ML20042C113

Forwards Certified Financial Statements for 1981,1980 & 1979

ML20042C113
Person / Time
Site:	Vermont Yankee File:NorthStar Vermont Yankee icon.png
Issue date:	03/23/1982
From:	Carey W VERMONT YANKEE NUCLEAR POWER CORP.
To:	Lear G Office of Nuclear Reactor Regulation
References
NUDOCS 8203300220
Download: ML20042C113 (19)

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V MR A10NT YAN KMM NUCLEAR POW MN COR POR ATION SEVENTY SEVEN GROVE STREET RUTLAND, VEltMONT 05701 TELEPHONE 802 77S 2964

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N'y March 23, 1982 7,'

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George Lear, Chief a

Boiling Water Reactors Branch 1

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Directorate Branch 1

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Directorate of Licensing i'.;f

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Nuclear Regulatory Commission Washington, D.C.

20555

Reference:

License No. DPR28 - Docket No. 50-271 Enclosed are ten (10) copies of Vermont Yankee's certified financial statements for the year ended December 31, 1981 and 1980.

Very truly yours, l Lh)tA 7

Willis W. Carey '

Treasurer & Ass't. Secretary 4

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l S WWC/sa Enclosures c'203300220 820323

'PDR ADOCK 05000271 g

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7ERMONT YANKEE NUCLEAR POWER CORPORATIOh' Financial Statements December 31, 1981, 1980, and 1979 (With Accountant 3' Report Thereon)

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Certified Public Accountants One Boston Place Pbat,Marwick,Mitchell&Ca noston, Massachusetts o2108 617 723-7700 The Stockholders and Board of Directors Vermont Yankee Nuclear Power Corporation:

We have examined the balance sheets of Vermont Yankee Nuclear Power Corporation as of Decembe r 31, 1981 and 1980 and the related statements of income and retained earn 2.ngs and changes in financial position for each of the years in the three year pe riod ended December 31, 1981.

Our examinations were :aade in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the aforementioned financial statements present fairly the financial position of Vermont Yankee Nuclear Power Corporation at December 31, 1981 and 1980, and the results of its operations and the changes in its finan-cial position for each of the years in the three year period ended December 31, 1981, in conformity with generally accepted accounting principles applied on a consistent basis, fekikik.Iktkll1la February 10, 1982

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VERMONT YANKEE NUCLEAR POWER CORPC3ATION Balance Sheets December 31,1981 and 1980 i

Assets 1981 1980 Utility plant:

Electric plant, at cost

$ 238,404,040 228,947,888 Less accumulated depreciation 70,129,351 61,267,#47

)

l Net electric plant 168,274,689 167,680,441 Nuclear fuel, at cost:

Assemblies in reactor 71,167,252 58,493,360 Fuel in process 11,125,703 15,662,953 Fuel in stock 2,283,785 Spent fuel 70,701,436 57,232,938 152,994,391 133,673,036 Less accumulated amortization:

Original cost 93,145,749 79,511,299 Permanent disposal 28,383,272 19,883,940 121,529,021 99,395,239 Net nuclear fuel 31,465,370 34,277,797 Net utility plant 199,740,059 201,958,238 Current assets:

i Cash (note 3) 1,145,584 1,639,289 Temporary investments, at cost which approximates market 199,833 Accounts receivable, principally from sponsors 11,625,796 7,757,520 Materials and supplies, at cost 4,412,664 3,911,527 Prepaid exper.ses.

442,971 977,453 1

4 Total current assets 17,627,015 14,485,622 Deferred charges:

Unamortized downtime costs 7,875,685 5,298,146 Unamortized debt expense 758,476 522,368 Accumulated deferred income taxes 14,240,000 4,433,000 Deferred reload analysis development costs 2,299,229 Other deferred charges 11,370 87,936 Total deferred charges 25,184,760 10,a41,450 i

$ 242,551,834 226,785,310 f

See accompanying notes to financial statements..

