ML20033A735

Annual Financial Rept,1980

ML20033A735
Person / Time
Site:	Comanche Peak
Issue date:	03/31/1981
From:	Marquardt W TEXAS ELECTRIC SERVICE CO.
To:
Shared Package
ML20033A729	List: ML20033A731 ML20033A733 ML20033A734 ML20033A735 ML20033A738 ML20033A741 ML20033A742 TXX-3438, Forwards Amend 1 to Application for Ol,Per R Tedesco 811006 Request & Annual Financial Repts for 1980
References
NUDOCS 8111270185
Download: ML20033A735 (39)

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4, 1980 1979 1978 (Dollars in housands)

Total Electric Plant

$2,224,000 51,978.000

$ 1,770,000 Construction Expenditures (excluding nuclear fuel)

$ 245,000 5 206.000 5 201.000 Net Generating Capability (Kilowatts)*

5,997,000 6.G23.000 5.686.000 Gas Oil Fueled _

4,256,000 4,282,000 4,282,000 Lignite Fueled 1,741,000 1,741,000 1,401,000 Fuel Alix for Electric Generation (% )

Gas 51.7 51.5 65.7 Oil 0.2 2.8 1.1

1. ignite 48.1 45.7 33.2 Fuel Expense

$ 203,000

$ 160.000

$ 172,000 Fuel Cost per AIA1Bru (c )_

84.4 70.0 76.2 Gas 98.0 71.3 88.3 Oil 233.9 177.3 174.4 D

Lignite 69.1 62.0 49.1 Number of Customers

• 534,000 507,000 485.000 Operating Revenues 5 666,000

$ 534,000 5 502.000 Return on Common Equity (% )

15.9 12.3 13.3 Supplemental Ratio of Earnings to Fixed Charges 3.6 3.4 3.8

• End of year.

Texas Electric Service Company, mon stock capital and short-term pany owns a natural gas pipeline an investor-owned electric utility, financing to the Company. Dallas system, acquires, stores, and deliv-provides s(rvice in 48 counties Power & IJght Company and ers fuel gas and oil and provides throughout north central and west Texas Power & IJght Company, other fuel services for the genera-Texas. This area includes the cities whose respective systems are tion of electricity; and Texas Utili-of Fort Worth, Wichita Falls, Alid-interc mnected with that of the ties Generating Company operates l

land, Odessa, Arlington, Grand Company, are also subsidiaries of the jointly owned generating sta-Prairie, and 72 other incorporated Texas Utilities.

tions and furnishes related ser-municipalities.

Texas Utilities has three other vices, including the ownership he Company is a wholly subs;.!iaries which perform spe-and operation of fuel production owned subsidiary of Texas Utilities cialized services, at cost, for the facilities for the surface mining Company which provides com-Texas Utilities Company System, and recovery oflignite for use as including the Company: Texas ruel at such stations.

Utilities Services Inc. furnishes engineering, financial, and other services; Texas Utilities Fuel Com-D 1

8111270185 811123 PDR ADOCK 05000445 h

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To the Shareholders andEmployees ofTexas Electric Service Company G

g W G Marquardt E

Pressdent and Chsef huutne Working together, the employ-tent decision-makers in gos ern-While helping customers hold ces of Texas Electric Service Com-ment, and we must do our part to down their energy bills, conserva-pany in 1980, as in years past, did support these efforts at strong tion and the planned management whatever was necessary to better leadership.

of future energy demand also can serve customers throughout the

'lhe solutions to our energy help reduce the need for new gen-service area. Employees worked to problems will not be simple.

erating capacity. 'lhis is particularly solve customer problems, main-Although the regulatory climate in important in these times ofinflation tained reliable electric service, Washington appears to be chang-and high interest rates, w hich are and planned ahead to make sure ing, many burdensome and of ten placing financial constraints on our all customers had enough electric-unnecessary regulations remain.

ability to build new power plants.

ity to meet their needs.

Many federal environmental We are in a good position The accomplishments of our guidelines affecting power plant because of the progress we have employees over the past year are construction and rules governing made in building new power significant, particularly with the the continued use of natural gas as plants that use ligMte coal and serious energy situation and a viable boiler fuel need changing.

nuclear fuels. Ten years ago, Texas other problems we in America

'Ibese changes are necessary if Electric depended solHy on natu-l face today.

we in this country are to further ral gas to generate efn cricity for Intiation, a nanonal recession.

reduce the need for imported oil, customers. Since 19 0, we have and rising energy prices in 1980 which is costly and unreliable, by been able to increase ot.r use of tested the American spirit. Gov-increasing des elopment of domes-less expensive and more abundant ernment indecision on important tic energy source 3 like coal and lignite coal.

energv related problems, such as nuclear.

Almost half, about 48 percent, nuclear plant licensing and waste in the meantime, we must of our customers' c!cctricity in handling, and the leasing of federal increase efforts to conserve the 1980 was produced with lignite, lands for coal mining, slowed energy we use. At Texas Electric, representing a signihcant sasings efforts to increase domestic we are helping customers learn to customers over what they energy production and reduce how to conserve electricity would base paid for electricity the nation's dependence on by making their homes more generated totally with market-imported oil.

energy-efficient.

priced natural gas.

It is times like these that require

'Ihese same kinds of benefits strong leadership in the public will be realized when the Coman-and private sector. It appears we che Peak nuclear power plant may see better and more consis-l 2

A.

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E.

A. R T.tfARTIN. VicePresident

, ~ N h, ' '

jl public relations

]U B. E D. SCARTif. Vice President.

cperations C. W.t!. TA)IOR Vice President. ptmer engineering purchasing & services D. D. E A11C11, Vice President & Treasures:

accounting financial & data systems r

}[

l E. E L WADON. VicePresident y

gtnernrnent affairs, rates &

regulators services begins operation. At year end, the a union at Texas Electric, and in the following pages, we plant was 76 percent complete.

carly in 1981, they petitioned the have attempted to show the great We still face many challenges.

National 1. abor Relations Board to strength of our system, namely, The problems of customers who conduct an election which could c..v people, who keep the lights have difficulty paying the rising authorize the union to represent on.md perform the other neces-costs of all energy sources will transmission and distribution sary services to keep us operating persist, requiring a strong effort employees in the Fort Worth area.

in our five divisions and Fort by employees to help customers We have asked the N1.Ril to rule Worth area. 'Ihis year's annual learn to conserve and use that any election must be by and report is dedicated to this electricity wisely.

for all eligible distribution and ongoing effort.

Other customer-related prob-transmission employees through.

'the times we live in are more tems dealing with rates, policies, out the system. Because of uni-difficult than in the past, but we and other matters will need to be form work conditions, policies, must remain flexible to change resolved by seeking out divergent temporary and permanent and always ready to adapt to the opinions and actively communi-employee transfers and other fac.

reali'ics around us.

D cating with all customers.

tors, we believe that transmission Together we can accomplish the Texas Electric remains a good and distribution employees goals we set, solve the problems place to work. Opportumties exist throughout the system would be we face, and meet the challenges for the professional and personal the " appropriate unit." A decision of the future.

development of all employees is pending.

here and throughout the Texas Regardless of how the N1.Rll 1 tilities Company System.

rules on who is eligibic to vote, Any company is no better or everv indication is that an over-worse than the people who work u helming majority of our employ-g there. We have always been fortu-ces, either in Fort Worth or nate in the high degree of compe-throughout the system, do not tence and understanding among want to be represented by a W. G. Marquardt employees. And we have always union.

President and Chief Executive made it a point to show apprecia-tion for employees' hard work and March 31,1981 dedication, and that's a tradition that will never end.

In the past year, union orgamz-ers have attempted to establish k

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Texas Electric Service Company, rates among the lowest of any another long-term ga3 supply, in as it entered the 1980s, sensed a electric utility in Texas.

1980, the contract supplied about renewed faith in America's ability By 1980, the 20-year contracts 16 percent of the fuel gas used to to come to grips with its energy for natural gas from the Old generate c!cctricity at an average problems and solve them.

Ocean field in south Texas were cost of about 22 cents per MMBtu.

The Company believes the '80s providing fuel at about 4I cents Odessa Natural's expiration is can be a " decade of solutions" per million Btu (MMBtu), while

<.<pected to raise fuel costs about rather than a continuation of the market-priced gas climbed to four-tenths of a cent per kilowatt-serious energy situation which has more than 52.50 per MMBru.

hour, or about 54 per thousand plagued the entire country for so As a result of TESCO's decision kilowatt-hours in 1982.

many years.

years ago, customers have saved Primarily due to the expiration Solutions require decisions.

more than $700 million in fuel of TESCO's long term gas con-Texas Electric has worked to solve costs over the life of the Old tracts, and because the costs of all many ofits problems by making Ocean gas contracts.

fuels are increasing rapidly, the good decisions, and as a result, the OnJanuary 1,1981, the Old Company's annual fuel bill will Company has been able to main.

