ML20041B101

Annual Financial Rept 1981

ML20041B101
Person / Time
Site:	Dresden, Byron, Braidwood, Quad Cities, Zion, LaSalle, 05000000
Issue date:	02/18/1982
From:	COMMONWEALTH EDISON CO.
To:
Shared Package
ML17194A479	List: ML17194A478 ML20041B101
References
NUDOCS 8202230270
Download: ML20041B101 (27)

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Contents I,riter to Simkho' ter s.

I l bghlight s.

2 1981 m Rcsiew.

27

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(;rneral Inform.ition.

8 Summary of Selected Consolidated Financial 1).ua 8

N!anagement's 1)iv ussion and Analy sis ol Financ ial Condition anil Results of Operations 9--10 Relwirt of Nf anagement 11 Reln>rts of lodcientient Pohlit A n oont.aus.

. I ! -12 l

l l'inami d Statements

.12-24 I)irri tors and Alanagement.

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Percent of Generation by Fuel Source 1970-1990

{ U" Our commitment to nuricar pow er is large and grow-2 ing. In 1970, only 5"L of the electricity we prodmed k

came from nuclear power. In 1981, nuclear's share

-j-was about 45"h. Ily the late 1980s, when the rest of y

our units are in sersire, three of escry four kilowatt-

"o hours we make muld be nuricar. With 75 reac tor

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years of experience beh d us, we base found nuilcar m

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power to be safe, < lean and reliable. It is aim our most T j

l cronomicai means for producing clettricity.

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Dear Stockholder:

Nuclear power received strong support in President Today's electric rates are based primarily on the low Reagan's O< tober nuclear policy statement. The Pres-facility costs which prevailed prior to the recent surge ident called for:

of inflation. Unfortunately, plants now under con-Faster licensing of nuclear power plants.

'". ion have much higher costs; and electricity must be priced at a lesel nearer the economic costs of power Progress in disposing of nu(Icar waste.

from such plants,if we are to provide the required new Removing the ban on nuclear fuel reprocessing.

generating capacity.

l Developing the breeder reactor, including con.

While the costs of building Edison's new nuclear structing the Clinch River lireeder Reactor plant.

units will be higher than comparable coal-fired capaci-ty (which also has become more expensive), the over.

All of this augurs well for the future of nmlear all costs of power produced by the nudear units will be power. And it gives us, at Edison, increased confidence less. This is because nudear fuel savings will more we will be able to phce in service on a timely basis the than offset higher carrying charges on the nuclear six nuclear units we are building at 1.aSalle County, plants. Completing those plants will eliminate the llyron and Ilraidwood.

need for more expensive coal and oil, saving billions of Ilowever, our ability to complete these units is being dollars over the useful lives of the nuclear units. When jeopardized by inflation, recession and high money the large nuclear fuel savings are considered, our nu-costs. Accordingly, on January 8,1982, we applied to clear plants are far and away the most economical the Illinois Commerce Commission for an annual rate c hoice.

increase of S805 million, or 19A %, and asked for half With 75 reactor years of experience, we are con-the increase on an interim basis while public hearings vinced that nuclear power is safe, clean, reliable and proceed on the full amount-economical. It has much to offer a nation searching for The two-step increase is needed not only to assure adequate and reasonably priced energy supplies. Pres-continuation of our construction program, but to cover ident Reagan has acknowledged this in his October depreciation and fixed costs when 1.aSalle County nuclear policy statement, and we applaud him for it.

Unit i begins commercial operation this summer. At that time, because of LaSalle's lower nuclear fuel costs, Sincerely, about half of the proposed interim increase would begin flowing back to our customers in the form of

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lower fuel charges-an annual savings of about 5200 million.

Unquestionably, nuclear power is the most eco-nomical means we have for producing electricity. If in James J. O'Connor 1981 the electricity we produced with nuclear fuel had Chairman and President come instead from low-sulfur coal, our fuel costs would have been S500 million higher. And with oil the

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increase would have been about S2 billion-almost tripling our actual 1981 fuel bill of St.2 binion.

There are two major reasons for the economic ad-vantage of Edison's nuclear units.

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First, our nuclear fuel costs are much lower than our fossil fuel costs. The fact is, the nuclear fuel required to produce a kilowatthour of electricity costs only one-fifth as much as coal and one-tenth as much as oil.

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Second, our operating nuclear units have very low capital costs. We were pioneers in buying nuclear plants and were able to do so at favorable prices.

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Commonwealth Edison Company 1981 in Review Dividend Raised Earnings Slightly Higher The November 1,1981 quarterly cash dividend on Earnings on common stock in 1981 were $3.06 per common stock was increased 5(, to 70( per share. The share, up 9( from the S2.97 per share earned in 1980.

new annual cash dividend rate is S2.80 per share, a The gain came from higher rates for electric service, 204 increase from the previous rate of $2.60 per share.

larger construction related credits and increased nu-Quarterly dividends have been paid on common stock clear output. These factors were barely enough to without interruption since 1890.

ofTset the effects of lower kilowatthour sales, increased purchased power costs, greater operation and mainte.

nance expenses, higher charges for interest, deprecia-Rate Relief Granted, More Requested tion and taxes, and more common shares outstanding.

On July I the Illinois Commerce Commission granted us a rate ircrease of S221 million annually, or about Sales Decline, Revenues Increase 5.9 %. This was m addition to the interim rate increase of $283 million on an annual basis approved by the Kilowatthour sales to ultimate consumers were down Commission in November 1980. In all, we received 1.5 % in 1981. The reduction was due to the combined about three-fourths of the 19.7 % rate increase we had effects of the recession, conservation and a much cooler requested.

than normal summer. Temperatures reached 90 de.

Nevertheless, the prices for electricity established by grees or higher on only four days in 1981, compared the July rate order simply will not provide adequate with 22 such days in 1980 and 20 days in a normal relief from rising costs in 1982 and subsequent years.

summer.

Accordingly, on January 8,1982 we applied for addi-Despite the sales decline, higher charges for elec-tional rate relief of S805 million, or 19.4 %. Ilecause tricity yielded a 12.4% increase in electric operating fmal action on that application is unlikely until late in revenues. An analysis of 1981 revenues and sales is 1982, we have asked that half of the amount become shown in the table at the bottom of page 3.

effective on an interim basis at the earliest possible The number of customers served at year-end was date. We need the increase to avoid adverse effects on 2,967,000, up approximately 18,000 from 1980.

our financial standing and ability to raise the funds necessary to carry on our construction program.

1 1981 Highlights change Average Since Annualincrease 1981 1980 Since 1971 Net Income on Common Stock S351.8 million up 22.5 %

11.0 %

Earnings per Common and Common Equivalent Share S3.06 up 3.0%

0.7 %

Cash Dividends Paid per Common Share S2.65 up 1.9 %

1.9 %

Electric Operating Revenues S3,737.3 million up 12.4 %

14.2 %

Sales to Ultimate Consumers 60.3 billion kwh down 1.5 %

2.4 %

Average Residential Revenue

• 7.134 per kwh up 14.4 %

10.1 %

Average Residential Use 6,291 kwh down 5.0%

0.8 %

Electric Customers at December 31 2.97 million up 0.6%

1.3 %

Peak Load 13.3 million kw down 6.5%

2.0 %

• Euludes light bulb senice.

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1981 Financings During 1981 we completed outside financings totaling this report went to print, we were planning to sell 10 about $839 million, including S186 million from the million shares of common stock through underwriters sale of to million shares of common stock in July. Our on or about February 3 and up to S?00 million of first 1981 financings are shown below.

mortgage bonds in February or Alar;h. The type and amount of financings beyond these will depend on fac-Amount tors such as market conditions, the amount of rate hionth (Alillions) relief received and the timing of our need for funds.

January

.14% First hlortgage Bonds S150 February 11%% and 11M% Pollution Tax Status of 1981 Dividends Control Obligations 60 hlay 16%% and 16%% First Cash dividends paid on common stock in 1981 were Afortgage Ilonds 200 S2.65 per share. Of this, the Company estimates July Common Stock 186 that 45% represented a return-of-capital distribution November 17%% First NIortgage Bonds 150 (rather than ordinary dividend income) for federal in-November Sale of Tax Benefits (Initial come tax purposes. Although this estimate is subject to Receipt) 14 adjustment by the Internal Revenue Service, it may be (Various)

Sale / Leaseback of Nuclear Fuel 79 used by stockholders in filing 1981 tax returns. All Total S839 1981 dividends on the preferred and preference stocks are taxable as ordinary dividend income.

The Company reported this information on the sub-stitute Form 1099 statements mailed in late January Afore Financing Ahead 1982. If you received dividends from the Company in As in 1981, the Company will be faced with heavy out-1981 but did not receive a statement, please contact Commonwealth Edison Shareholder Services, P.O.

side financing during 1982 and 1983. We must raise over $1 billion in the financial markets in each of those B x 767, Chicago, Illmois 60690.

years.

Our first 1982 financing was completed in late Jan-uary through bank borrowings of $100 million. When 1981 Revenues and Sales Electric Operating increase Kilowatthour Decrease

• Resenues Over Sales From (thousands) 1980 (millions) 1980 Residential S1,224,172 9.4 %

17,078 kwh 4.4 %

• Small commercial and industrial 1,269,473 14.8 %

18,892 0.1 %

• Large commercial and industrial 895,625 14.1 %

18,744 0.4 %

• Public authorities 270,646 13.3 %

5,246 0.7 %

• Electric railroads 16,619 12.7 %

351 3.8 %

• Ultimate consumers S3,676,535 12.7 %

60,311 kwh 1.5 %

• Sales for resale 37,509 918 Other revenues 23,267 Total S3,737,311 61,229 kwh 3

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l 1

New Generating Capacity Construction Budget $300 Million Lower l

Six generating units, all nuclear, are now under con-Our five-year construction budget for the years struction, as follows:

1982-86 is S5.55 billion, down 5300 million from the S5.85 billion budget for ihe 1981-85 period. Construc-S< heduled Net Capabih.ty Unit for Ser ic e (kilowans) -

tion expenditures in 1981 were $1,301 nu.ll.ion.

Construction work in progress, now amounting to 1.aSalle County I los2 1,078,000 S5.1 billion, will start to decline as the units at LaSalle LaSalle County 2 1983 1,078,000 County, Ilyron and liraidwood stations go into service.

j flyron 1 1981 1.120,000 There should be a corresponding decline in our exter-l Byron 2 1985 1,120,000 nal financing requirements.

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liraidwood 1 1985 1,120,000 pound growth rate in peak load for the next 10 years, lira.dwood 2 1986 1.120.000 i

compared with our previous estimate of 3 %. As a re-sult, we do not expect to begin construction of any These units were committed before the slowdown in additional generating units before the early 1990s.

load growth that began with the 1973 oil embargo.

Consequently, as the units come on line, they will probably give us somewhat greater capacity than required at the time to meet peak loads. Nevertheless, maintaining the present completion schedule is in the best interest of our stockholders and customers. The c,,,,u,u, n,,,, n,s,ou,,h,cc.j,,,rfin c,,,npf,,cs af n>,o,,

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units are well advanced in (onstruction. Delaying pouw r warmn, near n> ron. nhnon. The uanon', teu 7,/Jo.ooo.

completion would increase their costs significantly, Ad" man renc, anne una, a,e schedu/cd /,r 3erru c m 19xiand thus adding to future capital requirements. Moreover, 19" 7 '"' '"'" "'"" h"PCd "dd"' 0 '" "' "c'd /'" # r"."" d "'r the conta,n,nent st,uctures {,r the l n,I I and 2 reactors. lhe fun the sooner the units are placed.in service, the sooner we fu,,,, y,,,,,,,,,,,,3, 34,u,,,g y,, mf.,,t.4,gh,,ar u ral dra/r can displace higher cost generation, some of it oil-fired, co,s,ng fumers, ca,4 of wa,ch wat he,apaid,.,,fc,,c,danny o wpio with electricity produced with lower-cost nuclear fuel.

