ML20063C817
| ML20063C817 | |
| Person / Time | |
|---|---|
| Site: | Palo Verde  |
| Issue date: | 08/23/1982 |
| From: | Wall E EL PASO ELECTRIC CO. |
| To: | |
| Shared Package | |
| ML17297B653 | List: |
| References | |
| NUDOCS 8208270388 | |
| Download: ML20063C817 (44) | |
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N ME COVER - CO rate Information A late afternoon-after Figures appearing in this report are dark double exposure presented as general information and not in
- of the El Paso skyline connection with any sale or offer to sell or .
captures the theme of solicitation of any offer to buy any secunties e this year's annual report, " Energy for nor are they intended as a representation by , c the Sun Belt." the Company of the value of its secunties. 99 "
} ,
Annual Meeting c; Shareholders . All Shareholders are invited to attend the 1982 Annual Meeting of Shareholders on Monday, May 17,1982, at 10 a.m. El Paso time, in the El Paso Civic Center, the North Hall, El Paso, Texas. Proxies for the meeting will be solicited by the Board of Directors in a communication to be - mailed in early April. This Annual Report is not ' ~
- a part of such proxy sohcitation and is not intended to be used as such.
A copy of the Company's most recent 10-K Report, filed by El Paso Electric Company with the Securities and Exchange i, amission, will be made available to She iholders without charge upon written request to: Theta S. Fields, Secretary Contents El Paso Electric Company Post Office Box 982 Highlights 2-3 El Paso, Texas 79960 Message to Shareholders. .4-5 Dividend Heinvestment Communities We Serve . .6-7 Another year cf gro.cth was noted m the Company's Company Operations,1981 8-11 ' Dmdend Rmnvestment ar.d Stock Purchase Plan. The ' plan is available to ho!ders of record of Common Stock Serving Our astomers 12 - and is a convenmnt methai of investmo dmder.ds and As An Employer.
- cptiona! cah piyments in new shares without payment of
.13
- commtssons and fees. The 1982 dmdends remvested Directors & Executive Officers und"r the plan are eha.ble fer the exc!usion provided by the Econom:: Recovery Tax Act of 1981. An enrol: ment of the Company 14 card may bubtamni by wntmo the Compmy Secret 3ry. Management's Discussion and Common Stock Shareholders Analysis of Financial Condition The Commen Stock of the Comp 3ny is held in and Results of Operations 15-17 every state of the man, the Detnet cf Columba, some Market for the Company's
- U.S. t-rntones and many forem countnes. The nurrier Common Stock and Related of Shareholmrs increased from 42.132 at Dm aber 31.
' 1980 to 45.952 at Decemtwr 31.1981. Our records Security Holdor Mattere 17
""'"Y Shareholders own 1"d*"'""' " ' 'h" C gess than 500 rhares each.
Selected Ouarterly Financial Data 18 l Toll-Free Telephone System Installed Report of Independent Certified The Ccmpany recently instaned a toll f ree te:ephone Public Accountants 19 , system for the converuenm of Sharehdders who may Consolidated Financial ( have questions er mquines concerning ther accounts. If
- you are cahtnq from w
- thin Texas tr.e numter is Statements . .20 36 j 800 5921634. Elsewhere in the U.S. ca:! 800-3S1-ICl . Supplemental Information Transfer Agents Concermng the Effects National Bank ef North Amenca. 80 Pme Street, New of Inflation . .37-39 York, New Yort 1000S. (Comrnon and Preferred Stock) Selected Financial Data. .40-41 The State Natmnal Bank cf El Paso Selected Operating and Post Othee Box 1072 Statistical Data 42-43 El Paso, Texas 79W (Common Stock On'y)
2
= O erating Revenues (000) Operating Expenses (000)
HIghl*ghts i uFis9%o.e,1980 uPis.is e.er1980 Net Income (000) ue 37.7% e.e,1980 Not Income Per Common ss.,e uP 8 8% o.e,1980 At December 31,1983 1 1 $2 .373 1%I $200,0'M 1911. $5E69/ 1931 - $2.23 01981 Percentage Over 1980 01980 Figures _ [ em. m , h -
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* ...m.a ) a!.d .. . ._ a a l'H) .1210313 FW) $172 2% FH) - $41.177 1%0 $2 Or, Number of Customers Number of Employees Peak Load Net Generating Capacity l UP 3.0% over 1980 UP 4.0% over 1980 UP 2.5% over 1980 SAME as 1980 1981. ifo,388 1%1-1,025 1981 734000 KW 1931 977,000 KW i
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l y ; l .+ , , st .l A Ic0. im322 veo . % ru) . 7irtmo KW 1980 - 977.000 KW At December 31, 1981 1980 Operating Revenues (000). $ 250,379 $ 210,513 Operating Expcnses (000) . $ 200,094 $ 172,296 Net Income (000). $ S6,697 $ 41,177 Net income Per Common Share $ 2.23 $ 2.0S Dividends Paid Per Common Share . $ 1.25 $ 1.13 Book Value Per Common Share. $ 11.54 $ 10.82 Common Shares Outstanding. 25,110,066 20,48S,067 Number of Common Shareholders. 45,952 42,132 i Number of Customers . 186,388 180,922 Number of Employees . 1,02S 986 Peak Load 736,000 KW 718,000 KW Net Generating Capacity . 977,000 KW 977,000 KW Average Annual Residential Use. 5,849 KWH 6,065 KWH Fuel Expense (000) . $ 107,562 $ 35,461 Energy Sales 3,698,872 MWH 3,728,022 MWH Utility Plant (000) . $ 898,333 $ 715,190
l 3 hvulends Paid Per Common Book Value Per Share Common Shares Outstanding Number of Common ihare UP 10.6% over 1980 UP 6.7% over 1980 UP 22 6% over 1980 Shareholders UP 9.1'6 over 1980 981 - $1.2S 1981 $11.54 1981 25.110.066 1981- 45.952 eae se
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;980. $1.13 IW . $10 82 IGRO - 20 489 067 IW - 42.132 Sverage Annual Residential Fuel Expense (000) Energy Sales (MWH) Utility Plant (000) 1se DOWN 3.6% from 1980 UP 12.7% over 1980 DOWN .8% from 1980 UP 25.6% over 1980 981 - S.849 KWH 1981 $107.562 1981 - 3.698.872 1981 - $898,333 9 I 8 2' 7 33 54 E :Up- ...
980 6.065 KWH 1980 - $95.461 1980 - 3.728.022 l1980 L .S.190 l i i l L
4 A share in the Sun Belt. Shareholders: " Energy for the Sun Belt." To follow, we'll give you our unique view A message from of the Sun Belt as it relates to Texas, New Evern R. Wall, President. Mexico, Mexico, and how it also relates to our investors, our Company, our customers, our A sense of optimism and excitement employees and our communities. desenbes our view of the future for El Paso It is generally recognized that the Sun Belt Electric, the peop!e and the area we serve. begins on the west coast and follows the The Company finished 1981 much better southern tier of states to the east coast. It prepared to respond to the needs of customers, extends along the border with Mexico, a shareholders and employees in the coming country with a surging economy fueled by years. energy wealth just now being tapped. Our optimism stems from the progress Growth, prosperity and a vibrant future made toward our goal of enhancing the characterize the prospects for the Sun Belt financial strength of the Company through in the coming years. continued improvements in the overall financial "In sheer numbers," notes Edric Weld Jr., integrity. In addition, the innovation, a Cleveland State University urban affairs I dedication and foresight of our employees, expert, "five states-Cahfornia, Texas, Florida, w' coupled with hard work, has projected our Arizona and Georgia accounted for half the Company toward its second goal of becoming growth in U.S. population from 1970-1980. We the number one corporate citizen in our have seldom seen such a uniform shift from one s community. part of the country to another.. ..This is a shift Both goals were achieved while from the Old World to the New World." maintaining a consistently high level of service While the nation's population rose in that l and reliability to our customers and a period by 11.4%, Texas exploded by 27.1% competitive . ate of return to our Shareholders. and New Mexico by 17%. We live in an important region of the The Sun Belt dominates a Chase nation-The Buckle on the Sun Belt-and for Econometrics forecast of the 50 fastest j that reason we have titled this Annual Report to growing job markets because " lower wages, lower taxes and good weather have drawn
" Growth, business away from the Northeast and prosperity and a Midwest." Of the ten fastest growing vibrant future metropolitan centers, according to the national characterize the forecasting firm, four are in Texas, one of which prospects for the , .l l is El Paso.
Sun Belt..." Newsweek has called Texas an " Economic
- Evern R. Wall, llllll l Superstate."
President and il Money Magazine calls Texas " ..an empire to itself" and continues to note in a Chairman of , the Board e report on "The Surging States" that: "The
..i e West's appeal today - and tomorrow - rests ai 8 on two promises, sometimes kept, sometimes 8
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g , not. They are the promises of prosperity and E: that elusive abstraction known as quality EEE 300 333 g33 gg.8 itill}ill[
- e report continued: "Whatever the
+
. ' .- # problems of the West, its energy resources N ',j alone are sufficient grounds for optimism over its future...they are creating across the West a
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demand for construction, health facilities, transportation planning, social services,
- hotels, restaurants and plenty of other retail businesses."
Today, the El Paso Electric service area holds more potential than ever for people who want to work, attend school, retire, start a ushss or inest kom afar in a company 6afs Mills Building likely to thrive. In short, the spirit of the El Paso Electric El Paso Southwest characterizes the entire Sun Company
, Belt region and will offer tempting investments Headquarters
S m companies that stand to grow along with the ownership in the Palo Verde Station to M-S-R region. Public Power Agency in California. El Paso Electric, serving South Central New Mexico and Far Wost Texas, has been one
- We have contmued to excel in pr viding reliable, efficient service to our of those growing companies during 1981.
astomers and in assuming a leadership role in We are convinced that we can achieve the a mmmumks, M d wM am mM in quantity and quahty of growth that is necessary detail in this report. to create j,obs for an increasing population and at the same time afford the people of this area
- In order to provide an opportunity to its an acceptable standard of living, encompassing customers to become owners of the Company, a a higher quahty of life while safeguarding the Customer Stock Purchase Plan has been environment. At the same time we will strive adopted. We anticipate the plan will attract as toward assuring the maintenance of a many at 2,000 new shareholders from our reasonable social balance and improving the customer base during 1982.
average level of consumption of goods and We're proud of our participation in the services through the availabihty of an abundant Sun Belt's growth: and our accomplishments supply of electrical energy. and vital role in the community as a company, You ve already seen our expanded graphic as a servant to our customers, as an employer highlights but I would like to draw your and as an investment oppor unity. We invite attention further to some important points: you to explore these accomt lishments in the
- Income growth continued in 1981 as net details which follow.
income per sham of common stock increased to $2.23 in 1981 from $2.05 in 1980. Operating revenues for the year increased to $250.4 million from $210.S million a year ago, while - s ,, operating expenses incmased to $200.1 million in 1981 from $172.3 million the previous year. h f"/
- The Board of Directors increased quarterly dividends on Common Stock by 1.S Evern R. Wall cents in March and an additional 1.5 cents in President and Chairman of the Board September, increasing the indicated quarterly dividend on Common Stock to 32 cents.or $1.28 for the year.
- The Company continued in 1981 to make substantial sales of energy to Southern California Edison Company which provided approximately $6.9 million in annual revenues.
- We have for the past eight years aggressively pursued a large-scale fuel conversion program through our involvement in the Palo Verde Nuclear Generating Station designed to reduce dependence on petroleum-based fuel and meet the growing energy demands of our customers. Palo Verde is on 1977 19g1 the threshold of beginning commercial RETURN ON opera; ion in 1983. COMMON EQUITY
- The Company plans to open a vital E Industry Average.
interconnection with Southwestern Public -
- O El Paso Electric Service Company in the next 2 years to provide : retum above an additional source of needed electricity industry average.
to our service area. The agreemen't calls for
- Projected estimate the purchase of 100 megawatts (MW) of from previous S-year interruptible electric energy from average.
Southwestern.
- While our support for nuclear energy remains strong, the Company in 1981 entered .,
into an agreement to sell a portion of its
6 According to Chase Econometrics, a , Tha Sun Belt national forecaster, El Paso is expected to be I C2mmunitieS We servo. the eighth fastest growing population center in the United States with annual growth projected The Electric Company supplies electricity at 3.6%. to approximately 10,000 square miles of West El Paso has grown so fast that, in terms Texas and South Central New Mexico. The of percentage of population change, it was communities served by the Company extend surpassed in the last decade only by San Jose, from Van Horn, Texas to Caballo Dam in California and equaled only by Phoenix, Central New Mexico. Arizona. The cities of El Paso, Texas, and Las El Paso is the largest border port of entry Cruces, New Mexico, hold the majority of the for imports from Mexico. Last year over one population of our service area. From 1970 to billion dollars worth of goods passed through 1980 the population of the City of El Paso rose the border cities of Juarez, Mexico, and El Paso to over 425,000: Las Cruces to approximately destined for locations throughout ine U.S. The S1,000. El Paso is the 28th largest city in the fact remains: Juarez is good for the El Paso U.S. and fourth largest in Texas. Las Cruces is economy and vice versa. the second largest city in New Mexico. Two factors attributable to our border location continued to inject optimism into the unique border economy during 1981. First, the " Twin Plant" program continued to attract major new businesses to the area; COnNSE N M construction assembly and manufacturing 400 MILES ELEPH NT BUTTE TO ALBUQUERQUE CABALLO ALA M O N , DAM HOLLOMAN A F B MAR APOLLO HATCH '
\
M SS IRANGE LAS CRUCES
"? @MNa PALO ERDE %-
4% MILES ANTHONY NEWMAN FORT BUSS RIO GR ANDE NEw MEXICO , MEXICO [AREZ DO
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Tg. FABENS 1 1 SIERRA BLANCA Service Area Map i g VAN HORN -COMPANY LINES o y COMPANY 34SKV hamen OTHER LINES
& POWER STATION
7 [ operations in Juarez and technical, distribution .and management payrolls in El Paso facilities. ! l The ElPaso Times noted: " Political e istability compared to other Third World / -
/
{ countries, a large low-cost labor force, high i productivity and an adequate framework of ;. . , l government regulations that allow companies to
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work in their own environment are the major 4 ^ L l selling points te be offered businessmen N l' .:. .' / , ( ? . ' building plants in Mexico." f;' ' 3 ,
~' -
i l These " smokeless" industries are, by and -
; t large centered around electronics and lappar,el. In 1981 nine major firms moved b.J J.D :
]' A
. ., f .
,i operations into the El Paso area including , _ . ' "! -
.Q { ,- ;-!, '
Contico International, Woodhead El Paso, ' ( I. ,,; 1 -. : . El Paso Wire Inc. and Dietzgen Corporation.
- Two major expansions melude ATARI Inc. and R ;y h.h.7 f f I
. . ., f . ' , .. .
Dale Electronics. h .
-g^ > ~ r Also,1981 was a " boom" year for industrial 7
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. . ~
%9 l development in the Las Cruces and Santa i n, ., i. >-:
- Teresa, New Mexico, industrial areas. Eight e.. -
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' ~ ~ ~ ' :5 j firms located new facilities in these areas during -
1
~j.p - ( .:*'
j the first eleven months of the year. Among $ .
, ; G: .
i these companies were Entersteel Products Co., 4 : .1 7 ~, . ! Farah Manufacturing Co., Inc., Micro-Switch : ..
'l~_c: i=~- ( 7 ?
l(a division of Honeywell Corp.), Prepared M,' .
.J. .
_ 1. l Foods Inc., Semco Manufacturing Inc., Septor 's % ' b" ' .;
> ,' '.s " ' t ~
! Company, SWIG (pecan processing) and Tri- - ! Color, Inc. yc ' _ , "I :~.?+" - . . ' 'i' sc . - ! One factor which could have a positive -I!" ~ Oi.1 ' _ ";. 'k " -i 2 1.
-3 f.- W " < . - '
a d i effect on the local economy is the completion of -
- a 16-inch natural gas pipeline from the heart of Las Cruces, United Way, the League of United " Planning for fuel-rich Mexico to Juarez. It is expected to Latin American Citizens (LULAC), Junior future energy
' eventually attract heavy industry to the border Achievement, The Boys' Club and the " hands-I needs is an area. on" Insights Science Museum housed in Another economic plus was the designation and the start of construction the basement of the Company's corporate funchon at N"' headquarters. of a Foreign Trade Zone, as well as the Key to the Company's continuing The Electnc construction of a 300-room Marriott Hotel corporate responsibility role in the community Company., , in El Paso and the opening of a $12.2 million is El Paso Renaissance 400, a broad community - Harry Zimmer, regional shopping mall in Las Cruces. revitalization program which recruited Vice President, During 1981 the relocation and expansion Company President Evern Wall as its chairman. f"9 f ""'i"7' i of firms to El Paso has resulted in nearly 4,000 The goal of Renaissance 400 is to promote Transmission new manufacturing jobs in the city. "d E* "U " and coordinate an increased and broader i Approximately S,000 indirect jobs, mainly in involvement of private enterprise in the the service sector, have also resulted. In El Paso continuing development and improvement of alone, employment is up 3.3% over 1980 the economic and social growth of our city. i figures to 163,400. The Company has assumed this leadership , In Las Cruces, nonagricultural jobs have role and very strongly apports sound, planned l risen by approximately 15.6% since 1974. This area growth because it enhances the area's i has resulted in a total employed work force of overall economy and broadens the base on 35,000, up S.2% smce 1980. which the city levies taxes, consequently i El Paso Electric has made major enhancing the ability of the city to provide contributions in the communities it serves by needed services. accepting the respons:bility of being one of the "All of the people in this area are our area's major home-based, home-managed customers," says Wall, "and we have a very corporations. unique responsibility to our communities. We Corporate responsibility to the community are a leading corporation in the support of was reflected in the Company's leadership role major civic projects. I believe that 1981 during 1981 in El Paso's quadricentennial, the proved that and in 1982 The Electric Company 1 4 Centuries '81 celebration, as well as strong will continue to accept a more responsible role support for public television in El Paso and in the community." t
8
. customers add <d durino 1981, and the ave-The Company's operations residential customer usal 5,849 KWH durt and new developments the year, a decrease from 6,065 KWH in 1980.
- Commercial and industrial customers dun.ng 1981. ured 1,736,182 MWH, an increase of 129,182 Major factors and indicators contributing from 1980. The Company had a net gain of over to the Company's operating revenues during 500 new customers in this category which 1981 were: includes schools, hospitals, other public
- Total sales of electricity decreasmi facilities, stores and ofhces.
slightly in 1981, but sales to customers in the
- Southern California Edison Company Company's service area increased to 3,564,000 paid approximately $6.9 milhon to the megawatt-hours (MWH). This reflects an Company for electricity and firm capacity in increase of 4.1%. A record bieaking system 1981 the semnd year of a three year contract.
peak load of 736,000 KW was reached on June
- Rates and regulations: Retail base 22, an increase of 2.5% over 1980. During elmtric rates did not increase in either the 1977 1981 ,. m- Company's Texas or New Mexico jurisdictions
_l MEGAWATT HOUR - in 1981. (MWH) SALES [. '
.; In Texas the Company is operating in Commercial and O b
~
_ _ . compliance with an agreement reached in Industrial Sales August 1980 between the Company, the City of l
' El Paso and the Public Utihty Commission of Residential Sales C -
Other Sales E Texas. The Company agreed not to implement [
- ~ ~ - . - a base rate increase until after Apnl 1,1982,
*In millions.
which was voluntarily extended by the Company to October 1,1982. As part of the final agreement, the Company agreed to a hearing regarding its level of participation in the Palo Verde Nuclear Generating Station. The hearing is tentatively 77 78 79 80 81 scheduled to take place during 1982 but it could be postponed indefmitely or canceled 1981 approximately 78% of the Company's due to the Company's agreement to sell a revenues were derived from Texas customers, portion of its Palo Verde entitlement. The 16% from New Mexico customers,3% from Commission has on two previous occasions sales for resale customers and 3% from off- certihed the Company's full paWeipation system sales. in the project.
- El Paso Electric's net generating In New Mexico the Company is operating capacity is 977 mmawatts (MW) from four under a July 1980 rate order.
power stations: Rio Grande Power Station While the Company is keenly aware of the (333 MW), Newman Power Station (463 MW), effects of rising energy costs on its customers, it Copper Power Station (69 MW) and an has been able to hold the line on further base entitlement from the Four Corners Power rate increases, even with its heavy construction Station in northwestern New Mexico (112 MW). schedule. Although fmancialindicators were
- Residential electricity usage was strong in 1981, increasing costs affecting the 966,487 (MWH) in 1981, a shgnt de crease from Company will make it necessary to seek rate 1980. There were 4,855 new residential increases in both jurisdictions sometime in late 1981 REVENUE 1982 for implementation in early 1983.
Residential DOLLAR SOURCE Major expense items and developments Commercial, Large d"II"U 190II"Cl"d d2
- Ft.el expenses for the year were up 8*I'jjhoPuikik 12.7% to $107.6 million. Approximately 43 cents of each revenue dollar went to pay the Other a Company's fuel bill.
Sales for Resale Off System Sales 5 In N, h Omp n/s W mu 6 7-F' generate electricity was 86% natural gas,13%, i Commercial, Small lljlli oe o coal and 1% oil. Approximately 96% of fuel l I costs went for natural gas,3% for coal and 1% for oil. The Company paid an average of $2.93 h i
,pM rMf per million BTUs for natural gas, up 17% over g% .
!- # 1980; 63 cents per million BTUs for coal, up
. titillllllup' 37% and $5.02 per million BTUs for oil, up
9 Hw mp ny purchase electricity at a 1981 COST PER MILLION BTUs fN OST PER BTUs
* ' ' ' ' ' "" 9'" *'*"Y Y5 ** *0 OF ENERGY r natural gas.
ha GENERATION
- Environmental protection measures are O Oil important to El Paso Electric. The Company's h! B Natural Gas Newman, Copper and Rio Grande Power on -- .
n Coal Stations are in compliance with all existing
,5 4 g[4 environmental regulations and standards. A nu e ; large-scale environmental protection 4 f installation is currently under way at the coal-gg fired Four Corners Power Station (shared with S fg other utilities in the west). Particulate removal y equipment construction at the Station is L scheduled for completion in December 1982, j ;
while sulfur dioxide removal equipment is still in design stages and not scheduled for completion until late 1984.
- Research and development programs q on new energy producing sources and techniques are actively suprorted by the we ? -
"' W
^
a Company through a varie+y of means. p 44 i El Paso Electric is currently producing electricity from an experimental 20-KW on -
- 1% COAI.
15
) photovoltaic solar cell system installed at the Newman Power Station. The project, the first
- y. such installation in the country, started a two-year research-demonstration test period in June 1981. A joint effort with the New Mexico Solar Energy Institute (NMSEI), and supported in 1981 FUEL MIX part by a grant from the Department of Energy (DOE), the sun-to-electricity system is 19%. The Company has fuel cost recovery ,'There was no providing electricity to the control computer provisions in all of its jurisdictions. rate increase in of Newman Unit No. 4.
Fuel cost control was enhanced by the Texas or New The Electric Company along with the modification of natural gas facilities at Newman Mexico in NMSEI has also applied for a grant from the Station during the year, allowing it to utilize 1981...the Texas Energy Resources Advisory Council to interstate gas (the lowest cost fuel for local Company's conduct a feasibility study for a " solar pond" generation) as well as intrastate gas (higher, yet financial to be located at Newman Station. A solar pond less expensive than oil) depending upon would utilize high concentrations of salt water availabihty of the different fuel sources. indicators were strong enough for to trap heat which would, in turn, boil a El Paso Electric will gain even further secondary fluid and power a generator. control over fuel and purchased power costs us to be successful w2thout one...., se d h m e p p s d d W with the addition of nuclear energy and a this technology could feasibly work at night as proposed interconnection with Southwestern - Bill Ye E. Bostic, well as dunng cloudy days. With funding, the Public Service Company. Semor %ce President, project could begin as early as spring 1982.
- Nsw interconnection agreements were completed in late 1981 for the construction of a U " " CI I N 8'C#' .
Fuel 1981 R 125-mile, 345-kilovolt (KV) transmission line from the El Paso area to Artesia, New Mexico. Depreciation EXPENDITURE The hne is being constructed in conjunction Other Operatinq ! l
,y with Texas-New Mexico P wer Company which Expense 3
will own one-third of the line. Construction is I scheduled to begin in 1983 and when Interest Expense
~ ( p@g sf g$ a i
completed will provide an interconnection with Southwestern Public Service Company. A FC f a YC Retained Earnings direct current terminal to connect the two systems, which are not synchronized k(N b g ob 4 x
. .$ c ,
Ob p$4.* [ q electrically, will be built by Southwestern. The interconnection will make available 100 MW of interruptible electric energy Dividends ' i beginning in 1984 and will Taxes
10 I Four Corners Power Station I
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"The attention the An advanced study on a solar repowering palo Verde: nuclear power Company is project was started under a DOE grant in 1981.
The initial conceptual design study was for the Sun Belt. 1 directing to coal El Paso Electnc is a participant with four c nducted m 1979-1980. The proposal calls for and nuclear a field of mirrors ("heliostats") focusing the other Sun Belt utihties in the construction of the energy qoes not sun's energy on a central receiver, or power three-unit, Palo Verde Nuclear Generating
",ean it 2s tower, where water would boil generating Station,50 miles west of Phoenix, Anzona.
disregarding enough steam to provide an estimated 509 o Construction started in 1976 and the first of alternative , of the energy needed to operate Unit No. I the three 1,250-MW units is scheduled to begin energy sources. at Newman Station. The new study will commercial operation in May 1983.
- Donald Isbell, incorporate and refine new information into At the close of 1981, Unit No.1 was 95%
Vice President, the previous design and is expected to be complete with fuel scheduled to be on-site and Energy Resource completed in April 1982 and could lead to a loaded in late 1982. Unit No. 2 was 75% and Development prehminary engineering design grant during complete and due to begin operation a year Di'i81 " Se year. later in May 1984: and Unit No. 3 was 30% The Comp <my initiated a wind turbine site selection and installation project in 1981 a with two goals: (1) to determine the power c _ # ' '+
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f" producing potential of small wind-electric ~d- ' U% generating systems in the Company's service drea; dnd (2) to investigate interconnection requirements, ef fects on the electne system and the actual power producinq potential of a small (25 KW) wmd turbine system. In addition to conductmg its own research, O -
" si El Paso Electne also participated in research ,~
x - l and development through its membership in organizaticas including The Electne Power Research Institute, Texas Atomic Energy l Research Foundation and Western Energy I Supply and Transmission Associates (WEST). 1
11
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complete and schedukx3 for operation in 1986. some parts of the country. There are now about "As long as the Other participants in the Palo Verde 78 nuclear power plants in the United States nation needs Project include Anzona Public Service licensed to operate, supplying the nation with electricity, it is Company, Salt River Project Agricultural electricity that otherwise could require burning Improvement Distnet, Pubhc Service Company going to need nearly one and a half million barrels of oil of New Mexico and Southern Cahfornia Edison. per day. nuclear energy to El Paso Ekrtric owns a 15.8% undivided When electric power begins flowing to The supply much ofits interest (200 MW from each umt) in Palo Electric Company's service area from the Palo electrical Verde, but late in 1981 entered into an Verde Station in 1983, uranium fuel will be requirements. The assignment agreement to sell 25% of its added to the Company's fuel mix. One of the consumer will be participation (a total of 150 MW) to the M-S-R principal objectives of the Company for the the ultimate Public Power Agency. M-S-R is a Cahfornia past several years has been to convert from its beneficiary." consortium compored of the cities of Modesto, reliance on pe+roleum fuels toward the use of .-. Rolland York, Santa Clara and Reddmg. more abundant and less costly coal and nuclear Senior Vice The sale to M S-R is contingent upon both energy. Palo Verde represents a major step in President, parties obtaining all requisite approvals. M-S-R that direction. Power Supply is makmq monthly deposits of earnest money A successful energy production program is D' 10 " with the Company and will continue to do so based on sound planning principles. Planning until the sale is completed. The closing for the for future energy needs is an important function sale is projected to take place in August 1982. at The Ekstric Company and is, at the same The addition of nuclear fuel to El Paso time, growing in complexity. Just ar the Ekstric's fuel mix is expected to have a Company began preparing almost a decade stabilizing affect on fuel costs extending ago for Palo Verde it is also planning today through the 1990'.. in order to meet the needs of tomorrow's To generate electricity today and in the customers. future, energy supphes are needed that are . safe, clean, economical and available. That l hmits the choices to a very few. Clearly, nuclear energy is already an integral part of the nation's electric power supply system, l approachina 50 percent of the ceneration in
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"As a Company one full-time employee in Las Cruces.
we manufacture 8erVing Our CUSIOmerS. The Company's Community Services Section offers a mmber of programs ranging and distribute The Company,s primary function is to from present and future energy-related topics e ectricity, ht manufacture and distribute electricity, but its and electrical safety as well as conservation our product is product is service and this philosophy information. The programs are designed to service... continued to be accented during 1981 in help answer questions about energy and the
- fames Jones, a myriad of customer service programs. electric utility industry. During 1981 over Vice President, In an Area Development Department 26,000 personal contacts were made by l
l Mesfila Valley Program, 50 major industrial customers were employees of Community Services.
