ML20044D308
| ML20044D308 | |
| Person / Time | |
|---|---|
| Site: | Beaver Valley |
| Issue date: | 12/31/1992 |
| From: | Holland W, Kensinger R PENNSYLVANIA POWER CO. |
| To: | |
| Shared Package | |
| ML20044D300 | List: |
| References | |
| NUDOCS 9305180485 | |
| Download: ML20044D308 (23) | |
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, l IA PENN POWER 154!t' A N NI ' AI. IEI N liff ~W l
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Contents Csmpany Profile
- S,.w.d AnancialData 1 Ibnnsyhania Ibwer Company I
nssair 'Ib Stockruskiers 2
! pmvides electric service to nearly )
Afanaynamt's L>iscusskm l
And Analysis 4 l
138,000 customers in western '
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geng satans 6 Sati na rds OfIravme 7 l lbnnsylvam.a. The Company l Balanw Starts 8 Statements Of Capitali.:ntion 9 furnishes electric service in 139
) Statements Of Retained Eandngs 10 4
j Statoncuts Of CapitalStock Aruf Communities, as well as rural OtlarIbid-in Capital 10 Staterru nts Of Cash IT4ms 1I areas, and also sells electric Statements Of hws 12 Nutts 7b nnancial Statements 13 enerD' at wholesale to five Rejert OfIndejeraient Patilic a Acwuntards 20 j municipalit.ies. Its service area 3 Dinrtors And O[furrs 21
{ has an estimated population j
of 360,000. The Company, with l;
1; headquarters in New Castle, 1
l IVnnsylvania, is a wholly
! l i owned subsidiary of Ohio )
l Edison Company.
PENNSYLVANIA l 4 i
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Selected FinancialDats hnnsylvama n=er company
@na m ms.uato 1992 1991 19Ai) 1989 19SS Olerating Revenues 5 315,458 $ 321.845 $ 318.056 5 313,757 $ 2S4,705 Operatingincome 8 66,525 $ 81,102 $ 65,992 5 73,5S8 $ 67,054 Net income s 30,956 5 40,197 $ 25,519 $ 34,660 $ 37,900 .
Earnings on Common Stock 8 24,457 $ 32,475 $ 15,537 $ 23.9S7 $ 26,993 2
Return on Average Common Equity 9.2 % 12.2 % 53% 8.6% 98%
Cash Dividends on Common Stock 8 27,676 $ 27,676 $ 27,676 $ 27,676 $ 27,676 Total Assets s 986,158 $1.022,099 $1,091,090 $1,065,574 $1,014,052 CAPITALIZATION: ,
Common Stockholder's Equity 8 261,518 $ 266,058 $ 262.059 $ 274.158 $ 277,839 Preferred Stock-Not Subject to Manlamry Redemption 41,905 41,905 41,905 41,905 41,905 Subject to Mandatory Redemption 30,362 34,282 38,722 59,662 65,1(r2 fong Term Debt 398,630 408,443 431,146 411,473 403,111 TotalCapitalization s 732,415 $ 750,688 $ 773.832 $ 787,198 $ 787,957 CAPITAUZATION RAT 105:
Common Stockholder's Equity 35.7% 35.4 % 33.9 % 34.8 % 35.3%
Preferred Stock-Not Subject to Mandatory Redemption 5.7 5.6 5.4 5.3 5.3 Subject to Mandatory Redemption 4.2 4.6 50 7.6 8.3 ;
long-Term Debt 54.4 54.4 553 52.3 51.1 {
- 7btal Capitalization 100.0 % 100.0 % 100.0 % 100 0 % 100 0%
f (i) includes a $16,400,000 charge msulting from an adwrse regulatory decision concerning the reco;erabihty of mrtain pun hasedFmer costs resultmg m a $10.000D 0 redation in og rating income, net income and earnings on common sw k
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Message to Stockholders 1992 was a difficult year. Futum earnings will also benefit from die Two of our largest industrial customers- closing of two old, coal-fired generating units at Shamn Steel Corporation and Shenango Inc. - the New Castle Ibwer Plant scheduled for April filed for bankruptcy and reorganization during the 1993. This action will reduce our armual operating year, owing us more than $13 million. expenses by $3.2 million and enable us to avoid Although we are working to recover the an estimated $10 million in capital mquirements amount owed us, the uncertain outmme of this during the next five years. The plant's remaining effort required a provision for uncolleedble cus- units-three coal- and two oil fired-will remain tomer accounts. As a result, earnings on mmmon in operation.
stock fell $8.0 million from 1991 earnings, to In addition, we offered 70 employees at the
$24.5 million for the year. Ilruce Mansfield and New Castle plants a volun.
Despite this setback anc mild weather tary retirement program in February 1993. This throughout the year, we increaad total kilowat t- program could produce annual, after-tax savings hour sales and initiated sound str ategies to im- of about $1.4 million.
prove future earnings.
Total sales were up 3.8 pement, fueled by cean-Air Compilance record sales to commercial customers and strong 1, st year, Wnn Rwer and Ohio Edison intm-sales to other utilities. Sales to our parent com-duced a cost-effi ctive, flexible strategy for com-pany, Ohio Edison, and to other utilities jumped 25.5 percent. Commercial sales reached their plymg with new regulations under die Clean Air ,
Act Amendments of 1990. 'Ib comply with Phase 1 l seventleconsecutive mcord level, up 1.3 percent sulfur-dioxide (S0 2) mgulations, which take effect from the previous year. Residential sales declined l 0.9 percent because mild weather reduced home in 1995, our plan calls for using lower-sulfur coal l heating and air-condidoning use. and increasing reliance on generating units with Industrial sales dropped 8.1 percent in 1992, lower emissions of SO2 and nitrogen oxides (NO,).
We also expect to use emission allowances that I
mainly due to lower produedon at Sharon Steel,
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our largest industrial customer. However, we con. baome available for trading when companies ;
tinued to improve sales in other segments of our reduce their SO: emissions below levels required industrial market. Excluding Shamn Steel, our by law.
industrial sales were up 5.9 percent for the year. In 1992, we began installing continuous ]
emission monitors and low-NO, burners at our generating units to comply with the 1995 stand-Curdng Costs ards and the more stringent Phase 11 regulations I Despite the effects of the bankruptcies, that take effect in the year 2000.
i our 1992 results benefited from cost cutting l efforts, including mfinancing higtemst seemities.
Targeting New sales Taking advantage of favorable market conditions mugh targeted marketing strategies, helped lower our interest and dividend costs by '
we m mking to inemase future sales while con-17.0 percent, or $8.9 million.
immng h amount of eWeity our customers Also, through strict mst control, we reduced use during times of peak demand.
1992 operation and maintenance expenses 3.3 permnt-some $5.4 million-from the pre-Our GMnts pmgram dus 5nur s ving guidehnes that include the use of higle vious year, excluding the additional provision for efficiency, electric spam and water heating. In uncollectible acmunts.
, we mrtified 93 Good Cents homes in our In response to the loss of Sharon Steel reve-service area, and 96 more are planned or under nues, we implemented a strict austerity program mnn di n. In addition, we launcled our first to improve future earnings. Our plan includes System:GT/ Good Cents residential development.
reduedons in operating and capital costs, and en homes planned for this development intensified marketing activities.
will use geothermal energy fmm groundwater for l
efficient heating and cooling.
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We're also helping our business customers rates to recover costs for new generating units bemme more energy efficient. With our successful was completed, reducing by nearly 18 percent the Energy 'Ibamwork Connection workshops, we price of electricity for a typical msidential cus-promote the wise use of our pmduct through new tomer. While economic conditions and envimn-electrical technologies and energy-saving systems mental mquirements threaten to pressum future such asload management. prices upward, we are committed to delaying rate We look forward to future sales opportunities increases aslong as possible.
that should result from the new Greater Pitts- Despite these unwrtainties, we remain burgh International Airport and the nearby turn- confident in our ability to meet our challenges pike extension. During the next 20 years, the new and stay competitive in the energy business.
airport is expected to add 81,000 new jobs to a One of the main reasons we am positioned -
region that includes a portion of our service ama. so well for future growth is the solid leadership
'Ib promote new economic growth, we offer pmvided by Justin Rogers. Penn Nwer has bene-special, five-year incentive rates to new or ex- fited from the many achievements spearheaded panding businesses that meet criteria related to by Justin and our very capable management team increased employment and electric sales. While during his tenure as Chairman of the Board. We're on these rates,78 companies created 2,944 sure you join us in wishing Justin the best in his new jobs, adding $43.5 million in new revenue retimment.
since 1984. With the dedicated efforts of our employees.