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Zion Safety Study The safety of the public and our employes has always to be many times more severe than the worst on record been the first priority of our nuclear program.

in northern Illinois, rivaling those that struck San At the time our Zion nuclear units were placed in Francisco in 1906 and Alaska in 1968. And even then, service in 1973 and 1974, the station's unique safety the risk at Zion is small.

features far exceeded safety requirements. Since then, We remain convinced that nuclear power is a safe, improvements in Zion's equipment and procedures, clean, reliable and economical method of generating largely resulting from lessons learned as a result of the electricity. In Edison's 1979 and 1980 Annual Re-1 incident at the Three Ntile Island nuclear power plant, ports, and at our annual meetings in those years, we have further enhanced the station's safeguards.

reported on the measures being taken in response to In 1979 the Nuclear Regulatory Commission Three Niile Island to assure the safe operation of our (NRC) questioned whether the location of Zion sta-nuclear plants. The Zion study underscores our con-tion in a relatively high population area might repre-tinuing commitment to safe operations.

sent an undue risk. In response, a team of Edison scientists, engineers and outside consultants was N,uclear Power Saves formed to re-examine the matter. Eighteen months later they completed a 10-volume,6,000-page assess-In 1981 nuclear power accounted for about 45% of ment, the Zion Station Probabilistic Safety Study.

our total generation. In the process, it saved over S500 Presented to the N RC and made public in the fall of million in fuel costs compared with generating the 1981, the report found that despite its locat:on Zion same amount of electricity with western low-sulfur station poses no undue safety risk.

coal. This saving is equivalent to over 40% of our The study considered tens of thousands of accident total 1981 fuel cost of S t.2 billion. Using oil instead of poaibilities, including events initiated by operator er-nuclear fuel would have increased our fuel costs by S2 ror, pipe breaks, equipment failures, airplane crashes, billion. This is a major reason why, even with reccnt tornadoes and earthquakes. It found that an extremely increases, our electric service rates are lower than violent earthquake posed the most risk. Ilowever, ac-those in such urLan areas as New York, lloston, cording to the report, such an earthquake would have Philadelphia and San Diego.

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Zion nuclear power stalwn i:us the subject of an 18. month safety study com/deted m l'hi. Called the Zwn Stalwn Probabdntic Safety Studu the 10-odume. o,UtH3-page revin: found that Zwn station represented no undue rvk to the fmblie. */he statwn. !ocated on I.ake.\\luhigan at /wn,1!!nwn, i.m eompla tedin 1971andhas I::n 1,010,tkM1-kdm.ntt units. In 1% 1. l ' nut I set a Company reevrd ol217 dau of contmuous operatwn.

5

Load Management and Conservation The heaviest loads on our generating system occur in save ori their electric bills. Through time-of-day rates, the summer, due to air conditioning. The size of our savings are likewise available to large commercial and future construction program is determined by these industrial customers who shift use from heavy-load peak summer loads. Our goal is to reduce growth in daytime hours to nighttime periods and weekends.

peak load and thereby limit the need for more generat-In addition, we are promoting customer-owned ing capacity after the last of the six nuclear units now devices which produce and store cold and heat at night under construction is completed in 1986. To achieve for use the following day. This reduces daytime air that goal, we are employing a combination of rate in-conditioning and heating loads and shifts them to centives, load management techniques and marketing nighttime, when our most efficient base-load nuclear ciforts. These measures also are designed to encourage and coal-fired units can carry a greater percentage of off-peak use and promote energy conservation.

the load. A storage cooling system, for example, uses Our activities imlude, among others, the use of sea-electricity to make ice at night during off-peak hours.

sonal and time-of-day electric service rates to encour-The ice is then used to provide air conditioning during age customers to limit their peak loads. Seasonal rates the day, when the demand for electricity is high. One recognize that the cost of p oviding electricity on hr,!

of the largest buildings under construction in down-summer days is higher than at other times of the year.

town Chicago, the State of Illinois Center, will have a Our rates are, therefore, higher in the summer and storage cooling system.

lower during thc other seasons. Customers who curtail We are also participating in a home energy audit use, particularly during the peak summer months, can service through a non-profit association formed by eight Illinois electric and gas utilities. An on-site sur-vey provides the customer with a detailed plan for our ner.. n.dmehra ini.; nntr,a Acaenu, ins urnt mio opua.

making energy-efliciency improvements to his home or i,on m imi. h von the h c,mmanci n,aismg an opou.

apartment. The audits are of fered to customers in sin-inmi"orat,on m the imi Enary.tuwai en, gram of the nhwas gle-family homes and small apartment buildings (up a uf thc Jmn,can soortv of ucatmg. n fngaarn.n a"d '".-

to four units) at a nominal cost of S15. Announce-(;4a omatmume Engment /Ac Am4uartos fcato,n ao,aer us ments were mailed to all eligible customers in the fall Inn s hr cmJme and heatmg, udar wata heatmg and other enney of 1981 and audit offers are he.mg maded at the rate of wnservation measures. h 3ain ab.mt 170,000 peufde m 10 com-marntvs m the untan 3nhurbs of Chn ago.

about 4,000 per day over the next two years.

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Dividend Reinvestment Plan Revised We have modified the Automatic Dividend Reinvest-disposed of, with proceeds on sales of shares held one ment and Stock Purchase Plan to allow holders of year or longer generally taxed as a long-term capital common stock to reinvest cash dividends on some of the gain. Ilowever, if the shares are sold within one year, common shares registered in their names while they the long-term capital gain treatment will not be avail-continue to receive cash dividends on other shares so able and the entire sale proceeds will be taxable as registered. Previously, participants in the plan rein-ordinary income. The same is true if the shares are vested cash dividends on all their shares of common deemed to have been sold between the dividend record stock. Those who did were eligible to make optional date and one year from the dividend payment date.

cash payments of up to $3,000 per quarter to buy addi-Those Edison common shares purchased with quali-tional shares. Under the modified Plan, optional cash fied reinvested dividends will be deemed to have been purchases are permitted whether or not cash dividends sold if the stockholder disposes of any Edison mmmon are reinvested. Iloth changes are effective Slay 1, shares during this period.

1982.

A prospectus describing the modified plan and an As before, reinvested dividends are used to purchase enrollment form are available to interested common additional shares at a 5% discount from the market stockholders upon request to Commonwealth Edison price; optional cash payments purchase shares at the Shareholder Services, P.O. Ilox 767, Chicago, Illinois full market price, and no brokerage fees or service 60690.

charges are incurred by participants for such pur-chases Individual stockholders participating in qualified Board and hianagement Changes dividend reinvestment plans are eligible to exclude,in During 1981, llrooks AlcCormick and Joseph S.

the aggregate, from their income for federal income tax Wright stepped down from the lloard of Directors purimses up to S750 annually (S1,500 on a joint re-after 17 and 12 years of service, respectively. Wayne turn) of qualified reinvested dividends. Ilased on a L. Stiede was appointed Assistant Vice President; published interpretation by the Internal Revenue Ser-David W. Nocchi was named Af anager of Customer vice, it appears that our plan should qualify. The ex-Service, and Charles G. Ilarnach was named hian-clusion begins in 1982 and continues through 1985.

ager of hlarketing Services. K. E. Ilartels replaced if a stockholder elects to claim the exclusion on his hir. Ilarnach as Southern Division Vice President.

tan return, shares purchased with such dividends (but At the lloard of Directors meeting on January 25, not shares purchased with optional cash payments or 1982, Ralph L Ileumann was elected Vice President with distributions which represent a return of capital) and Comptroller and Donald A. Petkus was elected will have a zero cost basis for income tax purposes.

Vice President. Senior Vice President Ilubert II.

These shares will not be taxed until sold or otherwise Nexon retired in 1982.

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DIVIDEND REINVESTh1ENT PLAN PARTICIPATION

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General Information Commonwealth Edison Company Transfer Agents l

The Company is an imestor-owned utility engaged The First National llank of Chicago' principally in the production, purchase, transmission, One First Nati,onal Plaza distribution and sale of electricity in an 11,525-Chicago, Ilknms 60670 square-mile service area of northern Illinois. Corpo-NIanufacturers llanmer Trust Company

• rate address: One First National Plaza, P.O. Ilox 767, 4 New York Plaza New York, New York 10015 Chicago, Illinois 60690. Telephone: (312) 294-4321.

The First National Bank of Ilosion 100 Federal Street Annual hiceting Iluston, h!assachusetts 02110 The annual meeting of stockholders will be held at

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10:30 a.m. on Wednesday, April 21,1982, in the Grand llallroom of the Conrad llilton llotel, 720 South Alichigan Avenue, Chicago, Illinds. Notice of Registrars the meeting and proxy materials will be mailed to Continental Illinois National llank stockholders on or about hlarch 15.

and Trust Company of Chicago" 231 South LaSalle Street Annual Report, Form 10-5 and Financial Review Chicago, Illinois 60690 This 1981 Annual Report has been approved by the

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' ti$al nk of Chicago *"

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r t al lloard of Directors. l'he 1981 1 orm 10-K Annual Chicago, Illinois 60670 Report (to be filed with the Securities and Exchange Commission) and the 1981 Financial Review (with Al rg n Guar n y Trust Company of New York 30 hest Ilroadway comparative statistics for the last 10 years) w.ll be New York, New York 10015 i

available in early April. Stockholders may obtain a coIiy of either, or both, without charge from R. P.

gt te Street Bank and Trust Company 3.5 I ranklin Street llachert, Secretary and 'I.reasurer, Commonwealth lloston, hlassachuseus 02110 Edison Company, P.O. Ilox 767, Chicago, Illinois

,,C,ommon stm L only 60690.

... Preferred and preference sim L, only Other Information Dividend Reinvestment Plan Agent Stockholder inquiries regarding dividend payments or other account information, changes of address, and

.h,*r.."$hN j " lj "

f l

requests for the dividend reinvestment plan prospectus Suite 0128 and enrollment form, should he made to Common-Chicago, Illinois 60670 wealth Edison Shareholder Services, P.O. Ilox 767, Chicago, Illinois 60690. Inquiries about stock transfer requirements or lost or stolen certificates should be made to one of our Transfer Agents (see listing on this Page).

Summary of Selected C<m3olidated Financial Data 1981 1980 1979 1978 1977 l

-hfillions of Dollars-Electric operating revenues.

