ML20042E899

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Toledo Edison Co 1989 Annual Rept. W/900420 Ltr
ML20042E899
Person / Time
Site: Davis Besse Cleveland Electric icon.png
Issue date: 12/31/1989
From: Shelton D
TOLEDO EDISON CO.
To:
NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM)
References
1800, NUDOCS 9005040054
Download: ML20042E899 (220)


Text

{{#Wiki_filter:. . . . .. . ,. . ... . . . . . . . . TOLEDO EDISON i = A Cneww Energy Company DONALD C. SHELTON Vre Presdert- Acrear Docket Number 50-346 """ License Number NPF-3 Serial-Number 1800 April 20, 1990 United States Nuclear Regulatory Commission Document Control Desk Washington, D. C. 20555 Subj ect : Annual Financial Report Gentlemen:- In accordance,vith 10CFR50.71(b) Toledo Edison hereby submits its annual financial report, including the certified financial statements. Attached'are-The Toledo Edison Company 1989 Annual Report and Form 10-K, the Annual Report '

    'to the Securities and Exchange Commission for the fiscal year ended December- 31, 1989.

Very truly yours, 7 AVA/ssg Attachments E cc: P. H. Byron, DB-1 NRC Senior Resident Inspector A. B. Davis, Regional Administrator, NRC Region III T. E. Hurley, Director, Office of Nuclear Reactor Regulation T. V. Vambach, DB-1 NRC Senior Project Manager 9005040054 PDR ADOCK 40050@00346 ' R PDC g\ THE TOLEDO EDISON COMPANY EDISON PLAZA 300 MADISON AVENUE TOLEDO, OHIO 43652 6 .f

T THE

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TOLED0 i E DI S O N C O M P AN Y 1989 i q ANNEAL 4 i 4 l REPORT -; a i A Subsidiary of 'l Centerior Energy Corporation i

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     . ABOUT TOLEDO EDISON                               DIRECTORS l

{L The Company, a wholly-owned subsidiary Afurray R. Edelinan, President of the i of Centerior Energy Corporation, provides Company and Executh e Vice President of electric service to about 760,000 people in Centerior Energy Corporation.

;         a 2,$00-square mile area of northwestern           Robertf. Tarhng. Chairman and Chief Executive Ohtt). Including the City of Toledo. The           Officer of the Company and The Cleveland
;-        Company also provides electric energy at           Electric illuminating Company and President and wholesale to 13 municipally-owned                  Chief Operating Officer of Centerior Energy distribiaion systems and one rural electric        Corporation and Centerior Service Company.

i cooperative distribution system in its serve c Rkhard A. Afiller; Chairman and Chief Executive area. Ihe Company,s 2,800 employees serve about 283,000 customers. Officer of Centerior Energy Corporation and Centerior service Company. Donald n. Saunders, vice President-EXECUTIVE OGICES Administration & Governmental Affairs of the The 'Ibledo E .lson Company Company. 300Padison Avenue

          'Ibledo, of1436s2 OFFICERS (419)249 5000 Chairman and Chief Executive Officer      ...     . RobertJ. Farling Vice Chairman . . .    ...   . . . Paul Af, Smart President . ....... ..         . . Afurray R. Edehncu Senior Vice President . . . . .Rkbard R Crrmh Vice President-Customer Operations . . . .Dac/d L Afonscau Vice President-Marketing. 7bomas 31. Qu/nn Vice President-Administration &

Governmental Affairs . . Donald //. Saunders Vice President-Nuclear . Donald C. Sbc/ ton Controller and 'Itcasurer . . James R Afart/n Secretary . ...... . . . .E. I.yle Pepin I l i i I i 1

REPORT OF INDEPENDENT PUBUC ACCOUNTANTS ARTHUR To the Share Owners of ANDERSEN The Toledo I:dison Company: s Te have audited the accompanying balance sheet in our opinion, the financial statements referred and statement of cumulative preferred and to above present fairly, in all material respects, the preference stock of The Toledo 1:dison Company (a financial position of The Toledo 1:dison Company wholly-owned subsidiary of Centerior I:nergy as of December 31,1989 and 1988, and the results of Corporation) as of December 31,1989 and 1988, its operations and its cash flows for each of the three l and the related statements of income, tetained years in the period ended December 31,1989, in carnings and cash flows for each of the three years in conformity with generally accepted accounting the period ended December 31,1989. These principles. financial statements are the responsibility of the As discussed further in the Summary of Company's management Our responsibility is to Significant Accouming Policies and Notes 7 and 12, a express an opinion on these financial statements change was m':de in the methods of accounting for

!    based on our audits.                                     In':ome taxes and unbilled revenues in 1988, We conducted our audits in accordance with           retroactive to January 1,1988.

3 generally accepted auditing standards. Those As discussed further in Note 3(c), the future of standards require that we plan and perform the audit Perry Unit 2 is undecided. Construction has been  ; to obtain reasonable assurance about whether the suspended since July 198% Yarlous ahernatives are financial statements are free of material being considered, including resuming misstatement. An audit includes examining, on a test construction, mothballing or canceling the Unit. basis, evidence supporting the atuounts and Management can give no assurance when, if ever, disclosures in the financial statements. An audit also Perry Unit 2 will go in service or whether hs includes assessing the accounting principles used imestment and a return thereon will ultimately be and signifwant estimates made by management, as secovered. well as esaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. Cleveland, onlo I chruary 12,1990 Arthur Andersen & Co. ? t f t L F l l 2 L

V

SUMMARY

OF SIGNIFICANT ACCOUNTING POUCIES I- General Estimated future nuclear fuel disposal costs are The Toledo Edison Company (Company) is an bein recovered through the base rates. lectric utility and a wholly owned subsidiary of T ie Company defers the differences between [i Centerior Energy Corporation (Centerior Energy), actual fuel costs and estimated fuel costs currently The Company follows the Uniform System of being recovered frorn customers through the fuel i Accounts prescribed by the Federal Energy factor. This matches fuel expenses with fuel related Regulatory Commission (ITRC) and adopted by revenues.

        'lhe Public Utilities Commission of Ohio (PUCO).

The Company is a member of the Central Area Pre Phase In Deferrols of Operating Power Coordination Group (CAPCO), Other Expenses and Corrying Chorges members include The Cleveland Electric The PUCO authorized the Company to record as Illuminating Company (Cleveland Electric), deferred charges interest carrying costs and j Duquesne Light Company (Duquesne). Ohio operating expenses (including lease payments, i Edison Company and Pennsylvania Power Company, depreciation and taxes) for Beaver Valley Unit 2 The members have constructed and operate from its commercial in service date of November 17, f generation and transmision facilities for the use of 1987 through December 31, 1988. The PUCO the CAPCO companies. Cseveland Electric is also a determined that Perry Unit 1 was considered "used wholly owned subsidiary of Centerior Energy, and useful" on May 31, 1987 for regulatory i purposes. Consequently, the PUCO authorized the [ Related Party Transactions Company to defer operating expenses for Perry Unit f Operating expenses include those amounts for 1 from June 1,1987 through Decernber 22,1987, transactions with affiliated companies in the ordinary the date when these costs began to be recovered in course of business operations, rates. The PUCO authorized the deferral of interest The Company's transactions with Cleveland and equity carrying costs, exclusive of those 1:lectric are prim'arily for firm power, interchange associated with operating expenses, for Perry Unit I power, transmission line rentals and jointly owned from June 1,1987 through December 31,1987 and power plant operations and contruction. See Notes 1 deferral of interest carrying cosis from January 1, and 2. 1988 through December 31,1988. The amounts ' Centerior Service Company (Service Company), deferred for Perry Unit I pursuant to the PUCO the third wholly owned subsidiary of Centerior accounting orders were included in property, plant Energy, provides management, financial, and equipment through the November 18,1987 administrative, engineering, legal and other services commercial in service date. Subsequent to that date, to the Company and other affiliated companies at amounts deferred for Perry Unit 1 were recorded as cost. The Servi:e Company bihed the Company deferred charges. Amortization of the Ileaver Valley

       $40,000,000, $93,000,000 and $21,000,000 in 1989,             Unit 2 and Perry Unit I deferrals began onJanuary 1, 1988 and 1987, respectively, for such services.               1989 in accordance with the January 1989 PUCO rate order discussed in Note 6. The amortizations Rev:nues                                                     will continue over the lives of the related property, ir r r       or s it ipti r  iIeci n i         d les    Phase In Deferrals of Operating Expenses authorirchby the PUCO. Prior to 1988, these                   and Carrying Chorges revenues were recorded in the accounting period              As discussed in Netc 6, the January 1989 PUCO rate during which meters were read, except for the                 order for the Company included an approved rate portion of revenues which was deferred under the              phase in plan for the Company's investments and mirror construction work in progrew (CWlP) law                leasehold interests in Perry Unit I and Beaver Valley
  • discussed below. Uillity service rendered after Unit 2. On January 1,1989, the Company began monthly meter reading dates through the end of a recording the deferrals of operating expenses and calendar month (unhilled revenues) became a part interest and equity carrying charges on deferred rate-of operating revenues in the following month based investment pursuant to the phase in plan.

when the meters were read. I:ffective January 1, These deferrals will be recovered t>y December 31, 1988, the Company changed its method of 1998. accounting to accrue the estimated amount of revenues for sales unbilled at the end of each Depreolotlon and Amortization month. See Note 12. . A f ue1 factor is added to the base rates for (!ectne The cost of property plant and equipment, except service. Ihis factor is designed to recover fut;i and for the nuclear genNating units, is depreciated over mest purchased power costs from customers. It is their estimated useful lives on a straight line basis, el anged semiannually after a hearing bef, ore the The annual straight line depreciation provision d m a mw d my dpcih Mlly-plant in service was 3.6% in 1987,1988 and 1989. Depreciation expense for the nuclear units is based Fuel Expense on the unirs of production method.

     .The cost of fossil fuel is charged to fuel expense                Effective July 1988, the Company began the based on inventory usage. The cost of nuclear fuel,           external funding of future decommissioning costs including an interest component, is charged to fuel           for its operating nuclear units pursuant to a PUCO expense based on the rate of consumption.                     order. Cash contributions are made to the funds on a L                                                                  3 p

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p y a straight line basis over the remaining licensing investment t:x' credits is rer.orted as a reduction of period for eachcnit. Am urts currently in rat:s are depreciation expense See lwte 7. based on past estimates of decommissioning costs a for the Company of f 59,000,000 in 1986 dollars for interest Charges the Davis.Besse Nuclear Power Station (Davis- Debt interest reported in the income Statement does Besse) and $28,000,000 each for Perry Unit 1 and not include interest on nuclear fuel obligations. . Beaver Valley Unit 2 in 1987 dollars. Actual , I ' !.'> decomtnissioning costs are expected to exceed these Interest on nuclear fuel obilgations for fuel under i estimates. It is expected that increases in the cost construction is capitalized. See Note 5. [

!'          estimates will be recoverable in rates resulting from          L sses and gains realized upon the reacquisition
          . future rate proceedings. The current level of             or redemption of long term debt ate deferred, i

h accruals being - funded ' and recovered from. consistent with the regulatory rate treatment. Such k customers over the remaining licensing periods of losses and gains are either amortized ovet the , the Units is approximately $4,000,000 annually. The remainder of the original life of the debt issue  : present funding requirements for Beaver Valley retired or amortized over the life of the new debt

          - Unit 2 also satisfy a similar commitment made as          issue when the proceeds of a new issue are used for part of the sale and leaseback transaction discussed      the debt redemption. The amortizations are -

in Note 2. included in debt interest expense. i Property, Plant and Equipment Deterred Goin and Loss from Solos of - Utility Plant Property, plant and equipment are stated at original - cost less any amounts ordered to be written off. ' The Company is amortizing the applicable deferred included in the cost of construccion are items such i gain and loss (net of tax) associated with the sales as related payroll taxes, pensions. fringe benefits. of utility plant in 1987 over the terms of lease 5 management and general overheads and AFUDC. < i under sale and leaseback agreements. See Note 2. AFUDC represents the estimated composite debt-The amortization and lease expense amounts are and equity cost of funds used to fmance recorded as operation expense, construction. This noncash allowance is credited to

   ,                                                                  income, except for AFUDC for Perry Unit 2.

Federal Income Taxes  !!cginning in July 1985, Perry Unit 2 AFUDC was credited to a delerted income account until January The 1988 and 1989 financial statements reflect the on liability method of accountin for income taxes as a 1,1988, Peny nit when 2 was the practice ofSee discontinued. accruing APUDC,The Note 3(c). result of adopting a new stanf'ard for accounting for income taxes in 1988. Prior to 1988, income taxes EI"S* AI " ""#Y#'# ". 45% and 11.62% in were accounted for by the deferred method. Under the deferred method, deferred taxes and deferred h'UD "$s i 8k" mimenance and repairs are charged to expense tax credits wcre not adjusted for subsequent as incurred. Certain maintenance and repair changes in federal tax rates. Also, under the deferred expenses for Perry Unit I and lleaver Valley Unit 2 method, the Company did not record deferred taxes have been deferred pursuant to the - PUCo on the temporary differences between book and tax accounting orders discussed above. The cost of income that the PUCO used to reduce allowable replacing plant and equipment is charged to the costs nor ratemaking purposes. This ractice was . utility plant accounts. The cost of property retired premised on regulatory treatment w itch permits plus removal costs, after deducting any salvage recovery of such deferred income taxes in future value, is charged to the accumulated provision for revenues, depreciation' A major difference under the liability method is that deferred tax liabilities are adjusted for subsequent tax rate changes. Also, the Company Mirror Construction Work in Pro 9ress must now record deferred taxes for all temporary The Ohio mirror CWIP law requires that revenues

         - differences between the book and tax bases of assets      authorized by the PUCO and collected as a result of and liabilities. Application of the accounting             including CWIP in rate base he refunded in a standard in 1988 and 1989 did not impact results of       sub. sequent period after the project is meluded in operations as the additional deferred taxes were           rate base. For accounting purposes, such revenues offset by a regulatory asset on the balance sheet         are deferred and recorded as refund obligations to a           because of the regulatory treatment described in the       customers. During the period when such revenues preceding paragraph. Additionally, allowance for          are being collected. AFUDC (through the in-
         . funds used during construction (AFUDC) and                service date of the project) and carrying charges carrying charges that were previously accounted for        (during the remainder of the collection period) in the income statement on a net of tax or an after-      continue to be capitalized. The deferred revenues tax lusis are now stated on a pretax basis.                are then recognized as operating revenues in the Consequently, the 1988 and 1989 federal income tax         Income Statement over the period of the refund.          ;

provisions are equally higher. Amounts collected through January 31,1989 under j For certain property, the Company received the mirror CTIP law are being refunded pursuant investment tax credits which have been accounted to the January 1989 PUCO rate order discussed in for as deferred credits. Prior to 1988, tax credits i Note 6. After February 1,1989, no revenues were utilired were reflected as reductions to tax expense being collected under the mirror CWIP law. All mer the life of the wlated property. Under the new mirror CWIP revenues will be refunded to customers method , of accountir g, the' anai ='!on of by February 1990. 4 1 , 1

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    ;I      MANAGEMENT'S FINANCIAL ANALYSIS i                                                                    PUCO for cenain replacement fuel and purchased i       Results of Operations 1939 yg,1933                                               power costs collected from customero during a 1985 l                                                                             a      ene utagt htal Mowantour saks f        The January 1989 PUCO rate order for the Company (as discussed in Note 6) contributed to a                  (n reased
                                                                               " " ##52 A% in""1989."" " E Commercial E *"     "* ""*  sales increa i     ~ substantial improvement in cash flow in 1989, but           office buildings and retail outlets. T he comparadvely f        had significantly less effect on our earnings. The          tuoderate summer weather in 1989 lowered sales L        gain in reported revenues from higher rates was               ecauw         re ced air conmuoning usage, S        offset by a corresponding reduction in nuclear plant          e    endal sales    creased 2Ms InduMal sales related cost deferrals, as such costs are phased in         dareawd            as nmdest growth in industrial sales and recovered in rates.                                       cd yn9           was Hwt endreh by the hupart of c            The 1990 and 1991 rate increases included in the        dw on f a large industrial customer to a I        rate order will condnue to improve operating                mun        a pown ytem in We, Ohio, which I'       revenues in those years although further reductions            Tan paadng in AprH 19E q t custoinn in deferred costs and the earnings caps contained           an unted for L1% of the Company s total electric                   ,

in the Corupany's and Cleveland Electric's rate sales in 1988.  ! orders will limit increases in earnings. Revenue Operating expenses increased 18.9% in 1989' f gains may be limited somewhat by the effects of a own (j(. nrals nu af operating expense for sluggish cronomy and customer conservation efforts. l'erry Unit I and Beaver \ alley Unit 2 resulted in a [L Sales growth is cipected to be flat for 1990 and less $65,000,000 increase in expense. ruel and k than 2% annually for several years thereafter. This pu awd pown vnw inmawd largdy because i I makes our cost reduction efforts extremely inatc ng o expense with higher fuel cost  ! important. Future operational changes and cost rnowy rewnues cuswd in the prnnung reductions resulting from the PUCO mandated hupmwd nudear unh avaHabiHty E"'"E'a management audit should inake the Company more enabh.d the Company to sell pgver to other udlides competitive in an environment of inflation and uhn than Ckwland Ekade. the exwss revenues increasing competition with other energy providers' "* '# "" "' " '"d""I "I" E"'Ch

  • d including municipal electric systems and power expense. Depreciation expense increased, cogeneration proiccts. reundw f the increased generation from the ractors contributing to the 313% increase in Cmnpany's nuclear tmits since their depreciation is 1989 operating revenues are as follows: recorded based on units.of production.

Increase Total AFUDC and carrying charges decreased in clunge in o.peraung Revenon t oetrea. o 39g9 3 3 gg y ,

                                                                                                               ,,        , g g, riccmc Rnenues                                               Company's investment in its nuclear units currently j

i sain of Capacity to cleveland I:lectric. . $ '2,000.000 in rates pursuant to the rate order, jnterest expense nase R.un and Mwenancout unoomao and preferred dividend rniuiremems decreased in i neferred cwir Revenun. e moopan 1989 because of retirements and refinancings by the' l' lurl Cost Recovery Rhenun . 2:Suo,noo Company. - sales volume and Mm. amoomom sp>me.""" 1988 vs.1987 Fam c ntributing to the 3.8% increase in 1988 The primary factor for the increase in operating L revenues was a net increase in 1989 in the total sales "E""" " E "" " " "' " # "' """* ' to Cleveland Electric of a portion of the Company's inacase I *"'""#

                                                                        """"'""""'"""F""""""

leased capacity entitlements in lleaver Valley Unit 2 [ and llruce Mansfield Plant (Mansfield Plant L The neorg Rnenun. sales from Incaver Valley Unit 2 commenced in sain or capacuy to cineland nectoc. s .v2.noopoo I L f' November 1988 as discussed in Note 2. The sales sain volume and Mm 2'400m00 l Deferred cwir Revenun . moomon j I from Mansfield Plant were oniv for a three month ' ~ period in 1988. The rate order for the Company was ruel cow Rumy Rmnun . g roomom

                                                                           ""'"'""""d""""""*"'                          ' 2 ###""

primarHy responsible for the tu other major factors l dL 8^"""*"" impacting the increase in revenues. The PUCO l [ granted the Company a 9% rate increase effective  ! february 1,1989. Also, revenues which were in 1988, the Company sold to Cleveland 1:lectric 1 collected and oeferred through lanuary 31,1989 a pordon of its leased capacity entitlement in f under the Ohio mirror CWIP law cre being refunded Mansfield Plant and Beaver Valley Unit 2 for three 9 pursuant to the rate order. Such deferred CWIP and two momh periods, respectively, as discussed in  ! revenues are recognized as operating revenues over the 1989 vs.1988 analysis Total kilowatt. hour sales the period of the refund. Fuel cost recovery increased 11.8% in 1988. Sales growth of 5.3% in rewnues increased in 1989 because of a significant the industrial sector reflected broad based strength

         . rise in the fuel cost recovery factors compared to           in the economy, particularly among automobile i

1988. The lower 1988 factors recognized a greater manufacturers. Residential sales increased i.6% in I amount of refunds to customers ordered by the 1988 largely because of a substantially warmer l 1 s i L ' i

                                                                                                                                       .1

m summer.The hot 6 mmer also contributid to a 3.1% base. These carrying charges in 1988 were for gain in commercial sales as did new retail outlets, interest costs only and not equity cc ts, llowever, The increase in revenues attributed to deferred Al'UDC and carrying charges that were previously CWIP revenues resulted from a reduction in the accounted for on a net of tax or an after tax basis level of revenues deferred under the mirror CWIP were stated on a pretax basis in 1988. law. Lower fuel cost recovery revenues resulted Part of the proceeds from the 1987 sale and principally from the greater use of lower cost nuclear leaseback transactions was used to redeem fuel and the PUCO ordered refund discussed in the outstanding high-cost securities which reduced 1989 vs.1988 analysis. Rate increases granted to interest expense and preferred dividends in 1988, the Company in 1987 were ofTset by the impact of Resuhs for 1988 also included a one time net special contracts with larger industrial customers. after tax increase of f 6.000,000 related to a change Operating expenses increased 22.1% in 1988. in accounting for unbilled revenues. See Note 12. ruel and purchased power expense decreased largely because of the matching of expense with lower fuel cost recovery revenues discussed in the Effect of Inflation preceding paragraph. The increase in other Inflation adversely affected our results of operations operation and maintenance expense and in 1987 and 1988 as increases in base rates were less depreciatlan expense mainly resulted from a full than the rate of inflation in the costs of our labor, year of operation of Perry Unit 1 and lleaver Valley materials and services. Unit 2 and a full year of lease expense for Beaver The January 1989 PUCO rate order was primarily Valley Unit 2 and Mansfield Plant. The increase in designed to recover all operating and capital costs deferred operating expenses in 1988 was largely of our new nuclear investments. In 1989, total costs attributable to the deferral of Ileaver Valley Unit 2 of labor, materials and services increased 3.8%. Our operating expenses for most of the year because they cost reduction program helped mitigate the effect were not being recovered in rates. In 1987, Perry of the 4.6% rate of inflation in 1989 on our results of Unit 1 and lleaver Valley Unit 2 operating expenses operations, were deferred for only about seven and two Changes in fuel costs do not alTect our results of months, respectively. operations since those costs are deferred until As discussed in Note 6, $277,000,000 of nuclear reflected in the fuel cost recovery factor included in costs were written off in 1988 as a consequence of customers' bills, the tate orders. Inflation will have a negative impact on our The total amount of Al'UDC and carrying charges future results of operations. As stated above, the rate decreased in 1988. The change in status from order was primarily designed to recover costs construction to operation of Perry Unit 1 and Ileaver related to our new nuclear investments and will not Valle) Unit 2 in 1987 resulted in the cemation of afford protection against future inflation. Our cost Al'UDC on those Units. Instead, an aerrual of post. reduction efforts since the Company's 1986 in service carrying charges pursuant to PUCO orders affiliation with Cleveland F.lectric have been began on such investments not includc<l in rate substantial and will coyaue to be important. RETAINED EARNINGS w tottDO EDISON COMPANY For the years ended December 31, 1989 1988 1987 (mousanas of deliors) Balance at Beginning of Year.. . .. . .. S 89,614 S 297.22ji S 305.130 Additions Net income (loss) . .. . . . . 92,678 (115,452) 165,474 Deductions Dividends declarech Common stock . . (63,285) (61.711) (111.500) Preferred stock . . . . ... . .. . (19,036) (26.269) (40,212) Other, primarily preferred sicek redemption expenses . . (6) (4.475) (21,368) Net increase (Decrease) ... . 10,351 (207.607) (7.909) Bolonce of End of Year. . S 99,965 S 89.644 S 297,221 The accompanying notes and summary of significant accounting policies ::.e an integral part of this statement. 6

INCOME STATEMENT ist TotEDo EDISON COMPANY For the years ended December 31, 1989 _ 1988 1987 (thousands of cohots) Operating Revenues (1) . . . . . . . . . . . . . . . . . . ...... ... $826.803 S 627.997 $605.037 Operating Expenses i ruel a nd pu rchased pow er . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133,400 146,161 140.176 Other operation and maintenance . . . . . . . . . . . . . . . . . . . . . . . 372.530 358,823 223,307 j Depreciation and amortization . . . . . . . . . . . . . . . . . .... . 87.639 75.093 65.503 Taxes, other than federal income taxes. . . . . . . . . .... 72.123 80,138 59.658 Phase in def erred operating expenses . . . . . . . . . . . . . ...... (22.535) - - Pre phase-in deferred operating expenses . . . . . . . . . . . . . . . . . 4.044 (83,813) (39.797) rederal income taxes . . . . . . . . . . . . . . . . . . .... ... ..... 37.285 29.242 22.747 684.486 ' 575,644 471,594 Operating income.... . .. ................. .......... 142,317 52.353 133.443 N:noperating income (Loss) Allowance for equity funds used during construction.. . . .. 8,568 5.452 122,138 Other income and deductions, net. . . . .... .. .......... . 20.361 30.233 (16.904) Write of f of nuclear costs . . . . . . . . . . . . . . . . . ... ... .. ... - (276.955) - Phase.in carrying charges . . . . . . . . . . . . . . . . . ............... 82.308 - - Pre phase-in carrying charges . . .. .. .... ... . .... . - 129,632 14.989 rederal income taxes - credit (t xpense) .... . ..... ,J21,563) 86.244 42,726 89,674 (25.394) 162.949 , Inc;me Before interest Charges .... . ... . . .. ... 231.991 26.950 296.392 Interest Charges Debt interest . . . . . . ........ .. ... ... ........ .... 144,792 150.523 185,493 Allowance for horrowed funds used during construction. . . . , _(5,479) (1.833) (54.272) 139,313 148.690 131,221 Inc:me (Loss) Before Cumulative Effect of an Accounting Change. . . . . . . . . . . . ... . ....... . .. 92.678 (121.731) 165,171 Cumulative Effect on Prior Years (to December 31, 1987) of an Accounting Change for Unbilled R; venues (Net of income Taxes of $4,177,000) ... - 6.279 - N;t income (Loss).... ... ...... . . .. .... .. 92.678 (145.452) 165.171 Pr;ferred Dividend Requirements ... .. . ,, 25.390 26.983 42.749 Entnings (Loss) Avollable for Common Stock . . .. S 67.28_8 gi42.435) $ 122.422 (1) includes revenues from capacity sales to Cleveland 1:'ectric of $101.12',000 and $31,m a,000 in 1989 and 1988, re: pectively. The accompanying notes and summary of signibc:mt accounting policies are an integral part of this statement.

e MANAGEMENT'S FINANCIAL ANALYSIS Copitol Resources and Liquidity We expect to finance externally about two thirds of We carry on a continuous program of constructing

  • I991 and 1992 te(piirements. See Notes 10(c) new facilities and modifying existing facilities to and (d) for mformption concerning limitauons on meet anticipated demand for electric secrvice, to dw ance of prefened and preference Mock and comply with governmental regulations and to d6t. Our dmnlenn borrowing anangements are improve the environment. Ceh is also needed for explained in Note 1 L AQo, we wdl optionally mandatory retirement of securities. Over the three- redeem additional securities if economical.

year period 1987 1989, these needs totaled t he Company,s capital requirements will approximatelv i460,000,000. In addition, we probaNy increase substantially after 1992 if acid rain exercised various options to redeem and purchase ICEIdati n o enacted. See Note 3(b). a[' proximately $'00,000,000 of our securities. .Ihe availibility of capital to meet our external In 1987, the capital rec tired to finance our I.mancing nee 6 depen 6 upon sud factors as construction program and to retire and redeem Snandal madet conditions and our credit ratings. securities was obtained primarily from external M e expect to be able to raise cash as needed, sources. Also, in 1987. the Company sold and leased Current securities ratings for the Company are as back certain interests in three generating units as d"" discussed in Note 2. In 1988 and 1989, tbc %dd a Poors ww s investors Company issued $50,'00,000 and f 56,100,000, corporanon servke resperthely, of hrst mortgage bonds. Proceeds from FW morp bonds . , DUB- Haa3 these knancings were used to repay portions of short term debt incurred to finance the construction U "" "'d """ ' ' "D* D'I program, to retire and redeem outstanding P'efr'"'d^" * - - Dh* ba securities, to pay our construction program costs and A write o!T of the Company's investment in Perry for general corporate purposes. Unit 2, depending upon the magnitude and timing The Company has been granted rate increases of such a write-off, could reduce retained earnings effective in 1989,1990 and 1991 pursuant to a sulliciently to impair the Company's ability to January 1989 PUCO rate order. See Note 6 for declare dividends. bec Note 3(c). discussion of the Company's and Cleveland The Tax Reform Act of 1986 provided for a 40% 1:lectric's rate orders which provide for specific average income tax rate in 1987 and a 34% income levels of rate increases and earnings lunitations for tax rate in 1988 and thereafter, the repeal of the Centerior 1:ncrgy through 1991. Ahhough the - investmeta tax credh, scheduled reductions in Company's rate order iequired it to write off certain investment tax credit carryforwards, less favorable assets in 1988 which lowered its carnings base, depreciation rates, a new alternative minimum tax current cash flow was not impaired. ( AMT) and other items. The changes resuhed in Although the Company's cash requirements for increased tax payments and a reduction in cash flow construction ( $ 230,000,000 ) and mandatory during 1987 principally because the AMT reduced redemption of debt and preferred stock the amount of investment tax credits allowed as an ( $ 351,000,000 ) during the 1990 1992 period in the offset to federal income tax payable. These changes aggregate will exceed the total for the 1987-1989 had no significant cash flow impact in 1988 because period, internally generated cash is expected to the Company had a net operating loss for tax increase substantially as a result of the annual rate purposes. The changes in the tax law resulted in increases. Nearly all of the Company's construction decreased tax payments and an increase in cash flow and redemption requirements in 1990 of during 1989 because the tax savings resulting from approximately $ 190,000,000 will be met with available tax deductions were utili7ed on the internal cash generation and current cash resources, consolidated tax return in determining the AMT. 8

w [ l ASH FLOWS THr TOLEDO EDISON COMPANY For the years ended December 31, h h 1989 1988 (thousands of dohofs) 4987 ! Cosh Flows from Operatirig Activilles (i) Net income (Loss) ............. .... ......... .... ........

                                                                                                                 $' 92,678        S(145.452) $ 165,i71-Adjustments to Reconcile Net income (Loss) to Cash from i

Operating Activities: Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . 87.639 75,093 65,503 Delerred federal income taxes . . . . . . . . . . . . . . . . . . ... .. 79,199 (62.598) (150,747) Investment tax credits, net. .. ... .... ...... ............ 1,237 6.920 79.332 Write off of nuclear costs . . . . . . . . . . . . ....... .... ..

                                                                                                                        -            276,955               -
         ' Deferred and unbilled revenues . . . . . . . . . . . . . . . . . . . . . . . . .                         (42,624)           14 642            20,185 i:          De fe r red f u e l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        16.259         (20.693)            15.848 Carrying charges caplialized . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     (82.308)        (129.632)          (14.989)

Leased nuclear fuel amortization . . . . . . . . . . . . . . . . . . . . . . . . . 46,408 32,285 22.603 ! Deferred operating expenses, net . . . . . . . . . . .............. (18,491) (83,813)' (39.797) i Allowance for equity funds used during construction ... . (8,568) (5,452) (122.438)- L Amortization of reserve for Davis Ilesse refund obligations to cu st o mers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... ... (12,655) (20,777) - Cumulative effect of an accounting change . . . . . . . . . . . . . . . . - (6.279) - Changes in amounts due from customers and others, net. ... (4.406) 13,472 (12,138) L Changes in inventories . . . . . . . . . . . . . . . . . . . . . . . . .... 1,890 904 (11,856) Changes in accounts payable . . . . . . . . . . . . . . . . . . . . . . . 8,896 19.472 17,490

        ' Changes in working capital affecting operations . . . . ..... ..                                          (30,713)           11.766            35,788 Other noncash items . . . ....... ..... ......... . ..... .                                                  5,896            9.358            44,190 Total Adjustments. . . . . ... .......                              . ..........                  47,659         131,623           (50.6,96)-

Net Cash from Operadng Activities . . . . .. 140,337 16.471 114.475 C:sh Flows from Financing Activilles (2) llank loans, commercial paper and other short term debt. .....

                                                                                                                        -                -             (15,000)

Notes payable to affiliates. . . . . . . . . . . .. .. .. ... ... ..

                                                                                                                        -            (68,000)            61,700 Debt issues:

First mortgage bonds. . .. . ... .. ... ........ . ... .... 56,100 50,700 41,000 Unsecured debt . . . . . . . ... ... ...... .... ..... . ..

                                                                                                                        -                -             250,000
                                                                                                                        -                -               50,000 Preferred stock issue . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     .. ...

Fquity contributions from parent . . . . . . . . . . ..... . ...... ... . - - 30.000 Maturities redemptions and sinking funds . . . . . . .. .. . . .. (65.006) (222,166 (550,075) Nuclear fuel lease and trust obligations. . .. .. ...... ... (39,015) (32,285 (20.954) Dividends paid . . . . . . . . . , .. .. ... . . .............. . (88,743) (89,054 (155,545) Premlums, discounts and expenses . .. .. .. ........ .... (925) 1.489 (2.731)

                   . Net Cash from Financing Activities . . . . . . . . . . . . . .                               (137,589)         (359.316)         (311,575)

C:sh Flows from investing Activilles (2) Cash applied to construction . . . . . . . . . . . . . . . . . . ........ .. (65,296) (113,174) (177.019) Interest capitallred as allowance for borrowed funds used during construction . . . . . . . . . . . . . . . ... . . ..... (5.479) (1,833) (54,272) Loans to affiliates . . . . . .. ................... , . . ... . . (114,000) - - Cash recched f rom sale and leaseback transactions, net . . . . . . . . . . - - 1.075,988 Cash withdrawn from (deposited in) sale and leaseback trust ..

                                                                                                                        -            109.976          (109.976)

Other cash received (applied) . , ... .... ... ....... ,. .. . 831 3.947 (17.478) , Net Cash from investing Activitics. . . . . . . . . . ..... (183,944) (1,084) 747,243 N:t Change in Cash und Temporary Cash Investments. , _(181,196) (344.229) 520.143 Ccsh and Temporary Cash Investments at Beginning of Y or-................................................... 254.888' 599,117 78.974 C:sh and Temporary Cosh Investments at End of Year .. S 73,692 S 254.888 S 599,417 a-(1) Interest paid was f 141,000.000, $ 150.000.000 and i183,000.000 in 1989,1988 and 1987, respectively. f acome taxes paid were $21,980,0n0 in 1987. No income taxes were paid in 1989 and 1988. (2) Increases in Nuclear Fuel and Nuclear Fuel Lease and Trust Obligations resulting from the noncash capitalizations under nuclear fuel agreements are excluded from this statement. The accompanying notes and summary of significant accounting pohcies are an integial part of this statement. 9

BALANCE SHEET December Si, 1989 1988 (tnousanos of doliors) Property, Plant and Equipmeni Utility plant in senice . . . . . . . . . . . . ... .. .... ...... $2,532,291 $2,438,927 Less: accumulated depreciation and amortization. . . .. . 567,197 487.546 1,965,094 1.951,381 Construction work in progress . . . . . ... . .. ..... . .. . 84,586 115,978

  <           Perry Unit 2. . . . . . . . . . . . . . . . . .       .        .... .... .... .                   345,754                343.126 2,395.434              2.410.485 Nuclear fuel, net of amortization .                 ...            .      .. . . ....             235,193                260.362 Other property, less accumulated depreciation . . . . . . . . . . . . .                              2.125                    2.152 2,632.752              2.672,999 e       Current Assets Cash and temporary cash investments . . . . . . . . ... .... .....                                  73,692                254.888 Amounts due ftom customers and others, net . ..... ..... ..                                         53,800                 49,394 Accounts receivable from athliates . . . . . . .                    . .. .            .             35,114                  'ii.050     I Notes receivable from afhliates . . . .                   . .. ...                  . ... .        114,000                     -

Unbilled revenues. . . ..... ....... ..... ...... . . .. 23,525 13.415 Materials and supplies, at average cost . ...... .. . ..... 26,841 24,424 rossil fuel inventory, at average cost . . . . .. .. ... 14,882 19,189 Taxes applicable to succeeding years . . . . . ...... . ..... 61,967 53,752 Other . . . . .. . . .... .. .. ..... ... .. . ...... 4.815 1.947 408.636 448.059 Deferred Charges Amounts due from customers for future federal income taxes . . 519,469 519,238 Unamortired loss frora 13eaver Valley Unit 2 sale. . . .. . 122,911 127,367 Unamortized loss or reacquired debt . .... . .. .. .. 28,528 30.809 Carrying charges ar.d operating expenses, pre-phase in . .., 257,709 259,978 Carrying charges and operating expenses, phase-in . . . . . . . . . 104,843 - I Other .. . .. .. . ... .. ... .. .. .. , ........ 63.998 76.222 -) 1,097,458 1.013.614 I l I Total Assets . . .... .. . . . . . $4,138,846 $4.134.672 The accompanying notes and summary of significant accounting policies are an integral part of this statement. u l l 3 10 a

pm k '! l[i

    'i THE TOLEDO EDISON COMPANY December 31, 1989-1988 j                                                  .

(mwsonds of donors) , L Capitallrotion and Uobilities I 'Copitalizction i e Common shares, $5 par value; 60,000,000 authorized; 39,134,000 outstanding in 1989 and 1988 . . . . . . . . . . . . . . . . . $ 195,687 $ 195,687 - , l'remiu m o'n capital t, toc k . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . '481,082 . 481,082' ' L - Ot her pa id - in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121,059 121.059 Retained ear nings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99.965 89,614 . Common stock equity . . . . . . . , . . . . . . . . . . . . . . .......... 897,793 887.442 Preferred stock With mandatory redernption provis6ns . . . . . . . . . . . . . . . . . . . 68,t90 71,155  ; Without mandatory redemption provisions . . . . . . . . . . . . . . . . . . 210,000 210,000 long term debt . . . . . . . . . ....... ............................ 1,197,277 . 1,291,444 .t 2,374,060. 2.460,041 1 Other Noncurrent Uobilities J Refund obligations to customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,780 47,719 1 252,460 Other, primarily nuclear fuel lease and trust obligations . . . . . . . 269.345

,                                                                                                                           276,240              317.064     [

Current dobilities . current portion of long term debt and preferred stock . . . . . . . . . 114,870 26,932 Current portion of lease obligations. . . . ...... .... ......... 44.480 38.499 - Accounts payable . . . . . . . . . . . . . . . ............... ..... 108,338 99.442- 1 Accounts payable to uthilates . . . . . . . . . . ................... 8,311 16,059 '

                  ' Accrued taxes . . . . . ............... ............... .. ...                                           94.990               102.844     -

L Accrued interest . . . . . . . . ....... ............... .......... 39,075 39.807  ; Dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 6.423 Accrued payroll and vacations .. . . . .. ............... ... . 6.885 7.728 Current portion of refund obligations to customers . . . . . . . . . . . 26,125 34,700 . Other ....,...................... ..... ......... ......... 10,749 11,156  ! 453.823 383.557 D:ferred Credits Unamortized investment tax credits . ............... . . .... 103,349 105,551

                 . Accumulated deferred federal income taxes ... ......... ...                                              565,266              484.943 Reserve for Petry Unit 2 allowance for funds used during
                      . construction . . . . . . . . .       .. .. ......... .... .. .., .                                   88,295 ~              88.295  .;;

Unamortized gain from 13ruce Mansfield Plant sale . . . . . . . . . 247,305 255.973 .; other ...... .... .... ... ... ..... .... ... ........ . 30,508 39.278 t 1,034,723 974.010. . Total Capitalization and 1. labilities , ,. . .. . .. ... $4.138,846 $4.134.6.72 t i

                                                                                                                                  =::
                                                                                                                                                             ?

I J

                       ,                                                                    - 11                                                           .J
       +..                                                                                                                                                   2 C __

STATEMENT OF CUMULATIVE PREFERRED THE 10LEDO ED!$ON COMPANY AND PREFERENCE STOCK 1989 Shores Current December 31 Outston@ng Call Prg 1989 1988 (thogschds of dollOIS)

$100 par v.due preferred, 3.000,000 shares authorized; 725 par value preferred.

12.000,000 shares authorized; and $25 par value preference, 5.000.000 shares authorized, none outstanding Subject to mandatory redemption (less current maturities): f 100 par i11.00. . . . ... . . 39,800 SiO3.50 $ 3,980 S 4,480 9.375 .. .. .. 150,400 104.45 15,010 16,675 25 par 2.81. . . . . 2,000,000 27.19 50,000 1 0.000

                                                                                           $ 68,990         S 75,155 Not subject to mandatory redemption:

100 par 4.25 . . . . . . . 160,000 104.625 $ 16,000 S 16,000 4.56........ . 50,000 101.00 5.000 5,000 4.2 5 . . . . ... . . . 100.000 102.00 10,001 10,000 8.b 2 . . ... . . 100,000 102.46 10,000 10,000 7.M . . .. ... .. . 150,000 102.437 15.000 15,000 7.80 . . .. . . .. 150,000 101.65 15,000 15,000 10.00 . . . .. . . 100.000 101.00 19,000 19,000 25 par 2.21. . . . . .. . .. 1,000,000 25.90 25,000 25,000

                         ?.365..          .

1.400,000 28.45 35,000 35.000 Series A Adjustable . . .. 1,200.000 - 30,000 30,000 series li Adjustable . 1,200,000 - 30.000 30,000

                                                                                           $210.000         $210,000 The accompanying notes and sununary of significant accounting policies are an integral part of this statement.

i l i l I I f I i u l

  !     NOTES T            THE FINANCIAL STATEMENTS (1) Property Owned with Other Utilities and investors t  . The Company owns, as a tenant in conunon with other utilities and those investors who are owner. participants in
various sale and leaseback transactions (lessors), certain generating units as listed below. Each owner owns an undivided share in the entire unit. Each owner has the right to a percentage of the generating capability of each unit
a. equal to its ownership share. Each utility owner is obligated to pay for only its respective share of the construction

[ and operating costs. Each lessee is obligated to pay for the related lessor's share of those costs. The Company's share [ of the operating expense of these generating units is included in the Income Statement. Property, plant and l equipment at December 31,1989 includes the following facilities owned by the Company as a tenant in common

     . with other utilities and lessors:

Owner. In~ Owner- ship Plant Construction serdce ship Mega. Power to work Accumu?ated Generating lin!t Date share watts source service in Progress Depreciation in servitt" (thousands of dollars) Davis-Desse . ... .. . 19?? 4862% 428 Nuclear s 585,234 s 39,891 s lo3,363 s Perry tinit 1 & Conunon facilities . ... 198? 19.01 238 Nu&ar 915.659 2,625 72.317 Deaver valley 1. rut 2 & Common racilities (Note 2) . . . . 198? 1.65 14 Nuclear 182.244 2,357 13,166 Comtrucuan suspended (Note 3(c)): Perry l! nit 2 . tincertam 19 91 240 Nuclear ,

                                                                                                                   -              345.754             -

81.683.137 5390.627 f l88.N6 (2) Utility Plant Sale and I.easeback Transactions As a result of sale and leaseback transactions over the terms of the leases. The amounts recorded cornpleted in 1987, the Company and Cleveland by the Company as rental expense for the Mansfield i Electric are co lessees of 18.26% (152 megawatts) of Plant leases were $44,556,000, $43,095,000 and Beaver Valley Unit 2 and 6.5% (51 megawatts), $12,600,000 in 1989,1988 and 1987, respectively. 1 45.9% (358 megawatts) and 44.38 % (355 Rental expense for the Beaver Valley Unit 2 lease

       . megawatts) of Units 1,2 and 3, respectively, of the                                 was $72,276,000, $71,810,000 and $18.300,000 in coal fired Mansfield Plant for terms of about 29M 1989,1988 and 1987, respectively. Of these rental years. The Company sold a substantial portion of its                                  expense amounts for Beaver Valley Unit 2,                     I undivided tenam-m common mterest in Beaver                                            $58,254,000 and $ 18,300,000 in 1988 and 1987,
       \, alley Unit 2 and essentiall all of its interests in                                respectively, were recorded in a deferred charge Units 2 and 3 of the Mansfie d llant. 'I,he Company.s                                 account pursuant to PUCO accounting orders. Such proceeds from the transactions totaltd                                                deferred amounts are being amortized to expense
       $ 1,113,100,000. Cleveland Electric also sold essentially all of its interests in the three units of the                            over the life of the lease beginning in 1989.

Mansfield Plant. The Company and Cleveland Electric are As co-lessee with Cleveland Electric. the responsible under the leases for paying all taxes, l- insurance premiums, operation and maintenance Company is also obligated for Cleveland Electric's lease payments. If Cleveland Electric is unable to costs and all other similar costs for their interests in make its' payments undet the Manslield Plant leases, the Units sold and leased back. The Company and the Company would be obligated to make such Cleveland Electric may incur additional costs in payments. No payments Lave been made on behalf connection with capital improvements to the Units. 1 of Cleveland Electric to date. The Company and Cleveland Electriq have options Future minimum lease payments under these to buy the interests back at the end of the leases for operating leases at December 31, 1989 are the fair market value at that time or to renew the summari7ed as follows: leases. Additional lease provisions provide other for purchase options along with conditions for ror the Cleveland mandatory termination of the leases (and possible gar comp.mv ricctric repurchase of the leasehold interests) for events of ohouunds or dollars) default. These events of default include 1990. s 106.000 s 63.000 noncompliance with several financial covenants i 1991. 10?,000 63 moo affecting the Company, Cleveland Electric and L 1992. !10,000 63 moo Centerior Energy contained in an agreement relating

     .1993              .                           11troo              63Soo               to a letter of credit issued in connection with the 1994,                                        i s t moo           63 moo              sale and leaseback of Beaver Valley Unit 2, as                 ;

Later years . 2.~o3.000 L64 2.ono amended in 1989. See Note 10(d). {' Tocat ruure Minm,um The Company is selling 150 megawatts of its tease Payments . 83.2 moon s t .9s' moo Beaver Valley Unit 2 leased capacity entitlement to Cleveland Electric. This sale commenced in Semiannual lease payments conform with the November 1988 and we anticipate that it will j payment schedole for each lease. continue at least through 1998. Revenues recorded Rental expense is accrued on a straight line basis for this transaction were $104,127,000 and l 13 l m i

r w I:

                    ~ $18,533,00d h 1989 and 1988, respectively. The             -of maintaining Perry Unit 2 while construction is
                    . future minimum lease payments associated with -             suspended.

g '

                    ! Beaver Valley Unit 2 aggregate $2,002,000,000,-

(d) Superfund Sites

                     .(3)' Construction and Contingencies                         The Comprehensive Environmental Response, n                                                                              Compensation and Wability Act of 1980 as amended -
,                      (C) Construction Program (Superfund) established programs addressing the
 !-                 - The estimated cost of the Company's construction            clean up of hazardous waste disposal sites.

E program for the 1990 1992 period is $250,000,000, emergency preparedness and other issues. Pursuant including AFUDC and excluding nuclear fuel, to Superfund, the Company has been notified of its P ' J Should more stringent environmental regulations be potential involvement in the clean up of three Ladopted,' particularly. In the area of acid rain hazardous waste sites. We believe that the ultimate - pollution control, future construction program costs outcome of these matters will be immaterial; P , . would increase substantially. h ' (4) Nuclear Operations and [ '(b) Proposed Acid Roln I.egislation Contingencies There are several bills being considered in the (a) Operating Nuclear Units United States Congress which would require

       ~
                    %ignificant reductions in the emission of sulfur              The Company's interests in nuclear units may be
   ~
     .                  dioxide and nitrogen oxides by fossil fueled electric     impacted by activities or events beyond the generating units. Centerior Energy's preliminary          Company s control. Operating nuclear generating canalysis indicates that compliance with these bills         units have experienced unplanned outages or could require additional capital expenditures in the      extensions of scheduled outages because of range of $900,000,000 to $1,200,000,000 by the            equipraent problems or new regulatory Company and Cleveland Electric and would result             requirements. A maior accident at a nuclear facility
                     'n i higher fuel and operation and maintenance               anywhere in the world could cause the Nuclear expenses. The resulting aggregate rate increases           Regulatory Commission to limit or prohibit the.
                     ' could be in the range of 9 to 15% by the year 2000,        operation, construction or licensing of any nuclear One bill contains an additional proposal to           unit. If one of the Company'ri nuclear units is taken regulate certain types of toxic pollutants. This          out of ser ice nor an extended period of time for proposal could increase the cost of compliance            any reason, including an accident at such unit or any
significantly over the estimates stated in the other nuclear f acility, we cannot predict whether
               '        preceding paragraph.                                       regulatory authorities would impose unfavorable Under the proposed bills, capital expenditures        rate treatment such as taking the Company's affected '

and late increases would be incurred predominantly unit out of rate base. in the 1994 2000 period. The financial impact on 1 the Company is expected to be less than on (b) Nuclear Insurance Cleveland Electric, We cannot predict the outcome of the legislative process or be certain that The Price Anderson Act limits the liability of the Centerior Energy s compliance cost estimates will owners of a nulem' power plant to the amount not cliange significantly. We believe that Ohio law ovided by private insurance and an industry

                      ' would permit the recovery of compliance costs from         assessment plan, in the event of a nuclear incident at customers in rates.                                        any unit in the United States result lng in losses in excess of the level of private insurance .(curreinly 1200,000,000), the Company's maximum potential
                       -(c) Perry Unit 2                                           assessment under that plan (assuming the other
                      = Perry Unit 2, including its share of the common            CAPCO companies were to contribute their facilities, h about 58% complete, Construction of         proportionate share of any assessment) would be Perry Unit 2 was suspended in 1985 by the CAPCO            $58,503,000 (plus any inflation adjustment) per companies pending future consideration of sevetal         incident, but is limited to $8,844,000 per year for alternatives which include resumption' of full            each nuclear incident, construction with a revised estimated cost and                The CAPCO companies have insurance coverage.

cotapletion date, mothballing or cancellation. None for damage to property at Davis-Besse, Perry and cf these ahernatives may be implemented without Beaver Valley (including leased fuel and clean up

                       .the approval of each of the CAPCO companies.               costs). Coverage amounted to $2,035,000,000 for if Perry Unit 2 were to be canceled, then the          each site as of,lanuary 1,1990. Damage to property Company's net investment in Perry Unit 2 (less any         could exceed the insurance coverage by a tax saving) would have to be written off. We               substantial amount. If it does, the Company's share estimate that such a write off, based on the               of such amount could have a material adverse effect   -

Company's investment in this Unit as of December on the Company's financial condition and results of i

             .           31,1989, would have been about $172,000,000, aften         operations.
taxes. See Notes 10(b), (c) and (d) for a The Ccmpany also has insurance coverage for the
discussion of other potential consequences of such incremental cost of any replacement power a write off. purchased (over the costs which would have been Duquesne has advised the Pennsylvania Public incurred had the units been operating) after the Utilities Commission that it will not agree to occurrence of certain types of accidents at the resumption of construction of Perry Unit 2. Compants nuclear units. The amounts of the Duquesne is continuing to pay for its 13.74% share coverage are 10n% of the estimated incremental cost 14

hfIkf c -

                         .m y , .gg;        <
                                                                                                                                                        .L-Mper              week during'the 52 seek per!od starting 21                         cases. The orders endorsed agreements _which .                              ,
weeks after an accidenti67% of such estimate per . reached beyond the issues in such cases andl o sweek for the next.52 weeks and 33% of such : .~ resolved, with respect to the participants, other p h estimate per week for the next 52 weeks. The cost ' issues which had been contestedm All pending" K and f' duration : ofi replacement - power a could - L prudence investigations before the PUCO'and subst, ntially exceed the insurance coverage. pending litigation before the Ohio Supreme Court brought by the parties to the settlement involving i
                     }6LNuclear Fuel               1
                                                                                          .the Company's nuclear investment and other ratee
                 'The Coinpany lias inventories for nuclear fuel which                     matters have been terminated.
            ' tshould provide an adequate supply into the mid.                                .The orders provided for three annual rate                       '
                     .1990s. Substantial additional nuclear fuel must be                   Increases for the Company and Cleveland Electric of ?
                 ? obtained to supply fuel for the remaining useful .                      approximately pE 7.% and 6% effective with bills :
 ! > t lives of Davis Besse, Perry Unit 1 and Beaver Valley                                rendered on and after February 1,1989,1990 and
  • N Unit F 2. More nuclear fuel would be required if Perry 1991, respectively. The revenues associated with the .

c? L nit U 2 were completed. . CompanyY increases are as followsi .

                        'In 1989, existing nuclear fuel finimeing
                                                                                                                                       ^M7 arrangenents 'for the Company and Cleveland g[F .             : Electric were refmanced through leases from a                                                                       - gg m

j y _ special purpose cuiporation. 'Ihe maximum amount -

um k
                 ' of finaneir,g currently available under these lease L'                                                                                        """""""i"'"""""""""a                           $ 50p l 'u arrangements fintermediate termis            $609,000,000 notes               ($309,000,000 and $300,000,000
 !: # bank credit arrangements), although financing in an from         from$;'[",;',,"Z;;,,;,,',,[:',[                          .N
                                                                                                                                          , g ", ~-         ,

b - amount .up to~ $900,000,000 is permitted The P J Company and Cleveland Electric severally lease . K ,f heir t respe<:tive portions of the nuclear fuel and are These revenue increases are net increases after p L obligated 'in pay for the fuel as it is burned in a including adjustments required under the mirror s a ' reactor,' The lease rates are based on various CWIP law and the refunding of revenues collected t , Hintermediate-term . notefrates, bank rates and by the Company in 1985 through 1987 pursuant to a : 4

commercial paper ratescThe intermediate term February 1985 rate order,-- The - refunding _

notes mature in the period 19931o97, lleginning in - iequirement had no impact on net income because .

.. ' 01991, the bank credit arrangements ate cancelable                                    reserves had been provided in those years. All-p on two years notice by the lenders. As of December                                        amounts related to the refunding requirement will-i                     31L 1989; y $250,000,000 of nuclear fuel was                          be refunded to customers by November 1991.

L  : financed for the Company. This includes nuclear The orders provided for the permanent exclusion C J fuel in the Davis-liesse, Perry Unit I and Deaver from rate base of a portion of the Company's and V Vallry Unit 2 reactors with remaining payments of - . Cleveland Electric's combined investment in Perry-Unit 1 and lleaver Valley Unit 2, The exclusion

                  - $37,000.000c $36,000,000- and $ 17,000,000, F                J respectively, as of December 31,1989.                 _

resulted in .a write off by the companyJ of - t oThe Company 4 nuclear fuel amounts financed $242,000,000 ($160,000,000 after tax) in 1988. U ' tind capitalized included interest charges incurred since the onters effectivelyJ eliminated the C [by the lessors amounting to $19,000,000 in 1989, possibility of t!'e Company and Cleveland Electric-m '

                     $18,000,000 in 1988 imd $ 17,000,000 in 1987. The .                   recovering their remaining investment in~ four:

y estimated future lease amortization payments based - nuclear construction projects canceled in 1980 and Lon projected: burn' are $44,000.000 - in 1990, = recovering certain deferred expenses for Davls-

                  ' $50,000,000 e in > 1991, $51,000,000 in 1992,                          Ilesse, additior.al writ offs totaling $35,000,000 g

! ' L $46,000,000'hi 1993 and $51,000,000 in 1994..As ($21,000,0001.fter tax) were recorded by the -

            . Hthese payments are made, the amount of credit                               Company in 1988, bringing the total write.off of -

available to the lessor becomes available to finance nuclear costs emanating from the Company's order

                 . additional nuclear fuel, assuming the lessor's             .            to $277,000,000 -($181,000,000 after tax),

T +3  !!ntermediate ternt notes and bank credit _ The phase 4n plan ordered by the PUCO was.

            * ' arrangements continue to be outstanding.                                   designed so that the 9%,7% and 6% rate increases, .

compounded by sales growth, will be suilicient to-expenses and provide a fair

                 ' (6)' Regulatory Motters                                                 rec rate ver  an opuatingle of return   on t      Company 3 unrecovered Lin' 1987, the PUCO granted increases in electric rates                   investments in Perry Unit 1 and' Beaver Valley Unit 2 i{       >

y to the Company as follows: for ten years beginning January 1,1989; in the early M Annuaumt years of the f.lan, the operating expenses and 12me Amount return requirements exceed the re. venue increases, onnwn$ w Therefore, the amounts of onerating expenses and MW return on investment not currently recovered are May tvsi, .., , , . sao deferred or capitalized as carrying charges. The mereneer 19c , ,. uS PUCO authorized the Company to record a full net-of. tax carrying. charge of 9.2% on deferred rate-On January 31,1989,'the PUCO issued orders for based investment commencing January l',1989. O fil Company and Cleveland Electric which adopted - Since the unrecovered investments will decline over M Ja settlement reached between the companies and the period of the phasedn plans because of- [ jthe majority of the intervenors in then pending rate depreciation and federal income tax benefits that - Q  : 15 = *. . ,;. _ 1

ff , <

                                                                                                     .    (
 $@ ? resuN frhm the use of accelerathd 'ax                       t depreciation,E     >

savings are maximized. Until the managem:nt audit -

                                                                                                                                                                   -l g i the amount of revenues required to provide a fair :                              is completed in the spring of 1990,;an annual r                      J return also declines. Beginning in the sixth year, the               savings target range has been set for Centerior
% Kreventic levels authorized ptorsuant to the phase in                                     . Erergy. of $40,000,000 to $100,000,000 from the -
  ;P                                                                                           1988 normalized level of other openition and a @^qcurrent                    planoperating were designed           toreturn expenses, a fair  be sufficient'to on the'        recover
                                                                                           ' maintenance expense (excluding lease expense W                        unrecovered investment 3 and amortization of                  . arising from the sale and leaseback of assets)~of' kleferred operating : expenses 1 and : capitallred                      $576300,000, as determined by an audit advisory-                    q carrying charges recorded during the earlier years of.-           panel and approved by the PUCO. Also,' in t "

@ f the plan / A.ll phase in deferrals after December 31, connection with the orders, a nuclear management :

  • ,'1988 relating to these two Units will be recovered expert completed a cost reduction study.at Daviss hv; December 31i1098 Pursuant to such phase in 4

Besse. The study concluded that Centerior Energy , j '

                       ) plan, the Company deferred operating expenses of -                   could reduce annual operation and rnalntenance 4
$32,535,000 and debt and equity c' arrying costs of expenses -at E Davis Besse - by approximately
                        ; $30,617,000 and f $1,691,000, respectivelyiin 1989,                 f 33,000,000 in 1991. The management audit will-O                            - Under the orders, the Company and Cleveland                     consider the: Davis Desse study tesulttin the J
  , y 7 Electric may not seek any further permanent rate-                                     determination of overall savings,
                        ' increases to be efTective before February 1,'1992
                    ,                                                                              The orders provide that 50% of the net after tax Junless Centerior Energy's earnings available for-                    savings in 1989 and 1990 resu! ting from the cost :

common equity, prior to extraordinary items, are reduction effort or identified by the management . s

                        < forecasted either to fall below $210,000,000 over                   audit and approved by the l'UCo are to be used toL E( ,                         four consecutive quarters or 'to - fall below                     reduce cost deferrals recorded under the phase int f                         j $435,000,000 over eight consecutive quarters.                      plans for the Company:and Cleveland Electric.

k During this period, Centerior Energy's earnings Dased on 1989 results, no change was made in the

                         .available for common equity, prior to extraordinary                 cost deferrals for 1989. Fifty percent of the . net:

^p. items and excluding changes in expenses relating annualized savings -achieved or ~ identified and L to any future sale and leasenack of assets, are limited approved for a period to be determined will be used F to the following amounts for any four consecutive to reduce the 6% rate-increase scheduled for.- P quarters ending on or before the date indicated: February 1,1991. As an incentive to. achieve the ? savings, the remaining 50% of savings in each of the - L -

                                      $ 275,000,000          March 31,1990                    periods will:be retained by the Company and b                                      $295,000,000 '       - March 31,1991                    Cleveland Electric, subject to the earnings cap!

k $330,000,000 - December 31,1991 described in this. Note. Net savings would be - k .. , adjusted for changes in capital and operating costs ', p arising from certain events, such as changes in tax t E ' , 'exceede'd, an adjustment would be made to theif any lawsofor the earnings laws. environmental capsThere described were noabose such were E- . amount of the deferrals recorded under the phase in adjustments for 1989. If the Company and Clevelatid y F L plan J to . prevent any excess earnings. The Electric do not achieve at least one half of the L t adjustment; wor?d ' be applied proportionately savings identified by the management audit and L r

                       ' between the Company and Cleveland Electric based                     approved by the PUCO, earnings would be reduced:
                       , on the earned returns of the two companies,                          by the amount of the shortfall, subjett to the ability.         '
 .l ' '                          The orders provide that any permanent r,tte              - of the Company and Cleveland Electr!c to request .
lucrease sought to be effective during the period .aoditional rate relief if Centerior Energv's forecasted ,

N - February 1,1992 40 February 1,1994 may only be earnings fall below the minimum levels discussed based upon costs associated with act new -in this Note. . ..

Investment placed in service after Febru;ay 29, The orders also provide for possible deceases or '

1988 and necessary changes in operation and increases in the cost deferrals if actual revenues are : 5; maintenance . expenses (other than fuelLand higher or lower, respectively, as compared to n'

                        - purchased power) Jand other necessary cost'                     - projected amounts in the orders. No change was -

L

                       ? increases . from the levels identified in the                        made in the cost deferrals for 1989<.             .

management audit discussed in the next paragraph. The orders set nuclear performance standards < EAlso, if- Centerior ; Energy's return on average through 1998 Beginning in 1991, the Company ~ ' b' . common stock equity is behm the benchmark rate could be required to refund incremental-L Lestablished quarterly by FERC for rate cases subject replacement power costs if the standards are not g to its. Jurisdiction, the Company and Cleveland + meti Fossil fueled power plant performance may not . Electric could seek rate increases to improve the be raised as an issue in any rate proceeding before return under certain specified conditions. February 1994 as long as' the Company. and n " 5The Company, Cleveland Electric and the Service Cleveland Electric achieve a system-wide availability: _ Company are undergoing a management audit to factor of at least 65% annually. This standard was t 4 assure that operation and maintenance expense exceeded in 1989. f 4

                              ?

Rf ' ' '

(7) Federalincome Tax l'ederal income tax, computed by multiplying income before taxes by the statutory rates, is reconciled to the amount of federal income tax recorded on the books as follows: l'or the years ended December 31, 19H9 19HN 19H7 (thousands af dollant) limik Income (l.oss) before lederal Income Tax . f 1 % ) .526 8 ' 168.2'? ) 8 14%.192 13 on book income (L<m) at statutory Rate. I 5 t,519 I (57.2141 8 48.004 increaw (Decrease) in Tux-Af t!DC and Carrying Charges . . , (76.464) Ac(clerated Depreciation . . S,903 529 1,666 Organization Costs . . . . . , . , . . , , 2,2?4 _ Tuxes. Other Than lederA incorne Taxes . (107) 4,292 3,015 Other items . . 1.443 (2.'06) (6,200) lotal f ederal Incorne Tax 1.xpenw (CredsO. 8 %H.H48 am=no=:sr 8 (%2.k2%) 8 (19.979) l'ederal income tax expense is recorded in the Income Staternent as follows: ( f or the years ended December 31, ( 19H9 19HH 19H7 (thousarKb el dollars) Operating 1.xpenses: Current lax Provision . . . . _.... f(ll.95H) 8 (3,132) f 71,050 Changes in Accumulated Deferred l'ederal income lux-Accelerated Deprect.Hion and Amorti7 anon. H,?64 1,723 46,H15 Ahernauve Minimum las Credit Othet. . 21.291 - - sale and Leaschack Tramacdons and Amortirauon . , 4%$ 14,763 ( 179,5 % $) Property lax f.xpense . .

                                                                                            -                         (5,058)               5.454 Deferred CWIP Retenues .                                                      I1,*26                         (4,3311              (7,6HI )

Unbilled kevenues . . , - - (1,184) l Deferred l'uci Cmts . (1,229) 4.698 (6.441) system Development Cmts. 207 3.639 1,355 Davk liene Repla(ement l'ower. 9.0%$ F,3'5 - l'ederal Income lax Return Adjustments . . (2??) 760 kcatquired Dehl Cmts (3?H) 4.646 - Deferred Operaung 1:xpemes . ( 1,26H ) 4,039 10,356 Net Operaung i.oss Curryforward . .

                                                                                            -                         ( 2,56 )               --

Other items .... 2.39H (4.223) (1,346) Imesiment Tax Credus - Net 1,722 6320 H3.164 lotal Charged to Operaung I:xpemes . 37.2H5 29.242 22.747 Wono}torating Ilttome: Cunent Tax Provkion . . . . , ... (10.129) - (3 L209) Changes m Accumulated Deferred Iederal imome Tao Davb Hene Replacement Power , ,

                                                                                           -                           2,709             (10,114) 4 the off of Nuclear Costs .                                            .         -

19?,277) - Al'UDC and Carrymg Charges . . . 32,930 46,%43 - Net Operating 1.0% Carrytorward . - ( 36.H31 ) - Odler llerHs ( ) ,2 3 H ) (1 AHM) (1,403) lotal I.xpense (Credn) to Nonoperaur.g luceme s' t ,563 ( H6.244 ) (4 2.?26) j' l'eder.d Income lax Induded in Cumulathe 1:ticet of an Accounting Change for Unbilled Revenues . - 4,1 ?? -- [ I Total l'ederal Income Tat t xpense (Cred1). I %H.H4H $ (52.H2%) $ f 19.979) l i The Company joins in the bling of a consolidated federal income tax return with its affiliated companies. The ! method of tax ahocation approximates a separate return result for each company. l As discu%ed in the Summary of significant Accounting Policies, a change was made in 1988 in the method of accounting for income taxes. l'or tax purposes, net operathig loss (NOI.) carryforwards of approximately $187,019,000 and $21d26,000 were generated in 1988 and 1989, respectively, and are available to reduce future taxable income. The NOL carr) forwards will expire in 2003 and 2004. l'uture utilization of these tax NOL carr>1orwards would result in recording the related deferred taxes. The 34% tax effect of the NOL generated in 1989 ( $7,285,000) is included in the above table as a reduction to deferred federal income tax relating to accelerated depreciation and amortization. The 34%  ! tas effect of the NOL generated in 1988 ( $63,586.000) is included in the above table as reductions to deferred l [ federal income tax relating to accelerated depreciation and amortization ( $29,210,000') and to other deferred federal income tax charged to operating expenses ( $2,545,000) and to nonoperating income ($36,831,000). Approximately $23,038,000 of unused general business tax credits are available to reduce future tax obligations. The unused cledits expire in varying amounts in 2001 through 2004. Utillration of these' unused credits is limited by provisions of the Tax Iteform Act of 1986 and the level of future taxable income to which such credits may be i applied. l The Tax Iteform Act of 1986 provides for an AMT credit to be used to reduce the regular tax to the AMT level i, should the regular tax exceed the AMT. An AMT credit oliset for the consolidated tax return of $21,291,000 was generated in 1989, 17

p-t j ) Retirement income Plon ond Other The cc:t of post retirement medic 1 benefits l Post Retirement Benefits amounted to 81,500,000 in 1987, t 1,600,000 in 1988 a $2,l M.W O in N k We sponsor a noncontributing pension plan which covers all employee groups. The amount of retirement benefits generally depends upon the i_ length of service. Under certain circumstances, (9) Guarantees benefits can begin as early as age 55. The plat also Under a long term coal purchase arrangement, the provides certain death, medical and disability Compacy has guaranteed the loan and lease

  ,     benefits. The Company's funding policy is to be in                          obligadons of a mining company. This arrangement                      ,

l compliance with the Employee Retirement income also requires payments to the mining company for '

  !     Securhy Act guidelines.                                                     any actual out of pocket idle mine expenses (as l         .In 1987, the Company offered a Voluntary Early                         advance pryments for coal) when the mines are idle Retirement Opportunity Program (VEROP) which                                for reasons beyond the control of the mining j    cost $6,300,000. Pension and early retirement                               company. At December 31,1989, the principal program costs for the years 1987 through 1989                               amount of the mining company's loan and lease were $5,700,000, $2,100,000 and 11,100,000,                                 obligations guaranteed by the Company was 13pectivtly. Net pension and early retirement costs                         $ 24,000,000, for the three years were comprised of the following                               The Company has also guaranteed the debt components:                                                                 obligation of an equipment supplier. At December 1989        1988     1987     31, 1989, the principal amount of the debt onillions of dollars)        obligation guaranteed by the Company was Pension Costs-                                                              $ 9,00(),000.

Service rost for benefits carned during the period . . I 4 3 4 34 Iga i 10 9 8 (10) Capitallrollon Actual return on plan assets . . (17) (un (H) (O) Capitol Stock Transactions Net amortizauon and deferral . . 4 s' (3) Net pension cost . . ,, 1 - 1 Preferred nock shares sold and retired during the Yi rop Cost . . 2 4 three years ended December 31.1989 are listed in Net pension and VI: ROP costs. I 1 $ 2 is the following table. ( The following table presents a reconciliation of

                                                                                                                     *           ""          J9"?

ohousands of shares) the funded t.tatus of the plari at December 31,1989 3Dd 1988- Cumulathr Preferred stock December 31. Subk-(t to Mandatory 19H9 198H Redemption: tmilhons of sales

                                                                                                                      ~            '

Actuarial present Value of beneht p . CZ"Ls Nontested benefits .

                                 . . .                   , 92 7
                                                                         ,u 9
                                                                                        ' = ""' "g;                        g g g 13 2L              -            -

12Ih Accumulated benefit obligatior 99 91 1245. _ _ (190) 1:flect of future compensation levels 33 25 la No. - - (300)

             'Iotal projected beneht obligation            132            116 25 par 34           .       -           -

(l.200) Plan assets at fair market value p 152 372. - - t I A00) surplus of n% cts over projected Net Change. (22) (22) (1.293) bt.,cfit obligation . . (42) (36) t'nrecognlyed net gain due to Cumulauve Preferred stock Not i variance between assumptions and subiect to Mandatory experience . 35 20 Redemption Unrecognited nrior service cost . (5) 2 Retirements

       'Iransition asset at ,lanuary 1,198?                                             $2s par 5(28.                 -            -

(NOG) being amorti7ed over 19 ) carn J 24 3.4? - (l.200) - Net accrued pension cost included Change. _ (gn _ (800) in other deferred credits on the nalance sheet.  ; 11 ym Changes in premium on capital stock are Assumptions used for the actuarial calculations summarized as follows: for 1988 and 1989 summarized in the table are: settlement (discount) rate - 8% long term rate of """"'"" "'" annual compensation increase - 5% and long term nalan(e at neginning of Year hM) OM2 k N y o p gg, g* rate of return on plan assets - 8% Premium, Net of I3 pense Pla!) assets consist primarily of inYestments in I"0"fd SIM - (1484 (17) Columon stock. bonds, guaranteed investment contracts, cash equivalent securities and real estate, Dalance at f nd of Year ,N q ng2 p g),og2 pgy - g 18

y

       ) Equity Distribut!on Restrictions                           (d) kng Term Debt and Other Borrowing December 31,19N), retained earning were                              Arrangements
   $ 99,965,000. Substantially all of the retained                 1.ong term debt, less current maturities, was as earnings were available for the declaration of                  followy.:

dividends on the Company's preter;cd and common Anual share . All of the Company's common nates are or Average Dr"'"he' R. -_ Y'"' d M""""Y 3""'"'"'"' " " held by Centerior Energy A write off of the - Company's investment in Perry Unit 2, depending Ohousands of dollm) upon the magnitude and timing of such a wTite off, l'irst mortgage bonds:

 - could reduce retained earnings sufficiently to                  1993 *      **                 '     85
  • I D'# I D'"

impair the Company's ability to declare dividends. See Note 3(c).

                                                                          ,j949 2000 2004       .
                                                                                     ,' '      ,,       If(

8.22 2kB50 96,053 [2 96,053 A loan or advance by the Company to any of its 2005 2009 . , , , 9.64 101,900 101,900 nonutility affiliates requires PUCO authorization 2022-2023 . . ... 7.93 1 0 .800_ 91,700 unless the loan or advance is made in connection 644,603 625 H03 with transactions in the ordinary course of the Term bank loans .

                                                                                                         -             -         19,500 Company's public utilities business operations in               Notes due 1991 1997                  11.00       261,715    354,006 which the Company acts on behalf of the affiliate,              Debentures due 1997                  11.25       125,000    125,000 Pollution (ontrol notes due 199t-2015                10.82       166A80     167,400 (c) Cumulative Preferred and Preference                        other - net .            ..            __

(s2n ur,s > Stock Total tong Term Debt s1,197.277 51,29t.444 Amounts to be paid for preferred stock which must ,.. be redeemed during the next five years are

   $ 2,000,000 in each year 1990 through 1992 and                       tong term debt matures during the next five years
   $12,n00,000 in both 1993 and 1994,                             as follows: 1113,000,000 in both 1990 and 1991, The annual mandatory redemption provisions are              i119,000,000 in 1992, f 44,000,000 in 1993 and as follows.                                                      f 19,000,000 in 1994i.

Annual mndnon. The Corupany's mortgage constitutes a direct first nedenipoon trousns lien on substantially all property owned and shares negin Pnce franchises held by the Company. Excluded from the in ne mng Per liens, among other things, are cash, securities, Redeemed t r, share

                                                                                         .d fuel, supplies and liutomotive Preferred                                                       N         *
    $ 100 par $ 11.00.         ,      5,000      1979   1100 The issuance of additional first mortgage bonds p rs                in,osn      ms       too     by the Company is limited by provisions in its 2s par 2m.           .       oo,noo        1993      25     mortgage. Under the more restrictive of these provisions (currently, the earnings coverage test).

The annualized cumulative preferred dividend the Company would have been permined to issue requirement as of December 31, 19H9 is approximately $158,000,000 of nonrefunding bonds

   $ 2 5,000,000,                                                 based upon propery additions at December 31, The preferred dividend rates on the Company's               1989. The Company also would have been Series A and H iluctuate based on prevailing interest           permitted to issue approximately $86,000,000 cf rates, with the dividend rates for these issues                 refunding bonds based upon retired bonds at averaging 9.06% and 9.9 PA,, respectively, in 1989.             December 31, 1989, if Perry Unit 2 had been Under its articles of incorporation, the Company           canceled and written off as of December 31,1989,                        j cannot issee preferred stock unless certain earnings            the amount of nonrefunding and refunding bonds coverage requirements are met. Based on carnings                which could have been issued by the Company for the 12 months ended December 31,1989, the                   would not have changed.

Company could not issue additional preferred Certain unsecured loan agreements of the stock, A write <off by the Company of its investment Company contain covenants limiting to 65% of ptal in Perry Unit 2 could adversely affect its ability to capitalization (as defined) the total of its short term issue additional preferred stock in the future. See debt in excess of $150,000,000 and funded debt, Note 3(c). The issuance of additional preferred limiting secured financing other than through first stock in the future will depend on earnings for any mortgage bonds and certain other transactions and 12 consecutive months of the 15 months preceding requiring the Company to maintain earnings (as the date of issuance, the interest on all long-term defined) of at least 1,5 times interest on its first debt outstanding and the dividends on all preferred mortgage bonds. The earnings coverage ratio applies j stock issues outstanding. to $3H,500,000 of unsecured ;oans and was 2.8 at There are no restrictions on the Company's December 31,.1989. il aullity to issue preference sto(k. An agreetnent relating to a letter of credit issued With respect to dividend and liquidation rights, in connection with the sale and leaseback of Beaver the Comp;my's preferred stock is prior to its Valley Unit 2 (as amended in 1989) contains preference stock ami common stock, and its several financial covenants affecting the Company, preference stock is prior to its common stock. Cleveland Electric and Centerior Energy. Among 19

j.i' f 1 . A , . Q .l l ' ly these : are ; coverage covenants which , require: Most bono 3ving arrangements utider the short; ,

%o
' % y C!cveland                     Electricexpense earnings to interest        and Centerior    Energy ratios above specificto term bank lines of ctedit require a fee ranging from maintain0.25% to 0.375% per year to be paid on any unused
.m                levels. 'This agreeinent ~a lso contains. certain                       portion of the 1ines of credit. For those banks; m              CCpitalization covenants which require the Company                   i without fee requirements, the average daily cash.

W 'and Cleveland Electric to maintain common stock balance in the bank accounts satisfied informal - i equity above specific levels and require Centerior - compensating balance arrangements.

                 ; Energy to maintain the ratlo of common stock equity.                       At December 31,1989, the Company had no lto total capitalization and the ratio of total equity to --             commercial paper outstanding; If commercial paper J total'capitalization above specific percentages. The                  - were outstanding, it would be backed by at least an LCompany, Cleveland Electric and Centerior Energy                         equal amount of unused bank lines of credit.
s.  ; are in compliance with these covenant provisions.

O  ; Also,-we believe the Company, Cleveland Electric (12) Change in Accounting for Unbilled Jand Centerior Energy will continue to meet the ggygnggg

                 ; capitalization covenants in the event of a write off of the - ' Company's and Cleveland Electric's                          in January 1988, the Company adopted a change in -

,bm ' investments in Perry Unit 2, barring unforeseen accounting for revenues in order to record unbilled

                                                                                         . revenues ; as discussed In the Summary of;
                 - circumstances. See Note 3(c).

Significant Accounting Policies, The adoption of this accounting' method ($1) Shortyerm Borrowing Arrangement's

                        ~

increased 1988 net income, before the cumulative' j

            ' The. Company had $73,050,000 of bank' lines of                              effect on periods prior to January 1,1988; by, credit'unangements at December 31,1989. There '                     ' $218,000 (net of $112,000 of income taxes). The'
                  ;were no boanwings under these bank credit                             ,cumulatice effect of the change on the periods prior f arrangements at December 31,1989,                                       to January 1,1988 was $6,279,000. (net of:

Short term borrowing capacity authorized by the . $4,177,000 of income taxes) imd has been included : PUCO is $150,000,0Wc .The CompanyL and in 1988 net income. . Cleveland Electric have beta authorized by the If this change in accounting method were PUCO to borrow from each other on a short term applied retroactively,1987 pro forma net income basis. - would have decreased by $1,005,000;

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           .o (heuerterly flesults of Operations'(Unoudited):
   ; JThe following is a' tabulation of the unaudited quarterly results of operations for the two years ended December 31,                                                                                     -
                  .;1989J                                                                                                                                               . .