We're also adding value to the services we we are confident that we will achieve the cost pmvide our customers. 'Ib make mntacting us savings, increased sales and quality service more convenient, we extended our telephone needed to ensure our future success.
customer service hours from 7 a.m. to 6 p.m. In addition, we relocated one of our customer service offi s to better meet the needs of the fast-gmwing area north of Pittsburgh. We also installed a new, /m computerized telephone system that increases the number of calls we can handle during power Willard R. Holland ,
outages. Chairman of the Board and Chief Executive Officer :
Positioned for the Future ,
Our efforts to cut costs, expand sales and C enhance customer services will grow in impor-tance as we enter a new era of unprecedented 7
change and increased competition in the utihty Robert L Kensinger l
business. Passage of the Energy Nlicy Act makes President it easier for i'1 dependent power producers to enter i the energy market and compete with investor-owned utilities for bulk-power sales. The U.S.
Envimnmental Pmtection Agency is developing ,
new guidelines for nitrogen-oxide emissions that New Castle, Pt>nnsylvania could further inemase the cost of complying with March 3,1993 l the Clean Air Act Amendments. And,like all l
major energy suppliers, our costs could be affected l by the new Administration's pmposal to enact a broad-based energy tax and increase the corpo-rate income tax rate.
One of our greatest challenges is to keep our prices stable. In April, a four-year phase-in of 3
Management's Discus:lzn And Analysis Of '
R:sults Of Operati:ns And Fin:ncial Condition i
RESlUS OF OpEREONS - lower interest expenses in 1992 compared
! Tbtal kilowatt-hour sales in 1992 increased with 1991 resulted principally fmm long-term debt 3.8% over 1991 due primarily to a 25.6% increase refinancings at lower rates, decreased short-term in sales to other utilities. Sales to Edison increased borrowing levels and the absenm of unusual items !
41.3% and sales to non-associated utilities in- that increased expenses in 1991. Other interest ;
j creased 14.6% due to strong demand in the bulk expense increased in 1991 compared with 1990 as a I power market. Kilowatt-hour sales to commercial result of a 1991 provision for interest associated customers also increased by 1.3 %; however, sales with the outage-related refunds discussed previ-to residential and industrial customers decreased ously and estimated interest payable in connection ;
0.9% and 8.1 % , respectively. Lower industrial sales with federalir e ime tax adjustments for prior years. I wem due primarily to reduced pmduction by The 1991 increase was partially offset by decreased i Shamn Steel Corporation, which entered Chapter 11 interest due to lower short-term borrowing levels. i i bankruptcy pmceedings in November 1992. Sharon Interest on nuclear fuel obligations has declined I Steel had been the Company's largest customer, since 1989 due to reduced levels of nuclear material .
Pmspects for future sales to Sharon Steel are uncer- in process of conversion, enrichment and fabrica-tain at this time. tion into fuel assemblies combined with signifi- l lbtal kilowatt-hour sales were down 2.5% in cantly reduced interest rates. i 1991 compared with 1990 primarily due to a 15.4 % The Financial Accounting Standards Board i
dmp in sales to other utilities. Sales to Edison were (FASB) has issued statement of Financial Account-down 25.2% in 1991 and sales to non associated ing Standards (SFAS) No.106, " Employers' Ac- l utilities decreased 6.7%. counting fc,r Estretirement Benefits Other Than i l Fuel and purchased power costs in 1990 in- Pensions l' which the Company will adopt in 1993. l cluded achargeof approximately $16.374,000 The standard requires the Company to change the i
($9,994,000 after taxes) resulting from an adverse method of accounting for postretirement benefits, i regulatory decision concerning the recoverability of resulting in a substantial increase in the annual l certain purchased power costs (see Note 1 to the expense charged to income for such benefits. The ;
Financial Statements). Included in fuel and pur- Company is seeking regulatory appmval to defer chased power costs in 1991 was a reserve of approx- the increased annual expense for future collection imately $2,454,000 for refunds to the Company's from customers. If regulatory action is inadequate customers ordered by the Pennsyh ania Public to permit the recognition of an asset under gener-l Utility Commission (PPUC) for purchased replace- ally accepted accounting principles for these incre-ment power costs incurred during a 1979 outage at mental costs, there would be a material adverse Beaver Valley Unit 1(see Note 1). effect to net income beginning in 1993, as discussed The reduction in nuclear operating costs in in Note 1. The FASB has also issued SFAS No.109, l 1992 resulted from a higher level of costs in 1991 " Accounting for income lhxes," which the Com-l due to the refueling of Beaver Valley Unit 1. Other pany will adopt in 1993. This new standard will not operating costs increased during 1992 principally affect net income.
due to an increase in the provision for uncolketible The electric utility industry is subject to infia-accounts. tionary pressures similar to those experienced by The Pennsyhania state tax increases enacted all other industries. 'Ib the extent that the Company in 1991 (which included an increase to the corpo- incurs additional costs or receives benefits resulting i rate net income tax rate) are being recovemd from the effects of inflation, it is anticipated that j through a surcharge on customers' electric bills. those effects will ultimately be reflected in the Increased costs deferred in 1991 were subsequently Company's ekttric rates.
recovered in 1992 (see Note 2). The comparison of 1991 general taxes to 1990 was further affected by CAPrrAL RESolICES ANDL1QnDrrY a higher level of taxes in 1990 resulting from the At December 31,1992, the Company had ap-recognition of the liability for gross recei;)ts taxes proximately $4,000,000 of cash and temporary on revenue accrued since the inception of the investments and short-term indebtedness of Company's phase-in plan. $15,000,000. The Company also had available
$65,000,000 of unused bank lines of credit and l
$35,000,000 of bank facilities which may be !
bormwed on a short-term basis at the banks' discretion.
Capital requirements in 1992 for the Company's construction programs, capital leases and nuclear fuel were approximately $38,000,000. The 1993-1997 construction program and capital lease
! requirements are currently estimated to be approxi-l A
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mately $216,000,000 (excluding nuclear fuel), of The Clean Air Act Amendments of 1990 mquire which approximately $36,000,000 applies to 1993. f significant reductions of sulfur dioxide (SO 2) and The Company has additional cash requirements of oxides of nitrogen from the Company's coaltred i approximately $134,000,000 for the 1993-1997 generating units. Compliance options include, but .
period to meet maturities of, and sinking fund re- are not limited to, installing additional pollution quirements for, long-term debt (excluding nuclear control equipment, burning kss polluting fuel, fuel) and preferred stock; of that amount approxi- purchasing emission allowances fmm others, oper- l' mately $31,000,000 applies to 1993. ating existing facilities in a manner which mini-Investments for additional nuclear fuel during mizes pollution and retiring facilities. As part of the i the 1993-1997 period are estimated to be approxi- system compliance plan submitted to the PPUC and i mately $32,000,000, of which approximately to the Environmental Protection Agency (EPA) for ;
$2,000,000 applies to 1993. During the same periods, the Company's nuclear fuel im estments the Company and Edison (Companies), it was stated j that the required SO2reductions would be achieved j
. are expected to be reduced by approximately by burning lower sulfur coal at some of the Com- ;
$45,000,000 and $10,000,000, respectively, as the panies' generating units and generating more elec. !
nuclear fuelis consumed. tricity at lower emitting plants. Achieving the Sales by the Company of first mortgage bonds required reductions for oxides of nitrogen will result and of preferred stock require that applicable earn- !a additional capital expenditures and increased t ings coverage tests be met. With respect to the operating costs. The Company is also testing and issuance of first mortgage bonds, other require- analyzing compliance options for eductions re- ;
ments also apply and are more restrictive than the quired by the year 2000 for feasibility, cost-effw-l earnings test at the present time. The Company is tiveness and degree of flexibility. j currently able to issue $112,000,000 principal As discussed in Note 6, the Company has in- ;
amount of first mortgage bonds, with up to vested approximately $48,000,000 in Ibrry Unit 2, ;
$33,000,000 of such amount issuable against prop- a nuclear generating unit whose construction was '
erty additions (excluding Perry Unit 2 property suspended in 1985. Options under consideration !
additions); the remainder could be issued against include, but are not necessarily restricted to, re-previously retired bonds. Based upon earnings for sumption of mnstruction, continued suspension or - i 1992, the Company would be permitted, under the termination. If construction were to resume during ;
earnings coverage test contained in its charter, to '
the 1993-1997 period, the Company's capital ex-issue $30,000,000 of preferred stock at an assumed penditures would be higher than the amount dis- l dividend rate of 8.25L If the Company were to closed above for that period. If termination were to ;
issue first mortgage bonds or other debt at or prior occur, the Company would have to write off the i to the time it issued preferred stock, the amount of difference between its investment in fttry Unit 2 preferred stock which would be issuable would be and the estimated present value of revenue to be i reduced. collected from its customers. l The Company implemented a base rate de- The Company recently initiated strategies to i crease approximating $44,000,000 on an annual conserve cash and improve earnings opportunities l
basis in the second quarter of 1992, which brought in light of the potentially adverse effects resulting 3 its four-year phase-in plan to an end. The Company's from the Sharon Steel bankruptcy proceedings !
