ML20043A651
| ML20043A651 | |
| Person / Time | |
|---|---|
| Site: | Beaver Valley |
| Issue date: | 12/31/1989 |
| From: | Rogers J OHIO EDISON CO. |
| To: | |
| Shared Package | |
| ML20042G908 | List: |
| References | |
| NUDOCS 9005220357 | |
| Download: ML20043A651 (42) | |
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> ' p.uM,,OMo I&lison (lompany is headquanned in :lkmn, yy%gqqp w~
. ! l0hio. Its subsidiary, hwn.9Ivania lhrer Company, is headquannrdin & Casde, hwnsr/vania.
llased on totalkilowatt-hour sales, we air the lith latgest investor-ouwed clearu system in the Contents l nltal htates.
E our w kholders .'
Res icu of ()peranom 4 I inath ial Res icu I7 hkholder informanon .40 I hre(tors and \lanagement 4I l
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hon Cornpany is headquartnedin Akron,
, io. Its subsidiary,11nnsylvania 11eer Cornpany, is headquarteredin New Castle,11wnqivania.
Based on totalkilowatt-hoursales, we air the 17th largest investor-owned electric systnn in the C*****" United States.
'li> Our Stockholders . .2 Review of Operations .4 l'inancial Review . .17 Su>ckholder Information . .40 Directors and hianagement . .41 l
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( ! Finenelil Highliglets-l'or the Years Ended ikcember 31 - 1989 1988 Change (In mdlums cuegu get shart amtrunN Kilowatt-ilour Sales 31,878.2- 35,685.0 - 10.7 %
Operating Revenues $2,155.0 $2,142.6 + 0.6%
Operating Expenses and Taxes 1,611.3 I,645.6 - 2.1 %
Operating income - - 543.7 497.0' + 9.4 %
Allowance for Funds Used
[ During Construction and
. Capitalized Interest 26.4 25.2 + 4.5%
' interest and Other Charges 351.5 337.1 + 4.3%
Net incorne ' 361.0 218.9 + 64.9%
' Earnings on Common Stock 332.9 t h6.2 + 78.8%
Earnings per Common Share:
Before Disallowance $2.18 $2.06 + 5.8%
After Disallowance $2.18 $1.22 + 78.7%
Dividends per Common Share $1.96 $1.96 -
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- Dividends on Capital Stock $327.0 $330,7 -1.1% g iN
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Construction of l'acilities $213.1 SI82.4 (5 talked
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Nuclear Fuel - 39.0 32.9 *
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, Capital leases 5.9 6.3 in in
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'Iotal Internally Generated Cash S258.0 82.6
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, External Financing: p?
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[ n New Financing . $907.9 5186.5 0 ? ;t Redemptions and Repayments 997.9 528.5 g
' ? .g n y a Net External Financing $ (90.0) $ (342.0) l l l Return on Average Common Equity:
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- Before Disallowance 13.0 % 11.8 % p ,
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T3 Cur $1sckholdars hales to mdustnal customers ucre dem n less than one percent. reflecting hmen demand from the steel and auto- reuner unts assoaated with incaser related mdustries m our senice area. Valley 2- the last of the operatmg l
.i onnpam did ucll m 19H9. Retail The general sof temng of busmess nuclear units to be reflected in our acs eu ceded 19NF record-settmg actnits natmnalh m 1984 was rates. This unit has been scrung j lesels, earnings impimed sigmhcanth moderated in our sersice area t'n a customers smcc Nmember 1987.
j mer 1988 results, and the market strong export busmess for our mano-The new rates are designed to l talue of our comnum stock mercased tacturmg customers and a gum mg dm a nm m unwl mm- l l nearly 26 percent. plastics mdustro dM M18 n ilWn h N$
We carned $218 per share of common ' Intal kilowatt hour sales m 19H4 utre implemented - a request we felt was stock m 14H4. Tins compares tasorably dou n 10.7 percent from the 1988 supported bs ample esidence and u nh the $2 06 per share we carned m record lo ci maml3 because of a reflected aggressise management cost 1988 before the u nte-ott ol certam 28 2 percent drop in sales to other control. We were extremely disappointed nuelcar plant constructmn costs, uluch utihties (:apa(ity asailable foi ott bs the PU(:() Statfs report last month j redu< cd earnmgs to $1.22 per share. m. tem sales was significantly reduced that called for a one-step increase at a I Retal! Sales Remoln Strung because of refuchng outages at the maimum of about $118 nulkon. We l
hales m aU thice major categones re. Pem I and licaser Valley I and 2 intend to substantiate our position m.uned strong m 1989, mmpared nm icar units. Nonetheless, oftmstem before the (:omnussion when heanngs
! u nh 1988's rewid lesels. hales to sales pmduced more than $228 nulhon begin m April l conuneinal customers led the way, of resenue m 1989.
The Energy Marketplace:
i bettenng 1988 resuhs bs neath three We aho estabhshed a new rewrd peak Competitive l peu ent hales to residential couomers load of 5,152 megawatts on July 21- We base alwass competed with natural held steadt An expandmg wstomer the fourth consecutne year for a gas and fuel-oil companies for l base and aggressne marketmg efforts record peak. busmess, and weie been successful l
helped oftset reduc ed air-mndaioning A Decade of Progress becauw weh done a good job seiling j use caused bs cooler sununer We base completed a decade of re. a naturalh supenor produn -elenneny I temperatures. bmiding and h.ne come a ser3 long llut the energs marketplace has changed wat As we begin the 1990s, ut are a dramatically. We're nou up ag.unst new much stronger and better compant compet itors - cogent. at or s, indepen-We feel good about the progress dent power producers, esen neighboring ucie made: electric companies-that are selling
.i [" t (:onstruction of the Pern 1 and Beaser Valle3 2 nuclear uints is electricus too.
'Ib succeed in this marketplace, we l
belund ut had to deternune w hat more muld be
. Our generatmg umts are perfornung done to make electricity the energy of at far lugher lesels of asailabihty than choice and ()hio Edison the procider in 1980. of choice. We had to do more by way j r Our aseiage fuel msts are the kmest of anaMng cuuomer needs and of am of Oluo's elem < ompames. &lnenng cuuorneri wants in order to !
keep or attract their business. And we y Our off-ssstem sales base become had to differentiate our product and an unport mt sourt e of res enue.
sen ices f rom those of our competitors,
, Our cred tuorttuness has bee" and market those differences to our upgraded cuuomers l
Rote Request Filed Marketing in the 1990s: l In August, we filed an apphcation u nh Differentiation the Publu l tihties (:omnussion of in todais energs market, it isn't i 1
() hut IIN ll( }) hir a twil-step lilcICasC flCeessarlls prile Illat drlses cust(Irner m rates ma the neu tuo sean to dcasmns. (:ustomers are lookmg at !
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- the value they get for the price they
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- pay. The quality and reliability of the h
but,'Who is going to have the power services we provide are as important to supplyT to customers as price, We do, of course, have plans to meet
- An importarr edge that our com' covering all union-represented em- demand, but they are short-term,
, petitors lack is our experience and ployees. We also offered employees incremental solutions. While these staying power. Our dedication to both productivity incentives tied to the solutions may be right for the near
- customer and community service is achiewment of certain objectives term, they may not suffice for the also an important factor. Our many designed to help improve performance long term.
community-oriented programs attest in specific areas. Achievement of
- to our corporate citizenship. And our All electric companies cannot depend objectives by employees produced an numerous customer service programs on importing power from other additional Company match to the confirm our commitment to quality utilities or from independent power employee savings plan.
- and service, pmducers and cogenerators. The Power Supply Planning: transmission networks and system
- T:rgeted Marketing Tough Decisions Ahead interconnections cannot carry Our fivencar marketing strategy is Reliability has long been a comnetitive unlimited transfers.
aimed at increasing market share bY advantage for our company. Our power achieving specific objectives with each This is not simply a warning of trouble supplies have been strengthened by category of customers-residential, ahead. We regard it as a challenge to the addition of capacity from two commercial and industrial-thmugh our best and deepest thinking. And it nuclear units in late 1987. We have rate options and special services sets the stage for much-needed also pursued ways to get maximum
' tailored to their needs. This includes cooperation among all concerned, output fmm existing capacity: increasing
- aggressively going after increased elec- regionally and nationally, in planning coal-fired generating unit performance, tomorrow's energy supplies.
-tric sales to industrial customers bY promoting off-peak energy sales and .
- offering ceonomic development rates .
Our people have demonstrated an abih.ty l increasm.g energy eff. .iciencies. As a
' [
- to new or expanding businesses- result, the Company has m. place the to meet challenges and find ways to H:Iding the Line on Costs ~ resources it needs to meet customer turn solutmns into benefits for the We recognize that critical components demand as we enter the 1990s. Company With your support, we did
- in staying competitive are increased it in the 1980s. With your continued-Although our reserves are adequate productivity and holding the line on confidence, we will do it in the 1990s. l now and we are able to sell power off-costs.
system, we share the growing concerns in 1989, ur completed a work force study of our general offices. As a being voiced by many about a develop- .
Af -
ing generating capacity shortfall. This result, we have streamlined our situation compels our attention and an justin T. Rogers, Jr.
organization, elimWsing about eight explanation to our stockholders. President
. percent of genew oftice staff For some time, we have been
. posittom, ihat reduces annual costs anidyzhg our own circumstances, Ntarch 1,1990 by about $6 million. Since 1982, we w hich are a product of our past q
~j have trimmed our work force by nearlY building experience, our regulatory 1 1,000 positions through a combination relationships, shifting demand and of attrition, hiring freezes and the staff j
emerging legislation, particularly the '
reductions at our general offices. uncertain impact of acid rain Another' cost-cutting achievement of legislation. Like most other electric 1989 was the full operation of our new companies in this country, we have no
-subsidiaries, OES Capital and OES firm plans for major power piant Fuel. These subsidiaries will produce construction, substantial savings without increasinE Yet we foresee continued and steady staff, facilities or equipment. growth in demand for our product.
During the year, we successfully nego. The emerging question is not simply, tiated new three-year labor agreements "Who is going to supply the powerP 3
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l Review of Operations Are Ecznsmy and Rstall Salas
! Retail sales in 1989 bettered 198h.
record results. Sales to our commer-cial customers were up a healthy megawatts. Looking at 1990, we 2.9 percent, as retail and service expect continued strength in sales sectors continued to expand. Our to commercial customers. We also industrial sales were below 1988 anticipate higher sales to residential levels by less than one percent. This customers from continued additions f small decrease reflects the impact to our customer base and from on area steel companies and auto- increased use of electricity per related businesses from declining household. In the industrial sector, auto sales m the last half of the however, electric sales will decline year. Ilowever, local manufacturers if our steel and auto industry cus- J continued to benefit from a generally strong export market. We also sau w~- higher electric sales to the plastics
[ industry, w hich is an important and growing industrial group. Sales to residential customers held steady.
%A . More temperate weather moderated g ff
,f . both heating and air-conditioning
_.~ use, but continuing growth in our customer base aided our residential Uk' sales. In 1989, we added nearl)
' "y,49 4 9,000 new residential customers.
'k Total kilowatt-hour sales were dow n almost 11 percent in 1989, primarily because of a 28.2 percent decrease
$ in off-system sales. Sales to other N utilities were down because planned 4
F generating unit maintenance and the I
s refueling of three nuclear units re-i< duced the amount of power available for off-system sales. We established a new system-wide peak load on July 24. when customer demand hit 5,152 megawatts. This was i the fourth consecutive year for a record peak and represents about a io percent increase in peak demand over that period. On December 21, in the grip of the unusual cold that cmered ..ur service area, ue set a new winter peak load of 4,962
. WAErfj
tomers continue experiencing kmer 7: 2" demand for their products. \ '
Retail Kilowatt-Hour Off System Sales: An with Ibtomac Electric l\mer n3 9 r; soie, important Source of Revenue Company (l'El%:0), originated in : \ " ' " ' ' ' " " ' ' '
?!) s in 1989, off-systent sales accounted 1987, represelited an aggressive 71 0
,. N ] U for more than $228 milhon of reve- markenng approach to sclhng p(mer [ n il - p nue, compared w;th $254 milhon in off-system. In Januan 19M9, l'El'( :( Ts ,
n . e l 1988. While the decrease in ofl- power purchase Cominttmellt ultil '
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,. o system sales was a major reason for us went from 2n to 300 megauatts, 7l
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oWer kota1 k ioNatt*hou[ ba1Ch in and in )u ne an other i5 0 m ekaU at$s .
h 1989, these sales remain an impor- became part of the finn comnutment, P f? h tant clernent in our financial results. for a total of 450 megauatts. Tlus j; To illustrate the point, our contract agreement extends through 2005 Ek YL hk 2L $L ss se si es se l
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v tos t02 Customers toi served paw ,,,,,, peak sales, since we usually experi-ence our greatest electric demand during the summer. With our com-mercial customers, the strategies are to offer more competitive pricing and advanced technologies to capture more of the space heat-ing business. In the residential market, the objective is to increase space and water heating business.
