ML20065G894
| ML20065G894 | |
| Person / Time | |
|---|---|
| Site: | Comanche Peak  |
| Issue date: | 04/06/1994 |
| From: | John Marshall TEXAS UTILITIES ELECTRIC CO. (TU ELECTRIC) |
| To: | NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM) |
| References | |
| TXX-94106, NUDOCS 9404130309 | |
| Download: ML20065G894 (79) | |
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Ref. #'10CFR50.71(b) ty 4
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u 1EIELECTRIC April 6, 199 r e n.. __.
M liliani J. Cahill. Jr.
. Group Vicefresident y
U. ~ S. ; Nuclear' Regulatory Commission
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' Attention:
Document Control Desk i Washington, DC-.20555 g
SUBJECT:
COMANCHE. PEAK STEAM ELECTRIC STATION.(CPSES) a L
DOCKET NOS. 50-445 AND.50-446
-SUCMITTAL OF-SECURITIES AND EXCHANGE COMMISSION ANNUAL REPORT FORM 10K L
. Gentlemen:
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- Pursuant to-10CFR50.71(b), TV Electric hereby submits' five.-(5) copies of the Form 10K-~ Annual. Report.
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' Sincerely, a
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-William J. Cahill, Jr.
By:_
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' J. S. Ma r's ha l l Generic Licensing Manager.
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. Enclosures i
g c.- Mr. L. J. - Callan,- Region IV. ( cl o).
Resident -Inspectors, 'CPSES'(clo)
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, Mr.' T. A, Bergman,' NRR (clo)
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W gaf y SECURITIES AND EXCHANGE COMMISSION q
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WASHINGTON, D.C. 20549_
M Form 10-K.
[V] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 m:
For the Fisca! Year Ended December 31,1993 OR
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 011442
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Texas Utilities Electric Company (Exact n.xme of registrant as specified in its charter)
A Texas I.R.S. Employer Corporation No. 75-1837355 2001 Bryan Tower, Dallas, Texas 75201 Telephone Number (214) 812-4600
. Securities Registered Pursuant to Section 12(b) of the Act:
i Nau of each exchanse on 7:tle of each clear wMeh resistered Dogs Sharesgegpregg New York Stock Exchange,Inc.
Preferred Stock, without per value.
Depositary Shares. Series A, each New York Stock Exchanse,Inc.
CuSN f
d, t'hout par value.
']
of'a la of'$h.h Cumulativohreferred Stock, without n
par value.
.l Securities Registere:I Pursuant to Section 1 '@ sf the Act: Preferred Stock, without par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
' Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 mcaths (or for such j
shorter period that the registrant was required to file such reports), and (2) has been subject to such filing j
'4 requirements for the past 90 days.
' Yes f., No _
' Indicate by check mark if disclosure of delinquent fliers pursuant to Item 405 of Regulation S-K :
p is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
' this Form 10-K. [V]
Aggregate market value of Common Stock on February 28,1994 held by non-affiliates: None Common Stock outstanding at February 28,1994: 152,000,000 shares, without par value -
DOCUMENTS INCORPORATED BY REFERENCE
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TABLE OF CONTENTS Item Description Pase PARTI 1
B usin e s s.............................
1 The Company 1
Peak Load and Capability.........................................
2 Fuel Supply and Purchased Power....................................
3 Regulation and Rates............................................
7 Co mpet i ti on.................................................. 11 Environmental Matters........................................... 11 2
Properties............................
15 Construction Program 16 The Company Syst em............................................ 17 18 3
Leg.d Proceedings 4
Submission of Matters to a Vote of Security Holders.......................... 18 PARTII 5
Market for Registrant's Common Equity and Related Stockholder Matters............ 18 6
Selected Financial Data............................................. 19 Financia1 Statistics..........
19 Operating Statistics............................................. 20 7
Management's' Discussion and Analysis of Financial Condition and Results o f Operation..................................................
21 8
Financial Statements and Supplementary Data.............................
27 9
Changes in and Disagreements with Accountants on Accounting and Finar.cial Disclosure...........................................
54 PART III 10 Directors and Executive Officers of the Registrant 54 11 Executive Compensation...........................................
56 12 Security Ownership of Certain Beneficial Owners and Management...............
62 13 Certain Relationships and Related Transactions............................
62 PART IV 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K................
63 i
t PARTI Item 1. BUSINESS.
THE COMPANY Texas Utilities Electric Company (Company) was incorporated under the laws of the State of Texas in 1982 and has perpetual existence under the provisions of the Texas Business Corporation Act. The Company is an electric utility engaged in the generation, purchase, transmission, distribution and sale of electric energy wholly within the State of Texas. The Company possesses all of the necessary franchises and certificates required to enable it to conduct its business (see Regulation and Rates).
The Company is the principal subsidiary of Texas Utilities Company (Texas Utilities). The other electric utility of Texas Utilities is Southwestern Electric Service Company (SESCO), which is engaged in the purchase, transmission, distribution, and sale of electric energy in ten counties in the eastern and central parts of Texas with a population estimated at 125,000. Texas Utilities also has three other subsidiaries which perform specialized functions within the Texas Utilities Company system: Texas Utilities Fuel Company (Fuel Company) owns a natural gas pipeline system, acquires, stores and delivers fuel gas and provides other fuel services at cost for the generation of electric energy by the Company; Texas Utilities Mining Company (Mining Company) owns, leases and operates fuel production facilities for the surface mining and recovery of lignite at cost for use at the Company's generating stations; and Texas Utilities Services Inc. (TU Services) provides financial, accounting, computer, telecommunications, personnel, procurement and other administi ative services at cost. TU Services also acts as transfer agent, registrar and dividend paying agent with respect to the preferred stock of the Company. Texas Utilities and its subsidiaries are referred to herein as ' System Companies."
The Company's service area covers the north central, eastern and western parts of Texas, with a population estimated at 5,650,000 - about one-third of the population of Texas. Electric service is provided in 88 counties and 372 incorporated municipalities, including Dallas, Fort Worth, Arlington, Irving, Plano, Waco, Mesquite, Grand Prairie, Wichita Falls, Odessa, Midland, Carrollton, Tyler, Richardson and Killeen. The area is a diversified commercial and industrial center with substantial banking, insurance, communications, electronics, aerospace, petrochemical and specialized steel manufacturing, and automotive and aircraft assembly. The territory served includes major portions of the oil and ges fields in the Permian Basin and East Texas, as well as substantial farming and ranching sections of the State. It also includes the Dallas-Fort Worth International Airport and the Alliance Airport. For energy sales and operating revenues contributed by each customer classification, see Item 6. Selected Financial Data - Operating Statistics.
At December 31,1993, the Company had 7,674 full-time employees.
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j t Item 1. BUSINESS (Continued).
PEAK LOAD AND CAPABILITY The Company's net capability, peak load and reserve, in megawatts (MW), at the time of peak were as follows during the years indicated:
Peak Lead (a)
Increase (Decrease)
Firm Net Over Peak Year Capability Amount Prior Year Lead Reserve (b) 1993................. 21,697(e) 18,324 4.6%
17,852 3,845 1992................. 21,697 17,525 3.4 17,102 4,595 1991................. 21,84 9 16,952 (5.9) 16,831 5,018 (a) The 1993 peak load occurred on July 29. The Company peak load includes interruptible load at the time of peak of 499 MW in 1993,463 MW in 1992 and 341 MW in 1991.
(b) Amount of net capability in execes of firm peak load at the time of pea..
(c) Included in net capabilitywas 1,771 MW of firm purchased capacity. including 1,691 MW of cogeneration and small power production. Excluded from net capabilitywas Comanche Peak Unit 2 (1,150 MW),which was placed into commercial operation after the peak load occurred.
The peak load changes resulted primarily from customer growth in the service area and weather factors. The Company expects to continue to purchase capacity in the future from various sources.
(See Fuel Supply and Purchased Power and Note 12 to Financial Statements.)
On November 14,1993, the emissions chimney serving Unit 3 (750 MW) of the Monitcello lignite-fueled generating station (Monticello) collapsed, rendering the unit inoperable. The unit will be rebuilt and operated as a lignite / coal-fueled facility. The Company expects the unit to be returned to service durirs 1995. (See Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation - 13quidity and Capital Resources.)
Firm peak load increases over the next ten years are expected to average approximately 2.2%
annaally, after giving effect to load management programs (including interruptible contracts). The Company's ten year system resource plan (Resource Plan) provides for meeting the increases in required net capability through the completion of gas / oil-fueled combustion turbine and lignite-fueled capacity additions, purchased power capacity (including cogeneration and smallpower production) and load management programs. Imad managent programs are designed to improve the' efficient use of the Company's generating units and help uday the need to add new capacity. The Resource Plan is subject to annual review as part of a regular planning process. When compared to the previous resource plan, the current plan reflects a one year deferral for the in-service dates of 1,500 MW of Twin Oak lignite units (Twin Oak),1,230 MW of combined cycle combustion turbines and 272 MW -
of simple-cycle combustion turbines. The compor.cnts of the Resource Plan (see Item 2. Properties
- Construction Program) are as follows:
I 2
- s Item 1. BUSINESS (Continued).
PEAK IDAD AND CAPABILITY - (Concluded)
Resource Plan 1994 2003 Capability Resource Additions (MW)
Percent Combustion Turbines..............................
1,502 28 %
Lignite /Co al.....................................
1,500 28 Load M anagement................................
1,228 22 Pu rchased Power.................................
1,189 22 Total.......................................
5,419 g%
The Company is currently conducting an experimental pilot project, in conjunction with regulatory -
and customer groups, to develop a 1995 Integrated Resource Plan (IRP). In addition to increasing public participation in the planning process, the Company is soliciting proposals for additional demand-side management resources and certain renewable energy resources to meet a portion of the customers' future energy requirements. The IRP is expected to be completed and filed with the Public Utility Commission of Texas (PUC) late in the summer of 1994. The Company hopes to obtain approval of the IRP in early 1995. It is unknown what effect, if any, this new planning process will have on future resource plans.
FUEL SUPPLY AND PURCHASED POWER Net input for 1993 was 91,537 million kilowatt. hours (kWh) of which 79,105 million kWh were generated by the Company, During this period,844,128,889 million British thermalunits (Btu) of fuel (including 40,391,702 million Btu furnished by Aluminum Company of America (Alcoa) at no cost) were consumed for electric generation (see Lignite / Coal).
Average fuel and purchased power cost (excluding capacity charges) per kWh of net input was 1.92 cents for 1993,1.85 cents for 1992 and 1.82 cents for 1991. A comparison of the resource mix for net kWh input and the unit cost per million Btu of fuel to the Company during the last three years is as follows:
Mix for Net Unit Cost kWh Input Per Million Btu ins inz int ins inz int Fuel for Electric Generation:
Gas / Oil (a).......................
33.7 % 34.4 % 37.4 %
$2.81
$2.69
$2.47 Lignite / Coal (b)...................
40.3 44.2 43.9 1.10 1.05 1.05 12.4 8.1 6.1 0.71(c)' O.41 0.33 Nuclear........................
Total / Weighted Average Fuel Cost 86.4 86.7 87.4
$1.73
$1.65
$1.62 Purchased Power...................
13.6 13.3 12.6 To t al.......................... 100.0 % 100.0 % 100.0 %
(a) Fuct oil amou nted 1o 0.003 % in 1993, and 0.02% in 1992 and 0.1% in 1991 of total fuel and purchased power requirements.
(b) Lignite cost per ton to the Company was 513.98 in 1993. $13.19 in 1992 and $13.48 in 1991.
(c) Unit cost per million Btu in 1993 includes avoided cost of fuel during trial operations. 'llic 1993 cost.czcluding Comanche Peak Unit 2 while in trial operation,was $0.62 in 1993.
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Item 1. BUSINESS (Continued).
FUEL SUPPLY AND PURCIIASED POWER -(Continued) l Gas /Oli Fuel gas for units at nineteen of the principal generating statiocs of the Company, having an aggregate net gas / oil capability of 12,931 MW, was provided during 1993 by Fuel Company. Fuel Company supplied approximately 48% of such fuel gas requirements under contracts with producers at the wellhead and under other contracts with dedicated reserves and 52% under contracts with
.j commercial suppliers. Additionalgas/ oil-fueled combustion turbines,with an aggregate net capability of 1,502 MW, are planned for the future (see Peak Load and Capability and Item 2. Properties -
Construction Program).
Fuel Company has acquired under contracts expiring at intervals through 2008, with producers at the wellhead, supplies of gas which are generally expected to be produced over a ten to fifteen year period. As gas production under contract declines and contracts expire, new contracts are expected to be negotiated to replenish or augment such supplies. Fuel Company has negotiated gas purchase contracts, with terms ranging from one to twenty years, with a number of commercial suppliers.
Additionally, Fuel Company has enteredinto a number of short-term gas purchase contracts with other commercial suppliers at spot market prices; however, these contracts typically do not provide for a firm supply obligation from the seller or a firm purchase obligation from Fuel Company. In the past, curtailments of gas deliveries have been experienced during periods of winter peak gas demand; however, such curtailments have been of relatively short duration, have had minimal impact on operations and have generally required utilization of fuel oil and gas storage inventories to replace the gas curtailed. During 1993, no curtailments were experienced.
Fuel Company owns and operates an intrastate natural gas pipeline system which extends from the gas-producing area of the Permian Basin in West Texas to the East Texas gas fields and southward to the Gulf Coast area. This system includes a one-half interest in a 36-inch pipeline which extends 395 '
miles from the Permian Basin area of West Texas to a point of termination south of the Dallas-Fort Worth area and has a total estimated capacity of 800 million cubic feet per day with existing compression facilities. Additionally, Fuel Company owns a 39% undivided interest in another 36-inch pipeline, connecting to this pipeline and extending 58 miles castward to.one of Fuel Company's underground gas storage facilities. Fuel Company also owns and operates approximately 1,650 miles of various smaller capacity lines which are used to gather and transport natural gas from other gas-producing areas. The pipeline facilities of Fuel Company form an integrated network through which fuelgas is gathered and transported to certain generating stations of the Company for use in the generation of electric energy.
Fuel Company also owns and operates three underground gas storage facilities with a usable capacity of 27.2 billion cubic feet with approximately 20.2 billion cubic feet of gas in inventory at December 31,1993. Gas stored in these facilities currently can be withdrawn for use during periods of peak demand, to meet seasonal and other fluctuations or curtailment of deliveries by gas suppliers.
Under normal operating conditions, up to 500 million cubic feet can be withdrawn each day for a two-week period, with withdrawals at lower rates thereafter.
Fuel oilis stored at all nineteen of the principally gas-fueled generating stations. At December 31, 1993, the System Companies had fuel oil storage capacity sufficient to accommodate approximately 6.6 million barrels of oil, with approximately 2.4 million barrels of oilin inventory. Fuel Company has 4'
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i Item 1. BUSINESS (Continued).
FUEL SUPPLY AND PURCHASED POWER-(Continued) access to an oil pipeline and owns a terminal facility to provide for more dependable and efficient movement of oil. Generally, oil required to replenish that oil removed from storage will be obtained through purchases in the open market.
Lignite / Coal Lignite is used as the primary fuelin two units in service at the Big Brown generating station (Big Brown), three units at M onticello, three units at the Martin Lake generating station (Martin Lake) and one unit at the Sandow generating station (Sandow), having an aggregate net capability of 5,845 MW.
Two other lignite-fuelcd units, with an aggregate net capability of 1,500 MW, are included in the current Resource Plan (see Peak Load and Capability and Item 2. Properties - Construction Program). He Company's lignite units have been constructed adjacent to surface mined lignite reserves. At the present time, the Company owns in fee or has under lease an estimated 863 million tons of proven reserves dedicated to existing power plants or planned future power plants. Mining Company owns, leases and operates equipment to remove the overburden and to recover lignite. One of the Company's lignite units, Sandow 4, is fueled from lignite deposits owned by Alcoa, which furnishes fuel at no cost to the Company for that portion of energy generated from such unit which -
is equal to the amount of enere jelivered to Alcoa (see item 6. Selected FinancialData-Operating Statistics).
Lignite production operations at Big Drown, Monticello and Martin Lake are accompanied by an extensive reclamation program which returns the land to productive uses such as wildlife habitats, commercial timberland and pasture land. Similar programs are planned for future lignite-fueled production operations. For information concerning federal and state laws with respect to surface mining, see Environmental Matters.
The Company supplemented Company-owned lignite fuel at its Monticello plant with western coal from the Powder River Basin (PRB) in Wyoming during five months of 1993. The coalwas purchased and transported on an "as available, as-required" basis. Because current mine capacity in the PRD is greater than the demand at this time, ample amounts of western coal are available on the spot market at favorable prices. Fuelrequirements at Monticello were reduced as a result of the November 1993 collapse of the emissions chimney at Unit 3.
Consequently, deliveries of western coal were discontinued and lignite mining operations at the Monticello mines were reduced. When Unit 3 I
returns to service, lignite mining operations and western coal deliveries at Monticello will resume in order to supply the required fuels. Further, the Company is also actively considering the use of western coal as a supplemental fuel at its other existing lignite-fueled plants and as a long-term i
alternative fuel for existing and future units. For information concerning applicable air quality standards, see Environmental Matters.
Nuclear ne Company owns and operates two nuclear-fueled generating units at the Comanche Peak nuclear generating station (Comanche Peak), each of which is designed for a net capability of 1,150 MW. (See Peak Load and Capability.).
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Item 1. BUSINESS (Continued).
FUEL SUPPLY AND PURCHASED POWER -(Continued)
The nuclear fuel cycle requires the mining and milling of uranium ore to provide uranium oxide concentrate (U 0.), the conversion of U 0,to uranium hexafluoride (UF.), the enrichment of the UF, 3
3 and the fabrication of the enriched uranium into fuel assemblies. The Company has on hati or has contracted for the raw materials and services it expects to need for its nuclear units through the years h
shown below:
Uranium Conversion Enrichment Fabrication 2001 2003 2014 2002 The Company expects to meet its U 0, requirements through the years shown above from inventory 3
on hand and amounts under contract. Although the Company cannot predict the future availability of uranium and nuclear fuel services, the Company does not currently expect to have difficulty obtaining U 0, and the services necessary for its conversion, enrichment and fabrication into nuclear 3
fuel for years later than those shown above.
The National Energy Policy Act of 1992 (Energy Act) has provisions for the recovery of a portion of the costs associated with the decommissioning and decontamination of the gaseous diffusion plants used to enrich uranium for fuel. These costs are being recovered in fees paid to the Department of Energy as determined by the Secretary of Energy. The total annual assessment for all domestic utilities is capped at $150 million per federal fiscal year assessable for fifteen years. The Company's share, as established by the Department of Energy, is estimated to be $1.3 million per year.
The Nuclear Waste Policy Act of 1982, as amended (NWPA), provides for the development by the federal government of interim storage and permanent disposal facilities for spent nuclear fuel and/or high level radioactive waste materials. The Company is unable to predict when the federal government will be able to provide such storage and disposal facilities. Under provisions of the NWPA, funding -
)
for the program is provided by a one-mill per kWh fee currently levied on electricity generated and l
sold from nuclear reactors, including the Comanche Peak units. Onsite storage capacity for spent fuel is sufficient to accommodate the operation of Comanche Peak for approximately 10 years and this storage capacity can be increased, subject to approval by the Nuclear Regulatory Commission (NRC).
Purchased Power In 1993, the Company purchased 12,432 million kWh or approximately 14% of its energy requirements and had available 1,771 MW of firm purchased capacity, or approximately 8%, of net capability under contract at the time of peak load. The Company may acquire purchased power capacity in the future to accommodate a portion of system load and continues to investigate potential _.
)
available sources. For information concerning the Resource Plan, see Peak Load and Capability and Note 12 to Financial Statements.
I Genem!
The Company is not able to predict: (i) whether or not problems may be encountered in the future in obtaining the Lcl and purchased power it will require, (ii) the effect upon its operations of any difficulty it may experience in protecting its rights to fuel and purchased power now under contract, 6
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T
t Item 1. BUSINESS (Continued).
FUEL SUPPLY AND PURCHASED POWER - (Concluded) or (iii) the cost of fuel and purchased power. All reasonable costs of fuel and purchased power are generally recoverable subject to the rules of the PUC. (See Regulation and Rates for information pertaining to the method of recovery of purchased power and fuel costs.)
REG'ULATION AND RATES Regulation Texas Utilities and its subsidiaries, including the Company, are exempt from the provisions of the Public Utility Holding Act of 1935, except Section 9(a)(2) which relates to the acquisition of securities of public utility companies.
The Company does not transmit electric energy in interstate commerce or sell electric energy at wholesale in interstato commerce, or own or operate facilities therefor, and its facilities are not connected directly or indirectly to other systems which are involved in such interstate activities, except during the continuance of emergencies permitting t emporary or permanent connections or under order of the Federal Energy Regulatory Commission (FERC) exempting the Company from jurisdiction under the Federal Power Act. In view thereof, the Company believes that it is not a public utility as defined in the Federal Power Act and has been advised by its counsel that it is not subject to general regulation under such Act.
The PUC has originaljurisdiction over electric rates and service in unincorporated areas and those municipalities that have ceded originaljurisdiction to the PUC and has exclusive appellate jurisdiction to review the rate and service orders and ordinances of municipalities Generally, the Texas Public Utility Regulatory Act prohibits the collection of any rates or charges (including charges for fuel) by a public utility that does not have the prior approval of the PUC. The provisions for inclusion of construction work in progress (CWIP) in rate base provide that such inclusion is an exceptional form of rate relief to be granted only when necessary to the financialintegrity of the utility and that it shall not be included for major projects to the extent they have been imprudently planned or managed.
The construction of new production facilities of the Company is subject to PUC certification. In January 1992, the PUC approved Notice of Intent (F QI) applications which were filed by the Company in June 1991 for 1,512 MW of combustion turbines and 650 MW of coal-fired generation. An NOIis the first step of a process for PUC approval for construction of utility plant. Certain intervenors in the NOI proceeding appealed the PUC's approval. On November 23,1993, the 126th Judicial District Court of Travis County, Texas announced its decision to reverse and remand the PUC's approval; however, the court has not yet issued ajudgment. The Company will decide about an appeal after the judgment is issued. (See Peak Load and Capability and Item 2. Properties-Construction Program.)
The Company is subject to the jurisdhtlon of the NRC with respect to nuclear power plants. NRC regulations govern the granting oflicenses for the construction and operation of nuclear power plants and subject such plants to continuing review and regulation.
7
Item 1. BUSINESS (Continued).
REGUIATION AND RATES -(Continued)
In August 1992, following action by the NRC staff which extended the construction permit for Comanche Peak Unit 2, an Atomic Safety and Licensing Board (ASLB) was established to determine whether proposed intervenors have standing to intervene and, if so, whether valid issues exist to necessitate a hearing to determine if there was a good cause to extend such construction permit. In December 1992, the ASLB issued an order denying a hearing on these petitions, and the proposed intervenors have taken actions to appeal this decision. In April 1993, the NRC denied such appeals, and two of the proposedintervenors petitioned the U.S. Court of Appeals for the District of Columbia Circuit to grant a summary reversal of the NRC order and stay the operating license. On February 24, 1994, the appeal was voluntarily dismissed.
