ML20050B000
| ML20050B000 | |
| Person / Time | |
|---|---|
| Site: | Beaver Valley |
| Issue date: | 03/09/1982 |
| From: | PENNSYLVANIA POWER CO. |
| To: | |
| Shared Package | |
| ML20050A995 | List: |
| References | |
| NUDOCS 8204020487 | |
| Download: ML20050B000 (38) | |
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CONTENTS Prologue..
1 To Our Stockholders.......
2 Brief Summary of Operations...............
4 Rewnues and Sales....
4 Construction.
G Customer Suvices.
7 Legal and Environmental..
9 Communications.
10 Personnel....
11 General.....
12 Ma p.....
13 Operating Statistics.......................
14 Selected Financial Data........
15 Management Discussion and Analysis.........
16 Financial Statements..........
...... 17-31 Auditors' Report.........................
31 Directors and Officers...
32 i
l l
q The Ohio River at Shippingport. PA reflecta lights from the coal fired Bruce Mansfield Plant on a cold November avening. The plant's three unita have a net generating capability of 2,360 megawatta.
This annual report reflects events area has had electric service avail-of the past 50 years,since the able since the late 1910s and organization September 1,1931, of industrial uses of electricity have Pennsylvania Power Company as a expanded greatly. At the close of separate operating unit of the 1981, our sales totaled 3.5 billion Commonwealth & Southern kilowatt-hours.
Corporation.
During most of the past five l
As the nation moved into the decades the pattern has been one of l
1930s, the electric utility industry fairly steady growth for the electric was just emerging as the electric utility industry and Penn Power.
service industry it is today. Lighting Throughout those 50 years, the and a smattering of appliances nation-and the area served by represented the use of electricity in the Company-has had an adequate the typical home of that era. The and dependable supply of elec-average yearly use by our residential tricity. That is a tribute to respon-customers in 1931 was 538 sible and proper planning.
5 kilowatt-hours (kwh), and about 30 llowever difficult it may become percent of the farms in our area in the future, our efforts will con-were being served. Total sales at the tinue on that course of responsibil-t i
close of 1931 were 161.2 million ity, providing dependable electric
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1 kilowatt-hours.
service at reasonable cost to our Today, the all-electric home is customers. This has been uppermost
'm not uncommon and the Company's in the long tradition of Pennsylvania j 'r average residential customer in Power Company, and that tradition l,' f. 7 I
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1981 consumed more than 11 times has not changed.
the amount of electricity that PH
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the average residential customer
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used in 1931. Every farm in our t
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AtihM EG en 1
l To Our Stockholders 1
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Despite somewhat adverse Since the Company began func-economic conditions throughout tioning as a separate operating unit the Company's service area, our on September 1,1931, few 1981 total energy sales showed elements of the economy have had a
considerable improvement over the as great un impact on our ability previous year. Total kilowatt hour to realize satisfactory earnings as sales, led by our industrial cus-the combination of inflation and tomers, were up G.9 percent over hgh interest rates. Growth in both 1980, the largest increase since state and fedcral regulations, 1976.
environmental mandates and tae hdustrial kwh sales increased granting of less-than-realistic rate i
10.3 percent, a distinct turnaround increases during the past decade compared to 1980, when industrial have also been formidable obstacles l
kwh sales decreased 7.5 percent to improvement in earnings.
compared to the previous year.
In our efforts to improve earn-Commercial and residential cus.
ings, we have limited the hiring i
tomers also increased their use of new personnel wherever possible, l
of electricity during 1981, by working toward definite goals to commercial kwh sales rising 5.4 improving productivity and i
percent, while residential kwh sales efficiencies and have sought timely i
continued their pattern of the past rate relief.
f several years, increasing 2.0 percent.
The most notable improvement i
The increased industrial and in productivity was increased genera, Justin T. Rogers, Jr.
f commercial activity brought total ting plant availability at both the I
electric sales revenues to a new high New Castle Power Plant and Bruce On January 22,1982, the PUC of $153.0 million compared to Mansfield Plant over the previous apf roved an increase of $24.9
$142.8 million for the previous year.
million, which is 76 percent of our During the 1970s, the Company original request. The new rates year.
i Operating revenues were $174.5 sought and received more rate weat into effect January 23,1982.
j million compared to $157.2 million increases than in any previous Filing was also made on in 1980.
decade of its existence. Indeed, it is September 28,1981, with the Net income for common stock interesting to note that throughout Federal Energy llegulatory j
increased by 24 percent.
the 1931-1970 period, there were Commission (FEllC) for a rate more rate decreases than increases increase affecting our municipal for our customers. But the already-wholesale class of customers. This 1
noted economic forces of the request, which would increase rates l
1970s, coupled with the lag in to our five wholesale customers, the regulatory procedures and the grant-Boroughs of Ellwood City, Grove ing of only portions of the requested City, New Wilmington, Wampum l
increases, hampered any sustained and Zelienople, was for $2.3 1
improvement in both earnings and million.
I rate of return.
On January 13,1982, FEltC 1
Thus, even though we received a permitted $1.7 million of the rate l
$10.2 million rate increase in mid-increase requested to go into effect 1980, the Company filed with the en January 24, subject to refund.
PUC on April 15,1981 for an flate hearings are now in progress increase of $32.7 million, an before an administrative law judge increase which would affect all at FEllC with respect to the rates retail classes of customers, requested, including the portion not yet in effect.
As the decade of the 1980s began, it appeared that " acid rain" would i
emerge as a major issue, with the nation's coal-burning electric utilities the center of the growing controversy. The consensus among experts outside the EPA and the e
environmental movement indicates that much more research on the 2
mdlion of first mortgage bonds Maintaining high-quality service (15-3/4% Series) were sold to two to our customers has been a tradition insurance companies. The Company among our employees for many also sold 680,000 shares of years. Opinion polls show that i
common stock in December to our customers recognize good i.
its parent, Ohio Edison.
service and equally appreciate the Construction costs in 1981 were courteous efficiency of our
$52.9 million and a $68.4 million employees. We, too, appreciate s
budget has been authorized for their efforts and thank them for 1982 by the board of directors.
their excellent work during the past g,
Joseph J. Nowak, president of year.
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Sawhill Tubular Division of the Cyclops Corporation in Sharon, was f6 elected to the board of directors in
/
December 1981.
Mr. Nowak has 26 years of Chairman of the Board experience in steel mill management g
and has been associated with the
- 1 g Sawhill Division since 1976. lie also serves as a director of McDowell President
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National Bank in Sharon and a director of the United Way in New Castle, Pennsylvania Mercer County.
March 9,1982 A. Wayne Cole e U.S. Environmental Protection 1981 Agency approved change in origins of " acid rain" is necessary.
Our Bruce Mansfield Plant, with Beaver Valley Air Basin in its air and water pollution controls, e Net income for common December.
was included in a major story on " acid stock increased from rain" in the November 1981 issue of
$15,590,000 to $19,331,000.
the " National Geographic" e On April 15,1981 the Company magazine. Its air pollution control filed for a rate increase of $32.7 I
systems were featured as one e Totaloperating revenues were million. The Pennsylvania Public possible solution if coal-burning
$174.5 million compared to Utility Commission granted a power plants prove to be contribu-
$157.2 million in 1980, an
$24.9 million increase which i
tors to " acid rain."
increase of 11.0 percent.
went into effect January 23, Financing activities during 1981 1982 for all retail classes of included the sale in January of $1.G customers.
million of pollution control revenue
- Total kilowatt-hour sales bonds and $1 million of environ.
increased 6.9 percent, greatest mental improvement revenue bonds increase since 1976.
8 On September 28,1981 the to finance the Company's share of Company filed for a $2.3 pollution control facilities at the million rate increase for whole-1 ruce Mansfield Plant.
e New peak system load of sale customers. The Federal in June, $20 million of first 577,000 kilowatts was Energy Regulatory Commis-
"' corded June 16,1981.
sion granted a $1.7 million mortgage bonds (1G-1/8% Series) were sold to a group of under.
increase on January 13,1982.
writers and in January 1982,$15 1931 e.y
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Company began functioning
- i September 1,1931 as a separate L
operating unit of the Common-e en wealth & Southern Corporation.
The gold bar in this f
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- Kilowatt hours sold in 1931 annual report reflects y
totaled 164.2 million.
historical segments of the Company's 50 L,_ First CompanylogoLa.
- At the close of 1931 the xa.h years of service.
Company had 39,872 metered customers.
i
Revenues and Sales Although the nation's basic steel
{}gf Qgggf producers experienced another year of economic problems, such of Operations problems did not affect the specialty steel producers in our service area. Their use of electricity led the resurgence of industrial kilowatt-hour sales we realized in For the Years Ended December 31, 1981 1980 98L Total industrial nilowatt-hour Thousands of Dollars sales reached their highest point in the Company's history, exceeding SOURCES OF INCOME:
1.9 billion for 1981, one of the Operating revenues-most pronounced increases in From sale of electricity and several years. Commercial kwh sales miscellaneous revenues.
S174,488 S157,208 nereased in a pattern fairly consis-Other income and deductions, net 10,868 9,367 tent for a number of years, while residential kwh sales continued Total.
$185,356
$166.575 their moderate growth.
Total kilowatt-hour sales in 1981 DISTRIBUTION OF INCOME:
were 3.5 billion compared to 3.3 Wages to employees, including costs billion in 1980.
of pensions, group life insurance, Kilowatt-hour sales revenues hospitalization and other benefits.
S 20,670 S 18,293 increased from $142.8 million in Cost of fuel 60,979 51,220 1980 to $153.0 million in 1981.
Operating taxes federal, state and local 19,811 18,106 This increase of $10.2 million is Provision for depreciation.
1 f,171 13,021 attributable to the effects of a rate Materials and supplies and other increase granted in mid-1980 which expenses 26,411 22,023 was in effect for the full year of Electricity purchased and 1981, together with increased kwh intercha.iged with other electric sales of 6.9 percent over 1980. The utility companies.
(4,975) 2,118 increase also reflects a "levelized" Net interest 23,344 20,972 energy cost rate (ECR) authorized Preferred stock dividends 5,602 5,225 by the PUC in May 1981. This Common stock dividends 15,876 14,301 ECR replaced the former energy Retained income.
3,458 1,296 clause which changed monthly. The ECR will change each January and Total.
$185,356
$166,575 allow the customer to receive a "levelized" billing on the t..agy cost portion of his bill throughout the year.
Residential customers increased their annual average use from 7,726 kilowatt-hours in 1980 to 7,813 in 1981.The average monthly resi-dential bill was $39.75 compared to
$38.27 for the previous year.
Average cost for residential c8 7, N g
yw,,~wmm-m w-~ qw mn-w-wv.-~~m-essemised in Isas to n m m=3YNW' inessesssense.
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customers was 6.10 cents a 1.wh compared to 5.94 cents in 1180.
f Total operation and main.enance
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expenses were $103.1 milli >n com-pared to $93.7 million in 1980.