S 3,737 S 3,324 S2,721 S2,443 S2,095 Net income S

450 5

382 S 297 S 321 S 247 Earnings per common and common equivalent share (in dollars)

S 3.06 S 2.97 S 2.51 S 3.30 S 2.86 Total assets (at end of year)

S I1,197 S10,177 59,173 S7,924 56,830 Long-term debt, preference stock subject to mandatory redemption requirements and the capitalized nuclear fuel lease olligation (at end of year)

S 5,709 5 5,230 S4,867 S3,795 S3,255 Cash dividends declared per common share (in dollars)

S 2.70 S 2.60 S 2.60 S 2.45 S 2.40 l

8

l l

Management's Discussion and Analysis of Financial The ratings of the Company's securities by three prin-CiPal rating agencies are as follows:

Condition and Results of Standard Duffand Operations sioeus

& reer s racins

• d

• rtgage and secured Liquidity and Capital Resources The Company and its electric utility st.bsidiary, Common-pf[."" Id res and hI n

wealth Edison Company of Indiana, Inc., (the "mmpa.

unsecured pollution mntrol nics") are engaged in a continuing construction program obligations A

Bilin 6

which has been and will be modified as necessary for adap-convertible preferred stock a

A-6 tation to (hanging emnomic conditions and timeliness of Preference stock haa liBB 7

rate relief, as well as other relevant factors. The construction Commercial paper P-1 A-2 Not rated program for the five-year period 1982-86 calls for electric in connection with the electric rate increase filing in plant and equipment (excludmg nuclear fuel) expenditures January,1982, described on page 2, the Company has stat-of approximately $5,550 milhon,includmg $1,450 mdhon ed.its belief that current rates may be.madequate to main-in 1982, 51,350 million in 1983,$1,050 million in 1984, tain these securities ratings and to attract the financing

$900 million in 1985 and $800 million in 1986. These neens ry to continue the Company s construction program.

estimated expenditures include $4,360 million for produc-pnder pasent rain, the gompany anticipates the possibil-tion tacilities, $1,105 million for transmission and distribu-ny o substantial dech,nes m carn,mgs and mscrages, which tion facilities and $85 million for general plant, and assume

"*Y'"***'"''E'"9""**"

that construction msts will escalate 9% annually. Purchase for the issuance of first mortgage bonds after the assumed is-commitments, principally related to construction and nu-suann of miumn o nds in the first half of 1982, and clear fuel, approximated $1,755 million at December 31, further increases in the portion of earnings attributable to 1981. In addition, the companies hase substantial commit-aHowance for funds used during construction, a non-cash ments for the purchase of coal and oit under long-term con-item. l'he Company s continued v,iabihty,like that of other ngulated companies,is dependent upon adequate and time-f the funds required for the 1982-86 construction pro-gram and other capital requirements, it is presently esti-mated that approximately 60% will be provided from inter-Results of Operations nal sources, with a major portion of the external financing Earnings Per Common Shore. The Company's earnings per requirements expected in 1982 and 1983. In addition, common and common equivalent share were $3.06 in'1981, approximately $1,019 million will need to be raised exter-

$2.97 in 1980 and $2.51 in 1979. The increases in earnings nally to refinance currently outstanding first mortgage per share were limited by the effects of inflation on operat-bonds, debentures and long-term notes maturing by the end ing expenses, increases in interest expense and provisions of 1986. The type of financing will depend on market condi-for dividends on preferred and preference stocks, increases tions and the results of rate increase requests during the in the average number of common shares outstanding and fise-year period. The Company expects a portion of its by the other factors discussed below.

financing to be provided through the leasing of nuclear fuel.

Electric Operating Revenues. The Company's kilowatt-The type of financing, if possible, will reflect the Company's hour sales to ultimate consumers, with 1979 adjusted to goal to reduce the debt portion of its capitalization to ap-eliminate the effects of the change from bi-monthly to proximately 50% toward the end of the fise-year period, monthly hilling for certain customers, declined 1.5 %,1.6 %

Reference it made to the Statements of Consolidated and 0.1 % in 1981,1980 and 1979, respectively. The decline Changes m I mannal Positmn for the construction expendi-in kilowatthour sales in 1981 was affected by the recession, tures and funds provided internally from current operations amservation and a much cooler summer.

for the years 1981,1980 and 1979.

Rate increases granted by the Illinois Commerce Com-The Company's ability to finance the construction pro-mission had a significant effect on electric operating reve-gram is dependent u[mn electric rates which will provide a nues for the years 1981,1980 and 1979 and are summarized level of earnings sullicient to pay for that portion of the con-as follows:

struction program to be financed from internal sources and to maintain debt and preferred and preference stock emer-Interim or Annual Resenue ages and common sto(k equity earnings which will permit g.1Tertive Date Permanent increase (in millions) (a) the issuance of additional securities of the Company on rea-I98'

"' n n (b) s<mable terms. The necessity for extensive plant expansion I

20, W80 i

m an milationary cra, when the Company has been re-February 7,1980 Permanent

$389.6(c) quired to seek large amounts of new capital at high costs, October 15,1979 Interim 5 45.2 coupled with additmnal costs imposed by delays in mnstruc-December 14.1978 Permanent 5 74.9 tion and environmental mmpliance requirements, has ad-(a) Based on twehe-month test periods used in rate order.

versely affected the Company's earnings. These cifects hase (b) Includes the interim increase effectise Nmember 20,1980 caused dechnes in debt and preferred and preference stock which with certain minor exwptions was made permanent by cmerages and sescral downgradings of the Company's se-the July 1,1981 order.

curities ratings and have adversely affected the price and (c) Includes the interim increase clTectise Onober 15, 1979 cost at which the Company can sell equity and debt securi-which with certain exceptions was made permanent by the ties.

February 6,1980 order.

a 9

Operating revenues increased 5413,268,000 in 1981, of The Company has six nuclear generating units with an which approximately $399,500,000 resulted from rate in-aggregate net capability of 6,636,000 kilowatts under con-creases effective February 7,1980 and July 6,1981 (includ-struction with scheduled senice dates ranging from 1982 to ing the related interim in : case efle tive Nmember 20, 1986. With the addition of these units, the Company an-1980) and $51,400,000 from increased fuel adjustment ticipaics that by the late 1980's, almut three-fourths of the c harges because of higher fossil fuel costs, olfset by a net de.

kilowatthour generation muld be from nuclear generating crease of $37,632,000 in other items, primarily from a de-units.

cline in base rnenues resulting from lower kilowatthour Purchased and interchanged power expense during the sales to residential customers.

years was primarily affected by the availability of generat-Operating revenues increased 5603,121,000 in 1980, of ing units, weather and weather related problems and the which approximately $358,836.000 resulted from rate in-availability of lower cost pmver from other utilities. The in-creases, $283,689,000 from increased fuel adjustment crease in 1981 reflects the availability of short-term power charges because of higher fossil fuel msts, offset by a from orher utilities at msts lower than ihe incremental costs

$39,404.000 net decrease in other items, primarily from the of generation on the Company's system partly ofTset by in-effect of the change from bi-monthly to monthly billing in creased nei sales of emergency power to other utilities. In 1979 1979 the Company had prolonged generating unit outages Operating revenues increased $278,134,000 in 1979, of and prolonged sesere weather which impaired barge and which approximately $85,221,000 resulted from rate in-rail deliseries of coal and oil to fossil-fueled generating sta-creases, 5160,505,000 from increased fuel adjustment tions and hampered coal handling operations.

charges because of higher fossil fuel costs,533,716,000 from For a summary of taxes, except inmme taxes, reference is the change from bi-monthly to monthly billing and made to Note 13 of Notes to Financial Statements.

$8,434,000 from the transfer of rnenues from resale cus-Interest on long-term debt and notes payable increased tomers which had been recorded in other deferred (redits, because of greater amounts of debt outstanding and higher offset by a 59,742,000 decrease from other items. Refereme interest rates. During 1981,1980 and 1979, average long-is made to Notes 14 and 15 of Notes to Financial State-term debt outstanding was $5,039,781,000, S4,635,445,000 ments.

and S3,895,445,000, respectively, and the average interest Electric Operating Expenvs and Taxes. Fuel expense rates thereon were 9.11 %,8.50% and 7.66%, respectiscly; has increased mer the years primarily as a result of in-average notes payable outstanding were $503,243,000, creases in the price of fuel con imied. The increase in 1981

$445,525,000 and 5325,719,000, respectis ely, and the aver-was partially offset by a decrease in net generation of electric age interest rates thereon were 16.78 %, 12.82 % and energy. The change in the mix of the sources of electric 11.18 %, respectis ely, energy generation reflects primarily the availability of the The amounts of allowance for funds used during am-various types of generating units and the asailability of struction ("AFUDC") reflect increases in the inels of in-economy power to displace the more expensise generation sestment in construction work in progress and changes in on the Company's system during the respectise years. The the annual rates as discussed in Note 1 of Notes to Financial mst of fuel consumed, net generation of electric energy and Statements. AFUDC does not amtribute to the current cash fuel sources of generation are as follows:

flow of the Company. For the year 1981, the equity mm-ponent amstituted 45% of net income and t!.e debt compo-i 1981 1980 1979 nent, representing interest costs expended (net of income Cost of fuel mnsumed

.xed, w s equ alent ny 2% of net inmme. in mnnectkn (per million btu):

wnh the rate order elTective February 7,1980, the Company Coal.

$2.17

$1.99

$1.69 was allowed to include 5343,500,000 of construction work -

Nuclear.

50.41

$0.31

$0.29 in progress ("CWIP") related to 1,aSalle County Unit 1 in OH 56.79

$5.3s

$ 3.58 the rate base and ceased to capitalize AFUDC on such Natural gas.

54.58 53.54 52.80 CWIP. In connection with the interim rate order effectise Merage all fuels.

51.83

$ 1.68 51.39 Nmember 20,1980, the Company was required to cease Nei generation of electric energy capitalizing AFUDC on the remainder of its imestment in (millions of kilowaithours) 59,816 62,819 62.133 1.aSalle County Unit 1. The rate order effectise July 6, Fuel sounts of generation:

1981 allowed 'the Company to include $708,200,000 of Coal.

45 %

47 %

45 %

CWIP related to I.aSalle County Unit 1 in rate base and to fg h

resume capitalizing AFUDC on the remair. der ofits imest-1,aSalle County Unit 1, which amounted to Natural gas.

I I

3 ment in 5480,294,000 at December 31,1981.

l E'

E E'

Refetence is made to Note 22 of Notes to Financial State-i ments regarding the effects of inflation on selected sup-plementary data including cash disidends declared per com-mon share, the market price per common share and income i

from nmtinuing operations, on an inflation adjusted basis.

1 i

10

Report of Management l

To the Audit Committee of the Board of Directors The management of the Company has prepared and is Commonwealth Edison Company:

responsible for the consolidated financial statements We have made a study and evaluation of the system and the related financial data contained in this annual of internal accounting control of Commonwealth Edi.

report. In its opinion, the statements have been pre-son Company and subsidiary companies in effect at pared in conformity with generally accepted account-December 31,1981. Our study and evaluation was ing prmciples.

conducted in accordance with standards established by To meet its responsibilities for the reliability of the the American Institute of Certified Public Account.

financial statements and the related financial data, the ants.

Company maintains a system of internal accounting The management of Commonwealth Edison Com.

controls and supports a program of internal audits. In pany is responsible for establishing and maintaining a order to assure that the system is adequately designed system of internal accounting control. In fulfilling this and documented and that it is functioning as designed, responsibility, estimates anil judgments by manage-the Company routinely reviews its system of internal ment are required to as ess the expected benefits and accounting controls. It is management s opmmn that related costs of control procedures. The objectives of a the system is adequate to provide reasonable assurance system are to provide management with reasonable, that assets are safeguardni from loss or unauthorized but not absolute, assurance that assets are safe-use and that financial records are reliable for prepar-guarded against loss from unauthorized use or dispo-ing financial information in mnformity with generally sition and that transactions are executed in accor-accepted accounting principles. The concept of reason-dance with management's authorization and recorded able assurance is based on the recognition that the cost properly to permit the preparation of financial state.

of a system of internal accounting controls must be ments in accordance with generally accepted account-related to the benefits derived. The balancing of those ing principles.

f ctors requires estimates and judgment.

'llecause of inherent limitations in any system of in.