electric rates now reflect the same rates that would referred to above. Annual operating costs are ex- '
have been placed into effect in 1988 without the pected to be reduced by approximately $3.200,000 ;
phase-in plan. There is no material effect to net with the closing of two of the Company's generating i income resulting from this rate reduction since units in April 1993. This action will also eliminate l mvenue was recognized under the phase-in plan as the need to make additional capital expenditures of
- if the full revenue level had been placed into effect approximately $10,000,000 over the next five years.
l in 1988. In February 1993, the Company offered a voluntary The Energy Policy Act of 1992 was signed into retirement program to production department em-i law on October 24,1992. Thislegislation amends ployees that could result in annual after-tax savings portions of the Public Utility Holding Company Act of up to $1,400,000. Also in February 1993, the of 1935, providing independent power producers Company's Board of Directors reduced the quarterly and other nonregulated generating facilities easier common stock dividend to $.85 per share from the i entry into the electric generation markets. The Act previous level of $1.10 per share. If continued at also amends portions of the Federal Pbwer Act, this level, the Company's annual cash outlay for authorizing the Federal Energy Regulatory Commis- dividends would be reduced by approximately sion (FERC), under certain circumstances, to man- $6.3(0,(KO.
date access to utility-owned transmission facilities.
The Company is currently unable to predict the ultimate effects resulting from this legislation.
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Opertrtirg St:tIstics wnnsynma mer company" 1992 1991 1990 1989 19sS REVENUE FROM EIIcIPJC SAlIs(71erasands).
Residential $104,133 5103.W9 8 99.979 5101.794 $ 91.573 Commercial 62,554 61,172 58.646 57.004 50,648 Industrial 82,145 67,908 88.407 90.523 h6,225 8,145
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Other 8.633 8.645 8.269 8.640 1
Subtota! 257,465 260,734 255,301 257,961 236.591 Parent C(opany 15,311 14.576 16.591 11.719 6,541 Other Utihties 26,073 26.369 26,718 27JA5 30.890 lbtal 8298,849 $301.679 $298.610 1297.225 1274.022 REVENUE Fit 0M ElICTRIC SAILS:
Residential 34.9 % 34.1 % 33.5% ' 34.2 % 33 4 %
Canmercial 20.9 20.3 19.6 19.2 18.5
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Industnal 27.5 29 1 29 6 30 5 31.4 j Other 2.9 2.9 2.8 09 3.0 ;
l Subtotal 66.2 66 4 S5.5 66.8 86 3 Parent Company 5.1 4.8 56 39 2.4 ;
Other Utihties 8.7 8.8 89 9.3 11.3 4 7 trial 100.0 % 100 0% 100 0% 100 0% 100 0 %
KilDWATT-HOUR SAIIS(Milhons): l Residential 1,050 1.061 1.019 1,024 1,(05 i Commercial 782 772 732 695 66S Industrial 1,674 1.823 1,795 1.809 1,878 Other 138 ISS 135 137 136 ,
Subtotal 3,644 3,794 3.661 3.66s 3.690 !
Parent Company 786 556 743 3SS 313 Other Utihties 906 790 S47 949 1.332 r ;
Total 5,336 5,140 5,271 5.0J5 5,335 CUSTOMERS SERVED AT DECEMBER 31: )
Residential 121,879 120.537 !!9.530 11S.255 116.9S5 j l Commercia! 15.348 15.127 14.945 14.718 14.622
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industnal 235 243 257 264 264 Other 100 100 117 115 150 Total 137,562 136,007 134,652 133,382 132.004 Average Annual Residential Kilow att Hours t sed 8,672 8.S39 8.555 8,717 S,676 Averace Retai!Pnce per Kilowatt Hour (Cents) 7.66 7.89 7.09 6.33 5.66 Kilowatt HoursGenerated(Millions) 4,659 4.135 4,525 4.040 4,4 17 Peak lead (M"gau atts) 734 739 7(o 683 666 Cost of Fuel per Milhon BTU 8 1.26 $ 1 32 $ 1.27 3 1.26 $ 1 27 Generatdig Ca;>abihty:
Coal 74.6 % 74 6 % 746% 74 6't 74 6 %
Oil 2.8 2.8 2.8 2.8 2S Nuclear 22.6 22 6 22 6 22 6 22.6 Tce,al 100.0 % 100 0% ' 100.0 % 100 0't - 1(U 0%
SOURCES OF ElICTRIC GENERATION:
Coa! 68.3% 72 9% 684% 76 6% 71.8 %
Nuclear 31.7 27.1 31.6 23 4 28.2 Total 100.0 % 103 0% 100 0 % ' 1(00% 100.0 %
NUMBER OF EMP!DYEES AT DECEMBER 31 1,432 1,432 1.658 1.675 1,716 l
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Seat ments Oflocom2 Ivnnsylvania Mrr company (in thousamh)
For the Years Ended December 31, 1992 1991 1990 OPEIMTING REVENTES(Note 2) 8315,458 s321.845 s316,056 OPERATING EXPENSES AND TAXES.
Fuel and purchased ptmer 80,303 82,647 101.938 Nuclear operating costs 24,568 32,799 27,500 Other operating costs 67,578 52.054 55,994 lbtal operation and mamtenance expenses 172,469 167,500 185.432 Provision for depreciation 30,856 29.166 29.101 General taxes 22,162 22.698 23,683 Tax surcharge amortcation (deferral). net (Note 2) 2,377 (2,377) -
Inmme taxes 21,069 23,756 13.848 Totaloperatmgexpenses and taxes 248.933 240,743 252,064 OPERATINGINCOME 66,525 51.102 65.992 OIEERINCOME 781 2.461 1,722 TOTAllNCOME 67,306 83.563 67,714 NETINTEREST:
Interest on king term debt 35,707 37,867 37.50S Interest on nuclear fuel otilgations 457 1.013 1,765 Allowann for borrow ed funds used durmg mnstruction (678)' (1,329) (1,889)
Otherinterest expense 864 5.815 4,511 Net interest 36.350 43.366 42,195 NETINCOME 30,956 40,197 25,519 PREFERRED STOCK DIVIDEND REQUIREMENTS 6,499 7.722 9,982 EARNINGSON COMMON SloCK s 24,457 s 32.475 s 15.537 Tbc am,nivanymg Notn to rinannat statements are an mtegral pan a these statements 7
Balance Sheets Iwns.dvama her compani (Ir: ttuatendsi At Iktmber 31, l 1992 1991 ASSETS UTIUTV PLuT:
In servia, at original cost 81,138,408 $1.118,517 less- Accumulated provision for depreciation' 365,251 332.435 773,154 .S6.079
_ l Construction uork in progress- l Electric plant (Note 6) 60,239 60.141 i Nuclear fuel 15,805 9.383 l 76,044 69.524 i I
849,201 555.603 ,
OTFIR PROPERTY ANDINVESTMENTS 15,258 17.206 l
CL'PIENT ASSETS.
Cash and cash equivalents 3,663 4.078 '
Accounts re&ivable- i Customers (less amumulated provisions of $429,000 and $419.000, respectively, !
for uncollectible aavunts) 19,514 2S.633 l Parent company 15,170 20.920 Other 14,418 18.040 t Currently receivable amrued customer revenues (Note 2) - 19,517 i Matenals and supplies. at average cost -
Fuel 8,547 6.341 l Other 12.557 10.893 Prepayments 2,528 2.516 !
76.397 Il0.93S l DEFERRED CHARGES: !
Delerred Perry l' rut I costs 21,180 21,140 ,
Other 24,122 __
17.172 45,302 3S.352 8 986,158 51.022.099 I CAPITAUZATION ANDLIABluTIES !
CAPITAUZATION (See Statements of Capitahzation L l Common stockholder's eguity 8 261,518 $ 266.0%
Preferred stock- ,
Not sutpct to mandatory redemption 41,905 41.905
, l Subject to mandatory redemption 30,362 34.2S2 i Long term debt- !
Associated nimparues 21,567 22,164 l Other 377,063 386.279 1
732,415 750fA4 CL'RRENT LIABIUTIES Currently payable preferred stu k and long term debt-Associated comparaes 10,633 12.932 Other 30,246 36.bb6 Notes payable (Note 5)-
l 15,000 i
Ranks -
l Parent <nmpany - SM' i Accounts payable- )
l Awcated cumparues 8.329 8.056 l Other 25.480 33,h49 -
l l ActTued taxes - 9,548 21.816 Accrued mterest 8,971 10.930 Other 16,195 14.2fA 124,402 146J37 DEFERRED CREDlTS Accumulated defered income taxes 74,336 74582 Accumulated deferred mvestment tax credits 34,921 35 S80 Other 20,064 14.012 129,341 124,674 ,
COMMITMENTS, Gt:AR6 TEES AND CONTINGENCIES (Notes 3 & 6) -
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8 9h6,158 $1,022.099 The anumpanymg Notes to Finannal Statements are an integral part of these balance shwts i
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StatGments Of CapitalizDtion lunylvania Esmer company I
iMm m ou,usae nrept per st are amountsi l t
At Demmber 31, I '
1992 j _ 1991 '
COMMON SlDCKHOLDER'S EQt'ITY !