Differentiation of our services in as se er se se these highly competitive markets will require us to establish our and will represent, with inflation, identity more firmly, to develop an average of $150 million of revenue stronger, more direct communication annually. with our customers and to be more New Marketing Plam responsive to their viewpoints and e Differentiation needs. We are moving in these We initiated a new five-year directions by increasing our contacts marketing plan inlate 1989.The plan with customers and by providing recognizes and addresses the them with more usefulinformation continuing challenge of the energy on how to get the most out of their marketplace: to differentiate our energy dollars.
product and services from our com-Promoting Business Expansion petitors'on the bases of quality and ik>th Ohio Edison and l'enn l'ower value. Overall, the plan calls for a offer special five-year, priec-incentive two percent net increase annually . .
rates to new or expand.mg mdustnal in retail sales. The goal in industrial ,
customers. I,hese rates enable us to sales is more targeted marketing. We help customers meet their start-up aie looking for more penetration or growth reauirements and make into process heating. In the con.-
the wisest and most economical mercial and residential sectors, we use of our services. In 1989, want to increase wintertime, off-26 companies took advantage of
,y these rates, creating 1,357 new jobs -_
Attracting new business to our service
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V area depends on the availability of electric sales. Since the rates were ] ,,
skilled labor, quality communities, introduced in 1984,122 customers I controlled cost of living, accessible i.f
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location and top. notch eleoric servicm pg The Carousel Works, Inc., came to the investing approximately $411 million ' +-
Mansfield area to build a corovsc! as in capital improvements and adding #
pan o' a downtown redevelopment a project. .and decided to stay.
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Other a/ 1 attitudes. These annual surveys tell Utilities k it
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Iv more than 7,300 jobs in our senice us how customers feel about the
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/ g gg / , $ )f $41 million in electric sales in 1989 better serve them. What our
,s / 5 $ 5 customers say is sital to our E
i i A 1 Customer Service Starts b with a Phone Call '"""'I"""'"*""'"'""E'
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residential customers gave us high 4 1 I
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? 5 1 k 6 marks on electric service, respon-m d 8 4 million phone calls to us each year.
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.l.brough regular surveys, thes tell and the value of electricity compared
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$ 3 us that we do a good job of answering i ) L w N uith other senices. Our consumer Jk JL JR JL JL their questions and resolving their es so er as s' advisory panels are further evidence of our commitment to customer service. These panels, organized at the disision level, pull together commumty members u ho represent such diverse interest groups as senior citizens, business ou ners and managers, educators and social
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formation and ideas on topics that hase ranged from how to produce a better, more understandable elec-l tric bill to the role of nuclear power l in meeting energy needs. We also have a Reliability and Quahty ot
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0 Service 'lask Force u hich assesses s electric service reliability by moni- !
l toring the number, frequenev and duration of service interruptions. l By evaluating actual measurements of interruptions against established I company standards, the task force provides guidance on hou best to spend asailable dollars on nupros ements.
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New Rates Requested i
In .\ugu st 1989, Ohio Edison filed '
with the Pubhc l'tihties (:ommission of Oluo (Pl'('.0) for a tuo-step merease in electnc rates. The i
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$218-million request includes the capital and operating costs for the up Company's share of Unit 2 at the lleaver Valley l'ower Station. This unit went into commercial operation in Nosember 1987. As filed, these new rates would produce an increase in annual revenues of 7.5 percent, or $l24 milhon, et-fective July 1.1990, and another 5.3 percent, or $94 milhon, as sa si se se effective July 1,1991. On February 9.1990, the I'l'(1) minimized the need for new finan-Staff released its report on our cing to coser these expenditures.
rate request, recommendmg to the ()ur construction budget for 1990 is Commission a one-step increase $265 million. Financing activity in ranging from 5.5 to 7.1 percent. 1989 was largely directed toward The Staffs report is only one debt reduction and refinancing. step in the long and involved 1)uring the year, we redeemed, rate-setting process. llearings on retired or refinanced more than the Company's request are to begin $575 million of debt and preferred i" APfil- and preferense stock, reducing Effective Financial Management annual interest and dividend costs The Company's new subsidiary, OES by about $31 million. Capital, incorporated, formed in late Fiber Optics Contracts 1988, secured its financing and began Add Revenue
;t., doing business in the fourth quarter While our core business will con-of 1989. OES Capital prm ides a tinue to be electricity, we watch for specifically tailored financing struc- compatible opportunities to make cure w hich achieves substantial cost the best use of our assets and im-savings in financmg certain of the prove profitability. Getting more Company's electnt service accounts i recen able. In 1989, system construction expenditures were about
$219 million. We had ongoing expenditures for our coal-fired 4
\ generating plants and for the shared neoca, units. 2 men aum d,suibe-
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out of our assets led us to install 7 fiber-optic cable along some of our To IFal transmission hnes. Although we use operation of these units. Our goal is ;s Million Btu [ wm j a small portior; for our own needs- to push unit availability up to g g most of our fiber-optic capacity is 85 percent by thc mid-1990s.
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leased to telecommunications com-F FM Ce panies for their long-distance tele- Still Lowest in Oh:a , . g phone service needs. We secured Ohio li. dim,n continued to purchase two new orders for such lease arrange- co.d in 1989 at an average cost that l ( ments in 1989, which will brine was lower than that paid by any of l total annuai revenue from fiber Ohio's electric companies. This is ( optics leases to $1.7 million per an important advantage that we year by late 1990. have been able to claim for the past p Ig , ,, (p investment Recovery Program improving profitat,ility by reeveling or selling surplus assets is the idea behind the Company's investment Recovery Program. Since the program was formali/.ed in 1985, we have raised more than $4 million by y selling assets no longer used or useful. More than $1 million of that : total was raised in 1989, in part ,
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from our first public auction of office equipment, vehicles and construction eqmpment. Generating Unit Availability: ' . se . - A Critical Difference An intensive generating plant availability program begun in 1978 has dramatically increased coal-fired generating unit performance. In the g , late 1970s, we were dea!ing with run wnmors and Amme a < + lou rencrating unit asailability-a ""* n o " W " * ' ' " ' ' " "
< > i: n q a' b e d.? rM $9 f
- problem shared by other utihu. es , ,
with large cot-fired units. Ib 1988, we had increased availability to 80 percent. We achieved our goal of 76 percent for 1989. This goal uas 4 lower because we planned extended maintenance outages that would .. , enablc us to improve the long-term l 13
l i adsantages m malear fuel fmancine and procurement. mcludmg greater fuel anagenwnt Heduhn and sesen years. \Vc aclueved it by making timeh purchases and by managing wduced finanane and adnuruv Savings and 'lin l)eferral Plan. h tratne (osts- any of sn (:ompany objectives in coal supply contracts wha h uele structured to gise us good flexibih3 . Employee Mileposts the areas c' carnings per share, O ES liuel. Incorporated- a u huh Our employees arrived at some operating effectiveness, sales owned subsidiary formed late in important mileposts in 1989: growth, safety, attendance and 198. to finance the nuclear tuel rc~ service value were met in 1989, the Wou % Rum a quirements of the system -became ompany would inmase monunon I)uring the summet labor agreements fully operational in April. We espect stock conuWuuon by fise percent thro @ 1992 uere ieached with the the subsidian to produce substantial (:til ty Workers l'nion of America for each obycow acNewd, up to annual savings. OES Fuel pan ides 25 pewent. Bus Coinpany niawh and the International lirocherhood of Electrical Workers, coscring all plants and divisions that are uruon-represented. The Companies and the ( unions also finahzed pension plan arrangements through 1995. A benefit
.3 of good management / labor relations W
- is that the Companies have nego-y tiated fair labor agreements without experiencing a work stoppage since July 1978. !
Ilb\u H C \Rt Cosn
+fN llecause of the rapidly rising costs of providing health care to employees and retirees, we continue to look for ways to strike a balance between j i;, good coverage and cost control. In f M-r\dj
- y. 1989, we resamped our health care 41 .,
puons by offenng three choices in t mployees are tough compenion , everyth,ng they do m Aci.na Corpor a,e health ctre coserage, effective Chohenge evenn annuo;m"" January 1.1990. The basic differ-comnony. communoy wide owem . compantions that promote ym < n am
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hiness amounts ot deductibles and employee contributions to coveragt -
- usnmu sms em A pornon o' 1he A be m ~e hme g 39g9 g,( .
g spen + ve en-onmenw p.mec o . r I '
%ince l9 7 b hOs (lOne f(> presers n;j the '
po ov of i:aet on : sn e a m, +o ;q' employees participating in the ou , sponsorsnq o r ene i s,nq um program the imung of .akes and st rooms PO DeU!ral:ye 0,:dd ; at or i teome LWogu produc t- ', 14
i would be added to the standard h,h hh , , , Generating contribution of 25 percent on the first six percent of pay sased. long appreciated and addressed. l f y Fuel T pe Employees attained the safety, Since 1975, we have spent more f f $; than $2 bilhon on environmental 1 }} attendance and service value objec-protection and have reduced the r.m j {k f }[ h "' tives, resulting in an additional W sulfur-dioxidt minioin from our . I 3 -d 15 percent contribution, approxi- coal-fired plants by about 50 percent. l l I f mately $1.1 million, to the plan. ' We continue to look for cost-f [ f Environmental Commitment effective ways to protect the envi- L L d ju { reaiaps no issue is more timeiy n,n m e m. we a,e a pan nerin m ore l [ > m j g ,_ than that of environmental protec- clean coal technologs projects than l l l' s gg mr v u v n o f u }o " tion, but it is one that we have any other electric company in the fp fp fp fp fp gygqqggya
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sulfur-dmside renunal, many of the (lean coal technologies also reduce nitrogen oudes. another bs-product of United States. The nine projects bunnng coal. Our lugest operating Governor's Award for Outstanding in which ue participate represent clean coal technologs projet t is at Achievement in Waste Nianagement an investment of more than our Educuater P: ant in f oram. and Pollution Control, and Power
$183 million from gmernment and Ohio. The i.INill project u hich Niagaeine's 1989 Environmental private sources. The clean coal stands Ar I.imestone injection Protection Award. The $47-million 1
projects focus on findmg uays to Nluitistace llurner. reduces sulfur- 1,1N111 project is a jomt venture with I burn coal cleanly and at less cost dioxide enussions bs more than the l'.S. Environmental Protection than instalkng expenGe scrubbers. halt and nitrogen oxides bs almost Agenes, l .S. Department of Energy, a technology that could be outdated as much.1 lNill has receised tuo Ohio Coal Development Office, by the mid-1990s. In addition to major awards -- the 1989 Ohio Consolidation Coal Company and liabcock & Wilcox (:ompany. Clean Air Legislation
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exactly when and if the proposed
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channes minhi b-maau. we me actively pursuing every opportunity
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electric companics in the Niiduest, , ( N Company hm long oHered r~.w since 41 percent of our generating p m ntsoo n to omm o na , r wps Me m! .o r r i the [Oro!' > 'R' t (dPdC Iy DU I UCC IUdjuI dddiEiUUd! l s..m v 1 oco- Pr w, , m: environmental controls. Our nuclear d u e w ah" P<an'una v i . . I i Ufuts, our scrubber-c(luipped coal-i ,. , r m ,1 e., fired units and most of our oil-fited l peaking units are in this category. l l l I \ ' l i l l l l 16
e f
. ,t Financial Review -
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i Management Report ' I The consolidated financial statements were prepared by the' management of Ohio Edison Corupany, wno take - responsibility for their' integrity and objectivity. The - > statements were prepared in conformity with generally. 3 accepted accounting principles and are consistent wit5 - i other financial information appearing elsewhere in this ;
- j. report. Arthur. Andersen & Co., independent public ;
accountants, have issued a report on the Company's I financial statements in which they comment on the-- recoverability of the Companies' Perry Unit 2 irwestment. The Company's int: mal auditors, who are responsible - to the Audit Committee cf the Board of Directors, review the results and performance of operating units within the -l Company for adequacy, effectiveness and reliability of: , accounting and reporting systems, as well as managerial and operating controls. ,; The Audit Committee consists of four nonemployee directors whose duties include: consideration of the ade-quacy of the internal contmis of the Company and the , objectivity of financial reporting; inquiry into the number, i extent, adequacy and validity of regular and special audits conducted by independent public accountants and the: l internal auditors; the recommendation to the Board of 1 Directors of independent accountants to conduct the , normal annual audit and special purpose audits as may be ! required; and reporting to the Board of Directors the f Committee's findings and any recommendation for -) changes in scope, methods or procedures of the auditing - ' functions. The Audit Committee held three meetings t during 1989.- ,
- t. [
H. p. Burg W. A. Daniels Senior Vice president Comptroller 9 Chief Financial Officer I l. 17
g ? Management's Disc ssion cnd Analysis of Results of Operations cxd Financi:1 Condition hsvits of Operations The Companies' commitment to purchase a portion Earnings on common stock in 1989 increased 79% from of Cleveland Electric illuminating Company's Perry earnings in 1988, which were significantly reduced by Unit I capacity, which began in November 1987 and
$127,645,000 ($.84 per share of common stock) due to ended in hiay 1989, was primarily responsible for the . the Company's write-off of a portion of its investment in changes in purchased and interchanged power expense Perry Unit I and Beaver Valley Unit 2. Earnings per share in 1989 and 1988.
of common stock in 1989 were $2.18 compared to $1.22 Other aperation e.nd maintenance expenses increased in 1988. The return on average common equity increased in 1989 due principally to costs incurred during refueling to 13.0% from 7.0% in 1988. outages at the Companies' nuclear generating units. increased operating revenues in 1989 and 1988 resulted increased expenses in 1988 compared to 1987 wrre due primarily to the commercial operation of Beaver Valley 1 principally from increased retail sales revenue. The
~ Company and Penn Power (Companies) were granted rate Unit 2 and Perry Unit 1 in November 1987.