The Company is also subject to various other federal, state and local regulations. (See Environmental Matters.)
Fuel Cost Recovery Rule Pursuant to a PUC rule governing the recovery of fuel costs, the recovery of the Company's eligible fuel costs is provided through fixed fuel factors. The rule allows a utility's fuel factor to be revised upward or downward every six months, according to a specified schedule. Each six months, a utility is required to petition to make either surcharges or refunds to ratepayers, together with interest based on a twelve month average of prime commercial rates, for any material cumulative under-or over.
recovery of fuel costs. If the cumulative difference between the under-or over-recovery, plus interest, is in excess of 4% of the annual estimated fuel costs most recently approved by the PUC, it will be deemed to be material. Accordingly,in August 1993, the Company petitioned the PUC for a recovery of approximately $144.5 million, including interest, in under-collected fuel costs through June 30,1993 which were due primarily to increased naturalgas costs. The PUC approved the recovery of such costs in the finalorder in Docket 11735. The recovery will be offset by the refund of the difference between bonded rates and rates approved in the final order. (See Docket 11735 below, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation and Note 11 to Financial Statements.)
The fuel cost recovery rule also contains a procedure for an expedited change in the fixed fuel.
factor i'n the event of an emergency. Final reconciliation of fuel costs must be made either in a reconciliation proceeding, which may cover no more than three years and no less than one year, or in a general rate case. In a final reconciliation, a utility has the burden of proving that fuel costs under review were reasonable and necessary to provide reliable electric service, that it has properly accounted for its fuel-related revenues, and that fuel prices charged to the utility by an affiliate were reasonable and necessary and not higher than prices charged for similar items by such affiliate to other affiliates or nonaffiliates. In addition, the rule provides for recovery of purchased power capacity costs with respect to purchases from qualifying facilities, to the extent such costs are not otherwise included in base rates. Recovery is made on a monthly basis through a Power Cost Recovery Factor (PCRF).-
The energy-related costs of ruch purchases are included in the fixed fuel factor. Penalties of up to 10%
will be imposed in the event an emergency increase has been granted when there was no emergency or when collections under the PCRF exceed PCRF costs by 10% in any month or 5% in the most recent twelve months.
8 o
Item 1. BUSINESS (Continued).
REGUIATION AND RATES -(Continued)
Docket 11735 In January 1993, the Company made applications to the PUC (Docket 11735) and to its municipal regulatory authorities for upward adjustments in rates for electric service throughout its service area, which would have increased annualoperating revenues by approximately $760 million, or 15.3 %, based upon the test year ended June 30,1992. Such request reflected, among other things, costs associated with Comanche Peak Unit 2, costs associated with Comanche Peak Unit 1 after the end of the Docket 9300 (see below) test year, additional ad valorem taxes and certain postretirement benefit costs. In August 1993, pursuant to rules of the PUC, the Company placed its requested rate increase into effect, under bond and subject to refund with interest, applicable to energy sales on and after such date.
Revenues were recorded net of an estimated reserve for possible refunds.
In October 1993, the PUC issued an order (Order) approving the terms of an agreement (Settlement Agreement) among the Company, the General Counsel's office of the PUC and applicable intervenors which, among other things, settled all remaining issues relating to the design, construction and cost of Comanche Peak through commencement of commercial operation of Unit 2.
The Settlement Agreement provided for the disallowance in Docket 11735 o $250 million of costs relating r
to the completion of Comanche Peak. Pursuant to the Order, the Congany refunded $5 million in fuel charges previously incurred in order to resolve the fuel phase of Docket 11735 under which the Company was seeking reconciliation of approximately $4.6 billion ok fuel costs incurred during the three year period ended June 30,1992, under the fuel rule in effect prio, M May 1993. Further, in order to resolve the primary issue in another proceeding which resulted from a emplaint filed against the Company in October 1992 by the General Counsel's office of the PUC, as a result of the Order, the Company agreed to write off $83 million of allowance for funds used durhg construction (AFUDC), which consisted of the amount subject to dispute in such proceeding and shlitar charges subsequently accrued. Also, under the Settlement Agreement and confirmedin the Dodet 11735 final order (see below), the Company will recover, ratably over an eight year perbd, $197 million of operation and maintenance expenditures incurred by the Company in connection with its recent cost reduction program. However, an additional $25 million of such expenditures will not be subject to recovery and was written off by the Company. As a result of the Settlement Agrtement, the Company recorded a charge against earnings in September 1993 of approximately $363 muda ($265 million after tax).
On January 28,1994, the PUC issued a final order in Docket 11735 which provided for a total annual revenue increase of approximately $435 million, or 8.7% The Company strongly disagrees with the final order and has filed a motion for rehearing with the PUC, and will appeal the outcome, if necessary. As a result of this finalorder, unless the order is changed on rehearing, the Companywill refund the difference between the bonded rates and the rates approved in the final order, including interest, all of which is being fully reserved by the Company. The total amount to be refunded will be determined once approved rates have been implemented, which is expected to be during the second quarter of 1994. The amount to be refunded at Dece,nber 31,1993 was approximately $141.2 million.
Such refund will be mitigated by a fuelcost surcharge approved by the PUC of approximately $144.5 million, including interest, in under. collected fuel costs through June 30,1993. (See Fuel Cost Recovery Rule).
In November 1993, an intermediate appellate court in Texas, considering an appeal of another 9
L Item 1. BUSINESS (Continued).
REGULATION AND RATES -(Concluded) utility's rate case, ruled that utilizing tax benefits generated by costs not allowed in rates to reduce rates charged to customers was required by prior court rulings for all disallowed costs, including capital costs. The Company believes that such rulings are erroneous and not consistent with the Texas Public Utility Regulatory Act. According to a Private Letter Ruling issued to the Company by the internal Revenue Service (IRS) with respect to investment tax credits, such ratemaking treatment, to the extent related to property classified for tax purposes as public utility property, would result in a violation of the normalization rules contained in the Internal Revenue Code of 1986, as amended (Code).
Violation of the normalization rules would result in a significant adverse effect on the Company's results of operation and liquidity. The tax benetits associated with the Comanche Peak costs disallowed in Docket 9300 (see below) could be affected as a result of the court's method. In addition, in its final order in Docket 11735, the PUC reduced rates for the tax benefits generated by certain costs which were not allowed in rates. However, the PUC recognized the potential for a normalization violation if investment tax credits and tax depreciation generated by disallowed plant costs are used to reduce rates. Therefore, the PUC ordered the Company to obtain a Private Letter Ruling from the IRS with respect to tax depreciation on disallowed plant. Thus, the Conipany's rates would not reflect -
the tax dr.preciation benefit of disallowed plant unless the IRS rules such benefits can be utilized to reduce rates without violating the normalization rules contained in the Code. Such a finding by the IRS woald require the Company to refund the tax depreciation benefits to its customers. The Compaay does not believe it is likely that such refund will occur if the IRS maintains a position similar to that stated in its previous Private Letter Ruling to the Company.
Docket 9300 In September 1991, the PUC issued a final order in the Company's prior rate case (Docket 9300),
which provided for a total revenue increase of approximately $442 million and included $695 million of CWIP in rate base to support the revenue increase. It also included a prudence disallowance of
$472 million with respect to certain Comanche Peak costs relating to 87.8% of the Company's ownership interest in both units of Comanche Peak. With respect to the Company's reacquisition of the remaining 12.2% minority owner interests in Comanche Peak, the order included an additional disallowuce of $909 million.
In November 1991, the Company filed a petition in the 250th Judicial District Court of Travis County, Texas, requesting a reversal and remand of the Docket 9300 final order. Other parties to the PUC proceeding also filed appeals with respect to various portions of the order. In September 1992, after a hearing, the Court entered a judgment in the appeals which affirmed the prudence disallowance of $472 million but reversed and remanded to the PUC for reconsideration those portions of the PUC's final order providing for additional disallowances aggregating $884 million with respect to the Company's reacquisition of minority owner interests in Comanche Peak. The Court recognized that on remand the PUC may adjust the amount of CWIP included in the Company's rate ice to be consistent with the PUC's redeterminations regarding the minority owner reacquisitions and the amount of cash working capital. Therefore, the Company does not expect this judgment to affect the rates approved in the Docket 9300 final order. Other parties to this suit have appealed thisjudgment.
The Company disagrees with certain portions of this judgment and also has appealed. It is unable to predict the outcome of such appeals and any reconsiderations by the PUC.
10
Item 1. BUSINESS (Continued).
COMPETITION Re electric utility industry in general has become, and is expected to be, increasingly competitive due to a variety of regulatory and economic developments. The level of competition is affected by, among other things, price, reliability of service, the cost of energy alternatives, new technologies and governmental regulations. The Company's electric business is exposed to certain competitive forces in varying degrees.
The Company, like the electric industry generally, faces increasing competition in the supply of bulk power at wholesale. Electric utilities have historically sought to sell surplus capacity and energy outside their traditional service territories. The Energy Act was designed, among other things, to foster competition in the wholesale market by (a) facilitating, through amendments to the Public Holding Company Act of 1935, the ownership and operation of generating facilities by " exempt wholesale generators" (which may include independent power producers as well as affiliates of electric utilities) and (b) authorizing, through amendments to the Federal Power Act, the FERC under certain conditions to order utilities which own transmission facilities to provide wholesale transmission services to or for other utilities and other entities -
selling electric energy. While the Company has experienced competitive pressures in the wholesale market, resulting in a minor loss ofload, wholesale sales constitute a relatively low percentage of total sales. See Item 6. Selected Financial Data - Consolidated Operating Statistics.
The legislatures and/or the regulatory commissions in several states have considered or are considering
" retail wheeling" which, in general terms, means the transmission by an electric utility of energy produced by another entity over its transmission and distribution system to a retail customer in such utility's service territory. A requirement to transmit directly to retail customers would have the result of permitting retail
)
customers to purchase electric capacity and energy from, at the election of such customers, the electric utility In whose service area they are located or from any other electric utilities or independent power producers.
This issue has not been actively pursued in the Texas legislature or by the PUC.
The Company generally has the right, through PUC certification, to provide electric service to the public within its service area. However, some energy consumers in its servbe area have the ability to produce their own electricity or use alternative forms of energy. Additionally, the Company operates in some dually certified arcas with other utilities.
The Company is unable to predict the extent of future competitive developments or what impact, if any, such developments may have on its operations.
ENVIRONMENTAL MATTERS The System Companies are subject to various federal, state and local regulations dealing with air and water quality and related environmental matters (see item 2. Properties - Construction Program for environmental expenditures).
Air Under the Texas Clean Air Act, the Texas Natural Resource Conservation Commission (TNRCC),
formerly the Texas Air Control Board and the Texas Water Commission, has jurisdiction over the permissible level of air contaminant emissions from generating facilities located within the State of 11
- t
d Item 1. BUSINESS (Continued).
ENVIRONMENTAL MATTERS - (Continued)
Texas. In addition, the new source performance standards of the Environmental Protection Agency (EPA) promulgated under the federal Clean Air Act, as amended (Clean Air Act), which have also been adopted by the TNRCC, are applicable to such generating units, the construction of which commenced after September 18,1978. The Company's generating units have been constructed to operate in compliance with current regulations and emission standards promulgated pursuant to these Acts; however, due to variations in,the quality of the lignite fuel, operation of certain of the j
lignite-fueled generating units at reduced loads is required from time to time in order to maintain compliance with these standards. Planned future generating facilities have received state and federal permits and are designed to comply with applicable statutes and regulations, j
.i The Clean Air Act includes provisions which, among other things, place limits on the sulfur dioxide emissions produced by generating units. The Clean Air Act requires that fossil-fueled plants meet new sulfur dioxide emission standards by 1995 (Phase I) and additional sulfur dioxide emission standards by 2000 (Phase II). The Company's generating units are not affected by the Phase I requirements. The applicable Phase 11 requirements currently are met by 52 out of 56 of the Company's generating units.
Because the sulfur dioxide emissions from the other four units are relatively low and alternatives are available to enable these units to reduce sulfur dioxide emissions or utilize compensatory reduction allowances achieved in other units, compliance with the applicable Phase II sulfur dioxide requirements is not expected to have a significant impact on the Company. In January 1993, the EPA issued its " core" regulations to implement the sulfur dioxide reduction program. The Company is preparing compliance plans in accordance with the regulations.
To meet these sulfur dioxide requirements, the Clean Air Act provides for the annual allocation
)
of sulfur dioxide emission allowances to utilities. Under the Clean Air Act, utilities are permitted to transfer allowances within their own systems and to buy or sell allowances. The EPA grants a maximum number of allowances annually to the Company based on the amount of emissions from units in 1
operation during the period 1985-1987. The Clean Air Act also provides that the Company will be granted additional annual allowances for certain Company units under construction based on part of their anticipated emissions. The Companyintends to utilize internal allocation of emission allowances within its system and, if it is cost effective, may purchase emission allowances to enable both existing and future electric generating units to meet the requirements of the Clean Air Act. The Company is i
unable to predict the extent to which it may generate excess allowances or will be able to acquire allowances from others if needed.
Other provisions of the Clean Air Act may require the Company to take other actions. The Company's lignite-fired generating units meet the nitrogen oxide limits currently required by the Clean Air Act. The requirements of the Clean Air Act for ozone nonattainment areas may require nitrogen oxide emission reductions at the Company's natural gas-fired units in the Dallas-Fort Worth area. The Clean Air Act also requires studies over a four year period by the EPA to assess the potential for toxic emissions from utility boilers. The Company is unable to predict either the results of such studies or the effects of any subsequent regulations. Continuous emission monitoring systems are required by the i
'l Clean Air Act to be installed by 1995 on most of the Company's fossil-fueled units. Installation began in 1992 and is expected to be completed as required.
]
12 r
']
Item 1. BUSINESS (Continued).
I ENVIRONMENTAL MA'ITERS - (Continued) l Only certain parts of the regulations implementing the Clean Air Act have been published as final rules. Until more of these regulations have been promulgated and specific state requirements developed, the Company will not be able to fully determine the cost or method for compliance for these requirements. The Company believes that it can meet the requirements necessary to be in compliance with these provisions as they are developed. Estimates for the capital requirements related to the Clean Air Act are included in the Company's estimated construction expenditures. Any j
additional capital costs, as well as any increased operating costs associated with new requirements or j
compliance measures, are expected to be recoverable through rates, as similar costs have been i
recovered in the past.
Water The TNRCC and the EPA have jurisdiction over allwater discharges (including storm water) from all System Companies' facilities. The Company's facilities presently in operation have been.
constructed to operate in compliance with applicable state and federal requirements relating to discharge of pollutants into the water. The Company, Fuel Company, and Mining Company have obtained all required waste water discharge permits from the TNRCC and the EPA for facilities in operation and have applied for or obtained all such permits for facilities under construction. The Company, Fuel Company, and Mining Company believe they can satisfy the requirements necessary to obtain any required permits or renewals.
Diversion, impoundment and withdrawal of water for cooling and other purposes are subject to the jurisdiction of the TNRCC. The Company possesses all necessary permits for these activities from the TNRCC for its present operations and plants under construction.
Other Federal legislation regulating surface mining was enacted in August 1977 and regulations implementing the law have been issued. Mining Company's lignite mining operations are currently regulated at the state level by the Railroad Commission of Texas,with oversight by the United States Department of the Interior's Office of Surface Mining, Reclamation and Enforcement. Surface mining permits have been issued for current Mining Company operations that provide fuel for Big Brown, Monticello and Martin Lake.
Treatment, storage and disposal of solid and hazardous waste are regulated at the state level under 1
the Texas Solid Waste Disposal Act and at the federallevel under the Resource Conservation and Recovery Act of 1976, as amended (RCRA). The EPA has issued regulations under the RCRA and the TNRCC has issued regulations under the Texas act applicable to Company facilities. The 1
Company has registered its solid waste disposal sites and has obtained or applied for such permits as are required by such regulations.
Under the federallew-Level RadioactiveWaste Policy Act of 1980, as amended, the State of Texas is required to provide by 1996, either on its own or jointly with other states in a compact, for the i
disposal of alllow-level radioactive waste generated within the state. The State of Texas is taking steps l
to site, construct and operate a low-level radiooactive waste disposal site by 1996 and submitted a license application in March 1992 for a low. level waste disposal facility. The State of Texas has 13 i
Item 1. BUSINESS (Concluded).
ENVIRONMENTAL MATTERS -(Concluded) entered into an agreement with other states in its region to take and dispose of alllow-level radioactive waste frorn Texas for the period January 1,1993 through June 30,1994. It is expected that such material will be stored on-site until other facilities are available.
a j
14
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Item 2. PROPERTIES.
At December 31,1993, the Company owned or leased and operated the following units:
Electric Net Generating Capability
.j Units Fnel Source (MW) 47 Natural Gas (a).........
11,936 56.7 9
Lignite / Coal (b).........
5,845 27.7 2
Nuclear................
2,300 10.9 10 D i esel.................
20 0.1 15 Combustion Turbines (c)..
975 4.6 4
Tot al.................
21,076 100.0 l
(a) Thirty-eight natural gas units are designed to operate on fuel oil for short periods when gas supplies are Interrupted 1
or curtailed. Five natural gas units are designed to operate on fuel oil for extended periods.
j (b) Includes the Monticello Unit 3 (750 MW).
(c) Natural gas units leased and operated by the Company. Such units are designed to operate on fuel ol! for extended periods.
The principal generating facilities and load centers of the Company are connected by 3,861 circuit milen of 345,000 volt transmission lines and 9,098 circuit miles of 138,000 and 69,000 volt transmission lines.
The Company is connected by six 345,000 volt lines to Houston Lighting & Power Company; by 1
three 345,000 volt, eight 138,000 volt and nine 69,000 volt lines to West Texas Utilities Company; by two 345,000 volt, seven 138,000 volt and one 69,000 volt lines to the Lower Colorado River Authority; by four 345,000 volt and eight 138,000 volt lines to the Texas Municipal Power Agency; and at several points with smaller systems operating wholly within Texas. The Company is a member of the Electric Reliability Councilof Texas (ERCOT), an intrastate network of investor-owned entities, cooperatives and public entities. ERCOT is the regional reliability coordinating organization for member electric power systems in Texas.
" Die generating stations and other important units of property of the Company are located onlands -
owned primarily in fee simple. The greater portion of the transmission and distribution lines of the Company, and of the gas gathering and transmission lines of Fuel Company, has been constructed over lands of others pursuant to easements or along public highways an_d streets as permitted by law. The rights of the System Companies in the realty on which their properties are located are considered by
' them to be adequate for their use in the conduct of their business. Minor defects and irregularities customarily found in titles to properties oflike size and character may exist, but any such defects and irregularities do not materially impair the use of the properties affected thereby. The Company and.
Fuel Company have the right of eminent domain whereby they may, if necessary, perfect or secure titles to privately held land used or to be used in their operations. Electric plant of the Companyis generally subjcct to the liens of its mortgages.
)
15 1
Item 2. PROPERTIES (Centinued).
During the period from January 1,1991 to December 31,1993, the Company made gross property additions of approximately $6,321,587,000 and retirements of property aggregating approximately
$162,921,000. Such gross additions amounted to approximately 24.5% of electric plant at December 31,1993.
CONSTRUCTION PROGRAM The Company has taken steps to substantially reduce construction expenditures from amounts previously estimated. Such expenditures, excluding AFUDC (see Note 1 to Financial Statements), are.
presently estimated at $363 million for each of theyears 1994,1995 and 1996. The Company is subject to federal, state and local regulations dealing with environmental protection (see Item 1. Business -
Environmental Matters). Expenditures for construction to meet the requirements of such regulations at existing generating units are estimated to be $55 million for 1994 and were approximately $34 million for 1993, $25.4 million for 1992 and $10.4 million for 1991.
The Company's Resource Plan includes two lignite-fueled 750 MW units at Twin Oak currently scheduled for service for the peak seasons of 2000 and 2001, respectively. IIowever, estimated construction expenditures, excluding AFUDC, for the 1994-1996 period do not include any significant amounts for the resumption of construction of these units. Active construction and the acvual of AFUDC on Twin Oak, suspended in 1987 due to forecast changes in load growth, would need to resume in 1996 in order to meet the current schedule. Assuming the units are financed by the Company using traditional methods, approximately $210 million would be added to construction expenditures in 1996.
The Company's Resource Plan also includes 1,502 MW of gas /cil-fueled combustion turbine units (including 272 MW of simple cycle combustion turbines planned for completion during the peak season of 1999), none of which requires significant construction expenditures in the 1994-1996 period -
reflected above.
The reevaluation of growth expectations, the effects of inflation, additional ~ regulatory requirements, and the availability of fuel, labor, materials and capital may result in changes in estimated construction costs and dates of completion. Commitments in connection with the construction program, are generally revocable subject to reimbursement to manufacturers for expenditures incurred or other cancellation penalties. (See Item 1. Business - Peak lead and Capability.)
For information regarding financing of the construction program, see Item 7. Management's Discussion and Analysis of FinancialCondition and Results of Operation.
1 1
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Item 3. LEGAL PROCEEDINGS.
In November 1991, Sheree Anne Meyer, as custodian for Adam Joseph Davenpon, allegedly as a shareholder of Texas Utilities, filed suit in the United States District Court for the Northern District of Texas derivatively on behalf of Texas Utilities and the Company against Texas Utilities and the '
Company as nominal defendants and J. S. Farrington, Erle Nye, James K. Dobey, Jack W. E William M. Griffin, Margaret N. M xey, James A. Middleton, Charles R. Perry andWilliam II. Seay, directors of Texas Utilities, and James H. Zun2berge, a former director of Texas Utilities, S. S. Swi a former officer of Texas Utilities, and T. L. Baker, an officer of the Company. The plaintiff alleges breaches of fiduciary duty and negligence primarily relating to Comanche Penk, which the plaint claims have resulted in damages in an amount not less than $1.381 billion. In December 1991, the Court entered an order which stayed this suit until thirty days after entry of a final judgment by the District Court in the Company's appeal of the final order of the PUCin Docket 9300. In Septembe 1992, a final judgment in this appeal was entered by the District Court. (See Item 1. Business -
Regulation and Rates.) The plaintiff refused to extend the stay pending the appeals of this j and Texas Utilities moved to extend the stay through resolution of the appeals or alternatively to dismiss the suit. In December 1992, this suit was consolidated with a similar suit brought against Tex Utilities by another alleged shareholder. In January 1993, the Court entered an order which L
the consolidated suit until thirty days after the disposition of all appeals from the final order of the PUC in Docket 9300. (See Item 1. Business - Regulation and Rates.)
Item 4. SUBMISSION OF MA'ITERS TO A VOTE OF SECURITY IIOLDERS.
None.
a, PARTII f
item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED MATTERS.
b All of the Company's common stock is owned by Texas Utilities, f
Reference is made to Note 5 to Financial Statements regarding limitations upon payment of dividends on common stock of the Company.
l
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4 i
=In 18 r
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Item 6. SELECTED FINANCIAL DATA.
