, in the event that losses exceed the accumulated required to refund these amounts to their customers. Such funds available to NEIL. complaints were based on audit reports prepared by the JCP&L's insurance coverage under NEIL provides for a PaPUC staff. Met-Ed and Penelec believe that the payments maximum weekly indemnity of $2 million, beginning 26 which they made were justified and that there is no basis for weeks after an outage, for the incremental cost of replace-requiring such refund 3, and they have so responded to the ment power. The policy limits covered outages to fifty-two complaints. weeks at 100% of the weekly indemnity and fifty-two addi-The Corporation is unable at this time to predict the tional weeks at 50% of the weekly indemnity, outcome of these matters. Forked River Project Nuclear Fuel Litigation On November 6,1980, as a result of regulatory, cost and in 1971 JCP&L entered into a contract for the purchase of cther uncertainties, JCP&L abandoned its effort to proceed three nuclear fuel reloads for the Oyster Creek station, with with the construction of the Forked River nuclear project. an option for five additional annual reloads beginning in 1976. JCP&L's investment in the project of $112 million (including in 1974, the supplier offered an extension of that contract to $20 million of estimated cancellation costs) at December 31, cover five additional annual reloads beginning in 1981. JC P&L 1980 has been reclassified to deferred debits (unamortized believes that it effectively exercised the option in the initial property losses). Of this investment, $82 million reflects contract and accepted the offer to extend the contract to constniction financing costs and $23 million represents cover the annual reloads through 1985. The supplier disputes expenditures on contracts for nuclear fuel. this position and, in November 1978, submitted bills for During the second quarter of 1979, in v'ew of the impact of material and services in the c.ggregate amount of appmx-the accident at TMI-2 on its financing capability, JCP&L imately $33 million, covering reloads supplied in 1977,1978 suspended construction on the project. Furthermore, effec-and 1979. He supplier stated that its objective was to tive April 1,1980, JCP&L ceased the accrual of credits to establish revised prices and other terms and conditions incon,e for the carrying costs of funds associated with rather than to diminish supplies and, without prejudice to its construction of the project (allowance for funds used during legal position, provided the 1979 annual fuel reload. Of the construction), pending a decision as to its continuation. $33 million claimed by the supplier to be due, JCP&L has paid in its Apnl 29,1980 rate increase application, JC P&L is approximately $3.8 million and is of the opinion that the seeking allowance for amortization of its investment in the balance of approximately $29 million is not payable by it and pmject for rate-making purposes. has so informed the supplier. OnJanuary 26,1979, the supplier filed suit against JCP&L, the Corporation and GPU Coal Purchase Costs Service Corporation. JC P& L has filed a counterclaim for a In January and April 1977, the PaPUL, issued amended declaratoryjudgment confirming its view of the contractual complaints asserting that Met-Ed and Penelec made pay-status and for damages and has also filed another suit against ments in 1974 for coal that were $9.8 million and $4.9 million, the supplier and its parent seeking damages. JCP&L believes respectively, in excess of those required by their contracts, that any additional amount that it might be required to pay if and that such excess payments were without justification and the supplier is successfulin its suit would be valid costs and directing Met-Ed and Penelec to show cause why they should should be recognized for ratemaking purposes. Ilowever, not be required to refund these amounts to their customers. there can be no assurance that this will be the case. If the Met-Ed and Penelec believe that the payrnents which they suits were to be resolved in the supplier's favor, JCP&L made were justified and that there is no basis for requiring would incur $10 million in additional fuel expense, based on such refunds, and they so responded to the complaints. the amount of fuel consumed through December 31,1980. Dunng the spring of1980, the PaPUC upheld in part the complaint against Met-Ed and ordered Met-Ed to refund to 30 Other