Ocean contracts expired. Because increase substantially over the tain reliable electric service and Old Ocean supplied about 52 per-next few years.

plan for the future energv needs of cent of the Company's total fuel Natural gas, which is used to its customers.

gas supply in 1980, their expira-generate electricity at the Com-More than 20 years ago, the tion has had a significant impact pany's six gas-fueled power plants Company determined that its abil-on the cost of generating electric-across the system, will continue to ity to meet its customers' need for ity for customers.

be an integral part of the total fuel electricity depended on securing a The increase in fuel costs in mix, and replacement supplies of reliable fuel supply. So, Texas Elec-1981 due to the expiration of the gas will be secured by Texas Utili-

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tric secured long-term contracts Old Ocean contracts is expected ties Fuel Company.

l for natural gas to generate elec-to be about eight-tenths of a cent Planning ahead for the time j

tricity. It was a hard decision per kilowatt-hour, or about $8 per when the Old Ocean and Odessa i

bccause the price, at the time, was thousand kilowatt-hours.

Natural gas contracts would higher than gas available under Odessa Natural Contract expire, the Company recognized shorter contract terms-j to Expire that a more diverse fuel mix In the 1970s, natural gas prices At the end of 1981, Texas Elec-would benefit customers with rose dramatically, yet these long-tric's fuel contract with Odessa reliable supplies of electricity at term contracts enabled Texas Natural Corporation will expire.

a reas<mable cost.

Electric to produce electricity at

'lhis contract has provided Therefore. Texas Electric made another hard decision in the late 1960s to embark, along with its Fort Worth Area sister companies Dallas Power &

l A. An espanding f ort worth skyline 1.ight and Texas Power & l.ight, on l

exempt, pes strong economy' an ambitious fuel-changing pro-R. Testing meters an importantjob at gram designed to use other fuels f ort worth meter simp in addition to natural gas.

y C. Safety meetings at distrthution sert ice centers help pret vnt accidents 9

D. Training necessaryfor thepmpose i Residential Consert ation here ices pmgram E. Repair e reus Isard at unrk at the 1

flandler pourrplant E A nere elet toonic meter rnaling der-it e

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am lhe program involved building Comanche Peak Operation tions governing some of these new power plants that used more Dates Revised changes are still being developed, abundant and less expensive lig-The Company's interest in using which may affect the scheduled nite coal and uranium. This pro-uranium to generate electricity in-service dates and the final cost gram has enjoyed continued suc-involves the building of the two-of the plant.

cess since the first lignite unit was unit Comanche Peak nuclear Commitments have been completed in 1971. At year-end power plant near Glen Rose, obtained for anticipated uranium 1980, eight jointly owned lignite-southwest of Fort Worth. Con-ore concentrate requirements and fueled generating units were in struction of the plant continued for fabrication services for both operation at three locations in cast during the year; however, the esti-units for the first 17 years of oper-Texas. The Company's portion of mated dates for operation were ation of Comanche Peak.

these plants supplied almost half revised from 1981 to 1982 for Ownership of the nuclear plant of the electricity used by TESCO's Unit I and from 1983 to 1984 for is shared by Texas Electric, TP&I, customers.

Unit 2. The estimated cost of the DP&L, the Texas Municipal Power The construction program is nuclear facility also changed in Agency, and the Brazos Electric D

regularly reviewed, and as a result 1980 from $1.7 billion to $2.235 Power Cooperative. Farly in 1981, of this process, changes were billion, or $972 per kilowatt, Tex.12 Flectric Cooperative of made in early 1981 in the opera-when completed.

Texas, Inc. also purchased a por-tion dates of two lignite-fueled Even at this higher cost, Coman-tion of the plant from TP&l, sub-units under construction. The che Peak will provide significant ject to approval by the Nuclear deferred units are Martin 12ke savings to the Company's cus-Regulatory Ccmmission.

Unit 4 from 1985 to 1990 and the tomers compared to what they Texas Electric's interest in the single-unit Forest Grove plant would pay for electricity pro-nuclear facility is 35% percent, from 1987 to 1989.

duced with market priced natural which includes a 2% percent in May 1980. a milestone was gas or oil.

interest purchased at cost from reached in the jointly owned Comanche Peak's design has DP&L in 1980.

mining operations when the 100 changed considerably since con-Initiating the Company's fuel-millionth ton oflignite coal was struction began in 1974. The changing program involved the mined in east Texas. This exten.

Company, along with its sister same kind of difficult decision-sive surface mining operation con.

companies in the TU System, has making that occurred when tributed to making the Texas Utili.

attempted to estimate the cost of TESCO secured the Old Ocean f

ties Company System the fourth changes that are presently known and Odessa Natural gas contracts l

largest coal producer in the to be needed. Ilowever, regula-years ago. Decisions of this kind i

United States in 1980.

require a strong conviction about the long-term benefits to cus-Fort Worth Area (conthtued) tomers. The Company firmly believes the commitment that has been made to this program of A. 3rany suburban cities aroundror' building new power plants that Worth serted by TE\\CO EL Pnsperpipe insulation at Eagle and uranium, has resulted in more 3foy,,,,, pfyy,,,,yyffaf Tt reliable electric energy at a rea-

c. Arlington adds nen buildings in 9

dou ntoun business district D. Sert ice creus in Grand Prairie at uwk in residentialarea E. Work continues on Parker County substation F..ven Watauga substation to serte suburban residentialgrou'th

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sa sonable price for customers. And such an application, although in 1979. Plans are to spend about these benefits will continue in the technically feasible, would not 5256 million in 1981, 5229 mil-future.

be economically practical at lion in 1982, and 5190 million Coal Plant Studied this time.

in 1983 Years of planning and construc.

The study, completed by TESCO While construction expendi-and Rockwell International under tures have been large in recent tion go into each new generating unit long before a kilowatt of elec.

contract with the Department of years, the Company is committed tricity is produced. Texas Electric Encrgy, showed that electricity to reducing these expenditures as is inv'olved in a long-range plan.

from the solar-powered system a percentage of the total size of would be at least four or five times the Company's financial structure.

ning and des elopment program to look for new sources of electric as expensive as electricity gener-In 1980, for example, the con-energy for customers.

ated with natural gas.

struction budget was 17.6 percent Several years ago, the Company The Company is involved in of total capitalization; however, several other energy research projections indicate that figure began participating in preliminar'v studies to evaluate a possible site' projects through direct support will decline to about 10 percent in far west Texas for a coal-fueled and participation in the Electric for 1983 power plant.

Power Research Institute, a The financial condition of the As a result of this study, a site national research organization Company is an important factor in about 25 miles west of Slonahans supported by electric utilities Texas Electric's ability to raise has been acquired. Consideration throughout the United States.

capital for construction at reason-Nuclear fusion research also is able costs from people willing to is being given to building two jointly owned coal-fueled units at supported through participation in invest in the Company.

what would be called the alonu.

the Texas Atomic Energy Research For many years, TI5CO has ment Draw power plant. Projec.

Foundation, a research group sup-maintained a AAA bond rating tions now indicate that a niant will ported by investor-owned electric with rating agencies, which has be needed at the site in the late utilities in Texas.

proved invaluable in enabling the 1980s to early 1990s.

Construction Forecasts Company to obtain construction funds at reasonable costs.

In another development, an and Financing extensive examination throughout Construction expenditures for During 1980, the Company 1980 of the potential use of solar generating units and other facili.

raised 575 million by selling first energy to generate electricity by ties, excluding nuclear fuel, mortgage bonds. An additional partially converting a unit at amounted to 5245 million in 535 million was obtained through TE5CO's Permian Ilasin gas-fueled 1980, compared to $206 million a preferred stock sale, and $50 plant in west Texas proved that million was raised through a sale of common stock to Texas Utilities Wichita Falls Division Company.

Revenue Increase Granted The Company filed a rate

& cue mucM in May WM u n A. Transrnission unrk in Wichita rafts Q

often high abcn eground R. Ernployees conduct unrkshops to teach consenution 9

C. Wichita Falls'.Uidurstern Stale Unitersity tspifies educational h

opportunities in service area D. Customer representatie es call on

< ustomers to snite theirproblems E. Wichita Falls an impressite and grou ing city

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the cities it serves and the Public On,Iuly 2, customers set a new formers sening residential cus-Utility Commission in Austin.

recerd demand of 4.251 million tomers was extremely heasy.

