ML20052E662

Forwards Annual Financial Rept 1981

ML20052E662
Person / Time
Site:	Oyster Creek
Issue date:	04/27/1982
From:	Fiedler P GENERAL PUBLIC UTILITIES CORP.
To:	Office of Nuclear Reactor Regulation
References
NUDOCS 8205110317
Download: ML20052E662 (1)

Text

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1 GPU Nuclear e

Q ggf P.O. Box 388 Forked River, New Jersey 08731 609-693-6000 Writer's Direct Dial Number:

1982

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Director i 9 Office of Nuclear Reactor Pegulation ~; 7 3 ";E82i'" [

U.S. Nuclear Regulatory Cm mission 94 ,, , ,_ -. . ca -

Washington, D.C. 20555 7:,G f,,,,1 , .

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y Attention: Document Control Desk 6 2'/44i l {,)\

Subject:

Oyster Creek Nuclear Generating Station Docket No. 50-219 Annual Financial Report Enclosed with this letter are ten copies of the General Public Utilities Corporation 1981 Annual Report as required by 10 CFR Part 50, Appendix C, Section III and 10 CFR 50.71(b) .

Very truly yours,

-/

Peter'B. Fiedler Vice President and Director Oyster Creek PBF:OC:1se Enclosures cc: NRC Resident Inspector Oyster Creek Nuclear Generating Station Forked River, New Jersey 08731 l

/YT*Y i io 820S110317 820427 l PDR I

ADOCK 05000219 1 PDR GPU Nuclear is a part of the General Pubhc Utihties System 1

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GENERAL I PUBLIC l .

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! 1981 ANNUALREPORT s

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• Inside GPU's 1981 Annual Report The General Public Page Utilities System Companies The GPUSystem Companies Inside FrontCover General Public Utilities Corporation 1982 AnnualMeeting Inside Front Cover 100 Interpace Parkway Parsi any, NJ 07054 Quarterly StockPrice Data Inside FrontCover Financial Summary and Stockholder GPU Service Corporation Profile 1 GPU Nuclear Corporation latter to Stockholders 2 (Addresses and telephone numbers same as The Financial Report 4 GPU Corp.)

1981: Earmngs and Extraordinary Items Jersey Central Power & Light Company Credit Agreement Renewed Madison Avenue at Punchbowl Road Post Accident Capital Expenditures Cut By Half 1981 Outlays Generated Internally

[0 0 The Regulatory Situation 5 Progress in Pennsylvania Rate Cases Metropolitan Edison Company State Responses 2800 Pottsville Pike JCP&L Rate Case Pending Reading, PA 19640 Major Regulatory Actions (215) 929-3601 TMI.1: A Status Report 8 Pennsylvania Electric Company NRC Committee Cites Improvements 1001 Broad Street INPO Audits TMI 1 Johnstown, PA 15907 Unit 1 Licensing Hearings Completed (814) 533-8111 Steam Tube Leaks Cause Delays 1982 Annual Meeting TMI 2: Cleanup Progresses 9 The Annual Meeting of Stockholders of General Public Waste Management: An Important Agreement Utilities Corporation will be held at 10 A.M. EDT, GPU Proceeds With TMI Lawsmts May 6,1982 at the Warner Theater in the Erie Civic Modifications Underway At Oyster Creek 10 Center, Erie PA.

F ture System Planning 10 5400 Million Plus Saved Ontario Cable Link Coal Plant Delayed Coal-Cleaning Plant Opened Quarterly Stock Price Data 1980-1981 Conservation Plan Underway Administrative Changes 11 Price Management Moves 1981 High Low Equal Opportunity Stressed 51/2 37/8 First Quarter Statement of Management 12 Second Quarter 53/4 41/8 Management's Analysis of Financial Condition Tlurd Quarter 53/8 43/8 and Results of Operations 12 Fourth Quarter 67/8 43/8 Quarterly Financial Data (Unaudited) 13 Report of Auditors 14 1980 Consolidated Statements of Income 15 First Quarter 93!8 33/8 Consolidated Statements of Retained Earnings 15 Second Quarter 71/8 4 1/4 Consolidated Balance Sheets 16 l'~ Third Quarter 7 5 Consolidated Statements of Changes in Fourth Quarter 57/8 41!8 Financial Position 18 Notes to Consolidated Financial Statements 19-32 GPU is listed on the New York Gtock Exchange. At System Statistics 33 December 31,1981 there were 135,933 registered holders of GPU Common Stock. With respect to,,

Effecteof Changing Prices 34-35 restriction on the payment of common stock divi-Directors and Officers 36 dends by G PU, see Note 10 to the Financial State-The GPU System Map Inside BackCover ments, page 30.

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1981 Financial Summary 1981* 1980*

Net Income Before Extraordinary Items (000) S 20,544 S 20,591 Net Income (Loss) After Extraordinary Items (000) S (15,904) S 20,591 Per Share (Before Extraordinary Items) S .33 S .34 Per Share (After Extraordinary Items) S (.26) S .34 Common Shares Outstanding, Year End (000) 61,264 61,264 Number of Stockholders 135,933 150,965 Megawatt Hour Sales (000) 32,012 31,838 Operating Revenues (000) S 2,065,487 S 1,831,741 Construction Expenditures (000) S 263,960 S 245,740 Cost of Fuel and Purchased Power (000) S 934,425 S 831,915 Total Assets (000) S 5,054,021 S 5,042,972 Generating Capacity (megawatts)** 8,251 8,254 Peak Load (megawatts) 6,215 6,161 Customers Served at Year End 1,597,557 1,577,966 Number of Employees at Year End 12,030 11,490

• See Notes 1 and 3 to Consolidated Financial statements and Report of Auditors.

• • Includes both TMI Units rated at a totalof 1.706 megawatts.

Stockholder Profile:

. Third survey confirms family income is $24.934. About accident. Some 25% have purchased 25?e have incomes under S15.000 a their holdings since the accident.

carlier studies year. The typical GPU stockholder Of those owning stock prior to the As ahown m, the 1978 and 1950 owns 180 shares. Some 46.670 l accident 11.lec have increased their surveys, a December 1981 sampling stockholders responded to the 1981 holdings,7.5cc have reduced their of GPU shareholders revealed that questionnaire. According to the holdings and 81.4cc have made no two thirds of GPU s shareowners December 19S1 survey. about 75c~c change since the accident.

are retired or within five years of of current GPU stockholders held retirement, and the median annual company stock prior to the T.\1l 1

hearings have since been completed (DOE) has agreed to accept the To the and the exams re-administered: radioactive waste generated during Stockholders: enough operators have passed to T51I 2 cleanup which cannot be

. permit operation of the Unit. disposed of at a commercial site.

The DOE has also earmarked S34 1981 was a year of transition for We were looking forward to a million in its fiscal 1982 budget for G:neral Public Utilities. The earn- Nuclear Regulatory Commission the research and development ings slide m the two years since the vote on startup approval that could related to the cleanup effort. The Three Stile Island accident was have had T51I 1 on line in April. Reagan administration identified a slowed. The year s results-exclud- However, a January court ruling on federal role in the cleanup program ing extraordmary items-leveled a case brought by an anti nuclear involving tasks estimated to cost out at about the same as 1980. How- group against the NRC has raised about $123 million over a five year ever, the extraordmary items the possibility of further delays by period. The General Accounting mvolving the abandonment of the requiring the NRC to address the Office has estimated that about half Forked River Nuclear Plant and issue of potential psychological of these DOE research and develop-other adjustments produced a 1981 stress affecting area residents. In ment dollars can be considered as loss of 26 cents per share. Th?. addition, tube leaks in a consider- directly offsetting the cleanup funds overall earnings results, contmumg able portion of the Unit's steam needed at Three Alile Island. There cash restraints and the near term , generators were found in November. is growing acceptance in both indus-outlook prevented a resumption of Leakage was not evident during hot trial and government circles of the the quarterly dividend. functional testing conducted three nationwide value of research and de-m nths earlier. Further analytical velopment information to be gained Despite the disappointing financial and diagnostic work is required to from T311 cleanup operations.

results for 1981, we balieve that in ascertain the time and cost of cor-the past year and in the early rective measures. The combination months of 1982, some of the essen- of these events now puts T1111 re-tial buildm, g blocks leading toward start six months to a year off. Key rate case settlements the fmancial recovery of GPU were In a January 1982 action that was put in place. Aluch, however, On the second key item, that of vital to furthering national financial remains to be done, with several putting in place a broad cost- participation in cleanup funding.

tmportant milestones yet to be sharing program for the cleanup of the Pennsvivania Public Utility achieved. T511-2, a number of major moves Commission adopted the Thorn-Two criticalitems for financial that began in mid 1981 are burgh plan as a part of rate case recovery were significantly ad- progressmg. settlements for our two Pennsyl-vanced in the last twelve months, vania subsidiaries on requests filed but it is not yet possible to forecast in June 1981. This was the first time the exact date of their accomplish- Cleanup cost sharing that customer participation in ment. These events are: progress A plan calling for the sharing of cleanup funding was recognized by toward the return to both customer cleanup costs among GPU, the regulatory action. The rate case service and base rates of T5tI Unit nuclear industry and the state and request for our New Jersey sub-1, the undamaged nuclear unit at federal governments was introduced sidiary, currently befcre the Three hiile Island, and the estab- last July by Governor Thornburgh regulatory body in that state. also lishment of a cost sharing program of Pennsylvania, and has since gain. contains proposed customer cleanup to fund the cleanup of the damaged ed wide national acceptance. participation.

ficility, Tall 2. The Pennsylvam.a rate case settle-The board of directors of the ments represent a very significant After nine months of public hear- investor-owned utility industry ings on Thil 1 restart, the Atomic turning point. They address the trade association has endorsed m st important areas of financial Safety & Licensing Board of the l participation by the industry and uncertainty facing the Company. In Nuclear Regulatory Commission

, has committed itself to the $190 addition to T5112 cleanup fundmg, (NRC) rendered favorable recom- million program share designated mendations on the issues of the settlements provide for the l by the Thornburgh plan. In Wash-management competence, plant eventual return of TSII 1 to base l g,;gton, discussions are currently modifications and emergency centered on federallegislation yatys and the recovery of the subsid-tams mvestment in N2. nis response. The hearings were re- aimed at facilitating such utility opened, however, at our request, to recoverv of the T3112 investment t

participation. '

l consider the question of cheating by does not indicate a decision on the operators on exantinations. The The U.S. Department of Energy ultimate future of that facility.

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Credit agreement congressional, state, consumer and Summary extended regulatory bodies. Despite the positive steps accom-The Pennsylvania rate settlements plished this year, your Company's were deemed satisfactory by the financial recovery moves slowly and banks participating in our Revolv. System Planning major hurdles remain before us. The ing Credit Agreement, who decided In addition to our efforts to rebuild ,

return to gervice of T51! 1 is criti-in January to continue to supply the Company's financial health and cal. The actual cash flow from a credit through 1982 under the terms press the key Three 5 file Island 75112 cleanup funding program is a of the existing agreement. recovery issues, we must assure necessity. Reliable operation of our GPU's continued ability to serve its coal and nuclear plants is important There was increasing recognition franchised territory. It is in the best ~ so as to maintain Ic:w energy costs.

this past year that bankruptcy was interests of the stockholders to The capital required for plant modi-not a solution to GPU's post- maintain recognition of GPU as a fications must be held within avail- (

accident financial problems. long term provider of reliable able limits. Revenues and regula-Reports by the U.S. General electric service. In order to serve the tory treatment in the months ahead Accounting Office and the manage- customers, it is essential that we must be sufficient to meet our obli-ment consulting firm of Arthur hold down load growth, maximize gation and reduce bank credit to the Young and Company confirm that the use of available facilities, levels called for by our Revolving conclusion. The study by Arthur minimize new capitalinvestments Credit Agreement lenders. Favor-Young, while ruling out bankruptcy, and achieve early regulatory able resolution of these problems suggested that some options involv- participation in any new projects should make possible a more normal ing state public power agencies be rei;uired. Considerable effort was investor perception of risks and extmined to assist in solving T511 devoted to these areas in 1981. facilitate our return to the capital cl:anup funding and the financial . markets, an event that is crucial to future of GPU's subsidiary, Jersey The G PU Conservation and Load the full financial recovery of the Central Power & Light Company ' 51anpgement 51 aster Plan, initiated ' GPU System.

(JCP&lJ' several years ago and one of the first of its kind in the nation, has 1981 has been a difficult year for all, already produced solid results in

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but it has seen movement toward shifting customer demand to off. your Company's recovery.1982 D m dend outlook peak times, thus cutting back on offers the opportunity for more We recognize the importance of a progress. We pledge the utmost the need for new generating dividend to our shareholders. , energies of your management and capac tv.

Currently, and m, the near-term '

the GPU employees to that object-s future, our revenues do not support Long term energy suppifplans Ive. Your ' patience and support over a dividend resumption. The were brought into line with the past three years deserve Company must first deal with its expected lower growth rates of nothing less.

substantial bank debts, must about 2cc per year through the year t

achieve a level of earnings sufficient 2000. An aggressive program to ,

to support normal financing and reach both near and mid term , ' *.

must eliminate the major causes of contract agreements to purchase yj financial uncertamty. The return of power from utility sources to the A 7 T511 1 to service and the adoption west of GPU was an important part in New Jersey of the Pennsylvania of our overall power supply strategy. William G. Kuhns rate settlement pattern would be Chairmen and ChiefExecutive important items in such recovery. During 1981 we reached agreement Officer Completion of a program for shar. with Ontario Hydro for the joint ing the cost of T5112 remains a construction of a cable tie across

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significant challenge facing the Lake Erie through which electricity ,m __j Company. from Canadian coal-fired plants f would flow to JCP&L customers. V Your management must balance the A unique " project financing" ap. Herman Diechamp impact of a cash dividend on that proach was developed that involves President and Chief Operating process. Political pressures today JCP&L customers, banks and even O//icer against a dividend paym :nt are a the equipment suppliers. Regula-reality while our work to establish a tory review and approval will be ob-national program of shared cleanup tained before authorizing a final funding is under discussion among go ahead for the project. Starch 4,1982 3

January 1979 fez .\let-Ed and The financial Extraordinarysterms reduced 1981 income by $36.4 million or 59 cents Starch 1979 for Penelec. equal report per share as follows: to S18.6 mitifon or 31 cents per share: and for T111-1 since June  :

1). JCP&L abandoned the Forked 1980. S2.7 million or 4 cents per l Since the accident at T511 in Alarch River Nuclear Plant and re- share.

1979, the G PU System's earnings quested the New Jersey Board Further details are presented in j have been severely affected by the of Public UtilitiesiBPU) to Notes 1 and 3 to the Financial '

removal from customer rates of the authorize amortization of that Statements.

capital and operating costs investment. The BPU did so in associated with both 'lnree afile July 1981 but dented the re-Island generating units. G PU's Credit agreement renewed covery of the caphalized financ- The consortium of 45 banks partici-stockholders have been bearing- ing costs from 51 arch 1979 to and continue to bear- the burden of pating in the Revolving Credit April 1980, resultingin a Agreement IRCA agreed on October these costs, together with the fixed current write-off of $26.9 million 1,1981, (the original expiration charges related to the abandoned or 44 cents per share. date) to extend the GPU System Forked River nuclear project.

agreement to December 31.1982.

2). GPU has carried on its balance Consequently, GPU has not paid a common stock m,vidend smce sheet the excess of its invest- Credit potentially available under menh is its subsidiaries over the renewed agreement is S200 mil-November 1979 and System earn-their rdated net asaets since lion for the GPU System compared ings have dropped from $139 milh.on '

N 946, when the Company was with S412 million under the original or $2.30 per share m 1978 to $21

, formed. The Company con- agreement. Of the total credit, S150 milhon or 33 cents per share, before exied thdt in light of present million is currently available: the extraordmary items, in 1981 (See and proposed ratemaking, this remaining S50 mil' lion would require "htanagement s Discussion and .

excess investment has no realiz- additional approval of the banks.

Analysis, ' page 12 and Notes 1 and able value and wrote off such 3 to the Financial Statements for The new agreement revised the excess ($30.8 million or 50 cents additional details.) per share). individual company borrowing limits and established a loan reduc.

3). Rate orders in Pennsylvania in tion schedule for $1et Ed and GPU 1981: Earnings and 1981 and early 1982 have pro- Corporation under which they must extraordinary items vided for hiet-Ed and Penelec to reduce borrowings to zero by the 1981 earnings (before extraordinary recover their original invest- end of 1982. Penelec does not expect items) were $21 milhon, the same as ments m the Tall plant. The to borrow under the RCA in 1952.

last year. After extraordinary items rate rders specify recovery of At year end 1961, the System had there was a net loss in 1981 of $16 the net value of assets at the a es "

S73 million of short term debt out-million. or 26 cents per share. standing under the RCA compared b u ad t ons since those dates. Accordingly- t $169 milh,on the year before and a Although earnings (before extra- peak of S2S2 million outstanding in 3' depreciation charges accrued on ordir.ary items) were flat compared Atay 1980.

.t with last year, there were n number these assets since those dates of signific' ant offsetting increases are being restored to income as The banks participating in the RCA h f 11 ws: for TA!I 2, since decided on January 15,1982, to f ' and decreases. Decreases to income resulted from the full-year effect of ths loss of T5tl.1 revenues, which Net Income immnsi began in the spring of 1980, together with the increases in oper- 1981 S20.5*

ating and maintenance expenses resulting from inflation and from 1980 $20.6 GPU's nuclear improvement program. These decreases were 1979 S95.8 offset by the full-year effect of the Stay 1980 emergency rate increase 1978 *  ? MM . .: S138.5 l awarded to Jersey Central Power & , , ,

( Light (JCP&L) and by rate <' d --

increases received by the System

! companies in April and July,1981.

• Excluding effect of extraordinary items )

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continue Met-Ed's credit under the accident plans have stemmed from construction and S35 million for agreement. By so doing, the banks the TMI accident. Immediately retirement of maturing securities have viewed the recent Met-Ed rate after the accident, GPU initiated ex- and sinking fund requirements. It is case settlement as satisfactory and tensive cash control measurea, in- expected that these funds will be have recognized Met Ed's ability to cluding the suspension and subse- internally generated.

maintain its borrowings under the quent abandonment of the Forked The severe impact on earnings of limits established by the banks. River project, which were required the removal of the TMI units from to keep the System solvent.