**I " called upon in 1981 by a management-service Several special customer programs team to discuss Company services. continued to be offered to the public, including Under another program, mandated by a do-it-yourself Solar Water Heating Workshop Congress and implemented through the DOE, in which over 100 customers participated in l
I the Company conducted over 1,700 1981. These individuals built a total of 268 solar l conservation energy audits on request panels with a net result of 104 new solar water by commercial and residential customers. heating systems being placed in service. The program is the continuation cf a Contacts and communications with the valuable service offered by the Company customer, while most relevant on a one-to-one for many years. personal basis, remains most cost-efficient
" Star Services," a service-oriented section through the use of mass media including active offering special assistance to eligible customers, advertising and public affairs programs.
including alternative methods of bill payment to customers over 62 years of age on a fixed income, low income persons or those with other financial difficulties, has been fully implemented now. In 1981 Star Services employees handled over 2,900 personal contacts. The section consists of four specially trained employees. A Star Services office was also implemented and staffed with
13 The Electric Company as a 7%c E, Sun Belt employer. For the first time in 1981, the number cf Y Company employees topped the one thousand . F ^. mark at 1,02S, u ' rom 986 in 1980. V Of this total:
- On the management level, of the 145 officers and managers,14.5% are female and i minorities represent 22%. t
- In the professional he!ds (151 employees), . .
e - l 39.7% are minonties and 23.8% # A . c.1. (f , of the total are female. r '
- 29.6% are female (compared to 28.7% in
- 1980) and 53.6% are minorities (up from S2.7%
!in 1980).
- 332 (32.4%) are members of Local 960 of N
! the International Brotherhcxx] of Electrical & 4
- Workers. A two-year labor agreement between the Company and Local 960 was finaliwd in ji
! February 1982, and became oflective on .- -
- Monday, March 1,1982. The contract contains
. a mutually acceptable wage agreement.
The Company actively supports an , affirmative action program and is an ' ' equal opportunity employer. *' The Company provides many training , , programs for its employees. In 1981 a supervisor orientation program was initiated to j better prepare employees advancing to higher ! positions. The program was instituted to " Dedication and Employms are also offered Company stock provide supervisory personnel new to high Perforinance through two plans. The Employee Stock supervision with the basics for operating and are not cliches Purchase Plan allows for payroll deductions to managing their departments and sections. at El Paso purchase stock while the Employm Stock An education tuition aid program provides Owmrship Plan (ESOP) provides common Electric...they st ek to those employms who have bmn with reimbunwrment to employees of 90% of the cost are the norm., of tuition for counwfs (completed with a *"#"'""*"* Y"
^ charles Mai Management changes in 1981 included specified grade) at a university, college or Vice President, business / trade school. Over 170 employees Wiam W. Hoyer who joined the Company as Administrative
- participated in the program in 1981. Division General Counrel in 1981 to establish, for the l
In addition, the Intex Communications first time, a corporate legal division. I awrence System correspondence program offers a M. Downum, Ir. was appointed Assistant Vice rnyriad of job related counc programs President of the Mesilla Valley Division. through the correspondence rnethod. Downum has been with the Company 21 years, most recently as Manager of Pubhc Affairs. 53.ssg 1971-1981 AFFIRMATIVE 8""% ACTION PROGRESS E Minority
<s.223 Employment -
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l Wall Harvey Bonov Smah Matbn Iver Cutler salas Porres Goodman i I l Directors Of Officers Of The Company The Company l Evern R. Wall *, Evern R. Wall, l President and Chairman of the Board [7]. President and Chairman of the Board [24]. ! Paul Harvey*, Rolland E. York, l Honorary Chairman of the Board of the Senior Vice President [31). l l Company, Investments [41). Billye E. Bostic, Robert E. Boney * , Senior Vice President [34]. Investments, Las Cruces, New hiexico [34). James H. Jones, Tad R. Smith, Vice President [18]. Attorney, Kemp, Smith, Harry I. Zimmer, Duncan & Hammond: Vice President [36]. Counsel for the Company [21]. Donald G. Isbell, George G. hiatkin*, Vice President [17]. Senior Chairman of the Board, Charles hiais, State National Bank of El Paso and Vice P.esident [271 PanNational Group, Inc. [1S]. Ralph G. Crocker, Ben L. Ivey, Farming, Chairman of the Board, Treasurer [42]. l William J. Johnson, Bank of Ysleta [12]. I Controller [4]. Robert H. Cutler
- Chairman of the Board, Illinois-California Theta S. Fields, Express, Inc. (common carrier, Secretary [31].
motor transportation) [l1]. William W. Royer Leonard A. Goodman, Jr., General Counsel [l1 , Chartered Life Underwriter / General Agent, Robert N. Hackett, John Hancock hiutual Life Insurance Assistant Vice President [Ill. Company [3]. Lawrence M. Downum, Jr. Josefina A. Salas Porras, Assistant Vice President [21]. ( Executive Director, Robert L. Corbin, i BI Language Services [3]. Assistant Treasurer & i
- Membra ed the Executwe Committee. Assistant Secretary [33). I I 1 wr, et wmo. cn the teara. Richard E. Farlow, l Assistant Treasurer [33].
l Cecelia R. Shea, 1 Assistant Secretary [24). l Years c,f semce I l.
15 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES Liquidity is a measure of a business' abihty to provide cash for normal operations and for expansion of its facihties necessary to provide its product at a reasonable cost. Capital resources are those sources of cash available to the business for liquidity and include internal cash generation, short-term and long-term ob6tions, oreferred and common stock and other financial arrangements. Durmg a major construction program a utthty's abihty to .,ecure capital resources from external financmgs, such as selling common stock, preferred stock and long-term obhgations, may be the best measure of its hquidity. The Company is participatmg in the constructien of the Palo Verde Nuclear Generating Station (Palo Verde Station) which has required substantial amounts of capital. To date the Company has been successful in secunng the resources needed as shown in the table below. The Company expects to be able to continue to secure the funds necessary for its continuing construction program; however, due to market conditions, rate relief allowed and other uncontrollable factors, there can be no assurance that it will. The principal cash requirements of the Company and sources of such cash were approximately as follows: 1981 1980 1979 (In thousands) Requirements: Construction . $146,000 $130,000 $114,000 l Sources: Common stock . . 48,000 56,000 35,000 Preferred stock . - 15,000 26,000 Long term obligations and other. . 56,000 25,000 55,000 Short term obhgations, net of repayments . . 43,000 21,000 (8,000) Internally generated. . 11,000 15,000 10,000 The Company's capital structure has changed from 4S% long-term obhgations, IS% preferred stock and 40% common equity ct December 31,1978, to 41% leng-term obligations,13% preferred stock and 46% common equity at December 31, 1981. The change in the Company's capitalization structure has improved the Company's indenture of mortgage coverage from 3.02 at December 31,1978, to 4.84 at December 31,1981, and would have allowed the issuance of an additional $162,700,000 in first mortgage bonds at an assumed rate of 10%. The Company's Restated Articles of Incorporation contain restrictions on the issuance of preferred stock. The most restrictive cf these conditions would have allowed the issuance of an additional
$97,300,000 in preferred stock at December 31,1981, at an assumed dividend rate of 13%.
l Rste rehef to support construction and financing has been aggressively pursued and has resuhed in the granting of rate increases of approximateiy $52,300,000 over the past three years from all Jurisdictions. While the Company has been successful l in the past, there can be no assurance that the Company will continue to receive rate increases or that the rate increases, if l grsnted, will be in the amounts requested. l The Company's estimated construction expenditures for 1982 through 1985, including allowance for funds used during construction, are approximately $677,300,000. Of this amount, approximately $481,900,000 will be spent for the construction of the Palo Verde Station. External fmancing for the 1982 through 1985 construction program will be approximately $373,000,000 and will be accomphshed through a combination of first mortgage bonds, preferred stock, common stock, other secured and unsecured debt and pollution control bonds. The timing and amount of additional external financing will depend upon market conditions, rate increases, the possible sale by the Company of 25% of its ownership interest in the Palo Verde Station and other fac+ ors. The above constraction and financing estimates do not take into account the possible Palo Verde sale. Such sale, if consummated in August 1982 as currently scheduled, would provide approximately $180,000,000 to $200,000,000 cash proceeds to the Cc.npany either at such time er within a twelve-month period af ter August 1982. In addition, the purchaser would cssume responsibility for future construction costs applicable to its interest in the Palo Verde Station, thereby cubstantially reducing the Company's estimated construction expenditures for the Palo Verde Station during the 1982-1985 period. Th3 Company expects that its current capitahzation ratio, as discussed above, will not change substantially for the next several years.
16 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY RESULTS OF OPERATIONS Opertting Revenues Operating revenues increased approximately $39,900,000 in 1981 over 1980 representing an 18.9% increase. While recovery of escalating fuel costs represented approximately $15,300,000 of this increase, the balance of the increase resulted from base rate increases authorized by the Public Utility Commission of Texas (Texas Commission) and the New Mexico Public Service Commission (New Mexico Commission), partially offset by a slight decrease in volume. Special sales to Southern California Edison Company (SCE), including fuel, were approximately the same in 1981 and 1980. Special sales to Comision Federal de Electricidad (CFE), Ciudad Juarez, Mexico, decreased in 1981 as compared to 1980 by approximately $14,200,000, including fuel. Operating revenues increased approximately $50,800,000 in 1980 over 1979 representing a 31.8% increase. While recovery of escalating fuel costs represented approximately $17,000,000 of this increase, the major portion resulted from base rcte increases authorized by the Texas and New Mexico Commissions and special sales to SCE and CFE. Sales to SCE and CFE totaled approximately $21,400,000, including fuel, during 1980. There were no special sales to SCE and CFE in 1979. Of the increase in base revenues, average base rates and volume accounted for 79% and 21%, respectively. The increases in average base rates for all periods reflect increases in rates allowed by the various regulatory bodies which became effective in June and November 1979, and April, July and November 1980. Operating Expenses Increases in operating expenses for 1981 over 1980 and 1980 over 1979 were primanly due to increases in fuel expense and Federal income taxes. Increase- in other operations expense also contributed to the increase for 1981 over 1980. Fuel expense, Federal income taxes and other operations expense accounted for 44%,18% and 15%, respectively, of the total increase for 1981 over 1980. Fuel expense and Federal income taxes accounted for 38% and 34%, respectively, of the total increase for 1980 over 1979. Fuel expense increased in 1981 over 1980 and 1980 over 1979 primarily due to escalating fuel costs. The Company's primary fuel source for generation of electricity for all periods has been natural gas (86% in 1981, 81% in 1980 and 79% in 1979). It is anticipated that fuel expense will increase during the coming year based upon increased natural gas prices recently announced by the Company's supplier. Natural gas will likely continue to be the Company's primary fuel source until the Palo Verde Station starts commercial operation. Unit 1 of this station is scheduled to start operation in 1983. The Company also has an interest in an electrical interconnection system scheduled to start operation in early 1984. With this system, the Company will be supplied with interruptible electric energy and it is anticipated that this will save on overall fuel and purchased power expenditures. I'otal Federal income tax expenses increased in 1981 over 1980 primarily due to increased taxable income and increased provision for deferred income taxes relating to the borrowed portion of allowance for funds used during construction. Total Federal income tax expenses increased in 1980 over 1979 primarily due to increased taxable income and increased provision for deferred income taxes relating to the borrowed portion of allowance for funds used during construction, changes in deferred fuel balances and taxes capitalized. Other operations expense increased in 1981 over 1980 primanly ae a result of increased payroll, provision for uncollectible accounts, employee benefits and pensions, travel, automobile usage, general office supplies and property insurance. Allowance for Funds Used During Construction (AFUDC) AFUDC increased in 1981 over 1980 and in 1980 over 1979 due to the increased cumulative construction expenditures principally associated with the Palo Verde Station and the adoption of AFUDC compounding in 1980 on major projects, as well as increased accrual rates. AFUDC amounted to 70%,63% and 63% of net income applicable to common stock during the years ended December 31, 1931,1980 and 1979, respectively. AFUDC's contribution to net income is net of the effect of deferred Federal income taxes on the borrowed portion of AFUDC. See Note I of Notes to Consolidated Financial Statements for further details and a discussion of the non-cash nature of AFUDC. l
17 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY Oth:r Income, Net of Other Expenses and Federal Income Taxes The increase in 1981 as compared to 1980 is primarily due to interest earned on pollution control bond proceeds held in trust during 1981. Int: rest Charges Interest on long term obligations increased in all periods primarily due to the issuance of an additional first mortgage bond series, long term floating rata notes and pollution control bonds. Additionally, average prime interest rates used to determine interest costs on the floating rate notes increased in all periods. The changes in other interest in 1981 and 1980 over the respective prior years reflect increased short-term borrowing and higher prevailing average interest rates. Suppl mental Information Concerning the Effects of Inflation Information required in regard to the effects of inflation is included on pages 37 through 39 of this report. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS The Company's Common Stock is traded in the over-the-counter market. The bid quotations as reported on the National Associction of Securities Dealers Automated Quotations System (NASDAQ) and published by The Wall Street Journal and the quarterly dividends per sharo for the periods indicated were as follows: Bid Quotation High L_ow Dividends 1980 First Quarter 10 77s $0.27S Second Quarter 978 8:8 0.275 Third Quarter 10:s 9s 0.29 Fourth Quarter 95s 8 's 0.29 131 First Quarter 978 9:8 0.305 Second Quarter 10 6 9 0.30S Third Quarter 11 94 0.32 Fourth Quarter 115s 10 % 0.32 The above quotations do not include retail mark ups, mark-downs, or commissions and do not r ecessarily represent actual transactions. At February 25,1982 there were 47,6S7 holders of record of the Company's common stock. The Company's Restated Articles of Incorporation, the original Indenture of Mortgage and certain of the supplemental ind:ntures relating to the various series of first mortgage bonds contain restrictions as to the payment of dividends on the common stock of the Company and as to the purchase or retirement of capital stock of the Company. At December 31,1981 the cmount available for dividends on the common stock under the most restrictive of those provisions was approximately $54,000,000. The Company has paid quarterly dividends on its common stock without interruption since distribution of the common siock to the public in 1947 (34 years). At its meeting in January 1982 the Board of Directors declared a cash dividend of 50.32 per share of common stock, payabl3 March 15,1982, to shareholders of record at the close of business on February 25,1982. The current indicated annual divid:nd rate is $1.28 per share. Tha Company intends to continue to pay quarterly dividends on its common stock, but future dividends will depend upon earnings, cash flow, the financial condition of the Company and other factors. 4
18 Financial EL PASO ELECTRIC COMPANY AND D1BSIDIARY SELECTED QUARTGLY FINANCIAL DATA For the years ended December 31,1981 and 1980 (Unaudited) Net Net ; Income Income Applicable Per Share : Operating Operating Operating Net to Common of Common l Ilevenues Expenses _ Income. _ _ _ Income _ Stock _ _ _ Stock .._ (In thousands of dollars except for per share data) 1981 First Ouarter $54,400 542,142 $12,258 $12,520 $10,741 $.52 Second Ouarter 61,933 49,302 12,631 13,145 11,365 .55 Third Quarter 73,532 57,465 16,067 17,864 16,085 .70 Fourth Ouarter 60,514 S1,185 9,329 13,168 11,388 .46 1980 First Quarter 38,761 31,993 6,768 6,415 4,972 .32 Second Ouarter 49,372 41,187 8,185 9,107 7,665 .48 Third ouarter 65,860 53,519 12,341 14,131 12,688 .74 Fourth Quarter S6,520 45,597 10,923 11,524 9,734 .50 l
19 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS. To the Shareholders and Board of Directors El Paso Electric Company: We have examined the consolidated balarce sheets of El Paso Electric Company and Subsidiary at December 31,1981 and 1980, and the related consolidated statements of income, retained eal nings and changes in financial position for the three years ended December 3: ,1981,1980 and 1979. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessady in the circumstances. In our opinion, the consolidated financial ptatements referred to above present fairly the consolidated financial position of El Paso Electric Company and Subsidiary at December 31,1981 and 1980, and the conso idated results of operations and changes in financial position for the three yea ended December 31,1981,1980 and 1979, in conformity with generally accepted accounting principles applied on a consistent basis. COOPERS & LYBRAND
; Dallas, Texas .
February 12,1982
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20 Financial - l EL PASO ELECTRIC COMPANY AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS ASSETS December 31, 1981 1980 (In thousands) Utility plant (Notes B, E and H): Electric pisnt in service. . . .. .. . . . . $328,694 $315,S51 Less accumulated depreciation and amortization . . .. . . .. 92,565 82,239 Net plant in service . . . . 236,129 233,312 Construction work in progress. .. . . . . 561,851 386,149 Held for future use . . . 7,788 397 I l Other invutments . .... . . . . .. .. - 13,093 Net utility plant . .. .. . . 805,768 632,951 Nonutility property and investments, at cost net of accumulated depreciation of $268,000 and $150,000, respectively . . . 11,656 2,239 l Current assets: Cash (Note F) . ... ... . .. .. . . . .. . . . 13,555 7,799 Accounts receivable, principally trade (less allowance for , doubtful accounts of $436,000 and $371,000, respectively) . . 24,486 25,042 , Federal income taxes refundable . . . . . . . . 2,694 2,694 l Inventories: Materials and supplies . . . . 4,868 4,S72 Fuel (Note H) . . . . . 14.380 10,S51 Prepayments . . . . . 2.896 1,961 Other . . . . . 567 11 Total current assets. . . 63,446 S2,6 _30 Daferred charges and other assets . . . . 9,201 3, '. 72 Total assets . . . . . . . $890,071 $6901992 l The accompanying notes are an integral part of the consolidated financial statements. l w l
21 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY CONSOllDATED BALANCE SHEETS CAPITALIZATION AND LIABILITIES December 31, 1981 1980 (In thousands) Capitalization: Common stock, no par value, 40,000,000 and 30,000,000 shares authorized, respectively. Issued and outstanding 25.110,066 and 20,485,067 shares, respectively (Note C) . .
$210,148 $162,303 Retair.ed earnings (Note E) . 79,602_ 59,383 Common stock equity. 289,750 221,686 Preferred stock, cumulative, no par value, 2,000,000 and 1,000,000 shares authorized, respectively (Note D):
Redemption required, issued and outstanding 642,000 and 646,000 shares, respectively . . . 64,200 64,600 Redemption not required, issued and outstanding 190,000 shares. . 18,873 18,873 Long-term obligations (Note E) . 252,415 202,263 Total capitalization . 625,238 507,422 Current liabilities: Current portion of long-term obligations (Note E). 1,736 S4 Notes payable banks (Note F) . 54,200 16,225 Notes payable other (Note F) . 2,265 15,850 Commercial paper (Note F) . 63,508 44,836 Fuel purchase commitment (Note H) . 14,279 10,449 Accounts payable, principally trade. 13,682 9,244 Taxes accrued. 7,563 9,121 Interest accrued . 6,042 4,351 Other. 4,515 4,594 Total current liabilities . 167,790 114,724 Deferred credits and other liabilities: Accumulated deferred Federal income taxes. 46,554 33,260 Accumulated deferred investment tax credit . 42,499 31,721 Other (Note H) . . . 7,990_ 3,8_6S Total deferred credits and other liabilities . 97,043 68 a 846 Commitments and contingencies (Notes H and J) i Total capitalization and liabilities . $890,071 $690,992 The accompanying notes are an integral part of the consolidated financial statements.
22 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME For the years ended December 31,1981,1980 and 1979 1981 1980 1979 (In thousands) Operating revenues. . . .. .. 3 250.379 $210,513 $ 159,712 Operating expenses (Note J): Operations: Fuel . . . . . . 107,562 9S,461 81,669 Purchased and interchanged power. 2,551 (820) (3,531) Other . .. . 29.113 24,839 20,962 Maintenance . . . . . 10,087 7,925 6,725 Depreciation and amortization (Note B) . 10.508 9,090 8,24S Taxes (Note G): Federal income, current. . . . . 3,691 S,396 1,238 Federal income, deferred. . 13,005 8,743 6,138 Charge equivalent to investment tax credit, net of amortization. . 12,505 9,941 4,083 Other . , 11.072 11,721 1 1011_14 200,094 172,296 135 643 Operating income. 50,285 38,217 24,069 Other income (deductions): Allowance for equity funds used during construction (Note 1). . . 22,813 14,377 7,450 Other income, net of other expenses and Federalincome taxes (Note G). 1,342 (3_66) 292 24.155 14,0_11 7,742 Income before interest charges. . 74.440 S2,228 31,811 Interest charges (credits): Interest on long-term obligations. . 27,401 16,875 11,589 Otherinterest(Note B). 14,218 10,S33 7,420 Other interest capitalized (Note B) . (1,498) (1,980) (1,643) Allowance for borrowed funds used during construction (Note 1). . (22,378) (14,377) (8,745) 17,743 11,051 8,621 Net income (Note 1) . . 56,697 41,177 23,190 < Preferred stock dividend requirements. 7,118 6,118 31948 Net income applicable to common stock (Notes C and I) . S 49,579 $_35 0_S_9 1 $ 19,242 Net income per share of common stock, based on weighted average number of shares outstanding during the year (Notes C and I). . 52.23 _
$ 2.05 $ 1.45 Weighted average number of common shares outstanding (Note C). _22,250,664 17,063,864 13JS2,102 The accompanying notes are an integral part of the consolidated fmar.cial statements.
23 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF RETAINED EARNINGS For the years ended December 31,1981,1980 and 1979 1981 1980 1979 (In thousands) Retained earnings at beginning of year . S 59,383 $ 45,097 $ 40,753 Add: Net income. 56,697 41,lp . _23,190 116.080 _ 86 2_74 1 63,943 Deduct: Cash dividends: Preferred stock. 7.118 6,118 3,948 Common stock. 28,448 20,012 14,S23 Capital stock expense. 912 761 37S 36.478 26,891 18,846 Retained earnings at end of year. S 79,602 $ 59,383 $_45,097 The accompanying notes are an integral part of the consolidated fmancial statements.
24 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION For the years ended December 31,1981,1980 and 1979 1981 1980 1979 (In thousands) Source of funds: From operations: Net income. S 56,697 $ 41,177 $ 23,190 items not requiring (providing) working capital: Depreciation and amortization. 10,508 9,090 8,245 Daferred Federal income taxes. 12,979 8,387 6,875 Investment tax credit. 12,492 10,641 4,083 ) Allowance for equity funds used during construc* ion . (22,813) (l4,377) (7,450) l Other . (1,710) 337 278 i Funds provided by operations. 68.153 55,25S 35,22_1 l From financings and external sources: Sale of common stock. 47,845 55,974 35,060 Sale of preferred stock. - 15,000 26,000 Long-term obligations: Sale of first mortgage bonds. 40,000 - 25,000 Pollution control obligation, net of amount on deposit with trustee. 7,366 - - Sale of unsecured promissory notes. - 18,000 25,000 Other . 4,401 12,477 - Earnest money deposits on proposed sale . 3,500 - - Sale of uranium venture and nuclear fuel to trust . 4,376 - 4,712 Sale of assets. 1,284 - - Deferred gain on capitallease. - 2,386 - Long-term purchase commitment. - - 591 Short-term obligations
- _ 44,744_ _20<669 -
Total f rom fmancings and external sources . 153,516 124,506 116,363 Decrease in working capital other than short-term obligations * - - 6,789 Total source of funds. _S221,669 _$ 179,761_ _$ 158,37_3 Application of funds: Gross additions to plant. $191.969 $ 158,008 $130,048 Allowance for equity funds used during construction. (22,813) (14,377) (7,450) Gross additions to nonutility property. 9,535 32 794 Dividends on preferred stock. 7.118 6,118 3,948 Dividends on common stock. 28,448 20,012 14,523 Redemption of preferred stock. 400 400 - Reduction of long term obligations. 1,736 - 4,549 Increase (decrease) in deferred charges and other assets . (1,059) (380) 876 Transfer of long-term purchase commitment to current liabilities . - - 7,754 Other, net . 3,841 865 (193) Short-term obligations * - - 3,524 Increase in working capital other than short-term obligations
- 2,494 ___ 9,083 -
Totalapplication of funds. _S221,669 $179]61 _$ lS8,373
'2S Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION - (Continued)
For the years ended December 31,1981,1980 and 1979 1981 1980 1979 (In thousands) i Increase (decrease) in components of working capital other than short term obligations *- Current assets: Cash . . .. .... . .. . . ... .. ... . . 8 5,758 $ (2,88S) $ 4,6S2 Accounts receivable, principally trade . . .. . . .. ... ... (558) 6,715 3,002 Federal income taxes refundable. , . ... ............ ... .... . . - - (3,344) Materials and supplies. . .. .... ....... ..... .. . .. .. 298 692 1,0S9 Fuel . .... . ..... . . . .. .. ...... . .. ... .. . 3,829 2,491 (789) Prepayments . . . . . .. . ............. ........... ... ... 935 249 (76) Other . . . . . . . ..... .... . . .. .. ........ . .. 558 (1,019) (1,096) 10.818 6,243 3,408 Current liabilities: Turbine contract payable. .. ..... ... . ... .. . .