Following hearings on the kilowatts of electricity, surpassing Despite this fact. outages were request, the PCC granted the the previous record demand set kept to a minimum throughout Company a revenue increase of only a week earlier.

the system.

approximately $69 million, or The Company's ability to pro-During and after the hot 10.1 percent. The new rates vide reliable electric service in the weather, Texas Electric's customer became effectis e throughout the face of this high demand was a service and operations employees sy stem in October.

direct result of the hard work and worked diligently with customers IIeat Wave Ilits Service Area dedication of employees who who received abnormally high In 1980, Texas Electric's service planned ahead, maintained the hills due to their increased elec-area, along with much of Texas, system, and performed the many tric usage.

experienced one of the hottest necessary services to keep the For their hard work and dedi-summers on record. In the Fort generation, transmission, and dis-cated effort, all employees were Worth area, temperatures climbed tribution system operating honored by the Fort Worth Cham-past the 100-degree mark for more properly.

ber of Comn.erce for their "Aleri-than 60 consecutive days. Wichita Alecting such conditions torious Service During the Texas Falls set all-time high tempera.

requires long-range planning to IIcat Wase" tures during the summer, includ.

see that TESCO has the necessary Mting the extreme hot ing one dav of 117 degrees, while genciating capability, fuel weather, the proclamation stated

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cities in the Western, Sweetwater, resources, and well maintained that above it all "the men and Big Spring, and Eastland divisions transmission and distribution sys-women of Texas Electric Senice tem to meet the demand when it Company shouldered the load and experienced similar periods of hot weather.

occurs.

met the power needs of The "licat Wave of 1980" An example of this planning customers."

l caused some particularly dilhcult P,f"CCS* is the Company's progres-Conservation a Prirnary Goal times for TESCO's customers. The s ve mamtenance program ofiden-liciping customers learn how to stifling heat caused many of them tifying and replacing potentially conserve energy and better man-to uw rtcord amounts of electric-overloaded transformers with age their electric energy con-ity to stay cool, resulting in high larger transformers. The value of sumption is a primary goal of demands on the Company's gener.

this process was evident dunng Texas Electric and its employees.

ating capability.

the heat wave when the burden To achieve this goal the Com-on the more than 100,000 trans-pany oirers a variety of programs I

and related services. " Operation Tighten-Up" a neighbor to-Eastland Division neighbor energy conservation workshop, has been available for A. Lake anmnd Gralarnfw uvrplant open to recirationalactit ity B. Iastlaruicustorner representalites

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un.k u tth localbuilders C Netc additions in Eastland incorporate

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solar energy designs 9

D. Railroad car tvpair an irnportant industry in Ranger E. "IDCU Vidm Report" popular u ith ernployees E Oiland cattle businesses actite jg arourtd Eastland 11

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e successful in 1980, reaching more oped called "TESCO Video Growth Keeps Economy Strong than 17.000 resider:ts in the ser-Report." The program has proved At year-end 1980, with census vice area.

to be a popular and informative information and other economic Other senices include a Com-vehicle for employee information data becoming available, it puterized Energy Analysis pro-on a variety of topics.

became apparent that Texas, and gram, the National Energy Watch' An energv conservation driving in particular Texas Electric's ser-E-OK program, and an average program, talled " Driver Energy vice area, fared exceptionally billing plan.

Conseruion Awareness Training" w ell during the last decade.

Work abo continued on a home also wa.* in tiated for employees to Texas' population increased energy analysis program under help them become more energy.

from i1.2 million to 1-1.1 million, guidelmes established by the fed-efficient drivers at work and at '

ranking it third behind California cral government's Residential home. The program, which con-and New York. Population fi>r the Conwrvation Services program.

3isted of lecture and hands-on area served by Texas Electric was The energv audits are tentatively driving instruction, is expected to estimated to be 1.3 million, an scheduled to be available by help reduce the Companv's total increase of more than 230,000, or mid-1981.

gasoline fuel bill.

19.9 percent, over the last ten Employee Communications Employees also participated in years. This was a contrast to the Stressed on-the job training programs as 1960s when five of the six TESCO In keeping with a long-term more than 80,000 work-hours divisions lost population.

commitment to effective were devoted to such activities in Employment in the 17 major employee training and communi.

1980. Training and educational counties of TESCO's ser ice area cation-the Company provided opportunities out3ide the Com.

increased by about 18.682 or 2.8 many new programs during 1980 pany also were available, and 15 i percent, to more than 681.000 at designed to keep employees bet.

employees participated in the col.

year-end. As of December 1980, ter informed about TESCO activi.

lege tuition refund program.

unemployment increased to -1 per-I ties and issues.

In an efli)rt to make the benefits cent compared to 3.3 percent a Employee infi>rmation programs package more undt.rstandable, year earlier.

on political awareness, the 1980 Texas Electric provided employ.

lluilding permits issued during rate increase. and the expiration ecs with a tirst ever individual 1980 lbr towns of 3,000 persons of the Old Ocean gas contracts

" Employee llenefits Statement;'

or more totaled about 51.3 bilhon, were presented systemwide. In which spelled out the estimated a -1.2 percent increase over 1979, addition, a new sidcotape news dollar value of all benefits pro.

in spite of sharply lower residen-and feature program was devel.

vided to each employee by tial building permits for 1980.

TE5CO.

llank deposits in service area cities l

of 3.000 or more increased 19.1 percent, reaching an all time high i

Streetunter Division of $9.s billion.

l Significant economic activities l

included the strong performance l

of petroleum exploration and pro-l duction in west Texas, particularly A. Regular maintenance keeps.tlorgan 9

Cnsk prm nrplant operating H. Gypsum plants nearhurettnster pnwide many localjobs C. IDCO's netr 5nyder o[pce opennt in NMfl D. Pnn iding customer snices at 5usvtuuter o[fice

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.d the Permian Basin region, which is recession as much as other parts permit for the Comanche Peak served for the most part by Texas of the country, continued inflation nuclear station, would remain in Electric.

and high interest rates had an effect.

During 1980, drilling for oil and effect on the local economy.

In April 1978, the United States gas in the U.S. hit an all-time high, Several plant closings occurred Supreme Court upheld the origi-and Texas accounted for the larg-throughout the system during nal NRC review procedures but est share of the record drilling 1980, including plants manufac-required a court to determine if with more than 19,000 w(il turing garments, carbon black, the NRC rules were adequately completions.

cans and insulated cups, magne-supported by the rulemaking in other developments, down-sium, and conveying equipment.

record. Before commencement town Fort Worth is experiencing flowever, other industries, partic-of operations at Comanche Peak, the most activity at one time in utarly computer-related producta an operating license must be the central business district in the manufacturing which showed a obtained from the NRC for which city's history as 13 projects valued marked increase in activity in application has been made, at nearly 5812 million were under 1980, are expected to more than Following an incident at the D

construction or announced at offset any losses to the service Three Mile Island nuclear power year-end. During the next two area economy.

plant in Pennsylvania, the NRC staff issued an " Action Plan" in years more than three million Legal and Regulatory Matters square feet of new ofhce space Judicial decisions rendered in June 1980 to improve safety at wil. become available, and the July 1976 required the Nuclear nucIcar power reactors. Efforts are number of hotel rooms will Regulatorv Commission to con.

underway to comply with the increase by more than 2,000, sider the environmental impact of applicable requirements of the ar 83 percent.

reprocessing spent fuel and waste Action Plan. Many of the improve-1he record-breaking heat wave disposal before granting construe.

ments indicated by the accident of 1980 caused agricultural pro-tion permits or operating licenses had already been incorporated in duction and income to suffer sub-for nuclear generating stations. In the design of Comanche Peak stantial reductions from previous March 1977, the NRC adopted an and modifications presently l

years. The heat wave was accom-interim rule with respect to such underway will not significantly panied by reduced rainfall, which environmental impact and stated mpact either the scheduled com-i

[

remained well below normal at that all construction permits and pletion or the estimated com-l year-end.

operating licenses previousiv pleted cost. Ilowever, if an operat-j Although the service area, along issued, including the construction ing license has not been issued by with the rest of Texas, was not the time Unit I is ready for fuel i

affected by the 1980 na:!onal loading, construction costs niay increase and the in-service date Big Spring Division may be delayed.

l In September 1975 and April 1976, suits were filed involving claims of the First National llank of Chicago, the University of Chi-cago. Mobil Oil Corporation, A..Veter reading in Big Spring an ongoing activity B. Big \\pring's drtte in trindous a cont entence to customers C. Cotton ginning in lamesa a e ital industry D. Various displays used by employees g

to pwmote consert ation 1

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Texaco, Inc. and certain owners the Pt C further reconsider its is also contingent upon the settle-of carried working interest in the findings with respect to the appli-ment of other related proceedings.

Old Ocean field from which sub-cation of TESCO's fuel cost factor.

The Department ofJustice has stantial supplies of gas were fur.

'Ihe court also indicated that it intervened in opposition to the nished to the Company. This liti-was not ordering refunds or settlement proposal.

gation terminated favorably to requiring penalties but asked that Two other proceedings are Texas Electric inJanuary 1981.

these matters he further consid-pending which could subject In a proceeding before the cred by the PUC.