The recent rate relief granted m. customer rates has precluded GPU Pennsvlvania should enable Met-Ed from raising funds from the ex-

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to meet its 1982 and 1983 tax 1981 outlays generated ternal capital markets. Although obligations and a major 1983 bond internally GPU docs not plan, in 1982, to raise refunding requiring only a relatively In 1981, GPU's capital require- capital through long-term financ-smalllevel of short-term borrowing ments totaled $294 million, ings, the return of TMI-1 to service, for working capital. Anticipated compared to $279 million spent in other timely rate increases and the rate relief for Jersey Central Power 1980. About $264 million in 1981 continued progress on funding

& Light later this year should and $246 million in 1980 of total TMI 2 cleanup should begin to form enable JCP&L to meet its 1982 cash requirements was spent in the basis of our ability to re-enter needs within present credit limits. maintaining and upgrading System external capital markets.

Significant cash needs in 1983 for facilities. In 1981, $30 million was JCP&L's construction program and used to retire matured securities a bond refunding will require and sinking fund payments compared with $33 million in 1980.

The regulatory additional actions from JCP&L's . .

regulators. The 1981 and 1980 capital S1tuat10n requirements were primarily met .

Through the end of 1981, GPU had through internally generated funds. Progress in Pennsylvania incurred $223 milhon of cleanup and In 1981 and 1980 we sold assets rate cases recovery costs associated with the which generated external sources of In January 1982, the Pennsylvania accident. These costs have been funds of $15 million and S16 million, commission entered rate orders for offset by $230 milh,on of insurance rcspectively. Metropolitan Edison Company proceeds. Delays m the restart of (Met Ed) and Pennsylvania Electric TMI-1 will postpone customer Short term borrowings were re-Company (Penelec) which could participation in the cleanup as duced by S96 nullion from 1980 . ..

levels. This reduction is primarily allow sigmficant improvement in provided in the January 1982 the financial stability of both com-Pennsylvania rate case settlements. attributable to a $77 million pa sw res s (For further information about reduction in the deferred energy ,

cleanup costs and insurance balance. ,

recoveries, see , Management,s Subject to available cash resources Jersey and Pennsylvania in re-Discussion and Analysis page 12 and timely rate relief, capital sponse to the TMI 2 accident gen-and Note 1 to Fm, ancial Statements, expenditures for 1982 are expected erally had been only marginally suf-page 19.) to be about S355 million, of which ficient to permit GI)U to meet its Post-accident capital $320 minion will be spent for obligations.

expenditures cut by half Before the TMI accident, GPU ex- Earnings Per Average Share pected to spend about $1.7 billion '

for construction in the years 1979 1981 S.33*

through 1981, with about half of these requirements funded from 1980 S.34 external capital markets. Actually, G PU spent about $861 million 1979

. -81.20 $1.56 during these three years, about 50 S2.30 percent less than origmally planned, with almost 70 percent of that money, coming from m, ternal sources such as depreciation, amortization and other non-cash charges. Dividends Paid Per Share The dramatic reductions from pre.

• Excluding effect of extraordinary items 5

, v State responses in reaching these settlements, we In 1981, although both state com. believed a credit crisis for Alet Ed in missions continued to allow full January would be averted. The RCA banks' decision, subsequent to Major regulatory recovery from customers of current . .

energy costs, including T51I re- the settlements, to continue to act10ns m 1981 plrcement energy costs, the com- extend credit to Alet-Ed substanti- and 1982 missions also continued the ated our belief. We believe the re-exclusion of the capital and sub- cognition of customer participation In New Jersey stantially all of the operating costs in the funding of TAII-2's cleanup January 1981.

of the TAII units, beginningin 1979 will serve as a strongimpetus for JCP&L seeks S104.6 millien for Th1I-2 and 1980 for Th11-1. the further development in 1982 of Levelized Energy Adjustment Governor Thornburgh's broad. Clause (LEAC) increase.

Ths effect of this regulatory treat- based cleanup funding plan. These April 1981 settlemnts, barring serimsly Supreme Court of New Jersey af-d te a d nfair port on e adverse events, shald provide Slet-financial burden of the accident on firms the 1980 BPU actions in re-Ed and Penelec with a sigmficantly moving T31I-1 from JCP&L's base GPU's stockholders. Additionally greater degm of financial stability our ability to raise capital througl rates within the context of other into 1983 than we have expeienced Board actions taken during that normal external financing, partic- shee de M2 accident.

ularly needed by JCP&L, has been period. The Supreme Court further precluded. In 1981, we vigorously indicated that the BPU would have pursued redress of previous com- JCP&L rate case pending to give full attention to the mission actions through court JCP&L, at this writing, has pending continued exclusion of TAII 1 from appeals and more responsive rate before the New Jersey BPU a retail base rates in the pending base rate regulntion through our rate cases. base rate request to provide for proceeding.

TAU 4 pital and operating costs, A study for the Board of Public The Pennsylvania commision's recognition of the T3112 invest-January 1982 rate orders offer Utili es m mmeds casidaade ment, customer participation in f regional power authority to op-prospects for significant progress. TAII 2 cleanup funding consistent In that month, the Pennsylvania erate T3U and of a state power au-with Governor Thornburgh's plan.

commission accepted the settlement 7* * * * ** I' *I" and other cost increases. recommends interim, additional petitions concerning the Alet Ed and Penelee rate cases filed in June The New Jersey BPU in late De. rate increases to insure JCP&L's 1981. The settlements were entered cember 1981 approved the concept survival.

into mutually by the companies and 0f the Ontario Hydro cable connec-

, JCP&L granted S85.1 million the major, active parties to the rate tion (see page 10). Hearings on the LE AC increase: 95 percent of award cases. The terms are described in customer financing portion of the

, reflects non T311 related energ'y detail in the chronological display at project are ended and a decision is costs; a substantial portion is tied right. The settlements provide for expected shortly.

to planned maintenance outages at three-step base rate increases for In July 1981 JCP&L was granted Oyster Creek.

Alet-Ed and Penelee which,in torna an annual retail base rate increase of increased customer bills, will be of about $109 million of the S173 ..

cubstantially offset by reductions in Final BPU decision and order, de-million request filed in April 1980.

energy cost charges when TAII-1 Included in this allowance were ed myuly 23,1981. provides r: turns to service. h revenues to recover, over 15 years, 5 $1012 mmim of its In approving the settlements, the 5 nuh. overall retail base most of the investment in the rate request filed m, April 1980. Tlu,s commission stated that it would cancelled Forked River nuclear in ludes the S60 million retail r:scind its September 1980 order project. However, the commission interim increase granted in 31ay prohibiting the use of operating excluded from recovery some 7% of ,

1980 and made permanent by this revenues to pay for the TATI 2 the investment representing credits

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cl:anup. As part of the settlements, to income for allowance for funds A11t-Ed and Penelee agreed not to used during construction ( AFUDC) August 1981.

fib for general base rate increases accrued from Starch 1979 to April JCP&L files petition for S238.5 mil-b: fore January 1,1983. However, 1980. In addition, our request for a lion increase in retail base rates, the companies may file requests for return on the unamortized invest- later reduced to S214 million. Peti-cmergency interim rate relief prior ment in Forked River was denied. tion seeks the return of TA111 to to that time if events, presently un- These actions have compounded foreseen, warrant such filings. JCP&L's financing problems.

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b:se rates, revenues to support the In Pennsylvania Energy Cost Rate (ECR) increases TMI 2 investment, a provision for April 1981. for 1982 of $23.7 million anii S76.8 funding the decontamination of PUC approves base rate increases of million, respectively.

TMI 2, and revenues for a variety of about $51 million for Met Ed and oth:r capital and operating costs. about $55 million for Penelec; PUC Met Ed and Penelec reduce their June 1981 rate requests by $43.0 Sept:mber 1981. order provides a total of $16 million mimon and $20.5 million, respec-JCP&L files a Notice of Appeal for TMI-1 expenses related to tively, to reflect Penna. Governor with the Superior Court of New restart. Requests were filed in July Thornburgh's plan for sharing costs Jersey, Appellate Division re. 1980.

of the TMI 2 cleanup.

garding the BPU Decision and May 1981.

Ord:r of July 23,1981 on JCP&L's December 1981.

PUC rejects complaints filed, in bise rate application. PUC approves Met-Ed and Penelec July 1980 by Met-Ed and Penelec, ECRs for 1982.

October 1981. against temporary rates set by PUC BPU approves GPU Nuclear Corpo. in May 1980 in which TMI 1 costs Met-Ed and Penelec settlement ration, allows it to assume oper. were excluded from the companies' agreeements reached and presented ating r:sponsibilities for Oyster rates. to Administrative Law Judge who Creek and JCP&L's share in TMI recommends adoption by PUC.

PUC approves formation of GPU units. Nuclear Corporation. January 1982.

Nov:mber 1981. June 1981. PUC accepts settlements cf the JCP&L files a Petition regarding Met Ed and Penelee ask PUC to re- Met-Ed and Penelee rate cases call-the Ontario Hydro Interconnection considerits decision of May 8,1981 ing for immediate granting of an-Project which requests, among which rejected companies' com. nualretailbase rateincreases of 872 other things, authorization to plaints against temporary rates million for Met-Ed and $49 million proceed with the project: to fixed in June 1980 following for Penelec as Step 1 of tluestep organize a separate subsidiary of Commission's removal of undam- increases. These increases provide JCP&L to finance, construct, main- aged TMI Unit 1 from rates of cus- for the accelerated recovery of the tain and operate the interconnection tomers served by the utilities. companies' investments in TMI 2 facilitirs; and asks appropriate a m c st h eases, Met Ed files for $206 million and Subsequently, upon TMI 1,s return ratemaking for the provision of P 3 de M funds to provide the equivalent of to service, the related energy cost retail base rate increases. The re- reductions will be partially offset by the project's equity capital during quests, largest in the histories of base rate increases to provide abotit the period of construction. the companies, seek to restore $35.5 million yearly towards tlie TMI-1 to base rates. recognize the TMI 2 clean up-824.2 million for Drcember 1981.

The BPU indicates approvalin con. TMI 2 investment and, for first Met Ed and $11.3 million for cept of the Ontario Hydro project time, ask customers to provide 7.ctplec. This levelis consistent and authorizes JCP&L to organize a fundmg for TMI 2 cleanup. wh.h the plan proposed by Governor wholly-owned subsidiary to carry July 1981. Thornburgh. As part of this step, out the project. Board also directs PUC denies requests for recon. TMI l's capital and operating costs that evidentiary hearings begin s sideration of complaints against will be recognized in base rates. In l

l that a finaldetermination een be temporary rates. Met-Ed and another step, the energy cost mida in a timely fashion. Penelee file appeals in Common. reductions due to the completion of l

1 wealth Court. recovery of prior deferred energy J 1989 c sts would be partially offset by J P& files a brief with the Su- August 1981. ,

base rate increases for additional

! perior Court of New Jersey in sup. Met Ed's and Penelec's June 1981 ree very f the companies TMI 2 port of its appeal of the BPU Deci. base rate increase requests are sus- ,

i investment. No provision is made sion end Order of July 23,1981 on pended and proceedings commence. f r any earnings n theinvestment JCP&L's base rate application. The companies file court appeals on m TMI 2.

JCP&L files for S97.5 million in. PUC's April and May 1981 orders. February 1982.

crease in levelized energy adjust- November 1981. Penelec's 1982 ECR is challenged in Met-Ed and Penelec file for annual ment clause charges. Commonwealth Court.

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- - -- . -- m The emergency plans have been acquire top-level talent." for its

'TMI-1 a status thoroughly tested through a series operator training. quahty control.

report of detailed simulated drills during excellent communications and 1981. GPU Nuclear Corp., which dedication and positive morale of operates the plants, received gener- station personnel.

Changes reflecting the lessons ally high marks from the NRC and <

learned from the T511-2 accident are the Federal Emergency 51anage- .  !

being completed at T511-1. These ment Agency for the effectiveness Unit-1 licensing hearings improvements encompass not only of these drills. completed hardware and technical systems The Atomic Safety and Licensing but, just as importantly, the "hu- . Board ( ASLB) in July 1981 com-man" side of plant operations- NRC committee cites pleted nine months of hearings con-training, procedures and human Improvements cerning the restart of TAII-1. A engineering. For example, the In July 1981, the NRC's Advisory month later, the Board advised the control room design has been modi. Committee on Reactor Safeguards NRC in an initial. 269 page partial fled so that controls and instrument reported that T511-1 could be report that plant management is readouts are more closely operated without undue risk to competent to operate the imit interrelated. public health and safety. The Com- safely. And in December, the ASLB mittee said that T511-1 manage- issued an 800 page, second partial Some of the more fundamentalim- ment had been expanded and report on its assessment of T5111 provements are the changes that re- Improved, that emergency pro- modifications and emergency pre-flect the way operators are trained cedures and response capabihties paredness, recommendmg that to understand and diagnose plant had been upgraded at alllevels, and Unit-1 could be permitted to conditions. The operators today that mechanisms for keeping re-

' have a keener understanding of operate initially at 5 percent of full sponsible agencies and the public power'

( reactor operation under both normal informed had been satisfactorily and abnormal plant conditions. developed. Although the NRC is not The hearings were re opened at our l

Shift technical advisors with bound by this report, it will be suggestion in October 1981 after bachelor of science degrees pro-weighed along with the findings of tw f rmer WI opeators con-vide around-the-clock techmcal the Atomic Safety and Licensing fessed to cheating on an NRC assistance to plant operators at licensing examination. The ASLB Board (see belowi.

each of our nuclear facilities. review included locking at the ad-ministration of management s test-Detailed emergency plans have been INPO audits TMI-1 ing Procedures. 51eanwhile, the developed to improve response to The Institute of Nuclear Power Op.

• • aminations have been read-any future accident. The plans call erations (INPO) a nuclear industry mimstered and enough operators for improved in plant communica- group formed following the T5112 have passed to effectively man tions response; for prompt and accident, reviewed T511-1 opera-T511-1 when it returns to service.

continuing communication with the tions in a searching, two-week public as well as local, state and analysis and found the plant ready A January 1982 U.S. Court of federal officials: and for possible for safe operation. It complimented Appeals order, requiring the NRC to local evacuation. GPU for its commitment "to make an environmental assessment Comparative Rates: The GPU System Companies and Neighboring Utilities as of December 1981.

All Pennsylvania Utilities as an Average All New Jersey Utilities as an Average

$35.40 ,

348.11~ ?n '7; - EqWQ.

Alet-Ed Jersey Central Power & Light

$36.18 34a.07 . . -

fm 7 a M s@gg Penelec

• Residential customers without electric heating,500 kilowatt hours per month.

Q $31.75 I

• Residenthl customer 2 without electric heat-ing ,500 kilowatt hours per month. i l 8 1

~ - - - - - - - -

of psychological stress that might have been treated by the Sub- program,12 to 15 containers of the result from the restart of TMI-1, merged Demineralizer System SDS zeolite radioactive wastes will has raised the possibility of further (SDS). The sophisticated SDS mech- be taken by DOE along with 49 delays in the Unit,1 restart date. anism is submerged in the TMI-2 canisters from the operation of fuel pool where contaminated water Epicor II.

is pumped through specially The technology for the total cleanup Steam tube leaks cause constructed casks containing resins. of TMI-2 is known and available, ays The resin buds filter the water and but the timetable rests heavily on September saw the successful com- trap virtually all of the radioactive the availability of funds. Tenta-pletion of the hot functional testing contaminants except tritium. tively, however, the cleanup has program for TMI 1 s maj,or sys- .

been scheduled for completion m tems, procedures and modifications. Later, the water is further cleaned 1987, with the reactor core to be While the tests showed the unit to in the Epicor II System and then transferred to two large tanks in removed in 1985.

be service-ready, it was found in November that some of the steam which it is currently stored at the generator tubes were leaking, even plant site. GPU proceeds with TMI though they had not leaked during law suits As the contaminated water in the or before the hot functional testing. containment building's basement GPU is moving forward with its The Company had expected the unit was reduced to minimum levels, the lawsuits against the U.S. govern-to be ready for restart in March or SDS began cleaning the water used ment (NRC) and Babcock & Wilcox, April but more recent testing of the for further decontamination, includ- supplier of the nuclear steam sys-steam generator tubes indicates ing the scrubbing of the inside of tem at TMI 2.

that repairs to the damaged tubes the building as well as the 100,000 A suit against the NRC was filed m.

will probably result in at least a six- gallons of radioactive water remain- December 1981. This follows by six month further delay in preparing ing inside the reactor's cooling m nths the NRC dental of the GPU Unit 1 for restart. Extensive efforts system.

claim for damages against the are being made to identify the cause GPU Nuclear began a large scale de- agency. Federallaw requires seek-and extent of the problem and the ntaminati n, research and devel- ing reimbursement for damages time required and cost of corrective opment effort in late October with a from the charged agency before an measms' stepped-up series of entries into the action for damages can be filed in Thus, at this time it remains un- containment building funded by the federal court.

certain as to whether the ultimate U.S. Department of Energy (DOE). . .