The lloard of Directors carries out its responsibility ternal accounting control, errors or irregularities may I r the financial statements and the related financial occur and not be detected. Also, projection of any data through its Audit Committee, which is composed evaluation of the system to future periods is subject to solely of outside directors. The Audit Committee meets the risk that procedures may become inadequate periodically with management, the internal auditor, because of changes in conditions, or that the degree of nd independent public neountants to ensure that compliance witti the procedures may deteriorate.

each is carrying out its responsibilities, and to discuss In our opinion, the system of in'ternal accounting auditing, internal control, and fimandal reporting mat-control of Commonwealth Edison Company and sub.

ters. Iloth the internal auditor and the independent sidiary companies in effect at December 31, 1981, public accountants have free access to the Audit Com-taken as a whole, was suflicient to meet the objectives mittee, without management present, to discuss the re-stated above insofar as those objectives pertain to the suits of their audit work and their opinions on other prevention or detection of errors or irregularities in financial matters.

amounts that would be material in relation to the con-p 48WWF solidated financial statements.

ry James J. O'Connor W 11 ce B. Ilehnke,Jr.

=0% d t%.

Chairman and President Vice Chairman Chicago, Illinois, February 1,1982.

11

Commonweahh ihmn Company and Suboidiary Gwnpanics Statements of Consolidated Income 1981.Fhousands of Dollars-1980 1979 ELECTRIC OPERATING REVENUES (Notes 14 and 15).

53,737,311 53,324.043 52,720,922 ELECTRIC OPERATING ENPENSES AND TAXES:

51,242,132 51,167,232 5 962,742 Fuel (Notes 1 and 22)......

Punhased and intenhanged [mwer-net 183,983 115,392 163,205 532,671 461,873 406,179 Operation...

224,813 206,787 179,124 Alaintenance.......

Depreciation (Notes I and 22)....

282,349 269,937 250,122 432,179 390,244 305,705 Taxes (except income) (Note 13)..

income taxes (Notes 1,11 and 12)-

117,404 103,241 61,813 Current -Federal..

19,641 64,601 8,711

- State....

Deferred-Federal-net.

78,566 93,460 46,119 10,204 17,073 6,093

-State-net.....

Imestment tax credits deferred-net (Notes I,11 and 12) 15,989 (8,310)

(3,981 )

53,139,931 52.831,530 52,385,832 El.ECTRIC OPERATING INCOh!E.

5 597,380 5 492,513 5 335,090 OTilER INCOh!E AND DEDUCTIONS:

5(459,115) 5 (394,189) 5 (298,354)

Interest on long. term debt.

(84,459)

(57,133)

(36,422)

Interest on notes payable...

Allowance for funds used during wnstruction (Note 1)-

llorrowed funds, net ofincome taxes 102,172 88,778 68,859 201,166 165,375 153,269 Equity funds.

Curn it inmme tax credits applicable to nonoperating activities (Notes 1 113,123 106,731 77,305 and ' l )..

(20,373)

(20,072)

(3,069) hliscellanecus-net 5 (147,486) 5 (110,310) 5 (38,412)

N ET I N CO h 1 E................................................

5 449,894 5 382,003 5 296,678 PROVISION FOR DIVIDENDS ON PREFERRED AND PREFERENCE 98.091 94,910 81,722 STOCKS NET INCOh!E ON CO$f AION STOCK.

5 351,803 5 287,093 5 214,956 AVERAGE NUhlBER OF CONih!ON AND COh!NION EQUIVALENT SIIARES OUTSTANDING (in thousands).

114,866 96,569 85,759 EARNINGS PER COhlhtON AND COhlhlON EQUIVALENT SilARE 53.06 52.97 52.51 (Note 1 )....

32.70 52.60 52.60 CASil DIVIDENDS DECLARED PER COhlh10N SilARE..

( ) Indicates deduction.

The amunpanying Noics to linandal Statements are an integral part of the above statements.

Report ofIndependent Public Accountants To the Stockholders of Commonwealth Edison Company:

We have examined the consolidated balance sheets and counting records and such other auditing procedures as we statements of con clidated capitalization of Commonwealth considered necessary in the circumstances.

Edison Company (an Illinois corporation) and subsidiary In our opinion, the financial statements referred to above companies as of December 31,1981, and 1980, and the present fairly the financial position of Commonweal..

- related statements of consolidated income, retained earn-Edison Company and subsidiary mmpanies as of December ings, premium on common stock and other paid-in capital, 31,1981, and 1980, and the results of thei' operations and and <hanges in financial position for each of the three years the changes in their financial position for each of the three in the period ended December 31,1981. Our examinations years in the period ended December 31,1981,in mnformity.

were made in accordance with generally accepted auditing with generally accepted accounting principles applied on a standards and, accordingly, included such tests of the ac.

consistent basis.

2"""i'l'.%.

OAQJM.

12

Consolidated Balance Sheets December 31 1981 1980

-Thounnds of Dollars-ASSETS UTILi'IT PLANT (Notes 1,7,18 and 22):

Plant and equipment, at original mst (includes construction work in progress of

$5,103 million and $4,148 million, respertisely).

$13,243,737

$11,965,860 Less-Accumulated provision for depreciation.

2,589,762 2,334,809

$10,653,975

$ 9,631,051 L

Nudcar fuel, at amoriized cost (Note 16).

202,109 231.127

$10,856,084 5 9,862,178 Less-Anumulated deferred income taxes (Notes 11 and 12).

1,067,332 957,732 5 9,788.752

$ 8,904,446 POLI.UTION CONTROL FUNDS IIELD BY TRUSTEE.

203 INVESTh!ENTS:

Subsidiaries not consolidated (Notes 1 and 17)..

$ 176,963

$ 194,186 Other investments, at cost 107,612 92,931

$ 284,575

$ 287,117 CURRENT ASSETS:

Cash (Note 8).

16,665 5

12,328 Temporary cash investments, at cost which approximates market.

2,088 8,002 Special deixisits 10,359 26,405 Receivables-327,083 293,590 Customers...

Other.

24,541 16,548 Provision for uncollectible accounts.

(1,900)

(1,500)

Coal and fuel oil, at average cost..

600,811 486,179 Alaterials and supplies, at average cost.

92,520 86,408 Prepayments..

11,496 17,468 5 1,083,663

$ 945,428 DEFERRED CIIARGES 39,833 39,948

$11,196,823

$10,177,142 LIABILITIES CAPITALl7.ATION (see accompanying statements):

Common st<xk equity.

$ 3,217,595 5 2,912,994 Preferred and preference stocks without mandatory redemption requirements 475,304 483,940 Preference stock subject to mandatory redemption requirements..

624,312 628,081 Long. term debt 5,084,795 4,601,844 5 9,402,006 5 8,626,859 CURRENT LIABILITIES:

Notes payable (Note 8)-

$ 608,075 5 488,674 Commercial paper..

Hank loans 3,800 3,800 Current maturities of long. term debt 159,771 139,342 Accounts payable.

292,327 262,184 Accrued interest.

124,496 116,642 138,624 130,218 Accrued taxes...

Dividends payable I10,203 89,211 28,282-22,156 Customer deposits 35,752 31,171 Othe

$ 1,501,330

$ 1,283,398 DEFERRED CRED.. I'S:

Accumulated deferred investment tax credits (Notes 1,11 and 12).

5 251,304 5 233,077 42,183 33,808 Other.

5 293,487

$ 266.885 CONINilTAIENTS AND CONTINGENT LIABILITIES (Note 19)

$11,196,823

$10,177,142

( ) Indicates deduction.

The a<rompanying Notes to Financial Statements are an integral part of the above statemems.

i 13

l Statements of Consolidated Capitalization D" ember 31 1981 1980

-Thousandsof Dollars---

I COhlhlON STOCK EQUITY (Notes 2,5,6 and 21):

Common st<4k, $12.50 par value per share-

$1,531,411

$ 1,353,756 Outstanding-122,512.868 shares and 108,300,369 shares, respectisely Premium on common stmk and other paid.in capital 1,000,403 911,360 (11)

(10)

Treasury stm k. at cost.

(14,846)

(14,286)

Capital stmk and warrant expense.

Retained earnings 700,638 662,174

$3,217,595

$2,912,994 PREFERRED AND PREFERENCE STOCKS WITilOUT hlANDATORY REDEh!PTION REQUIREhlENTS (Notes 2 and 3):

Preference stm k, cumulatis e, wit hout par value-

$ 432,320

$ 432,320 Outstanding-10,499,549 shares.....

$1.425 consertible preferred sim k, cumulatise, without par value-Outstanding-1,351,713 shares and 1,623,295 shares, respectively 42,984 51,620 Prior preferred stock, cumulatise, $100 par value per share-no shares outstanding.

$ 475,304 5 483,940 PREFERENCE STOCK SUBJECT TO h! ANDATORY REDEh!PTION REQUIREh!ENTS (Notes 2 and 4):

Preference simk, cumulatise, without par value-Outstanding-10,250,000 shares and 10,406,200 shares, respectisely

$ 624,312 5 628,081 EONG-TERhl DEBT (Notes 7 and 21):

First mortgage Innds:

hiaturing 1981 through 1986-8M % due April 1,1981...

$ 39,269 4,000 4,000 3%% due January 1,1982...

Deposit for retirement of bonds maturing January 1,1982 (4,000) 3%% due July 1,1982..

40,000 40,000 8% due October I,1982.

99/>95 99,695 125,000 125,000 9% due August 1,1983.

50,000 50,000 3% due Stay 1,1984...

200,000 200,000 9%% dueJune 15,1984.

3% due April 1,1985..

100,000 100,000 4,000 4,000 3%% due June 1,1985.

40,630 40,000 3%% due June 1,1986..........

5.80% Pollution Control duc July 1,1986 10,000 10,000 hiaturing 1987 through 1996-3M% to 17%%

690,000 290,000 hlaturing 1997 through 2006-5%% to 9%%

925,000 925,000 890,000 790,000 Alaturing 2007 through 2011-8%% to 16M%

$3,173,695

$2,716,964 I

Debentures, due December 15, 1986 - 12 % %..

250,000 250,000 Debentures, due Alarch 15, 1987 - 14 % %.

125 000 125,000 Sinking fund debentures, due 1996 through 2011-2M% to 15%%..

1,228,120 1,235,804 Pollution control obligations, due 2000 through 2011-5%% to 11h%

395,000 335,000 102,053 102,127 Other (principal,1y long-term notes)........

Current maturities of long-term debt induded in current liabilities...

(159,771)

(139,342)

(29.302)

(23,709)

Unamortized net debt discount and premium (Note 1)

$5,084,795

$4,601,844

$9,402,006 58,626,859

( ) Indicates deduction.

The accompanying Notes to Financial Statements are an integral part of the above statements.

c 14

Statements of Consolidated

393, i9so

,979 Changes in Financial Position

-nmusanas of Doiiars-FUNDS PROVIDED llY:

Current operations-Nei income....

5 419,894 5 382,003 5 296,678 Depreciation and amortization 379,539 361,515 329,421 Ikferred income taxes and investment tax credits-net 114,229 110,222 54,445 Equity cominnent of allowance for funds used during construction.

(201,166)

(165,375)

(153,269)

Other ncn-cash items-net.

2,402 3.341 (5,384)

Funds provided internally..

5 744,898 5 691,706 5 521,891

.I. tuance of securities-1.ong. term debt 652,434 465,774 916,223 Capital stm k....

256,828 390,018 454,032 Sale of nuclear fuel 78,678 139,925 Sale of tax benefits-initial receipt.

Increase in short-term lorrowings 13,598 119,401 131,934 34,995 51,865,837 51,819,357 51,927,141 FUNDS APPL. LED TO:

Construction expenditures.