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These expenses per kilowatt-hour
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sold were 2.97 cents compared to
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2.88 cents in 1980, a rise of 3.13 f3 percent.
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Total operating taxes were $19.8 million compared to $18.1 million in 1980.
The $20 million sale of first mortgage bonds in June coupled i
,f with high short-term interest rates were the principal reasons for a M
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rise in interest charges to $27.2 j'
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million from $23.9 million in 1980.
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New Castle linemen C. L. Williams, left, M. II. Zeigler, D. E. Ilunter and D. E.
T'$k Flack rebuild transmission line.
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(h INTEREST RATES g
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18.83 %
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13.42 %
l 11.49 %
9.78% '
78 79 80 81
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Mortgage Bond and Short Term Borrowing Interest Rates
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- Effective weghted composite rates
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The New Castle Power Plant at West m.,
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Pittsburg. Its five generating units have a net generating capability of 422 megawatts, h?aw w~rm e n e m+rm--
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Construulon Espenditures T
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Mercer County substation crew performs maintenance at the Shenango transmission substation. K. L. Goodrick, electrical mechanic, is at right.
Construction Since the various Central Area W.11. Sammis Plant, Beaver Valley body before construction can Power Coordination Group Power Station and the Bruce proceed on lines carrying voltages (CAPCO) construction projects Alansfield Plant.
of 100,000 volts or more.
began in the early 1970s the A major project to improve our Another construction project majority of the Company's con-power supply in the northern which will strengthen power struction costs have been for portion of our service area was supplies in the southern portion l
clectric production facilities related completed in late 1981, a 138-kv involves a 138-kv transmission line I
to the CAPCO projects, transmission line and substation between our Alaple Substation and Expenditures for property between the Company's new the new Pine Substation in our additions and improvements for Alaysville Substation and Ohio Zelienople District.
1981, including improvements Edison's Alasury, Ohio substation.
The board of directors has relating to pollution controls, This was the first such transmission authorized the expenditure of were $52.9 million compared line construction program by the approximately $68.4 million in to $57.2 million in 1980. Approxi-Company which required PUC 1982, most of which will be for mately 80 percent of the 1981 approval prior to construction. New continuing CAPCO construction expenditures were for CAPCO con-PUC regulations, established in programs.
struction at Perry Nuclear Plant, 1980, require approval by that l
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, Louis B. Round, vice president
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Customer Services Throughout the year our commercial customers and through 1
customer services representatives individual contacts, produced these focused their activities in the specific excellent results. During educational areas of load management, process Energy Teamwork Conferences heating and the addition of new heavy emphasis was placed on space conditioning among all classes analysis and comparison of the of customers.
various forms of energy, their Our load management program present and projected costs and the
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continues as a major objective in advantages of installing electric our efforts to reduce the need for energy in substitution for or in
- f additional generating capacity, and replacement of other fuels.
t at the same time, make more Interest in the heat pump and y
l efficient use of our existing the add-on heat pump has grbwn facihties.
in the residential sector a3 home-N
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In five years our industrial and owners, builders and heating-cooling J/
commercial customers have shifted contractors have noted the predic-more than 31,000 kilowatts to off-tions of escalating costs of natural peak use, surpassing a goal gas and oil during this decade.
N originally targeted as attainable With new home construction at a over a ten-year period.
Iow point, the conversion of existing Effective communication by heating systems to electric was an Company representatives, both in obvious target for our residential
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training sessions with industrial and customer services representatives.
J. H. wimer, Jr., left, energy application engmeer, discusses solar applications with kt- '
J. N. Gruitza, Sharon architect, who 3 ) / - /
specializes in solar building dedgn. This
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solar medical office building is in Sharon.
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They exceeded thek god for new i
house heating customers by adding I
e 581 all-electric homes to our lines during 1981. In addition,61 1
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customers supplemented their e
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fossil-fuel heating systems with t
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A add-on heat pump installations. At 3
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Y the close of 1981 we had 4,399 all-f; electric homes in our service area, an increase of 15.2 percent over the y
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previous year.
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<1 customers were notified of a new
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An electric car attracts attention at our Zelienople District Office during a promotional activity sponsored by merchants in the Borough of Zelienople.
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TOTAL ELECTNC SALES j
MILUONS OF istL OW Ari HOURS m.
3.500 3 000 f
e 2.500
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- b 1972 73 74 75 76 77 78 79 5;0 81 Our Customer Sersices Departn'.cnt provides sisitors an informatise presentation of i
M Industnal energy-cfficient home heatmg and cooling systems and energ3 consersation techniques during " Energy Expo" held las March in cooperation with manufacturersand installers.
i
' ~ " Residential Q Commeraal itesidential Conservation Service in the home. During 1981,1 AG3 L_j onie' (ItCS) program. This " energy audit" school, home and public programs program is designed to show were conducted for a total of 37 A 12 TOTAL SALES REVENUES customers how and where to individtials.
MILUONS OF DOLL ARS on nergy in their homes Area development continues in through an audit performed by an our efforts to attract new firms and 1
155 experienced representative, but the assist existing firms in expansion program proved less than successful, programs. Expansions in 1981 saw 3
s gg Ilill inserts explaining the benefits expenditures of S21 million, Lm 4
125 of the program accompanied every providing employment for 391 Y.
residential electric bill during June.
workers. Working with community, "O
Additional publicity about the pro.
county and state development
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gram was used in all media. Never.
agencies, our area development pro-95 theless, only 114 applications were gram attracted 13 new 80 received.
industries, representing a capital Our farm customers, particularly investment of $20.7 million
. 65 dairy farmers and those utilizing and 319 new jobs.
50 electric grain drying processes, I
increased their energy use by 4.5 percent over 1980, using an average j
35 i 20 of 16,361 kwh last year compared to 15,657 kwh in 1980.
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Our educational programs in area schools have broadened notably; quyg # a.a w;g our consumer representatives i
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I 1972 73 74 75 76 77 78 79 80 81 now present programs which cover all methods of energy conservation i
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Repair crews from all Groandbreaking in 1949 i
LII areas worked to restore for Unit No. 3. Chair.
service in Sharon area man W. H. Sammis and, t k
efter June 1947 President L. B. Round m
tornado.
operating earthmover The Company added its at New Castle Power l
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45,000th customer in Plant.
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Legal & Environmental A significant achievement N..c 4
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occurred during 1981 when the United States Environmental tw
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s Protection Agency (EPA) approved 1r W w
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for the Beaver Valley Air Basin,
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D in which the Company's New
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Castle Power Plant is located. The revision allows the Company to e
meet sulfur dioxide emission limits
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by continuing to burn coal with a low sulfur content. The construc-tion cost of a scrubber system had been estimated to be $85 million and it was estimated that the
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installation of the system would
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about $14 million.
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increase annual operating costs by gff 6~'
Hecause of the approval of the W, -f
SIP revision, the Company expects ir'.
that EPA's suit against the I
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Company for alleged sulfur dioxide P
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emission violations at the New
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Castle Power Plant will be discon-1[
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tinued. In addition, noncompliance 7
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penalties under Section 120 of the 4ML _
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Clean Air Act are not expected to
~
be sought against the Company A National Geographic photographer works at the I,ittle illue Itun containment dam, because of the Company's com-the resemir for the sludge from the 11ruce Mansfield Plant's air pollution control systems. The November 1981 issue of National Geographic featured the plant and its
(
pliance with the revised sulfur environmental controls in an article concerning " acid rain."
dioxide emission limits.
Two of the Company's municipal The PUC investigation into an costs are the subjects of hearings to resale customers, the Boroughs of outage of Heaver Valley Unit No. I commence in the spring of 1982.
i l
Ellwood City and Grove City, filed from March to August 1979 Full discussions of environmental /
a complaint October 3,1977 resulted in a decision that the unit legal issues appear in Note 7 of the i
I alleging the Company was in viola-shouhl remain in the rate base of Notes to Financial Statements in l
tion of antitrust laws. The plaintiffs the Company. Ilowever, Duquesne this report.
I claimed treble damages totalling Light Company, the operating
$21 million. The Company on company of the unit, has been June 6,1978 filed a motion to ordered to refund to its customers dismiss or in the alternative to stay certain purchased power costs l
the action, and the Court on incurred during the 1979 outage.
l January 1,1979 granted the The Company has not been ordered Company's motion in part by as yet to make similar refunds. The dismissing most of the claims, Company's liability for the outage l
staying one claim and allowing one and any refund of purchased power l
claim to continue.
l l
.e~
- n -
l
~ lio Company Aled forthe first Construction rate increase in its history in began in 1958 on
, December 1951. Under pro-Generating u it No. 4 new Mercer 7
L Posed new rate, Company's
'Ihe Company joined q
went into operation in County Division o
August 1958 at the office building at average price per kwh is still Ohio Edison and 10 less than average for all New Castle Power Plant.
Clark.
i other utilities in a electric companies in the
,,,g,,,,,,,,,,3 p,,,
'I*0'*
gram in February 1957.
9
Commumcations e
e pm gn Our efforts to strengthen the in an informal "give-and-take" 1
findings of opinion surveys-that atmosphere, were held during the
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our service ranks as " good to year for area newspapers and radio excellent" in salue-is a dominant editors and reporters. With members objective in our communications.
of the Company's management avail-During the past two years our able at these sessions to answer
" Energy People" communications questions, newsmen had the theme has proven effective in opportunity to learn firsthand the identifying our employees as issues and problems of our industry, friends and neighbors in their Discussions of many issues con-communitie: Thk fir ae is carried tinue with our Consumer Inf orma-in every form of communications in tion Group which consists of 11 p'
radio and newspaper advertisements, citi/. ens representing civic, labor, O
the Company's employee publica-minority, church and senior A
%'P'a tions, bili stu ffers, Speakers llu reau citizens organizations. Through this
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\\
Extra impetus was given to our opinions during regularly scheduled
- y' presentations and displays.
group's <1uestions and freely-offered
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employee information program meetings we have an avenue to g fg when a new telephone information gauge the concerns and problems of s
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service, "Inside Line," went into a cross section of consumers.
N 1
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operation a late summer. Informa.
During the past year our power 1
^lj D
tion varies from national to local plant tours attracted many visitors,
..; i energy news and announcements of a total of 1,160 individuals repre-E 1
general interest to all employees senting 104 groups bemg escorted and the Company. Tnis new through the Ilruce Mansfield Plant, information source has grown in An Open llouse, held in.luly for popularity; at the close of 1981, an employees and friends of those who average of 110 calls to "Inside Line" work at the New Castle Power Plant, k.wd were being made daily, brought over 300 visitors to that
- . A.1)unlap. Unit No. 2 superintendent Two information sessions, held plant.
at the Ilruce Mansfield Plant, wearing
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,! / i white hard hat, explains equipment in the
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[.