The suit seeks $4 billion in dam-Unit I restart date will be deter. The accelerated series provided op- ages, alleging that negligence and mined bv the solution of the steam portunities for the government, omissions by NRC in performance generator problem or by the U.S. of its duties were responsible for the GPU Nuclear and other utilities to Court of Appeals ruling on psycho- TMI-2 accident. These alleged omis-

~

assess the effectiveness of the logical stress. In either case, it now cleanup technology and techniques sions include the failure of the NRC appears as though TMI 1 restart is, being tested by TMI personnel. to give GPU and other utilities a at best, six months to a year away.

warmng, based on a previous Waste management: an accident at an Ohio nuclear plant 18 m nths earlier, that would have important agreement TMI-2-cleanup waste management has remained a prevented the TMI-2 mishap.

top priority throughout the cleanup The suit against Babcock and progresses program, with particular emphasis Wilcox and its parent corporation, placed upon reducing the amount of J. Ray McDermott, Inc., was orig-Unit-2 cleanup activity in 1981 fo- liquid and solid wastes. inally filed in March 1980, seeking cused on the removal and treatment damages of $500,000,000. Subse-Key to the success of that effort has of the reactor containment been the DOE's agreement to 9".ently, n December 14,1981, We building s highly radioactive water suit was amended to increase

, accept virtually all of the cleanup damages sought to $4 billion. The

. . while contmumg to place the .

program's abnormal radioactive judge has scheduled this trial to utmost attention on public health wastes for research and develop-and safety. begin in October,1982.

ment purposes and ultimate dis-By mid-March 1982, essentially all posal at a U.S. Government of the buildingi 600,000 gallons of disposal site. It is expected that high level radioactive water will during the course of the cleanup 9

/

Modifications Two major objectives in this area are (1) to provide sufficient power percent of its energy needs from the mid-1980s through the mid 1990s.

underway at Oyster whiie the Tsti Station is out of seyona that. the cabie witi estabiish service and <2> to meet projected Creek growth in demand in the latter part a high-capacity transmission link for ongoing power exchange Jersey Central's Oyster Creek of the 1980s and in the 1990s. between the two utility systems.

nuclear station was taken off line in April 1981 to complete several S400 million-plus saved Coal plant delayed Special short-term power purchases It was decided late in 1981 that in

,t o o which res Ited f om le: sons learned through the T51I-2 since the Thil accident have saved view of the financial constraints eccident. During the year, there GPU customers more than $420 under which the GPU System is op-milhon compared to Pennsylvania- erating, it would be economically w:re several additionallengthy New Jersey 51aryland Power Pml impractical to proceed with the coal-outages because of repairs to the purchase costs. The special fired Seward 7 project. The unit had pl:nt's condenser system, a heat purchases have been negotiated been planned for completion m exchanger and other equipment.

with neighboring utilities and 1985, with a capacity of 625 Th3 upcoming refueling and main- others as far away as Indiana and megawatts. Alajor power purchases tenance outage planned for Oyster Canada. It is anticipated that from other utilities will make delay Creek will extend from July 1982 purchased power needs will decline of this project possible.

into the spring of 1983 to allow for by about a third when TA11-1 again m jor mandated structural is in service. Coal cleaning plant opened improvements to the torus (part of Initial operations were started in thm plant's emergency core cooling system). Also planned is th Ontario cable link September at the nation's newest agreement reached nd m st advanced coal cleaning re-construction of a new cable spread search. development and demon-room to provide for the installation In mid November, GPU entered stration facilitv. It is located at or relocation of hundreds of into an agreement with Ontario Homer City, P'ennsylvania, the site clectrical and control cables and Hydro of Canada to design, install of the GPU System's largest coal-associated conduits. Another major and maintain a five cable 1.200 fired generating station and its own project during this span calls for the megawatt underwater transmission coal cleaning facilitv. Penelec is a line stretching across the bottom of disassembly and inspection of the participant in the SI5 million plint's turbine and generator. Lake Erie and ultimately providing project with the Electric Power Re-a f rm source of coal-fired genaat- search Institute and other utilities.

During 1981, Jersey Central paid a ing capacity for Jersey Central Known as the Coal Cleaning Test

$80,000 fine levied by the NRC. The Pown & Light customas. Facility, the project is an fine followed the company's report that relief valves at Oyster Creek The cost of the approximatelv S700 jnvestment by the electric industry were inadvertently blocked by million project will be shared'bv in research seeking to stabihze the scaffolds erected by an outside JCP&L and Ontario Hydro. Regula- cost of meeting clean air standards contractor during maintenance tory approval for JCP&L's unique by removing sulphur from coal work in April. Improved controls project funding, which involves the bef re it is burned.

htve been established to prevent participation of customers, banks .

recurrence of such situations. and equipment suppliers, is Conservation plan i pending. underway A key portion of GPU's "$1 aster i Equal to the output of a large ceal- Plan" for energy conservation. pre-fired generating stati n, the cable

! Future svstem a project will provide enough elec-sented for approval to the state regulatory bodies in 1980, has been plannm, g tricity to meet the needs of a half- cleared for action by Penelec. which million residential customers. This has received approval to switch its While TA11 continues to demand project requires about one-half the much of GPU s attention and standard rate for new residential

, time and about one-third the capital customers to a time-of day (TOD) efforts, corporate management is investment required to build a new rate.

moving forward with a variety of coal fired station of the same projects to insure reliable future Penelee also has received permis-capacity.

electric service for G PU's customers sion to invest in customer owned cnd to assure the future integrity of The project is expected to provide conservat:on and load shifting th3 System. JCP&L with approximately 40 equipment. such as special controls 10

'and heat storage devices. JCP&L the management of GPU's nuclear sumer Affairs, became the new and Alet-Ed are seeking regulatory facilities-Oyster Creek and both Penelec President and Chief Oper-approval for similar programs. TMI units. ating Officer. Concurrently, Floyd J.

Smith moved up from his position Meanwhile, the G PU System,s over-  %,ith the granting of final regula-as Vice President of Administration allload management program, tory approvals, Robert C. Arnold for the GPU Service Corporation started seven years ago to enhance assumed the title of president and (GPUSC) and his temporary assign-conservation and shift demand for chief operating officer of GPU ment as Met-Ed's Senior Vice Presi-electricity from day to mght, has Nuclear Corporation and Philip R. dent and General Manager to serve saved 600 megawatts of electric Clark, that of Executive Vice Presi-.

as Met Ed's President and Chief power that otherwise would have dent. A month later, the new corpo.

Operating Officer.

had to be generated during costly ration announced the appointment peek demand periods, of Peter B. Fiedler to the position of Vice President of GPU Nuclear and At GPUSC, former JCP&L Presi-The GPU companies also are cur- dent Shepard Bartnoff has been Director of the Oyster Creek rently seekm, g regulatory approval Generating Station. naried to the newly created posi-for special cogeneration rates and tion, Executive Vice President-programs. Electric Operations, which encom-passes the responsibilities for the Management moves System's fossil generation facilities

. . Early in 1982, a number of signifi- and bulk power supplies. GPU Adininistrative

~

cant changes in the System manage. Treasurer John G. Graham has changes ment structure were made to better focus management resources and assumed the additionalrespon-sibilities of Vice-President-Final approvals for operation of the match individual strengths and Financial Planning for the Service System's nuclear stations by GPU expertise with the continuing and Corporation with Verner H. Condon Nuclear Corporation were receind emerging formidable challenges remaining Vice President and Chief in late December 1981 from the facing the GPU companies as they Financial Officer of GPU.

NRC and, on January 1,1982, the adjust priorities toward more new GPU subsidiary undertook this normal utility operations.

responsibility.

Equal opportum.ty Even before the TMI 2 accident; Key among the organizational Stressed moves was the February 1 reor. GPU s policy of equal employment GPU management had recognized ganization of the three operating opportunity was continued as em-the advantages of separate man. phasis on Affirmative Action pro-agement of its nuclear facilities by utilities

• top management posts and realignment of financial re. grams mereased employment levels an organization skilled in the tech, f w men and minorities during nolog~y of nuclear plant operation. sponsibilities within the GPU Ser.

vice Corporation (GPUSC). 1981.

The various investigations fol-lowing the accident further empha- The total number of System em-Effective that date, William A.

sized this need and GPU started ployees increased over the 1980 Verr chi, moving om from his level as efforts to strengthen the formation of a specialized Nuclear position with Penelee as President GPU Nuclear Corporation staff Group in 1979. This group has and Chief Operating Officer, as- continued. However, staffing at the evolved into corporate status since ,

sumed the corresponding position operating company subsidiaries was that time' at JCP&L while James R. Leva,

, held to below pre accident levels.

The new corporation's sole task is JCP&L's Vice President of Con-11

~

uncertainties resulting fr m the The severe constraints placed upon Staternent of nuclear accident at Three Alile the GPU Svstem as a result or the InanageInent Island. TAII accident have precluded the The management of General Public Corporation and its subsidiaries Reference is made to Notes 1 and 3 Utilities Corporation is responsible to the accompanving financial state-mr nNerm capha! hm for the information and representa-ments and to Alanagement's Discus-extemal sestks madets. He sion and Analysis of Financial Con- ratings f the System's securities tions contained in the financial '

have been lowered by 31oody s and statements and other sections of dition and Results of Operations on this annual report. The financial this page for further discussion of Standard & Poor's investor services and are below bvestment grah statements have been prepared in the effects and impact of the conformity with generally accepted accident. GPU's only major source of outside accounting principles consistently funding has been in the form of apphed. In preparing the financial short term borrowings under a re-statements, management makes in-formed judgments and estimates of Management's dis- volving cr<t agreement with a

. consortium of banks (see Note 5 to th3 expected effects of events and Cuss 10n and analysis consolidated financial statements, transactions that are currently being reported.

Of financial Condition page 28). Short term borrowings (including S13 million issued as U IOSU S f bonds) were S73 million at To fulfillits responsibilities for the Operat10ns December 31,1981.

reliability of the financial state.

m:nts, management has developed Such short-vrm financing has been Liquidity and Capital nd utinues t be used largely to and maintains a system of internal accounting control. Tlus system is Resources: meet costs resulting from increased intended to provide reasonable The rate making treatment ac- power purchases necessitated by a::surance that assets are safe- corded TA11-1 and 2 and Forked the loss of generation f om both guarded and transactions are River after the nuclear accident in TAII units. The short-term funding executed in accordance with man- Starch 1979 at Three Stile Island has bridged the gap between cash agement's authorization and re- (T511) has left the GPU System

, payments for power and the re-corded properly to permit the prep- with assets of about $1.5 bilhon covery of such payments through aration of financial statements in which are not earning a return. rates to customers.

accordance with generally accepted As part of the January 1982 Penn- Expenditures for the cleanup of accounting principles. sylvania PUC orders, T31I l's TA11-2 are anticipated to aggregate The Board of Directors, through its capital and operating costs will be $1 billion and such cleanup is Audit Committee, consisting solely restored to rates upon the restart of expected to be completed by 1967.

of outside directors of the Company, the unit and operation at a specified The subsidiaries, through December is responsible for reviewing and level. The PUC had removed the 31,1981, have received insurance monitoring the Company's financial unit from base rates in June 1980. proceeds of $230 million with about reporting and accounting practices. Also, the January 1982 orders $70 million remaining to be re-

~

The Audit Committee meets with allowed for the recovery in rates of covered in order to aggregate the management and internal auditors the Penns /lvania Companies' maximum S300 million available un-periodically to review the work of investments in T311-2, but does der their policy for property damage e:ch and to monitor the discharge n t allow any earnmgs on the un- at T11I 2.

by each of its responsibilities. The amortized investment. (For further audit committee also meets peri. mformation see The Regulatory odically with the independent audi. Situation , beginning on page 5.)

tors who have free access to the With respect to the abandoned tainty, major progress has been Audit Committee, without manage- Forked River nuclear generating made toward establishing a broad ment present, to discuss internal project, JCP&L is recovering most < ost sharing program. The plan recounting control, auditing, and of the original cost of its investment introduced by Governor Thorn-financialreporting matters. in the project, through rates, but is burgh of Pennsylvania in mid 1981.

Coopers & Lybrand, independent not earning a return on the unam- calling for a sharing of cleanup public accountants, are engaged to ortized investment. Such recovery costs among GPU customers. the examine and express an opinion on is over a 15-year period beginning in nuclear industry and the state and the financial statements. Their mid-1981 at $24.5 million annually federal governments has gained opinion, which appears on page 14, (see Note 3 to consolidated financial wide acceptance. Further, in Janu-refers to the contingencies and statem.ents). ary 1982, the Pennsylvania PCC 12

' approved rate requests that for the items). This reflects a decline in net removed from base rates during first time included customer income from $139 millionin 1978 to 1979.

participation in cleanup funding $21 million (before extraordinary Other factors contributing to the with the restart of TMI 1. Our rate items) in 1981.

dech.ne in earnings between 1978 case request for Jersey Central ,

The substantialincrease in oper- and 1981 include (a) the increase in Power & Light Company also con-perating and maintenance ex-tains proposed cleanup participa- ating revenues from 1978 to 1981 is mainly a result of the recovery of penses, resulting primarily from tion. (For further information see ,

inflati n and additional expendi-Letter to the Stockholders, page 2). higher fuel and purchased power costs through the subsidiaries. tures at the nuclear stations (b)

GPU is unable to determine at increased interest expenses from this time if any adverse effects may energy clauses. Such additional increased borrowings at higher result from the TMI-I tube leak revenues of $533 million reflect the rates (c) cessation of the accrual to problem and the Oyster Creek ex- recovery of highar energ'y costs incomein April 1980, of allowance tended outages as discussed in Note incur ed by the GPU System and

1. I" "

I to the financial statements. e no impact on net earnings 7U C 1e g on

. of funds associated with the Results of Operations: construction of the Forked River The decline in net income between The results of operations discussed project.

1978 and 1981 of $118 million is below compare 1981 with 1978. The primarily the result ot regulatory GPU had a net loss after extra-year 1978 is used as a basis for

. response to the accident at TMI 2. ordinary items of $16 million or 26 comparison because it represents , As previously indicated, tha sub- cents per share for 1981. A dis-

• V* '*^I perations ~

sidiaries are not recovering in their cussion of extraordinary items g 9 di,

. . base rates the capital and most of appears elsewhere in this annual subsidiaries. the operating costs associated with '

report.

Although operating revenues for TMI-1 and TMI 2. The capital and 1981 were S739 million higher than operating costs associated with For a further discussion of events those in 1978. earnings per share TMI 1 were removed from base subsequent to the TMI accident, see declined from S2.30 in 1978 to 33 rates in the second quarter of 1980 Note 1 to Consolidated Financial cents in 1981 lbefore extraordinary while similar costs for TMI 2 were Statements.

Quarterly Financial Data (Unaudited) lin Thousands Except Per Share Data)

First Quarter Second Quarter Third Quarter Fourth Quarter 1981 1980 1981 1980 1981 1980 1981 1980 Operating Revenues $523.877 5448.714 5476.159 $425.010 $538.724 $490.201 5526.727 $467.815 Operatmg Income S 62.641 5 66,862 S 50.206 S 51.410 $ 66.979 $ 67.539 $ 53.844 5 58.784 Income (Lossi Before Extraordinary items S 7.825 5 17.068 5 (2.357) $ (8.3541 S 14.050 S 10.458 8 1.026 8 1.419 Extr ordinary items iNote 31 S(24.313) S t12.1351 Nst Income llossi S 7.825' S 17.068 S t26.670) $ (8.3546 5 14.050 5 10.458 $ (11.1091 S 1.419 Earnings tLossi per shire Before Extra-ordinary items S .13 $ .2S S (.04) $ l.14) S .23 $ .17 $ .01 S .03 Extrtordinary items tper sharel 5 (.4 01 5 f.19)

Earnings tLossi per share S .13 $ .28 S t.446 S (.1 41 $ .23 $ .17 5 (.18) S .03 Average Shares 61.264 61.264 61.264 61,264 61.264 61.264 61.264 61.264 See Note I which contains information with respect to rate orders and their effect on quarterly earnings.

13

ag eemmisee N te 5 t Consondated snamiai Stam

.eport of Auditors ments), and obtaining access to long-term capital mar-kets. The eventual outcome and effect of the foregoing To the Board of Directors and Stoclkholders on the consolidated financial statements cannot GENERAL PUBLIC UTILITIES CORPORATION presently be determined.

Parsippany, New Jersey As more fully discussed in Note 1 to Consolidated Fi-We have examined the consolidated balance sheets of nancial Statements, the Corporation's New Jersey sub-General Public Utilities Corporation and Subsidiary sidiary is engaged in litigation with a nuclear fuel sup-Companies as of December 31,1981 and 1980, and the plier involving the pricing of nuclear fuel. At this time, rilited consolidated statements of income, retaired the outcome of the litigation and the rate-making treat-e:rnings and changes in financial position for esa of ment of any increased fuel costs which might result the five years in the period ended December 31,1981. from an adverse legal determination are uncertain.

Our examinations were made in accordance with In our report dated Alarch 5,1981, our opinion on the generally accepted auditing standards and, accordingly, 1980 and 1979 consolidated financial statements was included such tests of the accounting records and such qualified as being subject to the effect on those con-other auditing procedures as we considered necessary in solidated financial statements of such adjustments, if the circumstances. any, as might have been required had the outcome of As more fully discussed in Note 1 to Consolidated contingencies regarding the recovery of certain plant Financial Statements, the Corporation is unable to investments been known. As explained in Notes 1 and 3 d:termine the ultimate consequences of the accident at to Consolidated Financial Statements, the Pennsyl-Unit No. 2 of the Three Atile Island Nuclear Generating vania Public Utility Commission has authorized, effec-Station (TAII 2) and of the response of rate-making and tive January 1982, the Corporation's Pennsylvania sub-other regulatory agencies to that accident. Among the sidiaries to recover their investment in T111-2 and the contingencies and uncertainties which have resulted as New Jersey Board of Public Utilities has authorized, ef-a direct or indirect consequence of this accident are fective July 1981, the Corporation's New Jersey sub-qutstions concerning: sidiary to recover its net investment in the Forked River Nuclear project after requiring the write-off, in

a. The recovery of the approximately $159 million in- the current period, of a portion of such investment. Our vestment by the Corporation's New Jersey subsidi- aforementioned report on the consolidated financial ary in T1112; statements was also qualified as to the outcome of a

b. The recovery of the indeterminable amount of unin- e ntingency for refunds to customers by the Corpora-sured costs yet to be incurred, in connection with the tion's Pennsylvania subsidianes for certain payments anticipated cleanup of TA112 made for fuel purchases. These subsidianes have made

c. The recovery of the approximately S425 million in-provision for this contingency. Accordingly, our present vestment in Three Atile Island Unit No.1 Nuclear ,

pimon on the mdicated consolidated financial state-Generating Station: ,

ments, as presented herem is different from that ex-

d. The recovery of the excess,if any, of amounts which pressed in our previous report in that our present opin-might be paid in connection with claims for damages n is no longer qualified for these particular matters.

resulting from the accident over available insurance In ur pinion. subj,ect to the effect,if any, on the proceeds; and 1981,1980 and 1979 consolidated financial statements

e. Any action of rate-making agencies with respect to f such adjustments as might have been required had any portion of the replacement power costs for which the outcome of the uncertainties discussed in the recovery is now permitted. second through fourth paragraphs been known the aforementioned statements (pages 15 through 321 pre-The accompanying consolidated financial statements sent fairly the consolidated financial position of General have been prepared in conformity with generally ac-'

Public Utilities Corporation and Subsidiary Companies cepted accounting principles applicable to a going con- at December 31,1981 and 1980 and the consolidated c:rn which contemplates, among other things, the real-ization of assets and the liquidation ofliabilities in the yesults of their operations and the consolidated changes in their financial position for each of the five years in, normal course of business. The Corporation's subsidi-the period ended December 31.1981, m conformity with tries are currentiv not receiving a level of revenues suf-generally accepted accounting principles applied on a ficient to assure their ability to continue as a going con.

consistent basts.

l c rn. The continuation of the Corporation as a going concern is deoendent upon obtaining adequate and COOPERS & LYBRAND timely rate relief, meluding recognition of Tall costs.

l receiving financial assistance for the cleanup costs re- 11 arch 4.1982 l

quired for T1112, maintainir.g and increasing the avail. 1251 Avenue of the Americas ability of credit under the restated revolving credit New York. New York 10020 l

14

Consolidated Statements of Income (Note 1>

Gen:ral Public Utilities Corporation and Subsidiary Companies (In Thousands)

For the Years Ended December 31, 1981 1980 1979 1978 1977 Oper: ting Revenues S2,065,487 $1,831.741 $1.490.154 S1,326,644 S1,252,013 Oper: ting Expenses:

Fuel 437,931 401.922 347,079 326.083 270,612 Power purchased and interchanged, net 496,494 429,993 268,210 133,741 186,235 D:f trral of energy costs, net (Note 2) . 74,157 25,058 (69,832) (17,916) (17,937)

Other operation and maintenance (Note 13) 452,755 390,797 309,653 305,400 252,006 Depreciation (Notes 2 and 3) 145,962 147,086 141,224 109,505 96,508 A mortization of property losses (Note 3) . 11,312 1,265 1,168 1,186 739 Taxes, other than income taxes (Note 13) 189,260 172,565 149,445 129.862 114,682 Total . 1,807,871 1,568,686 1,146,947 987.861 902,845 Operating income before income taxes 257,616 263,055 343,207 338,783 349,168 Ineome taxes (Notes 2 and 11) 23,946 18,460 65,905 84.354 95.805 Oper: ting income 233,670 244,595 277,302 254,429 253,363 Othtr Income and Deductions:

Allowance for other funds used during construction (Note 4) . 7,486 12,014 24,744 49,888 47,787 Otherincome, net . 15,913 7,462 8,937 3,682 274 Income taxes on other income, net (Notes 2 and 11) (6.411) (4,513) (5,146) (2.461) (996)

Totalotherincome and deductions 16,988 14,963 28,535 51,109 47,065 Income Before Interest Charges and Preferred Dividends . 250,658 259.558 305.837 305,538 300,428 Inttr:st Charges and Preferred Dividends:

!nterest on long term debt . 178,226 176,754 168,325 155,320 142,632 Otherinterest . 31.122 41,786 24,387 4,527 9,117 Allowance for borrowed funds used during construction-credittnetof tax)(Note 4) . (15,229) (15,226) (18,296) (22,255) (22,269)

Income taxes attributable to the allowance for borrowed funds (Notes 4 and 11) . (6,432) (7,404) (7,977) (14,758) (12,514)

Preferred stock dividends of subsidiaries 42,427 43,057 43,615 43,930 40,683 Totalinterest charges and preferred dividends . 230,114 238,967 210.054 166,764 157,649 Income Before Extraordinary Items 20,544 20,591 95.783 138,774 142,779 Extraordinary Items, Net of Taxes (Note 3) (36,448)

Net Income (Loss) .S (15,904) S 20,591 S 95.783 S 138.774 S 142,779 Ecrnings Per Average Share Before Extraordinary .