FINANCIAL STATISTICS Year Ended Deceinber 31, 1993*
1992 1991*
1990 1989 (Dollars in Thousands)
Total assets - end of year............................ $19,870,990
$17,962,812
$17,093,474
$17,387,276
$16,173,648 Elcetric plant - grosa - end of year.................... 322,680,508
$21,957,681
$20,865,047
$19,693,580 $18,116,758 Accumulated depreciation and amortization -cod of year.
4,233,720 3,790,626 3,417,856 3,038,302 2,762,101 R.cserve for regulatory disallowances - end of year.......
1,308,460 1,308,460 1,308,460 Construction expenditures (including allowance for funds used during construction).....................
841,181 1,107,555 1,195,680 1,431,647 1,793.890 Capitalization -end of year Long. term debt....................,.............. $ 7,607.090
$ 7,280,301 3 7,253,626
$ 6,750,635 3 6,079,503 Preferred stock:
Not subject to mandatory redemption................
1,083,008 909,564 1.007,728 1,007,728 1,007,732 Subject to mandatory redemption...................
396,917 418,748 425,758 426,737 329,009 Com mon stock equity.............................
6,029.217 6.198,208 5,741.437 6,452,690 5,814,013 Total....................................
$15,116,232 314,806,821 514,428,549
$14,637,790,$13,230.257 Embedded laterest cost on long term debt -end of year....
8.8%
9.2%
9.7%
9.8%
9.8%
Embedded dividend cost on preferred stock-end of year...
7.6%
8.4%
8J%
8.6%
8.3%
-i 1
1 l
Income (losa) before cumulative effect of a change in accounting principle.............................
$476,526
$740,216
$(289.173)
$964,276
$886.176 j
Cumuistive effect of a change in accounting for unbilled j
80.907 sevenue (Net of taxes of $41,679,000)(Note 13)..........
$476,526
$821,123
$(289,173)
$964,276
$886,176 j
s d
Net income (loss)...................................
Dividends declared on common stock...................
3707.382 5645,260
$ 650,940
$607,230
$542,298 2.0 2.5 0.3 2.3 2.6 Ratio of earnings to fixed charges......................
Allowance for funds used during construction as 72.9 %
43.3 %
73.1 %
65.1%
percent of earnings to common stock...................
5.9%
11.8 %
(6.7)%
13.8 %
14.0 %
Return on average common stock equity...............
Certain financial statistics for the years 1993 and 1991 were affected by the Company recording regulatory disallowances in the rate orders issued by the Public Utility Commission of Texas in Dockets 11735 and 9300, respectively. ($ce Note 11 to Finane'.2 Statements.)
+n a
3.
19
.3
Item 6. SELECTED FINANCIAL DATA (Concluded).
OPERATING STATISTICS Year Ended Decesaber 31, 1993 1992 1991 1990 1989 ELECIRIC ENEROY GENERATED AND PURCIIASED (MWh) 79,105,495 74,652,339 76,326,601 76,044,403 74,925,395 Generated - net station output...
Purchased and net interchange...................
12,431,763 11,417,251 11,027.061 12.179,724 12,588,899 Total generated and purchased.................
91,537,258 86,069,590 87,353,662 88,224,127 87,514,294 Company use, losses and unaccounted for..........
6,347.232
, 5.747,156, 4,996,123 4,496.294 5,571.758 Total electric energy sales.....................
85,190,026 80,322,434 82,357,539 83,727,833 81,9U,526 ELECTRIC ENERGY SALES (MWh)
Residential.................................
29,992,945 27,266,411 28,505,885 28,157,802 27,294,613 Com me reial.................................. 23.911,679 22,959,464 23.012,114 23,429,101 22,539,351 I nd ustrial............,...................... 21,333,748 21,108,894 21,482,750 21,839,196 21,377,542 Government aad mualeipal.....................
5,315,258 5,032.780 5,056,868 4,914,503 4,683,259 Total general business........................
80,553,630 76,367,549 78,057,617 78,340,602 75,894,765 Other electric utilities..........................
4,636,3 %
3,954.885 4,299.922 -
5,387,231 6.047,761 Total electrie energy sales....................
85.190,026 80,322.434 82.357,539 83,727.833 81,942,526 OPERATING REVENUES (thousands)
Residential..................................
$2,236,469
$1,995,767 52,043,421
$1,859,239
$1,752,679 Com mercial.................................
1,489,691 1,405,546 1,391,995 1,266,030 1,228,672 l ad ustrial...................................
859,638 849,365 852,952 801,821 817,802 Government and municipal......................
338,758 304,286 303,597 273.596 251,941 Total general business........................
4,924,556 4,554,964 4,591,965 4,200,686
-4,051,094 Other electric utilitica..........................
227,938 209,170 228,075 232,755 245,821 -
Total from electric energy sales.................
5,152,494 4,764,134 4,820,040 4,433,441 4,296,915 Other operating revenues (including unbilled revenue and over/under. recovered fuel revenue)*.........
256.662 142,561 71,482 107,474 21.650 Total operating revenues................
55,409,156 54,906,695 34.891,522 54,540,915 54.318,565 ELECTRIC CUSTOMERS (end of year)
Reside ntial..................................
1,986.946 1,952.916 1,921319 1,900,005 1.875,524 Com mercial................................
215,621 210,185 205,555 205,359 210,824 Industrial....................................
21,716 21.967 22.156
. 22,214 22,024 Government and municipal......................
28,555 28,204 27,719 24.538, 23.434 Total general business........................
2,252,838 2,213,274 2,176,549 2,132,116 2,131,806 Other electrie utilities..........................
228 243 247 63 64 '
Total electric customers.......................
2.253,066 2,213,517 2,176.796 2.152,179 2,131,870 RESIDENTIAL STATIS*I1CS (excluden master metered customers, kWh sales and revenues)
Average kWh per customer..................,.
14,459 13,329 14,099 14,050 13.754 Averr,ge revenuc per kWh.....................
7.78r 7.41g 7.26g 6.69g 6.50s Industrial classification includes service to Alcoa-Sandow:
Electric energy sales (MWh)...................
3,166,791 3,157,852 3,359,824 3,517,431 3,276.303 Operating revenues (thousands)................
353,352 556,043 555,987 555,274 556,985 In 1992, other operating revenues do not include $122,586,000 of unbilled base rate revenues which were reclassified as a cumulative effect of a change in accounting principle effective January 1,1992.
20 1
i
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.
Liquidity and CapitalResources The primary capital requirements of Texas Utilities Electric Company (Company) in 1993 and as estimated for 1994 through 1996 are as follows:
1993 1994 1995 1996 Thousands of Dollar:
Cash construction expenditures (excluding allowance for funds used during construction)...... $ 598,000
$363.000
$363,000
$363,000 Nuclear fuel (excluding allowance for funds used during construction) and non-stility property.......
83,000 49,000 44,000 54,000 Maturities and redemptions of long-terra debt, sinking fund requirements and redemptions 2,703,000 145.000 110,000 102,000 l
of preferred stock.............................
$3,384,000 5557,000 1517.000
$519,000 Total...................................
For inforn;ation concerning construction work contemplated by the Company and the commitments j
with respect thereto, see Item 2. Properties -Construction Program and Note 12 to Financial Statements.
The Compaay has generated cash from operations sufficient to meet operating needs, pay dividends on capital stock and finance a portion of capital requirements. Factors affecting the ability of the
)
Company to continue to fund a portion of its capital requirements from operations inefe,:e adequate rate relief in the future reflecting regulatory practices allowing recovery of capital investment through adequate depreciation rates, normalization of federal income taxa, recovery of the cost of fuel and purchased power and the opportunity to earn competitive rates of return required in the capital markets
]
I l
In order to re:nain competitive and in response to the recent disappointing rate order in Docket 11735, l
the Company has taken steps to reduce operating costs and capital expenditures and is reviewing various g
alternatives and strategies to improve future earnings potential and its basic financial position. This 3
review may result in further initiatives which may include, but not necessarily be limited to, alternative uses or disposition of existing assets, somewhat greater utilization of short-term and variable rate securities, new marketing and rate initiatives and application for additional rate increases from regulatory authorities. It is not possible at this time to predict the effect any of these possibic initiatives will have on the Company's financial position or its results of operation. For 1995, approximately 62% of the cash needed for construction expenditures was generated from operations by the Company. The Company believes internal cash generation willincrease as a result of the Docket 11735 rate order and through the implementation of the initiatives discussed above.
In August 1993, the Company placed Comanche Peak Unit 2 in commercial operation and implemented, under bond, its 15.3% rate increase requested in Docket 11735. In September 1993, th Company recorded a charge against earnings of approximately $363 million ($265 million after tax) related to an agreement (Settlement Agreement) among the parties involved in the Company's Docket 11735. The Settlement Agreement resolved allissues in the prudence and fuel phases of Docket 11735 and also permits the Company to recover, ratably over an eight year period, $197 million of expenditures incurred in connectio: with the Company's recent cost reduction program. The Settlement Agreement '
1 also resolved the difference between the Company and the Public Utility Commission of Texas (PUC) staff that was the primary issue in another proceeding related to the accrual of an allowance for funds r.
i used during construction (AFUDC), during the bonded rate period of Docket 9300, on construction work
}
in progress (CWIP) that was subsequently included in rate base pursuant to the final order in J
Docket 9300.
21 7-
Iten 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION (Continued).
Liquidity and Capital Resources - (continued)
On January 28,1994, the PUC issued a final order in Docket 11b5 which provided for a total annual revenue increase of approximately $435 million, or 8.7%. The Company strongly disagrees with the final order and has filed a motion for rehearing with the PUC, and will appeal the outcome, if necessary. As a result of this final order, unless the order is changed on rehearing, the Company will refund the -
difference between the bonded rates and the rates approved in the final order, including interest, all of which is being fully reserved by the Company. The total amount to be refunded will be determined once approved rates have been implemented, which is expected to be during the second quarter of 1994. The amount to be refunded at December 31,1993 was approximately $141.2 million. Such refund will be mitigated by a fuel cost surcharge approved by the PUC of approximately $144.5 million, including interest, in under-collected fuel costs through June 30,1993. For additional information regarding the rate decision, see Item 1. Business -Regulation and Rates and Note 11 to Financial Statements.
As a result of the final order and its effects on earnings, the Company could be restricted from issuing additional shares of preferred stock. The Company does not believe this restriction would materially affect its ability to fund its continuing operations or capital requirements. Although the Company cannot predict the outcome ofits appeal of the Docket 9300 rate decision or its expected appeal of the Docket 11735 rate decision, future regulatory actions or any changes in economic and securities market conditions, no changes are expected in trends or commitments, other than those discussed above, which might significantly alter its basic financial position.
On November 14,1993, the emissions chimney for Unit 3 of the Monticello Steam Electric Station collapsed.' The cause of the collapse has not been determined but such unit and the associated lignite mining operation will be inoperative until completion of repairs. The Company is formulating the engineering, procurement and construction plans that will return the unit to service in 1995. The cost of repairs is covered by the Company's insurance which includes a $2,000,000 deductible. Therefore, the Company does not expect the accident to materially effect its results of operation or financial position.
External funds of a permanent or long-term nature are obtained through the sales of common stock to Texas Utilities Company (Texas Utilities), preferred stock and long-term debt. The capitalization ratios of the Company at December 31,1993 consisted of approximately 50% long-term debt,10%
preferred stock and 40% common stock equity.
The Company had financings totaling $3,378,707,370 in 1993. Proceeds from such financings were used primarily for the early redemption of higher coupon debt and higher dividend preferred stock. The Company redeemed or made principal payments of $2,702,847,000 on long-term debt and preferred stock.
Financings in 1993 by the Campany included the following:
1 Long-Term Debt:
Principal Descripties Amount Interest Rate Maturity Pirst mortynge and collateral trust bonds..... 12,050,000,000 5-1/2% to 7-7/8%
1998 to 2025 Taxable pollution control series *............
100,000,000 4.25 %
'2023 Pollution control series...................
298,465,000 5-1/2% to 6.10%.
2022 to 2028 i
Tot al........................... 32,448,465,000
- Tbc taxable pollution control series bonds are in a flexible mode and while in such mode will be remarketed for periods of less than 270 days and are secured by an irrevocable letter of credit. 'Ihe Company has suffielent unused existing lines of credit that would allow refinancing of the bonds on a long-term basis should remarketleg prove unsuccessful.
22 o
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION RESULTS OF OPERATION (Continued).
Liquidity and Capital Resources - (continued)
Net Shares Proceeds
~
Cesamon Stock...................
3,400,000 3t98,900,000 Net Shares Proceeds Dividends
)
Freferred Stock..................
7,500,000*
$731,342,370
$6.375 to 58.20
]
' Four depositary shares have been issued with respect to each of 5,000,000 of such underlying sharts of prefe The replacement of higher coupon debt and higher dividend preferred stock during 1993 reduce interest and dividend requirements by approximately $39,000,000 on an annualized basis. The Company i
redeemed $15,000,000 of 10.45% First Mortgage and Collateral Trust Bonds, Secured Medium-Term Notes on March 16,1994 and intends to redeem $335,000,000 of First Mortgage Bonds with interest rates ranging from 7-3/8% to 9-1/2% on April 1,1994 with each redemption subject to the deposit of tL necessary redemption monies by the Company. Additional early redemptions of long-term debt an preferred stock may occur from time to time in amounts presently undetermined. (See Notes 6 Financial Statements.)
'1hc Company expects to sell additional debt and equity securities as needed (subject to the pos restriction on the issuance of additional shares of preferred stock as discussed above) including the of First Mortgage and Collateral Trust Bonds currently possible future sale of up to $450,000,000 registered with the Securities and Exchange Comtnission for offering pursuant to Rule'415 unde Securities Act of 1933. The Company also has 250,000 shares of Cumulative Freferred Stock ($100 I
liquidation value) similarly registered. It is the intent of the Company and Texas Utilities to nego a new credit facility prior to the scheduled reduction in June 1994 in the joint lines of credit of the
={
Company and Texas Utilities. The new facility would be used for working capital, as back-up for commercial paper and for other corporate purposes. For information regarding short-term financings j
of the Company, see Note 3 to Financial Statements.
4 The Company's capital requirements have not been significantly affected by the require:nents of federalClean Air Act, as amended (Clean Air Act). Although the Companyis unable to fully determine the cost of compliance with the Clean Air Act, it is not expected to have a significant impact on the Company. Any additional capital costs, as well as any increased operating costs associated with the requirements, are expected to be recoverable through rates, as similar costs have been recovered past.
The National Energy Folicy Act of 1992 addresses a wide range of energy issues and is intended to increase competition in electric generation and broaden access to electric transmission systems. The Company is unable to predict the impact of regulations implementing this legislation on its opera until such regulations are promulgated and approved. However, the Company believes that such legislation reflects the trend toward increased competition in the energy industry.
)
While the Company has experienced competitive pressures in the wholesale market resulting in a h.
minor loss of load, wholesale sales constitute a relatively low percentage of total sales.The Company is f
unable to predict the extent of future competitive developments or what impact,if any, such developmen i
may have on operations. (See Item 1. Business-Competition.)
See Item 6. Selected Financial Data - Financial Statistics for additional information.
23
m
_. nl
,.?
i Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION (Continued).
Results of Operation Operating revenues increased 10.2% and 0.3% for the years ended December 31,1993 and 1992, respectively. The following table details the factors contributing to these changes:
Increase (Decrease)
Factors 1993 1992 Thousaade of Dollars Base rate revenue...........................
$333,187
$(57.824)
Puct reven ue...............................
150,707 42,161 Power cost recovery factor revenue............
(1,313)
(89)
Unbilled revenue and other...................
19,880 30,925 Total.................................
5502.461 5 15,173 Base rate revenue increased in 1993 due to higher energy sales and higher rate levels implemented in August 1993 as compared to a decrease in base rate revenues in 1992 as a result of lower energy sales.
Energy sales increased o.1% for 1993 and decreased 2.5% for 1992. The increase in energy sales in 1993 was due primarily to increased customer usage resulting from mo e normal weather conditions and an increase in customers, while the decrease in 1992 resulted from milder than normal weather and unfavorable economic conditions, partially offset by an increase in customers. The rate increase placed in effect in August 1993 increased base rate revenues, net of amounts to be refunded, by approximately
$177 million in 1993. The increase in fuel revenue for 1993 resulted from increased energy sales and increased fuel costs. The increase in fuel revenue in 1992 was primarily due to fuci refunds in 1991, partially offset by decreased energy sales in 1992. The increase in unbilled revenue and other resulted -
from a larger accrual of unbilled revenue in both periods. (See Note 13 to Financial Statemen's.)
Fuel and purchased power expense increased 9.6% and 1.1% for 1993 and 1992, respectively. Fuel and purchased power expense increased for 1993 primarily due to increased energy sales and the increase in the price of gas partially offset by an increased utilization of nuclear fuel. The 1992 increase in fuel and purchased power was primarily the result of an increased price of gas which more than offset the decrease in generation. (See Item 1. Business-Fuel Supply and Purchased Power and Item 6. Sclected Financial Data - Operating Statistics.)
Total operating expenses, excluding fuel and purchased power, increased 15.1% for 1993 and decreased 1.9% for 1992. Operation, maintenance and depreciation expenses increased in 1993 as a result of the commencement of commercial operation of Unit 2 of Comanche Peak in August 1993. Operation expense in 1993 also increased due to higher pension costs and other postretirement benefits costs associated with i
Financial Accounting Standards Board (FASB) Statem ent 106' Employers' Accounting for Postretirement Benefits Other Than Pensions", partially offset by lower employee labor costs. Maintenance expense was also affected by inventory adjustments during the third and fourth quarters of 1993. Operation and maintenance expenses decreased in 1992 primarily due to decreased employee rehted costs and management's efforts to further reduce other costs through a cost reduction program Depreciation expense decreased in 1992 as a result of recording the disallowances associated with Comanche Peak Unit 1 in the Company's Docket 9300 rate order. Taxes other than income increased in 1993 due primarily to increased local gross receipts tr.xes resulting from higher tax rates on increased revenues and an increase in ad valorem taxes. The increase in 1993 was partially offset by a refund of prior years i
franchise taxes of approximately $23,875,000.
j 24 i
J i
1 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION (Continued).
Results of Operntlen -(continued)
AFUDC decreased 13.5% and 16.4% in 1993 and 1992, respectively. The decrease in 1993 was primarily due to the discontinuation of the accrual of AFUDC on Unit 2 of Comanche Peak when such unit achieved commercial operation in August 1993. This decrease was partially offset by the change to a gross rate in 1993 related to the adoption of FASB Statement 109, " Accounting for Income Taxes", for projects commenced before March 1986 (see Notes 1 and 8 to Financial Statements). The decrease 1992 was caused by the implementation of the Docket 9300 rate order placing $695 million of CWIP in rate base and the exclusion of $485 million of CWIP disallowed on Unit 2 of Comanche Peak. (
Note 11 to Financial Statements.)
The regulatory disallowances reflect charges resulting from the Settlemnt Agreement amor.g the parties in Docket 11735. (See Note 11 to Financial Statements.)
Other income and deductions - net increased for 1993 and decreased for 1992, primarily due to changes in interest income for each year related to changes in the levels of temporary cash investments between years and an increase in interest income on under recovered fuel revenue in 1993.
Federal income taxes - other income decreased in 1993 due to the effect of recording the taxes associated with the regulatory disallowances and increased in 1992 because 1991 was affected by the recording of taxes associated with the provision for regulatory disallowances. (See Notes 8 and 11 to Financial Statements.)
Totalinterest charges, excluding AFUDC, decreased 0.4% and 6.0% for 1993 and 1992, respectively.
Interest on mortgage bonds increased in 1993 as a result of new issues sold and the annualization of laterest on bond issues sold in the prior period, partially offset by reduced interest requirements as a result of the Company's refinancing efforts. The decrease in 1992 resulted from retirements and 7demptions of certain higher rate issues. Interest on other long-term debt decreased in both periods d (t,ie continuing retirement of debt incurred on the purchases of the minurity ownership interests in u
manche Peak and refunding of higher interest rate debt. Other interest expense decreased in all periods due primarily to decreased interest on shott-term borrowings and decreased interest on over-recovered fuel revenues partially offset by increased amortization of debt issuance expenses and redemption premiums.
The cumulative effect of recording unbilled revenue reflects the accounting change made on January 1, 1992, by the Company to begin recording base rate revenue for energy sales sold but not billed.
The.najor factors affecting earnings in 1993 were the implementation of the rate increase, the recording of the regulatory disallowances, the discontinuation of AFUDC on Unit 2 of Comanche Peak and the commencement of depreciation on approximately $668 million of investment in Comanche Peak Unit 2 incurred after the end of the Docket 11735 test year which was not included in rates. The factors mentioned above resulted in a decrease in net income of 42.0% for 1993. The change in accounting for unbilled revenue in 1992 and the recording of the provision for regulatory disallowances in 1991 (see Note 11 to Financial Statements) resulted in an increase to net income in 1992 over 1991 y
).)
in 1991 was due to the recognition of the provision for regulatory disallowances and the provision for J
Another major factor affecting earnings in 1992 and 1991 was the refunds and related interest.
A discontinuation of the accrual of AFUDC on approximately $1.3 billion of investment in Comanche Peak 4
Unit 1, incurred after the end of the test year,which was not reflected in rates until Docket 11735 bonded
'd rates were implemented.
~
25 c'I
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION (Concluded).
Results of Operation -(concluded)
Preferred stock dividends decreased 2.7% and 2.6% for 1993 and 1992, respectively, primarily due to the rederuption of series with higher dividend rates partially offset by dividends on new issues.
Accounting Changes Ir November 1993, Statement of Financial Accounting Standards No.112," Employers' Accounting for Postemployment Benefits * (Statement 112) was issued. Statement 112 is effective for fiscal years Statement 112 applies to certain types of postemployment benefits beginning after December 15,1993.
provided to former or inactive employees after employment but before retirement. The Company does not expect Statement 112 to have a material effect on the Company's financial position or results of operation.
26
- r. M,
Itesa 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
TEXAS UTILITIES ELECTRIC COMPANY STATEMENTS OF INCOME Year Ended Decessber 31.
1993 1992 1991 Thousands of Dollars -
OPERATING REVENUES.................................
$5.409.156
$4,906,695
$4.891.522 OPERNI1NO EXPENSES Fuel and purchased power...............................
1,946,049 1,775,885 1.756,423 756,596 684,095 729,615 Ope ra tion............................................
M ainte na nce.........................................
341.840 297,079 304,683-Depreciation and amortizatloa...........................
427.992 409,006 425,216 Federal lacome taxes....................................
343,485 197,694 152, % 3 Taxes other than income.................................
445,220 423,505 437,347 Total operating expenses.............................
4,261.182 3,787,264 3.806,247 1,147.974 1,119,431 1,085.275 OPERATING INCOME...................
OTHERINCOME (LOSS)
Allowance for equity funds used during construction...........
150,115 194,442 251,744 (1,381,145)
Regulatony disallowances (Note 11)........................
(359,556)
Other income and deductions -net......................
9,114 7,882 12,462 Federal income taxes (Notes 8 and 11)......................
101,745 (2,479) 362,852 Total other income (loss).............................
(98,582) 199,865 (754,087) l_
TOTAL INCOME.....................................,..
1,049,392 1.319,296 331.188 INFEREST OIAROES Interest on mortgage bonds..............................