51,303,898 51,179,684 51,292,176 Nuclear fuel expenditures..

154,278 123,793 139,620 Equity component of allowance for funds used during construction.

(201,166)

(165,375)

(153,269) 51,257,010

$1,138,102 51,278,527 Cash disidends dedared on capital stak...

411,430 349,825 309,105 Deposit for retirement of first mortgage innds.

4,000 Retirement of first mortgage londs for cash.

39,269 49,009 139,504 Retirement of long-term notes.

100,000 Redeemed or reanguired preference sim k..

3,769 7,091 7,230 Imestment in subsidiaries not consolidated (13,673) 21,033 19,920 Decrease in pollution control funds held by trustee..

(203)

(444)

(4,503)

Increase in working capital (other than short-term lorrowings and current maturities of long-term debt) 60,133 244,740 152,990 Other items-net 4,102 10,001 24,368 51,865,837 51,819,357 51,927,141

( ) Indicates deduction.

State.ments of Consolidated

,93,

,93o

,979 Retamed EarmngS

-Thousands of DoHars-IIAI.ANCE AT IIEGINNING OF YEAR.

5 662,174 5 629,996 5 642,717 NET INCO.\\lE 449,894 382,003 296,678 51,112,068 51,011,999 5 939,395 DEDUCT-Cash dividends declared on-Common simk...

5 313,430 5 254,440 5 225,567 Preferred and preference stmks.

98,000 95,385 83,538 Premium and expense on preference stuk redeemed.

294 5 411,430 5 349,82s 5 309,399 IIAI.ANCE AT END OF YEAR.

5 700.638 5 662,174 5 629,996

==

Statements of Consolidated Premium on i933 39so 3979 Common Stock and Other Paid-In Capital

-Thousands of Dollars-IIAI.ANCE AT llEGINNING OF YEAR.....

ADD-Premium on issuance of common simk and gain on reacquired...

5 911,360

$ 818,929 5 687,100 preference stock 89,946 92,707 132,175 51,001,306 5 911,636 5 819,275 DEDUCT-Transfer to common stock account ugxm exercise of warrants 903 276 346 IIALANCE AT END OF YEAR..

51,000,403 5 911,360 5 818,929 The anompanying Notes to Finamial Statemems are an inirgral part of the atmvc statements.

15 -

Notes to Financial Statements (1) Summary of Significant Accounting Policies im estment tax credits utilized are deferred and amortized Principles of Cmw/idation. The mnsolidated financial through credits to income over the lives of the related statements include the accounts of subsidiaries engaged in property.

Provisions for deferrals of construction related income the electric utility business. All significant intercompany tax benefits (e4 anelerated cost rnmery and liberalized e

transactions have been climinated.

Indisidual financial statements of the Company hase depreciatmn) refint consumption of the plant and equip-been omitted because it is primarily an operating co'mpany ment 19 w,hich they relate. Consequently, they are similar to and subsidiaries included in the consolidated financial state-deprenation provisions, and the related accumulated deferred inmme taxes, like the accumulated provision for ments are totally-held subsidiaries. Financial statements of the Company's nonconsolidated subsidiaries have been depreciation, is a valuan,on reserve deducted from plant in-omitted because, considered in the aggregate, they would not vestmeni in arriving at the rate base used m ratemakmg constitute a significant subsidiary.

prmred, gs.

m Investments in Subsidiaries not C< min /idated. The Com-Income tax credits resulting from interest charges ap-pany acmunts for imestments in its subsidiaries not plic ble to nonoperating activities, principally constructmn, are classdied as other mcome.

consolidated in acmrdance with the equity method. At December 31,1981,1980 and 1979, retained earnings Alloreance for I unds Used I)uring Construction include $15,369,000, $ 18,354,000 and $23,389,000, respec-(AFU/K.'). In accordance with umform systems of accounts tively, of undistributed earnings of subsidiaries not am-prescribed by regulatory authonties, the Company capi-solidated. The equity in earnings of subsidiaries not con-talizes AFUDC, compounded semi-annually, which repre-sents the estimated net cost of funds used to finance the con-solidated, which is included in miscellaneous other income and deductions, for the years 1981,1980 and 1979 was s ruction program. Aserage annual rates of 8.55%,7.65%

and 7.26 % (net of income tax rates) were used in the years

$3,033,000, $965,000 and $4,362,000, respectively. The Company's investnient in its uranium subsidiary at 1981,1980 and 1979, resperihely, to determine the amounts of Af UDC. The rates used were ulculated in ac-Decembe, 31,1981 includes about $5,641,000 which repre-mrdance with the formula prescribed by the Federal Energy sents the unamortized portion of the punhase cost attrib, utable o uranium ore reserses after taking acmunt of the es-Regulatory Commission. Reference is made to the next to timated net value of the subsidiary's other assets at the date the last paragraph in hianagement's Discussion and Analy-sis of Financial Condition and Results of Operations.

of acquisition. This amount is being amortized on the bisis Unamortized Dcht Discount, Premium and Expense.

of uranium concentrate pnwiuced from the reserves.

Depreciation. Depreciation is provided on the straight-Debt discount, premium and expense on outstanding long-line basis by amortizing the cost of depreciable utility plant term debt are being amortized over the lives of the respective I55 " #5-and equipment over estimated composite service lives. Dur-ing the years 1981,1980 and 1979, provisions for deprecia-C"i" "n Rcacquired Debentures. Ga.ms resulting from tion approximated 3.74 %,3.72% and 3.68 %, respectively, reacquisition by the Company of its debentures to satisfy of average depreciable utility plant and equipment. While smkmg fund requirements are recogmzed currently m, other the eveniual cost of retiring a nuclear generating unit is un-mmme, net of the related income tax effect. The method is mnsistent with the treatment applied for ratemaking pur-certain at the present time, these composite depreciation rates include significant allowances for both interim Poses. The gam on reacquired debentures, net of income chemical cicaning and end-of-life decontamination and re-t xes, for the years 1981,1980 and 1979 was $2,106,000,

$2.207,000 and $1,437,000, respectisely.

tirement.

Amorti:ation of A*nclear Fuel. The cost of nuclear fuel is Earnings Pa Common anMmmon Equivalent Share.

amortized to fuel expense based on the quantity of heat Earnings per share were computed using the weighted aver-pnxiuced for the generation of electric energy. Provisions for ge number of shares of common stock and common stock spent f;el disposal costs are recorded based on kilowatthours equivalents outstanding. Additional shares of common stock which would be issued if all outstanding common simk pur-of nuclear generation. A rate of one mill per kilowatthour t nase warrants were converted into common stock have been was used from September 1978 through June 1981. In the mnsidered mmmon stock equivalents.

rate order dated July 1,1981, the Illinois Comment Com-mission approved the Company's request to increase the rate to two mills per kilowatthour, which includes a provi-(2) Authorized Shares and Voting sion for additional disposal costs for fuel already discharged Rights of Capital Stocks from reactors. During the years 1981,1980 and 1979, At December 31,1981, the authorized shares of capital provisions for amortization of nuclear fuel, including provi-stocks were: mmmon stm k-250,000,000 shares; preference sions for spent fuel disposal costs, were $97,190,000, stock-34,250,000 shares; $1.425 convertible preferred

$91,578.000 and $79,299,000, respectisely.

stock-1,351,713 shares; and prior preferred stock-Income Taxes. The Company provides for deferred in-850,000 shares. The preference stock is issuable in series mme taxes with respect to certain timing differences and may be issued with or without mandatory redemption between book and tax accounting as discussed in Note 11.

requirements. Ifolders of shares at any time outstanding, income taxes deferred in prior years are charged or credited regardless of class, are entitled to one vote for each share to income as the timing differences reverse.

held on each matter submitted to a vote at a meeting of stockholders, with the right to cumulate votes in all elections for directors.

16

l (3) Preferred and Preference Stocks Without Manda-(4) Preference Stock Subject to Mandatory Redemp-tory Redemption Requirements tion Requirements The series of preference stock without mandatory The series of preference stock subject to mandatory redemption requirements outstanding at December 31, redemption requirements outstanding at December 31, 1981 are summarized as follows:

1981 are summarized as follows:

Aggregate Redemption Price Per Share Aggregate Redemption Prict Per Share Shares Stated (plus accrued and unpaid Shares Stated (plus accrued and unpaid Series Outstanding Value disidends,if any)

Series Outstanding Value disidends,if any)

---Thousands

-Thousands of Dollars-of Dollars-

$130 4,249,549

$106,239 $25.25

$2.875 2,550.000

$ 61,455 Non-callable prior to Novem-

$23M) 2,o0j100 51,560 $26.04 ber 1.1984,cxcept for sink-

$1.96 2,000jxx) 52,440 $27.65 through Nosember ir.g fund; $26.50 ihrough 30,1982;and $27.11 there-October 31,1989; and after

$25.25 thereafter

$7.24 750.000 74,340 $103 through Februay 28,

$2.375 2,700,000 65,205 $26.50 through Octoler 31, 1983; and $101 thereafter 1985; $25.75 through Oc-

$3.40 750.000 74,175 $103 through January 31, tober 31,1990; and $25.25 1984; and $101 thereafter thereafter

$8.38 750fn>

73,566 Non-callable prior to April 1,

$8.20 750,000 75jn) Non-callable prior to Nosem-1982; $102.15 tbrough her 1,1987, except for smk-Alarch 31, 1987; and ing fund; $105 through

$100.16 thereafter October 31,1992; $103 through October 31, 1997; 10.499,549

$432.320 and $101 thereafter

$8.40, 750,000 74,494 Non-callable pri3r to Alay 1 Series il 1983; 5103 through April The outstanding shares of the $1.425 convertible "8'

preferred stock are convertible at the option of the holders 3 er thereof, at any time, into common stuk at the rate of

$8.85 750,000 75.000 Non-callable prior to August 92/100ths of a share of common stock for each share of con-1,1988, except for sinking vertible preferred stuk at December 31,1981, subject to fund; $105 through July future adjustment. The convert;ble preferred stock may be 31,1993; $103 through redeemed by the Company at $42 per share, plus accrued July 31,1998; and $101 and unpaid disidends,if any. During 1981,1980 and 1979, thereafier 271,582 shares, 199,985 shares and 722,443 shares, respec.

$9.25 1,500,000 150J100 Non-callabic prior to August I' I 989' **PL I ' 'I"ki"E tisely, of the con ertible preferred stock were conserted into fund; $105 through July common stm k.

31,1994; $103 through No shares of preferred or preference stock w. hout man-July 31,1999; and $101 it

. datory redemption requirements were issued or redeemed thereafter during 1981,1980 and 1979.

$11.70 750/xx) 73,553 Non-callable prior to Novem-The involuntary liquidation prices per share of the out-her 1,1989,except for sink-standing preference stock without mandatory redemption ing fund; $105 through requirements are $25.00 for the $1.90, $2.00 and $1.96 se-October 31,1994; $103 ries; $99.12 for the 57.24 series; 598.90 for the $8.40 series; ihrough October 31, 1999; and $101 thereafter and $98.09 for the 58.38 series; plus accrued and unpaid

$12.75 500J00 49.605 Non-callable prior to August dividends, if any. The involuntary liquidation price of the

$1.425 comertible preferred stock is $31.80 per share, plus fI985 103 th "

39

,n 510 accrued and unpaid dividends,if any, aber 10.250.000

$624.312 Shares of preferente stock subject to mandatory redemp-tion requirements were issued as follows: 500,000 shares in 1980 and 2,250,000 shares in 1979.