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d Capitalization and Liabilities 1981 1980 Capitalization:

Common stock equity (note 4):

Common stock, $100 par value; authorized 400,100 shares; outstanding 400,014 shares S 40,001,400 40,001,400 Other paid-in capital 13,531,497 13,314,284 Retained earnings 5,193,202 5,057,009 Total common stock equity 58,726,099 58,372,693 Redeemable cumulative preferred stock, 7.184 series; $100 par value; authorized 300,000 shares; outstanding 160,646 shares (172,197 shares in 1980) (note 4) 16,064,600 17,219,700 Long-term debt, net (note 5) 84,335,311 76,757,449 Total capitalization 159,126,010 152,349,842 Current liabilities:

Notes payable (note 3) 5,200,000 Long-term debt to be retired within 1

one year (note 5) 1,426,000 2,229,000 Accounts payable 13,534,365 12,021,402 l

Accrued interest 1,926,561 1,868,128 Accrued taxes 928,050 702,650 Dividends declared -- preferred 319,951 Total current liabilities 17,814,976 22,341,131 i

Unamortized gain on reacquired debt, net 2,932,968 1,480,457 Accumulated deferred income taxes 56,340,880 46,125,880 l

Accumulated deferred investment tax credits 6,337,000 4,488,000 Commitments and contingencies (note 8)

S 242,551,834 226,785,310

VERMONT YANKEE NUCLEAR POWER CORPORATICN Statements of Income and Retained Earnings Years ended December 31, 1981, 1980 and 1979 1981 1980 1979 Operating revenues S 88,170,620 78,339,803 65,981,813 Operating expenses:

Nuclear fuel expense (note 2) 22,133,783 18,721,108 15,326,978 Other operating expenses 21,127,630 16,724,441 11,245,967 Maintenance 9,705,558 8,756,236 5,363,759 Depreciation 9,322,873 8,629,219 8,299,930 Taxes on income (note 6) 5,184,466 6,296,000 6,564,000 Other taxes, principally property taxes 4,279,162 4,227,031 4,006,552 Total operating expenses 71,753,472 63,354,035 50,807,186 Operating income 16,417,148 14,985,768 15,174,624 Other income and deductions, net (2,881) 72,097 190,387 Income before interest expense 16,414,267 15,057,865 15,365,011 Interest expense:

Interest on long-term debt 7,233,544 7,521,524 7,944,832 Other interest expense 2,085,026 366,938 162,557 Total interest expense 9,313.570 7,883,462 8,107,389 Net income 7,095,697 7,169,403 7,257,622 Retained earnings at beginning of year 5,057,009 5,578,401 5,774,009 12,152,706 12,747,804 13,031,631 Dividends declared:

Preferred stock, $5.61 per share in 1981, S9.35 per share in 1980 and $7.48 per share in 1979 959,294 1,690,585 1,453,020 Common stock, $15.00 per share in 1981, 1980, and 1979 6,000,210 6,000,210 6,000,210 Retained earnings at end of year S 5,193,202 5,057,009 5,578,401 Net income per average share of common stock outstanding S 15.34 13.70 14.53 See accompanying notes to financial statements.

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VERMONT YANKEE NUCLEAR POWER CORPORATICN Statements of Changes in Financial Position Years ended December 31, 1981, 1980 and 1979 1981 1980 1979 Source of funds:

From operations:

Net income

$ 7,095,697 7,169,403 7,257,622 Charges not requiring use of funds:

j Depreciation 9,322,873 8,629,219 8,299,930 Amortization of nuclear fuel 22,133,783 18,721,108 15,326,978 Amortization of deferred downtime costs 6,348,237 5,033,610 2,350,554 Deferred income taxes 714,000 2,519,296 4,013,170 Investment tax credit adjustments 2,068,000 1,694,000 461,000 i

Amortization of deferred reload analysis development costs 306,564 Other (67,287)

(8,054) 18,711 Total from operations 47,921,867 43,758,582 37,727,965 Other, net (231,878) 23,020 499,609 Increase in long-term debt 12,098,986 Decrease in working capital 7,949,827 6,242,579

$ 59,788,975 51,731,429 44,470,153 3

Use of funds:

Electric plant additions 10,198,016 15,021,450 5,020,200 Nuclear fuel additions 19,321,355 17,411,563 22,276,307 Downtime costs deferred 8,925,776 7,112,973 4,099,292 Deferred reload analysis develop-ment costs 2,605,793 Reduction of long-term debt 2,955,883 3,388,948 4,521,124 Retirement of preferred stock 1,155,100 1,105,700 1,100,000 Preferred stock dividends 959,294 1,690,585 1,453,020 l

Common stock dividends 6,000,210 6,000,210 6,000,210 Increase in working capital 7,667,548 S 59,788,975 51,731,429 44,470,153 Changes in components of working capital Increase (decrease) in current assets:

Cash (493,705)

(2,414,285) 596,224 Temporary investments (199,833) 199,833 (2,591,448)

Accounts receivable 3,868,276 (1,725,004) 2,822,731 Materials and supplies 501,137 722,810 434,319 Prepaid expenses (534,482) 587,310 99,295 3,141,393 (2,629,336) 1,361,121 Increase (decrease) in current liabilities:

Notes payable (5,200,000)

(800,000) 6,000,000 Long-term debt to be retired within one year (803,000)

(2,119,000) 2,230,000 Accounts payable 1,512,963 7,955,444 (78,723)

Accrued interest 58,433 (109,145)

(29,314)

Accrued taxes 225,400 73,241 (518,263)-

Dividends payable (319,951) 319,951 (4,526,155) 5,320,491 7,603,700 Increase (decrease) in' working capital

$ 7,667,548 (7,949,827)

(6,242,579)

See accompanying notes to financial.tatements.

VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements December 31, 1981, 1990 and 1979 i

(1) Summary of Significant Accounting Policies (a) Regulation and Operations The Company is subject to the regulatory authority of the Federal Energy Regulatory Commission (FERC) and the Public Service Board of the State of Vermmt as to transactions with associated companies, accounting and security issues.

The Company is also subject to regulation by Federal or i

state agencies with respect to nuclear plant licensing and safety, air and water quality, land use and other enviroruental matters.

I Pursuant to the terms of Power Contracts with sponsors, for a term of 30 years comencing on December 1,1972, each Sponsor is obligated to pay the Company each month (regardless of the Plant's operating level or whether it is operating or shutdown during the period), an amount equal to its entitlement percentage of the Company's total fuel costs and operating expenses with respect to the Plant, and an allowed return on equity. Also, under terms of the Capital Funds Agreements, the Sponsors are committed, subject to obtaining necessary regulatory authorizations, to make funds available in amounts required to obtain or maintain licenses necessary to keep the Plant in operation.

(b) Denreciation and Maintenance Electric plaat is being depreciated on the straight-line method at rates designed to fully depreciate all depreciable properties through 1998.

Total depreciation expense was between 3.903% and 3.9991 of the cost of depreciable utility plant for the years 1979 througn 1981.

Renewals and betterments constituting retirement units are charged to electric e

plant. Minor renewals and betterments are charged to maintenance expense.

At the time depreciable properties are retired, the original cost, plus cost of removal, less salvage of such property is charged to the accumulated provision for depreciation.

(c) Amorti:stion of Nuclear P" 4 The cost of nuclear fuel ts amortized to expense on the basis of the rate of burn down of the irJividual assemblies comprising the total core.

The Company also accru's the estimated future costs of disposing of spent i

nuclear fuel. See note 2 of notes to financial statements.

(d) Deferred Charges t

Costs associated with scheduled plant downtime for replacement of nuclear fuel assemblies ard major maintenance are amortized to expe3se over the esti-mated period until the succeeding downtime (normally between ' twelve and

- seventeen mcnths).

(e) Taxes on Income The tax effects of timing differences are accounted for as prescribed by and in accordance with the rate-making policies of.FERC.

Provisions for deferred income taxes reflect the tax effects of all timing differences.

(Continued)

2 VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements Investment tax credits are deferred and amortized to income over the lives of the related assets.

(f) Decommissioning The Nuclear Regulatory Commission currently recognizes three decommissioning methods complete dismantling and removal, in-place encapsulation, or entombment and mothballing - or a combination of these methods.

Although the Company presently does not provide for nuclear plant decommissioning costs, it is considering immediate dismantling as the most desirable method of decommissioning its nuclear reactor. Based on a consultant's study, the estimated cost of decommissioning utilizing this methodology is $72,700,000 in 1981 dollars.

Accordingly, the Company plans to bill out through 2007 (expiration date of the operating license), an amount equal to the current estimate of the cost of decommissioning.

The date of commencement of billing has not been determined. The Company fully recognizes the relative uncertainty of the future costs involved with decornissioning, the changing technology available for decommissioning and new requirements under the law and, therefore, recognizes the need to constantly monitor and adjust, if necessary, the amount of billing relative to these costs.

(2) Nuclear Puel Expense The Company accrues estimated costs of disposing of nuclear fuel as a component of nuclear fuel expense.