2. Summary of Significant Accounting Policies The subsidiaries

• construction programs, which extend over

%g several years, contemplate expenditures of approximately The consolidated financial statements include the accounts of $26a million during 1981. In connection with these construc-all subsidiaries. tion programs, the subsidiaries have incurred commitments. It is the general policy of the Corporation's subsidiaries to The subsidiaries are engaged in negotiations and, in certain record additions to utility plant at cost, which includes instances, litigation with various suppliers relating to the material, labor, overhead and an allowance for funds used latters claims for delay or termination charges or mereased during construction (AFC). The cost of current repairs fees which such suppliers assert result from the subsidiaries, (except those related to the nuclear accident described in revisions of their construction plans and schedules and/or Note 1) and minor replacements is charmd to appropriate from the increased scope of supply. The subsidianes man-operating expense and clearing accountund the cost of agements do not expect at this time that such negotiations renewals and betterments is capitalized. The original cost of and htigation will result in any materialincrease in costs that utility plant retired, or otherwise disposed of, is charged to would not be valid costs properly recognizable thmugh the accumulated depreciation. ratemaking process. Claims for damages arising out of the operation of the Operating Revenues: Oyster Creek station have been asserted. JC P&L's manage. Revenues are generally recorded on the basis of billings ment believes that such liability, if any, as it may have for such rendered. damages in the pending suits and for all asserted and Deterred Energy Costs: potential similar claims would not be material The subsidiaries follow a policy of recognizing energy costs in JCP& L was a participant in the Atlantic generatmg station the period in which the related energy clause revenues are project, in December 1978, the non-affiliated co-owner and billed (see Note 1). pnneipal sponsor of the station announced the abandonment of the project. At December 31,1980,JCP&L's unamortized Depreciation: investment in the project was $4.1 million. In its pending rate The Corporation's subsidiaries provide for depreciation at - increase application to the NJBPU, JCP&L is seeking allow. annual rates determined and revised periodically, on the basis ance for amortization of its investment in the project for of studies, to be sufficient to amortize the original cost of ratemaking purposes. In testimony submitted in connection depreciable property over estimated remaining ser ice lives, with JC P& L*s motion for an interim rate increase, NJ BPU which are generally longer than those employed for tax staff members recommended allowance for ratemaking pur-purposes. The subsidstries use depreciation rates which, on poses of amortization of this investment over a 20-year an aggregate composite basis, resulted in an approximate peiiod. Effective April 1,1980, in accordance with the annual rate of 3.18%, 3.179, 3.07%, 3.02% and 2.95% for Federal Energy Regulatory Commission's (FERC) authoriza. the years 1980,1979,1978,1977 and 1976, respectively. tion. JCP&L is amortizing its investment in the Atlantic Nuclear Plant Decommissioning Costs: station (net of related income tax benefits of $1.4 million) In accordance with ratemaking determinations (a) JCP&L is over a period of 20 years. charging to expense and crediting to a non-funded reserve 5!et-Ed has cancelled plans forits Berne generating amounts intended to provide over their service lives for the station. At December 31,1980, Slet-Ed's iavestment in the cost of decommissioning nuclear plants at the erd of their project was appmximately $6.4 million, of which amount $3.8 usefullives (estimated for purposes of the ratemaking deter-million represented investment in land and $2.6 million minations to range between $27 and $36 million per unit, 1 preliminary licensing, emironmental and engineering studies, then current dollars assuming in-place entombment), and (b) In its July 29,1980 rate increase application, Slet-Ed asked Slet-Ed and Penelec are charging to expense amounts the PaPUC for authorization to amortize its investment in the ntended to provide over their service lives for the decom-project, subject.o disposition of the land, over a period of five missioning of their shares of the radiocctive components of years, and for the inclusion of the unamortized portion in rate their nuclear units (approxunately $24 million per unit in then base. There can be ne assurance that such treatment will be curi.ut dollars). In accordance with ratemaking require-granted. ments, these charges make no provision for possible inflation The Stony Creek pumped storage project has been can-in decommissioning costs during the period prior to decom-celled by its non-affiliated principal sponsor. At December 31, missioning but are expected to be subject to modification to 1980, Slet-Ed's investment in the project was approximately take cognizance of that factor. $2.6 million. In its current rate proceeding, Slet-Ed has asked for authorization to amortize such investment over a Amortization of Nuclear Fuel: period of five years and for the inclusion of the unamortized The amoi tization of nuclear fuel is provided on a unit of 1 partion in rate base. There can be no assurance tret such production basis. Rates are determined and periodically tmatment will be granted. 31 n revised to amortize the cost over the useful life. JC P&L is effective September 1977, began employing a net of tax - providing for estimated future handling costs for the spent . accrual rate for AFC on certain construction projects while Oyster Creek nuclear fuel, and similar treatment will be using a gross AFC rate on others. provided for future handling costs for the spent Thl! nuclear The subsidiaries have accrued AFC using rates which, on fuel when required. Previously accumulated estimated re-an aggregate composite basis, resulted in annual rates of. sidual credits, net of previously accumulated estimated costs 8.91%,8.60%,7.999,9.03% and 8.71% for the years 1980, of reprocessing, for the Oyster Creek station nuclear fuelare 1979,1978,1977 and 1976, respectively. being amortized to fuel expense on a unit of production basis. "8 ""8"'" Income Taxes: The Corporation and its subsidiaries file consolidated Federal in June 1979, the Corporation and its subsidiaries entered income tax returns. All participants in a consolidated Federal into a revohing credit agreement with a group of banks, income tax return are severally liable for the full amount of scheduled to expire on October 1,1981, under which they had any tax, including penalties and interest, which may be available, at December 31,1980, $292 million of credit, of assessed against the group. which $169 million ($156 million of short-term borrowings, fhe revenues of the Corporation's subsidiaries in any $13 mihion of first mortgage bonds due October 1,1981) has period are dependent to a significant extent upon the costs been utilized for outstanding borrowings. Borrowings under which are recognized and allowed in that period for rate-the agreement are renewable at six month intervals, the next makir}g purposes. In accordance therewith, the Comoration's such date being April l,1981. Such available credit may be subsidiaries have employed the following oolicies: increased to $412 million upon the approval of banks holding 7hx Dcpreciation The subsidiaries of the Corporation 85% of the notes outstanding. Subject to the overall system generally utilize liberalized depreciation methods and the limit, which is less than the total of the individual limits of the f. shortest depreciation lives permitted by the Internal Corporation and its subsidiaries, the effective individuallimits / Revenue Code in computing depreciation deductions and are: the Corporation-875 million (which may be increased to provide for deferred income taxes where permitted in $150 mil' ion upon the approval of the banks holding 85% of the ratemaking pmcess. Ilowever, in 1980, with respect the notes outstanding), JCP&L-8123 million, hiet-Ed-886 to TA11-2, the subsidiaries elected to utilize straight-line million (including $13 million of bonds sold to the banks in tax depreciation. January 1980) and Penelec- $116 million. The agreement Inrcstment Credits The 3% investment credits are being provides for a commitment fee of one-half of one percent per amortized over a 10-year period while the 4% and 10% annum of each bank's total commitment (whether used or l investment credits are being amortized over the esti-unused). Interest rates on such borrowings range from 105% mated senice lives of the related facilities. to 111% of the prime rate. In light of the actions taken by the PaPUC on hlay 23,