Ittms S.33 S.34 S1.56 $2.30 S2.50 Extr: ordinary Items Per Share . (.59)

Ectnings(Loss) Per Share S(.26) S.34 S1.56 S2.30 S2.50 Av:r:ge Common Shares Outstanding . 61,264 61,264 61,218 60,217 57,208 Consolidated Statements of Retained Earnings (Note ti Gen:ral Public Utilities Corporation and Subsidiary Companies (In Thousands)

For the Years Ended December 31, 1981 1980 1979 1978 1977 Balance, beginning of year S 506,162 S 485,571 S 463,173 $ 430,823 S 385,653 Add, net income (lossHNote 3) (15,904) 20,591 95.783 138,774 142.779 Total . 490,258 506,162 558,956 569,597 528,432 Deduct, dividends oncommon stock 73,385 106,424 97,609 Balance.end of year (Note 10) . S 490.258 S 506.162 S 485.571 S 463,173 S 430.823 The cecompanying notes are an integralpart of the consolidated financial statements.

15

Consolidated Balance Sheets (Note i: l General Public Utilities Corporation and Subsidiary Companies l

i!n Thousands:

December 31, 1981 1980*

Assets Utility Plant (at original cost):

S3,689,536 S3,514.535 In service . 975,409 Less, accumulated depreciation (Note 2) 1.072.150 2.617,386 2,539,126 Net .

Investment in Three Mile Island (Note 1): 435,590 469,462 Unit 1 745,490 747.719 Unit 2 Less, ceumulated depreciation (Notes 1 and 3) 97.347 123.242 1.117.605 1.060.067 Ne . 132,442 120,495 Constructionworkin progress 47,074 33,674 Held for futureuse 201,405 Nuclear fuel, net of amortization (Notes 2 and 5) 201.346 4,103.906 3.966,714 Net utility plant.

30.805 Excess of investments in subsidiaries over related net assets (Note 3)

Investments:

5,482 941 Other physical property, net .

Loans to non affiliated coalcompanies (Note 12) 16,575 18.275 Other, at cost . .

740 759 22,797 19.975 Total.

Current Assets:

8.251 6,845 Czsh.

13,052 37,407 Specialdeposits(Note 1) .

42,294 40,300 Ttmporary cashinvestments .

Accounts receivable:

Customers, net (Note 5) 147,001 135,196 8,457 37,886 Others(Note 11) .

Inventories, at average cost or less-Materials and supplies for construction and operation . 71,149 66.229 66,446 42.572 Fuel (Note 5) 14,391 13.967 Prepayments .

371,041 388.402 Total Deferred Debits:

70,554 147,712 D;ferred energy costs (Notes 1,2 and 5) .

376,807 420.216 Unamortized property losses (Note 3)

Deferred costs nuclear accident, net of insurance recoveries (Note 1) (6,635) (21,7351 D;ferred income taxes (Notes 2 and 11) 66,898 43.614 48,653 47.269 Other .

Total . 556.277 637.076 S5.054.021 S5.042.972

. Total Assets .

• R:classi6ed to conform teith 1981's presentation.

The accompanying notes are an integmipart of the consolidated financial s tatements.

G 16

- o On Thousands) 1981 1980*

Lirbilities and Capital Long Term Debt, Capital Stock and Consolidated Surplus:

S2,109,336 $2.105,439 Long term debt (Notes 5 and 6)

Cumulative preferred stock-mandatory redemption (Note 7) 79,700 85,050 2,365 2,674 Less, capital stock expense .

77,335 82,376 Total .

Cumulative preferred stock no mandatory redemption (Note 8) . 423,391 423,391 Premium on cumulative preferred stock 1,348 1,348 L:ss, capitalstock expense . 328 831 424,411 423,908 Total .

Common stock and consolidated surplus (Notes 5,9 and 10):

153,229 153,229 Common stock Consolidated capitalsurplus 773,473 772,958 Less,capitalstock expense 18,056 18,056 Consolidated retained earnings . 490,258 506,162 Total . 1,398,904 1,414,293 Less, reacquired common stock . 70 70 Total . 1,398,834 1,414,223 Total . 4,009,916 4,025,946 Curr:nt Liabilities:

Securities due within one year (Notes 6 and 7) 80,567 76,067 Notes payable to banks (Note 5) 60,300 156,000 Accounts payable 139,418 138,616 Customer deposits 7,587 7,190 Tars accrued (Note 11) . 64,884 55,910 Interest accrued 41,962 42,343 13,090 27,277 Accrued costs-Forked River abandonment (Note 3) 51,021 37,406 Other .

458,829 540,809 Total .

D:f:rred Credits and Other Liabilities:

Deferred income taxes (Notes 2 and 11) 465,936 385,011 63,393 66,377 Unamortized investment credits (Notes 2 and 11) ,

Reserve capacity (Note 2) 23,160 32,787 24,829 Oth r .

Total . 585,276 476,217 Ccmmitments and Contingencies (Note 1)

TotalLiabilities and Capital S5,054,021 $5,042,972 17

znsolidated Statements of Changes in Financial Position (Note 1)-

G:neral Public Utilities Corporation and Subsidiary Companies (In Thousands:

1981 1980 1979 1978 1977 For the Years Ended December 31, Source of Funde.

Operations:

Income before extraordinaryitems . S 20,544 S 20,591 S 95,783 S138,774 S142,779 Principal non-cash charges (credits) to income: 96,508 145,962 147,086 141,224 109.505 Depreciation (Note 2) 21,443 17,764 9.908 7,260 21,314 Amortization of nuclear fuel! Note 2) 11.312 1,265 1,168 1.186 739 Amortization of property losses (Note 3) 41,733 42,496 Investment tax credits, net (Notes 2 and 11) (4,104) (53,155) (11,830) 25,093 77,406 67,882 58,285 35,296 Deferred income taxes, net (Notes 2 and 11) . .

Allowance for other funds used during construction (Note 4) . (7.486) (12,014) (24,744) (49,888) (47,787)

Totalfromoperations . 201,229 188.439 290,797 321.038 287,795 Extracrdinary items, net of taxes (Note 3) . (36,448)

Extraordinary items (non cash portion) 36,448 32,848 15,783 153,800 154,082 155,920 Long termdebt(Note 6) . 22,273 82,166 4,771 Common stock.netof expense (Note 9) 50,000 Preferred stock (Notes 7 and 8) . 24,625 19,125 Inereaso in bank borrowings (Note 5) . 87,400 D:ferred energy costs, net (Note 2) 74,157 25,058 R: serve capacity (Note 2) . 23.160 15,094 15,798 S:bof nuclear fuel 17,954 Decrease in working capital (excluding debt) (a) 26,581 22,182 7,634 1,957 Other, net S395,251 $252.712 $554,722 S523,975 S595,006 Totalsourceof funds .

Application of Funds:

Coratruction expenditures-U tility plant $239,627 S191,980 $281,912 8376,812 S343,909 Nuclear fuel , 24,333 53,760 69.114 30,878 67,268 Allowance for other funds used during construction (Note 4) . (7,486) (12,014) (24,744) (49,888) (47,787)

Decreasein bank borrowings(Note 5) 95,700 15,000 29,677 32,602 54,463 32,908 73,389 Rs,tirement or redemption oflong term debt and preferred stock .

73,385 106,424 97,609 Dividends on common stock 69,832 17,916 17,937 D:ferred energy costs, net (Note 2) 15,100 (46,108) 24,373 D:ferred costs nuclear accident, net (Note 1)

(1,700) (1,100) 625 2,350 Loans to non affiliated coalcompanies (Note 12) .

18,592 8,300 21,239 Increase in working capital (excluding debt) (a) .

6.387 19,092 Other, net Tote.lapplication of funds . S395,251 S252,712 $554,722 S523,975 S595,006 (a) Changes in components of working capital (excluding debth Cashand temporaryinvestments . S (4,600) S (13.475) S 50,639 S (9.298) S (10,390)

(24,355) 15.599 9,969 (3,307) 4.531 Specialdeposits . 43,788 2,433 (17,624) 48,734 (26,441)

Accounts receivable (18,284) 30,620 28,794 (13,960) 35,772 Inventories (67,709) (12,386) (20.129)

(802) 23,546 Accounts payable 24,698 (8.974) (15.350) (19,903) 7,845 Taxesaccrued (4,838) (3,218) 381 1,134 (131)

Interest accrued.

14.187 (27,277)

Accrued cost-Forked River abandonment 4,557 73 47.306 t Other, net . (13,588) (3591 S (26,581) S 18,592 S(17.9541 5 8.300 S 21.239 Total The accompanying notes are an integralpart of the consolidated financial statements.

18

Notes To Consolidated Financial Statements

1. Commitments and Contingencies ding the effects of the proposed restart of TMI-1 on the

" psychological health of the neighboring residents and THREE MILE ISLAND NUCLEAR ACCIDENT: on the well being of the surrounding community", and On March 28,1979, an accident occurred at Unit No. 2 on the basis of this environmental assessment to deter-of the Three Mile Island nuclear generating station mine whether the National Environmental Policy Act (TMI 2) resulting in significant damage to TMI 2, and a requires preparation of a full Environmental Impact 3

release of some low level radiation which published re- Statement. The Court further ordered that the NRC ports of governmental agencies indicate did not consti- shall not make a decision on the restart of TMI-1 until tute a significant public health or safety hazard. TMI-2 it has complied with this requirement. In addition, the is jointly owned by the Corporation's subsidiaries, Court ordered the NRC to prepare a statement of it's Jersey Central Power & Light Company (JCP&L),25%; reasons for determining that psychological health is not Metropolitan Edison Company (Met-Ed),50%; and cognizable under the Atomic Energy Act. The Court's Pennsylvania Electric Company (Penelec),25%. At opinion in support of its judgement has not yet been December 31,1981, total net investment by the sub- issued. The Corporation and its subsidiaries are uncer-sidiaries in TMI 2 was $723 million (S745 million invest- tain as to the effect of the Court of Appeals' order on ment less $22 million accumulated depreciation), in- the restart of TMI 1. It is expected that a petition for cluding the unamortized investment of $37 million in reconsideration by the Court of Appeals w,31be filed the nuclear fuel core. and, if it is unsuccessful, that review by the U.S.

Three Mile Island nuclear generating station Unit Supreme Court willbe sought.

No.1 (TMI 1), which adjoins TMI 2, was out of service In late 1981, it was discovered that a number of tubes 1 for a scheduled refueling and was not involved in the ac- in the TMI-1 steam generators were defective. Recent cident. TMI-1 is jointly owned by the Corporation's testing has indicated a substantial fraction of the tubes j

subsidiaries in the same percentages as TMI 2. At De- probably will require corrective measures. The effect of cember 31,1981. total net investment by the subsidi- the steam generator problem on the schedule for restart aries in TMI 1 was $395 million (S469 million invest- of TMI-1 is uncertain at this time, but it is expected ment less S74 million accumulated depreciation), ex- that corrective measures will take at least until the fall cluding the unamortized investment in the nuclear fuel of 1982. Further analytical and diagnostic work is re-core of $30 million. quired to ascertain the time and cost of such corrective By orders dated July 2,1979 and August 9,1979, the measures.

Nuclear Regulatory Commission (NRC) directed that The NRC has proposed certain technical specifica-TMI 1 remain in a shutdown condition until terumption tions or license conditions to govern the maintenance of of operation is authorized by the NRC, after public TMI 2 in a safe shutdown condition. Two individuals hearings and the satisfaction of various requirements and one organization have intervened in a hearing to set forth in such orders. Hearings before the NRC's contest the adequacy of the proysed technical specifi-Atomic Safety and Licensing Board ( ASLB) on the re- cations. A hearing on this matter before an NRC licens-start of TMI 1 commenced on October 15,1980. The ing board is stillin a preliminary stage. The NRC has ASLB has issued two partial initial decisions, in which directed that the hearing should focus on the technical it found, among other things that the licensee "has de- specifications and not on the TMI 2 cleanup or whether monstrated (its) managerial capability and technical re- TMI-2 should be allowed to operate again.

sources to operate Unit 1,.." and recommended that -

subject to various conditions set forth in its partial in- Cost of Cleanup andRestoration:

itial decisions, short term operation of TMI-1 not to ex- Current projections provide for the cleanup of TMI-2 to ceed five percent of design power should be permitted. be completed by 1987, at a cost of S909 million (in 1982 The ASLB reopened the record in these proceedings to dollars). Escalation of these costs to give effect to infla-consider incidents of cheating on, and test administra- tion by amounts ranging from 8% to 10% per annum tion procedures used in connection with, operator train- result in an anticipated aggregate expenditure for the ing examinations given to TMI 1 control room opera- cleanup of TMI 2 of S1,034 million. The above estimate tors. Hearings on the reopened proceedings have been does not provide for: (i) the restoration of the unit, concluded. The NRC has not yet acted on the partialin- including the replacement of the fuel core which is ex-itial decisions. The Corporation and its subsidiaries are pected to be completed by 1988, at a preliminary esti-uncertain as to the outcome of these proceedings. mate of $300 million (in 1982 dollars-S415 million On January 7,1982 the U.S. Court of Appeals for the when adjusted for inflation ranging from 8% to 10% per -

District of Columbia entered a judgement ordering the annum) or (ii) the cost of modification to meer gost-acci-NRC to prepare an environmental assessment regar- dent regulatory requirements, estimated at about S80  ;

19 .

1 1

, - l 1

million after escalation for inflation- by TAII-1, Slet-Ed and Penelec will receive a level of )

The above estimates are subject to major uncertain- revenues for the cleanup and decontamination of T3112 ties, including ta) the regulatory environment, f b) the consistent with the plan proposed by the Governor of full scope of the challenges in decontaminating the reac- Pennsylvania. The plan provides for the remaining tor, (c) the effect of government regulations on the issue estimated cost of the cleanup (S760 million) to be shared of waste disposal,(d) the reusability of major com- as follows: The Corporation's subsidiaries, S245 million; ponents and (e) the availability of funds. the Federal government S190 million: the nuclear util-The subsidiaries, as of December 31,1981, in respond- ity industry, $190 million: insurance, S90 million: the ing to che accident at TS112, have deferred $223 million state of New Jersey, S15 million; and the state of Penn-of costs associated with the cleanup and recovery proc- sylvania, $30 million. The national trade association of css. These deferred costs have been offset by insurance the investor-owned electric utilities has approved the proceeds of $230 million received through December 31. level of participation for the industry called for by the 1981. The unamortized investment in the TAII 2 nuclear plan and it is contemplated that legislation to facilitate fu:1 core, included in deferred costs- nuclear accident such participation will be introduced. The Reagan in the 1980 financial statements, has been reclassified in Administration has proposed federal assistance for cer-1981 as part of the investment in TATI-2, tain activities engaged in during the course of the The subsidiaries

• first mortgage bond indentures pro- cleanup. The Corporation and its subsidiaries do not vide for insurance proceeds to be held by their respec. know what the final outcome of these developments will tive trustees for reimbursement to the company for be.

either expenditures on repair of damaged property or construction of other bondable property. Insurance pro-ceeds of $9.3 million remained on deposit with the sub- Accounting for the Investment in TMI:

sidiaries' trustees at December 31,1981. Such amounts As indicated below, most of the operating expenses and ars recorded on the balance sheet as special deposits capital costs associated with the investment in T311-1 and included in the aforementioned insurance proceeds. and T311-2 are not currently being recovered in rates The subsidiaries carried the maximum insurance charged to customers. Such capital costs are reflected coverage then available ($300 million) for damage to the in the financial statements in that the interest and unit and core and for decontamination expenses. It is preferred stock dividend components of these in-ths Corporation's belief that the recoveries from the in- vestments are being accrued and the earnings per share surance companies will approximate the amount of the of common stock are determined on a basis whicl insurance carried, as estimated cleanup expenditures reflects all outstanding shares including the shares ars expected to exceed significantly the available in- issued to finance the common stock components of surance coverage. these investments.