Common stock, $30 par value,6,MKluto shares authorced,6,290AKKi shares outstandmg $16N,700 ' $168.700 Other paid in capital 41 41 ;
Retained carrungs(Note 4a) 72,777 77,317 j Total mmmon stockholder's equity 261,518 266.058 !
Numter of Shares Optional !
_ Outstandag Redemption Prwe [
1992 1991 Per Share Aggregate PREFERRED STOCK (Note 4b):
Cumulative,5100 par value !
Authorized- 1,200.000 shares i Not Sutv et to Mandatory Redemptiotn 424% 4641 141,049 141.049 $122.98105 00 $14.614 14,105 14.105 i
- 7 64% 8 001 11S,000 118J00 102.07 102 56 12.074 11,800 11, BOO j N.4S's 9.164 160f/00 160 000 102 29 103 08 16.429 16,000 16.000 !
Total not subyt to mandatory redemption 419.049 419.049 $43.117 41,905 41,90f Surset to Mandatory Redemption (Note 4c):
7.6251 150,0(0 -
$107 63 $16,144 15,000 -
8 P411100% 56,616 169.616 102 06102B 5.787 5,662 - 16,962 l
11 MrL15 Out 130iKK) 209.400 103 29 107.80 13,743 13,000 20.940 !
I Redemption withm one year (3,300) (3,620) l j Total suttri to mandatory redem ption 336,616 379.016 $4674 30,362 34.282 [
LONG TERM DEBT (Note 4d). '
first mortgage londs- r 8 291 wrighted average interest rate, due 1992 through 1997 59,000 120.036 i 8 0n% w eghted average interest rate, due 1995 through 2002 49,409 68,593
- H 001 w eighted average inter si rate, due 2003 through 2007 59,870 19,870 i 9 74% weighted average interest rate, due 2008 through 2012 4,870 29E70 i R74% weghted average interest rate, due 2013 through 2017 4,870 4.870 !
8 551 weighted average interest rate. due 2016 through 2022 51,981 1381 Total flat mortgage bonds 230,000 !- '
245.220 i
- 4 Secured notes and obligaton- '
i 9 591 weighted average intsrest rate. due 1992 through 1997 57,998 f6.134 I 6 561 w eghted averaRe interest rate.due 1995 through 2002 4,453 lE953 i i
6 661 w emhted average mterest rate, due 2003 through 2007 8,987 8.987 : I hWA weighted average interest rate. due 2013 through 2017 50,075 l Mt075 ! t 7 641 wechted average interest rate. due 2018 through 2022 29,982 29,992 i
{ l 6 451 m eighted average interest rate, due 2027 1 14,500 -
Total secured notes and oblma00n 165,995 166,131 0'her obhgations- ' !
Nuclear fuel 31,158 33,754 Capitalleases (Note 3) 9,662 10 234 ; ;
Total other obligations 41,020 44.118 Net unamortized discount on de bi l
'(806) _ (h28) long term debt due within one year (37,579) i (46.198)
Total kmg term debt I 398,630 40h.443 .
TOTAL CAPITAUZATION 8732,415 17Mt6%
The accompanying Notes to Fmancial Statements are an ir*.egral part of these statements.
)
I f
9
l i l
Stat:ments Of Retained E:rni:gs Iwnsylvaniahmr company
- i On ttmuwnds)
For t% Years Ended Dewmter 31, 1992 1991 1990 Balana at leginning of year S 77,317 $ 73170 $ b5,257 Net income 30,956 40,197 25,519 108,273 113.367 110,776 l
Cash dividends on mmmon stoc k 27,676 . 27.676 27,676 l
Cash dividends on preferred stock 6,448 7,698 9,930 6 Premium on redemption of preferred stock 1,372 676 -
l 35,496 36.0f0 37,606 Balanx at end of year (Note 4a) $ 72,777 5 77,317 $ 73,170 l
i
( i Statements Of CapitalStock And Other Pald-in Capital ;
e Preferred Stock Not Sutdect to Sutgtto .
Common Stock Mandatory Redemption Mandatory Redemption l Other t Number Par Paid in Number Par Numter Par ofShares Value Capital ofShares Value ofShares Value
(!Adlars m stunsamts) l Balanw. January 1,1990 6.290,0f0 $188,700 $ 201 419,049 $41,905 - 632,816 $ 63.282 i Redemptions- J S.24% Series (5,000) (MO)
II.(O't Senes (S.(XX)) (8(0) 11.50% Series (6) (30fXO) (3,(KO) 13 001 Series (4) (10.000) (1.000) 15 001 Senes (2) (6.400) (640)
Balana, Denmter 31,1990 6,290.000 188.7(0 -189 419.049 41,905 573,416 57,342 Redemptions-8 24% Senes (5 (KO) (500) 11.001 Series (B.000) (600) 11.50% Senes (148) (165,000) (16,MK))
13 00t Series (10,(K0) (1,0(0) 15 001 Series (6.400) (640)
Balance, De&mter 31,1991 6.290.000 188,700 41 419.049 41,905 379,016 37,902 l Sale of 7.625% Preferred Stock 150,(KO 15A0 Redemptions-S 241 Senes (5.000) (500) 10 50't Series (l(0.000) (10#0) 11.(0t Series (8,000) (800) 11501 Senes (15AO) (1,500) 13 00i Series (10.0(0) (1po) 15 00% Series (54,400) (5,440)
Balance, Decemter 31.1992 !!BS,700 $ 41 419,049 $41,905 336,616 5 33f.62 l 6.290(KK)
The accompanying Notes to Finane:al Statements are an integral part of these statements.
l l
10
n nnsylvania n=er company . !
Statemeirts Of Cash Hows on thimsans) -l For the Years Ended Decemter 31, 1992 1991 1990 I j 1 CASH Plows PROM OPERATING AcmmES. r 8 30,956 & 40,197 5 25,519 i Net inmme Adjustments to remncile net income to net cash from operating activities: l Depreciation 30,856 29.166 29,101 I 13,866 11.061 14,071 i
) Nuclear fueland lease amorta.ation Deferred meome taxes, net (446) (6,575) (3,485) l Investment tax credits, net (959) 2.784 2.691 i f Deferred (amroed) revenue, net 19,517 . 37,757 (2,639)
Allowan& for equity funds used during construction (114) -
l Deferred fuel costs, net 2,745 (930) 20.979 l Tax surcharge amortization (deferral), net 2,377 (2,377) -
j 98,798 109.083 86,187 [
internalcash tefore dividends Receivabhs 19,077 (11.983) (7.282) r Matenals and supplies (3,870) 2,048 (2,207) !
(8,886) 7.449 ;
Accounts payable (8.588)
I Other (11,560) 4.539 9.55o Net cash pmvided fmm o;eratmg activities 93,559 111,136 77.666 ,
l CASH FLowsFROM FINANCING AcmTr!ES:
New finanemg- [
> Preferred stotk 15,000 - -
Iong term debt 102,914 31,696 54,442 4 '
Notes payable, net 7,000 - -
Redemptions and Repayments- ;
20,612 20.223 5,940 ,
Prefened stock I long term debt 137,343 74.968 21,963 Notes payable, net -
299CO 4.000 Dividend Payments- [
Common stwk 27,676 27,676 27.676 ;
Preferred stock 6,448 7.698 9,930 j l Net cash used for financing acuvities 67,165 127,869 15 067 CASH FlowsFROMINVESTING ACmmES:
Property additions 26,465 24,296 25,123 loan to parent - - 37,000 ;
Inan payment from parent -
(37,0f0) -
Other 344 707 526 Net cash used for (provided from) investing activities 26,809 (11,997) 62.649 Net decrease in cash and cash equivalents 415 4,736 50 +
Cash and cash equis alents at begmning of year 4,078 8.614 S.864 Cash and cash equivalents at end of year 8 3,663 5 4.078 $ 8.814 ;
SUPPLEMENTAL CASH Flows INFORMATION:
Cash paid dunng the year- ,
Interest (net of amounts capitala.ed) 8 37.111 3 39,852 3 40.610 Income taxes 31,312 23.649 11,42S
{
The accompanying Notes to Financial Statements are an integral part of these statements.
i p
l l
11-
I Statem:nts Of Taxes Annsyhania n,wer company '
On thmnands!