- (7,754) 7,754 Fuel purchase commitment. . .. ..... .. .. .... ... . 3.830 2,491 (789)
Accounts payable, principally trade . . .... ... .. . ... . 4,438 (1,363) 1,62S Taxes accrued. ... . . .. . ... ...... .. . .... .... . (1,558) 2,998 704 Interest accrued. . . . .. .... . . . . .. .. .. 1.891 1,168 3S2 Other . . . . . ... . . . .. .... . .. .. . . . .. . .. (79) (380) SSI , 8.322 (2,840) 10,197 Increase (decrease) in working capital other than short term obligations. . .. . .. . ... . . .. . $ 2.494 $ 9,083 $ (6 t789)
*Short-term obligations are represented by the current portion of long-term obligations, notes payable banks, notes payable other and commercial paper, 4
The accompanying notes are an integral part of the consolidated financial statements. i i
26 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMEITTS A. Summary of Significant Accounting Policies General The Company maintains its accounts in accordance with the Uniform System of Accounts prescribed for electric utilities by the Federal Energy Regulatory Commission (FERC). Reclassification In accordance with an FERC requirement, during 1980 the Company began charging all capital stock expense incurred directly to retained earnings. The Consolidated Statement of Retained Earnings for the year ended December 31,1979 has been reclassified to reflect the amount of capital stock expense incurred. Certain immaterial amounts in the consolidated fmancial statements for 1980 and 1979 have been reclassified to be consistent with classifications in 1981. Principles of Consolidation _ The consolidated financial statements include El Paso Electric Company and its wholly-owned subsidiary. All intercompany balances and significant intercompany transactions have been eliminated in consolidation. Utility Plant Utility plant is stated at original cost. The Company provides for depreciation on a straight-line basis at annual rates which will amortize the undepreciated cost of depreciable property over estimated remaining service lives. The Company charges the cost of repairs and minor replacements to the appropriate operating expense and capitalizes the cost of renewals and betterments. The cost of depreciable plant retired or sold and the cost of removal, less salvage, are charged to accumulated depreciation. Inventories Inventories are valued at the lower of average cost or market. Revenues Revenues are recognized based on cycle billings rendered to customers monthly. The Company does not accrue revenues with respect to energy consumed but not billed at the end of a fiscal period. _ Unamortized Debt Expense and Premium or Discount on Debt Unamortized amounts apply to outstanding issues and are being amortized ratably over the lives of such issues. Federal Income Taxes and Investment Tax Credit Accelerated methods of computing depreciation of utility plant are used for Federalincome tax reporting purposes which l differ from the methods used for financial reporting purposes. Diffeiences in the tax and financial methods of accounting for fuel costs and other capitalized costs also exist. In accordance with regulatory authority requirements, provision has been made in the fmancial statements for Federal income taxes deferred to future years as a result of these items. In addition, deferred l Federal income taxes are provided on the borrowed portion of AFUDC. I Investment tax credit utilized is deferred and amortized to income over the estimated useful lives of the related properties after such properties are placed in service. Net Income Per Share of Common Stock l Net income per share of common stock is computed using the weighted average number of common shares outstanding I during the year. Common equivalent shares related to the Amended Employee Stock Purchase Plan are not significant. l l
27 Financial EL PASO ELECTRIC COMPAtJY AtJD SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) B. Utility Plant During the years ended December 31,1981,1980 and 1979, interest in the amount of $1,498,000, $1,980,000 and $1,643,000, respectively, relative to funds borrowed by a turbine trust and the Company's subsidiary has been capitalized. The borrowed funds, at rates ranging from 4-1/4% to 21-1/2%, wer e used to acquire utility plant and vanous other assets. The interest amount has been included in the Consolidated Statements of Income ar "Other Interest" with a correspondmg amount included in "Other Interest Capitalized." The Company has a 7% undivided interest in Units 4 and 5 of the Four Corners Project (coal-fired c,eneratmg station) located in northwestern New Mexico and a 15.8% undivided interest in Units 1,2 and 3 of the Palo Verde Station which is under construction near Phoenix, Anzona. The Company also has an interest in constructing transmission facilities related to the Palo Verde Station. Participants in the joint plants are responsible for obtaining their respective fmancing. The extent of the Company's interests in these facilities (Palo Verde Project and Four Corners Project), excludmg nuclear fuel, is as follows: December 31, 1981 1980 Four Four Palo Verde Corners Palo Verde Corners _ Project Project Project Proiec_t (In thousands) Elecinc plant in service. $ - $ 17,095 $ - $15,42S Accumulated depreciation. - (3,986) - (3,500) Construction work in progress. 547,648 10,317 378,516 3,108 The Company's direct expenses associated with the in-service portion of the Four Corners Project are included in the applicable operatmg expense categones of the Consolidated Statements of Income. Total depreciation was $10,201,000 in 1981, $9,004.000 in 1980 and $8,531,000 in 1979, of which $281,000, $257,000 and
$286,000, respectively, was applicable to transportation equipment and has been charged to other accounts. Additionally, amortization of electric plant under capital lease, comrnencing in June 1980, amounted to $588,000 for 1981 and $343,000 for 1980.
The average annual depreciation rate used by the Company for the year ended December 31,1979 was 2.93%. Effective November 1980, in accordance with a Texas Commission order, the rate was changed from 2.93% to 3.28%. That rate was in effect through December 31,1981. C. Common Stock Under a shareholder approved employee stock purchase plan, qualified employees may purchase shares of the Company's common stock at two specified dates each year for a period endmg no later than June 30,1984. The purchase price is 90% of the average bid price of the stock at the option dates. In the event the option price exceeds the average of the bid and ask prices at the purchase date, then the options lapse and shares are purchased in the open market by the Company. During 1981, 1980 and 1979,14,305,12,388 and 6,717 shares of common stock, respectively, were issued at an aggregate amount of
$124,000, $106,000 and $63,000, respectively. The cumulative aggregate corresponding fair market values as of the option dates were $138,000, $117,000 and $70,000 in 1981,1980 and 1979, respectively. At December 31,1981, 40,185 shares were reserved for future purchases under the plan. Proceeds from issuances are cred.ted to common stock and no charges are reflected in income with respect to the plan.
28 Financial EL PASO ELECTRIC COMPANY AND SUB"IDIARY l NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The Company has a dividend reinvestment and stock purchase plan which provides holders of its common stock the option to invest cash dividends and/or optional cash payments (up to $3,000 per calendar quarter) in additional shares of the Company's common stock. During 1981,1980 and 1979, 405,360, 292,136 and 178,652 shares, respectively, were purchased by shareholders who reinvested dividends and invested cash in the amounts of $4,210,000, $2,711,000 and $1,854,000, respactively. The purchase price is the average of the highest closing bid and lowest closing ask price of the stock on the purchase date. At December 31,1981, 384,699 shares were reserved for future purchases under the plan. In January 1982, an additional 1,500,000 shares were reserved. The Company has an employee stock ownership plan (ESOP). In accordance with Federal income tax provisions, effective through 1982, common stock with a value equal to the sum of a specified amount of the Company's investment tax credit and employee cash participation will be contributed to the plan. Under the provisions of the Economic Recovery Tax Act of 1981, the ESOP investment tax credit based on investment in property will terminate with respect to qualifying investments made after 1982. Beginning in 1983, the ESOP investment tax credit will be based upon payroll costs. In October 1981,1980 and 1979, the Company and participating employees contributed 205,334,177,170 and 126,633 shares of stock, respectively, with a market value of $2,191,000, $1,709,000 and $1,287,000, respectively, to the plan. At December 31,1981,714,334 shares were reserved fcr future contributions under the plan. In November 1981, the Company implemented a customer !tock purchase plan. The shares are being offered to the Company's Texas and New Mexico customers who enroll in the plan. The purchase price per share is the average of the highest closing bid and lowest closing ask price on the investment date. Customers may purchase shares by making cash payments in
] '
amounts of not less than $25 per payment nor more than $3,000 total investment per calendar quarter. Dividends paid on all shares purchased by a participant will be automatically reinvested in additional shares, except for those participants who request the stock certificates and cash dividends. At December 31,1981, 500,000 shares were reserved for future purchases under the plan. In January and February 1982, a total of 61,417 shares were purchased by participants. The Company's Restated Articles of Incorporation were amended in June 1981, to increase the number of authorized shares of common stock from 30,000,000 to 40,000,000. Changes in common stock are as follows: Common Stock Shares Amount (In thousands) Balance, December 31,1978. . . . . . . . . . . . . . . . . ...... ... .... .... .. . 11,191,371 5 71,269
- Sales of Common Stock:
1979. . ... .. ... ............. . .... .. .. . .. .......... 3,312,002 35,060 l' 1980...... ... .. ......... ..... .. ... . .... . .... . 5,981,694 55,974 1981...... . . .... . ....... ......... . ......... ..... 4,624,999 47,84S Balance, December 31,1981. . . .. .. ....... . . . . ... ........ 25,110,066 $210,148 Net income applicable to common stock, net income per share of common stock and weighted average number of common i shares outstanding for the year ended December 31,1981, would have been $52,221,000, $2.08 and 25,110,066, respectively, i assuming that the proceeds (before expenses of sale) of $47,845,000 from the sale of common stock during the year were used to retire short. term obligations outstanding during the year. 1 i
29 Financicd EL PASO ELECTRIC COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - < Continued) j I D. Preferred Stock (1) Preferred _ Stock - Redemptio_n required Following is a summary of outstanding preferred stock - renemption required: Optional Redemption Price Per December 31, Share at 1981 1980 December 31, Shares Amount Shares Amount 1981 (In thousands) (In thousands) $10.75 Dividend. 92,000 $ 9,200 96,000 $ 9,600 $108.00 ) $ 8.44 Dividend. . . 150,000 15,000 150,000 15,000 108.44 $ 8.9S Dividend. . 150,000 15,000 150,000 15,000 108.95 $ 9.00 Dividend. . . . 100,000 10,000 100,000 10,000 - $ 8.80 Dividend. . . . . 50,000 5,000 50,000 S,000 - $ 9.S0 Dividend. . . . . 100,000 10,000 _100,000 10,000 - 642,000 _$64,200 646,_000 $_64&00 The $10.75 preferred shares are entitled to the benefits of an annual sinking fund whereby on January 1 of each year, beginning in 1980, the Company will redeem 4,000 shares at the sinking fund redemption price of $100 per share plus accrued dividends. The $10.75 preferred shares are redeemable at the option of the Company; however, no optional redemption of the shares may be made prior to January 1,1985, as a part of, or in anticipation of, any refunding involving the issue of indebtedness or preferred stock having an effective interest or dividend cost of less than 10.75% per annum. The $8.44 preferred shares are entitled to the benefits of an annual sinking fund whereby on October 1 of each year, beginning in 1984, the Company will redeem 4% (and may, at its option, redeem an additional 4%) of the aggregate maximum number of shares outstanding at the sinking fund redemption price of $100 per share plus accrued dividends. The $8.44 preferred shares are redeemab!e at the option of the Company; however, except as set forth above, no optional redemption of the shares may be made prior to October 1,1988, as a part of, or in anticipation of, any refunding involving the issue of indebtedness or preferred stock having an effective interest or dividend cost of less than 8.44% per annum. The $8.95 preferred shares are entitled to the benefits of an annual sinking fund whereby on October 1 of each year, beginning in 1985, the Company will redeem 5% (and may, at its option, redeem an additional 5%) of the aggregate maximum number of shares outstanding at the sinking fund redemption price of $100 per share plus accrued dividends. The $8.9S preferred shares are redeemable at the option of the Company; however, no optional redemption of the shares may be made prior to October 1,1984, as a part of, or in anticipation of, any refunding involving the issue of indebtedness or preferred stock having an elfective interest or dividend cost of less than 8.95% per annum. The 59.50 preferred shares are entitled to the benefits of an annual sinking fund whereby on July 1 of each year, beginning in 1986, the Company will offer to purchase on the next succeeding October 1, out of funds legally available for the purchase or redemption of $9.50 preferred shares, not less than 20,000 shares (or the number of such shares then outstanding if less than 20,000) at a purchase price of $100 per share, plus accrued dividends. The Company is required to redeem on October 1, 1990, all shares then outstanding at a redemption price equal to $100 per share plus an amount equal to accrued and unpaid dividends to and including the date of redemption. The 59.50 preferred shares are redeemable at the option of the Company, however, no optional redemption of the shares may be made prior to October 1,1987.
r 30 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Sinking fund requirements for each of the above series are cumulative and, in the event they are not satisfied at any redemption date, the Company is restricted from paying any dividends on its common stock (other than dividends in common stock or other class of stock ranking junior to the preferred stock as to dividends or assets). The $9.00 preferred shares have no provision for a sinking fund, are not redeemable at the option of the Company, and must be redeemed in full on October 1,1986, at $100 per share plus accrued dividends. In the event the Company fails to provide sufficient funds for redemption, the Company is restricted from paying any dividends on its common stock (other than dividends in common stock or other class of stock ranking junior to the the preferred stock as to dividends and assets). The $8.80 preferred shares have no provision for a sinking fund aad are not redeemable at the option of the Company until October 1,1987. On October 1 of each year, beginning in 1990, the Company will offer to purchase on the next succeeding February 1, out of funds legally available for the purchase or redemptic.n of the $8.80 preferred shares, any or all outstanding shares of $8.80 preferred shares at a purchase price of $100 per share, plus accrued dividends. In the event the Company fails to provide sufficient funds for redemption, the Company is restricted from paying any dividends on its common stock (other than dividends in common stock or other stock ranking junior to the preferred stock as to dividends and assets). The aggregate amounts of the above preferred stock required to be retired for each of the next five years are as follows: (In thousands) 1982. . . $ 400 1983. 400 1984. . 1,000 198S. 1,750 1986. 13,750 Sales and redemption of preferred stock - redemption required were as follows: _Sha re_s_ _ Amount (In thousands) Balance, December 31,1978. 240,000 $24,000 Issuance of Preferred Stock, $8.44 Dividend. 10,000 1,000 Issuance of Preferred Stock, $8.9S Dividend. . 150,000 15,000 Issuance of Preferred Stock, $9.00 Dividend. 100JX) _101000 Balance, December 31,1979. 500,000 S0,000 Redemption of Preferred Stock, $10.75 Dividend. (4,000) (400) Issuance of Preferred Stock, $8.80 Dividend. . 50,000 5,000 bsuance of Preferred Stock, $9.50 Dividend. .l_00 m 000 _ 10,000 Balance, December 31,1980. 646,000 64,600 Redemption of Preferred Stock, $10.75 Dividend. _ (4 E ) (400) Balance, December 31,1981. 642,000 $64g 200
31 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (2) Preferred Stock -- Redemption not required Following is a summary of preferred stock which is not redeemable except at the option of the Company: Optional Redemption Price Per Amount Share at December 31 u ___ December 31, Shares 1981 1980 1981 (In thousands) $4.50 Dividend. 15,000 $ 1,534 $ 1,534 $ 109.00 $4.12 Dividend. 15,000 1,506 1,506 103.98 $4.72 Dividend. 20,000 2,001 2,001 104.00 $4.56 Dividend. 40,000 4,000 4,000 100.00 $8.24 Dividend. 100,000 9,832 9,832 107.52 190,000 $ l_8,87_3 $ 18,873 The above preferred shares are redeemable at the option of the Company; however, no optional redemption of the $8.24 shares may be made prior to April 1,1982, directly or indirectly as part of, or in anticipation of, any refundmg involving the issue of indebtedness or preferred stock having an effective interest or dividend cost less than 8.38% per annum. There have been no changes in preferred stock - redemption not required during the three years ended December 31,1981. All preferred stock issues (redemption required and redemption not required) are entitled, in preference to common stock, to $100.00 per share, plus accrued dividends, upon involuntary liquidation. All issues except the 59.00, $8.80 and $9.50 preferred stock issues, are entitled to an ame'mt per share equal to the applicable optional redemption price, plus accrued dividends, upon voluntary liquidation. The $9.00, $8.80 and $9.50 preferred stock issues are entitled to a fixed price ($109.00,
$108.80 and $109.50 per share at December 31,1981, respectively), plus accrued dividends, upon voluntary liquidation.
The Company's Restated Articles of Incorporation were amended in June 1981, to increase the number of authorized shares of preferred stock from 1,000,000 to 2,000,000.
32 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) E. Iong-term Obligations Outstanding long-term obligations are as follows: Redemption Price at December 31, December 31, _1981 _ _1980__ l.9._81 (In thousands) First mortgage bonds: 3 4% Series, due 1984. $ 4,950 $ 4,950 $ 100.45 4%% Series, due 1988. 6,100 6,100 101.45 16.35% Series, due 1991. 40,000 - - 4%% Series, due 1992. 10,385 10,385 102.02 6 6% Series, due 1998. 24,800 24,800 103.73 7%% Series, due 2001. 15,838 15,838 105.85 9% Series, due 2004. 20,000 20,000 106.45 9.95% Series, due 2004. 25,000 25,000 109.95 101/.% Series, due 2005. 15,000 15,000 109.05 8 W% Series, due 2007. 25,000 25,000 107.55 _ 187,073 147,073 9% Pollution Control Revenue Bonds 1981 Series A. due 1984, net of
$28,074,000 on deposit with 'rustee, collateralized by second mortgage bonds. 7,366 -
Unsecured promissory notes, floating rate (15.75% at December 31, 1981 and 20.50% to 21.50% at December 31,1980): Due 1984. 25,000 25,000 Due 1985. 18,000 18,000 Obligation under capitallease. 13,725 12,477 Other secured and unsecured notes payable, interest at rates rangmg from 8.8125% to 14% per annum, due in installments through 1998. S,174 2,075 256,338 204,625 Current maturities of long-term obligations . (1,736) (54) Unamortized premium and discount. (2,187) J2,308)
$252,415 $202,263 The premiums reflected in the redemption prices shown above continue at reduced amounts in future years, finally resulting in each case in redemption at par at maturity.
The Company's indenture of mortgage securing its first mortgage bonds provides for sinking and improvement funds. For each series other than the 9.95% and 16.35% series, the Company is required to make annual payments to the trustee equivalent to 1% ($1,230,000 at December 31,1981 and 1980) of the greatest aggregate principal amount of such series outstanding prior to a specified date. The Company has generally satisfied the 1% requirements by relinquishing the right to use a net amount of additional property for the issuance of bonds or by purchasing bonds in the open market and expects to continue this practice. With respect to the 9.95% series, commencing Apnl 30,1985, the Company will be required to make annual cash payments to the trustee equivalent to 4-1/4% of the greatest aggregate principal amount of such series outstanding at any one time prior to a specihed date. The 4-1/4% cash payments must be applied to redeem bonds of the 9.95% series at 100% of the principal amount thereof plus accrued interest. No sinking fund is required for the 16.35% series.
33 Financial EL PASO ELECTEIC COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Scheduled maturities of long-term obligations at December 31,1981, excluding obligation under capital lease and sinking fund requirements are as follows (in thousands): 1982. $ 298 1983. 408 1984. 37,652 1985. 18,374 1986. 417 Thereaf ter . 185,464 The funds on deposit with a trustee at December 31,1981 represent a portion of the proceeds from pollution control revenue bonds issued in June 1981. The Company can draw funds from the trustee account as quahfied construction expenditures for pollution control are made. Substantially all of the Company's utility plant is subject to a lien under the indenture of mortgage collateralizing the Company's first mortage bonds and a hen collateralizing the Company's second mortgage bonds. The second mortgage bonds in the amount of $35,440,000 were issued solely to secure $35,440,000 principal amount of 93o Pollution Control Revenue Bonds 1981 Series A, due 1984. In accordance with certain provisions of the indenture covering the first mortgage bonds, payments of cash dividends on common stock are restricted to an amount equal to retained earnings accumulated after December 31,1966, plus $4,100,000. Retained earnings in the amount of approximately $54,000,000 are unrestricted as to the payment of cash dividends at December 31,1981. The unsecured floating rate notes due in 1984 and 1985 may be prepaid at the option of the Company without premium. At December 31,1979 the Company had a commitment in the amount of $7,754,000 to purchase a turbine from an independent trust no later than a specified date in 1980. During 1980 the turbine and related equipment were sold to a second independent trust and an arrangement was made whereby the Company leased the turbine and certain other related equipment from the trust lessor for a twenty-year period with renewal options for up to seven more years. Semi-annual lease payments, including interest, commencing in January 1982, are $719,000 through January 1991 and $861,000 thereafter to July 2000. The effective annual interest rate implicit in this lease is calculated to be 9.6%. The total cost of the equipment to the trust-lessor of $11,800,000 plus $1,925,000 interest accrued is reflected in long-term obligations at December 31,1981. Of the $11,800,000 approximately $8,400,000 was paid to the equipment trust which owned the turbine and approximately $3,400,000 was paid to the Company for its interest in the turbine and certain other related equipment. The aerence between the sales price and the original basis of the turbine and related equipment is being amortized to income over the lease term. F. Notes Payable and Commercial Paper The Company and its subsidiary have informal lines of credit with various lenders. Certain of these arrangements provide for the maintenance of compensating balances for the available lines of credit and the loans outstanding. At December 31,1981 the lines of credit available under these arrangements totaled $127,316,000 (including subsidiary lines of $9,316,000 not guaranteed by the Company). Average bank balances of $9,788,000 were maintained as compensating balances at December 31,1981 in connection with the informal lines of credit. The amount of unused lines of credit at December 31,1981 was
$84,165,000. In January 1982, an independent trust increased the available line of credit to the Company and subsidiary from $30,000,000 to $70,000,000 which increased the unused line of credit by $40,000,000 pending expenditures by the trust for nuclear fuel.
Through December 31,1982, the FERC has authorized the Company to incur short-term debt (in the form of promissory notes or commercial paper) in an amount not to exceed $175,000,000 outstanding at any one time, exclusive of short-term debt of the Company's subsidiary. The interest rates are to be at the prime rate in effect at the time of issuance, plus in some cases, previsions for compensating balances of 20% under certain conditions. The net proceeds from the issuance of the short-term debt are to be used primarily for construction expenditures.
34 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Contmued) G. Federal Income Taxes The provisions (credits) for deferred Federal income taxes, which arise from timing differences between financial and tax reporting, are as follows: Years Ended December 31, 1981 1980 1979 (In thousands) Tax effeet of: Operating income: Depreciation differences. $ 1,550 $ 1,565 $ 1,769 Deferred fuel costs. . 270 226 (1,074) Allowance for borrowed funds used during construction. 10,294 6,613 4,023 Other . 891 338 1,420 Other income. 48 __1609) -
$11453 $_8,134 $ _6,138 Federal income tax provisions are less than the amounts computed by applying the statutory rate of 46% to book income before Federal income taxes. Details are as follows:
Years Ended December 31, 1981 1980 1979 (In thousands) Tax computed at statutory rate. $40,003 $30,103 $ 16,062 Decreases due to: Allowance for equity funds used during construction. (10,494) (6,613) (3,427) Other . 757 774 (907) Total Federal income tax expense. $_30,266 $ 24,264 $ 11,728 Effective Federalincome tax rate. __34.8% _ 37.1% __33.6_% Total Federal income tat expense is as follows: Years Ended December 31, _1981 1980 1979 (In thousands) Current income taxes - operating. $ 3,691 $ S,3 % $ 1,238 Current income taxes - other income. 1,030 93 269 Total current. 4,721 S.489 1,507 Deferred income taxes - operating. 13,005 8,743 6,138 Deferred income taxes (credit) - other income . 48 (609) - Daferred investment tax credit - operating. 12,939 10,35S 4,379 Deferred investment tax credit - other income. (13) 700 - Amortization of deferred investment tax credit - operating . (434) (414) (296)
.$_30,266 5.2_4,2_64 $ 11,7_28 At December 31,1981, the Company had available for Federal income tax purposes an investment tax credit carryforward of approximately $16,100,000 expiring in 1996.
35 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) H. Commitments and Contmgencies The Company has approximately a 15.8% interest in three units of a nuclear plant (Palo Verde Station) and related transmission hnes and switchyard facilities presently under construction. Transmission lines represent approximately 6% of the aggregate Costs of these projects. The estimated aggregate costs of these projects to be incurred by the Company subsequent to December 31,1981, are approximately $507,000,000, includmg approximately $219,700,000 of allowance for funds used during construction ( AFUDC). The Company has entered into an assignment agreement, subject to certain conditions, for the sala of 25% of the Company's interest in the Palo Verde Station and related switchyard as well as nuclear fuel and uranium venture interest held by the trust discussed below. The proposed sales price is expected to exceed the carrying value of the assets. As of December 31,1981, the Company had received $3,500,000 in earnest money deposits related to the sale which are included in other deferred credits. The estimated costs in the preceding paragraph do not give effect to the sale. The Company is also committed at December 31,1981 for construction of pollution control fac:hties in the amount of approximately $39,300,000, includmq epproximately $13,700,000 of AFUDC. The above estimated amounts were computed assuming an estimated average annual inflation rate of 9% and an average AFUDC rate of 13.5%. The Company has an agreement with an independent trust whereby the trust purchases, at cost, all of the Company's nuclear fuel requirements and amounts related to a uranium venture. Under the trust agreement the Company has the option of either repurchasing the fuel from the trust or leasing the heat generated by the fuel. Management of the Company intends to enter into a basic heat supply conti set whereby title to the fuel remains with the trust and the Company will make lease payments for the heat generated. Based on this intention and in accordance with industry practice, the nuclear fuel and uranium venture assets and their related liabilities are not included in the accompanymg balance sheets. The aggrega:e investment at December 31,1981 amounted to approximately $27.700,000. The Company is cornmitted to reimburse the trust for its cash investment in nuclear fuel and uranium venture costs, not expected to exceed a maximum cash amount of $93,000,000 ! during the ten-year period ending December 31,1991, as well as for interest and other carrying costs of the trust.
- Included in the aggregate investment of the trust, described in the preceding paragraph, at December 31,1981, is a
$4,900,000 joint venture interest in certain mining claims and leases. In 1981, two of the participants in the venture expensed their investment in the venture due to their determination that production from the venture's mining claims and leases was not feasible in view of limited reserves and depressed market prices. The Company believes these revaluations to be inappropriate and at this time does not intend to provide for a reduction in the value of the investment of the trust. A minimum amount of exploration and development work is presently being performed.
The Company's fuel supply arrangements include short-term commitments under a fuel supply arrangement with a trust, whereby the Company concurrently assigned its principal long-term fuel supply contract to the trust and agreed to purchase all fuel oil delivered to the trust by the fuel supplier. Payments to the trust for fuel oil purchases consist of the trust's cost of oil determined on an average cost basis plus related administrative and carrying costs. For financial reporting purposes, purchases of the trust are assumed to have been made on behalf of the Company. Accordingly, the balance sheets at December 31,1981 and 1980, include $14,279,000 and $10,449,000, resgectively, recorded as fuel and fuel purchase commitment, representing the Company's commitment to purchase the trust's fuel oil inventory as of those dates. L December 1981, the Company entered into an agreement with Texas-New Mexico Power Company (TNP) for the purpose of constructmg, operating and maintaining a transmission system. This system includes a transmission hne connecting with an existing switchycrd in New Mexico, related switchyards and communication equipment. Completion of this system will allow the Company to purchase interruptible electric energy from another utility. In the performance of this agreement, the Company has been named Project Manager and will be responsible for all construction, operation and maintenance work. The agr* ment provides for the Company to receive advance funds, on a monthly basis, from TNP in order to perform all required work. The Company's interest in the construction, operation and maintenance costs is approximately 67%. The estimated cost of construction to be incurred by the Company subsequent to December 31,1981, is approximately $14,600,000, including
$900,000 of AFUDC.
In December 1981, the Company entered into an agreement with Southwestern Public Service Company (SPS) for the purpose of constructing a direct current terminal in New Mexico. The Company is obhgated to advance funds, on a monthly basis, to SPS who will perform the construction work. The Company's interest in the construction is approximately 67%. The estimated cost of construction to be incurred by the Company submquent to December 31,1981, is $19.400,000, including
$1,800,000 of AFUDC.
36 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) I. Allowance for Funds Used During Construction (AFUDC) The applicable regulatory uniform system of accounts provides for AFUDC which is defmed as an amount which includes the net cost during a period of construction of borrowed funds used for construction purposes plus a reasonable rate on other funds when so used. While AFUDC results in an increase in utility plant under construction for ratemaking purposes with a corresponding credit to income, it is not a current cash item. AFUDC is realized in cash net of certain tax effects after the related plant is placed in service and the depreciation charges based on the total cost of the plant, including AFUDC, are allowed in cost of service amounts by regulatory authorities. The amount of AFUDC is determined by applying an accrual rate to the balance of certain utility plant construction. In this connection, the FERC has promulgated procedures for the computation (a prescribed formula) of the accrual rate. The rates used by the Company do not exceed those permitted by the FERC. The Company used an accrual rate of 11.0% in 1979. Effective January 1,1980, the Company increased the accrual rate to 11.9%. During 1981, the Company increased the accrual rate to an effective rate of 13.8%. The increase in the AFUDC rate used during 1980 increased net income and net income applicable to common stock (excluding effect of compounded AFUDC) by $1,490,000 and net income per share by $.09. The increase in the AFUDC rate used during 1981 increased net income and net income applicable to common stock (excluding effect of compounded AFUDC) by $4,060,000 and net income per share by $.18. Effective January 1,1980, the Company began semi-annual compoundmg of AFUDC on major construction projects. Compounding involves using previously capitalized AFUDC as part of the cost base on which to apply the AFUDC rate. The increase in net income and net income applicable to common stock related to compounded AFUDC for 1980 and 1981 was
$2,444,000 and $2,%S,000, respectively. The increase in net income per share of common stock related to compounded AFUDC for 1980 and 1981 was $.14 and $.13, respectively.