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plant's control room to Dr. I,. G. Ford I d
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y f
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'e 2
and J. it. Edgerly during tour by Ohio
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d f ej Edison and Company directors. Right, E
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more than 300 toured the New Castle
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Pow er Plant during Open llouse for
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zi; employees in July.
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31 1 jL.
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rN 4-Fifty shovels were used Y-
- M.
In March 1960 the The Company pur-Company's Greenville as ground was broken L
- g.. l chased a portion of the and Sharon Divisions Mercer County.
for construction of psy 0:nerating Unit No. 5 f WWm;
' Carpente : Power &
merged to become the employees were
]
Light Company in Mercer County presented two national j M*C:
Division.
safety an irds in 1964 ct the New Castle Power 1J
~ @~MN; ; Crawford County in i
Plaat in June 1962.
~ '
February 1962, addirig for achieving finest
. more than 3,500 safety record in the H..
' customers to its lines.
Company's history.
N.,
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w 10
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=
- Personnel At the close of the year the Employees represented by and group basis were the feature of Company had 1,779 employees bargaining units have been working a new safety program during 1981.
compared to 1,682 at the end of under a two-year contract nego.
Zelienople District employees 1980.
tiated in 1980. New contract registered 2,400 consecutive days Hiring of new employees contir.-
negotiations with the Utility without a lost-time accident and ues to be carefully monitored Worker, Union of America ( AFL-employees at the Bruce Alansfield to control costs. Virtually all of CIO) Local 140 and Local 272 of Plant recorded the greatest reduc-these additional employees were the International Brotherhood of tion in lost-time accidents during necessary to fulfill the manpower Electrical Workers ( A FL-CIO) will the year.
needs at the Bruce Alansfield Plant.
be conducted in 1982.
Granting of wage and salary Awards on both an individual increases during 1981 and the addition of new employees 7
l 1
Mm n0: O y 1 h [
$fm l q ;g... _
increased total wages and salaries and the cost of fringe benefits,
- i-2 y 9 = m
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including amounts charged to con-bC JII["M"'
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struction, to $29.5 million com-y g,
EMiy
, y 'hg g'l parcd to $26.2 milh,on m, 1980.
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1C In an organizational change, p'
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Afark G. Anastas was named
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- s s manager, personnel relations on
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la e Don:dd C. Bluedorn who had held b.3 y - ~ %, N
!,';p j October 1,1981, succeeding g
that post since April 1980.
h, h $[{Y-k; t'
% J, Bluedorn, who was manager of
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V transmission and distribution J "'
i operations prior to his 1980 iy 7"
appointment, returned to that
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position. Alr. Anastas came to the j
Company from Ohio Edison's b
personnel department, where he
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g had been coordinator, employee assessment.
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Above, J. M. Othites, New Castle Power Plant senior shift supervisor, is interviewed duririg production of an information television program for employees. Left, a Mercer County Division line crew moves an 80-foot pole into position.
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. m--,m..y
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T 1 Edison and three other '~ 'I
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electrie ca-r==ama es ed th.ca.trei
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p'
,Aree Power coordine '.
100,000th customer p
- tion Group (CAPCO).
wee eoeneeted to our -
Se Compemy beg'na -
L in 1967 to jointly n lines in June 1968.
i using this new eysebol c de,elop generating and +
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During the past year an
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)EI E,mployee Suggestion System was
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initiated which provides a formal l
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appron:h for generating, evaluatmg L
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t ]x and implementing worthwhile ideas 4
of employees. Employees whose
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l suggestions prove feasible receive tn j l.
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! f cash awards commensurate with th(
f? ! b value of the suggestion.
h JlA" lq Tiaining sessions for supervisors g*
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were held throughout the Company during the past year in a continuing
- m program to improve managerial effectiveness. All management I
r group jobs were evaluated, using an V
g -
s outside consultant, in keeping with 7
(
y the Company's commitment to
(
' tl assure equitable salary administra-tion.
A noncontributory pension plan 7
covers almost all employees. At the
=
g, end of the year,248 former glk,
, d,.-== _; M employees and provisional payees Above, D 10. llackett, director, accident prevention, makes a safety presentation to or survivmg spouses of deceased school children. A portion of this "Iteady and Dave Safety Show" features Iteddy employees were receiving retirement Kilowatt on closed-circuit television. Below, J. H. Gump, center, training administrator; incomes through the plan. During
- 11. G. Fluxe, left and D. L. Bailey, operations training coordinators; study turbine panel simulator in Ilruce Mansfield Plant training center.
the year,14 employees retired, m
7 General
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l All of the Company's common s)'
l stock is owned by its parent, Ohio l
Edison Company. At year end, the Company had outstanding 10 series of cumulative preferred stock lC"
~
held by 3,308 stockholders. There l
were a total of 687,033 preferred
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shares outstanding. The preferred gs\\,
N stock is listed on the Philadelphia g< N Stock Exchange, Inc.
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. Construction'of the 1
- 3 l t ! Board Chairman
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Bruce Meneneld coal-UJ D. Bruce ManeSeld, at "4
'I. fired plant at Shipping-.
- controle, with J. M.
'. port began in 1971.
' Arthur, Duquesne IJaht In February 1976 the board chairman, during.
1,000th employee was groundbewaking for -
hired to meet growkag
. nuelser Beaver Valley
~
1 manpower.
,_d Power Station _in 1969. -
,. _ requirements, s'
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Service Territory ok and CAPCO Power Pool /@n~r ;
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q Pennsylvania Power Company Generating Units by Type t :
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Duquesne Ught Company g Nuclear Q(
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CAPCO Power Pbol Na i
Five electric utihty companies in Western Pennsylvania and
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Not thern Ohio have joined together for the development of
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^hy power generation and transmission f acihties. Members include
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9 Pennsylvania Power Company, Duquesne Light Company, The g,
Clevelaad Electric illuminating Company Ohio Edison jk 1
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Company and The Toledo Edison Company.
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The Company celebrated l*s
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d 50 years of dependable i een tocouheaetental 4 '* JF N#;
- i-
. The Company was ?i pented thelengest sete ' ~j. service with a special issue of
'y-r~ talense. M $800
, '1
,-s._
we.n_,
- "e b h h..; Profile magazine. Th,e 50th g
W Anniversary edition is avail-mammmmmmmens m
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<;ja W 3333,g34,3] 9 g.7 able upon request to the ,gg g g g - !. E.... L..m. h j Communications Services . M h M Stue l Department. ,.u:d-z z.z .,.~ ~ n. w w: w a m 13
RnejM3nia Fbe Corrpany Ooera:ing S:a:is:ics 1981 1980 1979 1978 1977 Revenue from Electric Sales (Thousands) Residential..... $ 52,649 $ 50,251 $ 46,425 $ 37,113 $ 31,763 Commercial..... 30,225 28,374 25,588 20,320 17,659 Industrial... 64,787 58,623 58,128 45,201 37,085 All Other.. 5,371 5,545 4,540 4,994 3,555 Total.. 3153.032 $142.793 $134,681 $107.628 $ 90,062 Revenue from Electric Sales p Residential.. 34.4 % 35.2% 34.5 % 34.5% 35.3% Commercial.......... 19.8 19.9 19.0 18.9 19.6 2 Industrial. 42.3 41.0 43.1 42.0 41.2 All Other......... 3.5 3.9 3.4 4.6 3.9 - Total. 100.0 % 100.0% 100.0% 100.0% 100.0%, Kilowatt Hour Sales (Millions) Residential... 862.4 845.5 823.3 814.7 788.3 Commercial.... 566.1 536.9 512.6 494.5 487.8 j Industrial...... 1,915.8 1,737.2 1,878.5 1,816.9 1,724.5 All Other.. 132.5 131.8 130.4 125.0 ~ 123.4 Total. 3,476.8 3,251.4 3,344.8 3,251.1 3,124.0 i Customers Served at End of Year Residential.... 111,121 110,012 109,032 107,126 105,197-Commercial. 12,902 12,839 12,919 12,647 12,317 i Industrial....... 109 107 135 133 133 All Other, 118 117 114 113 111 l Total... 124,250 123.075 122.200 120.019 117.758 Residential Customer Averages Average Kwh Used per Residential Customer. 7,813 7,726 7,626 7,679 7,548 Average Price per Kwh-Residential (Cents)..... 6.10 5.94 5.64 4.56 4.03 Kilowatt Hours Generated (Millions). 3,834.6 3,146.0 3,194.8 3,320.1 3,550.6 Kilowatt Hours Purchased and Interchanged i_ (Millions). (256.4) 296.5 281.7 116.7 (205.8) {- Peak Load (Kilowatts).. 577,000 548,000 554,000 552,000 551,000 j Cost of Coal per Million BTU.. $~ 1.50 1.41 1.22 1.08' .95 Generation Capability (Megawatts) Coal..... 676.8 675.6 650.0 650.0 650.0 Oil.................. 52.9 54.9 63.5 63.5 63.5 Nuclear.. 141.7 141.7 141.8 140.0 140.0 To t al............... 871.4 872.2 ~ 855.3 853.5 -853.5 Sources of Electric Generation Coa l............. 78.3% 97.7% 83.4 % 83.7% 84.5% : 4 Oil..................... 0.2 0.7 2.1 3.4 2.2 Nuclear.. 21.5 1.6 9.5 12.9 13.3 To tal................ 100.0% 100.0% 100.0% 100.0% 100.0% No. of E m ployees....................... 1,779 1.682 1.500 1.335 1.245 c 4 i i f 3 - -14 4