Provisions for estimated costs of disposing of nuclear fuel in the reactor (at projected costs in 1988) are being accrued based on the rate of burn-down of assemblies in the reactor. Provisions for costs of disposing of nuclear fuel used prior to October,1977 (estimated to cost $39,300,000 in 1988) are being accrued over an 11 year period ending in 1980.

Accruals for estimated costs of disposing of nuclear fuel increased 1991, 1980 and 1979 nuclear fuel expense by approximately S8,500,000, $7,900,000 and

$5,800,000, respectively. Current estimates of disposal costs are subject

-to a number of uncertainties including the cost, availability and timing of disposal facilities, the extent of future inflation, regulatory require-ments and the cost of future services, all of which may require periodic revisions in estimated costs of disposal.

(3) compensating Balances and Short-term Borrowings The Company had bank lines of credit aggregating $7,000,000 and $16,000,000 at December 31, 1981 and 1980, respectively, requiring average compensating balances equal to 7.5% of the outstanding loans (there were no amounts out-standing at December 31, 1981, and $5,200,000 of loans outstanding at December 31, 1980), and 7.5% of the line.

During 1981 and 1980, respec-tively, the maximum cmount of short-term borrowings outstanding at any month end was $14,800,000 and $10,000,000 and the daily average amount of short-term borrowings outstanding was $9,531,200 and $1,948,100 with corresponding weighted average interest rates of 19.34% and 17.77%.

(Continued)

3 VERENT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements (4) Capital S tock So long as any shares of the Cumulative Preferred Stock are outstanding, the paymen t of cash dividends and distributions on Common Stock (other than redemptions, which requires 30% common equity af ter redemption) is limited when Connon S tock Equity (as defined) is less than 25% of Total Capitaliza-tion (as defined).

At December 31, 1981 Common Stock Equity was 36% of Total Capitalization.

The 7.48% series Preferred Stock is redeemable (1) at par through a mandatory sinking fund in the amount of $1,100,000 per annum, (2) at the option of the Company, at par, an additional S1,100,000 per annum and (3) in whole or in part f rom time to time, at redemption prices per share ranging from $106.97 in 1982 to $100 in 1998, together in each case with accrued and unpaid dividends to the redemption date.

Any gains or losses on redemption of pref erred stock are charged or credited bo other paid-in capital.

( 5) Long-Term Debt A semnary of long-term debt is as follows:

1981 1980 First mortgage bonds:

Series A 5/8% due 1998 3 51,608,000 54,816,000 Series B 1/2% due 1998 3,574,000 10,357,000 Series C - 7.70% due 1998 12,361,000 13,687,000 Total first m.ortgage bonds 73,543,000 78,860,000 Unamortized premium on debt 119,325 126,449 Net first mortgage bonds 73,662,325 78,986,449 Veracn Energy (net of discount of $101,014) 12,098,986 Total long-term debt 35,761,311 78,986,449 Less long-term debt to be retired within one year 1,426,000 2,229,000 Long-term debt, net S 84,335,311 76,757,449 The Mortgage constitutes a first lien on utility plant, excluding nuclear fuel.

Bonds issuel under the Mortgage are f ur ther secured by the terms of the Power Contracts (except for related fuel payments) and the Capital Funds Agreements with the sponsors.

Sinking fund requirements with respect to First Mortgage Bonds amount to $4,514,000 annually.

(Continued)

4 VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements In November 1981, the Company entered into agreements to finance its nuclear fuel through the Vernon Energy Trust. The Trust will finance nuclear fuel through the issuance of commercial paper and bank loans on a revolving credit basis up to an aggregate amount of $40,000,000 outstanding.

The Trust will acquire an inventory of nuclear fuel in process from or on behalf l

of the Company.

Af ter fabrication is completed, the Trust will sell the fuel to the Company and lend the Company funds to pay for such fuel. Loans issued by the Trust are secured by a pledge of the company's right to receive fuel costs under power contracts with its sponsors.

Loans out-standing to the Trust are to be paid as fuel is consumed.

The Company has initially borrowed under the agreement based on the fuel in its reactor. As additional financing is needed, the Company plans to assign its interest in uranium and fuel contracts to the Trust.

The initial term of the agreement is through 1985; however, if the Trust fails to give written notification of termination on any anniversary date commencing November 1, 1984, the term will continue on a year to year basis through the year 2000.