Texas Electric to i ERC jurisdic-Texas Railroad Commission, Gulf Texas Electric operates entirely tion. In connection with the appli-Oil Corporation filed an applica-within the state of Texas and gen-cation for an operating license tion to pass through purchased gas crally is tiot subject to regulation for Comanche Peak, the Justice costs to Odessa Natural Corpora-by the Federal Energy Regulatory Department had indicated that tion and Odessa Natural filed a Commission.

certain of the intrastate operating motion to the effect that should 1he Company is involved in a practices of the Company and Odessa Natural be required to pay

, cries of Icgal and regulatory pro-others may raise anti-trust issues; D

any additional amounts to Gulf, it ccedings instituted by Central md however, proposed licensing con-should be allowed to pass these South h Corporation, and cer-ditions relating to this matter have l

increased costs to Texas Electric, tain of its subsidiaries in an etTort been agreed to by the NRC statT.

which purchases gas from Odessa to require Texas Electric and the Department ofJustice, and all Natural. Such costs could be sub-other electric utilitics operating parties to the proceeding. The stantial and may involve retroac wholly in Texas to interconnect other proceeding involves a tive charges which may not be with interstate facilities. In Octo-wholesale customer of TP&l. who l

recoverable. In December 1980, ber 1980, the Company, along has requested an investigation by i

the Railroad Commission entered with the other parties involved, the Pl:C and FERC to determine if an order denying Gulf s claim:

tiled an Offer of Settlement in pro-TP&L, with which TESCO is inter-however, Gulf filed an appeal in ccedings before the FERC provid-connected, engages in interstate January 198I.

ing for the enablishment of two commerce by the transmission of In December 1980, an appeal of direct current asynchronous inter-electricity from a plant located a previous Public Utility Commis-connections which would not near the Texas Oklahoma border.

sion ruling on the reasonabler. css subject Texas Electric to FERC A petition to determine the Texas-of transactions between alliliated jurisdiction generally. The settle-Oklahoma boundary line has been companies of the TU System ment proposal would include the granted by the United States resulted in tue court indicating its proceedings before the FERC and Supreme court.

intention to enter an order that Westent Dit'ision A. Purnpingfacus typijy bewoming orf and gas industry in Westmt Dit ision R. Customers get assistam e at local office in odessa W

C.1DCO serres much ofpetnnhemical 9

industry in the Permian flasin D. I'mnian flasin plant employees ur>rk on feedtwier heater E. Afkiland skyline a gn>tring examp!r of nest Texas economy

4 1980 The Year in Review e

1930 TESCO Revenue Dollar Average Annual Useper Residential Custorner*

Mhere it carnefmsn Mhere it n'ent g4 12 Raidr~ttial m Ofuration arul3 r-i teel

!O 4x

.ilaintenance 30c 22c s

- Reintwstal 0

-Ot/nr in Cominony

.c Sc

'{c 7a ItutustnalJ 2 *c intettst on Debt "

N - Ta.m 5,

arulDit-itteruts f 'c e

Commertial

.'W Def>nt lation

=

25c Mc

$0 19'6 19'M 1980

• fuhukont msistple umt master metemivrskleetses Construction 1001 Generation Nurnber bpenditures by 1)pe ofFuel ofCustorners qlh huhng Au< lear Iuct) 3(K)

WI 250 1971 100 100 5/#>

1973 H5 15 1(X) 2Mi

pty, 1975

'?

23 100 ISO 19

72 2M 100

,3ryg 19'9 56 46 100 pyj g

19M1*

55 45 1(M) k 50 19H3*

50 4I 9

I00 31(#1 4

r i

0

-I 1985*

-. 5 38 i'

iOO O

'6

'N

'9 HO N1* H2* H.;* l

'f stumatat 19'6 19'M 1980

• fstemarat On nershipInterest Return on Planned Additions to infointly On ned Cornanon Equity Generating Capability Lignite Generating Stations 198I-1990 l

'Ni h

k j

!!ig flrown # 1 5"5 192 19'I (e amtw Ilig itrou n #2 5'S 191 19'2 81 Ntontwello # 1 55 l*4 19's 14 t w am tw Alontnello #2 5'S l*2 19's V

n fy

%farrin lake # 1 "50 1%O 19 "

h*w p;

t urim

'50 150 1072 19H9 lignite Ntartin 12ke #2

'50 150 19'M

1. 3 SlontKcIlo #3

• %O 3"5 19'M s8 Martm X,

IAC

'50 356 654 1990 ligmte

%fartin take # 5 "So 44M 19*9

-(

84 i TEifA11, 5300 :

ISil

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b 210FAL M;3638 il-'

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• t umarn he lWk vrfrresswis c<atfor allfvertu tjmrits 18

l I

Five-Year Financial & Statistical Summary G

Financial Statistics Year Ended December 31, (Dollars in Thousands) 1980 1979 1978 1977 1976 _

TOTAL ASSETS

$1,924,006 51,690,795 51,529,979 51,429.664 51,218,217 ELECTRIC PIANT

$2,223,505 51,978,389 51,769,706 51,565,829

$ 1,346,576 Accumulated depreciation 417,856 375,982 329,838 292,596 260,107 Construction expenditures (including allowance for funds used during construction) 245,106 206,346 200,541 220,204 224,426 CAPITALIZATION long-term debt

$ 678,137 5 618,405 5 545,525 5 518,542 5 532,835 Preferred stock 209,606 174.991 174,991 145,336 145,336 Common stock equity 698,011 600,402 553.850 477,953 410. Oi lbtal

$1,585.754 51.393,798 51.274.366 51.171,831 51.088.875 AVERAGE INTEREST COST ON LONG-TER*+1 DEllT 8.3%

7.6%

7.2 %

7.2%

7.1 %

AVERAGE DIVIDEND COST ON PREFERRED STOCK 8.1%

77%

7.7%

7.5%

7.5%

NET INCOME

$ 121,217 5 85,511 5

85.179 5 68,212 5 67,918 DIVIDENDS DECIARED ON COMMON STOCK 58,320 5 50,500 5 46.080 5 40,000 5 34,500 RATIO OF EARNINGS TO FIXED CilARGES 4.3 3.8 4.1 3.2 3.6 SUPPLEMENTAL RATIO OF EARNINGS TO FIXED CIIARGES*

3.6 3.4 3.8 3.1 3.6 ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION AS A PERCENT OF EARNINGS TO COMMON STOCK 25.2%

lo 1%

27.5%

38.0%

31.3%

RETERN ON AVERAGE COMMON STOCK EQUITY 15.9 %

12.3%

13.3%

12.5%

15.5%

FUNDS FROM OPERATIONS AS A PERCENT OF CONSTRUCTION EXPENDITURES (excluding allow:mce for funds used during construction) 49.5%

50.4%

47.1%

31.4 %

26.9%

• 1he supplemental ratio of carnings to fixed charges includes the Company's allocable portion of interest on wnior notes of affiliated companies u hich provide senices to the Company.

4 20 l

D Operating Statistics Year Ended December 31.

1980 1979 19~8 1977 1976 ELECTRIC ENERGY GENERAFED AND Pl'RCllASED (mw h)

Generated-net station output 21,721,274 20,3 8,913 20.681.066 1 H.0 48,019 16,908,859 Purchased and net interchange

_ 113.265 4 e i,965 3i',9 15 643.733 1 H2,617 liital generated and purchased __ 21,834,539 20.823.908 21,029.011 1 H.691,782 17.091,476 Company use, losses and unaccounted ti>r 1/>41,934 1.534.200 1,659,322 1.316,432 1,211,503 Ti>tal electric energy sales 20,192,605 19,289,708 19,569.689 l,375,350 15.849,973 IEEL MIN FOR ELECTRIC GENERXFION Gas 51,7%

51.5%

65 '%

0.<>%

71 6%

Oil 0.2 2.8 1.1 1.3 0.1 Lignite 48.1 15.~

33 '

8 28 3 Total 100.0 %

100.0%

100.0 %

100.0%

100.0 %

ELECTRIC ENERGY 5 ALES (mu h)

Residential 6,513,255 5,'58,252 5,868.657 5,12i,924 4,671,725 Commercial 4.732,093 i,242,061 4,169,380 3.927,239 3,566,512 Industrial 7,155.624 6,989.265

6. 72,579 6.670.00i 6,376,247 Government and municipal 487/>08 503.923 527,971 668.872 137,962 D

Total generaf business 18,888,580 17,493.506 l',338,387 16.691.039 15,052,626 Other electric utilities 1,304.025 1,796.201 2,231,302 884.311 97,547 Tiital electric energv sales 20,192,605 19,289,~08 19,569.689 17.375.350 15.819.973 OPERATING REVENCES (thousands)

Residential

$264,920 5201,677 5189.150 51i6.879 5120,206 Commercial 169,332 135,009 125,257 97,895 82,391 Irdustrial 178,836 141,807 162,251 111,122 92,605, Gos ernment and municipal 18,990 16.259 15.266 10,761 9,221 li>tal general business 632,078 50i,'52 6 2,224 366.657 30i,623 Other ef t< tric utilities 30,648 26.748 27.932 13.67i 10,652 Total from electric energy sales _.

662,726 531,500 500.156 380,331 314,875 Other operating revenues 2,992 2.51i 2,092

_ 3,691 2,162 Ti>tal operating revenues

$665,718 5536.01i 5502.248 5384.022 5317,337 El ECTRIC CCSTO.\\lERS (end of year)

Residential 660,227 437, t8 i i16,889 390,680 383,970 Commercial 61,123 57.1 1 55.527 53.687 50,923 Industrial 10,238 9,~2' 9.197 9,189 H,903 Government and municipal 2,474 3.034 3,3 6 3,3'6 3,268 li>tal general business 534,062 507,416

1. 85.'87 462,732 i17,064 Other electric utilities 37 37 36 35 33 listal electric customers 536.099 507,153 685,321 162,767 417.097 Residential Jassification includes indirect sa'es (apartments, etc. );

dwc!!ing units not included in number of customers 50,656 53,516 53,~ i s 58,438 56,317 21 L

Management's Discussion and Analysis ofFinancial Condition and Results ofOperations e

Liquidity and Cspital Resources The Company generates funds from operations The primary c.pital requirements of the Com-sufficient to meet operating necus, pay dividends on pany for 1980 and as estimated for 1981 through its capital stock and finance a significant portion of 1983 are as follows-its capital requirements. These funds are derived 1980 1981 1982 1984 from net income, depreciation, deferred taxes, and 11msands of Douars federal investment tax credits. Factors -dfecting the construcuon ability of the Company to fund a portion ofits capi-cxPend " c5 tal requirements from operations include adequate rate rclief and regulatory practices allowing a signif-s218,430 s219.000 s200JX)0 s171.000 Nuclear fuct 11,023 5.000 19.000 26.000 icant portion of construction work in progress in Matunnes of long-rate base, adequate <icereciation rates, normaliza.

term debt 123x10 81100 don of federal income taxes, full current recovery of Total 5229.453 52 Wu) 522 JXx) s19 Jol the Cost of fuel used in the generation of electricity, and the opportunity to earn competitive rates of return required in the capital markets. For 1980, approximately 50% of the funds needed for con-struction was generated from operations.