J. Pension Plan The Retirement Income Plan (the plan) covers employees who have completed one year of service with the Company. The plan is a noncontnbutory defined benefit plan. Upon retirement or death of a vested plan participant, assets of the plan are used to purchase an annuity contract with an insurance company. Therefore, assets available for plan benefits and the present value of vested benefits represent amounts attributable to active employees only. The financial statements of the plan are presented on c cash basic. Under this method of accounting, certain revenue and expense items are not recognized when earned and incurred, but rather when cash is actually received or paid. Contributions from the Company are based on the amounts required to oe funded under provisions of the plan as actuariaily calculated. The benefits to be provided under the plan are valued using the Frozen Initial Liability variation of the Entry Age Normal Cost Method. The weighted average assumed rate of return used in determming the actuarial present value of accumulated plan benefits presented below was 6%, compounded annually. Accumulated net assets available for plan benefits and the actuarial present value of accumulated plan benefits as of the most recent actuarial determination date are presented below: June 30. 1981 1980 (In thousands) Net assets available for plan benefits. _$7m682 $6d40_ Actuarial present value of accumulated plan benefits: Vested benefits: Participants currently receiving payments. $ 22S $ 180 Other participants. 8,239 7,736 8,464 7,916 Nonvested benefits. 695_. 401 Total actuarial present value of accumulated plan benefits. $ 9,159_ _$ 8,317 The pension expense in 1981,1980 and 1979 was $920,000, $800,000 and $751,000, respectively, which includes amortization of past service cost over a 30-year period beginning in 1972.
1 37 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY SUPPLEMENTAL INFORMATION CONCERNING THE EFFECTS OF INFLATION (Unaudited) The following supplementary information is supplied in accordance with the requirements of Financial Accountmg Standards Board (FASB) Statement No. 33, Financial Reporting and Changing Prices, for the purpose of providing certain information about the effects of changing prices. It should be viewed as an estimate of the approximate effect of inflation, rather than as a precise measare. Constant dollar amounts represent historical costs stated in terms of dollars of equal purchasing power, as measured by the Consumer Price Index fer All Urban Consumers. Current cost amounts reflect the changes in specific prices from the date the plant was acquired to the present, and differ from constant dollar amounts to the extent that specific prices have increased more or less rapidly than prices in general. The current cost of plant net of accumulated depreciation and amortization, which includes electric plant in service, construction work in progress, other investments and nonutility property, represents the estimated cost of replacing existing plant assets and was determined by indexing the surviving plant by the Handy-Whitman Index of Public Utility Construction Costs. The current year's provision for depreciation and amortization on the constant dollar and current cost amounts of plant was detarmined by applying effective depreciation and amortization rates to the indexed plant amounts. Fuel inventories and the cost of fuel used in generation have not been restated from their historical cost in nominal dollars. Regulation hmits the recovery of fuel costs through the operation of adjustment clauses or adjustments in basic rate schedules to actual costs. For this reason fuel inventories are effectively monetary assets. As prescribed in FASB Statement 33, mcome taxes were not adjusted. Under the rate making prescribed by the regulatory commissions to which the Company is subject, only the historical cost of plant is recoverable in revenues as depreciation. Therefore, the excess of the cost of plant stated in terms of constant dollars or current cost over the histo-ical cost of plant is not presently recoverable in rates as depreciation, and is reflected as a reduction to net recoverable cost. While the rate making process gives no recognition to the current cost of replacing plant assets, based on past practices, the Company believes it will be allowed to earn on the increased cost of its net investment when replacement of facilities actually occurs. To properly reflect the economics of rate regulation in the Supplemental Consolidated Statement of Income from Operations Adjusted for Changing Prices, the reduction of plant to net recoverable amount should be offset by the gain from the decline in purchasing power of net amounts owed on a constant dollar basis. Meanwhile, on a current cost basis the excess of the increase in general price level over the increase in specific prices at the net recoverable amount should be offset by the gain from the decline in purchasing power of net amounts owed. During a period of inflation, holders of monetary assets suffer a loss of general purchasing power while holders of monetary liabilities experience a gain. The purchasing power gain on net monetary items owed is equal to the net gain found by restating in constant dollars the opening and closing balances of, and transactions in, monetary assets and liabilities. The gain from the decline in purchasing power of net amounts owed is primarily attributable to the substantial amount c f debt which has been used to finance plant assets. Since the depreciation of plant is limited to the recovery of historical costs, the Company does not have the opportunity to realize a holding gain on debt and is limited to recovery only of the embedded cost of debt capital. Restated net assets (which is equal to common stock equity and preferred stock) is measurable by adjusting the amount reported for net assets in the balance sheet for the difference between the historical cost and the restated constant dollar amounts or lower recoverable amounts of property less reserves. Because of the " lower recoverable amounts" provision, the determination of net assets for a utility company is based on the historical cost at year end, af ter conversion to constant dollars, with no aging of property required. FASB Statement 33 did not define what should be included in net assets, leaving the calculation open to experimentation. The Company calculates net assets by restating net utility plant, net nonutility property and monetary items on a constant dollar and current cost basis. Inferences which, in the case of some industries may be drawn from information in the nature of that presented below as to the adequacy of future cash flows in relation to future plant replacement requirements are believed by the Company to be less valid in the case of public utilities which, like itself, should be able to establish rates to cover increased costs of new plant. However, the information may provide some indication of the expanded capital structure that will be required for making plant replacements and additions with inflated dollars.
38 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY SUPPLEMENTAL INFORMATION CONCERNING THE EFFECTS OF INFLATION (Unaudited) - (Continued) Supplemental Consolidated Statement Of Income From Operations Adjusted For Changing Prices For the year ended December 31,1981 (Unaudited) Constant Current Dollar Cost Conventional Average Average Historical 1981 1981 Cost Dollars Dollars (In thousands) Operating revenues. $250,379 $250,379 $250,379 Fuel, purchased and interchanged power . 110,113 110,113 110,113 Other operating and maintenance expenses . 50,272 50,272 50,272 Depreciation and amortization. 10,508 22,479 23,180 Federal income taxes. 29,201 29,201 29,201 Interest expense. 17,743 17,743 17,743 Other income . (24,155) (24,155) (24,155) 193,662 205,653 206,354 Net income. $ 56 1697 $ 44,726 (2) $ 44,02S Increase in specific prices (current cost) of plant held during the year (1). $ 84,494 Reduction of plant to net recoverable amount. $(48,922)(2) (38,062) Effeet of increase in general price level . (91 022) Excess of increase in general price level over increase in specific prices at net recoverable amount . (44,590) Gain from decline in purchasing power of net amounts owed. 32,306 32,306 Net . $(l6,616) _$ (12,2_8_4) (1) At December 31,1981, current cost of plant net of accumulated depreciation was $1,219,234,000 while historical cost or net i amount recoverable through depreciation was $817,424,000. (2) Inclusion of the reduction to net recoverable amount in net income on a constant dollar basis produces a loss of $4,196,000 l l l
39 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY SUPPLEMENTAL INFORMATION CONCERNING THE EFFECTS OF INFLATION (Unaudited) - (Continued) Five Year Comparison Of Selected Supplementary Financial Data Adjusted For Effects Of Changing Prices (1) (Unaudited) Years ended December 31, 1981 1980 1979 1978 1977 (In thousands except for per share amounts) Operating revenues Historical cost. $250,379 $210,513 $159,712 $136,S56 $112,339 Constant dollars. 250,379 232,349 200,118 190,368 168,601 Xet_ income. Historical cost. $ S6,697 $ 41,177 $ 23,190 - - Constant dollars. 44,726 35,195 19,824 - - Current cost. 44,025 33,663 16,925 - - Net income per sh_are of commgn stock _ Historical cost. $ 2.23 $ 2.05 $ 1.4S - - Constant dollars. 1.69 1.67 1.13 - - Current cost. 1.66 1.58 .90 - - Net assets at_ year-end at net Iecgyerable amo_u.nts_ Historical cost. $372,823 $305,159 $220,299 - - Constant dollars. 360,770 321,693 261,024 - - Current cost . 360,770 321,693 261,024 - - Excess gf increase in_ general price level over increase in specific prices at net recoverable amount, current cost _ . $ 44,S90 $ 59,204 $ 53,762 - - Other information Gain from decline in purchasing power of net amounts owed, constant dollars. $ 32,306 $ 38,130 $ 37,585 - - Cash dividends declared per share of common stock: Historical cost. $ 1.25 $ 1.13 $ 1.07 $ 1.02 $ .99 Constant dollars. 1.25 1.25 1.34 1.42 1.49 Market price per share of common stock at year-end: Historical cost. $ 10.88 $ 9.50 $ 9.38 $ 10.88 $ 12.00 Constant dollars. 10.S3 10.01 11.11 14.61 17.56 Avercge consumer price index . 272.4 246.8 217.4 195.4 181.5 (1) Constant dc!!ars and current cost amounts are stated in average 1981 dollars.
40 i I Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY SELECTED FINANCIAL DATA For the years ended December 31 (In thousands except for per share amounts) 1981 1980 1979 Oparating revenues. . . .. . . .. . .. $250,379 $210,513 $ 159,712
! Fuel . .. ... . . . .. . 107,S62 95,461 81,669 Oparationand maintenance. . . .. .. . . . 41,7S1 31,944 24,156 Depreciation and amortization. . . . .. . .. 10,508 9,090 8,24S Taxes. .... . . .. .. . . . . . 40,273 35,801 21,573 Other income. .. . .... ... . . . .. .. . (24,155) (14,011) ( 7,742) 17S,939 158,285 127,901 Income before interest charges. . . . . 74,440 52,228 31,811 Total interest charges. . .. . .. .. . . . . 17,743 11,051 8,621 Income before cumulative effect on prior years ol change in accounting method. . . . . . . . . . 56,697 41,177 23,190 Cumulative effect to January 1,1974, j of change in accounting for fuel costs, net of related income taxes ($912,000). .
I Net income. . . . .. . . $ 56,697_ $ 41 1177 $ 231901 Net income per share of common stock, based on weighted average number cf shares outstanding during each year: Income applicable to common stock before cumulative elfect of change in accounting method. . . $ 2.23 $ 2.05 $ 1.45 Cumulative effect to January 1,1974, of change in accounting for fuel costs. . . . Net income applicable to common stock. . . . . . .. $ 2.23 $ 2.0S $ 1.45 i Pro forma amounts assuming the new method of accounting for fuel costs is applied retroactively: Net income applicable to common stock. . . t Netincome per shareof commonstock. . .. . . . . i Dividends per share paid on cormnon stock . . . $ 1.25 $ 1.13 $ 1.07 Gross utility plant. . . . .. . . . . .
$898,333 $715,190 $560,932_
1 Total assets. .. .. . . .
$890,071 $69,0 992 $537,118 l Long-term obligations and preferred stock redemption required. . . .. $316,615 $266,863 $221<721_
j i i
41 1978 1977 1976 1975 1974 1973 1972 $ 136,556 $ 112,339 $ 111,188 $ 91,461 $ 63,072 $ 49,483 $ 43,284 73,447 59,442 S3,154 44,714 24,914 1S,766 10,951 21,171 16,685 17,954 14,S16 11,463 8.160 8,101 7,361 6,498 6,233 S,506 4,345 4,102 3,776 14,128 12.377 15,727 11,197 9,809 9,573 9,279 (3,ffd3) (1,689) (838) (11423) (770) (84) (668) 112,419 93,313 92,230 74,510 49,761 37,517 31,439 24,137 19,026 18,958 16,951 13,311 11,966 11,845 8,113 7,604 7,442 6,853 5,280 3,962 3,591 16,024 11,422 11,516 10,098 8,031 8,004 8,254 988 $ _16,024 _ _ $ _11,422 __$_11,51_6 ___ _$_10,09_8 _ $_ 9,0l_9_ _ $ _ 8,004_ _$ _ 8,2_S4 . $ 1.30 $ 1.11 $ 1.29 $ 1.30 $ 1.19 $ 1.19 $ 1.22
.15
$ l.30 $ 1.11 $ 1.29 $ 1.30 $ 1.34 $ 1.19 $ 1.22
$ _8,270_ $ 8,035
$_ 329 = $=h25 5 1.02 _$ _ .99 _._$ __.95 _$_ _
.91 _ __ $ .88 $_ .86 $ _ .83 _
$ 437,468 _$ 338,598 _ $27_4,502 $ 2S0,375_ __ $227,196 _ $185,058_ $ 174,485_
$415,975 5326,910_ _ $258,407_ _$240,059 $ 206,490 $ 156,435 .__$ 14_6,401 7 _
$ 150_,152 $ 128,171 _$ 102.290_ _ __$ 1_03,104_ _ _ $. 85,906_ _ ... $_ _66,309_ __$ 66,299_._
42 Financial EL PASO ELECTRIC COMPANY AND SUBSIDIARY SELECTED OPERATING AND STATISTICAL DATA 1981 1980 1979 Population served at retail, estimated. 610,000 600,000 554,000 i Mumberof customers: Residential . 167,625 162,770 157,601 l Commercial and industrial, small. 16,724 16,169 15,791 ' Commercial and industrial, large. 43 42 44 Other . 1,996 1,941 1,875 Total . 186,388 I80,922 175,311 Annual native system peak load, net kilowatts . 736,000 718,000 688,000 Output, net generated and purchased, thousand kilowatt-hours: Steam . 3,790,666 3,928,860 3,771,043 Other . 25,704 47, % 9 - Purchased and interchanged. _ 138,104 9,794 (119,166) Total (a). 3,954,474 3,986,623 3,651,877 Sales of electricity, thousands of dollars: Residential . $ 79,019 $ 63,659 $ S2,899 Commercial and industrial, small. 76,585 58,679 46,741 Commercial and industrial, large. 38,62S 28,155 26,402 Other . SS,128 59,043 32,577 Total . $249,357 $ 209,536 $ 158,619 Sales, thousand kilowatt-hours: Residentia1. 966,487 972,070 937,858 Commercial and industrial, small. 1,033,859 985,123 949,514 Commercial and industrial, large . 702,323 621,877 682,163 Other . 996,203 1,148,952 854,749 Total (a). 3,698,872 3,728,022 3,424,284 Average annual use per residential customer, KWH . 5,849 6,06S 6,072 Average annual revenue per residential customer. $ 478.21 $ 397.74 $ 342.49 Average revenue per KWH cold, cents (b): Residential . 8.I8e 6.56e S.64e Commercial and industrial, small . 7.41 S.% 4.92 Commercial and industrial, large . S.50 4.53 3.87 Average revenue per KWH; total sales. 6.74 S.64 4.63 Electric line, pole miles: Ove: 15,000 volts. 2,157 2,131 2,070 Less than 15,000 volts (c). 2,865 2,841 2,794 Total . S,022 4 972 4,864 Total employees. 1,025 986 %S (a) Differences between total output and total sales represent Company use and line losses. (b) Includes adjustments under existing fuel clauses. (c) Includes minor amounts of line on poles owned by telephone utility.
43 1978 1977 1976 1975 1974 1973 1972 S44,0 _00 532,000 S20,000 S05,000 495,000 485,000 475,000 150,739 143,645 135,344 130,010 126,760 123,653 119,170 15,381 14,S18 14,203 13,294 13,163 12,816 12,333 47 46 39 32 29 27 27 1,842 1,715 1,748 1,663 1,545 1,445 1,351 168,009 159,924 151,334 144,999 141,497 137,941 132,881 690,000 657,000 677,000 640,000 638,000 618,000 543,400 3,673,685 3,475,753 3,501,416 3,433,698 3,369,606 3,450,021 3,075,013 (84,609) (3,574) 51,013 15,837 (13,709) (180,767) (112,435) 3,S89,076 3,472,179 3,552,429 3,449,53S 3,355,897 3,269,254 2,962,578
$ 44,178 $ 34,484 $ 31,4IS $ 27,080 $ 20,126 $ 16,749 $ 15,133 39,780 33,583 33,628 28,870 19,192 14,942 12,948 22,402 17,666 15,709 11,816 7,824 6,061 5,231 29,289 25,581 29,537 22,880 1S,595 11,416 9,696 $135,649 $111,314 $110,289 $ 90,646 $ 62,737 $ 49,168 $ 43,008 S07,956 874,140 816,169 782,285 765,636 75S,701 694,855 913,038 902,699 929,556 909,967 853,960 793,997 696,584 650,542 617,955 582,125 513,637 S08,482 536,754 487,945 849,113 847,930 1,030,812 1,006,311 980,175 958,252 853,978 3,320,649 _ 3,242,724 3,358,662 3,212,200 3,108,253 3,050,704 2,733,362 6,153 6,261 6,193 6,0_97_ 6,116 6,211 S,948 $ 299.40 $ 246.99 $ 238.36 $ 211.04 $ 160.72 $ 137.59 $ 129.53 4.87e 3.94c 3.8Se 3.46e 2.63e 2.22e 2.18e 4.36 3.72 3.62 3.17 2.2S 1.87 1.86 3.44 3.47 2.70 2.30 1.54 1.13 1.07 4.09 3.45 3.30 2.82 2.02 1.61 1.57 1,999 1,811 1,759 1,706 1,647 1,581 1,539 2,759 2,755 2,727 2,691 2,673 2,616 2,565 4,758 4,566 4,486 4,3._97 4,320 4,197 4,104 908 838 816 778 726 704 659
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- Southern California Edison Company
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Southern California Edison Company provides electric ser- Contents ! vice in a 50,000 square-mile area of Central and Southern California. This area includes some 800 cities and commu- 2: Letter to Shareholders nities with a population of more than eight million people. 4: Review of 1981 Edison's gross investment in utility plant totals nearly 13: Financial Review
$9.5 billion. Area generating capacity at peak during 1981 16: Responsibility for Financial Statements and l totaled 15,592 megawatts (MW), which included 13,269 MW Report of Independent Public Accountants
, of Company-owned facilities and 2,323 MW of capacity 17: Financial Statements 4 from other 30urces. Of the Company-owned facilities, 31: Capital Stock-Dividend and Price Information . 78% was comprised of oil-and gas-fired generating units. 32: Management's Discussion and Analysis of j SCE's interest in coal-fired generating units accounted Financial Condition and Results of Operations for another 12%, and 7% was in hydroelectric plants. 34: Selected Financial Data 1971-1981 l The Company's 80% interest in a nuclear plant accounted for the remaining 3%.
, The Company, incorporated in 1909 under the laws of California, is a public utility and its retail operations are subject to regulation by the California Public Utilities Commission which has the authority, among other things, to establish retail rates and to regulate security issuances, accounting and depreciation. The Company's resale operations are subject to regulation by the Federal Energy Regulatory Commission as to rates on sales for resale, i as well as to other matters including accounting and depreciation.
Under the National Energy Act, 1 Department of Energy has been granted regula . dthority over
- certain aspects of energy conservation, solar energy devel-opment, power plant fuel use, coal conversion, public utility regulatory policy and natural gas pricing.
The Company's planning and siting of new plant construction are subject to the jurisdiction of the California l Energy Commission. Edison also is subject to various l governmental licensing requirements, to Securities and ( Exchange Commission filing and disclosure requirements, and to certain other federal, state and local laws and regulations, including those related to nuclear energy and nuclear plant construction, environmental protection, fuel supplies and land use. On the Cover Solar rays reflected from heliostats (mirrors) at solar thermal generatmg station near Daggett, California, form star.hke test pattern in cover photograph. When facility is placed in operation in current year,1,818
- heliostats will concentrate sun's rays on 300-foot high central receiver l tower to produce 10 MW of electrical energy. Named Solar One, facihty is the largest central receiver solar generating plant ever built and represents a cooperative cffort by Edison, the Department of Energy, the Los Angeles . ,
Department of Water and Power and the Cahfornia Energy Commission. 4- __
I 1981 AnnualReport nve?vea,
% Compound Ilighlights 1981 1980 Change Growth an mmmmm Earnings Per Share $ 1.93 $3.50 40.9 % 5.3%
Common Dividends Paid Per Share (a) 53.03 $2.78 9.0 12.5 Rate of Rcturn on Common Equity 14.87"o 10.44 % 42.4 3.7 Operating Revenues (000) 54,( 54,356 $3,661,117 10.7 17.0 Enes gy Costs (000) 52A67,933 $2,371.827 4.1 21.9 Operating Expenses Net of Energy Costs and Taxes on income (000) S 697,403 $ 878,473 2.2 9.7 Kilowatt-Hour Sales (000) 62,4;1,319 59,915,187 4.2 3.1 i Customers Served 3,2,32,687 3,163,968 2.2 2.8 l Area Peak Demand (Megawatts) ;13,73S 12,841 7.0 4.0 Area Generating Capacity at Peak (Megawatts) h5,592 15,504 0.6 2.1 (a) On September 17,1981, the C:,mpany's Board of Directors authorized an increase in the common stock quarterly dividend to 50.81 from 50.74 per share, effective with the October 31,1981 payment, which is equivalent to $3.24 per share on an annual basis. Earnings Per Share and Dividends Paid Per Shr.re Rate of Re' tarn on Common Equity i e Earnings Dividends
$3.03
- 52. .'s
$2 54
$2 24
$192 i
19?? 1978 1979 19M0 1941 , I The Company's earnings per share of 54.93 for 1981 were the highest Rate of rt turn on common equity of 14.87% for 1981 closely approached recorded in the Company's history, surpassing the previous high of 54.56 the Comhany's authorized return of 14.95%. The California Public per share recorded in 1979. In addiGon, the 9.5% increase in th, common Utilities %ommission, in authorizing the Company's 1981 general rate stock dividend. authorized in September, represented the sisth increase increase, plso provided for a 592 million attrition allowance in 1982 in the past five years. to help meet inflation-related costs in this non rate case year.
To Our More Than 190,000 Shareholders: t 1981 was a year of record earnings for your Company in recognition of our improved earnings, your Board despite the continued impact of inflation on virtually of Directors declared a 9.5% increase in the common all phases of our operations. It was also the year in stock quarterly dividend by raising the rate, on an which we set in motion innovative plans to strengthen annual basis, from $2.96 per share to $3.24 per share, further our financial integrity over the course of The Board's action represented the sixth dividend this decade through strict internal cost controls, increase in the past five years. Over that period, the renewable resources, and practical conservation and annual dividend increase has averaged 14%.
, load management programs. Warren Christopher rejoined the Company in Earnings per share improved to $4.93 compared 1981 as a Director. He had resigned in 1977 to serve to $3.50 a year ago. This improvement resulted as Deputy Secretary of State and was awarded the from our increased emphasis on cost control and Medal of Freedom, the nation's highest civilian productivity improvement programs, the timely award, for his work in helping gain the release of the , authorization of the 1981 general rate increase, hot U.S. hostages in Iran.
weather-related increased kilowatt-hour sales, and in other Board actions, effective January 1,1982, increased non-cash allowances for funds used during David J. Fogarty, formerly senior vice president, was ] construction. elected executive vice president, and John R. Bury,
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Even though inflation continued in Southern the Company's genera! counsel, was elected vice California at near double-digit levels in 1981, Edison's president and general counsel. aperating expenditures were held to an increase of Projected 1983 increases in operating and main-only 2% during the year through productivity im- tenance expenses including labor, new revenue provement programs and the efforts of our people in requirements associated with changes in tax laws, car-adhering to strict operating and maintenance budgets. rying costs on new facilities, and continuing inflation In order to support 1981 construction and re- and increased capital costs resulted in our filing with funding requirements totaling $1.2 billion, eight the California Public Utilities Commission (CPUC) for major financings were accomplished in spite of the a general rate increase to produce additional annual most inflationary and volatile capital maiket in revenues of $1.247 billion, effective January 1,1983. i recent history. To help meet these requirements We are seeking an increase in the rate of return on innovatively, we became the first high quality U.S. common equity from the 14.95% currently allowed utility to enter the European money market and to 19% and an increase in the rate of return on rate completed three Euro-Debenture issues amounting base from the present 11.2% to 14%. We are also to $175 million. asking for CPUC support of our resource planning l l Approximately $275 million from our total 1981 through increased funding for research, development financings of $956 million was required fer San and the demonstration of alternate and renewable Onofre Nuclear Units 2 and 3 which at year-end energy resources, and for consumer conservation l I were 99% complete, and 92% complete, respectively. and load management programs. Additionally, we l In February 1982, following the close of licensing have requested an attrition allowance of $169 million l hearings, the Nuclear Regulatory Commission issued in increased reversues for the 1984 non-rate-case year. Conservation programs saved more than 4.2 bil-the Company a low-power license for Unit 2, cad we enpect that a full-power license will be issued in time lion kilowatt-hours of electricity during the year, the to permit Unit 2 to begin operation in mid-1982. We equivalent of approximately seven million barrels of expect Unit 3 to be operational in mid-1983. fuel oil, and successes in load management encour-In keeping with the Company's objective to aged us to increase our total load management re-provide a competitive return to its shareholders and i l 2
l l . . source commitment from 1,000 megawatts (h1W) to Already during the 1980s, we've seen continued 1,400 h1W by the end of the decade. Through man- improvement in the regulatory environment at the aged load reductions, we plan to hold growth in state level and, on the national level, the beginnings electric peak demand to 2% annually, compared of a workable energy policy which relies heavily on to a forecasted demand growth of 2.6% annually free market forces. Last year the Economic Recovery ; without load management. This should result in Tax Act was enacted with provisions that should significant reductions in new plant and capital costs. help relieve some of the intense capital pressure on , Even with reduced load growth, however, utilities and provide incentives for reinvestment of Edison will need to construct and/or purchase about dividends in utility stocks. ; 5,860 A1W of new resources during the current In the face of change, however, the goals of decade. This is equivalent to approximately 40% of Edison remain unalterably the same. .to provide today's existing generating system. Approximately reliable electric service to our customers at a reason-2,100 N1W of these additions are expected to be able price and to provide our shareholders with a based on alternative and renewable resources such competitive return on their investment. as hydroelectric, including small hydro (plants of We are deeply appreciative cf the hard work less than 30 h1W), cogeneration, wind, solar, geo- and innovative skills of our employees in helping us thermal and fuel cell technology. achieve our goals. We thank you, our shareholders, Our commitment and progress toward accel- for your support, and we pledge our continuing i erating the development of these resources are efforts to earn that support in the future. detailed in the text of this report. It is important to note, however, that the Company is on schedule at ' - ' ' this early stage in meeting the alternative resource I 4 1 ' F' commitments we initially outlined last year. Hydro- k, electric power, wind and cogeneration development , thus far have been the pacesetters in our shift to . renewables. Photovoliaics, geothermal and fuel cells ;
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have developed less rapidly than expected. When Solar One, a pilot 10-h1W central station l solarlthermal generating plant, comes on line this . year, it will bring us to the point where we utilize eight primary energy resources-oil, natural gas, q > coal, hydro, nuclear, wind, geothermal and solar- ' ' more than any other electric utility in the world. A N As indicated by this diverse list, your Company is actively committed to a decade of technological transition; a decade where we believe strict internal cost controls and productivity programs coupled to
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c G1 renewable resource development at the cutting-edge Howard P. Allen William R. Gould of technology will provide the needed flexibility to President Chairman of the Board keep pace with a changing social, financial and regu- and Chief Executive Officer latory climate. In short, we have embarked on a new way of doing business in these difficult and chang- February 18,1982 ing times. 3
Year in Review Significant accomplishments in a pany was the third largest U.S. hydro- In the area of large hydro develop-number of important areas related to electric utility in the 1920s) and also ment, preliminary engineering is the Company's operating plan for this the Company's prime source of alter- in the early stages for a 200-MW decade were achieved during the year. native energy for the 1980s. Company-owned unit at Balsam l Paced by strict cost controls and Until recently, it had been presumed Meadow, near Shaver Lake, with op-productivity improvement programs, that all cost-effective hydro sites eration scheduled for 1986. Addition-and further helped by rate increases, had already been developed. As other ally, Edison is continuing to examine increased hot weather-related sales fuel costs have climbed, however, the feasibility of purchasing the out-and innovative financing, earnings more and more small hydro projects put of the proposed 284-MW Granite
- were the highest ever recorded. have become feasible. As a result, Project as well as the output of the j Record purchases of lower-cost elec- the Company has scheduled 140 MW 120-MW Dinkey Creek Project, both tricity from other utilities supplied of generating capacity by 1990 from located on the west side of the over 26% of the Company's energy small hydro plants of under 30 MW High Sierra.