The subsidiaries do not know the extent,if any, to The April 9,1981 rate orders of the PaPUC referred which the expenditures for repair and restoration of the to below directed Slet-Ed and Penelee to cease the ac-unit to operation will represent plant improvements or crual of depreciation effective approximately when the other items that are capitalizable and which may be re- operating and capital costs of T3111 and TA112 were coverable in the future through rates charged to cus- eliminated from base rates IT311-1, June 1,1980 for tomers by amortization or depreciation charges. In ad- both Alet-Ed and Penelec: T1112, January 1,1979 for dition, the subsidiaries are seeking financial assistance Alet-Ed and April 1,1979 for Penelec). In June 1981, from the Federal government and the utility industry. Alet-Ed and Penelec ceased the accrual of depreciation, 51:nagemes believes that any loss suffered by the sub- effective June 1,1980, on that portion of their invest-sidiaries for which they do not receive financial assis- ment in TA11-1 subject to the PaPUC's jurisdirion tance, or reimbursement from suppliers or others, Olet Ed-97cc; Penelec-92c~c). With respect to their should be recoverabh in rates. 51oreover, it is manage- revenues applicable to their remaining investment in m;nt's intent to seek to recover such costs in rate and/ TA111, which are subject to the Federal Energy Regula-or judicial proceedings. Under these circumstances, the tory Commission's rate jurisdiction, Slet Ed and cmount of loss,if any, suffered by the Corporation and Penelee have continued to accrue depreciation. Slet Ed its subsidiaries resulting from damages to Th112 is not and Penelec continued until December 1981 to accrue presently determinable and, therefore, no provision has depreciation on T311-2 for financial reporting purposes been made in their accounts. since the PaPUC's orders of April 9,1981 did not ad-Various funding proposals for the cleanup and decon- dress the future rate treatment to be accorded possible tamination of T311-2 have been put forth by federal and material retirements at T311-2.

state officials. The rate settlement agreements ap- The settlement agreements approved by the PaPUC proved by the Pennsylvania Public Utility Commission on January S.1982, referred to below, provide for the (PaPUC) on January 8,1982 referred to below, contem- amortization of Slet-Ed's and Penelec's investment in plate that, coincident with the resumption of generation T1112 based on the unrecovered original cost of the 20

j facility, tb nuclear fuelin the reactor at the time of the $109.2 rGion effective immediately. Of this amount, accident in March 1979 and capital additions from that JCP&u had been collecting S60 million annually, on an

' time to the date of the settlement. Moreover, the settle- interim basis, effective May 15,1980. On September 11.

- ments make allowance for the future recognition in Met- 1981. JCP&L appealed this order to the Appellate Divi-Ed's and Penelec's base revenues for the operating and sion of the New Jersey Superior Court. The New Jersey ,

j capital costs associated with TMI 1, contingent upon Public Advocate and the County of Ocean have filed i that facility's generating power at a specified level. Pur- cross appeals. Reference is made to Note 3 for informa-i suant to the settlement agreements, in December 1981, tion regarding the rate treatment accorded by such Met-Ed and Penelec ceased the accrual of depreciation order for JCP&L's investment in the Forked River on that portion of their investment in TMI 2 subject to nuclear project.

the PaPUC's jurisdiction retroactive to January 1,1979 On August 11,1981 JCP&L filed a petition with the t and April 1,1979, respectively, the approximate dates NJBPU requesting an annual increase in base rates of the unit's operating and capital costs were removed $238 million. Subsequently, the amount requested was

' reduced to $214 million to be consistent with the plan of from base rates. (See Note 3)

The New Jersey Board of Public Utilities (NJBPU) the Governor of Pennsylvania, referred to above. Of has not issued a directive to JCP&L with respect to the this amount,843 million pertains to operating and capi-accrual of depreciation on the TMI plant. Accordingly, tal costs associated with TMI 1. The balance of the re-

, JCP&L has continued to accrue depreciation on both quest consists of (i) 814 million for the funding of the de- t i TMI 1 and TMI 2. On August 14,1981, JCP&L peti- contamination of TMI 2, (ii) 835 million for the return

! tioned the NJBPU for authorization to cease the ac- requirement on the investment in TMI 2 and (iii) $122 i crual of depreciation on TMI 1 retroactive to April 1. million for non-TMI 2 related factors, including in-1980, the date its operating and capital costs were re- creased costs of capital, and operation and maintenance moved from base rates. In September 1981, the NJBPU expenditures. The effect of this rate increase is expected indicated that it would reserve this issue for determina- to eventually be partially offset by a reduction in the

, tion in the proceedings on JCP&L's August 11,1981 re- levelized energy adjustment clause (LEAC) resulting i quest for an increase in base rates of $238 million. from the availability of TMI 1 generation and the expir-1 ation of current charges for deferred energy costs.

Rate Proceedings-New Jersey

On September 4,1981, the NJBPU agreed to consider On January 31,1979 JCP&L was granted a $33.8 JCP&L's August 11,1981 rate request in two stages.

! million annual rate increase by the NJBPU which. Stage I consists of $43 million, representing the opera-among other things, reflected in base rates the capital ting and capital costs associated with TMI 1, and the and operating costs then associated with its investment August 14,1981 petition to cease the accrual of depre-in TMI 2. On June 18,1979, the NJBPU issued a rate ciation on TMI-1 retroactive to April 1,1980. Stage II

! order reducing JCP&L's annual base revenues by $29 includes the remainder of the base rate increase request million which represented the amount allowed by the in the August 11,1981 petition. With respect to Stage l I, on January 8,1982, the parties to the proceedmgs i

NJB PU in its January 31,1979 order for JCP&L's an.

} nual capital and operating costs associated with its in. filed a stipulation with the NJBPU providing for (i) an i

terest in TMI 2. annualincrease in base revenues of approximately $35 By order dated April 1,1980, the NJBPU removed million associated with TMI l's operating and capital l

j from JCP&L's base rates the capital and operating costs, and (ii) the reversal of depreciation accrued on costa associated with TMI 1 of $17.9 million annually. TMI 1 subsequent to April 1,1980. The increase in base i

i Thst order did not reduce JCP&L's charges to cus. rater would be partially offset by a reduction of $17.9 tomers; instead, it directed that an equivalent amount million annually in the rate of amortization of JCP&L's (after adjustment for revenue taxes) be applied to ac. deferred energy costs. The effective date of the pro-

! celerate the amortization of its deferred energy costs in- posed increase in base rates and the related reduction in curred prior to the TMI 2 accident. In removing TMI 1 energy revenues has been left to the discretion of the i from JCP&L's base rates, the NJBPU determined that NJBPU. JCP&L is uncertain as to what effect the i

"given the extended period of unavailability and the im. delay in the restart of TMI 1 will have on the NJBPU's possibility of ascertaining when the unit may return to decision.

. service, TMI 1 is not used and usefulin supplying With respect to additional energy costs, including l energy. . . ." JCP&L appealed that order to the New those resulting from the outage at TMI-1 and TMI 2, l

! Jersey Supreme Court which, on April 8,1981, affirmed the NJBPU has allowed JCP&L to recover these costs .

< the NJBPU order stating that the issues raised by from ratepayers over current and future periods. In  !

i JCP&L should be considered by the NJBPU in the rate January 1982, JCP&L petitioned the NJBPU for an in- '

1 proceeding referred to in the t=t paragraph. crease in its LEAC charges of $97.5 million annually, ef-By an order' dated July 31,1981, the NJBPU granted fective March 1,1982.

JCP&L an annual increase in its retail base rates of During the pendency of the proceedings which re-21

stilted in the June 18,1979, April 1,1980 and July 31, crease which Penelee had been billing since January 27, 1981 rate orders of the NJBPU and in the rate pro- 1979 pursuant to the prior PaPUC order. On June 19.

ceeding re!ated to JCP&L's August 11,1981 petition, 1979, the PaPUC directed that such temporary rates be c:rtain intervenors requested that the NJBPU consider made permanent.

the issue of fault regarding the causation of the T511-2 On Stay 23,1980, the PaPUC dismissed a show cause accident. In this connection, motions were filed by in- order it had issued regarding the revocation of tervenors requesting that the NJBPU (i) undertake a 31et.Ed's franchise to conduct public utility operations.

formal proceeding to determine the fault issue and (ii) The PaPUC stated that it had found "no imminent and d:f:r consideration of LE AC and base rate relief pend- foreseeable threat to continued provision of adequate ing the final outcome of such fault proceedings. On and reliable service at reasonable rates." In addition.

April 23,1981, the NJBPU denied these motions, but the PaPUC found in this decision that TAII-1 is not indicated that it would requi. e JCP&L to develop and "used and usefulin the public service" and prescribed submit a plan for review as to the allocation to rate- temporary base rates for hiet-Ed and Penelec, effective payzrs of potential recoveries by JCP&L from suits in- June 1,1980, which removed the capital and operating stituted for damages as a result of the T5112 accident. costs olet-Ed-S27 million annually: Penelec-S12 In their cross appeals from the NJBPU's July 31,1981 million annually) associated with the unit from the com-ord:r referred to above, the New Jersey Public Advo- panies' base rates.

cate and the County of Ocean have also appealed the The PaPUC's decision of 11ay 23,1980 further al-April 23,1981 order of the NJBPU. lowed for levelized energy cost rates that provided for In its cross appeal, the Public Advocate has argued the full recovery of energy costs for the period June 1.

that the replacement power costs resulting from the ac- 1980 through December 31,1980. 31oreover, the deci-cidznt should not be charged to customers until the sion provided for the recovery of the then outstanding NJB PU had determined their reasonableness, that the post accident deferred energy costs over an 18 month costs were not reasonable if the accident were the fault period, in the form of a surcharge, effective June 1, of JCP&L, that the Public Advocate had improperly 1980, to Alet-Ed's and Penelec's customers. In this been denied an opportunity to litigate the issue of regard the PaPUC stated: "Those amounts are subject JCP&L's asserted fault, that the NJBPU's order of to audit and review bv the Commission and to a later July 31,1981, did not adequately validate the prior determination that specific amounts of energv costs LEAC increases, and that the matter should be remand- were imprudently or unreasonably incurred. If the ed to the NJBPU for additional hearings, with direction courts and/ or the NRC should ultimately cor,:lude that

~

that the revenues which have been and are currently be- Slet Ed was imprude. t or negligent in its operation or ing collected under the tarriffs established by such or- management of Three Stile Island, then this Commis-der and the earlier LEAC orders are subject to refund if sion will take notice of such determinations and their the rates are found to be unjust and unreasonable due relevance to any portion of the replacement power costs to inclusion of imprudently incurred expenses as the for which current recovery is permitted today.

Public Advocate maintains, Although differently The PaPUC, on April 9,1981, granted Slet Ed and phrased, the contention of the County of Ocean are Penelee annualincreases in their retail base rates of $51 smular m end result. Another participant in the rate mi' lion and S54.1 million, respectively, effective imme-case has filed a cross appeal raising the fault and other diately, By the same order, the PaPUC reduced Alet-tssues. Ed's deferred energy surcharge by S28.7 million annu-Rate Proceedings- Pennsylvania: ally, thereby reducing the current amortization and ex-During the first quarter of 1979, Slet Ed and Penelee tendin'g the amortization period of Alet-Ed's deferred were granted retail rate increases by the PaPUC which, energy balances. Although the orders did not restore among other things, reflected in base rates the capital the capital and operating costs associated with T311-1 r.nd operating costs associated with their investment in to base rates, they made allowance for S11 million Glet-T511-2. On April 19,1979 and April 25,1979, following Ed) and $5.5 million (Peneleci annually for operating th3 T5112 accident, the PaPUC established temporary costs associated with the restart of TAII-1.

r:tes for hiet-Ed and Penelec, respectively, reducing an- On January 8,1982, the PaPUC issued orders approv-nual base revenues by amounts approximating the oper- ing settlements reached by the parties to the rate pro-ating and capital costs associated with their interests in ceedings instituted on June 30,1981 by Alet Ed and T3112 that had been allowed in their pre-accident rate Penelec. The orders call for changes in rates to go into increase orders. These actions effectively revoked, prior effect in three steps. Under the first step. Alet Ed and to becoming effective, the S46.6 million annualincrease Penelee received, effective January 14,1982, annual in-in base rates granted Slet Ed on Starch 22,1979, re- creases in their retail base rates of S71.7 million and turning the rates to levels in effect prior to that rate $48.9 million, respectively. These increases represent ti) order. In Penelec's case, the PaPUC prospectively re- S62 million and S29.5 million, respectively, for the duced by S25 million the S56.2 million annual rate in- amortization of Alet-Ed's and Penelec's investments in 22

TMI 2, and (ii) S9.7 million and S19.4 million. respec- tee on Nucl:ar Regulation (Hart Committee) issued the tively, for attrition. results of their investigations of the accident at TMI-2 A further step, which will become effective upon the on January 23,1980 and July 2,1980, respectively.

resumption of substantial generation of power at Their conclusions with respect to these matters were TMI 1, would result in annual net reductions of S53.3 similar to those of the Kemeny Commission. On Janu-million and S24.9 million, respectively,in rates charged ary 23,1980, the NRC imposed civil penalties against to customers of Met Ed and Penelee. The timing for the Met Ed of $155,000 for safety, maintenance, procedural resumption of substantial generation by TMI 1 is de- and training violations at TMI. The NRC has also pendent upon resolution of the restart proceedings and stated that, depending upon the findings of continuing the steam generator tube matters referred to above. investigations into the TMI-2 accident, it may take ad-The components of such net decreases are (i) the return ditional enforcement action such as assessing addi-to base rates of the capital and operating costs associ. tional civil penalties or ordering the suspension, modifi-ated with the investment in TMI 1, resulting in in- cation or revocation of the license to operate TMI 2.

creases in Met Ed's and Penelec's base rates of $39.7 The Corporation and its subsidiaries do not know what million and S18.6 million, respectively, (ii) the reduction the ultimate outcome of this matter will be.

of the TMI 2 amortization instituted in the first step by In March 1980, the NJBPU requested an independent amounts equal to the increases authorized with respect analysis of strategic options for JCP&L in response to the extreme financial pressures experienced by JCP&L to TMI-1 capital and operating costs, liii) the recogni.

tion of a level of participation by customers in the following the TMI 2 accident. The intent of this study cleanup of TMI 2 consistent with the plan proposed by was to identify options that would mmmuze additional costs to JCP&L's customers and continue to provide an the Governor of Pennsylvania, resulting in increased adequate supply of power. The report was completed in revenues of S24.2 million and $11.3 million for Met-Ed and Penelec. respectively, and (iv) the estimated reduc. April 1981 and submitted to the NJBPU. It recom-tion of energy cost revenues by S77.5 million and S36.2 mends,in part, that (il a Re gional Power Authority own-million. respectively, representing the estimated sav. ing and operating TMI would best provide the financing ings to customers brought about by the return to ser. capability to fund the cleanup and reduce its cost to the ratepayer und (ii) some form of public ownership of vice of TMI 1.

JCP&L has the greatest likelihood of significantly Another step, which will go into effect about mid 1982, would result in net decreases in Met-Ed's and moderating the growth in electric rr.tes. The other op-Penelec's retail rates of S18.4 million and S6.4 million, tions, as stated in the report, including " merger, divesti-ture, bankruptcy and a state-owned generating company respectively. These net decreases represent (i) the scheduled expiration of the deferred energy surcharge would provide limited long-term benefits to the rate-payer and involve substantial legal, economic and poli-and the elimination from base rates of an allowance for tical risks." Regardless of the option selected, the study the collection of pre-TMI 2 accident deferred energy ~

balances, reducing retail revenues by $34.6 million and further indicates that immediate and consistent rate re-

$10.9 million for Met Ed and Penelec, respectively, and lief is necessary to restore JCP&L's earmngs, improve its cash flow and begin to restore its access to capital lii) additional TMI 2 amortization of S16.2 million for markets to ensure that needed construction and cleanup Met Ed and S4.5 million for Penelec.

The settlements also trovide that, except under ex- programs continue. On February IL 1982, the NJBPU directed that hearings begin in March 1982 on the op-traordinary conditions,' Met-Ed and Penelee will not tions identified in the study.

petition the PaPUC for further base rate increases be. The Corporation does not know what effect,if any, fore January 1,19S3. these reports will have upon it or its subsidiaries, With respect to additional energy costs, including Other investigations and inquiries into the nature, those resulting from the outage at TMI-1 and TMI 2, causes and consequences of the TMI 2 accident com-the PaPUC has allowed Met Ed and Penelee to recover menced by various federal and state bodies are con-those costs over current and future periods.

tinuing. The Corporation and its subsidiaries are unable a Investigations: , to estimate the full scope and nature of these continuing On October 30,1979, the President's (Kemeny) Com- investigations or the potential consequences thereof to mission on the Accident at Three Mile Island issued its the investors in the securities of the Corporation and its report. The report states, in part, that its "investiga- subsidiaries. The Corporation is also unable to determine tion has revealed problems with the ' system' that the impact,if any, the results of such investigations may manufactures, operates and regulates nuclear power have on (i) the proceedings to return TMI 1 to operation plants" and the shortcomings which turned the incident (ii) the efforts to clean up and rehabilitate TMI 2 and (iii) into a serious accident "are attributable to the utility, the rate regulatory agency decisions with respect to the to suppliers of eqtupment and to the federal commission ultimate recoverability from ratepayers of the replace-that regulates nuclear power." The NRC's Special In- ment power costs necessitated by the unavailability of quiry Group (Rogovin) and the U.S. Senate Subcommit- TMI-1 and TMI-2.