External funds of a permarent or long term nature are obtained through the sales of common stock to Texas Utilitics, preferred stock and long-term debt. The capitalization reios of the Company at December 31,1930 consisted of approximately 43% long-term debt,13% preferred stock and 44%

common stock equity, and similar ratios are expected to be maintained in the future. To provide for immediate cash requirements during periods between ;ong-term financings, the Company obtains short-term loans from Texas Utilities, w hich has lines of credit with commercial banks aggregating 5300.000,000 at December 31,1980. The Company does not maintain separate credit arrangements with banks or other lenders.

The Company expect 3 to sell additional semrities as needed, in amounts and of types present ande-termined. Although the Company cannot predict future regulatory practices and is to some degree exposed to thietuating economic and security mar-ket conditions, it does not currently expect any changes in trends or commitments which might sig-nificantly alter its basic financial position or ability to finance capital requirements in the future.

e 22 l

l9 Results of Operations lhe increase in allowance for funds used during increases in operating revenues include rate construction for 1980 is primarily attributable to an increases. recovery of higher fuel costs on a current increase in the amount of construction work in basis, customer growth and increased energy con-progress not allowed in rate base by regulatory sumption. Energy consumption per customer is authorities and an increase in the AIEDC rate effec-affected by material variations in weather condi-tive November 1979.

tions and was particularly impacted by the unusu.

The Company expects to pursue adequate and ally hot and dry summer of 1980 compared to the timely rate relief to offset increases in the cost of relatively mild summer of 1979, and by warmer providing electric service.

summer and colder winter weather in 1978. Cus-

'Ihe Company has prepared suppicm ntary infer-tomer consumption also retlects the effects of mation concerning the effects of changirqt prices in energv conservation on the part of some customers.

compliance with the reporting requiremt.nts of The increase in fuel expense for 1980 resulted Financial Accounting Stardrds luard Statement from higher levels of generation and higher unit fuel No. 33; such information is included following the cost, otTset in part by greater utilization of lignite.

Notes to Financial Statements.

The decrease for 1979 reflects the effect of the rel-atively mild summer on generation levels and by a substantially greater proportionate use oflower cost lignite. Fuci costs are expected to increase during 1981 and 1982 due to the expiration of contracts for fuel gas from the Old Ocean Field at the end of 1980, and expiration of the Odessa contract in December 1981.

Operation and maintenance expenses have increased substantially as a result of continuing inflationary pressures on the cost oflabor, materials and services and the additional hgnite-fueled gen-erating units placed in service during 1979 and 1978; operation and maintenance expenses were also affected by the higher costs of operating and maintaining existing lignite-fueled generating units, including the additional costs of operating and maintaining the pollution control equipment required and unscheduled maintenance on several such units in 1979. Increases in taxes other than income resulted primarily from increases in reve-nue and property based taxes.

D

I1 XAS El ECTRK. 51 R\\ 101: CO\\1 PANT and Subsidiarv - Consolid.ned Statement ofIncome G

Ye.ir 1:nded December 31.

1980 19'9 19'8 lhousanA of Dollars Of ERATING RE\\ ENt ES 5665,718 5' a, i.o l a 5502.2 is OPERATING EXPENSES Fuel 202,589 159,893 171,526 Uperation 99,988 85.850 0.330

.\\taintenance 18;030 40.140 2 a.96-Depreciation 51,453 i9.281 42,9i-Federal income taxes (Note ~)

71,613 48,128 52,523 Taxes other than income 41,718 3~.628 33.169 lotal operating expenses 515,391 420.920 395.462 OPERATING INCO.NIE I50,327 113.09i 106,786 OTilER INCONIE Allowance for equity funds used dunng construction 19,973 I3.990 9.280 Other income and deductions-net 3,374 3.188 6,958 1 ederal income taxes (1,552)

_ (l.605)

(3.340)

Total other income 21,795 15.8 3 12.898 TOTAL INCONIE 172,122 128.96-119.68i INTEREST CilARGES Interest on mortgage bonds 51,580 42,199 36.482 Interest on other long term debt 3,460 3.23

3. 8-Other interest 2,568 2.349 i, 61 Allowance for borrowed funds used during construction (6,703)

(i.815)

(10.508)

Total interest charges 50,905 63.iS6 34.505 NET INCONIE 121,217 85,51I 85,1 ~9 PREFERRED STOCK DIVIDENDS 15,288 13.159 I3,202 NET INCO.\\1E AFTER PREFERRED STOCK DIVIDE.NDS 5105,929 5 ~2.052 5

1.97~

See accompanying Notes to Financial Stattments.

24

'11X\\s I'lI CTitlC SI R\\ ICE CO\\lP\\NY and Ntwdun -Consolidated Statement ofSource ofFundsfor Construction D

Year i nded December 31, 1980 19 9 19 8

'Ihousands of Dollars ITNDS I RO\\1 OPERATION 5 Net income

$121,217 5 85.511 5 85,179 Depreciation 51,s53 49,281 62,9 7 Dcferred federal income taxc3-nct 16,467 15.698 12,972 Iederal imestment tax credits-net 19,237 26,759 23,131 Allowance for funds used during c<

.truction (26,676)

(18.805)

(19,788)

Total funds from operations 181,698 1584 i a i4i.+41 lxss-Dividends declared:

Preferred stock I5,288 13,159 13,202 Common stock 58,320 50.500

-i6.080 Total dividends declared 73,608 63.959 59.282 Net funds from operations 108,090 91.185 85,159 IUND5 l'RO.\\1 I INANCING Sales of securities:

First mortgage bonds 75,000 "5,000 Other long-term debt 502 5,500

~, 5.s Preferred stock 3s,615 29,655 Common stock 50,000 25,000 50,000 Retirement of long-term debt (3,332)

(15,900)

(7 95)

Increase (decrease)in notes payable to Texas Utilitics Company (parent )

(39,000) 17.000 (6 500)

Net funds from financing I17,785 106.600

12. I 1 i OTi!ER SOURCES ( US13) OF IUNDS Changes in working capital excluding uutes payabic and long-term debt due currently:

Cash in banks and tempoary cash investments 1,391 (2a)

(963)

Accounts reccirable-net (9,269)

(2.129)

(8,986)

Inventories -

(21,356)

,223

( 1,33')

Accounts pay able (390)

( l.99')

I1,436 Taxes accrued 27,638

( 6.69' )

15,346 Other-net 6.098 I.8~2 (180)

Net change 4,112 (I,52) 15.316 Investment advances to attiliates 8,785 Nuclear fuel (II,fM3)

(6j1-)

(9,915)

Other-net (536)

( 5.345)

( 06)

Net other sources (use ) of funds (7.465)

( l 3.5 6 s )

83.480 TOTAL

$218d30 s IH",5 61 5180.753 CON 5TRUCTION EXPENDITI'RLN Electric plant

$2 45,106 5206.366 5200.5 i I Allowance for funds used during constru(tion (26,676)

(18.805)

( 19.~88, LON5TRL CTION EXPENDITURES (excluding allowance for funds used during construction )

$2 3 8,430

$ 18".511 5180,753 See accompanying Notes to l'inancial 5tatements r

~

TINAs I-I.ECTRIC Sl R\\ ICE LOTil'ANY anst 5ubsidun -Con % didated Balance Sheet 8

Assets December 31, 1980 19'9 lhousands of Dollars ELECTRIC PLWT In senice:

Production

$ 854,174 5 852,941 Transmission 227,483 219,123 Distribution 412,001 383,239 General 37,855 30,739 Total 1,531,513 1,486,045 Construction work in progress 653,841 46i.463 Nuclear fuel 3i,852 23.829 Ileid for future uw 3,299

-1.052 Total ekuric plant 2,223,505 1,978,389 Less accumulated depreciation 417,856 375.982 Electric plant, less accumulated depreciation 1,805,669 I A)2,407 OTilER INTEST31EN"th 1,266 1,337 CURRENT ASSETS Cash in banks 4,834 5.425 Special deposits 1,458 1,159 Temporary cash investments-at cost 800 Accounts receivable:

Customers 42,495 33.248 Other 4,783 1,199 A'Imvance for uncollectible accounts (2,019)

(1,187)

Inventories-at aserage cost:

31aterials and supplies 10,682 9,808 Fuel stock 41,168 20.686 Other current awets 9,780 8.20-Total current assets 113,151 82,345 DEI ERRED DEBITS 3,9-a 0 4,706 TOTAL