The mandatory sinking fund requirements of outstanding preference stock are summarized as follows:

17

Notes to Financial Statements continued At December 31,1951, the Company held in its treasury Annual Sinking Fund Requirement and Price Per Share (plus aurued and 531 :, hares of its common stm k whi< h were reacquired from Series unpaid disidends. if any) participants who withdrew from the Automatic Disidend Reimestment and Stmk Punbase Plan.

$2.875 150fxu) shares at $25

$2.375 150fM shares at $25 (6) Common Stock Purchase Warrants

$8.20 35,715 shares irginning in 1982, at $ 100

$8 40 Series 11.

301Hhhares beginning in 1983, at $100 At December 31,1981 and 1980,258,131 and 482,312

$8A5 37,500 shares beginning in 1984, at $100 rommon stock punhase warrants, respertisely, were out-

$9.25 75.0tWishares beginning in 1985, at $lt#1 standing. Each warrant entitles the holder to cumert the

$11.70 37,500 sharcs leginning in 1985, at $ l oi) warrant into common stock at a wnversion rate of one share

$ 12.75 50fuhhares beginningin 1986 at $100 of conunon stock for three warrants. The option to punhase Annu:.! remaining sinking fund requirements through 1986 one share of mmmon stock for $30 for each warrant expired on April 30,1981. During 1981,1980 and 1979,224,181, will aggregate 511,071,500 in 1982, $14,071,500 in 1983,

$17,821,500 in 1984,529,071,500 in 1985 and S34,071,500 66,659 and 83,352 warrants, respertisely, were exercised luh m punbase and k mmemon mm common stml in 1986. During 1981,1980 and 1979,156,200 shares, 293,800 shares and 300,000 shares, resgectively, of prefer-Te %

enre stmk subject to mandatory redemptmn requirements were reacquired or redeemed. The Company has non.

Sinking fund requirements and scheduled maturities for cumulative options to increase the annual sinking fund the years 1982 through 1986 for first mortgage bonds and payments on cac h sinking fund requirement date to retire an debentures outstanding at December 31,1981, after deduct.

additional 150,(KK) shares of Imth the S2.875 series and the ing debentures rearquired for satisfaction of fua.re sinking

$2.375 series; 30.000 shares of the 58.40 Series 11, beginning fund requirements, first mortgage bonds maturing January in 1983; 37,500 shares of the SI1.70 series, beginting in 1,1982 and annual sinking fund requirements for mortgage 1985; and 50,000 shares of the S12.75 series, begir.ning in Imnds to be satisfied by available property additions, are 1986. The excess, if any, of the redemption prhe mer the summarized as follows: 1982 - S159,695,000; 1983 -

carrying value of preference shares retired all be (harged to S147,508,000; 1984 - 5294,957,000; 1985 - 5169,000,000; retained earnings.

and 1986-5365,135,000. long-term debt maturing within The imoluntary liquidation prices per share of the out.

one year, excluding 54,000,000 of first mortgage bonds standing prefereme simk subject to mandatory redemption maturing January 1,1982 and the deposit thereon, has been requirements are 524.10 for the $2.875 series; $24.15 for the included in current liabilities.

52.375 series; $100.00 for the 58.20 series; $99.326 for the At December 31, 1981, the Company had outstanding

$8.40 Series 11; $100.00 for the 58.85 aad $9.25 series; long term notes due January 15,1983, for an aggregate of

$98.07 for the $11.70 series; and 599.21 for the $12.75 se-

$ 100,000,000, at the presailing prime interest rate. Such ries; plus accrued and unpaid dividends,if any.

rate at December 31,1981 was 15M %.

The Company's outstanding first mortgage Imnds are (5) Common Stock scoured by a lien on substantially all property and fran-thises, other than expressly excepted property, owned by the At December 31, 1981, 18,863,056 shares of common

• P""U stock were resened for the following purgmses: 1,243,575 shares for comersion of $1.425 convertible preferred simk; (8) Notes Payable 86,043 shares for comersion of common stmk purchase warrants; 16,858,243 shares for Automatic Dividend Rein.

The Company had unused bank lines of credit of sestment and Simk Purchase Plan; 510.121 shares for Em.

5627,113,000 at December 31,1981. Ilorrowings may be playe Stmk Punhase Plan;and 165,074 shares for Employe made under these lines of credit on unsecured notes of the Stmk Ownership Plan.

Company. Of that amount, 5367,900,000, substantially all '

During 1981,1980 and 1979, shares of common simk, of which expires September 30,1982, may be borrowed at

$12.50 par value per share, were issued for the following prevailing prime interest rates. The Company maintains purgmses:

cash balances on delusit m prmide operating funds, to as-sure availability of such lines of credit and to compensate the 1981 1980 1979 banks for other senices they perform for the Company.

These bank balances for the Cempany and subsidiaries are Public otrerings.

.10,000.00017,tm,000 7,ootwoo maintained at an average lesel of approximately Automatic I isidend Reimesi-ment and Simk Purchase SIS,000,(KX) without formal commitments to do so. As Plan.

3,446,815 2.799,931 1,908,348 demand deposits, these balances may be legally withdrawn Employe Simk Punbase Plan.

451,108 431,910 341,515 at any time.

Comersion of $1.425 mmert-Of the unused bank lines of credit,5200,000,000, which g

ihte preferred stm k.

242,335 163,193 555.448 expires X!anh 31,1982, may be borrowed at prevailing Exercise of warrams,

72,241 22,075 27,697 prime interest rates. Under these lines of credit the Com-14.212.499 20,417,109 9,833,008 pany is obligated to pay commitment fees of % of 1 % per annum.

18

The remaining 559,213,000 of the unused bank lines of were (i) the federal income tax effect of the exclusion from credit is prmided in connection with the nuclear fuel lease taxable income of the equity component of allowance for agreement discussed in Note 16. The $300,000,000 max-funds used during construction which was 13.4 %, 12.9 %

imum amount available under the nuclear fuel lease agree-and 17.0% of pre-tax book income for 1981,1980 and 1979,

. ment is reduced by the amount of nuclear fuel lease obli-respectively, offset by (ii) state income taxes which, net of gations outstanding at any time under the agreement. This the federalincome tax effect, were 2.3%,2.8% and 1.9 % of line of credit expires January 30, 1985 and Imrrowings pre-tax book income for 1981,1980 and 1979, respectively.

made against this line will be at various interest rates.

Prmisions for deferred income taxes on timing differences between book and tax accounting, net of reversals, of which (9) Service Annuity Systems and Post-Retirement

$88,770,000, SI10,533,000 and $52,212,000 were charged Health Care Benefits to electric operations for 1981,1980 and 1979, respectisely, The Company and Commonwealth Edison Company of and $9,523,000, 58,001,000 and $6,217,000 were charged to other income and deductions for 1981,1980 and 1979, re-Indiana, Inc., a consolidated subsidiary, (the " companies")

have non-contributory service annuity systems which cmer spectively, were as follows:

all regular employes. Prmisions for contributions to the related trust funds for 1981,1980 and 1979 were 1981 1980 1979

-Thousands of Dollars-553,653.000, S54,095,000 and $56,804,000, respectively, and were equivalent to actuarial normal costs based on the Accelerated cost recmery and aggregate cost method. Portions of the provisions were liberalized depreciation.

548,844 5 50,968 558,942 charged to construction costs.

less carryforward..

45,121 13,813 (58,934)

The net assets available for sersice annuity plan benefits Spent nuclear fuel disposal costs (20,134) (12,932) (12,376) at January 1,1981 and 1980, the latest actuarial valuation dates, were $777,695,000 and 5610,879,000, respectively.

Oserheads capitalized,

19,993 20,546 19,337 At January 1,1981 and 1980, the actuarial present values of

1. P'? """'" '

'8

^

'"I#

accumulated plan benefits, based on participants' carnings

,,"[""', g'y i 1,916 6,762 15.243 and sertue rendered to such date and using a 7.0% rate nf Other items-net.

9,385 4.971 8,224 return, were S630,031,000 and S554,695,000, respectively, 598'293 5:18'534 558'429 of which 5598,738,000 and S504,171,000, respectively, related to sested benefits.

The companies also provide certain post-retirement At December 31, 1981, unused investment tax credits health care benefits to their retirees, to dependents of their were approximately S385,000,000, of which $69,000,000 retirees and to sursiting dependents of deceased retirees.

may be carried forward through 1993, S139,000,000 may be The actuarial present values of the liability for post-retire.

carried forward through 1994, $83,000,000 may be carried ment health care benefits at January 1,1981 and 1980, forward through 1995 and $94,000,000 may be carried for-the latest actuarial valuation dates, were S58,523,000 and ward through'1996. It is currently expected that, with rea-546,902,000, respectisely. In 1980, the mmpanies began sonable rate relief, the unused investment tax credits will be funding the liability for post-retirement heahh care benefits utilized by the expiration dates. The 1979 loss for income through a trust fund.The net assets of the trust fund at Jan" tax purposes will be fully utilized in the Company's 1981 uary 1,1981 were $4,421,000.

tax return.

(10) Employe Stock Purchase Plan (12) Sale of Tax Benefits Under the Company's Employe Stock Purchase Plan, all Under the provisions of the Economic Recovery Tax Act regular full-time employes, including officers but not direc-of 1981, the Company sold the investment tax credits and tors who are not ollicers or employes, may accumulate up to cost reco cry tax deductions related to certain plant and 10 4 of their regular pay and on designated dates twice each equipment placed in service in 1981 having a tax basis of year, in April and October, use such accumulated savings to

$68 million through sale and leaseback transaction. It purchase, at their option, common stmk of the Company at receised S13.6 millie 9 mh and will receise future tax 90 % of the (losing market price on sut h dates, but at not less benefits mer the ' x, ' ti+ lease. Of the rash proceeds than par salue.

receised, $11.'t dk has enen reported as accumulated deferred i -

m ind $2.3 million as accumulated (11) Income Taxes deferred, r #.,

er dits. These amounts, together Prmisions for current and deferred state and federal in-with the et.ccted u..a nx benefits, are being amortized 3

come taxes and investment tax credits deferred for 1981, mer the life of the related plam and equipment in a manner

- 1980 and 1979 resulted in effectise tax rates of 35.0%,

similar to that which would hase been followed had the tax 35.3 % and 28.4 %, respectivelv, on pre-tax lxmk income for benefits been realized as a reduction of inmme tax such years of approximatelv '5691,867,000, 5590,175,000 Payments. This accounting conforms to the treatment ap-and 5414,205,000, respectiicly. The principal differences Prmed for ratemaking purposes.

between these rates and the federal statutory rate of 46.0%

19

Notes to Financial Statements continued (13) Taxes, Except Income Taxes payments which cmer the amortization of the nuclear fuel used in the Company's reactors plus the lessor's related Provisions for taxes, except income taxes, for 1981,1980 fin nce expenses. U the leased nuclear fuel is not repro-and 1979 were as follows:

cessed, utte passes to the Company upon completmn of heat pnxiuction at which time the Company assumes responsi-1981 1980 1979 biliy for h fd

-Thousands of Dollars-In addition, the Company has leased certain other Illinois public utility revenue. $176,658 5157,446 5128,355 property which would meet the criteria requiring capi.

Illinois in ested capital 70,h 64,366 28,419 talization under an accounting standard issued by the Fi-Municipal utility gross nancial Accounting Standards Board. Ilowever, since these re-mg le ses for r tem km. ""g purposes, they have been Re I ate.

2 5

2 Af unicipal compensation.

49,355 44,032 36,175 ed for in the same manner. If such leases had been capi-Other-net.