The outstanding debt of the Trust is comprised of commercial paper.

The commercial paper is due within a maximum of 45 days frca issuance and had a weighted average interest rate of 12%.

The Company's obligation to the Trust has been classified as long-term debt based upon the intent and the ability of the Company to finance this debt on a long-term basis.

(6) Income Taxes The components of income tax expense are:

I 1981 1980 1979 Current:

l Federal income taxes:

Included in operating income

$ 1,605,566 1,436,209 1,419,479 l

Included in non-operating income 19,000 82,000 173,000 Vermont income taxec:

Included in operating income 796,900 646,495 670,351 2,421,466 2,164,704 2,262,830 Deferred:

Federal income taxes:

Included in operating income 614,000 2,198,791 3,695,521 Vermont income taxes:

l Included in operating income 100,000 320,505 317,649 Total deferred income taxes 714,000 -2,519,296 4,013,170 l

Investment tax credit adjustments 2,068.000 1,694,000 461,000 Total income taxes S 5,203,466 6,378,000 6,737,000 (Continued).

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5 VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements A reconciliation of the Company's effective income tax rates with the Federal statutory rate is as follows:

1981 1980 1979 Federal statutory rate 46.0%

46.0%

46.0%

State income taxes, net of Federal income tax benefit 3.9 3.9 3.8 Investment credit

( 9. 5)

(4.3)

(3.1)

Other 1.9 1.7 1.4 42.3%

47.1%

48.1 The principal items comprising deferred income tax expense are:

1981 1980 1979 Excess of tax depreciation over financial statement depreciation S

2,401,884 2,805,196 3,196,427 Excess of fuel amortization for financial statement purposes over tax amortization (3,102,683) (1,742,770) (1,750,704)

Maintenance expenses deferred for financial statement purposes 1,471,454 1,034,770 735,875 Other (56,655) 422,100 51,572 Investment tax credits utilized 1,780,000 S

714_,000 2,519,296 4,013,170 (7) Pension Plans The Company has two non-con tr ibu to ry tr usteed pension plans covering all regular employees and follows the consistent policy of funding all costs accrued.

Pension costs were $216,000, S230,000 and S250,000 for the years 1979 through 1981 including amortization of unfunded liabilities over a period ending in 1998. A comparison of accumulated plan benefits and plan net assets is presented below January 1, 1981 1980 Actuarial present value of accumulated plan benefits:

Vested 469,098 327,520 Nonvested 124,641 61,935 593,739 389,455 Net assets available for benefits S 1,578,743 1,086,962 The weighted average assumed rate of return used in determining the actuarial present value of accumulated plan benefits was 8. 5% and 911 for 1981 and 1980, respectively.

(Continued)

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6 VERENT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements (8) Commitments and Contingencies Certain intervenors, challenging the sufficiency of the Nuclear Regulatory Commission's (NRC) environmental review of portions of the fuel cycle, appealed the NRC decision authorizing the Company's permanent, full power, forty-year operating license, to the Court of Appeals for the District of Columbia Circuit, where their appeal was consolidated with another appeal f rom the NRC's generic rulemaking proceeding on the same subject. In July, 1976, that Court decided the appeals by setting aside and remanding to the NRC for further proceedings certain aspects of the rulemaking which dealt with fuel reprocessing and wasts disposal and by remanding the Vermont Yankee decision to await the outcome of the rulemaking.

On April 3,1978 the United States Supreme Court ruled favorably on the Company's appeal from that decision and remanded the consolidated cases to the District of Colum-bia circuit where the matter is still pending.

The Company has commitments for nuclear fuel purchases through 1992 approxi-mating $134,900,000.

Expenditures for such commitments will be approxi-mately S19,100,000 in 1982 and approximately S19,600,000; J21,200,000;

$22,100,000 and $20,600,000 in the years 1983 through 1986, respectively.

Vermont Yankee has contracted for uranium concentrate to meet substantially all its power production requir?ments through 1983.