increases effective in February 1988 and hiay 1988, Commercial operation of the units also resulted in respectively, designed to increase annual operating revenues increased depreciation and general taxes and decreased , by approximately $152,000,000 and $67,000,000, allowance for funds used during construction in 1988 respectively. The following summarizes the sources of the when compared to 1987. hiaintenance expenses were changes in operating revenues during 1989 and 1988: down in 1988 compared to 1987 due to costs incurred in iw9 i9u 1987 during an outage at the Bruce hiansfield Plant and
""* asbestos removal at several of the Company's other g, ,,,,7 Sales to retail customers; N00CI0tiUb u0itS*
Increased base rates 5 46.6 $212.1 The increase in expenses attributable to the commercial increased kiknratt-hour sales 10.2 90.3 operation of the nuclear units was somewhat offset by
"'"""I"'"* * * * ' ' accounting orders from the Public Utilities Commission o o and tb Wnns#ania Mc Mty Sale holesale customers (5 )
other 1.5 (0.3) Commission permitting the Companies to defer certain Net increase $ 12.4 $363.0 Beaver Valley Unit 2 and Perry Unit 1 costs until their , recognition in electric rates (see Note 3 to the Consolidated Sales to retail customers increased slightly by 0.4% in Financial Statements). The Company and Penn Power ' 1989, with sales to comtr creial customers increasing by . stopped deferring expenses attributable to Perry Unit 1 in 2.9%; residential and industrial sales each dropped by February and hiay 1988, respectively, when new rates less than 1%. Total kilowatt-hour sales were down 10.7% reflecting Perry Unit I costs became effective. The
'in 1989 due to a 28.2% drop in sales to other utilities Company will continue to defer expenses for Beaver compared to 1988. Valley Unit 2 until its costs are recognized in the The changes in fuel costs during the last two years Company's electric rates or June 30,1990, whichever were attributable to the following factors: is earlier. ;
1989 19u Decreased income taxes in 1989 were attributable to a on mm.ono PUCO accounting order permitting the Company to Change in fuel prices $(19.2) $ '17.0 amortize approximately $49,000,000 of certain deferred Change in fuel consumption (21.4) 64.8 income taxes and investment tax credits, which allowed Difference in net deferred fuel costs 16.3 (33.1) the Company to delay a request for an increase in electric Net change $(24.3) $ 48.7 rates to recover Beaver Valley Unit 2 costs. Amortization of these deferred income taxes and investment tax credits will not continue in 1990 since all applicable amounts had been amortized by the end of 1989. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 96,' Accounting for incomes Taxes,' which the Companies must adopt by 1992. As discussed in Note 1 to the Consolidated Financial Statements, this change is not expected to have a material effect on net income, i 18
(r Subsequent to December 31,1988, the Companies Short-term borrowings in 1989 included $90,000,000 decreased their net long-term debt outstanding by attributable to OES Capital. OES Capital began financing
; approximately $139,000,000, consisting of approximately Company customer accounts receivable under a receivables
$567,000,000 of debt redemptions which had a weighted financing agreement whereby OES Capital can bormw up average interest rate of 11.6%, partially offset by the to $140,000,000 at rates based on certain bank cornmer-L i tsuance of $428,000,000 of additional debt having a cial paper. The remaining $28,000,000 of short-term weighted average interest rate of 8.6% The decrease b borrowings outstanding at the end of 1989 were made by interest on long-term debt during 1988 restuted from the IVnn Iber under $53,000,000 of special uncommitted net wduction in long-term debt outstanding and the bank borrowing facilities. In addition, l'enn Power has -
resulting lower embedded debt cost. Dividends on $5,000,000 of short term bank lines of credit, none of. F preferred and preference stock decreased over the last which was utilized as of December 31,1989. Cash and [. two years as a result of the Companies' redemption of cash equivalents and other temporary cash investments at i approximately $113,000,000 of preferred and preference December 31,1989 were $129,830,000, The Companies stock subsequent to December 31,1987, due to mandatory issued $35,200,000 of pollution control notes in sinking fund requirements and early redemptions. February 1990 and expect to issue approximately The electric utility industry is subject to inflationary $250,000,000 of additionallong-term debt in 1990. pressures similar to those experienced by all other The Companies
- construction program and capital industries,'Ib the extent that the Companies incur addi- lease requirements for the period 19901994 are currently tional costs or receive benefits resulting from the effects estimated to be appmximately $1,570,000,000 (excluding of inflation, it is anticipated that those effects will ulti- nuclear fuel), of which appmximately $265,000,000 mately be reflected in the Companies' electric rates. applies to 1990. The Companies have additional cash requirements of appt ximately $1,253,000,000 for the Capitol itesoveces and Ligvidity 1990-1994 penod to meet maturities of, and sinking fund The Company's common equity base has been requirements f r,long-term debt and preferred and strengthened over the past five years, comprising 42.2%
prefaence smek of that amount appmximatdy
;. of total capitalization at the end of 1989 compared to
$ 82, 0,0M apphes m 19W.
33.2% at the end of 1984. This significant imprmrment , Investments for additional nuclear fuel during the resulted primarily imm issuing new common stock during 19901994 penod are estimated to be approximately the period, at an average price per share which exceeded
$180,000,000, of which approximately $51,000,000 average book value per share, with proceeds approximating
$426,000,000. During that fhr-year period total debt app sm1 , unng the sanw paws, de Compan,in, nuclear fuel investments are expected to be reduced by outstanding has not changed significantly, but the average cost of debt outstanding has been reduced, appmximawh $351,M,W and A.M.W.
Despite higher earnings in 1989, net cash provided respectyy, as de nuckar W n comume no, & Cmupamn haw opasting lease comminnents of appmx-from operations was lower compared to 1988 and is not imately $604,000,000 for the 1990-1994 pen,od, of which expected to increase significantly until the Company's Beaver Valley Unit 2 costs are included in its electric appmxinlst@ $121,M,M relato m N Dw ompamn rec m the cmt of nuclear fud consumd rites. The Company expects to begin reccwering such and operating leases through their electric rates. costs in the second half of 1990, as desciibed further below. Sales by dm Company of first mortgage bonds against During 1989, OES Fnel began financing nuclear fuel, pmperty addit ons and of pW d stock require that chich included the purchase of all naclear material applicable carnings coverage u.s oc met. Mith respect formerly fimnced under third-party leasing arrangements to the issuance of first mortgage bonds under the for the Companies, thmugh the issucce of commercial paper. All commercial paper issued ir, OES Fuel is supported by a $450,000,000 long-term bank credit agreement. OES Fuel had $325,050,000 of commercial g paper outstanding at December 31,1989. 19
I t Company's first mortgage indenture, the availability of Absent lengthy delays in the hearing process, a final ! property additions is more restrictive than the carnings PUCO decision would be expected late in the second ; test at the present time and (excluding Perry Unit 2 quarter of 1990. If the rate increase ultimately granted is in the range recommended by the PUCO staff, it will property additions) would limit the amount of first mortgage bonds issuable against property additions to have a materially adverse effect upon the Company's .
$239,000,000. The Company is currently able to issue results of operations. ,
$1,066,000,000 principal amount of first mortgage bonds Penn Power will be implementing the third-year increase r against previously retiicd bonds without the need to meet of its four. year phase in plan in May 1990. Annual cash the above restrictions. liased upon earnings for 1989 and revenues will increase by approximately $31,500,000; ;
after giving effect to the issuance of additional pollution however, there will be no material effect to net income , control notes in February 1990, the Company would be since Penn Power recognizes revenue under the phase-in I permitted, under the earnings coverage test contained in plan as if the full revenue level had been placed into effect its charter, to issue at least $1,365,000,000 of preferred in 1988. With the 1990 increase, amounts recognized as
- stock at an assumed dividend rate of 9.5%. If the accrued revenues in 1988 and 1989 will begin to be ,
1
- Company were to issue fint mortgage bonds or other recovered. ,
debt at or prior to the time it issued preferred stock, the A major uneenainty the Companies face is the ultimate amount of the prefened stock which would be issuable legislation to be adopted in connection with environmental would be reduced. issues-particularly with respect to power plant emissions [ Compliance by the Companies for various proposals Outlook submitted to Congress would range from making changt The Company has a rate increase request pending before in coal supply, which would have a minimal effect on th: : the PUCO that is designed to be implemented in two Companies' operations and financial condition, to make ' steps, if approved as requested, new rates designed to capital investments in excess of $1,000,000,000 and/or l inercase annual opWng revenues by approximately closmg certam generaung uruts. Any increased capital j
$124,000,000 (7.W , crease) would go into effect on or expen&mres that may ultimately be required during the f after July 1,1990, and an additional $94,000,000 (5.3%
increase) would go into effect twelve months later. This 1990-1994 period have not been included in the construe- , tion esdmate disclosed above for that period. Although request includes recovery of the Company's operating unable to predict the ultimate outcome of pending ; costs and investment in licaver Valley Unit 2, in addition legisladon, the Companies do not presently expect com-to recovay (over thirty years) of Perry Unit I and Necr , pliance requirements to materially adversely affect future Valley Unit 2 costs which were deferred for future recovery results of operations or financial condition, through electric rates, if granted as proposed, this rate increase would signifi- As disemeOn N te 7 to the Consolidated Financial ,
~
Statements, the Compartes how invested nearly cantly increase the Company's ability to generate cash
$400,000,000 in Perry Unit 2, a rmc2 ear generating unit from operations. Accordingly, the Company's dependenec w hose conumed(,n was suspende<t in 1985. The dis-on external financing would be reduced and certaio postvn of this unit it uncertain at the present time. +
- coverage ratios would be expected to improve. Net income, Optim inchide, but are imt necessarily mtsiered to, however, would not be expected to be significantly ,
resumpnon of conumedon, corenued suspensma cr affected due solely to the rate increase. Once the new rates are placed into effect, deferral accounting would tennWom W umchere mome durkg the !
- cease for the nuclear costs described above. Also, amorti. 1994t994 peri d, the Companies' capital expenditures ,.
would be higher than the amount disclosed above for that zation of past deferred costs which would be recovered through the new electric rates would increase operating P'" d E*I d ""'""'C"d "#ff **'T imm PUCOjurisdictional customers wre to be denied, ; expenses, the Company wculd have to tvrite off as rnuch as , The PUCO staff has initially recommended an
$210,000,000 after income exes. e increase ranging from $90,700,000 to $118,200,000 in this case. The staff did not recommend implementation <
of the increase in steps. as requested by the Company, since its recommended increase reprennts only 4154% of
- the Company's request, llearings will begin in April 1990.