1 a < , Quarters Ended f;g, - March 31. June & _ sept. 30. Dec.31, j

                                                                                                                                                       -(thousands of dollan) ~                             -t 1.999 c .                                                                                                                                               l t-
                                                                                                                                                                                                             ~l
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        .,                 ' Operating Revenue _s . . . . . . .1. . . . . . . . . . . . . . . . . . . . . . . . . $ 201,144.,                      . $203,436         $219,762 ' : $ 202,461'              'i-
                             . Ope rat i n g I n com e . . . . . . . . . . . . . . . . . . . . . . . . '. . .' . . . . . . . . .      32,041-          37,149               40,532 ~     32,595'
           ,4 Net i ncom e . . . . . . '. . . . . . . . . . . . . . . o . . '. . . . . . . . . . . . . . . . .       24,280           30.284               34,$01'        3,613 Earnings (1,oss) Available for Common Stock . . . . . . . . . . .                                      17,857           23,882            -28,176 -      l(2,627)               -l

[ (1,9N8 ' . .

b. , - Operating Reven ues -. ., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ' $156,689 L . $141.824
                                                                                                                                                                      $170,102       $ 159,382 -            ..
                            ' Operating income . . . . . . . . . . . . . . . . . . . . . i . . . . . . . . . . . ,
                                                                       .                                                              17,000 ~         16,481               17,655         1,217:          (j
                             . Cumulative Effect of an Accounting Change (Note 12) ..                                                  6,279              -:                     J        ' -
Net income ( Loss) . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

26,803 16,327 19,764- = (178,346) .;

13,295

( Earnings (( Loss) Available for Common Stock . . . . . . . . . . . 19,150 9,922 .(184,802)1 k I i:; , a g  ; b, ' ,* 'f t 9 l + a

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FINANCIAL AND STATISTICAL REVIEW Operating Revenues (thousands of dollars)

                                                                                                                                         $ team         fotol fotol                            Total         Hooting      operating Yeor                   kos60ential  Commercial         hdJstho!         other          Retoll       Wholeno+e          IlecthC          & Got       Devenues 1989...             .   $215 932     $463 991          $226 680       $99 451       $706 054        $120 749          $826 803         $-           $826 803 1988..                    200 946      142 696          199 521         34 961       578 094            49 903         627 907            -

627 997 1087. .. . 200 877 142 385 219 008 27 646 $90 006 45 034 605 037 - 605 037 1986.... ... 189 292 133 841 214 274 23 886 541 293 11 189 572 482 - 572 482 1985. 184 687 120 161 243 895 26 284 554 027 45 656 569 683 5 761 575 444 1979... . 113 464 72 354 128 934 25 119 339 86B 1B 830 358 707 6 414 365121 Operating Expenses (thousands of dollars) other Phose-in & Fuel & Operation Depreciation fores Pre-phose-in f ederot total Purchased & & Other Thon Deterres. hcomo Operating Year Power Maintenance Amortuotion Fil Net tones Expenses 1989. . $133 400 $372 530 $87 639 $72123 $(18 491) $37 285 $684 486 1988. 116 461 358 823 75 093 80 138 (83 843) 29 242 575 644  ; 1987. . . 140 176 223 307 65 603 59 658 (39 797) 22 747 471 594 1986. . 158 763 167 319 37 832 51 398 - 44 450 456 462 1985. . 158 990 141 608 44 338 47 772 -- 52 873 445581 1979. 146 869 65 828 29 117 29 760 -- 25 139 296 713 income (Loss) (thousands of dollars) Federal Other income income income & tones- Before Operating MUDC- Deductions, Corrying Crest interest Voor income (qJty Not Cho ges (Expense) Charges 1989. . .. $142 317 $ 8 568 $ 20 361 $ 82 308 $(21563) $231991 1988.. . 52 353 5452 (246 722)(a) 129 6?2 86 244 26.959 1987. .. . 133 443 122 438 (16 904) 44 989 42 726 296 392 1986. . 196 020 129 578 (1 627) -- 52 029 296 000 1985. 129 863 105 094 10 669 - 38 167 283 793 j 1979. 68 408 23 512 8251 -- 1017 101 188 Income (Loss) (thousands of dollars) Income (Loss) Cumulative l Before EPect of on t omings l Cumulative Accountng (Lost) }

                                                     ,    IWect of on              Change                    Net              Preferred           Avollobie      i Dobt       AFUDC-              Accounting             for Unbilled              income               $tock           for Common      ;

Yeor interest Debt Change Revenues (Loss) Divroends Stock ' 1989, $144 792 $ ($ 479) $ 92 678 $- $ 92 678 $25 390 $ 67 288 _j l 1988. 150 523 6 279 (1 833) (121 731) (115 452) 26483 (142 435) 1987. , 185 493 (54 272) 165 171 - 165 171 42 749 122 422 1986. . . 474 397 (55 314) 176 917 -- 176 917 45 243 131 674 1985. . 155 025 (44 745) 173 513 - 173 513 41 362 132 151 1979. 52 584 (9 991) 58 595 - 58 595 13 894 44 701 f (a) includes write off of nuclear co*,ts in the amount of $2 6.9%000 in 19M.

                                                                            =                                                                                   t 2

I' f THE TOLEDO EDISON COMPANY l- Electric Solos (millions of KWH) Electric Customers (year end) Posidentlol Usogo Averogo Averope Averope Price Revenue industrici rWH Per Per Per Yeor Resioentici CommerCiol IOCyltflol Whowiso;e Otner total Reocentio! Commercio! & Other fotot Customer KWH Customer 1989 a.. 2 017 1622 3 740 i 175 495 9 049 253 234 26 803 4 434 283 471 7 989 10.750 $855.29 L 1988 . . . . 2 068 1 579 3 780 938 474 8 839 251 500 25526 4 102 289 218 '8 264 9.72 802.87

     ~1987..                 i977            i $32      3 589        344 464 7 906 249 344                  25 170       4 085 278 $99 7 969                   10.46                 809.66 L.- 1986. .                 i 941           1 495       3 /82       242 449 7 609 247 256                  24 655       4 004 275945 7 881                     9.75                 768.43 F     1985.. . i 901
                ,                            1436       3 429        330 451 7 547 245 485                  24 261       3 942 273 6B8 7 770                    9.72                 765.00 1979.... i934                         1 256      5 $$9        559 401 7 709 238 353                  23 636       3 695 265 6B4 8 166                    5.87                 479.08 p

Loo (f (MW k %) Energy (millions of KWH) Fuel l Operobio o1 Peok Conocity Lood Company Generated Purchased Fuel Cost [ Year of Peak (b) Lood A4argin factor FosWI Nuclear 10101 Power Toiol Per kWH KWH

     -1989...          .              1 599        i 526         4.6%         65.2% 5206            5 552      10 758       (1 175)          9 583         1.42C                    10 293 1988...         ..             1 497        1614        (7.8)          62.8      5 820       3 325       9 145           385          0 $30         4.59                     10 474 1987. ...                      i698         148a         12.6         64 9       5916        3 218       9 134          (647)         8 487         4 45                     10 196 1986.. .            ,          1324         1423        (7.5)          64.8     o462             12      6 474         1689           8 163         1.82                      9 860-4985. . .                      133B         i374        (2.7)         66 8      5744           952       6 696         4402           8 098         1.90                     10 124 1979.. ....                    i825         4 395       23 6           66 8     5349         i 535       6 884         4348           8 232         1.33                     10 262 investment (thousands of dollars)

Construchon Wo'k in Totol Utllity Accumulated Pr gress Nuclear Property. Utility Plant in DeproClotion & Not & Perry Fueiand Plont and Plant total YCor service Amortnotson Plant Unit 2 Other E Quipment Additions Assets 1989. $2 532 291 $567197 $1965 094 $ 430 340 $237 318 $2 632 752 $ 77 357 $4138 846 1988.. . . 2 438 927 487 546 1 951 381 459 104 262 514 2 672 999 432 083 4 134 672. < 1987. . 2 600 Sii 419 149 2 181 362 374 274 267 069 2 822 705 380 974 4 277 587 1986... 1 442 812- 415 745 1 027 067 2 169 945 269 022 3 466 034 463 163 3 813 889 1985. . .. i 392 346 390 565 1 001 781 i 766 927 228 425 2 997 133 388 $$$ 3 385 26B 1979.... 979 141 201 895 777 246 512 199 20 735(c) i 310 480 239 010 4 467 512 Capitollzollon (thousands of dollors & %) Preterred Stock, Pretefred $tock. with without Mondatory Mondatory Year Cornmon $tocar iquity Redemption Provisions Redemption Provisions long Term Debt total 1989. ,, $ 897 793 38% $ 68 990 3% $210 000 9% $1197 277 50% $2 374 060 1988. . . 887 442 36 74 455 3 210 000 9 1 291 444 52 2 460 041 1987.... . 1 096 737 39 73 340 3 240 000 8 1 400 292 50 2 810 369 1986. ... i 074 663 36 148 797- 5 260 000 9 4 480 947 50 2 % 1 407 1985.... .. 949 881 36 153 639 6 230 000 8 1 339 268 50 2 672 788 1979.. . 432 554 35 34 000 3 150 000 12 611 137 50 1 227 691 (b) Capacity was reduced because of extended generating unit outages for renovation and irnprovements in 1985 (401 MW),1986 (416 MW) . and 1988 (416 MW). (c) Itest.ited for effects of capitatuation of nuclear fuel lease and financing arrangements pursuant to Statement of l'inancial Accounting

            $tandards 71.

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INVESTOR INFORMATION SHARE OWNER INFORMATION inquiries Dividend Reinvestment and Stock Purchase Questions regarding the Company or stock Plan and Individual Retirement Account (IRA) accounts should be directed to Share Owner Centerior Energy Corporation has a Services at Centerior Energy Corporation at Dividend Reinvestment and Stock Purchase the address and telephone numbers indicated Plan which provides 'Ibledo Edison share below for the Stock Transfer Agent. owners of record and other investors a Please have your account number ready c nvenient means of purchasing shares of when calling. Centerior common stock by investing a part 2o edy dividends as well as making cash investments. In addition, Stock Transfer Agent individuals may establish an Individual Centerior Energy Corporation Itetirement Account (Illa) which invests in Sharc Owner Services Centerior common stock through the Plan. P.O. Ilox 94661 . Information and a prospectus relating to the Cleveland, Oil 44101 4661

                                                  .         Plan and the IRA may be obtained from in Cleveland area        642-6900 or 447 2400           Centerior Share Owner Services.

Outside Cleveland area 1-800 433 7794 Stock transfers may be presented at Independent Accountants PNC 'Itust Company Arthur Andersen & Co. 40 ilroad Street, Fifth Floor 1717 East Ninth Street New York, NY 10004 Cleveland,01144114 Stock Registrar Form 10 K Ameritrust Company National Association The Company will furnish to share owners, , Corporate Trust Division without charge, a copy of its most recent  ! P.O. Itox 6477 annual report to the Securities and Exchange Cleveland,01144101 Commission (Form 10 K) and, upon payment of a reasonable fee, a copy of each Exchange Listings exhibit to form 10 K, itequests should be directed to the Secretary of Centerior Energy Pnferred-525 par value-8.84%,52.365 C'orporation at the address of the Stock and $2.81 series, Adjustable Series A and Adjustable Series ll-New York Stock "" AE'* ' Exchange Pnfi>rred-$l00 par value-4 % %,8.32 %, 7.76% and 10% series- American Stock Exchange  ! BOND AND DEBENTURE INFORMATION Bond Trustee and Paying Agent Debenture Trustee and Paying Agent i, The Chase Manhattan llank, N. A. National City llank Corporate Trust Administration Division 1900 East Ninth Street 1 New York Plaza,14th Floor Cleveland, Ohio 44114 New York, NY 10018 (216)575-2503 (212)676 5850 I

s Notice: The annual report and the financial statements herein are for general information and are not intended to be used in connection with any sale or purchase of sceurities. The Company is an equal opportunity employer.

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  ; gi$THE 10LEDO EDISON COMPANYi                                                                                                                                                                                 d                            m      suutami s               A di300 Mad 6aon Avenue
  • lthdo, Ohio 43606 -

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASilINGTON, D.C. 20549 Form 10-K (h1 ark One) [X] ANNUAL, REPORT PURSUANT TO SECTION 13 OR 15(d) OF Tile SECURITIES EXCllANGE ACT Of 1934 (IEE REQUIRED) For the fiscal ear 3 ended December 31,1989 OR [] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF Tilt SI:CURITIES EXCilANGE ACF OF 1934 (NO 000 REQUIRED) for the transition period from to Commluinn Registrant; State of Incorporation; i R.S. I:mploget I'lle Number Address; and Telephone Number Identification No. I 9130 CENTERIOR ENERGY CORPORATION 34 1479083 ( An Ohio Corporation) 6200 Oak Tree Boulevard independence, Ohio 44131 Telephone (216) 447 3100 1 2323 TIIE CLEVELAND ELECTRIC ILLUh11NATING 34 0150020 COh1PANY (An Ohio Corporation)

55 Public Square Cleveland, Ohio 44113 i

i Telephone (216) 622 9800 l 3583 Tile TOLEDO EDISON COh1PANY 34-4375005 ( An Ohio Corporation) 300 hindison Avenue Toledo, Ohio 43652 Telephone (419) 249-5000 Indicate by check mark whether each of the registrants (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Eschange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) has been subject to such liling requirements for the past 90 days. Yes X, No , The aggregate market value of Centerior Energy Corporation Common Stock, without par value, held by non atliliates was 52,700,962,749.37 on February 28,1990 based on the closing sale price as quoted for that date on a composite transactions basis in The it'allStreet Journal and on the 139,404,529 shares of Common Stock outstanding on that date. Centerior Energy Corporation is the sole holder of the 79,590,689 shares and 39,133,887 shares of the outstanding common stock of The Cleveland Electric illuminating Company and The Toledo Edison Company, respectively, i L.

Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Registrant Title of each class on which registered Centerior Energy Common Stock, Corporation vithout par value New York Stock Exchange Midvest Stock Exchange Pacific Stock Exchange The Clevcland E3cetric Cumulative Serial Preferred Illuminating Company Stock, without par value:

                             $7.40 Series A              New York Stock Exchange
                             $7.56 Series B              New York Stock Exchange Adjustable Rate, Series L New York Stock Exchange First Mortgage Bonds:

7-1/8% Series due 1990 New York Stock Exchange 8-3/8% Series due 1991 New York Stock Exchange 3-7/8% Series due 1993 New York Stock Exchange 4-3/8% Series due 1994 New York Stock Exchange 8-3/4% Series due 2005 New York Stock Exchange 9-1/4% Series due 2009 New York Stock Exchange 9.85% Series due 2010 New York Stock Exchange 8-3/8% Series due 2011 New York Stock Exchange 8-3/8% Series due 2012 New York Stock Exchange The Toledo Edison Cumulative Preferred Stock, Company par value $100 per share 4-1/4% Series American Stock Exchange 8.32% Series American Stock Exchange 7.76% Series American Stock Exchange 10% Series American Stock Exchange Cumulative Preferred Stock, par value $25 per share: 8.84% Series New York Stock Exchange

                              $2.365 Series               New York Stock Exchange Adjustable Rate, Series A New York Stock Exchange Adjustable Rate, Series B New York Stock Exchange
                              $2.81 Series                New York Stock Exchange First Mortgage Bonds:

9% Series due 2000 New York Stock Exchange 7-1/2% Series due 2002 New York Stock Exchange 8% Series due 2003 New York Stock Exchange 9.65% Series due 2006 New York Stock Exchange 9-5/8% Series due 2008 New York Stock Exchange

p+= n 3, , c g- ,q,33-  ;; 3,. .

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                                         ,' Corporation
                    ,.               - The Cleveland Electric !- None p ' "'                                         Illuminatingicompany.,

E. The Toledo Edisoni _. Cumulative Preferred Stock,

  •  % . Company. -par value $100 per share:

6 4.56%: Series and'4.25% Series. r -6 . ' DOCUMENTS INCORPORATED BY REFERENCE Part of: Form 10-K N Into Which Document

"                                      ' Descri p t ion <-
           ,s                                                                                             Is-Incorporated a

g "g Portions'of Proxy Statement of~Centerior Energy-Corporation,Ldated March 13, 1990f Part III:

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                                                                                                                                                                    -t
      ,                                                                                                                                                             j h,M                                                                                                                                Page .                     j m.m Number                             i g

5

                       . Glossary of r Terms                                                                                           ,v.                             :

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PART I > h ')

                          ; Item 1.- Business.:
   '                                                                                                                                     1 s                                                                                                                                                                     ,,

The Centerior System . '

                                                                  ... ... . . .-. . . . . . . . . .. . .. .                            - l'              .C     :      (

o . - .I P -Industry Problems and Financial Uncertainties ......... .2  ? E .!

                                                                                                                                                                       +'

y LCAPCO Groups . . .... .: ... . . . . . . . . . . . . . . . . . . . . . . . . 3-fi, 1 f'  : Construction and Financing Programs- .<. . . . . . . . .-.~. . . 4-3 r 4  : i Construction Program . . ......-............. Financing Program- . . . . .-. . . . . . . . . . . . . . . . .- 7  ! b 4 General Regulation .-. . . . . . . . . . . . . . . . . . . - . . . :8- . E

                                                                                                                                                                       ?
                                +    Holding Company' Regulation-. . . . . . . . . . . . . . . . . .                                     8 L           1                      State Utility Commissions                 . . . . . . . . . . . . . . . . . . - .        .

8-- Ohio- Power- Siting Board ...................:... 19  ? Federal Energy Regulatory Commission . . . . . . . . . . . . -. 9 4 Nuclear Regulatory-Commission .... . . . . . . . .. . . . .- 10 4 ~ 0ther Regulation .--. . . . . . . . . . . . . . -. . . , . . . .

                                                                                                                                     -10                             ,

s Environmental Regulation.. . . ' . . . . . . . . . . . . - . . . . - . 10

                                                                                                                                                                    'l u                                : General" ... ...-.-. . . . . . . . . . . . . . . . . . . . . .-                                 -10                    ";

Air Quality: Control.-.r. .-...........-....... 11 Water Quality Control . .-................... . 12 . Vaste Disposal . . . . ... . . . . . . . . . . . . . . '. .-. . 13-l

                                                               .' . . ...............-....                                            -13                             r l                                   Electric Rates .     . .

o

j. . General . . . .- . . . . . . . . . .. . . . . . . . . . . .. . . 13 1989 Rate Orders . . . . . . . . . . . . . . . . . . . . . ... 14 i

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{3 h' 4 Sales of; Electricity). .E.L. . .-.~. . . m . .-....~ . -. . ..-.E.-'.u.. Operating: Statis tics . .: . . . . ' . . . . . . - . .. . =. .-.c. '. n . - - . t . - 15I 16 l Operating Nuclear Unitsj .-.-.

                                                                                                                .  . o. - . . :. . . . .- . . . . - . . . . : .              19'
                                                   . Nuclear Unit Concerns ~. . . . . . . .- . .. . . . . - . . . . . . . - .                                                20?
                                                   " Competitive Conditions'. .:. . .-. . . ... .c.                                       .   .. '. - . . . . .              20 3

w [..

                                                      ' General                                                                                                              20 L"L     '

Chveland Elec t ric . . . . . . . .. . . .. . . . . . . . . . . . . .. 202 1?c kdo: Edison- . . .. .- . .- . . .- .. . .. . . s. . . . . . , . . ' . . .- .- '21'- . . l L Pool Supply' -

                                                                         .            . . . -. .. . . . . . . . . . . . .. . . . .-                                        122 .

m%.. ' p!. . ylC . Coal . . ... ... . . . . . . . . . . . , . . . . . .-. . . . _22 Nuclear: .=.s . . . ' . . - . . . .. . . . . . . . .' . . . . . .- . ..- 23 (m ' 011- . . .. . -. . . . . -. . . . . . . . . . . . . . . . .. . . . . 24 i Executive officers of-.the' Registrants and the. Service = Company . _25

           .                             tIteml2.' Properties                      .. . . , . - . . . .- . . .. . .. . .. . . . .- .                                         33' General'..E. .           .. .. . - . . . . . -. . . . -. . . . . _ . . . . .. . . . . . . .                                  33
                                                  'The'Centerior System .
                                                                                                 . .. . . . . . .. .. .-;. .. . . .. .                          4 . . .      33-

, Cleveland' Electric . . . .- . . .- . . . -. . . .. . -. . . . . . . . 34: Toledo Edison . .- . . . . . . . . . . . . . . .. . . . . .. .. . . .35-Title to. Property _ . . . - . . . . . . .- . . . . .. . .; . . . .. . . - . .35-Item 3. Legal Proceedings . . -. .. . .. . . . .. .., . .. . . . . 37 ja ,

                                         . Item._4.         Submission of, Mat ters to a Vote of ' Security: Holders                                          .8 .-   .__    37 "PART II
                                         . Item 5; eMarket-for Registrants' Common Equity and Related Stockholder Matters.. . . . . . . . .. . . . .-... . .                                         . .               37
Centerior Energy . . . ... . . . . . . . . ...-.-. . . . . . . 37' w
                      '                                                                                                                                                                    a
                          ,                          Market Information . ... . . . . .-. . . .                                    . . .- . . . . . .- .                     37             j
Share Owners . . .'-. . . . . . . . . . . . . . . . . . . . . . 38 ';

Dividends . . - '._ . . . . . . . . . . . . . . . . . . . . . . . . '38 'i i

  .                                             Cleveland Electric and Toledo Edison . . .                                      . . . . . . . . . . .                        38         1

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                                                                                                                                          ' Number y         i          Item 6'.. Selected: Financial Data =. .=.'. ...                            .t . . . . . .          .t.     . . .     '38 Centerior Energy'. . . .-. . .-. . .-.'.-- . . . . . . .
                                                                                                                               . ..=,           38 g                            Cleveland Electric . .          .  . . ' . .- .     .$. . . . . . . . .. . . . .-                        .-       38:

L . Toledo l Edison .. 4 - . . . . . . .. . . . . . . . . .-. . .-. . . . 38-F .

 ,DM                     Item 7.- . Management's Discussion and Analysis of Financial                                                               .

p Condition and Results:of Operations . . .L.'. . .. . . . . .' - 39: y, K 'Centerior Energy . . . . . .n. . .. . . . . . . . . . , . , . . . . . . . 39:

                            ' Cleveland Electric . . .                                        '
                                                                  . . . - . . . .......-........                                                39 Toledo Edison:     .  - . . . . . . . . .= ........-.......                                                       39
                     ' Item 8 : Financial Statements and-Supplementary Data ... ... . ' . .                                                     39
                            . Centerior~ Energy . . . . . . . . . . . . . . . . . . . . .- . .                                                 .39 Cleveland Electric . ... .               . . . . ................                        .

39

   >                          Toledo Edison      . . . . ... . . . . . ................                                                         39 Changes in and Disagreements Vith Accountants on Item.9. . ~ Accounting and Financial. Disclosure ..                             . . . .-. . . . .                      39 PART III a                       Item 10.-        Directors and Executive Officers of the Registrants                                       ..'         39~

Centerior-Energy . . . . . . . . . . . . . . . . . . . . . . . . 39

        .                    . Cleveland: Electric-. .         . . . . . . ...............                                                      40
Toledo Edison; . . . - . . . . . . . ............... -40 0
                        . Item 11. ' Executive Compensation . . .                        . . . . . . . . . . . . . ..                           41 l

2

 "                           'Centerior Energy Executive Compensation...                            ...........                               '41         Li Salaries and Insurance ~...-. . .                   . ...............                                             42-Pension Plan Benefits . . . . . . .                       . . . . . . . . . ... . . .-                          ~ 44 -
                             ' Employee Stock Plan Transactions . .                      . . . . . . . . . . . - . . . .                        46.

L (a)' Employee 1 Purchase Plan . . . ............... 46 q (b) Employee Savings Plan . . . ............... 46 (c).1978 Key Employee Stock Option Plan ........... 48 i

                                  .(d)' Employee Stock Ownership Plan ...............                                                           49        1
l Item 12.- Security ownership of Certain Beneficial Owners and q Management . . . . . . . . ............... 50 l L 1 Centerior Energy . . . .- . . . . . ............... 50 [

Cleveland Electric . .- . . . . . . ............... 50 1

                             -Toledo Edison ................. . . . . . . . .                                                                   50        l 1

i i i-

                                                                                - lii -

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v Page Number Item 13. Certain Relationships and Related Transactions . .-. . . 51 Centerior Energy and Toledo Edison . . . . . . . . . . . . . . . 51 Cleveland Electric . . . . . . . . .. . - . . . . . . . . . . .. . 51 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports

               ~ onM'                    . . . . . . . . . . . . . . . . . . . . .                        51 Signatures . .   . . - . . .     .'.            . . . . . . . . . . - . . . . . . .                  53 Index to Selected Financial Data; Manage.. t's Discussion and Analysis of Financial Condition and Result. of Operations:

and Financial Statements'. . . . . . . . ............. F-1 Index to Schedules . . . . . . . . . . .. ..... .. . . . . . . S-1 Exhibit Index . . . . . . . . . . . . . . .......d. . . . . E-1 s

                                                                                                \
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           ,.y.    :This: Tctmbin:d-FcrmL10-K is' sap 2rately filadt by Centarior Entrgy'Corporatien',            ;;

M F i W ~: Thel ClevelandJElectric4LIlluminating Company and The.-Toledo Edison Company.

              ,   (Informationicontained' herein relating .to any individual' registrant .is filed by -                *
such registrant on'its-ovn: behalf. -No'registrantLmakes any representation as.  !
                    'to   information. relating 1to any other registrant, .except that information                    ;

P 1 relating to' eitherTor: both of' 1the Centerior Utilities is.also attributedito '! Centerior Energy. l > GLOSSARY OF TERMS H> . e LThe ,followingLterms and . abbreviations used in the text of. 'this report'are  ; E . defined as indicated:. ' g Term Definition  ; e AFUDC Allowance for Funds Used-During Construction. t AMP-Ohio -American Municipal Pover-0hio, Inc., an Ohio  ;; not-for-profit corporation, 'the members of

vhich are certain Ohio municipal;' electric  ;

systems. . a r Beaver Valley Transaction -The September 1987 saleL and leaseback'of-

                                                                                                                ~
                                                                                                                  <t
,        ,                                               substantially all of Toledo Edison's-' interest'          1
                                                       -in Beaver-Valley Unit 2 as described in Note              R F

2. hv Beaver Valley Unit 2 Unit 2 of the Beaver Valley. Power. Station,,in. g which- the'centerior Utilities have ownership-  ; and leasehold interests. r CAPCO Group Central Area Power; Coordination Group. .. Centerior Energy or Centerior Centerior. Energy Corporation.- 't p Centerior' System Centerior. Energy,-the Centerior-Utilities and the Service Company.

                    -Centerior Utilities                 Cleveland Electric and Toledo Edison.                       '
                   -(individually, Centerior                                                                       4 LUtility);

Clean' Air Act ' Federal Clean Air Act of.1970 as amended. 1 g- Clean Vater Act Federal Vater -Pollution Control Act as , amended. l Cleveland Electric The Cleveland Electric Illuminating C'ompany, an electric utility subsidiary of Centerior Energy. Consol Consolidation Coal Company. 4 L -v-l- l- 's l

                                                                                                                  .i
 . Term'                   Definition-
 . Consumers Power         Consumers Power Company, an electric ~ utility subsidiary of-CMS Energy Corporation.

CPP Cleveland Public Power, a municipal electric system operated by the City of Cleveland. CV1P Construction Vork in Progress. Davis-Besse Davis-Besse Nuclear Power Station. Detroit Edison

                                                                         ~

Detroit Edison Company, an electric utility. District of Columbia United States Court of Appeals for the Dis-Circuit _ Appeals Court trict of Columbia Circuit. DOE _ United States Department of Energy. Duff & Phelps Duff & Phelps,-Incorporated. Duquesne Duquesne Light Company, an electric utility subsidiary of DOE, Inc. ECAR East Central Area Reliability Coordination Group. FERC. Federal Energy Regulatory Commissinn. FICA Federal Insurance Contributions Act. GPU General Public Utilities Corporation, an electric utility holding company. Ludington Plant Ludington Pumped Storage Power Plant, a pumped-storage, hydro-electric generating station jointly owned by Detroit Edison and Consumers Power. Mansfield Plant Bruce Hansfield Generating. Plant, a coal-fired power plant, in which the Cent.erior Utilities have leasehold interests as joint and several lessees. Moody's Moody's Investors Service. Note or Notes Note or Notes to the Financial Statements in the Centerior Energy, Cleveland Electric and Toledo Edison Annual Reports for 1989 (Note or Notes, where used, refers to all three companies unless otherwise specified).

                                - vi -
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    '?                                                _ . . . ,

Term- Definition;

     ,             NPDESi                               National-        Pollutant Dischargev Elimination y       . .y                                             System.

n

                'NRC-llnited _ States Nuclear Regulatory Commission.                         "

t Ohio EBR- Ohio' Environmental Board of Review.

                  ' Ohio Edison                         Ohio Edison Company, an electric utility.

m Ohio-EPA ' Ohio Environmental. Protection Agency. 10hio Pover. Ohio Power Company, an electric utility sub-sidiary of American-Electric, Pover Company, Inc.

                                                                                                                         '~
  ,                Ohio Valley                          The- Ohio Valley Coal Company, the successor corporation to The Nacco Mining Company snd a subsidiary of Ohio. Valley =Resoutces, Inc.

Operating Companies- -See "Centerior Utilities". OPSB: Ohio Power Siting Board. PaPUC- Pennsylvania Public' Utility Commission. Penelec Pennsylvania Electric- Company, an electric utility subsidiary of GPU. Pennsylvania Power Pennsylvania Power ' Company, an electric utility subsidiary of Ohio Edison. Perry Plant. Perry Nuclear Power Plant. Si il Perry! Unit 1 and Perry Unit 2- -Unit 1 and Unit 2 of the : Perry Plant, in j vhich the Centerior Utilities have ownership ~ intetests.

                   ~ PUC0 _                              The Public Utilities Commission of Ohio.                             -
                 -Purchase Plan.                         Centerior Energy's Employee Purchase Plan.

Ousrto Quarto Mining Company, a_ subsidiary of Consol. ., 1 Savings Plan Centerior Energy's Employee-Savings Plan.  : SFC Securities.and Exchange Commission..- Seneca Plant Seneca Power Plant,' a pumped-storage, hydro- i electric generating station jointly owned by i Cleveland Electric and Penclec. t

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                                                                                                                                      'Centerioro: Service Company,-faxservice> sub -                                                          '

r ~ ' sidiary-ofiCenterior_ Energy. . 4

                                                    . . . _ . . . .                                                                                    /             t i

LSixth Circuits

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                                  , ,-Superfund;                                                                                                                                                                                         '}
                                                           ~                                                                          . Comprehensive.' Envi ronmen tal'.sResp'onse',. ! Com-                                                   i e6                      w. -                                                                                 *
                                                                                                                                      *pensation-,and Liability Act of- 1980'and the                                                   '!
    ;9 y Superfund Amendments and Reauthorization-Act t                                                       l
                                                             .                                             4
                                                                                                                                       -of 1986.                                                                                           J,
                                             - Toledo Edison-                                                                                                                                                                          :t
                                                                                                                                      -The- ' Toledo . Edison. Company, . an electric-                                                          ;

4.7 , utility subsidiary of Centerior Energy, t 3 . . . u ,. EU.S. EPA; United States

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PART I g r t3 ltem 1. Business' t-THE CENTER 10R SYSTEM h H 'Centerior Energy is a public utility holding company and the parent company of the Centerior Utilities and the Service Company.' Centerior was incorporated-under the lavs of the State. of= Ohio in 1985 for the purpose of enabling Cleveland Electric and Toledo Edison to affiliate by becoming wholly owned subsidiaries of Centerior. The affiliation of the Centerior Utilities became effective on April 29, 1986. All-of the consolidated operating revenues of the Centerior-System are derived from the sale of electric energy by Cleveland Electric and Toledo Edison. L b The Centerior Utilities' combined service areas encompass approximately 4,200 square miles in northeastern and northwestern Ohio with an estimated-popula-  ;

     -tion of about 2,600,000.      At December 31, 1989, the Centerior System had 9,062 employees. Centerior Energy'has no employees.

1 Cleveland Electric, which was incorporated under the laws of the State of Ohio ' in 1892, is a public utility engaged in the generation, purchase, .transmis-sion, distribution and sale of electric energy in an area of approximately 1,700 square miles in northeastern Ohio, including the City of Cleveland. Cleveland -Electric also provides electric energy at wholesale to other elec-tric! utility companies and to two municipal electric systems in its service area. Cleveland Electric-serves approximately 737,000 customers and derives - approximately 74% of its total electric revenue from customers outside the j

     ' City of Cleveland. -Principal industries served by Cleveland Electric include those producing steel and other primary metals; automotive and other trans--

portation equipment; chemicals; electrical and nonelectrical machinery;  ; fabricated ' metal products; and. rubber and plastic products. All of-Cleveland 0 Electric's operating revenues are derived from the sale of electric energy. l I Prior to the sale of -its_ steam generation and distribution system on DecemberL30, 1987, Cleveland Electric also had provided steam service for heating and other purposes-in the downtown area of Cleveland. At December 31, 1989. Cleveland Eleetric had-5,256 employees. Toledo Edison, which was incorporated under the laws of the State of Ohio in 1901,- is a public utility engaged in the generation, purchase,. transmission, distribution and sale of electric energy in an area of approximately 2,500 square miles in northwestern Ohio, including the City of Toledo. . Toledo Edison also provides electric energy at wholesale to other electric-utility; companies and to 13 municipally owned distribution systems and :one rural electric cooperative distribution system in its service area. Toledo Edison serves approximately 283,000 customers and derives approximately 53% of its total electric revenue from customers outside the City-of Toledo. Among the .j principal industries served by Toledo Edison are metal casting, forming and fabricating; petroleum refining;- automotive equipment and assembly; food processing; and glass. All of Toledo Edison's operating revenues are derived from the sale of electric energy. At- December 31, 1989, Toledo Edison.had 2,778 employees. t

Y F 1Th2.'S:rv}ca Company, which ves incorporated in 1986 under the Invs of the State.of Ohio, is also a wholly owned subsidiary of Centerior Energy. - It pro-vides- management,-financial, administrative, engineering, legal, governmental

   -and public relations and other services to Centerior Energy and the Centerior Utilities. At December 31, 1989, the Service Company had 1,028 employees.

INDUSTRY PROBLEMS _AND FINANCIAL UNCERTAINTIES The Centerior System has experienced in recent years some of the significant problems confronting the electric utility industry in general, including the effects of fluctuating economic conditions and customer conservation practices i upon electricity usage; increased competiticn from municipal systems; diffi-culty in accurately forecasting.' demand for electric service; difficulty in obtaining : adequate and timely rate relief,-including disa11ovance or deferral of construction cost: in rates and the consequent write-offs of investments in l nuclear generating facilities; adverse changes in rate-making law; increasing operating costs; increasing costs of and delays in construction; increasing costs of complying vith evolving governmental regulations,- in particular, environmental and nuclear plant' regulations; uncertainty associated with the'

  • operation of nuclear units; and a reduction in common stock divideads.

Now and in the future, the Centerior System may have te contend with many of the problems ~ listed above as well as the following: difficulty in financing j construction due to high costs of capital, uncertain financial markets and I financing- limitations contained in articles of incorporation, indentures and j certain. financial agreements;1 increasing scrutiny of, and the involvement in management of, company operations by state utility commissions and state i consumer advocates; increasing pressure from the threat of municipalization for utilities to reduce rates; erM the emerging need for utilities to reduce , i electrical peak load growth through the integration of demand-side and i supply-side energy management programs.

   - As discussed in Note 3(b), compliance with any of several acid rain proposals currently being considered by the U.S. Congress would require significant capital. expenditures by the Centerior Utilities predominantly in the 1994-2000       i period and would result in higher fuel and operation and maintenance expenses.

Any legislation resulting from these proposals, or any other proposals, could also _ result in significant increases in the rates the Centerior Utilities charge their customers. j 1 See Note 3(c) and Note 4 for discussions of uncertainties associated with. Perry Unit 2 and the Centerior Utilities' operating nuclear units. The  : likelihood of the occurrence of any of the matters discussed under these Notes  ! vhich would have a financial impact on- the Centerior Utilities cannot be determined at this time. Based' on each Centerior Utility's and Centerior's current financial condition and levels of annual income, a write-off of either  !

   ' Centerior Utility's investment in Perry Unit 2 vould have a material adverse effect -on such Centerior Utility's and Centerior's results of operations in            ;

the period in which it were to occur and on retained earnings. Such a write- ' off could reduce Toledo Edison's retained earnings sufficiently to impair

   - Toledo-Edison's ability to declare dividends. However, such a write-off would not reduce retained earnings sufficiently to impair Centerior's or Cleveland Electric's ability to declare dividends.

1 . i ._

       ' As _ discus =d in NDt3 6 :nd als;.wh;ra h: rain,- on J nuary 31, 1989, ths PUCO-issued orders,for the Centerior Utilities settling then-pending rate increase requests, prudence-investigations and litigation with respect ;.o-the Centerior investments in Perry Unit l'and- Beaver Valley Unit 2, allegations
   ,     Utilities'
        . of- excess capacity for the period-covered by the orders snd certain other O'        matters.       The orders provided for              three annual     rate increases _for both.

Centerior Utilities which began in February 1989. Minimum and maximum earn-ings- levels were set, and a' management audit was agreed to which vill result-in- significant cost savings- after its completion in 1990. The orders also 1 established- nuclear plant performance standards for the 1991-1998 period (see 1

          " Operations--Operating Nuclear Units").                 Furthermore, certain assets were      j vritten down in 1986 which lowered the earnings-base, although current cash                    ;

flov was not impaired.- These orders create-the need for strict cost control l in. an environment of inflation and increasing competition from other energy producers or distributors, including municipal electric systems and togenera-tion projects, ilovever, cash flov. and the quality of earnings are expected to increase substantially at the same time that construction expenditures vill be substantially lover than those incurred prior to 1988. Consequently, the need-for new capital vill diminish significantly in the 1990-1992 period, but vould increase if acid-rain legislation.is enacted. CAPCO GROUP  ! Cleveland Electric and Toledo Edison are members of the CAPCO Group, a power l ; pool created in 1967 with Duquesne, Ohio Edison and Pennsylvania Power. This pool affords greater reliability and lover cost of providing electric service through coordinated generating unit operatiuns and maintenance and generating reserve back-up among the five companies. In addition, the CAPC0 Group has j completed programs to construct larger, more officient electric generating units and to strengthen interconnections within the pool. ' The CAPC0 Group companies have placed-in service nine major generating units, l of which the Centerior Utilities have ownership. or leasehold interests in , seven (three nuclear and four coal-fired). Construction of another nuclear [ generating _ unit (Perry Unit 2) has been suspended (see Note 3(c)). Each

                          ~

company owns, as a tenant-in-common,-or leases a portion of certain of these j generating units. Each -company has the right to the net capability and associated energy of its respective ownership and leasehold portions of the-units and -is, severally and not jointly, obligated for the capital and oper- _a ting costs equivalent to its respective ownership and leasehold portions of the units and the required fuel, except- that the obligations of Pennsylvania Power are the joint and several obligations of that company and Ohio Edison and except that the leasehold obligationr of Cleveland Electric and- Toledo

            -Edison are joint and several.      (See " Operations--Fuel Supply".) The company              1 in whose service area a generating unit is located is responsible for the operation of that unit for all the owners, except for the procurement of nuclear fuel for a nuclear generating unit.               Each company owns the necessary        ;
             -interconnecting transmission facilities within its service area, and the other                   !

CAPC0 Group companies contribute toward fixed charges and operating costs of those transmission facilities. l

t Alli of th9 CAPC0 Group,companics_ ara mzmb:rs!of_ECAR:vhich is compristd:of 27 electric companies located in nine' contiguous states._ ECAR's purpose - is.to-

      ' improve. reliability of: bulk power _ supply- through coerdination of planning and:
      . operation of member companies' generation and transmission facilities.-

CONSTRUCTION'AND FINANCING PROGRAMS Construction Program Although the Centerior System has completed its generating unit construction program, .it.is carrying on a continuous program of constructing transmission, .'

    ' distribution and general facilities and modifying existing generating fac!.1 .

ities to . meet anticipated- demand for electric -service, to comply with. l governmental regulations. and to improve the environment. .The Centerior System's integrated resource plan for .the 1990s combines . demand-side

   . management programs with maximum utilization of existing generating capacity-to postpone the .need for new generating -units until later in the decade.

Demand-side- management- programs,~ such as . direct _ load control, residential appliance.. interlocks, curtailable load, thermal storage and energy management, are expected to reduce peak load-growth and-increase energy usage in off-peak

   - periods.           The next increment of generating capacity to be constructed by the is expected to be relatively small, 100,000-150,000-Centerior. Utilities                                                                 ,

kilovatt' units with short. construction lead times. According to the current long-term integrated = resource plan, and assuming construction en Perry. Unit 2 is 'not resumed in the interim (see Note 3(c)), the Centerior System plans to put into service 220,000 kilowatts of such generating capacity in.the: 1997-1998 period. , The following table shows, categorized'by major components, the construction expenditures by Cleveland Electric and Toledo Edison and, by. aggregating them, for the Centerior System during 1987, 1988 and 1989 and the estimated cost of their construction programs for the 1990-1992 period, in each case including

   . AFUDC and excluding nuclear fuel:

l

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           ~                      ~
    ; Mi'                                                       1987:      :1988        ~1989-       1990-1992-
                                                              -Actual = Actual' Actualt Estimated
                           ' Cleveland Electric                       (Millions of Dollars):

Perry 1 Unit.1= $ J188 $_ 21- S; 5 S: 0 0: EBeaver Valley Unit 2 196 0 14 Perry' Unit;;2* 149- '0- 0- 0 .- q J Transmission, Distribution

                        =and General-Facilities                     53           65             87-      265                  il I

Renovation and Modification'of-m.

                        . Generating Units-                                                                                       !

L-Perry Unit:1 0 13- 5- 33-Beaver Valley Unit.21 0 24- 3 17 Davis-Besse? 28 56 25 ' 61-Non-NuclearLUn'its- 53 .33 24 174 Total- $ 567 $ ~212 :$ 7153 $-'550 0 1987- 1988- 1989J 1990-1992 Actual Actual Actual Estimated Toledo' Edison-- (Millions of Dollars) , 3 PerrysUnit 1 $ 133 $ 9 '$- -1 $ _0 Beaver Valley Unit 2 162 0 3 0 Perry! Unit 2*-. 32 'O 2 0 R;

Transmission, Distribution
                         .and.Goneral Facilities                      29          26             28         93-Renovation-and Modification of GeneratingLUnits-Perry? Unit.1                              0          22               3        20
                           . Beaver Valley Unit 2                      0          20               2        13
                           -Davis-Besse                               18          51-            29         59                   c    i U

Non-Nuclear Units 16 L2 10 65 [

                                              ' Total            $ 380 -$'       130        $-   78 $ 250                             i Notes -Footnotes to the table are on the following_page, i
                                                                                                                                      -i I

e

1987 1988 1989 1990-1992 Actual Actual Actual Estimated h Centerior Syste_m (Millions of Dollars) Perry Unit 1 $ 321 $ 50 $- 6 $ 0 Beaver Valley Unit 2 358 0 7 0

      -Perry Unit 2* .                                                81                                 0          2            0 Transmission, Distribution and General Facilities                                      82                                91       115          358 Renovation and Modification of Generating Units Perry Unit 1                                                0                               35          8          53 Beaver Valley Unit 2                                        0                               44          5          30 Davin-Besse                                               46                               107        54          120 Non-Nuclear Units                                         59                                35-        34         239 Total                              $ 947 $ 342 $ 231 $ 800
         *Constraction of Perry Un.4t 2 has been suspended. The amount shown for Perry Unit 2 in 1987 is primarily AFUDC. AFUDC was discontinued on January 1, 1988. See Note 3(c) regarding the future of that Unit. The amount shown in 1989 for Perry Unit 2 for Toledo Edison and the Centerior System is the result of a reallocation of previous years' costs between Perry Unit I and Perry Unit 2 for Toledo Edison.

See " Environmental Regulation--General" for the potential cost of complying with proposed acid rain legislation. Construction program costs in 1990, including AFUDC and excluding nuclear fuel, for Cleveland Electric, Toledo Edison and the Centerior System are ex-pected to be about $170,000,000, $80.000,000 and $250,000,000, respectively. Each company.in the CAPC0 Group is responsible for financing the portion of the capital costs of nuclear fuel equivalent to its . ownership and leased interest in the unit in which the fuel vill be utilized. See " Operations-- Fuel Supply--Nuclear" for information regarding nuclear fuel supplies and Ncte 5 regarding leasing arrangements to finance nuclear fuel capital costs. Nuclear fuel capital costs incurred by Cleveland Electric, Toledo Edison and the Centerior System during 1987, 1988 and 1989 and their estimated nuclear fuel capital costs for the 1990-1992 period are as follovc: 1987 1988 1989 1990-1992 Actual Actual Actual Estimated (Millions of Dollars) Cleveland Electric $ 26 $ 37 $ 29 $ 96 Toledo Edison S 20 $ 34 $ 21 $ 73 Centerior System $ 46 S 71 $ 50 $ 169

                                                                                                       ?

Cl:valand Elsctric's, Tolhdo Edison's' and ths Cxnterior System's nucloir fu21

     . capital . costs for 1990 are estimated to be about $38,000,000, $29,000,000 and
      $67,000,000,. respectively.

Financing Program Reference is. made -to Centerior Energy's, Cleveland Electric's and Toledo Edison's Management's Financial Analysis referred to under Item 7 of .this report- and to Notes 10 .and 11 for discussions of the Centerior System's financing activity in 1989; debt and preferred stock redemption requirements during the 1990-1992- period; expected external financing needs during such period; and short-term and long-term financing capability. Through the first two months of 1990, Cleveland Electric redeemed $60,000,000 principal amountiof maturing first mortgage bonds; issued $300,000,000 of first mortgage bonds as security for an equal aggregate principal amount'of secured . medium-term notes to be sold over about a 12-month period; and sold

      $112,500,000 of secured medium-term notes.        Financing activity for Cleveland Electric for the rest of 1990 is expected to consist of the issuance of up.to s      an additional $225,000,000 aggregate principal amount of secured medium-term-
     . notes,   the issuance of $100,000,000 principal amount of first mortgage bonds in the second quarter of 1990 primarily to redeem outstanding. higher-cost                    1 first mortgage bonds and obtaining $16,000,000 of additional term-bank loans.

Except .for the anticipated issuance in the second quarter of 1990 of

      $67,300,000 of first mortgage bonds to secure an equal principal amount of refunding pollution control revenue bonds to tue issued by public authorities                ';

and obtaining $15,000,000 of additional term bank loans, Toledo Edison is not i expected to engage in any financings in 1990. See Note 10(a) to Centerior's Financial Statements for information concerning a common stock repurchase program initiated by Centerior in 1989.  ; On -March 8, 1990, Duff & Phelps raised its rating on Cleveland Electric's first mortgage bonds to "BBB " from."BB+", but maintained its existing ratings , on the other securities of the Centerior Utilities. Currently, Toledo  ! Edison's first mortgage bonds and preferred stock are rated below investment .i grade. by Duff & Phelps.and its preferred stock and unsecured notes are rated  ! belov investment grade by both Hoody's and S&P. Cleveland Electric's pre-  ! ferred stock is currently rated below investment grade by both Duff & Phelps j and S&P. The current securities ratings for the Centerior Utilities are as j' follows: S&P Moody'n Duff & Phelps  ; Cleveland Electric j First Mortgage Bonds BBB- Baa2 BBB-Preferred Stock BB+ baa2 BB Toledo Edison j First Mortgage Bonds BBB- Baa3 BB+ Preferred Stock BB+ ba2 BB-Unsecured Notes BB+ Bal -- i 3 _____ J

                                                                                                                    ^

yo r b 1S W -Ntta 10 fcr discu2sions concerning- rastrictions on: tha'issu:nen 'of additional. debt securities and preferred and oreference stock by the_Centerior-Utilities.-- GENERAL REGULATION

Holdjng Conpany Regulation Centerior -Energy is currently. exempt from regulation under the Public Utility Holding Company Act of 1935.

State Utility Commissions

The ;Centerior Utilities are subject to the jurisdiction of the' PUC0 vith re-spect-to rates, service, accounting, issuance of securities and other matters.

Under Ohio-law, municipalities may regulate rates, subject to - appeal to the -

       .PUC0 if not acceptable to the utility. See " Electric Rates--General" for a description of certain- aspects of Ohio rate-making law. The: Centerior Utilities _ ' are also subject   to the jurisdiction of the PaPUC in certain re-spects relating to their-ownership interests in generating facilities located
       .in. Pennsylvania.                                                                                                                  j i

The- PUCO.is composed of five commissioners appointed by the Governor of Ohio. -f Irom nominees recommended by a-Public Utility Commission Nominating Council.  ; Nominees must have at least three years' experience in one of several disci- d plines. -Not more than three commissioners may belong to the same political ~ -j party.

                                                                                                                                        }'

Under Ohio law, a public utility must file with the PUC0 an annual-long-term }' forecast of customer loads, facilities needed to serve those loads and prospe'etive sites: for those facilities. In October 1989, the PUCO-made effective for:1990, as a part of each Ohio electric utility's annual long-term forecast, new rules and regulations to implement 'an integrated resource plan ' in lieu- of the resource plan currently filed. Beginning in 1990, the

      -long-term forecast must include the following:

l 1 (1)- Demand Forecast--the utility's 20-year forecast of sales and peak demand, including j and excluding the effect of new demand-side management ' programs. (2) Integrated Resource Plan--the utility's projected mix of resource options - to meet.the projected demand. The revenue requirements and rate impacts j. of the_ integrated resource _ plan must be compared to other plans which vere evaluated by the utility. ' 1 (3) Short-Term Implementation Plan and Status Report--the utility's discus- .! sion- of how it plans'to implement its integrated resource plan over the . ' next four' years. Estimates of annual expenditures and security issuances  ; associated with the integrated resource plan over the four-year period ] must also be provided. 4 1

                                                 . _ . . _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . _ _ _ _ _ _ _ _ _ _ Ej

p L Tha-'PUCO-munt hold a public. h3: ring on ths long-tsrm foracist and 4hs inte-grated resource plan at least once every five years.- The jurisdiction of the

                       ~

PUC0, _ relative:to.the long-term: _ forecast, is. limited to determining whether: the forecasts of energy and demand and- the integrated ' resource plan are reasonable. The PUC0 and the OPSB are required to consider the record of such hearings in proceedings for approving facility sites, changing rates, approv-ing security issues and- initiating energy conservation programs. The Centerior Utilities' 1990 long-term forecast report vill be filed by Centerior Energy in-the second-quarter.of 1990. The PUC0 has jurisdiction over certain transactions by companies in an elec-tric utility holding company system if it includes at least one Ohio electric utility and is exempt from regulation under Section 3(a)(1) or-'(2) of the - Public Utility Holding Company Act of 1935. .An Ohio electric utility in such a holding 1 company system must obtain PUC0 approval to invest in,- lend' funds to, guarantee the obligations of or.otherwise finance or_. transfer assets to any-non-utility company in that holding company system, unless the transaction-is in the ordinaryLcourse of business operations in which one company acts for or-with respect to another company. Also, the holding company in such a hold-  ! ing company system must obtain PUC0 approval to make any: investment in any non-utility subsidiaries, affiliates or associates of the holding company if  ; such investment would cause all such capital investments to exceed 15% of:the consolidated capitalization of the holding company unless such-funds were provided by non-utility subsidiaries, affiliates or associates. u The PUC0 has a reserve capacity policy for electric utilities in Ohio stating i I that :(i) 20% of service area peak- load excluding interruptible--load'is an appropriate generic benchmark for an electric utility's reserve margin; (ii) a reserve- margin exceeding 20% gives rise to- a presumption of excess capacity, but may--be appropriate if -it confers a positive net present benefit to customers or is justified by unique system characteristics; and -(iii)- appropriate remedies for excess capacity (possibly including disallowance of j costs. in rates) vill be determined by the PUC0 on a case-by-case basis. 4 Excess capacity vill not be an issue for the-Centerior Utilities in their ,

   -February 1991 rate increase.       See " Electric Rates--1989 Rate. Orders".            l i

Ohio Power Siting Board The .0PSB has state-vide jurisdiction, except to the extent pre-empted by I Federal lav, over the location, need for and certain environmental aspects of , i electric. generating. units with a capacity of 50,000 kilowatts or more and transmission lines with a rating of at least 125 kV. Federal Energy Regulatory Commission 1 The Centerior Utilities are each subject to the jurisdiction of the FERC with j respect to the transmission and sale-of power at wholesale in interstate com-  ! merce, interconnections with other utilities, accounting and certain other matters. Cleveland Electric -is also subject to FERC jurisdiction with respect to its ownership and operation of the Seneca Plant. I ,

Nucler Rsgulatory Commission l l The nuclear generating units in which the Centerior Utilities have an interest are subject to regulation by the NRC. The NRC's jurisdiction encompasses-broad supervisory and regulatory powers over the construction and operation of nuclear reactors, including, matters of health and safety, antitrust considera-3 tions and erivironmental impacts. Ovners of nuclear units are required to purchase the full amount of nuclear liability insurance available. See Note 4(b) for a description of nuclear in-surance coverages. Other Regulation The Centerior Utilities are subject to regulation by Federal, state and local authorities with regard to the location, construction and operation of certain facilities. The Centerior Utilities are also subject to regulation by local authorities with respect to certain zoning and planning matters. ENVIRONMENTAL REGULATION General The Centerior Utilities are subject to regulation with respect to air quality, vater quality and vaste disposal matters. Federal environmental legislation affecting the operations and properties of the Centerior Utilities includes the Clean Air Act, the Clean Vater Act, the Resource Conservation and Recovery Act of 1976 and Superfund. The requirements of these statutes and related state and local laws are continually changing due to the promulgation of new or revised regulations, the results of judicial and agency proceedings and f requer.? amendment of these statutes. As a result, the Centerior Utilities cannot estimate the effects of such laws, ryulations and proceedings upon their facilities and operations. Compliance with such laws and regulations may require the Centerior Utilities to modify, supplement, abandon or replace facilities and may delay or impede construction and operation of facilities, all at costs which could be substantial. The Centerior Utilities expect that the impact of such costs vould eventually be reflected in their respective rate schedules. Cleveland Electric and Toledo Edison plan to spend. during the period 1990-1992, $8,000,000 and $2,000,000, respec' : vely, for pollution control facilities. If acid rain legislation is enacted as discussed below under " Air Quality Control", it is anticipated that Cleveland Electric's estimated capital expenditures over the 1990-1992 period would increase by approximately $50,000,000 to $75,000,000 and that the capital expenditures for the Centerior Utilities vould increase substantially after 1993. The- Centerior Utilities believe that they are currently in compliance in all material respects with all applicable environmental laws and regulations, or to the extent that one or both of the Centerior Utilities may dispute the applicability or interpretation of a particular environmental law and regula-tion, the affected company has filed an appeal or has applied for permits, revisions in requirements, variances or extensions of deadlines.

Air Quality Control Under the Clean Air Act, the Ohio EPA has adopted Ohio emission ) imitations for particulate matter and sulfur dioxide for each of the Centerior Utilities' plants. The Cleen Air Act provides for civil penalties of up to $25,000 per dny for each violation of an emission limitation. The U.S. EPA has approved the Ohio EPA's emission limitations and the related implementation plans except for fugitive dust emissions and certain sulfur dioxide emissions. The U.S. EPA has adopted separate sulfur dioxide emission limitations for each of the Centerior Utilities' plants. The Centerior Utilities' fossil fuel-fired generating units in Ohio comply with the U.S. EPA limitations and Ohio EPA limitations on emissions of particulate matter and sulfur dioxide applicable to those plants. Currently, the U.S. EPA enforcement policy and Ohio regulations allow compliance with sulfur dioxide emission limitations to be based on a 30-day averaging period. x In 1985, the U.S. EPA issued revised regulations specifying the extent to

which stack height may be incorporated into the establishment of an emission limitation. Pursuant to the revised regulations, the Centerior Utilities sub-mitted to the Ohio EPA information intended to support continuation of the
  1. stack height credit received under the previous regulations for stacks at Cleveland Electric's Avon Lake and Eastlake Plants and Toledo Edison's Bay Shore Station. The Ohio EPA has accepted the submissions and forwarded them to the U.S. EPA for approval. On January 4, 1990, the U.S. EPA proposed the approval of the submissions for the Eastlake and Avon Lake Plants. No action was taken with respect to the Bay Shore Station. In January 1988, the District of Columbia Circuit Appeals Court remanded portions of the 1985 regulations to the U.S. EPA for further consideration. The Centerior Utilities cannot predict what action the U.S. EPA may take or whether the e proposed approval vill be affected by the remand.

s In 1986, the Sixth Circuit Appeals Court ruled on a challenge filed by an environmental group and several states east of Ohio seeking to overturn the Federal sulfur dioxide emission limitations for the Eastlake and Avon Lake Plants. The Court ruled that the validity of the air quality model used by the U.S. EPA to set the sulfur dioxide emission limitations for those plants had not been adequately established. The Court permitted the Ohio sulfur dioxide emission limitations to remain in effect while the U.S. EPA completed its review of the application of the air quality model. The U.S. EPA, along with Centerior, demonstrated the validity of the model used to establish the sulfur dioxide emission limitations for those plants. On January 4, 1990, the U.S. EPA proposed to reinstate the overturned emission limitations. In another administrative proceeding commenced in April 1988, several north-eastern states, a Canadian province and several environmental groups asked the U.S. EPA to promulgate rules under Section 115 of the Clean Air Act to reduce sulfur dioxide emissions by revising existing state implementation plans for sulfur dioxide. The U.S. EPA advised the petitioners that it would not take immediate action on their request. In November 1988, the petitioners filed suit in the U.S. District Court for the District of Columbia to force the U.S. EPA to act on their request. The Centerior Utilities cannot predict what action the Court may take.

                                                                                                                                                                                                    )

en. E Thgra cr# river:1 bills currc:ntly bring considered in the U.S. Congrass which ' wouldJ require significant reductions in the emission of sulfur dioxide _and

       . nitrogen oxides by fossil-fueled electric generating units. See Note'3(b).

Water Quality Control 1 The Clean Vater Act requires that power plants obtain permits that contain certain effluent limitations (that is. limits on discharges of pollutants into

       - bodies' of water). It also-provides that permits for new power plants include even ~ more stringent effluent limitations, including zero discharges, where practicable. The Clean Vater Act also requires that cooling water intake structures for_ power plants incorporate the best- available technology 'for minimizing adverse environmental impact.         The Clean Vater Act requires the     j states to establish water quality standards _(which could result in more strin-     _l gent- effluent liraitations-for facilities than those- described above) and a         1 permit system to be approved by the U.S.      EM. Violators of effluent limita-    1 tions and water quality standards are subject to a civil penalty not to exceed
       - $25,000 per day for each such violation.

The Clean Vater Act permits thermal effluent limitations to be established for  ! a facility which are less stringent than those-which otherwise would apply if i the' owner can demonstrate that such less stringent limitations are sufficient to assure the protection and propagation of aquatic and other vildlife in_the 't affected body of water. By 1978, the Centerior Utilities had submitted to the j Ohio EPA such demonstrations for reviev vith respect to their Ashtabula, Avon { Lake, Lake Shore, Eastlake, Acme and Bay Shore plants. The Ohio EPA has taken i no action on the submittals.

                                                                                             ~;

In 1985, Cleveland Electric's Ashtabula, Avon Lake, Lake Shore, Eastlake and { Perry plants and-Toledo Edison's Bay Shore and Davis-Besse plants received NPDES permits from the Ohio EPA vhich incorporate applicable effluent limita-

       - tions. In,1987, Toledo Edison filed an application vith the Ohio EPA to have the NPDES permit renewed for its Acme plant. The Ohio EPA has yet to act on-this application; however, Acme may continue to operate while the application is pending. Violations of these NPDES permits are considered to be viola-tions of the~ Clean Vater Act subject to the penalty. discussed above.        Appli-j cations for the renewal of the NPDES permits for the Ashtabula, Avon Lake,             j Lake' Shore and Eastlake plants have been filed.       The Ohio EPA is expected to    1
     <  act on these applications during 1990.                                                 !

In 1976, the Ohio EPA issued water quality standards applicable to Lake Erie and waters of the State of Ohio. These standards may serve as the basis for , more stringent effluent limitations for the Cleveland Electric plants than are contained in the current NPDES permits for those plants. Such limitations j! could result in the installation of additional pollution control equipment and. increased operating expenses. Cleveland Electric appealed the issuance of -! such standards and tvo subsequent amendments to such standards to the Ohio EBR on the' basis that the standards were technologically infeasible, economically. unreasonable and without scientific foundation. The Ohio EPA has recently  ; issued revisions to the water quality standards. Based upon these revisions, Cleveland Electric has withdrawn its appeal of the previous standards _1 applicable to Lake Erie. Cleveland Electric cannot predict whether the new standatds vill lead to more stringent effluent limitations in its NPDES ' permits. ' 3

Uaste Disposal-

                       -Superfund established programs addressing the clean-up of hazardous vaste disposal sites,-emergency preparedness and other issues. Cleveland Electric is aware of its potential involvement in the clean-up of six hazardous vaste sites, and Toledo Edison is aware of its potential involvement in the clean-up of three hazardous vaste sites. The majority of these nine sites are subject to Superfund. Centerior and the Centerior Utilities believe that the ultimate outcome of these matters will not be material to them.

The Federal Resource Conservation and Recovery Act exempts certain electric utility vaste products from hazardous vaste disposal requirements until the U.S. EPA has completed a study of these vastes and existing disposal' methods. The Centerior Utilities are unable to predict whether the results of the study would affect them or, if affected, the costs relating to any required changes in the operations of the Centerior Utilities. ELECTRIC RATES General Under Ohio lav, rate base is the original cost less-depreciation of a utility's total plant adjusted for certain items. The law permits the PUCO, in its discretion, to include CVIP in rate base when a construction project is at least 75% complete, but limits the amount included to 10% of rate base ex-cluding CVlP or, in the case of a project to construct pollution control fa-cilities which would remove sulfur and nitrous oxide from flue gas emissions, 20% of rate base excluding CVIP. When a project is completed, the portion of its ecst which had been included in rate base as CVIP is excluded from rate base until the revenue received due to the CVIP inclusion is offset by the revenue lost due to its exclusion. During this period of time, an AFUDC-type credit is allowed on the portion of the project cost excluded from rate base. Also, the law permits inclusion of CVIP for a particular projtet for a period not 1 cager than 48 consecutive months, plus any time needed to comply with changed governmental regulation, standards or approvals. The PUC0 is em-povered to permit inclusion for up to another 12 months for good cause shown. If a project is cancelled or not completed within the allovable period of time after inclusi:en of its CVIP has started, then CVIP is excluded from rate base and any revenues which resulted from such prior inclusion are offset against future revenues over the same period of time as the CVIP was included. Current Ohio lav further provides that requested rates can be collected by a public utility, subject to refund, if the PUC0 does not make a decision within 275 days after the rate request application is filed. If the PUC0 does not make its final decision within 545 days, revenues collected thereafter are not subject to refund. A notice of intent to file an application for a rate in-crease-cannot be filed before the issuance of a final order in any prior pend-ing application for a rate increase or until 275 days after the filing of the prior application, whichever is earlier. The minimum period by which the notice of intent to file must precede the actual filing is 30 days. The test year for determining rater may not end more than nine months after the date the application for a rate increase is filed.

b;' , Undar .0hio 1sv, electric . rates _ cro cdjusted avary six months, citer o PUC0 6 . hearing, to reflect changes in fuel; costs. -Any difference'between actual. fuel costs during a-six-month period and the fuel revenues recovered in that period ' is deferred'and is taken into account in setting the fuel' recovery factor for a subsequentasix-month period.  ; i Also, under Ohio -lav,- municipalities may regulate rates, subject to appeal to  : the PUC0 if not' acceptable to the utility. If municipally fixed rates are ac- " cepted -by the utility, such rates are binding on both parties for the speci-

      'fied term and'cannot be changed by the PUCO. See " Operations--Competitive Conditions--Toledo Edison" for a discussion of Toledo Edison's rate contract with AMP-Ohio.

1989 Rate Orders In March 1988, the Centerior Utilities separately filed with the PUC0 app 11-cations requesting rate increases. Each Centerior Utility proposed a gradual increase -in its rates so as to " phase in"' full recovery of all its allovable costs of Perry Unit 1 and Beaver Valley Unit 2 over a 10-year period. Each Centerior Utility included in its rate application, as an alternative to its phase-in plan, a request.for an approximate 30% rate increase which reflected the increase necessary for full recovery of its investment in Perry Unit 1 and Beaver Valley Unit 2 on a nondeferred basis. 10n January 11, 1989, the Centerior Utilities entered into a settlement agree-ment .vith the majority of those parties who had intervened in the'Centerior Utilities' then-pending electric rate cases, and, on January 31, 1989, the PUC0 issued orders to the Centerior Utilities which adopted, in its entirety, .i the January 11 settlement. Subsequently, all pending prudence investigations and litigation involving the Centerior Utilities' nuclear investments were terminated. A more complete description of the rate increases and other major provisions of' the PUC0's January 31, 1989 orders is included-in Note 6. The orders pro-  !

     .vided     for three annual of approximately      9%, rate increases for Cleveland Electric and Toledo Edison                          y 7%   and 6% effective with bills rendered on and after February 1,' 1989, 1990 and 1991, respectively. The- 1991 rate increase is subject to reduction as described in Note 6. The orders further provided for the permanent exclusion of a portion of the Centerior Utilities' combined                                 ,

investments in Perry Unit 1 and Beaver Valley Unit 2 which resulted-in a write-off in 1988; the recovery in rates of the Centerior' Utilities' allowed investment in those two units; a three-year cap on earnings and parameters for seeking- permanent rate increases prior to February 1, 1994; and a significant reduction in costs resulting from a management audit to be completed in~ April 1990 and a cost control study :at Davis-Besse completed in 1989. The orders also establish nuclear plant performance standards beginning in 1991 and ex-tending through 1998 for the Centerior Utilities.

                                                                                                                ~I

i l' OPERATIONS . Sales of Electricity Kilowatthour sales by the Centerior Utilities follow a seasonal pattern marked by increased customer usage in the summer for air conditioning and in the , vinter for heating. Traditionally, Cleveland Electric has experienced its heaviest demand for alectric service during the summer months because of a significant air conditioning load on its system and a relatively lov amount of electric heating load in the vinter. Toledo Edison, although having a significant electric heating load, has experienced in recent years its heaviest demand for electric service during the summer months because of heavy air conditioning usage. The Centerior System's largest customer is a major steel manufacturer which has two major steel producing facilities served by Cleveland Electric. Sales

                                           -to   this customer in 1989 accounted for 3% and 4% of     the 1989 total electric operating revenues of Centerior Energy and Cleveland Electric, respectively.               ;

The loss of this customer (and the resultant loss of another large customer whose primary product is purchased by the two steel producing facilities) would reduce Centerior Energy's and Cleveland Electric's net income by about

                                            $33,000,000 based on 1989 sales levels.

The largest customer served by Toledo Edison is a major automobile manufac-turer. Sales to this customer in 1989 accounted for 1% and 3% of the 1989 total electric operating revenues of Centerior Energy and Toledo Edison, re-spectively. The loss of this customer would reduce Centerior Energy's and Toledo Edison's net income by about $11,000,000 based on 1989 sales levels.

   ~ Opsrating Statistics l

Centerior System Years Ended December 31, 1989 1988 1987 Energy Generated (Millions of kVh): Net Generation 32,296 29,381 27,801 Net' Purchases (2,785) 920 601 Net Available for Service Area 29,511 30,301 28,402-Electric Sales (Millions of kVh): Residential- 6,806 6,920 6,659 Commercial 6,830 6,577 6,350 Industrial 12,520- 12,793 11,985 Wholesale 429 863 399 Other 996 946 949 Total Electric Sales 27,581 28,099 26,342 Customers (End of Period): Residential 914,020 909,182 903,365 Commercial 93,933 92,132 90,148 Industrial & Other 12,763 12,305 12,240 Total Electric Customers 1,020,616 1__,013,619 1,005,753 Operating Revenues (In Thousands): Residential $ 685,735 $ 637,329 $ 629,663 Commercial 616,902 537,861 531,682 Industrial 746,534 675,584 689,959 Other 204,769 84,524 36,272 Total Retail 2,253,940 1,935,298 1,887,576 Vholesale 48,496 102,262 24,409 Total Electric 2,302,436 2,037,560 1,911,985 Steam Heating - - 13,371 Total Operating Revenues $2,302,436 $2,037,560 $1,925,356 l i

[i < Cle:vnlend ElGetric. I? , Years Ended December 31, n 1989- 1988 .1987

                     -Energy Generated-(Millions of kWh):

i: Net: Generation- '21,538 20,236 18,667 Net Purchases . . (777) 1,091- 1,248 g_ Net-Available-for Service Area- 20,761 21,327- 19,915 N . F '

                     , Electric Sales (Millions of kVh):/                                                             I E                       Residentjal-                               4,789            4,852            4,682 Commercial.                                5,208            4,998:          _4,818-g;                      ; Industrial                                 8,780:           9,013            8,396-Wh'olesale                                    87               481                . 55 Other.                                       501              '4721                 485 l                                              ..

19,365 -19,816 6 Total' Electric-Sales 18,436' t Custemers (End~of Period):- _ . y i

                        -Residential                              660,786          657,592_         654,021 Commercial                              -68,030            66,606          64.978 Industrial & Other                         8,329-           8,203              8,155        4 Total Electric-Customers             737,145          732,401          727,154 Operating Revenues.(In Thousands):                   _                          _

p- Residential' _S 469,803 .$ 436,413 S 428,786- . commercial 452,911 395,165 _389,297 4 Industrial- 519,854 476,063- 470,861- J 10ther 117,220 59,804- 12,322 TotalLRetail 1,559,788 1,367,445_ 1,301,266

                        ~ Wholesale                                 31,874          -84,133              9,378 m                 . _ Total Electric                     1,591,662        1,451,578-      -1,310,644           ,
                        -Steam Heating                                    -                  .
                                                                                                     -13,371
                            -Total Operating Revenues          $1,591,662      $1,451,578.     '$1,324,015 i

i i 1

        .t.

i

fi _. .

                                              'Tnleds Edison-II Years Ended December 31, 1989           1988         1987 Energy Generated (Millions of kVh):

Net Generation 10,758 9,145 9,134~ y Net Purchases (1,175) -385

                                                                                           -(647)

Net Available for' Service Area 9,583- 9,530 8,487 Electric Sales'(Millions of kVh): Residential 2,017 2,068- 1,977; ' Commercial 1,622 1,579 1,532; Industrial 3,740 3,780 3,589

             ~Vholesale-                                    .1,175            938            344 other.                                           495           ,474            464-
                ' Total' Electric Sales-                     9,049         8,839-         7,906 a-
Customers (End of Period):

Residential- 253,234 251,590 249,344'- - Commercial i 25,803 25,526 25,170 Industrial & Other 4,434 4,102 4,085 1 Total Electric Customers 283,471 281,218 278,599 d Operating Revenues (In Thousands): - Residential $215,932 $200,916

                                                                                      $200,877     j Commercial                                 163,991         142,696       142,385 Industrial                                 226,680         199,521       219,098
             .0ther                                        99,451'       -34,961         27,646-Total.Retall                            706,054         578,094       590,006 3

Wholesale  ; 120,749 49,903 15,031 ,

               . Total Operating Revenues               $826,803.       $627,997      $605,037 l

l  : i

                                                                                                    'l l

o h I i 1 Opnrating Nuclear Units The -Centerior Utilities' generating facilities include, among others, three nuclear _ units owned as tenants-in-common or leased by the CAPC0 Group--Perry Unit 1, Beaver Valley Unit 2 and-Davis-Besse. (Davis-Besse is owned entirely by the Centerior Utilities.) These three units are in commercial operation. Cleveland Electric has responsibility for operating Perry Unit 1, Duquesne has responsibility for operating Beaver Valley Unit 2 and Toledo Edison has re-sponsibility for operating Davis-Besse. Cleveland Electric and Toledo Edison own, respectively, 31.11% and 19.91% of Perry Unit 1, 24.47% and 1.65% of Beaver _ Valley Unit'2 and 51.38% and 48.62% of Davis-Besse. Cleveland Electric and Toledo Edison also lease, as joint lessees, another 18.26% of Beaver Valley Unit 2 as a result of the Beaver Valley Transaction (see Note 2). Davis-Besse was placed in commercial operation in 1977, and its operating license expires in 2011 vith a possible extension to 2017. Perry Unit 1 and Beaver Valley Unit 2 vere placed in commercial operation in 1987, and their operating licenses expire in 2026 and 2027, respectively. The nuclear plant performance standards set for the Centerior Utilities for the 1991-1998 period as a result of the PUCO's January 1989 rate orders (see

" Electric Rates--1989 Rate Orders" and Note 6) vill be based on rolling three-year industry averages of operating availability for pressurized water reactors and for boiling water reactors. Operating availability is the ratio of the number of hours a unit is available to generate electricity (whether or not the unit is operated) to the number of hours in the period, expressed as a percentage. At year-end     1989,   the industry three-year average operating availability for pressurized water reactors such as Davis-Besse and Beaver Valley Unit 2 was 72% and for boiling water reactors such as Perry Unit 1 was 74%. Initially, the averages of the Centerior nuclear units over the 1988-1990 period vill be the basis for comparison against the appropriate industry average over      the same period.      As of January 1990,    the two-year average operating availability of the Centerier Utilitics' pressurized water reactors was 83% and boiling water reactor was 65%.

For 1989, Davis-Besse had an operating availability of 97%. During the year, Perry Unit 1 and -Beaver. Valley Unit 2 vere out of service for about five months and three months, respectively, for modifications, repairs and refuel-ing. These outages resulted in operating availabilities of 55% for Perry Unit 1 and 71% for Beaver Valley Unit 2 in 1989. Since returning to service from the outages, both Units have achieved high levels of operating availability. Davis-Besse was taken out of service on January 26, 1990 for a four-month refueling, plant modification and maintenance outage. Both Perry Unit 1 and Beaver Valley Unit 2 are scheduled for two-month refueling outages starting in September 1990. In the future, assuming normal operations, refueling outages for each of these three units are expected to occur every 18 months. Cleveland Electric has responsibility for maintaining Perry Unit 2, whose construction was suspended by the CAPC0 Group companies in 1985 (see Note 3(c)). Cleveland Electric and Toledo Edison own 31.11% and 19.91%, respectively, of Perry Unit 2. The construction permit for Perry Unit 2 expires in November 1991; however, Centerior and the Centerior Utilities believe that the NRC will renew the permit pending the CAPCO Group's resolution of the future of that Unit. 7 [] Nuclear Unit C'ncerns See' Note 4(a) for a discussion of potential problems facing owners of nuclear D < generating units. L Competitive Conditions Ceneral. The centerior Utilities compete in their respective service areas with suppliers of natural gas for space, vater and process heating and appli-ances. The Centerior Utilities also are engaged in competition to a lesser [ extent with-surpliers of oil and liquified natural gas for heating purposes, vith certain customers who own and operate cogeneration facilities and, in the L case of Cleveland Electric, with CPP. E Certain municipal officials in several of the municipalities served by the 4 Centerior Utilities have suggested that their municipalities investigate the economic' feasibility'of establishing and operating municipally ovned electric systems. Vith the exception of Clyde, Ohio, as discussed below under "Com-petitive conditions--Toledo Edison", none of those municipalities has obtained authorization to establish such a system. The Centerior Utilities face continuing competition from locations outside their service areas which are promoted by governmental and private agencies in attempts to influence potential and existing commercial and industrial cus-tomers to locate in their respective areas. Cleveland Electric and Toledo Edison also periodically compete with other electric utilities for sales to electric utilities which are in the market for bulk power purchases. Cleveland Electric. The City of Cleveland operates CPP in competition with

        - Cleveland Electric. CPP is primarily an electric distribution system which supplies electric power in approximately 35% of the City's area and to ap-
        ~ proximately 23% (about 50,000) of the electric consumers in the City--equal to-about 7% of all customers served by Cleveland Electric. CPP's kilovatthour sales and revenues are equal to about 3% of Cleveland Electric's kilowatthour              -

sales and revenues. Much of the aren served by CPP overlaps that of Cleveland Electric. Cleveland Electric is obligated to make available up to 100,000 kilowatts of CPP's energy requirements wer two 138 kV interconnections. However, in recent years, CPP has not made significant power purchases from Cleveland Electric. In 1989 Cleveland Electric provided less than 1% of CPP's energy requirements. The balance of CPP's power is purchased from other sources system.- and transmitted or "vheeled" over Cleveland Electric's transmission For all classes of customets, Cleveland Electric's rates are higher: than CPP's rates due primarily to CPP's purchases of lov-cost power which is not available, by lav, to Cleveland Electric and to the exemption from taxa-tion enjoyed by CPP. In May 1983, CPP announced its intention to convert some of Cleveland Electric's customers to its service. In August 1987, the City of Cleveland sold $50,000,000 of special obligation bonds payable only from.reve-nues of CPP. CPP stated that it plans to use the proceeds primarily to con-struct by 1992 new transmission and distribution facilities extending into easterly portions of Cleveland, comprising over 20% of the area of the City, which nov are served exclusively by Cleveland Electric. The construction a

i cch;dul2 of CPP is int:nd:d: to cnnblo it to stcrt offering sarvic3 in. that-  ! area. as early as 1991 to residential and commercial customers (including some f

     . classified as small industrial by cleveland Electric) and various City facili-ties. CPP projects that by 1992 it should take away from Cleveland Electric                  i
      .in .that area over 34,000 residential customers and a small number of commer-                   1 cial customers. 0ver the past three years, Cleveland Electric has experienced                  i
the net loss of an insignificant number of customers (about 2,300), which vere primarily residential,-to the CPP system.

, In May 1988, the Ohio Supreme Court ruled that CPP must-pay back the loan of approximately $29,400,000 it had received from tax revenues of the City of l Cleveland, which loan vas subsequently forgiven by the City. Cleveland i Electric had filed a suit in August 1984 on behalf of itself and all other

      ' taxpayers in the City of Cleveland claiming that the transfer of tax funds                     .
  • from the City to CPP was in violation of the City's charter. The Ohio Supreme L Court agreed with Cleveland Electric and remanded the case to the trial court i for .c determination of a repayment plan for the reimbursement of tax funds j vith proper-interest.  ;

L Tho' City of Painesville owns.and operates an electric generation and distribu- l tion system which supplies electric power exclusively to customers in the City  ; of Painesville. It also serves small portions of Painesville and Perry Town. ' ships which also are served by Cleveland Electric. The number of customers = ' served by the Painesville system is approximately 1% of the number of cus- i t- .tomers served by Cleveland Electric. Cleveland Electric has a 138 kV inter- -! l connection with the City of Painesville and provides power for emergency r purposes only, i Currently, four commercial customers and one industrial customer of Cleveland  ;

     -Electric have cogeneration installations. A number of customers have inquired                    !

about cogeneration applications although there were no new installations in 1989, and cogeneration vendors continue to be active in Cleveland Electric's

  • service area.

Toledo Edison. Located wholly or partly within Toledo Edison's service area 'f-are five rural electric cooperatives which are supplied with power, trans-  ; mitted in some cases over Toledo Edison's facilities, by Buckeye Power, Inc. (an affiliate of a number of Ohio rural electric cooperatives).  ;

      -Toledo Edison serves 13 municipalities      at' wholesale rates through AMP-Ohio.