requirements in 1981 or the equivalent each and 600 MW from large hydro of 31 million barrels of oil. facilities. Together, these additions will Cogeneration Company-developed conservation almost double the Company's total In an effort to conserve energy re-programs continued to encourage hydro resources. sources, the Company continued to more efficient use of electric energy, Edison completed three small hydro develop methods of capturing waste 4 while commitments in load manage- contracts in 1981 totaling 24.5 MW. heat to produce or cogenerate electric-ment were significantly increased to Small hydro resources totaling 7 MW ity at large commercial, industrial and help manage demand growth for the also were achieved by the upgrading residential sites. California's first
! 1980s and beyond. San Onofre Nu- of Units 1 and 2 at Big Creek Plant 4 multi-unit residential cogeneration clear Units 2 and 3 moved measurably in December 1981 and January 1982, demonstration project, one of the closer to operation and progress was respectively. most innovative of these efforts, was ;
achieved in the accelerated develop-ment of alternative and renewable
- Technician watches i
,, g . graphic video display resources. l ggMr of computer-controtted i Together, these results are indices h
! of the success of Edison's efforts in [ 1.pyjj l ['"",[ '[' i, 1981 to reduce its dependence on low "7 :*:. Qvls one facility, the world's sulfur fuel oil, eliminate the adverse financialimpact of conventional
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i Energy Resources when the system is Progress and achievements dun.ng %u - placed on.line early 1981 in Edison's accelerated develop- ? 9 this year. Computer I Pace'heliostatsin l ment of alternative and renewable re- i sources justified a continued sense of - Q q. (('[,]", r,",, optimism. At this early stage, the wJX vent renectn e surface Company's commitment to utilize re-
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I Jamage. newable resources for about one-third, or 2,100 megawatts (MW), of @%' 4 . SCE capacity additions this decade is 'j , / / ! still on target and achievable. , // 7 ~/
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.1 Hydroelectric V F l' Hydroelectric power is Edison's oldest source of electrical energy (the Com- i 4
1 dedicated in July 1981. The project is Generation Capacity Mix located at an apartment complex near Los Angeles and can provide up to 3.9 Dunnpe decaw 1981 Recorded 1990 Projected the IW0s. nearly all million kilowatt-hours (KWH) of 15,592 Megawatts 18,360 Megawatts cogenerated electricity per year to the Renewablet [j d d l Edison system. y'g' 15% from nuclear. purchases l A total of 156 MW of cogeneration hydro) and alternatwe and is on line or in the start-up phase of Hydro 6% renewable resources. Operation. The Company's resource plan calls for 1,000 MW of cogenera- power g 15 % Purchased Power
] i{h Company'$ generating tion capacity to be operational by the Nuclear 2% caPacay in iwi, are end of this decade of which 500 MW Projected to comprise C al 1% Nuclear 15 % approumately 47%
will be a firm resource dedicated to by w system needs. Coal 9% Wind Wind power, like hydro power, can come in both small and large forms. Small wind turbines at privately. Oil and Gas 67% owned wind parks in the Tehachapi oil and Gas 44% Mountains and in Riverside County with total outputs of 2 MW and 5.5 MW, respectively, were contracted for the Edison generating system in 1981 following the Company's third-party wind park opportunity announcement in late 1980. Principles of agreement last year,is also undergoing redesign and corrosion problems. Progress in were also reached during the year for for planned operation in late 1982. materials and process technologies in an additional 74 MW of both small Additionally, a vertical-axis wind tur- recent years, however, has reduced and large wind turbine energy from bine genertor, developed by DAF these difficulties in generating plant other developer-entrepreneurs. Indal Ltd., has been procured for test- operation. The Company's geothermal The largest customer-owned wind ing in 1982. resource goal is 375 MW in this decade. turbine generator contributing to the Edison will continue to pursue in 1981, Edison's geothermal pro-Edison system, a 40-KW Mehrkam wind generation as a viable resource grams centered on three Company-Induction Unit, was placed in service in the current decade even though owned power plants-the 10-MW in 1981 near Lancaster, along with a some early tests have reflected the Brawley unit which has been operating second 18-KW system integrated into developmental nature of this new for 18 months with an average capacity Federal Aviation Administration oper- technology, especially in hydraulics factor of 50% and availability in the ations at the Fox Field Airport near and rotor design and in scahng-up 80% to 90% range, a 10-MW Salton Lancaster, from small to large wind units. The Sea geothermal project scheduled At SCE's Wind Energy Center goalis 560 MW of wind capacity by for completion at mid-year, and the near Palm Springs, developmental the end of the decade, equivalent to 57-MW Heber dual-Hash geothermal testing of large wind generators also 140 MW of firm capacity, a reduction plant which is planned for operation continued during the year. The which reflects the resource's intermit- in 1984. three-bladed, horizontal axis Bendix/ tent availability. Additionally, purchased power Schachle unit is now undergoing a negotiations continued during the major modification. It was success- Geothermal year with third-party geothermal pro-fully operated while synchronized to Geothermal power is the generation ducers in the U.S. and with Mexico's the Edison system, producing 20,000 of electricity utilizing hot water and Comision Federal de Electricdad for KWH with output levels of up to steam resources locked beneath the up to 260 MW in geothermal pur-1 MW. A vertical-axis wind turbine earth's surface. High concentrations of chases to supplement 70 MW already generator, which encountered a rotor salts inherent in some geothermal re- under contract. failure during initial tests by Alcoa sources initially limited cost-effective applications by creating severe scaling 5
Solar Wind turhne generaton Solar power can be divided into q dot ridgesef mile-high two distinct categories: solar thennal which converts solar energy into T].; Angeles. Bu h steam for electnc power generation; ~~ entrepreneur-developer in response to Edison % and solar photovoltaic, which con- , . IW0 third-party wind verts sunlight directly into electrical V y energy. *~ 'd I' PI""" announcement, units During 1981, the Company ex- i . ! are the first of 40 to S0 panded its efforts to provide 290 N1W f 7y small wind turbnes, I cach scheduled to of solar-generated power by 1990 by - c , contnbute 25 to 50-pursuing both technologies for central 'Y - . f; . ' i 1 ' ~ , P-
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Solar One, the world's largest cen- ;~ f .[' ;-g? tral receiver electric power plant at the ;; ~ S . L; Cool Water Generating Station site , p r near Daggett,is scheduled for initial s operation in the spring of 1982. The 10-N1W solarithermal system is the re-sult of a cooperative effort by Edison, the Department of Energy, the Los Angeles Department of Water and Power, and the California Energy Commission. Concurrently, conceptual engineer-ing and financial studies are under way for a 100-N1W solar thermal cen-l tral receiver plant. This resource is tion of a 3-KW solar photovoltaic currently are planned for research and development in 1982, including sub-planned for development at Edison's experimental system. Lucerne Valley site. stantial alternative energy R&D. A letter of intent has been signed to fuel Cells Tl e Company's research efforts in purchase electricity from a 10-N1W Fuel cells, which convert chemical 1981 included stepped-up funding solar parabolic trough project to be energy directly into electrical energy, support for a demonstration coal located at the Cool Water generating are an environmentally attractive gasification facility at Edison's Cool station, and preliminary engineering generating source provided that cur- Water Generating Station site. j has begun on a 5-N!W solar salt rent fuel cell power designs meet the Problems with financial participation l pond generating facility at the Salton technical and economic objectives of by other entities were overcome and ) Sea. In addition, SCE is working with utility users. In this regard, the future construction of the facility began in ) l a private contractor to develop a of Edison's program wi!! depend upon December. When completed in mid- j l 25-KW parabolic dish solar project. the degree of success demonstrated 1984,it will be the nation's first power l Development efforts also continued by the fuel cell facilities under develop- plant based on coal gasification j t in the area of solar photovoltaics, with ment with utility support in New technology and willinitially process , I ! delivery to Edison last April of the York City and in Tokyo, Japan. SCE's 1,000 tons per day of Utah coal to a first of some 60 solar panels, each con- goalis 55 N1W by 1990. medium BTU gas for electrical taining 228 laser-etched solar cells generation. produced from dendritic-web ribbon. Other Research and Development A comprehensive, one-year study Sites are also being studied near Edison's research and development will begin in 1982 at the Company's Palm Springs and Barstow for installa- expenditures in 1981 totaled $43 million. liuntington Beach Generating Station Espenditures of nearly $47 million 6
I l to assess a process for the reduction of Peak Demand Forecast nitrogen oxides from boiler Hue gas. Also, a wood waste gasification dem- The Company is pro-jecting a managed ioad onstration project was initiated during recast Gmwt 2M gmw th targ M 2 Mo the year to determine the compatibility compared uith the of burning a wood-derived gas in Demand Reduction forecast growth rate of existing generating stations. 2 6% annually. !!y 1W0, The Company made continued load management pm-progress in marine biology and its c 7, ",*',*))'[d n'[ interface with coastal generating D[ Managed Growth-2.0% tiv 1.400 megawatts. plants, including aquaculture in the thermal discharge waters at the Re-d- 7 :- tiolding gmwth at a 2.0% Ievel with kud dondo and Ormond Beach Generating j management should Stations and an artificial reef de- ;N ~' [][jnf,{nc[ C velopment near Camp Pendleton, California. h*~ requirements at a man-ageat,ie level. g (.; k Record Peak Set During Ileat Wave Q. A record area peak demand of 13,738 h1W was set on August 27 as a h4 . result of heavy air-conditioning loads L.R I'" during the longest period of consis- _ tently hot weather in SCE's operatmg history. The new area peak demand represents a 7.0% increase over the previous 12,841 N1W record of July 30, 1980. The annual compound growth 425 N1W are already in place with realized from the 1981 program with in peak demand over the last five the balance planned to be met through over 150 h1W of load reduction ex-years, including the 1981 peak, has the expansion of earlier experiments pected from the expansion of the pro-been 4.0% in load cycling and through several gram by 1984. new programs which were success-Target Of 2% Set for hianaged fully demonstrated during the year. Demand Subscription Scivice: Load Growth Such programs include: This approach to reducing peak To help reduce the rate of growth of demand is the most technologically annual peak demand and further Residential Air-Conditioning Cycling: innovative of Edison's residentialload defer costly new generating plant con- For several years, Edison has been management programs. Demand struction, the Company in 1981 estab- evaluating the cycling of residential Subscription Service (DSS) uses lished a managed load growth target air conditioners. The intent of this remotely-activated load controllers on of 2% for the 1980s compared to the program is to remotely control the use residential customer meters. forecasted peak demand growth of of residential air conditioners during In operation, the customer selects a 2.6% without load management. It is system capacity shortages. Alore than minimum level of electrical service noteworthy that the 1981 peak de- 16,000 control units were under which will satisfy the customer's basic mand exceeded the 2% load growth evaluation in the Company's service electrical requirements during utility target for only eleven hc trs, thus territory at year-end. This enabled system capacity shortages. During further underscoring the need for load Edison to determine customer ac- normal utility operating conditions, the management. The reduced load ceptance, communication system and customer has normal electrical service. growth rate, which the Company con- cycling equipment reliability, as well During periods of system capacity siders both financially and environ- as the overall cost effectiveness of shortages, however, the customer's mentally prudent in the face of con- the program. DSS device is remotely activated and tinued in0ation,is reflected in Edison's Based on the results of the pro- the customer's load cannot exceed the commitment to vigorously pursue gram, Edison plans to install over previously agreed upon level of ser-load management to decrease demand 70,000 load control devices on cus- vice. If the customer's load exceeds his on its system by 1,400 N1W by 1990. tomers' air conditioners in high tem- subscribed service level, the customer's Load management programs totaling perature climates by 1984. A load total electrical service is interrupted. To reduction of approximately 5 N1W was 7
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l l l I restore service, the customer must turn These efforts in 1981 resulted in ment of off-peak storage applications off various appliances to lower the approximately one megawatt of load is expected to result in 14 h1W of de-load and then reset the DSS device. reduction. Based on these results, the ferred load by the end of 1984. The Company's successful test of commerciallindustrial air-conditioning ( 2,600 units in 1981 has resulted in cycling program will be expanded to Energy Coalition: plans to install more than llo,(XX) ad- approximately 10,0tX) customers by The Southern California Energy Coali-ditional units by the end of 1984. The the end of 1984 which is expected to tion, formed in 1979, is an association 1981 test yielded a load reduction of result in over 60 h1W of load reduction. of four Orange County companies approximately one megawatt. The ex- committed to cooperative load man-panded program is expected to yield Off-Peak Tircrinal Storage: agement. In 1981, the Coalition signed over 140 A1W of load reduction. Edison began a program in 1981 that an operating agreement with Edison encourages the installation of off-peak for load management and interrup-Comincrcial and Industrial Load Cycling: cooling systems in large commercial tible service under an incentives During 1981, Edison initiated an exper- and industrial facilities. These systems schedule which resulted in an energy iment in commercial and industrial chill or freeze water during off-peak savings of about 4 N1W during the air-conditioning load control using an periods and store it for air-conditioning year. The U.S. Department of Energy l AN1 radio station to remotely activate use during the hot hours of the day. has adopted the concept, calling it cycling devices. This is the first load Three large customers that began " Operation Powerplay." management program in the United operation in 1981 shifted approxi- i States to utilize Ah! broadcast tech- mately 3,000 tons of air-conditioning Conservation Programs Gain nology. Approximately 600 commer- load to off-peak hours of operation. Added hiomentum cial and industrial customers were This effort resulted in approximately Electric consumption by Edison's 3.2 equipped with cycling equipment 3 N1W of load reduction for the year. million customers during the year was involving 3,000 air-conditioning units. Continued emphasis in the develop- 59.6 billion KWii compared to 58 billion t e Heat recovery system of
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l KWil in 1980. Conservation programs Area Capacity and Peak Demand (in megawatts) were a primary factor in holding total electric consumption by Edison's ; A record peak demand residential customers to a 1.3% of 13,738 megawatts growth rate in 1981 even though air " A"' C'Pacity occurred on August 27, P * *'"d 1981, representing a 7% conditioning usa 8e was at a high level . increase over the peak due to record summer temperatures '
, set in 1980. The 1981 and despite the fact that new resi. peak exceeded the 2%
dential customers in the Company's gr wth targetinlarge service territory during the year in- n, P ,$,'[',"'.' "d creased by 59,279 or 2.1%. 12 m during which Southern
""2 Customer conservation efforts in u.iw california experienced 1981 and the higher cost of electricitv "w 84 consecutwe days in held average annual KWil residential which the temperature consuraption to 5,879 KWil compared to 5,939 KWII per customer in 1980.
Customer response to the Com-pany's conservation programs and Edison's own efforts in voltage regula-tion, distribution circuit management and streetlight conversion in 1981 re-sulted in savings of more than 4.2 bil- i lion KWil of electricity, the equivalent of about seven million barrels of expensive fuel oil. The streetlight con- "'7 "" '" "" '"' version program reached a 50% D us us as us us completion level in 1981, with a total savings to date of more than 75 million and Edison became the first California industrial customers. By year-end, KWII through the change to high- utility to have 1,000 ZIP loans granted more than 1,000 participants repre-pressure sodium-vapor lamps. to its customers. Conservation mea- senting 300 contracting firms were New conservation programs im- sures recommended for ZIP financing involved in the program. plemented in 1981 included Residential are identified during the Residential in 1981, non-residential audit efforts Conservation Service, low and zero Conservation Service home energy helped businesses save l.2 billion interest financing of conservation survey. KWil of electricity. hardware, and solar water heater A solar incentive program was ini-backfits. *iated during the year to encourage John and Alice Tyler EmlogyIEnergy Prize: The Residential Conservation Ser- energy-conserving retrofit installation In 1981, Edison became the first corpo-vice is a federally-mandated program of solar water heating systems on rate winner in the eight-year history enforced through a state plan which existing electric water heaters. Qual- of the prestigious John and Alice Tyler offers comprehensive in-home energy ifying customers are eligible for a $720 Ecology-Energy Prize. The Company surveys to recommend conservation rebate on systems which meet regula- received the honor for achievements actions to residential customers. In tory requirements. A 1981 heat pump in conservation and for its commit-1981, Edison became the first utility to water heater demonstration program ment to aggressively develop renew-implement this program in California, offered an alternative where solar able and alternative energy sources. logging more than 28,000 home en- panel applications were not practical. The Prize was commenced in 1973 by ergy audits by year-end. The Company initiated the " Con- the late John C. Tyler, founder and A Zero Interest Loan Program (ZIP) servation Means Business" program former chairman of the Farmers In-for financing residential conservation which involves contractors in the sell- surance Group, and his wife, Alice C. investments was pioneered in Edison's ing of conservation. The program Tyler. Edison directed that its $100,000 Eastern Desert service area to assist provides incentives to contractors and prize be presented in equal amounts customers with high bills. By year- lighting distributors who sell energy- to the University of Southern Califor-end, more than $2 million in zero efficient lighting systems, and heating / nia and the California Institute of interest loans had been committed, air-conditioning contractors who sell Technology. maintenance agreements and economy cycling equipment to commercial and l
~-w c Technicians monitor
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10
1 l Generation Resources for the 1980s 1981 Sources and Distribution of Income Even with the combined impact of Edison's conservation and load man- - - ' - -
-m i nergy costs, w hwh in awrces Distribution M aaounted Mr 5-*
agement programs, the Company projects a need for 5,860 MW of new gricultural 2% ,R,e nIn"[*d 3% cents out of every dol-Other 7% M.sintenance 4% reyenunollected generating capacity for this decade to meet the electricity needs of its custom- 'g gg Ta m 5% [{,y,",P""yd'{,n , Depreciation 5% linergy Cost Adjust. ers. This generation requirement is Pub!;c Interest 8% ment clause procedure equal to about 40"/o of current ' 8%
'"I ** and should haw no Company-owned facilities and will be impait on earmngs.
Dwidends 8% supplied'by 2,340 MW of nuclear capacity,1,420 MW of purchases, and industrial 24 % $r*a' tiong o 2,1G0 MW of alternative and renew- expenses able technologies. -$"[P'"Y Nuclear Units Approach Completion in January of 1982, the Atomic Safety commercial 25% and Licensing Board rendered a fa-vorable decision on seismic issues and Energy awts 57% matters relating to the low-power op-eration of San Onofre Nuclear Units 2 and 3. The decision provided a basis Residential 26% for the Nuclear Regulatory Commis-sion's issuance of a low-power license in February. A full-power operating ~ license is expected in time to permit Unit 2 to begin operation in mid-1982. is more than 70% complete, and oper- (CDWR) which will make 225 MW of Unit 3 is scheduled to follow a year ation is scheduled for the 1983-1986 generation capacity available to the later. period. Company during peaks with the Unit I at San Onofre was returned energy returned to the Department to service in early November after Ivanpah Coal Project during off-peak periods. The contract equipment repairs were completed. Edison anticipates the addition of brings Edison's total capacity pur-The unit has operated at approx- approximately 1,200 MW by 1993 chases with CDWR to 695 MW. imately 90 percent of rated capacity from its 80% share in the 1,500-MW since that time. Unit I was originally California Coal Project. The coal-fired Fuel and Purchased Power Costs placed in service in January 1968. generating station is planned to be to- Fuel and purchased power costs for Subject to regulatory approvals, cated in Ivanpah Valley in the Eastern 1981 totaled $2.6 billion, as compared the City of Anaheim purchased an California desert. with $2.0 billion in 1980. Fuel oil con-additional 1.5% ownership interest in sumptior during the year was 23.6 Units 2 and 3 in 1981. The Company's Purchased Power Resources million barrels, down from 30.2 mil-ownership interest in Unit I at San Edison continued to actively pursue lion barrels in 1980. This was primarily Onofre remains at 80% Edison's inter- the acquisition of non-capital genera- due to record power purchases of ap-est in Units 2 and 3 will be reduced tion resources in an effort to reduce proximately 18.4 billion KWH in 1981, to 75.05% when the sale to the City of the large amount of capital required equivalent to 31 million barrels of oil, Anaheim is completed. SCE's total for annual construction programs, and and the availability of more than 244 megawatt ownership in the three units to further reduce dependence on ex- billion cubic feet of natural gas, equiv-is 2,000 MW. pensive foreign oil. As opportunities alent to 42 million barrels of oil, the Edison also has a 15.8% interest arise, the Company plans to continue largest available quantity since 1970. totaling 579 MW in three 1,222-MW to purchase generating resources con- Although a surplus of conventional units being constructed at the Palo structed and owned by others in an fuel oil exists in today's world market, Verde Nuclear Generating Station effort to reduce the need for capital Southern California utilities are re-near Phoenix, Arizona. Construction expenditures. quired to burn a very low sulfur oil to In 1981, a capacity exchange agree- meet local air pollution standards. ment was completed with California's Department of Water Resources 11
This low-sulfur fuel oil continues to 1980; and (2) normalized accounting acts of courage and initiative by command a premium price and has for the full 10% Investment Tax Credit. Edison people. Gola medals were limited availability in world markets. The California Public Utilities presented to three employees who htoreover, contrary to earlier pro- Commission (CPUC), in conformance endangered their own lives while sav-jections, natural gas has largely with provisions of the Tax Act, has is- ing the lives of others. A total of seven supplanted the Company's use of fuel sued an interim order authorizing silver medals were presented for other oil and even though less costly than utilities to comply with provisions of heroic acts. Bronze medals were pre-oil, its price has increased substan- the Tax Act in establishing rates in sented to six additional employees for tially. As a result, fuel costs continued rate proceedings. The Company's 1983 humanitanan contributions ranging to rise, but remained below levels that general rate filing reflects the pro- from apprehension of a thief to long-could have been expected if natural visions of the Tax Act. term involvement with handicapped gas had not been available. youngsters. 1983 General Rate Request Amended Federal Fuel Use Law As a result of continued increases in Affirmative Action Progress Continues in 1981, Congress amended the Pow- costs of providing electric service, increases in the representation of erplant and Industrial Fuel Use Act of Edison prepared and filed during the females and minorities in the work 1978 to remove prohibitions on the year an application with the CPUC for force continued during the year. use of natural gas as a primary energy a general rate increase to be effective Edison's minority representation in-source in existing powerplants. For- in 1983. creased from 24.8% at the beginning merly, the Act limited the amount of The request,if approved, would of 1981 to 25.4% at year-end. During natural gas an existing powerplant raise annual Company revenues in the same period, female representa-could use prior to January 1,1990, te a 1983 by $1.247 billion and by an addi- tion increased from 20.2% to 20.6% percentage of the gas consumed dur- tional $169 million in the 1984 non- During the five-year period from ing the base period of 1974-1976, and rate-case year. The increase is made year-end 1976 through year-end 1981, prohibited the use of natural gas in necessary by high interest rates and minority representation in the work existing powerplants thereafter. Ilad capital costs, increased operation and force increased from 17.9% to 25.4%, this Act not been amended, Edison's maintenance expenses including and females from 16.7% to 20.6% future costs could have increased labor, recent federal tax law changes Edison's Procurement Division substantially. and construction and carrying costs also continued efforts in 1981 to in-associated with the need to provide crease opportunities provided to Economic Recovery Tax Act of 1981 facilities to serve new customers, hiinority Business Enterprises (h1BE). Changes made by the Economic Re- CPUC rate-case procedures call for Since the Company's hiinority and covery Tax Act of 1981 (Tax Act) will a 12-month time period during which Small Business Development Program improve the Company's cash flow and extensive public hearings are held and was formally introduced in 1979, the the quality of earnings in 1983. expert witness testimony is taken. number of h1BEs qualified to provide Provisions of the Tax Act include: goods and services to Edison has in-(1) normalized accounting for the tax Jack K. Ilorton llumanitarian Award creased by 72%, and the number of benefits derived from accelerated cost Sixteen Edison employees were the opportunities provided annually recovery depreciation on plant placed first recipients in 1981 of the Jack K. has increased 330% over the past in service subsequent to December 31, llorton llumanitarian Awards which three years. were established in 1980 to recognize Percentage of h1 ale, Female and hiinority Asian American Total Male Female Black American Indian Ifispanic Minonties Employees at % % % % % Year-End Year-End Year-End Year-End Year-End Year-End Year-End Year-End 1976 and 1981 1976 1981 1976 1981 1976 1981 1976 1981 1976 1981 1976 1981 1976 1981 hianagement'" 92.9 86.3 7.1 13.7 1.8 3.2 3.6 5.1 0.6 0.5 4.3 6.7 10.3 15.5 Non-hfanagementir' 79.2 76.0 20.8 24.0 6.7 8.9 1.7 3.1 0.8 1.0 11.9 17.3 21.2 30.2 Total Company"" 83.3 79.4 16.7 20.6 5.3 7.0 2.3 3.7 0.7 0.8 9.6 13.8 17.9 25.4 G H Af Anngement emtelovers mrlude Ikr "Othcaals and Managers" and ' Precusonals" A'hrmatwe Actuen Categenes m Mn Management emp;are unclude tore "Techortcnans. "O"rse and Ciencal: "Cratt. men: "Orvrators
'laberri nnd "Sertst hehtrC A*hrmatwr As tron Categones.
4 H Ins luJes nlI claurs al employers 12
l l Financial Review The events and occurrences which Common Stock Price Comparison (year-end) had a significant impact on the Com- m pany's financial condition during 1981 .uo 1 The Company's com-are highlighted in the following dis. mon stock price has "5 B'5': 19 % Performed well dunng cussion. Also addressed are certain - DJUA gg:
. $7 p the past five years com-items which the C,ompany believes DJIA 107.43 Pared with the Dow DJUA:
will have an impact in 1982 and be- DJIA: 990.09 Jones industrialand yond. A more detailed review of the m Dow Jones Utahty Aver-ages. The Company factors affecting the Company's opera- , tions during 1981 is contained in Man- ,
',",$"ji, "'
for-agement's Discussion and Analysis of mance to an aggressive Financial Condition and Results of dividend pohey, the Operations beginning on page 32 of commitment to devel-this report. 2* "Pi "8 'h"'"'tiv" '"d renewable resources and improved eamings Earnings Summary which reflect the imple-Earnings per share for 1981 were a mentation of stnngent record $4.93, surpassing the previous high of $4.56 recorded in 1979 and rep- n d[ $ y programs. resenting a significant improvement over the depressed earnings of $3.50 per share recorded in 1980. The 41% increase in earnings per share for 1981 retiected: , ,, ,,,, ,,, ,, a the results of stringent and effective cost control and productivity mea-sures implemented by the Company $3.66 billion. In addition to the impact Rate Increases and Adjustments a increased kilowatt-hour sales pri- of the general rate increase and higher General Rate Increase-The CPUC marily attributable to a record summer weather-related kilowatt-hour sales, granted the Company a general rate heat wave during which Southern the increase in 1981 revenue reflects increase of $294 million, effective California experienced 84 consecutive rate increases granted under the En- January 1,1981. This increase was au-days of temperatures exceeding ergy Cost Adjustment Clause (ECAC) thorized to cover substantial inflation-80 degrees procedure to provide for the recovery ary increases in operating and capital a higher non-cash allowances for of increased fuel and purebased costs, along with additional expenses funds used during construction, and power costs. for customer conservation programs. a the favorable impact of a general In its 1981 general rate decision, the rate increase granted on January l,1981. Dividend Rate Inc. eased CPUC also addressed the adverse im-Despite inflation and a sluggish in keeping with the Company's objec- Pact of inflation on the Company's economy, rate of return on common tive to provide a competitive return to financial condition in the 1982 non-equity for the year 1981 was 14.87%, ih shareholders, the Board of Direc- rate-case year by authorizing the which favorably compares to the tors on September 17,1981, authorized Company an additional base rate in-14.95% allowed by the California Pub- a 9.5% increase in the common stock crease of $92 million, effective January lic Utilities Comm'ission (CPUC) and quarterly dividend rate. On an an. 1,1982. This increase was placed in to the 10.44% earned in 1980. The nual basis, the Board's action raised effect on schedule. Company's cost control and produc- the dividend rate to $3.24 per share, Energy Cost Adjustments-During tivity efforts contributed significantly marking the sixth increase in the divi. the course of a year, the Company is to the improvement in rate of return dend rate in five years, representing a subject to fluctuations in both the on common equity in 1981. compound annual increase during availability and price of fuel oil, natural Revenues for 1981 totaled $4.05 bil- that time of 14% At year-end, the divi. gas and purchased power. Under the lion, an increase of $393 million, or dend was providing an 11.3% yield ECAC procedure, electric rates may be 10.7% over 1980 recorded revenues of on common stock market value of
$28.75 per share.