It has two long-term contracts for uranium by-product extraction for 20 and 12 years, respec-tively, each of which was expected to provide up to about 20% of its uranium requirements during these periods. Under the former of these contracts, the Company is committed to make minimum payments, aggregating 56,250,000 plus interest, over a period ending not later than 1993 regardless of the amount of uranium that is actually produced; the f acility f rom which uranium was to be supplied under that con tract never achieved its design production capability and was shut down by the owner in late 1981 when Vermont Yankee was notified by the owner of the f acility that it was presently unable to pay certain of its obligations under losn agreements with a Canadian bank and was in default ander other covenants made to the bank. The Company has been informed that the bank has not yet made demand or enforced its remedias and that the owner of the f acility is seeking a substantial infusion of new equity. Until the status of this production facility changes, the Company will charge future minimum payments to Oparating Expense and will bill the Sponsors for the payments under its power contracts.

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(Continued)

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7 VERENT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements The Company does not have contracts for disposal of spent fuel. Pursuant to an effective anendment to the plant's operating license, work is underway ta expaM temporary storage capacity so that spent fuel removed f ro:n the reactor through 1989 can be safely stored while maintaining the ability to discharge a full core should that be necessary for operational reasons. By decision dated January 27, 1979 the NRC Atomic Safety and Licensing Appeal Board af firmed an earlier Licensing Board decision authorizing the license amenduent to permit expansion of the fuel rack capacity f or storage of spent fuel at the Vermont Yankee plant. On appeal by one intervenor, the Court of Appeals for the District of Columbia Circuit rejected certain contentions by the petitioners as to procedural issues but remaMed the matter to the NRC for fur *her consideration in light of the generic rule-making referred to above. The matter is pending before the NRC.

Events at Three Mile Island Nuclear Unit No. 2 in Pennsylvania ("TMI") have prompted a rigorous reexaminstion of safety related equipment aM operating procedures in all nuclear facilities.

New regulatory requiremen ts involving both physical and procedural changes have been and are being promulgated, with which all nuclear f acilities will have to comply. Until the acopa of these improvements, as they apply to the Plant, and the time schedules for compliance have been fully defined, neither the cost of all modifications not their effect, if any, on the operations of the Company can be definitively determined.

The Company anticipates these and other requirement.s will necessitate significant capital expenditures during the period 1982 and 1983.

The Price-Anderson Act provides that each owner of an operating power reactor may be assessed a retrospective premium of up to $5,000,000 per reactor in the event of any one nuclear incident occurring in any reactor in the United States (with a maximum assessment of $10,000,000 per year per reac tor) should any nuclear incident result in liability losses which exceed the maximum available private insurance protection (presently $160,000,00 0).

That Act further provides for federal indemnity for liability losses in excess of the above two layers of insurance up to the statutory limit of liability of $360,000,000.

(Continued)

8 VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements (9) Unaudited Quarterly Financial Information The following quarterly financial information is unaudited and in the opinion of management includes all adjustments (consisting only of normal recurring accruals) necessary to a fair statement of results of operations for such pe riods.

Quarter ended 1901 December September June March Operating revenues S 20,553,414 22,627,440 22,989,600 22,000,166 Operating income 3,927,565 4,106,863 4,324,201 4,058,519 Net income 1,767,023 1,753,664 1,775,982 1,799,023 Net income per share of common stock 3.62 4.38 3.64 3.70 Quarter ended 1980 December September June March Operating revenues S 16,335,385 19,962,649 21,262,527 20,779,242 Operating income 3,676,672 3,610,178 3,874,904 3,824,014 Net income 1,813,183 1,781,930 1,773,445 1,800,845 Net income per share of common stock 2.88 3.60 3.58 3.64 (Continued)

9 VERMONT YANKEE NUCLEAR POWER CORPORATICN Notes to Financial Statements (10) Unaudited Information on the Effects of Changing Prices The following information is supplied for the purpose of providing certain information about the effects of changing prices. It should be viewed as an estimate of the approximate effect of changing prices, rather than as a precise measure. A statement of income adjusted for changing prices follows (dollars in thousands):

Year onded December 31, 1981 Conventional Adjusted for Adjusted historical general for changes in cost inflation specific prices Operating revenues S 88,171 88,171 88,171 Operating expenses:

Nuclear fuel expense 22,134 23,517 26,421 Other operating expenses 21,128 21,128 21,128 Maintenance 9,706 9,706 9,706 Depreciation 9,323 20,270 20,826 Taxes on income 5,184 5,184 5,184 Other taxes, principally property taxes 4,279 4,279 4,279 Total operating expenses 71,754 89,084 87,544 Operating income (loss) 16,417 (913) 627 Other income and deductions, not (3)

(3)

(3)

Interest expense (9,313)

(9,318)

(9,318)

Not income (loss) excluding reduction to net recoverable cost S 7,096 (10,234) (A)

(8,694) (A)

Gain from decline in purchasing power of net amounts owed 12,338 12,338 Reduction to net recoverable cost (557)

(2,097) 11,781 10,241 Increase in specific prices (current cost) of property, plant and equipment held during the year (B) 25,865 Effect of increase in general price level 37,391 Excess of increase in general price level over increase in specific prices

$ 11,526 (A)

Including the reduction to net recoverable cost, the net less would have been $10,791.