610,999 598,235 608,729 45,787 54,379 61,822 Interest on other long-term debt Other la terest.........................................
29,186 36,202 62.111 Allowance for borrowed funds used during construction (113.106)
(109.736)
(112,301)
Total laterest charges...............................
572.866 579,080 620,361 Income (loss) before cumulative effect of a change in account.ng principle..................................
476,526 740,216 (289,173)
Cumulative effect of a change in accounting for unbilled
- 80,907 revenue (Net of taxes of $41,679,000)(Note 13)...............
NET INCO MB (LO SS)..............................,....
476,526 821.123 (289,173)
PREFERRED STOCK DIVIDENDS.........................
115,232 118,418, 121,603 NETINCOME(LOSS) AFIERPREFERRED STOCKDIVIDENDS
$ 361,294 3 702.705
$ (410,776)
See accompanying Notes to Financial Statements.
27
TEXAS UTILITIES ELECTRIC COMPANY STATEMENTS OF CASil FLOWS Year Emded December 31, 1993 1992 1991 Thoussads of Dollars CASilFLOWS PROM OPERATING ACITVmES:
S 476.526
$ 821,123 3 (289,173)
Ne t locome (loss)......................................
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Dept selation and amortization...........................
512,195 444,243 450,525 118,368 177,097 (247,264)
Deferred federal income taxes -net.........
Federal investment tax credits -net.......................
(19,698)
(20,322)
(53.498)
Allowance for equity funds used during construction..........
(150.115)
(194,462)
(251,744) 1,381,145 Regulatory disallowances (Note 11)......................
359.556 Provision for refunds and related laterest -net..............
(27,235)
(18,475) 44.893 Cumuistive effect of a change in accounting for (80,907) unbilled revenue - net (Note 13)........................
Changes in assets andilabilities:
Rece ivables net....................................
(88,104) 101,299 (29,854)
Inve n to rie s.........................................
10.557 (17,791)
(19,224)
Accounts payable - net................................
(5,763) 36,613 (17,095)
Interest and taxes accred..............................
16,471 1,514 84,021 Other working capital.................................
151,153
$4,372 42.999 Under. recovered fuel revenue -net of deferred taxes........
(83,501)
(27,&54)
(28,729)
(90,905)
Voluntary retirement / severance program..................
10.025 (2,089) 21,105 O th e r - ne t.........................................
Cash provided by operating activities...................
1.280,435 1,183,456 1,088.107 CASil FLOWS FROM FINANCING ACITVITIES:
Sales of securities:
First mortga ge bonds..................................
2,448,465 1,808,595 737,298 215,000 Comme rcla1 paper......................................
Preferred stock.......................................
731,342 l
Common stock........................................
198,900 401,163 350,463 Retirement of long-term debt and preferred stock..............
(2,702,847)
(1,805,*45)
(237,178) 36.684 51,750 (134.000)
I Change in notes payable to parent Change in notes payable to banks...........................
(250.000) j Preferred stock dividends paid.............................
(114.933)
(120,362)
(121,610)
Common stock dividends paid..............................
(707.382)
(645,260)
(650,MO)
Debt premium, discount, financing and reacaulsition crpenns....
(132.356)
G26,846)
(22,298)
Cash provided by (used in) finsnelag activities...........
(492,137)
(436,505) 136,735 CASil FLOWS FROM INVESTING AC11VmES:
Construction expenditures.................................
(841,181)
(1,107,555)
(1.195,680) -
Allowance for equity funds used during construction (excluding amount for nuclear fuel).................................
138,941 179.519 -
232.068 (33,976)
(4,301)
(6,074)
Change la construction receivables /payables -net Cash construction expenditures.........................,
(736,216)
(932,337)
(%9,686)
Non-utility property net.................................
(6) 1,518 (27)
Nuclear fuel (escluding allowance for equity funds used during construction)....................................
(16,R89)
(33,656)
(16,694)
Oth e r investme nts......................................
(12,944)
(8.591)
(11.278)
Cash used la investing activities.......................
(766,055)
(973.066)
(997,685)
NLT CilANOB IN CASil AND CA511 EQU1VALENTS..........
22,243 (226,115) 227,157 y
3 CAS11 AND CAS11 EQUIVALENTS -BEGINNING BALANCB.,
5,686 231,801 4,644 CASil AND CASil EQU1VALENTS -ENDING BALANC11......
$ 27,929 5,686
$ 231,801 W
See accompanying Notes to Financial Statements.
28 3.
O
s 4
TEXAS UTILITIES ELECTRIC COMPANY BALANCE SIIEETS ASSETS December 31 1993 1992 Thessands of Dellars ELECTRIC Pl. ANT In service:
$15,501,384
$10.490,214 Prod uction.....................................................
1.537,447 1,493,602 TransmissLA...................................................
3,773,359 3,567,646 Dist rib ution....................................................
449,095 440.665 Oeneral.......................................................
21.261,285 15,992,127 Total.......................................................
4,118.855 3,741.020 Iess accumulated depreciation.......................................
17,142,430 12,251,107 EIcetric plant in service less accumulated depreciation.................
944,465 5,528,222 Construction work in progress.......................................
Nuclear fuel (net of accumulated amortization: 1993 ~$114,865,000; 320,891 358,087 1992 - $49,606,000)..............................................
39.002 29,639 IIeld for future use................................................
18,446.788 18,167,055 Electric plant less accumulated depreciation and amortization...........
1,308,460 1.308,460 Iess reserve for regulatory disallowances (Note 11).......................
17,138,328 16.858,595 Net electric plant..............................................
48.943 35.993 INVESTM ENTS.....................................................
CURRENT ASSIT5 6,910 5,686 Cash in b a n ks....................................................
21,019 Tempora ry cash investments.......................................
21.388 e,519 Special deposits...................................................
Accounta receivable:
217,924 113.576 Customers.....................................................
17,557 30,289 Other.......................................................
(6,304)
(1,613)
Allowance for uncollectible accounts.................................
Inventories -at average cost:
177,735 187,301 Materials and suppIles............................................
90,544 91,535 Puelstock......................................................
17,776 9,778 j
Prepaid taxes...........................................
43,625 Deferred federal income taxes......................................
16,201 17,693 O the r curre nt asse ts...............................................
624,375 461.755 Total curre nt assets............................................
DEFERRED DEBITS Unamortized regulatory assets:
232,119 214,245 Debt resequisition costs...........................................
20,678 23,189 Cance!!ed IIgnite unit costs........................................
66.508 52,006 Ra te case cos ts..................................................
72,685 72,685 Iltigation and settlement costa.....................................
180.180 204,881 Voluntary retirement / severance program.............................
1,239,360 Recoverable deferred federal income taxes -net (Note 8)................
18,480 O ther re gulatory assets...........................................
2')4,772 75,152 Under. recovered fuel revenue.......................................
47,247 36,996 O ther deferred debita.............................................
2,132,029 679,154 Total defe rre d debits...........................................
72,685 72,685 j
Less reserve for regulatory disallowances (Note 11).......................
2.059,344 606.469 Net deferred debits............................................
L
/I
$19,870,990
$17,962.812 Total..................................................
- p
)
See accompanying Notes to Financial Statements.
29 IY
TEXAS UTILITIES ELECTRIC COMPANY 1
BALANCE SIIEETS CAPITALIZATION AND LIABILITi.3 December 31, 1993 1993 Thousands of Dollars CAPITALI7ATION Common stock without par value:
Authorized shares-180,000,000 Outstanding shares: 1993 - 152,000,000; 1992 - 148,600,000...............
$ 4,916,525
$ 4,717,625 1.112,692 1,480,583 Re tained e arnin gs.................................................
6,029,217 6,198,208 Total com mon stock equity....................................
Preferred stock:
1,083,008 909.564 Not subject to mandatory redemption................................
396,917 418,748 Subject to mandatory redemption.................................
7,607,090 7,280,301 Long-term debt, less amounts due currently.............................
15,116,232 14,806,821 Total capitalization..........................................
CURRENT LIABIlJTIES Notes payabic:
88,434 51,750 Parent.......................................................
250,000 Banks.......................................................
145,188 164,054 Long. term debt due currently........................................
Accounts payable:
112,715 138,586 Affilia tes......................................................
136,540 151.587 Other........................................................
27.681 27,795 Dividends declared...............................................
50,129 52,640 Customers' deposits..............................................
284,507 257,384 Ta xes accrue d...................................................
170,764 181,415 Interest accrued..................................................
141,153 Refunds d ue to cus tomers...........................................
93,448 87.789 Other current liabilities............................................
1,250,559 1.363.000 Total current liabilities.......................................
i a
DEFERRED CREDTr5 AND CYIllER NONCURRENT LIABILITIES 2,577,989 889,576 Accumulated deferred federal income taxes (Note 8)......................
687.907 707,358 Unamortized federal investment tax credits.............................
238,303.
196.057 Other deferred credits and noncurrent liabilities.........................
Total deferred credits and other noncurrent liabilities...............
3,504,199 1,792,991 COMMITMENTS AND CONTINGENCIES (Notes 2 sad 12)
$19,870,990
$17,962,812 Total...................................................
l See accompanying Notes to Financial Statements.
30
.p,
- i
.; L
TEXAS UTILITIES ELECTRIC COMPANY STATEMENTS OF RETAINED EARNINESYear Ended December 31, 1993 1992 1991 Thousands of Dollars BALANCB AT BEGINNING OF YEAR............................
31,480,583 31.424,974
$2,485,690 ADD - NET INCOME (LOSS)...................................
476.526 821.123 (289.173) 1.957.109 2.246.097 2,197.517 i
Total..............................
DEDUCT Cash Dividends:
Preferred stock:
$ 4.50 series ($ 4.50 per share per annum).......................
334 334 334 4.00 series ($ 4.00 per share per annum).......................
280 280 280 609 609 609 436 series ($ 436 per share per annum).......................
440 440 440 4.00 series (3 4.00 per share per annum).......................
4.56 series ($ 4.56 per share per annum).......................
296 296 296 4.24 series ($ 4.24 per share per annum)......................
424 424 4 24 4.64 series ($ 4.64 per share per annum).......................
464 464 464 4.84 series ($ 4.84 per share per annum).......................
339 339 339 4.00 series ($ 4.00 per share per annum).......................
280 280 280 4.76 series (5 4.76 per share per annum)......................
476 476 476 5.08 series ($ 5.08 per share per annum).......................
407 407 407 4.80 series ($ 4.80 per share per annum).......................
480 480
' 480 4.44 series ($ 4.44 per share per annum).......................
666 666 666 7.20 series ($ 7.20 per share per annum).......................
1,440 1,440 1,440 7.80 series ($ 7.80 per share per annum).......................
2,339 2,339 2,339 8.92 series ($ 8.92 per share per annum)......................
1,438 1,784 1,784 6.84 series ($ 6.84 per share per annum).......................
1,368 1,368 1,368 7.24 series ($ 7.24 per share per annum).......................
1,809 1,809 1,809 7.44 series ($ 7.44 per share per annum).....................
2,232 2,232 2,232 7.48 series (3 7.48 per share per annum).......................
2,244 2,244 2,244 8.20 series ($ B.20 per share per annum).......................
2,460 2,460 2,460 8.44 series ($ 8.44 per share per annum)......................
2,532 2.532 2,532 I
932 series ($ 932 per share per annum)......................
1,428 2.796 2,796 936 series ($ 9.35 per share per annum)......................
1,668 2,808 2,808 8.68 series (5 8.68 per share per annum).......................
1,881 2,604 2,604 8.16 series ($ 8.16 per share per annum).......................
2,444 2,444 2,444 832 series (3 832 per share per annum).......................
2.010.
2,496 2,496 i
8.84 series ($ 8.84 per share per annum).......................
1,914 2,652 2,652 i
9.48 series ($ 9.48 per share per annum).......................
5.835 8,944 9,236 3,595 4,460 4,460 8.92 series ($ 8.92 per share per annum)..........
10.00 series ($10.00 per share per annum)......................
2,814 4,900 5,000 10.92 series ($10.92 per share per annum)......................
819 3,276 3,276 10.12 series ($10.12 per share per annum)......................
1,082 3,542 3,54 2 10.08 series ($10.08 per share per annum)......................
1,664 2,999 3,140 1132 series (31132 per share per annum).......................
867 3,396 3,396 9.64 series (3 9.64 per share per annum).......................
9,640 9,640 9,640 10.375 series ($10375 per share per annum)....................
7,781 7,781 7,781 9.875 series ($ 9.875 per share per annunu.....................
2,469 2,469 2,468 8.20 series ($8.20 per share per annum)........................
9,738 7.98 series ($7.98 per share per annum).......................
2,928 7.50 series ($750 per share per annum)........................
6,140 7.22 series ($7.22 per share per annum)........................
2,695 6.98 series ($6.98 per share per annum)........................
3,898 6.375 serica ($6.375 per share per annum)......................
1,753 '
Adjustab!c ra te series A.....................................
6,500 6,500 6,500
.]
Adjustable rate series B....................................
5,950 5,950 6,014 6,180 8,240 Stated rate auction series A..................................
.- 3 Flexible adjustable rate series A...............................
1,975 4,244 4,500
[
Flexible adjustable rate series B...............................
1,975 4,244 4,500
'1 Common stock (per share: 1993-34.68; 1992-34.48; 1991-34.80).......
707,382 645,260 650.940 D
Total cash dividends..................................
822,202 763,288 772,136 la Dividends other than cash - accretians............................
413 390 407 Total d ivide nds......................................
822,615 763,678 772,543 21.802 1,836 Preferred stock redemption costs.......
BALANCE AT END OF YEAR...................................
31,112.692 31.480,583
$1,424,974 See accompanying Notes to Financial Statements.
31 A.
a.-
TEXAS UTILITIES ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS 1.
SIGNIFtCANT ACCOtJNTING POWCIES System ofAccounts -The accounting records of Texas Utilities Electric Company (Company) are maintained in accordance with the Federal Energy R egulatory Commission's Uniform System ofAccounts as adopted by the Public Utili+y Commission of Texas (PUC). Certain financial statement items for 1992 and 1991 have been reclassified to conform to the 1993 presentation.
Electric Plant -Electric plant is stated at original cost. The cost of property additions to electric plant includes labor and materials, applicable overhead and payroll-related costs and an allowance fo funds used during construction.
Allowance For Funds Used During Construction - Allowance for funds used during construction (AFUDC) is a cost accounting procedure whereby amounts based upon interest charges on borrowe funds and a return on equity capital used to finance construction are added to cIcctric plant. The accrual of AFUDC is in accordance with generally accepted accounting principles for the industry, but does not represent current cash income.
The Company is capitalizing AFUDC, compounded semi-annually, on expenditures for ongoing construction work in progress (CWIP) and nuclear fuelin process not otherwise a!! owed in rate base by regulatory authorities. Effective January 1,1993, the Company began using a gross rate of 10.4% for AFUDC for all construction to comply with Statement of Nancial Accounting Standards No.109,
' Accounting for Income Taxes" (Statement 109). In 1992 and 1991, the Company used a net-of tax rate of 8.8% and 10.4%, respectively, on projects commenced before March 1,1986, and a gross rate of 10.4%
l and 12.0%, respectively, on projects commenced thereafter. Rates were determined on the basis of, but '
are less than, the cost of capital used to finance the construction program.
Depreciation ofElectric Plant-Depreciation is generally based upon an amortization of the original cost of depreciable properties (net of regulatory disallowances) on a straight-line basis over the estimat o
servicelives of the properties. Depreciation as a percent of average depreciable property approximated 2.4%,2.7% and 2.9% for 1993,1992 and 1991, respectively. Depreciation also includes an amount for Comanche Peak nuclear generating station (Comanche Peak) decommissioning costs which is being accrued over the lives of the units and deposited to external trust funds. (See Note 12.)
Amortization of Nuclear Fuel and Refueling Outage Costs -The amortization of nuclear fuelin the reactors (net of regulatorydisallowances)is calculated on the units of product on method and, subsequent to commercial operation,is included in nuclear fuel expense. The Company accrues a provision for costs anticipated to be incurred during the next scheduled Comanche Peak refueling outage.
Revenues -Revenues include billings under approved rates (including a fixed fuel factor) applied to meter readings each month on a cycle basis and, beginning January 1,1992, an accrual of base rate revenue for energy provided after cycle billingbut not billed through the end of each month (see Note 13).
?'
Revenues also include an amount for under or over-recovery of fuel revenue representing the difference between actual fuel cost and billings on the approved fixed fuel factor and a provision that generally y.
allows recovery through a Power Cost Recovery Factor, on a monthly basis, of the capacity portion of purchased power cost from qualifying facilities not included in base rates. The fuel portion of purc power cost is included in the fixed fuel factor. A utility's fuel factor can be revised upward or down every six months, according to a specified schedule. Each six months, a utility is required to petitio 32 f
TEXAS UTILITIES ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS -(Continued) 1.
SIGNWICANT ACCotMTING POLICIES-(concluded) make either surcharges or refunds to ratepayers, together with interest bued on a twelve month average of prime commercial rates, for any material cumulative under-or over recovery of fuel costs. If the cumulative difference between the under-or over recovery, plus interest,is in excess of 4% of the annual estimated fuel costs most recently approved by the PUC, it will be deemed to be material. A procedure exists for an expedited change in fuel factors in the event of an emergency. Final reconciliation of fuel costs must be made either in a reconciliation proceeding, which may cover no more than three years and no less than one year, or in a general rate case.
FederalIncome Taxes -The Company is included in the consolidated federalincome tax return of Texas Utilities Campany (Texas Utilities) and its subsidiaries (System Companies) and federal income taxes are allocated to all System Companies based upon their taxable income or loss. Deferred federal income taxes are currently provided for temporary differences between book and the tax basis of assets and liabilities (including the provision for regulatory disallowances). Generally, such differences result primarily from the use of liberalized depreciation and cost recovery deductions allowable under the Internal Revenue Code, the under-or over-recovery of fuel revenue and unbilled revenues accrued for,
tax purposes. Temporary differences in earlier years for which deferred federal income taxes were not at December 31, 1993. Investment tax credits are normally provided approximated $183,000,000 amortized to income over the estimated service lives of the properties. For 1992 and 1991, the Company's l
taxes were provided for under the provisions of Accounting Principles Board Opinion No.11, " Accounting i
for Income Taxes'. (See Note 8 for change in accounting for income taxes.)
1 Cash Flows ~ For purposes of reporting cash flows, temporary cash investments purchased with a j
remaining maturity of three months or less are considered to be cash equivalents.
The supplemental schedule below details cash payments:
Year Ended December 31, 1993 1992 1991 Thousands of Do!!ars CA511 PAYMENTS:
$556,762
$605,845 Interest (act of amounts capita!!ad)............................. $572,208 76,933 37,714 70,325 income ta xes.................................................
2.
AFFILIATES The Company is the principal subsidiary of Texas Utilities which provides common stock capital an partial requirements for short-term financing to the Company. Texas Utilities has three other s which perform specialized services for the System Companies, including the Company: Texas Uti Services Inc. provides financial, accounting, computer, telecommunications, procurement, personnel, 7
shareholder services and other administrative services at cost for which billings in 1993,1992 and 1991 i
were approximately $162,735,000, $118,407,000 and $133,615,000, respectively; Texas Utilities P
]j Company (Fuel Company) owns a natural gas pipeline system, acquires, stores and delivers fuel g provides other fuel services at cost for the generation of electrie energy by the Company, for whic j
in 1993,1992 and 1991 were approximately $901,761,000, $844,671,000 and $860,462,000, respect 33 m!
TEXAS UTILITIES ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS -(Continued) 2.
AFT 11.lATES =(concluded)
Texas Utilities Mining Cc mpany (Mining Company) owns, leases and operates fuel production facilities for the surface mining and recrxery of lignite at cost for use at the Company's generating stations, for which billings in 1993,1992 an i 1991 were approximately $374,464,000, $382,379,000 and $368,470,000, respectively. Payments for intet est on short term financings from Texas Utilities for 1993,1992 and 1991 wes e approximately $1,122,000, $4,310,000 and $3,512,000, respectively.
The Company has entered into agreemet.ts with Puel Company to procure certain fuels and related services and with Mining Company for the procurement and production oflignite. Payments are at cost for the services received and are required by the agreements to be "at least equivalent in the aggregate to the annual charge to income on the books' of Fuel Company and of Mining Company. The Company is,in effect, obligated for the principal, $442,680,000 at December 31,1993, and interest on long-term notes of Fuel Company and of Mining Company through payments described above. Such notes mature at various dates through 2005 and have interest rates ranging from 6.50% to 9.42%
3.
SrtonT. TERM FINANCING At December 31, 1993, the Company and Texas Utilities had joint lines of credit aggregating
$700,000,000 under a credit facility agreement with a group of commercial banks. The facility, for which Texas Utilities pays a fee, is scheduled by such agreement to be reduced by $350,000,000 in June 1994 and June 1995. It is the intent of the Company and Texas Utilities to negotiate a new credit facility prior to the scheduled reduction in June 1994, The new facility would be used for working capital, as backup for commercial paper and for other corporate purposes. From time to time Texas Utilities makes short-term loans to the Company.
4.
COMMON STOCK The Companyissued shares ofits authorized but unissued common stock to Texas Utilities as follows:
Net Year Shares Proceeds 1993 3,400,000
$198,900,000 1992 7,475,000 40t,162,500 1991 7,075,000 350,463,000 No shares of the Company's common stock are held by or for account of the Company, nor are any shares of such capital stock reserved for officers and employees or for options, warrants, conversions and other rights in connection therewith.
- 5. RETAINED EARNINGS RESTRICTIONS The Company's articles of incorporation, its mortgages, as supplemented, and its debenture agreements contain provisions which, under certain conditions, restrict distributions on or acquisitions of its common stock. At December 31,1993, $167,258,000 of retained earnings were thus restricted as
- Il a result of the provisions of such articles of incorporation.
34 M
4
TEXAS UTILITIES ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS -(Continued)
- 5. RETAINED EARNINGS RESTRICTIONS-(concluded)
The articles ofincorporation restriction providesin effect that the Company shall not pay any common dividend which would reduce retained earnings to less than one and one-half times annual preferred dividend requirements. The mortgage restrictions are based primarily on the replacement fund requirements of the mortgages. The restriction contained in the debenture agreements is designed to maintain the aggregate preferred and common stock equity at or above 33-1/3% of total capitalization.
- 6. PREFERRED STOCK (cumulative, without par value, entitled upon Ilquidation to $100 a share; authorized 17,000,000 shares)
Redemaption Price Per Share (Before Adding Accannisted Dtvideadd Shares Outstanding Amonet Dividends December 31, December 31 Carrent
. Eventsal Mlaimum From To 1993 1992 1993 1992 From To Frean To Not Subject to Mandatory Redemption
$4.00 3 5.08............. 1,222,942 1,222,942
$ 122,592 $122.592 $101.79 $112.00 $101.79 3112JO 6.84 7.98............. 5.799,675 1,549,675 568,175 155,266 102.40 103.42 100.00 103.42 8.16 8.92............. 2,149,475 1,999,475 210,528 198,642 102.04 103.29 100.00 103.29 153,205 1.550,000 9.32 11.32............