On December 1, 1989, Toledo Edison commenced billing AMP-Ohio under~a new agreement- which is in the process of being filed with the FERC for its approval. Under this nev 20-year agreement, Toledo Edison vill supply certain i power requirements of AMP-0hio and transmission service for 13 of its muni-cipal members. Rates under the proposed contract are permitted to increase annually to compensate for increased costs of operation. Less than 3% of Toledo Edison's total electric operating revenues in 1989 was derived from sales under the AMP-Ohio contract. i 3 v

I The tunicipalitics which h;va cntar:d inta cn cgrcerent with AMP-Ohio have - been purchasing some of their pover needs from other sources at rates lover than Toledo Edison's and transmitting and delivering such power through Toledo Edison's transmission and distribution systems. Two municipalities have expressed an ints. on to totally eliminate thei r pover purchases from Toledo Edison. Those ,a municipalities are attempting to force another Ohio utility to provide them with electricity. !!ovever, the Ohio utility involved has refused to provide such power, and the two munici-palities filed a complaint with the FERC in this matter. On December 11, 1989, the FERC dismissed the complaint. In November 1987, the city of Clyde, Ohio, initiated plans to establish and operate a municipally ovned electric distribution system. Toledo Edison's largest customer in Clyde, which accounted for about 75% of Toledo Edison's total sales to Clyde and represented over $5 million in annual revenues, converted to the Clyde system in March 1989. As of November 1989, the distribution system was 30% complete and over 300 Toledo Edison customers had ' switched to Clyde Light & Pover. Approximately 1,000 additional Toledo Edison customers have requested conversion when service becomes available. On October 10, 1989, the City of Toledo adopted an ordinance establishing an Electric Franchise Review Committee for the purpose of studying Toledo Edison's franchise agreement with the City to determine if alternate energy sources are available. The committee vill investigate the feasibility of establishing a municipal electrical system within the City of Toledo and the feasibility of utilizing other alternative electric power sources. Toledo Edison is negotiating with the City in an effort to address the City's concerns. Currently, two commercial customers of Toledo Edison plan to continue their cogeneration operations. A third commercial cogeneration installation vill l cease operation upon PUC0 approval of an incentive agreement. A number of ' customers have inquired about cogeneration applications although there were no nov installations in 1989, and cogeneration vendors continne to be active in Toledo Edison's servi-e area. Fuel Supply Cleveland Electric and Toledo Edison are primarily ccal-fired utilities. Gen-eration by type of fuel for 1989 for Cleveland Electric was 69% coal-fired and 31% nuclear; for Toledo Edison was 48% coal-fired and 52% nuclear; and for the Centerior System was 62% coal-fired and 38% nuclear. l Coal. In 1989, Cleveland Electric and Toledo Edison burned 6,136,000 tons and [ 2,000,000 tons of coal, respectively, for electric generation. Each utility i' normally maintains a reserve supply of coal sufficient for about 40 days of normal operations. On March 1, 1990, this reserve was about 45 days for plants operated by Cleveland Electric, 46 days for plants operated by Toledo Edison and 55 days for the Mansfield Plant, which is operated by Pennsylvania i Power. l l 1

                                                                                    )

1 r i. 13 1989, about $8% cf Clevelcnd E10ctric's ceal r;quirc2:nts was purchased  ; '^ under long-term contracts with the longest remaining term being almost 11 - years. In most cases, these contracts provide for' adjusting the price of the coal on the basis of changes associated with coa 1' quality and mining costs. ' The sulfur content of the coal purchased under the long-term contracts ranges from less than 1% to about 4%. The balance of Cleveland Electric's coal was  ! purchased on the spot market with sulfur content ranging from less than 1% to 3.5%.

                                                                                                     ~

In .1989, about 95% of Toledo Edison's coal requirements was purchased under long-term contracts with the longest remaining term being almost 11 years. In i most cases, these contracts provide for adjusting the price of the coal on the ' basis of changes associated with coal quality and mining costs. The sulfur e content of.the coal purchased under the long-term contracts ranges fros less than 1% to 4%. The balance of Toledo Edison's coal was purchased on the spot market with sulfur content of about 1%. One of Cleveland Electric's long-term coal supply contracts is with Ohio Valley. Cleveland Electric has agreed to pay Ohio Valley certain amounts to cover Ohio Valley's costs regardless of whether coal is actually delivered. Included in those costs are amounts sufficient to service the long-term debt and lease obligations incurred by Ohio Valley. If the coal sales agreement is terminated for any reason, including the inability to use the coal, Cleveland Electric must assume Ohio Valley's debt and lease obligations and may incur other expenses. Cleveland Electric believes that the cost of assuming such obligations and incurring such expenses vould not have a material adverse  ; effect upon its financial position. The principal amount of debt and - termination values of leased property covered by Cleveland Electric's agreement was $45,968,000 at December 31, 1989. Centerior and Cleveland Electric expect that Ohio Valley revenues from sales of coal to Cleveland Electric vill continue to be sufficient for Ohio Valley to meet its debt and Icase obligations. The contract with Ohio Valley expires in 1997. The CAPC0 Group companies, including the Centerior Utilities, have a long-term contract with Quarto and Consol for the supply of about 75%-85% of the annual coal needs of the Hansfield Plant. The contract runs through at least the end of 1999, and the price of coal is adjustable to reflect changes in labor, materials, transportation and other costs. The CAPC0 Group companies have . guaranteed, severally and not jointly, the debt and lease obligations incurred

    . by Quarto to develop, equip and operate two of the mines which supply the Mansfield Plant. At December 31, 1989, the total dollar amount of Quarto's debt and Icase obligations guaranteed by Cleveland Electtic was $43,205,000 and by Toledo Edison was $24,276,000. Centerior, Cleveland Electric and Toledo Edison expect that Quarto revenues from sales of coal to the CAPCO Group companies vill continue to be sufficient for Quarto to meet its debt and lease obligations.

Nuclear. The acquisition and utilization of nuclear fuel involves six dis-tinct steps: ~ (1) supply of uranium oxide rav material. (ii) conversion to uranium hexafluoride, (iii) enrichment, (iv) fabrication into fuel assemblies, (v) utilization as fuel in a nuclear reactor and (vi) storing and reprocessing , or disposing of spent fuel. The Centerior Utilities have inventories of raw material sufficient to provide nuclear fuel through 1994 for the operation of j

their .nucicar g:n: rating units cnd have c:ntrcets f:r c:nversien of that fuel and fabrication services-for most of that fuel. . The CAPCO Group companies s have a 30-year contract with the DOE vhich vill supply up to til of the-needed enrichment services.for their nuclear units' fuel supply for that period. The- e additional required fabrication services are available. Substantial additional fuel vill .have to be obtained in the future- over the remaining- l useful- lives of- the units and if Perry Unit 2 -is completed. There is a plentiful supply of uranium oxide rav material to meet the industry's nuclear i fuel needs. ( spent fuel reprocessing is not commercially available. Off-site disposal of i spent nuclear fuel is also unavailable, but the CAPCO Group companies have contracts with the DOE vhich provide for the future acceptance of spent fuel  ; for disposal by the Federal government. Pursuant to the Nuclear Vaste Policy- .l Act. of 1982, the. Pederal government has indicated it vill begin accepting -

   -spent fuel from utilities by the year 2010.            On-site storage capacity at     '

Davis-Besse .and Beaver Valley Unit 2 should be sufficient through 1996 and 2009, respectively. On-site storage capacity at the Perry Plant should be  ! sufficient through 2006.for Perry Unit 1. Any additional storage- capacity ' needed for the period until the government _ accepts the fuel can be provided for either on-site or off-site by the-time it is needed. 011. The Centerior Utilities each have adequate supplies of oil and fuel for their oil-fired electric generating units which are used primarily as reserve  : and peaking capacity. i P f i n 4 1 r

                                          .m-    n. -

EKBCtfTIVE CFFICERS CF THE REGISTRANTS AND THE SERVICE COMPANT 5et forth belov are the names, ages as of March 15, 1990, positions and brief cecounts of the business experience during the past five years of the execu-tive officers of Centerior Energy, the Service Compe.ny, Cleveland Electric and Toledo Edison, Positions currently held are designated with an asterisk (*). Centerior Energy Executive Officers Business Experience Effective Date Name Age (Positions as Indicated) of Position Richard A. Miller 63

  • Chairman of the Board and October 1988 Chief Executive Officer of Centerior and the Service Company Vice Chairman of the Board July 1988 and Chief Executive Officer of the Service Company and Cleveland Electric and Chairman of the Board and Chief Executive Officer of Toledo Edison President of the Service April 1986 Company President of Centerior February 1986 President of Cleveland September 1983 Electric Robert J. Farling $3
  • Chairman of the Board and February 1989 Chief Executive Officer of Cleveland Electric
  • President of Centerior and October 1988
  • Chairman of the Board and Chief Executive Officer of Toledo Edison
  • President of the Service July 1988 Company President of Cleveland April 1986 Electric Executive Vice President of February 1986 Centerior Vice President-Administrative July 1980 Services of Cleveland Electric w

n ,

                                                                                        =-   --

Lg', c jy Busin:ss Exp;riGnc3 Eff;ctiva Date g' <

                     -Name          Ag        (Poritions as Indicated)-        of Position Paul H. Smart     61   *Vice Chairman of'the Board-        April 1989-E U

of Centerior.

                                         *Vice Chairman of the Board         July.1988-s.

of Toledo Edison L[ Executive Vice President-of February 1986 Centerior-President of Toledo Edison July 1985.

                                         . Senior Vice-President,            January 1984 g
                                             . Corporate Development and L                                              General Counsel of-Toledo Edison Murray R. Edelman  50 i,
  • Executive.Vice President of July.1988 Centerior and
  • President

[ of Toledo Edison. F

        -                                  Vice President-Nuclear            April 1986 of the Service. Company and.

Senior Vice President-Nuclear of Cleveland Electric ' ' Vice President-Nuclear of December 1982 Cleveland Electric k Lyman C. Phillips 50

  • Executive Vice President of July 1988 Centerior and
  • President of uso Cleveland Electric J

Executive Vice President of June 1987 Toledo Edison and Senior Vice President of Centerior Senior Vice President- April 1986 Administration of the Service Company Senior Vice President, January 1984 Administration of Toledo Edison in Edgar H. Haugans 55

  • Senior Vice President-Finance April 1988 of Centerior
  • Senior Vice President-Finance April'1986 of the Service Company Vice President-Finance of February 1986 Centerior Vice President-Finance of February 1979-Cleveland Electric O

i

WW - y  ;>

                                                                                                                                               ~

g '- p W, ' k .f) , ~ i W~cx - < BusinMs Experienco :Eff0ctiv3 Data-jfa g:y :Name a g (Positions as-Indicated)' - of Position I

                                                                        -62. '*Vice. President-Legal'&-            : July;1989;                          '

f.L.

  • LVictor F. Grerenslade. Governmental' Affairs of.

y( 4 , Centerior.and the Service 1 Company.

 ,;<                         ,                                                   =*Vice President of Cleveland l     July 1989
 +               .'
                                                                                     ; Electric
Vice President & General June'1987
     .        %                                                                       ~ Counsel of Centerior and:
                                                                                    - the; Service. Company,             .

e J- ~ General Counsel of the. April 1986-Service Company . i- General Counsel & Director- February 1983 f Governmental Affairs of'

Cleveland Electric-
Paul G.' Busby 41 -
  • Controller of Centerior April 1988 7._
  • Controller.-of-the Service June 1986' a Company .

I , Controller of Toledo Edison April 1979-F h Gary M..Hawkinson 41 -* Assistant Treasurer of August 1987 , , k Cleveland Electric h

  • Assistant. Treasurer of -September 19861
                                                                                      , Toledo Edison p
  • Treasurer of the Service April 1986 m Company- . .

f

  • Treasurer of Centerior February 1986' Assistant-Secretary of April 1984 .
                                                                                      ' Toledo-Edison:                     . April 1986                 4-hs                                                                                 --Assistant Treasurer of           March?l979--

Toledo Edison April.1986 .

                         .E..Lyle~Pepin                                 ' 48
  • Secretary of Cleveland 0ctob'er 1988-Electric and Toledo Edison L

L

  • Secretary of'the Service April 1986 E Company g', Assistant Secretary of April 1986=

I Cleveland Electric and L Toledo Edison

  • Secretary of Centerior- February 1986 Secretary of Cleveland October 1982 Electric i >

1 g , 3- ,

?      >

W{. , , .

   ,c                                                                                       ; ---

to S7rvic7 C**pa*y Ex cutiva Offienrs Business Experience (Positions Vith the Service Company Effective Date Name Age Unless Otherwise Indicated) of Position Richard A. Miller 63

  • Chairman of the Board and- October 1988 Chief Executive Officer See listing under Centerior Energy. Executive Officers for additional business
                                       . experience.

Robert J. Farling 53

  • President July 1988 See listing under Centerior Energy Executive Officers for additional business experience.

Edgar H. Maugans 55

  • Senior Vice President-Finance April 1986 See listing under Centerior Energy Executive Of ficers for additional business experience.

Richard P.=Crouse 50

  • Senior Vice President of April 1988 Toledo Edison
                                    *Vice President-Fossil          August 1987 Engineering & Operations Senior Vice President,         June 1986 Engineering & Operations of Toledo Edison Senior Vice Presiaent, t

July 1985 Operations of Toledo Edison Vice President, Nuclear of December 1979 Toledo Edison Victor F. Greenslede 62 *Vice President-Legal & July 1989 Governmental Affairs See listing under Centerior Energy Executive Officers for additional business experience. Lf

p L Busin:ss Experitnce (P:sitiens 9~; .. With the Service Company Effective Date Name Age. Unless Otherwise Indicated) ~ of-Position John S. Levicki 50 *Vice President-Public Oc tober- 1988 - Affairs'& Rates Vice President-Finance, January:1988-Administration &' Legal of Cleveland Electric Vice President-Finance & April 1986 Administration of Cleveland Electric Manager-Consumer Services September 1981 Dept. of' Cleveland Electric Villiam D. Masters 59 *Vice President-System April 1986 Engineering & Operations Manager-System Planning & July 1985 Operations Dept. of Cleveland Electric Manager-Plant & Substa. tion February 1984 Engineering Dept. of Cleveland Electric Stanley E. Vertheim 62 *Vice President-Administration June 1987 Assistant to the President. April 1986 Director-Corporate Planning February 1985 of Cleveland Electric Manager-System Planning & January 1984

                                 -Operations Dept. of Cleveland Electric Paul G. Busby         41
  • Controller June 1986 See' listing under Centerior Energy Executive Officers for additional business experience.

Gary M. Hawkinson 41

  • Treasurer April 1986 See listing under Centerior Energy Executive Officers for additional business experience.

E. Lyle Pepin 48

  • Secretary April 1986 See listing under Centerior Energy Executive Officers 4 for additional business experience, i

i

                .-,                                      . . . .   ,                  . -c

p. v

          ,,                             C1cy^1 nd El^ctric Executive Officers                           !

f

                                                    . Business Experience (Positions
?

With Cleveland Electric Effective Date [ Name Ap Unless Otherwise Indicated) of' Position t i. Robert'J. Farling 53-

  • Chairman of the-Board and February 1989 I Chief Executive Officer See listing under Centerior Energy Executive Officers for additional-business  ;

experience. L- 1.yman C. Phillips 50

  • President ..  : July 1988 .:

See listing under Centerior [P

"                                                        Energy Executive Officers for additional business                          !

L experience.  !

                 - Gary J. Greben              52    *Vice President-Marketing         July 1987         ,

Manager-Business Ventures November 1984 L Victor F. Greenslade 62 *Vice President July 1989 f See listing under Centerior Energy Executive Officers for additional business experience. A

- Jacquita K. Wauserman 47 *Vice President-Administration October 1988
                                                     = Director-Consumer Services      April 1986       '

Dept. I Senior Corporate Planning August 1985- i Advisor General Supervisor-Personnel July 1985  :' Development Section, Personnel' Dept. General Supervisor-Employee November'1983 Services Section,~ Personnel Dept. Alvin Kaplan 51 '*Vice President-Nuclear' December 1987 Vice President-Nuclear February 1984 Operations Division Villiam'K. McClung 60 *Vice President-Distribution 6 January 1988-

                                                       -Services-                                        '

i Vice President-Distribution &- May 1986 Servicer Division ' Manager-Miles District Dept. July 1982 t P

                                                               ,                                                                                                    i 3

b - I

   ..e     >

Busin;ss Experi:nco (Ptsitions With Cleveland Electric Effective Date-Name Age __Unless Otherwise Indicated) of Position Richard A. Peterka 62 *Vice President-Pover Supply January 1988' Vice President-Pover May 1986 Production Division Director-Union Relations October 1993 John M. Borthwick 53

  • Controller January 1989 Manager-General Accounting March 1980 Section, Controller's Dept..
      -Terrence R. Moran     48
  • Treasurer April'1986 Assistant-Treasurer and July 1984 General Supervisor, Funds Management Section E. Lyle Pepin 48
  • Secretary October 1988 See listing under Centerior
                                     ' Energy Executive Officers for additional business experience.

Toledo Edison Executive Officers _ Business Experience (Positions Vith Toledo Edison Effective Date Name Age .Unlens Otherwise Indicated) of Position Robert J. Farling 53

  • Chairman-of the Board and October 1988 Chief Executive Officer See. listing under centerior Energy Executive Officers for additional businens experience.

Paul M. Smart 61 *Vice Chairman of the Board July 1988 See listing under Centerior Energy Executive Officers for additional business experience. Murray R. Edelman 50

  • President . July 1988 See listing under Centerior Energy Executive Officers for additional-business experience.
                                                                                        'l I
                                                                                        'I
                                                                                               'i

{JTJi.

     ,     19s-i' Busin:ss Experict.co (P:siticns         .

g, With Toledo Edison. Effective Date i. Name Age: Unless Otherwise Indicated) of Position  ; L Richard P. Crouso 50 .* Senior Vice President April 1988 i L' See listing under the [ Service Company Executive  ! Officers for additional

  • business experience, n

j David L. Monseau 49 *Vice President-Customer September 1987 ,

 ,                                               Operations Director-Human Resources       April 1986          ,

Dept. of the Service - Company Manager-Personnel Dept. of June'1980 < Cleveland Electric Thomas M. Quinn 50 *Vice President-Marketing September 1987 General Manager-Consumer August.1986 i Services Dept.  ! Manager-Southern District January 1979 'l Donald H. Saunders 54 *Vice-Presioent-Administra- January 1990 tion & Governmental Affairs j Vice President, Finance & July 1986 Administration  : Treasurer March 1979 I Donald C. Shelton 56 *Vice President, Nuclear August 1986  ! Project Manager, Stone and January 1983~  ; Vebster Engineering Corp. ,

                -James-P. Martin      46
  • Controller and Treasurer October 1988 Controller October 1987.

, Treasurer July.1986 Audit Manager October 1977 ' E. Lyle Pepin- 48

  • Secretary October 1988 See listing under Centerior .

Energy Executive Officers for. additional business experience.

                                                                                                 ?

s Y9 P

b i

                                                                                  ~

d A13 cf thh Cx;cutiv] cffic:rs ofLC;ntOrior Ensrgy, tha .S:rvica C::pany,  !

     ' Cleveland 1 Electric and Toledo Edison are elected annually for a one-year term-              I g     by the board of directors of. Centerior, the Service Company, Cleveland                       !

L Electric or. Toledo ~ Edison, as the case may be. Mr. Smart is employed by

  • Toledo' Edison through September 1, '1990 pursuant to an employment and L consulting agreement.- l No- family relationship exists among any of the executive officers and direc-
 ;                                                                                                   t tors of any of the Centetior System companies.

Item 2. Properties ,

 <                                            GENERAL The Centerior System                                                                          i p       The' wholly owned, jointly evned and leased electric generating facilities of                "

p the ~Centerior Utilities in commercial operation as of December 31, 1989 pro-

vide the Centerior System with a net demonstrated capability of 6,689,000 i- kilowatts during the vinter. These facilities include 28 generating units (4,390,000 kilowatts) at seven fossil-fired steam electric generation sta- '

tions; three nuclear generat3ng units (1,843,000 kilowatts); a 305,000 kilo-vatt share of the Seneca Plant; seven combustion turbine generating units (147,000 kilowatts) and one diesel generator (4,000 kijovatts).'.All of the Centerior System's generating facilities are located in Ohio and Pennsylvania. t The centerior System's net 60-minute peak load of its service area fcr 1989 was 5,389,000 kilowatts and occurred on July 10. At the time of the 1989 p2ak load, the operable capacity available to serve the load was 5,599,000 kilo- ! vatts.- The Centerior System's 1990 service area peak load is forecasted to be , 5,370,000 kilowatts. The 1990 forecasted peak load reflects a negligible  ; decrease 'from the 1989 peak load because of a projected slight economic j slowdown in 1990. The operable capacity expected to be available to serve the < Centerior System's 1990 peak is 6,597,000 kilowatts. Over the 1990-1992 period, Centerior Energy forecasts its operable capacity margins at the time of the.projectc4 Centerior System peak loads to range from 14% to 19%. .

       'Each Centerior Utility ovns the electric transmission and distribution facili-ties located in its respective service area. Cleveland Electric and Toledo Edison- are interconnected by-345 kV transmission facilities, some portions of which are owned and used by Ohio Edison.      The Centerior Utilities have a long-
              ~

term contract with the CAPCO Group-companies, including Ohio Edison, relating

  • to the use of these facilities. These interconnection facilities provide for ,

the interchange of power between the two 'Centerior Utilities. The Centerior System -is-interconnected with ' Ohio Edison, Ohio Pover, Penelec and Detroit Edison Company. j t

n

 ?

Cleval nd .El:ctrit his cntcr:d into :cn crrc:m:nt with GPU und r which Cleveland Electric vill sell the power from its 305,000-kilowatt share of the Seneca Plant (about 3,000,000 kilowatthours annually) to two subsidiaries of GPU- fron 1991. through. 1993.- For the same' time period. Toledo Edison has catered into separate agreements with Consumer $ Power and Detroit Edison under [ vhich Toledo Edison vill purchase 312,000 kilowatts (about 2,500,000 kilo-vatthours annually) from their Ludington Plant. . Toledo Edison vill then sell ! to' Cleveland Electric power equivalent to_the amount that Toledo Edison [ purchases from the Ludington Plant. The net result of the power purchase and L sale agteements vill be economically. beneficial for Cleveland Electric and economically neutral for Toledo . Edison. These transactions are subjtet to

,      approval by the FERC.

0

     ' Cleveland Electric i

The wholly owned, jointly ovned and leased electric generating facilities of Cleveland Electric in commercial operation as of December 31, 1989 provide a F net . demonstrated ernability of 4,595,000 kilovatts during the vinter. These facilities include C1 generating units (3,197,000 kilovatts) at five fossil-l fired steam electric generation stations; its share of three nuclear generat-ing units (1,019,000 kilowatts); a 305,000 kilowatt share of the Seneca Plant; two combustion turbine generating units (70,000 kilowatts) and one_ diesel gen-urator (4,000 kilowatts). 'All of Cleveland Electric's generating facilities-are located in Ohio and Pennsylvania. I The net 60-minute- peak load of Cleveland Electric's service' area for 1989 was 3,866,000 kilovatts and occurred on July '40. The operable capacity at the-time of the- 1989 peak vas 4,000,000 kilovatts. Cleveland Electric's 1990 service area peak load is forecasted to be 3,870,000 kilowatts. The 1990-forecasted- peak load reflects a negligible increase from the 1989 peak loed-because of a projected slight economic slowdown in 1990. . The operable ' capacity, which includes firm purchases, expected to be available to serve Cleveland, Electric's 1990 peak is 4,685,000 kilowatts. Over the 1990-1992 period,'-Cleveland Electric forecasts its operable capacity' margins at the time of its projected peak loads to range from 10% to 17%. Cleveland Electric owns 'the facilities located in the area it serves for transmitting and distributing power to all its customers. - Cleveland Electric has interconnections with Ohio Edison, Ohio Power and.Penelec. The intercon-nections with Ohio Edison provide for'tlu: interchange of-electric power with the other CAPCO Group companies and for transmission of power from the-tenant-in-common owned or leased CAPCO Group generating _ unic, as well as for the interchange of power with Toledo Edison. The interconnection with Penelee provides ofor transmissions of pover from Cleveland Electric's share of the Seneca Plant. . In addition, there interconnections provide the means for the.

     - interchange of electric power with other utilities.

Cleveland Electric Light Plant and CPP. also has interconnections with the Painesville Municipal 1

T-leda Edisin The wholly ovned,' jointly owned and leased electric generating facilities of Toledo Edison in commercial operation as of Decembet 31, 1989 provide a net demonstrated capability of 2,094,000 kilovatts during the vinter. These facilities' include nine generating units (1,193,000 kilowatts) at three fossil fired steam electric generation stations; its share of three nuclear generating units (824,000 kilovatts) and five combustion turbine generating units (77,000 kilowatts). All of Toledo Edison's generating facilities are located in Ohio and Pennsylvania. The net 60-minute peak load of Toledo Edison's service area for 1989 was 1,526,000 kilowatts and occurred on July 10. The operable capacity at the time -of the 1989 peak was 1,599,000 kilovatts. Toledo Edison's 1990 service area peak load is forecasted to be 1,510,000 kilowatts. The 1990 forecasted peak load reflects a negligible decrease from the 1989 peak load because of a proj ected slight economic slovdown in 1990 and reduced sales under the AMP-Ohio agreement. The operable capacity, which excludes firm sales, expected to be available to serve Toledo Edison's 1990 peak is 1,912,000 kilowatts. Over the 1990-1992 period, Toledo Edison forecasts its operable capacity margin at the time of its projected peak loads to be approximately 21%. Toledo Edison owns the facilities located in the area it serves for trans-mitting and distributing power to all its customers. Toledo Edison has interconnections with Ohio Edir.on, Ohio Power and Detroit Edison. The in-terconnection_ vith Ohio Edison provides for the interchange of electric power with the other CAPC0 Group companies and for transmission of power from the tenant-!n-common owned or leased CAPC0 Group generating units as well as for the interchange of power with Cleveland Electric. In addition, these inter-connections provide the means for the interchange of electric power with other utilities. Toledo Edison has interconnections with each of the municipal systems operating within its service area. TITLE TO PROPERTY j

                                                                                               ~

The generating plants and other principal facilities of the Centerior Utilities are located on land owned in fee by them, except as_follows: (1) Cleveland Electric and Toledo Edison lease from others for a term of about 29-1/2 years starting on October 1, 1987 undivided 6.5%, 45.9% and 44.38% tenant-in-common interests in Units 1, 2 and 3, respectively, of the Mansfield Plant located in Shippingport, Pennsylvania. Cleveland [ Electric ~ and Toledo Edison lease from others for a term of about 29-1/2 1 years starting on October 1, 1987 an 18.26% undivided tenant-in-common l interest in Beaver Valley Unit 2 located in Shippingport, Pennsylvania. Cleveland Electric and Toledo Edison own another 24.47% interest and 1.65% interest, respectively, in Beaver Valley Unit 2 as a tenant-in-common. Cleveland Electric and Toledo Edison continue to own as a tenant-in-common the land upon which the Mansfield Plant and Beaver l Valley Unit 2 are located, but_have leased to others certain portions of that land relating to the above-mentioned generating unit leases. (

r t [' (2) M;st cf the fccilitics of Clav21cnd ElGetric's Laks Shcro Pltnt tre  !

!         situated on artificially filled land, extending beyond the natural shore-   l line- of Lake Erie as it existed in 1910. As of December 31, 1989, the cost of Cleveland Electric's facilities, -other than water intake and       !

y discharge facilities, located on such artificially filled land aggregated i approximately $112,663,000. Title to land under the water of Lake Erie vithin the territorial limits of Ohio (including artificially filled land) is in the State of Ohio in trust for the people of the State for the public uses to which it may be adapted, subject to the powers of the United States, the public rights of navigation, water commerce and fishery and the rights of upland owners to vharf out'or fill to make use  ! of the water. The State is required by statute, after appropriate pro- i ceedings, to grant a lease to an upland ovrmr, such as Cleveland Elec-tric,. which erected and maintained facilities on. such-filled land prior to October 13,-1955. Cleveland Electric does not have'such a lease from , the State with respect to the; artificially filled land on which its Lake  ; Shore plant facilities are located, but Cleveland Electric's position,-on advice of counsel for. Cleveland Electric, is that its facilities and oc- ' cupancy may not be disturbed because they do not interfere,vith the free i flow of commerce in navigable channels and constitute (at least in part) ' and are on land filled pursuant to the exercise by it of its property " rights as owner of the land above the shoreline adjacent to the filled land. Cleveland Electric holds permits, under Federal statutes relating to navigation, to occupy such artificially filled land. (3) The facilities of Cleveland Electric's Seneca Plant in Varren County, Pennsylvania, are located on land owned by the United States and occupied by Cleveland Electric and Penelee pursuant to a license issued by the FERC for a 50-year period starting December 1, 1965 for the construction, ' operation and maintenance of a pumped-storage hydroelectric plant. (4) The water intake and discharge facilities at the electric generating plants of Cleveland Electric and Toledo Edison located along Lake Erie, the Haumee River and the Ohio River are extended into the lake and rivers under their property rights as owners of the land above the water line and pursuant to permits under Federal statutes relating to navigation. (5) The transmission systems of the Centerior Utilities are located on land, easemeuts or rights-of-way owned by them. Their distribution systems also are located, in part, on interests in land owned by them, but, for the most part, their distribution systems are located on lands owned by others and on streets and highways. In most cases, permission has been obtained f rom the apparent owner of the property or, if the distribution system is located on streets and highways, from the apparent owner of the abutting property. Their electric underground. transmission and distri-bution systems are located, for the most part, in public streets. The i Pennsylvania portions of the main transmission lines from the Seneca i Plant, the Mansfield Plant and Beaver Valley Unit 2 are not ovned by Cleveland Electric or Toledo Edison. All Cleveland Electric and Toledo Edison properties, with certain exceptions, are subject to the lien of their respective mortgages. i

Th7 f a tit 10s which Cl;valand Elcetric cnd TalGdo Edistn ccquira es t;n:nt-Lin-common -owners, and.the leasehold interests they have as joint lessees, of i certain generating units do not include the right to require a partition or  ; sale for division of proceeds of the units vithout the concurrence of all the other ovners and their respective mortgage trustees and the trustees under Cleveland Electric's and Toledo Edison's mortgages. Item 3. Legal Proceedings Regulatory Proceedings and Suits Contesting Sulfur Dioxide Emission ' Limitations and Related Regulations Applicable to the Centerior Utilities--See

" Item 1. Business--Environmental Regulation--Air Quality Control".

Administrative- Proceedings by the Centerior Utilities Challenging Effluent , Limitations and Vater Quality Standards and Requesting variances Under the Clean Vater Act--See " Item 1. Business--Environmental Regulation--Vater i Quality Control". l Taxpayer Suit Filed by Cleveland Electric Challenging Transfer of Funds by City of Cleveland to CPP--See " Item 1. Business--Operations--Competitive Conditions--Cleveland Electric". l Item.4. Submission of Matters to a Vote of Security Holders ClNTERIOR ENERGY. CLEVELAND ELECTRIC AND TOLEDO EDISON None. PART II Item 5. Market for Registrants' Common Equity and Related Stockholder Matters CENTERIOR ENERGY I Market Information Centerior Energy's common stock is traded on the New York, Midwest and Pacific Stock Exchanges. The quarterly high and low prices of Centerior common stock (as reported on the composite tape) in 1988 and 1989 vere as follows: 1988 1989 High Lov High Lov  ; 1st Quarter 18 15-1/8 16-1/4 13-3/3 2nd Quatter 16-1/2 14-3/8 18-1/4 15-5/8 l 3rd Quarter 16-1/2 12-3/4 19-1/8 17-1/4 4th Quarter 14 12-1/4 20-7/8 17-7/8 ,

                                                                                       .I Shara Ovnnrs As of March 9, 1990, Centerior Energy had 179,238 common stock share owners.

Dividends ' See Note 13 to Centerior's rinancial Statements for quarterly dividend pay- ' ments in the last two years. see Centerior's " Management's Financial Analysis--Capital Resources and Liquidity" contained under Item 7 of this Report for a discussion of the l payment of future dividends by Centerior. ~ At December 31, 1989, Centerior had earnings retained in the business of about

   $614,000,000 and capital surplus of about $1,989,000,000, both of which were available -to pay dividends. Cleveland Electric and Toledo Edison can make cash available for the funding of Centerior's common stock dividends by paying dividends on their evn common stocks.          At December 31,  1989, Cleveland Electric had about $507,000,000 of retained earnings and about $1,321,000,000 of capital surplus and Toledo Edison had about $100,000,000 of retained earn-          '

ings available under Ohio law for the declaration of dividends on their re-spective preferred and common stocks. However, the payment of dividends out i of capital surplus <by Cleveland Electric may be restricted under the Federal Povet Act. C_LEVELAND ELECTRIC AND TOLEDO EDISON The information required by this Item is not applicable to Cleveland Electric or Toledo Edison because all of their common stock is held solely by Centerior Energy. Item 6. Selected Financial Data CENTERIOR ENERGY The information required by this Item is contained on Pages F-23 and F-24 attached hereto. CLEVELAND ELECTRIC The information required by this Item is contained on Pages F-46 and F-47  ; attached hereto. TOLEDO EDISON The information required by this Item is contained on Pages F-68 and F-69 attached hereto. e m w

i I t ~1 7. M nag m nt's Disevazion end An' lysis of Financial Condition and Results of Operations CENTERIOR ENERGY The information required by this Item is contained on Pages F-5, F-6 and F-8 attached hereto. CLEVELAND ELECTRIC The information required by this Item is contained on Pages F-28, F-29 and F-31 attached hereto. TOLEDO EDISON The information required by this Item is contained on Pages F-51, F-52 and F-54 attached hereto. Item 8. _ Financial Statements and Supplementary Data CENTERIOR ENERGY The information required by this Item is contained on Pages P-2 through F-4, F-6, F-7 and F-9 through F-22 attached hereto. CLEVELAND ELECTRIC The information required by this Item is contained on Fages F-25 through F-27, F-29, F-30 and F-32 through F-45 attached hereto. TOLEDO EDISON The information required by this Item is contained on Pages F-48 through F-50, F-52, F-53 and F-55 through F-67 attached hereto. Item 9. Changes in and Disagreements Vith Accountants on Accounting and Financial Disclosure CENTERIOR ENERGY, CLEVELAND ELECTRIC AND TOLEDO EDISON None. PART Ill Item 10. Directors and Executive Officers of the Registrants CENTERIOR ENERGY ! The information required by this Item for Centerior regarding directors is incorporated herein by reference to Pages 4 through 7 of Centerior's definitive proxy statement dated March 13, 1990. Reference is also made to

    " Executive Officers of the Registrants and the Service Company" in Part I of this report for information regarding     the executive officers of Centerior Energy.

[ CLEVELAND ELECTRIC L Set forth below are the names, ages at March 15, 1990, positions, business experience during the past five years and other directorships held, if any, of the directors of Cleveland Electric. The year in which the director was first , elected to Cleveland Electric's Board of Directors is set forth in paren-  !

   . theses. Reference is made to aExecutive Officers of the Registrants and the       ;

Service Company" in Part I of this report for information regarding the executive officers of Cleveland Electric. , Robert J. Farling*, 53, Chairman and Chief Executive Officer of Cleveland Electric since February 1989, President of Centerior Energy since October 1988 [ t and the Service Company since July 1988. Mr. Farling also has been Chairman , and Chief Executive Officer of Toledo Edison since October 1988. From October . 1988_ to February 1989, he var Vice Chairman and Chief Executive Officer of Cleveland -Electric. Mr. Farling served as Executive Vice President of ' Centerior Energy from February 1986 to July 1988 and as President of Cleveland Electric from April 1986 to July 1988. From July 1980 to April 1986, he vas Vice President-Administrative Services of Cleveland Electric. He also is a director of National City Bank. (1986) , Richard A. Miller *, 63, Chairman and Chief Executive Officer of Centerior Energy and the Service Company since October 1988. From July 1988 to October 1988, he was Vice Chairman and Chief Executive Officer of the Service Company and Cleveland Electric and Chairman and Chief Executive Officer of Toledo Edison. Mr. Miller was President of Centerior Energy from February 1986 to October 1988 and of the Servich Company from April 1986 to July 1988. From .' September- 1983 to April 1986, Mr. Miller vas President of Cleveland Electric. Mr. Miller also is a director of Bank One, Cleveland, N.A., and The Lubrizol Corp. (1977) Lyman C. Phillips, 50. Executive Vice President of Centerior Energy and Presi- r Bent of Cleveland Electric since July 1988. From June 1987 to July 1988, he was Senior Vice President of Centerior and Executive Vice President of Toledo Edison. Mr. Phillips served as- Senior Vice President-Administration of the ' Service Company from April 1986 to June 1987 and Senior Vice President,

  -Administration of Toledo Edison from January 1984 to April 1986. (1988)
    *Also a director of Centerior Energy and the Service Company.

TOLEDO EDISON Set forth below are the names, ages at March 15, 1990, positions, business experience during the past five years and other directorships held, if any, of the directors of Toledo Edison. The year in which the director was first named to Toledo Edison's Board of Directors is set forth in parentheses.

  . Reference is made to " Executive Officers of the Registrants and the Service Company" 'in Part I of this' report for information regarding the executive officers of Toledo Edison.

i Robert J. Parling*, 53, Chnirman cnd Chief Executive Officer of Toledo Edloon and President of Centerior Energy since October 1988 and President of the Service Company since July 1988. In February 1989, he became Chairman and Chief Executive Officer of Cleveland Electric. From October 1988 to February 1989, he was Vice Chairman and Chief Executive Officer of Cleveland Electric. Mr. Farling served as Executive Vice President of Centerior Energy from February 1986 to July 1988 and as President of Cleveland Electric from April 1986 to July 1988. From July 1980 to April 1986, he vas Vice President-Administration Services of Cleveland Electric. He also is a director of National City Bank. (1988) Murray R. Edelman, 50, Executive Vice President of Centerior Energy and Presi-dent of Toledo Edison since July 1988. From April 1986 to July 1988, he was Vice President-Nuclear of the Service Company and Senior Vice President-Nuclear of Cleveland Electric. Previously, Mr. Edelman was Vice President-Nuclear of Cleveland Electric since December 1982. He is also a director of Society Bank & Trust. (1988) Richard A. Miller *, 63, Chairman and Chief Executive Officer of Centerior Energy and the Service Company since October 1988. From July 1988 to October 1988, he was Vice Chairman and Chief Executive Officer of the Service Company and Cleveland Electric and Chairman and Chief Executive Officer of Toledo Edison. Mr. Miller was President of Centerior Energy from February 1986 to October 1988 and of the Service Company from April 1986 to July 1988. From September 1983 to April 1986, Mr. Miller was President of Cleveland Electric. Mr. Miller also is a director of Bank One, Cleveland, N.A., and The Lubrizcl Corp. (1986) Donald H. Saunders, 54, Vice President-Administration & Governmental Affairs of Toledo Edison since January 1990. From July 1986 to January 1990, Mr. Saunders was Vice President, Finance and Administration of Toledo Edison. From March 1979 to July 1986, Mr. Saunders was Treasurer of Toledo Edison. (1988)

    *Also a director of Centerior Energy and the Service Company.

Item 11. Executive Compensation CENTERIOR ENERGY EXECtlTIVE COMPENSATION The information required by this Item for Centerior is incorporated herein by refertnce to the information concerning compensation of directors on Page 8, and the information concerning compensation, other than salaries and insurance. of executive officers on Pages 13 through 16, of Centerior's definitive proxy statement dated March 13, 1990.

k b E s b SALARIES AND INSilRANCE Centerior Energy . The following'information summarizes _(1) compensation paid by the Centerior i System to the five highest paid executive officers of Centerior Energy or the - Service Company for services rendered in all capacities in 1989 vhile an executive officer of Centerior Energy or the Service Company and, for  ; Messrs. Miller- and Farlingi. incentive compensation paid in 1989 for services ' rendered in 1988 and (2) the aggregate compensation paid by the Centerior System to all executive officers of Centerior Energy or the Service Company as a group for such services: , Cash Compensation i To Whom Paid and Principal Salaries and Incentive Insurance Capacities in Vhich Served (1) Compensation (1) Premiums (2) j Richard A. Miller S 457,522 S 5,994 l Robert J. Farling 250,020 3,649 Paul H. Smart 217,500 1,886

  .Lyman C. Phillips                                     204,530             '3,643 l

Murray R. Edelman. 202,224 1,716-All 15 executive officers (including - the above officers) as a group 2,496,322 37,446 (1) Data are included for the portion of 1989 during which the persons-vere executive officers of Centerior Energy or the Service Company and includes cash compensation paid or accrued in all capacities with the Centerior

System as listed in " Business--Executive Officers of the Registrants" for  ;

that- period. Includes Incentive Compensation awarded on March 27, 1990 for services rendered in 1989. (2) Centerior pays long-term disability benefits and premiums for life, acci-- dent and personal liability insurance benefits for executive officers to  ; the extent those benefits exceed the benefits uniformly available to sal-arled employees under the Centerior System's benefit plans. No such long-term disability benefits were paid in 1989. ' Centerior Energy has a deferred compensation plan under which employees desig-nated by the Compensatior. Committee of Centerior's Board of Directors' may. elect to defer the receipt of up to 25% of salary or up to all incentive com- . pensation until a year selected by the employee not later than the year in which the employee attains age 70 or, if it occurs earlier, at retirement, 12 months after death or at-other termination of employment. Amounts deferred by Centerior's executive officers in 1989 have been included in.the cash compen-sation table. Cleveland Electric The following information summarizes (1) compensation paid by the Centerior System to the five highest paid executive officers of Cleveland Electric for services rendered in all capacities in 1989 vhile an executive officer of Cleveland Electric and, for Mr. Farling, incentive compensation paid in 1989 for services rendered in 1988 and (2) the aggregate compensation paid to all Cleveland' Electric executive officers as a group for such services:

C'sh Ce pens 7titn To Whom Paid'and Principal Salaries and Incentive Insurance

    ' Capacities in Vhich Served (1)                 Compensation (1)        Premiums (2)
     ~ Robert J. Farling                                $ 250,020               $ 3,649 Lyman C. Phillips                                      204,530               3,643
    .Alvin Kaplan                                           131,352               2,203 Villiam K. McClung                                     120,753               2,024 Richard A. Peterka-                                    110,184               1,940 All 12 executive officers (including the above' officers) as a group                   1,374,532              21,960 (1) Data are included for the portion of 1989 during which the persons were executive officers of Cleveland Electric and includes cash compensation 6 ..        paid or accrued in all capacities with the .Centerior System as listed in
           " Business--Executive    :!ficers of. the Registrants" -for that period.

Includes Incentive Compensation awarded on March 27, 1990 for services rendered in 1989. (2) Centerior pays long-term disability benefits and premiums for life, acci-dent and personal liability insurance. benefits for executive officers to the extent those benefits exceed the benefits uniformly available to sal-aried employees under the Centerior System's benefit plans. No such long-term disability benefits were paid in 1989. Cleveland Electric has a deferred compensation plan under which- employees designated by the Compensation Committee of Centerior's board of Directors may elect to defer the receipt of up to 25% of salary or up to all incentive compensation until a year selected by the employee not later than the year in which -the employee attains age 70 or, if it occurs earlier, at. retirement, 12-months after death or at other termination of employment. Any amounts deferred by executive' officers in 1989 have been included in the cash com-pensation table. The. directors of Cleveland Electric received no remuneration in their capacity as directors. Toledo Edison The following information summarizes (1) compensation paid by the Centerior System. to the five highest paid executive officers of Toledo Edison for services rendered in all capacities in 1989 while an executive officer of Toledo Edison-and, for Hr. Farling, incentive compensation paid in 1989 for services rendered in 1988 and (2) the aggregate compensation paid to all Toledo Edison executive officers as a group for such servic.es:

                                                                                                                                         'I

r L i C sh Cirpensatirn To Vhom Paid and Principal Salaries and Incentive Insurance ! Capacities in Which Served (1) Compensation (1) Premiums (2) Robert J. Parling $ 250,020 $ 3,649 Paul M. Smart 217,500 1,886 Murray R. Edelman 202,224 1,716 Richard P. Crouse 141,369 2,406 Donald C. Shelton 138,078 1,027 All 10 executive officers (including the above officers) as a group 1,375,953 15,232 (1) Data are included for the portion of 1989 during which the persons were executive officers of Toledo Edison and includes cash compensation paid or accrued in all capacities with the Centerior System as listed in

      " Business--Executive    Officers of    the Registrants" for that period.

Includes Incentive Compensation awarded on March 27, 1990 for services rendered in 1989. (2) Centerior pays long-term disability benefits and premiums for life, acci-dent and personal liability insurance benefits for executive officers to the extent those benefits exceed the benefits uniformly available to sal-aried employees under the Centerior System's benefit plans. No such long-term disability benefits vete paid in 1989. Toledo Edison has a deferred compensation plan under which employ 9es desig-nated by the Compensation Committee of Centerior's Board of Directors may elect to defer the receipt of up to 25% of salary or up to all incentive compensation until a year selected by the employee not later than the year in which the employee attains age 70 or, if it occurs earlier, at retirement, 12 months after death or at other termination of employment. Any amounts deferred by executive officers in 1989 have been included in the cash com-pensation table. The directors of Toledo Edison received no remuneration in their capacity as directors. PENSION PLAN BENEFITS Centerior System employees, including officers of Cleveland Electric and Toledo Edison, are covered by Centerior's pension program. The pension pro-gram is a noncontributory fixed-benefit program which provides benefits upon retirement at or after age 55. The annual amount of the pension is based pri- . marily upon the monthly average straight-time salary and incentive compensa- l tion in the 60 consecutive highest paid months (" covered compensation") and the number of years of service. The resulting benefit is reduced by a percentage (based on the number of years of service) of the average FICA vage base. The pension is reduced in the event of retirement prior to age 62 and i

v ~in c:rtcin c:s:s pricr- to ag2 65. Appropriato rcducticns cro ::d2 if th2 i employee elects a joint' and survivor, guaranteed years certain, lump sum or other' form of pension in place of payments for life. To the extent limits imposed by' Federal law apply to reduce a pension which 'otherwise vould be i payable- under the pension program, the amount of the reduction vill be paid,- as permitted by Federal lav, directly_by Centerior, except to the extent it is paid out'of a trust established by Centerior. The following table shows the '7 annual, amount of= payment-for-life pension payable to salaried employees who retire under the pension program at or after age 62 at stated levels of covered compensation and years of service: Covered Years of Service Compensation. $ 10 20 30 40

$100,000   .............   $10,076     $20,152    $'40,303 $ 51,455 $ 56,031          .

150,000 ............. 15,326 30,652 61,303 78,455 85,531  ! 200,000 ............. 20,576 41,152 82,303 105,455 115,031 250,000 ............. 25,826 51,652 103,303 132,455- 144,531

  • 300,000 ............. 31,076 62,152 124,303 159,455 174,031 L 350,000 ............. 36,326 72,652 145,303 186,455 203,531 400,000 ............. 41,576 83,152 166,303 213,455 233,031 Cleveland Electric j The following table sets forth the years of service and the covered compensa-  !

tion as- of- year-end 1989 of the five highest- paid executive officers of ' Cleveland Electric: , Years of Covered Executive Officer Service Compensation Robert J. Farling 30 $173,296 Lyman C. Phillips 28 149,682 Alvin Kaplan 33 116,423 William K. McClung 37 105,750 Richard ~A. Peterka 38 99,305 Toledo Edison The following table sets forth the years of service and the covered compensa-tion as of year-end 1989 of the five highest paid executive officers of. Toledo - Edison , Years of Covered Executive Officer Service Compensation , Robert J. Farling 30 $173,296 Paul H. Smart (1) -- - Hurray R. Edelman 28 149,649 Richard P. Crouse 29 120,514 - -Donald C. Shelton (2) 3 -

(1) Mr. Smart's c;pityment cnd c:nsulting agrc::ent with C:nterior cnd Talcdo Edison provides that as of-. February 1, 1994, unless earlier terminated,  ; Centerior and Toledo Edison vill provide Mr. Smart or his beneficiary a i pension- benefit from the pension program and other sources in an amount  ! which assumes 30 years of service and covered compensation of S192,000. [ (2) Mr. Shelton .is not nov vested in the pension program and is therefore not f entitled to any' pension. EMP14 TEE STOCK PLAN TRANSACTIONS (a) Employee Purchase Plan t All employees, including officers, of Centerior,-the Service Company, i

 ~

Cleveland Electric (and its participating subsidiaries) and Toledo Edison ' (except certain of its union-represented employees) are eligible to , participate in the Purchase Plan. A participant may contribute to pur-  ! chase U.S.-Savings Bonds up to 100% of his straight-time pay less-(l)- payroll withholding tax and other payroll deductions, (2) ani .other

 '         contribution he makes into the Purchase Plan and (3) any contribution he makes into the Savings Plan. A participant also may contribute up to 8%

of his pay, less any Basic Contribution he makes into the Savings Plan, to purchase Centerior common stock at a price 15% below the fair market value on the semiannual dates of purchase, March 15.and September 15.- The Bonds and common stock are distributed to the participant immediately after purchase. Centerior's contribution into the Purchase Plan is the 15% discount on the price of the common stock. The 15% discount is taxable ordinary income to the participant in the tax year the common stock is purchased and is deductible by Centerior. Cleveland Electric None of-the five named officers of Cleveland Electric acquired Centerior common stock through ,the Purchase Plan in 1989. All 12 executive officers of Cleveland Electric as a group, including the five named officers, purchased a total of 66 shares at an aggregate purchase price of $977.25. The aggregate market value of the stock on the purchase date was $1.140.97. Toledo Edison 1 None of the 10 executive officers of Toledo Edison, inc2uding the five named officers, acquired Centerior common stock through the Purchase Plan in 1989. , (b) Employee Savings Plan All employees, including officers, of Centerior, the Service Company, Cleveland Electric (and its participating subsidiaries) and Toledo Edison (except. certain of its union-represented employees) may participate in-t

i

  ~F    th - S vings Plcn by m:cns of p:yroll d:ductien etntributions. The Stv-         i ings Plan consists of two patts: the After Tax Part and the Before Tax Part. The After Tax Part receives a participant's contributions after they have been. taxed <as pay. The Before Tax Part receives a partici-         ;

pant's contributions;before they have been taxed as pay however, they vill be taxed when vithdrawn from the Savings Plan. The combined maximum employee contribution into both Parts of the Savings ' j: Plan is 16% of pag - A participant may contribute up to 6% of his > straight-time pay as a Basic Contribution and up to another 10% as a t Supplemental Contribution into the After Tax and Before Tax Parts com- j bined. The minimum: contribution is 1% of pay. Centerior contributes out  : of: current income or retained earnings an amount equal to 50% of the L ' employee's Basic Contribution. Contributions of highly compensated , employees and Centerior's matching contributions are reduced when neces- l sary to keep the contributions within the limits of' Federal tax law.  : Contributions- are placed in a tax-exempt trust administered by a corpo- ' rate trustee. The trust invests in (1) Centerior common stock, (2) a diversified group of common stocks, excluding Centerior common Stock and (3) fixed income-debt or stock investments, which currently are deposits under insurance company contracts at fixed rates of interest. A partici-  ! pant may allocate his contributions into the three funds in such portions as he designates, except that not more than 12% of-pay may be allocated i to the Centerior- Stock Fund.- Centerior Stock Fund contributions and earnings are invested in Centerior common stock purchased by the trustee t e from Centerior: at its- fair market value or in- the open market. . Centerior's -contributions are all invested in the.Centerior Stock Fund. . 1 Centerior. contributions and the earnings thereon become 100% vested in the participant after the participant makes at least 36 months of contributions in the After Tax Part, but become immediately vested in the i Before Tax Part. Cleveland Electric The following table presents information relating to the acquisition of Centerior common. stock by executive officers of Cleveland Electric under , the Savings Plan during 1989: ' Centerior Whole Shares Purchased (Centerior l Executive Officer Contributions and Employee Contributions) Robert J. Farling S 5,646 320 Lyman C. Phillips 5,056 287

                                                                                     ~
       .Alvin Kaplan                  3,304                     188 Villiam K. McClung            2,806                     160 2,901                                          !

Richard A. Peterka 165 All 12 executive officers (includ-  : ing the above officers) as a group 31,146 1,768 a i

p . e < b. v.

  >. {
                                                                                                   .f; Toledre Edison-h         4 The..following' table-presents:information relating to the. acquisition of-        ,

6 Centerior:. common stock by executive officers of -Toledo Edison under the P

                  '. Savings Plan during 1989:
                                                                                                    'l i

M. " 3 Centerior Whole Shares Purchased (Centerior. - h Executive Officer = -Contributions and Employee Contributions)

                                                                                                   -t Robert lJ. Parling.         $ 5,646                        320-                1 L                     Paul M;. Smart                5,370                       E 305 ~-
                  . Hurray R..Edelman-               822                          46                   i Richard P. Crouse' 3,600                        204 m                     Donald C. Shelton             3,228                        183                    ;
                  .All 10 executive                                                                     i i;
                       -officers (includ-                                                              '

L ing'the_above officers) as a group. 29,820 1,689 7 (c) 1978 Key Employee Stock Option Plann  !

                                                                                                       -~

Prior -to becoming a -subsidiary of Centerior, opt!cns to buy Cleveland i Electric common stock were granted at'various times by Cleveland Electric- l tos certain of its key employees pursuant to its 1978 Key Empl.oyee Stock

                -Option _ Plan. When Cleveland Electric became a subsidiary of Centerior,           "

the;-Plan.was changed to provide for the sale of Centerior common-stock instead of Cleveland Electric common-stock upon exercise of those op .

                                                                                                   'i
                  .tlons,        and Centerior assumed.all the obligations of Cleveland Electric under' those options and the plan. No additional options can be granted g                     under the Plan.

J C rieland Electric The following table preset. . information relating to the exercise of- I options by executive officers of Cleveland Electric--under-the 1978 Key. Employee Stock Option Plan during 1989: Options Exercised-

                                                                              ' Excess of              .

Market Value Number of Over i

                -Executive Officer                       Shares            Exercise-Price-         'l Robert J. Farling                        -

S - Lyman C. Phillips -

               -Alvin Kaplan 400                    2,094
               ' William K. McClung                       1,200                    6,342 Richard A. Peterka                       -                           -

All 12 executive officers . (includir<g the above~ officers) as a group 1,600 8,436 1 m

t i Tn1rdo Edison ,

       ~ None of the 10 executive- officers of Toledo Edison,      including the five named officers, exercised options in 1989.
 '(d ) Employee Stock Ownership Plan                                                        l Under- the Toledo Edison Employee Stock Ownership Plan,' common stock of Toledo Edison was allocable and,     since 1986, Centerior common stock is allocable .to the accounts of all eligible employees of Toledo Edison in proportion to their compensation from Toledo Edison.--Toledo Edison made contributions in 1977, 1984, 1986 and 1988, in each case for the preced-ing tax year. Participants are always fully . vested in the common stock            [

credited to their acccunts. . Upon the affiliation of Cleveland Electric and Toledo Edison, the Toledo Edison common-stock in the Plan vasl con-

       -verted.into Centerior common stock.                                                 !
L Cleveland Electric At December 31, 1989, 495 shares of Centerior common stock were held in the account of Lyman C. Phillips under the Employee Stock Ovnership Plan.

None of the other ll Cleveland Electric executive officers, including the  ; other four named officers, hold any shares in the Plan since they were R not employed by Toledo Edison in e.ny of the. years which were used as the< basis for a distribution. Toledo Edison- 1 s The following table presents information relating to the holdings of ' Centerior common stock by executive officers of Toledo Edison under the Employee Stock Ovnership Plan in 1989: i Whole Shares Held as Executive Officer. of December 31, 1989-Robert J. LFarling (1) - i Paul M.. Smart 271 Murray_R. Edelman (1) - Richard P. Crouse 666 Donald C. Shelton 122 All 10 executive officers (including the above officers) as a group (1) 2,405 [ (1) Messrs. Farling .and Edelman and two other executive officers do' not- . hold any shares in the Plan since they were _not employed by. Toledo l Edison in any of the years which were used as the basis for a-distribution.

                                                                                       'i
                   ,   .        t        ,

[ t i

It m 12, Sicurity Ovn :rship of C7rtain 'B;n:ficiel Ovntrs and M:n :gement-CENTERIOR ENERGYL fThe information required by.this' Item is incorporated herein by reference to e

E Page::1 and Pages'4'through 7 of _Centerior's definitive proxy statement dated

March 13,.1990.

I r CLEVELAND ELECTRIC ' The -following.' table' sets forth the beneficial ownership-of Centerior common

                -stock -by' individual-~' directors of Cleveland Electric and all directors and'-                 -
of ficers of Cleveland Electric as 'a group as of February 28,'1990:  !
Name of Beneficial- Number of Common Owner' Shares Ovned (1)

Robert J. Farling 31,772 (2) Richard A. Miller- 61,392 (2)

                 -Lyman,C. Phillips                                        4,025                             l All directors and officers-                                                                ,!

as a group- 193,209 (2) l -- l(1) Beneficially owned shares include any shares vith respect to which' voting i L - or - investment power is attributed to a director because of joint or fidu-clary ownership of the shares'or relationship to the record ovners, such

                            ~

q as a spouse, even though the director or officer does not consider himself > the beneficial owner. On February 28, 1990, all directors and officers of Cleveland Electric as a group were considered to o'n v beneficially 0.1% of-

                                                                                                             -f Centerior's-common stock and none of Cleveland Electric's serial' preferred
                       -stock.

Certain directors and officers disclaim beneficial ownership:of= some of those shares. 1 i L' (2) Includes the following numbers of shares which are not owned- but could - have- been purchased within.60 days after February 28, 1990.upon exercise-Lof~ options 1 granted by  ; l . Cleveland -Electric: Mr. Farling - 24,835; '

                        -Mr. Miller - 37,749; and all other officers as a group - 32,794. None of~

l those options have been exercised as of March 27, W90. l TOLEDO EDISON The' following table sets forth the beneficial ownership ~of Centerior common

stock L by individual directors of Toledo Edison and all directors and of ficers j

_of Toledo Edison as a group as of February 28, 1990: NameJof. Beneficial Number of Common

                          'Ovner                                       Shares owned (1) y-
               .Murray R. Edelman                                         24,538 (2)                          {
               . Robert :J. Farling 31,772 (2)                           !
               ' Richard A. Miller                                        61,392 (2)
                . Donald 11. Saunders                                      4,340                               t
u. -All directors and officers as a group 155,630 (2)

~ l i i

(1) Beneficially owned shares include any shares with respect to which voting or investment power is attributed to a director because of joint or fidu-L elary ownership of the shares or relationship to the record ovners, such as a spouse, even though the director or officer does not consider himself the beneficial ovner. On February 28, 1990, all Toledo Edison directors and officers as a group vere considered to own beneficially 0.1% of Centerior's common stock. Certain directors and officers disclaim bene-ficial ownership of some of these shares. None of the directors or officers are the beneficial owner of equity securities of Toledo Edison of any class, except one officer, who owns 50 shares of Toledo Edison pre-ferred stock, 8.84%, $25 par value. (2) Includes the following numbers of shares which are not owned but could have been purchased within 60 days after February 28, 1990 upon exercise of options granted by Cleveland Electric: Mr. Edelman - 23,975; Mr. Farling - 24,835; Mr. Miller - 37,749; and all other officers as a group - 5,366. None of those options have been exercised as of March 27, 1990. Item 13. Certain Relationships and Related Transactions CENTERIOR ENERGY AND TOLEDO EDISON The information required by this Item is incorporated herein by reference to Page 8 of Centerior's definitive proxy statement dated March 13, 1990. CLEVELAND ELECTRIC None. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a)_ Documents Filed as a Part of the Report -

1. Financial Statemuas:

Financial Statements for Centerior Energy, Cleveland Electric and Toledo Edison are listed in the Index to Selected Financial Data; Management's Discussion and Analysis of Financial Condition and Re-sults of Operations; and Financial Statements. See Page F-1,

2. Financial Statement Schedules:

Financial Statement Schedules for Centerior Energy, Cleveland Electric and Toledo Edison are listed in the Index to Schedules. See Page S-1. I

fgs ~ n w

3. Exhibits Ph Exhib'itsj for'Centerior Energy,: Cleveland = Electric Jand Toledo Edisonc
,                      are listed in the. Exhibit Index. See Page E-1.-
           '(b)- Reports on Form 8-K h                 During 'the fourthi quarter of-1989, Centerior En'ergy, Cleveland Electric and. Toledo Edison each filed the following_ Current. Reports on Form 8-K:
                    -Date of Report                                   Item Reported'
",,              ; September 20, 1989                 Item 5. OtherLEvents (1. Dismissal of
;                                                     Rate Order Appeal, 2.'- ' City-of-Toledo-Ordinance and 3. Selected Financial-In-
,,                                                    formation of Cleveland Electric).

November' 14, 1989 Item 5.- Other Events (1. Proposed Acid Rain Legislation'and 2. Dismissal of Pending Appeals) c:

                                                                                                   ,i 1
                                                                                                  .-. L
                                                                                                     .j s
i u
                                                                                                  . -l 1

a a 4

                                                                                                     .)

I,

SIGNATURES-Pursuant to the requirements of Section 13 or 15(d) of the' Securities Exchange Act of 1934, the registrant has duly caused this. report to be signed on its behalf by the undersigned, thereunto duly authorized. CENTERIOR ENERGY CORPORATION Registrant March 29, 1990 By

  • RICHARD A, MILLER, Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this re-port has been signed belov by the following persons on behalf of the regi-strant and in the capacities and on the date indicated:

Signature Title Date Principal Executive Officer: )

  • RICilARD A. MILLER Chairman of the Board )

and Chief Executive ) Officer ) Principal Financial Officer: )

  • EDGAR 11. MAUGANS Senior Vice President- )

Finance ) Principal Accounting Officers

  • PAUL G. BUSBY Controller )

Directors: )

  • RICHARD P. ANDERSON Director )
  • ALBERT C. BERSTICKER Director )
*LEIGil CARTER                       Director                 )
  • THOMAS.A. COMMES Director ) March 29, 1990
  • ROBERT J. FARLING Director )
  • ROBERT M. G1NN Director )
 *ROY H. HOLDT                        Director                 )
  • GEORGE 11. KAULL Director )
  • RICHARD A. MILLER Director )
  • FRANK E. MOSIER Director )
 *SR. HARY MARTHE REINilARD, SND      Director                 )
  • PAUL M. SMART Director )
  • WILLI AM J. VILLI AMS Director )
  *By J. T. PERCIO J. T. Percio, Attorney-in-Fact
                                    -                                                                                       f f              .     -[                         .

r i SIGNATURES

+
       '+1 '                                                                                                             "

jPursuant to'thelrequirements ofJSection.13' or 15(d) ~of1the: Sectirities: Exchhnge:

                          ;Act-.-ofo1934,-thefregist' rant hastiduly caused this' report to be signed on its-           _,

EbehalfEby the undersigned,-thereunto duly authorized.

THE CLEVELAND ELECTRIC ILLUMINATING COMPANY.
                                                                ; Registrant                                              N
                                                                                                                          .?
                             -March 29, 1990                      By
  • ROBERT J.~ FARLING, Chairman of'the '
                                                                         . Board and Chief' Executive Officer-           fj Pursuanti . to;the requirements of the Securities Exchange'Act.cf 1934, this re--         _!

LportL has;beenisigned belov< . by-the following persons on behalf of the regi--

                          =strant and in the capacities and on the date. indicated::                              '

Signature Title Date.

Principal Executive Officer: )-

a::

                           -* ROBERT J. FARLING-                 Chairman of~the Board )

and Chief Executive ).

                                                                   -Officer-                 )-
                                                   ~
                                                                                                                          }

Principal Financial Officer -) -t

  • EDGAR'H MAUGANS Chief Financial ) .

Officer ) . March'29. 1990 l

Principal' Accounting Officer
                                                                                             )                            .I
                          '* JOHN =H.". BORTHVICK                Controller                -).                          .I LDirectors:                                                         )                            i
  • ROBERT J. - FARLING '

4 Director )' ~i

                         ~ *RICilARD A. MILLER                  LDirector.                   )
                              *LYMAN-C.-PHILLIPS                 Director                    )                              E
.                                                                                                                          i i
                                                                                                                        /h
                          '*By-J. T. PERCIO J.:T. Percio, Attorney-in-Fact-
                                                                                                                            \

y ;: w - -

SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly' authorized. l THE TOLEDO EDISON COMPANY Registrant Harch 29, 1990 By

  • ROBERT J. FARLING, Chairman of the Board and Chief Executive Officer Pursuant to-the requirements of the Securities Exchange Act of 1934, this re-port has been signed belov by the following persons on behalf of the regi-strant and in the capacities and on the date indicated:

Signature Title Date Principal Executive Officer )

  • ROBERT J. FARLING Chairman of the Board )

and Chief Executive ) , Officer ) Principal Financial Officer )

  • EDGAR H. MAUGANS Chief Financial )

Officer ) Principal Accounting Officer: ) March 29, 1990

  • JAMES P. MARTIN Controller and )  :

Treasurer ) Directors: )

  • HURRAY.R. EDELMAN Director )
  • ROBERT J. FARLING Director )
  • RICHARD A. MILLER Director )
  • DONALD H. SAUNDERS Director )
  • By J. T. PERCIO J. T. Percio, Attorney-in-Fact ROMN
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m INDEX TO SELECTED FINANCIAL DATAt MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND itESULTS OF OPERATIONSt AND FINANCIAL STATEMENTS Centerior Energy Corporation and Subsidiaries: Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2 Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . .. . . . . F-3 Management s Financial Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5/F 8 Retained Earnings for the years ended December 31,1989,1988 and 1987 . F6 Income Statement for the years ended December 31,1989,1988 and 1987 . . F7 Cash Flows for the years ended December 31,1989 ' 1988 and 1987 . . . F9 l Balance Sheet as of December 31,1989 and 1988 . . . . . . . . . . . . . . . . . . . . . . F 10 Statement of Cumulative Preferred and Preference Stock at December 31, 1989 and 1988. . ..... ... .. . .... . ... . .. . . . . . . . . F- 12 Notes to the Financial Statements ... ..... .. . . . . . .. . . .. . . . . .. .. . F 13 Financial and Statistical Review ............ .... ... . .. . . . . . . .. . . . F 23 f The Cleveland Electric Illuminating Company and Subsidiaries: Report of Indepeadent Public Accountants . . . . . . . . . .. . . F 24 l Summary of Significant Accounting Policies . . . . . . . . . . ... . . . . . . .. . F-26  ! Management's Financial Analysis . . . .. .. . .. . .. . . . . , , F 28/F 31 Retained Earnin),s for the years ended December 31,1989,1988 and 1987 . . F 29 l

                                                                                                                                                 ?

Income State. ment for the years ended December 31,1989,1988 and 1987 F 30 Cash Flows for the years ended December 31,1989,1988 and 1987 . . . . F-32 Italance Sheet as of December 31,1989 and 1988 . . . . . . . , , . . . F 34 Statement of Cumulative Freferred and Preference Stock at December 31, 1989 and 1988. . . . . . . .... . . . . , , , , . . . . , . F 36 Notes to the Financial Statements , , , . . . . . . . . . . , . ... . . . . . . . F-37 Financial and Statistical Review . . ... . . .. . . . . . . . F-46 The Toledo Edison Company: Report of Independent Public Accountants . . . . . . . , , . . . . . . . F 48 Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . F 19 Management's Financial Analysis ... ..... .. . . .. . . F 51/F 54 Retained Earnings for the years ended December 31,1989,1988 and 1987 . F-52 Income Statement for the years ended December 31,1989.1988 and 1987 F:53 Cash Flows for the years ended December 31,1989,1988 and 1987 . . . F 55 llalance Sheet as of December 31,1989 and 1988 . . . . . . . .. . F 56 Statement of Climulative Preferred and Preference Stock at December 31, 1989 and 1988. . , ,, . . . . . . . . . . . , F 58 Notes to the Financial Matements .. ....... ... . . . . F 59 Financial and Statistical Review ,, . . . . . . . F-68 l l l l i F1

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 @c ? Tithe Share 0,wners' and Board of Directors of ? Gk.                                         -                          "-
  • e yW ?Centerior Energy Corporatiom i A" ,

w:, M O o < K[4 Ne"ih ahdi$d thkaccompanying 7 Decenitier 31,1989lin conformity with generally, l balance; sheetiand; consolidated = statementconsolidated of , l-

                                                                                                               -accepted accounting principlese 1

W, icumulative ptsferredHand:: preference , stock of ~ W SCenterior;1 Energy L Corporationi F(anqOhiol

                                                                                                                    ~ . ,      _.        J,                 ..

LAs discussed furthei in the Summary of Significant .

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"B ', i corporation) and subsidiaries as of December 31; EAccounting Policies and Notes.7 and 12,-a change : y1989fand E1988,! and the;related consolidated :. was made in the methods of accounting for income : f "Ostatements of income,; retained earnings and cashi .. taxes and unbilled revenues 'in 1988, retroactive tol z J E dlows for each of the tiiree yearsin the period ended

                                                                                                                                                                          ~

January li 1988<  ? W ? December 31,L1989. These financial statements are

                                                                                                                                               .                              .3 +

s ?the responsibility of the Company's managementi z R. 1As discussed further in Note 3(c), the future of Perry' ,. 0Ouriresponsibillty is to exoress an opinion'on these - Unit L2 is undecidedi ConstructiotiL has been ~ d / ilinancial statements based on our. audits; ' esuspended since July'1985. Various alternatives are b We?cosiductedlotir audidiin accordance with . being : considered,1 ; including ; fresuming7 ' q I , [fgencially accepted 1: auditing standards?Those construction, mothballing or canceling >the Unit.; q E Fstandards require that we plan and perform the auditi Management can give no assurance when,if ever,g. c g W Lt o obtain tsasonable assdrance about whether the. fmyEn , w$ gf in service ort whether _itse , b ;fitsincialf statementsiare 1 freel of?materiait + . investment and a return thereon will ultimately bez

recovered,
                                                                                                                                                                                                                   ,            g h D ImisstatementfAn audit: Includes examining, on a test
                    ? basis,L evidence supporting [the camounts and..
                    -disclohures       in the financial statements. An audit also:                            .Our audus were made for the purpose of forming an?                                                            d) k'[O
  • iincludes assessing the -accotinting principles used i 'and significant e'stimates made by management, asc opinion on the basic financial statements taken as a3 lwhole. The schedules of Cent.erior Energy ry g

E ~ Corporation listed in the(Index to Schedules are"

                    %well Sprese:as.        evaluating the overalf financial statement                              ' pmsented for purp sesmf complyi.ngewith -the.
                                                                                                                                                                                                                      *3 ntatfori, We bblieve that o'ur audits provide a-                                                                                                                                                         i t                    c reasonante basis for our opinion?                                                          Securities and Exchange Commission's rules and are-g                    _ . . . . , . . .                                               .

not part of the basic financial statements. These - ' M hin our opinibn, the financial statements referred to schedules have,been subjected to the 'a'uditingJ @ NW c above present fairly lin all _ material respects, the; Lprocedures applied in' the audiisJ ofs thelbasici "t l ylinancial positi'on'of Centerior Energy Corporation . financial statements and, in our opintoriifairly state M N', Land subsidiaries as of December 31,1989 and 1988, in all material respects the financial data required toJ q t . and the' results of their operations and their cash ? 'be set forth therein in relation to'the basic financialJ. - M ? flows for each of the three years in the period ended statements taken as a whole; % G t

Clevehind? Ohio . . -c **

s ( February <12; 1990 - , , p 9, e a - D db

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SUMMARY

OF Sl1NIFICANT ACCOUNTIN: POLICIES General . Estimated future nuclear fuel disposal costs are. being recovered through the base rates.

     ' Centerior Energy Corporation-(Centerior Energy)                        The Operating Companies defer the differences
      -is a holding company with two electric utilities as                between actual fuel costs and estimated fuel costs       ,

[. - subsidiaries, The CWreland Electric illuminating currently being recovered from customers through E Company (Cleveland Electric) and The Toledo the fuel factor. ,Ihis matches fuel expenses with l Edison Company (Toledo Edison). The fuel related revenues.

     - consolidated f nancial statemems also include the                                                                            l i
      . accounts of Cleveland Electric's wholhsowned                      Pre Phase in Deferrols of OperaHng                       1 subsidiaries and Centerior Energy's other wholly-owned subsidiary, Centerior Service Company '                     Expenses and Carrying Charges g
      - (Service Company). The Service Company                            The PUCO authorized the C.perating Companies to t        provides, at cost, management, fmancial,                          reord as deferred charges interest carrying costs

[, administrative, engineering, legal and other

     - services to Centerior Energy, Cleveland Electric and operating expenses (including lease pa ments,         l' depreciation and taxes) for Beaver Vallev 1 nit 2 y}       and Toledo Edison. Cleveland Electric and 'loledo                 from lu, commercial in service date of No'vember 17,       ,

Edison (Operating Compames) operate,as separate 1987 through December 31, 1988. The PUCO j companies, each serving the customers m its determined that Perry Unit I was considered '"used , service area. The hrst mortgage bonds, other debt and useful" on May 31, 1987 for regulatory

obligations and preferred stock of the Operating papases. Consequentiv, the PUCO authorized the Companies continue to be outstanding securities of Operating Companies"to defer operating expenses L
      - the respective utility. All significant intercompany              for Perry Unit l' from June 1,1987 through                   I items have been eliminated in consolidation.                      Decemb'er 22,1987, the date when these costs              l Centerior Energy and the Operating Compam.es                  began to be recovered in rates. The PUCO                  I follow the Uniform System of Accounts prescribed                  authorized the deferral of interest and equity-            i by the Federal Energy Regulatory Commission                       carrying costs, exclusive of those associated wit'h        E (PERC) and adopted by The Public Utilities                        operating expenses. for Perry Unit I from June 1, Commission of Ohio (PUCO). The Service                             g9g7,hrough December 31,1987 and deferral of
  , - Company follows the Uniform System of Accounts                      interest carrying costs from January 1,1988 through for Mutual Service Companies prescribed by the                     December il,1988. The amounts fieferred for Perry Securities and Exchange Commission (SEC) under                    Unit 1 pursuant to the PUCO accounting orders             a the Ifublic Utility lloiding Company Act of 1935.                 were included in propertv, plant and equipment            i I

1he Operating Companies are members of the through the November l'8,1987 commercial.in. CA PCO') . service date. Subsequent to that date, amounts Central Other Area Power members include Coordination Duquesne UghtGroup (Company. deferred for Perry Unit I were recorded as deferred  !

      ; ( Duquesne), Ohio Edison Company (Ohio Edison)                    charges. Amortization of the Beaver Valley Unit 2        i and Pennsylvania Power Company (Pennsylvama                       and Perry Unit I deferrals began on January 1,198?         l Power).1he members have constructed and operate                    in accorilance with the January luS9 PUCO rate           3 generation and transmission facilities for the use of             orders discussed in Note 6. The amortizations will        l the CAPCO companies.                                              continue over the lives of the related property.          I i

i

      .'R: venues                                                          Phase-In Deferrals of Operating Expenses and Carrying Charges                                      !

Customers are billed on a monthly cycle basis for their energy consumption, based on rate schedules As discussed in Note 6, the Janua:v 1989 PUCO rate l authorized by the PUCO. Prior to 1988, these orders for the. Operating Comp. nies included E revenues were recorded in the accounting period approved rate phase in plans for our investments in i during which meters were read. except ior the Perry Unit I and Beaver Valles Unit 2. OnJanuarv 1, 1# portion of revenues which was deferred under the 1989, the Operating Companies began recording the mirror construction work.in. progress (CWIP) deferrals of operating expenses and Interest and ' + discussed below. Utility service rendered ter at law equity carrving charges on dererred rate. based  ! monthly meter reading dates through the end of a invesiment' pursuant to the phase.in plans. These calendar month (unbilled revenues) became a part deferrals will be recovered by December 31,1998, y of operating revenues in the following month j when the meters were read. Effective January 1, , Depreciation and Amortization sv 1988, the Operating Companies changed their I method of accounting to accrue the estimated The cost of property, plant and equipment, except for the nuclear generating units, is depreciated over amount of revenues for sales unbilled at the end of their estimated useful lives on a straight line basis. each month. See Note 12. The annual straight Une depreciation provision A fuel factor is added to the base rates for electric expressed as a percent of average depreciable utility service. This factor is designed to recover fuel and most purchased powet costs irom customers. It is plant in service was 3.8% in 1987,1988 and 1989 changed semiannually after a hearing before the Depreciation expense for the nuclear units is based on the units of-production method. PUCO. Effective July 1988, the Operating Companies j began the external funding of future decom- 0 Fu_,1 Expense missmning costs for their operating nuclear units j The cost of fossil fuel is charged to fuel expense pursuant to a PUCO order. Cash contributions are 1 based on inventory usage. The cost of nuclear fuel, made to the funds on a straight line basis oves the i remaining licensing period for each unit. Amounts j including an interest component,is charged to fuel expense based on the rate of convimption. currently in rates are based on past estimates of j u

       ' (Centerior Energy)                                           F-3                                      (Centerior Energy)

m y decommissioning costs for the Operating Int rist Ch rges-

  - Companies of $122,000,000 in 1986 dollars for the Debt interest reported in the income Statement does Davis Besse Nuclear Power Station (Davis-Besse)             not include interest on nuclear fuel obligations
   ;;nd $72,000,000 for Perry Unit 1 and $63,000,000 for Beaver Valley Unit 2, both in 1987 dollars. Actual          Interest on nuclear fuel obligations for fuel under d(commissioning costs are expected to exceed                 construction is capitalized. See Note 5.
these estimates. It is expected that increases in,the 1.osses and gains realized upon the reacquisition cost estimates will be recoverable in rates resultmg or redemption of long term debt are deferred, from future rate proceedings. The current level of c.onsistent with the regulatory rate treatment. Such accruals being funded and recovered from losses and gains are either amortized over the customers over the remaining licensing periods of remainder of the original life of the debt issue the Units is approximately $8,000,000 annually. The retired or amortized over the life of the new debt present funding requirements fo Beaver Valley issue when the proceeds of a new issue are used for Unit 2 also satisfy a similar commitment made as the debt redemption. The amortizations are part of the sale and leaseback transaction discussed included in debt interest expense. f In Note 2. i Property, Plant and Equipment f

D^ferred Gain and Loss from Sales of Propenn plant and equipment am stated at orignal Utility Plant c st tess any am unts rdemd to be wduen oft The Operating Companies are amortizing the Included irithe cost of construction are items such applicable dcferred gain and loss (net of tax) 9s related payroll taxes, pensions, fringe benefits, j associated wia the sales of utility plant in 1987 over management and general overheads and AFUDC. j

  -the terms of leases under sole and leaseback                 AFUDC represents the estimated composite debt                 ;

agreements. See Note 2. The amortization and lease and equity cost of funds used to fmance i expense amounts are recorded. as operation constructkin. This noncash allowance is credited to expense. income, except for AFUDC for Perry Unit 2. Beginning in July 1985, Perry Unit 2 AFUDC was F;deral Incorne Taxes credited to a deferred income account untilJanuary 1 1,1988, when the practice of accruing AFUDC on l

  - The 1986 and 1989 financial statements reflect the          Perry Unit 2 was discontinued. See Note 3(c). The                j liability method of accounting for income taxes as a        gross A,FUDC rates averaged 11.2% in 1989 and                    -

result of adopting a new standard for accounting for 11.4% m 1988. The net of income tax AFUDC rate j income taxes in 1988. Prior to 1988, income taxes averaged 10.7% in 198;<. a were accounted for by the deferred method. Under Maintenance and repairs are charged to expense l the deferred method, deferred taxes and deferred as incurred. Cenain maintenance and repair tax credits were not adjusted for subsequent expenses for Perry Unit I and Beaver \ alley Unit 2 j changes in federal tax rates. Also, under the deferred have been deferred pursuant to the PUCO j method, we did not record deferred taxes on the accounting orders discussed above. The cost of , temporary differences between book and tax income replacing plant and equipment is charged to the that the PUCO used to reduce allowable costs for utility plant accounts. The cost of property retired  ; ratemaking purposes. This practice was premised on plus removal costs, after deducting any salvage regulatory treatment which permits recovery of such value, i,s charged to the accumulated provision for j deferred income taxes in future revenues. depreciation. j A major difference under the liability method is that deferred tax liabilities are adjusted for Mirror Construcilon Work in Progress subsequent tax rate changes. Also, we must now record deferred taxes for all temporary differences The Ohio mirror CWIP law requires that revenues authorized by the PUCO and collected as a result of l between the book and tax bases of assets and including CtIP in rate base be refunded in a liabilities. Application of the accounting standard in  ! 1988 and 1989 did not impact results of. operations subsequent period after the project is included in. as the additional deferred taxes were off, set by a rate base. For accounting purposes, such revenues , regulatory asset on the balance sheet because 6f the are deferred and recorded as refund obligations to i regulatory treatment described in the preceding customers. During the period when such revenues are being collected, AFUDC (through the in- l paragraph. Additionalin allowance for funds used  ; during construction (AFUDC) and carrying charges service date of the project) and carr%ng charges > that were previously accounted for in the Income (during the remainder of the collection periodi continue to be capitalized. The deferred reverues  ! Statement on a net of tax or an after tax basis are are then recogni7ed as operating revenues in the now stated on a pretax basis. Consequently, our i 1988 and 1989 federal income tax provisions are income Statement over the period of the refund. equaHy higher. Amounts collected through January 31,1989 under For certain property, the Operating Companies the mirror CWlP law are being refunded pursuant h to the January 1989 PUCO rate orders discussed in

  • received investment tax credits which have been Note 6. After February 1,1989, no revenues were accounted for as deferreu credits. Prior to 1988, tax a being collected under the mirror CWIP law. All $

credits milized were reflected as reductions to tax expense over the life of the related property. Under mirror CWIP revenues will be refunded to l

 ~t he new method of accounting. the amortization of           customers by November 1990.