QRYs/,rinlil I MY bOf FOElny i l . Seec:ec mnancia Ja:a 4 i 1981 1980 1979 1978 1977 Thousands of Dollars Operating Revenues.. $174.488 $157,208 $145,340 $119.118 $100,843 Operating locome............... $ 37,412 $ 32,427 $ 29,421 $ 23,755 $ 20,481 Net income L24,936 $ 20 822 $ 21,206 $ 14,987 $ 15,511 2 Preferred Stock Dividend Requirements.. $ 5,605 $ 5.232 $ 4.660 $ 4.660 $ 3,873 fdet income for Common Stock... .... $ 19,331 $ 15.590 - $ 16,546 $ 10,327 $ 11,638 1 i Common Stock Dividends.... $ 15,876 $ 14.301 $ 12,278 $ 5,452 $ 7.220 . Total Assets at December 31.... 1633,463 $588,624 $517,285 $473,847 $418.572 Utility Plant............ $649,350 $599,982 $546,744 $506,374 $454,522 Depreciation Reserve... 124,115 113,044 101,585 90,742 81,542 Net Utility Plant.. $52525 $486.938 $445,159 $415,632 $372,980 )' Gross Property Additions. $ 52,858 $ 57,204 $ 57,676 $ 54,958 $ 63,221 ' CAPITALIZATION Common Stockholder's Equity........ $194,624 $170,713 $154,396 $150,128 $140,939 Preferred Stock-Not Subject to Mandatory Redemption. 41,947 41,947 41,947 41,947 41,947 Subject to Mandatory Redemption. 26,298 27,200 17,600 18,000 18,000 Long. Term Debt,.. 262,011 242,194 225,156 205,683 180,385 Total Capitalization......... $524,880 $482,054 $439,099 $415,758 $381,271 i CAPITALIZATION R ATIOS Common Stockholder's Equity........ 37.1% 35.4% 35.2% 36.1% 37.0% Preferred Stock- ' Not Subject to Mandatory Redemption.. 8.0 8.7 ' 9.5 13.1 11.0 Subject to Mandatory Redemption.. 5.0 5.6 4.0 4.3 4.7 Long-Term Debt...... 49.9 50.3 51.3 49.5 47.3 Total Capitalization... 100.0% 100.0% 100.0 % 100.0% 100.0% l 1 4 1 15
rtuema amcompany Vanagemen: Jiscussion anc Anaysis R:sults of Operations is indicative of the continued $20,000,000 principal mately $7,000,000 of The Company's operating improvement in the availabil-amount of new first mortgage additional preferred stock at revenues increased riuring ity of the Company's generat. bonds with an interest rate of an assumed dividend rate of 1981 compared to 1980 ing units. The substantially 16-1/8% in June 1981. 17%. primarily because of an increased availability of Information with respect As stated in Note 1 of increase in other electric Beaver Valley Unit No.1 in to the estimated effects of Notes to Financial revenues caused by inct eased 1981 compared to 1980, the inflation upon the Company Statements, the Company is capacity and energy sales to addition of new generating is given in Note 8 of Notes to precluded from currently Ohio Edison Company capacity with the commercial Financial Statements. recovering a portion of the (Edison), a rate increase operation of Bruce Mansfield cost of coal from Quarto received in June 1980 and Unit No. 3 in September Capital Resources and mines. Not only must the increased kilowatthour sales. 1980 and a change in the Liquidity Company find alternative These factors represent 41%, Company's buy / sell position The Company expects to sources of financingtocover 29% and 25% of the increase, with Edison, resulted in the spend approximately thedeferred recovery of these respectively. For 1980 com-change from a " net receipt" $68,000,000 for new con. costs, but the Company must pared to 1979, revenues position to a " net delivery" struction in 1982. In addition, also bear the financing costs increased primarily due to the position for interchange the Company expects to fund associated with the accumu-rate increase received in 1980, power transactions in 1981. through the Pennsylvania lated unrecovered coal costs increased capacity and energy increased availability of Power Fuel Corporation (see aggregating $5,428,000 at sales to Edison and increased the Company's generating Note 5 of Notes to Financial December 31,1981. collections under the units in 1981 was a major Statements) in 1982 The PPUC approved a Company's energy clauses, factor in the increase in other approximately $9,000,000 $24.9 million retail rate These factors represented operation expenses. Also, for the procurement of increase for the Company 43%,32% and 15% of that credits to other operation nuclear fuel. Also $5,805,000 effective for service rendered increase, respectively. expenses in 1980 (due to principal amount of first on and after January 23, Total kilowatt-hour sales expenses which were billed mortgage bonds mature in 1982. The PPUC action con-to customers increased 6.9% to other CAPCO companies 1982 and are expected to be firmed 76% of the $32.7 in 1981 following a decrease for the cost of energy used refunded. In order for the million request filed on April of 2.8% in 1980. The major in the construction of Bruce Company to meet its capital 15,1981 to offset the impact cause for the increase was Mansfield Unit No. 3 and requirements for 1982, the of inflation on the industrial kilowatt-hour sales displacement training costs); Company sold $15,000,000 Company's operating costs 4 which increased 10.3% in not available in 1981 principal amount of first and to finance mandated 1981 compared to a decrease accounted for approximately mortgage bonds,15-3/4% pollution controls, of 7.5% in 1980. The poor 28% of the total increase in series due 1989 in January in January 1982, the economic year experienced 1981. Maintenance expenses 1982.The remainder of the Company implemented a by the basic steel industry for decreased 2.3% in 1981 com-Company's 1982 capital $1.7 million municipal resale 1981 did not affect the pared to 1980 primarily due requirements will be funded rate increase, affecting the specialty steel producers in to the improved availability primarily through the Company's five resale the Company's service area. of the Company's generating issuance of additional customers under the jurisdic-Continually increasing unit units in 1981. The 29.7% securities. tion of FERC. The new rates costs for coal and oil were increase in 1980 compared to Based upon earnings as of went into effect on primarily responsible for the 1979 was due principally to December 31,1981, under January 24,1982, subject to increases in total fuel costs in maintenance at the Bruce the earnings coverage require. refund.The $1.7 million 1981 compared to 1980. The Mansfield Plant, Beaver ments of its first mortgage increase is the first part of a cost per unit of coal and oil Valley Unit No. I and W. H. indenture and after giving two-part $2.3 million resale consumed increased 16% and Samrnis Unit No. 7. effect to the issuance of rate increase request filed by 33%, respectively, in 1981 Interest on long-term debt $15,000,000 principal the Company on compared to 1980, and increased 14.7% and 16.6% in amount of first mortgage September 28,1981. Hearings increased 17% and 50%, 1981 and 1980, respectively, bonds in January 1982, the are to be held on the respectively,in 1980 com. compared to the prior year, Company could presently sell Company's request. partd to 1979.The Company's The increase was primarily approximately $22,000,000 deftrral of Quarto coal costs due to the Company's sales of in additional first mortgage htld down the increase in $16,000,000 principal bonds at an assumed interest total fuel costs by amount of new first mortgage rate of 17%. Based on those $5,214,000 and $107,000 in bonds with an interest rate of earnings and after giving j 1981 and 1980, respectively, 10.9% in April 1980, affect to the first mortgage l (see below and Note 1 of $5,645,000 principal amount bondsissued in January 1982, j Notes to Financial of pollution control and but assuming the issuance of l Statements), environmental improvement no additional debt, under its l-The reduction in purchased notes at 60% of floating Charter restrictions the l and interchanged power, net, prime in January 1981 and Company could issue approxi-16
fbmAanta IlmerCompany C S:afementso-ncome ^ ~ ~ l For the Years Ended December 31, 1981 1980 1979' Thousands of Dollars Operating Revenues.... $174,488 $157,208 S145,340,', Operating Expenses and Taxes: Operation-Cost of fuel.. 60,979 51,220 ,,45,587 Purchased and interchanged power, net.. (4,975) 2,118 7.516 Other operation expenses. 30,073 22,905 19,204 Total operation.... 86,077 76,243 - 72,307 Maintenance. 17,017 17,411 13,423 Provision for depreciation.. 14,171 13,021 12,517 General taxes..... 11,831 11,185 10,296 income taxes. 7,980 6,921 7,376 fotal operating expenses and taxes. 137,076 124,781 115,919 .y Operating income..................... 37,412 32,427 29,421 /, Other Income and Deductions: Allowance for equity funds used during construction.. '6,483 5,753 6,258 Miscellaneous, net....... 723 996 78 income taxes-credit 3,662 2,018 ,._2,176 Total other income and deductions. 10,868 9,367 8,512 Total income.. 48,280 41,794 ~ 37,933 ~ Net Interest: Interest on long-term debt.... 23,210 20,233 17/J53 Allowance for borrowed funds used during construction, net of deferred income taxes......... (3,807) ~(2,964) (2,056) O ther......... 3,941 3,703 1,460 Net interest. 23,344 20,972 16,727 Net income...... 24,936 20,822 21,206 Preferred Stock Dividend Requirements.. 5,605 5,232 4,660 Net income for Common Stock... J.19,331 $_15 590 - $ 16,543 The accompanying Notes to Financial Statements are an integral part of these statements. l i. l j N. s s-~ I / l 17 .) f
ft0fG/ v20la Ftwf Ccmpany I 3aance Slee:s ~ ~ Asset,s ~ e l s r-At December 31, v 1981 1980 Thousands of DoHars e 4 f r, ,,Otility Plant: b f in service, at original cost.. $502,318 $482,177
- ,,,,,,..c,',
Less-Accumulated provision for depreciation. 124,115 113,044 378,203 369,133 Construction work. i progress. 142,326 115,914 Nuclear fuel in process.. 4,706 1,891 525,235 48C,938 Other Proo'erty and investments.. 1,493 440 Current Assets: Cash....... 3,248 1,493 Temporary cash investments, at cost, which approximates rnarket value.. l. '.. 4,300 j Hoceivables-Clustomers (less accumulated provision of $363,000 and ,..$300,000, respectively, for uncollectible accounts)... 11,803 13,694 Puent cortpa1y... 20,352 18,403 Uthir 19,095 18,424 .hiaterials and supplies, at average cost-d F t:y, '... 12,986 12,249 Otid/.. 4,530 4,041
- Prepayments ;.............