7.958

-3,694 H,784 tahzed, related assets and liabihties of approximately

$432,179 5390.244 5305,705

$283,470,000 and $184,850,000 would have been recorded at December 31,1981 and 1980, respectively. The effect on expenses for 1981,1980 and 1979 would not have been ma-(14) Revenues Subject to Possible Refund terial.

Since October 31, 1974, the Company 1,as billed Future minimum rental payments, net of executory costs, at December 31,1981 of the capitalizable leases, including

$55,075,000 to resale customers subject to possible refund the nuclear fuel lease, are estimated to aggregate I

with interest pending final decisions on revised wholesale rate schedules filed 'with the Federal Energy Regulatory

$431,450,000, including $65,370,000 in 1982,588,030,000 in 1983, $104,040,000 in 1984, $79,800,000 in 1985, Commission. On September 14, 1979, the Commission

$48,460,000 in 1986 and $45,750,000 in 1987 91. The esti-issued an order with respect to the rate schedules effectise mated interest comimnent of such rental paymems ag-October 31, 1974 requiring that additional studies be gregates $l15,710,000.

prepared and filed with the Commission. The studies con.

cluded that any refunds required would be nominal, and in (17) Investments in Uranium Related Properties November 1979, the Company transferred to operating revenues $8,434,000, representing that portion of such prior At December 31,1981, the Compay and iis subsidiaries years billings which had been recorded in other deferred had investments of approximately S237,000,000 in uranium credits pending a final decision. This transfer increased related properties, equipment and activities. Production earnings per common and common equivalent share ap-from certain of the properties has been deferred due to de-proximately 50.05 in the year 1979. On November 12, pressed market prices for uranium. Management believes 1980, the Commission approved the rate schedules effective that uranium will ultimately be produced at prices which October 31 1974. Such order is presently being appealed to will provide for full recovery of this investment.

the U.S. Court of Appeals for the District of Columbia Cir-cuit. Of the $55,075,000 subject to refund, $12,531,000 (18) Joint Plant Ownership reflects billings under revised wholesale rate schedules effec-The Company has a 75% undivided ownership interest tive September 1,1979.

in the Quad-Cities nuclear generating station,is responsible Billings to customers collected subj.ect to imssible refund for 75 % of all costs which are charged to appropriate invest-are included in operating revenues.

ion or maintenance accounts, and provides its m

o i

own financing. At December 31,1981, for its share of own-(15) Effect of Change to Monthly Bill.mg ership in the station, the Company had an investment of Pursuant to an order of the Illinois Commerce Commis-

$214,977,000 in pnxluttion and transmission plant in ser-sion, the Company, beginning during the latter part of vice (before reduction of $67,858,000 of related accumulat-March 1979, changed from bi-monthly to monthly billing ed provision for depreciation) and S47,238,000 in construc- -

for residential and certain commercial customers. This tion work in progress.

change resulted in additional operating revenues of approxi-mately $33,716,000 and additional earnings per common (19) Commitments, Contingent Liabilities and common equivalent share of approximately $0.12 for and the Construction Program the year 1979.

Purchase commitments, principally related to construc-tion and nuclear fuel, approximated $1,755,000,000 at (16) Lease Obligations December 31,1981. In addition, the companies have sub-I Under a nuclear fuel lease agreement entered into in Jan.

stantial commitments for the purchase of coal and oil under uary 1980, a trust may purchase nuclear fuel and lease long-term contracts.

it to the Company. The trust can Imrrow a maximum The Company is a member of Nudear Mutual Limited, of $300,000,000 to finance nuclear fuel lease transactions.

established to provide insurance emerage against property At December 31, 1981, the Company's obligation to the damage to members' nuclear generating facilities. The trust for nuclear fuel sold and leased back amour ted Company would be subject to a maximum assessment of ap-to $240,787,000. The Company has agreed to make lease proximately $114,000,000 in the esent of losses.

l 20

The Company also is a member of Nuc! car Electric In-

~ $32,500,000 in the event of an incident, limited to a maxi-surance I.imited, which provides insurance mverage against mum of $65,000,000 in any calendar year. For each ad-the mst of replacement power during certain prolonged ac-ditional nudcar reactor placed in service, the Company's cidental outages of nudcar generating units and em erage for maximum assessments will increase $5,000,000 and property losses in excess of $500,000,000 at nuclear stations.

$10,000,000, respectively.

The Company would be subject to maximum assessments of Continuation of the Company's mnstruction program is appronimately 247,000,000 and S l9,000,000 in the esent of dependent upon adequate and timely rate relief. Reference losses under the replacement power and property damage is made to the third and fifth paragraphs in Management's coverages, respectively.

Discussion and Analysis of Financial Condition and Results in addition, the Nuclear Regulatory Commission's in-of Operations.

demnity for public liability coverage under the Price-Ander-The Company is involved in administrative and legal son Act is supported by a mandatory industry-wide program proceedings concerning air quality, water quality and other under which owners of nuclear generating facilities couhl be matters. The outcome of these pmceedings may require in-assessed in the event of nuclear incidents. Ilased on the crea es in the Company's future construction expenditures number of nuclear reactors presently in service, the Com.

and operating expenses.

pany would be subject to a maximum assessment of (20) Quarterly Financial Information Aserage Number of Earnings Per Electric Electric Common and Common and Operating Operating Net Net income on Common Erluivalent Common Revroocs Imome incomc Comroon Stoc k Sharn outstanding Equivalent Share

-Thousands of Dollars-

-In Thousands-Three Atombs ended:

hf arc h 31,1980.

5 779.783 $ 91,565 5 69,035 5 45,734 90,832

$0.50 June 30,1980

$ 728,280 $104,284 5 76,806 5 53,532 97,317

$0.55 September 30,1980.

$ 980,011 $ 164,970 $142,063

$118,454 98,080

$1.21 December 31,1980.

$ 835,969 $131,694 $ 94,099

$ 69,373 100,046

$0.69 hlarch 31,1981.

$ 918,607 $125,801 5 77,794 5 53,153 109,053

$0.49 June 30,1981

$ 837,679 $130,286 5 81,729

$ 57,214 110,121

$0.52 September 30,1981.

$1,076,957 $219,733 $189,759

$165,281 118,095

$1.40 December 31.1981

$ 904.068 $121.560 $100.612 5 76.155 122.197

$0.62 (21) Subsequent Events is required to provide funds for replacing facilities that wear ut or hemme obsolete, as wcH as for new facilities necessary On January 28, 1982, the Compaay issued long-term C"**

date growth m consumers, demands 2nd to

- promis'sory notes aggregating $100,000,000 to two banks at variable interest rates.

modify ex.istmg facilities to meet new environmental On January 19,1982, the Company filed a registration

,l"**"I

statement with the Securities and Exchange Commission

. 'he effects of innatmn have not been adequately recog-I mud for mcomc tax or unhty ratemakmg purposes. When related to the proposed sale in early February 1982 of

' '#5 "II O'", " **" low, the Company was able to ofTset 10,000,000 shares of the Company's Common Stock, S12.50 them w."h technolog.ical improvements and producurity it par value per share.

gains resuhing from installation of larger and more eflicient (22) Supplementary Information Concerning 8*"#Y"E' '9nsmissi n and distribution facilities. Ilow.

ever, in tmiay s emn my with high rates of inflanon and the Effects of Changing Prices (Unaudited) mereasing costs of environmental controls, the failure of Inflation, or the loss ir. the value or purchasing power of regulatory and taxing authorities to give adequate recogni-money resulting from increases in the levels of prices, is tion to the effects of inflation has placed a severe financial caused by a variety of factors, including government deficits, burden on the Company.

sharp increases in fossil fuel msts, low productivity gains Whether the effects of inflation on the Company will be and a proliferation of government regulations.

borne in future years in part by customers or taxing authori-llusiness corporations, as well as individuals, are affected ties or entirely by common stockholders will depend upon by inflation because sasings or retentions of dollars carned the actions of state and federal regulatory authorities, prin-after paying all expenses and taxes, as well as capital cipally the illinois Commerce Commission, and upon poten-recoveries # dollars previously invested, do not provide an tial changes in income tax laws to recognize the effects of adequate n enns, at today's inflated prices, to replace the inflation.

productis e assets being depleted. Regulated electric utilities, The Company's estimates of the effects of changing prices the most capital intensise of major industries, are sescrely (inflation) are presented in response to the Financial Ar-affected by inflation because the amounts of investment in counting Standards lloard Statement No. 33, " Financial plant and nuclear fuel which can be recovered through Reporting and Changing Prices" ("FASil 33").

revenues are limited by the regulatory process. New capital 21

Notes to Financial Statements continued Statements of Income From Continuing Operations Adjusted for Changing Prices During 1981 Adjusted Adjusted for General for Changes in inflation

• Specific Prices *

(Constant Dollars)

(Current Cost)

(Note a)

(Note a)

-hlillions of Dollars-Cumulatise Effect of Pa Inflation on the Current Year Net income on mmmon simk from continuing operations, as reported.

$ 352

$ 352 Decrease for efTect of additional provisions for depreciation of plant and amortization of nuc lear fuel to reflect the cumulatise etTect of inflation since acquisition (Note d)

(387)

(598)

Proportionate offset to above amount of additional depreciation and amortization primarily be.

cause of debt and non-convertible preference stuk financing of utility property (Note h).

271 419 Net inmme on common stock from continuing operations, adjusted for the cumulatise effect of past inflation on the current year"

$ 236

$ 173 Effect of Current Year's General Inflation on Common Stockholders' Investment Cost of current year's general inflation on common stockholders' imestment arising from regulatory restrictions upon the amount of net utility plant and nuclear fuel costs recoverable as depreciation and amortization (Note g)"*

$ (885)

OfTset to the cost of regt.latory restrictions primarily because of debt and non-mmertible preference stak financing (Note h),

619 Net cost of current year's generalinflation on common simkholders' investment.

$ (266)

Five-Year Comparison of Selected Supplementary Financial Data Adjusted for the Effects of Changing Prices 1981 1980 1979 1978 1977 Elettric operating revenues:

-Alillions of Dollars (except per share data)-

As reported.

53,737

$3,324 $2,721 $2,443 $2,095 Adjusted for general inflation using average 1981 dollars.

$3,737

$3,669 $3,409 $3,405 $3,144 Net income on mmmon simk from continuing operations:

As reporH.

$ 352

$ 287 $ 215 $ 254 $ 193 Adjusted for general inflation"

$ 236

$ 214 $ 181 Adjusted for changes in current cost"

$ 173

$ 145 5 95 Net income per common share from continuing operations:

As reported.

$ 3.06

$ 2.97 5 2.51 $ 3.30 $ 2.86 Adjusted for general inflation"

$ 2.05

$ 2.22 $ 2.11 Adjusted for changes in current cost"

$ 1.51 5 1.50 $ 1.11 Amount by which the increase in the current cost of net utility plant is greater or (less) than the increase in the general price lesel using average 1981 dollars (Note f).

$ 533 $(1,454) $ (458)

Reduction of purchasing power loss through debt and non-convertible preference stock financing using aserage 1981 dollars (Note h)

$ 619

$ 881 $ 94o Common stakholders'imestment (net assets) at December 31:

As reported.

53,218

$2,913 $2,534 $2,293 $2,021 Adjusted for either general inflation or (hanges in current cost after adjustment to recoverable amount, using year-end 1981 dollars (Note g).

$3,218

$3,173 $3,103 $3,181 $3,058 Cash dividends declared per common share:

As reported.

$ 2.70

$ 2.60 $ 2.60 $ 2.45 $ 2.40 Adjusted for general inflation using aserage 1981 dollars.