Adjustable rate (a)........... 1,850,000 1,850,000 181,713 181,713 103.00 1(0.00 100.00 100.00 98,146 1,000,000 Flexible adjustable rate.......
Total '................... 11,022,092 9,172,092 31,083,008
$909,564 Subject so Mandatory Redemptica (b)(c)
S-5100.00 $100.00
$ 197,755 5
$6.375 5 6.98.............
2,000,000 142,802 1,433,300 8.92 9.48.............
9.64 10.375............
2.000,000 2,774,000 199.162 275.946 100.00 100.00 100.00 100.00 Total................... 4,000,000 4,207,300
$ 396,917
_5418,748 (a) Adjustable rate series A bears a dMoend rate for the period ended January 31,1994,of 6.50% per annum and adjustable rate series B bears a dMdend rate for the period ended December 31,1993, of 7.00% per annum, both of which are based on a fixed Ilquidation price of $100 per share.
(b)The Company is required to redeem at a price of $100 per share plus accumulated dividends a speelfied minimum number of shares annually or semi-annua!!y on the (altlal/next dates shown below. These redeemable shares may be called, purchased or otherwise acquired. Certain issues may not be redeemed at the option of the Company prior to 1995. The Company may annually call for redemption, at its option, an aggregate of up to twice the number of shares shown below for each series at a pries of $100 per share plus accumulated dMdends, except for the $9.64 series which may be redeemed in l
a minimum amount of 10,000 shares at any time at a priev c 1100 per share plus accumulated dividends plus a component -
st a variable price per share which is designed to maintain the crpected yield at issusace:
Mlaimum Redeemable Initial /Next Date of
.i Series Shares Mandatory Redemptica
. 'l 39.64 125,000 semi-annually 5/1/95
- f 10.375 150,000 annually 4/1/95
.K 9.875 50,000 enavally 10/1/96 6.98 50,000 annually 7/1/03 f/
6.375 50.000 annually 10/1/03
/
h
.N 35
.j u
TEXAS UTILITIES ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS -(Continued)
FREFERRED Stock (cutnulative, without par value, entitled upon liquidattom to $100 a share; 6.
authorized 17,000,000 shares) -(concluded)
Preferred stock mandatory redemption requirements for the next five years are $25 million le 1995 and $45 mililoa annually in 1996,1997 and 1998. The carrying value of preferred stock subject to mandatory redemption is being lacreased periodically to equal the redemption amounts at the mandatory redemption dates with a corresponding increase in prefe stock dividends.
(c) Under certain circumstances relating to a change in federal tax law governing the dividends received deduction applicab to eligible corporations, the dividend rate of the 59.64 series may increase to a maximum of $10.74.
The table be10w details changes in preferred stock of the Company:
Shares A mount Dividends From To 1993 1992 1991 1993 1992 1991 Thoust. ads of Dellars Not sublect to mandatory redemotient Issued
$ 412,909
$7.22
$ 7.98................... 4.250,000
~
8.20...................
1,250,000 120,759 Redeemed
$8.32 3 8.92................... (1,100,000)
(108,872)
~
9.32 11.32.................. (1,550,000)
. (153,205)
(98,146)
Flexible Adjustable Rate............ (1,000,000)
(98,164)
(1.000.000)
Stated Rate Auction...............
$ 173,445
$(98,164) $
To t a l.......................... 1,850.000 (1,000,000)
Sublect te mandatory redesottont I
Issued
$ 197,675
$6.375
$ 6.9 8................... 2.000,000 Redeemed (142,802)
(4,095)
$ 8.92
$ 9.48................... (1.4 33,300)
(40,950) 10.00 10.0 8................... (774,000)
(34,000) (14,000)
(77.004)
(3,400)
(1,400)
To t a l.......................... (207.300)
(74,950) (14,000)
$ (22.131)
$(7.495) $(1,400) t n*.
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- )
h 36 a
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t.
TEXAS UTILITIES ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS -(Continued) 7.
LONG.TEllM DEBT,less announts due currently Maturity Interest Rate Deconsber 31 Frous Te From To 1993 1992 Thousands of Dellers First mortgage bonds:
1995 1997 4-1/2%
7-1/8%..................................... $ 474,000 $ 474,000 1998 2002 5-1/2 103/8.....................................
1.282,000 1,207,000 2003 2007 6-1/4 9-1/2.....................................
875,000 800,000 2008 2012 9-3/8 10.44......................................
150,000.
325,000 2015 2017 9-1/4 9-3/8......................................
450,000 2018 2022 8-7/8 11-3/8..................................... 1,075,000 1,225,000 2023 2025 73/8 8-3/4................
1,450,000 375,000 Pollution control series:
2007 2028 5-1/2 9-7/8...................................... 1,435,060 1,136,595 Taxabic pollution control series: (a) 2021 2023 Various..............................................
278,340 228,340 Sinking fund debentures:
7-3/4...................................,..
1994 11,950 Secured medium-term notes, series A through C:
1994 2003 8.72 1050......................................
320,000 600,000 Total....................................................................
7,339,400 6,832.885 Pollution control revenue bonds:
2004 2009 5.70 75/8......................................
157,150 Pacmissory note and debt assumed for purchase of electric plant: (b) 1993 2021 8.25 9.73.......................................
344,161 348,899 Unamortized premiu m a nd discount................................................
(76,471)
(58,633)
Total long-term debt, less amounts due currently................................. 37,607,090 $7.280,301 (a) Taxable pollution control series consist of four series: $18,000,000 at 3.35% and $10,340,000 at 3.40% of flexible rate Series 1991A at December 31,1993; $50,000,000 of Series 1991C at 8.49% through June 1,1994; $100,000,000 of Series 1991D at 8.85% through June 1,1995; and $100,000,000 at 3.425% of flexible rate Series 1993 at December 31,1993. Series 1991A and Series 1993 bonds are in a flexible modo and while in such mode will to remarketed for periods of less than 270 days, and are secured by an inevocable letter of credit with maturities le excess of one year. The interest rates on Series 1991C and Series 1991D bonds will be repriced on the mandatory tender dates of June 1,1994 and 1995, rerpectively, The Company has existing lines of credit that would allow refinancing of bonds not supported by the letter of credit on a long-term basis should remarketing prove unsuccessful.
(b) In 1988, the Companypurchased the ownership interest in Comanche Peak of Brazos Piectric Power Cooperative and issued j
a promissory note payable over 33 years. The note is secured by a mortgage on the acquired laterest. In 1990, the Company
-l purchased the ownership interest ic Comanche Peak of Tex-La Electric Cooperative of Texas,Inc. (Tex-La) and assumed
~ !
debt of Tex-La payable over approximately 32 years. De assumption is secured by a mortgage on the acquired interest.
Tcras Utilities has guaranteed these various payments.
1 i
37
TEXAS UTILITIES ELEC11 TIC COMPANY NOTES TO FINANCIAL STATEMENTS -(Continued) 7.
LONG TERM DEBT,less amounts due currently-(concluded)
Sinking fund and maturity requirements for the years 1994 through 1998 under long term debt instruments in effect at December 31,1993, were as follows:
Mimlanums Cash Sinking Requiremsent(b)
Fund Maturity (a)
Year Thousands of Dollars 1994............................................... $ 15,833
$140,450
$145,188 15,883 80,000 85,198 1995...............................................
15,695 96,000
'10! M 1996...............................................
15,295 399,800 40) 1997..............................................
14,342 450,000 456,6 6 1998...............................................
(a) Tbc maturity requirements do not include the mandatory tenders of the Company's taxable pollutlos control series equal to $50,000,000 in 1994 and $100,000,000 in 1995, which are expected to be remarketed.
(b) The minimunt cash requirement does not include the sinking fund requirements that may be satisfied by ecrtifi of property additions at the rate of 167% of such requirements, creept for twelve issues at 100%
From time to time, various principal amounts of first mortgage bonds have been redeemed by the Company prior to maturity. In 1993, the Company refunded $1,575,000,000 of higher coupon debt. The i
debt reacquisition costs have been deferred and are being amortized over the remaining lives of the bonds retired pursuant to current regulatory treatment.
g 1
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Electric plant of the Company is generally subject to the IIens of its mortgages.
8.
FEDERAL INCOME TAXES In January 1993, the Company adopted Statement 109, which among other things, requires the liability method of recognition for all temporary differences, requires that deferred tax liabilities and assets be adjusted for an enacted change in tax laws or rates and prohibits net-of tax accounting and reporting. Certain provisions of Statement 109 provide that regulated enterprises are permitted to recognize such adjustments as regulatory assets or liabilities if it is probable that such amounts will be recovered from or returned to customers in future rates. Accordingly, at December 31,1993, the Company's balance sheet reflects a regulatory asset of approximately $1.2 billion net of an approximate
$0.6 billion regulatory liability. The cumulative effect on net income of adopting Statement 109 is not considered material to the annual results of operation.
In August 1993, Congress passed the Revenue Reconciliation Act of 1993 which increased the top corporato income tax rate from 34% to 35% retroactive to January 1,1993.
J 38 g
TEXAS UTILITIES ELECI'RIC COMPANY NOTES TO FINANCIAL STATEMENTS -(Continued) 8.
FEDERAL INCOME TAXES =(Continued)
The details of federalincome taxes are as follows:
Year Ended Decesaber 31, 1993 1992 1991 Thousands of De11ers Charged (credited) to operating expensea:
$ 127.169
$ 50,616
$ 80,751 Current..........................................................
Deferred -net:
Differences between depreciation methods and lives.....................
208,322 115.246 222,766 33,251 5,189 2,706 Certain capitalized construction costs.................................
43,436 13,371 14,800 Under-recove red fuel revenue.......................................
22.944 35,543 3,364.
Early redeniptions of long-term debt.................................
(247)
(4,891)
(3,858)
Be nefit plans....................................................
(11.990)
(4.568) 277 Unbille d reven ues...............................................
(88.529)
(46.714)
(64,784)
Alte rna tive minim u m ta x...........................................
25,403 9,451 16,243 Investment tax credit carryforward...................................
17,316 (2,093)
(20,336)
Amortization of tax rate differences..................................
Provtalon for refunds and related laterest - net......................
(39,871) 6,282 (15.541)
(1,475) 1,428 (18,883)
Prior yea r adj ust ments.............................................
22,934 (60,554)
(46.595)
{
Net operaung loss carryforward.....................................
1,970 29,400 Voluntary retirement / severance costs.................................
2.530 310 (4,629)
Otrer.........................................................
236.014 167,400 85.530 Total.........................................................
(19.698)
(20,322)
(13,318)
Investment tax credits - net.........................................
343.485 197.694 152.963 Total to operating expenses......................................
8" Charged (credited) to other income:
(30,218)
(21,567)
(4,678)
Current..........................................................
Deferred -net:
(327,178)
Re gulatory disallowa nces...........................................
(102,034) 29,477 22,883 8.787 Amortization of regulatory disallowances..............................
1,030 1.163 397 Other..........................................................
(71,527) 24.046 (317.994)
Total.........................................................
(40.180)
Investment tax credits regulatory disallowances........................
Total to ot he r lacome...........................................
(101,745) 2,479 (362.852)
Charged to cumulative effect of a change in 41,679 accounting for unbilled revenue de ferred.............................
$ 241,740 3241,852
$(209.889)
Total federal income taxes.....................................
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.. +
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i
'IEXAS UTILITIES ELECTRIC COMPANY l
NOTES TO FINANCIAL STA'!EMENTS -(Contimmed) 8.
FEDERAL INCOME TAXES -(continued)-
The significant components of the Company's deferred tax assets and liabilities reflected net is the balance sheet at December 31,1993 are:
Thessands of DeMars DEFERRED TAX ASSETS Current:
. $ ~ 38,684 Unbliled revenues.........................................................
4,M1 Bad debt reserve..........................................................
3. 43,625 :
Total curre n t............................................................
b
~4
~
Non-current:
)
S 365,063 -
Usa mortised 1TC..........................................................
318,025 Regulatory disallowances....................................................
Alternative mielmum tax...............................................'..... -
335.177 -
' 93,238 Tax rete differences.......................................................
91,750 NOL carryforwa rd.........................................................
5,171 '
ITC carryforward..........................................................
10,338 Combustion turbine leases...................................................
' ?
! 49,403 Refunds and intercat........................................................
12.305 Bene fit pla ns............................................................
(1,090).
Property insurance rese rve..................................................
4.286 Other..................................................................
1,283,666 Total non-curre nt........................................................
DEFERRED TAX LIABILITIES
.-i Non-Current:
2.106,433 Capitalised construction costs.......................... ~.......... ;...........
Differences between depreciation methods and lives..............................
1,383,086 96.922 -
Previous flow-through differences.............................................
97,930 Unamortised debt reacquisition costs.......................................... -
- 71,666-Under-recovered fuel revenue................................................
' 25,046 Voluntary retirement /seversace costs..........................................
27,261:
Lignite depletion..........................................................
. Ra te case costs.......................... '..................................-
'24,089 i
.12.2M.
Nuclear fuel basis differences................................................
8.113 '
In tangible pia nt..........................................................
8,815 Cancelled lignite wait costs..................................................
- Total deferred tax liability...............................................
3,861,655 NET TOTAL NON-CURRENT DEFERRED TAX LIABILITY.........................
52,577,989,
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TEXAS UTILITIES ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS - (Continued)
- 8. FEDERAL INCOME TAXES -(concluded)
Federalincome taxes were less than the amount computed by applying the federal statutory rate to pre-tax book income (loss) as follows:
Year Ended Decea.ber 31, 1993 1992 1991 Thousands of Dollars Federal income taxes at statutory rate: 1993 -35%; 1992 and 1991 -34%........
$251,393
$361.411
$(169,681)
Reductions in federalincome taxes resulting from:
Allowance for funds used during co. struction.............................
32,540 98,221 118,603 Deple tion allowa nce.................................................
22,696 22,014 21,104 Amortization of investment tax credits..................................
19,698 20,322 20.401 Amortization of tax rate differences....................................
(17,316) 2,093 20,336 Reversal of prior book / tax differences:
(142,412)
Re gulatory disallowances...........................................
(21,553) 40,180 lovestment tax credit -regulatory disallowances........................
Other...........................................................
(27,454)
(24,159)
(23,278) 334 949 (11,694)
Prior yea r adj us tments...............................................
Other..........................................................
(19,292) 119 (3,032)
Total re ductions...............................................
9,653 119.559 40,208 Total fed eral income taxes...................................
$241.740
$241,852
$p09,889)
Effective tax ra te....................................................
33.7 %
22.8 %
42.1 %
The Company has net operating loss carryforwards of approximately $261 million that are availabic to offset future ordinary taxable income. Approximately $71 million of these loss carryforwards expire in 2006 and the remaining $190 million expire in 2007. In addition, the Company has approximately $12 i
million of general business etedit carryforwards which expire in 2006 and $335 million of minimum tax credit carryforwards which am available to offset future taxes.
As a part of its ongoing large case audit program, the Internal Revenue Service (IRS) is currently-auditing the consolidated Federalincome tax returns of the Company for the years 1987 through 1990.
During the course of the audit, theIRS has proposed a number of adjustments to the returns as filed,the most significant of which relates to a proposed reclassification of certain costs incurred in connection with the construction of Comanche Peak Unit 1 as costs incurred to procure a nuclear operatinglicense. The Company is unable to predict the ultimate resolution of the issues raised in the audit and therefore is unable to predict at this time the amount of any additional tax payment which may be required. While the making of additional tax payments would have an impact on the Company's cash pocition, the Company does not c:pect the outcome of the audit to have a material effect on its results of operation.
9.
RETIREMENT PLAN AND OTIIER POSTRETIREMENT BENEFITS 3
The Company has a retirement plan covering substantially all employees. An employee's benefits are based on years of accredited service and average annual earnings received during the three years of
'l highest earnings. The costs of the plan were determined by independent actuaries. Contributions to the plan were determined using the frozen attained age method which is one of the several actuarial methods allowed by the Employee Retirement Income Security Act of 1974. For financial reporting purposes, 3
pension cost has been determined using the projected unit credit actuarial method. The cumulative 41
TEXAS UTILITIES ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS -(Continued) 9.
RETIREMENT PLAN AND OT11ER POSTRETIREMENT BENEFITS-(continued) difference between pension cost as determined for financial reporting purposes and contributions to the plan is recorded either as prepaid pension cost or as accrued pension liability.
The table below details the plan's funded status and amount recognized in the Company's balance sheets:
Decesaber 31, 1993 1992 Thousands of Dollars Actuarial present value of accumulated benefits:
Accumulated benefit obligation (including vested benefits of 1551,103,000 for 1993 ead 1512,658,000 for 1992)............................... 5(589,201) 3(543,318)
Projected benefit obligation for service rendered to date.......................... $(720,415)
$(641.734)
Plan suets at fair value -primarily equity investments, 736.443 660.776 government bonds and corporate bonds.......................................
Plan assets in excess of projected benefit obligation...............................
16,028 19,042 Unrecognized net gain from past experience different from that assursed and effects of changes in assumptions..............................
(131,592)
(158,456)
Prior service cost nc: yet recognized in net periodic pension expense.................
20,295 21,839 Unrecognized plan assets in excess of projected benefit obligation at initial application...
(4.641)
(3,079)
Accru ed pe nsion cost.......................................................
_$ (99,910)
$(122,654)
Assumptions used in determination of the projected benefit obligation include the following:
1993 1992 D iscount rate................................
7.8 75 %
8.50 %
Increase in compensation levels..................
4.700 %
4.70 %
Total pension costs, including amounts deferred and capitalized, were comprised of the following components:
Year Ended Decennber 31, 1993 1992 1991 Thowsands of Dollars Service cost -benefits earned during the period.................... $ 17,764
$ 23,838
$ 23,860 Interest cost on projected benefit obligation........................
52,695 61,573 58,118 Act ual return on plan assets.................................... (80.495)
-(71,043)
( M126)
Net amortization and de ferral...................................
32.465 (1,285) 136,494 Net periodic pension cost.....................................
22,429 13,083 11.346 116,665 Deferred termination cost......................................
Total pension cost......................................... 5 22.429 5129,748
$ 11,346 a
The assumed long-term rate of return on plan assets was 8.75% for 1993,1992 and 1991.
In addition to the retirement plan, the Company offers certain health care and life insurance benefits to substantially allits employees and their cligible dependents at retirement which normally is age 65 but may be as early as age 55 with 15 years of service. Retirees currently pay a portion of the cost of providing such benefits and are expected to continue to do so in the future. In January 1993, the l
Company adopted Statement of Financial Accounting Standards No.106,* Employers' Accounting for.
42 s
TEXAS UTILITIES ELECTRIC COMPANY -
NOTES TO FINANCIAL STATEMENTS -(Continued) 9.
RETIREMENT PLAN AND OTilER POSTRETIREMENT BENErlTS -(concluded)
Postretirement Benefits Other Than Pensions" (Statement 106), which requires a change in the accounting for a company's obligation to provide health care and certain other benefits to its retirees from the " pay-as.you.go" method to an accrual method and requires the cost of the obligation to be recognized in the period from employment date until full eligibility for benefits.
The Company's net periodic postretirement benefits cost other than pensions for the year ended December 31,1993, including amounts capitalized, were comprised of the following components:
1 Thousands of Dogggg 3 5,642 Service cost -benefits earned during the period.....................
23,677 Interest cost on the accumulated postretirement benefit obligation.........................
15,058 Amortization of the transition obligation.............................................
Act ual return on pla n assets.......................................................
Net a mortization a nd de fe rral......................................................
346.371 Net postrctirement benefits cost.................................................
The table below details the funded status for other postretirement benefits and amount recognized by the Company at December 31,1993:
Thousands of Dollars Accumulated postretirement benefit obilgation (APDO):
Re tire e s..................................................................... $(224.116) l (3,796)
Fully eligible active employees.................................................... (121.687)
Othe r active e mploye es.........................................................
(149,599)
TotalAPDO.................................................................
Pla n asa4ts a t fai r value...........................................................
(349,599)
AP BO in excess of pla n awas.....................................................
40,087 Unrecognized net loss.............................................................
Unrecognized prior service cost.....................................................
286,093 Unrecognized transition obligation..................................................
3 (23,419)
Accrued postretirement benefits cost.................................................
The expected increase in costs of future benefits covered by the plan is projected using a health care cost trend rate of 7.5% in 1994,6.5% in 1995,5.5% in 1996 and 5.0% in 1997 and thereafter. A one percentage point increase in the assumed health care cost trend rate in each future year would increase the APBO at December 31,1993 by approximately $51.7 million and other postretirement benefits cost for 1993 by approximately $6.5 millior The assumed discount rate used to measure the APBO is 7.875%
The Company's cost of providing other postretirement benefits in 1992 and 1991, which was I
recognized on a " pay.as.you.go" basis,was approximately $13,002,000 and $13,781,000, respectively. The Company was granted recovery of its Statement 106 cost in Docket 11735 (see Note 11). Funding of the other postretirement benefits obligation will begin by the third quarter of 1994.
43 q.
u
l TEXAS UTILITIES ELECTRIC COMPANY NOTE 3 TO FINANCIAL STATEMENTS -(Continued)
- 10. SALES OF ACCOUNTS RECEIVABLE 1
In November 1993, the Company terminated its then existing receivables facility to sell receivables j
to certain financialinstitutions and entered into a new facility with other financialinstitutions. Under such new facility, the Company is entitled to sell and such financial institutions may purchase, on an ongoing basis, undivided interests in customer accounts receivable representing up to an aggregate of
$350,000,000. Additional receivables are continually sold to replace those collected. At December 31, 1993 and 1992, accounts receivable was reduced by $300,000,000 to reflect the sales of such receivables to financialinstitutions under such agreements.
- 11. RATE PROCEEDINGS Docket 11735 In January 1993, the Company made applications to the PUC in Docket 11735 and to its municipal regulatory authorities for upward adjustments in rates for electric service throughout its service area, which would have increased annual operating revenues by approximately $760 million, or 15.3%, based upon the test year ended June 30,1992. Such request reflects, among other things, costs associated with Comanche Peak Unit 2, costs associated with Comanche Peak Unit 1 after the end of the Docket 9300 (see below) test par, additional ad valorem taxes and certain postretirement benefit costs. In August 1993, pursuant te rules of the PUC, the Company placed its requested rate increase into effect, under bond and subject to refund with interest, applicable to energy sales on and after such date. Revenues were recorded net of an estimated reserve for possible refunds.