23

Litigation: pany providing such primary insurance coverage. That As a result of the accident, the Corporation and/or its insurance company has filed an answer to such com-subsidiaries have been named as defendants in various plaint denying liability. In May 1981, the court entered lawsuits. The suits include (i) individual suits as well as an order striking certain of the defenses asserted by the purported and actual class actions for alleged personal insurance company.

and property damages (including claims for punitive On December 14,1981, the Corporation and its sub-damages) resulting from the accident and (ii) suits to en- sidiaries filed an amended complaint against the sup-join the future operation of TMI-2. plier (and its parent) of the nuclear steam supply The suits described in (i) above involve questions as to system and associated services, training and pro-whether certain of such claims, that are material in cedures for TMI-2, for damages, estimated at about S4 cmount and arise out of both the accident itself and the billion, suffered by the Corporation and its subsidiaries cleanup and decontamination efforts, are (a) subject to and their customers as a result of the accident. The de-limitation of liability set by the Price-Anderson Act and fendants have answered the amended complaint deny-(b) outside the insurance coverage provided pursuant to ing liability and seeking approximately S4 million, plus ths Price-Anderson Act. These questions have not yet finance charges, from the Corporation and its subsidi-been resolved. aries for services rendered and equipment allegedly pro-In February 1981, the insurance companies and repre vided under the contract for the TMI-2 nuclear steam sentatives in the class actions reached an agreement for supply system.

the proposed settlement of the class action claims for On December 3,1981, the Corporation and its subsidi-economic losses and claims for the costs of medical de- aries filed a complaint against the U.S. Government for tection services resulting from the TMI-2 accident for damages and losses, estimated at about S4 billion. suf-persons, businesses and entities within a 25 mile radius fered by the Corporation and its subsidiaries and their of TMI 2. The settlement, which was approved in Sep- customers as a result of the accident. The complaint tember 1981 by the court in which class action claims alleges that the NRC violated its statutory and common are pending, provides for the insurance companies to es- law duties to warn plaintiffs of defects and hazardous tablish a fund of $20 million for economic loss claims conditions in equipment, analyses, procedures and train-and a separate fund of $5 million for public health pur- ing in use at TMI-2. The complaint also charges that, poses. Earlier, the court had held that personalinjury following a similar incident at a nuclear power plant claims (other than for medical detection services) could operated by a non-affiliated utility which the NRC had not be pursued in class action proceedings and the investigated, the NRC failed to take and recommend ap-February 1981 agreement does not deal with such propriate action and to warn Met-Ed and other licensees claims. Individual and purported class action com- of sinular reactors of any defects. The complaint seeks plaints for alleged economic injury by reason of in- to recover the cost of cleanup and restoration, replace-cr:ased charges for electricity and for alleged economic ment power costs, lost revenues and increased financing losses of persons, businesses and entities outside the 25 costs. The U.S. Government has not yet responded to the mile radius area, as well as individual complaints for complaint.

alleged personal injury, are pending. In January 1982, a The Corporation and its subsidiaries are presently group of customers of the subsidiaries, seeking class ac- unable to estimate the likelihood of an unfavorable out-tion certification to assert claims for all customers of come on any of the matters set forth in the preceding the subsidiaries residing or doing business at a distance paragraphs or their financial exposure with respect greater than 25 miles from TMI for alleged economic in- thereto.

jury by reason of increased charges for electricity as a Insurance:

result of the TMI 2 accident, filed a petition with the The property damage insurance, and the $300 million PmPUC seeking a declaratory order as to whether the limit of coverage, was applicable to both TMI-1 and PzPUC has jurisdiction to determine liability for dam- TMI 2. This property insurance had been reduced by ages or to award damages to customers of Met-Ed and claims paid. The insurance carriers have reinstated the Penelec for increased costs of electricity. coverage for the TMI site. However, with regard to Class suits for alleged damages on behalf of pur- property insurance for TMI 2, coverage has been rein-chasers of GPU common stock during the period stated only for possible damage which might result from j August 25,1975 through April 1,1979 have also been a non-nuclear accident during the unit's restoration instituted against the Corporation and certain of its di- period. Effective January 10,1982 on a prospective rectors as a result of the accident. These suits have basis, the property damage insurance coverage was raised questions, which have not yet been resolved, as raised to S450 million on the site.

to whether certain claims are beyond the ir surance cov- Effective April 1,1981 JCP&L became a member of I crage for directors' and officers' liability carried by the Nuclear Mutual Limited (NM L). Such membership

[ Corporation and its subsidiaries. The directors have provides JCP&L with S450 million of property damage l filed a third-party complaint against the insurance com- insurance for its Oyster Creek station. As a member of 24

NML. JCP&L is subject to annual assessments of up to annual reloads through 1985. The supplier disputes this 14 times its annual premium, or approximately $25.1 position and, in November 1978, submitted bills for million, in the event of an accident at a nuclear plant of material and services in the aggregate amount of any member company. approximately S33 million, covering reloads supplied in Damages in excess of $450 million are not covered by 1977,1978 and 1979. The supplier stated that its the aforementioned insurance. However, effective objective was to establish revised prices and other terms January 15,1982, the subsidiaries increased their and conditions rather than to diminish supplies and, property damage insurance for damages in excess of without prejudice to its legal position, provided the 1979 S500 million at each of their nuclear generating sites. The annual fuel reload. Of the S33 million claimed by the policy currently limits coverage to the sum of $186 supplier to be due, JCP&L has paid approximately S3.8 million and 12.2% of the amount of the loss in excess of million and is of the opinion that the balance of approxi-S500 million up to S1 billion. This excess property mately $29 million is not payable by it and has so insurance is provided by Nuclear Electric Insurance informed the supplier. On January 26,1979, the supplier Limited (NEIL), a mutual insurance company. Under filed suits against JCP&L, the Corporation and GPU this policy, the subsidiaries are subject to a retrospective Service Corporation (GPUSC). JCP&L has filed a coun-premium of up to $14.9 million in the event of an terclaim for a declaratory judgment confirming its view accident at a nuclear plant of any member company. of the contractual status and for damages and has also The Price Anderson Amendments to the Atomic Ener- filed another suit against the supplier and its parent gy Act limit liability to third parties to S560 million for seeking damages. Oral argument, following a trial on the each nuclear incident. Coverage of the first S140 million issues ofliability (but not the amount cf any damages),

(raised to S160 million following the accident) of such was completed on December 23.1981 and briefs have liability is provided by private insurance. The next S365 been filed. The matter is currently awaiting a decision.

n illion is provided by assessments of up to the limit of JCP&L believes that any additional amount that it S5 million per nuclear reactor perincident but not more might be required to pay if the supplier is successful in than $10 million per reactor in any calendar year. The its suit would be valid costs and should be recognized for remainder is provided by a government indemnity. ratemaking purposes. However, there can be no Based on the ownership of three nuclear reactors, the assurance that this will be the case. If the suits were to subsidiaries' maximum potential assessment under these be resolved in the supplier's favor, JCP&L would incur provisions would be $15 million per incident but not S14.2 million in additional fuel expense, based on the more than S30 million per calendar year for claims amount of fuel consumed through December 31,1981.

covered by this insurance.

Effective September 15,1980, JCP&L, with respect t OTHER:

incremental replacement power costs resulting from an The subsidiaries' constmetion programs, which extend extended accidental outage at its Oyster Creek nuclear over several years, contemplate expenditures of generating station only, became a member of NEIL.

approximately S320 million during 1982. In connection Coverage under NEIL provides for a weekly indemnity with these construction programs, the subsidiaries have of $2.3 milhon, beginning 26 weeks after an accidental incurred commitments.

outage, for the incremental cost of replacement power. The staff of the Federal Energy Regulatory Com-The policy limits covered outages to 52 weeks at 100% of mission (FERC) conducts periodic audits of the accounts the weekly indemnity and 52 additional weeks at 50% of of electric utilities subject to the Federal Power Act. In the weekly indemnity. As a member of NEIL, JCP&L is the course of its current audit of Met Ed. the FERC staff subject to a retrospective premium adjustment limited has raised various questions, the most material of which to $7.65 million, which is five tunes its annual premium, concerns the issue of whether the accrual by Met-Ed of in the event that losses exceed the accumulated funds allowance for funds used during construction (AFC) on available to NEIL. The subsidiaries expect to obtain ,

completed fabricated fuel assemblies held for use at similar coverage with respect to TMI 1 upon that umt's TMI 1 is appropriate. If such accruals are ultimately return to operation. disallowed, the FERC will presumably take a sinular position with respect to JCP&L and Penelec. At NUCLEAR FUEL LITIGATION: December 31,1981, the subsidiaries had accrued In 1971, JCP&L entered into a contract for the approximately $7.7 million of AFC on the subject fuel purchase of three nuclear fuel reloads for the Oyster assemblies since completion of their fabrication. In Creek station, with an option for five additional annual addition, the FERC staff re:erved judgement on the reloads beginning in 1976. In 1974, the supplier offered propriety of Met-Ed's accounting for nuclear fuelin an extension of that contract to cover five additional .

process and the AFC accrued thereon, pending the annual reloads beginning in 1981. JCP&L believes that it issuance of a rulemaking by FERC addressing nuclear effectively exercised the option in the mitial contract and fuelaccounting.

accepted the offer to extend the contract to cover the The Corporation's subsidiaries have entered into long-25

term commitments with the U.S. Department of Energy their construction plans and schedules and or from the (DOE) for the purchase of substantial amounts of nuclear increased scope of supply. The subsidiaries' manage-fu:1 enrichment services. The terms of the contracts with ments do not expect at this time that such negotiations ths DOE provide for significant termmation charges. In will result in any material increase in costs that would the aftermath of the T31I 2 accident,the Corporation's not be valid costs properly recognizable through the subsidiaries had an excess of commitments for nuclear ratemaking process.

fu:1 enrichment services. With respect to most excess Claims for damages arising out of the operation of the commitments through 1984 the subsidiaries have Oyster Creek station have been asserted. JCP&L's man-assigned such service to other nuclear fuel users at a agement believes that such liability,if any, as it may discount or provided for termination charges. The have for such damages in the pending suits and for all subsidiaries are unable to determine to what extent, if asserted and potential similar claims would not be any, future commitments for enrichment services material.

subsequent to 1984 may be in excess of those required.

Subject to regulatory approval and the securmg of the

2. Summary of Significant Accounting Policies necessary financing, JCP&L has agreed to enter into a GENERAL:

long-term contract for the purchase of large quantities of The consolidated financial statements include the ac-electricity from a major Canadian supplier. In order to counts of all subsidiaries.

effect the transmission of such power to the GPU It is the general policy of the Corporation's subsi-System, the parties to the proposed agreement intend to diaries to record additions to utility plant at cost, which construct an interconnection, the cost of which will be includes material, labor, overhead and AFC. The cost of shared equally, JCP&L's portion of such cost, approx. current repairs (except those related to the nuclear imately $330 million, to be incurred through 1986, is accident described in Note 1) and minor replacements is ,

I expected to be financed by contributions from its cus. charged to appropriate operating expense and clearing tomers and by borrowings from suppliers and institu. accounts and the cost of renewals and betterments is tional lenders. Such commitments are not presently capitalized. The original cost of utility plant retired, or ,

reflected in the constructio 1 program budget. otherwise disposed of, is charged to accumulated The subsidiaries have entered into long-term contracts depreciation.

with non-affiliated mining companies for the purchase of OPERATING REVENUES:

, coal for certain of their generating stations. These Revenues are generally recorded on the basis of billings contracts, which expire between 1997 and the remaining rendered.

lifa of the generating station, require the subsidiaries t DEFERRED ENERGY COSTS

purchase muumum amounts of the stations' coal require- Energy costs are recognized in the period in which the mints from these mining companies. The price of the related energy clause revenues are billed (See Note it d: livered coal is established by formulas described within the contracts and provides for the recovery by the RESERVE CAPACITY CREDIT:

mining companies of their costs. Coal purchases under Effective April 1981. Alet Ed and Penelec are recog-these agreements amounted to $84 million, $87 million, nizing future anticipated payments to other members of

$79 million, $61 million and $54 million for the years the Pennsylvania-New Jersey-11aryland Interconnection 1981,1980,1979,1978 and 1977, respectively. as a charge to current expense equivalent to the revenues i The subsidiaries have suspended or delayed con- provided for that purpose.

struction on various proposed generating projects. On l November 11,1981, the subsidaries, as a result of DEPRECIATION: -

financial co istraints, suspended, for a minimum of two The Corporation's subsidiaries provide for depreciation years, plans for the construction of the Seward 7 at annual rates determined and revised periodically, on ,

the basis of studies, to be sufficient to amortize the generating station. At December 31,1981, the sub-sidaries' investment in suspended and delayed generat. original cost of depreciable property over estimated  !

ing projects aggregated $27.2 million, of which $19.3 remaining serviu lives, which are generally longer than  ;

those employed for tax purposes. The subsidiaries use  :

million is related to Seward 7.

depreciation rates which, on an aggregate composite i

) The Oyster Creek nuclear generating station, owned basis, resulted in an approximate annual rate of 3.21%

by JCP&L,is expected to experience two extended out-3.18c*c. 3.17% 3.07% and 3.02% for the years 198'., -

eges of approximately ten months each, for refueling, maintenance and modi 5 cations to the unit, during the 1980,1979,1978, and 1977 respectively. Reference is  ;

made to Notes I and 3 regardmg the accrual of i period from July 1982 through 1985.

depreciation on T511-1 and Thll 2. j i The subsidiaries are engaged in negotiations with '

l various suppliers relating to the latters' claims for delay NUCLEAR PLANT DECO 31311SSIONING COSTS:

or termination charges or increased fees which such sup- In accordance with ratemaking determinations tai pliers assert result from the subsidiaries

• revisions of JCP&L is charging to expense and crediting to a non-26

1 funded reserve amounts intended to provide over their 3. Extraordinary Items service lives for the cost of decommissioning nuclear As a direct or indirect consequence of the nuclear acci-plants at the end of their usefullives (estimated for.

dent at TMI 2, consolidated net income for 1981 reflects purposes of the ratemaking determinations to range between $27 and $36 million per unit in then current the following extraordinary items net of any related doll rs assuming in place entombment), and (b) Met Ed income tax effects:

and Penelec, prior to the cessation of depreciation ag, accruals discussed in Note 1, were charging to expense tal Abandonment of the Forked River nuclear generating project s(26.9p amounts intended to provide over their service lives for the decommissioning of their shares of the radioactive (bi Reversal of depreciation on T5f t 1 2.7 components of their nuclear units (approximately $24 (c) Reversal of depreciation on T5fI 2 18.6 million per unit in then current dollars). During 1981, tdi write-off of the excess of investments in subsidiaries over related net assets 130.8i

- such charges to expense were discontinued retroactive to Net extraordinary charge s(36.4) the dates that the TMI units were removed from rate

• base in Pennsylvania. In accordance with ratemaking re-quirement::, these charges have made no provision for tal In November 1980, as a result of regulatory cost and other possible mflation in decommissioning costs during the uncertainties followmg the accident at T5fl 2. JCP&L abandoned its period prior to decommisssioning but are expected to be effort to proceed with the construction of the Forked River nuclear project., Subsequent to this decision, the investment of s413.7 subject to modification to take cognizance of that factor. million m the project was reclassified to deferred debits tunamortized property lossesi. The NJBPU. on July 31.1981. issued a rate order which permits JCP&L to recover, in part, over a 15 year AMORTIZATION OF NUCLEAR FUEL: period its investment in the Forked River project. The order The amortization of nuclear fuelis provided on a unit of provides for JCP&L to recover $225.4 million of its net investment production basis. Rates are determined and periodically of s252.3 million after giving effect to s142.2 million in anticipated income tax benefits and s19.2 million in anticipated salvage value.

revised to amortize the cost over the useful life. JCP&L However, the order excludes the recovery of AFC accrued during the is providing for estimated future handling costs for the period April 4.1979, the date of the suspension of construction spent Oyster Creek nuclear fuel, and similar treatment activities at the project, through 51 arch 31,1980, the effective date JCP&L ceased the accrual of AFC on the project. In view of this will be provided for future handling costs for the spent order in June 1981. JCP&L recorded an extraordinary charge of TMI nuclear fuel when required. Previously accumulated $26.9 million.

estimated residual credits, net of previously accumulated (b) As described in Note 1. Stet Ed and Penelec, pursuant to the estimated costs of reprocessing, for the Oyster Creek April 9.1981 orders of the PaPUC. ceased the accrual of depreciation n their investment in T5f f I subject to the PaPUC's jurisdiction station nuclear fuel are being amortized to fue. expense retroactive to June 1.1980. Siet Ed and Penelec, during the five on a unit of production basts, months ended 51ay 31.1981, charged to operations depreciation expense for T5111 of 54 million. The adjustment to reflect the nmsal of 59.3 million of depreciation accrued from June 1.1960 INCOME TAXES: through 51av 31,1981. net of 56.6 million of related income tax The Corporation and its subsidiaries file consolidated charges, was accounted for as an extraordinary item in Federalincome tax returns. All participants in a con- June 1981.

(c) As described in Note 1, pursuant to the January 9,1982 rate solidated Federal income tax return are severally liable orders of the PaPUC, hiet Ed and Penelee have ceased the accrual of for the full amount of any tax, meluding penalties and depreciation on their investment in Tail 2 subject to the PaPUC's interest, which may be assessed against the group, jurisdiction retroactive to the approximate dates the unit's Ed.P' rating and capital costs were removed from base rates The revenues of the Corporation's subsidiaries in any pericd are dependent to a sigmficant extent upon the Ed and Penelec. for the eleven months ended November 30.1981, charged to operations depreciation expense for Thil 2 of $15.5

, costs which are recognized and allowed in that period for milli n. The adjustment to reflect the reversal of $45.6 million of ratemaking purposes. In accordance therewith, the depreciation accrued by hiet Ed from January 1.1979 through Corporation's subsidiaries have employed the following November 30,1981 and by Penelec from April 1,1979 through November 30,1981, net of $27 million of related income tax charges.

policies: was accounted for as an extraordinary item in December 1981.

(d) Since 1946,in accordance with applicable regulations of the Securities and Exchange Commission (SEC) under the Public Utility Tax Depreciation: The Corporation's subsidiaries Holding Company Act the Corporation has carried its investment in g nerally utilize liberalized depreciation methods and its subsidiaries at amounts that were 530.8 million in excess of the tha shortest depreciation lives permitted by the related net assets. In December 1981, the Corporation concluded Internal Revenue Code in computing depreciation that, in light of present and proposed ratemaking. the investment in I

the subsidiaries in excess of related net assets had no realizable deductions and provide for deferred income taxes value and wrote off such excess as an extraordinary charge.

where permitted in the ratemaking process. However. The effective tax rates applicable to the reversal of depreciation on T511 1 and Thil 2 (items (b) and (c) abovel are greater than the in 1980, with respect to TMI-2, the subsidiaries elected statutory rate, since deferred income taxes are currently being to utilize straight line tax depreciation. .

provided on the portion of the excess of tr.x over book depreciation Intestment Credits: Investment credits are being on bc,th units which was previously flowed through to net income. In addition, investment tax credits associated with T5111 and T5112 amortized over the estimated service lives of the that were previously amortized have been reversed. Items tal and idi related facilities. above do not result in any income tax benefits.

27

E Allowance for Funds Used During JCP&L-The S125 million sublimit is subject to the further restriction that outstanding borrowings are Construction limited to the sum of ti) $60 million plus (ii) the amount of JCP&L's deferred energy account from time to The applicable regulatory Uniform System of Accounts time. Such sublimit was $110 million at December 31, provides for AFC which is defined as including the net cost during the period of construction of borrowed funds 1981.