1 investment tax credits is reported as a reduction of y depreciation expense. See Note 7. 4 j d 0 (Centerior Energy) F.4 (Centerior Energy) W i

MANAiEMENT'S FINANCIAL ANALYSIS Results of' Operations - Industrial sales decreased 2.1% principally because of a 7% reduction in sales to large steel and 1989 vs.1988 amomouve customers. Sales to other industrial

              - The January 1989 PUCO rate orders for the                                        customers increased 0.5E The decrease in revenues
               ' Operating Companies (as discussed in Note 6)                                     from sales to Ohio Edison and Pennsylvania Power contributed to a substantiai improvement in cash                                   s the result of the May 1989 expiration of flow in 1989, but hid signliicantly less effect on our                         Cleveland Electric's agreement to sell a portion of earnings per share. The gain in reported revenues                               its share of Perry Unit 1 caprity.

from higher rates was offset by a correspondin8 Operating expenses increased 8.4% in 1989. reduction in nuclear plant related cost deferrals, as 1.ower deferrals of nuclear operating expense for such costs are phased in and recovered in rates. Perry Unh 1 and Heaver Valley Unit 2 resulted in a Tl e 1990 and 1991 rate increases included in the $ 122,000,000 increase in expense. Fuel and rate orders will continue to improve operating purchased power expense increased largely because revenuer in those years although further reductions of the matching of expense with higher fuel cost

                - in deferred costs and the earnings caps contained                                  recovery revenues discussed in the preceding in the rate orders will limit increases in earnings.                              paragraph. Improved nuclear unit availability Revenue gains may be limited somewhat by the                                     enabled the Operating Companies to sell power to effects of a sluggish economy and customer                                       other utilities. The excess revenues over cost is conservation efforts. Sales growth is expected to be                             treated as a reduction in purchased power expense.

flat for 1990 and less than 2% annually for seseral Depreciation expense increased, reflective of the years thereafter. This makes our cost reduction increased generation from our nuclear units since efforts extremely important, Future operational their depreciation is recorded based on units of-changes and cost reductions resulting from the production. PUCO mandated management audit should make Total AFUDC and carrying charges decreased in the Operating Companies more competitive in an 1989 as a result of placing irrestment in rate base environment of inflation and increasing competition pursuant to the rate orcYrs. Interest expense and with other energy providers, including municipal preferred and preference dividend requirements electric systems and cogeneration projects. decreased in 1989 because of retirements and Factors contributing to the 13% Increase in 1989 refinancings by the Operating Companies. operating revenues are as follows: Inaeaw 1988 vs 1987 Change in operaung Revenues ( Decrease) Factors contribunng to the 5A% increase in 1988 Electric Revenues: opetaling revenues are as follows: nase Rates and Mhcellaneous. , , f 1 %000,000 H8,000.000 Increase Deferred CwlP Revenues. O'""dd l'uel Cost Recocery Revenues . 42,000,000 Od"E"I" DC"d"E N# " ""C' P sales volume and Mix. 14.000.000 Electric Resenues:

                      - sales to Ohio 1:dison and Pennsylnmb Power    (s2.000.000)                       tlase Rates and Miscellaneous.                        $ 40.000.000
                                                                    $ 2M,000.000                         sales Voluw.e and Mix.                                  60,000.000 sales to Ohio idnon and Pennsylvania lYwer              75.000.000
                                                           .                                             Deferred CwlP Revenun                       .           39/00,000 The rate orders tor the Operating Compam.es                                  ruel cost Recoverv Revenues .      '
                                                                                                                                                     <          o$000.000) were primarily responsible for two major factors                                      .g ggggg impacting the increase in revenues. The PUCO wani neung kewnues .                                     03moaom) granted both companies 9% rate increases effective February 1,1989. Also, revenues which were                                                 Toul.                                         s Lg.nm.0*

collected and deferred through. January 31,1989 under the Ohio mirror CWIP law are being refunded Rate increases granted to the Operating pursuant to the rate orders. Such deferred CWIP Companies in 1987 accounted for about two thirds revenues are recognized as operating revenues over of the increase in base rates and miscellaneous the periods of the refunds. Fuel cost recovery revenues. The remaindet of the increase resulted revenues increased in 1989 because of a significant from several minor factors, including an increase in rise in the fuel cost recovery factors compared to the amount of unbilled revenue 3. Total kilowatt-1988. The lower 1988 factors recognized a greater hour sales increased 6.7% in 1988. Sales growth of amount of refunds to our customers ordered by the 6.7% in the industrial sector retlected broad based PUCO for certain replacement fuci and purchased strength in the economy, particularly among power costs collected from customers during a automobile, steel and chemical producers. 1985-1986 Davis- Hesse outage. Total kilowatt hour Residential sales increased 19% in 1988 largely sales decreased 1.8% in 1989. The comparatively because of a substantially warmer summer. The hot mo:lerate summer weather in 1989 lowered sales eummer also contributed to a 3 6% gain in because of reduced air conditioning usage. commercial sales as did high occupancy rates in Residential sales decrea3ed I?% Commercial sales Cleveland office buildinp a continued office increased 3 9% as a result of continuing growth building boom in suburban areas and new retail from new office buildings and retail outlets. outlets. The increase in revenues from sales to Ohio 1 (Centerior Energy) F-5 (Centerior Energy) r- . - .

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     !? ~ ' Edison and Pdnsyhi ania Powe'r was the result of                                               '                                                                                     :
   # & ;: Cleveland Electric's sale .cf a portion'of its share ofLbasec                                                              These carrying charges irC1988 were for{

s' Interest costs only and not equity costs, floweverc h[gd LPerry - acomparedUnit to only 1 six

                                                          ' capacity weeks In11987.lforThe all increase 12 ' months  in -        'in AFUDC1988 and carrying charges .th;tLwere previouslyj accounted for on a net iof tax or an after tax basis; g revenues attribistable to deferied CWIP revenues -                                                 : were sta ed on a pretax basis in '1988.

{! J ^ f resulted from a reduction in the level of c partrevenues of the proceeds.froni the 198.7 sale and

% ^
deferred under the mirror CWIP law. l.ower fuel cost leaseback transactions ? was used to~ redeemt 4

7 recovery revenues resulted principally from the . outstanding high cost securities whichireduced s  ; greater use of lower cost nuclear fuel and the Interest expense and preferred dividends in.1988 i sl'UCO: ordered refund discussed in'the.1989 vs. Results forL1988 also included a one time net-y/ 1988 analysis. Cleveland Electric sold its steam - - afteraax increase of $28,000,000 related to a change Esystem in. December 1987.' .

                                                                                                                      .in accounting for unbllled revenues. See Note 12, f ' Operating expenses;lncreased i1.1% in 1988..

Fuel and purchased power expense decreased Effect of inflation y% flargely because of the matching of expense with-

                           ' lower. fuel cost recovery revenues discussed in tht .                                      Inflation adversely affseted our re ults of operations i

$q z preceding paragraph. s '!he increase: m . other in 1987 and 1988 as increases in base rates were less r y operationJ andy maintenance expense and than the rate of inflatiorthi the costs"of our labar' ' g  ; depreciation expense mainly resulted from a full materials and services

                         - year of operation of Perry Unit 1,and Beaver Valley                                               ,The Janua01989 FUCOtrate orders were-w
 ^                       1 Unit 2 and a full year of lease expense for Beaver ~                                        P'I*"flly designed to recover all. operating and caphal costs of our new nudear invesunents. .
                                             ~

DValley UnltL2 LandLthe Bruce Mansfield Plant L  :(Mansfield1 Plant).' The .. increase"in deferred- F1 wever, in 1989, t tM costs of labor, materials and - b s ces showM a shght dedine 'as a result of our . operating mpenses l_n 1988 was largely attributat le -

         '               Dto the~deetral~of Beaver Valley Unit 2 operatinr                                             c st reduedon program, thereby mitigating the expenses ;or a full year because they were not being                                       e ct of inHadon on our resub of opera @ns, t                        trecovered in rates.-In 1987, Perry Unit I and Beaver                                                  Changes in fuel costs do not affect our results of, l                      : Yalley Unit 2 operating expenses were deferred for                                              perations since those costs are deferred until Lonly about seven and two months, respectively.                                                reHected in the fuel cost recoven* facmr inchided ins                   1,

[b bill . g i

                         , . Js' discussed in Note 6, $534,000,000 of nuclea,r costs were written off in,1988 as a consequence ci                                         as]et p                          the rate orders.                                                                           future results of operations. As stated above, the ra:e:

g .1he total amount of AFUDC and carr>. lng charges orders were primarily. designed to recover' costs decreased in 1988. The change in status from related to our new nuclear investments and will'not 1 construction to operation of Perry Unit 1land Beaver - afford protection against future innatiotis :Our cost: alley Unit 2 in 1987 resulted in the cessaticn of' reduction efforts since the 1986 a0iliation of the-

                           )AFUDC on those Units. Insteadcan accrual                                              ofcontinue'g post- Companies have been substantial and will Operatin p                            in servic'e carrying charges pursuant to !?UCO orders                                                      to be important,

!j , ; began on such investments not included in rate V

    ., i s e

m f",' - r

                        ._. RETAINED EARNINGS                                                                                                                            ~
                                                                                                                                  ' CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES.

h For the years ended December Sic 1989 1988 1987 h . (thousands Of dollor5) . p i B2lonce at Beginning of Year . . . . . . . , . . . . , , . S 571,882 S 903.611- .S 893.616; L I Additions - P cNet ' income (loss) . . . .. ...... ,. .. ... ... . . :266,886 (73,960) 390,353

               ,- . D; ductions l Common stock cliv;dends . . . . . . . . . . . . .

1 h, .... . . . . (224,947) (259,022) (352.715) y EOther, primarily preferred stock redemption expenses of . . subsidiaries . . . . . . . ,. . .. . Net Increase (Decrease) ,, , .

                                                                                                                                                 -(47)          (3.747)         (22.643)     1
                                                                                    .        . ...                             .           41,892           (336,729)             14.995       :l JBElonCe ot'End of Year .,
                                                                             ... .           . ..            ..                        S 613,774           S 571,882         S 908.611          i y                                                                                                                                                                                                S
       '                                                                                                                                                                                       4 The accompanying notes und summary of significant accounting policies are an integral part of this statement.
                                                                                                                                                                                               ]
                                                                                                                                                                                               .3 g(Centerior Energy)'                                                               F6                                                       (Centerior Energy) 1,i   -

i

L

INCDME-STATEMENT . CENTERioR ENERGY CORPORAfloN AND SUBSIDIARIES For the years ended December Si, 1989 -1988 1987 (thousonds of dollors, except per share amounts)

Operating Revenues . . . . . . . . . . . . . . . .. ... ... . . $2.302.436 S2,037,560 S i,925,356

   ' Operating Expenses-
      - Fuel and purchased power . . ...... ... , ........ . ....                                            413,816 -           391,40i             470,466
      . Other opera + ion and maintenance . . . . . . . . . . . . . . . . . . . . .                          860,138             865,632             642.594 280,918             264,824              214,421 Depreciation and amortization               . .. . .... . ...                       ......

Taxes, other than federal income taxes . . . . . . . . . . . . . . . . . . 259,871 268,550 -207,521.- Phase in deferred operating expenses . . . . . . . . . . ......... (74,555) - - Pre phase-in deferred operating expenses .. . ........... 7.932 (188,209) (87,623) 122.385 123.697 105,912 Federal = income taxes . . . . . . . . . . . . . ...................... 1.870.505 1,725,895 1,553,291 Operating income . . . .. .. ... . . .. . ... .. 431,931 311,665 372.065 q Nonoperating Income . Allowance for equity funds used during construction. . . . . 16,930 13.504 299,308 Other income and deductions, net. . . . . .. . .. . . .. 14,212 45,308 -(30.665) j Write off of nuclear costs . . . . . . . . . ......... .. . ...

                                                                                                                  -            (534,355)                  -

(27,156)

       . Loss on steam system sale . , , . . . . . . . . . . . .

Phase in carrying charges . . . . . . . . . . . . . .... . .. . 299,159 - - 39,599

                                                                                                                                                                       ]
                                                                                                                  -              372,155 Pre-phase in carrying charges . . . . . . . . . . . . .                    ,           ,,

1 131,254 121,122 Federal income taxes - credit (expense) . . . . . .... ..... (73,177) 257.124 27.866 402,208 . Income Before interest Charges ..... . . ... . ... . 689.055 339.531 774,273 j 1 Intsrest Charges 369,481 378,292 435,042  ; Debt interest . . . ..... ... .... . .. ...... .. ... Allowance for borrowed funds used during construction. . . . (12.929) (6.137) (137,257) l 356,552 372.155 297,785 Income (Loss) After Interest Charges . . ... . ... 332.503 (32,624) 476,488 , Preferred and preference dividend requirements of l subsidiaries . , . . . . . . . . .. 65.617 60,489 86,135 1 income (Loss) Before Cumulative Effect of an 266,886 (102,113) 390,353 Accounting Change. .. . ... .. . . ., . . Cumulative Effect on Prior Years (to December 31, l ' 1987) of an Accounting Change for Unbilled Revenues (Net of income Taxes of $18,729,000) .. - 28,153 -  !

                                                                                                          $ 266,886          S (73.960)          S 300,353 N t income'(Loss) . . . . . .              ........ ...              . ... ..... .

Average Number of Common Shares Outstanding 138,395 I' 140.468 140,778 L(thousands) . . . . . . . . . .. ...,,. .. ... .. 4 Earnings (Loss) Per Common Shore Before cumulative effect of an accounting change. .. . $ 1.90 $ (.73) $ 2.82 Cumulative effect of an accounting change . . . .

                                                                                                                   -                     .20 Total . ,                   ..... .                      .. .         .          ..       $          1.90    S         (.53)     S          2.82 1.60              1.84      S          2.56 Dividends Declared Per Common Share.                                                .               $                  S The accompanying notes and summary of significant accounting policies are an integral part of this statement.

F7 (Centerior Energy) (Centerior Energy)

qpge r k MANAGEMENTS FINANCIAL ANALYSIS Copli 1 Res'. uri s: nd Uquidity our 1991 and 1992 requirements. See Notes 10(d) We carry on a continuous program of constructing and (e) for information concerning limitations on

[ ~

new facilities and modifying existing facilities t the issuance of preferred and preference s'.ock and meet anticipated demand for electric service, t debt, Our short. term borrowing arrangements are comply. with governmental regulations and t explained in Note 11. Also, we will optionally '

       . improve the environment. Cash is {dso needed for             redeem additional securities if econoinical.
 .      mandatory retirement of securities. Over the three.                Our capital requirements will probobly increase year. period 1987 1989, these needs totaled                   suWanW@-after 1992 ff acid rain legislation is -

[. t approximately $1,350,000,000, in addition, we enacted. See Note 3(b). exercised various options to redeem and purchased The availability of capital to meet our external { financing needs depends upon such factors as approximately $1,400,000,000 of our securities. in 1987, the capital required to finance our fmancial market conditions and our credit ratings, construction program and to retire and redeem We ect m be able to raise cash as needed. xcurities was obtained primarily from external Current securities ratings for the Operating sources. Also, in 1987, we sold and leased back Companies are as follows: certain interests in four generating units as dimussed mndud Moody s a Nor's investors in Note 2. In 1988, Cleveland Electric and Toledo corrioration senice Edison issued $188,730,000 and $50,700,000, cleveland Electric respectively, of first mortgage bonds. In 1989 rirst mortgage bonds . Ban- naa2 Cleveland Electric ~ issued $67,700,.k0 of first Preferred stock. , BB+ baaJ mortgage bands and $212,500,000 of secured Toledo tdtson b medium term notes. Also, Cleveland Electric first mangage bonds . BBB- Baa3 [ obtained a $40,000,000 term bank loan. Toledo Unsecured notes . 0B+ Dat ! Edison issued $56,100,000 of first mortgage bonds. Preferred stock. BB+ ba2 [ Proceeds from these fmancings were used to repay We believe that the rate orders, coupled with [ portions of short term debt incurred to finance the stringent cost control, give us a reasonable F construction program, to retire, redeen' and opportunity to achieve financial results which would purchase outstanding securities, to pay our permit Centerior Energy to continue the current i construction program costs and for general corporate quarterly common stock dividend of $ A0 per share.

     . purposes.                                                     Nevertheless, dividend action by our Board of The Operating Companies have been granted                Directors will continue to be decided on a quarter.

rate increases effective in 1989,1990 and 1991 to. quarter basis after evaluation of financial results, pursuant toJanuary 1989 PUCO rate orders. See Note potential earning capacity and cash flow. A write.off 6 for discussion of those rate orders which provide of our investment in Perry Unit 2, as discussed in for specliic levels of rate increases and earnings Note 3(c), would not reduce our retained eamings limitations through 1991. Although the rate orders sufficiently to impair our ability to declare required us to write off certain assets in 1988 which dividends. lowered our earnings base, our current cash flow The Tax Reform Act of 1986 provided for a 40% was not impaired. average income tax rate in 1987 and a 34% income

          - Although the Operating Companies' cash                  tax rate in 1988 and thereafter, the repeal of the requirements for construction ($510,000,000 for              investment tax credit, scheduled reductions in Cleveland Electric and $230,000,000 for Toledo               . investment tax credit carryforwards, less favorable Edison) and mandatory redemption of debt and                 depreciation rates, a new alternative minimum tax preferred stock ($315,000,000 for Cleveland I iectric (AMT) and other items. The changes resulted in and $351,000,000 for Toledo Edison) during the                increased tax payments and a reduction in cash flow 1990 1992 period in the aggregate will be                    during 1987 principally because the AMT reduced approximately the same as for the 19871989 period,            the amount of investment tax credits allowed as an internally generated cash is expected to increase             offset to federal income tax payable. These changes substantially as a result of the rate increases,              had no significant cash flow impact in 1988 because Cleveland Electric expects to finance externally              we had a net operating loss for tax purposes. The about. two-thirds of its 1990 construction and                changes in the tax law resulted in increased tax '

redemption requirements. Nearly all of Toledo payments and a reduction in cash flow during 1989 Edison's requirements in 1990 will be met with because we were subject to the AMT. Internal cash generation and current cash resources. We expect to finance externally about 40 to 50% of (Centerior Energy) F.8 (Centerior Energy)

CENTERtOR ENERGY CORPORATION AND sVBSOfARIEs ' [ CASH FLOWS For ihe years ended Decernber 34, 1989 1988 1987 (thousands of doWors) h ~ C:sh Flows from Operating Activilles (i) .  ;

                                                                                                                                           $ 266,886           S (73,960) S 390,353 ~             !

Net income (Loss) . . . . ... .. .. . Adjustments to Reconcile Net locome (Loss) to Cash from Operating Activities: 264,824 244,421 Depreciation and amortization . . . . .. . . ... 280,918 181,240 (37,422) (279,814) Deferred federal income taxes . . . . . . . . . . ... .. .. 132,699 Investment tax credits, net. .. ... . . ... .. 1,179 (3,687) 534,355 - Trite off of nuclear costs . . . . .. . . .. . 66,185 Delerred and unbilled revenues . . . , . ... (74,792) J3842 25.086 (64,601) 32,957 Deferred fuel . . . . . . . .. .. .. (372,155) .(39,599) Carrying charges capitalized . . . . . .. , (299,159) 49,330 102,120 77,196

             . Leased nuclear fuel amortization .                           .. . .. . . . . ,

(87,623). Deferred operating' expenses, net . . . . . .. . . '(66,623) (188,209) Allowance for equity funds used durmg construction (16,930) (13,504)' (299,308)

                                                                                                                                                   -                   -                27,156 Loss on steam system sale                    .. .. .. ...... ... ..,

Amortization of reserve for Davis-Besse refund obligations to customers . . . . . . . ... ...... .. . . ... .. (24.817) (41,118) - Cumulative efTect of.an accounting change . . . . . . . .

                                                                                                                                                   -              (28,453)                 -

Changes in amounts due from customers and others, net. (13,486) 5,384 (15,483) (3,029) 10,283 (32,617) Changes in inventor!es . . . . . . . . . . . . . . . 73,765 4,182 Changes in accounts payable . . . . . . .. (10,732) 17,120 17,058 150,837 Changes in working capital affecting operations . .. 84,237 Other noncash items . , , , . . (10.319) (8,510) 87,776 259,348 7,560 Total Adjustments . . . . . .. .. .. 354,662 185.388 397,913 Net Cash from Operating Activities . . . . ... Ccsh Flows from Financing Activilles (2) Bank loans, commercial paper and other short term debt. .. 29 (36,555) (9,197) Debt issues: 239,430 411,500 First mortgage bonds. , .

                                                                                                         .             ...                     123,800 212,500                  -                  -

Secured medium term notes . . . . . .. Term bank loan . . . , . 40,000 - - 250,000 Unsecured debt . . .. ..

                                                                                                                                                   -                   -               123,313 Preferred stock issues . . .                  . .. ,                                                .                       .

1,539 102.724 Common stock issues ... . . 740 Reacquired common stock. . ... .. .. .. . (19,804) - .

       . Maturities, redemptions and sinking funds .                                                     .

(370,747) (384,178) (1,026,934) Nuclear fuel lease =and trust obligations. , .. (86,589) (77,496) (39,808) Common stock dividends paid , . .. .. (224,947) (259,022) (352,715) Premiums, discounts and expenses . . . . . (2,622) 1,176 (5,209) Net Cash from Financing. Activities . , . . .. (327,640) (514,806) (546,326) Cash Flows from investing Activilles (2) (223,881) (313,157) (514,059) CMh applied to construction . .. .. . ... .. Interest capitalized as allowimce for horrowed funds used (137,257) (12,929) (6,137) during construction . . . . .. .. ... .

                                                                                                                                                    -                   -          1,690,816    i Cash received from sale and leaseback transactions, net.                                                    ..

Cash withdrawn from (deposited in) sale and leaseback and - 374,085 (374,085) other trusts . . . .. . (17,866) (11,021) Other cash applied . .. . (7.354) (254,676) 47.440 654,394 Net Cash from Investing Activities. . (227,654) (281,978) 505,981 N:;l Change in Cash and Temporary Cash Investments. . Cash and Temporary Cash Investments at Beginning of 106,794 330,797 612,775 Year . . . . ...... . . ... .. ... . . . .... .. Cash and Temporary Cash Investments at End of Year .. $ 103,143 S 330,797 8 612,775 (1) Interest paid was $367.000.000, $373.Ono,000 and $427.000,000 in 1989,1988 and 1987, respectively. Income taxes paid were $9,058,000, $76,531,000 and $52,010,000 in 1989.1988 and 1987, respectively. (2) Increases in Nuclear Fuel and Nuclear l'oel Lease and Trust Obligations resulting from the noncash capitalizations under nuclear fuel agreements are excluded from this statement. The accompanying notes and summary of significant accounting policies are an integral part of this statement. F9 (Centerior Energy) (Centerior Energy)

g r p

.     , BALANCE SHEET                                                                        CENTERIOR ENERGY CORPORATION AND sVBsIDIARIES      .

I- December 31, 1989 1988 s (thousands of dollars;

      ' Assets' Property, Plant and Equipment Utility plant in service . . . ....................... ...... ..                        S 8,411,116            $ 8,143,673 Less: accumulated depreciation and amortization. . . . . . . . . .                       1,831.767               1,569,304

[ 6,579,349 6,574,369 [ Construction work in progress. . . ... . .... .... .... .... 288,225 355,8b [ Perry Unit 2. . .. .... ... .. ... ... ........ ....... 869,048- 866,911 7,736,622 7,797,101 Nuclear fuel, net of an.ortization . ........ . .... . ... 544,375. 596,818 Other property, less accumulated depreciation . . . . . . . . . . . . . . . . 47,317 46,269 i

   ,                                                                                                      8,328,314               8,440,188
         - Current Assets Cash and temporary cash investments . . . . . ........ . ....                                103,143                330,797   3 Amounts due from customers and others, net ,                   . ..... . ..                 216,316                 202,830 Unbilled revenues. . .. ...           . ............ ...... . . ..                            78,718                  64,369-Materials and ' supplies, at average cost . . . . . . .... .........                          83,322                  77,217 Fossil fuel inventory, at average cost . . . .. ...            ... .. .. .                    48,999                  52,075 Taxes applicable to succeeding years ...              , ..      . .... ..                   207,635                  191,292 Other ..         .    . ..    .... ..... .., .. . .. .... . ..                                14.819                   6,971 752.952                 925,551 Deferred Charges :

Amounts due from customers for future federal income taxes . . 1,201,278 1,209,075 - Unamortized loss from 13eaver Valley Unit 2 sale . . . . .... 122,911 127,367 Unamortized loss on reacquired debt . . . . . . ... ., .... . .. 75,988 68,320 Carrying charges and operating expenses, pre phase in . .. 641,236 669,050' Carrying charges and operating expenses, phase in . . , . .. 373,714 - Other . . .... ... . .. .... .. ...... . .. 170.154 133,547 2.585,281 2,207,359 9 Total Assets . . .. ... .. . $ 11,666.547 S ii,573.098

     - The accompanying notes and summary of significant accounting policies are an integral part of this statement.

i i (Centerior Energy) F 10 (Centerior Energy)

p o L

#,                                                                                                                       H-       ,

CENTERIOR ENERGY CORPORATICN AND SUBSIDIARIES'. F'

December Si,
                                                                                                                                                       -1989                       1988 pw-                                                                                                                                                        (thousands of dollars) l L               : C pitalization and I.lobilities.

E > Capitalization

                              " Common shares, without par value (stated value of
 "                                 $191,710,000 and $192,711,000 for 1989 and 1988, respectively); 180,000,000 authorized; 1.49,791,000
                                  -(excluding 1;120,000 shares in Treasury) and 140,820,000 '

(excluding.38,000 shares in Treasury) outstanding in 1989 : x and 1988, respectively . . . . . . . . . . i . . . . . . . . . . . . . . . . . . . . . . . . $ 2,180,798, .S 2,199,862

  • R e tai ned earni ngs . . . .' . . . . . . . . i . . . . , . . . . . . . . . . . . . . . . . . . . . . . . 613,774- 571,882 i s Common stock equity : . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,794,572 2,771,744
Preferred and preference stock-With mandatory redemption provisions . . . . . . . . . . . . . . . . . . . . 281,352 -303,781, ,

Without mandatory redemption provisions . . . . . . . . . . . . . . . . 427,334 427,334 i Long term debt; . . . . . . .................. .... .. . ........ 3.533,656 3.551,o14-'  ;

                                                                                                                                                                                                 ^l 7,036,914                 7,054.473-Other Noncurrent liabillfles                                                                                                                                                .       .

Refund obligations to customerp . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,779- _ 74.290-597.876.

                               'Other, primarily nnelear fuel lease and trust obligations . . . . . .                                                   = $57.789 672,166' 581,568 Current Liabilities
   <                            " Current portion of long term debt and preferred stock . . . . . . . .                                                  217,706 101,057
                                                                                                                                                                                    -159,868
                                                                                                                                                                                     , 85,043:

l7 current portion of lease obligations. . ..... ........ . ..... 248,103- :258,835

                               . Acco u n t s pa ya b l e . . . . . . . . , . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                              ',
                              ' Acc r u ed t a xes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                       329,440                     300.413-84,232'                      90,453 Accrued interest . . . . . . . . . . . .... ...... ........... . ...                                                                                                    '

Dividends declared . . . . . ......... ......, .............. .13,893 14.518 Accrued payroll and vacations . . . . . . . . . . . . . . . . . . . . . .. 27,692 , 27.269 Current portion of refund obligations to customers . . . . . . . . . . . 58,752 68.684  ;

                                                                         ............... .............. .                                                  22,278                       21,082 ' .{

Other....... .....O,.. 1,103,153 -1,025,865' j Deferred Credits' 381,925 --383,074 Unamortized investment tax credits . . . . . . . . . . . . . . . . . . . . . . . . . 1,622.458' i,435,242 j Accumulated deferred federal incomc taxes ................

                               ' Reserve for Perry Unit 2 allowance for funds used during.                                                                    .
                                                                                                                                                                                                 .g 212,693.                  L 212,693 construction - .... ..                  . .. .... ...                      .. ............

655,573 668,669 Unamortized gain from Bruce Mansfield Plant sale .... .... .

                                                                                            .. .. .... . ... .... .                                        72,263                      100.916 .

Other..... ................... 2,944.912 2.820,594 Total Capualization and 1. labilities . . . . ........ .. . $ 11.666.547 S ii.573.098 - q

                                                                                                                                                                                                    -j 4

q

                                                                                                                                                                                                 .j l

l

I a
                                                                                                                                                                                                    -y (Centerior F.nergy)                                                                     F 11                                                      (Centerior Energy)-                f 3
  ' STATEMENT OF CUMULATIVE PREFERRED                                                            CENTERioR ENERGY CORPoRAT;ON AND SUBSIDtORIEs
AND PREFERENCE STOCK 1989 Shores Cunent December 31, Outstanding Con Price 1989 1988 Cleveland Electric Uh "' "#8 ' d "")

Without par value, 4,000,000 preferred and 3,000,000 preference shares authorized Subject to mandatory redemption (less current maturities): Preferred:

                 $ 7.35 Series C . ..... . . ,.                                        180,000        $    101.00     $ 18,000      $ 19,000         !

88.00 Series E . . .. . . 30,000 1,038.26 30,000- 33,000 75.00 Series F . . ... .. .. 2,384 1,000.00 2,384 2,884 80.00 Series G . . . . . . ....... 800 1,000.00 800 2,686  ; 145.00 Series H . . . ..... . 12.462 - 12,462 16.026 145.00 Series 1. .. .. ... .. 15,748 - 15,748 19,686 113.50 Series K . . . . . ...... 10.000 - 10,000 10,000 Adjustable Series M . . . . . . .. .. 500,000 104.25 49,000 49,000 9.125 Series N . .. . . . . 750,000 107.10 73,968 73,968-212,362 226,250 - Preference: 77.50 Series 1 . . . . . .. .

                                                                                           -                  -            -            6,376 Not subject to mandatory redemption:

Preferred: 7.40 Series A . . . . 500,000 101.09 50,000 50,000 7.56 Series B .. . . . 450,000 102.26 45,071 45,071 . gd Adjustable Series L. . . . . . . 500.000 103.00 48,950 48,950-Remarketed Series P .. . 750 400,500.00 73,313 - 73.313 217,334 217.334

         $100 par value preferred, 3,000,000 shares authorized; 525 par value preferred, 12,000,000 sha:es authorized; and $25 par value preference, 5,000,000 shares authorized, none outstanding
            - Subject to mandatory redemption (less current maturities):
                $ 100 par - $ 11.00. . . . . .                                          39,800             103.50         3,980         4,480 9.375 . ..                                          150,100              104.45       15,010         16,675 25 par         2.81.                .                            2,000,000                27.19      50,000        50,000 68,990        71,155 Not subject to mandatory redemption:

100 par 4.25. . . . .. .. 160,000 104.625 iWO 16,000 4.56 . . . 50,000 101.00 5,000 5,000-4.25. . .. . 100,000 102.00 10,000 10,000 8.32. .. 100,000 102.46 10,000 10,000 7.76. . .. 150,000 102.437 15,000 15.000

                                 ' 80 .                      .            .           150,000             101.65        15,000        15,000 10,00.                              .                 190,000             101.00        19,000        19,000 25 par         2.21.               ...                            1.000,000               25.90       25,000        25,000 2.365 .                        .                   i,400,000               28.45       35,000        35,000 Series A Adjustable                                    1,200,000               -

30,000 30,000 Series B Adjustable 1.200,000 - 30,000 30,000 Centerior Energy ' Without par value, 5,000,000 preferred shares authorized . Total Preferred and Preference Stock, with Mandatory Redemption Provisions . . . . . . . . . . . .. . . .. . $281,352 S303,781 Total Preferred Stock, without Mandatory Redemution provisions $427,3_34 S427,334 The accoinpanying notes and summary of significant accounting policies are an integral part of this statement. (Centerior Energy) F.12 (Centerior Energy)

NOTES TO THE FINANCIAL STATEMENTS
 '( 1) Pr:p:rly Own d with Oth r Utilitics and Inv sfors

-.The Operating Companies own, as tenants in common with other utilities and those Investors who are owner-participants in various sale and leasetmk transactions (lessors), certain generating units as listed below Each owner owns an undivided share in the entire unit. Each owner has the right to a percentage of the generating Lcapability of each unit equal to its ownership share. Each utility owner is obligated to pay for only its respective share of the construction and operating costs. Each lessee is obligated to pay for the related lessor's share of those Ecosts. The Operating Companies' share of the operating expense of these generating units is included in the Income Statement. Property, plant and equipmem at December $1,1989 includes the following facilities owned by

. the Operat ng Companies as tenants in common with other utiittles and lessors:

Owner in- Owner- ship Plant Construction serviv ship Mega- Power in work Accumulated Generailng Unit Date share watts sours e service in Program Depreciauon

~ jn Servicci                                                                                          Ohousands of dollars) seneca Pumped starage ,                       1970    H0.00%     30%        Hydro     1    58.291       $     IM        $ 18.422 1%ntlake Linu 5            , ...    ,         1972    68.H0     411         Coal          152,808           1,618           -

Perry Unit 1 & Common Iacilkies . . 1987 51.02 610 Nuclear 2.514,059 13.001 179,361. Deaver Valley Unu 2 & Common Facilides 1987 26.12 218 Nuclear 1,346,9 H 15,331 100.617 (Note 2) . , Construcuan suspended (Note 3(c)h Perry Unit 2 Uncertain 51.02 615 Nuclear - H69.04 H - f i O'2.0'2 $ H99.182 $29HA00 Depreciation for Eastlake Unit 5 has been accumulated with all other depreciable property rather than by specific

 . units of depreciable property.

Ohio Edison and Pennsylvania Power purchased 80 megawatts of Cleveland Electric's capacity entitlement in Perry Unit 1 Irom November 1987 through May 1989. Revenues for this transaction were $31,831,000, $84,068,000 and $9,251,000 in 1989,1988 and 1987, respectively. (2) Utility Plant Sale and Leaseback Transactions As a result of sale and leaseback transactions beginning in 1989. Additional rental expense completed in 1987, the Operating Companies are amounts, which were not deferred but were charged co lessees of 18.26% (152 megawatts) of Beaver to expense in 1988 and 1987, were not significant. Valley Unit 2 and 6.5% (51 megawatts), .i5.9% (358 The Operating Companies are responsible under megawatts) and +i.38% (355 megawatts) of Units the leases for paying all taxes, insurance premiums, 1,2 and 3, respectively, of the coaldired Mansfield operation and maintenance costs and all other

  - Plant for terms of about 29n years. Proceeds from                     similar costs for their interests in the Units sold and the transactions totaled $ l,738,600,000.                             leased back. The Operating Companies may incur additional costs in connection with capital Future minimum lease payments under these operating leases at December 31, 1989 are                              improvements to the Units. The Operating summarized as follows:                                                 Companies have options to buy the interests back at Amouni the end of the leases for the fair market value at that
       -year-time or to renew the leases. Additional lease ohousans d douam                  provisions provide other purchase options along 1990.               ,                $ 169.000                     with conditions for mandatory termination of the 1993 -                                  17*""O                     leases (and possible repurchase of the leasehold lh ' ,                                  $$                          interests) for events of default.- These events of default include noncompliance with several 1996 ,                                  174,000 taier Yean                            4.u s.ooo                     financial covenants atTecting Centerior Energy and total rmure suninnm                                                 the Operating Companies contained in an tease raimenn .    ,              ss.205 moo ~

agreement relating to a letter of credit issued in connection with the sale and leaseback of Beaver Semiannual lease payments conform with the Valhy Unh 2, as amended in l98% See Note 10(e), 1 ledo Edison is selling 150 megawatts of its

   ' payment schedule for each lease.                                        Beaver VaHey Unit 2 leased capacity entitlement to Rental expeme is accrued on a straight line basis over the terms of the leases. The amounts recorded                      Cleveland Electric. Tlus sale commenced m as rental expense for the Manstield Plant leases hwmber 1988 and wr andcipate that it will were $ 11 i,561,000, $ 111,105,000 and $32,'100,000                     c ntinue at least until 1998.

In 1989,1988 and 1987. respectively. Rental expense for the Beaver Valley Unit 2 lease was (3) Construction and Contingencies

     $72,276,000 in 1989. Rental expenses for Beaver Valley Unit 2 of $70,300,000 and $ 18,300.000 in                        (a) Construction Prograrn 1988 and 1987, respectively, were recorded in a                        The estimated cost of our construction program for deferred charge account pursuant to PUCO                                the 19901992 period is $800,000,000, including accouming orders. Such deferred amounts are being                       AFUDC and excluding nuclear fuel. Should more am6,tized to expeme over the life of the lease                          stringent environmental regulations be adopted,
    - (Cemerior Energ))                                           1513                                               (Centerior Energy)

k a particularly in the aren of acid rain pollution control, ultimate outcome of these matters will' be future construction program costs would increase

                                                                 ' immaterial.

substantially. (4) Nuclear Operations and

 .(b) Proposed Acid Rain Legislation =                                  Contingencies There are several bille beln;t considered in the                 (a) Operating Nuclear Units United States Congress which would require significant reductions in the emission of sulfur Our interests in nuclear units may be impacted by dioxide and nitrogen oxides by fossil fueled electric           activities or events beyond our control. Operating generating units. Our preliminary analysis indicates            nuclear generating units have experienced
. that compliance with these bills could require                  unplanned outages or extensions of scheduled outages because of equipment problems or new             I additional capital expenditures in the range of
   $900,000,000 to $1,200,000,000 by the Operating                regdmcnv requirernents. A major accident at a Companies and would result in higher fuel and                   nuclear facility anywhere in the world could cause operation and maintenance expenses. *1he resulting              the Nuclear Regulatory Commission to limit or           j
. aggregate rate increases could be in the range of 9             prohibit the operation, construction or licensing of     #

any nuclear unit. If one of our nuclear units is taken j to 15% b) the year 2000, odt o% ice for an extended period of time for any One bill contains an additional proposal t regulate certain types of toxic pollutants. This reason, including an accident at such unit or any proposal could increase the cost of compliance otber nuclear facility, we cannot predict whether signihcantly over the estimates stated m the regulatory authorities would impose unfavorable preceding paragrapn. rate treatment such a* taking our affected unit out of -j rateg)ast g Under the proposed bills, capital expenditures j and rate increases would be incurred predominantly j in the 1994 2000 period. The 6nancial impact on (b) Nuclear Insurance Cleveland Electric is expected to be greater than on l The Price Anderson Act limits the liability of the.  ; Toledo Edison. We cannot predict the outcome of owners of a nuclear power plant to the amount l the legislative process or be certain that our provided by prhate insurance and an industry compliance cost estimates will not change J assessment plan. In the event of a nuclear incident at significantly. We believe that Ohio law would permit any unit in the United States resulting in losses in the recovery of compliance costs from customers in excess of the level of private insurance (currently I rates. $200,000,000), our maximum potential n.ssessment under that plan (assuming the other CAPCO 1 (c) Perry Unit 2 companies were to contribute their proportionate  ! Perry Unit 2, including its share of the common share of any assessment) would be $129,257,000 ) facilities, is about 58% complete. Construction of (plus any inflation adjustment) per incident, but is Perry Unit 2 was suspended in 1985 by the CAPCO limited to $19,540,000 per year for each nuclear {g companies pending future consideration of several incident. alternatives whleh include resumption of full The CAPCO companies have insurance coverage  ! construction with a revised estimated cost and for damage to property at Davis Besse, Perry and completion date, mothballing or cancellation. None Beaver Valley (including le.; sed fuel and clean up of these alternatives may be implemented without costs). Coverage amounted to $2,035,000,000 for the approval of each of the CAPCO companies, each site as of January 1,1990. Damage to property if Perrv Unit 2 were to be canceled, then our net could exceed the insurance coverage by a investmerit-in Perry Unit 2 (less any tax saving) substantial amount. If it does, our share of such would have to be written off. We estimate that such a amount could have a material adverse effect on our write-oft, based on our investment in this Unit as of Snancial condition and results of operations. December 31. 1989, would have been about We also have insurance coverage for the - $438,000,000, after taxes. See Notes 10(d) and (e) incremental cost of any replacement power for a discu .sion of other potential consequences of purchased (over the costs which would have been such a write off, incurred had the units been operating) after the Duouesne has advised the Pennsyhania Public occurrence of certain types of accidents at our Utilitie:s Commission that it will not agree to nuclear un!ts. The amounts of the coverage are resumption of construction of Perrv Unit 2. 100% of the estimated incremental cost per week Duquesne is continuing to pay for its '13.74% share s during the 52 week period starting 21 weeks after . of maintaining Perry Unit 2 while construction is an accident,67% of such estimate per week for the .' suspended, next 52 weeks and 33% of such estimate per week for the next 52 weeks. The cost and duration of (d) Superfund Sites replacement power could substanually exceed the msurance coverage. The Comprehensive Environmental Response, Compensation and 1. lability Act of 1980 as amended (Superfund) established p'rograms addressing the (5) Nuclear Fuel clean-up of hazardous waste disposal sites, The Operating Companies have inventories for emergency preparedness and other issues. Pursuant nuclear fuel which should provide an adequate to Superfund, the Operating Companies have been supply into the mid-1990s. Substantial additional notifiert of their potential involvement in the clean- nuclear fuel must be obtained to supply fuel for the up of nine hazardous waste sites. We helieve that the remaining useful lives of Davis Besse, Perry Unit 1 (Centerior Energy) F-14 (Centerior Energy)

fWE yy ' + 3

                                                           ,u       ,        ,            ,

Wildy Ordt 2$1Me nt clear'f livoulde  ; 1991, crespectivelyhh'e / annual'izhd Jrevenuesi U abBha L Nbe, required!1f Perry Unit 2 Mere completedk . associated with these increases are as followsi % 4fini1989, existingJ nuclear, fuel financing s

                                                                                                                                    ' cleveland ' Toledo (                    . - -

% % arrangements for the operating Companies-were c **c*c- -T '81 - 1i br: financed through leases from a special purpom Ed" "E ' .

                                                                                                                                                 -(muuora of dollar 01           ,

N fcorporation? The maximum amount of financing e n scurrently available under these: lease arrangements is . 1989. . . . w. R. . s 120.7 ~ s 50.7  : s 7tw

                                                                                                        . a90 . , .    . i .. ..,,.       105.7i            44.3            iso o ;

i( l $609,000,000- ($309,000,000 from intermediate-p , ; term: notes:and $300,000,000 from' bank credit 1991 m . ... . 9R4.' '

                                                                                                                                                          - 40.7!           139.1; S                   tarrangements), although financing in an amotint up                                                                 s324 r        ~ s t 35.7 :     . s460 5.-

o ? , ? to ? $900,000,000 ' isf permhted.;Thc' Operating .

 ,        m ' Companies severally lease their respective portions These revenueincreases are net iticreases after?

F wof the nuclear fuel and are obligated to pay for-the. including adjustments required under the mirror' k 5 fuel. tis it is burned in a reactor,.The lease rates are

                   / hased .on various : Intermediate terminote rates,                                  - CWIP law and the refunding of revenues collected w                                                                                                      by Toledo Edison in 1985 through 1987 pursuant to L f                   kbank s rates' and commercial = paper rates. IThe -

R ' interniediate term notes mature in the period 1993, a February 19851 rate order; The refunding; (1997c Beginning 'in i 1991; 3 the r , bank credit . . - requirement had no impact on net income because'

     > < ; arrangements are cancelable on two years notice by                                           -reserves had been provided in those yearseAlli itheLlenders< Ms4 of1 December V31,. 1989; .                                        amounts related to the refunding requirement will be refunded to Toledo: Edison's customers by--

.g k $579,000,000 of nuclear fuel was financed. This . ilncludes nuclear fuel:In the Davis Besse Perry Unit November 1991 P The orders provided for the permanent exclusion -- p F1 and Beaver Valley Unit 2 reactors with remaining from rate-base of ra. portion of the Operating -

                     = payments of f $75,000,000ie $91,000,000= and ,

q $39,000,000, respectively, asiof December 31i1989.- Companies' combined investment in Perry Unit -1; N ~ and Beaver Vallev Unit'2 which resulted in a write.

.Theinuclear fuel samounisifinanced and. off of $454,000,000 '($300,000,000 after tax) In -
                      -c1pitalized included interest charges incurred by the
     @ Jlessors L amountingTto: $44,000,000iin .1989,                                                      1988. Since the orders effectively eliminated the
                      ; $41,000,000 in 1988 and $38,000,000 in 1987. The .                                possibility of the Operating Companies recovering s 4 estimated future lease amortization payments based -

their remaining investment in ..four nuclear: . "h Won projected burn are $101,000,00011n 1990,. cow truction projects canceled in11980; and:

$115,000,000 in 1991, $117,000,000. In .1992, recuering certain deferred expenses for Davis-e E Besse, additional write offs totaling $80,000,000e s S$106,000,000 in 1993 and $118.000,000 in 1994. As

($49,000,000 after tax) were recorded in 1988, n (these. payments are made, the amount of credit bringing the- total write off of nuclear costs - 1available to the lessor becomes available to fmance emanating from the : orders -to . $534,000,000 W hadditional tiuch ar fuel assuming the lessor's . s ($349,000,000 after titx). . .. .. .. . M Jintermediate-term.E notes E and bank credit .

                                                                                                            . The phase in plans were designed so that the 9%-

3 ,i arrangemems continue to be outstanding, 7% and 6% rate increases, compounded by sales; a P

                           =-

g(6)}Reigulatory Matteis'- growth, will be sullicient to recover all operating .

                                                                                                        . expenses and provide a fair rate-of return on the l                               j.

R 'In 1987lthe PUCO gramed increases in electric rates . Operating Companies' unrecovered hwestments in . #

             ,       uo the Operating Companies as follows:                                                Perry Unit I and Beaver Valley Unit 2 for ten years                                  '

begmning January 1,1989. In the early years of the-

      .#                                                                                                  plans, ' the operating . expenses and return I                                     :natb                     '

conmany ' *1"nded econw - requirements sexceed the revenue' increases. ' i

          .s donaro -         Therefore, the amounts of operating expenses and                                   cc return on investment not currently recovered are .

n itirch 1987 m . .clevelind Electric 539.6 deferred or capitalized as carrying charges / The no r May 198% . . . . . , c. . . . Toledo Edison Cleveland Elecme 2ss PUCO authorized the Operating-Companies to 7 [ December 198L . ... record a full net of tax carrying charge of 9.2% on - . j

                      , December.198%                  ,          Toledo Edson -            0.5 deferred rate based investment commencing lanuary '-                                  !
                              ;On lanuary 31,1989, the PUCO issued orders for                              1,1989. Since the unrecovered investment will.'                                   .i decline over the perlad of =the phase in plans -

the4 Operating Companies which adopted a r settlement reached between the Operating because of depreciation and federal income tax

r.  ? Companies and the majority of the intervenors in benefits that result from the use of accelerated tax
         <s           Lthen pending- rate-cases. The orders endorsed                                      depreciation, the amount of revenues required to - .                                 .

agreements which reached beyond the issues in provide a fair return also declines. Beginning in the-4G , 'such cases and resolved, with respect to the sixth year, the revenue levels authorized pursuant to; , the phase in plans were designed to be suflicient to - R jparticipants, other. issues which had been contested. j E All=pending prudence investigations before the recover current operating expenses, a fair return on JPUCO and pending litigation before the Ohio the unrecovered investments and amortization of y deferred operating expenses and capitalized 4 , , , ySupreme Court brought .by. the . parties to the carrying charges recorded during (Le earlier years of settlement' involving our nuclear investment and the plans. All phase in deferrals after December 31,-

 ^                    Ecther rate matters have been terminated, The orders                                                                  1988 relating to these two Units will be recovered .                                i
                      ~ ihereases Lfor^                    provided for        three annualof rate the Operating           Companies                        by December 31, 1998. Pursuant to such phase in approximately.9E17% and 6% effective with bills                                   plans, the Operating Companies deferred operating                                   #

urendered on and after February 1,1989,1990 and expenses el' $74,555,000 and debt and equhy

                  , :(Centerior Energy) .                                                         F- 15                                                 (Centerior Energy)
    @j '

ew-m- -- - '

                                                                                                                                    ]

/ carrying costs of $ 111,714,000 and $187,445,000,- arising from the sale and leaseback of assets) of.  ! h E resp'ectively, in 1989. $676,300,000, as determined by an audit advisory j

              ' Under the orders, the Operating Companies may              pancl and - approved by the PUCO. Also, in I                                                                                                                                             l I           not seek any further permanent rate increases to be             connection with the orders, a nuclear management              J F           effective before February 1,1992 unless Centerior                expert completed a cost reduction study at Davis-h           Energy's earnings available for common equity                    Besse. The study concluded that Centerior Energy g           prior to extraordinary items, are forecasted eith,er to could reduce annual operation and maintenance i           fall below $210,000,000 over four consecutive                   expenses - at Davis Besse by approximately

[ quarters or to fall below $435,000,000 over eight $33,000,000 in 1991. The management audit will b consecutive quarters. During this period, Centerior consider the Davis.Besse study results in~ the Energy's earnings available for common equity, prior determination of overall savings. to extraordinary items and excluding changes in The orders provide that 50% of the net after tax F . expenses relating to any future sale and leaseback of savings in 1989 and 1990 resulting from the cost assets, are limited to the following amounts for any

                                                   ~

reduction effort or identified by the m?nagement four consecutive quarters ending on or before the audit and approved by the PUCO are to be used to date indicated: reduce cost deferrals recorded under the phase-in plans for the Operating Companies. Based on 1989

                    $ 275,000,000          March 31,1990                   results, no change was made in the cost deferrals for              !
                    $ 295,000,000          March 31,1991                   1989. Fifty percent of the net annualized savings
                    $310,000,000           December 31,1991                achieved or identified and approved for a period to            4 be determined will be used to reduce the 6% rate if any of the earnings caps described above were           increase scheduled for February 1,1991. As an exceeded, an adjustment would be made to the incentive to achieve the savings the remaining 50%               j amount of the deferrals recorded under the phase in              of savings in each of the periods will be retained by              '

plans to . prevent any excess earnings. The the Operating Companies, subject to the earnings

         . adjustment would be applied proportionately                     cap descr bed in this Note. Net savings would be
 .-       between the Operating Companies based on the                     adjusted for changes in capital and operating costs earned returns 01 the two compames,                              arising from certain events, such as changes in tax The orders provide that any permanent rate                 laws or environmental laws. There were no such increase sought to be etTective during the period                                                                              i adjustments for 1989. If the Operating Companies               i February 1,1992 to February 1,1994 may only be                   da not achieve at least one half of the savings                I based upon costs associated with net new                         Mentified by the management audit and approved by              j investment placed in service after February 29,                 the PUCO, earnings would be reduced by the                      i b            1988 and necessary changes in operation and                    amount of the shortfall, subject to the Operating maintenance expenses (other than fuel and                                                                                       i Companies' ability to request additional rate relief if  .I purchased power) and other necessary cost                        Centerior Energy's forecasted earnings fall below              l increases from the levels- identified in the                     the minimum levels discussed in this Note,                     j management audit discussed in the next paragraph.                    The orders also provide for possible decreases or          i Also, If our return on average common stock equity

( is below the benchmark rate established quarterly increases in the cost deferrals if actual revenues are higher or lower, respectively, as compared to

                                                                                                                                    ,j

[ by FERC for rate cases subject to its jurisdiction, projected amounts in the orders. No change was [ tlie Operating Companies could seek rate increases made in the cost deferrals for 1989. { to improve our return under certain specllied The orders set nuclear performance standards 1 ) conditions. through 1998. Beginning in 1991, the Operating t The Operating Companies and the Service j I Companies could be required to refund incremental i Company are undergoing a management audit to rep lacement nov.e: costs if the standards are not-f assure that operation and mainten:mee expense [ met. Fossil fueled puver plant performance may not ' navings are maximized. Until the management audit be raised as an issue in any rate proceedin,.; before

         -is completed in the spring of 1990, an annual                                                                                  ;

}[p savings target range has been set for Centerior February 1994 is long as the Operating Companies achieve a syste n-wide availability factor of at least Energy of $.iO,000,000 to $ 100,000,000 f rom the i r 1988 normalized level of other operation and (M% annudiv. This standard was exceeded in 1989.

                                                                                        '                                                 W t

maintenance expense (excluding lease expense { I' ) o [= L I i t a f , f l 0 J t e (Centerior Energy) F- 16 l (Centerior Energy) j q __ .a

wwwp s' '=

                                                                                                                        ' - ,                                                                          : 4, QWW                   QQ .

v, d, ,

                                                                                              <aug>g             u O,
                                                                                                                                                ," b    =v                                    w            ,

s ,

              ; . . . de m,       t s
                                              , _. u % . . .                                  45. z          e                                                                      r           ,-                                              ,
                                                                                                                                                                                                                                                                         ,      .j psMT(7)lFederalincImeMx L
                                                                                                    ~
                                                                                                        . -        O'3 :       1                                                                                                    e1 kkF;deratincome tupcomputed by multiplying th'e income before taxes afid preferred and preference dividendi                                                                                                                                                                 .

M ' / requirements of subsidiaries by the statutory rates, is reconciled to the amoimt of federal income tax tccorded on the P R WMbooks' as followst t - *

For the years ended Decembar SU
        , gyS %                   '              ;          ~;
                                                                              - r i                                   <                                                                                                                              1989'                         19M8 '           ,

1987 y@@@/_

     ?--                              . ,

1

                                                                                                                                                                                                        - (thousands of dollars)J e                        >: <. .. > . .                     .c t

L Book i, ncome Defore Federal income. Tax . . . . . . . , . . . . . . . . -

                                                                                                                                            .L       , o. . . i . . . ;    = $528.065 : -                      $- '6.7011                    $461,2?H;             2
           .#c
 $ D iTax on luxtincome at Statutory Hate %,...                                                            .. ... .. ....... ...... ....                                   ( $179,542 f                        $ . 2.278 J                   $ 184.281 -
   %~                  Eincrease (Decrease) in ' int:                                                                                                                                                                        ,                            _

u s

/ AFUDC and Carrying Charges,o. .... .o .o ..o... ,,, , ...s., .'-  ?-- ;j l90.228); ,

e " % Accelerated Depreciation 4 4 / , , W . b. . . . . . . . . . .

                                                                                                                                       ..o..         ....        .o..            ;10,415                            ' 6.829;                      ~~15,852 L W                           Organization Costs . . o . . .i. , . M ; o .; ' . . . . . . . . o o . .... J.,                                           .r .... .                      ;-u                            5,617 3                        J -N                             ;
     / gll                tTaxes, Other Than Tederal . Income Taxes .6. . . . .. ' . . . ........                                                                    ..n               '(107).                    . 2,090                        f(1,167) O                   si,
         ~~ '
Other items ;o. ..o. .. n o rg . o . . , .c..,.........o... ...... ..

15,7127 - (5,642); 423.948)i 7)

        % RTotai l ederal Incon e Tax I spense (Credit)h , . ,,, .J. . , e . o .. . ... . ....                                                                             l $195.562                >
                                                                                                                                                                                                               $ n 11.172 :             L $ =(15.210) ;

l D $14deral.iticome tax expense is recorded in the income Statement as followsf

                            *                                   ,e For the years ended December 31l f                         ,                   y
                                                                                                                                                                                                                                                                                'l f'                                                ,

1989 1988, (thousands of dollars) 19H7 d j' ly;;- ~j0perating { Current Tax Expenses; Provision i , o.. . . o , . . . . .a c . . . o ,...... . . , ,. 8 51,869 $ 79,520_ - $ 203.513 :.

                       =Ch.tnges in Accumulated Deferred Federal locome Taxi                                                                                                                                                                                                     j 44,144 -                      26,168                        146,274:.

R Accelerated Depreciation and Amortiration..c.. o......o o .. . .. .

         ,              MAlternative Minimum Tax Credit,.m . .......... ., .. .. ,                                                                             ,       ,           (12.874)                               --                                    .
                                                                                                                                                                                                                                                                     .       y M,                                                                                                                                                                                      4.348                    . 13,588                   - (356,584) L                     ~;

3f' l Sale and I.easeback Transactions and Amottization . . .. . . .. .. ..o....,

                                                                                                                                                                                                                                             " c 11,6851 V             ! Propeny Tax Expense .o.                                . t. . . Wo .o . . . , , ...                              .              . ..                        -                        (12,127)

Q,  ; Deferred CWIP Revenues . .. .; J. . ...... ... . . . . 22.731

                                                                                                                                                                                                                  '- (8,453)                      (26,058) T
                                                                                                                                                                                                                                               .. (19,706):

M i Unbilled Revenues . . ' . . . . . . o . . . . . ......, ... . ... .. .o .- , 5 Deferred Fuel Costs .I = . o . 4.;.... ,. .... .. .o o.... , ,,,, (4.384) 16,227 t (12,511)c ' 3 3 i . J system Development Costs. . . . . . .- o . . . . . o . . . . .o , ,.o , , n. 555 9.157' 5,573;' a " h , Davis Besse Replacement Power;o. ......, .. . ., . .o....o ,,o.... 9,191 -15.291: H -. . , h ~ " FederalIncome Tax Return Adjustments . .... . .. . .o... , , .... '- (19,621) ; 2,117 G L Reacquired Debt Costs , . .i.4 .... ......o,o,. , ..... ... (1,250) 3,774 ~  : 4.152 - c. c 1,021 - ~ 14,913 . 29,490 '$ Deferred Operaung Expenses . . .. .o ... . .. , , , . ... . nNet Operating Loss Carr) forward o.. ..... , ,o . . ...., , ,, - - - (2,545) - . i q

                            "Other items , . . . . . , , . ; . .                      o...         , n           .. . .              .. ,                    ...         .              5.254                        (8,508) L                 . (19,244) .                     -<

Z JW finvestment Tax Cteditr- Net ., , ... .o.o. ..,., y, . . 1,780 (3.687) ;l ~ 137,211) _ 105,912 ll

                                            ; Total Charged to" Opera.f ing Expenses.                              .. . . .                  .              ,                 -122.385                            123.697 4

j"W 7Nonoperating income; L (88,934) . 4

RCurrent Tax Provbion - o. , i(39,341)- (46,432) ~
                    ' -Changes in' Accumulated Deferred Federal Income Tax:                                                                                                                                                                          ..
                              . Davis Desse Replacement Power.... ... .o . . .                                                           . .,,                   o..                     ~.                         - 5,724 ;                  '-(26.154) ;

[ Trite off of Nuclear Costs; ; ,i. ,,, . . . . . . . -  :(188.920)  ;

                                                                                                                                                                                                                                                                             -J s
                            # AFUDC and Carrying Charges ; o. o,                                   .    ,o         ,o       . . ...                                      .       114,300 :                         133,63L                                -
                                                                                                                                                                                                                                                                              -3
                            ? Taxes; Other Than Federal Income Taxes .                                           ..o.              .          .. . .                                     --                           5,520 .                          .-
                                                                                                                                                                                         -                        (36.831) ;                                                        [

e j Net Operating 1.oss Carnforward . . Other Items oio ,o . o (n . . o o.

                                                                                                                                                  , , n
                                                                                                                                                 ..o..
                                                                                                                                                                   , .             -(1.782)                     ~ - ( 3,952) ,                     ' (6,034 ) '
                                            } Tot.tl Expense (Credit) to Nonoperating income ' .                                          .                  ., , .                   73;177--                  (131.2% ) .                    (121.122):                      }
                  . Federal Income Tax included in Cumulative Effect of an                                                                                                                                                                                      '
                                                                                                                                                                                         -                           18,729 -                         .-

M

           ' M Accounting Change for Unt illed Revenues . ,,                                                       , ... . ...                           o     ,o      .,

LTotal Federal. income Tax Expense (Credit).. $ 195,562 $ 11;172 . . $ (15,210) - d# R ... . 4. ... . ... ...

=::==== d
                ,         -.'As discussed in the Summary of Significant Accounting Policies, a change was made in 1988'in tiie method'of.                                                                                                                                    d raccounting for income tanes.-                                                                                                                                                                                     L                                      h "i

TFor tax purposes; net operating loss (NOL) carr)Torwards of al' proximately $327,852.000 and $71,532,000 werei

      -           xgenerated in 1988 and 1989, respectively,'and are available to reduce future taxable income. The NOL carryforwnrds                                                                                                                                           j
                    ;will t'xpire in 2003 and 2004. Future utilization of these tax NOL carr> forwards would result in recording the !                                                                                                                                       )[

4

   .                  related deferred t' axes; The 34% tax effect of the NOL generated in 1989 ($24,321,000) is included in the above

. ' W: table as a reduction to' deferred federal income titx relating to accelerated depreciation and amortization

                    ; tax elTect of the NOL generated in 1988 ($111,470,000) is included in the above, table as reductions to deferred' federal hicome tax relating to accelerated depreciation and amortization ($72,094,000) and to other deferred                                                                                                                                           j w                  ' federal income' tax charged to operating expenses ($2,545,000) and to nonoperating income ($36,831,000).                                                                                                                                                        '.

7 ~ Approximately $35,444,000 of unused general business tax credits are available to reduce future tax obligations, GThe unused credits expire in varying amounts in 2001 through 2004c Utilization of these unused credits is limited a1 by provisions of the Tax Reform Act of 1986 and the level of future taxable income to which such credits may be

                    . applied. -
                            -The Tax Reform Act of 1986 provides for an AMT credit to be used to reduce the regular tax to the AMT level                                                                                                                                            '

4 shotild the regular tax exceed the AMT. An AMT credit of $12,874.000 was generated in 1989.

                                                                                                                                                                                                                                                                                "i

((Centerior INiergy) 1 17 (Centerior Energy) l "m ,

$d                                              , ,                       i                                                                           -

Y

gr gh Q

                                                                                                                                         -(

[  ;(8)_ Retirement incom , Plins :nd Othir Assumptions used for the actuarial calculations f'

Post Retirement Benefits for 1988 and 1989 sununarizcd in the table above

[ Ye sponsor noncontributing pension plans which are: settlement (discount) rate - 8%, long term rate cover all employee groups. The amount of of annual compensation increase - 5% and lorig- ' retirement benefits generally depends upon the term rate of return on plan assets - 8E [ length of service. Under certain circumstances, Plan assets c nsist pnmarily of investments in b benefits can begin as early as age 55. The plans also common si ek, bonds, guaranteed investment I provide certain death, medical and disability c ntracts, cash equivalent securities and real estate, The cost of post retirement medical benefits I - benefits. Our funding policy is to be in compliimee L with the Employee Retirement income Security Act amoumed to $3,NO,000 in 198h $3,800,000 in 1988 1 guidelines, and $5,000,000 in 1989. In 1987, we offered a Voluntary Early Retirement Opportunity Program (VEROP.) which cost . (9) Guarantees

       $ 31,800,000. Pension and early retirement program                                               ~

Under two long term coal purchase arrangements,

  . costs for the years 1987 through 1989 were                                 Cleveland Electric has guaranteed the loan and lease

? $23,300,000, ( $5,700,000) and -( $ 11,000,000), obligations of two mining companies. Toledo respectively. Net pension and early retirement costs- Edison is also a party to one of these guarantee y for the three years were comprised of the following arrangements, which requires payments to the components: mining company for any actual out of pocket idle 1989 1988 1987 mine expenses (as advance payments for coal) when 'h (millions of dollars) the mines are idle for rea. cons beyond the control of [ 3 rension cosis: service cost for nenefas earned the mining company. At December 31,1989, the  ; during the period , , ,, $ 1, $ 12 $ 16 principal amount of the mining companies' loan and - Intetest cost on nrojected benefit le obli ons pramud by the Operating obligation . , , , 35 33 3.3 Companies was $113,000,000. ~ Actual return on plan assets . (73) (76) (37) The Operating Companies have also guaranteed Net arnortization and deferral . 13 19 114) the debt obligation of an equipment supplier. At Net pension cost . . (H) (12) (3) ecember 31,1989, the principal amount of the vt: Roe cosi , - 6 26 debt obligation guaranteed by the Operating Net pension and Vl' ROP costs , . Companies was $ 18,500,000.

                                              $11,,1 )    $_16)    $J The following table presents a reconcillation of the funded atatus of the plans at December 31,1989 and 1988.

December 31, i989 ,gss (millions of dollars) Actuarial present calue of beneht obligations;

= vested benents. , , ,
                                                 $328           $309

( Nontested benefits , 2H 29 Accumulated benefit obligation 356 338 1.ffect of future compensadon levels Il' J Total projected benent obligation 473 436 Plan assets at fair market value 761 661 surplus of assets oser projected benelit obligation . , (288) (225) linrecognized net gain due to variance between assumptions and experience 163 H3 f Unrecognited prior service cost . (H) 12 Transition asset at January 1,198' being amoruzed over 19 years. 141 149 N- 1ccrued pension cost induded n e.5er dMerred (redits on the t.6. ce sheet, f H $ 19 ) (Centerior Energy) It l 8 (Centeriot Energy) C

                                                                                                                                                                                                            ~ s       . a L$ $%

NN Q; ' ! b 'W m >J ;

                                                                                                 .                     i V A, ;- ^-
  • gy g_ v< < ,

DU f 40 5 , _.SharesLof commonistock required for thej

                                                                                                                                          ) Dividend lieinvestment and Stock Purchase Plan, the t f f(7);c$ op k hadidnjhp , 4(yM )Copit' zlBock~ Trorisoctions!
                                               -          x             >
Employee Savings Plan and the Employee Purchase R , g$haresy. forte innd' purchased forctreasury Plan are being acquired in the open market.
 % ;during the three years ended D:cember 31,1989 are                                                                                            'In.1989; Centerior Energy beganf a program to -

g(listed in the following table . . purchase up to 3,000,000 shares of its common stock ' i f r1989 = 1988 : - 19st at prevailing prices in the open market in the period -

                                                                                           ; gthousands of shares) .                       ~between March 28,1989 and March 31,1991; As of J                            '

[' December 31,1989,1,092,000 shares had been chmmEn stockp E < purchased at a total cost of $19,975,000. Such shares - Y/ 3 Dividend Reinvestment and . (Stock I Lurchase Plan . U ... . J3 7 4,591 are being held as treasuty shares. (# * ' FEmployer savings Plan L. /.C V . 7 816

                   'k - Pla n .'.$. . .OiNtIes;p   6 . .. . .             < . . .
                                                                                                           . - - -              ~1-
                                                                                                                                          ,(b) Common Shores Reserved:for issue ~

Common shares reserved for.. issue' under1the f( < > ? (1978 Key smployee stock : Employee Savings Plan-and Purchase Plan t were f, "opoon Plan o ., g . . y . 17- 7 '59 3,176,7271and 21 A48eshares, respectivelyl at? VA . Toiai com,aan stock sales 53- .116 5,528 December 31, 1989.- . . . . k jTreassey shares a . . . . . ' 1 1.082) - (2) 14) Stock ~ options to purchase unissued shares of - Nei change . . . .w . . o m Ti.029). 114 s,soo ' common stock under the 1978 Key Employee Stock i-Option Plan were gramed at an exercise price of -

                                                                   ~

4.Os , .. . p>, icumulauve Preferred and -100%of the fair market value at the date of the: { i. Preference stock of  : grant. No additional options may be granted. The

                           . subsidiaries subjecI '                                                                                           exercise prices of option shares purchased during g$                    ' Jiandatory Redempuon:                                                                                                  the three vears ended December 31,.1989 ranged fr m41d9 to $18.25 per share. Shares and price 101 do Edaon
   ~'

ranges of outstanding options held by employees

                    ' tPretenedt
      .                              f 25 par $2.H L . ,         4   .              .
                                                                                           -               -               2.000.             WCfC AS IDIl0W5:

1978 Key Employee

                            ,     3 C                             Retirements                                                                                                                                            ' stock Opdon Plan -

P

  • ' ' Clevcland Electrie.'

39H9 1988 19874 J Prefened . [ ' $ . 7.35 series C . ., . '(10)' 00) (10) Options Outstandmg. >s 'lH8.00 series E . . .. . .(3)- , (3) (3) at December 31:

  > i                              J 75.00 series t . . .                      . ..              (1)        '(14)              (17)                shares.   .     . . .        215,187 < 314,693 - 392,935
           $>                       - 80.00 berles G . .                    ..                  :(2)          -(5)               (8)               Option Prices . o
                                                                                                                                                                           .   $ 14,09 to f14.09 to : $ 14,09 to ..

J 14 5.00 series H ;. , . . , m . . . . (4)  :(4) (4) $ 20.73 $20.73 ^ - $20.73

      -                          - 14 5.00 series 1. . . . . , . .                  .            (4)           ,(4)             -(4)

M . . u3.50 series h . . . . .

                              - Preference (29)           (c) Equity Distribution Restrictions 77.50 series 1,                                        .(6)'               (7)-                        At December 31c 1989, consolidated retained                               q h                                                                      . ..                                                      (9) earnings were comprised almost entirely of the -

F, EToledo Edison - !; t Preferredi undistributed retained earnings of the Operating s100 par s u.00.; .. m o (s). = (5) (5)  : Companies. Substantially <all of- their retained

                                                  . . 9.375 . ....                           -(17)         - 07)            -(17)             earnings were available for the declaration of 13.25 4 . . . o                                            .

021) dividends on their respective preferred and common [ shares. All of their common shares are held by:

                                                             .1'                     ,

Centerior Energy. g U ' 25 par 3.75 m ,

                                                                                            -              -              ( 1,'200)                                                               .      .

i 3,72. . . o - - 0.400) A loan or advance by an Operating Company to.

2) in9): (1,W ) any of 'lls ' nonutility .afflitates requires. PuCO
                                  ; Net Change. . .                    . .                           2

, , authorization unless the loan or advance is made in -

                       = Cumulative Preferred stock or connection with transactions in the ordinary course sutWdiaries Not sub}cet to                                                                                   Lof the companies' public utilities business
         "                                                                                                                                    operations in which one company acts on be half'of
                           ; Mandatory _ Redemption:

Sales- another. Cleveland Electric i -(d) Cumulative Preferred and Preference 9 ted series P. -- -

seurements . Stock Toledo cdaan - Amounts to be paid fir preferred stock which must d f Preferred: be redeemed during the next five years are l
                                  # P                                         "
                                                                                                        .yng)                                  $ 10,000,000 in-1990, $30,000,000 in 1991,                               j
                                                                                           ]                                                   $20,000,000 in 1992 and $45,000,000 in both 1993                         1 Net Change.                                        -

(l.200) (799) and 199L 4 F 19 (Centerior Energy)

                                                                                                                                                                                                                         ]

a i(Centerior Energy) d

         ,                                                                                                                                                                                                                q
                       -                    p/

( The annual mandakity redemption provisions : te (D) long Term Debt onJ Other Borrowing [ as f Ilows: Arrangements Antunt Mandatory Redempnon Promon, 1.ong term debt, less current maturities, for the sharra begin hu Operatmg Companies was as follows. k > lo be ning ter Actual Redeemed m sh. ire or Average December 31.

!-   Cicel,md Ilecinc                                                              * # "'""""                       I"'"""""
  • hetened (thousands of dollaro I ?3%senesC, 10.000 19tw $ 100 lirst mortgage bonds:
!         NhSO senes L                     5.00D      1981      1.000        1990.       , ......                        "125%,$
                                                                                                                                        ~      $ 60,000
!         ?%w series i                     2.5W       tvM       1,000        1991          ... . . . .                   8.375         35,000      35,000 un On series G .                   330'     19 4      1.000        1991 .                   .. ..            14.00            -

25.000 lesw senes H . , 1.?t<2 19M 1,000 1991. ... . .. . 15.00 70.000 70.000 144h0senes1 1.969 19H6 1,000 199) . . . ... . 13.75 4,334 4,334 11330 senes K . 10m00 1991 1,000 1992 . . .. . .... 15.25 20,000 20,000 Adnatable Aches M 100.090 1991 100 1992 . 10.58 40,000 - 9.12% !.cnes N . 150,000 1993 100 1992 4.334

                                                                                                  ..       ,. .        13.? $                       4.334
     'Ioledo I:dimn                                                          1993     .               .        ,.        F5           30,000       30,000 1993          .. ..           ..            n $$         50,000       50,000 k                                                                             I993                                      I3'75            4 334       4 334 I i f il ma.                      5.000      19'9        100                 *
  • 94?4 . 16Mo 19M 100 1994 .'..
                                                                                           .                             4.375        25.'000      25,'000 5          25 par 2 N1                  400.000        1993          25       D94
  • I 4' 4 t

5 kepresents remaining shares to be redeemed at holders' 1994 . .' ' .'*.

                                                                                                      .                11.25            -          37,'300 f                                                                             1995 1999 .. .. .                           9.90        274.270     274,270 t       opunn                                                                                                   .

2000 2004 .. . 9.24 155,473 155,473 The annuallzed cumulative preferred dividend 2 W v2 W 9 ' '

  • 8 "I 3U24 3 24 requiremerit as of December 31, 1989 is 2010 2014 v.66 465,450 590,450
     $ 61.000,000                                                            2015 2019 . . .                             9 41        669,065     669.065 J

2020 2023 -* 96 4 M,90n 3321 00 The preferred dividend rates on Cleveland . Electric's $erles 1. and M and Toledo Edison's $eries A und 11 iluctuate based on pievalling interest rates, .ktm bank loans due 1991 1993 . . 9111 130,000 143,500 with the dividend rates for these issues averaging 474,215 354,006 Notes due 1991 1999 10.16 8.4% 7.75% 9.06% and 9.91% respectively, in Debentures due 1997 11.25 125,000 125,000 1989 The dividend rate on Cleveland Electric's Polludon control Remarketed Series I averaged 9.23% in 1989. notes due 1991 2015 9,75 221,250 222,680 Under its articles of incorporation, Toledo Other - net . .. -

                                                                                                                                        ? 973       '710 Edison cannot issue preferred stock unless certain                         Total 1.ong Term earnings coverage requirements are met. Ilased on                             Debt . .        ..                           I3,633.656 13.551.614 earnings for the 12 months ended December 31.

1989, Toledo Edison could not issue additional 1.ong term debt matures during the next five years preferred stock. A write-oft by Toledo Edison of its as follows: $208,000,000 in 1990, $184,000,000 in investment in Perry Unit 2 tould adversely affect its 1991, $215,000,000 in 1992, f 200,000,000 in 1993 ability to issue additional preferred Mock in the and $58,000,000 in 1994 future, See Note 3(c). The issuance of additional in 1989, Cleveland Electric issued $212,500,000 preferred stock in the future will depend on million aggregate principal amount of secured earnings for any 12 consecutive m wins of the 15 medium term notes with 1995,1996 and 1999 months preceding the date of issuance, the interest maturities and annual interest rates ranging from on all h)ng term debt outstanding and the 8.95%, to 9.3L The notes are secured by first dividends on all preferred stock issues outstanding. mortgage bonds, At December 31,1989, an There are no restrictions on Cleveland Electrici additional f 37,500,000 of such notes remained ability to issue preferred or preference stock or unissued. An additional $300,000,000 of secured Toledo Edison's ability to issue preference stock. medium-term notes have been registered with the With respect to dividend and liquidation rights, SEC and are available for losue in 1990 cach company's preferred stock is prior to its The mortgages of Cleveland Electric and Toledo preference stock and common stock, and each Edison constitute direct first liens on substantially company's preference stock is prior to its common all property owned and franchises held by them. stock. Excluded from the liens, among other things, are cash, securities, accounts receivable, fuel, supplies and, in the case of Toledo Edison, automotive equipment. Additional first mortgage bonds may be issued by Cleveland Electric under its mortrage on the basis of bondable property additions, cash or substitution for refundable first mortgage bonds. The issuance of additional first mortgage bonds by Cleveland Electric on the basis of property addi' ions is limited tCenterior Energy) It20 (Centerior Energy)

              ,w             ,      ,

lk', ', 8 / byl wot provisions of I? mort, gage. One relates to the 1 Cent:rior Energy and the Operating Companies will Mkam:unt tf bondable property available and the continue to meet the capitalization covenants in the-

        " ' Rother to earnings coverage of interest on the bonds.                event of a wrne ofiof the Opet.nlog Cunprilest
           , HUnder the n ore restrictive of these provisions                    investments in Perry Uni'. 2, bareg unforeseen R g(currently, the amount of bondable property'                       circumstances. See Note 3(c).
         ,     t available), Cleveland Electric would have been permitted to issue approximately $273,000,000 of -             (ii) $h0ff*T9fm 80ff0 Wing Aff0n99m9hf4-Econrefunding bonds based upon property additions                 Our bank credit arrangements at December 31,1989 n             at December 31,1989, after giving effect to the-               **'" ""gg;U ".
               ; $300,000,000 of first mortgage bonds issued in                                     cleveland Toledo sender 11ectric I diann company    Total n           , connection with the secured medium team notes discussed in this Note and the January 1990                                           Ohmam!* of doHm)

I redemption of $60,000,000 principal amount of First Bank Lines of

               - Mortgage Bonds L125% Series due 1990. Cleveland                    credn . . ... I152.000 873.0s0- 88.000   1233.0$0 g              ' Electric also would have been permitted to issue                    There were no borrowings under these bank j '-              approximately $252,000,000 of refunding bonds                 credit arrarsgements at December 31,1989. An p                  based upon retired bonds at December 31,~ 1989, if            additional $5,000,000 line of credit is available to y,                  Perry Unit 2 had been canceled and written off as of December 31,1989, Cleveland Electric would the Service Company under a $30,000,000 Cleveland Electric line of credit, if unused by Cleveland E               have been permitted to issue only $2$J,000,000 of             ElectriemThe $30,000,000 line of credit is included -

y refunding bonds at December 31,1989, - in the Cleveland Electric total. The issuance of additional f,rst mortgage bonds short term borrowing capacity authorized by the D, by Toledo Edison also is limited by provisions in its PUCO is $300,000,000 for Cleveland Electric and pc , mortgage similar to those in Cleveland Electric's $150,000,000 for Toledo Edison. The Operating mortgage.1 Under the more restrictive of these Companies have been authorized by the PUCO to provisions (currently, the earnings coverage test)' borrow from each other on a short. term basis, p p Toledo Edison would have been permitted to issue Most borrowing' arrangements under the

               . approximately I158,000,000 of nontefunding                      Operating Companies'short term bank lines of-          <
'.g" bonds based upon propery additions at December
               ; $1,1989; Toledo 1:dison also would have been credit require a fee ranging from 0.25% to 0.375%

per year to be paid on any unused portion of the permitted to issue appro@ately $86,000,000 of lines of credit, for those banks without fee

               ' refunding bonds based upon retired bonds at-                    requirements, the average daily cash balance in the '

_Deccinber 31E1989. If Perry Unit 2 had been bank accounts satisfied informal compensating , L canceled and written off as of December 31,1989, balance arrangements. [

the amount of nonrefunding and refunding bonds At December 31,1989, the Operating Companies -

L which could have been issued by Toledo Edison had no commercial paper outstanding. If ', a - would not have changed. commercial paper were outstanding, it would he Certain unsecured loan agreements of Toled backed by at least an equal amount of unused bank L Edison contain covenants limiting to 65% of total lines of credit.