In October 1993, the PUC issued an order (Order) approving the terms of an agreement (Settlement j
Agreement) among the Company, the General Counsel's office of the PUC and applicable intervenors which, among other things, settled all remaining issues relating to the design, construction and cost of Comanche Peak through commencement of commercial operation of Unit 2. The Settlement Agreement provides for the disallowance in Docket 11735 of $250 million of costs relating to the completion of Comanche Peak. Pursuant to the Order, the Company refunded $5 million in fuel charges previously incurred in order to resolve the fuel phase of Docket 11735 under which the Company was seeking reconciliation of approximately $4.6 billion of fuel costs incurred during the three year period ended June 30,1992, under the fuel rule in effect prior to May 1993. Further, in order to resolve the primary issue in another proceeding which resulted from a complaint filed against the Company in October 1992 by the General Counsel's office of the PUC, as a result of the Order, the Company agreed to write off $83 million of AFUDC, which consists of the amount subject to dispute in such proceeding and similar charges subsequently accrued. Also, under the Settlement Agreement and confirmedin the Docket 11735 final order (see below), the Company will recover, ratably over an eight year period, $197 million of operation and maintenance expenditures incurred by the Company in connection with its recent cost
.f reduction program. However, an additional $25 million of such expenditures will not be subject to
{
recovery and was written off by the Company. As a result of the Settlement Agreement, the Company recorded a charge against earnings in September 1993 of approximately $363 million ($265 million after 3
tax).
s1
. h, 44 ll '
3
TEXAS UTILITIES ELECI'RIC COMPANY NOTES TO FINANCIAL STATEMENTS -(Continued)
- 11. RATE PROCEEDINGS-(continued)
On January 28,1994, the PUC issued a final order in Docket 11735 which provided for a total annual revenue increase of approximately $435 million, or 8.7% The Company strongly disagrees with the final order and has filed a motion for rehearing with the PUC, and will appeal the outcome,if necessary. ' As a result of this order, unless the order is changed on rehearing. the Company will refund the difference between the bonded rates and the rates approved in the final order, including interest, all of which is being fully reserved by the Company. The total amount to be refunded willbe determined once approved rates have been implemented, which is expected to be during the second quarter of 1994. The amount to be refunded at December 31,1993 was approximately $141.2 million. Such refund will be mitigated by a fuel cost surcharge approved by the PUC of approximately $144.5 million, including interest, in under-collected fuel costs through June 30,1993.
The following details the effect on 1993 net income of the Settlement Agreement and the Docket.
11735 final order charges:
Thousands of Dollars OPERATING REVENtJES........................................... $ (5,000)
OPERATING EXPENSES Federal income taxes -current.......................................
1,000 Federal income taxes deferred......................................
750 OPERATINO 1NCOM E..............................................
(3.250)
OTIIERINCOME (LOSS)
Regulatory disallowances........................................... (359,556)
Federal income taxes -current.......................................
2,25E Pederat income taxes - de ferred......................................
94.406 Total other income (loss).......................................... (262.s92)
EFFECT ON NET INCOME.......................................... $(266.142)
In November 1993, an intermediate appellate court in Texas, consMering an appeal of another utility's rate case, ruled that utilizing tax benefits generated by costs not allowed in rates to reduce rates charged to customers was required by prior court rulings for all disallowed costs, including capital costs. The Company believes that such rulings are erroneous and not consistent with the Texas Public Utility Regulatory Act. According to a Private Letter Ruling issued to the Company by the Internal Revenue Service (IRS) with respect to investment tax credits, such ratemaking treatment, to the extent related to property classified for tax purposes as public utility property, would result in a violation of the
. normalization rules contained in the Internal Revenue Code of 1986, as amended (Code). Violation of.
the normalization rules would result in a significant adverse effect on the Company's results of operation and liquidity. The tax benefits associated with the Comanche Peak costs disallowed in Docket 9300 (see below) could be affected as a result of the court's method. In addition,in its final order in Docket 11735,
,5 the PUC reduced rates for the tar benefits Fenerated by certain costs which were not allowed in rates.
f.
IIowever, the PUC recognized the potential for a normalization violation ifinvestment tax credits and tax 9
depreciation generated by disallowed plant costs are used to reduce rates. Therefore, the PUC ordered l
the Company to obtain a Private Letter Ruling from the IRS with respect to tax depreciation on
}.
disallowed plant. Thus, the Company's rates would not reflect the tax depreciation benefit of disallowed plant unless the IRS rules such benefits can be utilized to reduce rates without violating the normalization
-g rules contained in the Code. Such a finding by the IRS would require the Company to refund the tax -
45 a-jl
~
1 o
I TEXAS UTILITIES ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS -(Continued)
- 11. RATE PROCEEDINGS -(concluded) depreciation benefits to its customers. The Company does not believe it is likely that such refund will '
occur if the IRS maintains a position similar to that stated in its previous Private Lctter Ruling to the Company.
Docket 9300 In September 1991, the PUC issued a final order in Docket 9300, which provided for a total revenue increase of approximately $442 million and included $695 million of CWIP in rate base to support the revenue increase. It also included a prudence disallowance of $472 million with respect to certals Comanche Peak costs relating to 87.8% of the Companfs ownership interest in both units of Comanche Peak. With respect to the Compan/s reacquisition of the remaining 12.2% minority owner interests in Comanche Peak, the order included an additional disallowance of $909 million. In September 1991, the Company recorded a charge against earnings, as a provision for regulatory disallowances, of $1.381 billion
($1.011 billion after tax) as a result of the Docket 9300 final order.
In November 1991, the Company filed a petition in the 250th Judicial Dist:let Court of Travis County, Texas, requesting a reversal and remand of the Docket 9300 final order. Other parties to the PUC proceeding also filed appeals with respect to various portions of the order. In September 1992, after a hearing, the Court entered a judgment in the appeals which affirmed the prudence disallowance of $472 million but reversed and remanded to the PUC for reconsideration those portions of the PUC's final order providing for additional disallowances aggregating $884 million with respect to the Companfs reacquisition of minority owner interests in Comanche Peak. The Court recognized that on remand the PUC may adjust the amount of CWIP included in the Compan/s rate base to be consistent with the i
PUC's redeterminations regarding the minority owner reacquisitions and the amount of cash working capital. Therefore, the Company does not expect this judgment to affect the rates approved in the Docket 9300 final order. Other parties to this suit have appealed thisjudgment. The Company disagrees with certain portions of the judgment and also has appealed. The Company is unable to predict the outcome of such appeals and any reconsideration by the PUC.
- 12. COMMITMENTS AND CONTINGENCIES Construction Program The Company has taken steps to substantially reduce construction expenditures from amounts j
previously estimated. Construction expenditures, excluding AFUDC, are presently estimated at $363 million for each of the years 1994,1995 and 1996. Estimated construction expenditures for 1994 through 1996 do not include $210 million in 1996 to resume active construction of two lignite-fueled units at Twin i
Oak which would be necessary to meet the current scheduled in service dates of the units. The reevaluation of growth expectations, the effects of inflation, additional regulatory requirements, and the R
availability of fuel, labor, materials and capital may result in changes in estimated construction costs and
' %y i
dates of completion, Commitments in connection with the construction program are generally revocable _
f subject to reimbursement to manufacturers for expenditures incurred or other cancellation penalties.
~ L 3
- 6 46 l
lR n-x
I TEXAS UTILITIES ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS -(Continued)
- 12. COMMITMENTS AND CONTINGENCIES -(continued)
Clean Air Act The federal Clean Air Act, as amended (Clean Air Act) includes provisions which, among other things, place limits on the sulfur dioxide emissions produced by generating units. To meet these sulfur dioxide requirements, the Clean Air Act provides for the annual allocation of sulfur dioxide emission allowances to utilities. Under the Clean Air Act, utilities are permitted to transfer allowances within their own systems and to buy or sell allowances. The EPA grants a maximum number of allowances annually to the Company based on the amount of emissions from units in operation during the period 1985 through 1987. The Clean Air Act also provides that the Company be granted additional annual allowances for certain of the Company's units under construction based on part of their anticipated emissions. The Company's repital requirements have not been significantly affected by the requirements of the Clean Air Act. Although the Company is unable to fully determine the cost of compliance with the Clean Air Act, it is not expected to have a significant impact on the Company. Any additional capital costs, as well as any increased operating costs associated with these new requirements, are expected to be recoverable through rates, as similar costs have been recovered in the past.
Purchased Power Contracts The Company has entered into purchased power contracts to purchase portions of the generating output of certain qualifying cogenerators and qualifying small power producers through the year 2005.
These contracts provide for capacity payments subject to a facility meeting certain operating standards and energy payments based on the actual power taken under the contracts. The cost of these and other purchased power contracts is recovered currently through base rates, power cost and fuel recovery factors applied to customer billings. Capacity payments under these contracts for the years ended December 31, 1993,1992 and 1991 were $249,110,000, $240,341,000 and $229,953,000, respectively.
Assuming operating standards are achieved, future capacity payments under the agreements are estimated as follows:
Years Thousands of Dollars 1994..........................
$ 231,081 1995.........................
223,910 1996..........................
228.337 1997.........................
237,014 1998..........................
244,795 The re a f ter....................
654,641 Total........................
31.819.778 Leases The Company has entered into operating leases covering various facilities and properties including combustion turbines, transportation, mining and data processing equipment, and office space. Lease costs charged to operation expense for the years ended December 31,1993,1992 and 1991 were $68,311,000,
]
$66,219,000 and $60,085,000, respectively.
47 l
TEXAS UTILITIES ELEC1'RIC COMPANY NOTES TO FINANCIAL STATEMENTS -(Continued)
- 12. COMMITMENTS AND CONTINGENCIES -(continued)
The Company's future minimum lease commitments under such operating leases that have initial or remaining noncancellable lease terms in excess of cae year as of December 31,1993, were as follows:
Thousands of Dollars Years t994............................................
$ 34.96t t995............................................
33.079 1996............................................
31,387 t997...........................................
29,884 29,313 1998...........................................
The rea ft e r.......................................
$95,608 Total minimum icase commitments'.................
5754,232
- Minimum lease commitments have not been reduced by $46,000 due to the Company under noneanceliable subleases.
Cooling Water Contracts The Company has entered into contracts with public agencies to purchase cooling water for use in the generation of electric energy. In connection with certain contracts, the Company has agreed,in effect, to guarantee the principal, $38,590,000 at December 31,1993, and interest on bonds issued to finance the reservoirs from which the water is supplied. The bonds mature at various dates through 2011 and have interest rates ranging from 5-1/2 to 7% The Company is required to make periodic payments equal to such principal and interest for the years 1994 through 1998 which includes amounts assumed by a third i
party as follows: $4,423,000 for 1994; $4,431,000 for 1995; $4,430,000 for 1996; $4,435,000 for 1997 and
$4,435,000 for 1998. Payments made by the Company, net of amounts assumed by a third party under such contracts, for 1993,1992 and 1991 were $2,954,000, $2,849,000 and $2,5%,000, respectively. In addition, the Company is obligated to pay certain variable costs of operating and maintaining the reservoirs. The Company has assigned to a municipality all contract rights and obligations of the Company in connection with $86,450,000 remaining principal amount of bonds at December 31,1993, issued for similar purposes which had previously been guaranteed by the Company. The Company is, however, contingently liable in the unlikely event of default by the municipality.
NuclearInsurance With regard to liability coverage, the Price-Anderson Act (Act) provides financial protection for the public in the event of a significant nuclear power plant incident. The Act sets the statutorylimit of public liability for a single nuclear incident currently at $9.4 billion and requires nuclear power plant operators j
to provide financial protection for this' amount. As required, the Company provides this financial yj protection for a nuclear incident at Comanche Peak resulting in public bodily injury and property damage through a combination of private insurance and industry-wide retrospective payment plans. As the first
)
T layer of financial protection, the Company has purchased $200 million of liability insurance from American Nuclear Insurers (ANI), which provides such insurance on behalf of two major stock and mutual insurance pools, Nuclear Energy Liability Insurance Association and Mutual Atomic Energy Liability Underwriters. The second layer of financial protectionis provided under an industryretro-48
TEXAS UTILITIES ELECTRIC COMPANY NOTES TO FINANCIAL STA'IEMENTS -(Continued)
- 12. COMMintENTS AND CONTINGENCIES -(continued) spective payment program called Secondary Financial Protection (SFP). Under the SFP, each operating licensed reactor in the United States is subject to an assessment of up to $79.275 million, subject to increases for inflation every five years, in the event of a nuclear incident at any nuclear plant in the United States. Assessments are limited to $10 million per operating licensed reactor per year per incident. All assessments under the SFP are subject to a 3% insurance premium tax which is not included in the amounts above.
With respect to nuclear decontamination and property damage insurance, NRC regulations require that nuclear plant license-holders maintain not less than $1.06 billion of such insurance and require the proceeds thereof to be used to place a plant in a safe and stable condition, to decontaminate it pursuant to a plan submitted to and approved by the NRC before the proceeds can be used for plant repair or restoration or to provide for premature decommissioning. The Company maintains nuclear decontamination and property damage insurance for Comanche Peak in the amount of $2.75 billion, abou which the Company is self. insured. The primary layer of coverage of $500 million is provided by ANL The remaining coverage includes premature decommissioning coverage and is provided by ANI in the amount of $850 million and Nuclear Electric Insurance Limited (NEIL), a nuclear electric utility industry mutualinsurance company,in the amount of $1.4 billion. The Company is subject to a maximum annual assessment from NEIL of $17 million in the event NEIL's losses under this type of insurance for major incidents at nuclear plants participating in this program exceed its accumulated funds and reinsurance.
The Company maintains Extra Expense Insurance through NEIL to cover the additional costs of obtaining replacement power from another source if one or both of the units at Comanche Peak are out of service for more than twenty-one weeks as a result of covered direct physical damage. The coverage provides for weekly payments of up to $3.5 million for the first and $2.345 million for the second and third fifty-two week periods of each outage, respectively, after the initial twenty-one week period. The total maximum coverage is $426 million per unit. The coverage amounts applicable to each unit will be reduced to 80% if both units are out of service at the same time as a result of the same accident. Under this coverage, the Company is subject to a maximum assessment of $10 million per year.
Nuclear Decommissioning and Disposal of Spent Fuel The Company has established a reserve (included in accumulated depreciation) for the decommissioning of Com anche Peak,whereby decommissioning costs are being recovered from cvstom ers over the life of the plant and deposited in external trust funds (included in other investments). At December 31,1993, such reserve totaled $35,978,000 which includes an accrual of $12,612,000 for the year ended December 31,1993. At December 31,1993, $35,720,000 has been deposited in the external trust funds for decommissioning of Unit 1 and Unit 2. Realized earnings on funds deposited in the external trust are recognized in the reserve. Based on a site-specific study during 1992 using the prompt dismantlement method t.nd then-current dollars, decommissioning costs for Comanche Peak Unit 1, and
.l Unit 2 and common facilities were estimated to be $255,000,000 and $344,000,000, respectively.
- i i
Decommissioning activities are projected to begin in 2030 and 2032 for Comanche Peak Unit 1, and Unit 2 and common facilities, respectively. The Company is recovering such costs based upon the 1992 study through the rates placed in effect under Docket 11735 (see Note 11).
49
)
I'
TEXAS UTILITIES ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS -(Continued)
- 12. COMMITMENTS AND CONTINGENCIES -(conc!aded)
Tb Company has a contract with the United States Department of Energy for the future disposal of spent nuclear fuel at a cost of one mill per kilowatt. hour of Comanche Peak net generation. The disposal fee is included in nuclear fuel expense.
Genem!
In addition to the above, the Company is involved in various legal and administrative proceedings which, in the opinion of the Company, should not have a material effect upon its financial position or results of cperation.
- 13. CHANGEIN ACCOUNTING FOR UNBILLED REVENUE Effective January 1,1992, the Company began recording base rate revenue for energy sold but not billed through the end of each month to achieve a better matching of revenues and expenses. Prior to the change in accounting method, revenues were recognized based on customer billings on a cycle basis. The change in accounting increased net income in 1992 by $102,044,000, of which $80,907,000 represents the cumulative effect of the change in accounting principle at January 1,1992. Pro forma effects, assuming ruroactive application of recording unbilled revenues, are presented below:
Year Ended December 31 g
1992 1991 Thessands of Dollars As previously reported:
Net income (loss).............................................. $476,526
$821,123
$(289,173)
Pro forma:
$740,2t6
$(286,457)
Net income (loss)..............................................
- 14. FAIR VALUE OF FINANCIAL INSTRUMENTS In December 1991, the FASB issued Statement of Financial Accousting Standards No.107,
" Disclosures about Fair Value of F*mancial Instruments" (Statement 107) to provide readers of the financial statements another method of valuing financialinstruments on a current basis. The following information represents the Company's estimate of the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced sale.
The amounts reflected in the balance sheet for cash, temporary cash investments and special deposits approximate fair value due to the short maturity of such instruments. The fair values of financial instruments for which estimated fair values have not been specifically presented is not materially different than their related book value.
Other investments includes amounts principally for nuclear decommissioning fund assets and funds invested pursuant to certain incentive and compensation agreements. The fair values of the nuclear decommissioning assets and incentive and compensation assets are estimated based on quoted market prices at year end for the instruments in which such funds are invested.
The fair values of the long-term debt and preferred stock subject to mandatory redemption are estimated at the lesser of the Company's call price or the present value of future cash flows discounted at rates consistent with comparable maturities adjusted for credit risk.
50
TEXAS UTILITIES ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS -(Concluded)
- 14. FAIR VALUE OF FINANCIAL INSTRUMENTS -(concia ded)
The carrying amount of other financial liabilities classified as current on the balance sheet, such as notes payable banks and long-term debt due currently, approximates fair value due to the short maturity of such instruments. Customer deposits have no defined maturities and, therefore, are reflected at the amount payable on demand at the balance sheet date.
The Company has agreed, in effect, to guarantee the principal and interest on bonds used to finance the reservoirs from which the Company uses cooling water for certain generating units. The Company is also the guarantor for the principal amount of certain bonds issued for similar purposes which were assigned to a municipality. The outstanding principal at December 31,1993 and 1992 of the bonds for which the Company is contingently liable is $125,000,000 and $131,000,000, respectively. The fair value' of the bonds, approximately $136,000,000 and $131,000,000 for Dccember 31,1993 and 1992, respeetively, is based on the present value of the instruments' approximate cash flows discounted at the year end risk free rate for issues of comparable maturities adjusted for credit risk.
The Compr.ny is in effect obligated for the long-term notes of Fuel Company and Mining Company which total $442,680,000 and $359,150,000 at December 31,1993 and 1992, respectively. The fair value of such notes, approximately $460,72*,000 and $390,423,000 at December 31,1993 and 1992, respeetively, is calculated as the present value of the instruments' future cash flows discounted at the year end risk free rate for issues of comparable maturities adjusted for credit risk.
The estimated fair value of the Company's significant financialinstruments are as follows:
December 31,1993
, December 31,1992 Carrying Fair Carrytes Fair Amount Value Amonat Value nousands of Dollars Ien g-term d41...............................
$7,607.090
$8,481,960
$7,280,301
$7,976,303
)
Prefened stod subject to mandatory redemption....
396,917 408,347 418,748 445,009 i
Other investments............................
44,564 46,278 31,620 32,623
- 15. SUPPI.EMENTARY FINANCIALINFORMATION (Unaudited)
In the opinion of the Company, the information below includes all adjustments (constituting only normal recurting accruals and the change in accounting, see Note 13) necessary to a fair statem ent of such amounts. Quarterly results are not necessarily indicative of expectations for a full year's operations because of seasonal and other factors, including rate changes, variations in maintenance and other operating expense patterns, the impact of the change in AFUDC accruals (see Note 1) and the charges for regulatory disallowances. For additional information regarding the charges for regulatory disallowances, see item 7. Management's Discussion and Analysis of Financial CondiGon and Results of Operation and Note 11.
Operaties Revenues Operating income '
Net f aceae Quaner Eaded 1993 1992 1993 1992 1993 1992
]
Thonlands of Dollars 1
March 31................... $1,142,184
$1,056,920
$ 234,244
$ 218,249
$162,992
$196,907 s
Ju a e 30....................
1,255,657 1,195,775 264,607 281,85' 197,063 187,757 I'.l Septe mbe r 30...............
1,773,420 1,478,148 453.509 410,248 84,929 325,488 j!
December 31...............
1,237,895 1,175,852 195,614 209.081 31.542 110,971 b
$5,409,156
$4,906,695 51,147.974
~$1,119.431
$476,526
$821,123 51
i i
i INDEPENDENT AUDITORS' REPORT Texas Utilities Electric Company:
We have audited the accompanying balance sheets of Texas Utilities Electric Company as of December 31,1993 and 1992, and the related statements ofincome, retained earnings and cash flows for each of the three years in the period ended December 31,1993. Our audits also included the financial statement schedules listed in Item 14.(a)2. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of the Company at December 31,1993 and 1992, and the results of its operations and its cash flows for each of the three years in the period ended December 31,1993, in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
As discussed in Notes 8 and 9 to the financial statements, in 1993, the Company changed its methods of accounting for income taxes and postretirement benefits other than pensions to conform with Statements of Financial Accounting Standards No.109 and No.106, respectively. Also discussed in Note 13 to the financial statements,in 1992, the Company changed its method of accounting for base rate revenue sold but not billed.
DELOITTE & TOUCHE Dallas, Texas March 11,1994 52 H--)
TEXAS UTILITIES ELECTRIC COMPANY STATEMENT OF RESPONSIBILITY
'Ihe management of Texas Utilities Electric Company is responsible for the preparation, integrity and objectivity of the financial statements of the Company and other information included in this report.
The financial statements have been prepared in conformity with generally accepted accounting principles.
As appropriate, the statements include amounts based on informed estimates and judgments of management.
The managemtnt of the Company has established and maintains a system of internal control designed to provide reasonable assurance, on a cost-effective basis, that assets are safeguarded, j
transactions are executed in accordance with management's authorization and financial records are i
reliable for preparing financial statements. Management believes that the system of control provides reasonable assurance that errors or irregularities that could be material to the financial statements are prevented or would be detected within a timely period. Key elements in this system include the effective communication of established written policies and procedures, selection and training of qualified personnel and organizational arrangements that provide an appropriate division of responsibility. This system of control is augmented by an ongoing internal audit program designed to evaluate its adequacy and effectiveness. Management considers the recommendations of the internal auditors and independent certified public accountants concerning the Company's system of internal control and takes appropriate actions which are cost-effective in the circumstances. Management believes that, as of December 31,1993, the Company's system of internal control was adequate to accomplish the objectives discussed herein.
The independent certified public accounting firm of Deloitte & Touche is engaged to audit, in accordance with generally accepted auditing standards, the financial statements of the Company and to issue their report thereon.
/s/ ERLE NYE Erle Nye, Chairman of the Board and Chief Executive
/s/II. JARRELL OlBBS II. Jarrell Gibbs, Executive Vice President and Principal Financial Officer
/s/ II. DAN FARELL II. Dan Farell, Vice President and Controller -
53 w
Item 9.
CIIANGES IN AND DISACREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE, None.
PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Identification of directors, business experience and other directorships:
Other Positions and Offlees Presently Held Prennt Principal Occupation With the Company Date First or Employment and Principal (Current Term Expires Elected as Business (preceding 5 yta.),
Name Age May 20,1994)
Director Other Directorships T. L. Baker 48 Executive Vico February 20,1987 Exec 'ha Vice President of the President Co,any; prior thereto, Senior Vice President of the Company.
J. S. Parrington 59 None September 17,1982 Chairman of the Board and Chief Executive of Texas Utilities, the parent company of the Company; other directorships: Texas Utilities.
H. Jarrell Gibbs 56 Executive Vice May 24,1989 Vice Presiden t and Principal Financial President Officer of Texas Utilities and Executive Vice President of the Company; prior thereto, Executive Vice Prealdent of Texas Electric Service Division; prior thereto,Vice President of the Cornpany.