(allowance for borrowed funds used during construction) Slet Ed-The $50 million sublimit is subject to the used for construction purposes and a reasonable rate on further restriction that outstanding borrowings are other funds (allowance for other funds used during con-limited to the sum of (i) the value ascribed from time to struction) when so used. While AFC results m a current time by the banks to the uranium pledged by Met-Ed increase in utility plant to be recognized for ratemakmg as collateral (presently $18 million), (ii) the amount of purposes and represents, in this fasluon, current com- hiet-Ed's deferred energy account from time to time, pensation, AFC is not an item of current cash income: in- (iii) 80% of Met Ed's customer accounts receivable ste:d, AFC is realized m cash aftar the related plant is pledged as collateral and (iv) 50% (but not in excess of pitced in service by means of the allowance for deprecia- $5 million) of the market value of Met-Ed's coal tion charges based on the total cost of the plant, m- nventories pledged as collateral: less, S10 million.

c g AM Moreover, the sublimit and the permissible amount of To the extent permitted in the ratemaking proceedings Slet-Ed's outstanding borrowings are to be reduced of the subsidiaries, the income tax reductions associated ratably commencing April 30,1982 in a manner to with the mterest component of AFC have been allocated require full repayment by December 31,1982. At to reduce mterest charges and, correspondingly, have not December 31,1981, Met Ed's sublimit was $43 reduced income taxes charged to operating expenses. g Pursuant to such rate orders, the Pennsylvania sub-sidiaries employ a net of tax accrual rate for AFC. Penelec-The $75 million sublimit is subject to the JCP&L, effective September 1977, began employing a further restriction that outstanding borrowings are nn, of tax accrual rate for AFC on certain construction limited to the sum of (i) S50 million plus (ii) the amount projects while using a gross AFC rate on others, of Penelec's deferred energy account from time to The subsidiaries have accrued AFC using rates which, time. Such sublimit was $69 million at December 31, on an aggregate composite basis, resulted in annual rates 1981.

of 10.64%,8.91%,8.60%,7.99%, and 9.03% for the years 1981,1980,1979,1978 and 1977, respectively. The notes issued by the Corporation and its subsi-diaries evidencing borrowings under the restated cre-5 Short-Term Borrowing Arrangements dit agreement bear interest at 107% of the highar of (i) Citibank's base rate as in effect from time to time, or In June 1979, the Corporation and its subsidiaries (ii) one-half of 1% above the three week moving average entered into a i evolving credit agreement, which expired of offering rates for three month certificates of deposit on October 1,1981, with a group of banks under which of major banks. The agreement provides for a commit-they had available $292 million of credit. On October 1. ment fee of S1 million annually.

1981, the Corporation and its subsidiaries entered into a In connection with the restated revolving credit restated revolving credit agreement with the banks. The agreement, the Corporation has entered into a revised restated credit agreement, which expires on December term loan agreement with the five banks who were 31,1982, provides for an initial aggregate of $150 million parties to the original term loan agreement which ex-m credit to the Corporation and its subsidiaries, which pired by its terms on October 1,1981. The revised term may be mereased to $200 million with the consent of the loan agreement provides, among other things, that the banks holding 85% of the outstandmg notes. Individual Corporation's $39 million of outstanding borrowings will borrowing sublimits are applicable to each company. bear interest at the same rate as borrowings outstanding Such mdividual sublimits are: The Corporation-$43 under the restated revolving credit agreement and will be milliom JCP&L-$125 million Met-Ed-$50 million amortized ratably commencing January 1,1982 so as to (includmg $13 million of bonds sold to the banks m provide for full repayment by Decemoer 31.1982.

January 1980 and refinanced on October 1,1981); and The Corporation has guaranteed all borrowings by its ~

Penelec-$75 million. In addition, borrowings by the subsidiaries outstanding under the restated revolving companies under the credit agreement are further credit agreement. As collateral for such guarantee, the restricted as follows: Corporation's $39 million revised term loan referred to  !

The Corporation-The $43 million sublimit is reduced abo,e, and the guarantee by the Corporation of S4.4 (

such that the Corporation's borrowings outstanding million cf certain mortgage loans of GPUSC, the after October 1,1981 are fully amortized during the Corporation has pledged the common stock of JCP&L, period January 1,1982 through December 31,1982. Met Ed, Penelee and GPUSC.

JCP&L and Met Ed have secured their notes under the quarterly by the U.S. Treasury Department (18.35'c at restated revolving credit agreement by pledging as December 31,1981). The amounts due, and the schedule collateral certain nuclear fuel in the process of for their repayment, are as follows:

refinement, conversion. enrichment and fabrication. Such (i) Oyster Creek related charges of S13.5 million will be nuclear fuel was recorded on the December 31,1981 paid in 48 equal monthly installments, beginning balance sheet at a cost of $41.9 million. In addition, Met- January 29,1982.

Ed has pledged as collateral for its indebtedness under (ii) Amounts related to the TMI units, S22.2 million, the restated revolving credit agreement, (i) S40 million of will be paid in 48 equal monthly installments beginn-first mortgage bonds (ii) its customer accounts receivable ing on the earlier of (a) the last day of the month in (S29.7 million at 1>ecember 31,1981) and (iii) its coal which TMI 1 resumes commercial operation or (b) inventory (S12.2 millic, at December 31,1981). January 1983.

The restated revolving credit agreement and the purchase agreements for certain bonds sold by JCP&L As a result of the foregoing, amounts payable by the (S97.5 million) and Penelec ($50 million) subsequent to subsidiaries, due after December 31,1982, which are the accident at TMI 2 contain provisions for the recorded as accounts payable on the December 31,1980 immediate payment of the indebtedness involved upon balance sheet, are reflected as other long-term debt on the occurrence of an event deemed by specified the December 31,1981 balance sheet.

majorities of the lenders or holders of an issue to have a materially adverse effect on the borrower.

7. Cumulative Preferred Stock-Mandatory

6. Long-Term Debt Redemption At December 31,1981, the Corporation and its subsi. At December 31,1981 and 1980, the subsidiaries had diaries had long term debt outstanding, excluding outstanding the following issues of cumulative preferred amounts due within one year, as follows: St. 2k which are subject to mandatory redemption requirements:

(In Thousands >

In terest Rates Shares Stated Value Marunnes l'c to 64*c M to W4*c 9cc to 13%'c Total Outstanding (In Thousands)

First Mortgage 1981 1980 1981 1980 Bonds:

JCP&L:

1983-1990 $ 215.409 $ $211.502 S 426.911 13.5". Series F M2.500 175.000 $16.250 $17.500 1991 2000 278.952 134.869 189.736 603.557 11"c Series G 212.500 225.000 21,250 22.500 2001 2009 25.120 392.742 407.729 825.591 Due within oneyear (12.500) (1.250) (1.250)

(12.500)

Total $519.481 $527.611 $808.9X 1.856.059 Penelec:

Debentures: 11.72". Series J 175.000 187.500 17.500 18.750 1966 1990 $ 45.980 $ $ 45.980 10.88"e Series K 288.000 304.000 28.800 30.400 1991 1999 24.500 129.400 173.400 Due withinone year (28.500) (28.500) (2.850) (2.850) 19.500 Total Total 797.000 850.500 $79.700 S85.050 S 70.480 $129.400 _S_19.500 219.380 Other long term debt 36.949 JCP&L has had annual redemption requirements of

(

I Unamortized net 12,500 shares of the Series F preferred stock since 1975 discount (3.052) and 12,500 shares of the Series G preferred stock since l

Total $2.109.336 1980.

l Penelec has had annual redemption requirements of For the years 1982,1983,1984,1985, and 1986 the 12,500 shares of the Series J preferred stock since 1976 Corporation and its subsidiaries have long-term debt and 16,000 shares of the Series K preferred stock since maturities of S76,467,000, S117,054,000, $109,967,000, 1980.

S126,896.000 and $53,387,000, respectively, including All redemptions are at the stated values of the shares, cash sinking fund requirements. plus accmed dividends. No redemptions of preferred Substantially all of the subsidiaries' properties are stock may be made unless dividends on all preferred subject to the lien of their respective mortgages. stock for all past quarterly dividend periods have been On July 28,1981, GPUSC and the DOE entered into paid or declared and set aside for payment. If dividends an agreement for the repayment of amounts owed DOE upon any shares of preferred stock of any subsidiary are by the Corporation's subsidiaries under certain uranium in arrears in an amount equal to the annual dividend, the enrichment contracts. Such amounts had been deferred holders of preferred stock voting as a class, are entitled since 1979. Interest on these amounts is accrued using to elect a majority of the board of directors of that sub-the Current Value of Funds Rate, as determined sidiary until all dividends in arrears have been paid.

29

• The subsidiaries' aggregate mandatory redemption re- During the period January 1,1977 through December quirement for allissues of cumulative preferred stock 31,1981, the Corporation issued additional shares of outstanding at December 31,1981 is S5,350,000 per common stock as follows:

year, through 1986.

No shares of cumulative preferred stock-mandatory rIn Thousandse Par Value Excess over redemption have been sold during the five years ended Credned t Par Value December 31,1981* Number Common Credited to Year ofShares Stock Capital Surplus 8 Cumulative Preferred Stock- 1977 4.458.000 sli.146 s72.767 19.467 1978 1.250.000 3.124 No Mandatory Redemption 1979 293.000 732 4.187 1980 - -

At December 31,1981 and 1980, the subsidiaries had 1981 - - -

outstanding the following issues of cumulative preferred stock, which are redeemable solely at the option of the 10, Consolidated Retained Earnings issuers:

Under the restated revolving credit agreement. the Shares Stated Value balance of consolidated retained earnings must be at outstandine ,In Thcasands) gg,,t g499,999,999, JCP&L: In accordance with JCP&L's supplementalindenture 4% Series 125.000 s 12.500 9.36% Series 250.000 25.000 dated June 1,1979, common dividends payable by 8.12% Series 250.000 25.000 JCP&L are limited, to the extent thev are not matched N0 by cash capital contributions from th'e Corporation, to an 8 eries N l 00 8.75% Series II 2.000.000 50.000 amount equal to 25cb of earnings for the years 1979 and and M d esp heak M d hR Series 117,729 11,773 9

3,325 1981 S12,108,000 of retained earnings of S,,,a 187.000 4.35% Series 33.249 3.85% Series 29.175 2.917 was available for declaration or payment of dividends on JCP&L's common stock. There is presently no restric-I$$S I!e 3!$N 3$6] tion by the NJBPU on the payment of common mC3 8.12% Series 160.000 16.000 7.68% Series G 350.000 35.000 dends by JCP&L. However, JCP&L believes it would be appropriate to notify the NJBPU of any plans to resume 8jQ['[,sH Q ;gg 0l the payment of common dividends.

8.32% Series J 150.000 15.000 P:nelec:

In accordance with Alet Ed's supplementalindenture 4.40% Series a 56.810 5.681 dated 51 arch 1,1952 S3.360,000 of the balance of Alet-3.70% Senes C 97.054 9.705 6.370 Ed,s retamed earnings is restricted as to the payment of 4.05% Series D 63.696 4.70% Series E 28,739 2.874 dividends on its common stock. At December 31,1981, S21.058,000 of retained earnings of S24,418.000 was I6NSrs $.yj j{

available for declaration or payment of dividends on 8.36% Series H 250.000 25.000 8.12% Series 1 250.000 25.000 Alet Ed's common stock.

9.00% Series L 1.400.000 35.000 In accordance with Penelec's supplementalindenture Total 6.783.912 5423.391 dated June 1,1979, the aggregate amount of any declara-tion or payment of dividends on common stock after At December 31,1981 and 1980, the subsidiaries were December 31,1978 cannot exceed Penelec's earnings authorized to issue 37,035,000 shares (JCP&L-available for common stock for the period commencing 15,600,000 shares, Alet-Ed-10,000,000 shares, and January 1,1979 and terminating at the end of the last Penelec-11,435,000 shares) of cumulative preferred fiscal quarter preceding the date of such restricted pav- ~

stock, no par value. In 1977 JCP&L sold 200,000 shares ment. As of December 31,1981. S14,081.000 of retained of cumulative preferred stock-no mandatory redemR earnings of $51.128,000 was available for declaration or tion, stated value $25 per share. No shares of cumulative payment of dividends on Penelec's common stock. .

preferred stock-no mandatory redemption have been Under the Public Utility Holding Company Act of sold since 1977. 1935, the subsidiaries are prohibited from making any i 9, Common Stock and Capital Surplus I ans r 9 tending any credit to the Corporation without ,

first obtaimng authorization from the SEC.

Of the 75 ndllion authorized shares of S2.50 par value l

common stock of the Corporation at December 31,1981 11. Income Taxes l and 1980,61,264,000 shares were issued and outstanding and 28,000 shares were recorded as reacquired at $2.50 Examinations of Federalincome tax returns through  !

1978 have been completed.

i per share.

l 30

e Income tax expense for the years 1977 through 1981 (b) Redetermination of prior years' investment tax credits resulting was less than the amouemputed by applying the from net operating losses. These amounts are reflected in unused in-statutory rate to boch income subject to tax as follows:

~

lc"t$u*s d Ns'tment tax credits available for carryforward to future years aggregate $126 million (which includes $17 million of tln Afillionsi credits related to the Corporation's Tax Reduction Act Employee Stock Ownership Plant of which $12 million 548 million. $23 million.

1981 1980 1979 1978 1977 $21 million and $22 million expire in 1992,1993,1994.1995, and Operating income 1996, respectively.

before mcome taxes $258 S263 S343 $339 $349 (d) Does not include $34 million (deferred income tax er gense related Other income. net 16 7 9 4 to liberalized depreciation- $33 million and amortization of ac-Total 274 270 352 343 349 cumulated investment credits- 31 millioni related to extraordinary Inttrest expense (209) 12181 (1938 (1601 (152l items (see Note 31.

Book income subject to income tax $ 65 5 52 5159 $183 $197 The provisions for deferred income taxes. net, result income tax at from the following timing differences:

statutory tate lai $ 30 8 24 S 73 $ 88 $ 95 (In 5fillionsi EffIct of difference between tax and 1981 1980 1979 1978 1977 book depreciation for Liberalized depreciation which deferred taxes (Note 2h were not orovided Federal $42 536 $50 $37 $24 (Note 21 ~ 2 til (2) (10) (7) State 2 5 4 Amortization of ac. Deferral of energy costs cumulated invest. (Note 2h ment credits Federal (38) (11) 33 7 8 INote 2) (3) 141 (5) (4) (4) State (1) (1) (2) 1 Other adjustments (51 441 (3) (2) Forked River abandon-Income tax expense 5 24 S 15 S 63 $ 72 S 84 ment loss (Note 31 42 P)