- l. ;
30 f f.. e __ _
1 c h Selected Pinenelal Det2 Ohio l'.daca 1989 1988 1987 1986 1985 i On stunnamh, cuete ser stwe anuiurvo i Operating Rnemes $2,154,%9 $2,142,572 $1.779,556 $ 1.741,900 $ 1,754,749 l Operating incorne 543,659 496,996 397,468 392.357 380,354 Net income 361,026 218,888 412,920 410,828 370,685 ! F.arnire on Commun Stock 332,932 186,170 364,657 359,825 318,073 , l'arnings per Share of Common Stock (based on weighted everage number , of shares outstanding during tic year) 2,18 1.22 2.40 2.47 2.45 , Dividends Declared per Share of Common Suwk I,96 1.% 1.96 1.92 1.88 i
*Ibtal Assets at Decemler 31 7.722,N96 7,555,523 7,907.045 7,926.343 7.325,971 i referred and l' reference Suck Subject to ,
Mandatory Redemption 89,562 96,802 145,351 160,794 176,694 trarTerm Debt 3.073,796 3.208.553 3,332,858 3,663,861 3,464.549 . i Common Stock Date , 5
'ihe Company's Common Stock is listed on the New %rk and Midwest stock exchanges and is traded on other registered exchanges, l' rice Range of Common Stock 19N9 1988 First Quarter thqtriew 20 7/N 18-5/8 21 18 318 ,
Second Quarter liigirlem 21 3/4 19-7/N 19-114 171/4
' third Quarter liigh lam 23 21 1/8 19 17 3/4 l'ourth Quarter liigirlam 24 20-3/4 19-1/4 18 Warly ligdelem 24 18-5/8 21 17-l/4 l'rzen are bened on resnau put4nhed in 73r E#.$awr.Aerea/kw Nrn bk kod l'.nrhansr Omgmene 'Damarikms e
i I i l ClassWisation of Henders of Common Stock as of December 31,1989 lh4ders of Renwd 8 hares licid Numter % Numter tr Indwiduals lo0,437 86.55 65,425,579 42.88 L Fiduciaries 21,504 11.60 6,517,110 4.27 Nominees 143 0.08 77,863,277 51.03 Imurance Companies & Other Corporati<ms 1,701 0.92 1,565,534 1.03 All Oders 1,579 0.85 1,197,937 0.79 j
'lbtal 185,364 100.00 152,569,437 100.00 As of January 31,1990, there were 184,717 holders of 152,564.437 Quarterly devidends of 49t per share wetc paid on the Company's shares of the (bmpany's Common Stock. Common Stock during 1989 and 1988. Information regarding retained earnings available for payment of cash dividends is gnen -;
, , , in Note Sa. p>' l
- g-b 21 ,
Consehdeted Statements of inseme OhioEdion l'or the 'nars Ended December 31 1989 19t(8 1987 on it. no emnpi per stwe amounisi Operating Revenuca $2.154,969 $2,142,572 $1,779,556 Operating thpenses and Taxes: Operation-Fuel 428,223 452,535 403,794 l'urchased and interchanged power, net 67,216 134,822 55,809 Other operation expernes $29,507 471,637 352,883
'Ihtal operation . 1,024,946 1,058,994 812,486 Maintenance 189,fd6 149,851 157,266 Provision for depreciation and amortization 212,624 223,983 166,703 Generat taxes 190,104 188,023 154,504 ' Deferred nuclear unit costs (Note 3) (147,280) (147,610) (71,070)
Income taxes 141,280 172.335 162,199 "Ibtal operating expenses and tues 1,611.310 1,645,576 1,,382,088 Operating income $43,659 496,996 397,468 Other Income and Deductions: Alkmance for equity funds used during construction 2,513 3,397 211,936 Drsalkmed nuclear construction costs (Note 2) - (201,260) (44,400) Income tax benefit from disalkmed nuclear construction costs - 73,615 11,681 Miscellaneous, net 28,201 38,160 40,058 income taxes (9,776) (10,934) (37,403)
'lbtal other income and deductions 20,938 (97,022) 181.172
*Ibtal income $64,597 399,974 579.340 Net Interest und Other Chargea:
Interest on long term debt 332,023 318,706 356,769 Deferred nuclear unit interest (Note 3) (124,087) (134,173) (18,003) Alkmance for borrowed funds used during construction und capitalized interest (23,848) (21,819) (190,346)_ Other interest expense 8,810 7,405 6,917 Subsidiary's preferred stock dividend requirements 10,673 10,967 11,083 Net interest and other charges 203,571 181,086 166,420 Net income 361,026 218,888 412,920 l'referrrd and I' reference Stock Dividend Requirementa 28,094 32,718 48,263 Earnings on Common Stock 5 332,932 $ 186,170 $ 364,657 Weighted Aurage Number of Shurva of Common Stock Outstanding 152,531 152.441 151,770 Earnings per Share of Common Stock (based on weighted awrap number of shares outstanding during the year) $2.18 $1,22 $2,40 Dividends Declared per Share of Common Stock $1.96 $1.96 $1.96 he actompan3ing Notes to Consolidated Fmancial heatements are an integral pan of ttiene staternents. i 22
' Conse16deted telence Sheets chio raton At December 31 1989 1988 un stunnamh) g ' Utility Plant In service, at original cost 57,348,371 57,157,744 1,970,325 1,H13.611 , tres- Actumulated pnwisicm for depreciation 5,378,046 5,344,133 Comtruction work in progress-1:lectric plant (Note 7) 535,547 485,539 Nuclear fuel 168,144 21H362 703,691 703.901 1
6,081,737 6.04H,034 Other Property and inwatments $1,601 29,H17 Current Annetat Cash and cash equivalents 129,830 334,093 Other ternporary cash investments
- 19,994 Receivables-Customers (less accumulated provisions of 53,332,000 and 52,860,(KK), respectively, for uncollectible accounts) 194,619 181,455 Other 23,832 23,520 Materials and supplies, at antage cost-50,670 55,363 l'uct Other 75,595 71,274 hepayments 69,907 65,853 544,453 751,552 Deferrvd Charges:
Deferred nuclear imit costs (Note 3) 642,223 370,H56 , linamortized sale and leasebac k costa 98,515 100,495 l'roperty taxes 88,342 90,184 l Unamortised loss on reacquired debt 70,427 49,910 Acerued customet revenues (Note 3) 60,854 30.045 H4,744 84,630 Other 1,045,105 726,120 57.722,H96 57,555,523 s Capitalizatiott und Liabilities Capitalization (See Comolidated Statements of Capitaliation): Common stutkholders' equity 52,565,906 52,530,975 Preferred stock- 312,335 Not subject to mandatory redempti<m 312,335 20,000 20,000 Subject to mandatory redempti<m l'reterence stock-Subject to mandatory redemption 9,900 11,700 l' referred stock of consolidated subsidiary-41,905 41,905 Not subject to mandatory redemption 59,662 65,102 Subject to mandatory redemption 3.073,796 3,208,553 tong term debt 6,083,504 6,190,570 Current 1,iabilitiest 2N2,208 271,098 Ciarently payable preferred and preference stock and long term debt Shon-term borrowings (Note 6) I18,000 4,000 147,564 133,024 Accounts payable H5,250 94,215 Actrued tnes 79,53I 82,652 Accrued laterest 91,701 93,034 Other H16,400 665,937 Deferred Credits: 445,038 279,051 Accumulated deferred income taxes 294,248 265,719 Accumulated deferred investment tax credits 88,342 90,184 Property taxes 23,893 35,533 Other 822,992 699.016 Cornrtitrnents, Guarantees and Contingencies (Notes 4 and 7) 57,722,896 57,555,523 ! The eccompanying Notes to Consuhdated Financial Statemenn are an insepal pan of these balase Acets. 23 s
t is Consolidated Statements of Capitalisation Ohio leson
- At December 31 1989 1988 Cornruon Stockholders
- Equity: Un thwwid:.)
Common stock, $9 par value, authoriied 175,(MK),00() shares-152,569,437 and 152,507.413 shares outstanding, respectively $1,373,125 $ 1,372,571 Other paid-in rapital 733,093 732,734 i Retained earnino (Note Sa) 459,6M8 425,670
" Intal (ommon stodholders' equity 2,565,906 2,530,975 Number of Optional Redemption Price Shares Outstanding gg,,,,,,
Preferred Stock (Note $b): 1989 1988 l'er Share (In thousands) Cumulative, $100 par value-
. Authorie.ed 6,000,000 shares Not Subices to Mandatory Redemption:
3.90 % 152,510 152,510 $103.63 $ 15,804 15.251 15,251 4.40% 176,280 176.280 108.00 19,038 17,628 17,628 4.44 % 136,560 136.560 103.50 14.134 13,656 13,656 4,56% 144,300 . 144,300 1()3.38 14,917 14,430 14,430 ' 7.24 % 363,700 363,700 103.06 37,483 36,370 36,370 7,36 % 350,000 350,000 102,84 35,994 35,000 35,000 8.20 % 450,000 450,000 103.30 46,485 45,000 45,000 8.64 % 400,000 400,000 104.32 41,728 40,000 40,000 9,12 % 450,000 450,000 104,56 47,052 45,000 45,000
'lbtal riot subject to mandatory redemption 2,623,350 2.623,350 $272,635 262,335 262.335 ,
Subject to Mandatory Redernption (Note 5c): I 13,50 % 200,000 200,000 $107,50 $ 21,500 20,000 20,000 Cumulative, $25 par value-Authorked 8,000,000 shares Not Subject to Mandatory Redemption: , Series 11-9.30% c-urrent dividend rate 2,000,000 2,000,000 $ 25,75 $ $1,500 50,000 50,000 l' reference Stock (Note 5b): Cumulative, no par value-Authoned 8,(KK),000 shares Subject to Mandatory Redemption (Note Sc): 9,50 % - 1,800 - 1,800 10.25 % 10,800 12,600 $1,040,00 11,232 10,800 12,600 11.9 0 % - 88,110 - - - 1,333 Redemption within one year (900) (4,033)
'Ihtal subject to mandatory redemption 10,800 102,510 $ 11,232 9,900 11,700 l l* referred Stock of Connolidated Subsidiary (Note $b):
Cumulatiw, $100 par value-Authorked 1,200,000 shares Not Subject to Mandatory Redemption: 4.24 % 40,000 40,000 $103,13 $ 4,125 4,000- 4,000 4.25 % 41,049 41,049 105.00 4,310 4,105 4.105 4.64 % 60,000 60,0(K) 102,98 6,179 6,000 6,000 7.64 % 60,000 60,000 102.56 6,154 6,000 6,000 8.00 % 58,000 58,000 103.27 5,990 5,800 5,800 8.48 % 80,000 80,000 103.08 8,246 8,000 8,000 9.16 % 80,000 80,000 104.58 8,366 8,000 8,000
'thtal not subject to mandatory redemption 419,049 419,049 $ 43,370 41,905 41,905 Subject to Mandatory Redemption (Note Sc):
H.24% 60,000 65,000 $104.12 $ 6,247 6,000 6,500 ' 10.50 % 100,000 100,(KK) 107,22 10,722 10,000 10,000 l- 11.00 % 35,616 39,616 105.50 3,757 3,562 3,962 l 11.5 0 % 150,000 150,000 106.39 I5,958 15,000 15,000 l 11,5 0 % 120,000 150,000 103.29 12,395 12,000 15,000 13JX)% - 100,000 100,000 109,75 10,975 10,000 10,000 15.00 % 67,200 73,600 113,66 7,638 6,720 7.360 Redemption within one s car (3,620) (2,720)
'lbtal subject to mandatory redemption 632,816 678,216 $ 67,692 59,662 65,102 34 i
. Conselndeted Statements of Capitalisetlen (continued) Ohio Edman At December 31 1989 1988 i
On thumar,d ) LongTerrn Debt (Note $ds: First mortgage bonds: Ohio l'.dison Company-10.28% weighted sverage interest rate, duc 1989-1994 5 92.602 $ 179,398 10.23% weighted everage interest rate, due 1995-1999 240,995 240,995 - 8.34% weighted sverage interest rate, duc 2000-2004 190.976 190,976 4 9.09% weighted everage interest rate, due 2005-2009 274,310 274,310 15.50% weighted everage interest rate, duc 2010-2014 12,287 92,050 10.09% weighted everage interest rate, due 2015-2019 275,000 125.0(K) 1,086,170 I,102,729 lYnnsylvania Puwer Company-9.56% weighted sverage interest rate, duc 1989-1994 62.938 87,268 9.79% weighted everage interest rate, duc 1995-1999 57,610 58,940 8.47% weighted everage interest rate, due 2000-2004 53,184 54,232 9.22% weighted overage interest rate, due 2005-2009 40,000 40,000 9.74% weighted everage interest rate, duc 2019 20,000 .- 233,732 240,440
'Ibtal hrst rnortgage bonds 1,319,902 1,343,169 Secured notes and obligations:
Ohio l'.dison Company-9.40% *cighted everage interest rate, duc 1989-1994 531,851 147,756 8.36% weighted everage interest rate, duc 1995-1999 42,064 42,064 . 7.85% w eigh cd everage interest rate, duc 2000-2004 71,977 71,977 7.91% weighted everage interest rate, due 2005-2009 50,575 50,575 9.15% weighted everage interest rate, duc 2010-2014 132,150 240,150 10.55% weighted everage interest rate, due 2015-2019 100,000 100,000 7,71% weighted average inscrest ra.4, duc 2020-2024 15N,000 - 1,086,617 652,522 IVnnsylvania l'ower Company-7.85% weighted average interest rate, due 19H9-1994 20,804 20,919 11.01% weighted everage interest rate, due 1995-1999 49,261 49,261 10.09% weighted sverage interest rate, due 2000-2004 36,09N 35,782 7,34% weighted everage interest rate, due 2005-2009 12,720 12,720 11.12% weighted everage interest rate, due 2010-2014 17,900 17,889 8.11% weighted average interest rate, due 2015-2018 24,550 24,550 161,333 161,121 Ol2i Fuel Commercial Paper-8.39% weighted average interest rate 325,050 - Total secured t . 4 and obhgations 1,573,000 813.643 Unsecured notes: Ohio Ednon Company-11,75% weighted average interest rate, duc 1990-1994 150,000 150,000 7,25% weighted average interest rate, duc 2010-2014 100,000 132,404 7,56% weighted everage interest rate, duc 2015-2018 163,100 162,909
'Ibtal unsecured notes 413.100 445,313 Other Obhgations:
Construction energy trust - 500,000 l l Nuclear fuel trusts
- 274,709 Capital leases (Note 4) 57,155 111,609 i
'Ibtal other obligations 57,155 886,318 Net unamorthed discount on debe and other (11,673) (15,545) long-term debt due within one war (277,688) (264,345)
'Ibtal long-term debt 3,073,796 3.208,553 Total Capitalization $6,083,504 $6,190,570
'Ihe accompammg Notes to Cimnol, dated I'mence! Suitements are an integral part of these statements.