~
l For the Years Ended Decemter 31, 1992 1991 1990 !
GENERALTAXES:
State gross receipts s10,623 $11.422 613.642 !
Real and personal property 6,762 6.702 6,171 i State capital stack 2,252 2.457 1M7 i Social secunty and unemployment 2,067 1.822 1,712 Other [
458 295 191 i Total general taxes ' $22,162 122.69S 123.683 PROVISION FOR INCOME TAXES. !
Curmntly payable- i Federal 514,933 120.454 513,913 State 7,551 10.142 3,054 ;
22,484 30.596 16,967 Deferred, net (see telow)-
Federal 254 (3.259) (2.0'11)
State (700) (5.316) (1.454)
(446) (8.575) (3.4S5)
Investment tax credits, net of amortization 2.764 (959) 2.691 Total pmvismn for income taxes $21,079 $24.805 516,173 _
INCOME STATEMENT CLASSlFlCAT10N OF PROVISION FOR INCOME TAXES:
0;eraungexpenses $21,069 323,756 513.S48 Other income 10 1.049 2.325 Total provision for income taxes $21.079 $24.805 $16,173 l SOURCES OFDEFERREDINCOMETAXES.
! Exwss of tax over txmk depreciation, net $ 1,370 5 6,736 5 6.951 -
l Dtiference tetween tax and tak revenue, net (6,835)
' (15.363) (1.216)
Deferred fuel costs (1,042) (l.380) (8.173)
Deferred loss on reacquired debt, net 1,605 359 (56)
Amorttzation of deferred interest on leased nuclear fuel (1.144)
Pro;rrty taxes (1.123) (1M4)
(124) -
(1,675)
Alternative minimum tax credits utilized (deferred) 5,643 2.908 (5.773i Operatmg kss carryforward utdtzed - -
7,'E '
Pension msts 1,329 1,120 ' 443 Recoverable tax surcharge costs 978 (978) -
Other, net (470) (2.S10) (1227)
Net deferred income taxes 5 (446) 5 (S.575) $ (3.4S5)
RECONCILIATION OF FEDERALINCOME TAX EXPENSL AT STATL' TORY RATE TO TOTAL PROVISION FOR INCOME TAXES:
Ikxik income before provsion for income taxes $52,035 565 002 $41,692 Federal mcome tax expertse at statutory rate 817,692 $22,101 !14,175 Increases (reductions) m taxes resulting from-State income taxes, net of federal income tax benefit 4,522 Amortzzation ofinvestment tax cndts 3.185 1,056 )
(2,279) (lill) -(1,947)
Excess of tek over tax depreciation, net 2,863 2M7 2.280 Other. net (1,719) 609 (717) l Total provision for income taxes $21.079 124.805 316.173 1
The arrompanying Notes to Financml Statements are an integrut part of these statements 12
1 I
l
' Notes D FbincialSt:tcm:nts t
The Company provides for depreciation on a stra ight-
- 1. StM! ARY OF SIGNIRCANT ACCOUNTING Pouc1Es:
line basis at various rates over the estimatai lives of pmp-The Company, a wholly owned subsidiary of Ohio erty included in plant in servim. The annual composite mte Edison Company (Edison), follows the accounting policies '
for electric plant was a;)pmximately 3% in 1992,1991 and and pmetices prescribed by the Pennsylvania Public Utility '
1990. The Company acognizes estimated future decommis-Commission (PPUC) and the Federal Energy Regulatory -
sioning costs applicable to its ownership interest in two Commission (FERC). ;
REVExt Es-The Company's retail customers are me- nuclear generating units as a component of depreciation exIense. The Company's sham of the futum obligation to !
tered on a cycle basis. Revenue is recognized for electric '
decommission these units in curmnt dollars is approximately service based on meters mad through the end of the month. Reference is made to Note 2 with respect w the $48,000,000, based on estimates used in the Company's last rate filing. Amounts recovered from customers are invested in Company's policy of recognizing revenues in connection external trusts. The total value of such trusts at December 31, with a recently completed rate phase-in plan. Receivables from customers include sales to residential, commercial 1992 was appmximately $2,800,000. If the actual costs and industrial customers located in the Company's service of decommissioning the tmits exceed the accumulated j amounts recovemd from customers, the Company expects area and sales to w holesale customers. There was no mate.
rial concentration of receivables at December 31,1992 that difference to also be recovemble from its customers.
or 1991, with respect to any particular segment of the The Company has also recognized an estimatedliability of i
$3,500,000 related to decontamination and decommission-Company's customers.
ing of nuclear enrichment facihties operated by the United l On November 30,1992, Sharon Steel Corporation, '
States Department of Energy (DOE), as required by the the Company's largest customer filed a petition under Chapter 11 of the Federal Bankruptcy Code. Revenues fmm Energy Pblicy Act of 1992. The Company expects to recover Shamn Sieel amounted to approximately $24,518,000, these costsimm its customers.
$29,354,000 and $28,355,000 in 1992,1991 and 1990, CosmoN OWNERSHIP OF GENERAtwo FACilmes-The respectively. Sharon Steel has essentially ceased operations Company and other CAPCO companies own, as tenants in and the Company presently expects that resumption, if common, various power generating facilities Each of the any, of Sharon Steers business will result in less than half companies is obligated to pay a share of the construction of the electric revenues received from Sharon Steelin 1991. costs of any jointly owned facility in the same proportion Fl'EL costs-The Company recovers fuel and net as its ownership interest. The Company's portion of oper-ating expenses associated with jointly owned facilities is :
purchased power costs not otherwise recovered through base rates from its customers through an annual "leve. included in the correspondin2 operating expenses on lized" energy cost rate (ECR). The ECR, which includes the Statements ofIncome. The amounts reflected on the adjustment for any over or under collection from cus. Balance Sheet under utility plant at December 31,1992, i tomers, is recalculated each year. Accordingly, the Com- include the following:
pany defers the difference between actual energy costs m, wou amm. u,,%
l and the amounts currently recovered fmm its customers. I'm N=* w o=*
In December 1991, the Company was ordered by the PPUC to refund replacement power costs recovered from w H samme n s 5 600 yin 5 3m 20 sot customers through the ECR during an extended outage at Bruce Mansfield il' l Beaver Valley Unit 1 in 1979. As a result, the Company 42 and #3 SL300 30.6m 200 556%
recorded a liability for the estimated refund of $4,282,000, Beam vaney #1 212 300 73300 3AN mot l
including $1,828,000 of interest, reducing net income Itrry #1 and by $2,519,000 during the fourth quarter of 1991. On common racaties 301A00 3330 500 E2n l
i Narch 13,1992, the Company appealed this decision R m #2 - -
Wim E2n to the Commonwealth Court of Pennsylvania. h31 5ElW SN* 552AW In 1988, the PPUC disallowed costs attributable to the Company's purchase of 12 megawatts of Perry Unit I ca-pacity from Cleveland Elect ric Illuminating Company as provided in a 1980 agreement among the Central Area l Pbwer Coordination Group (CAPCO) companies. The Com.
I pany provided a $16,374,000 reserve in 1990, which re-duced net income by $9,994,000, pending the outcome of appeals relating to this matter. On October 7,1991, the United States Supreme Court denied the Company's peti-tion for writ of certiorari.
UTiuTi lust AND DEPRECIATION-Clility plant reflects t
the original cost of construction, including payroll and mlated costs such as taxes, pensions and other fringe bene-fits, administrative and general costs and allowance for funds used during construction (AFUDC).