=== Revenue taxes-energy E ffective mcome clause revenues tax rate 37"c _ 29"c 40*c 39"c 4 3 **c (Note 131 (7) (1c (4)

~~~ -

Reserve capacity credit (Note 2) (12) tal Effective Ja: em 1.1979 the statutory rate was changed from Other (4) (9; q9) 8 (1, 48 ci to 46 c"c .

Income tax expense is comprised of the following: == = == = =

tin Afillions) 1981 1980 1979 1978 1977 12. Loans to Non-Affiliated Coal Companies Federal income tax $ (2) $ 18) $3 $(20) S9 State income tax 5 2 7 5 9 Penelec is providing financing to non-affiliated mining I xn on other Qme n 6 5 2 1 companies supplying coal to the Homer City generating Income taxes at. Station under long term contracts. These loans bear in-tributable to the terest at a rate which is 1 %'To per annum above the to ed ds prime interest rate.

INote 4 6 166 171 186 (15) (1 31 Provisions for taxes cur. 13. Supplementary Income Statement Informa-rently payable tjon trefundablei 4 (7 Hat 7 (2 81 6 DefIrred income taxes, nit 24 75 68 58 35 Maintenance and other taxes charged to operating ex-Current investment penses consisted of the following:

credits k, (1) (491(bl (7)(b) 46 47 Amortization of ac. (In Afillionsi cumulated invest- 1981 1980 1979 1978 1977 m:nt credits 13) 14) 156 14 (4) .\laintenance $135 5120 $'l 5108 8 87 Income tax expense $24rdi $_15 $63 $12 $8$ Other taxes:

State and local gross tal As a result of the abandor. ment of the Forked River nuclear receipts $114 S103 $ 87 s 75 8 67 genirsting project. the Corporation and its subsidiaries incurred a Gross revenue a id franchise 30 26 20 17 14 consolidated net operating loss for tax purposes of $304 million in State surtax 13 11 9 7 6 1990. At December 31.1980. $144 million of this amount was carried Capital stock 5 6 11 11 10 l

brek to prior years resulting in a Federat income tax refund of $9 Real estate and l

million which is reflected in that year's Accounts receivable- personal prooerty 13 16 12 11 11 Orhrrt The unused balance of the net operating tax loss of $160 Other 14 11 10 9 7 million at December 31.1980 was available as a carryforward. which Total

[

l can be used to reduce future current taxable income through 1995.

S189 S173 S149 === S3 S115 During 1991. $99 million of such loss carryforward was utilized.

resulting in a reduction of $45 million in Federalincome tax currently paytble which was offset by an equivaler.t charge to deferred income The liability for New Jerse) State franchise and gross tex:s. receipt taxes and surtax is established in each year of ex-l 31

ercise of such franchise based on the preceding year's sidiaries' plans had accumulated benefits and net assets gross receipts and no liability exists in a current year to as follows:

pay a tax based on that year's gross receipts. Prior to ,f, ,qfffj,,,,

1979. JCP&L made provision in its accounts for such January 1.1981 January 1.1980 taxes on this basis. For ratemaking purposes (including Actuarial present value of th3 operation of the energy adjustment clause) tiie accumulated benefits:

NJBPU computes allowable expenses as including provi- y,8t,v sted . '

sion for such taxes based on the current year's gross s2sa.o s2st.o receipts rather than those of the preceding year. Effec- Net Assets available for tive January 1,1979, pursuant to a recommendation by benefits s2ss.2 s234.4 ,

th: FERC, JCP&L began recording state revenue taxes related to energy clause revenues in the period the The assumed rate of return used in determining the ac-revenues are collected. In July 1981, pursuant to an tuarial present value of accumulated plan benefits was 8 NJBPU rate order, $300 million of energy clause percent for both 1981 and 1980.

revenues were rolled into the base rates of JCP&L Following the precedent set by the FERC in 1979, 15. Jo.

in tly Owned Generating Stations  ;

JCP&L continued to record revenue taxes currently on the portion of energy clause revenues that were rolled in-The Corporation's subsidiaries participated, with non-to base rates and also recorded revenue tax expense on affiliated utilities, in the following jointly owned the incremental base revenues resulting from this order.

generating stations at December 31,1981:

Balance (In Thousands)

14. Pension Plans in Accumulated Station  % Ownership Service Depreciation

• c jo s7 53 sj2 The Corporation's subsidiaries have several pension N, *,*[,n ity plans applicable to all employees, the accrued costs of conemaugh 16.45 s 45.262 s11.184 Yards Creek 50 s 16.299 5 2.734 which are being funded. Prior service costs applicable to 20 s 13.317 s 1.948 Seneca all plans are being amortized and funded over 25 year periods. Each participant in a jointly owned generating unit Total pension cost for the years 1981,1980,1979, finances its own portion and charges the appropriate 1978, and 1977 amounted to approximately $25.9 operating expenses with its share of direct expenses. The million, $24.2 million, $22.8 million. $19.6 ndllion and dollar amounts shown above represent only those por-

$16.8 million,respectively. tions of the units owned by subsidiaries of the Corpora-Based on the latest available actuarial reports, the sub- tion.

l l

l l

32 i I

System Statistics General Public Utilities Corporation and Subsidiary Companies 1981 1980 1979 1978 1977 G:nerating Capscities and Peaks (MW):

8,251 8,254 8,262 8,281 7,190 Installed capacity (at year endl(a) .

6,161(b) 6,173(c) 5.898(c) 5,760(c)

Annual hourly peakload . 6.215(c) 32.8 34.0 33.8 40.4 24.8 Reserve (cc)(a)

Net System Requirements (in thousands of MWH):

22,266 22.659 26,891 29,747 26,576 Net generation .

Power purchased and interchanged, net . 12,659 12,346 7.982 4.275 5.926 Total Net System Requirements . 34.925 35.005 34,873 34,022 32.502 64.1 64.9 64.5 65.8 64.4 Load Factor (%)

Production Data:

Cost of fuel (in mills per KWH of generation):

Coal . 16.11 13.76 12.95 13.17 11.15 Oil 62.29 62.49 39.01 28.62 29.74 Nuclear 3.83 3.80 3.18 2.31 2.06 Other 56.82 42.29 35.77 27.58 22.82 Average . 19.06 17.17 12.48 11.17 10.17 Generation by fuel type (%):

Coal . 78 81 67 57 56 Oil 3 5 6 9 10 Nuclear 11 8 25 34 33 Other (gas & hydro) 8 6 2 1 Toutls 100 100 100 100 100 Electric Energy Sales (in thousands of MWH):

Residential 10,707 10,810 10,754 10,715 10,257 Commercial 7,949 7.687 7,359 7,208 6,832 Industrial 11,535 11,520 11,974 11,447 10,849 1,821 1.821 1,908 1,900 1,832 Other Totals 32,012 31,838 31,995 31,270 29.770 Electric Operating Revenues (in thousands):

S 793,056 $ 719,166 $ 597,757 $ 544,571 $ .515,522 Residential .

548,367 470,123 360,859 328,081 308,904 Commercial 609,177 531,369 431.104 365,456 342,487 Industrial .

91.591 87.535 77,512 67,421 64,541 Other Totals from KWH Sales . 2.042,191 1.808.193 1,467,232 1,305,529 1,231,454 20.097 21,102 20,479 18,721 18,222 Other Revenues Totals $2,062,288 $1.829.295 $1,487,711 $1.324,250 $1,249.676 Customers-Year End (in thousands):

1,422 1,405 1,386 1,364 1,339 Residential .

Commercial 163 161 157 154 151 Industrial . 10 9 10 9 9 Other 3 3 5 5 5 1,598 1.578 1.558 1,532 1.504 Totals Price per KWH-all customers (cents) . 6.38 5.68 4.59 4.18 4.14 tal includes the installed capacity of the Three hiile Island nuclear generating station Unit No. I of 800 5!W for all periods and Unit No. 2 of 906 11W for 1978 through 1981. The reserve ("a, excluding these units for 1981,1980 and 1979 would be 8.9"c. 6.3"c. and 6.2c , respectively.

tbl Summer peak.

'cl Winter peak.

33

Suppl:m:ntary Inform ti:n Concerning Inflation Effects (Unrudited)

INTRODUCTION: The following supplementary information is supplied in accordance with the requirements of FAS No. 33. " Financial Reportmg and Changmg Prices". FAS No. 33 requires companies to explam the effects of inflation upon their operations by applying two methods to adjust conventional historical cost financial statements for the effects of changmg prices. These methods are: (D the " constant dollar" method, and a the

" current cost" method.

Both methods employ a number of judgements and experimental estimating procedures presenbed by FAS No. 33 in an attempt to approximate-thnffects of inflation. Consequently, the Cor > oration cautions readers to view these data as estimates, rather than as any precise measurement.

Censolidated Statement of Income Adjusted for Changing Prices in Thousands Conventional In Average 1981 Dollars Historical Constant Current For the Year Ended December 31,1981 Cost Dollar Cost Income Statement Operating Revenues * $2.065.487 $2.065.487 S2.065.487 .

Entrgy Costs 1.008,582 1.008.582 1.008.582 Depreciation 145,962 312,855 333.259 Other Operating Expenses 653.327 653.327 653,327 Income Taxes 23.946 23.946 23.946 Total Operating Expenses 1.831.817 1.998.710 2.019.114 Operating Income

• 233.670 66.777 46.373 Other Income and Deductions 16.988 16.988 16,988 Interest Charges 187.687 187.687 187.687 Preferred Dividends 42.427 42.427 42.427 Income ILoss) Pefere Extraordinary items 20.544 4146.349) (166.753)

Extraordinary Items: Thil 1 and T3112 21.300 30.204 28.292 Other 157,748) 157.748) 157.748)

Income ILossl Available for Common lexcluding current year reduction to recoverable costP S 115.904) $ 1173.893) $ 1196.209)

Etrnings (Lossi per Common Share s 10.2 61 s 12.541 s 13.20, Effect of Changing Prices on Assets and Liabilities Current Cost Increase in Net Plant Held During 1981 S 662,743 Lxs: Increase in Current Cost Net Plant Attributed to General Inflation During 1981 643.196 Current Cost Increase, Net of General Inflation 19.547 Current Year Reduction to Recoverable Cost 3 (168.0941 1165.4096 Reductions Due to Depreciation Differences

-Expensed (166.893) (187.2971

-Capitalized (1.057) (973)

-Extraordinary Items: TS1I I and T1112 s.904 6.992 Total 1981 Reduction to Recoverable Cost 1327.1401 (327.140)

Grin from Decline in Purchasing Power of Net Amounts Owed 170.346 170.346 Nu Erosion of Common Stockholders' Equity $ 1156.7941 $ (156.794n

• Revenues, operating income, and income (lossi available for common have been adversely affected by regulatory disallowances of operating cxpenses and return requirements associated with T511-1 and T5112 Isee Note 11.

CONSTANT DOLLAR BASIS: Constant dollar amounts represent dollars of equal purchasing power, as measured by the Consumer Pnce Index for All Urban Consumers (CP! U). By this method. historicalinvestments in physical plant items are restated, using the CPI U. to amounts in present day dollars having the same purchasing power as the histoncal dollars had when origmally invested.

CURRENT COST B ASIS: Current cost amounts also restate historical physical plant investments to present day dollars. However specific price indexes applicable to the various types of plant equipment are applied rather than the generalinflation CPI U index. Specific pnce indexes more closely reflect the changes in purchasing power of surviving plant investments from the dates these were origmally acquired. The specific pnce indexes employed are individual company equipment cost indexes or the Handy Whitman Indexes of Public Utility Construction Costs.

510NETARY AND NON 510NETARY ITEhtS: A key concept in understanding the data adjusted for inflation is the distinction between monetary and non-monetary assets and liabilities.

Stonetary items are those assets or liabilities which are or will be converted into, or paid by, a fixed number of dollars regardless of inflationary changes. Holding assets, such as receivables, prepayments, and inventories, during periods of inflation results in a loss of purchasing power because the amount of dollars received in the future will purchase less. Holding c4 sh as an asset also results in a loss. sinular to what happens to savings accounts, as these dollars will buy less in the future due to inflation. Conversely, holding monetary liabilities dunng periods of inflation results in a purchasing power gain because payment in the future will be made with dollars of diminished purchasing power. similar to what occurs with a home mortgage.

Non-monetary assets and liabilities, such as property, plant, and equipment. do not gain or lose purchasing power solely as a result of general price level changes, but rather are affected by changes in specific prices for the related physicial property. For this reason, the Corporation considers tha current cost method to be preferable to the constant dollar method which applies the CPI U to all physical property investments without regard to specific property and equipment price changes.

PLANT. PROPERTY, AND EQUIPh!ENT: These investments are considered to be non monetary items. Estimated utility plant was d termined under both the constant dollar and current cost methods by applying the indexes specified above to the historical cost of utility 34

. e plant by vmtages and to related accumulated deprecistion. Neithtr of these restatements of the purchssing power investsd in surviving utility plant should be viewed as representing replacement cost or current value of existing plant productive capacity. The actual replacement of present facibties will occur over many years as future facilities, different in kind from present facilities, are constructed and placed into service.

G AIN FRON! DECLINE IN PURCHASING POWER OF NET 510NETARY ITE51S OWED: Since the Corporation owed net monetary liabihties sprimarily long term debt! during a period in which the purchasing power of the dollar declined, the inflation adjusted statements show the Corporation experiencing a net gain in purchasing power. This gain is strictly an economic concept and unfortunately is not realized in cash.

As a result, this gam amount does not represent funds available for actual use or for distribution to shareholders.

DEPRECI ATION EXPENSE: The current year's provision for depreciation for each inflation cost method was determined by applying the same methods and rates as used in the historical financial statements to the restated property, plant, and equipment investments.

OTHER ITEllS: In accordance with FAS No. 33, revenues and all expenses other than depreciation are considered to reflect the average price level for the year and accordingly remain unchanged from those amounts as reported in the Corporation's primary financial statements.

Energy costs. including fuel. power purchased and interchanged. and changes in deferred energy cost balances, have not been restated from their historical costs. Regulation limits the Corporation's recoveries of these items to actual historical cost through energy cost adjustment clauses in basic rate schedules. Consequently, energy and fuel costs, and related fuelinventories, are effectively monetary items.

Income taxes included in the inflation adjusted statements remain unchanged from those amounts presented in the primary financial statements, since present tax laws do not allow deductions for depreciation adjusted for inflationary effects.

INFLATION EFFECTS AND RATE REGULATION: Present regulatory ratemakinglimits the Corporation's recovery of plantinvestments and other expenses to historical cost amounts in charges for service to customers. Therefore. the excess of constant dollar or current cost utihty plant over historical cost is not recoverable in rates. The amount of this excess that accumulated es a result of inflation during 1981 is shown as a current year reduction to recoverable historical cost plant. Further non-re:overable amounts are included in the constant dollar and current cost depreciation amounts for 1981. The total of these reductions for 1981 are mdicative of the additional cash flow from depreciation required to preserve the purchasing pcwer of invested capital While this effect is partially offset by the gain from holding long term debt. the Corporation has a net purchasing power loss that erodes common shareholder interests and which can be overcome only as a result of appropriate recognition in the rate regulatory process.

Five Year Comparison of Selected Financial Data

• In Thousands Except Per Share Data 1981 1980 1979 1976 1977 Yen Ended December 31.

Operating revenues As reported $2.065.487 $1.831.741 $1.490.154 S1.326.644 $1.252.013 In 1981 average purchasing power 2.065.487 2.021.743 1.867.148 1.849,426 1.879.054 Income (Loss) before extraordinary items As reported $ 20.544 $ 20.591 $ 95.783 $ 138.774 5 142.775 in constant dollars (146.349) (133.172) (14.906)

In current cost dollars" (166.753) (159.9321 (54.054)

Earnings (Lossi per share before extraordinary items As reported $ 0.33 $ 0.34 S 1.56 $ 2.30 $ 2.50 In constant dollars (2.39) 12.17) (0.241 In current cost dollars" 12.72) (2.61) 10.8 8)

Cash dividends per common share As reported S 0.00 $ 0.00 $ 1.20 $ 1.77 $ 1.70 in 1981 average purchasing power 0.00 0.00 1.53 2.46 2.56 51arket price per common share at year-end As reported S 6.750 $ 5.000 $ 8.625 S 17.500 8 20.875 In 1961 average purchasing power 6.532 5.271 10.219 23.494 30.555 Net plant assets fin 1981 year end dollarsi"*

In historical cost dollars $3.871.243 83.729.452 $4.084,619 53.948.821 $3.687.615 In constant dollars 7.557.483 7.581.428 8.364.332 In current cost dollars" 7.825.652 7.902.999 8.815.682 Net assets at recoverable cost In historical cost dollars $1.823.244 S1.807.323 $1.785.556 51.757.554 51.702.148 In constant dollars 1.764.330 1.905.283 2.116.309 In current cost do!!ars" 1.764.330 1.905.283 2.116.309 Current cost increases. net of generalinflation. after current year reduction to recoverable cost" $ (145.862) $ (332.5001 5 (456.374)

Gain from decline in purchasing power of net amounts owed S 170.346 s 281.773 $ 352.841 Selected balance sheet data at year end thistorical costs) i Total assets 55.054.021 $5.042.972 54.991.994 $4.612.683 54.305.443 Long-term debt 2.109.336 2.105.439 2.148.972 2.017.123 1.924.650 Cumulative preferred stock-mandatory redemption 77.335 82.376 87.396 92.403 94.556 Average common shares outstanding 61.264 61.264 61.218 60.217 57.208 Average consumer price index 272.4 246.8 217.4 195.4 181.5 December consumer price index 281.5 256.4 229.9 202.9 186.1

• All constant dollar and current cost amounts expressed in 1981 average dollars. except as noted.

" Prior years' current cost amounts adjusted to 1981 by applying the CPI U indexes. as required.

"* Includes $5.482 for Other Physical Property and excludes $36.796 for the T5112 damaged core. The latter is treated as a monetary item for FAS No. 33 disclosure purposes. .

, 35

Directors Officers Lruis J. Appell Jr.t.u General Public .

President Susquehaima Broadcar.ing Co.

Utilities Corporation Y:rk, Pennsylvania 1l405 William G. Kuhns (Communications and Chairman and Chief Executive Of ficer Consumer Products)

Herman Dieckamp John F. Burdittra President and Chief Operating Officer Chairman and Chief Executive Officer ACF Industries. Inc. Verner H. Condon Nsw York. New York 10017 Vice President and Chief Financial (Equipment Manufacturing) Officer H:rman Dieckamp Edward J. Holcomoe President and Chief Operating Officer Comptroller GIneral Public Utilities Corporation John G. Graham Parsippany New Jersey 07054 Treasurer t

Vcl B. Diehl ,J Helen M. Graydon Former President and Chief Operating Officer Secretary Nabisco Inc.

Ecst Hanover New Jersey 07936 Grace Wade (Consumer Packaged Products) Assistant Secretary Dr. David L. Grove!J President David L. Grove Ltd.

Armonk New York 10504 Subsidiary Company (Economic Consultants' Presidents and Chief .

William G. Kuhns Chairman and Chief Executive Officer Operatm.g Officers General Public Utilities Corporation Robert C. Arnold Parsippany. New Jersey 07054 GPU Nuclear Corporation John F. O' Leary 33 Herman Dieckamp Energy Consultant GPU Service Corporation Washington D.C. 20008 James R. Leva Dr. John W.Oswaldt a Pennsylvam,a Electric Company President Pennsylvania State University Floyd J. Smith University Park. Pennsylvania 16802 Metropolitan Edison Company Paul R. Roedel!J William A. Verrochi President and Chief Executive Officer Jersey Central Power & Light Company Carpenter Technology Corporation Reading. Pennsylvania 19603 (Specialty Metals)

M.mber of Audit comnutte.

James B. Liberman.

%mber of compensation comnuttee General Counsel

%mber of Nommating Comnuttee Transfer Agent and Registrar-Common extra copies, please write to the Hartford Stock National Bank and Trust Company. P.O.

Hartford National Bank and Trust Company Box 210. Hartford. CT 06101. Please enclose 150 Windsor Street. Hartford. CT 06115 the mailing labels from the extra copies.

Agent-Dividend Reinvestment ani Stock For further information Purchase Plan-Common Stock Copies of GPU's " System Statistics" and of Hartford National Bank and Trust Company the Corporation's 1981 annual report to the P.O. Box 210. Hartford CT 06101 Securities and Exchange Commission will be Too many reports? available after March 31.1982. Write to You may be receiving extra copies of the Miss Helen .}1. Graydon Secretary. General Public Utilities Corporation.100 Interpace GPU Annual Report because of multiple Parkway Parsippany. NJ 0 054.

accounts within your household. To stop the 36

} I VERMONT

/

• , LAKE ONTARIO NEW NEW YORK MASSACHUSETTS l LAKE ERIE ONNECTICU o

\ I \

ISLAND PENNSYLVANIA  !

(, Y ,~ ,

OHIO MARYLAND NEW JERSEY l

m _

WEST VIRGINIA VIRGINIA 1 pany and Pennsylvania Electric / ne Aload Mods of the oper-GPU-A Profile of the Company. The GPU Service Cor- ating companies arein balance with System and the poration provides a broad range of winter peaks in Pennsylvania and Customers It Serves professional services to the operating summer peaks in New Jersey.

companies and a fifth, newly formed The General Public Utilities System subsidiary, GPU Nuclear Corpora-companies provide some 32 billion tion, is responsible for operation of kilowatt hours of electricity for the System's nuclear generating about 1.6 million customers (more facilities.

than 4 million people)in New Jersey and Pennsylvania.These customers About 33 percent of the electricity i livein about half the land area of the distributed by these companies is two states. used by residential customers,25 g .; ,

percent by commercialaccounts,36 The operating companies of the percent by industry and 6 percent by other customers, N

System are Jersey Central Power &

Light Company and,in Pennsyl- l l

vania, Metropolitan Edison Com-N j

Operating Companies' Statistics I

- Sr.les Mix j Residential Electric Peak .

Revenues Total Assets Commercial Customers- Sales Load Number of l t

(5000) ($000) Industrial Year End (MWH) (MW) Employees

[ i

$1,013,595 $2,190,242 40 % 29 % 29 % 714,779 12,924,999 2,517 3,724 l

$ 478,771 $1,298,835 32% 23% 41% 364,874 7,759,206 1,52 2.882

$ 579,194 $1,549,936 28% 22% 41% 517,904 11.327,581 2,177 4.052

$2,065,487 $5,054,021 33 % 25 % 36 % 1,597.557 32,011,786 6.215 12.030*

4

• Includes employees of GPU Nuclear and GPU Service Corporations

' l