               ' capitalization (as defined) the total of u short term                The fee for the Service Company's line of credit -

debt in excess of $150,000,000 and funded debt, is o,375g

                . limiting secured financing other than through first                 No formal short term borrowing arrangements' 7

mortgage bonds and certain other transactions and were established for Centerior Energy in 1989 or

                ' requiring Toledo Edison to maintain earnings (as                39gg, defined) of at least 1.5 times interest on its first mortgage bonds. The earnings coverage ratio applies           (12) Chonge in Accounting for Unbilled
               -. to $3%500,000 of unsecured loans and was 2.8 at December 31; 1989.                                                     N#V80U88 An agreement relating to a letter of credit issued        in January 1988, we adopted a change in accounting "In connection with the sale and leaseback of Beaver            for revenues in order to record unbilled revenues as b                Vlley Unit 2 (as amended in 1989) contains                      disc u 3ed in the Summary of Signi6 cant                   '

several financial covenants affecting Centerior Accounting Policies.

                ; Energy and the Operating Companies. Among these                     The adoption of this accounting. method are coverage covenants which require Centerior                increased 1988 net income and earnings per share, p                                                                                before the cumulative eflect on periods prior to
                ; Energy and Cleveland Electric to maintain earnings-V                 ,to interest expense ratios above specific levels. This         January 1,1988, by $3,581,000 (net of f1,845,000 of l ngreement also contains certain capitalization                  income taxes) and $.03, respectively. The
                 -covenants which require the Operating Companies                 cumulative effect of the change on the periods prior l tc maintain common stock equity above specific                  to January 1,1988 was $28,153,000 (net of LlevelA and require Centerior Energy to maintain the             $18,729,000 of income taxes), or f.20 per shareiand.

r ratio of common stock equity to total capitalization has been included in 1988 net income. and the ratio of total equity to total capitalization if this change in accounting method were above specific percentages. Centerior Energy and applied retroactively,1987 pro forma net income the Operating Companies are in compliance with and earnings per common share would have

                . these covenant provisions. Also, we believe                     decreased by $781,000 and f.01, respectively.

(Centerior Energy) . IL21 (Centerior Energy) g , , u- U

4 . . . . . . (13) QunrtOrly Results of Op3rctions (Uncuditod) The founwing h a inhulation of the unaudited quarterly results of operations for the two years ended December 31, 1989. Quarters inded March 31. Jine30 Sem 30. Dec 31. j (thouunds of clollars, except per share amount 0 1989 Operating itevermes . . . . . . . . . . . . . . . . . . . . . . . . . . . , 8555,230 $ $77.303 1637,619 i 532.284 1112.968 $ 129,708 (152,796 i 36,459 Operating income . . . . . . . . .. . ....... ... ..... N et i ncome . . . . . . . . . . . . . . . . . . . . . . . . ... .... $ 67,690 $ 77,807 1108,857 8 12.532 Average Common Shares (thousands) . . . . . . . . . . . . . . . . 140.829 140,752 140,391 139.990 Earnings Per Common Share . . . . . . . . . .... .... .. f .48 i .55 i .78 f .09

                                                                                                      .40               .40      $       .40     $         .40 Dividends Paid Per Common Share . . . . . . . . . . . . . . . f                                            $

1988 8506,579 1483.186 1586,510 $ 461.285 Operating iterenues . . . . . . . . . . . . . . . . . . . . . . . .. 8 48,116 Operating i ncome . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . t 69,300 $ 75,411 1118.838 Cumulative Effect of an Accounting Change (Note 12) . I 28,153 f - f - f - I 85.188 I 57,565 8110,911 7(327,624) Net income (loss) .. . ........ ....... ..... . .. 140,776 Average Common Shares (thousands) . . . . . . . . . . . . . . . 140,740 140.787 140.820 Earnings (Loss) Per Common Share Before cumulative effect of an accounting change. ... . $ .41 $ .41 8 .79 8 (2.33) Cumulative effect of an accounting change ( N ot e 12 ) . . . . . . . . . . . . . . . . . . . . . . . . . ...... . .20 -- - - Total........................... f .61_ _f 41 f 79 i (2.33) f .64 I .40 t .40 $ .40 Dividends Paid Per Common Share . . . . . . . ... .. (Centeritt Energy) F 22 (Centerior Energy)

                                                                     ,,                                                                            s

p r t r FINANCIAL AND STATISTICAL REVIEW Operating Ravenues (thousands of dollars)

                                                                                                                                              $'com         Toto' 1010!                              io'o!         beating     Doefoting Commercial          inWstno'        Otho'             Retoe        Who.escie           licetne          6 Gas      Reven+5 teor                 Dementio' 1969.                $685735          $616 902         $746 $34 $204 769 $2 253 940                    $ 48 406         $2 302 436        $-          $2 302 436 637 329          537 foi          675 5B4         64 524        1 035 208        402 262          2 037 560             -       2 037 560 1966.

629 663 534 6B2 6B9 950 36 272 i BB7 576 24 400 1 911 905 43 371

  • 925 356 19B7.

546 614 (75 682 70 746 i 874 457 ti 381 i 882 03B 12 053 t 895 791 1986. 509 445 4B5 260 667 450 73 224 1 702 606 io 036 4 00B 642 if Boo i 827 508 19BL. 566 666 267 253 454B40 47 318 1117 4B7 $2173 1 160 660 19 462 i 189 122 1970 , 351 076 Operating Expenses (thousands of dollars) Dthet Phose-lh & ope'ohon Deprec 6cNon Toses. Pre-phose In Feoeror iotal F uel & hCome Ope'ohng Purchased & A Othef lhon De'ef'co (upenses Molhtenonc e AmortJohon Fil Net lore $ ven' l' owe'

                                              $660138               $280 916                $259 871            $ (66 623)             $122 385         $1870 505

[ 1989. $413 846 L 264024 26B 550 (iBB 200) 123 607 1 725 805 1988. 391 toi 665 632 642 504 214421 207 521 (07 623) 105 912 1 553 291 1987. . 470 466 550 874 449 000 194 025 - 13B 481 i 547 270 1966. 522 281 1965. 510 844 450 376 idi 333  ; ti 120 -- i!4 623 1 438 496 229 157 BB $60 ,00 245 - 63 366 085 235 1979. 404 037 income (Loss) (thouscnds of dollars) F eocral income Other income income (L oss) income & T om- be' ore After Operahng AF UDC- Deductions. Co'rving Cred t inte'est Debt A8 UDC- Interest f ounty Not Choyes ([wpense) Cho'ges Inte' elf Debt Cho'ges voor income l 1969. $431931 $ 16 930 $ 14 242 $299159 $(73 477) $689 055 $369 461 8 (12 929) $332 503 I 1088. 314 665 13 504 (4PO 047)(ai 372 155 434 2!4 339 531 378 202 (6 137) (32 624) f 30 509 121 122 774 273 435 042 (137 257) 476 466 l 1967. 372 065 200 300 (57 824) 1996. 348 521 300 405 (8 108) - 116 422 765 240 406 465 (118 145) 476 920 4085. 380 012 260 001 5 825 - 86 775 740 613 367 315 (101 918) 484 216 56 944 13 140 - 10 317 264 288 437 883 (25 724) 172 129 1079. 203 687 income (Loss) (thousands of dollars) Common Stock (dollars per shore 86 %? Income (Loss) befo'e Retum on Pretened & Cumulatte Cumulahve Average Averogo Pref erenc e ifract of an ttreet of on Net $hoff Common Stock Accounting ACCounttno income Outstond.n'sg(c) fornings Stock Deconds Boo

  • Year Dtv60cnds Chonge Change (b) (L oss) (thousanos) (Losn(e) fouity Decio edfe) value(c) 1989. $65 617 $ 266 886 $~ $266 666 140 468 $ 190 9.6% Stoo $ 19.99 26 153 (73 060) 140 778 (0 53) (2 5) 1.84 10.68 1968.. 60 480 (102 143) 66 135 300 353 300 353 138 305 2 82 12.8 2 56 22.10 6 87. -

301 803 128 927 3 04 13 7 2 49 22 13 1G86. , 85 027 391 893 - 40'. 3B7 401 387 421 BOB 3 20 45 7 2 20 24 50 4985. 82 820 - 132 648 4 425 436 773 50 105 2 31 11.7 i 67 19.56 4979. 39 481 NOTin Data for yean prior to 19N6 are ihr resuh of combining and rest.uing r.leseland I.lestrk and Toleda 1 dnon data. (a) locludes wine off of nuclear costs in ihr anmunt of $U d%Mnn in im tb) In 19MM, the Operatmp Con'pames atlopted a s hange m the method of accounting for tmhilled restnues in 197. Cleveland llectric adopted a change in the method of depreciavon foi its nuclear generiting umt (c) OutstJudmg AhJtet for the periods prior lo ApMI .'% IVNb rrfirtl the C!rstland Illectric I Il fof onC CV h.mKC ratio and the Toledo hlhon one for one entiange ratio for Crnterior i nerg) stuuc( (Cerectior I;nergy) F J.4 (Centerior Criergyi

l. }
    ?"

i CENTI # LOR ENibbY CORPOA CICN AND SUBSIDIAMES - Electric Solos (millions of KWH) Etetric Customer $ (y:Of Cnd) Residentlol Usogo j AveroQs Ave' ope Averope Pnte - keverwe i incastno' . rWu ter Per Per Teot Descenitol Commefc6al hdJstNo' WtWesole Other Total Peecential Commerclot 1 0ther totol ' Customer kWH Culs oym , 1989.. 6 806 6 830 12 620 429 996 27 684 914 020 93 833 12 763 1 020 616' 7 295 90.080 $737.68 1- 1988.. . 6 920 6 677 12 793 863 946 28 000 909 982 92 132 12 305 1 013 6(9 7 462 9 21 690.06 l 1087. . 6 659 6 350 41 985 399 949 26 342 903 365 90 448 12 240 1 005 75? ? 217 9 46 685 43 1986.... 6 627 6 230 11400 242 909 25 326 898 $B3 87 947 12 012 998 642 7 108 9.18 664 99 l. 1985 . . . . 6 309 6 952 ii 410 331 865 24 867 892 727 87 442. 12 023 992 102 6 900 8 98 622.08 1979.... 6 287. 62P 12 $28 1 07 8L03 26 739 880 209 82 326 ii ?61 473 903 6 998 ( .!8 300 98

  ;                              Lood (MW & %)                                        Energy (millions of KWH)-                                         Fuel                         i Operobie Conoctty                                                                                                                                          l Not                                      Ithesency-ofIrne          Peak      Cooocsy         Lood        C0"D0'v G***'0'* d               Purchased                    f uel cost        giv rer     -

Year ot Peas (d) Load Y~> pin loctor lossli Nuclear 1otot Power total - Per KWH kWH 1989'. .

                .                    6 699        .6 389          3$%        63.3% 20 174          12 122 32 296             (2 786)       29 611            1.47C        10 404     [

t' 198 8 . . . . . 6 625 5673 (2 ') 60,8 21676 7 605 29 381 920 30 301 1 $9 10 410 ( t. 1987,..... 6 965 5 173 13 1 63 6 20894 6 907 27 801 601 28 402 4 63 10 466 .

        .1986.. . ..                 6 199         6 021          34         63 0     22 739            24 22 763             4 652        27 315            1.79         40 292 -   t 198 6 . . . . . . .        4 639         4 612          0.6        69.1     21 610        1 064 23 574              3 283        26857             4 85         40 343     5
        -1979... ...                 6 386         4 606        29 4         70 4     21 038        3 153 24 191              4 326        28 517            1.46         10 528 t

investment (thousondt of dollots) Construction Wors in totoi Utility Accumulated Prog ess Nuclear Property, Utility , Ploht in DepreC60 tion & Not & forty f uel and Plont ohd flont Total Voor Lervice Amortirotich Plant Unit 2 Other iospment Aoditions Assets -

,         1989 . . . . . $8 414116 -                   $1831767            $6 679 349       $1157 273           $691692        $8 328 344        $ 230 797            $11666 547     i 9088. . . .              B 443 673             9 669 334          6 574 369         1 222 732          643 087        6 440 188            343 443           11 573 098-   l 1987... ..               8 388 144             i 324 446          7 063 668         i 007 707          656 350        8 727 725            047 021           11 349 836 1986 . . . . . . .       4 639 642             1 367 662          3271880           6 237 782          652 564 '      9 462 226         4 433 748            10 014 932 ,

1985.. . .. 4 481 451 1 264 931 3 2io 520 4 291 094 664 276 8 071 890 994 260 9 022 094 l 1979.,. .., 6 076 422 - 72S 070 2 353 352 1 257 471 44 372(e) 3 654 895 668 B79 4 148 759 s Copitollzollon (thousands of dollars 86 %) Preferred Stock. Pretened & Preterence without Stock. with Mondatory Mondotory { Year = Common Stock lauffy Recomption Provisions Dedemption Provisions long Term ()ebt Iotal 1989. . $2 794 672 40% $281352 4% $427 334 6% $3 533 656 50% $7 036 914 ,i 1988, .. 2 771 744 39 303 781 4 427 334 6 3 551 644 59 7 054 473 I 1987... ... 3 109 060 41 343 985 4 457 334 6 3 718 249 49 7 628 628 1986,. 2 991 341 39 487 814 7 404 021 0 3 792 402 49 7 675 578 1985.. .. 2 710 098 39 468 306 7 374 021 5 3 438 928 49- 6 991 353 l 1979. .. ,, i 246 ii6 .37 266 000 8 245 071 7 1 585 128 48 3 342 315

        * (d) C:pacity was reduced tecauw of extended generating unit outages for renovation and improvements in 194 ( M90 MW L 19% (M6 MW)-
         ~' and 1988 (H% MW).
       ' (c) Restated for effects of capitahration of nuclear fuel lease and fmancing arr.ingements pursuant to statement of hnancial Accounting
              $tandards 71.                                                                                                                                                          '
                                                                                                                                                                                     ?
        -(Centerior Energy) -                                                               F 24                                                      (Centerior Energy) i
                        ,                           n s>                      ag                          '
       # TRE'PORTLF INDEPENDENTr POBLICl AC'COUNTANTS-r-
                                                                                                                             .,               f, t

W, " ' 4 , '

    ,      iTi,the Share Owners of m M            iThe Cleveland Electric illuminating Company:                                                                                   d
            ,     jYe have audited the accompanying consolidated '                  three years in the period ended December 31,1989,;                 -
                   ; balance sheet and consolidated statement of                    in conformity with generally accepted accounting               '~

[ cumulative preferred and preference stock of The . principles. F ' Cleveland Electric illuminating Company (a wholly- .

l owned subsidiary of Centerior Energy Corporation) As discussed further in the Summary of Significant and subsidiaries as of December 31,1989 and Accounting Policies and Notes 7 and 12, a change . d F L 1988, and the related consolidated statements of was made in the methods of accounting for income -
                     ' income' retained earnings and cash flows for each of taxes and unbilled revenues in 1988, retroactive to               i
                   ; the three years in the period ended December 31,              January 1,1988.                                                  .i
                     - 1989c. . These financial - statements are the responsibility of the Company's management Our               As discussed further in Note 3(c), the future of Perry -'

0 F ' f responsibility is to express an opinion on these Unit 2 is undecided ' Construction :has besn. .; 7 . financial statements based on out audits.  : suspended since July 1985. Various alternatives are t being considered, including . resuming.. 1 1 We conducted 'our audits iri accordance with constmedon, mothballing or canceling the Unit; i' ' generally accer.ted auditing standards Those Management can ghe no asmrance wWn, d ever, , It standards requhJ that we plan and perform the audit Peny Unh 2 wm go in+eMee orwhether its.  :

                    ' to obtain reasonable assurance about whether the ,            investment and a return thereon will ultimately be;
  ,                    fmancialE statements are free of material                                                                                    q recovered.

misstatement.LAn audit inch les examining, on a test l i basis, evidence supportin the amounts and our audits were made for the purpose of forming an : i disclosures in the fmancial s:cments. An audit also - opinion on the basic financial statements taken as a 3 includes assessing the accounting principles used dole. The schedules of The Cleveland Electric 5 l 1 s and significant estimates made by management, as Illuminating Company listed in the Index to-well as evaluating the overall financial statement Schedules are presented for purposes of complping ' presentation. 4 e believe that our audits provide a with the Securities and Exchange Commission's ' reasonable basis for our opinion. mies and are not part of the; basic financial- ! In our opinionithe financial statements referred to'- statements.These schedules have been subjected to; + N,~ above present fairly, in all material respects, the the auditing procedures applied in the audits of the .

fmancial ~ pos6 tion ' of The Cleveland Electric bask financial statements and, in our opinion, fairly ,

Illuminating Company and subsidiaries as of state in all materlil respects the fmancial data - , Decernber 31,1989 and 1988, and the results of required to be set forth therein in relation to the . l

                     ; their operations and their cash flows for each of the        basic financial statements taken as a whole.                       ;

f l Cleveland, Ohio l'ebruary.12l 1990 . ] { >

 .;!                                                                                                              Arthur Andersen & Co.            .{

e iP F  ! j [ t Y p a b l f 4 L F.25 (Cleveland Electric) -I (Cleveland Electric) s ' f t i

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES G;nOral including an interest component,is charged to fuel lhe Cleveland Electric illuminating Company expense based on the nue of mnsumption. (Company) is an electric utility and'a wholly oivned 1:stimated future nuclear fuel disposal costs are subsidiary of Centerior Energy Corporation belnp nyomed ihniugh the base utes (Centerior Energy), The Company follows the D' unupany defas du ch0nences bdween l'niform System of Accounts prescribed by the actual fuel ems and estimated fuel costs currently I'ederal En'ergy gegulatory Commission (l' ENC) and being (ecomed fnim mtomns through Om fuel adopted by The Public Utihties Conuuission of factor, Ihis matches fuel expenses with fuel related

                                                                  ' CVC D"C5 -

Ohio (PUCO). The fmancial statements include the accounts of the Company's wholly owned subsidiaries, which in the aggregate are not material. Pre Phase In Deferrals of Operating The Company is a member of the Central Area Expenses and Carrying Charges Power Coordination Group (CAPCO L Other The Pl?CO authorized the Compant to record as members include The Toledo Edison Company ,Jeferred charges interest carrying costs and (Toledo I:dison t , Duquesne 1.ight Company operating expenses (including lease payments, (Duquesne), Ohio Edison Company (Ohio 1:dison) depreciation and taxes) for licaver Vallev l' nit 2 and Pennsylvania Power Company (Pennsylvania from its conunercial in sersice date of No'vember 17 Power). The members have constructed and operate 19H" through December 31, 1988, The PUCO peneration and transmission f acilities for the use of determined that Perry tinit I was considered "used the CAPCO companies. Toledo Edison is also a and useful" on May 31, 1987 for regulatory wholly owned subsidiary of Centerior Energy. purposes. Consequently, the Pl?CO authorized t'he Company to defer operating expenses for Perry Unit Related Party Transactions 1 from June 1,19r through December 22,1987, Operaung resenues and expenses include those the date when these costs began to be recovered in amounts f or transactions with afbliated companies in rates. The PUCO authortred the deferral of interest the ordinary course of business operations. and equity carrying costs. txc!usive of those The Cotnpany's transactions with Toledo Edison auociated with operating expenses, for Perry Unit I are primarily for interchange power, transmission from June 1,1987 through December 31,198*' and line rentals and joindy owned power plant deterral of interest carrying costs f rom january 1, operations and construction. See Notes 1 and 2. 1988 through December 31, 1988 The amounts Centerior Service Company (Service Company), deferred for Perry Unit 1 pursmmt to the PUCO the third wholly owned subsidiary of Centerior accounting orders were included in fuoperty, plant Energy, provides nu,nage ment, huancial, and equipment through the Novembt, 18,19H7 administrative, engineering, legal and other services commercial in service date. Subsequem to that date, to the Company and other athilated companies at amounts deferred for Perry l' nit I we re recorded as cost. The Service Company billed the Company deterred charget Amortization of the Ocaver Valley

   $9Ln00,000,179,000,00n and f 43,000.000 in 1989,                 Unit 2 and Perry Unit 1 deferrals began on January 1, 19H8 and 19H7, respectively, for such services.                   1989 in accordance with the January 1989 PUCO rate order discussed in Note 6. The amortizations Revenues                                                          wik condnue e the km M the rduN propeny.

It i o t pti i ! nr dt I s Phase In Deferrals of Operating Expenses and Corrying Charges authosivefby the PUCO. Prior to 1988, these revenues were recorded in the accounting period As discussed in Note 6, the January 1989 PUCO rate during which meters were read, except for the order for the Company included an approved rate portion of revenuca which was defened under the phase in plan for the Company's imestments in mirror construction work in progress (CWIP) law Perry Unit I and lleaver VaMey tinit .'. On.hmuary 1, discussed below. Utility service rendeted aber 1909, the Company began recording the deferrals of monthly meter reading dates through the end of a operating expenses and interest and equity calendar month (unbilled revenues) became a part carrying (harges on deferr;d rate based investment of operating revenues in the following month pursuant to the phase in plan. These deterrals will when the meters were read. Effective January 1, he recovered by Decenber 31,1998. 1988, the Company changed its method of accounting to accrue the estimated amount of DepreClotion and Amortization revelmes for sales unbilled at the end of each mcnth. See Note 1. Tk cW W pp n @W ad qdp E my r the nuckar gnmung unb, b &pwa. a d m A fuel factor is added to the base ran s for electric servite, This tactor is designed to recover fuel and .thar MmaW udul he on a MmWutne bah most purchased power costs from customers. It is annu um W ne pmdauon provision changed semiannually af ter a hearing before the npmwd as a pmnt M atmg &pwdaW udhty PUCO' plant in servke was 3.9% in 198,,. ,1988 and 1989. Depreciation expense for the nuclear units is based on the umts-of production method. Fuel Expense Etfective July 1988, the Company began the The cost of fossil fuel is charged to fuel expense external f unding of f uture decommissioning costs based on imentory usage. T he cost of nuclear Hel, for its operating nuclear units pursuant to a Pl'CO (Cleveland Electric) 1126 (Cleveland Electric)

c, -- , m , order. Cash c mributions are made to the funds on a interest Chorget. k[ M straight line basis (ner the tcm:lning licensing Debt interest rep 6tted in the income Statement does

             'b period for each unit, Amounts currently in rates are                not include imerest on nuclear fuel obligationsi
                ^ based on past estimates of decommissioning costs Interest on nuclear fuel obligations for fuel under WN:for the Company of $63,000,000 in 1986 dollars for                     construction is capitallred. See Note L 9 )theliesse)    DavirBesse       Nuclear Power Station (Davis-for and i44,000,000                                  PerryLosses Un!! 1andand gains reallred upon the reacquisition F ~ $35,000,000 for lieuver Valley Unit 2, both in 1987                or redemption of long term debt are deferrede O                      dollars. Actual decommissioning costs are expected            consistent with the regulatory rate treatment. such.. a p                 ' to' exceed these tstimates. .it is ewected that '               losses and gains are either amortlyed over the .

increases in the cost estimates wth be recoverable remainder of the original life of the debt issue' retirt d or amortized over the life of the new debt

t. in rates resulting from future rate proceedings. The I current level of accruals being funded and issue when the proceeds of a new issue are used for tecovered from - customers over. the remaining - the debt redemption. The amortizations are l-'
                   ' licensing periods of, the Units is approximately               included in debt interest expense.

L

                    ' $ 4,000,000 annually.

Property, Plant and Equipment U . Deterred Goin from Solo of Utility Plant Pr penn plant and equipment am MatM at b@nal-t > The Company ls amor:l/ing'the deferred gain (not of . coM less any amounts ordered to be written off, tax La%ociated with the sale el the Bruce Mansfield included in the cost of construction are items such _ Plant (Manslicld Plantiin 1987 over the term of as related payroH taxes, pensions, Innge bench 1 the leases under the sale and leaseback agreement, management and general overheads and AFUDC.. See Note 2i The amortization and lease expense APU represents the estimated composite debt F arnounts are recorded as operation expense. and equity cost of funds used to huance t F construction. This noncash allowance is credited to o Federalincome Toxe8 income, except for AFUDC for Perry Unit 2.

                    . Thel 1988 and 1989 financial statements reflect the Beginning in.luly 1985(Perry Unit 2 AFUDC was credited to a deferred income account untd January liability method of accounting for income taxes as a l
 ;                     result of adopting a new standard for accounting for          1,1988, when the practice of accruing AFUDC on
                     . income taxes in 1988. Prior to 1988, income taxes             Perry Unit 2 was discontinued. See Note 3f c). The j                                                                                     gross AFUDC rates were 10.91% and 11.23% in f wre accounted for by the deferred method. Under the delerted method,' deferred taxes and deferred             1989 and 1988, respectively. The net of income tas g

tax credits were not adjusted for subsequent

                            ~

AFUDC rate was 10A7% in 1987.

,i
                   ' changt s in federal tax rates. Also, under the deferred              Maintenance and repairs are charged to expense as incurred. Certain malmenance~ And repair v            method, the Company did not record deferred taxes on the temporary differences between book and tax             expenses for Perry Unit 1 and licaver Valley imit 2
                    ; income that the PUCO used to reduce allowable                  have been deferred pursuant to the PUCO L                                                                                   accounting orders discussed above. The coM of costs for ratemaking purposes, This practice was premised on regulatory treannent which permits                replacing plant and equipment is charged to the recovery of such deferred income taxes in future              utility plant accounts. The cost of property retired o
                                                                                   plus removal costs, aher deducting any salvage
                      -revenues,
                         . A major difference under the liability method is          value, is charged to the accemulated provision for h

that deferted tax liabilities are adjusted for depreciation. subsequent tax rate changes. Also, the Company [must now record deferred taxes for all temporary Mirror Construction Wolk in Pro 9ress

                    - differences between the book and tax bases of assets and : liabilities. Application of the accounting-             The Ohio mirror CWIP law requires that revenues l-                                                                                   authorized by the PUCO and collected as a result of Mandard in 1988 and 1989 did not impact resuhs of Loperations as the additional deferred taxes were                 including CWIP in rate base be refunded in a l

s ~~ ol fset by a regulatory awet on the balance sheet subsequent period after the project is included in

                      'because of the regulatory treatment descrined in the          rate base. For accounting purposes, such revenues p
  • are deferred and recorded as refund obligations to
                    . preceding paragraph. Additionally, allowance for
                    ' funds used during construction (AFUDC) and                     customers. During the period when such revenues P

carrying charges that were previously accounted for are being collected, Al UDC (through the in-

                     ,in the Income Statement on a net.of tax or an after-           service date of the project) and carrying charges s

tas basistare now stated on a presax basis. (during the remainder of the cr"ection period)

                    - Consequently, the ~1988 and 1989 federal income tax             continue to be capitalired. The .ferred revenues
                      .prmisions are equally higher,                                  are then ecogniyed as operating revenues in the
                            .For certain property, the Company received .             Income statement over the period of the refund.

2 investment tax credits which have been accounted Amounts collected through January 31,1989 under

;:                      for as de ferred credits. Prior to 19M1, tax credits          the mirror CWIP law are being refunded pursuant Lutilized were reilected as reductions to tax expense            to the lanuary 1989 PUCO rate order discuned in -

over the life of the related property. Under the new Note d. After February 1,1989, no revenues were method ' of accounting. the. amortization of being collected under the mirror CWIP law. All

                       ' investment tax credits is reported as a reduction of         mirror CWIP revenues will be refunded to customers depreciation expense. See Note 7.                             by November 1990.

(Cleveland Electric) -

                          ~

F 27

                     =l(Clhveland Flectric)

L #

t MANAGEMENTS FINANCIAL ANALYSIS Rcsults of Operations retail outlett indusuia' sales decreased 2.6% 99g9 y $9gg principally because of th 45% reduction in sales to large primary metals and automotive customers. The January 1989 PUCO rate order f.or the Company sales to other industrial customers mercased 2%. (as discussed in Note 6) contributed to a The decrease in revenues from sales to Ohio Edison substantial improsement in cash flow in 1989, but and Per uvivania Power was the result of the May had sigmticandy 'eu ellect on our carnings. The 1989 expliation of the Company's agreement to sell gain in reported revenues from higher rates was a portion of its share of Perry Unit 1 capacity, offset ny a corresponding reduction in nuclear plant Operating expenses increaaed 9.2% in 1989. related cost deferrals, as such co3ts are phased in L.ower deferrala of nuelcar operating expense for and recovered in rate' Perry Unit 1 and Beaver Valley Unit 2 resuhed in a The 1990 and 1991 rate increases included in the B6.000,000 increase in expense. ruel and rate order will continue to improve operating purchased power expense in< reased largely because rewenues in those years u.nough further reductions of the matching of expense with higher fuel cost in 41clerted costs and the earnings caps contained recovery revenues discussed in the preceding in the Company's and Toledo 1:dison's rate orders paragraph. Improved nuclear unit availability will limit increases in camings. Revenue gains maY enabled the Company to sell power to other utilities, be limited somewhat by the effects of a sluggish The excess revenues over cost is treated as a economy and cotomer conservation efforts, sales reduction in purchased power expense, growth is expected to be flat foi 1990 and less than Depreciation expense increased, reflective of the 2% annually f or several years thereaf ter. This makes it. creased generation from the Company's nuclear our cost reduction efforts extremely important- units since their depreciation is recorded based on future operational changet and cost reductions units of production, resulting from the PUCamandaicd management Total Al UDC and carrying charges increased in audit should make the Co.npany more competitive 1989. As a result of recovering a greater share of the in an environment of inflation and increasing Company's investruent in its nuclear units currently competition with other energy providers, including in rates pursuant te the rate order, the phase-in municipal electric systems and togeneration carrying charges recorded in 1989 were less than the projects. pre phase-in carrying charges recorded in 1988. I actors contributing to the 9.M increase in 1989 Interest expense increased in 1989 because of the operating ren nues are as follows: higher level of debt outstanding. Preferred and inacase preference dividend requirements decreased in chang in operaung tesenues (nenea*' 1989 because of stock redemptions. I'lectric Orycuuc4 hase urs and susecu.uicouw s u.woohoo 1988 yg,1987 Deleired CwlP krsenoes. O.nn0.oon l uci tosi kemerv kevenues . 21.000 *o0 ractors contributing to the 9.6% increase in 1988 sale, vohnne and int mmoohoo operating revenues are as follows:- sales m Ohin i dnon and Pennsyhsuna Power Moon. coo) Inacase ( Chang in Operanng kewnues (Deceaw) _un poo.noo I;learic kevenues The rate order for the Company was pdmarily sale $ to Ohio 1dison and Pennsvivania Power s 75.000.000 responsible for two major tactors impacting the Da* he* und menaneout w w oo increase in revenues. The PUCO granted the sain Munie und h , , 2 00S00 Company a % rate increase eticctive february 1, 1989. Also, resenues which were collected and

                                                                                                        *[,         ,                      [

deferred through January 31,1989 under the Ohlu "d' ' "W0# U mirror CWIP law are bemg refunded pursuant to the Mearn neanng newnues . <11000000) rate order. Such deferred CWIP revenues are Total . s t 2Kooo ooo recogm/ed as operating revenues over the period of the ref und. I ucl cost recovery revenues increased The increase in revenues trom sales to Ohio in 1989 because of a signi6 cant rise in the fuel cost Edison and Pennsylvania Power was the result of the recovery tactors compared to 1988. The lower 1988 sale of a portion of the Company's share of Perry factors recogni/ed a gicater amount of refunds to Unit I capacity for all 12 months in 1988 compared customers ordered by the PUCO for certain to only six weeks in 1987. Rate increases granted to replacement fuel and purchased power costs the Company in 1987 accounted for about two-thirds collected from customers during a 19841986 Davis- of the incicase in base rates and miscellaneous Hesse outage. Total kilowatt hour sales decreased revenues. The remainder of the increase resulted 23% in 1989. The comparatively moderate summer from several minor factors, including an increase in v,eather in 1989 lowered sales because of reduced the amount of unbilled revenues. Total kilowatt' mr conditioning usage. Residential sales decreased hour sales increased '% in 1988. $ ales growth of 13% Commercial sales increased .L2% as a result of '3% in the industrial sector reflected broad based l contimung growth f rom new othee buildings and strength in the economy, particularly among (Cleveland Electric) f 28 (Cleveland Electric)

automobile, . steel and chemicci producers. began on such investments not included in rate Residential sales increased 34% in 1988 largely base. These carrying charges in 1988 were for because of a substanually warmer sunuuer. The hot interest costs only and not equity costs. Ilowever, sunuurt also contributed to a 3.7% gain in Al'UDC and carrying charges that were previously commercial sales as did high occupancy rates in accoanted for on a net.of tax or an after-tax basis Cleveland othce buildings, a continued omce were stated on a pretax basis in 1988. building boom in suburban areas and new retail Part of the prxeeds from the 1987 sale and outlets. The increase in revenues attributable to leaseback transaction was used to redeem deletred CWIP tevenues resulted f rom a reduction in outstanding high cost securnies which reduced the level of revenues deferred under the mhror interest expense and preferred dividends in .1988. CWlP law. Lower fuel cost recovery revenues Results for 1988 also included a one time net resulted principally from the grener use of lower after-tax increase of $22.000,000 related to a change cost nuclear fuel and the PdCO-ordered refund in accounting for unbilled revenues. See Note 12. discuued in the 1989 vs. 1988 analysis. The Company sold its steam system in December 1987. Operating expenses increased 10.1% in 1988. ruel and purchased power expense decreased Effect of Inflation largely because of the matching of expense with inflation adversely affected our results of operations lower fuel cost recovery revenues discusaed in the in 1987 and 1988 as increases in base rates were less preceding paragraph The increase in other than the rate of inflation in the costs of our labor, operation and maintenance expense and materials and services. depreciation expense mainly resulted fmm a full The January 1989 PUCO rate order was primarily year of operation of Perry Unit 1 and lleaver Valley designed to recover all operating and capital costs Unit 2 and a full year of lease expense for the of our new nuclear investments. Ilowever, in 1989, Mansfield Plant. The increase in deferred operating total costs of labor, materials and services decreased expenses in 1988 was largely attributable to the 3.1% as a result of our cost reduction program, delertal of fleaver Valley Unit 2 operating expenses thereby mitigating the effect of inflation on our for a full year because they were not being results of operations, recovered in rates. In 1987. Perry Unit I and Iteaver Changes in fuel costs do not affect our results of Valley Unit 2 operating expenses were deferred for operations $1nce those costs are deferred until only about seven and two months, respectively. reflected in the fuel cost recovery factor incle.ded in As discussed in Note 6, $257.000,000 of nuclear customers' hills. costs were written off in 1988 as a consequence of inflation will have a negative impact on our the rate order. future results of operations. As stated above, the rate The er:al amount of Al UDC and carrying charges order was primarily designed to recover co.sts decrease d in 1988. The change in status from related to our new nuclear investments and will not caustruction to operation of Perry '; nit 1 and llcaver allord protection against future inflation. Our cost Valley Unit 2 in 1987 resulted in the cessation of reduction efforts since the Company's 1986 Al'UDC on those Units. Instead, tn accrual of post. affiliation with Toledo Edison have been substamlat in service carrying charges pursuant to PUCO orders and will cont!nue to be important. RETAINED EARNINGS THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSOIARIES For the years ended December 31, 1989 1988 ~1987 (mousanos of oonors) Bolonce at Beginning of Year. . . .. . S 459,709 $ 604.516 S 522.805 Additions Net income . . . .. . 250,219 95.085 309,582 Deductions Dividend., declared: Commou stock .. . (161,662) (198,445) (179,320) Preferred stock . . (40,769) (41.203) (45.594) Preference stock , . . . (124) (638) (1.684) Other, primarily pref erred stock redemption expenses . 2 394 (4.273) Nel 1nerease (Decrease) . . 47,666 (444.807) 8i,7 ii Bolonce at End of Year. . S 507,375 S 459.709 $ 604.5.16 The accompanying notes and summary of significant accounting policies are an integral part of this statement. (Cleveland Electric) F29 (Cleseland Electric)

I INCOME STATEMENT THE CLEVELAND ELECTRIO ILLUMINATING COMPANY AND SUBSit, ARIES For the years ended December 31, 1989 1988 1987 (-thovsoncs of cohors) Operating Revenues . . . . . .. ........ $ 1.591.662 S i.451.578 $ 1.324.015 Operating Expenses ruel and purchased power (1) .... . .. .. ....... .. . . . 384,543 307,014 330,290 Other operation and maintenance . . . . .. .... . .. 508,151 524,478 425,938 Depreciation and amortization .. .. .. ... . 193,279 189,731 148.918 Taxes, other than feder4' income taxes. .. .. . . .... 183,120 184.843 146.407 Phase-in deferred operating expenses . . .... . ... .. . . (52.020) - - Pre phase in deferred operating expenses . ....... . . .. 3,888- (104.396) (47.826) rederal income taxes . . . . . . . . . . . . . . ....... ...... . 85,275 94.654 _ ,83.179 1.306.236 1,196.294 1.086806 Operating income . .. . ..... .... .... .. . ... 233.426 255.284 2?,7,109 Nonoperating Income Allowance for equity funds used during construction. . . . . . . 8,362 8.052 177.170 , Other income and deductions, net. . . . . . .. . .... . .. 7,934 14,103 (14.784) write off of nuclear costs . . . . ..... .. . .. .. (257.400) - Loss on steam system sale. . . . . . . . . .. . .. .. . ... .. - -- (27,156) Phasesn carrying charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216.851 - - P.ophas.e in carrying charges . . . . ... . .. . . . .. 17.937 224,585 24.610 i ederal income taxes - credit (expense) ... . . .. .. . -(55,699) 53.462 79.606 195,385 42.502 239.446 Income Before Interest Charges . ..... . .. ... 480,811 _ 297,786 476,555 Interest Charges Debt interest . . . ..... . . .. ... ... . .. . .. . 238,042 228,879 249,958 Allowance for borrowed funds used during construction. . . . (7,450) (4.304) (82.985) 230.592 224.575 166.973 Income Before Cumulative Effect of on Accounting C hange . . . . . . . . . . . . . . ... . . . . 250,219 73.211 309,582 Cumulative Effect on Prior Years (to December 31, 1987) of an Accounting Change for Unbilled Revenues (Net oilncome Taxes of $14,552,000) . . 21.874 - Net income ... .... .. . ... . . . . .... . . 250.219 95.085 309.582 Preferred and Preference Dividend Requirements . . 40.227 42,50.6 43.386 E:rnings Avollable for Common Sicek $ 209.992 S 52,579 S 266.196 (1) includes purchased power expense of $10 i,127,000 and $31,'".i,000 in 1989 and 1988, respectively, related to capacity purchases from Toledo Edison. The accompanying notes and summary of significant accounting policies are an integral part of this statement. (Cleveland Electric) r 30 (Cleveland Electric)

gm MANAGEMENT'S FINANCIAL ANALYSIS

  . Copliol Resources and I.lquidity                            $258,000,000. We expect to finance externally about I                                                                oneJounh of our 1991 and 1992 requirements. See 4

j ( Te carry on a continuous program of constructing NOI"510(c) and (d) for information concerning [ new facilities and modifying existing facilities to .limitau.ons on the issuance of preferred and i-meet anticipated demand for electric service, to prefnence stock and debt. Our short term comply with governmental regulations and to borrowing arrangements are explamed in Note 11. improve the environment. Cash is aLo needed for Also, we wth ptionally redeem additional securities tuandatorv retirement of securities. Over the three.

                ~                                                          "'C" b year period IP87 1989, these needs totaled                 II CE The"" Company.s capital requirements will approximately 1890,000,000, in addition. we                pr bably increase substantially after 1992 if acid rain exercised various options to redeem and purchase           legislation is enacted. See Note Mb).

approximately 1700,000,000 of our securities. The availability of capital to meet our external In 1987, the capital required to fmance our fmandng needs depends upon such factors as construction program and to retire and redeem imancial m rket conditions and our credit ratings. securities was obtained primarily from external Te expect to be able to raise cash as needed. sources. Also, in 1987, the Company sold and leased Current securities ratings for the Company are as back certain interests in the Mansfield plant's three IU* generating units as discussed in Note 2. In 1988 [ nnd 1989, the Company issued f188,730luc0 ant i og ,,,,

     $ 67,700,000, respectively, of hrst mortgage bonds.                                               & poor s   trnesn corporanon    senice Also, in 1989, the Company issued $212,500,006 of secured medium term notes and obtained a
     $ 40,000,000 term bank loan. Proceeds from these           twt nmnuge bonds .          ,           nua-        baa2 linancings were used to repay portions of short-term debt incutred to finance the construction program,         preferred nock.                           un+       baa to retire and redeem outstanding securities, to pay our construction program costs and for general corporate purposes.                                            A write.off of the Company's investment in Perry The Company has been granted rate increases            Unit 2 would not reduce retained earnings

( sufticiently to impair its ability to declare dividends. effective in 1989,1990 and 1991 pursuant to a January 19H9 PUCO rate order. See Note 6 for See Note Me). discussion of the Company's and Toledo Edison's The Tax Reform Act of 1986 provided for a 40% rate orders which provide for specific levels of rate average income tax rate in 1987 and a 3a, income , increases and earnings limitations for Centerior tax rate in 1988 and thereafter, the repeal of the k" Energy through 1991. Although the Company's rate investment tax credit, scheduled reductions in order required it to write eff certain assets in 1988 mvestment tax credit carryforwards, less favorable which lowered its earnings base, current cash flaw depreciation rates, a new alternative minimum tax was not impaired. (AMY) and other items. The changes resulted in Although the Company s cash requirements for increased tax payments and a reduction in cash flow

   ' construction ( $ 510,000,000 ) and mandatory               during 1987 principally because the AMT reduced redemption of debt and preferred stock                     the amount of investment tax credits allowed as an (1315,000,000) during the 1990-1992 period in the          ofTset to federal income tax payable. These changes aggregate will be approximately the same as for the        had no significant cash flow impact in '1988 because 1987 1989 period, internally generated cash is            the Company had a net opemting loss for tax expected to increase substantially as a result of the      purposes. The changes in the tax law resulted in annual rate increases. We expect to finance                increased tax payments and a reduction in eash flow externally about two thirds of our 1990 construction       during 1989 because the Company was subject to and redemption requirements of approximately               the AMT.                                                  l 9

(Cleveland 1.lectric) IL31 (Cleveland Electric)

7

CASH FLOWS w cavnAND FGCMC ILWMINATING COMPANY AND SUr$$0iAfMs L For thi y^ ors c nd'd D^c' rnber 31 1989 1988 1987 ,

(thovsorms of copors) Cash Flows from Operating Activilles (1) Net income . . . . . . . . . . . . . ... .... . , ... ....... ... S 250.219 $ 95,085 S 309.582 Adjustments to Iwconcile Net income to Cash from 0;wrvting Activities: 1 Depreciation and amortization . . ... . . ... .. 193,279 189,734 148,918 Deferred federal income taxes . . .. . . .. . . .... . 108,261 18,650 (129,097) Investment tax credits, net, . ..... .. . . .. ... .... (58) (40.607) 53,367 Write.otT of nuclear costs . . . . . . ..... . . . . .

                                                                                                                                       -             257,400              -

Defnred and unbilled revenues . .. . . . (32,168) 9,200 46.000 Deferred fuel . . . . . . . . . . . . . . . . . .. . . ., .... , ,, 8,827 (33,908) 17,109 , Carrying charges capitalized . , . . . . . . . . . . . . . .. . (234.788) (224.585) (24,610) Leased nuclear fuel amortization . . . . . . . . . . . .. . 55,712 44,944 26,727 - Deferred operating expenses, net . .. .. . ...... .. .(48,132) (404,396) (47,826)' Allowance for equity funds used during construction .... . (8,362) (8,052) (177,170) 1.oss on steam system sale .. . . . . ........ .... .. 27,156 Amortization of' reserve for Daviollesse refund obligations to customers . . . . . . . . ... ., . .... . ........ ... .... (12,162) (20,341) - Cumulative effect of an accounting change . .... . . ,.

                                                                                                                                       -             (21,874)             -

Changes in amounts due from customen and others, net. .. (9,251) (7,967) (3,239) , Changes in inventories ......... .. .... . .......... .. (4,919) 9,379 (20.761) Changes in accounts payable . .. .. .. . . .... .. (6,694) 45,6Ci (17,884) Changes in working capital affecting operations . .. .. . .. 29,604 5,825 -126.098 othei nuncash items . . . . . . . . . . . . . . . . . . . . .. .. (16.215) (17,657) 40,145 Total Adjustments. . . . . . . . . ... ..... ....... 22,834 134,310 64.903 Net Cash from Operating Activities . . . . .. . 273.053 226_,395 374.485 Cash Flows from Financing Activities (2) Dank loans, commercial paper and other short term debt. . 29 (36,555) 5.803 Notes payable to affiliates. . . . . . . . ... , , ,,, . . 90,200 73,000 11,000 Debt issues: First mortgage bonds. . ... . ... . . ... ... 67,700 188,730 -370,500 secured medium term notes . ., .. . . . .. 212,500 - - Term bank loan . . ... .......... .. . ... ... ..... 40.000 - - Preferred stock issue . . ... .. .. , ... ,, . .. . ..

                                                                                                                                       -                 -              73,313 Equity contributions from parent . . . . . . . . .....                                       . .. .. ..                      -

(95) 33 i

Maturities, redemptions and sinking funds . ,, .. . .......

(305.741) (162.411) (476,872) Nuclear fuel lease and trust obligations. .. . .. , ..... .., (47,574) (44.911 (18,855) Dividends paid . , . . ......, ., ... .. .. ...... ....... (202.444) (241.422) ) (281.418) Premiums, discounts and expenses . . ..... ........ .. .. (1,697) (343) (2.478) , Net Cash from Financing Activities . . . . . . . . , , ,,, (147,027) (223.977) (318.974) Cash Flows from Investing Activities (2) Cash applied to construction .... . . ....... .. . .... ...,, (158,585)- (199,983) (337,040) Interest capitalized as allowance for borrowed funds used during construction . ..... ...... ... . . ... .... .... (7,450) (4,304) (82.985) Cash received from sale and leaseback transaction, net. . .... ,,

                                                                                                                                       -                 -            614,828 Cash withdrawn from (deposited in) sale and leaseback and other trusts. . .. ........ .... . .....
                                 .                                                                .. .... .. .                         -             264,109        (264,109).

Other cash received (applied) . ... .. . . . .... . . .. (7.298) _ _SiO_ (901) Net Cash from Investing Activities. . . . ...., ... (173,333) 60.332 _ 70,207) ( Net Change in Cosh and Temporary Cash investments . (47,307) 62,750 (14.696) Cash and Temporary Cash investments at Beginnbg of Year........................................ ....... 75.637 C.887 27,583 Cash and Temporary Cash Investments at End of Year ., S 28,330 S 75.637 s 12.887 (1) Interest paid was $240,000,000, $224,000,000 and $2C,000,000 in 1989,1988 and 198. respectively. Income taxes paid were $29,106,000, $8i,007.000 and $27.060,000 in 1989,1988 and 1987, respectively. (2) Increases in Nuclear Fuel and Nuclear Fuel Lease and Trust Obligations resulting from the noncash capitalizations under nuclear fuel agreements are excluded from this statement. The accompanying notes and summary of significant accounting policies are an integral part of this statement. (Cleveland Electric) F.32 (Cleve'and Electric)

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                      - (Cleveland Electric)                     F.33                       (Cleveland lilectric)         -
 #-[u
                   .@                  n               !-

SALANCE SHEET  ! P December Si,

                               .                                                                                                            1989                  1988
                                                                                                                                              -(thousanos of oonors)          .
              ' Assets                                                                                                                                                        '
 .                  Property, Plant and Ecivipment s~

Utility plant in service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5.878.825 $5.704,746

                          - 1.ess: accumulated depreciation and amortization. . . .                                          .....        1,264,570           -

1.081.758- . 1 4,614.255 4,622.988

Construction worl<. In progress . . . . . . . . . . . . . . . . . . . . . . . . . . . 203,639 239,843 I Pe rry U n i t 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , . . . . . . . . . . .

523.294 523.785

  • f L

Nuclear fuel, net of amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,341,188 309,182 5.386.616

                                                                                                                                                                 -336.456   i Other property, less accumulated depreciation . . . . . . . . . . . . . . .                                         45,192                44.147-    .

5.695,562 5.767.489 L . Current Assets Cash and temporary cash investments . . . . . . . . . . . . . . . . . . . . . . . 28,330- 75,637 ' Amounts due from customers and others, net .... ........ ... 462,320 153.055 Amounts due from affiliates ........................ . .... 6.252 5.605 ' U nbilled revert u es . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,iV3 50.954 Materials and supplies, at average cost . . . . . . . . . . . . . . . . . . . . 56.481 52.793 rossil fuel-inventory, at average cost . . . . . . . . . . . . . . . . . . . . . . . . 34,117 32,886 - Taxes applicable 'o succeeding years . . . . . . . . . . . . . . . . ..... 145,668 137.540 other .. ... ........;.............. ....... ... .......... 9,312 4.207 . 497.673 512.677 i 1 Deferred Chorges - Amounts due from customers for future federal income taxes . 681,809- 689.837 Unamertirea loss on reacquired debt . .............. .... 47,460 37,511 Carrying charges and operating expenses, pre phase.in . . . . . 383,527 390,922

  • Carrying charges atid operating expenses, phase in . . . . . . . . . . 268,871 - -
                        ' other .... .... . .,............... ..... .... ......... ..                                                        95,503                 58.062-1.477,170             1,176.332-6 i

I i Total Assets . . . ....... . . .. . .. ............ ... . $7,670,405 $7.456.198 - The accompanying notes and summary of significant accounting policies are an integral part of this statement. p  ; 8 [(Cleveland Electric) . F 34 (Cleveland Electric) L , . . _ J

                                 =

kr n > ' 0- THE CLEVELAND E!ECTRC ILLUMINATING CCMPANY AND SUBSIDIARl[$ L< December 31 [' . 1989- 1988 (thousoncs of dolia s)i p-

          - Copitolization ond Llobilities-Capitalization Common shares, without par value; '105:000,000 authorized:

79,591,000 outstanding in 1989 and 1988 ...,.....,....... $1,242.074 S1.242.074 Ot her paid in capit al . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78.625 78.625 R eta ined ea rn in gs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507.375 459.709 Conunon stock equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.828.074 1,780,408 y g Preferred and preference stock

!;                    With mandatory redemption provisions . . . . . . . . . . . . . . . . . .                                           212.362                232.626 -

Without mandatory redemption provisions . . . . . . . . . . . . . . . . . . . 217,334' 217.334 [' 2,336.379 2.260.470 L 1.on g t e r m de bt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

 "                                                                                                                                     4,594.149              4,490.538 LOther Noncurrent Llobilities

' Refund obilgations to customers . . . . . . . . . . . . . . . . . . . . . . . . . . - 26.571 Other, primarily nuclear fuel lease and trust obligations . . ... 305,328 328.531

                                                                                                                                        -305.328                355.102 Current Llobilities Current portion of long-term debt and preferred stock. . . . . . . . .                                               102,836                432.936 Current portion of lease obligations. . . . . . . . . . . . . . . . . . . . . . . .                                   56,577                 46,544-A c co u n t s paya bl e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           138,912                145.606 Accounts and notes payable to affiliates . . . . . . . . . . . . . . . . . . . . . .                                 211.971                127.214' Accru ed t a x e s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               233.531                196,109 Acc rued i nte rest . . , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 45.157                 50,646 Dividends declared . . . . .               ..... ... ....... ..... .......                                           ~ 13,006                12.895 Accrued payroll and vacations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                             17,638                 16.195 Current pcrtion of refund obligations to customers . . . . . . . . . . . .                                            32,627                 33.984 Other ..... . .........                  ............ ...................,.                                            8,813                   7.648 861,068                769.777-F      '

Deferred Crediis Unamortived investment tax credits . . . . . . . . . . . . . . . . . . . . . . . . 278,576 277.523 Accumulated deferred federal income taxer. .....,..... . ... 1,057,189 944.099-I Reserve for Perry Unit 2 allowance for funds used during construction . . . . . . . . . . .. ...................... 124.398 124.398 Unamortized gain from 11ruce Mansfield Plant sale . .... ... 408.266. 432,696 Other.... .. ....... ........ .. ..... ... ... ...,. . ... 41,429 62.065 1,909,860 1,840.781: I Total Capitalization and 1. labilities . . . . . . . . . . . . . . . . . . 1 $7.670.g $7.456.198 s ( (Cleveland Electric) F 35 (Cleveland ciectric) .;

STATEMENT OF CUMULATIVE THE CLEVELAND ELECTRIC ILLUMINA?iNG COMPANY AND $Uti$iDIARIES PREFERRED AND PREFERENCE STOCK 1989 Shores Current December 31. Outstonding Coll Pnce 1989 1988 (thousanos of colio* ) Without par value,4.000.0fk1 preferred and 3,000.000 preference shares authorized subicet to mandatory redemption (less current maturities): Preferred:

               $   '.35 series C . .....                ... ....              480.000      $      101.00    $ 18,000       S 49,000 88 00 series I: .. .. . .                  ......            30.000           1.038.26        30,000       33.000 75.00 series r . . . . . ..              .. ..                 2,384          1.000.00          2.384        2.884 80.00 series G.        .... . . ..... .                           800         4,000.00              800      2,686 145.00 series II .      .           .. . ...                  42.462              -            12,462       16,026 195.00 ser!cs I      .     . . . ...... .                      15.748             -             15,748       19.686 113.50 series K.          ..              .. ....              10.000              -

10.000 10,000 Adjustable series M . . . . .. 500,000 104.25 49,000 40,000 9.1.!5 series N . . . . . 750.000 107.40 73.968 73.968

                                                                                                            $212.362       g212J           !

Preference:

                  -'?.50 series i       ..         . .           . .              -                 -               -

S 6.376 Not subject to mandatory redemption Preferred: , 7.40 series A . .. .. . 500.000 101.00 $ 50,000 $ 50.000 l 7.56 series n . . . ... . . ... 450.000 102.26 45.071 45,071 { Adjustable series 1. . . . . ... 500,000 103.00 48,950 48.950 t l<cmarketed series P . . . ... . ... 750 400.500.00 73,313 73,313

                                                                                                            $217d34        $217,334 1o101 Preferred and Preference Stock, with Mondatory Redempflon                                                                               l Provisions.............................................................                                    $212,362      S232 62j Total Prefericd Stock, WithoLit Mondatory Redemption Provisions . . . . . . .                                $217.334      $217.334 The accompanying notes and sununary of significant accounting policies are an integral part of this statement, i

(Cleveland 1 lectric) f-36 (Cleveland !!!ectric)

r j i 4 NOTES T' THE FINANCIAL STATEMENTS t I (1) Property Owned with Other Utillfles and Invest:ts j The Company owns, as a tenant in common with other utilities and those investors who are owner participants in

/    various sale and leaseback transactions (lessors), certain generating units as listed below. Each owner owns an

( undivided share in the entire unit Each owner has the right to a percentage of the generating capability of each unit k equal to its ownership share, Each utility owner is obligated to pay for only its respective share of the construction and operating costs. Each lessee is obligated to pay for the related lessor's share of those costs. The Company's share of the operating expense of these generating units is included in the income Statement. Property, plant and equipment at December 31,1989 includes the following facilities owned by the Company as a tenant in common with other utilities and lessors: Ou ner-In Owner ship Plant Construcuon scruse ship Mega Power in work Accumulated t,enerating l' nit Date share watts source servue in Progrea Deprecla,t,ttg in servite: Ohmands of doHars) seriera Pumped storage 19?o NO 00% 30$ Hydro I $N.291 $ 1H4 $ 18,4 22 I:astiale tinn 5 . 19'l 6k H0 411 Coal t $2. HOR 1,618 - D.am iteue . , 197' $138 452 Nuclear 600.262 $4489 146.211

!       ?ctry Unit I & Common f acillsles .                  198"        31.11       f"2      Nuclear     1,59sMo3            10 3 *6     10?,044 I

Deder valley Urut 2 K Common l'acilines (Note 2 ) . , 19R* 29 4? 204 Nuclear 1,1443*") 12,9"4 k? 4$1 construedon suspended (Note 3M h Perry Unit 2 , l'ncenain $111 3'5 Nuclear ~.

                                                                                                                             %2U94            -
                                                                                                        $ Wi Ab1           D 604.13 %    $$%o 128 Depreciation for Eastlake Unit 5 has been accumulated with all other depreciable property rather than by specific I    units of depreciable property.

Ohio Edison and Pennsylvania Power purchased 80 megawatts of the Company's capacity entitlement in Perry f Unit i from November 1987 through May 1989. Revenues for this transaction were $31,s31,000, f 8a,068,000 and j. {, $9,251,000 in 1989,1988 and 1987, respectively. 1 l (2) Ulllity Plant Sale and Leaseback Transactions As a result of sale and leaseback transactions Rental expense is accrued on a straight line basis  ; completed in 1987, the Company and Toledo Edison over the terms of the leases. The amounts recorded are co lessees of 18.26% (152 megawatts) of Beaver by the Company as rental expense for the Mansfield Valley Umt 2 and 6.5% (51 megawatts'), 45.9% Plant leases were $70,008,000, f 68,010,000 and (358 megawatts) and 44.38% (355 megawatts) of f19,500,000 in 1989,1988 and 1987, respectively. Units 1, 2 and 3 respectively, of the coal fired The Company and Toledo Edison are responsible Mansfield Plant for terms of about 29b years. The under the leases for paying all taxes, insurance Companyi proceeds from its sale of essentially all of premiums, operation and maintenance costs and all  ! Its undivided tenant-in common interests in the other similar costs for their interests in the Units 5 Mansfield Plant were $625,500,000. sold and leased back. The Company and Toledo l [ As co lessee with Tnledo Edison, the Company is Edison may incur additional costs in connection f also obligated for Toledo Edison's lease payments, with capital improvements to the Units. The 11 Toledo Edison is unable to make its payments Company and Toledo Edison have options to buy the under the Mansfield Plant and Beaver Valley Unit 2 interests back at the end of the leases for the fair leases, the Company would be obligated to make m:.rket value at that time or to renew the leases, g such payments. No payments have been made on Additional lease provisions provide other purchase [ behalf of Toledo Edison to date. options along with conditions for mandatory l l'uture minimum lease payments under these termination of the leases (and possible repurchase operating leases at December 31, 1989 are of the leasehold interests) for events of default. summarized as follows: These events of default include noncompliance with l'or the f or Toledo several financial covenants affecting the Company, vg company td""" Toledo Edison and Centerior Energy contained in [ minus, mas or con"" an agreement relating to a letter of credit issued in  : ! 1990 s 63.000 $ tuvoo connection with the sale and leaseback of Beaver -. ( N: 1993,

                                       ,          b 63.000 Ii [

illsoo YaHey Unit 2, as amended in 1989. See Note 10(d). Toltoo Edison is selling 150 megawatts of its l 1994. 63.000 tiipoo Beaver Valley Unit 2 leased capacity entitlement to later years 1.642 000 2ro3 0no the Company. This sale commenced in Nosember f

roul ruiure shnimum 1988 and we anticipate that it will continue at least L
1. ease Paymenu . s i ss' ooo s m 8 0"" through 1998. Purchased power expense for this I transaction was $ 10 i,127,000 and $18,533 000 in Semiannual lease payments conform with the 1989 and 1988, respectively. In 1988, a portion payment schedule for each hw (f16S61 Anm of the purchased power expense w1s l i l (Cleveland Electric) 1137 (Cleveland Electric) I L I
                                           ,,                     .  ,'                  s y                                a 3-
f '

Qg ,4 J secorded in a deferred charge n(count pursuant to a . 1 taxes, bee Note 10(d) for 'a diserssion of other m i ' N 3 PUCO accounting order; buch amount is being = potential consequences of buch a write off? / '

  ?

b l amortired_to expense over the dife of the lease 3 beginning ird1989. Thejfuture minimum lease

                                                                                                         - Duquesne. has advised the pennsylvania rublic; Utilities Commission that it will not agree to F~                   '

i d i h . Beaver Valley Unit) ' resumption of construction _of Perry Unit 2.<

   . % payments assoc ate w taggi;egatc $2,002,000,000.1Duquesne is continuing to pay for its 13.74% share.
                                     ~

h* ,- of maintaining Perry Unit 2 while construction is j

                                                     ~

suspended'

                    ?(3)\ Construction ond Contingencies -                                                                                                                ;

f(O) Construction Progrom . (d) Superfund Sites - The estimated cost of the Company's construction The Comprehensive Environmental Response - . ' Compensation and Liability Act of 1980 as arnended program for the 1990-1992 period is $550,000,000 Li ncluding MUDC and excluding nuclear fuel. (Superfund) established programs addressing the-- , F'  ! Should more string nt environmental regulations be clean up of hazardous waste Aposal shes,n ,

               '                                                                                    emergency preparedness and other issues. Pursuant, 5
adopted,control, b 3 ipollution. particularly future in the area of construction acid rain progratu costs to superfund, the Company has been nottlied of its L k' would increase substantially, potential involvement .in the clean up of six - ,

p hazardous waste sites, w e believe that the ultimate < outcome of these matters will be immaterial,

                   ' (b) Proposed Acid Rolri Legislation                                                                _
                                                                                                                                          ..                         1 There are several bills being considered in the                              (4) Nuclear Operations and:                                     ?

1 , . United Stats Congress which wou)d require ContingenClos j k significant' reductions in the emission of sulfur (a) Operating Nuclear Units.  ;! i Ldioxide and nitrogen oxides by fossil fueled electric .

                    ' generating units. Centerior 1:nergy% preliminary                              The Company % interem in nuclear units may be _                  d (analysis indicates that compliance with these bills                            impacted bv activities or events beyond the                          ;

C - could require additional capital expendhutes in the Company's control. Operating nuclear gentrating a' h  ! range'of $900,000,000 to f 1.200,000,000 by the units have experienced unplanned _ outages or = b . Company and Toledo Edison and would result in extensions of scheduled 'outsges because of l higherluel 'and operation and maintenance equipment = problems - or new regulatory j' L expenses The resuh!ng aggregate rate Increases . requirements, A major accident at a' nuclear facility-could be in the range of 9 to 15"riby the. year 2000. anywhere in the world could cause the Nuclear ,; W One bill contains an additional proposal to Regulatory Commission to limit or prohibit the regulate certain types of toxic pollutants. This operation, construction or licensing of any nuclear! proposal could increase the cost of compliance unit. If one of the Company's nuclear units is taken :e "u s out of service for an extended period.of tirne for-significantly Lover . J- Il e' estimates stated in the  !

                     - preceding paragraph.                                      .

any reason, including an accident at such unit or Imy- ^l

                                                                                                   'other nuclear facility, we cannot predict whether ~ ~
.J Under the proposed bills, capital expenditures
and rate increases would be incurred predominantly regulatory authorities 3vould impose unfavorable'. :i
             ,          in the 1994 2000 period. The financial impact on                            rate treatment such as taking the Company 4 affected
lthe Company is expected to be greater than on unit out of rate base, d b~ c Toledo Ediso 0 We cannot predict the outcome of 1 the legislative process or he certain that Centerior g) Nuclearinsurance  !

Energy s comphance cost estimates wdl not change ' P  ; signliicantly.Te believe that Ohio 8aw would The_ PriceJ A nderson Act limits the liability of the m ,

permit the recovery of compliance costs from . owners of a nuclear power _ plant to the amount . 3 J ~ customers'in rates. provided by private insurance and an tindustry 9 assessment plan !n the event of a nuclear incident at
                       . (cLPerry E                Unit 2.

any unit in the United States resulting ~in losses in ii exec 3s of the level of private insurance (currently 4 p{ l Perry Unit 2, including its share of the common $ 200,000,000 ), the Company's maximum potential a 4 Lfacilitiescis about 58% complete, Construction of anessment under that plan (assuming the other - 7 s'  : Perry Unit 2 was suspended in 1985 bylhe CAPCO CAPCO companies were to contribute .their .

    ,                  (companies pending future consideration of several                           proportionate share of any assessment);would be;                     ,

Latternatives;which zinclude resumption of full $70,7M,000 (plus any inflation adjustment) 'per [ construction with a -revised estimated cost and incident, but is limited to $10,696,000 per year for i

F completion date, mothballing or cancellation. None each nuclear incident. I i (of these alternatives may be implemented without The CAPCO companies have insurance coverage  ;!

Lthe approval of each of the CAPCO companies. for damage to property at Davis Desse, Perry and j g

                          . > If Perry Unit 2 were to be canceled, then the                           lleaver Valley (including leased fuel and clean up             ?

Company % net investment in Perry Unit 2 (less any costs). Coverage amounted to $2,035,000,000 for  ;

'+                       tax saving) would have'to be written off. We                               each site as of January 1,1990. Damage to property               l H.                     . estimate' .that such a write off, based on the                              could exceed the losurance coverage by _ a                       i
   <                   ; Company) investment in this Unit as of December                            substantial amount. If it does, the Company's share              j J1,1989, would have been abom $266,n00.000, after                            of such amount could have a material adverse effect              M
(Clevehmd Electric) It38 (Cleveland Electric) '

Qg , , , i

y ,; M ; y W '

                                                                                                                                                                             ~ ~ ' '" '

[, 4 s , g onde C' mpany's o fmancial conclition and redlN of : (6):R99ul010fy MOtt9f8 :

                  = yperations.: 4x.
                                                                        . ,       ein   '
                                                                                                   - In 1987, the PUCO granted increases in electric rates ,

3 ' g ; The Company also has insurance coverage for the ' ' to the Company as follows! a> incremental . cost . of . any> replacement 1 p.ower .. c

  " A : purchased (over the costs which would have been                                                                                                              Annuatired 1                  ,L incurred had the units been operating) after the .                                                        D!E
                      ? occurrence of certain types of accidents at the
                                                                                                                                                                    - ^['l"',
                                                                                                                                                                    ' amo y" s Company's nuclear unitse Thecamounts of the-                                                 March 1987 ; . . . . m    .      .m       . . ..... ....           s 39.6 qcoverage are 100% of the estimated incremental cost                             occcmt.er 1987.        .. . . . . . - .. ..         m.      ..       25.8 '

1 per week during the 52 week period starting 21

                   ' weeks after an accident; 67% of such estimate per
                      -                                                                                 . On January 31,1989 the PUCO issued orders for E                       week for the next 52: weeks and 33% of such                                 the Company and Toledo Edison which adopted a ,

Ss ' estimate per week for the next 52 weeks. The cost settlement reached between the companies and the - A< and L duration 1of replacement power could . majority of the imnvenors in then pending rate

       .              Lsubstantially exceed the insuranie coverage.                                  cases. The orders endorsed agreements. which _

reached beyond the issues in such cases and. h =

                                                                                                  = resolved, with respect to. the participants, other -

c  :(6) Nucleaf Fuel. hsues which had been contested. All pending . ' w iThe Company has inventories for nuclear fuel which '- prudence-investigations before the.PUCO and;

should prwide an adequate supply into the mid- pending litigation before the Ohio Supreme Court-
&f jl990s. substantial additional nuclear fuel must be                                               brought by the parties to the settlement involving'                                ,
                                                                                                                                                                                           +
 @ 'obtained to supply fuel for the remaining usehd                                                 the Company's nuclear investme nt and other rate -
                        -lives of Davis-Desse, Perry Unit 1 and Beaver Valley                        matters have been terminated.

/ ' 6 Unit 2. More nuclear fuel would be required if Perry The orders provided for three armual rate - TUnit 2 were completed.' . Increases for the Company and Toledo t'dison ofe

                               -In 1989, existing nuclear fuel . financing                          approximately 9%,7% andfi% effective with bilis 1 narrangements for the Company and Toledo Edison                               rendered on and after February 1,1989,1990 and <

were refinanced through leases from a special- 1991, respectively. The revenues associated with the 7

              ,- purpose corporation. The maximum amount of                                         Company *> increases are as follows:

ifinancing currently available under these lease - Annuatired ; g ;ntrangements is $609,000,000 ($309,000,000 from Amonne J Mntermediate. term notes and $300,000,000 from onmns or '

                      - bank credit arrangements), although financing in an                                                                                            umi
                    ' amount
                       ;                up to $900,000,000 is permitted. The                         3939 ,  ,          u,         ,,,, ,      ,u  m ,,,, ,,           si2o n M                      JComp.my and Toledo Edison ' severally lease their                             1990 .    .,,m.         ,        .,           J. , . .. - m.;

4 arespective portions of the nuclear fuel and are 19w . .. , , . . , o, n . 9H 4

                      " obligated to pay fgr the fuel as it1s burned in a                                                                                              s424 8 -

o- reactor, The lease rates are based on various 71ntermediate terin- note rates, bank" rates ' and These revenue increases are nerincreases after commercial paper ratescThe intermediate. term including adjustments required under the mirror m L notes mature in the period 1993,1997. Beginning in CWIP law. Y t1991l the bank credit arrangements are cancelable The orders provided for the permanent exclusion. from rate bat e of a portion of the Company's and lon31h1989,two years notice byofthe

                                          ; $329,000,000             lenders nuclear fuel < As of NcemberToledo Edinn's combined investment in Perry Unit-
                                                                               .was hminced for the Company.:This includes nuclear                              1 and Beaver Valley Unit 2JThe exclusion resulted
                      , fuel in the Davis Besse, Perry Unit 1 and Beaver                            in a write cff by the Company of $212,000,000 .

L 2n Walley Unit 2 reacters with remaining payments of ( $ 110,000,000 after tax):in 1988 Since the orders lq '

                    ' ; $38,000,000,a $55,000,000? and ? $ 22,000,000,                              effectively eliminated the possibility of the Company,                                    >1 W                trespectively, as of December 31,1989 ' .                                     and Toledo Edison recovering their remaining :
                         ~ !The' Company's nucitar fuel amounts fmanced                             investment in four nuclear construction projects m J and capitallred included interest charges incurred                                         canceled in 1980 and recovering certain deferred L                                    ?

p' " by.the lessors amounting to $25,000,000 in 1989, expenses for Davis-Desse, additional write offs q

                       ' $23,p00,000 in 1988 and $22,000,000 in 1987. The                           totaling $.15,000,000 ($28,000,000'after tax) were s festimated future lease amortization payments based                           recorded by the Company in 1988, bringing the total-
on< projected burn are. $57,000,000 in 1990, write off of nuclear costs' emanating from the.

2 : $65,000,000iin L1991,- l $66,000,000 In 1992. Company's order to $257,000,000 ($168,000,000-Q ! $60,000,000 in 1993 and $67,000,000 in 1991, As after tax). G Lthese paymentsTare made, the amount of credit The phase in plan ordered by the PUCO was available to the lessor becomes available to finance designed so that the 9%,7% and 6% rate increases,

 'n                   haddidonal nuclear fuel,. assuming the lessor's                               compounded by salps growth, will be sullicient to 4^,

Jintermediate. term = notes and bank credit recover all operating expenses and provide a fair L arrangements continue to be outstanding. rate of return on the Company's unrecovered . Investments in Peny Unit I and Beaver Valley Unit 2 for ten years beginningJanuary 1,1989. In the early. years of the plan, the operating expenses and ~ return requirements exceed the revenue increases.

  1. n .. .. .

jCleveland Electric) F.39 (Cleveland Electric) ~ s y  % ,

                                                                                                                                                                            ~-

1 Therefore, the amounts of operating expenses and could seek rate increases to improve the return return on itnestment not currently recovered are under certain specified conditions. deferred or capitalized as carrying charges. The The Company. Toledo Edison and the Service PUCO authort/ed the Company to record a full net- Company are undergoing a management audit to l of tax carrying charge of 9.2% on deferred rate- assure that operation and maintenance expense i based investment commencing January 1,1989. savings are maximized. Until the management audit Since the unrecosered investm nts will decline over is completed in the spring of 1990, an annual the period of the phase in plan because of savings target range has been set for Centerior depreciation and federal income tax benefits that Energy of $40,000,000 to $100,000,000 from the result from the use of accelerated tax depreciation, !988 normalized level of other operation and the amount of revenues required to provide a fair maimenance expense (excluding lease expense return also declines. Beginning in the sixth year, the arising from the sale and leaseback of assets) of revenue levels authorized pursuant to the phase in $ 6'6,300,000, as determined by an audit advisory plan were designed to be sufficient to recover panel and approved by the PUCO. Also, in current operating expenses, a fair return on the connection with the orders, a nuclear management unrecovered investments and amortization of expert completed a cost reduction study at Davis- 1 deferred operating expenses and capitallyed Besse. The study concluded that Centerior Energy carrying charges recorded during the earher years of .could reduce annual operation and maintenance the plan. All phase in defenals aftcr December 31, expenus at Davis liesse by approximately 1988 relating to these two Units will be recovered $33,000.000 in 1991. The management audit will by December 31,1998. Pursuam to such phase in consider the Davis-13 esse study results in the plan, the Company deferred operating expenses of determination of overall savings. j The orders provide that 50% of the net after tax

      $52,020,000 and debt and equity carrying costs of f 81,097,000 and $135,75t000, respectively, in              savings in 1989 and 1990 resulting from the cost 1989.                                                       nduction effort or iderrtified by the management Urider the orders, the Company and Toledo              audit and approved by the PUCO are to Iv used to           1 Edison may not seek any further permanent rate                educe cost deferrals recorded under the phase in increases to be effective before february 1,1992             plans for the Company and Toledo Edison. Ilased on unless Centerior Energy's earnings available for             1989 results, no change was madt in the cost common equity, prior to extraordinary items, are             deferrals for 1989. Fifty percent of the net forecasted either to fall below f 210,000,000 over          annualized savings achieved or identified and four consecutive quarters or to fall below                  approved for a period to be determined will be used           ;
      $435,000,000 over eight consecutive quarters.               to reduce the 6% rate increase scheduled for During this period, Centerior Energy's earnings              i ebruary 1,1991, As an incentive to achieve the available for common equity, prior to extraordinary          savings, the remaining 50% of savings in each of the items and excluding changes in expenses relating             periods will be retained by the Company and to any future sale and leaseback of assets, are limited      Toledo Edison, subject to the earnings cap to the following amounts for any four consecutive           described in this Note. Net savings would be quarters ending on or before the date indicated:            adjusted for changes in capital and operating costs arising from certain events, such as changes in tax
               $ 275,000,000         March 31,1990                 laws or environmental laws. There were no such
               $ 295 M00,000         March 31,1991                 adjustments for 1989. If the company and Toledo          ,

f 310,000.000 December 31,1991 Edison do not achieve at least one half of the savings  ! identilied by the management audit and approved If any of the earnings caps described above were by the PUCO, earnings would be reduced by the  ; exceeded, an adjustment would oc made to the amount of the shortfall, subject to the ability of the j amount of the deferrals recorded under the phase in Cotupany and Toledo Edison to request additional

  • plan to prevent any excess earnings. The rate relief if Centerior Energy's forecasted earnings adjustment would be appi;ed proportionately fall below the minimum levels discussed in this between the Company and Toledo Edison based on Note.

the earned returns of the two companies. The orde

                /

Tother items . J o.. i. . . . .....o.....,3 , n.....,o.. . ., , 3,546 ( 2, H I ) ( .. T 17,7'2) ;

p ' }otal rederal. income Tax Expense .. . . . . . c. . .. s140.974 . , o . . . . . .-_s .5,,6.o._4,4 s 3.573-o  ;$ .,: .} -

p a'* L Federal inco'me tax expense is recorded in the Income Statement as follows: . . For the vcars ended December 31J [M' u loN9 19MM - ' 1987: .i r (thousands of dollars)- ;i g/ , ; Operating Expensest 4 g

 - 4 Pf " p Current *!ax Provision i . m . o . .c..o o . . . . . ... m . o....                                                                    o...       . ..., .                3 63,447 L                                # 82,766                           = $ 132.479 9 Changes in Accumulated Deferred FederalIncome Tax:

r 1 Accelerated Depreciation and Amortization. . ..... . .... .......c... 3$,380 -24.445 l 99A59 '

                                                                                                                 ..oJ.............,.o                                                   (34.874)                                          -.-.                                        --
          ' 40 ' l Alternative Minimum Tax Credit...n Sale and Leaseback Transactions and Amortization 4..W...                                                  .. . .          .o                   3 tt93                                 ' (1.17$)                              (177 D29)-

Property Tux Expense . i.i ... ...o.o... ...i.. .. ...... . .. - (7,069) . 6.231

  ,                              > i Deferred CWif Sevenues . .... .io . .                                          .o.          . . .. , . .. . ..                                      11.005                                      (4.122)                              ' (18.377)-
                                ' ' Unbilled Revenues ! . . . . o . n . . . . ' . . . . . . , . . . . . . o
                                                                                                                                                                                                                                                                         ^ (18.$22) /
Deferred fuel Costs . . . . . .. f . , . . ... ...... . . .. ...o (3.155) 11,$29 x(6.070),

m - p^- system Development Costs. . . . . . , . . . . . . . . . . ... . . 34t* = $.$18 > 4,218 .

                                        'Davla Besse Replacement Power. .o .................                                                  .. .. .. .... .                               4.136                                       6,916                                     +:i l ederal income Tax Return Adjustments . . . . . . . . . . , .                                              .. .. . .                            -                                    (19,349)                                        1.3$7        ~yr 4;152 :

a T Reacquired Debt Costs . e . , . . . o . . . . o ....s......... . . .. . .. . -(872) (872) Deferred Operating Expenses o . . . , . . . . . . . i ...... .o...... . . . . .2.289 10,874 - '

                                                                                                                                                                                                                                                                              > 19.134 :

C, . . Other itemW... . . . . . o. 4 :n o . . ... ....i... , , . 3,620 (4,200) (17,900)?

           ,                       Investment Tax Credits - Net .. . . . .4o......-..                                               . . .... ,,....... . .                                        5H                           '(10.607)                                  _' 54.047?                     .

%  : Total Charged to Opeiating Lxpensesi .. .. ...... .... . ,, M5,275 94.654 ' H3.179 b TNonoperating locome .

                                                                                                                                                                                     .(31,298) m~ .y                        . Current Tax Provi*lon . . . . . c. W . . . . . . . . . . o . o . o . c...                                        .    . . . .. .                                                                   (48A13) -                                  ($8.030 '
        i ; Changes in Accumulated Deletred Federal income TaA:-

Davis bene Replacement Power . . . . . . .. . ,. .. . . ... . .- . 3,0l $ l  : (16.040) J > hy . I Write off of Nuclear Costs.d.,,. .. .. . .. . . .... ... . ... . - - '(91,643) ' - H" " 1 ArUDC and Carrying Charges .,.. . . . . .. ... , .. ...... . .. o. .. 87.541 80,923 - ps Taxes. Other Than Federal income Taxes .... . ,, .. , ,. . ~ $,520 . - p ,

                                    . Other Itema g o, . @ ..f.u_. Q .)..h..... ..      .
                                                                                                                                     . ..... . ..                .o                         (544).                                   (2.564) -                                 .(4.632) .
k. i iTotal Expeme. (Cted4) to Nonoperating income . . .. . .o . 55.699 (53.162) '(99 606) p Q,'deral'lticome Tax tricluded in Cumulauce rifect of an . .

14.5921 L [ ~ , _ ~ ~ t Accounting Change for Unbilled Revenues L . . . . . . . . . . . . . . . o , o. - @ mTdtal rederal Income Tax Expense , o o . . . ... o .. .s . . . ... ..oo. s140.974 - s 56,044 . "S - 3.573 ' u -- - O The Company joins in the filing 'of a consolidated federal income tax return with its affiliated companiesc The

                                                                    ~

4 method of tax allocation approximates a separate return result for each company.

                                      ' As discuned in the Summary of Significant Accounting Policies, a change was made in 1988 in the method of.-

4 ' i accounting for income taxes.i . .