13
i Notes continunf '
l 1
NUCLEAR FtT.L-0ES Fuel, Incorgirated (OES Fuel), a liabilities are expected to te paid. The standard also re- '
wholly owned subsidiary of Edison, is the sole lessor for quires recognition of a deferred tax liability for tax benefits j the Company's nuclear fuel requirements. Enimum lease that have previously been ik)wed through to the Company's l payments during the next five years are estimated to be as customers and an assumed deferred tax liability applicable l follows: to the equity component of AFUDC. Since the Company i expects that the additional deferred tax liabilities will be um sm.amm colk cted fmm its customers when the taxes become pay-1994 s.mno um able, an asset will be recognized for that probable future u41ao revenue. The Company is not required to adopt SFAS
[f '
No.109 until 1993. lkswever, if the Company had adopted the standard as of December 31,1992, total assets would The Company amortizes the cost of nuclear fuel based have increased by appmximately $190,000,000 with no on the rate of consumption. The Company's electric rates material effect to netincome.
include amounts for the future disposal of spent nuclear RETIREMENT BENEms-The Company's trusteed, non- .
fuel based upon the formula used to compute payments to contributory defined benefit pension plan covers almost all ,
the DOE. full-time employees. Upon retirement , employees receive a L AuMANCE Fon Pt NDs USED DURING CONSTRUCTION- monthly pension based on length of service and compensa. l AFUDC represents financing costs capitalized to construe. tion. The Company uses the pmjected unit credit method i
! tion work in progress (CWIP) during the construction for funding purposes and was not required to make pension period. The borrowed funds portion reflects capitalized contributions during the three years ended Demmber 31,1992. '
- interest payments, and the equity funds portion represents The following sets forth the funded status of the ;
the noncash capitalization ofimputed equity costs. AFUDC plan and amounts recognized on the Balance Sheets as '
varies acconting to changes in the level of CWlp and in the of December 31:
l sources and costs of capital. The AFUDC rates (excluding
,,~. n, l nuclear fuel interest) were 6.4 %,6.8 % and 8.9% in 1992, 1991 and 1990, respectively. Capitalization rates for inter- * " " "
%n3, p,,n, y,iu, on,nen, g,1ggnns est on nuclear fuel were 4.3%,6.7% and S.4% in 1992.
vesied teneras s 57s12 5 n4.no 1991 and 1990, respectively. synteswa b,.nena 4m on lNCOME Tuts-Details of the total pmvision for income Arrumulawd lerefn obhmm 5 02A01 $ sh 217 taxes are shown on the Statements of'ihxes The deferred n _.,,g,e, ingy ,g, income taxes result fmm timing differences m the recogm- .euanauent me or prv rwd tem tion of revenues and expenses for tax and accounting pur- oh!%mn sm is*17 poses. The Company expects that deferred taxes which nan as-a in mss or en,rewd tenerit obtaion 31494 31x2 have not been provided will be collected Imm its customers Unrmnwd muam ouq omno when the taxes become payable, based upon the estab- Unmwad prior service om,t 2.779 2Ko lished rate making practices of the PPUC and the FERC. Unm**d n""r="i"n - 00 2 02 El As of December 31,1992, the cumulative net income tax wo+ns"n =t $ 7w $ 4 N1 timing differences for which deferred income taxes have not been provided were approximately $100,000 000. asses oMe Nan ensist primarily of common All investment tax credits which were deferrbd when stocks, Umted States government bonds and corporate bonds.
utilized are being amortized over the estimated life of the Fn n s for the three years ended December 31, related property. The Company has approximately 2, w wmpuwd as Mows:
$6,700,000 of alternative minimum tax credits available to m nm m" offset future federal income taxes payable; such credits a wam may be carried forward indefinitely. S-s -t*m* earned dunns The Financial Accounting StandardsIksard(FASB) **""d '2"
- 2"2 #2" issued Statement of Financial Accounting Standanis(SFAS)
No.109, " Accounting for Income Taxes," which, among
(("j ["# " [ g[h [$
other things, requires a change in the method used by 9#%%,,u%n) pq m gm enterprises to account for deferred income taxes. Under w m m .a i am s av,r4 s om this standard, deferred income tax liabilities mud be recog- The assumed discount rate used in determining the nized at the statutory income tax rates in effect when the actuarial present value of the projected benefit obligation was 9% in each year. The assumed rate ofincrease in future compensation levels used to measure this obligation was 4.5% in 1992 and 5% in 1991 and 1990. Expected long-term rates of return on plan assets were assumed to be 11 % in each year.
-14 1= . - - -
I The Company provides a minimum amount of noncon- SUWLEMENTAL CASH Ftors INFORM AT10N- All temporary tributory life insurance to retired employees in addition to cash investments purchased with an initial maturity of ,
optional contributory insurance. llealth care benefits, three months or less are reported as cash equivalents on ,
which include certain employee deductibles and copay- the Balance Sheets. The Company records temporary cash ,
ments, are also available to retired employees, their investments at cost, which approximates their market !
dependents and, under certain circumstances, their value. Noncash financing and investing activities included ;
survivors. The Company pays insurance premiums to capital lease transactions amounting to $10,721,000, i cover a portion of these benefits in excess of set limits; $4,343,000 and $8,739,000 for the years 1992,1991 and l all amounts up to the limits are paid by the Company. 1990, respectively. !
Expenses associated with health care and life insurance All borrowings with initial maturities of less than one i benefits for retirees are charged to income during the year and $4,140,000 of investments other than cash and j applicable payment periods, and amounted to $1,411,000, cash equivalents at December 31,1992, which are defined ;
$948,000 and $1,035,000 in 1992,1991 and 1990, respectively. as financial instruments, are reflected at their approximate ;
The FASB has issued SFAS No.100, " Employers' fair market value. The approximate fair market value of all Accounting for Postretirement Benefits Other Than other long-term debt and preferred stock subject to manda- :
Pensions," which modifies the method to be used by - tory redemption exceeded the carrying cost of those finan- !
enterprises to account for other postretirement benefits. cialinstruments by approximately $19,220,000 and !
Under the standard, the Company will be required to $900,000, respectively, The fair value of these instruments
! recognize the expected cost of providing postretirement reflect the present value of the cash outflows relating to ;
i benefits to employees and their beneficiaries and covered those securities based on the current call price, the yield l
dependents from the time employees are hired until they to maturity or the yield to call, as deemed appropriate.
i l become eligible to receive those benefits. The Company The yields assumed were based on securities with similar
- will adopt this standard prospectively in 1993. Based on characteristics offered by a corporation with credit ratings current plan demographics, it is estimated that annual similar to the Company's ratings.
postretirement benefit expenses will increase by approxi- ;
- 2. RATE PHASE-IN PLAN AND SURCHARGE:
mately $4,000,000. The Company has petitioned the PPUC The PPUC granted the Company a base rate increase, ,
for authority to defer the incremental SFAS No.106 costs effective May 4,1988, designed to produce approximately m accordance with generally acwpted accounting princi' $67,100,000 of additional annual operating revenues. The :
ples. The PPUC previously demed a similarjomt petition nerease was phased in over several years, with amounts l submitted by thirteen Pennsylvania utilities. If the PPUC deferred during the phase in period recovered by the end i does not issue an order providing sufficient evidence for of the fourth year. Under this phase-in planithe Company's future recovery of deferred SPAS No.106 costs, there rates were initially increased to produce approximately '
will be a material adverse effect on net income begmm.ng $24,000,000 in additional cash revenue; the second ye'ar
- increase of $28,000,000 was implemented in 19S9. The TRANSACTIONS Wml AFFlutrED ComNIEs-Transac- Company began recovering revenues previously deferred tions with affiliated companies are included on the State-n 1990, when rates were increased approximately mentsofIncome as follows: $28,000,000 on an annual basis; the final increase of m m m $31,000,000 occurred in May 1991. The Company imple-un numsands) mented a base rate decrease approximating $44,000,0C0 l operaung revenues- on an annual basis in the second quarter of 1992, bringing
! tr to Edmn s22.7ss s23.292 s26349 its four-year phase-in plan to an end. The Company's ;
admtmstrative and general electric rates noW reflect the same rates that would have T charges to Edison 2.529 3.761 2.991 h.en p] aced into effect in 1988 without the phase-in plan. r ouer transactions m Eden r1 760 r8 There is no material effect to net income resulting from l s2sm5 as.813 sao.:us this rate reduction since the Company recognized revenue !
ruet and purchased io.er- under the phase-in plan as if the full revenue level had i Power purcha-d from Edmn s"1.936 521.339 117.246 -
been placed into effectin 1988.
Nuclear fuelleased from 1 oES ruel 15.199 12.910 lum On August 24,1991, the Commonwealth of Pennsyl-s29.ns su 249 saa,136 vama increased certain state tax rates retroactive to i January 1,1991. In conjunction with this increase, the
$7'fira$s1 5 1,174 Company deferred the increase in taxes for colk ction from customers in the form of a surcharge on ekctric bills. All hnes from Edison S 1.172 3 1.182 am unts deferred in 1991 were recovered in 1992.
- YrE" f 2.c24 2.4ei 2Sa9 other transacuons with Eden 2.67 9 2.611 2.389 3 6,47s 5 6.254 $ 6.200 l other mierest extense:
! short-term loans from Edison S 21 8 180 5 210 l
.15 i
i Notes ctmtinued *
- 3. LEASES: k) PREmtRED SmcK SLEECT 'Ib MANDAWRv REDEWDoN-The Company leases wrtain transmission facilities, Annual sinking fund pmvisions for the Company's pmfermd computer equipment, office space and other property and stock are as follows: ,
equipment under cancelable and noncancelable leases. s,.nes sw au Consistent with the regulatory treatment, rental payments u2st 7pm ortoter 1,22 l for capital and operating leases are charged to operating 8 24 s sw owemur 1(o ;
expenses on the Statements ofIncome. Such costs for the "j$ 3$ fuf$# {N !
three years ended December 31,1992, are summarized 13 oot su auty i m as follows: '
g g , (i) Sinking fund provisions are m effect.
g,,,,,,, Preferred shares are retired at $100 per share plus oieraung b ases accrued dividends. The Company's sinking fund require- '
Interest element s 212 s 223 8 232 ments for the DCXt five years are: -
other 1.032 E26 1.71S !
capitaltnses Interest element 1.109 1.191 1.108 1993 83.3 2.000 other 1.231 1.277 1.124 1994 2.SfdM i 1btal rental payments $3444 53.517 54,182 f
19m 1,aum :
The future minimum lease payments as of December 31,1992, are: Amounts shown above for 1993 include $400,000 cannai on,4.ung d11%; kh g&M md wh% ded b um January 1993.
u.m l g,,, (d)lhNG TERM DEBT-The first mortgage indenture and j 1993 s w,c, sm its supplements, which secure all of the Company's first M4 1 528 226 mortgage bonds, serve as direct first mortgage liens on 19W 1.5*
203 substantially all property and franchises, other than specif-ically excepted property, owned by the Company.