25
ConsoHdeted Statements of Retained Earnings chio I.dmon For die Years Ended December 31 1989 !988 1981 (In thoanands) flalance at beginning of year $425,670 $539,111 $471.223 Net income 361,026 218,888 412,920 786,696 757.999 884.143 Cash dwidends on preferred and preference stcek 28,040 31,948 47,691 Cash dividends on common stock 29N,968 298.793 297,34 l Premium on redemption of preferred stock - 1,588 - 327,008 332,329 345,032 Italance si end of year (Note Sa) $459,68N $425,670 $539,111 Consolidated Statements of Capital Stock and Other Pold in Capital preferred and l' reference htocl6 Not butycct to Sutnert to Common Simk blandatory Redernption klandatory Redemption Other Number 1%r I%id-in Number 1%r or Number Par or of Shares %lue Capital of Shares Stated %lue of Shares Stated %Iuc (Dollars in thousands) flalance, January l.1987 149,814,751 $ 1,348,333 $722.156 9.095.499 $455,567 1,903,691 $170,033 Sale of Common Stock 584,300 5,259 7,151 Dividend Reinvestment 1%n 1,673,401 15,060 20,348 Capital Stock Expense (184) Conversions and Redemptions-Series A Class A 110.448 994 333 (53,100) (1,327)
$1.80 Series 214,637 1,932 1,232 (232,888) (3,523)
$3.92 Series (10,400) (2,000,000) (50,000)
$95.00 Series (l,800) (1,800)
$102.50 Series (900) (900) 8.24% Series (5,000) (500) 10.48% Series (40,000) (4,000) 10,76% Series (17,290) (1,729) 11.00% Series (7.975) (797) llalance, December 31,1987 152,397,537 1,371,578 740,636 7,042,399 404,240 1,597,838 156,784 Capital Stock Expense (11)
Conversions and Redemptions-
$1.80 Series 110,376 993 635 (138,112) (2,089)
$95.00 Series (1,800) (1,800) 5102.50 Series (1,800) (1,800) 8.24% Series (5,0(K)) (500) 10.4t% Series (602) (220,000) (22,000) 10.76% Series (421) (240,000) (24,000) 11,00% Series (4,000) (400) 14.00% Series (7,500) (2,000,000) (50.000) 15.00% Series (3) (6A00) (640)
Balance, December 31,1988 152,507,913 1,372,571 732,734 5,042,399 354.240 980,726 103,555 Corwersions and Redemptions-
$1.80 Series 61,524 554 367 (88,110) (1,333)
$95.00 Series (l,800) (I,800)
$102.50 Series (1,800) (1,800) 8.24% Series (5,000) (500)
I1.00% Series (4,000) (400) I1,50% Series (6) D0,000) (3,000) 15.00% Series (2) (6.400) (640) II, dance, December 31,1989 152,569,437 $1,373.125 $733,093 5,042,399 $354,240 843,616 $ 94,082
'Ihe accompanyuq Notes to Consolateied Financ,al Statements are an interal pan at these statements-a
Cepe O deted StO99fDentS SIC 98h Pl9WS Ohio Edmin ilo the Years l'.nded December 31 1989 19M8 1987
""*'***d
Cash I? lows from Operating Activities: Net income $ 361,026 $ 218.888 $ 412,920 Principal noncash items-Depreciation and amortization 273,329 306.919 202,271 Deferred income taxes, net 131,612 72,744 42,962 lovestment tax credits, ret (28,529) (2,822) 62,965 Deferred (accrued) sevenue, net (38,350) (f4>,361) 42,584 Allowance for equity funds used during construction (2,513) (3,397) (211,936) Deferred fuel costs, net (12,450) (28,666) 4,5l54 Write +ff of disalkmed plant costs - 201,260 44,400 Deferred nuclear unit twts (271,367) (281,783) (89,073) Weite off of terminated construction projects - - 19,751 Gain on sale and leaseback - - (27.665) Change in applicable assets and habilities-Receivables (13,476) (9,702) (22,420) Materials and supplies 372 10,790 (18,082) Accounts payable H,866 (7.904) 18,897 Other 665 28,321 6,702 Nc cash prmided from operations 409,185 438,287 489,00 Cunh 17hms from Irinuncing Activities: New I'inancing-Common stock - - 47,818 long term debt 799,420 191,962 38,725 Short term borrowings, net 114,000 4,000 - Other (5,487) (9,486) (3,784) Redemptions and Itepayments-Preferred and preference stock 8,542 111,673 70,402 long-term debt 989.374 416,849 288,196 Dividend Payments-Common stock 298,422 301,043 286,072 Preferred and preference stock 28,202 35,186 49,376 Nei cash used for financing activities 416,607 678,275 611,287 Cash Irlows from Imenting Activitics: Pmperty addnions 221,773 192,246 555,313 Purchase of investments 6,611 4,807 422,766 Sale of investments (37,795) (296,471) (119,087) Sale and leaseback of utihty facilities . - - (1,308,999) Other 6,252 (6,255) 7,868 Net cash used for (provided from) investing activities 196,84I (105,673) (442.139) Net increase (decrease) in cash and cash equivalents (204,263) (134,315) 319,982 Cash and cash equivalents at beginning of 3rar 334,093 468.408 148,426 Cash and cash equivalents at end of 3 ear $ 129,830 $ 334,093 $ 468,408 Supplemental Cnah filcm Information: Cash Paid During the Year-Interest (net of amounts capitalized) $ 310.574 $ 299,707 $ 182,851 Income taxes 35,033 52,950 86,447
*lhe secompanying Notes to Consolidated I'mancial ScAMmentS Efr an 6DtytI paft OI thetC StattnWntl.
27
l COR80NdS$9d $90998Hents e{Ignes Ohio I'dmon l'or the Wars Ended December 31 1989 1988 1987 Cxneral Taxe a: On thouundo Real and personal property $ 85.523 $ 90,631 $ 58,856 State gross receipts 82,59N 77,226 73,085 Social security and unemployment 14,179 13,577 13,583 Other 7,804 6,5H9 8,980
*thtal general taxes $ 190,104 $ 188,023 $ 154,504 ' I'rtwinion for income Taxes:
Currently payable-l'ederal $ 46,765 $ 39,143 $ 77,909 State 1,20N $89 4,069 l'oreign - - 16 47,973 39,732 81,994 Deferred, net (see below)- 1:cderal 123,851 67.986 42,923 State 7.761 4,758 39 131,612 72,744 42,962 Imtsament tax credits, net of amortisatirm (2N,529) (2,822) 62,965 "Ihtal provinm for income taxes $ 151,056 $ 109,654 $ 187,921 income Statement Clansification of I'rovision for Income Titses: Operating income $ 141,2ND $ 172,335 $ 162,199 Other income 9,776 (62,681) 25,722
'thtal provism for income taxes $ 151,056 $ 109,654 $ 187,921 Sources of Deferred Tax I?xpense:
Excess of tax over book depreciation, net S 68,355 $ 60,249 $ 102,051 Alknvance for borrowed funds used during construction and capitalized interest H,405 7,155 77,705 Deferred fuel costs, net 6,869 10,514 (1,940) Amortie.atkm of deferred interest on leased nuclear fuel (10,113) (12,109) (455) Deferred nuclear unit costs 80,313 85,983 33,962 Deferred sale smileaseback costs, net 1,083 2,951 (128.524) Plant cost disallowance - (73,615) (11,681) Difference between tax and book revenu( net 13,723 5,882 (24,887)
'li rminated construction projects (5,212) (2,467) (9.802)
- Deferred loss on reaaluired debt, net 3,649 9,299 4,083 Alternative minimum tax deferral (35,973) (14,336) -
Other, net 513 (6,762) 2,450 Net deferred tax expeme $ 131.612 $ 72,744 5 42,962 Reconciliation ofIkleralincome Tax Expense n! Stntutory Rate to
'lbtal l'rtwinion for income Taxca:
Ikmk income before prtwision for income taxes $ 512,0H2 $ 328,542 $ 600,841 12c dcrat income tax expense at statutory rate $ 174,10N $ 111,704 $ 240,036 Increases (reductions) in taxes resulting from - Allowance for funds used during construction, which does not constitute taxable income (2,194) (1,676) (77,267) Excess of book mer tax depreciatkm 27,665 13,143 16,741 Sale and leaseback transactions - - 16,468 Amonisation of investment tn credits (43,826) (13,140) (10,058) Rapid amortization of deferred income taxes (15.360) - - Effect of reduced federal income tax rate - (5,656) (3,532) Other, net - 10,663 5,279 5.533
'Ihtal provision for incorne taxes $ 151,056 $ 109,654 $ 187,921
'The octumperrdng Notes to Conud, dated l'anannst Sutemems are en integral part of thene suiements.
4 28
Noeos to Conselndeced Financial Statements
- 1. Summary of Significam Accounting Policies: associated with these jointly ow ned facilities are included in The consolidated financial statements include Ohio Fxlison the corresponding operating expenses on the Consolidated Company (Company) and its wholly owned subsidiaries, Statements of income (see Note 3 with respect to the deferral Ibnnsyhania limer Company (Ibnn limer), OES Capital, of Ibtry Unit I and lleaver Valley Unit 2 costs). 'D e amounts incorporated (OES Capital) and OES Fuel Incorporated reflected on the Consolidated llalance Sheet under utility (OES Fuel). All significant intercompany transactions have plant at December 31,1989, include the folkming:
been climinated.The Company and Iban l\mtr (Companies) 3,,,,,,,,,, c,,,,n,,, follow the accounting policies and practices prescribed by Ocnnatme th % i'anc linwh e n won in cmp nice the Public Utilities Commission of Ohio (PUCO), the Ibnnsyhania Public Utility Commission (PPUC) and the w. it. Federal Energy Regulatory Commission (FERC). Certain sammii #7 s 24!,500 $ 67.500 s 28,400 r.H.Ho% financial statement items for periods prior to 1989 have n'ynsheid
. been reclassified to umform to the 1989 presentation. #1, #2 and #3 721,600 251,200 2,700 50.68 %
Hevenues 'Ihe Companies' retail customeis are metered on a cycle basis. Revenue is recognized for ciectne semce
*]n\d2
, I,800,300 32:,400 9.300 47,11%
ivtry ,1.nd based on meters read through the end of the month. Common
' Facilities 1,475.800 ll3.300 5.300 35.24 %
Fuel Costs- lhe Companies reunrr fuel-related costs not IVrry #2 .- - 399,100 35.24 % otherwise included in base rates from retail customers g;,tal $4.239,200 $753.400 $444,800 through separate energy rates; Any owr or under collection g m., ,,,g,,,n, pm,, w,,, ,, ,,,,, ,,,,3, , resulting from the operation of these rates are included as 'e"* a*= uaa adjustments to subsequent energy rates. Axordingly, the "'"*"'d*'d'"'"""""d""'""d'"d"'"'"""""" Companies defer the difference between actual fuel-related Nucienr Fuel- Nuclear fuel is recorded at original cost, ccts incurred and the amounts currently rennered from which includes material, enrichment, fabrication and their customers, interest costs incurred prior to reactor load. The
*P"" ""* at basd on ik Utility Flant and Deprecintion- Utility plant reflects b * " # ""c the original cost of construction (see Note 2), including jaw f consumpo. n. nw Compan.ms' electrk rates ine amounu rt future disposal of spent nuclear payroll and related costs such as taxes, pensions and other fu I based upon the formula used to compute payments fringe benefits, administrathe and general costs and alkm ance to the Umted States Department of Energy, for funds used during construction (AFUDC).
The Companies generally pawide for depreciation on a Allowance for Funds Used During Construction-straight-line basis at wrious rates owr the estimated lives of AFUDC represents financing costs capitalized to property included in plant in service. The annual composite construction work in progress (CWIP) during the straigla-line rates for electric plant were 3.2%,3.3% and construction period. The borrowed funds portion reflects 3.5% in 1989,1988 and 1987, respectiwly. 'lhe Company capitalized interest payments and the equity funds portion records depreciation expense applicable to Ibrry Unit 1 on represents the noncash capitalization of imputed equity a units of prcduction basis as authorized by the PUCO. "Ihe costs which are charged to construction. During 1987 the Companier recognize as depreciation expense estimated Company also charged AFUDC to Perry Unit I after its nuclear decommissioning costs which are being rennered in-service date for rate making purposes and prior to from their customers Such amounts are imetted in external recovery through electric rates in accordance with a PUCO decommissioning trust funds, order. AFUDC varies according to changes in the level of
. CWIP and in the cost of capital. The Companies capitalized l C,ommon Ownen,h.ip of G,enernting I,ned. it.ies- lhe l AFUDC to utility plant utilizing a net of tax rate in 1987, Compames and other Central Area Ibwer Coordmau,on Group (CAPCO) companies ou n, as tenants in common.
various power generating facilities. Each of the companies is obligated to pay a share of the construction cosa of any jointly owned 6cility in the same proportion as its ownership 1 interest. 'Ihe Companies'ponions of operating expenses l W L
r i [ Effective January 1,1988, substantially all of the credits available to offset future federal income taes payable; Companies' CWIP was subject to the capitalization rules such credits may be canied forward indefinitely. i for interest contained in the Tax Reform Act of 1986; 'Ihe Financial Acwunting Standards Ikiard issued therefore, no adjustment was necessary to reduce the Statement of Finand Accounting Standards No. 96, l CWIP AFUDC rate to recognize a current income tax ' Accounting for income 'Ihxes* (SI AS No. 96), w hich, among benefit. The composite AFUDC rates (excluding nuclear other things, requires a change in the method used by fuelinterest) were 11.1%,11.3% and 10.7% in 1989, enterprises to account for deferred income taxes. Under the ,
- 1988 and 1987, respectively, Capitalization rates for standard, deferred income ta liabilities must be recognized interest on nuclear fuel were 9.9%,8.8% and 8.1% in at the statutory income tax rates in effect when the liabilities 1989,1988 and 1987, respectively, are expected to te paid, The new standard also requires recogn tion of a deferred tax liability for tax benefits that have ;
income 'lhxen- Details of the total pnwision for income taxes are shown on the Consolidated State nents of'lixes, previously been flowed through to the Comparues' customers and an assumed deferred tax liability applicable to the equity , The defened income taxes result from timing differences component of A , for which no income tax timmg ; la the recognition of revenues and expenses for tax and dWaence exius unda cunent amunting standards Smec accounting purposes. The pnwision for income taxes in , 1989 included amortization of approximately $49,000,000 mpanks gen that tk ahond hd ta haw ines will be collected from their customers when the taxes of deferred income taxes and inwstment tax credits (flC) kmne payaNe, an asect wW bc recognized for that probable as authorized by the PUCO. future anue. W Cmpam,es are not required to adopt For income tax purposes, the Companies claim liberahzed SFAS No. 96 until 1992. Ihmevet, if the Comparues had depreciation and, consistent with the rate treatment, generally
- dopted the standard as of December 31,1989, total assets provide defened income tues. The Companies expect that wuuld haw mereased by approximately $1,300,000,000 defened taxes which have not been provided will be collected wh no material e#ect m na man.