Eric Nye 56 Chairman and September 17,1982 President of Texas U tilities; Chief Executive other directorships: Texas Utilities.
Michael D. Spence 52 Executive Vice September 17,1982 Executive Vice President of the Prealdent Company; prior thereto, President of Generating Diviskin.
W. M. Taylor 51 Executive Vice Msy 20,1986 Executive Vice Prealdent of the
]
President Company; prior thereto, President of Dallas Power Division.
E. L. Watson 59 Vice Chairman February 20,1987 Vice Chairman of the Company; prior thereto, ' Executive Vice President of the Company; prior thereto, Senior Vice President of the 1
Company.
4 i
54 i
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. Item 10. DIRECTORS Al fD EXECUTIVE OFFICERS OF THE REGISTRANT (Concluded).
Identification of executive officers and business experience:
l Positions and Omces Pnsently Held (Current Term Date First Elected Busteesa Emperlemes Name et omcer A_ge ExpIns May 20,1994) to Present Omces (Preceding Five Years)
Erlo Nye 56 Chairman and February 20,1987 Same and President of Texas Utilities.
Chief Executive T. L Baker 48 Executive Vica October 1,1991 Senior Vice President of th' e Company.
President
!!. Jarrell Gibbs 56 Executive Vice October 1,1991 Vice President and Principal Financial President Officer of Texas Utilities; prior there to, Executive Vice President of Texas -
Electric Service Division; prior C.creto, Vice President of the Company.
Michael D. Spence 52 Executive Vice October 1,1991 President of Generating Division.
President W. M. Taylor 51 Executive Vice October 1,1991 President of Dallas Power Division.
President E. L Watson 59 Vice Chairman November 1,1992 Executive Vice President; prior thereto, Senior Vice President of the Company..
There is no family relationship between any of the above named executive officers.
55
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l Item 11. FXECUTIVE COMPENSATION ne Company has paid or awarded compensation during the last three calendar years to the following executive officers for services in all capacities:
SUMMARY
COMPENSATION TABLE Annual Cornpensation tena-Term Compensation #
Awards Pavouts Name and Other Annual Restricted All Other Principal Compensation Stock Options /
L'HP Compensation Position Year Salary ($) Bonus ($)
($)
Awards ($1 SARs (#1 Pavouts ($)
($) #
61,938 ~
63,907 203,500 Erle Nye, 1993 554,167 100,000 50,266 60,739 194,500 Chairman of the 1992 525,000 0
0 NA 169,500 Board and Chief 1991 493,750 0
Executive of the M
Company 44,034 34,246 67,560 Michael D.
1993 289,083 31,000 33,223 22,800 66,300
- Spence, 1992 285,000 0
81,300 0
NA Executive Vice 1991 285,000 40,000 President of the Company 29,720 -
26,042 58,200 T. L Baker, 1993 237,083 25,000 24,404 25.112 56,940 Executive Vice 1992 233,000 0
0 NA 61,940 President of the 1991 223,417 0
Company 28,815 21,2 %
60,802 W. M. Taylor, 1993 217,250 65,000 22,543 12,795 66,900 Executive Vice 1992 205,000 0
0 NA 51,900 President of the 1991 198,750 0
Company 29,682 28,944 56,760 F. L Watson, 1993 227,000 27,000 23,920 28,146 54,600 Vice Chairman of 1992 220,000 0
0 NA 56,600 the Company 1991 213,333 0
Amounts reported in the table consist entirely of compensation paid by Texas Utilities.
W M
Amounts reported as long-Term Compensation are attributable to the officers' participation in the Deferred and Incentive Compenss, tion Plan of the Texas Utilities Company System (Plan). Under the Plan, officers of the Company with a title of Vice President or above may defer a percentage of their compensation not to exceed a mnimum percentage determined by tho' Organization and Compensation Conunittee of the Board of Directors of Texas Utilities (Committee) for each Plan year and in any event not to exceed 15% of the participant's compensation. The Company makes a matching award equal to 150% of the deferred compensation. In addition, the Committee can establish incentive awards under the Plan. In no event will the sum of all incentive awards in any Plan year exceed 25% of the aggregate compensation of eligible employees. Dese matching and incentive awards are subject to forfeiture under certain circumstances. Under the Plan, a trustee purchases Texas Utilities common stock with an amount of cash equal to the deferred compensation, matching award and incentive award and the Company establishes accounts for each participant containing performance units equal to such number of comnyan shares. Plan inveistments, including reinvested dividends, are restricted to Texas Utilities common stock. On the expiration of the applicable maturity period (three years for incentive awards, and five years for deferrals and matching awards) the value of the participants' accounts are paid in cash based upon the then current value of the units; provided, however, that in no event shall a participant's account be deemed to have a.
56
)
1 y'h
b cash value which is less than the sum of such participant's deferred amount together with a 6% per annum (compounded annually) interest equivalent thereon. The maturity requirement is waived if the participant dies or becomes totally and permanently disabled.
Compensation deferred under the Plan is included in amounts reported as Salary in the Summary Compensation Table. Amounts shown in the table below represent the number of shares purchased under the Plan with such deferred salaries for 1993:
teng-Term Incentive Plan. Awards in Last Fiscal Year Number of Shares, Units or Performance or Other Period Name Other Rights Until Maturation or Payout Erle Nye 1,502 5 yean Michael D. Spence 763 5 Years T. L Baker 627 5 Years W. M. Taylor 590 5 Years E. L Watson 606 5 Years Incentive and matching awards under the Plan are included under Restricted Stock Awards in the Summary Compensation Table. As a result of these awards and undistributed awards made under j
the Plan in prior years, at December 31,1993 the number and market value of performance units (each of which is equal 1:, one share of common stock) held in the Plan accounts for Messrs. Nye, Spence, Baker, Taylor and Watson were 15,336 ($663,282), 6,208 ($268,496), 4,910 ($212,358), 4,934
($213,396) and 4,673 ($202,107).
Amounts reported as LTIP Payouts in the Summary Compensation Table represent payouts maturing during such years of earnings on salary deferred under the Plan in prior years.
A Amounts reported as All Other Compensation are attributable to the officers' participation in certain benefit plans hereinafter described. Pursuant to the transition rules promulgated by the Securities and Exchange Commission with respect to the disclosure of executive compensation, such amounts for 1991 are omitted.
Under the Emplovees' Thrift Plan of the Texas Utilities Company System, as amended effective January 1,1993, all employees with at least six months of full time service with the Company may invest up to if fo of their regular salary or wages in common stock of Texas Utilities, or in a variety of selected :autual funds. The amounts reported under All Other Compensation in the Summary Compensation Table include contributions by employer-corporations to each participant's account' of 40%,30% or 60% of the employee's savings, up to 6% of the employce's regular salary or wages, depending upon length of service, which amount is invested in the common stock of Texas Utilities.
During 1993, these employer contributions for Messrs. Nye, Spence, Baker, Taylor. and Watson amounted to $8,490, $6,763, $2,334, $3,671 and $6,244, respectively.
~
Texas Utilities established a Salary Deferral Program (Program) effective April 1,1991 under which each employee of the Company and its subsidiaries whose annual salary is $80,000 ($84,870 for the Program Year beginning April 1993) or more may elect to defer a percentage of annual salary for a period of seven years, a period ending with the retirement of such employee, or for a combination thereof. Such deferrals may not exceed in the aggregate 10% of such annual salary, provided that no more than 6% may be deferred under the retirement option for the period ending with the 57 l*' ' I I:.
Ms i
.m
3 4.
retirement of such employee. Deferred compensation is included in amounts reported under Salary in the Summary Compensation Table. The Company makes a matching award, subject to forfeiture under certain circumstances, equal to 100% of the deferred compensation. A trustee will distribute at the end of the applicable maturity period cash equal to the amounts deferred and matching awards plus earnings equal to the greater of the actual earnings of Program assets, or the average interest rate during the applicable maturity period of U.S. Treasury Notes with a maturity of ten years. The distribution of the amounts due under the Program will be in a lump sum if the maturity period is seven years or, if the retirement option is elected, in twenty am.tal installments. 'Ibe Company is financing the retirement portion of the Program through the purchase of corporate owned life insurance on the lives of the participants and the proceeds from such insurance are expected to allow the Company to fully recover the cost of the retirement option. During 1993, matching awards, which are included under All Other Compensation in the Summary Compensation Table, were made for Messrs. Nye, Spence, Baker, Taylor and Watson in the amounts of $55,417, $27,483, $23,708,
$17,625 and $22,700, respectively.
PENSION TABLE He Company maintains a retirement plan qualified under applicable provisions of the Internal Revenue Code (Code). Annual retirement benefits are computed as follows: for each year of accredited service up to a total of 40 years of service,1.3% of the first $7,800, plus 1.5% of the excess over $7,800 of average annual salary received by the participant during his three years of highest earnings. Retirement benefits are computed with respect to base salaries only and amounts reported under Salary for the named officers in the Summary Compensation Table herein approximate earnings as defined by the retirement plans.
Such benefits are not subject to any reduction for Social Security payments. Benefits payable from a qualified retirement plan are limited by provisions of the Code and the Company maintains a Supplemental Retirement Plan which provides for the payment of retirement benefits calculated in accordance with the retirement plan formula which would otherwise be limited by the provisions of the Code. As of February 28,1994, years of -
accredited service under the plans for Messrs. Nye, Spence, Baker, Taylor and Watson were 31,27,23,25 and 34, respectively. He table illustrates the total annual benefit payable' at retirement under these retirement plans.
3-year average 20 Years 2J Years 30 Years 35 Years 40 Years annual carMnas Service Service Service Service Service 3 50,000
$ 14,688
$ 18,360
$ 22,032
$ 25,704 3 29,376 100,000 29,688 37,110 44,532 51,954 59,376 200,000 59,688 74,610 89,532 104,454 119,376 400,000 119,688 149,610 179,532 209,454 239,376 500,000 149,688 187,110 224,532 261,954 299.376 600400 179,688 224,610 269,532 314,454 359,376 800,000 239,688 299,610 359,532 419,454 479,376 900,000 269488 337,110 404,532 471,954 539,376 58
- n
'i
',,,,.,.-c..
The following report is presented herein for informational purposes only. This information is not required to be included herein and shall not be deemed to form a part of this report or be " filed" with the Securities and Exchange Commission. 'Ibe report set forth hereinafter is the report of the Organization and Compensation Committee of the Board of Directors of Texas Utilities. While this report deals with compensation of executives of Texas Utilities, it is illustratNe of the methodology utilized in establishing the compensation of executive officers of the Company. Refere aces in the report to the Company are references to Texas Utilities and references to pages of the proxy statement are references to the Texas Utilities' proxy statement to be filed with the Securities and Exchange Commission on or about April 1,1994.
ORGANIZATION AND COMPENSATION COMMITTEE REPORT ONEXECUTIVE COMPENSATION ne Organization and Compensation Committee of the Boani of Directors is responsible under the Company's Bylaws for establishing the level of compensation of the executive oficers of the Company. De Committee consists of all of the nonemployee directors of the Company and is chaired by James A. Middleton.
De Committee has directed thepreparation of this report and has approved its contents andits submhsion to the shareholders.
De Committee normally considers executive compensation maners at its May meeting heldin connection with the Annual Meeting of Shareholders. At that meeting, the Committee reviews and recommends to the full Board the amounts of executive oficers' base salaries and bonuses, if any, and establishes the matimum deferral percentage and incentin awants, if any, under the Deferred and Incentive Compensation Plan (Plan) which is described on pages 8, 9 and 10 of thisprazy statement. Although Company management may bepresent during Committee discussions of officers' compensation, Committee decisions with respect to the compensation of the Chainnan of the Board and ChiefExecutin and the President are reached in private session without thepresence of any member of Company management.
Levels of executive compensation, in the option of the Committee, should be based upon an evaluation of the perfonnance of the Company and its officers generally and in comparison topersons with comparable responsibilities in similar business enterprises. Compensation plans shouli align executive compensation with returns to shareholders with due consideration accorded to balancing both long-term and short-term objectives.
Such compensation princ@les andpractices have allowed, and should continue to allow, the Company to attract, retain and motivate its key executives.
In establishing levels of executive compensation, the Committee regularly reviews Companyperformance data and its oficers' compensation compared to the perfonnance of companies in similar businesses and the compensation levels of the management of such companies, including companies generally comparable in size represented in the Moody's 24 Utilities whose comparative investment return is depicted in the graph on page 15.
Information is gatheredfrom industry sources and otherpublished andprivate materials which provides a basis for comparing the largest electric and gas utilities and other survey groups representing a large variety ofbusiness organizations. Includedin the data was that, in 1992, TUElectric, the Company'sprincipalsubsidiary, was the i
largest electric utility in the United States as measured by megawatt hour sales; and compared to other electric
\\
utilities in the United States it was 5th in electric revenues, 3rd in total assets, 2nd in net generating capability, 6th in number of customers and 15th in number of employees. De Committee also reviews a variety ofindustry Jinancial and operatingperfonnance comparisons (includingproductivity indicators, service reliability indexes and measures of epiciency and service quality) throughout the year and at the time salaries are established in May of eachyear. Dese industry comparisons ' constitute an important component ofthe Committee's review ofexecutive
{
compensation. De Committee's decisions, however, are subjective because it has not adopted or approved a specific formula or other criteria linking any target level orperformance measure, or the aggregate of all measures, i
to the levels of executive compensation, j
59
i j
i De compensation of the officers of the Company consists primarily of base salaries, cash bonuses and the opportunity topanicipate in the Plan. Benefits provided under the Plan represent a substantialportion of the opicers' compensation and the value of thefuture payment thereofis directly related to thefutureperfonnance of the Company's common stock. De named executive oficers participate to the fullest extent permhsible in the j
elective feature of the Plan. 1he oficers are also eligible to participate in the Salary Deferra! Program and the Employees' Brift Plan, both of which are described on pages 10 and 11 of thisprary statement. ne officers also participate in the retirement plan, the benefits payable under which are described on page 11 of this prary statement. Except for benefits under these plans, the officers do not receive any otherfann of direct or indirect '
compensation from the Company.
At its meeting held in hiay 1993, the Committee established the ChiefExecutive's salary at an annual rate of $775,000 representing a $75,000, or eleven percent, increase our the annualrate established in hiay 1992. Alss the Committee provided for a cash bonus to the Chief Executive of $125,000 and an incentin award under the Plan of $125,000. nis amount of compensation was estabihhed based upon the Committee's subjective evaluation of the infonnation described herein. In addition to the Committee's evaluation of such comparative perforrnance and compensation information, specVic accomplishments considered by the Committee in establishing the compensation, specifically the salary increase, bonus and incentive award of the ChiefExecutive, included the I progress made in the redirection of the Company's business through its Competitive Action Plan which was implemented to reduce costs on a System-wide basis, and the receipt of an operating license for Unit 2 of the Comanche Peak nuclear generating station. De Committee also recognized that the base salary of the Chief Executive was not increased in 1992, nor was a bonus awarded.
Section 162(m) of the internal Revenue Code, which was enacted as a part of the Omnibus Budget Reconciliation Act of1993, limits, efective January 1,1994, the amount ofcompensation which a publicly traded corporation can deductforfederalincome taxpurposes. Various exceptions to the limitation areprovided. Bese exceptions relate generally to types of compensation plans andprograms which the Company does not maintain.
Nevertheless, the Company does not expect to provide compensation in 1994 which would not be deductiblefoe federalincome taxpurposes. The Company expects to continue to maintain a competitive compensation program in future years, and it is not possible to predict the impact which Section 162(m) may have on such future compensation or the deductibility thereof.
Shareholder comments to the Committee are welcomed and should be addressed to the Corporate Secretary of the Company at the Company's offices.
ORGAN 17AT10N AND COhfPENSAT10N CD&fMITTEE James A. Afiddleton, Chair Kerney Laday Jack W. Evans Afargaret N. Afarey Bayard 11. Friedman Charles R. Peny William Af. Griffin flerbert H. Richardson 60
4 g-PERFORMANCE GRAPH He folkming graph is presented herein for informational purposes only. His information is not required to be included herein and shall not be daa==I to form a part of this report or be "fusd" with the Securities and Nb-e Comadmlan. He graph pertains to the comanon stock of Texas Utuities. Inamance as the comman stock of the Company is whony owned by Texas Util' ties, this information is the most relevant data which is avanahia in regard to this subject matter.
He foHowing graph compares the performance of the Company's comanon stock to the S&P 500 Index and to the Moody's 24 Utuities for the last Sve years. ' He graph assumes the investment of $100 at December 31,1988 and that ah dividends were.1_:ti no amount of the investment at the end of each year is shown in the graph and in the table which foBows.
Cumulaeve Value of $100 isweeted.12/31/88 forthe Five Years Ended 12/Sk/93 240 229 220 a
200 200 3.g:.WT 197 :
150 y.
-, **~~~~i
',.q'........ -
160
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.:w~.'m _,,,,,,,,,,,,,[,'
140
..............g..-
120 d
j s
100 80 1988 1969 1990 1991 1992 1993 Years TexasUtlittles 8&P500Index Moody %
's 24 Utttles
......g........
1988 1989 1990'
'1991 1992
1993 Texas UtiHties 100 137 155.
192:
- 210 229
)
S&P 500 Inder
~
100 132
'127 166.
i79 197 l
Moody's 24 UtiHties 100 129 135 174-182 200
.W 61 q
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' Item 12. SECURITL OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Security ownership of certain beneficial owners at February 28,1994:
Amount and Natura Name and Address of Beneficial Title of Class of Beneficial Owner Ownershio Percent of Class -
Common Stock, Texas Utilities Company 152,000,000 shares.
100.0% ~
without par value, 2001 Bryan Tower sole voting and of the Company-Dallas, Texas 75201 investment power Security ownership of management at February 28,1994:
The following lists the common stock of Texas Utilities owned by the Directors and Executive Officers of the Company. The named individuals have sole voting and investment power for the shares of common stock reported. Ownership of such common stock constituted less than 1 % of the outstanding shares for each individual. None of the named individuals own ny of the preferred stock of the Company.-
Number of Shares Name of Cominion Stock T. L Baker 2,102 J. S. Farrington t 5,972 s
II. Jarrell Gibbs 4,239
.;~
Eric Nye 14,716 Michael D. Spence 5,898 W. M. Taylor 6,246 B. L Watson 5,136 -
All Directors and Executive Officers as a group (7) 54,309 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
E l
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PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
Page (a) Documents filed as part of this Report:
1.
Financial Statements (included in Item 8, Financial Statements i
and Supplementary Data):
+
Statements of Income for each of the three years in the period ended December 31,1993........................... 27 Statements of Cash Flows for each of the three years in the period ended December 31,1993........................ 28 Balance Sheets, December 31,1993 and 1992.................... 29 Statements of Retained Earnings for each of the three years in the period ended December 31,1993................... 31 Notes to Financial Statements................................ 32 Independent Auditors' Report............................... 52 Statement of Responsibility.................................. 53 2.
Financial Statement Schedules -
For each of the three years in the period ended December 31,1993:
Schedule V-Electric Plant.................................. 71 Schedule VI-Accumulated Depreciation....................... 72 Schedule VIII-Valuation and Qualifying Accounts............... 73 Schedule IX-Short-term Borrowings.......................... 74 Schedule X-Supplementary Information....................... 75 The following financial statement schedules are omitted because of the absence of the conditions under which they are required or because the required information is included in the Financial Statements or notes thereto: I, II, III, IV, VII, XI, XII and XIII.
(b) Reports on Form 8-K:
Reports on Form 8-K filed since September 30,1993, are as follows:
Date of Report Item, Departed October 12,1993 Item 7. FINANCIAL STATEMENTS AND EXHIBITS October 26,1993 Item 5. OTHER EVENTS November 24,1993 Item 5. OTHER EVENTS January 14,1994 Item 5. OTHER EVENTS January 31,1994 Item 5. OTHER EVENTS (c) Exhibits:
Previously Filed
- With File As Exhibits Number Exhibit Number Dated 3(a)
- Restated Articles of Incorporation of the Company.
Bylaws of the Company, as amended.
3(b) 33-64694 4(c) 4(a) 2 90185 4(a)
Mortgage and Deed of Trust, dated as of December 1,1983, between the Company and Irving Trust 63 r.'
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (Continued).
Preefousiv Filed
- With File As Exhibits Number Exhibit Number Dated Company (now The Bank of New York), Trustee.
4(a)-1
- SupplementalIndentures to Mortgage and Deed of Trust:
2-90185 4(b)
First April 1,1984 2-92738 4(a)-1 Second September 1,1984 2-97185 4(a)-1 Third April 1,1985 2 99940 4(a)-1 Fourth August 1,1985 2 99940 4(a)-2 Fifth September 1,1985 33-01774 4(a)-2 Sixth December 1,1985 33 9583 4(a)-1 Seventh March 1,1986 33-9583 4(a)-2 Eighth May 1,1986 33-11376 4(a) 1 Ninth October 1,1986 33-11376 4(a)-2 Tenth December 1,1986 33-11376 4(a)-3 Eleventh December 1,1986 33 14584 4(a)-1 Twelfth February 1,1987 33-14584 4(a)-2 Thirteenth March 1,1987 33-14584 4(a)-3 Fourteenth April 1,1987 33 24089 4(a)-1 Fifteenth July 1,1987 33-24089 4(a)-2 Sixteenth September 1,~ 1987 -
33-24089 4(a)-3 Seventeenth October 1,1987 33-24089 4(a)-4 Eighteenth March 1,1988 33-24089 4(a)-5 Nineteenth May 1,1988 33-30141 4(a)-1 Twentieth September 1,1988 33 30141 4(a)-2 Twenty-first November 1,1988 33-30141 4(a)-3 Twenty-second January 1,1989 33-35614 4(a)-1 Twenty third August 1,1989 33-35614 4(a)-2 Twenty-fourth November 1,1989 33-35614 4(a)-3 Twenty-fifth December 1,1989 -
33-35614 4(a) 4 Twenty-six February 1,1990 33-39493 4(a)-1 Twenty-seventh September 1,1990 33-39493 4(a)-2 Twenty-eighth October 1,1990 33-39493 4(a)-3 Twenty-ninth October 1,1990 33-39493 4(a)-4 Thirtieth March 1,1991 33-45104 4(a)-1 Thirty first May 1,1991 33-45104 4(a)-2 Thirty-second July 1,1991 33-46293 4(a)-1 Thirty-third February 1,1992 33-49710 4(a)-1 Thirty-fourth April 1,1992 33-49710 4(a)-2 Thirty-fifth April 1,1992 33-49710 4(a)-3 Thirty-sixth June 1,1992 33-49710 4(a)-4 Thirty-seventh June 1,1992 33-57576 4(a)-1 Thirty-eighth August 1,1992 33-57576 4(a)-2 Thirty-ninth October 1,1992 '
33 57576 4(a)-3 Fortleth November 1,1992 33-57576 4(a) 4 Forty first December 1,1992 64 e
L g. :
Item 14. EXIIIBITS, FINANCIAL STATEMENT SCIIEDULES AND REPORTS ON FORM 8-K (Continued).