Years o,ereaner auss 4.im '
Based on the amount of bonds authenticated by the 1btai muumum tease payments 26x4 ssaik Trustee through December 31,1992, the Company's an-
~
Executory nm 5.o27 nual sinking and improvement fund requirement for all j s t mmunum irase paynena 21.9 5 bonds issued under the mortgage amounts to $700,000. 1 interest y,rton 12w' The Company expects to satisfy this requirement in 1993 Present value ornet mirumum iease pa3 ments 9.8c2 l
by certifying unfunded property additions at 166 2/3% of b ss current p>ruun 1246 the required amount.
soncurrent v,rton s s.cis S nking fund requirements for certain series of first
- 4. CAPITAUZATIOR m rtgage bonds and maturing long term debt (excluding m RETAINED EARNINGS-Under the Company's Charter, capnalleawspor tk nh years am the Company's retained earnings unrestricted for payment m3 c,mi7m l
of cash dividends on the Company's common stock were 3994 mm,
$57,281,000 at Decemter 31,1992. 1995 40.220m l
0 ) PREm: RED SmcK-The Company's 13% series of prefermd stock has a restriction which prevents early m-y y ['
l demption befom July 1994 through new issuances of securi- The weighted average interest rates shown on the ties having interest or dividend rates less than the dividend Statements of Capitalization relate to long-term debt out-rates of the series being redeemed. The Company's 11.5% standing at December 31,1992. The Company's obliga-and 7.625% series of preferred stock have restnctions which tions to repay certain pollution control revenue bonds are prevent early edemption prior to July 1993 and October secured by series of first mortgage bonds and, in some 1997, respectively All other prefermd stock may be re- cases, by subordinate liens on the related pollution control deemed in whole, or in part, with at least 30 days but not facilities.
more than 60 days notice. The optional redemption prices shown on the Statements of Capitalization will decline to eventual minimums per share according to the Charter provisions that establish each series.
I i 16
l i
- 5. S110hT TERM FINANCING ARRANGEMENTS- The FERC has revised its policy with respect to recov- !
The Company has lines of credit with banks that pro- ering the costs of terminated mnstruction projects. As a i vide for borrowings of up to $65,000,000 under various result if Nrry Unit 2 were terminated, the Company interest rate options. Short-term borrowings may be made would be r quired to write off one-half ofits investment under these lines of credit on the Company's unsecured applicable to its FERC jurisdictional customers if and to notes. 'Ib assure the availability of these lines, the Com- the extent that the FERC revised policy is applicable. Un- -;
pany is required to pay commitment fees of 1/8% to 1/2L der such circumstances, the remaining costs, plus a return l Of these totallines, $5,000,000 expire in December 1993 on the unamortized investment, would be remvered from j and may be canceled by the banks at any time if unused; its FERCjurisdictionalcustomers. . .i*
the remaining line of credit is noncancelable and expires NUCLEAR INSL'RANCE-The Price-Anderson Act limits in May 1993. the public liability mlative to a single incident at a nuclear The Company also has a credit agreement with Edison power plant to $7,508,000,000. The amount is covered whereby either company can borrow funds fmm the other by a combination of private insurance and an industry by issuing unsecured notes at the prevailing prime or simi- retrospective rating plan. Based on its present ownership lar interest rate. Under the terms of this agreement the interests in Beaver Valley Unit I and ferry Unit 1, the t maximum borrowing is limited only by the availability of Company's maximum potential assessment under the funds; however, the Company's borrowing under this industry retrospective rating plan (assuming the other agreement is currently limited by the PPUC to a total of CAPCO companies wem to contribute their proportionate !
$50,000,000. Either company can terminate the agmement share of any assessments under the retmspective rating !
with six months' notice. plan)would be $14,326,000 perincident but not more j
- 6. CommnTS, GUARANTEES AND COhTINGENCIES: than $2,274,000 in any one year for each incident. The i CONsTRUc'n0N PROGRAM-The Company's current Company is also subject to an additional surcharge assess- l budget forecast reflects expenditures of approximately ment under this plan aggregating approximately $716,000. l
$216,000,000 for propeny additions and improvemen;s The Company is also insured as to its interest in j fmm 1993 through 1997, of which approximately Beaver Valley Unit I and the kny Plant under policies -l
$36,000,000 is applicable to 1993. issued to the operating company for each plant. Under :
The status of Perry Unit 2 continues to be under re_ these policies, up to $2,625,000,000 is provided for propi f view. Currently, no significant work is being performed on erty damage and demntamination and demmmissioning l
the Unit and the Company does not capitalize AFUDC. _ costs. The Company has also obtained approximately ;
Until review of the status of Wrry Unit 2 has been com. $44,290,000 ofinsurance coverage for replacement power !
pleted, there will be no dermed schedule for its completion; . costs for its interests in Beaver Valley Unit I and Wrry Umt 1. :
the construction estimate for the 1993-1997 period does Under these policies, the Company can be assessed a - !
not include any amounts applicable to Rrry Unit 2 if maximum of approximately $3,000,000 for accidents i construction of the Unit were to be resumed. Nssible alter. occurring during a policy year which are in excess of }
natives being reviewed with respect to Unit 2 include accumulated funds available to the insurer for paying kasses. -l indermite suspension of construction on the Unit, resump. The Company intends to maintain insurance against !
tion of work on the Unit and termination of the Unit. In nuclear risks as described above as long as it is available. j accordance with the CAPCO mangements, none of these 'Ib the extent that replacement power, property damage, j alternatives may be implemented without the approval of decontamination, decommissioning, repair and replace- !
cach of the owners of the Unit. ment costs and other such costs arising from a nuclear l As of December 31,1992, the Company had invested incident at any of the Company's plants exceed the policy :
approximately $48,000,000 applicable to Perry Unit 2. limits of the insurance from time to time in effect with !
Delay in the completion of Perry Unit 2 can be expected to respect to that plant, to the extent a nuclear incident is !
increase its total cost by amounts which are not presently determined not to be covered by the Company's insurance i determinable. Pending completion of the ongoing review, policies, or to the extent such insurance becomes unavail- !
the Company is unable to predict whether the construction able in the future, the Company would remain at risk for i on Unit 2 will continue or, if continued, on what basis such such costs. ;
continuation willproceed. f Based on Section 520 of the Pennsylvania Public Utility i Code, the Company believes it could recover its investment in Wrry Unit 2 with respect to its PPUC jurisdictional !
customers if a decision were made to terminate the Unit. l' The Company's reported net income would be reduced at that time by the difference between the cost of Nrry Unit 2 ;
and the pmsent value of revenue to be collected from retail jurisdictional customers applicable to the Unit.
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\ Notes contiwd -
1 G!MANTEES-The Company, together with the other in April 1988, several states, the Province of Ontario, CAPCO companies, has seveml guamntees of certain debt and several envimnmental groups petitioned the EPA to I and lease obligations in connection wit h a coal supply condact a rulemaking under Soction 115 of the Clean Air I contract for the Bruce Mansfield Plant. As of December 31, Act. Section 115 is that portion of the Clean Air Act which l
1992, the Company's share of the guarantee (which ap addresses pollution across international boundaries. The pmximates fair market value) was $14,436$0. The price petitioners claim that the EPA has already determined that under the coal supply contract, which includes certain sources in midwestern states contribute to air pollution
- minimum payments, has been determined to be sufficient which they allege is endangering public health and welfare to satisfy the debt and lease obligations. The Company's in Canada. The EPA is being asked to officially confirm this I total payments under the coal supply contract amounted determination. The EPA has informed the petitioners that l to $12,0S2,000, $12,041,000 and $12,833,000 during it does not presently have sufficient information to act on i 1992,1991 and 1990, respectively. Under the coal supply the petitions. The Company is unable to predict the out-l contract, the Company's future minimum payments are
- come of this proceeding.