$1,92 a,006 51.690.795 See accompanying Notes to Iinancial Statements.

l 2

1 lD Liabilities December 31, 1980 1979 lhousands of Dollars CAPITAll7ATION Common stock (Note 3 )

$ 575,000 5 525,000 Retained earnings ( Note 4 )

123,011 75M02 lbtal 698.011 600,602 Preferred stock : Note 3) 2094>06 174.991 Long-term debt-less amounts due currently (Note 51 First mortgage bonds 627,000 563,500 Other long-term debt 53,815 56,645 Unamortized premium and discount (2,678)

( I,7-io )

Total 678,137 618305 Total capitalization 1.585.754 1.393.798 CERRENT IJAfilLITIES Notes payable-Texas Utilities Company (parent )

12,000 51,000 Accounts payable:

D Affiliates 20,986 13.860 Other 28,363 35,879 Dividends declarett 4,250 3,365 inng-term debt due currently 11,500 Customers' deposits 4,898 3.265 Taxes accrued 43,979 16.3 ii Interest accrued 16,280 12,74 i Other current liabilities 2,285 669 lbtal current liabilities 144,541 137.123 RESERVE FOR INSURANCE AND CASUALTIES 2.450 1,586 ACCDilLATED DEFERRED FEDERAL INCO.\\lE TAXES 81,770 65.303 UNA.\\lORTIZED i EDERAL INVEST 31ENT TAX CREDITS 109,491 92.985 CO.\\bitT31ENTS AND CONTINGENCIES (Note 6)

TOTAL

$ 1,924,006 51.690. 95 See accompanying Notes to Financial Statements.

D 27 l

TFXAS ElI CTRIC 5ERVirl: COM PANY and subsidiarv-Consohdated Statement ofRetained Earnings t

Year Ended December 31, 1980 1979 1978 Thousands of Dollars BAIANCE AT BEGINNING OF YEAR

$ 75,402 5103,850 5 77,953 ADD-Net income 121,217 85.511 85.179 Total 196,619 189.361 163.132 DEDl;CT Dividends (cash):

Preferred stock:

54 series ( 5 4.00 per share per annum) 440 440 440

$ 4.56 series ( 5 4.56 per share per annum) 296 296 296 5 4.64 series ( 5 4.64 per share per annum) 464 464 464 5 5.08 series ( 5 5.08 per share per annum) 407 407 407 5 '.44 series ( 5 7.44 per share per annum) 2,232 2,232 2,232 5 8.32 series ( 5 8.32 per share per annum) 2,496 2,496 2,239 5 8.44 wrics ( 5 8.44 per share per annum) 2,532 2,532 2,532 5 8.92 series ( 5 8.92 per share per annum) 1,75-*

1,784 1,784 I 9.36 series ( 5 9.36 per share per annum)_.

2,808 2.808 2.808 510.12 series ( 510.12 per share per annum) 1,829 Common stock (per share: 1980, 52.20, 1979, 52.04,1978, 51.92) 58,320 50.500 46.080 Total dividends 73,608 63,959 59,282 Transfer to common stock account (Note 3) 50.000 Total deductions 73,608 I I 3.959 59.282 BALWCE AT END OF YEAR (Note 4)

$123.011 5 75.402 5103.850 See accompanying Notes to Financial Statements.

4 28

ll AA5 Fl.lCI HIC 51 Ri1(T CO\\1PANY and s bsidiary -Consohd.urd u

Notes to FinancialStatements lD 1.SIGNIFICANT ACCOUNTING POLICIES Consolidation - The consolidated fmancial ily from the use of liberalized depreciation and tne j

statements include the Company and its wholly class life depreciation system (ADR). Current fed-owned subsidiary, Old Ocean Fuel Company; all sig-eral income taxes have been reduced by amounts of nificant intercompany items and transactions have investment tex credits allowable under the Internal been climinated in consolidation.

Revenue Code; such credits are being amortized to Electric Plant-Electric plant is stated at origi-income over the estimated service lives of the prop-nal est rhe cost of property additions charged to crties. (See Note 7. )

electric plant includes labor and materials. applica.

Reserve for Insurance and Casualties-The ble overhead and payroll-related cost 3 and an allow-Company, as allowed by regulatory authorities, ance fer funds used during construction.

maintains a reserve for major uninsured losses and Allowance For Funds Usci During Construc.

claims.

tion-Allowance for funds used during construc-

2. AFFil.lATES tion ( AFUDC) is a cost accounting procedure The Company is a wholly owned subsidiary of whereby amounts based upon in: Not charges on Texas Utilities Company which provides common borrowed funds and a return on other capitai used stock capital and short-tcrm financing to the Com.

to finance construction are charged to electric pany. Dallas Power & l_ight Company and Texas plant. The accrual of AFUDC is in accord with estab-Power & Ught Company, whose respective systems lished accounting practices of the industry but does are interconnected with that of the Company, are not represent current cash income. He Company also subsidiaries of Texas Utilities. Texas Utilities has has capitalized AFL'DC at a net of tax rate of 8%

three other subsidiaries which ferform specialized compounded semi-annually of expenditures incurred.

services, at cost, for the Texas Utilities Company Sys-except for that portion of construction work in tem, including the Company: Texas Utilities Scr-progress allowed in rate base by regulatory author-v.ces Inc. furnishes engineering. fmancial and other ities. Prior to November 1979, a rate of 7% had been services: Texas Utilities Fuel Company owns a natu-used. Rese rates were determined on the basis of, ral gas pipeline system. acquires, stores and delivers but are less than, the cost of capital used to finance fuel gas and oil and provides other fuel services for the construction program. EffectiveJanuary 1,1981, the generation of electric energy; and Texas Utilities a rate of 8%% was adopted.

Generating Company operates the jointly owned Deprcciation - Depreciation is based upon an generating stations and furnishes related services, amortization of the original cost of depreciable including the ownership and operation of fuel pro-oroperties on a straight-line basis over the estimated duction facilities for the surface mining and recov-service lives of the pn perties. Depreciation as a per-cry oflignite for use as uel at such stations.

r cent of average depreciable electric plant in service The Company, jointly with Dallas Power and approximated 3.6% for 1980,1979 and 1978.

Texas Power has entered into agreements with Fuel Federal Incorne Taxes - The Company is Company to procure certain fuels and related ser-included in the consolidated federal income tax vices and with Gene aring Company for the produc-return of Texas Utilities Company and subsidiary tion oflignite fuel and the operation of electric gen-companies, and federal income taxes are allocated crating stations; payments are at cost of the services to all subsidiarv companies based upon taxable received and are required by the agreements to be i

income or loss. Deferred federal income taxes are "at least equivalent in the aggregate to the annual gener:lly provided for differences between book charge to income on the books" of Fuel Company and taxable income; such differences result primar.

and of Generating Company.

D 29

TFXA5 F11CTRIC $ERVICE CmlPANY and.s bsidiarv -Consolidated u

Notes to FinancialStatements 8

3. CO3DION AND PREFERRED STOCKS Redemption Prit e Per S ure (twfore adding accumulated Decemlier 31,1980 December 31.19'9 dnidends) shares shares th entual Outstanding Amount Outstanding Amount Current

%nimum Thouunds n ous.inds of Dollars of Dollars

-Texas Electric service Company Common stock-mithout par value; authorized MO.000.mM) shares 27,000,000 5 5'5JXK) 29 JM M)

• M) 552ijMM)

Preferred stock-cumulative, without par value, entitled upon liquidatum to

$100 a share, authonzed 10.WM)JM)0 shares-

$4 series

!!0,000

$ 11.000 llo.tMN) 5 llaxW) 5102 00 5102 00 s 4.56 series 65,000 6.563 65.mw) 6,563 Il2]M) 112.00 5 4 64 series 100,000 10,016 100JXM) 10.016 103 25 10325 5 5 08 series 80,000 8,004 H(LOOO HJM)4 IO3 N) 103 60 8 '.44 series 300,000 30,006 3mt000 30 un6 106 12 102. no 8 M 32 senes 300,000 29,655 300# M) 29.655 ION 32*

10100 8 8 44 series 300,000 30,046 3013M X) 30.0 e6 107.40 10 5. I N s 8 92 series 200,000 20,076 2t M)JH M) 20,0~6 10$ M3 103 60

$ 9 36 series 300,000 29.625 301J N M) 29.625 107.02 102.3 a s1012 senes 350.000 34.615 11012*

100 m) 2,105.000

$209,606 1.~is m H) 51'4.991 r+mnm m,.no,eennwacomnu,am e. m awronomM,u, He Company issued and sold shares ofits author-

4. RETAINED EARNINGS RESTRICTIONS ized common stock to Texas Utilities as follows: Feb-The Company's articles of incorporation, the ruary 1980,2,000,000 rhares for $50,000,000; Feb-mortgage, as supplemented, and the debenture ruary 1979,1,000,000 shares for $25,000.000; and agreements contain provisions which, under certain January 1978, 2,000.000 shares for 550,000.000.

conditions, restrict distributions on or acquisitions The Company also issued and sold shares of its of its common stock. At December 31,1980, authorized preferred stock as follows: June 1980, 525,431,000 of retained earnings was thus 350,000 shares of 510.12 preferred stock for restricted a3 a result of the provisions of the articles

$34,615,000; and February 1978,300.000 shares of of incorporation.