Previousiv Filed
- With File As Exhibits Number Exhibit Number Dated 33-60528 4(a)-1 Forty-second March 1,1993 33 64692 4(a)-1 Forty-third April 1,1993 33-64692 4(a) Forty-fourth April 1,1993 33-64692 4(a)-3 Forty-fifth May 1,1993 33-68100 4(a)-1 Forty-sixth July 1,1993 0-11442 99(b)
Forty-seventh October 1,1993 Form 10-0 (Quarter Ended September 30,1993) 4(a)-2 Forty-eighth November 1,1993 4(b) 2-2801 D-2
- Mortgage and Deed of Trust, dated as of February 1, 1937, between Dallas Power & Light Company and Old Colony Trust Company, Trustee (The First National Bank of Boston, successor Trustee).
4(b)1
- SupplementalIndentures to Mortgage and Deed of Trust:
2-7855 7(a)
First April 1,1949 2-8466 7(a)-2 Second June 1,1950 2-10071 4(b)-3
, Third March 1,1953 2-12200 2(b)-1 Fourth February 1,1956 2-77857 4(b)-5 Fifth December 1,1956 2 77857 4(b)-6 Sixth December 1,1959 2-20997 2(b)-7 Seventh February 1,1963 2-77857 4(b)8 Eighth January 1,1966 2-25805 2(b)-9 Ninth February 1,1967 i
2-37161 2(c)
Tenth June 1,1970 2-42043 2(c)
Eleventh November 1,1971 2-45403 2(c)
Twelfth September 1,1972 2-52708 2(c)
Thirteenth March 1,1975 2-77857 4(b)-14 Fourteenth May 1,1977 2 71621 4(c)
Fifteenth June 1,1981 1
2-77857 4(b)-16 Sixteenth November 1,1981 2 77857 4(c)
Seventeenth July 1,1982 2 81476 4(b)-18 Eighteenth November 1,1982 2-81476 4(c)
Nineteenth February 1,1983 2-90185 4(c)-1 Twentieth J uno 1,1983 2 90185 4(c)2 Twenty-first January 1,1984 2 90185 4(c)-3 Twenty-second April 1,1984
)
2-92738 4(b)-1 Twenty-third September 1,1984 2-99940 4(b)-1 Twenty-fourth September 1,1985 l
33-11376 4(b)-1 Twenty-fifth October 1,1986 33-14584 4(b)-1 Twenty sixth March 1,1987 33-24089 4(b)-1 Twenty seventh July 1,1987 33-30141 4(b)-1 Twenty eighth January 1,1989 65 4
A
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (Continued).
Previously Filed
- With File As Exh! bits N unber Exhibit Number Dated 33-35614 4(b)-1 Twenty-ninth November 1,1989 33-46293 4(b)-2 Thirtieth February 1,1992 33-49710 4(b)-1 Thirty-first June 1,1992 4(c) 2-5609 7(b)
Mortgage and Deed of Trust, dated as of March 1, 1945, between Texas Electric Service Company and The Fort Worth National Bank, Trustee (Bank One, Texas, N. A., successor Trustee).
4(c)-1
- SupplementalIndentures to Mortgage and Deed of Trust:
2-7186 7(b)
First October 1,1947 2 7423 7(c)
Second April 1,1948 2-7894 7(d)
Third April 1,1949 2-8982 7(e)
Fourth June 1,1951 2 9547 4(c)
Fifth May 1,1952 2-10118 4(c)
Sixth April 1,1953 2-12227 2(c)
Seventh March 1,1955.
2 60449 2(b)-1 Eighth March 1,1956 2 60449 2(b)-1 Ninth July 1,1957 2 60449 2(b)-1 Tenth November 1,1958 2-21105 2(b)
Eleventh April 1,1963 2-23056 2(b)
Twelfth February 1,1965 2-24384 2(c)
Thirteenth February 1,1966 2-26297 2(c)
Fourteenth May 1,1967 2-31474 2(c)
Fifteenth March 1,1969 2-38358 2(c)
Sixteenth October 1,1970 2-39627 2(c)
Seventeenth April 1,1971 2-42552 2(c)
Eighteeath January 1,1972 2 60449 2(b)-1 Nineteenth April 1,1974 2-60449 2(b)-1 Twentieth December 1,1974 2 60449 2(b)-1 Twenty-first June 1,1975 2-60449 2(b)-1 Twenty-second March 1,1976 2 63425 2(c)
Twenty-third February 1,1979 2-66633 2(c)
Twenty-fourth March 1,1980 2-74809 4(c)-1 Twenty-fifth
. November 1,1981 2 74809 4(d)1 Twentp sixth D ecember 1,1981.
2-76675 4(c)
Twenty-seventh April 1,1982.
2-80329 4(c)
Twenty-eighth November 1,1982 2-80329 4(d)
Twenty-ninth December 1,1982 2-90185 4(d)-1 Thirtieth Juno 1,1983 2-90185 4(d)-2 Thirty first January 1,1984 2-90185 4(d)-3 Thirty second April 1,1984 2-92738 4(c)-1 Thirty third September 1,1984 '
2 99940 4(c)-1 Thirty-fourth August 1,1985 -
33-9583 4(c)-1 Thirty-fifth March 1,1986 66
Item 14. E'XIIIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (Continued).
Previousiv Filed
- With File As Exhibits Number Exhibit Number Dated 33-11376 4(c)-1 Thirty-sixth December 1,1986 33-14584 4(c)-1 Thirty-seventh February 1,1987 33-24089 4(c)-1 Thirty-eighth September 1,1987 33-24089 4(c) 2 Thirty ninth October 1,1987 33-24089 4(c)-3 Fortieth March 1,1988 33-30141 4(c)-1 Forty-first September 1,1988 33 39493 4(c)-1 Fortydecond September 1,1990 33-39493 4(c)-2 Forty-third March 1,1991 33-46293 4(c)2 Forty-fourth February 1,1992 33-57576 4(c)-1 Forty-fifth October 1,1992 33-57576 4(c)-2 Forty-sixth November 1,1992 33-60528 4(c)-1 Forty-seventh March 1,1993 33-68100 4(c)-1 Forty-eighth July 1,1993 0-11442 99(a)
Forty-ninth October 1,1993 Form 10-0 (Quarter ended September 30,1993) 4(d) 2-5718 7(c)
- Mortgage and Deed of Trust, dated as of May 1, 1945, between Texas Power & Light Company and Republic National Bank of Dallas, Trustee (NationsBank of Texas, N.A., successor Trustee).
4(a)1 SupplementalIndentures to Mortgage and Deed of Trust:
2-7204 7(a)
First October 1,1947 2 7446 7(a)
Second April 1,1948 2-9474 4(c)
Third April 1,1952 2-10204 4(c)
Fourth May 1,1953 2 11162 2(b)
Fifth October 1,1954 2-12856 4(c)
Sixth November 1,1956 2 14553 2(b)
Seventh December 1,1958 2-19452 2(b)-1 Eighth January 1,1961 2-21028 2(b)
Ninth February 1,1963 2-24326 2(c)
Tenth January 1,1955 2 24326 2(d)
Eleventh February 1,1966 2 25885 2(c)
Twelfth-February 1,1967 2-27853 2(c)
Thirteenth January 1,1968 j
2-35941 2(c)
Fourteenth February 1,1970 2-38171 2(c)
Fifteenth Sept ember 1,1970 2-39083 2(c)
Sixteenth February 1,1971 2-42763 2(c)
Seventeenth February 1,1972 2-46740 2(c)
Eighteenth February 1,1973 2-73790 4(b)-19 Nineteenth February 1,1974 2-73790 4(b)-20 Twentieth October 1,1974 2-52865 2(c)
Twenty first April 1,1975 l
67 t-
Item 14. EXIIIBITS, FINANCIAL STATEMENT SCIIEDULES AND REPORTS ON FORM 8-K (Continued).
Previously Filed
- With File As Exhibits Number Exhibit Number Dated 2 55210 2(c)
Twenty second January 1,1976 2-57963 2(c)
Twenty-third February 1,1977 2 63369 2(c)
Twenty fourth February 1,1979 2 67594 (b)(2)-2 Twenty-fifth May 1,- 1980 2 73790 4(c)
Twen ty-sixth September 1,1981 2 77733 4(b)
Twenty-seventh November 1,1981 2-77733 4(c)
Twenty-eighth June 1,1982 2-90185 4(e)1 Twenty ninth November 1,1982 2-90185 4(e)-2 Thirtieth June 1,1983 2-90185 4(e)-3 Thirty-first October 1,1983 2-90185 4(e)-4 Thirty-second January 1,1984 2-90185 4(e)-5 Thirty-third April 1,1984 2-92738 4(d)-1 Thirty-fourth September 1,1984 2-97185 4(d)1 Thirty-fifth April 1,1985 33-01774 4(d)-1 Thirty-sixth December 1,1985 33 9583 4(d)-1 Thirty seventh May 1,1986 33 11376 4(d)-1 Thirty-eighth December 1,1986 33-14584 4(d)-1 Thirty-ninth April 1,1987 -
33 24089 4(d)-1 Fortieth May 1,1988 33-30141 4(d)-1 Forty-first August 1,1988 33-35614 4(d)-1 Forty-second August 1,1989 33-35614 4(d)-2 Forty-third December 1,1989 33-35614 4(d)-3 Forty-fourth February 1,1990 33-39493 4(d)-1 Forty-fifth October 1,1990 33-45104 4(d)-1 Forty-sixth May 1,1991 33 45104 4(d) 2 Forty-seventh July 1,1991 33-46293 4(d)-2 Forty-eighth February 1,1992 33-49710 4(d)-1 Forty-ninth April 1,1992 33-57576 4(d)1 Fiftieth August 1,1992 33-57576 4(d) 2 Fifty-first December 1,1992 33-64692 4(d)-1 Fifty-second April 1,1993 33-64692 4(d) 2 Fifty-third May 1,1993 4(d)-2 Fifty-fourth November 1,1993 4(e)
- Agreement to furnish certain debt instruments.
4(f) 33-68104 4(b) Deposit Agreement between the Company and Chemical Bank, dated as of January 11,1993.
4(g) 33-68104 4(b) Deposit Agreement between the Company and Chemical Bank, dated as of August 4,'1993.
4(h)
Deposit Agreement between the Company and Chemical Bank, dated as of October 14,1993, 10(a) " 0-11442 10(a)
Deferred and Incentive Compensation Plan of the Form 10 K Texas Utilities Company System, as amended June (1992) 30,1992, l
l 68
1 Item 14. EXHII.-
, GNANCIAL STATEMENT SCIIEDULES AND REPORTS ON FCRM 8-K (Continued).
Previously Filed' _
With File As Exhibits Number Exhibit Number Dated 10(b) " 0-11442 10(b)
- Salary Deferral Program of the Texas Utilities Form 10 K Company System, as amended May 31,1992.
(1992) 10(c) " 0-11442 10(c)
- Restated Supplemental Retirement Plan for the Form 10-K employees of Texas U tilities Company System, dated (1992) as of January 1,1991.
12
- Computation of Ratio of Earnings to Fixed Charges.
23(a)
- Consent of Counsel.
23(b)
- Independent Auditors' Consent.
99(a)
- Agreement, dated as of February 12,1988, between TU Electric and Texas Municipal Power Agency.
99(b) 33-55408 99(a)
- Agreement, dated as of July 5,1988, between the Company and the Brazos Electric Power Cooperative, Inc.
99(c) 33 55408 99(b)
- Agreement, dated as of February 1,1990, between TU Electric and Tex La Electric Cooperative, Inc.
99(d) 33-55408 99(c)
- Amended and Restated Credit Agreement, dated as of April 1,1990, among the Company, Texas Utilities, certain banks and Morgan Guaranty Trust Company of New York, Agent.
99(c) 33-23532 4(c)(i) - Trust Indenture, Security Agreement and Mortgage, dated as of December 1,1987, as supplemented by Supplement No.1 thereto dated as of May 1,1988 among the Lessor, TU Electric and the Trustee.
99(f) 33-24089 4(e)
- Supplement No. 2 to Trust Indenture, Security Agreement and Mortgage, dated as of August 1, 1988.
99(g) 33-24089 4(e)1 - Supplement No. 3 to Trust Indenture, Security Agreement and Mortgage, dated as of August 1, 1988 99(h) 0-11442 99(c)
- Supplement No. 4 to Trust Indenture, Security Form 10-Q Agreement and Mortgage, dated as of July 1,1993.
(Quarter ended June 30,1993) 99(i) 33-23532 4(d)
- Lease Agreement, dated as of December 1,1987 between the Lessor and TU Electric as supplemented by Supplement No.1 thereto datad as of May 20,1988 between the Lessor and TU Electric.
99(J) 33-24089 4(f)
- Lease Agreement Supplement No. 2, dated as of August 18,1988.
i 69
Item 14. EXIIIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (Concluded).
Previousiv Filed
- With File As Exhibits Number Exhibit Number Dated 99(k) 33-24089 4(f)-1
- Lease Agreement Supplement No. 3, da'ted as of-August 25,1988.
99(1) 33 63434 4(d)(iv)- Lease Agreement Supplement No. 4, dated as of December 1,1988.
99(m) 33-63434 4(d)(v) - Lease Agreement Supplement No. 5, dated as of June 1,1989.
99(n) 0-11442 99(d)
Lease Agreement Supplement No. 6, dated as of Form 10-Q July 1,1993.
(Quarter ended June 30,1993) 99(o) 33 23532 4(e)
- Participation Agreement dated as of December 1, 1987, as amended by a Consent to Amendment of the Participation Agreement, dated as of May 20,1988, each among the Lessor, the Trustee, the. Owner Participant, certain banking institutions, Capcorp, Inc. and TU Electric.
I 99(p) 33-24089 4(g)
- Consent to Amendment of the Participation Agreement, dated as of August 18,1988.
99(q) 33 24089 4(g)-1 Supplement No. I to the Participation Agreement,
.l dated as of August 18,1988.
99(r) 33 24089 4(g)-2 Supplement No. 2 to the Participation Agreement, dated as of August 18,1988.
99(s) 33 63434 4(e)(v) - Supplement No. 3 to the Participation Agreement, dated as of December 1,1988.
99(t) 0-11442 99(e)
Supplement No.4 to'the Participation Agreement, 1
Form 10-0 dated as of June 17,1993.
(Quarter onded i
June 30,1993)
- Incorporated herel.a by reference.
" Management contract or compensation plan or arrangement required to be filed as an exhibit to this report pursuant to Item 14(c) of Form 10 K.
1 70 hb
TEXAS UTILITIES ELECTRIC COMPANY SCHEDULE V-ELECTRIC PLANT For Each of the Three Years la the Period Ended December 31,1993 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F Balance at Other Balance Beslanlag Additions Changes -
at End Classification of Year at Cost Retiressents Add of Year Thousands of Dollas J Year Ended December 31,1993 Electric plant la service:
Production................ $10,490.215
$5,020,295
$ 9,126
$15.501,384 Transmiss!on..............
1,493,601 46,754 2,908 1.537,447 Distribution...............
3,567,646 234,197 28,484 3,773,359 General..................
440,665 19.687 11,257 449,095 Tota 1.................
15.992,127 5,320,933 51,775 21,261,285 Construction work in progress...
5,528,222 (4,583,757) 944,465 Nuclear fuel-net........
358,087 28,063 (65,259)(a) 320,891 Held for future use...........
29,639 9.363 39,002 Electric plant before reserve....
21,908,075 774,602 51,775 (65,259) 22,565,643 Less reserve for regulatory disallowances.............
(1,308,460)
(1,308,460)
Total electric plant...... $20,599,615
$ 774,602
$51,775
$ (65,259)
$21,257.183 Year Ended December 31,1992 Electric plant la service:
Prod uction................ $10,421,387
$ 80,882
$12,054
$10,490,215 Transmission..............
1,443,565 55.073 5,037 1,493,601 Distribution...............
3,377,396 218,007 27,757 3,567,646 General..................
425,448 24,194 8.977 440,665 Total................
15,667,796 378,156 53,825 15.992,127 Construction work in progress...
4,809,088 719,134 5,528,222 Nuclear fuel - net............
333,701 48,600 (24,214)(a) 358,087 licld for future use...........
29,069 570 29,639 Electric plant before reserve....
20,839,654 1,146,460 53,825 (24,214) 21,908,075 less reserve for regulatory disallowances.............
(1,308,460)
(1.308,460)
Total electric plant...... $19,531,194
$1,146,460
$53.825
$ (24,214)
$20,599,615 Year Ended December 31,1991 Electric plant la service:
Production................ $10,342,116
$ 90,446
$11,175
$10,421,387 Transmission............,
1,338,959 57,829 3,223 1,443,565 Distribution...............
3,190,258 220,796 33,658 3,377,396 Ge n eral..................
408.294 26,419 9,265 425,448 Tota l.................
15,329,627 395.490 57,321 15,667,796 Construction work in ptccess...
4,012,241 796,847 4,809,088 Nuclear fuel - net............
311,416 47,678 (25,393)(a) 333,701 Held for future use...........
28,989 80 29,06C Electrie plant before reserve....
19,682,273 1,240,095 57,321 (25,393) 20,839,654 Less reserve for regulatory disallowances.............
(1,308,460)(b)
(1,308,460)
Total electric plant...... $19,682,273 51,240,095
$57,321
$(1,333,853)
$19,531,194 (a) Other changes to nuclear fuel includes $65,259,000, $24,214,000 and $25,393,000 deducted for amortization in 1993,1992 and 1991, respectively.
(b) Disallowed Comanche Peak related costs. (See Note 11 to Financial Statements.)
71
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~ TEXAS UTILITIES ELECTRIC COMPANY-I
. SCHEDULE VI-ACCUMULATED DEPRECIATION For Each of the Three Years la the Period Ended December 31,1993
~ COLUMN A'
-COLUMNB COLUMN C COLUMN D COLUMN E COLUMN F i
4 Additions Balance at Charged to Other Balance.
- Beslanleg Coats and
. Not Changes -
at End Classification of Year Espenses (a) - Retirossents Add (b) of Year.
l~
Thessands of DeHars Year Eaded December 31,1993.
r Accumulated depreciation.........
33,741,020
$427,294
$54,706
$$,247 :
. 84,118,855 Year Ended December 31,1992 Accumulated depreciatloa.........
$3,392,463
$406,088
$63,444
$$,913:
-= $3,741,020 Year Ended December 31,1991 Accumulated depreciation......... 33,026,995
$418,899
$60,582
$7,151
$3,392,463 -
' (a) tecludes depreciation on lignite fuel production facilities charged to fuel and decommissioning expense for Comanche Peak.
(b) Depreciation and depletion charged tovarious accounts, including depreciation of transportation and work equipanent, based on estimated lives thereof, are charged to clearing accounts and allocated on the basis of the use of such equipment.
4 r
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72
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TEXAS UTILITIES ELECTRIC COMPANY.
SCHEDULE VIII-VALUATION AND. QUALIFYING ACCOUNTS '
^
. For Each of the Three Years la the Period Ended Deceinber 31,1993 COLUMN A COLUMNB COLUMN C -
COLUMN D COLUMN E Additions Balance at Charged to Charged Beslanlas Costs and to Other -
Balance et Clasalfication of Year Espenses Accomets-Deductless (a) End of Year Thessands of Dollars Valuaties acesent, deducted from reisted asset en the balance sheet -
Year Ended December 31,1993 Reserve for regulatory disallowances.... 31,381,145 S-
$1,381,145 Allowance for uncollectible accounts....
1,613 21,430 16,739 6,304 Year Ended December 31,1992 Reserve for regulatory disallowances.... 31,381,145 S-
$1,381,145 Allowance for uncollectibic accounts....
2,931 4,102 5,420 1,613 Year Ended December 31,1991 Reserve for regulatory disallowances... 3
$1,381.145 3-
$1,381,145 Allowance for uncollectible accounts....
2,290 14,226 13.585 2,931 (a) Deductions represents uncollectibio accounts written off net of recoverles of amounts previously written oft 73
n
- ..um TEXAS UTILITIES ELECTRIC COMPANY SCHEDULE IX-SHORT. TERM BORROWINGS For Each of the Three Years la the Period Ended December 31,1993 COLUMN A COLUMNB COLUMN C COLUMN D COLUMN E COLUMN F a
Weighted Weighted Average Balance Weighted Manisme Average
' Interest At Average A mesat A mount ~
Rate Category of Aggregate End of Interest Outstandtag Outstanding Darlag Short-term Borrowlass Year Rate During Year During Year (a)
Year (a)
Thessaads of Dellars Year Ended December 31,1993 Amounts payable to banks for borrowings.. $
$300,000
$ $5,611 3.92 %
Holders of commercial paper............
299,700 54,401 3.72 Year Ended December 31,1992 Amounts payable to banks for borrowings.. 32)o,000 3.86 %
$350,000
$277,306 4.28 %
Iloiders of commercial paper............
139,857 8,069 3.79 Year Ended December 31,1991 Amounts payable to banks for borrowings.. $250,000 5.77 %
$300,000
$229,681 6.51 %
11olders of commercial paper............
133,800 35,756 6.84 t
(a) Weighted averages are based upon daily amounts outstanding and equivalent annualinterest thereon.
2 P
B 1
74 P
t
y i'
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TEXAS UTILITIES ELECTRIC COMPANY SCHEDULE X -SUPPLEMENTARY INFORMATION For Each of the Three Yr;ars in the Period Emded December 31,1993 COLUMN A COLUMNB Charged to Espasses and Other Accomets Year Ended Deenunker 31 Items 1993 1992 1991 Thousands of Dellers Taxes other than income:
Advalorem...................................................
$210,849
$189,411
$176,414 Local gross receipts............................................
154,731
- 126,849 122.683 Sta te gross rece ipts............................................
77,547 72.345 71,512 Sta te franchise.................................................
(7.259) 20,252 49,182 Social security and unemployment.................................
28,318 41.356 38,170 Public Utility Cornmission assessment..............................
8,438 7,613 7,664 Miscella n e ous.................................................
25.177 22.143 18,821 Total.,..................................................
5497.801 5479.% 9 5484,446 Charged to:
Ope rati ng expe nses.............................................
5445,220
$423,505
$437.347 Electric plant and sundry accounts................................
52,581 56.464 47,099 Maintenance and repairs. depletion, amortization, royalties, research and development, and advertising, other than amounts set out separately in the financial statements, are not material.
75 h
I.
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9' 9
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TEXAS UTILITIES ELECTRIC COMPANY Date: March 24,1994 By:
/s/ ERLB NYE (Erle Nye, Chairman of the Board and Chief Executive)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date ludicated.
Signature Title Date
/s/
ERLE NYE principal Executive 4
(Erle Nye, Chairman of the Board and Chief Executive)
Officer and Director
/s/
H. J ARRELL GlBBS Principal Financial (II. Jarrell Olbbs, Executive Vice President)
Officer and Director
/s/
H. DAN PARELL Principal Accounting (11. Dan Farell, Vice President and Controller)
Officer
\\
/s/
T.L. BAKER Director i
(T. L. Baker)
?
March 24,1994 l
/s/
J. S. PARRINGTON Director
/
(J.S. Farrington)
/s/
MICHAEL D. SPENCE Director (Michael D. Spence)
/s/
W. M. TAYLOR Director (W. M. Taylor)
/s/
E. L, WATSON Director (B. L. Watson) 76
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