704 749 77,018 69,053 4 i Deferied Debits: i Deferred f 6el and energy costs, net. 1,284 2,293 U Deferred costs of terminated const/uction projects (Note 2)......... 14,597 14,525 Ottier.,. 13,836 15,375 29,717 32,193 $633.463 $588.624 x .s f / sp y* r I f 'q
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( % ~ ag / s 18 e .E
Caaitaization anc _iaciities At December 31, 1981 1980 Thousands of Dollar: Capitalisation (See Statements of Capitahiation): Common stockholder's equity. $194,624 $170,713 Preferred stock-Not subject to mandatory redemption... 41,947 41,947 Subject to mandatory redemption 26,298 27,200 Long ierm debt. 262,011 242,194 524,880 482.054 Current Liabilities: Current maturities of long-terne debt and preferred stock 6,305 5,000 Notes payable to banks (Note 6) 11,400 23,500 Accounts payable-Parent company 2,105 1,929 Other 47,223 39,036 Accrued taxes. 4,035 5,240 Accrued interest.... 3,665 3,710 Other 3,190 3,870 77,923 82,285 Deferred Credits: Accumulated deferred income taxes.. 20,790 16,740 Accumulated deferred investment tax credits. 4,150 2,902 Other 5,720 4,643 30,660 24,285 Commitments, Guarantees and Contingencies (Notes 2,3 and 7) $6.33,463_ $5.8_8J24_ The accompanying Notes to Financial Statements are an integral part of these balance sheets. 19
JITU/ /OMIO bMIbpOfly b la:emen:s o" CaoraIzalon At December 31, 1981 1980 Thousands of Doliars j Common stockholder's equity: Common stock. $30 par value. Authorised-6.500,000 st ares Outstanding-6,090.000 shares and 4,410,000 shares, respectively.. $152,700 $132.300 Other paid in capital.... 74 21 Retained earnings (Note 4a). __ 41.850 38,392 Total common stockholder's e.1uity. 194.624 170,713 Optional Redemption Price Number of Shares Aggregate Outstanding (in 1981 1980 Per Share Thousands) Preferred stock (Note 4b): Cumulauve. $100 par value Authorlied-740.000 shares Not Subject to Mandatory Reden ption: 4.24 % 4.64 % 141,049141,049 $102.980-105.000 $14,614 14,105 14,105 7,64 % 8 00% 118.000 118,000 105.270 106.380 12,489 11,800 11.800 8 48% 9.16% 100,000 160,000 106.870-107.320 17.135 16.000 16,000 Premium 42 42 Total not subject to mandatory redemption 4 3 41934g }4Sg 41,947 41,947 9 Subpect to Mandatory Redemption (Note 4ct: 8.24 % 100.000 100,000 $108.240 $10,824 10.000 10.000 10.t,0% 100.000 100.000 110.135 11.014 10,000 10,000 11.00% 67,984 72,000 112.110 7,622 6,798 7,200 N R 8,4E 2&OQ $29dQQ 26.798 27,200 Redemption within one year. (500) Total subject to mandatory redemption. 26,298 27.700 Longterm debt (Note 4d): Firit mortoege bonds-9 5/8% Series due 1981 5,000 31/4% Series due 1982. 5,805 5,805 9-1/2% Series due 1985. 25.000 25,000 161/8% Series due 1989... 20,000 4-3/8% 10-1/2% Serses due 1992 theough 2000. 68,000 68,000 7 5/8% 10.90% Seeses due 2001 through 2008. 96,000 9F000 Total first mottgage bonds. 214,805 199,805 Secured notes and obligations-Pollution control-1973 Series A. average interest rate 5.75% due 1984 through 2003... 3.500 3.500 1974 8 3/8% Series A and 8.due 1990 through 2004. 6.547 6.547 1976 7 7/8% 8% Seeies A and D,due 1992 through 2006. 20,000 20,000 1977 6-3/4% Series 8, due 1998 through 2007.. 10.600 10,600 1978 7.30% Obligation, due 1988 theough 2003. 314 314 1979 7.80% Serses C and F, due 2004 6,000 6,000 1981 Seeles G,60% of floating prime, due 1983.. 4,645 51,606 46,961 Environmentai notes-1976 7.90% Series, due 1992 through 2001....... 1.000 1,000 1981 Serses A,60% of floating prime, due 1933. 1.000 2,000 1,000 Total secured notes and obligation... 53.606 47,96i Net unamortired descour:t on debt. (595) (572) Long term debt due within one year. (5,805) (5,000) Totallong term debt. 262,011 242,194 Total capitafiration (Note 7). M 1412 OE The accompanying Notes to Financial Statements are an integral part of these statements. 20
( \\ :1 f c ;ji,Tf b;) f t jt.or (!' J T yY rj / Statemen s o" Re ainec Earnings l For the Years Ended December 31, 1981 1980 1979 Thousands of Dollars $ 38,392 $ 37,096 $ 32,828 Balance at beginning of period. Net income 24,936 20,822 21,206 63,328 57.918 54,034 Deduct: Common stock dividends 15,876 14,301 12,278 Preferred stock dividends. 5,602 5,225 4,660 21,478 19,526 16,938 Balance at end of period (See Note 4a for dividend restriction). .$ 41,850 $_38,392 $ 37,096 Statements o-Caoita Stoc< anc Otler Jaic-n Caai:a Preferred Stock Subject to Not Subject to Mandatory Common Stock Mandatory Redemption Redemption Other Number Par Paid-in Number Par Number Par of Shares Value Capital of Shares Value Premium of Shares Value Thousands of Dollars Balance, January 1, and December 31,1979..... 3,910,000 $117,300 $- 419,049 $41,905 $42 180,000 $18,000 Sale of Common Stock..... 500,000 15,000 Sale of 10.50% Series... 100,000 10,000 Sinking Fund Redemptions-11.00% Series. 21 (8,000) (800) Balance, December 31,1980...... 4.410,000 132,300 21 419,049 41,905 42 272,000 27,200 Sale of Common Stock. 680,000 20,400 Sinking Fund Redemptions-11.00% Series.... 53 (4,016) (402) Balance, December 31,1981... 5,090h_00 $152,700 $74, 419,049 $41,905 $42, 267,984 $26.798 7 The accompanying Notes to Financial Statements are an integral part of these statements. 21
i h ?g N h4 t, p, g Statements o~ Sources o~ uncs or Gross 3rocer:y Accitions l For the Years Ended December 31, 1981 1980 1979 Thousands of Dollars Sources of Funds: Net income S 24,936 $ 20.822 $ 21,206 Principal non cash items-Depreciation and amortitation-Charged to provision for depreciation. 14,171 13,021 12,517 Charged to other accounts. 202 203 201 Deferred income taxes, net 8,096 0,749 2,501 Investment tax credits, net 1,248 (2,340: 2,634 Allowance for equity funds used during construction. (6,483) (5,753) (6,258) Deferred fuel and energy costs, net.. 1,009__ 737 1,687 43,179 36,439 34,488 Less-Dividends on common stock 15,876 14,301 12,278 Dividends on preferred stock. 5,602 5,225 4,660 i Net f unds from operations. 21,701 16,913 17,550 Financing activities-Common stock. 20,400 15,000 First mortgage bonds. 20,000 22,000 20,000 Preferted stock. 10,000 Secured notes 5,645 6,000 Hetirement of long term debt and preferred stock. (5,402) (3,800) (3,500) Increase (decrease) in notes payable to banks. (12,100) 8,000 _ 9,000 28,543 51,200 31,500_ Net change in current assets and current liabilities excluding notes payable to banks and current maturities of long-term debt and preferred stock-Temporary cash investments. (4,300) Receivables (729) (22,702) 3,003 Materials and supplies. (1,226) (2,399) (2,430) i Accounts payable 8,363 14,787 (2,601) Accrued taxes. (1,205) (1,066) 2,977 Miscellaneous, net. (2,435) 646 3,392 / (1,532) (10,734) 4,341 Other, net-Construction funds heki in escrow, including accrued interest (933) 68 2,124 Allowance f or equity funds used during construction. 6,483 5,753 6,258 Deferred income taxes on allowance for borrowed funds used during construction.. (4,046) (3,148) (2,215) Miscellaneous, net.. 2,642 (2,848) (1,882) 4,146 (175) 4,285 Gross Property Additions.. $_52J858_ $ 57,204_ $ _57,676 The accompanying Notes to Financial Statements are an integral part of these statements. 22
}t.r-r / c.j t t/f 1 ( ) if f.; s v : / Stat'ements o ~~ axes For the Years Ended December 31, 1981 1980 1979 Thousands of Dollars General Taxes State aposs receipts S G,875 $ G,300 S 6.098 11 cal and personal property. 2,126 2,G18 2,312 State capital stock. 1,492 1,223 1,040 Unemployment and old age benefits. 1,275 9?1 801 Miscellaneous. 63 53 45 Total irneral tanes. S_11,831 S _ _1..I,185 $_1_0,79_G Provision for Income Taxes Currently payable-t edceat. S (1,65G) S 42 S 1,330 State. 676 950 (980) 42 2,280 Deferreil, net (see tirlow)- Federal. G754 8.293 1,893 State. 1,342 1,456 608 8,096 9,749 2,501 investment tax credits, net of amortuation (i) 1,248 (2,340) 2,G34 Total provision for income taxes $ _8,3_G4 $_ _7,451 $_7,415 income Statement Classification of Provision for income Tames Operatmg eapenses. S 7,980 $ 6.921 S 7.376 Other income. (3,6G2) (2,G18) (2,176) Allowance for borrowed funds used dur mg construction. 4,04G 3,148 2,215 Total provision for income taxes. $_8,364 S 7.451 $_7A15_ Sources of Deterred Tax Expense Cost of ternunated construction projects (Note 2). S 5,757 [ xcess of tax depreciation alloweu pursuant to the Class Life ADH and ACHS depreciation systems, net. 1,5G8 1,390 1,309 Deferred fuel and energy costs, net, (498) (380) (881) Deferred interest on lease f nuclur fuel, net. 3,146 Other, net (166) (166) (142)
- 4. ora 6,601 286 Allowance for borrowed funds used during construction, which is credited to plant.