13 l
adjusted up or down three times Funds Required for Construction (in millions) annually to reflect changes in the cost of fuel and purchased power used , With San Onofre Nuclear Units 2 and 3 to generate electricity. Energy costs m "
" P
above or below those used in the estab- [hn in]9 d 83, lished rates are accumulated in a respectively. and the balancing account, and the accumu- company' slower lated amount is reflected in succeed. growth rate projections reducing the need for ing rate adjustments. Although cash ' " P " flow can be affected for relatively tion c n tr ion short periods of time, the ECAC pro- , expenditures are pro-cedure has the effect of preventmg jected at more manage-able levels for the 1982 I fluctuations in earnings as a result of through 1986 timeframe. changes in energy costs. During 1981, the following ECAC-related rate adjustments were au-thorized by the CPUC:
+ an ECAC rate decrease of $194 million annually, effective January 1, 1981, and a $318.3 million annualized in-crease, effective October 25,1981.
The net annualized increase in ECAC-related revenues for the year y 1981 was $124.3 million. Effective January 5,1982, the Company was au-thorized a $172 million increase in Stock Purchase Plan and the Employee scheduled October 27 issue date when ECAC revenues for the four-month Stock Ownership Plan. Details of long-term interest rates reached period ending April 30,1982. these issues are provided in the ac- 18%% Deferring the issue until De-Resale Rates-On December 16, companying table. cember l enabled the Company to 1980, the Company filed an applica- Interest rates which reached record save more than $5 million annually in tion with the Federal Energy Regula- highs and were extremely volatile dur- interest costs. tory Commission to increase rates ing the year made the selection and In addition, the Company issued for electricity sold to resale customers, timing of financings extremely impor- pollution control equipment bonds on such as Anaheim and Riverside, tant. For example, to take advantage two occasions during the year. These which resell this electricity to their of rates below those prevailing in the tax-exempt financings also allowed own customers. These rates, which domestic bond market, the Company the Company to take advantage of went into effect on July 16,1981, sub- entered the European market on three lower rates. ject to refund, are designed to in- occasions during the year. In the ,ec- Reflecting the $956 million of total crease revenues by $16.7 million on an ond quarter of 1981, the Company sold capital raised in 1981, Edison's capital annual basis. two $50 million debt offerings in the structure at year-end 1981 was as European market and in the fourth follows: 47.3% debt,12.0% preferred Financing the Construction Program quarter, sold a $75 million debt offer- and preference stock, and 40.7% A record amount of new capital, $956 ing. All of these issues were placed at common equity. million, was raised in 1981 to fund the rates below levels existing in the In 1987, funds required for the Com-Company's continuing construction domestic market. pany's construction expenditures are program. During 1981, the Company Also, on December 1, the Company projected at $873 million. For the sold eight security issues in addition completed its eighth and final major five-year period 1982 through 1986, to the ongoing sales of common stock financing of 1981, a $200 million issue funds required for construction ex-through the Dividend Reinvestment of 30-year mortgage bonds at an penditures are projected to total $4.0 and Stock Purchase Plan, the Employee interest rate of 15% % The Company billion. postponed this offering from the 14
The first financing of 1982, Dividend Reinvestment and Stock Purchase Plan $176,800,000 of tax-exempt pollution control bonds with a 10% interest - o7 Participation in the rate, was placed on January 26. Also, Dtvidend Reinvestment the Company offered on February 17, t a Percent of Total Slureholders g g and Stock Purchase n ha incre 1982,5 millio'n shares of common . Percent of Total Shares stock at a public offering price of $28%
" i participating sharehold-per share, raising approximately ; ers as of February 1,
$139 million in net proceeds. In addi- ' 1982. representing an tion, the Company's financing plans i I"j" P i
'[g l,',','c; for 1982 include mortgage bonds and -
pants since year-end
"' ~
possibly preferred stock, as well as t 1980. The increase in again pursuing the European market participation is attnbut- , as a source of new capital. [n$rI Act of 1981, which for Dividend Reinvestment Plan the years 1982 threugh Under provisions of the Economic :n 19ss excludes from Recovery Tax Act of 1981, shareholders current.yeanaxable who reinvest dividends in qualified ji' '{g*,'Z' [ I public utility companies may exclude joint return > reinvested up to $750 of dividends per year in quahtied public ($1,500 on a joint return) from current , utdity companies. taxable income. This provision applies _ to dividends distributed in the years < 1982 through 1985. This change has m, m in in % ioi im begun to increase participation in the **" Dividend Reinvestment Plan. At the end of 1981, approximately 1981 Financings: 26,600 shareholders, or about 17.4% of coupon Amount nth Is w Tenn Rate p hone the eligible holders of Edison's com-mon stock, were participating in the January Common Stock-8,000,000 shares @ 524% 5189 Dividend Reinvestment and Stock l Purchase Plan (DRP). At year-end h! arch Pollution Control Bonds- i 1981, approximately 16.0 million shares Four Corners Generating Station 3 Years 8%% 93 were enrolled in DRP representing h1 arch Euro-Debentures 6 Years 14 % 50 18.3% of the total number of shares h1av First & Refunding htortgage Bonds 10 Years 15% % 200 outstanding. During 1981, DRP par- Euro-Debentures 7 Years 14% % 50 June ticipants purchased approximately 1.9 million shares by reinvesting over July PoHution control Bonds-liuntington Beach Generating Station 40 Years 10% % 8
$47 million of dividends and optional payments. October Euro-Debentures 5 Years 16% % 75 As of February 1,1982, approxi- December F;rst & Refunding Afortgage Bonds 30 Years 15% % 200 mately 27,900 shareholders, represent- Ongoing Dividend Reinvestment and Stock Purchase Plan 47 ing 18.3% of eligible shareholders, Employee Stock Purcha e Plan 28 were participating in DRP. At that Employee Stock Ownership Plan 16 time, approximately 15.9 million shares Total 5956 were enrolled in DRP, representing =
18.2% of the total number of shares outstanding. 15 l
Southern California Edison Company Responsibility for Financial Statements The management of Southern California Edison Company with, the independent accountants develop and maintain has prepared and is responsible for the financial state- an understanding of the Company's accounting and ments and the other related financial data contained in financial controls, and conduct such tests and related this Annual Report. The financial statements, which procedures as they deem necessary to render their include amounts based on estimates and judgments of opinion as to the fairness of the financial statements. management, have been prepared in conformity with The Audit Committee of the Board of Directors, generally accepted accounting principles applied on a composed entirely of directors who are not officers or em-consistent basis. ployees of the Company, meets periodically with the To meet its responsibilities with respect to financialin- management of the Company, the independent public formation, the Company maintains a system of internal accountants and the internal auditors to make inquiries as accounting controls which is designed to provide reason- to the manner in which the responsibilities of each are able assurance that assets are safeguarded from loss or being discharged. In addition, the Audit Committee recom-unauthorized use and that the financial records properly mends to the Board of Directors the annual appointment reflect the authorized transactions of the Company. This of the independent public accountants with whom the system is supported by written policies and procedures, Audit Committee reviews the scope of the audit and the organization structures that provide for appropriate divi- nature of other services provided as well as the related sion of responsibility, the selection and training of quali- fees, the accounting principles being applied by the Com-fied personnel and is augmented by programs of internal pany in financial reporting, the scope of internal financial audits. There are limits inherent in all systems of internal auditing procedures, and the adequacy of internal ac-accounting control based on the recognition that the counting controls. cost of such system should not exceed the benefits to be To further assure independence in performing and derived. The Company believes its system of internal reporting *he results of audits, representatives of the inde-accounting control appropriately balances this cost- pendent public accountants and the Company's staff of benefit relationship. internal auditors have full and free access to meet with An independent examination of these financial state- the Audit Committee, without members of Company ments has been conducted by Arthur Andersen & Co., management being present, to discuss any accounting, independent public accountants, in accordance with gen- auditing, or financial reporting matter. erally accepted auditing standards. In connection there-Report ofIndependent Public Accountants To the Shareholders and the Board of Directors, Southern California Edison Company: We have examined the balance sheets and statements of above present fairly the financial position of the Company capital stock and long-term debt of Southern California as of December 31,1981 and 1980, and the results of its Edison Company (a California corporation, hereinafter operations and the sources of its funds used for construc-referred to as the " Company"), as of December 31,1981 tion expenditures for each of the three years in the period and 1980, and the related statements of income, earnings ended December 31,1981, and further, in our opinion, the reinvested in the business, additional paid-in capital and quarterly financial data set forth in Note 7 of " Notes to sources of funds used for construction expenditures for Financial Statements" summarize fairly the results of op-each of the three years in the period ended December 31, erations for each quarter within such years, all in confor-1981. Our examinations were made in accordance with mity with generally accepted accounting principles generally accepted auditing standards and, accordingly, applied on a consistent basis. included such tests of the accounting records and such other auditing procedures as we considered necessary in g yg the circumstances, and also mcluded similar examinations of the financial statements for each quarter within each of Los Angeles, California ARTilGR ANDERSEN & CO. the years. February 5,1982 In our opinion, the financial statements referred to 16
Southern California Edison Cornpany Statements of Income Thousands of Dollars Year Ended December 31, 1981 1980 1979 Operating Revenues: Sales (Notes I and 2) . . . . .. .. . 54,026,548 $3,631,373 $2,553,126 Other . . .. .. ........ . 27,808 29,744 10,84b Total operating revenues (Note 7) . . . .. . . 4,054,356 3,661,117 2,563,974 Operating Expenses: Fuel. ... . .. . .. .. 2,078,393 1,729,552 1,433,658 Purchased power (Note 9) . . .. 479,813 280,675 99,245 Provision for energy cost adjustments (Notes I and 4) . .. . (90,273) 361,600 (188,880) Subtotal-energy costs . . .. 2,467,933 2,371,827 1,344,023 Other operation expenses (Notes 2,5,6 and 9) . 441,939 392,593 322,191 Maintenance (Note 1) . . . .. . . . 193,397 228,269 177,407 Provision for depreciation (Note 1) 202,182 187,959 178,637 Taxes on income-current and deferred (Notes I and 4) . 197,865 38,683 100,292 Property and other taxes (Note 4) .. 59,885 69,652 56,428 Total operating expenses (Note 8) . 3,563,201 3,288,983 2,178,978 Operating Income (Note 7) . 491,155 372,134 384,996 Other income and Allowance for equity funds used during Income Deductions: construction (Note 1) 162,879 121,488 92,019 Interest income . . 39,025 33,889 22,860 Other-net (Notes I and 4) _ 68,157 31,882 24,879 Total other income and inccme deductions '70,061
. 187,259 139,758 Total Income before Interest Charges . . 761,216 559,393 524,754 Interest Charges: Interest on long-term debt . . 271,324 227,163 179,626 Other interest and amortization (Note 1) . 69,653 55,493 25,456 Total interest charges . . . . 340,977 282,656 205,082 Allowance for debt funds used during construction (Note 1) . (69,673) (40,799) (26,547)
Net interest charges . . 271,304 241,857 178,535 Net income (Note 7) . . 489,912 317,536 346,219 Dividends on Cumulative Preferred and Preference Stock . . 67,888 60,950 53,738 Earnings Available for Common and Original Preferred Stock. 5 422,024 2 256,586 $ 292,481 Weighted Average Shares of Common and Original Preferred Stock Outstanding and Common Stock Equivalents (000) .. 85,610 73,241 64,202 Earnings Per Share: Primary (Notes I and 7) . . 54.93 $3.50 $4.56 Fully diluted (Notes 1 and 7) . 54.91 $3.48 $4.39 Dividends Declared Per Common Share . . 53.10 $2.84 $2.60 TI:e accornpanying notes are an integral part of these financial staternents. 17
l l i Southern Califi>rnia Edison Company Balance Sheets Thousands of Dollars December 31,
, Atsets 1981 1980 Utility Plant: Utility plant, at original cost (Notes I,2 and B) . . . 56,115,484 $5,785,200 Less-Accumulated provision for depreciation (Notes I and B) . . ... . .. 2,015,212 1,840,233 Net utility plant . . . ... .... . . . .. . 4,100,272 3,944, % 7 Construction work in progress (Notes 5 and B) . . 3,377,M4 2,600,460 Nuclear fuel, at amortized cost. . . 24,542 20,649 Total utility plant . . . .. . 7,502,458 6,566,076 i
4 Other Property and Investments: Real estate and other, at cost--less accumulated provision for depreciation . . . . 9,194 9,7M Subsidiary companies (Note 1) . . 124,558 %,757 Total other property and investments. 133,752 106,511 Current Assets: Cash and temporary cash investments (Note 3) . 10,409 7,M2 Receivables, less reserves of $10,682,000 and
$8,005,000 for uncollectible accounts at respective dates (Note 1) . . . 306,267 288,979 h
Fuel stock, at cost (First-in, First-out) (Note 3) . 579,633 593,008 Materials and supplies, at average cost . . . 63,197 48,942 Regulatory balancing accounts-net (Notes I and 4) 39,441 - Accumulated deferred income taxes-net (Notes 1 and 4) . 4,872 29,343 Prepayments and other (taxes, insurance, etc.) 38,943 54,040 Total current assets . . . . 1,04?,762 1,021,954 i Deferred Charges: Unamortized debt expense (Note 1) . . 22,368 18,880 Other deferred charges 27,203 20,477 Total deferred charges 49,571 39,357
$8,728,543 $7,733,898 l
, The aaornpanying notes are an integral part of thesefinancial staternents. 18
.___ . _ __._m _ _ _ _ _ _ _ ._ _ _ _ _ _ - - . _ __
Southern California Edison Contpany Thousands of Dollars December 31, ! Capitalization and Liabilities 1981 1980 j Capitalization: Preferred Stock-subject to mandatory redemption / repurchase requirements: d Cumulative Preferred Stock . . . .. . . S 337,500 5 337,500
- Preference Stock . ... . .. . . 62,000 62,000 Preferred Stock-other
! Original Preferred Stock .. . .. . .. 4,000 4,000 Cumulative Preferred Stock . . . ... 458,755 458,755 , Preference Stock . . . . ....... . 13,553 19,897 I
Common Stock, including additional stated capital . . . .. . 776,523 673,921 ' ] Other Shareholders' Equity: j Additional paid-in capital . . .. . . 953,268 763,519 ]i Earnings reinvested in the business . .. . 1,238,317 1,092,137 Long-term debt (Note 1) . . . .. 3,444,080 2,945,824 Total capitalization ,.. . .. . 7,287,996 6,357,553 r Current Liabilities: Accounts payable . . . . 360,018 356 340 Commercial paper payable (Note 3) . . 266,500 164,975 Notes payable to banks (Note 3) . . . . . 28,687 19,998 Current maturities of long-term debt . . . 121,025 143,548 Customer refunds . .. . . . 3,939 66,160 Taxes accrued (Note 4) .. . .. 61,774 121,916 Interest accrued . . . . . . 85,089 66,124 Customer deposits 12,518 11,242 Dividends declared . .. . . . .. 75,036 60,292 Regulatory balancing accounts-net (Notes 1 and 4) . . ... - 37,518 Other . . . . . . . . . 72,330 26,167 Total current liabilities . .. ... 1,086,916 1,074,280 Commitments and Contingencies (Notes 2 and 9) j Reserves and Deferred Credits: Customer advances and other deferred credits . . 66,697 63,652 4 Accumulated deferred income taxes and investment tax credits (Notes I and 4) . . . , 247,711 198,476 Reserves for pensions, insuranee, etc. (Note 6) . 39,223 39,937
) Total reserves and deferred credits . 353,631 302,065
$8,728,543 $7,733,898
( i The accompanying notes are an integral part of tiresefinancial statentents. 19
Southern California Edison Company Statements of Sources of Funds Used for Thousands of Dollars cember 31 Construction Expenditures 39}'iar Ende Funds Provided By-Operations: Net income (Note 7) 5489,912 $317,536 $346,219 Non-cash items in net income-Depreciation (Note I) 202,182 187,959 178,637 Allowance for debt and equity funds used during construction (Note 1) (232,552) (162,287) (118,566) Investment tax credits deferred-net (Notes I and 4) . 47,386 25,235 45,533 Other-net . 3,701 29,271 7,136 Total funds from operations . 510,629 397,714 458,959 Dividends . (336,546) (273,312) (221,400) Total funds from operations-reinvested 174,083 124,402 237,559 Long-term Financing: Sales of securities-Long-term debt . 634,435 350,000 355,000 Preferred stock - 75,000 127,500 Common stock (a) 292,356 258,607 62,002 Reduction of long-term debt-current maturities (121,025) (143,548) (84,544) Conversion of preference stock . (6,344) (7,169) (13,828) Total funds from long-term financing 799,422 532,890 446,130 Other Sources (Uses) of Funds- Working capital changes-Receivables-net (17,288) (76,251) (1,103) Fuel stock and materials and supplies (Note ]) (880) (284,6M) (165,812) Regulatory balancing accounts-net (Notes I and 4) . (37,568) 235,512 (162,586) Accounts payable 3,678 67,443 134,402 Net short-term borrowings and current maturities of long-term debt 87,691 89,797 185,002 Other changes in working capital . (43,805) 60,337 64,823 Net (increase) decrease in working capital (8,172) 92,184 M,726 Sale of non-current assets. 50,623 89,557 - Other-net . (59,193) (57,523) (64,268) Total other sources (uses) of funds . (16,742) 124,218 (9,M2) Funds Used for Construction Expenditures. 5956,763 5781,510 5674,147 (a) Includes conversions of Preference Stock,5.20% Convertible Series, to Common Stock, i The amnnpanying notes are an integral part of these financial statements. 20
Southern California Edison Company Statements of Earnings Reinvested Thousands of Dollars Year Ended December 31, in the Business 1981 1980 1979 Balance at January 1 .. . . . $1,092,137 $1,054,2% $ 931,217 Add: Net income. . .. . . . 489,912 317,536 346,219 1,582,049 1,371,832 1,277,436 Deduct: Dividends declared on capital stock-Original preferred . . . ... 1,454 1,334 1,219 Cumulative preferred . . . 62,504 55,230 47,574 Preference . .. ... . . 5,384 5,720 6,1 M Common-53.10 per share for 1981,
$2.84 per share for 1980 and
$2.60 per share for 1979 . 267,2N 211,028 166,443 Capital stock expense . . 7,186 6,383 1,740 343,732 279,695 223,140 Balance at December 31 (a) . . .. . . .. $1,238,317 $1,092,137 $1,054,2%
(a) Includes undistnbuted earnings of unconsolidated subsidiaries of 516,325,000 at December 31,1981. Statements of Additional Paid-in Capital Thousands of Dollars Year Ended December 31, 1981 1980 1979 Balance at January 1 $763,519 $601,578 $569,673 Premium received on sale of common stock. 189,754 161,949 31,908 Payments made in lieu of issuing fractional shares of common stock (5) (8) (3) Balance at December 31 . $953,268 $763,519 $601,578 The accompanying notes are an integral part of these financial statements. 21
l Southern California Edison Company Thousands of Dollars December 31,1981 Statements of Capital Stock saw vame- I yed**P "
. i December 31, Shares Price Outstanding Per Share 1981 1980 Prefened Stock-Subject to Mandatory Redemption /
Repurchaw Requirements (a)(b):
$100 Cumulative Preferred-par value $100 per share (f):
, 7.325% Series . 750,000 $110.00 $ 75,000 $ 75,000 7.80% Series . 600,000 110.00 60,000 60,000 8.54% Series , 750,000 108.M 75,000 75,000 8.70% Series A . . 525,000 110.00 52,500 52,500 12.00% Series . 750,000 112.00 75,000 75,000 ;
$337,500 $337,500 Preference-par value $25 per share: 7.375% Series . 2,480,000 25.75 $ 62,000 $ 62,000 Preferred Stock-Other:
Original Preferred-5%, prior, cumulative, participating, not redeemable, authorized 480,000 shares, par value $8% per share . 480,000 $ 4,000 $ 4,000 Cumulative Preferred-authorized 24,000,000 shares, par value
$25 per share (a): 4.08% Seiies . . . 1,000,000 $ 25.50 $ 25,000 $ 25,000
' 4.24% Serias . 1,200,000 25.80 30,000 30,000 i 4.32% Series . 1,653,429 28.75 41,336 41,336 4.78% Series . 1,296,769 25.80 32,419 32,419 5.80% Series . 2,200,000 25.25 55,000 55,000 8.85% Series . 2,000,000 26.50 50,000 50,000 9.20% Seres . 2,000,000 26.50 50,000 50,000
$100 Cumulative Preferred-authorized 12,000,000 shares, par value
$100 per share (a): 7.58% Series . 750,000 105.00 75,000 75,000 8.70% Series . 500,000 107.00 50,000 50,000 8.%% Series . 500,000 107.00 50,000 50,000 M58,755 $458,755 Preference-authorized 10,0C0,000 shares, par value
$25 per share (a)(c)(f): 5.20% Convertible Series . M2,139 25.00 $ 13,553 $ 19,897
$100 Preference-authorized 2,000,000 shares, par value
$100 per share . .
Common Stock-authorized 140,000,000 shares, par value $8% per share, including additional stated capital (c) (d) (e) (f) . - 87,603,272 $776,523 $673,921 (a) All series of $100 Cumulative Preferred (2) Based upon 2.5% of shares originally out- (e) The Company anticipates that 5,000,000 Sterk, Cumulative Preferred Stock and Prefer- standmg and increasing to 5.5% by 2003. shares of Common Stock will be issued on ence Stock are redeemable at the option of (3) Based upen 2.5% of shares originally out- February 24,1982. the Company. The various series of the $100 standing and increasing to 9.5% by 2000. Cumulative I' referred Stock, and the Preference (f) Transactions in the capital stock accounts Stczk,7.375% Series, are subject to certain For each of the five 12-month periods sub- during 1981,1980 and 1979 reflect the following: sequent to December 31,1981, the aggregate In 1981,8,000,000 shares of Common Stock at restrictions on redemption for refunding pur-poses. Authorized shares of Preferred Stock- mandatory redemption or repurchase re- an initial public offering pnce of $24.375 per Subject to Mandatory Redemption or Repur, quirements will be: none for 1982,54,500,000 for share were issued, in 1980,7,000,000 shares of chase Requirements are included under 1983,54,500,000 for 1984, $18,212,500 for 1985 Common Stock at an initial public offering price and $22,712,500 for 1986. of $23.125 per share and 750,000 shares of $100 Prefereed Stock-Other. Cumulative Preferred Stock,12% Series were (b) Prefened Stock Subi ect to Mandatory (c) Under a presenbed formula, the conversion issued; in 1979,525,000 shares of $100 Cumula-Redemption or Repurchase Requirements: Price of the Preference Stock,5.20% Convert- tive Preferred Stock,8.70% Series A and ible Series is adjus*ed when additional shares of 750,000 shares of $100 Cumulative Preferred Redemption or Repurchase Common Stock are sold by the Company.1he. Stock,8.54% Series, were issued. Additional w,* shares of Common Stock reserved for conversion shares of Common Stock were issued for the c and the adjusted conversion prices per share Dividend Reinvestment and Stock Purchase were as follows: Plan (DRP), Employee Stock Purchase Plan
$MO Cumulatire Daemfer 31, (ESPP), Employee Stock Ownership Plan Preferred 1980 (ESOP), and the conversion of 253,761, 198I 7.325 % 7 '.1/83 30,000 $100 i 286,7NO and 553,140 shares in the respective 7.80 % 11/A 83 15,000(2) 5100 . Shares of Common 430,268 612,230 years of Preference Stock,5.20% Convertible 22,500 Stock reserved 8.M % 6/30 86 $100 Series (5.20% Series) as follows:
6/30,85 13,125(3) $100 Ad ed con e ion 8.70% A 12.00 % 12/31/86 22,500 $100 P Pe 1981 1980 1979 Preferena (d) At December 31,1981, there were 5,575,702 DRP.. . 1,906,474 1,751,330 1,165,073 7.375 % 2/1/85 4 %,000 $ 25 authorized and unissued shares of Common ESPP. . 1,053,413 953,885 756,427 Stock reserved for sale and issuance under
~d.