58.32 preferred stock for $29,655,000 The articles of incorporation restriction provides In December 1979, the Company transferred in effect that the Company shall not pay any com-550,000,000 from retained earnings to the common mon dividend which would reduce retained earn-stock account.

ings to less than one and one-half times annual pre-No shares of the Company's common or preferred ferred dividend requirements. The mortgage stock are held by or for account of the Company nor restriction is based primarily on the replacement are any shares of such capital stocks reserved for fund requirements of the mortgage. De restriction otticers and employees or for options, warrants, con-contained in the debenture agreements is designed versions and other rights in connection therewith.

to maintain the aggregate preferred and common stock equity at or above 33% of total capitalization.

l 30

D

5. LONG-TER31 DEBT (less amounts due currently)

Sinking fund and maturity requirements for the December 31.

3 cars 1981 through 1985 under long term debt instruments in effect at December 31,1980 are as 1980 19 9 U"

huunds of Dollars First mortgage bonds.

Mir! Lum 3' % wnes duc 1981 5 11,5(x) cash 3'6% wnes duc 1982 8,000 8.000 sinking Maturity Require-Fund ( a) (see atww e) ment ( a )( b )

3.% wrics duc 19N5 17,000 l'Jxx) ycy 3\\.% senes duc 1986 10,000 103kW)

Wwnds of Willas

'.% series due 19M' 16,000 163M N) 1981 54.oMM S I 1,500 511,9x) 4%% series due 1988 10,000 10.000 3932 3,9g3 gygwy g.(gy) 4'ob wrics due 1993 22,000 22.000 39g3 3,933 4b% series duc 1995 16,000 16J M K)

393, 3,93g 58.% series duc 1996 15,000 15f x)o i9gs 3 -'s 2n6to 20.610 6'a% wnes due 1997 18,000 1H.ooo

'.% senes duc 1999 15,000 15J100 (ai smianna,.esta)ono he ca.h d thec.ro 19 n thrv.sah 19mi and sisuuni har iy,,s um.d prmr to tb emhrt 41, tw 8%% senes duc 2tXx) 25,000 25JxM) t M othrt trymrrmems man br wreed he uhamm d prTerts middun as the 7%% series due 2001 25,000 253xx)

te d 16 4 d mush requirements i.% series due 2002 30,000 4' 0f xx)

The total amounts of Sinking 1.und Debentures M'.% series duc 2004 40,000 40JMx) 9%% senes duc 2tx)4 60,000 603xx) authorized in the debenture agreements have been 8N% senes due 2005 50,000 503x)o issued.1he Company's First 31ortgage Bonds may be 8'.% series duc 2006 100,000 looJx)o issued in additional amounts, without limitation as i

e to the maximum thereof, but limited by property, earnings and other provisions of the mortgage.

Totai nrst mortgage bonds __

627,000 56 Wxt None of the long-term debt is pledged, held by or un u

n its dnUng M n g fu de n ures:

5".%, due 1985 3,610 4.95-other special funds. Substantially all of the electric 6',.%, due 1993 7.885 9.x o plant is subject to the lien of the mortgage.

Tetal 11.495 14.H2'

6. CO313tlT3 TENTS AND CONTINGENCIES Pollution control resenue lhe Company, along with Dallas Power and Texas tunds-net Power, has entered into contracts with public agon-6N C es o pu m

ng water fm uw in We gt >

d 19,025 19.025 5 o% senes due 200' 21.6 0 21.640 eration of c!cctric energy and has agreed, m. effect, 6 60% series duc 2008 3,085 3.o85 to guarantee its share of the principal, 553,779,000 Funds on deposit with at December 31,1980, and interest on bonds issued trustec (1,430)

(1.952) to fmance the reservoirs from which the water is Total 42,320 41.818 supplied.

Total ocher long-term debt _.

53.815 56665 The Company is mvolved in various legal and Unamortired premium and dncounr:

administrative proceedings which, in the opinion of t'namortized premium 528 559 the Company, are not expected to have a material t nam <>rtized diwount (3,206)

( 2.2M9 )

effect upon the financial position or results of oper-Total unamortued premium ations of the Company.

and discount (2,67M)

( l.'40 )

Total long term debt -

Icw rnounts due currentin

$6'8.137

. 6 l M. nos 31

TlXu El1 CTRIC SERVIU COMI'.\\NY and Mlmdiary - Consolidated Notes to FinancialStatements G

7. FEDERA1. INCO31E TAXES

8. RETIRDIENT PL\\N 1he deta:Is of federal income taxes are as follows:

The Company has a retirement plan covering sub-Year tnded December 31.

stantialli all employees. The cost of the plan is 198o i9 9 in s determined by an independent actuary and is Thousands (4 Dollars funded by the Company as accrued. The cost of the Charged to operating expensc+

plan, including amounts capitalized, approximated Current federal

$7,153,000 for 1980, 56,714,000 for 1979,' and income taes

$35.909 55.6'l s16.620

$5,153,000 for 1978. As of December 31,1980 and Deferred federal income 1979, accumulated benefits and not fund assets were as follows:

Difrerencn between depreciation methods 1980 19 9 and hves 13,914 13.521 10.959 1housands 6f Certain capitalized Dollars construction cmts 2,945 2.2'8 2,66' Actuarial prnent value of accumulated Other (342)

(l01)

(634) benefits:

ested

$%,5M7 562,595 Total 16,467 1 % 98 12.9'2 Nonvested

• 142 6.908 Investment tn credits-net 19,237 26'59 23.131 Total

$73,729 569.503 Total fedcral income taxes charged to Net fund aucts

$62,314 5 45.6M5 eperating expenses _

71,613 48.128 52.523 Charged to other income 1,552 i105 3.340 An assumed rate of return of 5%% was used in determining the value of accumulated benefits.

income tun

$?3.165 549. 33 555 M63 Federal income taxes were less than the amount computed by applying the federal statutory rate to pre-tax book income as follows:

Year Ended Detember 31, 1980 19'9 19'N 1housands of Dollars Federal income tues at statutory rate ( 46% :

48% prior to 19'9)_

$ 89,416 5 62.212 5 6".*00 Reductkins in federal income taes resulting from.

Alknrant e for funds used during constructkin 12,271 H.650 9,49M Depletion alkm ance 2,348 1.642 1.225 Amortization of investment tn credits 2,314 1,931 1,610 Other (682) 256

( 4%)

Totai reductions _

16,251 12.4'9 11.H 57 Total federal income tues

$ 73,165 5 49.733 s 55.864 FEcctive tu rate 37.6%

36 8 %

39 6%

y-

TEW I LECTRIC 5FRVICl: CO.\\lPANY and Subudiarv-Consolidated SupplementasyInformation Concerning 9

Efects ofChanging Prices Unaudited information furnished in compliance Depreciation on the constant dollar and current with the reporting requirements of Financial cost basis was determined by applying the Com-Accounting Standards Board Statcment No. 33, pany's straight-line depreciation rates used for finan-Financial Reporting and Changing Prices (FASB 33),

cial accounting purposes to the appropriate indexed follows. The Statement indicates the need for exper-electric plant amounts, and is the only income state-imentation in providing information about the ment item that has been restated from the Financial effects of changing prices. Such infor:mation is Statements. In compliance with FASil 33, no adjust-intended to help readers better understand the ment has been made to federal income taxes.

impact of inflation on the Company.11ccause the Under rate-making rules prescribed by the Pubhc information is presented on an experimental basis, Utility Commission of Texas, only the original cost it should be viewed with caution. Calculation of the of utility plant is recoverable through revenues as information inherently involves the use of assump-depreciation. Therefore, the excess of the cost of tions, approximations, and estimates and, therefore, plant stated in terms of constant dollars and current the resulting measurements should be considered in cost over the original cost is not recoverable that context and not as precise indications of the through rates as depreciation and is reflected as effects ofinflation. He effects of changing prices are Reduction to Net Recos crable Cost of Electric Plant.

not recognized for income tax or rate making pur-The Company believes, based on past experiences, poses, therefore the supplementary information that it will be allowed to earn on the net investment should not be interpreted as adjustments to earn.

in electric plant when replacement of facilities ings reported in the Financial Statements.

actually occurs.

Information concerning the ettects of general During periods ofinf;ation, the holders uimone-inflation (constant dollar) was determined i>y con-tary assets suffer a loss of general purchasing g ewer verting historical cost amounts into dollars of equal while holders of monetary liabilities experience a purchasing power, as measured by the Consumer gain. De amount shown as Unrealized Gain From Price Index for All Urban Conomers.

Decline in Purchasing Power of Net Amounts Owed Information concerning changes in specific prices reflects the net of these two items and is primarily (current cost) represents such changes in electr -

attributable to the substantial amount of long term plant from the date costs were initially incurred w debt which has been used to hnance electric plant.

present, and differs from constant dollar information Since depreciation on this electric plant is limited to the extent that the specific prices have increased by regulation to the recovery of histo ical costs, a at a rate different than the general rate of inflation.

holding gain on debt is not allowed anc recovery is The curretit cost of electric plant was compu;cd by limited to only the embedded cost of ddt capital.

indexing the existing historical cos' of plant by the To reflect the results of rate regulation Unrealized llandy-Whitman Index of Public Utility Construc.