             .           . cFor tax purposesinet operating loss (NOL) carr) forwards of approximately $140433,000 and $47,448,000 were                                                                                                                                                                  *
generated in 1988 and 1989, respectively, and are available to reduce future taxable income. The NOL carryforwards' M ' ;will expire in 200.3 and 2004. Future utilization of these tax NOL carryforwards would result in recording the f
            ,              related deferred taxes. The 34% tax effect of the NOL generated in each year = ($47,884,000 and $16i132,000 in 19881                                                                                                                                                     ,

y and1989,i respectively) is included in the above table as a reduction to deferred federal income tax relating to ? s acceleratt d depreciation and amortization.- . . r *

                                . Approximately $12,406,000 of unused general business tax credits are available to reduce future tax obligationsJ 3 The unused credits expire in' varying amounts in 2001 through 2004? Utilization of these unused credits is limited                                                                             ~

yby provlilons of the Tax Reform Act of 1986 and the level of future taxable income to which such credits may be . ' Y; applied. < ,

                           . :TheTax Reform Act of 1986 provides for an AMT credit to be used to reduce the regular tax to the AMT level .

Shoiild the regular tax exceed the AMT. An AMT eredit of $34,874.000 was generated in 1989.

                                   +

C m;_ T.Cleve, land Electric)" ~ F.41 (Cleveland 1:lectric) - l&

                                                                                  ,a

[m < dc N' e 9 - u

                                                                                                   ,                                                                                                                                                                                                    w
 - pe~                                                                                                                                                         ,
 .r Assumptions used for the actuarial calculations (8) Retirement income Plan and Other                                                 for 1988 and 1989 summarized in the 161e are:

b Post Retirement Benefits seulement counO mie - 8%, longtenu mte of We sponsor a noncontributing pension plan which IC ' and bngknn covers all employee groups. The amount of """"*#*P""*"y"na"m'*a"~8E - retirement benefits generally depends upon the ' " " , wturn on p

                                                                                                       " " "#     '   """P"*"

length of service. Under cenain circumstances, e nun n u ek," bonds, guaranteed mvestment"I"" benefits can begin as early as age 55. The plan also c nuac , equh lent mdtws and real eMak. provides certain death, medical and ditability benefits. The Company's funding PoliC} is to be in

                                                                                                         '" b    P "**I'""*"' *"# I "S" amounted to f.,.. 00,000 in both 1987 and 1988 and compliance with the Emp'oyee Retirement income                                       11900,000 in 1989.

Secutity Act guidelines In 1987, the Compariy offered a Voluntary Early Retirement Opportunity Program (YEROP) which (9) Guarantees cost $25,500,000. Pension and early retirement Under two long tenu coal purchase arrangements, program costs for the years 1987 through 1989 were the Company has guaranteed the loan and lease

        $17,600,000 (87,800,000) and ($12,100,000),                                         obligations of two mining companies. One of these respectively. Net pension and early retirement costs                                 arrangements also requires payments to the mining for the three years were comprised of the following                                  company for any actual out of pocket idle mine components:                                                                          expenses (as advance payments for coal) when the mines are idle for reasons beyond the control of the 39,9         ionn       ina; mining cmupany. At December 31,1989, the (miluons of dollars)             principal amount of the mining comp.mics' loan and rension Cosir                                                                       lease obligations guaranteed by the Company was service cost for benehts earned                                                   f 89,000,000.

8 ' ' The Cotrpany has also guaranteed the debt inte tc r jetted benefit 24 obligation of an equipment suppi er. At December obhgauon . 25 24 Actuat return on plan ussets . (56) (58) (29) 31, 1989, the principal amount of the debt obligation guaratiteed by the Company was Net amorttuuon and deferral . . 9 14 (11) 19, ,000. Net pension cost . ) (t2) (4) VEROP tost .

                                                          -              4         22 Net pension und V0 ROP tosts.                f(12) $ (H)            ,$.=1 H (10) Capitalization
                                                        ===          ===

(a) Coprtoi Stock Transactions The following table presents a reconciliation of Preferred and preference stock shsres sold and the funded status of the plan at December 31,1989 retired during the three years ended December 31, and 1988, 1989 are listed in the following table, 1989 i988 1987 g obousands of shares)

                                                            ]gggg gg                         Cumuhtive Preferred and dollars)                    Preferetxe stock subiect to Actuarial present value of benein                                                      Mandatory Redemption:

obhgauont kenrements vested benehts, 4 236 8 227 Preferred Nonvt sted benehts . . 21 2D $ .35 series C . (10) (10) 00) ,

                                                                                                           """'                                            b Accumulated benefii obliption                                   247                  $                        '

I Lifect of future compensation levels N i3 , Total protected beneht ohhgauon 343 320 h5.00 series H . N) O) H) Pln assets at fair market value . J 509 us oo senes t, 93 g) g) surplus of aucts over projected 113.50 series J . (29) benefit obugation . . (246) (IN9) Prt feren(c; q R50 series i , (M ,7 19) i Unrecognized net gain due to variance between assumpuons and Change. . . . 00) -( .0 ) (N) i experience . 128 63 Unrecognized prior service cost . (3) 10 Cumulauve Preferred stock Not Trandtion asset at January 1.1987 subject to M.mdatory ) being amortaed over 19 )rars. 114 12% Redemption 5dIC* Net anrued (prepaid) pension cost included in other deferred credits Remarketed knw P. - -- 1 on the Dalance sheet . 8 B) W Change . - - 1 ( (Cleveland Electric) l'42 (Cleveland Electric ~) 1 I w . 1

c: *

                                         <a.                             ,

m, ,. x WG(?) Eqdy Distribution Rostfictionst . (C) long-T;rm Debt cnd Other Borroung h"?AIDecembbt 31,1989," consolidated retained- . Arrangements earnings were $507.375,000. The retained earnings 1.ong. term debt, less current' maturities, was as ' were.available for the declaration of dividends on foggow3; S ' the Company's preferred and common shares. All of:

            ' the ; Company's < common - shares are held . by'                                                                                - Actual ~
         ' )Centerior Energy.                                                                                                                Of AVCf8                 December 31 LA loan or advance by th( Company to any of its                                           Y  * " "Y                l"*** "He  "          ""'              """       j[

U

nonutility afhilates requires PUCO authorization ' (thousands or dollars) unless the loan or advance.is made in connection First mortgage bonds
            ;with transactions in,the ordinary course of the                                              1990,,,,,,,,,,,,,,j,                  7.125% $              -      $ ' 60,000 Company's public utilities business operations in                                         1991..........,,.....                 8 375              '35.000: = $5,000             e q         swhien the. Company acts on behalf of the affiliate.                                          1991 ................ 14.00                                 --            25,000.
        + *
                                                        ,                                                 1991~...............                 13.75                  4,334-         4,334 y

19924.......... .... 15,25' 20,000- 20,000

             . (c)tCUmUotive Preferred.and Preference                                                     1992 ....... ........               10.58.               40.000.           - . '   S Y                          Stock                                                                           1992 ................ 13.75                                 4.334          4,334       '
 ;l           Amotmts to be paid for preferred stock which must                                                                                                                           y.

E "he redeemed during the next live ' years ~ are.- h ',, j , j ,*,' ',,'; 33,73 1993 , ,,,,,,,,,,, ,

                                                                                                                                                $$                 Q4,334        ;
                                                                                                                                                                                   ' 4,334 W          l $8,000,000 < in a 1990,1 $28,000,000 ' in 1991,                                              1994 m m,,,,,,,,,,,,.                 4,373-~        .
                                                                                                                                                                 ' 25,000       - 2$,000 ;

u f18,000,000 in .1992 and $33,000,000 in both 1993 1994 .. .....,,,,,,,, 13.75 4,334 4,334 and '1994. ,. . . 1995 1999 . . . . . . . . . 11.72-  : 45.420 = 45,4204  ; W 7 , The annual mandatory redemption provisions are 2000 2004 . . . . . . . . . . . 10.90 59,420 - 59,420 6 N  ? as follows , 2005 2009 . . . . . . . . . . . 8.44 205,824 205,824 ';

Annual luandatory . 2 010 2 014 ' . . . . . . . o . . 9.66 465,450 :590,450- .

O Redemption Promfor" - 2015 2019 . . . . . . . . . , . 9.41 669,065-669.065 *

i. . shares Degin. Price 2020 2023 . . . . . . . . . 7.97 -268.100 240,400 K' To ne' ning - Per i Redeemed in share - = 1,930,615 2,072.915 . ,
Y . .

Term bank Joans due

           . Preferred.                                                                                    1991 1993 . . o . . o o             9.11            130,000 x . 124,000           <!

w  : $ 7.35 series C . .. o.o. 10.000' 1981' 8 100 Notes due 1991 1999 9.12 212,$00 b R8.00 setten F. o. . . ,, , , 1 000 -1981 1.000 Pollution contro! . U ' 71.00 series I . .. . o oo 2,384* . 1985 t.000 notes due 1991 2012- 6.49 54,770' '55,280-9 80.00 heries G . . o ...... . 800' ~ .1984 1,000 Other - net . . . . . . . . . - 8,494' 7.975 3 4 5.00 Series, il . o . . 1.782 ' 19H5 1,000 ll ? .,n . Total Long lerm 1- 145.00 series 1. . . o .o.... 1,969 1986; 1.000 peh ,,;,, ,,,,,,.

10,000 '
                                                                                                                                                          --32,336.579 $2.260,170            1'
                - 113 50 series K .               . . ...                    1991        1,000 AdluMahle series M .. ,.               o. 100,000 -       1991           100 9.125 serien N . . o ..o..,             150.000-1 1993           100                                                                                                  '

1.ong term debt matures during the next five years

  • Represenn remaining shares to be redeemed at holder 5' as follows: $95,000,000 in 1990, $71,000,000 in
              " "Pdon -                             -

1991, $96,000,000 in 1992, $156,000,000 in 1993 ,[ n, . _ and $39,000,000 in 1994. The annualized cumulative preferred dividend . .in 1989, the Company. issued $212,500,000 :

requirement. 'as ' of . December 31,:1989 is - million aggregate principal' amount of secured -
           ~ $ 39.000,000. _.                                                                           medium. term notes with 1995,1996 -and 1999 -

_N :The preferred dividend rates on the Company's rnaturities and annual interest rates ranging fromf g Series L and M lluctuate based on prevaillng interest 8.95% to' 9.3%. The notes are secured by fire.t

           ; rates, with:the dividend rates for these issues                                            mortgage bonds. At December 31b 1989, an averaging 8.4% and 7.75%, respectivelycin 1989.                                            additional $37,500,000 of such notes remained j

iThe dividend rate'on Remarketed Series P averaged unissued. An additional $300,000,000 of secured / h 9.23% in 1989. medium term notes have been registered with the?

  • c  :

There are no restrictions on the Company's SEC and are available for issue in -1990.  ; sability to lisue preferred or preference stock. The Company's mortgage constitutes a direct first :v

      .. , With respect to dividend and liquidation rights,                                             lien -on substantially all property owned and 1" :the Company's preferred stock is prior to its                                                   franchises held by the Company. Excluded from the

. preference stock ' and common stock, and its' liens, among other things, are cash, securities, ' jpreference stock is prior to its common stock , accounts receivable, fuel and supplies, u p  ; y

                                                                                                                                                                                               'i 1         x i

J(Cbveland Electric) - P.4 3 (Cleveland Electric)

n. , <

%e

4

        'y,                                ,,                     c                                                                                  ,                  .

kh" bMddidcna! Nst marigige bonds m::y betsued by l the)CompanyV9nd Toledo Edho0Mnvestment).!C .

  • J I the Company under its. mortgage on the basis of Perry Unit 2, barring unforeseen circumstances (

7, i bondable propeny additions, cash or substitution See Note 3(ch .

                       ' for tefundable first mortgage bonds. The issuance of.                        .
                                                                                                               /            , .

p" N Ladditional first mortgage bonds by the Company on' '(ii) Short Term Borrowing Arrangements Ethe basis of property additions is limited by two The Company had $152,000,000 of htmk lines of i j

                       ; provisions of its mortgage. One relates to the amount :                credit arrangements at December 31,1989. This 0                      '1 e                    ^ of bondable property available and the other to '                       included a $30,000,000 line of credit:which                      '
                       ; carnings coverage of interest on the bondsc Under ~                    provided a $5,000,000 line of credit to be available                    >

a E the more restrictive of these provisions (currently,

                                                                                               . to the Service Company if unused by the Company.

the amount of bondable property available), the There were no borrowings under these bank credit i  ? Company _would have been permitted to_ issue arrangements at December 31,1989.

      .           , Lapproximately $273,000,000 of nontefunding bonds                               .Short term borrowing capacity authorized by the ~
            , - based upon property additions at December 31,"                                   PUCO is $300,000,000. The-Company and Toledo:

1989, after giving effect to the $300,000,000 of first ' Nf, g' mortgage bonds issued in connection with the Edison have been authorized by the PUCO toS borrow from each other on a short term basis; secured medium-term notes discussed .in this Note Atost borrowing arrangements under the short-and theJanuary 1990 redemption 'of $60,000,000

                                                                                                                                       ^

term bank lines of credit require a fee ranging from

g. . principal amount of First Atortgage Donds 7.125% 0.25% to 0.375% per year to be paid on any unused -

g , Series due 1990. The Company also woukt have portion of the lines of credit._ For those banks p been permitted to issue approximately $252,000,000 without fee requirements, the average daily cash R f oi refunding bonds based upon retired bonds at balance in the bank accounts satisfied _ informal ~m' ' December 31,11989. If Perry Unit 2 had been compensating balance arrangements. (' , (thecanceled and written off as of December 31,1989, Company would have been permitted to issue-

At December 31,1989, the Company had no commercial paper outstanding. If commercial paper

[47 tonly $252,000,000 of refunding bonds at December .were outstanding, it would be backed by at least an : , equal amount f unused bank lines of credit. i reement relating to a letter of credit issued A h; connection with the sale and leaseback of fleaver (12) Chonge_in Accounting for Unbilled

                           .\alle) Unit 2 (as amended in 1989) contains                                      Revenues.'

N . several financial covenants affecting the Companya F Toledo Edison and Centerior Energy. Among these - In January 1988, the Company adopted a change in z K a'r e coverage covenants which require the Company. accounting for revenues in order to record unbilled : Land Centerior Energy to maintain earnings to: revenues as discussed in the Summary of--

interest ex;iense ratios above specific levels. This Significant Accounting Policles.

[* - agreement also contains certain capitallrstion The adoption of' this accounting ( method 7' Leovenants which requ. ire the Company and Toledo increased 1988 net income, before the cumulative l Edison to maintain common stock equity above effect on periods prior to January. 171988,= by M apecific levels and require Centerior Energy to $3,363,000 (net of $1,733,000 ofincome titxes)iThe smaintain the ratio of common stock equity to_ total cumulative efrect of the change on the periods prior -

                          ; capitalization and the ratio of total equity to total                 to January 1,- 1988 was . $21,874,000E(net off p                                                                                                   $14,552,000 ' of ~ income : taxes) and ; has been -

L capitalization above specific: percentages. The' Company, Toledo Edison and Centerior Energy are included in 1988 net income; in compliance with these covenant provisions; Also, if this change in ' accounting' method were q we. believe the Company Toledo Edison and applied retroactively,1987 pro forma net income yCenterior Energy will _ continue to meet the and ' earnings per common share'would have

 ,                           capit_al_lzation covenants in the event of a write off of            increased by $224,000, p:
   ,s .::

4 .F 44 (Cleveliind' Electric) _ ((C10veland ElectricY m - 1.1

 -(13) Qucrterly Results of Operations ('Jncudited)

The following is a tabulation of the unaudited quarterly results of operations for the two years ended December 31, 1989. Quarters I ruicd Marc h 51. Jutic $0. ',ept 30, Dec . 31, (thourands of dollard 1989 Operating Revenues . . . . ..... . . $ 381,835 $ 4 01,"'?2 $ 44 8,091 $ 359,964 Operating Income , ,,, .. .. 79,766 91,486 111,372 2,802 Net income ... ..... . . . .... , ,, . .. 71,113 63,273 89.560 26,273 1:arning, Available for Common Stock , ... 60,586 52,*61 79,729 16.916

  !!)NH Operating Revenues . . ..                   .          .  ,,               ,.  $ 352,322  $ 343,861          f 429,333        $ 326,062 Operating income . ..                   ,   . .                ... .              51,916     57,340             100.219           95,811 Cumulative Effect of an Accounting Change (Note 12) .                             21,874        -                  --                 -

Net income (l.oss) . .. . .. . .. .. 76,170 $7,323 106,825 (145,533) 1:arnings (l.oss) Available for common Stock . . . . 65,20i 46,780 96,656 (156.061) (Cleveland Electric) I'-, 5 (Cleveland Electric)

W> L [. t HNANCIAL AND STAllSilCAL REVIEW Operating Revenuel (thousands of dolfors) Total Total fotor $1eom operating ~ Other Detoll WhDietoie Ilectne  % ohng Revenues Yeof Del +oential CommetClol _ hdush6ol 1989.. . .. $469603 $452 911 $519 854 $117 220 $1559 788 $34874 $1591662 $- $1591662 p. 395 165 476 063 59 804 4 367 445 84 133 4454578 - i t.51 578 1988. . ... . 436 413 198 7 . . . . . 428 786 389 297 470 861 42 322 1 301 266 9 378 1 340 644 - 43 371- - 4 324 015 382 773 461 408 60 245 1 344 579 192 1 314 771 12 953 1 327 724 1986.... .. 410 153 1 253 990 384979 356 108 453 555 48 863 1 240 505 380 4 240 885 13 105

            ~ 1985.      .. ,

194 899 322 909 22 465 777 885 33 334 811 219 43 O!B B24 267 4979. ... . 237 612 i n Operating Expenses (thousonds of dollars) Other Phase-In & f ue1 & Operatior. Depreclotton tomos. Pre-phose in fede'ol fotot 6 & Other Thon Deterreg. heome Operating Purchosed - Net fores E spenses y or Power Motntenonce Amortaction Frt 1989., .... . $384 543 $508 451 $193 279 $183120 $ (48132) $ B5 275 $1306 236

                                                             -524 478                 189 731               184 813              (104 396)               94 664         1 196 294 1988 . . . .                  307 044 330 290           425 938                 148 918               446 407               (47 826)               83 179        1 086 006

! 1987.. . . 363 sib 388 388 103 179 443 495 - 97 074 4 095 654 i 1986.. , .. 994 841 310 694 96 995 133 348 - 101 950 1985. . . 351 854 59 443 70 455 - 38 227 688 788' 1979. . 348 068 163 595 income (thousands of dollars) fede'ol Other income income i loxes- fiefore income & Operahng AFUDC- Deouctions, Corrying Cred!t mterest VMr income f ostry - Net Charges (IRDense) Chorge( T989..,..... $285 426 $ 8 362 3 7 934 $234 788 $(55 699) $400 811 224 $85 53 162 297 786

            -1988.... .                      255 284                  8 052                   (243 297)(a) 476 555 i;    1987... . ..                  237 400               177 170                     (41 940)                 24 610                       79 606 178 826                      (6 255)                   -                          64 544                469 185 1986;. . .,                   232 070 1985.~, ,..                   259 449               162 907                      (4 844)                    -                         48 608                465 820 33 432                        4 889                    -                           0300                183 400 1979..          .              135 479 L                                         income (thousands of dollors)

Noe Cumulative Preferred & Iomings Cumulative ifrect of on Efrect of "in Availabie Accounting Not Pre',erence ttock for Common Debt AF UDC- Accounting

v;or interest Debt Change Change (b) income , Dividends Stock -

1989 . $238 042 $ ' (7 450) $250 219 $- $250 219 $40 227 $209 992 1988.... . 228 879 (4 304) 73 2ii 21 874 95 085 42 506 52 579

              -1987.. ..                    249 958 -                            309 582                    -                309 582                 43 386             266 196
                                   ..                     (82 985) 1986.        .              232 433        (62 832)              299 884                    -                299 884                 39 784             260 100 212 290                              310 703                    -                310 703                 44 467             269 236 -
              -1985,......            ,

(67 173) 1979... . 85 299 (15 733) 143 534 4 125 ii7 659 25 587 92 072 - I

              - (a) includes write-off of nuclear costs in the amount of $N,400,000 in 1988.
              . (b) In 1988, a change in the method of accounting for unbilled revenues was adopted. In 19?9. a change in the method of depreciation for the Company) nuclear generating unit was adopted.

l E(Cleveland Electric) F 46 (Cleveland Electric) u

m , t THE CiEVELAND ELECTRIC kiUMWA? LNG COMPANY AND SCSIDIA41ES [ Electric Solos (millions of KWH) Electric Customers (year end) Residential Usogo F-, 3 Averope Avero@e C Averope Pnce Revenue IndJstool KWH ier Per Per [; Year Dewdentici Commercoat inosstrici Wnotesse Other Toto! Residentist Commerceol & Other 1o1o1 Customer KWH Customer 1 , .1989 , . . A 789 5 208 8 780 87 501 19 365 660 786 68 030 8 329 737 145 7 025 9.810 $69t03 l-1988. . 4852 4 998 0 013 481 472 19 816 657 592 66 606 8 203 732 401 7 152 8 99 646.35 - k 1987. 4 682 4 898 8 396 55' 485 18 436 654 021 64 978 8 155 727 154 6 927 9.16 637.46 9 1986'. .- 4 586 4 744' 7 927 - 460 17 717 651 327 63 292 8008 722 627 5 bio 8 94 611.34 1985, 4408 4 516- 7 081 i dia 47 320 647 242 8 081 718 504 6 567 63 181 8.70 57t03 1979. .. 4 353 ' 4 041 9 269 968 399 19 030 641 856 58 690 7 673 708 219 6 557 5 48 357.86 Lood (MW & %) Energy (millions of KWH) Fuel Operable  ; 4 Conocity Not (fhciency. b of Time Pook Copocity Lood 00*D0"V G'40'O8 Purchosed - f uel Cost BTU Per Year of Peak (c) tood Morgtn factor Fossil Nuclear lotal Power fotol MrKWH KWH 1989.i , 4 003 3 866. .34% 62.6 % 14 968 6 570 21 538 (777) 20 764 149c 10 459 1988... ... 4 028 4 067 (1.0) 59.8 15 756 4480 20 236 1 091 '21 327 4 59 10 517 1987., , , 4 257 3 722 ' , 12.6 62.5 14 978 3 689 48 667 4 248 19 915 ' i 56 10 596 E'

          = 9986. .          .        3 875         3 601            7.1         62 2      16 277              12     16 289         2 863         19152          1,78          10 464 1985.            .        3 244         3 257          (0 4)        -67.5      is 866          1 012      16 878         1881          18 759         i 81          10 387 4979.    . .              4 809         3 223         33.0           69 4      45 6B9          1 618      17 307         2 978         20 285        054            40 634 Investment (thousands of dollars)

Construction

                                                                                                     . Wo* In                                Total Utdity             Accumuloted                    -

Prod'ess Nuclear Property, Utety Pto it in Depreciation & Net & Perry fuelOnd Pion' ond Ploht Totot . Ueor Service Amortuation Plant Unit 2 Other IQuipment W% Assete 1989,. $5 878 825 $1264 570 $4 614 255 $ 726 933 $354 374 $$ 695 562 $153 440

                                                                                                                                                                            $7 670 405 1988,     ....           5 704 746              4 081 758              4 622 988             163 628            380 573         5 767 189       -211060           7 456 198' 1987. . ...              5 787 603                005 297              4 882 306             633 433            389 281         5 905 020         566 047         7 089 026
         -1986...           ,       3 196 730-                951 917             2 244 813           3 067 837            383 542         5 696 192-        670 585 -       6 209 692-1985...       m          3 089 105                874 366              2 294 739          2 524 167             335 851         5 074 757         605 705         5 650 560' 1979. .,.              -2 097 281                 524 175              i 576 106             744 972             23 F7(d) 2 344 715               329 869         2 682 920

. Capitollzotion (thousands of dollars & %) b Prefened $tock, Preferred & Preference without { $tock. With Mondatory Mondotory YCGr ' Common $tock IQutty Reuempt.on Proviuons Redemet,on Prov4sioni tono Term oeof totor 1989. ,, $1828 074 40% $212 362 4% $217 334 5% $2 336 379 51% $4 594149 1988,. . 1 780 408 40 232 626 5 217 334 5 2 260 470 50 4 490 538 1987 o , i 925 719 41 270 645 6 217 334 4 2 317 957 49 4 731 655 1986. ,, . 1 843 974 40 339 017 7 444 021 3 2 311 455 50 4 638 467

         '1985.        . ,         i 163 720              di           314 667               7            444 021               3           2 099 660           40          4 322 068 1979,    . , ,             820 dii             39           232 000              11             95 071               4             973 991           46          2121473 =
(c) Capacity was reduced becauw of e xtended generating unit outages f ar renovation and unpnwernents in 1985 (I,0M9 MW).1986 (440 MW) and 1988 (44o NWL
        - (d) itestated for rflects of capitahzation of nuclear fuel lease and hnancmg arrangements pursuant to Matement of l'inancial Accounting Standards 71.
       -.(Cleveland Electric)                                                                   Fm7                                                       (Cleveland Electrk) -

j

7, ' c P"{ ] nr ty *. d

 %gREPORTmOFi,lNDEPENDENT                                                                              PUBLIC ACCOUNTANTS:'.-                                                       1 pr                            . -

m- , - . y p 3^MTithe Shsre O.wners of / *

      ,J                     ?The Toledo Edison Companyi                                  >

M IOe have addited fhe accompanyl'ng' balance s_heet ' "In conformity with generally acc'eptedl accounting 3 a x M Tand1 statement %f: cumulative preferred: and

                                                                                                             " principles.i '

j d P' ' $' wholly preference < ownedstock of TheCenterior: subsidiaryeof. Toledo Energy Edison Company DAs '(a: discussed further in the Summary of Significants W 3 Corporation) as of December 31,1989 and 1988,':- ~ Accounting policies and Notes 7 and 12; a change il L and dw related ' statements of income, retained - was made in the methodi of accounting for income; J taxes and unbilled revenues in 1988, retroactive.to 1

                             ? earnings and cash hows for each of the three yean in                                                                                                 >

the period l ended December 31s 1989 These. januaryJ1,1988. ,

         <                   r                                                                                                                                                        4 y~ yfmancial statements are the responsibility.of the:                                                        As discussed further in Note 3(ch the future of Perry
    %               s        ? Company's management; Our responsibility'is to                                          '

Wexpress aniopinion:on these financial statements 1  : Unit- 2 =is undecided? Construction -has been s suspended since July,1985 Various alternatives are' y[ 4 i based on our audits, being : 1 considered,=' : includingL resumingc j (We" conducted _ouEaudits'in accordance with;  ;- y ,tructiod nmthballing or canceling the Unit. 1 generally Jaccepted t auditing standards.L Thora : . Managenwm can'ghe no assurance when,6 em .

standards regulre.that we plan and perform the audit it 3;
      $ i o obtain                 t               reasonable assurance about whether the                       Iterry Unit .,,. will go in service or whethepbesv         >

investment and a return thereon will ult _imatel>

                              ; fin'ancialH statements J are; freet of; material-                               ree vered.                                                               ,
                         ,         missta'%nt; An audit includes examining, on a test .

e ' yba@ m Jence supporting theramounts. and - Our audits were made for the purpose of forming an - 3

                           ' dist %ms in the financial statements An audit also ~                               opinion on the basic fmancial statements taken as a '

4 I i doleJThe schedules mof- The Toledo Edison" g' 7and significant estimatesm& $ management,

                                                                                                               . Company   aslisted
                                                                                                                                 . includes in the Indexassessing          the acqty to Schedules are-             4 a

s '

                              - well as' evaluating the ow@ unancial statement                                   presemed for -purposes -of complying with the:                           6
presentation. We believe tha: uur audits provide a ' Securities and Exchange _ Commission's rules and are treasonable basis for our opinion! not part of the basic hnancial statements.- These'

. .., m . -

                                                            -m                  .
                               ;ln our opinion, the fimncial statements referred to schedules have been subjected to the auditing L                    4 iabove present fairlyiin all material respects, the                                procedures applied in the; audits :ofLthe basic <            .j  '

( financial position of The Toledo Edison company 2s financial statements and, in our opinion, fairly stat _e , , , J of December $1',1989 and 1988cand the results of ' in all material respects the financial data required to - be set forth therein in relation to the basic financial 1 3 Ji

                                ;its operations and its cash flows for each of the                                                                                                   3 l three years in the period ended December 31,1989.                               statements taken as a whole.
                                             . - y                      -

ClevelandTOhiol 4

     ,i LFebruaryf12,1990 e                                                                                                                                        r s                  q s

JAnhur AndersenACo. j a 2 H s cj

?                \
    'y                                                    _

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                                                                                                                                                                                     'I 16                                                                                                                                                                                   4
                              > NToledo Edison)                                                         14 8                                               (Toledo Edison)'

ys k e

SUMMARY

1 lF SliNIFICANT ACCOUNTIND POLICIES L G9ne_rol listimated future nuclear fuel disposal costs are The Toledo Edison Company (Company) is an being recovered through the base rates.

electric utility and a wholly-owned subsidiary of - The Company defers the differences between Centerior linergy Corporation (Centerior Energy). actual fuel costs and estimated fuel costs currently
The Company follows the Uniform System of being recovered from customers through the fuel Accounit prescribed by the - Federal Energy factor. This matches fuel expenses with fuel relt Regulatory Commission (FERC) and adopted by revenuet The Public Utilities Commission of Ohio (PUCO).

p' The Company is a member of the Central Area Pie Phase In Deferrals of Operating Power Coordination Group (CAPCO.). Other ~ Expenses and Corrying Charges

      . members include The Cleveland Electric                            The PUCO authorized the Company to record .

Illuminating Company (Cleveland Electric), deferred charges interest carrying costs and

     - Duquesne Light- Company (Duquesne), Ohio                           operating expem as (including lease payments, p        Edison Company and Pennsylvania Power Company.                    depreciation and taxes) for Deaver Valley Unit 2 Ihe members have constructed and operate                          from its commercial in service date of November 17, generation and transmission facilities for the use of 1987 through December 31, 1988. The PUCO uthe CAPCO companies. Cleveland Electric is also a                    determined that Perry Unit I was considered "used-wholly owned st bsidiary of Centerior Energy,                      and useful" on - May 31, 1987 for regulatory purposes. Consequendy the PUCO authorized the Related Party Transactions                                         Company to defer operating expenses for Perry Unh Operating expenses include those amounts for                       1 from June 1,1987 through December 22,1987, transactions with affiliated companies in the ordinan.    '

the date when these costs began to be recovered in course of business operallons. rates. The PUCO authorized the deferral of interest The Company's transactions with Cleveland and equity carrying costs, exclusive of those Electric are primarily for firm power, interchange associated with operating expenses, for Perry Unit J power, transmission line rentals and jointiv owned from June 1,1987 through December 31,1987 and power plant operations and contruction. Se'e Notes i deferral of interest carrying costs from January 1, and 2. 1988 through December 31, 1988. The amounts

           , Centerior Service Company (Service Company),                 deferred for Perry Unit 1 pursuant to the PUCO the third wholly owned subsidiary of Centerior                     accounting orders were included in property, plant Energy, provides management, financial,                            and equipment through the November 18,1987 administrative, engineering, legal and other services              commercial.in service date. Subsequent to that date, to the Company and other affiliated companies at                 -amounts deferred for Perry Unit I were recorded as cost. The Service Company billed the Company                       deferred charges, Amortization of the Beaver Valley
       $40,00G E00, $43,000,000 and $21,000,000 in 1989,                  Unit 2 and Perry Unit I deferrals hegan onJanuary 1,
       '1988 and 1987, respectively, for such services.                   1989 in accordance with the January 1989 PUCO rate order discussed in Note 6. The amortizations      :

R venues will continue over the lives of the related property. Customers are billed o their energy consumph,n a monthly on. based cycle basis for on rate schedules Phase in Deferrois of OPerotin9 Expenses authorized by the PUCO; Prior to 1988, these and Corrying Charges revenues were recorded in the accounting period As discussed in Note 6, the January 1989 PUCO rate during which meters were read, except for the order for the Company included an approved rate portion of revenues which v as deferred under the phase in plan for the Company's investments and mirror construction work.in progress (CWIP) law leasehold interests in Perry Unit I and Beaver Valley discussed below, Utility service rendered after Unit 2. On January 1,1989, the Company began monthly meter reading dates through the end of a recording the deferrals of operating expenses and calendar month (unbilled revenues) became a part interest and equity carrying charges on oeferred rate-of operating revenues in the following month based investment pursuant to the phase in plan. when the meters were read. EtTective January 1, These deferrals will be recovered by Deccoher 31, 1988, the Company changed its method of 1998. accounting to accrue the estimated amount of revenues for sales unbilled at the end of each Depreclotion and Amortization month. See Note 12. A fuel factor is added to the base rates for electric The cost of property, plant and equipment, except

    - service. This factor is designed to recover fuel and              for the nuclear generating units, is depreciated over
     -most purchased power costs from customers. It is their estimated usefut lives on a straight line basis.

el anged semiannually alter a hearing before the The annual stralpht line depreciation provision expressed as a percent of average depreciable utility plant in service was 3.6% in 1987,1988 and 1989. Fu:1 Expense Depreciation expense for the nuclear units is based on the units-of. production method. The cost of fossil fuel is charged to fuel expense EITective July 1988, the Company began the based on inventory usage. The cost of nuclear fuel, external funding of future decommissioning costs including an interest component, is charged to fuel for its operating nuclear units pursuant to a PUCO expense based on the rate of consumption. order. Cash contributions are made to the funds on a (Toledo Edison) F 49 (Toledo Edison)

f a/* , g

                                            ,+                                                                                                              y p        4                                        ,

g& y w .. 1-N

                                                                                     > yinnstment tax credits is reported as a reduction of f i

f "it'raight line hels-over the remaining:lleensing V'  ? depreciation expense. See Notel period for each unit; Amounts currently in rates are r L based on past estimates of decommissioning costs. ( E Efor the Company of $59,000,000 in 1986 dollars for -

                  /the Davis-liesse Nuclear Power Station (Davisi Jnterest Chorges:                                    --
i l

Debt interest reponed in the Income Statement does - q 5 n flesse) and.$28,000,000 each for Perry Unit:1 and . not include interest on nuclear fuel obligations? '

                / L Deaver Valley ' Unit 2 in '19871 dollars. Actual                                                                                     g Interest on nuclear fuel obligations for fuel under.
 $[                f decommissioning costs are expected to exceed these                    construction is capitalized. See Note 5.-

R' 4 estimatesi It is expected that increases in the cost. 1. $ses and gains realized upon the reacquisition 3 estimates will be recoverable in rates resulting from r redemption of long. term debt are deferred, 4 future rate-proceedings 6The current level of. consistent with the regulatory rate treatment. Such;.

               ' saccruals: beingt funded and recovered from                               losses and gains are either amonized over the b                    Ecustomers over the remaining licensing periods of -                   remainder of the original life of the-debt issue the Units'is approximately $4,000,000 annually. The               retired or amortized over the life of the new debt C                         present funding recptirements for lleaver Valley                  issue when the proceeds of a new issue are used for
" Unit 2 also satisfy a similar commitment made as the debt redemption. The amortizations are
                        'part of the sale, and leaseback transaction discussed             included in debt interest expense.                                    I v.

In Note 2; E _ Property, Plant and Equipment d in and 1.oss from Sales of b 4

                    'hghjo Propeny, plant and eaulpment are stated at original cost less any amounts ordered to be wrluen off.. .

e EThe Company is amortizing the applicable deferred included in the cost of construction are items such y . pain and loss (net of tax) associated with the sales as related payroll taxes, pensions, fringe benefits, 7< Lof utility plant ins 1987;over the terms of leases - management and general overheads and .AFUDC.1

                        .under sale and leaseback agreements. See Note 2.                   AFUDC represents the estimated composite debt -

! The amortization and lease expense amounts are and equity cost of funds used! to financeL recorded as operation expense- construction. This noncash allowance is creditet to g income, except for AFUDC for- Perry Unit 2. lleginning in July 1985, Perry Unit 2 AFUDC was - J F:deral Income Taxes credited to a deferred incomtaccount until January s> The 1988 and 1989 financial statements reflect the 1,1988, when the practice of accruing AFUDC on -  ! f > liabiHty method of accounting for income taxes as a peq. Unit 2 was discontinued. See Note 3(c). The  ! result of adopting a new standard for accounting for gross AFUDC rates were 11 AS% and 11.62% in  ! income taxes in 1988 Prior to 1988, income taxes 1989 and 1988, respectively. The net.oflocome tax e the deferred method. Under AFUDC rate was 10,97% in 1987. were the deferredaccounted method, for b) deferred taxes and deferred . Maintenance and repairs are charged to expense

&                       Llax credits were not adjusted for subsequent                       as incurred. Certain maintenance and repair.

ychanges in federal tax rates. Also, under the deferred expenses for Perry Unit I and Beaver Valley Unit 2 .

                        = method, the Company did not record deferred taxes                  have been deferred pursuant to the PUCO -

g l t on the temporary differences between book and tax accounting orders discussed above. The cost of  ; { income that the PUCO used to reduce allowable replacing plant and equipment is charged to the =

                         ; costs for ratemaking purposes. This practice was.                 utility plant accounts. The cost of property retired -

7 premised on regulatory treatment which permits plus removal costs, after deducting any salvage

                        . recovery of such deferred income taxes in future

[9 value, is charged to the accumulated provision for : k' ' i or difference under the liability method is depm m uon.

                                                                                                                                                          }
                       , that deferred tax liabilities are adjusted for                      Mirror Construction Work in Progress -                             I L                            subsequent tax rate changes. Also, the Company                                                                                       I L                          imust now record deferred taxes for all temporary                  The Ohio mirror CWIP law requltes that revenues differences between the book and tax bases of assets             authorized by the PUCO and collected as a result of        q h: >                         and liabilities. Application of the accounting                   including CWIP in rate base be refunded in a               ?

b standard in -1988 and 1989 did not impact resuhs of subsequent period after the project is locluded in- 'f

                       ' operations as the additional deferred taxes were                    rate base. For accounting purposes, such revenues -

f are deferred and recorded as refund obligations to offset by a regulatory asset on the balance sheet o because of the regulatory treatment described in the customers. During the period when such revenues

  • preceding paragraph. Additionally, allowance for are being collected, AFUDC (through the in.
                         .. fuhds used during construction (AFUDC) and                       service date of the project) and carrying charges          g]

carrying charges that were previously accounted for (during the remainder of the collection period) 4 continue to be capitalized. The deferred revenues: j r . in the Income Statement on a net of tax or an after.

       ,                  ; taxi basis -are now stated on a pretax basis.                    are then recognized'as operating revenues in the           n!

Comequently, the 1988 and 1989 federal income tax Income Statement over the period of the refund. Jl

 .                           provisions are equally higher.                                  Amounts collected through January 31, '1989 under          <
                                                                                                                                                        ~

V . For.cettain property, the Company received the mirror CWIP law are being refunded pursuant investment tax credits which have been accounted to the January 1989 PUCO rate order discussed in Note 6. After' February 1,1989, no revenues were for as deferred credits. Prior to 1988, tax credits A utilized were reflected as reductions to tax expense being collected under the mirror CWIP law. All j over the life of the related property. Under the new mirror CWIP revenues will be refunded to customers z method inf - accounting, the amortization of by February 1990. , I f U(Toledo Edison) F.50 (Toledo Edison) j q l

.m t

a

ppw i y MANAGEMENT'S FINANCIAL ANALYES b 'Results of Operoflons- PUCO for cenain replacement fuel and purchased [ 1989 yg;1988 Iwwer costs collected from customers during a 1985-E 1986 Davis Besse outage. Total kilowatt. hour sales k TheJanuary 1989 PUCO rate order for the Company increased 2 A% in 1989. Commercial sales increased h (as discussed in Note- 6)- contributed to a 2,7% as a result of continuing growth from new p , substantial improvement in cash flow in 1989, but had significantly office buildings and retall outlets. The comparatively [ L

      . gain in ;eported.less revenues effect      on our from higher ratesearnings.

was The moderate sununer weather in 1989 lowered sales

    ' offset by a corresponding reduction in nuclear plant because of reduced air conditioning usage.

( itesidential sales decreased 2.5% Industrial sales orelated cost deferrals, as such costs are phased in decreased 1,1% as modest growth in industrial sales r,nd recovered in rates. activity in 1989 was olTset entirely by the impact of f .The 1990 and 1991 rate increases included in the rate order will continue to improve operating the loss of a large industrial customer to a municipal power system in Clyde, Ohio, which  ! [E q revenues in those years although further reductions

      -in deferred costs and the earnings caps contamed began operating in April 1989. That customer                   l accounted for 1.1% of the Company's total electric;       :)

h in the Company's and Cleveland Electric's rate orders will limit increases in earnings. Revenue sales in 1988. I ( Operating expenses increased 18.9% in 1989. [ gains may be limited somewhat by the effects of a. l.ower deferrals of nuclear operating expense for i sluggish economy and customer conservation ellorts. g[_ Perry Unit I and Beaver Valley Unit 2 resulted in'a l Sales growth is expected to be flat for 1990 and less MS.000,0u9 increa ' in expense. Fuel and + i than 2% annually for several years thereafter, This purchased power expense increased largely because  ! makes our ' cost reduction efforts extremely (( . Important. Future operational changes and cost reductions resulting from the PUCO mandated of the matching of expense with higher fuel cost recovery revenues discussed m the preceding

                                                                                                                                         'l 1

[ paragraph. Improved nuclear unit' availability  ! [ '~ management audit should make the Company more enabled the Company to sell power to other utilities f f competitive in an environment of inflation and other than Cleveland lilectric. The excess revenues I increasing competition with other energy providers, over cost is treated as a reduction in purchased including municipal electric systems and [ cogeneration projects. power expense. Depreciation expense increased, reflective of the increased generation from the

                                                                                                                                          ]i p              Factors contributing to the 31."% increase in Company's nuclear units since their depreciation is L     ~ 1989 operating revenues are as follows:

recorded based on units of. production, [ Increase Total AFUDC and carrying charges decreased in t change in operaung Revenues ( Decrease ) g 1989 as a result of recovering a greatn Nre of the y Electric Revenuet Company's investment in itS nuclear L.MW, currently I sales of capacity to cle eland taectric, p 72,000,000 in rates pursuant to the rate order. Interest expense pase Rates and Macenancous. e,000.000 l and preferred dividend requirements decreased in j octerred crie utvenues. . 45.000.000 1989 because of retirements and refinancings by the q l'uel Cost Recoury Revenue 3 21,000,000 Company. k sales volume and Mix. (2.000.000) t f s iw.noo.no" 1988 vs.1987 ' l P ars contributing to the 3.8% increase in 1988 Tae primary . factor for the increase in operating l rating revenues are as follows:  ! revenues was a net increase in 1989 m the total sales 'j to Cleveland filectric of a portion of the Company's leased capacity entitlements in Beaver Valley Unit 2 mnr in operaung Revenues

                                                                                                  -                          (rNcSb        l q

and Bruce Mansfield Plant (Mansfield Plant). The uccide Re enuet t sales from Ileaver Valley Unit 2 commenced in sales of capacity to clewland accmc. s 32.000.000 l November 1988 as discussed in Note 2 The sales sales wiuine and Nix. 27,000.000 j from Manslield Plant were only for a three. month Derened cw!P Revenues. 7.000.000 j t period in 1988. The rate order for the Compapy primarily responsible for the two other major f aci :3 ["[, {",j]c"c["c[ff  %,[o] l impacting the increase in revenues. The PUCO Total. # 2 mown p f . granted the Company a 9% rate increase elTective February 1,1989. Also, revenues which were f In 1988, the Company sold to Cleveland Electric { L sollected and deferred through January 31,1989 a portion of its leased capacity entitlement in j

   - under the Ohio mirror CWip law are being refunded                       Mansfield Plant and Beaver Valley Unit 2 for three            ;

pursuant to the rate order. Such deferred CWIP and two-month periods, respectively, as discussed in W

revenues are recognized as operating revenues over the 1989 vs.1988 analysis. Total kilowatt. hour sales r the- period of the refund. Fuel cost recovery inercased 11.8% in 1988. Sales growth of 5.3% in {

I revenues increased in 1989 because of a significant the industrial sector reflected broad-based strength j h rise in the fuel cost recovery factors compared to in the economy, particularly among automobile 1 ( 1988. The lower 1988 factors recognized a greater manufacturers. Residential sales increased 1.6% in 4 amount of refunds to customers ordered by the 1988 largely because of a substantially warmer i i (Toledo Edison) F 51 (Toledo Edison) { 4

base, These carrying charges in 1988 were for summer.The hot summer also contributed to a 3.1% Interest costs only and not equity costs. Ilowever, gain in commercial sales as did new retail outlets. AFUDC and carrying charges that were previously The increase in revenues attributed to deferred CTIP revenues resulted from a reduction in the accounted for on a net.of. tax or an after tax basis were stated on a pretax brsis in 1988. level of revenues deferred under the mirror CWIP . law. l.ower fuel cost recovery revenues resulted Part of the proceeds from the 1987 sale and principally from the greater use of lower cost nuclear leaseback transactions was used to redeem outstanding high. cost securities which reduced fuel and the PUCo ordered refund discussed in the 1989 vs.1988 analysis. Rate increases granted to interest expense and preferred dividends in 1988. the Company in 1987 were offset by the impact of Results for 1988 also included a one time net after. tax it' crease of $6,000,000 related to a change special contracts with larger industrial customers, Operating expenses increased 22.1% in 1988. In accounting for unbilled revenues. See Note 12. Fuel and purchased power expense decreased largely because of the matching of expense with Effect of Inflation lower fuel cost recovery revenues discussed in.the preceding paragraph. The increase in other inflation adversely affected our results of operations operation and maintenance expense and in 1987 and 1988 as increases in base rates were less than the rate of inflation ir. the costs of our labor, depreclation expense mainly resulted from a full year of operation of Perry Unit 1 and Beaver Valley materials and services. Unit 2 and a full year of lease expense for Beaver The January 1989 PUCO rate order was primarily_ Valley Unit 2 and Mansfield Plant. The increase in designed to recover all operating and capital costs of our new nuclear investments. In 1989, total costs deferred operating expenses in 1988 was largely attributable to the deferral of Beaver Valley Unit 2 of labor, materials and services increased 3.8%. Our operating expenses for most of the year because they cost reduction program helped mitigate the effect were not being recovered in rates. In 1987, Perry of the 4.6% rate of inflation in 1989 on our results of Unit I and Beaver Valley Unit 2 operating expenses operations. were deferred for only about seven and two Changes in fuel costs do not affect our results of

   . months. respectively,                                                            operations since those costs are deferred until As discussed in Note 6, $277,000,000 of nuclear                               reflected in the fuel cost recovery factor included in costs were written off in 1988 as a consequence of                                customers' bills.

inflation will have a negative impact on our the rate orders The total amount of AFUDC and carrying charges future results of operations. As stated above, the rate decreased in 1988. The change in status from order was primarily designed to recover costs construction to operation of Perry Unit I and Beaver related to our new nuclear investments and will not Valley Unit 2 in 1987 resulted in the cessation of afford protection against future inflation. Our cost APUDC on those Units. Instead, an accrual of post- reduction efSrts since the Company's 1986 in service carrying charges pursuant to PUCO orders affiliation with Cleveland Electric have been substantial and will continue to be important. began on such investments not included in rate THE TOLEDO EDISON COMPANY RETAINED EARNINGS For the years ended Decernber 31. 1988 1987 1989_ (thousanas of couars) Bolonce at Beginning of Year. . .. . .. S 89,614 S 297.221 S 305.130 Additions 92,678 165,471 Net income (loss) , .. . ... .. . (iiSA52) Deductions Dividends declared: (61,714) Common stock . . . . . . .. . .. . . (63,285) (141.500) (19,036) (26.269) (40,212) Preferred stock . . . . . ... .. .. .. . Other, primarily preferred stock redemption expenses . . (6) (4.175) (21.368) Net inercase (Decrease) ..... 10,351 (207.607) (7.909) Bolonce of End of Year .. . .. ,, .. . . S 99.965 S 89.614 S 297.221 The accompanying notes and summary of signiticant accounting policies are an integral part of this statement. F-52 (Toledo Edison) (Toledo Edison)

INCOME STATEMENT THE loLEDo EDISON COMPANY For the years ended Decernber 31, 1989 1988 1987 (thousands of dohms)  ; Op roling Revenues (1) .. .... .. .............. .. .. $826.803 S 627.997 $605,037 Op roling Expenses Fuel 'and purchased power . . . . . . ... ......... ....... 133,400 116,161 140,i76 Other operation and maintenance . . . . . . . . . . . . .. . .. ... 372.530 358.823 223,307 Depreciation and amortization . . . . . . . . . . . . . . . . . .. . 87,639 75,093 65,503 Taxes, other than federal income taxes . . . . . . . , . . . . . .. 72,123 80,138 59,658 Phase in deferred operating expenses . . . . ... .. .. .. (22,535) - - Pre phase-in deferred operating expenses . .. . . .. . .. 4.044 _ (83,813) (39,797) Federal income taxes , .............. . .. .... ........ . 37,285 29.242 22,747-684.486 575,644 471.594 l Optrating income . . . . , , ...... . ....... .. . .. . 142,317 52,353 133.443-Nanoperating income (Loss) Allowance for equity funds used during construction. . . .. 8,568 5.452 122,138 Other income and deductions, net. . ......... ... . . . 20,361 30.233 (16.904) Write off of nuclear costs . . . . . . . . . ... ... ..... . .. . (276,955) - Phase in carrying charges . . . . . ... ... . ... . .. 82,308 - - Pre phase in carrying charges ..... . . .. . ... . ..... - 129,632 14,989 Federal income taxes - credit (expense) .... .......... (21,563) 86,244 42,726 89,674 (25.394) 162,949 Income Before Interest Charges .. . . . . . ..... . 231,991 26.959 296,392 Int: rest Charges Debt interest . . . . . . ... . .. . ...... . . . ..... 144,792 150,523 185,493 Allowance for borrowed funds used during construction. . (5,479) (1,833) (54.272) i 139.313 148,690 131,221 Inceme (Loss) Before Cumulative Effect of an . Accounting Change. . . . . . . . . . ... . .. 92,678 (121,731) 165,171  ! Cumulative Effect on Prior Years (to December 31, 1987) of an Accounting Change for Unbilled ~ R venues (Net of income Taxes of $4,177,000) .. .

                                                                                                          -                6,279            -

N;t Income (Loss)... .. ... .. .. . .... .. . 92,678 (115,452) 165,171 Pr:fstred Dividend Requirements .. ... .. . 25,390 26.983 42,749 Earnings (Loss) Available for Common Stock .. . .. S 67,288 $(142.435) S122.422-(1) Includes revenues from capacity sales to Cleveland Electric of f 104,127.000 and 531,774,000 in 1989 and 1988, respectively. The accompanying notes and summary of significant accounting policies are an integral part of this statement. (Toledo Edison) F 53 (Toledo Edison)

L [^ h! MANAGEMENT'S FINANCIAL. ANALYSIS Capital Resources and Uquidity we expect t, finance externally about two thirds of ur 1991 and 1992 requirements. See Notes 10(c) . We carry on a continuous program of constructing and N) for mJonuation conmning Hmhadons on J new facilities and modifying existing facil; ties to the issuance of preferred and preference stock and k meet anticipated demand for electric service, to debt. Our short term borrowing arrangemems are comply with governmental regulations and to expl ined in Note i1. Also, we will optionally improve the environment. Cash is also needed for redeem addi:lonal securities if economical. l mandatory retirement of securhies. Over the three- & Company s capital requirements will  ! year period 1987 1989, these needs totaled pr bably increase substantially af ter 1992 if acid rain E approximately $460,000,000. In addition, we l legislation is enacted. See Note 3(b). exercised various options to redeem and purchase h avaHabWty of caphal to mnt our nternal l approximately $700,000,000 of our securities. 6nancing nw& depends upon such factors as In 1987, the capita; required to finance our 6nancial market conditions and our credit ratings. fK construction prograih and to retire and redeem W aputt be an' to rabe cash as nnded securities was obtaiou o ully from external Current securities ratings for the Company are as sources. Also, in 1987, the Company sold and leased IUII "8 back certain interest;s in three generating units as gg g discussed in Note 2. In 1988 and 1989, the a Poor s Investors -l conwradon service 2 Company issued $50,700,000 and $56.100,000, respectively, of first mortgage bonds. Proceeds from these financings were used to repay portions of rw m me w .. nnn- nae - f unwmed notes . un+ nat. short term debt incurred to finance 'the construction nn+ ba2 Prefmed nock. . program, to retire and redeem outstanding securities, to pay our construction program costs and A write off of the Company's investment in perry l for general corporate purposes. Unit 2, depending upon the magnitude and timing ' l The Company has been granted rate increases of such a write off, could reduce retained earnings effective in 1989,1990 and 1991 pursuant to a sufficiently to impair the Company's ability in ( January 1989 PUCO rate order. See Note 6 for declare dividends. See Note 3(c). discussion of the Company's and Cleveland The Tax Reform Act of 1986 provida for a 40% Electric's rate orders which provide for specific average income tax rate in 1987 and a 34% income - levels of rate increases and earnings limitations for tax rate in 1988 and thereafter, the repeal of the # Centerior Energy through 1991. Although the investment tax credit, scheduled reductions in l Company's rate order required it to write off certain investment tax credit carryforwards, less favorable { assets in 1988 which lowered its earnings base, depreciation rates, a new alternative minimum tax  ! current cash flow was noi impaired. (AMT) and other items. The changes resulted in ' (

            . Although the Company's cash requirements for           increased tax payments and a reduction in cash flow construction ( $ 230,000,000 ) and mandatory                during 1987 principally because the AMT reduced            j redemption of debt and preferred stock                      the amount of investment tax credits allowed as an         f offset to federal income tax payable. These changes        I l       ( $351,000,000) during the 1990 1992 period in the e       aggregate will exceed the total for the 1987-1989            had no significant cash flow impact in 1988 because          ;

period, internally generated cash is expected to the Company had a net operating loss for tax g increase substantially as a result of the annual rate purposes. The changes in the tax law resulted in  ! increases. Nearly all of the Company's construction decreased tax payments and an increase in cash flow ( and redemption requirements in 1990 of during 1989 because the tax savings resulting from {1 [. [ approximately $190,000,000 will be met with available tax deductions were utilized on the internal cash generation and current cash resources. consolidated tax return in determining the AMr. l (l- A i

                                                                                                                                 !i
                                                                                                                              'I l

[.. } l I L (Toledo Edison) F-54 (Toledo Edison) w j

e< t CASH Fl.OWS ist . TOLEDO EDlSoM COMPANY k , For the years ended December 34. N 1988 1987 1989 _ Cash Flows from Operating Activilles (i) n Not -income (Loss) .. . .. . . , , .. $ 92,678 $(115.452) $ 165,171 Adjustments to Reconcile Net income (Loss) to Cash from Operating Activities: i [ , Depreciation and amortization . . . . . .. . . . . . 87,639 75,093 65,503 [ . Deferred federal income taxes . . ., ... . , 79,199 (62.598) (150.717)- t investment tax cruilts, net. , ..... .. . . 1,237 6,920 79,332 L nite.off of nuclear costs . . . . . . . . . . . . . .. .

                                                                                                                                                                      -        276,955                  -

f Deferred and unbilled revenues . ., . . (42,624) 14,642 20,185 N Deferred fuel . . . , , ...,. . , ... . . .. .. .. 16,259 (20,693) 15,848 {"g Carrying char.ses capitalized , .. .. ... .. . . (82,308) (129,632) (14.989) Leased nur! car fuel amortization . . .. . 46.408 32,285 22,603 Deferred opetating expenses, net . . . .. . .. (18,491) (83,813) (39,797)

                           . Allowance for equity funds used during construction                                                                                  (8,568)         (5,452)        (122,138)

Amortization of reserve for Davis-Hesse refund obligations to , customers . . , ... .. .... ....... . .... (12,655) (20,777) - Cumulative effect of an accounting change . . . . . . . . . (6.279) - Changes in a'uonnts due from customers and others, net. (4,406) 13,472 (12,i38 Changes in inventories . . . . . . ,, ...... .. . ... . . 1,890 904 (11,856 , Changes in accounts payable . ... .... . ., 8,896 19,472 17,490 ' Changes in working capital affecting operations . (30,713) 11,766 35,788 Other noncash items . .. .. .. . .. . , ,. ... 5,896 9,358 44,190 Total Adjustments. . . . ,. . .. . 47,659 131,623 (50,696) Net Cash from Operating Activities . . . . . 140,337 16,171 114.475 CCsh Flows from Financing Activities (2) Bank loans, commercial paper and other short-term debt. - - (15,000) Notes payable to affiliates. ,, .,, . .. (68,000) 61,700 Debt issues: First mortgage bonds. . ,, . . 56,100 50,700 44,000 Unsecured debt . . . ... .. . .

                                                                                                                                                                    -                -           -250,000 Preferred stock issue .                      . . ,,. .                              . .                                  ..
                                                                                                                                                                     -               -              50,000 Equity contributions from parent . ..                                     ..          .                   .. .                                    -                -              30,000 Maturities, redemptions and sinking funds . .                                               .                       ..         .              (65,006)     (222,166)           (550,075)

Nuclear fuel lease and trust obligations. . .. (39,015) (32,285) (20,954)

                . Dividends paid . . . . . . . . . .  .                          ,, .                                                                          (88,743)       (89.054)          (155,515)-'

Premiums, discounts and expenses . . . (925) 1.489 (2,731) Net Cash from Financing Activities . .. . . (137,589) (359,316) (311,575)-

           . C^sh Flows from Investing Activilles (2)

Cash applied to construction . . . . . . . .. .. .. (65.296) (113,174) (177,019) Interest capitalized as allowance for borrowed funds used

                   ' during construction . . ,                     . ..                   .          .                   .             ,                         (5,479)         (1.833)          (54,272)

Loans to aftillates .. ...... .. .. , ... (114.000) - - Cash received from sale and leaschack transactions, net. - - 1,075,988 [ Cash withdrawn from (deposited in) sale and leaseback trust - 109.976 (109,976) [ Other cash received (applied) . ... . . . 831 3.947, (17.478) Net Cash from Investing Activities. . . . (183,944) (1,084) 747,243

           - N;t Change in Cash and Temporary Cash investments. .                                                                                            (181,196)

(344,229) 520.143 Ccsh and Temporary Cash Investments at Beginning of YC a r . . . . . . . . . , . .. ... . .. ... .. . .. .. ... . 254,888 599,117 78,974 C':sh and Temporary Cash Investments at End of Year .. S 73.692 S 254.888 3 599,117

           ' (l) Interest paid was $ 141,000,000, $150,000,000 and $183.000,000 in 1989,1988 and 1987, respectively. Income taxes paid were $24,980,000 in 1987. No income taxes were paid in 1989 and 1988.
            '(2)' increases in Nuclear Fuel and Nuclear Fuel Lease and Trust Obligations resulting from the noncash b                     caphalizations under nuclear fuel agreements are excluded from this statement.

The accompanying notes and summary of significant accounting policies are an integral part of this statemer.t. [. L

           . (Toledo Edison)                                                                                         F 55                                                                (Toledo Edison)

J

BAl.ANCE SHEET December 31, 1989 1988 (thousands of collars) Assels Property, P.ont and Equipment Utility plant in service . . . . ........ . . .. . .. .... .. $2,532.291 $2.438.927 1.ess: accumulated depreciation and amortization. . . . . . 567,197- 487,546 1,965.094 1.954,381 Construction work in progress . . . . . . ...... . .. . . ..... . 84,586 115,978 Perry U nit 2. . . . . . . . . . .... ... .. .. ... .. . ... 345,754 -343.426 2,395,434 2.410,485 Nuclear fuel, net of amortization . . . . . . . .. . . ... 235,193 260.362 Other property, less accumulated depreciation. .. .. ..... 2,125 2.152 2,632,752 2.672.999 Current Assets Cash and temporary cash investments . . . . . . . . . . . . . . . . . . . . 73,692 254.888 Amounts due from customers and others, net . ......... . 53,800 49.394 Accounts receivable from aftillates . . . . . . . ...... .... 35,114 31.050 Notes receivable from affiliates ... . .. ... .. . ... 114,000 - Unbilled revenues . . . . . ....... . . . .. . .. . . 23,525 13.415 Materials and supplies, at average cost . . . 26,841 24,424 14,882 = 19,189 rossil fuel inventory, at average cost . . . . . . ... .. Taxes applicable to succeeding years . . . . . .. . . .. 61,967- 53,752 Other . . ... ..... .. .......... ...... .. . 4,815 1.947-408,636 448.059

                   ! Deferred Charges Amounts due from customers for future federal income taxes .                                               519,469                           519.238 Unamortized loss from Ileaver Valley Unit 2 sale . ,                         .         ..                    122,911                          127.367
                                       -Unamortized loss on reacquired debt . . ..                       .               . ...                         28,528                          30.809 Cairying charges and operating expenses, pre phase in .                                 .

257,709 259,978 Carrying charges and operating expenses, phase in . . ..., .. 104,843 - Other . . ... .. , , ...., ,. .. . ... 63.998 76.222 1,097,458 1.043.644 Total Assets . .. .. . .. .. .. $4.138,846 S4.134.672 The accompanying notes and summary of significant accounting policies are an integral part of this statement. l (Toledo Edison) F 56 (Toledo Edison)

 .           , ,,     , . , , ,_ , , ,                  ,              ,                                                                          ._ _.. _ _ _ ._._._ _._ _ ==                . = = = .. =

THE TOLEDO EDISON COMPANY December 31, 1989 1988

                                                                                                                                       - (tnousands of dollars)

Capitalization and Llobilities

Capitalization Common shares, f 5 par value; 60,000,000 authorized; 39,134,000 outstanding in 1989 and 1988 . ,. .. ... ... $ 195.687 S 195,687 Premium on capital stock . . . .. ...... ... .... . 481,082- 481,082 Other paid in capital . . . . . . . . . . . . . ... . .. . . . 124.059 121,059 Retained earnings . .. .. ... . .. .. . . .. ... 99,965 89.644 Common stock equity ... . ... . . ... .. . . ... 897,793 887,442 Preferred stock With mandatory redemption provisions... ... . .... . 68,990 71,455 Without mandatory redemption provisions. . . .. . 210,000 210,000 i.ong term debt. .. . ... . .. . ... . . . y97.277 i,291,444 2,3/4,060 2.460.041
         - Other Noncurrent Uobilities Refund obligations to customers . . . .....                        ..                          .                      23,780                   47,719 other, primarily nuclear fuel lease and trust obligations .                                         ...             252.460                   269,045 276,240                   317.064 Current Uobilities Current portion of long term debt and preferred stock.                                            .                 114,870                     26,932 Current portion of lease obligations. . . . .                             ..                   ..                     44,480                    38,499 Accounts payable . . . . . . . .                   .      ..        .                   .                           108,338                     99,442 Accounts payable to affiliates .           , .            .      .           .                                          8,311                   16 059 Accrued taxes . . . . . , . . . . . ,            ..         ..,                           ,                           94,990                  102. S *. i Accrued interest .  .     .... . .                                                                                    39,075                    39,8(.:7
               - Dividends declared . . . .. .                                            .

6.423 Act rued payroll and vacations . . . . . . . 6,885 7,728 Current portion of refund obligations to customers. 26,125 34,700-Other . . . ., ... .. 10.749 11,156 453,823 383.557 Deferred Credits ' Unamortized investment tax credits . . .. . 103,349 105,551 Accumulated deferred federal income taxes . 565,266 484,913 Reserve for Perry Unit 2 allowance for funds used during construction . .. . . .. . 88,295 88,295 Unamortized gain from Bruce Mansfield Plant sale . 247,305 255,973 Other . . . .. .... . 30,508 39.278 1,034,723 _ 974.010 Total Capitalization and Liabilities . . . . $4,138,846 S4,134.672 (Toledo Edison) F-57 (Toledo Edison)

7 I STATEMENT OF CUMULATIVE PREFERRED ist Tottce tosca! COMPANY-

  'AND PREFERENCE STOCK-                                                                                         December 34.

Current

                                                                               ' 989 Shores 1

Outstonding Call Drice 1989 -1988 (thousands of dollars)

   $100 par value preferred, 3,000.000 shares authorlied; $25 par value preferred, -

12,000,000 shares authorized; and $25 par value preference, 5,000.000 shares authorized, none outstanding Subject to mandatory redemption (less current maturities):

                $100 par $11.00. .          ... .                   ..                39,800 $103.50       $ 3,980          $ 4.480 150,100   104.45          15,010           16,675 9.375        .....    .                   ..

25 par 2.81. . . . .. ... 2,000,000 27.19 50,000 50.000

                                                                                                           $ 68,990-        S 71,455 Not subjec4 to mandatory redemption:                                                                                         ;

100 par 4.25. .... ., 160.000 104.625 3 16,000 $ 16,000 4.56 . . . , , . . , -50,000 101.00 5,000 5,000 100,000 102.00 10,000 10,000 4.25. ... . 100,000 102.46 10,000- 10,000 8.3:. . . . . ., .. , 150,000 102.437 15,000 15,000 7.76 . . .. . .. 150,000 101.65 15,000 15,000 7.80 . . .

                            .10.00 . , , . . .                  .            .

190,000 101.00 19,000 19,000 1,000,000 25.90 25,000 25,000 25 par 2.21. . . . . 1,400,000 28.45 35,000 35,000 2.365. . .. , Series A Adjustable , 1,200,000 - 30,000 30,000 Series 15 Adjustable i,200,000 - 30,000 30.000

                                                                                                            $210,000        $210,000 The accompanying nu.es and summary of significant accounting policies are an integral part of this statement.

i (Toledo Edison) I'-58 (Toledo Edison)

NOTES TO THE FINANCIAL. STATEMENTS (1) Property Owned with Other Utilities and Investors The Company c,vns, as a tenant in common with other utilities and those investors who are owner participants in various sale and leaseback transactions (lessors), certain generating units as listed below, Each owner owns an

      . undivided share in the entire unit. Each owner has the right to a percentage of the generating capability of each unit equal to its ownership share. Each utility owner is obligated to pay for only its respective share of the construction and operating costs. Each lessee is obligated to pay for the related lessor's share of those costs. The Company's share
 .~

I

      - of the operating expense of these generating units is included in the income Statement, Property, plant and equipment at December 31,1989 includes the following facilities owned by the Company as a tenant in common with other utilities and lessors:

owner. In- Owner. sNp Plant Covtruction . servier- ahip Mega- I'ower in work ' Accumulated Date share source service in Progrew Depreciation Generating thit watts (thousands 01 dollars) in service; 428 Nuclear $ 585,234 $ 39f91 $ 103,363 Davis Bene. = ... ... , 1977 48.62 % 29 Nuclear 915,659 2,625 72,317 Perry Unit t & Common racilides . . . . 1987 19.91 11 caver valley Unit 2 & Common facilities 2,357 13,166 1987 1.65 14 Nuclear 182,244 (Note 2) , ,, , Construction suspended (Note 3(c)):

                                                                  . Uncertain                    19.91     240        Nuclear                -               M 5.741                                  --

Perry Unit 2 , f l .683 M_7

                                                                                                                                               -            $ 390.6,27                         _$ 188.846 (2) Ulliity Plant Sole and Leasebock Transactions As a result of sale and leaseback transactions                                                    over the terms of the leases. The amounts recorded con pleted in 1987, the Company and Cleveland                                                     by the Company as rental expense for the Mansfield Electric are co lessees of 18.26% (152 megawatts) of                                             Plant leases were $44,556,000, $43,095,000 and Beaver Valley Unit 2 and 6.5% (51 megawatts),                                                     $12,600,000 in 1989,1988 and 1987, respectively.
    ~

45,9 % (358 . megawatts) and 44.38% (355 llental expense for the Beaver v a' ley Unit 2 lease megayvatts) of Units 1,2 and 3, respectively, of the was $72,276,000, $71,810,000 and $18,300,000 in coal bred Mansfield Plant for terms of about 29% 1989,1988 and 1987, respectively. Of these rental years. The Company sold a substantial portion of its expense amounts for Beaver Valley Unit 2, undivided tenant in common interest in Beaver $58,254,000 and $18,300,000 in 1988 and 1987,

             \,Units alley2 Unit                                                                                  respectively, were recorded in a deferred charge and 32 of and  theessentially  all of its Mansfield Plant. The interests Company                 in ,s account pu'rsuant to PUCO accounting orders. Such deferred amounts are being amortized to expense
              $ 1 113,        0,0 1 Cl           tan    eti al                               d                  OVCf the life of the lease beginning in 1989.

essentially all of its :nterests in the three units of the ~1.he Company and Cleveland Electric are Mansfield Phnt. responsible under the leases for paying all taxes, As co lessee with Cleveland Electric, the insurance premiums, operation and maintenance

            . Company is alm obligated for Cleveland Electric's lease payments, if Cleveland Electric is unable to                                               costs and all other similar costs for their interests in
                            ~

the Units sold and leased back, The Company and make its payments under the Man field Plant leases, the Company would be obligated to make such Cleveland Electric may incur additional costs in payments. No payments have been made on behalf connection with capit.u improvements to the Units. of Cleveland Electric to date. The Com[ any and Cleveland Electric have options Future minimum lease payments under these to buy the interests back at the end of the leases for operating leases at December 31,1989 are the fair market value at that time or to renew the summarized as follows: leases. Additional lease provisions provide other For purchase options along, with conditions for For the Cleveland mandatory termination of the leases (and possible veg Company tiectric repurchase of the leasehold laterests) for events of (thouunds oI dollars > default. These events of c'efault ' include 1990. s 106,000 $ 63,00') noncompliance with several firancial covenants 1991. 107,000 63,000 affecting the Company, Cleveland Electric and 1992. 110,000 63.000 Centerior Energy contained in an agreement relating 1993 111,000 63,000 to a letter of Credit issued in connection with the 1994. 1I1,000 63,000 sale and leaseback of Beaver Vallev Unit 2, as Later Years , 2,70 Acon 1.642.000 amended in 1989. See Note 10(d). ' Total ruture Minimum The Company is selling 159 megawatts of its

1. ease Payments . s 3.248. coo s t .957,000 Beaver Valley Unit 2 leased capacity entitlement to Cleveland Electric. This sale commenced in Semiannual lease payments conform with the November 1988 and we anticipate that it will payment schedule for each lease. continue at least through 1998. Revenues recorded Rental expense is accrued on a straight line basis for this transaction were f104,127,000 and (Toledo Edison) F 59 (loledo Edison)
      " 316,533,000 in~ 1989 and 1988 cespectively. The              of maintaining Perry Unit 2 while construction is 1 future minimutn lease payments associated with               suspended.

Beaver Valley Unh 2 aggregate $2,002,000,000, (d) Superfund Sites (3) Construction and Contingencies The Comprehensive Environmental Response, Compensation and Liability Act of 1980 as annnded (a) Construction Program (Superfund) established programs addressing the The estimated cost of the Company's construction clean up of hazardous waste disposal sites, program for the 1990 1992 period is $250,000,000, emergency preparedness and other issues. Pursuant

      . locluding APUDC and excluding nuclear fuel.                  to Superfund, the Company has been no:ified of its should more stringent environmentai regulations be        potential involvement in the clean up of three adopted, particularly' in the area of acid rain             hazardous waste sites. We believe that the ultimate pollution control, future construction program costs        outcome of these matters will be immaterial, would increase substantially.

(4) Nuclear Operations and (b) Proposed Acid Rain Legislation Contingencies

       'There are several bills being considered in the United States Congress which would require (a) Operathg Nuclear Units significant reductions in the emission of sulfur             The Company's ;nterests m nuclear units may be dioxide and nitrogen oxides by fossil-fueled electric       impacted by activities or events beyond the generating units; Centerior Energy's preliminary            Company's control, Operating nuclear generating analysis indicates that compliance with these bills         units have experienced unplanned outages or could requiie addition d capital expenditures in the         extensions of scheduled outages because of range of $900,000,000 to $1,200,000,000 by the              equipment problems or new regulatory Company and Cleveland Electric and would result               requhements. A major accident at a nuclear facility in higher fuel and operation and maintenance                anywhere in the world could cause the Nuclear
      . expenses. The resuhing aggregate rate increases              llegulatory Commission to limit or prohibit the.

could be .in the range of 9 to 15% by the year 2000. operation, construction or licensing of any nuclear One bill contains an additional propo' sal to unit.11 one of the Company's nuclear units is taken regulate certain types of toxic pollutants. This out of service for an extended period of time for proposal.could increase the cost of compliance any reason, including an accident at such unit or any significantly over the estimates stated in the ther nuclear facility, we cannot predict whether preceding paragraph. regulaton authon tles would impose unfavorable Under the proposed bills, capital expenditures rate treatment such as taking the Company's affected and rate increases would be incurred predominantly unit out of rate base.

      -in the 19942000 period. The financial impact on the Company is expected to be less than on                   (b) Nuclear Insurance Cleveland Electric. We cannot predict the outcome of the legislative process or be certain that               The Priceanderson Act limits the liability of the Centen,or Energy s compliance cost esumates will owners of a nuclear power plant to the amount not change significantly, we believe that Ohio 1aw              ovideo by private insurance and an industry would permit the recovery of compliance costs f, rom        assessme a plan. In the event of a nuclear incident at customers in rates,                                         any unit .n the United States resuhing in losses in excess of the level of private insurance (currently (c) Perry Unit 2                                           $200,000,000), the Company's maximum potential assessment under that plan (assuming the other Perry Unit 2, including its share of the common             CAPCO companies were to contribute their facilities, is about SH% complete. Construction of          proportionate share of any assessment) would be Perry Unit 2 was suspend"d in 1985 by the CAPCO             $58,503,000 (phis any innation adjustment) per companie: pending future consideration of several           incident, but 13 limited to $8,844,000 per year for ahernatives which include resumption of full                each nuclear incident, construction whh a revised estimated cost and                    The CAPCO companies have insurance coverage completion date, mothballing or cancellation. None          for damage to property at Davis Besse, Perry and of these alternatives may be implemented without            Beaver Valley (including leased fuel and clean-up the approval of each of the CAPCO companies.                costs). Coverage amounted to $2,035,000,000 for if Perry Unit 2 were to be enceled, then the          each site as of January 1,1990. Damage to property.

Company's net investment in Perry Unit 2 (less any could exceed the insurance coverage by a tax saving) would have to be written off. We substantial amouret. If it does, the Company's share estimate that such a write off, based on the of such amount could have a material adverse effect Company's investment in this Unit as of December on the Company's financial condition and results of 31,1989, would have been about $ 172,000,u00, after operations. taxes.. See Notes 10(b), (c) and (d) for a The Company also has insurance coverage for the

      ~ discussion of other potential consequences of such          incremental cost of any replacement power
       .a write off.                                                purchased (over the costs which would have been Duquesne has advised the Pennsyh;mia Public           incurred had the units been operating) after the Utilities Commission that it will not agree to              occurrenec of certain types of accidents at the resumption of construction of Perry Unit 2.                 Company's nuclear units. The amounts of the Duquesne is continuing to pay for its 13.Mk share           coverage are 100% of the estimated incremental cost (Toledo Edison)                                        F.60                                       (Toledo Edison) k

W 3 ,, y ,;- g' +, ' pp +g, L

                                                           ~

7 lper welk duringN52 i wesi6 period starting 213 cascs. The fordsrs end8rkd agrcements wiilEhi , 4 weeks after an acciden4 67%of such estimate peri Jreached beyond the sissues in such casescand ; 1 L 9 Eweek for, the: next152 wee ks' and 33%"of suchr ' resolved,Lwith respect;to the participants, other . i p " issues .which had been icontested. AllipendingE i I (prudence > investigations'before the PUCO:and: y, 'j(estimate pg and Tduration 7 of replacement c power _ : could : s,ubstamiallp exceed the per week insurance coverage;for the next 52 weeks: The cost . pending litigation before the Ohlo: Supreme Court t

                                                                                                                                                              ~

QJ l v . . _ , . .

                                                                    ,                            1 brought by the parties to the settlement involvinge

[$ J The Company'has inventories for nuclear fuel whkh; f0 g~i($)l Nuclear Fuels ' the Company's nuclear investment und other rate E matters have been terminatedc , 6 <should provide an adequate supply into the midc The orders provided for three annual. rate - f fl990s, substantial additional nuclear fuel must be: - increases for the Company and Cleveland Electric!of ' k Nobtained to supply fuel for the remaming usefuit approxima_tely 9%,7% and 6% effective with bills; k filvcs of Davis BessevPerrysUnit ~1!and Beaver Valley rendered on and after February 1,1989l 1990 and s

     >A Unit 2; More nuclear fuel would be required if Perry -                                    .1991, respectivelyrThe revenues associated with the:

Company's increases are as follows: ' E ; Unit'2:were In completed ' = Em[ :'arr:ang;e198kexisting

  • ments for the Company and nucicah Clevelandfuel financing ~~ 3"""M m
                  - Electricavere refinanced through lenes from a                                                                                              :amaons or; 4                                                                                                                                                                  wu,p F                 > special purpose corporation. The niaximum amount                                                                                                          ,

W of financing currently available under these lease i

                 - arrangements is $609,000,000 ($309,000,000,from                                 ! 989 '
                                                                                                               '"" "  " " " ' ' " " " ' " " * *                     !W,         t I               i
              ' lintermediate            term   notes     asid'$300.000,000     from.               f9f"' " ' ' "'        " "'i"" "' ""'"'"

6 bank credit tirrangementsh although financing hi ali , . jy'@[' ' r tamount . up. to $900,000,000;is permittedDThe -

Company!and Cleveland Electric . severally lease L . .'

9their respective portions of the. nuclear fuel and are - 3hese revenue increases are net increases after1 t cobligated to pay for the fuel as it is burned in a including adjustments required under the mirror t

                ' reactor. The lease rates are based on vario'us -

CWIP law and the refunding of revenues collected',

.'              Jintermediate term note rates, bank ~ rates and                                     by the Company in 1985 through 1987 pursuant to a
,                 geommercial paper rates. The intermediate. term                                   February 1985- rate order. The refunding .                                            .

i

~'
                  . notes mature in the period 1993 1997. Beginning in _                            requirement had no impact on net income liecauses                                         -

1991, the bank credit arrangements are cancelable reserves had been provided in those yearss All: .. j

                                                                                                                                                                                         ~

Jon two years notice by the lenders. As of December amounts related to the refunding requirement will - ' 1 be refunded to customers by November 1991.. R , ,131,11989; $250,000,000Eofanuclear' fuel .was i i Lfmanced for the Company.f1his ' includes nuclear The orders provided for the permanent exclusion H fuel in.the: Davis Besse, Perry Unit 1,and Beaver from rate base ela portion of the Company's and? ' Talley Unit 2 reactors with remaining payments of Cleveland Electric's combined investment in-Perry!