4,046 3,148 2,215 Total deferred tax expense, net $_ 8,096 $_9,749_ $_2,501_ Heconciliation of Federal Income Tax Expense at Statutory Rate to Total Provision for income Taxes Book income before provision for income taxes $. 33,300_ $_28,2_73 $_28,621 Federal income tax expense at statutory rate. $ 15,318 $ 13,006 S 13,166 increases (reductions) in taxes resulting from: Allowance for equity funds used during construction, which does not constitute taxable income. (2.982) (2,G4G) (2,879) Excess of tax over book depreciation (3,G6G) (3,395) (3,290) State income taxes, net of Federal income tax benefit. 1,090 786 841 Other, net. (1,396) (300) (417) Total prevision f or income taxes $_826,4 $_7d51_ $_7d15_ (i) Amounts for 1980 refiect the reversal of previously recorded investment tax credits and related amortiration, carried forward due to the carryback of tax net operating losses. The accompanying Notes to Financial Statements are an integral part of these statements. 23
n n e m:.uc n n \\o es to snancia Statements I (1) Summary of Significant it estimated would Se billable quent ECR at more than accordance with a PPUC rate Accounting Policies: to most customers in future generally prevailing market order. The Company, a wholly-periods, in accordance with prices pending completion of owned subsidiary of Ohio the energy clause adopted by a PPUC investigation to Nuclear Fuel-Edison Company (Edison), the PPUC. The energy clause determine the reasonableness The cost of nuclear fuel is follows the accounting provided for: (1) the recovery of the costs of Quarto coal, charged to fuel expense based policies and practices pre-or refund, over a six-month The Company has deferred on the rate of consumption. scribed hv the Pennsylvania period beginni'1g two months $5,428,000 of such costs The storage of spent nuclear Put; ic Utdity Commission af ter incurrence, of energy through December 31,1981, fuel is ne:essary until the (PPUC) and the Federal costs which differed from of which $5,321,000 and manner of its disposal is Energy Regulatory established base energy costs; $107,000 is applicable to determined, which may take Commission (F E RC). The and (2) an adjustment for any 1981 and 1980, respectively. many years. The Company more significant policies are over or under collection Reference is made to Note received an allowance for summarized below. resulting from the operation 7 for a further discussion of the estimated permanent of the clause. the Quarto project. disposal costs in a January Revenues-Ef fective May 1,1981, by 1982 PPUC rate order. The Company's residential order of the PPUC, a " level-and commercial customers ized" energy cost rate (ECR) Utility Plant and Common Ownership of n are metered on a cycle basis. was initiated. The ECR in Depreciation-Generating Facilities-Revenue is recognized for effeet in 1981 was based upon Utility plant reflects the The Company and other electric service based on the anticipated energy costs original cost of construction, Central Area Power Coordina-meters read through the end for the last eight months of including payroll and related tion Group (CAPCO) com-of the month. 1981. A new ECR which costs such as taxes, pensions panies own, as tenants in Revenues from the Com-includes adjustment for any and other fringe benefits, common, various power pany's largest customer for over or under collection from administrative and general generating facilities. Each of 1981,1980 and 1979 customers will be recalculated costs and allowance for funds the companies is obligated to amounted to $20,707,000, each subsequent year in used during construction (see pay a share of the costs of $17,213,000 and November with an effective AFUDC), any jointly owned facility in $17,465,000, respectively. date of January 1. The Company provides for the same proportion as its These amounts represented Accordingly, the Company depreciation on a straight-line ownership interest. The approximately 11.9%,11.0 % defers the dif ference between basis at various rates over the Company's portion of opera-and 12.0%, respectively, of actual energv costs and the estimatedlivesof the prop-ting expenses associated with the Company's total operating amounts recovered from its erty. The ef fective composite these jointly owned facilities revenues. customers. rate was 3.0% in 1981 and is included in the correspond-In January 1981, the 1980 and 3.1% in 1979. The ing operating expenses on the Deterred Fuel and Energy PPUC ordered that the Com-Company provides for the Statements of income. The Costs-pany not include the cost of estimated cost of decommis-amounts reflected on the Prior to May 1,1981, the Quarto Mining Company sioning the radioactive com-Balance Sheet under ut;hty Company deferred certain (Ouarto) (see Note 7) coal in ponents of its only nuclear plant at December 31,1981 increased energy costs which its energy clause and subse-generating unit in service,in include the following: Accumulated Utility Plant Company's Utility Plant Provision for Under Ownership Generating Units in Service Depreciation Construction Interest Thousands of Dollars W. H. Sammis No. 7. $ 27,195 $ G,915 $ 5,591 20.80% Bruce Mansfictd No.1, No. 2 and No. 3. 81,536 6,926 1,241 5.76% Beaver Valley No.1.. 119,224 17,434 13,776 17.50% Perry No. I and No. 2 115,236 5.24% Total. 1227,955 $ 31.275 $135,844 All nuclear tael in process relates to the CAPCO units but is not segregated among them. 24
R mA,pna Fbus Company f Notes to Fmmal Stmements - cont Allowance for Funds Used The Company defers June 30, During Construction investment tax credits 1981 1980 (AFUDC)- utilized and amortizes these AFUDC, a non-cash item credits to income over the Auum;i, p&nt value of charged to construction work estimated life of the related accumulated pa-benefits: in progress during the con-property. At December 31, Vested. $18,177,000 $16,230,000 struction period, represents 1981, approximately Nonvested.. 1,961,000 1,549,000 the net cost of borrowed $20,000,000of unused invest-12M38 000_ $17.779.000 m furds and equity funds used ment tax credits were avail' Net assets available for for construction purposes. able to of fset future Federal benefits..... . }29,045,000 J25 359.000 m AFUDC varies according to income taxes payable. These Assumed rate of return for changes,n the level of con-credits expire at the end of actuarial present value of struction work in progress the following years: and in the cost of capital. The accumulated plan benefits. 8% 8% = = Company used a net of tax rate of 8.5% for computing 1991...... $ 5,000,000 AFUDC in 1981 and 8% in 1992. 4,000,000 Etfective January 1,1981 Significant Parent Company 1980 and 1979. 1993... 3,000,000 certain amendments were Transactions-1994.. 1,000,000 made to the plan relative to Operating revenues for inc:me Taxe - 1995..... 5,000,000 the calculation of benefit 1981,1980 and 1979 include Details of the total pro-1996... 2,000,000 payments to retired members. $16,172,000. $10,936,000 The ef fect of these amend-and $7,269,000, respectively, vision for income taxes are $20.000.000-ments increased the actuarial attributable to transactions shown on the Statements of Taxes. Deferred tax expense present value of accumulated with Edison. Such revenues results from timing differ. Pensions-plan benefits by approxi. resulted primarily from ences in the recognition of The Company's trusteed, mately $677,000 through Edison's purchase of capacity revenues and expenses for noncontributory pension plan Ju,e 30,1981. and energy from the tax and accounting purposes. covers almost all full time The total actuarial present Company's ownership The Company allocates employees. Upon retirement, value of accumulated plan interests in Beaver Valley the income tax credit result. employees receive a monthly benefits reflects pension Unit No.1 and W. H. ing from interest expense pension based on length of benefits applicable to eligible Sammis Unit No. 7, and also related primarily to construc-service and compensation. employees based upon costs associated with the tion work in progress, to Pension costs for 1981,1980 present salary levels and past Bruce Mansfield Plant. In income taxes credit included and 1979 were $2,668,000, years of service accumulated addition, purchased and under other income and $2,538,000 and $2,321,000, through the valuation date. interchanged power, net, diductions on the Statements respectively.Of those This is the generally accepted reflects credits of $7,565,000 of Income. amounts, $354,000, reporting procedure set forth and $911,000 due to the For income tax purposes, $671,000 and $1,146,000, by the Financial Accounting Company's net delivery of ~ the Company has claimed respectively, were charged to Standards Board. The interchanged power to Edison liberalized depreciation operating expenses. The Company's annual contribu. during 1981 and 1980, (double-declining balance, balances were primarily billed tion to the plan, however, respectively, and charges of guideline lives, Class Life to other CAPCO companies considers estimated ultimate $7,600,000 due to the ADR System and Accelerated or charged to construction, salary increases due to infla-Company's net receipt of Cost Recovery System Pension costs include the tion and other factors and the interchanged power from (ACRS) provision methods) amortization of past service estimated total service Edison during 1979. and, consistent with the rate costs on an actuarial basis expected to be accumulated treatmint, follows "normali-over 30 years. The Company by employees. This is a (2) Terminated Construction Zation" accounting except as funds pension costs accrued, widely recognized funding Projects: indicated on the Statements A comparison of accumulated technique and is consistent in January 1980, the of Tcxes.. plan benefits and plan net with the recommendation of Company and all other Tha Company expects that assets from the two latest the Company's actuary. In CAPCO companies termi-defIrrsd taxes not currently actuarial reports is as follows: addition, the actuary nated plans to construct the provided will be collected recommends,and the following four nuclear gener-from its customers wher' the Company utilizes, a discount ating units-Davis Besse No.2 taxis become payable, based rate of 6% for funding and No.3,and Erie No.1 upon the established rate. purposes. Differences and No. 2. The Company's ma' sing practices of the PPUC between funding bases and share of construction costs and ths FERC. reporting requirements can incurred as of December 31, have a significant effect on 1981 applicable to these units the comparisons shown above, amounted to $14,597,000. 25
Ufic;ji.3 %ifUU 5 C w G Uj N h >', E) [ if U :f Ul d bU MWM - W d The Company requested believes any amounts it may than 30 nor more than 60 Trustee through December 31, recovery of the costs allo-pay in the future as a result days notice, unless otherwise 1981, the Company's annual cable to its PPUC jurisdic-of these claims will be sub-noted. Redemption of all sinking and improvement tional customers in its stantially less than the preferred stock issued within fund requirements amount to recently concluded PPUC rate amounts claimed. The the past five years is subject $2,439,000. The Company proceedmgs; the PPUC Company has no reason to to certain restrictions regard-contemplates that these deferred its decision pending believe that cancellation ing refunding operations. The requirements will be satisfied the outcome of a current charges ultimat2ly payable,if optional redemption prices in 1982 by permanently investigation of the entire any, will not be recoverable shown on the Statements of waiving its right to issue CAPCO construction pro-from its customers. Capitalization will decline to bonds against $2,439,000 of gram. The Company is eventual minimums per share the $6,120,000 of retired currently seeking approval (3) Leases: according to the Charter pro-bonds that are presently avail-from the FERC to recover The Company leases visions establishing each able for that purpose, the costs from FERC jurisdic-nuclear fuel, certain trans. series. Alternatively, the Company is tional customers to the mission and distribution facil-permitted by its mortgage to extent they are allocable ities, of fice space and other (c) Preferred Stock deposit funds in the amount to those customers. The incidental property and Subject to Mandatory called for which can then be F ERC gave the Company equipment under cancelable Redemption-withdrawn upon surrender permission, for accounting and noncancelable leases. The The Company's 11% Series for cancellation of a like purposes only, to amortire total rental expenses included includes a provision for a principal amount of bonds the constr uction costs, plus on the Statements of Inccme mandatory sinking fund to specifically authenticated for contractors
- cancellation for 1981,1980 and 1979 retire a minimum of 4,000 such purposes against charges,if any,over a ten-year were $5,110,000, $1,642,000 shares every year on unfunded property additions.