3. Allowance for Funds Used During Construction 1980, and August 28,1980 the banks advised that they do not expedeMd to kmw in excess of an aggmgak amount The applicable regulatory Uniform System of Accounts equal to (i) $20,000,000 (the value ascribed by the banks to pmvides for AFC w.hich is defined as m. eluding the net cost the uranium Alet-Ed has pledged to them as collateral)(ii) the l

during the period of construction of borrowed funds (allow-amount of Alet-Ed's deferred energy account which amount j ance for borrowed funds used during construction) used for is anticipated to decrease from time to time ($42.4 million at j construction purposes and a reasonable rate on other funds December 31,1980), and (iii) 80% of pledged acceptable (allowance for u - funds used during construction) when so short-term h.qmd assets to the banks, such as accounts I used. While AFC results in a current increase in utility plant ma ey a so a s any ewnt Mxmw under the aforementioned formula should not excee { to be recognized for ratemaking purposes and represents, in 10a this fashion, current compensation AFC is not an item of milli n. On November 14,1980 hiet-Ed pledged its customer currv.nt cash income, instead, AFC is realized in cash after axounts receivable as collateral for loans under the revohing the related plant is placed in senice by means of the credit agreement. allowance for depreciation charges based on the total cost of The Corporation has guaranteed all borrowings outstand-the plant, including AFC. ing under the revohing credit agreement. As collateral for I To the extent permitted in the ratemaking pmceedings of such guarantee, the Corporation s $39 million term loan, and the subsidiaries, the income tax reductions associated with the guarantee by the Corporation of $4.6 million ofloans to the interest component of V C have been alk>cated to reduce GPU Senice Corporation (GPUSC), the Corporation has interest charges and, correspondingly, have not reduced pledged the common stock ofJCP&L, hiet-Ed. Penelec and income taxes charged to operating expenses. Pursuant to such rate orders, the Pennsylvania subsidiaries employ a net JCP&L and Alet-Ed have secured their notes under the of tax accrual rate for AFC, JCI &L employed a partial net of my hing credit agreement by pledging certain nuclear fuel m. tax AFC accrual rate fmm June 1975 through July 1976, and, 32 t the process of refinement, conversion, enrichment and fab-

6. Cumulative Preferred Stock-Mandatory Redemption rication as collateral. Such nuclear fuel was recorded. on the.

At December 31,1980 and 1979 thd subsidiaries had out-- Decetnber 31,1980 balance sheet, at a cost of $39.2 million. In addition, Afet-Ed has pledged $40 million of first mortgage standing the following issues of cumulative preferred stock bords as collateral for its indebtedness under the revolving which are subject to mandatory redemption requirements credit agreement and has also pledged its customer accounts outstandinc <In Thousan6s receivable ($28.9 million at December 31,1980), as noted im 19 3 Iw - 1979 above. JcP&t.: ihe revohing credit agreement and the purchase agree. 13.59 Series F 175.uo 187,50u - $17,500 $16,750. ments for the bonds sold byJCP&L and Penelec subsequent b I w to the accident at Tall-2 ($147.5 million) contam provisions Penelec: for the immediate payment of the indebtedness involved upon 11.729 seriesJ 187.500 zoo.uo 18.750 20.oto the occurrence of an event deemed by specified majorities of 10.889 senes K 304.0 0 320.000 - 30.400 32,000 the lenders or of holders of such bonds to have a materially Due mthin one year (28,9 4 (28.9Wo (2,83n (2.830 adverse effect on the bormwer. Aloreover, should the bor-hals 3M 9" 9%"'" $ & 50 8"" *

• mwings under the revolving credit agreement not be renewed JCP&L has had an annual redemption requirement of 12,500 on Aprill,1981, or the agreement not extended subsequent shares of the Series F preferred stock since 1975. It also has to October 1,1981, a specified majority of the bond holders

. an annual redemption requirement of 12,500 shares of the. could require the immediate payment of the indebtedness. series G preferred stock beginnir.g in 1980. There can be no assurance that the notes under the Penelec has had an annual redemption requirement of revohing credit agreement will be renewed or that the 12,500 shares of the SeriesJ preferred stock since 1976. It agreement will be extended beyond October 1,1981. also has an annual redemption requirement of 16,000 shares The maximum aggregate amount of bank borrowings of the Series K preferred stock beginning in 1980. outstanding at any month-end during 1980 was $269 million. All redemptions are at the stated values of the shares, plus For the year 1980, the average daily amount outstanding was accrued dividends. No redemptions of pn>ferred stock may appmximately $222 million, having a weighted average inter-be made unless dividends on all preferred stock for all past est rate of 17.09. Bank bormwings outstanding at December quarterly dividend periods have been paid or declared and set 31,1980 aggregated $156 million having a weighted average aside for payment.If dividends upon any shares of preferred. interest rate of 24.3% stock of any subsidiary are in arrears to an amount equal to The maximum aggregate amount of bank bormwings the annual dividend, the holders of preferred stock, voting as outstanding at any month-end during 1979 was $230 million. a class, are entitled to elect a majority of the board of For the year 1979, the average daily amount outstanding was directors of that subsidairy until all dividends in arrears have appmximately $157.2 million, having a weighted average been paid. interest rate of 14.21 Bank borrowings outstanding at The subsidiaries

• aggregate mandatory redemption require-December 31,1979 aggregated $171 million having a ment for all issues of cumulative preferred stock outstanding weighted av ige interest rate of17.2E at December 31,1980 is $5,350,000 per year, through 1985.

5. Ltng-Term Debt Maturities

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

mon stock of the Corporation,61,261,0W shares were issued. ,f, 7 y,,,, and outstanding at December 31,1980 and 1979 and 28,000 mrtwe shares were recorded as reacquired at $2.50 per share. liar Ilonas Isantures tither 7atal' During the periodJanuary 1,1976 through December 31, 198h B80 the Corporation issued additional shares of common-stock as follows: 1983 101.983 5.910 308 108.151 1984 90.984 5.900 4.mwi 100.F90 t/n Timusands) 1985 102.052 5.900 4 lo7.93i Iler ialue Excess arrr - Creditedto fizr la' lue (a) Includes a $39 nullion term loan of the Corporation and $13 nuthon of y,4mber Common Credited to .\\let-Ed bonds, both of which mature on October 1.1981. the date of liar o/Sharcs Stm* CapitalSurplus expiration of the revoinng credit agreement. Excludes $147.5 million of hrst 1976 507,u10 $ 1,29i $ ".431 mortgage bonds due after 1985, which could be presented for immediate 1977 4.4Euo 11.146 72.767 - payment under certain conditions. (sec Note 4). 1978 1.250.0 0 3.124 19.467 Substantially all of the subsidiaries

• properties are subject 1979 293.u o 731 4.188 to the lien of their respective mortgages.