                      $37,000,000% $36,000,000 .and = $17,000,000,                                  Unit 1 and Beaver Valley Unit 2. The exclusion-;

hrespectively/as of December 31,1989. . resulted -.in - af write off by : the: Company cof' nThe Company's nuclear fuel amounts financed $242,000,000 :($160,000,000_-after tax) in 1988; arid ~ capitalized included interest charges incurred Since the ' ' orders effectively eliminated . the ~ , cby the lessors amounting to $19,000,000 in 1989, possibility of the Company and Cleveland Electric L

                     . $ 18,000,000 in .1988 and $ 17,000,000 in 1987. The                          recovering their remaining investment in fourz 4:t                 Vestimated funire lease omortization payments based                              nuclear construction projects canceled in 1980 a.nd y on projected -burn are $44,000,000.'in11990,                                         recovering certain deferred expenses:for Davis .
<                 : $50,000,000 in :n 1991i $ 51,000,000 in ' 1992, Besse, additional _ write ofTs totaling $35,000,000l' J$46,000,000 in 1993 and $51,000,000;in 199i As                                     ( $21,000,000 after . tax) 'were. recordediby the ;                                Jj  '

jthese payments are made, the amount of credit Company in 1988, bringing the total writeioff of f nuclear costs emanating from the Company's order Savailable to the lessor becomes available to fmance additional-nuclear fuel, assuming the lessor's 'to $277,000,000 ($181,000,000 after tax), The phase in plan ordered by the PUCO wash l ilntermediateiterm - notes' and bank credit designed so that the 9%,7% and 6% rate' increases,: l l arrangements continue to be outstanding. j compounded by sales growth, will be suflicient to1 expenses and provide 'a fair .  : j W (6)LRegulofory Matters. rec rate ver all operatir9t of return 'on _ le Company s unrecovered a _' in 1987(the PUCO granted increases in electric rates investments in Perry Unit 1 and Beaver Valley Unit 2 for ten years beginningJanua,y 1,1989.'In the early'

                                                                                                                                                                                         .f
           .       ;to the Company as followM                                                                                                                                           (j n                                     Annualued             years of the plan, the operating expenses and
                                                   .twe:

Amount return requirements exceed the revenue increases.  ; 4 _ on nonsor Therefore, the amounts of operating expensesimd .  ? dollard return on investment not Currentir recovered are b JItay 198h .., . $43.0 deferred or capitalized as carrying charges. The d December 198L - -. , . 0.5 PUCO authorized the Company to record a fit" net. of tax carrying charge of 9.2% on deferred r te- 9 E based investment commencing January 1,W9. r i1. OnJanuary 3t,1989, the PUCO issued orders for j Since the unrecovered investments will decliae over j

       >           l the Company'and Cleveland Electric which adopted
                     -a sedlement reached between the companies and                                  the period of the phase in plar.s because of                                               ?

the majority of the intervenors in then pending rate depreciation and federal income tax benefits that q(Toledo Edison) F 61 (Toledo Edison) e m s m

                         +

y

f9?TW L,; f < > h' O y .9R .. .. . M i result froni the use of accelersted tax depreciationk ' savings are maximized, Until the' management audit ' < gb < the amount:f revenues required to provide a fair - is completed -in the spring of 1990, an armualc ,

         "a Treturn also declines. Beginning in the sixth year, the.                = savings : target range' has been set for Centeriori                e y@E              % revenue levels authorized pursuant to the phase in
                      . plan were designed'to be sufficient to-recover-Energy of $40,000,000 to $100,000,000 from the -              d 1988 normalized level of other operation and7           ,         l maintenance expense (excluding lease expense 1, g' ?unrecovered L investments Eandi amortization ofcurrent>                                  operating arising from-the  saleexpenses,      a fair.

and leaseback returnofon the of assets) -j-s 9 deferredfoperatingy expenses; and capitalized f 676,300,000, as determined by im audit advisory 1; 1 Jcarrying charges recorded during the earlier years of ~ panel and ' approved by the' PUCO.KAlsop in '  ; y' t the plan. All phase in deferrals after December 31, connection with-the orders, a nuclear management - ~! Q 71988 relating to these two Units will be recovered ' expert completed a cost reduction study at Daviss j n< 4 by< December 31, 1998; Pursuant to such phase in' - Besse. The study c;oncluded that Centerior Energy; L w ' 4 plan; the Company deferred operat_ing expenses of- could reduce annual operation and maintenaner i R ^ $22,535,000 and debt and equity carrying costs of t sexpenses at .' Davis Besse - by ; approximately .J 4$30,617,000 and $51,691,000, respectively, in 1989,; $33,000,000 in 1991. The management audit will- { W W VUnder the orders, the Company and Cleveland ~ l Electric may not seek any further permanent rate - consider. the Davis Besse study results cint the determination of overall savings. Ji increases to-be effective before, February 1,1992 The orders provide that 50 Eof the. net after tax - I', unless Centerior Energy's earnings available for savings in 1989 and 1990 resulting from the cost : .

                    ; common equity, prior to extraordinary items, are                reduction effort or identified by the management "                  i O                    Tforecasted either to fall below $210,000,000 over -              audy and apuroved by the PUCO are to be used to.

R , lfour^ consecutive 4 quarters -orl:to' fall below reduce cost veferrals recorded under the phase in- j n sS435,000,000- over eight. consecutive quarters, plans for the Company and Cleveland Electric.  ! E tDuring this period, Centerior Energy's earnings Based on 1989 results, no change was made in_the.-

                                                                                                                                                    ~!

e * : available for common equity, prior to extraordinary -cost deferrals for 19891 Fifty percent of the net . e

                 ' iltems and excluding changes in expenses relating                  annualized s, wings achieved or identified.and                     [

e' i e to'any future sale and leaseback of assetsiare ilmited approved for a period to be determined will be used i @ to the following amounts for any.four consecutive to reduce the 6% rate . increase scheduled'for -  ; quarters ending on or before the date indicated: February 1,1991JAs an incentise to achieve the _  ! savingsithe remaining 50% of savings in each of the - m T-

                                  ! $'275,000,000 -         Mar'ch 31,1990            periods will be retained by the Company and
  • 4 '
                                    $295,000,000 :          March 31,1991"            Cleveland Electric, subject to the earnings cap - ~
                                    $ 310.000,000           December 31,1991          described in this Notec Net ' savings would be-               4 adjusted fo changes in capital. and operating costs                ;

R 4

                           .!f any of the earnings caps described abovc were          arising from certain events, such as changes in tax -              ;

4 Fexceeded an adjustment would be made to the laws or environmental laws. There were no such ' n

amount of the deferrals recorded under the phase in adjustments for 198?. If the Company and Cleveland i d N cplan to prevent; any excess camings. The Electric do not achieve at least one half of the - 3 7 adjustment would beiapplied proportionately savings identified by the management audit and- -

p",f c between the Company and Cleveland-Electric based approved by the PUCO, earnings would be reduced = ':

                    . ors   the    earned  returns of the two companies,

" by the amount of the shortfall, subject to the ability -  !

                        , The orders provide that any permanent rate                  of the Company and Cleveland Electric to request              ;i
              " Lincrease sought to be effective during the period                    additional rate relief if Centerior Energy's forecasted __    1

, :Fabruary 1,1992 to February 1,1994 may only be earnings fall below the minimum levels discussed - l U ' based upon costs associated with net new in this Notei . _ . .

                    , Westment placed in service after February 29, The orders also provide for possible decreases or '       ?

t . fl988 and necessary changes in operation and _ . increases in the cost deferrals it actual revenues are - , t> >

                   " maintenance < expenses (other than fuel and                      higher or lower, respectively,'as compared to :                o 3              ' purchased: power) and. other necessary cost                     projected amounts in the orders. No change war                3 Lincreases t from . the levels Tidentified ~ in the               made in the cost deferrals for 1989/             J.            i

^ 6 management audit discussed in the next paragraph. The orders set nuclear performance standards  ! c Alsocif Centerior Energy's return on average through 1998.~Beginning in 1991, the Company; Leommon stock equity is below the benchmark rate J could be required to refund incremental. i established quarterly by PERC for rate cases subject replacement power costs if the standards are not - 1 ito its jurisdictioni the Company and Cleveland met. Fossil fueled power plant performance may not, 1 Electric cotild seek rate increases to improve the be raised as an issue in any rate proceeding before a

                    ; return under certain specified conditions.                      February 1994 as long as the Company and
The Company, Cleveland Electric and the Service Cleveland Electric achieve a system wide availability.!

m Company are ' undergoing a management audit to factor of at least 65% annually. This standard was"  ; y, assure that operation and maintenance expense exceeded in .1989. F 3 i

                         ?
                           ,fe L'

(Toledo Edison) F 62 (Toledo Edison) s ] f

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                                                                                                                                                                               ~
                                                                                                                                                                                                                                          ~

_i . sc su V ;l MQ[I C 14federial, income .  ; tax" =1' recorded on the books as followsr

                                                                                                                                                                          <         >                    h Tnt the yeariended December Bli w@t
        .M M.V';                      W                                M
                                                                      .u l                                                         19H9s                                       ,_39HH t                         ,    s.

19H7s '

                                                                                                                                                                                                                                                                                                                                                    ,~'
@an   p-- @
  • n"',P ,
                                                                                                                      '                                                                                                  : (thous, ands of dollars)(                                                               ;

W t 6 ; a+_ , < ;.

                                                                                                                        - *
  • u=.- . ,

_ . . , . - , , . . . . . .m' ,. . .

                                                                                                                                                                                       $ 151.526 =                                     ' -gt~6H.277)  ~ '
  • J
                                                                                                                                                                                                                                                                                             ' x$ .-  145/19h                                  ig

% fikmk intome (l.oss)' lief ore Federal Income Tax 4. . . o . . r. w. . , . o , . c ---  ; c wr w

                                                     =

7 ,. . - .

                                                                                                                                                         ~. .. .                       f . 51.519                                       o f -(57,214)n                                           I s 58,004 i ,                         e Qf
  • pTui orilloditiricome (Inss) at Natutory Rate. . . . . . . J. . . . i. . ~
                                                                                                                                                                                                                                                          ~ ~ '

Q,

  1. . 4 Increase (Decrease) in Taih  % W ~f(76.464);,

4J . " D A FUDC and Carrying Charges , . . g , i, . . , , . U. . . . , , , ,, . . . , . . . . . . . . . . * '

                                                                                                                                                                                                                                                                                                          .3,666 :

5,99) ;

  • t 1529f
  1. E"3 ' 1 Accelerated Depreciation y.Niui.oi...m. ..., . .. ..,... J....

D, 's ! Organization Cosu h o . o .U. 6. . , . t. . . . . . to igw. . . . , . . . . . . . w , E2 274 i fR > A107) 4,292 a '3.015 bw

  • O Taxesi Other Than Federal income Taxes . . i<.a i. . .. . . . J . , . . . , . . ,,,

l.443 .10 706)D  ? (6.200)" ,

                            , i Othet items 9. . . .h c tol. . , . M . .:. ,@ . . .i, . . . .i, u . a . . . . , . o '
                                                                                                                           .no.....<.               .....o......                     ' s 58,8481                                        : 1 (52.H25);                                             $ - (19,979) 2 m

grsm , J,,,s- Total Federatwt.. ,income Tax t;xpense. . .(Credit),, ... +

                                                             ,. ..                           ..                      :          ~                                                           ~

C Federal l_ncome tax expense'is recorded ln the Income Statement as followsl . . . .. . _ . f * %y'gr ,

For the years ended December 31; r y";

I

19H9 . . :198H ~ 19H7E 2

$ ,W

   .l
                              '1 > >J       -

t s  : (thousands of dollars); s W Jupiriting Expensesb '

                                                                                                                                                                                                                             ~-
                                                                                                                                                                                                                                                    ..                                         .      J           s.,                               ,
                                                                                                                                                                       ....           = f(t1;45Hb                                         : I 1(3,132),                                      t $E 71.050 S@

g ' 7 Current i ChangesTax Provision in Accumulated 5 a. federal Deferred . . ... incorner. . . . Taxd . . . . . . . cou . m . . . c , . . . . . . . . . .

                                                                                                                                                                                                . 8.764 -                                                   1.723                                         -46,815?

MM' "p (Acc& Sp i = Altertwtive rated Depreciation Minimum Tax Credit Offset and / .i Amortization.'.

c. . . . . . . . . m . , . , , . .. .. ....... .i.n ... , , . . '.21,291i . .l . . . . . . . . '
                                                                                                                                                                                                                                                         ' ~                                                         i

j W. ' o sale and 1.caseluck Transactions and Amortizat;on .. . . . . . . . . . 4 Property Tax Expense ;. i. i i. . o . . W. . . . . . . . . . . , , ,, . . 455 14.763i

                                                                                                                                                                                                                                                    - (5,058 ) ' '
                                                                                                                                                                                                                                                                                                 ~1 (179,555) i v5,4541
                                                                                                                                                                                                                                                                                                                                                    -q

$1 '11,726 f t4,331) .y c (7,681) f l@ nDeletred CWIP. Revenues n .. M .., c...,p .... 7. , , , ...., s ' (1,184):

                              ' Unbilled Revenues . o . . . . . . . . . a,,......o .... ,, ,, .. . ..

Qi .' 4,698 * ; (6,441) r km J - Deferred ruel Costs lo n=.n . . . c. i. o ,s , . o . . . . . . . .... . .

                                                                                                                                                              ..o..
                                                                                                                                                                                           -(1.229) 207'                                           r 3.639                                            T1.555%
                               ; system Development Costs... ! o. i.. ...                                                       ..,           .. .

c..... 5.055 H.375" (i d'9"

                          ' L Davis liense Hephtcement Power 4. . ., m . .i . o o ,
                             ,I Pederal Income Tax Heturn Adjustments . . . , o , o . . . ,

o

                                                                                                                                           ,o...

(272)' e 76'O c k ,  ? Reacquired Debt Costs .. . . . . ' . o o ..s.o .... .. . ., .. . . . . .;(37H)-

                                                                                                                                                                                             -(1,268) -

4,616 - 4.039 ' 110.356/ y M' .? Deferred Operating Expenses . . . , . .o . , ,,,......, .... . . .

                                                                                                                                                                                                      -                                            , (2,545)                                                  -

6 ' LNet Operating Lo s Carryforward ...... i Other items 7, . . . . . s o . . . . .oo,.o,

                                                                                                                                                              . . .                                2,398                                                 (4.223)                                      - (1,346) -

[ . E hwestment Tax Credus - Net . . . . . . . . . . . . , . . ' t .722 6.920 L " ' H3,164 3 Ji ... . . 29.242 x 22,747 i hb al .. 37.2H5

                                                    ! Charged to Operating Expenses.. ..

hN . _:G d 1 Nonoperating Incomei .

                         ' Currerd Tax Provision 'n. . .o.

(10,129) - (31.209)f C .

                           ; Changes in Accumulated Deferred Federal income Taxi 1,..........o                  . ,             .          . .

dj p6 ,

                                                                                                                                                                                                  'A                                                        2,709                                    ' (10,114) J                             N.r        l T                               L Dav_is tlesse Replacement Power . . . . . . .                                  .     ...,,o            ..        .. .
                                                                                                                                                                                          . w                                                     -(97.277) .                                                                                       1
b. m
                                                                                                          .o.             . .... . ,                                   o.

[ Write off oI Nuclear Costs. . .. . . 132,930 e . 46,543 J  %; 1i 2", kNet  ; AFUDC and Carrying Charges ;. o o ......., . . . . .. ' @ %i Operatlng Loss Carryforward .o.. . . ,.. ... . , . . ...o ,

                                                                                                                                                                                               ,;-..                                             ;(36,H3I)'                                                          .

LOdO3)f W~ g

                          )

Ot he t i tems . d. . . . . . . W . . . . . . . . . . . . . o J. .

                                          .~ ..                         .
                                                                                                                                     .... .         o                  ..
                                                                                                                                                                                              - ( t .238)..

21,563, O.3HH) f M6,244 ) * (42.726)i o* .g. ,. Total Expense (Credit) to Nonoperaung income .. . . . . . ! O rti deral income Tax Included in Cumuhitive Effect of an - w 4.17[ ' { ' Etotal rederat income Tax Expense .p tCreda)n.

                                                                                                                             .                            [ Accouming                   s 5H,H4H      change      "                 for$ Unhdled  4 %2,H25) '                        Revenues; $ -(19,979)q'. . . o o gs                                                                                                                  .                  ... .                       .. , . .
                                                                                                                                                                                                                       ~

The Company joins in the filing of a consolidated federal-income tax return with its aflillated compailles.LThe? l W g ,3

                                                                                                                                                                                                                                                                                                             ,-.                                    E

%gy Gniethod of tax allocation approximates a separate return result for each compa q 1 %  ; accounting for income taxest . net operating loss (NOL) carryforwards of approximatel $y 87,019,000 and $21,426,000;were l l

                      .. For tax purl oses,                i                                                                                                                                                           1                                                                                                                           M J            4    sgenerated inl1988 and 1989, respectively,'and are available to reduce future taxable income. The NOL carryforwards 2003 and 2004; Future utilization of these tax NOL carryforwards would resuh in recording the *

('MQwill expire in nrelated deferred.taxesi:The 34% tax effect of the NOL generated in 1989 T$7,285,000) is.inchided-in'the above . W .r Otable as a reduction to deferred federal inconie' tax relating to accelerated depreciation and amortization?The 34% stax effect of the NOL generated in 1988 ($63,586,000);is included in the above table as' reductions to deferredt @p ifederdincome tax relating to accelerate _d depreciation and amortizatioti ($24,210,000) and to other deferred W 5 federal locome tax charged to operating expenses' ($2,545,000) and to nonoperating fncome ($36,831,000). , K T - Approximately $23,038,000 of unused general business tax credits are available to reduce future tax obilgations. M 4 The unused credits expire in varying amounts in 2001;through 2004. Utilization of these unused credits is limited ' . gby provisions of the Tax Reform Act of 1986 and the level of future taxable income to which such credits mity be .yl b ,appliedi H N J The TaxLReform Act of 1986 provides for an AhlT credit to be used to reduct the regular tax to the AMT level y > 1should.the regular' _ tax exceed the AMT An AMT credit offset for the consolidated tax return of $21,291,000 was

                                                                                                                                                                                                                                                                                                                                                  ?

m w g,g generated.in 1989. p ' SO(Toledo Edison) F.63 -(Toledo. Edison)  ? m<

                                                  ~

m y , iy

f.
  • s
                                                                                                                                                                                                                                                                                                                                                 , di

(6) Rollrsmant incoms Plan and Other The cost of post. retirement medical benefitsu Post Rotirement Banatits amounted to i1,500,000 in 1987, $1,600,000 in 1988 - and f 2,100,000 in 1989. -- We sponsor a noncontributing pension plan which covers all employee greaps. The amount of-retirement benefits generally depends upon the length of service. Under certain circumstances, (9) Guarantees benents can begin as early as age 55. The plan also Under a long term coal purchase arrangement, the provides certain death, medical and disability Company has guaranteed' he loan and lease benefits. The Company's funding policy is to be in obilgations of a mining com)any. This arrangement i compliance with the Employee Retirement income also requires payments to the mining company for Security Act guidelines, any actual out of pocket idle mine expenses (P.s In 1987, the Company offered a Voluntary Early advance payments for coal) when the mines are idle Retirement Opportunity Program (VEROP) which for reasons beyond the control of the mining cost $6,300,000. Pension and early retirement company. At December 31,1989, the principal program costs for the years 1987 through 1989 amount of the mining company's loan and lease were $5,700,00n, $2,100,000 and $1,100,000, obligations guaranteed - by the Company was respectively. Net pension and early retirement costs $ 24,000,000, for the three years were comprised of the following The Company has also guaranteed the debt components: obligation of an equipment supplier. At December 1989 19HM 1987 31, 1989, the principal amount of the debt (millions of dollars) obligation guaranteed by the Company was Pension Costs: $ 9,000,000. service cost for benefas earned during the period . $ 4 $ 4 34 uierest cost on projected bener" (10) Capitalization obligation . . . - 10 9 8 Actual return on plan assets . (17) (18) (8) (a) Capital Stock Transactions Net amortization and deferral 4 5 (3) Net pension cost . .. 1 - 1 Preferred stock shares sold and retired during the VI. ROP cost . . -- 2 4 three years ended December 31,1989 are listed in odng tak Net pension and VI: ROP costs. , , f 1 ==,2

                                               ===                    m::s im             msa       wa7 The following table presents a reconciliation of (th usands f shares) the funded status of the plan at December 31,1989 and 1988.                                                                     Cumulative Preferred stock December 31,                 subiect to Mandatory 19H9             19H8            Redemption:

(millions of sales - dollars) $25 par $2.81. - - 2,000 Actuarlat present value of beneht Retirements VhIIN40005 $100 par $1 t.00. (5) (5) (5) Vested benefits. . $ 92 1 82 9,375 (37) (g7) (37) Nomested benefits . 7 9 13.25. - - (121) Accumulated twnefn obligation 99 91 12.65.. - - (190) ElYect of future compensation levels 33 25 14.80. - __ (300) 25 par 3.75. - - (1.200) ' Total projected benefit obligation 132 116 Plan assets at fair market value . l'4 3.72. - - (l.400) M2~~ Net Change. (22) (22) (1.233) surplus of assets over projected benefit obligation . (42) (36) Unrecognl/ed net gain due to Cumulative Preferred stock Not variance between assumptions and subject to Mandatory experience . 35 20 Redemption: Unrecognied prior service cost . (5) 2 Retirements Transition asset at January 1,1987 $25 par $4.28. - - (800) being amortized over 19 years. 23 24 347 - (l.200) - Net accrued pension cost menuded Change. - U.200) -(800) in other deferred credits on the Balance sheet.

                                                   $M
                                                   =               l=2                  Changes in premium on capital stock are Assumptions used for the actuarial calculations                          smnmarized as follows:

for 1988 and 1989 summarized in the table are: 1989 1988 i987 settlement (discount) rate - 8%, long term rate of (thousands of dollars) annual compensation increase - 5% and long term oatame at negmning of year $ 481.082 $482,770 5482 787 rate of return on plan assets - 8% Plan assets consist primarily of investraents in " ' ' ' " ' " " ' * * ' I "P'"'# -

                                                                                                                                           #'*")         "7) common stock, bonds, guaranteed investment B lance at End f Year .               s481.082 s481.082 1482.770 contracts, cash equivalent securities and real estate.                                                                                                 .

(Toledo Edison) F 64 (Toledo Edison)

g , s w . yp -(b)lEquity D_istribution Restricti:ns .(d) long4Tarm D;bt and Oth :t Borrowing 1, -

  1. ' UAfD6cember 31; 1989,'retalhed earnings were i Arrang;msnts ,

s 2 : $99,965,000. Substantially all ofl the retaine.d . Long term debt, less current maturities, was as +

                   < s earnings:were availabler forl the declaration .of;                              followsr idividends on the Company's preferred and common-                                                                     Actual Decenhr 3L eshares, All of the Company's common shares are                                                                     or Average                                            l

( <

                                                                                                           , Ye"""3'"'W._

N 19"" -

 -                      ; held by Centerior: Energy. A write.off of the'
                                                                                                                                        '"'e'r5' k8

(thousands or doHars) - t w L Company (s investment in Perry Unit 2, depending 11rst mongage bonds:  !

upon the magnitude and timing of such a write.off, 1993 ' " "..a 15.00W $ n70,000 $. 70.000 c could reduce retained earnings sufficiently to.
                      }lmpair the Company's ability to declare dividends.                                      g ] ']',                     Q5                 2kHW         2      5          i
            ,           ' See Note 3(c)#                                                               2000 2004 . . . . . . . . . . .        8.22 -            96.053'       96,053 e A loan or advance by the Company to any of its                         200 5 2009 . . . . . . . . . . .       9.64             101,900 . 101,900 -

nonutility affiliates requires PUCO authorization 2022 2023 ... ..... 7,93 147,800 91,700-

unless the loan or advance is made in connection 644,603 - -625,803- 1 J'

1 -with transactions in the ordinary course of the Term bank loans _. . . . - - ^ 19,500-Company's public utilities business operations in Notes due 1991 1997 11.00 261,715 ' 354,006,

                       - which the Company acts on behalf of the alliliate.                            Debentures due 1997                  11.25              125,000      125,000'           :
                                                                                                                                                                                             ,a J:                                                                                     Pollution control notes due 1991 2015- .10.82                           166A80 ' I'67,'4 00_-           '
, _                     f(c)l Cumulative Preferred and Preference                                      other a nei...... .,                  -                   '620           (26s)!

Total 1.ongererm L Stock . Debt . . . . .... $ 1,197.277 $ 1.291 A44

                                                                                                                                                                                     ..       1 LAmounts to be paid for preferred stock which must                                                          ..

L be: redeemed during the- next live years are s $2,000,000 in each year 1990 through 1992 and 1.ong term debt matures during the next live years - r

                       ! $ 12,000,000 in both 1993 and 1994,                                           as follows: $113,000,000 in both 1990 and 1991, '                                       '

The annual mandatory redemption provisions are $119.000,000 in 1992, $44,000,000 in 1993 and - 7' $ 19,000,000 in 1990

as followst Annual Mandjiory . The Company's mortgage constitutes a direct first :

b RedempHon Provisions lien on substantially all property owned and " j

                                                               - shares       Dcgin-   Price           franchises held by the Company. Excluded from the.

t , Re cc ed i sae accounts receivable, fuel, supplies and automotive q Preferred; C4"IP C"t- - 5,000 8100 The issuance of additional first mortgage bonds-

                             $100 par I11.00.           . ..                   1979-                                                                                                           *
+

9.375 .. . . ... 36,650 1985 loo by the company is limited by provisions in its mortgage. Under the more restrictive of these

                              - 25 par - 2.81. .       .... 400.000        1993       25 '-

provisions (currently, the earnings coverage test), The annualized cumulative. preferred dividend the Company _would have been permitted to issue ' requirement as of. December 31, 1989 is approximately $158,000,000 of nontefunding bonds

                         . $25,000,000.                                     .

based upon propery additions at December 31,  : 1989. The Company also would have been _ The preferred dividend rates on the Company's 1 Series A and B fluctuate based on prevailing interest permitted to issue approximately $86,000,000 of.  ; i

                        . rates, with the dividend rates for these issues                              refunding bonds based upon retired bonds at -

averaging 9.06% and 9.91%,' respectively, in 1989. December 31, 1989, if Perry Unit 2 had been a Under its articles of incorporation, the Company canceled and written off as of December 31/1989, cannot issue preferred stock unless certain earnings the amount of nontefunding and refunding bonds coverage requirements are met. Based on earnings which could have been issued by the Company for the 12 months ended December 31,' 1989, the would not have changed. 1 Company could.not issue additional preferred Certain' unsecured loan agreements of the stock. A write off by the Company of its investment Company contain covenants limiting to 65% of total . , in Perry Unit 2 could adversely affect its ability to capitalization (as defined) the total of its short. term - (

                          -issue additional preferred stock in the future. See                         debt in excess of $150,000,000 and funded debt,                                       y ~
                         . Note _3(c); The issuanc'e of additional preferred                           limiting secured financing other than through first -

i stoc_k in the future will depend on earnings for any mortgage bonds and certain other transactions and h 12 consecutive months of the 15 months preceding requiring the Company to maintain earnings (as a defined) of at least 1.5 times interest on its first

 ^

_ the date of issuance, the interest on all long term _ debt outstanding and the dividends on all preferred mortgage bonds. The earnings coverage ratio applies stock issues outstanding. to $344,500,000 of unsecured loans and was 2.8 at-There are no restrictions on the Company's December 31,1989. ability to issue preference stock. . An agreement relating to a letter of credit issued With respect to dividend and liquidation rights, in connection with the sale and leaseback of Beaver , i the Company's preferred stock is prior to its Valley Unit 2 (as amended in 1989) contains preference stock and ' common stock, and its several financial covenants affecting the Company, l preference stock is prior to its common stock. Cleveland Electric and Centerior Energy. Among-  ; AToledo' Edison) It65 (Toledo Edison)

((o o $ 1..

                             ?ce
                                       <  +:      <

lY . _ - _ - . W: W' ' 7 < ' fth'esi[lare9c6venige fcovenants Nhich frequire . . Most. borrowing arrangemen s under the siforts

 !44 (Cleveland Electric and Centerior Energy to maintaini                               - l term bank lines of credit require a fee ranging from

@MO ' iearnings

           - Llevels4This                to41nterest f agreement           expense also : contains        ratios lcertain    3   abovec0.25%  specliic portion to 0.375% per year to be paid on any unused L
lines of credit.'For those banks i of 4he k% ] capitalization covenants which require the Company ' without fee reqtitrementsi the average' daily cash ;

(fi Tand Cleveland Electric to maintain common stocki t

                                              '                                               : balance in' the bank' accounts satisfied linformalL hs i equity above specific levels and require Centerior:                                       compensating balance arrangements 4 ",

b"  ? Energy to maintain the ratio of common stock' equity. At December 31,1989,'the Company lhad noL M c to total capitalization and the ratio of total eqtilty to- ~ : commercial paper outstanding (If commercial paper pp itotal capitalization above specific percentages. The 1were outstanding,it would be backed by at least an !? - ! Company, Cleveland. Electric and Centerior Energy equal amount of unused bank'~ lines of=crediti W

? @.mAlso,              are wein compliance      with these believe the Company,        covenant Cleveland    Electric provisions,
                                                                                 ~

y' jand Centerior Energy will continue to meet the: (12);-p,ygnygg3 Change In Accounting for Unbilledi b + t capitalization covenants in the event of a wr!te off of ' N' ithe$. Company's: 'and T Cleveland - Electric's in January 1988f the Company adopted a' dhange in ? iinvestments in Perry Unit 2?barring unforeseen accounting for revenues in order to record unbilled revenues asidiscussedLinnthe; Suminary of :

                                                                      ~

Ecircumstances See Note 3(c)n Significant Accounting Policies. l - L, The adoption Lof-this > accounting Lmethod ; p a;'(ii)[$hort Tstm Borrowing Arrangements. increased 1988 net income, before the cumulative 1 ' g , sThe Company had $73,050,000 of bank lines of! effect on periods prior to January it 1988,.by. 2 i Scredit arrangements at December 31,'1989/There $218,000. (net of $112,000 ofincome taxes), Thel y" cwere no. borrowings under these bank credit' i arratigements at December 31,1989i _ cumulative effect of the change on the periods prior;

                                                                         . _ .                 to : January? 1,:'1988; 'was $6,279,000 ;(net Jofs
 .L                     . Short term borrowing cassacity authorized by the                      $4,177,000 of iticome taxes) and has been included .

I \

                 , i PUCO' is - $150,000,0000 The: Company; and                                in 1988 net incomeJ cClevelarid Electric have been suthorized by the?                                lf this change in accoutiting method--weren
b.
  • i PUCO to borrow from each other on a short term ' applied retroactively,1987 pro forma net income,
                    " basis.
                                                        <q                                   : would have decreased by $1,005,000,
, m .

p (% c N a f k t.J t i

                                                                                                                                                               ,f b y, g                                                                                                                                                             -

6 6 1 8 .' l f' i

                                                                                                                                                              }9 i

j AToledo Edison) F 66 - (Toledo Edison) . j h w f n r A r l j

p g. 2pmm <- w_ m, .  ; , = =- m ,

m. ,

p o pTV wmg %gJ6x. a.xA .-

                                                                                                                                                                                                                 .                                                                            * '                    n r                    -

S.g f . 4 p wr u[ w w v. a..u d;. F-? J. i,.W. 1,

                                                                               ,t-            y') s       ].b     N[,'-:,                       i. -

n I -- y V --- - - -. -- w --

                                                                                                                                                                                                                                           .                                                                                                                        4          i I
    #E'?
                                                                                                                                                                                                                                                                                                                     ~ -                                        - <

f, . gi m(13)n. 1G'ue'. ;y;e,sul'ts ,,,iOpet ,tns.'(Uncudit:d)$

n. rtir'ly' of'f R. <
                                                                                                                                                                                                                                                                       ., z .           r         ~# .

($AMTNelollowing is a tabulatioWof the unsudited qu'arterly results of operations for the~two yea'rs ended December:31,5 ~ T,. Me f 1989;y u,p e n

                                                                                        ;. s " m - ,~ , , -                                   -

a, ' Quaners Ended ; s-

                                           . G.            pdt          W cw's.,n%n                                                                          '               <
                                                                                                                                                                                                                                           -. March 3L                                    -Sept: 30.                   - Dec.$1t f'n ' 4, p^@a f;']s.                                                     -
                                                                                                 - i,~.                                                                                              .n                                                             -June 30.s -_. .                    .

dthousands of dollars)j N "/ h 1?.Q w.

         $$dW w
                                                                     .s l                           8
                                                                                                                                                                                                                                             ..           .-.c    .
                                                                                                                                                                                                                                                                        '..                           ~

a Ni ._ JOperating Revenues . . c. , e t.f. , , c. t.-i . . . . ; . . . q. , . . , t - $201;14 4 { $203,4361 ! $219,762 g ; $7 202,461j 9

$(dW 140,532r                           32,595 J Operating i ncome,i . ri . i . . . . . . . . . . . . . . . c.. . . . . . . . . . . . .                                                                                                   32,041-              3_7,149; WP M@ONet Incomed W. . z . . . . . . . . .;. . . . . c. , ,2 , J. , 7.24,280i
                                                                                                                                                                                                                                                . . . . . . . . ,L, 30,284^                 : 34,5012                             3,613 1 -                                  !

(28,176i  ;(2,627)i

                                                                                                                                                                                                       ~

JEarnings (Loss)[Available fo'r Common Stocki.' . . . . . . . . L17,857 ^ 23482?, h,n. y, y1W_ . s m - m i

                                                                                                                  ,             s,-                         '..-

_ 0 0perating Reyenues :. . . .vem . . . . . . . .'v.) $. 156,689--

                                                                                                                                                                                                                                                   . . . . . . '. $141,824?
                                                                                                                                                                                                                                                                     ,3. . . . ' $170,102 i ' t $ J159,382 ;
@                                                                                                                                                                                                                                                3 7,000:- ~' .16,481                          17,655 f.                       J,217..                              '

F% C10perating income ...r, . s , . ; . ; . ;-. . . . . . . . . . . . . . . . . . . . . . .

                                                                                                                                                                                                                                                    '6,279              ye                     7%,                     .. W m ,

R ' OCunktlative Effect of an) Accounting Change (Note 12) ^.7 6 v ,2 Net income ' ( Loss) h . .T 2 . d . . . .. . m . c i . . . . . . . . . . . . , 26,803 f 16,327' . 19,764 ~(.178,346) ' . 84 JIh.dEarnin'gsg(Loss)iAvailable for Commdn stock fia..... .

                                                                                                                                                                                                                                    ..          ;19;150:                99,922  - 1          E13.295 )                 '(184,802)3, 4 6rm:,9p                                                                            u c
                                                                                                                                                                                                                                                                                                                                                                   .m. e t

A _d.; Y'((-[ v I - k} Nf ux ' y 8.y. i

                                                                                                                                                                                           +         e                                                                                                                               r,
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FINANCIAL AND STATISTICAL REVIEW Operating Revenues (thousands of dollars) steorn total + total total Heating operating Year kesidenhol Commerc6cl industnol Other - Retail Wholesole Electric & Gas Revenues 1989. . $215 932 $163 991 $226 680 $99 451 $706 054 $120 749 $826 803 $- $826 803 1988. . ' 200 946 142 696 199 521 34 964 578 004 49 903 627 997 - 627 997

  ,1987.      .. .           200 877           442 385        219 008        21 646         590 006            15 031        605 037           -

605 037

 .1986,                       189 292          133 841        244 274        23 886         561 293            11 489        572 482           -
                                                                                                                                                         - 572 482 1985.           .          184 687          129 ioi        213 895        26 284         554 027            15 656        569 683          5 761        575 444 1979. .         .          113 464           72 354        128 9',4       25 119         339 868            18 839        358 707          6 444        365 121 Operating Expenses (thousands of dollars)

Other Phose-In & . Fuel & Operation Deprecichon ~ Taxes. Pre-phose-In federal fotof i Purchased & & Other Thon De'er'ed. Income Operating . Yxor Power Molntenance Amortuotoon FIT Net foxes E xpenses 1989. $133 400 $372 530 $87 639 $72123 $(18 491) $37 285 $684 486 1988. 116 461 358 823 75 093 80 138 (83 813) 29 242 575 644 1987. . 140 176 223 307 65 503 59 658 (39 797s 22 747 471 594 1985. . 158 763 467 319 37 832 Si398 - 41 150 456 462 1985. 158 990 141 608 44 338 47 772 - 52 873 445 581 1979. . 146 869 65 828 29 ii7 29 760 - 25 139 296 743 income (Loss) (thousands of dollars) Federal Other income income - > Operatrig AFUDC- De to Corrying e in re t Vior income Equity Net . Chorges (Expense) Chorges 1989. . $142 317 $ 8 568 3 20 361 $ 82 308 $(21563) $231991 1988. . 52 353 5 452 (246 722)(a) 129 632 86 244 26.959

 -1987.         ,,           133 443                 122 138                   (16 904)                   14 989                    42 726                 296 392 1986.                      i16 020                129 578                     (1 627)                    -

52 029 296 000 1985. . 129 863 105 094 10 669 - 38 167 283 793 1979.. . 68 408 23 512 8 251 -- 1 017 101 188 Income (Loss) (thousands of dollars) Income (Loss) Cumulative Before Effect of on E s S"7/ T!?, S Debt

                                                                                      ^8%                         Net             P,erer,ed            A50. ion e AF UDC-           Accounting              for Untxiled             income              Stock            for Common Year                      Interest           Debt             Change                  Revenues                 (Loss)           Divtoends              Stock 1989.                  $144 792          $ (5 479)          $ 92 678                  $-                  $ 92 678              $25 390            3. 67 288      j 1988.                    150 523            (1 833)          (121 731)                  6 279               (115 452)            26 983             (142 435) 1987.                    185 493           (54 272)            165 171                   -

165 171 42 749 122 422 1986. 174 397 (55 314) 176 917 - 476 917 45 243 131 674 1985. 155 025 (44 745) 173 513 - 173 513 41 362 132 151 1979. . 52 584 (9 991) 58 595 - 58 595 13 894 44 701 (ai Inchsdes wrlie off of nuclear costs in the amount of $276.955.000 in 1988 (Toledo Edison) It68 (Toledo Edison) u . _ .

m THE 70LEDO EDISON COMPANY Electric Sales '(millions of KWH) Electric Customers (year end) Residential Usage Averope . Average Averoge . Pnce - Revenue-KWH Per Per- Per Industnol - , Total Customer KWH Customer

            . Year =       Resident 6cl Commercio? Industr601 Wholesole Other totol' Residential Commerciai & Other
)            1989.i.,         20;7          .1622         3 7401 175 495 9 049 253 234                      25 803         4 434 283 471 7 989                 10.71C $855.29
           ' 1988. .          2 068'          i 579       3 780'-     938 474 - 8 839 251 590                 25 526       -4 102 281 218 8 264                   9.72      802.87 1987;,          1977          . i 532       3 589       344- 464 7 906 249 344                  25 170         4 086 278 599 7 969-                10.46~     809.66
1986.. 'i941- 449.5 3 482 242 449 7 609 . 247 256 24 655 4 004 ' 275 915 .7 884. 9.75 768 43 -
 <   g .- s 1985. m           i 901 -         1436-       3 429 -     330' 451 7 547 245 485                  24 261         3 942 273 688 ' 7 770                9.72-     755 00'
           - 1979 L           i934            1256-       3 559 '     559 -401        7 709 238 353           23 636         3 695 265 684 8 166                  5.87-     479.08 Load (MW & %)                                        Energy (millions of KWH)                                          Fuel =

Operob;e Copocity Net - Efectency-Lood Company Generated Purchased - Fuel Cost BYU Per of Time Peak - Copacity

          . Year                   of PeoL(b)        lood       Margin       Foctor      Fossil      Nuclear       fotot         Power          total     Per KWH            KWH 1989.      .             1 599         1 526        4.6%          65.2% 5206            5 552 10 758             - (i 175)        9 583        1.420        10 293-c         - 1988.     .. .            1 497         i614-       (7.8)          62.8 .5820            3 325        9445             385' - 9 536             1.59          40 474 1987.. ....              i698          1484        42.6.          64 9     5 916        3 248        9 134           (647)        8487         i 45          10 196
            ' 1986. ....               i 324         4 423       (7.5)          64 8     6 462            12       6 474          1 689         8 163        1 82           9 860              .

1 1985. , ,, 1338 -1374 (2.7) - 66 8 5 744 052 6 696 1402 8 098 1.90 { ~ 10 124 1979., . , i 825 ~ i395 23 6 66.8 5 349 1 535 6 884 1348 8 232 1 33 10 262 Investment (thousands of dollars) Construction

                                     -                                                            Work in                                fotoi Utsty          - Accumulated                               Progress            Nuciect          Property.          Utsty Plant in          Depreclotton &           Nel               & Perry            Fuelo M           Plant and       . Plant              Total
          ' Year -                   Service            Amortgotion             Plant              Jnit 2              Othe'          Equrpment        Additions           Assets 1989. ,        .     $2 532 291             $$67197            $1965 094           $ 430 340           $237 318         $2 632 752        $ 77 357         $4138 846 1988. .            . 2 438 927              487 546            i 951 381             459 104            262 514          2 672 999         132 083         4 134 672
            -1987,,.. .            2 600 511-             419 149            2 181 362             374 274            267 069          2 822 705         380 974,        4 277 587
           . 1986,     , ,,        4 442 812              415 745            1 027 067           2 169 945            260 022          3 466 034         463 163         3 813 889
           - 1985,,      ..         1 392 346-            390 565            1 001 781           1 766 927            228 425          2 997 133         388 555         3se5268 1979.., ,.               979 141 ~          201 895              777 246             512 199 -           20 735(c) i 310 180               239 010         1 467 512           d Capitalization (thouands of dollars & %)                                                                                                                  j 1

Preferred Stock. l I Preferred Stock. with witticut { Mondotory Mondatory .; voor - Common Stock Equity Redemption Provisions Redemotion Provisions lonO4erm Debt fotoi '

          - 1989..     , ,,       S 897 793              38%       $ 68 990               3%        $210 000                 9%         $1197 277           50%         $2 374 060            !

l 887 442 36 74 155 3 210 000 9 1 294 444 52 2 460 041 i 1988 o. .. 1987, 1 096 737 39 73 340 3 240 000 8 1 400 292- 50 - 2 810 369 , 1986. ... 1 074 663 36 448 797 5 260 000 9 i 480 947 50 . 2 964 407 {'

           ' 1985.. , ,                949 881           36         153 639               6           230 000                8           4 339 268          50           2 672 788-1979. ,                  432 554           35           34 000              3           150 000              42              611 137          50           1 227 691

_(b) C.4pacity was reduced because of extended generating unit outages for renovation and improvements in 19M 0601 MW),19H6 (416 MW) .y and 1988 (416 MW). .f (c) Restated for effects of capitalization or nucle.tr fuel lease and financing arrangements pursuant to Statement of Financial Accour. ting i

                   $tandards 71c i

l l l%9 (Toledo Edison) (Toledo Edison) i

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INDEX TO SCHEDULES P_ age Centerior Energf Corporation and Subsidiaries: Schedule V Property, Plant and Equipment for the Years Ended December 31, 1989, 1988 and 1987 Schedule VI S-2 Accumulated Depreciation and Amortization of Property, Plant and Equipment for the Years Ended December S-5 Schedule VII 31, 1989, 1988 and 1987 Schedule VIII Guarantees of Securities the Year Ended December 31, 1989 of Other Issuers S-B for Valuation and Qualifying Accounts for the Schedule IX Years Ended December S-9 Short-Term Borrowings for the Years Ended 31, 1989, 1988 and 1 December Schedule X- 31, 1989, 1988 and 1987 S-10 Supplementary Income Statement Information for the Years Ended December31, 1989, 1988 and 1987 S-11 T_he Cleveland Electric Illuminating Company s and Sub idi aries: Schedule V Property, Plant and Equipment Schedule VI Ended December for the Years 31, 1989, 1988 and 1987 S-12 Accumulated Depreciation and Amortization of Property, Plant and Equipment for the Years Ended December S-15 Schedule VII 31, 1989, 1988 and 1987 Schedule VIII Guarantees of Securities the Year Ended December 31, 1989 of Other IssuersS-18 for Valuation and Qualifying Accounts for the Schedule IX Years Ended December S-19 Short-Term Borrovings for the Years Ended 31, 1989, 1988 and 19 December Schedule X 31, 1989, 1988 and 1987 S-20 Supplementary Income Statement Information for the Years Ended December31, 1989, 1988 and 1987 S-21 The Toledo Edison Company: Schedule V Property, Plant and Equipment for the Years Ended December

f. Schedule VI 31, 1989, 1988 and 1987 S-22 Property, Plant and EquipmentAccumulated S-25 Depreciation a Schedule VII Ended December for the Years 31, 1989, 1988 and 1987 Schedule VIII Guarantees of Securities the Year Ended December 31, 1989 of Other Issuers S-28 for Valuation and Qualifying Accounts for the Schedule IX Years Ended December S-29 Short-Term Borrowings for the Years Ended 31, 1989, 1988 and 198 December Schedule X 31, 1989, 1988 and 1987 S-30 Supplementary Income Statement Information for the Years Ended December 31, 1989, 1988 and 1987 S-31 Schedules are not required or are not applicable, orother than for the reason thatthose listed above a in the financial statements or notes thereto the required information is shownthey S-1
                                                                                                      ~

CEN1ER10R CNERGY CORPORATION AND SUBSIDIARIES j SCHEDULE V

  • PROPER 1Y, PLAN 1 AND EQUlPt4ENT YEAR ENDED DECEMBER 31, 1989 (Thousands of Dollars)

Balance at Retirements Balance at End of Additions or Beginning of Other Period at Cost Sales Period ............ ............ Classification ............ ............ ............ Utility Plants Electric Productions

                                                                                                                    $0        $1,301,892
                                                                        $17,470            ($5,614)
                                                 $1,290,036                                                         $0        S5,029,605 steam                                               $208,809           ($12,377)
                                                 $4,833,173                                                         50            $56,300 Nuclear                                                   ($1)                 $0
                                                     $56,301                                                        $0            $13,995 HydrautIc                                                 553                 (51)
                                                     $13,943 other 50          5680,080 53,559            ($1,014) 5677,535 Transmission
                                                                                                                     $0        $1,143,810 554,837             (55,793)
                                                  $1,094,766 Distribution                                                                                                     $185,434

($4,014) $0

                                                     $177,919             $11,529                                              ............

General ............ ............ ............

                                                                                                                      $0        $8,411,116
                                                                         $296,256            ($28,813)
                                                   $8,143,673 Total Utility Plant
                                                                                                                       $0          $869,048 52,137                 .$0
                                                      $866,911 Perry Unit 2 (a)
                                                                                                                        $0          5288,225 Construction Work in -                                       (567,596)                  $0
                                                       $355,821 Progress
                                                                                                                        $0          $864,821
                                                                            $49,677                   $0
                                                       $815,144 Nuclear Fuel
                                                                                                                       $22            562,449
                                                                              $2,512                ($30)
                                                          $59,945                                             ............       ............

Other Plant ............ ............ ............ Total Property, Plant and $22 $10,495,659

                                                                            $282,986            ($28,843)
                                                    $10,241,494                                                ESSSESSESSEE       533333338255 Equipment                                       333333333333        R33333333333 E35333333333
                -(a) Includes Perry Unit 2 MU0C subsequent to July 1985. See Schedule Vill.

S-2

f CENTEkl0R ENERGY CORPORATION AND SUBSIDI ARIES SCHEDULE V . PROPERTY, PLANT AND EQUIPMENT YEAR ENDED DECEMBER 31, 1988 (Thousands of Dollars) Balance at- Retirements Balance at Beginning of Additions or - End of Classification Peritd at Cost Sales Other Period Utllity Plants Electric Production: Steam $1,241,340 $53,830 ($5,134) $0 $1,290,036 Nuclear (b) $5,195,992 591,211 (5454,030)(c) 50 $4,833,173 Hydraulic 556,306 ($5) $0 $0 556,301 Other $13,877 $76 (510) $0 $13,943 fransmission (b) $671,701 $8,101 (52,267) $0 5677,535 Distribution 51,043,350 S60,507 ($9,091) $0 51,094,766 ceneral $165,548 $16,598 ($4,227) 50 $177,919 Total Utility Plant $8,388,114 $230,318 ($474,759) 50 58,143,673 Perry Unit 2 (a) 5783,028 50 SO 583,883 (d) $866,911 Construction Work in Progress $224,679 $117,021 $0 $14,121 (d) $355,821-Nuclear fuel 5750,588 $64,556 $0 50 $815,144 Other. Plant $$9,785 $813 (5653) 50- $59,945 Total Property, Plant and Equipment $10,206,194 5412,708 ($475,412) $98,004 $10,241,494

=  :::::: ====  :::::====== ====ssenssa. ============

(a) Includes Perry Unit 2 AFUDC subsequent to July 1905. See Schedule Vill. (b) includes reclassification of PUC0 ordered AFUDC reserve to a ref und obligation consistent with terms of the January 1989 PUC0 rate order. (c) includes $453,674,000 of PUC0 ordered write of f of Perry Unit 1 and Beaver Valley Unit 2 investments. (d) Results primarily from adoption of a new method of accounting for income taxes which requires the presentation of amounts (previously stated on a net.of tax basis) on a pretox basis. S-3

                                                                                                   =

l CENTER 10R ENERGY CC3PORAil0N AND SUBSIDIARIES SCHEDULE V . PROPERTY, PLANT AND EQUIPMENT YEAR ENDED DECEMBER 31, 1987 (Thousands of Dottars) Balance at Retirements Balance at Beginning of Additions or End of Classification Period at Cost Sales Other Period Utility Plants Electric Production: Steam $1,753,698 530,919 ($529,725)(c) ($13,552)(f) $1,241,340 Nuclear (g) $974,053 $4,223,446 (b) ($1,507) SO 55,195,992 Hydraulic $56,145 5188 ($27) $0 $56,306 Other 513,895 ($4) ($14) $0 $13,877 Transmission (g) $651,081 $24,360 ($3,740) 50 $671,701 Distribution $993,334 $58,780 (58,764) 50 $1,043,350 Generat 5150,744 $18,437 ($3,633) 50 5165,548 Total Electric $4,592,950 $4,356,126 (5547,410) (513,552) 58,388,114 Steam $46,592 ($536) ($46,036)(d) 50 $0 Tusal Utility Plant $4,639,542 $4,355,570 ($593,446) ($13,552) $8,388,114 Perry Unit 2 (a) $702,579 $80,449 50 $0- $783,028 Construction Work in Progress (g) $4,535,203 ($3,488,098)(b) ($822,426)(c) $0 $224,679 Nuclear Fuel $705,063 $45,525 50 SO $750,588 Other Plant $42,819 $3,414 50 $13,552 (f) $59,785 Total Property, Plant and Equipment $10,625,206 5996,860 ($1,415,872) $0 $10,206,194 32a332333338 583333183333 ERERESSSESSE E85833333333 333323333235 (a) includes Perry Unit 2 AFUDC subsequent to July 1985. See Schedule Vill. (b) Perry Unit 1 and Beaver Valley Unit 2 were placed in commercial operation during November 1987. (c) Includes $476,084,000 relating to the sale of the Bruce Mensfield Plant. (d) Includes the sale of the steam system. (e) Includes the sale of a portion of Beaver Valley Unit 2. (f) Transfer of Utility Plant to Other Plant. (0) includes reclassification of PUC0 ordered AFU0C reserv? to a refund obligation consistent with terms of the January 1989 PUC0 rate order. S-4 a

INDEX TO SCHEDULES DULO Centerior Energy Corporation and Subsidiaries: Schedule V Property, Plant and Equipment for the Years S-2 Ended December 31, 1989, 1988 and 1987 Schedule VI Accumulated Depreciation and Amortization of S-5 Property, Plant and Equipment for the Years Ended December 31, 1989, 1988 and 1987 Schedule VII Guarantees of Securities of Other Issuers for S-8 the Year Ended-December 31, 1989 Schedule VIII Valuation and Qualifying Accounts for the S-9 Years Ended December 31, 1989, 1988 and 1987 Schedule IX Short-Term Borrovings for the Years Ended S-10 December 31, 1989, 1988 and 1987 Schedule X Supplementary Income Statement Information for S the Years Ended December 31, 1989, 1988 and 1987 The Cleveland Electric Illuminating Company and Subsidiaries: Schedule V Property, Plant and Equipment for the Years S-12 Ended December 31, 1989, 1988 and 1987 Schedule VI Accumulated Depreciation and Amortization of S-15 Property, Plant and Equipment for the Years Ended December 31, 1989, 1988 and 1987 Schedule VII Guarantees of Securities of Other Issuers for S-18 the Year Ended December 31, 1989 Schedule VIII Valuation and Qualifying Accounts for the S-19 Years Ended December 31, 1989, 1988 and 1987 Schedule IX Short-Term Borrowings for the Years Ended S-20 December 31, 1989, 1988 and 1987 Schedule X Supplementary Income Statement Information for S-21 the Years Ended December 31, 1989, 1988 and 1987 The Toledo Edison Company: Schedule V Property, Plant and Equipment for the Years S-22 Ended December 31, 1989, 1988 and 1987 Schedule VI Accumulated Depreciation and Amortization of S-25 Property, Plant and Equipment for the Years Ended December 31, 1989, 1988 and 1987 Schedule VII Guarantees of Securities of Other Issuers for S-28 the Year Ended December 31, 1989 Schedule VIII Valuation and Qualifying Accounts for the S-29 Years Ended December 31, 1989, 1988 and 1987 Schedule IX Short-Term Borrowings for the Years Ended S-30 December 31, 1989, 1988 and 1987 Schedule X Supplementary Income Statement Information for S-31 the Years Ended December 31, 1989, 1988 and 1987 Schedules other than those listed above are omitted for the reason that they are not required or are not applicable, or the required information is shown in the financial statements or notes thereto. i 5-1

      .l l

C(Wi[R!DR (NEkCY C0hP0hA110N AND SUS $1DIARlL$ SCHEDULt V

  • PROPIRTY, PLANT AND (9UlPMiki l I- YEAR ENDED DictMB(R 31, 1989 t L ,

y i (thcatiends of Dollere) - i: o ,

         ,                                              talende et                               Retitemente                                                   Belence et          !

Besi mino of Additions or End of Classification Period at Cost tales Other Period .[

 !C             - ..............                      . . . . . . . . . . . . . - ............   ............                                ............     ............        !

Utility P' ants l tiectric i I i Productions i !/  ; L: Steam $1,290,036 S17.470 (s's.,614) '.0 $1,301,892

g. huclear S4,833,173 $208,809_ ($12,377) 80 85,029,605 l' j-
             ,             Hydraulle                        656,301                      ($1)                       S0                                   S0         856,300.

Other $13,943 853 itil 80 813,995 , frenamisalon S677,535 63,559- ($1,014) $0 S680,080 r f Distribution $1,094,766 854,837 ($5,793) SO S1,143,810 l General $177,919 S11,529 (64,014) SD $185,434 f I L' total Utility Plant S8,143,673 S296,256 ($28,813) 80 68,411,116 , L. i F

                 - Perry Unit 2 (a)                        6866,911                 S2,137                          $0                                  'S0       $869,048        ,

Construction Work in . Progrese $355,821 (567,596) 59 SO S24,225-Nuclear Fuet $815.144 549,677 $0 S0 $864,821

                 ' Other Plant                              S59,945                 82,512                       :530).
                                                                                                                 .                                      S22         662,449 fotel Property, Plant and Equipment                   $10,241,494                5282.986                 ($28,843)                                    $22 - S10,495,659         l
       ,                                               ............          ............        ......es....                                 ............    ............      1 i

(a) includes Perry Unit 2 AFUDC subsequent to July 1985. See Schedule Vill. ,

                                                                                                                                                                                  ?

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[? , t Ct918kt0R ENERGY CORPORATION AND ButSIDI ARits [ SCHEDULE V

  • PROPERTY, PLANT AND EQUIPMENT
b. YEAR ENDED DEC Metr 31, 1988 (thousands of Dottars) b
                                                              ' Balance at                                 Retirenents                        Satance at
                                                                             ~

Sepinning of Additions or End of Classification Period at Cost $stes Other Period [ Utility Plantt U tiectric. Productlent [ tteam 51,241,340 $53,230 (85,134) 50 51,290,036

< Nuclear (b) 85,195,992 591,211 (5454,030)(c) S0 S4,833,173 sydraulic- 856,306 (15) S0 50 555,301 L Other $13,877 $76 ($10) $0' $13,943 t

h (52,267)

transtniaston (b) 5671,701 58,101 SO 6677,535-r

(' Distribution 51,043,350 S60,507 (39,091) 50 $1,094,766 i l' General $165,548 $16,598 (S4,227) to ,5177,919 s Total Utility'P6 ant $8,388,114 .S230,318 ($474,759) 60 58,143,673 Perry Unit 2 (a) 5783,028 S0 50 583,883 (d) $866,911 i: 4 - Ccnstruction Work in-Fi ' Progress- $224,679 $117,021 $0 $14,121 (d) $355,821 i Nuclear Fuel -$750,538 564,556 $0 SD 581$,144-Other Plant 159,785 5813 (1653) 50' 559,945

      <>                      fotal Property, Plant and to                           Equipment                   $10,206,194                S412,708             ($475,412)         $98,004     $10,241,494
                                                             ............         ............             eensessesses    esessessesse     ............

(h includes Perry Unit 2' AFUDC suosequent to July 1985. See Schulute , Vill. (b) Includes reclassification of PUC0 ordered AFUDC reserve to a refund obligation consistent with terms of the January 1989 PUC0 rate order.

                     - (c) includes $453,674,000 of PUC0 ordered write of f of Perry Unit 1 and Beaver Valley Unit 2 investments.

(d) Results primarily f rom adoption of a new method of accounting for income taxes which requires the presentation of amounts (previously stated on a net of tax basis) on a pretax basis. sj S-3 4

          . y%

e x- _ _ . s s s

     %       Of                                    ,

4

h. #

C(WitRID Cf RCY CORPORAT!] AWD SUS $1DIAtlLS *

                                                              ' SCHEDULE V
  • PR0rtRtYi PLAW1 AND (gUIPM(W1 YEAR (NDED DECEMBER 31, 1987 L(Thousands of Dotters)

Balonce et Retirements Betance at Beginning of Additions or tnd of. Ctessification Period at Cost Sales Other Period

                         ..............-                           .....s......      ............          ............     ............        ...........s lititity Plants.                                                                                                                              -

flectric -' Productlont-P

                                       ' Steam                      $1,753,698-             $30,919          (S$29,'725)(c)     (S13,552)(f)- $1,'241,340 Nuclear (g)                   8974,053        54,223,446 (b).          ($1,$07)               80        $5.195,992' Hydraulle                       S$6,145                  S188              (S27)              SO             .S56,306
                                      ; Other -                          $13,895                    (54)            ($14)              80              $13,877
      /                            Transmission (g)                    S651,081             $24,360             ($3,740)               50             S671,701 Distribution                        $993,334             $58,780             (58,764)               80        $1,043,350        -

General S150,744' S18,437- ($3,633) S0 $16$,548 1

                                                                   ............      ............          ............     ............       .............          c P
                                , total tlectric                    S4,592,950'        S4,356,126            ($547,410)1        ($13,552)        $8,388,114           E e: .                                                                   .

41 -

                             . Steam                                     S46,592                ($556)         ($46,036)(d)            SO                   SD-Total Utility Plant              $4,639,542         $4,355,570-          ~($593,446)         ($13,552)        $8,388,114 Perry Unit 2 (a)                              5702.579             580,449                   SD-              50          '$783,028        .i I

Constructlon Vork in ,[

Progress (s) 54,535,203 (53,488,098)(b) ..(SB22,426)(c)- 80 8224,679' ={

heteor f uet $705,063 545,525- ~S0 50 $750,588 0' I

                     . Other Plant.                                      $42,819              S3,414                  $0         $13,552 (f)          .S59,705        i total Property, Ptont and
       -                                 Equipment                 $10,625,206            $996,860         (51,415,872)                SO      S10,206.194            :
               ;                                                   sessosssasse-     s e s s a s s a.es sa seassessssse     sesssssssses       saassassssse e
                      ; (a) Includes Perry Unit 2 AFUDC subsequent to July 1985. See Schedute vill. .
                                                                                                                                                                   .I
                       '(t9 Perry Unit 1'and Beaver Valley Unit 2 were placed in comercial operation du*ing November 1987.                                          1
                       ._(c)!!ncludes $476,084,000 relating to the sete of the Bruce Mansfield Plant. -                                                               I v                   s    (d) Inetudes the sole of the steam system.                                                                                                   !
                      ;  (e) includes ibe sete of a portion of Beaver Valley Unit 2.                                                                                  !

(f) 1ransfer of Utility Plant to Otner Plant.  ! (g) Includes reelossific.ation of PUC0 ordered AFUDC reserve to a refund obligation consistent.wlth terms of - l' the Janunty 1989 PUC0 rate' order. S-4 p. 9 1 g ,

i .t s ,

  • p ' ",is ..
                                                - up :

(f f yv. l. 1 N  : CLN1f tlDR ENERGY CDRPDRATIDW AND SUS $1 DIAR!!$ st: t

                               '8CNEDULE VI.
  • ACCW4U.LAf tD DEPktCIATION AND hMOR112ATIDW OF PRDPIRTY, PLANT AND IOUIPMENT .

t p 6. YEAR END[D D(C[M9(R 31,'1999 i (Thousands of Dotters) r . O Additions Dedactions

t. L Betance et Charged to Removal Cost Bolence et e
! Description'..

Beginning of income Net of $stvepe End of f[ Period Statement Other (a) Retirements ' Add /(Deduct) Period i r o..........-. ............ ............ ............ ............ .............. . . . . . . . . . . . . - . Utility Flents. e

  . . tlectric ~ Depreciation                              11,565,978          5292,068               $3,595     ($28,813)            ($4,731)          81,828,097                 3

!! i

                            . Amortitstion                      53,326              S344                  SD             $0                  SO               S3,670'      ,

I

                                                                                                                                                                  .                )

, 11:tal Utility Plant ,,569,304 S292,412 (b)' S3,595 ($?8,813) (54,731) 81,831,767 'o ' Other Property Deprecist vi 813,676 $1.4B4 (c) SD, (SPD) '(SB) 515,132 - V .

1* tel
                                                           $1,582,980          $293,C96               $3,595     (626,833)            ($4,739)        =$1,846,899                  !

D. l' .

                                                          ............     ...... .....      ............     ............      ............          ............            .[
                                                                                                                                                                                   \

7 . i ! Nuclear Fuel . Amortitation $218,326 5102,120 (d) 80 $0 $0 $320,446' i ?-

                  . (a) Accumdtated depreciation t.harged to construction work in progress.

p . (b) Deprecletion and amortirttfon as reported in the income Statement includes ~ approx!mately $12 mittion of emorti 6 tion of Investment tax credits, i( L ,(c) Non utility plant expense charged to other income and deductions, net. _(d)' charged to nuclear f uet expense. i-e b. L ' i S-5 i e s

 -                               x                                                                .u-                                                                            J

l n

 ' O CENitRIOR EWtRGY CORPORAfl0W AND SUS $1DIARit$

t 5: CDULt VI

  • ACCUMJLAffD DEPRECIA110W AND ANDRT12All0W OF PR0rtRTY, PLANT AND 50VIPutWT f YEAR ENDED DECEMBtk 31,1988  ;
~

t-L (thousands of Dollars) . L' E I I) F I Addltlens Dodetions !" ............................ .............................. _i j- Balance at Charged to Removat Cost Balance at { Beginning of Income Wet of Salvage' Ind of , Descript!on Period Statement Other (a) Retiremente Add /(Deduct) Period 4 s .f . Utility Plants I i: I I tiectric

  • Depreciation $1,321,464 S267,004 83,$34 ($21,034) (64,990)' Si,$65,978' .

!

  • Amortitation $2,982 5344 S0 to 80 63,326  !

k ictal UtlfIty Plant $1,324,446 1267,348 (b) 53,$34 (S21,034) ($4,990) $1,$69,304 i [ Other Property . Depreciation $12,980 51,323 (c) 30 (S620) (67) 813,676 [ 1stal 81,337,426 $268,671 83,534 ($21,654) (64,997) 51,$82,980  ; Nucl!ar fuel . Amortitation $141,043 $77,283 (d) S0 60 10 5218,326

             . (a) Accumulated deprarlatice, charged to construction work in progress.

(b) Depreciation and amortitation as rcported in the income Statement includes approximately $9 million of ( emortitation related to terminated nuclear generating units and $13 million of amortitation of investment tax creolts resulting from the change in accounting for income taxes. The unamorttred costs related to the termi. i noted units were recorded as def erred chargea on the Balance Sheet. . The December 31, 1988 balance of S22.8 million in the def erred charge account was written of f at year end, t (c) Won uttlity plant expense charged to etter Ircome ed deductions, net. (d) Charged to nuclear fuel expense. 3 E v 9 P I S-6 is, Y . . . . . - - ,

p 4 t 4

                                                                                                                                                    )

CtWitR10R ENERGY CORPORAfl0N AND SUBSIDIARIES l t SCHEDUlf V]

  • ACCUMJLAf tD DEPRICIATION AND ANDRil2Afl0W 0F FROPERTY, PLANT AND $0VIPMENT l

ttAR ENDED DECEMBER 31, 1987 l (thousands of Dollars) Additions Deductions Balance et Charged to ' Removat Cost Balance at  ; Beginning of Income Wet of Selvoge End of .

 -Description                                 Period          Statement          Other (a)   Retirements       Add /(Deduc t)       Period I

Utility Plant: i flectric

  • Depreciation $1,351,381 S199,059 S3,945 ($217,301)(e) (S15,620) 81,321,464  ;
                . Anorti atIon                  $2,573                S409                SO           S0                 SO          St.982 l

i Steam

  • Depreciation . 813,708 St.413 SD ($14,851)(f) (870) 80 total Utility Plant 51,367,662 S200,681 (b) 83,945 (S232,152) ($15,690) 81,324,446' -

Other Property . Depreciation $3,606 88,937 (c) $437 S0 80 $12,980 j 1;tal 51,371,268. 6209,618 S4,382 (S232,152) .($15,690) 51,337,426

                                          ............       ............      ............  ............      ............     ...........e
  • t
 . Nuclear fuel . Amortitation                891,712             S49,331 (d)             80           50                $0        $141,043
                                          ............       ............      ............  ............      ............     ............-      q I

(a) Accunulated depreclation charged to construction work in progress. 5

          ~(b) Depreciation and amortitation as reported in the Income Statem nt includes approximately $14 million of                              !

atoortitation related to terminated nuclear generating units. The unamortised costs related to the terml= $ noted units are recorded as deferred charges on the Balance Sheet.  ; (c) Non utility plant expense charged to other income and deductions, net. (d) Charged to nuclear fuel expense. (e) includes $143,441,000 relating to the sete of the Bruce Mansfield Plant. l (f) The steam system was sold on December 30,'1987. j 1 S-7 , t

CIWitRIDR thfRGY CORPORAfl0N AND SUS $1DIARl[$

                                          $CHEDutt Vil
  • GUARAtifts 0F SECURITits 0F OTHER l$SUIR$

a YEAR ENDED DECEMBER 31, 1989 (Thousands of Dollars) Principal Amount Guaranteed and Wome of 1ssver of Outstanding Securities Guaranteed fitte of Issue (a) and (b) Wature of Guarantee Quarto Mining Company (b) Cuaranteed Mortgage Bands, Due 2000 series A 8.25% $1,173 Principal and Interest Series B 9.70% 1,145 Principal and Interest Series C 9.40% 5,723 Principal and Interest Berles D 12.625% 6,810 Principal and Interest series EA 10.25% 1,362 Principal and Interest series EB 11.70% 1,328 Principal and Interest Series EC 11.40% 6,642 Principal and Interest series CD 14.625% 7,263 Principat and Interest Series FA 10.50% 1,046 Principal and Interest

  • i Series FD 11.75% 331 Principal and interest series FC 11.40% 1,341 Principal and Interest Series G 9.05% 17,282 Principal and inte*est Unsecured Note, Interest at prime (11%

at 12/31/89) plus 2%, Due 2000 4,3B3 Principal and Interest Equipnent leases 11,652 1ermination Value per a . **

  • Agreements 67,481 3

ihe Ohio Valley Coal Conpany First Mortgage Notes Berles 0 8.00% Due 1990 to 1997 7,100 Principal and Interest series (* 10.251 Due 1990 to 1997 4,675 Prire* pal and-Interest  ; Equipment leases 6,929 Stipulated Lost Value per Agreements Term Notes **9.53% Due 1990 to 1996 3,749 Principal and Interest 10,85% Due 1990 to 1997 23,5?5 Principal and interest 45,968 General Physics Ohio Term hote 9.81% Due 1990 to 1994 18,500 Principal a d Interest Corporation

                                                                                         $131,949 seen...

(a) None of the securities were owned by the Centerior Utilities; none were held in the treasury of the issuet; and none were in default. (b) The Centerior Utilities and the other CAPCO Group Conpanies have agreed to guarantee severally, and not jointly, their proportionate shares of Quarto Mining Conpany debt and lease obligations incurred while developing and equipping the mines. The amounts shown are (' l-the Centerior Vtilities' proportionate share of the total obligations. S-8 _. . . .  : l

\ CthitRIOR ENERCY CORPORA 110N AND SUBSIDIARitt SCHEDULE Ylli VALUAf!ON AND QUALIFYlWG ACCOUNTS FOR THE YEARS INDED DECEMBER 31,1989,1988 AND 1987 (Thousands of Dotters) Additions Dedxtlons Botence et Charged to Deductions Botence et Beginning Income from End of D2scription of Period Statement Other Reserves Other Period Reflected es Redvetions to the Reteted Assets: Accuwtated Provision for Uncellectible Accounts (DedJction f rom Amounts Due from Customers and Others) 1989 $7,001 59,429 $2,000 (e) $16,154 (b) SD S2,276 1988 55,629 513,075 52,091 (a) 513,794 (b) SO $7,001 1987 S11,804 $8,395 S1,680 (a) 516,250 (b) SO $5,629 Reflected as Reserves on the Botence sheets Reserve for Perry Unit 2 Allowance for f uncs Used - During Construction 1909 5212,653 SO SO $0 SO S212,693 1988 5174,600 SO S38,093 (d) SD SD S212,693 1987 $93,947 $80,653 (c) $0 SO SO S174,600 (a) Cottection of accounts previously written of f. (b) Uncollectible accounts written of f. (c) Reflected as a reduction to Allowance for f unds Used During Construction ( ATUDC). (d) Results from adoption of a new method of occounting for income texes which requires the presentation of emounts (previously stated on a net of tax bests) on a pretex bests. S-9 a

CENitRIOR INtRGY CDRPDRATION AND SUBSIDI ARit$

                                                                          $CHEDutt IX $HDRT TERM BORRD.'INGS FDR THE YEAR $ INDED DECEMBER 34, 1989,1985 AND 1987 (Th)usands of Dotters)

Average Weighted Daily Average Average Maximum Weighted Daily Balance Interest Amount Amount Weighted et End Rate et Outstanding Outstanding Interest of End of During During the Rate During Category terlod Period Period Period the Period Bank Borrowings Lines of Credit 1989 SD 0.0% SD 50 (a) 19BB 0.0% (b) SD 0.0% $0 SO (a) 0.0% (b) 1987 10 0.0% $36,000 $19,538 (a) 8.0% (b) Consercial Paper 1989 SO 0.0% $55,000 $5,534 (c) 9.8% (b) 1988 SD 0.0% $123,000 $21,248 (c) 7.4% (b) i 1987 $37,000 8.7% S141,900 $41,992 (c) 7.2% (b) (a) Computed by dividtng the total of the daily outstanding balances f or the year by the number of days outstanding. (b) Computed by dividing total interest expense for the year by the everage daily batence outstanding. (c) Computed by dividing the total of the daily outstanding botances for the year by 365 days (366 for 1988). l S-10

i t i ~1: , ( i t-  ! y' . CEWitRIDR tuttGY CDRPORAf!DN AND SUBSIDIARl[$ i

               ,                             SCHEDutt X
  • SUPPLEMENTARY INCDME SIAffMENT INFDRMAflDN t FDR THE YEARS (WD((' DECEMBER 31,1989,1988 AND 1987 l l

cs s

- I b (Yhousands of Dotters) {

i m-i t Charged to Operating Expenses { yl > ..........................,................. -< r

                     . Item                                                   1989 -                  19h8              1987                        I
r.  !

p v ., ps- maintenance and Repairs $187,$59 8199,468 $161,296' i P sessansasssa asssssssssas Sasseessassa 1 [' i ( .: I

h. '

t. h 1, L faxes, Other than Payrott and. [- j,l Income Taxes [; . Operating Expenses, 'I

 ?,

Real and Personal Property Taxes $136,477 S14$,665 596,367 l Dhlo State Excise Taxes $92,877 591,644 $84,791 , r

                             -Other-                                           89,199                 $11,773           $10.347                     f 6

fotal Operating Expenses $238,$53 $249,082 $191,505- ' s i Other Income and Deductions, Net $751 S597 $798

                                      - Total                               $239,304               $249,679-          $192,303
7. essesssesses massenessoas essasssssssa i

!3 ! 1 1r I 1+ S-11 m s ,. + -

                                                                     +               . e,,   . , - ,          , , . ,           , .- . - ,

[R , Op s , , , 9 h 't b ' _ THE Cl(VEL AND ELECTRIC ltttMINAllNG COMPANY AND SUS $1DI ARl'El - p , 's ,. 7 - sg b: !! SCHEDULE'V .* PROPERif, PLANT AND E00lPMENT -j

.m                                                                                        1 EAR END[D D(C(MBER 31, 1989.

l

         ,4
                 ,                                                                              (thousands of Dollars)
       ,           i
           -v {t .

[ Balance et Retirements . Balance at ), Beginning c4 Additions or End of-  : Classification ' Period at Cost . Sales ,0ther Period .)

          >                     Utility Plantt                                                                                                                                                              ;
                       ~

Electric , .

                                                                                                                                                                                                       ]
                                       .Productfont                                                                                                                                                       1 o                                                 .

F --- Steam l S1,013.636 $9,595 -(SS,614) 50 S1,017,617 - Nuclear $3,235,716 $120,049 SO S0 s $3,355,765: a Hydrau'lle ' S$6,301 ($1) SD SO' ' $56,300 j [E other S7,287 S1 ($1) 50; S7,287'

                                                                                                                                                                                                        ]

p . p transmission S$26,820- $9,004~  :($1,011) . $0 - '$534,813: . F s .! p ~

                                                                                                                                                                                                          ,l L

e Distr (bution $754,650- S43,212- - ($5,424)- _ 50. S792,438'  ;

                                                                                                                                                                                                     . t e

General. S110,336 $8,275 ($4,006) 50 S114,605, '! U 8 p  ; 1 ' Total Utttity Plant $5,704,746 S190,135 ($16,056) SD $5.878,825 i l_

                                ' Perry Unit,2 (a)'                                       S523,785               .($491)                     SO                 SO             S$23,294;
                                                                                                                                                                                                       .[   >

Construction Work in Progress' 1239,843 ($36,204) ' $0 '$0 .S203,639  ! t u.,e

                                ~
                               -Nuclear fuel-                                             $453,6$4'            S28,438                     . SO                 SO:          'S482,092                  )

l Other Ptont, $56,62f $2,512 ($30) SO $59,107 j

                                                                                                                                                    . . . . . . . . . . . - ............                    j b                                               -               __
                                                                                                                                                                                                     ;i

] Total Property, Plant and _ $ s ~ Eq.sipment S6,978,653 S184,390 -($16,006) 50' S7,146,957' 'f

                                                                                                                                                                                                     ;j D                                                                                      neenseur,          u s.n e n... ..  ==n===as,                  sne sensus          un== suns               ,

l (ei ' ncludes i Perry unit 2' AFUDC subsequent to July 1985. See Schedute vill, rl , , ' i l 'I . 1

         ; y (n                                                                                                                                                                                                    -.
                                                                                                                                                                                                          ?

9, .; hu - r w S-12 L  !

                                                                                                                                                                                                     - i C                                           !
                                                                                                                                                                                                       .f r#                                                                                                                                                                                                         r is
~                [       N
                                                              =
                                                                                                                                    =.                             ..

L i l THE f t.4Vf LAND (LECTRIC ILLUMikAllNG COMPANY ALD SUBSIDI ARitt k

 '5                                      CCHIDUL( V
  • PROPERTY, PLANT AND (DUIPM[N1 YEAR (NDID DtCEMBit 31, 1988 (thousands of Dotters)

Balance at Retirements Balance at BeDinning of Additions or ind of Classification Period at Cost Sales Other Period Utility Plants flectric Productiont Steam 5967,557 550,87F (54,798) SD $1,013,636 Nuc lear 13,415,183 $32,127 (1211,594)(b) S0 $3,235,716 HydtoutIc $56,306 (55) 50 50 556,301 Other S7,221 $76 ($10) S0 $7,287 1ransmission $521,893 56,569 ($1,642) 50 55?6,820 Distribution 5719,330 $41,096 ($5,776) SO 5754,650 General 1100,113 512,775 (52,552) SO S110,336 Total Utillty Plant $5,787,603 $143,515 ($226,372) S0 55,704,746 Perry Unit 2 (a) S476,458 50 50 547,327 (c) 5523,785 Construction Vork in

     . Progress                                  t156,T75             $68,747                  SO        S14.121 (c)      S239,843 Nuclear Fuct                              5416,786             536,868                  50                SO       S453,654 Other Plant                                 $56,616                $639             (1630)                SD         $56,625
                                             ............        ... .. ....     ........ ...       ~.-........       ............

Total Preperty, Plant and (quiptrent $6,894,418 S249,769 ($227,002) $61,4481 56,978,653 e .. ::::: = as... is ess arenarences .eres.nu.... eres a.cssse (a) Includes Perry Unit 2 AFUDC subsequent to July 1985. See Schedule Vltt. (b) PUC0 ordered write of f of Perry Unit 1 end Seaver Valley Unit 2 investments. (c) Results primarily f rem adoption of a new method of accounting for income taxes which requires the presentation of amounts (previously stated on a net of tax basis) on a pretax basis. S-13 - l 1 i

                                                                                                                                        .i i

THE CLEVELAND ELECTRIC ILLUNINATING COMPANY AND SUBSIDIARIES SCHEDULE V . PROPERTY, PLANT AND EDUIPMENT YEAR ENDED DECEMBER 31, 1987 , (Thousands of Dollars) Balance at Retirements Salance at Beginning of Additions or End of Classi fica'. ion Period at Cost Sales Other Period Utility Plants Electric Productions , im Steam $1,296,566 S20,949 ($337,708)(c) ($12,250)(e) $967,557-Nuclear $500,861 $2,914,613 (b) (S291) SO $3,415,183 Nydraulle $56,145 S188 ($27) SO $56,306 Other $7,239 ($4) ($14) SO $7,221 f ransmisalon $509,186 S14,985 ($2,278) SO S521,893 Distribution 5688,319 S37,992 (56,981) S0 $719,330 General $91,622 $10,824 ($2,533) SO S100,113 C Total Electric S3,150,138 S2,999,547 ($349,832) (512,250) $5,787,603 Steam 546,592 ($556) (S46,034)(d) SO SO iotal Utility Flant $3,196,730 52,998,991 (5395,868) ($12,250) S5,787,603 Pc:cv Unit 2 (a) S427,524 S48,934 SO SO S476,458 Constructinn Work in Progress 02,640,313 (32,480,978)(b) (S2,360) SO $156,975 WucL9er Fuel 1391,031 $25,705 SO $0 $416,786 Other Piant s',0,952 $3,414 SO st2,250 (e) 556,616 Total Property, Plant and Equipment S6,696,600 S$96 D66 ($398,228) So $6,894,438 me.......... ............ ses......... === s==..... ====== ass === (a) includes Perry Unit 2 AFUDC subsequent to July 1985. See Schedule vill. (b) Perry Unit 1 and Beavet Valley Unit 2 were placed in commercial operation during November 1987. (c) Includes $285,417,000 relating to the sole of the Bruce Mansfield Plant. (d) Includes the sale of the stens. system. 1 (e) Transdar of Utility Plant to other Plant. S-14 u

 -                                                                                                                                                l'
           ;{.