from their customers when the taes become payable, based uptm the established rate making practices of the PUCO, Retirement lienefits- The Companies' trusteed, non-the PPUC and the FERC, As of December 31,1%9, the contributory dermed benefit pension plans cover almost cumulatiw net income tax timing differences for which all full-time employees. Upon retirement, employees deferred income taxes have not been provided were approxi- receive a monthly pension based on length of service and mately $500,000,000, compensation. The Companies use the projected unit Proceeds from the sales of wrtain tax benefits in credit method for funding purposes and were not required accordance with pnwisions of the Economic Remvery h to make pension contributions during the three years ended Act of 1981 are being amortized over the life of the related December 31,1989, property, Pmceeds attributable to fl0 were recorded as The following sets forth the funded status of the
. additional deferred TIC; the remaining amounts were plans and amounts recognized on the Consolidated recorded as reductions to utility plant in service. Balance Sheets:
The Companies defer FIC utilized and amortize these mg,,, 3, , , credits to income over the estimated life of the related ,g property. The Tax Reform Act of 1986 repealed the fl0 benent obligations: effectiw january 1,1986, except for certain transition Vested benents $339,987,000 $308,715,000 Nomested benefits 1,119,000 1 yK)0 property. As of December 31,1989, approximately
$7,500,000 of unused FIC was available to offset future Accumulated bene 6t oblication $341.106,000 5309.926.000 federal income taxes payable, of which appmximately Pian assets et fair value 5637,460,000 $s48.486,000 Ac'"* rial present value of
$7,200,000 expires at the end of 2002 with the remainder P'#*** *"* "* " #I ' #I#" ' #
expiring at the end of 2003. The Companies also have approximately $50,300,000 of alternative minimum tax Ier t ot$1gation
"'"p *[* d 222,196,000 136,299,000 Unrecognked net gain (130,116,000) (26,638,000)
Unrecognized prior service cost 19.456.000 ' 252,000 Unrecognked net tran ition asset (89.499.000) t97,443.000) Net pension anet 5 22.037,000 5 12,470.000 30
k p The assets of the plans consist primarily of common which are reflected as long-term debt on the Consolidated stocks, United States government bonds and corporate Balance Sheets (see Note 5d) but have initial maturity i bonds. Net pension costs for the three years ended periods of three months or less, are reported net within December 31,1989, were computed as folkms: financing activities under long-term debt. m9 ins 19 o 2. Disollowonce of Nuclear Construction Costs: Service mi- On March 7,1989, the PUCO approved a Stipulation and t t>cnefas earned Recommendation entered into between the Company during the period $ 15.983.000 515.519.000 $ 14.670,0(* [ and the PUCO Staff in connection with the investigations tEr$o 35,967,000 33.936,000 31.206.000 of Itrry Unit I and Beaver Valley Unit 2 construction Retca on plan mets (113.059.000) (M,079.000) (14.625,000) costs, in the Stipulation and Recommendation, the N cle g y Company agreed to permancntly forbear seeking recovery of $237,000,000 of ltrry Unit 1 construction costs and Nc pennon cost $ (9,567,000) $ (6.607.000) 5(5,705,000)
$@0MMbu4M2meinM
- The assumed discount rate used in determining the as they relate to the Company's PUCO jurisdictional actuarial present value of the projected benefit obligation customers. As a result, the Company wrote off the was 9% in each year. The assumed rate of increase in future applicable amounts, which, after giving effect to the compensation levels used to measure this obligation was reserve established by the Company in 1987 for potential 5% in 1989 and 7% in 1988 and 1987. The assumed disallowance of Perry Unit I construction costs, reduced cxpected long-term rates of seturn on plan assets were net income by $127,645,000 ($.84 per share of common 10% in 1989 and 1988, and 9% in 1987, stock) in the fourth quarter of 1988. Under the terms of-The Companies provide a minimum amount of non- the Stipulation and Recommendation, provision was contributory life insurance to retired employees in addition made for termination of all remaining issues related to C ta optional ccatributory insurance, llealth care benefits, construction of Perry Unit I and Beaver Valley Unit 2 and which inchide certain employee deductibles and co- the prudence of the Company's investment in such units payments, are also available to retired employees, their for rate making purposes, dependents and, under certain circumstances, their sur- 3. Recovery of Nuclear Unit Costs
vivors. The Companies pay insurance premiums to cover The PUCO ordered the Company to defer nonfuel a portion of these benefits in excess of set limits; all operation and maintenance costs relating to Perry Unit I amounts up to the limits are paid by the Companies. from its in-service date for rate making purposes until Expenses associated with health care and life insurance February 2,1988, when Perry operating costs were benefits for retirees are charged to income during the recognized in the Company's electric rates. It also ordered applicable payment periods, and amounted to $5,946,000, the Company to defer nonfuel operation and main'enance
~ $5,302,000 and $4,444,000 in 1989,1988 and 1987, expenses, depreciation expense, property taxes and respectively, interest expense associated with Beaver Valley Unit 2, Supplemental Cash Flows Informntion- All from its commercial operation date until costs relating to
- temporary cash investments purchased with an initial the unit are recognized in the Company's electric rates or maturity of three months or less are reported as cash June 30,1990, whichever is earlier. The PPUC ordered
- equivalents on the Consolidated Balance Sheets. All ibnn Power to defer operation and maintenance costs other temporary cash investments maturing within one (net of energy savings from Perry Unit 1), depreciation ye:r are reported as other temporary cash investments on expense, property taxes and interest expense associated the Consolidated Balance Sheets. The Companies record with Ittry Unit 1, from its commercial operation date temporary cash investments at cost, which approximates until May 4,1988, when Perry operating costs were their market value. Noncash financing and investing recognized in Penn Power's electric rates. Based on these activities included capital leases of $28,411,000, orders, the Companies have deferred $642,223,000
$43,470,000 and $43,389,000 for the years 1989, 1988 through December 31,1989, for future recovery from and 1987, respective!y. Noncash investing activities also their retail customers.
included allowance for equity funds used during construction. OES Fuel commercial paper transactions, j 31 2
I f r iL The PPUC granted IYnn Power a base rate increase, Consistent with the regulatory treatment, the rental i effective May 4,1988, designed to produce approximately payments for capital and operating leases are charged to ;
$67,100,000 of additional annual operating revenues, The operating expenses on the Consolidated Staternents of l increase is being phased in over several years, such that all income. Such costs reflected on the Consolidated State- i ments of income for the three years ended December 31, '
amounts deferred during the phase in period will be fully recovered by the end of the fourth year. Under this phase- 1989, are summarized as follows: -; in plan, lYnn Power's rates were initially increased to ,, ,,, , i produce approximately $24,000,000 in additional cash revenues; the second yest increase of approximately 4*'i"8 "" ' 3 307"** ' 3 3 3 3 3'"* Id d '"6"'"* dmortizat'enf of '
$28,000,000 was implemented in 1969, The difference capiinileases 12.015,000 39,857,000 21.537,000 [
between revenues actually billed and revenues that would interest on capiut i have been billed absent the phase in plan is recognized as tenn umme n,m,mo 12,t o4,mm additional accrued revenue for fin.mcial reporting purposes. *I""(
, $152,69tMm $188.2 to,e $78,599,mm Such revenues and associated interest accrued for future collection in connection with this plan amounted to approx;., The future minimum lease payments as of December mately $60,854,000 as of December 31,1989, of which 31,1989, are:
approximately $30,809,000 and $30,045,000 were accrued c,g i,,,,, g,,,,,,,,i,,,,, during 1989 and 1988, respectively. 1990 $ D,385, m $ 121,309,000 1991 14.774,000 122,290,000 ; 4' b88'88 1992 13,246,000 120,591,000 The Companies lease a portion of their nuclear generating 1993 12.178,000 120,249,000 1994 11.315,mm 120,028,000 facilitics, certain transmission facilities, computer equip. Yesa dewafter 139,191,m 2,652,8is m ment, office space and other property and equipment
%'83 *i"i*"* *" P8Y'nenu $208,m,m $3,257,285,m under cancelable and noncancelable leases, i
" **"' * ***" 3 7' ' " '"
in 1987 the Company sold a portion of its ownership Na ininimum icase paynienn 150,978.m ; interest in Perry Unit I and Beaver Valley Unit 2 and interest portion 93,823,000 simultaneously entered into operating leases on the portions p g, ,, ,,, ,,,;,,, r sold for basic lease terms of approximately 29 years. Dunng lease payments 57,155.000 the term of the leases the Company continues to be respon- tess current ponion 6,837,000 sible, to the extent of its combined ownership and lease- Noncurrent ponion 5 50,318,000 hold interest, for costs associated with the units including ! construction expenditures, operation and maintenance 5. Copitalisation expenses, insurance, nuclear fuel, property taxes and (n) Retained linrnings- Under the Company's decommissioning. The leases provide for adjustments to indenture, the Company's consolidated retained earnings , the basic rental payments for possible future changes in unrestricted for payment of cash dividends on the l the federal tax code, The Company has the right, at the Company's common stock were $387,642,000 at .l end of the respective basic lease terms, to renew the December 31,1989, ; leases for up to two years. The Company also has the right (b) Preferred and Preference Stock- At the > to purchase the facilities at the expiration of the basic lease Companies' option, all preferred and preference stock ; term or the renewal term (if elected) for a purchase price may be redeemed in w hole, or in part, at any time upon equal to the fair market value of the facilities, not less than 30 nor more then 60 days' notice, unless I otherwise noted, Redemption of all preferred and preference stock issued within the past five years is subject to certain restrictions regarding refunding. The ; optional redemption prices shown on the Consolidated Statements of Capitalization will decline to eventual - minimums per share according to the Charter provisions t?at establish each series. l l .- 1 as
i (c)l* referred nnd l' reference Stock Sub.iect to Sinking fund requirements for certain series of first Mandatory Redemption- Annual sinking fund mortgage bonds and msturing tong-term debt (excluding provisions for the Companies' preferred and preference capitalleases) for the next five years are: stock are as follows: gggg,g 3999 hence shues Iwe hermnme 199 Ohio IAon- g993 933;gg3 EIC"'d 1994 103 k 14 A10 Sud 13.50 % 40.000 June 1 1991 Preference The weighted average interest rates shown on the S 10.25 % 900 July I (i) Consolidated Statements of Capitalization relate to long-Preteneo term debt outstanding at December 31,1989, had H.24% SAi0 December i G 'Ibtal secured and unsecured notes outstanding at December 31,1988, exclude $18,114,000 of certain
.. .2( Jh 1. I 11.50 % 15 AK) juiy 15 m pollution control notes, the proceeds of which were then 13 3 )% 5AM) July 1 1990 in escrow pending their disbuncment for construction of e Companies' obHgadons a t % 1 hi l , poHution contml fagt es.
mm m.. .t om ne. hm e,rs. repay cenain pollution control revenue bonds are secured by several series of first mortgage bonds and, in some Preferred and preference shares are retired at $100 and cases, by subordinate liens on the related pollution con-
$1,000 per share, respectively, plus accrued dividends.
trol facilities. A portion of the unsecured notes outstanding I'he smking fund reqmrements for the next five years are: are entitled to the benefit of irrevocable bank letters of credit 1990 $ 4,520.000 of $282,412,000. To the extent that drawings are made 1991 11,120h00 under those letters of credit to pay principal of, or interest l[9j ly{( % the pollution control revenue bonds, the Company is 1994 i1.120.000 entitled to a credit on the notes. The Company pays an annual fee of 4/10% to 7/8% of the amounts of the letters (d) I,ongill rm Debt- The mortgages and their supple- of credit to the issuing banks and is obligated to reimburse ments, which secure all of the Companies' first mortgage the banks for any drawings thereunder, bcnds, serve as direct first mortgage liens on substantially During 1989, OES Fuel purchased all nuclear fuct which all property and franchises, other than specifically excepted was formerly financed under third-party leasing arrange-property, owned by the Companies. ments for the Companies. Nuclear fuel purchases are flased on the amount of bonds authenticated by the financed through the issuance of OES Fuct commercial "Itustees through December 31,1989, the Companies' paper, supported by a $450,000,000 tong-term bank credit annual sinking and imprmrment fund requirements for all agreement which expires March 31,1992. Accordingly, bonds issued under the mortgages amount to $31,131,000, the commercial paper is reflected as long-term debt on The Company expects to deposit funds in 1990 which will the December 31,1989 Consolidated Ilalance Sheet, be withdrawn upon the surrender for cancellation of a like OES Fuel must pay a facility fee of 1/8% on the total line principal amount of bondL which are specifically authen- of credit and a commitment fee of 1/20% on any unused ticated for such purposes against unfunded property amount. additions or against previously retired bonds. This method can result in minor increases in the amount of the annual sinking fund requirements. Penn Power expects to satisfy its requirements in 1990 by certifying unfunded property additions at 166-2/3% of the required amount. 33
g , A L r.: 6,' Short Term terrowings and Bank Unos of Credit PPUC in a 1987 rate order and Duquesne was allowed Short-term borrowings outstanding at December 31,1989, recovery at i + investment in Perry Unit 2 over a ten-year include $90,000,000 of OES Capital debt which is period. Duquesne has advised the PPUC that it will not i $ccured by customer accounts receivable. OES Capital agree to the resumption of construction of Perry Unit 2.
.. can borrow up to $140,000,000 under a receivables Duquesne's decision was independently made and does financing agreement at rates based on certain bank not represent a decision on the part of the Companies to L commercial paper. OES Capital is required to pay a fee abandon Unit 2 for rate making or any other purposes.
of 4/25% on the amount of the entire finance limit and flowvver, any future decision on the status of Perry Unit 2 L - 7/20% on the amount of borrowings outstanding. will have to take into account Duquesne*$ position and The receivables financing agreement expires ways will have to be found to accommodate this position November 27,1990. if construction on the unit is to resume. I Penn Power has lines of credit with banks that provide As of December 31,1989, the Company and Penn - for borrowings of up to $5,000,000 based on the Power had invested approximately $343,300,000 and prevailing prime or similar interest rate. Short term $55,800,000, respectively, applicable to Perry Unit 2. Imrowings may be made under these lines of credit on Delay in the completion of the unit can be expected to l'enn Power's unsecured notes. Penn Power is required to increase its total cost by amounts which are not presently pay commitment fees of 1/2% to assure the availability of determinable. If a decision were made to terminate Unit 2, those lines of credit. All of the current lines expire certain costs which are currently assigned to Unit 2 would December 31,1990; however, all unused lines may be be reassigned, where appropriate, to Unit 1,1lowever, canceled by the banks, cancellation charges payable to contractors and other costs of termination could be incurred. Ibnding completion of
- 7. Commitments, Guerentees and Contingencies:
the CAPCO review, the Company is unable to predict Construction Prognun-The Companies' current whether the construction on Unit 2 will contmue or, if budget forecasts reflect expenditures of approximately continued, on w hat basis such continuation will proceed.