(1) Plus accumulated unpaid dividends- ESOP . . . . 591,084 1,033,794 30,282 provisions of the Company's stock purchase Redemption or repurchase to continue plans. On February 1,1982, the Company 5.20% Series . 198,483 219,873 406,573 annually until all shares are redeemed issued 587,126 shares of Common Stock under or repurchased. these plans. The accomp.inying notes are an integral part of thesefinancial statements. 22
Southern California Edison Company Statements Of LOng-term Debt nousands of Doiiars Year Ended December 31, 1981 1980 First end Refunding Mortgage Bonds (a): (b) De Company has entered into a financing Series G, Due1981(3%%) . $ - $ 40,000 agreement, as amended, with certain English Series 11, Due 1982 (4%%) . , 37,500 37,500 banks pursuant to which it issued promissory Series 1, Due 1982 (4%%) .. 40,000 40,000 notes payable in pounds sterling.1hese notes Series J, Due 1982 (4%%) 40,000 40,000 are secured by a pledge of the Company's cus. Series K, Due 1983 (4h%) 50,000 50,000 tomer accounts receivable. On June 28,1976, the Series L, Due 1985 (5%) - 30,000 30,000 Company entered into forward exchange con-Series M, Due 1%5 (4%%) . 60,000 60,000 tracts with a United States bank to purchase at Series N, Due 1986 (4%%) 30,000 30,000 various times from February 1979 to August Series 0, Due 1987 (4%%) , 40,000 40,000 1983, pounds sterling to repay substantially all Series P, Due 1987(4%%) . 50,000 50,000 of the promissory notes. Series Q, Due 1988 (4te%) 60,000 60,000 Senes R, 60,000 60,000 (c) On h1 arch 19,1981, the City of Farmington, Due 1989 (4%%) Series S, 60,000 60,000 New hiexico (City) issued and sold $92,500,000 Due 1990 (4%%) Series T, ,5,000 75,000 aggregate principal amount of Pollution Control a Due 1991(5%%) Revenue Bonds,1981 Series A (Bonds). The net Series U, Due 1991 (6%%) 90,000 80,000 Senes V, 80,000 80,000 proceeds have been deposited with a Trustee Due 1992(5Ts%) . Series W, Due 1993 (6%%) 100,000 and, af ter excluding capitalized interest, repre-100.000 Series X, Due 1994 (7%%) 75,000 sent funds on which the Company may draw to 75 000 Senes Y, 100,000 100,000 defray its construction and other specified costs Due 1994 (8%%) Senes Z, Due 1995 (7Te%) 100,000 100,000 of pollution control facihties being built at the Series AA, Due 1996 (8%) 100,000 100,000 Four Corners Generating Station.The Company Senes BB, Due 1997 (7%%) , 125,000 125,000 s obligated to pay the principal and interest on Senes CC, llue 1999(8%%) . 100,000 100,000 the City's Bonds. The Company has provided Series DDP, Due 1999 (7%) (a). . 15,030 15,030 an irrevocable Documentary Letter of Credit Series EE, Due 1981 (9%) . . - 100,000 drawn on a commercial bank (Bank) to the Trus. Senes FF, 150,000 150,000 tee in the amount of the Company's obligation. Due 2000 (8%%) Series GG, 125,000 125,000 The Company is obligated to reimburse the Due 2001 (8Ts%) . Series IIII, Due 2002 (8%%) . 125,000 125,000 Bank for amounts drawn under the Irrevocable 4. Series 11, 75,000 75,000 Documentary Letter of Credit. Due 1984 (7%%) Series JJ, Due 2003 (9%%) 200,000 200,000 (d) During 1981, Southern California Edison Series KK, Due 2004 (9.95%) (a) . 105,000 105,000 Finance Company N. V. (Finance), an atfiliate Series LL, Due 1987(9%%) . 50,000 50,000 of the Company, sold $175,000,000 principil Series Mht, Due 2004 (11% %) . 200,000 200,000 amount of Guaranteeu Debentures Due Series NN, Due 2005 (15%%). 200,000 200,000 1986-1988 to representatives of purchasers in Series 00, Due 2010 (13%%). 150,000 150,000 European countries. Payment of the principal Series PP, Due 1991 (15% %) . . . . 200,000 - and interest on the Debentures is uncondition-Series QQP, Due 2021(10h%)(e) . 8,300 - ally guaranteed by the Company. The net Series RR, Due 2011 (15% %) . 200,000 - proceeds of the Debentures were loaned by 3,295,830 3,027,530 Finance to the Company in exchange for the First hfortgage Bonds Company's pronussory notes. (Calectnc)(a) Due 1984-1991(3%%5%%) 60,000 60,000 (e) On August 19,1981, the California Pollution Promissory Notes (b) Due 1982-1983 (5%%) . . . . . . 7,027 10,576 Control Financing Authority (Authority) issued Promissory Notes (d) Due 1986-1988 (14 16% %) . 175,000 -
$8,300,000 of Pollution Control Revenue Bonds, Pollution Control Series 198' Due August 1,2021(10%%).The net Indebtedness (c) Due 1984 (8%%) . 92,500 -
groceeds have been deposited in a Construction Principal amounts ou. standing . . . . . . . . . 3,630,357 3,098,106 rund and are being utdized to finance the acquisi. Current maturities of long-term debt (f) . 0 21,025) (143,548) tion and construction of pollution control facili-Unamortized remium (discount)-net. n6,252) (8,734) ties at the fluntington Beach Generating Station. Securities het by trustees (c)(e). H9,000) - The Company has issued and sold to the Au-Totallong-term debt. $3,444,080 $2,945,824 thority an identical principal amount of the Company's First and Refunding Mortgage Bonds, Series QQP, with the same maturity , (a)'Ihe authorized principal amount of each ments. In addition, an amount equivalent to date and interest rate as the Authority's bonds, series of First and Refunding Mortgage Bonds is the excess of 15% of defined operating revenues (f) Current maturities of long-term debt on equal to the amount outstanding. The Trust In- over costs of maintenance of the property December 31,1981 include 5%% Promissory j denture under which these bonds are issued subject to the lien of such indenture is required Notes Due February 28,1982, in the amount of permits the issuance from time to time of addi- to be deposited with the trustee annually. These $1,765,000 and Due August 31,1982,in the tional bonds, including additional bonds equal deposit requirements of such indentures may amount of $1760.000 and First and Refunding in principal amount to bonds retired, pursuant be or have been satisfied by property additions Mortgage Bonds, Series II, Due February 15, to the restrictions and conditions contained and replacements, and by delivery and cancella- 1982 (4% %) in the amount of $37,500,000, thrrein. The trust indenture requires semi- tion of bonds outstanding under the applicable Series I, Due July 1,1982 (4% %) in the amount Ennu11 deposits with the Trustees of 1%% of indenture. The Series DDP and KK, First and of $40,000,000 and Serie J, Due September 1, the principal amount of the Company's out- Refunding Mortgage Bonds, are subject to man- 1982 (4% %) in the amount of $40,000,000.1he standing First and Refunding Mortgage Bonds datory sinking fund requirements commencing amounts of long-term debt maturing in the four and the Calectric First Mortgage Bonds. The on July 1,1990 and June 15,1985, respectively. twelve-month periods subsequent tn December Ctlectric Indenture requires an annual cash de- In addition, on February 4,1982, the Company 31,1982 will be $53,501,000 in 1983; $175,500,000 posit with the Trustee of 1% of the principal sold $176,800,000 First and Refunding Mortgage in 1984; $278,050,000 in 1%5; and $118,250,000 in tmount of Calectric First Mortgage Bonds issued Bonds, Series SSP, Due 1%5, (10%) to finance 1986. The amounts for 1985 and 1986 include or 166%% of such amount if property additions pollution control facilities at the Four Corners mandatory sinking fund requirements for First ne used to satisfy the annual deposit require- Generating Station. and Refuriding Mortgage Bonds, Series KK. The accompanying notes are an integral part of thesefnancial statements. 23
Southern California Edison Cornpany Notes to Financial Statements l Not31-Summary of Significant Accounting Policies Revenues and Regulatory Balancing Accounts-Customers are billed monthly on a cycle basis and revenues
"#*b are recorded when customers are bilied. As authorized by The Company .is a pubh.c utility primarily engaged i. n the CPUC, the Company has established several regulatory the business of supplying electric energy in portions of balancing accounts for most of its energy costs. The central and southern California, excluding the City of Los Energy Cost Adjustment Clause (ECAC) balancing account Angeles and certam other cities. The accounting records is used by the Company to record monthly entries to of the Company are maintained m accordance with the adjust the results of operations for the variation between Uniform System of Accounts as prescribed by the Federal ECAC-related energy costs incurred and those included Energy Regulatory Commission (FERC) and adopted by in rates billed to customers. Such variations, including the Califorma Public Utilities Commissmn (CPUC). interest thereon, are accumulated in the balancing account until they are refunded to, or recovered from, utility Utili5 Plant- customers through CPUC-authorized rate adjustments.
l The cost of additions and replacements of retirement units ECAC related energy costsincludeincurred transportation l of property is capitahzed and included in utility plant. and interim storage costs related to spent nuclear fuel. The Such cost includes labor, matenal, indirect charges for en- income tax effects of ECAC variations are deferred. Billed gineering, supervision, transportation, etc., and an allow- revenues and incurred energy costs are utilized in the { ance for debt and equity funds used during construction
, determination of taxable income. The CPUC has also au-(AFUDC).The amount of AFUDC capitahzed is also re- thorized the recovery of $39,000,000 of fuel oil carrying ported in the Statements of Income as a reduction of costs relating prir.cipally to prior accounting periods and, interest charges for the debt component of AFUDC and as consistent with the Conipany's policy of recording reve-other income for the equity component. Although nues when customers are billed, the Company has rec-AFUDC increases net mcome,it does not represent cur-ognized revenues of $14,800,000 in 1981.
rent cash earnings. The AFUDC rate was 8.77% for 1981, 7.82% for 1980 and 7.76% for 1979, and is based upon a Subsidiaries-formula prescribed by the FERC. The Company's investments in unconsolidated subsidiary companies, all of which are wholly-owned, are accounted The cost of minor additions and repairs is charged t for by the equity method. None of the Company's i maintenance expense and the original cost, less net sal- holly-owned subsidiaries is considered significant for i vage, of retired property umts is charged to the accumu- financ'ial reporting purposes. I lated provision for depreciation. Earnings Per Share-Depreciatw.n- Primary earnings per share are determined by dividing For financial reporting purposes, depreciation of utility' . the earnings available for Common and Original Preferred plant is computed on a straight-line remaining life basis Stock by a weighted average number of such shares out-and approximated 3.6%,3.5%, and 3.5% of average standin'g. After providing for cumulative preferred and depreciable plant for the years 1981,1980, and 1979, re- preference dividend requirements, effect is given to the spectively. The Company's rates are designed to recover participating provisions of the Original Preferred Stock the original cost of utility plant, mcluding the estimated and Common Stock Eqvivalents for funds held for the decommissioning costs of $58,000,000 (stated m current purchase of the Company Stock by the Employee Stock year dollars) for nuclear generation facilities in service, P he Plan Trustee in each period. Fully-diluted earn-through depreciation expense os er the estimated remam- ings per share give effect to the dilution which would ing usefullives of the facilities. result from the conversion of convertible securities out-standing at the end of each period and treat all actual Ta us - . conversions during each period as if they took place at the Accounting poh. .cies with respect to taxes on income and beginning of the period. In the computations of fully-( related mvestment tax credits are set fortly m Note 4, together with supplementary income tax information. diluted earnings per share, consideration has been given to the dilutive effect of potential conversion of the Prefer-ence Stock,5.20% Convertible Series, and, for 1979 only, Dcht Prciniurn and Discount- the 3%% Convertible Debentures, Due 1980. Debt premium or discount and related expenses are amortized to income over the lives of the issues to which they pertain. 24
Southern California Diison Cornpany Note 2-Commitments and Contingencies sale purchases from the Company. The foregoing pro-Construction prograrn and fuel supply- '"0i"E' 5""" '* PI '* I"" *I I'" * "0 ' * "0' although the Company is unable to predict their final out-The Company has significant purchase commitments in connection w'ith its continuing construction program. As c me,it has categorically demed the allegations of these msale custone. of December 17,1981 (the date of the Company's latest ap-proved budget), funds required for construction expen-ditures are estimated at $872,859,000 for 1982, $803,698,000 am an Rentals-The Company has entered into various arrangements to for 1983 and $775,634,000 for 1984. Minimum long-term commitments of approximately $9.5 billion existed on lease automotive equipment, computer equipment, nu , clear fuel, ffice space, oil storage facilities and other mct-December 31,1981 under the Company's fuel supply and dental equipment and property. These agreements are ac-transportation arrangements. counted for as operating leases based upon ratemaking pr ctices.The present value of the minimum commit-Goecrnment licenses-ments under capital leases are not considered matenal for The terms and provisions of licenses granted by the financial reporting purposes. United States cover the Company's major and certain minor hydroelectric plants. These licenses also cover Note 3-Compensating Balances and Short-Term Debt certam storage and regulating reservoirs and related trans-mission facilities. All of the above licenses expire at in order to continue lines of credit with various banks, the various times between 1982 and 2009. The licenses contain Company presently maintains deposits aggregating ap-numerous restrictions and obligations on the part of the proximately $12,000,000 which are not legally restricted as Company, including the right of the United States to to withdrawal. The lines of credit, which are also available acquire Company properties or the FERC to issue a license to support commercial paper, amounted to $551,000,000 to a new licensee under certain conditions and upon the and $555,000,000 as of December 31,1981 and December payment to the Company of specified compensation. 31,1980, respectively. In addition, the Company also has lines of credit totaling $35,000,000 and $20,000,000 as of Resale rcecnues- December 31,1981, and December 31,1980, respectively, Pursuant to FERC procedures, on February 1,1976, which may be utilized for general corporate purposes. August 16,1979, and July 16,1981, increases in the Company's resale rates became effective, subject to refund The Company has an additional $150,000,000 line of credit with interest to the extent that any of the increases are which may be utilized only for the purchase of fuel oil subsequently determined to be inappropriate. Effective through the use of bankers' acceptances. Notes issued May 2,1974, a Fuel Clause Adjustment was added under this agreement are secured by a pledge of the to the Company's resale rates and has been modified Company's fuel oil inventory. concurrent with the subsequent base rate increases beginning with the February 1,1976 increase. As of Note 4-Taxes December 31,1981, approximately $565,000,000 had been . . In ccordance with CPUC requirements, no deferred in billed subject to refund.The Company believes that any c me taxes are provided for net increases or decreases m amounts which the FERC may require the Company to income tax expense whica result from reporting certam refund should not have a material financial effect on the transactions for income tax purposes in a penod different Company. frora that in which they are reported in the financial statements. The major items for which deferred income legal matters- , taxes are provided are the additional investment tax cred-in March 1978, five resale customers filed a suit against its (ITC) discussed below, and the tax effects of resale rev-the Company in federal court alleging violation of certain enues and regulatory balancing account provisions. antitrust laws. The complaint seeks damages in excess of
$23,000,000, consequential damages and a trebling of such damages, and certain injunctive relief, and alleges that the Although a portion of the Company's ITC have been APPli ed as a current reduction of income tax expense, ad-Company (i) is engaging in anti-competitive behavior by ditional ITC, permitted by the Tax Reduction Act of 1975 charging more for wholesale electricity sold to resale and the Tax Reform Act of 1976, have been deferred and customers than the Company charges certain classes of its retail customers, and (ii) has taken actions alone and in are being amortized as reductions to income tax expense r tably over the lives of the properties which gave nse to concert with other utilities to prevent or limit such resale the credits.
customers from obtaining bulk power supplies from other sources to reduce or replace the resale customers' whole- l 25 l
Stmthern California Edis<m Company Notes to Financial Statements (continued) For plant additions after December 31,1980 (post-1980 Note 5-Research and Development property), provisions of the Economic Recovery Tax Act of Research and Development (R&D) costs are expensed cur-1981 apply to tax depreciation and ITC. Under these rently if they are of a general nature. Plant-related R&D provisions tax depreciation is based upon generally costs are accumulated in construction work in progress shorter lives, and additional ITC are available. In addition, (CWIP) until a determination is made as to whether such there are provisions which require the adoption of nor- projects will result in construction of electric plant. If no malization accounting for post-1980 property with respect construction of electric plant ultimately results, the costs to the difference between tax depreciation and deprecia- are generally charged to operating expense. The balance tion of tax basis using book method and lives. There are of R&D expenditures included in CWIP at December 31, also provisions which no longer permit the flow through 1981,1980 and 1979 was $51,372,000, $35,076,000, and of ITC. Under transitional rules of the Act, these new $29,438,000 respectively. normalization provisions are not applicable to the Com- lhousands of Dollars _ pany for 1981 and will first apply, in part, in 1982. Year Ended December 31, 1981 1980 1979 R&D charged to espense $M,s42 $21,4e4 $15,778 Supplementary information regarding taxes on income R&D charged to N-net . 16,297 RM2 12.260 and other taxes is set forth in the following table: $42,919 $41,776 $28,038 Total R&D espenditures . Thousands of Dollars Year Ended December 31, 1981 1980 1979 Note 6-Employee Benefit Plans Current: PCHSiOH UIdH'-~ Federal 5 44,500 $ 38,582 5 6,717 The Company's current pension program is based on a state. 25,629 36,909 4,019 trusteed pension plan, which is non-contributory by em-70,429 75,491 10,736 ployees. Company contributions are determined on the Deferred-Federal and State: basis of a level premium funding method. There are no un-Investment tas credits-net . 47,W 25,235 45,533 Regulatory balancmg accounts . 26,545 (107,322) 34,148 funded prior service costs. The annual normal cost of the Other . 1759) 14,921 (13.f44) plan is funded by the Company. Pension costs are re-71,175 (67,166) 66,037 served for on the basis of actuarial determinations and Total tases on income . $143,6M $ 8.325 $ 76,773 amounted to $36,137,000, $40,321,00C and $37,456,000 for Tases on income included in 1981,1980 and 1979, respectively. The decline in pension operatmg espenses . _ . 5197,865 $ 38,683 $100,292 costs for 1981 is due to an investment return in excess of Tases on income included in the actuarial return assumption and changes in actuarial other income 64,2hl) (30,358) (23,519) assumptions. Total tases on income . $143,6M $ 8,325 $ 76.773 Thousands of Dollars Differences between the federal December 31, statutory tax rate and the 1980(a) 1979 r tcon s p(n n i Federal statutory tax rate. 46 E'a 46.0 % 46.0 % $301,429 Vested. . $383.676 Allowance for debt and equity Nonvested . 16,621 19,965 funds used during O b.9) $400,297 $321,394 construction . f22.9) (12.9) Percentage repair allowance , - (3.5) (3.3) Net assets available for benefits . $478.658 $375,M6 Admmistrative and general expenses capitali/ed . 0.5) (3 4) (2.2) (a) Litest available information. Investment tas credits-net . ( 4.3) (6.8) (8.1) Nuclear fuellease Actuarial rate of return assumptions of 6.5% and 5.5% interest capitalized . o .o> (3.3) (0.9) were used in determining the actuarial present value of [,','L','Ph','ji fon . N to.2) N 3 accumulated plan benefits for 1980 and 1979, respectively. All other dif ferences . (3.3) (3.7) Effective tu rate - 22.7'o 2.6% 18.1 % Other tases included in operating e penses: Property . . 5 41,632 $ 54,114 5 48,300 Payroll and other 18,231 15,538 8,128
$ 59W _$ 69,652 $ 56,428 26
Southern California Edison Company Employee Stock Purchase Plan- Note 8-Jointly-Owned Utility Projects Under the Employee Stock Purchase Plan adopted to The Company owns undivided interests in several su pplemen t employees' income a fter retiremen t, em ployees jointly-owned generating stations and transmission sys-may elect to contribute specified percentages of their tems for which each participant must provide its own regular monthly base pay to a trustee for the purchase of financing. The Company's proportionate share of expenses Company Common Stock. The Company contributes pertaining to such projects is included in the appropriate to the Plan an amount equal to one-half of the employees' category of operating expenses in the Statements of In-contributions, less forfeitures. The Company's contribu- come. In the table below, the amounts represent the tions to this Plan amounted to $4,452,000, $3,679,000 and Company's share for each such project as reported on the
$3,263,000 for 1981,1980 and 1979, respectively. In addi- Balance Sheets:
tion, employees may elect to contribute up to 5% of their T housands of Dollars regular monthly base pay through supplemental contribu- Decernber auw tions without regard to their years of service. These sup- m,, M
- 1 ,,, ,,,,
plemental contributions are not matched by the Company. p,,,, Gal,;7 [ll;l;g ga ig,';;r Asis Generating station 5 12,285 5 7,180 $ 2 33.3 % Employee Stock Ownership Plan- cml water coat casificaton - - 7,936 16.7 Under the Employee Stock Ownership Plan (ESOP), shares El Dorado System . 19,747 5.639 625 60.0(a) of Company Common Stock are purchased for the benefit I"",'O,' men ceneraung 100,511 32.402 82,695 48.0 of eligible employees and held in trust using funds gener- Mohave Generating Stanon . 187,316 47,007 2,3M 56.0 ated by additional 1% and %% investment tax credits Paafic intertie oc system 67,822 18,708 1,033 50.0 and matching employee contributions for the %% ITC. Pa$$rde n Generaung - - 526,457 15.8 The Company has elected the additional 1% ITC for the san onofre Generating years 1976 through 1980, and the %% ITC for the years 1978 stanon-Unit 1. . 266,ot>1 61,110 45,415 80.0 no through 1980. As of December 31,1981,1,961,301 shares of sa9sta iongU i 2D . - - 2,241,320 75.05 Common Stock were held by the Trustee under the Plan. san onofre ceneraung In addition, as of December 31,1981, the Company had a station, common 4,715 n87 d*,g$d"['j,,y3. liability to the Plan in the amount of $10,179,000. For the years 1978 through 1980 the amounts of ESOP Project . - - 16,729 80.0 ITC were higher than those utilized in the Federalincome Total. . 5658,460 $172 m6 $2.924,576 tax returns for such years. All of the 1978 and 1979 ESOP ITC were utilized in the 1980 Federal income tax return. (') RCP'"" ' C"* P 'i ''- However, none of the 1980 ESOP ITC was utilized in the 1980 Federalincome tax return. If not completely utilized Note 9-Long-term Purchased Power and in 1981 or future income tax returns, the excess ITC would Transmission Contracts expire in 1995, in which event the Company would be Under firm contracts, the Company has agreed to pur-allowed a tax deduction for the amounts contributed chase portions of the generating output of certam to the ESOP. facilities and to purchase firm transmission service where appropriate. Although the Company has no investment in Note 7-Quarterly Financial Data such facilities, these contracts provide that the Company carnings pay certain minimum amounts (which are based at least nouwds of oonars Per share in part on the debt service requirements of the provider) Three Months Ended Re nue e in e Pnmary I d whether or not the facility or transmission line is operat-December 31,1981. . $1,039,320 $113,026 $127,862 $1.27 $1.26 ing. None of such power contracts provides, or is September 30,1981. 1,122,674 150,996 147,944 1.51 1.51 expected to provide,in excess of five percent of the k"[ ch 1, 1 ,72 h) hl3x, Company's current or estimated future operating De ember 31,1980. 969,227 91,M9 70,495 0.71 0.71 capacity. The cost of power and firm transmission service September 30,1980. 1,058,916 103,011 88,427 0.99 0.98 June 30,1980. 828,028 88,996 76,929 0.84 0.82 March 31,1980 . Hm,946 88,478 81,685 0.% 0.93 December 31,1979. 709,252 100,352 92,538 1.19 1.15 September 30,1979 . 684,334 106,738 98,822 1.32 1.27 June 30,1979. 566,656 81,748 71,183 0.91 0.88 March 31,197u . 603,733 %,159 83,677 1.13 1.09 27
Southern California Edison Company Notes to Financial Statements (continued) obtained under the contracts, including payn.ents made Transnussion Service (Dollars in T housands) when a facility or transmission line is not operating, """ '"""'""' is included in Purchased Power and Other Operation Date of I s piratum Desemtwr 31. tW July 19. Ms Expenses, respectively, in the Statements of income. Vanabie Comr,,,enis of . em ,a,, %,c ,d 6,,,ai on,,a,,, Contracts o reraten ana aptami aame Information as of December 31,1981 Pertaininh* to such unmien . cm.s om,s contlacts is summarized in the following tables: Required i uture Minimum A nnual Pa) ments Purchased Power 19M2 51.tm 5 6.im 19M1 976 6, lite (Dollars in Thousands) Navaio lavutt Itoover Sales oronlle-T hermalito Date of E=p: ration . Ihrmber 31,1*4 May 31,19M7(b) Arni 1,19M1 1 +6 . - 5,7to Share of Lifect:ve I.ater years . - - - 120.31% Operatmg Capacity - 7gg,i . , y,943 349,g; 5 Megawatts (MW) . . 327.5 (a) 391.0 (c) %) Lew A nount Reprewntmg Interest to Share of Energy Output . 14 6 % 79% 37 6 % Reduse Total to Prewnt Value . (142) (MM.92ta Estimated Annual Cost . $M.HN) $1.M72 55,985 (e) Total at Prewnt Value _52J6L _S pM,_ Company's Portmn of Estimated Annual Cost total Payments for Each of the Applicable to supplier's Three lears m the Penod Ended Annual Mmimum Debt December 31,1)M1 Service Requirement . $ 4 5'0(d) $ 4% 55.234 (d) twl. 51.214 $6.441 Company's Alkicable IWO 1,2t o 6,954 Portmn of I..terest of 19W 1,1 % ) 7,098 Supplier Induded in Annual Minimum Debt Service Requirement . . $ 3,909(d) $ 74 $4.495 (d; Related long-term Debt or Isaw Obhgations Outstandmg of Company . None None None Vanable Components. . . .Prwrata Wre 4d Based on U S None of Contratts A<tual operatmg, Gosernment L. e Maintenaniv, and ad $crvar. Fuel cmts currently 2 i mills Ahli Required Future Mmimum Annual Payments 19M2. 5 8.230 S t.2MO $5,9M5 19M) . 7,590 1,400 1,496 1984. 7,070 1,540 - 1985. - 1,7tU - 1986. - 1.ked) - Later years . - MM - Total . ..... 22,M90 8.634 7,4xl Less Amount Represent-mg Interest to Reduce Total to Prewnt Value. (1,414) (M12) (419) Total at Prewr. Value . 521,476 57.M02 $7.N2 Total Purchases for Fach of the Three Years in the Penod Ended December 31,1881 19Hl . 54,792 $1.812 56.415 19H0. 35,621 2,90 6,596 1979. 32.59h 1.872 6.0M (a) The Company has agreed to certam reductions in its share of effective operating capaaty pnor to the December .".19M4 termmation date. (b) The Company has certam renewal nghts under the cetmg agreement. (c) Ef fective operatmg capacity may vary accordmg to water availabihty I and other conditions. (d) Based on amortizatmn of the supphers debt sersice obbgation estendmg over a 50-year penod. The Company's obhgation to purchaw power terminates pnor to the espiration of the 50-year penod. (e) Based on average energy de?ivenes over the hfe of the contratt. Actual dehvenes vary accordmg to water availabil.ty. 28