THE CLEVELAND ELECTRIC ILLUMlWAflNG COMPANY AND SUBSIDIARIES ( .' ,  ; SCHEDULE VI = ACCUMULATED DEPRECIATION AWD A40Ril2Af!DN OF PRDDERTY, PLANT AND EQUIPMENT YEAR ENDED DECEMBER 31, 1989 (Thousands of Dollars) Additions Deductions Balance et Charged to Removat Cost Selence at - Beginning of Income Net of Salvage End of

.. Description                              Period          Statenent          Other (a)      Retirements       Add /(Deduct)        Period s.,........                           ............       ............       ............    ............      .............. ............

Utility Plantti Electric + Depreciation $1,078,432 S200,541 $1,737 -($16,056) ($3,Y54) 81,260,900

  • Amortization $3,326 S344 SO $0 90 $3,670 Total Utility Plant $1,081,758 S200,B85 (b) S 1, 73 7 (S16,056) ($3,754) 81,264,570 Other Property
  • Deprecistion $12,508 $1,435 (c) SD ($20) (80) 813,915 Total $1,094.26u S202,320 $1,737 (S16,076) ($3,762) S1,278,485

- Nuclear. Fuel Amorttaation $117,198 S55,712 (d) $0 SO SO S172,910 (a) Accumulated depreciation charged to construction work in progress. (b) Depreciation and amortlantion as reported in the income Statement includes approximately $8 mlltion of amortlantion of investment tax credits. (c) Non Utllity plant expense charged to other income and deductiors, net. (d) Charged to nuclear fuel expensei t o 1 S-15

                                                                                                                                               ;i
                                                                                                                                                  )

r THE. CLEVELAND [LECTRIC ILLLMlWATING COMPANY AND SUS $1DIARl[$ i SCHEDULE VI . ACCLMULATED DEPRECI Afl0N AND AMORil!Atl0N OF PROPERTY, PLANT AND EDVIPMENT YEAR (NDED DECEMBER 31, 1988 'j i (Thousands of Dollars)  ; I AddltIons DeduetIons . 1 Balance at CharDed to Removal Cost talance at .,

        <                                 Beginning of                         Income                                                              Net of Salvage    End of           ;

Description. Period Statement Other (a) Retirements Add /(Deduct) Ierlod  ; ( i Utility Plant: -i i flectrie Depreciation ' $902,315 S192,354 $1,700 (S14,778) (13,159) $1,078,432-

                . Anortization                   52,982                             8344                         S0                       $0                  S0        $3,326 l
     'T3tal Utility Plant                     $905,297                         S192,698 (b)                 81,700           ($14'778) ,                ($3,159)   $1,081,758 OtSCr Property . Cepreclotl'on                $11,834                            $1,274 (c)                      SD              ($600)                      $0       $12,500        .

15tal S917,131 $193,972 $1,700 ($15,378) ($3,159) 81,094,266 i WuctCar Fuel + Amortiaation $72,287 S44,911 (d) SO S0 SO $117,198

                                          .......:....                     ............               .....=......       ............              ............   ............-;

i I (a) Accumulated depreciation charged to construction work in progress. {

          .(b) Depreciation and amortitation as reported in the income Statement includes approximately S6 million of                                                                 '

smorttaation related to terminated nuclear generating units and $10 million of amortiration of Investment tax  ; credits resulting f rom the change in accounting for income taxes. . The unamortized costs related to the terml*- j noted units were recorded as deferred charges on the Balance Sheet. The Decenber 31, 1988 balance of-  ? S17.6 mittlon in the deferred charge account was written of f at year end. l (c) NTt utility plant expense charged to other trwome ard deductions, net. (d) Charged to recteta f uct expense. . 4 x

                                                                                                                                                                                  '. t P

S-16 3

THE CLEVELAND ELECTRIC ILLUMikAflWG COMFAEY AND SUtt!DI ARlt$ SCHEDULE VI ACCUMULAftD DEPRECIAflDN AND AMORil!AflDN OF PRDFERTY, PLANT AND EQUIPMENT YEAR ENDED DECthBER 31, 1987 (Thousands of Dollars) Additi ons Dedactions Balance at Charged to Removal Cost balance at Beginning of ine one Net of Salvage End of Description Period Statement Other (a) Retirements Add /(Dedset) Parlod s.......... ............ ............ ............ ............ .............. ............ Utllity Plants tjectric Depreciation 5935,636 5138,741 S1,478 ($160,379)(e) ($13,161) 8902,315 Amortitation 52,573 S409 SO SO SO S2,982 Steam Depreciation $13,700 $1,213 SO ($14,851)(f) ($73) 80 T:tal Utility Plant 1951,917 S140,363 (b) $1.478 ($175,230) ($13,231) 1905,297 Oth.r Property Depreciation $2,932 $8,902 (c) 50 50 SO S11,854 T:tal 1954,849 $149,265 $1,478 ($175,230) (513,231) 8917,131 Nuclear luel

  • Amor11tation $45,559 $26,728 (d) 50 $0 SO $72,287
                                     ............        ............        ............    ............      ............     ...........w (a) Accumulated depreciation charged to construction work In progress.

(b) Depreciation and amortitation as reported in the income Statement includes approximately S9 million of amortitation related to terminated nuclear generatirg units. The unamortised costs related to the tertl* nated units ato recorded as deferred charges on the Balance Sheet. (c) Non* utility plant eypense charged to other (ncome and deductions, Det. (!) Churged to nuclear fuel expense. , te) In Ludes 593,431 000 relating to the sale of the Bruce Mansfield Plant. (f) The steam system was sold on Decenter 30, 1987. S-17

                                                                                                                                              .i

L

                                    ' THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUS $1DI ARitt f

f SCHEDULE Vil GUARANitts OF SECURlilts OF 01HER lsSUERS YEAR ENDED DECEMsta 31, 1989 (thousands of Dollars) Principal Amount Guaranteed and Name of Issuer of Outstanding securttles Guaranteed fitte of issue (a) and (b) Nature of Guarantee Quarto Mining Co m any (b) Cuaranteed Mortgage Bonds, Due 2000

Series A 8.25% $786 Principal and Interest I! Serles B 9.70% 767 Principal and Interest

,' series C 9.40% 3,834 Principal and Interest series D 12.625% 4,562 Principal and Interest series EA 10.25% 851 Principal and Interest series EB 11.70%. 830 Principal and Interest Berles EC 11.40% 4,1$2 Principal t,nd Interest terles ED 14.625% 4,540 Principal and Interest Ser,es FA 10.50% 654 Principal and Interest series FB 11.75% 207 Principal and Interest series FC -11.40% 838 Principal and Interest Series C 9.05% 10,639 Principal and Interest Unsecured Note, Interest at prime (11% at 12/31/89) plus 2%, Due 2000 2,740 Principal and interest , Equipment Leases 7,805 termination value per

                                                                                         "."."         Agreements 43,205 The Ohio vatley Coat Conpany            First Mortgage Notes Series D"8.00% Due 1990 to 1997                  7,100  Principal and interest Series ("10.25% Due 1990 to 1997                 4,675  Principal and Interest Equioment leases                                   6,929  Stipulated Loss Value per Agreements-Term Notes"9.53% Due 1990 to 1996                  3,749  Principot and Interest "10.85% Due 1990 to 1997             23,515  Principal and Interest 45,9t>3 General Phystes Ohio                   Term Note"9.81% Due 1990 to 1994                    9,505 trincipal tnd Ir.terest Corporation                                                                           " -"
                                                                                          $98,678 sus....

l (a) None of the securttles were owned by Cleveland Electric; none were held in the treasury of the issuer; and none were in default.

           . (b) Cleveland Electric and the other CAPC0 Croup Co@anies have agreed to guarantee severalty, and not jointly, their proportionate shares of Guarto Mining Company debt and lease obilgations incurred while developing and equipping the mines. The amounts shown are Cleveland Electric's proportionate share of the total obligatlons.

S-18 ,

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                                               ' THE CLEV(LAND ELECTRIC ILLUM!NAi!NG COMrANY AND SUBSIDIARIES SCHEDULE Vill
  • VALUAT10N AND QUALIFYING ACCOUNi$

FOR THE YEARS END(D DECEMB(R 31,1989,1988 AND 1987 (Thousands of Dollars) (I* Additions Deductions Bolence at Charged to Deductions . Balance at Beginning income' from End of

            ' Description-                     of. Period      -Statement            Other                     Reserves              Other.                          Period Reflected as Reductions;                                                                                                                              '
to the Related Assetst
       ,       Accumulated Provision fir UncollEctible Accounts
            ~ (Deductlen from Amounts Due
             'from Customers and Others) 1989'                         $6,026           .$5,742           S1,062 (a).               $11,904 (b)                SD                          .S926 1988                          $5,126            $9,307           51,146 (a)                  $9,553 (b)               SO                         $6,0261 1987                         S11,126            S6,515                                     $13,395 (b)
                                                                                          $880 (a)                                          SD -                       $5,126
            -.ReNectedasReserveson.
            .the Balance Sheet:
 '            Rhs;rveforPerryUnit2 Allowance for Funds Used DurIng Construction 3

1989 S124,398 $0 SO SD S0 S124,393-1988 5102,903 $0 $21,495 (d) . SO SD- $124,398 1987.' $54,408 S48,495 (c) $0 $0 50 $102,903-y i (a) Collection of accounts previously written off. (b) Uncolleetlble accounts written of f. 4 iii

            -(c) Reflected as 6 reduction to Allowance f or Funds Used During construction (AFUDC).                                                                              "
           . (d) Results from adoption of a new method of accounting for ircome taxrs which recuires the presentation L                   'of amounts (previously stated on a net of tt.x basis) on a pretax bests, s

U S-19 4 E

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  .,                                                             _THE CLtVELAND ELtcTRic ILLtmlhAtlNG COMPANY AND SUBSIDI ARl($
                                                                               $CHEDULE IX * $NORT*1ERM BORROWINGS
       ;g                                                           :FOR.INE YEAR $ [WDtD DECEM8tR 31,'19894 .1968 AND 1987
                            ,                                                           (Thousands of Dollare)                                                        ,

Average Weighted Dolly. Average Average ' McKimum . Weighted Daily Balance Interest Amount- Amount- Wolghted at End - Rate at Outstanding. Outstanding- Interest: of End of ~ During' During the . Rate During s . Category. Period Period Period Period ' the Period '

                                  - ........                               ............       ............     .............   ............        ...........v.
                                 - BSnk Borrowings 1
                                   . Not applicable'
                                  ; *omerclat Paper -

I F

                                                   '1989.                              $0               0.0%         .S55',000        55,534 (a)             9.8% (b) 1988                              SD               0.0%        S123,000         $21,248 (a)             7.4% (b) 42                                                  19P7                         S37,000               8.7%        S141,900         535,821 (a).          ' 7.3% (b)
                                   !(6) Conputed by dividing the total of the daily outstanding betences for the year by 365 days (366 for 1988).
         ,                         ;' (b)' Cgted by dividlog total thterest expanse for the year by 'the. average'd6lky belance outstanding.
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,.i                                                                                SCHEDULL A SUPPitMENTAtt INCOME STATEMENT INFORMAf!ON
y. .FOR THE YEARS (NDED DICEMBER 31, 1989,'1988 AND 1987 fl ,
                                                                                                      - (Thousands of Dollars) -
                                                                                                                              ' charged to Operattre tr.penses t 'k 4                                                                                                       ............................................
         ;                                                Item ,                                                            1989              1988 :           .1987 g              --q r                                                                                                                                                                                    i 1 ,

LMaintenanceandRepairs- $126,778 S132,946- $117,458 , E

                                                                                                             ............                ............s     ............
O
                                     . y i nfaxes, Other than Payroll and -
                                                            . Incone Taxess -

p l 4 lJ Operating tapenses 0

                                                                   . Real and Personal Property taxes                      $100,007-         $104,601.        :$71,262 0hio Stkte Excise Taxes                              -$63,870-           S61,990           $$7,471

[, !- Other $6,476 $6,307 $8,249 h t [q j. -Totat Operating Expenses $170,353 $172,898' , $136,982-Other Incone and Deductions, Net : -$660 $494 -- $733 '- lI ) f"' t ' hi'

                                                                                                                                                              $137,715 F

3

                                                                            . Total                                        $171,013          $173,392:
                                                                                                               ............              se..........-     .a..........

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y- :v r k 1 C f;s 1HE TOLEDO EDISDN CDNPANY-s g-SCHEDULE V PROPERTY, PLANT AND EQUIPMENT ~ TEAR ENDED DECEMBER 31, 1989

       .fi (fhousends of Dotters)
  !~                                                                .                        .

3 Balance at Retirements Balance at p Beginning of Additions or End of Classification Period at Cost . Sales other ' Period (f .............. Utility Planti-Etectric-.

                          . Production:

Steam S276,400 $7,875 SD 50 ' $284,275 f, Nuclear . $1,597,457 $88,760 ($12,377) S0 - $1,673,840 i f 'other $6,656 552 SD $0 66,708 P, Transmission $150,715 ($5,445) ($3) $0 Si45,267 r

 ,4
                          ' Distribution                   $340,116           S11,625             ($369)               SO           S351,372
                         . General                          S67,583            S3,254                (58)              SG             $70,829 i-                                                     ............     ............    ............     ............       ............

p- Total Utility Plant. 52,438,927 S106,121 ($12,757) 80 .$2,532,291 Perry Unit 2 (a) S343,126 $2,628 50 80 $345,754 Construction Work in~ Progress $115,978 (531,392) 50. $0 $84,586-f:, '

                  . Nuclear fuel                           5361,490           $21,239                 SO               SD           $382,729 Other Plant                               $3,320                .$0               $0             $22               $3,342 i :.                                                    ............      ............    ..... ......     ............       . . . . . . . . . . . . . -

L h '

Total Property, Plant and
                              ' Equipnent'               $3,262,841         -$98,596           ($12,757)             $22     .$3,348,702 P -'                                                    seasssesessa      sessessssses    assessassoas     susessassses      -sssssssssses (a) includes Perry Unit 2 MUDC subsequent to July 1985. See Schedule Vill.

s-t i S-22 1

THE TOLEDO EDISDN COMPANY SCHtDULE V

  • PR0t[RTY, PLANT AND COUIPMENT YEAR ENDED DECEMstR 31, 1988 (Thousands of Dollars)

Balance at Retirements Batence at Beginning of Additions or End of at Cost Sales Other P;rlod Classification Period UtilltysPlantI tiect.lc Productlent Steam $273,783 S2,953 ($336) 50 $276,400 Nuclear (b) 51,780,809 $59,084 ($242,436)(c) SD S1,597,457 Other S6,656 SD S0 $0 $6,656 Transmission (b) $149,808 $1,532 (1625) $0 $153,715 Distribution $324,020 $19,411 ($3,315) 50 1340,116 Cencral $65,435 53,823 ($1,675) SD $67,583 Total Utility Plant $2,600,511 SB6,803 (S248,387) SO S2,438,927 Perry Unit 2 (a) $306,570 50 SO S30,556 (d) 5343,126 -Construction Work in Progress $67,704 $4b,274 10 $0 $115,978 Nuclear Fuel 5333,802 $27,688 50 $0 1361,490 Other Plant $3,169 5174 ($23) SO $3,320 Total Property, Plant and Equipment S3,311,756 1162,939 (S248,410) 536,556 53,262,B41 assessaness. asssssssssna assassassess asanassssnes assss**ss===

. (a) Includes Perry Unit 2 AFUDC subsequent to July 1985. See Schedute Vllt.

(b) Includes reclussification of PUC0 ordered AFUDC reserve to a refund obligation consistent with terms of the January 1989 PUC0 rate order. (c) Includes $242,0B0,000 of PUC0 ordered write.of f of Perry Unit 1 and Beaver Valley Unit 2 investments. (d) Results primarity f rom adoption of a new method of accounting f or incerte taxes which requires the presentation of amounts (previously stated on a net.cf tax basis) on o pretax basis. S-23

Tht 70.EDO EDISDN COMPAWY SCHEDULE V 8RDPER1Y, PLANT AND EDUIPNthf TEAR EdDED DECEMBER 31, 1987 (Thousands of Dollers) Belence et Retirements Belence et Beginning of A$di ti ons of End of Ctessification Period at Cost Seles Other Period Utility Plants tiectric Productiont steam $457,132 59,970 ($192,017)(c) ($1,302)(e) $273,783 Nuclear (f) 5473,192 $1,308,833 (b) ($1,216) SO $1,780,809 other $6,656 $0 50 S0 $6,656 Transmission (1) 5141,895 $9,375 ($1,462) SO S149,808 Distribution 5305,015 S20,7B8 ($1,783) 50 $324,020 Generet $$8,922 $7,613 (51,100) SO $65,435 Total Utility Plant $1,442,812 $1,356,579 ($197,578) ($1,302) S2,600,511 Perry Unit 2 (e* S275,055 $31,515 SO S0 $306,570 Constructicn Work in Progress (f) 81,894,890 ($1,007,120)(b) (S820,066)(d) SO 167,704 Nucteer fuel 5313,982 $19,820 SD SD S333,802 Other Plant $1,B67 50 50 $1,302 (e) S3,169 Total Property, Plant and Equipment $3,928,606 $400,794 ($1,017,644) SO $3,311,756 (e) Includes Perry Unit 2 AFUDC subsequent to July 1985. See Schedule Vllt. (b) Perry Unit i and Beaver Vettey Unit 2 were placed in commercial operation during November 1987. (c) Includes $190,667,000 relating to the sale of the Bruce Mansfield Plent. (d) Includes the sete of a portion of Beaver Valley Unit 2. (e) Transfer of Utility Plant to Other Plent. (f) Includes reclassificatibn of PUC0 ordered AFUDC reserve to a refund obligetton consistent with terms of the January 1989 PUC0 rate order. S-24 l l 4 e -

M'-.-...- .' ,..l ; ,, ,, THE TOLEDO E0! SON COMPANY

                                $CHEDULE VI . ACCUMULATED LEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND [0UIPMENT
                                                                 )(AR [NDED DEC[MBER 51, 1989 (Thousands of Dollars)

Additions Deductions Batence et Charged to Removat Cost Balance et Beginninn of Income Wet of Salvage [nd cf Description Period Statement Other (a) Retirements Add /(Dedact) Period Eltetric Utility Plant

  • Depreciation $487,546 $91,527 (b) $1,858 (512,757) (5977) 8567,197 Other Property
  • Deprecletion $1.168 S49 (c) SO SO 50 $1,217
           -Totet                                          $488,714                 $91,576                  $1,858        ($12,757)            ($977)        $568,414 Nuclear fuel . Amortitation                                $101,128                 S46,408 (d)                    SO              SO               $0        5147,556 (a) Accunutated depreciation charged to construction work in progress.

(b) Depreciation and amortization es reported in the Income Statement includes approximately 54 mittlon of amortitetton of investment tax credits. (c) Non utility plant expense charged to other income and dedactions, net. (d) Charged to nucteer fuel expense. S-25

1 . THE TDLEDD EDISDN CDMFANY SCHEDULE VI . ACCUMJLATED DEtRECI ATIDN AND AMDRT12AtlDN OF PRDPERTY, PLANT AND EgulPMENT YEAR ENDED DECEMBER 31, 19B8 (Thousands of Dotters) Addit i ons Deduc tions Bet;rtce at Charged to Removat Cost Balance at Beginning of Income Net of Salvage End of terlod Statement Other (a) Retirements Add /(Deduct) Per'ed Description Electr'ic Utility Plant .

                                                                   $74,650 (b)         S1,834       ($6,256)           ($1,831)      5487,546 Depreciation                          S419,149 S49 (c)             SD           ($20)               (57)       51,168 Other troperty . Depreciation                    $1,146
                                                                   $74,699             S1,834       (56,276)            ($1,B38)     $4BB,714 Total                                 S420,295 S32,372 (d)              50             SO                 SO      S101,128 Nuclear Fuet . Amortitation                 $68,756 (a) Accumulated depreciation charged to construction work in progress.

(b) Depreciation and amortization as reported in the Income Statement inctu:Hs approximately $3 mittion of enortization related to terminated nuclear generating units and 53 mittlon of amorttaation of investment tax credits resulting f rom the change in accounting for income taxes. The unamortised costs related to the termi. noted units ware recorded oc def erred charges on the Balance Sheet. The Decenber 31,19B8 balance of

                 $10.2 mittlon in the deferred charge account was written of f at year end.

(c) Non utility plant expense charged to other ircome and deductions, net. (d) Charged to nuclear f uel expense. S-26

THE TDLEDO EDISDN CDMI'ANY SCHEDULE VI . ACCUMULA1tD DEPRECIATIDW AND AM3RT!!AflDN OF PRDPERTY, PLANT AND EDUl> MENT YEAR (NDED DICtMBER 31, 1987 (Thousands of Dollars) Ad:f1tions Dedaetions Balance at Charged to Removal Cost Balance at Beginning of Income Net of Salvage End of Description Period Statement Other (a) Retirements Add /(Deduct) Period Electric Utility Plant - Depreciation $415,745 S60,318 :b) S2,467 ($56,922)(e) ($2,459) S419,149 Dther Property

  • Deptecletion S674 $35 (c) 5437 SO SO S1,146 Total S416,419 S60,353 S2,904 (S$6,922) (S2,459) 5420,295 Nuclear f uel
  • Amorttgation $46,153 522,bO3 (d) r0 50 SO $68,756
                                      ............      ............       .........a..   ............      ............      ............

(a) Accumulated depreciation charged to construction work in p* ogress. (b) Depreciation and amortization as reported in the income Statement includes approximately $5 million of amortitation reteted to terminated nuclear generating units. The unamortised costa related to the terml* noted units are recorded as deferred charges on the Balance Sheet. (c) Non utility plant expense charged to other income and deductions, net. (d) CharDed to rt* Lear f uel expense. (e) InctuJee $50,010,000 relating to the sole of the Bruce Mansfield Plant. S-27

THE TOLEDO EDISON COMPANY SCHEDULE Vil

  • GUARAWitts 0F SECURiftt$ OF OTHER IS$Utt$

TLAR [NDED DECEMBER 31, 1989 (Thousands of Dotters) Principal Amount Guaranteed and Wome of issuer of Outstanding Securities Guaranteed Title of issue (a) and (b) Nature of Guarantee Duarto Mining Conpany (b) Guaranteed Mortgage Bonds, Due 2000 series A 8.25% $387 Principal and Interest Series B 9.70% 378 Principal and Interest Series C 9.40% 1,889 Principal and Interest Series D 12.625% 2,248 Principal and Interest Series EA 10.25% 511 Principal and Interest Series EB 11.70% 498 Prinetpat and Interest Series EC 11.40% 2,490 Principal and Interest series ED - 14.625% 2,723 Principal and Interest Series FA 10.50% 392 Principal and Interest

                                              $eries FB      11.75%                                 124     Principal and Interest  l Series FC      11.40%                                 503     Principal and Interest  l Series G       9.05%                               6,643      Principat and Interest Unsecured Note, Interest at prime (11% at 12/31/89) plus 2%,

Due 2000 1,643 Principal and Interest Equipment leases 3,847 Termination value per

                                                                                                          -    Agreements            ,

24,276 f General Physics Ohlo Term Note 9.81% Due 1990 ts 1994 8,995 Principal end Interest Corporation -

                                                                                               $33,271 33333333 (a) Wone of the securities were owned by Totado Edison; none were held in the treasury of                                  i the lasuer; and none were in Qf ault.

(b) Toledo Edison and the other CAPCO Group Conpanies have agreed to guarantee severally, and not jointly, their proportionate shares of Quarto Mining Conpany debt and Lease obligations incurred while developing and equipping the mines. The amounts shown are 1 Toledo Edison's proportionate share of the total obligations. 1 S-28

THE TOLEDO EDI$0N COMPANY SCHEDULE Vill

  • VALUATION AND QUAllFYING ACCOUNil FOR THE YEARS ENDED DECEMBER 31, 1989, 1968 AND 1987 (thousands of Detters)

Addltions DeduetIons Catence at Charged to Deductions Balance at Beginning income from End of Description of Period Statement Other Reserves Other Period Reflected as Raductions to the Related Assets: Accumulated Provlsion for Uncottectible Accounts (Deduet1on f rom Amounte Due from Customers and others) 1989 5975 53,687 $938 (a) $4,250 (b) $0 $1,350 1988 5503 53,768 $945 (a) 54,241 (b) SO 5775 1987 5678 S1,880 $800 (a) $2,855 (b) S0 5503 Reflected as Reserves on the Balance Sheett Reserve for Perry Unit 2 Allowance for f unds Used DurIng Constructlon 1989 $88,295 $0 $0 SO SO S88,295 1988 $71,697 $0 $16,598 (d) SO $0 $88,295 1987 $39,539 S32,158 (c) 50 $0 $3 S71,697 (a) Collection of accounts previously written of f. (b) Uncollectible accounts written off. (c) Reflected as a reduction to Allowance f or Funds Used During Construction (AFUDC). (d) Results f rom adoption of a new method of accounting for income taxes which requires the presentation of amounts (previously stated on a net of. tex basis) on a pretax basis. S-29

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                                                                                                                  .THE TOLEDO EDISON COMPANY s4           -
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                                                                                                           , $CHIWW IX .- SHORT*1ERM BORROWINOS ..
                                                                                                                                                                                                                                ;}

O W f FOR THE YEARS ENDED DECEMBER 31,~ 1989,1988 AND 1987 f (G

}
; ..-                                                    t        ,
                                          'a L -                                                                                                                                                                                         :

Il2 ,'.N I Ms (Thousands of Dollars)- .!

                                                                                                                                                                                                                                       .I flk ". '                     >

1 tlS, Average ~t f[ s i ,, Weighted Dolly'; Average : f h-l .

  • Average = Maxinum c Weighted Delly .

f[ ' "' Balance Interest Amount- Amount- .Weighted ; )] fid ' ' at End Rate at Outstanding: ~ Outstanding ' Interest.' '

                                                                                                                                                                                                                                ~:.I
;_r    u                                                                                                       of ? '           ,E nd,= o f .:       During.       During the         - Rate During                                    3 -

hl Category; Period Period Perlod- Perlod -ethe Period . i h%, .......... ............ ............ ............ ............ ............. J 4--:;f-9 b tt Bark Borrowings

                                                                                                                                                                                                                                        )
                                              ........e.......                                                                                                                                                                    .,.

p fm _ _ . d [-; Lines of Credit'- 1 kI f 1989 , $0 0.0% 50 $0 (a) .0.0% (b)g ;4s 1988 $0 - 0.0% 50 -. 50.(a)~ 'O.0% (b) .  ?!

,          *A                                                          1987                                           $0                0.0%:          $36,000          519,538 (a);             ; 8.0% (b).                            r c
                                                                                                                                                                                                                               ; ,t
                                             - Consnercial Paper                                     ,

r

                                                                                                                                                                                                  ,..                                   ,1 1989=                                          $0                0.0%-               50                $0 (c)-               0.0% (b):                          ?

9 1 1'988 ' SO 0.0% 50 -- 50 (c)- 0.0%-(b). . i> 6 -1987' $0 0.0% $47,000 56,172 (c) 6.9% (bh s n , - u H.;

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,                                             '(a) Computed by dividing the total of-the cally outstanding balances for the year by the number of days outstanding.

[ [i- . (b) (omputed by dividing total interest expense for the year by the-average daily balance out e anding. d

                                              -(c) Computed by dividing the, total of the daily outstanding. balances for the year by 365 dt a 566 for_1988).--
                                                                                                                                                                                                                                 .]

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i l THE'10LEDO EDISON COMPANY SCHEDULE X SUPPLEMENTARY INCOME STATEMENT INFORMA110N FOR THE YEARS ENDED DECEMBER 31, 1989, 19S8 AND 1987 (Thousands of Dollars) Charged to Operating Expenses Ittm 1989 1988 1987 Maintenance and Repairs $60,781 $66,522 $43,831 Taxes, other Than Payroll and Income taxest Operating Expenses Real and Personal Property Taxe2 $36,470 $41,064 $25,078 Ohio State Excise Taxes : $29,007 $29,654 $27,320 Other $1,902 $4,492 $2,242 Total operating Expenses $67,379 $75,210 $54,640 Other incone and Deductions, Net $91 $103 $65 Total $67,470. $75,313 $54,705 S-31

                =- ~

l L-b b , EXHIBIT,INDEX 1 TheLexhib'its designated vith anl asterisk (*) are filed herevith.- The exhibits noti so designate 4 have previously been filed with the SEC in _the file indi-cated;:in parenthesis,following the description,of such exhibits and are in--

             - corporated herein by reference.

e COMMON EXHIBITS (The following documents are exhibits to th'e reports of Centerior. Energy, Cleveland Electric and Toledo Edi on.) rip . Exhibit Number Document e 10b(1)(a) CAPCOL Administration Agreement dated November 1, 1971, as'

                                                                                                  -y of < September 14,- 1967, among,the. CAPCO Group members;re-   ir garding the organization and_ procedures for implementing          j the objectives of ' the CAPC0 Group (Exhibit 5(p), Amendment No. 1, File No. 2-42230, filed by Cleveland Electric).'

10b(1)(b) Amendment No.-1, dated January 4, 1974, to CAPCO-Adminis-tration Agreement among the CAPC0 Group members (Exhibit 5(c)(3),eFile No. 2-68906, filed by Ohio Edison). 10b(2) CAPC0 Transmission Facilities Agreement dated November 1, 1971, _as of September 14, 1967, among the CAPC0 Group ..' members regarding the installation,-operation and mainte-nance- of transmission facilities to carry out the objec-tives of the CAPC0 Group-(Exhibit,,5(q), Amendment No. 1, File No. 2-42230,. filed by Cleveland Electric).

            . 10b(3)              CAPCO Basic Operating Agreement as Amended September 1, 1980 among.the CAPC0 Group members regarding coordinated operation ~ of the members' systems (Exhibit 10.24, 1980 Form 10-K, File No. 1-956,. filed by Duquesne).

10b(4) Agreement dated September 1, 1980 for the Termination or Conctruction of.Certain Agreements by and among.the CAPCO j{ Group -members (Exhibit 10.25, 1980 Form-10-K, File No.- ' 1-956, filed'by Duquesne). 10b(5) Construction iAgreement, dated July 22, 1974, among the' CAPCO' Group members and relating to the Perry Nuclear [ Plant. (Exhibit 5(yy), File -No. 2-52251, filed :by Toledo  ! Edison). l 10b(6) Contract, dated as of December 5, 1975, among the CAPC0 { Group membert for the construction of Beaver Valley Unit ^ No._-2 (Exhibit 5(g), File No. 2-52996, filed by Cleveland Electric). -. 10b(7) Amendment No. 1, dated May 1, 1977, to Contract, dated as -[ of December 5, 1975, among the CAPC0 Group members for the l construction of Beaver Valley Unit No. 2 (Exhibit 5(d)(4), j File No. 2-60109, filed by Ohio Edison). j 10b(8) Contract, dated May 24, 1976, among the CAPC0 Group i members for the operation of Beaver Valley Unit No. 2 (Exhibit 5(d)(4), File No. 2-56944, filed by Pennsylvania j Pover). l l E-1 L

' Exhibit Number' Document 10b(9) Amendment No. 1, dated May 1, 1977,. to Contract, dated May 24, 1976, among the CAPCO Group members for the opera-tion of Beaver Valley Unit No. 2 (Exhibit 5(d)(6), File No. 2-60109, filed by Ohio Edison). 10b(10) Addendum No. 1, dated November 1, 1980, to contract, dated May 24, 1976, as amended among the CAPC0 Group members for the operation of Beaver Valley Unit No. 2 (Exhibit 10-9, File No. 2-68906, filed by Ohio Edison). 10b(11) Amendment No. 1, dated August 1, 1981, to CAPC0 Basic Operating Agreement as Amended September 1, 1980 among the CAPC0 Group members (Exhibit 10.27, 1981 Form 10-K, File No. 1-956, filed by Duquesne). 10b(12) Amendment No. 2, dated September 1, 1982, to CAPC0 Basic Operating Agreement as Amended September 1, 1980 among the CAPCO Group members (Exhibit 10.29, 1982 Form 10-K, File No. 1-956, filed by Duquesne). 10c(1) Participation Agreement, dated as of October 1, 1973, among Quarto, the CAPCO Group members, Energy Properties, Inc., General Electric Credit Corporation, the Loan Participants listed in Schedules A and B thereto, Central National Bank of Cleveland, as 0 ner Trustee, National City Bank, as Loan Trustee, and National City Bank, as Bond Trustee (Exhibit 5(z), File No. 2-59794, filed by Toledo Edison). 10c(2) Amendment No. 1, dated as of September 15, 1978, to Par-ticipation Agreement, dated as of October 1, 1973, among the same parties as Exhibit 10c(1) (Exhibit 5(e)(2), File No. 2-68906, filed'by Pennsylvania Power). 10c(3) Participation Agreement No. 2, deted as of August 1, 1974, among the same parties as Exhibit 10c(1) (Exhibit-5(h)(2), File No. 2-53059, filed by Ohio Edison). 10c(4) Amendment No. 1, dated as of September 15, 1978, to Par-ticipation Agreement No. 2, dated as of August 1, 1974, among the same parties as Exhibit 10c(1)-(Exhibit 5(e)(4), File No. 2-68906, filed by Pennsylvania Power). 10c(5) Participation Agreement No. 3, dated as of September 15, 1978, among the same parties as Exhibit 10c(1) (Exhibit 5(uu), File No. 2-64609, filed by Toledo Edison). 10c(6) Participation Agreement No. 4, dated as of October 31, 1980, among Quarto, the CAPC0 Group members, the Loan Par-ticipants listed in Schedule A thereto, and National City Bank, as Bond Trustee (Exhibit 10-16, File No. 2-68906, filed by Ohio Edison). 10c(7) Lease and Agreement, dated as of June 7, 1973, as amended and restated as of October 1, 1973, between Central National Bank of Cleveland, as Trustee, and Quarto, to-gether with Guaranty, dated as October 1, 1973, with re-spect thereto by'the CAPC0 Group members (Exhibit 5(aa), File No. 2-59794, filed by Toledo Edison). 5 E-2

e p j o Exhibit Nu~ber Document 10c(8) Trust Indenture and Mortgage, dated as of October 1,11973, between Quarto and National City Bank, as Bond Trustee,' k together- vith Guaranty,. dated as of October 1, 1973, with respect thereto by the CAPC0 Group members (Exhibit 5(bb), , File No. 2-59794, filed by Toledo Edison). 10c(9) ' Amendment No. 1, dated as of August 1, 1974, to Trust In-denture and Mortgage, dated as of October 1, 1973, between Quarto and National City Bank, as Bond Trustee, together with Amendment No. 1, dated August- 1, 1974, to Guaranty, dated as of October 1,1973, with respect thereto by the CAPC0 Group members (Exh1 bit 5(L)(2), File No. 2-53059, filed by Ohio Edison). , 10c(10) Amendment No, 2, dated as of September 15, 1978, to Trust j Indenture and Mortgage, dated as of October 1, 1973, as amended, between Quarto and National City Bank, as Bond j ' Trustee,. together with Amendment No. -2, dated as of ' September 15, 1978, to Guaranty, dated as of October 1,  ! 1973, with respect thereto by the CAPC0 Group members (Exhibits 5(e)(11) and 5(e)(12), File No .1 2-68906, filed , by Pennsylvania Pover). 4 10c(11) Amendment No. 3, dated as of October 31, 1980, to Trust .! Indenture and Mortgage, dated as .of October 1, 1973, as  ! amended, between Quarto and National City Bank, as Bond

                                                                                       }

Trustee (Exhibit 10-16, File No. 2-68906, filed by Ohio j Edison).  : 10c(12) Amendment No. 3, dated as of October 31, 1980, to Guaranty, dated as of October 1, 1973, with respect to .the- -' CAPC0 Group members (Exhibit 10-18, File No. 2-68906,

                   . filed by Ohio Edison).

10c(13) Open-End Mortgage, dated as of October 1, 1973, between Ouarto and the CAPCO Group members and Amendment No. 1 {g

                   -thereto, dated as of September 15, 1978 (Exhibit 10-5,                i File No. 2-68906, filed by Ohio Edison).

10c(14) Agreement, dated October 20, 1981, among the CAPCO Group ' members regarding the use of Quarto coal at Mansfield j Units 1, 2 and 3 (Exhibit 10(ff), 1981 Form 10-K', File No. ~ 1-3583, filed by Toledo Edison). . 10c(15)' Agreement, dated July 1, 1982, among the CAPC0 Group l' members reallocating the rights and liabilities of the members with respect to certain uranium supply contracts t (Exhibit 10(ff), 1982 Form 10-K, File No. 1-3583, filed by l Toledo Edison). h 10d(1)(a) Form of Collateral Trust Indenture among CTC Beaver Valley Funding Corporation, Cleveland Electric, Toledo Edison and Irving Trust Company, as Trustee (Exhibit 4(a), File No, j 33-18755, filed by clevelar.d Electric and Toledo Edison). 'i 10d(1)(b) Form of Supplemental Indenture to Collateral Trust' In- j denture, including form of Secured Lease Obligation Bond " (Exhibit 4(b), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). E-3 ' f t J

e, Exhibit Number- Document 10d(2)(a) Form :of Collateral Trust Indenture among CTC Hansfield Funding Corporation, Cleveland Electric, Toledo Edison and IBJ- Schroder. Bank & Trust Company, as Trustee (Exhibit , 4(a), _ File No. 33-20128, filed by Cleveland Electric and Toledo Edison). 10d(2)(b) Form of Supplemental Indenture to Collateral Trust In-denture, including forms of Secured Lease Obligation Bonds . i (Exhibit 4(b), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). 10d(3)(a)- Form of Facility Lease dated as of September 15, 1987 be-tween The First National Bank of Boston, as Ovner Trustee , under a Trust Agreement dated as of September 15, 1987 , with_ the limited partnership- Owner Participant named therein, Lessor, and Cleveland Electric and Toledo Edison, 3 ' Lessees (Exhibit 4(c), File No. .33-18755, filed by Cleveland Electric and Toledo Edison). ' 10d(3)(b) Form of Amendment No. I to Facility- Lease constituting i Exhibit 10d(3)(a) above (Exhibit 4(e), File No. 33-18755,. t filed by Cleveland Electric and Toledo Edison). . i 10d(4)(a) Form of Facility Lease dated as of September 15, 1987 be-tween The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987. With the corporate Ovner Participant named. therein, Lessor, and Cleveland Electric and Toledo Edison, Lessees (Exhibit 4(d), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10d(4)(b) Form of Amendment No. I to' Facility Lease constituting Exhibit 10d(4)(a) above (Exhibit 4(f), File No. 33-18755,  ; filed by Cleveland Electric and Toledo Edison). l 10d(5)(a) Form of Facility Lease dated as of September 30, 1987 be- ' tween Meridian Trust Company,- as Owner Trustee under a Trust Agreement dated as of September 30, 1987 with the ,' Owner Participant named therein,. Lessor, and Cleveland Electric and Toledo Edison, Lessees (Exhibit 4(c), -File No . 20128, filed by Cleveland Electric and Toledo Edison). 10d(5)(b) Form of Amendment No._1.to the Facility Lease constituting ,! Exhibit. 10d(5)(a) above (Exhibit 4(f), File No. 33-20128, 7 filed by Cleveland Electric and Toledo Edison). 10d(6)(a) Form of Participation Agreement dated as of September 15, 1987 among the limited partnership Owner Participant named , therein, the Original Loan Participants listed in Schedule 1 thereto, as Original Loan Participants, CTC Beaver-Valley Funding Corporation, as Funding Corporation, The EFirst National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee, and Cleveland Electric and Toledo Edison, as Lessees (Exhibit- 28(s), l File No. 33-18755, filed by cleveland Electric and Toledo Edison).

    -10d(6)(b)       Form of-Amendment No. I to Participation Agreement consti-   a tuting Exhibit 10d(6)(a) above (Exhibit 28(c), File No.

33-18755, filed by Cleveland Electric and Toledo Edison). E-4 -()

Exhibit Number Document 10d(7)(a) Form- of Participation Agreement dated as of September 15, 1987 among the corporate Owner Participant named therein, the Original Loan Participants -listed in Schedule 1 thereto,. as Original Loan Participants, CTC Beaver Valley Funding Corporation, as Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee, and Cleveland Electric and Toledo Edison, as Lessees (Exhibit 28(b), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10d(7)(b) Form of Amendment No. I to= Participation Agreement consti-tuting' Exhibit 10d(7)(a) above (Exhibit 28(d), File No. 33-18755, filed by Cleveland Electric and Toledo Edison), 10d(8)(a) Form of Participation Agreement dated as of September 30, 1987 amc.ng the owner Participant named therein, the Origi-nal Loan Participants listed in Schedule II. thereto .as Original Loan Participants, CTC Mansfield Funding Corpora-tion, Meridian Trust Company, as Ovner Trustee, IBJ Schroder Bank & Trust Company, as . Indenture Trustee, and Cleveland Electric and Toledo Edison, as Lessees (Exhibit 28(2), File No. 33-20128, filed by Cleveland Electric and , Toledo Edison). 10d(8)(b) Fotm of Amendment No. 1 to the Participation Agreement constituting Exhibit 10d(8)(a) above (Exhibit 28(b), File RNo. 33-20128. filed by Cleveland Electric and Toledo Edison). 10d(9) Form of Ground Lease dated as of September 15, 1987 be-tween Toledo Edison, Ground Lessor, and The First National Bank of Boston, as owner Trustee under a Trust Agreement.

                                                                 . dated as of September 15, 1987 with the Ovner Participant named therein, Tenant (Exhibit 28(e),      File No. 33-18755, filed by Cleveland Electric and Toledo Edison).

10d(10) Form of Site Lease dated as of September 30, 1987 between Toledo Edison, Lessor, and-Meridian Trust Company,- as Ovner Trustee under a Trust Agreement dated as of September 30, 1987 with the Owner Participant named therein, Tenant (Exhibit 28(c), File No. 33-20128,-filed by Cleveland Electric and Toledo Edison). E' 10d(11) Form of Site Lease dated as of September 30, 1987 between Cleveland Electric, Lessor, and Heridian Trust Company, as owner Trustee .under a Trust Agreement dated as of September 30, 1987 with the Owner Participant named therein, Tenant (Exhibit 28(d), File No. 33-20128, filed. by Cleveland Electric and Toledo Edison). 10d(12) Form of Amendment No. 1 to the Site Leases constituting Exhibits 10d(10) and 10d(11) above (Exhibit 4(f), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). E-5 J_______. - _ _ _ _ . - - . . . . - . . . . - -

Document jm of Assignment, Assumption and Further Agreement dated lofSeptember 15, 1987 among The First National Bank of iton, as Ovner Trustee under a Trust Agreement dated as September 15, 1987 vith the Ovner Participant named trein, Cleveland Electrie, Duquesne, Ohio Edison, insylvania Power and Toledo Edison (Exhibit 28(f), File 33-18755, filed by Cleveland Electric and Toledo son).

m of Additional Support Agreement dated as of
>tember 15, 1987 between               The First National Bank of ston,          as Owner Trustee under a Trust Agreement dated as September 15,        1987 vith the Owner Participant named erein,        and   Toledo Edison (Exhibit 28(g), File No.
 -18755, filed by Cleveland Electric and Toledo Edison).
m of Support Agreement dated as of September 30, 1987 tween Meridian Trust Company, as Owner Trustee under a ast Agreement dated as of September 30, 1987 with the ner Participant named there, Toledo Edison, Cleveland actric, Duquesne, Ohio Edison and Pennsylvania Power r.hibi t 28(e), File No. 33-20128, filed by Cleveland actric and Toledo Edison).

rm of Indenture, Bill of Sale, Instrument of Transfer

) Severance Agreement dated as of September 30, 1987 tueen Toledo Edison, Seller, and The First National Bank Boston, as Owner Trustee under a Trust Agreement dated of September 15, 1987 with the Owner Participant named Brein, Buyer (Exhibit 28(h), File No. 33-18755, filed by eveland Electric and Toledo Edison).

rm of Bill of Sale, Instrument of Transfer and Severance reement dated as of September 30, 1987 between Toledo ison, Seller, and Meridian Trust Company, as owner astee under a Trust Agreement dated as of September 30, B7 with the Owner Participant named therein, Buyer Khibit 28(f), File No. 33-20128, filed h Cleveland ectric and Toledo Edison). rm of Bill of Sale, Instrument of Transfer anu Severance reement dated as of September 30, 1987 between Cleveland ectric, Seller, and Meridian Trust Company, as Owner ustee under a Trust Agreement dated as of September 30, 87 with the Owner Participant named therein, Buyer xhibit 28(g), File No. 33-20128, filed by Cleveland ectric and Toledo Edison). tter regarding change in accounting principles (Exhibit

   ,   June 30, 1988 Form 10-0, File Nos. 1-9130, 1-2323 and 3583),

rm 11-K Annual Report of the Centerior Energy Corpo-tion Employee Savings Plan for the fiscal year ended cember 31, 1989 (to be filed by amendment on or before ril 30, 1990 pursuant to Rule 15d-21). Ev

___._ ____ - - __-...L '

l. ..' ' ' ' ' " ' " ' ' ' " ' " ' ' '
                                                                                                   ,fFJfTERIOR ENERGY EXIIIBITS Exhibit Nubber                                                                              Document 3a                                  Amended Articles of Incorporation of Centerior Energy ef                                                                           '

fective April 29, 1986 (Exhibit 4(a), File No. 33-4790). 3b' Regulations of Centerior Energy effective April 28, 1987 (Exhibit 3b, 1987 Form 10-K, File No. 1-9130). 10a

  • Indemnity Agreements between Centerior and certain of its current directors and officers.

10e(1) Consulting Agreement, dated February 1, 1989, with R. H. Ginn pursuant to which he is to provide consulting services to Centerior for the period March 1, 1989 through February 28, 1990 (Exhibit 10e(1), 1988 Form 10-K, File No. 1-9130). 10e(2)

  • Employment and Consulting Agreement, dated November 30, /

1989, with P. M. Smart regarding his employment with  ! Toledo Edison through August 31, 1990 and his providing \ consulting services to Centerior and Toledo Edison for the period September 1, 1990 through January 31, 1994. ' List of-subsidiaries (Exhibit 22,1986 Form 10-K,FileNo. 22 1-9130). g

                                                                                                                                                                                  \

24a

  • Consent of Independent Accountants.

24b

  • Consent of Counsel for Centerior Energy.

25 *Povers of Attorney and certified resolution of Centerior Energy's Board of Directors authorizing the signing on behalf of Centerior pursuant to a power of attorney. CLEVELAND ELECTRIC EXIIIBITS Exhibit Numbe Document 3a Amended Articles of Incorporation of Cleveland Electric, effective October 30, 1987 (Exhibit 3, September 30, 1987 Form 10-0, File No. 1-2323). 3b Regulations of Cleveland Electric, dated April 29, 1981, as amended effective October 1, 1988 (Exhibit 3b, 1988 Form 10-K, File No. 1-2323). E-7

i ? ' lExhibitNumber Document 4b(1) Mortgage and Deed of Trust between Cleveland Electric and l Guaranty Trust Company of New York (nov Morgan Guaranty Trust Company of New York), as Trustee, dated July 1, 1940

(Exhibit 7(a), File No. 2-4450).  ;

I Supplemental Indentures between Cleveland Electric and the Trustee, supplemental to Exhibit 4b(1), dated as follows: 4b(2) July 1, 1940 (Exhibit 7(b), File No. 2-4450). 4b(3) August 18, 1944 (Exhibit 4(c), File No. 2-9887). 4b(4) December 1, 1947 (Exhibit 7(d), File No. 2-7306). l 4b(5) September 1, 1950 (Exhibit 7(c), File No. 2-8587). 4b(6; June 1, 1951 (Exhibit 7(f), File No. 2-8994). l 4b(7) Ma," 1, 1954 (Exhibit 4(d), File No. 2-10830). 4b(8) March 1, 1958 (Exhibit 2(a)(4), File No. 2-13839). 4b(9) April 1, 1959 (Exhibit 2(a)(4), File No. 2-14753). 4b(10) December 20, 1967 (Exhibit 2(a)(4), File No. 2-30759). 4b(11) January 15, 1969 (Exhibit 2(a)(5), File No. 2-30759). 4b(12) November 1, 1969 (Exhibit 2(a)(4), File No. 2-35008). 4b(13) June 1, 1970 (Exhibit 2(a)(4), File No. 2-37235). 4b(14) November 15, 1970 (Exhibit 2(a)(4), File No. 2-38460). Ab(15) May 1, 1974 (Exhibit 2(a)(4), File No. 2-50537). Ab(16) April 15, 1975 (Exhibit 2(a)(4), File No. 2-52995). 4b(17) April 16, 1975 (Exhibit 2(a)(4), File No. 2-53309). 4b(18) May 28, 1975 (Exhibit 2(c), June 5, 1975 Form 8-A, File No. 1-2323). 4b(19) February 1, 1976 (Exhibit 3(d)(6), 1975 Form 10-K, File No. 1-2323). 4b(20) November 23, 1976 (Exhibit 2(a)(4), File No. 2-57375). 4b(21) July 26, 1977 (Exhibit 2(a)(4), File No. 2-59401). 4b(22) September 27, 1977 (Exhibit 2(a)(5), File No. 2-67221). 4b(23) May 1, 1978 (Exhibit 2(b), June 30, 1978 Form 10-0, File No. 1-2323). e 4b(24) September 1, 1979 (Exhibit 2(a), September 30, 1979 Form 10-0, File No. 1-2323). Ab(25) April 1, 1980 (Exhibit 4(a)(2), September 30, 1980 Form 10-0, File No. 1-2323). 4b(26) April 15, 1980 (Exhibit 4(b), September 30, 1980 Form 10-0, File No. 1-2323). Ab(27) May 28, 1980 (Exhibit 2(a)(4), Amendment No. 1, File No. 2-67221).

~ 4b(28)            June   9, 1980 (Exhibit 4(d), September 30, 1980 Form 10-0, File No. 1-2323).

4b(29) December 1, 1980 (Exhibit 4(b)(29), 1980 Form 10-K, File No. 1-2323). Ab(30) July 28, 1981 ' Exhibit 4(a), September 30, 1981, Form 10-0, File No. 1-2323). 4b(31) August 1, 1981 (Exhibit 4(b), September 30, 1981, Form j 10-0, File No. 1-2323). 14b(32) March 1, 1982 (Exhibit 4(b)(3), Amendment No. 1, File No. l 2-76029). w E-8

                                                               - _ n              ___

%I S Exhibit Number Document 110d(7)(a) Form of' Participation Agreement dated as of September 15,

   ,                   1987 among the corporate Owner Participant named therein,.

the original Loan Participants listed in Schedule 1 thereto, as original Loan Participants, CTC Beaver Valley i Funding Corporation, as Funding Corporation, The First National Bank of Boston, .as Owner Trustee, Irving Trust Company, as Indenture Trustee, and Cleveland Electric and Toledo Edison, as Lessees (Exhibit .28(b), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10d(7)(b) Form of Amendment No. 1 to Participation Agreement consti-tuting Exhibit 10d(7)(a) above (Exhibit 28(d), File No. 33-18755, filed by Cleveland Electric and Toledo. Edison). 10d(8)(a) Form' of Participation Agreement dated as of September-30, 1987 among tSe Owner Participant named therein, the Origi-- nal Loan Participants listed in Schedule II thereto, as Original Loan Participants, CTC Mansfield Funding Corpora-tion, Meridian Trust Company, as Ovner Trustee, IBJ Schroder Bank & Trust Company, as Indenture Trustee, and

                      -Cleveland Electric and Toledo Edison, as Lessees-(Exhibit       '

28(a), File No. 33-20128, filed.by Cleveland Electric and Toledo Edison). 10d(8)(b) Form of Amendment No. .1 to the Participation Agreement constituting Exhibit 10d(8)(a) above (Exhibit 28(b), File No. .33-20128, filed by Cleveland Electric and Toledo

          ,            Edison).

10d(9) Form of Ground Lease dated 'as of September 15, 1987 be-tween Toledo Edison, Ground Lessor, and The First National Bank .of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987 with the Owner Participant named therein, Tenant (Exhibit 28(e), File No. 33-18755,

                      -filed by Cleveland Electric and Toledo Edison).

10d(10) Form of Site Lease dated as of September 30, 1987 between Toledo Edison, Lessor, and Meridian Trust Company, as Owner Trustee under a Trust Agreement dated as of September 30, 1987 with the Owner- Participant named therein, Tenant (Exhibit 28(c), File No. 33-20128,-filed by Cleveland Electric and Toledo Edison). c 10d(11) Form of Site Lease dated as of September 30, 1987 between Cleveland Electric, Lessor, and Meridian Trust Company, as Owner Trustee under a Trust Agreement dated as of September 30, 1987 with the Owner Participant named therein, Tenant (Exhibit 28(d), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). 10d(12) Form of Amendment No. 1 to the Site Leases constituting Exhibits 10d(10) and 10d(11) above (Exhibit 4(f), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). E-5 I

h Exhibit-Nunbar Documint-icd (13) Form of Assignment, Assumption and Further Agreement dated as. of September'15, 1987 among The First National Bank of-Boston, as-Owner Trustee under a Trust Agreement dated as of September 15, 1987 vith the Owner Participant named therein, .Cloveland Electric, Duquesne, Ohio Edison, Pennsylvania Power and Toledo Edison (Exhibit 28(f), File. No. .33-18755, filed by Cleveland Electric and Toledo Edison). 10d(14). Form of Additional Support Agreement ' dated as .of September 15, 1987 between The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987 with the Owner Participant named. therein, and Toledo F.dison -(Exhibit 28(g), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10d(15) Form of Support Agreement dated as of September 30, 1987 between Heridian Trust Company, as Owner Trustee under a Trust Agreement dated as of September 30, 1987 with the Owner -Participant named there, Toledo Edison, Cleveland Electric, Duquesne, Ohio Edison and Pennsylvania Power (Exhibit 28(e), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). 10d(16) Form of Indenture, Bill of Sale, Instrument of Transfer and Severance Agreement dated as of September 30, 1987-between Toledo Edison, Seller, and The First National Bank-of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987 with the Owner Participant named therein, Buyer (Exhibit 28(h), File No. 33-18755,- filed by Cleveland Electric and Toledo Edison). 10d(17) Form of Bill of Sale, Instrument of Transfer and Severance Agreement dated as of September 30, 1987 between Toledo Edison, Seller, and -Meridian Trust Company, as Owner Trustee under a Trust Agreement dated as of September 30, 1987 with the Owner -Participant -named therein, Buyer (Exhibit 28(f), File' No. 33-20128, filed by Cleveland Electric and Toledo' Edison).

       ?0d(18)        Form of Bill of Sale, Instrument of' Transfer and Severance
                    . Agreement dated as of September 30, 1987 between Cleveland Electric,     Seller, and Heridian Trust Company, as -0Vner Trustee- under a Trust' Agreement dated as of September 30, 1987 with the Ovner- Participant named therein, Buyer (Exhibit 28(g), File No. 33-20128, filed by Cleveland Electric and Toledo Edison).

18 Letter regarding change in accounting principles (Exhibit 18, June 30, 1988 Form 10-0, File Nos. 1-9130, 1-2323 and 1-3583). 28(a) Form 11-K Annual Report of the Centerior Energy Corpo-ration Employee Savings Plan for the fiscal year ended December 31, 1989 (to be filed by amendment on or before April 30, 1990 pursuant to Rule 15d-21). E-6

E [ CFMTERIOR ENERGY EXHIBITS L Exhibit Number Document

 '3a                Amended Articles of Incorporation of Centerior Energy ef      '-

q fective~ April 29, 1985 (Exhibit 4(a), File No. 33 4790). l 3b Regulations of Centerior Energy effective April 28, 1987 (Exhibit 3b, 1987 Form 10-K, File No. 1-9130). 10a

  • Indemnity Agreements between Centerior.and certain of its i current directors and officers.

l 10e(1) Consulting Agreement, dated February 1, 1989, with 'l' R. M. Ginn pursuant to which he is to provide consulting i services to Centerior for the period March 1, 1989 through February 28, 1990 (Exhibit 10e(1), 1988 Form 10-K, File l No. 1-9130). .  ! 10e(2)

  • Employment and Consulting Agreement, dated November 30, 1989, with F. M.' Smart regarding his employment with [

l J Toledo Edison through August 31, 1990 and his providing \ consulting servicer to Centerior and Toledo Edison for the period September 1, 1990 through January 31, 1994. t 1

                                                                                                \

22 List of subsidiaries (Exhibit 22, 1986 Form 10-K, File No. . f 1-9130), y j-24a

  • Consent of Independent Accountants, i 24b
  • Consent of Counsel for Centerior Energy.

25 -*Fovers of Attorney and certified resolution of Centerior k Energy's Board of Directors authorizing the. signing on l behalf of Centerior pursuant to a power of attorney. l l CLEVELAND ELECTRIC EXHIBITS q Exhibit Number Document 3a Amended Articles of Incorporation of Cleveland Electric, effective October 30, 1987 (Exhibit.3, September 30, 1987 i Form 10-0, File No. 1-2323). 3b Regulations of Cleveland Electric, dated April 29, 1981, j as amended effective October 1, 1988 (Exhibit 3b, 1988  ; Form 10-K, File No. 1-2323). l l t l 1 I

                                     'E-7 h
            .                                                                                a

T -; ibit Number Document

1) Mortgage and Deed of Trust between Cleveland Electric and Guaranty Trust Company of New York (now Morgan Guaranty _

Trust Company of New York), as Trustee, dated July 1, 1940 (Exhibit 7(a), File No. 2-4450). Supplemental Indentures between Cleveland Electric and the Trustee, supplemental to Exhibit 4b(1), dated as follovs: -- ;;;;; July 1, 1940 (Exhibit 7(b), File No. 2-4450). iM f2)

3) August 18, 1944 (Exhibit 4(c), File No. 2-9887). _"""""""  ::: L-
4) December 1, 1947 (Exhibit 7(d), File No. 2-7306). -
5) September 1, 1950 (Exhibit 7(c), File No. 2-8587).
6) June 1, 1951 (Exhibit 7(f), File No. 2-8994).
7) May 1, 1954 (Exhibit 4(d), File No. 2-10830).

March 1, 1958 (Exhibit 2(a)(4), File No. 2-13839). 8)

9) April 1, 1959 (Exhibit 2(a)(4), File No. 2-14753).
10) December 20, 1967 (Exhibit 2(a)(4), File No. 2-30759). -
11) January 15, 1969 (Exhibit 2(a)(5), File No. 2-30759). _
12) November 1, 1969 (Exhibit 2(a)(4), File No. 2-35008). ,,,,,
13) Jun? 1, 1970 (Exhibit 2(a)(4), File No. 2-37235). -- o
14) November 15, 1970 (Exhibit 2(a)(4), File No. 2-38460). ___ ,,c
15) May 1, 1974 (Exhibit 2(a)(4), File No. 2-50537).
16) April 15, 1975 (Exhibit 2(a)(4), File No. 2-52995). --------
17) April 16, 1975 (Exhibit 2(a)(4), File No. 2-53309). 3
18) May 28, 1975 (Exhibit 2(c), June 5, 1975 Form 8-A, Fe No. 1-2323). -
19) February 1, 1976 (Exhibit 3(d)(6), 1975 Form 10-K, File ----

No. 1-2323). __

20) November 23, 1976 (Exhibit 2(a)(4), File No. 2-57375).
21) July 26, 1977 (Exhibit 2(a)(4), File No. 2-59401). -----
22) September 27, 1977 (Exhibit 2(a)(5), File No. 2-67221). ------

May 1, 1978 (Exhibit 2(b). June 30, 1978 Form 10-0, File """!!! (23) (24) No. 1-2323). September 1, 1979 (Exhibit 2(a), Sentember 30, 1979 Form 10-0, File No. 1-2323).

25) April 1, 1980 (Exhibit 4(a)(2), September 30, 1980 Form 10-0, File Po. 1-2323). -
26) April 15, 1980 (Exhi bi t 4(b), September 30, 1980 Form ------

10-0, File No. 1-2323).

27) May 28, 1980 (Exhibit 2(a)(4), Amendment No. 1, File No.

2-67221).

28) June 9, 1980 (Exhibit 4(d), September 30, 1980 Form 10-0, File No. 1-2323).
29) December 1, 1980 (Exhibit 4(h)(29), 1980 Form 10-K, File No. 1-2323).
30) July 28, 1981 (Exhibit 4(a), September 30, 1981, Form __
~

10-0, File No. 1-2323).

.31)                          August 1,     1983   (Exhibit  4(b), September 30,   '981, Form 10-0, File   No. 1-2323).
2) March 1, 1982 (Exhibit 4(b)(3), Amendment No. 1, File No.

2-76029). E-8 f -

7 .. I ClVrERIOR ENERGY EXHIBITS 3 Exhibit Number Document I 3a Amended Articles of 'Iti orporation of Centerior Energy ef a ' " fective April 29, 1986 @ ,hibit 4(a), File No. 33-4790). 3b Regulations of Centerior Energy effective April 28, 1987 i (Exhibit 3b, 1987 Form 10-K, File No. 1-9130). 10a

  • Indemnity Agreements between Centerior and certain of its i current directors and officers. l 10e(1) Consulting Agreement, dated February 1, 1989, with R. M. Ginn pursuant to which he is to provide consulting i services to Centerior for the period March 1, 1989 through February 28, 1990 (Exhibit 10e(1), 1988 Form 10-K, File No. 1-9130). .

10e(2)

  • Employment and Consulting Agreement, dated November 30, #

1989, with P. M. Smart regarding his employment with  !. Toledo Edison through August 31, 1990 and his providing I consulting services to Centerior and Toledo Edison for the period September 1,'1990 through January 31, 1994. '

     '22              List of subsidiaries (Exhibit 22, 1986 Form 10-K, File        o.

1-9130). g 4 [ 24a

  • Consent o.f Independent Accountants. l l

24b

  • Consent of Counsel for Centerior Energy. l l

25

  • Powers of Attorney and certified resolution of Centerior  !

Energy's Board of Directors authorizing the signing -on  ! behalf of Centerior pursuant to a power of attorney. 'l CLEVELAND ELECTRIC EXIIIBITS Exhibit Number Document 3a Amended Articles of Incorporation of Cleveland Electric, effective October 30, 1987 (Exhibit 3, September 30, 1987 Form 10-0, File No. 1-2323). 3b Regulations of Cleveland Electric, dated April 29,-1981, j as amended effective October 1, 1988 (Exhibit 3b, 1988 Form 10-K, File No. 1-2323). E-7

              .w

qr . - g% " 1% >- g g $whibit'Nuhbar. Documint [' E

                    - 4b(1)'-              Mortgage -and' Deed of Trust between Cleveland Electric and Guaranty Trust Company of New-York (nov- Morgan Guaranty
  • Trust Company'of New-York), s Trustee, dated July 1, 1940
                                         (Exhibit 7(a), File No. 2-4450).

n'

           ,                               Supplemental Indentures between Cleveland Electric and the Trustee, supplemental to Exhibit 4b(1), dated as follows:
                                                                                 ~

E 4b(2) July 1,~1940 (Exh1 bit-7(b), File No. 2-4450).

 & .                  4b(3)                August 18,-1944 (Exhibit-4(c), File No. 2-9887).
      ^-*                                  December 1, 1947 (Exhibit'7(d), File No. 2-7306).

4b(4) , 4b(5)- September 1, 1950 (Exhibit 17(c), File No. 2-8587). j. 14b(6). June 1, 1951 (Exhibit 7(f),. File No. 2-8994). ,) 4b(7) May 1, 1954 (Exhibit 4(d), File No. 2-10830). i p'  : 4b(8)- March 1, 1958 (Exhibit 2(a)(4), File No. 2-13839). I i 4b(9) April 1, 1959 (Exhibit 2(a)(4), File No. 2-14753). 4b(10) December 20, 1967 (Exhibit 2(a)(4), File No. 2-30759). .

                    .4b(11)                January 15, 1969 (Exhibit 2(a)(5),. File No. 2-30759).            !

4b(12) November 1, 1969 (Exhibit 2(a)(4), File No. 2-35008). l 4b(13). June 1, 1970 (Exhibit 2(a)(4), File No. 2-37235). 4b(14) November 15, 1970 (Exhibit 2(a)(4),. File No. 2-38460).- 4b(15) May 1, 1974 (Exhibit 2(a)(4), File'No. 2-50537). . , 4b(16) April 15,-1975 (Exhibit 2(a)(4), File No. 2-52995). j 4b(17) April 16, 1975 (Exhibit 2(a)(4), File No. 2-53309).  ! 4b(18) May 28, 1975 (Exhibit 2(c), June b, 1975 Form 8-A, File 1 No. 1-2323).

                     -4b(19)               February    1, 1976 (Exhibit    3(d)(6), 1975 Form '10-K, File. <

No. 1-2323). i 4b(20)- November 23, 1976 (Exhibit 2(a)(4), File No. 2-57375). i 4b(21) July 26, 1977 (Exhibit 2(a)(4), File No. 2-59401). l 4b(22) September 27, 1977 (Exhibit 2(a)(5), File No. 2-67221). j 4b(23) May 1, 1978 (Exhibit 2(b), June 30,. 1978-Form 10-0, File l No. 1-2323). l 4b(24) September 1, 1979-(Exhibit 2(a), September 30, 1979 Form 10-0, File No. 1-2323). 4b(25) ' April 1, 1980 (Exhibit 4(a)(2), September 30, 1980. Form j 10-0, File No. 1-2323).  ! 4b(26) April 15, 1980 (Exhibit 4(b), September 30, -1980 Form -7 10-0, File No. 1-2323). l 4b(27) May 28,-1980 (Exhibit 2(a)(4), Amendment No. 1, File No. .j 2-67221).  : 4b(28) June 9, 1980 (Exhibit 4(d), September 30, 1980 Fcrm 10-0, i File No. 1-2323). [ 4b(29) December 1, 1980 (Exhibit 4(b)(29), 1980 Form 10-K, File l No. 1-2323). 1 4b(30) July 28/ 1981 (Exhibit 4(a), September 30, 1981, Form  ; 10-0, File No. 1-2323). l 4b(31)- August 1, 1981 (Exhibit 4(b), September 30, 1981, Form j 10-0, File No. 1-2323). } 4b(32) March 1, 1982 (Exhibit 4(b)(3), Amendment No. 1, File No. 4 2-76029). 1; i f 4 E-8 g 2

         -                                                                                                   l

__h.-.__i__ M-

z = 7 h ". ~ 1 k r , Exhibit 1Nunb r( .Documnnt l 7

                        ,4b(33)                  July.15,-1982 (Exhibit 4(a), SeptemberL 30,.1982 Form 10-0,:

Nil . . . File No.:1-2323).

  • W '

4b(34)j September _ 1, 1982 (Exhibit:4(a)(1), September 30, 1982 Form 10-0,_ File No. 1-2323), i L 4b(35)~ , November 1,'1982'(Exhibit 4(a)(2),-September 30,~ 1982: Form- . . 10-0, File No. 1-2323). _ it

               ,      14b(36):                  November - 15, 1982 (Exhibit 4(b)(36), 1982 Form 10-K,: File'. i No..1-2323).'                                                         ;

14b(37) May 24, 1983 (Exhibit 4(a), June.30,-1983 Form 10-0,_ File t No. 1-2323). *

                     --4b(38) -                 May--1,'1984 (Exhibit 4, June 30, 1984 Form 10-0, File No.        K!

^ 1-2323).  ; 4b(39) May~~23, 1984~(Exhibit 4, May 22, 1984 Form 8-K, File No. 1-2323). 4b(40) June _27, 1984 (Exhibit 4, June 11, 1984 Form 8-K, File No.- , 1-2323). 3 ,',

                     .4b(41)                    September, 4, 1984 (Exhibit 4b(43,),1084 Form        10-K, File    .t No. 1-2323).                                                       ]

14b(42) November 14, 1984 (Exhibit 4b(42),.1984 Form 10-K, File i

No. 1-2323).

4b(43). November- 15,,1984 -- ( Exhibi t 4b(43), 1984 Form '10-K, File 1 No..1-2323).

                        .4b(44)                 April 15,11985 (Exhibit 4(a), May 8,         1985 Form 8-K,. File No. 1-2323).

4b(45): .May 28,-1985_(Exhibit 4(b), May 8,.1985 Form 8-K, File'No. 1-2323).  ! 4b(46) August 1, 1985 (Exhibit 4, September 30, 1985 Form'10-0, . File No. 1-2323). [

                      .4b(47).                  September 1,L1985 (Exhibit 4, September 30, 1985 Form 8-K',        4 File No. 1-2323).
                     '4b(48)-                   November- 1, 1985 (Exhibit 4,      January 31, 1986 Form :8-K, File No,' 1-2323).
                                              > April '15, 1986-(Exhibit 4,< March 31, 1986 Form 10-0, File 1
                     ..4b(49).
                                              -No. 1-2323).
                      '4b(50).                .May 14,1 1986 (Exhibit 4(a), June _30,-1986 Form 10-0, File J                                     ' '

No. 1-2323). M 4b(51): May 15, 1986 (Exhibit 4(b), June 30, 1986 Form 10-0, File  ; No.-1-2323). '

4b(52) -February. 25, 1987,(Exhibit- 4b(52),_1986 Form 10-K, File i No. 1-2323). '
                    ~4b(53)                     October 15, 1987.(Exhibit 4, September 30, 1987 Form 10-0,          ,
                                               ' File No. 1-2323).

4b(54) February 24, 1988 (Exhibit 4b(54), 1987 Form 10-K, File No. 1-2323).

                    ~4b(55)                     September    15, 1988 (Exhibit 4b(55), 1988 Form 10-K, File No. 1-2323).

4b(56) May 15, 1989 (Exhibit 4(a)(2)(1), File No. 33-32724). .; ' 4b(57) June 13, 1989?(Exhibit 4(a)(2)(ii), File No. 33-32724).

                    .4b(58)                    October      15,   1989    (Exhibit 4(a)(2)(iii),      File No.

33-32724). ,j 4b(59)

  • January 1, 1990. 1 E-9
                                                                                                                  ~f

fh p Document Exhibit Number Ingni% Agreements between Cleveland Electric and cer- - 10a ta' d its current directors (Exhibit 10a, 1988 Form 10s Ffe No. 1-2323). KeEmDyee Incentive Stock Plan (Exhibit 4(d), File No. 10a(1) 2'h9)' 19 Keitmployee Stock Option Plan (Exhibit 1, File No. 10a(2) 2J12). LDf tbsidiaries (Exhibit 22, 1986 Form 10-K, File No. 22 ga),

  ,                  *Cet (Independent Accountants.
  • Cat (Counsel f or Cleveland Electric.
                         *F0 (Attorney and certified         resolution of Cleveland         .

25 Elici Board of Directors authorizing the signing on be ICleveland Electric pursuant to a power of atey. TOLEDO EDISON EXHIBITS Document - g (Number Ad iticles of Incorporation of Toledo Edison ef fec-3a tienber 25, 1986 (Exhibit 3a, 1986 Form 10-K, File Nd58, 3 y) Ceca' of Amendment effective July 31, 1987 to Ait tticles of Incorporation of Toledo Edison (it 11),1988 Form 10-K, File No. 1-3583). C(f blations of Toledo Edison dated January 28, 3b 1%sended effective July 1 and October 1, 1988 (h 11988 Form 10-K, File No. 1-3583). e, lated as of April 1, 1947, between the Company 4b(1) art he National Bank of the City of New York (now - Thstmhattan Bank (National Association)) (Exhibit 2(le. 2-26908). Stnt Inden t u res between Toledo Ediso$ and the TI Semental to Exaibit 4b(1), dated as follows: Str 1948 (Exhibit 2(d), File No. 2-26908). - O(2) Al l(Exhibi t 2(e), File No. 2-269M) . 4b(3) Dc1)50 (Exhibit 2(f), File No. 2-26908). 4) H815(Exhibi t 2(g), File No. 2-26908). Ab(5) FE 166 (Exhibit 2(h), File No. 2-26908). -- e(6) HaShhibi t 5(g), File No. 2-59794). 4b(7) At, :(Exhibi t 2(c), File No. 2-26908). 4b(B) NC 110 (Exhibi t 2(c), File No. 2-38569). Ab(9) At 1(Exhibit 2(c), File No. 2-44873). 4b(10)

                                                                                         ~-

E-10

m t ixhibit Nu;b7r Docum9nt 10a' Indernity Agreements between Cleveland Electtic and cer- [ tain of its current directors- (Exhibit.10a, 1988 Form , 10-K, File No. 1-2323). 10a(1) Key Employee Incentive Stock Plan (Exhibit 4(d), File No. 2-37309).

 - 10a(2)          1978 Key Employee Stock option Plan (Exhibit 1, File No.

2-61712). 22 List of subsidiaries (Exhibit 22, 1986 Form 10-K, File No. 1-2323). 24a

  • Consent of Independent Accountants.  ;

24b

  • Consent of Counsel for Cleveland Electric.

25 *Povers of Attorney and certified resolution of Cleveland Electric's Board of Directors authorizing the signing on behalf of Cleveland Electric pursuant to a power of l 1 attorney. TOLEDG EDISON EXHIBITS Exhibit Number Document 3a Amended Articles of Incorporation of Toledo Edison effec- 1 tive September 25, 1986 (Exhibit 3a, 1986 Forn 10-K, File. j No. 1-3583). 3a(1) Certificate of Amendment effective July 3 't , 1987 to j Amended Articles of Incorporation of To:ledo Edison j (Exhibit 3a(1), 1988 Form 10-K, File No. 1-3583). . 4 3b Code of Regulations of Toledo Ediso7 dated January 28, I 1987, as amended effective July 1 and October 1, 1988 (Exhibit 3b, 1988 Form'10-K, File No. l-3583). 4b(1) Indenture, dated as of April 1, 1947, between the Company I and The Chase National Bank of the City of New York (nov- I The Chase Manhattan Bank (National Associat:-1)) (Exhibit 2(b), File No. 2-26908). Supplemental Indentures between Toledo Edison and the j Trustee, Supplemental to Exhibit 4b(1), dated as'follows: 4b(2) September 1, 1948 (Exhibit 2(d), File No. 2-26908).  : Ab(3) April 1, 1949 (Exhibit 2(e), File No. 2-26908). l 4b(4) December 1, 1950 (Exhibit 2(f), File No. 2-26908). l 4b(5) Harch 1, 1954 (Exhibit 2(g), File No. 2-26908).  ; 4b(6) February 1, 1956 (Exhibit 2(h), File No. 2-26908).  ! Ab(7) Hay 1, 1958 (Exhibit-5(g), File No. 2-59794). i 4b(8) August 1, 1967 (Exhibit 2(c), File No. 2-26908). 1 4b(9) November 1, 1970 (Exhibit 2(c), File No. 2-38569). 4b(10) August 1, 1972 (Exhibit 2(c), File No. 2-44873).  ; E-10 D

m, 7q Exhibit Numbkr; Docum:nt 4  ! J4b(11) ' ' November.1,- 1973f(Exhibit 2(c), File No. 2-49428).- il Td- '4b(12) July 1,: 1974 (Exhibit 2(c), File No. 2-51429).

;            4 4b(13)c                  October 1,-1975 (Exhibit 2(c), File No. 2-54627).-         'l;

[ ?4b(14):

                  .                         June-1, 1976'(Exbibit 2(c), File No. 2-56396).             .!'

14b(15) 0ctober 1, 1978:(Exhibit 2(c), File No. 2-62568). b -4b(16);  : September l',.1979 (Exhibit 2(c), File No.: 2-65350). ' 14b(17) September 1, 1980 (Exhibit 4(s), File No.- 2-69190).

                                                                                           ~

g '

,                 4b(18)'                   October'1, 1980 (Exhibit 4(c), File No. 2-69190).

4b(19): . April 1, 1981 (Exhibit:4(c), File No. 2-71580).-  ; 14b(20)~ November 1, 1981 (Exhibit 4(c), File No. 2-74485).. -l 4b(21)- ' June 1, 1982 (Exhibit 4(c), File No. 2-77763), 4b(22)l September 1, 1982-(Exhibit 4(x), File No. 2-87323).

!.                4b(23)                    April 1',-1983 (Exhibit 4(c),. March 31,- 1983 Form 10-0,       '

b(e File No. 1-3583). - L 4b(24). December -1, 1983 (Exhibit'4(x), 1983 Form 10-K, File No.- [ L . 1-3583). -l J 4b(25) April 1, 1984'(Exhibit 4(c),. File No. 2-90059).-  !

               '4b(26)                     October 15, 1984 (Exhibit 4(z), 1984 Form 10-K, File No.         L a                                -1 3583).
             - 4b(27)                     -October 15, 1984 (Exhibit 4(aa), 1984 Form 10-K, File No.-       :
                                           .1-3583).                                                       i
             '4b(28)                       August 1,.1985 (Exhibit 4(dd), File No. 33-1689).              .l 4b(29)'                  August 1, 1985 (Exhibit 4(ee), File No. 33-1689).               l 4b(30).                  December 1, 1985 (Exhibit 4(c), File No. 33-1689).

1 4b(31)- March .1,.1986 (Exhibit 4b(31), 1980 Form 10-K, File No. 1-3583). .' ~ 4b(32) October 15, 1987-(Exhibit.4, September 30, 1987 Form 10-0, ' File No. 1-3583). i

.4b(33) September .15,=1988 (Exhibit.4b(33),'1988 Form 10-K, File l No. 1-3583). -

L4b(34):

  • June 15, 1989. '

4b(35) *0ctober 15, 1989.

            . 10a                       . Indemnity Agreements between Toledo Edison and certain-of its current-directors (Exhibit 10a, 1988 Form 10-K, File No. 1-3583).

10e(2) Employment and Consulting LAgreement, dated NovemberL30, 1989,. with P. M.-Smart regarding his employment with Toledo: Edison through August 31, .1990 and his providing- .l consulting services to Center' lor and Toledo Edison for the i i period September 1, 1990 through January 31,~1994 (Exhibit 10e(2), 1989 Form 10-K, File No. 1-9130). -l f-t [: E-11

                                  "~

n , f{b V g;.

                       , IExh'Ibit Numb:r-3 ..                       .

Docum nt

i

/W-A3 ~ ;24a4

  • Consent.of Independent' Accountants.. ]

' w' '. 24bL

  • Consent of. Counsel-.for-Toledo 1 Edison.-

k -

                         -25                    *Powerst of Attorney' and. certified- resolution off Toledo             ,

Edison's!-Board of Directors' authorizing the signing, on.  ; Je

                                                . behalf of' Toledo Edison pursuant to a power of attorney.
                                                                                      ~

/U

                         '28(b)                 . Form- 11-K Annual Report of           the Toledo Edison-Savings       >

U Incentive. Plan for the fiscal year ended' December'31, 1989 j y (to -be filed- by- amendment on-or before April 30,' 1990,  ; p' pursuant to Rule 15d-21). [ t

   < '                    Pursuant'to Paragraph (b)(4)(iii)(A) of item 601 of' Regulation S-K, the'Regis-               '

trants' have not filed as anLexhibit, to this: Form. 10-K any instrument- viths -! < respect to long-term. debt 11f the total' amount' of securities, authorized there-  : under does not exceed 10% of the total assetsiof the applicable: Registrant and  : its subsidiaries'on'a consolidated basis, but each hereby agrees to furnish to g the Securities'and Exchange Commission on request any~such instruments. E -! Pursuant- to Rule 14a-3(b)(10) under the Securities ~ Exchange Act of 1934, copies; of exhibit's filed by the Registrants vith this_ Form 10-K1v111 be fur-  ! nished ,byr the Registrants to share ovners upon written. request-and Eupon re-- ceipt .in-advance of the aggregate- fee for preparation of.such. exhibits'at a  !

                          < rate of-$.25 per page, plus any postage or shipping expenses 'which would be incurred by the' Registrants.

f T t

                                                                                                                     .l a

1 e xj

                                                                                                                        +

E-12}}