1980 33 8 Cumulative Preferred Stock- $18,318,000 of retained earnings was available for declaration No Mandatory Redemption or payment of dividends onJCP&L's common stock. Further-m re, the NJBPU's May 13,1980 rate order requiresJCP&L At December 31,1980 and 1979, the subsidiaries had out-ctanding the following issues of cumulative preferred stock, } give 30 days notice ofits intention to declare a dividend on its common stock, so that the NjBPU can evaluateJCP&L's which are redeemable solely at the option of the issuers: financial condition. Shares Stated Value. In accordance with Met-Ed's suppementalindenture dated - outstanding (In Thousands) . March 1,1952, $3,360,000 of the balance of Met-Ed's JCP&l.: retained earnings is restricted as to the payment of dividen.ds $$"Scnes 8j', nitt c mm n stock. At December 31,1980,$18,265,000 of 8.12% Senes 250,000 25,000 retamed earnings was available for declaration or payment of. 82 Series 250,000 25,000 dividends on Met-Ed's common stock. 7.884 Senes 250,000 25,000 in accordance with Penelec',; supplementalindenture, - 8.75% Series !!(1) 2,000,000 50,000 datedJune 1,1979, the aggregate amount of any declara' ion k Series r payment of dividends on common stock after December 117.729 11,773 4.35% Series 33,249 3,325 31,1978 cannot eACeed Penelec's earntngs available for 3.85% Series 29,175 2,917 common stock for the period commencingJanuary 1,1979 3.80% Series 18,122 1,812 and terminating at the end of the last fiscal quarter preceding - 4.45* Senes 35,637 as the date of such restricted payment. As of December 31, , l} j)0 1980, $8,113,000 of retained eamings was available for decla-7 G 8.324 Series !! 250,mu 25,000 ration or payment of dividends on Penelec's common stock. 8.124 Series 1 250,000 25,000 8.324 SeriesJ 150,000 15,000 10.IncomeTaxes Penelec: 4.409 Senes15 56,810 5.681 Examinations of Federalincome tax returns through 1978 4 3.70% Senes C 97,054 9,705 have been completed. 4.05% Series D 63,696 6,370 Income tax expense for the years 1976 thmugh 1980 was 2,8

• l less than the amount computed by applying the statutory rate 7

4.60% Senes G 75.732 7,573 to book income subject to tax as follows: A36% Series 11 250,000 25,000 (In Mdlions1 8.124 Series 1 250,000 25,000 I!m 19 3 19;N 1977 19 76 9.004 Series IJ2) 1.40I) 0 0 35.000 Operatingincome Total 6,783,912 $423,391 before income taxes $263 $343 $339 $349 $310 Other income. net 7 9 4 1 Totals 270 352 343 349 311 Interest expense (218) (193) (160) (152) (139) At December 31,1980 and 1979, the subsidiaries were gon % authorized to issue 37,035,000 shares subject to mcome tax s 52 5159 5183 $197 5172 GCP&L-15,600,000 shares, Met-Ed-10,000,000 Income tax at statutory rate (a) s 24 s 73 s 88 s 95 s 82 shares, and Penelec-11.435,000 shares) of cumulative Excess of tax over tmk preferred stock, no par value. depreciation (flow through portion)(Note 2) (1) (2) (10) (7) (9) Amortizatonof accumulated

9. Consolidated Retained Earnings investment eredits(Note 2i (4)

(5) (4) (4) (4) Under the revohing credit agreement, the balance of consoli-other adjustments (4) (3) (2) I dated retained earnings must be at least $300,000,000. Income tax expense s 15 s al s 72 sa s 7o 7n th 399 l a 419 In accordance withjCP&L's supplementalindenture dated Effective income tax rate June 1,1979, the amount of common dividends payable by JCP&L is limited, to the extent they are not matched by cash (a) EffectiveJanuary 1,1979, the statutory rate was changed from 48% to 469. capital cantributions fmm the Corporation, to an amount equal to 25% of earnings for the years 1979 and 1980 and 100"e of earnings thereafter. As of December 31,1980, 31 Income tax expense is comprised of the following-

12. Supplementary income Statement Information hiaintenance and other taxes charged to operating expenses 19m i9M i 19 77 1976 Federalincorne tax

$ (8) $3 $(20) $9 $ 33 consisted of the following: State income tax 2 7 5 9 5 6"3filli""8) lnc<nne taxes on other 1980 19M 19M 19 77 1976 incocv, net 6 5 2 1' 1 Maintenance $120 $ 91 $108 $ 87 $ 79 incrane taxes attnbutable Other taxes-birn d n s( ote 3) (7) (8) (15) (13) (11) Gross revenue and franchise 26 20 17 14 12 Provisions for taxes currently State surtax 11 9 7 6 5. payable (refundable) (7Xa) 7 (28) 6 28 C@talstock 6 11 11 10 6 Deferred income taxes, net 75 68 58 35 34 Realestate and Current investrnent credits (c) (49Xb) (7Xb) 46 47 12 Amortization of accumulated personas property 16 12 11 11 10 Other 11 10 9 7 7 investment eredits J) (5) (4) (4) (4) Totals $173 $149 $130 $115 Income tax expense $ 15 $ 63 $ 72 $ 84 $ 70 - - $ 95 (a) As a result of the abandonment of the Forked River nuclear generating The liability for NewJersey State franchise and gross receipt pniret, the Grporation and its subsidiaries incurred a consohdated net taxes and surtax is established in each year of exercise of operating kiss for tax purposes of $318 mdhon in 1980. Of this amount, such franchise based on the preceding year's gross receipts $144 nulhon was carried back to prior years resulting in a Federalincorne and no liability exists in a current year to pay a tax based on - tax refund of $9 milhon, which is reflected in Accounts receivable-Others. that year's gross receipts. JCP&L has consistently made The unused balance of the net operating tax kiss of 5174 nu"onis asadable u a carr>1orward, which can be used to reduce future current provision in its accounts for such taxes on this basis. For rate-(b)Re$ rminat noIp m2 king purposes (including the operation of the energy r ears' investment tax credits resulting from net djustment clause) the NJBPU computes allowable expenses operating h>sses. These amounts are retlected in unused investment. as including provision for such taxes based on the current

credas, year's gross receipts rather than those of the precedir.g year.