$1,570,000,000 for property additions and imprtwements if conn etion of Perry Unit 2 is terminated, the
- from 1990-1994, of which approximately $265,000,000 is Company would seek to recover its investment but cannot -
applicable to 1990. rmw predict whether its investment in Unit 2 applicable The CAPCO companies are continuing to review the to its PUCO jurisdictional customers will be recoverable. status of IYrry Unit 2. Currently, no significant work is if n means of recovery of the costs of Unit 2,in the case being performed on the unit and the Companies do not of termination, were available to the Company from its .. capitalire AFUDC Until review of the status of Unit 2 PUCO jurisdictional customers and no other basis for re-has been completed, there will be no defined schedule for cmtry could be found or anticipated, the Company would its completion; the construction estimates for the be required to wnte off the portion of its mvestment 19901994 period do not include any amounts applicable applicable to its PUCO jurisdictional customers. As of to Perry Unit 2 if construction of the unit were to be December 31,1989, the Company estimates that the maxi-resumed, Ibssible alternatives being reviewed with mum ammmt of such a write off would be approximately respect to Unit 2 include indefinite suspension of
$210,000,000, net of income tax effect. The Company construction on the unit, resumption of work on the unit does not presently anticipate that a write-off of even this and termination of the unit, in accordance with the magnitude, if required, would of itself affect its ability to CAPCO arrangements, none of these alternatives may be pay common stock dividends at current levels, and studies implemented without the approval of each of the CAPCO indicate that the magnitude of any such write-off could be companks, much smaller. If, despite its best current information, a Duquesne Light Company's (Duquesne) claimed much larger write off were required, depending upon the "de facto' abandonment, for rate making purposes, of its timing invohed, such a write-off could temporarily affect 13.74% interest in Perry Unit 2 was accepted by the 1
the Company's ability to pay common stock dividends at current levels. Based on Section 520 of the Pennsylvania Public Utility Code (which specifically permits utilities to recover a re-turn of, but not a return on, prudently incurred costs of 34
f 1 t t-t ny partially completed facility when cancellation is found would require reductions in emissions of sulfur dioxide (by the PPUC to be in the public interest for any generating - (SO,) and oxides of nitrogen from utility power plants and unit canceled after October 10,1985), IYnn Iber beliews it other sources located in several states, including Ohio and g i could recover its investment in IVrry Unit 2 with respect IVnnsylvania. The Company is unable to predict whether
? to its PPUC jurisdictional custorwts, legislation will be enacted and, if so, to what extent, if l, if a' decision were made to terminate IVrry Unit 2, con- any, the emission limits at the Companies'pl. 's
- ould f
~.
solidated net income would be reduced at that time by the be affected. Substantial changes in the emissio., ..s A idifference between the cost of Itrry Unit 2 and the present - could result in the need for changes in coal supply, sig-r
- value of revenue to be collected from retailjurisdictional nificant capital investments in flue gas desulfurization or customers applicable to the unit. The FERC has revised other pollution control equipment or the closing of some s - its policy with respect to recovering the costs of terminated coal-fired generating capacity to assure compliance, if flue h construction projects. As a result,if 1%rry Unit 2 were gas desulfurization equipment were to be installed on all ' ,
terminated, the Companies would be required to write off of their generating units to achieve compliance, a circum-
;. one-half of their respective investments applicable to their stance that may be physically impossible because of space
( - FERC jurisdictional customers if and to the extent that limitations at certain of their plants, the Companies
- the FERC revised policy is applicable. Under such circum- estimate that the capital costs associated with such in-
, . stances, the remaining costs, plus a return on the unamor- stallation could exceed $1,000,000,000.
- tized investments, would be recovered from their FERC in April 1988, several states, the Province of Ontario, jurisdictional customers. and several environmental groups petitioned the Guarantees- The Companics, together with the other Environmental Protection Agere (Ei%) to conduct a CAPCO companics, have several guarantees of certain rulemaking under Section 115 of the Clean Air Act.
debt and lease obligations in connection with a coal Section 115 is that portion of the Clean Air Act which supply contract for the Bruce Mansfield Plant. As of addresses pollution across international boundaries. The
- December 31,1989, the Companies' shares of the petitioners claim that the El% has already determined guarantees were $143,000,000. The price under the coal that sources in midwestern states contribute to air supply contract, which includes certain minimum pollution which they allege is endangering public health payments, has been determined to be sufficient to satisfy and welfare in Canada. The El% is being asked to
' the debt and lease obligations. The Companies' total officially c nfirm this determination. The El% has
?i payments under the coal supply contract amounted to informed the petitioners that it does not presently have
$105,154,000, $100,037,000 and $89,094,000 during 8"IfiC"' 'nformati n to act n the petitions. On - -
1989.1988 and 1987, respecth'ely. Under the coal supply November 1,1988, the petitioners filed a petition for contract, the Companies' future minimum payments are: redew in the U.S. Court of Appeals for the District of Columbia challenging the EPA's alleged decision to reject 1990 $2u02m their request for findings. The Company, along with other 1991 24.924.000 . 199r 23J7A000 electne utility companies and others, .mtervened in the 1993 22.r>24,ooo appeal. Oral arguments are scheduled for February 15, 1994 21,480,000 1990. The Companies are unable to predict the outcome Yem thereafter - 90.459.000 of this proceeding.
- Environmental Matters- Various federal, state and During the past several years, the U.S. Court of L local authorities regulate the Companies with regard to air Appeals for the District of Columbia reversed several
! P and water quality and other environmental matters. The significant portions of the EPA's regulations on the
~
- Companies estimate that compliance requires additional methods used by the El% to determine the amount of L capital expenditures of approximately $113,000,000, stack height credit for establishing individual source l/ which is included in the construction estimate given emission limits for SO,. Portions of the latest El%
f .abne under ' Construction Program' for 1990 through 1994,; regulations were reversed and remanded by the Court in As a part of the reauthorization of the Clean Air Act, legislation has been introduced in Corgress to address the so-called " acid rain' problem. Various bills introduced 1 s l' II L
p , l January 1988 as a result of appeals by the Companies and District of Ohio alleging violation of the expired permit. others. Review of this decision was sought by The suit seeks a court order forcing construction of the environmental groups before the U.S. Supreme Court and cooling tower as required in the expired permit and seeks thereafter the Companies and others filed their own penalties for failure to adhere to the construction schedule petitions for review before that Court. The Supreme in the expired permit. The parties have agreed to a Court declined to hear the case, After the EPA settlement, subject to approval by the Court, under which promulgates new regulations in conformity with the final the Company will pay a penalty of $25,000 and the suit Court decision in this matter, Ohio and Pennsylvania will be dismissed. must then review their emission limits to ensure
- 8. Summary of Quarterly Financial Data (Unaudited):
conformance with the new El% regulations. Such review he foHowing summarizes certain consolidated operating could result in more stringent emission limits for some results by quarter for 1989 and 1988. existing plam- .d increased capital costs and operating l 3I,'hi%s, 3o,"iT39 Tl,",",',7 Tif,@ expenses The Companies are currently unable to predict n ,,, w ,,,, coa,a , the outcome of these proceedings. g,,,,g,,,,,,,,p,,,,,,,,,,,,,,, in June 1987, the EPA announced regulations covering Operating Revenues $546,708 $512,583 $549,970 $545,708 small particulate matter em'issions from utility boilers. Operating thpenses . and Taxes 403,031 382.871 402,898 422,510 l Although the Companics have power plants in one of the Operating income 143,677 129,712 147,072 123,198 two counties in Ohio u here El% computer modeling Other income and predicts excessive small particulate emissions will be 1) eductions 6,395 3,963 3,654 6,926 found, the Companies are unable to predict the ultimate Net Interesi and Other Charges 51,247 51,006 52,688 48,630 effect of these regulations. Net income $ 98,825 $ 82,669 $ 98,038 $ 81,494 With respect to the environmental matters described tbove, the Companies expect that any resulting additional Earnings on Comnmn Su,ck $ 91,624 6 75,62_0 $ 91,083 $ N ,605 capital costs which may be required, as well as any Weighted Average required increase in operating costs, would ultimately be recovered from their customers. )"c"[,I
,, "'N'[*'
The cooling water discharge permit issued by the Ohio Outstanding 152,509 152,509 152,538 152,569 Environmental Protection Agency (Ohio EPA)in 1978 for ihrnings per Shar: of common stack $.60 $.50 $.60 $.49 the Company's Niles Plant contained a requirement for construction of a cooling tower to climinate the discharge of heated water to the hiahoning River, Because of 3,,,,,,, togg {'jk, 3],% T'*g' I'$' h potential public health hazards, Ohio EPA suspended the g,,,,,,,g,,,,,,,,,,,,,,,,,,,,,,o construction schedule in January 1985 pending the results Orerating Revenues $526,752 $515,709 $567,072 $533,039 of a health risk assessment study. Ohio El% subsequently Operating threnses
'"d *'5 d 0 20d dU3 262 d37 744 394 366 determined that the applicable water quality standards Operating income 116.548 112,447 129,328 138,673 could be safely met by use of a thermal load management system which would curtail operation of the Niles Plant to '"t) 'd" '[> $ "" 8.3% on u24 (u 8,a6) the extent necessary to protect the fish population. Net interest and Accordingly, on hiay 1,1987, Ohio El% issued a new Other Charges 32,593 46,727 50,268 51,498 permit for the Niles Plant whi;h substituted the load Nei lneome (less) $ 92,301 $ 72,094 $ 85,784 $ (31,291) management system for the cooling tower. On hlay 6, Eamings (Loss)
Apphcable to 1987, the justice Department, on behalf of the ElR, sued $ 82,16i $ 6uso $ 78.656 $ (38,3m comnmn stock the Company in the U.S. District Court for the Northern Weighted ketage Number ol Shares of Common Stock Outstanding 152,403 152,406 152,447 152.507 Earning (lose per Share of Common Stock $.54 $.42 $.52 $(.25) 36
y Report of independent Public Assowntents b To the Stockholders and floard of Directors of Ohio Edison Company: We have audi:cd the accompanying consolidated balance sheets and consolidated statements of capitalization of Ohio Edison Company (an Ohio corporation) and subsid-iaries as of December 31,1989 and 1988, and the related consolidated statements of income, retained earnings, capital stock and other paid in caphal, cash flows and taxes for each of the three years in the period ended December 31,1989. These financial statements are the responsibility of the Company's management Our respon-sibility is to express an opinion on these financial statements based on our audits.. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assur-ance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclo-sures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the metall financial statement presentation. We believe that-our audits provMe a reasonable basis for our opinion, in our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Ohio Edison Company and subsidiaries as of December 31,1989 and 1988, and the results of their operations and their cash flows for each of the three years in the period ended December 31,1989, in conformity with generally accepted accounting principles. The continued construction of Perry Unit 2 is currently being reviewed by the CAPCO companies. As discussed in Note 7 to the consolidated financial statements, possible alternatiws being considered include indefinite suspension, resumption of work and termination of the Unit. Because the Companies are unable to predict the results of the review, they cannot now predict if construction of Perry Unit 2 will be terminated and, if terminated, to what extent the Companies' investments will be recoverable, k . Arthur Andersen & Co. New York, N.Y. February 7,1990 37