Gain From Decline in Purchasing Pr wer of Net tion Costs for the South Central Region and other Amounts Owed is offset by the Reduction to Net appropriate indices. Such current costs are not nec-Recoverable Cost of El ctric Flant.

essarily representative of the replacement cost of the Company's productive capacity that might be incurred in a future period.

B 33

Summary ofNetIncome Adjustedfor Efects ofChanging Prices t

Year Ended December 31,19HO flistorical Cant Adnntcu for Clunging t%es Reported in General inflation Sperilic Prices (Thousands of Dollars)

Financial Statements

, Constant Dollar)

(Current Cmt)

(

Ascrage l'.%) Dollars Operating Revenues _

3665,7 t h 8 665,718 5 665,718 Operating expenses (a) 5 I 5.39 I 561.225 5'?,I45 Operating income 150,327 104,493 MM.5?3 Other income 21,95 21,"95 21,M)5 Total income 172.122 126.2MM i 10.36H Interest charges W905 50.905 M905 Net income 8121.2I?

8

'5.48 4 8 59.464 Increase in specific prices of electnc plant held dunng the year (b)

$ 3 45.002 Reduction to net recoserable cost of electric plant s( l $3,01M)

(120,756)

Effect of general inflation on electric plant (461.u4)

Effect of general inflation in excess of increase in specihc prwes of electric plant after reduction to net recoverable cost (l37,098)

Gain from decline in purchasing pow er of net amounts oued t o 1.26 4 t o 1.26 4 Net change in purchasing pow er s (51.755) s(35M5)

< aiinriode. &preostam ut s51 eutm he teaormal cmt, sv' 2rsino ny cenwant 6,tiar and ei n2o am 5, arreni con (b ) At Decemhrr 31.19HO. elettric plant. net 54 as rumulated %satne, mas S 9.9%M92,tulO kr arrent reme and siDis.f>491sHH 64 hemorsal cret 4

Comparison ofSelectedFinancialData Adjusted forEfects ofChanging Prices 19NO 19 9 19 g l9-~

i9 g, (Thomands of Dol:ars )

Aserage 19M0 Dollars Operatmg revenues

$ 665,718 s (Wi.2 31 363O M

$5mg5 H 5'W Constant Dollar inforrnation Net income 75,383 52.054 Net assets at year-end at net recoserable cost Mi6.M72 H 32. 392 Current Cost Information Net income 59363 34328 IJfect of general inflation in exceu of increase in specihc prues of electric plant

[

after reduction to net recoscrable cost (137,09M)

(153.0"4)

Net assets at year end at net recuserable cost M66,M72 H 42,392 General Information Gain from de(line in purchasing power c4 net amounts ou ed 101,263 iOH.92H Consumer pricc index -average 2 66.8 217 4 1954 1 H 1.5 170 5 i

34 l

l l

Texas Electric Service Company

(.\\ Subsidurv of lesas l'tthrics Compant )

General Offices l' ort \\\\ orth. 'lexa,

D

_ - - _ = =.

. _ = = =. = _. = _ _ = _ = _ =

Officers Managers W G..\\larquard:

Fort Worth Area President and Chief Executive

11. R. Edmondson Arlington D. E. Kekh A. S. Dechert Suburban Vice President and Treasurer II. A. King.Jr.

Grand Prairie R. T.\\tartin K..\\l. Webb Iort Wortit' Vice President Suburban Area G.A. Itales Suburban Area

1. 1. th albert Cano Suburban J.

C#

I"*'

R. L I ain Suburb.m W.\\1. Tay lor W. D. I reenun Suburban Vice President 1,cRoy Sullivan Suburban E. L Watson L W. Todd Suburban Vice President R. II. Williams Suburban C. E.12yton J.11 Sanders liig Spring Disisina Secretary trRoy Olsak lamesa I W Cook

.rs.Jimmir K..ight O'Donnell Assistant Secretary 1.N Sayre Eastland Division J..\\l. O'Donnell B. W.\\kKinnis lireckenridge Assistant Treasurer D. R. Armstrong Detron and Gorman D

l'reda Sousae J. T. Salter Graham Assistant Secretary

11. D. lancaster Ranger R.N. Rhodes Sweetwater Disision II.11. Ilardec Colorado City

11. E Clark. lr.

$nyder C. W llarclJy Westcru Division J. II. Smartt Andrews

.\\1. E. Trimble,Jr.

Crane L E Stochner Grandfalls, 31onahans, Wink C. W Ilarclay

.\\lidland W..\\1. Grdhn Odessa Transfer Agent for Preferred Stocks J. C. Illair,Jr.

Stanton

'Ihc First National llank of I ort Worth J. D. Redding Wichita i alls Division R. D. Alsop Archer City 15.J. Vincent llurkhornett Registrar for Preferred stocks V. L 5mith llenrictra Continental National llank of I ort Worth W N. Ilouse Iowa Park 1lectra J. R. Neskorik 5eymour Trustee for First Afortgage Ilonds lhis report is submitted for the purpose

'he Fort Worth National llank of providing stoc kholders and others information about Texas I lectric Jervice Company, and not in connection with any Trustee for Sinking Fund Debentures proposed sale of, e r offer to sell or buy, any

'Ihe f irst National llank of I ort Worth stock or securitics.

B 35

l G

- - - ~ = = = = = = = = = = =

- - = = = = = = = = = - - - -

Directors T. L Austin.Jr., Dallas W. G. Alarquardt, Fort Worth Cluirman of the Board and President and Chief Executive Chief Executive Texas Electric Service Company Texas l'tilities Company Dr. James 31. 31oudy, Fort Worth W. P. Bomar, Fort Worth Chancellor Emeritus investm, ats Texas Christian t?niversity Jno. P. Butler, Slidland Charles R. Perry, Odessa Senior Chairman of the Board President and Chief Executive Officer The First National Bank of 31idland Perry Gas Companics, Inc.

Ed.B. Collett, Fort Worth E. Bruce Street, Grahaan investments Investments J. A. Gooch, Fort Worth W. K. Striplir.g,Jr., Fort Worth Senior Stember of the hrm of Cantey.

Investments llanger, Gooch, Alunn & Collins Chas. C. Thompson, Colorado City Paul Leonard, Fort Worth Chairman of the llo2rd and President Im estments City National llank of Colorado City G

=

=- -

=

=

=

Cities and Towns Served Ackerly Colorado City llolliday Pleasant Valley Aledo Crane lludson Oaks P>ute Andrews Crowley llurst Ranger Annetta Dalworthington Gardens Iowa Park Richland Ilitis Annetta North Dean Jolly River Oaks Annetta South Detron Kennedale Roscoe Archer City Eastland lake Worth Saginaw Arlington Edgecliif lakeside Sanwm Park Azle Electra l2keside City Seymour llellevue Everman lamesa Snyder Benhn >ok Forest Ilill Inraine Stanton liig Spring I orsan

.\\lansfield Sw cetw ater Illue Slound l' ort Worth

.\\lidland Thor ntonville liretkenridge Gorman Alonahans Watauga Iturkhurnett Graham North Richland Ihlis Westhnxik flurleson Grandfalls Odessa Westover Ilills Carbon Grand Prairie O'Donnell Westworth Coahoma IIaltom City l'antego White Settlement liaslet Wichita Falls lienrietta Wickett Willow Park g

Wink 36

4 8URK80RN TA FALLS

./

4 jASANT GRAHAM ORT WORTH fjf

.LCN H

$;;;&W g%,;;;3 0*0ONNELL LAMESA SNYDER 8 REC i

'*kg%g m

l

%:aw"Nggy' '

%g RANGER RI EM G

Tf HFNDERSON IN EASTLAND i

MIDLA k Cr'?ZanE~C

• COLORADO DESS CITY GLEN ROSE f

l FAIRFIELD 3

CRANE GRANDFALLS GENERAflNG STATIONS cas UGwit U4 DES ConstavC7104 m -

i t

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1 ie TEXAS POWER & LIGHT COMPANY was incorporated under the laws of the State of Texas in 1912. The Company is an investor-owned electric utility engaged in the genera-tion, purchase, transmission, distribution and sale of etectricity wholly within the State of Texas. The Company, Dallas Power & Light Company and Texas Electric Service Company, whose systems are interconnected, are subsidi-aries of Texas Utilities Company.

, The Company serves customers in 432 commu-nities in 51 counties of North Central and East Texas. Nine of these communities have popula-tions in excess of 50 000 and 34 have popula-tions of 10,000 to 50,000. The territory served has an estimated population of 2,538,000 (at De-cember 31,1980) end includes the agricultural placklands of Cenn :) Texas, the farming and r.,nching sections north and east of D/las, part of the oil and gas fields of East Texas and the Dallas / Fort Worth Airport. The area has a highly diversified base of light and heavy manufactur-ing and substantial commercial activities.

THE COVER Since 1968, the Company's construction and fuel programs have been directed to meeting customer demand for electric power while re-ducing the use of natural gas as a generating plant fuel.

The cover illustrations represent the mining of lignite coal, the eight lignite-fueled generating units in operation at year-end 1980 and con-struction of the nuclear-fueled Comanche Peak plant.

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