Southern California Edison Company Supplementary Information to Disclose the Effects of Accounting Standards Board (FASB) for the purpose Chinging Prices (Unaudited) of providiqg certain information about the effects of both general inflation (represented by constant dollar The Company's primary financial statements are stated amounts) dnd changes in specific prices (represented on the basis of historical costs in accordanc e with generally by current post amounts). accepted accounting principles. During periods of This information inherently involves the use of as-significant changes in price levels, amounts reported on approximations and estimates, and there-this basis reflect dollars of varying purchasing power sumptions]d fore, shoul be viewed in that context and and accordingly do not measure the effects of inflation. cise measufements of the effects of inflation on the The following supplementary information is presented Company. in accordance with the requirements of the Financial i nousands of Dollars Stat: ment of Earnings Available for Common and As Re rted Adjuster 1 For Original Preferred Stock Adjusted for Changing Prices i,ia nm fy Add ",5$or ganggin f:r the Year Ended December 31,1981 F " gta e n ts (C t n$"[ ar) (Curren C 0 Total Operating Revenues . $4,054,356 $4,054,356 $4,054,356 Operating Expenses: Provision for depreciation . . . . 202,182 468,000 552,000 Other operating expenses . 3,361,019 3,361,019 3,361,019 0ther income and deductions . (270,061) (270,061) (270,061) Net interest charges . . . . . 271,304 271,304 271,304 Dividends on cumulative preferred and preference stock 67,888 67,888 67,888 3,632,332 3,898,150 3,982,150 Earnings available for common and original preferred stock (excluding reduction of utility plant to net recoverable cost) . $ 422,024 5 156,2 % $ 72,2 % Other Adjustments For Changing Prices: Excess of increase in general price level of $1,149,000,000 over increase in specific prices of $1,102,000,000 of utility plant held during the year (b) . . $ (47,000) Reduction of utility plant to net recoverable cost . . $ (348,000) $ (217,000) Gain from decline in purchasing power of net monetary liabilities . $ 375,000 $ 375,000 (a) Average 1981 dollars, (b) At December 31,1981, cutrent cost of utility plant, net of accumulated depreciation, was $14,c410,000,000 while related historical cost and net recoverable cost was $7,E,000,0(n The difference of $6,498,000,000, which includes $1,102,000,000 for the current year, represents the changes in sp,'cific prices (current cost) of utihty plant from the date the plant was originally acquired. 29
Southern California Edison Company Supplementary Information (continued) Fiv Year Comparison of Selected Supplementary Financial Data Adjusted for the Effects of Changing Prices (Data adjusted for the effects of changing prices are reported in average 1981 dollars.) Year Ended December 31, In Thousands of Dollars, Except Per Share Amounts 1981 1980 1979 1978 1977 Total Operating Revenues As reported . .. .. . . $4,054,356 $3,661,117 $2,563,974 $2,328,798 $2,0M,914 In constant 1981 dollars .. $4,054,356 $4,041,000 $3,213,000 $3,246,000 $3,099,000 Earnings Available for (Loss on) Common and Original Preferred Stock (a) i As reported .. . $422,024 $256,586 $292,481 In constant 1981 dollars . . ... . $156,206 $ 42,543 $151,760 At current cost. . $ 72,206 $(47,962) $ 70,315 Earnings (Loss) Per Share on Common and Original Preferred Stock (a) As reported . . .. $4.93 $3.50 $4.56 In constant 1981 dollars . . . .. $1.82 $ .58 $2.36 At current cost. . . $ .84 $ (.65) 51.10 Excess of Increase in General Price Level Over increase in Specific Prices of Utility Plant after Reduction to Net Recoverable Cost . $2M,000 $462,000 $622,000 Net Assets at Year End at Net Recoverable Cost As reported . . . . $2,968,108 $2,529,577 $2,233,133 In constant 1981 doflars and current cost . . . 52,866,000 $2,671,000 $2,M6,000 Gain from Decline in Purchasing Power of Net Monetary Liabilities .. . $375,000 $491,000 $567,000 Cash Dividends Declared Per Common Share As reported $3.10 $2.84 $2.60 $2.30 $2.06 In constant 1981 dollars . . $3.07 $3.10 $3.22 $3.18 $3.07 Market Price Per Share at Year End In historical dollars . $28.75 $25.625 $24.50 $25.75 $26.375 In constant 1981 dollars . . $27.76 $27.01 $29.03 $34.57 $38.61 Average Consumer Price Index 272.4 246.8 217.4 195.4 181.5 l (Base Year 1967 = 100) i l (a) Escludes Reduction of Utility Plant to Net Recoverable Cost. The amounts adjusted for general inflation represent his- reported in the Handy-Whitman Index of Public Utility torical costs of utility plant restated in terms of dollars of Construction Costs. This method is intended to measure equal purchasing power (constant dollars) as measured by income after reflecting the cost of providing electric the Consumer Price Index for all Urban Consumers. This service at current price levels. l method is intended to measure income after restating all In accordance with procedures specified by the FASB, revenues and expenses in dollars of equivalent purchas- total operating revenues and all expenses other than ing power. depreciation were considered to reflect the average price The current cost amounts reflect the changes in specific level for the current year and accordingly remain un-l prices of utility plant from the date the plant was acquired changed from those amounts reported in the Company's I to the present, and differ from constant dollar amounts to primary financial statements. The current year's provision the extent that prices in general have increased more or foi depreciation on the constant dollar and current cost less rapidly than specific prices. The current cost of utility amounts of utility plant was determined by applying the plant represents the estimated cost of replacing existing Company's average annual depreciation rates to the i plant assets and was determined by restating its historical indexed plant amounts. ! cost using Company projections of year-end indices to be No adjustments to income tax expense have been made l 30
Southern California Edison Company Supplementary infonnation (continued) in computing the impact of inflation since only historical ratemaking process gives no recognition to the current costs are deductible for income tax purposes, cost of replacing utility plant, based on past ratemaking Fuel inventories and the cost of fuel consumed in the practices, the Company believes it will be allowed to re-generation of electricity have not been restated from their cover and earn a return on the increased cost of its historical cost. The recovery of fuel and purchased power investment when replacements of utility plant occur. costs are limited to historical costs through the operation During inflationary periods, holders of monetary assets of the Company's energy cost adjustment clauses. For this experience a loss of general purchasing power while holders reason fuelinventories and deferred recoverable energy of monetary liabilities experience a gain. The gain from the costs are effectively monetary assets. decline in purchasing power of net monetary liabilities is Under ratemaking procedures prescribed by the regula- primarily attributable to the substantial amount of debt tory commissions exercising rate jurisdiction over the which has been used to finance utility plant. However, to Company, only the historical cost of utility plant is re- properly reflect the economics of rate regulation, the gain coverable through future depreciation charges. Therefore, from the decline in purchasing power of net monetary the cost of utility plant, stated in terms of constant dollars liabilities, including Cumulative Preferred and Preference ; or current cost, exceeding the historical cost of utility Stock, is offset by the reduction to the recoverable cost of plant is not presently recoverable through depreciation utility plant. The Company, therefore, does not have the charges, and, accordingly, the excess is reflected as a re- opportunity to realize such holding gain on net monetary duction of utility plant to net recoverable cost. While the liabilities. Capital Stock-Dividend and Price Information Quarterly liigh and Low Sales Prices ($) Di dends Calendar Quarter-1981 Calendar Quarter-1980 Class and Per 1 2 3 _ 4 1 2 3 4 Series of Stock Share (a)(f) liigh Low liigh Low liigh Low liigh Low liigh Low liigh Low Iligh Low liigh Low Original Preferred .74 24 % 22 26 22 5 27 23 % 27 % 24 26 22 5 28 % 19 % 27 23 % 25 % 22 Cumulative Preferred: 4.08 % .25% 8% 7 8% 7 7% 65s 80s 6% 10 % 6% 10 7% 9% 7's 9 7 4.24 % .26% 8% 7% 8% 7% 8% 6% 9IS 65s 10 % 7% 10 % 8 105s 8 8% 70s 4 32 % .27 8% 7% 8% 7% 8'/2 7 8% 6% 9% 7% 10 % 7% 11 % 8 85 7's 4.78 % .29% 9% 74 9 Vs 7% 9% 7% 9 7% 118s 8 11 % 8% 115s 8% 100s 7?: 5.80 % .36 % 11?s 10 115e 9% 10 % 9% 10?s 9 13 % 105s 14?s loss 145s 11 % 122s 10 8.85 % .553125 17 15 % 16 % 147s 15 % 14 % 16's 14 202 15?s 22 % 15 % 213s 16 % 17 % 14 5 9.20 % .57% 17 % 16 17 15s 16 % 14 4 17 s 14 % 20 4 155s 22 % 16 % 22 % 175s 19 % 15
$100 Cumulative Preferred:
7.325% (b) 1.83 0s - - - - - - - - - - - - - - - - 7.58 % 1.89 % 573s M 55's 50 M 48 % 53 48 67 % 54 74 % 51 70 % 60 62 % 50 % 7.80% (b) 1.95 - - - - - - - - - - - - - - - - 8.M % 2.13 % (c) (c) (c) (c) 72 % 62 % 62 % 61 % 92 % 79 93 74 90 88 % 87 70Us 8.~0% 2.17 % 66 59 64 57 62 M% 61 5 55 5 79 56 % 84 60 82 67 % 71 597s 8.70%-A (b) 2.17 % - - - - - - - - - - - - - - - - 8 96 % 2.24 68 % 63 66$s 61 64 585s 66 56 4 77 % 66 85 58 % 82 % 72 4 74 % 62 12.00 % 3.00 1005s 95 99 94 % 97 % 88 % 93 4 82 % - - - - - - 101 97 Preference: 5.20 % .32% 20 17 % 215s 19 215s 19 24 20 % 17 % 15 % 20 % 16 5 19 % 182 20's 17 % Convertible 7.375% (b) .460938 - - - - - - - - - - - - - - - - Common (d)(e) .74 26 % 22 % 28 24 28 % 24 % 305s 262s 24?s 20 % 27% 5% 26 % 24's 267 s 23 's (a) Quarterly dividends were paid at the rates indicated in each quarter of 1981 except the fourth quarter dwidend on Original Preferred Stock and Common Stock which was at the rate of 50.81 per share. (b) There are no prices as these issues are private placements and shares are not traded. (c) No shares traded. (d) Dwidends declared on Common Stock totaled $3.10 and $2.84 for 1981 and 1980, respectively. (e) As of December 31,1981, there were approximately 152,000 Common Stock shareholders. (f) The Indenture securing the Company's First and Refunding Mortgage Bonds provides,in substance, that the Company shall not pay any cash dividends except out of its earnings reinvested in the business and net income. 31 l 1
Southern California Edison Company Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations increases in other operation expenses continue to be The Company's results of operations for 1981 were fa- due to system growth and to the impact of inflation on vorably affected by a decision, effective January 1,1981, the costs of labor, material and services. The Company, from the California Public Utilities Commission (CPUC) however, is continuing its efforts to alleviate the impact of which authorized a general rate increase of $294 mil- inflation on these expenses with con'inued emphasis on lion annually. In addition, the decision provided for an productivity and cost controls. attrition allowance to help meet inflation-related cost in- Maintenance expense reflects the impact of inflation as creases which have been a primary cause of fluctuations well as varying weather conditions. The comparative de-in net income between rate cases. The attrition allowance creases for1981 are principally the result of the large main-was implemented on January 1,1982, and increased base tenance expenditures which were incurred in 1980 at the rates by $92 million annually. Mohave and San Onofre (Unit 1) Generating Stations. The following table presents amounts and percentages Taxes on income for 1981 increased over 1980 primarily of increase (decrease) in the rate components of operat- as a result of increased pre-tax net income. Additionally, ing revenues from the prior years. income taxes increased because of adjustments to pre-tax stations of Dollars income, including the loss, due to recent Federal legisla-from P rya 1981 % 1980 % 1979 % n, of the percentage repair allowance deduction for periods after 1980. O "8 " " yCs The Company's reported net income reflects, in addi-Adjustment Clause $ (19) (0.9) $ 973 80.6 $ 75 6.6 tion to the items discussed above, the impact of higher Annual Energy Rate 32 - - - - - interest charges which were due to additional short- and Base Rates 280 23.3 31 2.6 153 15.1 long-term debt outstanding and higher interest rates. The Resale & Special additionalindebtedness was incurred by the Company Contracts 102 41.5 74 43.0 30 21.0 primarily in connection with its continuing construction Revenue (2) (6.5) 19 174.2 (23) (68.3) program, which is also responsible for the increasing Total Operating levels of the non-cash allowance for debt and equity Revenues $ 393 10.7 $1,097 42.8 $ 235 10.1 funds used during construction. 2,536 4.2 397 0.7 2,491 4.4 Earnings available for common and original preferred KWii Sales (Niillions) Customers 68,719 2.2 81,586 2.6 95,s37 3.2 stock were affected by the additional dividend require-ments of a series of $100 cumulative preferred stock issued For 1981, total operating revenues increased as a result of in October 1980 and two series of $100 cumulative pre-the net effect of the general rate increase, increased sales ferred stock issued in 1979. Earnings per share have been to other utilities, an annual energy rate which became impacted by the dilutive effect of an increasing number of effective on October 25,1981, and lower energy cost ad- outstanding shares of Common Stock sold to help finance justment clause revenues which are offset by energy costs the Company's continuing construction program. and do not affect earnings. Kilowatt-hour sales increased A discussion relating to supplementary information to 4.2% for 1981 primarily as a result of unusually high tem- disclose the effests of changing prices follows the " Notes peratures experienced in Southern California in the third to Financial Statements" on page 29 of this report. quarter and increased sales to other utilities. The following table presents amounts and percentages Liquidity of increase (decrease) from the prior years in selected Liquidity refers to the ability of a company to generate items from the Statements of income. funds, whether from operations, long-tedn financings Ntutions of Dollars, or other sources, adequate to meet its needs. The follow-Except Earnings Per Share Dat. Increase (Decrease) ag table provides a summary of the Company's sources from Prior years 1981 % 1980 % 1979 % of funds used for constructidn expenditures for the years Other Operation Expenses $ 49 12.6 $ 70 21.9 $ 39 13.6 1981,1980 and 1979. N!aintenance Expense (35) (15.3) 51 28.7 13 8.1 N1dlions of Dollars Taxes on income 159 (a) (62) (61.4) 27 37.8 Total lnterest Charges 58 20.6 78 37.8 22 12.3 1981 1980 1979 Allowance for Debt and Funds Provided by Operations-Reinvested 5 174 5 125 $ 238 Equity Funds Used Funds Provided by long-term Finanang-net 800 533 446 During Construction 70 43.3 44 36.9 40 51.2 Other Sources (Uses) of Funds (17) 124 (10) Net income 172 M3 (29) (8 3) 95 37.6 Earnings Available for Funds Used for Construction $ 957 $ 782 5 674 Common and Original Funds Provided by Operations as a Percent Preferred Stock 165 M.5 (36) (12.3) 90 44.6 of Funds Used for Construction 18 % 16 % 33 % Earnings Per Share 1.43 40.9 (1.06) (23.2) 134 29 5 Weighted Average Number The Company is engaged in an extensive construction of Shares (N1dlions) 12 16.9 9 14.1 7 11.7 program designed to accommodate existing and projected (a) Indicates over 200%. demands on its electric system. Because of the high level 32 of construction work in progress primarily related to the
I Southern California Edison Company construction of San Onofre Units 2 and 3, a significant of capital. The Company's estimates and underlying as-portion of the Company's net income in recent years sumptions are subject to continuous review and periodic has been attnbutable to the Allowance for Funds Used revision. During Construction (AFUDC), which does not represent The timing, type and amount of all additional long-term current cash income of the Company. AFUDC constituted financing are also influenced by market conditions, rate approximately 47%,51% and 34% of net income for the relief and other factors, including limitations imposed by years 1981,1980 and 1979, respectively. AFUDC is expected the Company's Articles of Incorporation and Trust to decline significantly when San Onofre Units 2 and 3 are Indenture. placed in service with a resulting reduction in this non- Funds provided by long-term financing after giving cash portion of net income. Assuming the costs incurred effect to the reduction of long-term debt, securities held in connection with the construction and operation of by trustees and the conversion of preference stock these units receive appropriate and timely rate treatment, amounted to $800 million in 1981. This reflects pollution sufficient revenues are expected to be authorized to offset control equipment financing bond issues and unsecured the decline in AFUDC. debt offerings in the European market, as well as tra-ditional public debt and equity offerings. In addition, the Capital Resources Company uses short-term borrowings as a part of normal To provide the funds for construction expenditures for daily operations and to meet interim cash needs for capi-the five years through 1986 estimated to total S4.0 billion tal projects, pending periodic reductions or repayment and to meet long-term debt maturities and preferred stock through long-term financing. The Company has a total of sinking fund requirements aggregating 1796 million dur- $736 million of available short-term borrowing facilities ing such years, the Company estimates that approxi- with foreign and domestic banks. At December 31,1981, mately $2.9 billion, or 60%, of such expenditures will be approximately $295 million of such borrowings were provided by long-term financing.The balance of funds outstanding. required for these purposes is expected to be obtained The Company's long-term goal is to maintain a capital from operations, primarily during the latter part of such structure with approximately equal amounts of debt and period, with a substantial majority of construction equity. The Company's capital structure at the end of the funds in 1982 projected to be obtained from external years 1981,1980 and 1979 is shown below. l98' I'8 ** e Company's estimates of funds available from oper-t ng-Term Debt 47.3 % 46.3 % 47.4 % ations assume the receipt of adequate and timely rate re- " lief, the timely inclusion of the new San Onofre Units and ho#" Palo Verde Units in rate base and the realization of its nm ruih"'" 100.0 % 100.0 % 100.0 % assumptions regarding cost increases, including the cost Operating Revenues and Kilowatt-Hour Sales Class of Service Operating Revenues (Thousands of Dollars) Kilowatt-flour Sales (000)
% of % % of %
1981 total 1981 1980 change 1981 totai 1981 g change Residential 27.5 $1,115,758 $1,026,778 8.7 26.7 16,688,956 16,471,840 1.3 Agricultural 1.9 75,257 68,503 9.9 1.8 1,116,308 9M,452 15.7 Commercial 26.9 1,090,694 979,051 11.4 24.9 15,562,087 14,778,843 5.3 Industrial 26.2 1,063,823 997,831 6.6 27.2 17,000,598 16,777,563 1.3 Public Authorities . . 8.2 331,972 312,578 6.2 7.5 4,667,700 4,623,886 0.9 Interdepartmental . - 77 51 51.1 - 1,218 1,138 7.0 Resale . 6.0 244,720 198,543 23.3 7.3 4,539,467 _4,415,038 2.8 Subtotal . 96 7 3,922,301 3,583,335 9.5 95.4 59,576,334 58,032,760 2.7 Resale-Special Contracts . 2.5 99,240 44,631 122.4 2.6 1,639,158 1,071,184 53.0 Public Authorities-Special . 0.1 5,007 3,407 47.0 2.0 1,235,827 811,243 52.3 Total Sales of Electric Energy . 99.3 4,026,548 3,631,373 10.9 100.0 62,431,319 59,915,187 4.2 Other Electric Revenues 0.7 27,808 29,744 (6.5) - - - Total. . 100.0 S4,0M,356 $3,661,117 10.7 100.0 _ 62,451,319 59,915,187 4.2 33
Southern California Edison Company Selected Financial Data 1971-1981 1981 1980 Summary of Operations Operating Revenues . . . . . 51,054,356 $3,661,117 (in thousands except percent Operating Expenses. . . . .. . 3,563,201 3,288,983 and per share data) Energy Costs (a) . . . . ... . 2,467,933 2,371,827 Taxes on Income-Current and Deferred (a) . .. . .. 197,865 38,683 Allowance for Debt and Equity Funds Used During Construction . . . .. . . 232,552 162,287 Interest Charges . . .. . 340,977 282,656 Net Income . 489,912 317,536 Earnings Available for Common and Original Preferred Stock . . ... 5 422,024 5 256,586 Weighted Average Shares of Common and Original Preferred Stock Outstanding and Common Stock Equivalents . .. 85,610 73,241 Per Share Data: Primary Earnings . . . . . . 54.93 $3.50 Fully Diluted Earnings .. . 54.91 $3.48 Dividends Declared Per Common Share. . 53.10 $2.84 Dividend Payout Ratio (paid basis) 61.596 79.4 % Balance Sheet Data Total Assets . . . . . . 58,728,543 57,733,898 (in thousands of dollars except Gross Utility Plant . .. 9,517,670 8,406 309 percent and per share data) Accumulated Provision for Depreciation 2,015,212 1,840,233 Percent of Gross Utility Plant . . 21.2 % 21.9 % Long-term Debt (excludes current maturities) (b) : Bonds . . . . 3,224,867 2,938,796 Debentures . . Other . . . . 219,213 7,028 Preferred Stock-Subject to Mandatory Redemption / Repurchase Requirements . 399,500 399,500 Preferred Stock-Other . . 476,308 482,652 Common Stock, including Additional Stated Capital. 776,523 673,921 Additional Paid-in Capital . . 953,268 763,519 Earnings Reinvested in the Business . 51,238,317 $1,092,137 Capital Structure (percent): Long-term Debt (excludes current maturities) (b): Bonds. 44.3 % 46.2 % Debentures - - Other 3.0 0.1 Preferred & Preference Stock. 12.0 13.9 Common Equity .. 40.7 39.8 Rate of Return on Common Equity . 14.87 % 10.44 % Book Value Per Common Share $33.74 533.19 Operating and Area Generating Capacity at Peak (MW) (c) . 15,592 15,504 Sales Data Total Energy Requirement (KWH) (000) 69,179,641 65,459,278 Percent Output: Thermal 67.7 % 71.4 % Hydro-Company Plants 5.7 9.0 Purchased Power & Other Sources 26.6 19.6 Kilowatt-Hour Sales (000) . 62,451,319 59,919,187 Number of Customers. 3,232,687 3,163,968 Average Annual KWH Sales Per Residential Customer. 5,879 5,939 Number of Employees 14,569 14,157 Area Peak Demand (MW) . . 13,738 12,841 (a) included in Operating Expenses. 34
Southern California Edison Company l 1979 1978 1977 1976 1975 1974 1973 1972 1971
$2,%3,974 $2,328,798 $2,064,914 $1,846,540 $1,647,134 $1,360,959 $1,075,949 $ 927,674 5 802,434 2,178,978 2,004,197 1,734,192 1,539,400 1,380,528 1,108,249 843,530 709,724 612,732 1,344,023 1,240,029 1,040,091 916,131 824,826 541,890 344,990 240,135 192,982 100,292 72,803 68,792 59,506 46,623 70,618 46,496 44,542 38,542 118,566 78,g 60,238 47,610 26,773 16,163 10,190 7,152 15,859 205,082 182,658 161,078 144,368 126,185 112,959 97,728 91,752 82,308 346,219 251,683 251,979 226,798 176,781 160,344 146,110 135,M8 127,297
$ 292,481 $ 202,226 $ 206,330 $ 185,047 5 137,177 $ 124,656 $ 117,268 5 110,469 $ 105,752 64,202 57,477 54,347 48,678 47,965 44,580 43,965 43,965 43,041
$4.56 $3.52 $3.80 $3.80 $2.86 $2.80 $2.67 $2.51 $2.46
$4.39 $3.38 $3.63 $3.61 $2.75 $2.68 $2.57 $2.43 $2.37 l $2.60 $2.30 $2.06 $1.68 $1.68 $1.68 $1.56 $1.56 $1.51%
- 3.7% 63.6 % 50.5 % 44.2 % 58.7 % 58.9 % 58.4 % 62.2 % 61.0 %
$6,977,237 $6,057,697 $5,725,266 $5,020,843 $4,729,444 $4,481,488 $3,893,379 $3,774,664 $3,498,985 7,577,670 6,810,891 6,191,733 5,658,433 5,147, 1 4,766,175 4,458,631 4,233, % 7 3,998,045 1,676,148 1,519,174 1,383,009 1,258,327 1,149,311 1,051,024 958,210 851,910 779,409 22.1 % 22.3 % 22.3 % 22.2 % 22.3 % 22.1 % 21.5 % 20.1 % 19.5 %
2,685,632 2,388,212 2,219,716 2,055,966 1,931,757 1,863,951 1,640,349 1,640,139 1,584,840
- 75,N 6 75,135 75,224 75,313 75,401 75,490 75,579 74,902 60,575 14,216 20,023 20,671 25,968 14,327 6,871 7,991 7,991 324,300 197,000 197,000 75,000 75,000 75,000 75,000 - -
489,822 503,650 518,172 537,753 537,753 487,753 437,753 437,753 362,753 577,259 547,166 470,374 442,741 395,709 395,709 362,376 362,376 362,376 601,578 569,673 443,109 427,422 350,503 350,503 316,636 316,636 316,636
$1,054,296 $ 931,217 $ 862,956 $ 769,425 $ 671,548 $ 616,562 $ 569,938 $ 512,164 $ 470,754 46.4 % 45.7 % 46.2 % 46.7 % 47.5 % 48.1 % 47.1 % 48.9 % 49.9 %
1.4 1.5 1.7 1.9 1.9 2.2 2.3 2.4 1.0 0.3 0.4 0.5 0.6 0.4 0.2 0.2 0.2 14.1 13.4 14.9 13.9 15.1 14.5 14.7 13.1 11.4 38.5 39.2 37.0 37.2 34.9 35.1 35.8 35.5 36.1 13.58 % 10.74 % 11.98 % 12.40 % 9.78% 9.35 % 9.59 % 9.42 % 9.58 %
$34.22 $32.57 $32.30 $30.67 $29.64 $28.50 $28.46 $27.14 $26.20 15,071 14,966 14,278 14,071 13,941 13,750 13,500 12,819 11,575 66,216,910 63,877,116 63,344,706 59,427,973 56,279,231 55,105,988 57,730,121 55,686,776 52,672,084 82.1 % 73.9 % 87.5 % 75.2 % 76.2 % 75.2% 84.9 % 86.6 % 80.0 %
7.6 9.2 2.4 4.3 8.4 10.0 9.0 6.4 8.4 10.3 16.9 10.1 20.5 15.4 14.8 6.1 7.0 11.6 59,517,861 57,027,035 57,726,273 53,685,378 51,327,508 51,089,981 54,092,934 52,309,906 48,856,493 3,082,382 2,986,545 2,900,856 2,814,403 2,749,680 2,691,691 2,626,492 2,566,341 2,497,342 6,010 5,883 5,630 5,650 5,596 5,541 5,885 5,777 5,M2 12,917 12,845 12,671 12,510 12,377 12,970 13,391 12,907 12,534 12,662 12,159 11,5M 11,292 10,369 10,279 10,535 10,317 9,817 (b) The years subsequent to 1971 include unamortized premium or discount related to each category of long-term debt. (c) Includes 2,323,2,283 and 1.944 MW available from others in 1981,1980 and 1979, respectively.
Southern California Edison Company Board of Directors William R. Could, Chainnan of the Board and Chief Executive Officer fIoward P. Allen, President Roy A. Anderson Chainnan of the Board and Chief Executive Officer, Lockheed Corporation, Burlunk, California Norman Barker, Jr., Chairman of the Board and Chief Executive Officer, First Interstate Bank of California, and Vice Chainnan of the Board, First Interstate Bancorp, Los Angeles, Cahfornia Edward W. Carter, Chainnan of the Board, Carter ilawhy iIale Stores, Inc., Los Angeles, Cahfontia Warren Chnstopher, Senior Partner, Law Finn of O*Alcireny & Afyers, Los Angeles, Cahfornia Walter B. Gerken, Chainnan of the Board and Chief Executive Offcer, Pacific hfutual Life Insurance Company, Newport Beach, California Joan C. Ilanley, General Partner and hianager, Afiramonte Vineyards, Rancho California, California Jack K. Iforton, Chainnan of the Executive Committee and Consultant (Retired Chainnan of the Board and Chief Executive officer, Southern Cahfornia Ediwn Company), las Angeles, California Frederick G. Larkin, Jr., Chairman of the Lxecutive Comnnttee, Security Pacific National Bank, Ins Angeles, California T. M. McDaniel, ]r. Corporate Director and Consultant (Retired President, Southern California Edison Company), San Atarino. California John V. Newman, President, CBS-Sony Cahfornia, Inc. (Citrus Production), Oxnard, Cahfornia Gerald f 1. Phipps, President, Gerald i1. Phipps, Inc., General Contractors (Building Construction), Denver, Colorado 1Ienry T. Segerstrom, h1anaging Partner, C. f. Segerstrom & Sons (Real Estate Development), Costa Atesa, Califontia E. L. Shannon, Jr.. Chairman of the Board and Chief Executive Officer, Santa Fe Inte: national Corporation (Oil Sen, ice Engineering, Petroleum Exploration and Production), Alhambra Cahfontia f1. Russell Smith, Chairman of the Board, Avery International (A1anufactarer of Self-Adhesive Products) Pasadena, California Richard R. Von ilagen, President, Lloyd Corporation, Ltd. (Real Estate Developtnent and Production of Oil and Gas) Beverly flills, California ExIcutive Officers William R. Gould, Chainnan of the Board and Chief Executive Officer floward P. Allen, President f1. Fred Christie, Executive Vice President and Chief Financial Officer "' David J. Fogarty, Senior Vice President A. Arenal, Vice President (Engineering and Construction) G.]. Bjorklund, Vice President (System Development) Robert Dietch, Vice President (Nuclear Engineering and Operations) C. E. f f athaway, Vice President illuman Resources) Joe T. f lead, Jr. Vice President iPower Supply) P. L. Martin. Vice President (Customer Service) A. L. Maxwell, Vice President and Comptroller Edward A. Myers, Jr., Vice President (Conservation, Communications and Revenue Services) Michael L. Noel, Vice President and Treasurer L. T. Papay, Vice President (Advanced Engineering) William f1. Seaman, Vice President (Fuel Supply) Robent E. Umbaugh, Vice President (Administration) ]ohn R, Bury, General Counsel flonor Muller, Secretary ID Af r fogartv teas elated Lnecutwe Vue Premdent, etMtree lanuarv 1.1982 (2) Atr kry tras einted Vwe PremJent and General Cwt e!. dutwe lanuary 1.1982 36
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1982 Annual Shareholders'N1ecting: For Investor Relations: Registrar of Stock: The annual meeting of sharehoklers of Institutional Investors contact: Security Pacific National llank Southern California Edison Company Treasurer's Department Los Angeles, California will be held at 10 a.m., T hursday, Apnl N1anager of Investor Relations 15,19S2, at the Company's Corporate Telephone (213) 572-1090 Dividend Reinvestment and lleadquarters,2244 Walnut Grove Stock Purchase Plan Agent: As enue, Rosemead, California 91770. Individual Slurcliolders contact: liank of America N.T. & S. A. Telephone (213) 572-1212. Southern California Edison Company San Francisco, Cahfornia Secretary's Department-Room 240 Statistical Supplement: Post Of fice flox 400 Stock Exchange Listings: A comprehensive financial and statistical Rosemead, California 91770 Common Stock: supplement to this report is available in New York Stock Enhange linuted quantity. A copy may be requested for Dividend Reinvestnient and Pacific Stock Exchange by writmg to the Nianager of Investor Stock Purcliase Plan information: london Stock Exchange Relations, Southern California Edison Telephone (213) 572-1852 or Company, P.O. Ilox NM), Rosemead, (213) 572-1995 Preferred and Preference Stot ks: California 91770. American Stock Exchange for other sliarelioider inquiries: Pacific Stock Exchange This Annual Report and flie statements and (Dividends, account status, etc.) statistics contained herein have 1cen asseini' led Telephone (213) 572-1997 1 icker Symbol: for genend informative purposes and are SCV (Common Stak) not miended to mduce, or foi use in connection Stock Transfer Agent: zeith, any sale or purchase of securities. Southern Cahfornia Edison Company Niedia Listings: Under no circum,tances is this report or any Post Office llox 400 Scaled
, part of its content, to l>e considered a pro- Rosemead, Cahlornia 91770 spectus, or as an offer to sell, or the solicitation Telephone (213) 572-1393 or of an etfer to l'uy any securitics. (213) 572-13H
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