p f Conselldatod Financial Statistics Ohio IMoon 1989 1988 1987 1986 1985 1984 1979
* **"6" " " " * * ' " "'
General FinancialInfortnation
- Operating Revenues $ 2.154,969 $ 2.142,572 $1.779.556 $1,741,900 $ 1,754,749 $ 1.637,104 $ 994,585 Operating income $ 543,659 $ 496,996 $ 397,468 $ 392,357 $ 380,354 $ 342,713 $ 163,744 Earnmp on Common Simk $ 332,932 5 186,170 $ 364,657 $ 359,825 $ 318,073 $ 290,694 $ 105,120 Ratio of Earnings on Common Stock to Operating Resenues 15.4 % H.7% 20.5% 20.7 % 18.1% 17.8 % 10.6%
Times Interest lirned liefore income *Ihs 2.46s 1.97x 2.60x 2.46x 2.34x 2.34x 2.3 t x Net Utihty l'iant at December 31 $ 6,081,737 $ 6,04 N,034 $ 6.336,099 $ 7,239,741 $ 6,644,750 $ 5,983,214 $ 3,012.197 Capital Expenditures $ 258,041 $ 221,583 $ 705.242 $ 776,198 $ H26,994 $ 868,099 $ 476.746 Capitaliuticm at December 31: Common $tockholders' l'A !uity $ 2.565,906 $ 2,530,975 $ 2.651,325 $ 2.541,712 $ 2.234,156 $ 1.947.357 $ 970,110 l' referred and l'rcierence Stxk Not , Subject to Mandatory Redemption 354,240 354.240 404,240 455,567 467,940 455,490 306,905 l'rcierred and I' reference Stoc k Subject to Mandatory Redemption 89,562 96,802 145,351 160,794 176.694 158,483 150,850
- temg'lkrm Debt 3,073,796 3.208,553 3,332,858 3.663.861 3,464,549 3,306,173 1,410,782 i
- Intal Capitahtati<m $ 6,083.504 $ 6,190,570 $ 6,533,774 $ 6,821.934 $ 6,343,339 $ 5.867,503 $ 2,838,647
= <
Capitaliution Ratios at December 31: Common Stockholders' Equity 42.2 % 40.9 % 40.6 % 37,3 % 35.2 % 33.2 % 34.2 % , Preferred and l' reference Stock Not Subject to klandatory Redemption 5.8 5.7 6.2 6.7 7,4 7,8 10.8 Preferred and l' reference Stock Subject to hlandatory Redemption 1,6 1.6 2.2 2.3 2.8 2.7 5.3 temg*lhrm Debt 50.5 51.8 51.0 $3.7 54.6 56.3 49.7 l Total Capitalieation 100.0 % 100.0 % 100.0 % 1(m.0% 100.0 % 100.0 % 100.0 % Cost of theferred and INeferen(c Stock , Outstanding at Dcccmber 31 8.72 % 8.71 % 9.38 % 9.66 % 10.00 % 9.87 % 8.36 % Cost of lamg*Ihrm Debt Outstanding at December 31 9.67% 10.26 % 10.22 % 10.29 % 10.88 % 11.04 % 8.13 % Cominon Stock Data Carmnp pc Average Common Sharc $2.18 $1.22 $2.40 $2.47 $2.45 $2.50 $180 Return on Average Common Equity 13.0 % 7.0% 13.8 % 14.9 % 15.2 % 15.9 % I t.2% Dividends Paid per Share $1.96 $1.96 $ 1.96 $ 1.92 $1.88 $ 1.84 $1.76 Common Stock Dividend Pavout Ratio 90 % 161% 82 % 78 % 77 % 74 % 98 % Common Stock Dividend Yield at December 31 8.3% 10.4 % 9.7% 9.8% 11.5% 13.6 % 13,2 % lhicc/ Earnings Ratio at December 31 10.9 15.5 8.4 7.9 6.7 5.4 7,4 Shares of Common Stock Outstanding at December 31 Rm0) 152,569 152,508 152,398 149,815 137,089 122,237 59,622 lbok Value per Common Share
. et December 31 $16.82 $16.60 $17.40 $ 16.97 $16.30 $15.93 $16.27 hlarket Price per Common Share at December 31 $23,75 $18.875 $20.125 $19.50 $16.375 $13.50 $13.375 s Ratio of hlarket Price to Ibok Value per Share at December 31 141 % 114 % 116 % 115 % 100 % 85 % H2%
38
Consolldeted Operating Statistks ohiolatison 1989 198K 1987 19H6 1985 1984 1979 Revenue l' rom Electric Sain (Thousand0: Rnidential $ 749,345 $ 728,410 $ 622,34H $ 615.262 $ 600.4HI $ 571.H78 $ 360,273 Commercial 558,524 533,825 454,706 449,590 433,445 400,291 240,45H Industrial 554,037 537,165 452,564 449,392 476,257 469,112 315,1H5 Other 39,769 65,521 69,454 64.345 64,70H 57,921 42,607 Subtotal 1,901,675 1,864,921 1,599,072 1.57H,$H9 1,574,891 1.494,202 45H,523 Sales to Utihties 228,155 254,052 156,633 137,994 159,262 117,3H5 10,185
*lhtml $ 2.129,830 $ 2,118,973 $ 1.755,705 $1,716,583 $1.734,153 $ 1,616,5H7 $ 968,708 Revenue l' rom Electric Sales-%:
Residential 35.2% 34.4 % 35.4 % 35.H% 34 6 % 35.4 % 37.2 % Commercial 26.2 25,2 25.9 26.2 25.0 24.7 24.8 Industrial 26,0 25.3 25.H 26.2 27,5 29,0 32,5 Other 1,9 3.1 4.0 3.8 3.7 3.6 4.4 Subtotal N9.3 NH.0 91.1 92.0 90.8 92.7 98.9 Sales in Utihties 10,7 12.0 H.9 H.0 9.2 7.3 1,1
*lhtal 100.0% 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Kilowatt linur Sales (hlithom): Rnidential 7,619 7,62H 7,299 7A46 6,791 6,H36 6,650 Commercial 6.234 6.060 5,782 5,560 5,266 5,101 4,693 industrial 9,795 9,H72 9,067 H,533 H,751 9,161 9,830 Other 357 1,159 1.310 1,192 1,149 1,075 1,346 Subiotal 24,005 24,719 23,45H 22.331 21,% 7 22,173 22,519 Sales to Utihties 7,H73 10,966 6,252 5,H35 6,929 4,591 441
*lhtal 31,N7N 35,6H5 29,710 28,166 28,HH6 26,764 22,9hD Cu:tomers Sened at December 31:
Residential 919,935 911,15H 902,466 894,164 8HM,107 H85,376 N61,196 Commercial 102,055 100,80H 99,322 97,383 96,04H 90,H 10 87,425 Industrial 2,836 2,624 ~"2 2,239 2,021 1,757 1,161 Other 883 91H l 802 M92 721 693
*lhtal 1,025,709 1,015.50H 1,00!., 994,5HH 987,068 978,664 950,475 Average Annual Residemial kWh Uuge N,336 H,425 H,140 7,924 7,682 7,762 7,780 Average Rnidential Price per LWh 9.69t 9.40t H.53t H.73t H.H4e H.37c 5.42t Cost of I'uci per klillion iku $1,26 $1,30 $ 1.32 $1,40 $ 1.4 7 - $1,51 $ 1.28 Cencrating Capability at Denmber 31:
Coal 77,9 % 77,9 % 77,9 % M9.1 % 89,1% 89.1 % H5,2% ; Oil 2.7 2.7 2.7 3.0 3.0 3.0 7.4 l l Nuclear 19.4 19.4 19.4 7.9 7,9 7.9 7.4
*Thial 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Sourecs of Electric Generation: Coal 82,1% 77.0 % H7,4% 91,0% 89.3 % 90.4 % 93.9 % Oi' - - - - - - 2.0 Nuclear 17,9 23.0 12.6 9.0 10.7 9.6 4.1
*lbt:I 100,0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
lhk load-hiegawatti 5,152 5,027 4,579 4,243 4,084 4,093 4,105 Number of Empkwees at December 31 6.905 7,180 7.266 7,3H3 7,496 7,611 7,157 39 L
s StockheWer informetion Stock Dividends empk yee or retirce, if you want to Transfer Agent Common stock dividends of 49 cents maintain separate accounts but clim- Ohio Edison Compiny per share were paid in each quarter inste multiple copies and help us 'llansfer Agent of 1989. For federat income tax pur- reduce costs, please write to Stock- 76 S. hiain Street I poses, all dividends paid by the holder Services and request that we Akron, Ohio 44308 Company in 1989, including preferred stop mailing an annual report to a p.,;,,,,, and preference stock dividends, rep- particular account. Be sure to provide National City Bank resent taxable income to stockholders. the exact registration of the stock One Cascade I'laza Dividend Reinvestmen, account for which you want the Akron, Ohio 44308 and Stock Purchase Plan annual report mailing discontinued. The Company's Dividend Reinvest. Dividends and proxy material will i nury 1990 meeting, Ohio ment and Stock 1%rchase Plan pro- continue to be sent for each account. Edison's Board of Directors elected vides an opportunity for registered if you want to combine your accounts, Dan R. Carmichael to the Board, , stockholders to acquire shares of please write or call Stockholder effective February 1,1990. Ohio Edison common stock. Paru,c,- i Services. hir. Carmichael is president, chair-pants may invest all or a portion of Stockholder Assistance man and chief executive officer of their dividends and/or make optional For assistance or information. The Shelby insurance Company, cash payments of up to $40,000 call Stockholder Services at Shelby, Ohio. annually. At the end of 1989, about 1800 321-0468 in Ohio, or 62,500 stockholders were enrolled Mon g8m'nt O*V*loPments 1800 633-4766 outside Ohio,
, in August 1989 Ohio Edisons Board m tiie plan. weekdays except holidays, from
. of Directors elected Associate General stock Listing and Trading 8:00 a.m. to 4:30 p.m., Eastern time.
Counsel Anthony J. Alexander vice Ohio Edison common stock is listed Stockholders m the Akron arca and president and general counsel, on the New %rk and hiidwest stock m foreign countries should call succeeding Executive Vice President exchanges under the *0EC* trading (216) 384 5509. You can also write t and General Counsel RussellJ. symbol. Newspapers generally use Stockholder Sernees, Ohio Edison gg, g
*OhioEd' in their stock listings. Ccmpany,76 S. hiain Street, Akron, 39g9 g gg ,
Form 10-K Annual Report Ohio 44308. Form 10-K, the 1989 Annual Report Stockholders who have personal M Vicesmin$csident l Frank E. Derry, e mputers and modems can call our to the Securities and Exchange who was in charge of the Company's Commission, will be sent without Bulletm Board service weekdays advertising and public relations, between 5:00 p.m. and 7:30 a.m., g g charge upon written request to and on weekends, at (216) 384 7937. Gregory F. LaFlame, Secretary, , The service features daily stock Ohio Edison Company, 76 S. hiain in hiay 1989, the Board elected Street, Akron, Ohio 44308. pnces and selected financial data. hianager ofinternal Auditing Kenneth Audio Financial Reports Annual Meeting d Stocholders J. Verbic treasurer, succeeding hf ark We invite stockholders to attend the T. Clark, w ho was named manager of Stockholders with impaired vision 1990 Annual hiceting of Stockholders the Springfield Division. Air. Clark can now obtain free of charge audio cassettes of the Company's annual on Dmtsday, April 26, a 10$0 a.m. replaced N. Rod hionahan, who in the Company's General Office in retired after more than 38 years report and interim reports by con-Akron. Ohio. Registered stockholders of service. tacting Stockholder Services. t attending can mte on the items hir. Spetrino, hir. Derry and Multiple Annvol Reports
" "# " "E ut and remming hit. hionahan played important roles You may be receiving several copies .
the pmxy card that is mailed abom in helping the Company achieve of the annual report if you have more days before the meeting. Stock- successes during their years than one stock account or you are holders whose shares are held m the a of seruce. both a stockholder and an Ohio Edison , name of a broker can attend the in November 1989, the Board ' meeting if a letter from the broker is elected Rate Analyst Nancy C. Brink presented indicating ownership of assistant secretag, replacing Joanne Ohio Edison stock on hiarch 7,1990. hiartin, who left the Company, i
Board of Directors OHicers ' Divlelen Menegers L: Donald C. Islasius,60 William R. Miller. 67 Justin T. Rogers. Jr. Robert L. Kensinger President of National President Akron Dnision
- President. Whac Consohdated Industries, Inc., Clescland. Ohio hianut acturing & Design Corp.,
Albany, Kentucky (clothing). Douglas W. Tschappat Gary M. Stair (home and commercial fley Division h1 ember, Compensation lixecutive Vice President uppliances, outdwr and industrial Committee. products, building components). hiember, l'inance Committee, Deeted 19kA II. b'"'"' clf M
' D E''d'"'
Maledm F., L, ash I'k' E"' U" i'i"" Nominating Committee. John Nelson,67 Fred M. Lentz Dened est Robert J. McWhorter Senior Vice Pres dent htansfield Dnision
- 11. Peter llurg,43 e ar nd h ef I t Senior Vice President of Ohio Offrer of Commercial Shearing. Anthony J. Alexander Fred K. White Edicon hiember, Finance Inc., now CommercialIntertech Vice President h1arion Division Committee. Corp., knptow n, Ohio and General Cournel Dened 1989 (crigineered metal componentst Mark T. Clark hiember, Compensation John A. Gill Springfield Division Robert i 1. Carlson,63 Comminee. Vice President Consultant for and formeri) 13ened 1982 liarl T. Carey President and Chief thecutisc Anthony N. Gorant Start Division Off cer of Unisersal Rundle Charles W. Rainger, 56 Vice President Corporation. New Castle. President of handusky Foundry lidward T. lleil
& A14 chine Company. Sandusky, llarry M. Miller Warren Division Pennsylvania (plurnbing Ohio (centrifural castings). Vice President fixtures). hjember. Audit Peter A. Fetterolf Committee. hiember. Compensation Dau.d L. Yeager knptown Division Dened 1981 Committee.
bec Preudent Dened 1987 Dan R. Carmichael,45 .ilh,am A. Dam,els Chairman of the lloard, Justin T. Rogers, Jr.,60 President of Ohio Edison and
""P"""
President and Chief thecutive [y Officer of The Shelby insurance Chairman of the llord of its Gregory F.1. aflame j Company, Shelby, Ohio subsidiary, lYnns)h ania limer. gee,cian ' (diversified insurance). Chairman. Finance Committee; Deeted 1990 hjember, Nominating Kenneth J. Verbie Committee. 'Deasurer Dr.1 -ucille G. Ford,68 i.:wnedi97o Vice l< resident for Academic Nancy C. lirink Affairs, Ashland Unisersity. George M. Snmrt,44 Assist mt Secretary Ashland, Ohio. Chairman, President and Chief Executive Nominating Committeet Officer of Central States Can Theodore F. Struck 11 Co., hlawiuon, Ohio (rigid Assistant Teasurer h1 ember, Finance Committee. Dened 1979 containers), hiernber, l'inance gg Committee. A"istant comptroller Robert L. leughhead, 60 Dened iox8 Reured, formerly Chairman of Douglas W. Tschappat. 62 U""*Y I'* W"A"" the ikiard, Presi[ lent and Chief ^ " '"' #"#"""#' thecutisc Officer of Weirton lhecutive Vice President of Steel Corporation, Weirton, Ohic Falison, West Vtrginia (steel productst Detted 19Mn Chairman, Compensation Committeet hjember, Audit Frank C. Watson,6s Committee. Cit) hlanager for the City of Dened 1980 Canfield, Ohio Chairman, Audit Committee; hiember, Glenn i 1. Meadows,60 Nominating Committee. Retired, formerly President and Dened 1974 Chief Executive Of ficer of hic %il(Ohio) Corporation, Director fmeritus Akron, Ohio (manufactured Fred i1. Zuck s products). hiember, Audit b Committee, Compensation Comtnittee. I 1:kned 19Mt 41 m
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