(c) t'nused investment tax credits avadable for carryforward to future years EffectiveJanuary 1,1979, pursuant to a recommendation by aggregate $101 mdlion of which $10 milhun, $48 nullion, $23 million and 82"""*"n expire in 1984,1985,1986 and 1987 respectively. the FERC, JCP&L began recording state revenue taxes related to energy clause revenues in the period the revenues The pmvisions for deferred income taxes, net, result from are collected. the following timing differences: an aril: ions)

13. Pension Plans

] IH1 19N 19M 1977 1976 1,ihrrahzed depreciation porasn's subshes be sad pensbn @s mie 23: applicable to all employees, the accrued costs of which are Federal $ 36 $ 50 $ 37 $ 24 $ 21 being funded. The costs of supplemental pension plans State 5 4 3 Deferralof energy costs applic2ble only to supenisorv employees were not funded prior to 1976. The previously unfunded supplemental pension h"hx plan costs are being funded during the five year period 2 (333 33 7 3 9 beginni.1gJanuary 1,1977. Prior senice costs applicab!e to all state (1) (2) 1 2 Forked River abandonment plans are being amortized and funded over 25-year neriods. loss (Note 1) 70 Revenue taxes-energy Total pension cost for the years 1980,1979,197o,1977 and 1976 amounted to approximately $24.2 million, $22,8 million, $19.6 mirion, $16.8 million and $14.9 million respectively. Other ) 8 (1) (1) Totals $ 75 - -b $ 35 $ 34 $ 68 n a aa a epes, as d January 1,1980, the subsidianes' plans had accumulated benefits and net assets as follows:

11. Loans to Non-Affiliated Coal Companies Penelee is providing financing to non-affiliated mining com-panics supplying coal to the Homer City generating station under long-term contracts. These loans bear interest at a s

rate which is 1%% per annum above the prime interest rate. 35 - tin Millions) Januars i. 980 Januars i.19m Actuarialpresent value of accumulated benents:' Vested $227.1' $203.7 - Nonvested $ 33.9 $ 27.6 $261.0. $31.3 Net assets avadable for benents $238.4 . $197.4

• Represents benehts earned only to the date of the evaluation by current participants in the plans. liascal upon assumptum of continuatitm of employment by all particip nts until normal retirement age, future levels of salary increases and fund earnings, the unfunded past i.ervice liabilities for -

the plans arnuunted to $133.0 mdhon and $125.7 million at January 1.1980 and 1979, respectively. The assumed rate of return used in determining the actuarial present value of accumulated plan benefits was 8 percent for. both 1980 and 1979.

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

i Balancelin Thousands) in Accumulated Station % Duenership Smice Deprecsation llomer City 50 296.013 43,732 Keystone 16.67 36.841 . 10,617 i Conemaugh 16.45 41,312 10.167 l Yards Creek 50 - 16,003 2.524 - l" _ Seneca 20 13.101 1,837 { Each participant in a jointly owned generating unit finances its j own portion and charges the appropriate operating expenses with its share of direct expenses. The dollar amounts shown above represent only those portions of the units owned by }. ,ubsidiaries of the Corporation.