E period beginning with the and $2,304,000, respectively. January 1, at $100 per share These methods can result in a date that rates in its next rate The future minimum rental plus accrued dividends,and the minor increase in the amount filings providing for recovery commitments as of 8.24% Series includes a pro-of the annual sinking and of the costs become etfective. December 31,1981 for all vision for a mandatory sink-improvement fund require. The Company believes that noncancelable leases are: ing fund to retire a minimum ments. the construction costs were of 5,000 shares on December 1 As of December 31,1981, prudently incurred and has 1982. .. $ 4,240,000 in each year beginning in the Company's sinking and no ecason to believe that the 1983. 3,888,000 1982, at $100 per share plus improvement fund require-PPUC and the FERC will not 1984. 3,093,000 accrued dividends. The ments and long-term debt act f avorably upon its request. 1985. 1,572,000 10.50% Series includes a maturities for the next five The Babcock & Wilcox 1986. 1,771,000 provision for mandatory years are: Company, as supplier for the Years redemption of the entire nucicar steam supply systems thereaf ter. 42,075,000 series on April 1,2040, 1982. .S 8,244,000 for the terminated units, has at $100 per share plus 1983. 8,084,000 asserted claims in connection if all noncapitalized accrued dividends. 1984. 2,489,000 with delays in, and the financing leases had been cap-The sinking fund require-1985. . 29,867,000 termination of, the units. The italized, the effect on total ments for the next five years 1986. 4,867,000 Company's share of the assets, total liabilities and are: claims is approximately expenses would not be (e) Subsequent Financing- $19,200,000, bef ore the material. 1982. $500,000 in January 1982, the application of cestain credits 1983... 898,000 Company sold $15,000,000 of undetermined amount. (4) Capitalization: 1984. 900,000 principal amount of first Representatives of Babcock & (a) Retained Earnings-1985. 900,000 mortgage bonds,15-3/4% Wilcox and the owners of the Under the Company's 1986. 900.000 Series due 1989. terminated nuclear units, Charter, the Company's including the Company, have retained earnings not avail. (d) Long-Term Debt-(5) Nuclear Fuel Financing: been meeting to discuss the able for payment of cash The mortgage and its In December 1981, matter and the discussions dividends on the Company's supplements, which secure all Pennsylvania Power Fuel have been proceeding in a Commen Stock were of the Company's first mort-Corporation (a corporation in manner that the Company $13,945,000 at December 31, gage bonds, serve as a direct which the Company has no considers satisf actory. The 1981. first mortgage lien on sub-ownership interest) was Company cannot predict at stantially all property and created to provide funds this time what,if any, (b) Preferred Stock-franchises, other than specif-fo:' the procurement of amounts it may ultimately At the Company's option, ica:ly excepted property, nuclear fuel. The fuel corpo-pay in connection with these all preferred stock may be owned by the Company. ration will lease fuel to claims nor when such redeemed in whole, or in part, Based on the amount o; the Company under a fuel amounts might be paid, but at any time upon not less bonds authenticated by the lease which will require 26
R f Gy%na Ftmo Ccn pany f tMes to Financirtl Staternents - cont lease payments sufficient to tion, the Company is required term financing arrangements 1982. .. $ 2,990,000 permit the fuel corporation to pay commitment fees that (see Note 5). The Company 1983. 2,919,000 to repay the obligations. vary from a flat rate of 1/2% is limited by its indenture and 1984.. 2,849,000 Under ordinary circum-to a variable rate of 8% of the Charter as to the amounts of 1985... 2,779,000 stances, the lease payments applicable ptime interest rate additional first mortgage 1986.. 2,709,000 will be made at such time and to assure the availability bonds and preferred stock it Years in such amounts as will of $21,000,000 of the may issue, thereafter. 31,787,000 coincide with the burn-up of lines of credit, the nuclear fuel. Quarto Project-Based on recent studies Pennsylvania Power Fuel (7) Commitments, Guarantees The Company, together concerning the economics of Corporation did not make and Contingencies: with the other CAPCO com-the Quarto project and the bank borrowings or issue panies, has made long-term various alternatives available commercial paper in 1981. Construction Program-coal supply arrangements with to provide the long-term fuel Financing of up to The Company expects to Quarto.The CAPCO com-requirements of the Bruce $30,000,000 will be available spend approximately panies have agreed to sever. Mansfield Plant, the coal in 1982, either through $306,000,000 for property ally, and not jointly, guaran-supply contracts were revolving credit arrangements additions and improvements tee their proportionate shares amended and changes were or the issuance of commercial from 1982 through 1986, of of Quarto's debt and lease made in the mode of opera-paper which is supported by a which approximatf y obligations incurred while tion of the Quarto mines bank letter of credit. Interest $68,000,000 is applicable to developing and equipping the which have the effect of on bank borrowings will be 1982. In addition, the Com-mines. The guarantees will reducing the annual tonnage computed at 110% of the pany expects to fund through remain even if environmental production of these mines, applicable prevailing prime the Pennsylvania Power Fuel regulations prohibit the use Additional coal requirements interest rate, plus a commit-Corporation approximately of thiscoal. Asof December 31, for the Bruce Mansfield Plant ment fee of 1/8% on the $30,000.000 for the pro-1981, the Company's are currently being pecured unused portion of the line of curement of nuclear fuel share of the guarantee was in the open market and the credit. The fuel corporation from 1982 through 1986, of $34,369,000 ($18,355,000-Company is presently contin-will also pay a 5/8% letter of which approximately long-term debt; uing to evaluate the alterna-credit fee on the aggregate $9,000,000 is applicable to $12,516,000-lease obliga-tives for making additional amount of outstanding 1982 (Note 5). The major por-tions; and $3,498,000-arrangements to fulfill, borrowings. tion of the Company's con-short-term bank credit). The tonether with the use of coal struction activities during this guarantee is expected to from the Quarto project, the (6) Not:s Payable to Banks five-year period relates to the increase to $35,640,000 tong-term fuel requirements and Lines of Credit: CAPCO companies' program based on budgeted mine of the Bruce Mansfield Plant. The Company has knes of for the joint development of construction costs of These changes are part of a credit with banks that power generation and trans- $431,000,000, fuel procurement strategy provide for borrowings of up mission f acilities, and to bring Under the terms of the designed to reduce the to $42,000,000 at the pre-the Company's existing coal supply contracts, which weighted average price of coal vailing prime interest rates. generating units into com. expire December 31,1999, used at the Bruce Mansfield Short term borrowings may plIance with environmental the Company must reimburse Plant. The Company will con-be made under these lines of regulations. The CAPCO Quarto for its share of the tinue to monitor the Quarto credit on the Company's companies have entered into costs of operating the Quarto project and conduct such unsecurrd notes. All of the other commitments (the mines, including those costs additional studies of the ,i current lines expire Company's share being associated with mine con-economics of the project as
- December 31,1982; however.
$95,000.000) for the supply struction, whether or not it are deemed warranted by l til unused lines may be can-of nuclear fuel in connection receives coal from Quarto, circumstances. celed by the banks or the with the future commercial The Company's total pay. The current price of
- Company, operation of nuclear genera-ments under these contracts Quarto coal to the Company Tha Company maintains ting units.
amounted to $10,836,000 is based on, among other cash bilances on deposit with The Company's financing during 1981. The Company's things, the actual production banks to provide operating program during 1982 through minimum payments under costs plus amortization of funds and to assure avaita-1986 will include the sale or the coal supply contracts certain production expenses bility of $12,264,000 of the issuance, from time to time, related to mine construction which were not included in lines of credit. These compen-of appropriate additional costs are: the price of coal to the Com-sating bilances, net of float", amounts of first mortgage pany during the development ar2 expected to be maintained bonds, secured pollution con. period,which ended on May 31, atanavirageof approximately trol and environmental notes 1980. The current price l $900,000 and are not subject and obligations, preferred of Quarto coal exceeds the to cny contractual restriction stock, common stock and current generally prevailing against withdrawal. In addi-proceeds from other long-27
Rmrchana Fbmr Ccmpany Notes to Fmnc at Statements-cont. market price of coal. The Plant. The sulfur dioxide January 1,1981, so that such The PPUC is investigating PPUC presently limits the (SO ) emissi n standard penalties could be sought an outage of Beaver Valley 2 recovery of the cost of formerly in ef fect was against it, but the Company Unit No. I which occurred Quarto coal to the generally shown to be more stringent cannot determine at this time during the period March-prevailing market price of than necessary to meet the whether they will be or, if August 1979. The outage had comparable coal. Reference is Federal ambient air standards, they are, the amount of been ordered by the Nuclear made to Note 1 for a discus-This SIP revision enables the economic benefit that could Regulatory Commission to sion of a PPUC order with Plant to continue to burn be established. If sought and analyze possible seismic defi-8 respect to the cost of Quarto the low sulfur coal it is now imposed, such penalties could ciencies of safety-related be significant. EPA, in piping and pipe supports in coal currently being burning to meet the new SO2 recovered from customers, emission standards. The SIP connection with the settle-the Unit. The PPUC has Despite the delay in the final revision was effective on ment of litigation involving ordered that the operating resolution of this matter by January 15,1982. W. H. Sammis Unit No. 7, has company of the Unit refund the PPUC, management has in a legal proceeding acknowledged that its policy an as yet undetermined no reason to believe that the against the Company under is to assign a low enforcement amount to that company's Company will not ultimately the Clean Air Act, the priority to companies in customers based upon be able to recover the total Federal government is asking compliance with outstanding expenditures for purchased costs of Quarto coal,includ. the court to assess civil consent orders such as the replacement power during the ing the deferred costs. penalties for alleged continu-one that embodies the outage. The PPUC is currently ing violations of SO emis-Sammis settlement. investigating the Company's 2 Environmental Matters-sion regulations at the New liability if any for the outage Various Federal, state and Castle Plant. The Clean Air Other Legal Actions and and whether refunds are due to local authorities regulate the Act Amendments, which Coreplaints-the Company's customers for Company with regard to air became ef fective in August in 1977, the Boroughs of purchased replacement power and water quality and other 1977, permit the imposition Ellwood City and Grove City, expenses incured during the environmental matters. The of civil penalties of up to Pennsylvania, filed a com-outage which were included Company estimates that com. $25,000 per day for violation. plaint against the Company, in its energy clause. If the pliance requires capital Because the Company is in alleging that the Company, Company is required at some expenditures of approxi-compliance with the revised individually and in conspiracy future time to make such a mately $23,000,000 for pro. emission standard (as with Edison and other refund, it is not expected that jects remaining to be com. detailed above), it is expected CAPCO companies, has vio-the amount would be pleted. Of this amount, that this legal proceeding will lated Sections 4 and 16 of material to the Company's approximately $6,000,000 be terminated without the the Clayton Act by restraining results of operations. In a was spent prior to 1982 and imposition of significant civil and monopolizing trade and separate investigation, the $17,000,000 is included in penalties or the necessity to commerce in alleged markets PPUC is considering whether the above construction esti. shut down coal fired capac-for electric power. Damages additional construction costs mate for 1982 through 1986. ity. of $7,000,000 (to be trebled) which resulted from deferral if the Company is required to Final regulations imple. and injunctions against the of construction projects should install of f-stream cooling in menting certain provisions of alleged unlawful acts are be excluded from rate base in connection with the opera-the Clean Air Act Amend. sought. In 1979, the Court future: rate proceedings. tion of the New Castle Plant, ments of 1977 have now been granted summary judgment in costs estimated at between promulgated which provide favor of the Company as to $13,800,000 and for the imposition of non. certain allegations of the $31,500,000, depending on compliance penalties based complaint. Management is thermal limitations, would on any economic benefit unable to predict the ultimate be incurred. In addition, realized by the operator of a outcome of this action, annual operating costs would pollution source as a result. ' increase substantially. The failure to comply with pollu-Company expects that the tion control laws and regula-impact of any such capital tions af ter January 1,1981. and operating expenditures The Company has filed a would eventually be reflected Petition for Review of these in its rate schedules. regulations. The Company On December 16,1981, did not achieve compliance the United States Environ-with all such regulations by mental Protection Agency (EPA) approved a change in the Pennsylvania State implementation Plan (SIP) af fecting the New Castle 28