(D)

At December 31, 1981, the current cost of utility plant net of accumulated depreciation and amor tica tion was estimated to be approximately

$425,319,000 as compared with net utility plant recoverable through depre-ciation and amor ti:stion of $199,740,000.

(Continued)

10 VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements A five-year comparison of selected supplementary financial data adjusted for the af fects of changing prices follows (in thousands of average 1981 dollars except per share amounts):

1981 1980 1979 1978 1977 Operating revenues S 88,171 86,466 32,675 35,927 91,723

!!istorical cost information adjusted for general inflation:

Not loss (excluding reduction to net recoverable cost) 10,234 5,857 340 Net loss per share of common stock (excluding reduction to net recoverable cost) 27.98 19.30 6.63 Not assets at year-end at net recoverable cost 84,294 82,496 83,786 Current cost information:

Net losa (excluding reduction to not recoverable cost)

S,694 7,709 4,949 Net loss per share of common stock (excluding reduction to net recoverable cost) 24.13 23.94 16.90 Excess of increase in general price level over increase in specific prices 11,526 25,978 14,410 Not assets at year-end at net recoverable cost 84,294 82,496 83,786 General information:

Gain from decline in purchasing power of net amounts owed S 12,338 18,331 21,088 Cash dividends declared per common share S

15.00 16.56 13.80 24.37 26.24 Average consumer price index 272.4 246.3 217.4 195.4 181.5 Dollar amounts adjusted for general inflation (constant dollar amounts) repre-sent historical costs stated in terms of dollars of equal purchasing power, as measured by the Consumers Price Index for all Urban Consumers (CPI-U).

Dollar amounts adjusted for changes in specific prices (current cost amounts) reflect the changes in specific prices of net utility plant from the date the plant was acquired to the present, and differ from constant dollar amounts to the extent that specific prices have increased more or less rapidly than prices in general.

(Continued)

11 VER.Ci? YANKEE NUCLEAR POWER CORPOPATION Notes to Financial Statements The current cost of promety, plant, and equipment, which includes land, lam r ig h ts, intangible plant and construction var'< in progress, represents the estimated cost of replacing existing plant assets ard was detarmined by indexing surviving plant by the Handy-Whitman Index of Puolic Utility Construction Costs.

The cu r re nt cost of nuclear fuel was determined by engineering e stimates of the replacement cost of fuel currently in the reac to r. The current year's provisions for nuclear fuel expanse and depre-clation on the constant dolla r and current cost amounts of utility plant were determimd by applying the Company's depreciation and amor tization rates to the restated plant amounts.

As proucribed in Financial Accounting Standard No. 33, income taxes sere not adjusted.

Under te rms of the Power Con tr ac t s, which specify costs billable to the Company's sponsors, only the historical cost of utility plant is recover-able in revenues as depreciation.

Therefore, the excess of the cost of plant stated in terms of constant dollars or current c at that exceeds the historical cost of plant is not presently recoverable in cates as deprecia-tion, and is reflected as a reduction to nat recoverable cost. The Company will be allowed to earn on the increaaed cost of i ts ne t investment when I

raplrement of f acilities actually occurs.

To properly reflect the econonics of rate regulation in the statement of income adjusted for changing prices, the reduction of net property, plant, and equipment should be of fset by the gain f rom the decline in purchasing power of net amounts owed.

During a period of inflation, holders of monetary assets suf fer a loss oC general purchasing power while holders of monetary liabilities experience a gain.

The gain from the decline in purchasing power of no t amounts owed is primarily attributable to the substantial amount oO debt which has been used to finance property, plant, and equip-mont.

Since the depreciation on this plant is limited to the recovery of historical costs, the Company does not have the opportunity to realize a holding gain on debt and is limited to recovery only of the embedded cost of debt capital.

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