15. Quarterly Financial Data (Unaudited) fin Thousands ExceptIVrShanisata)

Furst Quarter Second que2rter !!MO 19') 1980 19 3 Operating Revenues $448,714 $3M,889 $425.010 $335.364 Operating Income $ 6H,862 $ 76,4'u $ 51.410 - $ 63,778 Net income (Loss) $ 17.068 $ 35,744 $ (8.358) $ 19,936 4 Earnings (less)per share .28 .59 $ (.14) $ .33 Average Shares 61.264 61.082 61,264 61.264 ThirdQuarter Fourth Quarter !!MO 19m 1!MO 19B Operatmg Revenues $490,201 $383.927 $167,815 $385.974 Operatingincome $ 67,539 $ 73,220 $ 58,784 $ 63.812 Net Income $ 10,458 $ 25,591. $ 1,419 $ 14.512 Earnings per share .17 $ .42 $ .03 $ .23 Average Shares 61.268 61,268 61.264 61,264 See Note I which contains information with respect to rate orders and their ~ ffectonquarterlyearnings. e I e 1 1 ,~-,s -.m .y- System Statistics GeneralPubhc Uhhtws Corporahon andSubsidiary Companies 1980 1979 1978 1977 1976 G. crating Capacities and Peaks OlW): Installed capacity (at year end) (a).. 8,254 8,262 8,281 7,190 7,038 Annual hourly peak load........ 6,161(b) 6,173(c) 5,898(c) 5.760(c) 5,705(c) Reserve (%)(a). 31.0 33.8 40.4 24.8 23.4 Net System Requirements (in thousands of siwlo:. Net generation................ 22,659 26.891 29,747 26,576 26,213 Pow er purchased and interchanged., net.... 12,346 7,982 4,275 5.926 5.489 Total Net System Requirements......... 35,005 34.873 31.022 32,502 31.702 Load Factor (%).. 64.9 64.5 - 65.8 61.4 63.4 Production Data: Cost of fuel (in mills per Kwei of generation): Coal............... 13.76 12.95 13.17 11.15 10.50 Oil.. 62.49 39.01 28.62 29.74 26.13 Nuclear....... 3.82 3.18 2.31 2.06 2.01 Other.... 42.29 35.77 27.58 22.82 16.44 Average. 17.24 12.48 11.17 10.17 9.32 Generation by fuel type (%): Coal. 81 67 57 56 59 Oil.... 5 6 9 10 9 Nuclear... 8 25 34 33 31 Other (gas & hydro). 6 2 1 1 'Ibtals 100 100 100 100 100 Electric Energy Sales (in thousands of Mwio: Residential. 10,810 10,754 10,715 10,257 9,932 Commercial... 7,687 7,359 7,208 6,832 6,483 Industrial.. 11,520 11,974 11,447 10,849 10,477 Other.. 1,821 1,908 1.900 1,832 1,745 Totals....... 31,838 31,995 31.270 29,770 28,637 Electric Operating Revenues (in thousands): Residential.. .S 719,166 $ 597,757 $ 544,571 $ 515,522 $ 444.244 Commercial 470,123 360,859 328,081 308.901 263,423 Industrial...... 531,369 431.104 365,456 342,487 285,056 Other. 87,535 77.512 67,421 61,541 57,180 Totals from Kwii Sales.. 1,808,193 1,467,232 1,305.529 1,231,454 1,049,903 Other revenues..... 21,102 20,479 18.721 18.222 16.273 Totals .... $1,829,295 $1.487,711 $1,324.250 $1.249,676 $1,066,176 Cu:tomers-Year End (in thousands): Residential.... 1,405 1,386 1,361 1,339 1,320 Commercial 161 157 154 151 149 Industrial.... 9 10 9 9 10 Other........... 3 5 5 5 4 Totals 1,578 1,558 1.532 1.501 1,483 Price per Kwit-all customers (cents).. 5.68 4.59 4.18 4.14 3.67 (a) Includes the instaHed capadty of the 'Ihree Mde Island nuclear generating station Unit No. I of 800 MW for all periods and t! nit No. 2 of Soti MW for 1978 thmugh 1980. The reserve (4). excluding these units for 1980 and 1979. would be 6.39 and 6.24. respectively. (b) Summer peak. (c) Winter peak. 37 i Supplementary Information T3 Disclose The Effects Of Changing Prices (Unaudited): The following supplementary information is supplied in accord-prices. It should be viewed as an estimate of the approximate ance with the requirements of FASB Statement No. 33. effect ofinflation, rather than as a precise measurement, " Financial Reporting and Changing Prices," for the purpose since a number of subjective judgments and estimating of prrwiding certain information about the effects of changing techniques were employed in developing the tnformation. Consolidated Statement of Income Adjusted for Changing Prices In Thousands (Note A) Conventunal constant Dollar current cost Ihstoncal Aurage .4nrage For the Ikar Ended Drambrr31.1980 Cost 1980 Dollars 1.%0 Dollars Operating Revenuee $1.831.741 $1.831,741 $1.831.741 Energy Costs (Note D) 856,973 856.9 3 856.9 3 Deprematun (Note C) 147.0M 288.3J4 312.5FJ Other Operating Expenses 5 4.627 5M 6?7 5M.627 income Taxes (Note E' 18.460 18.160 18,460 Total Operatvg Expenses 1.587,1 M 1,728.394 1.752.639 Operatmg income

• 244.595 103.347

'J,102 Other Income and Deductions 14.963 14.963 14.967 Interest Charges 195,910 195.910 195.910 Preferred Dividends 43,057 43.057 43.05 7 inceme avadable for common (excluding reduction to net recoverable cost)* $ 20,591 $ H20,657) $ (144.902) Change m net plant assets dunng 19N) due to increases in spea6c pnces $ 748.403 Less: Chage in net plant assets during 1980 due to increase in general pnce level (intiation) 856,112 Change in speedic prices net of general pnce level (mflation) (107.7f 9) Reduction to net recoverable cost of plant assets (Note F) $ (325.432) (193.543) Excess of mcrease in general price level over mcrease in specinc prices, after reduction to net recoverable value (301.252) Gam from dechne in purchasing power of net amounts owed (Note B) 255 2 92 255.292 Net. Note F) $ (70.140) $ (45.960)

• Revenues, operating income, and income available for common have been adversely affected by regulatory &sallowances of operating expenses and return requirements associated with TMI-I and TMI-2 (see Note IL Notes to Supplementary information Note A-Adjustir g for changing prices:

gain of general purchasing power because the amoimr sf money required to Constant dollar amounts represent historical costs stated in terms of dollars settle the habihties represents dollars of du siished purchasing power. of equal purchasing per, as measured by the Consumer Pnce Index for All All assets and liabaues that are not monetary are nonmonetary. Nonmone-Urban Consumers (CPI-UL Current cost amounts reflect the changes in tary items, such as oroperty. plant and equipment, do not gain or lose speafic pnces of plant, and differ from constant dollar amounts to the extent general purchasirig power solely as a result of general ph level changes, that specific pnces have increased more or less rapidly than pnces in general. but rather are affected by the relationships between specific pnces for the The current cost cf property, plant, and equipment, which includes land, item and changes in the generallevel of prices. Land rights, intangible plant, property held for future use, construction work in progress, and other physical property, was determmed by applymg Note B-Purchasing Power Gain: in6vidual compar.y equipment cost indices or the llandy-Wluunan Index of Since the Company owed net monetary liabilities during a period in which Pubhc l'tdity Construction Costs to sumving plant investments. These the purchasing power of the dollar declined (i.e., during a penod of intiation), current cost amounts are restatements of the purchasmg power w bch was the Company experienced a gain in purchasing power. This net gairiin invested in survmng plant, but do not necessaaly represent replacement purchasing power, shown separately in the accompanying supplementary cost or current value of existmg plant production capaaty. The actual schedule, was calculated as the difference between beginning and ending replacement of the capaaty of present facihties wdl wcur over many years as year net monetary liabdities, each converted to average 1980 dollars per the future facihties, 6fferent in kind from present facihties, are constructed and CPI-U index. All assets and habilities other than property, plant and placed in somcc. equipment, as well as anw unts apphcable to redeemable. referred stock. A key coacept m understanding the data adjusted for inflation is the were treated as monetar y sems and thus included in the purchasing power &stinction between monetary and nonmonetary assets and habihues. gain computation. Althopp certam assets and liabdities might be considered Monetary items are those assets and habilit es which are or wdl be nonmonetary from a stric t theoreucal point of view, such amounts do not converted into a fixed number of dollars regardless of changes in pnces. materially affect the purchasing power gain reported. This gam is strictly an Examples of nonetary items include cash, accounts receivable and debt. economic concept and will never be realized in cash. As such, the amount Dunng penods of intiaten. the holding of monetary assets results in a k>ss of does not represent funds avadable for distribution te shareholders. general purchasmg power. Sinularly, monetary hab.hties are assoaated with a 38 Note *-Depreciationadjustedforchangingprices: Note F-Effect of Rete Regulation. In ac ordance w,th procedures spenned in FASB Staterra nt No. 33 Under the ratemaking prescnbed by the regulatory commissions to which rew nues and au expenses other than deprecution we considered to reflect the Corporaton's subsuharies are subject, only the histoncal cost of plant is the average pnce level for the year and accordmgly remain unchanged from recoverable in revenues es depreciatum. Therefore, the excess of the cost d those arruxmts shown m the Company's pnmary financial statements. plant stated in terms of constant douars or current cost over the historical 'the current yeari nestant dollar and current cost depreciation prmisions cost of plant is not presently recwerable in rates as depreciation, and is were deterraned by applying the depreciation rates of the Corporation's reflected as a reducten to net recoverable co.t. %hde the ratemaking subsdianes to their respective indexed average depreaable plant arr.ounts. process presently gives no recogrution to the current cost concept of Note D-Energy Coste and Inventories: property, plant, and equipment, the subsidiaries believe based on past Energy costs include fuet, puer purchased and interchanged, and changes practaces, they will be aHowed to earn on the increased cost of their net invest. in deferred ene gy cost bahnces. ment when constructum of both new and replacement capaaty actuauyoccurs. Fuel invutones, nuclear fuel, the cost of fuel used in generation, and To properly reflect the economics of rate regulation in the Conrohdated purchased pimer and mterchange have not been restated from their actual Statement of Income Adjusted for Changmg Prices, the reduction of net lustortral cost. Regulation,lirnits the recovery of fuel and purchased power property, riant, and equipment should be offset by the gain from the decime. rei interchange thmugh the operaton of energy adjustment clauses or in purchasing power of net amounts owed. Dunng a period of inflation, adristments in base rate schedules to actual historical costs. For tids reason. holders of monetary assets suffer a luss of general purchasing power while fuel inventones and nuclear fuel are effectively monetary assets. holders of monetary habdities experience a gain. The gain from the dectw in Note E-Income Temes: purchasing power of net amounts owed is pnmardy attnbutable to the Sutre present tax laws do no: allow mcreased deductions for depreciaton substantial amount of debt which has been used to finance property, plant. adjusted for the effects of mflation, income taxes included in the data and equipment. Smce the depreciation on this plant is kmited to the recovery adjusted for general inflation remain unchanged from those amounts pre, f histoncal costs, the Company du not have the opportunity to taahze a sented m the Company's pnmary financui sutements, hokhng gain on debt and is hnuted to recovery only of the embedded amounts of debt capitzL Five Year Comparison of Selected Financial Data in Thousands ExceptskrShartData Ikar Ended Damber31. 1%0 19 3 1978 1977 1976 Oprating resenues As rep >rted $1.831.741 $1,490.154 $1.326.644 $1,252,013 51,068,753 In 1980 average purchasmg pmer 1,831.741 1,691.674 1.675.618 1,702.462 1,M7,028 Ine xne (Loss) avadable for common In histuncal cost dollars $ 20,591 $ 95,783 $ 138,774 $ 142,779 $ 121,197 In amstant d,4ars (120,657) (l1.096) in current cost douarr (144,902) (43,140) Income (loss) per common share in tustoncalcost douars 0.34 $ 1.56 $ 2.30 $ 2.50 $ 2.20 In coratant doHars (1.97) (.19) In current cost dollars (2.37) {.70) Cash dmdends per comnum share As reported 1 0.00 $ 1.20 $ 1.77 $ 1.70 $ 1.68 in 1980 average purchasing puer 0.00 1.39 2.24 2.31 2.43 Market pnce per common share -t year end As reported 5.000 $ 8.625 $ 17.500 $ 20.875 $ 19.500 In 19M average pure!.asing power 4.776 9.259 21.286 27.684 27,611 Net plant assets (in year-end dollars) In historicalcost dollars $3,729,452 $4,084,619 $3.948.321 $3.687,615 $3.447.057 In constant douars 6,959,293 6,831,119 In current cost dollars 7.254.476 7,199,735 Net assets at year-end at net recoverable cost (in years' average dollars) In constant donars $1,726,226 $1,689.007 In current mt dudars 1.726,226 1.689,007 E xcess of increase in general pnce level over increase in spatic pnces af ter reducton to net recoverable cost $ (301,252) $ (3 M 228) Cam from dechne m purchasing pwer of net amounts owed $ 255.292 5 281.599 Selected balance sheet data at year end (historical costs) Totalassets $5,042,972 $4,991,994 $4,612.tM3 51.305.443 - $3.9M.M9 Img term debt 2.105,439 2,148,972 2.017,123 1.924.650 1.M4.607 Cumulative prefe. red stock-mandatory redemption 82.376 87,396 92,403 M,576 95,436 Average consumer price index 246.8 217.4 195.4 181.5 170.5 December consumer priceindex 258.4 229.9 202.9 186.I 174.3 39 DirectErs Officers Directors General Public Utilities Corporation GPU Service Corporation Louis J. Appell Jr.'. a. : William G. Kuhns William G. Kuhns Chai,, nan and President Chairman and ChiefExecutive Officer ChiefExecutive Officer Susquehanna Hroadcasting Co. 1' rk, Ptnnsylvania17405 Herman Dieckamp Her'sian DieckampPresidentand o (Communications and President and Chief Operating Offcer ChicfOperatingOjpcer C.msumerProducts) Verner H. Condon Verner H. Condon Executive VicePresident John F. Burditt,,, Vice President and ChiefFinancial Offcer Robert C. Arnold VicePresident, Generation Chairman and Chief Executive Officer Edward J. Holcombe [ ACPIndus: ries, Inc. Comptroller Bernard H. Cherry VicePresident l New 1brk, New lbrk 10017 CorporatePlanning (Equi,% ment Stanufacturing) John G. Graham Treasurer Phlilp C* ark VicePresident, NuclearActivities Herman Dieckamp WllIlam L Glttord VicePresident President and Chief Operating Officer Helen M.Graydon l GeneralPublic Utilities Corporation Suretary Communications, NuclearActivities larsippany, Newjersey 07054 Fred Glickman VicePresident Grace Wade Val B. Diehl ' ' AssistantSecrctary John G. Graha:n VicePresidenland Treasurer President and Chief Of crating Offcer Nabiscoinc. Fred D. Hater VicePresident EastHanover NewJersey07J36 Rate Case Atanagement (ConsumerPackagedProducts) Edward J. Holcombe Vice President and \\ ( Dr. David L Grove'