RylrU/ A3nla b/CrCompan'/ L Nefes to Financ al Sta*Oments -cont (8) Supplementary Financial Data Financial Reporting and Changing Prices (Unaudited) Statement of Financial Accounting Standards No. 33, " Financial Reporting and Changing Prices" (SFAS No. 33), provides for the preparation of supplementary financial information to oisclose the estimated effects of inflation and changes in prices on property, plant and equipment. This data is presented in accordance with SFAS No. 33; however,it is not intended as a substitute for earnings reported on a historical cost basis. Adjusted for the Effects of Changing Prices For the Year Ended December 31,1981 (In Thousands) As Reported Adjusted for On the Adjusted for Change in Primary General Specific Prices Statements inflation (Current Cost) (Average 1981 Dollars) Operating Revenues. $174 738 S174,488 S174,488 Operating Expenses and Taxes: Operation and maintenance. 103,094 103,094 103,094 Provision for depreciation. 14,171 29,936 30,503 General taxes.. 11,831 11,831 11,831 income taxes 7,980 7,980 7,980 Total operating expenses and taxes. 137,076 152,841 153,408 Operating income. 37,412 21,647 21,080 Other Income and Deductions. 10,868 10,868 10,868 Net Interest, 23,344 23,344 23,344 Preferred Stock Dividend Requirements. 5,605 5,605 5,605 income from Continuing Operations (excluding reduction to net recoverable cost). $ 19,331 $ 3,566(a) $ 2.999 Increase in specific prices (current cost) of property, plant and equipment held during the year (b) $ 75,016 F: eduction to net recoverable cost. $ (27,620) (26,294) Effect of increase in the general price level on property, plant and equipment (75,775) Excess of increase in the general price level over increase in specific prices of property, plant and equipment after reduction to net recoverable cost (27,053) Advantage resulting from the decrease in purchasing power of net monetary liabilities. 46,419 46,419 Net.... .$ 18,799 $ 19,366 (a) Including the reduction to net recoverable cost, the income (loss) from continuing operations adjusted for general inflation would have been $(24,054,000). (b) At December 31,1981, property, plant and equipment, ne' of accumulated depreciation, adjusted for changes in specific prices (current cost) was $936,739,000, while b storical cost (net recoverable cost) was $525,588,000. 29
FbrmAanla Rmer Con pany Notes to Financial Statements - cont Five. Year Comparison c.f Selected Supplementary Financial Data \\ Adjusted for the Effects of Changing Prices (Unaudited) For the Years Ended December 31, 1981 1980 1979 1978 1977 Thousands of Dollars Operating Revenues As reported on the primary statements. $174,488 $157,208 S145,340 $119,118 $100,843 Adjusted to average 1981 dollars.. $174,488 S173,510 $182,099 $166,048 $151,339 Historical Cost Information Adjusted for General inflation (in Average 1981 Dollars) Income Com continuing operations (excluding reduction to net recoverable cost).. S 3,5G6 $ 2,296 S 8,381 Current Cost Information (In Average 1981 Dollars) Income from continuing operations (excluding reduction to net recoverable cost).. $ 2,999 $ 1,468 $ 6,190 i Excess of increase in the general price level over increase in specific prices of property, plant and equipment af tei reduction to net recoverable cost.. $ (27,053) $ (44,538) $ (53,028) Other Information Common stockholder's equity at December 31 at net recoverable cost ( Average 1981 Dollars). $206,911 $181,020 S184,113 Advantage resulting from the decrease in purchasing power of net monetary liabilities (Average 1981 Dollars) S 46,419 $ 40,356 S 44,795 Average consumer price index. 272.4 246.8 217.4 195.4 181.5 i The Consumer Price index the year of its transfer to was then applied to each ment at its economic value to for All Urban Consumers plant in service. The current reserve balance for the respec-the Company, the adjustment (CPI-U) was used for convert. cost of land is the same as the tive year to determino the for reduction to net recover-ing actual dollars spent for computed amount adjusted composite current cost able cost must be made due property, plant and equip-for general inflation. The accumulated provision for to the additional constraints ment into average 1981 current cost adjustment depreciation. present in the ratemaking dollars. This adjustment reflects the approximate The total provision for process. illustrates the estimated dollars that would have to be income taxes has not Nen Net monetary liabilities ef fect that inflation has had spent today to acquire adjusted for genere!.nflation consist primarily of long-term upon the Company's princi-property, plant and equip-or changing prices, in con-debt and preferred stock. pal assets, ment identical to assets formity with the report. During inflationary periods, The Handy Whitman currently owned. ing requirements of SFAS net monetary liabilities will index of Nblic Utility Con-Depreciation expense was No. 33. be repaid with dollars having strun.on Costs for the North determined using the same The reduction to net less purchasing power than Central Division and the rates and methods under recoverable cost arises dollars had when the habili-Bureau of Labor and Statis-general inflation and changing because the current rate-ties were originally incurred, tics engineering iadices were prices as the provision for making policies to which the Adjustment for the advantage used to calculate the current depreciation reported on the Company is subject allow resulting from the decrease in cost of property, plant and primary financial statements. recovery through revenues of purchasing power of net equipment, excluding land. The accumulated provision only the historical cost of monetary liabilities is These indicer were applied to for depreciation was esti-utility property. During necessary to adequately actual dollars spent on large mated by using the Handy-inflationary periods, however, reflect these differences and construction projects accord-Whitman index. A theoretical the investment necessary to serves to partially offset the ing to the year of expendi-reserve balance was estimated replace that property will be adverse inflationary effects of ture. Current cost of all other for each class of property by more than its original cost, in replacing the Company's construction projects was year that the property was order to properly reflect prcperty, plant and equip-based upon original cost in placed in service. The index property, plant and equip-ment. 30
fbro/mnia RmerCorrpany Notes to Financ al Statements-cont. (9) Summary of Quarterly Financial Data: The following summarizes operating results for the four quarters of 1981 and 1980. Three Months Ended > larch 31, June 30, September 30, December 31, , 1981 1981 1981 1981 Thousands of Dollars Operating Revenues. $44,807 $42,645 $43,749 $43,287 Operating Expenses and Taxes. 34,819 33,170 33,941 35,146 Operating income. 9,988 9,475 9,808 8,141 Other income and Deduction.. 2,439 2,586 2,739 3,104 flet Interest. 5,646 6,089 5.860 5,749 N t income $ 6.781 $ 5,972 $ 6,687 $ 5.496 Net income for Common Stock. $_5,375 $__4,566 $ 5,289 $ 4,101 Three Months Ended March 31, June 30, September 30, December 31, 1980 1980 1980 1980 Thousands of Dollars Operating Revenues. $38,512 $35,794 $39,740 $43,162 Operating Expenses and Taxes. 30,491 28,687 31,630_ 33,973 Operating income. 8,021 7,107 8.110 9,189 Other Income and Deductions. 2,342 2,280 2.630 2,115 Net Interest. 4,642 5,321 5,271 5,738 Net income $ 5,721 $_.4,066 $ 5,469 $ 5,566 Net income for Common Stock. $ 4,567 $ 2,814 $ 4.052 $ 4.157 Aucitors' Reoort ARTitutt ANDERSEN & CO. Ni:w Yoitx, N. Y. To the Board of Directors of Pennsylvania Power Company: We have examined the balance sheets and statements of capitalization of Pennsylvania Power Company (a Pennsylvania corporation and a wholly-owned subsidiary of Ohio Edison Company) as of December 31,1981,and 1980, and the related statements of income, retained earnings, capital stock and other paid-in capital, sources of funds for gross property additions and taxes for each of the three years in the period ended December 31,1981. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the financial statements referred to above present fairly the financial position of Pennsylvania Power Company as of December 31, 1981, and 1980, and the results of its operations and the sources of funds for gross property additions for each of the three years in the period ended December 31,1981,in conformity with generally accepted accounting principles applied on a consistent basis. M n& February 12,1982. 31
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I ^ M Vn:,' '"::R"l;"",'"l':"l"' " ^ """ ~7 DIVISION MANAGER J. R. TOPPER JUSTIN T. ROGE RS. JR. Mercer county 5 Chair man of the Boat d Mr. Roger s is presatent of A. W AYNE COLE the parent conuiany. Ohio Pr es. den t Ed. son Company. The j pr mc. pal employment of all W.K.CONOVER other of ficers is mth the Vice Presulent Com pa n s. J. F. DUNLEVY Vice Pr es. dent REGISTR AR for Preferred Stock-J. R. EDGE RLY F nst Seneca Bank and Vice Pr es. dent and Gener al Tr ust Company, Counsel Washington Centie Nev. Castle, Pennsyls ania W.F.REEHER 16101 Vice President TR A'jsFE R AGENT R. P. WUSHINSK E f or Pr ef er r ed Stock. Secretary and Treasurer Of fice of the Company, Nee. Castle, Pennsvivama B. D. BURFORD 16103 Compt eller GENER AL OFFICES: R. P. ARMSTRONG 1 E Washins; ton Street, Ass >stant Comptroller F. O. Box 801 Net. Cast!e, Pennsv ivania F. A. F AZZONE 16103 Assistant Tr easurer V .\\ ( tw or. l{ P M ushinske and W F. Itecher P i yls a . r Cornpany Assistant Tr easurer emplos er. ANGEL.INE COMPARONE Assistant Secretar v
Pennsylvania Power Company U. S. Postage Annual Report Bulk Itate 1 E. Washington Street PAID P. O. Box 891 Permit No.158 New Castle, PA 16103 New Castle, Pa. l l 50 dependable service years of Penn@ Power U.
e J PENNSYLVANIA POWER COMPANY Income Statement for 3 Months Ended December 31, 1981 (Dollars in Thousands) (See Note 1) Operating Revenues $43,287 Operation and Maintenance Expenses 26,927 Provision for Depreciation 3,739 Taxes - General 2,677 - Federal Income (1,150) 1 - State Income 355 - Federal and State Income Taxes Deferred - Net 2,763 1 - Investment Tax Credit - Net (165) Operating Income 8,141 Other Income and Deductions: Allowance for Other Funds Used During Construction 1,680 Miscellaneous, Less Applicable Income Taxes - Net 1,424 Total 3,104 Total Income 11,245 Interest and Other Charges: Interest on Long-Term Debt 6,147 Amortization of Debt Disc.)unt, Premium and Expense - Net 49 j Other Interest Expense 774 Allowance for Borrowed Funds Used During Construction - Credit 1,221 l Net Income (Before Preferred Stock Dividend Requirements) 5,496 j Preferred Stock Dividend Requirements 1,395 l Net Income for Common Stock $ 4,101 Shares of Common Stock Outstanding - Average During Period 4,636,667 I j 2 1 w r --n+- p
s ? i ) j o r l I I 1 f PENNSYLVANIA POWER COMPANY t 1982 Internal Cash Flow Projection t for Beaver Valley Power Station Unit No. 1 ) (Dollars in Thousands) i I Prior Year Proj ection l Actual Total Year Total I 3 Net Income After Taxes $24,936 $33,016 [ Less: Dividends Paid 21,487 25,072 ( Retained Earnings 3,449 7,944 L Adj ustments: i Depreciation and Amortization 14,171 15,040 Deferred Income Taxes and i I Investment Tax Credits 5,298 11,284 i Allowance for Funds Used During Construction (6,483) (8,908) i Total Adjustments 12,986 17,416 i Internal Cash Flow $16,435 $25,360 l t Average Quarterly Cash Flow $ 4,109 $ 6,340 f I Percentage Ownership in Nuclear Unit 17.5% 1 Maximum Total Contingent Liability $1,750 i k i I l i + t 4 i I L [ I f I t 9 -...}}