$ 2.70

$ 2.87 $ 3.26 $ 3.42 5 3.60 hlarket price per common share at December 31:

As reported.

$ 19.88

$18.12 $20.00 $25.75 $28.88 Adjusted for general inflation using year-end 1981 dollars.

$19.88

$19.74 $24.49 $35.73 $43.68 Consumer Price Index (CPI) (1967-100)-Average.

272.4 246.8 217.4 195.4-181.5

-Year-end.

281.5 258.4 229.9 202.9 186.1 s

• At aserage 1981 price levels.

"If additional provisions for depreciation and amortization are reflected without the offsetting effects resulting primarily because of debt and non-comertible preference stock financing, net income (! ass) on common stock from continuing operations, at average 1981 price levels, adjusted for general inflation would be losses of $35 million or $0.30 p.er share in 1981, $33 million or 50.34 per share in 1980 and

$34 milhon or $0 40 per share in 1979; and on a current cost basis would be losses of $246 million or $2.14 per share in 1981,$268 million or $2.78 per share in 1980 and $329 million or $3.84 per share in 1979.

"*At December 31,1981, the current cost of net utility plant, including nuclear fuel, before reduction for anumulated deferred income taxes, is estimated at $22,517 million and the historical net mst presently reco crable through depreciation and amortization was

$10,856 million.

22

Notes to Supplementary information Concerning - the dex to the historical accumulated amortization at December Effects of Changing Prices:

31,1981 and 1980.

a. General. The data adjusted for general inflation (con.

Although a substantial portion of accumulated deferred stant dollars) were determined by converting the historical income taxes is deducted from utility plant investment in mst of plant and equipment, nudear fuel and certain other arriving at the rate base used in ratemaking proceedings,-

items into dollars of the same general purchasing power us-accumulated deferred income taxes were treated as mone-ing the Consumer Price Index for All Urban Consumers tary liabilities, in accordance with FASH 33.

(the " Consumer Price Index"). The adjustments to recog-

c. Coalandfueloilinventories. The historical cost ofin-nize the effects of general inflation are intended to measure ventories of mal and fuel oil was not adjusted for changing j

inmme after reflecting the cost of maintaining the purchas-prices because the effect on earnings would not be material ing p3wer of dollars invested in the Company's assets.

due to the relatively short turnover period.

The data adjusted for changes in specific prices (current

d. Fueland<kpreciation expenses. Fuel expense was ad-cost) of nudcar generating equipment were based on the justed for the amortization of nuclear fuel. Nuclear fuel cost of constructing new capacity at current price levels. The amortization was calculated by applying the nuclear fuel current cost of all other plant and equipment was esu,. sted usage to the adjusted mst data for nudear fuel and adding by applying the Ilandy-Whitman Index of Public Utility appropriate allowances for spent fuel disposal costs.

C(mstruction Costs to plant accounts by sintage years. The Depreciation expense was determined by applying the current cost of nuclear fuel was estimated by applying cur-rates and methods used for computing book depreciation to rent prices to existing nudear fuel. The adjustments to the adjusted cost data for plant and equipment.

recognize the effects of current cost are intended to measure

e. Income taxes. Present income tax laws do not permit inmme after refin ting the cost of maintaining the capability the use of higher depreciation or amortization charges in the of the Company's system to provide electric service at cur-computation of taxable income to reflect the effects of infla-rent price lesels.

tion. As a result, income taxes levied,in real terms, are sig-The difference between these two methods of measuring nificantly in excess of the effective and the statutory income the effects of inflation results from current cost of utility tax rates.

plant assets having increased at a rate different from the rate

f. Comparison ofincreases in the current cost ofnet utility of general inflation.

plant and the general price level. In 1981, the current cost The adjustments for changing prices reflected in the State-levels of electric utility plant increased more than general ments of Income from Continuing Operations Adjusted for price levels as measured by the Consumer Price Index. The Changing Prices were limited to depreciation of plant and increase in current costs applicable to net utility plant for

.cquipment and amortization of nuclear fuel in accordance 1981 amounted to $2,333 million and the increase in general with FASil 33.

prices was $1,800 million. Since the Company's plant was

b. Utility plant. The data for plant and equipment, in-initially acquired, the increases in the current cost of net cluding construction work in progress, were adjusted for electric utility plant have been significantly greater than general inflation and for current cost as described above.

general price increases.

The resulting adjusted data for plant and equipment are not

g. E]/cci of inflation on common stockholders

• invest-indicatise of the Company's future capital requirements ment. Because the regulatory process limits the amount of because the actual replacement of existing plant and equip-depreciation expense included in the Company's revenue al-ment will take place mer many years and is not likely to lowance to the original cost of utility plant imestment, the involve a repr wiuction of presently existing assets. The ac-resulting cash flows are inadequate to provide for re-cumulated provisions for depreciation of plant and equip-placement of that investment in future years or preserve the ment in service under both of the methmis described almve purchasing power of common equity capital previously in-were estimated for each major class of plant and equipment vested. While this effect is partially offset by the existence of by muhiplying the adjusted cost data by a percentage repre-debt and non-mnvertible preference stock having fixed dol-senting the ratio of the accumulated lxmk depreciation to the lar obligations, the Company has a significant net cost due to imok mst of existing depreciable plant in service for each inflation because the Comptny can recover only the same class of preperty at Dntmber 31,1981 and 1980.

number of lower-value dollars today as the number of The nudcar fuel data was adjusted for general inflation higher-value dollars originally invested. In terms of pur-and current cost as described above. Under loth methods chasing imwer, the imestment of common stockholders is appropriate reductions were made for accumulated amor-significantly reduced. As shown in the Statements, the com-tization and spent fuel disposal costs. The accumulated mon 6tockholders' investment in plant and nuclear fuel was amortization for current cost was cakulated by muhiplying ermied in 1981 by $266 million as a result of general infla-the current mst of nudear fuel by a per rntage representing tion. The cost of general inflation in 1981 on common stock.

L the enpired life at December 31,1981 and 1980. The ac-holders'imestment in plant and nudcar fuel, before reflect-cumulated amortization adjusted for general inflation was ing the offset primarily because of debt and non-convertible

! calculated by applying the appropriate Consumer Price In-preference stm k financing, includes the additional deprecia-23

Notes to Financial Statements concluded tion of plant and amortization of nuclear fuel of $387 mil-lion, as well as the $498 million reduction of net utility plant to its recoverable amount which is original cost. This reduc-tion may be necessary if ratemaking continues to limit the rermery of plant investment to original cost.

The detrimental effects of the erosion of common stock-holders' imestment can be avoided to the extent the regula-tory pmcess takes account of inflation in determining the amount of common stockholders'imestment to be reemered by provisions for depreciation and amortization in the fu-ture. Therefore, the Company believes that a change in the basic principles upim which its rates are set is now required to allow for such increased provisions.

h. OJJset to the cost of regulatory restrictions primarily became of debt and non-crmvertible preference stock financ-ing. By holding monetary assets, such as cash and receiv-ables, the Company loses purchasing power during periods of inflation because these items can purchase less at a future date. Comersely, monetary liabilitics, primarily long-term debt and non-comertible preference stoc ks, will be satisfied with payments of fixed dollar amounts which are not alTect-ed by inflation subsequent to issuance. Because such obliga-tions are fixed, there is a partial offset of the cost arising from regulatory use of original cost for determining the amount of utility plant and nuclear fuel costs recoverable as depreciation and amortization. Non-comertible preference stmks were treated in the same manner as long-term debt because there is no expectation that the purchasing power of such imestments will be maintained, but rather dividends and redemption amounts are expected to be paid in fixed numbers of dollars.

Quarterly Common Stock Market Price Range and hlarket Price Range' Dividend D..dend I3ayments Ilieh Low Per Share ivi 1981 by Quarter ist 19 %

17 %

65d 2nd 20%

17 %

65 3rd 21 18 %

65 4th 22 %

19%

70 1980 by Quarter 1st 21 %

17 %

654 2nd 23 %

18 %

65 3rd 22 %

19 %

65 4th 19 %

16%

65

• As reported on the NYSE <cmpimte transactions tape.

The Compan3's mmmon sim k is traded on the New York, Niida est and Pacific Sto< k Exc hanges, with the ticker sy mbol; CW E. At Denmher 31, t981, there were approximately 275,000 holders of remrd of the Company's mmmon sim k.

24

Board of Directors Officers James J. O'Connor m m James J. O'Connor Preston 15. Kavanagh Chairman and President of the Company Chairman and President Vice President Norris A. Aldeen m m Wallace 11. llehnke, Jr.

Donald A. Petkus Former Chairman and President Vic e Chairman Vice President Amero(k Cor poration (Cabinet hardware) llyron Lee, Jr.

Cordell Reed Executive Vice President Vice President Jean Allard m m m

' Partner llide L Thomas George P. Rifakes Sonnenschein Carlin Nath & Rosenthal Executive Vice President Vice President

(^""'"#Y')

llubert II. Nexon*

Robert J. Schultz Thomas G. Ayers m Senior Vice President Vite President Former Chairman of the Company and now Chairman of the Executne (.omnuttee John G. Eilering John J. Viera Vice President -

Vi(e President Wallace 11. llehnke, Jr. m m Vice Chairman of the Company Ralph L. lieumann Raymond P. llachert Vice President and Comptroller Secretary and Treasurer Gordon R. Corey m Former Vice Chairman of the Company James W. Johnson

' Retired in 1982 Vice President Albert !!. Dick 111 m m m i

Chairman of the lloard A. II. Ditk Company (Copying, duplicating and printing hianagers Division Vice Presidents equipment and supplies)

Donahl P. Jacobs m m Robert L llolger K. Edward liartels Dean, J. L. Kellogg Graduate S(hool Assistant Vice President Southern (Joliet) of Nianagement Northwestern Unisersity liarlan hl. Dellsy William J. Cormack Stall Counsel Chicago-North George E. Johnson m m Chairman and President Paul J. Fenoglio

1. ester J. Dugas Johnson Products Company, Inc.

Nianager of Computer Seni(es Chicago-South (llair care and facial cosmetics)

Charles G. Ilarnach Anthony E. Enrietto 1Iarvey Kapnick m O' h!anager of hlarketing Services Northern (Northbrook)

Financial Consultant Arthitr W. Kleinrath Robert J. hlanning Thomas L Nf artin, Jr. o, m m hianager of Station Construction Chicago-Central President Illinois Institute of Technology Thomas J. hlaiman 1.cslie W. hlilligan Assistant Vice President Western (Lombard)

Edward A. Alason u, m Vice President. Research James J. htaley Arthur J. Stoore Standard Oil Company (Indiana)

N!anager of Projects Ro(k Riser (Roc kford)

(Petroleum and petroleum products)

Dav.d %,. N,occh.i

1. rank A. Palmer i

William Wood Prince m m N1anager of Customer Senice Nuclear Stations t

President Ernest hl. Roth Richard E. VanDerway F.11. Prince & Co., Inc.

(Imestments and real estate) hlanager of Imestments Fossil Stations A. Dean Swift m m m J. Patrick Sanders Former President hlanager of Industrial Relations Sears, Roebu(k and Co.

James A. Schneider j

( hiert handnmg)

Operating hlanager m t.sn ons, u nnunce Walter J. Shewski i m an.ht comnunce h!anager of Quality Assurante t n hnan,e o.mnuare m conwen ei. n o mnunr<

Wayne L Stiede

( 5) Lnun.mng G.numuce

.\\ssistant Vite President Klaus II. Wisiol NIanager of lead N!anagement and Consenation

Cornmonwealth Edison Company

- Nt Office ikx 7M Chicago. Illinois MI690 -

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