I During the past seveml years, the U.S. Court of Ap-sem nm peals for the District of Columbia reversed several signifi-nq om cant portions of the EPA's regulations on the methods used m
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wa by the EPA to determine the amount of stack height credit for establishing individual source emission limits for S02.
wasown er Ao o " Ibrtions of the latest EPA regulations were reversed and ENVIRONMENTAL MArrERS-Various federal, state and rem nded by the Court in January 1988 as a result of ap-peals by the Company, Edison and others. After the EPA kical authorities regulate the Company with regard to air and water quality and other environmental matters. The pmmuy ws m'w regulations in conformity with the final Company has es'imtted t additional capital expenditures for Court decision in this matter, Pennsylvania and Ohio must environmental mmpliance of approximatel; $49,000 000, then review their emission limits to ensure conformance which is included in the construction forecast under " Con ' with the new EPA regulations. Such review muld result m otruction Program" for 1993 through 1997. mom stringent emission limits for some existing plants and '
increased capital costs and operating expenses. The Com-I The Clean Air Act Amendments of 1990 require signifi-p ny is currently unable to predict the outcome of these cant reductions of sulfur dioxide (S0 2) and oxides of nitro-gen from the Company's coal-fimd generating units by pmedings.
1995 and additional einission reductions by 2000. Coinpli- In June 1987, the EPA announced regulations covering i ance options include, but are not limited to, installing sman p rticul te matter emissions imm utility boilers.
additional pollution control equipment, burning less pollut- Although the Company has an ownerslup mterest in a
]
ing fuel, purchasing emission allowances from others, gener ting umt m one of the two munnes m Quo whm '
l operating existing facilities in a manner which minimizes EPA computer modeling predicts that excessive small par-pollution and retiring facilities. In a system compliance ticulate emissions will be found, the Company is unable to plan for the Company and Edison submitted to the pmdict the ultimate effect of these regulations.
PPUC and to the Environmental Protection Agency in July 1992, the Pennsylvama Department of Environ-(EPA), the Company stated that reductions for the years mental Resources issued final regulations dealmg with the 1995 through 1999 are likely to be achieved by burning storage, treatment, transportation and disposal of residual low er sulfur fuel, generating more electricity at theirlower waste such as coal ash and scrubber sludge. These regula-l emitting plants and/or purchasing emission allowances. tions impose additional requirements relating to permit-Plans for complying with the year 2000 reductions are less ting, gmund water monitoring, leachate collection systems, certain at this time. In addition, the EPA is required to el sure, liability insurace and operating matters. The perform studies, the first of which is due by November Company is developing and analyzing various mmpliance 1993, of the potential hazards to public health anticipated ptions and is presently unable to determine the ultimate to occur as a result of the emission by electric utilities of increase in capital and operating costs at existing sites.
certain potentially hazardous air pollutants. The EPA is to With respect to the environmental matters desenbed submit the results of these studies to Congress together abow, thdompany expects that any resulting add:tional c pital costs which may be required, as well as any re-with recommendations for further control requirements. )
I quired increase in operating costs, would ultimately be if needed.
i recovered from its customers.
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- 7. StXMARY OF QUAhTERDTINANCIAL DATA (UNAEDTTED). -
The following summarizes certain operating results by 'l quarter for 1992 and 1991.
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March 31. Jme 30. Septemter 3tl. Iermier 31.
Thn+ %mths Ended !!F.C 1992 IWJi) 1993i) ;
(in thousands)
Op rating Reventes $82,030 $77,412 $79,370 $76,646 .
Ol eratug Extenses and 7hxes 62.650 M,936 63.316 - 63,952 ,
Olerating income 19,3S0 1S,476 15.975 12,694 l Other huome 368 251 174 (12) !
Net interest 8532 9.370 9.382 - 8,966 Net income $11,116 8 9,357 8 6,767 $ 3,716 i'
Earnings on Common Stott 8 9.295 8 7,535 $ 5,406 $ 2.221 l t
Marth 31. June 31, September 3[}. Iwemter 31, L Three umths Duled IWI 1991 1991 1991 (In thousawds) ;
Olerating Revenues $81,174 ' $76.416 $81,410 $80.645 ;
Operat.ing Extenses and Tkxes 58.991 59.216 61,947 60,589 OIrrating income 22,183 19.30 19,463 20.256 Other lineme 719 981 491 270 Net Interest 10.323 10.029 10,531 12.483 Net income $12.579 $10.152 8 9,423 8 8.043 ,
Earmngs on Common Stock $10.523 $ 8,30 $ 7,559 8 6,193 (i)Incitxles charges of apprmumately $4,30A0($2,500 30 ret ofirunme taxts) l l in the third quarter and $9.'de,000($5,((0,000 ret of intume tases)in the fourth quarter relaurg to prDVLSiunS IOr UrKUllectible eUSIOmtT atXDuntS.
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R: port Of
- Ind: pend:nt Public Accountants
'Ib the Board of Directors of Ibnnsylvania Nwer Company:
We have audited the accompanying balance sheets and statements of capitalization of Ibnnsylvania Ibw er Company (a Ibnnsylvania corporation and wholly-owned subsidiary of Ohio Edison Company) as of December 31, l 1992 and 1991, and the related statements of income, retained earnings, capital stock and other paid in capital, cash flows and taxes for each of the three years in the period ended December 31,1992. These financial state-ments are the responsibility of the Company's manage-ment. Our responsibility 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 u.aterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and dirlo-sures in the fmancial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the finacial position of Rnnsylvania Ibwer Company as of Dewmber 31, 1992 and 1991, and the results of its operations and its cash flows for each of the three years in the period ended December 31,1992, in conformity with generally accepted accounting prmciples.
As discussed in Note 6 to the fmancial statements, the status ofIbrry Unit 2 continues to be under review.
Ibssible alternatives being considered include indefinite suspension, resumption of work and termination of the Unit. Because the Company is unable to predict the results of the review, it cannot now predict if construction ofIVrry Unit 2 will be terminated and, if terminated, to what extent the Company's investment will be recoverable.
Lik, Arthur Andersen & Co.
I New York, N.Y.
February 2,1993 1 1 20
Board cf Direct:rs M:n:gement Changes Officers II. Peter Burg Effective March I.1993, Willard R. Willard R. Holland Scroor Vkt President and Chief llolland was elected chainnan of the Chairman of the Ik>ard Financial Offurr of the Company's Ikiard and chief executive offnvr of parent. Ohm Edison Company, Ibnn Ibwer. sumuting Justm T. Robert L Eenkinger Akmn. Ohio. Ibgers. Jr., w ho retind after 13 President years of distinguished sern<r to Robert II.Carlson the Company. James R. Edgerly Retired.formerly President and Ykr Pn sident, Seurtary and
" """"#'- General Counsel Chief Executive Offuer of n D mgm mm ik Nad Universal Rundle Corporation, a plumbmg fixture manufacturer. Jack E. Reed was eleded vitr Jack E. Reed New Castle, h>nnsylvania president and Ikurd memtw r, Ykr President efiedive August 18.1991 James R.Edgerly sumedmg Wilham i Reeber. Robert P.Washinske Vice President. Smretary and w ho resigned. Viw President and Treasurer GeneralCounselof the Company.
luuglas W. Tschappat resigned from * ""
New Castle. R nnsylvama the Boani, effective June 27.1992' Comptroller pnor to tus reurement from Ohk, Willard R. Ilolland Chairnian of tte Ikiard and Chief I'disin on Januar.1.1993 s
Angeline Comparone Executive Officer of the Company, On March 25.1992, the Ikuni Assistant Secretary and President and Chief Executive ektwd David W. McKean Offkvr of the Company's parent- comptniDer and Clarenw il Francis A. Iizzone Ohio Ediscm Company. Kauffman assistant comptroller Assistant Treasurer Akron, Ohio.
Clarence II. Kauffman Robert L Kensinger Assistant Comptroller President of the Company, New Castle. R nnsylvania. Mr. Ilolland is president and chief executive officer of the Company's Joseph J. Nowak parent. The principal employment Consultant for and formerly of all other offuers is uith the Executive Vice President of Arnnu Company.
lisc., a manufadun r of steel pnxiucts. Pittsburgh. h nnsylvama Jack E. Reed REGISTRAR for Vke President of the Company.
Preferred Stoch Integra National Bank Ncch.
New Castle R nnsylvania Washington Centre New Castle.
I&nnsyh anta 16101 IM7 Director Emeritus TRANSFER AGENT for G. Im Winger Preferred Stock:
Offre of the Company, New Castle.
fi'rinFylvania 16103 (fi91 PRINCIPALOFFICES:
1 E Washington Stnot PO. Ikix 891 ;
New Castle Pennsylvania 16103 0S91 (412)652 T2fal R nnsylvania Ibwer Company is an equal opporturaty employer 21
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