• Comptroller President Subsidiary Operating Companies l

DavidL. Grove, Ltd. Wlillam B.Murray VicePresident Armonk, New lbrk Shepard Bartnott Communications (Economic Consultants} President Jersey Central ower & Light Company Edmund Newton Jr. VicePresident William G. Kuhns System Operations Chainnan and Chief Executive Officer Herman Dieck amp GeneralPublic Utilities Corparation ActsngPresident Robert H. Sims VicePresident, PowerSupply IUrsippany, NewJersey 07054 Sietropolitan Edis,n Company 7;,y 3, g,ggy y;,, p,,,;g,,,, pg,;,;,,,,,;,, g John F. O' Leary'

• William A.Verrochi Helen M.Graydon Secretary Enern Consultant President if ashingt<m. D.C. 20006 Pennsylvania Electric Company Patrick F. Daley Assistant Comptroller l

Dr. John W. Oswald '

• E. F. Muchoney Ascistant Comptrollcr President PennsylmniaState University Mildred Misura Assistant Treasurer University Thrk, Pennsylvania 1680 Grace Wade AssistantSecretary l

Paul R. Roedel'

• President and ChiefExecutive Officer 1

Carpenter Technoloc Corporation Reading, Pennsylvania 19603 James 3. Liberman GeneralCounsel (SpecialtyAletals) l 'Stember ofAuda Committer l 'Stember of Compensation Commatee 'Sfember ofNominating Committce 10 i Notices to Stockholders 1981 AnnualMeetng Quarterly Stock Price The Annual meeting of Stockholders of General Public and Dividend Data 1979-1980 Utilities Corporation will be held at 10 A.M. local time, May 7,1981 at the Strand-Capitol Perfonning Arts Center, 50 North George Street York, PA. Price Diridends 1979 liigh Low (Cents) Corporate Offices General Public Utilities Corporation First Quarter $18% 16 % 45 100 Interpace Parkway S econd Quarter 15 % 8% 25 Parsippany, NJ 07051 Lird Quarter 10% 9 25 (201)263-6500 Fourth Quarter 9% 7 25 GPU Senice Corporation (Address and telephone same as GPU Corp.) 1980 Jersey Central Power & Light Company First Quarter 9% 3% Madison Avenue at Punchbowl Road Second Quarter 7% 4% Morristown, NJ 07960 Third Quarter 7 5 (201)455-8200 Fourth Quarter 5% 4% Metropolitan Edison Company 2800 Pottsville Pike GPU is listed on the New York Stock Exchange. Reading, PA 19640 At December 31,1980 there were 150,965 registered holders (215) 929-3601 of GPU Common Stock. With respect to restrictons on the Pennsylvania Electric Company payment of common stock dividends by GPU, see Note 9 1001 Broad Street to the Financial Statements, page 34. Johnstown, PA 15907 (814) 533-8111 Transfer Agent and Registrar-Common Stock Too neny reports? liartford National Bank and Trust Company You may be receiving extra copies of the GPU Annual Report 777 Main Street, liartford, CN 06115 because of multiple accounts within your household. To stop the extra copies, please write to the liartford National Bank Agent-Dividend Reinvestment and Stock and Tnist Company, PO. Box 210, liartford, CN 06101. Purchase Plan-Common Stock Please enclose the mailir.g labels from the extra copies. Ilartford National Bank and Trust Company PO. Box 210, liartfc d, CN 06101 For furtherinformation Copies of GPU's " System Statistics" and of the Corporation's 1980 r.nnual report to the Securities and Exchange Commissi^n will be available after March 31,1981. Wnte to Miss lieten M. Graydon, Secretary, General Public Utilities Corporation, 100 Interpace Parkway, Parsippany, NJ 07051. 41 GENER AL PUBLIC UTILITIES CORPOR ATION 100 Interpice 15trkway I'arsipixuiy, NJ 07051 (201) 2fWi3)0 O m Zm 2 3>r TC CDCO Cdrb m U) OO 2TO I 4 _O Z i l .